<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to have the opportunity to review the performance and
discuss the holdings of the Goldman Sachs Equity Portfolios for the 12-month
period ended January 31, 1996. It was an exceptional year for U.S. equities and
a good year in European markets. In this very favorable environment, most of
the Goldman Sachs Equity Portfolios achieved strong total returns.
The U.S. Stock Market Climbed to New Heights...
The U.S. stock market soared during the period under review, rising 38.67%
(as measured by the total return of the Standard & Poor's 500 stock index) for
the 12 months ended January 31, 1996. The Dow Jones Industrial Average hit the
4000 mark in February and the 5000 mark in November. During the year, large-
capitalization stocks (as measured by the S&P 500) outperformed the Russell 2000
index of small-capitalization stocks by nearly 9%. Technology stocks fueled the
market during the first half of the year, ceding leadership to financial and
consumer growth stocks by year-end.
The stock market maintained its upward momentum every month excluding
October due to a favorable combination of low inflation, falling interest rates
and moderate economic growth. The other major market driver was that many large
U.S. companies posted corporate earnings growth that exceeded expectations.
This was partly due to a weakened dollar, which made American exports more
competitive. The possibility of a lower capital gains tax, which would be a
long-term boost to stocks, also helped to fuel the rally.
...Amid a Slowdown in Economic Growth
Economic growth slowed noticeably during the period, with annualized real
Gross Domestic Product (GDP) rising 1.7% and 0.7% in the first and second
quarters, respectively, well below the robust levels of the prior year. Though
revised third-quarter GDP rebounded to 3.2%, this increase was partly attributed
to increased federal government spending in anticipation of the budget debate.
Real GDP for the fourth quarter was 0.9% (annualized), an indication of the
economy's sluggish growth.
The economic slowdown was the result of a number of factors, including a
decline in consumer confidence and spending, which hurt retail sales and
culminated in an extremely weak Christmas season and a buildup in inventories
among retailers, wholesalers and manufacturers. In addition, a number of
temporary factors, including a sharp contraction in nondefense government
spending and a strike at Boeing aircraft, had a major impact on GDP in the
fourth quarter. Finally, harsh winter storms disrupted business activity in
December 1995 and January 1996 and also contributed to the slowdown.
The Fed Tightened at the Beginning of the Period, Then Reversed Course
The U.S. Federal Reserve Board raised the Federal funds rate (the rates
banks charge one another for overnight borrowing) by 50 basis points to 6.00% in
February 1995. This increase was the last in the Fed's tightening cycle, which
included seven rate hikes from February 1994 through February 1995, a total
increase of
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Table of Contents
<S> <C> <C> <C>
Introduction/Market Overview 1 Goldman Sachs International Equity Fund 27
Goldman Sachs Balanced Fund 4 Goldman Sachs Asia Growth Fund 32
Goldman Sachs Select Equity Fund 12 Financial Statements 50
Goldman Sachs Growth and Income Fund 15 Notes to Financial Statements 58
Goldman Sachs Capital Growth Fund 19 Financial Highlights 67
Goldman Sachs Small Cap Equity Fund 23
- -----------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
300 basis points. With inflation at bay and the economy moderating, the Fed
reversed course and cut the Federal funds rate 25 basis points in July. Two
additional 25 basis point cuts followed in December 1995 and January 1996,
bringing the Federal funds rate to 5.25% as of January 31, 1996.
Outlook for 1996:
Potential for Accelerating Growth in the Second Half
Economic growth is estimated to be approximately 1.0% for the first quarter
of 1996. Some economists believe a return to stronger growth is possible by
late spring. An anticipated pickup in economic growth in Japan and Mexico would
also bode well for U.S. exports and a further narrowing of the trade deficit.
If these general trends continue, they are likely to translate into slower
corporate earnings growth during the first half of the year, with improvement
expected in the second half.
The Dollar Strengthened After Falling to Historic Lows
The U.S. dollar weakened significantly against the Deutsche mark and
Japanese yen, hitting new postwar lows in April 1995, then recovering during the
summer and early fall. The dollar's rebound was primarily due to the resolution
of the U.S.-Japan trade dispute, Japan's stimulative monetary policy, and the
intervention of U.S. and foreign central banks in its support. Currency
volatility subsided as the dollar continued to strengthen against both the yen
and the Deutsche mark through the second half of the period. By the end of
January, the dollar had risen by approximately 32% against the yen (a two-year
high) and by approximately 10% against the Deutsche mark from its April low.
The International Market Environment:
Europe Generally Strong, While Japan and Asia Were Weaker
Despite generally positive performance, international stock markets
typically lagged the U.S. during the past 12 months, with the Japanese market
particularly weak in the first half of the period.
. Europe. Europe's economic recovery slowed during the past 12 months, in
part because monetary policy had been prematurely tightened in anticipation of
higher growth and short-term interest rates remained high during the first half
of the year. Still, most European stock markets did well during the period under
review, returning over 24% (as measured by the Financial Times-Actuaries Europe
Index designated in local currency). Stock markets in Switzerland, Sweden,
Denmark and the U.K. turned in strong performances, while markets in Italy and
France lagged, plagued by political and budgetary problems. On a positive note,
the Italian and French stock markets ended the period showing improvement.
. Japan. For the 12 months ended January 31, 1996, the Japanese TOPIX Index
achieved an 11% gain (in local currency). The Japanese stock market faltered
during the first half of the period under review, reflecting Japan's stagnating
economy, deflationary environment, weakened banking system and the aftermath of
the Kobe earthquake. In addition, the yen traded at historically high levels
versus the dollar, which thwarted exports and impacted GDP growth. From July
through the end of the period, however, Japanese stocks rallied, more than
recouping their losses from earlier in the year. The rebound was largely
attributed to a reversal in the factors that caused the previous decline: the
yen fell, the government took action to resolve the domestic banking crisis and
a fiscal stimulus policy raised expectations for an eventual pickup in growth
and a stronger stock market in 1996.
. Asia. During the first 10 months of the period, the performance of the
Asian markets was generally disappointing due to a variety of factors, including
profit shortfalls, economic overheating, balance of payments problems and
inflationary pressures. The Hong Kong market, a marked exception, rose over 20%
during the period. In addition, surging U.S. stocks contributed to a lack of
investor interest and low volumes throughout the region. Asian markets generally
declined during the third
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
quarter due to the rising U.S. dollar, which drained liquidity from the area.
However, from late November through the end of the period, the Asian markets
rebounded and cash inflows into the region rose considerably.
The U.S. stock market has continued to surge to record levels during the
first two months of 1996, fueled by strong cash inflows from individuals,
portfolio managers and foreign investors. However, history rarely repeats
itself, and while no one can predict the market with certainty, it is unlikely
that this year will match 1995's spectacular run. Realistic expectations and a
long-term investment horizon are essential for equity investors. We appreciate
your confidence in the Goldman Sachs Equity Portfolios and we look forward to
continuing to serve your investment needs.
Sincerely,
/s/ David B. Ford /s/ John P. McNulty
David B. Ford John P. McNulty
Co-Head, Co-Head,
Goldman Sachs Goldman Sachs
Asset Management Asset Management
March 1, 1996
- --------------------------------------------------------------------------------
3
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund
- --------------------------------------------------------------------------------
Objective and Investment Approach
The Goldman Sachs Balanced Fund seeks to provide investors with a
combination of long-term growth of capital and current income by investing in a
diversified portfolio that includes both equity and fixed income securities.
Under normal market conditions, the fund is expected to maintain an asset mix of
approximately 50% to 70% in equity securities, with the remainder (at minimum
25%) in fixed income securities. The fund's portfolio management team will
review the fund's asset mix on a regular basis and adjust it to reflect changes
in the economic environment.
Stocks are selected using a value style, identifying those judged to be
inexpensive relative to their expected long-term earnings and ability to pay
dividends. We also consider the degree to which a company's management is
committed to increasing value for shareholders.
In the fixed income portion of the portfolio, we actively manage the
portfolio within a risk-controlled framework. We de-emphasize interest rate
anticipation by monitoring the portfolio's duration to keep it within a narrow
range of a target, and instead focus on seeking to add value through sector
selection, security selection and yield curve strategies.
Performance Review:
Successful Equity and Fixed Income Selections
For the 12-month period ended January 31, 1996, the Goldman Sachs Balanced
Fund achieved a total return of 28.10% based on net asset value, outperforming
its peers in the Lipper balanced fund category, which returned an average of
25.96% during the same period. The fund ranked in the top quartile (59th among
237 funds) in the category based on total return for the 12-month period ended
January 31, 1996, according to Lipper Analytical Services, Inc. (Please note
that Lipper rankings do not take sales charges into account and that past
performance is not a guarantee of future results.)
. Equities: The fund's positive performance during the period can be
attributed to successful investments in a variety of sectors, including
defense/aerospace, tobacco and insurance. Top-performing holdings included
McDonnell Douglas Corp., Northrop Grumman Corp. and Lockheed-Martin Corp., which
we believe all benefited from the market's positive reaction to their sizable
cash flows; Philip Morris Companies, Inc., which achieved strong earnings growth
and increased market share; and Travelers Group, Inc., which rose partly due to
the announcement of its acquisition of Aetna's property and casualty business.
The fund's largest equity position, Goodyear Tire & Rubber Co., also achieved
good operating results, despite rising raw material costs and a generally
lackluster auto sector.
As the economy slowed, the portfolio's cyclically oriented holdings were
among its weaker performers during the period. These included its investments in
paper and forest products companies such as Stone Container Corp. and Georgia-
Pacific Corp., which came under pressure in the latter half of the year due to
rising inventories and declining demand. Ford Motor Co. also announced
disappointing results, as the automobile sector felt the impact of slower
consumer spending.
. Fixed Income: The fund's fixed income holdings generally performed well
during the period, with asset-backed securities and government agency debt
turning in the strongest relative performance due to our successful security
selection. In contrast, the mortgage-backed security sector came under pressure
due to rising prepayment risk in the declining interest rate environment and did
not meet our return expectations.
Portfolio Composition: Increased Emphasis on Large-
Cap Stocks and Fixed Income Diversification
In the spring of 1995, we shifted to a more favorable view of equities, as
we believed that prospects for future economic growth outweighed concerns
regarding high stock market valuation levels. As of January 31, 1996, the fund's
asset mix based on net assets was 53% in equities, 40% in fixed income
investments and the remainder in cash equivalents.
. Equities: During the course of the year, the fund added a number of large-
capitalization stocks that we
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
believed offered both more stable earnings growth and favorable valuations.
These included Allstate Corp. (insurance), Columbia/HCA Healthcare Corp. (health
care facilities) and NationsBank Corp. (commercial bank), as well as
substantially increased positions in Anheuser-Busch Companies, Inc. (the largest
U.S. brewer), Sears, Roebuck & Co. (retailer) and Texaco, Inc. (oil and gas).
These holdings performed well as investors shifted their attention to larger
companies that they perceived were less economically sensitive.
As of January 31, the fund's weighted average market capitalization was
approximately $12.6 billion compared with $31.7 billion for the S&P 500 stock
index.
<TABLE>
<CAPTION>
Top 10 Equity Holdings as of January 31, 1996
Percentage
of Total
Company Line of Business Net Assets
<S> <C> <C>
Goodyear Tire & Rubber Co. Tire and Rubber Products 1.8%
Ford Motor Co. Automotive Products 1.7%
McDonnell Douglas Corp. Aerospace/Defense 1.6%
Georgia-Pacific Corp. Paper and Forest Products 1.6%
NationsBank Corp. Commercial Bank 1.5%
Philip Morris Companies, Inc. Tobacco and Food Products 1.4%
Long Island Lighting Co. Electric Utilities 1.4%
J.C. Penney Company, Inc. Department Stores 1.4%
Texaco, Inc. International Integrated Oil 1.4%
Stone Container Corp. Pulp and Paper Products 1.3%
</TABLE>
. Fixed Income: As fund assets increased during the period, we diversified
the portfolio's fixed income investments. As of January 31, the fund's largest
fixed income position was in corporate bonds (13.2%), which was overweighted
compared with the Lehman Brothers Aggregate Bond Index. The fund favored the
corporate sector because we believed it offered incremental yield and the
opportunity for us to exploit potential pricing inefficiencies. The asset-backed
securities sector (4.9%) was also significantly overweighted compared with the
Index because of its high credit quality and incremental yield over U.S.
Treasuries. However, the fund underweighted mortgage-backed securities (10.0%),
which worked in the fund's favor when the sector underperformed during the
period. The fund used U.S. Treasuries, a 6.6% position, to manage the fund's
interest rate risk to match that of the Index. In addition, the fund held a
position in emerging market debt (3.1%), which included higher credit, short-
duration bonds that we believed to be attractively priced. The remainder of the
fixed income holdings was in government agency debt (1.9%) and cash equivalents
(13.8%).
Outlook
Despite near-term uncertainty, we anticipate that the Federal Reserve's
accommodative monetary policy and interest rate cuts will lead to improving
corporate profits and a stronger economy in the second half of the year.
Therefore, we continue to be cautiously optimistic regarding equities. We
believe that a number of our holdings have long-term earnings power that is
significantly unrecognized by the market, but will potentially benefit from an
eventual investor rotation out of well-known growth stocks into other sectors.
In the fixed income markets, we believe that the mortgage-backed sector
appears to have less downside risk than it did a year ago, with pessimistic
prepayment assumptions already largely reflected in security prices. We have a
positive view of the corporate and asset-backed securities sectors, which should
benefit from strong investor demand and favorable fundamentals.
In the near term, our overall asset allocation outlook favors stocks and is
slightly less bullish on bonds. Our view on equities is encouraged by the
prospects for improving economic growth later in the year, which would spur
corporate profits.
/s/ Mitchell E. Cantor /s/ Ronald E. Gutfleish
Mitchell E. Cantor Ronald E. Gutfleish
Portfolio Managers, Equities
/s/ Jonathan A. Beinner /s/ Theodore T. Sotir
Jonathan A. Beinner Theodore T. Sotir
Portfolio Managers, Fixed Income
March 1, 1996
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund
January 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange
Commission, the following data is supplied for the periods ended January
31, 1996. The performance for the Goldman Sachs Balanced Fund ("GS
Balanced") (assuming both the maximum sales charge of 5.50% and no sales
charge), is compared with its benchmarks--a combination of the Standard
and Poor's 500 Index (weighted at 60%) and the Lehman Brothers Aggregate
Bond Index (weighted at 40%) ("S&P 500/LBABI") /(b)/, the S&P 500 and
LBABI individually. 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balanced
- --------
(GS Balanced (GS Balanced
w/Sales Change) no Sales change) S&P 500/LBABI LBABI S&P 500
---------------- ----------------- ------------- ----- -------
10/12/94(a) $ 9,450 $10,000 $10,000 $10,000 $10,000
1/31/95 $ 9,532 $10,087 $10,206 $10,233 $10,184
1/31/96 $12,211 $12,922 $13,228 $11,966 $14,123
</TABLE>
------------------------------------
Average Annual Total Return
------------------------------------
One Year Since Inception /(a)/
- --------------------------------------------------------------------------------
GS Balanced, excluding sales charge 28.10% 21.67%
- --------------------------------------------------------------------------------
GS Balanced, including sales charge 21.04% 16.52%
- --------------------------------------------------------------------------------
/(a)/ Commenced operations October 12, 1994.
/(b)/ Please note: Going forward, we will be providing the total return of the
S&P 500 stock index and the Lehman Brothers Aggregate Bond Index as
benchmarks against which the Goldman Sachs Balanced Fund may be compared.
Typically, the Fund's returns are likely to fall between these two
indices. After this period, the blended return of 60% weighting of the
S&P 500 and 40% of the Lehman Aggregate will be eliminated because the
static blend does not necessarily reflect the allocation of the fund at
all points in time. By prospectus, the fund has the flexibility to invest
from 50% to 70% of its assets in equities with the remainder in fixed
income securities, which means that the exact percentage of equities and
fixed income investments can and does fluctuate.
- --------------------------------------------------------------------------------
6
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund
January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Common Stocks--53.3%
Aerospace/Defense--4.4%
6,404 Lockheed Martin Corp. $ 482,702
8,100 Loral Corp. 374,625
9,000 McDonnell Douglas Corp. 801,000
9,500 Northrop Grumman Corp. 608,000
- --------------------------------------------------------------------------------
2,266,327
- --------------------------------------------------------------------------------
Auto Parts-Original Equipment--0.7%
11,900 Lear Seating Corp.* 352,537
- --------------------------------------------------------------------------------
Automotive Products--2.3%
29,400 Ford Motor Co. 870,975
5,700 General Motors Corp. 299,963
- --------------------------------------------------------------------------------
1,170,938
- --------------------------------------------------------------------------------
Beverages-Alcoholic--1.2%
8,600 Anheuser Busch Companies, Inc. 597,700
- --------------------------------------------------------------------------------
Cable/Television Communications--1.2%
28,700 Tele-Communications, Inc.* 606,287
- --------------------------------------------------------------------------------
Chemicals-Plastics--0.9%
16,400 Geon Co. 459,200
- --------------------------------------------------------------------------------
Commercial Banks--3.1%
6,700 BankAmerica Corp. 451,413
9,368 Fleet Financial Group, Inc. 374,719
10,700 NationsBank Corp. 747,663
- --------------------------------------------------------------------------------
1,573,795
- --------------------------------------------------------------------------------
Drugs--0.1%
1,500 Thiokol Corp. 53,063
- --------------------------------------------------------------------------------
Electronics-Semiconductors--0.6%
5,900 Intel Corp. 325,882
- --------------------------------------------------------------------------------
Environmental Control--0.2%
4,300 Browning Ferris Industries, Inc. 126,850
- --------------------------------------------------------------------------------
Financial Services--1.3%
9,200 Allmerica Financial Corp. 244,950
8,500 Reliastar Financial Corp. 400,563
- --------------------------------------------------------------------------------
645,513
- --------------------------------------------------------------------------------
Food-Wholesale--1.7%
19,900 Fleming Companies, Inc. 378,100
15,300 Supervalu, Inc. 474,300
- --------------------------------------------------------------------------------
852,400
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
- --------------------------------------------------------------------------------
<C> <S> <C>
Common Stocks (continued)
Grocery Products--1.2%
43,600 Chiquita Brands International, Inc. $ 594,050
- --------------------------------------------------------------------------------
Home Builders--0.9%
3,800 Centex Corp. 122,550
13,300 Lennar Corp. 347,463
- --------------------------------------------------------------------------------
470,013
- --------------------------------------------------------------------------------
Hospital Management and Services--1.7%
8,600 Beverly Enterprises, Inc.* 103,200
5,800 Columbia/HCA Healthcare 322,625
20,400 Tenet Healthcare Corp.* 436,050
- --------------------------------------------------------------------------------
861,875
- --------------------------------------------------------------------------------
Household Products--0.5%
16,600 Sunbeam Corp. 265,600
- --------------------------------------------------------------------------------
Insurance--3.9%
6,600 Allstate Corp. 287,925
2,600 CIGNA Corp. 308,425
10,200 Lincoln National Corp. 539,325
12,500 PartnerRe Holdings, Ltd. 348,438
4,700 Travelers Group, Inc. 309,025
5,700 US Life Corp. 183,113
- --------------------------------------------------------------------------------
1,976,251
- --------------------------------------------------------------------------------
Marine and Pleasure Boats--1.7%
22,900 Brunswick Corp. 518,113
18,200 Outboard Marine Corp. 364,000
- --------------------------------------------------------------------------------
882,113
- --------------------------------------------------------------------------------
Oil & Gas-Domestic--2.8%
16,200 Ashland Inc. 595,350
2,200 Atlantic Richfield Co. 249,975
13,700 Tosco Corp. 573,687
- --------------------------------------------------------------------------------
1,419,012
- --------------------------------------------------------------------------------
Oil & Gas-International--2.9%
2,300 Mobil Corp. 254,725
3,800 Royal Dutch Petroleum ADR 528,200
8,600 Texaco, Inc. 695,525
- --------------------------------------------------------------------------------
1,478,450
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund (continued)
January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Packaging & Container--1.2%
42,900 Owens Illinois Corp.* $ 611,325
- --------------------------------------------------------------------------------
Paper and Forest Products--3.6%
7,900 Champion International Corp. 353,525
10,900 Georgia-Pacific Corp. 799,788
46,200 Stone Container Corp. 675,675
- --------------------------------------------------------------------------------
1,828,988
- --------------------------------------------------------------------------------
Print & Publishing--0.4%
12,700 Valassis Communications, Inc.* 214,313
- --------------------------------------------------------------------------------
Retail-Department Stores--2.8%
14,700 J.C. Penney, Inc.* 720,300
5,500 Melville Corp. 156,750
13,900 Sears Roebuck & Co. 576,850
- --------------------------------------------------------------------------------
1,453,900
- --------------------------------------------------------------------------------
Savings and Loans--0.7%
8,000 GP Financial Corp. 206,500
3,800 Standard Federal Bancorp. 154,850
- --------------------------------------------------------------------------------
361,350
- --------------------------------------------------------------------------------
Security and Commodity Brokers--0.5%
4,400 Dean Witter Discover Co. 238,150
- --------------------------------------------------------------------------------
Security and Commodity Brokers, Dealers and Services--0.7%
13,100 Lehman Brothers Holdings, Inc. 335,688
- --------------------------------------------------------------------------------
Technology--1.2%
6,500 Compaq Computer Corp.* 306,313
10,700 Storage Technology Corp.* 283,550
- --------------------------------------------------------------------------------
589,863
- --------------------------------------------------------------------------------
Tire and Rubber Products--1.8%
19,300 Goodyear Tire & Rubber Co. 923,988
- --------------------------------------------------------------------------------
Tobacco and Food Products--3.1%
7,900 Philip Morris Companies, Inc. 734,700
17,700 RJR Nabisco Holdings Corp. 575,250
11,900 Universal Corp. 278,163
- --------------------------------------------------------------------------------
1,588,113
- --------------------------------------------------------------------------------
Transportation-Air--0.5%
3,700 AMR Corp.* 281,200
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Description Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Trucking--1.0%
21,100 Consolidated Freightways, Inc. $ 485,300
- --------------------------------------------------------------------------------
Utility--2.5%
7,700 CMS Energy Corp. 239,663
9,700 Entergy Corp. 287,363
43,000 Long Island Lighting Co. 731,000
- --------------------------------------------------------------------------------
1,258,026
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $24,025,787) $27,148,060
- --------------------------------------------------------------------------------
Preferred Stocks--0.0%
Tobacco--0.0%
3,400 RJR Nabisco Holdings Corp. $ 22,525
Convertible Preferred, 6.50%
- --------------------------------------------------------------------------------
Total Preferred Stocks
(Cost $23,869) $ 22,525
- --------------------------------------------------------------------------------
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Securities--4.9%
Case Equipment Loan Trust, Series 1995-A, Class A
$ 124,074 7.30% 03/15/02 $ 127,067
Chemical Bank Master Credit Card Trust, Series 1995-2, Class A
140,000 6.23 06/15/03 143,986
Chevy Chase Auto Receivables, Series 1995-2, Class A
116,807 5.80 06/15/02 117,447
Ford Credit Grantor Trust, Series 1994-B, Class A
61,469 7.30 10/15/99 62,893
General Motors Acceptance Corp. Grantor Trust, Series 1994,
Class A
71,063 6.30 06/15/99 71,696
General Motors Acceptance Corp. Grantor Trust, Series 1995-A,
Class A
141,610 7.15 03/15/00 144,368
Navistar Financial Trust, Series 1995-A, Class A2
234,966 6.55 11/20/01 238,683
Navistar Financial Trust, Series 1995-B, Class A3
120,000 6.05 04/15/02 121,537
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount Rate Date
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Asset Backed Securities (continued)
Olympic Automobile Receivables Trust, Series 1993-D, Class A
$ 254,519 4.65% 07/15/00 $ 252,363
Premier Auto Trust, Series 1994-1, Class A3
144,299 4.75 02/02/00 143,457
Sears Credit Card Master Trust, Series 1995-2, Class A
700,000 8.10 06/15/04 763,434
Sears Credit Card Master Trust, Series 1995-3, Class A
70,000 7.00 10/15/04 73,872
Standard Credit Card Master Trust, Series 1994-4, Class A
110,000 8.25 11/07/03 122,993
Standard Credit Card Master Trust, Series 1995-3, Class A
100,000 7.85 02/07/02 108,281
- --------------------------------------------------------------------------------
Total Asset Backed Securities
(Cost $2,446,098) $2,492,077
- --------------------------------------------------------------------------------
Corporate Bonds--13.2%
Finance Bonds--5.4%
BankAmerica Corp.
