<PAGE>
Goldman Sachs Funds
- -------------------------------------------------------------------------------
ASSET ALLOCATION PORTFOLIOS Semi-Annual Report June 30, 1998
- -------------------------------------------------------------------------------
[GRAPHIC]
Strategies designed to provide a
complete investment program in a
single investment and capitalize
on the benefits of asset allocation.
LOGO
Goldman
Sachs
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
Market Overview
Dear Shareholder,
Stock and bond markets around the world turned in diverse performances over the
six-month period ended June 30, 1998.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
. U.S. -- The U.S. stock market generated strong performance during the
period, though not without an increase in overall market volatility.
Throughout, the mantle of market leadership was held by mega cap stocks --
the largest and most liquid stocks in the S&P 500 Index -- as investors
turned to them in a "flight to quality." In the bond market, bond prices
rose as fixed income securities became an increasingly popular investment
choice in the aftermath of Asia's financial crisis. The rally was prolonged,
helped along by, among other factors, a strengthening U.S. dollar. At
period-end, though, interest in U.S. bonds waned somewhat as overseas market
volatility subsided.
. Europe -- Ongoing merger and acquisition activity, consolidation moves and
the convergence of interest rates across Europe helped stocks surge upwards.
As in the U.S., investors favored large, liquid names. European bond markets
rallied through most of the period, reinforced by "softer" retail sales data
and lower-than-expected gross domestic product data. Italy was the
exception, given ongoing concerns about its suitability as a member of
European Monetary Union.
. Japan -- In Japan, continued troubles within the banking sector and the
resignation of the Minister of Finance were significant factors behind the
country's poor bond and equity market performances. Investor sentiment
improved somewhat after the government revealed economic measures designed
to prevent further deterioration of the economy. The announcement lifted
low-priced stocks that had underperformed the market in previous months,
while expectations for additional fiscal stimulus packages helped support
the market intermittently in the weeks that followed. By period-end,
however, negative news on corporate fundamentals caused the market to
retreat once more.
. Emerging Markets -- Japan's eroding economy and the dramatic weakening of
the Asian economies all contributed to the region's poor market performance.
Asia's troubles spilled over into other emerging markets, most notably Latin
America. Markets there sold off strongly amid renewed fears over Asia's
currency crisis, combined with increased political uncertainty in Colombia
and Venezuela and continued weak commodity prices. In Russia, much
anticipated capital inflows from privatizations were not forthcoming. In a
failed attempt to provide impetus to the market, President Yeltsin
restructured his cabinet in favor of a more reform-minded entity.
Conversely, the South African market outperformed the MSCI Emerging Markets
Free Index, on the back of falling interest rates. Likewise, the
Mediterranean region was a relatively safe haven; in particular, Greece
rallied strongly following the devaluation of its currency and its decision
to join the ERM.
We encourage you to maintain your 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 Asset Management Co-Head, Goldman Sachs Asset
Management
July 31, 1998
<PAGE>
FUND BASICS
Income Strategy
as of June 30, 1998
Assets Under Management
-----------------------
$59.2 Million
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GIPAX
-----------------------
Class B Shares
-----------------------
GIPBX
-----------------------
Class C Shares
-----------------------
GIPCX
-----------------------
Institutional Shares
-----------------------
GIPIX
-----------------------
Service Shares
-----------------------
GIPSX
-----------------------
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
January 2, 1998-June 30, 1998 Fund Cumulative Total Return (based on NAV)/1/
- --------------------------------------------------------------------------------
Class A 5.43%
Class B 5.16%
Class C 5.14%
Institutional 5.73%
Service Shares 5.41%
- --------------------------------------------------------------------------------
/1/ The net asset value represents the net assets of the Portfolio
(ex-dividend) divided by the total number of shares. Performance does not
reflect the deduction of any applicable sales charge.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
SEC CUMULATIVE TOTAL RETURNS/2/
- ------------------------------------------------------------------------------------------
For the period ending June 30, 1998 Class A Class B Class C Institutional Service
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Since Inception (1/2/98) -0.35% 0.12% 4.14% 5.73% 5.41%
- ------------------------------------------------------------------------------------------
</TABLE>
/2/ 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 Class A shares on June 30, 1998
was $11.05 and represents the NAV plus the maximum sales charge of 5.5%.
- --------------------------------------------------------------------------------
COMPOSITION/3/
- --------------------------------------------------------------------------------
For the investor seeking a high level of current income with greater stability
of principal than an investment in equity securities alone. Over half of the
portfolio is in domestic fixed income instruments which seek to provide income,
and a portion is in global bonds which seek to enhance income and total return.
The balance in equities is intended to add diversification and may enhance
returns, but will also add a moderate level of volatility to the portfolio.
[The following tables were depicted as pie charts in the printed material]
STRATEGIC MODEL
PORTFOLIO WEIGHTINGS/3/
Short Duration Government Fund 43%
High Yield Fund 5%
Global Income Fund 12%
Growth and Income Fund 14%
CORE Large Cap Growth Fund 10%
CORE International Equity Fund 16%
TACTICAL FUND WEIGHTINGS/3/
(Changes quarterly)
Short Duration Government Fund 36%
High Yield Fund 4%
Global Income Fund 14%
Growth and Income Fund 13%
CORE Large Cap Growth Fund 9%
CORE International Equity Fund 24%
- --------------------------------------------------------------------------------
/3/ As of 7/1/98. Actual Fund weighting in asset allocation portfolios may
differ slightly from the figures shown above due to rounding, differences
in returns of the underlying Funds, or both. The above figures are not
indicative of future allocations.
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.
1
<PAGE>
FUND BASICS
Growth and Income Strategy
as of June 30, 1998
Assets Under Management
-----------------------
$277.3 Million
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GOIAX
-----------------------
Class B Shares
-----------------------
GOIBX
-----------------------
Class C Shares
-----------------------
GOICX
-----------------------
Institutional Shares
-----------------------
GOIIX
-----------------------
Service Shares
-----------------------
GOISX
-----------------------
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
January 2, 1998-June 30, 1998 Fund Cumulative Total Return (based on NAV)/1/
- --------------------------------------------------------------------------------
Class A 7.70%
Class B 7.41%
Class C 7.30%
Institutional 7.81%
Service Shares 7.55%
- --------------------------------------------------------------------------------
/1/ The net asset value represents the net assets of the Portfolio
(ex-dividend) divided by the total number of shares. Performance does not
reflect the deduction of any applicable sales charge.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
SEC CUMULATIVE TOTAL RETURNS/2/
- ------------------------------------------------------------------------------------------
For the period ending June 30, 1998 Class A Class B Class C Institutional Service
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Since Inception (1/2/98) 1.80% 2.39% 6.30% 7.81% 7.55%
- ------------------------------------------------------------------------------------------
</TABLE>
/2/ 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 Class A shares on June 30, 1998
was $11.33 and represents the NAV plus the maximum sales charge of 5.5%.
- --------------------------------------------------------------------------------
COMPOSITION/3/
- --------------------------------------------------------------------------------
For the investor who is less conservative and seeks current income with the
opportunity for long-term capital appreciation. Under normal circumstances,
assets are allocated fairly equally among fixed income securities, which are
intended to provide the income component, and equity securities, which are
intended to provide the capital appreciation component.
[The following tables were depicted as pie charts in the printed material]
STRATEGIC MODEL
PORTFOLIO WEIGHTINGS/3/
Core Fixed Income Fund 18%
High Yield Fund 8%
Global Income Fund 14%
Growth and Income Fund 20%
CORE Large Cap Growth Fund 12%
CORE Small Cap Growth Fund 5%
CORE International Equity Fund 18%
Emerging Markets Equity Fund 5%
TACTICAL FUND WEIGHTINGS/3/
(Changes quarterly)
Core Fixed Income Fund 12%
High Yield Fund 6%
Global Income Fund 16%
Growth and Income Fund 19%
CORE Large Cap Growth Fund 11%
CORE Small Cap Growth Fund 5%
CORE International Equity Fund 26%
Emerging Markets Equity Fund 5%
- --------------------------------------------------------------------------------
/3/ As of 7/1/98. Actual Fund weighting in asset allocation portfolios may
differ slightly from the figures shown above due to rounding, differences
in returns of the underlying Funds, or both. The above figures are not
indicative of future allocations.
