<PAGE>
REAL ESTATE SECURITIES FUND Semi-Annual Report June 30, 1999
Long-term growth of capital
[GRAPHIC] and dividend income through
a diversified portfolio of REITs.
LOGO GOLDMAN SACHS
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Fund Basics
as of June 30, 1999
Assets Under Management
$176.7 Million
Number of Holdings
39
NASDAQ SYMBOLS
Class A Shares
GREAX
Class B Shares
GREBX
Class C Shares
GRECX
Institutional Shares
GREIX
Service Shares
GRESX
. NOT FDIC
INSURED
. May Lose Value
. No Bank
Guarantee
- -------------------------------------------------------------------------------
PERFORMANCE REVIEW
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
January 1, 1999-June 30, 1999 Fund Total Return (based on NAV)1 Wilshire Real Estate Securities Index 2
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A 8.91% 6.78%
Class B 8.63 6.78
Class C 8.57 6.78
Institutional 9.20 6.78
Service 8.95 6.78
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares. The Fund's performance reflects the
investment of dividends and other distributions.
2 The Wilshire Real Estate Securities Index is a market
capitalization-weighted index comprised of publicly traded real estate
investment trusts (REITS) and real estate operating companies.
- -------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURNS/3/
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period ended 6/30/99 Class A Class B Class C Institutional Service
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Since Inception -3.78% -3.90% 0.13% 2.25% 1.80%
(7/27/98)
</TABLE>
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 respective
Standardized Total Returns.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS AS OF 6/30/99 /4/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Holding % of Total Net Assets Line of Business
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Starwood Hotels & Resorts 6.6% Hotels
Public Storage, Inc. 3.8 Self-Storage
Equity Office Properties Trust 3.5 Office
Apartment Investment & Mgmt. Co. 3.5 Multi-Family
Prentiss Properties Trust, Inc. 3.2 Mixed
Brandywine Realty Trust 3.0 Mixed
Catellus Development Corp. 3.0 Mixed
Spieker Properties, Inc. 3.0 Office
Boston Properties, Inc. 2.9 Office
General Growth Properties 2.9 Retail
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4 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.
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Market Overview
Dear Shareholder,
During the first six months of 1999, we have seen generally strong performance
in the equity markets. However, the fixed income markets have posted more muted
results.
. Global Equity Markets -- The strength of the U.S. equity market continues to
surprise many financial experts. While the market experienced its share of
ups and downs, primarily related to uncertainty over interest rates and
inflation, the overall trend was upward. The year began on a positive note,
due in part to receding fears of a global financial crisis. However, the
rally was extremely narrow, limited largely to a few very large growth
companies and the technology sector. As the year progressed, investors
rotated assets into more cyclical issues. By the end of the reporting
period, long-shunned value and smaller cap stocks were among the best
performing sectors.
In Europe, most equity markets rebounded to start the year, as most
central banks lowered interest rates in advance of the monetary union, and
to prevent their own economies from sliding toward recession. The euphoria
surrounding the launch of the euro was short lived, as the markets retreated
on news of the peso devaluation, rising U.S. interest rates and sluggish
production data in much of the region.
The Japanese market advanced strongly during the period on the back of
improved investor sentiment. Expectations for an earnings recovery in late
1999 were substantially enhanced by a number of statistics indicating that
the worst was behind.
Asian stocks (ex-Japan) produced strong results, as signs pointed to
economies in the region rebounding much faster than anticipated. Investors
who were previously underweight in the region moved to increase their
exposure, creating an attractive investment environment.
. Global Fixed Income Markets--Economic data released in the U.S. in recent
months clearly shows that the U.S. economy has considerable momentum. Not
surprisingly, the Federal Reserve followed its bias to tighten with an
increase in interest rates at the end of June. We believe that inflation
will trend upward and that economic activity will remain strong, which
should push short-term rates and bond yields higher.
Within Europe, we believe it will be vital to selectively choose
investment opportunities going forward. We anticipate continuing to
underweight the core EMU markets in favor of the U.K.
We remain optimistic that inflationary pressures will continue to fall in
the U.K., and that growth will remain subdued as weak manufacturing and
export conditions remain a drag on economic activity.
