<PAGE>
Goldman Sachs Funds
EMERGING MARKETS EQUITY FUND Annual Report January 31, 1999
Long-term capital growth potential
through a diversified portfolio
of emerging markets stocks.
[LOGO] Goldman Sachs
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Market Overview
Dear Shareholder,
Throughout the period under review, events that began in Asia in 1997
continued to roil the world's emerging markets.
. Asia--During the early part of the period under review, Asian markets
fared poorly due to continued high interest rates and a weakening
Japanese economy. By October, however, lower global interest rates
and a strengthening of Asian currencies against the U.S. dollar
caused a dramatic upturn in sentiment. The continued upward movement
of stock prices will depend on the success of the restructuring
efforts in the troubled economies and the ability of the G-7
economies to continue to absorb exports from the region.
. Latin America--Local equity markets experienced significant pressure
following the collapse of Russia in August. Most affected was Brazil,
which experienced a substantial loss of reserves and had to raise
interest rates to defend its currency. Additional weakness in
commodity prices and political uncertainties in Venezuela helped
further depress markets. In November, Brazil announced an important
fiscal package and a $42 billion aid package from the International
Monetary Fund. Nevertheless, subsequent Congressional defeat in
passing the fiscal measures culminated with the float of Brazil's
currency in mid-January 1999.
. Europe, Middle East, Africa (EMEA)--After a strong start, the
devaluations in South Africa and Russia sent both markets into a
decline. The ensuing retreat of the hedge fund industry led to an
ease in selling pressure, a circumstance that allowed these markets
to rally at period end. While the convergence theme continued to
drive the Greek market, Turkey and Israel saw real rates rise due to
political problems at home.
. Market Outlook--Many Asian countries have generated current account
surpluses, enabling them to reduce interest rates and maintain stable
currencies. The key risks to the recovery in Asia include a sharp
weakening in the U.S. economy and an ongoing recession in Japan,
which could reduce the appetite for exports from the region.
Moreover, the sustainability of Asian equities, recent strength will
hinge on the successful restructuring of the industrial sectors and
external debt issues in the troubled countries.
Following the Brazilian devaluation in early 1999, Latin American
countries were forced to increase interest rates. We believe that the
outlook for the region depends entirely on how Brazil adjusts its
fiscal problem and controls inflation, post-devaluation. If Brazil
can stabilize its currency, implement the fiscal package and
accelerate privatization, interest rates will fall not only in Brazil
but in all Latin markets, thus allowing for a recovery in economic
growth.
Finally, we see interest rates falling in the EMEA region, which
should produce a better environment for companies. However, 1999 is
expected to see slower earnings growth in the region. The question
remains as to whether this can be offset by lower interest rates.
We encourage you to maintain your diversified, long-term investment
program, and look forward to serving your investment needs in the
years ahead.
Sincerely,
/s/ David B. Ford /s/ John P. McNulty
David B. Ford John P. McNulty
Co-Head, Goldman Sachs Co-Head, Goldman Sachs
Asset Management International Asset Management International
February 26, 1999
. NOT FDIC
INSURED
. May Lose Value
. No Bank
Guarantee
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Fund Basics
as of January 31, 1999
Assets Under Management
$143.6 Million
Number of Holdings
194
NASDAQ SYMBOLS
Class A Shares
GEMAX
Class B Shares
GEKBX
Class C Shares
GEMCX
Institutional Shares
GEMIX
Service Shares
GEMSX
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
PERFORMANCE REVIEW
- -----------------------------------------------------------------------------------------
Fund Total Return MSCI EMF (Partial Domestic)
January 31,1998 January 31,1999 (without sales charge)(1) MSCI EMF Index(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Class A -24.32% -20.29%
Class B -24.51% -20.29%
Class C -24.43% -20.29%
Institutional -23.66% -20.29%
Service -26.17% -20.29%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares. The Fund's performance assumes the
investment of dividends and other distributions.
(2) The Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Index (with dividends reinvested) is a market capitalization-weighted
composite of securities in over 30 emerging market countries, including
Argentina, Botswana, Brazil, Chile, China, Colombia, the Czech Republic,
Egypt, Greece, Hong Kong, Hungary, India, Israel, Jordan, Kenya, Malaysia,
Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Portugal, Russia,
Singapore, South Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey,
Venezuela and Zimbabwe. "Free" indicates an index that excludes shares in
otherwise free markets that are not purchasable by foreigners. Investors
cannot directly invest in the Index. The Index figures do not reflect any
fees or expenses.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
TOTAL RETURN (WITH SALES CHARGE)
- -----------------------------------------------------------------------------------------
For the period ended 12/31/98 Class A Class B Class C Institutional Service
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Last 6 Months(3) -16.92% -16.73% -13.15% -11.91%(5) -13.11%(5)
One Year(4) -31.10% -30.88% -27.82% -26.29%(5) -28.81%(5)
Since Inception(4) -28.30% -27.40% -24.36% -23.64%(5) -26.07%(5)
(12/15/97)
- -----------------------------------------------------------------------------------------
</TABLE>
(3) The Cumulative Total Return (with sales charge) 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 distri-
butions 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 1% in the sixth year) and the
assumed deferred sales charge for Class C shares (1% if redeemed within 12
months of purchase). The public offering price of the Class A shares on
December 31, 1998 was $7.59 and represents the NAV plus the maximum sales
charge of 5.5%.
(4) The Average Annual Total Return (with sales charge) is determined by
computing the annual percentage change in the value of $1,000 invested at
the maximum public offering price for specified periods, assuming
reinvestment of all distributions at NAV. The total return calculation
reflects sales charges.
(5) Cumulative or Average Annual Total Returns as of 12/31/98.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
TOP 10 COMPANY HOLDINGS AS OF 1/31/99
- -----------------------------------------------------------------------------------------
% of Total
Company Holding Net Assets Country Line of Business
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
ITC Limited 3.7% India Tobacco
Samsung Electronics 2.7% Korea Electronics
Telefonos de Mexico ADS 2.6% Mexico Telecommunications
Ote Greek Telecom 2.5% Greece Telecommunications
Mahanagar Telephono GDR 2.0% India Telecommunications
Videsh Sanchar Nigam Ltd. GDR 2.0% India Telecommunications
Hindalco ADR 2.0% India Metals
Korea Electric Power Corp. ADR 1.8% South Korea Utility
Hon Hai Precision 1.7% Taiwan Electronic Connectors
FirstRand Ltd. 1.6% South Africa Financial Services
- -----------------------------------------------------------------------------------------
</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. Performance reflects fee
waivers and expense limitations in effect. In their absence, performance would
be reduced.
1
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
PERFORMANCE OVERVIEW
Dear Shareholders,
We are pleased to report on the performance of the Goldman Sachs Emerging
Markets Equity Fund for the 12-month period ended January 31, 1999.
Performance Review
Over the 12-month period covered by this report, the Fund's Class A, B, C,
Institutional and Service shares generated annual total returns, without
sales charges, of -24.32%, -24.51%, -24.43%, -23.66% and -26.17%,
respectively. Over the same time period, the Fund's bench-mark, the Morgan
Stanley Capital International (MSCI) Emerging Markets Free Index generated an
annual total return of -20.29%.
While country and regional asset allocation added value during the year,
stock selection in South Africa and Asian countries detracted from
performance.
Regional Allocation
The Fund started the fiscal period with an underweight position in Asia, and
moved to an overweight position as relative valuations, real interest rate
levels, currency levels and trade situations made Asia a more attractive
region in which to invest. In Latin America, we lowered the Fund's exposure
to an underweight position, as higher real interest rates in the region
caused valuations to look unattractive. Elsewhere, we lowered the Fund's
exposure in South Africa, Russia and Turkey, and increased its exposure in
Greece.