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.
2
<PAGE>
FUND BASICS
Growth Strategy
as of June 30, 1998
Assets Under Management
-----------------------
$198.8 Million
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GGSAX
-----------------------
Class B Shares
-----------------------
GGSBX
-----------------------
Class C Shares
-----------------------
GGSCX
-----------------------
Institutional Shares
-----------------------
GGSIX
-----------------------
Service Shares
-----------------------
GGSSX
-----------------------
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
January 2, 1998-June 30, 1998 Fund Cumulative Total Return (based on NAV)/1/
- --------------------------------------------------------------------------------
Class A 8.05%
Class B 7.75%
Class C 7.84%
Institutional 8.16%
Service Shares 7.93%
- --------------------------------------------------------------------------------
/1/ The net asset value represents the net assets of the Portfolio
(ex-dividend) divided by the total number of shares. Performance does not
reflect the deduction of any applicable sales charge.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
SEC CUMULATIVE TOTAL RETURNS/2/
- ------------------------------------------------------------------------------------------
For the period ending June 30, 1998 Class A Class B Class C Institutional Service
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Since Inception (1/2/98) 2.13% 2.75% 6.84% 8.16% 7.93%
- ------------------------------------------------------------------------------------------
</TABLE>
/2/ 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 Class A shares on June 30, 1998
was $11.41 and represents the NAV plus the maximum sales charge of 5.5%.
- --------------------------------------------------------------------------------
COMPOSITION/3/
- --------------------------------------------------------------------------------
For the investor seeking capital appreciation and, secondarily, current income.
Over 75% of the assets are allocated among equity securities, with a blend of
domestic large cap, small cap and international stocks, which seek to provide
capital appreciation. The bond portion is intended to provide diversification.
[The following tables were depicted as pie charts in the printed material]
STRATEGIC MODEL
PORTFOLIO WEIGHTINGS/3/
Core Fixed Income Fund 10%
High Yield Fund 5%
Global Income Fund 5%
Growth and Income Fund 28%
CORE Large Cap Growth Fund 15%
CORE Small Cap Growth Fund 8%
CORE International Equity Fund 22%
Emerging Markets Equity Fund 7%
TACTICAL FUND WEIGHTINGS/3/
(Changes quarterly)
Core Fixed Income Fund 4%
High Yield Fund 3%
Global Income Fund 7%
Growth and Income Fund 27%
CORE Large Cap Growth Fund 14%
CORE Small Cap Growth Fund 8%
CORE International Equity Fund 30%
Emerging Markets Equity Fund 7%
- --------------------------------------------------------------------------------
/3/ As of 7/1/98. Actual Fund weighting in asset allocation portfolios may
differ slightly from the figures shown above due to rounding, differences
in returns of the underlying Funds, or both. The above figures are not
indicative of future allocations.
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.
3
<PAGE>
FUND BASICS
Aggressive Growth Strategy
as of June 30, 1998
Assets Under Management
-----------------------
$76.6 Million
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GAPAX
-----------------------
Class B Shares
-----------------------
GAPBX
-----------------------
Class C Shares
-----------------------
GAXCX
-----------------------
Institutional Shares
-----------------------
GAPIX
-----------------------
Service Shares
-----------------------
GAPSX
-----------------------
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
January 2, 1998-June 30, 1998 Fund Cumulative Total Return (based on NAV)/1/
- --------------------------------------------------------------------------------
Class A 7.60%
Class B 7.40%
Class C 7.40%
Institutional 7.60%
Service Shares 7.60%
- --------------------------------------------------------------------------------
/1/ The net asset value represents the net assets of the Portfolio
(ex-dividend) divided by the total number of shares. Performance does not
reflect the deduction of any applicable sales charge.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
SEC CUMULATIVE TOTAL RETURNS/2/
- ------------------------------------------------------------------------------------------
For the period ending June 30, 1998 Class A Class B Class C Institutional Service
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Since Inception (1/2/98) 1.70% 2.40% 6.40% 7.60% 7.60%
- ------------------------------------------------------------------------------------------
</TABLE>
/2/ 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 Class A shares on June 30, 1998
was $11.39 and represents the NAV plus the maximum sales charge of 5.5%.
- --------------------------------------------------------------------------------
COMPOSITION/3/
- --------------------------------------------------------------------------------
For the investor seeking capital appreciation. Substantially all assets are
allocated among equity securities, with a greater focus on small cap and
international stocks for enhanced return opportunities.
[The following tables were depicted as pie charts in the printed material]
STRATEGIC MODEL
PORTFOLIO WEIGHTINGS/3/
Growth and Income Fund 37%
CORE Large Cap Growth Fund 17%
CORE Small Cap Equity Fund 10%
CORE International Equity Fund 26%
Emerging Markets Equity Fund 10%
TACTICAL FUND WEIGHTINGS/3/
(Changes quarterly)
Growth and Income Fund 32%
CORE Large Cap Growth Fund 15%
CORE Small Cap Equity Fund 9%
CORE International Equity Fund 34%
Emerging Markets Equity Fund 10%
- --------------------------------------------------------------------------------
/3/ As of 7/1/98. Actual Fund weighting in asset allocation portfolios may
differ slightly from the figures shown above due to rounding, differences
in returns of the underlying Funds, or both. The above figures are not
indicative of future allocations.
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.
4
<PAGE>
PERFORMANCE OVERVIEW
Asset Allocation Portfolios
Dear Shareholders,
On behalf of Goldman Sachs, it is a pleasure to welcome you as a shareholder in
the Goldman Sachs Asset Allocation Portfolios.
In the future, we will be sending you both annual and semi-annual reports
that describe your Strategy's performance. This semi-annual report covers
the period from January 2, 1998, when the Strategies were launched, through
June 30, 1998.
Performance Review
The performance of your Strategy is driven by three factors: (1) strategic
asset allocation policy; (2) fund performance; and (3) tactical
reallocation. By tactically reallocating your Strategy on a quarterly basis,
we attempt to enhance performance over the long term.
During the first six months of 1998, the Strategies benefited from tactical
reallocation decisions. More specifically, we maintained an overweight
position in global stocks, which outperformed both bonds and cash. The
Strategies' overweight position in equities of developed international
markets relative to domestic equities helped performance in the first
quarter, but detracted from it in the second quarter. Similarly, the
Strategies' overweight position in global bonds relative to domestic bonds
improved performance in the first quarter. The Strategies' overweight
position in domestic bonds relative to global bonds in the second quarter
did not significantly impact performance.
Despite positive results from tactical reallocation decisions, Strategy
returns were offset by (1) poor performance in the emerging market sector,
due largely to the economic crisis in Asia; and (2) the underperformance of
one of the underlying funds, the Goldman Sachs Growth and Income Fund.
Year-to-date, large-cap growth stocks have generated significant
outperformance. This Fund is managed according to a value style and
currently has a mid-cap bias -- largely in response to the run-up in
mega-cap valuations over the past two years.
The following is a summary of the performance of each of the Strategies,
before the effect of any applicable sales charge, for the first half of the
year.
o Goldman Sachs Income Strategy -- Class A, B, C, Institutional and Service
shares generated cumulative total returns since inception of 5.43%, 5.16%,
5.14%, 5.73% and 5.41%, respectively.
o Goldman Sachs Growth and Income Strategy -- Class A, B, C, Institutional and
Service shares generated cumulative total returns since inception of 7.70%,
7.41%, 7.30%, 7.81% and 7.55%, respectively.
o Goldman Sachs Growth Strategy -- Class A, B, C, Institutional and Service
shares generated cumulative total returns since inception of 8.05%, 7.75%,
7.84%, 8.16% and 7.93%, respectively.
o Goldman Sachs Aggressive Growth Strategy -- Class A, B, C, Institutional and
Service shares generated cumulative total returns since inception of 7.60%,
7.40%, 7.40%, 7.60% and 7.60%, respectively.
