<PAGE>
GOLDMAN SACHS FUNDS SMALL CAP VALUE FUND Annual Report January 31, 1999
Long-term capital growth
[BACKGROUND ARTWORK APPEARS HERE] potential through a portfolio of
smaller capitalization companies.
[LOGO OF GOLDMAN SACHS APPEARS HERE]
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Market Overview
Dear Shareholder,
During the review period, events that began in Asia in 1997 continued to roil
financial markets around the world. U.S. financial markets were not immune to
the turmoil, and they fluctuated along with investor confidence.
. U.S. Equity Market Fluctuated Along With Investor Confidence -- Early in the
review period, the U.S. stock market generated strong performance, though not
without an increase in overall market volatility. The mantle of market
leadership was assumed by the largest and most liquid stocks in the S&P 500
Index, as circumstances conspired to make them the investment of choice among
U.S. investors.
As the period progressed, political and economic concerns worldwide dampened
overall U.S. equity market performance. By period end, however, stocks
rebounded on renewed confidence that concerted action from the G-7 (that is,
the U.S., Japan, Germany, France, Italy, Great Britain and Canada), including
an easing of rates by the Federal Reserve Board, would help avert a global
financial meltdown.
. The U.S. Economy Continued To See Growth -- Despite a slight tempering due to
soft employment numbers, the U.S. economy continued to see growth for most of
the review period. This growth, combined with continued uncertainty about the
impact of Asian instability on the U.S. economy, kept the Federal Reserve in a
wait-and-see mode for most of the period.
On September 29th, in the wake of increasing global market turmoil, the
Federal Reserve Board cut the Federal Fund's target rate by .25%, to 5.25%. As
increasing illiquidity concerns in the market became more severe, the Fed
followed up with two more surprise rate cuts, easing the target rate and the
discount rate by another .50%. The Fed's actions were a strong signal that the
monetary authorities were prepared to do whatever was necessary to provide
liquidity and to support the economy against the potential for a substantial
economic slowdown in 1999.
. Market Outlook: Optimism Prevails -- We have a generally positive outlook for
U.S. stocks. Over the last decade, global communication has increased,
resulting from significant technological advances as well as a generally
stable world political environment. We believe that this trend, combined with
favorable demographic trends (such as the aging of the baby boomers), will
benefit U.S. companies over the long term.
At period end, while consumer spending remained strong, the manufacturing
side of the economy appeared to weaken because of a trade drag and a slowdown
in capital spending. However -- while there are a variety of opinions as to
when the Fed will move -- based on signs of non-inflationary growth in the
areas of consumer spending, new home sales and strong fourth quarter gross
domestic product, the general consensus is that any further easing by the Fed
will come later, rather than sooner.
We encourage you to maintain your long-term investment program, and look
forward to serving your investment needs in the years ahead.
Sincerely,
/s/ David B. Ford /s/ John P. McNulty
David B. Ford John P. McNulty
Co-Head, Goldman Sachs Co-Head, Goldman Sachs
Asset Management Asset Management
February 26, 1999
. NOT FDIC INSURED
. May Lose Value
. No Bank Guarantee
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Fund Basics
as of January 31, 1999
Assets Under Management
$328.4 Million
Number of Holdings
67
NASDAQ Symbols
Class A Shares
GSSMX
Class B Shares
GSQBX
Class C Shares
GSSCX
Institutional Shares
GSSIX
Service Shares
GSSSX
- --------------------------------------------------------------------------------
Performance Review
- --------------------------------------------------------------------------------
January 31, 1998- Fund Total Return
January 31,1999 (without sales charge)1 Russell 2000 Index2
- --------------------------------------------------------------------------------
Class A -17.37% 0.33%
Class B -18.00% 0.33%
Class C -17.91% 0.33%
Institutional -17.04% 0.33%
Service -17.41% 0.33%
- --------------------------------------------------------------------------------
1The 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.
2The Russell 2000 Index figures include dividends reinvested and do not reflect
any fees or expenses. In addition, investors cannot invest directly in the
Index.
- --------------------------------------------------------------------------------
Total Return (with sales charge)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period ended 12/31/98 Class A Class B Class C Institutional Service
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Last 6 Months3 -27.40% -27.31% -24.17% -23.05%5 -23.21%5
One Year4 -21.44% -21.64% -18.26% -16.56%5 -16.92%5
Five Years4 2.89% N/A N/A N/A 4.04%5
Since Inception4 9.32% 2.67% -8.46% -7.50%5 10.31%5,6
(10/22/92) (5/1/96) (8/15/97) (8/15/97) (10/22/92)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
3The 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 the specified periods, assuming reinvestment of all
distributions at NAV. The total return calculation reflects a maximum initial
sales charge of 5.5% for Class A shares, the assumed deferred sales charge for
Class B shares (5% maximum declining to 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 $20.00 and represents the NAV plus the maximum sales charge of 5.5%.
4The 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.
5Cumulative or Average Annual Total Returns as of 12/31/98.
6Performance data for Service Shares prior to 8/15/97 is that of the Class A
Shares (excluding the impact of the front-end sales charge applicable to Class
A Shares since Service Shares are not subject to any sales charges).
Performance of Class A Shares of the Small Cap Value Fund reflects the expenses
applicable to the Fund's Class A Shares. The fees applicable to Service Shares
are different from those applicable to Class A shares which impact performance
ratings and rankings for a class of shares.
- --------------------------------------------------------------------------------
Top 10 Company Holdings as of 1/31/99
- --------------------------------------------------------------------------------
% of Total
Company Holding Net Assets Line of Business
- --------------------------------------------------------------------------------
Quest Diagnostics, Inc. 3.3% Healthcare Management
Friedmans, Inc. 3.3% Specialty Retail
Prime Hospitality Corp. 3.1% Restaurants & Hotels
Pacific Century Financial Corp. 2.9% Banks
Integrated Health Services, Inc. 2.8% Healthcare Management
Matria Healthcare, Inc. 2.5% Health & Medical Services
Healthplan Services Corp. 2.3% Health & Medical Services
UCAR International, Inc. 2.3% Steel
Vishay Intertechnology, Inc. 2.3% Semiconductors
ESG Re Ltd. 2.3% Insurance Services
- --------------------------------------------------------------------------------
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 SMALL CAP VALUE FUND
Performance Overview
Dear Shareholder,
The following is a report on the performance of the Goldman Sachs Small Cap
Value Fund for the 12-month period ended January 31, 1999.