Portfolio Highlights
. Telefonos de Mexico SA ADS (Telmex)--Telmex is Mexico's leading provider of
telecommunications services, from fixed residential and commercial phone
services (82% market share) to long-distance services (70% market share),
data processing, internet and cellular services. As the largest telecom
company in Latin America, Telmex has been able to successfully weather the
competition introduced in 1995. The company had previously been privatized in
1989. Telmex offers significant growth prospects due to low penetration of
phone services in Mexico (currently only an 11% penetration level in local
telephony and 3.5% in cellular services) and the expected implementation of
substantial cost-cutting and productivity improvements over the next couple
of years.
. Hon Hai Precision--A producer of PC connectors, Hon Hai has recently been
included in the first round of suppliers for Intel's newest "slot 1"
assembly. In addition, Hon Hai has made a very successful entry into the PC
casing business this year. This stable-pricing product will account for about
32% of the company's 1998 revenue with 9% of global market share. Hon Hai is
aiming for 50% global market share with its newest facilities in Shenzhen and
Kunshan, China.
. ITC Ltd.--ITC is the largest producer of cigarettes in India, with an
extensive distribution network and a market share of more than 70%.
Operational results in 1998 remained strong as the company's product mix
continued to improve, supporting our expectations of earnings growth over the
next three years.
2
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
INVESTMENT
PROCESS OVERVIEW
The investment process for the Goldman Sachs Emerging Markets Equity Fund
combines both qualitative andquantitative analysis,with an emphasis on
portfolio manager input.
Asset Allocation Committee
. Proprietary
Quantitative Model
. Portfolio
Manager Views
Country Allocation
Company Visits
--------------
Internal Research
-----------------
Return Expectations
- --------------------
Stock Selection
Portfolio Construction
. Stock & Industry
Views Relative
to Benchmark
Portfolio Review & Analysis
. Performance
Measurement
& Attribution
. BARRA
. Risk Analysis
Key New Acquisitions
. National Bank of Greece--The National Bank of Greece was purchased due to
successful restructuring taking place by new management (formerly, the
management of a bank previously run by the government). Since then,
nonperforming assets and low-yielding assets have been sold and cost ratios
reduced. The large bond portfolio provides the potential for substantial
capital gains from the convergence of Greek bond yields toward German levels.
. Medison Co.--Medison is a medical systems company specializing in ultrasound
equipment. With a lower research staff cost and shorter product development
cycle time, Medison is one of the lowest cost ultrasound producers in the
world, with a 20% cost advantage, excluding any currency effect. At the
same, with the bargain purchase of Kretztechnik, the inventor of 4-D ultra-
sound technology, Medison was able to maintain its technological leadership
in 3D/4D ultrasound. Over the next two years, the company aims to benefit
from gaining market share in the U.S. and European low-end market and from
leading the expansion into the high-end 3D/4D market.
Portfolio Outlook
We are currently overweight in Asia. Across the region, we are witnessing
positive macroeconomic developments driven by increasing current account
surpluses, relatively stable currencies, declining inflation and falling
interest rates. Within the Asian region we favor markets that have been more
proactive in reform, such as Korea, and countries whose financial systems
have been less impacted by the current crises, such as India and the
Philippines. We will maintain underweight positions in Thailand and Taiwan,
where the banking sectors continue to be faced with problems of deteriorating
asset quality.
In Latin America, we maintain our underweight position versus the Fund's
benchmark. We believe that existing high real interest rates should gradually
take their toll on economic growth in Latin America, resulting in a less
attractive risk/return profile for the region compared with the other regions
in which the Fund invests. The challenges facing Brazil and the economic
growth in the region remain crucial following the devaluation of the real on
January 13th, 1999. Additionally, the overall depressed levels of
commodities, such as oil, copper and coffee, continue to place pressure on
the external accounts of the Andean Pact countries and Mexico. Given these
factors, we believe the region will experience a significant decline in
economic performance, at least during 1999.
Overall, we are neutral in the European, Middle East and African regions.
However, we intend to maintain a modest overweight in Russia due to
attractive valuations and some political stability under newly appointed
Prime Minister Primakov.
We thank you for your investment and look forward to your continued
confidence.
Goldman Sachs Emerging Markets Equity Team
New York, London and Singapore
February 26, 1999
3
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
The Goldman Sachs Advantage
Founded in 1869,Goldman,Sachs & Co.is a premier financial services firm
traditionally known on Wall Street and around the world for its institutional
expertise.
Today, the firm's Asset Management Division provides individual investors the
opportunity to tap the resources of a global institutional powerhouse -- and put
this expertise to work in their individual portfolios.
What Sets Goldman Sachs Funds Apart?
Resources and Relationships
Our portfolio management teams are located on-site, around the world, in New
York, London, Tokyo and Singapore. Their understanding of local economies,
markets, industries and cultures helps deliver what many investors want: access
to global investment opportunities and consistent, risk-adjusted performance.
In-Depth Research
Our portfolio management teams make on-site visits to hundreds of companies each
month, then construct selective portfolios with an emphasis on their best ideas.
Our teams also have access to Goldman, Sachs & Co.'s Global Investment Research
Department.
Risk Management
In this, our institutional heritage is clear. Institutions, as well as many
individual investors, often look to us to manage the risks of global investing
over time in different market environments.
To learn more about the Goldman Sachs Family of Funds, call your investment
professional today.
4
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Performance Summary
January 31, 1999
The following graph shows the value, as of January 31, 1999, of a $10,000 in-
vestment made (with the maximum sales charge of 5.5% for Class A and contin-
gent deferred sales charges of 5.0% and 1.0% for Class B and Class C,
respectively, and at NAV for the Institutional and Service Classes) on Decem-
ber 15, 1997 (commencement of operations) of the Goldman Sachs Emerging Mar-
kets Equity Fund. For comparative purposes, the performance of the Fund's
benchmark (Morgan Stanley Emerging Markets Free Index ("MSCI EMF")) is shown.
All performance data shown represents past performance and should not be con-
sidered indicative of future performance which will fluctuate with changes in
market conditions. These performance fluctuations will cause an investor's
shares, when redeemed, to be worth more or less than their original cost.
Emerging Markets Equity Fund's Lifetime Performance
Performance of a $10,000 Investment, Distributions Reinvested December 15,
1997 to January 31, 1999
[GRAPHIC]
Insti-
Morgan tutional Service
Stanley Class A Class B Class C Class Class
------- ------- ------- ------- -------- -------
12/15/97 10,000 9,450 10,000 10,000 10,000 10,000
12/97 10,621 9,679 10,240 10,240 10,230 10,240
1/98 9,788 9,159 9,690 9,700 9,700 9,690
Feb-98 10,810 9,896 10,470 10,470 10,480 10,450
Mar-98 11,279 10,312 10,900 10,910 10,930 10,860
Apr-98 11,156 10,369 10,960 10,970 11,000 10,890
May-98 9,628 8,875 9,380 9,390 9,420 9,290
Jun-98 8,618 8,034 8,500 8,510 8,560 8,390
7/98 8,891 8,308 8,780 8,790 8,840 8,620
Aug-98 6,321 5,879 6,220 6,230 6,270 6,070
Sep-98 6,722 6,191 6,550 6,560 6,610 6,390
Oct-98 7,429 6,796 7,180 7,190 7,250 7,020
Nov-98 8,047 7,070 7,470 7,470 7,550 7,300
Dec-98 7,931 7,059 7,451 7,466 7,541 7,290
1/99 7,802 6,931 7,023 7,331 7,405 7,154
<TABLE>
<CAPTION>
Average Annual Total Return through January One
31, 1999(a) Since Inception Year
<S> <C> <C>
Class A
Excluding sales charges -23.97% -24.32%
Including sales charges -27.67% -28.45%
----------------------------------------------------------------------
Class B
Excluding contingent deferred sales charges -24.14% -24.51%
Including contingent deferred sales charges -26.83% -28.28%
----------------------------------------------------------------------
Class C
Excluding contingent deferred sales charges -24.00% -24.43%
Including contingent deferred sales charges -24.00% -25.18%
----------------------------------------------------------------------
Institutional Class -23.32% -23.66%
----------------------------------------------------------------------
Service Class -25.62% -26.17%
----------------------------------------------------------------------
</TABLE>
(a) All classes commenced operations on December 15, 1997.
