<PAGE>
Goldman Sachs Funds
================================================================================
EMERGING MARKETS EQUITY FUND Annual Report January 31, 1998
================================================================================
Long-term capital growth potential
through a diversified portfolio
of emerging markets stocks.
[LOGO]
Goldman
Sachs
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Fund Basics
as of January 31, 1998
Assets Under Management
-----------------------
$36.9 Million
-----------------------
Number of Holdings
-----------------------
99
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GEMAX
-----------------------
Class B Shares
-----------------------
GEKBX
-----------------------
Class C Shares
-----------------------
GEMCX
-----------------------
Institutional Shares
-----------------------
GEMIX
-----------------------
Service Shares
-----------------------
GEMSX
-----------------------
================================================================================
PERFORMANCE REVIEW
================================================================================
<TABLE>
<CAPTION>
December 15, 1997- Fund Total Return MSCI EMF (Partial Domestic)
January 31, 1998 (based on NAV)(1) MSCI EMF Index(2)
- --------------------------------------------------------------------------------
<S> <C> <C>
Class A -3.10% -2.12%
Class B -3.10% -2.12%
Class C -3.00% -2.12%
Institutional -3.00% -2.12%
Service -3.10% -2.12%
- --------------------------------------------------------------------------------
</TABLE>
(1) The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares.
(2) The Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Index (with dividends reinvested) is a market capitalization-weighted
composite of securities in over 30 emerging market countries, including
Argentina, Botswana, Brazil, Chile, China, Colombia, the Czech Republic,
Egypt, Greece, Hong Kong, Hungary, India, Israel, Jordan, Kenya, Malaysia,
Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Portugal, Russia,
Singapore, South Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey,
Venezuela and Zimbabwe. "Free" indicates an index that excludes shares in
otherwise free markets that are not purchasable by foreigners. Investors
cannot directly invest in the Index. The Index figures do not reflect any
fees or expenses.
================================================================================
SEC CUMULATIVE TOTAL RETURN(3)
================================================================================
<TABLE>
<CAPTION>
For the period
ending 12/31/97 Class A Class B Class C Institutional Service
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Since Inception -3.21% -2.60% 1.40% 2.30% 2.40%
(12/15/97)
- --------------------------------------------------------------------------------
</TABLE>
(3) The SEC Cumulative Total Return is determined by computing the percentage
change in the value of $1,000 invested at the maximum public offering price
for specified periods, assuming reinvestment of all distributions at NAV.
The total return calculation reflects a maximum initial sales charge of
5.5% for Class A shares, the assumed deferred sales charge for Class B
shares (5% maximum declining to 0% after six years) and the assumed
deferred sales charge for Class C shares (1% if redeemed within 12 months
of purchase). The public offering price of the Class A shares on 1/31/98
was $10.25 and represents the NAV plus the maximum sales charge of 5.5%.
<TABLE>
=======================================================================================
TOP 10 HOLDINGS AS OF 1/31/98
=======================================================================================
<CAPTION>
Percentage of
Company Holding Total Net Assets Line of Business
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ITC Limited 3.3% Consumer Goods and Services
Telebras ADR 3.2% Telecommunications
South African Breweries 2.4% Consumer Goods and Services
Mahanagar Telephone 2.3% Telecommunications
Liberty Life Association of Africa 2.1% Insurance and Financial Services
ABSA Group Limited 1.6% Insurance and Financial Services
CIFRA S.A. De C.V. 1.6% Consumer Goods and Services
Lukoil Holding-ADR 1.5% Energy Sources
Ranbaxy Laboratories 1.5% Consumer Goods and Services
CIA Tele. de Venezuela 1.4% Telecommunications
- ---------------------------------------------------------------------------------------
</TABLE>
The top 10 holdings may not be representative of the Fund's future
investments.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Market Overview
Dear Shareholder,
On behalf of Goldman Sachs, it is a pleasure to welcome you as a shareholder in
the Goldman Sachs Emerging Markets Equity Fund. This annual report covers the
brief period from December 15, 1997, when the Fund began operations, through
January 31, 1998.
o The Emerging Markets: The Impact of Asia's Market Downturn Was
Widespread -- The decision by Thai authorities to allow their currency
to float freely against the U.S. dollar on July 2, 1997, set in motion
a series of events that sent Asia's emerging market countries into a
tailspin. The Philippines, Malaysia and Indonesia --countries that,
like Thailand, albeit to a lesser extent, had pursued overly
aggressive investment policies --were most affected.
The strength and breadth of Asia's financial crisis powerfully
impacted the equity markets of many non-Asian emerging countries.
Latin America's equity markets sold off sharply, effectively slowing
what had been that region's strongest economic performance since 1982.
Most affected were those countries with overvalued exchange rates and
large external financing needs, such as Brazil. Eastern European
countries reacted as dramatically. Russia's markets were temporarily
closed as public concern caused steep declines. Currencies in Eastern
and Central Europe lost value against the dollar, amid speculation
that Poland, Hungary and the Czech Republic might follow the path of
Southeast Asian countries -- situations that did not occur. Markets in
Africa and the Mediterranean region behaved more defensively, with
Turkey even appreciating in the fourth quarter in anticipation of an
economic reform package.
o Outlook: A Waiting Game -- Going forward, it is necessary to place the
current turmoil in Asia into perspective. While emerging markets will
at times experience a higher level of volatility than more mature
economies, they also stand to benefit from significant long-term
growth potential as economies and markets develop. Additionally, we
believe the currency delinkings in Asia are likely to mark the
beginning of a new, healthier stage in the region's economic
development. A currency system that floats freely should stimulate
better economic management in the region. However, the adjustment
process for these economies will be marked by volatility, and could be
lengthy, depending on the appropriateness of policy responses. The
health of emerging market economies outside Asia depends to a great
extent on what happens in Asia --and it may take until mid-year to
determine the exact nature of this impact. However, there are positive
early indications -- such as the fact that Mexico expects to see a
level of foreign investment in 1998 equivalent to that of 1997 --that
the Asian crisis will not be as detrimental to the health of world
emerging market economies as initially feared.
