<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- -------------------------------- ---------------------------------------------
DEAR SHAREHOLDERS:
The U.S. stock market handsomely rewarded investors during the six-month
period ended July 31, 1997. Despite predictions that the rally's momentum would
falter following robust gains in 1995 and 1996, the market defied expectations
by continuing its dramatic push into previously unexplored heights. Investors
in most European markets also fared well, while the performance of several
Asian markets was dampened by regional issues.
U.S. STOCK MARKET REACHED RECORD LEVELS AS VOLATILITY INCREASED
The U.S. stock market soared during the period under review, achieving an
impressive 22.6% gain, as measured by the Standard & Poor's 500 stock index. As
was the case for much of last year, the market was led by "mega-cap" stocks,
the largest capitalization stocks in the index. To a significant extent, the
market's rally was attributable to highly favorable economic conditions: low
inflation, low unemployment, strong productivity gains and healthy profits. As
the market extended its advance, however, volatility increased. This trend was
particularly evident during the first half of the period, when stronger-than-
expected economic data prompted Federal Reserve policy makers to raise the
Federal funds rate by a quarter-percentage point in March to 5.50%. The Fed's
increase--its first since February 1995--fanned fears of a series of rate
hikes, and caused the market to sell off sharply from mid-March through mid-
April.
By the end of April, however, newly released data reassured investors that
the market-friendly environment remained intact: Moderating growth made further
rate hikes appear less likely, inflation remained subdued and most companies
continued to report strong earnings. These favorable factors helped the market
quickly recoup its losses and propelled indexes to record highs throughout the
latter half of the period. By mid-July, the Dow Jones Industrial Average closed
above 8000 for the first time, only five months after it hit the 7000
milestone.
ECONOMIC ACTIVITY MODERATED DURING THE SPRING, FOLLOWING A ROBUST FIRST QUARTER
Real GDP surged at a 4.9% annualized rate during the first quarter of 1997,
spurred by an upswing in consumer spending, rising factory output and buoyant
construction outlays. During the second quarter, however, real GDP eased to a
somewhat more moderate 3.6% growth rate (annualized), partly because a cool
spring impacted weather-sensitive areas such as retail sales and construction.
In July, most economic data pointed toward strengthening growth, as indicated
by a tightening labor market, a rebound in consumer purchases and an increase
in home sales.
OUTLOOK: ECONOMIC GROWTH IS EXPECTED TO ACCELERATE DURING THE REMAINDER OF THE
YEAR
Despite slowing economic activity during the second quarter, Goldman Sachs'
economists expect above-average growth to resume later in the year. If growth
does accelerate, increasing pressure on labor resources is likely to cause wage
inflation to climb and trigger further
- -------------------------------- ---------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction/Market Overview......... 1
Goldman Sachs Balanced Fund.......... 3
Goldman Sachs CORE U.S. Equity Fund.. 12
Goldman Sachs CORE Large Cap Growth
Fund................................ 20
Goldman Sachs Capital Growth Fund.... 26
Goldman Sachs Mid Cap Equity Fund.... 32
</TABLE>
<TABLE>
<S> <C>
Goldman Sachs International Equity
Fund................................ 36
Goldman Sachs Small Cap Equity Fund.. 43
Goldman Sachs Asia Growth Fund....... 48
Financial Statements................. 54
Notes to Financial Statements........ 62
Financial Highlights................. 73
</TABLE>
1
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
Fed monetary tightening by year-end. While the stock market's recent gains have
been impressive, additional rate hikes could affect equity performance. As
always, it is important to maintain realistic expectations regarding your
equity investments' returns.
We appreciate your investment in Goldman Sachs equity funds and look forward
to continuing to serve your investment needs in the future.
Sincerely,
/s/ David B. Ford /s/ John P. McNulty
David B. Ford John P. McNulty
Co-Head, Co-Head,
Goldman Sachs Goldman Sachs
Asset Management Asset Management
August 29, 1997
2
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs Balanced Fund seeks to provide investors with a combination
of long-term growth of capital and current income by investing in a diversified
portfolio that includes both equity and fixed income securities. Under normal
market conditions, the fund is expected to maintain an asset mix of 45% to 65%
in equity securities, with the remainder (at a minimum 25%) in fixed income
senior securities. The fund's portfolio management team reviews its asset mix
on a regular basis and adjusts it to reflect changes in the economic
environment.
Stocks are selected using a value style, focusing on those stocks judged to
be inexpensive relative to their expected long-term earnings and ability to pay
dividends. We also consider the degree to which a company's management is
committed to increasing value for shareholders.
In the fixed income portion of the portfolio, the portfolio is actively
managed within a risk-controlled framework. We seek to minimize interest rate
risk relative to the portfolio's benchmark, and focus on seeking to add value
through sector selection, security selection and yield curve strategies.
PERFORMANCE REVIEW: SUCCESSFUL EQUITY AND FIXED INCOME INVESTMENTS
PERFORMANCE SUMMARY: JANUARY 31, 1997--JULY 31, 1997
<TABLE>
<CAPTION>
FUND TOTAL RETURN
(BASED ON NET BENCHMARK
ASSET VALUE) TOTAL RETURN+
----------------- -------------
<S> <C> <C>
Class A* 15.42% 14.71%
Class B* 15.01% 14.71%
</TABLE>
* Class A and B share performance assumes reinvestment of all dividends and
distributions, a complete redemption at the net asset value at the end of the
period and no initial sales charge or contingent deferred sales charge.
+ The benchmark is a combination of the S&P 500 stock index (weighted at 55%)
and the Lehman Brothers Aggregate Bond Index (weighted at 45%) assuming
reinvestment of all dividends and interest.
During the period under review, both of the fund's share classes outperformed
the benchmark, as the accompanying table demonstrates. The equity and fixed
income portions of the fund both achieved favorable results, with equity
investments contributing most to relative outperformance. In addition, the
fund's asset mix yielded positive results. As of July 31, 1997, 56.4% of the
fund's net assets was invested in equities, 40.6% in fixed income and the
remainder in cash equivalents.
We are pleased to note that the fund fared well relative to its peers.
According to Lipper Analytical Services, Inc., Class A and B shares placed
within the top 15% of balanced funds (35th and 46th out of 317 funds for Class
A and B, respectively) for the 12-month period ended July 31, 1997. (Please
note that Lipper rankings do not take sales charges into account and that past
performance is not a guarantee of future results.)
HEALTHCARE, CONSUMER GOODS AND AIRLINE STOCKS WERE AMONG THE FUND'S BEST
PERFORMERS
The fund's top-performing stocks came from a diverse range of sectors,
including healthcare, consumer goods and airlines. AETNA, INC., a leading
healthcare provider, benefited from a friendlier regulatory environment and
consolidation in the healthcare industry. SUNBEAM CORP., INC., a consumer
products company, achieved strong results as investors responded positively to
its recent reforms, including major asset sales, improved distribution and a
new line of feature-laden products. CONTINENTAL AIRLINES, INC. performed well
as its improved service enabled it to continue to increase its share of
business traffic, which is typically more profitable than leisure travel. In
contrast, FRUIT OF THE LOOM, INC. was a disappointing performer as it was
impacted by a price war in screenprint tee shirts but held its prices steady in
order to maintain margins.
During the period, we significantly increased the fund's weighting in
technology stocks. New investments in the sector included two computer hardware
manufacturers: BAY NETWORKS, INC. (networking and
3
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
connectivity products) and QUANTUM CORP. (disk drives and other information
storage products).
TOP 10 EQUITY HOLDINGS AS OF JULY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
COMPANY LINE OF BUSINESS NET ASSETS
------- ---------------- ----------
<S> <C> <C>
Lear Corp. Autoparts/Original 2.6%
Equipment
Sunbeam Corp., 2.1
Inc. Appliances
Aetna, Inc. Healthcare 2.1
Management
Quantum Corp. Computer Component 2.1
Manufacturer
Unicom Corp. Electric Utility 2.0
Tosco Corp. Oil Refining and 2.0
Marketing
Lockheed Martin 2.0
Corp. Defense
Cigna Corp. Insurance 2.0
Morgan Stanley Financial Services 1.8
Dean Witter,
Discover & Co.
Avnet, Inc. Electronic 1.8
Components
Distributor
</TABLE>
FIXED INCOME HOLDINGS PERFORMED WELL AMID FAVORABLE CONDITIONS
Mortgage-backed securities (MBS) continued to account for the fund's largest
fixed income allocation at 13.7% of the portfolio's total net assets. The MBS
sector was one of the strongest performers during the period, benefiting from
declining volatility and stable mortgage prepayments. Corporate bonds, a 10.1%
allocation, also performed well as spreads continued to tighten amid positive
earnings growth and continued structural consolidation (e.g., mergers and
acquisitions activity, restructuring). Asset-backed securities (ABS) (6.0%)
experienced selling pressure early in the year, and then strengthened as
concerns regarding general credit deterioration and potentially vulnerable
insurance guarantees diminished. Emerging market debt was one of the smaller
portfolio allocations (3.0%), but significantly contributed to performance due
to a combination of positive emerging market country credit trends and global
liquidity. The remainder of the fixed income allocation was invested in U.S.
Treasuries (6.9%) to manage the fund's interest rate risk.
OUTLOOK
We remain committed to our strategy of identifying and purchasing stocks that
trade at a discount to their long-term earnings power and dividend-yielding
ability. In a market that has been characterized by speculation and momentum at
different times since the beginning of 1995, we believe that a value approach
is well suited to weather the ups and downs associated with a turbulent market.
In the fixed income markets, we are generally maintaining a neutral posture
as most sectors are currently trading at tight spreads. Regarding specific
sectors, support remains strong in the MBS market, but we believe spreads could
widen should volatility increase or investor demand diminish. In the ABS
sector, we expect spreads to stabilize or tighten modestly as new issuance
subsides and bargain hunters emerge, and will continue to emphasize issues with
tight underwriting standards and strong servicing capabilities. We have a
neutral view for the corporate sector, which is unlikely to experience much
further compression despite an anticipated reacceleration in economic activity
during the second half of the year. Finally, we are moderately optimistic
regarding the emerging debt sector, where we expect to shift the fund's
allocations among the different countries as we identify attractive investment
opportunities.
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
We will continue to carefully monitor the fund's asset allocation and adjust
its equity and fixed income weightings as economic and market conditions
change.
/s/ Ronald E. Gutfleish
Ronald E. Gutfleish
Senior Portfolio Manager,
U.S. Active Equity Value
/s/ G. Lee Anderson
G. Lee Anderson
Portfolio Manager,
U.S. Active Equity Value
/s/ Eileen A. Aptman
Eileen A. Aptman
Portfolio Manager,
U.S. Active Equity Value
August 29, 1997
/s/ Jonathan A. Beinner
Jonathan A. Beinner
Co-Head,
U.S. Fixed Income
/s/ C. Richard Lucy
C. Richard Lucy
Co-Head,
U.S. Fixed Income
5
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--56.2%
AEROSPACE/DEFENSE--2.0%
25,100 Lockheed Martin Corp. $ 2,673,150
- ------------------------------------------------------
AIRLINES--2.4%
16,100 AMR Corp.* 1,731,756
39,000 Continental Airlines, Inc.* 1,462,500
- ------------------------------------------------------
3,194,256
- ------------------------------------------------------
APPLIANCE MANUFACTURER--2.1%
73,000 Sunbeam Corp. 2,856,125
- ------------------------------------------------------
AUTO/ORIGINAL EQUIPMENT MANUFACTURER--2.6%
71,700 Lear Corp.* 3,432,638
- ------------------------------------------------------
AUTO/VEHICLE--1.6%
51,600 Ford Motor Co. 2,109,150
- ------------------------------------------------------
BANKS--5.2%
20,600 BankAmerica Corp. 1,555,300
20,700 Chase Manhattan Corp. 2,350,744
12,500 Fleet Financial Group, Inc. 848,438
9,000 NationsBank Corp. 640,688
13,400 Republic of New York Corp. 1,547,700
- ------------------------------------------------------
6,942,870
- ------------------------------------------------------
BUILDING MATERIALS & CONSTRUCTION--0.8%
32,300 Owens Illinois Corp.* 1,114,350
- ------------------------------------------------------
CHEMICAL PRODUCTS--1.6%
31,200 Union Carbide Corp. 1,727,700
22,200 Geon Co. 427,350
- ------------------------------------------------------
2,155,050
- ------------------------------------------------------
COMMUNICATIONS & MEDIA SERVICES--0.5%
19,600 MCI Communications, Inc. 692,125
- ------------------------------------------------------
DATACOM EQUIPMENT--1.2%
51,300 Bay Networks, Inc.* 1,564,650
- ------------------------------------------------------
DEFENSE--1.0%
17,300 McDonnell Douglas Corp. 1,323,450
- ------------------------------------------------------
ELECTRIC UTILITIES--2.8%
41,200 Long Island Lighting Co. 1,011,975
120,600 Unicom Corp. 2,736,113
- ------------------------------------------------------
3,748,088
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ENTERTAINMENT AND LEISURE--0.8%
26,100 Royal Caribbean Cruise Lines $1,035,844
- --------------------------------------------------
FOREST PRODUCTS--2.5%
18,600 Georgia Pacific Corp. 1,756,538
90,500 Stone Container Corp.* 1,504,563
- --------------------------------------------------
3,261,101
- --------------------------------------------------
HEALTHCARE MANAGEMENT--6.3%
24,200 Aetna Inc. 2,757,288
54,200 Columbia HCA Healthcare 1,747,950
46,000 Foundation Health Systems* 1,489,250
79,400 Tenet Healthcare Corp.* 2,377,038
- --------------------------------------------------
8,371,526
- --------------------------------------------------
HOME BUILDERS--2.4%
22,600 Centex Corp. 1,259,950
51,000 Lennar Corp. 1,899,750
- --------------------------------------------------
3,159,700
- --------------------------------------------------
INSURANCE BROKERS--0.3%
4,200 Loews Corp. 454,125
- --------------------------------------------------
INSURANCE-LIFE--2.0%
13,300 Cigna Corp. 2,653,350
- --------------------------------------------------
INSURANCE-PROPERTY AND CASUALTY--0.3%
9,200 Allmerica Financial Corp. 407,100
- --------------------------------------------------
INTEGRATED OIL--1.7%
15,600 Atlantic Richfield Co. 1,167,075
9,900 Texaco, Inc. 1,149,019
- --------------------------------------------------
2,316,094
- --------------------------------------------------
LOGISTICS/RAIL--0.7%
29,200 Canadian Pacific Ltd. 881,475
- --------------------------------------------------
OIL REFINING & MARKETING--2.0%
85,600 Tosco Corp. 2,680,350
- --------------------------------------------------
PERSONAL COMPUTERS-PERIPHERALS--2.1%
94,600 Quantum Corp* 2,749,313
- --------------------------------------------------
SECURITY AND COMMODITY BROKERS, DEALERS AND
SERVICES--1.8%
47,000 Morgan Stanley Dean Witter 2,458,688
- --------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS--1.8%
36,800 Avnet, Inc. $ 2,421,900
- -----------------------------------------------------
STEEL--1.0%
29,800 AK Steel Holding Corp. 1,367,075
- -----------------------------------------------------
SUPERMARKETS--2.1%
70,300 Fleming Companies, Inc. 1,120,406
41,200 Supervalu, Inc. 1,668,600
- -----------------------------------------------------
2,789,006
- -----------------------------------------------------
TEXTILES--1.3%
65,000 Fruit of the Loom, Inc.* 1,779,375
- -----------------------------------------------------
TIRE & OTHER RELATED RUBBER PRODUCTS--1.6%
33,500 Goodyear Tire & Rubber Co. 2,162,844
- -----------------------------------------------------
TOBACCO--0.8%
24,800 Philip Morris Companies, Inc. 1,119,100
- -----------------------------------------------------
TRANSPORTATION-MISCELLANEOUS--0.9%
33,400 CNF Transportation Inc. 1,164,825
- -----------------------------------------------------
TOTAL COMMON STOCKS
(COST $58,220,390) $ 75,038,693
- -----------------------------------------------------
PREFERRED STOCKS--0.2%
ENTERTAINMENT AND LEISURE--0.2%
3,000 Royal Caribbean Cruise Lines* $ 204,000
- -----------------------------------------------------
MEDIA/ENTERTAINMENT--0.0%
69 Time Warner, Inc. 78,853
- -----------------------------------------------------
TOTAL PREFERRED STOCKS
(COST $210,450) $ 282,853
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------------------------
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSET-BACKED SECURITIES--6.0%
Airplanes Pass Through Trust Series 1, Class C
$ 100,000 8.15% 03/15/19 $ 106,351
Asset Securitization Corp., Series 1996, Class A1
250,000 6.88 11/13/26 256,758
Case Equipment Loan Trust, Series 1995-A, Class A
51,206 7.30 03/15/02 51,581
Chemical Bank Master Credit Card Trust, Series 1995-2, Class A
140,000 6.23 06/15/06 140,612
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
Chevy Chase Auto Receivables Trust, Series 1995-2, Class A
$ 55,501 5.80% 06/15/02 $ 55,449
Discover Card Master Trust 1994-2, Class A
70,000 6.03 10/06/04 70,568
Discover Card Master Trust 1996-4, Class A
740,000 6.05 10/16/13 749,479
Discover Card Master Trust 1996-4, Class B
420,000 6.23 10/16/13 421,575
DVI Equipment Lease
391,239 6.55 07/10/04 393,136
Fasco Auto Trust, Series 1996-1, Class A
211,701 6.65 11/15/01 215,935
Fingerhut Master Trust, Series 1996-1, Class A
200,000 6.45 02/20/02 201,686
First USA Credit Card Master Trust
350,000 5.77 04/17/00 350,000
JP Morgan Commercial Mortgage Finance Corp., Series 1997-C4
400,000 7.32 12/26/28 416,562
MBNA Credit Card Master Trust
1,050,000 5.94 04/15/09 1,046,388
Mid-State Trust, Series 4, Class A
898,191 8.33 04/01/30 982,558
Morgan Stanley Capital Commercial Mortgage, Inc., Series 1997-C1
400,000 7.46 05/15/06 417,422
Mortgage Capital Funding Inc., Series 1997, Class A3
500,000 7.29 03/20/07 522,895
Navistar Financial Trust, Series 1995-A, Class A2
97,049 6.55 11/20/01 97,656
Navistar Financial Trust, Series 1995-B, Class A3
96,077 6.05 04/15/02 96,256
PXRE Capital Trust I
65,000 8.85 02/01/27 70,185
Sears Credit Account Master Trust, Series 1995-2, Class A
700,000 8.10 06/15/04 728,217
Sears Credit Card Master Trust, Series 1995-3, Class A
70,000 7.00 10/15/04 71,640
Standard Credit Card Master Trust, Series 1994-4, Class A
110,000 8.25 11/07/03 118,077
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
Standard Credit Card Master Trust, Series 1995-1, Class A
$ 360,000 8.25% 01/07/07 $ 395,773
- --------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(COST $7,865,244) $ 7,976,759
- --------------------------------------------------------------------------------------------------
CORPORATE BONDS--10.1%
FINANCE BONDS--3.7%
Asia Pulp and Paper International Finance Co.
$ 250,000 8.30% 06/28/99 $ 249,373
100,000 10.25 10/01/00 103,678
BankAmerica Corp.
1,000,000 7.75 07/15/02 1,058,620
Capital One Bank
150,000 6.90 04/15/99 151,664
290,000 6.88 04/24/00 294,539
900,000 6.60 08/20/01 898,083
Conseco, Inc.
160,000 10.50 12/15/04 192,754
Conseco Finance
200,000 8.70 11/15/26 215,468
Continental Bank
100,000 12.50 04/01/01 119,738
Countrywide Funding Corp.
150,000 8.00 12/15/26 159,333
100,000 6.08 07/14/99 100,009
200,000 7.73 08/09/01 209,930
Edison Mission Energy Funding Corp.
94,758 6.77 09/15/03 95,689
Fleet Mortgage Group, Inc.
250,000 6.50 06/15/00 252,110
Golden West Financial Corp.
200,000 10.25 12/01/00 223,420
Meditrust, Inc.
120,000 7.82 09/10/26 129,162
Signet Banking Corp.
500,000 9.63 06/01/99 528,390
Washington Real Estate
55,000 7.13 08/13/03 56,170
- --------------------------------------------------------------------------------------------------
TOTAL FINANCE BONDS
(COST $4,993,688) $ 5,038,130
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
INDUSTRIAL BONDS--5.9%
360 Communications Co.
$ 255,000 7.13% 03/01/03 $ 260,138
Auburn Hills Trust
50,000 12.00 05/01/20 78,081
Blockbuster Entertainment
50,000 6.63 02/15/98 50,072
Chelsea GCA Realty
226,000 7.75 01/26/01 233,024
Chrysler Corp.
60,000 7.45 02/01/97 62,490
Ford Motor Credit Co.
40,000 8.38 01/15/00 42,050
General Motors Acceptance Corp.
170,000 7.13 05/10/00 174,072
210,000 5.63 02/05/01 205,945
H + T Master Trust
220,000 8.18 08/15/02 220,000
Health & Retirement
250,000 6.20 07/09/07 250,000
Hertz Corp.
305,000 6.00 01/15/03 298,845
K Mart Corp.
40,000 9.55 06/30/98 40,570
40,000 9.60 09/15/98 40,500
Loewen Group International
200,000 7.75 10/15/01 203,500
Northwest Airlines
216,108 8.97 01/02/15 233,327
NWA Trust, Series A
66,300 8.26 03/10/06 71,090
NWCG Holding Corp.
450,000 6.81 06/15/99 400,721
Oryx Energy Co.
245,000 9.50 11/01/99 258,928
Owens-Illinois, Inc.
45,000 10.00 08/01/02 47,475
RJR Nabisco, Inc.
240,000 8.63 12/01/02 253,406
135,000 8.00 07/15/01 138,803
Rogers Cablesystems, Inc.
115,000 9.63 08/01/02 123,625
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
INDUSTRIAL BONDS (CONTINUED)
Taubman Realty Group, Inc.
$ 230,000 8.00% 07/30/01 $ 241,155
TCI Communications, Inc.
20,000 6.82 09/15/10 20,043
Tele-Communications, Inc.
805,000 6.28 09/15/03 804,598
125,000 9.65 10/01/03 134,944
Tenet Healthcare Corp.
60,000 9.63 09/01/02 66,150
Time Warner, Inc.
375,000 7.45 02/01/98 377,149
750,000 7.95 02/01/00 777,878
250,000 7.98 08/15/04 265,603
445,000 9.63 05/01/02 501,092
Tosco Corp.
110,000 7.00 07/15/00 112,069
U.S. Home Corp.
170,000 7.95 03/01/01 169,575
US Air Inc.
327,134 8.93 04/15/08 366,184
USI American Holdings
60,000 7.25 12/01/06 60,838
Viacom International
95,000 10.25 09/15/01 104,025
160,000 9.13 08/15/99 163,800
- --------------------------------------------------------------------------------------------------
TOTAL INDUSTRIAL BONDS
(COST $7,707,711) $ 7,851,765
- --------------------------------------------------------------------------------------------------
UTILITY BONDS--0.4%
Arkla, Inc.
$ 250,000 9.20% 12/18/97 $ 252,398
Central Maine Power Co.
100,000 7.38 01/01/99 101,742
160,000 7.45 08/30/99 161,925
- --------------------------------------------------------------------------------------------------
TOTAL UTILITY BONDS
(COST $521,661) $ 516,065
- --------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $13,223,060) $ 13,405,960
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EMERGING MARKET DEBT--3.0%
Argentina Bocon
$ 124,502 5.70% 04/01/01 $ 120,232
Argentina Bontes
10,000 8.00 12/13/98 10,115
50,000 8.75 05/09/02 50,950
Asia Pulp and Paper International Finance Co.
40,000 10.25 10/01/00 41,200
Banco Nacional de Obras
20,000 9.63 11/15/03 21,383
Banco de Colombia
30,000 8.63 06/02/00 31,354
BCO de Colombia
110,000 8.63 06/02/00 114,963
Bridas Corp.
90,000 12.50 11/15/99 99,788
60,000 9.50 06/17/99 61,061
Cemex S.A.
50,000 12.75 07/15/06 59,948
Cemex S.A. + Tolmex
20,000 10.00 11/05/99 20,926
City of Moscow
120,000 9.50 05/31/00 122,400
Comision Federal Electric
360,000 8.00 08/04/97 360,011
Corp. Andina de Fomento
100,000 7.25 04/30/98 100,898
80,000 8.38 07/29/01 83,215
DGS International Finance
100,000 10.00 06/01/07 106,200
Emp Ica Soc Contro
110,000 9.75 02/11/98 111,430
Empresa Col Petroleos
80,000 7.25 07/08/98 80,729
Financiera Energy Nacional
220,000 9.38 06/15/06 263,822
230,000 5.88 02/17/98 228,445
200,000 8.46 06/19/98 202,590
Groupo Iusacell
80,000 10.00 07/15/04 80,870
Grupo Industrial Durango
90,000 12.00 07/15/01 99,675
30,000 12.63 08/01/03 34,418
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
9
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EMERGING MARKET DEBT (CONTINUED)
Guangdong Enterprises
$ 100,000 8.88% 05/22/07 $ 105,562
Inst Fomento Industrial
210,000 8.38 07/29/01 218,440
Poland Communications, Inc.
90,000 9.88 11/01/03 91,532
Republic of Argentina
51,000 8.63 04/04/98 51,401
63,000 8.63 04/06/98 63,496
Republic of Croatia
80,000 7.00 02/27/02 79,477
Republic of Panama
446,158 7.03 05/10/02 446,171
Russian Federation
80,000 10.00 06/26/07 81,231
Sampoerna International Finance Co.
110,000 8.38 06/15/06 114,256
Trikem SA
100,000 10.63 07/24/07 101,241
YPF Sociedad Anonima
103,577 7.50 10/26/02 106,125
- ------------------------------------------------------------------------------------------------
TOTAL EMERGING MARKET DEBT
(COST $3,890,452) $ 3,965,555
- ------------------------------------------------------------------------------------------------
MORTGAGE BACKED OBLIGATIONS--13.7%
Asset Securitization Corp.
$ 450,000 7.49% 04/14/27 $ 479,444
Collateralized Mortgage Obligation Trust Series 64, Class Z
457,920 9.00 11/20/20 513,905
Federal Home Loan Mortgage Corp.(FHLMC)
1,000,000 7.50 TBA-15yr(a) 2,009,430
1,000,000 6.35 03/25/18 1,000,310
Federal National Mortgage Association (FNMA)
1,000,000 6.50 TBA-30yr(a) 1,000,930
1,000,000 7.50 TBA-30yr(a) 1,016,250
4,000,000 7.00 TBA-30yr(a) 3,993,720
1,000,000 8.50 TBA-30yr(a) 1,041,870
1,000,000 6.55 10/25/20 1,003,430
279,391 6.50 09/01/25 273,630
329,685 6.50 10/01/25 322,887
383,168 6.50 11/01/25 376,462
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS (CONTINUED)
First Union 1997C1 A2
$ 300,000 7.30% 04/18/29 $ 313,887
Government National Mortgage Association (GNMA)
3,000,000 8.00 TBA-30yr(a) 3,097,500
953,398 7.00 07/15/23 958,165
896,622 7.50 05/15/23 915,389
- ---------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(COST $18,087,031) $ 18,317,209
- ---------------------------------------------------------------------------------------------
SOVEREIGN CREDIT--0.8%
Province of Quebec
$ 200,000 13.25% 09/15/14 $ 235,528
Republic of Colombia
160,000 7.13 05/11/98 160,946
Republic of Croatia
100,000 7.00 02/27/02 100,554
State of Israel
190,000 6.38 12/15/05 184,399
United Mexican States
190,000 7.88 08/06/01 191,849
Republic of Argentina
JPY20,000,000 8.77 09/06/00 180,279
- ---------------------------------------------------------------------------------------------
TOTAL SOVEREIGN CREDIT
(COST $1,051,516) $ 1,053,555
- ---------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--6.8%
United States Treasury Bonds
$ 470,000 12.00% 08/15/13(d) $ 685,246
250,000 8.88 08/15/17 320,548
1,760,000 8.75 05/15/20(d) 2,256,654
170,000 7.88 02/15/21 200,573
280,000 7.63 02/15/25 325,674
United States Treasury Notes
450,000 6.88 08/31/99(d) 459,914
180,000 7.88 11/15/04(d) 199,715
1,250,000 6.13 07/31/00(d) 1,260,938
800,000 5.63 11/30/00 795,248
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS (CONTINUED)
United States Treasury Principal Only Stripped Securities(b)
$ 80,000 5.75% 08/15/99 $ 71,279
2,520,000 6.11 05/15/05 1,578,805
1,990,000 6.52 05/15/20 461,700
2,290,000 6.52 08/15/20 522,830
- -----------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $8,747,169) $ 9,139,124
- -----------------------------------------------------------------------------------------------
YANKEE BONDS--0.1%
Korea Electric Power
$ 92,815 7.40% 04/01/16 $ 98,403
- -----------------------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(COST $89,749) $ 98,403
- -----------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--0.1%
Argentina Treasury Bill
$ 80,000 6.17%(b) 10/17/97 $ 79,721
Republic of Argentina
90,000 5.36(b) 08/15/97 89,933
- -----------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(COST $168,673) $ 169,654
- -----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--12.1%
Joint Repurchase Agreement Account(d)
$16,200,000 5.84% 08/01/97 $ 16,200,000
- -----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $16,200,000) $ 16,200,000
- -----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $127,753,734)(C) $145,647,765
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which
value exceeds cost $18,844,921
Gross unrealized loss for investments in which
cost exceeds value (965,456)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain $17,879,465
- -----------------------------------------------------------------------------------------------------
</TABLE>
Futures contracts open at July 31, 1997 are as follows:
<TABLE>
<CAPTION>
Number of
Contracts Settlement Unrealized
Type Long(e) Month Gain
- -------------------------- --------- ---------- ----------
<S> <C> <C> <C>
September
2-Year U.S. Treasury Note 10 1997 $ 19,375
September
5-Year U.S. Treasury Note 6 1997 13,874
September
10-Year U.S. Treasury Bond 13 1997 32,158
September
30-Year U.S. Treasury Bond 12 1997 67,689
--------
$133,096
- -----------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) TBA (To Be Assigned) securities are purchased on a forward commitment basis
with an approximate (generally + /-2.5%) principal amount and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
(b) The interest rate disclosed for these securities represents effective
yields to maturity.
