<PAGE>
Goldman Sachs Funds
INTERNATIONAL SMALL CAP FUND Semiannual Report February 29, 2000
Long-term capital growth
potential through a portfolio of
smaller capitalization companies
located outside of the United States.
[GRAPHIC]
[LOGO OF GOLDMAN SACHS]
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Market Overview
Dear Shareholder,
During the period under review, international equity markets posted
generally strong results -- aided by a strong rally during the fourth
quarter of 1999. Technology stocks were among the best performers in
various markets around the world.
. Market Review: Overall, International Markets Perform
Well -- As the reporting period came to a close,
international equity markets around the globe had posted
generally solid results. The largest contributors to
performance occurred during the fourth quarter of 1999, as
investors correctly looked beyond Y2K fears and instead
focused on opportunities for their portfolios. More
recently, concerns over inflation have resulted in rising
interest rates in the U.S. and Europe. This has put somewhat
of a damper on returns, as many international markets have
given back some of their gains thus far in 2000.
Japanese stocks were among the strongest performers, as
restructuring efforts and strong corporate profits
reinforced the view that the economy was on an upward trend.
In Asia's developed markets, a continuation of improving
economic fundamentals and an increase in foreign investors
has helped last year's dramatic rebound to move steadily
forward. Many emerging market countries also generated
outstanding returns, as strong returns and attractive
relative valuations proved compelling for investors. In
Europe, an economic rebound, consolidation activity and the
technology sector drove the market higher.
. Market Outlook: Cautious Optimism -- Many attractive
investment opportunities remain in the international equity
market. Improving economic and corporate fundamentals,
consolidation activity and the vast potential of the "new
economy" are a few of the positive trends that exist.
However, there are several areas that could adversely affect
results going forward. The prospect for continued interest
rate hikes in the U.S. could have a ripple effect in many
regions and stunt growth rates in more fragile economies.
High valuations in some areas of the market, most notably
the technology sector, leave little room for disappointing
results. And currency fluctuations in the yen and euro could
put a strain on continued strong results.
Based on these uncertainties and the potential for
short-term market volatility, we encourage you to work
closely with your financial advisor to maintain a long-term
focus on your investment portfolio. As always, we appreciate
your support and we look forward to serving your investment
needs in the years to come.
Sincerely,
/s/ David B. Ford
David B. Ford
Co-Head, Goldman Sachs Asset Management
/s/ David W. Blood
David W. Blood
- ---------------- Co-Head, Goldman Sachs Asset Management
. NOT FDIC
INSURED March 13, 2000
. May Lose Value
. No Bank
Guarantee
- ----------------
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Fund Basics
as of February 29, 2000
Assets Under Management $306.9 Million
Number of Holdings
142
NASDAQ SYMBOLS
Class A Shares
GISAX
Class B Shares
GISBX
Class C Shares
GISCX
Institutional Shares
GISIX
Service Shares
GISSX
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
Fund Total Return MSCI EAFE
August 31, 1999-February 29, 2000 (without sales charge)1 Small Cap2
- --------------------------------------------------------------------------------
Class A 30.88% 2.34%
Class B 30.62 2.34
Class C 30.54 2.34
Institutional 31.23 2.34
Service 30.96 2.34
- --------------------------------------------------------------------------------
1 The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares. The Fund's performance assumes the
reinvestment of dividends and other distributions.
2 The unmanaged MSCI EAFE Small Cap Index, incepted 1/15/98, includes 1,502
securities from 23 developed markets with a capitalization range of
$200-$800 million and a general regional allocation of 60% Europe, 30%
Japan and 10% Asia. Total returns are calculated without dividends
reinvested. The Index figures do not reflect fees or expenses. In addition,
investors cannot invest directly in the Index.
- --------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURNS3
- --------------------------------------------------------------------------------
For the period ended Class A Class B Class C Institutional Service
12/31/99
- --------------------------------------------------------------------------------
Last 6 months 18.89% 20.27% 24.44% 26.30% 25.89%
One Year 39.40 41.62 45.69 48.56 47.68
Since inception 24.93 26.71 28.76 30.08 29.27
(5/1/98)
- --------------------------------------------------------------------------------
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, the assumed deferred sales
charge for Class B Shares (5% maximum declining to 0% after six years) and
the assumed deferred sales charge for Class C Shares (1% if redeemed within
12 months of purchase). Because Institutional and Service Shares do not
involve a sales charge, such a charge is not applied to their Standardized
Total Returns.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS AS OF 2/29/00
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Total
Holding Net Assets Country Line of Business
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sato Corp. 1.5% Japan Electronics Equipment
Smartforce PLC ADR 1.4 Ireland Information Services
Hakuto Co. 1.4 Japan Electrical Equipment
Vesta Wind Systems A/S 1.4 Denmark Energy Resources
Altran Technologies 1.4 France Business Services
Helsingin Puhelin Oyj 1.4 Finland Energy Resources
Komeri Co. Ltd. 1.3 Japan Home Products
Nippon Kanzai Co. 1.3 Japan Business Services
Sumitomo Real Estate Sales Co. Ltd. 1.2 Japan Real Estate
Societe Generale D'Affichage 1.2 Switzerland Media
- -------------------------------------------------------------------------------------
</TABLE>
The top 10 holdings may not be representative of the Fund's future investments.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance reflects expense
limitations in effect. In their absence, performance would be reduced.
1
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Performance Overview
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs
International Small Cap Fund for the six month period that ended
February 29, 2000.
Performance Review
Over the six month period ended February 29, 2000, the Fund's
Class A, B, C, Institutional and Service share classes produced
cumulative total returns, without sales charges, of 30.88%,
30.62%, 30.54%, 31.23% and 30.96%, respectively. These results
handily outpaced the 2.34% cumulative total return of the Fund's
benchmark, the Morgan Stanley Capital International (MSCI) Small
Cap Europe, Australasia, Far East Index (EAFE).
The Fund's outperformance during the period was primarily
attributable to a significant contribution from regional stock
selection.
Portfolio Composition
The Fund's weightings in each of the three key regions of Japan,
Europe and Asia were 31.3%, 54.1% and 7.1%, respectively, as of
February 29, 2000. Our objective is to add value more through
stock selection within each region than through regional
allocation. Having said that, in recent months some of the Fund's
best performance has come from stocks in the European and Asian
portions of the Fund.
Portfolio Highlights
. Intershop Communications AG -- Intershop Communications, an
Internet software provider, has been an outstanding contributor
to the Fund. The firm is one of the purest Internet plays in
the Fund that focuses on the explosive growth of e-commerce in
Europe. During the first two months of 2000, Intershop's share
price appreciated over 90%, indicating the market's confidence in
its ability to succeed in this fast growing market.
. Capita Group PLC -- Capita Group is one the Fund's longest
standing holdings and it has been an outstanding performer.
