<PAGE>
===============================================================================
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders:
We welcome the opportunity to review the performance and holdings of the
Goldman Sachs Equity Portfolios for the six-month period ended July 31, 1996. In
contrast to last year's robust and steady ascent, during this period U.S.
equities experienced much greater volatility, culminating in a sharp correction
in July. In this challenging environment, the Goldman Sachs Equity Portfolios
held their own, with several funds producing outstanding results.
The U.S. Stock Market Lost Momentum, Despite a Strengthening Economy
The U.S. stock market continued to advance during the period, rising 7.5%
from February through May, then gave back most of its gains in July. Overall,
the market recorded lackluster total returns for both large-cap stocks (1.76% as
measured by the Standard & Poor's 500 stock index) and small-cap stocks (0.87%
as measured by the Russell 2000 index) for the six-month period under review.
Large, growth-oriented stocks with higher than expected earnings did best
overall, with leadership rotating from more speculative technology and cyclical
stocks at the beginning of the period to large, consumer stocks at the end. The
main drivers of the market were corporate earnings expectations and fear of
rising interest rates. The flow of new cash into equity mutual funds, which had
been a major source of support for the market, weakened significantly in July.
The market moved in fits and starts, in response to a series of mixed
economic signals, often shifting from optimism to pessimism and back again
within days. Reading the economic tea leaves became increasingly difficult,
causing sentiment to swing from the belief that the economy was accelerating too
fast (and hence would lead to a U.S. Federal Reserve tightening) to fears that
corporate earnings would be weaker than expected due to an impending slowdown.
It is interesting to note that the price level of the S&P 500 has made six
round-trip swings from a high of approximately 670 to 630 at the low-end.
In this nervous market environment, several high-visibility earnings
disappointments, particularly in large technology companies, triggered the sharp
sell-off in July. However, despite investors' initial concerns, second-quarter
corporate earnings generally exceeded expectations, which helped the equity
market to rebound by August.
Economic Growth Accelerated, Then Moderated as the Fed Remained Neutral
When the period began in February, the distorting effects of the harsh winter
storms made it difficult to get an accurate reading on the economy's health. As
key indicators were finally reported for the first quarter, it became clear that
the economy had rebounded from a sluggish year-end faster than expected.
First-quarter real GDP was 2.0% (annualized), reflecting improved demand from
consumers and businesses. By May, a wide range of indicators pointed to
accelerating growth, including trade, factory orders, automobile sales and
industrial production, and second-quarter real GDP was revised to 4.8%
(annualized). Despite concerns of economic overheating, growth showed signs of
moderating in July, with weakness reported in housing starts and
<TABLE>
<CAPTION>
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Table of Contents
<S> <C>
Introduction/Market Overview........................ 1 Goldman Sachs International Equity Fund......... 34
Goldman Sachs Balanced Fund......................... 4 Goldman Sachs Asia Growth Fund.................. 40
Goldman Sachs Select Equity Fund.................... 13 Financial Statements............................ 46
Goldman Sachs Growth and Income Fund................ 20 Notes to Financial Statements................... 54
Goldman Sachs Capital Growth Fund................... 25 Financial Highlights............................ 63
Goldman Sachs Small Cap Equity Fund................. 29
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</TABLE>
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1
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
manufacturing. Retail sales, while stronger than expected, were nevertheless
also still relatively weak. In addition, July employment growth was below
expectations after robust employment data in the prior months. While these
statistics calmed investors, an unexpected increase in the Consumer Price Index
(CPI) and durable goods orders for July indicated that inflation, though under
control, might still be a potential threat.
In this mixed environment, the Fed left the Federal funds rate (the rate
banks charge one another for overnight borrowing) unchanged at 5.25% through
August.
Outlook in the U.S.:
Moderating Economic Growth for the Near Term
Many economists and strategists now believe growth may slow somewhat during
the remainder of 1996, with few definitive signs of significant inflation at
present. However, as of this writing, Goldman Sachs' economists believe this
pause in growth may be only temporary, particularly on the wage front, rather
than indicative of a deeper, more sustained slowdown. The Fed's "wait and see"
stance is likely to continue a while longer, until more convincing signs of
inflation emerge as policy makers attempt to strike a balance between the need
to contain inflation without snuffing out growth. Despite the stock market
rebound in August, the recent period of volatility in the U.S. equity market is
likely to persist until investors become more confident about the corporate
profit outlook for 1997.
The Dollar Rallied Against the Yen and the Mark, Then Tumbled in July
Along with the economy, the U.S. dollar strengthened against the Deutsche
mark and Japanese yen, then fell against both currencies when the U.S. stock
market corrected in July. The dollar's rise versus the mark and the yen peaked
at different points, reaching a 16-month high against the mark in May and a
29-month high against the yen in early July, just prior to the sell-off in U.S.
equities. The dollar's strength against the mark during most of the period was
supported by the Bundesbank's rate cuts in response to Germany's economic
weakness, which made U.S. currency relatively more attractive. The dollar also
rose against the yen due to reduced expectations of Japanese interest rate
increases. Though the July decline in the U.S. stock market triggered concern
that investors would switch out of dollar-denominated assets, the dollar
steadied against both currencies in August.
The International Market Environment:
Stock Markets Were Generally Weak
The international economic environment was generally weaker than expected,
particularly in Europe and Asia. Japan was a notable exception, with the pace of
economic growth improving. Against this mixed backdrop, Japanese and Asian
equities declined during the period under review, while selected European equity
markets were strong.
Europe. The long-awaited European economic recovery did not materialize
during the period, with high unemployment and weak growth in Germany, a "core"
market, persisting until the end of the period, when some signs of strengthening
began to emerge. However, growth in some of the peripheral markets (e.g., Sweden
and Spain) was somewhat stronger. Amid this generally sluggish economic picture,
the FT/S&P Actuaries Europe Index (designated in local currencies) rose 2.6%
during the period. Small-capitalization stocks outperformed larger stocks. The
slow growth environment and, in many cases, strengthening currencies created the
impetus for corporate restructuring (particularly in Germany and Switzerland) as
companies sought higher returns on assets. Within Europe, the equity markets of
Finland, Sweden and the Netherlands were among the best performers during the
period. Austria and Germany were two of the weakest markets, due to a sharp
slowdown in economic growth during the first quarter of 1996, while the U.K.
market declined due to a perceived increase in political risks and a scaling
back in growth estimates.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
Japan. Japanese stocks (as measured by the TOPIX index in yen) declined
1.8% during the period. These weak results masked the strong performance of
Japanese equities in March and April and an additional surge in June, when
Japanese stocks reached a four-year high. A number of factors contributed to the
Japanese market's rally, including increased foreign investments from Europe and
the United States and heavy buying from Japanese public pension funds. Long-term
interest rates remained very low during the period and the weak yen contributed
to increased exports to the U.S. The Japanese market experienced a dramatic
reversal in July, declining 7.5%, wiping out its recent gains. The sell-off was
linked to the U.S. correction and fears of a possible increase in interest rates
in Japan. To a degree, the government's fiscal stimulus package last year
appears to have begun to work, although sustainable corporate earnings growth
has not yet been demonstrated.
Asia. A 1995 year-end rally in Asia's equity markets came to an end during
the period as a wide range of regional concerns dampened investor interest in
the region. For the six months ended July 31, equities declined 5.8%, as
measured by the MSCI All Country Asia Free (ex Japan) Index. From mid-February
through mid-March, stocks came under pressure due to saber rattling by China as
well as political elections in other Asian countries. Though most markets
enjoyed a brief rebound from mid-March through April, investor uncertainty
resulted in weak performance during the second half of the period. The primary
factors contributing to the region's market declines were country-specific,
including Thailand's weakening corporate earnings and financial crises,
Indonesia's political transition concerns, and a Korean government corruption
probe. In the larger Asian markets, Singapore came under pressure after the
government introduced measures to dampen its residential property market and
Hong Kong declined due to concerns regarding rising U.S. interest rates.
While no one can accurately predict the future direction of the market, it
seems likely that U.S. equities will continue to be volatile in the months ahead
and large gains may be difficult to achieve. However unnerving, market
corrections do occasionally occur. As in any time period, investors would be
well served to maintain the discipline to stick to their own investment plans
and remember that over the long term, stocks have historically outperformed
other asset classes. It is also worth noting that diversification among equity
markets (domestic and international) and among asset classes (equities, fixed
income and money markets) can help temper the effects of a downturn in any one
market.
We appreciate your support and look forward to continuing our relationship
in the years to come.
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
August 31, 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
45% to 65% in equity securities, with the remainder (at a minimum of 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 Security Selection and Asset Allocation Benefited Performance
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Fund Total Return Benchmark
(based on net Total
asset value) Return+
------------ -------
<S> <C> <C>
Class A (1/31/96 - 7/31/96) 1.32% 0.29%
Class B (5/1/96 - 7/31/96)* -0.35% -0.21%
- ----------------------------------------------------------------
</TABLE>
* Performance for Class B shares is from their inception through the end of
the period. Class B performance assumes no redemption has been made and
therefore does not reflect the effects of the contingent deferred sales
charge.
+ The benchmark is a combination of the S&P 500 index (weighted at 55%) and
the Lehman Brothers Aggregate Bond Index (weighted at 45%).
Both the equity and the fixed income markets came under pressure during the
period, with rising interest rates impacting bond prices and adding to
volatility in equity prices. Despite the adverse market conditions, the fund's
Class A shares outperformed the benchmark (1.32% versus 0.29%) during the
six-month period ended July 31, 1996, as well as Lipper Analytical Services'
balanced fund category average (0.37%). The fund's Class B shares did not fare
as well since their inception was in May, just prior to the stock market's
sell-off in July.
During the period, the equity and fixed income portions of the fund
outperformed their respective benchmarks, the S&P 500 stock index and the Lehman
Brothers Aggregate Bond Index. However, both the fund's fixed income portfolio
and the Lehman Brothers Aggregate Bond Index recorded slightly negative returns
due to the impact of rising interest rates. This was offset by the portfolio's
equity investments, which achieved positive returns due to successful stock
selection. In addition, the fund's performance benefited from our asset
allocation decisions. During April and May, just prior to the stock market's
July correction, we decreased the fund's equity allocation in favor of fixed
income investments. This timely allocation adjustment was a result of our market
analysis, which indicated that slowing stock market momentum and rising bond
yields made fixed income securities relatively more attractive.
Equities: The fund's best performing equity investments came from a diverse
range of sectors, including banking, tobacco and technology. BankAmerica Corp.
and NationsBank Corp. appreciated due to stronger than expected earnings growth
and successful cost-reduction efforts. The fund's investment in Philip Morris
Companies, Inc. was increased after the stock became inexpensive due to some
unfavorable legal developments, then was subsequently trimmed after the stock
rebounded. A correction in technology stocks enabled us to increase the fund's
positions in Intel Corp. and Compaq Computer Corp. at attractive valuations,
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
both of which rebounded when their earnings exceeded expectations. Disappointing
performers included Fleming Companies, Inc., a food products distributor, which
experienced financial stress due to an unforeseen customer lawsuit, and marine
and boating manufacturers Brunswick Corp. and Outboard Marine Corp., whose
highly seasonal sales were hurt by the wet spring weather.
. Fixed Income: The favorable performance of the fund's fixed income holdings
relative to the Lehman Brothers Aggregate Bond Index can primarily be attributed
to successful security selection in the corporate bond and emerging debt
sectors. Within the corporate bond sector, aircraft equipment trust bonds issued
by Continental Airlines and Northwest Airlines performed particularly well.
Portfolio Composition:
Decreased Equity and Cash Equivalent Allocations in Favor of Fixed Income
Securities
As noted, we reduced the fund's equity weighting in favor of fixed income
during the spring. As of July 31, 1996, the fund's asset mix based on net assets
was 50.1% in equities, 46.5% fixed income and the remainder in cash equivalents.
. Equities: The fund's weightings in technology and transportation were
increased during the period. New positions included Lucent Technologies, Inc., a
recent spin-off from AT&T, which is expected to benefit from increasing demand
for its sophisticated communication products; Canadian Pacific Ltd. (Canadian
railroad and energy), where a more favorable regulatory environment has
contributed to the potential for a sizable reduction in railroad operating
expenses, and Continental Airlines, Inc., which dramatically enhanced customer
service and significantly increased its share of business travel.
As of July 31, the fund's weighted average market capitalization was
approximately $13.7 billion compared with $34.9 billion for the S&P 500 stock
index.
- --------------------------------------------------------------------------------
Top 10 Equity Holdings as of July 31, 1996
<TABLE>
<CAPTION>
Percentage
of Total
Company Line of Business Net Assets
- ------- ---------------- ----------
<S> <C> <C>
Philip Morris Companies, Inc. Tobacco and Food Products 1.9%
Cigna Corp. Insurance 1.5%
Atlantic Richfield Co. International Integrated Oil 1.5%
Company
Compaq Computer Corp. Computers and Peripherals 1.5%
McDonnell Douglas Corp. Aerospace/Defense 1.5%
Goodyear Tire & Rubber Co. Tire and Rubber Products 1.5%
Georgia-Pacific Corp. Paper and Forest Products 1.4%
Ford Motor Co. Automotive Products 1.4%
NationsBank Corp. Commercial Bank 1.4%
Texaco, Inc. International Integrated Oil 1.3%
Company
- --------------------------------------------------------------------------------
</TABLE>
. Fixed Income: In terms of total net assets, the fund's mortgage-backed
securities (MBS) sector was increased to 16.7%, up from 10.0% six months ago,
making it the largest fixed income allocation. The MBS sector became
increasingly attractive as rising interest rates during the first half of the
period slowed the pace of mortgage prepayments. Corporate bonds, a 13.4%
allocation, offered incremental yield as well as the opportunity for us to
exploit pricing inefficiencies, which we identified using our extensive
research. We also favored asset-backed securities (ABS), slightly increasing the
sector's weighting to 5.9% (versus 4.9% six months ago), due to its high credit
quality and attractive incremental yield over U.S. Treasuries. Though U.S.
Treasuries were trimmed to 5.2%, we continued to use them along with futures to
manage the fund's interest rate risk to match that of the Lehman Brothers
Aggregate Bond Index. The remaining fixed income positions were in emerging
market debt (4.0%), where we emphasized higher credit, short-duration
securities, and in government agency securities (1.3%).
- --------------------------------------------------------------------------------
5
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund (continued)
Outlook
In the near term, factors that will affect equity performance include the
strength of corporate earnings, the pace of economic growth and the Federal
Reserve's potential monetary tightening. Though we are expecting below-average
returns for the equity market for the remainder of 1996, we continue to find
attractive stocks that we believe are misunderstood and undervalued.
We have a relatively cautious view of the fixed income markets in the
coming months due to possible Fed tightening later in the year, which would
impact the prices of fixed income securities. We believe that the
mortgage-backed securities market remains attractive, with both prepayments and
supply continuing to slow. Though the pace of consumer credit delinquencies has
increased, we continue to have confidence in our asset-backed securities
position, where we emphasize high-quality, short-duration debt.
We believe that the fund's current equity and fixed income weightings
should serve it well in the near term. Going forward, we intend to continue to
utilize extensive investment research to seek attractive investments that we
believe will help the fund achieve its investment objectives.