5
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statement of Investments
January 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 92.0%
Argentina - 3.2%
30,751 Cresud SA ADR* (Agriculture) $ 332,495
21,483 Irsa Inversiones y Representos GDR (Real Estate) 494,118
159,400 Perez Compac SA (Diversified Industrial
Manufacturing) 649,802
56,300 Telefonica de Argentina (Telecommunications) 1,389,906
53,850 YPF Sociedad Anonima ADR (Oil & Gas Services) 1,716,469
---------------------------------------------------
4,582,790
----------------------------------------------------------------------------
Brazil - 4.9%
6,485 Cemig - Cia Energetica Minas Gerais* (Utility) 80,252
258,862,200 Cia Energetica (Utility) 397,561
103,676 Embratel ADR* (Telecommunications) 1,185,794
108,703,000 Gerasul Centrais G (Utility) 56,365
166,135,000 Paranaense Energy (Utility) 689,153
1,000 Tele Centro Sul PA (Telecommunications) 7
35,458 Tele Centro Sul Participacoes ADR*
(Telecommunications) 1,278,704
129,440 Tele Norte Leste Participacoes ADR*
(Telecommunications) 1,286,310
11,117,900 Telesp Cellular SA (Telecommunications) 296,422
24,640 Telesp Celular ADR* (Telecommunications) 432,740
76,528 Telesp Participacoes ADR* (Telecommunications) 1,344,023
---------------------------------------------------
7,047,331
----------------------------------------------------------------------------
Chile - 1.0%
17,800 Cia de Telecomunicaciones Chile
(Telecommunications) 362,675
16,200 Distribucion Y Servicio ADR* (Retail) 174,150
8,800 Embotelladora Andina* (Beverages) 99,000
23,700 Empresa Nacional de Electricidad SA (Utility) 275,513
20,100 Enersis SA (Utility) 545,213
---------------------------------------------------
1,456,551
----------------------------------------------------------------------------
Colombia - 0.1%
2,600 Banco Colombiano SA ADR (Banking) 12,513
48,600 Cementos Diamante GDR* (Building Materials) 100,238
---------------------------------------------------
112,751
----------------------------------------------------------------------------
Czechlosovakia - 2.1%
16,900 Ceska Sporitelna (Banking) 60,188
2,490 Ceske Radiomunikace AS* (Telecommunications) 93,375
8,900 CEZ (Electric Utility) 165,206
5,800 CEZ 2 (Electric Utility) 96,574
12,951 Galena (Health Care) 148,315
2,500 Komercni Banka AS (Banking) 27,535
22,176 Sporitelni (Investment Fund) 268,046
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Czechlosovakia - (continued)
122,415 SPT Telecom AS (Telecommunications) $ 1,755,203
790 Tabak AS (Tobacco) 201,209
10,782 Zivnobanka Fond (Investment Fund) 148,942
-----------------------------------------------------
2,964,593
------------------------------------------------------------------------------
Greece - 8.4%
13,340 Alpha Credit Bank (Banking) 1,559,528
26,535 Attica Enterprises (Transportation-Marine) 228,462
3,180 Commercial Bank of Greece (Banking) 342,523
4,400 Ergo Bank SA (Banking) 594,051
33,605 Hellenic Bottling (Beverages) 1,232,348
9,430 Intracom (Telecommunications Equipment) 516,882
11,660 Mailis (Containers) 291,257
7,441 National Bank of Greece (Banking) 2,056,435
117,215 Ote Greek Telecom (Telecommunications) 3,532,211
18,450 Panafon Hellenic Telecom* (Telecommunications) 631,877
15,480 Sarantis SA (Cosmetics) 252,300
12,900 Silver & Baryte Ores Mining (Mining) 443,354
5,205 Titan Cementos (Communications) 431,360
-----------------------------------------------------
12,112,588
------------------------------------------------------------------------------
Hong Kong - 2.8%
2,621,000 Beijing Datang Power Gen-H (Utility) 676,492
658,000 China Telecom Ltd.* (Telecommunications) 1,176,092
124,800 Dah Sing Financial (Banking) 234,338
566,000 Hengan International* (Health Care) 204,522
1,424,000 Legend Holdings (Electronics) 560,500
904,000 Ng Fung Hong (Consumer Goods) 682,480
3,257,000 Zhejiang Expressway (Construction) 479,168
-----------------------------------------------------
4,013,592
------------------------------------------------------------------------------
Hungary - 2.0%
31,430 Elektrim (Electronics & Other Electrical Equipment) 394,053
2,030 Gedeon Richter Ltd. ADR* (Drugs) 93,888
28,180 Magyar Olaj-Es Gazipari* (Oil & Gas) 781,291
41,272 Magyr Tavkozlesi ADR* (Telecommunications) 1,282,012
5,845 OTP Bank National Savings (Banking) 318,553
-----------------------------------------------------
2,869,797
------------------------------------------------------------------------------
India - 11.2%
245,450 Hindalco ADR* (Metals-Diversified) 2,848,325
220,900 ITC Ltd. GDR (Tobacco) 5,334,735
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
India - (continued)
263,350 Mahanagar Telephono GDR* (Telecommunications) $ 2,942,936
479,500 Mahindra & Mahindra GDR (Autos and Trucks) 2,061,850
280,100 Videsh Sanchar Nigam Ltd. GDR (Telecommunications) 2,942,798
----------------------------------------------------
16,130,644
-----------------------------------------------------------------------------
Indonesia - 2.4%
39,300 Asia Pulp & Paper Co. Ltd. ADR (Paper & Forest
Products) 284,925
702,240 Daya Guna Samudera (Food & Beverages) 367,934
591,500 Gudang Garam (Tobacco) 719,797
1,968,000 Indah Kiat Paper & Pulp. Corp. (Paper & Forest
Products) 449,037
637,000 Indofoods Sukses (Food & Beverages) 348,107
3,465,000 PT Telekom (Telecommunications) 1,288,394
----------------------------------------------------
3,458,194
-----------------------------------------------------------------------------
Israel - 3.7%
316,730 Bank Hapoalim (Banking) 549,593
146,262 Bank Leumi (Banking) 206,743
241,856 Bezeq Israel Telcomm (Telecommunications) 772,737
8,138 Blue Square Chain Investments (Retail) 105,314
25,900 ECI Telecommunications Ltd. (Electronics & Other
Electrical Equipment) 1,123,413
40,008 First International Bank Israel (Banking) 175,896
8,390 Formula Systems Ltd. (Computer Services/Software) 194,453
362,417 ICL Israel Chemical (Chemical Products) 334,749
1,670 IDB Holding Corp. Ltd. (Investment Fund) 33,943
27,213 Koors Industries Ltd.* (Utility) 469,424
127,500 Makhteshim-Agam Industries Ltd. (Investment Fund) 247,030
42,826 Super Sol (Retail Trade) 101,344
23,760 Teva Pharmaceutical Industries (Health & Medical
Services) 1,032,075
----------------------------------------------------
5,346,714