Capita is a leading provider of outsourcing services to local
authorities in the U.K., and it recently signed an agreement with
the U.S. software manufacturer Microsoft.
Key New Acquisitions
. Cybertron Telekom AG -- Cybertron Telekom is one of the largest
recent additions to the Fund's portfolio. We believe this
Austrian alternative telecommunication provider is poised to
benefit from the increased deregulation of the Austrian
telecommunication market, with plans to expand throughout central
Europe.
2
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
INVESTMENT PROCESS OVERVIEW
Company visits form the core of the investment process for the Goldman Sachs
International Small Cap Fund.
- -------------------
Company Visits
--------------
Internal Research
-----------------
Return Expectations
- -------------------
- -------------------
Stock Selection
- -------------------
- -------------------
Portfolio
Construction
- --------------------
. Stock, Industry
& Country Views
Relative to
Benchmark
- --------------------
- --------------------
Portfolio Review
& Analysis
- --------------------
. Performance
Measurement
& Attribution
. Risk Management
. Currency
Management
- ---------------------
. Saipem SpA -- Saipem is another important recent addition to the Fund. The
firm is an Italian international contractor, offering services in offshore
and onshore oil & gas exploration and drilling. Saipem is another
beneficiary of the tendency towards outsourcing in Europe.
Portfolio Outlook
We will continue to seek fast growing companies at attractive valuations.
As in the past, our strategy will aim to identify dynamic organizations
either benefiting from a structural change in the market, such as
outsourcing of services, or companies operating in a particularly
attractive market niche. The Fund's significant outperformance since its
inception indicates the long term strength of our investment process. In
addition, the Fund rose over 12% during the first two months of 2000,
compared to the Fund's benchmark, the MSCI Small Cap EAFE, increasing
slightly more than 2%. This is an indication of how the Fund can be an
excellent diversification tool to a U.S.-based portfolio. Looking ahead, we
believe that as bond yields stabilize, the strong growth rates for the
companies within the Fund, and their attractive valuations versus other
growth stocks, leave us well-positioned for the longer term. Consequently,
we feel that the Fund offers excellent value.
We thank you for your investment and look forward to your continued
confidence.
Goldman Sachs International Small Cap Equity Investment Team
London
February 29, 2000
3
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP 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 Investment Management Division provides
individual investors the opportunity to tap the resources of a
global institutional powerhouse -- and put this expertise to work
in their individual portfolios.
What Sets Goldman Sachs Funds Apart?
1
Resources and Relationships
Our portfolio management teams are located on-site, around the
world, in New York, London, Tokyo and Singapore. Their
understanding of local economies, markets, industries and
cultures helps deliver what many investors want: access to global
investment opportunities and consistent, risk-adjusted
performance.
2
In-Depth Research
Our portfolio management teams make on-site visits to hundreds of
companies each month, then construct selective portfolios with an
emphasis on their best ideas. Our teams also have access to
Goldman, Sachs & Co.'s Global Investment Research Department.
3
Risk Management
In this, our institutional heritage is clear. Institutions, as
well as many individual investors, often look to us to manage the
risks of global investing over time in different market
environments.
To learn more about the Goldman Sachs Funds, call your investment
professional today.
4
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Performance Summary
February 29, 2000 (Unaudited)
The following graph shows the value as of February 29, 2000, of a $10,000 in-
vestment made on May 1, 1998 (commencement of operations) in Class A Shares
(maximum sales charge of 5.5%), Class B Shares (applicable contingent de-
ferred sales charges of 5.0% declining to 0% after six years), Class C Shares
(applicable contingent deferred sales charge of 1.0% if redeemed within
twelve months), Institutional and Service Shares (at NAV) of the Goldman
Sachs International Small Cap Fund. For comparative purposes, the performance
of the Fund's benchmarks (Morgan Stanley Capital International EAFE Small Cap
Index unhedged ("MSCI Small Cap EAFE")) is shown. This performance data rep-
resents past performance and should not be considered indicative of future
performance which will fluctuate with changes in market conditions. These
performance fluctuations will cause an investor's shares, when redeemed, to
be worth more or less than their original cost.
International Small Cap Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested May 1, 1998 to
February 29, 2000.
[GRAPH]
<TABLE>
<CAPTION>
MSCI Small Cap EAFE Class A Class B Class C Institutional Class Service Class
<S> <C> <C> <C> <C> <C> <C>
5/1/98 10,000 9,450 10,000 10,000 10,000 10,000
May 98 10,033 9,830 10,400 10,400 10,400 10,400
Jun 98 9,634 9,783 10,350 10,350 10,360 10,350
Jul 98 9,502 10,038 10,620 10,620 10,630 10,620
Aug 98 8,237 8,856 9,370 9,370 9,400 9,370
Sep 98 7,858 8,384 8,870 8,870 8,900 8,870
Oct 98 8,488 9,008 9,520 9,520 9,560 9,530
Nov 98 8,893 9,348 9,880 9,880 9,930 9,890
Dec 98 8,927 9,830 10,400 10,400 10,447 10,400
Jan 99 8,815 10,038 10,610 10,610 10,667 10,610
Feb 99 8,704 9,981 10,550 10,550 10,617 10,550
Mar 99 9,175 10,302 10,880 10,880 10,967 10,890
Apr 99 9,857 10,822 11,430 11,430 11,527 11,440
May 99 9,499 10,473 11,050 11,050 11,157 11,080
Jun 99 10,004 11,531 12,170 12,160 12,288 12,200
Jul 99 10,310 12,070 12,730 12,730 12,879 12,770
Aug 99 10,528 12,514 13,190 13,190 13,360 13,240
Sep 99 10,496 12,892 13,580 13,580 13,760 13,640
Oct 99 10,352 12,788 13,470 13,470 13,670 13,540
Nov 99 10,408 13,601 14,320 14,320 14,540 14,400
Dec 99 10,503 14,507 15,268 15,258 15,520 15,358
Jan 00 10,516 14,909 15,673 15,673 15,955 15,783
Feb 00 10,775 16,379 16,814 17,218 17,532 17,339
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return through
August 31, 1999(a) Since Inception One Year Six Months(b)
<S> <C> <C> <C>
Class A
Excluding sales charges 34.92% 63.88% 30.88%
Including sales charges 30.84% 54.95% 23.69%
-----------------------------------------------------------------------------
Class B
Excluding contingent deferred sales
charges 34.49% 63.08% 30.62%
Including contingent deferred sales
charges 32.72% 57.92% 25.43%
-----------------------------------------------------------------------------
Class C
Excluding contingent deferred sales
charges 34.45% 62.99% 30.54%
Including contingent deferred sales
charges 34.45% 61.95% 29.50%
-----------------------------------------------------------------------------
Institutional 35.78% 64.91% 31.23%
-----------------------------------------------------------------------------
Service 34.96% 64.13% 30.96%
-----------------------------------------------------------------------------
</TABLE>
(a) Commencement date of operations was May 1, 1998 for all classes.