$ 500,000 7.75% 07/15/02 $ 545,590
Capital One Bank
250,000 8.13 02/27/98 261,923
200,000 8.33 02/10/97 205,346
CCP Insurance, Inc.
125,000 10.50 12/15/04 139,054
Comdisco Inc.
325,000 9.75 01/15/97 337,529
Continental Bank
100,000 12.50 04/01/01 129,300
Countrywide Funding Corp.
100,000 6.08 07/14/99 101,039
Fleet Mortgage Group, Inc.
250,000 6.50 06/15/00 256,332
Golden West Financial Corp.
200,000 10.25 12/01/00 235,094
Signet Banking Corp.
500,000 9.63 06/01/99 553,800
- --------------------------------------------------------------------------------
Total Finance Bonds
(Cost $2,726,609) $ 2,765,007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount Rate Date
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Corporate Bonds (continued)
Industrial Bonds--6.4%
Auburn Hills Trust
$ 90,000 12.00% 05/01/20 $ 140,384
Blockbuster Entertainment
50,000 6.63 02/15/98 50,758
Cablevision Industries Corp.
150,000 10.75 01/30/02 163,875
Chrysler Financial Corp.
250,000 5.71 01/12/98 251,217
Coastal Corp.
100,000 9.75 08/01/03 119,918
Ford Capital Corp.
275,000 9.38 01/01/98 294,981
Ford Motor Credit Co.
40,000 8.38 01/15/00 43,594
General Motors Acceptance Corp.
200,000 7.50 11/04/97 207,086
170,000 7.12 05/10/00 178,736
News America Holdings, Inc.
150,000 9.13 10/15/99 166,585
100,000 7.50 03/01/00 105,674
Oryx Energy Co.
275,000 9.30 05/01/96 276,985
95,000 9.50 11/01/99 102,617
RJR Nabisco, Inc.
50,000 8.62 12/01/02 52,977
135,000 8.00 07/15/01 139,019
Tele-Communications, Inc.
125,000 9.65 10/01/03 142,255
50,000 9.88 04/01/98 54,140
Tenneco, Inc.
260,000 10.00 08/01/98 286,772
Time Warner, Inc.
200,000 7.45 02/01/98 206,224
125,000 7.98 08/15/04 132,224
Tosco Corp.
110,000 7.00 07/15/00 111,650
- --------------------------------------------------------------------------------
Total Industrial Bonds
(Cost $3,166,925) $3,227,671
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
Corporate Bonds (continued)
<S> <C> <C> <C> <C>
Utility Bonds--0.7%
Arkla Inc.
$ 250,000 9.20% 12/18/97 $ 262,792
Central Maine Power Co.
100,000 7.38 01/01/99 103,582
- --------------------------------------------------------------------------------
Total Utility Bonds
(Cost $364,119) $ 366,374
- --------------------------------------------------------------------------------
Yankee Bonds--0.7%
Province of Quebec
$ 200,000 13.25% 09/15/14 $ 255,170
State of Israel
95,000 6.38 12/15/05 95,368
- --------------------------------------------------------------------------------
Total Yankee Bonds
(Cost $347,479) $ 350,538
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $6,605,132) $ 6,709,590
- --------------------------------------------------------------------------------
Emerging Market Debt--3.1%
Asia Pulp and Paper International Finance Co.
$ 60,000 10.25% 10/01/00 $ 59,980
Banco Nacional de Colombia
50,000 10.82 05/31/96 50,277
40,000 10.55 06/23/97 40,590
Bancoldex
90,000 8.62 06/02/00 94,441
Bancponce Financial Corp./(a)/
240,000 7.56 05/13/96 234,172
Corp. Andina de Fomento
200,000 7.25 04/30/98 203,088
Empresa Col Petroleos
300,000 7.25 07/08/98 30,150
Financiera Energy Nacional
30,000 6.63 12/13/96 30,030
Government of Poland
80,000 7.75 07/13/00 83,000
Mexico United Global
50,000 9.75 02/06/01 50,117
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Emerging Market Debt (continued)
Pemex
$ 250,000 6.13% 06/15/96 $ 247,743
PT Indah Kiat
10,000 8.88 11/01/00 9,584
Republic of Argentina
200,000 2.36 09/01/97 197,750
70,000 8.63 04/04/98 69,469
Republic of Colombia
160,000 9.25 02/15/00 163,724
YPF Sociedad Anonima
29,177 7.50 10/26/02 29,837
- --------------------------------------------------------------------------------
Total Emerging Market Debt
(Cost $1,578,200) $ 1,593,952
- --------------------------------------------------------------------------------
Government Agency Obligations--1.9%
Federal Home Loan Mortgage Corp.
$ 20,000 8.20% 01/16/98 $ 20,580
Federal National Mortgage Association/(b)/
520,000 8.50 02/01/05 572,244
130,000 7.70 08/10/04 137,776
Government Backed Trust (Turkey)
119,595 9.40 11/15/96 121,667
Resolution Funding Corp. Principal-Only Stripped Securities/(a)/
280,000 6.52 10/15/20 57,529
300,000 6.49 01/15/21 60,948
- --------------------------------------------------------------------------------
Total Government Agency Obligations
(Cost $943,746) $ 970,744
- --------------------------------------------------------------------------------
Mortgage Backed Obligations--10.0%
Federal Home Loan Mortgage Corp.
$ 1,000,000 7.50% TBA-30 year/(c)/ $ 1,026,875
1,000,000 6.50 TBA-30 year/(c)/ 991,250
Federal National Mortgage Association
1,000,000 8.00 TBA-30 year/(c)/ 1,036,562
1,000,000 6.00 TBA-15 year/(c)/ 990,703
Government National Mortgage Association
966,557 9.00 10/15/17 1,033,914
- --------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $5,051,041) $ 5,079,304
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations--6.6%
United States Treasury Bonds
$ 470,000 12.00%/(b)/ 08/15/13 $ 722,113
220,000 8.75 08/15/20 293,047
30,000 8.00 11/15/21 37,261
United States Treasury Notes
450,000 7.38 11/15/97 468,279
780,000 7.25/(b)/ 08/15/04 867,508
United States Treasury Principal-Only Stripped Securities/(a)/
980,000 5.72 11/15/04 595,810
1,850,000 6.38 08/15/20 395,715
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $3,209,300) $ 3,379,733
- --------------------------------------------------------------------------------
Repurchase Agreement--13.8%
Joint Repurchase Agreement Account
$ 7,000,000 5.96% 02/01/96 $ 7,000,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $7,000,000) $ 7,000,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $50,883,173)/(d)/ $54,395,985
- --------------------------------------------------------------------------------
Futures contracts open at January 31, 1996 are as follows:
Number of
Contracts Settlement Unrealized
Type Long/(e)/ Month Gain
- ----------------------------------- --------------- ------------ ------------
2-Year U.S. Treasury Notes 2 March 1996 $ 4,031
10-Year U.S. Treasury Notes 3 March 1996 1,188
20-Year U.S. Treasury Bond 10 March 1996 9,375
S&P 500 Stock Index 5 March 1996 61,125
- --------------------------------------------------------------------------------
$75,719
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 3,986,101
Gross unrealized loss for investments in which
cost exceeds value (474,622)
- --------------------------------------------------------------------------------
Net unrealized gain $ 3,511,479
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Non-income producing security.
/(a)/The interest rate disclosed for these securitites represents effective
yields to maturity.
/(b)/Portions of these securities are being segregated as collateral for
futures contracts, TBA (To Be Assigned) securities and/or mortgage dollar
rolls.
/(c)/TBA (To Be Assigned) securities are purchased on a forward commitment
basis with an approximate (generally + / -2.5%) principal amount and no
definite maturity date. The actual principal amount and maturity date will
be determined upon settlement when the specific mortgage pools are
assigned.
/(d)/The aggregate cost for federal income tax purposes is $50,884,506.
/(e)/Each 2-Year Treasury Note contract represents $200,000 in notional par
value. Each 10-Year U.S. Treasury Note contract and 20-Year U.S. Treasury
Bond contract represents $100,000 in notional par value. Each S&P 500
Stock Index represents $50,000 in notional par value. The total net
notional amount and net market value are $1,950,000 and $3,569,906,
respectively. The determination of notional amounts does not consider
market risk factors and therefore notional amounts as presented here are
indicative only of volume of activity and not a measure of market risk.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
11
<PAGE>
Objective and Investment Approach
The Goldman Sachs Select Equity Fund is designed to provide investors with
a broadly diversified portfolio that can be used as a core holding on which to
build an investment program. The fund seeks to provide investors with a total
return (consisting of capital appreciation and dividend income) that, net of
expenses, exceeds the total return of the S&P 500 stock index. The fund's
mandate is to remain fully invested with industry diversification,
capitalization and risk characteristics similar to the S&P 500. Therefore, the
fund's relative performance compared with the index comes almost exclusively
from stock selection within sectors. We believe the fund offers investors an
attractive combination of value and growth, without assuming more risk than the
broad market.
The fund employs a disciplined approach that combines fundamental
investment research provided by Goldman, Sachs & Co.'s Investment Research
Department with quantitative analysis generated by Goldman Sachs Asset
Management's proprietary model. Our model forecasts a stock's return using many
different criteria including valuation measures, growth expectations, earnings
momentum and risk. It also analyzes the impact of current economic conditions on
different types of stocks. Those stocks ranked highly by both our quantitative
model and the Goldman Sachs Investment Research Department are selected for the
fund's portfolio.
Performance Review:
Strong Performance Due to Successful Stock Selection
We are pleased to report that the fund performed well during the period
under review, reflecting an outstanding year for U.S. equities in general and
large-capitalization stocks in particular. For the 12 months ended January 31,
1996, the Goldman Sachs Select Equity Fund Class A shares had a total return of
38.63% based on net asset value, nearly identical to the 38.67% total return for
the S&P 500 stock index, its benchmark.
From their inception on June 15, 1995 through January 31, 1996, the fund's
Institutional shares returned 20.14% compared with 20.29% for the S&P 500 during
the same period.
Given the strong market conditions, matching the market's performance meant
the fund did better than most of its peers. The fund's Class A shares ranked in
the top quartile in the growth fund category for both the 12-month period (120th
out of 580 funds) and the three-year period (66th out of 350 funds) ended
January 31, 1996, based on total return according to Lipper Analytical Services,
Inc. (Please note that Lipper rankings do not take sales charges into account
and that past performance is not a guarantee of future results. Institutional
shares were not ranked for either of these periods because they were in
existence less than 12 months.)
The fund's strong performance during the past year can be attributed to
successful stock selection, which reflects a combination of the Goldman, Sachs &
Co. Investment Research Department's qualitative stock research and Goldman
Sachs Asset Management's proprietary quantitative analysis. In keeping with the
fund's investment philosophy, this combination of qualitative and quantitative
techniques seeks to take advantage of the unique and complementary benefits of
each discipline. Another factor that contributed to the fund's positive
performance was the extent to which the fund closely mirrored the market
valuations and sector weightings of the S&P 500 during a period when large-cap
stocks significantly outperformed small-cap stocks.
A more detailed picture shows that the fund outperformed the benchmark
during the second and third quarters of 1995 when some of the key factors
favored by our model -- value (stocks with low price/earnings ratios), growth
(stocks with rising earnings estimates) and stability (large stocks with
predictable earnings) -- all worked well. During the fourth quarter, investors
focused almost exclusively on large, defensive stocks (i.e., utilities, consumer
nondurables) and responded indifferently to most other fundamental factors. Even
stocks with attractive valuations and rising earnings estimates did not fare
particularly well as the market expressed skepticism
12
<PAGE>
- --------------------------------------------------------------------------------
that earnings could continue to advance in the weakening economy.
During the period, the fund attracted a healthy stream of cash inflows that
were invested as quickly as feasible. In this positive cash flow environment,
the fund had a higher cash position than usual (on average, 3% to 4% of assets).
However, even this small cash position proved to be a drag on performance in the
sharply rising market.
Portfolio Composition:
Broad Diversification Across Industries and Sectors
As of January 31, 1996, the fund was invested in 124 stocks, which were
well diversified by industry and sector. While its sector weightings were
generally in line with the S&P 500, the fund was slightly overweighted in
finance and basic industry and slightly underweighted in the capital spending,
health and retail sectors. The slight over- and underweightings were the result
of the fund's stock selection process and were not due to our opinions of
specific sectors.
A number of the fund's valuation characteristics continued to be more
favorable than the benchmark. For example, as of January 31, 1996, the fund had
a lower price/earnings ratio based on 1996 estimated earnings than the S&P 500
(14.3x versus 15.5x), a lower price/book ratio (2.9x versus 3.0x) and better
long-term growth characteristics (13.0% versus 12.1%) based on consensus
estimates for five-year growth.
The fund's best performing stocks during the period included large-
capitalization companies in widely diverse industries, such as Philip Morris
Companies, Inc. (tobacco and food products), Sears, Roebuck & Co. (retailing),
Federal National Mortgage Association (mortgage finance), Monsanto Co.
(chemicals), Allstate Corp. (insurance), IBM (computers) and Intel Corp.
(microprocessors).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Top 10 Portfolio Holdings as of January 31, 1996
Percentage Percentage
of Total of S&P 500
Company Line of Business Net Assets Index
<S> <C> <C> <C>
Philip Morris Tobacco and Food 2.7% 1.6%
Companies, Inc. Products
AT&T Corp. Telecommunications 2.5% 2.2%
Pepsico, Inc. Beverages and Food 2.3% 1.0%
Unicom Corp. Utility 2.2% 0.2%
Schering Plough Corp. Pharmaceuticals 2.0% 0.4%
Royal Dutch Petroleum Oil and Gas 1.9% 1.6%
NationsBank Corp. Commercial Bank 1.9% 0.4%
Dow Chemical Co. Diversified Chemicals 1.9% 0.4%
General Electric Co. Electrical Equipment 1.8% 2.7%
IBM Computers 1.7% 1.3%
------ ------
Total 20.9% 11.8%
- --------------------------------------------------------------------------------
Sector Breakout as of January 31, 1996
Percentage of Percentage of S&P
Industry Sectors Portfolio 500 Index
Finance 17.6% 14.2%
Consumer Nondurables 12.2% 12.9%
Health 9.1% 10.3%
Energy 8.4% 7.9%
Basic Industry 8.2% 7.6%
Technology 7.1% 8.2%
Telecommunications 6.8% 8.1%
Electric/Gas 5.4% 4.4%
Consumer Services 4.9% 5.6%
Cash 3.7% 0.0%
Capital Spending 3.3% 5.8%
Miscellaneous 3.2% 4.5%
Consumer Durables 3.1% 3.2%
Aerospace 2.9% 2.0%
Retail 2.2% 3.9%
Transportation 1.9% 1.4%
- --------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund (continued)
- --------------------------------------------------------------------------------
Outlook
Given last year's strong market performance, high levels of bullish
sentiment and low market dividend yields, our quantitative model currently
favors larger stocks with predictable earnings, stocks with low price/earnings
multiples, and stocks with positive earnings estimate revisions and price
momentum. The model is currently avoiding stocks with overly optimistic year-
over-year growth expectations. Though low-risk, defensive issues led the market
at the end of the period, such issues are not currently a dominant theme in our
portfolio. According to our analysis, the balance between stock and bond market
returns last year does not suggest that the stock market is ahead of its
fundamentals.
/s/ Robert C. Jones
Robert C. Jones
Portfolio Manager
March 1, 1996
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund
January 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1996. The
performance for the Goldman Sachs Select Equity Fund ("GS Select Equity")
(assuming both the maximum sales charge of 5.50% and no sales charge for the
Class A shares and at net asset value for the Institutional shares), 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
Class A
GS Select Equity GS Select Equity
(w/sales charge) (no sales charge) S&P 500
- --------------------------------------------------------------------------------
5/24/91(a) $ 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
1/31/96 $16,654 $17,617 $19,306
Institutional class
1/31/96 N/A $12,014 $12,029
<TABLE>
<CAPTION>
Average Annual Total Return
-----------------------------------------------
One Year Since Inception (a)
- --------------------------------------------------------------------------------
<S> <C> <C>
GS Select Equity-Class A,
excluding sales charge 38.63% 12.82%
- --------------------------------------------------------------------------------
GS Select Equity-Class A,
including sales charge 31.01% 11.47%
- --------------------------------------------------------------------------------
GS Select Equity,
Institutional Class N/A 20.14%(b)
- --------------------------------------------------------------------------------
</TABLE>
(a) The Class A shares commenced operations May 24, 1991 and the Institutional
shares commenced operations June 15, 1995.
(b) An aggregate total return (not annualized) is shown instead of an average
annual total return since the Institutional Class has not completed a full
twelve months of operations.
