-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OnWyDk3cR5C4eI7UA39u2ll/3zyvAoCbYxt98kUyUAfcHgAoCyDL1BRmsbq6XCQq 9SqnLcSfQBjqGuUMCJ7ztw== 0000950130-99-001053.txt : 19990301 0000950130-99-001053.hdr.sgml : 19990301 ACCESSION NUMBER: 0000950130-99-001053 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDMAN SACHS VARIABLE INSURANCE TRUST CENTRAL INDEX KEY: 0001046292 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08361 FILM NUMBER: 99551388 BUSINESS ADDRESS: STREET 1: 4900 SEARS TOWER CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129934400 MAIL ADDRESS: STREET 1: 4900 SEARS TOWER CITY: CHICAGO STATE: IL ZIP: 60606 N-30D 1 GOLDMAN SACHS VARIABLE INSURANCE TRUST Goldman Sachs Variable Insurance Trust - ------------------------------------------------------------------------------- GOLDMAN SACHS ASSET MANAGEMENT ONE NEW YORK PLAZA, 42ND FLOOR, NEW YORK, NEW YORK 10004 - ------------------------------------------------------------------------------- Annual Report [LOGO OF GOLDMAN SACHS December 31, 1998 APPEARS HERE] GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND Shareholder Letter Dear Shareholders, The following is a report on the performance of the Goldman Sachs Variable Insurance Trust Growth and Income Fund. This annual report covers the period from January 12, 1998, when the Fund began operations, through December 31, 1998. Performance Review From January 12, 1998 through December 31, 1998, the Fund generated a 5.47% aggregate total return. Over the same time period, the Fund's benchmark, the Standard & Poor's (S&P) 500 Index (with dividends reinvested), generated an aggregate total return of 34.44%. The Fund's underperformance over the review period is vari- ously attributable to the underperformance of value stocks versus growth stocks--and the broader market--over the year, and the Fund's lack of exposure to the narrow leader- ship of the market. With regard to the latter, performance was, on a relative basis, hurt by what the Fund did not own, as the market's continued rapid ascent was led mainly by large cap growth stocks and, in particular, high price- /earnings and price/book value technology stocks. Investment Strategy Update During the period, we took steps to improve the Fund's level of diversification and liquidity by increasing the number of holdings in the Fund's portfolio and its concen- tration in the large-cap market segment (companies whose capitalizations are greater than $5 billion), and by reduc- ing the Fund's sector concentrations. Investment Objective The Fund seeks long-term capital growth and growth of in- come primarily through investments in equity securities of companies selling at a discount to their long-term earning and/or dividend-paying ability. 1 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND Shareholder Letter Portfolio Composition Top 10 Portfolio Holdings as of December 31, 1998*
Percentage of Company Line of Business Net Assets ------- ---------------- ------------- Philip Morris Co., Inc. Tobacco 3.1% Aetna, Inc. Healthcare Management 2.6 Loews Corp. Insurance Services 2.4 First Union Corp. Banks 2.4 Bank One Corp. Banks 2.3 BankAmerica Corp. Banks 2.2 General Motors Corp. Auto/Vehicle 2.0 Elf Aquitaine ADR Integrated Oil 2.0 Royal Dutch Petroleum Co. Integrated Oil 1.9 Atlantic Richfield Co. Integrated Oil 1.9
* 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 in- vests. References to individual securities do not consti- tute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past perfor- mance 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. Outlook We believe that the steps we've taken to improve the Fund's level of diversification and liquidity has the potential to provide returns more in line with our peer group and the S&P 500 Index going forward. As we reposition the portfo- lio, we will maintain our value bias and hope to continue to add value through stock selection and fundamental re- search. Our portfolio continues to sell at a discounted valuation relative to the S&P 500 Index. We thank you for your investment and look forward to your continued confidence. Goldman Sachs Value Portfolio Management Team January 29, 1999 2 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND Performance Summary December 31, 1998 The following graph shows the value as of December 31, 1998, of a $10,000 in- vestment made on January 12, 1998 (commencement of operations). For compara- tive purposes, the performance of the Fund's benchmark (the Standard and Poor's 500 Index ("S&P 500 Index")) is shown. This performance data repre- sents past performance and should not be considered indicative of future per- formance 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. Growth and Income Fund's Lifetime Performance Growth of a $10,000 Investment, Distributions Reinvested January 12, 1998 to December 31, 1998 [GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND'S LIFETIME PERFORMANCE GRAPH APPEARS HERE] NAV Benchmark --- --------- 1/12/98 10,000 10,000 01/98 10,550 10,572 02/98 11,481 11,334 03/98 11,810 11,915 04/98 11,720 12,035 05/98 11,451 11,828 06/98 11,391 12,308 07/98 10,801 12,176 08/98 9,251 10,416 09/98 9,831 11,083 10/98 10,261 11,984 11/98 10,491 12,711 12/98 10,547 13,444 Since Inception Aggregate Total Return through December 31, 1998(a) Growth and Income Fund (commenced January 12, 1998) 5.47% --------------------------------------------------------------------------- (a) Represents aggregate total return since the Fund has not been in operation for a full 12 months. 3 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - 94.0% Aerospace/Defense - 5.9% 2,500 Boeing Co. $ 81,563 4,600 General Motors Corp. Class H (Hughes) 182,563 1,100 Honeywell Inc 82,844 2,600 Lockheed Martin Corp. 220,350 4,900 Raytheon Co. * 253,269 ---------- 820,589 ------------------------------------------------------------- Auto Suppliers - 2.4% 1,300 Federal-Mogul Corp. 77,350 3,100 Lucasvarity PLC-ADR 103,850 2,400 Magna International, Inc. 148,800 ---------- 330,000 ------------------------------------------------------------- Auto/Vehicle - 3.6% 1,400 Ford Motor Co. 82,162 3,800 General Motors Corp. 271,937 6,000 Volvo Aktiebolaget ADR B 139,875 ---------- 493,974 ------------------------------------------------------------- Banks - 9.0% 5,100 BankAmerica Corp. 306,637 6,300 Bank One Corp. 321,694 3,000 Chase Manhattan Corp. 204,187 5,400 First Union Corp. 328,387 2,100 Wells Fargo & Co. 83,869 ---------- 1,244,774 ------------------------------------------------------------- Broadcast Media - 0.6% 1,900 Mediaone Group, Inc. 89,300 ------------------------------------------------------------- Chemical Products - 1.1% 1,500 Du Pont (E.I.) de Nemours & Co. 79,594 1,100 Minnesota Mining and Manufacturing Co. 78,238 ---------- 157,832 ------------------------------------------------------------- Construction/Environmental Services - 2.1% 6,600 Browning-Ferris Industries, Inc. 187,687 2,200 Waste Management, Inc. 102,575 ---------- 290,262 ------------------------------------------------------------- Consumer Staples - 0.6% 1,800 Corning, Inc. 81,000 ------------------------------------------------------------- Department Stores - 3.5% 3,000 Dayton Hudson Corp. 162,750 3,100 Federated Department Stores, Inc.* 135,044 4,400 Sears Roebuck & Co. 187,000 ---------- 484,794 ------------------------------------------------------------- Electronics & Other Electrical Equipment - 0.5% 1,000 Philips Electronics NV 67,688 ------------------------------------------------------------- Energy Refining & Marketing - 1.1% 3,400 Tosco Corp. 87,975 2,000 USX-Marathon Group, Inc. 60,250 ---------- 148,225 -------------------------------------------------------------
Shares Description Value Common Stocks - (continued) Enterprise Systems - 1.8% 1,200 Hewlett-Packard Co. $ 81,975 500 International Business Machines, Inc. 92,375 600 Xerox Corp. 70,800 ---------- 245,150 -------------------------------------------------------------- Entertainment & Leisure - 2.4% 9,600 Hilton Hotels Corp. 183,600 9,900 Mirage Resorts, Inc.* 147,881 ---------- 331,481 -------------------------------------------------------------- Food & Beverages - 3.2% 10,900 Archer Daniels Midland Co. 187,344 2,700 Conagra, Inc. 85,050 2,600 Ralston Purina Co. 84,175 1,000 Unilever NV 82,938 ---------- 439,507 -------------------------------------------------------------- Forest Products - 1.1% 2,500 Georgia-Pacific Corp. 146,406 -------------------------------------------------------------- Health Suppliers/Services - 1.2% 1,300 Baxter International, Inc. 83,606 1,000 Johnson & Johnson 83,875 ---------- 167,481 -------------------------------------------------------------- Healthcare Management - 5.6% 4,500 Aetna, Inc. 353,812 6,600 Columbia/HCA Healthcare Corp. 163,350 9,600 Tenet Healthcare Corp.* 252,000 ---------- 769,162 -------------------------------------------------------------- Insurance Life - 1.4% 2,500 Cigna Corp. 193,281 -------------------------------------------------------------- Insurance Property and Casualty - 2.8% 4,300 Allstate Corp. 166,087 4,000 Hartford Financial Services Group, Inc. 219,500 ---------- 385,587 -------------------------------------------------------------- Insurance Services - 3.5% 3,400 Loews Corp. 334,050 3,700 Provident Companies, Inc. 153,550 ---------- 487,600 -------------------------------------------------------------- Integrated Oil - 7.4% 4,100 Atlantic Richfield Co. 267,525 4,800 Elf Aquitaine ADR 271,800 1,100 Exxon Corp. 80,437 4,200 Occidental Petroleum Corp. 70,875 5,600 Royal Dutch Petroleum Co. 268,100 1,200 Texaco, Inc. 63,450 ---------- 1,022,187 -------------------------------------------------------------- Logistics/Rail - 0.5% 1,900 Burlington Northern Santa Fe 64,125 --------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 4 GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH AND INCOME FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - (continued) Media & Communications - 3.5% 700 Alltel Corporation $ 41,869 2,800 CBS, Inc. 91,700 1,200 Gannett Co. 77,400 4,800 New York Times Co. 166,500 1,700 U.S. West, Inc. 109,863 ---------- 487,332 ----------------------------------------------------------- Nonferrous Metals - 0.6% 1,100 Aluminum Company of America* 82,019 ----------------------------------------------------------- Oil & Gas Services - 1.6% 4,700 Halliburton Co. 139,238 3,300 Transocean Offshore, Inc. 88,481 ---------- 227,719 ----------------------------------------------------------- Packaging - 1.0% 4,300 Crown Cork & Seal, Inc. 132,494 ----------------------------------------------------------- Personal Computers and Peripherals - 0.5% 1,800 Compaq Computer Corp. 75,487 ----------------------------------------------------------- Pharmaceuticals - 1.5% 2,100 American Home Products Corp. 118,256 1,500 Pharmacia & Upjohn, Inc. 84,938 ---------- 203,194 ----------------------------------------------------------- Publishing - 1.0% 4,300 Dun & Bradstreet Corp. 135,719 ----------------------------------------------------------- Recreational Products - 1.1% 4,100 Hasbro, Inc. 148,113 ----------------------------------------------------------- Semiconductors - 0.6% 700 Intel Corp. 82,994 ----------------------------------------------------------- Software & Services - 1.8% 7,900 First Data Corp. 250,331 ----------------------------------------------------------- Specialty Finance & Agencies - 1.1% 4,800 C.I.T. Group, Inc. 152,700 ----------------------------------------------------------- Specialty Retail - 1.7% 3,000 TJX Companies, Inc. 87,000 9,000 Toys R US, Inc.* 151,875 ---------- 238,875 ----------------------------------------------------------- Telecommunications - 6.1% 3,500 AT&T Corp. 263,375 5,800 BCE, Inc. 220,037 1,600 Bellsouth Corp. 79,800 3,100 GTE Corp. 201,500 1,500 Tele Communications, Inc. - Liberty* 82,969 ---------- 847,681 ----------------------------------------------------------- Tire & Other Related Rubber Products - 0.5% 1,500 Goodyear Tire & Rubber Co. 75,656 ----------------------------------------------------------- Tobacco - 4.2% 7,900 Philip Morris Co., Inc. 422,650 5,100 RJR Nabisco Holdings, Corp. 151,406 ---------- 574,056 -----------------------------------------------------------
Shares Description Value Common Stocks - (continued) Utilities - 5.9% 1,500 Consolidated Edison, Inc. $ 79,312 5,400 Entergy Corp. 168,075 6,400 Northeast Utilities* 102,400 2,500 P G & E Corporation 78,750 8,700 Pacificorp 183,244 5,100 Unicom Corp. 196,669 ----------- 808,450 ----------------------------------------------------- TOTAL COMMON STOCKS (Cost $12,728,418) $12,983,225 -----------------------------------------------------
Principal Interest Maturity Amount Rate Date Value U.S. Treasury Obligation - 0.7% U.S. Treasury Bill $100,000 4.40%(a) 02/04/99 $ 99,588 ----------------------------------------------------------------------------------------------- TOTAL U.S. TREASURY OBLIGATION (Cost $99,588) $ 99,588 ----------------------------------------------------------------------------------------------- Repurchase Agreement - 5.1% Joint Repurchase Agreement Account(b) $700,000 4.89% 01/04/99 $ 700,000 ----------------------------------------------------------------------------------------------- TOTAL REPURCHASE AGREEMENT (Cost $700,000) $ 700,000 ----------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $13,528,006)(c) $13,782,813 ----------------------------------------------------------------------------------------------- Federal Income Tax Information: Gross unrealized gain for investments in which value exceeds cost $ 674,983 Gross unrealized loss for investments in which cost exceeds value (493,329) ----------------------------------------------------------------------------------------------- Net unrealized gain $ 181,654 -----------------------------------------------------------------------------------------------
* Non-income producing security. (a) The interest rate disclosed for the security represents effective yield to maturity. (b) The repurchase agreement is fully collateralized by Federal Agency obligations. (c) The aggregate cost for federal income tax purposes is $13,601,159. The percentage shown for each investment category reflects the value of investments in that category as a percentage of total net assets. ------------------------------------------------------------------------------ Investment Abbreviations: ADR--American Depository Receipt ------------------------------------------------------------------------------ The accompanying notes are an integral part of these financial statements. 5 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE U.S. EQUITY FUND Shareholder Letter Dear Shareholders, We are pleased to report on the performance of the Goldman Sachs Variable In- surance Trust CORE U.S. Equity Fund. This annual report covers the period from February 13, 1998, when the Fund began operations, through December 31, 1998. Performance Review From February 13, 1998 through December 31, 1998, the Fund generated a 14.73% aggregate total return. Over the same time period, the Fund's benchmark, the Standard & Poor's (S&P) 500 Index (with dividends reinvested), generated an aggregate return of 21.62%. The CORE strategy is a well-defined investment process that has historically provided consistent, risk-managed outperformance, with a minimized risk that returns will be very different from those of a specific benchmark over time. The four months ended October, however, were charac- terized by a sharp increase in market volatility and an un- usual profile of top-performing equities among the stocks in our universe. As a result, our ability to outperform the index using a systematic approach to stock selection and portfolio construction was impaired. At the same time, the four basic components that the CORE investment process emphasizes in stock selection--value, momentum, risk and research--were negatively impacted by a market driven by uncertainty and fear rather than under- lying company fundamentals. As a result, richly-valued stocks outpaced cheap ones; stocks with poor momentum fared better than those with good momentum; low beta but volatile stocks performed well, as did those that were not favored by industry research analysts. These are all counter to what we've observed historically. Typically, the diversifi- cation of our models helps because when one theme doesn't work, others usually do (for example, when value stocks underperform, momentum stocks advance more than average), but diversification did not help during this period. And, because volatility was so high, the penalty for being wrong was higher than usual. Investment Objective The Fund seeks long-term capital growth and dividend income through a broadly diversified portfolio of large-cap and blue-chip equity securities representing all major sectors of the U.S. economy. The portfolio employs a disciplined approach that combines fundamental investment research provided by Goldman, Sachs & Co.'s Global Investment Research Department and consensus opinions with quantitative analysis generated by the Asset Management Division's proprietary model. This quantitative system evaluates each stock using many different criteria, including valuation measures, growth expectations, earnings momentum and risk profile. It also objectively analyses the impact of current economic conditions on different types of stocks to determine where the emphasis should be placed. While maintaining a profile close to that of the benchmark, those stocks ranked highly by both the quantitative model and the Goldman Sachs Global Investment Research Department and consensus opinion are selected for the portfolio. 6 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE U.S. EQUITY FUND Portfolio Composition Top 10 Portfolio Holdings as of December 31, 1998*
Percentage of Company Line of Business Net Assets ------- ---------------- ------------- Exxon Corp. Integrated Oil 4.2% General Electric Co. Electronics & Other Electrical Equipment 3.7 American General Corp. Insurance-Life 3.5 AT&T Corp. Telecommunications 3.4 Microsoft Corp. Software & Services 3.4 International Business Machines, Inc. Enterprise Systems 3.0 Intel Corp. Semiconductors 2.8 Ford Motor Co. Auto/Vehicle 1.6 Wal Mart Stores, Inc. Retail 1.6 Pfizer, Inc. Pharmaceuticals 1.5
* 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 in- vests. References to individual securities do not consti- tute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past perfor- mance 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. Outlook Returns reverted to a more normal pattern starting in Octo- ber, both for the factors we track, and for the overall portfolio. Although stock volatility remains higher than average, we have implemented a few changes in our process to help ensure a more accurate forecast of portfolio risk versus the benchmark. We maintain strong conviction, howev- er, that our model factors should, over time, lead to solid returns. We believe that cheaper stocks should outpace more expensive ones, good momentum stocks should do better than poor momentum stocks, lower-risk stocks should perform bet- ter than higher risk stocks, as should those favoured by research analysts. We thank you for your investment and look forward to your continued confidence. Goldman Sachs Quantitative Equity Management Team January 29, 1999 7 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE U.S. EQUITY FUND Performance Summary December 31, 1998 The following graph shows the value as of December 31, 1998, of a $10,000 in- vestment made on February 13, 1998 (commencement of operations). For compara- tive purposes, the performance of the Fund's benchmark (the Standard and Poor's 500 Index ("S&P 500 Index")) is shown. This performance data repre- sents past performance and should not be considered indicative of future per- formance 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. CORE U.S. Equity Fund's Lifetime Performance Growth of a $10,000 Investment, Distributions Reinvested February 13, 1998 to December 31, 1998 [GRAPH APPEARS HERE] Core US Equity Fund S&P 500 Index ------------------- ------------- 2/13/98 10,000 10,000 02/98 10,300 10,253 03/98 10,880 10,778 04/98 11,070 10,887 05/98 10,890 10,700 06/98 11,260 11,134 07/98 10,980 11,015 08/98 9,130 9,422 09/98 9,420 10,026 10/98 10,170 10,841 11/98 10,820 11,498 12/98 11,473 12,162 Since Inception Aggregate Total Return through December 31, 1998(a) CORE U.S. Equity Fund (commenced February 13, 1998) 14.73% -------------------------------------------------------------------------- (a) Represents aggregate total return since the Fund has not been in operation for a full 12 months. 8 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE U.S. EQUITY FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - 96.4% Aerospace/Defense - 2.3% 2,100 General Motors Corp. Class H (Hughes) $ 83,344 800 Honeywell, Inc. 60,250 800 United Technologies Corp. 87,000 ---------- 230,594 --------------------------------------------------------------- Agriculture/Heavy Equipment - 0.5% 400 Case Corp. 8,725 700 Caterpillar, Inc. 32,200 200 Deere & Co. 6,625 ---------- 47,550 --------------------------------------------------------------- Airlines - 0.8% 900 AMR Corp.* 53,437 400 Delta Air Lines, Inc. 20,800 ---------- 74,237 --------------------------------------------------------------- Alcohol - 0.3% 500 Anheuser Busch Companies, Inc. 32,812 --------------------------------------------------------------- Auto/ Vehicle - 2.5% 498 Daimlerchrysler AG 47,839 2,700 Ford Motor Co. 158,456 800 Hertz Corp. 36,500 ---------- 242,795 --------------------------------------------------------------- Banks - 3.0% 2,331 BankAmerica Corp. 140,151 600 Bank of New York, Inc. 24,150 324 Bank One Corp. 16,544 1,400 Chase Manhattan Corp. 95,287 600 U.S. Bancorp 21,300 ---------- 297,432 --------------------------------------------------------------- Basic Industries - 0.3% 200 Aluminum Company of America* 14,913 900 Barrick Gold Corp. 17,550 ---------- 32,463 --------------------------------------------------------------- Chemical Products - 2.4% 100 Avery Dennison Corp. 4,506 1,300 Dow Chemicals Co. 118,219 500 Du Pont (E.I.) de Nemours & Co. 26,531 600 Millennium Chemicals, Inc. 11,925 200 Minnesota Mining and Manufacturing Co. 14,225 300 Ppg Industries, Inc. 17,475 2,000 Solutia, Inc. 44,750 ---------- 237,631 --------------------------------------------------------------- Computer Services/Software - 1.0% 1,900 Gateway 2000, Inc.* 97,256 ---------------------------------------------------------------
