<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
DEAR SHAREHOLDERS:
We welcome this opportunity to review the performance and investment
activities of the Goldman Sachs Equity Portfolios for the 12-month period ended
January 31, 1995. In addition, we will discuss trends in the stock markets in
the U.S. and abroad during the period.
For the convenience of those shareholders who have invested in several funds
in the Goldman Sachs Equity Portfolios, we have included all of our equity
funds in one annual report for the first time. Another newsworthy item that may
interest many of you: We are pleased to note that the Goldman Sachs Capital
Growth Fund will celebrate its fifth anniversary on April 20, 1995.
As you are probably well aware, 1994 was a difficult year for U.S. stocks.
Still, it is important to realize that over the long term, U.S. stocks have
outperformed other financial investments, such as U.S. long-term government
bonds, and outpaced inflation as well./1/ For that reason, stocks have been a
valuable choice for many investors seeking long-term growth who have both the
financial ability and commitment to weather periods of market volatility.
Diversifying investments among different asset classes (stocks, bonds and
money markets) and within an asset class (for example, domestic and
international stocks) also plays an important role in any investment plan. How
you allocate your portfolio is an individual decision based on your personal
goals and tolerance for risk, which your investment representative can help you
evaluate. As you'll see in this report, Goldman Sachs offers a variety of
domestic and international equity funds from which to choose.
MARKET OVERVIEW: THE IMPACT OF HIGHER INTEREST RATES ON THE U.S. STOCK MARKET
For the 12 months ended January 31, 1995, the U.S. stock market was less
rewarding than in the previous three years. The market returned a modest 0.53%
as measured by the S&P 500 stock index, far below the historical average annual
return of 10.2% for large-capitalization stocks, as measured by the S&P 500 for
the period from 1926 through 1994./1/ Stocks with smaller capitalizations
experienced greater volatility and significantly underperformed large-
capitalization stocks for most of 1994.
The lackluster market performance, in the midst of a robust economic recovery,
generally strong corporate profits and low unemployment, reflected the impact
of rapidly rising interest rates. From February 4, 1994 through January 31,
1995, the Federal Reserve moved aggressively to pre-empt inflation by raising
the federal funds rate (the rate banks charge one another for overnight loans)
six times from 3.00% to 5.50%.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction/Market Overview........ 1
Goldman Sachs Balanced Fund......... 3
Goldman Sachs Growth and Income
Fund................................ 9
Goldman Sachs Select Equity Fund.... 15
Goldman Sachs Capital Growth Fund... 21
Goldman Sachs Small Cap Equity Fund. 26
</TABLE>
<TABLE>
<S> <C>
Goldman Sachs International Equity
Fund............................... 31
Goldman Sachs Asia Growth Fund..... 37
GSAM Equity Portfolio Management
Team............................... 43
Financial Statements............... 44
Notes to Financial Statements...... 52
Report of Independent Public
Accountants........................ 66
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
As interest rates rose, the skittish stock market reflected investors'
uncertainty as to exactly when, and by how much, the Fed would move next and
whether a recession would ultimately occur. For example, March was a
particularly difficult month, with the stock market declining sharply after the
first Fed increase. Despite two additional Fed hikes during the second quarter,
the market was relatively stable. A strong summer rally followed, but in
September the market retreated as fears of inflation and weakness in the bond
market affected stocks as well. The fourth quarter of 1994 was particularly
difficult, with the market shunning the stocks of cyclical companies (such as
automobile manufacturers), whose businesses tend to move in the same direction
as the economy, in favor of consumer growth companies, whose fortunes are less
dependent on the growth of the economy. Large-capitalization stocks, perceived
as safer and more stable, far outperformed small stocks during the quarter and
for the year.
The volatility throughout the equity market, though unpleasant, was not
unusual according to past history. During the recovery phase of most economic
cycles, the stock market has experienced relatively sharp corrections
associated with rapidly rising interest rates. Typically, the market has
resumed its ascent as the pace of interest rate increases and economic growth
slowed. We believe rates will be less volatile in 1995, allowing the market's
historical pattern to prevail.
MARKET OVERVIEW: VOLATILITY IN THE INTERNATIONAL MARKET ENVIRONMENT
During 1994, international equity markets were turbulent, marked by a
significant slowdown in new investments from the U.S. and elsewhere.
. The volatility in the Asian markets (excluding Japan) was largely triggered
by the sharp increase in U.S. short-term interest rates and significant mutual
fund redemptions that caused a sell-off in stocks. Following a brief summer
rally, Asian markets suffered a sharp correction in September that persisted
through the end of January.
. In Europe, economic recovery faltered as unemployment remained high; the
resulting uncertainty regarding expectations for corporate profit growth put
pressure on stock prices. European equity markets were strong at the beginning
of 1994, peaking in most cases by early February, with major market indices
subsequently declining 10% to 15% by year end.
. The Japanese economy was weak during the year, hindered by a strong yen and
low domestic consumption. The government stepped in with an aggressive fiscal
stimulus program that resulted in some patchy economic recovery in the last
few months of 1994. After posting gains from January through May of 1994, the
Japanese market, as measured by the Nikkei 300, had declined almost 11% by
January 1995, a good part of which occurred after the devastating Kobe
earthquake.
We appreciate your support, particularly during this difficult market period,
and want to assure you that we will continue to strive to help meet your long-
term investment objectives.
Sincerely,
/s/ David B. Ford
David B. Ford
Chairman, Chief Executive Officer
Goldman Sachs Asset Management, March 15, 1995
- -------
/1/ Data compiled by Ibbotson Associates, Chicago, Stocks, Bonds, Bills and In-
flation 1995 Yearbook(TM) . Please note that along with their superior histor-
ical returns, stocks have been more volatile than bonds during the period from
1926 through 1994. Past performance is not indicative of future results.
2
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
OBJECTIVES 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 senior fixed income securities.
The fund's "neutral" weighting will typically be 60% stocks and 40% bonds.
However, Goldman Sachs Asset Management's (GSAM'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, free cash flow and
ability to pay dividends. We also consider the degree to which a company's
management is committed to increasing value for shareholders.
On the fixed income portion of the portfolio, our approach is to seek to
control risk. Our emphasis is on sector and individual security selection,
rather than on trying to predict interest rate movements.
PERFORMANCE
Since its inception on October 12, 1994 through January 31, 1995, the Goldman
Sachs Balanced Fund had a total return of 0.87% based on net asset value
compared with a return of 2.06% 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 underperformance relative to the benchmark reflects the fact that
it began investing just as the stock market entered a very difficult period
marked by high volatility and rising interest rates. The latter caused some
investors to fear slower economic growth in the future, which, in turn, took
its toll on interest rate-sensitive and cyclical stocks represented in the
fund's portfolio.
PORTFOLIO COMPOSITION AND REVIEW
As of January 31, the fund's asset mix was allocated to stocks (58%) compared
with the benchmark weighting of 60%, reflecting a neutral to slightly bearish
outlook for the equity market on the part of the fund's portfolio managers.
. Equities: The fund's top-performing stocks during the period included
McDonnell Douglas (aerospace/defense), Texas Instruments (semiconductors),
Anheuser-Busch (alcoholic beverages) and Amgen (biotechnology), which all
benefited from strong earnings reports among other things. With the exception
of Texas Instruments, these companies have been active buyers of their own
stock.
Reflecting the market's general rejection of cyclical stocks in October and
November, a number of our holdings including General Motors (automotive) and
Stone Container, Georgia-Pacific and Champion International (all in paper and
forest products) did poorly in November and then rebounded in December. We
remain committed to these stocks based on our research which indicates that
they have the potential to post much stronger earnings than many in the
investment community currently expect.
3
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
TOP 10 EQUITY HOLDINGS AS OF JANUARY 31, 1995
<TABLE>
<CAPTION>
PERCENTAGE
OF EQUITY
COMPANY LINE OF BUSINESS HOLDINGS
<S> <C> <C>
General Motors Corp. Automotive Products 4.3%
Stone Container Corp. Containers and Paper Products 4.1%
Georgia-Pacific Corp. Paper and Forest Products 3.9%
McDonnell Douglas Corp. Aerospace/Defense 3.9%
Consolidated Truckers 3.6%
Freightways, Inc.
Northrup Grumman Corp. Aerospace/Defense 3.3%
National Medical Hospital Management 2.8%
Enterprises, Inc.
Chiquita Brands Grocery Products 2.8%
International Inc.
Universal Corp. Tobacco Producer 2.8%
PartnerRe Holdings Ltd. Property/Casualty 2.7%
Reinsurer
</TABLE>
. Fixed Income: During the period, the fixed income portion of the portfolio
was primarily invested in U.S. Treasury notes, with a small position in Federal
National Mortgage Association medium-term notes. As the fund's assets increase,
we intend to further diversify the portfolio's fixed income investments to
include corporate, mortgage-backed and asset-backed securities.
OUTLOOK
We will continue to carefully monitor the fund's asset allocation. We believe
that our 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. In addition, we believe that many of the
fund's equity holdings are poised to show earnings growth even if the economy
slows.
/s/ Mitchell E. Cantor /s/ Ronald E. Gutfleish
Mitchell E. Cantor, Ronald E. Gutfleish
Co-Head, U.S. Actively
Managed Equity
Investments
Portfolio Managers, Equities
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ Theodore T. Sotir
Theodore T. Sotir
Portfolio Managers, Fixed Income
4
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the period ended January 31, 1995. The
Goldman Sachs Balanced Fund's ("GS Balanced") performance (assuming both the
maximum sales charge of 5.50% and no sales charge) is compared with its bench-
mark--a combination of the Standard & Poor's 500 Index (weighted at 60%) and
the Lehman Brothers Aggregate Bond Index (weighted at 40%) ("S&P 500/LBABI").
All performance data shown represents past performance and should not be con-
sidered indicative of future performance which will fluctuate as market condi-
tions change. The investment return and principal value of an investment will
fluctuate with changes in market conditions so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
HYPOTHETICAL $10,000 INVESTMENT
(UNAUDITED)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GS Balanced GS Balanced
(w/sales charge) (no sales charge) S&P 500/LBABI
---------------- ----------------- -------------
<S> <C> <C> <C>
10/12/94 $9,450 $10,000 $10,000
1/31/95 $9,532 $10,087 $10,206
</TABLE>
<TABLE>
<CAPTION>
Aggregate Total Return/(b)/
---------------------------
Since Inception/(a)/
--------------------
<S> <C>
GS Balanced 0.87%
excluding sales charge
GS Balanced (4.68%)
including sales charge
</TABLE>
(a) Commenced operations October 12, 1994.
(b) An aggregate total return (not annualized) is shown instead of an average
annual total return since the Fund has not completed a full twelve months
of operations.
5
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--51.0%
AEROSPACE/DEFENSE--4.9%
800 Lockheed Corp. $ 57,600
700 Martin Marietta Corp. 31,238
3,000 McDonnell Douglas Corp. 150,000
3,200 Northrop Grumman Corp. 129,200
- -----------------------------------------------------------------------------------------
368,038
- -----------------------------------------------------------------------------------------
AUTOMOBILE--2.4%
600 Ford Motor Company 15,150
4,300 General Motors Corp. 166,625
- -----------------------------------------------------------------------------------------
181,775
- -----------------------------------------------------------------------------------------
AUTOPARTS--ORIGINAL EQUIPMENT--1.0%
4,100 Lear Seating Corp.* 75,338
- -----------------------------------------------------------------------------------------
BEVERAGES--ALCOHOLIC--1.0%
1,400 Anheuser Busch Companies, Inc. 76,650
- -----------------------------------------------------------------------------------------
BROKERAGE FIRMS--1.0%
4,300 Bear Stearns Companies, Inc. 71,487
- -----------------------------------------------------------------------------------------
COMMERCIAL BANKS--0.6%
1,300 Mellon Bank Corp. 45,500
- -----------------------------------------------------------------------------------------
CONTAINERS--METAL & GLASS--1.2%
8,400 Owens-Illinois, Inc.* 87,150
- -----------------------------------------------------------------------------------------
CONTAINERS--PAPER--2.1%
9,400 Stone Container Corp.* 159,800
- -----------------------------------------------------------------------------------------
ELECTRIC COMPANIES--1.2%
2,600 Texas Utilities Co. 90,350
- -----------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.7%
1,000 General Electric Co. 51,500
- -----------------------------------------------------------------------------------------
ELECTRONICS--0.9%
400 E-Systems, Inc.* 16,350
1,300 Loral Corp. 50,537
- -----------------------------------------------------------------------------------------
66,887
- -----------------------------------------------------------------------------------------
ELECTRONICS--SEMICONDUCTORS--2.1%
2,500 Advanced Micro Devices, Inc.* 73,438
1,200 Texas Instruments Inc. 82,800
- -----------------------------------------------------------------------------------------
156,238
- -----------------------------------------------------------------------------------------
FINANCIAL SERVICES--2.3%
500 Federal National Mortgage Association 35,750
2,600 North American Mortgage Co. 41,600
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (CONTINUED)
500 Student Loan Marketing Association $ 18,688
2,100 Travelers, Inc. 77,438
- ------------------------------------------------------
173,476
- ------------------------------------------------------
GROCERY PRODUCTS--1.4%
8,400 Chiquita Brands International, Inc. 108,150
- ------------------------------------------------------
HOMEBUILDERS--1.2%
2,000 Centex Corp. 45,500
3,100 Lennar Corp. 47,662
- ------------------------------------------------------
93,162
- ------------------------------------------------------
HOSPITAL MANAGEMENT--1.9%
3,000 Community Psychiatric Centers 36,750
7,400 National Medical Enterprises, Inc.* 108,225
- ------------------------------------------------------
144,975
- ------------------------------------------------------
INSURANCE-PROPERTY AND CASUALTY--1.4%
5,100 PartnerRe Holdings, Ltd. 103,913
- ------------------------------------------------------
LEISURE TIME--1.2%
3,800 Brunswick Corp. 74,575
900 Outboard Marine Corp. 18,900
- ------------------------------------------------------
93,475
- ------------------------------------------------------
LIFE INSURANCE--0.5%
1,000 USLife Corp. 35,375
- ------------------------------------------------------
MONEY CENTER BANKS--2.0%
2,100 BankAmerica Corp. 90,563
800 Bankers Trust New York Corp. 50,100
300 Chemical Banking Corp. 11,662
- ------------------------------------------------------
152,325
- ------------------------------------------------------
MULTI-LINE INSURANCE--1.2%
1,500 Aetna Life & Casualty Co. 74,250
200 Cigna Corp. 13,525
- ------------------------------------------------------
87,775
- ------------------------------------------------------
OIL--DOMESTIC INTEGRATED--0.7%
700 Amoco Corp. 40,600
300 Tenneco Inc. 13,200
- ------------------------------------------------------
53,800
- ------------------------------------------------------
OIL AND GAS--4.1%
800 Atlantic Richfield Co. 85,200
600 Chevron Corp. 26,775
1,200 Exxon Corp. 75,000
600 Texaco, Inc. 36,975
3,000 Tosco Corp. 85,875
- ------------------------------------------------------
309,825
- ------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PAPER & FOREST PRODUCTS--4.1%
2,700 Champion International Corp. $ 103,275
2,100 Georgia Pacific Corp. 151,200
700 International Paper Co. 49,787
- ------------------------------------------------------------------------------------------
304,262
- ------------------------------------------------------------------------------------------
PETROLEUM REFINING--0.6%
1,300 Ashland Oil Co. 42,412
- ------------------------------------------------------------------------------------------
PHARMACEUTICALS/BIOTECHNOLOGY--0.5%
600 Amgen, Inc.* 38,175
- ------------------------------------------------------------------------------------------
PUBLISHING--1.0%
5,000 Valassis Communications, Inc.* 75,000
- ------------------------------------------------------------------------------------------
RETAIL--DEPARTMENT STORES--0.1%
200 Sears Roebuck & Co. 8,825
- ------------------------------------------------------------------------------------------
RETAIL--SPECIALTY APPAREL STORES--1.1%
6,000 TJX Companies, Inc. 80,250
- ------------------------------------------------------------------------------------------
SAVINGS AND LOANS--0.8%
2,900 GP Financial Corp. 62,531
- ------------------------------------------------------------------------------------------
TOBACCO--3.6%
1,200 Philip Morris Companies, Inc. 71,550
3,000 UST, Inc. 88,500
5,400 Universal Corp. 106,650
- ------------------------------------------------------------------------------------------
266,700
- ------------------------------------------------------------------------------------------
TRUCKERS--1.8%
6,600 Consolidated Freightways, Inc. 137,775
- ------------------------------------------------------------------------------------------
UTILITIES--0.4%
1,300 CMS Energy Corp. 30,550
- ------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,792,765) $3,833,444
- ------------------------------------------------------------------------------------------
PREFERRED STOCK--0.3%
- ------------------------------------------------------------------------------------------
3,400 RJR Nabisco Holdings,
Convertible Preferred, 6.50% $ 21,250
- ------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $23,870) $ 21,250
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT AGENCY OBLIGATIONS--1.1%
Federal National Mortgage Association
$ 40,000 5.400% 12/30/98 $ 36,761
30,000 5.620 02/23/98 28,255
20,000 5.850 02/02/98 18,979
- -----------------------------------------------------------------------------------------------------
TOTAL GOVERNMENT AGENCY
OBLIGATIONS (Cost $82,992) $ 83,995
- -----------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--38.1%
United States Treasury Bond
$ 30,000 8.000% 11/15/21 $ 30,750
United States Treasury Interest Only Stripped Secu-
rities**
450,000 7.870 08/15/17 78,323
United States Treasury Notes
40,000 4.250 05/15/96 38,625
460,000 5.875 05/31/96 453,026
520,000 6.500 05/15/97 511,061
470,000 6.750 06/30/99 456,412
1,025,000 6.375 08/15/02 954,849
316,000 6.250 02/15/03 290,622
United States Treasury Principal Only
Stripped Securities**
30,000 7.880 02/15/16 5,884
300,000 7.840 05/15/20 42,765
- -----------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,831,268) $2,862,317
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLDMAN SACHS BALANCED FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ----------------------------------------------------------------------------------------
<C> <S> <C>
SHORT TERM OBLIGATIONS--9.3%
- ----------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--9.3%
$700,000 Joint Repurchase Agreement Account
5.860%, 02/01/95 $ 700,000
- ----------------------------------------------------------------------------------------
TOTAL SHORT TERM OBLIGATIONS
(Cost $700,000) $ 700,000
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $7,430,895)*** $7,501,006
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in
which value exceeds cost $139,875
Gross unrealized loss for investments in
which cost exceeds value (75,101)
- -------------------------------------------------------
Net unrealized gain $ 64,774
- -------------------------------------------------------
</TABLE>
* Non-income producing security.