/s/ Mitchell E. Cantor /s/ Ronald E. Gutfleish
Mitchell E. Cantor Ronald E. Gutfleish
Portfolio Managers, Equities
/s/ Jonathan A. Beinner /s/ C. Richard Lucy
Jonathan A. Beinner C. Richard Lucy
Portfolio Managers, Fixed Income
August 31, 1996
- --------------------------------------------------------------------------------
6
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
===========================================================
Common Stocks--50.0%
Airlines--1.8%
<S> <C> <C>
4,500 AMR Corp.* $ 354,938
26,500 Continental Airlines, Inc.* 675,750
- -----------------------------------------------------------
1,030,688
- -----------------------------------------------------------
Appliance Manufacturer--0.6%
19,100 Sunbeam Corp. 367,675
- -----------------------------------------------------------
Auto/Original Equipment Manufacturer--0.7%
11,900 Lear Corp.* 404,600
- -----------------------------------------------------------
Auto/Vehicle--1.4%
24,800 Ford Motor Co. 806,000
- -----------------------------------------------------------
Banks--3.5%
8,200 BankAmerica Corp. 653,950
13,200 GP Financial Corp.* 417,450
9,300 NationsBank Corp. 798,638
3,400 Republic of New York Corp. 215,475
- -----------------------------------------------------------
2,085,513
- -----------------------------------------------------------
Chemicals-Commodity --0.7%
16,400 Geon Co. 395,650
- -----------------------------------------------------------
Communications Technology--1.1%
17,400 Lucent Technologies, Inc. 645,975
- -----------------------------------------------------------
Computers & Peripherals--1.5%
15,900 Compaq Computer Corp.* 870,525
- -----------------------------------------------------------
Defense--2.7%
4,004 Lockheed Martin Corp. 331,832
19,400 McDonnell Douglas Corp. 868,150
4,400 Northrop Grumman Corp. 302,500
1,500 Thiokol Corp. 52,875
- -----------------------------------------------------------
1,555,357
- -----------------------------------------------------------
Department Stores--2.2%
14,700 JC Penney Inc. 731,325
13,900 Sears Roebuck & Co. 569,900
- -----------------------------------------------------------
1,301,225
- -----------------------------------------------------------
Electric Utilities--1.6%
7,700 CMS Energy Corp. 233,888
43,000 Long Island Lighting Co. 731,000
- -----------------------------------------------------------
964,888
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
===========================================================
Common Stocks (continued)
Food Producers--0.8%
<S> <C> <C>
40,200 Chiquita Brands International,Inc.* $ 482,400
- -----------------------------------------------------------
Forest Products--2.2%
10,900 Georgia Pacific Corp. 814,775
38,200 Stone Container Corp. 477,500
- -----------------------------------------------------------
1,292,275
- -----------------------------------------------------------
Health Suppliers/Services--0.9%
12,900 Baxter International, Inc. 536,963
- -----------------------------------------------------------
Healthcare Management--1.7%
10,300 Aetna Inc. 598,688
20,400 Tenet Healthcare Corp.* 395,250
- -----------------------------------------------------------
993,938
- -----------------------------------------------------------
Home Builders--1.5%
10,600 Centex Corp. 307,400
24,500 Lennar Corp. 548,188
- -----------------------------------------------------------
855,588
- -----------------------------------------------------------
Insurance-Life--2.3%
8,500 Cigna Corp. 905,250
10,200 Lincoln National Corp. 434,775
- -----------------------------------------------------------
1,340,025
- -----------------------------------------------------------
Insurance-Property & Casualty--2.4%
9,200 Allmerica Financial Corp. 272,550
6,600 Allstate Corp. 295,350
16,100 PartnerRe Holding 454,825
12,700 Tig Holdings, Inc. 352,425
- -----------------------------------------------------------
1,375,150
- -----------------------------------------------------------
Integrated Oil--3.3%
7,800 Atlantic Richfield Co. 904,800
2,600 Mobil Corp. 286,975
9,000 Texaco Inc. 765,000
- -----------------------------------------------------------
1,956,775
- -----------------------------------------------------------
Investment Brokers & Managers--0.5%
13,100 Lehman Brothers Holdings, Inc. 302,938
- -----------------------------------------------------------
Logistics/Trucking--0.7%
21,100 Consolidated Freightways, Inc. 414,088
- -----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund (continued)
July 31, 1996
(Unaudited)
- -----------------------------------------------------------
Shares Description Value
- -----------------------------------------------------------
Common Stocks (continued)
Logistics/Rails--1.0%
25,900 Canadian Pacific Ltd. $ 563,325
- -----------------------------------------------------------
Oil Refining & Marketing--1.6%
10,200 Ashland Inc. 373,575
11,500 Tosco Corp. 562,063
- -----------------------------------------------------------
935,638
- -----------------------------------------------------------
Packaging--1.1%
42,900 Owens Illinois Corp.* 670,313
- -----------------------------------------------------------
Recreational Products--1.2%
30,700 Brunswick Corp. 583,300
6,000 Outboard Marine Corp. 93,750
- -----------------------------------------------------------
677,050
- -----------------------------------------------------------
Semiconductors & Electronics--2.1%
13,700 Avnet Inc. 597,663
8,500 Intel Corp. 638,563
- -----------------------------------------------------------
1,236,226
- -----------------------------------------------------------
Software--0.4%
10,300 Autodesk Inc. 237,544
- -----------------------------------------------------------
Specialty Finance--0.8%
8,700 Dean Witter Discover & Co. 442,613
- -----------------------------------------------------------
Steel--1.0%
16,200 AK Steel Holding Corp. 593,325
- -----------------------------------------------------------
Supermarkets--1.1%
16,000 Fleming Companies, Inc. 242,000
15,300 Supervalu, Inc. 426,488
- -----------------------------------------------------------
668,488
- -----------------------------------------------------------
Textiles--0.9%
20,900 Fruit of The Loom, Inc.* 527,725
- -----------------------------------------------------------
Tires & Other Related Rubber Products--1.5%
19,300 Goodyear Tire & Rubber Co. 854,025
- -----------------------------------------------------------
Tobacco--3.2%
10,500 Philip Morris Companies, Inc. 1,098,563
14,100 RJR Nabisco, Inc.* 433,575
11,700 Universal Corp. 324,675
- -----------------------------------------------------------
1,856,813
- -----------------------------------------------------------
Total Common Stocks
(Cost $27,223,528) $29,241,321
===========================================================
- -----------------------------------------------------------
Preferred Stocks--0.1%
Media/Entertainment--0.1%
61 Time Warner Inc., 10.25% $ 60,390
- -----------------------------------------------------------
Tobacco--0.0%
3,400 RJR Nabisco, Inc. 20,825
- -----------------------------------------------------------
Total Preferred Stocks
(Cost $84,320) $ 81,215
- -----------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------
Asset-Backed Securities--5.9%
Airplanes Pass Through Trust Series 1, Class C
$ 100,000 8.15% 03/15/19 $ 99,297
Case Equipment Loan Trust, Series 1995-A, Class A
92,201 7.30 03/15/02 93,012
Chemical Bank Master Credit Card Trust Series 1995-2, Class A
140,000 6.23 06/15/03 137,201
Chevy Chase Auto Receivables Trust Series 1995-2, Class A
94,924 5.80 06/15/02 93,967
Discover Card Master Trust 1994-2 A
70,000 5.85 10/16/04 70,568
Discover Card Master Trust 1996-2 A
110,000 5.72 07/18/05 110,363
Discover Card Master Trust 1996-4 A
740,000 5.87 10/16/13 747,037
Fasco Auto Trust, Series 1996-1A
298,652 6.65 11/15/01 298,888
Fingerhut Master Trust, Series 1996-1, Class A
200,000 6.45 02/20/02 198,874
Navistar Financial Trust, Series 1995-A, Class A2
184,763 6.55 11/20/01 184,955
Navistar Financial Trust, Series 1995-B, Class A3
120,000 6.05 04/15/02 119,024
Sears Credit Card Master Trust, Series 1995-2, Class A
700,000 8.10 06/15/04 726,901
Sears Credit Card Master Trust, Series 1995-3, Class A
70,000 7.00 10/15/04 70,372
Standard Credit Card Master Trust, Series 1994-4, Class A
110,000 8.25 11/07/03 115,225
- -----------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund (continued)
July 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- ------------------------------------------------------------
Asset-Backed Securities (continued)
Standard Credit Card Master Trust, Series 1995-1, Class A
$ 360,000 8.25% 01/07/07 $ 378,450
- ------------------------------------------------------------
Total Asset-Backed Securities
(Cost $3,465,590) $3,444,134
- ------------------------------------------------------------
Corporate Bonds--13.4%
Finance Bonds--4.8%
BankAmerica Corp.
$ 500,000 7.75% 07/15/02 $ 514,000
Capital One Bank
200,000 8.33 02/10/97 202,004
250,000 8.13 02/27/98 255,083
Comdisco Inc.
525,000 9.75 01/15/97 533,211
Continental Bank
100,000 12.50 04/01/01 121,420
Countrywide Funding Corp.
100,000 6.08 07/14/99 97,923
Fleet Mortgage Group, Inc.
250,000 6.50 06/15/00 244,913
Golden West Financial Corp.
200,000 10.25 12/01/00 223,816
Olympic Financial Ltd.
95,000 13.00 05/01/00 103,075
Signet Banking Corp.
500,000 9.63 06/01/99 532,825
- ------------------------------------------------------------
Total Finance Bonds
(Cost $2,889,940) $2,828,270
- ------------------------------------------------------------
Industrial Bonds--7.1%
360 Communications Co.
$ 115,000 7.13% 03/01/03 $ 110,707
Auburn Hills Trust
90,000 12.00 05/01/20 129,979
Blockbuster Entertainment
50,000 6.63 02/15/98 49,694
Cablevision Industries Corp.
300,000 10.75 01/30/02 320,982
Continental Airlines, Inc.
$ 400,000 10.22% 07/02/14 $ 450,640
Federated Department Stores, Inc.
50,000 10.00 02/15/01 52,500
50,000 8.13 10/15/02 49,250
Ford Capital Corp.
275,000 9.38 01/01/98 285,637
Ford Motor Credit Co.
40,000 8.38 01/15/00 41,688
General Motors Acceptance Corp.
170,000 7.13 05/10/00 171,142
210,000 5.63 02/05/01 198,668
News America Holdings, Inc.
60,000 7.50 03/01/00 60,718
Northwest Airlines
75,000 8.07 01/02/15 76,205
220,000 8.97 01/02/15 222,475
Oryx Energy Co.
95,000 9.50 11/01/99 99,642
RJR Nabisco Inc.
135,000 8.00 07/15/01 133,655
100,000 8.63 12/01/02 101,185
Rogers Cablesystems, Inc.
115,000 9.63 08/01/02 114,138
Tele-Communications, Inc.
165,000 9.88 04/01/98 172,445
130,000 7.25 06/15/99 129,912
20,000 6.46 03/06/00 19,449
125,000 9.65 10/01/03 132,496
Tenet Healthcare Corp.
60,000 9.63 09/01/02 63,750
Tenneco Inc.
260,000 10.00 08/01/98 276,128
Time Warner, Inc.
175,000 7.45 02/01/98 176,626
125,000 9.63 05/01/02 137,066
250,000 7.98 08/15/04 247,875
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Statement of Investments
================================================================================
Goldman Sachs Balanced Fund (continued)
July 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
===========================================================
Corporate Bonds (continued)
Industrial Bonds (continued)
Tosco Corp.
$ 110,000 7.00% 07/15/00 $ 108,601
- -----------------------------------------------------------
Total Industrial Bonds
(Cost $4,142,333) $4,133,253
===========================================================
Utility Bonds--0.9%
Arkla Inc.
$ 250,000 9.20% 12/18/97 $ 257,948
Central Maine Power Co.
100,000 7.38 01/01/99 100,254
160,000 7.45 08/30/99 155,653
- -----------------------------------------------------------
Total Utility Bonds
(Cost $521,661) $ 513,855
===========================================================
Yankee Bonds--0.6%
Korea Electric Power
$ 95,000 7.40% 04/01/16 $ 92,206
Province of Quebec
200,000 13.25 09/15/14 241,596
- -----------------------------------------------------------
Total Yankee Bonds
(Cost $345,144) $ 333,802
===========================================================
Total Corporate Bonds
(Cost $7,899,078) $7,809,180
===========================================================
Emerging Market Debt--4.0%
Argentina Global Bond
$ 90,000 9.25% 02/23/01 $ 86,108
Asia Pulp and Paper International Finance Co.
30,000 10.25 10/01/00 30,278
80,000 8.00 04/03/97 74,713
Banco Nacional Com Ext
20,000 10.76 06/23/97 20,697
BCO Commercio Exterior
170,000 8.63/(a)/ 06/02/00 172,321
Bridas Corp.
80,000 12.50 11/15/99 82,951
- -----------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
===========================================================
Emerging Market Debt (continued)
Corp. Andina de Fomento
$ 160,000 7.25% 04/30/98 $ 160,070
Empresa Col Petroleos
100,000 7.25 07/08/98 99,208
Financiera Energy Nacional
50,000 9.38 06/15/06 49,953
150,000 6.63 12/13/96 150,009
Grupo Industrial Durango
60,000 12.00 07/15/01 60,604
Imexsa Export Trust
100,000 10.13 05/31/03 100,822
Inst Fomento Industrial
50,000 8.38 07/29/01 49,989
Nacional Financiera Snc
320,000 5.88 02/17/98 306,963
40,000 8.13 04/09/98 39,740
200,000 8.46 06/19/98 201,300
60,000 9.00 01/25/99 59,942
Panamerican Beverage Co.
30,000 8.13 04/01/03 29,713
PT Indah Kiat
130,000 8.88 11/01/00 124,682
Republic of Argentina
94,400 10.00/(a)/ 04/01/00 111,951
15,600 8.59 04/04/98 15,641
109,200 8.59 04/06/98 109,485
YPF Sociedad Anonima
119,099 7.50 10/26/02 118,509
Zhuhai Highway Co. Ltd
100,000 9.13 07/01/06 99,482
===========================================================
Total Emerging Market Debt
(Cost $2,356,383) $2,355,131
===========================================================
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund (continued)
July 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------
Government Agency Obligations--1.3%
Federal Home Loan Mortgage Corp.
$ 20,000 8.20% 01/16/98 $ 20,234
Federal National Mortgage Association
130,000/(d)/ 7.70 08/10/04 130,549
520,000/(d)/ 8.50 02/01/05 539,698
Government Backed Trust (Turkey)
42,115 9.40 11/15/96 42,406
Resolution Funding Corp. Principal--Only Stripped Securities/(a)/
300,000 7.39 01/15/21 51,108
- -----------------------------------------------------------
Total Government Agency Obligations
(Cost $815,934) $ 783,995
- -----------------------------------------------------------
Mortgage Backed Obligations--16.7%
Federal Home Loan Mortgage Corp.
$1,000,000 7.50% TBA-30 year/(b)/985,000
Federal National Mortgage Association
1,000,000 3.50 05/25/19 843,730
2,004,115 7.00 02/01/26 1,925,203
1,000,000 8.50 TBA-15 1,034,375
year/(b)/
1,000,000 7.50 TBA-15 1,002,813
year/(b)/
Government National Mortgage Association
1,000,000 7.00 TBA-30 957,500
year/(b)/
1,000,000 8.00 TBA-30 1,008,125
year/(b)/
1,000,000 8.00 TBA-30 1,006,563
year/(b)/
996,788 7.50 05/15/23 984,639
- -----------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $9,729,043) $9,747,948
- -----------------------------------------------------------
U.S. Treasury Obligations--5.2%
United States Treasury Bonds
$ 470,000/(d)/ 12.00% 08/15/13 $ 659,100
130,000/(d)/ 8.75 05/15/17 153,217
10,000 8.88 08/15/17 11,930
440,000 8.75 08/15/20 522,980
United States Treasury Notes
420,000/(d)/ 5.63 10/31/97 417,900
285,000/(d)/ 7.25 08/15/04 293,772
United States Treasury Principal-Only Stripped Securities/(a)/
690,000 6.87 11/15/04 394,673
2,300,000 7.26 05/15/20 420,716
600,000 7.26 08/15/20 107,934
80,000 6.46 08/15/99 65,916
- -----------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $3,118,240) $3,048,138
- -----------------------------------------------------------
Repurchase Agreement--13.2%
Joint Repurchase Agreement Account
$7,700,000 5.69% 08/01/96 $7,700,000
- -----------------------------------------------------------
Total Repurchase Agreement
(Cost $7,700,000) $7,700,000
- -----------------------------------------------------------
Total Investments
(Cost $62,392,116)/(c)/ $64,211,062
- -----------------------------------------------------------
- -----------------------------------------------------------
Futures contracts open at July 31, 1996 are as follows:
Number of
Contracts Settlement Unrealized
Type Long/(e)/ Month Gain/(Loss)
- --------------------------- ----------- ------------- ----------
2-Year U.S. Treasury Notes 5 September 1996 $3,047
5-Year U.S. Treasury Notes 2 September 1996 2,375
10-Year U.S. Treasury Notes 16 September 1996 15,688
S&P 500 Stock Index 1 September 1996 (18,400)
- ------------------------------------------------------------------------
$2,710
========================================================================
- ------------------------------------------------------------------------
The accompanying notes are an interal part of these financial statements.