(c) The aggregate cost for federal income tax purposes is $127,768,300.
(d) Portions of these securities are being segregated as collateral for futures
contracts, TBA securities and mortgage dollar rolls.
(e) Each 2-Year U.S. Treasury Note contract represents $200,000 in notional par
value. Each 5-Year U.S. Treasury Note, 10-Year and 30-Year Treasury Bond
represents $100,000 in notional par value. The total net notional amount
and market value at risk are $5,100,000 and $5,567,000, respectively. The
determination of notional amounts does not consider market risk factors and
therefore 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.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
11
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE U.S. EQUITY FUND
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs CORE U.S. Equity Fund is designed to provide investors with
a broadly diversified portfolio that can be used as a core holding within an
overall investment program. The fund's investment objective is to provide
investors with long-term growth of capital and dividend income through
investment in a broadly diversified portfolio of large-cap and blue-chip equity
securities representing all major sectors of the U.S. economy. The fund's
mandate is to remain fully invested while maintaining risk, style,
capitalization and industry characteristics similar to the aggregate U.S. stock
market as represented by the S&P 500 stock index. Therefore, the fund's
performance relative to the market should result almost exclusively from stock
selection within sectors. We believe the fund offers investors an attractive
combination of value and growth, while seeking not to assume more risk than the
broad market.
The fund employs a disciplined approach that combines fundamental investment
research provided by the Goldman Sachs Global Investment Research Department
with quantitative analysis generated by a proprietary multifactor model
developed by the Asset Management Division. The model evaluates each stock
using many different criteria including valuation, momentum and safety. It also
objectively analyzes the impact of current economic conditions on different
types of stocks. Those stocks ranked highly by both the multifactor model and
by Goldman Sachs research are considered for the fund's portfolio.
NAME CHANGE
The name of the Goldman Sachs Select Equity Fund was changed in May to the
Goldman Sachs CORE U.S. Equity Fund. CORE stands for "Computer-Optimized,
Research-Enhanced," which, compared with its previous name, better describes
our strategy of using quantitative and fundamental research to pick stocks for
a diversified and risk-controlled portfolio. The fund's investment focus and
process remain the same.
PERFORMANCE REVIEW: SUCCESSFUL STOCK SELECTION DROVE THE FUND'S PERFORMANCE
PERFORMANCE SUMMARY: JANUARY 31, 1997--JULY 31, 1997
<TABLE>
<CAPTION>
FUND TOTAL RETURN
(BASED ON NET S&P 500
ASSET VALUE) TOTAL RETURN
----------------- ------------
<S> <C> <C>
Class A* 22.08% 22.55%
Class B* 21.74% 22.55%
Institutional* 22.48% 22.55%
Service* 22.17% 22.55%
</TABLE>
* Class A, B, Institutional and Service share performance assumes reinvestment
of all dividends and distributions, a complete redemption at the net asset
value at the end of the period and no initial sales charge or contingent
deferred sales charge.
We are pleased to report that the fund fared well compared with its peers.
For the five-year period ended July 31, 1997, the fund's Class A shares were
rated "four stars" (in a universe of 1,146 domestic equity funds) by
Morningstar, Inc., an independent mutual fund rating agency./1/
In addition, the fund's Institutional shares ranked within the top quartile
of the Lipper growth fund category (172 of 764) for the 12-month period ended
July 31, 1997, according to Lipper Analytical Services, Inc.
- --------
/1/ Source: (C) 1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of 7/31/97.
The ratings are subject to change every month. Past performance is no guarantee
of future results. Morningstar ratings are calculated from a fund's three-,
five-, and ten-year average annual returns (where applicable) in excess of 90-
day Treasury bill returns with appropriate fee and sales charge adjustments and
a risk factor that reflects fund performance below 90-day Treasury bill
returns. The fund's Class A shares received four stars and were rated among
2,040 domestic equity funds for the three-year period. The Morningstar rating
applies only to the fund's Class A shares; the fund's Class B, Institutional
and Service shares have not been rated. Class B, Institutional and Service
shares are subject to additional fees and expenses that may have the effect of
lowering performance and may affect any future Morningstar rating. Morningstar
rates funds against peers in the same category. In all, there are four
Morningstar categories (domestic equity, international equity, taxable bond and
municipal). Morningstar ratings range from five stars (highest) to one star
(lowest). Funds with five-star ratings are in the top 10% of their category,
four-star ratings in the next 22.5%, three stars the next 35%, two stars the
next 22.5% and one star the lowest 10% of their categories.
12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
(Please note that Lipper rankings do not take sales charges into account and
that past performance is not a guarantee of future results.) Class A, B and
Service shares also fared well, and they all ranked within the top third of the
Lipper growth fund category. (Class A, B and Service shares ranked 211, 240 and
197, respectively, out of 764 growth funds.)
Successful stock selection drove the fund's performance during the period.
During the first half of the period, the fund particularly benefited from the
direction set by our proprietary mutifactor model. Of the three investment
themes considered by the model--value, momentum, and safety--the portfolio had
an above-average tilt toward safety. This strategy worked in the fund's favor
as defensive value stocks generally outperformed volatile growth stocks beyond
the largest capitalization tier of the S&P 500. In addition, the qualitative
stock recommendations produced by the Goldman Sachs Global Investment Research
Department achieved strong results during the second quarter.
The fund's best performers came from a wide range of sectors, including
technology (MICROSOFT CORP., INTERNATIONAL BUSINESS MACHINES INC.), electrical
equipment (GENERAL ELECTRIC CO.), retailing (DAYTON HUDSON CORP.) and machinery
(CATERPILLAR, INC.).
PORTFOLIO COMPOSITION: THE FUND FAVORED DEFENSIVE, VALUE STOCKS
In general, the fund's sector exposures approximated that of the S&P 500
stock index, although its current tilt toward defensive, value stocks resulted
in a slight overweighting in "cheap" sectors (e.g., consumer durables) and less
volatile sectors (e.g., utilities and energy) and a slight underweighting in
"pricey" sectors (e.g., consumer nondurables) and cyclical sectors (e.g., basic
industries). These differences, as shown in Table II, stemmed from the fund's
bottom-up stock selection process, not from an economic forecast for specific
sectors.
The fund's valuation characteristics were slightly more attractive than those
of the benchmark. For example, the fund had a lower price/earnings ratio based
on 1997 estimated earnings than the S&P 500 (18.7x versus 20.8x) and a lower
price/book ratio (3.8x versus 4.0x). In other respects, the fund maintained
growth and risk characteristics in line with the S&P 500.
TABLE I
TOP 10 PORTFOLIO HOLDINGS AS OF JULY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
COMPANY LINE OF BUSINESS NET ASSETS
------- ---------------- ----------
<S> <C> <C>
General Electric
Co. Electronics 4.2%
Exxon Corp. Petroleum and 2.8
Natural Gas
Intel Corp. Semiconductors and 2.2
Electronics
Microsoft Corp. Computer Software 1.8
Coca Cola Co. Beverages 1.7
General Motors Automobile 1.7
Corp. Manufacturer
Merck & Co.,
Inc. Pharmaceuticals 1.6
GTE Corporation Telecommunications 1.6
Mobil Petroleum and 1.5
Corporation Natural Gas
Bristol-Myers
Squibb Co. Pharmaceuticals 1.5
</TABLE>
TABLE II
SECTOR BREAKOUT AS OF JULY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
INDUSTRY SECTORS PORTFOLIO S&P 500 INDEX DIFFERENCE
---------------- ------------- ------------- ----------
<S> <C> <C> <C>
Capital Spending 17.8% 18.6% -0.8%
Consumer 17.5 19.9 -2.4
Nondurables
Finance 15.9 17.1 -1.2
Consumer
Services 10.9 11.7 -0.8
Utilities 9.3 8.5 0.8
Energy 9.1 8.1 1.0
Basic Industry 5.9 6.9 -1.0
Miscellaneous 4.5 5.5 -1.0
Consumer
Durables 4.2 2.4 1.8
Cash (Equitized 3.0 0.0 3.0
with S&P 500
futures)
Transportation 1.9 1.3 0.6
</TABLE>
13
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE U.S. EQUITY FUND (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
OUTLOOK
We intend to maintain a balanced approach by considering each of our
investment themes (value, momentum and safety) when making investment
decisions. In the near term, however, recent cautionary signals--such as
increasing stock market volatility and record-low dividend yields--have led us
to adopt a more defensive posture. As a result, we are focusing primarily on
low-risk stocks with attractive valuations, while slightly reducing our weight
on momentum.
/s/ Robert C. Jones
Robert C. Jones
Senior Portfolio Manager,
Quantitative Equity
/s/ Kent A. Clark
Kent A. Clark
Portfolio Manager,
Quantitative Equity
/s/ Victor H. Pinter
Victor H. Pinter
Portfolio Manager,
Quantitative Equity
August 29, 1997
14
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE U.S. EQUITY FUND
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
COMMON STOCKS--96.6%
ADVERTISING--0.3%
27,400 Omnicom Group $ 1,912,863
- -----------------------------------------------------
AEROSPACE--0.7%
42,600 United Technologies Corp. 3,602,363
- -----------------------------------------------------
AGRICULTURE/HEAVY EQUIPMENT--1.2%
24,500 Case Corp. 1,529,719
43,100 Conagra, Inc. 3,030,469
47,800 Tenneco, Inc. 2,228,675
- -----------------------------------------------------
6,788,863
- -----------------------------------------------------
AIRLINES--1.1%
23,400 AMR Corp.* 2,516,963
36,600 Delta Air Lines, Inc. 3,252,825
- -----------------------------------------------------
5,769,788
- -----------------------------------------------------
APPLIANCE MANUFACTURER--0.5%
76,500 Sunbeam Corp. 2,993,063
- -----------------------------------------------------
AUTO/ORIGINAL EQUIPMENT MANUFACTURER--0.3%
22,600 Cummins Engine, Inc. 1,774,100
- -----------------------------------------------------
AUTO/VEHICLE--2.5%
112,900 Ford Motor Co. 4,614,788
150,400 General Motors Corp. 9,306,000
- -----------------------------------------------------
13,920,788
- -----------------------------------------------------
AUTOMOBILES & AUTOMOBILE PARTS--0.3%
42,500 Genuine Parts Co. 1,386,563
- -----------------------------------------------------
BANK HOLDING COMPANIES--0.4%
25,400 Comerica, Inc. 1,920,875
- -----------------------------------------------------
BANKS--4.8%
32,750 Banc One Corp. 1,838,094
46,900 Bank of New York, Inc. 2,277,581
41,500 Chase Manhattan Corp. 4,712,844
25,200 Citicorp. 3,420,900
27,800 First Bank System, Inc. 2,474,200
33,600 First Chicago Corp. 2,549,400
94,600 NationsBank Corp. 6,734,338
10,000 Wells Fargo & Company 2,749,375
- -----------------------------------------------------
26,756,732
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BEVERAGES--2.5%
135,800 Coca Cola Co. $ 9,404,150
112,700 Pepsico, Inc. 4,317,819
- -----------------------------------------------------------
13,721,969
- -----------------------------------------------------------
BIOTECHNOLOGY--0.2%
14,700 Amgen, Inc.* 864,544
- -----------------------------------------------------------
BUILDING MATERIALS--0.3%
38,000 USG Corp.* 1,786,000
- -----------------------------------------------------------
BUSINESS SERVICES--0.5%
53,500 Automatic Data Processing, Inc. 2,648,250
- -----------------------------------------------------------
CHEMICAL PRODUCTS--0.7%
40,300 Du Pont (E.I.) de Nemours & Co. 2,697,581
44,500 IMC Global, Inc. 1,404,531
- -----------------------------------------------------------
4,102,112
- -----------------------------------------------------------
CHEMICALS-COMMODITY--1.4%
44,900 Dow Chemicals Co. 4,265,500
67,300 Monsanto Co. 3,352,381
- -----------------------------------------------------------
7,617,881
- -----------------------------------------------------------
COMMERCIAL SERVICES--0.3%
31,800 Interim Services, Inc.* 1,448,888
- -----------------------------------------------------------
COMMUNICATIONS SERVICES COMPANIES--0.4%
73,800 Airtouch Communications, Inc.* 2,430,788
- -----------------------------------------------------------
COMMUNICATIONS & MEDIA SERVICES--3.6%
52,400 Ameritech Corp. 3,533,725
48,500 Bellsouth Corp. 2,297,688
185,100 GTE Corp. 8,607,150
49,900 Sprint Corp. 2,470,050
87,200 Worldcom, Inc.* 3,046,550
- -----------------------------------------------------------
19,955,163
- -----------------------------------------------------------
CONSUMER GOODS--0.5%
42,000 Nike, Inc. 2,617,125
- -----------------------------------------------------------
CONSUMER STAPLES--1.7%
50,500 American Home Products Corp. 4,163,094
32,600 Procter & Gamble Co. 4,959,275
- -----------------------------------------------------------
9,122,369
- -----------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
15
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE U.S. EQUITY FUND (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DEFENSE--1.7%
75,000 Boeing Co. $ 4,410,938
36,200 Textron, Inc. 2,536,263
36,000 TRW, Inc. 2,106,000
- --------------------------------------------------------------
9,053,201
- --------------------------------------------------------------
DEPARTMENT STORES--3.6%
105,300 Dayton Hudson Corp. 6,805,013
37,100 Federated Department Stores, Inc.* 1,625,444
27,300 Fred Meyer, Inc.* 1,564,631
64,200 Sears Roebuck & Co. 4,064,663
150,700 Walmart Stores, Inc. 5,660,669
- --------------------------------------------------------------
19,720,420
- --------------------------------------------------------------
DIVERSIFIED MANUFACTURING--0.6%
36,900 Allied Signal, Inc. 3,404,025
- --------------------------------------------------------------
ELECTRIC UTILITIES--2.6%
74,600 Duke Power Co. 3,781,288
125,800 Edison International, Inc. 3,176,450
21,300 Empresa Nacional de Electric ADR 1,797,188
42,900 Teco Energy, Inc. 1,088,588
90,700 Texas Utilities Co. 3,214,181
57,600 Unicom Corp. 1,306,800
- --------------------------------------------------------------
14,364,495
- --------------------------------------------------------------
ELECTRICAL--0.3%
51,200 Cinergy Corp. 1,721,600
- --------------------------------------------------------------
ELECTRONICS & OTHER ELECTRICAL EQUIPMENT--4.6%
37,300 Emerson Electric Co. 2,200,700
327,000 General Electric Co. 22,951,313
- --------------------------------------------------------------
25,152,013
- --------------------------------------------------------------
ENTERPRISE SYSTEMS--3.2%
76,000 Compaq Computer Corp.* 4,341,500
63,700 Hewlett Packard Co. 4,462,981
65,300 International Business Machines 6,905,475
49,900 Sun Microsystems, Inc.* 2,279,806
- --------------------------------------------------------------
17,989,762
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ENTERTAINMENT AND LEISURE--0.8%
53,642 Walt Disney, Co. $ 4,334,944
- -----------------------------------------------------------------
FINANCIAL SERVICES--4.0%
25,700 American Express Co. 2,152,375
33,000 American Financial Group 1,575,750
90,700 BankAmerica Corp. 6,847,850
91,700 Federal National Mortgage Association 4,338,556
76,600 Providian Financial Corp. 3,001,763
60,033 Travelers Group, Inc. 4,318,624
- -----------------------------------------------------------------
22,234,918
- -----------------------------------------------------------------
FOOD--0.7%
35,100 Interstate Bakeries Corp. 2,141,100
7,800 Unilever, Inc. 1,700,400
- -----------------------------------------------------------------
3,841,500
- -----------------------------------------------------------------
FOOD PRODUCERS--0.6%
33,500 Dean Foods Co. 1,614,281
16,000 Ralston Purina Co. 1,444,000
- -----------------------------------------------------------------
3,058,281
- -----------------------------------------------------------------
FOREST PRODUCTS--1.4%
80,000 Avery Dennison Corp. 3,530,000
28,000 Georgia Pacific Corp. 2,644,250
26,600 Kimberly Clark Corp. 1,348,288
- -----------------------------------------------------------------
7,522,538
- -----------------------------------------------------------------
GAS DISTRIBUTION & PIPELINE--0.6%
45,100 Columbia Gas Systems, Inc. 3,100,625
- -----------------------------------------------------------------
GROCERY PRODUCTS--0.4%
97,500 IBP, Inc. 2,218,125
- -----------------------------------------------------------------
HEALTH & MEDICAL SERVICES--2.0%
62,800 Abbott Laboratories 4,109,475
85,400 Johnson & Johnson 5,321,488
28,900 Lincare Holdings, Inc.* 1,416,100
- -----------------------------------------------------------------
10,847,063
- -----------------------------------------------------------------
HEALTH SUPPLIERS/SERVICES--0.2%
31,900 Alberto Culver Co. Class B 895,194
- -----------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HEALTHCARE MANAGEMENT--0.8%
62,600 Columbia HCA Healthcare $ 2,018,850
51,800 Wellpoint Health Networks* 2,551,150
- --------------------------------------------------------------
4,570,000
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS--1.1%
58,800 Gillette Co. 5,821,200
- --------------------------------------------------------------
INDUSTRIAL--0.7%
61,400 Corning, Inc. 3,795,288
- --------------------------------------------------------------
INDUSTRIAL MACHINERY--0.7%
70,800 Caterpillar, Inc. 3,964,800
- --------------------------------------------------------------
INFORMATION MANAGEMENT--0.9%
189,700 Dun & Bradstreet Corp. 5,121,900
- --------------------------------------------------------------
INSURANCE--0.3%
12,900 MBIA, Inc. 1,522,200
- --------------------------------------------------------------
INSURANCE SERVICES--0.3%
35,600 Protective Life Corp. 1,811,150
- --------------------------------------------------------------
INSURANCE SPECIALTY--0.3%
40,900 Everest Reinsurance Holdings 1,584,875
- --------------------------------------------------------------
INSURANCE-LIFE--0.7%
18,300 Cigna Corp. 3,650,850
- --------------------------------------------------------------
INSURANCE-MULTI-LINE--0.3%
22,654 Aegon N V Amer Reg 1,718,872
- --------------------------------------------------------------
INSURANCE-PROPERTY AND CASUALTY--1.4%
25,356 Allstate Corp. 2,003,124
54,075 American International Group, Inc. 5,758,988
- --------------------------------------------------------------
7,762,112
- --------------------------------------------------------------
INTEGRATED OIL--6.5%
21,600 Amoco Corp. 2,030,400
41,800 Atlantic Richfield Co. 3,127,163
240,500 Exxon Corp. 15,452,125
82,200 Phillips Petroleum Co. 3,786,338
104,000 Royal Dutch Petroleum 5,817,500
27,200 Texaco, Inc. 3,156,900
55,000 Unocal Corp. 2,200,000
- --------------------------------------------------------------
35,570,426
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INVESTMENT BROKERS & MANAGERS--1.1%
49,200 Merrill Lynch Co. $ 3,465,525
40,800 Salomon, Inc. 2,588,250
- ---------------------------------------------------------
6,053,775
- ---------------------------------------------------------
LOGISTICS/RAIL--0.8%
37,900 Norfolk Southern Corp. 4,197,425
- ---------------------------------------------------------
MACHINERY AND EQUIPMENT--0.4%
28,600 Ingersoll-Rand Co. 1,946,588
- ---------------------------------------------------------
MEDIA/ENTERTAINMENT--0.6%
40,500 King World Productions, Inc.* 1,635,188
52,600 Meredith Corp. 1,456,363
- ---------------------------------------------------------
3,091,551
- ---------------------------------------------------------
MISCELLANEOUS MANUFACTURER--0.3%
79,200 Coltec Industries, Inc.* 1,742,400
- ---------------------------------------------------------
NONFERROUS METALS--0.6%
47,200 Alumax, Inc.* 2,000,100
15,500 Phelps Dodge Corp. 1,318,469
- ---------------------------------------------------------
3,318,569
- ---------------------------------------------------------
OFFICE & BUSINESS EQUIPMENT--0.9%
42,000 Miller Herman, Inc. 2,084,250
35,600 Xerox Corp. 2,928,100
- ---------------------------------------------------------
5,012,350
- ---------------------------------------------------------
OIL & GAS--2.6%
58,600 Ensco International, Inc.* 3,874,925
106,700 Mobil Corp. 8,162,550
60,100 Rowan Companies, Inc.* 1,975,788
- ---------------------------------------------------------
14,013,263
- ---------------------------------------------------------
OIL & GAS EXPLORATION--0.5%
101,900 Marine Drilling Companies* 2,528,394
- ---------------------------------------------------------
PERSONAL COMPUTERS & PERIPHERALS--1.6%
63,000 Creative Technology* 1,283,625
29,700 Eastman Kodak Co. 1,989,900
74,400 Quantum Corp.* 2,162,250
90,200 Western Digital Corp.* 3,472,700
- ---------------------------------------------------------
8,908,475
- ---------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
17
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE U.S. EQUITY FUND (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS--5.7%
103,800 Bristol-Myers Squibb $ 8,141,813
18,200 Eli Lilly & Co. 2,056,600
43,900 Forest Laboratories, Inc.* 1,997,450
84,000 Merck & Co., Inc. 8,730,750
56,000 Pfizer, Inc. 3,339,000
93,000 Schering Plough Corp. 5,074,313
13,500 Warner Lambert Co. 1,885,781
- --------------------------------------------------------------
31,225,707
- --------------------------------------------------------------
PRINTING--0.3%
51,400 Lexmark International Group, Inc.* 1,673,713
- --------------------------------------------------------------
RESTAURANTS--0.3%
28,000 McDonalds Corp. 1,505,000
- --------------------------------------------------------------
RESTAURANTS & HOTELS--0.3%
23,800 HFS, Inc.* 1,386,350
- --------------------------------------------------------------
RETAIL--1.5%
65,000 American Stores Co. 1,641,250
87,600 Best Buy Co., Inc.* 1,138,800
49,950 Home Depot, Inc. 2,491,256
44,800 Ross Stores, Inc. 1,416,800
58,400 TJX Companies, Inc. 1,744,700
- --------------------------------------------------------------
8,432,806
- --------------------------------------------------------------
RETAIL TRADE--0.4%
47,100 Gap, Inc. 2,093,006
- --------------------------------------------------------------
SAVINGS AND LOANS--0.6%
60,600 HF Ahmanson & Co. 3,223,163
- --------------------------------------------------------------
SECURITY--0.5%
30,400 Tyco International Ltd. 2,462,400
- --------------------------------------------------------------
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES--0.1%
13,800 Morgan Stanley Dean Witter 721,913
- --------------------------------------------------------------
SEMICONDUCTORS--3.9%
32,800 Advanced Micro Devices, Inc.* 1,150,050
132,400 Intel Corp. 12,155,975
33,700 Micron Technology, Inc.* 1,640,769
58,400 Motorola, Inc. 4,690,250
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS (CONTINUED)
48,100 National Semiconductor Corp.* $ 1,515,150
- -----------------------------------------------------------
21,152,194
- -----------------------------------------------------------
SOFTWARE & SERVICES--2.0%
68,700 Microsoft Corp.* 9,721,050
24,000 Oracle Corp.* 1,306,500
- -----------------------------------------------------------
11,027,550
- -----------------------------------------------------------
SPECIALTY RETAIL--0.3%
34,700 Tiffany & Co. 1,568,006
- -----------------------------------------------------------
SUPERMARKETS--0.6%
58,567 Safeway, Inc.* 3,140,655
- -----------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT--0.7%
43,303 Lucent Technologies, Inc. 3,678,049
- -----------------------------------------------------------
TEXTILES--0.3%
32,400 Sara Lee Corp. 1,419,525
- -----------------------------------------------------------
TIRE & OTHER RELATED RUBBER PRODUCTS--0.3%
29,100 Goodyear Tire & Rubber Co. 1,878,769
- -----------------------------------------------------------
TOBACCO--1.9%
176,500 Philip Morris Companies, Inc. 7,964,563
75,300 RJR Nabisco, Inc. 2,470,781
- -----------------------------------------------------------
10,435,344
- -----------------------------------------------------------
TRANSPORTATION--0.4%
52,400 Shell Transport & Trading PLC 2,338,350
- -----------------------------------------------------------
UTILITIES--1.6%
38,200 Cia de Telecomunicaciones Chile 1,258,213
94,900 Dominion Resources, Inc. 3,487,575
42,100 DQE, Inc. 1,328,781
50,700 Telecom Argentina ADR 2,931,076
- -----------------------------------------------------------
9,005,645
- -----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $364,176,160) $528,674,399
- -----------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ---------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS(B)--0.1%
$ 150,000 U.S. Treasury Bill
4.81%, 08/28/97 $ 149,459
145,000 U.S. Treasury Bill
4.91%, 09/18/97 144,926
50,000 U.S. Treasury Bill
4.93%, 09/18/97 49,971
65,000 U.S. Treasury Bill
4.86%, 09/18/97 64,780
115,000 U.S. Treasury Bill
5.03%, 9/18/97 114,863
- ---------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $521,989) $ 523,999
- ---------------------------------------------------------------
REPURCHASE AGREEMENT--2.4%
$12,900,000 Joint Repurchase Agreement Account
5.84%, 08/01/97(b) $ 12,900,000
- ---------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $12,900,000) $ 12,900,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS
(COST $377,598,149)(A) $542,098,398
- ---------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which
value exceeds cost $166,979,947
Gross unrealized loss for investments in which
cost exceeds value (2,842,693)
- ---------------------------------------------------------------
Net unrealized gain $164,497,254
- ---------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Futures contracts open at July 31, 1997 are as follows:
<TABLE>
<CAPTION>
Number of
Contracts Settlement Unrealized
Type Long(c) Month Gain
- ------------------- --------- ---------- ----------
<S> <C> <C> <C>
September
S&P 500 Stock Index 25 1997 364,677
- ----------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $377,601,144.
(b) Portion of this security is being segregated as collateral for futures
contracts.
(c) Each S&P 500 Stock Index represents $50,000 in notional par value. The
total net notional amount and market value at risk are $1,250,000 and
$11,974,375, respectively. The determination of notional amounts does not
consider market risk factors and therefore 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.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
19
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE LARGE CAP GROWTH FUND
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
On behalf of Goldman Sachs, it is a pleasure to welcome you as a shareholder
in the Goldman Sachs CORE Large Cap Growth Fund. In the future, we will be
sending you annual and semiannual reports that describe the fund's performance,
as well as information regarding specific holdings. This semiannual report
covers the abbreviated period from May 1, 1997, when the fund began operations,
through July 31, 1997.
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs CORE Large Cap Growth Fund is designed to provide investors
with a broadly diversified portfolio of growth-oriented equity securities of
large-cap U.S. issuers. The selected securities typically have higher
prospective growth rates than the general domestic economy. The fund's
portfolio is designed to maintain risk, style, capitalization and industry
characteristics similar to the Russell 1000 Growth Index. Therefore, the fund's
performance relative to the Growth Index comes primarily from stock selection
within sectors.
The fund employs a disciplined approach that combines fundamental investment
research provided by the Goldman Sachs Global Investment Research Department
with quantitative analysis generated by a proprietary multifactor model
developed by the Asset Management Division. The model evaluates each stock
using many different criteria including valuation, momentum and safety. It also
objectively analyzes the impact of current economic conditions on different
types of stocks. Those stocks ranked highly by both the multifactor model and
by Goldman Sachs research are considered for the fund's portfolio.
PERFORMANCE REVIEW: STOCK SELECTION BENEFITED PERFORMANCE, BUT RESULTS WERE
DAMPENED BY DEFENSIVE POSTURE
PERFORMANCE SUMMARY: MAY 1, 1997--JULY 31, 1997
<TABLE>
<CAPTION>
FUND TOTAL RETURN RUSSELL 1000
(BASED ON NET GROWTH INDEX
ASSET VALUE) TOTAL RETURN
----------------- ------------
<S> <C> <C>
Class A* 19.50% 21.37%
Class B* 19.40% 21.37%
Institutional* 19.50% 21.37%
Service* 19.40% 21.37%
</TABLE>
* Class A, B, Institutional and Service share performance assumes reinvestment
of all dividends and distributions, a complete redemption at the net asset
value at the end of the period and no initial sales charge or contingent
deferred sales charge. Performance for Class A, B, Institutional and Service
shares is from their inception through the end of the period.