** The interest rates disclosed for these securities represent effective yields
to maturity.
*** The aggregate cost for federal income tax purposes is $7,436,232.
The percentage shown for each investment category reflects the value of invest-
ments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS GROWTH AND INCOME FUND
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs Growth and Income Fund seeks long-term growth of capital 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
approach, which means we focus on stocks we consider inexpensive relative to
their expected earnings, free cash flow and ability to pay dividends.
Investments may include well-known companies that are temporarily out of favor
due to cyclical economic conditions or to specific difficulties the portfolio
managers judge to be temporary in nature. In-depth fundamental research
regarding a company's long-term financial strength, its competitive position in
the market and its management's commitment to increasing shareholder value are
all critical aspects of the fund's investment approach.
PERFORMANCE
For the 12 months ended January 31, 1995, the Goldman Sachs Growth and Income
Fund had a total return of 3.97% based on net asset value, outperforming the
S&P 500 stock index, which had a total return of 0.53%. The fund also did well
compared with its peers, ranking in the top 6.5% (23rd out of the 356 funds)
based on total return in the Lipper growth and income category, which returned
an average -4.26% during the period under review. (Please note that Lipper
rankings do not take sales charges into account.) The fund has paid a regular
quarterly dividend of 5.5 cents per share from income, and a special
distribution from income and capital gains of 38.1 cents per share in December
1994.
PORTFOLIO REVIEW
The fund's positive performance reflects the above-average returns of several
key holdings including McDonnell Douglas, which benefited from the company's
announcement of a three-for-one stock split, a 70% dividend increase and a 15%
stock repurchase plan; Consolidated Freightways, one of the three largest
trucking carriers in the U.S., which saw gains after turning around its
previously troubled Emery Air Freight division; National Medical Enterprises, a
hospital management company, whose stock rebounded during the third quarter
after the company settled a governmental investigation; and Advanced Micro
Devices, which rallied significantly in January.
During the course of the year, the fund saw its share of volatility. In
October and November, for example, investors' concerns surrounding the Federal
Reserve's much anticipated sixth interest rate increase for the year had a
negative impact on financial services stocks, which accounted for approximately
20% of the fund's assets as of January 31, 1995. Nonetheless, the fund's
portfolio managers continue to believe in the long-term potential of a number
of its financial holdings including BankAmerica, a dominant force in California
retail banking, and Traveler's Corp., a diversified insurance and financial
services firm, which was recently added to the fund.
During the fourth quarter, the market was similarly unkind to cyclical stocks
in general, which were also well represented in the fund through investments in
General Motors, the fund's largest holding as of January 31; Geon, a polyvinyl
chloride producer; and three paper and forest products companies: Stone
Container, Georgia-Pacific and Champion International. Despite recent stock
price
9
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS GROWTH AND INCOME FUND (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
declines, we believe each of those companies is fundamentally sound and will
prosper over time. In particular, General Motors appears to be very focused on
reducing manufacturing costs, and we have continued to add to our position.
In terms of other key sectors, the fund began the reporting period
significantly underweighted in utilities and consumer nondurables (food and
drug companies). By mid-year, we had purchased several electric utilities we
considered to be of high quality, such as Texas Utilities. In the consumer
products area, we realized significant profits from our investment in Borden,
which received an unsolicited takeover bid from Kohlberg Kravis Roberts & Co.
in September.
PORTFOLIO COMPOSITION
As of January 31, 1995, 89% of the fund's portfolio was invested in common
stocks, 2% in convertible preferred stock and 9% in cash or cash equivalents.
TOP 10 PORTFOLIO HOLDINGS AS OF JANUARY 31, 1995
<TABLE>
<CAPTION>
COMPANY LINE OF BUSINESS PERCENTAGE
<S> <C> <C>
General Motors Corp. Automotive Products 4.2%
Stone Container Corp. Containers and Paper Products 3.9%
Consolidated Freightways, Inc. Truckers 3.9%
National Medical Enterprises, Inc. Hospital Management 3.7%
McDonnell Douglas Aerospace/Defense 3.6%
Corp.
Bear Stearns Cos., Inc. Investment Banking/Brokerage 3.0%
Chiquita Brands International Inc. Grocery Products 2.9%
Georgia-Pacific Corp. Paper and Forest Products 2.8%
BankAmerica Corp. Money Center Banks 2.8%
Valassis Communications, Inc. Publishing 2.5%
</TABLE>
OUTLOOK
While over the short term the market favors different investment styles and
sectors, we believe our emphasis on undervalued companies will prove rewarding
over the long term.
/s/ Mitchell E. Cantor
Mitchell E. Cantor
Co-Head, U.S. Actively Managed
Equity Investments
Portfolio Manager
/s/ Ronald E. Gutfleish
Ronald E. Gutfleish
Portfolio Manager
10
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the period ended January 31, 1995. The
Goldman Sachs Growth and Income Fund's ("GS Growth & Income") performance
(assuming both the maximum sales charge of 5.50% and no sales charge) is
compared with its benchmark--the Standard & Poor's 500 Index ("S&P 500"). All
performance data shown represents past performance and should not be considered
indicative of future performance which will fluctuate as market conditions
change. The investment return and principal value of an investment will
fluctuate with changes in market conditions so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
HYPOTHETICAL $10,000 INVESTMENT
(UNAUDITED)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GS Growth & GS Growth &
Income Income
(w/sales charge) (no sales charge) S&P 500
---------------- ----------------- -------
<S> <C> <C> <C>
2/5/93 $ 9,450 $10,000 $10,000
1/31/94 $10,686 $11,308 $11,073
1/31/95 $11,110 $11,757 $11,132
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
-------------------------------------
One Year Since Inception/(a)/
------------ --------------------
<S> <C> <C>
Growth & Income
excluding sales charge 3.97% 8.48%
GS Growth & Income
including sales charge (1.75%) 5.44%
</TABLE>
(a) Commenced operations February 5, 1993.
11
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS GROWTH AND INCOME FUND
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--93.0%
AEROSPACE/DEFENSE--5.2%
20,500 Lockheed Corp. $ 1,476,000
133,800 McDonnell Douglas Corp. 6,690,000
48,000 Northrop Grumman Corp. 1,938,000
- ------------------------------------------------------------------------------------
10,104,000
- ------------------------------------------------------------------------------------
AUTO INSURANCE--0.2%
25,900 Integon Corp. 375,550
- ------------------------------------------------------------------------------------
AUTOMOBILE--4.0%
198,400 General Motors Corp. 7,688,000
- ------------------------------------------------------------------------------------
AUTOPARTS--ORIGINAL EQUIPMENT--1.3%
131,900 Lear Seating Corp. * 2,423,663
- ------------------------------------------------------------------------------------
BEVERAGES--ALCOHOLIC--0.9%
32,500 Anheuser Busch Companies, Inc. 1,779,375
- ------------------------------------------------------------------------------------
BROKERAGE FIRMS--2.8%
326,280 Bear Stearns Companies, Inc. 5,424,405
- ------------------------------------------------------------------------------------
CHEMICALS--1.4%
100,500 Geon Co. 2,663,250
- ------------------------------------------------------------------------------------
COMMERCIAL BANKS--0.7%
45,500 Union Bank of San Francisco, California 1,433,250
- ------------------------------------------------------------------------------------
CONTAINERS--METAL & GLASS--0.7%
136,100 Owens-Illinois, Inc. * 1,412,038
- ------------------------------------------------------------------------------------
CONTAINERS--PAPER--3.7%
426,700 Stone Container Corp. * 7,253,900
- ------------------------------------------------------------------------------------
COSMETICS--1.9%
436,800 Playtex Products, Inc. * 3,603,600
- ------------------------------------------------------------------------------------
ELECTRIC COMPANIES--2.2%
125,200 Texas Utilities Co. 4,350,700
- ------------------------------------------------------------------------------------
ELECTRONICS--0.5%
22,300 E-Systems, Inc. 911,513
- ------------------------------------------------------------------------------------
ELECTRONICS--SEMICONDUCTORS--3.2%
122,600 Advanced Micro Devices, Inc. * 3,601,375
36,400 Texas Instruments Inc. 2,511,600
- ------------------------------------------------------------------------------------
6,112,975
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL SERVICES--5.3%
36,900 Federal National Mortgage Association $ 2,831,400
22,700 Liberty Corp. 561,825
183,100 North American Mortgage Co.** 2,929,600
106,200 Travelers, Inc. 3,916,125
- ----------------------------------------------------------------------------------------
10,238,950
- ----------------------------------------------------------------------------------------
GAMING COMPANIES--0.6%
156,300 Penn National Gaming, Inc. * 1,114,419
- ----------------------------------------------------------------------------------------
GROCERY PRODUCTS--2.7%
410,500 Chiquita Brands International, Inc. 5,285,188
- ----------------------------------------------------------------------------------------
HOMEBUILDERS--0.5%
39,500 Centex Corp. 898,625
- ----------------------------------------------------------------------------------------
HOSPITAL MANAGEMENT--5.1%
225,400 Community Psychiatric Centers 2,761,150
464,000 National Medical Enterprises, Inc. * 6,786,000
149,100 Pharmchem Labs Inc. * 354,112
- ----------------------------------------------------------------------------------------
9,901,262
- ----------------------------------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES--1.7%
82,400 National Presto Industrials, Inc. 3,378,400
- ----------------------------------------------------------------------------------------
INSURANCE-PROPERTY AND CASUALTY--4.1%
74,600 American Premier Underwriters 1,874,325
141,500 Home Holdings, Inc. * 2,104,813
198,100 PartnerRe Holdings, Ltd. 4,036,287
- ----------------------------------------------------------------------------------------
8,015,425
- ----------------------------------------------------------------------------------------
LEISURE TIME--3.6%
189,600 Brunswick Corp. 3,720,900
152,000 Outboard Marine Corp. 3,192,000
- ----------------------------------------------------------------------------------------
6,912,900
- ----------------------------------------------------------------------------------------
LIFE INSURANCE--1.3%
94,700 FHP International Corp. * 2,438,525
- ----------------------------------------------------------------------------------------
METALS--MISCELLANEOUS--1.1%
103,200 Quanex Corp. 2,218,800
- ----------------------------------------------------------------------------------------
MISCELLANEOUS--1.0%
261,800 Figgie International Holdings Inc. * 1,799,875
- ----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLDMAN SACHS GROWTH AND INCOME FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MONEY CENTER BANKS--3.0%
119,300 BankAmerica Corp. $ 5,144,813
19,500 Chemical Banking Corp. 758,063
- ---------------------------------------------------------------------------------------
5,902,876
- ---------------------------------------------------------------------------------------
MOTOR VEHICLES AND EQUIPMENT--0.0%
12,574 United Mobile Homes Inc. 95,878
- ---------------------------------------------------------------------------------------
MULTI-LINE INSURANCE--1.8%
52,800 Aetna Life & Casualty Co. 2,613,600
14,000 Cigna Corp. 946,750
- ---------------------------------------------------------------------------------------
3,560,350
- ---------------------------------------------------------------------------------------
NEWSPAPER PUBLICATIONS--0.2%
31,700 American Publishing Co. 380,400
- ---------------------------------------------------------------------------------------
OIL--DOMESTIC INTEGRATED--0.5%
15,400 Amoco Corp. 893,200
- ---------------------------------------------------------------------------------------
OIL--INTERNATIONAL INTEGRATED--0.8%
14,700 Royal Dutch Petroleum Co. 1,644,562
- ---------------------------------------------------------------------------------------
OIL WELL EQUIPMENT & SERVICES--1.1%
106,000 Sonat Offshore Drilling, Inc. 2,146,500
- ---------------------------------------------------------------------------------------
OIL AND GAS--4.2%
16,000 Atlantic Richfield Co. 1,704,000
46,000 Exxon Corp. 2,875,000
27,300 Texaco, Inc. 1,682,362
68,100 Tosco Corp. 1,949,362
- ---------------------------------------------------------------------------------------
8,210,724
- ---------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--3.9%
63,100 Champion International Corp. 2,413,575
72,700 Georgia Pacific Corp. 5,234,400
- ---------------------------------------------------------------------------------------
7,647,975
- ---------------------------------------------------------------------------------------
PUBLISHING--2.4%
304,700 Valassis Communications, Inc. * 4,570,500
- ---------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST--2.6%
52,800 Centerpoint Properties Corp. 1,016,400
171,600 Haagen Alexander Properties, Inc. 2,659,800
107,000 LTC Properties 1,364,250
- ---------------------------------------------------------------------------------------
5,040,450
- ---------------------------------------------------------------------------------------
RETAIL--SPECIALTY APPAREL STORES--1.8%
259,700 TJX Companies, Inc. 3,473,487
- ---------------------------------------------------------------------------------------
SAVINGS AND LOANS--2.3%
207,200 GP Financial Corp. 4,467,750
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
SECURITY AND COMMODITY BROKERS,
DEALERS AND SERVICES--1.2%
135,600 Lehman Brothers Holdings, Inc. $ 2,305,200
- ---------------------------------------------------------------------------------------
TEXTILE--APPAREL MANUFACTURERS--1.2%
212,700 Chic by HIS, Inc. * 2,286,525
- ---------------------------------------------------------------------------------------
TOBACCO--4.0%
64,200 Philip Morris Companies, Inc. 3,827,925
54,300 RJR Nabisco Holdings Corp. 319,012
122,100 UST, Inc. 3,601,950
- ---------------------------------------------------------------------------------------
7,748,887
- ---------------------------------------------------------------------------------------
TRUCKERS--3.7%
339,600 Consolidated Freightways, Inc. 7,089,150
- ---------------------------------------------------------------------------------------
UTILITIES--2.6%
27,800 CMS Energy Corp. 657,359
106,800 DQE, Inc. 3,390,900
25,400 Dominion Reserves, Inc. 968,375
- ---------------------------------------------------------------------------------------
5,016,634
- ---------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $180,357,741) $180,219,636
- ---------------------------------------------------------------------------------------
PREFERRED STOCK--1.9%
44,600 Chiquita Brands International, Inc.
Convertible Preferred, 2.875% $ 1,795,150
287,100 RJR Nabisco Holdings,
Convertible Preferred, 6.500% 1,794,375
- ---------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $3,843,416 ) $ 3,589,525
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM OBLIGATIONS--9.0%
- -------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--1.0%
$1,900,000 Federal National Mortgage Association
5.570%, 02/12/95 $ 1,896,472
- -------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS GROWTH AND INCOME FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
SHORT TERM OBLIGATIONS (CONTINUED)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--8.0%
$15,588,000 SBC Securities, Inc., dated 01/31/95, 5.800%, due
02/01/95,
repurchase price $15,590,511 (U.S. Treasury
Notes: $16,135,000, 6.125%, 07/31/96) $ 15,588,000
- -------------------------------------------------------------------------------
TOTAL SHORT TERM OBLIGATIONS
(Cost $17,484,472) $ 17,484,472
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $201,685,629)*** $201,293,633
- -------------------------------------------------------------------------------
<CAPTION>
Contracts # Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
OPTIONS WRITTEN--(0.0)%
- -------------------------------------------------------------------------------
CALL OPTIONS WRITTEN (Premiums received $76,997)
(200) North American Mortgage Co.
expiring March 1995 @ $30.00 --
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value exceeds
cost $ 6,635,471
Gross unrealized loss for investments in which cost exceeds
value (7,207,240)
- -------------------------------------------------------------------------------
Net unrealized loss $ (571,769)
- -------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** A portion of this security is being segregated as collateral on option
contracts.
*** The aggregate cost for federal income tax purposes is $201,865,402.
# One contract relates to 100 shares.
The percentage shown for each investment category reflects the value of invest-
ments 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 SELECT EQUITY FUND
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs Select Equity Fund seeks to provide investors with a total
return (consisting of capital appreciation and dividend income net of expenses)
that exceeds the total return of the S&P 500 stock index. The fund's mandate is
to remain fully invested with industry diversification closely in line with the
S&P 500. Therefore, the fund's relative performance compared with the index
comes almost exclusively from stock selection within sectors.
Our investment process starts with stocks that the Goldman Sachs Investment
Research Department, one of Wall Street's leading research teams, believes will
outperform the broader market. We then use GSAM's proprietary, multifactor
model to estimate individual stock returns in terms of both company-specific
characteristics and general economic conditions. These include a wide range of
quantitative factors, such as a stock's price valuations, yield, profitability,
growth potential, price momentum, risk and liquidity. The relative weight
assigned to each factor depends on general economic conditions. The highest
rated stocks in each industry sector are included in the fund's portfolio. We
believe that combining the fundamental research of Goldman Sachs analysts with
our disciplined, quantitative approach increases the fund's potential to
deliver superior performance.
PERFORMANCE
For the 12 months ended January 31, 1995, the fund had a total return of -
1.10% based on net asset value compared with a return of 0.53% for the S&P 500
stock index, its benchmark. During the same period, the average growth fund, as
tracked by Lipper Analytical Services, Inc., returned -4.26%, placing the fund
well ahead of its peers.
The fund's underperformance relative to the S&P 500 occurred during the second
half of the year, primarily during the fourth quarter of 1994, amid investor
concern that rapidly increasing short-term interest-rates would lead to slower
economic growth. In general, the market shunned cyclical and interest rate-
sensitive stocks and the fund was modestly overweighted in both automotive and
utility stocks compared with the index. Consequently, the list of stocks that
did well shifted as the market rotated to favor different sectors and styles.
For example, stocks with strong value or momentum characteristics such as
General Motors, Chrysler and the Federal National Mortgage Association were
quite promising during the first half of the year, but faltered during the
fourth quarter along with cyclical stocks in general. Typically, stocks of
companies with increased earnings estimates do well, but this year they did not
as investors discounted the news in anticipation of a possible economic
downturn.
In addition, the fund held a substantial position in Telefonos de Mexico
stock, which suffered a price decline of 22% in December as a consequence of
the devaluation of the peso and the ensuing sharp downturn in the Mexican stock
market. However, in our opinion, the fundamentals of the company remain
attractive. A number of retail stocks, including J.C. Penney, felt the impact
of declining prices in that sector.
PORTFOLIO REVIEW
The fund was invested in a broadly diversified list of securities, with sector
allocations generally within two percentage points of the S&P 500. As of
January 31, the portfolio was slightly overweighted in financial stocks (14.6%
versus 13.3% for the
15
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS SELECT EQUITY FUND (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
index) and slightly underweighted in consumer services (12.0% versus 14.6% for
the index).