-----------------------------------------------------------------------------
Mexico - 6.9%
394,500 Alfa SA (Diversified Holding Companies) 952,711
641,800 Cifra Ser C (Retail) 714,868
35,700 Coca Cola Femsa SA CV (Food & Beverages) 448,481
47,300 Desc SA de CV ADS(a) (Diversified Holding
Companies) 966,694
289,600 Grupo Carso SA (Diversified Holding Companies) 813,563
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Mexico - (continued)
588,100 Grupo Modelo SA (Beverages) $ 1,313,008
21,000 Grupo Televisa GDR* (Broadcast Media) 538,125
196,100 Kimberly Clark (Retail) 562,495
71,700 Telefonos de Mexico SA ADS (Telecommunications) 3,665,663
----------------------------------------------------
9,975,608
-----------------------------------------------------------------------------
Peru - 0.4%
51,400 Telefonica del Peru SA ADS (Telecommunications) 610,375
-----------------------------------------------------------------------------
Philippines - 6.7%
4,611,400 Ayala Land Inc. (Real Estate) 1,407,375
493,200 Manila Electric Co. (Utility) 1,486,005
217,830 Metropolitan Bank and Trust (Banking) 1,612,508
39,400 Philippine Long Distance (Telecommunications) 921,039
78,300 Philippine Long Distance ADR (Telecommunications) 1,800,900
440,500 San Miguel Corp. "B" (Breweries) 629,286
9,418,200 SM Prime (Real Estate) 1,785,789
----------------------------------------------------
9,642,902
-----------------------------------------------------------------------------
Poland - 1.3%
12,800 Bank Handlowy Warszawie (Banking) 150,711
6,760 Bank Rozwoju Eksportu SA (Banking) 153,846
2,240 Bank Slaski (Banking) 110,504
43,300 Big Bank Gdanski (Banking) 42,486
11,902 Drugi Narodowy Fundusz Inwesty (Investment Fund) 9,083
11,902 Eugeniusza Kwiatkowskiego Narodowy Fundusz Inwesty
(Investment Fund) 19,301
11,902 Foksal SA Norodowy Fundusz Inwesty (Investment
Fund) 13,462
11,902 Fortuna SA Narodowy Fundusz
Inwesty (Investment Fund) 15,084
11,902 Hetman SA Narodowy Fundusz
Inwesty (Investment Fund) 9,245
11,902 Jedenasty Narodowy Fundusz
Inwesty (Investment Fund) 10,381
31,000 KGHM Polska Miedz SA
(Metals-Diversified) 124,203
9,872 Lentex (Building Materials) 42,243
11,902 Magna Polonia SA Narodowy Fundusz Inwesty
(Investment Fund) 15,571
17,100 Mostostal Zabrze
(Engineering & Construction) 61,055
11,902 Octava SA Narodowy Fundusz
Inwesty (Investment Fund) 19,139
12,300 Orbis SA (Leisure Time) 100,572
11,902 Piast SA Narodowy Fundusz
Inwesty (Investment Fund) 10,867
11,902 Pierwszy Narodowy Fundusz
Inwesty (Investment Fund) 11,354
11,902 Progress SA Narodowy Fundusz
Inwesty (Investment Fund) 19,464
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statement of Investments (continued)
January 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Poland - (continued)
3,390 Prokom Software SA (Computer
Services/Software) $ 121,500
2,800 Softbank SA (Computer
Services/Software) 99,210
72,300 Telekomunikacja Polska SA
(Telecommunications) 528,111
11,902 Trzeci Narodowy Fundusz
Inwesty (Investment Fund) 9,407
11,902 Victoria SA Narodowy Fundusz
Inwesty (Investment Fund) 18,166
11,902 Wielkiego Narodowy Fundusz
Inwesty (Investment Fund) 10,056
17,300 Wielkopolski Bank Kredytowy
(Banking) 111,278
11,902 Zachodni Fundusz Inwesty
(Investment Fund) 16,382
-----------------------------------------
1,852,681
------------------------------------------------------------------
Russia - 1.6%
39,608 AO Mosenergo* (Oil & Gas Services) 59,412
48,155 Lukoil Co.* (Oil & Gas Services) 168,543
49,873 Lukoil Co. ADR* (Oil & Gas Services) 741,861
27,755 Rao Gazprom ADS* (Energy) 236,611
26,000 Rostelecom ADR (Telecommunications) 110,500
163,492 Surgutneftegaz ADR* (Oil) 551,786
1,865 Unified Energy System ADR* (Utility) 5,595
125,397 Unified Energy System GDR* (Utility) 415,378
-----------------------------------------
2,289,686
------------------------------------------------------------------
Singapore - 2.2%
169,000 Natsteel Electronics Ltd. (Electronics) 504,403
155,000 Overseas Chinese Banking Corp-
Alien Market (Banking) 1,062,648
67,000 Singapore Airlines Ltd. (Airlines) 455,378
187,000 United Overseas Bank (Banking) 1,116,253
-----------------------------------------
3,138,682
------------------------------------------------------------------
South Africa - 11.1%
104,000 ABSA Group Ltd.
(Financial Services) 509,720
65,300 Anglo American Platinum Corp.
(Chemical Products) 962,825
26,129 Anglogold (Natural Resources) 1,052,908
85,580 De Beers Centenary
(Natural Resources) 1,226,600
202,259 Dimension Data Holdings Ltd.
(Computer Services/Software) 919,662
1,869,598 FirstRand Ltd.
(Financial Services) 2,242,286
75,000 Gold Fields Ltd. (Mining) 460,873
21,000 Impala Platinum Holdings Ltd.
(Metals-Diversified) 328,666
124,776 Imperial Holdings Ltd.
(Holding Company-Diversified) 842,803
66,370 Liberty Life Association
(Insurance Services) 885,662
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
South Africa - (continued)
456,402 Metro Cash & Carry Ltd.
(Wholesale Trade) $ 349,633
82,550 Nedcor Ltd. (Financial Services) 1,664,600
230,490 Pepkor Ltd. (Retail Trade) 717,671
115,000 Rembrandt Group (Diversified) 854,448
179,625 Sasol (Oil & Gas Services) 633,274
111,929 South Africa Brewery (Beverages) 1,807,091
48,828 Tiger Oats (Food & Beverages) 450,472
-----------------------------------------------------
15,909,194
------------------------------------------------------------------------------
South Korea - 10.9%
98,130 Housing & Communications
Bank (Banking) 1,407,226
140,000 Kook Min Bank (Financial Services) 1,043,745
153,300 Korea Electric Power Corp. ADR
(Utility) 2,654,006
74,797 Medison Co. (Health & Medical Services) 767,067
16,388 Pohang Iron & Steel (Steel) 1,012,151
57,000 Pohang Iron & Steel ADR (Steel) 1,068,750
15,350 Pusan City Gas (Oil & Gas) 380,157
51,000 Samsung Electronics (Electronics & Other Electrical
Equipment) 3,902,043
2,793 Samsung Electronics-Rights exp. 02/10/99
(Electronics & Other Electrical Equipment) 91,753
2,200 Samsung Fire & Marine Insurance
(Insurance) 718,979
93,771 SK Telecom Ltd. ADR*
(Telecommunications) 955,294
2,250 SK Telecom Ltd.
(Telecommunications) 1,709,617
-----------------------------------------------------
15,710,788
------------------------------------------------------------------------------
Taiwan - 5.3%
263,000 Cathay Life Insurance Co.