(b) Not annualized.
5
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Statement of Investments
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - 91.2%
<C> <S> <C>
Australia - 1.7%
154,000 Brazin Ltd. (Specialty Retail) $ 270,143
199,500 Fairfax (John) Holdings Ltd. (Publishing) 702,372
257,147 Hutchison Telecommunications (Australia) Ltd.*
(Telecommunications) 829,356
205,000 Melbourne IT Ltd.* (Business Services) 1,397,668
131,600 North Ltd. (Mining) 222,750
250,000 Primary Health Care Ltd. (Health) 815,538
89,762 Tab Corp. Holdings Ltd. (Entertainment) 535,911
172,600 TAB Ltd. (Entertainment) 253,902
190,495 Village Roadshow Ltd. (Entertainment) 311,884
------------
5,339,524
-----------------------------------------------------------------------------
Austria - 1.1%
11,440 Cybertron Telekom AG* (Telecommunications) 3,276,382
-----------------------------------------------------------------------------
China - 0.7%
466,000 Legend Holdings (Electrical Equipment) 2,155,495
-----------------------------------------------------------------------------
Denmark - 4.7%
62,969 DSV, De Sammensluttede Vognmaend af* (Transportation) 1,304,753
28,126 Falck A/S (Electrical Equipment) 3,077,841
49,945 GN Store Nord A/S (Telecommunications) 3,331,046
29,032 Sondagsavisen A/S (Publishing) 2,349,841
15,128 Vesta Wind Systems A/S* (Energy Resources) 4,261,105
------------
14,324,586
-----------------------------------------------------------------------------
Finland - 2.8%
22,173 Alma Media Corp. (Publishing) 1,090,452
39,158 Helsingin Puhelin Oyj (Energy Resources) 4,191,365
45,441 Nokian Renkaat Oyj (Auto) 1,722,077
47,820 Talentum (Publishing) 1,475,610
------------
8,479,504
-----------------------------------------------------------------------------
France - 8.3%
14,892 Altran Technologies (Business Services) 4,221,943
10,669 Cerg Finance (Computer Software) 1,491,776
17,596 Coface* (Insurance) 1,425,297
18,956 Compagnie Generale de Geophysique SA* (Energy
Resources) 1,124,175
21,307 Diosos* (Diversified Industrial Manufacturing) 924,585
25,272 Entrelec Groupe SA (Electrical Utilities) 1,398,825
28,944 Etam (Specialty Retail) 586,125
12,761 FI System* (Business Services) 1,722,760
14,478 GFI Informatique (Business Services) 2,917,876
20,680 IPSOS (Media) 2,865,625
10,540 Jet Multimedia* (Information Services) 1,123,091
29,864 Royal Canin SA (Grocery) 2,879,785
21,271 Unibail (Real Estate) 2,689,073
------------
25,370,936
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - (continued)
<C> <S> <C>
Germany - 5.8%
39,852 Allbecon AG (Business Services) $ 1,018,376
16,513 Bertrandt AG (Auto) 1,004,772
15,925 Brokat Infosystems AG (Computer Software) 2,364,897
19,323 Dis Deutscher Industrie (Business Services) 1,546,552
5,070 Intershop Communications AG* (Computer Software) 2,640,060
32,885 m&s Elektronic AG (Information Services) 637,391
13,283 Parsytec Pattern AG* (Computer Software) 2,817,934
64,507 Rhoen-Klinikum AG (Health) 2,919,071
11,821 ricardo. de AG* (Information Services) 2,143,009
4,938 Tecis Holding AG* (Financial Services) 352,367
6,519 Wanderer-Werke AG*
(Multi-Industrial) 490,329
------------
17,934,758
------------------------------------------------------------------------------
Hong Kong - 2.3%
2,138,000 Cafe De Coral Holdings (Restaurants) 700,497
365,200 Dah Sing Financial Holdings (Banks) 1,187,162
903,000 Dickson Concepts International Ltd. (Specialty
Retail) 986,200
1,708,000 Esprit Holdings (Multi-Industrial) 1,634,943
1,300,000 Giordano International Ltd. (Specialty Retail) 1,453,186
971,200 HKR International Ltd. (Real Estate) 477,308
1,230,000 JCG Holdings Ltd. (Financial Services) 576,842
------------
7,016,138
------------------------------------------------------------------------------
Ireland - 2.2%
122,185 Independent News & Media PLC (Publishing) 1,281,584
441,245 Kingspan Group PLC (Construction) 1,276,477
98,800 SmartForce PLC ADR* (Information Services) 4,353,375
------------
6,911,436
------------------------------------------------------------------------------
Italy - 3.5%
104,458 Banca Popolare Commercio e Industria Ordinary Shares
(Banks) 3,635,850
198,703 Banca Popolare di Milano BPM (Banks) 1,475,391
171,555 Brembo SpA (Auto) 2,016,597
194,191 Gruppo Coin SpA* (Department Store) 2,147,853
363,541 Saipem SpA (Energy Resources) 1,381,216
------------
10,656,907
------------------------------------------------------------------------------
Japan - 31.3%
61,000 ABLE, Inc. (Real Estate) 3,608,318
70,700 Aderans Co. Ltd. (Specialty Retail) 1,930,200
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - (continued)
<C> <S> <C>
Japan - (continued)
148,000 Alpine Electronics Inc. (Electronics Equipment) $ 2,159,021
116,000 Amatsuji Steel Ball Manufacturing Co. Ltd. (Industrial
Parts) 1,045,093
16,600 Citizen Electronic (Electrical Equipment) 3,323,474
257,000 Daiwa Electronics (Consumer Durables) 703,981
261,000 Foster Electric Co. Ltd. (Electrical Equipment) 1,662,647
17,700 Fuji Seal (Heavy Machinery) 1,050,225
267,000 Fujitec Co. Ltd. (Construction) 2,337,480
147,000 Fukuda Denshi Co. Ltd. (Health) 2,474,860
4,300 Funai Electric Co. Ltd. (Electrical Equipment) 3,091,414
106,500 Hakuto Co. (Electrical Equipment) 4,312,918
484,000 Hitachi Powdered Metals (Mining) 3,215,361
164,100 Inaba Denkisangyo (Electrical Equipment) 1,720,373
223,500 Iuchi Seieido Co. (Electrical Equipment) 3,620,421
38,000 Japan Business Computer Co. Ltd. (Computer Software) 2,299,677
180,900 Japan CBM Corp. (Electrical Equipment) 2,897,429
436,000 Kato Sangyo Co. Ltd. (Food & Beverage) 2,579,060
230,000 Kawasumi Labs, Inc. (Chemicals) 2,490,786
89,300 Koekisha Co. Ltd. (Medical Providers) 2,763,070
136,900 Komeri Co. Ltd. (Home Products) 3,961,796
43,400 Kuroda Electric Co. Ltd. (Electronics Equipment) 1,718,069
136 Kyoto Kimono Yuzen Co. Ltd.* (Specialty Retail) 1,027,256
90,700 Meitec Corp. (Business Services) 2,600,036
169,600 Ministop Co. Ltd. (Specialty Retail) 3,542,176
93,000 Mirai Industry Co. Ltd. (Multi-Industrial) 1,079,929
88,000 MKC-STAT Corp. (Business Services) 2,506,621
155,000 Nippon Kanzai Co. (Business Services) 3,949,584
253,000 Ogura Clutch Co. Ltd. (Auto) 2,394,503
4,000 OZEKI Co. Ltd. (Grocery) 192,201
12,760 People Co. Ltd. (Health) 1,137,990
66,000 Rock Field Co. Ltd. (Grocery) 2,612,731
121,100 Sato Corp. (Electronics Equipment) 4,518,451
156,300 Sumitomo Real Estate Sales Co. Ltd. (Real Estate) 3,797,798
33,000 Suruga Co. Ltd. (Consumer Durables) 2,222,323
32,900 Taiyo Ink Manufacturing Co. Ltd. (Chemicals) 3,293,443
228,300 Trusco Nakayama (Wholesale) 2,638,586
206 Yoshinoya D&C Co. Ltd. (Restaurants) 3,468,171
------------
95,947,472
-------------------------------------------------------------------------------
