GOLDMAN SACHS TRUST
N-30D, 2000-11-08

Previous: GOLDMAN SACHS TRUST, N-30D, 2000-11-08

Next: GOLDMAN SACHS TRUST, N-30D, 2000-11-08

GOLDMAN SACHS CAPITAL GROWTH FUND

Market Overview

Dear Shareholder:

During the period under review the financial markets experienced a dramatic increase in volatility. However, investors who stayed the course were generally rewarded for their disciplined approach, as many sectors of the market generated solid returns.

• Market Review: Increased Volatility and a Dramatic Correction — For the one-year reporting period that ended August 31, 2000, the U.S. stock market, as measured by the S&P 500 Index, appreciated 16.32%. However, this masked the volatile nature of the market. During the first half of the reporting period the markets rose, however the vast majority of the gains were generated by large cap growth and technology-related stocks. Then, in mid-March, the markets abruptly corrected due to continued strong economic growth, inflationary pressures and rising interest rates.

  While a range of stocks were negatively impacted by the correction, technology issues experienced the brunt of the decline. At one point the technology-heavy Nasdaq composite was down 37% from its peak. While the Nasdaq posted a one-year return of 45.93% for the period ended August 31, 2000, this was largely due to the strong performance of technology stocks late in 1999 and in the summer of 2000. However, by the end of the reporting period the Nasdaq was still off 19% from its peak. In contrast, the S&P 500 Index, which also fell during the middle of the period, recovered to the point that it was again nearing its record high by the end of August.

• Indications of Slower Economic Growth — After a series of six short-term interest rate hikes by the Federal Reserve Board (the “Fed”) to slow economic growth, the economy finally began to show signs of moderating during the summer. As such, the Fed left rates unchanged during both its June and August meetings. With the presidential election nearing, it’s now unlikely that the Fed will move to raise rates again before year-end.
• Market Outlook: More Moderate Growth — Looking ahead, we remain cautiously optimistic about the near term prospects for the U.S equity market. Reasonable growth in the U.S., stronger demand growth outside of the U.S. (particularly in Asia), and continued productivity gains would be a combination of factors that would be quite beneficial to equities. However, we do not anticipate the 20-30% gains the stock market has provided over the past several years. As such, we believe it’s important for investors to maintain realistic expectations about their investment returns, and to maintain a long-term focus for their portfolios.

  As always, we appreciate your support and we look forward to serving your investment needs in the years to come.

  

  Sincerely,

  David B. Ford Co-Head, Goldman Sachs Asset Management		David W. Blood Co-Head, Goldman Sachs Asset Management

September 15, 2000

 

GOLDMAN SACHS CAPITAL GROWTH FUND

Fund Basics

as of August 31, 2000

PERFORMANCE REVIEW
August 31, 1999–August 31, 2000	Fund Total Return (without sales charge)1			S&P 500 Index2
Class A	25.70	%		16.32	%
Class B	24.75			16.32
Class C	24.75			16.32
Institutional	26.18			16.32
Service	25.53			16.32

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 S&P 500 Index (with dividends reinvested) figures do not reflect any fees or expenses. In addition, investors cannot invest directly in the Index.

STANDARDIZED TOTAL RETURNS 3
For the period ended 6/30/00	Class A		Class B		Class C		Institutional		Service
One Year	8.39	%	8.42	%	12.82	%	15.16	%	14.59	%
Five Years	23.22		N/A		N/A		N/A		24.554
Ten Years	18.96		N/A		N/A		N/A		19.604
Since Inception	18.95		24.93		22.96		24.29		19.584
	(4/20/90)		(5/1/96)		(8/15/97)		(8/15/97)		(4/20/90)

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.

⁴ Performance data for Service shares prior to 8/15/97 is that of Class A shares (excluding the impact of front-end sales charges applicable to Class A shares since Service shares are not subject to any sales charges). Performance of Class A shares of the Capital Growth Fund reflects the expenses applicable to the Fund’s Class A shares. The fees applicable to Service shares are different from those applicable to Class A shares which impact performance ratings and rankings for a class of shares.

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.

TOP 10 HOLDINGS AS OF 8/31/2000
Holding	% of Total Net Assets		Line of Business
General Electric Co.	4.1	%	Financial Services
Intel Corp.	3.7		Semiconductors
Cisco Systems	3.6		Computer Hardware
Pfizer, Inc.	2.9		Drugs
Microsoft Corp.	2.9		Computer Software
Nortel Networks Corp.	2.2		Electrical Equipment
Exxon Mobil Corp.	2.1		Energy Resources
Oracle Corp.	2.0		Computer Software
Citigroup, Inc.	2.0		Banks
Bristol-Meyers Squibb Co.	1.8		Drugs

The top 10 holdings may not be representative of the Fund’s future investments.

 

GOLDMAN SACHS CAPITAL GROWTH FUND

Performance Overview

Dear Shareholder,

We are pleased to report on the performance of the Goldman Sachs Capital Growth Fund for the one year period that ended August 31, 2000.

Performance Review

Over the one-year period that ended August 31, 2000, the Fund’s Class A, B, C, Institutional and Service shares generated cumulative total returns, without sales charges, of 25.70%, 24.75%, 24.75%, 26.18%, and 25.53%, respectively. These figures compare very favorably to the 16.32% cumulative total return of the Fund’s benchmark, the S&P 500 Index.

