<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Investments
July 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------
<C> <S> <C>
COMMON STOCKS - 95.6%
AEROSPACE/DEFENSE - 3.4%
Lockheed Martin
372,200 Corp. $ 39,639,300
- -----------------------------------------------
AIRLINES - 4.1%
237,600 AMR Corp.* 25,556,850
Continental Air-
571,900 lines, Inc.* 21,446,250
- -----------------------------------------------
47,003,100
- -----------------------------------------------
APPLIANCE MANUFACTURER - 3.6%
1,074,200 Sunbeam Corp. 42,028,075
- -----------------------------------------------
AUTO/ORIGINAL EQUIPMENT MANUFACTURER - 4.4%
1,058,400 Lear Corp.* 50,670,900
- -----------------------------------------------
AUTO/VEHICLE - 2.7%
761,700 Ford Motor Co. 31,134,488
- -----------------------------------------------
BANKS - 5.9%
Chase Manhattan
305,700 Corp. 34,716,056
NationsBank
130,900 Corp. 9,318,444
Republic of New
209,200 York Corp. 24,162,600
- -----------------------------------------------
68,197,100
- -----------------------------------------------
CHEMICAL PRODUCTS - 2.2%
Union Carbide
456,700 Corp. 25,289,763
- -----------------------------------------------
CHEMICALS-COMMODITY - 0.5%
325,800 Geon Co. 6,271,650
- -----------------------------------------------
COMMUNICATIONS & MEDIA - 0.9%
MCI Communica-
290,600 tions, Inc. 10,261,813
- -----------------------------------------------
DATACOM EQUIPMENT - 2.0%
Bay Networks,
747,100 Inc* 22,786,550
- -----------------------------------------------
DEFENSE - 1.7%
McDonnell Doug-
253,800 las Corp. 19,415,700
- -----------------------------------------------
ELECTRIC UTILITIES - 4.7%
Long Island
574,000 Lighting Co. 14,098,875
1,784,800 Unicom Corp. 40,492,650
- -----------------------------------------------
54,591,525
- -----------------------------------------------
ENTERTAINMENT AND LEISURE - 1.2%
Royal Caribbean
359,600 Cruise Lines 14,271,625
- -----------------------------------------------
FINANCIAL SERVICES - 3.0%
BankAmerica
294,000 Corp. 22,197,000
Fleet Financial
185,000 Group, Inc. 12,556,875
- -----------------------------------------------
34,753,875
- -----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- -----------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FOREST PRODUCTS - 4.1%
Georgia Pacific
274,000 Corp. $ 25,875,875
Stone Container
1,332,800 Corp.* 22,157,800
- -----------------------------------------------
48,033,675
- -----------------------------------------------
HEALTHCARE MANAGEMENT - 10.7%
357,400 Aetna Inc. 40,721,263
Columbia HCA
801,400 Healthcare 25,845,150
Foundation
679,100 Health Systems* 21,985,863
Tenet Healthcare
1,173,400 Corp.* 35,128,663
- -----------------------------------------------
123,680,939
- -----------------------------------------------
HOME BUILDERS - 3.9%
330,400 Centex Corp. 18,419,800
731,900 Lennar Corp. 27,263,275
- -----------------------------------------------
45,683,075
- -----------------------------------------------
INSURANCE BROKERS - 1.0%
102,000 Loews Corp. 11,028,750
- -----------------------------------------------
INSURANCE-LIFE - 3.4%
198,500 Cigna Corp. 39,600,750
- -----------------------------------------------
INTEGRATED OIL - 2.9%
Atlantic Rich-
228,000 field Co. 17,057,250
146,800 Texaco, Inc. 17,037,975
- -----------------------------------------------
34,095,225
- -----------------------------------------------
LOGISTICS/RAIL - 1.5%
Canadian Pacific
579,700 Ltd. 17,499,694
- -----------------------------------------------
OIL REFINING & MARKETING - 3.4%
1,264,600 Tosco Corp. 39,597,788
- -----------------------------------------------
PERSONAL COMPUTERS & PERIPHERALS - 3.5%
1,396,600 Quantum Corp. 40,588,688
- -----------------------------------------------
PACKAGING - 1.4%
Owens Illinois
469,400 Corp.* 16,194,300
- -----------------------------------------------
SECURITY AND COMMODITY BROKERS, DEALERS AND
SERVICES - 3.1%
692,500 Morgan Stanley
Dean Witter Dis-
cover & Co. 36,226,406
- -----------------------------------------------
SEMICONDUCTORS - 3.1%
543,700 Avnet, Inc. 35,782,256
- -----------------------------------------------
STEEL - 1.7%
439,300 AK Steel Holding
Corp. 20,152,888
- -----------------------------------------------
</TABLE>
- -----------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Investments (continued)
July 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
- ----------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SUPERMARKETS - 3.6%
1,038,300 Fleming Compa-
nies, Inc. $ 16,547,906
632,100 Supervalu, Inc. 25,600,050