11
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Balanced Fund (continued)
July 31, 1996
(Unaudited)
- -----------------------------------------------------------
- -----------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $ 3,221,867
Gross unrealized loss for investments in
which cost exceeds value (1,405,683)
- -----------------------------------------------------------
Net unrealized gain $ 1,816,184
- -----------------------------------------------------------
*Non-income producing security.
/(a)/ The interest rate disclosed for these securitites represents effective
yields to maturity.
/(b)/ 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.
/(c)/ The aggregate cost for federal income tax purposes is $62,394,878.
/(d)/ Portions of these securities are being segregated as collateral for
futures contracts, TBA (To Be Assigned) securities and/or mortgage dollar
rolls.
/(e)/ Each 2-Year Treasury Note contract represents $200,000 in notional par
value. Each 5-Year U.S. Treasury Note contract and 10-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 at risk are $2,850,000 and
$3,274,825, 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.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund
- --------------------------------------------------------------------------------
Objective and Investment Approach
The Goldman Sachs Select Equity Fund is designed to provide investors with
a broadly diversified portfolio that can be used as a core holding on which to
build an investment program. The fund seeks to provide investors with a total
return (consisting of capital appreciation and dividend income) that, net of
expenses, exceeds the total return of the S&P 500 stock index. The fund's
mandate is to remain fully invested with industry diversification,
capitalization and risk characteristics similar to the S&P 500 stock index.
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 the Asset Management
Division's proprietary model. Our quantitative system evaluates each stock using
many different criteria including valuation measures, growth expectations,
earnings momentum and risk. It also objectively 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:
Fund Held Its Own Amid a Choppy Market
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Fund Total Return S&P 500
(based on net Total
asset value) Return
<S> <C> <C>
Class A (1/31/96 - 7/31/96) 1.37% 1.76%
Class B (5/1/96 - 7/31/96)* -2.64% -1.58%
Institutional (1/31/96 - 7/31/96) 1.78% 1.76%
Service (6/7/96 - 7/31/96)* -5.19% -4.66%
- --------------------------------------------------------------------
</TABLE>
* Performance for Class B and Service shares is from their inception through
the end of the period. Class B performance assumes no redemption has been
made and therefore does not reflect the effects of the contingent deferred
sales charge.
Despite the volatile equity market during the period under review and its
dramatic sell-off in July, the fund's Class A and Institutional shares delivered
positive returns. The Institutional shares slightly outperformed the benchmark,
the S&P 500 stock index, while the fund's Class A shares slightly lagged the
index due to the necessarily higher expenses that come from servicing a greater
number of smaller accounts. We are nevertheless pleased to note that for the
12-month period ended July 31, 1996, the fund's Class A shares placed in the top
third of the Lipper growth fund category (ranking 172 out of 622), 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. Lipper did not rank the fund's Class B, Institutional and
Service shares.) The fund's Class B and Service shares were particularly
impacted by the adverse market conditions because their inceptions were in May
and June respectively, just prior to the market correction.
In February and March, the fund outperformed the S&P 500 due to successful
stock selection resulting from both the Investment Research Department's
qualitative stock ratings and the Asset Management Division's quantitative
model. However, at different points during the remainder of the period, either
the quantitative model or the qualitative analysis fell out of step with
investor sentiment.
A more detailed analysis reveals that the best performing stocks during
the period had strong near-term growth expectations and high price/earnings
multiples. In general, the fund does not emphasize these so-called "torpedo"
stocks, which tend to hold up reasonably well until an adverse earnings surprise
comes along to blow them out of the water. While these types of stocks generally
underperform over the long term, over this particular period they did well as an
unusually large number of companies reported earnings above analysts' estimates.
In contrast, value-oriented stocks with positive earnings momentum but lower
near-term growth expectations, which are heavily weighted by our model, did not
perform as well. Historically, these types of stocks
13
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund (continued)
- --------------------------------------------------------------------------------
have recorded strong results and, under normal circumstances, we will continue
to stress them.
Portfolio Composition:
Increased Emphasis on Defensive Positions
As of July 31, the fund was well diversified with 139 stocks. In general,
its sector exposures approximated those of the S&P 500 stock index, although the
fund was slightly overweighted in the financial, energy and electric/gas sectors
and underweighted in the consumer nondurables and telecommunications sectors.
These differences, as shown in Table II, were the result of our "bottom-up"
stock selection process rather than the result of a "top-down" sector rotation
strategy.
One of the most significant changes to the portfolio's allocation was its
increased exposure to the energy sector, which appears attractive due to its low
risk characteristics, strong earnings momentum and fair valuations based on
moderate growth expectations. As a result, several oil stocks joined Royal Dutch
Petroleum Co. among the fund's top 10 holdings, including Exxon Corp., which is
the largest position, Texaco, Inc., and Mobil Corp.
Despite the recent volatility in tobacco stocks, we continue to favor
Philip Morris Companies, Inc., which has demonstrated stable earnings growth, an
attractive dividend yield and an inexpensive price/earnings multiple. The
portfolio's position in Philip Morris enables us to closely match the fund's
weighting in the tobacco industry to that of the S&P 500, which is consistent
with our investment style of approximating the sector weightings of the index
while attempting to outperform it through stock selection.
During the period, our stock selection became slightly more defensive, and
we now equally favor value stocks, momentum stocks, and stocks with stable price
and earnings histories. (Normally, we prefer value and momentum stocks more than
defensive issues.) This change in emphasis was due to three primary drivers.
Yield spreads between higher and lower quality bonds were tight, which typically
occurs near the peak of a business cycle and indicates that the price of risk is
low; the stock market was no longer being supported by falling interest rates;
and the market's low dividend yield relative to short-term interest rates
suggested that the equity market was trading at expensive valuation levels, at
least until the July correction.
Most of the fund's valuation characteristics continued to be more
favorable than those of the benchmark. For example, the fund had a lower
price/earnings ratio based on 1996 estimated earnings than the S&P 500 (13.5x
versus 15.5x) and a lower price/book ratio (2.5x versus 2.9x). The fund achieved
these valuation levels without sacrificing potential growth or taking additional
risk, as the fund's expected growth and volatility were both quite similar to
the S&P 500.
The fund's best performers during the period came from a variety of
sectors, including banks (NationsBank Corp. and BankAmerica Corp.), technology
(Microsoft Corp. and Intel Corp.), beverages (Coca-Cola Co. and Pepsico, Inc.),
and retailing (Gap, Inc. and Wal-Mart Stores, Inc.). However, performance was
hindered by some of the fund's utility and telecommunication investments (Unicom
Corp., AT&T Corp., Sprint Corp. and Ameritech Corp.).
<TABLE>
<CAPTION>
Table I
- ----------------------------------------------------------------------
Top 10 Portfolio Holdings as of July 31, 1996
<S> <C> <C> <C>
Percentage Percentage
of Total of S&P 500
Company Line of Business Net Assets Index
Exxon Corp. Petroleum and 2.7% 2.1%
Natural Gas
General Electric Co. Electronics 2.6% 2.8%
Philip Morris Tobacco and Food 2.2% 1.8%
Companies, Inc. Products
Texaco, Inc. Petroleum and 1.9% 0.5%
Natural Gas
Pepsico, Inc. Beverages and Food 1.8% 1.0%
NationsBank Corp. Commercial Bank 1.6% 0.5%
Mobil Corp. Petroleum and 1.5% 0.9%
Natural Gas
Royal Dutch Petroleum and 1.5% 1.7%
Petroleum Co. Natural Gas
Schering Plough Pharmaceuticals 1.5% 0.4%
Corp.
AT&T Corp. Telecommunications 1.5% 1.7%
------ ------
Total 18.8% 13.4%
- ----------------------------------------------------------------------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Table II
- --------------------------------------------------------------------
Sector Breakout as of July 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Percentage of Percentage of
Industry Sectors Portfolio S&P 500 Index Difference
Finance 17.9% 15.5% 2.4%
Consumer Nondurables 10.1% 13.7% -3.6%
Energy 9.8% 7.9% 1.9%
Health 8.2% 9.6% -1.4%
Basic Industry 8.2% 7.8% 0.4%
Technology 7.1% 8.7% -1.6%
Electric/Gas 7.0% 3.9% 3.1%
Telecommunications 5.0% 7.2% -2.2%
Capital Spending 4.4% 5.0% -0.6%
Consumer Services 4.2% 5.3% -1.1%
Miscellaneous 4.2% 4.9% -0.7%
Retail 3.7% 4.2% -0.5%
Consumer Durables 3.5% 3.0% 0.5%
Cash 2.6% 0.0% 2.6%
Transportation 2.4% 1.6% 0.8%
Aerospace 1.9% 1.7% 0.2%
- --------------------------------------------------------------------
</TABLE>
Outlook
Despite the recent market volatility, we continue to have a moderately
favorable view of the equity market, assuming stable interest rates, continued
expectations for favorable corporate profit growth and no significant pickup in
inflation. Furthermore, July's stock price declines have resulted in more
attractive equity valuations. The fund's quantitative model currently favors
stocks with attractive valuations (i.e., low price/earnings, price/book and
price/cash flow multiples), high returns on capital, positive earnings estimate
revisions, and stable earnings and prices. We believe that the fund is well
positioned and we intend to maintain our strategy of diversified,
risk-controlled exposure to sound investment themes (value, momentum and
stability).
/s/ Robert C. Jones
Robert C. Jones
Portfolio Manager
August 31, 1996
- --------------------------------------------------------------------------------
15
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Shares Description Value
====================================================================
Common Stocks--97.4%
Aerospace--0.9%
<S> <C> <C>
21,800 United Technologies Corp. $ 2,455,225
- --------------------------------------------------------------------
Agency/Government--1.1%
93,600 Federal National Mortgage Assn. 2,971,800
- --------------------------------------------------------------------
Agriculture/Heavy Equipment--1.8%
18,600 Caterpillar, Inc. 1,225,275
31,500 Conagra Inc. 1,338,750
35,400 Dover Corp. 1,517,775
12,400 Tenneco, Inc. 610,700
- --------------------------------------------------------------------
4,692,500
- --------------------------------------------------------------------
Airlines--2.2%
40,700 AMR Corp.* 3,210,213
35,400 Delta Air Lines, Inc. 2,473,575
- --------------------------------------------------------------------
5,683,788
- --------------------------------------------------------------------
Alcohol--0.3%
10,800 Anheuser Busch Companies, Inc. 807,300
- --------------------------------------------------------------------
Appliance Manufacturer--0.3%
8,500 Emerson Electric Co. 717,188
- --------------------------------------------------------------------
Auto/Original Equipment Manufacturer--1.3%
17,200 Cummins Engine Inc. 642,850
41,900 Rockwell International Corp. 2,199,750
14,200 Varity Corp.* 667,400
- --------------------------------------------------------------------
3,510,000
- --------------------------------------------------------------------
Auto/Vehicle--2.1%
33,200 Chrysler Corp. 942,050
51,500 Ford Motor Co. 1,673,750
58,100 General Motors Corp. 2,832,375
- --------------------------------------------------------------------
5,448,175
- --------------------------------------------------------------------
Banks--6.7%
33,550 Banc One Corp. 1,161,669
27,400 Bank of New York, Inc. 1,411,100
46,400 BankAmerica Corp. 3,700,400
12,900 Chase Manhattan Corp. 896,550
25,800 Citicorp 2,112,375
22,400 Corestates Financial Corp. 879,200
28,500 First Bank System, Inc. 1,745,625
48,200 NationsBank Corp. 4,139,175
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Shares Description Value
====================================================================
Common Stocks (continued)
Banks (continued)
<S> <C> <C>
6,200 Wells Fargo & Company $ 1,443,825
- --------------------------------------------------------------------
17,489,919
- --------------------------------------------------------------------
Beverages--2.2%
21,400 Coca Cola Co. 1,003,125
149,600 Pepsico, Inc. 4,731,100
- --------------------------------------------------------------------
5,734,225
- --------------------------------------------------------------------
Commercial Services--0.2%
16,500 Interim Services, Inc.* 610,500
- --------------------------------------------------------------------
Communications Services Companies--3.1%
50,000 Airtouch Communications, Inc.* 1,375,000
75,400 AT&T Corp. 3,930,225
73,900 Sprint Corp. 2,706,588
- --------------------------------------------------------------------
8,011,813
- --------------------------------------------------------------------
Chemicals-Commodity --3.4%
46,000 Dow Chemicals Co. 3,421,250
20,600 Du Pont EI de Nemours 1,663,450
99,500 Monsanto Co. 3,109,375
12,100 Rohm & Haas Co. 719,950
- --------------------------------------------------------------------
8,914,025
- --------------------------------------------------------------------
Chemicals-Speciality --1.2%
37,800 Allied Signal, Inc. 2,220,750
27,700 Morton International, Inc. 997,200
- --------------------------------------------------------------------
3,217,950
- --------------------------------------------------------------------
Communications Technology--0.6%
27,800 Motorola Inc. 1,501,200
- --------------------------------------------------------------------
Computers--1.2%
72,800 Hewlett Packard Co. 3,203,200
- --------------------------------------------------------------------
Computers & Peripherals--3.2%
40,000 Cisco Systems, Inc.* 2,070,000
17,400 Compaq Computer Corp.* 952,650
20,300 Eastman Kodak Co. 1,514,888
36,400 International Business Machines,
Corp. 3,926,650
- --------------------------------------------------------------------
8,464,188
- --------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund (continued)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Shares Description Value
====================================================================
Common Stocks (continued)
Construction/Environmental Services--1.0%
<S> <C> <C>
13,300 Armstrong World Industries, Inc. $ 738,150
2,300 Crane Co. 83,950
20,300 Fluor Corp. 1,223,075
15,000 Owens Corning, Inc.* 568,125
- --------------------------------------------------------------------
2,613,300
- --------------------------------------------------------------------
Consumer Staples--2.2%
13,300 Clorox Co. 1,208,638
39,000 Corning Inc. 1,438,125
33,400 Procter & Gamble Co. 2,985,125
- --------------------------------------------------------------------
5,631,888
- --------------------------------------------------------------------
Defense--1.5%
27,100 McDonnell Douglas Corp. 1,212,725
14,000 Textron, Inc. 1,120,000
18,400 TRW Inc. 1,662,900
- --------------------------------------------------------------------
3,995,625
- --------------------------------------------------------------------
Department Stores--3.1%
80,100 Dayton Hudson Corp. 2,423,025
38,600 Dillard Department Stores, Inc. 1,211,075
18,900 Mercantile Stores Co. 926,100
46,500 Sears Roebuck & Co. 1,906,500
71,500 Walmart Stores, Inc. 1,716,000
- --------------------------------------------------------------------
8,182,700
- --------------------------------------------------------------------
Electrical Equipment Manufacturer--2.6%
81,300 General Electric Co. 6,697,088
- --------------------------------------------------------------------
Electric Utilities--5.6%
53,000 Duke Power Company 2,537,375
127,700 Edison International, Inc. 1,979,350
41,000 Empresa Nacional de Electric ADR 2,398,500
19,200 General Public Utilities Corp. 624,000
57,700 Public Service Company of New
Mexico 1,146,788
53,600 Texas Utilities Co. 2,251,200
155,100 Unicom Corp. 3,644,850