The Fund’s outperformance was primarily attributable to stock selection and sector allocation. In particular, our overweight in the Consumer Staples sector and underweight in the Technology sector boosted results during the very volatile period in the financial markets. While the Fund wasn’t immune to the steep decline in Technology stocks that occurred during the second quarter, its holdings in the semiconductor industry performed relatively well, due to ongoing robust demand. In recent months the Fund holdings in the Financial Services sector enhanced results. Investors favored these rate-sensitive stocks, perceiving that an economic slowdown will prevent the Federal Reserve Board from raising rates in the near future.

Portfolio Composition

As bottom-up stock pickers, we focus on the real worth of the business, and to the extent that we find several businesses in related industries that have long-term growth potential, we may develop an overweight in a given sector. With this in mind, as of August 31, 2000, the Fund maintained overweight positions in the Consumer Services and Consumer Discretionary sectors. Underweight positions were held in the Energy and Cyclical sectors.

Portfolio Highlights

• Nabisco Group Holdings — Nabisco’s stock price appreciated significantly when it was announced that another Fund holding, Philip Morris, would purchase the company. This transaction will fill a gap in Philip Morris’s vast Kraft Foods area, bolstering the company as the world’s second largest food company.
• Pfizer Inc. — Our holding in Pfizer performed well, as the U.S. Federal Trade Commission voted to approve its purchase of Warner-Lambert (also a Fund holding). We believe this merger will position the combined company (now known as Pfizer) with the industry’s deepest pipeline and largest research and development budget.
• Intel Corp. — Our position in Intel aided returns, as the top semiconductor company continues to benefit from the increased demand in this area. We believe Intel and the Fund’s other infrastructure companies are well-positioned to benefit from the growth of the Internet.

GOLDMAN SACHS CAPITAL GROWTH FUND

 

GROWTH
INVESTMENT
PROCESS

Our approach to growth
investing is based on a
consistent style that has
been applied over the past
18 years.

Strong
Growth
Characteristics

Growth companies have
earnings expectations that
exceed those of the stock market
as a whole. We search for
growth companies with:

• Favorable financial characteristics
• High returns on invested capital
• Dominant market share for core service or product
• Recurring revenue streams
• Solid brand franchises
• Management committed to maximizing shareholder returns

Result

A diversified portfolio of
stocks with strong long-term
growth potential.

Portfolio Outlook

While we neither make nor rely on economic forecasts to make investment decisions, we are generally bullish on the U.S. economy. Over the last decade, global communication has increased, due to significant technological advances and a generally peaceful world political environment. We believe that this trend, combined with favorable demographic trends, will benefit U.S. companies over the long term. More fundamentally, though, we continue to focus on the core business characteristics which provide a foundation for long-term growth, such as strength of franchise, quality of management, and free cash flow, along with favorable demographic trends. We believe that the enduring competitive advantage of the companies we own, based on the criteria mentioned above, may even withstand an uncertain market environment.

We thank you for your investment and look forward to your continued confidence.

 

Goldman Sachs Growth Equity Investment Team

New York
September 15, 2000

GOLDMAN SACHS CAPITAL GROWTH 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?

---

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.

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.

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.

 

The following graph shows the value, as of August 31, 2000, of a $10,000 investment made on April 20, 1990 (commencement of operations) in Class A shares (maximum sales charge of 5.5%) of the Goldman Sachs Capital Growth Fund. For comparative purposes, the performance of the Fund’s benchmark (the Standard and Poor’s 500 Index (with dividends reinvested) (“S& P 500 Index”)) is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance of Class B, Class C, Institutional and Service shares will vary from Class A due to differences in fees and loads.

Capital Growth Fund’s Lifetime Performance

Growth of a $10,000 Investment, Distributions Reinvested April 20, 1990 to August 31, 2000.

Average Annual Total Return through August 31, 2000		Since Inception			Ten Years		Five Years		One Year
Class A (commenced April 20, 1990)
Excluding sales charges		19.67%			20.91%		24.47%		25.70%
Including sales charges		19.02%			20.22%		23.06%		18.80%
Class B (commenced May 1, 1996)
Excluding contingent deferred sales charges		25.16%			n/a		n/a		24.75%
Including contingent deferred sales charges		24.84%			n/a		n/a		19.32%
Class C (commenced August 15, 1997)
Excluding contingent deferred sales charges		22.91%			n/a		n/a		24.75%
Including contingent deferred sales charges		22.91%			n/a		n/a		23.66%
Institutional Class (commenced August 15, 1997)		24.25%			n/a		n/a		26.18%
Service Class (commenced August 15, 1997)		23.68%			n/a		n/a		25.53%

