N-CSR 1 e16291nvcsr.htm N-CSR N-CSR
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES

Investment Company Act file number 811-08361

Goldman Sachs Variable Insurance Trust

(Exact name of registrant as specified in charter)

71 South Wacker Drive, Suite 500, Chicago, Illinois 60606

(Address of principal executive offices) (Zip code)
     
Howard B. Surloff, Esq.   Copies to:
Goldman, Sachs & Co.   Jeffrey A. Dalke, Esq.
One New York Plaza   Drinker Biddle & Reath LLP
New York, New York 10004   One Logan Square
    18th and Cherry Streets
    Philadelphia, PA 19103
(Name and address of agents for service)

Registrant’s telephone number, including area code: (312) 655-4400

Date of fiscal year end: December 31

Date of reporting period: December 31, 2005

     
ITEM 1.   REPORTS TO STOCKHOLDERS.
     
    The Annual Report to Stockholders is filed herewith.

 

 

Goldman

Sachs Variable Insurance Trust

 

GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32nd Floor, NEW YORK, NEW YORK 10005

 
Growth and Income Fund
 
Annual Report
December 31, 2005
 

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND 

Shareholder Letter

Dear Shareholders:

This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Growth and Income Fund during the one-year reporting period that ended December 31, 2005.

Market Review

The U.S. equity markets finished 2005 with solid gains, resulting in a third calendar year of positive returns. After a lackluster first half, the markets strengthened in the third and fourth quarters of the year and the S&P 500 Index returned 4.91% during the one-year period ended December 31, 2005. Value stocks outperformed their growth counterparts for the sixth consecutive year, with the Russell 3000 Value Index returning 6.85% versus the Russell 3000 Growth Index return of 5.17%. From a market cap perspective, mid caps outperformed large-and small-cap stocks, with the Russell Midcap, Russell 1000, and Russell 2000 Indexes returning 12.65%, 6.27%, and 4.55%, respectively.

Investment Objective

The Fund seeks long-term growth of capital and growth of income.

Portfolio Composition

Top 10 Portfolio Holdings as of December 31, 2005*

             
% of
Company Net Assets Business
Bank of America Corp. 
     5.3 %   Large Banks
Citigroup, Inc. 
     4.9     Large Banks
Exxon Mobil Corp. 
     4.3     Energy Resources
J.P. Morgan Chase & Co. 
     3.5     Large Banks
AT&T, Inc. 
     3.0     Telephone
ConocoPhillips
    3.0     Energy Resources
Chevron Corp. 
     3.0     Energy Resources
Pfizer, Inc. 
     2.8     Drugs
J.C. Penney Co., Inc. 
     2.8     Retail Apparel
Washington Mutual, Inc. 
     2.5     Specialty Financials

* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.

 
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 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND
 
Shareholder Letter (continued)

Performance Review

Over the one-year period that ended December 31, 2005, the Fund generated a cumulative total return of 3.93%. Over the same time period, the Fund’s benchmark, the Russell 1000 Value Index (with dividends reinvested), generated a cumulative total return of 7.05% and its former benchmark, the Standard & Poor’s 500 Index (with dividends reinvested), generated a cumulative total return of 4.91%.

During the period, the Fund generated positive returns, but lagged the benchmark. The Fund’s holdings in the Utilities and Consumer Cyclicals sectors enhanced results, while its Insurance and REITs stocks detracted from relative results.

In Insurance, difficult headwinds weighed on several of the Fund’s large holdings, including RenaissanceRe Holdings Ltd. and Willis Group Holdings Ltd. The destructive hurricane season pressured RenaissanceRe, a reinsurance company. Although we believe the company should recover its losses from an improved pricing cycle, we reduced the Fund’s exposure to this stock over the reporting period. Willis Group’s stock declined after it reported lower earnings attributed to new regulatory requirements. As regulators continue to redefine industry contracts and accounting methods, we believe the environment will become increasingly challenging for many firms, as they must decide between growth and profitability.

iStar Financial, Inc. detracted from the portfolio in 2005. iStar is one of the largest publicly traded providers of customized financing to public and private owners of commercial real estate. The company lowered guidance earlier in the year due to a spike in loan prepayments and reduced credit spreads. We believe this well-managed company is attractively valued given its above-average return on equity and below-average leverage relative to the peer group.

Several individual stocks contributed to results during the reporting period. The Fund’s investment in Burlington Resources, Inc. was the top performer, highlighted by ConocoPhillips’ decision to acquire the company. Retail company J. C. Penney Co., Inc. performed well as recent progress in the company’s turnaround, including share buybacks and improved operating results, lifted its stock higher. While the turnaround has been impressive to date, we believe that its company management continues to remain focused on improving operating margins and store productivity.

We thank you for your investment and look forward to serving your investment needs in the future.

Goldman Sachs Value Portfolio Management Team

January 18, 2006

Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Growth and Income Fund are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity

 
2

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND 

contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.

The VIT Growth and Income Fund invests primarily in large-capitalization U.S. equity investments and may also invest in fixed income securities. The Fund’s equity investments will be subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The Fund may invest in foreign securities, which may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all.

SECTOR ALLOCATION AS OF DECEMBER 31, 2005†

Percentage of Portfolio Investments

(BAR CHART)

† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value. Short-term Investments include repurchase agreements and securities lending collateral.

 
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 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND

Performance Summary

December 31, 2005

The following graph shows the value as of December 31, 2005, of a $10,000 investment made on January 12, 1998 (commencement of operations). For comparative purposes, the performance of the Fund’s benchmark, the Russell 1000 Value Index (with dividends reinvested), as well as the Fund’s former benchmark, the Standard and Poor’s 500 Index (with dividends reinvested) (“S&P 500 Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance also would have been reduced had expense limitations not been in effect. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a Fund.

Growth and Income Fund’s Lifetime Performance

Growth of a $10,000 Investment, Distributions Reinvested from January 12, 1998 to December 31, 2005.

(PERFORMANCE CHART)

                             
Since Inception Five Years One Year
Average Annual Total Return Through December 31, 2005
Growth and Income Fund (commenced January 12, 1998)
     3.42%       4.30%       3.93%      
 
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GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND 

Statement of Investments

December 31, 2005
                     
Shares Description Value
   
Common Stocks – 97.5%
    Aerospace & Defense – 1.5%
      40,569     General Dynamics Corp.   $ 4,626,894  
   
    Brokers – 1.8%
      23,677     Lehman Brothers Holdings, Inc.     3,034,681  
      48,020     Morgan Stanley     2,724,655  
                 
 
                  5,759,336  
   
    Chemicals – 2.4%
      94,088     Dow Chemical Co.     4,122,936  
      70,709     Rohm & Haas Co.     3,423,730  
                 
 
                  7,546,666  
   
    Computer Software – 4.0%
      230,892     Activision, Inc.*     3,172,456  
      10,638     International Business Machines Corp.     874,444  
      232,455     Microsoft Corp.     6,078,698  
      206,962     Oracle Corp.*     2,527,006  
                 
 
                  12,652,604  
   
    Diversified Energy – 0.5%
      44,045     Equitable Resources, Inc.     1,616,011  
   
    Drugs – 4.6%
      105,356     Abbott Laboratories     4,154,187  
      62,138     Bristol-Myers Squibb Co.     1,427,931  
      373,411     Pfizer, Inc.     8,707,945  
                 
 
                  14,290,063  
   
    Electrical Utilities – 6.6%
      9,750     Dominion Resources, Inc.     752,700  
      2,300     Edison International     100,303  
      106,027     Entergy Corp.     7,278,753  
      109,022     Exelon Corp.     5,793,429  
      39,738     FirstEnergy Corp.     1,946,765  
      165,390     PPL Corp.     4,862,466  
                 
 
                  20,734,416  
   
    Energy Resources – 12.3%
      73,702     Burlington Resources, Inc.     6,353,112  
      164,621     Chevron Corp.     9,345,534  
      161,754     ConocoPhillips     9,410,848  
      239,233     Exxon Mobil Corp.     13,437,718  
                 
 
                  38,547,212  
   
    Energy-MLP – 3.0%
      41,770     Energy Transfer Partners, LP     1,430,205  
      190,414     Enterprise Products Partners LP     4,571,840  
      95,120     Magellan Midstream Partners LP     3,065,718  
      8,788     Williams Partners LP     273,746  
                 
 
                  9,341,509  
   
    Environmental & Other Services – 1.1%
      111,300     Waste Management, Inc.     3,377,955  
   
    Financial Technology – 0.9%
      65,517     First Data Corp.     2,817,886  
   
    Food & Beverage – 1.8%
      81,529     Kraft Foods, Inc.     2,294,226  
      46,881     Unilever NV     3,218,381  
                 
 
                  5,512,607  
   
    Home Products – 2.4%
      201,310     Newell Rubbermaid, Inc.     4,787,152  
      24,184     Procter & Gamble Co.     1,399,770  
      22,387     The Clorox Co.     1,273,596  
                 
 
                  7,460,518  
   
    Large Banks – 14.6%
      357,013     Bank of America Corp.     16,476,150  
      313,833     Citigroup, Inc.     15,230,316  
      277,057     J.P. Morgan Chase & Co.     10,996,392  
      104,218     U.S. Bancorp     3,115,076  
                 
 
                  45,817,934  
   
    Media – 2.7%
      195,781     The Walt Disney Co.     4,692,871  
      219,050     Time Warner, Inc.     3,820,232  
                 
 
                  8,513,103  
   
    Medical Products – 0.9%
      78,322     Baxter International, Inc.     2,948,823  
   
    Motor Vehicle – 0.7%
      51,285     Autoliv, Inc.     2,329,365  
   
    Oil Services – 1.3%
      32,361     Baker Hughes, Inc.     1,966,902  
      53,629     BJ Services Co.     1,966,575  
                 
 
                  3,933,477  
   
    Paper & Packaging – 1.1%
      152,791     Packaging Corp. of America     3,506,553  
   
    Parts & Equipment – 3.9%
      46,420     American Standard Companies, Inc.     1,854,479  
      152,396     Tyco International Ltd.     4,398,148  
      107,049     United Technologies Corp.     5,985,110  
                 
 
                  12,237,737  
   
    Property Insurance – 4.8%
      59,764     PartnerRe Ltd.     3,924,702  
      60,748     RenaissanceRe Holdings Ltd. Series B     2,679,594  
      68,237     The Allstate Corp.     3,689,575  
      67,196     Willis Group Holdings Ltd.     2,482,220  
      32,235     XL Capital Ltd.(a)     2,171,994  
                 
 
                  14,948,085  
   
 
The accompanying notes are an integral part of these financial statements.

5

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND
 
Statement of Investments (continued)
December 31, 2005
                     
Shares Description Value
   
Common Stocks – (continued)
    Real Estate Investment Trusts (REITs) – 4.3%
      71,519     Apartment Investment & Management Co.   $ 2,708,425  
      65,307     Developers Diversified Realty Corp.     3,070,735  
      138,543     iStar Financial, Inc.     4,939,058  
      72,320     Plum Creek Timber Co., Inc.     2,607,136  
                 
 
                  13,325,354  
   
    Regional Banks – 3.8%
      148,197     KeyCorp     4,880,127  
      112,236     PNC Financial Services Group, Inc.     6,939,552  
                 
 
                  11,819,679  
   
    Retail Apparel – 3.2%
      19,135     Federated Department Stores, Inc.     1,269,225  
      155,312     J. C. Penney Co., Inc.     8,635,347  
                 
 
                  9,904,572  
   
    Specialty Financials – 5.2%
      75,876     Alliance Capital Management Holding LP     4,286,235  
      41,529     American Capital Strategies Ltd.     1,503,765  
      82,297     Countrywide Financial Corp.     2,813,734  
      180,169     Washington Mutual, Inc.     7,837,352  
                 
 
                  16,441,086  
   
    Telephone – 3.9%
      386,167     AT&T, Inc.     9,457,230  
      88,983     Verizon Communications, Inc.     2,680,168  
                 
 
                  12,137,398  
   
    Thrifts – 1.3%
      60,388     Golden West Financial Corp.     3,985,608  
   
    Tobacco – 1.5%
      61,977     Altria Group, Inc.     4,630,921  
   
    Transports – 0.5%
      21,919     United Parcel Service, Inc. Class B     1,647,213  
   
    Trust/Processors – 0.9%
      86,343     Bank of New York Co., Inc.     2,750,025  
   
    TOTAL COMMON STOCKS
    (Cost $273,924,581)   $ 305,160,610  
   
                             
Principal Interest Maturity
Amount Rate Date Value
   
Repurchase Agreement(b) – 2.4%
    Joint Repurchase Agreement Account II
    $ 7,600,000       4.29 %   01/03/2006     $7,600,000  
    Maturity Value:  $7,603,620
    (Cost $7,600,000)        
   
    TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
    (Cost $281,524,581)     $312,760,610  
   
                     
Shares Description Value
   
Securities Lending Collateral – 0.5%
      1,718,750     Boston Global Investment Trust – Enhanced Portfolio   $ 1,718,750  
    (Cost $1,718,750)        
   
    TOTAL INVESTMENTS – 100.4%
    (Cost $283,243,331)   $ 314,479,360  
   
  The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.
 
 * Non-income producing security.
 
 (a) All or portion of security is on loan.
 
 (b) Joint repurchase agreement was entered into on December 30, 2005.
 
 
The accompanying notes are an integral part of these financial statements.

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GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND 

ADDITIONAL INVESTMENT INFORMATION

JOINT REPURCHASE AGREEMENT ACCOUNT II — At December 31, 2005, the Fund had an undivided interest in the following Joint Repurchase Agreement Account II which equaled $7,600,000 in principal amount.

                             
Principal Interest Maturity Maturity
Repurchase Agreements Amount Rate Date Value
Banc of America Securities LLC
  $ 3,020,000,000       4.30 %   01/03/2006   $ 3,021,442,889  
Barclays Capital PLC
    2,260,000,000       4.30     01/03/2006     2,261,079,778  
Greenwich Capital Markets
    300,000,000       4.33     01/03/2006     300,144,333  
J.P. Morgan Securities, Inc.
    400,000,000       4.30     01/03/2006     400,191,111  
Morgan Stanley & Co.
    3,140,000,000       4.27     01/03/2006     3,141,489,756  
UBS Securities LLC
    600,000,000       4.18     01/03/2006     600,278,667  
UBS Securities LLC
    2,565,000,000       4.30     01/03/2006     2,566,225,500  
TOTAL
   $ 12,285,000,000                 $ 12,290,852,034  
  At December 31, 2005, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 3.50% to 4.40%, due 02/24/2006 to 01/18/2007; Federal Home Loan Mortgage Association, 0.00% to 13.00%, due 01/01/2006 to 01/01/2036; Federal National Mortgage Association, 0.00% to 15.50%, due 02/01/2006 to 01/01/2036; Government National Mortgage Association, 4.50% to 6.50%, due 11/15/2013 to 12/15/2035 and Tennessee Valley Authority, 4.75% to 7.14%, due 11/13/2008 to 08/01/2013. The aggregate market value of the collateral, including accrued interest, was $12,560,093,631.  
 
The accompanying notes are an integral part of these financial statements.

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 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND

Statement of Assets and Liabilities

December 31, 2005
               
 
    Assets:
   
Investment in securities, at value (identified cost $281,524,581) — including $1,684,500 of securities on loan
  $ 312,760,610  
   
Securities lending collateral, at value (cost $1,718,750)
    1,718,750  
   
Cash
    85,412  
   
Receivables:
       
     
Dividends and interest
    500,488  
     
Fund shares sold
    177,664  
     
Investment securities sold
    114,956  
     
Securities lending income
    581  
   
   
Total assets
     315,358,461  
   
    Liabilities:
   
Payables:
       
     
Payable upon return of securities loaned
    1,718,750  
     
Amounts owed to affiliates
    211,101  
     
Investment securities purchased
    98,736  
     
Fund shares repurchased
    57,743  
   
Accrued expenses
    120,235  
   
   
Total liabilities
     2,206,565  
   
    Net Assets:
   
Paid-in capital
    286,441,654  
   
Accumulated undistributed net investment income
    424,392  
   
Accumulated net realized loss on investment transactions
    (4,950,179 )
   
Net unrealized gain on investments
    31,236,029  
   
   
NET ASSETS
   $ 313,151,896  
   
   
Total shares of beneficial interest outstanding, par value $0.001 (unlimited shares authorized)
    26,157,480  
   
Net asset value, offering and redemption price per share
  $ 11.97  
   
 
The accompanying notes are an integral part of these financial statements.

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GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND 

Statement of Operations

For the Year Ended December 31, 2005
             
    Investment income:
   
Dividends
  $ 7,559,451  
   
Interest (including securities lending income of $3,802)
    223,015  
   
   
Total income
     7,782,466  
   
    Expenses:
   
Management fees
    2,201,474  
   
Transfer agent fees
    117,412  
   
Printing fees
    110,114  
   
Custody and accounting fees
    79,335  
   
Professional fees
    45,743  
   
Trustee fees
    16,492  
   
Other
    14,614  
   
   
Total expenses
     2,585,184  
   
   
Less — expense reductions
    (1,403 )
   
   
Net expenses
     2,583,781  
   
   
NET INVESTMENT INCOME
     5,198,685  
   
    Realized and unrealized gain (loss) on investment transactions:
   
Net realized gain from investment transactions
    22,131,005  
   
Payments by affiliates to reimburse certain security claims
    9,144  
   
Net change in unrealized gain on investments
    (15,849,453 )
   
   
Net realized and unrealized gain on investment transactions
     6,290,696  
   
   
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
   $ 11,489,381  
   
 
The accompanying notes are an integral part of these financial statements.

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 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND

Statements of Changes in Net Assets

                     
For the For the
Year Ended Year Ended
December 31, 2005 December 31, 2004
    From operations:
   
Net investment income
  $ 5,198,685     $ 4,203,524  
   
Net realized gain on investment transactions
    22,131,005       31,697,872  
   
Payments by affiliates to reimburse certain security claims
    9,144       —  
   
Payments by affiliates to reimburse certain brokerage commissions
    —       51,635  
   
Net change in unrealized gain (loss) on investments
    (15,849,453 )     6,786,601  
   
   
Net increase in net assets resulting from operations
     11,489,381       42,739,632  
   
    Distributions to shareholders:
   
From net investment income
    (5,139,069 )     (3,899,045 )
   
    From share transactions:
   
Proceeds from sales of shares
    58,037,222       33,498,391  
   
Reinvestment of dividends and distributions
    5,139,069       3,899,045  
   
Cost of shares repurchased
    (32,770,160 )     (30,158,379 )
   
   
Net increase in net assets resulting from share transactions
     30,406,131       7,239,057  
   
   
TOTAL INCREASE
     36,756,443       46,079,644  
   
    Net assets:
   
Beginning of year
    276,395,453       230,315,809  
   
   
End of year
  $ 313,151,896     $ 276,395,453  
   
   
Accumulated undistributed net investment income
   $ 424,392     $ 371,862  
   
    Summary of share transactions:
   
Shares sold
    4,906,882       3,088,976  
   
Shares issued on reinvestment of dividends and distributions
    428,971       335,835  
   
Shares repurchased
    (2,776,580 )     (2,861,998 )
   
   
NET INCREASE
     2,559,273       562,813  
   
 
The accompanying notes are an integral part of these financial statements.

10

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year
                                                                                                             
Income (loss) from Ratios assuming no
investment operations expense reductions
Net Distributions Net Ratio of Ratio of Ratio of
Net asset realized to shareholders Net asset assets Ratio of net investment total net investment
value, Net and Total from from net value, at end net expenses income expenses income Portfolio
beginning investment unrealized investment investment end of Total  of year to average to average to average to average turnover
of year income(a) gain (loss) operations income year return(b) (in 000s) net assets net assets net assets net assets rate
 
    For the Years ended December 31,
    2005   $ 11.71     $ 0.21     $ 0.25     $ 0.46     $ (0.20 )   $ 11.97       3.93 %   $ 313,152       0.88 %     1.77 %     0.88 %     1.77 %     46 %
    2004     10.00       0.19       1.69       1.88       (0.17 )     11.71       18.80       276,395       0.86       1.75       0.86       1.75       58  
    2003     8.14       0.13       1.85       1.98       (0.12 )     10.00       24.36       230,316       1.02       1.44       1.20       1.26       51  
    2002     9.33       0.13       (1.19 )     (1.06 )     (0.13 )     8.14       (11.34 )     36,911       1.05       1.51       1.27       1.29       98  
    2001     10.34       0.05       (1.02 )     (0.97 )     (0.04 )     9.33       (9.34 )     40,593       1.00       0.49       1.17       0.32       48  
   

(a)  Calculated based on the average shares outstanding methodology.
(b)  Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions and a complete redemption of the investment at the net asset value at the end of the year.

The accompanying notes are an integral part of these financial statements.

 
11

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND

Notes to Financial Statements

December 31, 2005

1. ORGANIZATION

Goldman Sachs Variable Insurance Trust (the “Trust”) 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 Growth and Income Fund (the “Fund”). The Fund is a diversified portfolio under the Act.
     Shares of the Trust may be purchased and held by separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Trust are not offered directly to the general public.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies consistently followed by the Fund. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity and debt securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line or pro rata basis depending upon the nature of the expense.

D. Federal Taxes — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.

     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules. Therefore, the source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income or net realized gain, or from tax return of capital.
     In addition, distributions paid by the Fund’s investments in real estate investment trusts (“REITs”) often include a “return of capital” which is recorded by the Fund as a reduction of the cost basis of the securities held. The Code requires a REIT to distribute at least 95% of its taxable income to investors. In many cases, however, because of “non-cash” expenses such as property depreciation, an equity REIT’s cash flow will exceed its taxable income. The REIT may distribute this excess cash to offer a more competitive yield. This portion of the distribution is deemed a return of capital and is generally not taxable to shareholders.
 
12

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND 
 
2. SIGNIFICANT ACCOUNTING POLICIES (continued)

E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate liquid assets, on the books of their custodian, with a daily mark-to-market value equal to or greater than the market value of the corresponding transactions.

F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.

     Pursuant to exemptive relief granted by the Securities and Exchange Commission (the “SEC”) and terms and conditions contained therein, the Fund, together with other registered investment companies having management or investment advisory agreements with Goldman Sachs Asset Management, L.P. (“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.

3. AGREEMENTS

GSAM, an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Fund. Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trust’s Board of Trustees.
     As compensation for the services rendered pursuant to the Agreements, the assumption of the expenses related thereto and administering the Fund’s business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”) computed daily and payable monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
     At a meeting held on June 16, 2005, the Board of Trustees of the Trust approved a fee reduction commitment for the Fund which will be effective on a contractual basis in 2006. Effective July 1, 2005, GSAM implemented the fee reduction commitment on a voluntary basis which resulted in the following annual Management fee rates:
         
Average Daily Net Assets Annual Rate
First $1 Billion
    0.75 %
Next $1 Billion
    0.68 %
Over $2 Billion
    0.65 %

     Prior to July 1, 2005, the Fund’s Management fee as an annual percentage rate of average daily net assets was 0.75%.

     GSAM has voluntarily agreed to limit certain “Other Expenses” of the Fund (excluding Management fees, Transfer Agency fees, taxes, interest, brokerage fees and litigation, indemnification costs, shareholder meeting and other extraordinary expenses exclusive of any offset arrangements) to the extent that such expenses exceed, on an annual basis, 0.11% of the average daily net assets of the Fund. GSAM agreed to maintain this expense limitation contractually through June 30, 2005 and on a voluntary basis thereafter. Such expense reimbursements, if any, are computed daily and paid monthly.

     In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the year ended December 31, 2005, GSAM made no reimbursements to the Fund.
 
13

 

 
 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND
 
Notes to Financial Statements (continued)
December 31, 2005
 
3. AGREEMENTS (continued)
     In addition, the Fund has entered into certain offset arrangements with the custodian resulting in a reduction in the Fund’s expenses. For the year ended December 31, 2005, custody fees were reduced by approximately $1,400.
     Goldman Sachs also serves as the Transfer Agent of the Fund for a fee. The fees charged for such transfer agency services are calculated daily and payable monthly equal to an annual rate of 0.04% of the average daily net assets of the Fund. Goldman Sachs serves as the distributor of the Fund’s shares at no cost to the Fund.
     At December 31, 2005, amounts owed to affiliates were approximately $200,400 and $10,700 for Management and Transfer Agent fees, respectively.

4. PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds of sales and maturities of long-term securities for the year ended December 31, 2005, were $156,264,332 and $130,937,049, respectively. For the year ended December 31, 2005, Goldman Sachs earned approximately $6,500 in brokerage commissions from portfolio transactions executed on behalf of the Fund.
     During the year ended December 31, 2005, GSAM voluntarily reimbursed the Fund $9,144 for certain class action settlements in which the Fund was eligible to participate.

5. SECURITIES LENDING

Pursuant to exemptive relief granted by the SEC and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Boston Global Advisers (“BGA”), 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 loans are collateralized at all times with cash and/or securities with a market value at least equal to the securities on loan. As with other extensions of credit, the Fund bears the risk of delay on recovery or loss of rights in the collateral should the borrower of the securities fail financially.
     Both the Fund and BGA receive compensation relating to the lending of the Fund’s securities. The amount earned by the Fund for the year ended December 31, 2005 is reported parenthetically under Investment Income on the Statement of Operations. For the year ended December 31, 2005, BGA earned $671 in fees as securities lending agent. At December 31, 2005, the Fund loaned securities having a market value of $1,684,500 collateralized by cash in the amount of $1,718,750. The Fund invests the cash collateral received in connection with securities lending transactions in the Enhanced Portfolio of Boston Global Investment Trust, a Delaware statutory trust. The Enhanced Portfolio is exempt from registration under Section 3(c)(7) of the Act and is managed by GSAM, for which GSAM receives an investment advisory fee of up to 0.10% of the average daily net assets of the Enhanced Portfolio. The Enhanced Portfolio invests in high quality money market instruments. The Fund bears the risk of incurring a loss from the investment of cash collateral due to either credit or market factors.

6. LINE OF CREDIT FACILITY

The Fund participates in a $350,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Fund must own securities having a market value in excess of 300% of the Fund’s total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. This committed facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. During the year ended December 31, 2005, the Fund did not have any borrowings under this facility.
 
14

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND 

7. TAX INFORMATION

The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows:
                 
For the years ended December 31,
2005 2004
Distributions paid from:
               
Ordinary income
  $ 5,139,069     $ 3,899,045  
Total taxable distributions
  $ 5,139,069     $ 3,899,045  

As of December 31, 2005, the components of accumulated earnings (losses) on a tax basis were as follows:

           
Undistributed ordinary income — net
  $ 386,886  
Undistributed long-term capital gains
    432,170  
Total undistributed earnings
    819,056  
Capital loss carryforward:(1)(2)
       
 
Expiring 2010
    (4,587,095 )
Total capital loss carryforward
    (4,587,095 )
Timing differences (related to the recognition of certain REIT dividends for tax purposes)
    35,266  
Unrealized gains — net
    30,443,015  
Total accumulated earnings — net
  $ 26,710,242  

(1)  Expiration occurs on December 31 of the year indicated and utilization of these losses may be limited under the Code.
(2)  During the year ended December 31, 2005, the Fund utilized $21,855,122 of capital loss carryforwards.

At December 31, 2005, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:

         
Tax cost
  $ 284,036,345  
Gross unrealized security gain
    35,958,845  
Gross unrealized security loss
    (5,515,830 )
Net unrealized security gain
  $ 30,443,015  

The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and return of capital distributions from underlying fund investments. The cumulative timing differences consist of deferred income distributions from underlying fund investments.