Performance Review
Over the 12-month period ended January 31, 1999, the Fund's Class A, B, C,
Institutional and Service shares generated annual total returns, without sales
charges, of -17.37%, -18.00%, -17.91%, -17.04% and -17.41%, respectively.
These figures underperformed the 0.33% annualized return of the Fund's
benchmark, the Russell 2000 Index.
What Hurt Fund Performance
Our underperformance during the year was primarily attributable to market
upheaval in the third quarter of 1998, and the resultant discount of small cap
companies, particularly some in our value portfolio.
. In the broadest sense, our portfolio was deeply affected by a "flight to
quality" mentality. Small cap companies that were achieving solid results sold
at a deep discount to the broad market, while companies with near-term
problems sold at an extreme discount to the market.
. In the second half of the year, our portfolio also suffered due to several
macro factors: the smallest capitalization stocks were hardest hit during the
third quarter, and our portfolio's median market cap was in the bottom
quartile. Furthermore, small cap growth style investing outperformed small cap
value style investing: for the 12-month period ended January 31, 1999, the
Russell 2000 Growth Index returned 7.21%, while the Russell 2000 Value Index
returned -6.89%. Finally, tax loss selling in the latter part of the year
created an additional negative for small cap stocks, especially the poorest
performers.
. Several specific holdings also detracted from our Fund's performance, but we
are pleased to report that many of these have rebounded from their lows. Among
the stock highlights on the next page, we discuss some of the holdings that
were detrimental to returns in the third quarter of 1998 but that led our
fourth quarter rebound. We believe that such examples help illustrate what we
do as value investors: we aim to exploit market anomalies by investigating
what is undiscovered or misunderstood by the marketplace. By applying a
disciplined investment strategy to small cap companies that sell at a discount
to their peers, we believe we have the potential to create long-term value for
our clients.
Portfolio Composition
As bottom-up stock-pickers, the Fund's management team focuses on individual
companies first, but sometimes finds a concentration of value within
particular industries or sectors. With this in mind, as of January 31, 1999,
the Fund maintained overweight positions in the energy, consumer services,
industrials and financial sectors. Underweight positions were maintained in
basic materials, consumer noncyclicals and cyclicals, technology,
telecommunications and commercial services.
2
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Value investment Process
Value stocks represent companies that are currently undervalued in the market,
but whose intrinsic value we believe ultimately will be recognized. Our value
stock selection process emphasizes a bottom-up approach.
Search for Value
We search for value from a universe of 1,000 stocks, and then select 200 to 300
of the least expensive.
Fundamental Research
We refine our stock list through rigorous analysis of companies' "fundamentals"
and face-to- face meetings with company management, competitors, suppliers and
customers.
Risk Management
We maintain ongoing risk management resulting in an intentional and quantifiable
risk/return profile.
Portfolio Highlights
. ESG Re -- ESG Re, a specialty reinsurance firm, had been trading below the
value of the cash on its balance sheet in the third quarter of 1998. Beyond a
rebound from this extraordinarily cheap valuation, the company has benefited
from growing investor confidence about premium growth in 1999.
. Friedman's -- This jewelry retailer recovered from a depressed valuation of
0.5 X book value (reached in the third quarter of 1998) as management optimism
and the resolution of earnings uncertainty restored investor confidence.
. MEMC Electronic Material -- This manufacturer of silicon wafers (a component
of semiconductors) was up more than 180% in the fourth quarter of 1998. Its
stock rebounded from its price level at one-third of book value earlier this
year; this depressed price level was a consequence of a poor near-term outlook
for semiconductors, but we believed that the company's standing as one of only
five providers of silicon wafers made it a valuable business.
Portfolio Outlook
As value investors, we believe that extremes are not sustainable, and as small
cap stocks declined while the broad market continued its ascent, we remained
committed to our research-based value portfolio. We are positive about the
long-term value offered by small caps and by this portfolio.
Small cap stocks have historically exhibited the ability to generate strong
earnings even as larger cap companies' profits slow. Earnings of the overall
S&P 500 Index have been slowing since 1997, and in an environment of global
uncertainty and modest growth expectations, smaller cap stocks may benefit
from their relative economic insensitivity. Furthermore, 1998 gains of the S&P
500 were driven by a small group of mega-cap and Internet stocks. Without the
largest 250 companies in the index, the S&P 500 would have posted negative
returns for the year. The discounted valuation of small caps may reattract
capital to the asset class and drive a return to more normal valuations --
historically, small caps have traded at a valuation premium to larger
companies.
We perform rigorous, firsthand research into small cap stocks that trade at
a discount to the market and their peers due to obscurity or uncertainty. We
aim to exploit market anomalies by investigating what is undiscovered or
misunderstood by the marketplace. Investment ideas are put to qualitative
tests to assess downside risk/return potential, and holdings adhere to a
disciplined investment strategy employing quantitative portfolio constraints
to manage security and sector exposure, cash levels, turnover and tracking
error. Strong fourth quarter results strengthen our belief that our
combination of a value-based approach with a well-prioritized and disciplined
investment strategy has the potential to provide solid returns to the
long-term investor.
Goldman Sachs Small Cap Value Team
New York, February 26, 1999
3
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE 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 SMALL CAP VALUE 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%) in Class A shares on
October 22, 1992 (commencement of operations) of the Goldman Sachs Small Cap
Value Fund. For comparative purposes, the performance of the Fund's bench-
mark, the Russell 2000 Growth Index and the Standard and Poor's 500 Index
("S&P 500 Index") are shown. This performance data represents past perfor-
mance and should not be considered indicative of future performance which
will fluctuate with changes in market conditions. These performance fluctua-
tions 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.