Shares		Description		Value
Common Stocks – 94.0%
Banks – 4.9%
457,049		Bank of America Corp.		$  24,480,687
1,298,000		Citigroup, Inc.		75,770,750
398,490		State Street Corp.		46,922,197
272,900		The Bank of New York Co., Inc.		14,310,194
128,950		The Chase Manhattan Corp.		7,205,081
442,900		Wells Fargo & Co.		19,127,744
				187,816,653
Chemicals – 1.5%
468,429		E.I. du Pont de Nemours & Co.		21,020,752
296,000		Minnesota Mining & Manufacturing Co.		27,528,000
346,300		The Dow Chemicals Co.		9,068,731
				57,617,483
Computer Hardware – 8.4%
2,003,780		Cisco Systems, Inc.*		137,509,402
703,690		Dell Computer Corp.*		30,698,476
670,500		EMC Corp.*		65,709,000
197,660		Hewlett-Packard Co.		23,867,445
489,400		Sun Microsystems, Inc.*		62,123,213
154,100		Xerox Corp.		2,475,231
				322,382,767
Computer Software – 6.8%
136,830		CheckFree Corp.*		7,089,504
86,700		Gemstar-TV Guide International, Inc.*		7,824,675
424,700		International Business Machines, Inc.		56,060,400
1,569,600		Microsoft Corp.*		109,577,700
833,600		Oracle Corp.*		75,805,500
49,760		VERITAS Software Corp.*		5,999,190
				262,356,969
Defense/Aerospace – 0.1%
105,300		Honeywell International, Inc.		4,060,631
Department Store – 1.6%
1,286,400		Wal-Mart Stores, Inc.		61,023,600
Drugs – 7.9%
361,100		American Home Products Corp.		19,567,106
297,300		Amgen, Inc.*		22,539,056
1,319,210		Bristol-Myers Squibb Co.		69,918,130
326,300		Eli Lilly & Co.		23,819,900
497,600		Merck & Co., Inc.		34,769,800
2,611,510		Pfizer, Inc.		112,947,807
482,100		Schering-Plough Corp.		19,344,263
				302,906,062

Shares		Description		Value
Common Stocks – continued
Electrical Equipment – 5.7%
186,700		Corning, Inc.		$  61,225,931
907,050		Lucent Technologies, Inc.		37,926,028
430,887		Motorola, Inc.		15,538,863
1,041,100		Nortel Networks Corp.		84,914,719
311,440		QUALCOMM, Inc.*		18,647,470
				218,253,011
Electrical Utilities – 1.9%
103,500		Duke Energy Corp.		7,743,094
901,900		The AES Corp.*		57,496,125
218,160		The Southern Co.		6,531,165
				71,770,384
Energy Resources – 4.1%
209,700		Chevron Corp.		17,719,650
189,300		Enron Corp.		16,066,838
994,406		Exxon Mobil Corp.		81,168,390
635,000		Royal Dutch Petroleum Co.		38,854,062
148,400		Unocal Corp.		4,952,850
				158,761,790
Entertainment – 1.5%
351,600		The Walt Disney Co.		13,690,425
623,545		Viacom, Inc. Class B*		41,972,373
				55,662,798
Environmental Services – 0.1%
210,500		Waste Management, Inc.		3,986,344
Financial Services – 7.2%
900,200		Federal Home Loan Mortgage Corp.		37,920,925
729,800		Federal National Mortgage Assn.		39,226,750
2,688,000		General Electric Co.		157,752,000
1,177,680		MBNA Corp.		41,586,825
				276,486,500
Food & Beverage – 3.0%
726,260		Nabisco Group Holdings Corp.		20,380,671
818,000		PepsiCo., Inc.		34,867,250
800,300		The Coca-Cola Co.		42,115,787
224,780		Wm. Wrigley Jr. Co.		16,647,769
				114,011,477
Forest – 0.6%
247,900		International Paper Co.		7,901,812
127,200		Kimberly-Clark Corp.		7,441,200
174,300		Weyerhaeuser Co.		8,072,269
				23,415,281
Heavy Electrical – 0.1%
59,200		Emerson Electric Co.		3,918,300

Shares		Description		Value
Common Stocks – continued
Home Products – 2.5%
358,800		Avon Products, Inc.		$    14,060,475
777,860		Colgate-Palmolive Co.		39,622,243
681,800		Energizer Holdings, Inc.*		13,465,550
266,800		The Gillette Co.		8,004,000
328,780		The Procter & Gamble Co.		20,322,714
				95,474,982
Hotels – 2.0%
1,077,000		Harrah’s Entertainment, Inc.*		30,559,875
592,940		Marriott International, Inc.		23,421,130
725,380		Starwood Hotels & Resorts Worldwide, Inc. Class B		23,212,160
				77,193,165
Industrial Parts – 0.7%
293,250		Tyco International Ltd.		16,715,250
130,540		United Technologies Corp.		8,150,591
				24,865,841
Information Services – 2.1%
314,500		Automatic Data Processing, Inc.		18,752,063
905,500		Cendant Corp.*		11,941,281
686,060		First Data Corp.		32,716,486
559,430		Valassis Communications, Inc.*		16,153,541
				79,563,371
Internet – 2.1%
416,790		America Online, Inc.*		24,434,314
125,300		DoubleClick, Inc.*		5,098,144
52,390		E.piphany, Inc.*		5,448,560
158,160		S1 Corp.*		2,757,915
126,765		VeriSign, Inc.*		25,210,389
147,600		Yahoo!, Inc.*		17,933,400
				80,882,722
Life Insurance – 1.2%
1,503,320		MetLife, Inc.*		36,549,468
269,800		Nationwide Financial Services, Inc.		10,758,275
				47,307,743
Media – 6.0%
1,102,000		A.H. Belo Corp.		21,075,750
1,483,100		AT&T Corp.-Liberty Media Corp.*		31,701,262
162,100		Cablevision Systems Corp.*		10,901,225
182,830		Clear Channel Communications, Inc.*		13,232,321
244,420		Comcast Corp.		9,104,645
256,190		EchoStar Communications Corp.*		12,489,262
185,300		Gannett Co., Inc.		10,492,613
780,277		General Motors Corp. Class H*		25,846,676