- --------------------------------------------------------------------
14,582,063
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Shares Description Value
====================================================================
Common Stocks (continued)
Food Producers--0.8%
<S> <C> <C>
10,800 CPC International, Inc. $ 722,250
52,800 IBP, Inc. 1,234,200
- --------------------------------------------------------------------
1,956,450
- --------------------------------------------------------------------
Forest Products--1.1%
17,100 Alco Standard Corp. 748,125
39,300 Avery Dennison Corp. 2,033,775
- --------------------------------------------------------------------
2,781,900
- --------------------------------------------------------------------
Health Suppliers/Services--1.6%
72,600 Johnson & Johnson 3,466,650
15,800 Medtronic Inc. 748,525
- --------------------------------------------------------------------
4,215,175
- --------------------------------------------------------------------
Healthcare Management--0.7%
37,000 Columbia HCA Healthcare 1,896,250
- --------------------------------------------------------------------
Insurance Brokers & Other Insurance--0.3%
24,600 Exel Insurance Ltd. 817,950
- --------------------------------------------------------------------
Insurance-Life --3.2%
29,100 American General Corp. 1,011,225
16,200 Cigna Corp. 1,725,300
36,400 Protective Life Corp. 1,251,250
27,500 Transamerica Corp. 1,900,938
61,200 Travelers Group, Inc. 2,585,700
- --------------------------------------------------------------------
8,474,413
- --------------------------------------------------------------------
Insurance-Property & Casualty--2.5%
25,956 Allstate Corp. 1,161,531
32,850 American International Group, Inc. 3,092,006
67,900 Safeco Corp. 2,338,306
- --------------------------------------------------------------------
6,591,843
- --------------------------------------------------------------------
Integrated Oil--10.1%
25,600 Amoco Corp. 1,712,000
86,200 Exxon Corp. 7,089,950
21,700 Kerr McGee Corp. 1,236,900
36,700 Mobil Corp. 4,050,763
59,800 Norsk Hydro ADR 2,593,825
19,200 Phillips Petroleum Co. 758,400
26,600 Royal Dutch Petroleum ADR 4,013,275
59,800 Texaco Inc. 5,083,000
- --------------------------------------------------------------------
26,538,113
- --------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund (continued)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Shares Description Value
====================================================================
<S> <C> <C>
Common Stocks (continued)
Investment Brokers & Managers--1.5%
38,900 Merrill Lynch Co. $ 2,348,588
33,400 Morgan Stanley Group, Inc. 1,628,250
- --------------------------------------------------------------------
3,976,838
- --------------------------------------------------------------------
Local Phone Companies--2.1%
53,600 Ameritech Corp. 2,974,800
63,300 GTE Corp. 2,611,125
- --------------------------------------------------------------------
5,585,925
- --------------------------------------------------------------------
Logistics/Trucking--1.1%
11,200 Federal Express Corp.* 870,800
71,600 Ryder Systems, Inc. 1,906,350
- --------------------------------------------------------------------
2,777,150
- --------------------------------------------------------------------
Machinery--0.2%
50,000 Giddings & Lewis, Inc. 581,250
- --------------------------------------------------------------------
Media/Entertainment--1.4%
20,000 King World Productions, Inc.* 717,500
54,942 The Walt Disney, Co. 3,056,149
- --------------------------------------------------------------------
3,773,649
- --------------------------------------------------------------------
Nonferrous Metals--1.3%
20,100 Aluminum Company of America 1,165,800
29,700 Asarco Inc. 712,800
29,400 Cyprus Amax Minerals Co. 632,100
15,900 Phelps Dodge Corp. 934,125
- --------------------------------------------------------------------
3,444,825
- --------------------------------------------------------------------
Oil & Gas Services--0.2%
18,500 Baker Hughes, Inc. 543,438
- --------------------------------------------------------------------
Oil Refining & Marketing--0.3%
20,000 Repsol SA ADR 667,500
- --------------------------------------------------------------------
Pharmaceuticals--6.1%
29,900 Abbott Labs 1,315,600
13,600 Amgen, Inc.* 742,900
39,000 Bristol-Myers Squibb 3,378,375
18,600 Eli Lilly & Co. 1,041,600
39,400 Merck & Co. 2,531,450
23,600 Pfizer, Inc. 1,649,050
31,700 Pharmacia & Upjohn, Inc. 1,307,625
72,500 Schering Plough Corp. 3,996,563
- --------------------------------------------------------------------
15,963,163
====================================================================
<CAPTION>
- --------------------------------------------------------------------
Shares Description Value
====================================================================
<S> <C> <C>
Common Stocks (continued)
Recreational Products--0.3%
29,407 Mattel, Inc. $ 727,823
- --------------------------------------------------------------------
Restaurants & Hotels--1.3%
23,600 ITT Corp.* 1,339,300
45,200 McDonalds Corp. 2,096,150
- --------------------------------------------------------------------
3,435,450
- --------------------------------------------------------------------
Semiconductors & Electronics--1.3%
37,900 Intel Corp. 2,847,238
14,400 Texas Instruments, Inc. 622,800
- --------------------------------------------------------------------
3,470,038
- --------------------------------------------------------------------
Software--2.4%
33,150 Computer Associates International, Inc. 1,686,506
30,700 Microsoft Corp.* 3,618,763
24,600 Oracle Corp.* 962,475
- --------------------------------------------------------------------
6,267,744
- --------------------------------------------------------------------
Specialty Finance--1.3%
42,600 Beneficial Corp. 2,300,400
21,000 Dean Witter Discover & Co. 1,068,375
- --------------------------------------------------------------------
3,368,775
- --------------------------------------------------------------------
Specialty Retail--0.9%
48,200 Gap, Inc. 1,433,950
8,600 Nike, Inc. 884,725
- --------------------------------------------------------------------
2,318,675
- --------------------------------------------------------------------
Supermarkets--0.9%
37,900 Great A&P Tea Co., Inc. 1,046,988
38,800 Safeway, Inc.* 1,396,800
- --------------------------------------------------------------------
2,443,788
- --------------------------------------------------------------------
Technology Capital Goods--0.7%
20,700 Applied Materials Inc.* 494,213
22,000 Harris Corp. 1,265,000
- --------------------------------------------------------------------
1,759,213
- --------------------------------------------------------------------
Textiles--0.9%
36,000 Liz Claiborne Inc. 1,174,500
33,200 Sara Lee Corp. 1,062,400
- --------------------------------------------------------------------
2,236,900
- --------------------------------------------------------------------
</TABLE>
The accompnaying notes are an integral part of these financial statements.
18
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Select Equity Fund (continued)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Shares Description Value
====================================================================
<S> <C> <C>
Common Stocks (continued)
Tire & Other Related Rubber Products--0.9%
32,000 BF Goodrich Co. $ 1,160,000
29,800 Goodyear Tire & Rubber Co. 1,318,650
- --------------------------------------------------------------------
2,478,650
- --------------------------------------------------------------------
Tobacco--2.2%
55,600 Philip Morris Companies, Inc. 5,817,150
- --------------------------------------------------------------------
Gas Distribution & Pipeline--2.0%
19,500 Coastal Corp. 726,375
36,800 Columbia Gas Systems, Inc. 1,973,400
28,400 Oneok Inc. 749,050
22,900 Panenergy Corp. 727,075
22,200 Williams Companies, Inc. 1,018,417
- --------------------------------------------------------------------
5,194,317
- --------------------------------------------------------------------
Total Common Stocks
(Cost $217,856,296) $ 255,240,015
====================================================================
<CAPTION>
Principal
Amount Description Value
====================================================================
<S> <C> <C>
Repurchase Agreement--2.6%
$ 6,800,000 Joint Repurchase Agreement Account
5.69%, 08/01/96 $ 6,800,000
- --------------------------------------------------------------------
Total Repurchase Agreement
(Cost $6,800,000) $ 6,800,000
- --------------------------------------------------------------------
Total Investments
(Cost $224,656,296)(a) $ 262,040,015
- --------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $42,482,356
Gross unrealized loss for investments in
which cost exceeds value (5,118,394)
- --------------------------------------------------------------------
Net unrealized gain $37,363,962
====================================================================
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $224,676,053.
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 growth 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. Though we are
not sector investors, we closely monitor the fund's sector and industry
exposures compared with the benchmark in an effort to avoid unintentional over-
or underweightings.
Performance Review: Fund Performance Reflects the Market's Choppy Trading Range
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Fund Total Return S&P 500
(based on net Total
asset value) Return
------------ ------
<S> <C> <C>
Class A (1/31/96 - 7/31/96) 1.96% 1.76%
Class B (5/1/96 - 7/31/96)* -2.72% -1.58%
Institutional (6/3/96 - 7/31/96)* -4.45% -4.06%
Service (3/6/96 - 7/31/96)* -1.71% -1.56%
- ----------------------------------------------------------------
</TABLE>
* Performance for Class B, Institutional and Service shares is from their
inceptions through the end of the period. Class B performance assumes no
redemption has been made and therefore does not reflect the effects of the
contingent deferred sales charge.
In sharp contrast to last year's soaring stock market, equities were
trapped in a choppy trading range during the period under review. Though stocks
achieved positive returns from February through June, most of their gains were
erased when the market retreated in July. Despite the adverse market conditions,
the fund's Class A shares outperformed the S&P 500 stock index (1.96% versus
1.76%) during the period under review, primarily due to successful stock
selection. For the six-month period ended July 31, 1996, the fund's Class A
shares also outperformed its peers in the growth and income category, which had
an average return of 1.75%, according to Lipper Analytical Services, Inc.
The fund's Class A shares fared better than the Class B, Institutional and
Service shares primarily due to their strong relative performance in February,
prior to the inceptions of the other share classes.
During the period, the fund increased its regular quarterly dividend to
$0.08 per share.
Top Performers Came From Diverse Industries
A number of the fund's investments in two of its largest sectors,
financials and consumer durables, significantly contributed to its performance
during the period. In the financial sector, our banking stocks performed
particularly well, including NationsBank Corp., which benefited from robust
mortgage-servicing fees, healthy investment banking income and dramatically
successful cost-reduction efforts, and BankAmerica Corp., which appreciated due
to a combination of stronger than expected earnings and share repurchases.
The buoyant economy helped fuel sales of consumer durables during the
period, which benefited Ford Motor Co. along with other auto-related fund
holdings. Ford's second-quarter earnings significantly exceeded market
expectations and the company attracted additional investor interest with news of
its spin-off of Associates First Capital Corp., which raised investor awareness
of the potential value of its non-car businesses. In a continuation of its
successful strategy to produce products for vehicle interiors, Lear Corp.
announced the acquisition of carpet manufacturer Masland Corp.
In addition, the fund's holdings in the tobacco industry, Philip Morris
Companies, Inc., RJR Nabisco Holdings Corp. and Universal Corp. (tobacco leaf
grower), did very well during the period. We increased these positions when they
were inexpensive due to
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
negative legal developments in March and subsequently trimmed the fund's
investments in these companies after they rebounded, which helped minimize the
impact of an unfavorable legal decision in early August. We will be particularly
vigilant in monitoring the litigation environment in the coming months, but at
present we continue to believe that the fund's tobacco-related holdings
represent compelling values.
Other top performers during the period were Tosco Corp., an oil refiner,
which acquired Circle K Corp., making it the country's largest operator of
convenience stores (many of which sell gasoline), and Sunbeam Corp., which
appreciated sharply in July after appointing a new chief executive officer known
for his aggressive cost cutting.
Investments in Recreational Products and Food Distribution Lagged
Investments that did not meet our expectations included marine and boating
manufacturers Brunswick Corp. and Outboard Marine Corp., whose highly seasonal
sales were hurt by the rainy spring weather, and Fleming Companies, Inc., a
distributor of food products to independent retail chains, which came under
pressure due to an unforeseen customer lawsuit.
New Investments in Technology and Transportation Sectors
We increased the fund's holdings in the technology sector after it became
inexpensive due to investor concerns that earnings would fall short of
expectations. We added to existing holdings in Intel Corp., the dominant
microprocessor manufacturer, which rebounded and was a top performer, and Compaq
Computer Corp., which also achieved strong returns and ranked among the fund's
10 largest positions by the end of the period.
In the transportation sector, we initiated a position in Canadian Pacific
Ltd. (Canadian railroad and energy), where new management and a more favorable
regulatory environment has contributed to the potential for a meaningful
reduction in railroad operating expenses, and Continental Airlines, Inc., which
dramatically enhanced customer service and significantly increased its share of
business travel.
Other holdings new to the top 10 were Atlantic Richfield Co. (integrated
oil firm), which has initiated an aggressive cost-reduction program, and Cigna
Corp., a diversified insurance company, which has also cut costs in its
property/casualty business following a reorganization and has been posting
strong earnings as a result.
Sales in Defense and Media/Communications Stocks
The fund's weighting in the defense/aerospace sector was reduced by the
sale of Loral Corp., after it had appreciated significantly following the
announcement of its acquisition by Lockheed Martin, and a decrease in the fund's
positions in Northrop Grumman Corp. and Lockheed Martin Corp. In addition, we
sold the fund's sole investment in the media/communications sector,
Tele-Communications, Inc., after its prospects for future growth were impacted
by the higher than anticipated costs of competing in local telephone markets.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Top 10 Portfolio Holdings as of July 31, 1996
Percentage
of Total
Net
Company Line of Business Assets
<S> <C> <C>
Philip Morris Companies, Inc. Tobacco and Food Products 3.7%
Atlantic Richfield Co. International Integrated
Oil Company 3.0%
Cigna Corp. Insurance 2.9%
Compaq Computer Corp. Computers and Peripherals 2.9%
McDonnell Douglas Corp. Aerospace/Defense 2.8%
Goodyear Tire & Rubber Co. Tire and Rubber Products 2.7%
NationsBank Corp. Commercial Bank 2.7%
Ford Motor Co. Automotive Products 2.7%
Georgia-Pacific Corp. Pulp and Paper Products 2.6%
Texaco, Inc. International Integrated
Oil Company 2.5%
- ------------------------------------------------------------------------
</TABLE>
Outlook
Going forward, the primary factors determining the direction of the equity
market in the coming months will be the strength of corporate earnings, the pace
of economic growth and the impact of potential Fed tightening later in
- --------------------------------------------------------------------------------
21
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund (continued)
- --------------------------------------------------------------------------------
the year. Though we have a positive view of near-term economic growth, we
believe overall equity valuations are somewhat unattractive. Accordingly, we
anticipate that the return of the equity market may be slightly less than its
historical average for the remainder of 1996. However, we continue to find
attractive stocks that we believe are misunderstood and undervalued.