Small Cap Value Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions reinvested October 22, 1992 to
January 31, 1999
[GRAPH APPEARS HERE]
Small Cap Class A S & P 500 Russell 2000 Growth index
----------------- --------- ------------------------
- -
10/22/92 9,450 10,000 10,000
Oct 9,620 10,095 10,187
Nov 10,120 10,439 10,966
Dec 10,857 10,567 11,348
01/93 11,138 10,655 11,731
Feb 11,138 10,800 11,460
Mar 11,752 11,028 11,832
Apr 11,618 10,762 11,508
May 11,772 11,050 12,016
June 12,266 11,082 12,091
07/93 12,606 11,037 12,258
Aug 13,341 11,456 12,787
Sept 13,663 11,368 13,148
Oct 13,897 11,603 13,486
Nov 13,763 11,493 13,042
Dec 14,241 11,632 13,488
01/94 14,493 12,027 13,912
Feb 14,269 11,701 13,861
Mar 14,058 11,191 13,130
Apr 13,925 11,334 13,207
May 13,883 11,520 13,059
June 13,609 11,238 12,618
07/94 13,294 11,606 12,825
Aug 13,960 12,082 13,540
Sept 14,009 11,788 13,495
Oct 13,461 12,053 13,442
Nov 12,835 11,614 12,899
Dec 12,131 11,786 13,246
01/95 11,953 12,091 13,080
Feb 12,508 12,563 13,624
Mar 12,738 12,935 13,858
Apr 12,819 13,315 14,166
May 12,442 13,847 14,409
June 12,501 14,169 15,157
07/95 13,108 14,639 16,030
Aug 13,716 14,676 16,362
Sept 13,679 15,295 16,655
Oct 12,605 15,240 15,924
Nov 13,160 15,909 16,592
Dec 13,177 16,216 17,030
01/96 12,813 16,767 17,012
Feb 13,221 16,923 17,542
Mar 14,185 17,086 17,905
Apr 15,407 17,337 18,863
May 16,608 17,784 19,607
June 16,393 17,852 18,800
07/96 15,682 17,063 17,159
Aug 16,267 17,423 18,156
Sept 16,964 18,404 18,866
Oct 16,097 18,911 18,574
Nov 16,134 20,341 19,340
Dec 16,054 19,938 19,846
01/97 16,320 21,184 20,243
Feb 16,335 21,350 19,750
Mar 16,515 20,472 18,817
Apr 16,304 21,692 18,870
May 18,130 23,014 20,970
June 18,942 24,045 21,870
07/97 19,200 25,959 22,887
Aug 19,886 24,505 23,411
Sept 21,805 25,848 25,125
Oct 21,169 24,984 24,021
Nov 20,589 26,141 23,865
Dec 20,899 26,591 24,283
01/98 20,591 26,886 23,899
Feb 22,132 28,824 25,655
Mar 23,681 30,300 26,979
Apr 24,452 30,606 27,127
May 23,656 30,080 25,665
June 22,611 31,301 25,719
07/98 20,428 30,966 23,636
Aug 15,847 26,488 19,046
Sept 15,323 28,186 20,537
Oct 16,251 30,478 21,375
Nov 17,124 32,325 22,495
Dec 17,372 34,187 23,888
01/99 17,014 35,616 24,205
<TABLE>
<CAPTION>
Average Annual Total Return through January 31,
1999 Since Inception Five Years One Year
<S> <C> <C> <C>
Class A (commenced October 22, 1992)
Excluding sales charges 9.81% 3.26% -17.37%
Including sales charges 8.83% 2.10% -21.92%
--------------------------------------------------------------------------------------
Class B (commenced May 1, 1996)
Excluding contingent deferred sales charges 2.93% n/a -18.00%
Including contingent deferred sales charges 1.80% n/a -22.10%
--------------------------------------------------------------------------------------
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges -9.32% n/a -17.91%
Including contingent deferred sales charges -9.32% n/a -18.73%
--------------------------------------------------------------------------------------
Institutional Class (commenced August 15, 1997) -8.35% n/a -17.04%
--------------------------------------------------------------------------------------
Service Class (commenced August 15, 1997) -8.87% n/a -17.41%
--------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Statement of Investments
January 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 94.7%
Advertising & Marketing - 1.9%
586,800 MDC Communications Corp.* $ 6,088,050
-----------------------------------------------------------
Aerospace/Defense - 2.5%
676,600 AVTeam Inc.* 3,213,850
628,400 Tristar Aerospace Co.* 5,145,025
------------
8,358,875
-----------------------------------------------------------
Agriculture/Heavy Equipment - 1.5%
575,800 Titan International Inc. 4,786,338
-----------------------------------------------------------
Banks - 2.9%
434,700 Pacific Century Financial Corp. 9,563,400
-----------------------------------------------------------
Chemical Products - 1.0%
674,600 Methanex Corporation* 3,373,000
-----------------------------------------------------------
Commercial Services - 2.1%
95,300 Black Box Corp.* 3,496,319
493,000 Opinion Research Corp.* 3,389,375
------------
6,885,694
-----------------------------------------------------------
Construction/Environmental Services - 1.7%
173,500 Stone & Webster, Inc. 5,443,563
-----------------------------------------------------------
Consumer Products - 1.0%
300,600 American Safety Razor Co.* 3,306,600
-----------------------------------------------------------
Educational Services - 1.0%
117,700 Career Education Corp.* 3,442,725
-----------------------------------------------------------
Electrical Equipment - 1.9%
468,200 Dennison International PLC* 6,320,700
-----------------------------------------------------------
Electronics & Other Electrical Equipment -
1.3%
214,400 Belden, Inc. 4,301,400
-----------------------------------------------------------
Energy - 1.4%
750,700 Swift Energy Company* 4,598,038
-----------------------------------------------------------
Health & Medical Services - 4.9%
898,100 Healthplan Services Corp. 7,633,850
2,373,600 Matria Healthcare, Inc.* 8,307,600
------------
15,941,450
-----------------------------------------------------------
Healthcare Management - 9.2%
662,300 American Physician Partners* 4,967,250
657,800 Integrated Health Services, Inc. 9,209,200
1,095,800 Mariner Post-Acute Network, Inc.* 5,205,050
576,300 Quest Diagnostics, Inc.* 10,913,681
------------
30,295,181
-----------------------------------------------------------
Industrial Machinery - 1.1%
193,600 Unova, Inc.* 3,666,300
-----------------------------------------------------------
Insurance - 1.3%
138,700 SCPIE Holdings, Inc. 4,117,656
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Insurance Services - 4.8%
313,500 Amerin Corp.* $ 7,288,875
433,700 ESG Re Ltd. 7,481,325
55,500 Frontier Insurance Group, Inc. 835,969
------------
15,606,169
-------------------------------------------------------
Insurance-Life - 0.9%
164,600 ARM Financial Group, Inc. 3,034,813
-------------------------------------------------------
Insurance-Property and Casualty - 3.8%
184,100 American Safety Insurance* 1,725,937
188,000 Penn Treaty American Corp.* 4,441,500
231,800 PXRE Corp. 4,737,413
345,800 Seibels Bruce Group* 1,123,850
45,400 Symons International Group* 408,600
