<PAGE>
Goldman Sachs Funds
================================================================================
GROWTH ANDINCOME FUND Annual Report January 31, 1998
================================================================================
Long-term capital growth and growth
of income potential from a diversified
portfolio of equity securities.
[GRAPHIC]
[LOGO]
Goldman
Sachs
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Fund Basics
as of January 31, 1998
Assets Under Management
-----------------------
$1.6 Billion
-----------------------
Number of Holdings
-----------------------
46
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GSGRX
-----------------------
Class B Shares
-----------------------
GSGBX
-----------------------
Class C Shares
-----------------------
GSGCX
-----------------------
Institutional Shares
-----------------------
GSIIX
-----------------------
Service Shares
-----------------------
GSGSX
-----------------------
================================================================================
PERFORMANCE REVIEW
================================================================================
<TABLE>
<CAPTION>
January 31, 1997- Fund Total Return S&P 500
January 31, 1998 (based on NAV)(1) Index(2)
- --------------------------------------------------------------------------------
<S> <C> <C>
Class A 23.71% 26.92%
Class B 22.87% 26.92%
Class C (8/15/97-1/31/98) 0.51% 6.78%
Institutional 24.24% 26.92%
Service 23.63% 26.92%
- --------------------------------------------------------------------------------
</TABLE>
(1) The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares.
(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 AVERAGE ANNUAL TOTAL RETURN(3)
================================================================================
<TABLE>
<CAPTION>
For the period Class C
ending 12/31/97 Class A Class B (Cumulative)(4) Institutional Service
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Last 12 Months 20.88% 21.51% N/A 28.44% 27.87%
Since Inception 18.72% 24.49% -1.19% 28.56% 25.78%
(2/5/93) (5/1/96) (8/15/97) (6/3/96) (3/6/96)
- --------------------------------------------------------------------------------
</TABLE>
(3) 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 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 and the assumed deferred
sales charge for Class B shares (5% maximum declining to 0% after six
years). The public offering price of the Class A shares on 1/31/98 was
$27.44 and represents the NAV plus the maximum sales charge of 5.5%.
(4) 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 the assumed deferred sales charge for
Class C shares (1% if redeemed within 12 months of purchase).
================================================================================
TOP 10 HOLDINGS AS OF 1/31/98
================================================================================
<TABLE>
<CAPTION>
Percentage of
Company Holding Total Net Assets Line of Business
- --------------------------------------------------------------------------------
<S> <C> <C>
Quantum Corp. 4.5% Tape and Disk Drive Products
Lockheed Martin Corp. 4.0% Defense
Cigna Corp. 3.6% Insurance
Aetna Inc. 3.6% Healthcare Management
Lear Corp. 3.6% Auto Supplies
Morgan Stanley, Dean Witter Discover 3.2% Financial Services
Tosco Corp. 3.0% Oil Refining and Marketing
Union Carbide Corp. 2.9% Chemicals and Plastics
Fruit of the Loom, Inc. 2.9% Clothing Manufacturer
Unicom Corp. 2.9% Electric Utilities
- --------------------------------------------------------------------------------
</TABLE>
The top 10 holdings may not be representative of the Fund's future
investments.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost.
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Market Overview
Dear Shareholder,
The U.S. stock market took investors on an unsteady ride during the period under
review -- one that saw the market climb to record highs, and plummet in what
would be the market's largest single-day percentage drop in a decade.
Nonetheless, for the 12 months ended January 31, 1998, the market posted an
approximate 27% return as measured by the S&P 500 stock index -- well above
stocks' historical long-term average return.
o The U.S. Equity Market: An Upward Climb Marked by Periods of
Volatility -- Market turbulence early in the period was largely fueled
by speculation over Federal Reserve policy. The Fed's decision to
increase the Federal funds rate in March was perceived by investors as
potentially the first in a series of tightenings, and the market,
after a period of buoyancy, sold off sharply. By late April, though,
economic indicators slowed, reassuring the market that further rate
hikes were unlikely. Renewed investor confidence sent the market
soaring. Throughout the remainder of the year, several factors,
including a lack of inflationary pressure, furthered the market's
upward climb. Waxing and waning investor confidence, however, caused a
degree of market volatility. Most notably, in October, investor
uncertainty helped to foster overreaction to falling Asian markets.
The market fell precipitously, posting the largest single-day decline
in nearly a decade. Soon thereafter, the market firmed as investors
accepted the argument that Asian market weakness would have little
impact on U.S. companies.
o The U.S. Economy: Robust Activity, Then Moderation -- Economic
activity gained momentum during the first quarter of 1997, with real
GDP surging at a revised 4.9% annualized rate. Growth moderated
somewhat during the second quarter, a slowdown that continued into the
second half of the year. Signs that the U.S. economy remained strong
were eminently present, though, despite the fact that Asian market
turmoil cast a shadow over sales and trade prospects to that region.
Most notably, U.S. unemployment figures reached a 24-year low during
the fourth quarter, as the proportion of working Americans --
approximately 64% -- reached an unprecedented level.
o Outlook: Expect Moderating Economic Growth and Low Inflation -- Going
forward, we believe the inflation and interest rate environments will
likely remain favorable, particularly over the near term. Furthermore,
although we believe the equity market will produce returns closer to
the historic norm, this scenario should also be accompanied by more
normal levels of volatility.