We remain negative on Japanese bonds, despite the steepness of the yield
curve and the poor growth outlook. We remain committed in our belief that
the volume of new issuance by the government and wholesale selling by
institutions will keep an upward pressure on yields. We encourage you to
maintain your long-term investment program, and look forward to serving your
investment needs in the years ahead.
Sincerely,
/s/ David B. Ford /s/ John P. McNulty
David B. Ford John P. McNulty
Co-Head, Goldman Sachs Asset Management Co-Head, Goldman Sachs Asset Management
July 29, 1999
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Performance Overview
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Real Estate
Securities Fund. This semi-annual report covers the six-month period ended June
30, 1999.
REIT Market Review
Following lackluster results in 1998, the REIT market continued to underperform
during the first quarter of 1999. REIT stocks suffered from a lack of investor
interest, as both technology and large-cap growth stocks were the favored
securities. Another concern weighing against the REIT sector was the impact of
Internet sales on "brick and mortar" retail stores.
However, during the second quarter, REITs experienced an impressive rebound,
outperforming the S&P 500 Index by more than 350 basis points. The turnaround
was due in part to renewed investor interest in cyclical, value and small cap
stocks. The sector also benefited from a number of high profile investments by
"smart money" in publicly traded real estate securities, including investments
by Warren Buffet and real estate opportunity funds.
Performance Review
During the six-month period ended June 30, 1999, the Fund's Class A, B, C,
Institutional and Service shares generated cumulative total returns of 8.91%,
8.63%, 8.57%, 9.20% and 8.95%, respectively (figures do not reflect the
deduction of any applicable sales charge). All the Fund's share classes
outperformed the 6.78% return of its benchmark, the Wilshire Real Estate
Securities Index.
During the reporting period, the Fund benefited from the portfolio management
team's orientation toward undervalued growth holdings. Despite some setbacks
late in the reporting period, our hotel stocks enhanced Fund performance for the
period, outperforming all other property types. Our large cap multifamily stocks
also provided outperformance to the Index, as demand for residential rental
properties relative to new supply was stronger than anticipated. A significant
overweight in office stocks and a focus on strong downtown markets also allowed
the Fund to exceed index returns.
Portfolio Positioning
In general, throughout the period under review, we focused on purchasing stocks
with strong real estate fundamentals, in terms of both assets and geographic
market exposure. We established overweight positions in the office and hotel
sectors, and underweight positions in the retail and multifamily sectors.
Within the hotel sector, we remain positive on several individual stocks, as
opposed to having a bullish outlook on the entire group. We have moderated our
underweight in the multifamily sector based on improving supply/demand
characteristics. Development is slowing at the same time that rising interest
rates and escalating home prices are making apartment rentals attractive
relative to home ownership.
2
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Another trend worth noting is the merger activity taking place in the REIT
market. As the public market value of many REITs remains at a significant
discount to the liquidation value, we expect to see additional private market
transactions and merger activity. Given our investment horizon, our bias is
toward holding larger-cap names, rather than small, capital-constrained
companies that may make better takeover targets. We believe we can still buy
many of larger-cap issues at attractive valuations, and that earnings visibility
will drive their medium-term stock performance. We feel this is a more prudent
approach than pinning our hopes on obtaining short-term gains from investments
in unattractive companies that may become takeover targets.
Portfolio Highlights
. Cousins Properties, Inc. -- Cousins Properties is a real estate developer
and operator, primarily of office properties. The firm has produced
outstanding long-term results -- generating average annual returns of 25%
over the last 20 years. The firm has demonstrated the ability to anticipate
market shifts and recycle investment capital accordingly. In addition, it
focuses on creating value through high-yielding development opportunities
and accessing competitively priced capital, including joint ventures with
strong institutional partners.
. AIMCO -- Apartment Investment and Management Company is a consolidator of
residential rental properties on a nationwide basis. Its diversified
portfolio and sophisticated management infrastructure make it one of the
strongest competitors in this sector. In addition, AIMCO has the potential
to grow earnings at a higher rate than its peer group by consolidating
unowned limited partnership interests in partnerships they currently
control. These interests total $5 billion, comprising a substantial
opportunity set and creating significant earnings visibility for several
years.
