<PAGE>
Goldman Sachs Funds
INTERNATIONAL EQUITY FUND Annual Report August 31, 1999
[GRAPHIC APPEARS HERE] Long-term capital growth potential
through investments in equity markets
located around the world.
-------
Goldman
Sachs
-------
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Market Overview
Dear Shareholder,
During the period under review, the Asian stock market rebounded
dramatically following the last economic crisis. Japan also posted
surprisingly strong returns, while many European countries produced
lackluster results.
. Market Review: Overall, Global Markets Performed Well -- As the
reporting period began, a cloud hovering over the world's equity
markets was appearing to lift. Concerted action from the G-7,
including multiple interest rates cuts by the Federal Reserve
Board, began to alleviate fears of a global financial meltdown,
after a severe reduction in liquidity in late 1998. The launch of
the euro reflected the continued move toward closer monetary
unification in Europe, while the Japanese government finally
appeared ready to seriously address its structural problems.
In most cases, this has led to positive market returns
around the world. The U.S. stock market has moved forward,
despite rising interest rates. In Asia, a dramatic rebound
unfolded after last year's currency crisis. Investors who were
previously underweight in the region moved to increase their
exposure, creating an attractive investment environment. In
Japan, the market has generated very strong returns, due to
unexpected gains in the country's domestic economy, and a flood
of capital from institutional investors. Europe was relatively
disappointing, with the euphoria surrounding the launch of the
euro being short lived. European markets were also held back due
to the conflict in Bosnia, rising U.S. interest rates and data
indicating sluggish production in the region.
. Market Outlook: Mixed Signals Prevailed -- The outlook for Asia
as a region has improved, although it is important to note that
intra-regional discrepancies still exist. We believe that several
countries have "bottomed out" and are now showing signs of
recovery following the crises of 1998. On a cautious note, we
recognize that a recovery in Asia is very dependent on the
continued strength of the U.S. market. Consequently, it will be
important to closely monitor all economic data coming out of the
U.S. in an effort to determine its impact on the Asian markets.
In Japan, for the time being, we remain cautious on the
market, given the recent rally and the concerns of equity
valuations. Based on the current price levels, the market seems
to have discounted much of the earnings recovery expected to
materialize in late 1999. On a positive note, many companies are
in the process of implementing restructuring plans that they
announced several months back -- benefits of which could improve
earnings.
And in Europe, we are positive on the outlook for the
continental region, as we see signals of sustained consumer and
producer confidence improvements, benefits from Asia and Japan
restocking inventories, the weaker euro, and continued industrial
reorganization and consolidation.
. Special Note: Reporting Period Change -- The fiscal year-end of
your Fund has been changed to August 31. Previously, your Fund
had a January 31 fiscal year-end. This will serve as the Fund's
annual report. This change does not affect your Fund's investment
objective or strategy in any way.
We encourage you to maintain your long term investment program
and we look forward to serving your investment needs in the years
to come.
Sincerely,
/s/David B. Ford /s/John P. McNulty
David B. Ford John P. McNulty
Co-Head, Co-Head,
Goldman Sachs Asset Management Goldman Sachs Asset Management
September 3, 1999
- ------------------------
. NOT FDIC INSURED
. May Lose Value
. No Bank Guarantee
- ------------------------
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Fund Basics
as of August 31, 1999
Assets Under Management
$1.2 Billion
Number of Holdings
135
NASDAQ Symbols
Class A Shares
GSIFX
Class B Shares
GSEBX
Class C Shares
GSICX
Institutional Shares
GSIEX
Service Shares
GSISX
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
January 31, 1999- Fund Total Return FT/S&P Actuaries
August 31, 1999 (without sales charge)/1/ Europe and Pacific Index/2/
- --------------------------------------------------------------------------------
Class A 5.47% 10.91%
Class B 5.09 10.91
Class C 5.08 10.91
Institutional 5.81 10.91
Service 5.52 10.91
- --------------------------------------------------------------------------------
/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
reinvestment of dividends and other distributions.
/2/The unmanaged FT/S&P Actuaries Europe and Pacific Index (EuroPac) is a market
capitalization-weighted composite of approximately 1,500 stocks from 20
countries in the Europe and Asia-Pacific region. EuroPac is calculated on
both a hedged and unhedged basis. From the inception of the Fund until
8/31/94, the Fund was managed using the hedged EuroPac as a benchmark, after
which the unhedged EuroPac was used. The combined benchmark reflects this
weighting. The Index figures do not reflect any fees or expenses. Investors
cannot invest directly in the Index.
- --------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURNS/3/
- --------------------------------------------------------------------------------
For the period
ended 6/30/99 Class A Class B Class C Institutional Service
- --------------------------------------------------------------------------------
Last 6 Months -3.24% -2.93% 1.04% 2.66% 2.41%
One Year -4.32 -4.34 -0.40 1.88 1.35
Five Years 11.01 N/A N/A N/A 12.35/4/
Since Inception 10.36 8.29 4.86 12.38 11.37/4/
(12/1/92) (5/1/96) (8/15/97) (2/7/96) (12/1/92)
- --------------------------------------------------------------------------------
/3/The Standardized Total Returns are average annual total returns or cumulative
total returns (only if the performance period is one year or less) as of the
most recent calendar quarter-end. They assume reinvestment of all
distributions at net asset value. These returns reflect 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) and the
assumed deferred sales charge for Class C shares (1% if redeemed within 12
months of purchase). Because Institutional and Service shares do not involve
a sales charge, such a charge is not applied to their Standardized Total
Returns.
/4/Performance data for Service shares prior to 3/6/96 is that of Class A shares
(excluding the impact of front-end sales charges applicable to Class A shares
since Service shares are not subject to any sales charges). Performance of
Class A shares of the International Equity Fund reflects the expenses
applicable to the Fund's Class A shares. The fees applicable to Services
shares are different from those applicable to Class A shares which impact
performance ratings and rankings for a class of shares.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS AS OF 8/31/99
- --------------------------------------------------------------------------------
% of Total
Holding Net Assets Country Line of Business
- --------------------------------------------------------------------------------
Vodafone Airtouch PLC 2.1% Britain Telecommunications
Skandia Forsakring 1.9 Sweden Insurance
Getronics NV 1.8 Netherlands Business Services
Glaxo Wellcome PLC 1.8 Britain Health
Mannesmann AG 1.7 Germany Machinery
Rhone-Poulenc SA 1.7 France Chemicals
Nokia AB Oyj 1.6 Finland Telecommunications
British Telecom PLC 1.6 Britain Telecommunications
Securitas AB 1.6 Sweden Business Services
Preussag AG 1.5 Germany Multi-Industrial
- --------------------------------------------------------------------------------
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 expense limitations in effect. In their absence, performance would
be reduced.
1
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Performance Overview
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs
International Equity Fund for the seven-month period ended August 31, 1999.
This reporting period is based on the Fund's new August 31st fiscal
year-end.