We encourage you to maintain your diversified, long-term
investment program, and look forward to serving your investment needs
in the years ahead.
Sincerely,
/s/ David B. Ford /s/ John P. McNulty
David B. Ford John P. McNulty
Co-Head, Goldman Sachs Co-Head, Goldman Sachs
Asset Management International Asset Management International
February 27, 1998
1
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Performance Overview
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Emerging
Markets Equity Fund for the period since the Fund's inception on December 15,
1997, through January 31, 1998.
Performance Review: Short Performance Record Reflects
Asian Market Downturn
Asian markets in general fared poorly over the short time period covered by
this report, a circumstance that is reflected in the Fund's performance.
From the Fund's inception on December 15, 1997 through January 31, 1998,
the Fund's Class A shares generated a total return of -3.10%, compared to a
-2.12% return for the Fund's benchmark, the MSCI Emerging Markets Free
Index. The Fund's underperformance compared to its benchmark is
attributable to a large initial cash position held by the Fund (see
"Regional Allocations"). As a result, the Fund was not able to participate
in a market rally that occurred in the final weeks of December.
Regional Allocations
At the time of its inception, the Fund held a substantial cash position
that was significantly reduced as the period progressed and positions were
initiated. As of January 31, 1998, the portfolio was significantly
overweighted in the Eastern Europe, Middle East and Africa (EMEA) regions,
and underweighted in both Latin America and Asia.
Portfolio Highlights
o Compania Anonima de Telefonos de Venezuela (CANTV) -- CANTV is the
largest telecommunications company in Venezuela and holds an exclusive
concession to provide fixed local, domestic and international
long-distance services throughout the country until October 2000. The
company was privatized in 1991. We believe that the company's
potential lies on three fronts: increasing demand for telecom services
as the Venezuelan economy recovers, cost cutting primarily from
headcount reduction and revenue enhancement from tariff rebalancing.
o Liberty Life Association of Africa -- Liberty Life provides life
insurance and pension plans to customers throughout South Africa. The
company also provides construction, development, management and
ownership of fixed property and a range of investment and fund
management services. The company has good sales growth prospects due
to a newly introduced laptop-based sales platform, and stands to
benefit from ongoing corporate restructuring.
o Lukoil Holding -- The second largest oil producer in Russia, Lukoil is
a prospector, extractor, transporter, refiner and provider of oil and
gas, mainly from Western Siberia. The company also manufactures
petrochemicals, fuels and other petroleum products, and operates two
refineries, 162 oil and gas fields, and 800 filling stations.
2
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
INVESTMENT
PROCESS OVERVIEW
The investment process for
the Goldman Sachs Emerging
Markets Fund combines both
qualitative and quantitative
analysis, with an emphasis
on portfolio manager input.
==================
Asset Allocation
Committee
==================
o Proprietary
Quantitative Model
o Portfolio
Manager Views
\/
==================
Country Allocation
==================
Company Visits
--------------
Internal Research
-----------------
Return Expectations
\/
==================
Stock Selection
==================
==================
Portfolio
Construction
==================
o Stock & Industry
Views Relative
to Benchmark
\/
==================
Portfolio Review
& Analysis
==================
o Performance
Measurement
& Attribution
o BARRA
o Risk Analysis
o Mahanagar Telephone Nigam Ltd (MTNL) -- MTNL is the primary provider
of fixed line telephone services in the two most important cities in
India, Delhi and Bombay. While a second private operator has been
licensed in each of these areas, these operators are burdened by very
high license fees, and start-up has been slow. MTNL stands to benefit
from the growth of telephone lines in India as a result of economic
growth in the country.
o Ranbaxy Laboratories -- Ranbaxy is the largest pharmaceutical company
in India. In addition to a strong presence in the Indian formulations
market, Ranbaxy has aggressively pursued a strategy to tap the global
generics market. The company recently received approval from the FDA
for two drugs, Ranitidine and Cephaclor; Cephaclor has already been
launched in the United States and there are plans to launch Ranitidine
in March 1998.
o South African Breweries -- South African Breweries is the dominant
brewer in South Africa. Company shares are local shares quoted on the
Johannesburg stock exchange. The company is expanding successfully in
other emerging markets in Africa and Eastern Europe.
o Telecomunicacoes Brasileiras (Telebras) -- Telebras is a holding
company that has the monopoly to provide telecommunication services in
Brazil. It is the largest telecom company in Latin America and is
scheduled to be privatized by mid-1998. Telebras offers significant
growth prospects as there is huge pent-up demand for telephone
services in Brazil as well as substantial cost-cutting potential
following privatization.
Portfolio Outlook
Investor sentiment toward Asia turned positive in January as the IMF
programs in Indonesia and South Korea appeared to be helping to stabilize
currencies in the region. The real economies in Asia, however, are likely
to enter a period of slow to negative growth with a number of corporate
bankruptcies and increasing unemployment. On a selective basis, the recent
turmoil has created investment opportunities, but volatility in the equity
markets is likely to remain high.
We thank you for your investment and look forward to your continued
confidence.
Sincerely,
/s/ Warwick M. Negus /s/ Robert A. Beckwitt
Warwick M. Negus Robert A. Beckwitt
Portfolio Manager, Portfolio Manager,
Goldman Sachs Goldman Sachs
Emerging Markets Equity Fund Emerging Markets Equity Fund
February 27, 1998
3
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Emerging Markets Offer Long-Term Rewards
For investors willing to
assume the sometimes
significant price fluctuations
associated with emerging
market investments,
the long-term rewards
may be higher returns and
lower portfolio volatility.
Two compelling reasons for investors to consider allocating a portion of
their portfolios to emerging market countries are the potential for higher
returns and reduced overall portfolio volatility.
Diversification Can Reduce Portfolio Volatility
Emerging market countries have widely varying economies, growth rates and
stages of development. As a result, stock markets in emerging market
countries generally do not move in tandem with markets in developed
countries. Diversifying among markets can help to reduce the impact a
downturn in any one market may have on a portfolio. Over time, this can
lead to lower overall portfolio volatility.