The fund's performance during the period was primarily driven by specific
stock selection. Within the growth universe, the fund focused on more stable
companies trading at reasonable valuations, as our proprietary multifactor
model emphasized stocks with lower price/earnings ratios and less potential for
earnings disappointments. In addition, qualitative stock recommendations
produced by the Goldman Sachs Global Investment Research Department also
benefited the fund's performance.
Given cautionary market conditions (i.e., increasing volatility and record-
low dividend yields), we maintained a "safety-first" stock-selection bias. This
approach led us to seek stocks with relatively stable characteristics (i.e.,
predictable earnings and less volatile prices) relative to the large-cap growth
universe. ALTHOUGH DEFENSIVE STOCKS OUTPERFORMED, AIDING OUR "STOCK-SELECTION"
RETURNS, OUR IMPLICIT CAUTION (OR LOWER BETA) HURT THE PORTFOLIO'S RELATIVE
PERFORMANCE. Additionally, May proved to be a difficult month for momentum
strategies, which led the fund to trail the benchmark for the period despite
achieving healthy gains in June.
20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
The fund's best performing stocks during the period came from a wide range of
sectors. These included financial holdings such as AMERICAN INTERNATIONAL
GROUP, INC., TRAVELERS, INC. and MERRILL LYNCH & CO., INC., pharmaceutical
companies such as PFIZER INC. and WARNER LAMBERT CO., and computer manufacturer
COMPAQ COMPUTER CORP.
PORTFOLIO COMPOSITION
As of July 31, 1997, the fund held 139 stocks. The fund's fundamental
characteristics were generally more attractive than those of the benchmark. For
example, within the growth universe, the fund had a lower price/earnings ratio
based on 1997 estimated earnings than the Russell 1000 Growth Index (20.1x
versus 25.5x) and a lower price/book ratio (4.1x versus 6.4x), while having a
higher five-year earnings-per-share growth projection (26% versus 24%).
TOP 10 PORTFOLIO HOLDINGS AS OF JULY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF
COMPANY LINE OF BUSINESS TOTAL NET ASSETS
------- ---------------- ----------------
<S> <C> <C>
Intel Corp. Semiconductors 4.2%
and Electronics
Microsoft Corp. Computer Software 3.5
Dayton Hudson Department Stores 2.8
Corp.
General Electric
Co. Electronics 2.8
American Property/Casualty 2.8
International Insurance
Group, Inc.
Corning Inc. Glass Products 2.2
Manufacturer
Pfizer Inc. Pharmaceuticals 2.0
Philip Morris Tobacco and Food 1.9
Companies, Inc. Products
Gillette Co. Cosmetics and 1.9
Toiletries
Abbott Health & Medical 1.9
Laboratories Services
</TABLE>
OUTLOOK
We intend to maintain a balanced approach by considering all of our
investment themes (value, momentum and safety) when making investment
decisions. In the near term, however, recent cautionary signals such as
increasing market volatility and record-low dividend yields have led us to
adopt a slightly more defensive posture. Therefore, we are currently favoring
less volatile stocks selling at reasonable valuations, while avoiding stocks
whose primary attractions are strong prior earnings and price momentum. Despite
these near-term preferences, we continue to adhere to our primary investment
style as defined by the Russell 1000 Growth Index. As a result, we will
continue to have a significant growth tilt relative to the overall market.
/s/ Robert C. Jones
Robert C. Jones
Senior Portfolio Manager,
Quantitative Equity
/s/ Kent A. Clark
Kent A. Clark
Portfolio Manager,
Quantitative Equity
/s/ Victor H. Pinter
Victor H. Pinter
Portfolio Manager,
Quantitative Equity
August 29, 1997
21
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE LARGE CAP GROWTH FUND
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
COMMON STOCKS--95.8%
AEROSPACE--0.2%
600 United Technologies Corp. $ 50,738
- ---------------------------------------------------
AEROSPACE/DEFENSE--0.6%
1,700 Gulfstream Aerospace Corp.* 45,263
5,700 Rohr Inc.* 135,375
- ---------------------------------------------------
180,638
- ---------------------------------------------------
AGRICULTURE/HEAVY EQUIPMENT--0.9%
6,100 Tenneco, Inc. 284,413
- ---------------------------------------------------
AIRLINES--1.6%
2,000 Delta Air Lines, Inc. 177,750
4,200 UAL Corp.* 344,663
- ---------------------------------------------------
522,413
- ---------------------------------------------------
APPLIANCE MANUFACTURER--0.9%
2,900 Creative Technology* 59,088
5,500 Sunbeam Corp. 215,188
- ---------------------------------------------------
274,276
- ---------------------------------------------------
BANKS--0.5%
2,500 NationsBank Corp. 177,969
- ---------------------------------------------------
BEVERAGES--0.8%
3,800 Coca Cola Co. 263,150
- ---------------------------------------------------
BIOTECHNOLOGY--0.4%
2,200 Amgen, Inc.* 129,388
- ---------------------------------------------------
BROADCAST MEDIA--0.1%
900 Belo A H Corp 40,050
- ---------------------------------------------------
BUILDING MATERIALS--0.4%
2,500 USG Corp.* 117,500
- ---------------------------------------------------
BUSINESS SERVICES--0.5%
17,000 Medaphis Corp.* 153,000
- ---------------------------------------------------
CHEMICAL PRODUCTS--0.6%
1,900 Cytec Industries, Inc.* 75,050
3,900 IMC Global Inc. 123,094
- ---------------------------------------------------
198,144
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
CHEMICALS-COMMODITY--0.9%
1,700 Dow Chemicals Co. $ 161,500
2,700 Monsanto Co. 134,494
- -----------------------------------------------
295,994
- -----------------------------------------------
COMMERCIAL SERVICES--0.3%
2,500 Interim Services, Inc.* 113,906
- -----------------------------------------------
COMMUNICATIONS & MEDIA SERVICES--2.4%
13,100 GTE Corp. 609,150
2,000 Tellabs Inc.* 119,750
1,900 Worldcom, Inc.* 66,381
- -----------------------------------------------
795,281
- -----------------------------------------------
CONSUMER GOODS--0.5%
2,900 Nike, Inc. 180,706
- -----------------------------------------------
CONSUMER PRODUCTS--0.5%
4,300 Blyth Industries Inc* 154,531
- -----------------------------------------------
CONSUMER STAPLES--1.6%
3,600 Procter & Gamble Co. 547,650
- -----------------------------------------------
DATACOM EQUIPMENT--0.8%
3,300 Cisco Systems, Inc.* 262,556
- -----------------------------------------------
DEPARTMENT STORES--4.4%
14,600 Dayton Hudson Corp. 943,525
3,400 Fred Meyer Inc.* 194,863
2,000 Sears Roebuck & Co. 126,625
4,900 Walmart Stores, Inc. 184,056
- -----------------------------------------------
1,449,069
- -----------------------------------------------
DIVERSIFIED MANUFACTURING--0.8%
5,700 Acx Technologies Inc.* 144,281
1,800 Dover Corp. 128,475
- -----------------------------------------------
272,756
- -----------------------------------------------
ELECTRONICS & OTHER ELECTRICAL EQUIPMENT--
3.6%
13,300 General Electric Co. 933,494
3,300 Jabil Circuit Inc.* 160,669
1,500 Linear Technology Corp. 100,313
- -----------------------------------------------
1,194,476
- -----------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ENTERPRISE SYSTEMS--2.0%
2,300 Avid Technology Inc.* $ 79,063
4,600 Hewlett Packard Co. 322,288
6,600 Silicon Graphics Inc.* 165,000
2,500 Sun Microsystems, Inc.* 114,219
- -------------------------------------------------------------
680,570
- -------------------------------------------------------------
ENTERTAINMENT AND LEISURE--2.6%
9,400 Carnival Cruise Lines Corp. Class A 395,975
4,100 Hollywood Entertainment Co.* 76,875
5,000 Walt Disney, Co. 404,063
- -------------------------------------------------------------
876,913
- -------------------------------------------------------------
FINANCIAL SERVICES--2.6%
1,200 American Express Co. 100,500
2,100 BankAmerica Corp. 158,550
1,500 CMAC Investment Corp. 70,781
3,500 Federal National Mortgage Association 165,594
4,900 Travelers Group, Inc. 352,494
- -------------------------------------------------------------
847,919
- -------------------------------------------------------------
FOOD--0.5%
2,800 Interstate Bakeries Corp. 170,800
- -------------------------------------------------------------
FOREST PRODUCTS--0.5%
4,100 Avery Dennison Corp. 180,913
- -------------------------------------------------------------
GAS DISTRIBUTION & PIPELINE--0.6%
2,700 Columbia Gas Systems, Inc. 185,625
- -------------------------------------------------------------
HEALTH & MEDICAL SERVICES--4.3%
9,500 Abbott Laboratories 621,656
1,200 Biomet Inc. 23,925
4,400 Dura Pharmaceuticals Inc.* 171,600
2,600 Health Management Association* 83,038
5,300 Johnson & Johnson 330,256
2,400 Lincare Holdings Inc.* 117,600
3,800 Prime Hospitality Corp.* 69,825
- -------------------------------------------------------------
1,417,900
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HEALTH SUPPLIERS/SERVICES--0.7%
4,900 Alberto Culver Co., Class B $ 137,506
900 Medtronic Inc. 78,525
- -----------------------------------------------------
216,031
- -----------------------------------------------------
HEALTHCARE MANAGEMENT--1.3%
5,800 Columbia HCA Healthcare 187,050
3,200 Quest Diagnostics Inc.* 55,600
4,100 Wellpoint Health Networks* 201,925
- -----------------------------------------------------
444,575
- -----------------------------------------------------
HOUSEHOLD DURABLES--0.5%
3,000 Ethan Allen Interiors Inc. 159,000
- -----------------------------------------------------
HOUSEHOLD PRODUCTS--2.2%
6,300 Gillette Co. 623,700
3,500 Premark International Inc. 110,469
- -----------------------------------------------------
734,169
- -----------------------------------------------------
INDUSTRIAL--2.2%
11,700 Corning Inc. 723,206
- -----------------------------------------------------
INDUSTRIAL MACHINERY--1.6%
6,800 Caterpillar, Inc. 380,800
2,700 Tecumseh Products Co. Class A 151,875
- -----------------------------------------------------
532,675
- -----------------------------------------------------
INFORMATION MANAGEMENT--1.1%
13,100 Dun & Bradstreet Corp. 353,700
- -----------------------------------------------------
INSURANCE SERVICES--1.9%
2,000 AMBAC Inc. 170,375
2,500 Conseco, Inc. 101,875
3,000 MGIC Investment Corp. 157,688
2,700 Protective Life Corp. 137,363
1,300 SunAmerica, Inc. 78,650
- -----------------------------------------------------
645,951
- -----------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
23
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE LARGE CAP GROWTH FUND (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSURANCE-PROPERTY AND CASUALTY--2.8%
8,700 American International Group, Inc. $ 926,550
- -----------------------------------------------------------
INTEGRATED OIL--1.2%
3,700 Exxon Corp. 237,725
2,000 Norsk Hydro ADR 104,500
600 Phillips Petroleum Co. 27,638
1,000 Unocal Corp. 40,000
- -----------------------------------------------------------
409,863
- -----------------------------------------------------------
OFFICE & BUSINESS EQUIPMENT--0.5%
4,400 Banctec Inc.* 107,525
800 Pitney-Bowes Inc. 60,100
- -----------------------------------------------------------
167,625
- -----------------------------------------------------------
OIL & GAS--2.8%
5,400 El Paso Natural Gas Co. 312,188
3,800 Ensco International Inc.* 251,275
4,900 Mobil Corp. 374,850
- -----------------------------------------------------------
938,313
- -----------------------------------------------------------
OIL & GAS EXPLORATION--1.3%
16,000 Marine Drilling Companies* 397,000
1,800 Union Texas Petroleum Holdings Inc. 37,463
- -----------------------------------------------------------
434,463
- -----------------------------------------------------------
PERSONAL COMPUTERS & PERIPHERALS--5.2%
7,500 Compaq Computer Corp.* 428,438
2,200 Dell Computer Corporation* 188,100
7,400 Komag Inc.* 154,013
2,400 Quantum Corp.* 69,750
14,500 Read Rite Corp.* 375,188
13,300 Western Digital Corp.* 512,050
- -----------------------------------------------------------
1,727,539
- -----------------------------------------------------------
PHARMACEUTICALS--3.8%
1,400 Merck & Co. 145,513
11,100 Pfizer, Inc. 661,838
3,000 Schering Plough Corp. 163,688
2,200 Warner Lambert Co. 307,313
- -----------------------------------------------------------
1,278,352
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RECREATIONAL PRODUCTS--0.3%
3,200 Mattel, Inc. $ 111,200
- ---------------------------------------------------------------
RESTAURANTS & HOTELS--0.4%
2,507 HFS, Inc.* 146,033
- ---------------------------------------------------------------
RETAIL--3.3%
22,200 Best Buy Co. Inc.* 288,600
4,059 CVS Corporation 230,856
10,000 Ross Stores, Inc. 316,250
8,800 TJX Companies, Inc. 262,900
- ---------------------------------------------------------------
1,098,606
- ---------------------------------------------------------------
SECURITY--1.4%
5,600 Tyco International Ltd. 453,600
- ---------------------------------------------------------------
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES--1.9%
2,800 Bear Stearns Companies Inc. 114,275
2,400 Merrill Lynch Co. 169,050
5,500 Salomon, Inc. 348,906
- ---------------------------------------------------------------
632,231
- ---------------------------------------------------------------
SEMICONDUCTORS--5.9%
7,400 Advanced Micro Devices Inc.* 259,463
15,200 Intel Corp. 1,395,550
2,000 Microchip Technology* 74,500
1,100 Micron Technology 53,556
5,900 National Semiconductor Corp.* 185,850
- ---------------------------------------------------------------
1,968,919
- ---------------------------------------------------------------
SOFTWARE & SERVICES--5.5%
4,600 Cadence Design Systems, Inc.* 204,413
1,500 Computer Associates International, Inc. 102,094
3,100 Electronic Data Systems 134,075
8,200 Microsoft Corp.* 1,160,300
3,200 Oracle Corp. 174,200
4,000 Sybase Inc.* 59,000
- ---------------------------------------------------------------
1,834,082
- ---------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SPECIALTY RETAIL--2.8%
9,600 Footstar Inc.* $ 256,800
2,700 Gap, Inc. 119,981
2,700 Limited Inc. 60,244
9,000 Pier 1 Imports Inc. 158,625
4,000 Tiffany & Co. 180,750
7,800 Zale Corp.* 169,650
- -----------------------------------------------------
946,050
- -----------------------------------------------------
STEEL--0.5%
2,800 AK Steel Holding Corp. 128,450
1,900 British Steel PLC ADR 52,844
- -----------------------------------------------------
181,294
- -----------------------------------------------------
SUPERMARKETS--1.7%
4,100 Kroger Company* 121,206
6,400 Safeway, Inc.* 343,200
1,500 Smith's Food & Drug Center* 89,063
- -----------------------------------------------------
553,469
- -----------------------------------------------------
TECHNICAL SERVICES--0.4%
2,400 3Com Corp.* 131,250
- -----------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT--1.1%
4,600 Motorola Inc. 369,438
- -----------------------------------------------------
TEXTILES--0.8%
4,100 Burlington Industries, Inc.* 53,044
4,000 Jones Apparel Group Inc* 207,750
- -----------------------------------------------------
260,794
- -----------------------------------------------------
TOBACCO--2.7%
14,300 Philip Morris Companies, Inc. 645,288
7,800 RJR Nabisco, Inc. 255,938
- -----------------------------------------------------
901,226
- -----------------------------------------------------
UTILITIES--0.7%
7,600 DQE Inc. 239,875
- -----------------------------------------------------
WASTE MANAGEMENT--0.1%
1,000 U.S.A. Waste Services Inc* 40,313
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
WHOLESALE TRADE--0.8%
7,000 Tech Data Corp* $ 259,859
- ----------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $28,026,861) $31,839,495
- ----------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- ----------------------------------------------------------------
<C> <S> <C> <C>
REPURCHASE AGREEMENT--2.4%
$800,000 Joint Repurchase Agreement Account
5.84%, 08/01/97 $ 800,000
- ----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $800,000) $ 800,000
- ----------------------------------------------------------------
TOTAL INVESTMENTS
(COST $28,826,861)(A) $32,639,495
- ----------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in
which value exceeds cost $ 3,958,026
Gross unrealized loss for investments in
which cost exceeds value (155,914)
- ----------------------------------------------------------------
Net unrealized gain $ 3,802,112
- ----------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $28,837,383.
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.
25
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS CAPITAL GROWTH FUND
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs Capital Growth Fund seeks long-term growth of capital
primarily through investments in large-capitalization growth stocks. To meet
its objective, the fund is managed with a "growth at a reasonable price"
investment style, which means we utilize extensive fundamental research to
identify companies in a diversified range of industries that we believe offer
attractive growth potential at a reasonable price.
The fund's investment management team believes that wealth is created through
the long-term ownership of growing businesses. We view each stock purchase as
if we were buying the entire business. To implement this investment strategy,
we focus on growing companies with characteristics such as strong brand
franchises, dominant market share, recurring revenue, product pricing
flexibility, long product life cycles, high returns on invested capital, high
profit margins, strong free cash flow, excellent management and favorable long-
term prospects. Finally, we will buy a stock meeting our rigorous criteria only
if it trades at a reasonable discount to the company's intrinsic value.
PERFORMANCE REVIEW: BOTH SHARE CLASSES OUTPERFORMED THE BENCHMARK
PERFORMANCE SUMMARY: JANUARY 31, 1997--JULY 31, 1997
<TABLE>
<CAPTION>
FUND TOTAL RETURN
(BASED ON NET S&P 500
ASSET VALUE) TOTAL RETURN
----------------- ------------
<S> <C> <C>
Class A* 23.25% 22.55%
Class B* 22.74% 22.55%
</TABLE>
* Class A and B share performance assumes reinvestment of all dividends and
distributions, a complete redemption at the net asset value at the end of the
period and no initial sales charge or contingent deferred sales charge.
We are pleased to note that the fund continued to perform well compared with
its peers. For the five- and one-year periods ended July 31, 1997, the fund's
Class A shares were rated "four stars" (in universes of 1,146 and 2,040
domestic equity funds for the five- and one-year periods, respectively) by
Morningstar, Inc., an independent mutual fund rating agency./1/ The fund also
fared well versus its peers in the Lipper growth fund category, placing in the
top 15% (83 and 101 out of 764 funds for Class A and B shares, respectively)
for the 12-month period and in the top quartile (70 out of 286 funds for Class
A shares) for the five-year period, as of July 31, 1997, according to Lipper
Analytical Services, Inc. (Please note that Lipper rankings do not take sales
charges into account and that past performance is not a guarantee of future
results. Class B shares were not ranked for the five-year period because they
did not exist during the entire period.)
INVESTMENTS IN PHARMACEUTICAL, FINANCIAL AND CONSUMER PRODUCTS COMPANIES
BENEFITED PERFORMANCE
The strongest contributors to the fund's performance included pharmaceutical
companies BRISTOL-MYERS SQUIBB CO. and PFIZER INC. These stocks were buoyed by
a number of positive factors, including new product introductions, a benign
political environment, a more accommodative FDA, strong unit growth, powerful
free cash flow and reasonable valuations. Over the coming decades, we believe
these companies are positioned to
- --------
/1/ Source: (C) 1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of 7/31/97.
The ratings are subject to change every month. Past performance is no guarantee
of future results. Morningstar ratings are calculated from a fund's three-,
five- and ten-year average annual returns (where applicable) in excess of 90-
day Treasury bill returns with appropriate fee and sales charge adjustments and
a risk factor that reflects fund performance below 90-day Treasury bill
returns. The one-year rating is calculated using the same methodology, but is
not a component of the overall rating. The fund's Class A shares received three
stars for the three-year period and were rated among 2,040 domestic equity
funds. The Morningstar rating applies only to the fund's Class A shares; the
fund's Class B shares have not been rated. Class B shares are subject to
additional fees and expenses that may have the effect of lowering performance
and may affect any future Morningstar rating. Morningstar rates funds against
peers in the same category. In all, there are four Morningstar categories
(domestic equity, international equity, taxable bond and municipal).
Morningstar ratings range from five stars (highest) to one star (lowest). Funds
with five-star ratings are in the top 10% of their category, four-star ratings
in the next 22.5%, three stars the next 35%, two stars the next 22.5% and one
star the lowest 10% of their categories.
26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
benefit as the baby boomers age and require more health-related products and
services.
In the financial sector, two of the fund's commercial bank holdings,
BANKAMERICA CORP. and NATIONSBANK CORP., were prime beneficiaries of the
"Goldilocks" economy. This favorable environment, which has been characterized
by steady economic growth, modest loan demand, low inflation and stable
interest rates, contributed to strong earnings gains for both banks. In
addition, MBNA CORP., the second largest credit card lender in the world,
appreciated due to surging growth in credit card accounts, new affiliations
with sponsoring organizations for its affinity cards and the rapid growth of
its U.K. business.
Several producers of household products also performed well. These included
companies with world-class franchises and/or strong brand names such as PROCTER
& GAMBLE CO., GILLETTE CO. and COLGATE-PALMOLIVE CO., all of which reported
solid earnings gains and high returns on equity. These companies are benefiting
from strong international growth as capitalism spreads throughout the world and
per capita income rises.
An investment that lagged during the period was GAYLORD ENTERTAINMENT CO., a
diversified entertainment and communications company, as investors responded
negatively to the sale of its two cable channels (The Nashville Network and
Country Music Television) to Westinghouse Electric Corp. Under terms of the
agreement, Gaylord will receive a fixed dollar amount of Westinghouse stock,
which minimized the company's risk but also limited its upside potential in the
surging stock market. We continue to believe Gaylord is attractively valued.
NEW POSITIONS IN SEVERAL MEDIA STOCKS
Among the new positions added during the period were media stocks such as
GANNETT CO., INC., TRIBUNE CO. and NEW YORK TIMES CO., all of which have
dominant local franchises in newspapers and broadcasting. These companies have
reported strong year-to-date earnings gains as they have benefited from healthy
advertising revenue and reduced newsprint costs. Sales included FISHER
SCIENTIFIC INTERNATIONAL, INC., a maker of scientific instruments, supplies and
equipment, after it appreciated strongly due to takeover rumors.
TOP 10 PORTFOLIO HOLDINGS AS OF JULY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF
COMPANY LINE OF BUSINESS TOTAL NET ASSETS
------- ---------------- ----------------
<S> <C> <C>
BankAmerica
Corp. Commercial Bank 3.4%
Banc One Corp. Commercial Bank 3.1
Intel Corp. Semiconductors and 3.0
Electronics
General Electric
Co. Electronics 2.9
Pfizer Inc. Pharmaceuticals 2.9
Bristol-Myers Pharmaceuticals 2.9
Squibb Co.
NationsBank
Corp. Commercial Bank 2.8
MBNA Corp. Specialty Finance 2.6
and Agencies
Lucent 2.4
Technologies Telecommunications
Co. Equipment
Texaco Inc. International 2.3
Integrated Oil
Company
</TABLE>
OUTLOOK
In our opinion, the outlook for the economy and the stock market appears
attractive, with low inflation, stable interest rates and modest economic
growth expected to help the fund's holdings produce favorable earnings gains.
However, we do expect increased volatility in the stock market as a result of
options and futures expirations, as well as investors' perceptions of inflation
and interest rate fluctuations.
During the past six months, we increased the fund's diversification among
industry sectors and increased its holdings of large-cap growth stocks. We
believe the fund is currently well positioned to benefit from the positive
investing climate that we anticipate.
27
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS CAPITAL GROWTH FUND (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
/s/ Herbert E. Ehlers
Herbert E. Ehlers
Senior Portfolio Manager,
U.S. Active Equity Growth
/s/ George D. Adler
George D. Adler
Portfolio Manager,
U.S. Active Equity Growth
/s/ Robert G. Collins
Robert G. Collins
Portfolio Manager,
U.S. Active Equity Growth
August 29, 1997
/s/ Gregory H. Ekizian
Gregory H. Ekizian
Portfolio Manager,
U.S. Active Equity Growth
/s/ Ernest C. Segundo, Jr.
Ernest C. Segundo, Jr.
