GOLDMAN SACHS TRUST
N-30D, 2000-11-09

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Goldman Sachs Funds

 

 

GOLDMAN   SACHS   LARGE   CAP   VALUE   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   LARGE  CAP   VALUE   FUND

Fund Basics
as of August 31, 2000

PERFORMANCE  REVIEW
December 15, 1999–August 31, 2000		Fund Total Return (without sales charge)1				Russell 1000 Value Index2
Class A		3.90%				4.32%
Class B		3.30				4.32
Class C		3.20				4.32
Institutional		4.00				4.32
Service		3.80				4.32
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 Russell 1000 Value Index (with dividends reinvested) is a market capitalization weighted index of the 1,000 highest ranking U.S. stocks with below-average growth orientation. The Index figures do not reflect any fees or expenses. In addition, investors cannot invest directly in the Index.
STANDARDIZED TOTAL  RETURNS3
For the period ended 6/30/00		Class A		Class B		Class C	Institutional		Service
Since Inception		–8.32%		–8.33%		–4.47%	–3.00%		–3.20%
(12/15/99)
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.
Total return figures represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’ s shares, when redeemed, may be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced.
TOP  10  HOLDINGS  AS  OF   8/31/00
Holding	% of Total Net Assets				Line of Business
Citigroup, Inc.		4.7	%		Banks
Exxon Mobil Corp.		4.3			Energy Resources
American International Group, Inc.		3.1			Property Insurance
XL Capital Ltd.		2.4			Property Insurance
Verizon Communications		2.2			Telephone
Morgan Stanley Dean Witter & Co.		1.9			Security/Asset Management
SBC Communications Inc.		1.9			Telephone
Johnson & Johnson		1.8			Medical Products
Anadarko Petroleum Corp.		1.8			Energy Resources
E.I. du Pont de Nemours & Co.		1.5			Chemicals
The top 10 holdings may not be representative of the Fund’s future investments.

 

 

 

 

GOLDMAN  SACHS  LARGE  CAP  VALUE  FUND

Performance Overview

Dear Shareholder:

We are pleased to report on the performance of the Goldman Sachs Large Cap Value Fund for the period from the Fund’s inception on December 15, 1999 through the period that ended August 31, 2000.

Performance Review

From the Fund’s inception through the period that ended August 31, 2000, its Class A, B, C, Institutional and Service share classes generated cumulative total returns, without sales charges, of 3.90%, 3.30%, 3.20%, 4.00%, and 3.80%, respectively. These returns compare to the Fund’s benchmark, the Russell 1000 Value Index, which generated a cumulative total return of 4.32%. However, for year-to-date through August 31, 2000, the Fund (Class A, B, C, Institutional and Service shares) remains comfortably ahead of its benchmark.
     This year continues to be a volatile environment for value stocks, although not as severe as the past two years. Even though large-cap value stocks posted positive absolute returns, particularly from March through May when the high valuations of many growth companies concerned investors, they still trail their growth counterparts in 2000. For the year-to-date that ended August 31, 2000 the Russell 1000 Value Index appreciated 2.4%, versus a 8.9% return for the Russell 1000 Growth Index.
     During the reporting period, we enhanced returns through stock selection across a variety of industries. Our investments in property/casualty insurance stocks were beneficial, and we believe many of our companies are well-positioned to benefit from gradual improvements in industry pricing conditions. Our financial stocks performed particularly well, despite our underweight position. Because of our concerns over deteriorating credit quality we focused on companies with large components of fee-based income, and relatively little exposure to lending activities. More challenging this year has been telecommunication companies, particularly Sprint Corp., Verizon Communications, SBC Communications and AT& T. We were underweight in this industry due to increasing levels of competition. We also moved to reduce our exposure during the period based on disappointments with actions by several company management groups.

Portfolio Composition

As we seek to add value through superior stock selection, we spend the majority of our efforts performing thorough, first-hand fundamental research. We rebuild, analyze and forecast the financial statements of companies, and test our assumptions through meetings and discussions with company management, competitors, customers and suppliers. We seek to buy well positioned businesses that sell at conservative valuation levels. We also understand that our Large Cap Value clients seek a fund that will be competitive with the Russell 1000 Value Index over a long-term investment horizon. As such, we employ careful risk management techniques and thoughtful portfolio construction based on that mandate.