5
<PAGE>
PERFORMANCE OVERVIEW
Global Asset Allocation Views -- First Half 1998
. Equities -- During the period, we were positive on Japan due to attractive
valuations. Negative momentum factors, however, led us to underweight Japan
in the first quarter and move to a neutral stance during the second quarter.
Within Europe, we favored Finland, Italy, Norway and Germany, while we were
negative on the UK due to unattractive valuations and relatively poor
momentum. We have also underweighted the U.S. due to unattractive
valuations.
. Bonds -- We favored Europe, especially Sweden, due to attractive valuations
and specific momentum factors. Our negative view on Japanese bonds
intensified during the period due to poor market momentum and a flattening
yield curve. In the first quarter, the Strategies were overweight
international bonds against the U.S., but in the second quarter they were
overweight U.S. bonds relative to the rest of the world.
. Currencies -- We preferred the U.S. dollar versus international currencies
during the period, because of its continued market strength and yield curve
factors. Malaysia's, New Zealand's and Singapore's currencies were our least
favorite, due mostly to poor momentum factors. Additionally, we were
negative on the yen during both the first and second quarters. During this
period, our currency views moderated our international equity views. Had we
been negative on the U.S. dollar, the Strategies would have been more
overweighted in international stocks and bonds.
Current Outlook
. Equities -- Currently, we view Japan positively due entirely to attractive
valuations. This is a marked change in our views, as continental Europe has
dropped in rank for the first time in two years. Within Europe, we continue
to favor Finland, Italy, Norway and Germany. We remain negative on the UK as
a result of unattractive valuations and relatively poor momentum. We
continue to underweight U.S. equities versus international equities due to
unattractive valuations and worsening market sentiment.
. Bonds -- We continue to favor Europe, especially Sweden, due to attractive
valuations and specific momentum factors. Our negative view on the Japanese
bond market has increased due to poor market momentum and a continued
flattening of the yield curve. Currently, we are underweight the U.S. bond
market relative to the rest of the world.
. Currencies -- Our preferred currency is the Japanese yen due to momentum
factors. We continue to favor the U.S. dollar versus international
currencies, except in the cases of Japan and the UK, due to continued market
strength and yield curve factors.
We hope this summary has been helpful to you in your understanding of how we
manage the Asset Allocation Portfolios. If you have any questions or
comments, we encourage you to contact your Goldman Sachs investment
professional.
We thank you for the confidence you have placed in us and look forward to
your continued support.
Goldman Sachs Quantitative Research Management Team
New York, July 31, 1998
6
<PAGE>
PERFORMANCE OVERVIEW
Goldman Sachs' proprietary asset allocation strategy is based on an exclusive
risk management framework, the Black-Litterman Asset Allocation Model.
- --------------------------------------------------------------------------------
THE GOLDMAN SACHS ASSET ALLOCATION PROCESS
- --------------------------------------------------------------------------------
-----------------------
1
Determine
Expected Returns
-----------------------
Estimate long-term expected returns for various asset classes under
market-equilibrium conditions with emphasis on three key factors:
o future volatility estimates,
o the degree of asset class correlation,
o a market-capitalization weighting of assets.
Result: Own asset classes that don't move at the same time. Only accept
risks deemed worth the potential return.
-----------------------
2
Create Long-Term
Strategic Allocations
-----------------------
Determine the long-term asset allocation for each Strategy using the
equilibrium expected returns and estimates of future volatility and
correlation, targeted at specific investor needs.
Result: Invest in underlying Funds that are linked to long-term
objectives.
-----------------------
3
Make Short-Term
Tactical Adjustments
-----------------------
Adjust the strategic allocations quarterly in response to current economic
data, market outlook and return forecasts derived from quantitative and
qualitative analyses.
Result: Capitalize on Strategies that are positioned to seek opportunities
in the current market environment.
7
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
Balance Portfolio Risk and Return
Through Asset Allocation
Diversifying investments across several asset classes can enhance investment
returns and/or manage risk in a portfolio.
Striking the Right Balance Is Crucial
For many investors, the optimum goal is to possess a portfolio that provides
the right balance between risk and return -- that is, one that manages risk
while providing satisfactory returns. In pursuit of this ideal, asset
allocation -- the process of developing a personalized, diversified
investment portfolio by strategically mixing different asset classes in
varying proportions -- is critical. In fact, a study of performance returns
for the nation's largest pension plans revealed that asset allocation
policy, not individual security selection or timing decisions, accounted for
over 91% of an investment portfolio's total return./1/
The Impact of Asset Allocation on Risk and Return
To illustrate the effect that diversifying across asset classes can have on
a portfolio's risk and return characteristics, consider the diagram below.
Please note each portfolio's asset breakdown and the resulting impact on its
risk and return characteristics.
----------------------------------------------------------------------------
Hypothetical Asset Allocations (1970-1997)/2)
[The following table was depicted as pie charts in the printed material]
PORTFOLIO A PORTFOLIO B PORTFOLIO C
RETURN: 9.4% RETURN: 9.4% RETURN: 10.7%
RISK: 8.3% RISK: 6.6% RISK: 8.3%
bonds 0% 59% 43%
treasury bills 90% 29% 21%
stocks 10% 12% 36%
For More Information
Professionally structured asset allocation portfolios are designed to help
investors easily access the benefits associated with the asset allocation
process. Goldman Sachs Asset Management offers four strategic portfolios --
Income Strategy, Growth and Income Strategy, Growth Strategy and Aggressive
Growth Strategy --from which investors can choose. Each Strategy, which is
composed of a carefully balanced blend of Goldman Sachs Funds, holds a
defined place on the risk/return spectrum.
For more information on the Goldman Sachs Asset Allocation Portfolios or
other Goldman Sachs Funds, contact your investment professional.
/1/ Source: Financial Analysts Journal, May/June 1991
/2/ Source: Ibbotson Associates. Stocks are represented by the S&P 500; Bonds
represent an equally weighted portfolio of long-term and intermediate-term
government bonds. Long-term government bonds are represented by the
20-year U.S. government bond; Treasury bills are represented by the 30-Day
U.S. Treasury bill. Risk is measured by standard deviation. Risk and
return are based on annual data over the period 1970-1997. The portfolios
presented in the image are based on Modern Portfolio Theory. Past
performance is not indicative of future results.
8
<PAGE>
GOLDMAN SACHS INCOME STRATEGY PORTFOLIO
Statement of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
MUTUAL FUNDS - 97.1%
EQUITY - 44.8%
1,177,748 Goldman Sachs CORE International Equity Fund -
Institutional - 20.0% $11,824,589
451,550 Goldman Sachs CORE Large Cap Growth Fund -
Institutional - 10.8% 6,412,004
302,748 Goldman Sachs Growth and Income Fund -
Institutional - 14.0% 8,258,957
-----------
$26,495,550
----------------------------------------------------------------------------
FIXED INCOME - 52.3%
310,482 Goldman Sachs Core Fixed Income Fund -
Institutional - 5.3% $ 3,145,182
280,485 Goldman Sachs High Yield Fund -Institutional - 4.8% 2,863,753
2,548,007 Goldman Sachs Short Duration Government Fund -
Institutional -42.2% 24,970,471
-----------
$30,979,406
----------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(COST $57,624,406) $57,474,956
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
REPURCHASE AGREEMENT - 0.5%
$300,000 Joint Repurchase
Agreement Ac-
count
5.83%, 07/01/98 $ 300,000
------------------------------------------
TOTAL REPURCHASE
AGREEMENT ACCOUNT
(COST $300,000) $ 300,000
------------------------------------------
TOTAL INVESTMENTS
(COST $57,924,406) $57,774,956
------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for
investments in which value
exceeds cost $ 326,101
Gross unrealized loss for
investments in which cost
exceeds value (475,551)
------------------------------------------
Net unrealized gain $ (149,450)
------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
For information on the underlying mutual funds, please call our toll free
Shareholder Services Line at
1-800-526-7384 or visit us on the web at www.gs.com/funds.