Shares Description Value Common Stocks - (continued) Conglomerates - 0.5% 500 Allied Signal, Inc. $ 22,156 400 Tyco International, Ltd. 30,175 ---------- 52,331 -------------------------------------------------------------- Construction/Environmental Services - 0.1% 300 Fluor Corp. 12,769 -------------------------------------------------------------- Consumer Products - 0.6% 700 Eastman Kodak Co. 50,400 400 Sara Lee Corp. 11,275 ---------- 61,675 -------------------------------------------------------------- Consumer Staples - 1.8% 600 Clorox Co. 70,087 600 Gillette Co. 28,987 900 Procter & Gamble Co. 82,181 ---------- 181,255 -------------------------------------------------------------- Electronics & Other Electrical Equipment - 4.2% 700 Emerson Electric Co.* 42,350 3,600 General Electric Co. 367,425 ---------- 409,775 -------------------------------------------------------------- Enterprise Systems - 5.4% 400 Ceridian Corp.* 27,925 500 EMC Corp. 42,500 400 Hewlett-Packard Co. 27,325 1,600 International Business Machines, Inc. 295,600 800 Unisys Corp.* 27,550 900 Xerox Corp. 106,200 ---------- 527,100 -------------------------------------------------------------- Entertainment & Leisure - 0.6% 200 Carnival Cruise Lines Corp. 9,600 200 Viacom, Inc. Class B* 14,800 1,200 Walt Disney Co. 36,000 ---------- 60,400 -------------------------------------------------------------- Financial Services - 0.4% 400 American Express Co. 40,900 -------------------------------------------------------------- Food & Beverages - 2.8% 1,890 Archer Daniels Midland Co. 32,484 1,700 Coca Cola Co. 113,687 300 Interstate Bakeries Corp. 7,931 800 Pepsico, Inc. 32,750 1,100 Unilever NV 91,231 ---------- 278,083 -------------------------------------------------------------- Health Suppliers/Services - 2.0% 200 Arterial Vascular Engineering, Inc.* 10,500 450 Cardinal Health, Inc. 34,144 200 Guidant Corp. 22,050 1,500 Johnson & Johnson 125,813 ---------- 192,507 --------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 9 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE U.S. EQUITY FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - (continued) Healthcare Management - 0.8% 900 Columbia/HCA Healthcare Corp. $ 22,275 600 Lincare Holdings, Inc.* 24,338 800 Tenet Healthcare Corp.* 21,000 100 Wellpoint Health Networks, Inc.* 8,700 ---------- 76,313 -------------------------------------------------------------------- Hotels & Restaurants - 0.3% 600 Tricon Global Restaurants, Inc.* 30,075 -------------------------------------------------------------------- Industrial Machinery - 0.5% 1,000 Ingersoll-Rand Co. 46,938 -------------------------------------------------------------------- Insurance-Life - 4.0% 4,400 American General Corp.* 343,200 700 Equitable Companies, Inc. 40,512 100 SunAmerica, Inc. 8,113 ---------- 391,825 -------------------------------------------------------------------- Insurance-Property and Casualty - 3.3% 200 Allmerica Financial Corp. 11,575 1,800 Allstate Corp. 69,525 1,250 American International Group, Inc. 120,781 300 Conseco, Inc. 9,169 400 Hartford Financial Services Group, Inc. 21,950 2,900 Travelers Property & Casualty Corp. 89,900 ---------- 322,900 -------------------------------------------------------------------- Insurance Services - 0.4% 400 AMBAC, Inc. 24,075 200 MBIA, Inc. 13,113 ---------- 37,188 -------------------------------------------------------------------- Integrated Oil - 6.5% 100 Chevron Corp. 8,294 5,600 Exxon Corp. 409,500 700 Mobil Corp. 60,988 2,700 Royal Dutch Petroleum ADR 129,263 500 Texaco, Inc. 26,438 ---------- 634,483 -------------------------------------------------------------------- Internet Services - 0.5% 200 Yahoo!* 47,388 -------------------------------------------------------------------- Investment Brokers & Managers - 3.0% 2,400 Lehman Brothers Holdings, Inc. 105,750 1,100 Merrill Lynch & Company, Inc. 73,425 1,600 Morgan Stanley, Dean Witter, Discover & Co. 113,600 ---------- 292,775 -------------------------------------------------------------------- Local Exchange Companies - 2.5% 1,000 Bell Atlantic Corp.* 53,000 2,200 Bellsouth Corp. 109,725 1,300 GTE Corp. 84,500 ---------- 247,225 --------------------------------------------------------------------
Shares Description Value Common Stocks - (continued) Media & Communications - 2.2% 600 Gannett Co. $ 38,700 100 Mcgraw-hill Companies, Inc. 10,188 300 Meredith Corp. 11,363 1,300 SBC Communications, Inc. 69,713 800 Time Warner, Inc. 49,650 500 Tribune Co. 33,000 ---------- 212,614 ----------------------------------------------------------- Oil Refining & Marketing - 0.1% 300 Sunoco, Inc. 10,819 ----------------------------------------------------------- Packaging - 0.2% 500 Owens-Illinois, Inc.* 15,313 ----------------------------------------------------------- Personal Computers and Peripherals - 1.0% 600 Dell Computer Corporation* 43,912 500 Lexmark International Group, Inc.* 50,250 ---------- 94,162 ----------------------------------------------------------- Pharmaceuticals - 9.6% 1,000 Abbott Laboratories 49,000 1,300 American Home Products Corp. 73,206 1,100 Amgen, Inc.* 115,019 1,500 Biogen, Inc.* 124,500 900 Bristol-Myers Squibb Co. 120,431 400 Eli Lilly & Co. 35,550 700 Merck & Co. 103,381 1,200 Pfizer, Inc. 150,525 2,000 Schering-Plough Corp. 110,500 800 Warner-Lambert Co. 60,150 ---------- 942,262 ----------------------------------------------------------- Recreational Products - 0.4% 800 Hasbro, Inc.* 28,900 400 Mattel, Inc. 9,125 ---------- 38,025 ----------------------------------------------------------- Restaurants & Hotels - 0.4% 500 McDonalds Corp. 38,313 ----------------------------------------------------------- Retail - 3.0% 1,600 Dayton Hudson Corp. 86,800 800 Federated Department Stores, Inc.* 34,850 500 Ingram Micro, Inc.* 17,438 1,900 Wal Mart Stores, Inc. 154,731 ---------- 293,819 ----------------------------------------------------------- Semiconductors - 2.8% 2,300 Intel Corp. 272,694 ----------------------------------------------------------- Software & Services - 4.1% 300 Automatic Data Processing, Inc. 24,056 400 Computer Sciences Corp.* 25,775 200 Compuware Corp.* 15,625 2,400 Microsoft Corp.* 332,850 ---------- 398,306 -----------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 10 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE U.S. EQUITY FUND
Shares Description Value Common Stocks - (continued) Specialty Finance & Agencies - 1.0% 890 Associates First Capital Corp. $ 37,714 750 Providian Financial Corp. 56,250 ---------- 93,964 --------------------------------------------------------------- Specialty Retail - 3.2% 800 Abercrombie & Fitch Co.* 56,600 400 American Greetings Corp. 16,425 2,300 Best Buy Co., Inc.* 141,162 200 Home Depot, Inc. 12,238 700 Lowes Companies, Inc. 35,831 500 Ross Stores, Inc. 19,688 100 Tandy Corp. 4,119 800 TJX Companies, Inc. 23,200 ---------- 309,263 --------------------------------------------------------------- Steel - 0.3% 3,300 Bethlehem Steel Corp.* 27,637 --------------------------------------------------------------- Supermarkets - 2.3% 1,100 Albertson's, Inc. 70,056 3,600 Food Lion, Inc. 38,250 1,000 Kroger Co.* 60,500 1,000 Safeway, Inc.* 60,937 ---------- 229,743 --------------------------------------------------------------- Telecommunications - 5.2% 700 Ameritech Corp. 44,362 4,400 AT&T Corp. 331,100 1,100 MCI Worldcom, Inc.* 78,925 400 Sprint Corp. (FON Group) 33,650 200 Sprint Corp. (PCS Group)* 4,625 400 Tele Communications, Inc. (TCI Group)* 22,125 ---------- 514,787 --------------------------------------------------------------- Telecommunications Equipment - 2.4% 1,400 Cisco Systems, Inc.* 129,937 1,000 Lucent Technologies, Inc. 110,000 ---------- 239,937 --------------------------------------------------------------- Tobacco - 2.4% 4,000 Fortune Brands, Inc. 126,500 2,100 Philip Morris Companies, Inc. 112,350 ---------- 238,850 ---------------------------------------------------------------
Shares Description Value Common Stocks - (continued) Utilities - 2.5% 700 Dominion Resources, Inc. $ 32,725 500 Duke Energy Co. 32,031 900 Edison International, Inc. 25,088 600 FPL Group, Inc. 36,975 200 Pinnacle West Capital Corp. 8,475 1,600 Texas Utilities Co. 74,700 900 Unicom Corp. 34,706 ---------- 244,700 ------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $8,156,434) $9,451,883 ------------------------------------------------------------------- Other Investment - 4.1% 3,266 Standard & Poor's 500 Depositary Receipt* $ 401,718 ------------------------------------------------------------------- TOTAL OTHER INVESTMENT (Cost $384,060) $ 401,718 ------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $8,540,494)(a) $9,853,601 ------------------------------------------------------------------- Federal Income Tax Information: Gross unrealized gain for investments in which value exceeds cost $1,560,535 Gross unrealized loss for investments in which cost exceeds value (247,428) ------------------------------------------------------------------- Net unrealized gain $1,313,107 -------------------------------------------------------------------
*Non-income producing security. (a) The amount stated also represents aggregate cost for federal income tax purposes. The percentage shown for each investment category reflects the value of investments in that category as a percentage of total net assets. ------------------------------------------------------------------------------ Investment Abbreviations: ADR--American Depository Receipt ------------------------------------------------------------------------------ The accompanying notes are an integral part of these financial statements. 11 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE LARGE CAP GROWTH FUND Shareholder Letter Dear Shareholders, We are pleased to report on the performance of the Goldman Sachs Variable In- surance Trust CORE Large Cap Growth Fund. This annual report covers the pe- riod from February 13, 1998, when the Fund began operations, through December 31, 1998. Performance Review From February 13, 1998 through December 31, 1998, the Fund generated a 16.99% aggregate total return, underperforming the 28.66% aggregate total return generated by its bench- mark, the Russell 1000 Growth Index. The CORE strategy is a well-defined investment process that has historically provided consistent, risk-managed outperformance, with a minimized risk that returns will be very different from those of a specific benchmark over time. The four months ended October, however, were charac- terized by a sharp increase in market volatility and an un- usual profile of top-performing equities among the stocks in our universe. As a result, our ability to outperform the index using a systematic approach to stock selection and portfolio construction was impaired. At the same time, the four basic components that the CORE investment process emphasizes in stock selection--value, momentum, risk and research--were negatively impacted by a market driven by uncertainty and fear rather than under- lying company fundamentals. As a result, richly-valued stocks outpaced cheap ones; stocks with poor momentum fared better than those with good momentum; low beta but volatile stocks performed well, as did those that were not favored by industry research analysts. These are all counter to what we've observed historically. Typically, the diversifi- cation of our models helps because when one theme doesn't work, others usually do (for example, when value stocks underperform, momentum stocks advance more than average), but diversification did not help during this period. And, because volatility was so high, the penalty for being wrong was higher than usual. The qualitative research portion of the Fund's investment model also produced mixed results, thus negatively im- pacting performance. After adjusting for their large-cap, high-growth bias, stocks that Goldman analysts rated highly underperformed, by a wide margin, those they ranked only as market performers or market underperformers. Investment Objective The Fund seeks long-term capital growth, primarily through a broadly diversified portfolio of equity securities that are expected to have better prospects for earnings growth than the growth rate of the general domestic economy. The portfolio employs a disciplined approach that combines fundamental investment research provided by Goldman, Sachs & Co.'s Global Investment Research Department and consensus opinions with quantitative analysis generated by the Asset Management Division's proprietary model. This quantitative system evaluates each stock using many different criteria, including valuation measures, growth expectations, earnings momentum and risk profile. 12 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE LARGE CAP GROWTH FUND It also objectively analyzes the impact of current economic conditions on different types of stocks to determine where the emphasis should be placed. While maintaining a profile close to that of the benchmark, those stocks ranked highly by both the quantitative model and the Goldman Sachs Global Investment Research Department and consensus opinion are selected for the portfolio. Portfolio Composition Top 10 Portfolio Holdings as of December 31, 1998*
Percentage of Company Line of Business Net Assets ------- ---------------- ------------- Microsoft Corp. Software & Services 5.1% General Electric Co. Electronics & Other Electrical Equipment 4.7 Intel Corp. Semiconductors 3.8 Cisco Systems, Inc. Telecommunications Equipment 3.4 Johnson & Johnson Health Suppliers/Services 3.0 Pfizer, Inc. Pharmaceuticals 2.9 Eastman Kodak Co. Consumer Products 2.5 Merck & Co. Pharmaceuticals 2.2 General Instrument Corp. Telecommunications Equipment 2.1 Wal Mart Stores, Inc. Retail 2.0
* 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 in- vests. References to individual securities do not consti- tute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past perfor- mance 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. Outlook As always, the Fund remains substantially invested in stocks. Our sector and capitalization weightings are targeted to stay close to those of the Russell 1000 Growth index, as are exposures to other risk factors (such as div- idend yield). Based on long-term results, our quantitative process presently emphasizes low P/E and low price/book stocks with good momentum characteristics; we therefore maintain an exposure to these factors. We thank you for your investment and look forward to your continued confidence. Goldman Sachs Quantitative Equity Management Team January 29, 1999 13 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE LARGE CAP GROWTH FUND Performance Summary December 31, 1998 The following graph shows the value as of December 31, 1998, of a $10,000 in- vestment made on February 13, 1998 (commencement of operations). For compara- tive purposes, the performance of the Fund's benchmark (Russell 1000 Growth Index) is shown. All performance data shown represents past performance and should not be considered indicative of future performance which will fluctu- ate 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. CORE Large Cap Growth Fund's Lifetime Performance Growth of a $10,000 Investment, Distributions Reinvested February 13, 1998 to December 31, 1998 [CHART APPEARS HERE] Core Large Cap Russell 2000 -------------- ------------ 2/13/98 10,000 10,000 03/98 10,830 10,681 04/98 11,050 10,828 05/98 10,750 10,521 06/98 11,260 11,166 07/98 11,000 11,092 08/98 9,059 9,427 09/98 9,449 10,151 10/98 9,939 10,967 11/98 10,749 11,802 12/98 11,699 12,866 Since Inception Aggregate Total Return through December 31, 1998(a) CORE Large Cap Growth Fund (commenced February 13, 1998) 16.99% ---------------------------------------------------------------------------- (a) Represents aggregate total return since the Fund has not been in operation for a full 12 months. 14 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE LARGE CAP GROWTH FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - 95.6% Aerospace/Defense--0.7% 1,300 General Motors Corp. Class H (Hughes) $ 51,594 100 Honeywell, Inc. 7,531 ---------- 59,125 --------------------------------------------------------------- Agriculture/Heavy Equipment - 0.8% 900 Caterpillar, Inc. 41,400 600 Dover Corp. 21,975 ---------- 63,375 --------------------------------------------------------------- Alcohol - 1.9% 700 Anheuser Busch Companies, Inc. 45,937 1,400 Brown Forman Corp. Class B 105,962 ---------- 151,899 --------------------------------------------------------------- Auto/Vehicle - 1.3% 500 Ford Motor Co. 29,344 1,700 Hertz Corp. 77,562 ---------- 106,906 --------------------------------------------------------------- Banks - 0.7% 139 BankAmerica Corp. 8,357 1,700 Dime Bancorp, Inc. 44,944 ---------- 53,301 --------------------------------------------------------------- Basic Industries - 0.2% 1,000 Barrick Gold Corp. 19,500 --------------------------------------------------------------- Chemical Products - 1.1% 300 Avery Dennison Corp. 13,519 500 Dow Chemicals Co. 45,469 300 IMC Global, Inc. 6,413 100 Minnesota Mining and Manufacturing Co. 7,113 900 Solutia, Inc. 20,138 ---------- 92,652 --------------------------------------------------------------- Conglomerates - 0.4% 400 Tyco International, Ltd. 30,175 --------------------------------------------------------------- Consumer Products - 2.5% 2,800 Eastman Kodak Co. 201,600 --------------------------------------------------------------- Consumer Staples - 1.7% 300 Clorox Co. 35,044 1,100 Procter & Gamble Co. 100,444 ---------- 135,488 --------------------------------------------------------------- Electronics & Other Electrical Equipment - 5.5% 600 Emerson Electric Co. 36,300 3,800 General Electric Co. 387,837 500 Johnson Controls, Inc. 29,500 ---------- 453,637 --------------------------------------------------------------- Energy Refining & Marketing - 0.1% 100 Columbia Gas Systems, Inc. 5,775 ---------------------------------------------------------------
Shares Description Value Common Stocks - (continued) Enterprise Systems - 4.6% 400 Ceridian Corp.* $ 27,925 1,000 EMC Corp.* 85,000 200 Hewlett-Packard Co. 13,662 600 International Business Machines, Inc. 110,850 600 Sun Microsystems, Inc.* 51,375 1,300 Unisys Corp.* 44,769 400 Xerox Corp. 47,200 ---------- 380,781 -------------------------------------------------------------- Entertainment & Leisure - 1.3% 1,200 Carnival Cruise Lines Corp. 57,600 700 Viacom, Inc. Class B* 51,800 ---------- 109,400 -------------------------------------------------------------- Financial Services - 0.4% 300 American Express Co. 30,675 -------------------------------------------------------------- Food & Beverages - 5.1% 1,365 Archer Daniels Midland Co. 23,461 2,000 Coca-Cola Co. 133,750 600 Coca-Cola Enterprises, Inc. 21,450 1,500 IBP, Inc. 43,688 1,900 Pepsico, Inc. 77,781 1,400 Unilever NV 116,113 ---------- 416,243 -------------------------------------------------------------- Health Suppliers/Services - 4.5% 100 Allergan, Inc. 6,475 2,000 Bergen Brunswig Corp. 69,750 600 Biomet, Inc. 24,150 300 Cardinal Health, Inc. 22,762 2,900 Johnson & Johnson 243,238 ---------- 366,375 -------------------------------------------------------------- Healthcare Management - 2.7% 900 Beverly Enterprises, Inc.* 6,075 1,700 Columbia/HCA Healthcare Corp. 42,075 200 Lincare Holdings, Inc.* 8,113 700 Tenet Healthcare Corp.* 18,375 1,700 Wellpoint Health Networks, Inc.* 147,900 ---------- 222,538 -------------------------------------------------------------- Hotels & Restaurants - 0.2% 300 Tricon Global Restaurants, Inc.* 15,038 -------------------------------------------------------------- Household Durables - 0.1% 100 Newell Co. 4,125 -------------------------------------------------------------- Insurance-Life - 0.9% 700 Equitable Companies, Inc. 40,512 400 Nationwide Financial Services, Inc. 20,675 200 SunAmerica, Inc. 16,225 ---------- 77,412 --------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 15 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE LARGE CAP GROWTH FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - (continued) Insurance-Property and Casualty - 0.9% 450 American International Group, Inc. $ 43,481 1,100 Travelers Property & Casualty Corp. 34,100 --------- 77,581 ------------------------------------------------------------------- Insurance Services - 0.4% 200 AMBAC, Inc. 12,037 11 Berkshire Hathaway, Inc.* 24,675 --------- 36,712 ------------------------------------------------------------------- Integrated Oil - 0.5% 500 Exxon Corp. 36,562 100 Royal Dutch Petroleum ADR 4,788 --------- 41,350 ------------------------------------------------------------------- Internet Services - 2.3% 1,000 America Online, Inc.* 144,750 200 Yahoo!* 47,388 --------- 192,138 ------------------------------------------------------------------- Investment Brokers & Managers - 2.4% 500 Lehman Brothers Holdings, Inc. 22,031 1,400 Merrill Lynch & Company, Inc. 93,450 1,100 Morgan Stanley, Dean Witter, Discover & Co. 78,100 --------- 193,581 ------------------------------------------------------------------- Local Exchange Companies - 0.8% 1,000 GTE Corp. 65,000 ------------------------------------------------------------------- Media & Communications - 0.6% 800 Gannett Co. 51,600 ------------------------------------------------------------------- Oil & Gas Services - 0.3% 472 Schlumberger, Ltd. 21,771 ------------------------------------------------------------------- Oil Refining & Marketing - 0.1% 300 Sunoco, Inc. 10,819 ------------------------------------------------------------------- Personal Computers and Peripherals - 2.2% 300 Apple Computer, Inc.* 12,281 200 Compaq Computer Corp. 8,387 1,500 Dell Computer Corporation* 109,781 500 Lexmark International Group, Inc.* 50,250 --------- 180,699 ------------------------------------------------------------------- Pharmaceuticals - 13.5% 2,800 Abbott Laboratories 137,200 800 American Home Products Corp. 45,050 800 Amgen, Inc.* 83,650 300 Biogen, Inc.* 24,900 1,100 Bristol-Myers Squibb Co. 147,194 600 Eli Lilly & Co. 53,325 1,200 Merck & Co. 177,225 1,900 Pfizer, Inc. 238,331