Portfolio Manager,
U.S. Active Equity Growth
/s/ David G. Shell
David G. Shell
Portfolio Manager,
U.S. Active Equity Growth
28
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CAPITAL GROWTH FUND
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--98.1%
ADVERTISING & MARKETING--1.7%
711,580 Valassis Communications, Inc.* $ 19,968,714
- --------------------------------------------------------------------
ALCOHOL--0.7%
207,700 Anheuser Busch Companies, Inc. 8,918,119
- --------------------------------------------------------------------
AUTO/ORIGINAL EQUIPMENT MANUFACTURER--0.8%
206,600 Lear Corp.* 9,890,975
- --------------------------------------------------------------------
BANKS--7.2%
649,522 Banc One Corp. 36,454,422
468,700 NationsBank Corp. 33,365,581
253,400 State Street Bank Corp. 14,206,238
- --------------------------------------------------------------------
84,026,241
- --------------------------------------------------------------------
BEVERAGES--2.7%
234,500 Coca Cola Co. 16,239,125
408,100 Pepsico Inc. 15,635,331
- --------------------------------------------------------------------
31,874,456
- --------------------------------------------------------------------
BUILDING MATERIALS & CONSTRUCTION--0.3%
99,700 Sherwin Williams Co. 3,196,631
- --------------------------------------------------------------------
BUSINESS SERVICES--1.0%
289,400 First Data Corp. 12,625,075
- --------------------------------------------------------------------
CABLE/TELEVISION COMMUNICATIONS--0.3%
69,000 Cablevision Systems Corp. Class A* 4,096,875
- --------------------------------------------------------------------
CHEMICAL PRODUCTS--0.5%
86,100 Du Pont (E.I.) de Nemours & Co. 5,763,319
- --------------------------------------------------------------------
CHEMICALS-COMMODITY--0.4%
88,700 Monsanto Co. 4,418,369
- --------------------------------------------------------------------
CHEMICALS-SPECIALTY--1.0%
26,900 Betzdearbon, Inc. 1,761,950
101,200 Minnesota Mining and Manufacturing Co. 9,588,700
- --------------------------------------------------------------------
11,350,650
- --------------------------------------------------------------------
COMMERCIAL SERVICES--0.9%
226,500 Ecolab Inc. 10,574,719
- --------------------------------------------------------------------
COMMUNICATIONS SERVICES COMPANIES--0.2%
56,900 Airtouch Communications, Inc.* 1,874,144
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
CONSUMER STAPLES--3.8%
143,700 American Home Products Corp. $ 11,846,269
49,200 Amway Asia Pacific Ltd. 1,891,125
44,400 Clorox Co. 6,199,350
160,940 Procter & Gamble Co. 24,482,998
- -------------------------------------------------------------
44,419,742
- -------------------------------------------------------------
COMMUNICATIONS & MEDIA SERVICES--1.2%
530,700 Tele-Communications, Inc.* 13,566,019
- -------------------------------------------------------------
COSMETICS--1.0%
168,100 Avon Products Inc. 12,197,756
- -------------------------------------------------------------
DATACOM EQUIPMENT--0.4%
62,100 Cisco Systems, Inc.* 4,940,831
- -------------------------------------------------------------
DEFENSE--1.5%
226,800 McDonnell Douglas Corp. 17,350,200
- -------------------------------------------------------------
DEPARTMENT STORES--1.3%
69,900 Federated Dept. Stores, Inc.* 3,062,494
329,500 Walmart Stores, Inc. 12,376,844
- -------------------------------------------------------------
15,439,338
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.5%
107,400 American Standard Companies* 5,336,438
- -------------------------------------------------------------
ELECTRONICS & OTHER ELECTRICAL EQUIPMENT--5.9%
485,100 General Electric Co. 34,047,956
386,400 Intel Corp. 35,476,350
- -------------------------------------------------------------
69,524,306
- -------------------------------------------------------------
ENTERPRISE SYSTEMS--1.3%
87,400 Hewlett Packard Co. 6,123,463
79,100 International Business Machines 8,364,825
- -------------------------------------------------------------
14,488,288
- -------------------------------------------------------------
ENTERTAINMENT AND LEISURE--1.2%
112,100 Mirage Resorts, Inc.* 2,998,675
130,400 Walt Disney, Co. 10,537,950
- -------------------------------------------------------------
13,536,625
- -------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
29
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CAPITAL GROWTH FUND (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES--6.2%
527,400 BankAmerica Corp. $ 39,818,700
453,000 Federal Home Loan Mortgage Corp. 16,336,313
345,300 Federal National Mortgage Association 16,337,006
- -------------------------------------------------------------------
72,492,019
- -------------------------------------------------------------------
FOOD--3.4%
111,600 Campbell Soup Co. 5,789,250
133,100 Kellogg Company 12,228,563
218,900 Nabisco Holdings Corp. 9,303,250
160,480 William Wrigley Jr. Co. 12,346,930
- -------------------------------------------------------------------
39,667,993
- -------------------------------------------------------------------
FOOD PRODUCERS--0.5%
64,800 Ralston Purina Co. 5,848,200
- -------------------------------------------------------------------
FOREST PRODUCTS--0.8%
97,300 Georgia Pacific Corp. 9,188,769
- -------------------------------------------------------------------
FUNERAL SERVICES--1.1%
379,500 Service Corp. International 12,903,000
- -------------------------------------------------------------------
HEALTH & MEDICAL SERVICES--1.8%
331,900 Johnson & Johnson 20,681,519
- -------------------------------------------------------------------
HEALTH SUPPLIERS/SERVICES--0.5%
35,470 Perkin-Elmer Corp. 2,895,239
64,500 U.S. Surgical Corp. 2,394,563
- -------------------------------------------------------------------
5,289,802
- -------------------------------------------------------------------
HEALTHCARE MANAGEMENT--2.0%
104,720 Aetna Inc. 11,931,535
164,950 Columbia HCA Healthcare 5,319,638
219,000 Tenet Healthcare Corp.* 6,556,313
- -------------------------------------------------------------------
23,807,486
- -------------------------------------------------------------------
HOTELS & RESTAURANTS--1.2%
202,220 Marriott International, Inc. 13,902,625
- -------------------------------------------------------------------
HOUSEHOLD PRODUCTS--2.2%
118,100 Colgate Palmolive Co. 8,946,075
173,100 Gillette Co. 17,136,900
- -------------------------------------------------------------------
26,082,975
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INDUSTRIAL--0.5%
97,900 Corning Inc. $ 6,051,444
- -----------------------------------------------------------------
INFORMATION MANAGEMENT--1.0%
180,770 Reuters Holdings PLC 11,682,261
- -----------------------------------------------------------------
INSURANCE SERVICES--1.1%
4,800 AMBAC Financial Group, Inc. 408,900
214,100 SunAmerica, Inc. 12,953,050
- -----------------------------------------------------------------
13,361,950
- -----------------------------------------------------------------
INSURANCE-LIFE--0.5%
210,100 Nationwide Financial Services, Inc. 6,355,525
- -----------------------------------------------------------------
INSURANCE-PROPERTY AND CASUALTY--0.8%
90,000 American International Group, Inc. 9,585,000
- -----------------------------------------------------------------
INTEGRATED OIL--4.4%
52,200 Amoco Corp. 4,906,800
47,400 Atlantic Richfield Co. 3,546,113
74,300 Exxon Corp. 4,773,775
164,800 Royal Dutch Petroleum 9,218,500
227,900 Texaco, Inc. 26,450,644
76,200 Unocal Corp. 3,048,000
- -----------------------------------------------------------------
51,943,832
- -----------------------------------------------------------------
LOGISTICS/RAIL--0.3%
31,800 Norfolk Southern Corp. 3,521,850
- -----------------------------------------------------------------
MANUFACTURING--0.2%
53,400 Millipore Corp. 2,359,613
- -----------------------------------------------------------------
MEDIA--0.2%
154,200 Tele Communications Inc.* 2,640,675
- -----------------------------------------------------------------
MEDIA/ENTERTAINMENT--3.8%
54,500 Central Newspapers, Inc. 3,804,781
106,900 Gannett Co. 10,616,506
166,200 Gaylord Entertainment Co. 3,853,763
133,100 New York Times Co. 6,688,275
237,610 Time Warner Inc. 12,964,596
114,300 Tribune Co. 6,050,756
- -----------------------------------------------------------------
43,978,677
- -----------------------------------------------------------------
MISCELLANEOUS-CONSUMER--0.5%
76,800 HBO & Company 5,942,400
- -----------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
NONFERROUS METALS--0.3%
42,400 Aluminum Company of America $ 3,752,400
- ---------------------------------------------------------
OFFICE & BUSINESS EQUIPMENT--0.3%
49,000 Xerox Corp. 4,030,250
- ---------------------------------------------------------
OIL & GAS--1.6%
181,800 Mobil Corp. 13,907,700
71,400 Schlumberger Ltd. 5,453,175
- ---------------------------------------------------------
19,360,875
- ---------------------------------------------------------
PACKAGING--0.3%
105,500 Owens Illinois Corp.* 3,639,750
- ---------------------------------------------------------
PHARMACEUTICALS--10.5%
428,800 Bristol-Myers Squibb 33,634,000
159,340 Eli Lilly & Co. 18,005,420
143,200 Merck & Co. 14,883,850
565,820 Pfizer, Inc. 33,737,018
237,800 Schering Plough Corp. 12,974,963
60,400 Sigma Aldrich Corp. 2,091,350
55,800 Warner Lambert Co. 7,794,563
- ---------------------------------------------------------
123,121,164
- ---------------------------------------------------------
RECREATIONAL PRODUCTS--0.3%
97,300 Hasbro Inc. 2,985,894
- ---------------------------------------------------------
RESTAURANTS--0.2%
54,300 McDonalds Corp. 2,918,625
- ---------------------------------------------------------
RETAIL--0.9%
82,300 CVS Corporation 4,680,813
122,200 Home Depot, Inc. 6,094,725
- ---------------------------------------------------------
10,775,538
- ---------------------------------------------------------
RETAIL TRADE--1.2%
259,230 Walgreen Co. 14,646,495
- ---------------------------------------------------------
SEMICONDUCTORS--0.7%
124,800 Avnet Inc. 8,213,400
- ---------------------------------------------------------
SOFTWARE & SERVICES--3.4%
76,900 Autodesk Inc. 3,258,638
58,600 Intuit Inc.* 1,475,988
147,700 Microsoft Corp.* 20,899,550
148,900 Oracle Corp.* 8,105,744
36,100 Peoplesoft, Inc.* 2,111,850
102,500 Sterling Commerce, Inc.* 3,862,969
- ---------------------------------------------------------
39,714,739
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SPECIALTY FINANCE--2.6%
683,925 MBNA Corp. $ 30,776,625
- -----------------------------------------------------------------
SPECIALTY RETAIL--1.8%
90,100 Autozone, Inc.* 2,579,113
205,800 Tandy Corp. 12,232,238
174,300 Toys R US Inc.* 5,937,094
- -----------------------------------------------------------------
20,748,445
- -----------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT--2.4%
335,960 Lucent Technologies, Inc. 28,535,603
- -----------------------------------------------------------------
TIRE & OTHER RELATED RUBBER PRODUCTS--0.5%
86,300 Goodyear Tire & Rubber Co. 5,571,731
- -----------------------------------------------------------------
TOBACCO--1.8%
336,800 Philip Morris Companies, Inc. 15,198,100
202,000 UST Inc. 5,870,625
- -----------------------------------------------------------------
21,068,725
- -----------------------------------------------------------------
UTILITIES--0.5%
79,300 Aes Corp.* 6,264,700
- -----------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $798,962,978) $1,152,790,404
- -----------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT--2.3%
$27,500,000 Joint Repurchase Agreement Account
5.84%, 08/01/97 $ 27,500,000
- -----------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $27,500,000) $ 27,500,000
- -----------------------------------------------------------------
TOTAL INVESTMENTS
(COST $826,462,978)(A) $1,180,290,404
- -----------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which
value exceeds cost $ 354,450,568
Gross unrealized loss for investments in which
cost exceeds value (1,068,462)
- -----------------------------------------------------------------
Net unrealized gain $ 353,382,106
- -----------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $826,908,298.
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.
31
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS MID CAP EQUITY FUND
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs Mid Cap Equity Fund seeks long-term capital appreciation
primarily by investing at least 65% of its total assets in equities with market
capitalizations of between $500 million and $10 billion at the time of
investment. However, the fund currently intends to emphasize investments in
companies with market capitalizations of under $5 billion at the time of
investment. The fund is managed with a value style, which means we focus on
companies whose stocks we believe are inexpensive relative to their expected
long-term earnings growth and their asset value. Investments may include well-
known companies that are temporarily out of favor due to cyclical economic
conditions or are experiencing near-term difficulties the portfolio managers
judge to be temporary in nature. In-depth fundamental research of a company's
financial structure, its competitive position in the market and its
management's commitment to increasing shareholder value are all critical parts
of the fund's investment approach. Though we are not sector investors, we
closely monitor the fund's sector and industry exposures compared with the
benchmark in an effort to avoid unintentional over- or underweightings.
PERFORMANCE REVIEW: FUND ACHIEVED STRONG RESULTS
PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
FUND TOTAL RUSSELL
RETURN MIDCAP
(BASED ON NET INDEX TOTAL
ASSET VALUE) RETURN
------------- -----------
<S> <C> <C>
Institutional* (1/31/97-7/31/97) 26.37% 17.63%
Service* (7/18/97-7/31/97) 2.87% N/A
</TABLE>
* Institutional and Service share performance assumes reinvestment of all
dividends and distributions, a complete redemption at the net asset value at
the end of the period and no initial sales charge or contingent deferred sales
charge. Performance for Service shares is from their inception date through the
end of the period.
WE ARE PLEASED TO NOTE THAT IN ADDITION TO SIGNIFICANTLY OUTPERFORMING THE
MID-CAP BENCHMARK DURING THE PERIOD, THE FUND'S INSTITUTIONAL SHARES ALSO
OUTPERFORMED THE BROADER LARGE-CAP MARKET, AS REPRESENTED BY THE S&P 500.
During the period, the market rally continued to be led by the largest, most
liquid stocks, which many investors perceived to be the most convenient vehicle
for rapid investment. As a result, the S&P 500 stock index, which is heavily
weighted toward large-cap stocks, returned 22.6%. In contrast, the mid-cap
sector of the market returned 17.6% (as measured by the Russell Midcap Index)
and small caps returned 13.1% (as measured by the Russell 2000 index).
FUND PERFORMED WELL RELATIVE TO ITS PEERS
The fund also fared very well compared with its peers. For the 12-month
period ended July 31, 1997, the fund's Institutional shares ranked second out
of 198 mid-cap funds, according to Lipper Analytical Services, Inc. (Please
note that Lipper rankings do not take sales charges into account and that past
performance is not a guarantee of future results. The fund's Service shares
were not ranked because they did not exist during the entire 12-month period.)
TOP PERFORMERS INCLUDED COMPANIES BENEFITING FROM RESTRUCTURING PROGRAMS AND
ACQUISITIONS
The fund's best performers during the period included several companies that
benefited from major restructuring initiatives. INTERNATIONAL MULTIFOODS CORP.,
a distributor of specialty foods, appreciated due to its new management's focus
on turning around its vending distribution business and the proposed sale of
its Canada Frozen bakery products unit. SUNBEAM CORP., INC., a leading consumer
products company, performed well as investors responded positively to its
dramatic reforms, which included major asset sales, improved distribution and a
new line of products. LENNAR CORP., a diversified homebuilder, announced its
intention to spin off its commercial real estate business and merge its
homebuilding operations with a major California builder. SHOPKO STORES, INC., a
leading regional retailer, decided to end its ownership by SuperValu, Inc. by
repurchasing
32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
approximately 8.2 million shares of its common stock, which helped the market
focus on ShopKo's competitive strengths.
Other holdings contributed to the fund's positive results when they initiated
or accepted takeover offers. ROYAL CARIBBEAN CRUISE LINES LTD., the second
largest cruise operator, appreciated when it agreed to acquire Celebrity Cruise
Lines, and AMERICAN STATES FINANCIAL CORP., a property/casualty insurer, was
acquired by Safeco Corp. at a premium.
SPECIFIC ENERGY- AND UTILITY-RELATED STOCKS LAGGED
Not all of the fund's holdings fulfilled our expectations. UNICOM CORP., an
electric utility, was impacted by negative press and regulatory rulings, but we
believe the market has overreacted to these issues and continue to have
confidence in the company's fundamentals. In addition, we expect Unicom to
benefit from a recent change in senior management and an improving operating
environment. TOSCO CORP., an oil refiner and marketer, suffered from soft
margins in its West Coast refining operations due to excess supply during the
first half of the year. However, we are optimistic that the long-term supply-
and-demand situation will improve.
PORTFOLIO CHANGES
New positions included LEAR CORP., the world's largest supplier of automotive
interior systems, which appears to be well positioned to benefit from
automakers' trend toward outsourcing, and two computer hardware manufacturers:
BAY NETWORKS, INC., (networking and connectivity products) and QUANTUM CORP.
(disk drives and other information storage products).
During the period, we sold TERADYNE, INC., a manufacturer of semiconductor
testing equipment, and DECISIONONE CORP., the leading independent provider of
computer support services to U.S. companies, after they appreciated and reached
our price targets.
OUTLOOK
We remain committed to our strategy of identifying and purchasing stocks that
trade at a discount to their
TOP 10 EQUITY HOLDINGS AS OF JULY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL NET
COMPANY LINE OF BUSINESS ASSETS
------- ---------------- ------------
<S> <C> <C>
Lear Corp. Autoparts/Original 3.9%
Equipment
Tosco Corp. Oil Refining and 3.2
Marketing
ShopKo Stores,
Inc. Discount Retailer 3.1
Quantum Corp. Computer Component 3.0
Manufacturer
Sunbeam Corp.,
Inc. Appliances 2.8
Darden 2.8
Restaurants Restaurants and
Inc. Hotels
Owens & Minor Health 2.7
Inc. Suppliers/Services
Goodyear Tire & Tire and Rubber 2.6
Rubber Co. Products
Quest
Diagnostics, Clinical
Inc. Laboratories 2.5
Republic New 2.5
York Corp. Banks
</TABLE>
intrinsic value. In a market that has been characterized by speculation and
momentum at different times since the beginning of 1995, we believe that a
value approach is well suited to weather the ups and downs associated with a
turbulent market.
/s/ Eileen A. Aptman /s/ Ronald E. Gutfleish
Eileen A. Aptman Ronald E. Gutfleish
Portfolio Manager, Portfolio Manager,
U.S. Active Equity Value U.S. Active Equity Value
/s/ G. Lee Anderson
G. Lee Anderson
Portfolio Manager,
U.S. Active Equity Value
August 29, 1997
33
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS MID CAP EQUITY FUND
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--96.2%
AIRLINES--2.0%
102,400 Continental Airlines, Inc.* $ 3,840,000
- -------------------------------------------------------
APPLIANCE MANUFACTURER--2.8%
138,200 Sunbeam Corp. 5,407,075
- -------------------------------------------------------
AUTO/ORIGINAL EQUIPMENT MANUFACTURER--3.9%
154,800 Lear Corp.* 7,411,050
- -------------------------------------------------------
BANKS--3.7%
176,400 National Bank of Canada 2,297,706
40,700 Republic of New York Corp. 4,700,850
- -------------------------------------------------------
6,998,556
- -------------------------------------------------------
CHEMICAL PRODUCTS--1.7%
60,800 Union Carbide Corp. 3,366,800
- -------------------------------------------------------
CHEMICALS-COMMODITY--0.8%
75,600 Geon Co. 1,455,300
- -------------------------------------------------------
DATACOM EQUIPMENT--4.6%
132,600 Bay Networks Inc* 4,044,300
271,200 Quest Diagnostics Inc.* 4,712,100
- -------------------------------------------------------
8,756,400
- -------------------------------------------------------
DEPARTMENT STORES--3.1%
199,900 ShopKo Stores Inc.* 5,772,113
- -------------------------------------------------------
ELECTRIC UTILITIES--5.8%
242,100 Central Maine Power Co. 3,268,350
125,400 Long Island Lighting Co. 3,080,138
201,200 Unicom Corp. 4,564,725
- -------------------------------------------------------
10,913,213
- -------------------------------------------------------
ENTERTAINMENT AND LEISURE--2.0%
96,400 Royal Caribbean Cruise Lines 3,825,875
- -------------------------------------------------------
FINANCIAL SERVICES--1.9%
75,800 American States Financial Corp. 3,519,963
- -------------------------------------------------------
FOOD--2.1%
142,000 International Multifoods Corp. 4,011,500
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FOREST PRODUCTS--3.4%
31,000 Georgia Pacific Corp. $ 2,927,563
208,300 Stone Container Corp.* 3,462,988
- -----------------------------------------------------
6,390,551
- -----------------------------------------------------
HEALTH & MEDICAL SERVICES--2.1%
297,700 Perrigo Co.* 3,870,100
- -----------------------------------------------------
HEALTHCARE MANAGEMENT--5.2%
118,700 Foundation Health Systems* 3,842,913
85,000 Sierra Health Services, Inc.* 2,794,375
105,200 Tenet Healthcare Corp.* 3,149,425
- -----------------------------------------------------
9,786,713
- -----------------------------------------------------
HOME BUILDERS--3.4%
44,900 Centex Corp. 2,503,175
104,600 Lennar Corp. 3,896,350
- -----------------------------------------------------
6,399,525
- -----------------------------------------------------
INSURANCE SPECIALTY--1.5%
80,900 Old Rep International Corp. 2,831,500
- -----------------------------------------------------
INSURANCE-LIFE--3.4%
68,849 American General Corp. 3,666,209
36,900 Reliastar Financial Corp. 2,829,769
- -----------------------------------------------------
6,495,978
- -----------------------------------------------------
INSURANCE-PROPERTY AND CASUALTY--1.8%
74,800 Allmerica Financial Corp. 3,309,900
- -----------------------------------------------------
MEDIA/ENTERTAINMENT--1.3%
78,200 Carmike Cinemas* 2,473,075
- -----------------------------------------------------
MEDICAL PRODUCTS AND SUPPLIES--4.8%
160,700 Imation Corporation* 3,947,194
347,200 Owens & Minor Inc. 5,164,600
- -----------------------------------------------------
9,111,794
- -----------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES--2.2%
52,300 Unionbancal Corporation 4,066,325
- -----------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL REFINING & MARKETING--6.3%
415,100 Groupe AB SA ADR* $ 3,242,969
192,400 Tosco Corp. 6,024,525
60,500 Valero Energy Corp.* 2,601,500
- -----------------------------------------------------
11,868,994
- -----------------------------------------------------
PACKAGING--1.5%
83,200 Owens Illinois Corp.* 2,870,400
- -----------------------------------------------------
PERSONAL COMPUTERS & PERIPHERALS--3.0%
196,400 Quantum Corp* 5,707,875
- -----------------------------------------------------
PHARMACEUTICALS--1.7%
65,935 Block Drug Co. 3,115,429
- -----------------------------------------------------
RESTAURANTS--2.8%
560,300 Darden Restaurants, Inc. 5,357,869
- -----------------------------------------------------
SEMICONDUCTORS--4.0%
62,600 Avnet Inc. 4,119,863
130,462 Vishay Intertechnology, Inc.* 3,489,859
- -----------------------------------------------------
7,609,722
- -----------------------------------------------------
STEEL--1.7%
70,300 AK Steel Holding Corp. 3,225,013
- -----------------------------------------------------
SUPERMARKETS--3.4%
168,800 Fleming Companies, Inc. 2,690,250
90,600 Supervalu, Inc. 3,669,300
- -----------------------------------------------------
6,359,550
- -----------------------------------------------------
TEXTILES--4.0%
168,000 Angelica Corp. 3,234,000
161,200 Fruit of The Loom, Inc.* 4,412,850
- -----------------------------------------------------
7,646,850
- -----------------------------------------------------
TIRE & OTHER RELATED RUBBER PRODUCTS--2.6%
76,200 Goodyear Tire & Rubber Co. 4,919,663
- -----------------------------------------------------
TRANSPORTATION-MISCELLANEOUS--1.7%
89,800 CNF Transportation Inc. 3,131,769
- -----------------------------------------------------
TOTAL COMMON STOCKS
(COST $136,678,430) $181,826,440
- -----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- --------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT--2.9%
$5,600,000 Joint Repurchase Agreement Account
5.84%, 08/01/97 $ 5,600,000
- --------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $5,600,000) $ 5,600,000
- --------------------------------------------------------------
TOTAL INVESTMENTS
(COST $142,278,430)(A) $187,426,440
- --------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which
value exceeds cost $ 48,533,786
Gross unrealized loss for investments in which
cost exceeds value (3,408,004)
- --------------------------------------------------------------
Net unrealized gain $ 45,125,782
- --------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $142,300,658.
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.
35
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs International Equity Fund seeks long-term capital
appreciation by investing in equity securities of companies organized or traded
outside the U.S. that we believe have the potential to appreciate over the long
term. The fund focuses on growing companies that are attractively valued and
have strong, competitive positions in their respective industries. The fund's
portfolio managers are based in London, Tokyo and Singapore and their knowledge
of local markets plays an important role in uncovering investment
opportunities. While the fund does not allocate assets across specific
countries based on top-down economic or market forecasts, the portfolio
managers strive to manage risk by remaining diversified by country and industry
sector and by closely monitoring economic and political events in countries in
which the fund does invest.
MARKET OVERVIEW: EUROPEAN MARKETS PERFORMED BEST WHILE ASIA LAGGED
During the six-month period under review, slower than expected economic
growth persisted in several European and Asian countries while growth in other
countries, such as the U.K., accelerated. Most European equity markets
continued to perform very well, buoyed by healthy earnings and an increased
focus on improving shareholder value. In Asia, several markets posted strong
results while others were impacted by a variety of regional and country-
specific issues.
.Europe. Europe's overall economic recovery continued, but growth for specific
countries was mixed. The economies of the U.K., Spain, the Netherlands and
parts of Scandinavia showed the most improvement, while those of Germany and
France were disappointing despite signs of a moderate upturn. The climate for
equities in continental Europe remained positive, as stocks continued to
benefit from loose monetary policies, subdued inflation and the strong U.S.
dollar. During the period under review, the European equity markets climbed
26.1%, as measured by the FT/S&P Actuaries Europe Index in terms of local
currencies. However, the performance of U.K. equities lagged most European
markets as the strong pound sterling impacted the profitability of export-
dependent companies. In addition, investors feared further monetary tightening
would be necessary to rein in the U.K.'s rising inflationary pressures.
.Japan. For the six-month period ended July 31, Japanese stocks (as measured by
the TOPIX index in yen without dividends reinvested) rose 12.5%,
underperforming most other equity markets. Though Japan's economy strengthened,
the recovery remained fragile and investors lacked confidence in the
sustainability of corporate profits. With future earnings uncertain, investors
focused on international blue-chip stocks that benefited from the weakness of
the yen, and shied away from the rest of the market. Despite these concerns,
the market strengthened during the second half of the period, when healthy
demand from pension plans and foreign investors helped support equity prices.
.Asia (ex-Japan). The Asian stock markets returned 1.3% during the period, as
measured by the Morgan Stanley Capital International All Country Asia Free
(Ex Japan) Index (without dividends reinvested). The weak performance indicated
by the Index masks the extreme divergence of performance among the individual
Asian markets. For example, India rose 26.1%, Hong Kong returned 17.3%,
Thailand fell 7.4% and the Philippines dropped 22.7% (all in local currency
terms). Among the key events affecting the Asian markets during the period were
the July handover of Hong Kong to China and the devaluation of the Thai baht.
Though investor optimism regarding the handover helped buoy the region's
performance, the Thai devaluation sparked currency turmoil that impacted
several markets, such as the Philippines.
36
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
PERFORMANCE REVIEW: FUND OUTPERFORMED THE BENCHMARK PRIMARILY DUE TO SUCCESSFUL
STOCK SELECTION
PERFORMANCE SUMMARY: JANUARY 31, 1997--JULY 31, 1997
<TABLE>
<CAPTION>
FUND TOTAL RETURN FT/S&P ACTUARIES
(BASED ON NET EUROPE & PACIFIC
ASSET VALUE) INDEX TOTAL RETURN
----------------- ------------------
<S> <C> <C>
Class A* 20.81% 16.72%
Class B* 20.48% 16.72%
Institutional* 21.19% 16.72%
Service* 20.89% 16.72%
</TABLE>
* Class A, B, Institutional and Service share performance assumes reinvestment
of all dividends and distributions, a complete redemption at the net asset
value at the end of the period and no initial sales charge or contingent
deferred sales charge.
During the period, all of the fund's share classes outperformed the
benchmark, the Financial Times/S&P Actuaries Europe & Pacific Index ("Europac")
unhedged. (Europac is a capitalization-weighted composite of approximately
1,500 stocks from 23 countries in Europe and the Asia-Pacific region and is
calculated on a monthly basis.) We are also pleased to note that the fund
continued to perform well compared with its peers. For the three-year period
ended July 31, 1997, the fund's Class A shares were rated "four stars" (in a
universe of 555 international equity funds) by Morningstar, Inc., an
independent mutual fund rating agency./1/
- --------
/1/ Source: (C) 1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of 7/31/97.
The ratings are subject to change every month. Past performance is no guarantee
of future results. Morningstar ratings are calculated from a fund's three-,
five- and ten-year average annual returns (where applicable) in excess of 90-
day Treasury bill returns with appropriate fee and sales charge adjustments and
a risk factor that reflects fund performance below 90-day Treasury bill
returns. The Morningstar rating applies only to the fund's Class A shares; the
fund's Class B, Institutional and Service shares have not been rated. Class B,
Institutional and Service shares are subject to additional fees and expenses
that may have the effect of lowering performance and may affect any future
Morningstar rating. Morningstar rates funds against peers in the same category.
In all, there are four Morningstar categories (domestic equity, international
equity, taxable bond and municipal). Morningstar ratings range from five stars
(highest) to one star (lowest). Funds with five-star ratings are in the top 10%
of their category, four-star ratings in the next 22.5%, three stars the next
35%, two stars the next 22.5% and one star the lowest 10% of their categories.
The fund's strong performance can primarily be attributed to successful stock
selection across regions. In addition, several of the fund's country weightings
favorably contributed to its results. These included an overweighting in
Europe, which performed well during the period, and a relative underweighting
in Japan and other Asian markets, which were generally weaker.
Europe. As of July 31, the fund was overweighted in European stocks relative
to the Index, 56.8% versus 53.0%. Two of the fund's best performers in the
region were temporary employment agencies ADECCO (Switzerland) and RANDSTAD
HOLDINGS (Netherlands), which appreciated due to earnings upgrades and a
cyclical upturn in the temporary employment industry. A number of technology-
related holdings also achieved strong results, including ASM LITHOGRAPHY (Dutch
manufacturer of wafer steppers), SGS THOMSON (French semiconductor
manufacturer), MISYS (British software manufacturer) and ERICSSON (Swedish
supplier of mobile handsets and infrastructure). In contrast, RENTOKIL GROUP
(British environmental services) suffered when the strong pound sterling
translated into weaker foreign earnings, which fueled concerns regarding the
company's ability to match its prior 20% annualized earnings growth record.
New European investments included ASM Lithography, one of only three volume
manufacturers of wafer stepper machines used in the manufacturing of
semiconductors. This stock performed very well since it was added, as noted.
Sales during the period included Randstad Holdings, which reached our price
target.
Japan. As of July 31, the fund's 30.5% allocation in Japan was underweighted
compared with the benchmark (32.6%). The Japanese portion of the fund
significantly outperformed the TOPIX index, as it held a large number of
internationally competitive export-oriented companies that fared well during
the period. SMC CORP., a manufacturer of pneumatic control devices used in
automated assembly lines, continued to benefit from its dominant market share
in Japan and successful
37
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
expansion of its overseas operations. CANON, INC., a manufacturer of office
equipment, cameras and computer peripherals, performed well due to good
earnings results and a bright outlook for PC peripherals. TDK CORP., an
electronic components manufacturer, continued to surprise the market with
better than expected profits resulting from its strong market position in
"magneto-resistive" type of hard disk drive heads. However, the performance of
MITSUBISHI HEAVY INDUSTRIES LTD. was disappointing due to a difficult pricing
outlook for the domestic electric power generation market. Japanese positions
initiated during the period include NINTENDO, one of the largest video game
manufacturers, which is positioned to benefit from Nintendo 64, its new game
platform, and ONO PHARMACEUTICAL CO., which introduced a new anti-asthma drug
with substantial market potential.
Asia-Pacific. The portfolio was underweighted in Asia (outside Japan)
compared with the benchmark, 8.7% versus 10.1%. One of the fund's best
performers in the region was ASIA SATELLITE TELECOMMUNICATION HOLDINGS LTD., a
leading satellite owner and operator in the Asia-Pacific region. The company
performed well when satellite utilization and transponder rates remained firm,
which eased market concerns that an impending oversupply of transponders would
impact the profitability of Asian satellite operators. In contrast, COMMERCE
ASSET HOLDINGS, the fifth largest financial group in Malaysia, came under
pressure due to concerns of a slowdown in future earnings growth resulting from
tighter monetary conditions, a more difficult operating environment for its
merchant banking and stockbrokerage businesses, and potential deterioration in
the credit quality of its loan portfolio. A new addition was VILLAGE ROADSHOW,
an Australian media and entertainment company with interests in cinema, radio,
theme park and resort businesses. The company appears to be well positioned to
benefit from aggressive expansion in Europe and Asia, as well as from a number
of partnerships that are expected to give it a competitive advantage.
