<PAGE>
Goldman Sachs Funds
GROWTH AND INCOME FUND Semi-Annual Report July 31, 1998
Long-term capital growth and growth
[GRAPHIC] of income potential from a diversified
portfolio of equity securities.
Goldman
Sachs
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Fund Basics
as of July 31, 1998
Assets Under Management
$2.0 Billion
Number of Holdings
45
NASDAQ SYMBOLS
Class A Shares
GSGRX
Class B Shares
GSGBX
Class C Shares
GSGCX
Institutional Shares
GSIIX
Service Shares
GSGSX
Mutual funds, annuities, and other investment products:
. are not FDIC insured;
. are not deposits or obligations of, or guaranteed by, any financial
institution;
. are subject to investment risks, including possible loss of the principal
amount invested.
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
January 31, 1998 -- Fund Total Return
July 31, 1998 (based on NAV)/1/ S&P 500 Index/2/
- --------------------------------------------------------------------------------
Class A -1.26% 15.18%
Class B -1.59% 15.18%
Class C -1.63% 15.18%
Institutional -1.07% 15.18%
Service -1.26% 15.18%
- --------------------------------------------------------------------------------
/1/ The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares. The Fund's performance assumes the
investment of dividends and other distributions.
/2/ The S&P 500 Index (with dividends reinvested) figures do not reflect any
fees or expenses. In addition, investors cannot invest directly in the
Index.
- --------------------------------------------------------------------------------
SEC TOTAL RETURN
- --------------------------------------------------------------------------------
For the period
ended 7/31/98 Class A Class B Class C Institutional Service
- --------------------------------------------------------------------------------
Last 6 Months/3/ -6.69% -6.51% -2.62% -1.07% -1.26%
One Year/4/ -6.80% -6.92% N/A -0.93% -1.41%
Five Years/4/ 17.45% N/A N/A N/A 18.75%
Since Inception 16.48%/4/ 17.63%/4/ -2.12%/3/ 20.05%4 17.66%/4,/5/
(2/5/93) (5/1/96) (8/15/97) (6/3/96) (2/5/93)
- --------------------------------------------------------------------------------
/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 the 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 7/31/98 was
$27.02 and represents the NAV plus the maximum sales charge of 5.5%.
/4/ The SEC Average Annual Total Return is determined by computing the annual
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 sales charges.
/5/ Performance data for Service shares prior to 3/6/96 is that of Class A
shares (excluding the impact of front-end sales charges applicable to Class
A shares since Service shares are not subject to any sales charges).
Performance of Class A shares of the Growth and Income Fund reflects the
expenses applicable to the Fund's Class A shares. The fees applicable to
Services shares are different from those applicable to Class A shares which
impact performance ratings and rankings for a class of shares.
- --------------------------------------------------------------------------------
TOP 10 COMPANY HOLDINGS AS OF 7/31/98
- --------------------------------------------------------------------------------
Company Holding % of Total Net Assets Line of Business
- --------------------------------------------------------------------------------
Aetna, Inc. 3.93% Healthcare Management
Lockheed Martin Corp. 3.58% Defense
Loews Corp. 3.50% Insurance
Raytheon Co. 3.48% Defense
NationsBank Corp. 3.36% Banking
Cigna Corp. 3.34% Insurance
Fruit Of The Loom, Inc. 3.25% Clothing Manufacturer
Quantum Corp. 3.10% Tape And Disk Drive Products
Union Carbide Corp. 2.89% Chemicals And Plastics
Avnet, Inc. 2.73% Semiconductors
- --------------------------------------------------------------------------------
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 GROWTH AND INCOME FUND
Market Overview
Dear Shareholder,
During the period under review, the bull market that began in 1995 continued its
unprecedented run into positive territory. On July 17, the U.S. stock market, as
measured by the Dow Jones Industrial Average, reached a record level of 9337.97.
Simultaneously, investors found themselves subjected to increasing levels of
market volatility.
. The U.S. Equity Market: Amidst Increasing Volatility, Market Continues Its
Climb -- The U.S. stock market generated strong performance, rising into
record territory during the final month of the period under review.
Throughout, the mantle of market leadership was held by mega-cap stocks, the
largest and most liquid stocks in the Standard & Poor's 500 Index. Several
factors -- including ongoing Asian market turbulence, benign inflation and
concern about the sustainability of the current bull market -- made mega-caps
the investment of choice among U.S. investors.
. The U.S. Economy: A Growth Surge, Followed by a Slowdown -- Early in the
period, a strong economy fueled speculation that the Federal Reserve Board
would choose to increase rates in a preemptive strike against inflation. The
move never came, though, as the release of economic indicators suggesting a
slight slowdown in growth combined with fears that a rate increase could
intensify a worsening situation in Asia. By period end, a need for a Fed
increase was ruled out again as continued Asian market turbulence and a
striking General Motors workforce combined to further curb the U.S. economy's
pace of economic growth.
. Market Outlook: Uncertainty Brings Opportunity -- We believe the recent sharp
declines in the stock market have created opportunities to buy both excellent
companies at discounted valuations and companies experiencing temporary
uncertainties at deeply depressed prices. Longer term, in our opinion, the
outlook for the economy and the stock market is favorable. We believe that the
economy will continue to expand, albeit at a moderate rate, and that inflation
will remain benign, allowing interest rates to hold steady.
We encourage you to maintain your long-term investment program, and look
forward to serving your investment needs in the years ahead.
/s/ David B. Ford /s/ John P. McNulty
David B. Ford John P. McNulty
Co-Head, Goldman Sachs Co-Head, Goldman Sachs
Asset Management Asset Management
August 31, 1998
1
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Performance Overview
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Growth and
Income Fund for the six-month period ended July 31, 1998.