Shares Description Value Common Stocks - (continued) Pharmaceuticals - (continued) 1,800 Schering-Plough Corp. $ 99,450 1,400 Warner-Lambert Co. 105,263 ---------- 1,111,588 ----------------------------------------------------------- Publishing - 0.5% 1,300 Dun & Bradstreet Corp. 41,031 ----------------------------------------------------------- Recreational Products - 0.2% 600 Mattel, Inc. 13,688 ----------------------------------------------------------- Retail - 4.5% 200 Ann Taylor Stores Corporate* 7,887 1,800 Dayton Hudson Corp. 97,650 700 Federated Department Stores, Inc.* 30,494 1,400 Ingram Micro, Inc.* 48,825 800 Saks, Inc.* 25,250 2,000 Wal Mart Stores, Inc. 162,875 ---------- 372,981 ----------------------------------------------------------- Semiconductors - 4.0% 2,600 Intel Corp. 308,263 600 Tech Data Corp.* 24,150 ---------- 332,413 ----------------------------------------------------------- Software & Services - 6.7% 700 Automatic Data Processing, Inc. 56,131 300 BMC Software, Inc.* 13,369 200 Cadence Design Systems, Inc.* 5,950 400 Computer Sciences Corp.* 25,775 400 Compuware Corp.* 31,250 200 Learning Company, Inc.* 5,188 3,000 Microsoft Corp.* 416,063 ---------- 553,726 ----------------------------------------------------------- Specialty Finance & Agencies - 1.0% 500 C.I.T. Group, Inc. 15,906 900 Providian Financial Corp. 67,500 ---------- 83,406 ----------------------------------------------------------- Specialty Retail - 3.7% 1,300 Best Buy Co., Inc.* 79,787 200 CVS Corp. 11,000 2,200 Home Depot, Inc. 134,612 500 Lowes Companies, Inc. 25,594 1,800 TJX Companies, Inc. 52,200 ---------- 303,193 ----------------------------------------------------------- Steel - 0.2% 2,000 Bethlehem Steel Corp.* 16,750 ----------------------------------------------------------- Supermarkets - 2.1% 300 Albertson's, Inc. 19,106 1,500 Food Lion, Inc. 15,937 700 Kroger Co.* 42,350 1,600 Safeway, Inc.* 97,500 ---------- 174,893 -----------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 16 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE LARGE CAP GROWTH FUND
Shares Description Value Common Stocks - (continued) Telecommunications - 2.0% 1,200 AT&T Corp. $ 90,300 1,024 MCI Worldcom, Inc.* 73,472 ---------- 163,772 ------------------------------------------------------------------- Telecommunications Equipment - 7.6% 3,000 Cisco Systems, Inc. * 278,437 5,000 General Instrument Corp.* 169,687 1,400 Lucent Technologies, Inc. 154,000 500 Northern Telecom, Ltd. 25,063 ---------- 627,187 ------------------------------------------------------------------- Textiles - 0.2% 900 Jones Apparel Group, Inc.* 19,856 ------------------------------------------------------------------- Tobacco - 2.1% 600 Fortune Brands, Inc. 18,975 2,800 Philip Morris Companies, Inc. 149,800 ---------- 168,775 ------------------------------------------------------------------- Transportation/rail - 0.1% 300 The St. Joe Company 7,031 ------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $6,176,310) $7,857,561 ------------------------------------------------------------------- Other Investment - 3.8% 2,530 Standard & Poor's 500 Depositary Receipt* $ 311,190 ------------------------------------------------------------------- TOTAL OTHER INVESTMENT (Cost $296,487) $ 311,190 ------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $6,472,797)(a) $8,168,751 ------------------------------------------------------------------- Federal Income Tax Information: Gross unrealized gain for investments in which value exceeds cost $1,830,073 Gross unrealized loss for investments in which cost exceeds value (134,201) ------------------------------------------------------------------- Net unrealized gain $1,695,872 -------------------------------------------------------------------
* Non-income producing security. (a) The aggregate cost for federal income tax purposes is $6,472,879. The percentage shown for each investment category reflects the value of investments in that category as a percentage of total net assets. ------------------------------------------------------------------------------ Investment Abbreviations: ADR--American Depositary Receipt ------------------------------------------------------------------------------ The accompanying notes are an integral part of these financial statements. 17 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND Shareholder Letter Dear Shareholders, We are pleased to report on the performance of the Goldman Sachs Variable In- surance Trust CORE Small Cap Equity Fund. This annual report covers the pe- riod from February 13, 1998, when the Fund began operations, through December 31, 1998. Performance Review The period under review was a difficult one for small cap stocks. From February 13, 1998 through December 31, 1998, the Fund generated an aggregate total return of -9.30%, compared to the -5.77% aggregate total return of its bench- mark, the Russell 2000 Index. The CORE strategy is a well-defined investment process that has historically provided consistent, risk-managed outperformance, with a minimized risk that returns will be very different from those of a specific benchmark over time. The four months ended October, however, were charac- terized by a sharp increase in market volatility and an un- usual profile of top- performing equities among the stocks in our universe. As a result, our ability to outperform the Index using a systematic approach to stock selection and portfolio construction was impaired. At the same time, the four basic components that the CORE investment process emphasizes in stock selection--value, momentum, risk and research--were negatively impacted by a market driven by uncertainty and fear rather than under- lying company fundamentals. As a result, richly-valued stocks outpaced cheap ones; stocks with poor momentum fared better than those with good momentum; low beta but volatile stocks performed well, as did those that were not favored by industry research analysts. These are all counter to what we've observed historically. Typically, the diversifi- cation of our models helps because when one theme doesn't work, others usually do (for example, when value stocks underperform, momentum stocks advance more than average), but diversification did not help during this period. And, because volatility was so high, the penalty for being wrong was higher than usual. Investment Objective The Fund seeks long-term capital growth, primarily through a broadly diversified portfolio of equity securities of U.S. issuers that are included in the Russell 2000 Index at the time of investment. The portfolio employs a disciplined approach that combines fundamental investment research provided by Goldman, Sachs & Co.'s Global Investment Research Department and consensus opinions with quantitative analysis generated by the Asset Management Division's proprietary model. This quantitative system evaluates each stock using many different criteria, including valuation measures, growth expectations, earnings momentum and risk profile. It also objectively analyzes the impact of current economic conditions on different types of stocks to determine where the emphasis should be placed. While maintaining a profile close to that of the benchmark, those stocks ranked highly by both the quantitative model and the Goldman Sachs Global Investment Research Department are selected for the portfolio. 18 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND Portfolio Composition Top 10 Portfolio Holdings as of December 31, 1998*
Percentage of Company Line of Business Net Assets ------- ---------------- ------------- Priority Healthcare Corp. Health Suppliers/Services 1.3% Landauer, Inc. Business Services 1.2 CNB Bancshares, Inc. Banks 0.8 Aquarion Co. Pipelines 0.7 Oneok, Inc. Pipelines 0.7 Alpharma, Inc. Pharmaceuticals 0.6 Sovereign Bancorp, Inc. Savings and loans 0.6 AK Steel Holding Corp. Steel 0.5 Charter One Financial, Inc. Healthcare Management 0.5 Bindley West Industries, Inc. Pharmaceuticals 0.5
* 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 in- vests. References to individual securities do not consti- tute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past perfor- mance 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. Outlook As always, the Fund remains fully invested in stocks. The Fund's sector weightings and distribution among size cate- gories are targeted to stay close to those of the Russell 2000 index, as are exposures to other risk factors (such as dividend yield). Based on long-term results, the Fund's quantitative process presently prefers low P/E and low price/book stocks with good momentum characteristics; we therefore maintain an exposure to these factors. Finally, we expect the factors that comprise the quantitative model will return to more "normal" patterns of performance going forward. We thank you for your investment and look forward to your continued confidence. Goldman Sachs Quantitative Equity Management Team January 29, 1999 19 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND Performance Summary December 31, 1998 The following graph shows the value as of December 31, 1998, of a $10,000 in- vestment made February 13, 1998 (commencement of operations). For comparative purposes, the performance of the Fund's benchmark (Russell 2000 Index) 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 origi- nal cost. CORE Small Cap Equity Fund's Lifetime Performance Growth of a $10,000 investment, Distributions Reinvested February 13, 1998 to December 31, 1998 [CHART APPEARS HERE] Core Small Russell 2000 Cap Equity Growth Index ---------- ------------ 2/13/98 10,000 10,000 02/98 10,160 10,221 03/98 10,720 10,642 04/98 10,920 10,701 05/98 10,440 10,124 06/98 10,520 10,145 07/98 9,650 9,323 08/98 7,640 7,513 09/98 7,860 8,101 10/98 7,990 8,432 11/98 8,499 8,873 12/98 9,070 9,423 Since Inception Aggregate Total Return through December 31, 1998(a) CORE Small Cap Equity Fund (commenced February 13, 1998) -9.30% -------------------------------------------------------------------------- (a) Represents aggregate total return since the Fund has not been in operation for a full 12 months. 20 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - 99.9% Advertising & Marketing - 0.2% 200 Advo, Inc.* $ 5,275 100 Valassis Communications, Inc.* 5,163 ---------- 10,438 ---------------------------------------------------------- Aerospace/Defense - 0.7% 750 AAR Corp. 17,906 300 Fairchild Corp. * 4,725 200 Gencorp, Inc. 4,987 400 Oea, Inc. 4,725 ---------- 32,343 ---------------------------------------------------------- Agriculture/Heavy Equipment - 0.7% 800 Allied Products Corp. 5,050 400 Cort Business Services Corp.* 9,700 300 Terex Corp.* 8,569 343 United Rentals, Inc.* 11,362 ---------- 34,681 ---------------------------------------------------------- Airfreight, Truck & Other - 0.5% 200 Airborne Freight Corp. 7,213 200 Avondale Industries, Inc.* 5,800 200 Seacor Smit, Inc.* 9,888 ---------- 22,901 ---------------------------------------------------------- Airlines - 1.1% 500 Alaska Air Group, Inc.* 22,125 700 America West Holdings Corp.* 11,900 200 Asa Holdings, Inc. 6,100 100 Atlas Air, Inc.* 4,893 200 Skywest, Inc. 6,538 ---------- 51,556 ---------------------------------------------------------- Alcoholic Beverages - 0.7% 400 Adolph Coors Co. Class B 22,575 100 Canandaigua Brands, Inc.* 5,781 800 The Boston Beer Company, Inc.* 6,800 ---------- 35,156 ---------------------------------------------------------- Auto/Vehicle - 0.5% 500 Avis Rent A Car, Inc.* 12,093 400 Budget Group, Inc.* 6,350 300 Wabash National Corp. 6,094 ---------- 24,537 ---------------------------------------------------------- Auto Suppliers - 1.7% 200 A.O. Smith Corp. 4,913 400 Arvin Industries, Inc. 16,675 100 Borg Warner Automotive, Inc. 5,581 200 Clarcor, Inc. 4,000 200 Csk Auto Corp.* 5,337 300 Excel Industries, Inc. 5,250 300 Modine Manufacturing Co. 10,875 200 SPX Corp.* 13,400 500 Standard Products Co. 10,188 300 Superior Industries International 8,344 ---------- 84,563 ----------------------------------------------------------
Shares Description Value Common Stocks - (continued) Banks - 6.1% 300 Bancorp South, Inc. $ 5,418 300 Bancwest Corporation 14,400 855 CNB Bancshares, Inc. 39,864 220 CVB Financial Corp. 4,950 400 Commerce Bancorp, Inc. 21,000 300 Cullen Frost Bankers, Inc. 16,462 200 Downey Financial Corp. 5,087 1,000 First Commonwealth Financial Corp. 24,500 400 First Republic Bank* 10,025 100 Greater Bay Bancorp 3,375 300 Hubco, Inc. 9,037 300 Imperial Bancorp* 4,987 600 Independence Community BA* 9,563 100 Mainstreet Financial Corp. 4,644 206 Mid America Bancorp 5,588 400 One Valley Bancorp, Inc. 13,150 133 Oriental Financial Group 4,165 100 Pacific Capital Bancorp 2,575 500 Republic Security Financial 6,063 200 Riggs National Corp. 4,075 400 Roslyn Bancorp, Inc. 8,600 1,000 Southwest Bancorp of Texas, Inc.* 17,875 400 Staten Island Bancorp, Inc. 7,975 200 Sterling Bancorp 4,563 200 Triangle Bancorp, Inc. 3,163 115 Trustco Bank Corp. 3,450 500 United Bankshares, Inc. 13,250 500 UST Corp. 11,781 200 Westamerica Bancorp 7,350 100 Western Bancorp 2,925 100 Whitney Holding Corp. 3,750 ---------- 293,610 ------------------------------------------------------------- Broadcast Media - 1.0% 500 Century Communications * 15,859 500 Cox Radio, Inc. * 21,125 300 Macromedia, Inc.* 10,106 ---------- 47,090 ------------------------------------------------------------- Business Services - 5.3% 100 Abacus Direct Corp* 4,550 100 Abm Industries, Inc. 3,463 400 AC Nielsen Corp.* 11,300 300 Acxiom Corp.* 9,300 100 Catalina Marketing Corp.* 6,837 100 Computer Task Group 2,712 300 Cotelligent, Inc.* 6,394 200 Devry, Inc.* 6,125 200 Excite, Inc.* 8,412 200 Ha-lo Industries, Inc.* 7,525 100 Incyte Pharmaceuticals, Inc.* 3,737 100 Infoseek Corp.* 4,937 700 Interim Services, Inc.* 16,363 100 International Telecomm Data Systems* 1,475 1,800 Landauer, Inc. 58,275 200 Legato Systems, Inc.* 13,187
The accompanying notes are an integral part of these financial statements. 21 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - (continued) Business Services - (continued) 200 Lycos, Inc.* $ 11,112 100 Medquist, Inc.* 3,950 400 Metzler Group, Inc.* 19,475 300 Mindspring Enterprises, Inc.* 18,319 200 National Data Corp. 9,737 200 Service Experts, Inc.* 5,850 400 StaffMark, Inc.* 8,950 200 Sylvan Learning System, Inc.* 6,100 200 Urs Corporation* 4,675 200 Wallace Computer Services, Inc. 5,275 ---------- 258,035 -------------------------------------------------------------- Chemical Products - 1.5% 500 Bio-Rad Laboratories, Inc.* 10,500 200 Cambrex Corporation 4,800 200 Catalytica, Inc.* 3,600 600 Dexter Corp. 18,862 300 Nova Corp.* 10,406 200 Scotts Co.* 7,688 300 Wd 40 Co. 8,588 900 Wellman, Inc. 9,169 ---------- 73,613 -------------------------------------------------------------- Chemicals-Commodity - 0.5% 200 Geon Co. 4,600 500 Winstar Communications, Inc.* 19,500 ---------- 24,100 -------------------------------------------------------------- Commercial Products - 0.3% 400 Knoll, Inc.* 11,850 100 Vwr Scientific Products Corp.* 1,738 ---------- 13,588 -------------------------------------------------------------- Commercial Services - 1.8% 800 Bowne & Company, Inc. 14,300 300 Century Business Services, Inc.* 4,312 200 Dendrite International, Inc.* 4,994 300 Integrated Electrical Services, Inc.* 6,675 500 Metamor Worldwide, Inc.* 12,500 900 Sensormatic Electronics* 6,244 200 Standard Register Co. 6,188 700 Wackenhut Corp. 17,806 400 World Color Press Co.* 12,175 ---------- 85,194 -------------------------------------------------------------- Communications & Media Service - 2.2% 300 Adelphia Communications * 13,725 300 Aliant Communications, Inc. 12,263 500 American Tower Corp.* 14,781 300 CFW Communications Co. 7,012 600 Centennial Cellular Corp.* 24,600 400 E Spire Communications, Inc.* 2,550 100 Exodus Communications* 6,425 500 Foster Wheeler Corp. 6,594 300 Kaman Corp. 4,819 200 Regal Beloit Corp. 4,600
Shares Description Value Common Stocks - (continued) Communications & Media Service - (continued) 100 Transaction Network Services* $ 2,006 200 Vanguard Cellular System* 5,163 ---------- 104,538 ----------------------------------------------------------- Computer Services/Software - 4.1% 1,200 Acclaim Entertainment, Inc.* 14,700 200 American Management Systems, Inc.* 8,000 200 Apex PC Solutions, Inc.* 5,775 200 Aris Corp.* 2,388 100 Aspect Development, Inc.* 4,431 400 Avt Corporation* 11,600 200 Axent Technologies, Inc.* 6,112 300 Broadvision, Inc.* 9,600 400 CACI International, Inc.* 6,750 200 Cerner Corp.* 5,350 200 Clarify, Inc.* 4,887 200 Geotel Communications Corp.* 7,450 200 Hnc Software, Inc.* 8,087 300 Hyperion Solutions Corp.* 5,400 300 Idt Corp.* 4,612 800 Informix Corp.* 7,900 100 Jack Henry & Assoc., Inc. 4,975 100 Mercury Interactive Corp.* 6,325 500 Microchip Technology, Inc.* 18,500 100 Peregrine Systems, Inc.* 4,638 600 Rational Software Corp.* 15,900 400 Read Rite Corp.* 5,913 100 Sapient Corporation* 5,600 300 Software AG Systems, Inc.* 5,438 200 Transaction Systems Architects* 10,000 200 Wind River Systems, Inc.* 9,400 ---------- 199,731 ----------------------------------------------------------- Construction/Environmental Services - 2.7% 500 ACX Technologies, Inc.* 6,625 165 Allied Waste Industries, Inc.* 3,898 200 Ameron International Corp. 7,400 300 Butler Manufacturing Co. 6,712 400 Carlisle Companies, Inc. 20,650 200 Coachmen Industries, Inc. 5,250 300 Comfort Systems U.S.A.* 5,362 400 Dycom Industries, Inc.* 22,850 100 Elcor Corporation 3,231 200 Florida Rock Industrial, Inc. 6,200 300 Granite Construction, Inc. 10,069 200 Lone Star Industries, Inc. 7,362 200 Nci Building Systems, Inc.* 5,625 100 Stone & Webster, Inc. 3,325 300 Texas Industries, Inc. 8,081 300 Tower Automotive, Inc.* 7,481 ---------- 130,121 -----------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 22 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND
Shares Description Value Common Stocks - (continued) Consumer Products - 0.7% 800 Herbalife International, Inc. $ 11,400 600 Jo-ann Stores, Inc.* 9,675 200 Nu Skin Asia Pacific, Inc.* 4,725 500 Playtex Products, Inc.* 8,031 ---------- 33,831 ----------------------------------------------------------- Consumer Staples - 0.4% 300 First Brands Corp. 11,831 500 Media Arts Group, Inc.* 7,031 ---------- 18,862 ----------------------------------------------------------- Diversified Manufacturing - 0.7% 600 Federal Signal Corp. 16,425 300 General Cable Corp. 6,150 200 Getchell Gold Corp.* 5,450 100 Precision Castparts Corp. 4,425 ---------- 32,450 ----------------------------------------------------------- Electrical Services - 1.6% 100 Black Hills Corp. 2,637 100 Cilcorp, Inc. 6,119 500 Eastern Utilities Assoc. 14,125 200 Empire District Electric Co. 4,950 400 Hawaiian Electric Industries, Inc. 16,100 100 Minnesota Power & Light Co. 4,400 300 Nevada Power Company 7,800 200 Rochester Gas & Electric 6,250 100 United Illuminating Co. 5,150 500 Washington Water Power Co. 9,625 ---------- 77,156 ----------------------------------------------------------- Electronics & Other Electrical Equipment - 1.7% 300 Baldor Electric Co. 6,075 100 Barnes Group, Inc. 2,938 200 C-cube Microsystems, Inc.* 5,425 300 Group Maintenance America* 3,637 100 Hughes Supply, Inc. 2,925 100 Jabil Circuit, Inc.* 7,462 200 Kuhlman Corp. 7,575 100 Micro Systems, Inc.* 3,288 200 Novellus Systems, Inc.* 9,900 300 Park Electrochemical Corp. 8,588 400 Silicon Valley Group, Inc.* 5,100 400 Technitrol, Inc. 12,750 300 Unitrode Corp.* 5,250 200 Watsco, Inc. 3,350 ---------- 84,263 ----------------------------------------------------------- Energy Refining & Marketing - 1.0% 600 Berry Petroleum Co. 8,512 300 Calpine Corp.* 7,575 200 Holly Corp. 3,375 200 Newfield Exploration Co.* 4,175 1,000 Octel Corp.* 13,875 300 Penn Va Corp. 5,513 400 Snyder Oil Corporation 5,325 ---------- 48,350 -----------------------------------------------------------
Shares Description Value Common Stocks - (continued) Engineering - 0.2% 200 Jacobs Engineering Group, Inc.* $ 8,150 --------------------------------------------------------------- Enterprise Systems - 0.4% 400 Avid Technology, Inc.* 9,350 300 Electronics For Imaging, Inc.* 12,056 ---------- 21,406 --------------------------------------------------------------- Entertainment & Leisure - 0.8% 300 Hollywood Entertainment Co.* 8,175 300 Premier Parks, Inc.* 9,075 1,400 Sunterra Corp.* 21,000 ---------- 38,250 --------------------------------------------------------------- Financial Services - 1.8% 500 Americredit Corp.* 6,906 300 Chittenden Corp. 9,600 1,100 Credit Acceptance Corp. * 8,044 300 Everen Capital Corp. 6,825 300 F & M National Corp. 8,981 100 Fair Isaac & Co., Inc. 4,619 100 Fund American Enterprises Holdings 14,006 300 JSB Financial, Inc. 16,312 315 NBT Bancorp, Inc. 7,363 200 Reliance Bancorp, Inc. 5,563 ---------- 88,219 --------------------------------------------------------------- Food & Beverages - 1.2% 400 Agribrands International* 12,000 200 Corn Products International 6,075 400 International Multifoods Corp. 10,325 400 Michael Foods, Inc. 12,000 300 Pilgrims Pride Corp. 5,981 300 Ralcorp Holdings, Inc.* 5,475 300 Universal Foods Corp. 8,231 ---------- 60,087 --------------------------------------------------------------- Forest Products - 0.8% 200 Kimball International, Inc. Class-B 3,800 700 Schweitzer-Mauduit International, Inc. 10,806 1,800 Unisource Worldwide, Inc. 13,050 500 United Stationers, Inc.* 13,000 ---------- 40,656 --------------------------------------------------------------- Gaming - 0.5% 2,700 Boyd Gaming Corp.* 8,944 600 Dover Downs Entertainment, Inc. 7,237 1,000 Grand Casinos, Inc.* 8,062 ---------- 24,243 --------------------------------------------------------------- Healthcare Management - 1.8% 1,600 American Homepatient, Inc.* 2,900 907 Charter One Financial, Inc. 25,169 700 Integrated Health Services, Inc. 9,887 1,300 Mariner Post-acute Network* 5,931 100 Maximus, Inc.* 3,700 1,600 Novacare, Inc.* 4,000
The accompanying notes are an integral part of these financial statements. 23 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - (continued) Healthcare Management - (continued) 600 OEC Medical Systems, Inc.* $ 18,862 200 Quest Diagnostics, Inc.* 3,563 200 Sierra Health Services, Inc.* 4,213 1,100 Sun Healthcare Group, Inc.* 7,219 ---------- 85,444 ---------------------------------------------------------- Health & Medical Services - 5.0% 200 Agouron Pharmaceuticals, Inc.* 11,750 1,200 Ameripath, Inc.* 10,725 300 Amerisource Health Corp.* 19,500 200 Ballard Medical Products 4,863 100 Barr Labs, Inc.* 4,800 600 Chemed Corp. 20,100 400 Covance, Inc.* 11,650 200 Diagnostic Products Corp. 6,225 100 Entremed, Inc.* 2,100 200 Gilead Sciences, Inc. * 8,212 200 Hanger Orthopedic Group* 4,500 200 Icos Corp.* 5,950 200 Idexx Laboratories, Inc.* 5,381 100 Idx Systems Corp.* 4,400 100 Inhale Therapeutic Systems* 3,300 100 International Network Services* 6,650 400 Ivax Corp.* 4,975 100 Jones Pharmaceutical, Inc. 3,650 200 Maxxim Medical, Inc.* 5,950 100 Medicis Pharmaceutical Co.* 5,962 100 Medimmune, Inc.* 9,944 200 Millennium Pharmaceutical* 5,175 200 Neurogen Corp.* 3,500 100 Pathogenesis Corp.* 5,800 100 Pediatrix Medical Group, Inc.** 5,994 400 Primark Corp.* 10,850 200 Protein Design Labs, Inc.* 4,625 200 Renal Care Group, Inc.* 5,763 300 Roberts Pharmaceutical Co.* 6,525 100 Sepracor, Inc.* 8,813 300 Sequus Pharmaceuticals, Inc.* 6,075 200 Vertex Pharmaceuticals, Inc.* 5,950 200 Veterinary Centers America, Inc.* 3,988 100 Visx, Inc.* 8,744 ---------- 242,389 ---------------------------------------------------------- Health Suppliers/Services - 2.3% 200 Haemonetics Corp.* 4,550 400 Imation Corporation* 7,000 900 Input/Output, Inc.* 6,581 200 Mettler-toldeo, Inc.* 5,612 300 Owens & Minor, Inc. 4,725 1,200 Priority Healthcare Corp.* 62,250 400 PSS World Medical, Inc.* 9,200 400 Thermo Bioanalysis* 5,300 150 Xomed Surgical Products, Inc.* 4,800 ---------- 110,018 ----------------------------------------------------------