Shares		Description		Value
Common Stocks – continued
Media – (continued)
729,320		Infinity Broadcasting Corp.*		$    27,622,995
713,300		Time Warner, Inc.		60,987,150
189,800		Tribune Co.		6,773,488
				230,227,387
Medical Products – 0.7%
305,000		Johnson & Johnson		28,040,938
Mining – 0.2%
285,200		Alcoa, Inc.		9,482,900
Motor Vehicle – 0.7%
542,242		Ford Motor Co.		13,115,478
193,048		General Motors Corp.		13,935,653
				27,051,131
Oil Refining – 0.2%
184,100		Texaco, Inc.		9,481,150
Oil Services – 1.3%
569,900		Schlumberger Ltd.		48,619,594
Property Insurance – 2.1%
397,930		Ambac Financial Group, Inc.		25,716,226
621,031		American International Group, Inc.		55,349,388
				81,065,614
Publishing – 0.4%
392,800		The New York Times Co.		15,392,850
Restaurants – 0.7%
934,600		McDonald’s Corp.		27,921,175
Security/Asset Management – 1.1%
99,600		Merrill Lynch & Co., Inc.		14,442,000
721,300		The Charles Schwab Corp.		27,544,644
				41,986,644
Semiconductors – 6.8%
92,500		Analog Devices, Inc.*		9,296,250
152,200		Applied Materials, Inc.*		13,136,763
1,923,200		Intel Corp.		143,999,600
316,840		JDS Uniphase Corp.*		39,441,629
82,500		Maxim Integrated Products, Inc.*		7,234,219
33,800		PMC-Sierra, Inc.*		7,976,800
492,300		Texas Instruments, Inc.		32,953,331
93,800		Xilinx, Inc.*		8,336,475
				262,375,067
Specialty Retail – 2.3%
236,900		CVS Corp.		8,794,913
201,600		RadioShack Corp.		11,894,400

Shares		Description		Value
Common Stocks – (continued)
Specialty Retail – (continued)
666,150		The Home Depot, Inc.		$        32,016,834
1,059,420		Walgreen Co.		34,828,432
				87,534,579
Telephone – 3.2%
590,298		AT&T Corp.		18,594,387
1,007,600		SBC Communications, Inc.		42,067,300
763,718		Verizon Communications		33,317,198
831,750		WorldCom, Inc. *		30,358,875
				124,337,760
Tobacco – 0.8%
998,190		Philip Morris Cos., Inc.		29,571,379
Wireless – 1.5%
855,800		Crown Castle International Corp. *		29,685,563
339,900		Sprint Corp. (PCS Group) *		17,058,731
297,200		Vodafone Group PLC ADR		12,166,625
				58,910,919
TOTAL COMMON STOCKS
(Cost $2,480,410,243)				$    3,611,716,961

Principal Amount		Interest Rate			Maturity Date		Value
Repurchase Agreement – 5.8%
Joint Repurchase Agreement Account II Ù
$222,000,000		6.66	%		09/01/2000		$      222,000,000
TOTAL REPURCHASE AGREEMENT
(Cost $222,000,000)							$      222,000,000
TOTAL INVESTMENTS
(Cost $2,702,410,243)							$    3,833,716,961

*

Non-income producing security.

Ù

Joint repurchase agreement was entered into on August 31, 2000.

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

Assets:
Investment in securities, at value (identified cost $2,702,410,243)		$3,833,716,961
Cash (a)		4,013,696
Receivables:
Fund shares sold		9,481,995
Dividends and interest		3,511,394
Variation margin		836,000
Reimbursement from investment adviser		121,601
Other assets		45,898
Total assets		3,851,727,545
Liabilities:
Payables:
Amounts owed to affiliates		4,771,543
Fund shares repurchased		3,735,605
Accrued expenses and other liabilities		290,584
Total liabilities		8,797,732
Net Assets:
Paid-in capital		2,456,264,852
Accumulated net realized gain from investment and futures transactions		252,884,068
Net unrealized gain on investments and futures		1,133,780,893
NET ASSETS		$3,842,929,813
Net asset value, offering and redemption price per share: (b)
Class A		$28.95
Class B		$27.99
Class C		$27.94
Institutional		$29.19
Service		$28.81
Shares outstanding:
Class A		94,525,771
Class B		16,137,213
Class C		5,121,908
Institutional		17,059,630
Service		474,444
Total shares outstanding, $.001 par value (unlimited number of shares authorized)		133,318,966

(a)

Includes restricted cash of $4,000,000 relating to initial margin requirements and collateral for futures transactions.

(b)

Maximum public offering price per share (NAV per share multiplied by 1.0582) for Class A Shares is $30.63. 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.

Investment income:
Dividend (a)		$  27,242,338
Interest		6,268,033
Total income		33,510,371
Expenses:
Management fees		32,406,631
Distribution and Service fees (b)		11,010,364
Transfer Agent fees (c)		5,577,565
Registration fees		352,348
Custodian fees		318,438
Professional fees		64,244
Service Share fees		48,672
Trustee fees		8,729
Other		239,388
Total expenses		50,026,379
Less — expense reductions		(853,521	)
Net expenses		49,172,858
NET INVESTMENT LOSS		(15,662,487	)
Realized and unrealized gain on investment and futures transactions:
Net realized gain from:
Investment transactions		326,037,782
Futures transactions		7,257,241
Net change in unrealized gain on:
Investments		394,881,460
Futures		2,474,175
Net realized and unrealized gain on investment and futures transactions		730,650,658
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$714,988,171

(a)

Foreign taxes withheld on dividends were $138,007.