Performance Review
During the six-month period covered by this report, all of the Fund's share
classes underperformed the 15.18% return of the Fund's benchmark, the S&P 500
Index. The primary reasons for the Fund's underperformance versus its
benchmark were our mid-cap bias and value discipline in an environment where
mega-cap, growth companies have led the performance of the S&P 500.
We have consistently applied our strategy over the last five years, performing
rigorous, firsthand research into low-expectation stocks. We aim to exploit
market anomalies by investigating overdiscounted company-specific or industry
issues, understanding the fundamentals of cyclical or otherwise complex
businesses, and building positions in the portfolio when companies are
inexpensive relative to long-term earnings power. When, over the course of a
multiyear investment horizon, short-term issues are resolved, cycles turn, or
corporate actions become evident and acknowledged by the broader Wall Street
community, we believe that our value investments will generate solid returns
for our shareholders.
Portfolio Allocation
As bottom-up stock-pickers, the Fund's management team focuses on individual
companies first, but sometimes finds a concentration of value within
particular industries or sectors. With this in mind, the Fund is currently
overweight in the tobacco industry. Over the longer term, the team believes
that these companies are committed to rewarding shareholders and exhibit
substantially better fundamental value than their stock prices currently
indicate. The Fund remains underweight in pharmaceuticals and media and
communications stocks, as management believes the strong fundamentals of most
companies in these industries are already reflected in stock prices.
Portfolio Highlights
In the current market environment, the management team has found opportunities
to invest in companies that sell at a substantial discount to the market and
to their respective industries. This valuation dichotomy may be a result of
limited near-term earnings visibility, cyclically out-of-favor status, or
companies that are poorly followed or misunderstood. The team believes that by
performing rigorous, proprietary fundamental research into these low-
expectation stocks, it is building a portfolio that offers long-term value.
. Unicom Corp. and Northeast Utilities -- These two utility holdings appreciated
significantly over the period. The company's stock had previously suffered
from company-specific problems that, in our view, were overdiscounted in the
marketplace. Given that the resolutions to these problems are within sight,
the market has rewarded the companies with substantially higher valuations.
2
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
VALUE
INVESTMENT
PROCESS
Value stocks represent companies that are currently undervalued in the market,
but whose intrinsic value we believe ultimately will be recognized. Our value
stock selection process emphasizes a bottom-up approach.
1 Search for Value
We search for value from a universe of 1,000 stocks, and then select 200 to
300 of the least expensive.
2 Fundamental Research
We refine our stock list through rigorous analysis of companies'
"fundamentals" and face-to-face meetings with company management, competitors,
suppliers and customers.
3 Risk Management
We maintain ongoing risk management resulting in an intentional and
quantifiable risk/return profile.
. Chase Manhattan Corp. -- Chase has been a top performer throughout the period.
The stock's strong performance has been driven not only by industry-wide
appreciation, but also by Chase's announcements of a new capital allocation
structure and cost-management program.
. Union Carbide Corp. -- Union Carbide, a commodity chemical company, recovered
from early-June lows over rumors that it was an acquisition target.
Furthermore, as we approach tough profit margins, the outlook for the company
seems less bleak than previously expected. (This commodity chemical company
illustrates well our goals as value investors. We seek companies that, due to
near-term uncertainty or cyclically out-of-favor status, trade at what we
believe is a substantial discount to their long-term earnings potential.)
Key New Acquisitions
. Crown Cork and Seal Inc. (CCK) -- CCK manufactures packaging products for
consumer goods. The company's diverse product line includes metal cans,
plastic containers and a variety of caps, closures and pumps. A recent
acquisition has improved the company's cost savings and overseas presence. At
the time of purchase, CCK's stock was trading at its lowest valuation in 10
years. We believe that CCK is poised for solid earnings over the next few
years and, as a result, will generate high cash flow, pay down debt or
repurchase shares, and reduce capital expenditures.
. General Motors Corp. -- General Motors has historically traded at a lower
multiple than its peer group due to continuing labor issues, manufacturing
inefficiencies and a multi-industry focus. We believe that GM's recently
initiated restructuring plan should unlock the value of its separate
divisions.
Portfolio Outlook
Although the Fund's short-term performance has trailed the market, we believe
that our rigorous research has the potential to produce strong long-term
appreciation. Most importantly, when the current excesses are wrung from the
system, we believe that our discipline has the potential to dampen volatility
and preserve capital.
We thank you for your investment and look forward to your continued
confidence.
Goldman Sachs U.S. Value Investment Team
August 31, 1998
3
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
An Action Plan for Volatile Markets
When fear and uncertainty temporarily take hold of global markets, you can gain
a greater sense of control over your own investment portfolio by making sound
decisions. Whether you are a seasoned investor or a market neophyte, the
following thoughts are intended to help you maintain some perspective during
these volatile market times.
Remember the factors
you considered when you first
began investing: your long-term
objectives, time horizon, risk
tolerance and financial needs.
Stay on Course
Don't let market directions dictate your investment decisions -- avoid the
common mistake of basing decisions on emotions or uncertainty. Remember the
factors you considered when you first began investing: your long-term
objectives, time horizon, risk tolerance and financial needs.
Stay Diversified
Global diversification is one of the best defenses against uncertain markets.
Because the world's countries have varying economies, growth rates and stages of
development, they tend to offer strong performance at different times.
Diversifying among equity markets enables you to capture a wide range of
opportunities and seek maximum risk-adjusted returns.
Stay Invested
Investors often redeem at market lows because of concern or lack of
information -- and negatively impact their longer-term returns. With stock
investing, the longer your holding period, the greater the likelihood of
positive returns.