As in the past, the fund's quantitative characteristics remain superior to the
S&P 500 stock index. As of January 31, the fund had a lower average
price/earnings (P/E) ratio than the market based on reported earnings for 1994
(14.0x versus 16.1x) and estimated earnings for 1995 (11.4x versus 13.0x), and
also had a lower price to book (P/B) ratio than the broader market (2.3x versus
2.5x). Finally, the fund's long-term expected growth rate is also slightly
ahead of the S&P 500 (12.4% versus 11.9%). Typically, the fund will seek to
maintain equal or slightly lower risk than the S&P 500. All told, we believe
the fund offers investors an attractive combination of value and growth,
without assuming more risk than the broad market as represented by the S&P 500.
TOP 10 PORTFOLIO HOLDINGS AS OF JANUARY 31, 1995
<TABLE>
<CAPTION>
COMPANY LINE OF BUSINESS PERCENTAGE
<S> <C> <C>
Philip Morris Cos. Inc. Tobacco 3.6%
Schering Plough Corp. Pharmaceuticals 3.3%
General Electric Co. Electrical Equipment 3.2%
AT&T Corp. Telephone 2.7%
American International Multi-line Insurance 2.6%
Group, Inc.
British Petroleum P.L.C. International Oil 2.3%
Rockwell International Corp. Aerospace/Defense 2.3%
PepsiCo Inc. Beverages/Soft Drinks 2.2%
DuPont E.I. DeNemours Diversified Chemicals 2.1%
Dow Chemical Co. Diversified Chemicals 2.1%
</TABLE>
OUTLOOK
During the course of the year, we have continued to research ways to improve
our quantitative model in order to more accurately predict the relative impact
of different economic factors on a stock's performance. Our research shows that
different market and economic conditions favor stocks with different
characteristics. Our model's enhancements, which will go into effect during the
next few months, are intended to help us predict which characteristics the
market is likely to reward in the near future. Currently, we expect stocks with
low P/E multiples, rising earnings estimates and solid growth potential to
outperform the market. Conversely, we expect stocks with strong prior price
momentum to do less well than normal in the near term.
/s/ Robert C. Jones
Robert C. Jones, CFA
Portfolio Manager
16
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS SELECT EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1995. The
Goldman Sachs Select Equity Fund's ("GS Select Equity") performance (assuming
both the maximum sales charge of 5.50% and no sales charge) is compared with
its benchmark--the Standard & Poor's 500 Index ("S&P 500"). All performance
data shown represents past performance and should not be considered indicative
of future performance which will fluctuate as market conditions change. The in-
vestment return and principal value of an investment will fluctuate with
changes in market conditions so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
HYPOTHETICAL $10,000 INVESTMENT
(UNAUDITED)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GS Select Equity GS Select Equity S&P 500
(w/sales charge) (no sales charge)
---------------- ----------------- -------
<S> <C> <C> <C>
5/24/91 $ 9,450 $10,000 $10,000
1/31/92 $10,112 $10,701 $11,092
1/31/93 $10,548 $11,162 $12,266
1/31/94 $12,144 $12,851 $13,846
1/31/95 $12,009 $12,708 $13,919
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
--------------------------------
One Year Since Inception/(a)/
-------- --------------------
<S> <C> <C>
GS Select Equity
excluding sales charge (1.10%) 6.70%
GS Select Equity (6.54%) 5.08%
including sales charge
</TABLE>
(a) Commenced operations May 24, 1991.
17
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS SELECT EQUITY FUND
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--97.4%
AEROSPACE/DEFENSE--2.2%
55,500 Rockwell International Corp. $ 2,088,187
- ------------------------------------------------------------------------------------------
AUTOMOBILE--2.9%
23,300 Chrysler Corp. 1,048,500
41,300 Ford Motor Co. 1,042,825
17,200 General Motors Corp. 666,500
- ------------------------------------------------------------------------------------------
2,757,825
- ------------------------------------------------------------------------------------------
BEVERAGES--ALCOHOLIC--1.2%
21,100 Anheuser Busch Companies, Inc. 1,155,225
- ------------------------------------------------------------------------------------------
BEVERAGES--SOFT DRINKS--2.2%
55,900 PepsiCo, Inc. 2,061,312
- ------------------------------------------------------------------------------------------
BROADCAST MEDIA--1.5%
17,000 Capital Cities ABC, Inc. 1,411,000
- ------------------------------------------------------------------------------------------
BUILDING MATERIALS--0.7%
14,200 Armstrong World Industries, Inc. 628,350
- ------------------------------------------------------------------------------------------
CHEMICALS--5.2%
16,200 Cytec Industries Inc. * 615,600
30,400 Dow Chemical Co. 1,896,200
22,000 Monsanto Co. 1,617,000
19,700 Norsk Hydro ADR 778,150
- ------------------------------------------------------------------------------------------
4,906,950
- ------------------------------------------------------------------------------------------
CHEMICALS--DIVERSIFIED--2.1%
37,300 Du Pont E.I. De Nemours 1,986,225
- ------------------------------------------------------------------------------------------
COMMERCIAL SERVICES--1.7%
32,800 Omnicom Group, Inc. 1,648,200
- ------------------------------------------------------------------------------------------
COMPUTER SOFTWARE AND SERVICES--0.9%
13,800 Microsoft Corp. * 819,375
- ------------------------------------------------------------------------------------------
COMPUTER SYSTEMS--2.3%
23,100 Gateway 2000 Inc. * 482,213
24,100 International Business Machines 1,738,213
- ------------------------------------------------------------------------------------------
2,220,426
- ------------------------------------------------------------------------------------------
CONTAINERS--METAL & GLASS--0.9%
78,000 Owens-Illinois, Inc. * 809,250
- ------------------------------------------------------------------------------------------
ELECTRIC COMPANIES--2.8%
29,300 Empresa Nacional De Electric ADR 1,193,975
28,500 General Public Utilities Corp. 805,125
25,700 Peco Energy Co. 687,475
- ------------------------------------------------------------------------------------------
2,686,575
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------------------------------
<C> <S> <C>
ELECTRICAL EQUIPMENT--3.2%
58,100 General Electric Co. $ 2,992,150
- --------------------------------------------------------------------------------------
ELECTRONICS--INSTRUMENTATION--0.7%
6,800 Hewlett Packard Co. 683,400
- --------------------------------------------------------------------------------------
ELECTRONICS--SEMICONDUCTORS--3.7%
18,800 Intel Corp. 1,304,250
18,200 Motorola Inc. 1,076,075
15,800 Texas Instruments Inc. 1,090,200
- --------------------------------------------------------------------------------------
3,470,525
- --------------------------------------------------------------------------------------
ENTERTAINMENT--1.6%
30,400 Walt Disney Co. 1,546,600
- --------------------------------------------------------------------------------------
FINANCIAL--3.8%
16,700 BankAmerica Corp. 720,188
17,300 Chase Manhattan Corp. 573,063
18,900 Federal National Mortgage Association 1,351,350
27,700 MGIC Investment Corp. 1,004,125
- --------------------------------------------------------------------------------------
3,648,726
- --------------------------------------------------------------------------------------
GROCERY PRODUCTS--1.3%
41,500 IBP, Inc. 1,239,813
- --------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--2.6%
32,000 Philips NV 1,008,000
9,600 Procter & Gamble Co. 626,400
7,400 Unilever NV 873,200
- --------------------------------------------------------------------------------------
2,507,600
- --------------------------------------------------------------------------------------
INSURANCE-PROPERTY AND CASUALTY--1.7%
18,100 CMAC Investment Corp. 572,413
26,400 Exel Insurance Ltd. 1,036,200
- --------------------------------------------------------------------------------------
1,608,613
- --------------------------------------------------------------------------------------
IRON/STEEL--0.5%
9,300 Nucor Corp. 474,300
- --------------------------------------------------------------------------------------
MACHINERY AND EQUIPMENT--1.0%
18,600 Caterpillar, Inc. 957,900
- --------------------------------------------------------------------------------------
MAJOR REGIONAL BANKS--3.3%
27,000 Banc One Corp. 796,500
21,200 First Fidelity Bancorp 1,001,700
28,400 NationsBank Corp. 1,320,600
- --------------------------------------------------------------------------------------
3,118,800
- --------------------------------------------------------------------------------------
MEDICAL PRODUCTS AND SUPPLIES--1.1%
25,100 Columbia/HCA Healthcare 1,007,138
- --------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS SELECT EQUITY FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MISCELLANEOUS--1.9%
51,800 Allied Signal, Inc. $ 1,851,850
- -----------------------------------------------------------------------------------------
MONEY CENTER BANKS--0.8%
19,500 Citicorp 792,188
- -----------------------------------------------------------------------------------------
MULTI-LINE INSURANCE--2.5%
23,000 American International Group, Inc. 2,394,875
- -----------------------------------------------------------------------------------------
OIL--DOMESTIC INTEGRATED--3.3%
25,300 Amoco Corp. 1,467,400
27,400 Tenneco Inc. 1,205,600
16,700 Teppco Partners L.P. 465,513
- -----------------------------------------------------------------------------------------
3,138,513
- -----------------------------------------------------------------------------------------
OIL--INTERNATIONAL INTEGRATED--5.0%
28,000 British Petroleum PLC ADR 2,173,500
12,900 Mobil Corp. 1,114,237
12,700 Royal Dutch Petroleum Co. 1,420,812
- -----------------------------------------------------------------------------------------
4,708,549
- -----------------------------------------------------------------------------------------
OIL AND GAS--3.1%
27,200 Exxon Corp. 1,700,000
33,300 Panhandle Eastern Corp. 699,300
18,600 Repsol S.A. ADR 520,800
- -----------------------------------------------------------------------------------------
2,920,100
- -----------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--1.5%
36,900 Caraustar Industries, Inc. 779,512
9,600 International Paper Co. 682,800
- -----------------------------------------------------------------------------------------
1,462,312
- -----------------------------------------------------------------------------------------
PERSONAL LOANS--1.2%
28,700 Beneficial Corp. 1,151,588
- -----------------------------------------------------------------------------------------
PHARMACEUTICALS--4.8%
17,700 Abbott Labs 626,137
13,400 Amgen, Inc. * 852,575
39,300 Schering Plough Corp. 3,085,050
- -----------------------------------------------------------------------------------------
4,563,762
- -----------------------------------------------------------------------------------------
RADIO & TELEVISION BROADCASTING--0.4%
15,900 Heritage Media Corp. * 409,425
- -----------------------------------------------------------------------------------------
RETAIL--DEPARTMENT STORES--1.9%
15,000 May Dept. Stores Co. 526,875
28,000 Sears Roebuck & Co. 1,235,500
- -----------------------------------------------------------------------------------------
1,762,375
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ---------------------------------------------------------------------------------------
<C> <S> <C>
RETAIL--FOOD CHAINS--1.4%
40,400 Safeway Inc. * $ 1,297,850
- ---------------------------------------------------------------------------------------
RETAIL--GENERAL MERCHANDISE--1.8%
14,500 J.C. Penney, Inc. 601,750
48,700 Wal Mart Stores, Inc. 1,120,100
- ---------------------------------------------------------------------------------------
1,721,850
- ---------------------------------------------------------------------------------------
RETAIL--SPECIALTY APPAREL STORES--1.0%
54,000 The Limited, Inc. 911,250
- ---------------------------------------------------------------------------------------
TELECOMMUNICATIONS-- LONG DISTANCE--2.6%
27,600 Ameritech Corp. 1,210,950
44,500 Sprint Corp. 1,268,250
- ---------------------------------------------------------------------------------------
2,479,200
- ---------------------------------------------------------------------------------------
TELEPHONE--5.2%
50,500 AT&T Corp. 2,518,687
26,400 British Telecommunications PLC ADR 1,659,900
20,900 Telefonos de Mexico S.A. ADR 739,337
- ---------------------------------------------------------------------------------------
4,917,924
- ---------------------------------------------------------------------------------------
TEXTILE--APPAREL MANUFACTURERS--1.3%
26,500 V.F. Corp. 1,275,312
- ---------------------------------------------------------------------------------------
TOBACCO--4.2%
55,300 Philip Morris Companies, Inc. 3,297,262
110,600 RJR Nabisco Holdings Corp. 649,775
- ---------------------------------------------------------------------------------------
3,947,037
- ---------------------------------------------------------------------------------------
TOYS--0.7%
33,406 Mattel, Inc. 689,004
- ---------------------------------------------------------------------------------------
TRANSPORTATION--MISCELLANEOUS--0.7%
11,700 Federal Express Corp. * 710,775
- ---------------------------------------------------------------------------------------
UTILITIES--1.0%
36,800 Unicom Corp. 956,800
- ---------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $87,841,086) $92,497,004
- ---------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS SELECT EQUITY FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
SHORT TERM OBLIGATIONS--2.3%
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--2.3%
$2,144,000 SBC Securities, Inc., dated 01/31/95, 5.800%, due
02/01/95, repurchase price $2,144,345 (U.S. Treasury
Notes: $2,170,000, 7.50%, 11/15/01) $ 2,144,000
- -------------------------------------------------------------------------------
TOTAL SHORT TERM OBLIGATIONS
(Cost $2,144,000) $ 2,144,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $89,985,086)** $94,641,004
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value exceeds
cost $ 8,293,943
Gross unrealized loss for investments in which cost exceeds
value (3,638,025)
- -------------------------------------------------------------------------------
Net unrealized gain $ 4,655,918
- -------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** The amount stated also represents aggregate cost for federal income tax
purposes.
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.
20
<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.
The portfolio managers use fundamental research to identify companies whose
business value is, in their 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. Their 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 turnover.
PERFORMANCE
During the period under review, the fund's total return was -4.38% based on
net asset value compared with a total return of 0.53% for the S&P 500 stock
index, an unmanaged index that reflects the performance of 500 large-company
stocks. The fund's results were very close to the Lipper growth fund category
average return of -4.26% for the 12 months ended January 31. In part, the fund
fared less well than the S&P 500 due to our focus on less well-known companies
with medium capitalizations to which the market was particularly unkind during
this period. As is often the case during periods when interest rates rise
sharply and quickly, the market looked for relative stability among larger,
established companies in lieu of smaller companies with greater growth
potential. While we are never happy to report average returns, we will continue
to focus on companies that are temporarily out of favor but, in our opinion,
offer the potential for superior results over the long term.
As mentioned in the introduction to this letter, the Goldman Sachs Capital
Growth Fund will reach a milestone shortly. We are pleased to note that the
fund will celebrate its fifth anniversary on April 20, 1995.
PORTFOLIO REVIEW
In the difficult market environment, retail stocks suffered
disproportionately. The fund's holdings in Musicland Stores (specialty
retailing), Charming Shoppes (a retailer of moderately priced women's apparel)
and Service Merchandise (the nation's largest catalog retailer) felt the impact
of earnings shortfalls resulting in what we believe are exaggerated declines in
share prices. In some cases, we have taken advantage of these lower prices and
purchased additional shares.
Among the stocks in the portfolio that performed particularly well during the
period was one of our largest holdings, McDonnell Douglas. During the period,
higher earnings and cash flow enabled this leading aerospace/defense company to
raise dividends significantly, announce a stock split and institute an
aggressive stock repurchase program. Other strong performers included two
technology companies, Analog Devices Inc., a semiconductor manufacturer, and
AMP Inc., the largest company in the worldwide electronic connector business.
Both benefited from the continuing acceleration of demand that should result in
an extended period of growth and continued price appreciation.
21
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS CAPITAL GROWTH FUND (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
NEW POSITIONS IN THE PORTFOLIO
During the past 12 months, we established new positions in a number of
companies including Amgen, Consolidated Freightways and Lear Seating. The
selection of Amgen, one of the world's largest biotechnology companies, is a
particularly good example of our investment process working successfully. We
purchased the stock earlier in the period under review when it sold in the low
40s, based on our belief that the company and its key products (Neupogen and
Epogen) had the potential to produce a high level of earnings and cash flow,
despite stagnant earnings estimates at the time. Our analysis proved correct,
causing the market and potential acquirers to take note as the stock rose
significantly during the year.
TOP 10 PORTFOLIO HOLDINGS AS OF JANUARY 31, 1995
<TABLE>
<CAPTION>
COMPANY LINE OF BUSINESS PERCENTAGE
National Medical Hospital Management 5.0%
Enterprises, Inc.
<S> <C> <C>
McDonnell Douglas Corp. Aerospace/Defense 4.6%
Georgia-Pacific Corp. Paper and Forest Products 4.4%
Snap-On Inc. Machine Tools 3.9%
Valassis Communications, Publishing 3.8%
Inc.
Millipore Corp. Manufacturing-Diversified 3.8%
Industrial
Amgen Inc. Pharmaceuticals/Biotechnology 3.4%
Stone Container Corp. Containers--Paper Products 3.3%
Lear Seating Corp. Autoparts/Original 3.3%
Equipment
Varian Associates, Inc. Electron Technology 3.3%
</TABLE>
OUTLOOK
We believe that as the pace of interest rate increases slows during 1995, the
market will resume its upward movement signaling the next phase of the bull
market. In addition, our analysis indicates that many medium- and smaller cap
stocks are still inexpensive by historical standards. We will therefore use
this period as an opportunity to buy the stocks of well-managed companies at
distressed prices. This strategy calls for extensive research, very careful
stock selection and a commitment to a long-term time horizon -- all hallmarks
of the fund's investment approach.
/s/ James S. McClure
James S. McClure
Portfolio Manager
22
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS CAPITAL GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1995. The
Goldman Sachs Capital Growth Fund's ("GS Cap Growth") performance (assuming
both the maximum sales charge of 5.50% and no sales charge) is compared with
its benchmark--the Standard & Poor's 500 Index ("S&P 500"). All performance
data shown represents past performance and should not be considered indicative
of future performance which will fluctuate as market conditions change. The in-
vestment return and principal value of an investment will fluctuate with
changes in market conditions so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
HYPOTHETICAL $10,000 INVESTMENT
(UNAUDITED)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GS Cap Growth GS Cap Growth
(w/sales charge) (no sales charge) S&P 500
---------------- ----------------- --------
<S> <C> <C> <C>
April 20, 1990 $ 9,450 $10,000 $10,000
January 31, 1991 $ 9,529 $10,084 $10,552
January 31, 1992 $12,322 $13,040 $12,946
January 31, 1993 $14,542 $15,388 $14,316
January 31, 1994 $16,998 $17,987 $16,160
January 31, 1995 $16,254 $17,200 $16,246
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
-----------------------------------
One Year Since Inception/(a)/
----------- --------------------
<S> <C> <C>
GS Cap Growth
excluding sales charge (4.38%) 11.99%
GS Cap Growth
including sales charge (9.64%) 10.67%
</TABLE>
(a) Commenced operations April 20, 1990.