Performance Review
Over the seven-month period ended August 31, 1999, the Fund's
Class A, B, C, Institutional and Service shares generated
cumulative total returns, without sales charges, of 5.47%, 5.09%,
5.08%, 5.81% and 5.52%, respectively. These figures compare to
the 10.91% cumulative total return of the Fund's benchmark, the
FT/S&P-Actuaries Europe & Pacific ("Europac") Index (unhedged).
The Portfolio's underperformance versus its benchmark was
due to sector and asset allocation strategies. The Portfolio was
hurt by its underweight position in Japan and Asia in favor of
the weaker-performing European market. Performance was further
muted due to a strong shift in investor sentiment from growth to
value and other cyclical issues as the year progressed.
Portfolio Composition
In the beginning of the reporting period we favored European
stocks, given the region's encouraging economic prospects and its
good level of earnings growth relative to other regions.
Moreover, valuations were not excessive, and Europe was
benefiting from a consolidation process not seen in other
regions. However, as the period progressed and European equities
failed to meet investor expectations, we reduced our overexposure
and took a more neutral stance. Assets from Europe were shifted
into stronger-performing Asian markets and selective Japanese
holdings.
Portfolio Highlights
. Shin-Etsu Chemical Co. Ltd. -- Shin-Etsu Chemical (1.3% of net
assets), is one of the leading manufacturers of semiconductor
silicon wafers and PVC (polyvinyl chloride). Its wafer sales are
recovering and are expected to buttress their profits for the
next few years. In addition, their valuations are reasonable
compared to those of many other cyclicals.
. China Telecom Ltd. -- One of the key portfolio holdings in Asia
is China Telecom (0.4% of net assets). Listed on the Hong Kong
stock exchange, China Telecom is the dominant provider of mobile
phone services in mainland China. The firm has over 90% market
share in the three provinces it operates in, and continues to
grow new subscriptions at a remarkable rate. Looking ahead, a
rumored bond issue is likely to be used to acquire providers in
other parts of China, extending China Telecom's dominance.
. Mannesmann AG -- Mannesmann is a long-standing engineering
company that has successfully transformed itself into one of
Europe's leading telecommunications companies. Mannesmann is
currently the second largest mobile phone company in Europe, with
significant exposure to the fast-growing German market.
Furthermore, the potential for linked fixed access and mobile
assets in Germany, France and Italy could lead to significant
further gains.
. Skandia Forsakring -- Skandia is one of the world's largest
global players in the market for long-term savings products.
Skandia is the third largest variable annuity provider in the
U.S. and it expects continued strong growth. In addition, the
company acts as an arranger between independent agents and large
fund management companies, and is the largest purchaser of asset
management services in the U.S.
2
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
INVESTMENT PROCESS OVERVIEW
The results of our bottom-up stock selection process are enhanced by a top-down
review of our regional market views and the views of the quantitative research
team.
Regional Portfolio Management Team
Stock Selection
by Region:
. Expected
Stock Returns
. Expected
Market Returns
. Earnings
Momentum
. Economic and
Political Risks
Quantitative
Research/Asset
Allocation Team
Proprietary Models:
. Expected
Country Returns
. Regional
Optimization
Portfolio
Construction
. Risk Control BARRA
. Currency Management
Optimal
Portfolio
Key New Acquisitions
. Terumo Corp. -- Terumo is a leading Japanese medical equipment
company. The firms earnings outlook is expected to improve over
the next two years, due to the continued launch of new products.
In addition, we would expect to see enhanced sales through its
U.S. cardiovascular business unit that was recently acquired from
3M Corp.
. Getronics NV -- Getronics is a global provider of computer
products and services including computer system solutions,
installation services and network systems. Information Technology
spending in Europe as a percentage of GDP is half that of the
U.S. and we expect to see this gap diminish. This trend could
help to drive Getronics' sales and profits. The company is
currently trading on low multiples that we do not believe
reflects the growth potential of its stock.
Portfolio Outlook
. Europe -- We continue to invest in quality stocks that we believe
are undervalued and have strong growth opportunities. Such stocks
are located in a wide variety of sectors. Presently, one of the
more favored sectors is telecommunications, where both
technological advance and consolidation on both a European and
global level are proceeding at a rapid pace. In addition, certain
electronic, service, pharmaceuticals and leisure companies remain
attractive. While the sector rotation towards value stocks has
made the past period challenging, we continue to believe in the
structural growth of the aforementioned sectors.
. Japan -- For the time being, we remain cautious on the market,
given the recent rally, volatility in the yen and the concerns of
equity valuations. Based on the current price levels, the market
seems to have discounted much of the earnings recovery expected
to materialize in late 1999. And, if the current strength in the
yen persists, corporate earnings could be revised down. On a
positive note, many companies are in the process of implementing
restructuring plans that they announced several months back --
the benefits of which could help to lift returns on capital in
the long run. Key to sustainability of market strength will be
profit trends in coming years. If we become convinced of the
sustainability of corporate earning growth next year and onward,
we may need to revise our stance.
. Asia -- Our outlook on Asia as a region has improved, although it
is important to note that intra-regional discrepancies still
exist. Industrial production and economic growth has increased in
many countries, leading a rapid rise in equity prices. On a
cautious note, we recognize that a recovery in Asia is very
dependent on the continued strength of the U.S. market.
Consequently, we will be closely monitoring all economic data
coming out of the U.S. in an effort to determine its impact on
the Asian markets.
We thank you for your investment and look forward to your
continued confidence.
Goldman Sachs International Equity Investment Team
London, Tokyo, Singapore
September 3, 1999
3
<PAGE>
GOLDMAN SACHS INTERNATIONAL 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?
1
---------------------------
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.
2
---------------------------
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.
3
---------------------------
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 INTERNATIONAL EQUITY FUND
Performance Summary
August 31, 1999
The following graph shows the value, as of August 31, 1999, of a $10,000 in-
vestment made (with the maximum sales charge of 5.5%) in Class A shares on
December 1, 1992 (commencement of operations) of the Goldman Sachs Interna-
tional Equity Fund. For comparative purposes, the performance of the Fund's
benchmark (FT/S&P Euro-Pac Unhedged) and the FT/S&P Europac Combined are
shown. This performance data represents past performance and should not be
considered 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.