- ----------------------------------------------
42,147,956
- ----------------------------------------------
TEXTILES - 2.3%
966,800 Fruit of The
Loom, Inc.* 26,466,150
- ----------------------------------------------
TIRE & OTHER RELATED RUBBER PRODUCTS - 2.8%
494,400 Goodyear Tire &
Rubber Co. 31,919,700
- ----------------------------------------------
TOBACCO - 1.4%
367,600 Philip Morris
Companies, Inc. 16,587,950
- ----------------------------------------------
TRANSPORTATION-MISCELLANEOUS - 1.5%
485,900 CNF Transporta-
tion Inc. 16,945,759
- ----------------------------------------------
TOTAL COMMON STOCKS
(COST $853,830,971) $1,108,547,413
- ----------------------------------------------
- ----------------------------------------------
PREFERRED STOCKS - 0.3%
46,000 Royal Caribbean
Cruise Lines* $ 3,128,000
- ----------------------------------------------
TOTAL PREFERRED STOCKS
(COST $2,300,000) $ 3,128,000
- ----------------------------------------------
- ----------------------------------------------
REPURCHASE AGREEMENT - 3.9%
$45,600,000 Joint Repurchase
Agreement
Account 5.84%,
08/01/97 $ 45,600,000
- ----------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $45,600,000) $ 45,600,000
- ----------------------------------------------
- ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS DESCRIPTION VALUE
- -----------------------------------------------------
<C> <S> <C> <C> <C>
OPTIONS - 0.1%
800 S&P 500 Index
Put, Strike 775,
exp. 09/97 $ 80,000
650 S&P 500 Index
Put, Strike 800,
exp. 09/97 89,375
800 S&P 500 Index
Put, Strike 875,
exp. 09/97 520,000
- -----------------------------------------------------
TOTAL OPTIONS
(COST $4,192,750) $ 689,375
- -----------------------------------------------------
- -----------------------------------------------------
TOTAL INVESTMENTS
(COST $905,923,721) (A) $1,157,964,788
- -----------------------------------------------------
- -----------------------------------------------------
FEDERAL INCOME TAX INFORMA-
TION:
Gross unrealized gain for
investments in which value
exceeds cost $ 266,542,770
Gross unrealized loss for
investments in which cost
exceeds value (14,535,337)
- -----------------------------------------------------
Net unrealized gain $ 252,007,433
- -----------------------------------------------------
- -----------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $905,957,355.
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.
6
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Assets and Liabilities
July 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities, at value
(identified cost $905,923,721) $1,157,964,788
Cash 43,389
Receivables:
Investment securities sold 1,175,798
Fund shares sold 13,105,678
Dividends and interest 1,284,635
Deferred organization expenses, net 9,844
Other assets 9,615
- -------------------------------------------------------------------------------
Total assets 1,173,593,747
- -------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 12,225,088
Fund shares repurchased 337,189
Amounts owed to affiliates 1,760,533
Accrued expenses and other liabilities 153,495
- -------------------------------------------------------------------------------
Total liabilities 14,476,305
- -------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 820,086,389
Accumulated distributions in excess of
net investment income (58,032)
Accumulated undistributed net realized
gain on investment, option and futures
transactions 87,048,018
Net unrealized gain on investment,
options and futures 252,041,067
- -------------------------------------------------------------------------------
Net assets $1,159,117,442
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total shares of beneficial interest
outstanding, $.001 par value
(100,000,000 and 25,000,000 shares per
each class authorized for each Class A
and B, respectively) 34,440,476 5,396,253
Net asset and Class A redemption value
per share (a) $28.62 $28.47
Maximum public offering price per share
(Class A NAV X 1.0582) $30.29 $28.47
<CAPTION>
INSTITUTIONAL SERVICE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total shares of beneficial interest
outstanding, $.001 par value
(50,000,000 shares per each class
authorized) 441,533 252,527
Net asset value, offering and
redemption price per share $28.63 $28.61
- -------------------------------------------------------------------------------
</TABLE>
(a) At redemption, Class B shares are subject to a contingent deferred sales
charge assessed on the amount equal to the lesser of the current net asset
value or the original purchase price of the shares.