     In order to present certain components of the Fund’s capital accounts on a tax basis, certain reclassifications have been recorded to the Fund’s accounts. The Fund reclassified $7,086 from accumulated undistributed net investment income to accumulated net realized loss on investment transactions. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from the difference in tax treatment of underlying fund investments.

8. LEGAL PROCEEDINGS

Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds and the Trustees and Officers of the Goldman Sachs Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties
 
15

 

 
 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND
 
Notes to Financial Statements (continued)
December 31, 2005
 
8. LEGAL PROCEEDINGS (continued)
including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. It is possible that the plaintiffs may appeal this decision.

     Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuits will have a material adverse financial impact on the Fund is remote, and the pending actions are not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

 
16

 

Report of Independent Registered Public Accounting Firm

To the Shareholders of Goldman Sachs Growth and Income Fund and Board of Trustees
Goldman Sachs Variable Insurance Trust

We have audited the accompanying statement of assets and liabilities of Goldman Sachs Growth and Income Fund (one of the funds comprising the Goldman Sachs Variable Insurance Trust) (the “Fund”), including the statement of investments, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs Growth and Income Fund at December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

  -s- Ernst & Young LLP

New York, New York
February 10, 2006
 
17

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND

Fund Expenses (Unaudited) — Six Month Period Ended December 31, 2005

            As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  
 
            The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2005 through December 31, 2005.  
 
            Actual Expenses — The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.  
 
            Hypothetical Example for Comparison Purposes — The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.  
 
            Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges (loads), redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.  

                         
Expenses Paid
for the
Beginning Ending 6 months
Account Value Account Value ended
7/1/05 12/31/05 12/31/05*
Actual
  $ 1,000     $ 1,033.10     $ 4.61  
Hypothetical 5% return
    1,000       1,020.67 +     4.58  

  *   Expenses are calculated using the Fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2005. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratio for the period was 0.90%.  
  +   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.  

 
18

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND 

Trustees and Officers (Unaudited)

Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Ashok N. Bakhru
Age: 63		   Chairman & Trustee   Since 1997   President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President — Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors — III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003).

Chairman of the Board and Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
John P. Coblentz, Jr.
Age: 64		   Trustee   Since 2003   Partner, Deloitte & Touche LLP (June 1975-May 2003).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Patrick T. Harker
Age: 47		   Trustee   Since 2000   Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-Present); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Mary P. McPherson
Age: 70		   Trustee   Since 1997   Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Wilma J. Smelcer
Age: 56		   Trustee   Since 2001   Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Lawson Products Inc. (distributor of industrial products).
 
19

 

Trustees and Officers (Unaudited) (continued)
Independent Trustees
 
 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Richard P. Strubel
Age: 66		   Trustee   Since 1997   Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company, (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Gildan Activewear Inc. (a clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (53 Portfolios).

Interested Trustees

                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
*Alan A. Shuch
Age: 56		   Trustee   Since 1997   Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994- May 1999).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
*Kaysie P. Uniacke
Age: 44		   Trustee
  &		   Since 2001   Managing Director, GSAM (1997-Present).   72   None
    President   Since 2002   Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies).

Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).		        
 
*
These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1
Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Howard B. Surloff.
2
Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
3
The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of December 31, 2005, the Trust consisted of 61 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios.
4
This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726.

 
20

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND 

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*
             
Term of
Office and
Position(s) Held Length of
Name, Age And Address With the Trust Time Served1 Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke
32 Old Slip
New York, NY 10005
Age: 44		   President & Trustee   Since 2002

Since 2001		   Managing Director, GSAM (1997-Present).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).
James A. Fitzpatrick
71 South Wacker Drive
Suite 500
Chicago, IL 60606
Age: 45		   Vice President   Since 1997   Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara
32 Old Slip
New York, NY 10005
Age: 43		   Vice President   Since 2001   Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004)
John M. Perlowski
32 Old Slip
New York, NY 10005
Age: 41		   Treasurer   Since 1997   Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003).

Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Howard B. Surloff
One New York Plaza
37th Floor
New York, NY 10004
Age: 40		   Secretary   Since 2001   Managing Director, Goldman Sachs (November 2002-Present); Associate General Counsel, Goldman Sachs and General Counsel to the U.S. Funds Group (December 1997-Present).

Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies) (2001-Present) and Assistant Secretary prior thereto.
 
1
Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*
Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726.

Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)

For the year ended December 31, 2005, 100% of the dividends paid from net investment company taxable income by the Growth and Income Fund qualifies for the dividends received deduction available to corporations.

 
21

 

     
TRUSTEES
  OFFICERS
Ashok N. Bakhru, Chairman
   Kaysie P. Uniacke, President
John P. Coblentz, Jr.
  James A. Fitzpatrick, Vice President
Patrick T. Harker
  James A. McNamara, Vice President
Mary Patterson McPherson
  John M. Perlowski, Treasurer
Alan A. Shuch
  Howard B. Surloff, Secretary
Wilma J. Smelcer
   
Richard P. Strubel
   
Kaysie P. Uniacke
   
 
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent 		   
 
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
 
Visit our Web site at www.gs.com/funds to obtain the most recent month-end returns.
 
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
 
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov.
 
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, the Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
 
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.
 
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.
 
    Toll Free (in U.S.): 800-292-4726
 
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust: Growth and Income Fund.
 
 
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: February 18, 2006
 
VITG&IAR/06-291/02-06    

 

Goldman
Sachs Variable Insurance Trust

GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32nd FLOOR, NEW YORK, NEW YORK 10005

CORESM U.S. Equity Fund

Annual Report

December 31, 2005

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND 

Shareholder Letter

Dear Shareholders:

This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — CORE U.S. Equity Fund during the one-year reporting period that ended December 31, 2005.

Market Review

The S&P 500 Index returned 4.91% over the one-year reporting period ended December 31, 2005. Eight of the ten sectors in the Index posted positive results, led by the Energy (+31.4%) and Utilities (+16.8%) sectors. The Energy sector also contributed the most (weight times performance) to relative returns for the period. In the style area, the Russell 1000 Value Index (+7.05%) outperformed the Russell 1000 Growth Index (+5.26%) for the one-year period. From a market cap perspective, mid caps outperformed large- and small-cap stocks, with the Russell Midcap, Russell 1000, and Russell 2000 Indexes returning 12.65%, 6.27%, and 4.55%, respectively.

Investment Objective

The Fund seeks long-term capital growth and dividend income.

Portfolio Composition

Top 10 Portfolio Holdings as of December 31, 2005*

             
% of
Company Net Assets Business
General Electric Co.
    3.9 %   Industrial Conglomerates
Bank of America Corp.
    3.2     Banks
Johnson & Johnson
    3.1     Pharmaceuticals
J.P. Morgan Chase & Co.
    2.8     Diversified Financials
Amgen, Inc.
    2.4     Biotechnology
Hewlett-Packard Co.
    2.3     Computers & Peripherals
Time Warner, Inc.
    2.3     Media
The Procter & Gamble Co.
    2.2     Household Products
Intel Corp.
    2.2     Semiconductor Equipment & Products
Merrill Lynch & Co., Inc.
    2.1     Diversified Financials

* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.

 
1

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND
 
Shareholder Letter (continued)

Performance Review

Over the one-year period that ended December 31, 2005, the Fund generated a cumulative total return of 6.51%. This return compares to the 4.91% cumulative total return of the Fund’s benchmark, the Standard & Poor’s 500 Index (with dividends reinvested), over the same time period.

The Fund outperformed its benchmark during the reporting period, as returns to the CORESM investment themes were positive. Momentum and Valuation were the biggest positive contributors to relative returns, as inexpensive companies with strong momentum characteristics outperformed their industry counterparts. Earnings Quality, Management Impact, Profitability, and Analyst Sentiment also added value, albeit to a lesser extent.

Stock selection was positive in seven of the ten sectors. The Fund’s holdings in the Energy and Information Technology sectors outpaced their peers in the benchmark the most. On the downside, stock selection in the Consumer Discretionary sector detracted the most from excess returns, but did little to offset gains experienced elsewhere.

In managing the CORESM products, we do not make size or sector bets. We hope to add value versus the Fund’s index through individual stock selection. Our quantitative process seeks out stocks with good momentum that also appear to be good values. We prefer stocks about which fundamental research analysts are becoming more positive and companies with strong profit margins, sustainable earnings, and that use their capital to enhance shareholder value. These factors are not highly correlated to each other, which diversifies the Fund’s sources of returns.

We thank you for your investment and look forward to serving your investment needs in the future.

Goldman Sachs Quantitative Equity Management Team

January 18, 2006

Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) CORE U.S. Equity Fund are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.

The VIT CORE U.S. Equity Fund invests in a broadly diversified portfolio of U.S. stocks. The Fund is subject to market risks, as the share prices of the securities in the portfolio may go up or down. This could occur in response to the prospects of the companies issuing the stock, overall sector performance and/or general economic conditions.

 
2

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND 

SECTOR ALLOCATION AS OF DECEMBER 31, 2005†

Percentage of Portfolio Investments

(BAR CHART)

† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value. Short-term Investments include repurchase agreements and securities lending collateral.

 
3

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND

Performance Summary

December 31, 2005

The following graph shows the value as of December 31, 2005, of a $10,000 investment made on February 13, 1998 (commencement of operations). For comparative purposes, the performance of the Fund’s benchmark, the Standard and Poor’s 500 Index (with dividends reinvested) (“S&P 500 Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance also would have been reduced had expense limitations not been in effect. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a Fund.

CORESM U.S. Equity Fund’s Lifetime Performance

Growth of a $10,000 Investment, Distributions Reinvested from February 13, 1998 to December 31, 2005.

                             
Since Inception Five Years One Year
Average Annual Total Return Through December 31, 2005
CORESM U.S. Equity Fund (commenced February 13, 1998)
     4.41%       1.74%       6.51%      
 
4

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND 

Statement of Investments

December 31, 2005
                     
Shares Description Value
   
Common Stocks – 98.9%
    Aerospace & Defense – 3.8%
      245,700     Northrop Grumman Corp.   $ 14,769,027  
      232,800     The Boeing Co.     16,351,872  
                 
 
                  31,120,899  
   
    Banks – 6.0%
      566,766     Bank of America Corp.     26,156,251  
      41,800     Bank of Hawaii Corp.     2,154,372  
      83,200     Hudson City Bancorp, Inc.     1,008,384  
      189,600     U.S. Bancorp     5,667,144  
      61,200     UnionBanCal Corp.     4,205,664  
      59,400     Wachovia Corp.     3,139,884  
      165,300     Washington Mutual, Inc.(a)     7,190,550  
                 
 
                  49,522,249  
   
    Beverages – 0.3%
      58,300     The Coca-Cola Co.     2,350,073  
   
    Biotechnology – 3.1%
      250,800     Amgen, Inc.*     19,778,088  
      58,300     Genentech, Inc.*     5,392,750  
                 
 
                  25,170,838  
   
    Chemicals – 1.8%
      189,300     Monsanto Co.     14,676,429  
   
    Commercial Services – 0.0%
      12,800     CCE Spinco, Inc.*     167,680  
   
    Commercial Services & Supplies – 0.1%
      19,000     Automatic Data Processing, Inc.     871,910  
   
    Communications Equipment – 1.3%
      110,200     Cisco Systems, Inc.*     1,886,624  
      30,200     Comverse Technology, Inc.*     803,018  
      285,700     Corning, Inc.*     5,616,862  
      30,400     QUALCOMM, Inc.     1,309,632  
      73,100     Tellabs, Inc.*     796,790  
                 
 
                  10,412,926  
   
    Computers & Peripherals – 3.1%
      652,800     Hewlett-Packard Co.     18,689,664  
      355,800     Western Digital Corp.*     6,621,438  
                 
 
                  25,311,102  
   
    Diversified Financials – 8.4%
      180,300     AmeriCredit Corp.*     4,621,089  
      44,400     Ameriprise Financial, Inc.     1,820,400  
      66,300     Ameritrade Holding Corp.*     1,591,200  
      122,132     Citigroup, Inc.     5,927,066  
      581,200     JPMorgan Chase & Co.     23,067,828  
      258,800     Merrill Lynch & Co., Inc.     17,528,524  
      195,400     Moody’s Corp.     12,001,468  
      58,400     Principal Financial, Inc.     2,769,912  
                 
 
                  69,327,487  
   
    Diversified Telecommunication Services – 2.5%
      31,400     BellSouth Corp.     850,940  
      166,500     CenturyTel, Inc.     5,521,140  
      210,200     Sprint Nextel Corp.     4,910,272  
      313,900     Verizon Communications, Inc.     9,454,668  
                 
 
                  20,737,020  
   
    Electric Utilities – 2.9%
      73,600     American Electric Power Co., Inc.     2,729,824  
      319,500     PG&E Corp.     11,859,840  
      176,800     TXU Corp.     8,873,592  
                 
 
                  23,463,256  
   
    Electrical Equipment – 0.8%
      140,300     Energizer Holdings, Inc.*     6,985,537  
   
    Energy Equipment & Services – 0.2%
      24,900     Helmerich & Payne, Inc.     1,541,559  
   
    Food & Drug Retailing – 0.8%
      61,800     SUPERVALU, Inc.     2,007,264  
      238,900     The Kroger Co.*     4,510,432  
                 
 
                  6,517,696  
   
    Food Products – 2.4%
      406,700     Archer-Daniels-Midland Co.     10,029,222  
      560,800     Tyson Foods, Inc.     9,589,680  
                 
 
                  19,618,902  
   
    Gaming/Lodging – 0.1%
      14,900     Carnival Corp.     796,703  
   
    Healthcare Equipment & Supplies – 0.5%
      22,300     Guidant Corp.     1,443,925  
      57,000     St. Jude Medical, Inc.*     2,861,400  
                 
 
                  4,305,325  
   
    Healthcare Providers & Services – 3.1%
      316,800     AmerisourceBergen Corp.     13,115,520  
      48,400     Express Scripts, Inc.*     4,055,920  
      66,500     Humana, Inc.*     3,612,945  
      86,600     McKesson Corp.     4,467,694  
                 
 
                  25,252,079  
   
    Hotels, Restaurants & Leisure – 0.7%
      141,100     Darden Restaurants, Inc.     5,485,968  
   
    Household Durables – 0.3%
      28,000     Whirlpool Corp.     2,345,280  
   
    Household Products – 3.1%
      139,500     Colgate-Palmolive Co.     7,651,575  
      313,390     The Procter & Gamble Co.     18,139,013  
                 
 
                  25,790,588  
   
    Industrial Conglomerates – 5.0%
      119,200     3M Co.     9,238,000  
      915,100     General Electric Co.     32,074,255  
                 
 
                  41,312,255  
   
 
The accompanying notes are an integral part of these financial statements.

5

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND
 
Statement of Investments (continued)
December 31, 2005
                     
Shares Description Value
   
Common Stocks – (continued)
    Insurance – 6.3%
      103,500     Chubb Corp.   $ 10,106,775  
      224,100     Genworth Financial, Inc.     7,749,378  
      144,900     Loews Corp.     13,743,765  
      225,800     MBIA, Inc.     13,584,128  
      64,500     MetLife, Inc.(a)     3,160,500  
      65,800     W.R. Berkley Corp.     3,133,396  
                 
 
                  51,477,942  
   
    Internet Software & Services – 1.6%
      31,000     Google, Inc.*     12,860,660  
   
    IT Consulting & Services – 1.5%
      241,700     Computer Sciences Corp.*     12,239,688  
   
    Machinery – 0.5%
      40,000     ITT Industries, Inc.     4,112,800  
   
    Media – 6.3%
      102,400     Clear Channel Communications, Inc.     3,220,480  
      123,664     Comcast Corp.*     3,210,318  
      1,458,100     Liberty Media Corp. Series A*     11,475,247  
      15,000     The McGraw-Hill Companies, Inc.     774,450  
      1,068,900     The Time Warner, Inc.     18,641,616  
      433,900     Viacom, Inc. Class B     14,145,140  
                 
 
                  51,467,251  
   
    Metals & Mining – 0.5%
      15,800     Newmont Mining Corp.     843,720  
      42,700     Nucor Corp.     2,848,944  
      11,900     Southern Copper Corp.     797,062  
                 
 
                  4,489,726  
   
    Mining – 0.4%
      61,400     Freeport-McMoRan Copper & Gold, Inc. Series B     3,303,320  
   
    Multiline Retail – 0.3%
      85,300     Dillard’s, Inc.     2,117,146  
   
    Oil & Gas – 9.0%
      149,800     Anadarko Petroleum Corp.     14,193,550  
      176,100     Burlington Resources, Inc.     15,179,820  
      16,400     ConocoPhillips     954,152  
      230,100     Devon Energy Corp.     14,390,454  
      42,200     EOG Resources, Inc.     3,096,214  
      228,466     Exxon Mobil Corp.     12,832,935  
      170,200     Sunoco, Inc.     13,340,276  
                 
 
                  73,987,401  
   
    Pharmaceuticals – 7.6%
      31,000     Allergan, Inc.(a)     3,346,760  
      429,600     Johnson & Johnson     25,818,960  
      486,500     Merck & Co., Inc.     15,475,565  
      750,705     Pfizer, Inc.     17,506,441  
                 
 
                  62,147,726  
   
    Real Estate – 0.6%
      10,600     Boston Properties, Inc. (REIT)     785,778  
      17,700     Developers Diversified Realty Corp. (REIT)     832,254  
      55,500     Equity Office Properties Trust (REIT)     1,683,315  
      41,800     ProLogis (REIT)     1,952,896  
                 
 
                  5,254,243  
   
    Restaurants – 0.6%
      106,600     Yum! Brands, Inc.     4,997,408  
   
    Retailing – 0.1%
      11,800     Lowe’s Companies, Inc.     786,588  
   
    Road & Rail – 0.9%
      102,700     Burlington Northern Santa Fe Corp.     7,273,214  
   
    Semiconductor Equipment & Products – 4.7%
      30,900     Freescale Semiconductor, Inc.*     778,371  
      80,208     Freescale Semiconductor, Inc. Class B*     2,018,835  
      722,700     Intel Corp.     18,038,592  
      98,000     Micron Technology, Inc.*     1,304,380  
      509,300     Texas Instruments, Inc.     16,333,251  
                 
 
                  38,473,429  
   
    Software – 1.9%
      117,400     Autodesk, Inc.     5,042,330  
      44,800     Fair Isaac Corp.     1,978,816  
      236,900     Microsoft Corp.     6,194,935  
      72,300     Symantec Corp.*     1,265,250  
      72,200     Synopsys, Inc.*     1,448,332  
                 
 
                  15,929,663  
   
    Specialty Financials – 0.9%
      140,000     SLM Corp.     7,712,600  
   
    Specialty Retail – 1.5%
      285,300     AutoNation, Inc.*     6,199,569  
      278,456     Circuit City Stores, Inc.     6,290,321  
                 
 
                  12,489,890  
   
    Textiles & Apparel – 1.7%
      409,200     Coach, Inc.*     13,642,728  
   
    Tobacco – 1.6%
      170,700     Altria Group, Inc.     12,754,704  
   
    Wireless Telecommunication Services – 0.1%
      10,700     United States Cellular Corp.*     528,580  
   
    TOTAL COMMON STOCKS
    (Cost $731,600,097)   $ 811,130,468  
   
 
The accompanying notes are an integral part of these financial statements.

6

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND 
                             
Principal Interest Maturity
Amount Rate Date Value
   
Repurchase Agreement(b) – 0.8%
    Joint Repurchase Agreement Account II
    $ 7,000,000       4.29 %   01/03/2006     $7,000,000  
    Maturity Value:  $7,002,501
    (Cost $7,000,000)
   
    TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
    (Cost $738,600,097)     $818,130,468  
   
                     
Shares Description Value
   
Securities Lending Collateral – 0.9%
      7,289,750     Boston Global Investment Trust – Enhanced Portfolio   $ 7,289,750  
    (Cost $7,289,750)
   
    TOTAL INVESTMENTS – 100.6%
    (Cost $745,889,847)   $ 825,420,218  
   
  The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.
 
 * Non-income producing security.
 
 (a) All or portion of security is on loan.
 
 (b) Joint repurchase agreement was entered into on December 30, 2005.
                     
   
    Investment Abbreviation:
    REIT—Real Estate Investment Trust
   

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At December 31, 2005, the following futures contracts were open as follows:

                                 
Number of Settlement Unrealized
Type Contracts Long Month Market Value Loss
S&P 500 Index
    124       March 2006     $ 7,779,760     $ (129,854 )

JOINT REPURCHASE AGREEMENT ACCOUNT II — At December 31, 2005, the Fund had an undivided interest in the following Joint Repurchase Agreement Account II which equaled $7,000,000 in principal amount.

                                 
Principal Interest Maturity Maturity
Repurchase Agreements Amount Rate Date Value
Banc of America Securities LLC
  $ 3,020,000,000       4.30%       01/03/2006     $ 3,021,442,889  
Barclays Capital PLC
    2,260,000,000       4.30       01/03/2006       2,261,079,778  
Greenwich Capital Markets
    300,000,000       4.33       01/03/2006       300,144,333  
J.P. Morgan Securities, Inc.
    400,000,000       4.30       01/03/2006       400,191,111  
Morgan Stanley & Co.
    3,140,000,000       4.27       01/03/2006       3,141,489,756  
UBS Securities LLC
    600,000,000       4.18       01/03/2006       600,278,667  
UBS Securities LLC
    2,565,000,000       4.30       01/03/2006       2,566,225,500  
TOTAL
   $ 12,285,000,000                     $ 12,290,852,034  
  At December 31, 2005, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 3.50% to 4.40%, due 02/24/2006 to 01/18/2007; Federal Home Loan Mortgage Association, 0.00% to 13.00%, due 01/01/2006 to 01/01/2036; Federal National Mortgage Association, 0.00% to 15.50%, due 02/01/2006 to 01/01/2036; Government National Mortgage Association, 4.50% to 6.50%, due 11/15/2013 to 12/15/2035 and Tennessee Valley Authority, 4.75% to 7.14%, due 11/13/2008 to 08/01/2013. The aggregate market value of the collateral, including accrued interest, was $12,560,093,631.  
 
The accompanying notes are an integral part of these financial statements.

7

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND

Statement of Assets and Liabilities

December 31, 2005
               
 
    Assets:
   
Investment in securities, at value (identified cost $738,600,097) — including $7,095,800 of securities on loan
  $ 818,130,468  
   
Securities lending collateral, at value (cost $7,289,750)
    7,289,750  
   
Cash(a)
    1,405,177  
   
Receivables:
       
     
Dividends and interest
    1,139,005  
     
Fund shares sold
    413,404  
     
Securities lending income
    2,594  
   
   
Total assets
     828,380,398  
   
    Liabilities:
   
Payables:
       
     
Payable upon return of securities loaned
    7,289,750  
     
Amounts owed to affiliates
    479,500  
     
Fund shares repurchased
    49,720  
     
Variation margin
    32,860  
   
Accrued expenses
    134,074  
   
   
Total liabilities
     7,985,904  
   
    Net Assets:
   
Paid-in capital
    765,105,735  
   
Accumulated undistributed net investment income
    500,484  
   
Accumulated net realized loss on investment and futures transactions
    (24,612,242 )
   
Net unrealized gain on investments and futures
    79,400,517  
   
   
NET ASSETS
   $ 820,394,494  
   
   
Total shares of beneficial interest outstanding, par value $0.001 (unlimited shares authorized)
    62,492,001  
   
Net asset value, offering and redemption price per share
  $ 13.13  
   

(a)  Includes restricted cash of $1,351,150 relating to initial margin requirements and collateral on futures transactions.

 
The accompanying notes are an integral part of these financial statements.

8

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND 

Statement of Operations

For the Year Ended December 31, 2005
               
    Investment income:
   
Dividends
  $ 10,813,375  
   
Interest (including securities lending income of $16,523)
    455,277  
   
   
Total income
     11,268,652  
   
    Expenses:
   
Management fees
    4,292,427  
   
Transfer agent fees
    258,809  
   
Custody and accounting fees
    136,733  
   
Printing fees
    117,847  
   
Professional fees
    46,793  
   
Trustee fees
    16,492  
   
Other
    19,915  
   
   
Total expenses
     4,889,016  
   
   
Less — expense reductions
    (88,371 )
   
   
Net expenses
     4,800,645  
   
   
NET INVESTMENT INCOME
     6,468,007  
   
    Realized and unrealized gain (loss) on investment and futures transactions:
   
Net realized gain from:
       
     
Investment transactions
    20,276,646  
     
Futures transactions
    370,346  
     
Payments by affiliates to reimburse certain security claims
    1,193  
   
Net change in unrealized gain (loss) on:
       
     
Investments
    25,872,776  
     
Futures
    (168,337 )
   
   
Net realized and unrealized gain on investment and futures transactions
     46,352,624  
   
   
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
   $ 52,820,631  
   
 
The accompanying notes are an integral part of these financial statements.

9

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND

Statements of Changes in Net Assets

                     
For the For the
Year Ended Year Ended
December 31, 2005 December 31, 2004
    From operations:
   
Net investment income
  $ 6,468,007     $ 5,395,406  
   
Net realized gain on investment and futures transactions
    20,646,992       51,876,006  
   
Payments by affiliates to reimburse certain security claims
    1,193       —  
   
Net change in unrealized gain on investments and futures
    25,704,439       5,841,843  
   
   
Net increase in net assets resulting from operations
     52,820,631       63,113,255  
   
    Distributions to shareholders:
   
From net investment income
    (6,029,395 )     (5,358,837 )
   
    From share transactions:
   
Proceeds from sales of shares
    283,997,163       113,401,573  
   
Reinvestment of dividends and distributions
    6,029,395       5,358,837  
   
Cost of shares repurchased
    (37,560,740 )     (38,402,436 )
   
   
Net increase in net assets resulting from share transactions
     252,465,818       80,357,974  
   
   
TOTAL INCREASE
     299,257,054       138,112,392  
   
    Net assets:
   
Beginning of year
    521,137,440       383,025,048  
   
   
End of year
  $ 820,394,494     $ 521,137,440  
   
   
Accumulated undistributed net investment income
   $ 500,484     $ 61,872  
   
    Summary of share transactions:
   
Shares sold
    23,122,045       9,833,811  
   
Shares issued on reinvestment of dividends and distributions
    461,669       433,562  
   
Shares repurchased
    (3,060,370 )     (3,365,832 )
   
   
NET INCREASE
     20,523,344       6,901,541  
   
 
The accompanying notes are an integral part of these financial statements.

10

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year
                                                                                                                 
Ratios assuming no
Income (loss) from expense reductions
investment operations
Ratio of Ratio of
Net Distributions Net Ratio of net Ratio of net
Net asset realized to shareholders Net asset assets net investment total investment
value, Net and Total from from net value, end expenses income expenses income Portfolio
beginning investment unrealized investment investment end of Total of year to average to average to average to average turnover
of year income(a) gain (loss) operations income year return(b) (in 000s) net assets net assets net assets net assets rate
 
    For the Years ended December 31,
    2005   $ 12.42     $ 0.13     $ 0.68     $ 0.81     $ (0.10 )   $ 13.13       6.51 %   $ 820,394       0.74 %     1.00 %     0.76 %     0.99 %     109 %    
    2004     10.92       0.14       1.49       1.63       (0.13 )     12.42       14.94       521,137       0.75       1.26       0.78       1.23       128      
    2003     8.49       0.07       2.43       2.50       (0.07 )     10.92       29.47       383,025       0.85       0.79       0.85       0.79       92      
    2002     10.94       0.06       (2.45 )     (2.39 )     (0.06 )     8.49       (21.89 )     143,439       0.85       0.60       0.86       0.59       84      
    2001     12.48       0.05       (1.54 )     (1.49 )     (0.05 )     10.94       (11.94 )     163,904       0.81       0.48       0.82       0.47       72      
   

(a)  Calculated based on the average shares outstanding methodology.
(b)  Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions and a complete redemption of the investment at the net asset value at the end of the year.