Netherlands - 2.1%
52,208 Beter Bed Holding NV (Specialty Retail) 1,364,327
112,579 Samas Groep NV (Business Services) 1,378,710
59,853 Versatel Telecom International NV* (Telecommunications) 3,630,351
------------
6,373,388
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - (continued)
<C> <S> <C>
Norway - 1.7%
162,842 EDB Business Partner ASA (Business Services) $ 2,546,380
79,379 Stepstone ASA* (Information Services) 303,208
131,615 Tomra Systems ASA (Machinery) 2,497,975
------------
5,347,563
---------------------------------------------------------------------------
Portugal - 0.9%
68,061 ParaRede, SGPS (Information Services) 2,720,413
---------------------------------------------------------------------------
Singapore - 2.4%
111,000 Datacraft Asia Ltd. (Telecommunications) 937,950
453,000 JIT Holdings Ltd. (Electronics Equipment) 1,458,747
600,000 Lindeteves-Jacoberg Ltd. (Electrical Equipment) 623,150
1,491,000 PCI Ltd. (Electronics Equipment) 1,193,838
209,000 Venture Manufacturing Ltd. (Electrical Equipment) 3,140,760
------------
7,354,445
---------------------------------------------------------------------------
Spain - 2.9%
59,905 Baron de Ley SA* (Alcohol) 1,250,642
150,071 Centros Comerciales Pryca SA (Grocery) 1,985,468
163,764 Sociedad General de Aguas de Barcelona SA
(Multi-Industrial) 2,403,506
52,373 Sogecable SA* (Broadcasting) 3,383,719
------------
9,023,335
---------------------------------------------------------------------------
Sweden - 2.9%
146,033 Europolitan Holdings AB (Telecommunications) 3,420,563
83,368 Proffice AB (Business Services) 1,886,067
139,329 Sifo Group AB Series B (Business Services) 1,663,606
623,127 Swedish Match AB (Tobacco) 2,036,270
------------
9,006,506
---------------------------------------------------------------------------
Switzerland - 6.0%
1,033 Bachem AB Class B (Chemicals) 1,554,614
3,482 Belimo Holding AG (Construction) 1,468,854
4,910 Carrier 1 International SA* (Telecommunications) 767,023
6,681 Charles Voegele Holding AG (Apparel) 1,102,475
1,671 Komax Group AG (Machinery) 1,263,402
288 Kudelski SA * (Electrical Equipment) 3,096,886
887 Lindt & Spruengli AG Class B (Food & Beverage) 2,128,481
5,015 Logitech International SA* (Computer Hardware) 3,301,203
6,923 Societe Generale D'Affichage (Media) 3,655,710
------------
18,338,648
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Statement of Investments (continued)
February 29, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value
Common Stocks - (continued)
<C> <S> <C>
United Kingdom - 7.9%
100,754 Capita Group PLC (Construction) $ 2,540,987
347,224 Cattles PLC (Financial Services) 1,211,438
105,589 Future Network PLC* (Media) 1,525,243
116,008 Guardian IT PLC (Business Services) 1,904,674
499,879 Independent Insurance Group PLC (Insurance) 1,862,414
6,890 JSB Software Technologies PLC* (Computer Software) 331,756
2,905 JSB Software Technologies PLC ADR* (Computer Software) 435,750
32,740 Kewill Systems PLC (Business Services) 1,314,649
688,346 London Merchant Securities PLC (Real Estate) 2,465,593
380,845 Matalan PLC (Real Estate) 3,457,128
221,866 N Brown Group PLC (Specialty Retail) 2,723,268
124,247 Nestor Healthcare Group PLC (Health) 764,980
60,364 Serco Group (Business Services) 2,240,527
210,948 The Berkeley Group PLC (Construction) 1,490,280
------------
24,268,687
------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $228,425,466) $279,846,123
------------------------------------------------------------------------------
Preferred Stocks - 1.3%
Germany - 1.3%
692 Porsche AG (Auto) $ 2,021,905
42,701 Rhoen-Klinikum AG Non-Voting (Health) 1,992,946
------------
4,014,851
------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $3,379,243) $ 4,014,851
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
Short-Term Obligation - 3.6%
<C> <S> <C> <C>
State Street Bank & Trust Euro-Time Deposit
$11,094,000 5.75% 03/01/2000 $ 11,094,000
-----------------------------------------------
TOTAL SHORT-TERM OBLIGATION
(Cost $11,094,000) $ 11,094,000
-----------------------------------------------
TOTAL INVESTMENTS
(Cost $242,898,709) $294,954,974
-----------------------------------------------
</TABLE>
* Non-income producing security.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
Investment Abbreviations:
ADR--American Depositary Receipt
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage of
Total Net Assets
Common and Preferred Stock Industry Classifications +
<S> <C>
Alcohol 0.4%
Apparel 0.4
Auto 3.0
Banks 2.0
Broadcasting 1.1
Business Services 11.3
Chemicals 2.4
Computer Hardware 1.1
Computer Software 4.0
Construction 3.0
Consumer Durables 1.0
Department Store 0.7
Diversified Industrial Manufacturing 0.3
Electrical Equipment 10.7
Electrical Utilities 0.5
Electronics Equipment 3.6
Energy Resources 3.6
Entertainment 0.4
Financial Services 0.7
Food & Beverage 1.5
Grocery 2.5
Health 3.2
Heavy Machinery 0.3
Home Products 1.3
Industrial Parts 0.3
Information Services 3.7
Insurance 1.1
Machinery 1.2
Media 2.6
Medical Providers 0.9
Mining 1.1
Multi-Industrial 1.8
Publishing 2.2
Real Estate 5.4
Restaurants 1.4
Specialty Retail 4.5
Telecommunications 5.3
Tobacco 0.7
Transportation 0.4
Wholesale 0.9
--------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK 92.5%
--------------------------------------------------------
</TABLE>
+ Industry concentrations greater than one tenth of one percent are
disclosed.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Statement of Assets and Liabilities
February 29, 2000 (Unaudited)
Assets:
<TABLE>
<S> <C>
Investment in securities, at value (identified cost
$242,898,709) $294,954,974
Cash, at value 572,661
Receivables:
Investment securities sold 4,692,932
Dividends and interest, at value 79,926
Fund shares sold 13,129,638
Reimbursement from investment adviser 220,400
Deferred organization expenses, net 10,258
Other assets, at value 47,306
-------------------------------------------------------------------------------
Total assets 313,708,095
-------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased, at value 6,154,406
Fund shares repurchased 146,528
Amounts owed to affiliates 353,242
Forward foreign currency exchange contracts, at value 5,276
Accrued expenses and other liabilities, at value 182,256
-------------------------------------------------------------------------------
Total liabilities 6,841,708
-------------------------------------------------------------------------------
Net Assets:
Paid-in capital 232,328,852
Distribution in excess of net investment income (1,015,590)
Accumulated undistributed net realized gain on investment,
futures and foreign currency related transactions 23,514,896