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 Co-Head, Goldman Sachs
Asset Management Asset Management
February 27, 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 12-month period ended January 31, 1998.
Outperformance Relative to Peers
The Fund's share classes fared well in the peer rankings for the one-year
period ended January 31, 1998, according to Lipper Analytical Services,
Inc. The Fund's Class A shares, Class B shares and Institutional shares
outperformed the 21.82% average return of the Lipper Growth and Income Fund
peer group (ranking 214, 255 and 187, respectively, out of 633 funds. Class
C share and Service share rankings were not available. Please note that
Lipper rankings do not take sales charges into account and that past
performance is not a guarantee of future results).
Sector Allocations
As bottom-up stock pickers, we do not focus on sectors as guides to value.
Instead, we evaluate individual stocks on a one-by-one basis, sometimes
investing in multiple companies within a sector or industry. Hence,
throughout most of the period, we were overweighted in consumer durables
and capital goods. These sectors, which are composed of cyclical stocks,
became significantly discounted in the year-end "flight to quality," which
slightly hurt Fund performance. We believe, however, in the potential of
cyclical stocks to generate strong earnings even in a downturn.
Portfolio Highlights
o Ford Motor Co. -- New products and cost-cutting efforts drove the auto
manufacturer's earnings during the period under review. The company's
performance in 1998 will largely depend upon changes in its capital
structure.
o Tenet Health Care Corp. -- The nation's number two-ranked hospital
chain, Tenet benefited from its acquisition of OrNda, which helped the
company build a strong market position. We believe the company will
continue to acquire not-for-profit hospitals in a market with few
buyers.
o Morgan Stanley Dean Witter Discover & Co. -- This financial services
company was a top performer during the period under review, as Wall
Street finally recognized its post-merger profitability.
o Unicom Corp. -- Unicom is an electric utility company servicing the
northern third of Illinois, including most of the Chicago metropolitan
area. After a period of sustained weakness due to negative press and
regulatory rulings, investors regained confidence in Unicom when local
industry legislation concerns were resolved. We believe in this
company's fundamentals and took advantage of price declines earlier in
the year to increase our position.
2
<PAGE>
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.
o Centex Corp. -- Homebuilding stock Centex performed well in the
slow-growth, low-inflation economic environment, but company-specific
developments further abetted performance. The company appreciated as
the market began to see results in cost-cutting efforts in
homebuilding operations, as well as the company's use of its
substantial free cash flow to reduce debt and grow the business.
Key New Acquisitions
o Quantum Corp. -- The disk drive and digital linear tape (DLT)
manufacturer performed well, although it suffered a setback toward the
end of the period when company-specific issues were exacerbated by
industry oversupply. Going forward, we believe the company's DLT
business will be extremely profitable (DLT provides rapid backup for
network servers).
o Wells Fargo & Co. -- The second largest bank in California, Wells
Fargo is the most advanced of its peers in lowering branch
distribution costs and in data-mining. Following initial difficulties
after a merger with First Interstate, prospects for the bank are
positive.
Portfolio Outlook
We are keeping a close eye on the U.S. equity market's current valuation.
In recent memory, inflation has consistently surprised on the downside,
with technology improving overall productivity and the Asian economic
events driving down prices of imported goods. As many investors believe
this low-inflation environment will continue, the market's P/E level has
risen. The current S&P 500 P/E ratio seems unsustainable to us, as the
combination of rising labor costs and Asia-driven pricing pressure could
squeeze U.S. margins. By focusing on reasonably valued and discounted
names, however, we feel comfortable with our domestic portfolio.
We thank you for your investment and look forward to your continued
confidence.
Sincerely,
/s/ Ronald E. Gutfleish /s/ G. Lee Anderson
Ronald E. Gutfleish G. Lee Anderson
Portfolio Manager, Portfolio Manager,
Goldman Sachs Growth Goldman Sachs Growth
and Income Fund and Income Fund
/s/ Eileen A. Aptman
Eileen A. Aptman
Portfolio Manager,
Goldman Sachs Growth and Income Fund
February 27, 1998
3
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
For Best Results,
It's Time in the Market That Counts
For optimal long-term
investment results,
time in the market can
make the difference.
After a year of record-breaking returns in the U.S. stock market, forecasts
for 1998 are more subdued. As a result, investors may be tempted to move
out of equities. Doing so, however, could substantially reduce a
portfolio's long-term return potential.
Investors Who Time the Market Get Less on Their Investment
Investors who try to time the market -- that is, those who try to predict
market highs and lows, and invest accordingly -- can do more harm than good
to their portfolio's long-term returns.
The chart below illustrates the effect that missing the "best" days in the
market -- when stocks post their largest gains -- would have had on a
portfolio's returns over the 15-year period from 1982 through 1996.