Portfolio Highlights

Astute use of technology has become a key determinant of success across many industries. As such, our portfolios have focused on the companies in all industries that are the true beneficiaries of technological innovation. In particular, we seek firms that are using information-based tools and other resources to improve their cost positions, their distribution to customers, their product development, or their raw material costs. We also believe that many “old economy” companies will prove to be extremely rewarding investments as they use new tools to drive shareholder value, and increase their competitive distance from others in their respective industries.

 

GOLDMAN  SACHS  LARGE  CAP  VALUE  FUND

Citigroup Inc., Bank of New Yorkand Mellon Financial Corp. were among our financial stocks that have performed well in recent months. We believe that their effective use of technology to better serve a global customer base should enhance their competitive advantage over their peers. Additionally, we find these companies attractively valued relative to the extended market.
Southwest Airlines Co., the only airline in the Fund, was one of our top performers this year. We believe the company’s superior economic model sets it apart from its competition. We also find that its increasing use of the Internet for ticket bookings will continue to provide cost advantages for Southwest.
XL Capital Ltd. and American International Group, Inc. contributed strongly to Fund performance. The past several years have been a difficult environment for the insurance industry, as a flood of excess capital drove prices downward. Among property insurance stocks, XL Capital and AIG are not only attractively valued, but have some of the strongest balance sheets, cash flows and competitive positioning in the industry.
Portfolio Outlook We continue to believe that the current environment offers tremendous investment opportunity for large-cap value stocks. Improved absolute returns reflect not only a renewed interest in the extended market but, more importantly, a renaissance of value investing after a lengthy hiatus. In addition, several large-cap value companies were acquired, which helped to generate interest in the sector. It is not surprising that the Large Cap Value Fund benefited from several takeovers in its holdings during the year. We believe merger activity should continue to be a positive catalyst for the sector, as their current prices offer large corporate buyers a very favorable return on investment.

 

 

 

Signs of slower economic growth in the U.S. suggest a decreased likelihood of tightening by the Federal Reserve Board for the remainder of the year. Reasonable growth in the U.S., stronger demand growth outside of the U.S. (particularly in Asia), and a moderation in energy prices would be a combination of factors which would be quite beneficial to many of the traditional industrial and financial companies in the Fund.

As always, we appreciate your investment and look forward to earning your continued confidence in the years to come.

Goldman Sachs Large Cap Value Investment Team

New York, September 15, 2000

 

 

 

 

 

 

GOLDMAN   SACHS   LARGE   CAP   VALUE  FUND

The Goldman Sachs Advantage

Founded in 1869, Goldman, Sachs & Co. is a premier financial services firm traditionally known on Wall Street and around the world for its institutional expertise.

Today, the firm’s 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?

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 December 15, 1999 (commencement of operations) in Institutional Shares (at NAV) of the Goldman Sachs Large Cap Value Fund. For comparative purposes, the performance of the Fund’s benchmark, the Russell 1000 Value Index with dividend reinvestment (“Russell 1000 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 A, Class B, Class C and Service Shares may vary from Institutional due to differences in fees and loads.

Large Cap Value Fund’s Lifetime Performance

Growth of a $10,000 Investment, Distributions reinvested December 15, 1999 to August 31, 2000.

Aggregate Total Return through August 31, 2000		Since Inception (a)
Class A (commenced December 15, 1999)
Excluding sales charges		3.90%
Including sales charges		-1.80%
Class B (commenced December 15, 1999)
Excluding contingent deferred sales charges		3.30%
Including contingent deferred sales charges		-1.70%
Class C (commenced December 15, 1999)
Excluding contingent deferred sales charges		3.20%
Including contingent deferred sales charges		2.20%
Institutional Class (commenced December 15, 1999)		4.00%
Service Class (commenced December 15, 1999)		3.80%

(a)

Not annualized.