PORTFOLIO COMPOSITION: DIVERSIFICATION BY COUNTRY AND INDUSTRY
As of July 31, 1997, 96.2% of the fund's net assets were invested in equities
and the remainder (4.8%) was invested in cash equivalents. The fund was widely
diversified by both country and industry, with positions in 60 companies based
in 16 countries. In terms of total net assets, the fund's five largest country
exposures were Japan (30.5%), the U.K. (13.5%), Sweden (7.6%), Switzerland
(7.0%) and Germany (6.9%).
TOP 10 PORTFOLIO HOLDINGS AS OF JULY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
COMPANY (Line of Business) COUNTRY NET ASSETS
-------------------------- ------- ----------
<S> <C> <C>
Novartis Switzerland 3.6%
Pharmaceuticals
Rentokil Group U.K. 3.1
Environmental
Services
ASM Lithography Netherlands 2.9
Manufacturer of
Wafer Steppers
SMC Corp. Japan 2.8
Manufacturer of
Industrial
Controls
Canon, Inc. Japan 2.8
Office Equipment
Manufacturer
Hoechst Germany 2.7
Chemical and Drug
Manufacturer
Mitsubishi Heavy
Industries, Ltd. Japan 2.4
Heavy Machinery
Manufacturer
Bank of Ireland Ireland 2.4
Commercial Bank
Electrocomponents U.K. 2.4
Catalog
Distributor of
Industrial
Components
Adecco SA Switzerland 2.3
Commercial
Services
</TABLE>
38
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
OUTLOOK
We remain optimistic regarding the performance of European equities, given
the current favorable environment of low interest rates, contained
inflationary pressures and improved economic growth prospects. Furthermore,
currency devaluation relative to the U.S. dollar and the British pound is
helping strengthen European corporate competitiveness, while corporate
restructuring and the focus on enhancing shareholder value are trends that we
expect to continue unabated.
In Japan, we believe the market may consolidate in the short term, as
investors have become more cautious regarding the economic outlook due to
indications of economic softening. However, Japanese equities should continue
to benefit from a number of factors: Corporate fundamentals are expected to
remain sound, particularly for manufacturing companies; inflationary pressures
are still virtually nonexistent; and interest rates are unlikely to rise to
levels that would be harmful to the stock market.
We are generally positive on the long-term outlook of other Asian markets.
However, we remain cautious over the near term as the volatility of these
markets will be higher due to uncertainties resulting from the delinking of a
number of currencies from the U.S. dollar. Select Asian equities remain
attractively valued on a historical basis and are expected to benefit from a
pickup in export growth, improved inflation and a modest economic recovery
throughout the region subsequent to the currency devaluations. We will manage
our exposure in a conservative manner as we remain committed to our long-term
investment style.
FORTHCOMING MANAGEMENT TEAM CHANGES
During the period, Goldman Sachs Asset Management International continued to
expand and strengthen its global investment team. With growth comes change,
however, and we are sorry to announce that Messrs. Jack and Jongen, two of the
portfolio managers of the European portion of the fund, will be leaving
Goldman Sachs in September to pursue other opportunities. To ensure decision-
making continuity and a smooth transition, Messrs. Jack and Jongen have taken
an active role in integrating new members into the team. For example, James
Hordern, a specialist in European equities, joined the firm from Mercury Asset
Management in July, and we expect to add another senior European portfolio
manager shortly. The fund's investment process will continue to be based on a
team approach, which enables it to benefit from the contribution of several
viewpoints and a continuity of style, unlike an investment approach that is
dependent on specific individuals.
/s/ Ivor H. Farman
Ivor H. Farman
Portfolio Manager, London
/s/ Alessandro P. G. Lunghi
Alessandro P. G. Lunghi
Portfolio Manager, London
/s/ Shogo Maeda
Shogo Maeda
Portfolio Manager, Tokyo
/s/ Warwick M. Negus
Warwick M. Negus
Portfolio Manager, Singapore
August 29, 1997
39
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------
<C> <S> <C>
COMMON STOCKS--96.2%
AUSTRALIAN DOLLAR--3.0%
1,060,422 Australia & New Zealand
Bank Group (Commercial
Banks) $ 8,479,696
2,982,818 Village Roadshow
(Entertainment
& Leisure) 7,958,141
992,791 Woodside Petroleum, Ltd.
(Oil & Gas) 8,420,543
- ---------------------------------------------------
24,858,380
- ---------------------------------------------------
BRITISH POUND STERLING--13.5%
2,670,475 Electrocomponents
(Electronics) 19,806,549
1,857,248 Farnell Electronics
(Electronics) 15,633,965
754,039 Misys PLC (Business
Services) 18,806,989
7,108,918 Rentokil Group (Business
Services) 25,371,412
819,521 Siebe (Engineering) 14,792,264
1,053,405 Standard Chartered
(Banking) 17,363,097
- ---------------------------------------------------
111,774,276
- ---------------------------------------------------
DEUTSCHE MARK--6.9%
141,131 Adidas AG (Textiles) 16,552,259
88,741 Fresenius AG (Health
Care) 18,213,660
483,530 Hoechst AG (Health Care) 22,670,802
- ---------------------------------------------------
57,436,721
- ---------------------------------------------------
FRENCH FRANC--6.1%
90,735 CLF Dexia France
(Financial Services) 8,976,498
25,428 Comptoirs Modernes
(Retail Trade) 12,291,282
105,352 Credit Local de France
(Financial Services) 10,422,572
208,421 SGS Thomson
Microelectronics
(Electronics) 18,839,444
- ---------------------------------------------------
50,529,796
- ---------------------------------------------------
HONG KONG DOLLAR--3.5%
4,000,037 Asia Satellite Telephone
(Utility) 12,011,735
1,388,900 Dao Heng Bank Group
(Commercial Bank) 8,467,043
692,678 Sun Hung Kai Properties
Co.
(Real Estate) 8,700,411
- ---------------------------------------------------
29,179,189
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
IRISH POUND--2.4%
1,640,114 Bank of Ireland (Commercial Banks) $ 20,028,917
- ---------------------------------------------------------------------------
ITALIAN LIRA--3.9%
2,415,600 Ente Nazionale Idrocarburi (Oil & Gas) 14,097,734
3,811,980 Telecom Italia Mobile (Utility) 12,836,950
3,392,066 Telecom Italia Mobile (Di Risp Shares) (Utility) 5,853,045
- ---------------------------------------------------------------------------
32,787,729
- ---------------------------------------------------------------------------
JAPANESE YEN--30.5%
268,459 Aderans Company Ltd. (Retail Trade) 7,508,232
109,000 Autobachs Seven Co.
(Automobiles & Automobile Parts) 8,141,613
726,265 Canon, Inc.
(Office Equipment Manufacturer) 23,196,295
152,252 Hoya Corp. (Electronics) 7,718,732
285,108 Inaba Denkisangyo
(Electronics) 4,456,694
220,000 Ito En (Beverages) 4,926,067
397,497 Kokuyo Co., Ltd. (Computers/Office) 9,504,997
195,615 Kyocera Corp. (Electronics) 16,859,087
339,776 Max Co. (Office Equipment Manufacturer) 5,655,756
260,750 Mirai Industry Co. (Electronics) 5,177,545
2,853,707 Mitsubishi Heavy Industries Ltd. (Machinery) 20,133,884
2,639,790 Mitsui Marine & Fire (Insurance) 18,133,918
151,642 Nintendo (Toys) 15,375,614
253,000 Ono Pharmaceutical (Pharmaceuticals) 8,807,435
498,354 Santen Pharmaceutical Co. (Pharmaceuticals) 8,674,349
111,323 Sanyo Shinpan Financial (Financial) 6,753,689
357,654 Shimachu Co. (Retail-Furniture) 9,277,547
238,511 SMC Corp. (Machinery) 23,579,033
407,129 Taikisha Ltd. (Machinery) 6,157,675
376,002 Takeda Chemical Industry (Pharmaceuticals) 11,405,552
223,037 TDK Corp. (Consumer Goods) 19,222,453
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
40
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPANESE YEN (CONTINUED)
409,835 Tostem Corp. (Building Materials) $ 9,211,331
122,727 York Benimaru (Food-Retailer) 3,411,676
- ------------------------------------------------------------------------
253,289,174
- ------------------------------------------------------------------------
MALAYSIAN RINGGIT--1.0%
1,645,557 Commerce Asset Holdings
(Commercial Banks) 4,117,792
581,000 United Engineers Malaysia (Engineering) 4,053,232
- ------------------------------------------------------------------------
8,171,024
- ------------------------------------------------------------------------
NETHERLANDS GUILDER--6.5%
173,039 Aegon (Insurance) 13,120,017
292,315 ASM Lithography HL
(Electronics-Semiconductors) 23,728,652
131,669 Wolters Kluwer (Publishing) 17,324,701
- ------------------------------------------------------------------------
54,173,370
- ------------------------------------------------------------------------
PHILIPPINE PESO--0.3%
13,746,266 Metro Pacific Corp.
(Wholesale Trade) 2,166,784
- ------------------------------------------------------------------------
PORTUGUESE ESCUDO--1.4%
682,475 Elec de Portugal (Utility) 11,562,336
- ------------------------------------------------------------------------
SINGAPORE DOLLAR--1.0%
1,850,266 Parkway Holdings (Conglomerate) 8,489,767
83 Singapore Land (Real Estate) 409
- ------------------------------------------------------------------------
8,490,176
- ------------------------------------------------------------------------
SPANISH PESETA--1.6%
60,358 Banco Popular (Commercial Banks) 13,357,266
- ------------------------------------------------------------------------
SWEDISH KRONA--7.6%
395,232 Ericsson Telecommunications (Computer/Office) 17,805,028
572,104 Securitas AB (Business Services) 16,632,389
648,000 Sparbanken Sverige (Banking) 14,210,348
4,685,493 Swedish Match AB (Tobacco) 14,854,823
- ------------------------------------------------------------------------
63,502,588
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SWISS FRANC--7.0%
49,797 Adecco SA (Commercial Services) $ 19,371,530
6,384 Cie Financier Richemont AG (Consumer Goods) 9,402,497
18,330 Novartis AG (Pharmaceuticals) 29,381,753
- -------------------------------------------------------------------------
58,155,780
- -------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $634,200,651) $799,463,506
- -------------------------------------------------------------------------
SHORT-TERM OBLIGATION--4.8%
$39,478,820 State Street Bank & Trust Euro-Time Deposit,
5.69%, 08/01/1997 $ 39,478,820
- -------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATION
(COST $39,478,820) $ 39,478,820
- -------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $673,679,471)(A) $838,942,326
- -------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost $178,334,650
Gross unrealized loss for investments in which cost
exceeds value (18,650,863)
- -------------------------------------------------------------------------
Net unrealized gain $159,683,787
- -------------------------------------------------------------------------
</TABLE>
(a) The aggregate cost for federal income tax purposes is $679,258,539.
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.
41
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
- -------------------------------------------
<S> <C>
COMMON STOCK INDUSTRY CONCENTRATIONS
- -------------------------------------------
Automobiles & Automobile Parts 1.0%
Banking 3.8%
Beverages 0.6%
Building Materials 1.1%
Business Services 7.3%
Commercial Banks 6.6%
Commercial Services 2.3%
Computers/Office 3.3%
Conglomerate 1.0%
Consumer Goods 3.4%
Electronics 10.6%
Electronics-Semiconductors 2.9%
Engineering 2.3%
Entertainment & Leisure 1.0%
Financial 0.8%
Financial Services 2.3%
Food Retailer 0.4%
Health Care 4.8%
Insurance 3.8%
Machinery 6.0%
Office Equipment Manufacturer 3.5%
Oil & Gas 2.7%
Pharmaceuticals 7.0%
Publishing 2.1%
Real Estate 1.0%
Retail-Furniture 1.1%
Retail Trade 2.4%
Textiles 2.0%
Tobacco 1.8%
Toys 1.9%
Utility 5.1%
Wholesale Trade 0.3%
- -------------------------------------------
Total Common Stocks 96.2%
- -------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
42
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS SMALL CAP EQUITY FUND
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs Small Cap Equity Fund seeks long-term capital appreciation,
primarily through investments in equity securities of U.S. companies with
market capitalizations of $1 billion or less. The fund is managed according to
a "business value" approach to investing, which means we look for attractive
companies with high or improving returns on capital that we believe can achieve
solid, sustainable growth, as well as generate free cash after investing for
future growth. This approach differs markedly from many emerging growth small-
cap funds that invest in companies with high price-to-earnings multiples solely
on the basis of rapid, but frequently unsustainable, growth rates. Our rigorous
fundamental research includes meeting with a company's management and examining
a company's competitors, customers and suppliers.
NAME CHANGE
To more closely reflect the fund's value investment style, its name was
changed in August from the Goldman Sachs Small Cap Equity Fund to the Goldman
Sachs Small Cap Value Fund. Please note that the fund's objective and
investment focus remain the same.
PERFORMANCE REVIEW: FUND SIGNIFICANTLY OUTPERFORMED THE BENCHMARK
PERFORMANCE SUMMARY: JANUARY 31, 1997--JULY 31, 1997
<TABLE>
<CAPTION>
FUND TOTAL RETURN
(BASED ON NET RUSSELL 2000
ASSET VALUE) TOTAL RETURN
----------------- ------------
<S> <C> <C>
Class A* 17.65% 13.07%
Class B* 17.26% 13.07%
</TABLE>
* Class A and B share performance assumes reinvestment of all dividends and
distributions, a complete redemption at the net asset value at the end of the
period and no initial sales charge or contingent deferred sales charge.
Overall, small-cap stocks continued to lag large-cap stocks during the
period, primarily due to the relatively weak performance of emerging growth
small caps early in the year. Though the emerging growth sector strengthened
during the second quarter, small-cap stocks with value characteristics, which
the fund emphasizes, significantly outperformed small-cap growth stocks for the
period as a whole. The period was marked by significant volatility, with the
Russell 2000 down nearly 10% toward the end of April, and then rebounding to
close up 13% at the end of July. The turbulence was primarily driven by
concerns over tightening monetary policy in the first quarter, which faded as
more moderate growth was reported in the second quarter.
THE FUND'S CLASS A AND CLASS B SHARES BOTH SIGNIFICANTLY OUTPERFORMED THE
BENCHMARK DURING THE PERIOD, PRIMARILY DUE TO SUCCESSFUL STOCK SELECTION IN A
WIDE RANGE OF INDUSTRIES. In general, the fund's best performers achieved
strong results relative to the benchmark due to several reasons:
.The stock prices of several holdings rebounded when company fundamentals
stabilized and began to improve after previous earnings disappointments or
operational difficulties. These included health-related companies such as
MARINER HEALTH GROUP INC. and SUN HEALTHCARE GROUP INC. (providers of long-term
care services) as well as specialty retailers such as GENERAL NUTRITION COS.
INC. (vitamins and nutrition supplements) and J. BAKER, INC. (men's apparel and
discount licensed shoe departments). The solid performance of Mariner Health
Group and Sun Healthcare Group was particularly notable as the healthcare
sector was among the weakest overall performers in the Russell 2000 over the
period.
.A number of stocks appreciated when their continued strong underlying growth
began to be more widely recognized by the market. These included two of the
fund's restaurant investments, IHOP CORP. and MORTON'S RESTAURANT GROUP, INC.;
financial stocks such as IPC HOLDINGS LTD. (catastrophe reinsurance) and HORACE
MANN EDUCATORS CORP. (property, casualty and life insurance for the educator
market); CARBIDE/GRAPHITE GROUP, INC. (a manufacturer of electrodes for steel
mini-
43
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS SMALL CAP EQUITY FUND (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
mills); and MOVADO GROUP INC. (owner of the Movado, Concord and Esquire watch
brands).
.Some holdings performed well when they received and accepted merger proposals.
These included HERITAGE MEDIA CORP. (in-store marketing products and services),
DECISIONONE CORP. (computer support provider) and LESLIE'S POOLMART, INC.
(swimming pool supplies).
An investment that did not meet our expectations was GROUPE AB, the largest
independent provider of content for French television, which declined due to
concerns over the potential cancellation of a major customer's expected youth
programming orders. We believe the market has overreacted to this news as
Groupe AB has the potential to benefit from the distribution of its library of
youth programming to other television broadcasters. In addition, the company
has large upside opportunity as one of three main providers of direct-to-home
satellite services in the French market.
NEW INVESTMENTS IN HEALTHCARE AND BASIC INDUSTRY, SALES IN SEVERAL HOLDINGS
New investments in healthcare during the period included QUEST DIAGNOSTICS,
INC., one of the top three clinical laboratories in the U.S., which is
positioned to benefit from its turnaround plan, and PHYSICIANS RESOURCE GROUP
INC., the leading provider of physician practice management services to
ophthalmic practices. In basic industry, new investments included FEDDERS
CORP., the largest manufacturer of room air conditioners in North America,
which has exciting international growth opportunities, and REXEL INC., a well-
managed, expanding distributor of electrical products to the construction and
utility industries.
During the period, we sold a number of holdings (e.g., HORACE MANN EDUCATORS
CORP., THE MORNINGSTAR GROUP and AMERICAN SAFETY RAZOR CO.) after they reached
our target prices. Though the fund's cash position increased significantly as a
result of new sales, we are gradually reinvesting the cash as we identify
attractive investments that meet our disciplined selection criteria.
TOP 10 PORTFOLIO HOLDINGS AS OF JULY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
COMPANY LINE OF BUSINESS NET ASSETS
------- ---------------- ----------
<S> <C> <C>
Movado Group, Luxury Watch 4.3%
Inc. Distributor
Friedman's, Inc. Jewelry Retailer 3.6
Groupe AB Media Content 3.5
Provider
Heritage Media Media/Marketing 3.2
Corp. Services
J. Baker, Inc. Specialty Apparel 2.8
Landstar System
Inc. Trucking 2.8
Quest
Diagnostics, Clinical
Inc. Laboratories 2.5
Terra Nova 2.5
Bermuda Property/Casualty
Holdings Insurance
Morton's Restaurants 2.5
Restaurant
Group, Inc.
DecisionOne Computer Support 2.5
Corp. Provider
</TABLE>
OUTLOOK
The stock market as a whole has reached historically high valuations as a
result of the most recent rally. However, we believe the outlook for small-cap
stocks is potentially more positive than that of large caps, as small-cap
valuations have remained at relatively modest levels. If the investment
environment becomes more volatile due to a deterioration in sentiment, stock
selection will play an increasingly important role in determining returns. We
remain optimistic that our disciplined, bottom-up investment approach will
enable us to continue to identify attractive opportunities.
/s/ Paul D. Farrell /s/ Matthew B. McLennan
Paul D. Farrell Matthew B. McLennan
Senior Portfolio Manager, Portfolio Manager,
U.S. Active Equity Value U.S. Active Equity Value
August 29, 1997
44
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS SMALL CAP EQUITY FUND
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--83.3%
AUTO/ORIGINAL EQUIPMENT MANUFACTURER--2.0%
889,700 APS Holding Corp.* $ 6,394,719
- ---------------------------------------------------------------
BANKS--0.8%
63,325 Banca U.S.* 1,021,116
94,200 Northwest Savings Bank 1,660,275
- ---------------------------------------------------------------
2,681,391
- ---------------------------------------------------------------
COMMERCIAL PRODUCTS--3.0%
211,000 Figgie International, Inc. Class A* 3,006,750
239,300 Figgie International, Inc. Class B* 3,305,331
194,600 Spartech Corp. 2,991,975
- ---------------------------------------------------------------
9,304,056
- ---------------------------------------------------------------
COMMERCIAL SERVICES--3.1%
151,700 Black Box Corp.* 5,537,050
74,600 Galileo International Inc.* 1,967,575
539,200 Opinion Research Corp.* 2,089,400
- ---------------------------------------------------------------
9,594,025
- ---------------------------------------------------------------
COMMUNICATIONS-MEDIA SERVICES--1.6%
176,700 Rural Cellular Corp.* 1,833,263
78,300 Telephone & Data Systems, Inc. 3,004,763
- ---------------------------------------------------------------
4,838,026
- ---------------------------------------------------------------
DATACOM EQUIPMENT--2.5%
327,700 DecisionOne Corp.* 7,598,544
- ---------------------------------------------------------------
ELECTRIC UTILITIES--2.4%
538,800 Central Maine Power Co. 7,273,800
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT--4.3%
187,700 Carbide/Graphite Group* 5,443,300
378,300 Fedders Corp Class A* 2,246,156
258,100 Fedders Corp. 1,564,731
214,900 Rexel, Inc.* 3,921,925
- ---------------------------------------------------------------
13,176,112
- ---------------------------------------------------------------
ENGINEERING--0.2%
59,500 RCM Technologies* 654,500
- ---------------------------------------------------------------
ENTERTAINMENT AND LEISURE--1.3%
11,600 CMP Media Inc.* 313,200
70,100 Royal Caribbean Cruise Lines 2,782,094
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ENTERTAINMENT AND LEISURE (CONTINUED)
44,700 Silverleaf Resorts, Inc.* $ 877,238
- ---------------------------------------------------------
3,972,532
- ---------------------------------------------------------
FINANCIAL SERVICES--0.9%
118,500 Amerin Corp.* 2,918,063
- ---------------------------------------------------------
FOOD--0.4%
259,900 Cadiz Land Co., Inc.* 1,348,231
- ---------------------------------------------------------
FOOD PRODUCERS--1.0%
374,600 Alpine Lace Brands, Inc.* 3,043,625
- ---------------------------------------------------------
HEALTH & MEDICAL SERVICES--1.9%
82,100 Matria Healthcare, Inc.* 369,450
61,100 Perrigo Co.* 794,300
564,100 Physicians Resource Group I* 4,724,338
- ---------------------------------------------------------
5,888,088
- ---------------------------------------------------------
HEALTHCARE MANAGEMENT--7.3%
443,200 Mariner Health Group, Inc.* 5,955,500
445,300 Quest Diagnostics Inc.* 7,737,088
164,200 Sierra Health Services, Inc.* 5,398,075
168,300 Sun Healthcare Group, Inc.* 3,565,856
- ---------------------------------------------------------
22,656,519
- ---------------------------------------------------------
HOME FURNISHING & SERVICES--0.7%
197,600 Congoleum Corp.* 2,198,300
- ---------------------------------------------------------
INSURANCE-LIFE--0.3%
37,300 ARM Financial Group, Inc.* 773,975
- ---------------------------------------------------------
INSURANCE-PROPERTY AND CASUALTY--7.0%
142,700 IPC Holdings Ltd. 4,245,325
117,700 Scpie Holdings, Inc. 3,104,338
126,600 Seibels Bruce Group* 1,076,100
301,900 Symons International Group* 5,660,625
329,600 Terra Nova Bermuda Holdings 7,663,200
- ---------------------------------------------------------
21,749,588
- ---------------------------------------------------------
JEWELRY--4.3%
458,075 Movado Group, Inc. 13,284,175
- ---------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
45
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS SMALL CAP EQUITY FUND (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDIA--3.7%
1,369,400 Groupe AB SA ADR* $ 10,698,438
34,400 Scientific Games Holdings, Inc.* 597,270
- --------------------------------------------------------------
11,295,708
- --------------------------------------------------------------
MEDIA/ENTERTAINMENT--1.1%
432,300 International Post Ltd.* 1,296,900
367,400 Platinum Entertainment, Inc.* 2,158,475
- --------------------------------------------------------------
3,455,375
- --------------------------------------------------------------
PACKAGING--0.6%
93,600 Shorewood Packaging Corp.* 1,977,300
- --------------------------------------------------------------
PHARMACEUTICALS--0.5%
87,900 Chirex, Inc.* 1,505,288
- --------------------------------------------------------------
RADIO AND TELEVISION BROADCASTING--4.8%
562,800 Heritage Media Corp.* 9,919,350
370,200 Pegasus Communications, Inc.* 4,905,150
- --------------------------------------------------------------
14,824,500
- --------------------------------------------------------------
REAL ESTATE--1.1%
186,800 Insignia Financial Group, Inc.* 3,549,200
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--1.0%
132,900 Boykin Lodging Trust Inc 3,148,069
- --------------------------------------------------------------
RECREATIONAL PRODUCTS--0.8%
335,800 DSI Toys Inc.* 2,518,500
- --------------------------------------------------------------
RESTAURANTS & HOTELS--3.4%
90,700 IHOP Corp.* 2,879,725
362,000 Mortons Restaurant Group, Inc.* 7,602,000
- --------------------------------------------------------------
10,481,725
- --------------------------------------------------------------
RETAIL HARDGOODS--3.7%
731,000 Brookstone Inc.* 6,487,625
290,700 Finlay Enterprises, Inc.* 4,941,900
- --------------------------------------------------------------
11,429,525
- --------------------------------------------------------------
SPECIALTY FINANCE--1.3%
341,500 Long Beach Financial Corp.* 3,927,250
- --------------------------------------------------------------
SPECIALTY RETAIL--9.5%
720,100 Friedmans, Inc.* 11,071,538
43,100 General Nutrition Companies, Inc.* 1,228,350
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SPECIALTY RETAIL (CONTINUED)
67,100 Hibbett Sporting Goods, Inc.* $ 1,526,525
999,300 J. Baker, Inc. 8,743,875
34,900 Linens N'things, Inc.* 981,563
765,300 Loehmann's, Inc.* 5,309,269
125,400 Multiple Zones International, Inc.* 603,488
- ---------------------------------------------------------------
29,464,608
- ---------------------------------------------------------------
STEEL--1.3%
84,400 J & L Specialty Steel, Inc. 1,139,400
153,500 Lukens Inc. 2,935,688
- ---------------------------------------------------------------
4,075,088
- ---------------------------------------------------------------
TEXTILES--1.8%
151,800 Pluma, Inc.* 2,191,613
144,900 Synthetic Industries, Inc.* 3,396,086
- ---------------------------------------------------------------
5,587,699
- ---------------------------------------------------------------
TRUCKING--3.7%
193,400 Allied Holdings, Inc.* 2,949,350
341,900 Landstar Systems, Inc.* 8,547,500
- ---------------------------------------------------------------
11,496,850
- ---------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $230,250,550) $258,084,954
- ---------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- ---------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--0.1%
$ 500,000 J. Baker, Inc.
7.0%, 06/01/02 $ 446,250
- ---------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $498,537) $ 446,250
- ---------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Contracts Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
OPTIONS--0.3%
500 S&P 500 Index Put Strike 900
exp.09/97 $ 518,750
200 S&P 500 Index Put Strike 825
exp.09/97 47,500
300 S&P 500 Index Put Strike 775
exp.09/97 30,000
350 S&P 500 Index Put Strike 800
exp.09/97 48,125
500 S&P 500 Index Put Strike 875
exp.09/97 325,000
- ------------------------------------------------------------------------------
969,375
- ------------------------------------------------------------------------------
TOTAL OPTIONS
(COST $3,270,771) $ 969,375
- ------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENTS--16.1%
$49,800,000 Joint Repurchase Agreement Account
5.84%, 08/01/97 $ 49,800,000
- ------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(COST $49,800,000) $ 49,800,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $283,819,858)(A) $309,300,579
- ------------------------------------------------------------------------------
<CAPTION>
Contracts Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
OPTIONS WRITTEN--(0.2%)
CALL OPTIONS WRITTEN
500 Black Box Corp., Call Strike $35 expiring 09/20/97 262,500
500 Black Box Corp., Call Strike $40 expiring 09/20/97 100,000
400 General Nutrition Companies, Inc., Call Strike $25
expiring 10/18/97 185,000
400 Royal Caribbean Cruise Lines Call Strike $40
expiring 09/20/97 80,000
- ------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(PREMIUMS RECEIVED $528,963) 627,500
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description Value
- -------------------------------
<C> <S> <C>
FEDERAL INCOME TAX
INFORMATION:
Gross
unrealized
gain for
investments in
which value
exceeds cost $ 52,656,504
Gross
unrealized
loss for
investments in
which cost
exceeds value (27,422,188)
- -------------------------------
Net unrealized
gain $ 25,234,316
- -------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $284,066,263.
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.
47
<PAGE>
Letter to Shareholders
- -------------------------------------------------------------------------------
GOLDMAN SACHS ASIA GROWTH FUND
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs Asia Growth Fund seeks long-term capital appreciation by
investing in a limited number of carefully selected companies located in 12
Asian markets: China, Hong Kong, India, Indonesia, Malaysia, Pakistan, the
Philippines, Singapore, South Korea, Sri Lanka, Taiwan and Thailand.
We utilize extensive fundamental research in our search for well-managed
companies whose stock prices are, in our opinion, undervalued in the
marketplace. Because many companies in the Asian region are growing at
relatively rapid rates, we consider a company's return on capital, its price-
to-book value and the predictability of its earnings stream as among the best
measures of its intrinsic value. A strong market position and a skilled
management team dedicated to maximizing shareholder returns are also important
to us. Our investment process includes face-to-face meetings with senior
management as well as frequent contact with a company's customers, suppliers
and competitors.
While our primary focus is on stock selection, we seek to carefully manage
risk by diversifying the fund's portfolio in terms of countries, industry
sectors and size of capitalization. We are also mindful of making certain that
the market for a particular stock is relatively liquid, so we can easily sell
a position if our opinion changes. From time to time, we may choose to
significantly overweight or underweight our holdings in a country compared
with our benchmark, if we believe there is a compelling reason to do so.
Finally, we closely monitor the potential impact of political and economic
events in the region on particular companies and adjust the portfolio
accordingly.