---------------------------------------------------------------------------
The Impact of Missing the "Best" Days in the Market (1982-1996)
(Annual Return Percentage)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATTER]
<TABLE>
<CAPTION>
Annual Return
Percentage
-------------
<S> <C>
Invested all 5,478 trading days 16.78%
Less 10 best days 13.39%
Less 40 best days 7.53%
Less 70 best days 2.87%
</TABLE>
Based on the daily total returns of the S&P 500 Index. It assumes that all
dividends were reinvested and that there were no investment fees, sales
charges or taxes paid during the period. The returns shown above have been
annualized. The chart is for illustrative purposes only and is not
representative of any Goldman Sachs Fund. Past performance is not
indicative of future results. Investors cannot invest in the Index
directly.
Over the Long Term, a Buy and Hold Strategy Works Best
Over the past 20 years, the market has generated negative returns only
twice. In other words, over the long term, securities prices have
increased. This statistic illustrates a common theory about equity
investing: buying and holding securities is generally a sounder investment
strategy than timing the market.
For More Information
A diversified portfolio of stocks is one of the best ways to reduce the
effects of market fluctuations on a portfolio. For most investors,
diversification is most easily acquired through mutual funds. Goldman Sachs
Asset Management offers a broad spectrum of equity mutual funds that can
help investors weather market ups and downs. For more information on these
and other Goldman Sachs Funds, contact your investment professional.
4
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Performance Summary
January 31, 1998
The following graph shows the value as of January 31, 1998, of a $10,000 in-
vestment made (with the maximum sales charge of 5.5%) in Class A shares on
February 5, 1993. 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 consid-
ered indicative of future performance which will fluctuate with changes in
market conditions. These performance fluctuations will cause an investor's
shares, when redeemed, to be worth more or less than their original cost.
Performance of Class B, Class C, Institutional and Service 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
JANUARY 31, 1998.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Growth and Income Fund (Class A) S&P 500
<S> <C> <C>
02/05/1993 9450 10000
9507 9943
9773 10153
9513 9907
9727 10172
9637 10202
Jul-93 9764 10161
10045 10547
9942 10466
9962 10682
9908 10580
10185 10708
Jan-94 10686 11073
10842 10772
10674 10302
10722 10434
10960 10606
10739 10346
Jul-94 10950 10685
11570 11123
11383 10852
11055 11096
10645 10692
10787 10850
Jan-95 11110 11131
11764 11565
12124 11908
12385 12258
12752 12748
13023 13044
Jul-95 13434 13477
13661 13511
13930 14081
13646 14030
14115 14646
14399 14929
Jan-96 14716 15436
15026 15580
15132 15729
15398 15961
15709 16372
15457 16435
Jul-96 15004 15708
15405 16040
16140 16943
16549 17410
17860 18727
18152 18356
Jan-97 18911 19503
19286 19655
18714 18848
19556 19971
20937 21187
21555 22137
Jul-97 23420 23899
23208 22560
24044 23796
23061 23002
23143 24067
23214 24481
Jan-98 23395 24752
</TABLE>
<TABLE>
<CAPTION>
SINCE INCEPTION FIVE YEARS ONE YEAR
AVERAGE ANNUAL TOTAL RETURN THROUGH JANUARY 31, 1998
<S> <C> <C> <C>
CLASS A (COMMENCED FEBRUARY 5, 1993)
Excluding sales charges 19.91% n/a 23.71%
Including sales charges 18.56% n/a 16.90%
-----------------------------------------------------------------------------
CLASS B (COMMENCED MAY 1, 1996)
Excluding redemption charges 26.06% n/a 22.87%
Including redemption charges 23.72% n/a 17.36%
-----------------------------------------------------------------------------
CLASS C (COMMENCED AUGUST 15, 1997)(A)
Excluding redemption charges 0.51% n/a n/a
Including redemption charges -0.50% n/a n/a
-----------------------------------------------------------------------------
INSTITUTIONAL CLASS (COMMENCED JUNE 3,
1996) 27.58% n/a 24.24%
-----------------------------------------------------------------------------
SERVICE CLASS (COMMENCED MARCH 6, 1996) 25.01% n/a 23.63%
-----------------------------------------------------------------------------
</TABLE>
(a) Represents aggregate total return since the class has not been in opera-
tion for a full 12 months.