Shares			Description		Value
Common Stocks – 92.9%
Airlines – 0.7%
8,200			Southwest Airlines Co.		$        185,525
Alcohol – 0.6%
2,100			Anheuser-Busch Cos., Inc.		165,506
Apparel – 0.4%
2,300			Nike, Inc. Class B		90,994
Banks – 12.7%
4,900			Bank of America Corp.		262,456
4,600			Bank One Corp.		162,150
20,633			Citigroup, Inc.		1,204,471
3,200			FleetBoston Financial Corp.		136,600
1,150			J.P. Morgan & Co., Inc.		192,266
7,300			Mellon Financial Corp.		330,325
1,400			PNC Financial Services Group		82,512
4,850			The Bank of New York Co., Inc.		254,322
5,350			The Chase Manhattan Corp.		298,931
8,000			Wells Fargo & Co.		345,500
					3,269,533
Chemicals – 3.4%
8,500			E.I. du Pont de Nemours & Co.		381,438
3,250			Minnesota Mining & Manufacturing Co.		302,250
7,100			The Dow Chemicals Co.		185,931
					869,619
Computer Hardware – 2.5%
2,900			Apple Computer, Inc.*		176,719
6,600			Compaq Computer Corp.		224,812
1,400			Dell Computer Corp.*		61,075
1,400			Hewlett-Packard Co.		169,050
					631,656
Computer Software – 0.9%
1,850			International Business Machines, Inc.		244,200
Defense/Aerospace – 1.5%
3,500			Honeywell International, Inc.		134,969
3,200			Northrop Grumman Corp.		249,000
					383,969
Department Store – 0.8%
1,000			Costco Wholesale Corp.*		34,438
4,900			The May Department Stores Co.		112,394
1,400			Wal-Mart Stores, Inc.		66,412
					213,244
Drugs – 3.3%
700			Amgen, Inc.*		53,069
2,300			Bristol-Myers Squibb Co.		121,900
3,200			Merck & Co., Inc.		223,600
4,775			Pfizer, Inc.		206,519
1,866			Pharmacia Corp.		109,278
3,500			Schering-Plough Corp.		140,437
					854,803
Electrical Equipment – 1.1%
7,800			Motorola, Inc.		281,288

Shares			Description		Value
Common Stocks – (continued)
Electrical Utilities – 5.3%
6,000			DTE Energy Co.		$        208,500
3,200			Duke Energy Corp.		239,400
10,300			Entergy Corp.		313,506
5,300			FPL Group, Inc.		282,887
13,100			Niagara Mohawk Holdings, Inc.*		168,663
3,200			Unicom Corp.		146,200
					1,359,156
Energy Resources – 8.6%
6,860			Anadarko Petroleum Corp.		451,182
13,600			Exxon Mobil Corp.		1,110,100
4,000			Royal Dutch Petroleum Co. ADR		244,750
4,400			Unocal Corp.		146,850
9,800			USX-Marathon Group		268,888
					2,221,770
Entertainment – 3.2%
10,800			Carnival Corp.		215,325
9,600			The Walt Disney Co.		373,800
3,572			Viacom, Inc. Class B*		240,440
					829,565
Equity REIT – 0.3%
1,600			Cousins Properties, Inc.		65,800
Financial Services – 3.0%
2,800			American Express Co.		165,550
8,500			Federal Home Loan Mortgage Corp.		358,063
2,300			General Electric Co.		134,981
2,500			Household International, Inc.		120,000
					778,594
Food & Beverage – 1.2%
1,400			The Coca-Cola Co.		73,675
3,500			The Quaker Oats Co.		237,781
					311,456
Forest – 2.0%
4,200			Bowater, Inc.		215,775
9,496			International Paper Co.		302,685
					518,460
Grocery – 1.5%
3,700			Safeway, Inc.*		182,456
8,500			The Kroger Co.*		192,844
					375,300
Heavy Electrical – 0.8%
3,000			Emerson Electric Co.		198,563
Heavy Machinery – 1.3%
5,400			Crane Co.		135,675
6,000			Deere & Co.		197,625
					333,300
Home Products – 0.3%
3,700			Ralston Purina Group		83,713