(Insurance Services) 813,863
466,600 Hon Hai Precision (Electronic
Connectors) 2,497,967
622,000 President Chain Stores (Retail) 1,790,066
15,000 Quanta Computer (Computer
Services/Software) 271,546
728,480 Siliconware Precis* (Technology) 1,363,857
310,750 Taiwan Semiconductor* (Technology) 812,575
-----------------------------------------------------
7,549,874
------------------------------------------------------------------------------
Thailand - 2.9%
118,600 Bangkok Bank (Financial Services) 220,464
631,200 Bangkok Expressway (Construction) 513,867
87,500 BEC World PLC (Media) 422,659
238,800 Electricity Generating Public Co.--Alien Market
(Utility) 576,749
124,000 PTT Exploration & Production (Energy Source) 935,468
20,300 Siam Cement Public Co. (Building Materials &
Construction) 462,741
27,000 Siam City Cement (Building Materials) 95,251
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Thailand - (continued)
296,500 Telecomasia Corporation (Telecommunications) $ 140,807
415,500 Thai Farmers Bank Public - Alien Market (Financial
Services) 789,281
----------------------------------------------------
4,157,287
-----------------------------------------------------------------------------
Turkey - 0.9%
13,855,724 Adana Cimento (Building/Construction Materials) 236,708
8,619,651 Akbank (Banking) 160,173
16,369,230 IS Bankasi (Banking) 387,583
379,610 Migros (Food & Beverages) 375,457
60,942 Petrol Ofisi (Oil & Gas) 9,315
5,618,421 Yapi Kredi Bankesi (Banking) 65,673
----------------------------------------------------
1,234,909
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $136,366,965) $132,167,531
-----------------------------------------------------------------------------
Preferred Stocks - 1.7%
Brazil - 1.7%
70,163,623 Cemig - Cia Energetica Minas Gerais (Utility) $ 897,401
6,825,800 Petroleos Brasileiros - Petrobras (Oil & Gas
Services) 458,424
12,429,912 Telesp (Telecommunications) 1,104,881
----------------------------------------------------
2,460,706
-----------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $6,808,214) $ 2,460,706
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount/Units Rate Date Value
Bond - 0.0%
<S> <C> <C> <C>
Russia - 0.0%
Inter American Development Bank(b)
7,900,0001 31.0% 05/08/00 $ 58,117
------------------------------------------------------------------------------------------
TOTAL BOND
(Cost $1,856,802) $ 58,117
------------------------------------------------------------------------------------------
</TABLE>
Structured Notes - 6.2%
<TABLE>
<C> <S> <C>
1,362,570 units Merrill Lynch Call Warrant
on Korean Stock Price
Index 200 $ 7,546,730
180,314 units Taiwan Index Linked Note 1,373,993
----------------------------------------------------------
TOTAL STRUCTURED NOTES
(Cost $8,000,000) $ 8,920,723
----------------------------------------------------------
TOTAL INVESTMENTS
(Cost $153,031,981)(c) $143,607,077
----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
Federal In-
come Tax In-
formation:
Gross
unrealized
gain for in-
vestments in
which
value exceeds
cost $ 14,855,341
Gross
unrealized
loss for in-
vestments in
which
cost exceeds
value (25,948,990)
----------------------------
Net
unrealized
loss $(11,093,649)
----------------------------
</TABLE>
* Non-income producing security.
(a) Portions of these securities are being segregated for extended settlement
securities.
(b) Represents a security that is fair valued. See footnote 2(A).
(c) The aggregate cost for federal income tax purposes is $154,700,726.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
<TABLE>
<S> <C>
As a %
of Total
Net Assets
Common and Preferred Stock Industry Classifications
Agriculture 0.2%
Airlines 0.3
Autos and Trucks 1.4
Banking 8.7
Beverages 3.1
Breweries 0.4
Broadcast Media 0.4
Building/Construction
Materials 0.7
Chemical Products 0.9
Communications 0.3
Computer Services/
Software 1.1
Construction 0.7
Consumer Goods 0.5
Containers 0.2
Cosmetics 0.2
Diversified 0.6
Diversified Holding
Companies 1.9
Diversified Industrial
Manufacturing 0.5
Drugs 0.1
Electric Utility 0.2
Electronic Connectors 1.7
Electronics 0.7
Electronics & Other
Electrical Equipment 3.8
Energy Source 0.8
Engineering &
Construction 0.0
Financial Services 4.5
Food & Beverages 1.4
Health & Medical Services 1.3
Health Care 0.2
Holding Company-
Diversified 0.6
Insurance Services 1.7
Investment Fund 0.6
Leisure Time 0.1
Media 0.3
Metals-Diversified 2.3
Mining 0.6
Natural Resources 1.6
Oil & Gas Services 3.8
Paper & Forest Products 0.5
Real Estate 2.6
Retail Trade 2.9
Steel 1.4
Technology 1.5
Telecommunications 24.8
Telecommunications
Equipment 0.4
Tobacco 4.4
Transportation-Marine 0.2
Utility 6.4
Wholesale Trade 0.2
-----------------------------------------------------------------
TOTAL COMMON AND
PREFERRED STOCK 93.7%
-----------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statement of Assets and Liabilities
January 31, 1999
Assets:
<TABLE>
<S> <C>
Investment in securities, at value (identified cost
$153,031,981) $143,607,077
Cash, at value 3,668,924
Receivables:
Investment securities sold, at value 474,744
Fund shares sold 218,872
Dividends and interest, at value 508,916
Reimbursement from investment adviser 164,845
Deferred organization expenses, net 11,396
Other assets, at value 15,634
- ----------------------------------------------------------------------------
Total assets 148,670,408
- ----------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased, at value 4,090,946
Income distribution 745
Fund shares repurchased 437,353
Amounts owed to affiliates 204,264
Accrued expenses and other liabilities, at value 311,519
- ----------------------------------------------------------------------------
Total liabilities 5,044,827
- ----------------------------------------------------------------------------
Net Assets:
Paid-in capital 199,658,406
Accumulated undistributed net investment income 26,133
Accumulated net realized loss on investment and foreign
currency related transactions (46,285,294)
Net unrealized loss on investments and translation of assets
and liabilities denominated in foreign currencies (9,773,664)
- ----------------------------------------------------------------------------
NET ASSETS $143,625,581
- ----------------------------------------------------------------------------
</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) 7,483,990 65,322 38,754
Net asset value, offering and redemption price
per share(a) $7.04 $7.03 $7.05
- -------------------------------------------------------------------------------
<CAPTION>
Institutional Service
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Total shares of beneficial interest
outstanding, $.001 par value (unlimited shares
authorized) 12,715,053 166
Net asset value, offering and redemption price
per share $7.09 $6.87
- -------------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share (NAV per share X 1.0582) for
Class A shares is $7.45. 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 pur-
chase price of the shares.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statement of Operations
For the Year Ended January 31, 1999
<TABLE>
<S> <C>
Investment income:
Dividends (a) $ 2,694,167
Interest 1,004,258
----------------------------------------------------------------------------
Total income 3,698,425
----------------------------------------------------------------------------
Expenses:
Management fees 1,519,721
Custodian fees 456,456
Distribution and service fees (b) 231,956
Transfer agent fees 163,405
Registration fees 103,143
Professional fees 56,375
Trustee fees 7,520
Amortization of deferred organization expenses 1,399
Other 71,321
----------------------------------------------------------------------------
Total expenses 2,611,296
----------------------------------------------------------------------------
Less-expenses reimbursed and fees waived by Goldman Sachs (562,301)
----------------------------------------------------------------------------
Net expenses 2,048,995
----------------------------------------------------------------------------
NET INVESTMENT INCOME 1,649,430
----------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment and foreign
currency transactions:
Net realized gain (loss) from:
Investment transactions (45,507,353)
Foreign currency related transactions 4,180,921
Net change in unrealized loss:
Investments (8,569,284)
Translation of assets and liabilities denominated in foreign
currencies (340,817)
----------------------------------------------------------------------------
Net realized and unrealized loss on investment and foreign
currency transactions: (50,236,533)
----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (48,587,103)
----------------------------------------------------------------------------
</TABLE>
(a) Taxes withheld on dividends were $258,446.
