<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to have the opportunity to review the performance and discuss
the holdings of the Goldman Sachs Equity Portfolios for the six-month period
ended July 31, 1995. There is good news to report as performance of the U.S.
stock market and selected markets elsewhere in the world improved dramatically
over 1994.
U.S. Market Overview:
Relatively Stable Interest Rates, Strong Earnings and Low Inflation Propelled
Stocks Higher
In marked contrast to 1994, thus far in 1995 the U.S. stock market experienced
one of the most vigorous rallies since the bull market began in 1991. Many
investors returned to the stock market, as interest rates stabilized in the U.S.
after the seventh tightening by the U.S. Federal Reserve Board on February 1 and
then declined. The market set new records each month, with enthusiasm sustained
by strong corporate earnings for many large U.S. companies during the first
quarter of 1995, and healthy earnings growth for the second quarter as well.
Meanwhile, inflation, as measured by the Consumer Price Index (CPI), increased a
small amount to an estimated annualized rate of 3.2% from December through June
compared with 2.6% for 1994.
Earnings growth for the second half of the year is expected to be considerably
more subdued as the economy has slowed markedly during the past few months.
Consensus appears to be that the hoped-for "soft landing" (slower growth with
low inflation) will materialize.
During the first few months of the period under review, larger U.S. companies
outperformed smaller companies, with the technology sector leading the way for
most of the period. Financial service companies and companies that realized
substantial revenues from exports also did well. During the second quarter,
smaller stocks caught up. From February 1 through July 31, the S&P 500 stock
index (with income reinvested), often used as a broad indicator of large U.S.
stocks, rose 21.1%. The Russell 2000 (with income reinvested), a leading
benchmark consisting of smaller U.S. companies, increased 22.6% for the same
period.
Despite Generally Slower Economic Growth, the Fed Remained Neutral Until July
Slower economic growth coupled with relatively contained inflation
characterized the period and fueled a major bond rally that gained momentum in
late April and early May. Key economic indicators showed a relatively sharp
slowdown during much of the period under review, with some signs of growth
emerging in July.
. Real Gross Domestic Product (GDP) increased a relatively modest 2.7% during
the first quarter of 1995 (compared with 5.1% for the fourth quarter of 1994)
and, based on revised estimates, was 1.1% for the second quarter.
. Auto sales were soft, as were orders for durable goods, which fell 4.6% in
April, recovered only 2.7% in May, then declined 2.1% in July.
. Factory output slowed after a significant buildup in inventories and very high
plant capacity utilization during the fourth quarter of 1994.
- --------------------------------------------------------------------------------
Table of Contents
Introduction/Market Overview.............................................. 1
Goldman Sachs Balanced Fund............................................... 4
Goldman Sachs Select Equity Fund.......................................... 10
Goldman Sachs Growth and Income........................................... 15
Goldman Sachs Capital Growth Fund......................................... 19
Goldman Sachs Small Cap Equity Fund....................................... 23
Goldman Sachs International Equity Fund................................... 27
Goldman Sachs Asia Growth Fund............................................ 32
Financial Statements...................................................... 38
Notes to Financial Statements............................................. 46
Financial Highlights...................................................... 53
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
. Sales and starts of single-family homes declined from January through April,
each reaching its lowest level in two years. Lower interest rates caused the
trend to reverse sharply in May, with sales of new and existing homes rising
approximately 20% and 4.7%, respectively. In July, housing starts rose 6.7%,
their biggest gain in 16 months.
After February 1, the U.S. Federal Reserve remained resolutely neutral until
July 6, when it decreased the Federal Funds rate (the rate banks charge one
another for overnight borrowing) by 25 basis points to 5.75%, in an effort to
stem the economic slowdown. The stock market responded favorably.
Resumption of Growth by Year End Probable
Opinion is divided regarding exactly when the economy will resume its ascent,
with some expecting a turnaround by year end and others believing that some
sectors of the economy have already begun to rebound. The factors that could
contribute to this positive outlook include the recent decrease in short-term
rates by the Fed, the decrease in long-term interest rates that could eventually
strengthen home building and other interest rate-sensitive sectors, the
potential for U.S. export growth to continue and indications that a stimulative
fiscal policy may be adopted based on the continuing discussions in Congress
regarding tax reform.
After Declining to Post-World War II Lows, the Dollar Stabilized
Starting in February 1995, the dollar weakened dramatically, stemming from the
general economic slowdown, the U.S. trade imbalance with Japan and concern
regarding the devaluation of the Mexican peso. From January through April, the
dollar fell approximately 18% against the yen and 12% against the deutsche mark,
hitting postwar lows during that period. In May, the dollar recovered a small
portion of its losses, held its own in June and then rallied 4% against the yen
in July, making the second half of the period under review considerably more
stable than the first. The positive side of the weaker dollar was that it
brought good news for U.S. exports, which were relatively cheap in terms of most
foreign currencies. In mid-August, the central banks of the U.S., Japan and
Germany intervened to support the dollar.
The International Market Environment: A Mixed Picture With a Stronger Finish
for Some Markets
In the first half of 1995, international equity markets started in the
doldrums but, in some cases, ended markedly improved. The Japanese market
declined the most significantly, then rallied briefly in July.
. European stock markets were less volatile during the first half of 1995
compared with a weak ending for 1994. From mid-March forward, a sustained
rally in Europe favored some stock markets more than others. In general, the
European economic recovery has proceeded at a moderate pace, with inflation
low and unemployment remaining high. Political uncertainties, stemming from
such factors as elections in France, the struggle for leadership in Britain
and large budget deficits that spurred fears of inflation in Italy and Sweden,
caused investors to seek what were perceived to be safe havens in deutsche
marks and Swiss francs based on Germany and Switzerland's political and
economic stability.
. In Japan, the economy was hindered by the strong yen that contributed to a
decline in exports. In addition, significant costs and concerns resulting from
the devastating earthquake in Kobe took a heavy toll. Domestic consumption
declined and the trend for Japanese companies to outsource production to less
expensive markets in Southeast Asia increased. During the first half of the
year, the Nikkei 300 declined by approximately 22% amid significant downward
revisions in earnings growth based on the assumption that the yen would remain
strong, then rose 12% in July.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
. Asian stock markets experienced mixed performance and low volume, despite
stable economic fundamentals in the region. After a violent sell-off in Asia
during January, caused in part by the "spillover" effect of the devaluation of
the Mexican peso and weakness in Latin American markets, February saw most
Asian markets rebound strongly. March and April were mixed followed by another
strong rally in May, which was fueled by foreign capital inflows to the
region. In addition, the positive results of the U.S. equity market encouraged
increased investor interest in the relatively inexpensive markets of Asia.
Profit taking in June affected markets throughout the region, while July
brought lower volatility and positive results.
We are pleased to note that most of The Goldman Sachs Equity Portfolios did
well during this period, due to our emphasis on extensive fundamental research
and successful stock selection by our portfolio managers, as well as the
favorable environment for equities. As in the past, we remind you to take a
long-term point of view with regard to your investments in The Goldman Sachs
Equity Portfolios. While our goal is to deliver consistent performance over
time, equity markets can be volatile and it is unlikely that the second half of
1995 will match the powerful stock market rally that marked the first half of
the year. As always, we appreciate your support and will continue to do our best
to serve your investment needs.
Sincerely,
/s/ David B. Ford
David B. Ford
Chairman, Chief Executive Officer
Goldman Sachs Asset Management
August 31, 1995
- --------------------------------------------------------------------------------
3
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund
- --------------------------------------------------------------------------------
Objective and Investment Approach
The Goldman Sachs Balanced Fund seeks to provide investors with a combination
of long-term growth of capital and current income by investing in a diversified
portfolio that includes both equity and fixed income securities. Under normal
market conditions, the fund is expected to maintain an asset mix of
approximately 50% to 70% in stocks and other equity securities, with the
remainder (at minimum 25%) in bonds and other fixed income securities.
Currently, the fund's "neutral" weighting is expected to be approximately 55%
stocks and 45% bonds. However, the fund's portfolio management team will review
the fund's asset mix on a regular basis and adjust it to reflect changes in the
economic environment. The fund will focus primarily on U.S. common stocks, other
equity securities and fixed income securities.
Stocks are selected using a value style, identifying those judged to be
inexpensive relative to their expected long-term earnings and ability to pay
dividends. We also consider the degree to which a company's management is
committed to increasing value for shareholders.
In the fixed income portion of the portfolio, our investment approach is to
actively manage the portfolio within a risk-controlled framework. We de-
emphasize interest rate anticipation by monitoring the portfolio's duration to
keep it within a narrow range of a target, and instead focus on seeking to add
value through sector selection, security selection and yield curve strategies.
Performance Review: The Fund's Slight Overweighting in Equities Aids Results
For the six-month period ended July 31, 1995, the Goldman Sachs Balanced Fund
had a total return of 16.96% based on net asset value compared with a return of
16.14% for its benchmark, a combination of the S&P 500 stock index (weighted at
60%) and the Lehman Brothers Aggregate Bond Index (weighted at 40%).
The fund's outperformance relative to the benchmark reflects a combination of
its slight overweighting in equities during the period and its successful stock
selection. In the declining interest rate environment, the fixed income portion
of the fund's portfolio also contributed to its positive return.
Portfolio Composition: Successful Stock Selection in Diverse Sectors
As of July 31, the fund's asset mix based on net assets was 58% in equities,
34% in fixed income investments and 14% in cash equivalents.
. Equities: The fund's top-performing stocks during the period included
several well-known names in the defense sector: McDonnell Douglas Corp.,
Northrop Grumman Corp. and Lockheed-Martin. Investors are beginning to recognize
the extent to which these companies can generate and benefit from their
significant cash flows. For example, McDonnell Douglas is using some of its
excess cash for a stock repurchase program and Northrop is expected to begin
paying down some of its debt.
The fund also benefited from its investments in paper stocks including Stone
Container Corp., Georgia-Pacific Corp. and Champion International Corp., all of
which reported stronger earnings than expected. Even as the U.S. economy slows,
demand for paper products is expected to continue to grow and worldwide
production capacity is still somewhat muted.
Brunswick Corp. (marine engines and pleasure boats) and Outboard Marine Corp.
experienced slow early spring sales, which led to stock price declines. Since
we believed that the long-term earnings power of both companies was
underappreciated by the market, we used this as an opportunity to add to our
positions. During the summer, sales at both companies have rebounded and so
have the stocks. Another weak performer, Valassis Communications (a publisher of
inserts and coupons for newspapers), was hurt by the company's announcement that
its return to previous levels of profitability would take longer than expected.
However, we believe opportunities exist for Valassis to improve its margins over
time.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Equity Holdings as of July 31, 1995
<TABLE>
<CAPTION>
Percentage
of Equity
Company Line of Business Holdings
<S> <C> <C>
McDonnell Douglas Corp. Aerospace/Defense 4.2%
Stone Container Corp. Pulp and Paper Products 4.0%
Ford Motor Co. Automotive Products 3.5%
RJR Nabisco Holdings Corp. Tobacco and Food Products 3.4%
Georgia-Pacific Corp. Paper and Forest Products 3.3%
Chiquita Brands International, Inc. Grocery Products 3.1%
Consolidated Freightways, Inc. Trucking 2.9%
J.C. Penney Co., Inc. Discount Retailing 2.8%
Brunswick Corp. Marine Engines and 2.6%
Pleasure Boats
Philip Morris Cos., Inc. Tobacco and Food Products 2.6%
</TABLE>
. Fixed Income: During the period, the fixed income portion of the portfolio
was gradually diversified. As of July 31, the fund's fixed income investments
included U.S. Treasury securities (27.3%), corporate bonds (20.8%), mortgage-
backed securities (10.7%), asset-backed securities (6.4%), government agency
debt (5.9%) and cash equivalents (28.9%). Despite an increase in prepayment
risk, we like the mortgage sector, which we believe is attractively valued. We
also have a positive view of corporate securities, which we expect to perform
well as the risk of recession declines. We hold asset-backed securities and
government agency debt because they provide attractive yields over Treasuries.
Outlook
If economic growth resumes later in the year and inflation remains low, both
the stock and bond markets should do well. Currently, we favor equities over
bonds and will allocate the portfolio accordingly. However, we will continue to
carefully monitor the fund's asset allocation and make adjustments as economic
and market conditions change. We believe that our extensive fundamental research
will uncover underpriced stocks and attractive fixed income opportunities that
will help in seeking to achieve the fund's investment objectives over time.
/s/ Mitchell E. Cantor /s/ Ronald E. Gutfleish
Mitchell E. Cantor Ronald E. Gutfleish
Portfolio Managers, Equities
/s/ Jonathan A. Beinner /s/ Theodore T. Sotir
Jonathan A. Beinner Theodore T. Sotir
Portfolio Managers, Fixed Income
August 31, 1995
- --------------------------------------------------------------------------------
5
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
<S> <C> <C>
Common Stocks--58.0%
Aerospace/Defense--4.4%
3,204 Lockheed Martin Corp. $ 201,452
8,900 McDonnell Douglas Corp. 735,363
5,700 Northrop Grumman Corp. 324,900
1,500 Thiokol Corp. 49,875
- --------------------------------------------------------------------------------
1,311,590
- --------------------------------------------------------------------------------
Auto Parts-Original Equipment--1.4%
5,900 Goodyear Tire & Rubber Co. 255,913
5,800 Lear Seating Corp.* 156,600
- --------------------------------------------------------------------------------
412,513
- --------------------------------------------------------------------------------
Automotive Products--2.6%
20,900 Ford Motor Co. 603,488
3,300 General Motors Corp. 160,875
- --------------------------------------------------------------------------------
764,363
- --------------------------------------------------------------------------------
Bank Holding Companies--1.0%
7,300 Lincoln National Corp. 300,213
- --------------------------------------------------------------------------------
Beverages-Alcoholic--1.3%
7,200 Anheuser Busch Companies, Inc. 400,476
- --------------------------------------------------------------------------------
Building Materials--0.2%
1,000 Armstrong World Industries, Inc. 55,250
- --------------------------------------------------------------------------------
Cable Television Systems--1.2%
13,900 Tele Communications, Inc.* 347,500
- --------------------------------------------------------------------------------
Chemicals-Plastics--1.1%
12,100 Geon Co. 340,313
- --------------------------------------------------------------------------------
Commercial Banks--2.1%
6,100 Nationsbank Corp. 342,363
9,400 Shawmut National Corp. 290,225
- --------------------------------------------------------------------------------
632,588
- --------------------------------------------------------------------------------
Computers--1.9%
6,700 Compaq Computer Corp.* 340,025
3,700 Dell Computer Corp.* 240,500
- --------------------------------------------------------------------------------
580,525
- --------------------------------------------------------------------------------
Containers-Metal and Glass--1.1%
24,500 Owens Illinois Corp.* 339,938
- --------------------------------------------------------------------------------
Discount Retailing--1.6%
10,100 J.C. Penney, Inc.* 488,588
- --------------------------------------------------------------------------------
Electronics--0.9%
5,000 Loral Corp.* 280,000
- --------------------------------------------------------------------------------
Energy--0.9%
11,900 Entergy Corp. 282,625
- --------------------------------------------------------------------------------
Financial Services--0.8%
1,500 North American Mortgage Co. 32,438
5,200 Reliastar Financial Corp. 198,250
- --------------------------------------------------------------------------------
230,688
- --------------------------------------------------------------------------------
Grocery Products--1.8%
37,200 Chiquita Brands International, Inc. 544,050
- --------------------------------------------------------------------------------
Health and Medical Services--2.7%
1,700 U S Healthcare Inc. 53,763
20,400 Tenet Healthcare Corp. 311,100
9,200 Columbia/HCA Healthcare 450,800
- --------------------------------------------------------------------------------
815,663
- --------------------------------------------------------------------------------
Home Builders--1.2%
3,500 Centex Corp. 98,000
13,300 Lennar Corp. 256,025
- --------------------------------------------------------------------------------
354,025
- --------------------------------------------------------------------------------
Insurance--3.9%
13,300 FHP International Corp.* 349,137
12,500 PartnerRe Holdings, Ltd. 315,625
7,400 Travelers Group, Inc. 350,575
3,800 US Life Corp. 158,650
- --------------------------------------------------------------------------------
1,173,987
- --------------------------------------------------------------------------------
Marine and Pleasure Boats--2.4%
22,900 Brunswick Corp. 460,863
12,400 Outboard Marine Corp. 248,000
- --------------------------------------------------------------------------------
708,863
- --------------------------------------------------------------------------------
Miscellaneous--0.7%
7,800 Fleming Companies Inc. 205,725
- --------------------------------------------------------------------------------
Money Center Banks--0.6%
3,100 BankAmerica Corp. 167,400
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund (continued)
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
<S> <C> <C>
Common Stocks (continued)
Mortgage Banking--0.8%
10,900 Bergen Brunswig Corp. $ 235,713
- --------------------------------------------------------------------------------
Oil & Gas--2.5%
1,600 Chevron Corp.* 79,000
1,400 Texaco, Inc. 93,100
2,000 Atlantic Richfield Co. 230,500
10,700 Tosco Corp. 350,425
- --------------------------------------------------------------------------------
753,025
- --------------------------------------------------------------------------------
Oil & Gas-International--0.3%
1,300 Exxon Corp. 94,250
- --------------------------------------------------------------------------------
Oil-International Integrated--0.8%
1,600 Mobil Corp. 156,400
700 Royal Dutch Petroleum ADR 88,900
- --------------------------------------------------------------------------------
245,300
- --------------------------------------------------------------------------------
Paper and Forest Products--2.9%
5,100 Champion International Corp. 287,513
6,600 Georgia-Pacific Corp. 569,250
- --------------------------------------------------------------------------------
856,763
- --------------------------------------------------------------------------------
Petroleum Refining--0.6%
5,200 Ashland Inc. 178,750
- --------------------------------------------------------------------------------
Publishing--0.6%
12,700 Valassis Communications, Inc. 180,975
- --------------------------------------------------------------------------------
Pulp and Paper Products--2.3%
32,100 Stone Container Corp. 694,163
- --------------------------------------------------------------------------------
Retail--1.1%
9,500 Melville Corp.* 342,000
- --------------------------------------------------------------------------------
Retail-Department Stores--0.3%
2,700 Sears Roebuck & Co. 88,088
- --------------------------------------------------------------------------------
Retail-General Merchandise--0.6%
5,600 Supervalue, Inc. 172,200
- --------------------------------------------------------------------------------
Savings and Loans--1.1%
8,000 GP Financial Corp. 193,000
3,800 Standard Federal Bancorp. 139,175
- --------------------------------------------------------------------------------
332,175
- --------------------------------------------------------------------------------
Security and Commodity Brokers, Dealers and Services--0.4%
800 Salomon, Inc.* 29,500
3,800 Lehman Brothers Holdings, Inc. 84,075
- --------------------------------------------------------------------------------
113,575
- --------------------------------------------------------------------------------
Shoes--0.2%
17,900 LA Gear, Inc.* 53,700
- --------------------------------------------------------------------------------
Technology--0.3%
3,700 Storage Technology Corp. 94,813
- --------------------------------------------------------------------------------
Tobacco and Food Products--4.0%
6,300 Philip Morris Companies, Inc. 451,238
7,500 Universal Corp. 161,250
21,700 RJR Nabisco Holdings Corp. 599,463
- --------------------------------------------------------------------------------
1,211,951
- --------------------------------------------------------------------------------
Trucking--1.7%
21,100 Consolidated Freightways, Inc. 503,763
- --------------------------------------------------------------------------------
Utility--1.7%
6,500 CMS Energy Corp. 162,500
21,600 Long Island Lighting Co. 345,600
- --------------------------------------------------------------------------------
508,100
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $15,959,175) $17,396,187
================================================================================
Preferred Stocks--0.1%
Tobacco--0.1%
3,400 RJR Nabisco Holdings Corp.
Convertible Preferred, 6.50% $ 19,975
- --------------------------------------------------------------------------------
Total Preferred Stocks
(Cost $23,870) $ 19,975
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
================================================================================
<S> <C> <C> <C>
Asset Backed Securities--3.1%
Case Equipment Loan Trust, Series 1995-A, Class A
$162,153 7.30% 03/15/02 $164,141
Ford Credit Grantor Trust, Series 1994-B, Class A
77,714 7.30 10/15/99 78,823
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund (continued)
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
================================================================================
Principal Interest Maturity
Amount Rate Date Value
================================================================================
<S> <C> <C> <C>
Asset Backed Securities (continued)
General Motors Acceptance Corp. Grantor Trust, Series 1994-A,
Class A
$ 96,973 6.30% 06/15/99 $ 97,099
General Motors Acceptance Corp. Grantor Trust, Series 1995-A,
Class A
187,551 7.15 03/15/00 189,601
Peoples Bank Credit Card Master Trust, Series 1994-1, Class A
140,000 5.10 08/15/97 137,763
Premier Auto Trust, Series 1994-1, Class A3
160,000 4.75 02/02/00 157,429
Standard Credit Card Master Trust, Series 1995-3 Class A
100,000 7.85 02/07/02 104,656
- --------------------------------------------------------------------------------
Total Asset Backed Securities
(Cost $925,049) $ 929,512
================================================================================
Corporate Bonds--10.0%
Finance Bonds--4.7%
Bank America Corp.