International Equity Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 1, 1992 to
August 31, 1999
[LINE GRAPH APPEARS HERE]
FT Euro-Pac FT Euro-Pac
Unhedged Combined Class A
12/1/92 10,000 10,000 9,450
DEC 10,054 10,057 9,547
Jan-93 10,055 10,063 9,567
FEB 10,401 10,256 9,780
MAR 11,342 10,861 9,827
APR 12,441 11,542 9,800
MAY 12,790 11,635 9,980
JUNE 12,458 11,550 10,000
JULY 13,028 12,079 10,347
AUG 13,680 12,578 10,827
SEPT 13,301 12,223 10,580
OCT 13,621 12,734 11,020
NOV 12,377 11,676 10,820
DEC 13,226 12,599 11,527
Jan-94 14,399 13,498 12,067
FEB 14,422 13,186 11,947
MAR 13,871 12,519 11,273
APR 14,439 12,878 11,567
MAY 14,388 12,994 11,187
JUNE 14,613 12,664 10,720
JULY 14,725 12,857 10,987
AUG 15,041 13,113 11,240
SEPT 14,588 12,718 11,080
OCT 15,081 13,148 11,167
NOV 14,309 12,475 10,613
DEC 14,434 12,584 10,736
Jan-95 13,903 12,121 10,058
FEB 13,774 12,008 10,203
MAR 14,644 12,767 10,785
APR 15,219 13,268 11,173
MAY 15,003 13,079 11,117
JUNE 14,703 12,818 11,394
JULY 15,658 13,651 11,817
AUG 15,046 13,117 11,734
SEPT 15,317 13,353 12,253
OCT 14,917 13,005 12,032
NOV 15,362 13,392 12,108
DEC 15,972 13,924 12,769
Jan-96 16,042 13,986 12,942
FEB 16,079 14,018 13,318
MAR 16,416 14,311 13,807
APR 16,963 14,788 14,229
MAY 16,656 14,520 14,372
JUNE 16,749 14,602 14,522
JULY 16,228 14,147 14,214
AUG 16,277 14,190 14,214
SEP 16,714 14,572 14,522
OCT 16,517 14,400 14,432
NOV 17,150 14,951 15,019
DEC 16,899 14,733 15,163
Jan-97 16,244 14,161 14,691
FEB 16,530 14,410 15,034
MAR 16,522 14,404 15,262
APR 16,596 14,468 15,361
MAY 17,781 15,501 16,311
JUNE 18,705 16,307 17,079
JULY 18,960 16,529 17,748
AUG 17,532 15,284 16,319
SEP 18,451 16,085 17,239
OCT 17,061 14,874 15,999
NOV 16,807 14,652 15,756
DEC 16,861 14,699 15,840
JAN '98 17,667 15,402 16,326
FEB 18,796 16,386 17,493
MAR 19,326 16,848 18,522
APR 19,395 16,909 18,785
MAY 19,354 16,873 19,221
JUNE 19,380 16,895 18,892
JULY 19,504 17,003 18,892
AUG 17,099 14,907 16,786
SEP 16,641 14,507 16,178
OCT 18,413 16,052 16,885
NOV 19,422 16,932 17,773
DEC 20,115 17,536 18,689
JAN '99 20,033 17,464 19,001
FEB 19,592 17,080 18,472
MAR 20,495 17,868 18,871
APR 21,440 18,691 19,148
MAY 20,338 17,731 18,350
JUNE 21,190 18,473 19,131
JULY 21,928 19,116 19,703
AUG 22,217 19,369 20,041
<TABLE>
<CAPTION>
Average Annual Total
Return through August 31,
1999 Since Inception Five Years One Year Seven Months
<S> <C> <C> <C> <C>
Class A (commenced December 1, 1992)
Excluding sales charges 11.77% 12.25% 19.39% 5.47%
Including sales charges 10.84% 10.99% 12.81% -0.34%
-----------------------------------------------------------------------------
Class B (commenced May 1, 1996)
Excluding contingent
deferred sales charges 10.20% n/a 18.68% 5.09%
Including contingent
deferred sales charges 9.37% n/a 13.40% 0.09%
-----------------------------------------------------------------------------
Class C (commenced August 15, 1997)
Excluding contingent
deferred sales charges 6.79% n/a 18.61% 5.08%
Including contingent
deferred sales charges 6.79% n/a 17.56% 4.08%
-----------------------------------------------------------------------------
Institutional Class (com-
menced February 7, 1996) 13.26% n/a 20.05% 5.81%
-----------------------------------------------------------------------------
Service Class (commenced
March 6, 1996) 12.53% n/a 19.43% 5.52%
-----------------------------------------------------------------------------
</TABLE>
5
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Statement of Investments
August 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - 94.4%
<C> <S> <C>
Australia - 2.9%
116,900 Brambles Industries Ltd. (Multi-Industrial) $ 3,257,405
352,500 Broken Hill Proprietary Co. Ltd. (Nonferrous Metals) 3,791,857
260,747 Lend Lease Corp. (Financial Services) 3,186,394
301,300 National Australia Bank (Banks) 4,556,770
294,074 News Corp. Ltd. (Media) 2,149,587
697,500 Pioneer International Ltd. (Construction) 1,781,136
231,700 Rio Tinto Ltd. (Mining) 3,978,975
358,270 Tab Corp. Holdings Ltd. (Entertainment) 2,447,299
518,800 Telstra Corp. (Utilities) 2,699,296
637,493 Westpac Banking Corp. (Banks) 3,866,267
1,011,923 Woolworths Ltd. (Specialty Retail) 3,538,852
------------
35,253,838
------------------------------------------------------------------------------
Britain - 19.2%
1,186,336 Allied Zurich PLC (Insurance) 14,438,395
352,825 AstraZeneca Group PLC (Health) 13,991,960
209,531 Barclays PLC (Banks) 6,226,119
824,048 BP Amoco PLC (Energy Resources) 15,285,656
1,258,528 British Telecom PLC (Telecommunications) 19,275,342
862,237 Carlton Communications PLC (Media) 6,540,495
820,771 Diageo PLC (Tobacco) 8,332,084
915,203 General Electric Co. PLC (Electrical Equipment) 9,143,475
812,351 Glaxo Wellcome PLC (Health) 21,345,123
650,383 Great Universal Stores PLC (Specialty Retail) 6,550,068
485,537 Halifax Group PLC (Banks) 5,421,058
1,026,247 HSBC Holdings PLC* (Banks) 12,712,908
721,857 Lloyds TSB Group PLC (Banks) 9,993,194
1,010,181 Misys PLC (Business Services) 8,946,616
246,063 National Westminster Bank PLC (Banks) 5,051,255
1,179,425 Rentokil Initial PLC (Business Services) 4,724,675
938,923 Select Appointment Holdings PLC* (Business Services) 13,398,490
1,287,886 Shell Transport & Trading Co. (Energy Resources) 10,271,702
1,686,049 Stagecoach Holdings PLC (Railroads) 5,865,818
891,858 Unilever NV (Food & Beverage) 8,393,708
1,287,439 Vodafone AirTouch PLC (Telecommunications) 25,931,835
------------
231,839,976
------------------------------------------------------------------------------
China - 0.5%
1,715,000 China Telecom Ltd.* (Telecommunications) 5,322,863
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - (continued)
<C> <S> <C>
Denmark - 0.6%
125,884 ISS International Service System Series B* (Business
Services) $ 6,942,659