The chart below illustrates the low correlation that stock markets in
emerging market countries have had to market performances in the United
States over the past 10 years.
---------------------------------------------------------------------------
Performance of Emerging vs. U.S. Equity Markets
(MSCI EMF Index vs. S&P 500 Index)
(Rolling 10-Year Cumulative Returns)
[TABLE ILLUSTRATED BY A BAR CHART]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992
<S> <C> <C> <C> <C> <C>
MSCI EMF 34.87% 114.70% 85.16% 188.79% 214.92%
S&P 500 16.61% 53.56% 48.80% 94.14% 108.94%
1993 1994 1995 1996 1997
MSCI EMF 439.34% 392.58% 358.39% 376.36% 312.53%
S&P 500 130.00% 133.03% 220.61% 294.22% 425.73%
</TABLE>
Source: Morgan Stanley Capital International (MSCI) Emerging Markets Free
(EMF) Index and the S&P 500 Index. The MSCI EMF Index is a market
capitalization-weighted composite of securities in over 30 emerging market
countries. The MSCI EMF Index and the S&P 500 Index are unmanaged indices
and the figures for the Indices do not reflect any fees or expenses. In
addition, investors cannot invest directly in the indices. The chart is for
illustrative purposes only and is not representative of any Goldman Sachs
fund. Past performance is not indicative of future results.
Emerging Country Markets Offer Greater Return Potential
Historically, emerging market countries have been among the fastest growing
in the world. On average, the rate of economic growth in emerging market
countries -- at 6% to 8% -- is four to five percentage points greater than
the growth rates of developed countries. This can lead to greater corporate
profitability and potentially greater market returns over time.
For More Information
A mutual fund composed of emerging market stocks is one of the best ways
for investors to access the benefits associated with emerging country
investing. Goldman Sachs Asset Management offers a variety of funds that
invest in emerging market countries. For more information on these and
other Goldman Sachs Funds, contact your investment professional.
4
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Performance Summary
January 31, 1998
The following graph shows the value as of January 31, 1998, of a $10,000 in-
vestment made (with the maximum sales charge of 5.5% for Class A and redemp-
tion charges of 5.0% and 1.0% for Class B and Class C, respectively) on
December 15, 1997. For comparative purposes, the performance of the Fund's
benchmark (Morgan Stanley Emerging Markets Free Index ("MSCI EMF")) is shown.
All performance data shown represents past performance and should not be con-
sidered indicative of future performance which will fluctuate with changes in
market conditions. These performance fluctuations will cause an investor's
shares, when redeemed, to be worth more or less than their original cost.
EMERGING MARKETS EQUITY FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, DISTRIBUTIONS REINVESTED DECEMBER 15, 1997 TO
JANUARY 31, 1998.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Morgan Stanley EMF Index Class A Fund Class B Fund Class C Fund Institutional Class Service Class
<S> <C> <C> <C> <C> <C> <C>
12/15/1997 10000 9500 10000 10000 10000 10000
JAN 9788 9159 9205 9603 9700 9690
</TABLE>
<TABLE>
<CAPTION>
SINCE INCEPTION
AGGREGATE TOTAL RETURN THROUGH JANUARY 31, 1998
<S> <C> <C> <C>
CLASS A (COMMENCED DE-
CEMBER 15, 1997)
Excluding sales charges -3.10%
Including sales charges -8.41%
--------------------------------------------------
CLASS B (COMMENCED DE-
CEMBER 15, 1997)
Excluding redemption
charges -3.10%
Including redemption
charges -7.95%
--------------------------------------------------
CLASS C (COMMENCED DE-
CEMBER 15, 1997)
Excluding redemption
charges -3.00%
Including redemption
charges -3.97%
--------------------------------------------------
INSTITUTIONAL CLASS
(COMMENCED DECEMBER 15,
1997) -3.00%
--------------------------------------------------
SERVICE CLASS (COMMENCED
DECEMBER 15, 1997) -3.10%
--------------------------------------------------
</TABLE>
5
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statement of Investments
January 31, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS - 79.7%
ARGENTINIAN PESO - 3.4%
8,338 Banco de Galicia ADR (Financial Services) $ 182,904
5,300 Cresud S.A. ADR* (Natural Resources) 96,063
3,500 Irsa GDR (Real Estate) 111,781
7,700 Telefonica de Argentina ADR (Telecommunications) 266,613
13,600 YPF Sociedad Anonima ADR
(Energy Source) 414,028
26,900 Perez Companc SA (Diversified) 176,810
---------------------------------------------------
1,248,199
-----------------------------------------------------------------------------
BRAZILIAN REAL - 11.5%
2,900 Brasil Distr Pao Acu ADR (Consumer Goods) 51,642
5,062,000 Cemig Cia Energy Mg (Utility) 199,890
54,000 Cia Cerve Brahma (Consumer Goods) 37,023
82,118,200 Cia Energet Ceara (Utility) 246,361
121,330 Cia Riogrand Telecommunications (Telecommunications) 125,857
14,900 Cia Vale Rio Doce (Diversified) 279,069
10,600 Cia Vale Do Rio Doce ADR* (Mining) 206,700
10,300 Companhia Cervejaria Brah ADR* (Consumer Goods) 143,556
5,300 Companhia Energetica de Minas Gerais ADR* (Utility) 208,025
23,580,000 Copel Parana Energy (Utility) 285,328
4,940,000 Electrobras Centr (Utility) 222,126
1,710,000 Petrol Brasileiros (Energy Source) 365,417
10,500 Telebras ADR (Telecommunications) 1,165,500
1,660,000 Telesp Tel Sao Pau (Telecommunications) 480,382
8,100 Unibanco GDR* (Bank) 243,000
---------------------------------------------------
4,259,876
-----------------------------------------------------------------------------
CHILEAN PESO - 3.5%
8,900 Banco de A. Edwards ADR (Financial Services) 134,121
7,500 Cia Telecom de Chile ADR (Telecommunications) 180,469
18,100 CN Quinenco S.A. ADR* (Diversified) 176,430
11,400 Distribucion Y Servicio ADR* (Consumer Goods) 179,550
11,800 Embotelladora Andina ADR* (Consumer Goods) 208,030
11,400 Empresa Nacional de Electric ADR (Utility) 192,375
7,700 Enersis S.A ADR (Utility) 203,569
---------------------------------------------------
1,274,544
-----------------------------------------------------------------------------
COLOMBIAN PESO - 0.7%
16,300 Banco Industrial Colombiano ADR* (Bank) 198,656
5,600 Cementos Diamante GDR* (Construction) 60,834
---------------------------------------------------
259,490
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
GREEK DRACHMA - 1.2%
6,770 Attica Enterprises (Transportation) $ 84,922
3,435 Hellenic Bottling (Consumer Goods) 89,787
8,940 Ote Greek Telecom (Telecommunications) 164,671
2,709 Titan Cement Co (Construction Materials) 120,429
-------------------------------------------------