- -----------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Operations
For the Six Months Ended July 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (a) $ 6,990,857
Interest 816,428
- ------------------------------------------------------------------------------
Total Income 7,807,285
- ------------------------------------------------------------------------------
EXPENSES:
Management fees 2,901,738
Distribution fees 1,198,314
Authorized dealer service fees 1,023,679
Custodian fees 74,717
Transfer agent fees 546,444
Professional fees 34,493
Registration fees 82,048
Amortization of deferred organization expenses 9,477
Trustee fees 6,327
Other 80,193
- ------------------------------------------------------------------------------
Total expenses 5,957,430
Less--expenses reimbursed and fees waived by Goldman Sachs (712,627)
- ------------------------------------------------------------------------------
Net expenses 5,244,803
- ------------------------------------------------------------------------------
Net investment income 2,562,482
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT, OPTION AND FUTURES
TRANSACTIONS:
Net realized gain from:
Investment transactions 69,243,703
Futures transactions 131,178
Net change in unrealized gain on:
Investments 126,699,516
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investment, option and
futures transactions: 196,074,397
- ------------------------------------------------------------------------------
Net increase in assets resulting from operations $198,636,879
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(a) Taxes withheld on dividends were $12,912.
- -----------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JULY 31, 1997 YEAR ENDED
(UNAUDITED) JANUARY 31, 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 2,562,482 $ 8,054,855
Net realized gain on investment, option and
futures transactions 69,374,881 58,230,209
Net change in unrealized gain on
investments 126,699,516 67,575,111
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 198,636,879 133,860,175
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A shares (2,315,182) (8,111,894)
Class B shares (72,045) (5,818)
Institutional shares (27,378) (494)
Service shares (12,653) (11,500)
In excess of net investment income
Class A shares -- (135,533)
Class B shares -- (48,273)
Institutional shares -- (380)
Service shares -- (9,070)
From net realized gain on investment,
option and futures transactions
Class A shares -- (46,442,616)
Class B shares -- (754,312)
Institutional shares -- (9,971)
Service shares -- (255,610)
- -------------------------------------------------------------------------------
Total distributions to shareholders (2,427,2 58) (55,785,471)
- -------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 361,407,405 140,362,846
Reinvestment of dividends and distributions 2,281,159 53,352,809
Cost of shares repurchased (36,596,735) (72,730,939)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
share transactions 327,091,829 120,984,716
- -------------------------------------------------------------------------------
Total increase 523,301,450 199,059,420
NET ASSETS:
Beginning of period 635,815,992 436,756,572
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
End of period $1,159,117,442 $635,815,992
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income $ (58,032) $ (193,256)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
- -----------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
9
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS(H) DISTRIBUTIONS TO SHAREHOLDERS
-------------------------------- -----------------------------------
NET REALIZED FROM NET
NET ASSET AND UNREALIZED REALIZED GAIN IN EXCESS
VALUE, NET GAIN (LOSS) ON FROM NET ON INVESTMENT OF NET ADDITIONAL NET INCREASE
BEGINNING INVESTMENT INVESTMENTS, INVESTMENT AND OPTION INVESTMENT PAID-IN IN NET ASSET
OF PERIOD INCOME OPTIONS AND FUTURES INCOME TRANSACTIONS INCOME CAPITAL VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31 (UNAUDITED),
1997 - Class A
Shares $23.18 $0.08(b) $5.44(b) $(0.08) $ -- $ -- $ -- $5.44
1997 - Class B
Shares 23.10 (0.01)(b) 5.41(b) (0.03) -- -- -- 5.37
1997 - Institu-
tional Shares 23.19 0.12(b) 5.44(b) (0.12) -- -- -- 5.44
1997 - Service