(b)

Class A, Class B and Class C had Distribution and Service fees of $5,843,877, $4,009,512 and $1,156,975, respectively.

(c)

Class A, Class B, Class C, Institutional Class and Service Class had Transfer Agent fees of $4,441,347, $761,807, $219,825, $150,692 and $3,894, respectively.

		For the Year Ended August 31, 2000			For the Seven Months Ended August 31, 1999			For the Year Ended January 31, 1999
From operations:
Net investment loss		$    (15,662,487	)		$      (9,313,696	)		$      (4,273,950	)
Net realized gain from investment and futures transactions		333,295,023			120,162,134			133,916,314
Net change in unrealized gain on investments		397,355,635			(19,552,612	)		392,953,579
Net increase in net assets resulting from operations		714,988,171			91,295,826			522,595,943
Distributions to shareholders:
From net realized gain on investment transactions
Class A Shares		(175,959,949	)		—			(59,433,653	)
Class B Shares		(31,007,673	)		—			(6,254,745	)
Class C Shares		(8,484,987	)		—			(1,535,180	)
Institutional Shares		(24,209,541	)		—			(949,782	)
Service Shares		(570,727	)		—			(97,173	)
Total distributions to shareholders		(240,232,877	)		—			(68,270,533	)
From share transactions:
Proceeds from sales of shares		1,067,676,367			705,992,404			958,527,625
Reinvestment of dividends and distributions		220,662,950			—			63,389,050
Cost of shares repurchased		(570,091,770	)		(481,582,281	)		(452,101,755	)
Net increase in net assets resulting from share transactions		718,247,547			224,410,123			569,814,920
TOTAL INCREASE		1,193,002,841			315,705,949			1,024,140,330
Net assets:
Beginning of period		2,649,926,972			2,334,221,023			1,310,080,693
End of period		$3,842,929,813			$2,649,926,972			$2,334,221,023
Accumulated net investment loss		$                  —			—			—

1.  ORGANIZATION

Goldman Sachs Trust (the “Trust”) is a Delaware business trust registered under the Investment Company Act of 1940 (as amended) as an open-end management investment company. The Trust includes the Goldman Sachs Capital Growth Fund (the “Fund”). The Fund is a diversified portfolio offering five classes of shares — Class A, Class B, Class C, Institutional and Service.

2.  SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies consistently followed by the Fund. The preparation of financial statements in conformity 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 include 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 foreign 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 occurs, 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 portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes where applicable. 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. Interest income is recorded on the basis of interest accrued, premium amortized and discount earned.

Net investment income (other than class specific expenses) and unrealized and realized gains or losses are allocated daily to each class of shares of the Fund based upon the relative proportion of net assets of each class.

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. Income and capital gain distributions, if any, are declared and paid annually.

The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with income tax rules. Therefore, the source of the Fund’s distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist.

At August 31, 2000, the aggregate cost of portfolio securities for federal income tax purposes is $2,702,579,305. Accordingly, the gross unrealized gain on investments was $1,275,440,219 and the gross unrealized loss on investments was $144,302,563 resulting in a net unrealized gain of $1,131,137,656.

2.  SIGNIFICANT ACCOUNTING POLICIES (continued)

D.  Expenses — Expenses incurred by the Trust that do not specifically relate to an individual fund of the Trust are allocated to the funds on a straight-line or pro rata basis depending upon the nature of the expense.

Class A, Class B and Class C 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.

E.  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 valuations, foreign currency and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates; and (ii) purchases and sales of foreign investments, income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions.

Net realized and unrealized gain (loss) on foreign currency transactions will represent: (i) foreign exchange gains and losses from the sale and holdings of foreign currencies; (ii) currency gains and losses between trade date and settlement date on investment securities transactions and forward exchange contracts; and (iii) gains and losses from the difference between amounts of dividends and interest recorded and the amounts actually received.

F.  Segregation Transactions — The Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these 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.

G.  Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the sellers agreement to repurchase them at a mutually agreed upon date and price.

During the term of a repurchase agreement, the value of the underlying securities, including accrued interest, is required to equal or exceed the value of the repurchase agreement. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian.

3.  AGREEMENTS

Pursuant to the Investment Management Agreement (the “Agreement”), Goldman Sachs Funds Management, L.P. (“GSFM” ), a unit of the Investment Management Division of Goldman, Sachs & Co. (“Goldman Sachs”), serves as the investment adviser to the Fund. Under the Agreement, the adviser, subject to the general supervision of the Trust’s Board of Trustees, manages the Fund’s portfolio. As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Fund’s business affairs, including providing facilities, the adviser is entitled to a fee, computed daily and payable monthly, at an annual rate equal to 1.00% of the average daily net assets of the Fund.

The adviser has voluntarily agreed to limit certain “Other Expenses” of the Fund (excluding Management fees, Distribution and Service fees, Transfer Agent fees, taxes, interest, brokerage, litigation, Service Share fees, indemnification costs and other extraordinary expenses) to the extent such expenses exceed, on an annual basis, 0.00% of the average daily net assets of the Fund. For the year ended August 31, 2000, Goldman Sachs has agreed to reimburse approximately $810,000.