459,809
---------------------------------------------------------------------------
HONG KONG DOLLAR - 0.9%
471,000 Beijing Datang Power (Utility) 223,720
653,000 Zhejiang Expressway (Construction) 91,996
-------------------------------------------------
315,716
---------------------------------------------------------------------------
HUNGARIAN FORINT - 2.5%
4,809 Gedeon Richter Ltd. ADR (Consumer Goods)* 462,866
19,643 Magyar Olaj Es Gaz ADR (Energy Source) 476,343
-------------------------------------------------
939,209
---------------------------------------------------------------------------
INDIAN RUPEE - 8.6%
61,400 ITC Ltd. ADR (Consumer Goods) 1,214,306
56,400 Mahanagar Telephone Ni ADR (Telecommunications) 849,525
23,900 Ranbaxy Labs ADR (Pharmaceuticals) 564,638
34,400 St Bank India GDR (Bank) 533,200
-------------------------------------------------
3,161,669
---------------------------------------------------------------------------
INDONESIAN RUPIAH - 0.9%
208,000 Daya Guna Samudera (Consumer Goods) 123,349
374,000 H M Sampoerna (Consumer Goods) 163,516
122,000 Telekomunikasi Ind (Telecommunications) 48,800
-------------------------------------------------
335,665
---------------------------------------------------------------------------
ISRAELI SHEKEL - 4.2%
2,110 Eci Telecom Ltd. ADR* (Technology) 52,750
557 First International Bank (Financial Services) 386,608
180,077 ICL Israel Chemicals (Cyclical) 206,065
14,979 Makteshim Chemical Works (Cyclical) 96,521
6,716 Nice Systems Ltd. ADR (Technology) 251,850
129,996 Super Sol (Consumer Goods) 360,338
3,940 Teva Pharmaceutical Industries Ltd. ADR* (Consumer
Goods) 180,994
-------------------------------------------------
1,535,126
---------------------------------------------------------------------------
MALAYSIAN RINGGIT - 1.1%
34,000 Rothmans Pall Mall (Consumer Goods) 268,847
71,000 Tenaga Nasional (Utility) 119,881
-------------------------------------------------
388,728
---------------------------------------------------------------------------
</TABLE>
6 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
MEXICAN PESO - 13.0%
21,700 Alfa S.A. (Diversified) $ 115,521
80,800 Cemex S.A. (Construction) 348,073
330,400 Cifra Sa de Cv (Other) 559,196
25,025 Cifra Sa de Cv Series V (Other) 45,532
14,600 Empresas Ica S.A. ADR (Construction) 198,813
38,800 Fomento Econ Mexic (Consumer Goods) 250,273
76,500 Groupo Carso (Diversified) 448,985
129,200 Groupo Fin Banamex Ac (Financial Services) 346,931
561,900 Groupo Fin Bancomer (Financial Services) 300,460
46,000 Grupo Modelo Sa De (Consumer Goods) 375,631
13,900 Grupo Televisa S.A. ADR* (Media) 447,053
8,500 Industrias Bachoco S.A. ADR* (Consumer Goods) 140,565
98,800 Kimberly Clark Mexico (Consumer Staples) 427,218
8,000 Panamerican Beverages, Inc. ADR (Consumer Goods) 260,111
11,200 Telefonos de Mexico ADR (Telecommunications) 551,598
--------------------------------------------------
4,815,960
----------------------------------------------------------------------------
NEW TAIWAN DOLLAR - 1.5%
112,000 Siliconware Precis (Technology) 271,765
77,000 Taiwan Semiconductor (Technology) 266,103
--------------------------------------------------
537,868
----------------------------------------------------------------------------
PERUVIAN NEW SOL - 0.4%
2,300 Creditcorp. Ltd. ADR* (Bank) 39,963
5,900 Telefonica de Peru ADR (Telecommunications) 115,788
--------------------------------------------------
155,751
----------------------------------------------------------------------------
PHILIPPINE PESO - 2.1%
688,000 Ayala Land Inc. (Real Estate) 240,000
79,000 Manila Electric Co. (Utility) 248,023
12,000 Philippine Long Distance (Telecommunications) 291,628
--------------------------------------------------
779,651
----------------------------------------------------------------------------
POLISH ZLOTY - 0.5%
5,788 Government of Poland NIF Privatization Certificates
(Government) 190,948
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
RUSSIAN RUBLES - 3.5%
8,817 Ao Mosenergo ADR (Utility) $ 257,897
8,634 Lukoil Co. ADR (Energy Source) 552,576
24,217 Unified Energy Systems Russia ADR (Utility) 480,556
--------------------------------------------------
1,291,029
----------------------------------------------------------------------------
SOUTH AFRICAN RAND - 13.9%
82,705 Absa Group Ltd. (Financial Services) 586,145
11,803 Anglo American Industrial Corp. (Diversified) 280,586
35,200 Barlow Ltd. (Construction) 320,745
22,496 De Beers Centenary (Cyclical) 489,232
49,000 First National Bank (Bank) 466,336
29,600 Liberty Life Association of Africa (Financial
Services) 781,581
287,881 Premier Group (Consumer Goods) 314,783
65,484 Rembrandt Group (Consumer Goods) 496,583
55,758 Sasol (Cyclical) 508,071
33,805 South African Breweries (Consumer Goods) 891,245
--------------------------------------------------
5,135,307
----------------------------------------------------------------------------
THAILAND BAHT - 1.2%
272,000 Bangkok Expressway (Construction) 207,545
19,400 PTT Exploration & Production (Energy Source) 223,606
--------------------------------------------------
431,151
----------------------------------------------------------------------------
TURKISH LIRA - 3.7%
3,860,878 Adana Cimento (Construction) 308,906
3,651,937 Akbank (Bank) 296,362
320,778 Migros (Consumer Goods) 289,650
804,803 Netas (Technology) 279,644
5,536,000 Yapi Kredi Bankasi (Bank) 199,952
--------------------------------------------------
1,374,514
----------------------------------------------------------------------------
VENEZUELAN BOLIVAR - 1.5%
15,300 Cia Anonima Telefonos de Venezuela ADR
(Telecommunications) 562,418
----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $30,308,248) $29,452,628
----------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 15.5%
$5,726,614 State Street Bank & Trust Euro-Time Deposit 5.56%,
02/02/98 $ 5,726,614
----------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(COST $5,726,614) $ 5,726,614
----------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $36,034,862) (A) $35,179,242
----------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 7
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statement of Investments
January 31, 1998
<TABLE>
<CAPTION>
-----------------------------
<C> <S> <C>
FEDERAL INCOME
TAX
Gross
unrealized gain
for investments
in which
value exceeds
cost $ 790,909
Gross
unrealized loss
for investments
in which
cost exceeds
value (1,649,829)
-----------------------------
Net unrealized
loss $ (858,920)
-----------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $36,038,162.