- --------------------------------------------------------------------------------
15
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund
January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Common Stocks--95.5%
Aerospace/Defense--2.7%
6,700 McDonnell Douglas Corp. $ 596,300
41,900 Rockwell International Corp. 2,456,388
21,800 United Technologies Corp. 2,237,225
- --------------------------------------------------------------------------------
5,289,913
- --------------------------------------------------------------------------------
Auto Parts-Original Equipment--0.5%
31,100 Masland Corp. 431,513
14,200 Varity Corp.* 525,400
- --------------------------------------------------------------------------------
956,913
- --------------------------------------------------------------------------------
Automotive Products--1.6%
58,100 General Motors Corp. 3,057,513
- --------------------------------------------------------------------------------
Basic Materials and Natural
Resources--0.6%
27,200 Alco Standard Corp. 1,067,600
- --------------------------------------------------------------------------------
Beverages-Alcoholic--0.4%
10,800 Anheuser Busch Companies, Inc. 750,600
- --------------------------------------------------------------------------------
Beverages-Soft Drinks--2.7%
10,700 Coca Cola Co. 806,513
74,800 PepsiCo, Inc. 4,459,950
- --------------------------------------------------------------------------------
5,266,463
- --------------------------------------------------------------------------------
Biotechnology--0.4%
13,600 Amgen, Inc.* 817,700
- --------------------------------------------------------------------------------
Broadcast Media--1.3%
19,100 Capital Cities/ABC Inc. 2,456,738
- --------------------------------------------------------------------------------
Building Materials--0.4%
14,200 Armstrong World Industries, Inc. 834,250
- --------------------------------------------------------------------------------
Cable/Television Communications--0.3%
29,000 Tele-Communications, Inc.* 612,625
- --------------------------------------------------------------------------------
Chemicals--5.3%
48,800 Dow Chemicals Co. 3,635,600
11,600 Du Pont E I De Nemours 891,750
22,000 Monsanto Co. 2,865,500
11,600 Morton International, Inc. 429,200
59,800 Norsk Hydro ADR 2,444,325
- --------------------------------------------------------------------------------
10,266,375
- --------------------------------------------------------------------------------
Commercial Banks--6.0%
30,500 Banc One Corp. 1,155,188
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Description Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Commercial Banks (continued)
46,400 BankAmerica Corp. $ 3,126,200
44,200 Corestates Financial Corp. 1,768,000
9,300 First Interstate Bancorp. 1,434,525
11,000 MBNA Corp. 448,250
52,300 NationsBank Corp. 3,654,463
- --------------------------------------------------------------------------------
11,586,626
- --------------------------------------------------------------------------------
Commercial Services--0.5%
25,800 Interim Services Inc.* 961,050
- --------------------------------------------------------------------------------
Communications--1.2%
83,800 Airtouch Communications* 2,367,350
- --------------------------------------------------------------------------------
Computer Software and Services--2.8%
15,400 Cisco Systems, Inc.* 1,282,050
6,500 First Data Corp. 459,875
30,700 Microsoft Corp.* 2,839,750
16,400 Oracle Corp.* 783,100
- --------------------------------------------------------------------------------
5,364,775
- --------------------------------------------------------------------------------
Computers--1.7%
29,800 International Business Machines 3,240,750
- --------------------------------------------------------------------------------
Electrical Equipment--1.8%
45,800 General Electric Co. 3,515,150
- --------------------------------------------------------------------------------
Electronics--0.7%
11,100 Boston Scientific Corp.* 568,875
8,500 Emerson Electric Co. 711,875
- --------------------------------------------------------------------------------
1,280,750
- --------------------------------------------------------------------------------
Electronics-Instrumentation--1.0%
21,900 Hewlett Packard Co. 1,856,025
- --------------------------------------------------------------------------------
Electronics-Semiconductors--2.4%
31,600 Intel Corp. 1,745,406
14,100 Micron Technology Inc. 482,925
23,000 Motorola Inc. 1,236,250
25,300 Texas Instruments Inc. 1,176,450
- --------------------------------------------------------------------------------
4,641,031
- --------------------------------------------------------------------------------
Engineering & Construction--0.8%
21,700 Fluor Corp. 1,453,900
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Entertainment--1.5%
46,700 The Walt Disney Co. $3,000,475
- --------------------------------------------------------------------------------
Financial Services--1.8%
50,700 Federal National Mortgage Association 1,749,150
8,600 Household International, Inc. 557,925
16,400 MGIC Investment Corp. 1,057,800
2,500 Transamerica Corp. 190,313
- --------------------------------------------------------------------------------
3,555,188
- --------------------------------------------------------------------------------
Food Products--1.9%
37,600 Conagra Inc. 1,724,900
10,800 CPC International, Inc. 785,700
33,200 Sara Lee Corp. 1,120,500
- --------------------------------------------------------------------------------
3,631,100
- --------------------------------------------------------------------------------
Grocery Products--1.2%
55,200 IBP, Inc. 1,469,700
11,500 Kellogg Co. 881,188
- --------------------------------------------------------------------------------
2,350,888
- --------------------------------------------------------------------------------
Health and Medical Services--0.4%
13,300 United Healthcare Corp. 836,238
- --------------------------------------------------------------------------------
Hospital Management and Services--0.7%
22,700 Columbia/HCA Healthcare 1,262,688
- --------------------------------------------------------------------------------
Household Products--1.4%
33,400 Procter & Gamble Co. 2,805,600
- --------------------------------------------------------------------------------
Insurance--5.9%
25,956 Allstate Corp. 1,132,331
29,100 American General Corp. 1,098,525
32,850 American International Group, Inc. 3,182,344
15,600 CMAC Investment Corp. 897,000
17,500 Exel Insurance Ltd. 1,203,125
43,300 Protective Life Corp. 1,504,675
27,700 Safeco Corp. 993,738
21,200 Travelers Group, Inc. 1,393,900
- --------------------------------------------------------------------------------
11,405,638
- --------------------------------------------------------------------------------
Machine-Diversified--0.9%
16,800 Applied Materials, Inc.* 621,600
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Machine-Diversified (continued)
13,800 Black & Decker Corp. $ 467,475
15,400 Dover Corp. 702,625
- --------------------------------------------------------------------------------
1,791,700
- --------------------------------------------------------------------------------
Machinery and Equipment--0.6%
18,600 Caterpillar, Inc. 1,197,375
- --------------------------------------------------------------------------------
Medical/Biotechnology--0.5%
15,800 Medtronic Inc. 902,575
- --------------------------------------------------------------------------------
Metals-Diversified--0.3%
18,700 Asarco Inc. 593,725
- --------------------------------------------------------------------------------
Miscellaneous Manufacturer--1.2%
37,800 Allied Signal, Inc. 1,885,275
6,700 Eastman Kodak Co. 491,613
- --------------------------------------------------------------------------------
2,376,888
- --------------------------------------------------------------------------------
Money Center Banks--1.8%
31,800 Chemical Banking Corp. 2,130,600
19,500 Citicorp 1,440,563
- --------------------------------------------------------------------------------
3,571,163
- --------------------------------------------------------------------------------
Office & Business Equipment--0.7%
22,000 Harris, Corp. 1,377,750
- --------------------------------------------------------------------------------
Oil & Gas Exploration--0.8%
18,500 Baker Hughes, Inc. 478,688
20,000 Repsol S.A. ADR 697,500
20,800 Union Texas Petroleum Holdings, Inc. 379,600
- --------------------------------------------------------------------------------
1,555,788
- --------------------------------------------------------------------------------
Oil & Gas-Domestic--1.1%
21,500 Enron Corp. 795,500
22,900 Panhandle Eastern Corp. 661,238
19,200 Phillips Petroleum Co. 626,400
- --------------------------------------------------------------------------------
2,083,138
- --------------------------------------------------------------------------------
Oil & Gas-International--6.4%
25,600 Amoco Corp. 1,801,600
34,300 Exxon Corp. 2,752,575
17,700 Mobil Corp. 1,960,275
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Oil & Gas-International (continued)
26,600 Royal Dutch Petroleum ADR $ 3,697,400
27,500 Texaco, Inc. 2,224,063
- --------------------------------------------------------------------------------
12,435,913
- --------------------------------------------------------------------------------
Oil-Domestic Integrated--1.7%
19,500 Coastal Corp. 738,563
13,800 Kerr McGee Corp. 872,850
13,700 Tenneco, Inc. 707,263
22,200 Williams Companies, Inc. 1,046,175
- --------------------------------------------------------------------------------
3,364,851
- --------------------------------------------------------------------------------
Packaging & Container--1.1%
39,300 Avery Dennison Corp. 2,097,638
- --------------------------------------------------------------------------------
Paper and Forest Products--0.5%
11,900 Caraustar Industries, Inc. 232,050
14,200 Mead Corp. 784,550
- --------------------------------------------------------------------------------
1,016,600
- --------------------------------------------------------------------------------
Personal Loans--0.4%
16,700 Beneficial Corp. 816,213
- --------------------------------------------------------------------------------
Pharmaceuticals--6.9%
29,900 Abbott Labs 1,263,275
19,600 Bristol-Myers Squibb 1,734,600
18,600 Eli Lilly & Co. 1,069,500
17,600 Johnson & Johnson 1,689,600
28,700 Merck & Co. 2,016,175
23,600 Pfizer, Inc. 1,622,500
72,500 Schering Plough Corp. 3,924,063
- --------------------------------------------------------------------------------
13,319,713
- --------------------------------------------------------------------------------
Retail-Department Stores--2.1%
18,800 Gap, Inc. 885,950
15,800 Harcourt General, Inc. 616,200
28,000 Sears Roebuck & Co. 1,162,000
71,500 Wal Mart Stores, Inc. 1,456,813
- --------------------------------------------------------------------------------
4,120,963
- --------------------------------------------------------------------------------
Retail-Food Chains--0.9%
70,600 Safeway, Inc.* 1,800,300
- --------------------------------------------------------------------------------
Retail-Specialty Apparel Stores--0.2%
22,600 The Limited, Inc. 378,550
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Description Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Security and Commodity Brokers--1.1%
21,000 Dean Witter Discover Co. $ 1,136,625
19,600 Morgan Stanley Group, Inc. 933,450
- --------------------------------------------------------------------------------
2,070,075
- --------------------------------------------------------------------------------
Shoes--0.3%
8,600 Nike Inc. Class B 599,850
- --------------------------------------------------------------------------------
Technology--0.4%
17,400 Compaq Computer Corp.* 819,975
- --------------------------------------------------------------------------------
Telecommunications--5.7%
48,900 Ameritech Corp. 2,940,113
71,800 AT&T Corp. 4,801,625
27,000 GTE Corp. 1,242,000
49,600 Sprint Corp. 2,139,000
- --------------------------------------------------------------------------------
11,122,738
- --------------------------------------------------------------------------------
Tires & Rubber--0.6%
16,000 BF Goodrich Co. 1,178,000
- --------------------------------------------------------------------------------
Tobacco and Food Products--2.7%
55,600 Philip Morris Companies, Inc. 5,170,800
- --------------------------------------------------------------------------------
Toys--0.6%
33,606 Mattel, Inc. 1,083,780
- --------------------------------------------------------------------------------
Transportation--1.9%
12,800 Conrail, Inc. 905,600
5,400 Delta Air Lines, Inc. 369,225
25,100 Federal Express Corp.* 1,910,738
7,600 Union Pacific Corp. 506,350
- --------------------------------------------------------------------------------
3,691,913
- --------------------------------------------------------------------------------
Utility--4.2%
41,000 Empresa Nacional De Electric ADR 2,255,000
19,200 General Public Utilities Corp. 652,800
57,700 Public Service Company of New Mexico* 1,031,388
127,100 Unicom Corp. 4,273,738
- --------------------------------------------------------------------------------
8,212,926
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $143,543,010) $185,242,812
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal
Amount Description Value
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
U.S. Treasury Obligation--0.2%
$ 375,000 United States Treasury Bill(a)
4.87%, 02/08/96 $ 374,645
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligation
(Cost $374,645) $ 374,645
- --------------------------------------------------------------------------------
Repurchase Agreement--3.5%
$6,800,000 Joint Repurchase Agreement Account
5.96%, 02/01/96 $ 6,800,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $6,800,000) $ 6,800,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $150,717,655)(b) $192,417,457
- --------------------------------------------------------------------------------
Futures contracts open at January 31, 1996 are as follows:
Number of
Contracts Settlement Unrealized
Type Long(c) Month Gain
- ----------------------- ------------ ------------ ------------
S&P 500 Stock Index 5 March 1996 $24,625
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $42,882,569
Gross unrealized loss for investments in
which cost exceeds value (1,183,987)
Net unrealized gain $41,698,582
- --------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
(a)A portion of this security is being segregated for futures margin
requirements.
(b)The aggregate cost for federal income tax purposes is $150,718,875.
(c)Each S&P 500 Stock Index represents $50,000 in notional par value. The total
net notional amount and net market value are $250,000 and $1,594,875,
respectively. The determination of notional amounts does not consider market
risk facors and therefore notional amounts as presented here are indicative
only of volume of activity and not a measure of market risk.
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.
19
<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
style, which means we focus on companies whose stocks we believe are inexpensive
relative to their expected long-term earnings power and their ability to pay
dividends. Investments may include well-known companies that are temporarily out
of favor due to cyclical economic conditions or are experiencing near-term
difficulties the portfolio managers judge to be temporary in nature. In-depth
fundamental research of a company's financial structure, its competitive
position in the market and its management's commitment to increasing shareholder
value are all critical parts of the fund's investment approach.
Performance Review: Defense and Financial Stocks Were Among the Top Performers
For the 12-month period ended January 31, 1996, the Goldman Sachs Growth
and Income Fund had a total return of 32.45% based on net asset value compared
with a total return of 38.67% for the S&P 500 stock index, the fund's benchmark.
The fund has increased its regular quarterly dividend during the period to $0.07
per share.
The fund provided solid returns for the year due to successful stock
selection in a variety of sectors. Top performers during the period included two
stocks in the defense sector, McDonnell Douglas Corp. and Northrop Grumman
Corp., both of which benefited from their ability to generate significant cash
flows and expand margins; Tenet Healthcare Corp., which rose when the market
responded favorably to its strong earnings growth; and Philip Morris Companies,
Inc., which continued to generate high earnings growth and increased market
share. Goodyear Tire & Rubber Co., one of the three largest tire manufacturers
in the world and the fund's largest holding by year-end, also enjoyed solid
earnings growth despite general softness in auto sales and the rapidly rising
cost of rubber during the period.
Many of the fund's investments in the financial sector performed very well
and were subsequently sold when they hit or exceeded our target prices. These
included Bear Stearns Cos. Inc., Citicorp, Chemical Bank Corp., Federal National
Mortgage Association, Student Loan Marketing Association and Union Bank of San
Francisco. The fund continued to hold Travelers Group, Inc., a diversified
financial services company, which saw its share price rise significantly due in
part to the announcement of its acquisition of Aetna's property and casualty
business.
Although the fund was underweighted in the technology sector, it benefited
from several technology investments it did hold. Advanced Micro Devices, Inc.
and Dell Computer Corp. appreciated sharply and were subsequently sold, while we
continue to hold Compaq Computer Corp. because we believe its valuation levels
were still attractive as of the end of the period. We added Intel Corp. at what
we believed to be an attractive price after the semiconductor sector declined in
the latter half of the period. This company has a dominant market share in
microprocessors, the heart of personal computers.
Weaker Economy Favors Large Caps, Hurts Cyclicals
Factors that impacted the fund's performance relative to the benchmark
during the period were the outperformance of large growth stocks over value
stocks during the latter part of the year and the resulting underperformance of
some of the fund's value-oriented cyclical holdings. As of January 31, 1996, the
fund's weighted average market capitalization was $12.6 billion compared with
$31.7 billion for the S&P 500.
More specifically, the fund's cyclically oriented investments, such as Ford
Motor Co., came under pressure during the period as sales slowed due to investor
uncertainty stemming from the weakening economy. The paper sector, in which the
fund was overweighted compared with the benchmark, was particularly hard hit
when declining demand resulted in an inventory buildup and price discounting.
The fund had trimmed its positions in Stone Container Corp., Champion
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
International Corp. and Georgia-Pacific Corp. earlier in the year when paper
stocks were strong, and continued to hold these investments when their prices
fell, on the expectation that the paper sector would rebound.
Increased Investments in Energy and Retailing Stocks
The fund deployed some of the cash generated from its sales in the
financial sector into energy and retail stocks, two sectors in which it has had
little previous exposure. The fund added to its holdings in several oil
companies that have been restructured to become more efficient producers
(Atlantic Richfield Co. and Texaco, Inc.) and initiated a new position in
Ashland Inc. We also took advantage of the past year's slowdown in retailing to
add several well-known retailing companies at attractive prices. These included
J.C. Penney Company, Inc., a high-quality, low-cost merchandiser; Melville
Corp., which announced the sale of Marshall's; and Sears, Roebuck & Co., which
has spun off its financial services holdings to concentrate on its core retail
business.
Top 10 Portfolio Holdings as of January 31, 1996 *
Percentage
of Total
Company Line of Business Net Assets
Goodyear Tire & Rubber Co. Tire and Rubber Products 3.2%
Ford Motor Co. Automotive Products 3.0%
Georgia-Pacific Corp. Paper and Forest Products 2.8%
McDonnell Douglas Corp. Aerospace/Defense 2.7%
NationsBank Corp. Commercial Bank 2.6%
Long Island Lighting Co. Electric Utilities 2.5%
Philip Morris Companies, Inc. Tobacco and Food Products 2.5%
J.C. Penney Company, Inc. Department Stores 2.5%
Stone Container Corp. Pulp and Paper Products 2.4%
Texaco, Inc. International Integrated Oil 2.2%
* Percentages shown are of common stock positions.
- --------------------------------------------------------------------------------
Outlook
Investor uncertainty concerning the economy's health has resulted in a
rotation out of economically sensitive issues and into more defensive stocks
with larger market capitalizations and stable growth characteristics. We believe
that this phenomenon should reverse at some point, which will potentially
benefit some of our smaller, more cyclical holdings whose long-term earnings
streams are now available at what we believe are attractive prices. Our outlook
for 1996 is cautiously optimistic despite our concerns regarding the slowdown in
economic growth. We intend to continue researching attractive investment
opportunities that are consistent with the fund's management style, avoiding
areas where valuation levels appear excessively high.
/s/ Mitchell E. Cantor
Mitchell E. Cantor
Portfolio Manager
/s/ Ronald E. Gutfleish
Ronald E. Gutfleish
Portfolio Manager
March 1, 1996
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund
January 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1996. The
performance for the Goldman Sachs Growth and Income Fund ("GS G & I") (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
GS Growth & Income GS Growth & Income
(w/sales charge) (no sales charge) S&P 500
- --------------------------------------------------------------------------------
2/5/93(a) $ 9,450 $10,000 $10,000
1/31/94 $10,686 $11,308 $11,073
1/31/95 $11,110 $11,757 $11,132
1/31/96 $14,716 $15,573 15,436
Average Annual Total Return
---------------------------------------------
One Year Since Inception (a)
- --------------------------------------------------------------------------------
GS G&I,
excluding sales charge 32.45% 15.97%
- --------------------------------------------------------------------------------
GS G&I,
including sales charge 25.17% 13.80%
- --------------------------------------------------------------------------------
(a) Commenced operations February 5, 1993.
- --------------------------------------------------------------------------------
22
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund (continued)
January 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
<S> <C> <C>
- --------------------------------------------------------------------------------
Common Stocks--92.6%
Aerospace/Defense--7.7%
96,715 Lockheed Martin Corp. $ 7,289,893
121,100 Loral Corp. 5,600,875
134,000 McDonnell Douglas Corp. 11,926,000
140,800 Northrop Grumman Corp. 9,011,200
- --------------------------------------------------------------------------------
33,827,968
- --------------------------------------------------------------------------------
Auto Parts-Original Equipment--1.3%
187,400 Lear Seating Corp.* 5,551,725
- --------------------------------------------------------------------------------
Automotive Products--4.0%
440,200 Ford Motor Co. 13,040,925
84,500 General Motors Corp. 4,446,813
- --------------------------------------------------------------------------------
17,487,738
- --------------------------------------------------------------------------------
Beverages-Alcoholic--2.1%
130,000 Anheuser Busch Companies, Inc. 9,035,000
- --------------------------------------------------------------------------------
Cable/Television Communications--2.1%
429,700 Tele-Communications, Inc.* 9,077,413
- --------------------------------------------------------------------------------
Chemicals-Plastics--1.6%
245,500 Geon Co. 6,874,000
- --------------------------------------------------------------------------------
Commercial Banks--5.1%
103,700 BankAmerica Corp. 6,986,788
95,465 Fleet Financial Group, Inc. 3,818,600
163,300 NationsBank Corp. 11,410,587
- --------------------------------------------------------------------------------
22,215,975
- --------------------------------------------------------------------------------
Electronics-Semiconductors--1.1%
88,400 Intel Corp. 4,882,719
- --------------------------------------------------------------------------------
Environmental Control--0.4%
63,600 Browning Ferris Industries, Inc. 1,876,200
- --------------------------------------------------------------------------------
Food-Wholesale--3.0%
302,100 Fleming Companies, Inc. 5,739,900
240,600 Supervalu, Inc. 7,458,600
- --------------------------------------------------------------------------------
13,198,500
- --------------------------------------------------------------------------------
Grocery Products--1.9%
596,800 Chiquita Brands International, Inc. 8,131,400
- --------------------------------------------------------------------------------
Home Builders--1.4%
46,800 Centex Corp. 1,509,300
180,100 Lennar Corp. 4,705,112
- --------------------------------------------------------------------------------
6,214,412
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Description Value
<S> <C> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Hospital Management and Services--3.4%
129,600 Beverly Enterprises, Inc.* $ 1,555,200
88,600 Columbia/HCA Healthcare 4,928,375
387,200 Tenet Healthcare Corp.* 8,276,400
- --------------------------------------------------------------------------------
14,759,975
- --------------------------------------------------------------------------------
Household Products--1.7%
82,400 National Presto Industrials, Inc. 3,605,000
250,700 Sunbeam Corp. 4,011,200
- --------------------------------------------------------------------------------
7,616,200
- --------------------------------------------------------------------------------
Insurance--6.9%
98,300 Allstate Corp. 4,288,337
39,100 CIGNA Corp. 4,638,237
24,400 Integon Corp. 515,450
166,200 Lincoln National Corp. 8,787,825
237,200 PartnerRe Holdings, Ltd. 6,611,950
71,000 Travelers Group, Inc. 4,668,250
20,100 US Life Corp. 645,712
- --------------------------------------------------------------------------------
30,155,761
- --------------------------------------------------------------------------------
Marine and Pleasure Boats--3.1%
386,100 Brunswick Corp. 8,735,512
239,400 Outboard Marine Corp. 4,788,000
- --------------------------------------------------------------------------------
13,523,512
- --------------------------------------------------------------------------------
Metals-Miscellaneous--0.5%
103,200 Quanex Corp. 2,128,500
- --------------------------------------------------------------------------------
Oil & Gas-Domestic--4.6%
232,800 Ashland Inc. 8,555,400
38,600 Atlantic Richfield Co. 4,385,925
167,900 Tosco Corp. 7,030,812
- --------------------------------------------------------------------------------
19,972,137
- --------------------------------------------------------------------------------
Oil & Gas-International--5.0%
36,200 Mobil Corp. 4,009,150
58,900 Royal Dutch Petroleum ADR 8,187,100
118,800 Texaco, Inc. 9,607,950
- --------------------------------------------------------------------------------
21,804,200
- --------------------------------------------------------------------------------
Packaging & Container--2.0%
604,300 Owens Illinois Corp.* 8,611,275
- --------------------------------------------------------------------------------
Paper and Forest Products--6.4%
118,600 Champion International Corp. 5,307,350
166,300 Georgia-Pacific Corp. 12,202,262
704,600 Stone Container Corp. 10,304,775
- --------------------------------------------------------------------------------
27,814,387
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund (continued)
January 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
<S> <C> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Print & Publishing--1.4%
359,700 Valassis Communications, Inc.* $ 6,069,938
- --------------------------------------------------------------------------------
Retail-Department Stores--5.0%
220,000 J.C. Penney, Inc. 10,780,000
88,100 Melville Corp. 2,510,850
207,700 Sears Roebuck & Co. 8,619,550
- --------------------------------------------------------------------------------
21,910,400
- --------------------------------------------------------------------------------
Savings and Loans--1.9%
207,200 GP Financial Corp. 5,348,350
76,600 Standard Federal Bancorp. 3,121,450
- --------------------------------------------------------------------------------
8,469,800
- --------------------------------------------------------------------------------
Security and Commodity Brokers, Dealers and Services--1.1%
195,900 Lehman Brothers Holdings, Inc. 5,019,938
- --------------------------------------------------------------------------------
Technology--2.1%
111,900 Compaq Computer Corp.* 5,273,288
153,800 Storage Technology Corp.* 4,075,700
- --------------------------------------------------------------------------------
9,348,988
- --------------------------------------------------------------------------------
Tire and Rubber Products--3.2%
287,500 Goodyear Tire & Rubber Co. 13,764,063
- --------------------------------------------------------------------------------
Tobacco and Food Products--5.4%
116,900 Philip Morris Companies, Inc. 10,871,700
263,680 RJR Nabisco Holdings Corp. 8,569,600
176,800 Universal Corp. 4,132,700
- --------------------------------------------------------------------------------
23,574,000
- --------------------------------------------------------------------------------
Transportation-Air--1.0%
54,600 AMR Corp.* 4,149,600
- --------------------------------------------------------------------------------
Trucking--1.8%
348,000 Consolidated Freightways, Inc. 8,004,000
- --------------------------------------------------------------------------------
Utility--4.4%
131,800 CMS Energy Corp. 4,102,275
144,300 Entergy Corp. 4,274,887
641,400 Long Island Lighting Co. 10,903,800
- --------------------------------------------------------------------------------
19,280,962
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $346,638,724) $404,350,686
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares Description Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Preferred Stocks--0.9%
Grocery Products--0.4%
44,600 Chiquita Brands International, Inc.
Convertible Preferred, 2.88% $ 1,995,850
- --------------------------------------------------------------------------------
Tobacco and Food Products--0.4%
287,100 RJR Nabisco Holdings Corp.
Convertible Preferred, 6.50% 1,902,038
- --------------------------------------------------------------------------------
Total Preferred Stocks
(Cost $3,843,410) $ 3,897,888
- --------------------------------------------------------------------------------
Principal
Amount Description Value
- --------------------------------------------------------------------------------
Repurchase Agreement--6.3%
- --------------------------------------------------------------------------------
$27,400,000 Joint Repurchase Agreement
Account
5.96%, 02/01/96 $ 27,400,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $27,400,000) $ 27,400,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $377,882,134)(a) $ 435,648,574
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 64,178,911
Gross unrealized loss for investments in which
cost exceeds value (6,439,893)
- --------------------------------------------------------------------------------
Net unrealized gain $ 57,739,018
- --------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
(a)The aggregate cost for federal income tax purposes is $377,909,556.
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.
24
<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
primarily through investments in a portfolio of medium- and large-capitalization
stocks. We use extensive fundamental research to identify companies that we
believe to be either unrecognized or significantly undervalued in the
marketplace, either because the company's business is not well understood or
because it is experiencing what are judged to be temporary difficulties. Our
analysis focuses on such factors as a company's long-term growth potential, its
competitive position in its industry, the extent to which 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, it is best
suited for investors with a long-term investment horizon. The fund's weighted
average market capitalization was approximately $15.2 billion as of January 31,
1996 compared with $31.7 billion for the S&P 500 stock index.
Performance Review: Strong Absolute Results, Despite Weakness in Cyclical and
Retail Sectors
For the 12 months ended January 31, 1996, the Goldman Sachs Capital Growth
Fund had a total return of 30.45% based on net asset value compared with a total
return of 38.67% for the fund's benchmark, the S&P 500 stock index.
The fund's returns during the period were high by absolute and historical
standards, reflecting successful stock selection in diverse industries. The
fund's investments in the financial sector produced some of the strongest
performers during the period, including Federal National Mortgage Association
and two of our longer term holdings, Citicorp and Penncorp Financial Group,
Inc., both of which appreciated significantly and were sold after hitting our
target prices. Another long-term holding that did very well was Millipore
Corp., which manufactures filters for use in many commercial and high technology
markets. During the period, we added Pall Corp., another major filtration
producer with a specialization in filtration for the health care industry, as we
believe there is a growing recognition of a crisis in the safety of the world
blood supply. Though the automotive sector was generally weak during the second
half of the year, Lear Seating Corp., an auto seat manufacturer, was a notable
exception and contributed to the fund's positive performance.