Net unrealized gain on investments, futures and translation
of assets and liabilities denominated in foreign currencies 52,038,229
-------------------------------------------------------------------------------
NET ASSETS $306,866,387
-------------------------------------------------------------------------------
Net asset value, offering and redemption price per
share:(a)
Class A $16.71
Class B $16.61
Class C $16.60
Institutional $16.90
Service $16.72
-------------------------------------------------------------------------------
Shares outstanding:
Class A 10,794,013
Class B 102,429
Class C 226,925
Institutional 7,162,682
Service 156
-------------------------------------------------------------------------------
Total shares of beneficial interest outstanding, $.001 par
value (unlimited number of shares authorized) 18,286,205
-------------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share (NAV per share multiplied by
1.0582) for Class A Shares is $17.68. 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.
9
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Statement of Operations
For the Six Months Ended February 29, 2000 (Unaudited)
<TABLE>
<S> <C>
Investment income:
Dividends(a) $ 373,264
Interest 319,089
-----------------------------------------------------------------------------
Total income 692,353
-----------------------------------------------------------------------------
Expenses:
Management fees 1,158,654
Custodian fees 321,255
Distribution and Service fees(b) 272,059
Transfer Agent fees(c) 118,875
Registration fees 46,320
Professional fees 27,098
Trustee fees 4,008
Amortization of deferred organization expenses 1,136
Other 31,252
-----------------------------------------------------------------------------
Total expenses 1,980,657
-----------------------------------------------------------------------------
Less -- expenses reimbursed (272,714)
-----------------------------------------------------------------------------
Net expenses 1,707,943
-----------------------------------------------------------------------------
NET INVESTMENT LOSS (1,015,590)
-----------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment, futures and
foreign currency related transactions:
Net realized gain (loss) from:
Investment transactions 27,039,241
Futures transactions (31,323)
Foreign currency related transactions 52,000
Net change in unrealized gain (loss) on:
Investments 32,205,943
Futures (27,792)
Translation of assets and liabilities denominated in foreign
currencies (14,351)
-----------------------------------------------------------------------------
Net realized and unrealized gain on investment, futures and
foreign currency related transactions 59,223,718
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $58,208,128
-----------------------------------------------------------------------------
</TABLE>
(a)Taxes withheld on dividends were $49,650.
(b)Class A, Class B and Class C had Distribution and Service fees of
$262,963, $3,423 and $5,673, respectively.
(c)Class A, Class B, Class C, Institutional Class and Service Class had
Transfer Agent fees of $99,927, $650, $1,078, $17,220 and $0, respectively.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the For the
Six Months Ended Seven Months Ended Period Ended
February 29, 2000 August 31, 1999 January 31, 1999(a)
(Unaudited)
<S> <C> <C> <C>
From operations:
Net investment loss $ (1,015,590) $ (173,328) $ (147,894)
Net realized gain from
investment, futures and
foreign currency related
transactions 27,059,918 3,660,821 232,160
Net change in unrealized
gain on investments,
futures and translation
of assets and
liabilities denominated
in foreign currencies 32,163,800 17,316,915 2,557,514
--------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations 58,208,128 20,804,408 2,641,780
--------------------------------------------------------------------------------------
Distributions to share-
holders:
In excess of net
investment income
Class A Shares -- -- --
Class B Shares -- -- --
Class C Shares -- -- --
Institutional Shares -- (3,921) (21,659)
Service Shares -- -- --
From net realized gain
on investment, futures
and foreign currency
transactions
Class A Shares (3,823,471) -- --
Class B Shares (23,470) -- --
Class C Shares (31,640) -- --
Institutional Shares (3,219,751) -- --
Service Shares (79) -- --
--------------------------------------------------------------------------------------
Total distributions to
shareholders (7,098,411) (3,921) (21,659)
--------------------------------------------------------------------------------------
From share transactions:
Proceeds from sales of
shares 132,484,145 58,890,454 81,743,079
Reinvestment of
dividends and
distributions 4,607,274 2,349 8,522
Cost of shares
repurchased (17,288,305) (14,124,187) (13,987,269)
--------------------------------------------------------------------------------------
Net increase in net
assets resulting from
share transactions 119,803,114 44,768,616 67,764,332
--------------------------------------------------------------------------------------
TOTAL INCREASE 170,912,831 65,569,103 70,384,453
--------------------------------------------------------------------------------------
Net assets:
Beginning of period 135,953,556 70,384,453 --
--------------------------------------------------------------------------------------
End of period $306,866,387 $135,953,556 $ 70,384,453
--------------------------------------------------------------------------------------
Distribution in excess
of net investment income $ (1,015,590) $ -- $ (106,697)
--------------------------------------------------------------------------------------
</TABLE>
(a) Commencement date of operations was May 1, 1998 for all share classes.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Notes to Financial Statements
February 29, 2000 (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, manage-
ment investment company. The Trust includes the Goldman Sachs International
Small Cap Fund (the "Fund"). The Fund is a diversified portfolio offering
five classes of shares -- Class A, Class B, Class C, Institutional and Serv-
ice.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consist-
ently followed by the Fund. The preparation of financial statements in con-
formity with generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts. Actual
results could differ from those estimates. Effective for fiscal year 1999,
the Board of Trustees approved a change in the fiscal year end of the Fund
from January 31 to August 31. Accordingly, the Statements of Changes in Net
Assets, Summary of Share Transactions, and Financial Highlights of the Fund
are included for the seven months ended August 31, 1999 and for the year
ended January 31, 1999.