. Starwood Hotels and Resorts -- Starwood Hotels and Resorts is global
owner and operator of branded upscale and luxury hotels, including the
Westin, Sheraton and new W brands. The strength of the owned asset base, the
quality of management and the breadth of potential growth opportunities make
this one of our favorite stocks. Starwood has shown an ability to improve
margins, manage capital wisely and compete effectively with more established
peers in growing owned property income and third-party management fees.
Portfolio Outlook
Despite the recent rebound, our view continues to be that the REIT sector is
undervalued on both an absolute and relative basis. An extended supply/demand
equilibrium exists in most real estate markets and across property types. We
believe that our research-intensive stock selection process should help to
generate the potential for superior performance in the long-term.
We thank you for your investment and look forward to your continued confidence.
Goldman Sachs Real Estate Securities Investment Team
July 29, 1999
3
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES 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?
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
and deliver consistent performance over time.
Research Expertise
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.
Focused Portfolios
Our portfolios tend to be focused, with clear investment objectives. We also
make every effort to ensure that our fund styles do not drift away from their
stated objectives -- so an investor can be confident that they know what they
own. As a result, our Funds can be particularly effective tools for implementing
asset allocation strategies.
To learn more about the Goldman Sachs Family of Funds, call your investment
professional today.
4
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Performance Summary
June 30, 1999 (Unaudited)
The following graph shows the value as of June 30, 1999, of a $10,000 invest-
ment made (with the maximum sales charge of 5.5% for Class A and contingent
deferred sales charges of 5.0% and 1.0% for Class B and C, respectively and
at NAV for the Institutional and Service Classes) on July 27, 1998 (commence-
ment of operations) of the Goldman Sachs Real Estate Securities Fund. For
comparative purposes, the performance of the Fund's benchmark (Wilshire Real
Estate Securities Index) is shown. This performance data represents past per-
formance 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.
REAL ESTATE SECURITIES FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, JULY 27, 1998 TO JUNE 30, 1999.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Class A Class B Class C Insitutional Service Securities Index
<S> <C> <C> <C> <C> <C> <C>
7/27/98 9550 10000 10000 10000 10000 10000
7/98 9244 9780 9780 9780 9780 9557
8/98 8299 8770 8770 8780 8780 8564
9/98 8597 9081 9081 9100 9092 9044
10/98 8749 9232 9232 9271 9253 8920
11/98 8996 9493 9493 9533 9514 9087
12/98 8834 9312 9315 9363 9344 8957
1/99 8700 9171 9164 9221 9202 8763
2/99 8652 9111 9103 9180 9151 8694
3/99 8530 8985 8975 9048 9018 8647
4/99 9585 10088 10075 10176 10133 9569
5/99 9711 10220 10207 10320 10276 9730
6/99 9622 9610 10013 10225 10180 9565
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN THROUGH JUNE
30, 1999(A) SINCE INCEPTION SIX MONTHS(B)
<S> <C> <C>
CLASS A
Excluding sales charges 1.80% 8.91%
Including sales charges -3.78% 2.88%
---------------------------------------------------------------------------
CLASS B
Excluding contingent deferred sales charges 1.16% 8.63%
Including contingent deferred sales charges -3.90% 3.55%
---------------------------------------------------------------------------
CLASS C
Excluding contingent deferred sales charges 1.14% 8.57%
Including contingent deferred sales charges 0.13% 7.56%
---------------------------------------------------------------------------
INSTITUTIONAL CLASS 2.25% 9.20%
---------------------------------------------------------------------------
SERVICE CLASS 1.80% 8.95%
---------------------------------------------------------------------------
</TABLE>
(a) All classes commenced operations on July 27, 1998.
(b) Not annualized.
