<PAGE>
Goldman Sachs Funds
- --------------------------------------------------------------------------------
INTERNET TOLLKEEPER FUND(SM) Annual Report December 31, 1999
- --------------------------------------------------------------------------------
Long-term growth of capital through companies that are strategically positioned
to benefit from the expansion of the Internet.
[LOGO OF GOLDMAN SACHS]
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Fund Basics
as of December 31, 1999
Assets Under Management
$1.5 Billion
Number of Holdings
58
NASDAQ SYMBOLS
Class A Shares
GITAX
Class B Shares
GITBX
Class C Shares
GITCX
Institutional Shares
GITIX
Service Shares
GITSX
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
October 1, 1999- Fund Cumulative S&P 500 NASDAQ Goldman Sachs
December 31, 1999 Total Return (based on NAV)1 Index2 Composite Index2 Internet Index2
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 92.50% 14.88% 48.18% 56.13%
Class B 92.00 14.88 48.18 56.13
Class C 91.90 14.88 48.18 56.13
Institutional 92.50 14.88 48.18 56.13
Service 92.30 14.88 48.18 56.13
- -------------------------------------------------------------------------------------------------
</TABLE>
1 The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares. The Fund's performance reflects the
investment of dividends and other distributions.
2 The indexes are unmanaged and do not reflect any fees or expenses. In
addition, investors cannot invest directly in the indexes. The S&P 500 and
NASDAQ Composite Indexes have dividends reinvested.
- --------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period ended 12/31/99 Class A Class B Class C Institutional Service
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Since Inception3 81.95% 87.00% 90.90% 92.50% 92.30%
(10/1/99)
</TABLE>
3 The Standardized Total Returns are cumulative total returns (if the
performance period is one year or less) as of the most recent calendar
quarter-end. They assume reinvestment of all distributions at NAV. These
returns reflect a maximum initial sales charge of 5.5% for Class A shares
and the assumed deferred sales charge for Class B shares (5% maximum
declining to 0% after six years) and the assumed deferred sales charge for
Class C shares (1% if redeemed within 12 months of purchase). The public
offering price of the Class A shares on 12/31/99 was $20.37 and represents
the NAV per share divided by 1.0 minus the maximum sales charge of 5.5%.
Because Institutional and Service shares do not involve a sales charge,
such a charge is not applied to their respective Standardized Total
Returns.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS AS OF 12/31/99 4
- --------------------------------------------------------------------------------
Holding % of Total Net Assets Line of Business
- --------------------------------------------------------------------------------
VeriSign, Inc. 3.4% Information Services
America Online, Inc. 3.2 Information Services
CBS Corp. 3.1 Media
MCI WorldCom, Inc. 2.8 Telephone
EMC Corp. 2.6 Computer Hardware
Cisco Systems, Inc. 2.6 Computer Hardware
Yahoo!, Inc. 2.6 Information Services
AMFM, Inc. 2.6 Media
Liberty Digital, Inc. 2.5 Media
JDS Uniphase Corp. 2.5 Semiconductors
- --------------------------------------------------------------------------------
4 The top 10 holdings may not be representative of the Fund's future
investments.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers and expense limitations in effect. In their absence,
performance would be reduced.
. NOT FDIC INSURED
. May Lose Value
. No Bank Guarantee
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Market Overview
Dear Shareholder,
During the year ended December 31, 1999, we saw generally strong performance in
the equity markets.
Market Review
.U.S.-- In the U.S., the year began with an equity rally, albeit a
narrow one that included only select large companies and sectors. The
rally broadened and continued through to mid-year, fueled by investor
excitement over the explosive growth of the Internet. Briefly, worries
about inflationary pressures in the wake of strong economic reports
resulted in a strong sell-off. However, stocks rallied at year end as
investors responded to robust quarterly earnings news and low
inflation readings and employment costs.
.Europe -- In Europe, euphoria surrounding the launch of the Euro was
short-lived as markets retreated on news of rising U.S. interest rates
and sluggish production data in much of the region. Markets only
strengthened at the end of the year, boosted by, among other things,
strong merger and take-over activity and improved consumer confidence
and production levels. Investor interest in technology-oriented stocks
propelled the Telecommunications, Media and IT sectors to new highs.
.Japan -- Japan's market performed strongly over the year, due to the
stellar performance of a small number of stocks. Underpinning the
market's strength were expectations for improvement in corporate
fundamentals and the macro economy. Consolidation activity accelerated
in various industries, while a series of Telecom/Technology mutual
fund launches helped drive up the stock prices of a select group of
communications stocks.