/s/ Mitchell E. Cantor
Mitchell E. Cantor
Portfolio Manager
/s/ Ronald E. Gutfleish
Ronald E. Gutfleish
Portfolio Manager
August 31, 1996
- --------------------------------------------------------------------------------
22
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
===========================================================
Common Stocks--96.4%
Airlines--3.4%
<S> <C> <C>
71,100 AMR Corp.* $ 5,608,013
407,300 Continental Airlines, Inc.* 10,386,150
- -----------------------------------------------------------
15,994,163
- -----------------------------------------------------------
Appliance Manufacturer--1.3%
324,200 Sunbeam Corp. 6,240,850
- -----------------------------------------------------------
Auto/Original Equipment Manufacturer--1.3%
187,400 Lear Corp.* 6,371,600
- -----------------------------------------------------------
Auto/Vehicle--2.7%
389,700 Ford Motor Co. 12,665,250
- -----------------------------------------------------------
Banks--7.3%
128,900 BankAmerica Corp. 10,279,775
207,200 GP Financial Corp.* 6,552,700
146,900 NationsBank Corp. 12,615,038
78,800 Republic of New York Corp. 4,993,950
- -----------------------------------------------------------
34,441,463
- -----------------------------------------------------------
Commodity Chemicals--1.3%
245,500 Geon Co. 5,922,688
- -----------------------------------------------------------
Communications Technology--2.1%
265,200 Lucent Technologies, Inc. 9,845,550
- -----------------------------------------------------------
Computers & Peripherals--2.9%
246,600 Compaq Computer Corp.* 13,501,350
- -----------------------------------------------------------
Defense--4.9%
60,215 Lockheed Martin Corp. 4,990,318
298,200 McDonnell Douglas Corp. 13,344,450
68,200 Northrop Grumman Corp. 4,688,750
- -----------------------------------------------------------
23,023,518
- -----------------------------------------------------------
Department Stores--4.1%
220,000 JC Penney Inc. 10,945,000
207,700 Sears Roebuck & Co. 8,515,700
- -----------------------------------------------------------
19,460,700
- -----------------------------------------------------------
Electric Utilities--3.2%
131,800 CMS Energy Corp. 4,003,425
641,400 Long Island Lighting Co. 10,903,800
- -----------------------------------------------------------
14,907,225
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
===========================================================
Common Stocks (continued)
Food Producers--1.5%
<S> <C> <C>
582,200 Chiquita Brands International,
Inc.* $ 6,986,400
- -----------------------------------------------------------
Forest Products--4.7%
67,500 Champion International Corp. 2,851,875
161,500 Georgia Pacific Corp. 12,072,125
579,100 Stone Container Corp. 7,238,750
- -----------------------------------------------------------
22,162,750
- -----------------------------------------------------------
Health Suppliers/Services--1.8%
203,400 Baxter International, Inc. 8,466,525
- -----------------------------------------------------------
Healthcare Management--3.6%
158,200 Aetna Inc. 9,195,375
387,200 Tenet Healthcare Corp.* 7,502,000
- -----------------------------------------------------------
16,697,375
- -----------------------------------------------------------
Home Builders--2.8%
153,400 Centex Corp. 4,448,600
388,500 Lennar Corp. 8,692,688
- -----------------------------------------------------------
13,141,288
- -----------------------------------------------------------
Insurance Life--4.4%
127,800 Cigna Corp. 13,610,700
166,200 Lincoln National Corp. 7,084,275
- -----------------------------------------------------------
20,694,975
- -----------------------------------------------------------
Insurance-Property & Casualty--2.4%
98,300 Allstate Corp. 4,398,925
24,400 Integon Corp. 478,850
237,600 PartnerRe Holding 6,712,200
- -----------------------------------------------------------
11,589,975
- -----------------------------------------------------------
Integrated Oil--6.6%
121,400 Atlantic Richfield Co. 14,082,400
48,100 Mobil Corp. 5,309,038
138,900 Texaco Inc. 11,806,500
- -----------------------------------------------------------
31,197,938
- -----------------------------------------------------------
Investment Brokers & Managers--1.0%
195,900 Lehman Brothers Holdings, Inc. 4,530,188
- -----------------------------------------------------------
Logistics/Trucking--1.5%
348,000 Consolidated Freightways, Inc. 6,829,500
- -----------------------------------------------------------
Logistics/Rails--1.9%
415,700 Canadian Pacific Ltd. 9,041,475
- -----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Growth and Income Fund (continued)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
===========================================================
<S> <C> <C>
Common Stocks (continued)
Oil Refining & Marketing--3.5%
187,700 Ashland Inc. $ 6,874,513
197,800 Tosco Corp. 9,667,475
- -----------------------------------------------------------
16,541,988
- -----------------------------------------------------------
Packaging--2.4%
726,200 Owens Illinois Corp.* 11,346,870
- -----------------------------------------------------------
Recreational Products--2.7%
471,500 Brunswick Corp. 8,958,500
239,400 Outboard Marine Corp. 3,740,625
- -----------------------------------------------------------
12,699,125
- -----------------------------------------------------------
Semiconductors & Electronics--4.0%
217,400 Avnet Inc. 9,484,075
126,200 Intel Corp. 9,480,775
- -----------------------------------------------------------
18,964,850
- -----------------------------------------------------------
Software--0.8%
163,000 Autodesk Inc. 3,759,188
- -----------------------------------------------------------
Specialty Finance--1.5%
136,500 Dean Witter Discover & Co. 6,944,438
- -----------------------------------------------------------
Steel--1.9%
251,600 AK Steel Holding Corp. 9,214,850
- -----------------------------------------------------------
Supermarkets--2.2%
232,400 Fleming Companies, Inc. 3,515,050
240,600 Supervalu, Inc. 6,706,725
- -----------------------------------------------------------
10,221,775
- -----------------------------------------------------------
Textiles--1.8%
329,800 Fruit of The Loom, Inc.* 8,327,450
- -----------------------------------------------------------
Tires & Other Related Rubber Products--2.7%
287,500 Goodyear Tire & Rubber Co. 12,721,875
- -----------------------------------------------------------
Tobacco--6.2%
166,000 Philip Morris Companies, Inc. 17,367,750
220,480 RJR Nabisco, Inc.* 6,779,760
175,300 Universal Corp. 4,864,575
- -----------------------------------------------------------
29,012,085
- -----------------------------------------------------------
Total Common Stocks
(Cost $414,332,547) $453,467,240
===========================================================
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
===========================================================
<S> <C> <C>
Preferred Stocks--0.8%
Food--0.4%
44,600 Chiquita Brands International,
Inc. Convertible Preferred,
2.88% $ 1,839,750
- -----------------------------------------------------------
Tobacco--0.4%
287,100 RJR Nabisco, Inc. 1,758,488
- -----------------------------------------------------------
Total Preferred Stocks
(Cost $3,843,410) $ 3,598,238
===========================================================
<CAPTION>
Principal
Amount Description Value
===========================================================
<S> <C> <C>
Repurchase Agreement--2.8%
- -----------------------------------------------------------
$13,000,000 Joint Repurchase Agreement
Account
5.69%, 08/01/96 $ 13,000,000
- -----------------------------------------------------------
Total Repurchase Agreement
(Cost $13,000,000) $ 13,000,000
- -----------------------------------------------------------
<CAPTION>
Contracts Description Value
===========================================================
<S> <C> <C>
Options--0.1%
- -----------------------------------------------------------
233 S&P 500 Index Put Strike 600
expiring 09/21/96 $ 128,150
233 S&P 500 Index Put Strike 625
expiring 09/21/96 235,913
- -----------------------------------------------------------
Total Options
(Cost $437,905) $ 364,063
- -----------------------------------------------------------
Total Investments
(Cost $431,613,862)(a) $470,429,541
===========================================================
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $ 55,570,827
Gross unrealized loss for investments in
which cost exceeds value (16,771,260)
- -----------------------------------------------------------
Net unrealized gain $38,799,567
===========================================================
</TABLE>
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes is $431,629,974.
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 in a
diversified range of industries that we believe offer attractive growth
potential at a reasonable price. Our analysis focuses on such factors as a
company's estimated long-term earnings and growth potential, its competitive
position in its industry, and management's commitment to producing value for
shareholders.
Performance Review: Equities Came Under Pressure Amid Increased Volatility
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Fund Total Return S&P 500
(based on net Total
asset value) Return
------------ ------
<S> <C> <C>
Class A (1/31/96 - 7/31/96) 0.87% 1.76%
Class B (5/1/96 - 7/31/96)* -4.15% -1.58%
- -----------------------------------------------------------
</TABLE>
* Performance for Class B shares is from their inception through the end of the
period. Class B performance assumes no redemption has been made and therefore
does not reflect the effects of the contingent deferred sales charge.
The fund's Class A shares outperformed the S&P 500 stock index from
February through April, but came under pressure during the second half of the
period, reflecting a choppy, difficult market. Most of Class A shares' slight
lag versus the benchmark occurred in June; then they outperformed the index
during the dramatic July sell-off. The fund's Class B shares were more
significantly impacted because their May inception date coincided with more
difficult market conditions.
Technology, Tobacco and Retail Stocks Were Among the Best Performers
The fund's best performers during the period came from a wide range of
sectors, including its technology holdings, which were increased significantly
to 15.2% of the portfolio, and its holdings in consumer services (7.1%) and
consumer nondurables (5.2%).
. Despite volatility in the technology sector during the period, Intel Corp.
and Compaq Computer Corp., two stocks new to the fund's 10 largest holdings,
achieved strong returns. Intel, the dominant microprocessor manufacturer, was
the fund's best performer due to better than expected earnings, and Compaq
Computer, the world's largest manufacturer of personal computers, benefited from
continued strong sales growth.
. During the period, the fund's tobacco holdings, Philip Morris Companies,
Inc. and Universal Corp., significantly contributed to performance. We increased
the fund's positions in these companies when their stock prices were depressed
due to unfavorable legal developments against tobacco manufacturers. After the
stocks rebounded, we trimmed the fund's investment in Philip Morris and
liquidated its position in Universal. We continued to reduce the fund's holdings
in Philip Morris just after the period ended, which helped minimize the impact
of other litigation in early August.
. Consumer spending experienced a modest rebound, which produced stronger
than expected financial results for many retailers, particularly those in
apparel. Positions that benefited included Dillard Department Stores, Inc.,
which continued to expand and experienced a significant rebound in same-store
sales, and Wal-Mart Stores, Inc., the world's largest discount retailer.
Investments in Selected Cyclical and Semiconductor Stocks Hindered Performance
Fund holdings that lagged during the period included several companies that
were affected by general economic conditions. These included Consolidated
Freightways, Inc., which encountered higher fuel prices and a short-term price
war in the trucking industry that exerted downward pressure on rates, and Geon
Corp., a low-cost polyvinyl chloride manufacturer, which was hurt by lower
selling prices for its basic chemicals. In addition, Silicon Valley Group, Inc.,
a leading semiconductor equipment manufacturer, was impacted because the
precipitous decline in semiconductor prices resulted in fewer orders for
equipment.
- --------------------------------------------------------------------------------
25
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Capital Growth Fund (continued)
- --------------------------------------------------------------------------------
New Investments in the Health and Financial Sectors
. As of July 31, the fund held 57 stocks across a wide range of industries.
We added several attractive health-related investments during the period,
including Aetna Inc., which announced its acquisition of U.S. Healthcare, a high
quality, low-cost producer in the HMO business, and Baxter International, Inc.,
which is spinning off Allegiance Corp., its lower growth hospital supply
business, in order to maximize shareholder value by focusing on its higher
growth medical technology division. In the financial sector, we added to the
fund's positions in specialty credit card companies. These included First USA,
Inc., which spun off a minority interest in Paymentech, a credit card
transaction processor, thus drawing investor attention to the success of its
remaining operations, and MBNA Corp., the industry leader in affinity credit
cards in the United States.
Reduced Exposure to Specialty Retailers and Media/Communications
During the period, the fund sold a number of long-held positions in
specialty retailers, which brought its weighting in the consumer services sector
nearly in line with the benchmark. These included Service Merchandise Co., Inc.
and Musicland Stores Corp., which we determined had experienced deteriorating
fundamentals, and TJX Companies, Inc. (a retailer of women's apparel and
accessories), which had appreciated and reached our target price. In the
media/communications sector we sold Tele-Communications, Inc., after our updated
analysis indicated that higher than expected capital spending would be required
for it to compete against local telephone service providers.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Top 10 Portfolio Holdings as of July 31, 1996
Percentage
of Total
Company Line of Business Net Assets
<S> <C> <C>
Philip Morris Companies, Inc. Tobacco and Food
Products 4.4%
Compaq Computer Corp. Computers and
Peripherals 3.6%
NationsBank Corp. Commercial Bank 3.4%
Intel Corp. Semiconductors and
Electronics 3.2%
First USA, Inc. Financial Services 3.0%
Texaco, Inc. International Integrated
Oil Company 3.0%
Wal-Mart Stores, Inc. Department Stores 2.8%
Ford Motor Co. Automotive Products 2.6%
BankAmerica Corp. Commercial Bank 2.6%
Dillard Department Stores, Inc. Department Stores 2.5%
- -------------------------------------------------------------------------
</TABLE>
Outlook
As of the end of the period, we have a positive near-term outlook for
economic growth, but we believe that equity valuations are somewhat
unattractive. Furthermore, the uncertainty surrounding corporate earnings may
continue to buffet the market in the coming months, as the July sell-off
dramatically demonstrated. As a result, we believe that it is likely that the
performance of the equity market will slightly lag its historical average for
the remainder of 1996. However, the portfolio's outperformance of the S&P 500
during the July correction highlights the benefits of our diversified approach,
as well as the importance of maintaining a long-term investment perspective.
/s/ Mitchell E. Cantor
Mitchell E. Cantor
Co-Chief Investment Officer
/s/ Paul D. Farrell
Paul D. Farrell
Co-Chief Investment Officer
August 31, 1996
- --------------------------------------------------------------------------------
26
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Capital Growth Fund
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
- -----------------------------------------------------------
<S> <C> <C>
Common Stocks--94.8%
Advertising & Marketing--1.9%
888,900 Valassis Communications, Inc.* $15,889,088
- -----------------------------------------------------------
Agency/Government--1.3%
345,300 Federal National Mortgage Assn. 10,963,275
- -----------------------------------------------------------
Airlines--2.7%
176,500 AMR Corp.* 13,921,438
334,100 Southwest Airlines Co. 8,268,975
- -----------------------------------------------------------
22,190,413
- -----------------------------------------------------------
Auto/Original Equipment Manufacturer--1.6%
391,900 Lear Corp.* 13,324,600
- -----------------------------------------------------------
Auto/Vehicle--2.6%
664,900 Ford Motor Co. 21,609,250
- -----------------------------------------------------------
Banks--6.0%
263,700 BankAmerica Corp. 21,030,075
323,000 NationsBank Corp. 27,737,625
- -----------------------------------------------------------
48,767,700
- -----------------------------------------------------------
Chemicals-Commodity--2.1%
700,400 Geon Co. 16,897,150
- -----------------------------------------------------------
Commercial Services--0.7%
183,400 Ecolab Inc. 5,662,475
- -----------------------------------------------------------
Communications Services Companies--1.8%
278,200 AT&T Corp. 14,501,175
- -----------------------------------------------------------
Communications Technology--1.3%
293,700 Lucent Technologies, Inc. 10,903,613
- -----------------------------------------------------------
Computers & Peripherals--3.6%
543,100 Compaq Computer Corp.* 29,734,725
- -----------------------------------------------------------
Defense--2.8%
226,800 McDonnell Douglas Corp. 10,149,300
187,500 Northrop Grumman Corp. 12,890,625
- -----------------------------------------------------------
23,039,925
- -----------------------------------------------------------
Department Stores--6.5%
658,400 Dillard Department Stores, Inc. 20,657,300
198,100 JC Penney Inc. 9,855,475
963,000 Walmart Stores, Inc. 23,112,000
- -----------------------------------------------------------
53,624,775
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
- -----------------------------------------------------------
Electric Utilities--1.4%
<S> <C> <C>
669,400 Long Island Lighting Co. $11,379,793
- -----------------------------------------------------------
Food--0.7%
494,100 Chiquita Brands International,
Inc.* 5,929,200
- -----------------------------------------------------------
Forest Products--2.9%
273,500 Georgia Pacific Corp. 20,444,125
270,100 Stone Container Corp. 3,376,250
- -----------------------------------------------------------
23,820,375
- -----------------------------------------------------------
Health Suppliers/Services--6.4%
471,100 Baxter International, Inc. 19,609,538
477,500 Fisher Scientific
International, Inc. 18,562,813
277,600 Perkin-Elmer Corp. 14,504,600
- -----------------------------------------------------------
52,676,951
- -----------------------------------------------------------
Healthcare Management--7.8%
275,560 Aetna Inc. 16,016,925
337,400 Beverly Enterprises, Inc.* 3,205,300
325,100 Columbia HCA Healthcare 16,661,375
427,400 Health Systems International,
Inc.* 8,441,150
1,021,400 Tenet Healthcare Corp.* 19,789,625
- -----------------------------------------------------------
64,114,375
- -----------------------------------------------------------
Insurance-Life --1.3%
254,100 Lincoln National Corp. 10,831,013
- -----------------------------------------------------------
Insurance-Property & Casualty--3.7%
540,250 Integon Corp. 10,602,406
703,800 PartnerRe Holding 19,882,350
===========================================================
30,484,756
- -----------------------------------------------------------
Integrated Oil--6.2%
68,700 Amoco Corp. 4,594,313
52,700 Atlantic Richfield Co. 6,113,200
90,900 Mobil Corp. 10,033,088
41,200 Royal Dutch Petroleum ADR 6,216,050
284,800 Texaco Inc. 24,208,000
- -----------------------------------------------------------
51,164,651
- -----------------------------------------------------------
Investment Brokers & Managers--1.6%
571,000 Lehman Brothers Holdings, Inc. 13,204,375
- -----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Capital Growth Fund (continued)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
- -----------------------------------------------------------
<S> <C> <C>
Common Stocks (continued)
Logistics/Trucking--1.8%
620,200 Consolidated Freightways, Inc. $12,171,425
75,650 Trinity Industries, Inc. 2,354,606
- -----------------------------------------------------------
14,526,031
- -----------------------------------------------------------
Logistics/Rails--1.0%
368,800 Canadian Pacific Ltd. 8,021,400
- -----------------------------------------------------------
Media/Entertainment--1.1%
130,900 Knight Ridder, Inc. 8,573,950
- -----------------------------------------------------------
Packaging--1.2%
614,000 Owens Illinois Corp.* 9,593,750
- -----------------------------------------------------------
Semiconductors & Electronics--4.4%
219,700 Avnet Inc. 9,584,413
353,500 Intel Corp. 26,556,688
- -----------------------------------------------------------
36,141,101
- -----------------------------------------------------------
Specialty Finance--4.6%
495,400 First USA, Inc. 24,212,675
455,950 MBNA Corp. 12,709,606
- -----------------------------------------------------------
36,922,281
- -----------------------------------------------------------
Supermarkets--0.5%
273,400 Fleming Companies, Inc. 4,135,175
- -----------------------------------------------------------
Technology Capital Goods--5.9%
325,700 Applied Materials Inc.* 7,776,088
310,300 Millipore Corp. 10,588,988
724,700 Pall Corp. 17,483,388
745,700 Silicon Valley Group, Inc.* 12,257,444
- -----------------------------------------------------------
48,105,908
- -----------------------------------------------------------
Tires & Other Related Rubber Products--3.0%
430,100 Cooper Tire & Rubber Co. 8,118,138
362,400 Goodyear Tire & Rubber Co. 16,036,200
- -----------------------------------------------------------
24,154,338
- -----------------------------------------------------------
Tobacco--4.4%
347,400 Philip Morris Companies, Inc. 36,346,725
===========================================================
Total Common Stocks
(Cost $692,081,557) $777,234,312
- -----------------------------------------------------------
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<S> <C> <C>
Preferred Stocks--0.1%
Healthcare Management--0.1%
10,658 Aetna Inc. $ 667,407
- -----------------------------------------------------------
Total Preferred Stocks
(Cost $696,088) $ 667,407
===========================================================
<CAPTION>
Contracts Description Value
- -----------------------------------------------------------
<S> <C> <C>
Repurchase Agreement--5.7%
$46,600,000 Joint Repurchase Agreement
Account
5.69%, 08/01/96 $46,600,000
- -----------------------------------------------------------
Total Repurchase Agreement
(Cost $46,600,000) $46,600,000
===========================================================
<CAPTION>
Contracts Description Value
- -----------------------------------------------------------
<S> <C> <C>
Options--0.1%
217 S&P 500 Index Put Strike 625
expiring 09/21/96 $ 219,713
467 S&P 500 Index Put Strike 600
expiring 09/21/96 256,850
- -----------------------------------------------------------
Total Options
(Cost $611,171) $ 476,563
- -----------------------------------------------------------
Total Investments
(Cost $739,988,816)(a) $824,978,282
===========================================================
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $112,642,432
Gross unrealized loss for investments in
which cost exceeds value (28,494,723)
- -----------------------------------------------------------
Net unrealized gain $84,147,709
- -----------------------------------------------------------
</TABLE>
*Non-income producing security.