------------------------------------------------------------------------------
Finland - 1.6%
234,954 Nokia AB Oyj Series A (Telecommunications) 19,635,133
------------------------------------------------------------------------------
France - 11.5%
18,297 Accor SA (Hotel) 4,409,177
240,293 Alstom (Machinery) 8,103,700
107,295 Axa (Insurance) 13,370,532
27,624 Carrefour SA (Specialty Retail) 4,500,193
60,020 Dexia France (Banks) 7,828,580
92,345 Elf Aquitaine (Energy Resources) 16,216,061
90,001 Equant* (Computer Software) 7,973,630
416,153 Rhone-Poulenc SA (Chemicals) 20,215,236
220,418 SEITA (Tobacco) 12,031,525
62,995 Societe Generale (Banks) 12,348,250
33,291 ST Microelectronics (Semiconductors) 2,213,380
102,374 Total Fina SA Class B (Energy Resources) 13,212,147
217,263 Vivendi (Business Services) 16,800,688
------------
139,223,099
------------------------------------------------------------------------------
Germany - 5.0%
321,097 Commerzbank AG (Banks) 11,514,892
65,099 HypoVereinsbank (Financial Services) 3,863,324
134,287 Mannesmann AG (Machinery) 20,626,450
322,640 Preussag AG (Multi-Industrial) 18,396,317
74,969 Siemens AG (Diversified Industrial Manufacturing) 6,312,751
------------
60,713,734
------------------------------------------------------------------------------
Hong Kong - 3.0%
532,000 Cheung Kong Holdings Ltd. (Real Estate) 4,641,785
416,000 CLP Holdings Ltd. (Utilities) 1,966,181
377,000 Hang Seng Bank Ltd. (Banks) 4,260,422
1,881,000 Hong Kong & China Gas Co. Ltd. (Utilities) 2,676,796
2,380,800 Hong Kong Telecom (Telecommunications) 5,396,345
951,000 Hutchison Whampoa (Financial Services) 9,277,422
10,000 New World China Land Ltd.* (Real Estate) 8,049
1,756,000 New World Development Co. Ltd. (Real Estate) 4,228,928
469,000 Sun Hung Kai Properties Co. Ltd. (Real Estate) 3,986,400
------------
36,442,328
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - (continued)
<C> <S> <C>
Ireland - 0.6%
723,130 Bank of Ireland* (Banks) $ 6,555,731
----------------------------------------------------------------------------
Italy - 1.9%
502,859 San Paolo-IMI SpA (Banks) 6,761,074
9,444,971 Seat Pagine Gialle SpA (Business Services) 7,933,139
1,854,575 Unicredito Italiano SpA (Banks) 8,573,334
------------
23,267,547
----------------------------------------------------------------------------
Japan - 24.8%
203,059 Aderans Co. Ltd. (Specialty Retail) 9,137,516
773,000 Asahi Glass Co. Ltd. (Home Products) 4,892,450
893,000 Bank of Tokyo-Mitsubishi (Banks) 13,353,958
264,000 Bridgestone Corp. (Auto) 7,485,252
190,265 Canon, Inc. (Computer Hardware) 5,568,647
806,000 Chiba Bank Ltd. (Banks) 3,029,826
302,600 Circle K Japan Co. (Specialty Retail) 12,924,882
536,000 Fuji Bank Ltd. (Banks) 5,539,672
215,000 Fuji Photo Film Ltd. (Leisure) 7,865,734
121,000 Honda Motor Co. Ltd. (Auto) 4,869,438
252 Hoya Corp. (Electrical Equipment) 15,120
108 Inaba Denkisangyo (Electrical Equipment) 1,827
302,000 Kao Corp. (Food & Beverage) 8,590,296
700,000 Kirin Brewery Ltd. (Alcohol) 8,515,114
497 Kokuyo Co. Ltd. (Specialty Retail) 8,864
85,300 Konami Co. Ltd. (Computer Software) 7,481,840
776 Max Co. (Electrical Equipment) 9,028
750 Mirai Industry Co. Ltd. (Multi-Industrial) 12,073
1,792,790 Mitsui Marine & Fire (Insurance) 9,854,729
730,000 NGK Insulators Ltd. (Multi-Industrial) 7,678,237
56,742 Nintendo Co. Ltd. (Entertainment) 9,860,502
1,327 Nippon Telephone & Telegraph Corp.
(Telecommunications) 14,928,523
122 NTT Mobile Communications Network, Inc. New Shares
(Telecommunications) 2,030,823
488 NTT Mobile Communications Network, Inc.*
(Telecommunications) 8,078,657
716,000 Ricoh Co. Ltd. (Computer Hardware) 12,783,025
83,800 Rohm Co. (Electrical Equipment) 16,708,648
54 Shimachu Co. (Specialty Retail) 1,003
391,000 Shin-Etsu Chemical Co. Ltd. (Chemicals) 15,949,696
95,811 SMC Corp. (Machinery) 14,634,323
171,000 Taisho Pharmaceutical Co. Ltd. (Drugs) 7,210,043
112,200 Takefuji Corp. (Financial Services) 18,071,450
142,037 TDK Corp. (Computer Hardware) 17,278,018
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - (continued)
<C> <S> <C>
Japan - (continued)
327,000 Terumo Corp. (Medical Products) $ 10,467,828
231,600 Tokyo Electric Power (Electrical Utilities) 5,401,564
451,500 Toppan Forms Co. Ltd. (Publishing) 10,674,784
397,000 Yamanouchi Pharmaceutical (Drugs) 17,719,486
57 Yoshinoya D&C Co. Ltd. (Restaurants) 1,355,467
------------
299,988,343
------------------------------------------------------------------------------
Netherlands - 10.0%
78,256 Aegon NV (Financial Services) 6,854,439
244,773 Benckiser NV Class B (Food & Beverage) 14,966,328
252,752 Fortis Netherlands NV* (Financial Services) 8,569,324
438,948 Getronics NV (Business Services) 21,522,203
246,178 ING Groep NV (Financial Services) 13,515,761
116,017 Koninklijke Royal Philips Electronics NV (Appliance) 11,972,168
270,740 KPN NV (Telecommunications) 12,143,453
316,949 Libertel NV* (Telecommunications) 6,035,118
313,463 TNT Post Group NV (Business Services) 7,742,783
450,273 VNU NV (Media) 17,290,456
------------
120,612,033
------------------------------------------------------------------------------
New Zealand - 0.1%
277,000 Telecom Corp. of New Zealand Ltd. (Utilities) 1,241,862
------------------------------------------------------------------------------
Singapore - 1.3%
451,000 City Developments (Real Estate) 2,732,521
312,847 DBS Bank Ltd. (Banks) 3,586,544
778,000 First Capital Corp. Ltd. (Real Estate) 1,081,390
507,000 Natsteel Electronics Ltd. (Electrical Equipment) 2,529,730
111,000 Singapore Airlines Ltd. (Airlines) 1,041,758
173,000 Singapore Press Holdings Ltd. (Publishing) 2,877,339
1,025,000 Singapore Technologies Engineering Ltd. (Machinery) 1,235,967
489,000 Singapore Telecommunications Ltd.