Consult Your Financial Advisor
Market declines provide a good opportunity to touch base with your advisor, gain
confirmation that you are properly diversified and assess whether any recent
life events necessitate a change in asset allocation policy.
For More Information
Goldman Sachs Asset Management offers a broad spectrum of equity mutual funds
that can help you weather market ups and downs. For more information on Goldman
Sachs Funds, contact your investment professional.
4
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Performance Summary
July 31, 1998 (Unaudited)
The following graph shows the value as of July 31, 1998, of a $10,000 invest-
ment made (with the maximum sales charge of 5.5%) in Class A shares on Febru-
ary 5, 1993 (commencement of operations). For comparative purposes, the
performance of the Fund's benchmark (the Standard and Poor's 500 Index ("S&P
500 Index")) is shown. This performance data represents past performance and
should not be considered indicative of future performance which will fluctu-
ate with changes in market conditions. These performance fluctuations will
cause an investor's shares, when redeemed, to be worth more or less than
their original cost. Performance of Class B, Class C, Institutional and Serv-
ice shares will vary from Class A due to differences in fees and loads.
GROWTH AND INCOME FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, DISTRIBUTIONS REINVESTED FEBRUARY 5, 1993 TO
JULY 31, 1998
LOGO
GS-Growth and Income Class A
Inception Date 02/05/93
S&P 500 Fund
-------------
5-Feb 10,000 9,450
FEB 9,943 9,507
MAR 10,153 9,773
APR 9,907 9,513
MAY 10,172 9,727
JUNE 10,202 9,637
JULY 10,161 9,764
AUG 10,547 10,045
SEPT 10,466 9,942
OCT 10,682 9,962
NOV 10,580 9,908
DEC 10,708 10,185
JAN/94 11,073 10,686
FEB 10,772 10,842
MAR 10,302 10,674
APR 10,434 10,722
MAY 10,606 10,960
JUNE 10,346 10,739
JULY 10,685 10,950
AUG 11,123 11,570
SEPT 10,852 11,383
OCT 11,096 11,055
NOV 10,692 10,645
DEC 10,850 10,787
JAN/95 11,131 11,110
FEB 11,565 11,764
MAR 11,908 12,124
APR 12,258 12,385
MAY 12,748 12,752
JUNE 13,044 13,023
JULY 13,477 13,434
AUG 13,511 13,661
SEPT 14,081 13,930
OCT 14,030 13,646
NOV 14,646 14,115
DEC 14,929 14,399
JAN/96 15,436 14,716
FEB 15,580 15,026
MAR 15,729 15,132
APR 15,961 15,398
MAY 16,372 15,709
JUNE 16,435 15,457
JULY 15,708 15,004
AUG 16,040 15,405
SEP 16,943 16,140
OCT 17,410 16,549
NOV 18,727 17,860
DEC 18,356 18,152
JAN/97 19,503 18,911
FEB 19,655 19,286
MAR 18,848 18,714
APR 19,971 19,556
MAY 21,187 20,937
JUNE 22,137 21,555
JULY 23,899 23,420
AUG 22,560 23,208
SEP 23,796 24,044
OCT 23,002 23,061
NOV 24,067 23,143
DEC 24,481 23,214
JAN '98 24,752 23,395
FEB 26,537 25,388
MAR 27,896 25,901
APR 28,177 26,037
MAY 27,693 25,359
JUNE 28,817 24,675
JULY 28,509 23,101
<TABLE>
<CAPTION>
SINCE INCEPTION
OF CLASS FIVE YEARS ONE YEAR SIX MONTHS
AVERAGE ANNUAL TOTAL RETURN THROUGH JULY 31, 1998
<S> <C> <C> <C> <C>
CLASS A (COMMENCED FEBRUARY 5, 1993)
Excluding sales charges 17.69% 18.78% -1.36% -1.26%
Including sales charges 16.48% 17.45% -6.80% -6.69%
-----------------------------------------------------------------------------
CLASS B (COMMENCED MAY 1, 1996)
Excluding redemption charges 18.94% n/a -2.02% -1.59%
Including redemption charges 17.63% n/a -6.92% -6.51%
-----------------------------------------------------------------------------
CLASS C (COMMENCED AUGUST 15, 1997)(A)
Excluding redemption charges -1.13% n/a n/a -1.63%
Including redemption charges -2.12% n/a n/a -2.62%
-----------------------------------------------------------------------------
INSTITUTIONAL CLASS (COM-
MENCED JUNE 3, 1996) 20.05% n/a -0.93% -1.07%
-----------------------------------------------------------------------------
SERVICE CLASS (COMMENCED
MARCH 6, 1996) 18.76% n/a -1.41% -1.26%
-----------------------------------------------------------------------------
</TABLE>
(a) Since inception represents the cumulative total return since the class
has not been in operation for a full 12 months.