(a)The aggregate cost for federal income tax purposes is $740,830,573.
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.
28
<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 currently
emphasizes stocks with market capitalizations of $500 million or less. The fund
is managed using a "business value" approach to investing, which means we look
for attractive companies with high or improving returns on capital that we
believe can achieve solid, sustainable growth, as well as generate free cash
after investing for future growth. 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 considering a company's competitors, customers and suppliers, we
build the fund's portfolio one stock at a time.
Performance Review: Strong Fund Returns Despite a
Sharp Correction in Small Caps
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Fund Total Return Russell 2000
(based on net Total
asset value) Return
------------ ------
<S> <C> <C>
Class A (1/31/96 - 7/31/96) 22.38% 0.87%
Class B (5/1/96 - 7/31/96)* 1.59% -9.03%
- -------------------------------------------------------------------
</TABLE>
* Performance for Class B shares is from their inception through the end of the
period. Class B performance assumes no redemption has been made and therefore
does not reflect the effects of the contingent deferred sales charge.
Though small-cap stocks generally performed well through May, outpacing
large-cap stocks, a sharp market correction during June and July impacted small
caps significantly. Especially hard hit in the sell-off were a number of
formerly high-flying technology stocks, some of which had risen sharply based
more on investor optimism than sustainable business fundamentals.
Despite the challenging market conditions, the fund's Class A and Class B
shares significantly outperformed their benchmark, the Russell 2000 index,
during the period under review. However, Class B shares were affected along with
the benchmark by the difficult market environment during the brief period since
their inception.
For the 12 months ended July 31, 1996, the fund's Class A shares ranked
within the top 20% of the Lipper small company growth fund category (52 out of
338) 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. Class B shares were not ranked because they did
not exist during the full period.)
In general, the type of stocks the fund owned fared better than the
benchmark for several reasons:
. Our holdings had generally stronger fundamentals and more attractive
valuations than the market as a whole.
. The fund held a number of quality companies that had experienced
temporary difficulties, but investors were valuing them as if the difficulties
were permanent. As their fundamentals improved and investor concerns receded,
the shares of these companies rebounded.
. Many of our positions were (and to a large extent remain) relatively
undiscovered by the market and therefore were less affected by the reduction of
overinflated expectations that impacted other, more widely followed stocks.
A number of stocks contributed to the fund's strong performance,
particularly in the consumer services, consumer nondurables and technology
sectors. Within consumer services, several of the fund's long-term holdings that
had declined in 1995 rebounded strongly during early 1996, including retailers
such as Brookstone, Inc. (specialty retailer), J. Baker, Inc. (specialty apparel
and discount shoes) and Levitz Furniture, Inc. (furniture retailer). Other
investments that benefited from improved investor awareness were consumer
nondurables such as American Safety Razor Co. (razor blades) and Morningstar
Group, Inc. (specialty foods).
- --------------------------------------------------------------------------------
29
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund (continued)
- --------------------------------------------------------------------------------
Though many technology stocks fell during the period, the fund's technology
holdings were among its best performers. Catalog marketers Black Box Corp.
(private-label communications and networking products) and Multiple Zones
International, Inc. (brand-name computer-related products) both rose as the
market began to recognize their strong growth potential and low valuations.
As of July 31, the fund's largest holding was Movado Group, Inc. (formerly
known as North American Watch Corp.), the owner of the Movado, Concord and
Esquire watch brands and the exclusive distributor of the Piaget and Corum
brands. Though the stock declined during the period under review, the underlying
business continued to perform well.
Disappointing performers included Amphenol Corp. (coaxial cable and
connector manufacturer), where a slowdown in domestic coaxial cable demand
impacted earnings, and Central Maine Power Co., which suffered from rising
interest rates and uncertainty surrounding deregulation in the utility industry.
In both cases we used the price declines to add to our original positions.
New Investments in Health Care, Technology and Specialty Insurance Stocks
During the period, we continued to widen our search for attractive
investments across various industry sectors. The fund's largest sector increase
was in health care, where we found several stocks at attractive valuation levels
that we believe offer long-term growth potential. These investments, TheraTx,
Inc., Sun Healthcare Group, Inc., and Mariner Health Group, Inc., all provide
long-term care services and had declined in price due to both industry-related
and company-specific issues, many of which have been (or are expected to be)
resolved.
New technology investments focused on companies that we believe are
positioned to participate in the long-term growth in technology but are not
dependent on any single product or type of service. These included Multiple
Zones International, noted earlier, and DecisionOne Corp., the leading
independent provider of computer hardware, software and maintenance support
services to U.S. companies. Other new additions were IPC Holdings Ltd. and Terra
Nova Bermuda Holdings, both in the catastrophe reinsurance business, which have
historically earned higher (albeit more volatile) returns on their invested
capital than the average commodity insurance company.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Top 10 Portfolio Holdings as of July 31, 1996
<S> <C> <C>
Percentage
of Total
Company Line of Business Net Assets
Movado Group, Inc. Luxury and Affordable 6.4%
Watches
Black Box Corp. Catalog Marketer of 4.8%
Networking Products
Multiple Zones Catalog Marketer of 4.0%
International, Inc. Computer-Related
Products
American Safety Razor Co. Private Label 4.0%
Consumer Products
Morningstar Group, Inc. Specialty Food 3.5%
Products
Brookstone, Inc. Specialty Retailer 3.5%
Sun Healthcare Group, Inc. Health Care 3.1%
Services
Mortons Restaurant Group, Inc. Restaurants 3.0%
TheraTx, Inc. Health Care Services 3.0%
Amphenol Corp. Cable and Connector 2.8%
- ----------------------------------------------------------------------
</TABLE>
What We Sold
We sold several positions at substantial gains after they reached or
exceeded our target prices, including Nimbus CD International, Inc. (CD and
CD-ROM manufacturer) and The Paul Revere Corp. (insurance). We also liquidated
Automated Security Holdings and Intersolv, Inc., due to disappointing company
fundamentals.
Outlook
In our opinion, the correction in small-cap stocks during June and July
resulted in a number of interesting values, particularly in companies where the
market has overreacted to current and potentially temporary issues
30
<PAGE>
rather than focusing on underlying fundamentals. One possible area of
opportunity is "busted" initial public offerings (IPOs), stocks that went public
at excessive valuations but have recently fallen to more interesting levels. We
continue to believe that our current holdings should offer the potential for
above-average returns through the compounding of sustainable internal growth and
the advantageous reinvestment of excess cash flow.
/s/ Paul D. Farrell
Paul D. Farrell
Portfolio Manager
August 31, 1996
31
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
- -----------------------------------------------------------
<S> <C> <C>
Common Stocks--97.7%
Auto/Original Equipment Manufacturer--1.9%
190,100 APS Holding Corp.* $ 4,110,913
- -----------------------------------------------------------
Banks--1.8%
165,500 Dime Bancorp, Inc.* 2,048,063
26,100 GP Financial Corp.* 825,413
38,100 Peoples Bank Co. 800,100
- -----------------------------------------------------------
3,673,576
- -----------------------------------------------------------
Commercial Products--2.4%
215,200 Figgie International, Inc.
Class A* 2,663,100
210,600 Figgie International, Inc.
Class B* 2,474,550
- -----------------------------------------------------------
5,137,650
- -----------------------------------------------------------
Commercial Services--1.6%
539,200 Opinion Research Corp.* 3,437,400
- -----------------------------------------------------------
Computers & Peripherals--11.6%
409,402 Black Box Corp.* 10,081,524
262,400 Decisionone Corp.* 5,871,200
476,400 Multiple Zones International,
Inc.* 8,456,100
- -----------------------------------------------------------
24,408,824
- -----------------------------------------------------------
Consumer Staples--4.0%
740,900 American Safety Razor Co.* 8,427,738
- -----------------------------------------------------------
Electrical Equipment--2.0%
268,700 Carbide/Graphite Group* 4,299,200
- -----------------------------------------------------------
Electric Utilities--1.1%
186,400 Central Maine Power Co. 2,236,800
- -----------------------------------------------------------
Food Producers--6.5%
374,600 Alpine Lace Brands, Inc.* 2,036,888
705,500 Morningstar Group, Inc.* 7,495,938
190,500 Ralcorp Holdings Inc.* 4,119,563
- -----------------------------------------------------------
13,652,389
- -----------------------------------------------------------
Gaming--2.5%
204,700 Trump Hotels & Casino Resorts,
Inc. 5,373,375
- -----------------------------------------------------------
Healthcare Management--10.3%
285,200 Health Systems International,
Inc.* 5,632,700
178,000 Mariner Health Group, Inc.* 3,181,750
508,900 Sun Healthcare Group, Inc.* 6,488,475
371,600 Theratx, Inc.* 6,363,650
- -----------------------------------------------------------
21,666,575
- -----------------------------------------------------------
<CAPTION>
Shares Description Value
- -----------------------------------------------------------
<S> <C> <C>
Common Stocks (continued)
Home Furnishing & Services--1.7%
308,800 Congoleum Corp.* $ 3,512,600
- -----------------------------------------------------------
Insurance-Life --1.3%
139,100 John Alden Financial Corp. 2,799,388
- -----------------------------------------------------------
Insurance-Property & Casualty--8.6%
173,900 Horace Mann Educators Co. 5,434,375
238,900 IPC Information Systems, Inc.* 4,748,138
177,900 Risk Capital Holdings, Inc.* 3,091,013
297,700 Terra Nova Bermuda Holdings 4,986,475
- -----------------------------------------------------------
18,260,001
- -----------------------------------------------------------
Insurance Specialty--0.9%
86,100 Old Rep International Corp. 1,808,100
- -----------------------------------------------------------
Jewelry--6.4%
715,600 Movado Group, Inc. 13,417,500
- -----------------------------------------------------------
Logistics/Trucking--1.3%
105,400 Landstar Systems, Inc.* 2,714,050
- -----------------------------------------------------------
Media/Entertainment--3.9%
350,600 Hollinger International, Inc. 3,593,650
484,100 International Post Ltd.* 1,936,400
189,000 Platinum Entertainment Inc.* 2,693,250
- -----------------------------------------------------------
8,223,300
- -----------------------------------------------------------
Packaging--2.2%
317,200 Shorewood Packaging Corp.* 4,678,700
- -----------------------------------------------------------
Printing--0.3%
25,400 Devon Group, Inc.* 698,500
- -----------------------------------------------------------
Real Estate--0.8%
84,300 Insignia Financial Group,
Inc.* 1,707,075
- -----------------------------------------------------------
Restaurants & Hotels--5.6%
240,000 IHOP Corp.* 5,520,000
399,300 Mortons Restaurant Group,
Inc.* 6,388,800
- -----------------------------------------------------------
11,908,800
- -----------------------------------------------------------
Retail Hardgoods--7.8%
737,000 Brookstone Inc.* 7,370,000
265,500 Finlay Enterprises, Inc.* 3,584,250
625,300 Levitz Furniture, Inc.* 3,048,338
855,940 Musicland Stores Corp.* 2,460,822
- -----------------------------------------------------------
16,463,410
- -----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Small Cap Equity Fund (continued)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
- -----------------------------------------------------------
<S> <C> <C>
Common Stocks (continued)
Semiconductors & Electronics--4.4%
311,100 Amphenol Corp.* $ 5,988,675
173,500 Dupont Photomasks, Inc.* 3,296,500
- -----------------------------------------------------------
9,285,175
- -----------------------------------------------------------
Specialty Retail--5.9%
850,400 J. Baker, Inc. 5,527,600
200,700 General Nutrition Companies,
Inc.* 2,859,975
460,420 Supercuts, Inc.* 4,028,675
- -----------------------------------------------------------
12,416,250
- -----------------------------------------------------------
Technology Capital Goods--0.8%
82,800 Cincinnati Milacron, Inc. 1,635,300
- -----------------------------------------------------------
Textiles--0.1%
19,700 Authentic Fitness Corp. 256,100
- -----------------------------------------------------------
Total Common Stocks
(Cost $203,381,875) $206,208,689
- -----------------------------------------------------------
<CAPTION>
Principal
Amount Description Value
- -----------------------------------------------------------
<S> <C> <C>
Corporate Bonds--0.2%
- -----------------------------------------------------------
$500,000 J. Baker, Inc.
7.00%, 06/01/02 $ 395,000
- -----------------------------------------------------------
Total Corporate Bonds
(Cost $500,000) $ 395,000
- -----------------------------------------------------------
Repurchase Agreement--0.2%
- -----------------------------------------------------------
$500,000 Joint Repurchase Agreement Account
5.69%, 08/01/96 $ 500,000
- -----------------------------------------------------------
Total Repurchase Agreement
(Cost $500,000) $ 500,000
- -----------------------------------------------------------
<CAPTION>
Contracts Description Value
- -----------------------------------------------------------
<S> <C> <C>
Options--0.8%
1,000 S&P 500 Index Put Strike 640
expiring 09/21/96 $ 1,500,000
100 S&P 500 Index Put Strike 650
expiring 12/20/96 260,000
- -----------------------------------------------------------
Total Options
(Cost $1,160,775) $ 1,760,000
- -----------------------------------------------------------
Total Investments
(Cost $205,542,650) (a) $208,863,689
- -----------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $28,470,098
Gross unrealized loss for investments in
which cost exceeds value (25,334,574)
- -----------------------------------------------------------
Net unrealized gain $ 3,135,524
- -----------------------------------------------------------
</TABLE>
*Non-income producing security.
(a)The aggregate cost for federal income tax purposes is $205,728,165.
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.
33
<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: European and Japanese Holdings Contributed to Strong
Results
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
FT/S&P
Fund Total Actuaries
Return Europe &
(based on net Pacific Index
asset value) Total Return
------------- -------------
<S> <C> <C>
Class A (1/31/96 - 7/31/96) 9.83% 1.16%
Class B (5/1/96 - 7/31/96)* -0.21% -4.32%
Institutional (2/7/96 - 7/31/96)* 8.54% 0.42%
Service (3/6/96 - 7/31/96)* 6.72% 0.74%
- -----------------------------------------------------------------
</TABLE>
* Performance for Class B, Institutional and Service shares is from their
inception through the end of the period. Class B performance assumes no
redemption has been made and therefore does not reflect the effects of the
contingent deferred sales charge.