In addition, the Fund has entered into certain offset arrangements with the custodian resulting in a reduction in the Fund’s expenses. For the year ended August 31, 2000, custody fees were reduced by approximately $44,000.

The Trust, on behalf of the Fund, has adopted Distribution and Service Plans. Under the Distribution and Service Plans, Goldman Sachs and/or authorized dealers are entitled to a monthly fee from the Fund for distribution and shareholder mainte 3.  AGREEMENTS (continued)

nance services equal, on an annual basis, to 0.25%, 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 Distribution Agreements. 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 $1,947,000 for the year ended August 31, 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 payable monthly at an annual rate as follows: 0.19% of the average daily net assets for Class A, Class B and Class C Shares and 0.04% of the average daily net assets for Institutional and Service Shares.

The Trust, on behalf of the Fund, has adopted a Service Plan. This Plan allows for Service Shares to compensate service organizations for providing varying 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 August 31, 2000, the amounts owed to affiliates were approximately $3,174,000, $1,057,000, and $541,000 for Management, Distribution and Service and Transfer Agent fees, respectively.

4.  PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds of sales or maturities of securities (excluding short-term investments and futures) for the year ended August 31, 2000, were $1,377,035,017 and $1,063,546,227, respectively. For the year ended August 31, 2000, Goldman Sachs earned approximately $106,000 of brokerage commissions from portfolio transactions including futures transactions executed on behalf of the Fund.

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” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Fund daily, depending on the daily fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Fund realizes a gain or loss which is reported in the Statement of Operations.

The use of futures contracts involve, to varying degrees, elements of market risk which may exceed the amounts recognized in the Statement of Assets and Liabilities. Changes in the value of the futures contract may not directly correlate with changes in the value of the underlying securities. This risk may decrease the effectiveness of the Fund’s hedging strategies and potentially result in a loss.

As of August 31, 2000, open futures contracts were as follows:

Type		Number of Contracts Long		Settlement Month		Market Value		Unrealized Gain
S&P 500 Index Futures		190		September 2000		$72,257,000		$2,474,175

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 liability 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 4.  PORTFOLIO SECURITIES TRANSACTIONS (continued)

originally received. When a written put option is exercised, the amount of the premium originally received will reduce the cost of the security which the Fund purchases upon exercise. There is a risk of loss from a change in value of such options which may exceed the related premiums received.

Upon the purchase of a call option or a protective put option by the Fund, the premium paid is recorded as an investment and subsequently marked-to-market 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, depending 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 purchased 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 August 31, 2000, there were no open written option contracts.

5.  LINE OF CREDIT FACILITY

Effective May 31, 2000, the Fund participates in a $350,000,000 committed, unsecured revolving line of credit facility. Prior thereto, the Fund participated 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 facilities also require a fee to be paid by the Fund based on the amount of the commitment. During the year ended August 31, 2000, the Fund did not have any borrowings under any of these facilities.

Goldman Sachs Capital Growth Fund — Tax Information (unaudited)

For the year ended August 31, 2000, 79.23% of the dividends paid from net investment company taxable income by the Capital Growth Fund, qualify for the dividends received deduction available to corporations.

Goldman Sachs Capital Growth Fund — Tax Information (unaudited)

Pursuant to Section 852 of the Internal Revenue Code, the Fund designated $207,043,137 as capital gain dividends paid during its year ended August 31, 2000.

6.  JOINT REPURCHASE AGREEMENT ACCOUNT

The Fund, together with other registered investment companies having management agreements with GSFM or its affiliates, transfers uninvested cash into joint accounts, the daily aggregate balance of which is invested in one or more repurchase agreements.

At August 31, 2000, the Fund had an undivided interest in the repurchase agreements in the joint account which equaled $222,000,000 in principal amount. At August 31, 2000, the following repurchase agreements held in this joint account were fully collateralized by Federal Agency obligations:

Repurchase Agreements		Principal Amount		Interest Rate			Maturity Date		Amortized Cost		Maturity Value
ABN/AMRO, Inc.		$  814,100,000		6.66	%		09/01/2000		$  814,100,000		$  814,250,608
Banc of America Securities LLC		900,000,000		6.67			09/01/2000		900,000,000		900,166,750
Barclays Capital, Inc.		500,000,000		6.67			09/01/2000		500,000,000		500,092,639
Bear Stearns Companies, Inc.		300,000,000		6.67			09/01/2000		300,000,000		300,055,583
Chase Securities, Inc.		450,000,000		6.67			09/01/2000		450,000,000		450,083,375
Donaldson, Lufkin & Jenrette, Inc.		1,000,000,000		6.67			09/01/2000		1,000,000,000		1,000,185,278
J.P. Morgan & Co., Inc.		800,000,000		6.65			09/01/2000		800,000,000		800,147,778
Morgan Stanley Dean Witter & Co.		750,000,000		6.65			09/01/2000		750,000,000		750,138,542
Morgan Stanley Dean Witter & Co.		300,000,000		6.60			09/01/2000		300,000,000		300,055,000
UBS Warburg LLC		800,000,000		6.65			09/01/2000		800,000,000		800,147,778
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT II									$6,614,100,000		$6,615,323,331

7.  CERTAIN RECLASSIFICATIONS

In accordance with AICPA Statement of Position 93-2, the Fund has reclassified $15,662,487 from accumulated net realized gain from investment transactions to accumulated net investment loss. These reclassifications have no impact on the net asset value of the Fund and are designed to present the Fund’s capital accounts on a tax basis.