Shares Description Value Common Stocks - (continued) Home Builders - 2.2% 400 Champion Enterprises, Inc.* $ 10,950 800 Fairfield Communities, Inc.* 8,850 600 Kaufman & Broad Home Co. 17,250 600 Lennar Corp. 15,150 400 NVR, Inc.* 19,075 400 Pulte Corp. 11,125 300 Ryland Group, Inc. 8,663 300 Toll Brothers, Inc.* 6,769 200 U S Home Corp.* 6,650 ---------- 104,482 -------------------------------------------------------------- Home Furnishing & Services - 0.5% 200 Ethan Allen Interiors, Inc. 8,200 500 Furniture Brands International, Inc.* 13,625 ---------- 21,825 -------------------------------------------------------------- Hotels & Restaurants - 1.5% 800 Buffets, Inc.* 9,550 100 Harveys Casino Resorts 2,769 600 Lubys Cafeterias, Inc. 9,262 800 Ruby Tuesday, Inc. 17,000 850 Sonic Corp.* 21,144 2,500 Sunburst Hospitality Corp.* 10,625 ---------- 70,350 -------------------------------------------------------------- Household Durables - 0.3% 300 La-Z-Boy, Inc. 5,344 300 Mascotech, Inc. 5,137 100 Pillowtex Corp. 2,675 ---------- 13,156 -------------------------------------------------------------- Industrial Machinery - 1.5% 600 Applied Power, Inc. 22,650 200 Briggs & Stratton Corp. 9,975 100 Idex Corp. 2,450 500 Kaydon Corp. 20,031 200 Nacco Industries, Inc. 18,400 ---------- 73,506 -------------------------------------------------------------- Information Management - 1.4% 800 BA Merchant Services, Inc.* 16,100 100 Choicepoint, Inc.* 6,450 300 Earthlink Network, Inc.* 17,100 1,600 Infousa, Inc. Class B* 8,400 200 Mastech Corporation* 5,725 100 National Computer Systems, Inc. 3,700 200 Sabre Group Holdings, Inc.* 8,900 ---------- 66,375 -------------------------------------------------------------- Insurance Brokers & Other Insurance - 2.9% 500 Arthur J Gallagher & Co. 22,062 700 Capital Re Corp. 14,044 440 Fidelity National Financial, Inc. 13,420 300 Financial Security Assurance Holdings 16,275 500 First American Financial Corp. 16,062 200 Express Scripts, Inc.* 13,425
The accompanying notes are an integral part of these financial statements. 24 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND
Shares Description Value Common Stocks - (continued) Insurance Brokers & Other Insurance - (continued) 100 E. W. Blanch Holding, Inc. $ 4,744 1,000 Hilb Rogal & Hamilton Co. 19,875 100 Landamerica Financial Group 5,581 100 Poe & Brown, Inc. 3,494 400 SCPIE Holdings, Inc. 12,125 ---------- 141,107 ------------------------------------------------------------ Insurance-Life - 1.9% 200 America Heritage Life Investments 4,887 200 ARM Financial Group, Inc. 4,437 326 Delphi Financial Group, Inc.* 17,095 1,000 FBL Financial Group, Inc. 24,250 200 Hartford Life, Inc. 11,650 200 Nationwide Financial Services, Inc. 10,338 300 Reinsurance Group of America, Inc. 21,000 ---------- 93,657 ------------------------------------------------------------ Insurance-Property and Casualty - 1.7% 600 American Medical Security Group 8,738 900 Argonaut Group, Inc. 22,050 400 Chartwell Re Corp. 9,500 300 Commerce Group, Inc. 10,631 600 Fremont General Corp. 14,850 200 Pxre Corp. 5,013 300 Tig Holdings, Inc. 4,669 400 Zenith National Insurance Corp. 9,250 ---------- 84,701 ------------------------------------------------------------ Investment Brokers & Managers - 0.6% 100 Dain Rauscher Corp. 2,950 900 Friedman Billings Ramsey* 5,850 300 Jeffries Group, Inc. 14,888 200 John Nuveen Co. 7,425 ---------- 31,113 ------------------------------------------------------------ Machinery - 0.9% 500 Columbus Mckinnon Corp. 9,000 800 Commercial Intertech Corp. 10,350 200 Flowserve Corporation 3,312 800 Thomas Industries, Inc. 15,700 100 Zebra Technologies, Inc.* 2,875 ---------- 41,237 ------------------------------------------------------------ Media & Communications - 1.1% 1,700 Ascent Entertainment Group* 12,538 500 Big Flower Press Holdings, Inc.* 11,031 600 McClatchy Newspapers, Inc. 21,225 100 Media General, Inc. 5,300 100 Metris Companies, Inc. 5,031 ---------- 55,125 ------------------------------------------------------------ Metals-Diversified - 0.2% 500 Asarco, Inc. 7,531 400 Southern Peru Copper Corp. 3,775 ---------- 11,306 ------------------------------------------------------------
Shares Description Value Common Stocks - (continued) Mining - 0.1% 800 Hecla Mining Co.* $ 2,900 ----------------------------------------------------- Nonferrous Metals - 0.8% 500 AFC Cable Systems, Inc.* 16,813 1,500 Battle Mountain Gold Co. 6,188 650 Encore Wire Corp.* 6,012 100 Stillwater Mining Company* 4,100 100 Superior Telecom, Inc. 4,725 ---------- 37,838 ----------------------------------------------------- Office & Business Equipment - 1.9% 100 Adac Laboratories* 1,997 100 Csg Systems* 7,900 300 Data General Corp.* 4,931 300 Gerber Scientific, Inc. 7,144 300 Micron Electronics, Inc.* 5,194 400 Network Appliances, Inc.* 18,000 500 Pairgain Technologies, Inc.* 3,844 400 Psinet, Inc.* 8,350 200 Safeguard Scientifics, Inc.* 5,488 300 Wang Laboratories, Inc.* 8,325 400 Xircom, Inc.* 13,600 300 Xylan Corp.* 5,269 ---------- 90,042 ----------------------------------------------------- Oil & Gas Exploration - 0.4% 1,200 Cabot Oil & Gas Corp. 18,000 100 Devon Energy Corp. 3,069 ---------- 21,069 ----------------------------------------------------- Oil & Gas Services - 1.0% 500 Barrett Resources Corp.* 12,000 200 Cross Timbers Oil Co. 1,500 200 Hanover Compressor* 5,137 100 Peoples Energy Corp. 3,988 1,200 Pool Energy Services Co.* 12,975 600 Seitel, Inc.* 7,463 400 Veritas DGC, Inc.* 5,200 ---------- 48,263 ----------------------------------------------------- Packaging & Container - 0.2% 400 Aptargroup, Inc. 11,225 ----------------------------------------------------- Paper & Forest Products - 0.5% 300 Glatfelter (PH) Co. 3,712 300 Longview Fibre Co. 3,469 500 Potlatch Corp. 18,438 ---------- 25,619 ----------------------------------------------------- Personal Computers and Peripherals - 1.2% 600 Banctec, Inc.* 7,538 400 Bell & Howell Company* 15,125 1,200 CHS Electronics, Inc.* 20,325 100 Scm Microsystems, Inc.* 7,106 200 Visio Corp.* 7,313 ---------- 57,407 -----------------------------------------------------
The accompanying notes are an integral part of these financial statements. 25 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - (continued) Pharmaceuticals - 1.5% 800 Alpharma, Inc. $ 28,250 200 Applied Micro Circuits* 6,794 500 Bindley Western Industries, Inc. 24,625 300 ICN Pharmaceuticals, Inc. 6,787 1,200 NBTY, Inc.* 8,550 ---------- 75,006 --------------------------------------------------------- Pipelines - 1.3% 800 Aquarion Co. 32,800 900 Oneok, Inc. 32,513 ---------- 65,313 --------------------------------------------------------- Real Estate - 0.6% 600 Calmat Co. 18,525 400 Ingles Markets, Inc. 4,375 300 Security Capital Group, Inc.* 4,069 ---------- 26,969 --------------------------------------------------------- Recreational Products - 0.8% 800 Huffy Corp. 13,200 200 Jostens, Inc. 5,237 800 Russ Berrie and Company, Inc. 18,800 200 Strum Ruger & Co., Inc. 2,388 ---------- 39,625 --------------------------------------------------------- Recreational Services - 0.1% 200 Carematrix Corporation* 6,125 --------------------------------------------------------- Restaurants & Hotels - 0.1% 200 CEC Entertainment, Inc.* 5,550 --------------------------------------------------------- Retail - 3.9% 125 99 Cents Only Stores* 6,141 300 Ames Deparment Stores, Inc.* 8,100 300 Anntaylor Stores Corp.* 11,831 500 Blair Corp. 11,094 200 Central Garden & Pet Co.* 2,875 300 Department 56, Inc.* 11,269 1,400 Genesco, Inc.* 7,962 200 Genovese Drug Stores 5,700 400 Hancock Fabrics, Inc. 3,350 200 Haverty Furniture Cos., Inc. 4,200 500 Heilig Meyers Co. 3,344 100 Henry Schein, Inc.* 4,475 400 Inacom Corp.* 5,950 200 Long Drug Stores, Inc. 7,500 500 Michaels Stores, Inc.* 9,047 200 Micro Warehouse, Inc.* 6,762 300 Musicland Stores Corp.* 4,481 500 Petsmart, Inc.* 5,500 1,250 Pier 1 Imports, Inc. 12,109 400 The Buckle, Inc.* 9,600 200 Transworld Entertainment Corp.* 3,813 500 Unifirst Corporation 11,406 200 Williams-Sonoma, Inc.* 8,063 700 Zale Corp.* 22,575 ---------- 187,147 ---------------------------------------------------------
Shares Description Value Common Stocks - (continued) Savings and Loans - 0.8% 600 FirstFed Financial Corp.* $ 10,725 1,960 Sovereign Bancorp, Inc. 27,930 ---------- 38,655 ----------------------------------------------------------------- Semiconductors - 2.6% 300 Aavid Thermal Technologies* 5,063 700 Anixter International, Inc.* 14,218 200 Benchmark Electronics, Inc.* 7,325 600 Brightpoint, Inc.* 8,250 200 CTS Corporation 8,700 600 Cypress Semiconductor Corp.* 4,987 200 Dallas Semiconductor Corp. 8,150 400 Esterline Technologies Corp.* 8,700 200 Level One Communications, Inc.* 7,100 200 Marshall Industries, Inc.* 4,900 300 Methode Electronics, Inc. 4,687 100 Micrel, Inc.* 5,500 400 Neomagic Corp.* 8,850 200 Oak Industries, Inc.* 7,000 200 Pmc-Sierra, Inc.* 12,625 100 Sanmina Corp.* 6,250 200 Smart Modular Technologies* 5,550 ---------- 127,855 ----------------------------------------------------------------- Software & Services - 1.1% 300 Avant Corporation* 4,800 200 Complete Business Solution* 6,775 200 Computer Horizons Corp.* 5,325 186 DST Systems, Inc.* 10,614 200 Learning Company, Inc.* 5,187 300 New Era of Networks Inc* 13,200 100 Realnetworks, Inc.* 3,588 300 Systems & Computer Tech Corp.* 4,125 ---------- 53,614 ----------------------------------------------------------------- Specialty Finance & Agencies - 0.6% 100 Rambus, Inc.* 9,625 1,300 Resource Bancshares Mortgage Group, Inc. 21,531 ---------- 31,156 ----------------------------------------------------------------- Specialty Retail - 1.0% 700 Fingerhut Companies, Inc. 10,806 500 Goody's Family Clothing Inc.* 5,016 900 Handleman Co.* 12,656 200 Insight Enterprises, Inc.* 10,175 200 Linens-n-Things, Inc.* 7,925 250 Pacific Sunwear of California, Inc.* 4,094 ---------- 50,672 ----------------------------------------------------------------- Steel - 1.7% 200 A. M. Castle & Co. 3,000 1,100 AK Steel Holding Corp. 25,850 1,500 Bethlehem Steel Corp.* 12,562 100 Cleveland Cliffs, Inc. 4,031 600 LTV Corp. 3,487
The accompanying notes are an integral part of these financial statements. 26 GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE SMALL CAP EQUITY FUND
Shares Description Value Common Stocks - (continued) Steel - (continued) 1,700 National Steel Corp. $ 12,112 400 Quanex Corp. 9,025 400 Reliance Steel & Aluminum Corp. 11,050 ---------- 81,117 --------------------------------------------------------- Supermarkets - 0.5% 1,100 Fleming Companies, Inc. 11,412 200 Great A&P Tea Co., Inc. 5,925 100 Whole Foods Market, Inc.* 4,838 ---------- 22,175 --------------------------------------------------------- Telecommunications - 0.2% 1,900 Paging Network, Inc.* 8,906 --------------------------------------------------------- Telecommunications Equipment - 1.2% 75 Ascend Communications, Inc.* 4,931 300 Aspect Telecommunications Corp.* 5,175 100 Concord Communications, Inc.* 5,675 100 L-3 Communications Corp.* 4,656 200 Plantronics, Inc.* 17,200 400 Polycom, Inc.* 8,900 300 Skytel Communications, Inc.* 6,638 300 Tekelec* 4,969 ---------- 58,144 --------------------------------------------------------- Textiles - 1.8% 100 American Eagle Outfitters* 6,663 300 Brown Group, Inc. 5,269 100 Footstar, Inc.* 2,500 300 Kellwood Company 7,500 200 Kenneth Cole Productions* 3,750 500 Nautica Enterprises, Inc.* 7,500 500 Oxford Industries, Inc. 14,125 500 Phillips-van Heusen Corp. 3,594 200 Quiksilver, Inc.* 6,000 100 Rayonier, Inc. 4,594 300 Russell Corp. 6,094 300 Springs Industries, Inc. 12,431 200 Talbots, Inc. 6,275 ---------- 86,295 --------------------------------------------------------- Tires & Rubber - 0.4% 400 Bandag, Inc. 15,975 300 Mark IV Industries, Inc. 3,900 ---------- 19,875 --------------------------------------------------------- Tobacco - 0.3% 700 Dimon Incorporated 5,206 300 Universal Corp. 10,538 ---------- 15,744 --------------------------------------------------------- Transportation/Storage - 0.5% 300 Alexander & Baldwin, Inc. 6,975 100 Midwest Express Holdings* 2,631 300 Overseas Shipholding Group 4,819
Shares Description Value Common Stocks - (continued) Transportation/Storage - (continued) 200 Wisconsin Central Transportation* $ 3,438 100 Xtra Corp. 4,138 ---------- 22,001 -------------------------------------------------------------- Trucking - 1.3% 1,400 Consolidated Freightways Corp.* 22,225 1,400 Rollins Truck Leasing Corp. 20,650 1,000 Yellow Corp.* 19,125 ---------- 62,000 -------------------------------------------------------------- Utilities - 2.2% 200 Agl Resources, Inc. 4,613 600 California Water Services Group 18,787 200 Equitable Resources, Inc. 5,825 100 Idacorp, Inc. 3,619 100 Laclede Gas Co. 2,675 300 Northwestern Corporation 7,931 1,200 Public Service Company of New Mexico 24,525 100 South Jersey Industries 2,619 400 Southwestern Energy Co. 3,000 400 TNP Enterprises, Inc. 15,175 400 Ugi Corporation 9,500 200 United Water Resource, Inc. 4,788 100 Wps Resources Corp. 3,525 ---------- 106,582 -------------------------------------------------------------- Waste Management - 0.1% 100 Eastern Environment Services* 2,969 -------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $4,534,117) $4,835,367 -------------------------------------------------------------- TOTAL INVESTMENTS (Cost $4,534,117)(a) $4,835,367 -------------------------------------------------------------- Federal Income Tax Information: Gross unrealized gain for investments in which value exceeds cost $ 836,486 Gross unrealized loss for investments in which cost exceeds value (546,676) -------------------------------------------------------------- Net unrealized gain $ 289,810 --------------------------------------------------------------
* Non-income producing security. (a) The aggregate cost for federal income tax purposes is $4,545,557. The percentage shown for each investment category reflects the value of investments in that category as a percentage of total net assets. The accompanying notes are an integral part of these financial statements. 27 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND Shareholder Letter Dear Shareholders, We are pleased to report on the performance of the Goldman Sachs Variable In- surance Trust Capital Growth Fund. This annual report covers the period from April 30, 1998, when the Fund began operations, through December 31, 1998. Performance Review From April 30, 1998 through December 31, 1998, the Fund generated a 13.40% aggregate total return. Over the same time period, the Fund's benchmark, the Standard & Poor's 500 Index (with dividends reinvested), generated an aggre- gate total return of 11.71%. Investment Objective The Fund seeks long-term capital growth, primarily through investments in a diversified portfolio of companies strate- gically poised for long-term growth. Sector Performance As bottom-up stock pickers, we focus on the real worth of the business, and to the extent that we find several busi- nesses in related industries that we believe have long-term growth potential, the Fund may develop an overweight in a given sector. Recently, the Fund benefited from positions in the consumer staples sector, which we find fundamentally attractive. All of the companies owned in this sector fit our strategy of owning the stocks of companies with per- ceived strong business franchises, dominant market posi- tions and sustainable growth rates. 28 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND Portfolio Composition Throughout the review period, in a market that rewarded consistency and sustainability of above-average earnings growth, the Fund benefited from our focus on companies that offer enduring, strategic, competitive advantages. Top 10 Portfolio Holdings as of December 31, 1998*
Percentage of Company Line of Business Net Assets ------- ---------------- ------------- Microsoft Corp. Software & Services 3.1% AES Corp. Energy Refining & Marketing 2.5 Pfizer, Inc. Pharmaceuticals 2.5 Bristol-Myers Squibb Co. Pharmaceuticals 2.4 Liberty Media Group Media & Communications 2.4 Federal Home Loan Mortgage Corp. Specialty Finance & Agencies 2.3 General Electric Co. Appliance 2.3 BankAmerica Corp. Banks 2.2 Federal National Mortgage Association Specialty Finance & Agencies 2.2 CBS, Inc. Media & Communications 2.1
* 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 in- vests. References to individual securities do not consti- tute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past perfor- mance 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. Outlook While we neither make nor rely on economic forecasts to make investment decisions, we are generally bullish on the U.S. economy. Over the last decade, global communication has increased, a result of significant technological ad- vances as well as generally stable political conditions worldwide. We believe that this trend, combined with favor- able demographic trends (such as the aging baby boom popu- lation and the spread of capitalism), will benefit U.S. companies over the long term. More fundamentally, though, we continue to focus on the core business characteristics which we believe provide a foundation for long-term growth, such as strength of franchise, quality of management, and free cash flow, along with favorable demographic trends. We believe that the enduring competitive advantages of the companies we own -- based on the criteria mentioned above-- has the potential to withstand even an uncertain market en- vironment. We thank you for your investment and look forward to your continued confidence. Goldman Sachs Growth Equity Management Team January 29, 1999 29 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND Performance Summary December 31, 1998 The following graph shows the value as of December 31, 1998, of a $10,000 in- vestment made on April 30, 1998 (commencement of operations). For comparative purposes, the performance of the Fund's benchmark (the Standard and Poor's 500 Index ("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. Capital Growth Fund's Lifetime Performance Growth of a $10,000 investment, Distributions Reinvested April 30, 1998 to December 31, 1998 (CHART APPEARS HERE) Capital S&P 500 Growth Fund Index ----------- ----- 04/98 10,000 10,000 05/98 9,720 9,828 06/98 10,280 10,227 07/98 10,189 10,118 08/98 8,590 8,655 09/98 9,120 9,209 10/98 9,960 9,958 11/98 10,539 10,562 12/98 11,340 11,171 Since Inception Aggregate Total Return through December 31, 1998(a) Capital Growth Fund (commenced April 30, 1998) 13.40% --------------------------------------------------------------------------- (a) Represents aggregate total return since the Fund has not been in operation for a full 12 months. 30 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - 95.9% Advertising & Marketing - 1.6% 1,400 Valassis Communications, Inc.* $ 72,275 ----------------------------------------------------------------- Appliance - 2.3% 1,000 General Electric Co. 102,062 ----------------------------------------------------------------- Banks - 7.4% 1,600 BankAmerica Corp. 96,200 1,400 Bank One Corp. 71,487 750 Citigroup, Inc. 37,125 600 First Union Corp. 36,487 1,300 State Street Boston Corp. 90,431 ---------- 331,730 ----------------------------------------------------------------- Chemical Products - 0.7% 300 Du Pont (E.I.) de Nemours & Co. 15,919 200 Minnesota Mining and Manufacturing Co. 14,225 ---------- 30,144 ----------------------------------------------------------------- Commercial Services - 1.4% 900 Ecolab, Inc. 32,569 700 Galileo International, Inc. 30,450 ---------- 63,019 ----------------------------------------------------------------- Consumer Staples - 6.0% 1,400 Avon Products, Inc. 61,950 200 Clorox Co. 23,362 1,000 Colgate Palmolive Co. 92,875 500 Gillette Co. 24,156 700 Procter & Gamble Co. 63,919 ---------- 266,262 ----------------------------------------------------------------- Energy Refining & Marketing - 2.6% 2,400 AES Corp.* 113,700 ----------------------------------------------------------------- Enterprise Systems - 3.1% 800 EMC Corp. 68,000 200 International Business Machines, Inc. 36,950 400 Sun Microsystems, Inc.* 34,250 ---------- 139,200 ----------------------------------------------------------------- Entertainment & Leisure - 0.8% 1,200 Marriott International, Inc. 34,800 ----------------------------------------------------------------- Food & Beverages - 6.0% 800 Coca Cola Co. 53,500 1,100 Nabisco Holdings Corp. 45,650 1,500 Pepsico, Inc. 61,406 1,900 Ralston Purina Co. 61,513 500 William Wrigley Jr. Co. 44,781 ---------- 266,850 -----------------------------------------------------------------