The accompanying notes are an integral part of these financial statements.

 
11

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND

Notes to Financial Statements

December 31, 2005

1. ORGANIZATION

Goldman Sachs Variable Insurance Trust (the “Trust”) 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 CORE U.S. Equity Fund (the “Fund”). The Fund is a diversified portfolio under the Act.
     Shares of the Trust may be purchased and held by separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Trust are not offered directly to the general public.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies consistently followed by the Fund. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity and debt securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line or pro rata basis depending upon the nature of the expense.

D. Federal Taxes — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.

     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules. Therefore, the source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income or net realized gain, or from tax return of capital.
     In addition, distributions paid by the Fund’s investments in real estate investment trusts (“REITs”) often include a “return of capital” which is recorded by the Fund as a reduction of the cost basis of the securities held. The Code requires a REIT to distribute at least 95% of its taxable income to investors. In many cases, however, because of “non-cash” expenses such as property depreciation, an equity REIT’s cash flow will exceed its taxable income. The REIT may distribute this excess cash to offer a more competitive yield. This portion of the distribution is deemed a return of capital and is generally not taxable to shareholders.
 
12

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND 
 
2. SIGNIFICANT ACCOUNTING POLICIES (continued)

E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate liquid assets, on the books of their custodian, with a daily mark-to-market value equal to or greater than the market value of the corresponding transactions.

F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.

     Pursuant to exemptive relief granted by the Securities and Exchange Commission (the “SEC”) and terms and conditions contained therein, the Fund, together with other registered investment companies having management or investment advisory agreements with Goldman Sachs Asset Management, L.P. (“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.

G. Futures Contracts — The Fund may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit with a broker, or the Fund’s custodian bank on behalf of the broker an amount of cash or securities equal to the minimum “initial margin” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Fund daily, dependent on the daily fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Fund realizes a gain or loss which is reported in the Statement of Operations.

     The use of futures contracts involves, to varying degrees, elements of market and counterparty risk which may exceed the amounts recognized in the Statement of Assets and Liabilities. Changes in the value of a futures contract may not directly correlate with changes in the value of the underlying securities. This risk may decrease the effectiveness of the Fund’s strategies and potentially result in a loss.

3. AGREEMENTS

GSAM, an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Fund. Under this Agreement, GSAM manages the Fund, subject to the general supervision of the Trust’s Board of Trustees.
     As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Fund’s business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”) computed daily and payable monthly. Effective April 29, 2005, GSAM reduced the contractual Management fee from 0.70% to 0.65% of the Fund’s average daily net assets. Prior to April 29, 2005, GSAM had voluntarily waived a portion of its Management fee equal to 0.05% of the Fund’s average daily net assets. For the year ended December 31, 2005, GSAM waived Management fees of approximately $86,800.
 
13

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND
 
Notes to Financial Statements (continued)
December 31, 2005
 
3. AGREEMENTS (continued)
     At a meeting held on June 16, 2005, the Board of Trustees of the Trust approved a fee reduction commitment for the Fund which will be effective on a contractual basis in 2006. Effective July 1, 2005, GSAM implemented the fee reduction commitment on a voluntary basis which resulted in the following annual Management fee rates:
         
Average Daily Net Assets Annual Rate
First $1 Billion
    0.65 %
Next $1 Billion
    0.59 %
Over $2 Billion
    0.56 %

     Prior to July 1, 2005, the Fund’s Management fee as an annual percentage rate of average daily net assets was 0.65%.

     GSAM has voluntarily agreed to limit certain “Other Expenses” of the Fund (excluding Management fees, Transfer Agency fees, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent that such expenses exceed, on an annual basis, 0.16% of the average daily net assets of the Fund. GSAM agreed to maintain this expense limitation contractually through June 30, 2005 and on a voluntary basis thereafter. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the year ended December 31, 2005, GSAM made no reimbursements to the Fund.

     The Fund has entered into certain offset arrangements with the custodian resulting in a reduction in the Fund’s expenses. For the year ended December 31, 2005, custody fees were reduced by approximately $1,600.
     Goldman Sachs also serves as Transfer Agent of the Fund for a fee. Fees charged for such transfer agency services are calculated daily and payable monthly equal to an annual rate of 0.04% of the average daily net assets of the Fund. Goldman Sachs serves as the distributor of the Fund’s shares at no cost to the Fund.
     At December 31, 2005, amounts owed to affiliates were approximately $451,700 and $27,800 for Management and Transfer Agent fees, respectively.

4. PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds from sales and maturities of long-term securities for the year ended December 31, 2005, were $943,425,869 and $691,584,604, respectively. For the year ended December 31, 2005, Goldman Sachs earned approximately $16,900 in brokerage commissions from futures transactions executed on behalf of the Fund.
     During the year ended December 31, 2005, GSAM voluntarily reimbursed the Fund $1,193 for certain class action settlements in which the Fund was eligible to participate.

5. SECURITIES LENDING

Pursuant to exemptive relief granted by the SEC and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Boston Global Advisers (“BGA”), 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 loans are collateralized at all times with cash and/or securities with a market value at least equal to the securities on loan. As with other extensions of credit, the Fund bears the risk of delay on recovery or loss of rights in the collateral should the borrower of the securities fail financially.
     Both the Fund and BGA receive compensation relating to the lending of the Fund’s securities. The amount earned by the Fund for the year ended December 31, 2005, is reported parenthetically under Investment Income on the Statement of Operations. A portion of this amount, $37, represents compensation earned by the Fund from lending its securities to Goldman Sachs. For the year ended December 31, 2005, BGA earned $2,915 in fees as securities lending agent.
 
14

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND 
 
5. SECURITIES LENDING (continued)
     At December 31, 2005, the Fund loaned securities having a market value of $7,095,800 collateralized by cash in the amount of $7,289,750. The Fund invests the cash collateral received in connection with securities lending transactions in the Enhanced Portfolio of Boston Global Investment Trust, a Delaware statutory trust. The Enhanced Portfolio is exempt from registration under Section 3(c)(7) of the Act and is managed by GSAM, for which GSAM receives an investment advisory fee of up to 0.10% of the average daily net assets of the Enhanced Portfolio. The Enhanced Portfolio invests in high quality money market instruments. The Fund bears the risk of incurring a loss from the investment of cash collateral due to either credit or market factors.

6. LINE OF CREDIT FACILITY

The Fund participates in a $350,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Fund must own securities having a market value in excess of 300% of the Fund’s total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. This committed facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. During the year ended December 31, 2005, the Fund did not have any borrowings under this facility.

7. TAX INFORMATION

The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows:
                 
For the years ended December 31,
2005 2004
Distributions paid from:
               
Ordinary income
  $ 6,029,395     $ 5,358,837  
Total taxable distributions
  $ 6,029,395     $ 5,358,837  

As of December 31, 2005, the components of accumulated earnings (losses) on a tax basis were as follows:

           
Undistributed ordinary income — net
  $ 483,718  
Capital loss carryforward:(1)(2)
       
 
Expiring 2009
    (6,318,404 )
 
Expiring 2010
    (13,059,084 )
 
Expiring 2011
    (2,163,043 )
Total capital loss carryforward
    (21,540,531 )
Timing differences (related to the recognition of certain REIT dividends for tax purposes)
    16,766  
Unrealized gains — net
    76,328,806  
Total accumulated losses — net
  $ 55,288,759  

(1)  Expiration occurs on December 31 of the year indicated and utilization of these losses may be limited under the Code.
(2)  During the year ended December 31, 2005, the CORE U.S. Equity Fund utilized $22,704,467 of capital loss carryforwards.

 
15

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND
 
Notes to Financial Statements (continued)
December 31, 2005
 
7. TAX INFORMATION (continued)

At December 31, 2005, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes was as follows:

         
Tax cost
  $ 749,091,412  
Gross unrealized security gain
    87,614,254  
Gross unrealized security loss
    (11,285,448 )
Net unrealized security gain
  $ 76,328,806  

The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and financial futures contracts. The cumulative timing differences consists of deferred income distributions from underlying fund investments.

8. LEGAL PROCEEDINGS

Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds and the Trustees and Officers of the Goldman Sachs Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. It is possible that the plaintiffs may appeal this decision.

     Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuits will have a material adverse financial impact on the Fund is remote, and the pending actions are not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

9. SUBSEQUENT EVENT

At a meeting held on July 12, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization providing for the tax-free acquisition of the Allmerica Core Equity Fund by the CORE U.S. Equity Fund. Following the approval of the Board of Trustees of the Allmerica Core Equity Fund, the acquisition was completed on January 9, 2006.
 
16

 

Report of Independent Registered Public Accounting Firm

To the Shareholders of Goldman Sachs CORE U.S. Equity Fund and Board of Trustees
Goldman Sachs Variable Insurance Trust

We have audited the accompanying statement of assets and liabilities of Goldman Sachs CORE U.S. Equity Fund (one of the funds comprising the Goldman Sachs Variable Insurance Trust) (the “Fund”), including the statement of investments, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs CORE U.S. Equity Fund at December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

  -s- ERNST & YOUNG LLP

New York, New York
February 10, 2006
 
17

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND

Fund Expenses (Unaudited) — Six Month Period Ended December 31, 2005

            As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  
 
            The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2005 through December 31, 2005.  
 
            Actual Expenses — The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.  
 
            Hypothetical Example for Comparison Purposes — The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.  
 
            Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges (loads), redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.  

                         
Expenses Paid
for the
Beginning Ending 6 months
Account Value Account Value ended
7/1/05 12/31/05 12/31/05*
Actual
  $ 1,000     $ 1,094.20     $ 3.93  
Hypothetical 5% return
    1,000       1,021.45 +     3.79  

  *   Expenses are calculated using the Fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2005. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The net annualized expense ratio for the period was 0.74%.  
  +   Hypothetical expenses are based on the Fund’s actual annualized expense ratios and an assumed rate of return of 5% per year before expenses.  

 
18

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND 

Trustees and Officers (Unaudited)

Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Ashok N. Bakhru
Age: 63		   Chairman & Trustee   Since 1997   President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President — Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors — III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003).

Chairman of the Board and Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
John P. Coblentz, Jr.
Age: 64		   Trustee   Since 2003   Partner, Deloitte & Touche LLP (June 1975-May 2003).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Patrick T. Harker
Age: 47		   Trustee   Since 2000   Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-Present); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Mary P. McPherson
Age: 70		   Trustee   Since 1997   Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Wilma J. Smelcer
Age: 56		   Trustee   Since 2001   Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Lawson Products Inc. (distributor of industrial products).
 
19

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND
 
Trustees and Officers (Unaudited) (continued)
Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Richard P. Strubel
Age: 66		   Trustee   Since 1997   Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-2005); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Gildan Activewear Inc. (an activewear clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (53 Portfolios).

Interested Trustees

                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
*Alan A. Shuch
Age: 56		   Trustee   Since 1997   Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994- May 1999).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
*Kaysie P. Uniacke
Age: 44		   Trustee
  &		   Since 2001   Managing Director, GSAM (1997-Present).   72   None
    President   Since 2002   Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies).

Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).		        
 
*
These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1
Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Howard B. Surloff.
2
Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
3
The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of December 31, 2005, the Trust consisted of 61 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios.
4
This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726.

 
20

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM U.S. EQUITY FUND 

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*
             
Term of
Office and
Position(s) Held Length of
Name, Age And Address With the Trust Time Served1 Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke
32 Old Slip
New York, NY 10005
Age: 44		   President & Trustee   Since 2002

Since 2001		   Managing Director, GSAM (1997-Present).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).
James A. Fitzpatrick
71 South Wacker Drive
Suite 500
Chicago, IL 60606
Age: 45		   Vice President   Since 1997   Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara
32 Old Slip
New York, NY 10005
Age: 43		   Vice President   Since 2001   Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004)
John M. Perlowski
32 Old Slip
New York, NY 10005
Age: 41		   Treasurer   Since 1997   Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003).

Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Howard B. Surloff
One New York Plaza
37th Floor
New York, NY 10004
Age: 40		   Secretary   Since 2001   Managing Director, Goldman Sachs (November 2002-Present); Associate General Counsel, Goldman Sachs and General Counsel to the U.S. Funds Group (December 1997-Present).

Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies) (2001-Present) and Assistant Secretary prior thereto.
 
1
Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*
Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726.

Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)

For the year ended December 31, 2005, 100% of the dividends paid from net investment company taxable income by the CORE U.S. Equity Fund qualifies for the dividends received deduction available to corporations.

 
21

 

     
TRUSTEES
  OFFICERS
Ashok N. Bakhru, Chairman
   Kaysie P. Uniacke, President
John P. Coblentz, Jr.
  James A. Fitzpatrick, Vice President
Patrick T. Harker
  James A. McNamara, Vice President
Mary Patterson McPherson
  John M. Perlowski, Treasurer
Alan A. Shuch
  Howard B. Surloff, Secretary
Wilma J. Smelcer
   
Richard P. Strubel
   
Kaysie P. Uniacke
   
 
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent 		   
 
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
 
Visit our Web site at www.gs.com/funds to obtain the most recent month-end returns.
 
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
 
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov.
 
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, the Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
 
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.
 
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.
 
COREsm is a registered service mark of Goldman, Sachs & Co.
 
    Toll Free (in U.S.): 800-292-4726
 
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust: COREsm U.S. Equity Fund.
 
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: February 18, 2006
 
VITCOREUSAR/06-290/02-06    

 

Goldman
Sachs Variable Insurance Trust
GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32nd FLOOR, NEW YORK, NEW YORK 10005
CORESM Small Cap Equity Fund
 
Annual Report
December 31, 2005
 

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 

Shareholder Letter

Dear Shareholders:

This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — CORE Small Cap Equity Fund during the one-year reporting period that ended December 31, 2005.

Market Review

The S&P 500 Index returned 4.91% over the one-year reporting period ended December 31, 2005. Eight of the ten sectors in the Index posted positive results, led by the Energy (+31.4%) and Utilities (+16.8%) sectors. The Energy sector also contributed the most (weight times performance) to relative returns for the period. In the style area, the Russell 1000 Value Index (+7.05%) outperformed the Russell 1000 Growth Index (+5.26%) for the one-year period. From a market cap perspective, mid caps outperformed large- and small-cap stocks, with the Russell Midcap, Russell 1000, and Russell 2000 Indexes returning 12.65%, 6.27%, and 4.55%, respectively.

Investment Objective

The Fund seeks long-term growth of capital. The Fund seeks this objective through a broadly diversified portfolio of equity investments of U.S. issuers.

Portfolio Composition

Top 10 Portfolio Holdings as of December 31, 2005*

             
% of
Company Net Assets Business
SVB Financial Group
    1.5 %   Banks
Veritas DGC, Inc.
    1.5     Energy Equipment & Services
Intergraph Corp.
    1.5     Computers & Peripherals
Swift Energy Co.
    1.5     Oil & Gas
Arbitron, Inc.
    1.5     Commercial Services & Supplies
Administaff, Inc.
    1.5     Commercial Services & Supplies
Choice Hotels International, Inc.
    1.4     Hotels, Restaurants & Leisure
Stewart Information Services Corp.
    1.4     Insurance
Global Payments, Inc.
    1.4     Commercial Services & Supplies
Bank of Hawaii Corp.
    1.4     Banks

* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.

 
1

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND
 
 
Shareholder Letter (continued)

Performance Review

Over the one-year period that ended December 31, 2005, the Fund generated a cumulative total return of 6.07%. This return compares to the 4.55% cumulative total return of the Fund’s benchmark, the Russell 2000 Index (with dividends reinvested), over the same time period.

The Fund outperformed its benchmark during the reporting period, as returns to the CORE investment themes were positive. Momentum was the biggest positive contributor to relative returns, as companies with strong momentum characteristics outperformed their industry counterparts. Earnings Quality, Management Impact, Profitability, Valuation, and Analyst Sentiment also added value for the period, albeit less significantly.

Stock selection was positive in five of the 10 sectors. The Fund’s holdings in the Industrials sector were the most successful for the period. Conversely, stock selection in the Energy sector underperformed their peers in the benchmark the most, but did little to offset the gains experienced elsewhere.

In managing the CORE products, we do not make size or sector bets. We hope to add value versus the Fund’s Index through individual stock selection. Our quantitative process seeks out stocks with good momentum that also appear to be good values. We prefer stocks about which fundamental research analysts are becoming more positive, and companies with strong profit margins, sustainable earnings, and that use their capital to enhance shareholder value. These factors are not highly correlated to each other, which diversifies the Fund’s sources of returns.

We thank you for your investment and look forward to serving your investment needs in the future.

Goldman Sachs Quantitative Equity Management Team

January 18, 2006

Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) CORE Small Cap Equity Fund are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.

The VIT CORE Small Cap Equity Fund invests in a broadly diversified portfolio of small-capitalization U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Stocks of smaller companies are often more volatile and less liquid and present greater risks than stocks of larger companies. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all.

 
2

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 

SECTOR ALLOCATION AS OF DECEMBER 31, 2005†

Percentage of Portfolio Investments

(BAR CHART)

† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value. Short-term Investments include repurchase agreements and securities lending collateral.
 
3

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND

Performance Summary

December 31, 2005

The following graph shows the value as of December 31, 2005, of a $10,000 investment made February 13, 1998 (commencement of operations). For comparative purposes, the performance of the Fund’s benchmark, the Russell 2000 Index (with dividends reinvested), is shown. All performance data shown represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance also would have been reduced had expense limitations not been in effect. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a Fund.

COREsm Small Cap Equity Fund’s Lifetime Performance

Growth of a $10,000 investment, Distributions Reinvested from February 13, 1998 to December 31, 2005.

Performance Chart

                             
Since Inception Five Years One Year
Average Annual Total Return Through December 31, 2005
COREsm Small Cap Equity Fund (commenced February 13, 1998)
     7.25%       9.87%       6.07%      
 
4

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 

Statement of Investments

December 31, 2005
                     
Shares Description Value
   
Common Stocks – 99.0%
    Aerospace & Defense – 0.7%
      24,000     Kaman Corp.   $ 472,560  
      19,500     United Industrial Corp.     806,715  
                 
 
                  1,279,275  
   
    Airlines – 0.9%
      43,400     Alaska Air Group, Inc.*     1,550,248  
      8,000     SkyWest, Inc.     214,880  
                 
 
                  1,765,128  
   
    Banks – 8.5%
      29,400     Bank Mutual Corp.     311,640  
      52,600     Bank of Hawaii Corp.     2,711,004  
      15,300     Central Pacific Financial Corp.     549,576  
      24,400     Chittenden Corp.     678,564  
      4,600     City National Corp.     333,224  
      21,000     Corus Bankshares, Inc.(a)     1,181,670  
      9,500     CVB Financial Corp.     192,945  
      6,100     Downey Financial Corp.     417,179  
      4,600     First Citizens BancShares, Inc.     802,332  
      3,333     First Financial Bankshares, Inc.     116,855  
      31,200     FirstFed Financial Corp.*     1,701,024  
      5,000     Hancock Holding Co.     189,050  
      23,900     Hanmi Financial Corp.     426,854  
      7,175     IBERIABANK Corp.     365,997  
      39,400     PFF Bancorp, Inc.     1,202,488  
      17,000     Provident Bankshares Corp.     574,090  
      19,200     Provident Financial Services, Inc.     355,392  
      14,927     Republic Capital Trust     177,631  
      5,100     S&T Bancorp, Inc.     187,782  
      63,500     SVB Financial Group*     2,974,340  
      2,970     UMB Financial Corp.     189,813  
      19,000     Umpqua Holdings Corp.     542,070  
      3,500     Westcorp     233,135  
      1,200     WSFS Financial Corp.     73,500  
                 
 
                  16,488,155  
   
    Biotechnology – 4.1%
      64,500     Albany Molecular Research, Inc.*     783,675  
      36,500     Alkermes, Inc.*     697,880  
      148,700     Applera Corp. – Celera Genomics Group*     1,629,752  
      13,400     Connetics Corp.*     193,630  
      34,200     Kos Pharmaceuticals, Inc.*     1,769,166  
      15,300     Maxygen, Inc.*     114,903  
      22,300     Protein Design Labs, Inc.*     633,766  
      31,100     United Therapeutics Corp.*     2,149,632  
                 
 
                  7,972,404  
   
    Building Products – 0.1%
      7,700     Griffon Corp.*     183,337  
   
    Chemicals – 0.6%
      11,200     H.B. Fuller Co.     359,184  
      34,700     NewMarket Corp.*     848,762  
                 
 
                  1,207,946  
   
    Commercial Services & Supplies – 7.3%
      67,300     Administaff, Inc.     2,829,965  
      8,500     Aleris International, Inc.*     274,040  
      13,300     American Ecology Corp.     191,919  
      74,600     Arbitron, Inc.     2,833,308  
      14,500     Consolidated Graphics, Inc.*     686,430  
      24,100     CSG Systems International, Inc.*     537,912  
      59,100     Global Payments, Inc.     2,754,651  
      68,000     Labor Ready, Inc.*     1,415,760  
      35,400     Pre-Paid Legal Services, Inc.(a)     1,352,634  
      52,300     Spherion Corp.*     523,523  
      76,100     TeleTech Holdings, Inc.*     917,005  
                 
 
                  14,317,147  
   
    Communications Equipment – 2.8%
      14,900     Audiovox Corp.*     206,514  
      63,700     Comtech Telecommunications Corp.*     1,945,398  
      33,700     DSP Group, Inc.*     844,522  
      71,700     Emulex Corp.*     1,418,943  
      49,500     InterDigital Communications Corp.*     906,840  
      45,000     Optical Communication Products, Inc.*     103,950  
                 
 
                  5,426,167  
   
    Computers & Peripherals – 2.6%
      58,700     Intergraph Corp.*     2,923,847  
      45,900     Komag, Inc.*     1,590,894  
      33,400     Western Digital Corp.*     621,574  
                 
 
                  5,136,315  
   
    Construction & Engineering – 1.4%
      22,100     EMCOR Group, Inc.*     1,492,413  
      20,600     Perini Corp.*     497,490  
      49,600     Quanta Services, Inc.*     653,232  
                 
 
                  2,643,135  
   
    Construction Materials – 0.1%
      4,100     Florida Rock Industries, Inc.     201,146  
   
    Containers & Packaging – 0.1%
      4,000     Greif, Inc.     265,120  
   
    Distributors – 0.8%
      17,900     Brightpoint, Inc.*     496,367  
      79,600     Handleman Co.     988,632  
                 
 
                  1,484,999  
   
    Diversified Financials – 3.2%
      14,400     AmeriCredit Corp.*     369,072  
      45,000     CBIZ, Inc.*     270,900  
      63,400     CompuCredit Corp.*     2,439,632  
      50,200     Investment Technology Group, Inc.*     1,779,088  
      46,000     World Acceptance Corp.*     1,311,000  
                 
 
                  6,169,692  
   
 
The accompanying notes are an integral part of these financial statements.

5

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND
 
Statement of Investments (continued)
December 31, 2005
                     
Shares Description Value
   
Common Stocks – (continued)
    Diversified Telecommunication Service – 0.7%
      41,800     Commonwealth Telephone Enterprises, Inc.   $ 1,411,586  
   
    Electric Utilities – 1.3%
      14,500     Cleco Corp.     302,325  
      34,100     NorthWestern Corp.     1,059,487  
      89,700     Sierra Pacific Resources*     1,169,688  
                 
 
                  2,531,500  
   
    Electrical Equipment – 1.0%
      26,800     A.O. Smith Corp.     940,680  
      10,100     The Genlyte Group, Inc.*     541,057  
      6,400     Woodward Governor Co.     550,464  
                 
 
                  2,032,201  
   
    Electronic Equipment & Instruments – 3.3%
      47,000     Avnet, Inc.*     1,125,180  
      26,000     Coherent, Inc.*     771,680  
      24,900     Exar Corp.*     311,748  
      17,300     Greatbatch, Inc.*     449,973  
      18,700     Itron, Inc.*     748,748  
      11,800     LoJack Corp.*     284,734  
      41,700     MTS Systems Corp.     1,444,488  
      7,000     Tech Data Corp.*     277,760  
      35,700     Teledyne Technologies, Inc.*     1,038,870  
                 
 
                  6,453,181  
   
    Energy Equipment & Services – 3.2%
      30,200     Cal Dive International, Inc.*     1,083,878  
      22,100     Helmerich & Payne, Inc.     1,368,211  
      8,400     Hornbeck Offshore Services, Inc.*     274,680  
      13,200     Universal Compression Holdings, Inc.*     542,784  
      82,600     Veritas DGC, Inc.*     2,931,474  
                 
 
                  6,201,027  
   
    Food & Drug Retailing – 3.3%
      65,800     Longs Drug Stores Corp.     2,394,462  
      47,300     Nash-Finch Co.     1,205,204  
      196,200     Terra Industries, Inc.*(a)     1,098,720  
      13,000     The Great Atlantic & Pacific Tea Co., Inc.*     413,140  
      20,600     The Pantry, Inc.*     967,994  
      27,500     Wild Oats Markets, Inc.*(a)     332,200  
                 
 
                  6,411,720  
   
    Food Products – 1.4%
      59,200     Chiquita Brands International, Inc.     1,184,592  
      3,300     J & J Snack Foods Corp.     196,053  
      148     Seaboard Corp.     223,628  
      28,900     USANA Health Sciences, Inc.*(a)     1,108,604  
                 
 
                  2,712,877  
   
    Healthcare Equipment & Supplies – 5.1%
      98,700     Applera Corp. – Applied Biosystems Group     2,621,472  
      10,000     Computer Programs and Systems, Inc.     414,300  
      12,100     DJ Orthopedics, Inc.*     333,718  
      11,600     Hologic, Inc.*     439,872  
      80,800     Immucor, Inc.*     1,887,488  
      6,700     LCA-Vision, Inc.     318,317  
      42,800     Mentor Corp.     1,972,224  
      10,300     Meridian Bioscience, Inc.     207,442  
      10,200     SurModics, Inc.*     377,298  
      54,100     Thoratec Corp.*     1,119,329  
      7,400     Ventana Medical Systems, Inc.*     313,390  
                 
 
                  10,004,850  
   
    Healthcare Providers & Services – 1.6%
      44,900     Genesis HealthCare Corp.*     1,639,748  
      45,800     Kindred Healthcare, Inc.*     1,179,808  
      38,000     Stewart Enterprises, Inc.     205,580  
                 
 
                  3,025,136  
   
    Hotels, Restaurants & Leisure – 4.6%
      67,200     Choice Hotels International, Inc.     2,806,272  
      65,800     Dave & Buster’s, Inc.*(a)     1,158,738  
      35,600     Domino’s Pizza, Inc.     861,520  
      33,300     Landry’s Restaurants, Inc.     889,443  
      40,200     Papa John’s International, Inc.*     2,384,262  
      16,000     Shuffle Master, Inc.*(a)     402,240  
      69,000     Six Flags, Inc.*(a)     531,990  
                 
 
                  9,034,465  
   
    Household Durables – 1.1%
      89,200     American Greetings Corp.     1,959,724  
      23,500     Kimball International, Inc. Class B     249,805  
                 
 
                  2,209,529  
   
    Insurance – 4.4%
      7,800     American Physicians Capital, Inc.*     357,162  
      5,900     Argonaut Group, Inc.*     193,343  
      6,500     FBL Financial Group, Inc.     213,265  
      67,300     Fremont General Corp.     1,563,379  
      42,500     LandAmerica Financial Group, Inc.     2,652,000  
      1,300     National Western Life Insurance Co.     268,983  
      7,300     Safety Insurance Group, Inc.     294,701  
      57,000     Stewart Information Services Corp.     2,774,190  
      4,900     The Midland Co.     176,596  
                 
 
                  8,493,619  
   
    Internet & Catalog Retail – 0.7%
      29,550     Coldwater Creek, Inc.*     902,161  
      10,800     Nutri/System, Inc.*     389,016  
                 
 
                  1,291,177  
   
 
The accompanying notes are an integral part of these financial statements.