------------
12,437,300
-------------------------------------------------------
Jewelry - 1.8%
234,112 Movado Group, Inc. 5,955,223
-------------------------------------------------------
Manufacturing-Miscellaneous - 1.2%
353,600 Lydall, Inc.* 3,845,400
-------------------------------------------------------
Metal Fabricate/Hardware - 1.2%
174,300 Wolverine Tube, Inc.* 3,932,644
-------------------------------------------------------
Oil Refining & Marketing - 0.5%
147,500 Tesoro Petroleum Co.* 1,604,063
-------------------------------------------------------
Personal Computers and Peripherals -
1.6%
401,300 Banctec, Inc.* 5,216,900
-------------------------------------------------------
Pharmaceuticals - 1.7%
628,900 Perrigo Co.* 5,738,712
-------------------------------------------------------
Real Estate - 4.2%
113,400 Annaly Mortgage Management 1,077,300
429,100 RFS Hotel Investors, Inc. 5,444,205
302,033 Insignia Financial Group* 4,322,847
327,600 Prime Retail, Inc. 2,948,400
------------
13,792,752
-------------------------------------------------------
Restaurants & Hotels - 5.3%
406,400 Mortons Restaurant Group, Inc.* 7,391,400
964,300 Prime Hospitality Corp.* 10,064,881
------------
17,456,281
-------------------------------------------------------
Retail Hardgoods - 0.8%
173,500 Brookstone, Inc.* 2,483,218
-------------------------------------------------------
Retail Trade - 1.6%
617,800 Syms Corp.* 5,212,688
-------------------------------------------------------
Savings and Loan - 0.5%
129,700 Sovereign Bancorp, Inc. 1,645,568
-------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Semiconductors - 8.3%
708,600 General Semiconductor Inc.* $ 5,845,950
643,200 MEMC Electronic Materials, Inc.* 5,708,400
86,600 Silicon Valley Group, Inc.* 1,423,488
636,900 Kemet Corp.* 6,767,063
571,962 Vishay Intertechnology, Inc.* 7,471,254
-------------
27,216,155
---------------------------------------------------------
Software & Services - 2.0%
806,800 Vanstar Corp* 6,605,675
---------------------------------------------------------
Specialty Retail - 5.1%
882,500 Friedmans, Inc.* 10,755,468
964,700 J. Baker, Inc. 5,727,906
116,900 Loehmann's, Inc.* 138,819
-------------
16,622,193
---------------------------------------------------------
Steel - 4.1%
224,300 Carbide/Graphite Group* 2,733,656
396,300 Ispat International NV 2,997,019
413,100 UCAR International, Inc.* 7,616,531
-------------
13,347,206
---------------------------------------------------------
Supermarkets - 0.4%
165,300 Fleming Companies, Inc. 1,477,369
---------------------------------------------------------
Textiles - 2.2%
652,100 Burlington Industries, Inc.* 4,320,163
119,200 Reebok International Ltd.* 1,773,100
66,100 Synthetic Industries, Inc.* 1,181,538
-------------
7,274,801
---------------------------------------------------------
Transportation/Logistics - 1.2%
203,800 Hub Group, Inc.* 4,076,000
---------------------------------------------------------
Trucking - 2.7%
501,000 Allied Holdings, Inc.* 7,014,000
41,600 Landstar Systems, Inc.* 1,736,800
-------------
8,750,800
---------------------------------------------------------
Utilities - 2.2%
401,500 CMP Group, Inc. 7,227,000
---------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $371,596,629) $ 311,047,900
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
<C> <S> <C>
Corporate Bonds - 0.1%
$ 500,000 J. Baker, Inc. 7.0%, 06/01/02 $ 378,750
--------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $498,992) $ 378,750
--------------------------------------------------------------------
<CAPTION>
Contracts Description Value
<C> <S> <C>
Options - 0.1%
125 S&P 500 Index Put Strike 1125 exp 06/99 $ 425,000
--------------------------------------------------------------------
TOTAL OPTIONS
(Cost $646,625) $ 425,000
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
Repurchase Agreement - 6.0%
<S> <C> <C> <C>
Joint Repurchase Agreement Account
$19,700,000 4.84% 02/01/99 $ 19,700,000
-----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $19,700,000) $ 19,700,000
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $392,442,246)(a) $331,551,650
-----------------------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 20,883,299
Gross unrealized loss for investments in which
cost exceeds value (83,282,286)
-----------------------------------------------------------------------------------------------
Net unrealized loss $(62,398,987)
-----------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $393,950,637.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Statement of Assets and Liabilities
January 31, 1999
Assets:
<TABLE>
<S> <C>
Investment in securities, at value (identified cost
$392,442,246) $331,551,650
Cash 13,549
Receivables:
Investment securities sold 4,172,234
Dividends and interest, at value 113,011
Fund shares sold 282,474
Reimbursement from investment adviser 160,728
Other assets 39,065
------------------------------------------------------------------------------
Total assets 336,332,711
------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased 3,416,796
Fund shares repurchased 3,968,193
Amounts owed to affiliates 458,233
Accrued expenses and other liabilities 125,654
------------------------------------------------------------------------------
Total liabilities 7,968,876
------------------------------------------------------------------------------
Net Assets:
Paid-in capital 410,398,210
Accumulated net realized loss on investment and options
transactions (21,143,779)
Net unrealized loss on investments and options transactions (60,890,596)
------------------------------------------------------------------------------
NET ASSETS $328,363,835
------------------------------------------------------------------------------
Net asset value, offering and redemption price per share:(a)
Class A $18.51
Class B $18.10
Class C $18.12
Institutional $18.62
Service $18.50
------------------------------------------------------------------------------
Shares outstanding:
Class A 14,139,071
Class B 2,369,281
Class C 453,409
Institutional 824,509
Service 14,136
------------------------------------------------------------------------------
Total shares outstanding, $.001 par value (unlimited number of
shares authorized) 17,800,406
------------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share (NAV per share multiplied by