Shares Description Value Common Stocks - (continued) Funeral Services - 2.0% 2,400 Service Corp. International $ 91,350 ------------------------------------------------------------- Health Suppliers/Services - 1.5% 800 Johnson & Johnson 67,100 ------------------------------------------------------------- Healthcare Management - 0.9% 500 Aetna, Inc. 39,312 ------------------------------------------------------------- Insurance Brokers & Other Insurance - 0.5% 400 AMBAC, Inc. 24,075 ------------------------------------------------------------- Insurance-Life - 2.4% 400 Hartford Life, Inc. 23,300 500 Nationwide Financial Services, Inc. 25,844 700 SunAmerica, Inc. 56,787 ---------- 105,931 ------------------------------------------------------------- Integrated Oil - 2.2% 100 Atlantic Richfield Co. 6,525 400 Exxon Corp. 29,250 300 Mobil Corp. 26,138 500 Texaco, Inc. 26,438 300 Unocal Corp. 8,756 ---------- 97,107 ------------------------------------------------------------- Internet Services - 1.0% 300 America Online, Inc.* 43,425 ------------------------------------------------------------- Media & Communications - 17.6% 2,200 AH Belo Corp. 43,862 800 Cablevision Systems Corp.* 40,150 2,900 CBS, Inc. 94,975 500 Central Newspapers, Inc. 35,719 1,400 Chancellor Media Corp.* 67,025 400 Comcast Corp. 23,475 600 Gannett Co. 38,700 1,800 HBO & Co. 51,637 1,800 Infinity Broadcasting Corp.* 49,275 700 Jacor Communications, Inc.* 45,062 900 New York Times Co. 31,219 2,300 Liberty Media Group* 105,944 1,300 TCI Group* 71,906 1,000 Time Warner, Inc. 62,062 300 Tribune Co. 19,800 300 Ziff Davis, Inc.* 4,744 ---------- 785,555 ------------------------------------------------------------- Oil & Gas Services - 1.3% 1,300 Schlumberger, Ltd. 59,963 ------------------------------------------------------------- Pharmaceuticals - 9.8% 1,600 American Home Products Corp. 90,100 800 Bristol-Myers Squibb Co. 107,050 900 Pfizer, Inc. 112,894 800 Schering-Plough Corp. 44,200 1,100 Warner-Lambert Co. 82,706 ---------- 436,950 -------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 31 GOLDMAN SACHS VARIABLE INSURANCE TRUST CAPITAL GROWTH FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - (continued) Recreational Products - 0.8% 1,000 Hasbro, Inc. $ 36,125 ---------------------------------------------------------------- Retail - 1.8% 1,000 Wal-Mart Stores, Inc. 81,437 ---------------------------------------------------------------- Semiconductors - 0.8% 300 Intel Corp. 35,569 ---------------------------------------------------------------- Software & Services - 5.2% 1,900 First Data Corp. 60,206 1,000 Microsoft Corp.* 138,688 700 Sterling Commerce, Inc.* 31,500 ---------- 230,394 ---------------------------------------------------------------- Specialty Finance & Agencies - 6.6% 600 C.I.T. Group, Inc. 19,088 1,600 Federal Home Loan Mortgage Corp. 103,100 1,300 Federal National Mortgage Association 96,200 3,000 MBNA Corp. 74,813 ---------- 293,201 ---------------------------------------------------------------- Specialty Retail - 1.8% 600 Home Depot, Inc. 36,713 1,100 Tandy Corp. 45,306 ---------- 82,019 ---------------------------------------------------------------- Supermarkets - 2.7% 500 CVS Corp. 27,500 600 Rite Aid Corp. 29,738 1,100 Walgreen Co. 64,419 ---------- 121,657 ---------------------------------------------------------------- Telecommunications - 1.0% 600 MCI Worldcom, Inc.* 43,050 ---------------------------------------------------------------- Telecommunications Equipment - 2.7% 700 Cisco Systems, Inc.* 64,969 500 Lucent Technologies, Inc. 55,000 ---------- 119,969 ---------------------------------------------------------------- Tobacco - 1.4% 1,200 Philip Morris Companies, Inc. 64,200 ---------------------------------------------------------------- TOTAL COMMON STOCKS (Cost $3,745,142) $4,278,431 ----------------------------------------------------------------
Principal Interest Maturity Amount Rate Date Value Repurchase Agreement - 2.2% Joint Repurchase Agreement Account(a) $100,000 4.89% 01/04/99 $ 100,000 -------------------------------------------- TOTAL REPURCHASE AGREEMENT (Cost $100,000) $ 100,000 -------------------------------------------- TOTAL INVESTMENTS (Cost $3,845,142)(b) $4,378,431 -------------------------------------------- Federal Income Tax Informa- tion: Gross unrealized gain for investments in which value exceeds cost $ 669,406 Gross unrealized loss for investments in which cost exceeds value (137,940) -------------------------------------------- Net unrealized gain $ 531,466 --------------------------------------------
* Non-income producing security. (a) The repurchase agreement is fully collateralized by Federal Agency obligations. (b) The aggregate cost for federal income tax purposes is $3,846,965. The percentage shown for each investment category reflects the value of in- vestments in that category as a percentage of total net assets. The accompanying notes are an integral part of these financial statements. 32 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP EQUITY FUND Shareholder Letter Dear Shareholders, The following is a report on the performance of the Goldman Sachs Variable Insurance Trust Mid Cap Equity Fund. This annual report covers the period from May 1, 1998, when the Fund began operations, through December 31, 1998. Performance Review From May 1, 1998 through December 31, 1998, the Fund gener- ated a negative return of 13.56%. Over the same time peri- od, the Fund's benchmark, the Russell Midcap Index, generated a negative return of 0.90%. Early in the review period, stocks fared poorly in reaction to global economic uncertainties and a concomitant decline in liquidity. Investors sought security (Treasuries) and sold uncertainty (most stocks) with a vengeance. Stocks in the lower capitalization ranges, including mid-cap stocks, of which your Fund is primarily composed--suffered the steepest declines as a result. Although these stocks recov- ered somewhat toward the end of the period under review, they finished far behind large-cap stocks. In addition to a capitalization bias, investors appeared to prefer growth versus value investing. This aspect of the market environment particularly affected the Fund's perfor- mance. We buy stocks that we believe are typically subject to uncertainty or pessimism; in our view these conditions create value buying opportunities. As of December 31, 1998, the average stock in the VIT Mid Cap Equity Fund was valued at only 12.4 times projected 1999 earnings and 1.7 times book value. The underlying stocks of the Russell Midcap In- dex were valued at 18.4 times projected 1999 earnings and 2.9 times book value, and the underlying stocks of the S&P 500 at 24.8 times projected 1999 earnings and 4.9 times book value. We believe that near-term uncertainty associ- ated with individual securities has resulted in a market discount in the values of the portfolio's securities. In our view, as uncertainty surrounding industry or company- specific problems, cyclical issues or reorganizations dis- sipates, the portfolio has the potential to achieve solid returns as the long-term earnings and cash flow potential of the Fund's holdings are realized. Investment Objective The Fund seeks long-term capital growth, primarily through equity securities of companies with public stock market capitalizations within the range of the market capitaliza- tion of companies constituting the Russell Midcap Index at the time of investment. (Currently, between $400 million and $16 billion at the time of investment.) 33 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP EQUITY FUND Shareholder Letter Portfolio Composition Top 10 Portfolio Holdings as of December 31, 1998*
Percentage of Company Line of Business Net Assets ------- ---------------- ------------- CMP Group, Inc. Utilities 2.7% Aetna, Inc. Healthcare Management 2.7 Avnet Inc. Electronics 2.5 Georgia-Pacific Corp. Forest Products 2.3 Loews Corp. Insurance Brokers & Other Insurance 2.3 Pacific Century Financial Corp. Banks 2.3 Vishay Intertechnology, Inc. Electronics 2.0 Quantum Corp. Personal Computers and Peripherals 1.9 Tenet Healthcare Corp. Healthcare Management 1.9 Quest Diagnostics, Inc. Healthcare Management 1.8
* 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 in- vests. References to individual securities do not consti- tute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past perfor- mance 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. Outlook We remain enthusiastic about the potential long term value offered by mid-cap companies, particularly those comprising the portfolio. In our view, the asset class became tremen- dously discounted during the past year relative to larger cap issues. We believe the discounted valuations will re- attract capital and drive valuations to historical means, with mid caps trading more in line with larger companies. In all environments, we perform rigorous, first-hand re- search into mid cap stocks which trade at a discount to the market and their peers due to uncertainty or obscurity. We aim to exploit anomalies by investigating what is misunder- stood or undiscovered by the marketplace. Mid cap stocks' recovery at the end of the period from third quarter lows strengthens our conviction that our disciplined value-based approach has the potential to deliver strong returns to the long-term investor. We thank you for your investment and look forward to your continued confidence. Goldman Sachs Value Portfolio Management Team January 29, 1999 34 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP EQUITY FUND Performance Summary December 31, 1998 The following graph shows the value as of December 31, 1998, of a $10,000 in- vestment made on May 1, 1998 (commencement of operations). For comparative purposes, the performance of the Fund's benchmark (the Russell Midcap 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. Mid Cap Equity Fund's Lifetime Performance Growth of a $10,000 investment, Distributions Reinvested May 1, 1998 to December 31, 1998 [CHART APPEARS HERE] Mid Cap Russell Mid Equity Cap Index ------ --------- 5/1/98 10,000 10,000 05/98 9,710 9,690 06/98 9,400 9,825 07/98 8,760 9,356 08/98 7,400 7,859 09/98 7,820 8,368 10/98 8,230 8,938 11/98 8,530 9,362 12/98 8,644 9,910 Since Inception Aggregate Total Return through December 31, 1998(a) Mid Cap Fund (commenced May 1, 1998) -13.56% --------------------------------------------------------------------------- (a) Represents aggregate total return since the Fund has not been in operation for a full 12 months. 35 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP EQUITY FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - 70.3% Air Freight, Truck & Other - 1.4% 2,100 CNF Transportation, Inc. $ 78,881 --------------------------------------------------------------- Auto Suppliers - 4.1% 500 Federal-Mogul Corp. 29,750 1,300 Lear Corp.* 50,050 2,200 Lucasvarity PLC ADR 73,700 1,200 Magna International, Inc. 74,400 ---------- 227,900 --------------------------------------------------------------- Banks - 4.0% 5,200 Pacific Century Financial Corp. 126,750 2,100 Republic New York Corp. 95,681 ---------- 222,431 --------------------------------------------------------------- Chemical Products - 1.0% 2,100 IMC Global, Inc. 44,888 400 Olin Corp. 11,325 ---------- 56,213 --------------------------------------------------------------- Construction/Environmental Services - 1.0% 1,900 Browning-Ferris Industries, Inc. 54,031 --------------------------------------------------------------- Consumer Staples - 0.9% 5,900 Perrigo Co.* 51,994 --------------------------------------------------------------- Department Stores - 2.0% 1,200 Federated Department Stores, Inc.* 52,275 1,400 Sears Roebuck & Co. 59,500 ---------- 111,775 --------------------------------------------------------------- Electronics - 4.5% 2,300 Avnet, Inc. 139,150 7,750 Vishay Intertechnology, Inc.* 112,375 ---------- 251,525 --------------------------------------------------------------- Energy Refining & Marketing - 1.7% 3,100 Tosco Corp. 80,213 600 USX-Marathon Group, Inc. 18,075 ---------- 98,288 --------------------------------------------------------------- Entertainment & Leisure - 3.4% 3,400 Hilton Hotels Corp. 65,025 3,200 Mirage Resorts, Inc.* 47,800 1,600 Tricon Global Restaurants, Inc.* 80,200 ---------- 193,025 --------------------------------------------------------------- Forest Products - 4.8% 1,300 Georgia-Pacific Corp. 76,131 5,500 Georgia-Pacific Corp. (Timber Group) 130,969 4,061 Smurfit-Stone Container Corp.* 64,215 ---------- 271,315 ---------------------------------------------------------------
Shares Description Value Common Stocks - (continued) Healthcare Management - 6.4% 1,900 Aetna, Inc. $ 149,387 5,800 Quest Diagnostics Inc.* 103,312 4,000 Tenet Healthcare Corp.* 105,000 ---------- 357,699 ------------------------------------------------------------------ Insurance Brokers & Other Insurance - 2.3% 1,300 Loews Corp. 127,725 ------------------------------------------------------------------ Insurance-Life - 0.8% 400 Reliastar Financial Corp. 18,450 700 Torchmark Corp. 24,719 ---------- 43,169 ------------------------------------------------------------------ Insurance-Property and Casualty - 2.2% 800 Allmerica Financial Corp. 46,300 1,200 CNA Financial Corp.* 48,300 700 Everest Reinsurance Holdings, Inc. 27,256 ---------- 121,856 ------------------------------------------------------------------ Integrated Oil - 1.9% 1,000 Elf Aquitaine ADR 56,625 2,900 Occidental Petroleum Corp. 48,938 ---------- 105,563 ------------------------------------------------------------------ Investment Brokers & Managers - 1.7% 68 Waddell & Reed Financial, Inc. 1,611 3,993 Waddell & Reed Financial, Inc. Class B* 92,837 ---------- 94,448 ------------------------------------------------------------------ Logistics/Rail - 1.2% 3,700 Canadian Pacific, Ltd. 69,837 ------------------------------------------------------------------ Media & Communications - 3.0% 2,300 AH Belo Corp. 45,856 1,800 Dun & Bradstreet Corp. 56,813 1,900 New York Times Co. 65,906 ---------- 168,575 ------------------------------------------------------------------ Oil & Gas Services - 2.8% 2,700 Baker Hughes, Inc. 47,756 2,200 Transocean Offshore, Inc. 58,988 1,600 Veritas DGC, Inc.* 20,800 1,600 Weatherford International* 31,000 ---------- 158,544 ------------------------------------------------------------------ Packaging - 1.6% 1,400 Crown Cork & Seal, Inc. 43,138 900 Sealed Air Corp.* 45,956 ---------- 89,094 ------------------------------------------------------------------ Personal Computers and Peripherals - 1.9% 5,100 Quantum Corp.* 108,375 ------------------------------------------------------------------ Recreational Products - 1.3% 2,000 Hasbro, Inc. 72,250 ------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 36 GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP EQUITY FUND
Shares Description Value Common Stocks - (continued) Specialty Finance & Agencies - 1.8% 1,600 C.I.T. Group, Inc. $ 50,900 900 Finova Group, Inc. 48,544 ---------- 99,444 ------------------------------------------------------ Specialty Retail - 1.1% 3,600 Toys R Us, Inc.* 60,750 ------------------------------------------------------ Steel - 3.2% 2,400 AK Steel Holding Corp. 56,400 5,900 Ispat International NV 45,725 4,200 Ucar International, Inc.* 74,813 ---------- 176,938 ------------------------------------------------------ Supermarkets - 1.2% 6,500 Fleming Companies, Inc. 67,437 ------------------------------------------------------ Textiles - 0.8% 3,300 Fruit of the Loom, Inc.* 45,581 ------------------------------------------------------ Tire & Other Related Rubber Products - 0.9% 1,000 Goodyear Tire & Rubber Co. 50,437 ------------------------------------------------------ Tobacco - 2.0% 1,600 RJR Nabisco Holdings, Corp. 47,500 1,900 UST, Inc. 66,263 ---------- 113,763 ------------------------------------------------------ Utilities - 3.4% 8,000 CMP Group, Inc. 151,000 2,400 Northeast Utilities* 38,400 ---------- 189,400 ------------------------------------------------------ TOTAL COMMON STOCKS (Cost $4,093,358) $3,938,263 ------------------------------------------------------
Principal Interest Maturity Amount Rate Date Value U.S. Treasury Obligation - 1.1% United States Treasury Bill $60,000 4.57%(a) 02/04/99 59,738 --------------------------------------------------------------------------------------------------- TOTAL U.S. Treasury Obligation (Cost $59,738) $ 59,738 ---------------------------------------------------------------------------------------------------
Principal Interest Maturity Amount Rate Date Value Repurchase Agreement - 30.3% Joint Repurchase Agreement Account(b) $1,700,000 4.89% 01/04/99 $1,700,000 ------------------------------------------------------------------------------------------------- TOTAL REPURCHASE AGREEMENT (Cost $1,700,000) $1,700,000 ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $5,853,096)(c) $5,698,001 ------------------------------------------------------------------------------------------------- Federal Income Tax Information: Gross unrealized gain for investments in which value exceeds cost $ 200,558 Gross unrealized loss for investments in which cost exceeds value (397,485) ------------------------------------------------------------------------------------------------- Net unrealized loss $ (196,927) -------------------------------------------------------------------------------------------------
Futures contracts open at December 31, 1998 are as follows:
Number of Contracts Settlement Unrealized Type Long(d) Month Gain ----------------------------------------------------- S&P 500 Stock Index 3 March 1999 $ 42,855 -----------------------------------------------------
* Non-income producing security. (a) The interest rate disclosed for this security represents the effective yield to maturity and is being segregated as collateral for open futures contracts. (b) The repurchase agreement is fully collateralized by Federal Agency obligations and is being segregated as collateral for open futures contracts. (c) The aggregate cost for federal income tax purposes is $5,894,928. (d) Each S&P 500 Stock Index represents $250,000 in notional par value. The total net notional amount and net market value are $750,000 and $934,125, respectively. The determination of notional amounts as presented here are indicative only of volume of activity and not a measure of market risk. The percentage shown for each investment category reflects the value of investments in that category as a percentage of total net assets. ------------------------------------------------------------------------------ Investment Abbreviations: ADR--American Depository Receipt ------------------------------------------------------------------------------ The accompanying notes are an integral part of these financial statements. 37 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND Shareholder Letter Dear Shareholders, We are pleased to report on the performance of the Goldman Sachs Variable In- surance Trust International Equity Fund. This annual report covers the period from January 12, 1998, when the Fund began operations, through December 31, 1998. Performance Review From January 12, 1998 through December 31, 1998, the Fund generated a 20.07% aggregate total return. Over the same time period, the Fund's benchmark, the FT/Actuaries EuroPac Total Return Index (unhedged with dividends reinvested), generated an aggregate total return of 22.84%. The Fund outperformed its benchmark for most of the year. However, in the final three months of the period under re- view, stock selection in both Japan and Europe slightly hurt performance. In Japan, the Fund suffered from over- weight positions in a number of export oriented companies within the technology sector. All of these stocks suffered from unprecedented yen strength in the month of October. Also in the fourth quarter, the Fund was somewhat disadvan- taged by its lack of exposure to Japanese banks, which per- formed strongly in October, although the underweight bank position in general benefited the Fund over the year. In Europe, strong first half performance was impacted by the increased volatility in the markets in September and October. However, the positioning towards strong business franchises in sectors we believe offer good structural growth prospects, strong cash generation and reinvestment opportunities allowed the portfolio to benefit from the substantial market re-rating of November and December. Spe- cifically, the business services sector and the telecommu- nications sector continue to feature prominently in the portfolio. Although the financials sector is facing unprec- edented change and consolidation with the advent of the Eu- ro, we also see a number of competitive threats facing the sector. Accordingly, the portfolio is only neutrally weighted in European banks, with exposure to selected banks possessing strong franchise value. Investment Objective The Fund seeks long-term capital appreciation, primarily through equity securities of companies that are organized outside the United States or whose securities are princi- pally traded outside the United States. 38 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND Portfolio Composition As of December 31, 1998, 95.6% of the Fund was invested in equity securities, with the remaining position in cash. Top 10 Portfolio Holdings as of December 31, 1998*
Percentage of Company Country Line of Business Net Assets ------- ------- ---------------- ------------- Bank of Ireland Ireland Banks 3.3% Rentokil Initial PLC United Kingdom Business Services 3.1 TNT Post Groep NV Netherlands Business Services 3.1 Wolters Kluwer NV Netherlands Media & Communications 2.8 Dexia France France Banks 2.7 VNU Netherlands Media & Communications 2.6 Telecom Italia Mobile SPA Italy Utilities 2.6 Misys PLC United Kingdom Business Services 2.6 Glaxo Wellcome PLC United Kingdom Pharmaceuticals 2.4 Elf Aquitaine France Oil & Gas 2.3
* 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 in- vests. References to individual securities do not consti- tute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past perfor- mance 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. Outlook . Europe--With the advent of the single currency, the euro, prospects for equities are bright. We believe that the consolidation process within industries will continue un- abated, and as companies strive to lower their costs and to dominate in Europe, investors will benefit. The Fund remains overweight in continental Europe, which, from a research perspective, is increasingly viewed as a single region. In comparison, the UK economy has slowed consid- erably, and expectations for earnings growth in the UK are modest. . Japan--Japan's economy is expected to contract more than 2% over the fiscal year ending March 1999, and lackluster performance is expected to continue into the following fiscal year. Faced with weak domestic demand, the govern- ment is expected to implement stimulatory economic pack- ages, including tax cuts, which we believe could have a positive impact on bottom-line earnings next year given the continued cost-cutting efforts of Japanese companies. To be fair, the corporate earnings forecast for the cur- rent fiscal year has been downgraded after a difficult first half. However, weak market performance over the summer, in our opinion, indicates that the current year's poor earnings have already been discounted in stock pric- es. In addition, earnings for the next fiscal year are expected to rise, with a weak first half followed by a recovery in the second half due to the bottoming-out of domestic demand. If the outlook for the economy stops de- teriorating, and we find any signs of a pick-up in corporate earnings, in- vestors will likely find the market attractive given inex- pensive valuation levels relative to interest rates and to the book value of shareholders' equity. 39 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND Shareholder Letter . Asia--The sharp appreciation of most Asian stock markets between September and November 1998 was driven by a con- fluence of events, the most important of which were grow- ing account surpluses, the stability and appreciation of Asian currencies led by the Yen, a sharp drop in interest rates in several countries and a "buying panic" by insti- tutional investors who were very underweight in Asia. This liquidity rally lifted a wide range of stocks with- out particular regard to company-specific considerations. Macro risks going forward include a slowing of the U.S. and European economies and a possible renewed weakness in the Yen. We also believe that investors will begin to fo- cus on the timing of economic recoveries in Asian coun- tries, as well as a possible earnings recovery for many companies. Therefore, bottom-up stock selectivity will become more important in the coming year, since not all companies or sectors will participate equally in the eco- nomic recovery. We intend to continue our focus on find- ing companies whose earnings we believe are likely to grow sharply as these economies recover. We thank you for your investment and look forward to your continued confidence. Goldman Sachs International Equity Management Team January 29, 1999 40 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND Performance Summary December 31, 1998 The following graph shows the value as of December 31, 1998, of a $10,000 in- vestment made on January 12, 1998 (commencement of operations). For compara- tive purposes, the performance of the Fund's benchmark (FT Euro-Pac Unhedged) are 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 origi- nal cost. International Equity Fund's Lifetime Performance Growth of a $10,000 investment, Distributions Reinvested January 12, 1998 to December 31, 1998 [CHART APPEARS HERE] Intl Equity Fund FT Euro ---- ------- 1/12/98 10,000 10,000 01/98 10,350 10,789 02/98 11,040 11,478 03/98 11,671 11,802 04/98 11,841 11,845 05/98 12,131 11,820 06/98 11,952 11,835 07/98 11,982 11,911 08/98 10,702 10,442 09/98 10,352 10,162 10/98 10,832 11,245 11/98 11,402 11,861 12/98 12,007 12,284 Since Inception Aggregate Total Return through December 31, 1998(a) International Equity Fund (commenced January 12, 1998) 20.07% ---------------------------------------------------------------------------- (a) Represents aggregate total return since the Fund has not been in operation for a full 12 months. 41 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND Statement of Investments December 31, 1998