5
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Investments
July 31, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - 88.3%
<C> <S> <C>
AEROSPACE/DEFENSE - 7.1%
731,900 Lockheed Martin Corp. $ 72,961,281
1,309,500 Raytheon Co.* 70,958,531
--------------
143,919,812
------------------------------------------------------------
AIRFREIGHT, TRUCK & OTHER - 2.5%
1,184,300 CNF Transportation, Inc. 51,220,975
------------------------------------------------------------
AIRLINES - 0.6%
234,700 Continental Airlines, Inc.* 12,556,450
------------------------------------------------------------
AUTO SUPPLIERS - 2.2%
856,200 Lear Corp.* 45,432,113
------------------------------------------------------------
AUTO/VEHICLE - 2.0%
557,600 General Motors Corp. 40,321,450
------------------------------------------------------------
BANKS - 9.9%
396,800 Banc One Corp. 20,509,600
718,000 Chase Manhattan Corp. 54,298,750
349,800 First Union Corp. 21,075,450
859,800 NationsBank Corp. 68,569,050
534,600 Pacific Century Financial Corp. 10,491,525
473,200 Republic of New York Corp. 28,066,675
--------------
203,011,050
------------------------------------------------------------
CHEMICAL PRODUCTS - 4.6%
1,383,800 IMC Global, Inc. 35,373,388
1,227,500 Union Carbide Corp. 58,920,000
--------------
94,293,388
------------------------------------------------------------
CONSTRUCTION/ENVIRONMENTAL SERVICES - 2.1%
1,028,200 Fluor Corp. 43,248,663
------------------------------------------------------------
DEPARTMENT STORES - 2.0%
803,800 Sears Roebuck & Co. 40,792,850
------------------------------------------------------------
ENERGY REFINING & MARKETING - 2.4%
1,718,900 Tosco Corp. 48,129,200
------------------------------------------------------------
FOREST PRODUCTS - 4.7%
798,800 Georgia Pacific Corp. 41,038,350
999,200 Georgia Pacific Corp.
(Timber Group) 22,419,550
2,429,400 Stone Container Corp.* 31,734,038
--------------
95,191,938
------------------------------------------------------------
HEALTHCARE MANAGEMENT - 8.0%
1,157,600 Aetna, Inc. 80,236,150
1,492,600 Foundation Health Systems, Inc.* 30,784,875
1,716,300 Tenet Healthcare Corp.* 51,381,731
--------------
162,402,756
------------------------------------------------------------
HOTELS & RESTAURANTS - 1.9%
794,300 Hilton Hotels Corp. 20,006,431
515,000 Tricon Global Restaurants, Inc.* 18,218,125
--------------
38,224,556
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - (CONTINUED)
<C> <S> <C>
INSURANCE BROKERS & OTHER INSURANCE -
3.5%
886,300 Loews Corp. $ 71,457,938
---------------------------------------------------------
INSURANCE-LIFE - 3.3%
1,030,800 Cigna Corp. 68,097,225
---------------------------------------------------------
INTEGRATED OIL - 3.7%
473,100 Elf Aquitane ADR 30,692,363
723,500 Texaco, Inc. 43,997,844
--------------
74,690,207
---------------------------------------------------------
LOGISTICS/RAIL - 2.0%
1,693,000 Canadian Pacific, Ltd. 40,420,375
---------------------------------------------------------
PACKAGING - 1.0%
477,200 Crown Cork & Seal, Inc. 19,624,850
---------------------------------------------------------
PC AND PERIPHERALS - 4.0%
3,619,100 Quantum Corp.* 63,334,250
834,500 Seagate Technology, Inc.* 18,984,875
--------------
82,319,125
---------------------------------------------------------
REAL ESTATE - 0.4%
411,400 LNR Property Corp. 9,179,363
---------------------------------------------------------
SEMICONDUCTORS - 3.4%
1,014,100 Avnet, Inc. 55,648,738
1,086,855 Vishay Intertechnology, Inc.* 14,264,972
--------------
69,913,710
---------------------------------------------------------
STEEL - 0.5%
661,600 ISPAT International NV* 10,006,700
---------------------------------------------------------
TEXTILES - 3.2%
2,124,300 Fruit of The Loom, Inc.* 66,251,606
---------------------------------------------------------
TIRE & OTHER RELATED RUBBER PRODUCTS -
2.0%
655,400 Goodyear Tire & Rubber Co. 39,938,438
---------------------------------------------------------
TOBACCO - 6.0%
1,188,100 Philip Morris Companies, Inc. 52,053,631
1,971,400 RJR Nabisco Holdings, Inc. 48,176,088
807,400 UST, Inc. 21,799,800
--------------
122,029,519
---------------------------------------------------------
UTILITIES - 5.3%
1,024,000 Entergy Corp. 28,032,000
1,901,900 Northeast Utilities* 29,003,975
1,486,500 Unicom Corp. 51,377,152
--------------
108,413,127
---------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,819,159,226) $1,801,087,384
---------------------------------------------------------
</TABLE>
6
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT RATE MATURITY DATE VALUE
REPURCHASE AGREEMENT - 10.7%
<C> <S> <C> <C>
Joint Repurchase Agreement Account
$218,700,000 5.69% 08/03/98 $ 218,700,000
-----------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $218,700,000) $ 218,700,000
-----------------------------------------------------
TOTAL INVESTMENTS
(COST $2,037,859,226)(A) $2,019,787,384
-----------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
FEDERAL INCOME
TAX INFORMATION:
Gross unrealized
gain for
investments in
which
value exceeds
cost $ 139,623,372
Gross unrealized
loss for
investments in
which
cost exceeds
value (158,719,628)
---------------------------------
Net unrealized
loss $ (19,096,256)
---------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $2,038,883,640.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
7
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Assets and Liabilities
July 31, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
ASSETS:
<TABLE>
<S> <C> <C>
Investment in securities, at value (identified cost
$2,037,859,226) $2,019,787,384
Cash 51,751
Receivables:
Investment securities sold 50,528,187
Fund shares sold 13,129,761
Dividends and interest 1,339,761
Other assets 79,128
---------------------------------------------------------------------------
TOTAL ASSETS 2,084,915,972
---------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 31,806,432
Fund shares repurchased 7,750,747
Amounts owed to affiliates 4,493,391
Accrued expenses and other liabilities 171,801
---------------------------------------------------------------------------
TOTAL LIABILITIES 44,222,371
---------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 1,909,601,006
Accumulated distributions in excess of net investment
income (376,702)
Accumulated undistributed net realized gain on
investment, option and futures transactions 149,541,139
Net unrealized loss on investments (18,071,842)
---------------------------------------------------------------------------
NET ASSETS $2,040,693,601
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Total shares of beneficial interest
outstanding, $.001 par value (unlimited
shares authorized) 53,147,731 16,448,379 2,495,856
Net asset and Class A redemption value
per share(a) $25.53 $25.32 $25.27
-----------------------------------------------------------------------------
<CAPTION>
INSTITUTIONAL SERVICE
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Total shares of beneficial interest outstanding,
$.001 par value (unlimited shares authorized) 7,518,494 483,317
Net asset value, offering and redemption price per
share $25.55 $25.53
-----------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share (NAV X 1.0582) for Class A shares
is $27.02. 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.