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>
COMMON STOCK INDUSTRY CONCENTRATIONS
</TABLE>
<TABLE>
<S> <C>
Banking 5.3%
Construction 4.5
Consumer Goods 18.8
Cyclicals 3.5
Diversified 4.6
Energy Sources 5.5
Financial Services 7.4
Government 0.5
Media 1.2
Natural Resources 0.3
Others 1.6
Pharmaceuticals 1.5
Real Estate 1.0
Technology 3.0
Telecommunications 13.0
Transportation 0.2
Utilities 7.8
--------------------------
TOTAL COMMON STOCK 79.7%
--------------------------
</TABLE>
8 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statement of Assets and Liabilities
January 31, 1998
ASSETS:
<TABLE>
<S> <C> <C> <C>
Investment in securities, at value
(identified cost $36,034,862) $35,179,242
Cash 1,504,468
Receivables:
Fund shares sold 3,021,558
Dividends and interest 10,915
Deferred organization expenses, net 48,685
Other assets 71,870
------------------------------------------------------------------------------
TOTAL ASSETS 39,836,738
------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 2,662,464
Fund shares repurchased 18,924
Amounts owed to affiliates 41,312
Accrued expenses and other liabilities 175,000
------------------------------------------------------------------------------
TOTAL LIABILITIES 2,897,700
------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 37,805,183
Accumulated undistributed net
investment income 19,872
Accumulated undistributed net realized
loss on investment transactions (8,792)
Accumulated net realized foreign
currency loss (13,662)
Net unrealized loss on investments (289,186)
Net unrealized loss on translation of
assets and liabilities denominated in
foreign currencies (574,377)
------------------------------------------------------------------------------
NET ASSETS $36,939,038
------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B CLASS C
------------------------------------------------------------------------------
<S> <C> <C> <C>
Total shares of beneficial interest
outstanding, $.001 par value (unlimited
shares authorized) 1,824,207 6,579 7,520
Net asset and Class A redemption value
per share(a) $9.69 $9.69 $9.70
Maximum public offering price per share
(Class A NAV X 1.0582) $10.25 $9.69 $9.70
------------------------------------------------------------------------------
<CAPTION>
INSTITUTIONAL SERVICE
------------------------------------------------------------------------------
<S> <C> <C> <C>
Total shares of beneficial interest
outstanding, $.001 par value (unlimited
shares authorized) 1,971,850 160
Net asset value, offering and
redemption price per share $9.70 $9.69
------------------------------------------------------------------------------
</TABLE>
(a) At redemption, Class B and Class C shares may be 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. 9
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statement of Operations
For the Period Ended January 31, 1998(a)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends(b) $ 10,077
Interest 55,754
----------------------------------------------------------------------------
TOTAL INCOME 65,831
----------------------------------------------------------------------------
EXPENSES:
Management fees 34,840
Distribution fees 3,447
Authorized dealer service fees 3,404
Transfer agent fees 2,524
Custodian fees 9,468
Professional fees 32,973
Registration fees 57,535
Printing fees 15,000
Amortization of deferred organization expenses 1,315
Trustee fees 158
Other 923
----------------------------------------------------------------------------
TOTAL EXPENSES 161,587
----------------------------------------------------------------------------
Less -- expenses reimbursed and fees waived by Goldman Sachs (115,628)
----------------------------------------------------------------------------
NET EXPENSES 45,959
----------------------------------------------------------------------------
NET INVESTMENT INCOME 19,872
----------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized loss from:
Investment transactions (8,792)
Foreign currency related transactions (13,662)
Net change in unrealized loss on:
Investments (289,186)
Translation of assets and liabilities denominated in foreign
currencies (574,377)
----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT AND FOREIGN
CURRENCY TRANSACTIONS (886,017)
----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(866,145)
----------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on December 15, 1997.
(b) Taxes withheld on dividends were $374.