Shares Description Value Common Stocks - 93.4% Australian Dollar - 2.8% 2,800 AMP, Ltd. (Insurance) $ 35,474 13,800 Fosters Brewing Group, Ltd. (Alcohol) 37,377 3,768 Lend Lease Corp. (Financial Services) 50,797 4,550 Tab Corp Holdings, Ltd. (Entertainment & Leisure) 27,882 15,500 Telstra Corp. (Utilities) 72,471 7,100 Westpac Banking Corp. (Banks) 47,510 12,200 Woolworths, Ltd. (Retail) 41,536 ---------- 313,047 ----------------------------------------------------------------------------- British Pound Sterling - 14.2% 7,812 Glaxo Wellcome PLC (Pharmaceuticals) 268,923 11,804 Great Universal Stores PLC (Retail) 124,531 23,798 Hays PLC (Business Services) 209,552 38,949 Misys PLC (Business Services) 286,019 46,164 Rentokil Initial PLC (Business Services) 348,972 17,658 Select Appointments Holdings PLC (Business Services) 181,890 10,753 Vodafone Group PLC (Utilities) 174,721 ---------- 1,594,608 ----------------------------------------------------------------------------- Danish Krone - 1.8% 1,995 ISS International Service System (Business Services) 129,775 515 Novo-Nordisk A/S (Pharmaceuticals) 67,973 ---------- 197,748 ----------------------------------------------------------------------------- French Franc - 12.3% 1,551 Axa (Insurance) 224,702 1,930 Dexia France (Banks) 297,215 597 Vivendi (Utilities) 154,829 2,276 Elf Aquitaine (Oil & Gas) 262,976 2,325 STMicroelectronics (Electronics) 182,973 1,556 Societe Generale (Banks) 251,866 ---------- 1,374,561 ----------------------------------------------------------------------------- Hong Kong Dollar - 1.9% 5,000 Asia Satellite Telecom Holdings, Ltd. (Utilities) 8,906 13,000 Cheung Kong Holdings, Ltd. (Real Estate) 93,545 42,000 China Telecom (Hong Kong), Ltd. (Utilities) 72,642 8,000 CLP Holdings, Ltd. (Utilities) 39,858 ---------- 214,951 ----------------------------------------------------------------------------- Irish Punt - 3.3% 16,528 Bank of Ireland (Banks) 367,491 -----------------------------------------------------------------------------
Shares Description Value Common Stocks - (continued) Italian Lira - 3.5% 3,085 Arnoldo Mondadori Editore SPA (Utilities) $ 40,768 92,618 SEAT Pagine Gialle (Media & Communications) 71,139 38,903 Telecom Italia Mobile SPA (Utilities) 287,046 ---------- 398,953 ------------------------------------------------------------------------- Japanese Yen - 21.6% 2,500 Aderans Company, Ltd. (Retail) 77,621 6,000 Canon, Inc. (Computers/Office) 128,173 3,400 Circle K Japan Co. (Retail) 149,474 4,000 Fuji Photo Film, Ltd. (Entertainment & Leisure) 148,607 1,300 Ito En, Ltd. (Food & Beverages) 67,041 7,000 Kao Corp. (Consumer Goods) 157,895 11,000 Kirin Brewery, Ltd. (Alcohol) 140,115 7,000 Kokuyo Company, Ltd. (Computers/Office) 94,180 3,000 Mirai Industry Company, Ltd. (Electronics) 29,987 25,000 Mitsui Marine & Fire (Insurance) 131,579 10,000 NGK Insulators, Ltd. (Diversified Industrial Manufacturing) 128,881 1,300 Nintendo Company, Ltd. (Entertainment & Leisure) 125,918 3 NTT Mobile Communications (Utilities) 123,395 1,000 Rohm Co. (Electronics) 91,022 8,000 Sankyo Company, Ltd. (Pharmaceuticals) 174,790 1,100 SMC Corp. (Industrial Machinery) 87,766 2,000 Takefuji Corp. (Financial Services) 145,953 2,000 TDK Corp. (Consumer Goods) 182,751 8,000 Toppan Forms Company, Ltd. (Printing) 142,238 3,000 Yamanouchi Pharmaceutical (Pharmaceuticals) 96,594 ---------- 2,423,980 ------------------------------------------------------------------------- Netherlands Guilder - 12.3% 1,939 Aegon NV (Insurance) 238,001 2,974 Benckiser NV (Consumer Goods) 194,710 10,691 TNT Post Groep NV (Business Services) 344,284 7,625 VNU (Media & Communications) 287,353 1,470 Wolters Kluwer NV (Media & Communications) 314,391 ---------- 1,378,739 ------------------------------------------------------------------------- Portuguese Escudo - 1.5% 7,516 Electricidade de Portugal SA (Utilities) 165,554 -------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 42 GOLDMAN SACHS VARIABLE INSURANCE TRUST INTERNATIONAL EQUITY FUND
Shares Description Value Common Stocks - (continued) Singapore Dollar - 0.6% 3,000 Singapore Airlines, Ltd. (Transportation) $ 21,987 4,000 Singapore Press Holdings, Ltd. (Media & Communications) 43,610 ----------- 65,597 ------------------------------------------------------------------------ Spanish Peseta - 3.1% 10,275 Banco Santander SA (Banks) 203,881 3,277 Telefonica de Espana SA (Utilities) 145,496 ----------- 349,377 ------------------------------------------------------------------------ Swedish Krona - 6.9% 6,090 Ericsson Telecommunications (Computers/Office) 144,664 15,942 Securitas AB (Business Services) 247,230 8,099 Skandia Forsakring (Insurance) 123,606 9,969 ForeningSparbanken AB (Banks) 257,667 ----------- 773,167 ------------------------------------------------------------------------ Swiss Franc - 7.6% 452 Adecco SA (Business Services) 206,307 115 Nestle SA (Food & Beverages) 250,309 114 Novartis AG (Pharmaceuticals) 224,066 548 UBS AG (Banks) 168,345 ----------- 849,027 ------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost $9,174,972) $10,466,800 ------------------------------------------------------------------------ Preferred Stock - 2.2% German Deutschemark - 2.2% 2,749 Henkel KGAA - Vorzug (Chemical Products) $ 245,770 ------------------------------------------------------------------------ TOTAL PREFERRED STOCK (Cost $193,435) $ 245,770 ------------------------------------------------------------------------ Rights - 0.0% Spanish Peseta - 0.0% 3,277 Telefonica de Espana SA* (Utilities) $ 2,905 ------------------------------------------------------------------------ TOTAL RIGHTS (Cost $0) $ 2,905 ------------------------------------------------------------------------ TOTAL INVESTMENTS (Cost $9,368,407)(a) $10,715,475 ------------------------------------------------------------------------
---------------------------- Federal Income Tax Informa- tion: Gross unrealized gain for investments in which value exceeds cost $1,626,347 Gross unrealized loss for investments in which cost exceeds value (291,763) ---------------------------- Net unrealized gain $1,334,584 ----------------------------
*Non-income producing security. (a)The aggregate cost for federal income tax purposes is $9,380,891. The percentage shown for each investment category reflects the value of investments in that category as a percentage of total net assets. Common and Preferred Stock Industry Concentrations Alcohol 1.3% Banks 14.2 Business Services 17.4 Chemical Products 2.2 Computers/Office 3.3 Consumer Goods 4.8 Diversified Industrial Manufacturing 1.2 Electronics 2.7 Entertainment & Leisure 2.7 Financial Services 1.8 Food & Beverages 2.8 Industrial Machinery 0.8 Insurance 7.1 Media & Communications 6.4 Oil & Gas 2.2 Pharmaceuticals 7.4 Printing 1.3 Real Estate 0.8 Retail 3.5 Transportation 0.2 Utilities 11.5 ----------------------------- TOTAL COMMON AND PREFERRED STOCK 95.6% -----------------------------
The accompanying notes are an integral part of these financial statements. 43 GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL INCOME FUND Shareholder Letter Dear Shareholders, We are pleased to report on the performance of the Goldman Sachs Variable In- surance Trust Global Income Fund. This annual report covers the period from January 12, 1998, when the Fund began operations, through December 31, 1998. Performance Review From January 12, 1998 through December 31, 1998, the Fund generated an 8.29% aggregate total return. Over the same time period, the Fund's benchmark, the JP Morgan Global Government Bond Index (hedged into U.S. dollars), generated an aggregate total return of 9.77%. The primary factor behind the Fund's slight underperformance relative to its benchmark was the Fund's overweight position in New Zealand bonds during the first quarter of 1998. Investment Objective The Fund seeks high total return, emphasizing current in- come and, to a lesser extent, providing opportunities for capital appreciation, primarily through investments in fixed income securities of U.S. and foreign issuers and foreign currencies. Portfolio Composition Top Portfolio Holdings (by currency) as of December 31, 1998*
Percentage of Bonds Denomination Net Assets ------------------ ------------- United States Dollar 42.2% British Pound Sterling 13.9 Japanese Yen 10.5 German Deutschemark 9.6 Danish Krone 5.1 Italian Lira 4.2 Spanish Peseta 2.8 Canadian Dollar 1.8 French Franc 1.0
* Opinions expressed in this report represent our present opinions only. Reference to individual bonds should not be construed as a commitment that such bonds will be retained in the Fund. From time to time, the Fund may change the in- dividual bonds it holds, the number or types of bonds held and the markets in which it invests. References to individ- ual bonds do not constitute a recommendation to the in- vestor to buy, hold or sell such bonds. 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. 44 GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL INCOME FUND Outlook We believe conditions remain favorable for bond markets globally with inflationary pressures continuing to decline and economic conditions remaining sluggish. Furthermore, the economic problems facing Brazil may intensify, which could cause a further bout of economic weakness. In the U.S., economic data remains buoyant with housing activity and consumer confidence at historically high levels. Howev- er, we expect that Treasuries will be supported by a favor- able inflationary environment and by the expectations that the weak global economy will ultimately impact the U.S. economy -- especially if conditions were to deteriorate in South America. Within the EMU region, weak manufacturing activity, high levels of unemployment, deteriorating business and consumer confidence, and falling commodity prices are all counter- acting inflationary pressures that are beneficial for bonds. Similarly, in the UK, weakness in the manufacturing and export sectors, as well as extremely poor business con- fidence, should place downward pressure on UK bond yields. We believe the rise in yields in Japan has been caused by supply side fears, and not an improvement in Japan's eco- nomic outlook. The steepness of the yield curve and the magnitude of the fall mean that the argument for underweighting Japanese bonds has weakened in recent days, and it is possible that Japanese bonds will remain firm in the short term. We thank you for your investment and look forward to your continued confidence. Goldman Sachs Global Income Management Team London, January 29, 1999 45 GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL INCOME FUND Performance Summary December 31, 1998 The following graph shows the value as of December 31, 1998, of a $10,000 in- vestment made on January 12, 1998. For comparative purposes, the performance of the Fund's benchmark (the J.P. Morgan Global Government Bond Index hedged to U.S. Dollars (the "J.P. Morgan GGB Index - $ Hedged")) is shown. This per- formance data represents past performance and should not be considered indic- ative 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 costs. Global Income Fund's Lifetime Performance Growth of a $10,000 Investment, Distributions Reinvested January 12, 1998 to December 31, 1998 [CHART APPEARS HERE] Global J.P. Morgan Income GGB Index ------ --------- 1/12/98 10,000 10,000 01/98 9,950 9,993 02/98 9,980 10,034 03/98 10,090 10,099 04/98 10,130 10,149 05/98 10,250 10,276 06/98 10,270 10,350 07/98 10,340 10,416 08/98 10,530 10,653 09/98 10,840 10,925 10/98 10,750 10,901 11/98 10,810 10,978 12/98 10,829 10,977 Since Inception Aggregate Annual Total Return through December 31, 1998(a) Global Income Fund (commenced January 12, 1998) 8.29% ------------------------------------------------------------------------------- (a) Represents aggregate total return since the Fund has not been in operation for a full 12 months. 46 GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL INCOME FUND Statement of Investments December 31, 1998
Principal Interest Maturity Amount(a) Rate Date Value Foreign Debt Obligations - 43.5% British Pound Sterling - 10.7% United Kingdom Treasury BPS 200,000 9.50% 10/25/04(b) $ 416,264 100,000 7.75 09/08/06(b) 201,208 ---------- $ 617,472 ------------------------------------------------------------------------------------ Canadian Dollar - 1.8% Government of Canada CAD 150,000 6.00% 06/01/08(b) $ 106,232 ------------------------------------------------------------------------------------ Danish Krone - 5.1% Kingdom of Denmark DKK 1,600,000 8.00% 05/15/03(b) $ 291,807 ------------------------------------------------------------------------------------ French Franc - 1.0% Government of France FRF 200,000 8.50% 04/25/23(b) $ 55,395 ------------------------------------------------------------------------------------ German Deutschemark - 7.4% Federal Republic of Germany DEM 300,000 6.00% 01/04/07 $ 206,381 300,000 6.25 01/04/24(b) 216,679 ---------- $ 423,060 ------------------------------------------------------------------------------------ Italian Lira - 4.2% Republic of Italy ITL 70,000,000 6.75% 07/01/07(b) $ 50,586 200,000,000 9.00 11/01/23(b) 189,878 ---------- $ 240,464 ------------------------------------------------------------------------------------ Japanese Yen - 10.5% Asian Development Bank JPY 20,000,000 5.63% 02/18/02 $ 200,749 Government of Japan 40,000,000 0.90 12/22/08(b) 313,100 International Bank for Reconstruction and Development 10,000,000 2.00 02/18/08 87,990 ---------- $ 601,839 ------------------------------------------------------------------------------------ Spanish Peseta - 2.8% Government of Spain ESP 20,000,000 6.00% 01/31/08(b) $ 161,976 ------------------------------------------------------------------------------------ TOTAL FOREIGN DEBT OBLIGATIONS (Cost $2,408,994) $2,498,245 ------------------------------------------------------------------------------------ Corporate Bonds - 24.3% British Pound Sterling - 3.2% Abbey National Treasury BPS 100,000 8.00% 04/02/03 $ 183,051 ------------------------------------------------------------------------------------ German Deutschemark - 2.2% Baden-Wuerttembergische Land--Finance DEM 200,000 5.38% 02/05/10 $ 129,478 ------------------------------------------------------------------------------------
Principal Interest Maturity Amount(a) Rate Date Value Corporate Bonds - continued United States Dollar - 18.9% Bayerische Landesbank Girozentrale USD 250,000 6.63% 06/25/07 $ 264,610 Ford Motor Credit Corp. 200,000 6.13 04/28/03 203,624 International Bank for Reconstruction and Development 100,000 5.63 03/17/03 101,163 100,000 5.75 02/06/08 103,610 Merrill Lynch and Company, Inc. 100,000 6.00 02/12/03 101,500 Nederlandse Waterschapsbank 100,000 6.13 02/13/08 104,277 Ontario Hydro 100,000 6.10 01/30/08(b) 104,283 Prudential Insurance Company of America 100,000 6.38 07/23/06 102,070 ---------- $1,085,137 -------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS (Cost $1,353,196) $1,397,666 -------------------------------------------------------------------------------------- U.S. Treasury Obligations - 23.3% United States Treasury Bond USD 100,000 6.75% 08/15/26(b) $ 119,796 United States Treasury Notes 300,000 5.38 01/31/00(b) 302,250 100,000 6.25 02/15/03 105,750 650,000 7.00 07/15/06(b) 740,084 60,000 6.63 05/15/07(b) 67,472 -------------------------------------------------------------------------------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,303,679) $1,335,352 -------------------------------------------------------------------------------------- TOTAL INVESTMENTS (Cost $5,065,869)(c) $5,231,263 --------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 47 GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL INCOME FUND Statement of Investments December 31, 1998 --------------------------- Federal Income Tax Information: Gross unrealized gain for investments in which value exceeds cost $ 194,013 Gross unrealized loss for investments in which cost exceeds value (30,476) --------------------------- Net unrealized gain $ 163,537 ---------------------------
(a) The principal amount of each security is stated in the currency in which the bond is denominated. See below. BPS = British Pound Sterling ITL = Italian Lira CAD = Canadian Dollar JPY = Japanese Yen DKK = Danish Krone ESP = Spanish Peseta DEM = German Deutschemark USD = United States Dollar FRF = French Franc (b) The security is being segregated as collateral for forward foreign currency exchange contracts. (c) The aggregate cost for federal income tax purposes is $5,067,726. Interest rates represent either the stated coupon rate, annualized yield on date of purchase for discounted notes, or for floating rate securities, the current reset rate, which is based upon current interest rate indices. The percentage shown for each investment category reflects the value of investments in that category as a percentage of total net assets. The accompanying notes are an integral part of these financial statements. 48 GOLDMAN SACHS VARIABLE INSURANCE TRUST Report of Independent Public Accountants To the Shareholders and Board of Trustees of Goldman Sachs Variable Insurance Trust We have audited the accompanying statements of assets and liabilities of Goldman Sachs Growth and Income Fund, CORE U.S. Equity Fund, CORE Large Cap Growth Fund, CORE Small Cap Equity Fund, Capital Growth Fund, Mid Cap Equity Fund, International Equity Fund and Global Income Fund, portfolios constituting the Goldman Sachs Variable Insurance Trust (a Delaware Business Trust), including the statements of investments, as of December 31, 1998, and the related statements of operations and the statements of changes in net assets and the financial highlights for the periods presented. These financial statements and the financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1998 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and the financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective portfolios constituting the Goldman Sachs Variable Insurance Trust as of December 31, 1998, the results of their operations, the changes in their net assets and the financial highlights for the periods presented, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Boston, Massachusetts February 4, 1999 49 GOLDMAN SACHS VARIABLE INSURANCE TRUST Statements of Assets and Liabilities December 31, 1998
Growth and Income Fund Assets: Investment in securities, at value (identified cost $13,528,006, $8,540,494, $6,472,797, $4,534,117, $3,845,142, $5,853,096, $9,368,407, $5,065,869) $13,782,813 Cash 26,407 Receivables: Investment securities sold 1,595 Forward foreign currency exchange contracts -- Fund shares sold 19,406 Dividends and interest 18,110 Variation margin -- Deferred organization expenses 16,656 Other assets 18,237 ---------------------------------------------------------------------------- Total assets 13,883,224 ---------------------------------------------------------------------------- Liabilities: Payables: Investment securities purchased -- Forward foreign currency exchange contracts -- Fund shares repurchased 8,923 Management fees 8,273 Transfer Agent fees 8,039 Accrued expenses and other liabilities 43,560 ---------------------------------------------------------------------------- Total liabilities 68,795 ---------------------------------------------------------------------------- Net Assets: Paid-in capital 14,014,385 Accumulated distributions in excess of net investment income -- Accumulated undistributed net realized gain (loss) on investments, futures and foreign currency transactions (454,763) Net unrealized gain (loss) on investments, futures and translation of assets and liabilities denominated in foreign currencies 254,807 ---------------------------------------------------------------------------- NET ASSETS $13,814,429 ---------------------------------------------------------------------------- Total shares of beneficial interest outstanding, no par value (unlimited shares authorized) 1,321,884 Net asset value and redemption price per share $ 10.45 ----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 50 GOLDMAN SACHS VARIABLE INSURANCE TRUST