During the period under review, the fund's Class A, Class B, Institutional
and Service shares all significantly outperformed the benchmark, the Financial
Times/S&P Actuaries Europe & Pacific Index ("EuroPac") unhedged. EuroPac is a
market capitalization-weighted composite of approximately 1,500 stocks from 23
countries in Europe and the Asia-Pacific region calculated on monthly basis.
. The fund's positive performance was primarily due to successful stock
selection. During the first half of the period, the fund's positions in Europe
performed particularly well, where an emphasis on high-quality companies in
growing industries worked to its advantage, while the fund's Japanese holdings
were especially strong during the second half of the period.
. Other favorable factors were the fund's underweighted position in cyclical
stocks, which came under pressure during the period, and the inclusion of a
number of outstanding mid-capitalization companies, which did better than
large-capitalization companies in Europe.
. Finally, though the fund's neutral currency strategy is unhedged, we
opportunistically hedged a portion of its Japanese yen and Deutsche mark
exposure during the first half of the period, which helped performance as the
U.S. dollar rose. By the end of the period, we had eliminated all of the fund's
hedges, which worked in the fund's favor when the dollar fell in July.
The fund's Class A shares did significantly better than most of its peers,
ranking third out of 308 international equity funds based on total return as
tracked by Lipper Analytical Services, Inc. for the 12-month period ended July
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. Class B,
Institutional and Service shares were not ranked because they did not exist
during the full period.)
While the fund's Class B shares outperformed the benchmark, their absolute
performance was weak due to the difficult period in the European equity markets
since their inception in May.
Portfolio Composition: Fund Was Widely Diversified by Country and Industry
As of July 31, 1996, approximately 93% of the fund's net assets were
invested in common stocks and 7% in cash equivalents, and the fund held
positions in 53 companies based in 17 countries. In terms of total net assets,
the five largest country exposures were Japan (33.6%), the
- --------------------------------------------------------------------------------
34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.K. (10.9%), Sweden (7.8%), Switzerland (6.2%) and Germany (5.0%).
. Europe. As of July 31, 1996, 46% of the portfolio was invested in European
stocks, in line with the benchmark's allocation. Though European markets began
the year with favorable upward momentum, after the first quarter of 1996
corporate earnings expectations were generally downgraded due to slower than
expected economic growth. Despite the lackluster economic conditions, a number
of the fund's long-term holdings continued to achieve strong results. These
included Fresenius AG (Germany), a major producer of kidney dialysis and other
medical equipment, which more than doubled during the period on news of its
proposed merger with W.R. Grace's medical equipment division in the United
States; Randstad Holdings (Netherlands), the leading temporary help organization
in its market, which benefited from significant growth in its major markets; and
Securitas (Sweden), the largest security services company in Europe, which
consolidated its position through some important acquisitions. Other top
performers were Adidas AG (Germany), a sports clothing manufacturer, due to
higher than expected revenue growth and cost savings realized by moving
production from Germany to less expensive Asian markets, and Comptoirs Modernes
(France), a supermarket chain operator, after the market started to recognize
the strong growth prospects of its diversification into new countries.
New investments included Ecco (France), expected to become the largest
temporary employment agency worldwide after its proposed merger with Adia;
Sandoz (Switzerland), a major pharmaceutical company that announced its proposed
merger with Ciba Geigy; and Misys plc (U.K.), a computer service provider
primarily for the European insurance and banking industry.
. Japan. As of July 31, the fund's substantial allocation in Japan (33.6%)
was nevertheless underweighted compared with the benchmark (41.8%). Though the
Japanese market soared during March and April, equities declined sharply in July
when the market was impacted by a sell-off in the U.S. technology sector. As a
result, the total return of the Japanese market declined by 1.8% (as measured by
the TOPIX index in yen), for the six months ended July 31. The fund's Japanese
positions generally performed well, primarily due to our successful stock
selection as well as our avoidance of some of the poorest performing sectors,
such as banks and electric utility stocks. Top performers included Mirai
Industry, which has captured a leading market share in electric cable, pipes,
wiring boxes and other electric wiring, and continued to achieve better than
expected earnings through new products and cost reduction; Santen Pharmaceutical
Co., one of the largest ophthalmic drug manufacturers in Japan, which achieved
very stable, strong earnings growth; Terumo Corp., a leading manufacturer of
disposable medical supplies that benefited from new management; and Inaba
Denkisangyo, a manufacturer of air conditioner equipment, which has benefited
from the significant sales growth of air conditioners.
Japanese stocks added during the period included Canon Inc., a manufacturer
of office equipment, cameras and computer peripherals, and SMC, a manufacturer
of pneumatic control equipment, which has an over 50% share in its domestic
market. The company has recently expanded its direct distribution channels in
North America, Europe and Asia.
. Asia-Pacific. Approximately 13% of the fund was invested in Asia (outside
Japan), compared with 9.5% for the benchmark, with the fund's largest country
allocation in Hong Kong (3.9%). A year-end 1995 rebound in the region's equity
markets extended into the early months of the period under review, but most
Asian markets faltered by mid-period due to a host of country-specific and
regional concerns. One of the fund's best performers in the region was Woodside
Petroleum, an Australian-based oil and gas explorer and producer, which is
growing strong cash flows from its Northwest shelf development and its existing
exploration program. New Asian
- --------------------------------------------------------------------------------
35
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund (continued)
- --------------------------------------------------------------------------------
investments included Leader Universal Holdings, the leading manufacturer of
power and telecom cable in Malaysia, which successfully expanded its client base
outside Malaysia and recently built a new factory to increase its capacity.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Top 10 Portfolio Holdings as of July 31, 1996
Percentage
of Total
Company Country Line of Business Net Assets
<S> <C> <C> <C>
Fresenius AG Germany Health Care 2.7%
Sandoz Switzerland Pharmaceuticals 2.5%
Mitsubishi Heavy Japan Heavy Machinery 2.4%
Industries Manufacturer
Adidas AG Germany Sporting Goods 2.3%
Manufacturer
Mitsui Marine & Fire Japan Insurance 2.3%
Wolters Kluwer Netherlands Professional and 2.3%
Technical
Publishing
Securitas Sweden Security Services 2.3%
Randstad Holdings Netherlands Temporary Help 2.2%
Services
Santen Japan Ophthalmic 2.2%
Pharmaceutical Co. Pharmaceuticals
Electrocomponents U.K. Catalog 2.1%
Distributor of
Industrial
Components
- ---------------------------------------------------------------------
</TABLE>
Outlook
For the remainder of the year, we believe the performance of international
markets will generally remain positive, though large gains are likely to be more
difficult to achieve. We believe that stock market valuations may remain
favorable, provided that companies in aggregate achieve or exceed the market's
expectations for earnings growth. Our generally positive outlook for European
equities is somewhat tempered by the possibility that the region might achieve
slower than expected economic growth, which could result in a weakening of
corporate earnings momentum. Japanese stocks appear to be supported by the
country's low interest rates, relatively weak yen and continued recovery in
corporate earnings, but large-cap stocks are still relatively expensive. In
addition, the Japanese market is vulnerable if the central bank tightens
monetary policy or the yen strengthens, so we intend to remain cautious
investors. Despite a recent increase in volatility in Asia, we believe that the
long-term outlook for the region remains favorable. In Hong Kong, strong interim
corporate earnings and rising property prices are positive and Singapore's
market still appears attractive as well.
In general, we intend to continue to focus on individual companies with the
potential to grow regardless of the economic environment, and we are encouraged
by the positive developments in companies currently held by the fund.
In closing, we appreciate your continued support and we look forward to
continuing to help you achieve your investment goals in the future.
/s/ Roderick D. Jack
Roderick D. Jack
Portfolio Manager, London
/s/ Marcel J. Jongen
Marcel Jongen
Portfolio Manager, London
/s/ Shogo Maeda
Shogo Maeda
Portfolio Manager, Tokyo
/s/ Warwick M. Negus
Warwick M. Negus
Portfolio Manager, Singapore
August 31, 1996
- --------------------------------------------------------------------------------
36
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
===========================================================
Common Stocks--92.7%
Australian Dollar--2.4%
<S> <C> <C>
1,837,000 Boral Ltd.* (Building $ 4,418,803
Materials)
1,099,955 Woodside Petroleum, Ltd.*
(Oil & Gas) 6,610,450
- -----------------------------------------------------------
11,029,253
- -----------------------------------------------------------
Austrian Schilling--1.7%
105,400 Oesterreichische Elektrizita*
(Utilities) 7,853,752
- -----------------------------------------------------------
Belgian Franc--0.1%
1,701 Colruyt SA* (Food-Retailer) 588,542
- -----------------------------------------------------------
British Pound Sterling--10.9%
1,095,569 British Airport Authority*
(Airport Operator) 7,821,841
1,699,378 Electrocomponents* (Wholesale
Trade) 9,714,130
793,710 Farnell Electronics*
(Electronics) 7,691,419
671,000 Misys PLC* (Computer Software
and Services) 7,984,368
1,455,700 Rentokil Group* (Business
Services) 8,808,015
540,000 Siebe* (Electrical Equipment
Manufacturer) 7,391,507
- -----------------------------------------------------------
49,411,280
- -----------------------------------------------------------
Deutschemark--5.0%
135,900 Adidas AG* (Sportswear) 10,614,303
65,110 Fresenius AG* (Health Care) 12,315,359
- -----------------------------------------------------------
22,929,662
- -----------------------------------------------------------
French Franc--3.7%
20,431 Comptoirs Modernes*(Retail) 9,463,795
163,630 Seita* (Tobacco) 7,232,265
- -----------------------------------------------------------
16,696,060
- -----------------------------------------------------------
Hong Kong Dollar--3.9%
571,800 HSBC Holdings (Commercial Bank) 9,131,587
890,000 Sun Hung Kai Properties*
(Real Estate) 8,401,329
- -----------------------------------------------------------
17,532,916
- -----------------------------------------------------------
Irish Pound--2.0%
1,301,014 Bank of Ireland (Commercial
Banks) $ 9,154,659
- -----------------------------------------------------------
Italian Lira--2.0%
2,310,500 Telecom Italia Mobile*
(Utilities) 4,834,445
3,574,000 Telecom Italia Mobile (Di
Risp Shares)* (Utilities) 4,355,210
- -----------------------------------------------------------
9,189,655
- -----------------------------------------------------------
Japanese Yen--33.6%
477,000 Canon, Inc.* (Office
Equipment Manufacturer) 9,025,713
290,000 Hoya Corp.* (Optical Glass
Manufacturer) 8,801,461
257,400 Inaba Denkisangyo*
(Industrial) 6,606,492
333,000 Kokuyo Co., Ltd.* (Office
Equipment Manufacturer) 9,233,104
72,000 Kyocera Corp.* (Electronics) 4,930,167
375,000 Max Co.* (Office Equipment
Manufacturer) 7,938,738
218,900 Mirai Industry Co.*
(Electrical Equipment
Manufacturer) 6,746,110
804,000 Mitsubishi Electric CP*
(Electrical Equipment) 5,271,884
1,303,000 Mitsubishi Heavy Industries,
Ltd.* (Aerospace/Defense) 11,045,993
1,420,000 Mitsui Marine & Fire* 10,534,776
(Insurance)
414,100 Santen Pharmaceutical Co.*
(Pharmaceuticals) 10,085,336
69,700 Sanyo Shinpan Financial*
(Financial) 4,544,162
243,000 Shimachu* (Retail-Furniture) 7,670,929
118,500 SMC* (Machinery) 9,213,152
255,000 Sumitomo Electric Industries,
Ltd.* (Electronics-Equipment) 3,535,197
390,000 Taikisha Ltd.* (Capital
Goods) 7,854,433
160,000 TDK Corp.* (Electronics) 9,277,317
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes area an integral part of these financial statements.
37
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs International Equity Fund (continued)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
===========================================================
Common Stocks (continued)
Japanese Yen (continued)
<S> <C> <C>
466,000 Terumo Corp.* (Health Care) $ 5,587,373
270,000 Tostem Corp.* (Building 8,245,047
Materials)
158,800 York Benimaru* 6,664,081
(Food-Retailer)
- -----------------------------------------------------------
152,811,465
- -----------------------------------------------------------
Malaysian Ringgit--3.2%
1,078,000 Commerce Asset Holdings*
(Commercial Banks) 6,090,151
3,398,000 Leader Universal Holdings*
(Metals-Diversified) 8,373,147
- -----------------------------------------------------------
14,463,298
- -----------------------------------------------------------
Netherlands Guilder--4.5%
138,180 Randstad Holdings* (Temporary
Help) 10,160,909
90,396 Wolters Kluwer* (Publishing) 10,515,107
- -----------------------------------------------------------
20,676,016
- -----------------------------------------------------------
Singapore Dollar--1.8%
1,301,000 Singapore Land* (Real Estate) 8,332,071
- -----------------------------------------------------------
Spanish Peseta--1.8%
46,595 Banco Popular* (Commercial
Banks) 8,052,495
- -----------------------------------------------------------
Swedish Krona--7.8%
359,300 Ericsson Telecommunications*
(Communications) 7,201,327
268,440 Hoganas AB* (Metals-Products) 8,831,732
420,970 Securitas* (Commercial 10,379,541
Services)
3,109,100 Swedish Match AB* (Tobacco) 9,170,832
- -----------------------------------------------------------
35,583,432
- -----------------------------------------------------------
Swiss Franc--6.2%
35,938 Adia SA Br* (Commercial 8,824,666
Services)
5,366 Cie Financiere Richemont AG*
(Luxury Products) 8,179,195
10,200 Sandoz AG* (Pharmaceuticals) 11,381,609
- -----------------------------------------------------------
28,385,470
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Shares Description Value
===========================================================
Common Stocks (continued)
Thai Baht--2.1%
<S> <C> <C>
492,300 Bangkok Bank* (Commercial
Banks) $ 5,811,509
1,147,000 Electricity Generating Public
Co. - Alien Market* 3,612,205
(Utilities)
- -----------------------------------------------------------
9,423,714
- -----------------------------------------------------------
Total Common Stocks
(Cost $357,336,033) $422,113,740
===========================================================
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Description Value
===========================================================
Short-Term Obligation--6.9%
- -----------------------------------------------------------
State Street Bank & Trust
Euro-Time Deposit, 5.63%,
<S> <C> <C>
$31,502,385 08/01/96 $ 31,502,385
- -----------------------------------------------------------
Total Short-Term Obligation
(Cost $31,502,385) $ 31,502,385
===========================================================
Total Investments
(Cost $388,838,418)/(a)/ $453,616,125
===========================================================
</TABLE>
<TABLE>
<CAPTION>
===========================================================
Federal Income Tax Information:
<S> <C>
Gross unrealized gain for investments
in which value exceeds cost $ 74,189,513
Gross unrealized loss for investments
in which cost exceeds value (9,600,240)
- -----------------------------------------------------------
Net unrealized gain $ 64,589,273
===========================================================
</TABLE>
* Non-income producing security.
/(a)/ The aggregate cost for federal income tax purposes is $389,008,465.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
38
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs International Equity Fund (continued)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
===========================================================
Common Stock Industry Concentrations*
===========================================================
<S> <C>
Commercial Banks 8.5%
Office Equipment Manufacturer 5.8%
Electronics 4.8%
Pharmaceuticals 4.7%
Utilities 4.5%
Commercial Services 4.2%
Health Care 3.9%
Real Estate 3.7%
Tobacco 3.6%
Electrical Equipment Manufacturer 3.1%
Building Materials 2.8%
Aerospace/Defense 2.4%
Sportswear 2.3%
Insurance 2.3%
Publishing 2.3%
Temporary Help 2.2%
Wholesale Trade 2.1%
Retail 2.1%
Machinery 2.0%
Metals-Products 1.9%
Business Services 1.9%
Optical Glass Manufacturer 1.9%
Metals-Diversified 1.8%
Luxury Products 1.8%
Computer Software and Services 1.8%
Capital Goods 1.7%
Airport Operator 1.7%
Retail-Furniture 1.7%
Food Retailer 1.6%
Communications 1.6%
Oil & Gas 1.5%
Industrial 1.5%
Electrical Equipment 1.2%
Financial 1.0%
Electronics-Equipment 0.8%
- -----------------------------------------------------------
Total Common Stock 92.7%
===========================================================
</TABLE>
*Industry market value as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
39
<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 one 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: Asian Equity Markets Faltered Due to a Host of Regional
Concerns
The performance of most Asian equity markets was weak during the six-month
period ended July 31, 1996. A year-end rally in the region extended into
mid-February, ending when Asian markets experienced broad selling pressure due
to volatility in the U.S. market, tension between Taiwan and China preceding the
Taiwanese election, and uncertainty surrounding the Korean election. The region
briefly rebounded from mid-March through April, led by India, Korea and
Indonesia, but most Asian markets came under pressure again from May through
July. A number of country-specific factors depressed equities, including
short-term negative economic data in Malaysia, turmoil at Thailand's central
bank, an investigation of government corruption in Korea and political upheaval
in Indonesia. In addition, exports have slowed throughout Asia, principally due
to a weakening electronics market. As a result of the region's recent
difficulties, cash flows into the Asian markets have slowed from their robust
year-end levels, though inflows continue to be significantly higher than last
year.