$ 200,000 7.75% 07/15/02 $ 207,156
Capital One Bank
200,000 8.13 02/27/98 204,934
Chase Manhattan Corp.
50,000 10.00 06/15/99 55,363
Comdisco Inc.
225,000 9.75 01/15/97 235,523
Continental Bank
100,000 12.50 04/01/01 124,001
Countrywide Funding Corp.
100,000 6.08 07/14/99 97,711
Fleet Mortgage Inc.
175,000 6.50 06/15/00 172,802
Golden West Financial Corp.
200,000 10.25 12/01/00 228,772
Resolution Funding Corp.
280,000 7.33(a) 10/15/20 45,178
300,000 7.32(a) 01/15/21 47,658
- --------------------------------------------------------------------------------
Total Finance Bonds 1,419,098
- --------------------------------------------------------------------------------
Industrial Bonds--5.3%
Auburn Hills Trust
$ 50,000 12.00% 05/01/20 $ 72,519
Blockbuster Entertainment
50,000 6.63 02/15/98 49,558
Cablevision Industries Corp.
60,000 10.75 01/30/02 65,400
Chrysler Financial Corp.
125,000 6.43 07/31/97 125,000
Coastal Corp.
100,000 9.75 08/01/03 113,226
Ford Capital Corp.
175,000 9.38 01/01/98 186,198
General Motors Acceptance Corp.
170,000 7.13 05/10/00 171,851
News America Holdings
150,000 9.13 10/15/99 161,298
Oryx Energy Co.
125,000 9.30 05/01/96 126,551
RJR Nabisco Inc.
50,000 8.63 12/01/02 50,539
35,000 8.00 07/15/01 34,835
Tenneco Inc.
110,000 10.00 08/01/98 119,815
Time Warner Inc.
200,000 7.45 02/01/98 201,178
TKR Cable Inc.
50,000 10.50 10/30/07 56,239
Tosco Corp.
60,000 7.00 07/15/00 59,400
- --------------------------------------------------------------------------------
Total Industrial Bonds 1,593,607
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $3,038,995) $3,012,705
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
- -------------------------------------------------------------------------------
Goldman Sachs Balanced Fund (continued)
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
===============================================================================
Principal Interest Maturity
Amount Rate Date Value
===============================================================================
<S> <C> <C> <C>
Government Agency Obligations--1.1%
Federal Home Loan Bank
$ 50,000 8.59% 01/11/00 $ 50,261
Federal Home Loan Mortgage Corp.
20,000 8.20 01/16/98 20,521
Federal National Mortgage Association
40,000 5.40 12/30/98 38,684
30,000 5.62 02/23/98 29,442
Government Backed Trust (Turkey)
199,752 9.40 11/15/96 203,685
- -------------------------------------------------------------------------------
Total Government Agency Obligations
(Cost $346,034) $ 342,593
===============================================================================
Mortgage Backed Obligations--6.9%
Federal Home Loan Mortgage Corp.
$ 350,000 7.00% TBA-30 year(b) $ 341,018
500,000 8.00 TBA-30 year(b) 507,618
Government National Mortgage Association
1,000,000 8.00 TBA-30 year(b) 1,021,875
199,278 7.00 09/15/23 194,732
- -------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $2,076,307) $2,065,243
===============================================================================
U.S. Treasury Obligations--13.2%
United States Treasury Bonds
$ 30,000 8.00% 11/15/21 $ 33,802
United States Treasury Interest-Only Stripped Securities
140,000 7.22(a) 05/15/20 24,130
United States Treasury Notes
1,326,000 6.25 02/15/03 1,313,562
510,000 6.50 05/15/97 515,340
60,000 5.88 05/31/96 60,056
900,000 7.50 10/31/99 943,596
280,000 7.38 11/15/97 288,224
United States Treasury Principal-Only Stripped Securities
830,000 6.48(a) 11/15/04 452,466
1,950,000 7.19(a) 08/15/20 332,183
- -------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $3,945,747) $3,963,359
===============================================================================
Repurchase Agreements--14.0%
Joint Repurchase Agreement Account(d)
$4,200,000 5.86% 08/01/95(c) $4,200,000
- -------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $4,200,000) $4,200,000
===============================================================================
Total Investments
(Cost $30,515,177)(e) $31,929,574
===============================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 1,601,876
Gross unrealized loss for investments in which
cost exceeds value (187,752)
- -------------------------------------------------------------------------------
Net unrealized gain $1,414,124
===============================================================================
</TABLE>
* Non-income producing security.
(a) The interest rate disclosed for these securities represents effective
yields to maturity.
(b) TBA (To Be Assigned) securities are purchased on a forward basis with an
approximate (generally +/-2.5%) principal amount and no definite maturity
date. The actual principal amount and maturity date will be determined upon
settlement when the specific mortgage pools are assigned.
(c) Portions of these securities are being segregated for open TBA purchases.
(d) Portions of these securities are being segregated for mortgage dollar
rolls.
(e) The aggregate cost for federal income tax purposes is $30,515,450.
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.
9
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund
- --------------------------------------------------------------------------------
Objective and Investment Approach
The Goldman Sachs Select Equity Fund is designed to provide investors with a
broadly diversified portfolio that can be used as a core holding on which to
build an investment program. The fund seeks to provide investors with a total
return (consisting of capital appreciation and dividend income) that, net of
expenses, exceeds the total return of the S&P 500 stock index. The fund's
mandate is to remain fully invested with industry diversification,
capitalization and risk characteristics similar to the S&P 500. Therefore, the
fund's relative performance compared with the index comes almost exclusively
from stock selection within sectors. We believe the fund offers investors an
attractive combination of value and growth, without assuming more risk than the
broad market.
The fund employs a disciplined approach that combines fundamental investment
research provided by Goldman, Sachs & Co.'s Investment Research Department with
quantitative analysis generated by our own proprietary model and other
techniques. Our model forecasts a stock's return using many different criteria
including valuation measures, growth expectations, earnings momentum and risk.
It also analyzes the impact of current economic conditions on different types of
stocks. Those stocks ranked highly by both our quantitative model and the
Goldman Sachs Investment Research Department are selected for the fund's
portfolio.
Performance Review: Successful Stock Selection and Superior Valuation
Characteristics
For the six-month period ended July 31, 1995, the Goldman Sachs Select Equity
Fund Class A shares had a total return of 23.48% based on net asset value
compared with a total return of 21.07% for the S&P 500 stock index, its
benchmark. The fund's outperformance of the S&P 500 during the period can be
primarily attributed to successful stock selection, with a lesser portion from
our strategic focus on stocks with lower price/earnings ratios, lower yields and
significant sales from outside the U.S.
The best performing stocks during the period under review had, on average, low
ratios of price to earnings and book value, positive earnings momentum, positive
earnings estimate revisions, large capitalizations and above-average volatility.
In general, the fund's holdings have, on average, a better outlook for growth
and profitability than the broad market, but they sell at cheaper valuation
multiples. For example, as of July 31, the fund had both a lower average
price/earnings ratio and a lower price to book ratio than the index. In
addition, the fund's long-term expected growth rate (based on consensus
estimates for five-year growth) was also slightly ahead of the S&P 500 as was
its average return on equity.
During the period, the fund benefited from several enhancements to our
multifactor model, which now provides more dynamic information regarding the
impact of changes in general economic and market conditions on various factors
measured by the model. This "fine-tuning" is expected to continue to add value
to the fund's stock selection by providing better, more timely return
predictions.
Portfolio Composition:
Broad Diversification Is the Hallmark
The fund was invested in a broadly diversified list of securities, with sector
allocations and style characteristics generally similar to the S&P 500 stock
index.
The fund's top performers included several technology stocks like Texas
Instruments, Intel and IBM, each of which contributed significantly to the
fund's total return, as well as market leaders in other diverse industries such
as Philip Morris, Schering Plough, PepsiCo, DuPont and Citicorp. The fund's
holdings in Capital Cities/ABC stock also rose strongly, benefiting from the
friendly takeover by the Walt Disney Company announced on July 31.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Top 10 Portfolio Holdings as of July 31, 1995
<TABLE>
<CAPTION>
Percentage Percentage
of Total of S&P 500
Company Line of Business Net Assets Index
<S> <C> <C> <C>
International Business Machines Computers 3.3% 1.5%
Philip Morris Cos., Inc. Tobacco and Food Products 2.9% 1.5%
AT&T Corp. Telephone 2.5% 2.0%
Schering Plough Corp. Pharmaceuticals 2.4% 0.4%
DuPont E.I. De Nemours Diversified Chemicals 2.3% 0.9%
Dow Chemical Co. Diversified Chemicals 2.0% 0.5%
Royal Dutch Petroleum Co. Oil 1.8% 1.6%
American International Group Inc. Insurance 1.8% 0.9%
Intel Corp. Electronics/Semiconductors 1.8% 1.3%
Ameritech Corp. Telephone 1.7% 0.7%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Sector Breakout as of July 31, 1995
Percentage Percentage
of of S&P
Industry Sectors Portfolio Index
<S> <C> <C>
Consumer Nondurables 17.4% 18.5%
Capital Spending 16.8% 17.3%
Finance 15.3% 12.7%
Basic Industry 11.9% 8.0%
Utility 10.9% 12.0%
Consumer Services 9.7% 13.9%
Energy 7.5% 8.4%
Consumer Durables 2.8% 3.3%
Transportation 1.6% 1.6%
Miscellaneous 3.3% 4.3%
Cash 2.8% 0
</TABLE>
- --------------------------------------------------------------------------------
Outlook
The market is currently characterized by a low dividend yield and strong price
appreciation, which, when coupled with the fact that many equity mutual funds
have most of their assets invested, are indications of modest overvaluation.
However, valuation alone rarely ends a bull market. Our expectations for
continued but lower profit growth, low inflation and stable interest rates cause
us to remain modestly bullish on stocks for the remainder of the year. As we
design the fund's stock selection strategy going forward, our analysis shows
that current market conditions favor stocks with low price/earnings ratios,
higher earnings estimates revisions and high sustainable growth rates. Given the
increased risk of somewhat slower economic growth in the near term, we have de-
emphasized cyclical securities, which could be the most vulnerable.
/s/ Robert C. Jones
Robert C. Jones
Portfolio Manager
August 31, 1995
- --------------------------------------------------------------------------------
11
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
<S> <C> <C>
Common Stocks--97.3%
Aerospace/Defense--2.4%
6,700 McDonnell Douglas Corp. $ 553,588
41,900 Rockwell International Corp. 1,911,688
10,300 United Technologies Corp. 865,200
- --------------------------------------------------------------------------------
3,330,476
- --------------------------------------------------------------------------------
Automotive Products--0.8%
24,100 General Motors Corp. 1,174,875
- --------------------------------------------------------------------------------
Auto Parts-Original Equipment--0.8%
31,100 Masland Corp. 427,625
14,200 Varity Corp.* 665,625
- --------------------------------------------------------------------------------
1,093,250
- --------------------------------------------------------------------------------
Basic Materials and Natural Resources--0.8%
13,600 Alco Standard Corp. 1,106,700
- --------------------------------------------------------------------------------
Beverages-Alcoholic--0.8%
19,700 Anheuser Busch Companies, Inc. 1,095,813
- --------------------------------------------------------------------------------
Beverages-Soft Drinks--1.7%
50,200 PepsiCo, Inc. 2,353,125
- --------------------------------------------------------------------------------
Biotechnology--0.3%
5,300 Amgen, Inc.* 451,163
- --------------------------------------------------------------------------------
Broadcast Media--1.6%
19,100 Capital Cities/ABC Inc. 2,229,925
- --------------------------------------------------------------------------------
Building Materials--0.6%
14,200 Armstrong World Industries, Inc. 784,550
- --------------------------------------------------------------------------------
Chemicals--2.9%
5,100 First Mississippi Corp. 174,038
22,000 Monsanto Co. 2,048,750
11,600 Morton International, Inc. 348,000
33,600 Norsk Hydro ADR 1,478,400
- --------------------------------------------------------------------------------
4,049,188
- --------------------------------------------------------------------------------
Chemicals-Diversified--4.3%
38,200 Dow Chemicals Co. 2,831,575
47,900 Du Pont E I De Nemours 3,209,300
- --------------------------------------------------------------------------------
6,040,875
- --------------------------------------------------------------------------------
Commercial Banks--3.4%
44,200 Corestates Financial Corp. 1,613,300
8,500 First Fidelity Bancorp. 535,500
9,700 First Interstate Bancorp. 835,413
3,800 MBNA Corp. 136,325
28,400 Nationsbank Corp. 1,593,950
- --------------------------------------------------------------------------------
4,714,488
- --------------------------------------------------------------------------------
Commercial Services--1.3%
25,800 Interim Services Inc. 632,100
19,500 Omnicom Group, Inc. 1,177,313
- --------------------------------------------------------------------------------
1,809,413
- --------------------------------------------------------------------------------
Communications--1.2%
54,300 Airtouch Communications/r/ 1,710,438
- --------------------------------------------------------------------------------
Computer Software and Services--1.6%
21,600 Microsoft Corp.* 1,954,800
5,400 Silicon Graphics Inc.* 226,800
- --------------------------------------------------------------------------------
2,181,600
- --------------------------------------------------------------------------------
Computers--3.3%
41,700 International Business Machines 4,540,089
- --------------------------------------------------------------------------------
Containers-Metal and Glass--0.5%
49,300 Owens Illinois Corp.* 684,038
- --------------------------------------------------------------------------------
Electrical Equipment--1.3%
30,600 General Electric Co. 1,805,400
- --------------------------------------------------------------------------------
Electronics--0.3%
11,700 Boston Scientific Corp.* 427,050
- --------------------------------------------------------------------------------
Electronics-Instrumentation--1.3%
23,600 Hewlett Packard Co. 1,837,850
- --------------------------------------------------------------------------------
Electronics-Semiconductors--4.4%
37,600 Intel Corp. 2,444,000
8,900 Micron Technology Inc. 556,250
12,300 Motorola Inc. 942,488
13,700 Texas Instruments Inc. 2,140,625
- --------------------------------------------------------------------------------
6,083,363
- --------------------------------------------------------------------------------
Entertainment--2.3%
9,200 Loews Corp. 1,107,450
30,600 The Walt Disney Co. 1,793,925
5,000 Viacom Inc.* 253,750
- --------------------------------------------------------------------------------
3,155,125
- --------------------------------------------------------------------------------
Environmental Control--0.7%
25,700 Browning Ferris Industries, Inc. 992,663
- --------------------------------------------------------------------------------
Financial--0.6%
16,400 MGIC Investment Corp. 832,300
- --------------------------------------------------------------------------------
Financial Services--1.0%
10,800 Federal National Mortgage Association 1,011,150
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund (continued)
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
<S> <C> <C>
Common Stocks (continued)
Financial Services (continued)
8,600 Household International, Inc. $ 451,500
- --------------------------------------------------------------------------------
1,462,650
- --------------------------------------------------------------------------------
Food Processing--0.5%
10,800 CPC International, Inc. 666,900
- --------------------------------------------------------------------------------
Food Products--0.1%
3,800 Conagra Inc. 143,450
- --------------------------------------------------------------------------------
Grocery Products--1.6%
29,500 IBP, Inc. 1,379,125
11,500 Kellogg Co. 826,563
- --------------------------------------------------------------------------------
2,205,688
- --------------------------------------------------------------------------------
Health and Medical Services--1.1%
25,100 Columbia/HCA Healthcare 1,229,900
6,000 St. Jude Medical, Inc.* 328,500
- --------------------------------------------------------------------------------
1,558,400
- --------------------------------------------------------------------------------
Household Products--2.4%
32,200 Philips NV 1,585,850
25,900 Procter & Gamble Co. 1,783,863
- --------------------------------------------------------------------------------
3,369,713
- --------------------------------------------------------------------------------
Insurance--5.7%
25,957 Allstate Corp. 811,156
29,100 American General Corp. 1,058,513
32,850 American International Group, Inc. 2,463,750
18,100 CMAC Investment Corp. 889,163
26,400 Exel Insurance Ltd. 1,382,700
43,300 Protective Life Corp. 1,255,700
- --------------------------------------------------------------------------------
7,860,982
- --------------------------------------------------------------------------------
Machine Tools--0.6%
13,800 Black & Decker Corp. 436,425
23,600 Giddings & Lewis, Inc. 392,350
- --------------------------------------------------------------------------------
828,775
- --------------------------------------------------------------------------------
Machine-Diversified--0.9%
15,200 Dover Corp. 1,204,600
- --------------------------------------------------------------------------------
Machinery and Equipment--0.9%
18,600 Caterpillar, Inc. 1,308,975
- --------------------------------------------------------------------------------
Medical/Biotechnology--0.5%
7,900 Medtronic Inc. 647,800
- --------------------------------------------------------------------------------
Metals-Diversified--0.3%
11,700 Asarco Inc. 371,475
- --------------------------------------------------------------------------------
Miscellaneous Manufacturer--2.0%
37,800 Allied Signal, Inc. 1,767,150
6,700 Eastman Kodak Co. 386,088
3,600 Minnesota Mining & Manufacturing Co. 203,850
7,600 Nacco Industries, Inc. 465,500
- --------------------------------------------------------------------------------
2,822,588
- --------------------------------------------------------------------------------
Money Center Banks--2.2%
26,500 BankAmerica Corp. 1,431,000
8,000 Chemical Banking Corp. 413,000
19,500 Citicorp 1,216,313
- --------------------------------------------------------------------------------
3,060,313
- --------------------------------------------------------------------------------
Oil & Gas Exploration--0.9%
20,000 Repsol S.A. ADR 667,500
30,200 Union Texas Petroleum Holdings, Inc. 611,550
- --------------------------------------------------------------------------------
1,279,050
- --------------------------------------------------------------------------------
Oil & Gas-Domestic--0.3%
10,100 Enron Corp. 350,975
- --------------------------------------------------------------------------------
Oil & Gas-International--5.8%
22,300 Amoco Corp. 1,499,675
32,400 Exxon Corp. 2,349,000
17,700 Mobil Corp. 1,730,175
19,900 Royal Dutch Petroleum ADR 2,527,300
- --------------------------------------------------------------------------------
8,106,150
- --------------------------------------------------------------------------------
Oil-Domestic Integrated--1.8%
8,800 Coastal Corp. 273,900
8,400 Kerr McGee Corp. 477,750
13,700 Tenneco, Inc. 678,150
30,000 Williams Companies, Inc. 1,110,000
- --------------------------------------------------------------------------------
2,539,800
- --------------------------------------------------------------------------------
Packaging & Container--1.9%
38,600 Avery Dennison Corp. 1,548,825
28,600 Ball Corp. 1,058,200
- --------------------------------------------------------------------------------
2,607,025
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund (continued)
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Shares Description Value
===============================================================================
<S> <C> <C>
Common Stocks (continued)
Paper and Forest Products--1.9%
13,600 Caraustar Industries, Inc. $ 263,500
6,100 Champion International Corp. 343,888
24,200 International Paper Co. 2,044,900
- -------------------------------------------------------------------------------
2,652,288
- -------------------------------------------------------------------------------
Personal Loans--0.7%
20,700 Beneficial Corp. 980,663
- -------------------------------------------------------------------------------
Pharmaceuticals--5.5%
17,700 Abbott Labs 708,000
9,300 Eli Lilly & Co. 727,725
12,000 Johnson & Johnson 861,000
16,700 Merck & Co. 862,138
23,600 Pfizer, Inc. 1,191,800
72,500 Schering Plough Corp. 3,371,251
- -------------------------------------------------------------------------------
7,721,914
- -------------------------------------------------------------------------------
Pulp & Paper Products--0.3%
20,000 Stone Container Corp. 432,500
- -------------------------------------------------------------------------------
Retail-Department Stores--2.1%
15,800 Harcourt General, Inc. 711,000
28,000 Sears Roebuck & Co. 913,500
48,900 Wal Mart Stores, Inc. 1,301,963
- -------------------------------------------------------------------------------
2,926,463
- -------------------------------------------------------------------------------
Retail-Food Chains--1.0%
35,300 Safeway, Inc.* 1,350,225
- -------------------------------------------------------------------------------
Retail-Specialty Apparel Stores--0.3%
22,600 The Limited, Inc. 463,300
- -------------------------------------------------------------------------------
Security and Commodity Brokers, Dealers and Services--0.8%
21,000 Dean Witter Discover Co. 1,060,500
- -------------------------------------------------------------------------------
Shoes--0.5%
8,400 Nike Inc. Class B 759,150
- -------------------------------------------------------------------------------
Steel--0.1%
6,000 Inland Steel Industries Inc. 172,500
- -------------------------------------------------------------------------------
Telecommunications-Long Distance--1.2%
11,900 MCI Communications Corp. 285,600
40,600 Sprint Corp. 1,390,550
- -------------------------------------------------------------------------------
1,676,150
- -------------------------------------------------------------------------------
Telephone--4.2%
48,900 Ameritech Corp. 2,365,538
65,200 AT&T Corp. 3,439,301
- -------------------------------------------------------------------------------
5,804,839
- -------------------------------------------------------------------------------
Tobacco and Food Products--3.0%
55,600 Philip Morris Companies, Inc. 3,982,351
5,920 RJR Nabisco Holdings Corp. 163,540
- -------------------------------------------------------------------------------
4,145,891
- -------------------------------------------------------------------------------
Toys--0.7%
33,606 Mattel, Inc. 949,370
- -------------------------------------------------------------------------------
Transportation--1.6%
26,100 Federal Express Corp. 1,761,750
7,600 Union Pacific Corp. 494,950
- -------------------------------------------------------------------------------
2,256,700
- -------------------------------------------------------------------------------
Utility--3.7%
33,700 Empresa Nacional De Electric ADR 1,777,675
24,400 General Public Utilities Corp. 704,550
76,400 Public Service Company of New Mexico* 1,098,246
56,100 Unicom Corp. 1,556,775
- -------------------------------------------------------------------------------
5,137,246
- -------------------------------------------------------------------------------
Total Common Stocks
(Cost $109,791,835) $135,368,765
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
===============================================================================
<S> <C> <C>
Repurchase Agreement--2.6%
$3,600,000 Joint Repurchase Agreement Account
5.86%, 08/01/95 $ 3,600,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $3,600,000) $ 3,600,000
===============================================================================
Total Investments
(Cost $113,391,835)(a) $138,968,765
===============================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $ 26,173,740
Gross unrealized loss for investments in
which cost exceeds value (598,030)
- -------------------------------------------------------------------------------
Net unrealized gain $ 25,575,710
===============================================================================
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $113,393,055.