10 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
JANUARY 31, 1998(A)
<S> <C>
FROM OPERATIONS:
Net investment income $ 19,872
Net realized loss on investment transactions (8,792)
Net realized loss on currency related transactions (13,662)
Net change in unrealized loss on investments (289,186)
Net change in unrealized loss on translation of assets
and liabilities denominated in foreign currencies (574,377)
-----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (866,145)
-----------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 37,824,117
Cost of shares repurchased (18,934)
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM SHARE
TRANSACTIONS 37,805,183
-----------------------------------------------------------------------------
TOTAL INCREASE 36,939,038
-----------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
-----------------------------------------------------------------------------
End of period $36,939,038
-----------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $ 19,872
-----------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on December 15, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 11
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Notes to Financial Statements (continued)
January 31, 1998
1. ORGANIZATION
Goldman Sachs Trust (the "Trust"), a Delaware business trust, includes the
Goldman Sachs Emerging Markets Equity Fund (the "Fund"). The Trust is regis-
tered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. At January 31, 1998, the Fund offered five
classes of shares--Class A, Class B, Class C, Institutional and Service.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consist-
ently followed by the Fund. The preparation of financial statements in con-
formity 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 for-
eign 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 on
the valuation date. If there are no sales on the valuation day, securities
are valued at the last sale price on valuation date, or if no sale occurs at
the mean between the closing bid and asked price, or if closing bid and asked
price are not available at the exchange defined close price. If the relevant
exchange or system has not closed by the above-mentioned time for determining
the Fund's NAV, the securities will be valued at the last sale price on valu-
ation date or, if no sale occurs at the mean between the bid and asked prices
at the time the NAV is determined. 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 valua-
tions 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.
Investing in emerging markets may involve special risks and considerations
not typically associated with investing in the United States. These risks in-
clude revaluation of currencies, high rates of inflation, repatriation re-
strictions on income and capital, and future adverse political and economic
developments. Moreover, securities issued in these markets may be less liq-
uid, subject to government ownership controls, delayed settlements, and their
prices more volatile than those of comparable securities in the United
States.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions
are recorded on the trade date. Realized gains and losses on sales of invest-
ments are calculated on the identified-cost basis. Dividend income is re-
corded on the ex-dividend date. Dividends for which the Fund has the choice
to receive either cash or stock are recognized as investment income in an
amount equal to the cash dividend. Interest income is determined on the basis
of interest accrued, premium amortized and discount earned.
12
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
C. FOREIGN CURRENCY TRANSLATIONS -- The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in foreign currencies are
translated into U.S. dollars on the following basis: (i) investment valua-
tions, 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 hold-
ings of foreign currencies and investments; (ii) gains and losses between
trade date and settlement date on investment securities transactions and for-
ward exchange contracts; and (iii) gains and losses from the difference be-
tween amounts of dividends and interest recorded and the amounts actually
received.
D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Fund is 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. All
commitments are "marked-to-market" daily at the applicable translation rates
and any resulting unrealized gains or losses are recorded in the Fund's fi-
nancial statements. The Fund records realized gains or losses at the time the
forward contract is offset by entry into a closing transaction or extin-
guished by delivery of the currency. Risks may arise upon entering these con-
tracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
E. SHORT SECURITIES POSITIONS -- The Fund 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 the cash received is re-
ported as unrealized gain or loss. Gains and losses are realized when a short
position is closed out by delivering securities back to the broker.
F. FEDERAL TAXES -- It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute each year substantially all of its investment company taxable
income and capital gains to its shareholders. Accordingly, no federal tax
provision is required. The characterization of distributions to shareholders
for financial reporting purposes is determined in accordance with income tax
rules. Therefore, the source of the Fund's distributions may be shown in the
accompanying financial statements as either from or in excess of net invest-
ment 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 tim-
ing differences associated with having different book and tax year ends.
G. DEFERRED ORGANIZATION EXPENSES -- Organization-related costs are amortized
on a straight-line basis over a period of five years.
13
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Notes to Financial Statements (continued)
January 31, 1998
H. EXPENSES -- Expenses incurred by the Trust which do not specifically re-
late to an individual fund of the Trust are allocated to the funds based on
each Fund's relative average net assets for the period.
Class A, Class B and Class C shares bear all expenses and fees relating to
the distribution and authorized dealer service plans as well as other ex-
penses which are directly attributable to such shares. Each class of Shares
separately bears their respective class-specific transfer agency fees. Serv-
ice shares separately bear a service class fee payable monthly, at an annual
rate equal to .50% of the average daily net assets of the service class.
I. OPTION ACCOUNTING PRINCIPLES -- When the Fund writes 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 Fund enters
into a closing purchase transaction, the Fund realizes a gain or loss without
regard to any unrealized gain or loss on the underlying security, and the li-
ability related to such option is extinguished. When a written call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security, and the proceeds of the sale are increased by the premium origi-
nally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the
Fund purchases upon exercise. There is a risk of loss from a change in value
of such options which may exceed the related premiums received.
Upon the purchase of a call option or a protective put option by the Fund,
the premium paid is recorded as an investment and subsequently marked-to-mar-
ket to reflect the current market value of the option. If an option which the
Fund has purchased expires on the stipulated expiration date, the Fund will
realize a loss in the amount of the cost of the option. If the Fund enters
into a closing sale transaction, the Fund will realize a gain or loss, de-
pending on whether the sale proceeds for the closing sale transaction are
greater or less than the cost of the option. If the Fund exercises a pur-
chased put option, the Fund will realize a gain or loss from the sale of the
underlying security, and the proceeds from such sale will be decreased by the
premium originally paid. If the Fund exercises a purchased call option, the
cost of the security which the Fund purchases upon exercise will be increased
by the premium originally paid.
J. FUTURES CONTRACTS -- The Fund may enter into futures transactions to hedge
against changes in interest rates, securities prices or to seek to increase
total return.
Upon entering into a futures contract, the Fund is required to deposit with
a broker an amount of cash or securities equal to the minimum "initial mar-
gin" requirement of the respective futures exchange. Subsequent payments for
futures contracts ("variation margin") are paid or received by the Fund dai-
ly, dependent on the daily fluctuations in the value of the contracts, and
are recorded for financial reporting purposes as unrealized gains or losses.
When contracts are closed, the Fund realizes a gain or loss which is reported
in the Statement of Operations.
14
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
The use of futures contracts involve, to varying degrees, elements of mar-
ket and counterparty risk which may exceed the amounts recognized in the
Statement of Assets and Liabilities. Changes in the value of the futures con-
tract may not directly correlate with changes in the value of the underlying
securities. This risk may decrease the effectiveness of the Fund's hedging
strategies and potentially result in a loss.