(b) Class A, Class B and Class C had distribution and service fees of
$226,631, $3,075 and $2,250, respectively.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Statements of Changes in Net Assets
For the Year Ended January 31, 1999 and Period Ended January 31, 1998
<TABLE>
<CAPTION>
January 31, 1999 January 31, 1998(a)
<S> <C> <C>
From operations:
Net investment income $ 1,649,430 $ 19,872
Net realized loss on investment and
foreign currency related transactions (41,326,432) (22,454)
Net change in unrealized loss on
investments and translation of assets
and liabilities denominated in
foreign currencies (8,910,101) (863,563)
------------------------------------------------------------------------------
Net decrease in net assets resulting
from operations (48,587,103) (866,145)
------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A shares (569,869) --
Class B shares (4,352) --
Class C shares (2,737) --
Institutional shares (1,092,333) --
Service shares (11) --
In excess of net investment income
Class A shares (1,680,766) --
Class B shares (12,834) --
Class C shares (8,074) --
Institutional shares (3,221,713) --
Service shares (33) --
------------------------------------------------------------------------------
Total distributions to shareholders (6,592,722) --
------------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 220,344,538 37,824,117
Reinvestment of dividends and
distributions 4,301,531 --
Cost of shares repurchased (62,779,701) (18,934)
------------------------------------------------------------------------------
Net increase in net assets resulting
from share transactions 161,866,368 37,805,183
------------------------------------------------------------------------------
TOTAL INCREASE 106,686,543 36,939,038
------------------------------------------------------------------------------
Net assets:
Beginning of period 36,939,038 --
------------------------------------------------------------------------------
End of period $143,625,581 $36,939,038
------------------------------------------------------------------------------
Accumulated undistributed net
investment income $ 26,133 $ 19,872
------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on December 15, 1997.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Notes to Financial Statements
January 31, 1999
1. ORGANIZATION
Goldman Sachs Trust (the "Trust"), a Delaware business trust registered under
the Investment Company Act of 1940 (as amended) as an open-end management in-
vestment company. The Trust includes the Goldman Sachs Emerging Markets
Equity Fund (the "Fund"). At January 31, 1999, 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. Certain
reclassifications have been made to the prior period amounts to conform with
the current period presentation. Such reclassifications have no effect on
previously reported net asset values of the Fund.
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. If
no sale occurs, securities are valued at the mean between the closing bid and
asked price. Debt securities are valued at prices supplied by an independent
pricing service, which reflect broker / dealer-supplied valuations or matrix
pricing systems. Unlisted equity and debt securities for which market quota-
tions are available are valued at the mean between the most recent bid and
asked prices. Short-term debt obligations maturing in sixty days or less are
valued at amortized cost. Restricted securities, and other securities for
which quotations are not readily available, are valued at fair value using
methods approved by the Board of Trustees of the Trust.
Investing in emerging markets may involve special risks and considerations
not typically associated with investing in the United States. These risks in-
clude revaluation of currencies, high rates of inflation, repatriation re-
strictions on income and capital, and adverse political and economic
developments. Moreover, securities issued in these markets may be less liq-
uid, subject to government ownership controls, delayed settlements, and their
prices more volatile than those of comparable securities in the United
States.
B. Security Transactions and Investment Income -- Security transactions are
recorded as of the trade date. Realized gains and losses on sales of portfo-
lio securities are calculated using the identified-cost basis. Dividend in-
come is recorded on the ex-dividend date. Dividends for which the Fund has
the choice to receive either cash or stock are recognized as investment in-
come in an amount equal to the cash dividend. Interest income is recorded on
the basis of interest accrued, premium amortized and discount earned. It is
the Fund's policy, where necessary, to accrue for estimated capital gains
taxes on appreciated foreign securities.
C. Foreign Currency Translations -- The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in foreign currencies are
translated into U.S. dollars on the following basis: (i) investment valua-
tions, foreign currency and other assets and liabilities initially expressed
in foreign currencies are converted each business day into U.S. dollars based
on current exchange rates; (ii) purchases and sales of foreign investments,
income and expenses are converted into U.S. dollars based on currency ex-
change rates prevailing on the respective dates of such transactions.
Net realized and unrealized gain (loss) on foreign currency transactions
will represent: (i) foreign exchange gains and losses from the sale and hold-
ings of foreign currencies; (ii) currency gains and losses between trade date
and settlement date on investment securities transactions and forward ex-
change contracts; and (iii) gains and losses from the difference between
amounts of dividends, interest and foreign withholding taxes recorded and the
amounts actually received.
13
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Notes to Financial Statements (continued)
January 31, 1999
D. Forward Foreign Currency Exchange Contracts -- The Fund may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
cross-hedge against either specific transactions or portfolio positions. The
Fund may also purchase and sell such contracts to seek to increase total re-
turn. All commitments are "marked-to-market" daily at the applicable transla-
tion rates. The Fund realizes gains or losses at the time a forward contract
is offset by entry into a closing transaction or extinguished by delivery of
the currency. Risks may arise upon entering these contracts from the poten-
tial inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
E. Derivative Financial Instruments -- Structured Notes
The Fund may utilize derivative financial instruments such as structured
notes. Such instruments are used by the Fund as a means of investing in a
particular market or of increasing the return on the Fund's investments or
both. The value of the principal of and/or interest on such securities is de-
termined by reference to changes in the value of the financial indicators in-
cluding, but not limited to indices, currencies or interest rates. These
financial instruments may subject the fund to a greater degree of market risk
and loss than other types of securities.
F. 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.
G. 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 paid-in
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.
The Fund had approximately $33,647,000 at October 31, 1998 (the Fund's tax
year end) of capital loss carryforward expiring 2006 for federal tax purpos-
es. This amount is available to be carried forward to offset future capital
gains to the extent permitted by applicable laws or regulations.
H. Deferred Organization Expenses -- Organization-related costs are amortized
on a straight-line basis over a period of five years.
I. 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 a
straight-line or pro rata basis depending upon the nature of the expense.
Class A, Class B and Class C shares bear all expenses and fees relating to
their respective distribution and service plans. Each class of shares sepa-
rately bears its respective class-specific transfer agency fees. Service
shares bear all expenses and fees paid to service organizations for their
services with respect to such shares.
J. 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
14
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
originally received. When a written put option is exercised, the amount of
the premium originally received will reduce the cost of the security which
the 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.
K. Futures Contracts -- The Fund may enter into futures transactions to hedge
against changes in interest rates, securities prices, currency exchange rates
or to seek to increase total return.
Upon entering into a futures contract, the Fund is required to deposit with
a broker an amount of cash or securities equal to the minimum "initial mar-
gin" requirement of the associated futures exchange. Subsequent payments for
futures contracts ("variation margin") are paid or received by the Fund, de-
pending on the fluctuations in the value of the contracts, and are recorded
for financial reporting purposes as unrealized gains or losses. When con-
tracts are closed, the Fund realizes a gain or loss which is reported in the
Statement of Operations.