8
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Operations
For the Six Months Ended July 31, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends(a) $ 14,756,464
Interest 3,797,985
-----------------------------------------------------------------------------
TOTAL INCOME 18,554,449
-----------------------------------------------------------------------------
EXPENSES:
Management fees 7,017,056
Distribution fees 3,498,544
Authorized dealer service fees 2,341,062
Transfer agent fees 1,193,749
Registration fees 174,493
Custodian fees 160,347
Professional fees 30,705
Trustee fees 4,241
Amortization of deferred organization expenses 209
Other 175,260
-----------------------------------------------------------------------------
TOTAL EXPENSES 14,595,666
-----------------------------------------------------------------------------
Less -- fees waived by Goldman Sachs (1,127,884)
-----------------------------------------------------------------------------
NET EXPENSES 13,467,782
-----------------------------------------------------------------------------
NET INVESTMENT INCOME 5,086,667
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSAC-
TIONS:
Net realized gain from:
Investment transactions 89,244,504
Net change in unrealized gain on:
Investments (162,876,752)
-----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS: (73,632,248)
-----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (68,545,581)
-----------------------------------------------------------------------------
</TABLE>
(a) Taxes withheld on dividends were $35,363.
9
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Changes in Net Assets
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JULY 31, 1998
(UNAUDITED)
<S> <C>
FROM OPERATIONS:
Net investment income $ 5,086,667
Net realized gain on investment 89,244,504
Net change in unrealized gain on investments (162,876,752)
-------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS (68,545,581)
-------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A shares (4,157,463)
Class C shares (22,272)
Institutional shares (641,067)
Service shares (28,536)
-------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (4,849,338)
-------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 766,339,859
Reinvestment of dividends and distributions 4,080,924
Cost of shares repurchased (257,533,394)
-------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM SHARE
TRANSACTIONS 512,887,389
-------------------------------------------------------------------------
TOTAL INCREASE 439,492,470
-------------------------------------------------------------------------
NET ASSETS:
Beginning of year 1,601,201,131
-------------------------------------------------------------------------
End of period $2,040,693,601
-------------------------------------------------------------------------
ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INVESTMENT
INCOME $ (376,702)
-------------------------------------------------------------------------
</TABLE>
10
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Changes in Net Assets
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
JANUARY 31,
1998
<S> <C>
FROM OPERATIONS:
Net investment income $ 3,523,119
Net realized gain on investment and futures transactions 172,955,906
Net change in unrealized gain on investments 19,463,359
------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 195,942,384
------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A shares (3,826,646)
Institutional shares (92,867)
Service shares (20,774)
In excess of net investment income
Class B shares (72,045)
Class C shares (7,576)
From net realized gain on investment and futures
transactions
Class A shares (101,878,845)
Class B shares (22,880,349)
Class C shares (1,205,452)
Institutional shares (1,886,598)
Service shares (761,129)
In excess of net realized gain on investment and futures
transactions
Class B shares (656,842)
Class C shares (936,744)
Institutional shares (64,615)
------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (134,290,482)
------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 918,965,833
Reinvestment of dividends and distributions 127,012,752
Cost of shares repurchased (142,245,348)
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 903,733,237
------------------------------------------------------------------------------
TOTAL INCREASE 965,385,139
------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 635,815,992
------------------------------------------------------------------------------
End of year $1,601,201,131
------------------------------------------------------------------------------
ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME $ (614,031)
------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS(E) DISTRIBUTIONS TO SHAREHOLDERS
---------------------------- ------------------------------------------------
IN EXCESS OF
NET REALIZED FROM NET NET REALIZED
NET ASSET AND UNREALIZED IN EXCESS REALIZED GAIN GAIN ON
VALUE, NET GAIN (LOSS) ON FROM NET OF NET ON INVESTMENT INVESTMENT ADDITIONAL
BEGINNING INVESTMENT INVESTMENTS INVESTMENT INVESTMENT AND FUTURES AND FUTURES PAID-IN
OF PERIOD INCOME (LOSS) AND FUTURES INCOME INCOME TRANSACTIONS TRANSACTIONS CAPITAL
<CAPTION>
NET INCREASE
(DECREASE)
IN NET ASSET
VALUE
FOR THE SIX MONTHS ENDED JULY 31 (UNAUDITED),
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 - Class A
Shares $25.93 $ 0.09 $(0.41) $(0.08) $ -- $ -- $ -- $ --
1998 - Class B
Shares 25.73 -- (0.41) -- -- -- -- --
1998 - Class C
Shares 25.70 0.01 (0.43) (0.01) -- -- -- --
1998 - Institu-
tional Shares 25.95 0.13 (0.40) (0.13) -- -- -- --
1998 - Service
Shares 25.92 0.07 (0.39) (0.07) -- -- -- --
<S> <C>
1998 - Class A
Shares $(0.40)