THE ACCOMPANYING NOTES ARE AN
INTEGRAL PART OF THESE FINANCIAL
STATEMENTS. 9
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO
Statement of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
MUTUAL FUNDS - 96.4%
<C> <S> <C>
EQUITY - 63.3%
6,395,541 Goldman Sachs CORE International Equity Fund -
Institutional - 23.1% $ 64,211,230
2,380,069 Goldman Sachs CORE Large Cap Growth Fund -
Institutional - 12.2% 33,796,980
1,143,543 Goldman Sachs CORE Small Cap Equity Fund -
Institutional - 4.8% 13,390,885
1,315,381 Goldman Sachs Emerging Markets Equity Fund -
Institutional - 4.1% 11,259,663
1,938,881 Goldman Sachs Growth and Income Fund -
Institutional - 19.1% 52,892,674
------------
$175,551,432
-----------------------------------------------------------------------------
FIXED INCOME - 33.1%
6,479,637 Goldman Sachs Core Fixed Income Fund -
Institutional - 23.7% $ 65,638,829
179,931 Goldman Sachs Global Income Fund - Institutional -
1.0% 2,727,753
2,293,640 Goldman Sachs High Yield Fund -Institutional - 8.4% 23,418,060
------------
$ 91,784,642
-----------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(COST $269,137,543) $267,336,074
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
REPURCHASE AGREEMENT - 0.9%
$2,500,000 Joint Repurchase
Agreement
Account
5.83%, 07/01/98 $ 2,500,000
--------------------------------------------
TOTAL REPURCHASE
AGREEMENT ACCOUNT
(COST $2,500,000) $ 2,500,000
--------------------------------------------
TOTAL INVESTMENTS
(COST $271,637,543) $269,836,074
--------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for
investments in which value
exceeds cost $ 2,257,620
Gross unrealized loss for
investments in which cost
exceeds value (4,059,089)
--------------------------------------------
Net unrealized gain $ (1,801,469)
--------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
For information on the underlying mutual funds, please call our toll free
Shareholder Services Line at
1-800-526-7384 or visit us on the web at www.gs.com/funds.
10 THE ACCOMPANYING NOTES ARE AN
INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO
Statement of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
MUTUAL FUNDS - 97.0%
<C> <S> <C>
EQUITY - 83.1%
5,231,414 Goldman Sachs CORE International Equity Fund -
Institutional - 26.4% $ 52,523,396
2,162,763 Goldman Sachs CORE Large Cap Growth Fund -
Institutional - 15.4% 30,711,241
1,330,006 Goldman Sachs CORE Small Cap Equity Fund -
Institutional - 7.8% 15,574,369
1,339,383 Goldman Sachs Emerging Markets Equity Fund -
Institutional - 5.8% 11,465,116
2,013,095 Goldman Sachs Growth and Income Fund -
Institutional - 27.7% 54,917,222
------------
$165,191,344
-----------------------------------------------------------------------------
FIXED INCOME - 13.9%
1,865,300 Goldman Sachs Core Fixed Income Fund -
Institutional - 9.5% $ 18,895,491
862,796 Goldman Sachs High Yield Fund -Institutional - 4.4% 8,809,148
------------
$ 27,704,639
-----------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(COST $195,303,787) $192,895,983
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
REPURCHASE AGREEMENT - 0.8%
$1,600,000 Joint Repurchase
Agreement
Account
5.83%, 07/01/98 $ 1,600,000
--------------------------------------------
TOTAL REPURCHASE
AGREEMENT ACCOUNT
(COST $1,600,000) $ 1,600,000
--------------------------------------------
TOTAL INVESTMENTS
(COST $196,903,787) $194,495,983
--------------------------------------------
FEDERAL INCOME TAX INFORMA-
TION:
Gross unrealized gain for
investments in which value
exceeds cost $ 1,738,429
Gross unrealized loss for
investments in which cost
exceeds value (4,146,233)
--------------------------------------------
Net unrealized gain $ (2,407,804)
--------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
For information on the underlying mutual funds, please call our toll free
Shareholder Services Line at
1-800-526-7384 or visit us on the web at www.gs.com/funds.
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS. 11
<PAGE>
GOLDMAN SACHS AGGRESSIVE GROWTH STRATEGY PORTFOLIO
Statement of Investments
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
MUTUAL FUNDS - 97.1%
EQUITY - 97.1%
2,334,699 Goldman Sachs CORE International Equity Fund -
Institutional - 30.6% $23,440,379
896,849 Goldman Sachs CORE Large Cap Growth Fund -
Institutional - 16.6% 12,735,251
581,819 Goldman Sachs CORE Small Cap Equity Fund -
Institutional - 8.9% 6,813,095
743,411 Goldman Sachs Emerging Markets Equity Fund -
Institutional - 8.3% 6,363,598
917,807 Goldman Sachs Growth and Income Fund -
Institutional - 32.7% 25,037,777
-----------
$74,390,100
-----------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(COST $76,066,880) $74,390,100
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
REPURCHASE AGREEMENT - 1.0%
$800,000 Joint Repurchase
Agreement
Account
5.83%, 07/01/98 $ 800,000
------------------------------------------
TOTAL REPURCHASE
AGREEMENT ACCOUNT
(COST $800,000) $ 800,000
------------------------------------------
TOTAL INVESTMENTS
(COST $76,866,880) $75,190,100
------------------------------------------
FEDERAL INCOME TAX INFORMA-
TION:
Gross unrealized gain for
investments in which value
exceeds cost $ 611,213
Gross unrealized loss for
investments in which cost
exceeds value (2,287,993)
------------------------------------------
Net unrealized gain $(1,676,780)
------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
For information on the underlying investment funds, please call our toll free
Shareholder Services Line at
1-800-526-7384 or visit us on the web at www.gs.com/funds.
12 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
13
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
Statements of Assets and Liabilities
June 30, 1998 (Unaudited)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
GOLDMAN SACHS
INCOME
STRATEGY PORTFOLIO
ASSETS:
<S> <C>
Investment in securities, at value (identified cost
$57,924,406, $271,637,543, $196,903,787 and
$76,866,880, respectively) $57,774,956
Cash 30,792
Receivables:
Fund shares sold 1,646,833
Dividends and interest 167,161
Other assets 98,510
----------------------------------------------------------------------------
TOTAL ASSETS 59,718,252
----------------------------------------------------------------------------
LIABILITIES:
Payables:
Dividends 4,602
Investment securities purchased 330,792
Fund shares repurchased 21,284
Amounts owed to affiliates 98,902
Accrued expenses and other liabilities 62,424
----------------------------------------------------------------------------
TOTAL LIABILITIES 518,004
----------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 59,243,281
Accumulated undistributed (distributions in excess of)
net investment income (loss) (2,596)
Accumulated undistributed net realized gain on
investment transactions 109,013
Net unrealized loss on investments (149,450)
----------------------------------------------------------------------------
NET ASSETS $59,200,248
----------------------------------------------------------------------------
NAV(a)
Class A $10.44
Class B $10.44
Class C $10.44
Institutional $10.44
Service $10.44
----------------------------------------------------------------------------
Shares Outstanding:
Class A 2,720,513
Class B 1,598,623
Class C 1,305,682
Institutional 6,491
Service 37,530
----------------------------------------------------------------------------
Total shares outstanding, $.001 par value (unlimited
number of shares authorized) 5,668,839
----------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share (NAV per share X 1.0582) for
Class A shares of the Income, Growth and Income, Growth and Aggressive
Growth Strategy Portfolios is $11.05, $11.33, $11.41 and $11.39,
respectively. 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.