5
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Statement of Investments
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - 95.7%
<C> <S> <C>
HOTELS - 15.6%
135,700 Felcor Suites Hotels, Inc. $ 2,815,775
407,800 Host Marriott Corp. 4,842,625
78,700 Meristar Hospitality Corp. 1,765,831
173,500 Prime Hospitality Corp.* 2,082,000
141,200 Promus Hotel Corp.* 4,377,200
383,200 Starwood Hotels & Resorts Worldwide 11,711,550
------------
27,594,981
-------------------------------------------------------------
INDUSTRIAL - 7.2%
192,500 AMB Property Corp. 4,523,750
96,700 Centerpoint Properties Corp. 3,541,638
184,700 Liberty Property Trust 4,594,413
------------
12,659,801
-------------------------------------------------------------
MANUFACTURING HOMES - 1.5%
100,100 Manufactured Home Communities, Inc. 2,602,600
-------------------------------------------------------------
MIXED - 20.8%
266,600 Brandywine Realty Trust 5,282,013
337,200 Catellus Development Corp.* 5,226,600
151,000 Cousins Properties, Inc. 5,105,688
186,100 Duke Realty Investors, Inc. 4,198,881
135,400 Highwood Properties, Inc. 3,715,038
239,400 Prentiss Properties Trust, Inc. 5,625,900
120,250 Reckson Associates Realty Corp. 2,825,875
136,100 Vornado Realty Trust 4,806,031
------------
36,786,026
-------------------------------------------------------------
MULTI-FAMILY - 12.4%
145,800 Apartment Investment & Management Co. 6,232,950
116,900 AvalonBay Communities, Inc. 4,325,300
108,300 Equity Residential Properties Trust 4,880,269
79,800 Essex Property Trust, Inc. 2,822,925
133,100 Home Properties of New York, Inc. 3,676,888
------------
21,938,332
-------------------------------------------------------------
OFFICE - 18.9%
85,000 Alexandria Real Estate Equities, Inc. 2,656,250
145,300 Boston Properties, Inc. 5,212,638
200,700 Corporate Office Properties Trust 1,643,231
243,800 Equity Office Properties Trust 6,247,375
161,400 Mack-Cali Realty Corp. 4,993,313
70,200 Parkway Properties, Inc. 2,325,375
134,200 Spieker Properties, Inc. 5,217,025
251,600 TrizecHahn Corp. 5,126,350
------------
33,421,557
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - (CONTINUED)
<C> <S> <C>
RETAIL - 15.5%
265,700 Developers Diversified Realty Corp. $ 4,417,263
145,900 General Growth Properties 5,179,450
132,200 Kimco Realty Corp. 5,172,325
94,600 Macerich Co. 2,483,250
248,300 Prime Retail, Inc. 2,157,106
167,750 Rouse Co. 4,256,656
149,700 Simon Property Group, Inc. 3,798,634
------------
27,464,684
-----------------------------------------------------------
SELF-STORAGE - 3.8%
240,900 Public Storage, Inc. 6,745,200
-----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $159,041,593) $169,213,181
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
REPURCHASE AGREEMENT - 1.9%
<C> <S> <C> <C>
Joint Repurchase Agreement Account
$3,400,000 5.13% 07/01/1999 $ 3,400,000
-----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $3,400,000) $ 3,400,000
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $162,441,593)(A) $172,613,181
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value exceeds
cost $ 11,540,689
Gross unrealized loss for investments in which cost exceeds
value (1,381,768)
-----------------------------------------------------------------------------
Net unrealized gain 10,158,921
-----------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $162,454,260.
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.
6
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Statement of Assets and Liabilities
June 30, 1999 (Unaudited)
ASSETS:
<TABLE>
<S> <C>
Investment in securities, at value (identified cost
$162,441,593) $172,613,181
Cash 11,854
Receivables:
Dividends and interest 1,126,201
Fund shares sold 3,131,074
Reimbursement from adviser 131,220
Other assets 14,055
-----------------------------------------------------------------------------
TOTAL ASSETS 177,027,585
-----------------------------------------------------------------------------
LIABILITIES:
Payables:
Fund shares repurchased 54,609
Amounts owed to affiliates 185,482
Accrued expenses and other liabilities 57,115
-----------------------------------------------------------------------------
TOTAL LIABILITIES 297,206
-----------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 165,619,073
Accumulated undistributed net investment income 460,080
Accumulated net realized gain on investment transactions 479,638
Net unrealized gain on investments 10,171,588
-----------------------------------------------------------------------------
NET ASSETS $176,730,379
-----------------------------------------------------------------------------
Net asset value, offering and redemption price per share:(a)
Class A $9.84
Class B $9.91
Class C $9.84
Institutional $9.86
Service $9.86
-----------------------------------------------------------------------------
Shares outstanding:
Class A 11,421,966
Class B 16,228
Class C 24,880
Institutional 6,478,918
Service 166
-----------------------------------------------------------------------------
Total shares outstanding, $.001 par value (unlimited number of
shares authorized) 17,942,158
-----------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share for Class A shares is $10.41 (NAV
per share multiplied by 1.0582). At redemption, Class B and Class C
shares are 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.