A. Investment Valuation -- Investments in securities traded on a U.S. or for-
eign securities exchange or the NASDAQ system are valued daily at their last
sale price on the principal exchange on which they are traded. If no sale oc-
curs, securities are valued at the last bid price. Debt securities are valued
at prices supplied by independent pricing services, broker/dealer-supplied
valuations or matrix pricing systems. Unlisted equity and debt securities for
which market quotations are available are valued at the last sale price on
valuation date, or if no sale occurs at the last bid price. Short-term debt
obligations maturing in sixty days or less are valued at amortized cost,
which approximates market value. Securities for which quotations are not
readily available are valued at fair value using methods approved by the
Board of Trustees of the Trust.
B. Security Transactions and Investment Income -- Security transactions are
recorded as of the trade date. Realized gains and losses on sales of portfo-
lio securities are calculated using the identified-cost basis. Dividend in-
come is recorded on the ex-dividend date. Dividends for which the Fund has
the choice to receive either cash or stock are recognized as investment in-
come in an amount equal to the cash dividend. Interest income is recorded on
the basis of interest accrued, premium amortized and discount earned.
C. Federal Taxes -- It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute each year substantially all of its investment company taxable
income and capital gains to its shareholders. Accordingly, no federal tax
provision is required.
The characterization of distributions to shareholders for financial report-
ing purposes is determined in accordance with income tax rules. Therefore,
the source of the Fund's distributions may be shown in the accompanying fi-
nancial statements as either from or in excess of net investment income or
net realized gain on investment transactions, or from paid-in capital, de-
pending on the type of book/tax differences that may exist.
At February 29, 2000, the aggregate cost of portfolio securities for fed-
eral income tax purposes is $242,935,843. Accordingly, the gross unrealized
gain on investments was $66,971,632 and the gross unrealized loss on invest-
ments was $14,952,501 resulting in a net unrealized gain of $52,019,131.
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 based on a
straight-line or pro rata basis depending upon the nature of the expense.
Class A, Class B and Class C Shares bear all expenses and fees relating to
their respective Distribution and Service Plans. Shareholders of Service
Shares bear all expenses and fees paid to service organizations. Each class
of shares separately bears its respective class-specific Transfer Agency
fees.
12
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
E. Deferred Organization Expenses -- Organization-related costs are amortized
on a straight-line basis over a period of five years.
F. Foreign Currency Translations -- The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in foreign currencies are
translated into U.S. dollars on the following basis: (i) investment valua-
tions, foreign currency and other assets and liabilities initially expressed
in foreign currencies are converted each business day into U.S. dollars based
on current exchange rates; (ii) purchases and sales of foreign investments,
income and expenses are converted into U.S. dollars based on currency ex-
change rates prevailing on the respective dates of such transactions.
Net realized and unrealized gain (loss) on foreign currency transactions
will represent: (i) foreign exchange gains and losses from the sale and hold-
ings of foreign currencies; (ii) currency gains and losses between trade date
and settlement date on investment securities transactions and forward ex-
change contracts; and (iii) gains and losses from the difference between
amounts of dividends, interest and foreign withholding taxes recorded and the
amounts actually received.
G. Segregation Transactions -- The Fund may enter into certain derivative
transactions to seek to increase total return. Forward foreign currency ex-
change contracts, futures contracts, written options, when-issued securities
and forward commitments represent examples of such transactions. As a result
of entering into those transactions, the Fund is required to segregate liquid
assets on the accounting records equal to or greater than the market value of
the corresponding transactions.
3. AGREEMENTS
Pursuant to the Investment Management Agreement (the "Agreement"), Goldman
Sachs Asset Management International ("GSAMI"), a unit of the Investment Man-
agement Division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the in-
vestment adviser to the Fund. Under the Agreement, GSAMI, subject to the
general supervision of the Trust's Board of Trustees, manages the Fund's
portfolio. As compensation for the services rendered under the Agreement, the
assumption of the expenses related thereto and administering the Fund's busi-
ness affairs, including providing facilities, GSAMI is entitled to a fee,
computed daily and payable monthly, at an annual rate equal to 1.20% of the
average daily net assets of the Fund.
The investment adviser has voluntarily agreed to limit certain "Other Ex-
penses" (excluding Management fees, Distribution and Service fees, Transfer
Agent fees, taxes, interest, brokerage, litigation, Service Share fees, in-
demnification costs and other extraordinary expenses) to the extent such ex-
penses exceed, on an annual basis, 0.16% of the average daily net assets of
the Fund.
The Trust, on behalf of the Fund, has adopted Distribution and Service
Plans. Under the Distribution and Service Plans, Goldman Sachs and/or autho-
rized dealers are entitled to a monthly fee from the Fund for distribution
and shareholder maintenance services equal, on an annual basis, to 0.50%,
1.00% and 1.00% of the Fund's average daily net assets attributable to Class
A, Class B and Class C Shares, respectively.
Goldman Sachs serves as the distributor of shares of the Fund pursuant to a
Distribution Agreement. Goldman Sachs may receive a portion of the Class A
sales load and Class B and Class C contingent deferred sales charges and has
advised the Fund that it retained approximately $548,000 for the period ended
February 29, 2000.
Goldman Sachs also serves as the transfer agent of the Fund for a fee. The
fees charged for such transfer agency services are calculated daily and pay-
able monthly at an annual rate as follows: 0.19% of average daily net assets
for Class A, Class B and Class C Shares and 0.04% of average daily net assets
for Institutional and Service Shares.
13
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Notes to Financial Statements (continued)
February 29, 2000 (Unaudited)
3. AGREEMENTS (continued)
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
0.50% (on an annualized basis), of the average daily net asset value of the
Service Shares.
As of February 29, 2000, the amounts owed to affiliates were approximately
$260,000, $65,000 and $28,000 for Management, Distribution and Service, and
Transfer Agent fees, respectively.
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of securities (excluding
short-term investments and futures) for the period ended February 29, 2000,
were $199,499,778 and $92,567,354, respectively. For the period ended Febru-
ary 29, 2000, Goldman Sachs earned approximately $3,100 of brokerage commis-
sions from portfolio transactions, including futures transactions executed on
behalf of the Fund.
Forward Foreign Currency Exchange Contracts -- The Fund may enter into for-
ward foreign currency exchange contracts for the purchase or sale of a spe-
cific foreign currency at a fixed price on a future date as a hedge or cross-
hedge against either specific transactions or portfolio positions. The Fund
may also purchase and sell such contracts to seek to increase total return.