1.0582) for Class A shares is $19.59. At redemption, Class B and Class C
shares may be subject to a contingent deferred sales charge, assessed on
the amount equal to the lesser of the current net asset value or the
original purchase price of the shares.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Statement of Operations
For the Year Ended January 31, 1999
<TABLE>
<S> <C>
Investment income:
Dividends $ 3,423,058
Interest 2,128,511
----------------------------------------------------------------------------
Total income 5,551,569
----------------------------------------------------------------------------
Expenses:
Management fees 4,417,249
Distribution and service fees(a) 2,232,779
Transfer agent fees 693,789
Custodian fees 139,000
Professional fees 85,541
Registration fees 82,511
Trustee fees 9,226
Service share fees 589
Other 240,144
----------------------------------------------------------------------------
Total expenses 7,900,828
----------------------------------------------------------------------------
Less -- expenses reimbursed and fees waived by Goldman Sachs (919,108)
----------------------------------------------------------------------------
Net expenses 6,981,720
----------------------------------------------------------------------------
NET INVESTMENT LOSS (1,430,151)
----------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment and option
transactions:
Net realized gain (loss) from:
Investment transactions (21,057,157)
Options written 3,952
Net change in unrealized gain (loss) on:
Investments (75,425,946)
----------------------------------------------------------------------------
Net realized and unrealized loss on investment and option
transactions (96,479,151)
----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(97,909,302)
----------------------------------------------------------------------------
</TABLE>
(a) The distribution and service fees for Class A, Class B and Class C were
$1,655,658, $494,223, and $82,898, respectively.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
January 31, 1999 January 31, 1998
<S> <C> <C>
From operations:
Net investment loss $ (1,430,151) $ (1,001,901)
Net realized (loss) gain on investment
transactions (21,053,205) 54,033,025
Net change in unrealized (loss) gain on
investments (75,425,946) 9,929,833
-----------------------------------------------------------------------------
Net (decrease) increase in net assets
resulting from operations (97,909,302) 62,960,957
-----------------------------------------------------------------------------
Distributions to shareholders:
From net realized gain on investment
transactions
Class A shares (20,135,069) (30,853,322)
Class B shares (2,897,126) (3,473,153)
Class C shares (512,006) (381,647)
Institutional shares (946,473) (1,305,439)
Service shares (16,422) (149)
-----------------------------------------------------------------------------
Total distributions to shareholders (24,507,096) (36,013,710)
-----------------------------------------------------------------------------
From share transactions:
Proceeds from sales of shares 285,768,961 231,518,320
Reinvestment of dividends and
distributions 22,881,335 33,954,677
Cost of shares repurchased (291,025,366) (74,999,747)
-----------------------------------------------------------------------------
Net increase in net assets resulting
from share transactions 17,624,930 190,473,250
-----------------------------------------------------------------------------
TOTAL (DECREASE) INCREASE (104,791,468) 217,420,497
-----------------------------------------------------------------------------
Net assets:
Beginning of year 433,155,303 215,734,806
-----------------------------------------------------------------------------
End of year $ 328,363,835 $433,155,303
-----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Notes to Financial Statements
January 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 Small Cap Value
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.
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 prices. Debt securities are valued at prices supplied by independent
pricing services, 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 last sale price on valuation date, or
if no sale occurs, at the mean between the most recent bid and asked prices.
Short-term debt obligations maturing in sixty days or less are valued at am-
ortized cost. Restricted securities, and other securities for which quota-
tions are not readily available, are valued at fair value using methods
approved by the Trust's Board of Trustees.
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. Howev-
er, the Fund does not amortize premiums on U.S. Government and corporate
bonds. It is the Fund's policy, when necessary, to accrue its estimated capi-
tal gain taxes on 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
upon current exchange rates; and (ii) purchases and sales of foreign invest-
ments, income and expenses are converted into U.S. dollars based upon cur-
rency exchange 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 and interest recorded and the amounts actually received.
D. 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.
E. 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.
11
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Notes to Financial Statements (continued)
January 31, 1999
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.
The Fund had approximately $9,630,000 at January 31, 1999 (the Fund's tax
year end) of capital loss carry forward expiring in 2007 for federal tax pur-
poses. This amount is available to be carried forward to offset future capi-
tal gains to the extent permitted by applicable laws or regulations.
F. Expenses -- Expenses incurred by the Trust that do not specifically relate
to an individual fund of the Trust are allocated to the funds on a straight-
line or pro rata basis depending upon the nature of the expense.
Class A, Class B and Class C shareholders of the Fund bear all expenses and
fees relating to their respective distribution and service plans. Sharehold-
ers of Service shares bear all expenses and fees paid to service organiza-
tions of their services with respect to such shares. Each class of Shares of
the Fund bear its respective class-specific transfer agency fees.