MARKET OVERVIEW: REGIONAL FACTORS DAMPENED PERFORMANCE OF SEVERAL KEY MARKETS
Asian stock markets returned 1.3% during the period, as measured by the MSCI
All Country Asia Free (Ex Japan) Index (without dividends reinvested). During
the first half of the period, several key issues dampened the region's
performance, including continued uncertainty in Thailand, the results of the
Indian budget process and several weaker than expected Asian economic
indicators. In May and June, the Asian equity markets improved as earlier
concerns eased and investors grew increasingly optimistic regarding the Hong
Kong handover. The period closed on a volatile note, however, when Thailand's
devaluation of the baht sparked currency turmoil throughout the region,
particularly the ASEAN (Association of South East Asian Nations) countries.
On an individual country level, Taiwan and India were two of the strongest
performing markets, rising 31.4% and 26.7%, respectively (in U.S. dollar
terms). Taiwan's market benefited from local liquidity, an accommodative
monetary policy and a constant inflow of foreign capital, all of which helped
it reach a seven-year record high in July. In India, stocks briefly came under
pressure due to political uncertainty but recovered when Indian politicians
renewed their commitment to liberalization and deregulation. Hong Kong, the
most heavily weighted country in the Index, also performed well, particularly
during the latter half of the period when property stocks rebounded on
positive sentiment related to the July handover and China-related "red-chip"
stocks soared on investor excitement over China's potential asset injections.
In contrast, several markets experienced sharp declines. Thailand was one of
the weakest performers, as it suffered from an overextended financial sector,
sharp downgrades to earnings forecasts and an uncertain political outlook. The
Thai situation impacted countries such as Malaysia and the Philippines, where
spillover concerns regarding a run on their respective currencies led
investors to decrease their weightings in those stock markets.
48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
PERFORMANCE REVIEW: TOP PERFORMING STOCKS IN A VARIETY OF MARKETS
PERFORMANCE SUMMARY: JANUARY 31, 1997--JULY 31, 1997
<TABLE>
<CAPTION>
FUND TOTAL RETURN
(BASED ON NET MSCI AC ASIA FREE
ASSET VALUE) (EX JAPAN) INDEX+
----------------- -----------------
<S> <C> <C>
Class A* 1.29% 1.30%
Class B* 0.99% 1.30%
Institutional* 1.59% 1.30%
</TABLE>
* Class A, B and Institutional share performance assumes reinvestment of all
dividends and distributions, a complete redemption at the net asset value at
the end of the period and no initial sales charge or contingent deferred sales
charge.
+ Represents a price-only index that does not reflect reinvested dividends.
Though the region's performance was generally weak, the fund benefited from
our specific stock selections. Several of the fund's country weightings also
worked in its favor, such as its overweighting in Hong Kong, which performed
well, and its underweighting in Thailand and Malaysia, two of the weakest
markets. Conversely, the fund's overweighting in the Philippines was negative
for the portfolio.
The fund's top performers came from a variety of different countries. In
India, HINDUSTAN LEVER, LTD., which is 51% owned by Unilever, appreciated as
its core business in detergents and soaps achieved strong growth rates and its
merger with Brooke Bond Lipton India Ltd. was finally approved by the Indian
Supreme Court. TAIWAN-SOGO SHINKONG, a Taiwan-based security services company
that controls approximately 38% of the market, recorded strong results driven
by increased demand for its products following several high-profile kidnappings
in Taiwan.
The fund's overweighting in Hong Kong's banking sector also contributed
significantly to performance as our bank stocks did very well, particularly in
May. HSBC HOLDINGS PLC, a banking and financial services organization, rose
approximately 50% during the period due to a favorable re-rating and strong
earnings fueled by fast growth in the Hong Kong banking market. Other favorable
investments in the sector were WING HANG BANK LTD., the portfolio's largest
holding as of July 31, and DAO HENG BANK GROUP LTD., a new position added
during the period.
PORTFOLIO COMPOSITION
As of July 31, 1997, 93.6% of the fund's net assets was invested in equities
and 6.0% was in cash equivalents, with the remainder in other securities. By
country, the portfolio's five largest allocations were in Hong Kong (40.6%),
Malaysia (12.1%), Singapore (10.5%), India (6.2%) and Taiwan (6.1%). Compared
with the Index, as of the end of the period, the portfolio was overweighted in
Hong Kong and the Philippines and underweighted in Malaysia, Indonesia,
Thailand and Taiwan.
The fund's 40.6% allocation in Hong Kong included 4.4% in China-based
companies that are traded on the Hong Kong stock exchange. The fund has not
made any direct investments in China due to its poor regulatory environment and
generally weak company management. Instead, we seek to participate in China's
growth potential through China-related stocks in other countries or stocks of
companies that operate in China but are listed on the Hong Kong exchange, where
companies are required to meet higher standards. We expect these management
issues and stock market regulations to continue under Hong Kong's new China-
appointed Special Administrative Region (SAR) government. In addition, we
expect to limit the fund's exposure to "red-chip" stocks traded in Hong Kong,
as most of them are trading at a substantial premium to their asset values with
little or no fundamental justification.
PORTFOLIO CHANGES INCLUDED NEW POSITIONS IN HEALTHCARE AND PROPERTY DEVELOPMENT
STOCKS
During the period, we added a number of stocks to the portfolio. In March, we
initiated a position in PARKWAY HOLDINGS (Singapore), the largest healthcare
group in the region, which is currently focusing on
49
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASIA GROWTH FUND (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
regional expansion and has established hospitals in Indonesia, Malaysia and
India. Another new investment was NEW WORLD DEVELOPMENT, a Hong Kong-based
property developer with rapidly increasing exposure to projects in China. New
World Development is expected to be one of the prime beneficiaries of the land
supply policies of the new SAR government. During the period, we sold
METROPOLITAN BANK AND TRUST, the largest bank in the Philippines, due to its
expensive valuation and a deterioration of the company's fundamentals.
TOP 10 PORTFOLIO HOLDINGS AS OF JULY 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
COMPANY (LINE OF BUSINESS) COUNTRY NET ASSETS
-------------------------- ------- ----------
<S> <C> <C>
Wing Hang Bank Ltd. Hong Kong 4.1%
Banking and
Finance
Taiwan-Sogo
Shinkong Taiwan 4.0
Consumer Goods and
Services
Dao Heng Bank Group
Ltd. Hong Kong 3.7
Banking and
Finance
Hutchison Whampoa Hong Kong 3.7
Conglomerate
Hong Kong Electric
Holdings Hong Kong 3.7
Utilities
New World
Development Hong Kong 3.5
Real Estate
HKR International
Ltd. Hong Kong 3.4
Real Estate
Asia Satellite
Telecommunications Hong Kong 3.4
Telecommunications
Dah Sing Financial Hong Kong 3.3
Banking and
Finance
Hindustan Lever,
Ltd. India 3.3
Consumer Products
</TABLE>
OUTLOOK
We are generally positive on the long-term outlook of the Asian markets.
However, we remain cautious over the near term as the volatility of these
markets will be higher due to uncertainties resulting from the delinking of a
number of currencies from the U.S. dollar. Select Asian equities remain
attractively valued on a historical basis and are expected to benefit from a
pickup in export growth, improved inflation and a modest economic recovery
throughout the region subsequent to the currency devaluations. We will manage
our exposure in a conservative manner as we remain committed to our long-term
investment style.
We intend to focus our investments in those countries with strong domestic
growth. We expect to maintain the fund's overweighting in Hong Kong, as we
anticipate most companies will continue to perform well under its new China-
appointed government. Hong Kong's political situation is currently marked by
concerns that China might implement drastic changes that could jeopardize the
existing laissez-faire environment that Hong Kong has thrived on, as well as
rumors that the SAR government may introduce measures to cool the property
sector. However, we believe the Hong Kong equity market will benefit from
strong earnings momentum and increased exposure to the recovering Chinese
economy. We also favor some of the smaller Asian markets where we expect
macroeconomic conditions to improve. In particular, subsequent to their
currency devaluations, both the Philippines and Indonesia should enjoy better
economic climates amongst the Asian countries, and should continue to record
improved export growth and healthy corporate profits.
In contrast, we intend to limit our exposure to Thailand, which continues to
experience structural problems. To rebuild the Thai economy, Thailand will need
to implement a series of fiscal tightenings and a comprehensive restructuring
in the months and years ahead to correct the past misallocation of resources.
We will also remain underweighted in Malaysia, where economic overheating
remains a concern.
In general, we expect Asian markets will benefit over time as foreign
investment in the region increases. Therefore, we urge investors to be prepared
to withstand periods of volatility and to view the fund as a long-term
investment opportunity.
50
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
/s/ Warwick M. Negus
Warwick M. Negus
Senior Portfolio Manager,
Asia Active Equity
/s/ Alice Lui
Alice Lui
Portfolio Manager,
Asia Active Equity
/s/ Ravi Shanker
Ravi Shanker
Portfolio Manager,
Asia Active Equity
/s/ Karma A. Wilson
Karma A. Wilson
Portfolio Manager,
Asia Active Equity
August 29, 1997
51
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASIA GROWTH FUND
July 31, 1997
(Unaudited)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--89.4%
HONG KONG DOLLAR--40.6%
3,049,000 Asia Satellite Telephone (Telecommunications) $ 9,155,861
17,231,000 Beijing Datang Power Gen-H
(Utility) 8,735,121
1,420,600 Dah Sing Financial
(Banking) 9,063,951
1,660,000 Dao Heng Bank Group
(Banking) 10,119,729
6,103,440 HKR International Ltd. (Real Estate) 9,183,736
2,447,500 Hong Kong Electric Holdings (Utility) 9,989,151
95,283 HSBC Holdings (Banking) 3,322,752
1,028,000 Hutchison Whampoa (Diversified) 10,024,411
1,309,000 New World Development Co.
(Real Estate) 9,425,476
670,000 Sun Hung Kai Properties Co.
(Real Estate) 8,415,563
916,000 Swire Pacific Ltd. "A" (Diversified) 8,695,641
1,877,000 Wing Hang Bank Ltd.
(Banking) 11,224,424
11,000,000 Zhejiang Expressway (Construction) 3,267,678
- -------------------------------------------------------------------------------
110,623,494
- -------------------------------------------------------------------------------
INDIAN RUPEE--6.2%
190,000 Colgate Palmolive (Consumer Goods and Services) 1,716,627
227,600 Hindustan Lever Ltd.
(Consumer Goods and Services) 9,047,889
427,000 ITC Ltd. (Consumer Goods and Services) 6,160,667
644 Larsen & Toubro Ltd. (Heavy Industry) 4,858
350 Mahindra & Mahindra Ltd.
(Automotive) 4,309
400 Niit Limited (Technology) 5,065
- -------------------------------------------------------------------------------
16,939,415
- -------------------------------------------------------------------------------
INDONESIAN RUPIAH--6.0%
2,374,750 Indofoods Sukses Makmur--Foreign (Consumer Goods and
Services) 4,949,288
464,300 Peregrine Indo Food ADR (Food) 1,420,758
2,346,000 PT Bank of Bali--Foreign (Banking) 6,504,207
2,613,000 PT Jaya Real Property--Foreign
(Real Estate) 3,497,323
- -------------------------------------------------------------------------------
16,371,576
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MALAYSIAN RINGGIT--11.9%
1,703,800 Commerce Asset Holdings
(Banking) $ 4,263,537
1,919,000 Road Builder Malaysia Holdings
(Construction & Infrastructure) 8,003,412
1,695,000 Tenaga National Berhad (Utility) 6,812,133
1,470,000 UMW Holdings Berhad
(Automotive) 5,796,398
1,081,000 United Engineers Malaysia (Construction
and Infrastructure) 7,541,384
- -----------------------------------------------------------------------------
32,416,864
- -----------------------------------------------------------------------------
NEW TAIWAN DOLLAR--6.1%
2,673,750 Kindom Construction Co. Ltd.
(Real Estate) 5,869,207
2,791,677 Taiwan-Sogo Shinkong (Consumer Goods and Services) 10,894,349
- -----------------------------------------------------------------------------
16,763,556
- -----------------------------------------------------------------------------
PHILIPPINE PESO--5.3%
7,971,000 Ayala Land Inc. "B" (Real Estate) 5,809,373
1,169,570 Manila Electric Co., Class B
(Utility) 4,995,452
23,028,400 Metro Pacific Corp., Class A
(Diversified) 3,629,900
- -----------------------------------------------------------------------------
14,434,725
- -----------------------------------------------------------------------------
SINGAPORE DOLLAR--10.5%
858,000 City Developments (Real Estate) 7,290,463
356,750 Keppel Land Warrants (Real Estate) 329,808
949,800 Overseas Union Bank--Foreign (Banking) 6,165,855
1,860,000 Parkway Holdings (Consumer
Goods and Services) 8,534,430
337,000 Singapore Press Holdings--Foreign (Media) 6,391,340
- -----------------------------------------------------------------------------
28,711,896
- -----------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
52
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
- ---------------------------------------------------------------------
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SOUTH KOREAN WON--2.7%
7,132 Samsung Fire & Marine Insurance
(Financial Services) $ 2,931,332
4,758 SK Telecom (Telecommunications) 3,536,424
86,920 SK Telecom ADR (Telecommunications) 999,579
- ---------------------------------------------------------------------
7,467,335
- ---------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $211,826,215) $243,728,861
- ---------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- ---------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--0.2%
MALAYSIAN RINGITT--0.2%
MYR1,024,000 United Engineers Malaysia (Construction)
4.00%, 05/22/99 $ 628,954
- ---------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $521,580) $ 628,954
- ---------------------------------------------------------------------
STRUCTURED NOTES--4.4%
$ 1,000,000 SK Telecom $ 981,300
783,987 Taiwan Index Linked Note 10,928,779
- ---------------------------------------------------------------------
TOTAL STRUCTURED NOTES
(COST $10,935,000) $ 11,910,079
- ---------------------------------------------------------------------
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------------
<C> <S> <C>
EQUITY LINKED NOTE--0.2%
$ 1,308 SK Telecom (Telecommunications) $ 690,716
- ---------------------------------------------------------------------
TOTAL EQUITY LINKED NOTE
(COST $667,627) $ 690,716
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- ------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM OBLIGATIONS--6.0%
$16,284,594 State Street Bank & Trust Euro-Time Deposit
5.687%, 08/01/97 $ 16,284,594
- ------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(COST $16,284,594) $ 16,284,594
- ------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $240,235,016)(A) $273,243,209
- ------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost $ 42,057,404
Gross unrealized loss for investments in which cost
exceeds value (13,554,092)
- ------------------------------------------------------------------------
Net unrealized gain $ 28,503,312
- ------------------------------------------------------------------------
</TABLE>
(a) The aggregate cost for federal income tax purposes is $243,331,769.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
<TABLE>
- ----------------------------
<S> <C> <C>
COMMON STOCKS INDUSTRY
CONCENTRATIONS
- ----------------------------
Automotive 2.1%
Banking 18.5%
Construction and
Infrastructure 6.9%
Consumer Goods and
Services 15.1%
Diversified 8.2%
Engineering + Others 0.2%
Financial Services 1.1%
Food 0.5%
Heavy Industry 0.0%
Media 2.3%
Real Estate 18.3%
Technology 0.0%
Telecommunications 5.0%
Utility 11.2%
- ----------------------------
TOTAL COMMON STOCKS 89.6%
- ----------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
53
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS
BALANCED CORE U.S. EQUITY
FUND FUND
-------------------------------
<S> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost $127,753,734, $377,598,149,
$28,826,861, $826,462,978, $142,278,430,
$673,679,471, $283,819,858 and $240,235,016,
respectively) $145,647,765 $542,098,398
Cash, at value 24,774 93,046
Receivables:
Investment securities sold 3,238,030 --
Forward foreign currency exchange contracts -- --
Fund shares sold 879,535 5,489,136
Dividends and interest 651,887 496,369
Variation margin 9,657 20,000
Deferred organization expenses, net 29,512 --
Other assets 70,779 11,347
- ------------------------------------------------------------------------------
TOTAL ASSETS 150,551,939 548,208,296
- ------------------------------------------------------------------------------
LIABILITIES:
Options Written, at value (premium received,
$528,963) -- --
Payables:
Investment securities purchased 16,714,962 --
Forward foreign currency exchange contracts 11,101 --
Fund shares repurchased 80,696 123,745
Capital gains tax -- --
Amounts owed to affiliates 184,578 780,165
Variation margin -- --
Accrued expenses and other liabilities 39,439 128,711
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 17,030,776 1,032,621
- ------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 108,955,474 354,693,448
Accumulated undistributed (distributions in
excess of) net investment income (loss) 339,584 2,043,010
Accumulated undistributed (distributions in
excess of) net realized gain (loss) on
investment, option and futures transactions 6,207,098 25,574,291
Accumulated net realized foreign currency
loss (2,148) --
Net unrealized gain on investments, options
and futures 18,014,255 164,864,926
Net unrealized gain (loss) on translation of
assets and liabilities denominated in
foreign currencies 6,900 --
- ------------------------------------------------------------------------------
NET ASSETS $133,521,163 $547,175,675
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class A Class B 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 authorized for each
Class A and B, respectively) 5,812,234 434,759 11,508,646 1,352,331
Net asset and Class A redemption
value per share(a) $21.38 $21.30 $28.47 $28.23
Maximum public offering price
per share (Class A
NAV X 1.0582) $22.62 $21.30 $30.13 $28.23
<CAPTION>
Institutional Service Institutional Service
------------- ------- ------------- ---------
<S> <C> <C> <C> <C>
Total shares of beneficial
interest outstanding, $.001 par
value
(50,000,000 shares per each
class authorized) -- -- 6,121,100 197,898
Net asset value, offering and
redemption price per share -- -- $28.71 $28.43
- -------------------------------------------------------------------------------
</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.
54
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
CORE LARGE CAP CAPITAL GROWTH MID CAP INTERNATIONAL EQUITY SMALL CAP EQUITY ASIA GROWTH
GROWTH FUND FUND EQUITY FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$32,639,495 $1,180,290,404 $187,426,440 $838,942,326 $309,300,579 $273,243,209
10,398 54,166 43,278 160,110 210,038 2,861,814
-- -- 819,883 457,596 1,947,290 --
-- -- -- 7,725,121 -- --
1,001,965 4,256,988 1,044,197 5,090,337 3,836,809 350,379
21,085 897,205 152,413 468,788 69,615 422,050
-- -- -- -- -- --
47,479 -- 51,544 7,346 6,789 61,377
47,701 9,494 66,516 524,549 750 24,844
- ------------------------------------------------------------------------------------------------
33,768,123 1,185,508,257 189,604,271 853,376,173 315,371,870 276,963,673
- ------------------------------------------------------------------------------------------------
-- -- -- -- 627,500 --
407,378 8,221,644 359,116 15,473,640 4,112,414 783,887
-- -- -- 707,762 -- --
612 311,158 -- 4,371,624 343,333 482,630
-- -- -- -- -- 1,408,129
42,652 1,795,928 107,071 1,646,456 543,850 596,421
-- -- -- -- -- 779,796
90,508 60,368 44,441 464,249 4,781 225,073
- ------------------------------------------------------------------------------------------------
541,150 10,389,098 510,628 22,663,731 5,631,878 4,275,936
- ------------------------------------------------------------------------------------------------
29,040,278 691,258,887 120,969,622 614,334,694 256,493,400 256,752,469
24,537 609,537 580,925 1,036,836 (620,559) (792,684)
349,524 129,423,309 22,395,086 45,368,038 28,484,967 (12,411,607)
-- -- -- (1,890,238) -- (2,433,287)
3,812,634 353,827,426 45,148,010 211,562,708 25,382,184 39,610,602
-- -- -- (39,699,596) -- (8,037,756)
- ------------------------------------------------------------------------------------------------
$33,226,973 $1,175,119,159 $189,093,643 $830,712,442 $309,739,992 $272,687,737
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class A Class B Class A Class B Class A Class B Class A Class B Class A Class B Class A
- ------------- ------- ------------- ------- ------------- ------- ------------- --------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2,468,215 312,763 56,181,750 818,966 -- -- 30,913,314 2,125,041 11,816,017 783,168 15,499,590
$11.95 $11.94 $20.62 $20.46 -- -- $23.34 $23.18 $24.63 $24.42 $16.52
$12.65 $11.94 $21.82 $20.46 -- -- $24.70 $23.18 $26.06 $24.42 $17.48
<CAPTION>
Institutional Service Institutional Service Institutional Service Institutional Service Institutional Service Institutional
- ------------- ------- ------------- ------- ------------- ------- ------------- --------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
155 150 -- -- 7,989,163 87 2,461,067 89,276 -- -- 685,661
$11.95 $11.94 -- -- $23.67 $23.67 $23.51 $23.38 -- -- $16.59
<CAPTION>
Class B
- -------
<S> <C>
319,335
$16.40
$16.40
Service
- -------
<S> <C>
--
--
</TABLE>
55
<PAGE>
Goldman Sachs Trust-Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Six Months Ended July 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS
BALANCED CORE U.S. EQUITY
FUND FUND
------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends(a) (including $65,234 received from
affiliated issuers for Small Cap Equity) $ 486,754 $ 4,172,206
Interest(b) 1,633,213 283,272
- ---------------------------------------------------------------------------------
TOTAL INCOME 2,119,967 4,455,478
- ---------------------------------------------------------------------------------
EXPENSES:
Management fees 332,006 1,669,777
Distribution fees 139,549 413,921
Authorized dealer service fees 127,694 352,253
Custodian fees 50,207 62,893
Transfer agent fees 99,878 240,104
Professional fees 35,455 29,552
Registration fees 15,137 54,862
Amortization of deferred organization expenses 6,661 --
Trustee fees 1,202 3,091
Other 10,294 48,453
- ---------------------------------------------------------------------------------
TOTAL EXPENSES 818,083 2,874,906
Less--expenses reimbursed and fees waived by
Goldman Sachs (289,609) (462,438)
- ---------------------------------------------------------------------------------
NET EXPENSES 528,474 2,412,468
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,591,493 2,043,010
- ---------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT, OPTION, FUTURES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) from:
Investment transactions (including realized
gains of $2,634,349 on sales of investments in
affiliated issuers for Small Cap Equity) 5,165,557 20,056,208
Futures transactions 64,054 1,115,559
Foreign currency related transactions (14,723) --
Net change in unrealized gain (loss) on:
Investments 9,359,807 73,407,077
Futures 42,885 272,877
Translation of assets and liabilities
denominated in foreign currencies 19,468 --
- ---------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT,
OPTION, FUTURES AND FOREIGN CURRENCY
TRANSACTIONS 14,637,048 94,851,721
- ---------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $16,228,541 $96,894,731
- ---------------------------------------------------------------------------------
</TABLE>
(a) For the Balanced, CORE U.S. Equity, CORE Large Cap Growth, Capital Growth,
Mid Cap Equity, International Equity and Asia Growth Funds, taxes withheld
on dividends were $744, $20,389, $408, $42,487, $4,487, $909,357 and
$201,084, respectively.
(b) For the Balanced Fund, taxes withheld on interest were $2,724.
(c) CORE Large Cap Growth Fund commenced operations on May 1, 1997.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
56
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
CORE LARGE CAP GROWTH CAPITAL GROWTH MID CAP EQUITY INTERNATIONAL EQUITY SMALL CAP EQUITY ASIA GROWTH
FUND(C) FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 69,444 $ 6,813,967 $ 1,183,533 $ 5,932,214 $ 722,690 $ 2,369,480
9,091 868,702 94,041 858,131 595,147 473,203
- --------------------------------------------------------------------------------------------------------
78,535 7,682,669 1,277,574 6,790,345 1,317,837 2,842,683
- --------------------------------------------------------------------------------------------------------
43,779 4,891,228 592,506 3,437,442 1,226,018 1,360,100
15,564 1,241,280 -- 868,168 326,906 335,767
14,589 1,222,807 -- 790,939 306,505 325,580
22,154 63,364 18,791 474,368 36,394 232,094
12,099 450,925 31,600 420,003 265,468 214,033
18,627 32,460 31,072 36,142 32,119 37,005
17,155 32,147 13,894 83,971 20,320 45,375
2,521 -- 8,512 7,227 6,678 15,736
126 7,847 1,278 5,544 1,706 2,373
4,577 69,092 12,670 68,155 12,586 20,217
- --------------------------------------------------------------------------------------------------------
151,191 8,011,150 710,323 6,191,959 2,234,700 2,588,280
(97,193) (1,213,570) (38,816) (464,116) (296,304) (269,236)
- --------------------------------------------------------------------------------------------------------
53,998 6,797,580 671,507 5,727,843 1,938,396 2,319,044
- --------------------------------------------------------------------------------------------------------
24,537 885,089 606,067 1,062,502 (620,559) 523,639
- --------------------------------------------------------------------------------------------------------
349,524 115,156,585 14,892,426 42,837,306 21,099,362 4,610,560
-- -- -- -- -- (994,498)
-- -- -- (972,391) -- (2,021,368)
3,812,634 101,151,901 23,232,147 99,071,315 20,776,667 6,596,227
-- -- -- -- -- --
-- -- -- (7,290,060) -- (6,042,525)
- --------------------------------------------------------------------------------------------------------
4,162,158 216,308,486 38,124,573 133,646,170 41,876,029 2,148,396
- --------------------------------------------------------------------------------------------------------
$4,186,695 $217,193,575 $38,730,640 $134,708,672 $41,255,470 $ 2,672,035
- --------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
Goldman Sachs Trust-Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended July 31, 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS
BALANCED CORE U.S. EQUITY
FUND FUND
-------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 1,591,493 $ 2,043,010
Net realized gain on investment, option and
futures transactions 5,229,611 21,171,767
Net realized loss on foreign currency
related transactions (14,723) --
Net change in unrealized gain on
investments, options and futures 9,402,692 73,679,954
Net change in unrealized gain (loss) on
translation of assets and liabilities
denominated in foreign currencies 19,468 --
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 16,228,541 96,894,731
- ----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A shares (1,375,790) --
Class B shares (56,323) --
Institutional shares -- --
Service shares -- --
- ----------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,432,113) --
- ----------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 40,396,833 99,586,343
Reinvestment of dividends and distributions 1,224,846 --
Cost of shares repurchased (6,417,071) (45,139,094)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from share transactions 35,204,608 54,447,249
- ----------------------------------------------------------------------------
Total increase (decrease) 50,001,036 151,341,980
NET ASSETS:
Beginning of period 83,520,127 395,833,695
- ----------------------------------------------------------------------------
End of period $133,521,163 $547,175,675
- ----------------------------------------------------------------------------
Accumulated undistributed (distributions in
excess of) net investment income (loss) $ 339,584 $ 2,043,010
- ----------------------------------------------------------------------------
</TABLE>
(a) CORE Large Cap Growth Fund commenced operations on May 1, 1997.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
58
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
CORE LARGE CAP GROWTH CAPITAL GROWTH MID CAP EQUITY INTERNATIONAL EQUITY SMALL CAP EQUITY ASIA GROWTH
FUND(A) FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 24,537 $ 885,089 $ 606,067 $ 1,062,502 $ (620,559) $ 523,639
349,524 115,156,585 14,892,426 42,837,306 21,099,362 3,616,062
-- -- -- (972,391) -- (2,021,368)
3,812,634 101,151,901 23,232,147 99,071,315 20,776,667 6,596,227
-- -- -- (7,290,060) -- (6,042,525)
- --------------------------------------------------------------------------------------------------------------
4,186,695 217,193,575 38,730,640 134,708,672 41,255,470 2,672,035
- --------------------------------------------------------------------------------------------------------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------
-- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------
29,901,684 95,800,041 6,949,969 191,045,207 73,020,425 46,386,178
-- -- -- -- -- --
(861,406) (61,741,484) (1,840,296) (119,570,466) (20,270,709) (56,060,080)
- --------------------------------------------------------------------------------------------------------------
29,040,278 34,058,557 5,109,673 71,474,741 52,749,716 (9,673,902)
- --------------------------------------------------------------------------------------------------------------
33,226,973 251,252,132 43,840,313 206,183,413 94,005,186 (7,001,867)
-- 923,867,027 145,253,330 624,529,029 215,734,806 279,689,604
- --------------------------------------------------------------------------------------------------------------
$33,226,973 $1,175,119,159 $189,093,643 $ 830,712,442 $309,739,992 $272,687,737
- --------------------------------------------------------------------------------------------------------------
$ 24,537 $ 609,537 $ 580,925 $ 1,036,836 $ (620,559) $ (792,684)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
Goldman Sachs Trust-Equity Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended January 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS
BALANCED CORE U.S. EQUITY
FUND FUND
------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 2,322,774 $ 3,164,879
Net realized gain (loss) on investment,
option and futures transactions 3,956,460 15,032,718
Net realized gain on options written -- --
Net realized gain (loss) on foreign currency
related transactions 12,575 --
Net change in unrealized gain (loss) on
investments, options and futures 5,023,032 49,460,545
Net change in unrealized loss on translation
of assets and liabilities denominated in
foreign currencies (12,568) --
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 11,302,273 67,658,142
- ----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A shares (2,259,972) (1,515,575)
Class B shares (13,466) (4,750)
Institutional shares -- (1,606,175)
Service shares -- (6,666)
In excess of net investment income
Class A shares (7,504) --
Class B shares -- (118,421)
Institutional shares -- (34,205)
Service shares -- (16,030)
From net realized gain on investment, option
and futures transactions
Class A shares (3,654,841) (7,174,235)
Class B shares (77,400) (440,131)
Institutional shares -- (4,675,726)
Service shares -- (68,472)
- ----------------------------------------------------------------------------
Total distributions to shareholders (6,013,183) (15,660,386)
- ----------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 29,174,047 167,209,718
Reinvestment of dividends and distributions 5,694,651 14,904,237
Cost of shares repurchased (7,565,668) (32,152,494)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from share transactions 27,303,030 149,961,461
- ----------------------------------------------------------------------------
Total increase 32,592,120 201,959,217
NET ASSETS:
Beginning of year 50,928,007 193,874,478
- ----------------------------------------------------------------------------
End of year $83,520,127 $395,833,695
- ----------------------------------------------------------------------------
Accumulated undistributed (distributions in
excess of) net investment income $ 180,204 $ --
- ----------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
60
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
CAPITAL GROWTH MID CAP EQUITY INTERNATIONAL EQUITY SMALL CAP EQUITY ASIA GROWTH
FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 5,337,292 $ 1,726,659 $ (242,737) $ (1,551,590) $ 538,846
53,687,297 13,627,039 16,714,697 28,767,853 (7,436,150)
-- 40,466 -- -- --
-- -- 146,694 -- (1,099,538)
145,350,120 14,749,074 60,236,901 22,913,571 5,823,115
-- -- (28,245,657) -- (599,549)
- ------------------------------------------------------------------------------------
204,374,709 30,143,238 48,609,898 50,129,834 (2,773,276)
- ------------------------------------------------------------------------------------
(5,948,617) -- -- -- (206,784)
-- -- -- -- --
-- (1,837,675) (106,712) -- --
-- -- -- -- --
(258,749) -- -- -- --
(12,838) -- -- -- (5,064)
-- (25,142) -- -- (83,075)
-- -- -- -- --
(91,862,169) -- (5,358,559) (10,210,264) --
(179,327) -- (159,717) (149,626) --
-- (6,629,058) (689,171) -- --
-- -- (3,947) -- --
- ------------------------------------------------------------------------------------
(98,261,700) (8,491,875) (6,318,106) (10,359,890) (294,923)
- ------------------------------------------------------------------------------------
76,008,897 3,933,239 321,475,961 56,119,213 144,448,826
90,088,874 8,489,760 5,481,492 9,876,571 221,279
(229,399,817) (24,491,993) (75,580,037) (95,024,895) (67,451,011)
- ------------------------------------------------------------------------------------
(63,302,046) (12,068,994) 251,377,416 (29,029,111) 77,219,094
- ------------------------------------------------------------------------------------
42,810,963 9,582,369 293,669,208 10,740,833 74,150,895
881,056,064 135,670,961 330,859,821 204,993,973 205,538,709
- ------------------------------------------------------------------------------------
$ 923,867,027 $145,253,330 $624,529,029 $215,734,806 $279,689,604
- ------------------------------------------------------------------------------------
$ (275,552) $ (25,142) $ (25,666) $ -- $ (1,316,323)
- ------------------------------------------------------------------------------------
</TABLE>
61
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
1. ORGANIZATION
Effective May 1, 1997, the 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 Equity Portfolios,
collectively the "Funds" or individually a "Fund". The Trust is registered
under the Investment Company Act of 1940, as amended, as an open-end,
diversified management investment company. Included in this report are the
financial statements for the Goldman Sachs Balanced Fund ("Balanced Fund"),
Goldman Sachs CORE U.S. Equity Fund ("CORE U.S. Equity Fund"), Goldman Sachs
CORE Large Cap Growth Fund ("CORE Large Cap Growth Fund"), Goldman Sachs
Capital Growth Fund ("Capital Growth Fund"), Goldman Sachs Mid Cap Equity Fund
("Mid Cap Equity Fund"), Goldman Sachs International Equity Fund
("International Equity Fund"), Goldman Sachs Small Cap Equity Fund ("Small Cap
Equity Fund") and Goldman Sachs Asia Growth Fund ("Asia Growth Fund"). At July
31, 1997, the CORE U.S. Equity, CORE Large Cap Growth, International Equity and
Asia Growth Funds offer four classes of shares--Class A, Class B, Institutional
and Service. The Balanced, Capital Growth and Small Cap Equity Funds offer two
classes of shares--Class A and Class B. The Mid Cap Equity Fund offers two
classes of shares--Institutional and Service.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consistently
followed by the Funds. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates 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,
securities 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 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 investments are calculated on the identified-cost basis.