Shares			Description		Value
Common Stocks – (continued)
Industrial Parts – 2.2%
4,000			Caterpillar, Inc.		$        147,000
3,500			Parker-Hannifin Corp.		121,844
1,900			Tyco International Ltd.		108,300
3,200			United Technologies Corp.		199,800
					576,944
Information Services – 0.5%
950			Electronic Data Systems Corp.		47,322
1,900			First Data Corp.		90,606
					137,928
Life Insurance – 0.8%
3,650			AFLAC, Inc.		197,100
Media – 3.0%
15,400			AT&T Corp.-Liberty Media Corp.*		329,175
5,200			Comcast Corp.*		193,700
1,400			EchoStar Communications Corp.*		68,250
900			The News Corp. Ltd. ADR		47,362
1,500			Time Warner, Inc.		128,250
					766,737
Medical Products – 3.5%
5,800			Abbott Laboratories		253,750
2,100			Baxter International, Inc.		174,825
5,100			Johnson & Johnson		468,881
					897,456
Mining – 0.9%
7,100			Alcoa, Inc.		236,075
Oil Refining – 0.4%
1,900			Texaco, Inc.		97,850
Oil Services – 2.6%
1,400			Baker Hughes, Inc.		51,187
1,400			Diamond Offshore Drilling, Inc.		62,737
4,300			Halliburton Co.		227,900
2,000			Santa Fe International Corp.		78,625
600			Schlumberger Ltd.		51,188
3,500			Transocean Sedco Forex, Inc.		209,125
					680,762
Property Insurance – 9.1%
5,700			Ambac Financial Group, Inc.		368,362
8,850			American International Group, Inc.		788,756
4,600			The Hartford Financial Services Group, Inc.		306,475
5,600			The St. Paul Cos., Inc.*		266,700
8,900			XL Capital Ltd.		613,544
					2,343,837
Railroads – 0.5%
4,200			Canadian National Railway Co.		123,638
Restaurants – 0.6%
5,600			McDonald’s Corp.		167,300

Shares			Description		Value
Common Stocks – (continued)
Security/Asset Management – 3.1%
2,100			Merrill Lynch & Co., Inc.		$        304,500
4,600			Morgan Stanley Dean Witter & Co.		494,787
					799,287
Semiconductors – 0.2%
700			Intel Corp.		52,413
Specialty Retail – 0.6%
3,200			CVS Corp.		118,800
500			RadioShack Corp.		29,500
					148,300
Telephone – 6.8%
4,200			BellSouth Corp.		156,713
900			NEXTLINK Communications, Inc.*		31,556
2,791			Qwest Communications International, Inc.*		144,085
11,700			SBC Communications, Inc.		488,475
3,900			Sprint Corp.		130,650
12,802			Verizon Communications		558,487
6,550			WorldCom, Inc.*		239,075
					1,749,041
Thrifts – 0.6%
4,600			Washington Mutual, Inc.		161,000
Tobacco – 1.1%
9,400			Philip Morris Cos., Inc.		278,474
Wireless – 1.0%
900			ALLTEL Corp.		45,506
3,200			Sprint Corp. (PCS Group)*		160,600
1,300			Vodafone Group PLC ADR		53,219
					259,325
TOTAL COMMON STOCKS
(Cost $22,588,162)					$  23,939,481

Principal Amount		Interest Rate			Maturity Date		Value
Repurchase Agreements – 7.0%
Joint Repurchase Agreement Account II _
$1,800,000		6.66	%		09/01/2000		$  1,800,000
TOTAL REPURCHASE AGREEMENTS
(Cost $1,800,000)							$  1,800,000
TOTAL INVESTMENTS
(Cost $24,388,162)							$25,739,481

*

Non-income producing security.

_

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 $24,388,162)		$25,739,481
Cash		95,012
Receivables:
Investment securities sold		368,928
Fund shares sold		141,578
Dividends and interest		47,957
Reimbursement from investment adviser		39,983
Other assets		252
Total assets		26,433,191
Liabilities:
Payables:
Investment securities purchased		520,412
Fund shares repurchased		83,895
Amounts owed to affiliates		20,523
Accrued expenses and other liabilities		38,368
Total liabilities		663,198
Net Assets:
Paid-in capital		24,705,481
Accumulated undistributed net investment income		131,769
Accumulated net realized loss on investment and futures transactions		(418,576	)
Net unrealized gain on investments		1,351,319
NET ASSETS		$25,769,993
Net asset value, offering and redemption price per share: (a)
Class A		$10.39
Class B		$10.33
Class C		$10.32
Institutional		$10.40
Service		$10.38
Shares outstanding:
Class A		690,929
Class B		153,219
Class C		82,372
Institutional		1,552,809
Service		150
Total shares outstanding, $.001 par value (unlimited number of shares authorized)		2,479,479

(a)

Maximum public offering price per share (NAV per share multiplied by 1.0582) for Class A Shares is $10.99. 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:
Dividends (b)		$    198,686
Interest		50,998
Total income		249,684
Expenses:
Registration fees		95,897
Management fees		87,323
Printing		60,402
Custodian fees		52,543
Professional fees		22,930
Distribution and Service fees (c)		14,153
Transfer Agent fees (d)		9,920
Trustee fees		6,431
Other		10,278
Total expenses		359,877
Less — expense reductions		(241,023	)
Net expenses		118,854
NET INVESTMENT INCOME		130,830
Realized and unrealized gain (loss) on investment and futures transactions:
Net realized loss from:
Investment transactions		(411,802	)
Futures transactions		(6,774	)
Net unrealized gain on investments		1,351,319
Net realized and unrealized gain on investment and futures transactions		932,743
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$1,063,573

(a)

Commencement of operations was December 15, 1999.