23
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CAPITAL GROWTH FUND
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--93.4%
AEROSPACE/DEFENSE--6.4%
744,000 McDonnell Douglas Corp. $ 37,200,000
448,700 Northrop Grumman Corp. 18,116,262
- -------------------------------------------------------------------------------------
55,316,262
- -------------------------------------------------------------------------------------
AUTOMOBILE--2.9%
644,400 General Motors Corp. 24,970,500
- -------------------------------------------------------------------------------------
AUTOPARTS--ORIGINAL EQUIPMENT--3.1%
1,445,200 Lear Seating Corp. * 26,555,550
- -------------------------------------------------------------------------------------
CHEMICALS, PLASTICS--2.4%
795,900 Geon Co. 21,091,350
- -------------------------------------------------------------------------------------
CONGLOMERATES--2.0%
385,500 Tenneco Inc. 16,962,000
- -------------------------------------------------------------------------------------
CONTAINERS--PAPER--3.1%
1,568,900 Stone Container Corp. * 26,671,300
- -------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.7%
326,700 AMP, Inc. 23,195,700
- -------------------------------------------------------------------------------------
ELECTRON TECHNOLOGY--3.0%
718,900 Varian Associates, Inc. 26,509,438
- -------------------------------------------------------------------------------------
ELECTRONICS--SEMICONDUCTORS--4.4%
919,625 Analog Devices, Inc. * 19,771,938
985,200 National Semiconductor Corp. * 17,979,900
- -------------------------------------------------------------------------------------
37,751,838
- -------------------------------------------------------------------------------------
HOSPITAL MANAGEMENT--6.5%
1,316,200 Community Psychiatric Centers 16,123,450
2,739,300 National Medical Enterprises, Inc.* 40,062,263
- -------------------------------------------------------------------------------------
56,185,713
- -------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--2.4%
607,200 First Brands Corp. 20,417,100
- -------------------------------------------------------------------------------------
INSURANCE--PROPERTY AND CASUALTY--4.2%
1,170,200 Home Holdings, Inc. * 9,800,425
670,150 Integon Corp. 9,717,175
799,800 PartnerRe Holdings, Ltd. 16,295,925
- -------------------------------------------------------------------------------------
35,813,525
- -------------------------------------------------------------------------------------
LIFE INSURANCE--1.2%
724,200 Penncorp Financial Group, Inc. 9,867,225
- -------------------------------------------------------------------------------------
MACHINE TOOLS--3.6%
992,800 Snap-On, Inc. 31,397,300
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------
<C> <S> <C>
MACHINES--DIVERSIFIED--0.4%
134,800 Harinschfeger Industries, Inc. $ 3,589,050
- ------------------------------------------------------------------------------------
MANUFACTURING--DIVERSIFIED INDUSTRIAL--3.6%
625,500 Millipore Corp. 30,805,875
- ------------------------------------------------------------------------------------
METALS--MISCELLANEOUS--1.1%
421,500 Quanex Corp. 9,062,250
- ------------------------------------------------------------------------------------
MISCELLANEOUS--2.9%
638,500 Fisher Scientific International, Inc. 16,441,375
482,600 Keystone International, Inc. 8,204,200
- ------------------------------------------------------------------------------------
24,645,575
- ------------------------------------------------------------------------------------
MONEY CENTER BANKS--4.8%
524,100 BankAmerica Corp. 22,601,812
470,700 Citicorp 19,122,187
- ------------------------------------------------------------------------------------
41,723,999
- ------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--6.2%
485,800 Champion International Corp. 18,581,850
487,600 Georgia-Pacific Corp. 35,107,200
- ------------------------------------------------------------------------------------
53,689,050
- ------------------------------------------------------------------------------------
PHARMACEUTICALS/BIOTECHNOLOGY--3.2%
432,100 Amgen, Inc.* 27,492,362
- ------------------------------------------------------------------------------------
PUBLISHING--3.6%
2,059,400 Valassis Communications, Inc. * 30,891,000
- ------------------------------------------------------------------------------------
RAILCARS--2.3%
598,550 Trinity Industries, Inc. 19,752,150
- ------------------------------------------------------------------------------------
RETAIL--DEPARTMENT STORES--4.0%
946,000 Dillard Department Stores, Inc. 24,832,500
2,261,200 Service Merchandise Co. * 9,892,750
- ------------------------------------------------------------------------------------
34,725,250
- ------------------------------------------------------------------------------------
RETAIL--SPECIALTY--1.7%
1,725,800 Musicland Stores Corp. * 14,885,025
- ------------------------------------------------------------------------------------
RETAIL--SPECIALTY APPAREL STORES--5.1%
3,268,100 Charming Shoppes, Inc. 20,834,138
1,715,400 TJX Companies,Inc. 22,943,475
- ------------------------------------------------------------------------------------
43,777,613
- ------------------------------------------------------------------------------------
SAVINGS AND LOANS--0.6%
412,950 Firstfed Financial Corp. * 4,852,162
- ------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS CAPITAL GROWTH FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SHOES--0.6%
1,143,500 LA Gear, Inc. * $ 5,431,625
- -----------------------------------------------------------------------------
TEXTILES--1.0%
569,200 Warnaco Group, Inc. * 8,822,600
- -----------------------------------------------------------------------------
TOBACCO--2.0%
881,900 Universal Corp. 17,417,525
- -----------------------------------------------------------------------------
TRANSPORTATION--MISCELLANEOUS--1.7%
910,200 Kirby Corp. * 14,676,975
- -----------------------------------------------------------------------------
TRUCKERS--0.7%
300,000 Consolidated Freightways, Inc. 6,262,501
- -----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $750,981,831) $805,207,388
- -----------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--0.9%
CONTAINERS--PAPER--0.9%
$8,000,000 Stone Container Corp.
9.875%, 02/01/01 $ 7,540,000
- -----------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $8,000,000 ) $ 7,540,000
- -----------------------------------------------------------------------------
SHORT TERM OBLIGATIONS--6.0%
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS--6.0%
$51,409,000 SBC Securities, Inc., dated 01/31/95, 5.800%, due
02/01/95, repurchase price $51,417,283 (U.S.
Treasury Notes: $54,615,000, 5.875%, 03/31/99) $ 51,409,000
- -----------------------------------------------------------------------------
TOTAL SHORT TERM OBLIGATIONS
(Cost $51,409,000) $ 51,409,000
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $810,390,831)** $864,156,388
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------
<S> <C>
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in
which value exceeds cost $123,755,372
Gross unrealized loss for investments in
which cost exceeds value (71,160,746)
- ----------------------------
Net unrealized gain $ 52,594,626
- ----------------------------
</TABLE>
* Non-income producing security.
** The aggregate cost for federal income tax purposes is $811,561,762.
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.
25
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS SMALL CAP EQUITY FUND
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
The Goldman Sachs Small Cap Equity Fund seeks long-term capital appreciation,
primarily through investments in equity securities of U.S. companies with
market capitalizations of $1 billion or less, with an emphasis on those with
capitalizations of $500 million 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 through interviews with its competitors, customers and
suppliers, we build the fund's portfolio one stock at a time.
PERFORMANCE
During the period under review, the stocks of smaller companies had a
particularly difficult time. After a disappointing first half of 1994, small
stocks enjoyed a brief rally in July and August. Since then, small stocks have
declined more sharply than larger stocks. The market has been particularly
unforgiving to the stocks of small companies that have reported disappointing
earnings, with even modest shortfalls resulting in substantial stock price
declines.
In this environment, the Goldman Sachs Small Cap Equity Fund had a total
return of -17.53% based on net asset value compared with a total return of -
6.01% for the Russell 2000, a small stock index and the fund's benchmark.
PORTFOLIO REVIEW
The fund's underperformance partially reflects its concentration in the retail
sector, which was not favored by the market in 1994, particularly during a very
disappointing fourth quarter. In addition, the fund was underweighted in the
high tech sector, which rallied strongly starting in July.
However, the fund suffered most from specific setbacks for a number of its
holdings that we believe will prove temporary. For example, Musicland Stores'
(retail) stock suffered as a result of the company's new aggressive pricing and
promotional strategy in its mall stores that hurt current profits but that we
believe could pay off in the long term. Other large retail positions, including
Brookstone, Charming Shoppes and Service Merchandise suffered price declines
after reporting disappointing earnings and poor sales in the fourth quarter.
Concerns about near-term profitability hurt the stock prices of Foamex
International (foam products) and J. Baker, (shoe and apparel retailer), but we
used the declines as an opportunity to add to our positions in those stocks at
what we believe were very attractive valuations.
When a company failed to meet our expectations for earnings or cash flow
because of what we viewed as longer term problems, we sold the stock. That was
the case for Central Garden and Pet, Miles Homes and Carr Gottstein, a grocery
store chain based in Alaska.
Several of the fund's investments performed quite well during the year. In
particular, Black Box, a catalog marketer of data communications and networking
products, formerly part of MB Communications, and Plantronics, a producer of
lightweight headsets and communications equipment, both reported higher than
expected earnings and their stock prices responded accordingly. We sold other
holdings that hit or exceeded our target price including APS Holdings,
International Imaging, AnnTaylor Stores and Nu-Kote Holding Materials.
26
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS SMALL CAP EQUITY FUND (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
During the fourth quarter, several new stocks were added to the fund's
portfolio including Levitz Furniture, a leading retailer of moderately priced
furniture, and TJX Companies, the parent company of T. J. Maxx, a discount
retailer.
Finally, to help manage volatility, going forward we intend to reduce the
percentage of a company's outstanding shares we will own. Such limitations will
provide us with more flexibility to add to our position in the event of market
declines and to provide more liquidity should we decide to sell.
TOP 10 PORTFOLIO HOLDINGS AS OF JANUARY 31, 1995
<TABLE>
<CAPTION>
COMPANY LINE OF BUSINESS PERCENTAGE
<S> <C> <C>
North American Watch Corp. Specialty Retail 4.4%
Black Box Corp. Commercial 4.2%
Services
American Publishing Co. Print & 4.2%
Publishing
American Safety Razor Co. Household 3.9%
Products
ABT Building Products Corp. Building 3.5%
Materials
Sonic Corp. Restaurants 3.5%
Foamex International Inc. Diversified 3.5%
Industrial
Manufacturing
DIMAC Corp. Advertising 3.4%
Morningstar Group, Inc. Grocery Products 3.2%
J. Baker, Inc. Specialty Retail 3.0%
</TABLE>
OUTLOOK
With regard to small-cap stocks in particular, we believe the market has been
experiencing an intracycle correction that will prove temporary. Historically,
small-cap stocks have experienced relatively long, dramatic cycles during which
they outperform larger stocks, followed by periods in which they underperform.
Typically, these cycles last from seven to 10 years, beginning when small-cap
stocks are extremely undervalued and ending when they are extremely overvalued.
During these longer cycles, there are generally several periodic pullbacks or
corrections of 10% to 15%. In our opinion, the latest positive small-cap cycle,
which began in early 1991, still has several years to go.
Our analysis indicates that many small-cap stocks are still attractively
valued relative to larger stocks, as well as to their own earnings and cash
flow potential. We remain committed to our disciplined, stock-by-stock
approach, which we believe will uncover attractive opportunities for investors
over the long term.
/s/ Paul D. Farrell
Paul D. Farrell
Co-Head, U.S. Actively Managed Equity Investments
Portfolio Manager
27
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS SMALL CAP EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1995. The
Goldman Sachs Small Cap Equity Fund's ("GS Small Cap") performance (assuming
both the maximum sales charge of 5.50% and no sales charge) is compared with
its benchmarks--the Standard & Poor's 500 Index ("S&P 500") and the Russell
2000 Index ("Russell 2000"). All performance data shown represents past perfor-
mance and should not be considered indicative of future performance which will
fluctuate as market conditions change. The investment return and principal
value of an investment will fluctuate with changes in market conditions so that
an investor's shares, when redeemed, may be worth more or less than their orig-
inal cost.
HYPOTHETICAL $10,000 INVESTMENT
(UNAUDITED)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GS Small Cap/(a)/ GS Samll Cap
(w/sales charge) (no sales charge) S&P 500 Russell 2000
---------------- ----------------- -------- ------------
<S> <C> <C> <C> <C>
10/22/92 $ 9,450 $10,000 $10,000 $10,000
1/31/93 $11,138 $11,786 $10,655 $11,733
1/31/94 $14,494 $15,337 $12,027 $13,914
1/31/95 $11,953 $12,649 $12,091 $13,078
</TABLE>
<TABLE>
<CAPTION>
Aggregate Annual Total Return
-----------------------------------
One Year Since Inception/(a)/
----------- --------------------
<S> <C> <C>
GS Small Cap
excluding sales charge (17.53%) 10.86%
GS Small Cap
including sales charge (22.06%) 8.14%
</TABLE>
(a) Commenced operations October 22, 1992.
28
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS SMALL CAP EQUITY FUND
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--91.5%
ADVERTISING--3.1%
806,700 Dimac Corp. * $ 9,882,075
- --------------------------------------------------------------------------------
BROADCAST MEDIA--2.3%
621,800 USA Mobile Communications Holdings * 7,461,600
- --------------------------------------------------------------------------------
BUILDING MATERIALS--3.2%
751,500 ABT Building Products Corp. * 10,333,125
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES--8.3%
2,819,268 Automated Security Holdings PLC ADR 6,343,353
904,202 Black Box Corp. * 12,206,727
986,300 International Post, Ltd. * 5,424,650
539,200 Opinion Research Corp. * 2,493,800
- --------------------------------------------------------------------------------
26,468,530
- --------------------------------------------------------------------------------
COMMUNICATION-EQUIPMENT--1.5%
165,800 Plantronics, Inc. * 4,621,675
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE AND SERVICES--0.8%
339,367 Micom Communications * 2,672,515
- --------------------------------------------------------------------------------
COSMETICS--1.3%
483,500 Playtex Products, Inc. * 3,988,875
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.4%
432,000 Holophane Corp. * 7,560,000
- --------------------------------------------------------------------------------
FINANCIAL SERVICES--0.2%
208,700 Hamilton Financial Services Corp. * 730,450
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
189,300 Alpine Lace Brands, Inc. * 804,525
- --------------------------------------------------------------------------------
GROCERY PRODUCTS--2.9%
1,579,800 Morningstar Group, Inc. * 9,281,325
- --------------------------------------------------------------------------------
HEALTH CARE--MISCELLANEOUS--2.9%
233,050 American Healthcorp, Inc. * 1,456,562
503,000 Grancare, Inc. * 7,733,625
- --------------------------------------------------------------------------------
9,190,187
- --------------------------------------------------------------------------------
HOMEBUILDING AND LAND DEVELOPMENT--0.0%
57,000 Miles Homes, Inc. (Warrants expiring 04/01/97) * 28,500
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--3.5%
921,500 American Safety Razor Co. * 11,288,375
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------------------
<C> <S> <C>
LIFE INSURANCE--0.3%
50,400 The Paul Revere Corp. $ 856,800
- -------------------------------------------------------------------------------------
MANUFACTURING--DIVERSIFIED INDUSTRIAL--7.6%
564,800 DT Industries, Inc. 5,648,000
1,228,500 Figgie International, Inc Class A * 8,445,937
9,800 Figgie International, Inc Class B * 67,375
1,054,200 Foamex International, Inc. * 10,146,675
- -------------------------------------------------------------------------------------
24,307,987
- -------------------------------------------------------------------------------------
MEDICAL--HOSPITAL MANAGEMENT & SERVICES--2.1%
680,400 Physicians Clinical Laboratory, Inc. * 6,804,000
- -------------------------------------------------------------------------------------
METALS--MISCELLANEOUS--1.3%
455,700 Webco Industries, Inc. * 4,215,225
- -------------------------------------------------------------------------------------
MISCELLANEOUS--2.8%
376,100 Childrens' Discovery Centers * 4,889,300
91,600 Fisher Scientific International, Inc. 2,358,700
248,500 Oroamerica, Inc. * 1,739,500
- -------------------------------------------------------------------------------------
8,987,500
- -------------------------------------------------------------------------------------
MULTI-LINE INSURANCE--0.7%
172,800 Penncorp Financial Group, Inc. 2,354,400
- -------------------------------------------------------------------------------------
OIL AND GAS--2.0%
556,600 Total Petroleum of North America Ltd. 6,261,750
- -------------------------------------------------------------------------------------
PACKAGING AND CONTAINER--0.6%
175,500 Concordia Paper Holdings Ltd. ADR * 2,018,250
- -------------------------------------------------------------------------------------
PRINT & PUBLISHINGS--3.8%
1,015,900 American Publishing Co. 12,190,800
- -------------------------------------------------------------------------------------
RESTAURANTS--3.3%
17,600 IHOP Corp. * 484,000
463,600 Sonic Corp. * 10,199,200
- -------------------------------------------------------------------------------------
10,683,200
- -------------------------------------------------------------------------------------
RETAIL--FOOD CHAINS--2.5%
738,100 Quantum Restaurant Group, Inc. * 8,026,837
- -------------------------------------------------------------------------------------
RETAIL--SPECIALTY--21.9%
265,800 A Pea in the Pod, Inc. * 1,063,200
1,080,100 Brookstone, Inc. * 5,940,550
375,700 Brothers Gourmet Coffees, Inc. * 3,757,000
938,900 Charming Shoppes, Inc. 5,985,488
454,400 Ernst Home Center, Inc. * 4,089,600
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLDMAN SACHS SMALL CAP EQUITY FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAIL--SPECIALTY--(CONTINUED)
641,600 J.Baker, Inc. $ 8,902,200
882,100 Levitz Furniture, Inc. * 5,843,913
733,440 Musicland Stores Corp. * 6,325,920
884,200 North American Watch Corp. 12,820,900
677,800 Service Merchandise Co., Inc. * 2,965,375
644,400 Supercuts, Inc. * 6,766,200
398,600 TJX Companies, Inc. 5,331,275
- --------------------------------------------------------------------------------
69,791,621
- --------------------------------------------------------------------------------
SHOES--1.0%
601,700 Shoe Carnival, Inc. * 3,083,713
- --------------------------------------------------------------------------------
TELECOM EQUIPMENT--1.3%
310,800 IPC Information Systems, Inc. * 4,040,400
- --------------------------------------------------------------------------------
TEXTILE--APPAREL MANUFACTURERS--4.3%
515,600 Authentic Fitness Corp. * 6,831,700
135,000 Horace Small Apparel PLC, ADR 810,000
386,000 Norton McNaughton, Inc. * 6,127,750
- --------------------------------------------------------------------------------
13,769,450
- --------------------------------------------------------------------------------
TRUCKERS--1.3%
204,800 Consolidated Freightways, Inc. 4,275,200
- --------------------------------------------------------------------------------
WHOLESALE--SPECIAL LINE--2.0%
1,023,000 American Recreation Company Holdings, Inc. * 6,393,750
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $338,409,306) $292,372,640
- --------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- --------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--4.4%
- --------------------------------------------------------------------------------
$3,500,000 Cole National Group Inc. 11.250%, 10/01/01 $ 3,298,750
4,000,000 Figgie International Inc.