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.
14
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund
- --------------------------------------------------------------------------------
Objective and Investment Approach
The Goldman Sachs Growth and Income Fund seeks long-term capital appreciation
and growth of income primarily through investments in a diversified portfolio of
common stocks and other equity securities. The fund is managed with a value
style, which means we focus on companies whose stocks are inexpensive relative
to their expected earnings and ability to pay dividends. Investments may include
well-known companies that are temporarily out of favor due to cyclical economic
conditions or near-term difficulties the portfolio managers judge to be
temporary in nature. In-depth fundamental research of a company's financial
structure, its competitive position in the market and its management's
commitment to increasing shareholder value are all critical parts of the fund's
investment approach.
Performance Review: A Positive Period
For the six months ended July 31, 1995, the Goldman Sachs Growth and Income
Fund had a total return based on net asset value of 20.91% compared with a total
return of 21.07% for the S&P 500 stock index, the fund's benchmark. The fund has
increased its regular quarterly dividend twice during the period to 6.5 cents
per share.
Portfolio Composition: Good Results in Defense, Technology and Cyclicals
As of July 31, 92% of the fund's net assets were invested in common stocks, 1%
in convertible preferred stock and 8% in cash or cash equivalents.
During the period, the fund's largest investment, McDonnell Douglas Corp. and
other defense holdings, including Northrop Grumman Corp. and Lockheed-Martin
Corp., performed particularly well as the market recognized the potential that
we saw in these companies early on.
Although only 4% of the fund was invested in technology stocks, the best
performing sector of the market during the period under review, those technology
investments the fund held during the period proved to be quite successful.
During the first quarter of 1995, we became attracted to two computer stocks,
Compaq Computer and Dell Computer, as investor anxiety regarding product
transitions at both companies created attractive buying opportunities. Since we
purchased the stocks, both have appreciated more than 40%. Despite the run-up
in their prices, we believe both companies are well positioned to succeed in all
aspects of client-server computing in the corporate market over the longer term.
Earlier in the year, the fund's position in Advanced Micro Devices, a
semiconductor manufacturer, was sold after the stock hit our target price for
fair valuation.
Philip Morris Cos., Inc., which reported greater than expected earnings in the
first and second quarters, benefited from a perceived easing on the litigation
front and strong gains in its overseas tobacco revenues. Entergy Corp., a
utility holding company that provides gas and electric services to customers in
Arkansas, Louisiana, and parts of Mississippi and East Texas, also performed
well as investors came to believe that most of the company's earnings problems
were behind it.
Although the fund's holdings in General Motors Corp. stock did well during the
period, we gradually trimmed the fund's holdings of GM stock in favor of Ford
Motor Co., which we believe is more competitively positioned to gain market
share (mostly at the expense of imports) over the long term. Ford, which has
proven itself to be a very efficient producer, has done a significant amount of
investment spending in order to reduce its manufacturing costs.
Not all of the fund's holdings fulfilled our expectations. For example, we
sold the fund's investments in Playtex and Texas Utilities. Other disappointing
performers included Home State Holdings, Inc., an insurance company that
suffered from weak second-quarter earnings, and Valassis Communications, (a
publisher of inserts and coupons for newspapers), which was hurt by rising paper
costs. However, the long-term prospects of both companies appear to be positive
and, therefore, we continued to hold the stocks.
- --------------------------------------------------------------------------------
15
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund
- --------------------------------------------------------------------------------
Top 10 Portfolio Holdings as of July 31, 1995
<TABLE>
<CAPTION>
Percentage
of Total Net
Company Line of Business Assets
<S> <C> <C>
McDonnell Douglas Corp. Aerospace/Defense 3.6%
Ford Motor Co. Automotive Products 3.3%
RJR Nabisco Holdings Corp. Tobacco and Food Products 2.9%
Georgia-Pacific Corp. Paper and Forest Products 2.8%
Brunswick Corp. Pleasure Boats/Marine Engines 2.7%
Consolidated Freightways, Inc. Trucking 2.6%
Stone Container Corp. Pulp and Paper Products 2.5%
Philip Morris Cos., Inc. Tobacco and Food Products 2.5%
Tenet Healthcare Corp. Hospital Management 2.4%
Columbia/HCA Healthcare Health Care 2.3%
</TABLE>
Outlook
We take a long-term view of the market, and therefore the fund's investment
focus will remain the same: on stocks that are judged to be inexpensive
compared with their estimated future earnings and ability to pay dividends.
While over the short term, the market favors different investment styles and
sectors, we remain confident that the fund's emphasis on undervalued, well-
established companies will prove rewarding over the long term.
/s/ Mitchell E. Cantor
Mitchell E. Cantor
Portfolio Manager
/s/ Ronald E. Gutfleish
Ronald E. Gutfleish
Portfolio Manager
August 31, 1995
- --------------------------------------------------------------------------------
16
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
<S> <C> <C>
Common Stocks--91.5%
Aerospace/Defense--6.7%
64,715 Lockheed Martin Corp. $ 4,068,956
138,600 McDonnell Douglas Corp. 11,451,825
106,700 Northrop Grumman Corp. 6,081,900
- --------------------------------------------------------------------------------
21,602,681
- --------------------------------------------------------------------------------
Auto Parts-Original Equipment--2.5%
107,400 Goodyear Tire & Rubber Co. 4,658,475
131,400 Lear Seating Corp. 3,547,800
- --------------------------------------------------------------------------------
8,206,275
- --------------------------------------------------------------------------------
Automotive Products--4.2%
369,500 Ford Motor Co. 10,669,313
60,700 General Motors Corp. 2,959,125
- --------------------------------------------------------------------------------
13,628,438
- --------------------------------------------------------------------------------
Beverages-Alcoholic--1.8%
105,200 Anheuser Busch Companies, Inc. 5,851,750
- --------------------------------------------------------------------------------
Cable Television Systems--2.0%
253,800 Tele-Communications, Inc.* 6,345,000
- --------------------------------------------------------------------------------
Chemicals-Plastics--1.9%
217,800 Geon Co. 6,125,625
- --------------------------------------------------------------------------------
Commercial Banks--2.9%
125,100 Nationsbank Corp. 7,021,238
81,400 Shawmut National Corp. 2,513,225
- --------------------------------------------------------------------------------
9,534,463
- --------------------------------------------------------------------------------
Computers--3.1%
112,600 Compaq Computer Corp.* 5,714,450
67,400 Dell Computer Corp.* 4,381,000
- --------------------------------------------------------------------------------
10,095,450
- --------------------------------------------------------------------------------
Containers-Metal and Glass--1.9%
443,100 Owens Illinois Corp.* 6,148,013
- --------------------------------------------------------------------------------
Discount Retailing--2.2%
147,100 J.C. Penney, Inc 7,115,963
- --------------------------------------------------------------------------------
Electronics--1.5%
84,700 Loral Corp. 4,743,200
- --------------------------------------------------------------------------------
Financial Services--0.2%
36,000 North American Mortgage Co. 778,500
- --------------------------------------------------------------------------------
Food-Wholesale--1.9%
114,600 Fleming Companies Inc. 3,022,575
103,700 Supervalue, Inc. 3,188,775
- --------------------------------------------------------------------------------
6,211,350
- --------------------------------------------------------------------------------
Grocery Products--2.2%
486,600 Chiquita Brands International, Inc. 7,116,525
- --------------------------------------------------------------------------------
Health and Medical Services--2.7%
151,700 Columbia/HCA Healthcare 7,433,300
36,900 U S Healthcare Inc. 1,166,963
- --------------------------------------------------------------------------------
8,600,263
- --------------------------------------------------------------------------------
Home Builders--1.2%
39,500 Centex Corp 1,106,000
147,500 Lennar Corp. 2,839,375
- --------------------------------------------------------------------------------
3,945,375
- --------------------------------------------------------------------------------
Hospital Management--2.4%
503,600 Tenet Healthcare Corp.* 7,679,900
- --------------------------------------------------------------------------------
Household Furnishing and Appliances--1.2%
82,400 National Presto Industrials, Inc. 3,831,600
- --------------------------------------------------------------------------------
Insurance--8.4%
252,600 FHP International Corp. 6,630,750
141,500 Home Holdings, Inc. 1,397,313
25,900 Integon Corp. 437,063
139,900 Lincoln National Corp. 5,753,388
237,200 PartnerRe Holdings, Ltd. 5,989,300
134,900 Travelers Group, Inc. 6,390,888
13,400 US Life Corp. 559,450
- --------------------------------------------------------------------------------
27,158,152
- --------------------------------------------------------------------------------
Marine and Pleasure Boats--4.1%
428,400 Brunswick Corp. 8,621,550
239,400 Outboard Marine Corp. 4,788,000
- --------------------------------------------------------------------------------
13,409,550
- --------------------------------------------------------------------------------
Metals-Miscellaneous--0.8%
103,200 Quanex Corp. 2,541,300
- --------------------------------------------------------------------------------
Money Center Banks--1.6%
94,600 BankAmerica Corp. 5,108,400
- --------------------------------------------------------------------------------
Oil & Gas-Domestic--4.0%
85,900 Ashland Inc. 2,952,813
38,600 Atlantic Richfield Co. 4,448,650
167,900 Tosco Corp. 5,498,725
- --------------------------------------------------------------------------------
12,900,188
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund (continued)
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
<S> <C> <C>
Oil & Gas-International--3.3%
8,100 Chevron Corp. $ 397,580
46,000 Exxon Corp. 3,335,000
28,500 Mobil Corp. 2,785,875
14,700 Royal Dutch Petroleum ADR 1,866,900
33,200 Texaco, Inc. 2,207,800
- --------------------------------------------------------------------------------
10,593,155
- --------------------------------------------------------------------------------
Paper and Forest Products--4.2%
83,000 Champion International Corp. 4,679,125
103,800 Georgia-Pacific Corp. 8,952,750
- --------------------------------------------------------------------------------
13,631,875
- --------------------------------------------------------------------------------
Publishing--1.6%
359,700 Valassis Communications, Inc.* 5,125,725
- --------------------------------------------------------------------------------
Pulp and Paper Products--2.5%
379,500 Stone Container Corp. 8,206,688
- --------------------------------------------------------------------------------
Real Estate Investment Trusts--0.4%
110,600 Haagen Alexander Properties, Inc. 1,354,850
- --------------------------------------------------------------------------------
Retail-Department Stores--2.2%
158,200 Melville Corp. 5,695,200
46,000 Sears Roebuck & Co. 1,500,750
- --------------------------------------------------------------------------------
7,195,950
- --------------------------------------------------------------------------------
Savings and Loans--2.4%
207,200 GP Financial Corp. 4,998,700
76,600 Standard Federal Bancorp. 2,805,475
- --------------------------------------------------------------------------------
7,804,175
- --------------------------------------------------------------------------------
Security and Commodity Brokers, Dealers and Services--0.6%
13,700 Salomon, Inc. 505,188
70,200 Lehman Brothers Holdings, Inc. 1,553,175
- --------------------------------------------------------------------------------
2,058,363
- --------------------------------------------------------------------------------
Technology--0.5%
64,300 Storage Technology Corp. 1,647,688
- --------------------------------------------------------------------------------
Tobacco and Food Products--5.4%
113,100 Philip Morris Companies, Inc. 8,100,788
341,180 RJR Nabisco Holdings Corp. 9,425,098
- --------------------------------------------------------------------------------
17,525,886
- --------------------------------------------------------------------------------
Trucking--2.6%
348,000 Consolidated Freightways, Inc. 8,308,500
- --------------------------------------------------------------------------------
Utility--4.4%
60,800 CMS Energy Corp. 1,520,000
275,100 Entergy Corp. 6,533,625
390,900 Long Island Lighting Co. 6,254,400
- --------------------------------------------------------------------------------
14,308,025
- --------------------------------------------------------------------------------
Total Common Stocks (Cost $261,912,557) $296,438,841
================================================================================
Preferred Stocks--1.1%
Grocery Products--0.6%
44,600 Chiquita Brands International, Inc.
2.88% Convertible Preferred $ 2,023,725
- --------------------------------------------------------------------------------
Tobacco--0.5%
287,100 RJR Nabisco Holdings Corp. 6.50% 1,686,713
Convertible Preferred
- --------------------------------------------------------------------------------
Total Preferred Stocks
(Cost $3,843,410) $ 3,710,438
================================================================================
<CAPTION>
Principal
Amount Description Value
===============================================================================
<S> <C> <C>
Repurchase Agreement--7.7%
$24,800,000 Joint Repurchase Agreement Account
5.86%, 08/01/95 $ 24,800,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $24,800,000) $ 24,800,000
===============================================================================
Total Investments
(Cost $290,555,967)(a) $324,949,279
===============================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 37,667,451
Gross unrealized loss for investments in which
cost exceeds value (3,301,561)
- -------------------------------------------------------------------------------
Net unrealized gain $ 34,365,890
===============================================================================
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $290,583,389.
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.
18
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Capital Growth Fund
- --------------------------------------------------------------------------------
Objective and Investment Approach
The Goldman Sachs Capital Growth Fund seeks long-term growth of capital
through investments in a portfolio of medium- and large-capitalization stocks.
We use fundamental research to identify companies whose business value is, in
our opinion, unrecognized or significantly undervalued in the marketplace,
either because the company's business is not well understood or because it is
experiencing what are judged to be temporary difficulties. Our analysis focuses
on such factors as a company's long-term growth potential, the amount of excess
or free cash flow it can be expected to generate after providing for future
growth, its competitive position in its industry, how the general economic
environment might affect its business and how committed its management is to
producing value for shareholders. Because this investment approach requires the
patience to hold a stock until the market recognizes its true value, the fund is
expected to have a fairly low portfolio turnover.
Performance Review:
Fund Outperforms the Broader Market
During the six months ended July 31, 1995, the Goldman Sachs Capital Growth
Fund had a total return of 23.63% based on net asset value compared with a total
return of 21.07% for the S&P 500 stock index, an unmanaged index that reflects
the performance of 500 large company stocks.
The fund outperformed the S&P 500, despite its overweighting in retail stocks,
as a result of successful stock selection in several industries including
defense, paper and technology.
Portfolio Composition
As of July 31, 87% of the portfolio's net assets was invested in common stocks
and 16% in cash equivalents.
Although the fund was significantly underweighted in technology stocks in
general, the stocks we did own in the sector performed very well during the
period, delivering greater than expected earnings growth. These include two
semiconductor manufacturers, Analog Devices, Inc. and National Semiconductor, as
well as Varian Associates, Inc. (electron devices for the communications,
scientific, medical, industrial and defense markets) and Millipore Corp.
(industrial filters used to analyze and purify fluids). The latter two
companies announced the sale of underperforming divisions and used the proceeds
to fund share repurchase programs.
The fund also benefited from some of our cyclically oriented holdings. For
example, our investments in several paper and forest products companies,
including Georgia-Pacific Corp., Champion International Corp. and Stone
Container Corp., have enjoyed strong demand and a recovery in prices from
depressed levels. After several years of excess capacity and underinvestment in
new plant and equipment, the paper industry is currently operating at very high
levels of capacity utilization. Despite the run-up in prices that these stocks
have already experienced in 1995, this period of robust profitability is
expected to continue, barring a sustained recession.
Although we have trimmed the size of our position, we also continue to own
General Motors Corp. stock, on the expectation that the company's aggressive
cost-cutting initiatives will pay off in higher earnings when automobile sales
rebound. During the period, we added Ford Motor Co. stock to the portfolio
because we believe it is more competitively positioned to increase its market
share (largely at the expense of imports) in the future.
Lear Seating Corp. (automobile seating) was another strong performer, with its
stock rising 18% in July alone based on the news that the company was acquiring
Automotive Industries Holdings, Inc., a manufacturer of moldings and other
materials for car interiors. The acquisition is expected to help Lear increase
its market share despite softness in the auto industry.
McDonnell Douglas Corp., the fund's largest holding, and Northrop Grumman
Corp., two aerospace/defense companies, were among the fund's strongest
performers during the period. Both have experienced rising cash flow that has
been spent on nondefense acquisitions and aggressive share repurchase
- --------------------------------------------------------------------------------
19
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Capital Growth Fund
- --------------------------------------------------------------------------------
programs, which have benefited shareholders.
The portfolio is overweighted in retail stocks, which have generally lagged
the market during the first half of 1995, reflecting lackluster consumer
spending. Among the fund's retail holdings that have been particularly
disappointing were Charming Shoppes, Inc. (a specialty retailer of moderately
priced women's apparel) and L.A. Gear Inc. (sneakers and sports apparel).
However, in July, several of the fund's retail holdings saw significant
improvement including TJX Companies (off-price women's apparel and accessories)
and Service Merchandise Co., Inc. (the nation's largest catalog showroom
retailer), whose stock rose 33% after the company reported strong second-quarter
earnings.
Another of the fund's retail investments, Dillard Department Stores Inc.,
operating primarily in the southern and midwestern regions of the U.S., has
already proven to be a notable exception in retailing, surpassing many of its
peers in recent months.
During the period, we sold several holdings when they reached what we viewed
as their fair value. These included Amgen (biotechnology) and AMP Inc. (a
worldwide producer of electrical and electronic connections, programming and
switching devices).
Top 10 Portfolio Holdings as of July 31, 1995
<TABLE>
<CAPTION>
Percentage
of Total Net
Company Line of Business Assets
<S> <C> <C>
McDonnell Douglas Corp. Aerospace/Defense 4.0%
Georgia-Pacific Corp. Paper and Forest Products 4.0%
Lear Seating Corp. Autoparts/Original Equipment 3.6%
Stone Container Corp. Pulp and Paper Products 3.6%
Snap-On Tools Hardware and Tools 3.1%
Tenet Healthcare Corp. Hospital Management 3.0%
General Motors Corp. Automotive 3.0%
Millipore Corp. Commercial Services 3.0%
Varian Associates, Inc. Electron Technology 3.0%
Dillard Department Stores, Inc. Retailing 2.9%
</TABLE>
Outlook
Having experienced four years of economic recovery, the slowdown in the second
quarter was to be expected and may contribute to the durability of the upward
trend over time. We believe stocks will continue to do well for some time to
come, with occasional corrections from time to time. As in the past, the fund
will continue to search for companies that are undervalued but offer outstanding
long-term appreciation potential.