During the period, the market favored large, growth stocks, while the fund
was heavily invested in value-oriented cyclical stocks in the capital equipment
and paper and forest products sectors. These industries were all impacted by the
slowing economy, particularly during the fourth quarter of 1995. Holdings that
came under pressure included capital equipment manufacturers Tenneco, Inc. and
Keystone International, Inc., which were subsequently liquidated. The fund's
investments in the paper and forest products sector (Champion International
Corp., Georgia-Pacific Corp. and Stone Container Corp.) also fared poorly due to
price discounting in the latter half of the period as demand for paper and pulp
products declined amid healthy supply. The fund sold Champion International but
continued to hold its other investments in the sector in the belief that the
correction was overdone and they were attractively valued.
We have dramatically modified our investment strategy in the retailing
sector, shifting the fund's concentration from specialty retailers such as
AnnTaylor Stores, Inc. and Charming Shoppes, Inc., which fared poorly in the
disappointing retailing environment, to higher quality retailing franchises,
such as Wal-Mart Stores, Inc., J.C. Penney Company, Inc. and Dillard Department
Stores, Inc.
New Additions Added Diversification
We deployed the cash resulting from our mid-period sales into investments
that we believed had the potential to do well regardless of the economic
environment. These included financial services companies such as First USA, Inc.
(credit cards) and NationsBank Corp. (commercial
- --------------------------------------------------------------------------------
25
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Capital Growth Fund (continued)
- --------------------------------------------------------------------------------
bank); media and telecommunication companies such as Knight-Ridder, Inc.
(newspaper publishing) and AT&T Corp.; and energy-related companies such as Long
Island Lighting Co. (an electric and gas utility serving Long Island, N.Y.) and
Texaco, Inc. (oil and gas).
Another recent investment was Goodyear Tire & Rubber Co., one of the
world's three dominant tire companies, which performed well despite rapidly
rising raw material costs during the period. The fund bought Perkin-Elmer Corp.,
a health care equipment manufacturer, which has benefited from management's
increased focus on cost reduction, and provides a way to participate in
potential biotechnology sector growth at an attractive earnings multiple. When
the technology sector became more reasonably priced following a sell-off in the
second half of the period, the fund added Intel Corp., Compaq Computer Corp. and
Silicon Valley Group, Inc.
<TABLE>
<CAPTION>
Top 10 Portfolio Holdings as of January 31, 1996
Percentage
of Total
Company Line of Business Net Assets
<S> <C> <C>
Georgia-Pacific Corp. Paper and Forest Products 3.4%
Ford Motor Co. Automotive Products 3.2%
NationsBank Corp. Commercial Bank 3.1%
Northrop Grumman Corp. Aerospace/Defense 2.9%
Tele-Communications, Inc. Cable Television System 2.8%
Valassis Communications, Inc. Publishing 2.7%
Dillard Department Stores, Inc. Department Stores 2.7%
Philip Morris Companies, Inc. Tobacco and Food Products 2.7%
Texaco, Inc. International Integrated Oil 2.6%
First Brands Corp. Household Products 2.6%
</TABLE>
Outlook
The equity market appears to be caught in a tug of war between moderate
overvaluation and a likely reacceleration of the economy during the second half
of 1996. The accommodative stance of the Federal Reserve to date should help to
stimulate economic growth later in 1996, which would be beneficial for corporate
profits and ultimately for common stocks. As of this writing, however, the
profit picture is still uneven and the economically sensitive parts of the
market may be vulnerable to additional negative surprises. Despite the overall
economic uncertainty, we believe many of our remaining cyclical holdings have
strong fundamentals and attractive valuations, and we expect to hold them until
the market recognizes their fair value. As noted, we have diversified the
portfolio to include holdings that should withstand a slower economy in the near
term. Going forward, we will continue to emphasize selection of individual
stocks that we believe offer long-term growth potential.
/s/ Mitchell E. Cantor
Mitchell E. Cantor
Portfolio Manager
/s/ Paul D. Farrell
Paul D. Farrell
Portfolio Manager
March 1, 1996
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Capital Growth Fund
January 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1996. The
performance for the Goldman Sachs Capital Growth Fund ("GS Cap Growth")
(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
GS GS
Cap Growth Cap Growth
(w/sales charge) (no sales charges) S&P 500
---------------- ------------------ -------
4/20/90(a) $ 9,450 $10,000 $10,000
1/31/91 $ 9,529 $10,084 $10,552
1/31/92 $12,322 $13,040 $12,946
1/31/93 $14,542 $15,388 $14,316
1/31/94 $16,998 $17,987 $16,160
1/31/95 $16,254 $17,200 $16,246
1/31/96 $21,203 $22,437 $22,528
<TABLE>
<CAPTION>
--------------------------------------------------
Average Annual Total Return
--------------------------------------------------
One Year Five Year Since Inception/a/
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
GS Cap Growth, excluding sales charge 30.45% 17.34% 14.98%
- -----------------------------------------------------------------------------------------
GS Cap Growth, including sales charge 23.24% 16.01% 13.86%
- -----------------------------------------------------------------------------------------
</TABLE>
/a/ Commenced operations April 20, 1990.
- -------------------------------------------------------------------------------
27
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund (continued)
January 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
<S> <C> <C>
- --------------------------------------------------------------------------------
Common Stocks--96.2%
Aerospace/Defense--4.8%
188,400 McDonnell Douglas Corp. $16,767,600
394,900 Northrop Grumman Corp. 25,273,600
- --------------------------------------------------------------------------------
42,041,200
- --------------------------------------------------------------------------------
Auto Parts-Original Equipment--1.3%
391,900 Lear Seating Corp.* 11,610,037
- --------------------------------------------------------------------------------
Automotive Products--3.2%
948,800 Ford Motor Co. 28,108,200
- --------------------------------------------------------------------------------
Cable/Television Communications--2.8%
1,165,800 Tele-Communications, Inc.* 24,627,525
- --------------------------------------------------------------------------------
Chemicals-Plastics--2.2%
700,400 Geon Co. 19,611,200
- --------------------------------------------------------------------------------
Commercial Banks--5.8%
218,700 BankAmerica Corp. 14,734,913
231,900 MBNA Corp. 9,449,925
390,400 NationsBank Corp. 27,279,200
- --------------------------------------------------------------------------------
51,464,038
- --------------------------------------------------------------------------------
Cosmetics--0.9%
155,000 Tambrands, Inc. 7,614,375
- --------------------------------------------------------------------------------
Electronics--3.3%
216,200 Perkin-Elmer Corp. 10,215,450
704,400 Silicon Valley Group, Inc.* 18,402,450
- --------------------------------------------------------------------------------
28,617,900
- --------------------------------------------------------------------------------
Electronics-Semiconductors--2.6%
346,200 Intel Corp. 19,122,141
214,500 National Semiconductor Corp.* 3,700,125
- --------------------------------------------------------------------------------
22,822,266
- --------------------------------------------------------------------------------
Financial Services--4.0%
382,000 Federal National Mortgage Association 13,179,000
430,900 First U.S.A., Inc. 22,460,663
- --------------------------------------------------------------------------------
35,639,663
- --------------------------------------------------------------------------------
Grocery Products--0.8%
494,100 Chiquita Brands International, Inc. 6,732,113
- --------------------------------------------------------------------------------
Hardware and Tools--1.1%
220,800 Snap-on Tools, Inc. $ 9,687,600
- --------------------------------------------------------------------------------
Hospital Management and Services--5.4%
337,400 Beverly Enterprises, Inc.* 4,048,800
268,900 Columbia/HCA Healthcare 14,957,563
1,021,400 Tenet Healthcare Corp.* 21,832,425
142,300 US Healthcare, Inc.* 6,901,550
- --------------------------------------------------------------------------------
47,740,338
- --------------------------------------------------------------------------------
Household Products--2.6%
465,700 First Brands Corp. 22,993,937
- --------------------------------------------------------------------------------
Insurance--4.8%
540,250 Integon Corp. 11,412,781
218,600 Lincoln National Corp. 11,558,475
703,800 PartnerRe Holdings, Ltd. 19,618,425
- --------------------------------------------------------------------------------
42,589,681
- --------------------------------------------------------------------------------
Manufacturing-Diversified Industrial--1.0%
271,000 Harnischfeger Industries, Inc. 9,180,125
- --------------------------------------------------------------------------------
Manufacturing-Miscellaneous--5.9%
551,200 Fisher Scientific International, Inc. 19,429,800
310,300 Millipore Corp. 13,265,325
724,700 Pall Corp. 19,566,900
- --------------------------------------------------------------------------------
52,262,025
- --------------------------------------------------------------------------------
Metal Fabricate/Hardware--0.9%
238,650 Trinity Industries, Inc. 8,352,750
- --------------------------------------------------------------------------------
Metals-Miscellaneous--0.6%
241,100 Quanex Corp. 4,972,687
- --------------------------------------------------------------------------------
Oil & Gas-International--6.1%
68,700 Amoco Corp. 4,834,763
88,400 Chevron Corp. 4,585,750
68,500 Exxon Corp. 5,497,125
90,900 Mobil Corp. 10,067,175
41,200 Royal Dutch Petroleum ADR 5,726,800
284,800 Texaco, Inc. 23,033,200
- --------------------------------------------------------------------------------
53,744,813
- --------------------------------------------------------------------------------
Packaging & Container--1.0%
605,700 Owens Illinois Corp.* 8,631,225
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
Shares Description Value
- --------------------------------------------------------------------------------
Common Stocks (continued)
<S> <C> <C>
Paper and Forest Products--5.3%
410,900 Georgia-Pacific Corp. $ 30,149,787
1,145,900 Stone Container Corp. 16,758,787
- --------------------------------------------------------------------------------
46,908,574
- --------------------------------------------------------------------------------
Print & Publishing--3.7%
130,900 Knight Ridder, Inc. 8,688,488
1,416,500 Valassis Communications, Inc.* 23,903,437
- --------------------------------------------------------------------------------
32,591,925
- --------------------------------------------------------------------------------
Retail-Department Stores--6.6%
829,900 Dillard Department Stores, Inc. 24,067,100
198,100 J.C. Penney, Inc. 9,706,900
920,900 Service Merchandise Co., Inc.* 4,374,275
963,000 Wal Mart Stores, Inc. 19,621,125
- --------------------------------------------------------------------------------
57,769,400
- --------------------------------------------------------------------------------
Retail-Specialty--2.0%
1,827,500 Charming Shoppes, Inc.* 5,025,625
818,500 Musicland Stores Corp.* 1,943,937
576,600 TJX Companies, Inc. 10,883,325
- --------------------------------------------------------------------------------
17,852,887
- --------------------------------------------------------------------------------
Security and Commodity Brokers, Dealers and Services--1.7%
571,000 Lehman Brothers Holdings, Inc. 14,631,875
- --------------------------------------------------------------------------------
Technology--1.7%
323,700 Compaq Computer Corp.* 15,254,363
- --------------------------------------------------------------------------------
Telecommunications--2.1%
278,200 AT&T Corp. 18,604,625
- --------------------------------------------------------------------------------
Tire and Rubber Products--1.7%
314,900 Goodyear Tire & Rubber Co. 15,075,837
- --------------------------------------------------------------------------------
Tobacco and Food Products--4.7%
254,900 Philip Morris Companies, Inc. 23,705,700
776,100 Universal Corp. 18,141,338
- --------------------------------------------------------------------------------
41,847,038
- --------------------------------------------------------------------------------
Transportation-Air--2.3%
260,400 AMR Corp.* 19,790,400
- --------------------------------------------------------------------------------
Transportation-Marine--0.4%
178,500 Kirby Corp.* 3,168,375
- --------------------------------------------------------------------------------
Trucking--1.6%
620,200 Consolidated Freightways, Inc. $14,264,600
- --------------------------------------------------------------------------------
Utility--1.3%
669,400 Long Island Lighting Co. 11,379,800
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $740,857,992) $848,183,397
================================================================================
Principal
Amount Description Value
================================================================================
Repurchase Agreement--2.4%
$20,900,000 Joint Repurchase Agreement Account
5.96%, 02/01/96 $ 20,900,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $20,900,000) $ 20,900,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $761,757,992)(a) $869,083,397
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $135,542,409
Gross unrealized loss for investments in
which cost exceeds value (29,033,799)
- --------------------------------------------------------------------------------
Net unrealized gain $106,508,610
================================================================================
</TABLE>
*Non-income producing security.
(a)The aggregate cost for federal income tax purposes is $762,574,787.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund
- --------------------------------------------------------------------------------
Objective and Investment Approach
The Goldman Sachs Small Cap Equity Fund's objective is long-term capital
appreciation, primarily through investments in equity securities of U.S.
companies with market capitalizations of $1 billion or less. The fund is
managed using a "business value" approach to investing, which means we look for
attractive companies with high or improving returns on capital that we believe
can achieve solid, sustainable growth, as well as generate free cash after
investing for future growth. This approach differs markedly from many pure
growth small-cap funds that invest in companies with high multiples solely on
the basis of rapid, but frequently unsustainable, growth rates. Using our own
rigorous fundamental research, which includes meeting with a company's
management and interviewing a company's competitors, customers and suppliers, we
build the fund's portfolio one stock at a time.
Disappointing Retailers and Others Impacted Performance
Small-cap stock performance significantly lagged large-cap stocks during the
period under review, with much of the gap occurring in the latter half of the
year. In part, small-cap stocks underperformed due to the correction in
technology stocks during the second half of the period. More significantly,
small-cap stocks lost momentum when concern regarding slowing economic growth
caused many investors to shift their focus to large-cap consumer growth stocks,
which were perceived to be more stable in an economic downturn.
During the 12 months ended January 31, 1996, the Goldman Sachs Small Cap
Equity Fund had a total return of 7.20% based on net asset value compared with
30.06% for the Russell 2000, the fund's benchmark.
The fund underperformed the benchmark primarily due to the disappointing
results of a number of its holdings, particularly in the specialty retailing
sector. For example, Charming Shoppes, Inc. (retailer of women's apparel), Ernst
Home Center, Inc. (home improvement stores) and Shoe Carnival, Inc. (shoe
retailer) all saw price declines. The fund liquidated these positions, some
during the period and some soon after the period ended, due to their
deteriorating fundamentals. However, we continued to hold other retailers, such
as J. Baker, Inc. (specialty apparel and discount shoes), which in our opinion
have attractive long-term potential.
Some of the fund's nonretailing positions were also disappointing, such as
Foamex International, Inc. (foam products), which failed to capitalize on its
market position, and Physicians Clinical Laboratory, Inc. (clinical lab
testing), whose fundamentals began to deteriorate rapidly in a difficult
environment. Both investments were sold during the period.
Strategic Shifts Resulted in Greater Balance Across Sectors
During the latter half of the period, we widened our search for attractive
investments to give the portfolio a more balanced representation of value across
industry sectors. As a result, the fund's weightings reflect additional
investments in specialty insurance and technology-related companies and reduced
investments in retailing stocks. Financial holdings that performed well
included Horace Mann Educators Co. (property, casualty and life insurance for
the educator market), Western National Corp. (annuity product marketer) and
Insignia Financial Group, Inc. (real estate management).
During the period, the portfolio's overall liquidity increased. The
portfolio's weighted average market capitalization was approximately $343
million as of January 31, 1996, up from approximately $210 million a year ago.
Diverse Sectors Contributed Good Results
A number of the portfolio's longer term holdings did particularly well
during the period and were sold after they reached our target prices. USA Mobile
Communications Holdings (a Midwest-based provider of paging services) rose due
to a tender offer from Arch Communications. TJX Companies, Inc. (off-priced
women's apparel and accessories) sold its
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
underperforming "Hit or Miss" chain and acquired Marshall's, the nation's second
largest chain in off-priced apparel. Sonic Corp. (drive-in restaurants),
Authentic Fitness Corp. (owner's of Speedo sports apparel) and Holophane Corp.
(lighting fixtures) all experienced solid price appreciation as investors
reacted to continued strong earnings gains.
Strong performers that the fund continued to hold at the end of the period
included DIMAC Corp., a direct marketer of database management services, which
saw its share price more than double during the period as it continued to grow,
and eventually agreed to be acquired by Heritage Media at a very attractive
price; North American Watch Corp., owner of the Movado, Concord and Esquire
watch brands, which appreciated on earnings gains and greater investor
awareness; and Figgie International, Inc., an industrial conglomerate, which
achieved improving earnings resulting from restructuring and the sale of its
less profitable, noncore businesses. Technology-related investments that
performed well included one of the fund's long-term holdings and currently its
largest position, Black Box Corp., a catalog marketer of data communication and
networking products, which has high profit margins, a strong balance sheet and a
reputation for quality and service, and Intersolv, Inc., a producer of software
development tools.
Recent Additions
We added a number of positions that produced good results. For example,
Amphenol Corp. (coaxial cable and connector manufacturer) rebounded on the
expectation that telecom legislation would be passed by Congress, Buckeye
Cellulose Corp. (manufacturer and marketer of specialty papers and fibers)
climbed approximately 30% as investors discovered its earnings potential, and
Trump Hotels & Casino Resorts, Inc. (hotels and casinos) appreciated
considerably when investors recognized its ability to generate strong cash
flows.
<TABLE>
<CAPTION>
Top 10 Portfolio Holdings as of January 31, 1996
Company Line of Business Percentage of
Total Net
Assets
<S> <C> <C>
Black Box Corp. Catalog Marketer of Communications and Networking Products 7.3%
North American Watch Corp. Luxury and Affordable Watches 6.6%
Landstar Systems, Inc. Trucking 5.3%
Hollinger International, Inc. Publishing/Newspapers 4.6%
Trump Hotels & Casino Resorts, Inc. Hotels and Casinos 4.4%
DIMAC Corp. Direct Marketing/ Database Management 4.1%
Quantum Restaurant Group, Inc. Restaurants 3.8%
Morningstar Group, Inc. Specialty Food Products 3.8%
The Paul Revere Corp. Insurance 3.6%
Brookstone, Inc. Specialty Retailer 3.4%
</TABLE>
Outlook
Going forward, the fund will stress investments that offer growth at a
reasonable price, emphasizing companies that possess both strong value
characteristics and the growth potential necessary for long-term success. In
general, we believe small-cap stocks are inexpensive relative to their larger
counterparts.
We appreciate your support in what has been a difficult period for the fund.
We believe that our strategic adjustments have improved the fund's ability to
uncover attractive investment opportunities and will serve it well in the
future.
/s/ Paul D. Farrell
Paul D. Farrell
Portfolio Manager
March 1, 1996
- --------------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund
January 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1996. The
performance for the Goldman Sachs Small Cap Equity Fund ("GS Small Cap")
(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 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
GS GS
Small Cap Small Cap
(w/sales charge) (no sales charge) S&P 500 Russell 2000
- --------------------------------------------------------------------------------
10/22/92(a) $ 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
- --------------------------------------------------------------------------------
1/31/96 $12,813 $13,559 $16,768 $17,010
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------
Average Annual Total Return
-----------------------------------------
One Year Since Inception /(a)/
<S> <C> <C>
- --------------------------------------------------------------------------------
GS Small Cap,excluding sales charge 7.20% 9.73%
- --------------------------------------------------------------------------------
GS Small Cap,including sales charge 1.30% 7.85%
- --------------------------------------------------------------------------------
</TABLE>
/(a)/ Commenced operations October 22, 1992.
- --------------------------------------------------------------------------------
32
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund
January 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
<S> <C> <C>
- --------------------------------------------------------------------------------
Common Stocks--97.1%
Advertising--4.1%
301,800 DIMAC Corp.* $ 8,337,225
- --------------------------------------------------------------------------------
Broadcast Media--0.1%
8,200 U.S. Satellite Broadcast* 221,400
- --------------------------------------------------------------------------------
Broadcasting--1.3%
206,800 International Family Entertainment, Class B* 2,714,250
- --------------------------------------------------------------------------------
Building Materials--2.1%
412,800 Congoleum Corp.* 4,231,200
- --------------------------------------------------------------------------------
Commercial Services--11.3%
1,284,982 Automated Security Holdings PLC ADR* 1,124,359
863,302 Black Box Corp.* 14,891,958
984,100 International Post Ltd.* 4,059,413
539,200 Opinion Research Corp.* 3,167,800
- --------------------------------------------------------------------------------
23,243,530
- --------------------------------------------------------------------------------
Communication-Equipment--1.0%
112,200 IPC Information Systems, Inc.* 2,131,800
- --------------------------------------------------------------------------------
Computer Software and Services--1.4%
279,600 Intersolv, Inc.* 2,900,850
- --------------------------------------------------------------------------------
Electrical Equipment--1.0%
66,000 UCAR International, Inc.* 2,054,250
- --------------------------------------------------------------------------------
Electronics--4.4%
271,800 Amphenol Corp.* 5,741,775
421,400 Nimbus CD International, Inc.* 3,213,175
- --------------------------------------------------------------------------------
8,954,950
- --------------------------------------------------------------------------------
Food Processing--3.8%
936,500 Morningstar Group, Inc.* 7,726,125
- --------------------------------------------------------------------------------
Food Products--0.6%
151,200 Alpine Lace Brands, Inc.* 1,200,150
- --------------------------------------------------------------------------------
Hospital Management and Services--0.3%
55,100 Sterling Healthcare Group, Inc.* 688,750
- --------------------------------------------------------------------------------
Hotels and Casinos--4.4%
414,900 Trump Hotels & Casino Resorts, Inc.* 9,024,075
- --------------------------------------------------------------------------------
Household Products--3.2%
780,900 American Safety Razor Co.* 6,540,037
- --------------------------------------------------------------------------------
Insurance--11.5%
169,900 Horace Mann Educators Co. $ 5,627,937
200,100 John Alden Financial Corp. 4,152,075
155,500 Risk Capital Holdings, Inc.* 3,168,313
325,700 The Paul Revere Corp. 7,409,675
200,200 Western National Corp. 3,278,275
- --------------------------------------------------------------------------------
23,636,275
- --------------------------------------------------------------------------------
Jewelry--6.6%
721,700 North American Watch Corp. 13,441,663
- --------------------------------------------------------------------------------
Manufacturing-Diversified Industrial--3.0%
395,600 Figgie International, Inc. Class A* 4,401,050
162,100 Figgie International, Inc. Class B* 1,823,625
- --------------------------------------------------------------------------------
6,224,675
- --------------------------------------------------------------------------------
Oil & Gas-Domestic--0.9%
216,200 Total Petroleum of North America Ltd. 1,905,263
- --------------------------------------------------------------------------------
Packaging & Container--2.1%
320,400 Shorewood Packaging Corp.* 4,245,300
- --------------------------------------------------------------------------------
Paper and Forest Products--1.4%
123,400 Buckeye Cellulose Corp.* 2,899,900
- --------------------------------------------------------------------------------
Print & Publishing--4.6%
941,800 Hollinger International, Inc. 9,418,000
- --------------------------------------------------------------------------------
Real Estate--2.5%
262,300 Insignia Financial Group, Inc.* 5,114,850
- --------------------------------------------------------------------------------
Restaurants--6.5%
250,300 IHOP Corp.* 5,444,025
646,200 Quantum Restaurant Group, Inc.* 7,835,175
- --------------------------------------------------------------------------------
13,279,200
- --------------------------------------------------------------------------------
Retail-Specialty--12.0%
1,061,500 Brookstone, Inc.* 7,032,438
357,300 Finlay Enterprises, Inc.* 3,930,300
961,700 J. Baker, Inc. 4,387,756
1,005,700 Levitz Furniture, Inc.* 4,148,513
1,233,340 Musicland Stores Corp.* 2,929,183
335,400 Supercuts, Inc.* 2,054,325
- --------------------------------------------------------------------------------
24,482,515
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund (continued)
January 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
<S> <C> <C>
- --------------------------------------------------------------------------------
Common Stocks (continued)
Savings and Loans--0.3%
26,100 GP Financial Corp. $ 673,706
- --------------------------------------------------------------------------------
Trucking--5.3%
435,300 Landstar Systems, Inc.* 10,882,500
- --------------------------------------------------------------------------------
Utilities--1.4%
186,400 Central Maine Power Co. 2,912,500
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $217,180,660) $199,084,939
================================================================================
Warrants--0.0%
Home Builders and Land Development--0.0%
58,800 Miles Homes, Inc.* $ 29,400
- --------------------------------------------------------------------------------
Total Warrants
(Cost $43,650) $ 29,400
Principal
Amount Description Value
================================================================================
Corporate Bonds--0.2%
- --------------------------------------------------------------------------------
$500,000 J. Baker, Inc.,
7.0%, 06/01/02 $ 300,000
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $498,083) $ 300,000
================================================================================
Total Investments
(Cost $217,722,393)(a) $199,414,339
================================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $ 32,280,290
Gross unrealized loss for investments in
which cost exceeds value (50,964,644)
- --------------------------------------------------------------------------------
Net unrealized loss $(18,684,354)
================================================================================
</TABLE>
*Non-income producing security.