9.875%, 10/01/99 3,460,000
525,000 Integon Corp. 8.000%, 08/15/99 497,102
4,750,000 Miles Homes Services, Inc. 12.000%, 04/01/01 2,850,000
1,000,000 Plantronics, Inc.
10.000%, 01/15/01 990,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
- ------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
- ------------------------------------------------------------------------------
$ 3,000,000 Stone Container Corp.
9.875%, 02/01/01 $ 2,827,500
- ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $16,788,774) $ 13,923,352
- ------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS--4.0%
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--4.0%
$12,673,000 SBC Securities, Inc., dated 01/31/95, 5.800%, due
02/01/95, repurchase price $12,675,041 (U.S.
Treasury Notes: $13,640,000, 5.375%, 05/31/98) $ 12,673,000
- ------------------------------------------------------------------------------
TOTAL SHORT TERM OBLIGATIONS
(Cost $12,673,000) $ 12,673,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $367,871,080)** $318,968,992
- ------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value exceeds
cost $ 19,017,366
Gross unrealized loss for investments in which cost exceeds
value (68,037,616)
- ------------------------------------------------------------------------------
Net unrealized loss $(49,020,250)
- ------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** The aggregate cost for federal income tax purposes is $367,989,242.
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.
30
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
OBJECTIVE AND INVESTMENT APPROACH
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 uses intensive fundamental analysis to select
companies with strong, competitive positions in their respective industries
that, for a variety of reasons, are selling at discounts to what we believe to
be their true value. One criterion we consider particularly important is a
company's ability to generate free cash flow -- excess cash after all working
and fixed capital requirements have been satisfied. While our bottom-up
approach puts primary emphasis on selecting individual companies, we also
closely monitor the fund's regional, country and sector allocations in an
effort to manage risk within the context of the country allocations in the
fund's benchmark. Foreign exchange risk is managed by a separate currency
overlay program.
PERFORMANCE
For the 12 months ended January 31, 1995, the Goldman Sachs International
Equity Fund's total return declined by 16.65% based on net asset value compared
with a total return of -10.21% for its benchmark, the Financial Times-Actuaries
Europe & Pacific Index ("Europac") combined hedged and unhedged. Europac is a
capitalization-weighted composite of approximately 1,500 stocks from 20
companies in Europe and the Asia-Pacific region. Until August 31, 1994, the
fund hedged the majority of its assets into U.S. dollars and hence used the
hedged Europac as its benchmark. Since then, the fund has used the unhedged
index because it more accurately reflects the portfolio managers' efforts to
reduce currency hedging costs.
While many of the fund's holdings in Europe and Asia reported positive sales
and earnings results during the period, those results were over shadowed by
broader market movements and economic events. The portfolio underperformed the
Europac Index primarily as a function of its regional asset allocation rather
than because of its stock selection.
For example, during the first three quarters of 1994, the fund had limited
exposure in Japan while that market experienced positive stock market returns.
In September, a new Tokyo-based portfolio manager joined our team and the
fund's position in Japanese stocks was subsequently increased to approximately
30% by the fourth quarter of 1994, just prior to the downturn in the Japanese
market following the Kobe earthquake.
By contrast, the portfolio's position was over- weighted in Asia compared with
the Europac Index (13% versus 5%), based on our positive view for long-term
prospects in that region. Although the majority of stocks we owned in Asia
substantially outperformed their respective markets, during the period under
review Asian markets declined by 24.3% as measured by the FT World Pacific
Basin Ex-Japan Index. January was a particularly rough month, as many investors
reacted to the devaluation of the Mexican peso by avoiding other emerging
markets. Fortunately, Asian currencies have shown strength and resilience
during this difficult period.
Meanwhile, European stocks, reflecting higher interest rates that accompanied
economic recovery, declined by just over 11% as measured by the FT Europe
Index. While many of the fund's European holdings outperformed the Index,
nonetheless they felt the impact of volatile markets.
31
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
PORTFOLIO REVIEW
During the period under review, several investments did not meet our
expectations. Weru Ag (Germany), a manufacturer of prefabricated polyvinyl
chloride (PVC) windows, was hurt by a combination of its own rapid expansion in
the face of increased competition and sharply higher prices for PVC and glass.
We invested in Huhtamaki I Free (Finland), which manufactures confectionery
products, pharmaceuticals and packaging, based on our expectations that
management would refocus the company on its core businesses and improve
profits. When these efforts fell short of our expectations, we sold our
position at a loss.
However, a number of the companies in the fund's portfolio did well and, in
our opinion, have attractive long-term potential. The portfolio's best
performers included Fresenius Ag, the German producer of kidney dialysis
equipment and disposables; Hoganas Ag, a Swedish manufacturer that dominates
the non-U.S. production of iron and steel powdered metals used mainly in
automotive components, which enjoys excellent profit margins and has shown
extremely high volume growth; and Consolidated Electric Power Asia (CEPA) (Hong
Kong), one of the region's largest independent power producers, which we
believe is well positioned to benefit from the increased use of private power
operators in Asia. After CEPA's stock rose 35% since we bought it in July, we
sold part of the position.
We believe a number of our new Japanese holdings, carefully selected because
they were taking aggressive steps to reduce costs, have the potential to show
improvements in earnings in 1995. One such company is Mirai Industry, which
produces electric cable conduits, wiring boxes and other electrical accessories
for the commercial and residential sectors. The company, which currently holds
over 1,000 patents, has gained market share despite the recession in Japan by
actively investing in new product development and containing costs. Aiwa, one
of our larger positions, has expanded its market share in audio consumer
electronics by capitalizing on its innovative products and cost controls, which
include shifting about half of its production and research and development
facilities to lower cost Asian countries. Another Japanese addition, Hoya
Corp., the world's leading manufacturer of optical glass, has successfully
applied its technology to the development of various electronic products
including photomasks and high-density glass magnetic-memory disks. The company
is actively refocusing its business toward higher margin areas, has cut
employees and has shifted much of its production to Thailand.
TOP 10 PORTFOLIO HOLDINGS AS OF JANUARY 31, 1995
<TABLE>
<CAPTION>
COMPANY COUNTRY LINE OF BUSINESS PERCENTAGE
<S> <C> <C> <C>
Banco Popular Spain Financial 4.4%
Mitsubishi Japan Aerospace/Defense 4.2%
Heavy Industry
Mitsubishi Electric CP Japan Electrical Equipment 4.0%
Cie Financiere Switzerland Consumer Goods 3.9%
Richemont Ag Luxury Products
Ranstad Holdings Netherlands Commercial Services 3.8%
Hoya Corp. Japan Optical Glass Manufacturer 3.7%
Santen Pharmaceutical Co. Japan Pharmaceutical 3.7%
Fresenius Ag Germany Health Care 3.6%
Hoganas Ag Sweden Metal Powder 3.6%
Aiwa Japan Audiovisual 3.6%
Equipment
</TABLE>
OUTLOOK
We believe that while worldwide markets are likely to continue to experience
significant volatility in the short run, during the medium-term our outlook for
international stocks is positive in 1995. The broader economic picture in
Europe and Japan
32
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
appears to be improving, but stocks are still expensive in many cases,
particularly in France and Germany. During the past few months, bond yields
have stabilized in Europe, which should help stocks. We also expect Asian
markets to be more attractive this year. The key will be to identify
undervalued companies with the ability to withstand competitive pressures and
deliver above-average, long-term potential.
/s/ Jeffrey M. Weingarten
Jeffrey M. Weingarten, Chief Investment Officer
International Equity Funds
London
33
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1995. The
Goldman Sachs International Equity Fund's ("GS Int'l Equity") performance (as-
suming both the maximum sales charge of 5.50% and no sales charge) is compared
with its benchmarks--the Financial Times-Actuaries World Euro-Pacific Index
hedged into U.S. dollars ("FT Euro-Pac (US$ hedged)") and the Financial Times-
Actuaries World Euro-Pacific Index hedged and unhedged into U.S. dollars ("FT
Euro-Pac (Combined)")(b). All performance data shown represents past perfor-
mance and should not be considered indicative of future performance which will
fluctuate as market conditions change. The investment return and principal
value of an investment will fluctuate with changes in market conditions so that
an investor's shares, when redeemed, may be worth more or less than their orig-
inal cost.
HYPOTHETICAL $10,000 INVESTMENT
(UNAUDITED)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GS Int'l Equity GS Int'l Equity FT Euro-Pac FT Euro-Pac
(w/sales charge) (no sales charge) (US$ hedged) (combined)/(b)/
---------------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C>
12/1/92 $ 9,450 $10,000 $10,000 $10,000
1/31/93 $ 9,566 $10,123 $10,063 $10,063
1/31/94 $12,066 $12,768 $13,498 $13,498
1/31/95 $10,058 $10,643 $11,916 $12,119
</TABLE>
<TABLE>
<CAPTION>
Aggregate Annual Total Return
-----------------------------------
One Year Since Inception/(a)/
----------- --------------------
<S> <C> <C>
GS Int'l Equity
excluding sales charge (16.65%) 2.91%
GS Int'l Equity
including sales charge (21.23%) 0.26%
</TABLE>
(a) Commenced operations December 1, 1992.
(b) Beginning on September 1, 1994, the Fund began using the unhedged FT Euro-
Pac as its benchmark (prior thereto, the Fund used the hedged FT Euro-Pac).
The combined FT Euro-Pac represents the hedged FT Euro-Pac performance up
to August 31, 1994 and the unhedged FT Euro-Pac performance from September
1, 1994 through January 31, 1995.
34
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--94.4%
AUSTRIAN SCHILLINGS--2.8%
137,400 Oester Elektrizita
(Electric Utility) $ 7,725,717
- --------------------------------------------------------------------------------
BELGIAN FRANCS--3.2%
39,327 Colruyt SA (Food-Retailer) 8,674,935
- --------------------------------------------------------------------------------
BRITISH POUND STERLING--7.5%
437,411 Boots Co.
(Health Care--Diversified) 3,216,766
1,171,639 British Airport Authority (Transportation--
Miscellaneous) 8,282,819
2,600,000 Rentokil Group
(Commercial Services) 9,128,578
- --------------------------------------------------------------------------------
20,628,163
- --------------------------------------------------------------------------------
DANISH KRONER--3.1%
171,900 TeleDanmark AS (Telecommunications) 8,542,857
- --------------------------------------------------------------------------------
HONG KONG DOLLAR--8.1%
3,890,800 Consolidated Electric Power Asia
(Utility) 7,595,485
395,000 HongKong Electric
(Utility) 1,051,971
10,722,000 National Mutual Asia Ltd.
(Life Insurance) 6,514,984
12,959,680 South China Morning Post (Publishing) 7,246,363
- --------------------------------------------------------------------------------
22,408,803
- --------------------------------------------------------------------------------
INDONESIAN RUPIAH--3.3%
125,000 Indosat (Telecommunications) 397,497
2,605,000 Astra International
(Auto Distribution & Assembly) 4,112,539
144,400 PT Indonesia Satellite ADR (Telecommunications) 4,530,550
- --------------------------------------------------------------------------------
9,040,586
- --------------------------------------------------------------------------------
JAPANESE YEN--30.9%
438,000 Aiwa Co.
(Audio-Visual Equipment
Manufacturer) 9,779,342
439,000 Hoya Corp.
(Optical Glass Manufacturer) 10,199,035
159,000 Inaba Denkisangyo (Retail) 4,317,610
388,000 Max Co.
(Office Equipment Manufacturer) 8,584,934
55,000 Ministop Co. (Retail) 1,493,514
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
JAPANESE YEN (continued)
200,000 Mirai Industry Co. (Miscellaneous Manufacturers) $ 4,706,829
1,799,000 Mitsubishi Electric CP
(Electrical Equipment) 11,054,903
1,700,000 Mitsubishi Heavy Industry (Aerospace/Defense) 11,489,490
374,000 Santen Pharmaceutical Co. (Pharmaceutical) 10,118,274
315,000 Shimachu Co. (Furniture Retail) 8,959,910
184,000 Taikisha Ltd.
(Engineering & Construction) 3,423,514
35,200 Trusco Nakayama (Trading) 817,781
- -------------------------------------------------------------------------------
84,945,136
- -------------------------------------------------------------------------------
MALAYSIAN RINGGIT--1.8%
881,000 Kim Hin Industry (Building Materials) 3,718,898
452,000 Tanjong (Leisure) 1,165,996
- -------------------------------------------------------------------------------
4,884,894
- -------------------------------------------------------------------------------
NETHERLANDS GUILDERS--6.7%
197,815 Ranstad Holdings
(Commercial Services) 10,499,046
107,583 Wolters Kluwer (Publishing) 7,944,862
- -------------------------------------------------------------------------------
18,443,908
- -------------------------------------------------------------------------------
NORWEGIAN KRONE--3.9%
469,580 Helikopter Services (Transportation) 4,499,644
412,890 Unitor A/S
(Ship Maintenance Services) 6,089,185
- -------------------------------------------------------------------------------
10,588,829
- -------------------------------------------------------------------------------
SPANISH PESETAS--6.1%
101,099 Banco Popular (Financial) 12,231,533
48,063 Zardoya Otis (Electrical Equipment) 4,443,728
- -------------------------------------------------------------------------------
16,675,261
- -------------------------------------------------------------------------------
SWEDISH KRONA--13.1%
202,107 Arjo (Health Care--Miscellaneous) 3,558,554
178,380 Gentinge
(Health Care--Miscellaneous) 4,627,901
610,250 Hoganas Ag
(Metal Powder Manufacturer) 9,808,738
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS INTERNATIONAL EQUITY FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SWEDISH KRONA (continued)
365,790 Securitas AB-B-Free (Commercial Services) $ 9,758,434
452,000 Volvo AB
(Car and Truck Manufacturer) 8,410,676
- -------------------------------------------------------------------------------
36,164,303
- -------------------------------------------------------------------------------
SWISS FRANC--3.9%
12,251 Cie Financiere Richemont Ag (Consumer
Goods--Luxury Products) 10,821,764
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $264,192,085) $259,545,156
- -------------------------------------------------------------------------------
PREFERRED STOCK--3.6%
DEUTSCHEMARKS--3.6%
20,631 Fresenius Ag
(Health Care--Diversified) $ 9,963,528
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $6,455,014) $ 9,963,528
- -------------------------------------------------------------------------------
OPTIONS--0.2%
- -------------------------------------------------------------------------------
JPY36,097,529 Nikkei 300 Call @ 328.55 expiring
12/22/95 $ 511,893
JPY2,380,000,000 Nikkei 300 Call @ 284.70 expiring
03/09/95 124,422
- -------------------------------------------------------------------------------
OPTIONS (Cost $8,340,192) $ 636,315
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $278,987,291)* $270,144,999
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in
which value exceeds cost $ 16,862,791
Gross unrealized loss for investments in
which cost exceeds value (25,810,034)
- -------------------------------------------------------------------------------
Net unrealized loss $ (8,947,243)
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
COMMON AND PREFERRED STOCK INDUSTRY CONCEN-
TRATIONS
- ----------------------------------------------
Commercial Services 10.7%
Electrical Equipment 5.6%
Publishing 5.5%
Telecommunications 4.8%
Health Care--Diversified 4.8%
Financial 4.4%
Aerospace/Defense 4.2%
Consumer Goods--Luxury Products 3.9%
Optical Glass Manufacturer 3.7%
Pharmaceutical 3.7%
Metal Powder Manufacturer 3.6%
Audio-Visual Equipment Manufacturer 3.6%
Furniture Retail 3.3%
Utility 3.2%
Food-Retailer 3.2%
Office Equipment Manufacturer 3.1%
Car and Truck Manufacturer 3.1%
Transportation--Miscellaneous 3.0%
Health Care--Miscellaneous 3.0%
Electric Utility 2.8%
Life Insurance 2.4%
Ship Maintenance Services 2.2%
Retail 2.1%
Miscellaneous Manufacturers 1.7%
Transportation 1.6%
Auto Distribution & Assembly 1.5%
Building Materials 1.4%
Engineering & Construction 1.2%
Leisure 0.4%
Trading 0.3%
- ----------------------------------------------
TOTAL COMMON AND PREFERRED STOCK 98.0%
- ----------------------------------------------
</TABLE>
* The aggregate cost for federal income tax purposes is $279,092,242.
JPY = Japanese Yen
The percentage shown for each investment category reflects the value of invest-
ments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
36
<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. In selecting investments for the fund, we use firsthand fundamental
research. Our goal is to find well-managed companies whose prices are, in our
opinion, undervalued in the marketplace. In addition, ideal candidates for the
fund's portfolio share the following characteristics: 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 REFLECT NEAR-TERM VOLATILITY AND LONG-TERM POTENTIAL
Since the fund's inception on July 8, 1994 through January 31, 1995, Asian
stock markets have been extremely volatile. Throughout the period, the rate of
new foreign investment in Asian markets slowed considerably from last year.
Despite strong economic fundamentals in the region, September marked the end of
a powerful run-up in the Asian markets that began in July. The fourth quarter
of 1994 saw a significant correction among overvalued Asian stocks, caused
primarily by the specter of additional interest rate increases and a weak bond
market in the U.S. January was a particularly brutal month, as Asian markets
felt the halo effect of investor concern regarding all emerging markets spurred
by the devaluation of the Mexican peso and the worsening trade relations
between the U.S. and China. Other factors that contributed to volatility in the
region included the slowdown in the real estate market in Hong Kong, elections
in India and signs of accelerating inflation in China.
PERFORMANCE REVIEW
During the period from inception on July 8, 1994 through January 31, 1995, the
fund had a total return of -5.46% based on net asset value, significantly
outperforming its benchmark, the Morgan Stanley Capital International Combined
Asia (ex Japan) Index, which returned -9.26% for the same period. While we are
never pleased by any decline, our better relative performance was the result of
a combination of careful stock selection and good timing, which included a move
from cyclical stocks and into growth stocks.
The high-quality companies in which the portfolio is invested have held up
better than their respective markets during the most recent period of market
declines. In addition, we used hedging strategies judiciously, including
futures and puts, in an effort to preserve capital in the declining markets.