Shares 23.17 0.07(b) 5.44(b) (0.07) -- -- -- 5.44
- ---------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31,
1997 - Class A
Shares 19.98 0.35 5.18 (0.35) (1.97) (0.01) -- 3.20
1997 - Class B
Shares(f) 20.82 0.17 4.31 (0.17) (1.97) (0.06) -- 2.28
1997 - Institu-
tional Shares(f) 21.25 0.29 3.96 (0.30) (1.97) (0.04) -- 1.94
1997 - Service
Shares(f) 20.71 0.28 4.50 (0.28) (1.97) (0.07) -- 2.46
1996 - Class A
Shares 15.80 0.33 4.75 (0.30) (0.60) -- -- 4.18
1995 - Class A
Shares 15.79 0.20(b) 0.30(b) (0.20) (0.33) (0.07) 0.11(b) 0.01
- ---------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JANUARY 31,
1994 - Class A
Shares(c) 14.18 0.15 1.68 (0.15) (0.06) (0.01) -- 1.61
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at the net asset value at the beginning
of the period, reinvestment of all dividends and
distributions, a complete redemption of the investment at
the net asset value at the end of the period and no sales
or redemption charges. Total return would be reduced if a
sales or redemption charge were taken into account.
(b) Calculated based on the average shares outstanding
methodology.
(c) For the period from February 5, 1993 (commencement of
operations) to January 31, 1994.
(d) Not annualized.
(e) Annualized.
(f) For the period from March 6, May 1 and June 3, 1996
(commencement of operations) to January 31, 1997 for
Service, Class B and Institutional shares, respectively.
(g) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate on
security transactions on which commissions are charged.
This rate may vary due to various types of transactions and
number of security trades executed.
(h) Includes the balancing effect of calculating per share
amounts.
- -----------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
10
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
NET ASSETS RATIO OF NET INVESTMENT
NET ASSET AVERAGE AT END OF NET EXPENSES INCOME (LOSS)
VALUE, END TOTAL PORTFOLIO COMMISSION PERIOD TO AVERAGE TO AVERAGE NET
OF PERIOD RETURN(A) TURNOVER RATE RATE(G) (IN 000S) NET ASSETS ASSETS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$28.62 23.85%(d) 30.80%(d) $0.0592 $985,654 1.21%(e) 0.68%(e)
28.47 23.40(d) 30.80(d) 0.0592 153,619 1.91(e) (0.11)(e)
28.63 24.07(d) 30.80(d) 0.0592 12,641 0.83(e) 0.94(e)
28.61 23.82(b) 30.80(d) 0.0592 7,203 1.33(e) 0.54(e)
- ---------------------------------------------------------------------------------------
23.18 28.42 53.03 .0586 615,103 1.22 1.60
23.10 22.23(d) 53.03 .0586 17,346 1.93(e) 0.15(e)
23.19 20.77(d) 53.03 .0586 193 0.82(e) 1.36(e)
23.17 23.87(d) 53.03 .0586 3,174 1.32(e) 0.94(e)
19.98 32.45 57.93 -- 436,757 1.20 1.67
15.80 3.97 71.80 -- 193,772 1.25 1.28
- ---------------------------------------------------------------------------------------
15.79 13.08(d) 102.23(d) -- 41,528 1.25(e) 1.23(e)
- ---------------------------------------------------------------------------------------
<CAPTION>
RATIOS ASSUMING NO VOLUNTARY WAIVER
OF FEES OR EXPENSE LIMITATIONS
-----------------------------------------------------
RATIO OF
RATIO OF NET INVESTMENT
NET ASSET EXPENSES TO INCOME (LOSS) TO
VALUE, END AVERAGE NET AVERAGE NET
OF PERIOD ASSETS ASSETS
- ---------------------------------------------------------------------------------------
<S> <C> <C>
$28.62 1.41%(e) 0.48%(e)
28.47 1.91(e) (0.11)(e)
28.63 0.83(e) 0.94(e)
28.61 1.33(e) 0.54(e)
- ---------------------------------------------------------------------------------------
23.18 1.43 1.39
23.10 1.93(e) 0.15(e)
23.19 0.82(e) 1.36(e)
23.17 1.32(e) 0.94(e)
19.98 1.45 1.42
15.80 1.58 0.95
- ---------------------------------------------------------------------------------------
15.79 3.24(e) (0.76)(e)
- ---------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements
July 31, 1997
(Unaudited)
- ------------------------------ -----------------------------------------------
1. Organization
Effective May 1, 1997, Goldman Sachs Equity Portfolios, Inc. was reorganized
from a Maryland corporation to a Delaware business trust named the Goldman
Sachs Trust (the "Trust"). The Trust includes the Goldman Sachs Growth and In-
come Fund (the "Fund"). The Fund is registered under the Investment Company Act
of 1940, as amended, as an open-end, diversified management investment company.