3. AGREEMENTS
Goldman Sachs Asset Management International ("GSAM International"), an af-
filiate of Goldman, Sachs & Co. ("Goldman Sachs"), acts as investment adviser
pursuant to an Investment Management Agreement (the "Agreement"). Under the
Agreement, GSAM International, subject to the general supervision of the
Trust's Board of Trustees, manages the Fund's portfolio. As compensation for
the services rendered under the Agreement, the assumption of the expenses re-
lated thereto and administering the Fund's business affairs, including pro-
viding facilities, GSAM International is entitled to a fee, computed daily
and payable monthly, at an annual rate equal to 1.20% of the average daily
net assets of the Fund. For the period ended January 31, 1998, GSAM Interna-
tional has voluntarily agreed to waive approximately $3,000 of its Management
Fee. GSAM International may discontinue or modify this waiver in the future
at its discretion.
Goldman Sachs has voluntarily agreed to reduce or limit certain "Other Ex-
penses" for the Fund (excluding management, service, distribution and autho-
rized dealer service fees and litigation and indemnification costs, taxes,
interest, brokerage commissions, transfer agent fees and extraordinary ex-
penses) until further notice to the extent such expenses exceed .16% of the
average daily net assets of the Fund. For the period ended January 31, 1998,
Goldman Sachs has reimbursed approximately $113,000. At January 31, 1998, ap-
proximately $72,000 is owed to the Fund.
Goldman Sachs serves as the Distributor of shares of the Fund pursuant to
Distribution Agreements. Goldman Sachs may receive a portion of the Class A
sales load and Class B and Class C contingent deferred sales charge and has
advised the Trust that it has retained approximately $107,000 during the pe-
riod ended January 31, 1998.
The Trust has adopted Distribution Plans (the "Distribution Plans") pursu-
ant to Rule 12b-1. Under the Distribution Plans, Goldman Sachs is entitled to
a quarterly fee from the Fund for distribution services equal, on an annual
basis, to .25%, .75% and .75% of the Fund's average daily net assets attrib-
utable to Class A, Class B and Class C shares, respectively.
The Fund has adopted Authorized Dealer Service Plans (the "Service Plans")
pursuant to which Goldman Sachs and Authorized Dealers are compensated for
providing personal and account maintenance services. The Fund pays a fee un-
der its Service Plan equal, on an annual basis, to .25% of its average daily
net assets attributable to Class A, Class B and Class C shares. Goldman Sachs
also serves as the Transfer Agent of the Fund for a fee.
At January 31, 1998, the Fund owed approximately $32,000, $3,000, $3,000
and $2,500 for Management, Distribution, Authorized Dealer Service and Trans-
fer Agent fees, respectively.
15
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Notes to Financial Statements (continued)
January 31, 1998
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of securities (excluding short-
term investments and futures) for the period ended January 31, 1998, were
$31,005,666 and $688,626, respectively.
For the period ended January 31, 1998, Goldman Sachs earned approximately
$6,000 of brokerage commissions from portfolio transactions.
5. LINE OF CREDIT FACILITY
The Fund participates in a $250,000,000 uncommitted, unsecured revolving line
of credit facility. In addition, the Fund participates in a $50,000,000 com-
mitted, unsecured revolving line of credit facility. Both facilities are to
be used solely for temporary or emergency purposes. Under the most restric-
tive arrangement, the Fund must own securities having a market value in ex-
cess 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 period ended January 31, 1998, the Fund did not
have any borrowings under these facilities.
16
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
6. SUMMARY OF SHARE TRANSACTIONS
Share activity for the period ended January 31, 1998 are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED JANUARY 31, 1998
-------------------------
SHARES DOLLARS
----------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES
Shares sold 1,824,207 $ 17,866,344
Reinvestment of dividends and distributions -- --
Shares repurchased -- --
-------------------------
1,824,207 17,866,344
----------------------------------------------------------------------------
CLASS B SHARES
Shares sold 6,579 64,645
Reinvestment of dividends and distributions -- --
Shares repurchased -- --
-------------------------
6,579 64,645
----------------------------------------------------------------------------
CLASS C SHARES
Shares sold 7,520 72,494
Reinvestment of dividends and distributions -- --
Shares repurchased -- --
-------------------------
7,520 72,494
----------------------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 1,973,802 19,819,033
Reinvestment of dividends and distributions -- --
Shares repurchased (1,952) (18,934)
-------------------------
1,971,850 19,800,099
----------------------------------------------------------------------------
SERVICE SHARES
Shares sold 160 1,601
Reinvestment of dividends and distributions -- --
Shares repurchased -- --
-------------------------
160 1,601
----------------------------------------------------------------------------
NET INCREASE 3,810,316 $ 37,805,183
----------------------------------------------------------------------------
</TABLE>
17
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout The Period
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS(E) DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------ -----------------------------------
NET REALIZED FROM NET
NET ASSET NET REALIZED AND UNREALIZED REALIZED GAIN IN EXCESS
VALUE, NET AND UNREALIZED LOSS ON FOREIGN FROM NET ON INVESTMENT OF NET NET DECREASE
BEGINNING INVESTMENT GAIN (LOSS) ON CURRENCY RELATED INVESTMENT AND OPTIONS INVESTMENT IN NET ASSET
OF PERIOD INCOME INVESTMENTS TRANSACTIONS INCOME TRANSACTIONS INCOME VALUE
FOR THE PERIOD ENDED JANUARY 31, 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 - Class A
Shares(b) $10.00 $ -- $(0.11) $(0.20) -- -- -- $(0.31)
1998 - Class B
Shares(b) 10.00 -- (0.11) (0.20) -- -- -- (0.31)
1998 - Class C
Shares(b) 10.00 -- (0.10) (0.20) -- -- -- (0.30)
1998 - Institu-
tional Shares(b) 10.00 0.01 (0.11) (0.20) -- -- -- (0.30)
1998 - Service
Shares(b) 10.00 -- (0.11) (0.20) -- -- -- (0.31)
------------------------------------------------------------------------------------------------------------------------
</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) Class A, Class B, Class C, Institutional and Service share activity