7
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Statement of Operations
For the Six Months Ended June 30, 1999 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends(a) $ 4,057,514
Interest 98,952
--------------------------------------------------------------------------
TOTAL INCOME 4,156,466
--------------------------------------------------------------------------
EXPENSES:
Management fees 714,274
Distribution and service fees(b) 215,624
Registration fees 101,967
Transfer agent fees(c) 93,135
Custodian fees 38,950
Professional fees 31,272
Trustee fees 5,334
Other 58,128
--------------------------------------------------------------------------
TOTAL EXPENSES 1,258,684
--------------------------------------------------------------------------
Less -- expenses reimbursed and fees waived (340,194)
--------------------------------------------------------------------------
NET EXPENSES 918,490
--------------------------------------------------------------------------
NET INVESTMENT INCOME 3,237,976
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS:
Net realized gain from investment transactions 752,553
Net change in unrealized gain on investments 9,901,592
--------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS: 10,654,145
--------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,892,121
--------------------------------------------------------------------------
</TABLE>
(a) Taxes withheld on dividends were $6,342.
(b) Class A, Class B and Class C had distribution and service fees of
$214,805, $326 and $493, respectively.
(c) Class A, Class B, Class C and Institutional Class had transfer agent fees
of $81,625, $62, $94 and $11,354, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, 1999 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1998(A)
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 3,237,976 $ 756,089
Net realized gain (loss) on investment
transactions 752,553 (272,915)
Net change in unrealized gain on
investments 9,901,592 269,996
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 13,892,121 753,170
------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A shares (1,773,487) (142,487)
Class B shares (1,580) (6)
Class C shares (2,474) (17)
Institutional shares (1,178,731) (435,155)
Service shares (27) (21)
------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (2,956,299) (577,686)
------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Proceeds from sales of shares 102,212,306 68,339,282
Reinvestment of dividends and
distributions 2,153,017 377,842
Cost of shares repurchased (6,052,019) (1,411,355)
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM SHARE TRANSACTIONS 98,313,304 67,305,769
------------------------------------------------------------------------------
TOTAL INCREASE 109,249,126 67,481,253
------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 67,481,253 --
------------------------------------------------------------------------------
End of period $176,730,379 $67,481,253
------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME $ 460,080 $ 178,403
------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations was July 27, 1998 for all classes.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
9
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Notes to Financial Statements
June 30, 1999 (Unaudited)
1. ORGANIZATION
Goldman Sachs Trust (the "Trust") is a Delaware business trust registered un-
der the Investment Company Act of 1940 (as amended) as an open-end management
investment company. The Trust includes the Goldman Sachs Real Estate Securi-
ties Fund (the "Fund"). The Fund is a diversified portfolio offering five
classes of shares -- Class A, Class B, Class C, Institutional and Service.
The Fund invests primarily in securities of issuers that are engaged in or
related to the real estate industry, and does have a policy of concentrating
its investments in the real estate industry. Therefore, an investment in the
Fund is subject to certain risks associated with the direct ownership of real
estate and with the real estate industry in general.
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.
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. 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. Restricted securities, and other securities for which quo-
tations are not readily available, are valued at fair value using methods ap-
proved by the Board of Trustees.
B. Securities Transactions and Investment Income -- Securities transactions
are recorded as of the trade date. Realized gains and losses on sales of in-
vestments are calculated on the identified-cost basis. Dividend income is re-
corded on the ex-dividend date. Dividends for which the Fund has the choice
to receive either cash or stock are recognized as investment income in an
amount equal to the cash dividend. This amount is also used as an estimate of
the fair value of the stock received. Interest income is determined on the
basis of interest accrued.