During much of the period we maintained a relatively high cash weighting (over
10%) to help achieve greater stability, but took advantage of what we viewed as
an oversold market in January to put much of that cash to work.
PORTFOLIO HIGHLIGHTS
As of January 31, the fund's portfolio was invested 90% in common stocks, 3%
in corporate bonds and 7% in cash or cash equivalents. This reflects a
reduction in the portfolio's cash position, which was as high as 15% earlier in
the period.
37
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASIA GROWTH FUND (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
By country, our heaviest concentrations were in Hong Kong (34.4%), Indonesia
(11.0%), Singapore (12.9%), the Philippines (9.7%), Malaysia (9.5%) and India
(7.9%). Compared with the Index, the portfolio was over-weighted in Hong Kong,
Indonesia and the Philippines as we took advantage of good relative values
available in those countries, and significantly underweighted in Malaysia and
Thailand.
The portfolio was invested in a wide range of industries including banking,
life insurance, utilities, telecommunications and beverage.
Three of our largest holdings, Metropolitan Bank & Trust Co. (Metrobank),
Overseas Union Bank Ltd. (OUB) and National Mutual Asia, were among the fund's
best performers. Philippines-based Metrobank, a high-quality service provider,
has benefited from deregulation. OUB, Singapore's fourth largest local bank,
with an established network of branches at home as well as in Malaysia and
other countries, has benefited from capital expansion, strong loan demand and
the acquisition of Chase Manhattan Bank's credit card business in Singapore.
National Mutual Asia, one of Hong Kong's leading local insurance companies, has
a dominant market share of about 35% in individual insurance products, sizable
financial reserves and a high return on capital. The company has plenty of room
for future growth: Approximately 30% of the population in Hong Kong is insured
compared with close to 70% penetration for developed markets.
During the period, our investment in Ranbaxy Laboratories Ltd., an Indian
pharmaceutical company with very competent management, exhibited strong growth
and appears to have excellent long-term potential in the still relatively
unsophisticated Indian economy. In addition, a number of our investments in
Indonesian companies, including PT Indonesia Satellite, a tele- communications
company well positioned to take advantage of deregulation and lack of
competition, contributed to the fund's performance.
We also maintained a sizable investment in Consolidated Electric Power Asia
(CEPA) (Hong Kong), which builds and operates power stations. The company has
established an enviable track record in China and is now aggressively seeking
opportunities to expand in Indonesia, India and Pakistan, where potential
returns are even higher. Though the stock has been extremely volatile in recent
months, we still believe in the company's long-term prospects.
Not all the stocks in our portfolio performed as well as we anticipated. For
example, Straits Steamship Land had a disappointing January, reflecting a
perceived downturn in real estate in Singapore. The market had anticipated
better growth that had already been reflected in the stock's price.
During the past few months, we added a new position in the San Miguel Brewery
Ltd. (Hong Kong), which has done well and declared a special dividend.
TOP 10 PORTFOLIO HOLDINGS AS OF JANUARY 31, 1995
<TABLE>
<CAPTION>
COMPANY COUNTRY LINE OF BUSINESS PERCENTAGE
<S> <C> <C> <C>
Henderson Land Development Hong Kong Real Estate 4.9%
Metropolitan Bank & Trust Philippines Banking 4.7%
Overseas Union Bank Ltd. Singapore Banking 4.1%
National Mutual Asia Ltd. Hong Kong Life Insurance 3.9%
Ranbaxy Laboratories Ltd. India Pharmaceuticals 3.6%
HongKong Electric Hong Kong Utility 3.5%
Hong Kong Telecommunications Hong Kong Telecommunications 3.4%
San Miguel Brewery Ltd. Hong Kong Brewery 3.4%
Singapore Press Holdings Singapore Printing & 3.4%
Publishing
Global Mark International Indonesia Foods 3.3%
Indofoods
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASIA GROWTH FUND (continued)
- ----------------------------------- -------------------------------------------
- ----------------------------------- -------------------------------------------
INVESTMENT OUTLOOK
Despite recent volatility, we believe the long-term fundamentals for Asia are
positive. In general,
the region has enjoyed a period of relative political stability. Asian
economies have remained strong while managing to contain inflation (with the
exception of China) and are expected to see an increasing amount of growth from
within as Asian countries invest in their own infrastructure and consumer
spending increases.
Nearer term, events in the U.S. could still have a major impact. As interest
rates stabilize in the U.S., Asian markets should see lower volatility and
generally better returns in 1995. Consequently, we have used the recent sell-
offs in the Asian markets as an opportunity to invest in quality companies at
attractive prices.
In addition, we will continue to look for interesting companies in some of the
region's smaller stock markets, such as India and Indonesia, which we believe
offer good growth potential and attractive valuations.
In general, we expect stocks in the region to benefit over time as investors
in Europe, Japan and the U.S. internationalize their portfolios and increase
their investments in Asian companies. But as the past few months have amply
demonstrated, there will be periods of high volatility along the way.
Therefore, it is particularly important that investors view this fund as a
long-term growth opportunity and be prepared to stay the course.
/s/ Warwick M. Negus
Warwick M. Negus
Portfolio Manager, Hong Kong
39
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASIA GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the period ended January 31, 1995. The
Goldman Sachs Asia Growth Fund's ("GS Asia Growth") performance (assuming both
the maximum sales charge of 5.50% and no sales charge) is compared with its
benchmark--the Morgan Stanley Capital International Combined Asia (ex Japan)
Index ("MSCI Combined Asia-ex Japan"). All performance data shown represents
past performance and should not be considered indicative of future performance
which will fluctuate as market conditions change. The investment return and
principal value of an investment will fluctuate with changes in market condi-
tions so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
HYPOTHETICAL $10,000 INVESTMENT
(UNAUDITED)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Goldman Sachs Asia Growth Goldman sachs Asia Growth MSCI Combined
(w/sales charge) (no sales charge) Asia--ex Japan
------------------------- ------------------------- --------------
<S> <C> <C> <C>
7/8/94 $9,450 $10,000 $10,000
1/31/95 $8,934 $ 9,454 $ 9,074
</TABLE>
<TABLE>
<CAPTION>
Aggregate Total Return/(b)/
---------------------------
Since Inception/(a)/
--------------------
<S> <C>
GS Asia Growth (5.46%)
excluding sales charge
GS Asia Growth (10.66%)
including sales charge
</TABLE>
(a) Commenced operations July 8, 1994.
(b) An aggregate total return (not annualized) is shown instead of an average
annual total return since the Fund has not completed a full twelve months
of operations.
40
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASIA GROWTH FUND
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--87.8%
HONG KONG DOLLAR--33.5%
2,305,000 Amoy Properties (Real Estate) $ 2,041,273
2,036,800 Consolidated Electric Power Asia* (Utility) 3,976,171
437,800 Hang Seng Bank (Banking) 2,411,154
1,390,000 Henderson Land Development (Real Estate) 6,127,860
1,614,000 HongKong Electric (Utility) 4,298,436
2,430,000 HongKong Telecommunications Ltd.
(Telecommunications) 4,272,527
6,686,000 JCG Holdings Ltd.
(Financial Services) 3,457,531
7,952,000 National Mutual Asia Ltd.
(Life Insurance) 4,831,855
5,463,200 San Miguel Brewery Ltd. (Brewery) 4,202,462
6,994,000 South China Morning Post (Publishing) 3,910,672
8,123,000 Winton Holdings
(Financial Services) 2,126,577
- --------------------------------------------------------------------------------
41,656,518
- --------------------------------------------------------------------------------
INDIAN RUPEE--7.7%
150,000 Larsen & Toubro Limited--GDR (Engineering) 1,916,250
212,000 Ranbaxy Laboratories Ltd.--GDS (Pharmaceuticals) 4,452,000
175,000 Tata Engineering & Locomotive Company Ltd. GDS
(Engineering) 2,942,625
75,000 Tata Engineering & Locomotive Company Ltd. GDR--
Warrants expiring 03/08/96
(Engineering) 225,000
- --------------------------------------------------------------------------------
9,535,875
- --------------------------------------------------------------------------------
INDONESIAN RUPIAH--10.7%
110,000 PT TRI Polyta Indonesia ADR (Chemicals) 2,406,250
1,950,000 Astra International
(Auto Distribution & Assembly) 3,078,484
108,200 PT Indonesia Satellite ADR (Telecomnmunications) 3,394,775
81,000 PT Indonesia Satellite (Telecommunications) 257,578
1,614,040 Mulia Industrindo
(Manufacturing--Diversified Industrial) 3,276,130
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
- ----------------------------------------------------------------------------------
<C> <S> <C>
INDONESIAN RUPIAH (continued)
1,291,232 Mulia Industrindo (Rights) (Manufacturing--
Diversified Industrial) $ 873,635
- ----------------------------------------------------------------------------------
13,286,852
- ----------------------------------------------------------------------------------
KOREAN WON--3.7%
4,200 Korea Mobile Telecommunications Corp.
(Telecommunications) 3,230,606
10,200 Samsung Electronics GDR (Electronics) 1,403,631
- ----------------------------------------------------------------------------------
4,634,237
- ----------------------------------------------------------------------------------
MALAYSIAN RINGGIT--9.3%
430,000 Cement Manufacturers of Sarawak
(Building Materials) 1,630,252
1,011,000 Commerce Asset Holdings (Financial Services) 3,477,350
523,000 Kim Hin Industry
(Building Materials) 2,207,702
400,000 Malakoff Berhad (Utility) 820,793
402,000 Oriental Holdings (Conglomerate) 1,728,356
648,000 Tanjong (Leisure) 1,671,604
- ----------------------------------------------------------------------------------
11,536,057
- ----------------------------------------------------------------------------------
PHILIPPINE PESO--9.4%
229,657 Metropolitan Bank & Trust (Banking) 5,846,665
13,000 Philippine Long Distance Telephone
(Telecommunications) 675,153
182,867 Benpres Holding Corp.-- GDS
(Telecommunications) 1,280,069
75,000 Philippine Long Distance Telephone ADR
(Telecommunications) 3,909,375
- ----------------------------------------------------------------------------------
11,711,262
- ----------------------------------------------------------------------------------
PAKISTAN RUPEE--0.4%
4,550 Pakistan Telecommunications GDS
(Electronics) 445,900
- ----------------------------------------------------------------------------------
SINGAPORE DOLLAR--12.5%
441,000 Keppel Corp. (Transportation) 3,305,983
933,500 Overseas Union Bank (Banking) 5,104,075
243,000 Singapore Press Holdings
(Publishing) 4,161,417
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASIA GROWTH FUND (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- ------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
SINGAPORE DOLLAR (continued)
1,070,000 Straits Steamship Land
(Real Estate) $ 3,031,912
- ------------------------------------------------------------------------------------
15,603,387
- ------------------------------------------------------------------------------------
THAI BAHT--0.6%
662,000 Siam City Bank Ltd.
(Banking) 705,658
- ------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $123,439,833) $109,115,746
- ------------------------------------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- ------------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--3.3%
$4,250,000 Global Mark International
Indofoods 3.500%,
04/06/97 (Foods) $ 4,122,500
- ------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $4,711,250) $ 4,122,500
- ------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS--6.4%
- ------------------------------------------------------------------------------------
$5,325,826 Euro-Time Deposit 5.750%, 02/01/95 $ 5,325,826
2,649,399 HongKong Time Deposit 5.000%, 02/03/95* 2,649,399
- ------------------------------------------------------------------------------------
TOTAL SHORT TERM OBLIGATIONS
(Cost $7,975,225) $ 7,975,225
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $136,126,308)** $121,213,471
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
Contracts # Description Value
- -----------------------------------------------------------------------------
<C> <S> <C>
OPTIONS WRITTEN--(0.1)%
- -----------------------------------------------------------------------------
PUT OPTIONS WRITTEN
(12,700) Consolidated Electric Power Asia, Put Strike HK $16
expiring 04/16/95 $(239,716)
- -----------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Premiums received $180,767) $(239,716)
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------
<S> <C>
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in
which value exceeds cost $ 3,087,568
Gross unrealized loss for investments in
which cost exceeds value (15,634,971)
- ---------------------------
Net unrealized loss $(12,547,403)
- ---------------------------
</TABLE>
<TABLE>
<S> <C>
COMMON STOCK INDUSTRY
CONCENTRATIONS
Telecommunications 13.7%
Banking 11.3%
Real Estate 9.0%
Financial Services 7.3%
Utility 7.3%
Publishing 6.5%
Engineering 4.1%
Life Insurance 3.9%
Pharmaceuticals 3.6%
Brewery 3.4%
Manufacturing--Diver-
sified Industrial 3.3%
Building Materials 3.1%
Transportation 2.7%
Auto Distribution &
Assembly 2.5%
Chemicals 1.9%
Electronics 1.5%
Conglomerate 1.4%
Leisure 1.3%
- ---------------------------
Total Common Stock 87.8%
- ---------------------------
</TABLE>
* A portion of this security is being segregated as collateral on options
contracts.
** The aggregate cost for federal income tax purposes is $136,147,016.
# One contract relates to 100 shares.
The percentage shown for each investment category reflects the value of invest-
ments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS EQUITY PORTFOLIO MANAGEMENT TEAM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Portfolio Managers:
Mitchell E. Cantor, Co-Head, U.S. Actively Managed Equity Investments
Paul D. Farrell , Co-Head, U.S. Actively Managed Equity Investments
Ronald E. Gutfleish
James S. McClure
Robert C. Jones, CFA, Quantitative Equity Investments
International Portfolio Managers:
Jeffrey M. Weingarten, CIO, International Equity Funds (London)
Warwick M. Negus (Hong Kong)
Roderick D. Jack (London)
Marcel J. Jongen (London)
Shoga Maeda (Tokyo)
Equity Analysts:
James L. Adler (New York)
G. Lee Anderson (New York)
Eileen A. Aptman (New York)
Kent A. Clark (New York)
Alice Lui (Hong Kong)
Victor H. Pinter (New York)
Ashwin Ranganathan (Hong Kong)
Francesca E. Scarito (New York)
Kirsten Sehnbruch (London)
William A. Strong (New York)
Karma Wilson (Hong Kong)
43
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS
BALANCED GROWTH & INCOME
FUND FUND
------------------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (identified
cost $7,430,895, $201,685,629, $89,985,086,
$810,390,831, $367,871,080, $278,987,291 and
$136,126,308, respectively) $7,501,006 $201,293,633
Cash 78,743 456
Receivables:
Investment securities sold 48,165 2,643,263
Forward foreign currency exchange contracts -- --
Fund shares sold 268,302 2,257,008
Dividends and interest 61,396 163,759
Deferred organization expenses, net 93,864 57,597
Other assets 78,636 --
- ------------------------------------------------------------------------------
TOTAL ASSETS 8,130,112 206,415,716
- ------------------------------------------------------------------------------
LIABILITIES:
Options written, at value (a) -- --
Payables:
Investment securities purchased 460,235 12,154,854
Cash overdraft -- --
Forward foreign currency exchange contracts -- --
Fund shares repurchased -- 135,926
Investment advisory fees 2,820 88,073
Administration fees 845 24,020
Distribution fees 1,408 40,033
Transfer agent fees 20,000 107,418
Accrued expenses and other liabilities 135,236 93,149
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 620,544 12,643,473
- ------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital 7,419,039 193,968,736
Accumulated undistributed (distributions in
excess of) net investment income 20,283 29,482
Accumulated undistributed (distributions in
excess of) net realized gain (loss) on
investment, option and futures transactions 135 89,024
Accumulated net realized foreign currency gain
(loss) -- --
Net unrealized gain (loss) on investments and
options 70,111 (314,999)
Net unrealized gain on translation of assets
and liabilities denominated in foreign
currencies -- --
- ------------------------------------------------------------------------------
NET ASSETS $7,509,568 $193,772,243
- ------------------------------------------------------------------------------
Total shares of beneficial interest outstand-
ing, $.001 par value (100,000,000 shares au-
thorized) 528,104 12,267,186
Net asset value and redemption price per share
(net assets/shares outstanding) $14.22 $15.80
- ------------------------------------------------------------------------------
Maximum public offering price per share (NAV
per share X 1.0582) $15.05 $16.72
- ------------------------------------------------------------------------------
</TABLE>
(a) Premiums received are $76,997 for Growth and Income and $180,767 for Asia
Growth.
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
SELECT EQUITY CAPITAL GROWTH SMALL CAP EQUITY INTERNATIONAL EQUITY ASIA GROWTH
FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$94,641,004 $864,156,388 $318,968,992 $270,144,999 $121,213,471
467 -- -- -- 1,041,875
-- 14,058,080 1,757,767 11,985,640 2,503,849
-- -- -- 1,972,755 --
347,233 1,354,877 808,482 517,847 1,210,235
262,073 1,137,303 665,059 529,386 255,053
40,395 13,155 50,899 49,731 107,204
-- 7,493 14,319 5,057 20,942
- ---------------------------------------------------------------------------------
95,291,172 880,727,296 322,265,518 285,205,415 126,352,629
- ---------------------------------------------------------------------------------
-- -- -- -- 239,716
-- 15,861,011 1,607,623 4,135,244 1,220,910
-- -- -- 278,621 --
-- -- -- 2,381,776 --
76,433 1,382,344 284,076 2,394,503 49,299
39,992 578,407 207,582 185,404 80,366
19,996 192,802 69,194 61,801 26,789
19,996 192,802 69,194 61,801 26,789
63,145 350,585 317,062 275,821 81,071
104,101 64,540 223,577 343,975 329,410
- ---------------------------------------------------------------------------------
323,663 18,622,491 2,778,308 10,118,946 2,054,350
- ---------------------------------------------------------------------------------
89,555,372 803,944,279 372,939,313 282,851,907 141,648,168
148,064 851,025 -- (423,846) 143,969
608,155 3,543,944 (4,550,015) (10,496,419) (2,447,689)
-- -- -- 12,287,074 (72,160)
4,655,918 53,765,557 (48,902,088) (17,580,498) (15,289,160)
-- -- -- 8,448,251 315,151
- ---------------------------------------------------------------------------------
$94,967,509 $862,104,805 $319,487,210 $275,086,469 $124,298,279
- ---------------------------------------------------------------------------------
6,502,206 63,048,601 19,789,421 18,940,127 9,337,994
$14.61 $13.67 $16.14 $14.52 $13.31
- ---------------------------------------------------------------------------------
$15.46 $14.47 $17.08 $15.37 $14.08
- ---------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS
BALANCED GROWTH & INCOME
FUND(B) FUND
------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of $0, $11,195, $39,517, $0,
$4,622, $822,794 and $41,473, respectively,
in foreign withholding taxes) $ 14,705 $ 2,490,782
Interest 45,122 373,745
- ------------------------------------------------------------------------------
TOTAL INCOME 59,827 2,864,527
- ------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 6,814 621,416
Administration fees 2,044 169,477
Distribution fees(a) 3,407 282,462
Custodian fees 8,000 37,529
Transfer agent fees 20,000 262,158
Registration fees 17,241 45,004
Professional fees 32,301 50,831
Amortization of deferred organization expenses 6,136 19,182
Other 13,592 48,046
- ------------------------------------------------------------------------------
TOTAL EXPENSES 109,535 1,536,105
Less--expenses reimbursable by Goldman Sachs 95,906 106,725
- ------------------------------------------------------------------------------
NET EXPENSES 13,629 1,429,380
- ------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 46,198 1,435,147
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVEST-
MENT, OPTION, FUTURES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) from:
Investment transactions 2,675 2,870,890
Options transactions -- 299,736
Futures transactions (2,540) --
Foreign currency related transactions -- --
Net change in unrealized gain (loss) on:
Investments 70,111 (2,671,306)
Options -- 76,997
Translation of assets and liabilities denomi-
nated in foreign currencies -- --
- ------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON IN-
VESTMENT, OPTION, FUTURES AND FOREIGN CURRENCY
TRANSACTIONS 70,246 576,317
- ------------------------------------------------------------------------------
NET INCREASE(DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $116,444 $ 2,011,464
- ------------------------------------------------------------------------------
</TABLE>
(a) During the year ended January 31, 1995, the distributor waived fees of
$3,407, $282,462, $231,128, $2,181,207, $846,475, $796,627 and $138,271,
respectively.