8.  CHANGE IN INDEPENDENT ACCOUNTANTS

On October 26, 1999 the Board of Trustees of the Fund, upon the recommendation 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 fiscal year ended January 31, 1999, Arthur Andersen LLP’s audit reports contained no adverse opinion or disclaimer of opinion; nor were their reports qualified or modified as to uncertainty, audit scope, or accounting principles. Further, there were no disagreements between the Fund and Arthur Andersen LLP on accounting principles or practices, financial statement disclosure or audit scope or procedure, which if not resolved to the satisfaction of Arthur Andersen LLP would have caused them to make reference to the disagreement in their reports.

9.  SUMMARY OF SHARE TRANSACTIONS

Share activity is as follows:

		For the Year Ended August 31, 2000						For the Seven Months Ended August 31, 1999						For the Year Ended January 31, 1999
		Shares			Dollars			Shares			Dollars			Shares			Dollars
Class A Shares
Shares sold		24,015,612			$652,956,057			12,642,498			$314,261,490			32,045,496			$679,898,165
Reinvestments of dividends and distributions		6,216,899			162,385,895			—			—			2,523,862			55,320,129
Shares repurchased		(14,669,534	)		(395,793,370	)		(16,595,373	)		(416,956,361	)		(19,634,822	)		(411,065,361	)
		15,562,977			419,548,582			(3,952,875	)		(102,694,871	)		14,934,536			324,152,933
Class B Shares
Shares sold		4,183,831			108,757,719			4,426,589			107,188,155			8,217,516			174,195,041
Reinvestments of dividends and distributions		1,113,074			28,260,990			—			—			269,890			5,814,080
Shares repurchased		(2,693,312	)		(70,581,776	)		(922,539	)		(22,536,793	)		(692,115	)		(14,198,964	)
		2,603,593			66,436,933			3,504,050			84,651,362			7,795,291			165,810,157
Class C Shares
Shares sold		2,244,635			58,635,987			1,430,606			34,761,116			2,456,617			52,140,496
Reinvestments of dividends and distributions		290,772			7,371,075			—			—			62,802			1,350,138
Shares repurchased		(1,000,329	)		(26,074,413	)		(404,991	)		(9,881,726	)		(254,033	)		(5,309,819	)
		1,535,078			39,932,649			1,025,615			24,879,390			2,265,386			48,180,815
Institutional Shares
Shares sold		8,732,980			236,966,132			9,692,869			245,837,614			2,253,646			49,347,338
Reinvestments of dividends and distributions		845,809			22,210,942			—			—			36,717			807,532
Shares repurchased		(2,701,667	)		(72,457,337	)		(1,248,315	)		(31,382,873	)		(946,047	)		(21,160,240	)
		6,877,122			186,719,737			8,444,554			214,454,741			1,344,316			28,994,630
Service Shares
Shares sold		386,213			10,360,472			164,617			3,944,029			140,100			2,946,585
Reinvestments of dividends and distributions		16,688			434,048			—			—			4,439			97,171
Shares repurchased		(188,392	)		(5,184,874	)		(33,428	)		(824,528	)		(15,887	)		(367,371	)
		214,509			5,609,646			131,189			3,119,501			128,652			2,676,385
NET INCREASE		26,793,279			$718,247,547			9,152,533			$224,410,123			26,468,181			$569,814,920

				Income from investment operations						Distributions to shareholders
		Net asset value, beginning of period		Net investment income (loss)		Net realized and unrealized gains		Total income from investment operations		From net investment income		In excess of net investment income		From net realized gains		Total distributions
FOR THE YEAR ENDED AUGUST 31,
2000 - Class A Shares		$24.96		$(0.11)(c)		$6.29		$6.18		$    —		$    —		$(2.19)		$(2.19)
2000 - Class B Shares		24.37		(0.30) (c)		6.11		5.81		—		—		(2.19)		(2.19)
2000 - Class C Shares		24.33		(0.30) (c)		6.10		5.80		—		—		(2.19)		(2.19)
2000 - Institutional Shares		25.06		—		6.32		6.32		—		—		(2.19)		(2.19)
2000 - Service Shares		24.88		(0.13) (c)		6.25		6.12		—		—		(2.19)		(2.19)
FOR THE SEVEN MONTHS ENDED AUGUST 31,
1999 - Class A Shares		24.03		(0.08)		1.01		0.93		—		—		—		—
1999 - Class B Shares		23.57		(0.17)		0.97		0.80		—		—		—		—
1999 - Class C Shares		23.52		(0.16)		0.97		0.81		—		—		—		—
1999 - Institutional Shares		24.07		(0.02)		1.01		0.99		—		—		—		—
1999 - Service Shares		23.96		(0.08)		1.00		0.92		—		—		—		—
FOR THE YEARS ENDED JANUARY 31,
1999 - Class A Shares		18.48		(0.03)		6.35		6.32		—		—		(0.77)		(0.77)
1999 - Class B Shares		18.27		(0.12)		6.19		6.07		—		—		(0.77)		(0.77)
1999 - Class C Shares		18.24		(0.10)		6.15		6.05		—		—		(0.77)		(0.77)
1999 - Institutional Shares		18.45		0.01		6.38		6.39		—		—		(0.77)		(0.77)
1999 - Service Shares		18.46		(0.04)		6.31		6.27		—		—		(0.77)		(0.77)
1998 - Class A Shares		16.73		0.02		4.78		4.80		(0.01)		(0.01)		(3.03)		(3.05)
1998 - Class B Shares		16.67		0.02		4.61		4.63		—		—		(3.03)		(3.03)
1998 - Class C Shares (commenced August 15, 1997)		19.73		(0.02)		1.60		1.58		—		(0.04)		(3.03)		(3.07)
1998 - Institutional Shares (commenced August 15, 1997)		19.88		0.02		1.66		1.68		(0.01)		(0.07)		(3.03)		(3.11)
1998 - Service Shares (commenced August 15, 1997)		19.88		(0.01)		1.66		1.65		—		(0.04)		(3.03)		(3.07)
1997 - Class A Shares		14.91		0.10		3.56		3.66		(0.10)		(0.02)		(1.72)		(1.84)
1997 - Class B Shares (commenced May 1, 1996)		15.67		0.01		2.81		2.82		(0.01)		(0.09)		(1.72)		(1.82)
1996 - Class A Shares		13.67		0.12		3.93		4.05		(0.12)		—		(2.69)		(2.81)