C. Federal Taxes -- It is the Fund's policy to comply with the requirements
of the Internal Revenue Code (the "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 capital, depending on
the type of book/tax differences that may exist. In addition, distributions
paid by the Fund's investments in real estate investment trusts ("REITs") of-
ten include a "return of capital" which is recorded by the Fund as a reduc-
tion of the cost basis of the securities held. The Code requires a REIT to
distribute at least 95% of its taxable income to investors. In many cases,
however, because of "non-cash" expenses such as property depreciation, an eq-
uity REIT's cash flow will exceed its taxable income. The REIT may distribute
this excess cash to offer a more competitive yield. This portion of the dis-
tribution is deemed a return of capital, and is generally not taxable to
shareholders.
The Fund, at its most recent tax year-end of December 31, 1998, had approx-
imately $230,000 of capital loss carryforwards expiring in 2006 for U.S. tax
purposes. This amount is available to be carried forward to offset future
capital gains to the extent permitted by applicable laws or regulations.
D. EXPENSES -- Expenses incurred by the Trust which do not specifically re-
late 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. Each class
of shares separately bears its respective class-specific transfer agency
fees. Shareholders of Service shares bear all expenses and fees paid to serv-
ice organizations.
10
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
E. 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.
3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as investment adviser pursuant
to an Investment Management Agreement (the "Agreement"). Under the Agreement,
GSAM, 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 administer-
ing the Fund's business affairs, including providing facilities, GSAM is en-
titled 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.
Goldman Sachs has voluntarily agreed to reduce or limit certain "Other Ex-
penses" for the Fund (excluding management fees, Service share fees, distri-
bution and service fees, litigation and indemnification costs, taxes,
interest, brokerage commissions, transfer agent fees and extraordinary ex-
penses) until further notice to the extent such expenses exceed .00% of the
average daily net assets of the Fund. For the period ended June 30, 1999, the
adviser reimbursed approximately $233,000.
Goldman Sachs serves as the Distributor of shares of the Funds 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 $795,000 for the period ended
June 30, 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 for distribution and shareholder
maintenance services equal, on an annual basis, to .50%, 1.00% and 1.00% of
the average daily net assets attributable to Class A, Class B and Class C
shares, respectively. Goldman Sachs has voluntarily agreed to waive a portion
of the Distribution and Service fees equal, on an annual basis, to .25% of
the average daily net assets attributable to the Class A shares. For the pe-
riod ended June 30, 1999, Goldman Sachs has waived approximately $107,000 of
the Distribution and Service fees attributable to the Class A shares. Goldman
Sachs may discontinue or modify this waiver in the future at its discretion.
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.
Goldman Sachs also serves as the Transfer Agent of the Fund for a fee cal-
culated 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.
11
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Notes to Financial Statements (continued)
June 30, 1999 (Unaudited)
At June 30, 1999, the Fund owed approximately $143,000, $23,000 and $19,000
for Management, Distribution and Service and Transfer Agent fees, respective-
ly.
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of securities (excluding short-
term investments) for the period ended June 30, 1999, were $111,653,665 and
$12,047,117, respectively.
For the period ended June 30, 1999, Goldman Sachs earned approximately
$15,600 of brokerage commissions from portfolio transactions.
5. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying secu-
rities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping at the Fund's custodian.
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund, together with other registered investment companies having manage-
ment agreements with GSAM or its affiliates, transfers uninvested cash bal-
ances into joint accounts, the daily aggregate balance of which is invested
in one or more repurchase agreements. At June 30, 1999, the Fund had an undi-
vided interest in the following joint repurchase agreement account, which
equaled $3,400,000 in principal amount. At June 30, 1999, the 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. $412,400,000 5.30% 07/01/1999 $ 412,400,000
------------------------------------------------------------------------------
BANC OF AMERICA SECURITIES 500,000,000 5.05 07/01/1999 500,000,000
------------------------------------------------------------------------------
BEAR STEARNS COMPANIES, INC. 200,000,000 5.00 07/01/1999 200,000,000
------------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,112,400,000
------------------------------------------------------------------------------
</TABLE>
7. LINE OF CREDIT FACILITY
The Fund participated in a $250,000,000 uncommitted, unsecured revolving line
of credit facility. Under the most restrictive arrangement, the Fund must
have owned securities having a market value in excess of 300% of the total
bank borrowings. 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 six
months ended June 30, 1999, the Fund did not have any borrowings under any of
these facilities.