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
Pursuant to the Investment Management Agreement ("the Agreement"), Goldman
Sachs Asset Management International ("GSAMI"), an affiliate of Goldman Sachs
Asset Management ("GSAM"), serves as the investment adviser to the Fund. Un-
der the Agreement, GSAMI, subject to the general supervision of the Trust's
Board of Trustees, manages the Fund's portfolio. As compensation for the
services rendered under the Agreement, the assumption of the expenses related
thereto and administering the Fund's business affairs, including providing
facilities, GSAMI is entitled to a fee, computed daily and payable monthly,
at an annual rate equal to 1.20% of the average daily net assets of the Fund.
For the year ended January 31, 1999, the adviser has agreed to waive $65,000
of its management fee. The adviser may discontinue or modify this waiver in
the future at its discretion.
The adviser voluntarily agreed to limit certain "Other Expenses" (excluding
management fees, distribution and service fees, transfer agent fees, taxes,
interest, brokerage, litigation, Service share fees, indemnification costs
and other extraordinary expenses) through August 31, 1998 to the extent such
expenses exceeded .16% of the average daily net assets of the Fund. Goldman
Sachs reimbursed approximately $497,000 for the year ended January 31, 1999.
Effective September 1, 1998, this expense limitation was modified to .15%.
Goldman Sachs serves as the Distributor of shares of the Fund pursuant to a
Distribution Agreement. Goldman Sachs may receive a portion of the Class A
sales load and Class B and Class C contingent deferred sales charges and has
advised the Fund that it has retained approximately $495,000 for the year
ended January 31, 1999.
Prior to September 1, 1998, the Trust, on behalf of the Fund, had adopted
Distribution Plans (the "Distribution Plans") pursuant to Rule 12b-1. Under
the Distribution Plans, Goldman Sachs was entitled to a quarterly fee from
the Fund for
15
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Notes to Financial Statements (continued)
January 31, 1999
distribution services equal, on an annual basis, to .25%, .75% and .75% of
the Fund's average daily net assets attributable to Class A, Class B and
Class C shares, respectively.
Prior to September 1, 1998, the Trust, on behalf of the Fund, had adopted
Authorized Dealer Service Plans (the "Dealer Service Plans") pursuant to
which Goldman Sachs and Authorized Dealers are compensated for providing per-
sonal and account maintenance services. The Fund paid a fee under the Dealer
Service Plans equal, on an annual basis, up to .25% of its average daily net
assets attributable to Class A, Class B and Class C shares.
Effective September 1, 1998, the Distribution Plans and Dealer Service
Plans were combined into Distribution and Service Plans. Under the Distribu-
tion and Service Plans, Goldman Sachs and/or Authorized Dealers are entitled
to a monthly fee from the Fund for distribution and shareholders maintenance
services equal, on an annual basis, to .50%, 1.00%, and 1.00% of each of the
Fund's average daily net assets attributable to Class A, Class B and Class C
shares, respectively.
Goldman Sachs also serves as the Transfer Agent of the Fund for a fee. Ef-
fective September 1, 1998, the fees charged for such transfer agency services
are calculated daily and payable monthly at an annual rate as follows: 0.19%
of average daily net assets for Class A, Class B and Class C shares and 0.04%
of average daily net assets for Institutional and Service shares.
The Trust, on behalf of the Fund, has adopted a Service Plan. This Plan al-
lows for Service shares to compensate service organizations for providing va-
rying levels of account administration and shareholder liaison services to
their customers who are beneficial owners of such shares. The Service Plan
provides for compensation to the service organizations in an amount up to
.50% (on an annualized basis), of the average daily net asset value of the
Service shares.
As of January 31, 1999, the amounts owed to affiliates were approximately
$162,000, $25,000 and $17,000 for Management, Distribution and 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) for the year ended January 31, 1999, were
$345,349,929 and $177,077,849, respectively.
For the year ended January 31, 1999, Goldman Sachs earned approximately
$76,000 of brokerage commissions from portfolio transactions.
5. LINE OF CREDIT FACILITY
The Fund participates in a $250,000,000 uncommitted, unsecured revolving line
of credit facility. In addition, the Fund participates in a $50,000,000 com-
mitted, unsecured revolving line of credit facility. Both facilities are to
be used solely for temporary or emergency purposes. Under the most restric-
tive arrangement, the Fund must own securities having a market value in ex-
cess of 300% of the total bank borrowings. The interest rate on the
borrowings is based on the Federal Funds rate. The committed facility also
requires a fee to be paid based on the amount of the commitment which has not
been utilized. During the year ended January 31, 1999, the Fund did not have
any borrowings under these facilities.
6. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, the Fund reclassified $13,145
from paid-in capital to accumulated undistributed net investment income and
$4,936,408 from accumulated net realized loss on investment and foreign cur-
rency related transactions to accumulated undistributed net investment in-
come. These reclassifications have no impact on the net asset value of the
Fund and are designed to present the Fund's capital accounts on a tax basis.
16
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
7. SUMMARY OF SHARE TRANSACTIONS
Share activity for the year ended January 31, 1999 and period ended January
31, 1998 are as follows:
<TABLE>
<CAPTION>
For the Year Ended January 31, 1999 For the Period Ended January 31, 1998(a)
------------------------------------- ------------------------------------------
Shares Dollars Shares Dollars
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold 10,357,445 $ 89,405,582 1,824,207 $ 17,866,344
Reinvestment of divi-
dends and distribu-
tions 318,269 2,176,957 -- --
Shares repurchased (5,015,931) (38,121,169) -- --
----------------------------------- ----------------------------------------
5,659,783 53,461,370 1,824,207 17,866,344
--------------------------------------------------------------------------------------------------------
Class B Shares
Shares sold 73,263 638,031 6,579 64,645
Reinvestment of divi-
dends and distribu-
tions 1,969 13,468 -- --
Shares repurchased (16,489) (112,961) -- --
---------------------------------- ----------------------------------------
58,743 538,538 6,579 64,645
--------------------------------------------------------------------------------------------------------
Class C Shares
Shares sold 44,699 387,030 7,520 72,494
Reinvestment of divi-
dends and distribu-
tions 1,550 10,621 -- --
Shares repurchased (15,015) (115,705) -- --
---------------------------------- ----------------------------------------
31,234 281,946 7,520 72,494
--------------------------------------------------------------------------------------------------------
Institutional Shares
Shares sold 13,487,704 129,913,895 1,973,802 19,819,033
Reinvestment of divi-
dends and distribu-
tions 304,854 2,100,442 -- --
Shares repurchased (3,049,355) (24,429,866) (1,952) (18,934)
---------------------------------- ----------------------------------------
10,743,203 107,584,471 1,971,850 19,800,099
--------------------------------------------------------------------------------------------------------
Service Shares
Shares sold -- -- 160 1,601
Reinvestment of divi-
dends and distribu-
tions 6 43 -- --
---------------------------------- ----------------------------------------
6 43 160 1,601
--------------------------------------------------------------------------------------------------------
NET INCREASE 16,492,969 $ 161,866,368 3,810,316 $ 37,805,183
--------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on December 15, 1997.
8. OTHER MATTERS
As of January 31, 1999, the Goldman Sachs Growth and Income Strategy Portfo-
lio, the Goldman Sachs Growth Strategy Portfolio and the Goldman Sachs Ag-
gressive Growth Strategy Portfolio were beneficial owners of approximately
12%, 11% and 5% of the outstanding shares of the Fund, respectively. In addi-
tion, two clients are the beneficial owners of 11% and 10% of the outstanding
shares of the Fund, respectively.
Goldman Sachs Emerging Markets Equity Fund -- Tax Information (unaudited)
For its fiscal year ended January 31, 1999, the total amount of
income received by the Fund from sources within foreign countries
and possessions of the United States was $.0571 per share all of
which is attributable to qualified passive income. The total
amount of taxes paid by the Fund to such countries was $.0090 per
share. A separate notice containing the country by country compo-
nents of these totals has been previously mailed to shareholders.