Market Outlook
.U.S.-- Over the last decade, significant technological advances and a
generally peaceful world political environment have increased global
communications. We believe that this trend, combined with favorable
demographic trends, will benefit U.S. companies over the long term.
.Europe -- Growth continues to strengthen across the region in the
relative absence of inflation. Long-term prospects are enhanced by
ongoing structural reform in the pension and savings industry, which
we expect over time will lead to highly significant inflows of funds
into equity markets. In addition, there continues to be profound
structural change taking place in the corporate sector, which is now
truly cross-border in nature.
.Japan -- Corporate fundamentals are improving, as evidenced by the
fact that earnings are expected to bottom out by the fiscal year
ending March 2000. We believe it is possible that the growth rate will
accelerate next year. On a cautious note, some of the
information/technology stocks are becoming fairly expensive after a
year-long rally. Any significant investor concerns related to these
stocks could trigger a market correction.
We encourage you to maintain your long-term investment program, and
look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ David B. Ford
-------------------
David B. Ford
Co-Head, Goldman Sachs Asset Management
/s/ David W. Blood
-------------------
David W. Blood
Co-Head, Goldman Sachs Asset Management
January 31, 2000 1
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Performance Overview
Dear Shareholder,
On behalf of Goldman Sachs, it is a pleasure to welcome you as a
shareholder in the Goldman Sachs Internet Tollkeeper Fund(SM). In the
future, we will be sending you both annual and semi-annual reports that
describe your Fund's performance. This annual report covers the period from
October 1, 1999, the Fund's inception, through December 31, 1999.
Performance Review
The Goldman Sachs Internet Tollkeeper Fund posted outstanding
results over the period covered by this report, as a result of
successful stock selection and a market fueled by the strong
performance of technology and Internet-related stocks. Since
inception on October 1, 1999 through December 31, 1999, the
Fund's A, B, C, Institutional and Service Class shares have
generated cumulative total returns of 92.5%, 92.0%, 91.9%, 92.5%
and 92.3%, respectively. Of course, the past performance of the
Fund is no indication of its future results.
Portfolio Positioning
The Fund invests primarily in established growth businesses
within the Media, Telecommunications, Technology and Internet
sectors. Throughout the period under review, the Fund benefited
from strong performance across a broad base of sectors.
Portfolio Highlights
During the period, our Internet Tollkeeper investments benefited
from investor enthusiasm over the significant expansion of the
Internet. In addition, several companies in the Technology
sector, which provide Internet infrastructure, performed
strongly. Finally, our Media holdings, and in particular our
broadcasting holdings, posted significant advances. Many of these
not only have direct investments in Internet companies, but
should have higher advertising revenues as new dot.com companies
strive to establish brand name recognition through traditional
communication mediums.
CBS (3.1% of the portfolio as of 12/31/99) is an example of a
Media company that experienced strong revenue growth in
television, radio and billboard advertising due to dot.com
spending.
2
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Portfolio Outlook
While we neither make nor rely on economic forecasts to make
investment decisions, we are generally bullish on growth in
Technology, Media and Internet-related businesses. Throughout the
investment process, we perform in-depth fundamental research,
focusing on growth businesses that meet our investment criteria
and have quality management, free cash flow, recurring revenue
streams and often dominate markets with high barriers to entry.
Over the last decade, technological advances and the Internet
have enhanced global communication and provided significant
benefits to both consumers and businesses. Our approach to
capitalizing on these trends is to purchase "Internet
Tollkeepers," growth businesses that are strategically positioned
to benefit from expansion of the Internet over time. We believe
our Internet Tollkeeper strategy is a unique solution to
investing in Internet-related companies and has significant
potential for long-term capital appreciation.
We thank you for your investment and look forward to your
continued confidence.
Goldman Sachs Growth Equity Management Team
January 29, 2000
3
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
The Goldman Sachs Advantage(SM)
Founded in 1869, Goldman, Sachs & Co. is a premier financial services firm
traditionally known on Wall Street and around the world for its institutional
expertise.
Today, the firm's Asset Management Division provides individual investors the
opportunity to tap the resources of a global institutional powerhouse -- and
put this expertise to work in their individual portfolios.
What Sets Goldman Sachs Funds Apart?
1
Resources and Relationships
Our portfolio management teams are located on-site, around the world, in
New York, London, Tokyo and Singapore. Their understanding of local
economies, markets, industries and cultures helps deliver what many
investors want: access to global investment opportunities and consistent,
risk-adjusted performance.