14
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
GROWTH AND INCOME GROWTH AGGRESSIVE GROWTH
STRATEGY PORTFOLIO STRATEGY PORTFOLIO STRATEGY PORTFOLIO
<S> <C> <C>
$269,836,074 $194,495,983 $75,190,100
39,956 71,716 18,027
9,884,401 5,995,847 2,301,682
584,526 265,757 60,707
159,822 146,443 114,700
-----------------------------------------------------------------------------------
280,504,779 200,975,746 77,685,216
-----------------------------------------------------------------------------------
807 543 --
2,539,956 1,671,716 818,027
258,600 126,064 71,921
341,758 244,640 142,325
113,408 101,165 62,733
-----------------------------------------------------------------------------------
3,254,529 2,144,128 1,095,006
-----------------------------------------------------------------------------------
278,421,279 200,859,765 78,216,813
(9,963) 732 (64,045)
640,403 378,925 114,222
(1,801,469) (2,407,804) (1,676,780)
-----------------------------------------------------------------------------------
$277,250,250 $198,831,618 $76,590,210
-----------------------------------------------------------------------------------
$10.71 $10.78 $10.76
$10.70 $10.77 $10.74
$10.69 $10.78 $10.74
$10.71 $10.78 $10.76
$10.70 $10.78 $10.76
-----------------------------------------------------------------------------------
11,485,519 8,000,109 2,829,632
7,976,819 6,363,820 2,873,451
6,298,406 4,033,515 1,414,897
59,963 35,169 159
91,487 13,820 8,095
-----------------------------------------------------------------------------------
25,912,194 18,446,433 7,126,234
-----------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
Statements of Operations
For the Period Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
GOLDMAN SACHS
INCOME
STRATEGY PORTFOLIO(A)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 438,701
Interest 11,414
--------------------------------------------------------------------------
TOTAL INCOME 450,115
--------------------------------------------------------------------------
EXPENSES:
Management fees 44,833
Distribution fees 63,811
Authorized dealer service fees 31,833
Transfer agent fees 70,645
Custodian fees 17,802
Professional fees 12,968
Registration fees 51,691
Service class fees 307
Trustee fees 1,804
Other 7,604
--------------------------------------------------------------------------
TOTAL EXPENSES 302,298
--------------------------------------------------------------------------
Less -- expenses reimbursed and fees
waived by Goldman Sachs (184,772)
--------------------------------------------------------------------------
NET EXPENSES 118,526
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 331,589
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS:
Net realized gain from:
Investment transactions 109,013
Net change in unrealized loss on:
Investments (149,450)
--------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENT TRANSACTIONS (40,437)
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 291,152
--------------------------------------------------------------------------
</TABLE>
(a) Commencement date of operations was January 2, 1998.
16 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
GROWTH AND INCOME GROWTH AGGRESSIVE GROWTH
STRATEGY PORTFOLIO(A) STRATEGY PORTFOLIO(A) STRATEGY PORTFOLIO(A)
<S> <C> <C>
$ 1,406,608 $ 536,295 $ 92,532
57,313 40,077 --
--------------------------------------------------------------------------------
1,463,921 576,372 92,532
--------------------------------------------------------------------------------
202,146 143,413 54,841
300,854 217,693 87,195
143,575 102,053 39,087
92,108 92,039 83,082
17,802 17,802 17,802
12,968 12,968 12,968
114,900 97,447 54,600
734 145 74
1,838 1,821 1,787
9,668 9,427 7,629
--------------------------------------------------------------------------------
896,593 694,808 359,065
--------------------------------------------------------------------------------
(345,872) (298,958) (202,488)
--------------------------------------------------------------------------------
550,721 395,850 156,577
--------------------------------------------------------------------------------
913,200 180,522 (64,045)
--------------------------------------------------------------------------------
640,403 378,925 114,222
(1,801,469) (2,407,804) (1,676,780)
--------------------------------------------------------------------------------
(1,161,066) (2,028,879) (1,562,558)
--------------------------------------------------------------------------------
$ (247,866) $(1,848,357) $(1,626,603)
--------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
Statements of Changes in Net Assets
For the Period Ended June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
GOLDMAN SACHS
INCOME
STRATEGY PORTFOLIO(A)
<S> <C>
FROM OPERATIONS:
Net investment income (loss) $ 331,589
Net realized gain on investment transactions 109,013
Net change in unrealized loss on investments (149,450)
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS 291,152
-----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A shares (186,703)
Class B shares (73,952)
Class C shares (68,633)
Institutional shares (499)
Service shares (1,802)
In excess of net investment income
Class A shares (1,462)
Class B shares (579)
Class C shares (537)
Institutional shares (4)
Service shares (14)
-----------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (334,185)
-----------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 62,302,655
Reinvestment of dividends and distributions 274,793
Cost of shares repurchased (3,334,167)
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM SHARE
TRANSACTIONS 59,243,281
-----------------------------------------------------------------------------
TOTAL INCREASE 59,200,248
-----------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
-----------------------------------------------------------------------------
End of period $59,200,248
-----------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS
OF) NET INVESTMENT INCOME $ (2,596)
-----------------------------------------------------------------------------
</TABLE>
(a) Commencement date of operations was January 2, 1998.
18 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
GROWTH AND INCOME GROWTH AGGRESSIVE GROWTH
STRATEGY PORTFOLIO(A) STRATEGY PORTFOLIO(A) STRATEGY PORTFOLIO(A)
<S> <C> <C>
$ 913,200 $ 180,522 $ (64,045)
640,403 378,925 114,222
(1,801,469) (2,407,804) (1,676,780)
-------------------------------------------------------------------------------
(247,866) (1,848,357) (1,626,603)
-------------------------------------------------------------------------------
(495,776) (146,995) --
(229,371) (20,520) --
(181,015) (10,842) --
(3,675) (1,275) --
(3,363) (158) --
(5,408) -- --
(2,503) -- --
(1,975) -- --
(40) -- --
(37) -- --
-------------------------------------------------------------------------------
(923,163) (179,790) --
-------------------------------------------------------------------------------
281,588,258 203,875,249 81,510,173
842,919 168,562 5,000
(4,009,898) (3,184,046) (3,298,360)
-------------------------------------------------------------------------------
278,421,279 200,859,765 78,216,813
-------------------------------------------------------------------------------
277,250,250 198,831,618 76,590,210
-------------------------------------------------------------------------------
-- -- --
-------------------------------------------------------------------------------
$277,250,250 $198,831,618 $76,590,210
-------------------------------------------------------------------------------
$ (9,963) $ 732 $ (64,045)
-------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
GOLDMAN SACHS INCOME STRATEGY PORTFOLIO
Financial Highlights
Selected Data for a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
------------------------- ------------------------
NET ASSET NET REALIZED FROM NET
VALUE, NET AND UNREALIZED FROM NET REALIZED GAIN NET INCREASE
BEGINNING INVESTMENT GAIN ON INVESTMENT ON INVESTMENT IN NET ASSET
OF PERIOD INCOME INVESTMENTS INCOME TRANSACTIONS VALUE
FOR THE PERIOD ENDED JUNE 30 (UNAUDITED),
<S> <C> <C> <C> <C> <C> <C>
1998 - Class A Shares(b) $10.00 $0.10 $0.44 $(0.10) $-- $0.44
1998 - Class B Shares(b) 10.00 0.08 0.44 (0.08) -- 0.44