5
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Investments
January 31, 1998
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - 93.0%
<C> <S> <C>
AEROSPACE & DEFENSE - 5.7%
576,440 Boeing Company $ 27,416,928
611,400 Lockheed Martin Corp. 63,623,813
-----------------------------------------
91,040,741
-----------------------------------------------------------------
AIRLINES - 3.5%
238,400 AMR Corp.* 30,098,000
569,900 Continental Airlines Inc.* 26,429,113
-----------------------------------------
56,527,113
-----------------------------------------------------------------
APPLIANCES - 2.2%
933,800 Sunbeam Corp. 35,426,038
-----------------------------------------------------------------
AUTO/VEHICLE - 5.0%
472,500 Ford Motor Co. 24,097,500
1,151,700 Lear Corp.* 57,225,094
-----------------------------------------
81,322,594
-----------------------------------------------------------------
BANKS - 8.3%
359,000 Chase Manhattan Corp. 38,480,313
542,100 Fleet Financial Group Inc. 38,827,913
236,600 Republic N.Y. Corp. 25,759,825
96,800 Wells Fargo & Co. 29,911,200
-----------------------------------------
132,979,251
-----------------------------------------------------------------
CHEMICAL PRODUCTS - 4.9%
991,600 IMC Global Inc. 31,979,100
1,066,600 Union Carbide Corp. 46,730,413
-----------------------------------------
78,709,513
-----------------------------------------------------------------
COMPUTER PERIPHERALS - 4.5%
2,986,400 Quantum Corp.* 72,793,500
-----------------------------------------------------------------
DATACOM EQUIPMENT - 2.1%
1,255,200 Bay Networks, Inc.* 34,125,750
-----------------------------------------------------------------
DEPARTMENT STORES - 0.6%
209,400 Sears Roebuck & Co. 9,645,488
-----------------------------------------------------------------
FOREST PRODUCTS - 5.1%
620,800 Georgia-Pacific Corp. 34,221,600
976,300 Georgia-Pacific Corp. (Timber Group)* 22,698,975
1,940,200 Stone Container Corp.* 24,737,550
-----------------------------------------
81,658,125
-----------------------------------------------------------------
GAMING - 2.0%
1,359,400 Circus Circus Enterprises, Inc.* 31,266,200
-----------------------------------------------------------------
HEALTHCARE MANAGEMENT - 8.4%
786,300 Aetna Inc. 57,793,050
1,271,200 Foundation Health Systems, Inc.* 32,971,750
1,275,600 Tenet Healthcare Corp.* 44,008,200
-----------------------------------------
134,773,000
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - (CONTINUED)
<C> <S> <C>
HOMEBUILDERS - 0.4%
16,700 Centex Corp. $ 1,047,925
197,200 Lennar Corp. 4,843,725
-----------------------------------------------
5,891,650
-----------------------------------------------------------------------
INSURANCE-BROKERS - 2.3%
369,500 Loews Corp. 36,880,719
-----------------------------------------------------------------------
INSURANCE-LIFE - 3.6%
343,600 Cigna Corp. 58,261,675
-----------------------------------------------------------------------
INSURANCE-PROPERTY & CASUALTY - 0.2%
22,100 CNA Financial Corp.* 2,953,113
-----------------------------------------------------------------------
OIL-INTEGRATED - 1.0%
293,600 Texaco Inc. 15,285,550
-----------------------------------------------------------------------
OIL & GAS-REFINING AND MARKETING - 3.1%
1,461,300 Tosco Corp. 48,862,219
-----------------------------------------------------------------------
REAL ESTATE - 1.1%
731,900 LNR Property Corp.* 17,336,881
-----------------------------------------------------------------------
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES - 3.2%
889,900 Morgan Stanley, Dean Witter, Discover & Co. 51,947,913
-----------------------------------------------------------------------
SEMICONDUCTORS - 2.6%
676,200 Avnet Inc. 41,248,200
-----------------------------------------------------------------------
SPECIALTY FINANCE - 0.1%
36,300 C.I.T. Group Inc.* 1,091,269
-----------------------------------------------------------------------
STEEL - 3.6%
1,573,700 AK Steel Holding Corp. 28,129,888
1,381,400 Ispat International NV* 29,872,775
-----------------------------------------------
58,002,663
-----------------------------------------------------------------------
SUPERMARKETS - 2.9%
1,038,300 Fleming Companies Inc. 15,639,394
691,100 Supervalu Inc. 30,322,013
-----------------------------------------------
45,961,407
-----------------------------------------------------------------------
TEXTILES - 2.9%
1,928,600 Fruit of the Loom Inc.* 46,286,400
-----------------------------------------------------------------------
TIRE & OTHER RELATED RUBBER PRODUCTS - 2.6%
655,400 Goodyear Tire & Rubber Co. 41,044,425
-----------------------------------------------------------------------
TOBACCO - 3.5%
1,268,300 RJR Nabisco Holdings Corp. 39,951,450
486,300 UST Inc. 16,777,350
-----------------------------------------------
56,728,800
-----------------------------------------------------------------------
</TABLE>
6 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - (CONTINUED)
<C> <S> <C>
TRANSPORTATION & LOGISTICS - 3.7%
961,800 Canadian Pacific Ltd. $ 26,028,713
710,600 CNF Transportation Inc. 32,465,538
---------------------------
58,494,251
---------------------------------------------------
UTILITIES-ELECTRIC - 3.9%
1,367,300 Northeast Utilities* 16,749,425
1,486,500 Unicom Corporation 46,081,500
---------------------------
62,830,925
---------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,344,570,463) $1,489,375,373
---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
REPURCHASE AGREEMENT - 5.8%
$93,500,000 Joint Repurchase Agreement Account 5.64%,
02/02/98 $ 93,500,000
------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT ACCOUNT
(COST $93,500,000) $ 93,500,000
------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $1,438,070,463)(A) $1,582,875,373
------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost $ 198,724,322
Gross unrealized loss for investments in which cost
exceeds value (54,632,790)
------------------------------------------------------------------------
Net unrealized gain $ 144,091,532
------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $1,438,783,841.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 7