(a)

Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the period and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Total returns for periods less than one full year are not annualized.

(b)

Annualized.

(c)

Calculated based on the average shares outstanding methodology.

													Ratios assuming no expense reductions
Net asset value, end of period		Total return (a)			Net assets at end of period (in 000s)		Ratio of net expenses to average net assets			Ratio of net investment income (loss) to average net assets			Ratio of expenses to average net assets			Ratio of net investment income (loss) to average net assets			Portfolio turnover rate
$28.95		25.70	%		$2,736,484		1.45	%		(0.41	)%		1.47	%		(0.44	)%		34.03	%
27.99		24.75			451,666		2.20			(1.16	)		2.22			(1.19	)		34.03
27.94		24.75			143,126		2.20			(1.16	)		2.22			(1.19	)		34.03
29.19		26.18			497,986		1.05			—			1.07			(0.03	)		34.03
28.81		25.53			13,668		1.55			(0.49	)		1.57			(0.52	)		34.03
24.96		3.87			1,971,097		1.44	(b)		(0.53	) (b)		1.47	(b)		(0.56	) (b)		18.16
24.37		3.39			329,870		2.19	(b)		(1.29	) (b)		2.22	(b)		(1.32	) (b)		18.16
24.33		3.44			87,284		2.19	(b)		(1.29	) (b)		2.22	(b)		(1.32	) (b)		18.16
25.06		4.11			255,210		1.04	(b)		(0.20	) (b)		1.07	(b)		(0.23	) (b)		18.16
24.88		3.84			6,466		1.54	(b)		(0.65	) (b)		1.57	(b)		(0.68	) (b)		18.16
24.03		34.58			1,992,716		1.42			(0.18	)		1.58			(0.34	)		30.17
23.57		33.60			236,369		2.19			(0.98	)		2.21			(1.00	)		30.17
23.52		33.55			60,234		2.19			(1.00	)		2.21			(1.02	)		30.17
24.07		35.02			41,817		1.07			0.11			1.09			0.09			30.17
23.96		34.34			3,085		1.57			(0.37	)		1.59			(0.39	)		30.17
18.48		29.71			1,256,595		1.40			0.08			1.65			(0.17	)		61.50
18.27		28.73			40,827		2.18			(0.77	)		2.18			(0.77	)		61.50
18.24		8.83			5,395		2.21	(b)		(0.86	) (b)		2.21	(b)		(0.86	) (b)		61.50
18.45		9.31			7,262		1.16	(b)		0.18	(b)		1.16	(b)		0.18	(b)		61.50
18.46		9.18			2		1.50	(b)		(0.16	) (b)		1.50	(b)		(0.16	) (b)		61.50
16.73		25.97			920,646		1.40			0.62			1.65			0.37			52.92
16.67		19.39			3,221		2.15	(b)		(0.39	) (b)		2.15	(b)		(0.39	) (b)		52.92
14.91		30.45			881,056		1.36			0.65			1.61			0.40			63.90

To the Shareholders and Board of Trustees of

Goldman Sachs Trust — Capital Growth Fund:

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Goldman Sachs Capital Growth Fund (“the Fund”), one of the portfolios constituting Goldman Sachs Trust, at August 31, 2000, the results of its operations, the changes in its net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at August 31, 2000 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion. The statements of changes in net assets of the Fund for the period ended August 31, 1999 and the year ended January 31, 1999 and the financial highlights for each of the periods ended on or before August 31, 1999 were audited by other independent accountants whose report dated October 8, 1999 expressed an unqualified opinion thereon.

PricewaterhouseCoopers LLP

Boston, Massachusetts

October 23, 2000

GOLDMAN SACHS FUND PROFILE

Goldman Sachs Capital Growth Fund

An Investment Idea for the Long Term

Historically, stocks have demonstrated greater potential to build wealth over the long term than most other types of investments.

Goldman Sachs Capital Growth Fund provides investors access to the benefits associated with equity investing. The Fund seeks long-term capital growth, primarily through a diversified portfolio of equity securities with long-term capital appreciation potential.

Target Your Needs

The Goldman Sachs Capital Growth 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.)

For More Information

To learn more about the Goldman Sachs Capital Growth 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.