(b) For the period from October 12, 1994 (commencement of operations) to Janu-
ary 31, 1995.
(c) 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.
46
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
SELECT EQUITY CAPITAL GROWTH SMALL CAP EQUITY INTERNATIONAL EQUITY ASIA GROWTH
FUND FUND FUND FUND FUND(C)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,390,226 $ 10,003,053 $ 338,183 $ 6,099,868 $ 1,590,670
113,765 3,440,974 3,026,561 687,774 476,203
- ---------------------------------------------------------------------------------
2,503,991 13,444,027 3,364,744 6,787,642 2,066,873
- ---------------------------------------------------------------------------------
462,255 6,543,621 2,539,424 2,389,882 414,813
231,128 2,181,207 846,475 796,627 138,271
231,128 2,181,207 846,475 796,627 138,271
49,586 143,270 96,570 816,573 210,487
151,230 694,014 600,618 481,169 120,000
21,084 54,057 111,762 100,691 25,698
73,974 84,989 73,470 69,833 78,396
30,845 61,554 18,689 17,555 17,796
23,742 63,113 34,071 42,814 49,186
- ---------------------------------------------------------------------------------
1,274,972 12,007,032 5,167,554 5,511,771 1,192,918
-- -- -- -- 135,905
- ---------------------------------------------------------------------------------
1,274,972 12,007,032 5,167,554 5,511,771 1,057,013
- ---------------------------------------------------------------------------------
1,229,019 1,436,995 (1,802,810) 1,275,871 1,009,860
- ---------------------------------------------------------------------------------
3,907,236 54,473,913 9,687,581 (128,287) (2,452,351)
-- 2,489,778 362,679 (506,200) --
-- -- -- (152,952) 4,662
-- -- -- (15,347,388) (72,160)
(6,127,762) (98,030,384) (74,050,988) (48,710,436) (15,230,211)
-- (515,843) 37,346 (7,538,057) (58,949)
-- -- -- 15,093,970 315,151
- ---------------------------------------------------------------------------------
(2,220,526) (41,582,536) (63,963,382) (57,289,350) (17,493,858)
- ---------------------------------------------------------------------------------
$ (991,507) $(40,145,541) $(65,766,192) $(56,013,479) $(16,483,998)
- ---------------------------------------------------------------------------------
</TABLE>
47
<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 GROWTH & INCOME
FUND(A) FUND
--------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 46,198 $ 1,435,147
Net realized gain (loss) on investment, option
and futures transactions 135 3,170,626
Net realized loss on foreign currency related
transactions -- --
Net change in unrealized gain (loss) on invest-
ments, options and futures 70,111 (2,594,309)
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 2,011,464
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (31,952) (1,435,147)
In excess of net investment income -- (750,732)
From net realized gain on investment, option and
futures transactions -- (3,710,152)
In excess of net realized gains -- --
- -------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (31,952) (5,896,031)
- -------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
- -------------------------------------------------------------------------------
Net proceeds from sale of shares 7,557,294 179,853,719
Reinvestment of dividends and distributions 29,834 5,475,966
Cost of shares repurchased (162,052) (29,980,986)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from share
transactions 7,425,076 155,348,699
- -------------------------------------------------------------------------------
Additional paid-in-capital -- 779,879
- -------------------------------------------------------------------------------
TOTAL INCREASE 7,509,568 152,244,011
NET ASSETS:
Beginning of year -- 41,528,232
- -------------------------------------------------------------------------------
End of year $7,509,568 $193,772,243
- -------------------------------------------------------------------------------
Accumulated undistributed (distributions in
excess of) net investment income $ 20,283 $ 29,482
- -------------------------------------------------------------------------------
SUMMARY OF SHARE TRANSACTIONS:
Shares sold 537,644 11,178,610
Reinvestment of dividends and distributions 2,141 355,278
Shares repurchased (11,681) (1,896,509)
- -------------------------------------------------------------------------------
Net increase in shares outstanding 528,104 9,637,379
- -------------------------------------------------------------------------------
</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.
48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
SELECT EQUITY CAPITAL GROWTH SMALL CAP EQUITY INTERNATIONAL EQUITY ASIA GROWTH
FUND FUND FUND FUND FUND(B)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,229,019 $ 1,436,995 $ (1,802,810) $ 1,275,871 $ 1,009,860
3,907,236 56,963,691 10,050,260 (787,439) (2,447,689)
-- -- -- (15,347,388) (72,160)
(6,127,762) (98,546,227) (74,013,642) (56,248,493) (15,289,160)
-- -- -- 15,093,970 315,151
- ------------------------------------------------------------------------------------
(991,507) (40,145,541) (65,766,192) (56,013,479) (16,483,998)
- ------------------------------------------------------------------------------------
(1,194,733) (647,525) -- -- (883,487)
-- -- -- -- --
(5,666,531) (94,255,733) (13,272,809) (11,299,568) --
-- -- (4,550,015) -- --
- ------------------------------------------------------------------------------------
(6,861,264) (94,903,258) (17,822,824) (11,299,568) (883,487)
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
22,943,423 220,153,475 198,396,818 145,195,062 148,278,779
6,328,837 85,073,760 16,371,394 9,972,049 793,314
(19,220,744) (141,755,523) (72,766,153) (81,858,604) (7,406,329)
- ------------------------------------------------------------------------------------
10,051,516 163,471,712 142,002,059 73,308,507 141,665,764
- ------------------------------------------------------------------------------------
-- -- -- -- --
- ------------------------------------------------------------------------------------
2,198,745 28,422,913 58,413,043 5,995,460 124,298,279
92,768,764 833,681,892 261,074,167 269,091,009 --
- ------------------------------------------------------------------------------------
$ 94,967,509 $ 862,104,805 $319,487,210 $275,086,469 $124,298,279
- ------------------------------------------------------------------------------------
$ 148,064 $ 851,025 -- $ (423,846) $ 143,969
- ------------------------------------------------------------------------------------
1,499,807 14,260,854 10,110,654 8,468,691 9,803,931
430,647 5,913,973 971,295 655,625 52,995
(1,250,288) (9,348,284) (3,925,959) (5,047,356) (518,932)
- ------------------------------------------------------------------------------------
680,166 10,826,543 7,155,990 4,076,960 9,337,994
- ------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (continued)
For the Year Ended January 31, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS
GROWTH & INCOME SELECT EQUITY
FUND(A) FUND
--------------------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 225,138 $ 876,850
Net realized gain on investment, option and
futures transactions 756,398 8,416,993
Net realized gain on foreign currency related
transactions -- 3,215,345
Net change in unrealized gain on investments,
options
and futures 2,279,310 --
Net change in unrealized loss on translation of
assets and liabilities denominated in foreign
currencies -- --
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,260,846 12,509,188
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (225,138) (913,042)
From net realized gain on investment, option and
futures transactions (127,848) (8,561,339)
In excess of net investment income (38,700) (5,540)
- -------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (391,686) (9,479,921)
- -------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
- -------------------------------------------------------------------------------
Net proceeds from sale of shares 40,143,536 15,403,693
Reinvestment of dividends and distributions 354,386 8,490,805
Cost of shares repurchased (1,838,850) (51,912,326)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from share transactions 38,659,072 (28,017,828)
- -------------------------------------------------------------------------------
TOTAL INCREASE 41,528,232 (24,988,561)
NET ASSETS:
Beginning of year -- 117,757,325
- -------------------------------------------------------------------------------
End of year $41,528,232 $92,768,764
- -------------------------------------------------------------------------------
Accumulated undistributed (distributions in
excess of) net
investment income $ (18,447) $ 82,933
- -------------------------------------------------------------------------------
SUMMARY OF SHARE TRANSACTIONS:
Shares sold 2,728,965 973,122
Reinvestment of dividends and distributions 24,016 550,298
Shares repurchased (123,174) (3,316,053)
- -------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 2,629,807 (1,792,633)
- -------------------------------------------------------------------------------
(a) For the period from February 5, 1993 (commencement of
operations) to January 31, 1994.
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOLDMAN SACHS GOLDMAN SACHS GOLDMAN SACHS
CAPITAL GROWTH SMALL CAP EQUITY INTERNATIONAL EQUITY
FUND FUND FUND
- -----------------------------------------------------------------------
<S> <C> <C>
$ 945,236 $ (564,337) $ 672,834
81,232,678 14,577,980 3,090,999
-- -- 2,848,300
34,429,838 19,052,562 37,175,602
-- -- (6,641,717)
- -----------------------------------------------------------------------
116,607,752 33,066,205 37,146,018
- -----------------------------------------------------------------------
(574,317) -- --
(52,104,708) (9,241,279) --
(818,686) -- --
- -----------------------------------------------------------------------
(53,497,711) (9,241,279) --
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
184,932,820 187,622,040 174,378,624
48,101,662 8,315,921 --
(128,438,462) (18,027,399) (8,496,836)
- -----------------------------------------------------------------------
104,596,020 177,910,562 165,881,788
- -----------------------------------------------------------------------
167,706,061 201,735,488 203,027,806
665,975,831 59,338,679 66,063,203
- -----------------------------------------------------------------------
$833,681,892 $261,074,167 $269,091,009
- -----------------------------------------------------------------------
-- -- $ (105,294)
- -----------------------------------------------------------------------
12,062,498 9,574,639 10,783,851
3,126,663 420,438 --
(8,442,526) (919,964) (525,536)
- -----------------------------------------------------------------------
6,746,635 9,075,113 10,258,315
- -----------------------------------------------------------------------
</TABLE>
51
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Growth and Income
Fund ("Growth and Income Fund"), Goldman Sachs Select Equity Fund ("Select
Equity 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,
Growth and Income Fund, Select Equity Fund and Capital Growth Fund are
diversified portfolios whereas Small Cap Equity Fund, International Equity Fund
and Asia Growth Fund are non-diversified portfolios.
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. 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 to 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.
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 upon current exchange rates; (ii) purchases and sales of
foreign investments, income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
52
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
C. Foreign Currency Translations (continued)
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
The Funds, with the exception of the Select Equity Fund, 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 if the
funds intend to settle the contract prior to delivery. 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 their investment company taxable income and capital gains
to its 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.
F. Deferred Organization Expenses
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
Included in the accompanying Statements of Assets and Liabilities are
approximately $93,000 and $26,000 payable to Goldman Sachs related to the
estimated organization costs for the Balanced Fund and the Asia Growth Fund,
respectively.
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.
H. Option Accounting Principles
When the Funds, with the exception of the Select Equity Fund, 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
53
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
H. Option Accounting Principles (continued)
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
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,
with the exception of the Select Equity Fund, the premium paid is recorded as
an investment and subsequently marked-to-market to reflect the current market
value of the option. If an option which the 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
54
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. AGREEMENTS (continued)
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 receives 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 receives a fee of .50% and
.75% of the average daily net assets of the Select Equity and Capital Growth
Funds, respectively. GSAM International receives 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, the Funds pay GSAM
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 Select Equity,
Capital Growth, Small Cap Equity, International Equity and Asia Growth Funds.
Goldman Sachs has voluntarily agreed to reduce or limit certain "Other
Expenses" for the Balanced, Growth and Income and Asia Growth Funds (excluding
advisory, administration and distribution fees and litigation, indemnification,
taxes, interest, brokerage commissions and extraordinary expenses) until
further notice to the extent such expenses exceed .10%, .30% and .65% of the
average daily net assets of the Balanced, Growth and Income and Asia Growth
Funds, respectively. The amounts reimbursable to the Balanced and Asia Growth
Funds at January 31, 1995 were approximately $79,000, and $10,000,
respectively, and are reflected in "Other assets" in the accompanying
Statements of Assets and Liabilities. Included in "Accrued expenses and other
liabilities" on the accompanying Statements of Assets and Liabilities of the
Growth and Income Fund is approximately $23,000 related to excess
reimbursements payable to Goldman Sachs.
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 $14,000, $361,000, $58,000, $815,000, $868,000, $660,000 and
$829,000 during the year ended January 31, 1995 for the Balanced, Growth and
Income, Select Equity, Capital Growth, Small Cap Equity, International Equity
and Asia Growth Funds, respectively.
The Funds have adopted Distribution Plans (the "Plans") pursuant to Rule 12b-
1. Under the Plans, Goldman Sachs is entitled to receive a quarterly
distribution fee of .50% of each fund's average daily net assets. Currently,
Goldman Sachs has voluntarily agreed to limit the amount of the distribution
fee to .25% of each fund's average daily net assets. The effect of this
voluntary limitation resulted in $3,407, $282,462, $231,128,
55
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. AGREEMENTS (continued)
$2,181,207, $846,475, $796,627 and $138,271 of waived distribution fees for the
Balanced, Growth and Income, Select Equity, Capital Growth, Small Cap Equity,
International Equity and Asia Growth Funds, respectively, for the year ended
January 31, 1995. Goldman Sachs also serves as the Transfer Agent of the Funds
for a fee.
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of securities (excluding short-
term investments, futures and options written) for the year ended January 31,
1995 were as follows:
<TABLE>
<CAPTION>
Sales or
Fund Purchases Maturities
- ---- ------------ ------------
<S> <C> <C>
Balanced $ 7,372,199 $ 643,979
Growth and Income 225,225,270 76,401,877
Select Equity 55,558,360 50,448,868
Capital Growth 387,007,279 310,683,760
Small Cap Equity 299,077,421 132,670,731
International Equity 317,840,809 250,158,149
Asia Growth 162,870,583 32,157,509
</TABLE>
Included in the above amounts were purchases and proceeds of sales or
maturities of governmental securities (excluding short-term investments and
options) for the Balanced Fund in the amounts of $3,016,323 and $105,586,
respectively.
For the year ended January 31, 1995, written option transactions in the Growth
and Income Fund were as follows:
<TABLE>
<CAPTION>
Call Options Put Options
-------------------- --------------------
Number of Premiums Number of Premiums
Contracts Received Contracts Received
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance outstanding,
beginning of year -- $ -- -- $ --
Options written 990 244,577 3,300 283,970
Options expired (480) (106,116) (2,518) (193,628)
Options exercised (310) (61,464) (782) (90,342)
- -----------------------------------------------------------------
Balance outstanding,
end of year 200 $ 76,997 -- $ --
- -----------------------------------------------------------------
</TABLE>
For the year ended January 31, 1995, option transactions in the Capital Growth
Fund were as follows:
<TABLE>
<CAPTION>
Call Options Put Options
--------------------- -------------------
Number of Premiums Number of Premiums
Contracts Received Contracts Received
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance outstanding,
beginning of year 3,500 $ 561,621 1,100 $ 80,472
Options written 13,109 2,257,917 6,550 782,334
Options expired (13,129) (2,066,407) (4,250) (423,371)
Options exercised (3,480) (753,131) (3,400) (439,435)
- -----------------------------------------------------------------
Balance outstanding,
end of year -- $ -- -- $ --
- -----------------------------------------------------------------
</TABLE>
For the year ended January 31, 1995, option transactions in the Small Cap
Equity Fund were as follows:
<TABLE>
<CAPTION>
Call Options Put Options
------------------- -------------------
Number of Premiums Number of Premiums
Contracts Received Contracts Received
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance outstanding,
beginning of year -- $ -- 1,400 $142,654
Options written 1,621 359,735 200 10,380
Options expired (571) (139,283) (1,500) (151,254)
Options exercised (1,050) (220,452) (100) (1,780)
- ---------------------------------------------------------------
Balance outstanding,
end of year -- $ -- -- $ --
- ---------------------------------------------------------------
</TABLE>
For the year ended January 31, 1995, option transactions in the International
Equity Fund were as follows:
<TABLE>
<CAPTION>
Options Purchased Cost
- ----------------------------------------------------
<S> <C>
Balance outstanding, beginning of year $ 193,500
Options purchased 10,286,982
Options expired (1,284,625)
Options sold (855,665)
- ----------------------------------------------------
Cost at end of year 8,340,192
Unrealized loss (7,703,877)
- ----------------------------------------------------
Value at end of year $ 636,315
- ----------------------------------------------------
</TABLE>
56
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. PORTFOLIO SECURITIES TRANSACTIONS (continued)
For the year ended January 31, 1995, option transactions in the Asia Growth
Fund were as follows:
<TABLE>
<CAPTION>
Put Options
------------------
Number of Premiums
Contracts Received
- ----------------------------------------------------------
<S> <C> <C>
Balance outstanding, beginning of year -- $ --
Options written 12,700 180,767
Options expired -- --
Options exercised -- --
- ----------------------------------------------------------
Balance outstanding, end of year 12,700 $180,767
- ----------------------------------------------------------
</TABLE>
Certain risks arise related to written call or put options from the possible
inability of counterparties to meet terms of their contracts.