commenced on December 15, 1997.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
18 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
RATIOS ASSUMING NO VOLUNTARY WAIVER
OF FEES OR EXPENSE LIMITATIONS
RATIO OF -----------------------------------
NET ASSETS RATIO OF NET INVESTMENT RATIO OF
NET ASSET PORTFOLIO AVERAGE AT END OF NET EXPENSES INCOME (LOSS) EXPENSES TO RATIO OF NET
VALUE, END TOTAL TURNOVER COMMISSION PERIOD TO AVERAGE TO AVERAGE AVERAGE NET INVESTMENT LOSS TO
OF PERIOD RETURN(A) RATE RATE (IN 000S) NET ASSETS NET ASSETS ASSETS AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$9.69 (3.10)%(d) 3.35% $0.0005 $17,681 1.90%(c) 0.55%(c) 5.88%(c) (3.43)%(c)
9.69 (3.10)(d) 3.35 0.0005 64 2.41(c) 0.05(c) 6.39(c) (3.93)(c)
9.70 (3.00)(d) 3.35 0.0005 73 2.48(c) (0.27)(c) 6.46(c) (4.25)(c)
9.70 (3.00)(d) 3.35 0.0005 19,120 1.30(c) 0.80(c) 5.28(c) (3.18)(c)
9.69 (3.10)(d) 3.35 0.0005 2 2.72(c) (0.05)(c) 6.70(c) (4.03)(c)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Report of Independent Public Accountants
To the Shareholders and Board of Trustees of Goldman Sachs Trust--Emerging
Markets Equity Fund:
We have audited the accompanying statement of assets and liabilities of
Goldman Sachs Emerging Markets Equity Fund, one of the portfolios constitut-
ing Goldman Sachs Trust--Equity Funds (a Delaware Business Trust), including
the statement of investments, as of January 31, 1998, and the related state-
ment of operations and the statement of changes in net assets and the finan-
cial highlights for the periods presented. These financial statements and the
financial highlights are the responsibility of the fund's management. Our re-
sponsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that plan and perform the audit to obtain rea-
sonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the finan-
cial statements. Our procedures included confirmation of securities owned as
of January 31, 1998 by correspondence with the custodian and brokers. An au-
dit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights re-
ferred to above present fairly, in all material respects, the financial posi-
tion of Goldman Sachs Emerging Markets Equity Fund as of January 31, 1998,
the results of its operations and the changes in its net assets and the fi-
nancial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 12, 1998
20
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs Emerging Markets Equity Fund
THE GOLDMAN
SACHS ADVANTAGE
When you invest in the Goldman Sachs Emerging Markets Equity Fund, you can
capitalize on Goldman Sachs' history of excellence while benefiting from the
firm's leadership in three areas:
1
Global Resources
With more than 10,600 professionals based in 35 offices in 19 countries
throughout the Americas, Europe and Asia, Goldman Sachs possesses first-hand
knowledge of the world's markets and economies.
2
Fundamental Research
Goldman Sachs is recognized by the managements of corporations worldwide as a
leader in investment research. As a result, we obtain face-to-face meetings with
managers on a timely, regular basis.
3
Risk Management
Goldman, Sachs & Co. excels in understanding, monitoring and managing investment
risk -- a process that is integrated into all Goldman Sachs investment products.
An Investment Idea for the Long Term
History has shown that a long-term plan that includes stocks of emerging
market countries is more likely to provide greater returns and reduce
overall portfolio volatility over time than a portfolio that invests only
in U.S.-based stocks.
Goldman Sachs Emerging Markets Equity Fund offers investors access to the
benefits associated with emerging market investing. The Fund seeks
long-term capital appreciation, primarily through equity securities of
emerging country issuers.
Target Your Needs
The Goldman Sachs Emerging Markets Equity Fund has a distinct investment
objective and a defined place on the risk/return spectrum. As your
investment objectives change, you can exchange shares within Goldman Sachs
Funds without an additional charge. (Please note: in general, greater
returns are associated with greater risk.)
---------------------------------------------------------------------------
Goldman Sachs International Equity Funds
<TABLE>
<CAPTION>
[Fund Risk/Return]
<S> <C>
Higher Asian Growth Fund
Risk/Return
EMERGING MARKETS EQUITY FUND
International Equity Fund
Lower
Risk/Return CORE International Equity Fund
</TABLE>
For More Information
To learn more about the Goldman Sachs Emerging Markets Equity Fund and
other Goldman Sachs Funds, call your investment professional today.
<PAGE>
================================================================================
GOLDMAN SACHS ASSET MANAGEMENT
ONE NEW YORK PLAZA, 42ND FLOOR, NEW YORK, NEW YORK 10004
================================================================================
TRUSTEES
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
John P. McNulty
Mary P. McPherson
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard B. Strubel
OFFICERS
Douglas C. Grip, President
James A. Fitzpatrick, Vice President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
Investment Adviser
GOLDMAN SACHS INTERNATIONAL
Peterborough Court, 133 Fleet Street
London EC4A 2BB, England
This material is not authorized for distribution to prospective investors unless
preceded or accompanied by a current Prospectus. Investors should read the
Prospectus carefully before investing or sending money.
Goldman, Sachs & Co., distributor of the Fund, is not a bank, and Fund shares
distributed by it are neither bank deposits nor obligations of, nor endorsed,
nor guaranteed by any bank or other insured depository institution, nor are they
insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve
Board, or any other government agency. Investment in the Fund involves risks,
including possible loss of the principal amount invested.
The Fund's foreign investments and active management techniques are subject to
risks in addition to those customarily associated with investing in
dollar-denominated securities of U.S. issuers. In particular, the securities
markets of emerging countries in which the Fund may invest without limit are
less liquid, subject to greater price volatility, have smaller market
capitalizations, have problems with share registration and custody, have less
government regulation and are not subject to as extensive and frequent
accounting, financial and other reporting requirements as the securities markets
of more developed countries.
(C)Copyright 1998 Goldman, Sachs & Co. All rights reserved.
Date of first use: March 31, 1998 EMEAR / 30K / 3-98