2
In-Depth Research
Our team-driven investment processes encourage us to share information,
challenge ideas and form fresh opinions that shape investment portfolios.
Our growth, value and international equity teams complement this process by
performing rigorous, fundamental research and by conducting on-site visits
to hundreds of companies each year. Our quantitative CORE equity team
conducts its own research and capitalizes on the resources of Goldman
Sachs'Global Investment Research Department.
3
Risk Management
In this, our institutional heritage is clear. Institutions, as well as many
individual investors, often look to us to manage the risks of global
investing over time in different market environments.
To learn more about the Goldman Sachs Family of Funds, call your investment
professional today.
4
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Performance Summary
December 31, 1999
The following graph shows the value as of December 31, 1999, of a $10,000 in-
vestment made on October 1, 1999 (commencement of operations) in Class A
shares (with the maximum sales charge of 5.5%), Class B shares (applicable
contingent deferred sales charges of 5.0% declining to 0% after six years),
Class C shares (applicable contingent deferred sales charge of 1.0% if re-
deemed within twelve months), Institutional and Service shares (at NAV) of
the Goldman Sachs Internet Tollkeeper Fund. For comparative purposes, the
performance of the Fund's benchmarks (S&P 500 Index, NASDAQ Composite Index
and Goldman Sachs Internet Index) are shown. This performance data represents
past performance and should not be considered indicative of future perfor-
mance which will fluctuate with changes in market conditions. These perfor-
mance fluctuations will cause an investor's shares, when redeemed, to be
worth more or less than their original cost.
INTERNET TOLLKEEPER FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, OCTOBER 1, 1999 TO DECEMBER 31, 1999.
[GRAPH]
Period Begin
Class Class Class S&P NASDAQ Comp.
Date A B C Institutional Service Index Index
10/1/99 9,550 10,000 10,000 10,000 10,000 10,000 10,000
10/99 11,068 11,710 11,710 11,720 11,710 10,633 10,802
11/99 14,149 14,950 14,940 14,970 14,960 10,849 12,148
12/99 18,195 18,700 19,090 19,250 19,230 11,488 14,818
Goldman
Sachs
Internet
Index
Date (GIN)
10/1/99 10,000
11/99 10,207
11/99 12,596
12/99 15,613
<TABLE>
<CAPTION>
AGGREGATE TOTAL RETURN THROUGH DECEMBER 31, 1999 SINCE INCEPTION(A)
<S> <C>
CLASS A SHARES (COMMENCED OCTOBER 1, 1999)
Excluding sales charges 92.50%
Including sales charges 81.95%
----------------------------------------------------------------------
CLASS B SHARES (COMMENCED OCTOBER 1, 1999)
Excluding contingent deferred sales charges 92.00%
Including contingent deferred sales charges 87.00%
----------------------------------------------------------------------
CLASS C SHARES (COMMENCED OCTOBER 1, 1999)
Excluding contingent deferred sales charges 91.90%
Including contingent deferred sales charges 90.90%
----------------------------------------------------------------------
INSTITUTIONAL SHARES (COMMENCED OCTOBER 1, 1999) 92.50%
----------------------------------------------------------------------
SERVICE SHARES (COMMENCED OCTOBER 1, 1999) 92.30%
----------------------------------------------------------------------
</TABLE>
(a) Not annualized.