6

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 
                     
Shares Description Value
   
Common Stocks – (continued)
    Internet Software & Services – 2.2%
      40,200     EarthLink, Inc.*   $ 446,622  
      14,900     InfoSpace, Inc.*     384,718  
      21,300     J2 Global Communications, Inc.*     910,362  
      44,200     Trizetto Group, Inc.*     750,958  
      16,900     United Online, Inc.     240,318  
      22,300     Websense, Inc.*     1,463,772  
                 
 
                  4,196,750  
   
    IT Consulting & Services – 0.8%
      77,200     Agilysys, Inc.     1,406,584  
      15,500     Redback Networks Inc.*     217,930  
                 
 
                  1,624,514  
   
    Machinery – 4.2%
      42,000     Applied Industrial Technologies, Inc.     1,414,980  
      15,900     Barnes Group, Inc.     524,700  
      10,100     CIRCOR International, Inc.     259,166  
      23,800     EnPro Industries, Inc.*     641,410  
      49,000     JLG Industries, Inc.     2,237,340  
      12,600     NACCO Industries, Inc.     1,476,090  
      59,600     Navistar International Corp.*     1,705,752  
                 
 
                  8,259,438  
   
    Media – 0.6%
      41,100     Catalina Marketing Corp.     1,041,885  
      8,100     Hearst-Argyle Television, Inc.     193,185  
                 
 
                  1,235,070  
   
    Metals & Mining – 2.4%
      22,700     Quanex Corp.     1,134,319  
      85,500     Ryerson Tull, Inc.(a)     2,079,360  
      12,300     Steel Dynamics, Inc.     436,773  
      86,700     USEC, Inc.     1,036,065  
                 
 
                  4,686,517  
   
    Multiline Retail – 0.4%
      17,100     Dillard’s, Inc.     424,422  
      21,500     Retail Ventures, Inc.*(a)     267,460  
                 
 
                  691,882  
   
    Office Electronics – 0.5%
      33,900     PAR Technology Corp.*     941,064  
   
    Oil & Gas – 2.6%
      16,500     Berry Petroleum Co.     943,800  
      12,600     Encore Acquisition Co.*     403,704  
      16,900     Pogo Producing Co.     841,789  
      64,400     Swift Energy Co.*     2,902,508  
                 
 
                  5,091,801  
   
    Paper & Forest Products – 0.1%
      7,200     Louisiana-Pacific Corp.     197,784  
   
    Personal Products – 0.4%
      16,200     Mannatech, Inc.(a)     223,722  
      19,500     NBTY, Inc.*     316,875  
      6,400     Parlux Fragrances, Inc.*(a)     195,392  
                 
 
                  735,989  
   
    Pharmaceuticals – 1.3%
      80,700     Alpharma, Inc.     2,300,757  
      9,700     Endo Pharmaceuticals Holdings, Inc.*     293,522  
                 
 
                  2,594,279  
   
    Real Estate – 6.7%
      6,200     American Home Mortgage Investment Corp. (REIT)     201,934  
      50,800     Anthracite Capital, Inc. (REIT)     534,924  
      43,300     BioMed Reality Trust, Inc. (REIT)     1,056,520  
      20,500     Boykin Lodging Co.* (REIT)     250,510  
      99,500     Commercial Net Lease Realty (REIT)     2,026,815  
      21,500     Digital Realty Trust, Inc. (REIT)     486,545  
      29,600     Entertainment Properties Trust (REIT)     1,206,200  
      13,400     FelCor Lodging Trust, Inc. (REIT)     230,614  
      21,700     HRPT Properties Trust (REIT)     224,595  
      19,500     National Health Investors, Inc. (REIT)     506,220  
      34,400     New Century Financial Corp.(a) (REIT)     1,240,808  
      14,100     RAIT Investment Trust (REIT)     365,472  
      109,200     Senior Housing Properties Trust (REIT)     1,846,572  
      73,000     Spirit Finance Corp. (REIT)     828,550  
      44,800     Trammell Crow Co.*     1,149,120  
      52,200     Trustreet Properties, Inc. (REIT)     763,164  
      5,700     Universal Health Realty Income Trust (REIT)     178,638  
                 
 
                  13,097,201  
   
    Road & Rail – 1.7%
      12,800     Covenant Transport, Inc.*     178,944  
      58,500     Dollar Thrifty Automotive Group, Inc.*     2,110,095  
      20,600     GATX Corp.     743,248  
      21,100     U. S. Xpress Enterprises, Inc.*     366,718  
                 
 
                  3,399,005  
   
 
The accompanying notes are an integral part of these financial statements.

7

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND
 
Statement of Investments (continued)
December 31, 2005
                     
Shares Description Value
   
Common Stocks – (continued)
    Semiconductor Equipment & Products – 2.2%
      17,000     Advanced Energy Industries, Inc.*   $ 201,110  
      14,800     Cymer, Inc.*     525,548  
      34,300     Genesis Microchip, Inc.*     620,487  
      29,100     Lam Research Corp.*     1,038,288  
      36,500     LSI Logic Corp.*     292,000  
      22,700     MPS Group, Inc.*     310,309  
      9,600     Netlogic Microsystems Inc.*     261,504  
      16,400     OmniVision Technologies, Inc.*     327,344  
      51,300     Photronics, Inc.*     772,578  
                 
 
                  4,349,168  
   
    Software – 2.3%
      25,900     ANSYS, Inc.*     1,105,671  
      63,800     Atari, Inc.*     68,904  
      22,700     JDA Software Group, Inc.*     386,127  
      39,100     Lawson Software, Inc.*     287,385  
      54,000     Parametric Technology Corp.*     329,400  
      12,000     QAD, Inc.     91,680  
      19,800     Quest Software, Inc.*     288,882  
      29,700     SeaChange International, Inc.*     234,630  
      13,500     SPSS, Inc.*     417,555  
      37,100     Sybase, Inc.*     811,006  
      8,600     TALX Corp.     393,106  
                 
 
                  4,414,346  
   
    Specialty Retail – 4.9%
      20,600     Building Materials Holding Corp.     1,405,126  
      92,700     Circuit City Stores, Inc.     2,094,093  
      5,000     Genesco, Inc.*     193,950  
      11,300     Group 1 Automotive, Inc.*     355,159  
      7,100     Hibbett Sporting Goods, Inc.*     202,208  
      28,000     Lithia Motors, Inc.     880,320  
      46,700     Payless ShoeSource, Inc.*     1,172,170  
      31,600     Sonic Automotive, Inc.     704,048  
      30,550     Stage Stores, Inc.     909,779  
      8,800     The Cato Corp.     188,760  
      9,500     The Children’s Place Retail Stores, Inc.*     469,490  
      43,000     The Wet Seal, Inc.*(a)     190,920  
      33,400     United Rentals, Inc.*     781,226  
                 
 
                  9,547,249  
   
    Textiles & Apparel – 0.7%
      11,100     Brown Shoe Co.     470,973  
      25,200     Guess?, Inc.*     897,120  
                 
 
                  1,368,093  
   
    Wireless Telecommunication Services – 0.1%
      26,500     UbiquiTel, Inc.*     262,085  
   
    TOTAL COMMON STOCKS
    (Cost $168,800,158)   $ 193,045,069  
   
                             
Principal Interest Maturity
Amount Rate Date Value
   
Repurchase Agreement(b) – 0.8%
    Joint Repurchase Agreement Account II
    $ 1,500,000       4.29 %   01/03/2006     $1,500,000  
    Maturity Value:  $1,500,715        
    (Cost $1,500,000)
   
    TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
    (Cost $170,300,158)     $194,545,069  
   
                     
Shares Description Value
   
Securities Lending Collateral – 5.4%
      10,606,425     Boston Global Investment Trust – Enhanced Portfolio   $ 10,606,425  
    (Cost $10,606,425)
   
    TOTAL INVESTMENTS – 105.2 %
    (Cost $180,906,583)   $ 205,151,494  
   
  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) Joint repurchase agreement was entered into on December 30, 2005.
                     
   
    Investment Abbreviation:
    REIT—Real Estate Investment Trust
   
 
The accompanying notes are an integral part of these financial statements.

8

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 

ADDITIONAL INVESTMENT INFORMATION

FUTURES CONTRACTS — At December 31, 2005, the following futures contracts were open as follows:

                             
Number of Settlement Unrealized
Type Contracts Long Month Market Value Loss
Russell 2000 Index
    24     March 2006   $ 1,627,920     $ (27,478 )

JOINT REPURCHASE AGREEMENT ACCOUNT II — At December 31, 2005, the Fund had an undivided interest in the following Joint Repurchase Agreement Account II which equaled $1,500,000 in principal amount.

                             
Principal Interest Maturity Maturity
Repurchase Agreements Amount Rate Date Value
Banc of America Securities LLC
  $ 3,020,000,000       4.30 %   01/03/2006   $ 3,021,442,889  
Barclays Capital PLC
    2,260,000,000       4.30     01/03/2006     2,261,079,778  
Greenwich Capital Markets
    300,000,000       4.33     01/03/2006     300,144,333  
J.P. Morgan Securities, Inc.
    400,000,000       4.30     01/03/2006     400,191,111  
Morgan Stanley & Co.
    3,140,000,000       4.27     01/03/2006     3,141,489,756  
UBS Securities LLC
    600,000,000       4.18     01/03/2006     600,278,667  
UBS Securities LLC
    2,565,000,000       4.30     01/03/2006     2,566,225,500  
TOTAL
   $ 12,285,000,000                 $ 12,290,852,034  
  At December 31, 2005, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 3.50% to 4.40%, due 02/24/2006 to 01/18/2007; Federal Home Loan Mortgage Association, 0.00% to 13.00%, due 01/01/2006 to 01/01/2036; Federal National Mortgage Association, 0.00% to 15.50%, due 02/01/2006 to 01/01/2036; Government National Mortgage Association, 4.50% to 6.50%, due 11/15/2013 to 12/15/2035 and Tennessee Valley Authority, 4.75% to 7.14%, due 11/13/2008 to 08/01/2013. The aggregate market value of the collateral, including accrued interest, was $12,560,093,631.  
 
The accompanying notes are an integral part of these financial statements.

9

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND

Statement of Assets and Liabilities

December 31, 2005
               
 
    Assets:
   
Investment in securities, at value (identified cost $170,300,158) — including $10,244,433 of securities on loan
  $ 194,545,069  
   
Securities lending collateral, at value (cost $10,606,425)
    10,606,425  
   
Cash(a)
    363,808  
   
Receivables:
       
     
Fund shares sold
    322,695  
     
Dividends and interest
    248,594  
     
Securities lending income
    13,170  
   
   
Total assets
     206,099,761  
   
    Liabilities:
   
Payables:
       
     
Payable upon return of securities loaned
    10,606,425  
     
Fund shares repurchased
    159,872  
     
Amounts owed to affiliates
    184,606  
     
Variation margin
    4,560  
   
Accrued expenses
    102,249  
   
   
Total liabilities
     11,057,712  
   
    Net Assets:
   
Paid-in capital
    169,470,595  
   
Accumulated undistributed net investment income
    249,576  
   
Accumulated net realized gain on investment and futures transactions
    1,104,445  
   
Net unrealized gain on investments and futures transactions
    24,217,433  
   
   
NET ASSETS
   $ 195,042,049  
   
   
Total shares of beneficial interest outstanding, par value $0.001 (unlimited shares authorized)
    13,998,699  
   
Net asset value, offering and redemption price per share
  $ 13.93  
   

(a)  Includes restricted cash of $350,000 relating to initial margin requirements on futures transactions.

 
The accompanying notes are an integral part of these financial statements.

10

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 

Statement of Operations

For the Year Ended December 31, 2005
               
    Investment income:
   
Dividends
  $ 2,151,067  
   
Interest (including securities lending income of $171,378)
    189,004  
   
   
Total income
     2,340,071  
   
    Expenses:
   
Management fees
    1,390,313  
   
Printing fees
    75,008  
   
Custody and accounting fees
    103,157  
   
Transfer agent fees
    74,150  
   
Professional fees
    49,786  
   
Trustee fees
    16,492  
   
Other
    13,334  
   
   
Total expenses
     1,722,240  
   
   
Less — expense reductions
    (73,533 )
   
   
Net expenses
     1,648,707  
   
   
NET INVESTMENT INCOME
     691,364  
   
    Realized and unrealized gain (loss) on investment and futures transactions:
   
Net realized gain from:
       
     
Investment transactions
    10,762,324  
     
Futures transactions
    142,292  
   
Payments by affiliates to reimburse certain security claims
    16,973  
   
Net change in unrealized loss on:
       
     
Investments
    (1,008,897 )
     
Futures
    (29,672 )
   
   
Net realized and unrealized gain on investment and futures transactions
     9,883,020  
   
   
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
   $ 10,574,384  
   
 
The accompanying notes are an integral part of these financial statements.

11

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND

Statements of Changes in Net Assets

                     
For the For the
Year Ended Year Ended
December 31, 2005 December 31, 2004
    From operations:
   
Net investment income
  $ 691,364     $ 257,676  
   
Net realized gain on investment and futures transactions
    10,904,616       15,481,829  
   
Payment by affiliates to reimburse certain security claims
    16,973       —  
   
Payment by affiliates to reimburse certain brokerage commissions
    —       32,935  
   
Net change in unrealized gain (loss) on investments and futures transactions
    (1,038,569 )     11,810,368  
   
   
Net increase in net assets resulting from operations
     10,574,384       27,582,808  
   
    Distributions to shareholders:
   
From net investment income
    (459,667 )     (339,002 )
   
From net realized gains
    (17,009,088 )     (8,690,421 )
   
   
Total distributions to shareholders
     (17,468,755 )     (9,029,423 )
   
    From share transactions:
   
Proceeds from sales of shares
    22,353,469       8,359,311  
   
Reinvestment of dividends and distributions
    17,468,455       9,029,423  
   
Cost of shares repurchased
    (29,706,807 )     (25,886,127 )
   
   
Net increase (decrease) in net assets resulting from share transactions
     10,115,117       (8,497,393 )
   
   
TOTAL INCREASE
     3,220,746       10,055,992  
   
    Net assets:
   
Beginning of year
    191,821,303       181,765,311  
   
   
End of year
  $ 195,042,049     $ 191,821,303  
   
   
Accumulated undistributed net investment income
   $ 249,576     $ 19,700  
   
    Summary of share transactions:
   
Shares sold
    1,522,405       616,586  
   
Shares issued on reinvestment of dividends and distributions
    1,224,164       629,223  
   
Shares repurchased
    (2,065,937 )     (1,920,659 )
   
   
NET INCREASE (DECREASE)
     680,632       (674,850 )
   
 
The accompanying notes are an integral part of these financial statements.

12

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year
                                                                                                                                         
Income (loss) from Ratios assuming no
investment operations Distributions to shareholders expense reductions
Ratio of Ratio of
Net Net Ratio of net Ratio of net
Net asset realized From From Net asset assets net investment total investment
value, Net and Total from From net tax net value, end expenses income expenses income Portfolio
beginning investment unrealized investment investment return of realized Total end of Total  of year to average to average to average to average turnover
of year income(a) gain (loss) operations income capital gain distributions year return(b) (in 000s) net assets net assets net assets net assets rate
 
    For the Years ended December 31,
    2005   $ 14.40     $ 0.05     $ 0.86     $ 0.91     $ (0.04 )   $ —     $ (1.34 )   $ (1.38 )   $ 13.93       6.07 %   $ 195,042       0.89 %     0.37 %     0.93 %     0.33 %     119 %    
    2004     12.99       0.02       2.10       2.12       (0.03 )     —       (0.68 )     (0.71 )     14.40       16.33       191,821       0.90       0.14       0.97       0.07       146      
    2003     9.19       0.04       4.18       4.22       (0.03 )     —       (0.39 )     (0.42 )     12.99       46.00       181,765       1.03       0.40       1.25       0.18       141      
    2002     10.84       0.03       (1.65 )     (1.62 )     (0.03 )     —       —       (0.03 )     9.19       (14.97 )     47,005       1.04       0.25       1.29       0.00       128      
    2001     10.40       0.03       0.44       0.47       (0.02 )     (0.01 )     —       (0.03 )     10.84       4.53       54,365       1.00       0.32       1.22       0.10       105      
   

(a)  Calculated based on the average shares outstanding methodology.
(b)  Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions and a complete redemption of the investment at the net asset value at the end of the year.

The accompanying notes are an integral part of these financial statements.

 
13

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND

Notes to Financial Statements

December 31, 2005

1. ORGANIZATION

Goldman Sachs Variable Insurance Trust (the “Trust”) 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 CORE Small Cap Equity Fund (the “Fund”). The Fund is a diversified portfolio under the Act.

     Shares of the Trust may be purchased and held by separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Trust are not offered directly to the general public.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies consistently followed by the Fund. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity and debt securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line or pro rata basis depending upon the nature of the expense.

D. Federal Taxes — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.

     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules. Therefore, the source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income or net realized gain, or from tax return of capital.

 
14

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 
 
2. SIGNIFICANT ACCOUNTING POLICIES (continued)

     In addition, distributions paid by the Fund’s investments in real estate investment trusts (“REITs”) often include a “return of capital” which is recorded by the Fund as a reduction of the cost basis of the securities held. The Code requires a REIT to distribute at least 95% of its taxable income to investors. In many cases, however, because of “non-cash” expenses such as property depreciation, an equity REIT’s cash flow will exceed its taxable income. The REIT may distribute this excess cash to offer a more competitive yield. This portion of the distribution is deemed a return of capital and is generally not taxable to shareholders.

E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate liquid assets, on the books of their custodian, with a daily mark-to-market value equal to or greater than the market value of the corresponding transactions.

F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.

     Pursuant to exemptive relief granted by the Securities and Exchange Commission (the “SEC”) and terms and conditions contained therein, the Fund, together with other registered investment companies having management or investment advisory agreements with Goldman Sachs Asset Management, L.P. (“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.

G. Futures Contracts — The Fund may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit with a broker, or the Fund’s custodian bank on behalf of the broker an amount of cash or securities equal to the minimum “initial margin” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Fund daily, dependent on the daily fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Fund realizes a gain or loss which is reported in the Statement of Operations.

     The use of futures contracts involve, to varying degrees, elements of market and counterparty risk which may exceed the amounts recognized in the Statement of Assets and Liabilities. Changes in the value of a futures contract may not directly correlate with changes in the value of the underlying securities. This risk may decrease the effectiveness of the Fund’s strategies and potentially result in a loss.

 
15

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND
Notes to Financial Statements (continued)
December 31, 2005
 

3. AGREEMENTS

GSAM, an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Fund. Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trust’s Board of Trustees.

     As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Fund’s business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”) computed daily and payable monthly, equal to an annual percentage rate of the Fund’s average daily net assets.

     At a meeting held on June 16, 2005, the Board of Trustees of the Trust approved a fee reduction commitment for the Fund which will be effective on a contractual basis in 2006. Effective July 1, 2005, GSAM implemented the fee reduction commitment on a voluntary basis and waived a portion of its Management fee which resulted in the following annual Management fee rates:

         
Average Daily Net Assets Annual Rate
First $2 Billion
    0.75 %
Over $2 Billion
    0.68 %

     Prior to July 1, 2005, the Fund’s Management fee as an annual percentage rate of average daily net assets was 0.75%.

     Additionally, effective July 1, 2005 GSAM has voluntarily agreed to waive a portion of its Management fee equal to 0.02% of the Fund’s average daily net assets. For the year ended December 31, 2005, GSAM waived approximately $19,200 of the Fund’s Management fee.

     GSAM has voluntarily agreed to limit certain “Other Expenses” of the Fund (excluding Management fees, Transfer Agency fees, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent that such expenses exceed, on an annual basis, 0.11% of the average daily net assets of the Fund. GSAM agreed to maintain this expense limitation contractually through June 30, 2005 and on a voluntary basis thereafter. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the year ended December 31, 2005, GSAM reimbursed approximately $53,900 to the Fund.

     In addition, the Fund has entered into certain offset arrangements with the custodian resulting in a reduction in the Fund’s expenses. For the year ended December 31, 2005, custody fees were reduced by approximately $400.

     Goldman Sachs also serves as the Transfer Agent of the Fund for a fee. The fees charged for such transfer agency services are calculated daily and payable monthly equal to an annual rate of 0.04% of the average daily net assets of the Fund. Goldman Sachs serves as the distributor of the Fund’s shares at no cost to the Fund.

     At December 31, 2005, the amounts owed to affiliates were approximately $141,600, $6,700 and $36,300 for Management and Transfer Agent fees and over-reimbursement of Fund expenses, respectively.

 
16

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 

4. PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds from sales and maturities of long term securities for the year ended December 31, 2005, were $221,123,012 and $228,993,393, respectively. For the year ended December 31, 2005, Goldman Sachs earned approximately $1,200 of brokerage commissions from portfolio transactions, including futures transactions, executed on behalf of the Fund.

     During the year ended December 31, 2005, GSAM voluntarily reimbursed the Fund $16,973 for certain class action settlements in which the Fund was eligible to participate.

5. SECURITIES LENDING

Pursuant to exemptive relief granted by the SEC and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Boston Global Advisers (“BGA”), 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 loans are collateralized at all times with cash and/or securities with a market value at least equal to the securities on loan. As with other extensions of credit, the Fund bears the risk of delay on recovery or loss of rights in the collateral should the borrower of the securities fail financially.

     Both the Fund and BGA receive compensation relating to the lending of the Fund’s securities. The amount earned by the Fund for the year ended December 31, 2005, is reported parenthetically on the Statement of Operations. A portion of this amount, $40,315, represents compensation earned by the Fund from lending its securities to Goldman Sachs. For the year ended December 31, 2005, BGA earned approximately $30,239 in fees as securities lending agent. At December 31, 2005, the Fund loaned securities having a market value of $10,244,433 collateralized by cash in the amount of $10,606,425. The Fund invests the cash collateral received in connection with securities lending transactions in the Enhanced Portfolio of Boston Global Investment Trust, a Delaware statutory trust. The Enhanced Portfolio is exempt from registration under Section 3(c)(7) of the Act and is managed by GSAM, for which GSAM receives an investment advisory fee of up to 0.10% of the average daily net assets of the Enhanced Portfolio. The Enhanced Portfolio invests in high quality money market instruments. The Fund bears the risk of incurring a loss from the investment of cash collateral due to either credit or market factors.

6. LINE OF CREDIT FACILITY

The Fund participates in a $350,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Fund must own securities having a market value in excess of 300% of the Fund’s total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. This committed facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. During the year ended December 31, 2005, the Fund did not have any borrowings under this facility.

 
17

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND
Notes to Financial Statements (continued)
December 31, 2005
 

7. TAX INFORMATION

The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows:

                 
For the years ended December 31,
2005 2004
Distributions paid from:
               
Ordinary income
  $ 4,784,105     $ 2,262,135  
Net long-term capital gains
    12,684,650       6,767,288  
Total taxable distributions
  $ 17,468,755     $ 9,029,423  

As of December 31, 2005, the components of accumulated earnings on a tax basis were as follows:

         
Undistributed ordinary income — net
  $ 228,483  
Undistributed long-term capital gains
    1,316,886  
Total undistributed earnings
  $ 1,545,369  
Timing differences (related to the recognition of certain REIT dividends for tax purposes)
    18,500  
Unrealized gains — net
    24,007,585  
Total accumulated earnings — net
    25,571,454  

At December 31, 2005, the Fund’s aggregate security unrealized gains and losses based on a cost for U.S. federal income tax purposes were as follows:

         
Tax cost
  $ 181,143,909  
Gross unrealized gain
    29,590,407  
Gross unrealized loss
    (5,582,822 )
Net unrealized security gain
  $ 24,007,585  

     The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, futures contracts and return-of-capital distributions from underlying fund investments.

     In order to present certain components of the Fund’s capital accounts on a tax basis, certain reclassifications have been recorded to the Fund’s accounts. The Fund reclassified $1,821 from undistributed net investment income to accumulated net realized gain on investment and futures transactions. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from the difference in tax treatment of dividend redesignations.

8. LEGAL PROCEEDINGS

Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds and the Trustees and Officers of the Goldman Sachs Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust

 
18

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 

8. LEGAL PROCEEDINGS (continued)

enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. It is possible that the plaintiffs may appeal this decision.
     Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuits will have a material adverse financial impact on the Fund is remote, and the pending actions are not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.
 
19

 

Report of Independent Registered Public Accounting Firm

To the Shareholders of Goldman Sachs CORE Small Cap Equity Fund and Board of Trustees
Goldman Sachs Variable Insurance Trust

We have audited the accompanying statement of assets and liabilities of Goldman Sachs CORE Small Cap Equity Fund (one of the funds comprising the Goldman Sachs Variable Insurance Trust) (the “Fund”), including the statement of investments, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs CORE Small Cap Equity Fund at December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

  -s- Ernst & Young LLP

New York, New York
February 10, 2006
 
20

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 

Fund Expenses (Unaudited) — Six Month Period Ended December 31, 2005

            As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  
 
            The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2005 through December 31, 2005.  
 
            Actual Expenses — The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.  
 
            Hypothetical Example for Comparison Purposes — The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.  
 
            Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges (loads), redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.  

                         
Expenses Paid
for the
Beginning Ending 6 months
Account Value Account Value ended
7/1/05 12/31/05 12/31/05*
Actual
  $ 1,000     $ 1,050.50     $ 4.55  
Hypothetical 5% return
    1,000       1,020.77 +     4.48  

  *   Expenses are calculated using the Fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2005. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratio for the period was 0.88%.  
  +   Hypothetical expenses are based on the Fund’s actual annualized expense ratios and an assumed rate of return of 5% per year before expenses.  

 
21

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND

Trustees and Officers (Unaudited)

Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Ashok N. Bakhru
Age: 63		   Chairman & Trustee   Since 1997   President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President — Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors — III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003).

Chairman of the Board and Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
John P. Coblentz, Jr.
Age: 64		   Trustee   Since 2003   Partner, Deloitte & Touche LLP (June 1975-May 2003).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Patrick T. Harker
Age: 47		   Trustee   Since 2000   Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-Present); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Mary P. McPherson
Age: 70		   Trustee   Since 1997   Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Wilma J. Smelcer
Age: 56		   Trustee   Since 2001   Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Lawson Products Inc. (distributor of industrial products).
 
22

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 
 
Trustees and Officers (Unaudited) (continued)
Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Richard P. Strubel
Age: 66		   Trustee   Since 1997   Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Gildan Activewear Inc. (an activewear clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (53 Portfolios).