At July 31, 1997, the Growth and Income Fund offers four classes of shares--
Class A, Class B, Institutional and Service.
2. Significant Accounting Policies
The following is a summary of the significant accounting policies consistently
followed by the Fund. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make esti-
mates and assumptions that may affect the reported amounts.
A. INVESTMENT VALUATION
Investments in securities traded on a U.S. or foreign securities exchange or
the NASDAQ system are valued daily at their last sale or closing price on the
principal exchange on which they are traded or NASDAQ. If no sale occurs, secu-
rities traded on a U.S. exchange or NASDAQ are valued at the mean between the
closing bid and asked price, and securities traded on a foreign exchange will
be valued at the official bid price. Unlisted equity and debt securities for
which market quotations are available are valued at the mean between the most
recent bid and asked prices. Debt securities are valued at prices supplied by
an independent pricing service, which reflect broker/dealer-supplied valuations
and matrix pricing systems. Short-term debt obligations maturing in sixty days
or less are valued at amortized cost. Restricted securities, and other securi-
ties 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 investments are calculated on the identified-cost basis.
Dividend income is recorded on the ex-dividend date. Dividends for which the
Fund has the choice to receive either cash or stock are recognized as invest-
ment income in an amount equal to the cash dividend. This amount is also used
as an estimate of the fair value of the stock received. Interest income is de-
termined on the basis of interest accrued, premium amortized and discount
earned.
C. FEDERAL TAXES
It is the 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 income and capital gains to
its shareholders. Accordingly, no federal tax provisions are required. The
characterization of distributions to shareholders for financial reporting pur-
poses is determined in accordance with income tax rules. Therefore, the source
of the Fund's distributions may be shown in the accompanying financial state-
ments as either from or in excess of net investment income or net realized gain
on investment transactions, or from capital, depending on the type of book/tax
differences that may exist as well as timing differences associated with having
different book and tax year ends.
D. DEFERRED ORGANIZATION EXPENSES
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
E. EXPENSES
Expenses incurred by the Trust which do not specifically relate to an individ-
ual fund of the Trust are allocated to the funds based on each funds' relative
average net assets for the period.
Class A and Class B shares bear all expenses and fees relating to the distri-
bution and authorized dealer service
12
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
July 31, 1997
(Unaudited)
- ------------------------------ -----------------------------------------------
plans as well as other expenses which are directly attributable to such shares.
Each class of Shares separately bears their respective class-specific transfer
agency fees. Service shares separately bear a service fee.
F. OPTION ACCOUNTING PRINCIPLES
When the Fund writes call or put options, an amount equal to the premium re-
ceived is recorded as an asset and as an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current market
value of the option written. When a written option expires on its stipulated
expiration date or the Fund enters into a closing purchase transaction, the
Fund realizes a gain or loss without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is extin-
guished. When a written call option is exercised, the Fund realizes a gain or
loss from the sale of the underlying security, and the proceeds of the sale are
increased by the premium originally received. When a written put option is ex-
ercised, the amount of the premium originally received will reduce the cost of
the security which the Fund purchases upon exercise. There is a risk of loss
from a change in value of such options which may exceed the related premiums
received.