G. Option Accounting Principles -- When the Fund writes call or put options,
an amount equal to the premium received is recorded as an asset and as an
equivalent liability. The amount of the liability is subsequently marked-to-
market to reflect the current market value of the option written. When a
written option expires on its stipulated expiration date or the Fund enters
into a closing purchase transaction, the Fund realizes a gain or loss without
regard to any unrealized gain or loss on the underlying security, and the li-
ability related to such option is extinguished. When a written call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security, and the proceeds of the sale are increased by the premium origi-
nally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the
Fund purchases upon exercise. There is a risk of loss from a change in value
of such options which may exceed the related premiums received.
Upon the purchase of a call option or a protective put option by the Fund,
the premium paid is recorded as an investment and subsequently marked-to-mar-
ket to reflect the current market value of the option. If an option which the
Fund has purchased expires on the stipulated expiration date, the Fund will
realize a loss in the amount of the cost of the option. If the Fund enters
into a closing sale transaction, the Fund will realize a gain or loss, de-
pending on whether the sale proceeds for the closing sale transaction are
greater or less than the cost of the option. If the Fund exercises a pur-
chased put option, the Fund will realize a gain or loss from the sale of the
underlying security, and the proceeds from such sale will be decreased by the
premium originally paid. If the Fund exercises a purchased call option, the
cost of the security which the Fund purchases upon exercise will be increased
by the premium originally paid.
H. Futures Contracts -- The Fund may enter into futures transactions to hedge
against changes in interest rates, securities prices, currency exchange rates
or to seek to increase total return.
Upon entering into a futures contract, the Fund is required to deposit with
a broker an amount of cash or securities equal to the minimum "initial mar-
gin" requirement of the associated futures exchange. Subsequent payments for
futures contracts ("variation margin") are paid or received by the Fund dai-
ly, dependent on the daily fluctuations in the value of the contracts, and
are recorded for financial reporting purposes as unrealized gains or losses.
When contracts 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.
12
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
3. AGREEMENTS
Pursuant to the Investment Management Agreement ("the Agreement"), Goldman
Sachs Asset Management ("GSAM"), a separate operating division of Goldman,
Sachs & Co. ("Goldman Sachs"), serves as the investment adviser for the Fund.
Under the Agreement, the adviser, subject to the general supervision of the
Trust's Board of Trustees, manages the Fund's portfolio. As compensation for
the services rendered pursuant to the Agreement, the assumption of the
expenses related thereto and administering the Fund's business affairs,
including providing facilities, the adviser 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.
Effective September 1, 1998, the adviser has voluntarily agreed to limit
certain "Other Expenses" of the Fund (excluding management fees, distribution
and service fees, transfer agent fees, taxes, interest, brokerage,
litigation, service share fees, indemnification costs and extraordinary
expenses) to the extent such expenses exceeded, on an annual basis, .06% of
the average daily net assets of the Fund. For the year ended January 31,
1999, Goldman Sachs reimbursed approximately $181,000.
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 $596,000 during 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 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. For the year ended January 31,
1999, the Distributor voluntarily agreed to waive approximately $738,000 of
its distribution fees attributable to the Class A shares.
Prior to September 1, 1998, the Trust, on behalf of the Fund, had also
adopted Authorized Dealer Service Plans (the "Dealer Service Plans") pursuant
to which Goldman Sachs and Authorized Dealers were compensated for providing
personal and account maintenance services. The Fund paid a fee under the
Dealer Service Plan 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 a Distribution and Service Plan. Under the
Distribution and Service Plan, Goldman Sachs and/or Authorized Dealers are
entitled to a monthly fee from the Fund for distribution and shareholder
maintenance services equal, on an annual basis, to .25%, 1.00%, and 1.00% of
the 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.
Effective September 1, 1998 the fees charged for such transfer agency
services are calculated daily and payable monthly at an annual rate as
follows: .19% of the average daily net assets for Class A, Class B and Class
C shares and .04% of the 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
$296,000, $104,000, and $58,000 for Management, Distribution and Service and
Transfer Agent fees, respectively.
13
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Notes to Financial Statements (continued)
January 31, 1999
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of securities (excluding short-
term investments, futures and options transactions) for the year ended
January 31, 1999, were $394,082,808 and $393,501,489 respectively.
For the year ended January 31, 1999, Goldman Sachs earned approximately
$49,000 of brokerage commissions from portfolio transactions.
For the year ended January 31, 1999, written put option transactions in the
Fund were as follows:
<TABLE>
<CAPTION>
Written Options Number of Contracts Premium Received
----------------------------------------------------------------------------
<S> <C> <C>
Balance outstanding at beginning of
year -- --
Options written 16 3,952
Options expired (16) (3,952)
----------------------------------------------------------------------------
BALANCE OUTSTANDING, END OF YEAR 0 0
----------------------------------------------------------------------------
</TABLE>
5. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the
value of the repurchase agreement. The underlying securities for all
repurchase agreements are held in safekeeping at the Fund's custodian.
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund, together with other registered investment companies having
management agreements with GSAM or its affiliates, transfers uninvested cash
into joint accounts, the daily aggregate balance of which is invested in one
or more repurchase agreements.
At January 31, 1999, the Fund had an undivided interest in the repurchase
agreements in the joint account which equaled $19,700,000 in principal
amount. At January 31, 1999, the following repurchase agreements held in this
joint account were fully collateralized by federal agency obligations.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Repurchase Agreements Amount Rate Date Cost
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ABN/AMRO, Inc. $ 875,000,000 4.84% 02/01/99 $ 875,000,000
-----------------------------------------------------------------------------
Bear Stearns & Co. 250,000,000 4.83 02/01/99 250,000,000
-----------------------------------------------------------------------------
NationsBanc Montgomery
Securities LLC 1,000,000,000 4.84 02/01/99 1,000,000,000
-----------------------------------------------------------------------------
CS First Boston Corp. 363,500,000 4.83 02/01/99 363,500,000
-----------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $2,488,500,000
-----------------------------------------------------------------------------
</TABLE>
14
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
7. 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.