Dividend income is recorded on the ex-dividend date. Dividends for which the
Funds have the choice to receive either cash or stock are recognized as
investment 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
determined on the basis of interest accrued, premium amortized and discount
earned with the exception of the Balanced Fund which does not amortize premiums
on U.S. Government and Corporate bonds. In addition, it is the Funds' policy to
accrue for estimated capital gains taxes on foreign securities held by the
Funds subject to such taxes.
C. Mortgage Dollar Rolls
The Balanced Fund 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. For
financial reporting and tax reporting purposes, the Fund treats mortgage dollar
rolls
62
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
as two separate transactions; one involving the purchase of a security and a
separate transaction involving a sale.
D. Foreign Currency Translations
The books and records of the Funds are maintained in U.S. dollars. Amounts
denominated in foreign currencies are translated into U.S. dollars on the
following basis: (i) investment valuations, other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based on current exchange rates; (ii) purchases and sales of
foreign investments, income and expenses are converted into U.S. dollars based
on currency exchange rates prevailing on the respective dates of such
transactions.
Net realized and unrealized gain (loss) on foreign currency transactions will
represent: (i) foreign exchange gains and losses from the sale and holdings of
foreign currencies and investments; (ii) gains and losses between trade date
and settlement date on investment securities transactions and forward exchange
contracts; and (iii) gains and losses from the difference between amounts of
dividends and interest recorded and the amounts actually received.
E. Forward Foreign Currency Exchange Contracts
Certain of the Funds are authorized to enter into forward foreign currency
exchange contracts for the purchase of a specific foreign currency at a fixed
price on a future date as a hedge or cross-hedge against either specific
transactions or portfolio positions. The Balanced, International Equity and
Asia Growth Funds may enter into such contracts to seek to increase total
return. All commitments are "marked-to-market" daily at the applicable
translation rates and any resulting unrealized gains or losses are recorded in
the funds' 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 delivery of the currency. Risks may arise upon entering 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.
F. Short Securities Positions
The Funds (other than the CORE U.S. Equity and CORE Large Cap Growth Funds) may
enter into covered short sales. Short securities positions are accounted for at
cost and subsequently marked to market to reflect the current market value of
the position. The market value of the short position is recorded as a liability
on the fund's records and any difference between this market value and cash
received is reported as unrealized gain or loss. Gains and losses are realized
when a short position is closed out by delivering securities back to the
broker.
G. Federal Taxes
It is the Funds' policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute each year
substantially all of their investment company taxable income and capital gains
to their shareholders. Accordingly, no federal tax provisions are required. The
characterization of distributions to shareholders for financial reporting
purposes is determined in accordance with income tax rules. Therefore, the
source of the Funds' 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 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.
Asia Growth Fund had approximately $184,000, $5,487,000 and $9,825,000 at
January 31, 1997 of capital loss carryforward expiring in 2002, 2003 and 2004
for federal tax purposes. These amounts are available to be carried forward to
offset future capital gains to the extent permitted by applicable laws or
regulations.
H. Deferred Organization Expenses
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
63
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
I. Expenses
Expenses incurred by the Funds which do not specifically relate to an
individual Fund are allocated to the Funds based on each Fund's relative
average net assets for the period.
Class A and Class B shares bear all expenses and fees relating to the
distribution and authorized dealer service 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.
J. Option Accounting Principles
When certain of the Funds write call or put options, an amount equal to the
premium received 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 funds enter into a closing purchase
transaction, the funds realize a gain or loss without regard to any unrealized
gain or loss on the underlying security, and the liability related to such
option is extinguished. When a written call option is exercised, the funds
realize 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 exercised, the amount of the premium originally received
will reduce the cost of the security which the funds purchase 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 Funds
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 Funds
have purchased expires on the stipulated expiration date, the funds will
realize a loss in the amount of the cost of the option. If the funds enter into
a closing sale transaction, the funds 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 Funds exercise a purchased put option, the
funds 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 Funds exercise a purchased call option, the cost of the security which
the funds purchase upon exercise will be increased by the premium originally
paid.
K. Futures Contracts
The Funds may enter into futures transactions in order to hedge against changes
in interest rates, securities prices or currency exchange rates or to seek to
increase total return. The CORE U.S. Equity and CORE Large Cap Growth Funds may
enter into such transactions only with respect to the S&P 500 Index or a
representative index, respectively. A Fund will engage in futures transactions
only for bona fide hedging purposes as defined in regulations of the CFTC or to
seek to increase total return to the extent permitted by such regulations. The
use of futures contracts involve, to varying degrees, elements of market risk
which may exceed the amounts recognized in the Statements of Assets and
Liabilities.
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. Subsequent
payments ("variation margin") are made or received by the Funds each day,
dependent on the daily fluctuations in the value of the contract, and are
recorded for financial reporting purposes as unrealized gains or losses. When
entering into a closing transaction, the Funds will realize a gain or loss
equal to the difference between the value of the futures contract to sell and
the futures contract to buy. Futures contracts are valued at the most recent
price, unless such price does not reflect the fair market value of the
contract, in which case the position will be valued using methods approved by
the Board of Trustees of the Trust.
64
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
Certain risks may arise upon entering into futures contracts. The predominant
risk is that the 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 Funds' hedging strategies and may also result
in a loss to the Funds.
3. AGREEMENTS
As of May 1, 1997, the Fund's Investment Advisory and Administration Agreements
were combined into an Investment Management Agreement (the "Agreement")
encompassing 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 to the Balanced, CORE Large Cap
Growth, Mid Cap Equity and Small Cap Equity Funds; Goldman Sachs Funds
Management, L.P. ("GSFM"), an affiliate of Goldman Sachs, acts as investment
adviser to the CORE U.S. Equity and Capital Growth Funds; and Goldman Sachs
Asset Management International ("GSAM International") acts as investment
adviser to the International Equity and Asia Growth Funds. Under the
Agreements, GSAM, GSFM and GSAM International (the "Investment Advisors"),
subject to the general supervision of the Trust's Board of Trustees, manage the
Fund's portfolios. As compensation for the services rendered under the
Agreements, the assumption of the expenses related thereto and administering
the Funds' business affairs, including providing facilities, GSAM is entitled
to a fee, computed daily and payable monthly, at an annual rate equal to .65%,
.75%, .75% and 1.00% of the average daily net assets of the Balanced, CORE
Large Cap Growth, Mid Cap Equity and Small Cap Equity Funds, respectively. GSFM
is entitled to a fee of .75% and 1.00% of the average daily net assets of the
CORE U.S. Equity and Capital Growth Funds, respectively. GSAM International is
entitled to a fee for the International Equity and Asia Growth Funds of 1.00%
and 1.00% of the average daily net assets for those funds, respectively.
Goldman Sachs has voluntarily agreed to reduce or limit certain "Other
Expenses" for the Balanced, CORE U.S. Equity, CORE Large Cap Growth, Mid Cap
Equity, International Equity and Asia Growth Funds (excluding management,
service, distribution and authorized dealer service fees and litigation and
indemnification costs, taxes, interest, brokerage commissions and extraordinary
expenses and with the exception of the Balanced and CORE Large Cap Growth
Funds, transfer agent fees) until further notice to the extent such expenses
exceed .10%, .06%, .05%, .06%, .20% and .24% of the average daily net assets of
the funds, respectively.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to
Distribution 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 Trust that it retained approximately $126,000, $318,000, $34,000, $420,000,
$840,000, $212,000, $546,000 during the six months ended July 31, 1997 for the
Balanced, CORE U.S. Equity, CORE Large Cap Growth, Capital Growth,
International Equity, Small Cap Equity and Asia Growth Funds, respectively.
The Trust, on behalf of each Fund, other than the Mid Cap Equity Fund, 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
each Fund for distribution services equal, on an annual basis, to .25% and .75%
of a Fund's average daily net assets attributable to Class A and Class B
shares, respectively.
The Trust, on behalf of each Fund, other than the Mid Cap Equity Fund, has
adopted an Authorized Dealer Service Plan (the "Service Plan") pursuant to
which Goldman Sachs and Authorized Dealers are compensated for providing
personal and account maintenance services. Each 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 funds for a fee.
65
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
For the six months ended July 31, 1997, the Manager and Distributor have
voluntarily agreed to waive certain fees and reimburse other expenses as
follows (in thousands):
<TABLE>
<CAPTION>
Waivers
------------------ Reimburse-
Class A Reimburse- ment
Fund Management 12b-1 ment Outstanding
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balanced $ -- $ 122 $168 $52
CORE U.S. Equity 356 51 55 10
CORE Large Cap Growth 9 14 74 48
Capital Growth -- 1,214 -- --
Mid Cap Equity -- -- 39 9
International Equity 344 120 -- --
Small Cap Equity -- 296 -- --
Asia Growth 190 51 28 17
</TABLE>
The Investment Manager and Distributor may discontinue or modify such waivers
and limitations in the future at their discretion.
At July 31, 1997, the amounts owed to affiliates were as follows (in
thousands):
<TABLE>
<CAPTION>
Authorized
Distri- Dealer Transfer
Fund Management butor Service Agent Total
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced $ 69 $ 12 $ 71 $ 33 $ 185
CORE U.S. Equity 259 139 260 122 780
CORE Large Cap Growth 15 1 15 12 43
Capital Growth 955 20 646 175 1,796
Mid Cap Equity 107 -- -- -- 107
International Equity 617 420 427 182 1,646
Small Cap Equity 250 22 168 104 544
Asia Growth 198 143 156 99 596
</TABLE>
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 as follows:
<TABLE>
<CAPTION>
Sales or
Fund Purchases Maturities
- ---- ------------ ------------
<S> <C> <C>
Balanced $129,509,183 $ 94,675,496
CORE U.S. Equity 167,742,702 121,365,630
CORE Large Cap Growth 32,152,475 4,475,138
Capital Growth 455,703,046 432,962,894
Mid Cap Equity 59,312,478 55,776,587
International Equity 237,116,150 148,697,747
Small Cap Equity 118,941,639 104,800,391
Asia Growth 134,170,651 151,973,563
</TABLE>
Included in the above amounts were purchases and proceeds of sales or
maturities of governmental securities for the Balanced Fund in the amounts of
$77,260,237 and $68,674,762, respectively.
For the six months ended July 31, 1997, written put option transactions in
the Small Cap Equity Fund were as follows:
<TABLE>
<CAPTION>
Number of Premium
Written Options Contracts Received
- --------------- --------- --------
<S> <C> <C>
Balance outstanding at beginning of period 0 $ 0
Options written 1,800 528,963
- --------------------------------------------------------------
Balance outstanding, end of period 1,800 $528,963
- --------------------------------------------------------------
</TABLE>
Certain risks arise related to call and put options from the possible inability
of counterparties to meet the terms of their contracts.
66
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
At July 31, 1997, the International Equity Fund had the following outstanding
forward foreign currency exchange contracts:
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
VALUE ON
FOREIGN CURRENCY SETTLEMENT UNREALIZED
SALE CONTRACTS DATE CURRENT VALUE GAIN (LOSS)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
AUSTRALIAN DOLLAR
expiring 9/18/97 $ 22,928,352 $ 22,877,160 $ 51,192
DEUTSCHE MARK expiring 8/21/97 23,195,818 21,660,471 1,535,347
expiring 9/11/97 15,822,424 15,344,454 477,970
FRENCH FRANC expiring 10/23/97 40,939,929 40,045,646 894,283
HONG KONG DOLLAR
expiring 8/8/97 18,484,541 18,491,623 (7,082)
expiring 8/8/97 5,803,189 5,802,003 1,186
JAPANESE YEN expiring 9/22/97 74,555,000 71,008,671 3,546,329
expiring 10/22/97 9,761,324 9,593,392 167,932
- -----------------------------------------------------------------------------
Total Foreign Currency Sale Contracts $211,490,577 $204,823,420 $6,667,157
- -----------------------------------------------------------------------------
</TABLE>
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered. At July 31, 1997, the
International Equity Fund had sufficient cash and securities to cover any
commitments under these contracts.
The Balanced and International Equity Funds have recorded a "Receivable for
forward foreign currency exchange contracts" and "Payable for forward foreign
currency exchange contracts" resulting from open and closed but not settled
forward foreign currency exchange contracts of $0 and $11,101 and $7,725,121
and $707,762, respectively, in the accompanying Statements of Assets and
Liabilities. Included in these amounts for the International Equity Fund are
$1,050,882 and $700,680 respectively, and a payable of $11,101 for the Balanced
Fund related to forward contracts closed but not settled as of July 31, 1997.
For the six months ended July 31, 1997, Goldman Sachs earned approximately
$12,000, $162,000, $14,000, $14,000, and $71,000 of brokerage commissions from
portfolio transactions executed on behalf of the Balanced, Capital Growth, Mid
Cap Equity, Small Cap Equity and Asia Growth Funds.
5. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying
securities, 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.
67
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The Funds, together with other registered investment companies having advisory
agreements with GSAM or its affiliates, 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 Balanced, CORE
U.S. Equity, CORE Large Cap Growth, Capital Growth, Mid Cap Equity and Small
Cap Equity Funds had undivided interests in the repurchase agreements in the
following joint account which equaled $16,200,000, $12,900,000, $800,000,
$27,500,000, $5,600,000 and $49,800,000, respectively, in principal amount. At
July 31, 1997, the repurchase agreements held in this joint account, along with
the corresponding 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 Funds participate in a $250,000,000 uncommitted, unsecured revolving line
of credit facility. In addition, the Funds, except the CORE U.S. Equity Fund,
participate in a $50,000,000 committed, unsecured revolving line of credit
facility. Both facilities are to be used solely for temporary or emergency
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. The
committed 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 Funds did not have any borrowings under these facilities.
8. TRANSACTIONS WITH AFFILIATED COMPANIES
A Fund is considered to be invested in an affiliated company if that Fund owns
greater than five percent of the outstanding voting securities of such company.
Transactions during the six months ended July 31, 1997 which are considered to
be affiliates of Small Cap Equity and which are still held as of period end are
as follows (dollar amounts in thousands):
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Purchases Sales Realized Dividend Market
Affiliate Name at Cost Proceeds Gain/(Loss) Income Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alpine Lace Brands, Inc. $ -- $ -- $ -- $-- $ 3,044
APS Holding Corp. 759 -- -- -- 6,395
J. Baker, Inc. -- 970 (802) 30 8,744
Brookstone, Inc. -- -- -- -- 6,488
Congoleum Corp. -- 336 96 -- 2,198
International Post Ltd. -- -- -- -- 1,297
Loehmann's Inc. 6,413 -- -- -- 5,309
Mortons Restaurant Group, Inc. -- 764 392 -- 7,602
Movado Group, Inc. -- 5,361 2,948 35 13,284
Opinion Research Corp. -- -- -- -- 2,089
Pegasus Communications Corp. 1,153 -- -- -- 4,905
Platinum Entertainment Corp. 265 -- -- -- 2,158
Seibels Bruce Group 890 -- -- -- 1,076
- -------------------------------------------------------------------------------
</TABLE>
9. OTHER MATTERS
As of July 31, 1997, Goldman, Sachs & Co. Employees Profit Sharing and
Retirement Income Plan was the beneficial owner of approximately 13% and 96% of
the outstanding shares of the CORE US Equity and Mid Cap Equity Funds,
respectively.
68
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
10. SUMMARY OF SHARE TRANSACTIONS
Share activity for the six months ended July 31, 1997 is as follows:
<TABLE>
<CAPTION>
Balanced Fund CORE U.S. Equity CORE Large Cap Growth Capital Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars Shares Dollars
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 1,737,618 $33,943,369 2,647,977 $ 65,826,339 2,541,195 $26,311,995 4,685,824 $ 84,105,240
Reinvestment of
dividends and
distributions 59,887 1,173,108 -- -- -- -- -- --
Shares repurchased (321,372) (6,246,538) (828,137) (20,340,078) (72,980) (857,534) (3,525,798) (61,466,440)
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1,476,133 28,869,939 1,819,840 45,486,261 2,468,215 25,454,461 1,160,026 22,638,800
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Shares sold 328,037 6,453,464 667,031 16,620,871 313,111 3,587,107 641,628 11,694,801
Reinvestment of
dividends and
distributions 2,626 51,738 -- -- -- -- -- --
Shares repurchased (8,564) (170,533) (58,922) (1,454,365) (348) (3,872) (15,902) (275,044)
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
322,099 6,334,669 608,109 15,166,506 312,763 3,583,235 625,726 11,419,757
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Shares sold -- -- 648,136 15,939,242 155 1,550 -- --
Reinvestment of
dividends and
distributions -- -- -- -- -- -- -- --
Shares repurchased -- -- (878,994) (23,136,379) -- -- -- --
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- (230,858) (7,197,137) 155 1,550 -- --
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICE SHARES
Shares sold -- -- 49,244 1,199,891 150 1,032 -- --
Reinvestment of
dividends and
distributions -- -- -- -- -- -- -- --
Shares repurchased -- -- (8,810) (208,272) -- -- -- --
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- 40,434 991,619 150 1,032 -- --
<CAPTION>
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net increase (decrease)
in shares 1,798,232 $35,204,608 2,237,525 $ 54,447,249 2,781,283 $29,040,278 1,785,752 $ 34,058,557
<CAPTION>
=================================================================================================
</TABLE>
69
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
10. SUMMARY OF SHARE TRANSACTIONS (continued)
Share activity for the six months ended July 31, 1997 is as follows:
<TABLE>
<CAPTION>
Mid Cap Equity Fund International Equity Fund Small Cap Equity Fund Asia Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars Shares Dollars
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Shares sold -- -- 7,064,902 $ 150,626,998 2,575,972 $ 58,437,359 2,679,332 $ 43,080,940
Reinvestment of
dividends and
distributions -- -- -- -- -- -- -- --
Shares repurchased -- -- (3,917,168) (83,252,386) (900,448) (19,664,773) (3,301,864) (52,529,142)
<CAPTION>
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- 3,147,734 67,374,612 1,675,524 38,772,586 (622,532) (9,448,202)
<CAPTION>
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Shares sold -- -- 1,152,179 24,332,741 634,966 14,583,066 145,477 2,305,142
Reinvestment of
dividends and
distributions -- -- -- -- -- -- -- --
Shares repurchased -- -- (24,945) (522,072) (28,342) (605,936) (32,529) (515,087)
<CAPTION>
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- 1,127,234 23,810,669 606,624 13,977,130 112,948 1,790,055
<CAPTION>
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Shares sold 328,465 $ 6,947,969 732,981 14,842,655 -- -- 64,282 1,000,096
Reinvestment of
dividends and
distributions -- -- -- -- -- -- -- --
Shares repurchased (95,076) (1,840,296) (1,796,083) (35,721,797) -- -- (194,120) (3,015,851)
<CAPTION>
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
233,389 5,107,673 (1,063,102) (20,879,142) -- -- (129,838) (2,015,755)
<CAPTION>
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICE SHARES
Shares sold 87 2,000 57,954 1,242,813 -- -- -- --
Reinvestment of
dividends and
distributions -- -- -- -- -- -- -- --
Shares repurchased -- -- (3,508) (74,211) -- -- -- --
<CAPTION>
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
87 2,000 54,446 1,168,602 -- -- -- --
<CAPTION>
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net increase
(decrease) in shares 233,476 $ 5,109,673 3,266,312 $ 71,474,741 2,282,148 $ 52,749,716 (639,422) $ (9,673,902)
<CAPTION>
===================================================================================================
</TABLE>
70
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
10. SUMMARY OF SHARE TRANSACTIONS (continued)
Share activity for the year ended January 31, 1997 is as follows:
<TABLE>
<CAPTION>
Balanced Fund Select Equity Fund Mid-Cap Equity Fund Capital Growth Fund
- ---------------------------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars Shares Dollars
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 1,529,469 $27,172,279 3,862,697 $ 81,642,386 -- $ -- 4,677,047 $ 73,029,007
Reinvestment of
dividends and
distributions 310,437 5,598,883 370,586 8,175,333 -- -- 5,870,272 89,898,521
Shares repurchased (446,535) (7,533,272) (1,109,202) (23,823,146) -- -- (14,635,348) (229,277,586)
<CAPTION>
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1,393,371 25,237,890 3,124,081 65,994,573 -- -- (4,088,029) (66,350,058)
<CAPTION>
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Shares sold 109,171 2,001,768 733,802 15,946,016 -- -- 188,331 2,979,890
Reinvestment of
dividends and
distributions 5,284 95,768 24,314 535,407 -- -- 12,408 190,353
Shares repurchased (1,795) (32,396) (13,894) (310,118) -- -- (7,499) (122,231)
<CAPTION>
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
112,660 2,065,140 744,222 16,171,305 -- -- 193,240 3,048,012
<CAPTION>
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL
SHARES
Shares sold -- -- 3,151,881 66,277,175 227,071 3,933,239 -- --
Reinvestment of
dividends and
distributions -- -- 275,197 6,102,331 483,747 8,489,760 -- --
Shares repurchased -- -- (363,536) (7,991,198) (1,480,859) (24,491,993) -- --
<CAPTION>
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- 3,063,542 64,388,308 (770,041) (12,068,994) -- --
<CAPTION>
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICE SHARES
Shares sold -- -- 154,590 3,344,141 -- -- -- --
Reinvestment of
dividends and
distributions -- -- 4,126 91,166 -- -- -- --
Shares repurchased -- -- (1,252) (28,032) -- -- -- --
<CAPTION>
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- 157,464 3,407,275 -- -- -- --
<CAPTION>
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net increase
(decrease) in
shares 1,506,031 $27,303,030 7,089,309 $149,961,461 (770,041) $(12,068,994) (3,894,789) $ (63,302,046)
<CAPTION>
======================================================================================================
</TABLE>
71
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 1997
(Unaudited)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
10. SUMMARY OF SHARE TRANSACTIONS (continued)
Share activity for the year ended January 31, 1997 is as follows:
<TABLE>
<CAPTION>
Small Cap Equity Fund International Equity Fund Asia Growth Fund
- --------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 2,508,268 $ 52,353,524 12,103,239 $ 230,847,197 7,588,351 $124,281,405
Reinvestment of
dividends and
distributions 475,255 9,732,097 241,377 4,749,851 11,669 184,607
Shares repurchased (4,697,902) (94,933,279) (3,820,157) (72,226,935) (3,945,614) (63,723,269)
<CAPTION>
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(1,714,379) (32,847,658) 8,524,459 163,370,113 3,654,406 60,742,743
<CAPTION>
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Shares sold 173,849 3,765,689 1,000,064 19,327,085 210,879 3,433,876
Reinvestment of
dividends and
distributions 7,086 144,474 7,924 155,475 279 4,391
Shares repurchased (4,391) (91,616) (10,181) (198,263) (4,771) (76,391)
<CAPTION>
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
176,544 3,818,547 997,807 19,284,297 206,387 3,361,876
<CAPTION>
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES
Shares sold -- -- 3,657,119 70,627,799 1,041,822 16,733,545
Reinvestment of
dividends and
distributions -- -- 28,973 572,219 2,040 32,281
Shares repurchased -- -- (161,923) (3,153,741) (228,363) (3,651,351)
<CAPTION>
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-- -- 3,524,169 68,046,277 815,499 13,114,475
<CAPTION>
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SERVICE SHARES
Shares sold -- -- 34,686 673,880 -- --
Reinvestment of
dividends and
distributions -- -- 200 3,947 -- --
Shares repurchased -- -- (56) (1,098) -- --
<CAPTION>
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-- -- 34,830 676,729 -- --
<CAPTION>
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net increase (decrease)
in shares (1,537,835) $(29,029,111) 13,081,265 $ 251,377,416 4,676,292 $ 77,219,094
<CAPTION>
==============================================================================
</TABLE>
72
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Distributions to
investment operations(h) shareholders
------------------------- ----------------------------------
Net realized From
and unrealized net realized
Net asset gain on From gain on In excess Net asset
value, Net investments, net investment of net Net increase value,
beginning investment options and investment and futures investment in net end of Total
of period income futures income transactions income asset value period return(a)
- --------------------------------------------------------------------------------------------------------------------------
BALANCED FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31,
1997--Class A
Shares
(unaudited)..... $18.78 $0.29 $2.58 $(0.27) $ -- $ -- $2.60 $21.38 15.42%(c)
1997--Class B
Shares
(unaudited)..... 18.73 0.27 2.52 (0.22) -- -- 2.57 21.30 15.01(c)
FOR THE YEAR ENDED JANUARY 31,
1997--Class A
Shares.......... 17.31 0.66 2.47 (0.66) (1.00) -- 1.47 18.78 18.59
1997--Class B
Shares(b)....... 17.46 0.42 2.34 (0.42) (1.00) (0.07) 1.27 18.73 16.22(c)
1996--Class A
Shares.......... 14.22 0.51 3.43 (0.50) (0.35) -- 3.09 17.31 28.10
FOR THE PERIOD ENDED JANUARY 31,
1995--Class A
Shares(d)....... 14.18 0.10 0.02 (0.08) -- -- 0.04 14.22 0.87(c)
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
--------------------------
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to income to expenses to income (loss)
turnover commission period average net average net average to average
rate rate(g) (in 000s) assets assets net assets net assets
-------------------------------------------------------------------------------------------------
BALANCED FUND
-------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JULY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997--Class A
Shares
(unaudited)..... 95.62%(c)(f) $0.0595 $124,260 1.00%(e) 3.15%(e) 1.59%(e) 2.56%(e)
1997--Class B
Shares
(unaudited)..... 95.62(c)(f) 0.0595 9,261 1.75(e) 2.37(e) 2.09(e) 2.03(e)
FOR THE YEAR ENDED JANUARY 31,
1997--Class A
1997--Class A
Shares.......... 208.11(f) .0587 81,410 1.00 3.76 1.77 2.99
1997--Class B
Shares(b)....... 208.11(f) .0587 2,110 1.75(e) 2.59(e) 2.27(e) 2.07(e)
1996--Class A
Shares.......... 197.10(f) -- 50,928 1.00 3.65 1.90 2.75
FOR THE PERIOD ENDED JANUARY 31,
1995--Class A
Shares(d)....... 14.71(c) -- 7,510 1.00(e) 3.39(e) 8.29(e) (3.90)(e)
</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) For the period from May 1, 1996 (commencement of operations) to January
31, 1997.