Interested Trustees

                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
*Alan A. Shuch
Age: 56		   Trustee   Since 1997   Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994- May 1999).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
*Kaysie P. Uniacke
Age: 44		   Trustee
  &		   Since 2001   Managing Director, GSAM (1997-Present).   72   None
    President   Since 2002   Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies).

Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).		        
 
*
These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1
Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Howard B. Surloff.
2
Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
3
The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of December 31, 2005, the Trust consisted of 61 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios.
4
This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726.

 
23

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*
             
Term of
Office and
Position(s) Held Length of
Name, Age And Address With the Trust Time Served1 Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke
32 Old Slip
New York, NY 10005
Age: 44		   President & Trustee   Since 2002

Since 2001		   Managing Director, GSAM (1997-Present).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).
James A. Fitzpatrick
71 South Wacker Drive
Suite 500
Chicago, IL 60606
Age: 45		   Vice President   Since 1997   Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara
32 Old Slip
New York, NY 10005
Age: 43		   Vice President   Since 2001   Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004)
John M. Perlowski
32 Old Slip
New York, NY 10005
Age: 41		   Treasurer   Since 1997   Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003).

Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Howard B. Surloff
One New York Plaza
37th Floor
New York, NY 10004
Age: 40		   Secretary   Since 2001   Managing Director, Goldman Sachs (November 2002-Present); Associate General Counsel, Goldman Sachs and General Counsel to the U.S. Funds Group (December 1997-Present).

Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies) (2001-Present) and Assistant Secretary prior thereto.
 
1
Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*
Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726.
 
 
24

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CORESM SMALL CAP EQUITY FUND 

Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)

For the year ended December 31, 2005, 28.57% of the dividends paid from net investment company taxable income by the CORE Small Cap Equity Fund qualifies for the dividends received deduction available to corporations.

Pursuant to Section 852 of the Internal Revenue Code, the CORE Small Cap Equity Fund designates $12,684,650 as capital gain dividends paid during the year ended December 31, 2005.

 
25

 

     
TRUSTEES
  OFFICERS
Ashok N. Bakhru, Chairman
   Kaysie P. Uniacke, President
John P. Coblentz, Jr.
  James A. Fitzpatrick, Vice President
Patrick T. Harker
  James A. McNamara, Vice President
Mary Patterson McPherson
  John M. Perlowski, Treasurer
Alan A. Shuch
  Howard B. Surloff, Secretary
Wilma J. Smelcer
   
Richard P. Strubel
   
Kaysie P. Uniacke
   
 
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent 		   
 
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
 
Visit our Web site at www.gs.com/funds to obtain the most recent month-end returns.
 
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
 
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov.
 
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, the Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330.When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
 
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.
 
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.
 
COREsm is a registered service mark of Goldman, Sachs & Co.
    Toll Free (in U.S.): 800-292-4726
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust: COREsm Small Cap Equity Fund.
 
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: February 18, 2006
 
VITCORESCAR/06-289/02-06    

 

Goldman
Sachs Variable Insurance Trust

GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32nd FLOOR, NEW YORK, NEW YORK 10005

Capital Growth Fund

Annual Report

December 31, 2005

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND 

Shareholder Letter

Dear Shareholders:

This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Capital Growth Fund during the one-year reporting period that ended December 31, 2005.

Market Review

In 2005, the U.S. equity markets, as measured by the S&P 500 Index, generated single-digit returns, but there was disparity of performance between different industries. Energy and Utility companies continued to be favored by investors, producing significant returns. Conversely, areas such as the Auto industry and the Consumer Discretionary sector suffered from weak sales growth throughout the year. The housing market in some regions began to cool by mid-year on the backdrop of steady and consistent tightening of monetary policy by the Federal Reserve Board (the “Fed”). The Fed’s actions were anticipated by the market, as the U.S. economy was robust and many corporations revealed large cash balances. Towards the middle of the year, growth style investing began to outperform value for the first extended period in over five years.

Investment Objective

The Fund seeks long-term growth of capital.

Portfolio Composition

Top 10 Portfolio Holdings as of December 31, 2005*

             
% of
Company Net Assets Business
Freddie Mac
    5.1 %   Financials
The McGraw-Hill Cos., Inc. 
     4.2     Commercial Services
Microsoft Corp. 
     3.8     Computer Software
PepsiCo, Inc. 
     3.3     Beverages
First Data Corp. 
     3.2     Computer Services
Lowe’s Companies, Inc. 
     3.1     Retailing
QUALCOMM, Inc. 
     3.0     Semiconductors
Schlumberger Ltd. 
     2.9     Oil Well Services & Equipment
Dell, Inc. 
     2.6     Computer Hardware
Wal-Mart Stores, Inc. 
     2.3     Retailing

* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.

Performance Review

Over the one-year period that ended December 31, 2005, the Fund generated a cumulative total return of 2.94%. This return compares to the 5.26% cumulative total return of the

 
1

 

 
 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND
 
Shareholder Letter (continued)

Fund’s benchmark, the Russell 1000 Growth Index (with dividends reinvested), over the same time period.

The Fund underperformed its benchmark during the reporting period, primarily due to weakness in the Media and Finance sectors. In contrast, strength in the Energy and Producer Goods & Services sector enhanced results, as did holdings in select Wireless Tower companies.

During the year, the Fund’s holding in Wal-Mart Stores, Inc. detracted from results, as it reported that its earnings would fall short of analysts’ expectations. The company cited concerns about the impact of high oil prices on low-income consumers. Despite the recent weakness, we believe that Wal-Mart’s long-term growth will be supported by its U.S. grocery effort as it currently has a 12-14% market share in this area. We also believe that Wal-Mart’s international business, which currently constitutes between 15-20% of sales, should proliferate and help the company sustain strong long-term growth.

Dell, Inc. was another fund holding that was a negative contributor to performance. At the beginning of November, Dell, Inc. lowered its earnings guidance for its recently completed fiscal third quarter, driving down its stock price. The reduced expectations for growth were attributed to restructuring and expenses associated with a faulty computer component. We believe that Dell is refocusing on profitability versus volume and we do not feel that its business model is broken. As Dell works through its issues, we believe that the market will realize that some of Dell’s problems are transitional and are not all secular in nature.

Although Freddie Mac was a detractor to performance during the reporting period, the company began to rally during the fourth quarter as it announced a $2 billion stock buyback plan. We believe this indicates that Freddie Mac is focused on strengthening its business. The company currently holds an additional $4.8 billion in excess capital above an imposed capital surcharge. When Freddie Mac finalizes its updated financial report, we believe it should receive approval from its regulator, the Office of Federal Housing Enterprise Oversight, thereby increasing the company’s financial flexibility. It is our belief that when this occurs, the company will use some of its excess capital to buy back stock more aggressively.

Another holding that hurt Fund performance was Cendant Corp. Toward the end of 2005, Cendant Corp. announced plans to break up the company into four parts and downwardly revised its earnings guidance for the fourth quarter and 2006, citing weakness in its travel area. Its stock fell sharply on the news. In terms of the restructuring, we think it is to Cendant’s advantage to break up the company. It is possible that when the businesses become standalone entities, which will be mid- to small-cap companies, investors will focus more on their growth characteristics. We think that this move could elicit a more favorable investor reaction toward Cendant’s businesses versus the recent sentiment. While we believe that Cendant’s spin offs have the potential to grow, we took the more conservative approach and exited the position. In addition, the ensuing mid- to small-cap companies from Cendant’s breakup would not be appropriate for the Capital Growth Fund’s large-cap growth focus.

Energy stocks generated very strong performance during the reporting period and due to strong stock selection, the Fund’s Energy holdings generated even better returns than the overall Energy sector. Many energy companies’ earnings are directly linked to the price of oil. Fund holding Schlumberger Ltd., however, is not in the business of buying or selling oil — it is in the business of testing to determine the presence of oil. With oil reserves becoming harder to find and the size of new discoveries shrinking, it is likely that more wells will need to be drilled in order to meet global oil demand. For Schlumberger, more wells

 
2

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND 

translate into more testing services. While the exploration companies’ drilling efforts require large capital investments, Schlumberger’s testing services are less capital intensive. Since it does not have much of a manufacturing base, Schlumberger’s return on capital has increased sharply.

Another Fund holding which performed well this year and contributed positively to performance was The McGraw-Hill Cos., Inc., which owns Standard & Poor’s (S&P), and Moody’s Corp. These businesses meet our investment criteria as they operate in an industry environment that can be characterized as quasi-monopolistic or a “partnership-monopoly.” This is because most issuers tend to have at least two ratings, one from each agency. As a result, S&P and Moody’s rate approximately 90% of the debt issuance in the U.S. We believe their growth is sustainable because it is supported by favorable secular trends such as the globalization of capitalism, deregulation, and financial innovation.

We thank you for your investment and look forward to serving your investment needs in the future.

Goldman Sachs Growth Equity Management Team

January 18, 2006

Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Capital Growth Fund are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.

The VIT Capital Growth Fund invests primarily in large-capitalization U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. The Fund may invest in foreign securities, which may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all. The Fund may participate in the Initial Public Offering (IPO) market, and a portion of the Fund’s returns consequently may be attributable to its investment in IPOs. The market value of IPO shares may fluctuate considerably due to factors such as the absence of a prior public market, unseasoned trading, and the small number of shares available for trading and limited information about the issuer. When a fund’s asset base is small, IPOs may have a magnified impact on the fund’s performance. As a fund’s assets grow, it is probable that the effect of the fund’s investment in IPOs on its total returns may not be as significant, which could reduce the fund’s performance.

 
3

 

 
 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND
 
Shareholder Letter (continued)

SECTOR ALLOCATION AS OF DECEMBER 31, 2005†

Percentage of Portfolio Investments

(BAR CHART)

† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value.
 
4

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND 

Performance Summary

December 31, 2005

The following graph shows the value as of December 31, 2005, of a $10,000 investment made on April 30, 1998 (commencement of operations). For comparative purposes, the performance of the Fund’s benchmark, the Russell 1000 Growth Index (with dividends reinvested) is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance also would have been reduced had expense limitations not been in effect. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a Fund.

Capital Growth Fund’s Lifetime Performance

Growth of a $10,000 investment, Distributions Reinvested from April 30, 1998 to December 31, 2005.

                             
Since Inception Five Years One Year
Average Annual Total Return Through December 31, 2005
Capital Growth Fund (commenced April 30, 1998)
     2.33%       -2.10%       2.94%      
 
5

 

 
 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND

Statement of Investments

December 31, 2005
                     
Shares Description Value
   
Common Stocks – 98.7%
    Aerospace & Defense – 0.5%
      15,730     United Technologies Corp.   $ 879,464  
   
    Apparel/ Shoes – 0.5%
      10,090     Nike, Inc. Class B     875,711  
   
    Audio & Visual Equipment – 0.6%
      9,720     Harman International Industries, Inc.      951,102  
   
    Banks – 1.1%
      46,892     J.P. Morgan Chase & Co.     1,861,143  
   
    Beverages – 5.2%
      20,280     Fortune Brands, Inc.     1,582,246  
      95,000     PepsiCo, Inc.     5,612,600  
      39,775     The Coca-Cola Co.     1,603,330  
                 
 
                  8,798,176  
   
    Biotechnology – 2.2%
      47,070     Amgen, Inc.*     3,711,940  
   
    Broadcasting & Cable/ Satellite TV – 1.7%
      69,750     Univision Communications, Inc.*     2,049,953  
      28,750     XM Satellite Radio Holdings, Inc.*     784,300  
                 
 
                  2,834,253  
   
    Commercial Services – 7.3%
      30,670     ARAMARK Corp. Class B     852,013  
      17,320     Cognizant Technology Solutions Corp.*     872,062  
      56,290     Moody’s Corp.     3,457,332  
      137,350     The McGraw-Hill Cos., Inc.      7,091,380  
                 
 
                  12,272,787  
   
    Computer Hardware – 2.7%
      148,435     Dell, Inc.*     4,451,566  
   
    Computer Services – 3.2%
      126,680     First Data Corp.      5,448,507  
   
    Computer Software – 5.9%
      51,525     Electronic Arts, Inc.*     2,695,273  
      244,955     Microsoft Corp.     6,405,573  
      65,660     Oracle Corp.*     801,709  
                 
 
                  9,902,555  
   
    Drugs & Medicine – 2.9%
      25,740     Eli Lilly & Co.     1,456,627  
      49,280     Pfizer, Inc.      1,149,210  
      49,435     Wyeth     2,277,470  
                 
 
                  4,883,307  
   
    Electrical Equipment – 0.8%
      43,650     Tyco International Ltd.     1,259,739  
   
    Financials – 10.8%
      17,060     American Express Co.     877,908  
      39,160     Fannie Mae     1,911,400  
      130,555     Freddie Mac     8,531,769  
      16,630     Golden West Financial Corp.     1,097,580  
      23,235     Merrill Lynch & Co., Inc.     1,573,706  
      25,345     Morgan Stanley     1,438,075  
      183,330     The Charles Schwab Corp.     2,689,451  
                 
 
                  18,119,889  
   
    Foods – 1.6%
      39,620     Wm. Wrigley Jr. Co.     2,634,334  
   
    Gaming/ Lodging – 5.1%
      50,640     Carnival Corp.     2,707,721  
      44,450     GTECH Holdings Corp.     1,410,843  
      33,620     Harrah’s Entertainment, Inc.     2,396,770  
      30,630     Marriott International, Inc.     2,051,291  
                 
 
                  8,566,625  
   
    Household/ Personal Care – 0.8%
      23,100     Procter & Gamble Co.     1,337,028  
   
    Insurance – 0.5%
      23,910     Willis Group Holdings Ltd.     883,235  
   
    Internet & Online – 2.3%
      6,110     Google, Inc.*     2,534,795  
      34,790     Yahoo!, Inc.*     1,363,072  
                 
 
                  3,897,867  
   
    Medical Products – 6.5%
      10,330     C.R. Bard, Inc.     680,954  
      11,250     Fisher Scientific International, Inc.*     695,925  
      59,720     Medtronic, Inc.     3,438,080  
      17,790     St. Jude Medical, Inc.*     893,058  
      62,900     Stryker Corp.     2,794,647  
      37,100     Zimmer Holdings, Inc.*     2,502,024  
                 
 
                  11,004,688  
   
    Movies & Entertainment – 3.7%
      197,350     Time Warner, Inc.     3,441,784  
      86,548     Viacom, Inc. Class B     2,821,465  
                 
 
                  6,263,249  
   
    Networking/ Telecommunications Equipment – 2.0%
      194,670     Cisco Systems, Inc.*     3,332,750  
   
    Oil & Gas – 4.7%
      69,740     Canadian Natural Resources Ltd.     3,460,499  
      11,702     Exxon Mobil Corp.     657,301  
      58,920     Suncor Energy, Inc.     3,719,620  
                 
 
                  7,837,420  
   
    Oil Well Services & Equipment – 4.5%
      44,660     Baker Hughes, Inc.     2,714,435  
      50,580     Schlumberger Ltd.     4,913,847  
                 
 
                  7,628,282  
   
    Pharmacy Benefit Manager – 3.3%
      66,165     Caremark Rx, Inc.*     3,426,685  
      38,690     Medco Health Solutions, Inc.*     2,158,902  
                 
 
                  5,585,587  
   
 
The accompanying notes are an integral part of these financial statements.

6

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND 
                     
Shares Description Value
   
Common Stocks – (continued)
    Producer Goods – 0.6%
      13,510     W.W. Grainger, Inc.   $ 960,561  
   
    Publishing – 1.6%
      46,155     Lamar Advertising Co.*     2,129,591  
      21,610     Valassis Communications, Inc.*     628,203  
                 
 
                  2,757,794  
   
    Retailing – 7.5%
      78,970     Lowe’s Companies, Inc.     5,264,140  
      83,460     PETCO Animal Supplies, Inc.*     1,831,947  
      27,890     Target Corp.     1,533,113  
      83,720     Wal-Mart Stores, Inc.     3,918,096  
                 
 
                  12,547,296  
   
    Semiconductors – 5.9%
      52,670     Intel Corp.     1,314,643  
      97,940     Linear Technology Corp.     3,532,696  
      116,590     QUALCOMM, Inc.     5,022,697  
                 
 
                  9,870,036  
   
    Telecommunications – 2.7%
      109,890     American Tower Corp.*     2,978,019  
      58,450     Crown Castle International Corp.*     1,572,890  
                 
 
                  4,550,909  
   
    TOTAL COMMON STOCKS
    (Cost $149,348,774)   $ 165,907,800  
   
    TOTAL INVESTMENTS – 98.7%
    (Cost $149,348,774)   $ 165,907,800  
   
  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.

7

 

 
 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND
 

Statement of Assets and Liabilities

December 31, 2005
               
 
    Assets:
   
Investment in securities, at value (identified cost $149,348,774)
  $ 165,907,800  
   
Cash
    35,627  
   
Receivables:
       
     
Investment securities sold
    2,292,511  
     
Dividends
    98,948  
     
Fund shares sold
    11,678  
     
Securities lending income
    372  
   
   
Total assets
     168,346,936  
   
    Liabilities:
   
Payables:
       
     
Amounts owed to affiliates
    114,786  
     
Fund shares repurchased
    71,389  
   
Accrued expenses
    107,135  
   
   
Total liabilities
     293,310  
   
    Net Assets:
   
Paid-in capital
    178,997,199  
   
Accumulated undistributed net investment income
    2,946  
   
Accumulated net realized loss on investment transactions
    (27,505,545 )
   
Net unrealized gain on investments
    16,559,026  
   
   
NET ASSETS
     168,053,626  
   
   
Total shares of beneficial interest outstanding, par value $0.001 (unlimited shares authorized)
    15,741,999  
   
Net asset value, offering and redemption price per share
  $ 10.68  
   
 
The accompanying notes are an integral part of these financial statements.

8

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND 

Statement of Operations

For the Year Ended December 31, 2005
             
    Investment income:
   
Dividends(a)
  $ 1,755,861  
   
Interest (including securities lending income of $2,668)
    29,804  
   
   
Total income
     1,785,665  
   
    Expenses:
   
Management fees
    1,284,754  
   
Transfer agent fees
    68,520  
   
Custody and accounting fees
    56,991  
   
Printing fees
    52,724  
   
Professional fees
    46,193  
   
Trustee fees
    16,492  
   
Other
    8,256  
   
   
Total expenses
     1,533,930  
   
   
Less — expense reductions
    (1,167 )
   
   
Net expenses
     1,532,763  
   
   
NET INVESTMENT INCOME
     252,902  
   
    Realized and unrealized gain on investment transactions:
   
Net realized gain on investment transactions (including commissions recaptured of $17,489)
    2,625,757  
   
Payments by affiliates to reimburse certain security claims
    2,915  
   
Net change in unrealized gain on investments
    1,234,312  
   
   
Net realized and unrealized gain on investment transactions
     3,862,984  
   
   
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
   $ 4,115,886  
   

(a)  Foreign taxes withheld on dividends were $2,711.

 
The accompanying notes are an integral part of these financial statements.

9

 

 
 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND

Statements of Changes in Net Assets

                     
For the For the
Year Ended Year Ended
December 31, 2005 December 31, 2004
    From operations:
   
Net investment income
  $ 252,902     $ 1,224,380  
   
Net realized gain on investment transactions
    2,625,757       1,083,044  
   
Payments by affiliates to reimburse certain security claims
    2,915       —  
   
Payments by affiliates to reimburse certain brokerage commissions
    —       665  
   
Net change in unrealized gain on investments
    1,234,312       13,497,200  
   
   
Net increase in net assets resulting from operations
     4,115,886       15,805,289  
   
    Distributions to shareholders:
   
From net investment income
    (249,956 )     (1,269,081 )
   
    From share transactions:
   
Proceeds from sales of shares
    11,639,337       16,794,368  
   
Reinvestment of dividends and distributions
    249,956       1,269,081  
   
Cost of shares repurchased
    (34,389,302 )     (25,605,992 )
   
   
Net decrease in net assets resulting from share transactions
     (22,500,009 )     (7,542,543 )
   
   
TOTAL INCREASE (DECREASE)
     (18,634,079 )     6,993,665  
   
    Net assets:
   
Beginning of year
    186,687,705       179,694,040  
   
   
End of year
  $ 168,053,626     $ 186,687,705  
   
   
Accumulated undistributed net investment income
   $ 2,946     $ —  
   
    Summary of share transactions:
   
Shares sold
    1,146,173       1,723,683  
   
Shares issued on reinvestment of dividends and distributions
    23,144       122,973  
   
Shares repurchased
    (3,389,711 )     (2,631,519 )
   
   
NET DECREASE
     (2,220,394 )     (784,863 )
   
 
The accompanying notes are an integral part of these financial statements.

10

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year
                                                                                                                             
Income (loss) from Ratios assuming no
investment operations Distributions to shareholders expense reductions
Net Ratio of Ratio of net Ratio of Ratio of net
Net asset realized Net asset Net assets net investment total investment
value, Net and Total from From net From net value, at end expenses income expenses income (loss) Portfolio
beginning investment unrealized investment investment realized Total end of Total  of year to average to average to average to average turnover
of year income(a) gain (loss) operations income gain distributions year return(b) (in 000s) net assets net assets net assets net assets rate
 
    For the Years ended December 31,
    2005   $ 10.39     $ 0.02     $ 0.29     $ 0.31     $ (0.02 )   $ —     $ (0.02 )   $ 10.68       2.94 %   $ 168,054       0.90 %     0.15 %     0.90 %     0.15 %     35 %
    2004     9.59       0.07       0.80       0.87       (0.07 )     —       (0.07 )     10.39       9.09       186,688       0.89       0.69       0.89       0.69       45  
    2003     7.77       0.03       1.81       1.84       (0.02 )     —       (0.02 )     9.59       23.74       179,694       1.02       0.38       1.43       (0.03 )     16  
    2002     10.28       0.01       (2.50 )     (2.49 )     (0.02 )     —       (0.02 )     7.77       (24.33 )     18,052       1.10       0.16       1.77       (0.51 )     24  
    2001     12.09       0.02       (1.78 )     (1.76 )     (0.02 )     (0.03 )     (0.05 )     10.28       (14.46 )     16,266       1.00       0.15       1.69       (0.54 )     39  
   

(a)  Calculated based on the average shares outstanding methodology.
(b)  Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions and a complete redemption of the investment at the net asset value at the end of the year.

The accompanying notes are an integral part of these financial statements.

 
11

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND

Notes to Financial Statements

December 31, 2005
 
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust”) 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 Capital Growth Fund (the “Fund”). The Fund is a diversified portfolio under the Act.
     Shares of the Trust may be purchased and held by separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Trust are not offered directly to the general public.
 
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consistently followed by the Fund. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/ dealer-supplied valuations or matrix pricing systems. Unlisted equity and debt securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amount reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line or pro rata basis depending upon the nature of the expense.

D. Federal Taxes — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.

     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules. Therefore, the source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income or net realized gain, or from tax return of capital.

E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate liquid assets, on the books of their custodian, with a daily mark-to-market value equal to or greater than the market value of the corresponding transactions.

F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the

 
12

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

underlying securities held as collateral on behalf of the Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.
     Pursuant to exemptive relief granted by the Securities and Exchange Commission (the “SEC”) and terms and conditions contained therein, the Fund, together with other registered investment companies having management or investment advisory agreements with Goldman Sachs Asset Management, L.P. (“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. At December 31, 2005, the Fund did not have an interest in the joint repurchase agreement.

G. Commission Recapture — The Fund may direct portfolio trades, subject to obtaining best price and execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to the Fund as cash payments and are included in the net realized gain (loss) on investments in the Statement of Operations.

 
3.  AGREEMENTS
GSAM, an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Fund. Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trust’s Board of Trustees.
     As compensation for the services rendered pursuant to the Agreements, the assumption of the expenses related thereto and administering the Fund’s business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”) computed daily and payable monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
     At a meeting held on June 16, 2005, the Board of Trustees of the Trust approved a fee reduction commitment for the Fund which will be effective on a contractual basis in 2006. Effective July 1, 2005, GSAM implemented the fee reduction commitment on a voluntary basis which resulted in the following annual Management fee rates:
         
Average Daily Net Assets Annual Rate
First $1 Billion
    0.75 %
Next $1 Billion
    0.68 %
Over $2 Billion
    0.65 %

     Prior to July 1, 2005, the Fund’s Management fee as an annual percentage rate of average daily net assets was 0.75%.

     GSAM has voluntarily agreed to limit certain “Other Expenses” of the Fund (excluding Management fees, Transfer Agency fees, taxes, interest, brokerage fees and litigation, indemnification costs, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent that such expenses exceed, on an annual basis, 0.11% of the average daily net assets of the Fund. GSAM agreed to maintain this expense limitation contractually through June 30, 2005 and on a voluntary basis thereafter. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the year ended December 31, 2005, GSAM did not make any reimbursements to the Fund.

     In addition, the Fund has entered into certain offset arrangements with the custodian resulting in a reduction in the Fund’s expenses. For the year ended December 31, 2005, custody fees were reduced by approximately $1,200.
     Goldman Sachs also serves as the Transfer Agent of the Fund for a fee. The fees charged for such transfer agency services are calculated daily and payable monthly equal to an annual rate of 0.04% of the average daily net assets of the Fund. Goldman Sachs serves as the distributor of the Fund’s shares at no cost to the Fund.
 
13

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND
 
Notes to Financial Statements (continued)
December 31, 2005

3. AGREEMENTS (continued)

     At December 31, 2005, amounts owed to affiliates were approximately $109,000 and $5,800 for Management and Transfer Agent fees, respectively.
 
4. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds of sales and maturities of long-term securities for the year ended December 31, 2005, were $60,026,030 and $82,167,679 respectively. For the year ended December 31, 2005, Goldman Sachs earned approximately $3,400 of brokerage commissions from portfolio transactions executed on behalf of the Fund.
     During the year ended December 31, 2005, GSAM voluntarily reimbursed the Fund $2,915 for certain class action settlements in which the Fund was eligible to participate.
 
5. SECURITIES LENDING
Pursuant to exemptive relief granted by the SEC and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Boston Global Advisers (“BGA”), 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 loans are collateralized at all times with cash and/or securities with a market value at least equal to the securities on loan. As with other extensions of credit, the Fund bears the risk of delay on recovery or loss of rights in the collateral should the borrower of the securities fail financially.
     Both the Fund and BGA receive compensation relating to the lending of the Fund’s securities. The amount earned by the Fund for the year ended December 31, 2005 is reported parenthetically under Investment Income on the Statement of Operations. A portion of this amount, $1,164, represents compensation earned by the Fund from lending its securities to Goldman Sachs. For the year ended December 31, 2005, BGA earned $471 in fees as securities lending agent. At December 31, 2005, the Fund did not have any securities on loan. The Fund invests the cash collateral received in connection with securities lending transactions in the Enhanced Portfolio of Boston Global Investment Trust, a Delaware statutory trust. The Enhanced Portfolio is exempt from registration under Section 3(c)(7) of the Act and is managed by GSAM, for which GSAM receives an investment advisory fee of up to 0.10% of the average daily net assets of the Enhanced Portfolio. The Enhanced Portfolio invests in high quality money market instruments. The Fund bears the risk of incurring a loss from the investment of cash collateral due to either credit or market factors.
 
6. LINE OF CREDIT FACILITY
The Fund participates in a $350,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Fund must own securities having a market value in excess of 300% of the Fund’s total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. This committed facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. During the year ended December 31, 2005, the Fund did not have any borrowings under this facility.
 