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Assets and Liabilities
January 31, 1998
ASSETS:
<TABLE>
<S> <C> <C>
Investment in securities, at value (identified cost
$1,438,070,463) $1,582,875,373
Cash 55,896
Receivables:
Investment securities sold 15,321,885
Fund shares sold 15,323,500
Dividends and interest 1,699,243
Deferred organization expenses, net 209
Other assets 22,101
---------------------------------------------------------------------------
TOTAL ASSETS 1,615,298,207
---------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 9,325,328
Fund shares repurchased 1,510,824
Amounts owed to affiliates 3,007,196
Accrued expenses and other liabilities 253,728
---------------------------------------------------------------------------
TOTAL LIABILITIES 14,097,076
---------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 1,396,713,617
Accumulated distributions in excess of net investment
income (614,031)
Accumulated undistributed net realized gain on
investment, option and futures transactions 60,296,635
Net unrealized gain on investments 144,804,910
---------------------------------------------------------------------------
NET ASSETS $1,601,201,131
---------------------------------------------------------------------------
</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) 46,918,649 11,963,607 1,233,014
Net asset and Class A redemption value
per share(a) $25.93 $25.73 $25.70
Maximum public offering price per
share (Class A NAV X 1.0582) $27.44 $25.73 $25.70
---------------------------------------------------------------------------
<CAPTION>
INSTITUTIONAL SERVICE
---------------------------------------------------------------------------
<S> <C> <C> <C>
Total shares of beneficial interest outstanding,
$.001 par value (unlimited shares authorized) 1,396,153 343,095
Net asset value, offering and redemption price
per share $25.95 $25.92
---------------------------------------------------------------------------
</TABLE>
(a) At redemption, Class B and Class C shares may be subject to a contingent
deferred sales charge assessed on the amount equal to the lesser of the
current net asset value or the original purchase price of the shares.
8 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statement of Operations
For the Year Ended January 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends(a) $ 15,481,524
Interest 2,863,267
-----------------------------------------------------------------------------
TOTAL INCOME 18,344,791
-----------------------------------------------------------------------------
EXPENSES:
Management fees 7,740,380
Distribution fees 3,500,325
Authorized dealer service fees 2,716,755
Transfer agent fees 1,553,121
Custodian fees 188,085
Professional fees 70,544
Registration fees 137,442
Amortization of deferred organization expenses 19,112
Trustee fees 10,054
Other 487,190
-----------------------------------------------------------------------------
TOTAL EXPENSES 16,423,008
-----------------------------------------------------------------------------
Less -- fees waived by Goldman Sachs (1,601,336)
-----------------------------------------------------------------------------
NET EXPENSES 14,821,672
-----------------------------------------------------------------------------
NET INVESTMENT INCOME 3,523,119
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT AND FUTURES TRANS-
ACTIONS:
Net realized gain from:
Investment transactions 172,824,728
Futures transactions 131,178
Net change in unrealized gain on:
Investments 19,463,359
-----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT, OPTION AND
FUTURES TRANSACTIONS: 192,419,265
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $195,942,384
-----------------------------------------------------------------------------
</TABLE>
(a) Taxes withheld on dividends were $15,521.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 9
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
JANUARY 31, 1998 JANUARY 31, 1997
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 3,523,119 $ 8,054,855
Net realized gain on investment and
futures transactions 172,955,906 58,230,209
Net change in unrealized gain on
investments 19,463,359 67,575,111
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 195,942,384 133,860,175
------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A shares (3,826,646) (8,111,894)
Class B shares -- (5,818)
Class C shares -- --
Institutional shares (92,867) (494)
Service shares (20,774) (11,500)
In excess of net investment income
Class A shares -- (135,533)
Class B shares (72,045) (48,273)
Class C shares (7,576) --
Institutional shares -- (380)
Service shares -- (9,070)
From net realized gain on investment and
futures transactions
Class A shares (101,878,845) (46,442,616)
Class B shares (22,880,349) (754,312)
Class C shares (1,205,452) --
Institutional shares (1,886,598) (9,971)
Service shares (761,129) (255,610)
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) (55,785,471)
------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 918,965,833 140,362,846
Reinvestment of dividends and
distributions 127,012,752 53,352,809
Cost of shares repurchased (142,245,348) (72,730,939)
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS 903,733,237 120,984,716
------------------------------------------------------------------------------
TOTAL INCREASE 965,385,139 199,059,420
------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 635,815,992 436,756,572
------------------------------------------------------------------------------
End of year $1,601,201,131 $635,815,992
------------------------------------------------------------------------------
ACCUMULATED DISTRIBUTIONS IN EXCESS OF
NET INVESTMENT INCOME $ (614,031) $ (193,256)
------------------------------------------------------------------------------
</TABLE>
10 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements
January 31, 1998
1. ORGANIZATION
Effective May 1, 1997, Goldman Sachs Equity Portfolios, Inc. was reorganized
from a Maryland corporation to a Delaware business trust named the Goldman
Sachs Trust (the "Trust"). The Trust includes the Goldman Sachs Growth and
Income Fund (the "Fund"). The Trust is registered under the Investment Com-
pany Act of 1940, as amended, as an open-end, management investment company.