5
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Statement of Investments
December 31, 1999
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - 94.4%
<C> <S> <C>
COMPUTER HARDWARE - 10.4%
54,400 CacheFlow, Inc. * $ 7,109,400
364,400 Cisco Systems, Inc. * 39,036,350
363,300 EMC Corp. * 39,690,525
209,000 Nortel Networks Corp. 21,109,000
458,000 Sun Microsystems, Inc. * 35,466,375
47,100 Sycamore Networks, Inc. * 14,506,800
------------
156,918,450
--------------------------------------------------------
COMPUTER SOFTWARE - 14.6%
44,800 BroadVision, Inc. * 7,618,800
265,200 CheckFree Holdings Corp. * 27,713,400
114,200 Citrix Systems, Inc. * 14,046,600
55,800 E.piphany, Inc. * 12,450,375
132,800 Intertrust Technologies Corp. * 15,620,600
115,100 Interwoven, Inc. * 13,999,038
344,000 Intuit, Inc. * 20,618,500
258,400 Microsoft Corp. * 30,168,200
321,800 Oracle Corp. * 36,061,712
324,300 S1 Corp. * 25,335,938
54,300 Safeguard Scientifics, Inc. * 8,799,994
50,400 VERITAS Software Corp. * 7,213,500
------------
219,646,657
--------------------------------------------------------
CONSUMER SERVICES - 2.8%
278,100 Cendant Corp. * 7,387,031
697,300 First Data Corp. 34,385,606
------------
41,772,637
--------------------------------------------------------
INFORMATION SERVICES - 20.9%
630,700 America Online, Inc. * 47,578,431
590,400 At Home Corp. * 25,313,400
80,800 CMGI, Inc. * 22,371,500
87,400 DoubleClick, Inc. * 22,117,663
315,800 E-Stamp Corp. * 7,026,550
51,200 eBay, Inc. * 6,409,600
185,800 Expedia, Inc. * 6,503,000
265,600 GetThere.com, Inc. * 10,690,400
112,700 InfoSpace.com, Inc. * 24,117,800
104,800 Network Solutions, Inc. * 22,800,550
567,200 Preview Travel, Inc. * 29,565,300
269,900 VeriSign, Inc. * 51,534,031
90,200 Yahoo!, Inc. * 39,028,412
------------
315,056,637
--------------------------------------------------------
MEDIA - 29.3%
496,400 AMFM, Inc. * 38,843,300
606,900 AT&T Corp.-Liberty Media Group * 34,441,575
378,200 Cablevision Systems Corp. * 28,554,100
724,400 CBS Corp. * 46,316,325
753,700 Comcast Corp. 36,083,387
153,500 EchoStar Communications Corp.* 14,966,250
987,725 Infinity Broadcasting Corp.* 35,743,298
517,100 Liberty Digital, Inc.* 38,394,675
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
COMMON STOCKS - (CONTINUED)
<C> <S> <C>
MEDIA - (CONTINUED)
470,000 MediaOne Group, Inc.* $ 36,101,875
496,000 Time Warner, Inc. 35,929,000
528,000 TV Guide, Inc.* 22,704,000
314,100 UnitedGlobalCom, Inc. * 22,183,313
202,200 Univision Communications, Inc.* 20,662,313
423,800 Westwood One, Inc.* 32,208,800
--------------
443,132,211
-----------------------------------------------------------
SECURITY/ASSET MANAGEMENT - 0.9%
343,400 The Charles Schwab Corp. 13,177,975
-----------------------------------------------------------
SEMICONDUCTORS - 7.5%
76,500 E-Tek Dynamics, Inc.* 10,298,813
191,200 Intel Corp. 15,738,150
233,800 JDS Uniphase Corp.* 37,714,862
206,800 QUALCOMM, Inc. 36,422,650
139,000 Texas Instruments, Inc. 13,465,625
--------------
113,640,100
-----------------------------------------------------------
TELEPHONE - 2.8%
809,500 MCI WorldCom, Inc.* 42,954,094
-----------------------------------------------------------
WIRELESS - 5.2%
223,800 American Tower Corp. * 6,839,888
749,300 Crown Castle International Corp.* 24,071,262
297,800 Sprint Corp. (PCS Group) 30,524,500
347,300 Vodafone AirTouch PLC ADR 17,191,350
--------------
78,627,000
-----------------------------------------------------------
TOTAL COMMON STOCKS
(COST $1,079,532,677) $1,424,925,761
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
REPURCHASE AGREEMENT - 3.7%
<C> <S> <C> <C>
Joint Repurchase Agreement Account
$56,600,000 3.16% 01/03/2000 $ 56,600,000
----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $56,600,000) $ 56,600,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $1,136,132,677) $1,481,525,761
----------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Statement of Assets and Liabilities
December 31, 1999
ASSETS:
<TABLE>
<S> <C>
Investment in securities, at value (identified cost
$1,136,132,677) $1,481,525,761
Cash, at value 92,297
Receivables:
Investment securities sold 31,856,835
Dividends and interest, at value 21,484
Fund shares sold 95,204,521
Reimbursement from adviser 344,635
Other assets 53,523
----------------------------------------------------------------------------
TOTAL ASSETS 1,609,099,056
----------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 95,066,152
Fund shares repurchased 1,736,079
Amounts owed to affiliates 1,657,830
Accrued expenses and other liabilities 358,602
----------------------------------------------------------------------------
TOTAL LIABILITIES 98,818,663
----------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 1,137,907,372
Accumulated net investment income --
Accumulated net realized gain on investment transactions 26,979,937
Net unrealized gain on investments 345,393,084
----------------------------------------------------------------------------
NET ASSETS $1,510,280,393
----------------------------------------------------------------------------
Net asset value, offering and redemption price per share(a)
Class A $19.25
Class B $19.20
Class C $19.19
Institutional $19.25
Service $19.23
----------------------------------------------------------------------------
Shares outstanding:
Class A 29,900,792
Class B 27,974,226
Class C 17,150,331
Institutional 3,546,066
Service 2,764
----------------------------------------------------------------------------
Total shares outstanding, $.001 par value (unlimited number
of shares authorized) 78,574,179
----------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share (NAV per share multiplied by
1.0582) for Class A shares is $20.37. 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.