All commitments are "marked-to-market" daily at the applicable translation
rates and any resulting unrealized gains or losses are recorded in the Fund's
financial statements. The Fund realizes gains or losses at the time a forward
contract is offset by entry into a closing transaction or extinguished by de-
livery of the currency. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their con-
tracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At February 29, 2000, the Fund had outstanding forward foreign exchange
contracts to sell foreign currency as follows:
<TABLE>
<CAPTION>
Value on Unrealized
Settlement Current -----------
Open Foreign Currency Sales Contracts Date Value Gain Loss
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Norwegian Krone expiring 3/10/2000 $132,716 $127,440 -- $5,276
----------------------------------------------------------------------------
TOTAL OPEN FOREIGN CURRENCY SALE CONTRACTS $132,716 $127,440 $-- $5,276
----------------------------------------------------------------------------
</TABLE>
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 or the Fund's custodian bank,
an amount of cash or securities equal to the minimum "initial margin" re-
quirement of the associated futures exchange. Subsequent payments for futures
contracts ("variation margin") are paid or received by the Fund, depending on
the fluctuations in the value of the contracts, and are recorded for finan-
cial 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 risk which may exceed the amounts recognized in the Statement of Assets
and Liabilities. Changes in the value of the futures contract may not di-
rectly correlate with changes in the value of the underlying securities. This
risk may decrease the effectiveness of the Fund's hedging strategies and po-
tentially result in a loss. At February 29, 2000, the Fund had no open
futures contracts.
14
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
4. PORTFOLIO SECURITIES TRANSACTIONS (continued)
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 equiv-
alent liability. The amount of the liability is subsequently marked-to-market
to reflect the current market value of the option written. When a written op-
tion 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 liability
related to such option is extinguished. When a written call option is exer-
cised, the Fund realizes a gain or loss from the sale of the underlying secu-
rity, and the proceeds of the sale are increased by the premium originally
received. When a written put option is exercised, the amount of the premium
originally received will reduce the cost of the security which the Fund pur-
chases 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. At February 29, 2000, the Fund had no open
written option contracts.
5. LINE OF CREDIT FACILITY
The Fund participates in a $250,000,000 uncommitted and a $250,000,000 com-
mitted, unsecured revolving line of credit facility. Under the most restric-
tive arrangement, the Fund must own securities having a market value in
excess of 400% of the total bank borrowings. This facility is 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. During the
period ended February 29, 2000, the Fund did not have any borrowings under
any of these facilities.
6. CHANGE IN INDEPENDENT ACCOUNTANTS
On October 26, 1999 the Board of Trustees of the Fund, upon the recommenda-
tion of the Board's audit committee, determined not to retain Arthur Andersen
LLP and approved a change of the Fund's independent accountants to
PricewaterhouseCoopers LLP. For the period ended August 31, 1999 and the fis-
cal year ended January 31, 1999, Arthur Andersen LLP's audit reports con-
tained no adverse opinion or disclaimer of opinion; nor were their reports
qualified or modified as to uncertainty, audit scope, or accounting princi-
ples. Further, there were no disagreements between the Fund and Arthur Ander-
sen LLP on accounting principles or practices, financial statement disclosure
or audit scope or procedure, which if not resolved to the satisfaction of Ar-
thur Andersen LLP would have caused them to make reference to the disagree-
ment in their report.
15
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Notes to Financial Statements (continued)
February 29, 2000 (Unaudited)
7. SUMMARY OF SHARE TRANSACTIONS
Share activity for the:
<TABLE>
<CAPTION>
Six-Month
Period Ended
February 29, 2000
(Unaudited)
-----------------------
Shares Dollars
---------------------------------------------------------------------
<S> <C> <C>
Class A Shares
Shares sold 6,139,422 $ 91,680,488
Reinvestment of dividends and distributions 157,579 2,229,750
Shares repurchased (748,919) (11,072,901)
----------------
5,548,082 82,837,337
---------------------------------------------------------------------
Class B Shares
Shares sold 82,988 1,260,517
Reinvestment of dividends and distributions 1,259 17,723
Shares repurchased (4,779) (72,674)
----------------
79,468 1,205,566
---------------------------------------------------------------------
Class C Shares
Shares sold 365,090 5,562,450
Reinvestment of dividends and distributions 2,170 30,550
Shares repurchased (172,071) (2,636,435)
----------------
195,189 2,956,565
---------------------------------------------------------------------
Institutional Shares
Shares sold 2,314,888 33,980,690
Reinvestment of dividends and distributions 162,879 2,329,172
Shares repurchased (242,887) (3,506,127)
----------------
2,234,880 32,803,735
---------------------------------------------------------------------
Service Shares
Shares sold -- --
Reinvestment of dividends and distributions 6 79
Shares repurchased (11) (168)
----------------
(5) (89)
---------------------------------------------------------------------
NET INCREASE 8,057,614 $119,803,114
---------------------------------------------------------------------
</TABLE>
16
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
7. SUMMARY OF SHARE TRANSACTIONS
Share activity for the:
<TABLE>
<CAPTION>
Seven-Month Nine-Month
Period Ended Period Ended
August 31, 1999 January 31, 1999(a)
---------------------- ----------------------
Shares Dollars Shares Dollars
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold 2,607,810 $32,403,673 3,789,828 $39,461,070
Reinvestment of dividends and
distributions -- -- -- --
Shares repurchased (470,755) (5,480,465) (680,952) (6,496,553)
-----------------------------------------------
2,137,055 26,923,208 3,108,876 32,964,517
------------------------------------------------------------------------------
Class B Shares
Shares sold 6,837 79,235 24,738 250,752
Reinvestment of dividends and
distributions -- -- -- --
Shares repurchased (3,975) (41,451) (4,639) (43,306)
-----------------------------------------------
2,862 37,784 20,099 207,446
------------------------------------------------------------------------------
Class C Shares
Shares sold 21,336 268,279 19,740 196,453
Reinvestment of dividends and
distributions -- -- -- --
Shares repurchased (6,059) (68,915) (3,281) (32,610)
-----------------------------------------------
15,277 199,364 16,459 163,843
------------------------------------------------------------------------------
Institutional Shares
Shares sold 2,231,140 26,139,267 4,172,165 41,833,210
Reinvestment of dividends and
distributions 183 2,349 851 8,522
Shares repurchased (773,017) (8,533,356) (703,520) (7,414,800)
-----------------------------------------------
1,458,306 17,608,260 3,469,496 34,426,932
------------------------------------------------------------------------------
Service Shares
Shares sold -- -- 161 1,594
Reinvestment of dividends and
distributions -- -- -- --
Shares repurchased -- -- -- --
-----------------------------------------------
-- -- 161 1,594
------------------------------------------------------------------------------
NET INCREASE 3,613,500 $44,768,616 6,615,091 $67,764,332
------------------------------------------------------------------------------
</TABLE>
(a) The Fund commenced operations on May 1, 1998 for all share classes.