At January 31, 1998, the Fund offered five classes of shares--Class A, Class
B, Class C, Institutional and Service.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consist-
ently followed by the Fund. The preparation of financial statements in con-
formity with generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts.
A. INVESTMENT VALUATION -- Investments in securities traded on a U.S. or for-
eign securities exchange or the NASDAQ system are valued daily at their last
sale or closing price on the principal exchange on which they are traded 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.
11
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
January 31, 1998
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.
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
the distribution and authorized dealer service plans as well as other ex-
penses which are directly attributable to such shares. Each class of shares
separately bears their respective class-specific transfer agency fees. Serv-
ice shares separately bear a service class fee payable monthly, at an annual
rate equal to .50% of the average daily net assets of the service class.
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.
12
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
H. FUTURES CONTRACTS -- The Fund may enter into futures transactions to hedge
against changes in interest rates, securities prices or to seek to increase
total return.
Upon entering into a futures contract, the Fund is required to deposit with
a broker an amount of cash or securities equal to the minimum "initial mar-
gin" requirement of the respective futures exchange. Subsequent payments for
futures contracts ("variation margin") are paid or received by the Fund dai-
ly, dependent on the daily fluctuations in the value of the contracts, and
are recorded 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
As of May 1, 1997, the Fund's Investment Advisory and Administration Agree-
ments were combined into an Investment Management Agreement (the "Agreement")
encompassing the same services and fee structure. Goldman Sachs Asset Manage-
ment ("GSAM"), a separate operating division of Goldman, Sachs & Co.
("Goldman Sachs"), acts as investment adviser. Under the Agreement, GSAM,
subject to the general supervision of the Trust's Board of Trustees, 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 facilities, 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.
Goldman Sachs has voluntarily agreed to reduce or limit certain "Other Ex-
penses" for the Fund (excluding management, service, distribution and autho-
rized dealer service fees and litigation and indemnification costs, taxes,
interest, brokerage commissions, transfer agent fees and extraordinary ex-
penses) until further notice to the extent such expenses exceed .11% of the
average daily net assets of the Fund.
Goldman Sachs serves as the Distributor of shares of the Fund pursuant to
Distribution Agreements. Goldman Sachs may receive a portion of the Class A
sales load and Class B and Class C contingent deferred sales charges and has
advised the Fund that it retained approximately $2,405,000 during the year
ended January 31, 1998.
The Trust has adopted Distribution Plans (the "Distribution Plans") pursu-
ant to Rule 12b-1. Under the Distribution Plans, Goldman Sachs is entitled to
a quarterly fee from the Fund for distribution services equal, on an annual
basis, to .25%, .75% and .75% of the Fund's average daily net assets attrib-
utable to Class A, Class B and Class C Shares, respectively. For the year
ended January 31, 1998, the Distributor has voluntarily agreed to waive ap-
proximately $1,601,000 of its distribution fee attributable to the Class A
shares. The Distributor may discontinue or modify this waiver in the future
at its discretion.
13
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
January 31, 1998
The Trust has adopted Authorized Dealer Service Plans (the "Service Plans")
pursuant to which Goldman Sachs and Authorized Dealers are compensated for
providing personal and account maintenance services. The Fund pays a fee un-
der its Service Plan equal, on an annual basis, to .25% of its average daily
net assets attributable to Class A, Class B and Class C shares. Goldman Sachs
also serves as the Transfer Agent of the Fund for a fee.
At January 31, 1998, the Fund owed approximately $906,000, $798,000,
$856,000 and $447,000 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 year ended January 31,
1998, were $1,333,580,933 and $648,647,904, respectively.
For the year ended January 31, 1998, Goldman Sachs earned approximately
$367,000 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.