(Telecommunications) 868,494
------------
15,953,743
------------------------------------------------------------------------------
Spain - 2.6%
196,201 Acerinox SA (Steel) 6,465,218
347,008 Endesa SA (Electrical Utilities) 6,974,563
1,136,043 Telefonica de Espana SA* (Telecommunications) 18,146,615
------------
31,586,396
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Statement of Investments (continued)
August 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - (continued)
<C> <S> <C>
Sweden - 4.7%
432,337 Ericsson Telecommunications Series B
(Electrical Equipment) $ 13,968,376
1,317,205 Securitas AB Series B* (Business Services) 18,878,925
1,142,082 Skandia Forsakring (Insurance) 23,304,965
--------------
56,152,266
---------------------------------------------------------------------------
Switzerland - 4.1%
4,850 Nestle SA (Food & Beverage) 9,586,501
8,606 Novartis AG (Health) 12,402,380
1,172 Roche Holding AG (Health) 13,574,033
50,093 UBS AG (Banks) 14,156,645
--------------
49,719,559
---------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $1,001,564,056) $1,140,451,110
---------------------------------------------------------------------------
Preferred Stocks - 0.9%
Germany - 0.9%
84,259 Henkel KGAA Vorzug, Non-Voting (Chemicals) $ 6,105,634
13,347 SAP AG (Computer Software) 5,365,265
--------------
11,470,899
---------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $11,625,088) $ 11,470,899
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
Short-Term Obligation - 3.8%
<S> <C> <C> <C>
State Street Bank & Trust Euro-Time Deposit
$45,418,000 5.50% 09/01/1999 $ 45,418,000
---------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATION (Cost $45,418,000) $ 45,418,000
---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $1,058,607,144) $1,197,340,009
---------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
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.
8
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
As a % of total
net assets
<S> <C>
Common and Preferred Stock Industry Classifications
Airlines 0.1%
Alcohol 0.7
Appliance 1.0
Auto 1.0
Banks 12.0
Business Services 8.9
Chemicals 3.5
Computer Hardware 3.0
Computer Software 1.7
Construction 0.1
Diversified Industrial Manufacturing 0.5
Drugs 2.1
Electrical Equipment 3.5
Electrical Utilities 1.0
Energy Resources 4.6
Entertainment 1.0
Financial Services 5.2
Food & Beverage 3.4
Health 5.1
Home Products 0.4
Hotel 0.4
Insurance 5.0
Leisure 0.7
Machinery 3.7
Media 2.2
Medical Products 0.9
Mining 0.3
Multi-Industrial 2.4
Nonferrous Metals 0.3
Publishing 1.1
Railroads 0.5
Real Estate 1.4
Restaurants 0.1
Semiconductors 0.2
Specialty Retail 3.0
Steel 0.5
Telecommunications 11.4
Tobacco 1.7
Utilities 0.7
--------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK 95.3%
--------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Statement of Assets and Liabilities
August 31, 1999
Assets:
<TABLE>
<S> <C>
Investment in securities, at value (identified cost
$1,058,607,144) $1,197,340,009
Cash, at value 564,230
Receivables:
Investment securities sold, at value 15,459,246
Dividends and interest, at value 1,826,341
Fund shares sold 12,708,631
Forward foreign currency exchange contracts, at value 26,518
Variation margin(a) 2,471,516
Reimbursement from investment adviser 95,641
Other assets, at value 1,095,742
----------------------------------------------------------------------------
Total assets 1,231,587,874
----------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased, at value 18,009,154
Fund shares repurchased 3,382,461
Amounts owed to affiliates 1,613,562
Forward foreign currency exchange contracts, at value 416,413
Accrued expenses and other liabilities, at value 345,377
----------------------------------------------------------------------------
Total liabilities 23,766,967
----------------------------------------------------------------------------
Net Assets:
Paid-in capital 946,201,036
Accumulated undistributed net investment income 6,242,794
Accumulated net realized gain from investment, options,
futures and foreign currency related transactions 116,694,141
Net unrealized gain on investments, futures and translation
of assets and liabilities denominated in foreign currencies 138,682,936
----------------------------------------------------------------------------
NET ASSETS $1,207,820,907
----------------------------------------------------------------------------
Net asset value, offering and redemption price per share(b)
Class A $23.12
Class B $22.73
Class C $22.54
Institutional $23.49
Service $23.14
----------------------------------------------------------------------------
Shares Outstanding:
Class A 40,815,150
Class B 3,021,681
Class C 498,644
Institutional 7,687,724
Service 166,459
----------------------------------------------------------------------------
Total shares outstanding, $.001 par value (unlimited number
of shares authorized) 52,189,658
----------------------------------------------------------------------------
</TABLE>
(a) Includes approximately $1,145,000 relating to initial margin requirements
for futures transactions.
(b) Maximum public offering price per share for Class A shares is $24.47 (NAV
per share X 1.0582). At redemption, Class B and Class C shares are sub-
ject to a contingent deferred sales charge, assessed on the amount equal
to the lesser of the current net asset value or the original purchase
price of the shares.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Statement of Operations
For the Seven-Month Period Ended August 31, 1999
<TABLE>
<S> <C>
Investment income:
Dividends(a) $ 12,961,397
Interest 621,135
------------------------------------------------------------------------------
Total income 13,582,532
------------------------------------------------------------------------------
Expenses:
Management fees 6,475,659
Distribution and service fees(b) 3,070,949
Transfer agent fees(c) 1,113,047
Custodian fees 726,028
Registration fees 113,873
Professional fees 45,335
Service share fees 10,635
Trustee fees 5,773
Other 93,505
------------------------------------------------------------------------------
Total expenses 11,654,804
------------------------------------------------------------------------------
Less -- expenses reimbursed (311,046)
------------------------------------------------------------------------------
Net expenses 11,343,758
------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,238,774
------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment, futures and
foreign currency related transactions:
Net realized gain (loss) from:
Investment transactions 96,860,780
Futures transactions (863,213)
Foreign currency related transactions 2,725,602
Net change in unrealized gain (loss) on:
Investments (33,864,411)
Futures 334,730
Translation of assets and liabilities denominated in foreign
currencies 123,621
------------------------------------------------------------------------------
Net realized and unrealized gain on investment, futures and
foreign currency related transactions 65,317,109
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 67,555,883
------------------------------------------------------------------------------
</TABLE>
(a) Taxes withheld on dividends were $1,557,370.
(b) Class A, Class B and Class C had distribution and service fees of
$2,622,519, $388,156 and $60,274, respectively.