14

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND 
 
7. TAX INFORMATION
The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows:
                 
For the years ended December 31,
2005 2004
Distributions paid from:
               
Ordinary income
  $ 249,956     $ 1,269,081  
Total taxable distributions
  $ 249,956     $ 1,269,081  

As of December 31, 2005, the components of accumulated earnings (losses) on a tax basis were as follows:

           
Undistributed ordinary income — net
  $ 2,946  
Capital loss carryforward:(1)(2)
       
 
Expiring 2008
    (4,206,400 )
 
Expiring 2009
    (13,983,325 )
 
Expiring 2010
    (6,239,358 )
 
Expiring 2011
    (1,064,803 )
Total capital loss carryforward
    (25,493,886 )
Timing differences (post-October losses)
    (1,208,929 )
Unrealized gains — net
    15,756,296  
Total accumulated losses — net
  $ (10,943,573 )

(1)  Expiration occurs on December 31 of the year indicated and utilization of these losses may be limited under the Code.
(2)  During the year ended December 31, 2005, the Fund utilized $3,606,802 of capital carryforwards.

At December 31, 2005, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
         
Tax cost
  $ 150,151,504  
Gross unrealized security gain
    24,454,922  
Gross unrealized security loss
    (8,698,626 )
Net unrealized security gain
  $ 15,756,296  

The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales.

 
8. LEGAL PROCEEDINGS
Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds and the Trustees and Officers of the Goldman Sachs Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed
 
15

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND
 
Notes to Financial Statements (continued)
December 31, 2005

8. LEGAL PROCEEDINGS (continued)

pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. It is possible that the plaintiffs may appeal this decision.

     Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuits will have a material adverse financial impact on the Fund is remote, and the pending actions are not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

 
9. SUBSEQUENT EVENT

At a meeting held on July 12, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization providing for the tax-free acquisition of the Allmerica Select Growth Fund by the Capital Growth Fund. Following the approval of the Board of Trustees and shareholders of the Allmerica Select Growth Fund, the acquisition was completed on January 9, 2006.

 
16

 

Report of Independent Registered Public Accounting Firm

To the Shareholders of Goldman Sachs Capital Growth Fund and Board of Trustees
Goldman Sachs Variable Insurance Trust

We have audited the accompanying statement of assets and liabilities of Goldman Sachs Capital Growth Fund (one of the funds comprising the Goldman Sachs Variable Insurance Trust) (the “Fund”), including the statement of investments, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs Capital Growth Fund at December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

  -s- ERNST & YOUNG LLP

New York, New York
February 10, 2006
 
17

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND

Fund Expenses (Unaudited) — Six Month Period Ended December 31, 2005

            As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  
 
            The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2005 through December 31, 2005.  
 
            Actual Expenses — The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.  
 
            Hypothetical Example for Comparison Purposes — The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.  
 
            Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges (loads), redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.  

                         
Expenses Paid
for the
Beginning Ending 6 months
Account Value Account Value ended
7/1/05 12/31/05 12/31/05*
Actual
  $ 1,000     $ 1,061.10     $ 4.57  
Hypothetical 5% return
    1,000       1,020.77 +     4.48  

  *   Expenses are calculated using the Fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2005. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The net annualized expense ratio for the period was 0.88%.  
  +   Hypothetical expenses are based on the Fund’s actual annualized expense ratios and an assumed rate of return of 5% per year before expenses.  

 
18

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND 

Trustees and Officers (Unaudited)

Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Ashok N. Bakhru
Age: 63		   Chairman & Trustee   Since 1997   President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President — Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors — III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003).

Chairman of the Board and Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
John P. Coblentz, Jr.
Age: 64		   Trustee   Since 2003   Partner, Deloitte & Touche LLP (June 1975-May 2003).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Patrick T. Harker
Age: 47		   Trustee   Since 2000   Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-Present); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Mary P. McPherson
Age: 70		   Trustee   Since 1997   Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Wilma J. Smelcer
Age: 56		   Trustee   Since 2001   Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Lawson Products Inc. (distributor of industrial products).
 
19

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND
 
Trustees and Officers (Unaudited) (continued)
Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Richard P. Strubel
Age: 66		   Trustee   Since 1997   Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Gildan Activewear Inc. (a clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (53 Portfolios).

Interested Trustees

                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
*Alan A. Shuch
Age: 56		   Trustee   Since 1997   Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994- May 1999).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
*Kaysie P. Uniacke
Age: 44		   Trustee
  &		   Since 2001   Managing Director, GSAM (1997-Present).   72   None
    President   Since 2002   Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies).

Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).		        
 
*
These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1
Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Howard B. Surloff.
2
Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
3
The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of December 31, 2005, the Trust consisted of 61 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios.
4
This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726.

 
20

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND 

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*
             
Term of
Office and
Position(s) Held Length of
Name, Age And Address With the Trust Time Served1 Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke
32 Old Slip
New York, NY 10005
Age: 44		   President & Trustee   Since 2002

Since 2001		   Managing Director, GSAM (1997-Present).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).
James A. Fitzpatrick
71 South Wacker Drive
Suite 500
Chicago, IL 60606
Age: 45		   Vice President   Since 1997   Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara
32 Old Slip
New York, NY 10005
Age: 43		   Vice President   Since 2001   Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004)
John M. Perlowski
32 Old Slip
New York, NY 10005
Age: 41		   Treasurer   Since 1997   Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003).

Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Howard B. Surloff
One New York Plaza
37th Floor
New York, NY 10004
Age: 40		   Secretary   Since 2001   Managing Director, Goldman Sachs (November 2002-Present); Associate General Counsel, Goldman Sachs and General Counsel to the U.S. Funds Group (December 1997-Present).

Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies) (2001-Present) and Assistant Secretary prior thereto.
 
1
Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*
Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726.

Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)

       For the year ended December 31, 2005, 100% of the dividends paid from net investment company taxable income by the Capital Growth Fund qualifies for the dividends received deduction available to corporations.  

 
21

 

     
TRUSTEES
  OFFICERS
Ashok N. Bakhru, Chairman
   Kaysie P. Uniacke, President
John P. Coblentz, Jr.
  James A. Fitzpatrick, Vice President
Patrick T. Harker
  James A. McNamara, Vice President
Mary Patterson McPherson
  John M. Perlowski, Treasurer
Alan A. Shuch
  Howard B. Surloff, Secretary
Wilma J. Smelcer
   
Richard P. Strubel
   
Kaysie P. Uniacke
   
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent 		   
 
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
 
Visit our Web site at www.gs.com/funds to obtain the most recent month-end returns.
 
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
 
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov.
 
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, the Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
 
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.
 
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.
 
    Toll Free (in U.S.): 800-292-4726
 
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust: Capital Growth Fund.
 
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: February 18, 2006
 
VITCGAR/06-288/02-06    

 

Goldman
Sachs Variable Insurance Trust
GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32nd FLOOR, NEW YORK, NEW YORK 10005
Mid Cap Value Fund
 
Annual Report
December 31, 2005
 

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND 

Shareholder Letter

Dear Shareholders:

This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust – Mid Cap Value Fund during the one-year reporting period that ended December 31, 2005.

Market Review

The U.S. equity markets finished 2005 with solid gains, resulting in a third calendar year of positive returns. After a lackluster first half, the markets strengthened in the third and fourth quarters of the year and the S&P 500 Index returned 4.91% during the one-year period ended December 31, 2005. Value stocks outperformed their growth counterparts for the sixth consecutive year, with the Russell 3000 Value Index returning 6.85% versus the Russell 3000 Growth Index return of 5.17%. From a market cap perspective, mid caps outperformed large- and small-cap stocks, with the Russell Midcap, Russell 1000, and Russell 2000 Indexes returning 12.65%, 6.27%, and 4.55%, respectively.

Investment Objective

The Fund seeks long-term capital appreciation.

Portfolio Composition

Top 10 Portfolio Holdings as of December 31, 2005*

             
% of
Company Net Assets Business
PPL Corp.
    2.8 %   Electrical Utilities
J.C. Penney Co., Inc.
    2.7     Retail Apparel
EOG Resources, Inc.
    2.5     Energy Resources
AMBAC Financial Group, Inc.
    2.3     Property Insurance
Harrah’s Entertainment, Inc.
    2.1     Hotel & Leisure
Zions Bancorp
    2.0     Regional Banks
PG&E Corp.
    1.9     Electrical Utilities
Range Resources Corp.
    1.9     Energy Resources
The Bear Stearns Companies, Inc.
    1.8     Brokers
American Standard Companies, Inc.
    1.8     Parts & Equipment

* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.

 
1

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
 
Shareholder Letter (continued)

Performance Review

Over the one-year period that ended December 31, 2005, the Fund generated a cumulative total return of 12.83%. This return compares to the 12.65% cumulative total return of the Fund’s benchmark, the Russell Midcap Value Index (with dividends reinvested), over the same time period.

During the reporting period, stock selection was strongest in the Energy and Financial sectors, while holdings in Insurance and REITs detracted from performance.

In the Energy sector, our approach has been focused on companies with a favorable mix of competitively low-cost structures, positive reserve trends, and disciplined management teams. As a result, many of the Fund’s holdings have outperformed the extraordinary gains in the sector during the year. We believe the prospects for EOG Resources, Inc., Range Resources Corp., and The Williams Companies, Inc. have all improved in the higher priced environment, particularly as fundamentals in North American natural gas continue to strengthen. Given their strength, we have taken profits in several of the Fund’s Energy stocks.

Retail company J.C. Penney Inc. performed well as recent progress in the company’s turnaround, including share buybacks and improved operating results, lifted its stock higher. While the turnaround has been impressive to date, we believe that the company’s management remains focused on improving operating margins and store productivity through a number of key initiatives.

In Insurance, difficult headwinds weighed on several of the Fund’s larger holdings, including RenaissanceRe Holdings Ltd. and Willis Group Holdings Ltd. The destructive hurricane season pressured RenaissanceRe, a reinsurance company. Although we believe the company should recover its losses from an improved pricing cycle, we reduced the Fund’s exposure to this stock over the reporting period. Willis Group declined after it reported lower earnings attributed to new regulatory requirements. As regulators continue to redefine industry contracts and accounting methods, we believe the environment will become increasingly challenging for many firms, as they must decide between growth and profitability.

The portfolio’s largest detractor in 2005 was iStar Financial, Inc. iStar is one of the largest publicly traded providers of customized financing to public and private owners of commercial real estate. The company lowered guidance earlier in the year due to an increase in loan prepayments and reduced credit spreads. We believe this well-managed company is attractively valued, given its above-average return on equity and below-average leverage relative to its peer group.

We thank you for your investment and look forward to serving your investment needs in the future.

Goldman Sachs Value Portfolio Management Team

January 18, 2006

Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Mid Cap Value Fund are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for

 
2

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND 

information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.

The VIT Mid Cap Value Fund invests primarily in mid-capitalization U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. The securities of mid-capitalization companies involve greater risks than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements. The Fund may invest in foreign securities, which may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all. The Fund may invest in fixed income securities. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk.

SECTOR ALLOCATION AS OF DECEMBER 31, 2005†

Percentage of Portfolio Investments

† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value. Short-term Investments include repurchase agreements and securities lending collateral.
 
3

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND

Performance Summary

December 31, 2005

The following graph shows the value as of December 31, 2005, of a $10,000 investment made on May 1, 1998 (commencement of operations). For comparative purposes, the performance of the Fund’s benchmark, the Russell Mid Cap Value Index (with dividends reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance also would have been reduced had expense limitations not been in effect. In addition to the investment adviser’s decisions regarding issuer/industry/country investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a Fund.

Mid Cap Value Fund’s Lifetime Performance

Growth of a $10,000 investment, Distributions Reinvested from May 1, 1998 to December 31, 2005.

                             
Since Inception Five Years One Year
Average Annual Total Return Through December 31, 2005
Mid Cap Value Fund (commenced May 1, 1998)
     10.72%       14.25%       12.83%      
 
4

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND 

Statement of Investments

December 31, 2005
                     
Shares Description Value
   
Common Stocks – 96.6%
    Aerospace & Defense – 2.5%
      233,466     Alliant Techsystems, Inc.*   $ 17,783,105  
      376,817     Rockwell Collins, Inc.     17,510,686  
                 
 
                  35,293,791  
   
    Biotechnology – 1.4%
      583,164     MedImmune, Inc.*     20,422,403  
   
    Brokers – 1.8%
      226,171     The Bear Stearns Companies, Inc.(a)     26,129,536  
   
    Chemicals – 2.9%
      343,259     Agrium, Inc.     7,548,265  
      141,618     Carlisle Cos., Inc.     9,792,885  
      895,990     Chemtura Corp.     11,379,073  
      255,682     Rohm & Haas Co.     12,380,123  
                 
 
                  41,100,346  
   
    Computer Hardware – 3.7%
      269,679     Amphenol Corp.     11,935,993  
      115,636     Avocent Corp.*     3,144,143  
      195,597     CDW Corp.     11,260,519  
      454,369     Ingram Micro, Inc.*     9,055,574  
      416,165     Zebra Technologies Corp.*     17,832,670  
                 
 
                  53,228,899  
   
    Computer Software – 1.3%
      1,370,984     Activision, Inc.*     18,837,320  
   
    Construction – 1.6%
      384,427     Lennar Corp.     23,457,736  
   
    Consumer Durables – 2.3%
      242,480     Mohawk Industries, Inc.*     21,090,910  
      246,593     The Stanley Works     11,846,328  
                 
 
                  32,937,238  
   
    Diversified Energy – 3.2%
      1,108,703     The Williams Companies, Inc.     25,688,649  
      416,568     Western Gas Resources, Inc.     19,616,187  
                 
 
                  45,304,836  
   
    Drugs – 1.3%
      431,858     Charles River Laboratories International, Inc.*     18,297,823  
   
    Electrical Utilities – 10.5%
      193,983     CMS Energy Corp.*     2,814,693  
      552,713     Edison International     24,103,814  
      364,813     Entergy Corp.     25,044,413  
      178,409     FirstEnergy Corp.     8,740,257  
      300,918     Northeast Utilities     5,925,075  
      739,725     PG&E Corp.     27,458,592  
      134,658     PNM Resources, Inc.     3,297,774  
      1,342,200     PPL Corp.     39,460,680  
      56,159     Public Service Enterprise Group, Inc.     3,648,650  
      264,959     Wisconsin Energy Corp.     10,349,299  
                 
 
                  150,843,247  
   
    Energy Resources – 4.3%
      482,584     EOG Resources, Inc.     35,407,188  
      1,006,060     Range Resources Corp.     26,499,621  
                 
 
                  61,906,809  
   
    Environmental & Other Services – 1.1%
      417,255     Republic Services, Inc.     15,667,925  
   
    Food & Beverage – 2.5%
      565,867     Archer-Daniels-Midland Co.     13,954,280  
      240,587     Pepsi Bottling Group, Inc.     6,883,194  
      502,551     Smithfield Foods, Inc.*     15,378,061  
                 
 
                  36,215,535  
   
    Gas Utilities – 1.6%
      675,432     AGL Resources, Inc.     23,511,788  
   
    Health Insurance – 1.0%
      274,786     Health Net, Inc.*     14,165,218  
   
    Healthcare Providers & Services – 0.7%
      185,487     Coventry Health Care, Inc.*     10,565,340  
   
    Home Products – 2.4%
      756,211     Newell Rubbermaid, Inc.     17,982,698  
      298,134     The Clorox Co.     16,960,843  
                 
 
                  34,943,541  
   
    Hotel & Leisure – 2.1%
      428,702     Harrah’s Entertainment, Inc.     30,562,166  
   
    Information Services – 1.2%
      2,096,539     BearingPoint, Inc.*(a)     16,478,797  
   
    IT Consulting & Services – 0.3%
      98,286     Computer Sciences Corp.*     4,977,203  
   
    Life Insurance – 1.8%
      169,999     Assurant, Inc.     7,393,257  
      321,025     Torchmark Corp.     17,848,990  
                 
 
                  25,242,247  
   
    Media – 1.0%
      324,782     Lamar Advertising Co.*     14,985,441  
   
    Medical Providers – 0.7%
      423,840     Apria Healthcare Group, Inc.*     10,218,782  
   
    Mining – 1.7%
      240,075     Allegheny Technologies, Inc.     8,661,906  
      111,296     Carpenter Technology Corp.     7,843,029  
      188,977     Commercial Metals Co.     7,094,197  
                 
 
                  23,599,132  
   
    Motor Vehicle – 0.7%
      208,213     Autoliv, Inc.     9,457,034  
   
    Oil & Gas – 1.0%
      248,556     Ultra Petroleum Corp.*     13,869,425  
   
    Oil Services – 1.6%
      641,251     BJ Services Co.     23,514,674  
   
 
The accompanying notes are an integral part of these financial statements.

5

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
 
Statement of Investments (continued)
December 31, 2005
                     
Shares Description Value
   
Common Stocks – (continued)
    Oil Well Services & Equipment – 0.5%
      150,823     Grant Prideco, Inc.*   $ 6,654,311  
   
    Paper & Packaging – 1.1%
      665,380     Packaging Corp. of America     15,270,471  
   
    Parts & Equipment – 3.2%
      647,776     American Standard Companies, Inc.     25,878,651  
      263,773     Cooper Industries Ltd.     19,255,429  
                 
 
                  45,134,080  
   
    Property Insurance – 7.1%
      435,350     AMBAC Financial Group, Inc.(a)     33,548,071  
      204,511     Everest Re Group Ltd.     20,522,679  
      202,563     PartnerRe Ltd.     13,302,312  
      274,102     RenaissanceRe Holdings Ltd. Series B     12,090,639  
      272,906     The PMI Group, Inc.(a)     11,208,250  
      289,998     Willis Group Holdings Ltd.     10,712,526  
                 
 
                  101,384,477  
   
    Publishing – 1.0%
      400,653     Dow Jones & Co., Inc.(a)     14,219,175  
   
    Real Estate Investment Trusts (REITs) – 6.8%
      446,443     Apartment Investment & Management Co.     16,906,796  
      345,364     Developers Diversified Realty Corp.     16,239,015  
      183,896     Equity Residential Properties Trust     7,194,011  
      89,295     Healthcare Realty Trust, Inc.     2,970,845  
      592,660     iStar Financial, Inc.     21,128,329  
      165,444     Liberty Property Trust     7,089,275  
      524,111     Plum Creek Timber Co., Inc.     18,894,202  
      161,910     Prentiss Properties Trust     6,586,499  
                 
 
                  97,008,972  
   
    Regional Banks – 6.4%
      132,116     Commerce Bancshares, Inc.     6,885,886  
      545,072     FirstMerit Corp.     14,122,816  
      554,237     KeyCorp     18,251,024  
      208,156     M&T Bank Corp.     22,699,412  
      382,279     Zions Bancorp.     28,885,001  
                 
 
                  90,844,139  
   
    Retail Apparel – 4.8%
      219,742     Federated Department Stores, Inc.     14,575,487  
      700,360     J. C. Penney Co., Inc.     38,940,016  
      520,382     Ross Stores, Inc.     15,039,040  
                 
 
                  68,554,543  
   
    Semiconductors – 0.8%
      132,204     Freescale Semiconductor, Inc.*     3,330,219  
      296,842     Tessera Technologies, Inc.*     7,673,365  
                 
 
                  11,003,584  
   
    Specialty Financials – 2.2%
      172,260     American Capital Strategies Ltd.     6,237,534  
      350,019     CIT Group, Inc.     18,123,984  
      261,430     Eaton Vance Corp.     7,152,725  
                 
 
                  31,514,243  
   
    Telecom Equipment – 0.7%
      432,379     ADC Telecommunications, Inc.*(a)     9,659,347  
   
    Tobacco – 0.9%
      137,821     Reynolds American, Inc.(a)     13,138,476  
   
    Transports – 1.8%
      346,247     Norfolk Southern Corp.     15,522,253  
      257,077     Teekay Shipping Corp.(a)     10,257,372  
                 
 
                  25,779,625  
   
    Trust/Processors – 1.1%
      309,526     Northern Trust Corp.     16,039,637  
   
    TOTAL COMMON STOCKS
    (Cost $1,209,726,375)   $ 1,381,939,312  
   
                             
Principal Interest Maturity
Amount Rate Date Value
   
Repurchase Agreement(b) – 3.4%
    Joint Repurchase Agreement Account II
    $ 49,300,000       4.29 %   01/03/2006   $ 49,300,000  
          Maturity Value:  $49,323,483
    (Cost $49,300,000)        
   
    TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
    (Cost $1,259,026,375)   $ 1,431,239,312  
   
 
The accompanying notes are an integral part of these financial statements.

6

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND 
                     
Shares Description Value
   
Securities Lending Collateral – 3.0%
      42,848,300     Boston Global Investment Trust – Enhanced Portfolio   $ 42,848,300  
    (Cost $42,848,300)
   
    TOTAL INVESTMENTS — 103.0%
    (Cost $1,301,874,675)   $ 1,474,087,612  
   
  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) Joint repurchase agreement was entered into on December 30, 2005.

ADDITIONAL INVESTMENT INFORMATION

JOINT REPURCHASE AGREEMENT ACCOUNT II — At December 31, 2005, the Fund had an undivided interest in the following Joint Repurchase Agreement Account II which equaled $49,300,000 in principal amount.

                             
Principal Interest Maturity Maturity
Repurchase Agreements Amount Rate Date Value
Banc of America Securities LLC
  $ 3,020,000,000       4.30 %   01/03/2006   $ 3,021,442,889  
Barclays Capital PLC
    2,260,000,000       4.30     01/03/2006     2,261,079,778  
Greenwich Capital Markets
    300,000,000       4.33     01/03/2006     300,144,333  
J.P. Morgan Securities, Inc.
    400,000,000       4.30     01/03/2006     400,191,111  
Morgan Stanley & Co.
    3,140,000,000       4.27     01/03/2006     3,141,489,756  
UBS Securities LLC
    600,000,000       4.18     01/03/2006     600,278,667  
UBS Securities LLC
    2,565,000,000       4.30     01/03/2006     2,566,225,500  
TOTAL
   $ 12,285,000,000                 $ 12,290,852,034  
  At December 31, 2005, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 3.50% to 4.40%, due 02/24/2006 to 01/18/2007; Federal Home Loan Mortgage Association, 0.00% to 13.00%, due 01/01/2006 to 01/01/2036; Federal National Mortgage Association, 0.00% to 15.50%, due 02/01/2006 to 01/01/2036; Government National Mortgage Association, 4.50% to 6.50%, due 11/15/2013 to 12/15/2035 and Tennessee Valley Authority, 4.75% to 7.14%, due 11/13/2008 to 08/01/2013. The aggregate market value of the collateral, including accrued interest, was $12,560,093,631.  
 
The accompanying notes are an integral part of these financial statements.

7

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND

Statement of Assets and Liabilities

December 31, 2005
               
    Assets:
   
Investment in securities, at value (identified cost $1,259,026,375) — including $41,716,467 of securities on loan
  $ 1,431,239,312  
   
Securities lending collateral, at value (cost $42,848,300)
    42,848,300  
   
Cash
    56,565  
   
Receivables:
       
     
Dividends and interest
    2,278,532  
     
Fund shares sold
    1,810,532  
     
Receivable from affiliate
    105,000  
     
Investment securities sold
    446,353  
     
Securities lending income
    8,992  
   
   
Total assets
     1,478,793,586  
   
    Liabilities:
   
Payables:
       
     
Payable upon return of securities loaned
    42,848,300  
     
Investment securities purchased
    2,862,380  
     
Fund shares repurchased
    1,114,397  
     
Amounts owed to affiliates
    1,008,134  
   
Accrued expenses
    146,195  
   
   
Total liabilities
     47,979,406  
   
    Net Assets:
   
Paid-in capital
    1,238,364,327  
   
Accumulated undistributed net investment income
    1,880,132  
   
Accumulated net realized gain on investment transactions
    18,356,784  
   
Net unrealized gain on investments
    172,212,937  
   
   
NET ASSETS
   $ 1,430,814,180  
   
   
Total shares of beneficial interest outstanding, par value $0.001 (unlimited shares authorized)
    92,121,171  
   
Net asset value, offering and redemption price per share
  $ 15.53  
   
 
The accompanying notes are an integral part of these financial statements.

8

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND 

Statement of Operations

For the Year Ended December 31, 2005
             
    Investment income:
   
Dividends
  $ 18,154,715  
   
Interest (including securities lending income of $73,831)
    1,467,534  
   
   
Total income
     19,622,249  
   
    Expenses:
   
Management fees
    9,241,075  
   
Transfer agent fees
    462,054  
   
Custody and accounting fees
    205,761  
   
Printing fees
    48,204  
   
Professional fees
    45,743  
   
Trustee fees
    16,492  
   
Other
    27,109  
   
   
Total expenses
     10,046,438  
   
   
Less — expense reductions
    (2,928 )
   
   
Net expenses
     10,043,510  
   
   
NET INVESTMENT INCOME
     9,578,739  
   
    Realized and unrealized gain on investment transactions:
   
Net realized gain from investment transactions (including commissions recaptured of $184,886)
    132,448,454  
   
Payments by affiliates to reimburse certain security claims
    9,275  
   
Net change in unrealized gain on investments
    493,340  
   
   
Net realized and unrealized gain on investment transactions
     132,951,069  
   
   
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
   $ 142,529,808  
   
 
The accompanying notes are an integral part of these financial statements.

9

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND

Statements of Changes in Net Assets

                     
For the For the
Year Ended Year Ended
December 31, 2005 December 31, 2004
 
    From operations:
   
Net investment income
  $ 9,578,739     $ 4,663,695  
   
Net realized gain from investment transactions
    132,448,454       96,038,101  
   
Payments by affiliates to reimburse certain security claims
    9,275       —  
   
Payments by affiliates to reimburse certain brokerage commissions
    —       4,488  
   
Net change in unrealized gain on investments
    493,340       71,810,943  
   
   
Net increase in net assets resulting from operations
     142,529,808       172,517,227  
   
    Distributions to shareholders:
   
From net investment income
    (7,785,943 )     (4,829,536 )
   
From net realized gains
    (130,595,641 )     (77,536,102 )
   
   
Total distributions to shareholders
     (138,381,584 )     (82,365,638 )
   
    From share transactions:
   
Proceeds from sales of shares
    445,767,317       221,280,141  
   
Reinvestment of dividends and distributions
    138,381,584       82,365,638  
   
Cost of shares repurchased
    (74,634,247 )     (54,569,105 )
   
   
Net increase in net assets resulting from share transactions
     509,514,654       249,076,674  
   
   
TOTAL INCREASE
     513,662,878       339,228,263  
   
    Net assets:
   
Beginning of year
    917,151,302       577,923,039  
   
   
End of year
  $ 1,430,814,180     $ 917,151,302  
   
   
Accumulated undistributed net investment income
   $ 1,880,132     $ 123,988  
   
    Summary of share transactions:
   
Shares sold
    27,827,100       15,134,517  
   
Shares issued on reinvestment of dividends and distributions
    8,956,843       5,458,182  
   
Shares repurchased
    (4,668,033 )     (3,828,587 )
   
   
NET INCREASE
     32,115,910       16,764,112  
   
 
The accompanying notes are an integral part of these financial statements.