(b)

Foreign taxes withheld on dividends were $902.

(c)

Class A, Class B and Class C had Distribution and Service fees of $6,978, $4,532 and $2,643, respectively.

(d)

Class A, Class B, Class C, Institutional Class and Service Class had Transfer Agent fees of $5,304, $861, $502, $3,253 and $0, respectively.

From operations:
Net investment income		$      130,830
Net realized loss on investment and futures transactions		(418,576	)
Net unrealized gain on investments		1,351,319
Net increase in net assets resulting from operations		1,063,573
From share transactions:
Proceeds from sales of shares		27,589,665
Cost of shares repurchased		(2,883,245	)
Net increase in net assets resulting from share transactions		24,706,420
TOTAL INCREASE		25,769,993
Net assets:
Beginning of period		—
End of period		$25,769,993
Accumulated undistributed net investment income		$      131,769

(a)

Commencement date of operations was December 15, 1999 for all share classes.

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 Large Cap Value 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.

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.

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 gains 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 $24,611,396. Accordingly, the gross unrealized gain on investments was $2,366,093 and the gross unrealized loss on investments was $1,238,008 resulting in a net unrealized gain of $1,128,085.

D.  Expenses — Expenses incurred by the Trust which 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.  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 commit ments 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.

F.  Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s 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 Asset Management (“GSAM”), a unit of the Investment Management Division of Goldman, Sachs & Co. (“Goldman Sachs”), serves as the investment adviser to the Fund. Under the Agreement, GSAM, subject to the general supervision of the Trust’s Board of Trustees, manages the Fund’s portfolio. As compensation for the services rendered under the Agreement, the assumption of the expenses related thereto and 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 0.75% of the average daily net assets of the Fund.

The investment 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, 0.06% of the average daily net assets of the Fund. For the period ended August 31, 2000, the adviser reimbursed approximately $239,000. In addition, the Fund has entered into certain offset arrangements with the custodian resulting in a reduction in the Fund’s expenses. For the period ended August 31, 2000, custody fees were reduced by approximately $2,000.

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 maintenance 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 $46,000 for the period 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 $15,000, $4,000 and $2,000 for Management, Distribution and Service and Transfer Agent fees, respectively.

4.  PORTFOLIO SECURITIES TRANSACTIONS

The cost of purchases and proceeds of sales and maturities of securities (excluding short-term investments and futures) for the period ended August 31, 2000 were $33,457,986 and $10,458,022, respectively. For the period ended August 31, 2000, Goldman Sachs earned approximately $1,300 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, 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 contracts 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. At August 31, 2000, there were no open futures contracts.

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 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.  JOINT REPURCHASE AGREEMENT ACCOUNT

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

At August 31, 2000, the Fund had an undivided interest in the repurchase agreements in the joint account which equaled $1,800,000 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

6.  LINE OF CREDIT FACILITY

The Fund participates in a $350,000,000 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. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the Federal Funds rate. The committed facility also requires a fee to be paid by the Fund based on the amount of the commitment. During the period ended August 31, 2000, the Fund did not have any borrowings under this facility.

7.  SUMMARY OF SHARE TRANSACTIONS

Share activity is as follows:

		For the Period Ended August 31, 2000(a)
		Shares			Dollars
Class A Shares
Shares sold		923,249			$  9,131,437
Shares repurchased		(232,320	)		(2,326,070	)
		690,929			6,805,367
Class B Shares
Shares sold		162,981			1,619,970
Shares repurchased		(9,762	)		(97,213	)
		153,219			1,522,757
Class C Shares
Shares sold		108,974			1,083,827
Shares repurchased		(26,602	)		(248,355	)
		82,372			835,472
Institutional Shares
Shares sold		1,573,915			15,752,931
Shares repurchased		(21,106	)		(211,607	)
		1,552,809			15,541,324
Service Shares
Shares sold		150			1,500
		150			1,500
NET INCREASE		2,479,479			$24,706,420

(a)

Commencement date of operations was December 15, 1999 for all share classes.