(c) Class A, Class B, Class C, Institutional Class and Service Class had
transfer agent fees of $996,557, $73,750, $11,452, $30,437 and $851, re-
spectively.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the
Seven-Month
Period Ended
August 31, 1999
<S> <C>
From operations:
Net investment income $ 2,238,774
Net realized gain from investment, futures and foreign cur-
rency related transactions 98,723,169
Net change in unrealized gain (loss) on investments,
futures, and translation of assets and liabilities
denominated in foreign currencies (33,406,060)
------------------------------------------------------------------------------
Net increase in net assets resulting from operations 67,555,883
------------------------------------------------------------------------------
From share transactions:
Proceeds from sales of shares 1,029,391,946
Reinvestment of dividends and distributions --
Cost of shares repurchased (1,032,832,481)
------------------------------------------------------------------------------
Net decrease in net assets resulting from share
transactions (3,440,535)
------------------------------------------------------------------------------
TOTAL INCREASE 64,115,348
------------------------------------------------------------------------------
Net assets:
Beginning of period 1,143,705,559
------------------------------------------------------------------------------
End of period $ 1,207,820,907
------------------------------------------------------------------------------
Accumulated undistributed net investment income $ 6,242,794
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the
Year Ended
January 31, 1999
<S> <C>
From operations:
Net investment loss $ (2,714,406)
Net realized gain from investment and foreign currency re-
lated transactions 96,004,014
Net change in unrealized gain (loss) on investments and
translation of assets and liabilities denominated in
foreign currencies 55,278,283
------------------------------------------------------------------------------
Net increase in net assets resulting from operations 148,567,891
------------------------------------------------------------------------------
Distributions to shareholders:
From net realized gain on investment and foreign currency
transactions
Class A shares (41,132,351)
Class B shares (3,418,683)
Class C shares (556,864)
Institutional shares (4,927,209)
Service shares (179,258)
------------------------------------------------------------------------------
Total distributions to shareholders (50,214,365)
------------------------------------------------------------------------------
From share transactions:
Proceeds from sales of shares 2,171,378,743
Reinvestment of dividends and distributions 40,976,198
Cost of shares repurchased (1,982,583,097)
------------------------------------------------------------------------------
Net increase in net assets resulting from share
transactions 229,771,844
------------------------------------------------------------------------------
TOTAL INCREASE 328,125,370
------------------------------------------------------------------------------
Net assets:
Beginning of year 815,580,189
------------------------------------------------------------------------------
End of year $ 1,143,705,559
------------------------------------------------------------------------------
Accumulated undistributed net investment income $ 1,040,126
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from
investment operations(a) Distributions to shareholders
-------------------------- ------------------------------------
Net asset Net In excess
value, investment Net realized From net of net
beginning income and unrealized investment investment From net
of period (loss) gain (loss) income income realized gains
FOR THE SEVEN-MONTH PERIOD ENDED AUGUST 31,
<S> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $21.92 $ 0.04 $1.16 $ -- $ -- $ --
1999 - Class B Shares 21.63 (0.02) 1.12 -- -- --
1999 - Class C Shares 21.45 (0.03) 1.12 -- -- --
1999 - Institutional
Shares 22.20 0.12(e) 1.17(e) -- -- --
1999 - Service Shares 21.93 0.06 1.15 -- -- --
FOR THE YEARS ENDED JANUARY 31,
1999 - Class A Shares 19.85 (0.06) 3.24 -- -- (1.11)
1999 - Class B Shares 19.70 (0.17) 3.21 -- -- (1.11)
1999 - Class C Shares 19.56 (0.15) 3.15 -- -- (1.11)
1999 - Institutional
Shares 19.97 0.03 3.31 -- -- (1.11)
1999 - Service Shares 19.84 (0.04) 3.24 -- -- (1.11)
----------------------------------------------------------------------------------------------------
1998 - Class A Shares 19.32 0.03 2.04 -- (0.30) (1.24)
1998 - Class B Shares 19.24 (0.08) 2.02 -- (0.25) (1.23)
1998 - Class C Shares
(commenced August 15,
1997) 22.60 (0.04) (1.38) -- (0.38) (1.24)
1998 - Institutional
Shares 19.40 0.10 2.11 (0.07) (0.33) (1.24)
1998 - Service Shares 19.34 0.02 2.06 -- (0.35) (1.23)
----------------------------------------------------------------------------------------------------
1997 - Class A Shares 17.20 0.10 2.23 -- -- (0.21)
1997 - Class B Shares
(commenced May 1, 1996) 18.91 (0.06) 0.60 -- -- (0.21)
1997 - Institutional
Shares (commenced Febru-
ary 7, 1996) 17.45 0.04 2.15 (0.03) -- (0.21)
1997 - Service Shares
(commenced March 6,
1996) 17.70 (0.02) 1.87 -- -- (0.21)
----------------------------------------------------------------------------------------------------
1996 - Class A Shares 14.52 0.13 4.00 (0.58) -- (0.87)
----------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) 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.
(c) Annualized.
(d) Not annualized.
(e) Calculated based on the average shares outstanding methodology.
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
Ratios assuming no
voluntary expense
limitations
------------------
Ratio of Ratio of
Net increase Net assets Ratio of net investment Ratio of net investment
(decrease) Net asset at end of net expenses income (loss) to expenses to income (loss) Portfolio
in net asset value, end Total period to average average net average net to average net turnover
value of period return(b) (in 000s) net assets assets assets assets rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1.20 $23.12 5.47%(d) $943,473 1.79%(c) 0.31%(c) 1.84%(c) 0.26%(c) 61.10%(d)
1.10 22.73 5.09(d) 68,691 2.29(c) (0.19)(c) 2.34(c) (0.24)(c) 61.10(d)
1.09 22.54 5.08(d) 11,241 2.29(c) (0.26)(c) 2.34(c) (0.31)(c) 61.10(d)
1.29 23.49 5.81(d) 180,564 1.14(c) 0.89(c) 1.19(c) 0.84(c) 61.10(d)
1.21 23.14 5.52(d) 3,852 1.64(c) 0.47(c) 1.69(c) 0.42(c) 61.10(d)
2.07 21.92 16.39 947,973 1.73 (0.28) 1.82 (0.37) 113.79
1.93 21.63 15.80 69,231 2.24 (0.79) 2.32 (0.87) 113.79
1.89 21.45 15.70 11,619 2.24 (0.98) 2.32 (1.06) 113.79
2.23 22.20 17.09 111,315 1.13 0.23 1.21 0.15 113.79
2.09 21.93 16.49 3,568 1.63 (0.18) 1.71 (0.26) 113.79
- -------------------------------------------------------------------------------------------------------------------------
0.53 19.85 11.12 697,590 1.67 (0.27) 1.80 (0.40) 40.82
0.46 19.70 10.51 55,324 2.20 (0.90) 2.30 (1.00) 40.82
(3.04) 19.56 (5.92)(d) 3,369 2.27(c) (1.43)(c) 2.37(c) (1.53)(c) 40.82
0.57 19.97 11.82 56,263 1.08 0.30 1.18 0.20 40.82
0.50 19.84 11.25 3,035 1.55 (0.36) 1.65 (0.46) 40.82
- -------------------------------------------------------------------------------------------------------------------------
2.12 19.32 13.48 536,283 1.69 (0.07) 1.88 (0.26) 38.01
0.33 19.24 2.83(d) 19,198 2.23(c) (0.97)(c) 2.38(c) (1.12)(c) 38.01
1.95 19.40 12.53(d) 68,374 1.10(c) 0.43(c) 1.25(c) 0.28(c) 38.01
1.64 19.34 10.42(d) 674 1.60(c) (0.40)(c) 1.75(c) (0.55)(c) 38.01
- -------------------------------------------------------------------------------------------------------------------------
2.68 17.20 28.68 330,860 1.52 0.26 1.77 0.01 68.48
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Notes to Financial Statements
August 31, 1999
1. ORGANIZATION
Goldman Sachs Trust (the "Trust") is a Delaware business trust registered un-
der the Investment Company Act of 1940 (as amended) as an open-end, manage-
ment investment company. The Trust includes the Goldman Sachs International
Equity Fund (the "Fund"). The Fund is a diversified portfolio offering 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. Actual
results could differ from those estimates. Effective for fiscal year 1999,
the Board of Trustees approved a change in the fiscal year end of the Fund
from January 31 to August 31. Accordingly, the financial statements of the
Fund are presented for the seven-month period ended August 31, 1999.