/s/ Mitchell E. Cantor
Mitchell E. Cantor
Portfolio Manager
/s/ Paul D. Farrell
Paul D. Farrell
Portfolio Manager
/s/ Ronald E. Gutfleish
Ronald E. Gutfleish
Portfolio Manager
August 31, 1995
20
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Capital Growth Fund
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
<S> <C> <C>
Common Stocks--87.2%
Aerospace/Defense--6.5%
502,700 McDonnell Douglas Corp. $ 41,535,585
448,700 Northrop Grumman Corp. 25,575,900
- --------------------------------------------------------------------------------
67,111,485
- --------------------------------------------------------------------------------
Auto Parts-Original Equipment--4.2%
13,500 Goodyear Tire & Rubber Co. 585,563
1,378,900 Lear Seating Corp. 37,230,300
131,400 Stewart & Stevenson Services, Inc.* 5,009,625
- --------------------------------------------------------------------------------
42,825,488
- --------------------------------------------------------------------------------
Automotive Products--3.3%
120,400 Ford Motor Co. 3,494,971
632,400 General Motors Corp. 30,829,500
- --------------------------------------------------------------------------------
34,324,471
- --------------------------------------------------------------------------------
Chemicals-Plastics--2.2%
795,900 Geon Co. 22,384,688
- --------------------------------------------------------------------------------
Commercial Banks--0.0%
11,600 Shawmut National Corp. 353,603
- --------------------------------------------------------------------------------
Commercial Services--3.0%
890,600 Millipore Corp.* 30,725,700
- --------------------------------------------------------------------------------
Containers-Metal and Glass--0.1%
84,300 Owens Illinois Corp.* 1,169,663
- --------------------------------------------------------------------------------
Electron Technology--3.0%
552,800 Varian Associates, Inc.* 30,473,100
- --------------------------------------------------------------------------------
Electronics-Semiconductors--4.9%
655,225 Analog Devices, Inc.* 23,751,902
985,200 National Semiconductor Corp.* 26,600,400
- --------------------------------------------------------------------------------
50,352,302
- --------------------------------------------------------------------------------
Hardware and Tools--3.1%
754,200 Snap-on Tools Corp.* 31,487,850
- --------------------------------------------------------------------------------
Health and Medical Services--0.3%
57,300 Columbia/HCA Healthcare 2,760,313
- --------------------------------------------------------------------------------
Hospital Management--3.0%
2,034,000 Tenet Healthcare Corp.* 31,018,502
- --------------------------------------------------------------------------------
Household Products--2.4%
607,200 First Brands Corp.* 24,288,000
- --------------------------------------------------------------------------------
Insurance--4.7%
670,150 Integon Corp. 11,308,781
63,800 Lincoln National Corp. 2,623,775
799,800 PartnerRe Holdings, Ltd. 20,194,950
724,200 Penncorp Financial Group, Inc.* 14,031,375
- --------------------------------------------------------------------------------
48,158,881
- --------------------------------------------------------------------------------
Manufacturing-Diversified Industrial--2.3%
629,200 Harnischfeger Industries, Inc.* 23,595,000
- --------------------------------------------------------------------------------
Manufacturing-Miscellaneous--3.0%
626,400 Fisher Scientific International, Inc.* 20,592,900
489,300 Keystone International, Inc.* 10,275,300
- --------------------------------------------------------------------------------
30,868,200
- --------------------------------------------------------------------------------
Metal Fabricate/Hardware--0.9%
271,250 Trinity Industries, Inc.* 9,086,875
- --------------------------------------------------------------------------------
Metals-Miscellaneous--1.0%
421,500 Quanex Corp. 10,379,438
- --------------------------------------------------------------------------------
Money Center Banks--2.9%
470,700 Citicorp 29,359,913
- --------------------------------------------------------------------------------
Oil & Gas-International--2.9%
78,100 Amoco Corp. 5,252,225
88,400 Chevron Corp. 4,364,750
72,500 Exxon Corp. 5,256,250
102,900 Mobil Corp. 10,058,475
41,200 Royal Dutch Petroleum ADR 5,232,400
- --------------------------------------------------------------------------------
30,164,100
- --------------------------------------------------------------------------------
Oil-Domestic Integrated--1.9%
385,500 Tenneco, Inc. 19,082,250
- --------------------------------------------------------------------------------
Paper and Forest Products--6.6%
485,800 Champion International Corp. 27,386,975
470,800 Georgia-Pacific Corp. 40,606,500
- --------------------------------------------------------------------------------
67,993,475
- --------------------------------------------------------------------------------
Publishing--2.2%
1,609,700 Valassis Communications, Inc.* 22,938,225
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Capital Growth Fund (continued)
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
<S> <C> <C>
Common Stocks (continued)
Pulp and Paper Products--3.6%
1,698,700 Stone Container Corp. $ 36,734,388
- --------------------------------------------------------------------------------
Retail-Department Stores--5.0%
969,400 Dillard Department Stores, Inc.* 30,051,400
156,700 Sears Roebuck & Co. 5,112,338
2,261,200 Service Merchandise Co., Inc.* 15,828,400
- --------------------------------------------------------------------------------
50,992,138
- --------------------------------------------------------------------------------
Retail-Specialty--1.5%
1,580,500 Musicland Stores Corp.* 15,409,875
- --------------------------------------------------------------------------------
Retail-Specialty Apparel Stores--5.0%
317,200 Ann Taylor Stores Corp.* 6,264,700
3,268,100 Charming Shoppes, Inc. 15,931,988
1,970,300 TJX Companies, Inc.* 28,815,638
- --------------------------------------------------------------------------------
51,012,326
- --------------------------------------------------------------------------------
Savings and Loans--0.4%
261,650 Firstfed Financial Corp.* 3,924,750
- --------------------------------------------------------------------------------
Security and Commodity Brokers, Dealers and Services--0.2%
44,500 Salomon, Inc. 1,640,938
- --------------------------------------------------------------------------------
Shoes--0.3%
1,143,500 LA Gear, Inc.* 3,430,500
- --------------------------------------------------------------------------------
Textiles--0.3%
145,500 Warnaco Group, Inc.* 3,201,000
- --------------------------------------------------------------------------------
Tobacco and Food Products--3.4%
230,000 Philip Morris Companies, Inc. 16,473,750
881,900 Universal Corp. 18,960,850
- --------------------------------------------------------------------------------
35,434,600
- --------------------------------------------------------------------------------
Transportation-Marine--1.4%
949,700 Kirby Corp.* 14,720,350
- --------------------------------------------------------------------------------
Trucking--1.6%
704,800 Consolidated Freightways, Inc. 16,827,100
- --------------------------------------------------------------------------------
Utility--0.1%
82,600 Long Island Lighting Co. 1,321,600
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $699,520,619) $ 895,551,087
================================================================================
<CAPTION>
Principal
Amount Description Value
================================================================================
<S> <C> <C>
Repurchase Agreement--16.4%
$168,400,000 Joint Repurchase Agreement
Account 5.86%, 08/01/95 $ 168,400,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $168,400,000) $ 168,400,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $867,920,619)/(a)/ $1,063,951,087
================================================================================
<CAPTION>
Contracts # Description Value
===============================================================================
<S> <C> <C>
Options Written--(0.1)%
Put Options Written
(8,850) National Semiconductor, Call
Strike $30 expiring 11/18/95 $ (1,438,125)
- -------------------------------------------------------------------------------
Total Options Written
(Premiums received $1,758,487) $ (1,438,125)
- -------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $ 240,185,746
Gross unrealized loss for investments in
which cost exceeds value (45,364,901)
- -------------------------------------------------------------------------------
Net unrealized gain $ 194,820,845
===============================================================================
</TABLE>
* Non-income producing security.
/(a)/ The aggregate cost for federal income tax purposes is $869,130,242.
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.
22
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund
- --------------------------------------------------------------------------------
Objective and Strategies
The Goldman Sachs Small Cap Equity Fund's objective is long-term capital
appreciation, primarily through investments in equity securities of U.S.
companies with market capitalizations of $1 billion or less. The fund is managed
using a "business value" approach to investing, which means we look for
attractive companies with high or improving returns on capital that we believe
can achieve solid, sustainable growth, as well as generate free cash after
investing for future growth. Using our own rigorous fundamental research,
meeting with a company's management and interviewing a company's competitors,
customers and suppliers, we build the fund's portfolio one stock at a time.
Performance Review:
A Difficult Period Brings Tactical Enhancements
During the period under review, the Goldman Sachs Small Cap Equity Fund had a
total return of 9.67% based on net asset value compared with a total return of
22.56% for the Russell 2000, the fund's benchmark. The fund's underperformance
relative to the benchmark was primarily attributable to the disappointing
results of a number of specific investments. However, its significant
underweighting in the technology sector, which led the market during most of the
period, and its overweighting in retailing stocks, which lagged the market, also
hindered performance during the period.
While the fund will continue to be managed using the same approach to
individual stock selection, we intend to make several adjustments.
. Specifically, we intend to broaden the fund's sector diversification by adding
15 to 20 smaller positions, while continuing to keep the bulk of the fund's
assets relatively focused in 25 to 30 core positions.
. In addition, we intend to emphasize core positions in companies with market
capitalizations of more than $100 million, which tend to be more liquid than
stocks with smaller capitalizations. Currently, the fund's weighted average
market capitalization is approximately $235 million and we expect that to
increase gradually over time.
Portfolio Composition:
A Concentration in Retail and Consumer Stocks With
New Holdings in Varied Sectors
As of July 31, 93% of the portfolio (based on net assets) was invested in
common stocks and 7% in cash equivalents.
Among the portfolio's retail stocks that saw declines were J. Baker, Inc.
(men's apparel and family and women's shoes) and Charming Shoppes, Inc.
(specialty retailer of moderately priced women's apparel). In general, consumer
spending slowed during the period, which impacted these and other retail stocks.
However, in July, several of the fund's retail holdings saw significant
improvement, including TJX Companies (off-price women's apparel and
accessories), Service Merchandise Co., Inc. (the nation's largest catalog
showroom retailer), whose stock rose 33% after the company reported strong
second-quarter earnings and Authentic Fitness Corp. (owner's of Speedo sports
apparel), reflecting an upturn in investor's perceptions of value in the sector.
Another of the fund's holdings, Supercuts (haircut chain emphasizing quick
service), failed to meet our expectations, largely because earnings suffered
when the company's expansion into the greater New York metropolitan area fell
behind schedule. We still believe in the company's potential to increase its
earnings as the expansion is completed.
On the other hand, our patience has begun to pay off as a number of the fund's
longer term holdings saw substantial rebounds during the past few months. These
included ABT Building Products Corp. (specialty building materials), which
rallied significantly despite a sluggish housing market; USA Mobile
Communications (Midwest-based provider of paging products), which we sold after
the stock rose significantly due to a tender offer from Arch Communications;
Sonic Corp. (drive-in restaurants), whose continued strong earnings finally
convinced the market of the value we originally saw in the company; DIMAC Corp.
(direct marketing and database management), which continued to report strong
internal growth and completed several acquisitions; and Figgie
- --------------------------------------------------------------------------------
23
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund
- --------------------------------------------------------------------------------
International (industrial conglomerate), where new management has been selling
less profitable businesses to pay down debt and restructure the company. After
more than a year of disappointing earnings, Figgie has the potential to return
to profitability in the third quarter of 1995.
Another investment with better news to report this period was Musicland Stores
Corp. (discount music retailer). Musicland stock has begun to rebound as
investors gain confidence in the company's growth strategy instituted in the
latter part of 1994 that focuses on using cash generated by its mature stores
located in shopping malls to finance its rapidly growing and much larger
"superstores."
New Additions: From Trucking to Pancakes
During the period under review, we added Landstar Systems (trucking company)
to the portfolio. Unlike most traditional trucking companies, Landstar uses
owner-operated trucks and schedules its routes through independent agents, and
therefore has very low fixed costs. Although Landstar has generated a high
return on capital and has suffered less from the recent economic slowdown and
the decrease in car transports than other truckers, the company has been largely
misunderstood by the market and therefore has suffered undeservedly with the
sector in general. Other new holdings include International House of Pancakes
(IHOP), a company whose well-known name and differentiated niche in the
franchise restaurant business (its restaurants are run by owners who work on the
premises) contribute to its expansion potential, and Horace Mann, which has
grown steadily and generated a strong cash flow by selling life, homeowners and
auto insurance to public school employees through a direct sales force.
Top 10 Portfolio Holdings as of July 31, 1995
<TABLE>
<CAPTION>
Percentage
of Total
Company Line of Business Net Assets
<S> <C> <C>
Black Box Corp. Catalog Marketer 4.2%
of Communications
and Networking Products
Morningstar Group, Inc. Specialty Food Products 4.1%
American Publishing Co. Publishing/Newspapers 3.4%
Landstar Systems Trucking 3.4%
North American Watch Corp. Luxury and Affordable Watches 3.4%
DIMAC Corp. Direct Marketing/Database Management 3.3%
J. Baker, Inc. Specialty Retail/Shoes/Apparel 2.8%
Trump Hotels & Casinos Hotels and Casinos 2.7%
ABT Building Products Corp. Specialty Building Materials 2.6%
Quantum Restaurant Group Restaurants 2.6%
</TABLE>
Outlook
We believe that small-cap stocks are currently undervalued, both compared with
their own earnings potential and compared with larger U.S. stocks, and are
positioned to achieve better returns in both relative and absolute terms going
forward. The fund's investment style emphasizes seeking undiscovered or
undervalued stocks, and therefore we may purchase stocks earlier in the cycle
than some other investors. However, we are patient investors prepared to hold
stocks we consider fundamentally sound as we pursue the fund's objective of
long-term growth. We believe the fund's tactical enhancements will contribute
to the fund over time.
/s/Paul D. Farrell
Paul D. Farrell
Portfolio Manager
August 31, 1995
- --------------------------------------------------------------------------------
24
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks--92.9%
Broadcasting--0.8%
160,600 International Family Entertainment, Class B* $ 2,409,000
- --------------------------------------------------------------------------------
Building Materials--3.9%
414,400 ABT Building Products Corp.* 7,770,000
302,700 Congoleum Corp.* 3,783,750
- --------------------------------------------------------------------------------
11,553,750
- --------------------------------------------------------------------------------
Commercial Services--9.5%
2,168,868 Automated Security Holdings PLC ADR* 2,711,085
830,802 Black Box Corp.* 12,565,880
986,300 International Post Ltd.* 4,746,569
539,200 Opinion Research Corp.* 2,763,400
675,100 Supercuts, Inc.* 5,569,575
- --------------------------------------------------------------------------------
28,356,509
- --------------------------------------------------------------------------------
Communication-Equipment--3.1%
310,800 IPC Information Systems, Inc.* 4,817,400
140,400 Plantronics, Inc.* 4,282,200
- --------------------------------------------------------------------------------
9,099,600
- --------------------------------------------------------------------------------
Computer Software and Services--1.0%
339,367 Micom Communications* 2,842,199
- --------------------------------------------------------------------------------
Direct Marketing/Database Management--3.3%
600,400 DIMAC Corp.* 9,681,450
- --------------------------------------------------------------------------------
Electronics--1.8%
93,900 Holophane Corp.* 2,277,075
143,300 Recoton Corp.* 2,973,475
- --------------------------------------------------------------------------------
5,250,550
- --------------------------------------------------------------------------------
Environmental Control--1.1%
163,917 U.S.A. Waste Services, Inc.* 3,114,423
- --------------------------------------------------------------------------------
Financial Services--0.1%
163,700 Hamilton Financial Services Corp.* 388,788
- --------------------------------------------------------------------------------
Food Processing--0.9%
379,900 Brothers Gourmet Coffees, Inc.* 2,801,763
- --------------------------------------------------------------------------------
Food Products--0.5%
168,700 Alpine Lace Brands, Inc. 1,349,600
- --------------------------------------------------------------------------------
Hardware and Tools--0.8%
363,400 Webco Industries, Inc.* $2,362,100
- --------------------------------------------------------------------------------
Health Care-Miscellaneous--1.1%
183,300 Grancare Inc.* 3,184,838
- --------------------------------------------------------------------------------
Hotels and Casinos--2.7%
545,900 Trump Hotels & Casino Resort* 8,120,256
- --------------------------------------------------------------------------------
Household Products--2.6%
777,700 American Safety Razor Co.* 7,679,788
- --------------------------------------------------------------------------------
Insurance--4.3%
267,400 Horace Mann Educators Co. 6,852,125
323,000 The Paul Revere Corp.* 6,056,250
- --------------------------------------------------------------------------------
12,908,375
- --------------------------------------------------------------------------------
Leisure Time--2.3%
537,890 Bell Sports Corp. 6,858,098
- --------------------------------------------------------------------------------
Luxury and Affordable Watches--3.4%
693,400 North American Watch Corp.* 10,227,650
- --------------------------------------------------------------------------------
Manufacturing-Diversified Industrial--5.8%
376,300 DT Industries, Inc.* 4,327,450
653,700 Figgie International, Inc. Class A* 6,618,713
111,200 Figgie International, Inc. Class B* 1,098,100
602,000 Foamex International, Inc.* 5,342,750
- --------------------------------------------------------------------------------
17,387,013
- --------------------------------------------------------------------------------
Medical-Hospital Management & Services--1.0%
680,400 Physicians Clinical Laboratory, Inc.* 3,061,800
- --------------------------------------------------------------------------------
Oil & Gas-Domestic--2.0%
498,000 Total Petroleum of North America Ltd. 5,789,250
- --------------------------------------------------------------------------------
Publishing/Newspapers--3.4%
930,900 American Publishing Co. 10,239,900
- --------------------------------------------------------------------------------
Restaurants--6.1%
251,100 IHOP Corp.* 7,219,125
672,100 Quantum Restaurant Group, Inc.* 7,729,150
106,800 Sonic Corp.* 3,230,700
- --------------------------------------------------------------------------------
18,178,975
- --------------------------------------------------------------------------------
Retail-Department Stores--1.6%
677,800 Service Merchandise Co., Inc.* 4,744,600
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund (continued)
July 31, 1995
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
===============================================================================
<S> <C> <C>
Common Stocks (continued)
Retail-Specialty--12.3%
1,080,100 Brookstone, Inc.* $ 7,695,713
789,900 Ernst Home Center, Inc.* 4,739,400
353,200 Finlay Enterprises* 5,518,750
850,000 J. Baker, Inc.* 8,340,625
632,500 Levitz Furniture, Inc.* 4,032,188
644,940 Musicland Stores Corp.* 6,288,165
- -------------------------------------------------------------------------------
36,614,841
- -------------------------------------------------------------------------------
Retail-Specialty Apparel Stores--4.5%
108,400 Ann Taylor Stores Corp.* 2,140,900
938,900 Charming Shoppes, Inc. 4,577,138
464,800 TJX Companies, Inc.* 6,797,700
- -------------------------------------------------------------------------------
13,515,738
- -------------------------------------------------------------------------------
Savings and Loans--0.1%
8,100 GP Financial Corp. 195,413
- -------------------------------------------------------------------------------
Shoes--1.2%
591,700 Shoe Carnival, Inc.* 3,624,163
- -------------------------------------------------------------------------------
Specialty Food Products--4.1%
1,579,800 Morningstar Group, Inc.* 12,243,450
- -------------------------------------------------------------------------------
Textile-Apparel Manufacturers--2.6%
170,600 Authentic Fitness Corp. 3,348,025
181,400 Haggar Corp. 3,537,300
49,200 Norton McNaughton, Inc.* 885,600
- -------------------------------------------------------------------------------
7,770,925
- -------------------------------------------------------------------------------
Trucking--5.0%
189,100 Consolidated Freightways, Inc. 4,514,763
341,300 Landstar Systems, Inc.* 10,239,000
- -------------------------------------------------------------------------------
14,753,763
- -------------------------------------------------------------------------------
Total Common Stocks
(Cost $302,495,418) $276,308,568
===============================================================================
Warrants--0.0%
Home Builders and Land Development--0.0%
57,000 Miles Homes, Inc.* $ 28,500
- -------------------------------------------------------------------------------
Total Warrants
(Cost $42,750) $ 28,500
===============================================================================
- -------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
===============================================================================
<S> <C> <C>
Corporate Bonds--0.2%
$ 500,000 J. Baker, Inc.
7.5%, 06/01/02 $ 457,500
- -------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $497,813) $ 457,500
===============================================================================
Repurchase Agreement--6.5%
$19,400,000 Joint Repurchase Agreement
Account 5.86%, 08/01/95 $ 19,400,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $19,400,000) $ 19,400,000
===============================================================================
Total Investments
(Cost $322,435,981)(a) $296,194,568
===============================================================================
<CAPTION>
Contracts # Description Value
===============================================================================
<S> <C> <C>
Options Written--(0.0)%
Call Options Written
(900) Grancare Inc., Call Strike $17.50
expiring 9/16/95 $ 0
- -------------------------------------------------------------------------------
Total Options Written
(Premiums received $65,448) $ 0
===============================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $ 29,561,183
Gross unrealized loss for investments in
which cost exceeds value (55,920,758)
- -------------------------------------------------------------------------------
Net unrealized loss $(26,359,575)
===============================================================================
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $322,554,143.