8. TRANSACTIONS WITH AFFILIATED COMPANIES
A Fund is considered to be invested in an affiliated company if that Fund
owns greater than five percent of the outstanding voting securities of such
company. Transactions during the year ended January 31, 1999 with affiliates
of the Fund are as follows:
<TABLE>
<CAPTION>
Market
Purchases Sales Realized Dividend Value
Affiliate Name at Cost Proceeds Gain/(Loss) Income 1/31/99
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allied Holdings, Inc. $316, 314 $1,769,883 $ 626,371 $ -- $ 7,014,000
----------------------------------------------------------------------------------------------
AVTeam Inc. 729,500 374,388 60,893 -- 3,213,850
----------------------------------------------------------------------------------------------
J. Baker, Inc. 2,240,024 6,244,871 (2,976,259) 58,746 5,727,906
----------------------------------------------------------------------------------------------
Brookstone, Inc. -- 8,104,846 719,739 -- 2,483,218
----------------------------------------------------------------------------------------------
DSI Toys, Inc. -- 545,999 (2,138,254) -- NA
----------------------------------------------------------------------------------------------
Friedmans, Inc. 3,821,540 3,933,586 (2,005,721) -- 10,755,468
----------------------------------------------------------------------------------------------
Friendly Ice Cream Corp. 693,088 5,431,375 (2,545,144) -- NA
----------------------------------------------------------------------------------------------
Healthplan Services Corp. 6,234,702 2,955,961 (1,953,175) 535,079 7,633,850
----------------------------------------------------------------------------------------------
Loehmann's Inc. -- 1,368,886 (3,552,718) -- 138,819
----------------------------------------------------------------------------------------------
Martria Healthcare, Inc. 5,702,248 125,071 (64,129) -- 8,307,600
----------------------------------------------------------------------------------------------
MDC Corp. 6,211,251 760,500 20,600 -- 6,088,050
----------------------------------------------------------------------------------------------
Mortons Restaurant Group, Inc. 1,359,173 972,099 562,894 -- 7,391,400
----------------------------------------------------------------------------------------------
Movado Group, Inc. 1,601,032 8,842,750 6,733,528 14,183 5,955,223
----------------------------------------------------------------------------------------------
Opinion Research Corp. -- 253,190 (122,185) -- 3,389,375
----------------------------------------------------------------------------------------------
Platinum Entertainment Inc. -- 5,201,688 613,672 -- NA
----------------------------------------------------------------------------------------------
Pluma Inc. 430,696 1,955,770 (2,785,119) -- NA
----------------------------------------------------------------------------------------------
Scott Technologies -- 3,419,302 1,165,492 -- NA
----------------------------------------------------------------------------------------------
Seibels Bruce Group, Inc. 966,094 1,252,116 (448,614) -- 1,123,850
----------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Notes to Financial Statements (continued)
January 31, 1999
9. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, the Fund has reclassified
$1,430,151 from paid-in capital to accumulated undistributed net investment
income and $35 from paid-in-capital to accumulated net realized loss on in-
vestment and options transactions. These reclassifications have no impact on
the net asset value of the Fund and are designed to present the Fund's capi-
tal accounts on a tax basis.
10. SUMMARY OF SHARE TRANSACTIONS
Share activity for the years ended:
<TABLE>
<CAPTION>
January 31, 1999 January 31, 1998
------------------------- -------------------------
Shares Dollars Shares Dollars
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold 11,250,168 $248,147,068 7,020,650 $172,468,843
Reinvestments of divi-
dends and distributions 1,120,125 18,887,752 1,196,260 29,143,998
Shares repurchased (13,625,605) (275,189,998) (2,963,020) (72,385,902)
-------------------------------------------------
(1,255,312) (8,155,178) 5,253,890 129,226,939
-----------------------------------------------------------------------------
Class B Shares
Shares sold 1,020,790 24,298,444 1,583,327 39,092,621
Reinvestments of divi-
dends and distributions 159,248 2,632,705 133,772 3,203,441
Shares repurchased (609,437) (12,177,880) (94,963) (2,262,530)
-------------------------------------------------
570,601 14,753,269 1,622,136 40,033,532
-----------------------------------------------------------------------------
Class C Shares
Shares sold 348,913 8,014,845 237,741 6,114,667
Reinvestments of divi-
dends and distributions 24,492 404,852 12,751 303,029
Shares repurchased (156,144) (3,072,836) (14,344) (349,698)
-------------------------------------------------
217,261 5,346,861 236,148 6,067,998
-----------------------------------------------------------------------------
Institutional Shares
Shares sold 191,950 5,013,154 553,727 13,840,589
Reinvestments of divi-
dends and distributions 55,467 939,606 53,456 1,304,063
Shares repurchased (30,030) (583,311) (61) (1,617)
-------------------------------------------------
217,387 5,369,449 607,122 15,143,035
-----------------------------------------------------------------------------
Service Shares
Shares sold 13,163 295,450 64 1,600
Reinvestments of divi-
dends and distributions 974 16,420 6 146
Shares repurchased (71) (1,341) -- --
-------------------------------------------------
14,066 310,529 70 1,746
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) (235,997) $ 17,624,930 7,719,366 $190,473,250
-----------------------------------------------------------------------------
</TABLE>
16
<PAGE>
Goldman Sachs Small Cap Value Fund -- Tax Information (unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$11,303,078 as capital gain dividends for its year ended January 31, 1999.