10

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year
                                                                                                                                 
Income (loss) from Ratios assuming no
investment operations Distributions to shareholders expense reductions
Net Ratio of Ratio of Ratio of
Net asset realized From Net asset Net assets Ratio of net investment total net investment
value, Net and Total from From net net value, at end net expenses income expenses income Portfolio
beginning investment unrealized investment investment realized Total end of Total  of year to average to average to average to average turnover
of year income(a) gain (loss) operations income gain distributions year return(b) (in 000s) net assets net assets net assets net assets rate
 
    For the Years ended December 31,
    2005   $ 15.28     $ 0.13     $ 1.82     $ 1.95     $ (0.10 )   $ (1.60 )   $ (1.70 )   $ 15.53       12.83 %   $ 1,430,814       0.87 %     0.83 %     0.87 %     0.83 %     53 %    
    2004     13.37       0.10       3.34       3.44       (0.09 )     (1.44 )     (1.53 )     15.28       25.88       917,151       0.88       0.67       0.88       0.67       72      
    2003     10.61       0.12       2.89       3.01       (0.11 )     (0.14 )     (0.25 )     13.37       28.39       577,923       0.91       1.02       0.91       1.02       64      
    2002     11.29       0.14       (0.67 )     (0.53 )     (0.12 )     (0.03 )     (0.15 )     10.61       (4.69 )     357,537       0.91       1.20       0.91       1.20       95      
    2001     10.67       0.14       1.14       1.28       (0.11 )     (0.55 )     (0.66 )     11.29       12.05       243,521       0.93       1.27       0.94       1.26       82      
   

(a)  Calculated based on the average shares outstanding methodology.
(b)  Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions and a complete redemption of the investment at the net asset value at the end of the year.

The accompanying notes are an integral part of these financial statements.

 
11

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND

Notes to Financial Statements

December 31, 2005

1. ORGANIZATION

Goldman Sachs Variable Insurance Trust (the “Trust”) 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.
     Shares of the Trust may be purchased and held by separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Trust are not offered directly to the general public.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies consistently followed by the Fund. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity and debt securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line or pro rata basis depending upon the nature of the expense.

D. Federal Taxes — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.

     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules. Therefore, the source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income or net realized gain, or from tax return of capital.
     In addition, distributions paid by the Fund’s investments in real estate investment trusts (“REITs”) often include a “return of capital” which is recorded by the Fund as a reduction of the cost basis of the securities held. The Code requires a REIT to distribute at least 95% of its taxable income to investors. In many cases, however, because of “non-cash” expenses such as property depreciation, an equity REIT’s cash flow will exceed its taxable income. The REIT may distribute this excess cash to offer a more competitive yield. This portion of the distribution is deemed a return of capital and is generally not taxable to shareholders.
 
12

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND 
 
2. SIGNIFICANT ACCOUNTING POLICIES (continued)

E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate liquid assets, on the books of their custodian, with a daily mark-to-market value equal to or greater than the market value of the corresponding transactions.

F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.

     Pursuant to exemptive relief granted by the Securities and Exchange Commission (the “SEC”) and terms and conditions contained therein, the Fund, together with other registered investment companies having management or investment advisory agreements with Goldman Sachs Asset Management, L.P. (“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.

G. Commission Recapture — The Fund may direct portfolio trades, subject to obtaining best price and execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to the Fund as cash payments and are included in the net realized gain (loss) on investments in the Statement of Operations.

3. AGREEMENTS

GSAM, an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Fund. Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trust’s Board of Trustees.
     As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Fund’s business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”) computed daily and payable monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
     At a meeting held on June 16, 2005, the Board of Trustees of the Trust approved a fee reduction commitment for the Fund which will be effective on a contractual basis in 2006. Effective July 1, 2005, GSAM implemented the fee reduction commitment on a voluntary basis which resulted in the following annual Management fee rates:
         
Average Daily Net Assets Annual Rate
First $2 Billion
    0.80 %
Over $2 Billion
    0.72 %

     Prior to July 1, 2005, the Fund’s Management fee as an annual percentage rate of average daily net assets was 0.80%.

     GSAM has voluntarily agreed to limit certain “Other Expenses” of the Fund (excluding Management fees, Transfer Agency fees, taxes, interest, brokerage fees and litigation, indemnification costs, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent that such expenses exceed, on an annual basis, 0.25% of the average daily net assets of the Fund. GSAM may waive or modify the expense limitation for the Fund, at its discretion, at anytime. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the year ended December 31, 2005, GSAM made no reimbursements to the Fund.

 
13

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
 
Notes to Financial Statements (continued)
December 31, 2005
 
3. AGREEMENTS (continued)
     In addition, the Fund has entered into certain offset arrangements with the custodian resulting in a reduction in the Fund’s expenses. For the year ended December 31, 2005, custody fees were reduced by approximately $2,900.
     Goldman Sachs also serves as the Transfer Agent of the Fund for a fee. The fees charged for such transfer agency services are calculated daily and payable monthly equal to an annual rate of 0.04% of the average daily net assets of the Fund. Goldman Sachs serves as the Distributor of the Fund’s shares at no cost to the Fund.
     At December 31, 2005, the amounts owed to affiliates were approximately $960,100 and $48,000 for Management and Transfer Agent fees, respectively.

4. PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds from sales and maturities of long-term securities for the year ended December 31, 2005, were $954,195,204 and $593,205,559, respectively. For the year ended December 31, 2005, Goldman Sachs earned approximately $59,900 of brokerage commissions from portfolio transactions, executed on behalf of the Fund.
     During the year ended December 31, 2005, GSAM voluntarily reimbursed the Fund $9,275 for certain class action settlements in which the Fund was eligible to participate.

5. SECURITIES LENDING

Pursuant to exemptive relief granted by the SEC and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Boston Global Advisers (“BGA”), 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 loans are collateralized at all times with cash and/or securities with a market value at least equal to the securities on loan. As with other extensions of credit, the Fund bears the risk of delay on recovery or loss of rights in the collateral should the borrower of the securities fail financially.
     Both the Fund and BGA receive compensation relating to the lending of the Fund’s securities. The amount earned by the Fund for the year ended December 31, 2005, is reported parenthetically under Investment Income on the Statement of Operations. A portion of this amount, $326, represents compensation earned by the Fund from lending its securities to Goldman Sachs. For the year ended December 31, 2005, BGA earned $13,028 in fees as securities lending agent. At December 31, 2005, the Fund loaned securities having a market value of $41,716,467 collateralized by cash in the amount of $42,848,300. The Fund invests the cash collateral received in connection with securities lending transactions in the Enhanced Portfolio of Boston Global Investment Trust, a Delaware statutory trust. The Enhanced Portfolio is exempt from registration under Section 3(c)(7) of the Act and is managed by GSAM, for which GSAM receives an investment advisory fee of up to 0.10% of the average daily net assets of the Enhanced Portfolio. The Enhanced Portfolio invests in high quality money market instruments. The Fund bears the risk of incurring a loss from the investment of cash collateral due to either credit or market factors.

6. LINE OF CREDIT FACILITY

The Fund participates in a $350,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Fund must own securities having a market value in excess of 300% of the total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. This committed facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. During the year ended December 31, 2005, the Fund did not have any borrowings under this facility.
 
14

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND 

7. TAX INFORMATION

The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows:
                 
For the years ended December 31,
2005 2004
Distributions paid from:
               
Ordinary income
  $ 38,750,746     $ 36,189,251  
Net long-term capital gains
    99,630,838       46,176,387  
Total taxable distributions
  $ 138,381,584     $ 82,365,638  

As of December 31, 2005, the components of accumulated earnings on a tax basis were as follows:

         
Undistributed ordinary income — net
  $ 4,307,995  
Undistributed long-term capital gains
    16,185,713  
Total undistributed earnings
  $ 20,493,708  
Timing differences (related to the recognition of REIT dividends for tax purposes)
    186,497  
Unrealized gains — net
    171,769,648  
Total accumulated earnings — net
  $ 192,449,853  

At December 31, 2005, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:

         
Tax cost
  $ 1,302,317,964  
Gross unrealized security gain
    185,456,840  
Gross unrealized security loss
    (13,687,192 )
Net unrealized security gain
  $ 171,769,648  

The difference between book-basis and tax-basis unrealized gains (losses) is attributable to wash sales and return of capital distributions from underlying fund investments.

     In order to present certain components of the Fund’s capital accounts on a tax basis, certain reclassifications have been recorded to the Fund’s accounts. The Fund reclassified $36,652 from accumulated undistributed net investment income to accumulated net realized gain on investment transactions. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from the difference in the tax treatment of underlying fund investments.
 
15

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
 
Notes to Financial Statements (continued)
December 31, 2005
 

8. LEGAL PROCEEDINGS

Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds and the Trustees and Officers of the Goldman Sachs Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. It is possible that the plaintiffs may appeal this decision.
     Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuits will have a material adverse financial impact on the Fund is remote, and the pending actions are not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

9. SUBSEQUENT EVENT

At a meeting held on July 12, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization providing for the tax-free acquisition of the Allmerica Select Value Opportunity Fund by the Mid Cap Value Fund. Following the approval of the Board of Trustees and shareholders of the Allmerica Select Value Opportunity Fund, the acquisition was completed on January 9, 2006.
 
16

 

Report of Independent Registered Public Accounting Firm

To the Shareholders of Goldman Sachs Mid Cap Value Fund and Board of Trustees
Goldman Sachs Variable Insurance Trust

We have audited the accompanying statement of assets and liabilities of Goldman Sachs Mid Cap Value Fund (one of the funds comprising the Goldman Sachs Variable Insurance Trust) (the “Fund”), including the statement of investments, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs Mid Cap Value Fund at December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

  -s- ERNST & YOUNG LLP

New York, New York
February 10, 2006
 
17

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND

Fund Expenses (Unaudited) — Six Month Period Ended December 31, 2005

            As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  
 
            The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2005 through December 31, 2005.  
 
            Actual Expenses — The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.  
 
            Hypothetical Example for Comparison Purposes — The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.  
 
            Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges (loads), redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.  

                         
Expenses Paid
for the
Beginning Ending 6 months
Account Value Account Value ended
7/1/05 12/31/05 12/31/05*
Actual
  $ 1,000     $ 1,062.20     $ 4.47  
Hypothetical 5% return
    1,000       1,020.87 +     4.38  

  *   Expenses are calculated using the Fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2005. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratio for the period was 0.86%.  
  +   Hypothetical expenses are based on the Fund’s actual annualized expense ratios and an assumed rate of return of 5% per year before expenses.  

 
18

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND 

Trustees and Officers (Unaudited)

Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Ashok N. Bakhru
Age: 63		   Chairman & Trustee   Since 1997   President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President—Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003- Present); Director, Private Equity Investors—III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003).

Chairman of the Board and Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
John P. Coblentz, Jr.
Age: 64		   Trustee   Since 2003   Partner, Deloitte & Touche LLP (June 1975-May 2003).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Patrick T. Harker
Age: 47		   Trustee   Since 2000   Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-Present); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Mary P. McPherson
Age: 70		   Trustee   Since 1997   Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Wilma J. Smelcer
Age: 56		   Trustee   Since 2001   Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Lawson Products Inc. (distributor of industrial products).
 
19

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
 
Trustees and Officers (Unaudited) (continued)
Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Richard P. Strubel
Age: 66		   Trustee   Since 1997   Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Gildan Activewear Inc. (a clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (53 Portfolios).

Interested Trustees

                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
*Alan A. Shuch
Age: 56		   Trustee   Since 1997   Advisory Director—GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
*Kaysie P. Uniacke
Age: 44		   Trustee
  &		   Since 2001   Managing Director, GSAM (1997-Present).   72   None
    President   Since 2002   Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).

President—Goldman Sachs Mutual Fund Complex (2002- Present) (registered investment companies).

Assistant Secretary—Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).		        
 
*
These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1
Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Howard B. Surloff.
2
Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
3
The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of December 31, 2005, the Trust consisted of 61 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios.
4
This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726.

 
20

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND 

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*
             
Term of
Office and
Position(s) Held Length of
Name, Age And Address With the Trust Time Served1 Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke
32 Old Slip
New York, NY 10005
Age: 44		   President & Trustee   Since 2002

Since 2001		   Managing Director, GSAM (1997-Present).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies).

President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).
James A. Fitzpatrick
71 South Wacker Drive
Suite 500
Chicago, IL 60606
Age: 45		   Vice President   Since 1997   Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara
32 Old Slip
New York, NY 10005
Age: 43		   Vice President   Since 2001   Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).

Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies).

Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004)
John M. Perlowski
32 Old Slip
New York, NY 10005
Age: 41		   Treasurer   Since 1997   Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003).

Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies).
Howard B. Surloff
One New York Plaza
37th Floor
New York, NY 10004
Age: 40		   Secretary   Since 2001   Managing Director, Goldman Sachs (November 2002-Present); Associate General Counsel, Goldman Sachs and General Counsel to the U.S. Funds Group (December 1997-Present).

Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies) (2001-Present) and Assistant Secretary prior thereto.
 
1
Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*
Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States):
1-800-292-4726.

Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)

For the year ended December 31, 2005, 35.83% of the dividends paid from net investment company taxable income by the Mid Cap Value Fund qualifies for the dividends received deduction available to corporations.

Pursuant to Section 852 of the Internal Revenue Code, the Mid Cap Value Fund designates $99,630,838 as capital gain dividends paid during the year ended December 31, 2005.

 
21

 

     
TRUSTEES
  OFFICERS
Ashok N. Bakhru, Chairman
   Kaysie P. Uniacke, President
John P. Coblentz, Jr.
  James A. Fitzpatrick, Vice President
Patrick T. Harker
  James A. McNamara, Vice President
Mary Patterson McPherson
  John M. Perlowski, Treasurer
Alan A. Shuch
  Howard B. Surloff, Secretary
Wilma J. Smelcer
   
Richard P. Strubel
   
Kaysie P. Uniacke
   
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent 		   
 
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
 
Visit our Web site at www.gs.com/funds to obtain the most recent month-end returns.
 
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
 
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov.
 
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, the Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
 
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.
 
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.
ree (in U.S.): 800-292-4726
   
 
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust: Mid Cap Value Fund.
 
 Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: February 18, 2006
 
VITMIDCAPAR/06-287/02-06    

 

Goldman
Sachs Variable Insurance Trust

GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32nd FLOOR, NEW YORK, NEW YORK 10005

International Equity Fund

Annual Report

December 31, 2005

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 

Shareholder Letter

Dear Shareholders:

This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust – International Equity Fund during the one-year reporting period that ended December 31, 2005.

Market Overview

The international equity markets, as measured by the MSCI EAFE Index, were strong in 2005, driven by the Energy sector and significant growth in Japan and the emerging markets. The Energy sector generated outstanding results during the reporting period, as the price of oil reached a record high due to an attractive supply-and-demand environment. The Japanese equity market rallied on the back of a domestic economic recovery demonstrated by strong industrial production and retail sales data. The emerging equity markets rose substantially due to overall strong economic growth and higher commodity prices.

After a strong 2004, the Telecommunications sector was weak over the reporting period. The sector suffered from poor consolidation trends, while increased competition and increased capital expenditure reduced earnings visibility, leading to analysts’ downgrades. In addition, the sector was hampered by increased regulation, particularly in Europe.

Investment Objective

The Fund seeks long-term capital appreciation.

Portfolio Composition

Top 10 Portfolio Holdings as of December 31, 2005*

                 
% of Line of
Holding Net Assets Business Country
Total SA Class B
    3.8 %   Energy   France
E.ON AG
    3.3     Utilities   Germany
Nestle SA
    3.3     Food, Beverage & Tobacco   Switzerland
GlaxoSmithKline PLC
    3.3     Pharmaceuticals & Biotechnology   United Kingdom
Vodafone Group PLC
    3.2     Telecommunication Services   United Kingdom
Millea Holdings, Inc.
    3.2     Insurance   Japan
Hyundai Motor Co. GDR
    3.2     Automobiles & Components   South Korea
TNT NV
    3.1     Transportation   Netherlands
Samsung Electronics Co. Ltd. GDR
    2.9     Semiconductors & Semiconductor Equipment   South Korea
Svenska Cellulosa AB (SCA) Series B
    2.8     Materials   Sweden

* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.

 
1

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND
 
Shareholder Letter (continued)

Performance Review

Over the one-year period that ended December 31, 2005, the Fund generated a cumulative total return of 13.70%. This return compares to the 14.02% cumulative total return of the Fund’s benchmark, the Morgan Stanley Capital International (“MSCI”) Europe, Australasia and Far East (“EAFE”) Index (unhedged, with dividends reinvested), over the same time period.

During the reporting period, strong stock selection in the Energy, Financials, and Information Technology sectors contributed to the Fund’s results. However, this was offset by its overweight in the Telecommunications sector and stock selection in the Consumer Discretionary sector.

On the stock-specific level, Hyundai Motor Co., the South Korean auto manufacturer, was a leading contributor to performance. Its shares rose on the back of an improving outlook for domestic car sales. In addition, the company benefited from South Korea’s strengthening economy as it generates approximately half of its total sales from within its country. LUKOIL ADR, a leading Russian oil and gas producer, also significantly enhanced results on the back of strength in oil prices globally during the year. We believe that the market has yet to give LUKOIL full credit for its operational turnaround and therefore we continue to find significant value in the stock.

Mitsui Fudosan, a Japanese real estate service provider, was also a significant contributor to performance as a result of a strong first quarter earnings announcement, stabilizing land prices, and increased confidence in the Japanese economy in general. On the back of strong returns for the past two years, and following a meeting with management in Tokyo, we exercised our sell discipline and exited the holding to capture profits. The company’s shares had reached our price target and, during our management meeting, it became clear to us that the scope for further upgrades to its operating cash flows from the office leasing business was limited.

Premiere, a pay-TV market provider in Germany and Austria, was the leading detractor from performance during the reporting period. Its shares declined due to disappointing guidance in August. The stock also weakened when several large shareholders disposed of a large proportion of their holdings at the end of September. Operationally, the company continued to disappoint, and it had a lot to achieve in the second half of 2005 in order to meet market expectations. Given the continuing operational difficulties and our concerns over the main shareholders selling their shares, we exited this position as well. Vodafone Group PLC, the world’s largest mobile telecommunications company, also significantly hurt performance. Its shares fell sharply after the company warned that margins would fall next year, due to continued heavy investment in its troubled Japanese business and intensifying competition in its core European markets. Investor confidence was also weakened by the group’s disclosure that it expected to see £5 billion in tax liabilities within the next three years. While we acknowledge that earnings visibility within the mobile sector has decreased, we continue to believe that Vodafone’s scale gives it a strong position in the industry as it has competitive advantages in purchasing power and brand recognition.

We thank you for your investment and look forward to serving your investment needs in the future.

Goldman Sachs International Equity Portfolio Management Team

January 18, 2006

 
2

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 

Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) International Equity Fund are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.

The VIT International Equity Fund invests in equity investments in companies that are organized outside the United States or whose securities are principally traded outside the United States and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Foreign and emerging market securities may be more volatile than investments in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all.

 
3

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND

Performance Summary

December 31, 2005

The following graph shows the value as of December 31, 2005, of a $10,000 investment made on January 12, 1998 (commencement of operations). For comparative purposes, the performance of the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index (“MSCI EAFE Index”) (unhedged with dividends reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance also would have been reduced had expense limitations not been in effect. In addition to the investment adviser’s decisions regarding issuer/ industry/ country investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting a Fund.

International Equity Fund’s Lifetime Performance

Growth of a $10,000 investment, Distributions Reinvested from January 12, 1998 to December 31, 2005.

(PERFORMANCE GRAPH)

                             
Since Inception Five Years One Year
Average Annual Total Return Through December 31, 2005
International Equity Fund (commenced January 12, 1998)
     5.44%       2.11%       13.70%      
 
4

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 

Statement of Investments

December 31, 2005
                     
Shares Description Value
   
Common Stocks – 98.3%
    Australia – 1.6%
      329,519     Alumina Ltd. (Materials)   $ 1,790,088  
   
    France – 12.3%
      82,501     Credit Agricole SA (Banks)     2,593,782  
      98,803     France Telecom SA (Telecommunication Services)     2,454,801  
      26,056     Schneider Electric SA(a) (Capital Goods)     2,323,521  
      16,661     Total SA Class B(a) (Energy)     4,201,487  
      22,300     Vinci SA (Capital Goods)     1,920,729  
                 
 
                  13,494,320  
   
    Germany – 5.6%
      35,215     E.ON AG (Utilities)     3,638,665  
      36,505     Schering AG (Pharmaceuticals & Biotechnology)     2,444,368  
                 
 
                  6,083,033  
   
    Hong Kong – 5.1%
      358,000     Esprit Holdings Ltd. (Retailing)     2,539,380  
      4,968,000     PICC Property and Casualty Co. Ltd. (Insurance)     1,406,369  
      676,000     Techtronic Industries Co. Ltd. (Consumer Durables & Apparel)     1,608,136  
                 
 
                  5,553,885  
   
    Hungary – 1.8%
      30,000     OTP Bank Rt. GDR (Banks)     1,968,000  
   
    Italy – 1.4%
      33,000     Fastweb* (Telecommunication Services)     1,507,937  
   
    Japan – 15.5%
      56,800     Credit Saison Co. Ltd. (Diversified Financials)     2,830,971  
      175,000     Hitachi Metals Ltd. (Materials)     1,904,424  
      204     Millea Holdings, Inc. (Insurance)     3,518,305  
      153,400     Nomura Holdings, Inc. (Diversified Financials)     2,952,909  
      51,000     Shin-Etsu Chemical Co. Ltd. (Materials)     2,714,765  
      740,000     Taiheiyo Cement Corp. (Materials)     3,004,532  
                 
 
                  16,925,906  
   
    Netherlands – 7.0%
      70,783     ING Groep NV (Diversified Financials)     2,455,470  
      108,387     TNT NV (Transportation)     3,389,592  
      55,532     VNU NV (Media)     1,840,466  
                 
 
                  7,685,528  
   
    Russia – 3.2%
      36,900     LUKOIL ADR (Energy)     2,177,100  
      38,800     Mobile Telesystems ADR (Telecommunication Services)     1,358,000  
                 
 
                  3,535,100  
   
    South Korea – 6.1%
      72,039     Hyundai Motor Co. GDR(a)(b) (Automobiles & Components)     3,471,440  
      5,100     Samsung Electronics Co. Ltd. GDR(b) (Semiconductors & Semiconductor Equipment)     1,680,584  
      6,200     Samsung Electronics Co. Ltd. GDR-Preferred Shares(b) (Semiconductors & Semiconductor Equipment)     1,494,200  
                 
 
                  6,646,224  
   
    Spain – 2.7%
      167,419     Banco Bilbao Vizcaya Argentaria SA (Banks)     2,989,074  
   
    Sweden – 2.8%
      82,755     Svenska Cellulosa AB (SCA) Series B (Materials)     3,093,458  
   
    Switzerland – 8.0%
      42,668     Credit Suisse Group (Diversified Financials)     2,173,462  
      12,096     Nestle SA (Food, Beverage & Tobacco)     3,612,330  
      56,178     Novartis AG (Pharmaceuticals & Biotechnology)     2,946,536  
                 
 
                  8,732,328  
   
    Taiwan – 2.1%
      197,807     Hon Hai Precision Industry Co. Ltd. GDR (Technology, Hardware & Equipment)     2,274,782  
   
    United Kingdom – 23.1%
      314,338     Amvescap PLC (Diversified Financials)     2,390,864  
      371,445     Bodycote International PLC (Capital Goods)     1,417,293  
      119,900     BP PLC (Energy)     1,283,815  
      40,016     Carnival PLC (Consumer Services)     2,273,017  
      142,499     GlaxoSmithKline PLC (Pharmaceuticals & Biotechnology)     3,597,329  
      288,836     Prudential PLC (Insurance)     2,735,839  
      72,720     Royal Bank of Scotland Group PLC (Banks)     2,194,499  
      135,293     Shire PLC (Pharmaceuticals & Biotechnology)     1,731,129  
      1,645,565     Vodafone Group PLC (Telecommunication Services)     3,541,170  
      581,059     W.M. Supermarkets PLC (Food & Staples Retailing)     1,932,717  
      198,311     WPP Group PLC (Media)     2,145,470  
                 
 
                  25,243,142  
   
    TOTAL COMMON STOCKS
    (Cost $85,988,311)   $ 107,522,805  
   
 
The accompanying notes are an integral part of these financial statements.

5

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND
 
Statement of Investments (continued)
December 31, 2005
                             
Principal Interest Maturity
Amount Rate Date Value
   
Short-Term Obligation – 1.7%
    State Street Bank & Trust Euro – Time Deposit
    $ 1,936,000       3.95 %   1/3/2006   $ 1,936,000  
    (Cost $1,936,000)        
   
    TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL
    (Cost $87,924,311)   $ 109,458,805  
   
                     
Shares Description Value
   
Securities Lending Collateral – 5.2%
      5,637,660     Boston Global Investment Trust – Enhanced Portfolio        
    (Cost $5,637,660)   $ 5,637,660  
   
    TOTAL INVESTMENTS – 105.2%
    (Cost $93,561,971)   $ 115,096,465  
   
             
As a % of
Net Assets
   
Industry Classifications(c)
    Automobiles & Components     3.2 %
    Banks     8.9  
    Capital Goods     5.2  
    Consumer Durables & Apparel     1.5  
    Consumer Services     2.1  
    Diversified Financials     11.7  
    Energy     7.0  
    Food & Staples Retailing     1.8  
    Food, Beverage & Tobacco     3.3  
    Insurance     7.0  
    Materials     11.4  
    Media     3.6  
    Pharmaceuticals & Biotechnology     9.8  
    Retailing     2.3  
    Semiconductors & Semiconductor Equipment     2.9  
    Short-Term Investments(d)     6.9  
    Technology, Hardware & Equipment     2.1  
    Telecommunication Services     8.1  
    Transportation     3.1  
    Utilities     3.3  
   
    TOTAL     105.2 %
   
  The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets.
 
 * Non-income producing security.
 
 (a) All or portion of security is on loan.
 
 (b) Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $6,646,224, which represents approximately 6.1% of net assets as of December 31, 2005.
 
 (c) Industry concentrations greater than one-tenth of one percent are disclosed.
 
 (d) Short-term investments include short term obligations and securities lending collateral.
             
   
    Investment Abbreviations:
    ADR   —   American Depositary Receipt
    GDR   —   Global Depository Receipt
   
 
The accompanying notes are an integral part of these financial statements.

6

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 

Statement of Assets and Liabilities

December 31, 2005
               
    Assets:
   
Investment in securities, at value (identified cost $87,924,311) — including $5,339,391 of securities on loan
  $ 109,458,805  
   
Securities lending collateral, at value (cost $5,637,660)
    5,637,660  
   
Cash
    208  
   
Foreign currencies, at value (identified cost $113,725)
    113,351  
   
Receivables:
       
     
Dividends and interest, at value
    139,874  
     
Fund shares sold
    76,254  
     
Reimbursement from adviser
    32,714  
     
Securities lending income
    3,222  
   
   
Total assets
     115,462,088  
   
    Liabilities:
   
Payables:
       
     
Payable upon return of securities loaned
    5,637,660  
     
Investment securities purchased, at value
    181,941  
     
Amounts owed to affiliates
    95,744  
     
Fund shares repurchased
    2,071  
   
Accrued expenses
    145,497  
   
   
Total liabilities
     6,062,913  
   
    Net Assets:
   
Paid-in capital
    131,585,306  
   
Accumulated net realized loss on investment, futures and foreign currency related transactions
    (43,719,439 )
   
Net unrealized gain on investments and translation of assets and liabilities denominated in foreign currencies
    21,533,308  
   
   
NET ASSETS
   $ 109,399,175  
   
   
Total shares of beneficial interest outstanding, par value $0.001 (unlimited shares authorized)
    9,076,959  
   
Net asset value, offering and redemption price per share
  $ 12.05  
   
 
The accompanying notes are an integral part of these financial statements.