(a)The aggregate cost for federal income tax purposes is $218,098,693.
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.
34
<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 appreciate over the long
term. The fund focuses on selecting attractively valued companies with strong,
competitive positions in industries expected to grow. The fund's portfolio
managers are based in London, Tokyo and Singapore and their knowledge of local
markets plays an important role in uncovering investment opportunities. While
the fund does not allocate assets across specific countries based on top-down
economic or market forecasts, the portfolio managers strive to manage risk by
remaining diversified by country and industry sector and by closely monitoring
economic and political events in countries in which the fund does invest.
Performance Review: Substantial Outperformance Reflects Successful Stock
Selection in All Regions
For the 12 months ended January 31, 1996, the Goldman Sachs International
Equity Fund had a total return of 28.68% based on net asset value compared with
a return of 15.37% for the fund's benchmark, the Financial Times-Actuaries
Europe & Pacific Index ("EuroPac") unhedged. EuroPac is a capitalization-
weighted composite of approximately 1,500 stocks from companies based in Europe
and the Asia-Pacific region that is calculated on a monthly basis.
The fund's substantial outperformance of the EuroPac Index during the period
was mainly due to successful stock selection.
With regard to currency, the fund's neutral position is unhedged, although
it occasionally engages in hedging strategies. From May through October, the
fund successfully hedged a portion of its yen exposure, which worked in its
favor when the yen began to depreciate against the dollar. As of January 31,
approximately 25% of the fund's yen and European currency exposure was hedged to
the U.S. dollar.
The fund did extremely well compared with its peers. Based on total return,
the fund placed in the top 2% of international equity funds (ranking fourth out
of 259) tracked by Lipper Analytical Services, Inc. for the 12-month period
ended January 31, 1996. (Please note that Lipper rankings do not take sales
charges into account and that past performance is not a guarantee of future
results.)
Portfolio Composition:
Diversification Across Countries and Industries
As of January 31, 1996, approximately 92% of the fund's net assets were
invested in common stocks and 8% in cash equivalents. The fund was widely
diversified with positions in 48 companies based in 18 countries, with its five
largest country exposures in Japan (34.4%), the U.K. (8.5%), Sweden (5.9%),
Germany (5.7%) and the Netherlands (5.6%).
. Europe. As of January 31, 43.5% of the portfolio was invested in European
stocks, nearly in line with the Index. Though slower than expected economic
growth led to somewhat disappointing corporate profits and earnings downgrades
for many companies throughout the year, most European equity markets did
reasonably well. A number of the fund's long-term European holdings were
outstanding performers. These included Fresenius (Germany), a major producer of
kidney dialysis equipment, which rose due to strong sales and profit growth
resulting from its cost cutting and expanding market share; Hoganas (Sweden), a
leading manufacturer of metal powder, which benefited from positive earnings
results and increased broker coverage; Randstad Holdings (Netherlands), a
temporary help organization, which experienced strong growth in temporary
employment volumes and earnings upgrades; and Securitas (Sweden), the largest
security services company in Europe, which was driven by good underlying growth
in the security services business. In addition, several of the fund's newer
European investments also achieved good results, such as Adidas (Germany), the
European market leader in athletic shoes and sports apparel;
- --------------------------------------------------------------------------------
35
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund (continued)
- --------------------------------------------------------------------------------
Electrocomponents (U.K.), one of the leading catalog providers of electronic
components and other equipment to businesses in the U.K. and Europe; and Bank of
Ireland, the country's largest and most profitable bank.
. Japan. As our expectations for the Japanese economy improved, we have
increased the fund's Japanese holdings from approximately 30% a year ago to
34.4% as of January 31, though still underweighted compared with the Index
(43.0%). Our holdings included a number of attractive opportunities that
performed well during the year, focusing particularly on companies actively
engaged in reducing their costs. For example, Hoya Corporation (the world's
leading manufacturer of optical glass) has restructured its business to focus on
growth areas and has moved the bulk of its manufacturing to Thailand, and
Mitsubishi Heavy Industries (the country's largest heavy machinery maker)
benefited from cost reductions and increased procurement of raw materials from
outside Japan.
The fund added several new Japanese holdings during the past 12 months,
including Kyocera, a leading global manufacturer of ceramic and electronic
components; Chiyoda, a large shoe and toy manufacturer that is in the process of
restructuring to reduce costs; and Tostem Corp., a producer of aluminum building
materials used in residential housing, which is positioned to benefit from the
revival of the Japanese housing market. During the period, the fund did not
invest in any Japanese banks because we believed that the sector was still at
risk due to its potential liabilities.
. Asia-Pacific. The fund was overweighted in Asia (outside Japan) compared
with the Index (13.7% versus 10.3%), with 4.9% of the fund invested in Hong
Kong, the region's strongest performer. In general, we focused on larger and
more liquid Asian companies, a number of which outperformed the region's
generally lackluster results (outside of Hong Kong) during much of the period.
One of the fund's most successful Asian holdings during the period was Korea
Mobile Telecommunications, the dominant provider of cellular telecommunications
and pagers in Korea, which experienced strong subscriber growth. There were a
number of Asian additions to the fund, including Hong Kong-based HSBC Holdings,
one of the largest and best capitalized banking organizations in the world, and
Bangkok Bank, generally considered to be the highest quality and leading bank in
Thailand.
<TABLE>
<CAPTION>
Top 10 Portfolio Holdings as of January 31, 1996
Company Country Line of Business Percentage of Total Net Assets
<S> <C> <C> <C>
Fresenius Germany Health Care 3.3%
Mitsubishi Heavy Industries Japan Heavy Machinery Manufacturer 3.1%
Mitsui Marine & Fire Japan Insurance 2.9%
Mitsubishi Electric CP Japan Electrical Equipment 2.8%
Hoya Corporation Japan Optical Glass Manufacturing 2.6%
Korea Mobile Telecommunications Korea Telecommunications 2.5%
Banco Popular Spain Bank 2.5%
Santen Pharmaceutical Co. Japan Ophthalmic Pharmaceuticals 2.4%
Tostem Corp. Japan Aluminum Building Materials 2.4%
Bangkok Bank Thailand Bank 2.4%
</TABLE>
Outlook
We are generally positive on the outlook for international equity markets in
1996, though our views vary by region. Europe is still struggling with below-
par economic growth, which is currently leading to earnings downgrades in many
markets. However, interest rate cuts, reasonable valuations and improving
growth for the second half of 1996 should ensure fair, though not spectacular,
returns.
In Japan, we believe the combination of a weaker yen and fiscal stimulus
will succeed in lifting economic growth and corporate earnings after two years
of disappointments. With returns on equity at historically very low levels in
Japan, and with many companies' profits being highly sensitive to even small
improvements
- --------------------------------------------------------------------------------
36
<PAGE>
- --------------------------------------------------------------------------------
in sales, we think the earnings growth outlook will be positive for the equity
market.
Asian markets closed the period with a strong December and January amid
evidence of renewed interest from U.S. and other foreign investors and improved
liquidity. Our outlook for the Asian markets is positive over the long term, as
they continue to offer attractive long-term growth potential.
In closing, we are pleased this has been a very good year for the fund and
we look forward to being a part of your investment program for many years to
come.
/s/ Roderick D. Jack
Roderick D. Jack
Portfolio Manager, London
/s/ Marcel Jongen
Marcel Jongen
Portfolio Manager, London
/s/ Shogo Maeda
Shogo Maeda
Portfolio Manager, Tokyo
/s/ Warwick M. Negus
Warwick M. Negus
Portfolio Manager, Singapore
March 1, 1996
- --------------------------------------------------------------------------------
37
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund
January 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1996. The
performance for the Goldman Sachs International Equity Fund ("GS Int'l Equity")
(assuming 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 and unhedged into U.S. dollars ("FT Euro-Pac (Combined)")/(b)/ and
the Financial Times-Actuaries World Euro-Pacific Index Unhedged ("FT Euro-Pac
(Unhedged)") (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
INT'L
GS Int'l Equity GS Int'l Equity FT Euro-Pac FT Euro-Pac
(w/sales charge) (no sales charge) (combined)(b) (unhedged)
---------------- ----------------- ------------- -----------
12/1/92 $ 9,450 $10,000 $10,000 $10,000
1/31/93 $ 9,566 $10,123 $10,063 $10,055
1/31/94 $12,066 $12,768 $13,498 $14,399
1/31/95 $10,058 $10,643 $12,119 $13,902
1/31/96 $12,942 $13,695 $13,983 $16,039
<TABLE>
<CAPTION>
------------------------------------
Average Annual Total Return
------------------------------------
One Year Since Inception /(a)/
- --------------------------------------------------------------------------------
<S> <C> <C>
GS Int'l Equity,excluding sales charge 28.68% 10.43%
- --------------------------------------------------------------------------------
GS Int'l Equity,including sales charge 21.56% 8.48%
- --------------------------------------------------------------------------------
</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, 1996.
- --------------------------------------------------------------------------------
38
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund
January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
- --------------------------------------------------------------------------------
Common Stocks--92.3%
Australian Dollar--2.2%
<C> <S> <C>
1,147,000 Boral Limited (Building Materials) $ 2,887,361
819,955 Woodside Petroleum (Oil & Gas) 4,335,801
- --------------------------------------------------------------------------------
7,223,162
- --------------------------------------------------------------------------------
Austrian Schilling--2.0%
105,400 Oester Elektrizita (Utility) 6,786,034
- --------------------------------------------------------------------------------
Belgian Franc--1.8%
20,342 Colruyt SA (Food-Retailer) 5,976,294
- --------------------------------------------------------------------------------
British Pound Sterling--8.5%
939,039 British Airport Authority
(Airport Operator) 6,868,594
1,373,378 Electrocomponents (Wholesale Trade) 7,119,067
1,455,700 Rentokil Group (Business Services) 7,655,790
537,000 Siebe (Electrical Equipment Manufacturer) 6,431,502
- --------------------------------------------------------------------------------
28,074,953
- --------------------------------------------------------------------------------
Danish Krone--1.8%
111,200 TeleDanmark AS (Telecommunications) 6,137,568
- --------------------------------------------------------------------------------
Deutschemark--5.7%
135,900 Adidas AG (Sportswear) 7,763,581
121,510 Fresenius AG (Health Care) 10,979,573
- --------------------------------------------------------------------------------
18,743,154
- --------------------------------------------------------------------------------
French Franc--3.7%
17,056 Comptoirs Modernes (Retail) 5,859,505
163,630 Seita (Tobacco) 6,294,078
- --------------------------------------------------------------------------------
12,153,583
- --------------------------------------------------------------------------------
Hong Kong Dollar--4.9%
392,000 HSBC Holdings (Commercial Bank) 6,489,227
745,000 Hutchison Whampoa (Conglomerates) 4,841,604
500,000 Sun Hung Kai Properties (Real Estate) 4,752,852
- --------------------------------------------------------------------------------
16,083,683
- --------------------------------------------------------------------------------
Common Stocks (continued)
Irish Pound--2.1%
982,014 Bank of Ireland (Commercial Bank) $ 7,056,111
- --------------------------------------------------------------------------------
Japanese Yen--34.4%
155,600 Chiyoda Co. (Retail) 3,578,349
70,000 Circle K Japan (Retail-Convenience) 3,029,821
260,000 Hoya Corp. (Optical Glass Manufacturer) 8,507,058
214,000 Inaba Denkisangyo (Industrial) 5,001,402
108,000 Kyocera Corp. (Electronics) 7,663,083
317,000 Max Co. (Office Equipment Manufacturer) 6,312,144
209,000 Mirai Industry Co. (Electrical Equipment Manufacturer) 5,119,005
1,284,000 Mitsubishi Electric CP (Electrical Equipment) 9,302,608
1,288,000 Mitsubishi Heavy Industries (Aerospace/Defense) 10,222,604
1,300,000 Mitsui Marine & Fire (Insurance) 9,576,517
371,000 Santen Pharmaceutical Co. (Pharmaceuticals) 8,011,686
49,700 Sanyo Shinpan Financial (Financial) 3,749,453
228,000 Shimachu Co. (Retail-Furniture) 7,097,691
316,000 Taikisha Ltd. (Capital Goods) 5,346,920
81,000 TDK Corp. (Electronics) 4,035,991
342,000 Terumo Corp. (Health Care) 3,325,044
243,000 Tostem Corp. (Building Materials) 7,996,261
154,800 York Benimaru Co. (Food-Retailer) 5,889,838
- --------------------------------------------------------------------------------
113,765,475
- --------------------------------------------------------------------------------
Netherlands Guilder--5.6%
121,500 Philips Electronic Companies (Electrical Equipment) 4,846,590
149,180 Randstad Holdings (Temporary Help Services) 6,845,582
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund (continued)
January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Description Value
- --------------------------------------------------------------------------------
Common Stocks (continued)
Netherlands Guilder (continued)
<C> <S> <C>
69,165 Wolters Kluwer (Publishing) $ 6,783,323
- --------------------------------------------------------------------------------
18,475,495
- --------------------------------------------------------------------------------
Singapore Dollar--1.5%
668,000 Singapore Land (Real Estate) 5,093,139
- --------------------------------------------------------------------------------
South Korean Won--2.5%
7,000 Korea Mobile Telecommunications
(Telecommunications) 8,263,610
- --------------------------------------------------------------------------------
Spanish Peseta--4.8%
45,725 Banco Popular (Commercial Bank) 8,185,362
223,535 Repsol SA (Oil & Gas-Production and Distribution) 7,771,411
- --------------------------------------------------------------------------------
15,956,773
- --------------------------------------------------------------------------------
Swedish Krona--5.9%
359,300 Ericsson Telecommunications (Communications) 7,221,322
253,440 Hoganas AG (Metals-Products) 6,420,543
135,490 Securitas (Commercial Services) 5,870,265
- --------------------------------------------------------------------------------
19,512,130
- --------------------------------------------------------------------------------
Swiss Franc--1.9%
3,831 Cie Financiere Richemont AG
(Consumer Goods-Luxury Products) 6,381,314
- --------------------------------------------------------------------------------
Thai Baht--3.0%
572,300 Bangkok Bank (Commercial Bank) 7,995,036
434,000 Electricity Generating (Utilities) 1,847,760
- --------------------------------------------------------------------------------
9,842,796
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $258,243,666) $305,525,274
- --------------------------------------------------------------------------------
Short-Term Obligation--8.6%
28,410,029 State Street Bank & Trust Euro-
Time Deposit, 5.75%, 02/01/96 $28,410,029
- --------------------------------------------------------------------------------
Total Short-Term Obligation
(Cost $28,410,029) $28,410,029
- --------------------------------------------------------------------------------
Total Investments
(Cost $286,653,695)(a) $333,935,303
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $52,228,920
Gross unrealized loss for investments in
which cost exceeds value (5,123,064)
--------------------------------------------------------------------------------
Net unrealized gain $47,105,856
- ---------------------------------------------------------------------------------
</TABLE>
(a)The aggregate cost for federal income tax purposes is $286,655,735.
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.
40
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------- -----------------------------
Common Stock Industry Concentrations
- --------------------------------------------------
Commercial Banks 9.0%
Telecommunications 4.4%
Health Care 4.3%
Electrical Equipment 4.3%
Food-Retailer 3.6%
Electronics 3.5%
Electrical Equipment Manufacturer 3.5%
Building Materials 3.3%
Aerospace/Defense 3.1%
Real Estate 3.0%
Insurance 2.9%
Retail 2.9%
Optical Glass Manufacturer 2.6%
Pharmaceuticals 2.4%
Oil & Gas-Production and Distribution 2.3%
Sportswear 2.3%
Business Services 2.3%
Communications 2.2%
Wholesale Trade 2.2%
Retail-Furniture 2.1%
Airport Operator 2.1%
Temporary Help Services 2.1%
Utility 2.0%
Publishing 2.0%
Metal Products 1.9%
Consumer Goods-Luxury Products 1.9%
Office Equipment Manufacturer 1.9%
Tobacco 1.9%
Commercial Services 1.8%
Capital Goods 1.6%
Industrial 1.5%
Conglomerates 1.5%
Oil & Gas 1.3%
Financial 1.1%
Retail-Convenience 0.9%
Utilities 0.6%
- --------------------------------------------------
Total Common Stocks 92.3%
==================================================
- ----------------------------------- ---------------------------------------
The accompanying notes are an intergral part of these financial statements.
41
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund
- ----------------------------------- -------------------------------------------
Objective and Investment Approach
The Goldman Sachs Asia Growth Fund seeks long-term capital appreciation by
investing in a limited number of carefully selected companies located in 12
Asian markets, including China, Hong Kong, India, Indonesia, Malaysia, Pakistan,
the Philippines, Singapore, South Korea, Sri Lanka, Taiwan and Thailand.
We utilize extensive fundamental research in our search for well-managed
companies whose stock prices are, in our opinion, undervalued in the
marketplace. Because many companies in the Asian region are growing at
relatively rapid rates, we consider a company's return on capital, its price-to-
book value and the predictability of its earnings stream as among the best
measures of its intrinsic value. A strong market position and a skilled
management team dedicated to maximizing shareholder returns are also important
to us. Our investment process includes face-to-face meetings with senior
management as well as frequent contact with a company's customers, suppliers and
competitors.
While our primary focus is on stock selection, we seek to carefully manage
risk by diversifying the fund's portfolio in terms of countries, industry
sectors and size of capitalization. We are also mindful of making certain the
market for a particular stock is relatively liquid, so we can easily sell a
position if our opinion changes. From time to time, we may choose to
significantly overweight or underweight our holdings in a country compared with
our benchmark, if we believe there is a compelling reason to do so. Finally, we
closely monitor the potential impact of political and economic events in the
region on particular companies and adjust the portfolio accordingly.
Market Overview:
A Year of Volatility and a Strong Finish
Asian stock markets experienced high volatility and generally low volumes
for most of the period under review, despite relatively stable economic
fundamentals for most of the region. Corporate earnings, while respectable, were
lower than expected for a number of companies and operating margins were under
pressure. The period was marked by several powerful stock market rallies during
February and May, followed by weakness during much of the second half of 1995 as
the strengthening U.S. dollar drained liquidity from Asian markets. Economic
growth accelerated during the third quarter of the year, an outcome not widely
anticipated, and consequently, interest rates in some Asian countries increased.
During most of the period under review, Hong Kong provided the region's
strongest and most consistent returns, up over 20%.
During the first half of the reporting period, regional political turmoil
in India, a change of government in Thailand, an accelerating current account
deficit in Malaysia and a series of natural disasters in the Philippines took a
toll in their respective markets. In general, the region was considerably more
stable during the second half.
For much of the period under review, Asian markets experienced low volumes
due to muted investor interest resulting from the powerful performance of the
U.S. equity market and solid returns in parts of Europe, which kept many foreign
investors focused closer to home. Another contributing factor: investors were
concerned that the devaluation of the Mexican peso might have a spillover effect
on other emerging markets. The tide turned for Asian markets in late November,
when the flow of foreign investments began to gradually increase in anticipation
that the U.S. Federal Reserve would cut interest rates in December. The period
ended on a much more positive note when renewed interest and significantly
higher volumes from foreign investors contributed to a rally in December and
January.
Performance Review: Successful Stock Selection and Country Weightings Prevailed
During the 12-month period ended January 31, 1996, the Goldman Sachs Asia
Growth Fund earned a total return of 26.49% based on net asset value compared
with a total return of 22.65% for its benchmark, the Morgan Stanley Capital
International Combined Asia (ex Japan) Index.
42
<PAGE>
The fund outperformed the benchmark due to several factors.
. Successful stock selection was the primary reason for outperformance. A
number of the portfolio's holdings in a variety of countries did very well
during the period, with some doing considerably better than their markets. For
example, Mulia Industrindo (Indonesia) appreciated significantly, benefiting
from its expanded capacity and its position as one of the lowest cost providers
to the construction industry. In addition, Korea Mobile Telecommunications, the
sole provider of cellular services and a major force in the Korean paging
market, increased substantially despite the fact that the Korean stock market
was down by approximately 20%. The story was similar in India, the region's
worst performing market in 1995 (down 23%), where several of the fund's holdings
prospered. These included Tata Engineering & Locomotive, a manufacturer of
commercial vehicles, which enjoyed continued earnings growth in the rapidly
expanding Indian auto market, and Larsen & Toubro Ltd., an engineering company.
Industrial Finance Corporation (Thailand), established over 30 years ago by the
Thai government to promote and develop private business in the country, has
developed into a major finance company specializing in providing financing for
emerging companies.
. During most of the period, the portfolio was overweighted in Hong Kong
compared with the Index, as we correctly anticipated the market was cheap and
would rebound. A number of the fund's investments outperformed the strong Hong
Kong market. They included HSBC Holdings (Hong Kong), one of the top 15 banks in
the world in terms of assets, which saw its earnings and loan volumes grow as
loan quality also improved; Sun Hung Kai Properties (Hong Kong), a property
company that benefited as property prices stabilized and as substantial hidden
value in its additional large tract of farmland emerged that was previously
undisclosed; and Hutchison Whampoa (Hong Kong), a conglomerate, which enjoyed
excellent performance due to its successful property launches and involvement in
other new major development projects, its continued strength in port and port-
related services, as well as better than expected growth of its Orange Telecom
Network U.K. subsidiary.