CORE U.S. CORE Large Cap CORE Small Cap Capital Mid Cap International Global Equity Fund Growth Fund Equity Fund Growth Fund Equity Fund Equity Fund Income Fund $9,853,601 $8,168,751 $4,835,367 $4,378,431 $5,698,001 $10,715,475 $5,231,263 -- 4,865 13,918 73,811 3,458 499,083 400,438 24,697 12,349 -- 15,993 15,800 920 -- -- -- -- -- -- 7,328 31,618 2,856 45,885 -- 104,170 18 25,906 1,123 10,823 7,378 3,401 3,095 4,013 13,343 139,066 -- -- -- -- 2,550 -- -- 17,019 17,020 17,020 17,882 17,893 16,656 16,656 16,711 22,617 24,078 10,181 9,588 20,905 17,118 ---------------------------------------------------------------------------------------------------- 9,925,707 8,278,865 4,893,784 4,603,563 5,751,321 11,299,616 5,837,282 ---------------------------------------------------------------------------------------------------- 9,904 9,904 -- 67,350 63,290 -- -- -- -- -- -- -- 25,104 37,513 35,833 247 95 -- 8,290 516 813 5,581 4,566 2,922 2,563 3,433 8,993 4,381 10,955 8,802 6,280 9,310 9,704 10,003 8,609 54,573 40,957 43,595 61,286 62,708 49,278 44,680 ---------------------------------------------------------------------------------------------------- 116,846 64,476 52,892 140,509 147,425 93,894 95,996 ---------------------------------------------------------------------------------------------------- 8,732,725 7,146,086 5,311,057 3,953,090 5,939,157 9,870,592 5,585,944 -- -- -- -- -- (12,690) (6,552) (236,971) (627,651) (771,415) (23,325) (223,029) 7,926 (1,856) 1,313,107 1,695,954 301,250 533,289 (112,232) 1,339,894 163,750 ---------------------------------------------------------------------------------------------------- $9,808,861 $8,214,389 $4,840,892 $4,463,054 $5,603,896 $11,205,722 $5,741,286 ---------------------------------------------------------------------------------------------------- 859,002 703,221 535,508 394,437 653,841 941,060 556,488 $ 11.42 $ 11.68 $ 9.04 $ 11.31 $ 8.57 $ 11.91 $ 10.32 ----------------------------------------------------------------------------------------------------
51 GOLDMAN SACHS VARIABLE INSURANCE TRUST Statements of Operations For the Period Ended December 31, 1998(a)
Growth and Income Fund Investment income(b): Dividends $ 98,920 Interest 76,118 ----------------------------------------------------------------------------- Total income 175,038 ----------------------------------------------------------------------------- Expenses: Management fees 47,801 Custodian fees 43,223 Transfer agent fees 26,530 Professional fees 34,553 Amortization of deferred organization expenses 4,016 Trustee fees 5,543 Other 9,537 ----------------------------------------------------------------------------- Total expenses 171,203 ----------------------------------------------------------------------------- Less -- expenses reimbursed by Goldman Sachs (113,842) ----------------------------------------------------------------------------- Net expenses 57,361 ----------------------------------------------------------------------------- NET INVESTMENT INCOME 117,677 ----------------------------------------------------------------------------- Realized and unrealized gain (loss) on investments, futures and foreign currency transactions: Net realized gain (loss) from: Investment transactions (510,320) Futures transactions 55,557 Foreign currency related transactions -- Net change in unrealized gain (loss) on: Investments 254,807 Futures -- Translation of assets and liabilities denominated in foreign currencies -- ----------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments, futures and foreign currency transactions (199,956) ----------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (82,279) -----------------------------------------------------------------------------
(a) The Growth and Income, International Equity and Global Income Funds commenced operations on January 12, 1998; the CORE U.S. Equity, CORE Large Cap Growth and CORE Small Cap Equity Funds commenced operations on February 13, 1998; the Capital Growth and Mid Cap Equity Funds commenced operations on April 30, 1998 and May 1, 1998, respectively. (b) For the Growth and Income, CORE U.S. Equity, CORE Large Cap Growth, Mid Cap Equity, International Equity and Global Income Funds, taxes withheld on dividends and interest were $766, $427, $225, $325, $15,495 and $1,422, respectively. The accompanying notes are an integral part of these financial statements. 52 GOLDMAN SACHS VARIABLE INSURANCE TRUST
CORE U.S. CORE Large Cap CORE Small Cap Capital Mid Cap International Global Equity Fund Growth Fund Equity Fund Growth Fund Equity Fund Equity Fund Income Fund $ 79,736 $ 46,614 $ 46,750 $ 24,980 $ 26,963 $ 111,164 $ -- 9,937 6,653 4,631 5,084 36,107 15,850 291,028 ---------------------------------------------------------------------------------------------------- 89,673 53,267 51,381 30,064 63,070 127,014 291,028 ---------------------------------------------------------------------------------------------------- 41,825 37,366 32,003 17,067 18,776 85,560 46,434 46,810 36,700 55,644 25,156 27,974 84,442 37,983 26,705 25,676 26,065 21,905 18,123 28,662 27,998 34,785 34,786 34,785 33,867 33,869 36,589 38,754 3,654 3,654 3,654 2,791 2,778 4,016 4,016 5,544 5,542 5,544 5,544 5,316 5,557 5,543 9,539 9,547 9,550 5,600 5,597 9,549 9,499 ---------------------------------------------------------------------------------------------------- 168,862 153,271 167,245 111,930 112,433 254,375 170,227 ---------------------------------------------------------------------------------------------------- (121,062) (110,583) (128,862) (91,450) (90,137) (147,424) (116,054) ---------------------------------------------------------------------------------------------------- 47,800 42,688 38,383 20,480 22,296 106,951 54,173 ---------------------------------------------------------------------------------------------------- 41,873 10,579 12,998 9,584 40,774 20,063 236,855 ---------------------------------------------------------------------------------------------------- (189,538) (618,244) (771,415) (23,325) (177,110) 97,996 100,192 (47,433) (9,407) -- -- (45,919) -- -- -- -- -- -- (2) (38,843) (76,247) 1,313,107 1,695,954 301,250 533,289 (155,095) 1,347,068 165,394 -- -- -- -- 42,855 -- -- -- -- -- 8 (7,174) (1,644) ---------------------------------------------------------------------------------------------------- 1,076,136 1,068,303 (470,165) 509,964 (335,263) 1,399,047 187,695 ---------------------------------------------------------------------------------------------------- $1,118,009 $1,078,882 $(457,167) $519,548 $(294,489) $1,419,110 $ 424,550 ----------------------------------------------------------------------------------------------------
53 GOLDMAN SACHS VARIABLE INSURANCE TRUST Statements of Changes in Net Assets For the Period Ended December 31, 1998(a)
Growth and Income Fund From operations: Net investment income $ 117,677 Net realized gain (loss) on investments, futures and foreign currency transactions (454,763) Net change in unrealized gain (loss) on investments, futures and translation of assets and liabilities denominated in foreign currencies 254,807 ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (82,279) ------------------------------------------------------------------------------ Distributions to shareholders: From net investment income (117,677) In excess of net investment income (3,441) From net realized gain on investment transactions -- ------------------------------------------------------------------------------ Total distributions to shareholders (121,118) ------------------------------------------------------------------------------ From share transactions: Proceeds from sales of shares 14,318,816 Reinvestment of dividends and distributions 121,118 Cost of shares repurchased (522,108) ------------------------------------------------------------------------------ Net increase in net assets resulting from share transactions 13,917,826 ------------------------------------------------------------------------------ TOTAL INCREASE 13,714,429 ------------------------------------------------------------------------------ Net assets: Beginning of period 100,000 ------------------------------------------------------------------------------ End of period $13,814,429 ------------------------------------------------------------------------------ Accumulated distributions in excess of net investment income $ -- ------------------------------------------------------------------------------ Summary of share transactions: Shares sold 1,362,585 Shares issued on reinvestment of dividends and distributions 11,782 Shares repurchased (52,483) ------------------------------------------------------------------------------ TOTAL 1,321,884 ------------------------------------------------------------------------------
(a) The Growth and Income, International Equity and Global Income Funds commenced operations on January 12, 1998; the CORE U.S. Equity, CORE Large Cap Growth and CORE Small Cap Equity Funds commenced operations on February 13, 1998; the Capital Growth and Mid Cap Equity Funds commenced operations on April 30, 1998 and May 1, 1998, respectively. The accompanying notes are an integral part of these financial statements. 54 GOLDMAN SACHS VARIABLE INSURANCE TRUST
CORE U.S. CORE Large Cap CORE Small Cap Capital Mid Cap International Global Equity Fund Growth Fund Equity Fund Growth Fund Equity Fund Equity Fund Income Fund $ 41,873 $ 10,579 $ 12,998 $ 9,584 $ 40,774 $ 20,063 $ 236,855 (236,971) (627,651) (771,415) (23,325) (223,031) 59,153 23,945 1,313,107 1,695,954 301,250 533,289 (112,232) 1,339,894 163,750 ------------------------------------------------------------------------------------------------ 1,118,009 1,078,882 (457,167) 519,548 (294,489) 1,419,110 424,550 ------------------------------------------------------------------------------------------------ (41,873) (10,579) (12,998) (9,584) (40,774) -- (213,231) (1,567) (1,864) (1,946) (1,046) (2,334) -- -- -- -- -- -- -- (85,668) (57,323) ------------------------------------------------------------------------------------------------ (43,440) (12,443) (14,944) (10,630) (43,108) (85,668) (270,554) ------------------------------------------------------------------------------------------------ 9,097,369 7,271,607 5,329,424 3,988,296 6,990,413 9,861,289 5,338,273 43,440 12,443 14,944 10,630 43,107 85,668 270,269 (406,517) (136,100) (31,365) (44,790) (1,092,027) (74,677) (21,252) ------------------------------------------------------------------------------------------------ 8,734,292 7,147,950 5,313,003 3,954,136 5,941,493 9,872,280 5,587,290 ------------------------------------------------------------------------------------------------ 9,808,861 8,214,389 4,840,892 4,463,054 5,603,896 11,205,722 5,741,286 ------------------------------------------------------------------------------------------------ -- -- -- -- -- -- -- ------------------------------------------------------------------------------------------------ $9,808,861 $8,214,389 $4,840,892 $4,463,054 $ 5,603,896 $11,205,722 $5,741,286 ------------------------------------------------------------------------------------------------ $ -- $ -- $ -- $ -- $ -- $ (12,690) $ (6,552) ------------------------------------------------------------------------------------------------ 893,251 715,088 537,211 397,752 781,599 940,178 532,484 3,963 1,122 1,756 995 5,238 7,521 26,012 (38,212) (12,989) (3,459) (4,310) (132,996) (6,639) (2,008) ------------------------------------------------------------------------------------------------ 859,002 703,221 535,508 394,437 653,841 941,060 556,488 ------------------------------------------------------------------------------------------------
55 GOLDMAN SACHS VARIABLE INSURANCE TRUST Financial Highlights Selected Data for a Share Outstanding Throughout Each Period
Income from investment operations(b) Distributions to shareholders ------------------------------- ------------------------------ Net realized and unrealized gain (loss) on Net asset investments, In excess value, Net futures and From net of net From net beginning investment foreign currency investment investment realized of period income related transactions income income gain FOR THE PERIOD ENDED DECEMBER 31, 1998(a) Growth and Income Fund $10.00 $0.09 $ 0.45 $(0.09) $ -- $ -- ----------------------------------------------------------------------------------------------- CORE U.S. Equity Fund 10.00 0.05 1.42 (0.05) -- -- ----------------------------------------------------------------------------------------------- CORE Large Cap Growth Fund 10.00 0.02 1.68 (0.02) -- -- ----------------------------------------------------------------------------------------------- CORE Small Cap Equity Fund 10.00 0.02 (0.95) (0.02) (0.01) -- ----------------------------------------------------------------------------------------------- Capital Growth Fund 10.00 0.03 1.31 (0.03) -- -- ----------------------------------------------------------------------------------------------- Mid Cap Equity Fund 10.00 0.07 (1.43) (0.07) -- -- ----------------------------------------------------------------------------------------------- International Equity Fund 10.00 0.02 1.98 -- -- (0.09) ----------------------------------------------------------------------------------------------- Global Income Fund 10.00 0.45 0.38 (0.40) -- (0.11) -----------------------------------------------------------------------------------------------
(a) The Growth and Income, International Equity and Global Income Funds commenced operations on January 12, 1998; the CORE U.S. Equity, CORE Large Cap Growth and CORE Small Cap Equity Funds commenced operations on February 13, 1998; the Capital Growth and Mid Cap Equity Funds commenced operations on April 30, 1998 and May 1, 1998, respectively. (b) Includes the balancing effect of calculating per share amounts. (c) Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of period. (d) Annualized. The accompanying notes are an integral part of these financial statements. 56 GOLDMAN SACHS VARIABLE INSURANCE TRUST
Ratios assuming no expense reimbursements --------------------------- Ratio of Ratio net Net Ratio of net investment Net increase Net asset assets at of net investment Ratio of income (decrease) value, end of expenses income expenses (loss) to Portfolio in net end of Total period to average to average to average average turnover asset value period return(c) (in 000's) net assets(d) net assets(d) net assets(d) net assets(d) rate $ 0.45 $10.45 5.47 % $13,814 0.90% 1.85% 2.69% 0.06 % 88% ----------------------------------------------------------------------------------------------------------------- 1.42 11.42 14.73 9,809 0.80 0.70 2.83 (1.33) 75 ----------------------------------------------------------------------------------------------------------------- 1.68 11.68 16.99 8,214 0.80 0.20 2.87 (1.87) 69 ----------------------------------------------------------------------------------------------------------------- (0.96) 9.04 (9.30) 4,841 0.90 0.30 3.92 (2.72) 74 ----------------------------------------------------------------------------------------------------------------- 1.31 11.31 13.40 4,463 0.90 0.42 4.92 (3.60) 20 ----------------------------------------------------------------------------------------------------------------- (1.43) 8.57 (13.56) 5,604 0.95 1.74 4.79 (2.10) 38 ----------------------------------------------------------------------------------------------------------------- 1.91 11.91 20.07 11,206 1.25 0.23 2.97 (1.49) 76 ----------------------------------------------------------------------------------------------------------------- 0.32 10.32 8.29 5,741 1.05 4.59 3.30 2.34 203 -----------------------------------------------------------------------------------------------------------------
57 GOLDMAN SACHS VARIABLE INSURANCE TRUST Notes to Financial Statements December 31, 1998 1. ORGANIZATION Goldman Sachs Variable Insurance Trust (the "Trust") is a Delaware business trust registered under the Investment Company Act of 1940, as amended ("the Act") as an open-end, management investment company. The Trust includes Goldman Sachs Growth and Income Fund ("Growth and Income"), Goldman Sachs CORE U.S. Equity Fund ("CORE U.S. Equity"), Goldman Sachs CORE Large Cap Growth Fund ("CORE Large Cap Growth"), Goldman Sachs CORE Small Cap Equity Fund ("CORE Small Cap Equity"), Goldman Sachs Capital Growth Fund ("Capital Growth"), Goldman Sachs Mid Cap Equity Fund ("Mid Cap Equity"), Goldman Sachs International Equity Fund ("International Equity") and Goldman Sachs Global Income Fund ("Global Income"), collectively, "the Funds" or individually a "Fund". Each Fund, except the Global Income Fund is diversified under the Act. The Global Income Fund is a "non-diversified" Fund under the Act. Shares of the Trust may be purchased and held by separate accounts of par- ticipating life insurance companies for the purpose of funding variable annu- ity 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 significant accounting policies consistently followed by the Funds. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make es- timates and assumptions that may affect the reported amounts. A. Investment Valuation -- Securities listed on any U.S. or foreign stock ex- change or on the National Association of Securities Dealers Automated Quota- tions System ("NASDAQ") will be valued at the last sale price on the exchange or system in which they are principally traded on the valuation date. If there is no sale on the valuation day, securities traded will be valued at the mean between the closing bid and asked prices. Over-the-counter securi- ties not quoted on NASDAQ will be valued at the last sale price on the valua- tion day or, if no sale occurs, at the mean between the last bid and asked price. Debt securities are valued at prices supplied by an independent pric- ing service, which reflect broker/dealer-supplied valuations and matrix pric- ing systems. Short-term debt obligations maturing in sixty days or less are valued at amortized cost. Restricted securities, and other securities for which quotations are not readily available, are valued at fair value using methods approved by the Board of Trustees of the Trust. B. Securities Transactions and Investment Income -- Securities transactions are recorded on the trade date. Realized gains and losses on sales of invest- ments are calculated on the identified-cost basis. Dividend income is re- corded on the ex-dividend date. Dividends for which the fund has the choice to receive either cash or stock are recognized as investment income in an amount equal to the cash dividend. Interest income is determined on the basis of interest accrued, premium amortized and discount earned. Growth and Income and Global Income do not amortize premiums. In addition, it is the Funds' policy to accrue for estimated capital gains taxes on foreign securities held by the Funds, which are subject to such taxes. C. Foreign Currency Translations -- Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investment valu- ations, other assets and liabilities initially expressed in foreign curren- cies are converted each business day into U.S. dollars based upon current exchange rates; (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. 58 GOLDMAN SACHS VARIABLE INSURANCE TRUST Net realized and unrealized gain (loss) on foreign currency transactions will represent: (i) foreign currency exchange gains and losses from the sale and holdings of foreign currencies; (ii) gains and losses between trade date and settlement date on investment securities transactions and forward ex- change contracts; and (iii) gains and losses from the difference between amounts of interest and dividend recorded and the amounts actually received. D. Forward Foreign Currency Exchange Contracts -- International Equity and Global Income may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a fu- ture date as a hedge or cross-hedge against either specific transactions or portfolio positions. International Equity and Global Income 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 re- sulting unrealized gains or losses are recorded in each Fund's financial statements. The Funds record realized gains or losses at the time the forward contract is offset by entry into a closing transaction or extinguished by de- livery 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. E. Mortgage Dollar Rolls -- The Global Income may enter into mortgage "dollar rolls" in which the Fund sells securities in the current month for delivery and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund bene- fits to the extent of any difference between the price received for the secu- rities sold and the lower forward price for the future purchase (often referred to as the "drop") or fee income plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward pur- chase. The Fund will hold and maintain in a segregated account, until the settlement date, cash or liquid assets, high-grade debt securities in an amount equal to the forward purchase price. For financial reporting and tax reporting purposes, the Fund treats mortgage dollar rolls as two separate transactions; one involving the purchase of a security and a separate trans- action involving a sale. F. Futures Contracts -- The Funds may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek an increase of total return. Upon entering into a futures contract, the Funds are required to deposit with a broker an amount of cash or securities equal to the minimum initial margin requirement of the futures exchange on which the contract is traded. Payments for mark to market on futures contracts ("variation margin") are paid or received by the Funds 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 Funds realize a gain or loss equal to the difference between the value of the futures con- tract to sell and the value of futures contract to buy. Gains and losses are reported in the Statements of Operations. The use of futures contracts involve, to varying degrees, elements of mar- ket and counterparty risk which may exceed the amounts recognized in the Statements of Assets and Liabilities. Changes in the value of the futures contract may not directly correlate with changes in the value of the under- lying securities. This risk may decrease the effectiveness of the Funds' hedging strategies and potentially result in a loss. G. Federal Taxes -- It is each Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable and tax- exempt income to its shareholders. Accordingly, no federal tax provisions are required. 59 GOLDMAN SACHS VARIABLE INSURANCE TRUST Notes to Financial Statements December 31, 1998 The characterization of distributions to shareholders for financial report- ing purposes is determined in accordance with income tax rules. Therefore, the source of a portfolio's distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in-capital, de- pending on the type of book/tax differences that may exist as well as timing differences. As of December 31, 1998, the following Funds had capital loss carryforwards for U.S. federal tax purposes. This amount is available to be carried forward to offset future capital gains to the extent permitted by applicable laws or regulations.