8.  CERTAIN RECLASSIFICATIONS

In accordance with AICPA Statement of Position 93-2 the Fund has reclassified $939 from paid-in capital to accumulated undistributed net investment income. This reclassification has no impact on the net asset value of the Fund and is designed to present the Fund’s capital accounts on a tax basis. Reclassifications result primarily from the difference in the tax treatment of foreign currency, net operating losses and organization costs.

				Income from investment operations
		Net asset value at beginning of period		Net investment income (c)		Net realized and unrealized gain		Total from investment operations
FOR THE PERIOD ENDED AUGUST 31,
2000 - Class A Shares (commenced Dec. 15, 1999)		$10.00		$0.06		$0.33		$0.39
2000 - Class B Shares (commenced Dec. 15, 1999)		10.00		—		0.33		0.33
2000 - Class C Shares (commenced Dec. 15, 1999)		10.00		0.01		0.31		0.32
2000 - Institutional Shares (commenced Dec. 15, 1999)		10.00		0.09		0.31		0.40
2000 - Service Shares (commenced Dec. 15, 1999)		10.00		0.07		0.31		0.38

(a)

Assumes investment at the NAV at the beginning of the period, reinvestment of all dividends and distributions, a complete redemption of the investment at the NAV 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 (b)		Ratio of net investment income to average net assets (b)			Ratio of expenses to average net assets (b)			Ratio of net investment income to average net assets (b)			Portfolio turnover rate
$10.39		3.90%		$7,181		1.25%		0.84	%		3.30	%		(1.21	)%		66.79	%
10.33		3.30		1,582		2.00		0.06			4.05			(1.99	)		66.79
10.32		3.20		850		2.00		0.15			4.05			(1.90	)		66.79
10.40		4.00		16,155		0.85		1.31			2.90			(0.74	)		66.79
10.38		3.80		2		1.35		0.95			3.40			(1.10	)		66.79

To the Shareholders and Board of Trustees of

Goldman Sachs Trust — Large Cap Value Fund:

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statement of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Goldman Sachs Large Cap Value 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 period 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.

PricewaterhouseCoopers LLP

Boston, Massachusetts

October 23, 2000

GOLDMAN SACHS FUND PROFILE

Goldman Sachs Large Cap Value Fund

An Investment Idea for the Long Term

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

Goldman Sachs Large Cap Value Fund provides investors access to the benefits associated with equity investing. The Fund seeks to invest in quality businesses selling at conservative valuations, as we believe that these investments offer substantial upside potential.

Target Your Needs

The Goldman Sachs Large Cap Value Fund has a distinct investment objective and a defined place on the risk/return spectrum. As your investment objectives change, you can exchange shares within the Goldman Sachs Funds family without an additional charge.* (Please note: in general, greater returns are associated with greater risk.)

For More Information

To learn more about the Goldman Sachs Large Cap Value Fund and other Goldman Sachs Funds, call your investment professional today.

*The exchange privilege is subject to termination and its terms are subject to change.

 

GOLDMAN  SACHS  ASSET  MANAGEMENT     32  OLD  SLIP,  17TH  FLOOR ,  NEW  YORK ,  NEW  YORK  10005

 

TRUSTEES		O F F I C E R S
Ashok N. Bakhru, Chairman		Douglas C. Grip, President
David B. Ford		Jesse H. Cole, Vice President
Douglas C. Grip		James A. Fitzpatrick, Vice President
Patrick T. Harker		John M. Perlowski, Treasurer
John P. McNulty		Peter W. Fortner, Assistant Treasurer
Mary P. McPherson		Philip V. Giuca, Jr., Assistant Treasurer
Alan A. Shuch		Howard B. Surloff, Secretary
William H. Springer		Amy E. Belanger, Assistant Secretary
Richard P. Strubel		Valerie A. Zondorak, Assistant Secretary
GOLDMAN, SACHS & CO.		GOLDMAN SACHS ASSET MANAGEMENT
Distributor and Transfer Agent		Investment Adviser

 

Visit our internet address: www.gs.com/funds

 

This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Investors should read the Prospectus carefully before investing or sending money.

The Large Cap Value Fund’s foreign investments may be more volatile than an investment in U.S. securities and are subject to the risks of currency fluctuations and political developments.

Goldman, Sachs & Co. is the distributor of the Fund.

 

Copyright 2000 Goldman, Sachs & Co. All rights reserved. Date of first use: October 30, 2000 / 00-1383

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