. Finally, the fund's low cash position (1%) in October enabled it to fully
participate in the year-end rally in Asian markets, with positive returns
realized in December 1995 and January 1996.
There were some disappointments as well. We sold Rashid Hussain Berhad, a
Malaysian securities company, which failed to meet our expectations in the
declining Malaysian market, and Kim Hin Industry (Malaysia), a leading producer
of floor and tile products in Malaysia, which saw its profits decline due to an
overly ambitious expansion plan and a price war resulting from increased
competition. We also liquidated the fund's position in Astra International
(Indonesia), which sells Japanese cars in Indonesia, when the company suffered
from the appreciation of the Japanese yen relative to the Indonesian rupiah.
Portfolio Composition
As of January 31, 1996, 96.4% of the fund's net assets were invested in
equity positions and the remainder was in cash equivalents. By country, the
fund's five heaviest concentrations were in Hong Kong (34.0%), Indonesia
(12.0%), Thailand (11.7%), Malaysia (11.0%) and Singapore (10.0%). As of January
31, the portfolio's weightings were in line with the Index in Hong Kong,
overweighted in Indonesia and the Philippines, and underweighted in Singapore,
Malaysia and Thailand.
New Holdings Added During the Period
During the second half of the portfolio's fiscal year, we added several new
positions, including HKR International, Ltd., a small property company with
sites in Discovery Bay on Lantau Island (a self-contained community of 10,000
residents catering to a "quality lifestyle"), and ACP Industries, a Malaysian
infrastructure company.
43
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
- ---------------------------------- ---------------------------------------------
<TABLE>
<CAPTION>
Percentage
Top 10 Portfolio Holdings as of January 31, 1996 of Total
Company Country Line of Business Net Assets
<S> <C> <C> <C>
Sun Hung Kai Properties Hong Kong Property 5.6%
Mulia Industrindo Indonesia Manufacturing 4.6%
Swire Pacific Hong Kong Conglomerate 4.6%
Industrial Finance Corporation Thailand Banking and Finance 4.6%
Hutchison Whampoa Hong Kong Conglomerate 4.5%
HSBC Holdings Hong Kong Banking and Finance 4.3%
JCG Holdings Hong Kong Banking and Finance 3.8%
HKR International, Ltd. Hong Kong Property 3.6%
Metropolitan Bank & Trust Philippines Banking and Finance 3.3%
Straits Steamship Land Singapore Property 3.0%
</TABLE>
Stocks Sold on Strength
We sold several stocks that had reached our target prices, including a good
portion of our holdings in Consolidated Electric Power of Asia (Hong Kong),
which builds and operates power stations, based on our evaluation that further
appreciation was unlikely for several years. We also sold Indostat, the major
domestic telephone service provider in Indonesia, at a profit in advance of the
company's privatization in late 1995.
Investment Outlook: Optimistic for 1996
We are optimistic about the region's prospects for 1996 due to a number of
factors, including our expectation that the year will bring relative economic
prosperity and the fact that valuations in Asia are low after nearly two years
of consolidations. Therefore, we have kept the fund's cash weighting low, opting
to remain nearly fully invested. In the coming months, we will be looking for
opportunities to increase the portfolio's exposure in some of the smaller Asian
markets, including Thailand, Indonesia, the Philippines and Malaysia. In
addition, we expect the Korean market to begin to benefit from extensive capital
spending programs undertaken in 1994. During the first half of 1996, India and
Taiwan will be holding major elections, and we will be particularly vigilant in
monitoring political developments as they unfold. In general, however, we are
currently quite positive on India, where valuations are cheap and where we
anticipate a more stable and accommodating business environment during the
second half of the year. Finally, we still see growth potential in Hong Kong,
which should be a major beneficiary once China eases its austerity program in
1996. In terms of stock selection, we will continue to focus on undervalued
companies with above-average long-term growth potential.
We appreciate your support, particularly during this volatile year. We
remain convinced that over the long term, Asian markets offer attractive growth
potential for investors prepared to stay the course.
/s/ Warwick M. Negus
Warwick M. Negus
Portfolio Manager, Singapore
March 1, 1996
44
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund
January 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended January 31, 1996. The
performance for the Goldman Sachs Asia Growth Fund ("GS Asia") (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
conditions so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
HYPOTHETICAL $10,000 INVESTMENT
GS Asia GS Asia MSCI Combined
(w/sales charge) (no sales charge) Asia-ex Japan
---------------- ----------------- --------------
7/8/94(a) $ 9,450 $10,000 $10,000
1/31/95 $ 8,934 $ 9,454 $ 9,074
1/31/96 $11,300 $11,958 $11,129
<TABLE>
<CAPTION>
-------------------------------
Average Annual Total Return
-------------------------------
One Year Since Inception (a)
- ---------------------------------------------------------------
<S> <C> <C>
GS Asia,
excluding sales charge 26.49% 12.09%
- ---------------------------------------------------------------
GS Asia,
including sales charge 19.58% 8.11%
- ---------------------------------------------------------------
</TABLE>
(a) Commenced operations July 8, 1994.
- --------------------------------------------------------------------------------
45
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
Common Stocks--95.1%
Hong Kong Dollar--33.9%
<S> <C> <C>
441,000 Dao Heng Bank
(Banking) $ 1,904,943
6,584,400 HKR International Ltd.
(Real Estate) 7,323,380
1,624,000 Hong Kong Electric
(Utility) 5,513,308
1,253,824 Hong Kong Land Holdings
(Real Estate) 2,846,180
3,117,000 Hopewell Holdings
(Construction) 2,096,221
537,000 HSBC Holdings
(Commercial Bank) 8,889,579
1,431,000 Hutchison Whampoa
(Conglomerate) 9,299,779
8,265,666 JCG Holdings Ltd.
(Financial Services) 7,857,097
6,169,400 San Miguel Brewery Ltd.
(Breweries) 2,972,118
1,217,000 Sun Hung Kai Properties
(Real Estate) 11,568,441
1,089,000 Swire Pacific
(Conglomerate) 9,506,673
- -------------------------------------------------------------
69,777,719
- -------------------------------------------------------------
Indian Rupee--6.6%
43,750 Hindustan Lever
(Consumer Goods) 770,893
225,400 Larsen & Toubro Ltd. GDR
(Construction) 3,797,990
188,750 Mahindra & Mahindra GDR
(Automotive Products) 1,426,950
116,600 Ranbaxy Laboratories Ltd. GDS
(Pharmaceuticals) 2,769,250
374,400 Tata Engineering & Locomotive
Company Ltd. GDR
(Autos and Trucks) 4,801,680
- -------------------------------------------------------------
13,566,763
- -------------------------------------------------------------
Common Stocks (continued)
Indonesian Rupiah--12.0%
1,617,500 Bank Bali
(Commercial Bank) $ 4,093,150
1,183,625 Indofoods Sukses Makmur
(Food Processing) 6,196,989
948,500 Jaya Real Property (Real Estate) 2,803,703
6,023,371 Mulia Industrindo
(Manufacturing-Diversified
Industrial) 9,460,792
70,000 Perusahaan Persero PT Telekom
ADR (Telecommunications) 2,152,500
- -------------------------------------------------------------
24,707,134
- -------------------------------------------------------------
Malaysian Ringgit--11.0%
759,000 ACP Industries
(Construction) 3,052,954
1,041,000 Commerce Asset Holdings
(Financial Services) 5,569,454
1,617,000 Leader Universal Holdings
(Construction) 3,757,234
1,312,000 Road Builder Berhad
(Construction) 4,867,419
994,000 UTD Engineers Berhad
(Construction) 5,270,356
- -------------------------------------------------------------
22,517,417
- -------------------------------------------------------------
Philippine Peso--5.1%
326,764 Metropolitan Bank & Trust
(Commercial Bank) 6,801,863
172,000 Philippines Commercial
International Bank
(Commercial Bank) 1,757,314
450,000 Pilippino Telephone
(Telecommunications) 515,622
369,000 San Miguel Corp.
(Food and Beverages) 1,395,272
- -------------------------------------------------------------
10,470,071
- -------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value
- -------------------------------------------------------------
Common Stocks (continued)
Singapore Dollar--10.0%
732,100 Far East Levingston Shipbuilding
(Marine) $ 3,945,449
823,500 Overseas Union Bank Ltd.
(Financial Services) 6,381,472
532,000 Singapore Land (Real Estate) 4,047,622
1,745,000 Straits Steamship Land
(Real Estate) 6,207,996
- -------------------------------------------------------------
20,582,539
- -------------------------------------------------------------
South Korean Won--4.8%
146,000 Korea Electric Power Corp. ADR
(Utility) 3,686,500
5,320 Korea Mobile Telecommunications
Corp. (Telecommunications) 6,280,344
- -------------------------------------------------------------
9,966,844
- -------------------------------------------------------------
Thai Baht--11.7%
830,000 Bangkok Metropolitan Bank PLC
(Commercial Bank) 990,825
3,802,300 Bangkok Metropolitan Bank PLC
(Commercial Bank) 4,501,539
366,434 Industrial Finance Corp.
(Financial Services) 2,480,684
1,818,566 Industrial Finance Corp.
(Financial Services) 7,033,128
360,800 Kiatnakin Finance & Securities
(Financial Services) 1,288,571
424,000 National Finance & Securities
(Financial Services) 2,978,374
3,067,000 Siam Panich Leasing
(Financial Services) 4,780,841
- -------------------------------------------------------------
24,053,962
- -------------------------------------------------------------
Total Common Stocks
(Cost $169,147,199) $195,642,449
=============================================================
Preferred Stocks--1.0%
Philippine Peso--1.0%
56,600 Philippine Long Distance Telephone
Convertible Preferred, 5.75%
(Telecommunications) $ 2,009,300
- -------------------------------------------------------------
Total Preferred Stocks
(Cost $2,413,594) $ 2,009,300
=============================================================
Warrants--0.3%
107,000 Tata Engineering & Locomotive
Company GDR, (Autos and Trucks) $ 428,000
353,750 Straits Steamship Land
(Real Estate) 199,366
- -------------------------------------------------------------
Total Warrants
(Cost $552,814) $ 627,366
=============================================================
<CAPTION>
Principal
Amount Description Value
- -------------------------------------------------------------
<S> <C> <C>
Corporate Bonds--0.6%
$697,000 Kiatnakin Finance & Securities
Convertible, 4.00%, 11/30/03 $ 561,085
1,012,000 UTD Engineers Berhad Convertible,
4.00%, 05/22/99 573,046
- -------------------------------------------------------------
Total Corporate Bonds
(Cost $1,129,751) $ 1,134,131
=============================================================
Short-Term Obligation--7.1%
$14,591,112 State Street Bank & Trust Euro-
Time Deposit, 5.75%, 02/01/96 $ 14,591,112
- -------------------------------------------------------------
Total Short-Term Obligation
(Cost $14,591,112) $ 14,591,112
=============================================================
Total Investments
(Cost $187,834,470)(a) $214,004,358
=============================================================
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $31,429,020
Gross unrealized loss for investments in
which cost exceeds value (5,694,618)
=============================================================
Net unrealized gain $ 25,734,402
=============================================================
</TABLE>
(a) The aggregate cost for federal income tax purposes is $187,858,691.
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.
47
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
January 31, 1996
- --------------------------------------------------------------------------------
Common and Preferred Stock Industry Concentrations
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Financial Services 18.6%
Real Estate 16.9%
Construction 15.7%
Commercial Banks 13.2%
Telecommunications 5.3%
Manufacturing-Diversified Industrial 4.6%
Conglomerates 4.5%
Utility 4.5%
Food Processing 3.0%
Autos and Trucks 2.3%
Marine 1.9%
Breweries 1.5%
Pharmaceuticals 1.4%
Banking 0.9%
Automotive Products 0.7%
Food and Beverages 0.7%
Consumer Goods 0.4%
- --------------------------------------------------------------------------------
Total Common and Preferred Stocks 96.1%
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
- --------------------------------------------------------------------------------
[This Page Intentionally Left Blank]
- --------------------------------------------------------------------------------
49
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund Fund
=================================================
<S> <C> <C>
Assets:
Investments in securities, at value (identified cost $50,883,173,
$150,717,655, $377,882,134, $761,757,992, $217,722,393,
$286,653,695 and $187,834,470, respectively) $54,395,985 $192,417,457
Cash 155,627 60,282
Receivables:
Investment securities sold 4,098,640 --
Forward foreign currency exchange contracts -- --
Fund shares sold 396,592 1,841,527
Dividends and interest 322,781 236,279
Deferred organization expenses, net 49,641 9,549
Other assets 26,017 64,472
- --------------------------------------------------------------------------------------------------------------------------
Total assets 59,445,283 194,629,566
- --------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased 8,378,513 --
Due to bank -- --
Forward foreign currency exchange contracts -- --
Fund shares repurchased 20,396 492,617
Investment advisory fees 20,749 61,772
Administration fees 6,225 23,203
Distribution fees -- 25,458
Authorized dealer service fees 9,534 25,458
Transfer agent fees 25,883 56,565
Accrued expenses and other liabilities 55,976 70,724
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 8,517,276 755,088
- --------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid-in capital 46,460,904 150,294,287
Accumulated undistributed (distributions in excess of) net investment income 125,304 86,854
Accumulated undistributed (distributions in excess of) net realized gain
(loss) on investment, option and futures transactions 753,268 1,768,910
Accumulated net realized foreign currency gain (loss) -- --
Net unrealized gain (loss) on investments, options and futures 3,588,531 41,724,427
Net unrealized loss on translation of assets and liabilities denominated in
foreign currencies -- --
- --------------------------------------------------------------------------------------------------------------------------
Net assets $50,928,007 $193,874,478
==========================================================================================================================
<CAPTION>
Class A Institutional/(a)/
----------- -------------
<S> <C> <C> <C>
Total shares of beneficial interest outstanding, $.001 par value
(100,000,000 shares authorized) 2,942,730 6,564,725 3,288,416
Net asset value and redemption price per share (net assets/shares
outstanding) $17.31 $19.66 $19.71
==========================================================================================================================
Maximum public offering price per share (NAV x 1.0582) $18.32 $20.80 $19.71/(b)/
==========================================================================================================================
</TABLE>
/(a)/The Goldman Sachs Select Equity Fund Institutional share class has
authorized shares of 50,000,000.
/(b)/The Goldman Sachs Select Equity Fund's Institutional shares maximum public
offering price per share is equivalent to the net asset value per share.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
January 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth & Income Capital Growth Small Cap Equity International Equity Asia Growth
Fund Fund Fund Fund Fund
==================================================================================================
<S> <C> <C> <C> <C>
$435,648,574 $869,083,397 $199,414,339 $333,935,303 $214,004,358
82,485 27,024 -- 182,861 11,863
955,652 23,702,991 12,808,125 -- --
-- -- -- 1,919,496 36,208
1,386,015 1,232,985 332,693 2,051,144 2,570,690
402,372 1,100,563 80,241 183,905 99,941
38,485 -- 32,209 32,176 108,824
6,084 17,997 28,808 7,070 4,867
-------------------------------------------------------------------------------------------------
438,519,667 895,164,957 212,696,415 338,311,955 216,836,751
-------------------------------------------------------------------------------------------------
697,884 11,743,752 4,693,500 5,414,722 10,296,828
-- -- 1,563,117 -- --
-- -- -- 1,107,534 --
536,701 1,146,702 925,354 227,748 134,631
195,665 550,420 141,082 200,976 118,365
53,364 183,473 47,026 66,992 39,455
-- -- -- -- --
82,015 183,473 47,026 66,992 39,455
170,213 219,769 137,292 98,941 70,593
27,253 81,304 148,045 268,229 598,715
- -------------------------------------------------------------------------------------------------
1,763,095 14,108,893 7,702,442 7,452,134 11,298,042
- -------------------------------------------------------------------------------------------------
372,028,608 720,502,376 232,791,537 291,784,579 189,238,989
56,087 607,360 -- 227,683 (1,630,536)
6,905,437 52,620,923 (9,489,510) (7,972,571) (8,214,084)
-- -- -- (1,270,483) 348,762
57,766,440 107,325,405 (18,308,054) 52,254,492 27,191,260
-- -- -- (4,163,879) (1,395,682)
- -------------------------------------------------------------------------------------------------
$436,756,572 $881,056,064 $204,993,973 $330,859,821 $205,538,709
=================================================================================================
21,855,325 59,109,753 11,854,872 19,241,121 12,467,716
$19.98 $14.91 $17.29 $17.20 $16.49
=================================================================================================
$21.14 $15.78 $18.30 $18.20 $17.45
=================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
51
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund Fund
================================
<S> <C> <C>
Investment income:
Dividends, net/(a)/ $ 404,637 $ 2,755,279
Interest 975,995 288,579
- --------------------------------------------------------------------------------------------------------------------------------
Total income 1,380,632 3,043,858
- --------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees/(b)/ 148,493 679,759
Administration fees/(b)/ 44,548 339,880
Distribution fees/(c)/ 84,350 349,883
Authorized dealer service fees 64,145 182,881
Custodian fees 67,250 54,871
Transfer agent fees/(d)/ 72,067 115,253
Professional fees 58,620 58,601
Amortization of deferred organization expenses 13,431 30,846
Director fees 382 7,042
Other 10,353 105,063
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses 563,639 1,924,079
Less--expenses reimbursable and fees waived by Goldman Sachs (266,652) (398,381)
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses 296,987 1,525,698
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1,083,645 1,518,160
- --------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment, option, futures and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions 1,697,147 4,964,974
Options transactions -- --
Futures transactions 18,740 (277,031)
Foreign currency related transactions -- --
Net change in unrealized gain (loss) on:
Investments 3,442,701 37,043,884
Options -- --
Futures 75,719 24,625
Translation of assets and liabilities denominated in foreign currencies -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investment, option, futures and foreign currency
transactions 5,234,307 41,756,452
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $6,317,952 $43,274,612
================================================================================================================================
</TABLE>
/(a)/For the Balanced, Select Equity, Growth and Income, Capital Growth, Small
Cap Equity, International Equity and Asia Growth Funds, foreign taxes
withheld were $800, $38,480, $12,059, $14,511, $17,604, $521,564 and
$174,079, respectively.
/(b)/For the Select Equity Fund, the Advisor and Administrator both waived fees
of $101,038, respectively.
/(c)/For the year ended January 31, 1996, the distributor waived fees of
$74,247, $85,724, $794,841, $2,333,936, $727,210, $698,718 and $390,910 for
the Balanced, Select Equity, Growth and Income, Capital Growth, Small Cap
Equity, International Equity and Asia Growth Funds, respectively.
/(d)/For the Select Equity Fund, Class A shares and Institutional shares
incurred $103,682 and $11,571, respectively, of Transfer Agency fees.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth & Income Capital Growth Small Cap Equity International Equity Asia Growth
Fund Fund Fund Fund Fund
=======================================================================================================
<S> <C> <C> <C> <C>
$ 7,890,451 $ 13,689,007 $ 958,805 $ 4,473,190 $ 3,748,089
1,227,990 5,032,176 1,428,163 491,270 665,670
- -------------------------------------------------------------------------------------------------------
9,118,441 18,721,183 2,386,968 4,964,460 4,413,759
- -------------------------------------------------------------------------------------------------------
1,748,649 7,001,809 2,181,629 2,096,154 1,172,731
476,904 2,333,936 727,210 698,718 390,910
986,255 3,104,424 999,563 929,746 505,066
603,426 1,563,448 454,857 470,027 276,754
61,543 124,521 47,141 463,834 353,745
524,671 549,844 254,292 129,313 192,097
48,019 93,674 57,827 80,117 83,293
19,112 13,155 18,690 17,555 31,625
6,066 32,591 3,149 2,739 2,857
130,712 205,183 87,579 49,606 152,109
- -------------------------------------------------------------------------------------------------------
4,605,357 15,022,585 4,831,937 4,937,809 3,161,187
(794,841) (2,333,936) (727,210) (698,718) (390,910)
- -------------------------------------------------------------------------------------------------------
3,810,516 12,688,649 4,104,727 4,239,091 2,770,277
- -------------------------------------------------------------------------------------------------------
5,307,925 6,032,534 (1,717,759) 725,369 1,643,482
- -------------------------------------------------------------------------------------------------------
18,738,323 188,770,202 (5,099,047) (417,744) (5,262,344)
76,997 20,437 65,448 (8,340,192) (225,907)
-- -- -- -- (278,144)
-- -- -- 21,213,851 416,433
58,158,436 53,559,848 30,594,034 62,221,183 42,480,420
(76,997) -- -- 7,613,807 --
-- -- -- -- --
-- -- -- (12,612,130) (1,710,833)
- -------------------------------------------------------------------------------------------------------
76,896,759 242,350,487 25,560,435 69,678,775 35,419,625
- -------------------------------------------------------------------------------------------------------
$82,204,684 $248,383,021 $23,842,676 $70,404,144 $37,063,107
=======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
53
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund Fund
==========================================
<S> <C> <C>
From operations:
Net investment income (loss) $ 1,083,645 $ 1,518,160
Net realized gain (loss) on investment, option and futures transactions 1,715,887 4,687,943
Net realized gain on foreign currency related transactions -- --
Net change in unrealized gain on investments, options and futures 3,518,420 37,068,509
Net change in unrealized loss on translation of assets and liabilities
denominated in foreign currencies -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 6,317,952 43,274,612
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (991,655) (1,610,216)
In excess of net investment income -- --
From net realized gain on investment, option and futures transactions (962,754) (3,527,188)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1,954,409) (5,137,404)
- ------------------------------------------------------------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 41,736,040 102,149,318
Reinvestment of dividends and distributions 1,802,563 4,880,575
Cost of shares repurchased (4,483,707) (46,260,132)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from share transactions 39,054,896 60,769,761
- ------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) 43,418,439 98,906,969
Net assets:
Beginning of year 7,509,568 94,967,509
==============================================================================================================================
End of year $50,928,007 $193,874,478
==============================================================================================================================
Accumulated undistributed (distributions in excess of) net investment income $ 125,304 $ 86,854
==============================================================================================================================
Summary of share transactions:
<CAPTION>
Class A Institutional
----------- -------------
<S> <C> <C> <C>
Shares sold 2,578,356 2,479,285 3,220,915
Reinvestment of dividends and distributions 108,023 161,481 97,993
Shares repurchased (271,753) (2,578,247) (30,492)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 2,414,626 62,519 3,288,416
==============================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth & Income Capital Growth Small Cap Equity International Equity Asia Growth
Fund Fund Fund Fund Fund
=======================================================================================================
<S> <C> <C> <C> <C>
$ 5,307,925 $ 6,032,534 $ (1,717,759) $ 725,369 $ 1,643,482
18,815,320 188,790,639 (5,033,599) (8,757,936) (5,766,395)
-- -- -- 21,213,851 416,433
58,081,439 53,559,848 30,594,034 69,834,990 42,480,420
-- -- -- (12,612,130) (1,710,833)
- -------------------------------------------------------------------------------------------------------
82,204,684 248,383,021 23,842,676 70,404,144 37,063,107
- -------------------------------------------------------------------------------------------------------
(5,300,032) (6,289,354) -- (9,491,864) (1,787,451)
-- -- -- -- (1,657,672)
(11,998,907) (139,713,660) (161,357) (14,089,155) --
- -------------------------------------------------------------------------------------------------------
(17,298,939) (146,003,014) (161,357) (23,581,019) (3,445,123)
- -------------------------------------------------------------------------------------------------------
199,623,973 144,529,476 56,891,181 85,900,104 88,560,430
16,219,024 131,979,456 149,801 21,651,092 2,951,847
(37,764,413) (359,937,680) (195,215,538) (98,600,969) (43,889,831)
- -------------------------------------------------------------------------------------------------------
178,078,584 (83,428,748) (138,174,556) 8,950,227 47,622,446
- -------------------------------------------------------------------------------------------------------
242,984,329 18,951,259 (114,493,237) 55,773,352 81,240,430
193,772,243 862,104,805 319,487,210 275,086,469 124,298,279
=======================================================================================================
$436,756,572 $881,056,064 $204,993,973 $330,859,821 $205,538,709
=======================================================================================================
$ 56,087 $ 607,360 $ -- $ 227,683 $ (1,630,536)
=======================================================================================================
10,766,604 9,130,715 3,285,739 5,082,572 5,830,049
848,870 9,145,811 8,585 1,286,112 197,978
(2,027,335) (22,215,374) (11,228,873) (6,067,690) (2,898,305)
- -------------------------------------------------------------------------------------------------------
9,588,139 (3,938,848) (7,934,549) 300,994 3,129,722
=======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
55
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended January 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund/(a)/ Fund (Class A)
=================================
<S> <C> <C>
From operations:
Net investment income (loss) $ 46,198 $ 1,229,019
Net realized gain (loss) on investment, option and futures transactions 135 3,907,236
Net realized loss on foreign currency related transactions -- --
Net change in unrealized gain (loss) on investments, options and futures 70,111 (6,127,762)
Net change in unrealized gain on translation of assets and liabilities
denominated in foreign currencies -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 116,444 (991,507)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income (31,952) (1,194,733)
In excess of net investment income -- --
From net realized gain on investment, option and futures transactions -- (5,666,531)
In excess of net realized gains -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (31,952) (6,861,264)
- ---------------------------------------------------------------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 7,557,294 22,943,423
Reinvestment of dividends and distributions 29,834 6,328,837
Cost of shares repurchased (162,052) (19,220,744)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from share transactions 7,425,076 10,051,516
- ---------------------------------------------------------------------------------------------------------------------------------
Additional paid-in-capital -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total increase 7,509,568 2,198,745
Net assets:
Beginning of year -- 92,768,764
- ---------------------------------------------------------------------------------------------------------------------------------
End of year $7,509,568 $ 94,967,509
=================================================================================================================================
Accumulated undistributed (distributions in excess of) net investment income $ 20,283 $ 148,064
=================================================================================================================================
Summary of share transactions:
Shares sold 537,644 1,499,807
Reinvestment of dividends and distributions 2,141 430,647
Shares repurchased (11,681) (1,250,288)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in shares outstanding 528,104 680,166
=================================================================================================================================
</TABLE>
/(a)/For the period from October 12, 1994 (commencement of operations) to
January 31, 1995.