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.
26
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund
- --------------------------------------------------------------------------------
Objective and Strategies
The Goldman Sachs International Equity Fund seeks long-term capital
appreciation by investing in equity securities of companies organized or traded
outside the U.S. that we believe have the potential to achieve superior returns
over the long term. The fund searches for attractively valued companies with
strong, competitive positions in industries expected to grow. Our bottom-up
approach focuses on individual companies, rather than on making investment
choices based on our view of a particular country or industry sector. Currency
risk, inherent in any international investment, is managed by a separate team of
currency specialists based in London.
Performance Review:
Successful Stock Selection Results in Outperformance
For the six months ended July 31, 1995, the Goldman Sachs International Equity
Fund had a total return of 17.49% based on net asset value compared with a total
return of 12.62% for the fund's benchmark, the Financial Times-Actuaries Europe
& Pacific Index ("Europac") unhedged. Europac is a capitalization-weighted
composite of approximately 1,500 stocks from 20 countries in Europe, Japan and
the Asia-Pacific region and is calculated on a monthly basis. For the 12 months
ended July 31, the fund placed in the top quartile of international equity funds
based on total return, ranking 41 out of 201 international equity funds tracked
by Lipper Analytical Services, Inc. (Lipper rankings do not take sales charges
into account.)
The fund outperformed the Index primarily due to successful stock selection.
The fund also benefited from its overweighting in some of the better performing
European markets, such as the U.K. and Sweden, and its underweighting in Japan
compared with the Index. Finally, the hedging strategies employed during the
period were largely successful as well. While the fund's neutral position is
unhedged, in May we began to partially hedge the fund's exposure in deutsche
marks and yen based on our belief that those currencies had become overvalued
versus the dollar and other European currencies. By July, approximately 35% of
the fund was hedged.
Portfolio Composition: Diversification Among Countries and Industry Sectors
During the period, approximately 94% of the fund's portfolio (based on net
assets) was invested in 40 stocks based in 16 different countries and 2% in cash
equivalents. Its five largest country allocations were Japan (37.2%), the U.K.
(10.0%), Sweden (7.6%), Spain (6.0%) and the Netherlands (4.9%). The fund's
average market capitalization is approximately $4 to $5 billion. We favor highly
focused, efficient companies in well-defined businesses.
. Japan. Stocks suffered during most of the period under review, reflecting
Japan's economic problems, but rebounded sharply during July. During the course
of the period, we increased the fund's holdings in Japan from approximately 30%
to 37% (still well below the Index weighting of 44%), based on our increased
confidence in future improvements in the valuation of the market and of the
specific companies we own. We have concentrated on companies that are taking
aggressive steps to reduce costs and optimize the use of their assets.
. Successful Japanese investments during the period included Hoya Corporation
(the world's leading manufacturer of optical glass) and Mirai (a large producer
of electric cable conduits, wiring boxes and other electrical accessories),
which both outperformed the market. Aiwa (audio/visual equipment manufacturer)
is a good example of one of the fund's newer Japanese holdings. The company's
new management has reduced costs, shifting both research and development and
production from Japan to lower cost manufacturers in Southeast Asia.
. Europe. As of July 31, the fund continued to be slightly overweighted in
Europe. Within Europe, the U.K., Scandinavia and Switzerland performed the best,
- --------------------------------------------------------------------------------
27
<PAGE>
while countries with the strongest currencies, namely Germany and France, were
weakest.
. Several of the fund's holdings in the U.K. did particularly well,
outperforming the market's 15% appreciation during the period. They include
Siebe, one of the world's leading manufacturers of industrial electronic
equipment and control devices; Electrocomponents, the largest catalog provider
of electronic components and other equipment to businesses in the U.K. and
Europe, which has consistently earned a return on capital averaging over 30% for
the past decade; and Rentokil, a large environmental services group involved in
pest control and commercial and security services.
. Other strong performers included Fresenius, a major producer of kidney
dialysis equipment based in Germany; Securitas, the largest security services
company in Europe; and Hoganas, the largest producer of powdered metal for use
in auto components.
. In contrast, our investment in Volvo (Sweden) was disappointing during the
period, hurt by the weakness of the U.S. dollar, which depressed automobile
exports to the U.S., and by general difficulties in the automotive sector.
However, we added to the fund's position in Volvo stock on price weakness
because the company is fundamentally strong and management's plan to restructure
to core businesses is expected to prove successful ultimately.
. Asia-Pacific. The fund was slightly overweighted in the Asia-Pacific region
during the period, although we reduced the fund's exposure in Hong Kong in favor
of greater diversification in Korea, Indonesia and the Philippines, where
valuations were more attractive. The region experienced mixed results during the
period, with sharp rallies in February and May.
. A large portion of the fund's holdings of Hong Kong-based Consolidated
Electric Power of Asia was sold to take profits when the stock hit our target
price, and a significant position in Korea Mobile Telecommunications (KMT) was
added. KMT is the sole provider of cellular telecommunications in Korea and
controls half of the pager market, both of which should see significant growth
potential. Another relatively new holding, Philippine Long Distance Telephone,
did quite well from March through May.
Top 10 Portfolio Holdings as of July 31, 1995
<TABLE>
<CAPTION>
Percentage
of Total
Company Country Line of Business Net Assets
<S> <C> <C> <C>
Fresenius Germany Health Care 3.8%
Santen Japan Pharmaceutical 3.7%
Korea Mobile
Telecommunications (KMT) Korea Telecommunications 3.4%
Mitsubishi Heavy Industry Japan Aerospace/ Defense 3.4%
Mitsubishi Electric Japan Electrical Equipment 3.4%
Hoya Corporation Japan Optical Glass 3.4%
Manufacturing
Volvo Sweden Car and Truck Manufacture 3.4%
Repsol Spain Oil/Gas Production and 3.2%
Distribution
Shimachu Japan Furniture Retailer 3.2%
Mitsui Marine & Fire Japan Insurance 3.2%
</TABLE>
Outlook
Our outlook for most international markets is quite positive. In our opinion,
Europe is likely to see continuing reasonable levels of economic growth with low
inflation. However, unlike the U.S. stock market, which may be reaching a near-
term peak, many European stock markets are still 10% to 20% off their highs,
which were set during 1993, and thus still offer what we believe are attractive
valuations. In addition, many European companies are at an early stage of what
we expect to be a sustained upturn in earnings.
Near term, the Japanese market continues to suffer from a liquidity crisis in
the domestic economy and from the strong yen. However, during the first few
weeks of July, the Nikkei 225 stock index rallied over 12% on news
- --------------------------------------------------------------------------------
28
<PAGE>
that the Bank of Japan cut short-term interest rates -- a sign that many believe
indicates the Japanese government's commitment to provide monetary and fiscal
stimulus to help improve Japan's economy. In addition, the recent decline in the
yen and signs of some resolution in the trade discussions with the U.S. are
encouraging. However, real evidence of economic recovery and strong earnings
growth will be necessary to produce a sustained market upturn.
Finally, we expect Asian stock markets to benefit from a combination of better
liquidity, a stable and strengthening U.S. dollar and the prospect for lower
interest rates worldwide during the second half of 1995.
/s/Roderick D. Jack
Roderick D. Jack
Portfolio Manager, London
/s/Marcel Jongen
Marcel Jongen
Portfolio Manager, London
/s/Shogo Maeda
Shogo Maeda
Portfolio Manager, Tokyo
/s/Warwick M. Negus
Warwick M. Negus
Portfolio Manager, Hong Kong
August 31, 1995
- --------------------------------------------------------------------------------
29
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund
July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
================================================================================
<S> <C> <C>
Common Stocks--94.4%
Austrian Schilling--2.9%
105,400 Oester Elektrizita (Utility) $ 7,739,464
- --------------------------------------------------------------------------------
Belgian Franc--2.2%
20,342 Colruyt SA (Food-Retailer) 5,723,197
- --------------------------------------------------------------------------------
British Pound Sterling--10.0%
764,039 British Airport Authority (Airport Operator) 6,409,723
682,474 Electrocomponents (Electrical Equipment Distributor) 6,995,958
1,625,700 Rentokil Group (Commercial Services) 7,377,737
537,000 Siebe (Industrial/Electronic Equipment Manufacturer) 5,856,544
- --------------------------------------------------------------------------------
26,639,962
- --------------------------------------------------------------------------------
Danish Krone--3.0%
141,900 TeleDanmark AS (Telecommunications) 7,934,590
- --------------------------------------------------------------------------------
French Franc--2.3%
187,630 Seita (Tobacco) 6,192,241
- --------------------------------------------------------------------------------
Hong Kong Dollar--4.8%
1,843,800 Consolidated Electric Power Asia (Utility) 4,300,985
370,000 HSBC Holdings (Financial) 5,020,742
4,706,000 National Mutual Asia Ltd. (Financial) 3,344,964
- --------------------------------------------------------------------------------
12,666,691
- --------------------------------------------------------------------------------
Irish Pound--2.3%
958,060 Bank of Ireland (Banking) 5,985,725
- --------------------------------------------------------------------------------
Japanese Yen--37.2%
326,000 Aiwa Co. (Audio-Visual Equipment Manufacturer) 8,304,087
87,000 Futaba Corp. (Capital Goods) 4,294,351
301,000 Hoya Corp. (Optical Glass Manufacturing) 8,996,264
196,000 Inaba Denkisangyo (Industrial) 5,014,831
319,000 Max Co. (Office Equipment Manufacturer) 6,717,310
209,000 Mirai Industry Co. (Miscellaneous Manufacturer) 4,732,254
1,228,000 Mitsubishi Electric CP (Electrical Equipment) 9,078,275
1,268,000 Mitsubishi Heavy Industry (Aerospace/Defense) 9,144,300
1,208,000 Mitsui Marine & Fire (Insurance) 8,465,436
363,000 Santen Pharmaceutical Co. (Pharmaceuticals) 9,780,822
14,400 Sanyo Shinpan Financial (Financial) 1,173,780
315,000 Shimachu Co. (Retail-Furniture) 8,487,490
311,000 Taikisha Ltd. (Capital Goods) 4,894,034
54,000 Tostem Corp. (Building Materials) 1,748,443
259,000 Yamatake Honeywell (Industrial/Electronic Equipment
Manufacturer) 3,753,198
115,200 York Benimaru Co. (Food Retailer) 4,460,365
- --------------------------------------------------------------------------------
99,045,240
- --------------------------------------------------------------------------------
Netherlands Guilder--4.9%
98,590 Randstad Holdings (Temporary Help Services) 6,991,748
68,165 Wolters Kluwer (Publishing) 6,174,446
- --------------------------------------------------------------------------------
13,166,194
- --------------------------------------------------------------------------------
Philippine Peso--3.1%
117,000 Philippine Long Distance Telephone Co. ADR
(Telecommunications) 8,116,875
- --------------------------------------------------------------------------------
South Korean Won--3.4%
10,500 Korea Mobile Telecommunications
(Telecommunications) 9,170,596
- --------------------------------------------------------------------------------
Spanish Peseta--6.0%
45,725 Banco Popular (Financial) 7,410,504
253,535 Repsol SA (Oil & Gas-Production and Distribution) 8,562,997
- --------------------------------------------------------------------------------
15,973,501
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund
July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
[S] [C] [C]
Common Stocks (continued)
Swedish Krona--7.6%
304,340 Hoganas Ag (Metals-Miscellaneous) $ 6,139,014
150,490 Securitas (Commercial Services) 5,176,529
452,000 Volvo (Car and Truck Manufacture) 8,957,590
- --------------------------------------------------------------------------------
20,273,133
- --------------------------------------------------------------------------------
Swiss Franc--2.3%
4,931 Cie Financiere Richemont Ag
(Consumer Goods-Luxury Products) 6,173,933
- --------------------------------------------------------------------------------
Thai Baht--2.4%
572,300 Bangkok Bank (Financial) 6,379,435
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $224,432,664) $251,180,777
================================================================================
Preferred Stock--3.8%
Deutsche Mark--3.8%
13,771 Fresenius Ag (Health Care) $ 10,241,988
- --------------------------------------------------------------------------------
Total Preferred Stock
(Cost $4,266,827) $ 10,241,988
================================================================================
[CAPTION]
Principal
Amount Description Value
================================================================================
[S] [C] [C]
Short-Term Obligation--1.6%
- --------------------------------------------------------------------------------
$4,356,357 State Street Bank & Trust
Euro-Time Deposit
5.75%, 08/01/95 $ 4,356,357
- --------------------------------------------------------------------------------
Total Short-Term Obligation
(Cost $4,356,357) $ 4,356,357
================================================================================
Options--0.0%
JPY36,097,529 Nikkei 300 Call @ 328.55 expiring 12/22/95 $ 8,173
- --------------------------------------------------------------------------------
Total Options (Cost $7,795,054) $ 8,173
================================================================================
Total Investments (Cost $240,850,902)(a) $265,787,295
================================================================================
[CAPTION]
Shares Description Value
===============================================================================
[S] [C] [C]
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $ 37,967,861
Gross unrealized loss for investments in
which cost exceeds value $(13,033,508)
- -------------------------------------------------------------------------------
Net unrealized gain $ 24,934,353
================================================================================
[CAPTION]
Common and Preferred Stock Industry Concentrations
================================================================================
[S] [C]
Telecommunications 9.5%
Financial 8.8%
Capital Goods 6.1%
Commercial Services 4.7%
Utility 4.5%
Health Care 3.8%
Pharmaceuticals 3.7%
Industrial/Electronic Equipment Manufacturer 3.6%
Aerospace/Defense 3.4%
Electrical Equipment 3.4%
Optical Glass Manufacturing 3.4%
Car and Truck Manufacture 3.4%
Oil & Gas-Production and Distribution 3.2%
Retail-Furniture 3.2%
Insurance 3.2%
Audio-Visual Equipment Manufacturer 3.1%
Temporary Help Services 2.6%
Office Equipment Manufacturer 2.5%
Airport Operator 2.4%
Tobacco 2.3%
Publishing 2.3%
Consumer Goods-Luxury Products 2.3%
Metals-Miscellaneous 2.3%
Banking 2.2%
Food-Retailer 2.2%
Industrial 1.9%
Miscellaneous Manufacturer 1.8%
Retail-Convenience 1.7%
Building Materials 0.7%
- --------------------------------------------------------------------------------
Total Common and Preferred Stock 98.2%
================================================================================
(a) The aggregate cost for federal income tax purposes is $240,852,942.
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.
31
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund
- --------------------------------------------------------------------------------
Objective and Investment Approach
The fund seeks long-term capital appreciation by investing in a limited number
of carefully selected companies located in the 12 Asian markets that make up the
fund's investment mandate, to the extent permitted by applicable local laws.
Those countries include China, Hong Kong, India, Indonesia, Malaysia, Pakistan,
the Philippines, Singapore, South Korea, Sri Lanka, Taiwan and Thailand. While
we put our primary emphasis on selecting individual investments, we also monitor
the economic and political climate of every country in the region and carefully
manage risk by diversifying the fund's investments across countries and
industries.
We use firsthand fundamental research in our search for well-managed companies
whose stock prices are, in our opinion, undervalued in the marketplace. Other
characteristics we look for in investment candidates include a strong market
position, high or improving returns on invested capital, above-average growth
potential, strong free cash flow that is wisely allocated and a skilled
management team dedicated to maximizing shareholder returns. Our investment
process includes face-to-face meetings with senior management as well as
frequent contact with a company's customers, suppliers and competitors.
Asian Markets Volatile, Punctuated by Sharp Rallies
During the period under review, Asian stock markets experienced mixed
performance and low volumes, despite stable economic fundamentals in the region:
low core inflation, high productivity and solid growth. The period was
punctuated by two strong rallies, in February and May, fueled in part by foreign
cash that had been sitting on the sidelines. In addition, indications that U.S.
interest rates had stabilized and the strong performance of the U.S. equity
market encouraged increased investor interest in the relatively inexpensive
markets of Asia.
In contrast to some other emerging markets, Asian currencies showed resilience
due to the regions' large foreign exchange reserves and well-regulated
economies. The strength of the yen forced interest rates to rise in some Asian
countries; in others (i.e., the Philippines, Indonesia and Thailand), local
interest rates moved up due to intervention by their central banks. Generally,
the region has been relatively stable politically, with the exceptions of India,
where the Congress Party lost several key state elections, and Thailand, which
experienced a change of government.
Performance Review: Good Stock Performance in Various Markets and Sectors
During the six-month period ended July 31, 1995, the Goldman Sachs Asia Growth
Fund had a total return of 17.58% based on net asset value, slightly
underperforming its benchmark, the Morgan Stanley Capital International Combined
Asia (ex Japan) Index, which returned 17.92% for the same period.
For the 12 months ended July 31, the fund placed in the top 6% of its peers
based on total return, ranking 4th out of 63 Pacific region funds tracked by
Lipper Analytical Services, Inc. (Lipper rankings do not take sales charges into
account.)
Along with the Asian markets in general, the fund started the period with
strong performance in February, then retreated temporarily, rebounded again in
May and outperformed the benchmark in July. Over the course of the period, we
continued to emphasize high-quality companies that we believe have the potential
to realize gains in varied market environments.
. The majority of the fund's positive performance came from successful stock
selection. The top-performing stocks during the period included Hong Kong
Electric, Philippine Long Distance Telephone, Mulia Industrinado (Indonesia)
and Tata Engineering and Locomotive Company (India). Most of these stocks did
well because of market recognition of their value and strong growth (as
measured by Gross Domestic Product) within their own countries.
. In January, we overweighted the portfolio in Hong Kong based on our belief
that the market was oversold and therefore cheap. Our analysis proved
- --------------------------------------------------------------------------------
32
<PAGE>
correct: the Hong Kong market rose approximately 14% in February and the
portfolio benefited.
. In terms of currency, the portfolio was primarily unhedged during the period,
a strategy that worked to our benefit as Asian currencies performed well
against the dollar and continued to appreciate.
. During the period, we used options on several occasions, selling calls on
existing holdings; these strategies were largely successful.
Portfolio Composition: An Emphasis on Companies
Fueled by Domestic Sales
As of July 31, 89% of the fund's net assets were invested in common stocks and
6% was in cash equivalents. By country, our heaviest concentrations were in Hong
Kong (39.0%), Thailand (11.6%), Malaysia (9.8%), Singapore (7.3%) and the
Philippines (5.4%). Compared with the Index, the portfolio was overweighted in
Hong Kong, Indonesia and the Philippines and underweighted in Singapore,
Malaysia and South Korea.
The portfolio was invested in a wide range of industries including banking, a
sector that has provided strong earnings momentum during the period, as well as
telecommunications, food, automotive, manufacturing and utilities.
During the period, our focus was on Asian companies with primary sales from
within their own countries, rather than from sales driven by exports.
Accordingly, we have added several new positions described below.
. Swire Pacific (Hong Kong), a diversified holding company with principal
activities in aviation, property, consumer products, trading, marine services,
insurance and hotels, earns the bulk of its profits from its 51.8% stake in
Cathay Pacific Airways and its property division. Over the next few years, its
consumer properties division is expected to experience rapid growth and to
continue to diversify its range of consumer products manufactured in China.
. HSBC Holdings (Hong Kong), the holding company for the Hong Kong & Shanghai
Banking Corporation, ranks among the top 15 banks in the world in terms of
assets. It is one of the strongest and best capitalized financial and banking
service organizations in the world, with more than 3,000 offices located in 65
countries in Europe, the Asia-Pacific region, the Middle East and the
Americas. The company maintains a dominant position in Hong Kong and in the
profitable Asia-Pacific region.
. Korea Mobile Telecommunications (Korea), the sole provider of cellular
services in Korea, also commands 55% of the Korean paging market. Despite the
possibility of competition, KMT is believed to be well positioned to
experience exponential growth in the years to come. The company is also
developing new cellular technology that should enable it to expand into other
Asian and international markets.
During the period, we sold several stocks that had reached our target prices.
These included a good portion of our holdings in Consolidated Electric Power of
Asia (Hong Kong), which builds and operates power stations, based on our
evaluation that further appreciation was unlikely for several years. Similarly,
we sold Indostat (Indonesia) at a profit on the belief that significant
appreciation would be difficult due to the fact that the major domestic
telephone service provider in Indonesia will be privatizing later this year.
Not all the stocks in our portfolio performed as well as we anticipated. One
notable disappointment was Kim Hin (Malaysia), a leading producer of floor and
tile products in Malaysia, which saw its profits decline as a result of an
overly ambitious expansion plan and a price war from increased competition. As a
result, we have sold the stock. We also liquidated Astra International
(Indonesia), which sells Japanese cars in Indonesia, as it felt the impact of
the appreciation of the Japanese yen relative to the Indonesian rupiah. The
higher cost of imported cars, coupled with an increase in interest rates, is
expected to result in a lower rate of growth.