7
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Statement of Operations
For the Period Ended December 31, 1999(a)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends(b) $ 28,326
Interest 255,757
---------------------------------------------------------------------------
TOTAL INCOME 284,083
---------------------------------------------------------------------------
EXPENSES:
Management fees 1,347,758
Distribution and service fees(c) 894,623
Registration fees 356,305
Transfer agent fees(d) 246,740
Custodian fees 36,050
Professional fees 35,696
Organization expenses 32,844
Service share fees 39
Other 16,025
---------------------------------------------------------------------------
TOTAL EXPENSES 2,966,080
---------------------------------------------------------------------------
Less -- expenses reimbursed (390,663)
---------------------------------------------------------------------------
NET EXPENSES 2,575,417
---------------------------------------------------------------------------
NET INVESTMENT LOSS (2,291,334)
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS:
Net realized gain from investment transactions 28,576,273
Net change in unrealized gain on investments 345,393,084
---------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS: 373,969,357
---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $371,678,023
---------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations was October 1, 1999 for all classes.
(b) Taxes withheld on dividends were $453.
(c) Class A, Class B and Class C had distribution and service fees of
$130,302, $478,409 and $285,912, respectively.
(d) Class A, Class B, Class C, Institutional Class and Service Class had
transfer agent fees of $99,030, $90,898, $54,323, $2,486 and $3,
respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
DECEMBER 31, 1999(A)
<S> <C>
FROM OPERATIONS:
Net investment loss $ (2,291,334)
Net realized gain on investment transactions 28,576,273
Net change in unrealized gain on investments 345,393,084
----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 371,678,023
----------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Proceeds from sales of shares 1,167,201,530
Cost of shares repurchased (28,599,160)
----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM SHARE
TRANSACTIONS 1,138,602,370
----------------------------------------------------------------------------
TOTAL INCREASE 1,510,280,393
----------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
----------------------------------------------------------------------------
End of period $1,510,280,393
----------------------------------------------------------------------------
ACCUMULATED NET INVESTMENT INCOME $ --
----------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations was October 1, 1999 for all classes.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
9
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Notes to Financial Statements
December 31, 1999
1. ORGANIZATION
Goldman Sachs Trust (the "Trust") is a Delaware business trust registered un-
der the Investment Company Act of 1940 (as amended) as an open-end management
investment company. The Trust includes the Goldman Sachs Internet Tollkeeper
Fund (the "Fund"). The Fund is a diversified portfolio offering five classes
of shares -- Class A, Class B, Class C, Institutional and Service.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consist-
ently followed by the Fund. The preparation of financial statements in con-
formity with generally accepted accounting principles requires management to
make estimates and assumptions that may affect the reported amounts. Actual
results could differ from those estimates.
A. Investment Valuation -- Investments in securities traded on a U.S. or for-
eign securities exchange or the NASDAQ system are valued daily at their last
sale or closing price on the principal exchange on which they are traded. If
no sale occurs, securities are valued at the last bid price. Unlisted equity
and debt securities for which market quotations are available are valued at
the last sale price on valuation date, or if no sale occurs, at the last bid
price. Short-term debt obligations maturing in sixty days or less are valued
at amortized cost. Restricted securities, and other securities for which quo-
tations are not readily available, are valued at fair value using methods ap-
proved by the Trust's Board of Trustees.
B. Securities Transactions and Investment Income -- Securities transactions
are recorded as of the trade date. Realized gains and losses on sales of in-
vestments are calculated using the identified-cost basis. Dividend income 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 income in an
amount equal to the cash dividend. This amount is also used as an estimate of
the fair value of the stock received. Interest income is determined on the
basis of interest accrued.