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 last bid price. Debt securi-
ties are valued at prices supplied by independent pricing services, broker /
dealer-supplied valuations or matrix pricing systems. Unlisted 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 last bid
price. Short-term debt obligations maturing in sixty days or less are valued
at amortized cost. 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. 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.
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; and (ii) currency gains and losses between trade
date and settlement date on investment securities transactions and forward
exchange contracts; and (iii) gains and losses from the difference between
amounts of dividends, interest and foreign withholding taxes recorded and the
amounts actually received.
16
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
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 and any resulting unrealized gains or losses are recorded in the
Fund's financial statements. The Fund realizes gains or losses at the time a
forward contract is offset by entry into a closing transaction or extin-
guished by delivery of the currency. Risks may arise upon entering these con-
tracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
E. Short Securities Positions -- The Fund may enter into covered short sales.
Short securities positions are accounted for at cost and subsequently marked-
to-market to reflect the current market value of the position. The market
value of the short position is recorded as a liability on the Fund's records
and any difference between this market value and the sales proceeds is re-
ported as an unrealized gain or loss. Gains and losses are realized when a
short position is closed out by delivering securities back to the broker.
F. 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.
17
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
August 31, 1999
G. Segregation Transaction -- The Fund may enter into certain derivative
transactions to seek to increase total return. Forward foreign currency ex-
change contracts, futures contracts, written options, mortgage dollar rolls,
when-issued and forward commitments represent examples of such transactions.
As a result of entering into those transactions the Fund is required to seg-
regate liquid assets on the accounting records equal to or greater than the
market value of the corresponding transactions.
H. Expenses -- Expenses incurred by the Trust which do not specifically re-
late to an individual fund of the Trust are allocated to the funds based on 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
the Distribution and Service plans. Shareholders of Service shares bear all
expenses and fees paid to service organizations. Each class of shares of the
Fund separately bears its respective class-specific transfer agency fees.
I. 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 report-
ing purposes is determined in accordance with income tax rules. Therefore,
the source of the Fund's distributions may be shown in the accompanying fi-
nancial statements as either from or in excess of net investment income or
net realized gain on investment transactions, or from paid-in capital, de-
pending on the type of book / tax differences that may exist.
At August 31, 1999 the aggregate cost of portfolio securities for federal
income tax purposes is $1,060,091,222. Accordingly gross unrealized gain on
investments was $168,699,398 and the gross unrealized loss on investments was
$31,450,611 resulting in a net unrealized gain of $137,248,787.
18
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
3. AGREEMENTS
Pursuant to the Investment Management Agreement (the "Agreement"), Goldman
Sachs Asset Management International ("GSAMI"), an affiliate of Goldman Sachs
Asset Management ("GSAM"), a separate operating division of Goldman, Sachs &
Co. ("Goldman Sachs"), serves as the investment adviser to the Fund. Under
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 facili-
ties, GSAMI is entitled to a fee, computed daily and payable monthly, at an
annual rate equal to 1.00% of the average daily net assets of the Fund.
The adviser has voluntarily agreed to limit certain "Other Expenses" (ex-
cluding management fees, distribution and service fees, transfer agent fees,
taxes, interest, brokerage, litigation, Service share fees, indemnification
costs and other extraordinary expenses) to the extent such expenses exceed,
on an annual basis, .10% of the average daily net assets of the Fund. Goldman
Sachs has agreed to reimburse approximately $311,000 for the period ended Au-
gust 31, 1999.
The Trust, on behalf of the Fund, has adopted Distribution and Service
Plans. Under the Distribution and Service Plans, Goldman Sachs and/or autho-
rized dealers are entitled to a monthly fee from the Fund for distribution
and shareholder maintenance services equal, on an annual basis, to .50%,
1.00% and 1.00% of the Fund's average daily net assets attributable to Class
A, Class B and Class C shares, respectively.
Goldman Sachs serves as the distributor of shares of the Fund pursuant to a
Distribution Agreement. Goldman Sachs may receive a portion of the Class A
sales load and Class B and Class C contingent deferred sales charges and has
advised the Fund that it retained approximately $818,000 for the period ended
August 31, 1999.
Goldman Sachs also serves as the transfer agent of the Fund for a fee. The
fees charged for such transfer agency services are calculated daily and pay-
able 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 August 31, 1999, the amounts owed to affiliates were approximately
$990,000, $457,000 and $167,000 for management, distribution and service and
transfer agent fees, respectively.
19
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
August 31, 1999
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of securities (excluding short-
term investments and futures) for the period ended August 31, 1999, were
$665,136,041 and $667,728,986, respectively.
At August 31, 1999, the Fund had the following outstanding forward foreign
currency exchange contracts:
<TABLE>
<CAPTION>
Value on
Open Forward Foreign Currency Settlement Current Unrealized Unrealized
Sale Contracts Date Value Gain Loss
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hong Kong Dollar
expiring 9/10/1999 $20,448,129 $20,444,586 $ 3,543 $ --
expiring 12/8/1999 20,847,800 21,260,082 -- 412,282
--------------------------------------------------------------------------------------------
TOTAL OPEN FORWARD FOREIGN CURRENCY
SALE CONTRACTS $41,295,929 $41,704,668 $ 3,543 $412,282
--------------------------------------------------------------------------------------------
<CAPTION>
Closed but Unsettled Realized Realized
Forward Foreign Currency Contracts Purchase Value Sale Value Gain Loss
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Euro
expiring 10/26/1999 $16,956,131 $16,979,106 $22,975 $ --
Hong Kong Dollar
expiring 12/8/1999 573,886 569,755 -- 4,131
--------------------------------------------------------------------------------------------
TOTAL CLOSED BUT UNSETTLED FORWARD FOREIGN
CURRENCY CONTRACTS $17,530,017 $17,548,861 $22,975 $ 4,131
--------------------------------------------------------------------------------------------
</TABLE>
The contractual amounts of forward foreign currency exchange contracts do
not necessarily represent the amounts potentially subject to risk. The mea-
surement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. At August 31,
1999, the Fund had sufficient cash and securities to cover any commitments
under these contracts.