8. OTHER MATTERS
As of June 30, 1999, the Goldman Sachs Growth and Income Strategy Portfolio
was the beneficial owner of approximately 5% of the outstanding shares of the
Fund.
12
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
9. SUMMARY OF SHARE TRANSACTIONS
Share activity for the six months ended June 30, 1999 (unaudited) and the pe-
riod ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, 1999 FOR THE PERIOD ENDED DECEMBER 31, 1998(A)
--------------------------------------------------------------
SHARES DOLLARS SHARES DOLLARS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 9,212,080 $85,520,390 2,290,778 $ 21,057,481
Reinvestment of divi-
dends and distribu-
tions 176,603 1,632,004 15,406 140,082
Shares repurchased (136,082) (1,362,723) (136,819) (1,259,100)
--------------------------------------------------------------
9,252,601 85,789,671 2,169,365 19,938,463
-------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 15,888 149,550 3,365 30,562
Reinvestment of divi-
dends and distribu-
tions 151 1,454 1 6
Shares repurchased -- -- (3,177) (29,200)
--------------------------------------------------------------
16,039 151,004 189 1,368
-------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 24,658 236,137 161 1,600
Reinvestment of divi-
dends and distribu-
tions 221 2,082 2 16
Shares repurchased (162) (1,436) -- --
--------------------------------------------------------------
24,717 236,783 163 1,616
-------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 1,756,918 16,306,229 5,144,538 47,248,039
Reinvestment of divi-
dends and distribu-
tions 55,905 517,451 25,915 237,717
Shares repurchased (491,039) (4,687,860) (13,319) (123,055)
--------------------------------------------------------------
1,321,784 12,135,820 5,157,134 47,362,701
-------------------------------------------------------------------------------------------
SERVICE SHARES
Shares sold -- -- 161 1,600
Reinvestment of divi-
dends and distribu-
tions 3 26 2 21
Shares repurchased -- -- -- --
--------------------------------------------------------------
3 26 163 1,621
-------------------------------------------------------------------------------------------
NET INCREASE 10,615,144 $98,313,304 7,327,014 $ 67,305,769
-------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations was July 27, 1998 for all classes.
13
<PAGE>
GOLDMAN SACHS REAL ESTATE SECURITIES FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS(A) SHAREHOLDERS
------------------------------------ ---------------------
NET REALIZED
NET ASSET AND UNREALIZED IN EXCESS
VALUE, NET GAIN (LOSS) ON FROM NET OF NET
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS INCOME INCOME
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED)
<S> <C> <C> <C> <C> <C>
1999 - Class A Shares $9.20 $0.21(e) $0.60(e) $(0.17) $--
1999 - Class B Shares 9.27 0.20(e) 0.59(e) (0.15) --
1999 - Class C Shares 9.21 0.21(e) 0.57(e) (0.15) --
1999 - Institutional
Shares 9.21 0.22(e) 0.61(e) (0.18) --
1999 - Service Shares 9.21 0.20(e) 0.61(e) (0.16) --
FOR THE PERIOD ENDED DECEMBER 31,
1998 - Class A Shares
(commenced July 27) 10.00 0.15 (0.80) (0.15) --
1998 - Class B Shares
(commenced July 27) 10.00 0.14(e) (0.83)(e) (0.04) --
1998 - Class C Shares
(commenced July 27) 10.00 0.22(e) (0.91)(e) (0.10) --
1998 - Institutional
Shares (commenced July
27) 10.00 0.31(e) (0.95)(e) (0.15) --
1998 - Service Shares
(commenced July 27) 10.00 0.25(e) (0.91)(e) (0.13) --
-----------------------------------------------------------------------------------
</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 REAL ESTATE SECURITIES FUND
<TABLE>
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES
OR 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 TO EXPENSES TO INCOME PORTFOLIO
IN NET ASSET VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE NET TO AVERAGE TURNOVER
VALUE OF PERIOD RETURN(B) (IN 000S) NET ASSETS NET ASSETS ASSETS NET ASSETS RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0.64 $9.84 8.91%(d) $112,430 1.44%(c) 4.47%(c) 2.02%(c) 3.89%(c) 8.89%(d)