C. Expenses -- Expenses incurred by the Trust which do not specifically re-
late to an individual fund of the Trust are allocated to the funds on a
straight-line or pro rata basis depending upon the nature of the expense.
Class A, Class B and Class C shareholders of the Fund bear all expenses and
fees relating to their respective Distribution and Service Plans. Each class
of shares separately bears its respective class-specific transfer agency
fees. Shareholders of Service shares bear all expenses and fees paid to serv-
ice organizations.
D. 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 December 31, 1999 the aggregate cost of portfolio securities for federal
income tax purposes is $1,136,607,189. Accordingly, the gross unrealized gain
on investments was $352,049,804 and the gross unrealized loss was
$(7,131,232) resulting in a net unrealized gain of $344,918,572.
3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a unit of the Investment Management
division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as investment ad-
viser pursuant to an Investment Management Agreement (the "Agreement"). Under
the Agreement, GSAM, subject to the general supervision of the Trust's Board
of Trustees, manages the Fund's portfolio. As compensation for the services
rendered pursuant to the Agreement, the assumption of the expenses related
thereto and administering the Fund's business affairs, including providing
facilities, GSAM 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.
10
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
3. AGREEMENTS (CONTINUED)
Goldman Sachs has voluntarily agreed to limit "Other Expenses" for the Fund
(excluding management fees, Service share fees, distribution and service
fees, transfer agent fees, litigation and indemnification costs, taxes, in-
terest, brokerage commissions, and extraordinary expenses) to the extent such
expenses exceed .06% of the average daily net assets of the Fund. For the pe-
riod ended December 31, 1999, the adviser reimbursed approximately $391,000.
Goldman Sachs serves as the Distributor of shares of the Fund pursuant to a
Distribution Agreement. Goldman Sachs may receive a portion of the Class A
sales load and Class B and Class C contingent deferred sales charges and has
advised the Fund that it retained approximately $2,076,000 for the period
ended December 31, 1999.
The Trust, on behalf of the Fund, has adopted Distribution and Service
plans. Under the Distribution and Service plans, Goldman Sachs and/or Autho-
rized Dealers are entitled to a monthly fee for distribution and shareholder
maintenance services equal, on an annual basis, to .25%, 1.00% and 1.00% of
the average daily net assets attributable to Class A, Class B and Class C
shares, respectively.
The Trust, on behalf of the Fund, has adopted a Service Plan. This Plan al-
lows for Service shares to compensate service organizations for providing va-
rying levels of account administration and shareholder liaison services to
their customers who are beneficial owners of such shares. The Service Plan
provides for compensation to the service organizations in an amount up to
.50% (on an annualized basis), of the average daily net asset value of the
Service shares.
Goldman Sachs also serves as the Transfer Agent of the Fund for a fee. Fees
charged for such transfer agency services are calculated daily and payable
monthly at an annual rate as follows: .19% of the average daily net assets
for Class A, Class B and Class C shares and .04% of the average daily net as-
sets for Institutional and Service shares.
At December 31, 1999, the Fund owed approximately $894,000, $599,000 and
$165,000 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) for the period ended December 31, 1999, were $1,142,685,278
and $91,728,874, respectively.
For the period ended December 31, 1999, Goldman Sachs earned approximately
$11,040 of brokerage commissions from portfolio transactions.
5. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying secu-
rities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping by a bank custodian.
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund, together with other registered investment companies having manage-
ment agreements with GSAM or its affiliates, transfers uninvested cash into
joint accounts, the daily aggregate balance of which is invested in one or
more repurchase agreements.
11
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Notes to Financial Statements (continued)
December 31, 1999
6. JOINT REPURCHASE AGREEMENT ACCOUNT (CONTINUED)
At December 31, 1999, the Fund had an undivided interest in the repurchase
agreement in the following joint account which equaled $56,600,000 in princi-
pal amount. At December 31, 1999, the following repurchase agreements held in
this joint account were fully collateralized by Federal Agency obligations.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
REPURCHASE AGREEMENTS AMOUNT RATE DATE COST
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANC OF AMERICA SECURITIES $700,000,000 3.10% 01/03/2000 $ 700,000,000
-----------------------------------------------------------------------------
CHASE MANHATTAN BANK 340,000,000 3.15 01/03/2000 340,000,000
-----------------------------------------------------------------------------
MORGAN STANLEY & CO. 501,500,000 3.25 01/03/2000 501,500,000
-----------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,541,500,000
-----------------------------------------------------------------------------
</TABLE>
7. 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 which has
not been utilized. During the period ended December 31, 1999, the Fund did
not have any borrowings under this facility.
8. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, the Fund has reclassified
$1,596,336 and $694,998 from accumulated net realized gain and paid-in capi-
tal, respectively, to accumulated undistributed net investment income. 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.
9. CHANGE IN INDEPENDENT AUDITOR
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 auditors to Ernst & Young
LLP. For the fiscal year ended December 31, 1999, Arthur Andersen LLP's audit
report contained no adverse opinion or disclaimer of opinion; nor was their
report 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 dis-
closure or audit scope or procedure, which if not resolved to the satisfac-
tion of Arthur Andersen LLP would have caused them to make reference to the
disagreement in their reports.
12
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
10. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1999(A)
-------------
SHARES DOLLARS
- -----------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES
Shares sold 30,877,360 $ 446,765,899
Shares repurchased (976,568) (15,181,934)
------------- -------------
29,900,792 431,583,965
- -----------------------------------------------------------------
CLASS B SHARES
Shares sold 28,306,620 $ 410,588,840
Shares repurchased (332,394) (5,542,861)
------------- -------------
27,974,226 405,045,979
- -----------------------------------------------------------------
CLASS C SHARES
Shares sold 17,453,014 $ 255,619,532
Shares repurchased (302,683) (4,835,240)
------------- -------------
17,150,331 250,784,292
- -----------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 3,805,337 $ 54,197,768
Shares repurchased (259,271) (3,039,125)
------------- -------------
3,546,066 51,158,643
- -----------------------------------------------------------------
SERVICE SHARES
Shares sold 2,764 $ 29,491
Shares repurchased -- --
------------- -------------
2,764 29,491
- -----------------------------------------------------------------
NET INCREASE 78,574,179 $ 1,138,602,370
- -----------------------------------------------------------------
</TABLE>
(a) Commencement of operations was October 1, 1999 for all classes.
13
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout The Period
<TABLE>
<CAPTION>
INCOME FROM
INVESTMENT OPERATIONS(A)
-----------------------------------
NET ASSET
VALUE, NET NET REALIZED NET INCREASE NET ASSET
BEGINNING INVESTMENT AND UNREALIZED IN NET ASSET VALUE, END
OF PERIOD LOSS(E) GAIN(E) VALUE OF PERIOD
FOR THE PERIOD ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C>
1999 - Class A Shares
(Commenced October 1) $10.00 $(0.05) $9.30 $9.25 $19.25
1999 - Class B Shares
(Commenced October 1) 10.00 (0.08) 9.28 9.20 19.20
1999 - Class C Shares
(Commenced October 1) 10.00 (0.08) 9.27 9.19 19.19
1999 - Institutional
Shares (Commenced Octo-
ber 1) 10.00 (0.03) 9.28 9.25 19.25
1999 - Service Shares
(Commenced October 1) 10.00 (0.05) 9.28 9.23 19.23
</TABLE>
- --------------------------------------------------------------------------------
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
(c) Annualized.
(d) Not annualized.
(e) Calculated based on the average shares outstanding methodology.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
14
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
<TABLE>
<CAPTION>
RATIOS ASSUMING
NO EXPENSE LIMITATIONS
----------------------------------------
NET ASSETS RATIO OF RATIO OF
AT END OF RATIO OF NET INVESTMENT RATIO OF NET INVESTMENT PORTFOLIO
TOTAL PERIOD NET EXPENSES TO LOSS TO EXPENSES TO LOSS TO TURNOVER
RETURN(B)(D) (IN 000S) AVERAGE NET ASSETS(C) AVERAGE NET ASSETS(C) AVERAGE NET ASSETS(C) AVERAGE NET ASSETS(C) RATE(D)
<S> <C> <C> <C> <C> <C> <C>
92.50% $575,535 1.50% (1.29)% 1.79% (1.58)% 16.16%
92.00 537,282 2.25 (2.04) 2.54 (2.33) 16.16
91.90 329,135 2.25 (2.05) 2.54 (2.34) 16.16
92.50 68,275 1.10 (0.88) 1.39 (1.17) 16.16
92.30 53 1.60 (1.35) 1.89 (1.64) 16.16
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Report of Independent Public Accountants
To the Shareholders and Board of Trustees of Goldman Sachs Trust -- Internet
Tollkeeper Fund:
We have audited the accompanying statement of assets and liabilities of the
Goldman Sachs Internet Tollkeeper Fund, one of the portfolios constituting
Goldman Sachs Trust (a Delaware Business Trust), including the statement of
investments, as of December 31, 1999, and the related statement of opera-
tions, the statement of changes in net assets and the financial highlights
for the period presented. These financial statements and the financial high-
lights are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and the financial high-
lights based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the finan-
cial statements and financial highlights. Our procedures included confirma-
tion of securities owned as of December 31, 1999 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting prin-
ciples used and significant estimates made by management, as well as evaluat-
ing the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights re-
ferred to above present fairly, in all material respects, the financial posi-
tion of Goldman Sachs Internet Tollkeeper Fund as of December 31, 1999, the
results of its operations, the changes in its net assets and the financial
highlights for the period presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 17, 2000
16
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs Internet Tollkeeper Fund(SM)
An Investment Idea for the Long Term
The Internet may be one of the most transforming events in global
economic history. It is changing the way consumers and businesses
communicate, transact commerce, and compete with each other -- and
will likely result in decades of wealth creation.