1998 - Class B
Shares (0.41)
1998 - Class C
Shares (0.43)
1998 - Institu-
tional Shares (0.40)
1998 - Service
Shares (0.39)
FOR THE YEARS ENDED JANUARY 31,
1998 - Class A
Shares 23.18 0.11 5.27 (0.11) -- (2.52) -- --
1998 - Class B
Shares 23.10 0.04 5.14 -- (0.03) (2.45) (0.07) --
1998 - Class C
Shares(b) 28.20 (0.01) 0.06 -- (0.03) (1.42) (1.10) --
1998 - Institu-
tional Shares 23.19 0.27 5.23 (0.22) -- (0.24) (2.28) --
1998 - Service
Shares 23.17 0.14 5.23 (0.06) (0.04) (2.52) -- --
---------------------------------------------------------------------------------------------------------------------
1997 - Class A
Shares 19.98 0.35 5.18 (0.35) (0.01) (1.97) -- --
1997 - Class B
Shares(b) 20.82 0.17 4.31 (0.17) (0.06) (1.97) -- --
1997 - Institu-
tional Shares(b) 21.25 0.29 3.96 (0.30) (0.04) (1.97) -- --
1997 - Service
Shares(b) 20.71 0.28 4.50 (0.28) (0.07) (1.97) -- --
---------------------------------------------------------------------------------------------------------------------
1996 - Class A
Shares 15.80 0.33 4.75 (0.30) -- (0.60) -- --
---------------------------------------------------------------------------------------------------------------------
1995 - Class A
Shares 15.79 0.20(f) 0.30(f) (0.20) (0.07) (0.33) -- 0.11(f)
1998 - Class A
Shares 2.75
1998 - Class B
Shares 2.63
1998 - Class C
Shares(b) (2.50)
1998 - Institu-
tional Shares 2.76
1998 - Service
Shares 2.75
---------------------------------------------------------------------------------------------------------------------
1997 - Class A
Shares 3.20
1997 - Class B
Shares(b) 2.28
1997 - Institu-
tional Shares(b) 1.94
1997 - Service
Shares(b) 2.46
---------------------------------------------------------------------------------------------------------------------
1996 - Class A
Shares 4.18
---------------------------------------------------------------------------------------------------------------------
1995 - Class A
Shares 0.01
FOR THE PERIOD ENDED JANUARY 31,
1994 - Class A
Shares(b) 14.18 0.15 1.68 (0.15) (0.01) (0.06) -- --
---------------------------------------------------------------------------------------------------------------------
1994 - Class A
Shares(b) 1.61
---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the
period, reinvestment of all dividends and distributions, a complete
redemption of the investment at the net asset value at the end of
the period and no sales or redemption charges. Total return would be
reduced if a sales or redemption charge were taken into account.
(b) Class A, Class B, Class C, Institutional and Service share activity
commenced on February 5, 1993, May 1, 1996, August 15, 1997, June 3,
1996 and March 6, 1996, respectively.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
(f) Calculated based on the average shares outstanding methodology.
12
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
RATIO OF
NET ASSETS RATIO OF NET INVESTMENT
NET ASSET PORTFOLIO AT END OF NET EXPENSES INCOME (LOSS)
VALUE, END TOTAL TURNOVER PERIOD TO AVERAGE TO AVERAGE NET
OF PERIOD RETURN(A) RATE (IN 000S) NET ASSETS ASSETS
<CAPTION>
RATIOS ASSUMING NO VOLUNTARY WAIVER
OF FEES OR EXPENSE LIMITATIONS
-----------------------------------
RATIO OF
RATIO OF NET INVESTMENT
NET ASSET EXPENSES TO INCOME (LOSS) TO
VALUE, END AVERAGE NET AVERAGE NET
OF PERIOD ASSETS ASSETS
<S> <C> <C> <C> <C> <C>
$25.53 (1.26)%(d) 37.78%(d) $1,356,662 1.22%(c) 0.64%(c)
25.32 (1.59)(d) 37.78(d) 416,520 1.88(c) (0.03)(c)
25.27 (1.63)(d) 37.78(d) 63,080 1.88(c) (0.03)(c)
25.55 (1.07)(d) 37.78(d) 192,094 0.80(c) 1.06(c)
25.53 (1.26)(d) 37.78(d) 12,338 1.30(c) 0.57(c)
- --------------------------------------------------------------------------------
<S> <C> <C>
1.38%(c) 0.48%(c)
1.88(c) (0.03)(c)
1.88(c) (0.03)(c)
0.80(c) 1.06(c)
1.30(c) 0.57(c)
25.93 23.71 61.95 1,216,582 1.25 0.43
25.73 22.87 61.95 307,815 1.94 (0.35)
25.70 0.51(d) 61.95 31,686 1.99(c) (0.48)(c)
25.95 24.24 61.95 36,225 0.83 0.76
25.92 23.63 61.95 8,893 1.32 0.32
- -------------------------------------------------------------------------------
23.18 28.42 53.03 615,103 1.22 1.60
23.10 22.23(d) 53.03 17,346 1.93(c) 0.15(c)
23.19 20.77(d) 53.03 193 0.82(c) 1.36(c)
23.17 23.87(d) 53.03 3,174 1.32(c) 0.94(c)
- -------------------------------------------------------------------------------
19.98 32.45 57.93 436,757 1.20 1.67
- -------------------------------------------------------------------------------
15.80 3.97 71.80 193,772 1.25 1.28
1.42 0.26
1.94 (0.35)
1.99(c) (0.48)(c)
0.83 0.76
1.32 0.32
- -------------------------------------------------------------------------------
1.43 1.39
1.93(c) 0.15(c)
0.82(c) 1.36(c)
1.32(c) 0.94(c)
- -------------------------------------------------------------------------------
1.45 1.42
- -------------------------------------------------------------------------------
1.58 0.95
15.79 13.08(d) 102.23 41,528 1.25(c) 1.23(c)
- -------------------------------------------------------------------------------
3.24(c) (0.76)(c)
- -------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements
July 31, 1998 (Unaudited)
1. ORGANIZATION
Goldman Sachs Trust (the "Trust") is a Delaware business trust registered un-
der the Investment Company Act of 1940 (as amended) as an open-end, manage-
ment investment company. The Trust includes the Goldman Sachs Growth and
Income Fund (the "Fund"). At July 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 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. Un-
listed equity and debt securities for which market quotations are available
are valued at the last sale price on valuation date or, if no sale occurs at
the 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 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.