0.64 9.91 8.63(d) 161 2.19(c) 4.09(c) 2.52(c) 3.76(c) 8.89(d)
0.63 9.84 8.57(d) 245 2.19(c) 4.48(c) 2.52(c) 4.15(c) 8.89(d)
0.65 9.86 9.20(d) 63,892 1.04(c) 4.64(c) 1.37(c) 4.31(c) 8.89(d)
0.65 9.86 8.95(d) 2 1.54(c) 4.31(c) 1.87(c) 3.98(c) 8.89(d)
(0.80) 9.20 (6.53)(d) 19,961 1.47(c) 23.52(c) 3.52(c) 21.47(c) 6.03(d)
(0.73) 9.27 (6.88)(d) 2 2.19(c) 3.60(c) 4.02(c) 1.77(c) 6.03(d)
(0.79) 9.21 (6.85)(d) 1 2.19(c) 5.49(c) 4.02(c) 3.66(c) 6.03(d)
(0.79) 9.21 (6.37)(d) 47,516 1.04(c) 8.05(c) 2.87(c) 6.22(c) 6.03(d)
(0.79) 9.21 (6.56)(d) 1 1.54(c) 6.29(c) 3.37(c) 4.46(c) 6.03(d)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs Real Estate Securities Fund
An Investment Idea for the Long Term
Over the long term, real estate investment trusts (REITs) have historically
outperformed many traditional investments, such as fixed income securities,
while seeking to provide competitive total returns against the broad equity
market./1/
Goldman Sachs Real Estate Securities Fund ("the Fund") seeks to provide
investors access to the benefits associated with equity investing. The Fund
seeks long-term growth of capital and dividend income primarily through
investments in equity securities of issuers engaged in or related to the real
estate industry.
Target Your Needs
The Goldman Sachs Real Estate Securities Fund has a distinct investment
objective and a defined place on the risk/return spectrum. As your investment
objectives change, you can exchange shares within the Goldman Sachs Family of
Funds without an additional charge./2/
(Please note: in general, greater returns are associated with greater risk.)
Goldman Sachs Funds
INTERNATIONAL
EQUITY
DOMESTIC
EQUITY
FIXED
INCOME
MONEY
MARKET
Lower Risk/Return Higher Risk/Return
ASSET ALLOCATION
SPECIALTY
Goldman Sachs
Real Estate
Securities Fund
For More Information
To learn more about the Goldman Sachs Real Estate Securities Fund and other
Goldman Sachs Funds, please call your investment professional today.
1 An investment in real estate securities is subject to greater price
volatility the special risks associated with the direct ownership of real
estate.
2 The exchange privilege is subject to termination and its terms are subject
to change.
Four professionals with more than
60 years of combined experience
manage the Goldman Sachs Real
Estate Securities Fund. The team
draws on Goldman, Sachs & Co.'s
global real estate capabilities:
Global Network
Presence in the Americas, Europe
and Asia, including more than
100 asset managers with local and
regional market expertise.
Research Expertise
The firm's Equity Research
Department provides coverage of
more than 80 real estate related
companies.
History of Strength
The firm has been a leading
presence in the real estate finance
business for more than 20 years
and is one of the most active
underwriters of real estate equity
and debt offerings.
<PAGE>
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
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
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
Adrien E. Deberges, Jr., Assistant Treasurer
Philip V. Giuca, Jr., Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN SACHS ASSET MANAGEMENT
Investment Adviser
Visit our internet address: www.gs.com/funds
This material is not authorized for distribution to prospective investors unless
preceded or accompanied by a current Prospectus. Investors should read the
Prospectus carefully before investing or sending money.
Goldman, Sachs & Co. is the distributor of the Fund.
An investment in the Real Estate Securities Fund is subject to certain risks
associated with the direct ownership of real estate and with concentrating its
investments in the real estate industry in general and may be suitable only for
those investors who are financially able to assume greater risk and share price
volatility than presented by funds that do not concentrate in the real estate
industry.
Copyright 1999 Goldman, Sachs & Co. All rights reserved. Date of first use:
August 30, 1999 REITSAR /7.5K / 8-99