(c) Not annualized.
(d) For the period from October 12, 1994 (commencement of operations) to
January 31, 1995.
(e) Annualized.
(f) Includes the effect of mortgage dollar roll transactions.
(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.
73
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from Distributions to
investment operations(h) shareholders
------------------------- ----------------------------------
From
Net realized net realized
and unrealized gain on
Net asset gain (loss) on From investments, In excess Net increase Net asset
value, Net investments, net options of net (decrease) value,
beginning investment options and investment and futures investment in net end of Total
of period income futures income transactions income asset value period return(a)
- --------------------------------------------------------------------------------------------------------------------------
CORE U.S. EQUITY FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31,
1997--Class A
Shares
(unaudited)..... $23.32 $0.08 $ 5.07 $ -- $ -- $ -- $ 5.15 $28.47 22.08%(b)
1997--Class B
Shares
(unaudited)..... 23.18 0.09 4.96 -- -- -- 5.05 28.23 21.74(b)
1997--
Institutional
Shares
(unaudited)..... 23.44 0.18 5.09 -- -- -- 5.27 28.71 22.48(b)
1997--Service
Shares
(unaudited)..... 23.27 0.12 5.04 -- -- -- 5.16 28.43 22.17(b)
FOR THE YEAR ENDED JANUARY 31,
1997--Class A
Shares.......... 19.66 0.16 4.46 (0.16) (0.80) -- 3.66 23.32 23.75
1997--Class B
Shares(f)....... 20.44 0.04 3.70 (0.04) (0.80) (0.16) 2.74 23.18 18.59(b)
1997--
Institutional
Shares.......... 19.71 0.30 4.51 (0.28) (0.80) -- 3.73 23.44 24.63
1997--Service
Shares(f)....... 21.02 0.13 3.15 (0.13) (0.80) (0.10) 2.25 23.27 15.92(b)
1996--Class A
Shares.......... 14.61 0.19 5.43 (0.16) (0.41) -- 5.05 19.66 38.63
1996--
Institutional
Shares(d)....... 16.97 0.16 3.23 (0.24) (0.41) -- 2.74 19.71 20.14(b)
1995--Class A
Shares.......... 15.93 0.20 (0.38) (0.20) (0.94) -- (1.32) 14.61 (1.10)
1994--Class A
Shares.......... 15.46 0.17 2.08 (0.17) (1.61) -- 0.47 15.93 15.12
1993--Class A
Shares.......... 15.05 0.22 0.41 (0.22) -- -- 0.41 15.46 4.30
FOR THE PERIOD ENDED JANUARY 31,
1992--Class A
Shares(e)....... 14.17 0.11 0.88 (0.11) -- -- 0.88 15.05 7.01(b)
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
--------------------------
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to income to expenses in income
turnover commission period average net average net average to average
rate rate(g) (in 000s) assets assets net assets net assets
--------------------------------------------------------------------------------------
CORE U.S. EQUITY FUND
--------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JULY 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1997--Class A
Shares
(unaudited)..... 27.62%(b) $0.0406 $327,636 1.28%(c) 0.72%(c) 1.50%(c) 0.50%(c)
1997--Class B
Shares
(unaudited)..... 27.62(b) 0.0406 38,170 1.82(c) 0.14(c) 2.00(c) (0.04)(c)
1997--
Institutional
Shares
(unaudited)..... 27.62(b) 0.0406 175,744 0.65(c) 1.37(c) 0.83(c) 1.19(c)
1997--Service
Shares
(unaudited)..... 27.62(b) 0.0406 5,626 1.15(c) 0.84(c) 1.33(c) 0.66(c)
FOR THE YEAR ENDED JANUARY 31,
1997--Class A
Shares.......... 37.28 $ .0417 225,968 1.29 0.91 1.53 0.67
1997--Class B
Shares(f)....... 37.28 .0417 17,258 1.83(c) 0.06(c) 2.00(c) (0.11)(c)
1997--
Institutional
Shares.......... 37.28 .0417 148,942 0.65 1.52 0.85 1.32
1997--Service
Shares(f)....... 37.28 .0417 3,666 1.15(c) 0.69(c) 1.35(c) 0.49(c)
1996--Class A
Shares.......... 39.35 -- 129,045 1.25 1.01 1.55 0.71
1996--
Institutional
Shares(d)....... 39.35(b) -- 64,829 0.65(c) 1.49(c) 0.96(c) 1.18(c)
1995--Class A
Shares.......... 56.18 -- 94,968 1.38 1.33 1.63 1.08
1994--Class A
Shares.......... 87.73 -- 92,769 1.42 0.92 1.67 0.67
1993--Class A
Shares.......... 144.93 -- 117,757 1.28 1.30 1.53 1.05
FOR THE PERIOD ENDED JANUARY 31,
1992--Class A
Shares(e)....... 135.02(c) -- 151,142 1.57(c) 1.24(c) 1.82(c) 0.99(c)
</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) Not annualized.
(c) Annualized.
(d) For the period from June 15, 1995 (commencement of operations) to January
31, 1996.
(e) For the period from May 24, 1991 (commencement of operations) to January
31, 1992.
(f) For the period from May 1 and June 7, 1996 (commencement of operations) to
January 31, 1997 for Class B and Service 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.
74
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Distributions to
investment operations(e) shareholders
------------------------- ----------------------------------
Net realized From
and unrealized net realized
Net asset gain on From gain on In excess Net asset
value, Net investments, net investment of net Net increase value,
beginning investment options and investment and futures investment in net end of Total
of period income futures income transactions income asset value period return(a)
- --------------------------------------------------------------------------------------------------------------------------
CORE LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JULY 31,(C)
1997--Class A
Shares
(unaudited)..... $10.00 $0.01 $1.94 -- -- -- $1.95 $11.95 19.50%(f)
1997--Class B
Shares
(unaudited)..... 10.00 -- 1.94 -- -- -- 1.94 11.94 19.40(f)
1997--
Institutional
Shares
(unaudited)..... 10.00 0.03 1.92 -- -- -- 1.95 11.95 19.50(f)
1997--Service
Shares
(unaudited)..... 10.00 0.02 1.92 -- -- -- 1.94 11.94 19.40(f)
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
---------------------------
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to income to expenses to income (loss)
turnover commission period average net average net average to average
rate rate(b) (in 000s) assets assets net assets net assets
-----------------------------------------------------------------------------------------------
CORE LARGE CAP GROWTH FUND
-----------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31,(C)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997--Class A
Shares
(unaudited)..... 18.14%(f) $0.0292 $29,491 0.90%(d) 0.45%(d) 2.96%(d) (1.61)%(d)
1997--Class B
Shares
(unaudited)..... 18.14(f) 0.0292 3,734 1.65(d) (0.35)(d) 3.46(d) (1.90)(d)
1997--
Institutional
Shares
(unaudited)..... 18.14(f) 0.0292 2 0.65(d) 0.94 (d) 2.46(d) (0.87)(d)
1997--Service
Shares
(unaudited)..... 18.14(f) 0.0292 2 1.15(d) 0.30 (d) 2.96(d) (1.51)(d)
</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) 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.
(c) For the period from May 1, 1997 (commencement of operations) to July 31,
1997.
(d) Annualized.
(e) Includes the balancing effect of calculating per share amounts.
(f) Not annualized.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
75
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from Distributions to
investment operations(g) shareholders
--------------------------- ----------------------------------
Net realized From
and unrealized net realized
Net asset gain (loss) on From gain on In excess Net increase Net asset
value, Net investments, net investments, of net (decrease) value,
beginning investment options and investment options and investment in net end of Total
of period income futures income futures income asset value period return(a)
- ----------------------------------------------------------------------------------------------------------------------------
CAPITAL GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31,
1997--Class A
Shares
(unaudited)..... $16.73 $0.02(h) $ 3.87(h) $ -- $ -- $ -- $ 3.89 $20.62 23.25%(d)
1997--Class B
Shares
(unaudited)..... 16.67 (0.06)(h) 3.85(h) -- -- -- 3.79 20.46 22.74(d)
FOR THE YEAR ENDED JANUARY 31,
1997--Class A
Shares.......... 14.91 0.10 3.56 (0.10) (1.72) (0.02) 1.82 16.73 25.97
1997--Class B
Shares(b)....... 15.67 0.01 2.81 (0.01) (1.72) (0.09) 1.00 16.67 19.39(d)
1996--Class A
Shares.......... 13.67 0.12 3.93 (0.12) (2.69) -- 1.24 14.91 30.45
1995--Class A
Shares.......... 15.96 0.03 (0.69) (0.01) (1.62) -- (2.29) 13.67 (4.38)
1994--Class A
Shares.......... 14.64 0.02 2.40 (0.01) (1.07) (0.02) 1.32 15.96 16.89
1993--Class A
Shares.......... 13.65 0.06 2.28 (0.07) (1.28) -- 0.99 14.64 18.01
1992--Class A
Shares.......... 11.10 0.28 2.90 (0.31) (0.32) -- 2.55 13.65 29.31
FOR THE PERIOD ENDED JANUARY 31,
1991--Class A
Shares(c)....... 11.34 0.34 (0.27) (0.31) -- -- (0.24) 11.10 0.84(d)
<CAPTION>
Ratios assuming no
voluntary waiver of fees
---------------------------
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to income (loss) to expenses to income (loss)
turnover commission period average net average average to average
rate rate(f) (in 000s) assets net assets net assets net assets
---------------------------------------------------------------------------------------------------
CAPITAL GROWTH FUND
---------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JULY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997--Class A
Shares
(unaudited)..... 44.92%(d) $0.0620 $1,158,360 1.38%(e) 0.19%(e) 1.63%(e) (0.06)%(e)
1997--Class B
Shares
(unaudited)..... 44.92(d) 0.0620 16,759 2.13(e) (0.66)(e) 2.13(e) (0.66)(e)
FOR THE YEAR ENDED JANUARY 31,
1997--Class A
Shares.......... 52.92 .0563 920,646 1.40 0.62 1.65 0.37
1997--Class B
Shares(b)....... 52.92 .0563 3,221 2.15(e) (0.39)(e) 2.15(e) (0.39)(e)
1996--Class A
Shares.......... 63.90 -- 881,056 1.36 0.65 1.61 0.40
1995--Class A
Shares.......... 38.36 -- 862,105 1.38 0.16 1.63 (0.09)
1994--Class A
Shares.......... 36.12 -- 833,682 1.38 0.13 1.63 (0.12)
1993--Class A
Shares.......... 58.93 -- 665,976 1.41 0.42 1.66 0.17
1992--Class A
Shares.......... 48.93 -- 500,307 1.53 2.09 1.78 1.84
FOR THE PERIOD ENDED JANUARY 31,
1991--Class A
Shares(c)....... 35.63(d) -- 437,533 1.27(d) 3.24(d) 1.47(d) 3.04(d)
</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) For the period from May 1, 1996 (commencement of operations) to January
31, 1997.
(c) For the period from April 20, 1990 (commencement of operations) to January
31, 1991.
(d) Not annualized.
(e) Annualized.
(f) 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.
(g) Includes the balancing effect of calculating per share amounts.
(h) Calculated based on average shares outstanding methodology.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Distributions to
investment operations(h) shareholders
------------------------- ----------------------------------
Net realized From
and unrealized net realized
Net asset gain on From In excess gain on Net asset
value, Net investments, net of net investment Net increase value,
beginning investment options and investment investment and futures in net end of Total
of period income futures income income transactions asset value period return(b)
- -----------------------------------------------------------------------------------------------------------------------------
MID CAP EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31,
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997--
Institutional
Shares
(unaudited)..... $18.73 $0.08 $4.86 $ -- $ -- $ -- $4.94 $23.67 26.37%(f)
1997--Service
Shares(a)
(unaudited)..... 23.01 -- 0.66 -- -- -- 0.66 23.67 2.87(f)
FOR THE YEAR ENDED JANUARY 31,
- ------------
1997--
Institutional
Shares.......... 15.91 0.24 3.77 (0.24) (0.02) (0.93) 2.82 18.73 25.63
FOR THE PERIOD ENDED JANUARY 31,
- ------------
1996--Individual
Shares(d)....... 15.00 0.13 0.90 (0.12) -- -- 0.91 15.91 6.89(d)(f)
- -----------
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
--------------------------
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to income (loss) to expenses to income (loss)
turnover commission period average net average net average to average
rate rate(c) (in 000s) assets assets net assets net assets
-------------------------------------------------------------------------------------------------
MID CAP EQUITY FUND
-------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED JULY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997--
Institutional
Shares
(unaudited)..... 35.77%(f) $0.0540 $189,092 0.85%(e) 0.77%(e) 0.90%(e) 0.72%(e)
1997--Service
Shares(a)
(unaudited)..... 35.77(f) 0.0540 2 1.35(e) (0.06)(e) 1.40(e) (0.11)(e)
FOR THE YEAR ENDED JANUARY 31,
- ------------
1997--
Institutional
Shares.......... 74.03 0.0547 145,253 0.85 1.35 0.91 1.29
FOR THE PERIOD ENDED JANUARY 31,
- ------------
1996--Individual
Shares(d)....... 58.77(f) -- 135,671 0.85(e) 1.67(e) 0.98(e) 1.54(e)
</TABLE>
- ----
(a) For the period from July 18, 1997 (commencement of operations) to July 31,
1997.
(b) 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.
(c) 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.
(d) For the period from August 1, 1995 (commencement of operations) to
January 31, 1996.
(e) Annualized.
(f) Not annualized.
(g) For the period from October 12, 1994 (commencement of operations) to
January 31, 1995.
(h) Includes the balancing effect of calculating per share amounts.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
77
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from
investment operations(g)
-------------------------------------------------
Net realized
and unrealized
Net realized gain (loss)
Net asset and unrealized on foreign
value, Net gain (loss) on currency
beginning investment investments, options related
of period income (loss) and futures transactions
---------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JULY 31,
- -------------
<S> <C> <C> <C> <C>
1997--Class A
Shares
(unaudited)..... $19.32 $0.03(h) $4.20(h) $(0.24)
1997--Class B
Shares
(unaudited)..... 19.24 (0.02)(h) 4.17(h) (0.24)
1997--
Institutional
Shares
(unaudited)..... 19.40 0.08(h) 4.26(h) (0.24)
1997--Service
Shares
(unaudited)..... 19.34 0.04(h) 4.24(h) (0.24)
FOR THE YEAR ENDED JANUARY 31,
- -------------
1997--Class A
Shares.......... 17.20 0.10 3.51 (1.28)
1997--Class B
Shares(e)....... 18.91 (0.06) 0.94 (0.34)
1997--
Institutional
Shares(e)....... 17.45 0.04 3.39 (1.24)
1997--Service
Shares(e)....... 17.70 (0.02) 2.95 (1.08)
1996--Class A
Shares.......... 14.52 0.13 2.58 1.42
1995--Class A
Shares.......... 18.10 0.06 (3.04) (0.01)
1994--Class A
Shares.......... 14.35 0.05 4.08 (0.38)
FOR THE PERIOD ENDED JANUARY 31,
- ------------
1993--Class A
Shares(b)....... 14.18 (0.01) 0.29 (0.11)
<CAPTION>
Distributions to
shareholders
-----------------------
From
net realized
gain on Net
From investment, increase Net asset
net option and (decrease) value,
investment futures in net asset end of Total
income transactions value period return(a)
-----------------------------------------------------------------
INTERNATIONAL EQUITY FUND
-----------------------------------------------------------------
FOR THE SIX MONTHS ENDED JULY 31,
- ------------
<S> <C> <C> <C> <C> <C>
1997--Class A
Shares
(unaudited)..... $ -- $ -- $ 4.02 $23.34 20.81%(c)
1997--Class B
Shares
(unaudited)..... -- -- 3.94 23.18 20.48(c)
1997--
Institutional
Shares
(unaudited)..... -- -- 4.11 23.51 21.19(c)
1997--Service
Shares
(unaudited)..... -- -- 4.04 23.38 20.89(c)
FOR THE YEAR ENDED JANUARY 31,
- ------------
1997--Class A
Shares.......... -- (0.21) 2.12 19.32 13.48
1997--Class B
Shares(e)....... -- (0.21) 0.33 19.24 2.83(c)
1997--
Institutional
Shares(e)....... (0.03) (0.21) 1.95 19.40 12.53(c)
1997--Service
Shares(e)....... -- (0.21) 1.64 19.34 10.42(c)
1996--Class A
Shares.......... (0.58) (0.87) 2.68 17.20 28.68
1995--Class A
Shares.......... -- (0.59) (3.58) 14.52 (16.65)
1994--Class A
Shares.......... -- -- 3.75 18.10 26.13
FOR THE PERIOD ENDED JANUARY 31,
- ------------
1993--Class A
Shares(b)....... -- -- 0.17 14.35 1.23(c)
<CAPTION>
Ratio of net
Portfolio Average Net assets expenses to
turnover commission at end of average net
rate rate (f) period (in 000's) assets
---------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
---------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JULY 31,
- -------------
<S> <C> <C> <C> <C>
1997--Class A
Shares
(unaudited)..... 22.30%(c) $0.0230 $721,502 1.69%(d)
1997--Class B
Shares
(unaudited)..... 22.30(c) 0.0230 49,263 2.23(d)
1997--
Institutional
Shares
(unaudited)..... 22.30(c) 0.0230 57,860 1.10(d)
1997--Service
Shares
(unaudited)..... 22.30(c) 0.0230 2,087 1.60(d)
- -------------
FOR THE YEAR ENDED JANUARY 31,
- -------------
1997--Class A
Shares.......... 38.01 .0318 536,283 1.69
1997--Class B
Shares(e)....... 38.01 .0318 19,198 2.23(d)
1997--
Institutional
Shares(e)....... 38.01 .0318 68,374 1.10(d)
1997--Service
Shares(e)....... 38.01 .0318 674 1.60(d)
1996--Class A
Shares.......... 68.48 -- 330,860 1.52
1995--Class A
Shares.......... 84.54 -- 275,086 1.73
1994--Class A
Shares.......... 60.04 -- 269,091 1.76
- ------------
FOR THE PERIOD ENDED JANUARY 31,
- ------------
1993--Class A
Shares(b)....... 0.00 -- 66,063 1.80(d)
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
--------------------------
Ratio of net
investment Ratio of
income Ratio of net investment
(loss) to expenses income (loss)
average net to average to average
assets net assets net assets
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JULY 31,
- -------------
<S> <C> <C> <C>
1997--Class A
Shares
(unaudited)..... 0.30%(d) 1.83%(d) 0.16%(d)
1997--Class B
Shares
(unaudited)..... 0.22)(d) 2.33(d) (0.32)(d)
1997--
Institutional
Shares
(unaudited)..... 0.78(d) 1.20(d) 0.68(d)
1997--Service
Shares
(unaudited)..... 0.35(d) 1.70(d) 0.25(d)
FOR THE YEAR ENDED JANUARY 31,
- ------------
1997--Class A
Shares.......... (0.07) 1.88 (0.26)
1997--Class B
Shares(e)....... (0.97)(d) 2.38(d) (1.12)(d)
1997--
Institutional
Shares(e)....... 0.43(d) 1.25(d) 0.28(d)
1997--Service
Shares(e)....... (0.40)(d) 1.75(d) (0.55)(d)
1996--Class A
Shares.......... 0.26 1.77 0.01
1995--Class A
Shares.......... 0.40 1.98 0.15
1994--Class A
Shares.......... 0.51 2.01 0.26
FOR THE PERIOD ENDED JANUARY 31,
- ------------
1993--Class A
Shares(b)....... (0.42)(d) 2.58(d) (1.20)(d)
</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) For the period from December 1, 1992 (commencement of operations) to
January 31, 1993.
(c) Not annualized.
(d) Annualized.
(e) For the period from February 7, March 6 and May 1, 1996 (commencement of
operations) to January 31, 1997 for Institutional, Service and Class B
shares, respectively.
(f) 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.
(g) Includes the balancing effect of calculating per share amounts.
(h) Calculated based on average shares outstanding methodology.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
78
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from Distributions to
investment operations(g) shareholders
---------------------------------- ------------------------------------
From In excess
net realized of realized
Net realized gain on gain on
Net asset Net and unrealized From investment, investment,
value, investment gain (loss) on net option and option and
beginning income investments, options investment futures futures
of period (loss) and futures income transactions transactions
- -----------------------------------------------------------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31,
- -------------
1997--Class A
Shares
(unaudited)..... $20.91 $(.0.05)(h) $ 3.77(h) $ -- $ -- $ --
1997--Class B
Shares
(unaudited)..... 20.80 (0.12)(h) 3.74(h) -- -- --
FOR THE YEAR ENDED JANUARY 31,
- ------------
1997--Class A
Shares.......... 17.29 (0.21) 4.92 -- (1.09) --
1997--Class B
Shares(b)....... 20.79 (0.11) 1.21 -- (1.09) --
1996--Class A
Shares.......... 16.14 (0.23) 1.39 -- (0.01) --
1995--Class A
Shares.......... 20.67 (0.07) (3.53) -- (0.69) (0.24)
1994--Class A
Shares.......... 16.68 (0.04) 5.03 -- (1.00) --
FOR THE PERIOD ENDED JANUARY 31,
- ------------
1993--Class A
Shares(c)....... 14.18 0.03 2.50 (0.03) -- --
<CAPTION>
Net increase Net asset Ratio of net
(decrease) value, Portfolio Average Net assets at expenses to
in net end of Total turnover commission end of period average net
asset value period return(a) rate rate(g) (in 000's) assets
-------------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31,
- -------------
1997--Class A
Shares
(unaudited)..... $ 3.72 $24.63 17.65%(d) 46.02%(d) $0.0506 $290,615 1.56%(e)
1997--Class B
Shares
(unaudited)..... 3.62 24.42 17.26(d) 46.02(d) 0.0506 19,125 2.31(e)
FOR THE YEAR ENDED JANUARY 31,
- ------------
1997--Class A
Shares.......... 3.62 20.91 27.28 99.46 .0461 212,061 1.60
1997--Class B
Shares(b)....... 0.01 20.80 5.39(d) 99.46 .0461 3,674 2.35(e)
1996--Class A
Shares.......... 1.15 17.29 7.20 57.58 -- 204,994 1.41
1995--Class A
Shares.......... (4.53) 16.14 (17.53) 43.67 -- 319,487 1.53
1994--Class A
Shares.......... 3.99 20.67 30.13 56.81 -- 261,074 1.60
FOR THE PERIOD ENDED JANUARY 31,
- ------------
Shares(c)....... 2.50 16.68 17.86(d) 7.12(e) -- 59,339 1.65(e)
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
---------------------------
Ratio of net Ratio of net
investment Ratio of investment
income (loss) to expenses to loss
average net average to average
assets net assets net assets
- -----------------------------------------------------------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31,
- -------------
1997--Class A
Shares
(unaudited)..... (0.49)%(e) 1.81%(e) (0.74)%(e)
1997--Class B
Shares
(unaudited)..... (1.06)(e) 2.31(e) (1.06)(e)
FOR THE YEAR ENDED JANUARY 31,
- ------------
1997--Class A
Shares.......... (0.72) 1.85 (0.97)
1997--Class B
Shares(b)....... (1.63)(e) 2.35(e) (1.63)(e)
1996--Class A
Shares.......... (0.59) 1.66 (0.84)
1995--Class A
Shares.......... (0.53) 1.78 (0.78)
1994--Class A
Shares.......... (0.45) 1.85 (0.70)
FOR THE PERIOD ENDED JANUARY 31,
- ------------
1993--Class A
Shares(c)....... 0.62(e) 2.70(e) (0.43)(e)
</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) For the period from May 1, 1996 (commencement of operations) to January
31, 1997.
(c) For the period from October 22, 1992 (commencement of operations) to
January 31, 1993.
(d) Not annualized.
(e) Annualized.
(f) 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.
(g) Includes the balancing effect of calculating per share amounts.
(h) Calculated based on average shares outstanding methodology.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
79
<PAGE>
Goldman Sachs Trust--Equity Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from Distributions to
investment operations(g) shareholders
-------------------------------------------- ---------------------
Net realized
Net asset Net Net realized and unrealized From In excess Net increase Net asset
value, investment and unrealized gain on foreign net of net (decrease) value,
beginning income gain (loss) on currency related investment investment in net end of Total
of period (loss) investments transactions income income asset value period return(a)
- --------------------------------------------------------------------------------------------------------------------------------
ASIA GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31,
1997--Class A
Shares
(unaudited)..... $16.31 $ 0.03(h) $ 0.86(h) $(0.68) $ -- $ -- $ 0.21 $16.52 1.29%(c)
1997--Class B
Shares
(unaudited)..... 16.24 (0.02)(h) 0.71(h) (0.56) -- -- 0.16 16.40 0.99(c)
1997--
Institutional
Shares
(unaudited)..... 16.33 0.07(h) 0.90(h) (0.71) -- -- 0.26 16.59 1.59(c)
FOR THE YEAR ENDED JANUARY 31,
1997--Class A
Shares.......... 16.49 0.06 (0.11) (0.12) (0.01) -- (0.18) 16.31 (1.01)
1997--Class B
Shares(e)....... 17.31 (0.05) (0.48) (0.51) -- (0.03) (1.07) 16.24 (6.02)(c)
1997--
Institutional
Shares(e)....... 16.61 0.04 (0.11) (0.11) (0.04) (0.06) (0.28) 16.33 (1.09)(c)
1996--Class A
Shares.......... 13.31 0.17 3.44 (0.12) (0.17) (0.14) 3.18 16.49 26.49
FOR THE PERIOD ENDED JANUARY 31,
1995--Class A
Shares(b)....... 14.18 0.11 (0.89) 0.01 (0.10) -- (0.87) 13.31 (5.46)(c)
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
-------------------------
Ratio of net Ratio of net
Ratio of net investment Ratio of investment
Portfolio Average Net assets at expenses to income (loss) expenses income (loss)
turnover commission end of period average net to average net to average to average
rate rate(f) (000's) assets assets net assets net assets
------------------------------------------------------------------------------------------
ASIA GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED JULY 31,
- ------------
1997--Class A
Shares
(unaudited)..... 51.72%(c) $0.0068 $256,078 1.72%(d) 0.37%(d) 1.92%(d) 0.17%(d)
1997--Class B
Shares
(unaudited)..... 51.72(c) 0.0068 5,237 2.27(d) (0.21)(d) 2.43(d) (0.37)(d)
1997--
Institutional
Shares
(unaudited)..... 51.72(c) 0.0068 11,372 1.10(d) 0.91(d) 1.26(d) 0.75(d)
FOR THE YEAR ENDED JANUARY 31,
- ------------
1997--Class A
Shares.......... 48.40 .0151 263,014 1.67 0.20 1.87 0.00
1997--Class B
Shares(e)....... 48.40 .0151 3,354 2.21(c) (0.56)(d) 2.37(d) (0.72)(d)
1997--
Institutional
Shares(e)....... 48.40 .0151 13,322 1.10(d) 0.54(d) 1.26(d) 0.38(d)
1996--Class A
Shares.......... 88.80 -- 205,539 1.77 1.05 2.02 0.80
FOR THE PERIOD ENDED JANUARY 31,
- ------------
1995--Class A
Shares(b)....... 36.08(c) -- 124,298 1.90(d) 1.83(d) 2.38(d) 1.35(d)
</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) For the period from July 8, 1994 (commencement of operations) to January
31, 1995.
(c) Not annualized.
(d) Annualized.
(e) For the period from February 2 and May 1, 1996 (commencement of
operations) to January 31, 1997 for Institutional and Class B shares,
respectively.
(f) 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.
(g) Includes the balancing effect of calculating per share amounts.
(h) Calculated based on average shares outstanding methodology.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
80