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
- --------------------------------------------------------------------------------
Top 10 Holdings as of July 31, 1995
<TABLE>
<CAPTION>
Percentage
of Total
Company Country Line of Business Net Assets
<S> <C> <C> <C>
Hutchison Whampoa Hong Kong Conglomerate 5.6%
Swire Pacific Hong Kong Air Transportation 4.8%
HSBC Holdings Hong Kong Banking and Finance 4.4%
Philippine Long Distance Philippines Telecommunications 4.0%
Industrial Finance Corp. Thailand Banking and Finance 4.0%
Sun Hung Kai Hong Kong Property 3.9%
Mulia Industrindo Indonesia Manufacturing 3.9%
Metropolitan Bank & Trust Co. Philippines Banking and Finance 3.6%
Hong Kong Electric Hong Kong Electric Utility 3.5%
Indofood Indonesia Food and Beverage 3.2%
</TABLE>
Outlook: A Stronger Second Half
We believe the Asian markets will do better in the second half of 1995, due to
a number of factors including the expected cyclical recovery in the U.S. dollar
and the prospect of lower interest rates worldwide. We see general earnings
growth in the region reaching approximately 15% by year end, which, though
slightly lower than last year's 17.5% rate, is still quite respectable. Our
efforts will continue to focus on stock selection, with emphasis on attractive
valuations and companies that deliver a high return on capital. Our research
indicates that some interesting opportunities for the balance of the year may be
found in Hong Kong, as well as in some of the smaller Asian markets, namely
Thailand, Indonesia and the Philippines. In India, the cancellation of a major
power project by the newly elected government in the state of Maharashtra has
dampened foreign investment in the Indian market. We will continue to spend time
in India, assessing potential opportunities.
As always, we urge investors to view the fund as a long-term investment
opportunity and to be prepared to withstand periods of volatility. Over time,
we believe the region's potential will be realized as foreign investment
increases and economic growth continues.
/s/Warwick Negus
Warwick M. Negus
Portfolio Manager, Hong Kong
August 31, 1995
- --------------------------------------------------------------------------------
34
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
================================================================================
<S> <C> <C>
Common Stocks--89.2%
Hong Kong Dollar--39.0%
1,715,800 Consolidated Electric Power Asia (Utility) $ 4,002,402
2,625,600 HKR International Ltd. (Real Estate) 2,001,968
1,614,000 Hong Kong Electric (Utility) 5,850,773
2,657,824 Hong Kong Land Holdings (Real Estate) 5,156,179
1,158,000 Hong Kong Telecommunications Ltd. (Telecommunications) 2,125,073
542,000 HSBC Holdings (Banking) 7,354,709
1,845,000 Hutchison Whampoa (Conglomerate) 9,299,035
6,686,000 JCG Holdings Ltd. (Finance) 5,184,352
4,772,000 National Mutual Asia Ltd. (Life Insurance) 3,391,876
6,169,400 San Miguel Brewery Ltd. (Breweries) 3,946,617
857,000 Sun Hung Kai Properties (Real Estate) 6,451,395
1,017,000 Swire Pacific (Transportation-Air) 7,951,576
8,123,000 Winton Holdings (Financial Services) 1,994,559
- --------------------------------------------------------------------------------
64,710,514
- --------------------------------------------------------------------------------
Indian Rupee--6.2%
132,500 Larsen & Toubro Ltd. GDR (Engineering) 2,865,975
116,600 Ranbaxy Laboratories Ltd. GDS (Pharmaceuticals) 3,338,257
175,000 Tata Engineering & Locomotive Company Ltd. GDR
(Autos and Trucks) 3,829,000
- --------------------------------------------------------------------------------
10,033,232
- --------------------------------------------------------------------------------
Indonesian Rupiah--7.1%
1,183,625 Indofoods Sukses Makmur (Food Processing) 5,298,232
2,905,272 Mulia Industrindo (Manufacturing-Diversified Industrial) 6,502,399
- --------------------------------------------------------------------------------
11,800,631
- --------------------------------------------------------------------------------
Malaysian Ringgit--9.8%
875,000 Commerce Asset Holdings (Financial Services) 5,233,978
364,000 Kim Hin Industry (Building Materials 1,451,556
460,000 Rashid Hussain Berhad (Financial Services) 1,591,048
1,245,000 Road Builder Berhad (Holding Company-Diversified) 4,483,520
496,000 UTD Engineers Berhad (Engineering) 3,552,228
- --------------------------------------------------------------------------------
16,312,330
- --------------------------------------------------------------------------------
Philippine Peso--5.4%
130,000 Advanced Semiconductor GDR (Electronics-Semiconductors) 1,950,000
18,286 Benpres Holdings Corp. GDR (Telecommunications) 137,145
306,588 Metropolitan Bank & Trust (Banking) 5,981,041
13,000 Philippine Long Distance Telephone Co. ADR
(Telecommunications) 905,384
- --------------------------------------------------------------------------------
8,973,570
- --------------------------------------------------------------------------------
Singapore Dollar--7.3%
467,100 Far East Levingston Shipbuilding (Oil & Gas) 2,329,634
823,500 Overseas Union Bank (Banking) 5,200,431
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
July 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Shares Description Value
===============================================================================
<S> <C> <C>
Common Stocks (continued)
Singapore Dollar (continued)
800 Singapore Press Holdings (Publishing) $ 11,023
1,415,000 Straits Steamship Land (Real Estate) 4,528,812
- -------------------------------------------------------------------------------
12,069,900
- -------------------------------------------------------------------------------
South Korean Won--2.8%
5,320 Korea Mobile Telecommunications Corp. 4,646,436
(Telecommunications)
263 Samsung Electronics (Electronics) 37,183
- -------------------------------------------------------------------------------
4,683,619
- -------------------------------------------------------------------------------
Thai Baht--11.6%
4,199,300 Bangkok Metropolitan Bank PLC (Banking) 4,873,810
2,421,000 Industrial Finance Corp. (Financial) 6,551,171
804,200 Kiatnakin Finance & Securities PLC (Financial Services) 3,280,460
2,768,000 Siam Panich Leasing (Financial Services) 4,555,574
- -------------------------------------------------------------------------------
19,261,015
- -------------------------------------------------------------------------------
Total Common Stocks (Cost $139,393,384) $147,844,811
===============================================================================
Preferred Stocks--3.5%
Philippine Peso--3.5%
143,400 Philippine Long Distance
Telephone 5.75% Convertible
Preferred (Telecommunications) $ 5,744,604
- -------------------------------------------------------------------------------
Total Preferred Stocks (Cost $6,208,086) $ 5,744,604
===============================================================================
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------------------------
<S> <C> <C>
Warrants--0.3%
Indian Rupee
75,000 Tata Engineering & Locomotive Company Ltd. GDR
(Autos and Trucks) $ 487,500
- -------------------------------------------------------------------------------
Total Warrants (Cost $110,550) $ 487,500
===============================================================================
Corporate Bonds--0.9%
$1,047,000 Kiatnakin Finance & Securities PLC
Convertible 4.00%, 11/30/03 $ 879,480
1,012,000 UTD Engineers Berhad Convertible
4.00%, 05/22/99 621,819
- -------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $1,431,084) $ 1,501,299
===============================================================================
Short-Term Obligations--5.6%
$9,258,045 State Street Bank & Trust
Euro-Time Deposit 5.75%, 08/01/95 $ 9,258,045
- -------------------------------------------------------------------------------
Total Short-Term Obligations
(Cost $9,258,045) $ 9,258,045
===============================================================================
Total Investments
(Cost $156,401,149)(a) $164,836,259
===============================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $ 14,459,128
Gross unrealized loss for investments in
which cost exceeds value (6,185,332)
- -------------------------------------------------------------------------------
Net unrealized gain $ 8,273,796
===============================================================================
</TABLE>
(a) The aggregate cost for federal income tax purposes is $156,498,213.
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.
36
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common and Preferred Stock Industry Concentrations
==================================================
<S> <C>
Banking 14.0%
Real Estate 10.8%
Financial Services 10.1%
Telecommunications 8.2%
Utility 5.9%
Conglomerate 5.6%
Transportation-Air 4.8%
Financial 4.0%
Engineering 3.9%
Manufacturing-Diversified Industrial 3.9%
Food Processing 3.2%
Finance 3.1%
Holding Company-Diversified 2.7%
Autos and Trucks 2.6%
Breweries 2.4%
Life Insurance 2.1%
Pharmaceuticals 2.0%
Oil & Gas 1.4%
Electronics-Semiconductors 1.2%
Building Materials 0.9%
Electronics 0.1%
Publishing 0.1%
- --------------------------------------------------
Total Common and Preferred Stocks 93.0%
==================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Fund Select Equity Fund
==================================
<S> <C> <C>
Assets:
Investments in securities, at value (identified cost $30,515,177, $113,391,835,
$290,555,967, $867,920,619, $322,435,981, $240,850,902 and $156,401,149, respectively) $31,929,574 $138,968,765
Cash 20,494 37,725
Receivables:
Investment securities sold 1,654,917 --
Forward foreign currency exchange contracts -- --
Fund shares sold 788,488 166,677
Dividends and interest 165,589 145,667
Deferred organization expenses, net 56,412 25,099
Other assets 45,295 24,050
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 34,660,769 139,367,983
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Options written, at value (a) -- --
Payables:
Investment securities purchased 4,522,868 --
Forward foreign currency exchange contracts -- --
Fund shares repurchased 2,236 55,146
Investment advisory fees 11,674 46,378
Administration fees 3,502 17,392
Distribution fees -- 25,645
Authorized dealer service fees 5,837 25,645
Transfer agent fees 35,784 56,608
Accrued expenses and other liabilities 78,928 39,828
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,660,829 266,642
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid-in capital 27,784,489 110,100,345
Accumulated undistributed net investment income (loss) 92,753 728,121
Accumulated undistributed net realized gain (loss) on investment, option and futures
transactions 708,301 2,695,945
Accumulated net realized foreign currency gain -- --
Net unrealized gain (loss) on investments, options and futures 1,414,397 25,576,930
Net unrealized gain on translation of assets and liabilities denominated in foreign currencies -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets $29,999,940 $139,101,341
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class A Institutional
-------- -------------
<S> <C> <C> <C>
Total shares of beneficial interest outstanding, $.001 par value (100,000,000 shares
authorized)(b) 1,826,773 5,264,421 2,445,264
Net asset value and redemption price per share (net assets/shares outstanding) $16.42 $18.04 $18.06
===================================================================================================================================
Maximum public offering price per share (NAV x 1.0582)(c) $17.38 $19.09 $18.06
===================================================================================================================================
</TABLE>
(a)Premiums received are $1,758,487 and $65,448 for the Goldman Sachs Capital
Growth Fund and the Goldman Sachs Small Cap Equity Fund, respectively.
(b)The Goldman Sachs Select Equity Fund Institutional share class has authorized
shares of 50,000,000.
(c)The Goldman Sachs Select Equity Fund's Institutional shares maximum public
offering price per share is equivalent to the net asset value per share.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth & Income Fund Capital Growth Fund Small Cap Equity Fund International Equity Fund Asia Growth Fund
===================================================================================================================================
<S> <C> <C> <C> <C>
$324,949,279 $1,063,951,087 $296,194,568 $265,787,295 $ 164,836,259
63,994 68,613 7,860 -- 2,080,351
-- 30,638,738 2,829,293 1,864,765 3,894,404
-- -- -- 488,733 --
3,118,256 2,231,043 531,613 808,145 1,032,897
401,852 571,485 38,897 523,276 152,445
48,120 -- 41,631 41,026 124,506
-- 6,625 12,655 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
328,581,501 1,097,467,591 299,656,517 269,513,240 172,120,862
- -----------------------------------------------------------------------------------------------------------------------------------
-- 1,438,125 -- -- --
3,926,140 54,126,128 1,240,575 -- 5,799,403
-- -- -- 2,429,068 --
242,819 13,249,583 268,396 234,575 55,135
145,443 663,302 188,963 170,505 103,888
39,666 221,101 62,986 56,835 34,630
-- -- -- -- --
66,110 221,101 62,986 56,835 34,630
117,841 243,820 229,781 189,553 79,750
7,213 21,199 149,817 253,259 224,085
- -----------------------------------------------------------------------------------------------------------------------------------
4,545,232 70,184,359 2,203,504 3,390,630 6,331,521
- -----------------------------------------------------------------------------------------------------------------------------------
279,376,544 767,160,205 322,420,302 230,050,883 160,091,510
457,981 3,479,902 (721,126) 823,303 1,609,760
9,808,432 60,292,296 1,929,802 (14,579,950) (4,851,489)
-- -- -- 26,149,475 561,703
34,393,312 196,350,829 (26,175,965) 6,858,344 7,934,180
-- -- -- 16,820,555 443,677
- -----------------------------------------------------------------------------------------------------------------------------------
$324,036,269 $1,027,283,232 $297,453,013 $266,122,610 $ 165,789,341
===================================================================================================================================
17,082,060 60,777,258 16,803,939 15,600,364 10,593,838
$18.97 $16.90 $17.70 $17.06 $15.65
===================================================================================================================================
$20.07 $17.88 $18.73 $18.05 $16.56
===================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
39
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Operations
For the Six Months Ended July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund Fund
=======================================
<S> <C> <C>
Investment income:
Dividends (net of withholding taxes)(a) $ 110,609 $ 1,173,804
Interest 261,291 100,137
- --------------------------------------------------------------------------------------------------------------------
Total income 371,900 1,273,941
- --------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (b) 40,841 253,505
Administration fees (b) 12,252 115,986
Distribution fees (c) 10,103 132,503
Authorized dealer service fees 10,318 48,815
Custodian fees 30,316 27,885
Transfer agent fees 40,882 55,142
Professional fees 35,933 23,426
Amortization of deferred organization expenses 6,660 15,296
Director fees 560 1,624
Other 13,766 43,752
- --------------------------------------------------------------------------------------------------------------------
Total expenses 201,631 717,934
Less--expenses reimbursable by Goldman Sachs (119,948) (24,050)
- --------------------------------------------------------------------------------------------------------------------
Net expenses 81,683 693,884
- --------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 290,217 580,057
- --------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment, option, futures and
foreign currency transactions:
Net realized gain (loss) from:
Investment transactions 708,166 2,087,790
Options transactions -- --
Futures transactions -- --
Foreign currency related transactions -- --
Net change in unrealized gain (loss) on:
Investments 1,344,286 20,921,012
Options -- --
Translation of assets and liabilities denominated in foreign currencies -- --
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investment, option, futures and
foreign currency transactions 2,052,452 23,008,802
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $2,342,669 $23,588,859
====================================================================================================================
</TABLE>
(a)For the Select Equity, Growth and Income, Small Cap Equity, International
Equity and Asia Growth Funds taxes withheld were $20,635, $6,882, $11,864,
$361,560 and $100,331.
(b)For the Select Equity Fund, the Advisor and Administrator each waived fees of
$21,532.
(c)For the six months ended July 31, 1995, the distributor waived fees of
$20,421, $85,724, $315,413, $1,195,769, $398,222, $340,358 and $181,136 for
the Balanced, Select Equity, Growth and Income, Capital Growth, Small Cap
Equity, International Equity and Asia Growth Funds.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth & Income Capital Growth Small Cap Equity International Equity Asia Growth
Fund Fund Fund Fund Fund
=============================================================================================================
<S> <C> <C> <C> <C>
$3,241,111 $ 5,664,862 $ 431,994 $ 3,374,603 $ 2,262,656
541,958 3,404,604 1,083,414 71,562 453,425
- --------------------------------------------------------------------------------------------------------
3,783,069 9,069,466 1,515,408 3,446,165 2,716,081
- --------------------------------------------------------------------------------------------------------
693,908 3,587,307 1,194,667 1,021,074 543,411
189,248 1,195,769 398,222 340,358 181,137
191,415 770,488 272,353 228,691 114,156
123,998 425,281 125,869 111,667 66,980
29,691 61,210 27,945 345,030 155,921
216,785 251,329 130,246 68,362 100,495
21,601 41,687 30,926 43,758 33,362
9,477 13,155 9,268 8,705 15,682
2,592 14,353 5,375 5,077 1,398
59,019 80,010 41,663 26,294 37,748
- --------------------------------------------------------------------------------------------------------
1,537,734 6,440,589 2,236,534 2,199,016 1,250,290
-- -- -- -- --
- --------------------------------------------------------------------------------------------------------
1,537,734 6,440,589 2,236,534 2,199,016 1,250,290
- --------------------------------------------------------------------------------------------------------
2,245,335 2,628,877 (721,126) 1,247,149 1,465,791
- --------------------------------------------------------------------------------------------------------
9,642,411 56,748,352 6,479,817 (3,538,394) (1,876,183)
76,997 -- -- (545,138) (249,473)
-- -- -- -- (278,144)
-- -- -- 13,862,401 633,863
34,785,308 142,264,910 22,660,675 23,537,040 23,223,340
(76,997) 320,362 65,448 901,802 --
-- -- -- 8,372,305 128,526
- --------------------------------------------------------------------------------------------------------
44,427,719 199,333,624 29,205,940 42,590,016 21,581,929
- --------------------------------------------------------------------------------------------------------
$46,673,054 $201,962,501 $28,484,814 $43,837,165 $23,047,720
========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
41
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Six Months Ended July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund Fund
========================================
<S> <C> <C>
From operations:
Net investment income (loss) $ 290,217 $ 580,057
Net realized gain (loss) on investment, option
and futures transactions 708,166 2,087,790
Net realized gain on foreign currency
related transactions -- --
Net change in unrealized gain on
investments, options and futures 1,344,286 20,921,012
Net change in unrealized gain on
translation of assets and liabilities
denominated in foreign currencies -- --
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 2,342,669 23,588,859
- ---------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (217,747) --
- ---------------------------------------------------------------------------------------
Total distributions to shareholders (217,747) --
- ---------------------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 21,427,970 58,021,459
Reinvestment of dividends and distributions 196,693 --
Cost of shares repurchased (1,259,213) (37,476,486)
- ---------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from share transactions 20,365,450 20,544,973
- ---------------------------------------------------------------------------------------
Total increase (decrease) 22,490,372 44,133,832
Net assets:
Beginning of period 7,509,568 94,967,509
=======================================================================================
End of period $29,999,940 $139,101,341
=======================================================================================
Accumulated undistributed net investment
income (loss) $ 92,753 $ 728,121
=======================================================================================
Summary of share transactions:
<CAPTION>
Class A Institutional
------------ -------------
<S> <C> <C> <C>
Shares sold 1,366,941 904,181 2,445,264
Reinvestment of dividends and distributions 12,512 -- --
Shares repurchased (80,784) (2,141,966) --
- --------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 1,298,669 (1,237,785) 2,445,264
============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth & Income Capital Growth Small Cap Equity International Equity Asia Growth
Fund Fund Fund Fund Fund
=============================================================================================================
<S> <C> <C> <C> <C>
$ 2,245,335 $ 2,628,877 $ (721,126) $ 1,247,149 $ 1,465,791
9,719,408 56,748,352 6,479,817 (4,083,532) (2,403,800)
-- -- -- 13,862,401 633,863
34,708,311 142,585,272 22,726,123 24,438,842 23,223,340
-- -- -- 8,372,305 128,526
- --------------------------------------------------------------------------------------------------------
46,673,054 201,962,501 28,484,814 43,837,165 23,047,720
- --------------------------------------------------------------------------------------------------------
(1,816,836) -- -- -- --
- --------------------------------------------------------------------------------------------------------
(1,816,836) -- -- -- --
- --------------------------------------------------------------------------------------------------------
102,097,485 76,450,174 32,261,803 19,074,752 46,004,241
1,694,146 -- -- -- --
(18,383,823) (113,234,248) (82,780,814) (71,875,776) (27,560,899)
-------------------------------------------------------------------------------------------------------
85,407,808 (36,784,074) (50,519,011) (52,801,024) 18,443,342
- --------------------------------------------------------------------------------------------------------
130,264,026 165,178,427 (22,034,197) (8,963,859) 41,491,062
193,772,243 862,104,805 319,487,210 275,086,469 124,298,279
========================================================================================================
$324,036,269 $1,027,283,232 $297,453,013 $266,122,610 $165,789,341
========================================================================================================
$ 457,981 $ 3,479,902 $ (721,126) $ 823,303 $ 1,609,760
========================================================================================================
5,756,404 4,956,954 1,901,872 1,195,342 3,067,938
95,503 -- -- -- --
(1,037,033) (7,228,297) (4,887,354) (4,535,105) (1,812,094)
- --------------------------------------------------------------------------------------------------------
4,814,874 (2,271,343) (2,985,482) (3,339,763) 1,255,844
========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
43
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended January 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund(a) Fund (Class A)
===============================
From operations:
<S> <C> <C>
Net investment income (loss) $ 46,198 $ 1,229,019
Net realized gain (loss) on investment,
option and futures transactions 135 3,907,236
Net realized loss on foreign currency related
transactions -- --
Net change in unrealized gain (loss) on
investments, options and futures 70,111 (6,127,762)
Net change in unrealized gain on translation of
assets and liabilities denominated in foreign
currencies -- --
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 116,444 (991,507)
- --------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (31,952) (1,194,733)
In excess of net investment income -- --
From net realized gain on investment, option and
futures transactions -- (5,666,531)
In excess of net realized gains -- --
- --------------------------------------------------------------------------------
Total distributions to shareholders (31,952) (6,861,264)
- --------------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 7,557,294 22,943,423
Reinvestment of dividends and distributions 29,834 6,328,837
Cost of shares repurchased (162,052) (19,220,744)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from share
transactions 7,425,076 10,051,516
- --------------------------------------------------------------------------------
Additional paid-in-capital -- --
- --------------------------------------------------------------------------------
Total increase 7,509,568 2,198,745
Net assets:
Beginning of year -- 92,768,764
- --------------------------------------------------------------------------------
End of year $7,509,568 $ 94,967,509
================================================================================
Accumulated undistributed (distributions in excess
of) net investment income $ 20,283 $ 148,064
================================================================================
Summary of share transactions:
Shares sold 537,644 1,499,807
Reinvestment of dividends and distributions 2,141 430,647
Shares repurchased (11,681) (1,250,288)
- --------------------------------------------------------------------------------
Net increase in shares outstanding 528,104 680,166
================================================================================
</TABLE>
(a) For the period from October 12, 1994 (commencement of operations)
to January 31, 1995.