17
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from
investment operations(d) Distributions to shareholders
------------------------- --------------------------------------
Net realized
and unrealized
loss on From net
investments realized gain
Net asset Net and foreign In excess on investment
value, investment currency From net of net and foreign Net decrease
beginning income related investment investment currency related in net asset
of period (loss) transactions income income transactions value
FOR THE YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $ 9.69 $ 0.04 $(2.40) $(0.07) $(0.22) -- $(2.65)
1999 - Class B Shares 9.69 0.03 (2.41) (0.07) (0.21) -- (2.66)
1999 - Class C Shares 9.70 0.01 (2.39) (0.07) (0.20) -- (2.65)
1999 - Institutional
Shares 9.70 0.06 (2.36) (0.08) (0.23) -- (2.61)
1999 - Service Shares 9.69 (0.13) (2.41) (0.07) (0.21) -- (2.82)
FOR THE PERIOD ENDED JANUARY 31,
1998 - Class A Shares
(commenced December 15,
1997) 10.00 -- (0.31) -- -- -- (0.31)
1998 - Class B Shares
(commenced December 15,
1997) 10.00 -- (0.31) -- -- -- (0.31)
1998 - Class C Shares
(commenced December 15,
1997) 10.00 -- (0.30) -- -- -- (0.30)
1998 - Institutional
Shares (commenced Decem-
ber 15, 1997) 10.00 0.01 (0.31) -- -- -- (0.30)
1998 - Service Shares
(commenced December 15,
1997) 10.00 -- (0.31) -- -- -- (0.31)
------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the
period, reinvestment of all dividends and distributions, a complete
redemption of the investment at the net asset value at the end of
the period and no sales or redemption charges. Total return would be
reduced if a sales or redemption charge were taken into account.
(b) Annualized.
(c) Not annualized.
(d) Includes the balancing effect of calculating per share amounts.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
Ratios assuming no voluntary waiver
of fees or expense limitations
-----------------------------------
Ratio of
Net assets Ratio of net investment Ratio of Ratio of net
Net asset at end of net expenses income (loss) expenses to investment income Portfolio
value, end Total period to average to average average net (loss) to average turnover
of period return(a) (in 000s) net assets net assets assets net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$7.04 (24.32)% $52,704 2.09% 0.80% 2.53% 0.36% 153.67%
7.03 (24.51) 459 2.59 0.19 3.03 (0.25) 153.67
7.05 (24.43) 273 2.59 0.28 3.03 (0.16) 153.67
7.09 (23.66) 90,189 1.35 1.59 1.79 1.15 153.67
6.87 (26.17) 1 1.85 (1.84) 2.29 (2.28) 153.67
9.69 (3.10)(c) 17,681 1.90(b) 0.55(b) 5.88(b) (3.43)(b) 3.35(c)
9.69 (3.10)(c) 64 2.41(b) 0.05(b) 6.39(b) (3.93)(b) 3.35(c)
9.70 (3.00)(c) 73 2.48(b) (0.27)(b) 6.46(b) (4.25)(b) 3.35(c)
9.70 (3.00)(c) 19,120 1.30(b) 0.80(b) 5.28(b) (3.18)(b) 3.35(c)
9.69 (3.10)(c) 2 2.72(b) (0.05)(b) 6.70(b) (4.03)(b) 3.35(c)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
Report of Independent Public Accountants
To the Shareholders and Board of Trustees of
Goldman Sachs Trust--Emerging Markets Equity Fund:
We have audited the accompanying statement of assets and liabilities of
Goldman Sachs Emerging Markets Equity Fund, one of the portfolios constitut-
ing Goldman Sachs Trust--Equity Funds (a Delaware Business Trust), including
the statement of investments, as of January 31, 1999, and the related state-
ment of operations, the statements 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, 1999 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 Emerging Markets Equity Fund as of January 31, 1999,
the results of its operations, the changes in its net assets and the finan-
cial highlights for the periods presented, in conformity with generally ac-
cepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 19, 1999
20
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs Emerging Markets Equity Fund
An Investment Idea for the Long Term
History has shown that a long-term plan that includes stocks of emerging market
countries is more likely to provide greater returns and reduce overall portfolio
volatility over time than a portfolio that invests only in U.S.-based stocks.
Goldman Sachs Emerging Markets Equity Fund offers investors access to the
benefits associated with emerging market investing. The Fund seeks long-term
capital appreciation, primarily through equity securities of emerging country
issuers.
Target Your Needs
The Goldman Sachs Emerging Markets Equity Fund has a distinct investment
objective and a defined place on the risk/return spectrum. As your investment
objectives change, you can exchange shares within Goldman Sachs Funds without an
additional charge.(*) (Please note: in general, greater returns are associated
with greater risk.)
Goldman Sachs Funds
Goldman Sachs Funds offers more than 30 investment options for global
diversification across borders, investment styles,asset classes and security
capitalizations.
ASSET ALLOCATION SPECIALTY
Higher Risk/Return
- ------------------
INTERNATIONAL EQUITY
- --------------------
o Goldman Sachs Emerging Markets Equity Fund
DOMESTIC EQUITY
FIXED INCOME
Lower Risk/Return
- -----------------
MONEY MARKET
For More Information
To learn more about the Goldman Sachs Emerging Markets Equity Fund and other
Goldman Sachs Funds, call your investment professional today.
(*)The exchange privilege is subject to termination and its terms are subject to
change.
<PAGE>
GOLDMAN SACHS ASSET MANAGEMENT ONE NEW YORK PLAZA 42ND FLOOR, NEW YORK,
NEW YORK 10004
TRUSTEES OFFICERS
Ashok N. Bakhru, Chairman Douglas C. Grip, President
David B. Ford Jesse H. Cole, Vice President
Douglas C. Grip James A. Fitzpatrick, Vice President
John P. McNulty Anne E. Marcel, Vice President
Mary P. McPherson Nancy L. Mucker, Vice President
Alan A. Shuch John M. Perlowski, Treasurer
Jackson W. Smart, Jr. Philip V. Giuca, Jr., Assistant Treasurer
William H. Springer Michael J. Richman, Secretary
Richard P. Strubel Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
Investment Adviser
GOLDMAN SACHS INTERNATIONAL
Peterborough Court, 133 Fleet Street
London EC4A 2BB, England
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.
Asia Growth Fund's, Emerging Markets Equity Fund's and International 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 market of
emerging countries in which the Funds may invest without limit are less liquid,
are 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.
Asia Growth Fund's, Japanese Equity Fund's, International Small Cap
Equity Fund's, European Equity Fund's and CORE International Equity Fund's
foreign investments and active management techniques entail risks in addition to
those customarily associated with investing in dollar-denominated securities of
U.S. issuers. Compared with domestic securities markets, foreign markets may be
less liquid, more volatile and less subject to government regulation, and may
make available less public information about issuers. The Funds may incur
losses because of changes in securities prices expressed in local currencies,
movements in exchange rates or both. Concentration of the Japanese Equity and
Asia Growth Fund's assets in one or a few countries and currencies will subject
the Fund to greater risk than if a Fund's assets were not geographically
concentrated.
The stocks of smaller companies are often associated with higher risks,
including greater volatility than stocks of larger companies.
An investment in a money market fund is neither insured nor guaranteed by the
U.S. government and there can be no assurance that any money market fund will be
able to maintain a net asset value of $1.00 per share.
Copyright 1999 Goldman, Sachs & Co. All rights reserved.
Date of first use: March 31, 1999 EMEAR/12K/3-99