/(b)/For the period from July 8, 1994 (commencement of operations) to
January 31, 1995.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth & Income Capital Growth Small Cap Equity International Equity Asia Growth
Fund Fund Fund Fund Fund/(b)/
=======================================================================================================
<S> <C> <C> <C> <C>
$ 1,435,147 $ 1,436,995 $ (1,802,810) $ 1,275,871 $ 1,009,860
3,170,626 56,963,691 10,050,260 (787,439) (2,447,689)
-- -- -- (15,347,388) (72,160)
(2,594,309) (98,546,227) (74,013,642) (56,248,493) (15,289,160)
-- -- -- 15,093,970 315,151
- -------------------------------------------------------------------------------------------------------
2,011,464 (40,145,541) (65,766,192) (56,013,479) (16,483,998)
- -------------------------------------------------------------------------------------------------------
(1,435,147) (647,525) -- -- (883,487)
(750,732) -- -- -- --
(3,710,152) (94,255,733) (13,272,809) (11,299,568) --
-- -- (4,550,015) -- --
- -------------------------------------------------------------------------------------------------------
(5,896,031) (94,903,258) (17,822,824) (11,299,568) (883,487)
- -------------------------------------------------------------------------------------------------------
179,853,719 220,153,475 198,396,818 145,195,062 148,278,779
5,475,966 85,073,760 16,371,394 9,972,049 793,314
(29,980,986) (141,755,523) (72,766,153) (81,858,604) (7,406,329)
- -------------------------------------------------------------------------------------------------------
155,348,699 163,471,712 142,002,059 73,308,507 141,665,764
- -------------------------------------------------------------------------------------------------------
779,879 -- -- -- --
- -------------------------------------------------------------------------------------------------------
152,244,011 28,422,913 58,413,043 5,995,460 124,298,279
41,528,232 833,681,892 261,074,167 269,091,009 --
- -------------------------------------------------------------------------------------------------------
$193,772,243 $862,104,805 $319,487,210 $275,086,469 $124,298,279
=======================================================================================================
$ 29,482 $ 851,025 -- $ (423,846) $ 143,969
=======================================================================================================
11,178,610 14,260,854 10,110,654 8,468,691 9,803,931
355,278 5,913,973 971,295 655,625 52,995
(1,896,509) (9,348,284) (3,925,959) (5,047,356) (518,932)
- -------------------------------------------------------------------------------------------------------
9,637,379 10,826,543 7,155,990 4,076,960 9,337,994
=======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
57
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements
January 31, 1996
- --------------------------------------------------------------------------------
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,
diversified management investment company. Included in this report are the
financial statements for the Goldman Sachs Balanced Fund ("Balanced Fund"),
Goldman Sachs Select Equity Fund ("Select Equity Fund"), Goldman Sachs Growth
and Income Fund ("Growth and Income Fund"), Goldman Sachs Capital Growth Fund
("Capital Growth Fund"), Goldman Sachs Small Cap Equity Fund ("Small Cap Equity
Fund"), Goldman Sachs International Equity Fund ("International Equity Fund")
and Goldman Sachs Asia Growth Fund ("Asia Growth Fund"), collectively, "the
Funds." As of January 31, 1996, the Select Equity Fund offers two classes of
shares - Class A and Institutional shares.
2. Significant Accounting Policies
The following is a summary of the significant accounting policies consistently
followed by the Company which are in conformity with those generally accepted in
the investment company industry.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts.
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 of the stock received. Interest income is
determined on the basis of interest accrued, premium amortized and discount
earned. The Balanced Fund does not amortize premiums. In addition, net
realized capital gains on securities in certain countries gives rise to capital
gains taxes. It is the Funds' policy to accrue for estimated capital gains taxes
on certain foreign securities held by the Funds.
C. Mortgage Dollar Rolls
- -------------------------
The Balanced Fund may enter into mortgage "dollar rolls" in which the Fund sells
securities in the current month for delivery and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon and maturity) but
not identical securities on a specified future date. The Fund loses the right
to receive principal and interest paid on the securities sold. However, the
Fund benefits to the extent of any price received for the securities sold and
the lower forward price for the future purchase (often referred to as the
"drop") or fee income plus the interest earned on the cash proceeds of the
securities sold until the settlement date of the forward purchase. The Fund
will hold and maintain in a segregated account, until the settlement date, cash
or liquid, high grade debt securities in an amount equal to
- --------------------------------------------------------------------------------
58
<PAGE>
- --------------------------------------------------------------------------------
the forward purchase price. For financial reporting and tax reporting purposes,
the Fund treats mortgage dollar rolls as two separate transactions; one
involving the purchase of a security and a separate transaction involving a
sale.
D. Foreign Currency Translations
- ---------------------------------
The books and records of the Company are maintained in U.S. dollars. Amounts
denominated in foreign currencies are translated into U.S. dollars on the
following basis:
(i) investment valuations, other assets and liabilities initially expressed in
foreign currencies are converted each business day into U.S. dollars based on
current exchange rates; (ii) purchases and sales of foreign investments, income
and expenses are converted into U.S. dollars based on currency exchange rates
prevailing on the respective dates of such transactions.
Net realized and unrealized gain (loss) on foreign currency transactions will
represent: (i) foreign exchange gains and losses from the sale and holdings of
foreign currencies and investments; (ii) gains and losses between trade date and
settlement date on investment securities transactions and forward exchange
contracts; and (iii) gains and losses from the difference between amounts of
dividends and interest recorded and the amounts actually received.
E. Forward Foreign Currency Exchange Contracts
- -----------------------------------------------
Certain of the Funds are authorized to enter into forward foreign currency
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 International Equity and Asia Growth
Funds may enter into such contracts to seek to increase total return. The
aggregate principal amounts of the contracts for which delivery is anticipated
are reflected in the Funds' accounts, while the aggregate principal amounts are
reflected net in the accompanying Statements of Assets and Liabilities. All
commitments are "marked-to-market" daily at the applicable translation rates and
any resulting unrealized gains or losses are recorded in the funds' financial
statements. The Funds record realized gains or losses at the time the forward
contract is offset by entry into a closing transaction or extinguished by
delivery of the currency. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar.
F. 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 their shareholders. Accordingly, no federal tax provisions are required.
The characterization of distributions to shareholders for financial reporting
purposes is determined in accordance with income tax rules. Therefore, the
source of the Funds' distributions may be shown in the accompanying financial
statements as either from or in excess of net investment income or net realized
gain on investment transactions, or from capital, depending on the type of
book/tax differences that may exist as well as timing differences associated
with having different book and tax year ends.
Asia Growth Fund had approximately $184,000 and $5,623,000 at October 31, 1995
(the Fund's tax year end) of capital loss carryforward expiring in 2002 and
2003, respectively, for federal tax purposes. The Small Cap Equity Fund had
approximately $2,438,000 of capital loss carryforward at January 31, 1996 (the
Fund's tax year end) expiring in 2004. These amounts are available to be
carried forward to offset future capital gains to the extent permitted by
applicable laws or regulations.
G. Deferred Organization Expenses
- ----------------------------------
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
- --------------------------------------------------------------------------------
59
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
January 31, 1996
- --------------------------------------------------------------------------------
H. Expenses
- ------------
Expenses incurred by the Company which do not specifically relate to an
individual fund of the Company are allocated to the Funds based on each Fund's
relative average net assets for the period.
For the Select Equity Fund, shareholders of Class A shares bear all expenses
and fees relating to the distribution and authorized dealer service plans as
well as other expenses which are directly attributable to such shares. The Class
A and Institutional shareholders separately bear their respective class-specific
transfer agency fees.
I. Option Accounting Principles
- --------------------------------
When certain of the Funds write call or put options, an amount equal to the
premium received is recorded as an asset and as an equivalent liability. The
amount of the liability is subsequently marked-to-market to reflect the current
market value of the option written. When a written option expires on its
stipulated expiration date or the funds enter into a closing purchase
transaction, the funds realize a gain or loss without regard to any 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.
There is a risk of loss from a change in value of such options which may exceed
the related premiums received.
Upon the purchase of a call option or a protective put option by the Funds
the premium paid is recorded as an investment and subsequently marked-to-market
to reflect the current market value of the option. If an option which the Funds
have purchased expires on the stipulated expiration date, the funds will realize
a loss in the amount of the cost of the option. If the funds enter into a
closing sale transaction, the funds will realize a gain or loss, depending on
whether the sale proceeds from the closing sale transaction are greater or less
than the cost of the option. If the Funds exercise a purchased put option, the
funds will realize a gain or loss from the sale of the underlying security, and
the proceeds from such sale will be decreased by the premium originally paid. If
the Funds exercise a purchased call option, the cost of the security which the
funds purchase upon exercise will be increased by the premium originally paid.
J. Futures Contracts
- ---------------------
The Funds may enter into futures transactions in order to hedge against changes
in interest rates, securities prices or currency exchange rates or to seek to
increase total return. The Select Equity Fund may enter into such transactions
only with respect to the S&P 500 Index. A Fund will engage in futures
transactions only for bona fide hedging purposes as defined in regulations of
the CFTC or (except with respect to transactions by the Balanced, Growth and
Income, Select Equity, Capital Growth and Small Cap Equity Funds, in futures on
foreign currencies) to seek to increase total return to the extent permitted by
such regulations. The use of futures contracts involve, to varying degrees,
elements of market risk which may exceed the amounts recognized in the
Statements of Assets and Liabilities.
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 contract, 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 price, unless such price does not reflect the fair
market value of the contract, in which case the position will be valued
- --------------------------------------------------------------------------------
60
<PAGE>
- --------------------------------------------------------------------------------
using methods approved by the Board of Directors of the Company.
Certain risks may arise upon entering into futures contracts. The predominant
risk is that the changes in the value of the futures contract may not directly
correlate with changes in the value of the underlying securities. This risk may
decrease the effectiveness of the Funds' hedging strategies and may also result
in a loss to the Funds.
3. Agreements
- --------------
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), acts as investment adviser to the
Balanced, Growth and Income, Small Cap Equity and International Equity Funds;
Goldman Sachs Funds Management, L.P. ("GSFM"), an affiliate of Goldman Sachs,
acts as investment adviser to the Select Equity and Capital Growth Funds; and
Goldman Sachs Asset Management International ("GSAM International") acts as
investment adviser to the Asia Growth Fund. GSAM International also acts as
subadviser to the International Equity Fund. Under the Investment Advisory and
Subadvisory Agreements, GSAM, GSFM and GSAM International, subject to the
general supervision of the Company's Board of Directors, manage the Company's
portfolios. With regard to the Asia Growth Fund, GSAM International relies on
its Singapore affiliate, Goldman Sachs (Singapore) Limited, for portfolio
decisions and management. As compensation for the services rendered under the
Investment Advisory Agreements and the assumption of the expenses related
thereto, GSAM is entitled to a fee, computed daily and payable monthly, at an
annual rate equal to .50%, .55%, .75% and .25% of the average daily net assets
of the Balanced, Growth and Income, Small Cap Equity and International Equity
Funds, respectively. GSFM is entitled to a fee of .50% and .75% of the average
daily net assets of the Select Equity and Capital Growth Funds, respectively.
For the year ended January 31, 1996, for the Select Equity Fund, GSFM waived a
portion of its advisory fee. GSFM may discontinue or modify such limitation in
the future at its discretion. GSAM International is entitled to an advisory fee
for the Asia Growth Fund and a subadvisory fee for the International Equity Fund
of .75% and .50% of the average daily net assets for those funds, respectively.
GSAM also acts as the Funds' administrator pursuant to Administration
Agreements. Under these Administration Agreements, GSAM administers the Funds'
business affairs, including providing facilities. As compensation for the
services rendered pursuant to the Administration Agreements, GSAM is entitled to
a fee of .15% of the average daily net assets of the Balanced and Growth and
Income Funds, and .25% of the average daily net assets of the Select Equity,
Capital Growth, Small Cap Equity, International Equity and Asia Growth Funds.
For the year ended January 31, 1996, for the Select Equity Fund, GSAM waived a
portion of its administration fee. GSAM may discontinue or modify such
limitation in the future at its discretion.
Goldman Sachs has voluntarily agreed to reduce or limit certain "Other
Expenses" for the Balanced, Select Equity, Growth and Income and Asia Growth
Funds (excluding advisory, administration, distribution and authorized dealer
service fees and litigation, indemnification, taxes, interest, brokerage
commissions and extraordinary expenses and with respect to the Select Equity
Fund, transfer agent fees) until further notice to the extent such expenses
exceed .10%, .06%, .30% and .65% of the average daily net assets of the funds,
respectively. The amount reimbursable to the Select Equity Fund at January 31,
1996 was approximately $33,000 and is reflected in "Other Assets" in the
accompanying Statements of Assets and Liabilities.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to
Distribution Agreements. Goldman Sachs may receive a portion of the sales load
imposed on the sale of fund shares and has advised the Company that it retained
approximately $28,000, $108,000, $771,000, $523,000, $202,000, $211,000 and
$507,000 during the year ended January 31, 1996 for the Balanced, Select Equity
Class A, Growth and Income, Capital Growth,
- --------------------------------------------------------------------------------
61
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
January 31, 1996
- --------------------------------------------------------------------------------
Small Cap Equity, International Equity and Asia Growth Funds, respectively.
The Company, on behalf of each Fund, has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1. Under the Distribution Plan,
Goldman Sachs is entitled to a quarterly fee from each Fund for distribution
services equal, on an annual basis, to .25% of a Fund's average daily net assets
(or, in the case of Select Equity Fund, the average daily net assets
attributable to Class A shares). For the year ended January 31, 1996, Goldman
Sachs has voluntarily agreed to waive a portion of such fee for each Fund.
Effective June 1, 1995, each Fund's Distribution Plan was amended to reduce the
contractual fee from .50% to .25% of average daily net assets and to eliminate
the provision of certain services under the Distribution Plan which are
currently provided under the Authorized Dealer Service Plan.
Effective June 1, 1995, the Company, on behalf of each Fund, adopted an
Authorized Dealer Service Plan (the "Service Plan") pursuant to which Goldman
Sachs and Authorized Dealers are compensated for providing personal and account
maintenance services. Each Fund pays a fee under its Service Plan equal to an
annual basis of .25% of its average daily net assets (or, in the case of Select
Equity Fund, the average daily net assets attributable to Class A shares).
Goldman Sachs also serves as the Transfer Agent of the Funds for a fee.
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,
1996, were as follows:
<TABLE>
<CAPTION>
Fund Purchases Sales or Maturities
- ---- -------------- -------------------
<S> <C> <C>
Balanced $ 89,305,633 $ 54,456,475
Select Equity 102,720,929 51,983,979
Growth and Income 320,155,385 172,612,731
Capital Growth 542,809,663 749,703,704
Small Cap Equity 159,198,180 291,510,540
International Equity 185,822,152 209,935,006
Asia Growth 183,192,199 130,716,523
</TABLE>
Included in the above amounts were purchases and proceeds of sales or
maturities of governmental securities (excluding short-term investment and
options) for the Balanced Fund in the amounts of $47,737,263 and $41,994,556,
respectively.
For the year ended January 31, 1996, written option transactions in the
Growth and Income Fund were as follows:
<TABLE>
<CAPTION>
Call Options
------------------------------------------
Number of Premiums
Options Written Contracts Received
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance outstanding,
beginning of year 200 $ 76,997
Options written -- --
Options expired (200) (76,997)
Options exercised -- --
- -------------------------------------------------------------------------------
Balance outstanding,
end of year -- $ --
- -------------------------------------------------------------------------------
</TABLE>
For the year ended January 31, 1996, written option transactions in the
Capital Growth Fund were as follow:
<TABLE>
<CAPTION>
Call Options
------------------------------------------
Number of Premiums
Options Written Contracts Received
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance outstanding,
beginning of year -- $ --
Options written 8,850 1,758,487
Options expired (2,626) (752,364)
Options repurchased (6,224) (1,006,123)
- -------------------------------------------------------------------------------
Balance outstanding,
end of year -- $ --
- -------------------------------------------------------------------------------
</TABLE>
For the year ended January 31, 1996, written option transactions in the Small
Cap Equity Fund were as follows:
<TABLE>
<CAPTION>
Call Options
------------------------------------------
Number of Premiums
Options Written Contracts Received
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance outstanding,
beginning of year -- $
Options written 900 65,448
Options expired (900) (65,448)
Options exercised -- --
- -------------------------------------------------------------------------------
Balance outstanding,
end of year -- $
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
62
<PAGE>
- --------------------------------------------------------------------------------
For the year ended January 31, 1996, purchased option transactions in the
International Equity Fund were as follows:
<TABLE>
<CAPTION>
Call Options Purchased Cost
- --------------------------------------------------------------------------------
<S> <C>
Balance outstanding, beginning of year $ 8,340,192
Options purchased --
Options expired (8,340,192)
Options sold $ --
- --------------------------------------------------------------------------------
Value at end of year $ --
================================================================================
</TABLE>
For the year ended January 31, 1996, written and purchased option
transactions in the Asia Growth Fund were as follows:
<TABLE>
<CAPTION>
Put Options
--------------------------------
Number of Premiums
Options Written Contracts Received
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance outstanding, beginning of year 12,700 $ 180,767
Options written -- --
Options expired (12,700) (180,767)
Options exercised -- --
- --------------------------------------------------------------------------------
Balance outstanding, end of year -- $ --
================================================================================
</TABLE>
Call Options Purchased Cost
- --------------------------------------------------------------------------------
Balance outstanding, beginning of year $ --
Options purchased 495,606
Options expired --
Options sold (495,606)
- --------------------------------------------------------------------------------
Value at end of year $ --
================================================================================
Certain risks arise related to call and put options from the possible
inability of counterparties to meet terms of their contracts.
At January 31, 1996, the International Equity Fund had the following
outstanding forward foreign currency exchange contracts:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Foreign Currency Value on Unrealized
Sale Contracts Settlement Date Current Value Gain (Loss)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Belgian Franc
expiring 9/9/96 $ 5,263,357 $ 5,310,094 $ (46,737)
Deutschemark
expiring 3/4/96 30,900,000 30,492,745 407,255
Hong Kong Dollar
expiring 2/7/96 13,737,848 13,742,301 (4,453)
Japanese Yen
expiring 4/17/96 30,840,446 30,278,095 562,351
British Pound Sterling
expiring 2/12/96 12,440,309 12,190,130 250,179
expiring 4/4/96 3,796,394 3,741,279 55,115
Swedish Krona
expiring 2/7/96 12,852,992 12,389,934 463,058
- --------------------------------------------------------------------------------
Total Foreign Currency
Sale Contracts $109,831,346 $108,144,578 $1,686,768
================================================================================
<CAPTION>
- --------------------------------------------------------------------------------
Foreign Currency Value on Unrealized
Purchase Contracts Settlement Date Current Value Gain (Loss)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Deutschemark
expiring 2/7/96 $ 12,762,995 $ 12,155,628 $ (607,367)
expiring 4/4/96 3,703,390 3,587,995 (115,395)
expiring 9/9/96 5,262,483 5,289,903 27,420
British Pound Sterling
expiring 2/1/96 1,257,254 1,261,225 3,971
Japanese Yen
expiring 2/1/96 198,390 198,909 519
Singapore Dollar
expiring 2/2/96 359,737 359,737 0
Thailand Baht
expiring 2/2/96 205,650 205,569 (81)
- --------------------------------------------------------------------------------
Total Foreign Currency
Purchase Contracts $ 23,749,899 $ 23,058,966 $ (690,933)
================================================================================
</TABLE>
At January 31, 1996, the Asia Growth Fund had the following outstanding
forward foreign currency exchange contract:
- --------------------------------------------------------------------------------
63
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
January 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Foreign Currency Value on Unrealized
Sale Contract Settlement Date Current Value Gain
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Malaysian Ringgit
expiring 4/22/96 $ 9,320,000 $ 9,283,792 $ 36,208
- --------------------------------------------------------------------------------
</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,
1996, the International Equity and Asia Growth Funds 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 $1,919,496 and $1,107,534, respectively, in the
accompanying Statements of Assets and Liabilities. Included in these amounts are
$149,628 and $333,501, respectively, related to forward contracts closed but not
settled as of January 31, 1996. The Asia Growth Fund has recorded a "Receivable
for forward foreign currency exchange contracts" resulting from the open forward
foreign currency exchange contract of $36,208 in the accompanying Statements of
Assets and Liabilities.