1998 - Class C Shares(b) 10.00 0.07 0.44 (0.07) -- 0.44
1998 - Institutional
Shares(b) 10.00 0.12 0.44 (0.12) -- 0.44
1998 - Service Shares(b) 10.00 0.10 0.44 (0.10) -- 0.44
----------------------------------------------------------------------------------------------------
</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 January 2, 1998.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
20 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
GOLDMAN SACHS INCOME STRATEGY PORTFOLIO
<TABLE>
<CAPTION>
RATIOS ASSUMING NO VOLUNTARY WAIVER
OF FEES OR EXPENSE LIMITATIONS
-----------------------------------
RATIO OF
NET ASSETS RATIO OF NET INVESTMENT RATIO OF RATIO OF
NET ASSET PORTFOLIO AT END OF NET EXPENSES INCOME EXPENSES TO NET INVESTMENT
VALUE, END TOTAL TURNOVER PERIOD TO AVERAGE TO AVERAGE AVERAGE NET INCOME TO AVERAGE
OF PERIOD RETURN(A)(D) RATE(D) (IN 000S) NET ASSETS(C) NET ASSETS(C) ASSETS(C) NET ASSETS(C)
<S> <C> <C> <C> <C> <C> <C> <C>
$10.44 5.43% 11.50% $28,413 0.60% 2.91% 2.10% 1.41%
10.44 5.16 11.50 16,692 1.25 2.29 2.60 0.94
10.44 5.14 11.50 13,635 1.25 2.09 2.60 0.74
10.44 5.73 11.50 68 0.25 3.20 1.60 1.85
10.44 5.41 11.50 392 0.75 2.86 2.10 1.51
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO
Financial Highlights
Selected Data for a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
------------------------- ------------------------
NET ASSET NET REALIZED FROM NET
VALUE, NET AND UNREALIZED FROM NET REALIZED GAIN NET INCREASE
BEGINNING INVESTMENT GAIN ON INVESTMENT ON INVESTMENT IN NET ASSET
OF PERIOD INCOME INVESTMENTS INCOME TRANSACTIONS VALUE
FOR THE PERIOD ENDED JUNE 30 (UNAUDITED),
<S> <C> <C> <C> <C> <C> <C>
1998 - Class A Shares(b) $10.00 $0.06 $0.71 $(0.06) $-- $0.71
1998 - Class B Shares(b) 10.00 0.04 0.70 (0.04) -- 0.70
1998 - Class C Shares(b) 10.00 0.04 0.69 (0.04) -- 0.69
1998 - Institutional
Shares(b) 10.00 0.07 0.71 (0.07) -- 0.71
1998 - Service Shares(b) 10.00 0.05 0.70 (0.05) -- 0.70
</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 January 2, 1998.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
22 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME STRATEGY PORTFOLIO
<TABLE>
<CAPTION>
RATIOS ASSUMING NO VOLUNTARY WAIVER
OF FEES OR EXPENSE LIMITATIONS
-----------------------------------
RATIO OF RATIO OF
NET ASSETS RATIO OF NET INVESTMENT RATIO OF NET INVESTMENT
NET ASSET PORTFOLIO AT END OF NET EXPENSES INCOME TO EXPENSES TO INCOME
VALUE, END TOTAL TURNOVER PERIOD TO AVERAGE AVERAGE NET AVERAGE NET TO AVERAGE
OF PERIOD RETURN(A)(D) RATE(D) (IN 000S) NET ASSETS(C) ASSETS(C) ASSETS(C) NET ASSETS(C)
<S> <C> <C> <C> <C> <C> <C> <C>
$10.71 7.70% 14.58% $123,007 0.60% 1.92% 1.28% 1.24%
10.70 7.41 14.58 85,316 1.25 1.30 1.78 0.77
10.69 7.30 14.58 67,306 1.25 1.29 1.78 0.76
10.71 7.81 14.58 642 0.25 2.18 0.78 1.65
10.70 7.55 14.58 979 0.75 1.88 1.28 1.35
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO
Financial Highlights
Selected Data for a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
------------------------- ------------------------
NET REALIZED
NET ASSET AND UNREALIZED FROM NET
VALUE, NET GAIN ON FROM NET REALIZED GAIN NET INCREASE
BEGINNING INVESTMENT INVESTMENT INVESTMENT ON INVESTMENT IN NET ASSET
OF PERIOD INCOME TRANSACTIONS INCOME TRANSACTIONS VALUE
FOR THE PERIOD ENDED JUNE 30 (UNAUDITED),
<S> <C> <C> <C> <C> <C> <C>
1998 - Class A Shares(b) $10.00 $0.03 $0.78 $(0.03) $-- $0.78
1998 - Class B Shares(b) 10.00 -- 0.77 -- -- 0.77
1998 - Class C Shares(b) 10.00 -- 0.78 -- -- 0.78
1998 - Institutional
Shares(b) 10.00 0.04 0.78 (0.04) -- 0.78
1998 - Service Shares(b) 10.00 0.01 0.78 (0.01) -- 0.78
</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 January 2, 1998.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
24 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
GOLDMAN SACHS GROWTH STRATEGY PORTFOLIO
<TABLE>
<CAPTION>
RATIOS ASSUMING NO VOLUNTARY WAIVER
OF FEES OR EXPENSE LIMITATIONS
-----------------------------------
RATIO OF RATIO OF
NET ASSETS RATIO OF NET INVESTMENT RATIO OF NET INVESTMENT
NET ASSET PORTFOLIO AT END OF NET EXPENSES INCOME (LOSS) TO EXPENSES TO INCOME (LOSS) TO
VALUE, END TOTAL TURNOVER PERIOD TO AVERAGE AVERAGE NET AVERAGE NET AVERAGE NET
OF PERIOD RETURN(A)(D) RATE(D) (IN 000S) NET ASSETS(C) ASSETS(C) ASSETS(C) ASSETS(C)
<S> <C> <C> <C> <C> <C> <C> <C>
$10.78 8.05% 6.49% $86,268 0.60% 0.81% 1.41% --%
10.77 7.75 6.49 68,569 1.25 0.16 1.91 (0.50)
10.78 7.84 6.49 43,467 1.25 0.15 1.91 (0.51)
10.78 8.16 6.49 379 0.25 1.05 0.91 0.39
10.78 7.93 6.49 149 0.75 0.59 1.41 (0.07)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
GOLDMAN SACHS AGGRESSIVE GROWTH STRATEGY PORTFOLIO
Financial Highlights
Selected Data for a Share Outstanding Throughout The Period
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(E) SHAREHOLDERS
------------------------- ------------------------
NET REALIZED
NET ASSET NET AND UNREALIZED FROM NET
VALUE, INVESTMENT GAIN ON FROM NET REALIZED GAIN NET INCREASE
BEGINNING INCOME INVESTMENTS INVESTMENT ON INVESTMENT IN NET ASSET
OF PERIOD (LOSS) TRANSACTIONS INCOME TRANSACTIONS VALUE
FOR THE PERIOD ENDED JUNE 30 (UNAUDITED),
<S> <C> <C> <C> <C> <C> <C>
1998 - Class A Shares(b) $10.00 $ -- $0.76 $-- $-- $0.76
1998 - Class B Shares(b) 10.00 (0.02) 0.76 -- -- 0.74
1998 - Class C Shares(b) 10.00 (0.02) 0.76 -- -- 0.74
1998 - Institutional
Shares(b) 10.00 0.01 0.75 -- -- 0.76
1998 - Service Shares(b) 10.00 -- 0.76 -- -- 0.76
</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 January 2, 1998.
(c) Annualized.
(d) Not annualized.
(e) Includes the balancing effect of calculating per share amounts.
26 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.
<PAGE>
GOLDMAN SACHS AGGRESSIVE GROWTH STRATEGY PORTFOLIO
<TABLE>
<CAPTION>
RATIOS ASSUMING NO VOLUNTARY WAIVER
OF FEES OR EXPENSE LIMITATIONS
-----------------------------------
RATIO OF RATIO OF
NET ASSETS RATIO OF NET INVESTMENT RATIO OF NET INVESTMENT
NET ASSET PORTFOLIO AT END OF NET EXPENSES INCOME (LOSS) TO EXPENSES TO INCOME (LOSS) TO
VALUE, END TOTAL TURNOVER PERIOD TO AVERAGE AVERAGE NET AVERAGE NET AVERAGE NET
OF PERIOD RETURN(A)(D) RATE (IN 000S) NET ASSETS(C) ASSETS(C) ASSETS(C) ASSETS(C)
<S> <C> <C> <C> <C> <C> <C> <C>
$10.76 7.60% 2.76% $30,445 0.60% -- % 1.99% (1.39)%
10.74 7.40 2.76 30,861 1.25 (0.67) 2.49 (1.91)
10.74 7.40 2.76 15,195 1.25 (0.67) 2.49 (1.91)
10.76 7.60 2.76 2 0.25 0.28 1.49 (0.96)
10.76 7.60 2.76 87 0.75 (0.22) 1.99 (1.46)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
Notes to Financial Statements
June 30, 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 Goldman Sachs Income Strategy
Portfolio (Income Strategy), Goldman Sachs Growth and Income Strategy Portfo-
lio (Growth and Income Strategy), Goldman Sachs Growth Strategy Portfolio
(Growth Strategy) and Goldman Sachs Aggressive Growth Strategy Portfolio (Ag-
gressive Growth Strategy), collectively, (the "Portfolios") or individually
(a "Portfolio"). All of the Portfolios offer five classes of shares --Class
A, Class B, Class C, Institutional and Service shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios. 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 -- Each Portfolio invests in a combination of Under-
lying Funds (the "Underlying Funds") for which Goldman Sachs Asset Management
("GSAM"), a separate operating division of Goldman Sachs & Co. ("Goldman
Sachs"), Goldman Sachs Funds Management L.P. ("GSFM"), an affiliate of
Goldman Sachs or Goldman Sachs Asset Management International ("GSAMI"), an
affiliate of Goldman Sachs, acts as investment adviser. Investments in the
Underlying Funds are valued at the closing net asset value per share of each
Underlying Fund on the day of valuation. Because each Portfolio invests pri-
marily in other mutual funds, which fluctuate in value, the Portfolios'
shares will correspondingly fluctuate in value. Short-term debt obligations
maturing in sixty days or less are valued at amortized cost.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
recorded on trade date. Realized gains and losses on sales of portfolio secu-
rities are calculated on the identified cost basis. Dividend income is re-
corded on the ex-dividend date. Interest income is determined on the basis of
interest accrued.