14
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund, together with other registered investment companies having advisory
agreements with GSAM or its affiliates, transfers uninvested cash into joint
accounts, the daily aggregate balance of which is invested in one or more re-
purchase agreements. The underlying securities for the repurchase agreements
are U.S. Treasury and agency obligations. At January 31, 1998, the Fund had
an undivided interest in the repurchase agreements in the following joint ac-
count which equaled $93,500,000 in principal amount. At January 31, 1998, the
repurchase agreements held in this joint account, along with the correspond-
ing underlying securities (including the type of security, market value, in-
terest 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. $600,000,000 5.65% 02/02/98 $ 600,000,000
dated 01/30/98, repurchase price $600,282,500 (total collateral value
$618,151,386 of FNMA: 6.50%-8.50%, 08/01/27-01/01/28; GNMA: 6.50%-8.00%,
05/15/23-11/15/27; FHLMC: 6.50%-7.00%, 06/01/00-10/01/26)
----------------------------------------------------------------------------
LEHMAN BROTHERS INC. 474,200,000 5.65 02/02/98 474,200,000
dated 01/30/98, repurchase price $474,423,269 (total collateral value
$483,683,617 consisting of FGLMC: 5.50%-9.50%, 01/01/99-01/01/28; FHA/VA:
7.50%-14.00%, 01/01/01-09/01/12; FNMA: 5.50%-11.25%, 09/01/00-01/01/28)
----------------------------------------------------------------------------
NOMURA SECURITIES INTERNA-
TIONAL 200,000,000 5.64 02/02/98 200,000,000
dated 01/30/98, repurchase price $200,094,000 (total collateral value
$204,002,700 consisting of FHLMC: 6.00%, 10/20/99; FHLB: 5.48%-5.53%,
01/15/03-1/21/03; FNMA: 7.40%, 07/01/04; FMC discount note: 03/06/98)
----------------------------------------------------------------------------
NOMURA SECURITIES, INTERNA-
TIONAL 270,000,000 5.64 02/02/98 270,000,000
01/30/98, repurchase price $270,126,900 (total collateral value
$275,400,571 consisting of FNMA: 5.90%-7.52%, 02/12/98-01/22/08; FHLMC:
6.59%-7.13%, 07/21/99-08/13/07; FHLB: 6.19%-7.00%, 08/26/99-08/21/07; FMC:
03/06/98; FFCB: 6.30%, 08/08/07)
----------------------------------------------------------------------------
SALOMON-SMITH BARNEY 200,000,000 5.61 02/02/98 200,000,000
dated 01/30/98, repurchase price $200,093,500 (total collateral value
$204,048,538 consisting of U.S. Treasury Stripped Interest Only Security:
02/15/99; U.S. Treasury Stripped Principal Only Security: 7.8%, 08/15/01)
----------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,744,200,000
----------------------------------------------------------------------------
</TABLE>
15
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Notes to Financial Statements (continued)
January 31, 1998
7. SUMMARY OF SHARE TRANSACTIONS
Share activity for the years ended January 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JANUARY 31, 1998 FOR THE YEAR ENDED JANUARY 31, 1997
------------------------------------------------------------------------
SHARES DOLLARS SHARES DOLLARS
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 20,995,379 $ 557,445,055 5,616,082 $ 121,074,992
Reinvestments of divi-
dends and distributions 4,040,452 100,776,496 2,390,917 52,287,188
Shares repurchased (4,651,468) (124,783,147) (3,328,038) (72,163,062)
------------------------------------------------------------------------
20,384,363 533,438,404 4,678,961 101,199,118
---------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 10,786,633 285,377,804 729,877 16,222,639
Reinvestments of divi-
dends and distributions 884,342 21,878,707 35,976 787,421
Shares repurchased (458,457) (12,335,625) (14,764) (340,546)
------------------------------------------------------------------------
11,212,518 294,920,886 751,089 16,669,514
---------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 1,258,885 34,759,146 -- --
Reinvestments of divi-
dends and distributions 71,436 1,766,121 -- --
Shares repurchased (97,307) (2,549,826) -- --
------------------------------------------------------------------------
1,233,014 33,975,441 -- --
---------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 1,383,424 36,071,512 8,229 186,173
Reinvestments of divi-
dends and distributions 72,596 1,812,637 92 2,020
Shares repurchased (68,188) (1,831,590) -- --
------------------------------------------------------------------------
1,387,832 36,052,559 8,321 188,193
---------------------------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 204,087 5,312,316 134,652 2,879,042
Reinvestments of divi-
dends and distributions 31,372 778,791 12,587 276,180
Shares repurchased (29,341) (745,160) (10,262) (227,331)
------------------------------------------------------------------------
206,118 5,345,947 136,977 2,927,891
---------------------------------------------------------------------------------------------------
NET INCREASE 34,423,845 $ 903,733,237 5,575,348 $ 120,984,716
---------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
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 year ended January 31, 1998, the Fund did not have
any borrowings under these facilities.
9. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, the Fund has reclassified
$14,180 from paid-in capital to accumulated distributions in excess of net
investment income and $61,834 from accumulated undistributed net realized
gain on investments to accumulated distributions in excess of net investment
income. These reclassifications have no impact on the net asset value of the
Fund and is designed to present the Fund's capital accounts on a tax basis.
17
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<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 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
FOR THE YEARS ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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(g) 0.30(g) (0.20) (0.07) (0.33) -- 0.11(g)
FOR THE PERIOD ENDED JANUARY 31,
1994 - Class A
Shares(b) 14.18 0.15 1.68 (0.15) (0.01) (0.06) -- --
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
NET INCREASE
(DECREASE)
IN NET ASSET
VALUE
<S> <C>
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
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) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security
transactions on which commissions are charged. This rate may vary
due to various types of transactions and number of security trades
executed.
(g) Calculated based on the average shares outstanding methodology.