17
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income (loss) from
investment operations(d) Distributions to shareholders
------------------------------ ------------------------------
Net realized and
unrealized From net
Net asset gain (loss) In excess realized gain Net increase
value, Net on investment of net on investment, (decrease)
beginning investment and options investment options and futures in net asset
of period income (loss) transactions income transactions value
FOR THE YEARS ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $24.05 $(0.06) $(4.48) $ -- $(1.00) $(5.54)
1999 - Class B Shares 23.73 (0.21) (4.42) -- (1.00) (5.63)
1999 - Class C Shares 23.73 (0.18) (4.43) -- (1.00) (5.61)
1999 - Institutional
Shares 24.09 0.03 (4.50) -- (1.00) (5.47)
1999 - Service Shares 24.05 (0.04) (4.51) -- (1.00) (5.55)
---------------------------------------------------------------------------------------------------------------
1998 - Class A Shares 20.91 0.14 5.33 -- (2.33) 3.14
1998 - Class B Shares 20.80 (0.01) 5.27 -- (2.33) 2.93
1998 - Class C Shares
(commenced August
15, 1997) 24.69 (0.06) 1.43 (0.34) (1.99) (0.96)
1998 - Institutional
Shares (commenced August
15, 1997) 24.91 0.03 1.48 (0.28) (2.05) (0.82)
1998 - Service Shares
(commenced August 15,
1997) 24.91 (0.01) 1.48 (0.31) (2.02) (0.86)
---------------------------------------------------------------------------------------------------------------
1997 - Class A Shares 17.29 (0.21) 4.92 -- (1.09) 3.62
1997 - Class B Shares
(commenced May 1, 1996) 20.79 (0.11) 1.21 -- (1.09) 0.01
---------------------------------------------------------------------------------------------------------------
1996 - Class A Shares 16.14 (0.23) 1.39 -- (0.01) 1.15
---------------------------------------------------------------------------------------------------------------
1995 - Class A Shares 20.67 (0.07) (3.53) (0.24) (0.69) (4.53)
---------------------------------------------------------------------------------------------------------------
</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 SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
Ratios assuming no voluntary
waiver of fees or expense
limitations
------------------------------
Ratio of Ratio of
Net assets Ratio of net investment Ratio of net investment
Net asset at end of net expenses income (loss) to expenses to income (loss) Portfolio
value, end Total period to average average net average net to average net turnover
of period return(a) (in 000s) net assets assets assets assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$18.51 (17.37)% $261,661 1.50% (0.24)% 1.74% (0.48)% 98.46%
18.10 (18.00) 42,879 2.25 (0.99) 2.29 (1.03) 98.46
18.12 (17.91) 8,212 2.25 (0.99) 2.29 (1.03) 98.46
18.62 (17.04) 15,351 1.13 0.13 1.17 0.09 98.46
18.50 (17.41) 261 1.62 (0.47) 1.66 (0.51) 98.46
- ------------------------------------------------------------------------------------------------------------------
24.05 26.17 370,246 1.54 (0.28) 1.76 (0.50) 84.81
23.73 25.29 42,677 2.29 (0.92) 2.29 (0.92) 84.81
23.73 5.51(c) 5,604 2.09(b) (0.79)(b) 2.09(b) (0.79)(b) 84.81
24.09 6.08(c) 14,626 1.16(b) 0.27(b) 1.16(b) 0.27(b) 84.81
24.05 5.91(c) 2 1.45(b) (0.07)(b) 1.45(b) (0.07)(b) 84.81
- ------------------------------------------------------------------------------------------------------------------
20.91 27.28 212,061 1.60 (0.72) 1.85 (0.97) 99.46
20.80 5.39(c) 3,674 2.35(b) (1.63)(b) 2.35(b) (1.63)(b) 99.46
- ------------------------------------------------------------------------------------------------------------------
17.29 7.20 204,994 1.41 (0.59) 1.66 (0.84) 57.58
- ------------------------------------------------------------------------------------------------------------------
16.14 (17.53) 319,487 1.53 (0.53) 1.78 (0.78) 43.67
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
GOLDMAN SACHS SMALL CAP VALUE FUND
Report of Independent Public Accountants
To the Shareholders and Board of Trustees ofGoldman Sachs Trust -- Small Cap
Value Fund:
We have audited the accompanying statement of assets and liabilities of
Goldman Sachs Small Cap Value Fund, one of the portfolios constituting
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 Small Cap Value Fund as of January 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
March 19, 1999
20
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs Small Cap Value Fund
An Investment Idea For The Long Term
Historically, stocks have demonstrated greater potential to build wealth over
the long term than most other types of investments.
Goldman Sachs Small Cap Value Fund offers investors access to the benefits
associated with equity investing. The Fund seeks long-term capital growth,
primarily through equity securities of companies with public stock market
capitalizations of $1 billion or less at the time of investment.
Target Your Needs
The Goldman Sachs Small Cap Value 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 Small Cap Value Fund and other Goldman
Sachs Funds, call your investment professional today.
* The exchange privilege is subject to termination and its terms are subject to
change.
<PAGE>
Goldman Sachs Asset Management One New York Plaza, 42nd Floor, New York,
New York 10004
Trustees
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
John P. McNulty
Mary P. McPherson
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Douglas C. Grip, President
Jesse H. Cole, Vice President
James A. Fitzpatrick, Vice President
Anne E. Marcel, Vice President
Nancy L. Mucker, Vice President
John M. Perlowski, Treasurer
Philip V. Giuca, Jr., Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN SACHS
Investment Adviser,
Distributor and Transfer Agent
Visit our internet address: www.gs.com/funds
This material is not authorized for distribution to prospective investors unless
preceded or accompanied by a current Prospectus. Investors should read the
Prospectus carefully before investing or sending money. Small Cap Value Fund's,
Mid Cap Equity Fund's, Capital Growth Fund's, and Growth and Income Fund's
foreign investments and active management techniques entail risks in addition to
those customarily associated with investing in dollar-denominated securities of
U.S issuers. Compared with domestic securities markets, foreign markets may be
less liquid, more volatile and less subject to government regulation, and may
make available less public information about issuers. The Funds may incur losses
because of changes in securities prices expressed in local currencies, movements
in exchange rates or both.
The stocks of smaller companies are often associated with higher risks,
including greater volatility, than stocks of larger companies.
An investment in a money market fund is neither insured nor guaranteed by the
U.S. government and there can be no assurance that any money market fund will be
able to maintain a net asset value of $1.00 per share.
Copyright 1999 Goldman,Sachs & Co. All rights reserved. Date of first use:
March 31, 1999 SCVAR /46K /3-99