C. 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.
14
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
D. 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
timing differences associated with having different book and tax year ends.
E. DEFERRED ORGANIZATION EXPENSES -- Organization-related costs are being am-
ortized on a straight-line basis over a period of five years. The Fund's or-
ganization costs are fully amortized.
F. 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 net assets.
Class A, Class B and Class C shares bear all expenses and fees relating to
distribution and authorized dealer service plans. Each class of shares sepa-
rately bears their respective class-specific transfer agency fees. Service
shares separately bear a service class fee payable monthly to service organi-
zations for their services.
G. 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.
15
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
July 31, 1998 (Unaudited)
H. FUTURES CONTRACTS -- The Fund may enter into futures transactions to hedge
against changes in interest rates, securities prices, currency exchange rates
or to seek to increase total return.
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 as unrealized gains or losses. When contracts are closed, the
Fund realizes a gain or loss which is reported in the Statement of Opera-
tions.
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 ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), acts as the Fund's investment adviser
pursuant to an Investment Management Agreement (the "Agreement"). Under the
Agreement, GSAM, subject to the general supervision of the Trust's Board of
Trustees, manages the Fund's portfolios. As compensation for the services
rendered under the Agreement, the assumption of the expenses related thereto
and administering the Fund's business affairs, including providing facili-
ties, GSAM is entitled to a fee, computed daily and payable monthly, at an
annual rate equal to .70% of the average daily net assets of the Fund.
During the six months ended July 31, 1998, Goldman Sachs voluntarily agreed
to reduce or limit certain "Other Expenses" for the Fund (excluding manage-
ment, service, distribution and authorized dealer service fees and litigation
and indemnification costs, taxes, interest, brokerage commissions, transfer
agent fees and extraordinary expenses), to the extent such expenses exceeded
.11% of the average daily net assets of the Fund. Effective September 1,
1998, this expense limitation has been modified.
Goldman Sachs serves as the Distributor of shares of the Fund pursuant to a
Distribution Agreement. Goldman Sachs may receive a portion of the Class A
sales load and Class B and Class C contingent deferred sales charges and has
advised the Fund that it retained approximately $1,292,000 during the six
months ended July 31, 1998.
The Trust, on behalf of the Fund, has adopted Distribution Plans (the "Dis-
tribution Plans") pursuant 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 av-
erage daily net assets attributable to Class A, Class B and Class C Shares,
respectively. For the six months ended July 31, 1998, the Distributor has
voluntarily agreed to waive approximately $1,128,000 of its distribution fee
attributable to the Class A shares. The Distributor may discontinue or modify
this waiver in the future at its discretion.
16
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
The Trust, on behalf of the Fund, has adopted Authorized Dealer Service
Plans (the "Dealer Service Plans") pursuant to which Goldman Sachs and Autho-
rized Dealers are compensated for providing personal and account maintenance
services. The Fund pays a fee under its Dealer Service Plan equal, on an an-
nual 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. Effective September 1, 1998 fees charged for such
transfer agent services are as follows: 0.19% of average daily net assets for
Class A, Class B and Class C Shares and 0.04% of average daily net assets for
Institutional and Service Class Shares.
The Trust, on behalf of the Fund, has adopted a Service Plan. This plan al-
lows for Service shares to compensate service organizations for providing va-
rying levels of account administration and shareholder liaison services to
their customers who are beneficial owners of such shares. The Service Plan
provides for compensation to the service organizations in an amount up to
.50% (on a annualized basis), of the average daily net asset value of the
Service shares.
At July 31, 1998, the Fund owed approximately $1,272,000, $1,285,000,
$1,222,000, and $714,000 for Management, Distribution, Authorized Dealer
Service and Transfer Agent fees, respectively.
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of securities (excluding short-
term investments and futures transactions) for the six months ended July 31,
1998, were $1,078,584,927 and $693,240,667, respectively.
For the six months ended July 31, 1998, Goldman Sachs earned approximately
$245,000 of brokerage commissions from portfolio transactions.
5. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying secu-
rities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping at the Fund's custodian.