18 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
<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 AVERAGE AT END OF NET EXPENSES INCOME (LOSS) EXPENSES TO INCOME (LOSS) TO
VALUE, END TOTAL TURNOVER COMMISSION PERIOD TO AVERAGE TO AVERAGE NET AVERAGE NET AVERAGE NET
OF PERIOD RETURN(A) RATE RATE(F) (IN 000S) NET ASSETS ASSETS ASSETS ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$25.93 23.71% 61.95% $.0590 $1,216,582 1.25% 0.43% 1.42% 0.26%
25.73 22.87 61.95 .0590 307,815 1.94 (0.35) 1.94 (0.35)
25.70 0.51(d) 61.95 .0590 31,686 1.99(c) (0.48)(c) 1.99(c) (0.48)(c)
25.95 24.24 61.95 .0590 36,225 0.83 0.76 0.83 0.76
25.92 23.63 61.95 .0590 8,893 1.32 0.32 1.32 0.32
- ---------------------------------------------------------------------------------------------------------------------------
23.18 28.42 53.03 .0586 615,103 1.22 1.60 1.43 1.39
23.10 22.23(d) 53.03 .0586 17,346 1.93(c) 0.15(c) 1.93(c) 0.15(c)
23.19 20.77(d) 53.03 .0586 193 0.82(c) 1.36(c) 0.82(c) 1.36(c)
23.17 23.87(d) 53.03 .0586 3,174 1.32(c) 0.94(c) 1.32(c) 0.94(c)
- ---------------------------------------------------------------------------------------------------------------------------
19.98 32.45 57.93 -- 436,757 1.20 1.67 1.45 1.42
- ---------------------------------------------------------------------------------------------------------------------------
15.80 3.97 71.80 -- 193,772 1.25 1.28 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>
19
<PAGE>
GOLDMAN SACHS GROWTH AND INCOME FUND
Report of Independent Public Accountants
To the Shareholders and Board of Trustees of Goldman Sachs Trust--Growth and
Income Fund:
We have audited the accompanying statement of assets and liabilities of
Goldman Sachs Growth and Income Fund, one of the portfolios constituting
Goldman Sachs Trust--Equity Funds (A Delaware Business Trust), including the
statement of investments, as of January 31, 1998, and the related statement
of operations and the statement of changes in net assets and the financial
highlights for the periods presented. These financial statements and the fi-
nancial highlights are the responsibility of the Fund's management. Our re-
sponsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the finan-
cial statements. Our procedures included confirmation of securities owned as
of January 31, 1998 by correspondence with the custodian and brokers. An au-
dit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and the financial highlights re-
ferred to above present fairly, in all material respects, the financial posi-
tion of Goldman Sachs Growth and Income Fund as of January 31, 1998, the
results of its operations the changes in its net assets and the financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 12, 1998
20
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs Growth and Income Fund
THE GOLDMAN
SACHS ADVANTAGE
When you invest in the Goldman Sachs Growth and Income Fund, you can capitalize
on Goldman Sachs' history of excellence while benefiting from the firm's
leadership in three areas:
1
Global Resources
With more than 10,600 professionals based in 35 offices in 19 countries
throughout the Americas, Europe and Asia, Goldman Sachs possesses first-hand
knowledge of the world's markets and economies.
2
Fundamental Research
Goldman Sachs is recognized by the managements of corporations worldwide as a
leader in investment research. As a result, we obtain face-to-face meetings with
managers on a timely, regular basis.
3
Risk Management
Goldman, Sachs & Co. excels in understanding, monitoring and managing investment
risk -- a process that is integrated into all Goldman Sachs investment products.
An Investment Idea for the Long Term
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 Domestic Equity Funds
<TABLE>
<CAPTION>
[Fund Risk/Return]
<S> <C>
Higher Small Cap Value Fund
Risk/Return CORE Small Cap Equity Fund
Mid Cap Equity Fund
Capital Growth Fund
CORE Large Cap Growth Fund
Lower CORE U.S. Equity Fund
Risk/Return GROWTH AND INCOME FUND
</TABLE>
For More Information
To learn more about the Goldman Sachs Growth and Income Fund and other
Goldman Sachs Funds, call your investment professional today.
<PAGE>
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GOLDMAN SACHS ASSET MANAGEMENT
ONE NEW YORK PLAZA, 42ND FLOOR, NEW YORK, NEW YORK 10004
================================================================================
TRUSTEES
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
John P. McNulty
Mary P. McPherson
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard B. Strubel
OFFICERS
Douglas C. Grip, President
James A. Fitzpatrick, Vice President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN SACHS
Investment Adviser,
Distributor and Transfer Agent
This material is not authorized for distribution to prospective investors unless
preceded or accompanied by a current Prospectus. Investors should read the
Prospectus carefully before investing or sending money.
Goldman, Sachs & Co., distributor of the Fund, is not a bank, and Fund shares
distributed by it are neither bank deposits nor obligations of, nor endorsed,
nor guaranteed by any bank or other insured depository institution, nor are they
insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve
Board, or any other government agency. Investment in the Fund involves risks,
including possible loss of the principal amount invested.
The Fund's foreign investments and active management techniques are subject to
risks in addition to those customarily associated with investing in
dollar-denominated securities of U.S. issuers. 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. Funds that invest in foreign issues may incur losses because of changes
in securities prices expressed in local currencies, movements in exchange rates,
or both.
The Lipper rankings shown in this report are based on relative performance
within an individual fund's Lipper category. Please be advised that certain
differences do exist among the funds; for example, there may be differences in
investment policies, risks, fees and expense ratios, and Goldman Sachs strongly
recommends that these factors be taken into consideration before an investment
decision is made.
(C)Copyright 1998 Goldman, Sachs & Co. All rights reserved.
Date of first use: March 31, 1998 GIAR / 276K / 3-98