Upon the purchase of a call option or a protective put option by the Fund, the
premium paid is recorded as an investment and subsequently marked-to-market to
reflect the current market value of the option. If an option which the Fund has
purchased expires on the stipulated expiration date, the Fund will realize a
loss in the amount of the cost of the option. If the Fund enters into a closing
sale transaction, the Fund will realize a gain or loss, depending on whether
the sale proceeds from the closing sale transaction are greater or less than
the cost of the option. If the Fund exercise a purchased put option, the Fund
will realize a gain or loss from the sale of the underlying security, and the
proceeds from such sale will be decreased by the premium originally paid. If
the Fund exercises a purchased call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
G. FUTURES CONTRACTS
The Fund may enter into futures transactions to hedge against changes in inter-
est rates, securities prices or to seek to increase total return.
Upon entering into a futures contract, the Fund is 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 futures contracts ("variation margin") are paid or received by the Fund
daily, dependent on the daily fluctuations in the value of the contracts, and
are recorded for financial reporting purposes as unrealized gains or losses.
When contracts are closed, the Fund realizes a gain or loss equal to the dif-
ference between the value of the futures contract to sell and the value of
futures contract to buy. Gains and losses are reported in the Statement of Op-
erations.
The use of futures contracts involve, to varying degrees, elements of market
and counterparty risk which may exceed the amounts recognized in the Statement
of Assets and Liabilities. Changes in the value of the futures contract may not
directly correlate with changes in the value of the underlying securities. This
risk may decrease the effectiveness of the Fund's hedging strategies and poten-
tially result in a loss.
3. Agreements
As of May 1, 1997, the Fund's Investment Advisory and Administration Agreements
were combined into an Investment Management Agreement (the "Agreement") encom-
passing the same services and fee structure. Goldman Sachs Asset Management
("GSAM"), a separate operating division of Goldman, Sachs & Co. ("Goldman
Sachs"), acts as investment adviser. Under the Agreement, GSAM, subject to the
general supervision of the Trust's Board of Trustees, manage the Fund's portfo-
lios. As compensation for the services rendered under the Agreement, the as-
sumption of the expenses related thereto and administering the Fund's business
affairs, including providing facilities, GSAM is entitled to a fee,
13
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
July 31, 1997
(Unaudited)
- ------------------------------ -----------------------------------------------
computed daily and payable monthly, at an annual rate equal to .70% of the av-
erage daily net assets of the Fund.
Goldman Sachs has voluntarily agreed to reduce or limit certain "Other Ex-
penses" for the Fund (excluding management, service, distribution and autho-
rized dealer service fees and litigation and indemnification costs, taxes, in-
terest, brokerage commissions, transfer agent fees and extraordinary expenses)
until further notice to the extent such expenses exceed .11% of the average
daily net assets of the Fund.
Goldman Sachs serves as the Distributor of shares of the Fund pursuant to Dis-
tribution Agreements. Goldman Sachs may receive a portion of the Class A sales
load and Class B contingent deferred sales charge imposed and has advised the
Company that it retained approximately $1,103,000 during the six months ended
July 31, 1997.
The Trust has adopted a Distribution Plan (the "Distribution Plan") pursuant
to Rule 12b-1. Under the Distribution Plan, Goldman Sachs is entitled to a
quarterly fee from the Fund for distribution services equal, on an annual ba-
sis, to .25% and .75% of the Fund's average daily net assets attributable to
Class A and Class B shares, respectively.
The Trust has adopted an Authorized Dealer Service Plan (the "Service Plan")
pursuant to which Goldman Sachs and Authorized Dealers are compensated for pro-
viding personal and account maintenance services. The Fund pays a fee under its
Service Plan equal, on an annual basis, to .25% of its average daily net assets
attributable to Class A and Class B shares. Goldman Sachs also serves as the
Transfer Agent of the fund for a fee.
For the six months ended July 31, 1997, the Distributor has voluntarily agreed
to waive approximately $713,000 attributable to the Class A shares. The Dis-
tributor may discontinue or modify this waiver in the future at its discretion.
At July 31, 1997, the Fund owed approximately $634,000, $354,000, $558,000 and
$215,000 for Management, Distribution, Authorized Dealer Service and Transfer
Agent fees, respectively.
4. Portfolio Securities Transactions
Purchases and proceeds of sales or maturities of securities (excluding short-
term investments, futures and options) for the six months ended July 31, 1997,
were $551,541,092 and $250,128,551, respectively.
For the six months ended July 31, 1997, Goldman Sachs earned approximately
$177,000 of brokerage commissions from portfolio transactions.