17
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
July 31, 1998 (Unaudited)
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund, together with other registered investment companies having manage-
ment agreements with GSAM or its affiliates, transfers uninvested cash 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, 1998, the
Fund had an undivided interest in the repurchase agreements in the following
joint account which equaled $218,700,000 in principal amount. At July 31,
1998, 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> <C>
BEAR STEARNS COMPANIES, INC. $100,000,000 5.70% 08/03/98 $ 100,000,000
dated 07/31/98, repurchase price $100,047,500 (total collateral value
$103,015,560 consisting of GNMA: 6.50%, 08/15/27; FHLMC: 7.00%, 11/01/27;
FNMA: 9.00%, 11/01/25)
----------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE 200,000,000 5.68 08/03/98 200,000,000
dated 07/31/98, repurchase price $200,094,667 (total collateral value
$207,985,925 consisting of FNMA: 7.00%, 03/01/28; FHLMC: 5.50%, 05/01/13)
----------------------------------------------------------------------------
NATIONSBANK 300,000,000 5.70 08/03/98 300,000,000
dated 07/31/98, repurchase price $300,142,500 (total collateral value
$306,061,477 consisting of FNMA: 6.50%, 11/01/12)
----------------------------------------------------------------------------
NOMURA SECURITIES, INTERNA-
TIONAL 450,000,000 5.70 08/03/98 450,000,000
dated 07/31/98, repurchase price $450,213,750 (total collateral value
$459,000,001 consisting of FNMA: 5.50%-9.00%, 07/01/99-08/01/28; FHLMC:
5.00%-8.50%, 12/01/98-07/01/28)
----------------------------------------------------------------------------
SALOMON-SMITH BARNEY 404,700,000 5.69 08/03/98 404,700,000
dated 07/31/98, repurchase price $404,891,895 (total collateral value
$413,162,707 consisting of FNMA: 6.50%-8.00%, 08/01/26-07/01/28; FHLMC:
8.00%-8.50%, 05/01/27-11/01/27)
----------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,454,700,000
----------------------------------------------------------------------------
</TABLE>
18
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
7. SUMMARY OF SHARE TRANSACTIONS
Share activity for the six months ended July 31, 1998 and for the year ended
January 31, 1998 are as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JULY 31, 1998
(UNAUDITED) FOR THE YEAR ENDED JANUARY 31, 1998
----------------------------------------------------------------------------
SHARES DOLLARS SHARES DOLLARS
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 13,263,555 $ 370,866,548 20,995,379 $ 557,445,055
Reinvestments of divi-
dends and distributions 140,940 3,905,455 4,040,452 100,776,496
Shares repurchased (7,175,413) (199,306,736) (4,651,468) (124,783,147)
----------------------------------------------------------------------------
6,229,082 175,465,267 20,384,363 533,438,404
-------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 5,734,215 159,901,328 10,786,633 285,377,804
Reinvestments of divi-
dends and distributions -- -- 884,342 21,878,707
Shares repurchased (1,249,443) (33,841,654) (458,457) (12,335,625)
----------------------------------------------------------------------------
4,484,772 126,059,674 11,212,518 294,920,886
-------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 1,539,698 42,789,323 1,258,885 34,759,146
Reinvestments of divi-
dends and distributions 632 17,499 71,436 1,766,121
Shares repurchased (277,488) (7,462,757) (97,307) (2,549,826)
----------------------------------------------------------------------------
1,262,842 35,344,065 1,233,014 33,975,441
-------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 6,710,128 188,526,803 1,383,424 36,071,512
Reinvestments of divi-
dends and distributions 4,807 132,746 72,596 1,812,637
Shares repurchased (592,594) (16,573,763) (68,188) (1,831,590)
----------------------------------------------------------------------------
6,122,341 172,085,786 1,387,832 36,052,559
-------------------------------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 151,968 4,255,857 204,087 5,312,316
Reinvestments of divi-
dends and distributions 905 25,224 31,372 778,791
Shares repurchased (12,651) (348,484) (29,341) (745,160)
----------------------------------------------------------------------------
140,222 3,932,597 206,118 5,345,947
-------------------------------------------------------------------------------------------------------
NET INCREASE 18,239,259 $ 512,887,389 34,423,845 $ 903,733,237
-------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
July 31, 1998 (Unaudited)
8. 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 six months ended July 31, 1998, the Fund did not
have any borrowings under these facilities.
20
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs Growth and Income Fund
THE GOLDMAN
SACHS ADVANTAGE
When you invest in the Goldman Sachs Mid Cap 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 professionals based in offices 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
Historically, stocks have demonstrated greater potential to build wealth over
the long term than most other types of investments.
Goldman Sachs Growth and Income Fund provides investors access to the benefits
associated with equity investing. The Fund seeks long-term capital growth and
growth of income, primarily through equity securities that, in management's
view, offer favorable capital appreciation and/or dividend-paying ability.
Target Your Needs
The Goldman Sachs Growth and Income 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 the Goldman Sachs Funds family without an
additional charge./*/ (Please note: in general, greater returns are associated
with greater risk.)
- --------------------------------------------------------------------------------
Goldman Sachs Funds
ASSET ALLOCATION
Higher Risk/Return Lower Risk/Return
- -------------------------------------------------------------------------
INTERNATIONAL EQUITY DOMESTIC EQUITY FIXED MONEY
. Goldman Sachs INCOME MARKET
Growth and
Income Fund
For More Information
To learn more about the Goldman Sachs Growth and Income Fund and other Goldman
Sachs Funds, call your investment professional today.
/*/ The exchange privilege is subject to termination and its terms are subject
to change.
<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
Jesse Cole, Vice President
James A. Fitzpatrick, Vice President
Anne Marcel, Vice President
Nancy L. Mucker, Vice President
John M. Perlowski, Treasurer
Philip V. Giuca, Jr., Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN SACHS
Investment Adviser,
Distributor and Transfer Agent
Visit our internet address: www.gs.com/funds
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.
Small Cap Value Fund's, Mid Cap Equity Fund's, Capital Growth Fund's, and Growth
and Income Fund's foreign investments and active management techniques entail
risks in addition to those customarily associated with investing in dollar-
denominated securities of U.S issuers. Compared with domestic securities
markets, foreign markets may be less liquid, more volatile and less subject to
government regulation, and may make available less public information about
issuers. The Funds may incur losses because of changes in securities prices
expressed in local currencies, movements in exchange rates or both.
The stocks of smaller companies are often associated with higher risks,
including greater volatility, than stocks of larger companies.
An investment in a money market fund is neither insured nor guaranteed by the
U.S. government and there can be no assurance that any money market fund will be
able to maintain a net asset value of $1.00 per share.
(C) Copyright 1998 Goldman, Sachs & Co. All rights reserved.
Date of first use: September 30, 1998 GISAR / 167K / 9-98