The Goldman Sachs Internet Tollkeeper Fund seeks to provide investors
with a unique solution to investing in the Internet. The Fund invests
in established growth companies that are strategically positioned to
benefit long-term from the growth of the Internet by providing
media/content, infrastructure/backbone, and services to Internet
companies and Internet users.
Target Your Needs
The Goldman Sachs Internet Tollkeeper Fund has a distinct investment
objective and a defined place on the risk/return spectrum. As your
investment objectives change, you can exchange shares within the
Goldman Sachs Family of Funds without an additional charge.* (Please
note: in general, greater returns are associated with greater risk.)
----------------------------------------------------------------------
[GRAPH]
INTERNATIONAL . Lower Risk/Return . Higher Risk/Return .Goldman Sachs
EQUITY Real Estate
Securities Fund
DOMESTIC ASSET ALLOCATION
EQUITY
SPECIALTY
FIXED
INCOME
MONEY
MARKET
For More Information
To learn more about the Goldman Sachs Internet Tollkeeper Fund and
other Goldman Sachs Funds, please call your investment professional
today.
* The exchange privilege is subject to termination and its terms are
subject to change. Goldman Sachs Internet Tollkeeper Fund is a service
mark of Goldman, Sachs & Co.
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASSET MANAGEMENT 32 OLD SLIP, 17TH FLOOR, NEW YORK, NEW YORK 10005
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TRUSTEES OFFICERS
Ashok N. Bakhru, Chairman Douglas C. Grip, President
David B. Ford Jesse H. Cole, Vice President
Douglas C. Grip James A. Fitzpatrick, Vice President
John P. McNulty Nancy L. Mucker, Vice President
Mary P. McPherson John M. Perlowski, Treasurer
Alan A. Shuch Adrien E. Deberghes, Jr.,
Assistant Treasurer
Jackson W. Smart, Jr. Philip V. Giuca, Jr.,
Assistant Treasurer
William H. Springer Michael J. Richman, Secretary
Richard P. Strubel Amy E. Belanger, Assistant Secretary
Howard B. Surloff, Assistant Secretary
Kaysie P. Uniacke, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN SACHS ASSET MANAGEMENT
Investment Adviser
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
</TABLE>
Visit our internet address: www.gs.com/funds
This material is not authorized for distribution to prospective investors unless
preceded or accompanied by a current Prospectus. Investors should read the
Prospectus carefully before investing or sending money.
Goldman, Sachs & Co. is the distributor of the Fund.
Goldman Sachs Internet Tollkeeper Fund is a service mark of Goldman, Sachs & Co.
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 Fund is subject to greater risk of loss as a result of adverse economic
business or other developments than if its investments were diversified across
different industry sectors. Securities of issuers held by the Fund may lack
sufficient market liquidity to enable the Fund to sell the securities at an
advantageous time or without a substantial drop in price.
The Fund invests in "Internet Tollkeeper" companies, and its net asset value may
fluctuate substantially over time. Because the Fund concentrates its investments
in Internet Tollkeeper companies, the Fund's performance may be substantially
different from the returns of the broader stock market and of "pure" Internet
funds. Past performance is not an indication of future returns and, depending on
the timing of your investment, you may lose money even if the Fund's past
returns have been positive.
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
investments 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 investments in IPOs on its total returns may not be as significant.
Copyright 2000 Goldman, Sachs & Co. All rights reserved. Date of first use:
February 29, 2000
TOLLAR/145k/2-000