(b) For the period from July 8, 1994 (commencement of operations) to January 31,
1995.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth & Income Capital Growth Small Cap International Asia Growth
Fund Fund Equity Fund Equity Fund Fund(b)
================================================================================
<S> <C> <C> <C> <C>
$1,435,147 $ 1,436,995 $ (1,802,810) $ 1,275,871 $ 1,009,860
3,170,626 56,963,691 10,050,260 (787,439) (2,447,689)
-- -- -- (15,347,388) (72,160)
(2,594,309) (98,546,227) (74,013,642) (56,248,493) (15,289,160)
-- -- -- 15,093,970 315,151
- --------------------------------------------------------------------------------
2,011,464 (40,145,541) (65,766,192) (56,013,479) (16,483,998)
- --------------------------------------------------------------------------------
(1,435,147) (647,525) -- -- (883,487)
(750,732) -- -- -- --
(3,710,152) (94,255,733) (13,272,809) (11,299,568) --
-- -- (4,550,015) -- --
- --------------------------------------------------------------------------------
(5,896,031) (94,903,258) (17,822,824) (11,299,568) (883,487)
- --------------------------------------------------------------------------------
179,853,719 220,153,475 198,396,818 145,195,062 148,278,779
5,475,966 85,073,760 16,371,394 9,972,049 793,314
(29,980,986) (141,755,523) (72,766,153) (81,858,604) (7,406,329)
- --------------------------------------------------------------------------------
155,348,699 163,471,712 142,002,059 73,308,507 141,665,764
- --------------------------------------------------------------------------------
779,879 -- -- -- --
- --------------------------------------------------------------------------------
152,244,011 28,422,913 58,413,043 5,995,460 124,298,279
41,528,232 833,681,892 261,074,167 269,091,009 --
- --------------------------------------------------------------------------------
$193,772,243 $ 862,104,805 $319,487,210 $275,086,469 $124,298,279
================================================================================
$ 29,482 $ 851,025 -- $ (423,846) $ 143,969
================================================================================
11,178,610 14,260,854 10,110,654 8,468,691 9,803,931
355,278 5,913,973 971,295 655,625 52,995
(1,896,509) (9,348,284) (3,925,959) (5,047,356) (518,932)
- --------------------------------------------------------------------------------
9,637,379 10,826,543 7,155,990 4,076,960 9,337,994
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
45
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements
July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
1. Organization
Goldman Sachs Equity Portfolios, Inc. (the "Company") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. The Company consists of seven funds: Goldman
Sachs Balanced Fund ("Balanced Fund"), Goldman Sachs Select Equity Fund ("Select
Equity Fund"), Goldman Sachs Growth and Income Fund ("Growth and Income Fund"),
Goldman Sachs Capital Growth Fund ("Capital Growth Fund"), Goldman Sachs Small
Cap Equity Fund ("Small Cap Equity Fund"), Goldman Sachs International Equity
Fund ("International Equity Fund") and Goldman Sachs Asia Growth Fund ("Asia
Growth Fund"), collectively, "the Funds." Balanced Fund, Select Equity Fund,
Growth and Income Fund and Capital Growth Fund are diversified portfolios
whereas Small Cap Equity Fund, International Equity Fund and Asia Growth Fund
are non-diversified portfolios. The Select Equity Fund currently offers two
classes of shares - Class A shares and Institutional shares.
2. Significant Accounting Policies
The following is a summary of the significant accounting policies consistently
followed by the Company which are in conformity with those generally accepted in
the investment company industry:
A. Investment Valuation
- ------------------------
Investments in securities traded on a U.S. or foreign securities exchange or the
NASDAQ system are valued at their last sale or closing price on the principal
exchange on which they are traded or NASDAQ, on the valuation day; if no sale
occurs, securities traded on a U.S. exchange or NASDAQ are valued at the mean
between the closing bid and asked price, and securities traded on a foreign
exchange will be valued at the official bid price. Unlisted equity and debt
securities for which market quotations are available are valued at the mean
between the most recent bid and asked prices. Debt securities are valued at
prices supplied by an independent pricing service, which reflect broker/dealer-
supplied valuations and matrix pricing systems. Short-term debt obligations
maturing in sixty days or less are valued at amortized cost. Restricted
securities, and other securities for which quotations are not readily available,
are valued at fair value using methods approved by the Board of Directors of the
Company.
B. Securities Transactions and Investment Income
- -------------------------------------------------
Securities transactions are recorded on the trade date. Realized gains and
losses on sales of investments are calculated on the identified-cost basis.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities which are not known on the ex-dividend date
are recorded as soon as the Fund is informed of the dividend. Dividends for
which the Funds have 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, premium amortized and
discount earned. The Balanced Fund does not amortize premiums. In addition,
net realized capital gains on securities in certain countries gives rise to
capital gains taxes. It is the fund's policy to provide a reserve against net
unrealized gains for capital gains taxes on certain foreign securities held by
the fund. The Asia Growth Fund paid $135,905 of capital gains taxes on gains
realized on the sale of certain foreign securities during the six months ended
July 31, 1995. As of July 31, 1995, a reserve of $64,250 for capital gains
taxes is netted against unrealized gains and included in Accrued expenses-other
of Asia Growth's Statement of Assets and Liabilities.
C. Foreign Currency Translations
- ---------------------------------
The books and records of the Company are maintained in U.S. dollars. Amounts
denominated in foreign currencies are translated into U.S. dollars on the
following basis:
(i) investment valuations, other assets and liabilities initially expressed in
foreign currencies are converted each business day into U.S. dollars based on
current exchange rates; (ii) purchases and sales of foreign investments,
- --------------------------------------------------------------------------------
46
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
income and expenses are converted into U.S. dollars based on 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 and investments; (ii) 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.
D. Forward Foreign Currency Exchange Contracts
- -----------------------------------------------
Certain of the Funds are authorized to enter into forward foreign exchange
contracts for the purchase of a specific foreign currency at a fixed price on a
future date as a hedge or cross-hedge against either specific transactions or
portfolio positions. The aggregate principal amounts of the contracts for which
delivery is anticipated are reflected in the funds' accounts, while the
aggregate principal amounts are reflected net in the accompanying Statements of
Assets and Liabilities. All commitments are "marked-to-market" daily at the
applicable translation rates and any resulting unrealized gains or losses are
recorded in the funds' financial statements. The funds record realized gains or
losses at the time the forward contract is offset by entry into a closing
transaction or extinguished by delivery of the currency. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
E. Federal Taxes
- -----------------
It is the Funds' 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
their shareholders. Accordingly, no federal tax provisions are required. The
characterization of distributions to shareholders for financial reporting
purposes is determined in accordance with income tax rules. Therefore, the
source of the Funds' 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 capital, depending on the type of
book/tax differences that may exist as well as timing differences associated
with having different book and tax year ends.
At October 31, 1994 (the Company's tax year end), Asia Growth had
approximately $184,000 of capital loss carryforward expiring in 2002 for federal
tax purposes. This amount is available to be carried forward to offset future
capital gains to the extent permitted by applicable laws or regulations.
F. Deferred Organization Expenses
- ----------------------------------
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
G. Expenses
- ------------
Expenses incurred by the Company which do not specifically relate to an
individual fund of the Company are allocated to the funds based on each fund's
relative average net assets for the period.
For the Select Equity Fund, shareholders of Class A shares bear all expenses
and fees relating to the distribution and authorized dealer service plans as
well as other expenses which are directly attributable to such shares. The Class
A and Institutional shareholders separately bear transfer agency fees.
H. Option Accounting Principles
- --------------------------------
When certain of the Funds write 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 funds enter into a closing purchase
transaction, the funds realize a gain or loss without regard to any
- --------------------------------------------------------------------------------
47
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
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 funds
realize 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 funds purchase upon exercise. In
the case of index options, 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 Funds 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 funds
have purchased expires on the stipulated expiration date, the funds will realize
a loss in the amount of the cost of the option. If the funds enter into a
closing sale transaction, the funds will realize a gain or loss, depending on
whether the sale proceeds from the closing sale transaction are greater or less
than the cost of the option. If the funds exercise a purchased put option, the
funds 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 funds exercise a purchased call option, the cost of the security
which the funds purchase upon exercise will be increased by the premium
originally paid.
I. Futures Contracts
- ---------------------
The Funds may enter into financial futures contracts for hedging purposes. Upon
entering into a futures contract, the Funds are required to deposit with a
broker an amount of cash or securities equal to the minimum "initial margin"
requirement of the futures exchange on which the contract is traded. Subsequent
payments ("variation margin") are made or received by the Funds each day,
dependent on the daily fluctuations in the value of the underlying index, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Funds. When entering into a closing transaction, for book purposes, the
Funds will realize a gain or loss equal to the difference between the value of
the futures contract to sell and the futures contract to buy. Futures contracts
are valued at the most recent settlement price, unless such price does not
reflect the fair market value of the contract, in which case the position will
be valued using methods approved by the Board of Directors of the Company.
Certain risks may arise upon entering into futures contracts. These risks may
include changes in the value of the futures contract that may not directly
correlate with changes in the value of the underlying securities, or that the
counterparty to a contract may default on its obligations to perform.
3. Agreements
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), acts as investment adviser to the
Balanced, Growth and Income, Small Cap Equity and International Equity Funds;
Goldman Sachs Funds Management, L.P. ("GSFM"), an affiliate of Goldman Sachs,
acts as investment adviser to the Select Equity and Capital Growth Funds; and
Goldman Sachs Asset Management International ("GSAM International") acts as
investment adviser to the Asia Growth Fund. GSAM International also acts as
subadviser to the International Equity Fund. Under the Investment Advisory and
Subadvisory Agreements, GSAM, GSFM and GSAM International, subject to the
general supervision of the Company's Board of Directors, manage the Company's
portfolios. With regard to the Asia Growth Fund, GSAM International relies on
the asset management division of its Hong Kong affiliate, Goldman Sachs (Asia)
Limited, for portfolio decisions and management. As compensation for the
services rendered under the Investment Advisory Agreements and the assumption of
the expenses related thereto, GSAM is entitled to a fee, computed daily and
payable monthly, at an annual rate equal to .50%, .55%, .75% and .25% of the
average daily net assets of the Balanced, Growth and Income, Small Cap Equity
and International Equity Funds, respectively. GSFM is entitled
- --------------------------------------------------------------------------------
48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to a fee of .50% and .75% of the average daily net assets of the Select Equity
and Capital Growth Funds, respectively. For the Select Equity Fund, GSFM is
currently imposing its advisory fee at the annual rate of .40% of average daily
net assets. GSFM may discontinue or modify such limitation in the future at its
discretion, although it has no current intention to do so. GSAM International is
entitled to an advisory fee for the Asia Growth Fund and a subadvisory fee for
the International Equity Fund of .75% and .50% of the average daily net assets
for those funds, respectively.
GSAM also acts as the Funds' administrator pursuant to Administration
Agreements. Under these Administration Agreements, GSAM administers the Funds'
business affairs, including providing facilities. As compensation for the
services rendered pursuant to the Administration Agreements, GSAM is entitled to
a fee of .15% of the average daily net assets of the Balanced and Growth and
Income Funds, and .25% of the average daily net assets of the Select Equity,
Capital Growth, Small Cap Equity, International Equity and Asia Growth Funds.
For the Select Equity Fund, GSAM is currently imposing its administration fee at
the annual rate of .15% of average daily net assets. GSAM may discontinue or
modify such limitation in the future at its discretion, although it has no
current intention to do so.
Goldman Sachs has voluntarily agreed to reduce or limit certain "Other
Expenses" for the Balanced, Select Equity, Growth and Income and Asia Growth
Funds (excluding advisory, administration, distribution and authorized dealer
service fees and litigation, indemnification, taxes, interest, brokerage
commissions and extraordinary expenses and with respect to the Select Equity
Fund, transfer agent fees) until further notice to the extent such expenses
exceed .10%, .06%, .30% and .65% of the average daily net assets of the funds,
respectively. The amounts reimbursable to the Balanced and Select Equity Funds
at July 31, 1995 were approximately $45,000 and $24,000, respectively, and are
reflected in "Other Assets" in the accompanying Statements of Assets and
Liabilities.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to
Distribution Agreements. Goldman Sachs may receive a portion of the sales load
imposed on the sale of fund shares and has advised the Company that it retained
approximately $1,000, $38,000, $438,000, $328,000, $176,000, $108,000 and
$189,000 during the six months ended July 31, 1995 for the Balanced, Select
Equity Class, Growth and Income, Capital Growth, Small Cap Equity, International
Equity and Asia Growth Funds, respectively.
The Company, on behalf of each Fund, has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1. Under the Distribution Plan,
Goldman Sachs is entitled to a quarterly fee from each Fund for distribution
services equal, on an annual basis, to .25% of a Fund's average daily net assets
(or, in the case of Select Equity Fund, the average daily net assets
attributable to Class A shares). Currently, Goldman Sachs has voluntarily
agreed to waive the entire amount of such fee for each Fund (other than the
Select Equity Fund). Effective June 1, 1995, each Fund's Distribution Plan was
amended to reduce the contractual fee from .50% to .25% of average daily net
assets and to eliminate the provision of certain services under the Distribution
Plan which are currently provided under the Authorized Dealer Service Plan.
Effective June 1, 1995, the Company on behalf of each Fund adopted an
Authorized Dealer Service Plan (the "Service Plan") pursuant to which Goldman
Sachs and Authorized Dealers are compensated for providing personal and account
maintenance services. Each Fund pays a fee under its Service Plan equal to an
annual basis of .25% of its average daily net assets (or, in the case of Select
Equity Fund, the average daily net assets attributable to Class A shares).
Goldman Sachs also serves as the Transfer Agent of the Funds for a fee.
- --------------------------------------------------------------------------------
49
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
4. Portfolio Securities Transactions
Purchases and proceeds of sales or maturities of securities (excluding short-
term investments, futures and options written) for the six months ended July 31,
1995, were as follows:
<TABLE>
<CAPTION>
Sales or
Fund Purchases Maturities
===== =========== ============
<S> <C> <C>
Balanced $ 39,905,390 $ 21,063,467
Select Equity 49,806,916 29,943,957
Growth and Income 187,823,825 115,911,425
Capital Growth 112,697,257 228,906,816
Small Cap Equity 85,307,105 143,944,537
International Equity 90,232,222 140,974,601
Asia Growth 105,786,918 83,188,307
</TABLE>
Included in the above amounts were purchases and proceeds of sales or
maturities of governmental securities (excluding short-term investment and
options) for the Balanced Fund in the amounts of $19,445,085 and $16,572,696,
respectively.
For the six months ended July 31, 1995, written option transactions in the
Growth and Income Fund were as follows:
<TABLE>
<CAPTION>
Call Options
===========================
Number of Premiums
Options Written Contracts Received
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance outstanding,
beginning of period 200 $76,997
Options written -- --
Options expired (200) (76,997)
Options exercised -- --
- -------------------------------------------------------------------------------
Balance outstanding,
end of period -- $ --
===============================================================================
</TABLE>
For the six months ended July 31, 1995, written option transactions in the
Capital Growth Fund were as follow:
<TABLE>
<CAPTION>
Call Options
===========================
Number of Premiums
Options Written Contracts Received
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance outstanding,
beginning of period -- $ --
Options written 8,850 1,758,487
Options expired -- --
Options exercised -- --
- -------------------------------------------------------------------------------
Balance outstanding,
end of period 8,850 $1,758,487
===============================================================================
</TABLE>
For the six months ended July 31, 1995, written option transactions in the
Small Cap Equity Fund were as follows:
<TABLE>
<CAPTION>
Call Options
===========================
Number of Premiums
Options Written Contracts Received
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance outstanding,
beginning of period -- $ --
Options written 900 65,448
Options expired -- --
Options exercised -- --
- -------------------------------------------------------------------------------
Balance outstanding,
end of period 900 $65,448
===============================================================================
</TABLE>
For the six months ended July 31, 1995, purchased option transactions in the
International Equity Fund were as follows:
<TABLE>
<CAPTION>
Options Purchased Cost
- -------------------------------------------------------------------------------
<S> <C>
Balance outstanding, beginning of period $ 8,340,192
Options purchased --
Options expired (545,138)
Options sold --
- -------------------------------------------------------------------------------
Cost at end of period 7,795,054
Unrealized loss (7,786,881)
- -------------------------------------------------------------------------------
Value at end of period $ 8,173
===============================================================================
</TABLE>
- --------------------------------------------------------------------------------
50
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the six months ended July 31, 1995, written and purchased option
transactions in the Asia Growth Fund were as follows:
<TABLE>
<CAPTION>
Put Options
===========================
Number of Premiums
Options Written Contracts Received
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance outstanding,
beginning of period 12,700 $ 180,767
Options written -- --
Options expired (12,700) (180,767)
Options exercised -- --
- -------------------------------------------------------------------------------
Balance outstanding,
end of period -- $ --
===============================================================================
<CAPTION>
Options Purchased Cost
- -------------------------------------------------------------------------------
<S> <C>
Balance outstanding, beginning of period $ --
Options purchased 472,040
Options expired --
Options sold (472,040)
- -------------------------------------------------------------------------------
Value at end of period $ --
===============================================================================
</TABLE>
Certain risks arise related to call and put options from the possible
inability of counterparties to meet terms of their contracts.
At July 31, 1995, the International Equity Fund had outstanding forward
foreign currency exchange contracts, both to purchase and sell foreign
currencies.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
At July 31, 1995, the International Equity Fund had sufficient cash and
securities to cover any commitments under these contracts which were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Foreign Currency Value on Unrealized
Sale Contracts Settlement Date Current Value Gain (Loss)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Belgian Franc
expiring 9/8/95 $ 5,835,751 $ 5,961,426 $ (125,675)
Deutschemark
expiring 9/18/95 24,177,576 24,100,148 77,428
expiring 9/18/95 13,820,000 14,264,980 (444,980)
expiring 9/18/95 7,129,074 7,254,397 (125,323)
expiring 9/18/95 2,608,320 2,602,091 6,229
French Franc
expiring 9/11/95 5,510,000 5,890,014 (380,014)
Hong Kong Dollar
expiring 10/18/95 12,576,034 12,580,683 (4,649)
expiring 8/1/95 1,034,367 1,034,447 (80)
Japanese Yen
expiring 10/17/95 40,102,758 39,949,301 153,457
Swedish Krona
expiring 11/7/95 14,773,507 15,204,466 (430,959)
- -------------------------------------------------------------------------------
Total Foreign Currency
Sale Contracts $127,567,387 $128,841,953 $(1,274,566)
===============================================================================
<CAPTION>
- -------------------------------------------------------------------------------
Foreign Currency Value on Unrealized
Purchase Contracts Settlement Date Current Value Gain (Loss)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Deutschemark
expiring 9/8/95 $ 5,836,640 $ 5,970,706 $ 134,066
expiring 11/7/95 14,743,548 14,753,168 9,620
Japanese Yen
expiring 10/27/95 13,450,000 13,311,587 (138,413)
- -------------------------------------------------------------------------------
Total Foreign Currency
Purchase Contracts $34,030,188 $34,035,461 $ 5,273
===============================================================================
</TABLE>
The International Equity Fund has recorded a "Receivable for forward foreign
currency exchange contracts" and "Payable for forward foreign currency exchange
contracts" resulting from open and closed but not settled forward foreign
currency exchange contracts of $488,733 and $2,429,068, respectively, in the
accompanying Statements of Assets and Liabilities. Included in these
- --------------------------------------------------------------------------------
51
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
amounts are $107,933 and $778,975, respectively, related to forward contracts
closed but not settled as of July 31, 1995.