Year of Fund Amount Expiration - ----------------------------------------------- Growth and Income Fund $382,000 2006 - ----------------------------------------------- CORE U.S. Equity Fund 237,000 2006 - ----------------------------------------------- CORE Large Cap Growth Fund 628,000 2006 - ----------------------------------------------- CORE Small Cap Equity Fund 760,000 2006 - ----------------------------------------------- Capital Growth Fund 22,000 2006 - ----------------------------------------------- Mid Cap Equity Fund 138,000 2006 - -----------------------------------------------
H. Deferred Organization Expenses -- Organization-related costs are being am- ortized on a straight-line basis over a period of five years. Included in "Accrued expenses and other liabilities" in the accompanying Statements of Assets and Liabilities, the Capital Growth and Mid Cap Equity Funds each owed $11,781 to an affiliate for organization expenses incurred for the period ended December 31, 1998. The deferred organization costs for the Growth and Income, International Equity and Global Income Funds each have an unamortized period remaining through January 12, 2003; the CORE U.S. Equity, CORE Large Cap Growth and CORE Small Cap Equity Funds each have an unamortized period remaining through February 13, 2003; the Capital Growth and Mid Cap Equity Funds have an unam- ortized period remaining through April 30, 2003 and May 1, 2003, respective- ly. I. Expenses -- Expenses incurred by the Trust that do not specifically relate to an individual portfolio of the Trust are generally allocated to the port- folios on a pro-rata basis. 3. AGREEMENTS Pursuant to the Investment Management Agreement (the "Agreement"), Goldman Sachs Asset Management ("GSAM"), a separate operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the investment advisor for the Growth and Income, CORE U.S. Equity, CORE Large Cap Growth, CORE Small Cap Equity, Capital Growth and Mid Cap Equity Funds. Goldman Sachs Asset Manage- ment International ("GSAMI"), an affiliate of Goldman Sachs, serves as the investment advisor for International Equity and Global Income Fund. Under the Agreement, the advisers, subject to the general supervision of the Trust's Board of Trustees, manage the Funds' portfolios (GSAM and GSAMI are each re- ferred to herein as the "investment advisor.") As compensation for the serv- ices rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Funds' business affairs, including pro- viding facilities, the advisor is entitled to a fee, computed daily and pay- able monthly at an annual rate equal to .75%, .70%, .70%, .75%, .75%, .80%, 1.00% and .90% of average daily net assets of Growth and Income, CORE U.S. Equity, CORE Large Cap Growth, CORE Small Cap Equity, Capital Growth, Mid Cap Equity, International Equity and Global Income, respectively. The advisor has voluntarily agreed to limit certain "Other Expenses" of the Funds (excluding management fees, taxes, interest, brokerage fees, litigation and indemnification and other extraordinary expenses) to the extent that such expenses exceed .15%, .10%, .10%, .15%, .15%, .15%, .25% and .15% of the av- erage daily net assets of Growth and Income, CORE 60 GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. Equity, CORE Large Cap Growth, CORE Small Cap Equity, Capital Growth, Mid Cap Equity, International Equity and Global Income, respectively. Goldman Sachs also serves as the Transfer Agent of the Funds for a fee. Goldmans Sachs serves as the distributor of each Fund's shares at no cost to the Funds. As of December 31, 1998, Goldman Sachs was the beneficial owner of 16%, 58%, 71%, 94%, 76%, 31%, 83% and 94% of the outstanding shares of the Growth and Income, CORE U.S. Equity, CORE Large Cap Growth, CORE Small Cap Equity, Capital Growth, Mid Cap, International Equity and Global Income Funds, re- spectively. For the period ended December 31, 1998, the advisor has voluntarily agreed to reimburse other expenses as follows (amounts in thousands):
Reimbursement Fund Reimbursement Outstanding ----------------------------------------------------------------------------------------- Growth and Income $114 $18 ----------------------------------------------------------------------------------------- CORE U.S. Equity 121 17 ----------------------------------------------------------------------------------------- CORE Large Cap Growth 111 23 ----------------------------------------------------------------------------------------- CORE Small Cap Equity 129 24 ----------------------------------------------------------------------------------------- Capital Growth 91 10 ----------------------------------------------------------------------------------------- Mid Cap Equity 90 10 ----------------------------------------------------------------------------------------- International Equity 147 21 ----------------------------------------------------------------------------------------- Global Income 116 17 -----------------------------------------------------------------------------------------
The reimbursement outstanding balance is included in other assets in the ac- companying statements of assets and liabilities. 4. PORTFOLIO SECURITY TRANSACTIONS Purchases and proceeds of sales or maturities of long-term securities for the period ended December 31, 1998, were as follows:
Sales or Sales or Maturities Purchases of Purchases Maturities of (excluding U.S. U.S. Government (excluding U.S. U.S. Government Government and and agency Government and and agency agency obligations agency obligations) obligations obligations) -------------------------------------------------------------------------------------- Growth and Income -- $18,156,349 -- $4,917,610 -------------------------------------------------------------------------------------- CORE U.S. Eq- uity -- 13,803,509 -- 5,073,477 -------------------------------------------------------------------------------------- CORE Large Cap Growth -- 11,263,545 -- 4,172,504 -------------------------------------------------------------------------------------- CORE Small Cap Equity -- 8,849,890 -- 3,544,358 -------------------------------------------------------------------------------------- Capital Growth -- 4,425,556 -- 657,008 -------------------------------------------------------------------------------------- Mid Cap Eq- uity -- 5,312,296 -- 1,041,828 -------------------------------------------------------------------------------------- International Equity -- 15,832,457 -- 6,562,046 -------------------------------------------------------------------------------------- Global Income 3,427,184 11,517,813 2,311,961 7,667,469 --------------------------------------------------------------------------------------
61 GOLDMAN SACHS VARIABLE INSURANCE TRUST Notes to Financial Statements December 31, 1998 At December 31, 1998, the International Equity Fund had open forward for- eign currency exchange contracts both to purchase and sell foreign currencies as follows:
Forward Foreign Currency Contractual Current Unrealized Purchase Contracts Value Value Gain (Loss) ------------------------------------------------------------------------------ Deutschemark Expiring 1/25/99 $ 280,271 $ 278,458 $ (1,813) Deutschemark Expiring 1/29/99 118,176 116,509 (1,667) Deutschemark Expiring 1/29/99 14,387 14,323 (64) Japanese Yen Expiring 2/10/99 116,038 120,640 4,602 ------------------------------------------------------------------------------ TOTAL FORWARD FOREIGN CURRENCY PURCHASE CONTRACTS $ 528,872 $ 529,930 $ 1,058 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ Forward Foreign Currency Contractual Current Unrealized Sale Contracts Value Value Gain (Loss) ------------------------------------------------------------------------------ British Pound Expiring 1/29/99 $ 118,177 $ 116,152 $ 2,025 British Pound Expiring 1/29/99 14,862 14,934 (72) Hong Kong Dollar Expiring 12/8/99 223,411 226,290 (2,879) Japanese Yen Expiring 3/4/99 113,877 120,995 (7,118) Swiss Franc Expiring 2/17/99 256,746 259,189 (2,443) ------------------------------------------------------------------------------ TOTAL FORWARD FOREIGN CURRENCY SALE CON- TRACTS $ 727,073 $ 737,560 $(10,487) ------------------------------------------------------------------------------ At December 31, 1998, the Global Income Fund had open forward foreign cur- rency exchange contracts both to purchase and sell foreign currencies as fol- lows: Forward Foreign Currency Contractual Current Unrealized Purchase Contracts Value Value Gain (Loss) ------------------------------------------------------------------------------ Deutschemark Expiring 1/29/99 $ 39,666 $ 39,491 $ (175) Swedish Krona Expiring 1/22/99 34,792 33,470 (1,322) ------------------------------------------------------------------------------ TOTAL FORWARD FOREIGN CURRENCY PURCHASE CONTRACTS $ 74,458 $ 72,961 (1,497) ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ Forward Foreign Currency Contractual Current Unrealized Sale Contracts Value Value Gain Loss) ------------------------------------------------------------------------------ Canadian Dollar Expiring 2/22/99 $ 103,083 $ 104,328 $ (1,245) British Pound Expiring 1/29/99 551,755 540,935 10,820 British Pound Expiring 1/29/99 63,793 63,603 190 British Pound Expiring 1/29/99 212,560 209,942 2,618 Deutschemark Expiring 1/22/99 36,363 35,729 634 Deutschemark Expiring 1/25/99 22,189 22,257 (68) Deutschemark Expiring 1/25/99 214,864 215,958 (1,094) Deutschemark Expiring 1/25/99 54,000 53,898 102 Deutschemark Expiring 2/10/99 109,441 108,721 720 Danish Krone Expiring 1/13/99 307,274 301,110 6,164 French Franc Expiring 1/14/99 54,356 53,188 1,168 Italian Lira Expiring 1/12/99 230,317 231,693 (1,376) Japanese Yen Expiring 2/10/99 380,011 392,114 (12,103) Japanese Yen Expiring 2/10/99 77,473 80,188 (2,715) Japanese Yen Expiring 2/10/99 1,428 1,510 (82) Japanese Yen Expiring 2/10/99 167,003 171,393 (4,390) Spanish Pesta Expiring 1/20/99 161,325 161,976 (651) Swiss Franc Expiring 2/17/99 134,530 135,810 (1,280) ------------------------------------------------------------------------------ TOTAL FORWARD FOREIGN CURRENCY SALE CON- TRACTS $2,881,765 $2,884,353 $ (2,588) ------------------------------------------------------------------------------
62 GOLDMAN SACHS VARIABLE INSURANCE TRUST The contractual amounts of forward foreign currency exchange contracts do not necessarily represent the amounts potentially subject to risk. The mea- surement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered. At December 31, 1998, International Equity and Global Income had sufficient cash and/or secu- rities to cover any commitments under these contracts. At December 31, 1998, the International Equity and Global Income Funds have recorded open forward foreign currency contracts which are included in the accompanying Statements of Assets and Liabilities according to the following amounts:
International Equity Global Income Fund Fund ----------------------------------------------------------------------------- Receivable for open forward foreign currency exchange contracts $ 6,627 $22,416 ----------------------------------------------------------------------------- Payable for open forward foreign currency exchange contracts 16,056 26,501 -----------------------------------------------------------------------------
Included in the receivable and payable for foreign currency exchange con- tracts in the accompanying Statements of Assets and Liabilities are closed but unsettled forward foreign currency exchange contracts of the following amounts as of December 31, 1998:
International Equity Global Income Fund Fund ---------------------------------------------------------------------------- Receivable for closed but unsettled forward foreign currency exchange contracts $ 701 $ 9,202 ---------------------------------------------------------------------------- Payable for closed but unsettled forward foreign currency exchange contracts 9,048 11,012 ----------------------------------------------------------------------------
Mid Cap Equity is due $2,550 from Goldman Sachs related to variation margin on futures contracts as of December 31, 1998. For the period ended December 31, 1998, the Trust paid Goldman Sachs approximately $14,000 of brokerage commissions from portfolio transactions. 5. REPURCHASE AGREEMENTS During the term of a repurchase agreement, the value of the underlying secu- rities, including accrued interest, is required to equal or exceed the value of the repurchase agreement. The underlying securities for all repurchase agreements are held in safekeeping at the Funds' custodian. 6. JOINT REPURCHASE AGREEMENT ACCOUNT The Funds, together with other registered investment companies having manage- ment agreements with GSAM or their affiliates, transfer uninvested cash into joint accounts, the daily aggregate balance of which is invested in one or more repurchase agreements. 63 GOLDMAN SACHS VARIABLE INSURANCE TRUST Notes to Financial Statements December 31, 1998 At December 31, 1998, Growth and Income, Capital Growth and Mid Cap had un- divided interests in the repurchase agreements in the following joint account which equaled $700,000, $100,000 and $1,700,000, respectively, in principal amount. At December 31, 1998, the following repurchase agreements held in this joint account were fully collateralized by Federal Agency obligations.
Principal Interest Maturity Amortized Repurchase Agreements Amount Rate Date Cost ------------------------------------------------------------------------------ ABN-AMRO, Inc. $120,000,000 5.15% 01/04/1999 $ 120,000,000 ------------------------------------------------------------------------------ Deutsche Bank 77,300,000 5.07 01/04/1999 77,300,000 ------------------------------------------------------------------------------ Donaldson, Lufkin & Jenrette, Inc. 150,000,000 4.95 01/04/1999 150,000,000 ------------------------------------------------------------------------------ J.P. Morgan Securities, Inc. 700,000,000 4.75 01/04/1999 700,000,000 ------------------------------------------------------------------------------ Morgan Stanley & Co. 200,000,000 4.95 01/04/1999 200,000,000 ------------------------------------------------------------------------------ NationsBanc Montgomery Securities LLC 125,000,000 5.15 01/04/1999 125,000,000 ------------------------------------------------------------------------------ TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,372,300,000 ------------------------------------------------------------------------------
7. LINE OF CREDIT FACILITY The Funds participate in a $250,000,000 uncommitted, unsecured revolving line of credit facility. The facility is to be used solely for temporary or emer- gency purposes. Under the most restrictive arrangement, each Fund must own securities having a market value in excess of 300% of the total bank borrowings. The interest rate on the borrowings is based on the Federal Funds Rate at the time of participation. During the period ended December 31, 1998, the Funds did not have any borrowings under this facility. 8. CERTAIN RECLASSIFICATIONS In accordance with statement 93-2, the Growth and Income, CORE U.S. Equity, CORE Large Cap Growth, CORE Small Cap Equity, Capital Growth, Mid Cap Equity, International Equity and Global Income Funds have reclassified $3,441, $1,567, $1,864, $1,946, $1,046, $2,336, $1,688 and $1,346, respectively, from paid in capital to accumulated undistributed net investment income. Addition- ally, the Mid Cap Equity, International Equity and the Global Income Funds have reclassified $2, $34,441 and $31,522, respectively, from accumulated un- distributed net realized loss on investments, futures, and foreign currency transactions to accumulated undistributed net investment income. These re- classifications have no impact on the net asset value of the Funds and are designed to present the Funds' capital accounts on a tax basis. 64 [THIS PAGE INTENTIONALLY LEFT BLANK] 65 TRUSTEES OFFICERS Ashok N. Bakhru, Chairman Douglas C. Grip, President David B. Ford Jesse Cole, Vice President Douglas C. Grip James A. Fitzpatrick, Vice President John P. McNulty Anne Marcel, Vice President Mary P. McPherson Nancy L. Mucker, Vice President Alan A. Shuch John M. Perlowski, Treasurer Jackson W. Smart, Jr. Philip V. Giuca, Jr., Assistant Treasurer William H. Springer Michael J. Richman, Secretary Richard P. Strubel Howard B. Surloff, Assistant Secretary Valerie A. Zondorak, Assistant Secretary GOLDMAN, SACHS & CO. Distributor and Transfer Agent GOLDMAN SACHS ASSET MANAGEMENT Investment Adviser GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL 133 Peterborough Court London, England EC4A 2BB 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, CORE U.S. Equity, CORE Large Cap Growth, CORE Small Cap Equity, Capital Growth, Mid Cap Equity, International Equity and Global Income Funds. This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus which contains facts concerning the Fund's objectives, policies, management, expenses and other information. -----END PRIVACY-ENHANCED MESSAGE-----