C. FEDERAL TAXES -- It is each Portfolio's policy to comply with the require-
ments of the Internal Revenue Code applicable to regulated investment compa-
nies and to distribute each year substantially all of its investment company
taxable income to its shareholders. Accordingly, no federal tax provisions
are required.
The characterization of distributions to shareholders for financial report-
ing purposes is determined in accordance with income tax rules. Therefore,
the source of a Portfolio's distributions may be shown in the accompanying
financial statements as either from or in excess of net investment income or
net realized gain on investment transactions, or from paid-in-capital, de-
pending on the type of book/tax differences that may exist.
D. EXPENSES -- Expenses incurred by the Trust that do not specifically relate
to an individual Portfolio of the Trust are generally allocated to the Port-
folios based on each Portfolio's relative average net assets for the period.
Class A, Class B and Class C shareholders of the Portfolios bear all ex-
penses and fees relating to their respective distribution and authorized
dealer service plans. Shareholders of Service shares bear all expenses and
fees paid to service organizations for their services with respect to such
shares.
3. AGREEMENTS
Pursuant to the Investment Management Agreement (the "Agreement"), GSAM
serves as the investment adviser to each Portfolio. Under the Agreement,
GSAM, subject to the general supervision of the Trust's Board of Trustees,
manages the Portfolios. As compensation for the services rendered pursuant to
the Agreement, the assumption of the expenses related thereto and administer-
ing the Portfolios' business affairs, including providing facilities, GSAM is
entitled to a fee, computed daily and payable monthly at an annual rate equal
to 0.35% of average daily net assets of each Portfolio.
28
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
During the period, GSAM has voluntarily agreed to limit "Other Expenses",
(excluding management fees, distribution and authorized dealer service fees,
taxes, interest, brokerage, litigation, Service share fees, indemnification
costs and other extraordinary expenses) to the extent that such expenses ex-
ceed 0.10% of the average daily net assets of each Portfolio.
Goldman Sachs serves as Distributor of the shares of the Portfolios pursu-
ant to Distribution Agreements. 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 Portfolios that it retained approximately $85,000,
$522,000, $331,000 and $149,000 for the period ended June 30, 1998 for Income
Strategy, Growth and Income Strategy, Growth Strategy and Aggressive Growth
Strategy, respectively.
The Trust, on behalf of each Portfolio, has adopted Distribution Plans pur-
suant to Rule 12b-1. Under the Distribution Plans, Goldman Sachs is entitled
to a quarterly fee from each Portfolio for distribution services equal, on an
annual basis, to .25%, .75% and .75% of the average daily net assets attrib-
utable to Class A, Class B and Class C shares, respectively.
The Trust, on behalf of each Portfolio, has adopted Authorized Dealer Serv-
ice Plans (the "Dealer Service Plans") pursuant to which Goldman Sachs and
Authorized Dealers are compensated for providing personal and account mainte-
nance services. Each Portfolio pays a fee under the Dealer Service Plan
equal, on an annual basis, up to 0.25% of its average daily net assets at-
tributable to Class A, Class B and Class C shares. Goldman Sachs also serves
as Transfer Agent of the Portfolios for a fee.
For the period ended June 30, 1998, the advisor and distributor have volun-
tarily agreed to waive certain fees and reimburse other expenses as follows
(in thousands):
<TABLE>
<CAPTION>
WAIVERS
------------------
CLASS A TOTAL WAIVERS REIMBURSEMENT
PORTFOLIO MANAGEMENT 12B-1 REIMBURSEMENT AND REIMBURSEMENT OUTSTANDING
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income
Strategy $ 26 $10 $149 $185 $81
-----------------------------------------------------------------------------------
Growth and
Income
Strategy 116 39 191 346 135
-----------------------------------------------------------------------------------
Growth
Strategy 82 27 190 299 130
-----------------------------------------------------------------------------------
Aggressive
Growth
Strategy 31 9 162 202 97
-----------------------------------------------------------------------------------
</TABLE>
As of June 30, 1998, the "Amounts owed to affiliates" are as follows (in
thousands):
<TABLE>
<CAPTION>
MANAGEMENT AUTHORIZED DEALER TRANSFER DISTRIBUTION
PORTFOLIO FEES SERVICE FEES AGENT FEES FEES TOTAL
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Strategy $ 7 $ 23 $35 $ 34 $ 99
-----------------------------------------------------------------------------
Growth and Income
Strategy 30 102 43 167 342
-----------------------------------------------------------------------------
Growth Strategy 22 73 27 123 245
-----------------------------------------------------------------------------
Aggressive Growth
Strategy 8 28 55 51 142
-----------------------------------------------------------------------------
</TABLE>
4. SERVICE PLAN
The Trust, on behalf of each Portfolio, has adopted a Service Plan. This plan
allows for Service shares to compensate service organizations for providing
varying 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 an annualized basis), respectively, of the average daily net asset
value of the Service shares.
29
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
Notes to Financial Statements
June 30, 1998 (Unaudited)
5. SUMMARY OF SHARE TRANSACTIONS
Share activity for the period ended June 30, 1998 is as follows:
<TABLE>
<CAPTION>
GOLDMAN SACHS
INCOME STRATEGY PORTFOLIO(A)
---------------------------
SHARES DOLLARS
---------------------------
<S> <C> <C>
CLASS A SHARES
Shares sold 2,877,099 $ 30,114,067
Reinvestment of dividends and distributions 14,551 151,902
Shares repurchased (171,137) (1,790,023)
---------------------------
2,720,513 28,475,946
----------------------------------------------------------------------------
CLASS B SHARES
Shares sold 1,628,941 16,983,997
Reinvestment of dividends and distributions 5,978 62,377
Shares repurchased (36,296) (379,624)
---------------------------
1,598,623 16,666,750
----------------------------------------------------------------------------
CLASS C SHARES
Shares sold 1,408,523 14,714,285
Reinvestment of dividends and distributions 5,572 58,196
Shares repurchased (108,413) (1,134,993)
---------------------------
1,305,682 13,637,488
----------------------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 6,443 68,194
Reinvestment of dividends and distributions 48 503
Shares repurchased -- (10)
---------------------------
6,491 68,687
----------------------------------------------------------------------------
SERVICE SHARES
Shares sold 40,202 422,112
Reinvestment of dividends and distributions 174 1,815
Shares repurchased (2,846) (29,517)
---------------------------
37,530 394,410
----------------------------------------------------------------------------
NET INCREASE IN SHARES 5,668,839 $ 59,243,281
----------------------------------------------------------------------------
</TABLE>
(a) Class A, Class B, Class C, Institutional and Service share activity
commenced on January 2, 1998.