For the six months ended July 31, 1995, Goldman Sachs earned approximately
$2,000, $56,000, $86,000, $7,000, $12,000 and $18,000 of brokerage commissions
from portfolio transactions executed on behalf of the Balanced, Growth and
Income, Capital Growth, Small Cap, International Equity and Asia Growth Funds,
respectively.
5. Repurchase Agreements
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 in the customer-only account of State Street
Bank & Trust Co., the Company's custodian, or at sub-custodians. Goldman Sachs
monitors the market value of the underlying securities by pricing them daily.
6. Joint Repurchase Agreement Account
The Funds, together with other registered investment companies having advisory
agreements with GSAM or GSFM transfer uninvested cash balances into joint
accounts, the daily aggregate balance of which is invested in one or more
repurchase agreements. The underlying securities for the repurchase agreements
are U.S. Treasury and agency obligations. At July 31, 1995, the Balanced,
Select Equity, Growth and Income, Capital Growth and Small Cap Equity Funds had
a .36%, .31%, 2.15%, 14.63% and 1.69%, respectively, undivided interest in the
repurchase agreements in the following joint account which equaled $4,200,000,
$3,600,000, $24,800,000, $168,400,000 and $19,400,000, respectively, in
principal amount. At July 31, 1995, the repurchase agreements held in this
joint account, along with the corresponding underlying securities (including the
type of security, market value, interest rate and maturity date) were as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===============================================================================
<S> <C> <C> <C>
Lehman Government Securities, dated 07/31/95,
repurchase price $450,073,438 (U.S. Treasury
Notes: $441,483,578, 4.37%-8.75%,
08/15/96-05/15/02; U.S. Treasury Principal-
Only Strips: $17,361,643, 7.50%-8.00%,
02/15/01-05/15/02)
$450,000,000 5.88% 08/01/95 $ 450,000,000
Nomura Securities International, Inc., dated
07/31/95, repurchase price $400,065,000
(FHLMC Gold, $269,147,917, 7.00%-9.00%,
02/01/02-07/01/25; FNMA, $142,751,971,
6.00%-7.50%, 10/01/08-06/01/09)
400,000,000 5.85% 08/01/95 400,000,000
Salomon Brothers, Inc., dated 07/31/95,
repurchase price $301,048,913 (U.S.
Treasury Interest-Only Strips: $108,618,956,
02/15/98-02/15/99; U.S. Treasury Principal-
Only Strips: $198,627,836, 8.13%-8.88%,
02/15/98-02/15/99)
301,000,000 5.85% 08/01/95 301,000,000
- -------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $1,151,000,000
===============================================================================
</TABLE>
7. Other Matters
During the year ended January 31, 1995, GSAM contributed additional paid-in
capital to the Growth and Income Fund of approximately $780,000 for the purpose
of correcting an administrative error.
During the year ended January 31, 1995, the Capital Growth Fund paid
approximately $12,650,000 of redemption proceeds in kind. The related
securities were contributed by the redeeming shareholders for shares of a fund
advised by GSAM International.
8. Subsequent Events
On August 1, 1995, the Capital Growth Fund, in an interportfolio trade,
transferred securities valued at approximately $105,460,000 to the Goldman Sachs
Mid-Cap Equity Fund related to shareholder exchanges into such fund.
- --------------------------------------------------------------------------------
52
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Goldman Sachs Balanced Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to
Income from investment operations shareholders
----------------------------------------- -------------------------
Net realized
Net asset and unrealized Total income From Total Net asset
value, Net gain on from net distributions Net increase value,
beginning investment investment investment investment to in net end of
of period income transactions operations income shareholders asset value period
=======================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
============================================
1995 .................... $14.22 $0.22 $2.18 $2.40 $(0.20) $(0.20) $2.20 $16.42
For the Period Ended January 31,
================================
1995/d/.................. 14.18 0.10 0.02 0.12 (0.08) (0.08) 0.04 14.22
<CAPTION>
Ratios assuming no
voluntary waiver of
distribution fees or
expense limitations
===========================
Ratio of Ratio of net Ratio of net
net investment Ratio of investment
expenses to income to Net assets at expenses to income(loss)
Total average net average net Portfolio end of period average to average
return /a/ assets assets turnover rate (in 000s) net assets net assets
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
============================================
1995..................... 16.96%/b/ 1.00%/c/ 3.55%/c/ 136.11%/b/ $30,000 2.72%/c/ 1.83%/c/
For the Period Ended January 31,
================================
1995/d/.................. 0.87/b/ 1.00/c/ 3.39/c/ 14.71/b/ 7,510 8.29/c/ (3.90)/c/
- --------------------
</TABLE>
/(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 charges. Total return would be reduced if a sales
charge were taken into account.
/(b)/ Not annualized.
/(c)/ Annualized.
/(d)/ For the period from October 12, 1994 (commencement of operations) to
January 31, 1995.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Goldman Sachs Select Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from Distributions to
investment operations shareholders
===================================== ====================================
Net realized From
and unrealized net realized
Net asset gain (loss) on Total income From gain on Total Net increase Net asset
value, Net investments, (loss) from net investment distributions (decrease) value,
beginning investment options and investment investment and futures to in net end of
of period income futures operations income transactions shareholders asset value period
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Periods Ended July 31, (unaudited)
==========================================
1995 - Class A shares.. $14.61 $0.11 $ 3.32 $ 3.43 $ -- $ -- $ -- $ 3.43 $18.04
1995 - Institutional
shares/d/............. 16.97 0.01 1.08 1.09 -- -- -- 1.09 18.06
For the Year Ended January 31,
==============================
1995 - Class A shares.. 15.93 0.20 (0.38) (0.18) (0.20) (0.94) (1.14) (1.32) 14.61
1994 - Class A shares.. 15.46 0.17 2.08 2.25 (0.17) (1.61) (1.78) 0.47 15.93
1993 - Class A shares.. 15.05 0.22 0.41 0.63 (0.22) -- (0.22) 0.41 15.46
For the Period Ended January 31,
================================
1992 - Class A shares/e/ 14.17 0.11 0.88 0.99 (0.11) -- (0.11) 0.88 15.05
<CAPTION>
Ratios assuming no
voluntary waiver of
fees or
expense limitations
===========================
Ratio of Ratio of net Ratio of net
net investment Ratio of investment
expenses to income to Portfolio Net assets at expenses to income
Total average net average net turnover end of period average to average
return /a/ assets assets rate (in 000s) net assets net assets
============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Periods Ended July 31, (unaudited)
==========================================
1995 - Class A shares.. 23.48%/b/ 1.28%/c/ 1.06%/c/ 27.65%/b/ $ 94,944 1.56%/c/ 0.78%/c/
1995 - Institutional
shares/d/............. 6.42/b/ 0.65/c/ 0.88/c/ 27.65/b/ 44,157 0.96/c/ 0.57/c/
For the Year Ended January 31,
==============================
1995 - Class A shares.. (1.10) 1.38 1.33 56.18 94,968 1.63 1.08
1994 - Class A shares.. 15.12 1.42 0.92 87.73 92,769 1.67 0.67
1993 - Class A shares.. 4.30 1.28 1.30 144.93 117,757 1.53 1.05
For the Period Ended January 31,
================================
1992 - Class A shares/e/ 7.01/b/ 1.57/c/ 1.24/c/ 135.02/c/ 151,142 1.82/c/ 0.99/c/
- --------------------
</TABLE>
/(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 charges. Total return would be reduced if a sales
charge were taken into account.
/(b)/ Not annualized.
/(c)/ Annualized.
/(d)/ Institutional shares commenced operations on June 15, 1995.
/(e)/ For the period from May 24, 1991 (commencement of operations) to
January 31, 1992.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Goldman Sachs Growth and Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment
operations Distributions to shareholders
===================================== =================================================
Net realized Total From net
Net asset and unrealized income realized gain In excess Total
value at Net gain on from From net on investment of net distributions
beginning investment investments investment investment and option investment to
of period income and options operations income transactions income shareholders
===================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995..................... $15.80 $0.17 $3.13 $3.30 $(0.13) $ -- $ -- $(0.13)
For the Year Ended January 31,
==============================
1995..................... 15.79 0.20/d/ 0.30/d/ 0.50 (0.20) (0.33) (0.07) (0.60)
For the Period Ended January 31,
================================
1994/e/.................. 14.18 0.15 1.68 1.83 (0.15) (0.06) (0.01) (0.22)
<CAPTION>
Ratio of
Net asset net
Additional Net increase value at expenses to
paid-in in net end of Total average net
capital asset value period return/a/ assets
=============================================================
<S> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995..................... $ -- $3.17 $18.97 20.91%/b/ 1.22%/c/
For the Year Ended January 31,
==============================
1995..................... 0.11/d/ 0.01 15.80 3.97 1.25
For the Period Ended January 31,
================================
1994/e/.................. -- 1.61 15.79 13.08/b/ 1.25/c/
<CAPTION>
Ratios assuming no
voluntary waiver of
distribution fees
and expense limitations
==========================
Ratio of net Ratio of net
investment Ratio of investment
income to Portfolio Net assets at expenses to income (loss)
average net turnover end of period average to average
assets rate (in 000's) net assets net assets
=====================================================================
<S> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995..................... 1.78%/c/ 48.69%/b/ $324,036 1.47%/c/ 1.53%/c/
For the Year Ended January 31,
==============================
1995..................... 1.28 71.80 193,772 1.58 0.95
For the Period Ended January 31,
================================
1994/e/.................. 1.23/c/ 102.23/b/ 41,528 3.24/c/ (0.76)/c/
</TABLE>
/(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 charges. Total return would be reduced if a sales
charge were taken into account. For the year ended January 31, 1995,
total return, excluding additional paid in capital, would have been 3.34%.
/(b)/ Not annualized.
/(c)/ Annualized.
/(d)/ Calculated based on the average shares outstanding methodology.
/(e)/ For the period from February 5, 1993 (commencement of operations) to
January 31, 1994.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Goldman Sachs Capital Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment
operations Distributions to shareholders
======================================= =================================================
Net realized Total
and unrealized income From net
Net asset gain (loss) on (loss) realized gain In excess Net increase
value at Net investments, from From net on investments, of net Total (decrease)
beginning investment options and investment investment options investment distributions in net
of period income futures operations income and futures income to shareholders asset value
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995 ......... $13.67 $0.04 $ 3.19 $ 3.23 $ -- $ -- $ -- $ -- $ 3.23
For the Year Ended January 31,
==============================
1995 ......... 15.96 0.03 (0.69) (0.66) (0.01) (1.62) -- (1.63) (2.29)
1994 ......... 14.64 0.02 2.40 2.42 (0.01) (1.07) (0.02) (1.10) 1.32
1993 ......... 13.65 0.06 2.28 2.34 (0.07) (1.28) -- (1.35) 0.99
1992 ......... 11.10 0.28 2.90 3.18 (0.31) (0.32) -- (0.63) 2.55
For the Period Ended January 31,
================================
1991/d/ ....... 11.34 0.34 (0.27) 0.07 (0.31) -- -- (0.31) (0.24)
<CAPTION>
Ratio of Ratio of net
Net asset net investment
value, expenses to income to Portfolio Net assets at
end of Total average net average net turnover end of period
period return/a/ assets assets rate (in 000's)
================================================================================
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995 ...................... $16.90 23.63%/b/ 1.35%/c/ 0.55%/c/ 13.26%/b/ $1,027,283
For the Year Ended January 31,
==============================
1995 ...................... 13.67 (4.38) 1.38 0.16 38.36 862,105
1994 ...................... 15.96 16.89 1.38 0.13 36.12 833,682
1993 ...................... 14.64 18.01 1.41 0.42 58.93 665,976
1992 ...................... 13.65 29.31 1.53 2.09 48.93 500,307
For the Period Ended January 31,
================================
1991/d/ ................... 11.10 0.84/b/ 1.27/b/ 3.24/b/ 35.63/b/ 437,533
<CAPTION>
Ratios assuming no
voluntary waiver of
distribution fees
===========================
Ratio of net
Ratio of investment
expenses to income (loss)
average to average
net assets net assets
============================
<S> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995 ............................... 1.60%/c/ 0.30%/c/
For the Year Ended January 31,
==============================
1995 ............................... 1.63 (0.09)
1994 ............................... 1.63 (0.12)
1993 ............................... 1.66 0.17
1992 ............................... 1.78 1.84
For the Period Ended January 31,
================================
1991/d/ ............................ 1.47/b/ 3.04/b/
</TABLE>
- --------------------
/(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 charges. Total return would be reduced if a sales
charge were taken into account.
/(b)/ Not annualized.
/(c)/ Annualized.
/(d)/ For the period from April 20, 1990 (commencement of operations) to
January 31, 1991.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Goldman Sachs Small Cap Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment
operations Distributions to shareholders
========================================== ======================================================
From In excess of
Net realized net realized
and unrealized realized gain gains on
Net asset Net gain (loss) on Total income From on investment, investment, Total
value, investment investments, (loss) from net option and option and distributions
beginning income options and investment investment futures futures to
of period (loss) futures operations income transactions transactions shareholders
============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995................ $16.14 $(0.06) $ 1.62 $ 1.56 $ -- $ -- $ -- $ --
For the Year Ended January 31,
==============================
1995................ 20.67 (0.07) (3.53) (3.60) -- (0.69) (0.24) (0.93)
1994................ 16.68 (0.04) 5.03 4.99 -- (1.00) -- (1.00)
For the Period Ended January 31,
================================
1993/d/............. 14.18 0.03 2.50 2.53 (0.03) -- -- (0.03)
<CAPTION>
Ratio of
net
Ratio of investment
Net increase Net asset net income
(decrease) value, expenses to (loss) to Portfolio Net assets
in net end of Total average net average turnover at end of period
asset value period return/a/ assets net assets rate (in 000's)
===========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995 ......................... $ 1.56 $17.70 9.67%/b/ 1.40%/c/ (0.45)%/c/ 28.01%/b/ $297,453
For the Year Ended January 31,
==============================
1995 ......................... (4.53) 16.14 (17.53) 1.53 (0.53) 43.67% 319,487
1994 ......................... 3.99 20.67 30.13 1.60 (0.45) 56.81 261,074
For the Period Ended January 31,
================================
1993/d/ ...................... 2.50 16.68 17.86/b/ 1.65/c/ 0.62/c/ 7.12/c/ 59,339
<CAPTION>
Ratios assuming no
voluntary waiver of
distribution fees
============================
Ratio of
net
Ratio of investment
expenses to loss
average to average
net assets net assets
============================
<S> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995 ...................................... 1.65%/c/ (0.70)%/c/
For the Year Ended January 31,
==============================
1995 ...................................... 1.78 (0.78)
1995 ...................................... 1.85 (0.70)
For the Period Ended January 31,
================================
1993/d/ ................................... 2.70/c/ (0.43)/c/
</TABLE>
- --------------------
/(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 charges. Total return would be reduced if a sales
charge were taken into account.
/(b)/ Not annualized.
/(c)/ Annualized.
/(d)/ For the period from October 22, 1992 (commencement of operations) to
January 31, 1993.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Goldman Sachs International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment
operations Distributions to shareholders
======================================================== =========================================
Net realized From
Net realized and unrealized net
and unrealized gain (loss) realized gain
Net asset Net gain (loss) on on foreign Total income From on investment, Total
value, investment investments, currency (loss) from net option and distributions
beginning income options and related investment investment futures to
of period (loss) futures transactions operations income transactions shareholders
============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995................. $14.52 $ 0.10 $ 1.17 $ 1.27 $ 2.54 $ -- $ -- $ --
For the Year Ended January 31,
==============================
1995................. 18.10 0.06 (3.04) (0.01) (2.99) -- (0.59) (0.59)
1994................. 14.35 0.05 4.08 (0.38) 3.75 -- -- --
For the Period Ended January 31,
================================
1993/d/.............. 14.18 (0.01) 0.29 (0.11) 0.17 -- -- --
<CAPTION>
Ratio of net
Net Ratio of investment
increase Net asset net income
(decrease) value, expenses to (loss) to Portfolio Net assets at
in net asset end of Total average net average net turnover end of period
value period return/a/ assets assets rate in (000s)
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995................. $ 2.54 $17.06 17.49%/b/ 1.62%/c/ 0.92%/c/ 33.37%/b/ $266,123
For the Year Ended January 31,
==============================
1995................. (3.58) 14.52 (16.65) 1.73 0.40 84.54 275,086
1994................. 3.75 18.10 26.13 1.76 0.51 60.04 269,091
For the Period Ended January 31,
================================
1993/d/.............. 0.17 14.35 1.23/b/ 1.80/c/ (0.42)/c/ 0.00 66,063
<CAPTION>
Ratios assuming no
voluntary waiver of
distribution fees
and expense limitations
---------------------------
Ratio of
net investment
Ratio of income
expenses (loss)
to average to average
net assets net assets
===========================
<S> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995................. 1.87%/c/ 0.67%/c/
For the Year Ended January 31,
==============================
1995................. 1.98 0.15
1994................. 2.01 0.26
For the Period Ended January
============================
1993/d/.............. 2.58/c/ (1.20)/c/
</TABLE>
- -------------------
/(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 charges. Total return would be reduced if a sales charge were taken
into account.
/(b)/ Not annualized.
/(c)/ Annualized.
/(d)/ For the period from December 1, 1992 (commencement of operations) to
January 31, 1993.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Goldman Sachs Asia Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss)
from investment operations Distributions to shareholders
========================================== =============================
Net realized
and unrealized Net
gain on increase
Net asset Net foreign Total gain Total (decrease)
value, Net unrealized currency (loss) from From net distributions in net
beginning investment gain (loss) on related investment investment to asset
of period income investments transactions operations income shareholders value
============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995................. $13.31 $ 0.14 $ 2.12 $ 0.08 $ 2.34 $ -- $ -- $ 2.34
For the Period Ended January 31,
================================
1995/d/.............. 14.18 0.11 (0.89) 0.01 (0.77) (0.10) (0.10) (0.87)
<CAPTION>
Ratios assuming no
voluntary waiver of
distribution fees
and expense limitations
========================
Ratio Ratio
Ratio of net of net
Net of net investment Ratio of investment
asset expenses to income to expenses income to
value, average average Portfolio Net asets at to average average
end of Total net net turnover end of period net net
period Return/a/ assets assets rate (000s) assets assets
===============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1995................. $15.65 17.58%/b/ 1.73%/c/ 2.02%/c/ 62.98%/b/ $165,789 1.98%/c/ 1.77/c/
For the Period Ended January 31,
================================
1995/d/.............. 13.31 (5.46)/b/ 1.90/c/ 1.83/c/ 36.08/b/ 124,298 2.38/c/ 1.35%/c/
</TABLE>
- ----------------
/(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 charges. Total return would be reduced if a sales charge were taken
into account.
/(b)/ Not annualized.
/(c)/ Annualized.
/(d)/ For the period from July 8, 1994 (commencement of operations) to
January 31, 1995.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
[This Page Intentionally Left Blank]
- --------------------------------------------------------------------------------
60
<PAGE>
[This Page Intentionally Left Blank]
- --------------------------------------------------------------------------------
61
<PAGE>
[This Page Intentionally Left Blank]
- --------------------------------------------------------------------------------
62
<PAGE>
- --------------------------------------------------------------------------------
This Semiannual Report is authorized for distribution to prospective investors
only when preceded or accompanied by a Goldman Sachs Equity Portfolios, Inc.
Prospectus which contains facts concerning the Fund's objectives and policies,
management, expenses and other information.
- --------------------------------------------------------------------------------
63
<PAGE>
Goldman Sachs
One New York Plaza
New York, NY 10004
Directors
Paul C. Nagel, Jr., Chairman
Ashok N. Bakhru
Marcia L. Beck
David B. Ford
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Marcia L. Beck, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Goldman Sachs
Investment Adviser, Administrator,
Distributor and Transfer Agent
eq3/72k/0795
The Goldman Sachs
Equity Portfolios
- --------------------------------------------------------------------------------
Semiannual Report
July 31, 1995
Goldman Sachs Balanced Fund
Goldman Sachs Select Equity Fund
Goldman Sachs Growth and Income Fund
Goldman Sachs Capital Growth Fund
Goldman Sachs Small Cap Equity Fund
Goldman Sachs International Equity Fund
Goldman Sachs Asia Growth Fund
[LOGO OF GOLDMAN SACHS APPEARS HERE]
================================================================================