17
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Income from
investment operations(a) Distributions to shareholders
--------------------------- --------------------------------------
Net asset In excess
value, Net Net realized of net Net increase
beginning investment and unrealized investment From net in net asset
of period loss gain income realized gains value
FOR THE SIX MONTHS ENDED FEBRUARY 29, (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
2000 - Class A Shares $13.24 $(0.10)(e) $4.09(e) $ -- $(0.52) $3.47
2000 - Class B Shares 13.19 (0.14)(e) 4.08(e) -- (0.52) 3.42
2000 - Class C Shares 13.19 (0.14)(e) 4.07(e) -- (0.52) 3.41
2000 - Institutional
Shares 13.35 (0.05)(e) 4.12(e) -- (0.52) 3.55
2000 - Service Shares 13.24 (0.08)(e) 4.08(e) -- (0.52) 3.48
FOR THE SEVEN-MONTH PERIOD ENDED AUGUST 31,
1999 - Class A Shares 10.62 (0.03) 2.65 -- -- 2.62
1999 - Class B Shares 10.61 (0.08)(e) 2.66(e) -- -- 2.58
1999 - Class C Shares 10.61 (0.08)(e) 2.66(e) -- -- 2.58
1999 - Institutional
Shares 10.66 -- 2.69 -- -- 2.69
1999 - Service Shares 10.61 (0.02) 2.65 -- -- 2.63
FOR THE PERIOD ENDED JANUARY 31,
1999 - Class A Shares
(commenced May 1, 1998) 10.00 (0.04) 0.66 -- -- 0.62
1999 - Class B Shares
(commenced May 1, 1998) 10.00 (0.10) 0.71 -- -- 0.61
1999 - Class C Shares
(commenced May 1, 1998) 10.00 (0.06) 0.67 -- -- 0.61
1999 - Institutional
Shares (commenced May 1,
1998) 10.00 -- 0.67 (0.01) -- 0.66
1999 - Service Shares
(commenced May 1, 1998) 10.00 (0.02) 0.63 -- -- 0.61
-------------------------------------------------------------------------------------------------------
</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) Not annualized.
(d) Annualized.
(e) Calculated based on the average shares outstanding methodology.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
GOLDMAN SACHS INTERNATIONAL SMALL CAP FUND
<TABLE>
<CAPTION>
Ratios assuming no expense limitations
--------------------------------------
Net assets Ratio of Ratio of
Net asset at end of Ratio of net investment Ratio of net investment
value, end Total period net expenses to loss to expenses to loss to
of period return(b)(c) (in 000s) average net assets(d) average net assets(d) average net assets(d) average net assets(d)
<S> <C> <C> <C> <C> <C> <C>
$16.71 30.88% $180,329 2.05% (1.34)% 2.33% (1.62)%
16.61 30.62 1,700 2.55 (1.88) 2.83 (2.16)
16.60 30.54 3,766 2.55 (1.93) 2.83 (2.21)
16.90 31.23 121,068 1.40 (0.67) 1.68 (0.95)
16.72 30.96 3 1.90 (1.04) 2.18 (1.32)
13.24 24.67 69,458 2.05 (0.68) 2.42 (1.05)
13.19 24.32 303 2.55 (1.16) 2.92 (1.53)
13.19 24.32 419 2.55 (1.21) 2.92 (1.58)
13.35 25.24 65,772 1.40 (0.05) 1.77 (0.42)
13.24 24.79 2 1.90 (0.35) 2.27 (0.72)
10.62 6.20 33,002 2.02 (1.03) 3.60 (2.61)
10.61 6.10 213 2.51 (1.30) 4.09 (2.88)
10.61 6.10 175 2.51 (1.45) 4.09 (3.03)
10.66 6.67 36,992 1.40 (0.19) 2.98 (1.77)
10.61 6.10 2 1.90 (0.26) 3.48 (1.84)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Portfolio
turnover
rate(c)
50.53%
50.53%
50.53%
50.53%
50.53%
58.81
58.81
58.81
58.81
58.81
96.11
96.11
96.11
96.11
96.11
19
<PAGE>
(This page intentionally left bank)
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs
International Small Cap Fund
An Investment Idea for the Long Term
History has shown that a long-term plan that includes international
stocks can help provide greater protection against market volatility
over time than a portfolio that invests only in U.S. stocks.
Goldman Sachs International Small Cap Fund provides investors access
to the benefits associated with international investing. The Fund
seeks long-term capital growth, primarily through equity securities of
smaller capitalization companies located outside of the United States.
Target Your Needs
The Goldman Sachs International Small Cap 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 Fund
Goldman Sachs Funds offers more than 30 investment options for global
diversification across borders, investment styles, asset classes and
security capitalizations.
[GRAPH]
INTERNATIONAL
EQUITY
.Goldman Sachs
International
Small Cap
Fund
DOMESTIC
EQUITY
FIXED
INCOME
MONEY
MARKET
-- Lower Risk/Return Higher Risk/Return --
ASSET ALLOCATION
SPECIALTY
For More Information
To learn more about the Goldman Sachs International Small Cap Fund and
other Goldman Sachs Funds, call your investment professional today.
*The exchange privilege is subject to termination and its terms are
subject to change.
<PAGE>
GOLDMAN SACHS ASSET MANAGEMENT 32 OLD SLIP, 17TH FLOOR, NEW YORK, NEW YORK 10005
TRUSTEES OFFICERS
Ashok N. Bakhru, Chairman Douglas C. Grip, President
David B. Ford Jesse H. Cole, Vice President
Douglas C. Grip James A. Fitzpatrick, Vice President
John P. McNulty Nancy L. Mucker, Vice President
Mary P. McPherson John M. Perlowski, Treasurer
Alan A. Shuch Philip V. Giuca, Jr., Assistant Treasurer
Jackson W. Smart, Jr. Michael J. Richman, Secretary
William H. Springer Amy E. Belanger, Assistant Secretary
Richard P. Strubel Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
Investment Adviser
GOLDMAN SACHS INTERNATIONAL
Peterborough Court, 133 Fleet Street
London EC4A 2BB, England
Visit our internet address: www.gs.com/funds
This material is not authorized for distribution to prospective investors unless
preceded or accompanied by a current Prospectus. Investors should read the
Prospectus carefully before investing or sending money.
Emerging markets securities are volatile. They are subject to substantial
currency fluctuations and sudden economic and political developments. At
times, the Fund may be unable to sell certain of its portfolio securities
without a substantial drop in price, if at all.
The stocks of smaller companies are often more volatile and present greater
risks than stocks of larger companies. At times, the Fund may be unable to sell
the securities it holds without a substantial drop in price, if at all.
The Fund may participate in the Initial Public Offering (IPO) market, and a
portion of the Fund's returns consequently may be attributable to its investment
in IPOs, which may have a magnified impact due to the Fund's small asset base.
As the Fund's assets grow, it is probable that the effect of the Fund's
investment in IPOs on its total returns may not be as significant.
Goldman, Sachs & Co. is the distributor of the Fund.
Copyright 2000 Goldman, Sachs & Co. All rights reserved. Date of first use:
April 30, 2000/00-528 INTLSMCAPSAR/7.5K/4-00