7

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND

Statement of Operations

For the Year Ended December 31, 2005
               
    Investment income:
   
Dividends(a)
  $ 1,943,492  
   
Interest (including securities lending income of $98,865)
    137,211  
   
   
Total income
     2,080,703  
   
    Expenses:
   
Management fees
    1,036,859  
   
Custody and accounting fees
    134,223  
   
Printing fees
    114,864  
   
Professional fees
    47,543  
   
Transfer agent fees
    41,474  
   
Trustee fees
    16,492  
   
Other
    19,850  
   
   
Total expenses
     1,411,305  
   
   
Less — expense reductions
    (168,595 )
   
   
Net expenses
     1,242,710  
   
   
NET INVESTMENT INCOME
     837,993  
   
    Realized and unrealized gain (loss) on investment, futures and foreign currency transactions:
   
Net realized gain (loss) from:
       
     
Investment transactions
    11,861,077  
     
Futures transactions
    (1,726 )
     
Foreign currency related transactions
    (1,015,718 )
   
Net change in unrealized gain on:
       
     
Investments
    1,798,631  
     
Translation of assets and liabilities denominated in foreign currencies
    63,658  
   
   
Net realized and unrealized gain on investment, futures and foreign currency transactions
     12,705,922  
   
   
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
   $ 13,543,915  
   

(a)  Foreign taxes withheld on dividends were $170,061.

 
The accompanying notes are an integral part of these financial statements.

8

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 

Statements of Changes in Net Assets

                     
For the For the
Year Ended Year Ended
December 31, 2005 December 31, 2004
    From operations:
   
Net investment income
  $ 837,993     $ 763,630  
   
Net realized gain on investment, futures and foreign currency related transactions
    10,843,633       6,084,785  
   
Net change in unrealized gain on investments and translation of assets and liabilities denominated in foreign currencies
    1,862,289       5,896,272  
   
   
Net increase in net assets resulting from operations
     13,543,915       12,744,687  
   
    Distributions to shareholders:
   
From net investment income
    (326,535 )     (1,154,644 )
   
   
Total distributions to shareholders
     (326,535 )     (1,154,644 )
   
    From share transactions:
   
Proceeds from sales of shares
    7,590,092       5,062,404  
   
Reinvestment of dividends and distributions
    326,450       1,154,644  
   
Cost of shares repurchased
    (20,358,779 )     (15,975,317 )
   
   
Net decrease in net assets resulting from share transactions
     (12,442,237 )     (9,758,269 )
   
   
TOTAL INCREASE
     775,143       1,831,774  
   
    Net assets:
   
Beginning of year
    108,624,032       106,792,258  
   
   
End of year
  $ 109,399,175     $ 108,624,032  
   
   
Accumulated undistributed net investment income
   $ —     $ 420,026  
   
    Summary of share transactions:
   
Shares sold
    693,983       520,639  
   
Shares issued on reinvestment of dividends and distributions
    27,664       111,462  
   
Shares repurchased
    (1,868,842 )     (1,676,423 )
   
   
NET DECREASE
     (1,147,195 )     (1,044,322 )
   
 
The accompanying notes are an integral part of these financial statements.

9

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND

Financial Highlights

Selected Data for a Share Outstanding Throughout Each Year
                                                                                                                                     
Income (loss) from Ratios assuming no
investment operations Distributions to shareholders expense reductions
Net Ratio of Ratio of Ratio of
Net asset realized From From Net asset Net assets Ratio of net investment total net investment
value, Net and Total from From net tax net value, at end net expenses income expenses income (loss) Portfolio
beginning investment unrealized investment investment return of realized Total end of Total of year to average to average to average to average turnover
of year income(a) gain (loss) operations income capital gain distributions year return(b) (in 000s) net assets net assets net assets net assets rate
 
    For the Years ended December 31,
    2005   $ 10.62     $ 0.09     $ 1.38     $ 1.47     $ (0.04 )     —       —     $ (0.04 )   $ 12.05     13.70%   $ 109,399       1.20 %     0.81 %     1.36 %     0.66 %     56 %    
    2004     9.48       0.07       1.18       1.25       (0.11 )     —       —       (0.11 )     10.62     13.48     108,624       1.20       0.75       1.35       0.60       63      
    2003     7.25       0.04       2.53       2.57       (0.34 )     —       —       (0.34 )     9.48     35.49     106,792       1.37       0.49       2.60       (0.74 )     49      
    2002     8.99       0.03       (1.68 )     (1.65 )     (0.09 )     —       —       (0.09 )     7.25     (18.34)     13,214       1.46       0.32       2.96       (1.18 )     86      
    2001     11.78       0.05       (2.68 )     (2.63 )     (0.09 )     (0.04 )     (0.03 )     (0.16 )     8.99     (22.26)     17,773       1.35       0.47       2.05       (0.23 )     76      
   

(a)  Calculated based on the average shares outstanding methodology.
(b)  Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions and a complete redemption of the investment at the net asset value at the end of the year.

The accompanying notes are an integral part of these financial statements.

 
10

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 

Notes to Financial Statements

December 31, 2005

1. ORGANIZATION

Goldman Sachs Variable Insurance Trust (the “Trust”) 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 International Equity Fund (the “Fund”). The Fund is a diversified portfolio under the Act.
     Shares of the Trust may be purchased and held by separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Trust are not offered directly to the general public.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies consistently followed by the Fund. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.

A. Investment Valuation — Investments in equity securities traded on a foreign securities exchange are valued daily at fair value determined by an independent service (if available) under valuation procedures approved by the Board of Trustees consistent with applicable regulatory guidance. The independent service takes into account multiple factors including, but not limited to, movements in the U.S. securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates.

     Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system or for investments in securities traded on a foreign securities exchange for which an independent service is not available are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer supplied valuations or matrix pricing systems. Unlisted equity and debt securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.
     Investing in foreign markets may involve special risks and considerations not typically associated with investing in the United States. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls, delayed settlements, and their prices may be more volatile than those of comparable securities in the United States.

B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted. In addition, it is the Fund’s policy to accrue for estimated capital gains taxes on foreign securities held by the Fund which are subject to such taxes.

C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line or pro rata basis depending upon the nature of the expense.

D. Federal Taxes — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required.

 
11

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND
 
Notes to Financial Statements (continued)
December 31, 2005
 
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
     Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.
     The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules. Therefore, the source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income or net realized gain, or from tax return of capital.

E. Foreign Currency Translations — The books and records of the Fund are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investment valuations, foreign currency and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates; and (ii) purchases and sales of foreign investments, income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions.

     Net realized and unrealized gain (loss) on foreign currency transactions will represent: (i) foreign exchange gains and losses from the sale and holdings of foreign currencies; (ii) currency gains and losses between trade date and settlement date on investment securities transactions and forward exchange contracts; and (iii) gains and losses from the difference between amounts of dividends, interest and foreign withholding taxes recorded and the amounts actually received. The effect of changes in foreign currency exchange rates on securities and derivative instruments are not segregated in the Statement of Operations from the effects of changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain or loss on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized appreciation/depreciation on foreign currency related transactions.

F. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate liquid assets, on the books of their custodian, with a daily mark-to-market value equal to or greater than the market value of the corresponding transactions.

G. Forward Foreign Currency Exchange Contracts — The Fund may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific transactions or portfolio positions. The Fund may also purchase and sell forward contracts to seek to increase total return. All commitments are “marked-to-market” daily at the applicable translation rates and any resulting unrealized gains or losses are recorded in the Fund’s financial statements. The Fund records realized gains or losses at the time a forward contract is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.

     The contractual amounts of forward foreign currency exchange contracts do not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered.

H. Futures Contracts — The Fund may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund is required to deposit with a broker, or the Fund’s custodian bank on behalf of the broker an amount of cash or securities equal to the minimum “initial margin” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Fund, dependent on the daily fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Fund realizes a gain or loss which is reported in the Statement of Operations.

 
12

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 
 
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
     The use of futures contracts involves, to varying degrees, elements of market and counterparty risk which may exceed the amounts recognized in the Statement of Assets and Liabilities. Changes in the value of the futures contract may not directly correlate with changes in the value of the underlying securities. This risk may decrease the effectiveness of the Fund’s strategies and potentially result in a loss.

3. AGREEMENTS

Pursuant to the Investment Management Agreement (the “Agreement”), Goldman Sachs Asset Management International (“GSAMI”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as the investment adviser to the Fund. Under the Agreement, GSAMI manages the Fund subject to the general supervision of the Trust’s Board of Trustees.
     As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Fund’s business affairs, including providing facilities, GSAMI is entitled to a fee (“Management fee”) computed daily and payable monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
     At a meeting held on June 16, 2005, the Board of Trustees of the Trust approved a fee reduction commitment for the Fund which will be effective on a contractual basis in 2006. Effective July 1, 2005, GSAM implemented the fee reduction commitment on a voluntary basis which results in the following Management fee rates:
         
Average Daily Net Assets Annual Rate
First $1 Billion
    1.00 %
Next $1 Billion
    0.90 %
Over $2 Billion
    0.86 %

     Prior to July 1, 2005, the Fund’s Management fee as an annual percentage rate of average daily net assets was 1.00%.

     GSAMI has contractually agreed to limit certain “Other Expenses” (excluding Management fees, Transfer Agency fees, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent that such expenses exceed, on an annual basis, 0.16% of the average daily net assets of the Fund. GSAMI agreed to maintain this expense limitation contractually through June 30, 2005 and on a voluntary basis thereafter. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAMI for prior fiscal year expense reimbursements, if any. For the year ended December 31, 2005, GSAMI reimbursed approximately $167,100 to the Fund.

     In addition, the Fund has entered into certain offset arrangements with the custodian resulting in a reduction in the Fund’s expenses. For the year ended December 31, 2005, custody fees were reduced by approximately $1,500.
     Goldman Sachs also serves as the Transfer Agent of the Fund for a fee. The fees charged for such transfer agency services are calculated daily and payable monthly equal to an annual rate of 0.04% of the average daily net assets of the Fund. Goldman Sachs serves as the distributor of the Fund’s shares at no cost to the Fund.
     At December 31, 2005, the amounts owed to affiliates were approximately $92,000 and $3,700 for Management and Transfer Agent fees, respectively.

4. PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds from sales and maturities of long-term securities for the year ended December 31, 2005, were $57,329,072 and $70,961,912, respectively. For the year ended December 31, 2005, Goldman Sachs earned approximately $12,600 of brokerage commissions from portfolio transactions executed on behalf of the Fund.
 
13

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND
 
Notes to Financial Statements (continued)
December 31, 2005

5. 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, Boston Global Advisers (“BGA”), 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 loans are collateralized at all times with cash and/or securities with a market value at least equal to the securities on loan. As with other extensions of credit, the Fund bears the risk of delay on recovery or loss of rights in the collateral should the borrower of the securities fail financially.
     Both the Fund and BGA receive compensation relating to the lending of the Fund’s securities. The amount earned by the Fund for the year ended December 31, 2005, is reported parenthetically on the Statement of Operations. A portion of this amount, $2,482, represents compensation earned by the Fund from lending its securities to Goldman Sachs. For the year ended December 31, 2005, BGA earned approximately $17,445 in fees as securities lending agent. At December 31, 2005, the Fund loaned securities having a market value of $5,339,391 collateralized by cash in the amount of $5,637,660. The Fund invests the cash collateral received in connection with securities lending transactions in the Enhanced Portfolio of Boston Global Investment Trust, a Delaware statutory trust. The Enhanced Portfolio is exempt from registration under Section 3(c)(7) of the Act and is managed by GSAM, for which GSAM receives an investment advisory fee of up to 0.10% of the average daily net assets of the Enhanced Portfolio. The Enhanced Portfolio invests in high quality money market instruments. The Fund bears the risk of incurring a loss from the investment of cash collateral due to either credit or market factors.

6. LINE OF CREDIT FACILITY

The Fund participates in a $350,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Fund must own securities having a market value in excess of 300% of the Fund’s total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the federal funds rate. This committed facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. During the year ended December 31, 2005, the Fund did not have any borrowings under this facility.

7. TAX INFORMATION

The tax character of distributions paid during the years ended December 31, 2005 and December 31, 2004 was as follows:
                 
For the years ended December 31,
2005 2004
Distributions paid from:
               
Ordinary income
  $ 326,535     $ 1,154,644  
Total taxable distributions
  $ 326,535     $ 1,154,644  
 
14

 

 
GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 
 
7. TAX INFORMATION (continued)
As of December 31, 2005, the components of accumulated earnings (losses) on a tax basis were as follows:
           
Capital loss carryforward:(1)(2)
       
 
Expiring 2008
  $ (6,413,975 )
 
Expiring 2009
    (27,159,909 )
 
Expiring 2010
    (8,409,296 )
 
Expiring 2011
    (609,034 )
Total capital loss carryforward
    (42,592,214 )
Unrealized gains — net
    20,406,083  
Total accumulated losses — net
  $ (22,186,131 )

(1) Expiration occurs on December 31 of the year indicated and utilization of these losses may be limited under the Code.

(2) During the year ended December 31, 2005, the International Equity Fund utilized $10,641,636 of capital loss carryforwards.

At December 31, 2005, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:

         
Tax cost
  $ 94,689,196  
Gross unrealized security gain
    21,109,874  
Gross unrealized loss
    (702,605 )
Net unrealized security gain
  $ 20,407,269  
Net unrealized loss on other investments
    (1,186 )
Net unrealized gain
  $ 20,406,083  

The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales.

In order to present certain components of the Fund’s capital accounts on a tax basis, certain reclassifications have been recorded to the Fund’s accounts. The Fund reclassified $931,484 from accumulated undistributed net investment income and $290,794 from paid-in capital to accumulated net realized loss on investment, futures and foreign currency related transactions. This reclassification has no impact on the net asset value of the Fund. Reclassifications result primarily from the difference in tax treatment of foreign currency transactions and wash sales.

 
15

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND
 
Notes to Financial Statements (continued)
December 31, 2005

8. LEGAL PROCEEDINGS

Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds and the Trustees and Officers of the Goldman Sachs Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. It is possible that the plaintiffs may appeal this decision.

     Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuits will have a material adverse financial impact on the Fund is remote, and the pending actions are not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.

9. SUBSEQUENT EVENT

At a meeting held on July 12, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization providing for the tax-free acquisition of the Allmerica Select International Equity Fund by the International Equity Fund. Following the approval of the Board of Trustees of the Allmerica Select International Equity Fund, the acquisition was completed on January 9, 2006.
 
16

 

Report of Independent Registered Public Accounting Firm

To the Shareholders of Goldman Sachs International Equity Fund and Board of Trustees
Goldman Sachs Variable Insurance Trust

We have audited the accompanying statement of assets and liabilities of Goldman Sachs International Equity Fund (one of the funds comprising the Goldman Sachs Variable Insurance Trust) (the “Fund”), including the statement of investments, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs International Equity Fund at December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

  -s- ERNST & YOUNG LLP

New York, New York
February 10, 2006
 
17

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND

Fund Expenses (Unaudited) — Six Month Period Ended December 31, 2005

            As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.  
 
            The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2005 through December 31, 2005.  
 
            Actual Expenses — The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.  
 
            Hypothetical Example for Comparison Purposes — The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.  
 
            Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges (loads), redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.  

                         
Expenses Paid
for the
Beginning Ending 6 months
Account Value Account Value ended
7/1/05 12/31/05 12/31/05*
Actual
  $ 1,000     $ 1,167.80     $ 6.53  
Hypothetical 5% return
    1,000       1,019.18 +     6.06  

  *   Expenses are calculated using the Fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2005. Expenses are calculated by multiplying the annualized expense ratio by the average account value for such period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The net annualized expense ratio for the period was 1.19%.  
  + Hypothetical expenses are based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses.  

 
18

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 

Trustees and Officers (Unaudited)

Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Ashok N. Bakhru
Age: 63		   Chairman & Trustee   Since 1997   President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President—Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003- Present); Director, Private Equity Investors—III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003).

Chairman of the Board and Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
John P. Coblentz, Jr.
Age: 64		   Trustee   Since 2003   Partner, Deloitte & Touche LLP (June 1975-May 2003).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Patrick T. Harker
Age: 47		   Trustee   Since 2000   Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-Present); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Mary P. McPherson
Age: 70		   Trustee   Since 1997   Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
Wilma J. Smelcer
Age: 56		   Trustee   Since 2001   Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Lawson Products Inc. (distributor of industrial products).
 
19

 

 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND
 
Trustees and Officers (Unaudited) (continued)
Independent Trustees
                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
Richard P. Strubel
Age: 66		   Trustee   Since 1997   Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   Gildan Activewear Inc. (an activewear clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (53 Portfolios).

Interested Trustees

                     
Number of
Term of Portfolios in
Position(s) Office and Fund Complex Other
Name, Held with Length of Principal Occupation(s) Overseen by Directorships
Address and Age1 the Trust Time Served2 During Past 5 Years Trustee3 Held by Trustee4
*Alan A. Shuch
Age: 56		   Trustee   Since 1997   Advisory Director—GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).		   72   None
*Kaysie P. Uniacke
Age: 44		   Trustee
  &		   Since 2001   Managing Director, GSAM (1997-Present).   72   None
    President   Since 2002   Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).

President—Goldman Sachs Mutual Fund Complex (2002- Present) (registered investment companies).

Assistant Secretary—Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).		        
 
*
These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
1
Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Howard B. Surloff.
2
Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
3
The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of December 31, 2005, the Trust consisted of 61 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 11 portfolios.
4
This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.

Additional information about the Trustees is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726

 
20

 

GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND 

Trustees and Officers (Unaudited) (continued)

Officers of the Trust*
             
Term of
Office and
Position(s) Held Length of
Name, Age And Address With the Trust Time Served1 Principal Occupation(s) During Past 5 Years
Kaysie P. Uniacke
32 Old Slip
New York, NY 10005
Age: 44		   President & Trustee   Since 2002

Since 2001		   Managing Director, GSAM (1997-Present).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies).

President—Goldman Sachs Mutual Fund Complex (registered investment companies).

Assistant Secretary—Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies).
James A. Fitzpatrick
71 South Wacker Drive
Suite 500
Chicago, IL 60606
Age: 45		   Vice President   Since 1997   Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999).

Vice President—Goldman Sachs Mutual Fund Complex (registered investment companies).
James A. McNamara
32 Old Slip
New York, NY 10005
Age: 43		   Vice President   Since 2001   Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).

Vice President—Goldman Sachs Mutual Fund Complex (registered investment companies).

Trustee—Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004)
John M. Perlowski
32 Old Slip
New York, NY 10005
Age: 41		   Treasurer   Since 1997   Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003).

Treasurer—Goldman Sachs Mutual Fund Complex (registered investment companies).
Howard B. Surloff
One New York Plaza
37th Floor
New York, NY 10004
Age: 40		   Secretary   Since 2001   Managing Director, Goldman Sachs (November 2002-Present); Associate General Counsel, Goldman Sachs and General Counsel to the U.S. Funds Group (December 1997-Present).

Secretary—Goldman Sachs Mutual Fund Complex (registered investment companies) (2001-Present) and Assistant Secretary prior thereto.
 
1
Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
*
Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726.

Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)

       For the 2005 tax year, the International Equity Fund has elected to pass through a credit for taxes paid to foreign jurisdictions. During the year ended December 31, 2005, the Fund paid distributions of $0.0359 per share, all of which was attributable to qualified passive income. The total amount of foreign taxes paid by the Fund was $0.0084 per share. The country-by-country components of these totals, reflected as a percentage of total distributions and foreign taxes paid, are provided below.  

                 
Source of Income % Foreign Tax Paid %
Australia
    1.77%       0.00%  
Belgium
    6.64%       0.00%  
France
    7.08%       16.67%  
Germany
    0.44%       1.19%  
Hong Kong
    8.41%       0.00%  
Hungary
    1.77%       4.76%  
Japan
    5.75%       7.14%  
Netherlands
    8.41%       16.67%  
Norway
    0.44%       1.19%  
Russia
    4.87%       13.10%  
South Korea
    3.54%       7.14%  
Spain
    7.52%       20.24%  
Sweden
    1.77%       4.76%  
Switzerland
    0.44%       1.19%  
Taiwan
    1.77%       5.95%  
United Kingdom
    39.38%       0.00%  
TOTAL
     100.00%       100.00%  
 
21

 

     
TRUSTEES
  OFFICERS
Ashok N. Bakhru, Chairman
   Kaysie P. Uniacke, President
John P. Coblentz, Jr.
  James A. Fitzpatrick, Vice President
Patrick T. Harker
  James A. McNamara, Vice President
Mary Patterson McPherson
  John M. Perlowski, Treasurer
Alan A. Shuch
  Howard B. Surloff, Secretary
Wilma J. Smelcer
   
Richard P. Strubel
   
Kaysie P. Uniacke
   
 
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent 		   
 
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
 
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
133 Peterborough Court
London, England EC4A 2BB
 
Visit our Web site at www.gs.com/funds to obtain the most recent month-end returns.
 
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
 
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov.
 
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, the Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330.When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
 
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.
 
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.
 
    Toll Free (in U.S.): 800-292-4726
 
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust: International Equity Fund.
 
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: February 18, 2006
 
VITINTLAR/06-292/02-06    

 

     
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.
     
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. John P. Coblentz, Jr. is the “audit committee financial expert” and is “independent” (as each term is defined in Item 3 of Form N-CSR).

     
ITEM 4.   PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Item 4 — Principal Accountant Fees and Services for the Goldman Sachs Variable Insurance Trust:
Table 1 – Items 4(a) -4(d)

                     
    2005
   2004
   Description of Services Rendered
Audit Fees:
                    
 
                    
• Ernst & Young LLP (“E&Y”)
  $ 112,000     $ 112,000     Financial statement audits
 
                    
Audit-Related Fees
                    
 
                    
• E&Y
  $ 0     $ 0      
 
                    
Tax Fees
                    
 
                    
• E&Y 
  $ 28,400     $ 28,400     Tax compliance services provided in connection with the preparation and review of the Registrant’s tax returns
All Other Fees
  $ 0     $ 0      

Items 4(b)(c) & (d) Table 2. Non-Audit Services to the Goldman Sachs Variable Insurance Trust’s service affiliates * that were pre-approved by the Goldman Sachs Variable Insurance Trust’s Audit Committee pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X

                 
    2005
   2004
   Description of Services Rendered
Audit-Related Fees
                
 
                
• E&Y
  $ 0   $ 0    
 
                
Tax Fees
                
 
                
• E&Y
  $ 0   $ 0    
 
                
All Other Fees
                
 
                
• E&Y
  $ 0   $ 0    

*   These include the advisor (excluding sub-advisors) and any entity controlling, controlled by or under common control with the advisor that provides ongoing services to the registrant (hereinafter referred to as “service affiliates”).

Item 4(e)(1) – Audit Committee Pre Approval Policies and Procedures

Pre-Approval of Audit and Non-Audit Services Provided to the Funds of the Goldman Sachs Variable Insurance Trust. The Audit and Non-Audit Services Pre-Approval Policy (the “Policy”) adopted by the Audit Committee of Goldman Sachs Variable Insurance Trust (“GSVIT”) sets forth the procedures and the conditions pursuant to which services performed by an independent auditor for GSVIT may be pre-approved. Services may be pre-approved specifically by the Audit Committee as a whole or, in certain circumstances, by the Audit Committee Chairman or the person designated as the Audit Committee Financial Expert. In addition, subject to specified cost limitations, certain services may be pre-approved under the provisions of the Policy. The Policy provides that the Audit Committee will consider whether the services provided by an independent auditor are consistent with the Securities and Exchange Commission’s rules on auditor independence. The Policy provides for periodic review and pre-approval by the Audit Committee of the services that may be provided by the independent auditor.

     De Minimis Waiver. The pre-approval requirements of the Policy may be waived with respect to the provision of non-audit services that are permissible for an independent auditor to perform, provided (1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues subject to pre-approval that was paid to the independent auditors during the fiscal year in which the services are provided; (2) such services were not recognized by GSVIT at the time of the engagement to be non-audit services; and (3) such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee to whom authority to grant such approvals has been delegated by the Audit Committee, pursuant to the pre-approval provisions of the Policy.

     Pre-Approval of Non-Audit Services Provided to GSVIT’s Investment Advisers. The Policy provides that, in addition to requiring pre-approval of audit and non-audit services provided to GSVIT, the Audit Committee will pre-approve those non-audit services provided to GSVIT’s investment advisers (and entities controlling, controlled by or under common control with the investment advisers that provide ongoing services to GSVIT) where the engagement relates directly to the operations or financial reporting of GSVIT.

Item 4(e)(2) — 0% of the audit-related fees, tax fees and other fees listed in Table 1 were approved by GSVIT’s Audit Committee pursuant to the “de minimis” exception of Rule 2-01(c)(7)(i)(C) of Regulation S-X. In addition, 0% of the non-audit services to the GSVIT’s service affiliates listed in Table 2 were approved by GSVIT’s Audit Committee pursuant to the “de minimis” exception of Rule 2-01(c)(7)(i)(C) of Regulation S-X.

Item 4(f) — Not applicable.

Items 4(g) Aggregate Non-Audit Fees Disclosure

The aggregate non-audit fees billed to GSVIT for the 12 months ended December 31, 2005 and December 31, 2004 were approximately $28,400 and $28,400, respectively.

The aggregate non-audit fees billed to GSVIT’s adviser and service affiliates by Ernst & Young LLP for non-audit services for the twelve months ended December 31, 2005 and December 31, 2004 were approximately $49.0 million and $34.5 million, respectively.

Items 4(h) — GSVIT’s Audit Committee has considered whether the provision of non-audit services to GSVIT’s investment advisor and service affiliates that did not require pre-approval pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the auditor’s independence.

     

     
ITEM 5.   AUDIT COMMITTEE OF LISTED REGISTRANTS.

    Not applicable.

     
ITEM 6.   SCHEDULE OF INVESTMENTS

    Schedule of Investments is included as part of the Report to Shareholders filed under Item 1.

     
ITEM 7.   DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

    Not applicable.

     
ITEM 8.   PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

    Not applicable.

     
ITEM 9.   PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS

    Not applicable.

     
ITEM 10.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.

     
ITEM 11.   CONTROLS AND PROCEDURES.

  (a)   The registrant’s principal executive and principal financial officers or persons performing similar functions have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing 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 11(a)(1) of the Registrant’s Form N-CSR filed on March 8, 2004 (accession number 0000950123-04-002976)
         
  (a)(2)
 
 		 Exhibit 99.CERT
 
 
Exhibit 99.906CERT
   Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith
 
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith

 

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
Goldman Sachs Variable Insurance Trust
   
 
    
 
    
/s/ Kaysie Uniacke
    
   
By: Kaysie Uniacke
    
Chief Executive Officer of
    
Goldman Sachs Variable Insurance Trust
    
 
    
Date: February 15, 2006
    
 
    
 
    
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
    
 
    
/s/ Kaysie Uniacke
   
By: Kaysie Uniacke
    
Chief Executive Officer of
    
Goldman Sachs Variable Insurance Trust
    
 
    
Date: February 15, 2006
    
 
    
 
    
/s/ John M. Perlowski
   
By: John M. Perlowski
    
Chief Financial Officer of
    
Goldman Sachs Variable Insurance Trust
    
 
    
Date: February 15, 2006