6. PORTFOLIO SECURITY TRANSACTIONS
Purchases and proceeds of sales or maturities of long-term securities for the
period ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
----------------------------------------------------
<S> <C> <C>
Income Strategy $ 61,071,933 $ 3,556,539
----------------------------------------------------
Growth and Income Strategy 287,762,145 19,265,005
----------------------------------------------------
Growth Strategy 201,040,862 6,116,000
----------------------------------------------------
Aggressive Growth Strategy 76,949,091 996,433
----------------------------------------------------
</TABLE>
30
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
GROWTH AND INCOME STRATEGY PORTFOLIO(A) GROWTH STRATEGY PORTFOLIO(A) AGGRESSIVE GROWTH STRATEGY PORTFOLIO(A)
--------------------------------------------------------------------------------------------------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11,638,632 $ 124,939,296 8,130,748 $ 88,549,649 2,999,160 $ 32,937,854
44,082 470,002 12,989 139,478 458 5,000
(197,195) (2,118,896) (143,628) (1,553,713) (169,986) (1,884,459)
--------------------------------------------------------------------------------------------------------------------
11,485,519 123,290,402 8,000,109 87,135,414 2,829,632 31,058,395
--------------------------------------------------------------------------------------------------------------------
8,059,317 86,695,607 6,471,799 70,551,964 2,961,452 32,547,554
19,582 208,864 1,745 18,818 -- --
(102,080) (1,101,899) (109,724) (1,203,658) (88,001) (960,242)
--------------------------------------------------------------------------------------------------------------------
7,976,819 85,802,572 6,363,820 69,367,124 2,873,451 31,587,312
--------------------------------------------------------------------------------------------------------------------
6,354,913 68,294,059 4,070,956 44,222,841 1,457,078 15,932,065
14,905 158,691 830 8,914 -- --
(71,412) (764,988) (38,271) (411,275) (42,181) (453,659)
--------------------------------------------------------------------------------------------------------------------
6,298,406 67,687,762 4,033,515 43,820,480 1,414,897 15,478,406
--------------------------------------------------------------------------------------------------------------------
59,784 636,388 36,024 392,405 159 1,597
179 1,923 111 1,199 -- --
-- -- (966) (10,400) -- --
--------------------------------------------------------------------------------------------------------------------
59,963 638,311 35,169 383,204 159 1,597
--------------------------------------------------------------------------------------------------------------------
93,431 1,022,908 14,269 158,390 8,095 91,103
324 3,439 14 153 -- --
(2,268) (24,115) (463) (5,000) -- --
--------------------------------------------------------------------------------------------------------------------
91,487 1,002,232 13,820 153,543 8,095 91,103
--------------------------------------------------------------------------------------------------------------------
25,912,194 $ 278,421,279 18,446,433 $ 200,859,765 7,126,234 $ 78,216,813
--------------------------------------------------------------------------------------------------------------------
</TABLE>
7. LINE OF CREDIT FACILITY
The Portfolios participate in a $250,000,000 uncommitted, unsecured revolving
line of credit facility and a $50,000,000 committed, unsecured revolving line
of credit facility. Both facilities are to be used solely for temporary or
emergency purposes. Under the most restrictive arrangement, each Portfolio
must own securities having a market value in excess of 300% of the total bank
borrowings. The interest rate on the borrowings is based on the federal funds
rate. The committed facility also requires a fee to be paid by the Portfolio
based on the amount of the commitment which has not been utilized. During the
period ended June 30, 1998, the Portfolios did not have any borrowings under
these facilities.
31
<PAGE>
GOLDMAN SACHS ASSET ALLOCATION PORTFOLIOS
Notes to Financial Statements
June 30, 1998 (Unaudited)
8. 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 Portfolios' custodian.
9. JOINT REPURCHASE AGREEMENT ACCOUNT
The Portfolios, together with other registered investment companies having
management agreements with GSAM or their affiliates, transfer uninvested cash
into joint accounts, the daily aggregate balance of which is invested in one
or more repurchase agreements. The underlying securities for the repurchase
agreements are U.S. Treasury and agency obligations. At June 30, 1998, Income
Strategy, Growth and Income Strategy, Growth Strategy and Aggressive Growth
Strategy had undivided interests in the repurchase agreements in the follow-
ing joint account which equaled $300,000, $2,500,000, $1,600,000 and
$800,000, respectively, in principal amount. At June 30, 1998, the repurchase
agreement in the joint account along with the corresponding underlying secu-
rities (including the type of security, market value, interest rate and matu-
rity data) were as follows:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CIBC OPPENHEIMER, INC., $250,000,000 5.70% 07/01/1998 $250,000,000
dated 06/30/98, repurchase price $250,039,583 (total collateral value $255,475,165
consisting of FHLMC: 7.00%, 12/01/27)
--------------------------------------------------------------------------------------
LEHMAN BROTHERS INC., $300,000,000 6.00% 07/01/1998 $300,000,000
dated 06/30/98, repurchase price $300,050,000 (total collateral value $305,999,913
consisting of FHLMC: 6.00%-12.50%, 09/01/98-06/01/28: FNMA: 6.00%-9.50%, 03/01/02-
08/01/26)
--------------------------------------------------------------------------------------
LEHMAN BROTHERS INC., $270,000,000 5.85% 07/01/1998 $270,000,000
dated 06/30/98, repurchase price $270,043,875 (total collateral value $275,398,468
consisting of FHLMC: 5.50%-12.00%, 10/01/98-11/01/27: FNMA: 6.29%-9.50%, 05/01/02-
07/01/25)
--------------------------------------------------------------------------------------
SALOMON-SMITH BARNEY, $264,400,000 5.75% 07/01/1998 $264,400,000
dated 06/30/98, repurchase price $264,442,231 (total collateral value $269,848,754
consisting of U.S. Treasury Stripped Interest Only Security: 05/14/04; U.S. Treasury
Stripped Principal Only Securities: 7.50%-8.75%, 08/15/00-11/15/01)
--------------------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,084,400,000
--------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs
Asset Allocation Portfolios
THE GOLDMAN
SACHS ADVANTAGE
When you invest in Goldman Sachs Asset Allocation Portfolios, you can capitalize
on Goldman Sachs' 129-year history of excellence while benefiting from the
firm's leadership in three areas:
1
Global Resources
With professionals based 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.
How you choose to allocate your assets may have a far greater impact on your
portfolio's total return potential than any other investment decision you
can make. By carefully balancing the percentage of assets allocated to each
asset class -- stocks, bonds and cash -- a portfolio can be tailored to your
current investment goals and timeframes.
The Goldman Sachs Asset Allocation Portfolios offer you easy access to the
benefits associated with asset allocation. Each is designed to provide
results consistent with your investment objectives via a complementary blend
of Goldman Sachs Funds.
Target Your Needs
The four Goldman Sachs Asset Allocation Portfolios -- Income Strategy,
Growth and Income Strategy, Growth Strategy and Aggressive Growth Strategy
-- are carefully tailored to specific financial goals. As your investment
objectives change, you can exchange shares among the Goldman Sachs Asset
Allocation Portfolios without any additional charge.* (Please note: in
general, greater returns are associated with greater risk.)
----------------------------------------------------------------------------
Goldman Sachs Asset Allocation Portfolios
GROWTH AND INCOME STRATEGY AGGRESSIVE GROWTH STRATEGY
- --------------------------------------------------------------------------------
Lower Risk/Return Higher Risk/Return
- --------------------------------------------------------------------------------
INCOME STRATEGY GROWTH STRATEGY
For More Information
To learn more about the Goldman Sachs Asset Allocation Portfolios, 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 P. Strubel
OFFICERS
Douglas C. Grip, President
James A. Fitzpatrick, Vice President
Nancy L. Mucker, Vice President
John M. Perlowski, Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS INTERNATIONAL
133 Peterborough Court
London, England EC4A 2BB
GOLDMAN SACHS ASSET MANAGEMENT
Investment Adviser
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.
CORE International Equity Fund's, Global Income Fund's and Core Fixed 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 U.S. securities markets, foreign
markets may be less liquid, more volatile and less subject to governmental
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.
Short Duration Government Income Fund's net asset value and yield are not
guaranteed by the U.S. Government or by its agencies, instrumentalities, or
sponsored enterprises.
The High Yield Fund invests primarily in high yield, fixed income securities
rated below investment grade that are considered speculative and generally
involve greater price volatility and greater risk of loss of principal and
interest than investment in higher rated fixed income securities.
The CORE Small Cap Fund invests in stocks of smaller companies. The stocks of
smaller companies are often associated with higher risks than the stocks of
larger companies, including higher volatility.
Emerging Markets Equity Fund's investment in securities of foreign issuers and
foreign currencies entails certain risks not customarily associated with
investing in securities of U.S. issuers. Quoted in U.S. dollars. 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: August 31, 1998 AASAR / 80K / 8-98