The Fund has recorded a "Receivable for forward foreign currency exchange
contracts sold" and "Payable for forward foreign currency exchange contracts
purchased" of $26,518 and $416,413, respectively, in the accompanying State-
ment of Assets and Liabilities.
The Fund may enter into futures transactions to hedge against changes in
interest rates, securities prices, currency exchange rates or to seek to in-
crease total return. Upon entering into a futures contract, the Fund is re-
quired to deposit with a broker or the Fund's custodian bank, an amount of
cash or securities equal to the minimum "initial margin" requirement of the
associated futures exchange. Subsequent payments for futures contracts
("variation margin") are paid or received by the Fund, depending on the fluc-
tuations in the value of the contracts, and are recorded for financial re-
porting purposes 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.
20
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
The use of futures contracts involve, to varying degrees, elements of mar-
ket and counterparty risk which may exceed the amounts recognized in the
Statement of Assets and Liabilities. Changes in the value of the futures con-
tracts 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.
At August 31, 1999 the following futures contracts were open as follows:
<TABLE>
<CAPTION>
Number of
Contracts Settlement Market Unrealized
Type Long Month Value Gain
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FTSE 100 Index 76 September 1999 $ 7,622,852 $ 58,496
MIB 30 Index 28 September 1999 4,996,266 113,232
DAX Index 45 September 1999 6,293,742 163,002
------------------------------------------------------------------------------------
$18,912,860 $334,730
------------------------------------------------------------------------------------
</TABLE>
5. LINE OF CREDIT FACILITY
The Fund participated in a $250,000,000 uncommitted and a $50,000,000 commit-
ted, unsecured revolving line of credit facility which was terminated on
April 30, 1999. Effective April 30, 1999, the Fund now participates in a
$250,000,000 uncommitted and a $250,000,000 committed, unsecured revolving
line of credit facility. Under the most restrictive arrangement, the Fund
must own securities having a market value in excess of 400% of the total bank
borrowings. These facilities are to be used solely for temporary or emergency
purposes. The interest rate on borrowings is based on the Federal Funds rate.
The committed facility also requires a fee to be paid by the Fund based on
the amount of the commitment which has not been utilized. During the period
ended August 31, 1999, the Fund did not have any borrowings under any of
these facilities.
6. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, the Fund reclassified
$2,963,894 from accumulated net realized gain on investment, options, futures
and foreign currency related transactions to accumulated undistributed net
investment income and $1,628 from accumulated net realized gain on invest-
ment, options, futures and foreign currency related transactions to paid-in
capital. 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.
21
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
August 31, 1999
7. SUMMARY OF SHARE TRANSACTIONS
Share activity for:
<TABLE>
<CAPTION>
Seven Month Period Year Ended
Ended August 31, 1999 January 31, 1999
-------------------------------------------------------
Shares Dollars Shares Dollars
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold 40,503,629 $ 878,896,664 90,785,418 $ 1,949,815,404
Reinvestments of divi-
dends and distributions -- -- 1,669,818 34,480,481
Shares repurchased (42,925,516) (937,796,470) (84,367,795) (1,819,683,956)
-------------------------------------------------------
(2,421,887) (58,899,806) 8,087,441 164,611,929
----------------------------------------------------------------------------------
Class B Shares
Shares sold 231,545 5,004,374 794,593 17,488,784
Reinvestments of divi-
dends and distributions -- -- 156,073 3,180,373
Shares repurchased (410,880) (8,878,625) (557,697) (11,834,003)
-------------------------------------------------------
(179,335) (3,874,251) 392,969 8,835,154
----------------------------------------------------------------------------------
Class C Shares
Shares sold 3,386,747 71,812,024 6,644,608 139,922,460
Reinvestments of divi-
dends and distributions -- -- 19,517 394,623
Shares repurchased (3,429,722) (73,325,070) (6,294,716) (133,220,855)
-------------------------------------------------------
(42,975) (1,513,046) 369,409 7,096,228
----------------------------------------------------------------------------------
Institutional Shares
Shares sold 3,229,820 73,161,867 2,805,737 62,386,145
Reinvestments of divi-
dends and distributions -- -- 131,238 2,741,464
Shares repurchased (556,938) (12,395,514) (740,110) (16,145,728)
-------------------------------------------------------
2,672,882 60,766,353 2,196,865 48,981,881
----------------------------------------------------------------------------------
Service Shares
Shares sold 23,838 517,017 78,227 1,765,950
Reinvestments of divi-
dends and distributions -- -- 8,677 179,257
Shares repurchased (20,037) (436,802) (77,199) (1,698,555)
-------------------------------------------------------
3,801 80,215 9,705 246,652
----------------------------------------------------------------------------------
NET INCREASE (DECREASE) 32,486 (3,440,535) 11,056,389 $ 229,771,844
----------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Goldman Sachs International Equity Fund -- Tax Information
(unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Fund
designated $50,214,365 as capital gain dividends paid during its
year ended August 31, 1999.
23
<PAGE>
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
Report of Independent Public Accountants
To the Shareholders and Board of Trustees of
Goldman Sachs Trust -- International Equity Fund:
We have audited the accompanying statement of assets and liabilities of
Goldman Sachs International Equity Fund, one of the portfolios constituting
Goldman Sachs Trust -- Equity Funds (a Delaware Business Trust), including
the statement of investments, as of August 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 August 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 International Equity Fund as of August 31, 1999, 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
October 8, 1999
24
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs International Equity Fund
An Investment Idea for the Long Term
History has shown that a long-term plan that includes
international stocks can help provide greater protection against
market volatility over time than a portfolio that invests only in
U.S. stocks.
Goldman Sachs International Equity Fund offers investors access
to the benefits associated with international market
diversification. The Fund seeks long-term capital growth,
primarily through equity securities of companies that are
organized outside the United States or whose securities are
principally traded outside the United States.
Target Your Needs
The Goldman Sachs International 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 any 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.
[GRAPHIC APPEARS HERE]
For More Information
To learn more about the Goldman Sachs International 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 32 OLD SLIP, 17TH Floor, New York, New York 10005
- --------------------------------------------------------------------------------
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 Nancy L. Mucker, Vice President
Mary P. McPherson John M. Perlowski, Treasurer
Alan A. Shuch Adrien E. Deberghes, Jr., Assistant 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.
Emerging markets securities are volatile. They are subject to substantial
currency fluctuations and sudden economic and political developments. At times,
the Fund may be unable to sell certain of its portfolio securities without a
substantial drop in price, if at all.
An investment in a money market fund is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any government agency. Although a
money market fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
Copyright 1999 Goldman, Sachs & Co. All rights reserved.
Date of first use: October 15, 1999 INTLAR / 64K / 10-99