5. Repurchase Agreements
During the term of a repurchase agreement, the value of the underlying securi-
ties, including accrued interest, is required to equal or exceed the value of
the repurchase agreement. The underlying securities for all repurchase agree-
ments are held in safekeeping at the Fund's custodian.
6. Joint Repurchase Agreement Account
The Fund, together with other registered investment companies having advisory
agreements with GSAM, transfer uninvested cash balances into joint accounts,
the daily aggregate balance of which is invested in one or more repurchase
agreements. The underlying securities for the repurchase agreements are U.S.
Treasury and agency obligations. At July 31, 1997, the Growth and Income Fund
had an undivided interest in the repurchase agreements in the following joint
account which equaled $45,600,000 in principal amount. At July 31, 1997, the
repurchase agreements held in this joint account, along with the corre-
14
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
July 31, 1997
(Unaudited)
- ------------------------------ -----------------------------------------------
sponding underlying securities (including the type of security, market value,
interest rate and maturity date) were as follows:
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bear Stearns Securities, Inc., dated 07/31/97, repurchase price $100,016,250
(FNMA: $48,113,651, 5.50%-7.50%, 02/01/01-06/01/10; FHLMC: $55,056,251,
7.00%, 03/01/12)
$100,000,000 5.85% 08/01/97 $100,000,000
JP Morgan Securities, Inc., dated 07/31/97, repurchase price $80,013,000
(FNMA: $81,948,067, 6.76%-6.99%, 07/09/07-07/16/07)
80,000,000 5.85% 08/01/97 80,000,000
Lehman Government Securities, dated 07/31/97, repurchase price $28,004,480
(U.S. Treasury Note: $28,554,949, 6.75%, 04/30/00)
28,000,000 5.76% 08/01/97 28,000,000
Nomura Securities, Inc., dated 07/31/97, repurchase price $50,008,125 (GNMA:
$51,000,001, 7.00%-7.50%, 01/01/00-10/15/26)
50,000,000 5.85% 08/01/97 50,000,000
- ---------------------------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $258,000,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
7. Line of Credit Facility
The Fund participates in a $250,000,000 uncommitted, unsecured revolving line
of credit facility. In addition, the Fund participates in a $50,000,000 commit-
ted, unsecured revolving line of credit facility. Both facilities are to be
used solely for temporary or emergency purposes. Under the most restrictive ar-
rangement, the 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. This facility also requires a fee to be paid based on
the amount of the commitment which has not been utilized. During the six months
ended July 31, 1997, the Fund did not have any borrowings under this facility.
8. Summary of Share Transactions
Share activity for the six months ended July 31, 1997 and for the year ended
January 31, 1997 are as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JULY 31, 1997 JANUARY 31, 1997
------------------------ ------------------------
SHARES DOLLARS SHARES DOLLARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 9,172,565 $229,040,955 5,616,082 $121,074,992
Reinvestments of dividends
and distributions 87,181 2,178,974 2,390,917 52,287,188
Shares repurchased (1,353,556) (33,856,032) (3,328,038) (72,163,062)
- -------------------------------------------------------------------------------
7,906,190 197,363,897 4,678,961 101,199,118
- -------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 4,706,211 117,757,844 729,877 16,222,639
Reinvestments of dividends
and distributions 2,765 68,483 35,976 787,421
Shares repurchased (63,812) (1,652,479) (14,764) (340,546)
- -------------------------------------------------------------------------------
4,645,164 116,173,848 751,089 16,669,514
- -------------------------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 455,141 11,230,182 8,229 186,173
Reinvestments of dividends
and distributions 802 21,075 92 2,020
Shares repurchased (22,731) (593,738) -- --
- -------------------------------------------------------------------------------
433,212 10,657,519 8,321 188,193
- -------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 135,204 3,378,424 134,652 2,879,042
Reinvestments of dividends
and distributions 506 12,627 12,587 276,180
Shares repurchased (20,160) (494,486) (10,262) (227,331)
- -------------------------------------------------------------------------------
115,550 2,896,565 136,977 2,927,891
- -------------------------------------------------------------------------------
Net increase 13,100,116 $327,091,829 5,575,348 $120,984,716
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
15