For the year ended January 31, 1996, Goldman Sachs earned approximately
$7,000, $71,000, $285,000, $73,000, $14,000 and $49,000 of brokerage commissions
from portfolio transactions executed on behalf of the Balanced, Growth and
Income, Capital Growth, Small Cap Equity, International Equity and Asia Growth
Funds, respectively.
5. Line of Credit Facility
The Funds participate in a $100,000,000 uncommitted, unsecured revolving line of
credit facility. In addition, the Funds, except the Select Equity Fund,
participate in a $50,000,000 committed, unsecured revolving line of credit
facility. Both facilities are to be used solely for temporary or emergency
purposes. Under the most restrictive arrangement, each Fund must own securities
having a market value in excess of 300% of the total bank borrowings. The
interest rate on the borrowings is based on the Federal Funds rate. The
committed facility also requires a fee to be paid based on the amount of the
commitment which has not been utilized. During the year ended January 31, 1996,
the Funds did not have any borrowings under these facilities.
6. Certain Reclassifications
In accordance with Statement of Position 93-2, the Balanced, Select Equity,
Growth and Income, Capital Growth, International Equity and Asia Growth Funds
have reclassified $13,031, $30,846, $18,712, $13,155, $17,555 and $31,625,
respectively, from paid-in capital to accumulated undistributed net investment
income. Additionally, the Small Cap Equity Fund has reclassified $1,717,759 from
paid-in capital to accumulated net investment loss and $255,461 from paid in
capital to accumulated undistributed net realized loss. The International Equity
Fund has reclassified $9,400,469 from accumulated net realized foreign currency
loss to undistributed net investment income and $25,370,939 from undistributed
net realized loss. The Asia Growth Fund has reclassified $4,489 from
undistributed net investment income to accumulated net realized foreign currency
gain. These reclassifications have no impact on the net asset value of the Funds
and are designed to present the Funds' capital accounts on a tax basis.
7. 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
- --------------------------------------------------------------------------------
64
<PAGE>
- --------------------------------------------------------------------------------
custodian, or at sub-custodians. Goldman Sachs monitors the market value of the
underlying securities by pricing them daily.
8. Joint Repurchase Agreement Account
The Funds, together with other registered investment companies having advisory
agreements with GSAM or GSFM, transfer uninvested cash balances into joint
accounts, the daily aggregate balance of which is invested in one or more
repurchase agreements. The underlying securities for the repurchase agreements
are U.S. Treasury and agency obligations. At January 31, 1996, the Balanced,
Select Equity, Growth and Income and Capital Growth Funds had a 1.43%, 1.39%,
5.61%, and 4.28%, respectively, undivided interest in the repurchase agreements
in the following joint account which equaled $7,000,000, $6,800,000, $27,400,000
and $20,900,000, respectively, in principal amount. At January 31, 1996, the
repurchase agreements held in this joint account, along with the corresponding
underlying securities (including the type of security, market value, interest
rate and maturity date) were as follows:
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Lehman Government Securities, dated 01/31/96, repurchase price $250,041,458
(U.S. Treasury Notes: $254,879,914, 4.63%-8.88%,
02/15/96-08/15/02)
$250,000,000 5.97% 02/01/96 $ 250,000,000
Salomon Brothers, Inc., dated 01/31/96, repurchase price
$238,439,402 (U.S. Treasury Interest-Only Strips: $151,540,101,
05/15/97-11/15/02; U.S. Treasury Principal-Only Strips:
$91,713,529, 8.13%-9.13%, 02/15/98-11/15/00)
238,400,000 5.95% 02/01/96 238,400,000
- --------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $488,400,000
================================================================================
</TABLE>
9. Transactions With Affiliated Companies
A Fund is considered to be invested in an affiliated company if that Fund owns
greater than five percent of the outstanding voting securities of such company.
Transactions during the year with companies which are considered affiliates of
Small Cap Equity as of January 31, 1996 are as follows (dollar amounts in
thousands):
<TABLE>
<CAPTION>
Purchase Sales Dividend Market
Affiliate Name Cost Proceeds Income Value
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Safety Razor Co. $ 267 $ 1,918 $ -- $ 6,540
J. Baker, Inc. 3,565 -- 53 4,388
Black Box Corp. 569 1,115 -- 14,892
Brookstone, Inc. 287 379 -- 7,032
Congoleum Corp. 6,405 1,468 -- 4,231
Finlay Enterprises, Inc. 5,108 110 -- 3,930
Hollinger International Inc. 457 1,105 96 9,418
International Post Ltd. 135 157 -- 4,059
Morningstar Group, Inc. 359 5,551 -- 7,726
North American Watch Corp. 502 2,719 70 13,442
Opinion Research Corp. -- -- -- 3,168
Quantum Restaurant Group, Inc. 290 1,393 -- 7,835
- ----------------------------------------------------------------------------------------------------
Totals $17,944 $ 15,915 $ 219 $ 86,661
=====================================================================================================
</TABLE>
10. Summary of Share Transactions
Share activity for the year ended January 31, 1996 is as follows:
<TABLE>
<CAPTION>
Select Equity Fund Class A Institutional
================================================================================
<S> <C> <C>
Shares sold $ 44,569,920 $ 57,579,397
Reinvestments of dividends
and distributions 3,032,597 1,847,978
Shares repurchased (45,692,944) (567,188)
-----------------------------------------
1,909,573 58,860,187
-----------------------------------------
Distributions from:
Net investment income 925,006 685,210
Net realized gain 2,363,976 1,163,212
-----------------------------------------
3,288,982 1,848,422
-----------------------------------------
</TABLE>
11. Other Matters
On August 1, 1995, the Capital Growth Fund, in an interportfolio trade,
transferred securities valued at approximately $105,460,000 to the Goldman Sachs
Mid-Cap Equity Fund related to shareholder exchanges into such fund.
- --------------------------------------------------------------------------------
65
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Distributions to
investment operations shareholders
------------------------------------------ ------------------------------------------
Net realized From
and unrealized net realized
Net asset gain on Total Income From gain on
value, Net investments, from net investment Total
beginning investment options and investment investment and futures distributions to
of period income futures operations income transactions shareholders
===================================================================================================
BALANCED FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996............................. $14.22 $0.51 $3.43 $3.94 ($0.50) ($0.35) ($0.85)
For the Period Ended January 31,
- --------------------------------
1995 /(c)/....................... 14.18 0.10 0.02 0.12 (0.08) -- (0.08)
<CAPTION>
Ratio of Ratio of net Net
Net asset net investment assets at
Net increase value, expenses to income to Portfolio end of
in net end of Total average net average net turnover period
asset value period return/(a)/ assets assets rate (in 000s)
========================================================================================
BALANCED FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996...................................... $3.09 $17.31 28.10% 1.00% 3.65% 197.10%/(a)/ $50,928
For the Period Ended January 31,
- --------------------------------
1995 /(c)/................................ 0.04 14.22 0.87/(b)/ 1.00/(d)/ 3.39/(d)/ 14.71/(b)/ 7,510
<CAPTION>
Ratio assuming no
voluntary waiver of fees
or expense limitations
------------------------------
Ratio of net
Ratio of investment
expenses income (loss)
to average to average
net assets net assets
==============================
- ----------------------------------------------------------------
<S> <C> <C>
For the Year Ended January 31,%
- ------------------------------
1996............................. 1.90% 2.75%
For the Period Ended January 31,
- --------------------------------
1995 /(c)/....................... 8.29/(d)/ (3.90)/(d)/
- ---------------------------------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge were taken into
account.
/(b)/Not annualized.
/(c)/For the period from October 12, 1994 (commencement of operations) to
January 31, 1995.
/(d)/Annualized.
/(e)/Includes the effect of mortgage dollar roll transactions.
- --------------------------------------------------------------------------------
The accompanying notes are an intergral part of these financial statements.
66
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<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
value, Net investments, (loss) from net investment Total
beginning investment options and investment investment and futures distributions to
of period income futures operations income transactions shareholders
===================================================================================================
SELECT EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996-Class A Shares.............. $14.61 $0.19 $5.43 $5.62 ($0.16) ($0.41) ($0.57)
1996-Institutional Shares/(d)/... 16.97 0.16 3.23 3.39 (0.24) (0.41) (0.65)
1995-Class A Shares.............. 15.93 0.20 (0.38) (0.18) (0.20) (0.94) (1.14)
1994-Class A Shares.............. 15.46 0.17 2.08 2.25 (0.17) (1.61) (1.78)
1993-Class A Sahres.............. 15.05 0.22 0.41 0.63 (0.22) -- (0.22)
For the Period Ended January 31,
- --------------------------------
1992-Class A Shares/(e)/......... 14.17 0.11 0.88 0.99 (0.11) -- (0.11)
<CAPTION>
Ratio of Ratio of net Net
Net increase Net asset net investment assets at
(decrease) value, expenses to Income to Portfolio end of
in net end of Total average net average net turnover period
asset value period return/(a)/ assets assets rate (in 000s)
========================================================================================
SELECT EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996-Class A Shares........................... $5.05 $19.66 38.63% 1.25% 1.01% 39.35% $129,045
1996-Institutional Shares/(d)/................ 2.74 19.71 20.14/(b)/ 0.65/(e)/ 1.49/(c)/ 39.35/(b)/ 64,829
1995-Class A Shares........................... (1.32) 14.61 (1.10) 1.38 1.33 56.18 94,968
1994-Class A Shares........................... 0.47 15.93 15.12 1.42 0.92 87.73 92,769
1993-Class A Shares........................... 0.41 15.46 4.30 1.28 1.30 144.93 117,757
For the Period Ended January 31,
- --------------------------------
1992-Class A Shares/(e)/....................... 0.88 15.05 7.01/(b)/ 1.57/(c)/ 1.24/(c)/ 135.02/(c)/ 151,142
<CAPTION>
Ratio assuming no
voluntary waiver of fees
or expense limitations
------------------------------
Ratio of net
Ratio of investment
expenses income
to average to average
net assets net assets
==============================
- ----------------------------------------------------------------
<S> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996-Class A Shares............. 1.55% 0.71%
1996-Institutional Shares/(d)/.. 0.96/(c)/ 1.18/(c)/
1995-Class A Shares............. 1.63 1.08
1994-Class A Shares............. 1.67 0.67
1993-Class A Shares............. 1.53 1.05
For the Period Ended January 31,
- --------------------------------
1992-Class A Shares/(e)/......... 1.82/(c)/ 0.99/(c)/
- ---------------------------------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge were taken into
account.
/(b)/Not annualized.
/(c)/Annualized.
/(d)/Institutional shares commenced operations on June 15, 1995.
/(e)/For the period from May 24, 1991 (commencement of operations) to January
31, 1992.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
67
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from Distributions to
investment operations shareholders
------------------------------------------ ------------------------------------------
From
Net realized Total net realized
Net asset and unrealized income From gain on In excess
value, Net gain on from net investment of net
beginning investment investments, investment investment and option investment
of period income and options operations income transactions income
===================================================================================================
GROWTH AND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996............................. $15.80 $0.33 $4.75 $5.08 $(0.30) $(0.60) $ --
1995............................. 15.79 0.20/(b)/ 0.30/(b)/ 0.50 (0.20) (0.33) (0.07)
For the Period Ended January 31,
- --------------------------------
1994 /(c)/....................... 14.18 0.15 1.68 1.83 (0.15) (0.06) (0.01)
<CAPTION>
Ratio of Ratio of net
Net asset net investment
Total Additional Net increase value, expenses to income to Portfolio
distributions to paid-in in net end of Total average net average net turnover
shareholders capital asset value period return/(a)/ assets assets rate
==========================================================================================================
GROWTH AND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996.......................... $(0.90) $ -- $4.18 $19.98 32.45% 1.20% 1.67% 57.93%
1995.......................... (0.60) 0.11/(b)/ 0.01 15.80 3.97 1.25 1.28 71.80
For the Period Ended January 31,
- --------------------------------
1994 /(c)/.................... (0.22) -- 1.61 15.79 13.08/(d)/ 1.25/(e)/ 1.23(e) 102.23/(d)/
<CAPTION>
Ratio assuming no
voluntary waiver of fees
or expense limitations
------------------------------
Net Ratio of net
assets at Ratio of investment
end of expenses income (loss)
period to average to average
(in 000s) net assets net assets
===========================================
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996............................. $436,757 1.45% 1.42%
1995............................. 193,772 1.58 0.95
For the Period Ended January 31,
- --------------------------------
1994 /(c)/....................... 41,528 3.24/(e)/ (0.76)/(e)/
- ----------------------------------
</TABLE>
/(a)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if a sales charge were taken
into account.
/(b)/ Calculated based on the average shares outstanding methodology.
/(c)/ For the period from February 5, 1993 (commencement of operations) to
January 31, 1994.
/(d)/ Not annualized.
/(e)/ Annualized.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
68
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment
operations Distributions to shareholders
---------------------------------------------- -------------------------------------------
Net realized
and unrealized From net
Net asset gain (loss) on Total income From realized gain In excess
value, Net investments, (loss) from net on investments, of net
beginning investment options and investment investment options investment
of period income futures operations income and futures income
===================================================================================================
CAPITAL GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996............................. $13.67 $0.12 $3.93 $4.05 ($0.12) ($2.69) $ --
1995............................. 15.96 0.03 (0.69) (0.66) (0.01) (1.62) --
1994............................. 14.64 0.02 2.40 2.42 (0.01) (1.07) (0.02)
1993............................. 13.65 0.06 2.28 2.34 (0.07) (1.28) --
1992............................. 11.10 0.28 2.90 3.18 (0.31) (0.32) --
For the Period Ended January 31,
- --------------------------------
1991/(b)/........................ 11.34 0.34 (0.27) 0.07 (0.31) -- --
<CAPTION>
Ratio of Ratio of net Net
Net increase Net asset net investment assets at
Total (decrease) value, expenses to Income to Portfolio end of
distributions in net end of Total average net average net turnover period
in shareholders asset value period return/(a)/ assets assets rate (in 000s)
=========================================================================================================
CAPITAL GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996.......................... $(2.81) $1.24 $14.91 30.45% 1.36% 0.65% 63.90% $881,056
1995.......................... (1.63) (2.29) 13.67 (4.38) 1.38 0.16 38.36 862,105
1994.......................... (1.10) 1.32 15.96 16.89 1.38 0.13 36.12 883,682
1993.......................... (1.35) 0.99 14.64 18.01 1.41 0.42 58.93 665,976
1992.......................... (0.63) 2.55 13.65 29.31 1.53 2.09 48.93 500,307
For the Period Ended January 31,
- --------------------------------
1991.......................... (0.31) (0.24) 11.10 0.84/(c)/ 1.27/(c)/ 3.24/(c)/ 35.63/(c)/ 437,533
<CAPTION>
Ratios assuming no
voluntary waiver of fees
------------------------------
Ratio of net
Ratio of investment
expenses income (loss)
to average to average
net assets net assets
==============================
- ----------------------------------------------------------------
<S> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996............................ 1.61% 0.40%
1995............................ 1.63 (0.09)
1994............................ 1.63 (0.12)
1993............................ 1.66 0.17
1992............................ 1.78 1.84
For the Period Ended January 31,
- --------------------------------
1991/(b)/........................ 1.47/(c)/ 3.04/(c)/
- ---------------------------------------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge were taken into
account.
(b) For the period from April 20, 1990 (commencement of operations) to January
31, 1991.
(c) Not annualized.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from Distributions to
investment operations shareholders
------------------------------------------ ------------------------------------------
In excess of
Net realized From net realized
and unrealized realized gain gains on
Net asset gain (loss) on Total Income From on investment, investment,
value, Net investments, (loss) from net option option and
beginning investment options and investment investment and futures futures
of period income (loss) futures operations income transactions transactions
===================================================================================================
SMALL CAP EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996 ........................... $16.14 ($0.23) $ 1.39 $ 1.16 $ -- $(0.01) $ --
1995 ........................... 20.67 (0.07) (3.53) (3.60) -- (0.69) (0.24)
1994 ........................... 16.68 (0.04) 5.03 4.99 -- (1.00) --
For the Period Ended January 31,
- --------------------------------
1993/(b)/ ...................... 14.18 0.03 2.50 2.53 (0.03) -- --
<CAPTION>
Ratio of Ratio of net Net
Net increase Net asset net investment assets at
Total (decrease) value, expenses to income to Portfolio end of
distributions in net end of Total average net average net turnover period
to shareholders asset value period return/(a)/ assets assets rate (in 000s)
=========================================================================================================
SMALL CAP EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996 ........................... $(0.01) $ 1.15 $17.29 7.20% 1.41% (0.59)% 57.58% $204,994
1995 ........................... (0.93) (4.53) 16.14 (17.53) 1.53 (0.53) 43.67 319,487
1994 ........................... (1.00) 3.99 20.67 30.13 1.60 (0.45) 56.81 261,074
For the Period Ended January 31,
- --------------------------------
1993/(b)/ ...................... (0.03) 2.50 16.68 17.86/(c)/ 1.65/(d)/ 0.62/(d)/ 7.12/(d)/ 59,339
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
------------------------------
Ratio of net
Ratio of investment
expenses loss
to average to average
net assets net assets
==============================
- ----------------------------------------------------------------
<S> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996 ........................... 1.66% (0.84)%
1995 ........................... 1.78 (0.78)
1994 ........................... 1.85 (0.70)
For the Period Ended January 31,
- --------------------------------
1993/(b)/ ...................... 2.70/(d)/ (0.43)/(d)/
- ---------------------------------------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge were taken into
account.
(b) For the period from October 22, 1992 (commencement of operations) to January
31, 1993.
(c) Not annualized.
(d) Annualized.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
70
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from
investment operations
-------------------------------------------------------------------- --------------
Net Net
realized realized
and unrealized and unrealized Total
Net asset gain (loss) on loss on foreign income From
value, Net investments, currency (loss) from net
beginning investment otions related investment investment
of period income (loss) and futures transactions operations income
====================================================================================================================================
INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
For the Year Ended January 31,
- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996........................ $14.52 $ 0.13 $ 2.58 $ 1.42 $ 4.13 $(0.58)
1995........................ 18.10 0.06 (3.04) (0.01) (2.99) --
1994........................ 14.35 0.05 4.08 (0.38) 3.75 --
For the Period Ended January 31,
- --------------------------------
1993/(b)/................... 14.18 (0.01) 0.29 (0.11) 0.17 --
- ----------------------
Distributions to
shareholders
------------------------------------
From net
realized
gain on Net Ratio of
investment, Increase Net asset net
option and Total (decrease) value, expenses to
futures distributions to in net asset end of Total average net
transactions shareholders value period return/(2)/ assets
====================================================================================================================================
INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996........................ $(0.87) $(1.45) $ 2.68 $17.20 28.68% 1.52%
1995........................ (0.59) (0.59) (3.58) 14.52 (16.65) 1.73
1994........................ -- -- 3.75 18.10 26.13 1.76
For the Period Ended January 31,
- --------------------------------
1993/(b)/................... -- -- 0.17 14.35 1.23/(c)/ 1.80/(d)/
- -----------------------
Ratios assuming no
voluntary waiver of fees
or expense limitations
-------------------------------
Ratio of net Ratio of
investment net investment
income Ratio of income
(loss) to Portfolio Net assets at expenses (loss)
average net turnover end of period to average to average
assets rate (in 000s) net assets net assets
====================================================================================================================================
INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- ------------------------------
1996........................ 0.26% 68.48% $330,860 1.77% 0.01%
1995........................ 0.40 84.54 275,086 1.98 0.15
1994........................ 0.51 60.04 269,091 2.01 0.26
For the Period Ended January 31,
- --------------------------------
1993/(b)/................... (0.42)/(d)/ 0.00 66,063 2.58/(d)/ (1.20)/(d)/
- ----------------
</TABLE>
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of the
investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge were taken into
account.
(b)For the period from December 1, 1992 (commencement of operations) to January
31, 1993.
(c)Not annualized.
(d)Annualized.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
71
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) Distributions to
from investment operations shareholders
--------------------------------------------------- ------------------------------------
Net
realized and
unrealized
Net gain (loss) Total In
asset Net on foreign gain (loss) From excess Total
value, Net unrealized currency from net of net distributions
beginning investent gain(loss) on related investment investment investment to
of period income investments transactions operations income income shareholders
==================================================================================================
ASIA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- -------------------------------
1996................................ $13.31 $0.17 $3.44 $(0.12) $3.49 $(0.17) $(0.14) $(0.31)
For the Period Ended January 31,
- --------------------------------
1995/(b)/........................... 14.18 0.11 (0.89) 0.01 (0.77) (0.10) -- (0.10)
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
-------------------------
Ratio Ratio
Net Ratio of net of net
increase Net of net investment Net Ratio of investment
(decrease) asset expenses to income to assets at expenses income to
in net value, average average Portfolio end of to average average
asset end of Total net net turnover period net net
value period return/(a)/ assets assets rate (in 000s) assets assets
====================================================================================================
ASIA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended January 31,
- -------------------------------
1996............................... $3.18 $16.49 26.49% 1.77% 1.05% 88.80% $205,539 2.02% 0.80%
For the Period Ended January 31,
- ---------------------------------
1995/(b)/..........................(0.87) 13.31 (5.46)/(c)/ 1.90/(d)/ 1.83/(d)/ 36.08/(c)/ 124,298 2.38/(d)/ 1.35/(d)/
- ------------------------------
</TABLE>
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of the
investment at the net asset value at the end of the period and no sales
charges. Total return would be reduced if a sales charge were taken into
account.
(b)For the period from July 8, 1994 (commencement of operations) to January 31,
1995.
(c)Not annualized.
(d)Annualized.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
72
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Goldman Sachs Equity Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities of the
Goldman Sachs Equity Portfolios, Inc., (a Maryland Corporation) comprising the
Balanced Fund, Select Equity Fund, Growth and Income Fund, Capital Growth Fund,
Small Cap Equity Fund, International Equity Fund and Asia Growth Fund including
the statements of investments, as of January 31, 1996, and the related
statements of operations, 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 Funds'
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, 1996 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, 1996, the results of their operations and the
changes in their net assets and the financial highlights for the periods
presented, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
March 15, 1996
73
<PAGE>
[This Page Intentionally Left Blank]
74
<PAGE>
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Equity Portfolios, Inc.
Prospectus which contains facts concerning the Fund's objectives and policies,
management, expenses and other information.
- --------------------------------------------------------------------------------
75
<PAGE>
Goldman Sachs
One New York Plaza
New York, NY 10004
Directors
Paul C. Nagel, Jr., Chairman
Ashok N. Bakhru
Marcia L. Beck
David B. Ford
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Marcia L. Beck, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Goldman Sachs
Investment Adviser, Administrator,
Distributor and Transfer Agent
The Goldman Sachs
Equity Portfolios
Annual Report
January 31, 1996
Goldman Sachs Balanced Fund
Goldman Sachs Select Equity Fund
Goldman Sachs Growth and Income Fund
Goldman Sachs Capital Growth Fund
Goldman Sachs Small Cap Equity Fund
Goldman Sachs International Equity Fund
Goldman Sachs Asia Growth Fund
[LOGO OF GOLDMAN SACHS APPEARS HERE]
76