At January 31, 1995, the International Equity Fund had outstanding forward
foreign currency exchange contracts, both to purchase and sell foreign
currencies as follows:
<TABLE>
<CAPTION>
Foreign Currency Value on Unrealized
Sale Contracts Settlement Date Current Value Gain (Loss)
- ------------------------------------------------------------------
<S> <C> <C> <C>
Danish Krone
expiring 2/2/95 $ 645,045 $ 635,717 $ 9,328
Deutschemark
expiring 3/7/95 36,386,098 37,558,976 (1,172,878)
Finnish Markka
expiring 2/2/95 3,142,888 3,127,105 15,783
Hong Kong Dollar
expiring 4/18/95 18,598,972 18,731,862 (132,890)
Spanish Peseta
expiring 2/2/95 489,182 486,210 2,972
Swedish Krona
expiring 2/2/95 954,411 948,912 5,499
expiring 3/6/95 36,370,601 36,682,431 (311,830)
- ------------------------------------------------------------------
Total Foreign Currency
Sale Contracts $96,587,197 $98,171,213 $(1,584,016)
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Foreign Currency Value on Unrealized
Purchase Contracts Settlement Date Current Value Gain (Loss)
- -----------------------------------------------------------------
<S> <C> <C> <C>
Deutschemark
expiring 3/3/95 $ 468,429 $ 476,719 $ 8,290
expiring 3/6/95 36,737,002 37,580,701 843,699
Japanese Yen
expiring 2/2/95 889,915 895,590 5,675
expiring 3/13/95 8,965,298 8,982,265 16,967
Swiss Franc
expiring 4/10/95 29,075,000 29,565,715 490,715
- -----------------------------------------------------------------
Total Foreign Currency
Purchase Contracts $76,135,644 $77,500,990 $1,365,346
- -----------------------------------------------------------------
</TABLE>
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 January 31, 1995, the International Equity Fund had sufficient cash and
securities to cover any commitments under these contracts.
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 $1,972,755 and $2,381,776, respectively, in the
accompanying Statements of Assets and Liabilities. Included in these amounts
are $573,827 and $764,178, respectively, related to forward contracts closed
but not settled as of January 31, 1995.
For the periods ended January 31, 1995, Goldman Sachs earned approximately
$1,500, $37,000, $163,000, $7,700 and $97,000 of brokerage commissions from
portfolio transactions executed on behalf of the Balanced, Growth and Income,
Capital Growth, Small Cap Equity and Asia Growth Funds, respectively.
57
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
January 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, the Balanced, Growth and Income,
Select Equity, Capital Growth, Small Cap Equity, International Equity and Asia
Growth Funds have reclassified $6,037, $798,661, $30,845, $61,555, $18,690,
$17,555 and $17,596, respectively, from paid-in capital to accumulated
undistributed net investment income. Additionally, the Small Cap Equity Fund
has reclassified $1,784,120 from accumulated undistributed net realized gain
(loss) on investment, option and futures transactions to accumulated net
investment loss; and the International Equity Fund has reclassified $22,815,517
from accumulated undistributed net investment income to accumulated net foreign
currency loss, and $1,215,049 from accumulated undistributed net realized gain
on investment, option and futures transactions to accumulated undistributed net
investment income, and $19,988,490 from paid in capital to accumulated
undistributed net investment income. These reclassifications have no impact on
the net asset value of the funds and are designed to present each fund's
capital accounts on a tax basis.
6. 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.
7. 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 obligations. At January 31, 1995, the Balanced Fund had a
.05% undivided interest in the repurchase agreements in the following joint
account which equaled $700,000 in principal amount. At January 31, 1995, the
repurchase agreements held in this joint account, along with the corresponding
underlying securities (including the type of security, principal amount,
interest rate and maturity date) were as follows ($ in thousands):
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lehman Government Securities, dated 01/31/95,
repurchase price $500,082 (U.S. Treasury Notes:
$506,949, 6.375%-7.750%,
01/15/00-01/31/00)
$500,000 5.90% 02/01/95 $ 500,000
Salomon Brothers, Inc., dated 01/31/95, repurchase
price $921,249 (U.S. Treasury Bills: $908,112,
02/09/95-01/11/96; U.S. Treasury Notes: $57,742,
7.500%, 12/31/96)
921,100 5.84 02/01/95 921,100
- ---------------------------------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,421,100
- ---------------------------------------------------------------------------------------------------
</TABLE>
8. 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.
58
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD(A)
BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
INCOME FROM INVESTMENT OPERATIONS SHAREHOLDERS
-------------------------------------- ---------------------------
NET REALIZED
NET ASSET AND UNREALIZED TOTAL INCOME FROM NET ASSET
VALUE, NET GAIN ON FROM NET TOTAL NET INCREASE VALUE,
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS TO IN NET END OF TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME SHAREHOLDERS ASSET VALUE PERIOD RETURN(B)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1995(a)......... $14.18 $0.10 $0.02 $0.12 $(0.08) $(0.08) $0.04 $14.22 0.87%(d)
<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 EXPENSES TO LOSS
AVERAGE NET AVERAGE NET PORTFOLIO NET ASSETS AT AVERAGE TO AVERAGE
ASSETS ASSETS TURNOVER RATE END OF PERIOD NET ASSETS NET ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1995(a)......... 1.00%(c) 3.39%(c) 14.71% $7,509,568 8.29%(c) (3.90)%(c)
</TABLE>
- ----
(a) For the period from October 12, 1994 (commencement of operations) to
January 31, 1995.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if a sales charge were taken
into account.
(c) Annualized.
(d) Not Annualized.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
GROWTH AND INCOME FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------- ----------------------------------------------------
NET REALIZED FROM NET
NET ASSET AND UNREALIZED TOTAL INCOME REALIZED GAIN IN EXCESS
VALUE AT NET GAIN ON FROM FROM NET ON INVESTMENT OF NET TOTAL
BEGINNING INVESTMENT INVESTMENTS INVESTMENT INVESTMENT AND OPTION INVESTMENT DISTRIBUTIONS TO
OF PERIOD INCOME AND OPTIONS OPERATIONS INCOME TRANSACTIONS INCOME SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY
31,
- --------------------------
1995............ $15.79 $0.20(f) $0.30(f) $0.50 $(0.20) $(0.33) $(0.07) $(0.60)
FOR THE PERIOD ENDED JANU-
ARY 31,
- --------------------------
1994(a)......... 14.18 0.15 1.68 1.83 (0.15) (0.06) (0.01) (0.22)
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER OF
DISTRIBUTION FEES OR
EXPENSE LIMITATIONS
-------------------------
RATIO OF RATIO OF NET RATIO OF NET
NET ASSET NET INVESTMENT NET RATIO OF INVESTMENT
ADDITIONAL NET INCREASE VALUE AT EXPENSES TO INCOME TO PORTFOLIO ASSETS AT EXPENSES TO INCOME (LOSS)
PAID-IN IN NET END OF TOTAL AVERAGE NET AVERAGE NET TURNOVER END OF AVERAGE TO AVERAGE
CAPITAL(E) ASSET VALUE PERIOD RETURN(B) ASSETS ASSETS RATE PERIOD NET ASSETS NET ASSETS
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY
31,
- --------------------------
1995............ $0.11(f) $0.01 $15.80 3.97% 1.25% 1.28% 71.80% $193,772,243 1.58% 0.95%
FOR THE PERIOD ENDED JANU-
ARY 31,
- --------------------------
1994(a)......... -- 1.61 15.79 13.08(d) 1.25(c) 1.23(c) 102.23(d) 41,528,232 3.24(c) (0.76)(c)
</TABLE>
- ----
(a) For the period from February 5, 1993 (commencement of operations) to
January 31, 1994.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales 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(e), would be 3.34%.
(c) Annualized.
(d) Not annualized.
(e) See Note 8.
(f) Calculated based on the average shares outstanding methodology.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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 NET INCREASE NET ASSET
VALUE, NET INVESTMENTS, (LOSS) FROM NET INVESTMENT TOTAL (DECREASE) VALUE,
BEGINNING INVESTMENT OPTIONS AND INVESTMENT INVESTMENT AND FUTURES DISTRIBUTIONS 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 YEAR ENDED JANUARY
31,
- --------------------------
1995............ $15.93 $0.20 $(0.38) $(0.18) $ (0.20) $(0.94) $(1.14) $(1.32) $14.61
1994............ 15.46 0.17 2.08 2.25 (0.17) (1.61) (1.78) 0.47 15.93
1993............ 15.05 0.22 0.41 0.63 (0.22) -- (0.22) 0.41 15.46
FOR THE PERIOD ENDED JANU-
ARY 31,
- --------------------------
1992(a)......... 14.17 0.11 0.88 0.99 (0.11) -- (0.11) 0.88 15.05
<CAPTION>
RATIOS
ASSUMING NO
VOLUNTARY WAIVER
OF DISTRIBUTION FEES
------------------------
RATIO OF RATIO OF NET RATIO OF NET
NET INVESTMENT NET RATIO OF INVESTMENT
EXPENSES TO INCOME TO PORTFOLIO ASSETS AT EXPENSES TO INCOME
TOTAL AVERAGE NET AVERAGE NET TURNOVER END OF AVERAGE TO AVERAGE
RETURN(B) ASSETS ASSETS RATE PERIOD NET ASSETS NET ASSETS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY
31,
- --------------------------
1995............ (1.10)% 1.38% 1.33% 56.18% $ 94,967,509 1.63% 1.08%
1994............ 15.12 1.42 0.92 87.73 92,768,764 1.67 0.67
1993............ 4.30 1.28 1.30 144.93 117,757,325 1.53 1.05
FOR THE PERIOD ENDED JANU-
ARY 31,
- --------------------------
1992(a)......... 7.01(d) 1.57(c) 1.24(c) 135.02(c) 151,141,667 1.82(c) 0.99(c)
</TABLE>
- ----
(a) For the period from May 24, 1991 (commencement of operations) to January
31, 1992.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if sales charges were taken
into account.
(c) Annualized.
(d) Not annualized.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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 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 JANU-
ARY 31,
- --------------------------
1991(a)......... 11.34 0.34 (0.27) 0.07 (0.31) -- -- (0.31) (0.24)
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER OF
DISTRIBUTION FEES
-------------------------
RATIO OF RATIO OF NET RATIO OF NET
NET ASSET NET INVESTMENT NET RATIO OF INVESTMENT
VALUE, EXPENSES TO INCOME TO PORTFOLIO ASSETS AT EXPENSES TO INCOME (LOSS)
END OF TOTAL AVERAGE NET AVERAGE NET TURNOVER END OF AVERAGE TO AVERAGE
PERIOD RETURN(B) ASSETS ASSETS RATE PERIOD NET ASSETS NET ASSETS
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY
31,
- --------------------------
1995............ $13.67 (4.38)% 1.38% 0.16% 38.36% $862,104,805 1.63% (0.09)%
1994............ 15.96 16.89 1.38 0.13 36.12 833,681,892 1.63 (0.12)
1993............ 14.64 18.01 1.41 0.42 58.93 665,975,831 1.66 0.17
1992............ 13.65 29.31 1.53 2.09 48.93 500,306,650 1.78 1.84
FOR THE PERIOD ENDED JANU-
ARY 31,
- --------------------------
1991(a)......... 11.10 0.84(d) 1.27(d) 3.24(d) 35.63(d) 437,532,964 1.47(d) 3.04(d)
</TABLE>
- ----
(a) For the period from April 20, 1990 (commencement of operations) to January
31, 1991.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if a sales charges were taken
into account.
(c) Annualized.
(d) Not annualized.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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
NET ASSET NET GAIN (LOSS) ON TOTAL INCOME FROM ON INVESTMENT, INVESTMENT, TOTAL INCREASE
VALUE, INVESTMENT INVESTMENTS, (LOSS) FROM NET OPTION AND OPTION AND DISTRIBUTIONS (DECREASE)
BEGINNING INCOME OPTIONS AND INVESTMENT INVESTMENT FUTURES FUTURES TO IN NET
OF PERIOD (LOSS) FUTURES OPERATIONS INCOME TRANSACTIONS TRANSACTIONS SHAREHOLDERS ASSET VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
1995............ $20.67 $(0.07) $(3.53) $(3.60) $-- $(0.69) $(0.24) $(0.93) $(4.53)
1994............ 16.68 (0.04) 5.03 4.99 -- (1.00) -- (1.00) 3.99
For the Period Ended January 31,
1993(a)......... 14.18 0.03 2.50 2.53 (0.03) -- -- (0.03) 2.50
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER OF
DISTRIBUTION FEES OR
EXPENSE LIMITATIONS
------------------------
RATIO OF
NET RATIO OF
RATIO OF INVESTMENT NET
NET ASSET NET INCOME RATIO OF INVESTMENT
VALUE, EXPENSES TO (LOSS) TO PORTFOLIO NET ASSETS EXPENSES TO LOSS
END OF TOTAL AVERAGE NET AVERAGE TURNOVER AT END AVERAGE TO AVERAGE
PERIOD RETURN(B) ASSETS NET ASSETS RATE OF PERIOD NET ASSETS NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 31,
- ------------------------------
1995............ $16.14 (17.53)% 1.53% (0.53)% 43.67% $319,487,210 1.78% (0.78)%
1994............ 20.67 30.13 1.60 (0.45) 56.81 261,074,167 1.85 (0.70)
For the Period Ended January 31,
1993(a)......... 16.68 17.86(d) 1.65(c) 0.62(c) 7.12(c) 59,338,679 2.70(c) (0.43)(c)
</TABLE>
- ----
(a) For the period from October 22, 1992 (commencement of operations) to
January 31, 1993.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if a sales charge were taken
into account.
(c) Annualized.
(d) Not annualized.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS
-------------------------------------------------------- ---------------------------------------
NET NET FROM NET
REALIZED REALIZED REALIZED
AND UNREALIZED AND UNREALIZED TOTAL GAIN ON
NET ASSET GAIN (LOSS) ON LOSS ON FOREIGN INCOME FROM INVESTMENT,
VALUE, NET INVESTMENTS, CURRENCY (LOSS) FROM NET OPTION AND TOTAL
BEGINNING INVESTMENT OPTIONS RELATED INVESTMENT INVESTMENT FUTURES DISTRIBUTIONS
OF PERIOD INCOME (LOSS) AND FUTURES TRANSACTIONS OPERATIONS INCOME TRANSACTIONS TO SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 JANU-
ARY 31,
- --------------------------
1993(a)......... 14.18 (0.01) 0.29 (0.11) 0.17 -- -- --
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER OF
DISTRIBUTION FEES OR
EXPENSE LIMITATIONS
-------------------------
RATIO OF NET RATIO OF
NET RATIO OF INVESTMENT NET INVESTMENT
INCREASE NET ASSET NET INCOME NET RATIO OF INCOME
(DECREASE) VALUE, EXPENSES TO (LOSS) TO PORTFOLIO ASSETS EXPENSES (LOSS)
IN NET ASSET END OF TOTAL AVERAGE NET AVERAGE NET TURNOVER AT END OF TO AVERAGE TO AVERAGE
VALUE PERIOD RETURN(B) ASSETS ASSETS RATE PERIOD NET ASSETS NET ASSETS
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY
31,
- --------------------------
1995............ $(3.58) $14.52 (16.65)% 1.73% 0.40% 84.54% $275,086,469 1.98% 0.15%
1994............ 3.75 18.10 26.13 1.76 0.51 60.04 269,091,009 2.01 0.26
FOR THE PERIOD ENDED JANU-
ARY 31,
- --------------------------
1993(a)......... 0.17 14.35 1.23(d) 1.80(c) (0.42)(c) 0.00% 66,063,203 2.58(c) (1.20)(c)
</TABLE>
- ----
(a) For the period from December 1, 1992 (commencement of operations) to
January 31, 1993.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if a sales charge were taken
into account.
(c) Annualized.
(d) Not annualized.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD(A)
ASIA GROWTH FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME (LOSS) DISTRIBUTIONS TO
FROM INVESTMENT OPERATIONS SHAREHOLDERS
----------------------------------- ----------------
NET
REALIZED AND
UNREALIZED
NET GAIN ON TOTAL NET NET
ASSET NET FOREIGN LOSS TOTAL DECREASE ASSET
VALUE, NET UNREALIZED CURRENCY FROM FROM NET DISTRIBUTIONS IN NET VALUE,
BEGINNING INVESTMENT (LOSS) ON RELATED INVESTMENT INVESTMENT TO ASSET END OF TOTAL
OF PERIOD INCOME INVESTMENTS TRANSACTIONS OPERATIONS INCOME SHAREHOLDERS VALUE PERIOD RETURN(B)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANU-
ARY 31,
- --------------------------
1995(a)......... $14.18 $0.11 $(0.89) $0.01 $(0.77) $(0.10) $(0.10) $(0.87) $13.31 (5.46%)(d)
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER OF
DISTRIBUTION FEES OR
EXPENSE LIMITATIONS
--------------------
RATIO RATIO
RATIO OF NET OF NET
OF NET INVESTMENT RATIO OF INVESTMENT
EXPENSES TO INCOME TO NET EXPENSES LOSS TO
AVERAGE AVERAGE PORTFOLIO ASSETS AT TO AVERAGE AVERAGE
NET NET TURNOVER END OF NET NET
ASSETS ASSETS RATE PERIOD ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED JANU-
ARY 31,
- --------------------------
1995(a)......... 1.90%(c) 1.83%(c) 36.08% $124,298,279 2.38%(c) 1.35%(c)
</TABLE>
- ----
(a) For the period from July 8, 1994 (commencement of operations) to January
31, 1995.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if a sales charge were taken
into account.
(c) Annualized.
(d) Not annualized.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
65
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Goldman Sachs Equity Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities of
Goldman Sachs Equity Portfolios, Inc., (a Maryland Corporation) comprising the
Balanced Fund, Growth and Income Fund, Select Equity Fund, Capital Growth Fund,
Small Cap Equity Fund, International Equity Fund, and Asia Growth Fund
including the statements of investments, as of January 31, 1995, and the
related statements of operations and the statements of changes in net assets
and the financial highlights for each of the periods presented. These financial
statements and the financial highlights are the responsibility of the fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting Goldman Sachs Equity Portfolios,
Inc. as of January 31, 1995, the results of its operations and the changes in
its net assets and the financial highlights for each of the periods presented,
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
March 3, 1995
66
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Equity Portfolios, Inc. Pro-
spectus which contains facts concerning each Fund's objectives and policies,
management, expenses and other information.
67
<PAGE>
GOLDMAN
SACHS
Goldman Sachs
1 New York Plaza
New York, NY 10004
BOARD OF 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
EQANN95
GOLDMAN
SACHS
GOLDMAN SACHS
EQUITY PORTFOLIOS, INC.
Annual Report
January 31, 1995