India was the best performing Asian market by a wide margin for the period
under review, returning over 20%. Most of India's gains occurred during the
first half of the period, when investor optimism prior to the country's May
election and strong corporate earnings helped restore confidence in its market.
Other markets that had moderately positive returns for the period included
Malaysia and the Philippines, while Thailand and Singapore declined
significantly. After its strong showing in 1995, the Hong Kong market declined
approximately 6% during the period, due to concerns relating to its reversion of
sovereignty to China in 1997 and its exposure to U.S. interest rate movements.
Performance Review:
Fund Performed in Line With the Benchmark
- -------------------------------------------------------------------
Fund Total
Return MSCI AC
(based on Asia Free
net (Ex Japan)
asset value) Index +
------------ -------
Class A (1/31/96 - 7/31/96) -5.70% -5.80%
Class B (5/1/96 - 7/31/96)* -10.28% -10.29%
Institutional (2/2/96 - 7/31/96)* -6.14% -6.09%
- ------------------------------------------------------------------
* Performance for Class B and Institutional shares is from their inception
through the end of the period. Class B performance assumes no redemption
has been made and therefore does not reflect the effects of the contingent
deferred sales charge.
+ Represents a price-only index that does not reflect reinvested dividends.
- --------------------------------------------------------------------------------
40
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We are pleased to note that the fund performed well relative to its peers.
For the 12-month period ended July 31, 1996, the fund's Class A shares ranked in
the top quartile of the Pacific Excluding Japan fund category (11 out of 49),
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. Class B and Institutional shares were not ranked
because they did not exist during the full period.)
While the fund's absolute results reflected the general weakness of the
Asian markets during the period, its competitive relative performance was due to
the positive results from a number of the fund's holdings, as well as its
overweighting in India and the Philippines, two of the region's best performing
markets.
Successful Stock Selection Added Value in India, Thailand and Malaysia
Several of the fund's investments in India, the strongest regional market,
did particularly well during the period. These included Mahindra & Mahindra,
Ltd., India's largest utility vehicle manufacturer, which rose on expectations
that the company's operating margin will continue to improve, and Hindustan
Lever, Ltd., 51% owned by Unilever in the Netherlands, which experienced
expanding sales volume with both the number one shampoo and the number one
detergent in India. Other top investments included Industrial Finance
Corporation of Thailand (IFCT), a major development finance company specializing
in providing financing for emerging companies, which substantially outperformed
its market primarily due to its strong operating results. In addition, Road
Builder Malaysia Holdings, a contractor specializing in civil engineering and
road construction, recently won several new construction contracts and is well
positioned to benefit from the Malaysian government's commitment to improve the
country's infrastructure.
Investments that did not meet our expectations included Mulia Industrindo,
an Indonesian manufacturer of high-quality glass and ceramic tile products,
which was impacted by a price war resulting from substantial additional capacity
in Indonesia and the rest of the region. In Singapore, Overseas Union Bank Ltd.
came under pressure due to concerns that mortgage demand might slow as a result
of the government's efforts to limit property prices. Overseas Union Bank's
earnings for the first half of 1996 were the strongest among Singapore's four
largest banks, and we believe investors' concerns are exaggerated.
Portfolio Composition
As of July 31, 1996, 94.4% of the fund's total net assets were invested in
equity securities and 5.6% were in cash equivalents. By country, the fund's five
heaviest concentrations were in Hong Kong (26.5%), Malaysia (14.4%), Singapore
(10.8%), India (10.3%) and Thailand (9.8%). As of July 31, the portfolio was
overweighted relative to the Index in India, Indonesia, the Philippines and
South Korea, slightly underweighted in Hong Kong, and significantly
underweighted in Singapore and Malaysia.
New Additions in India, Hong Kong and Malaysia
During the period, we added several investments in India, including
Colgate-Palmolive India, Ltd., which has a dominant position in personal care
products, a strong brand franchise and robust cash flows, and Hindustan Lever,
as noted. In Hong Kong, new positions included Wing Hang Bank Ltd., a provider
of banking, foreign exchange and treasury services, which benefits from its
superior product range, low-cost operations and above-average loan growth, and
Asia Satellite Telecommunications Holdings Ltd., a leading satellite owner and
operator in the Asia-Pacific region with prime orbital slots that are expected
to result in high utilization rates and fees. We also initiated a position in
Leader Universal Holdings, the leading manufacturer of power and telecom cable
in Malaysia, which has successfully expanded its client base outside Malaysia
and has built a new factory that will increase its capacity in higher margin
power cables by 50%.
- --------------------------------------------------------------------------------
41
<PAGE>
Letter to Shareholders
- ----------------------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
- ----------------------------------------------------------------------
Top 10 Portfolio Holdings as of July 31, 1996
Percentage
of Total
Company Country Line of Business Net Assets
Swire Pacific Ltd. Hong Kong Conglomerate 3.5%
Tenaga Nasional Malaysia Utility 3.5%
Berhad
Metropolitan Bank Philippines Banking and Finance 3.4%
& Trust
Korea Mobile Korea Telecommunications 3.4%
Telecommunications
JCG Holdings Ltd. Hong Kong Banking and Finance 3.3%
Industrial Finance Thailand Banking and Finance 3.2%
Corporation of
Thailand
Asia Satellite Hong Kong Telecommunications 3.2%
Telecommunications
HKR International Hong Kong Property 3.1%
Ltd.
Wing Hang Bank Ltd. Hong Kong Banking and Finance 3.1%
Hong Kong Electric Hong Kong Utility 3.1%
- ----------------------------------------------------------------------
Stocks Sold
Sales during the period were primarily "trimmings" of positions that had
appreciated. However, we sold the fund's entire position in Hong Kong Land
Holdings, a property investment company, because its management was not actively
seeking new business opportunities.
Outlook
Despite the difficult environment for Asian equities during recent months,
we continue to believe in the region's long-term potential. In our opinion, the
decline in Asian exports is not indicative of a loss of competitiveness but is
instead related to the low U.S. demand for consumer goods, slow economic growth
in Europe and slightly slower growth within Asia itself. In September, the
benchmark will change its allocations by doubling its weighting in Korea and
establishing a new weighting in Taiwan, and we are actively seeking attractive
new investments in those countries. In other markets, we have an increasingly
favorable view of Hong Kong, due to its strong interim corporate earnings and
rising property prices, and we are moderately optimistic regarding Indonesia,
despite its recent political unrest. In contrast, Thailand appears to be
suffering from lingering problems and a rebound in that market may be more
difficult. We intend to continue to closely monitor the changing political and
economic conditions of the markets in which we invest and will adjust the fund's
allocations appropriately.
We thank you for your support in what has been a volatile period for the
Asian markets. We urge investors to take a long-term view based on our belief
that Asian markets continue to offer investors attractive growth potential.
/s/ Warwick M. Negus
Warwick M. Negus
Portfolio Manager, Singapore
/s/ Karma A. Wilson
Karma A. Wilson
Portfolio Manager, Singapore
August 31, 1996
- --------------------------------------------------------------------------------
42
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund
July 31, 1996
(Unaudited)
- -----------------------------------------------------------
Shares Description Value
- -----------------------------------------------------------
Common Stocks--94.2%
Hong Kong Dollar--26.5%
2,762,500 Asia Satellite Tel. $ 8,144,647
(Telecommunications)
7,124,400 HKR International Ltd.
(Real Estate) 7,968,921
2,678,000 Hong Kong Electric Holdings
(Utility) 7,878,202
1,311,000 Hutchison Whampoa
(Conglomerates) 7,832,129
9,985,666 JCG Holdings Ltd.
(Financial Services) 8,522,286
6,169,400 San Miguel Brewery Ltd.
(Breweries) 2,632,643
806,000 Sun Hung Kai Property Co.
(Real Estate) 7,608,395
1,055,000 Swire Pacific Ltd. "A"
(Transportation) 9,038,024
1,998,500 Wing Hang Bank Ltd.
(Financial Services) 7,959,577
- -----------------------------------------------------------
67,584,824
- -----------------------------------------------------------
Indian Rupee--10.3%
20,000 Brook Bond Lipton India Ltd. 208,268
(Foods)
182,900 Colgate Palmolive*
(Consumer Goods) 1,306,613
176,450 Hindustan Lever Ltd.
(Household Products) 4,243,262
439,400 Larsen & Toubro Ltd. GDR
(Engineering) 7,085,325
10,000 Larsen & Toubro Ltd.
(Engineering) 70,522
434,250 Mahindra & Mahindra Ltd.
(Auto Engineer) 4,177,130
165,750 Mahindra & Mahindra GDR
(Autos and Trucks) 1,906,125
48,400 Niit Limited
(Computers) 363,171
446,600 Tata Engineering & Locomotive
Co. GDS (Engineering) $ 6,810,650
- -----------------------------------------------------------
26,171,066
- -----------------------------------------------------------
Indonesian Rupiah--8.5%
2,126,000 PT Bank of Bali - Foreign
(Banking) 4,407,506
1,470,625 Indofood Sukses Makmur - Foreign
(Foods) 6,035,097
2,513,000 PT Jaya Real Property - Foreign
(Property) 3,740,378
7,458,719 Mulia Industrindo - Foreign
(Manufacturing) 7,452,928
- -----------------------------------------------------------
21,635,909
- -----------------------------------------------------------
Malaysian Ringgit--14.4%
1,267,000 Commerce Asset Holdings
(Conglomerate) 7,157,905
2,696,000 Leader Universal Holdings
(Electronics) 6,643,321
1,803,000 Road Builder Malaysia Holdings
(Construction) 7,513,102
2,098,000 Tenaga National Berhad 8,826,428
(Utility)
998,000 United Engineers Malaysia*
(Construction) 6,717,846
- -----------------------------------------------------------
36,858,602
- -----------------------------------------------------------
Philippine Peso--6.0%
22,500,000 Centennial City Inc.
(Real Estate) 3,734,974
408,455 Metropolitan Bank and Trust
(Banking) 8,650,736
32,500 Philippine Commercial
International Bank
(Banking) 424,776
1,850,000 Pilipino Telephone Corp.
(Telecommunications) 2,435,604
36,900 San Miguel Corp. "B"
(Brewing) 104,201
- -----------------------------------------------------------
15,350,291
===========================================================
43
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
July 31, 1996
(Unaudited)
- -----------------------------------------------------------
Shares Description Value
===========================================================
Common Stocks (continued)
Singapore Dollar--10.8%
722,100 Far East-Levingston Shipbuilding
(Oil & Gas) $ 3,423,728
894,500 Overseas Union Bank - Foreign
(Banking) 5,317,246
1,138,000 Singapore Land
(Real Estate) 7,288,161
314,000 Singapore Press Holdings -
Foreign
(Printing & Publishing) 5,466,280
1,918,000 Straits Steamship Land
(Conglomerate) 6,026,410
- -----------------------------------------------------------
27,521,825
- -----------------------------------------------------------
South Korean Won--7.9%
374,000 Korea Electric Power Corp. ADR
(Utility) 7,713,750
4,620 Korea Mobile Telecommunications
Corp. (Telecommunications) 6,375,589
130,000 Korea Mobile Telecommunications
Corp. ADR (Telecommunications) 2,177,500
5,940 Samsung Fire & Marine Insurance
(Insurance) 3,794,066
- -----------------------------------------------------------
20,060,905
- -----------------------------------------------------------
Thai Baht--9.8%
3,664,273 Bangkok Metropolitan Bank -
Foreign (Banking) 2,286,179
741,200 Electricity Generating Public
Co. (Utility) 2,143,385
943,900 Electricity Generating Public
Co. - Foreign (Utility) 2,972,590
2,072,000 Industrial Finance Corp -
Foreign (Financial Services) 8,125,812
93,500 Industrial Finance Corp -
(Financial Services) 366,681
2,823,900 Siam Panich Leasing - Foreign
(Financial Services) 2,237,284
681,700 Thai Farmers Bank Public -
Foreign (Financial Services) 6,697,100
- -----------------------------------------------------------
24,829,031
- -----------------------------------------------------------
Total Common Stocks
(Cost $232,751,915) $240,012,453
===========================================================
Shares Description Value
- -----------------------------------------------------------
Warrants--0.2%
353,750 Straits Steamship Land 12/12/00
(Conglomerate) $ 425,571
- -----------------------------------------------------------
Total Warrants
(Cost $197,764) $ 425,571
===========================================================
Principal
Amount Description Value
===========================================================
Corporate Bonds--0.2%
Malaysian Ringgit--0.2%
MYR United Engineers Malaysia
1,012,000 4.00%, 05/22/99 $ 583,893
- -----------------------------------------------------------
Total Corporate Bonds
(Cost $514,021) $ 583,893
===========================================================
Short-Term Obligations--5.6%
$14,257,938 State Street Bank & Trust
Euro-Time Deposit, 5.63%, $14,257,938
08/01/96
- -----------------------------------------------------------
Total Short-Term Obligations
(Cost $14,257,938) $14,257,938
===========================================================
Total Investments
(Cost $247,721,638)/(a)/ $255,279,855
===========================================================
===========================================================
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $ 22,877,020
Gross unrealized loss for investments in
which cost exceeds value (16,105,292)
===========================================================
Net unrealized gain $ 6,771,728
===========================================================
*Non-income producing security.
/(a)/ The aggregate cost for federal income tax purposes is
$247,745,859.
The percentage shown for each investment category reflects
the value of investments in that category as a percentage
of total net assets.
- -----------------------------------------------------------
44
<PAGE>
- -----------------------------------------------------------
Goldman Sachs Asia Growth Fund (continued)
July 31, 1996
(Unaudited)
- -----------------------------------------------------------
- -----------------------------------------------------------
Common Stock Industry Concentrations*
- -----------------------------------------------------------
Financial Services 13.4%
Utilities 11.6%
Real Estate 10.4%
Banking 8.4%
Conglomerates 8.2%
Telecommunications 7.5%
Construction 5.6%
Engineering 5.6%
Transportation 3.5%
Manufacturing 2.9%
Electronics 2.6%
Foods 2.4%
Printing and Publishing 2.1%
Household Products 1.7%
Auto Engineers 1.6%
Insurance 1.5%
Property 1.5%
Oil and Gas 1.3%
Breweries 1.1%
Autos and Trucks 0.7%
Consumer Goods 0.5%
Computers 0.1%
- -----------------------------------------------------------
Total Common Stock 94.2%
- -----------------------------------------------------------
*Industry market value as a percentage of total net assets.
- -----------------------------------------------------------
45
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
July 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund Fund
------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value (identified cost $62,392,116,
$224,656,296, $431,613,862, $739,988,816, $205,542,650,
$388,838,418 and $247,721,638, respectively) $64,211,062 $262,040,015
Cash 18,090 75,643
Receivables:
Investment securities sold 2,389,703 --
Forward foreign currency exchange contracts -- --
Fund shares sold 126,465 1,034,529
Dividends and interest 369,992 358,929
Deferred organization expenses, net 42,944 --
Other assets 89,837 34,781
- ------------------------------------------------------------------------------------------------
Total assets 67,248,093 263,543,897
- ------------------------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased 8,630,207 1,031,613
Forward foreign currency exchange contracts -- --
Fund shares repurchased 72,254 245,270
Amounts owed to affiliates 63,484 195,543
Accrued expenses and other liabilities 54,596 103,933
- ------------------------------------------------------------------------------------------------
Total liabilities 8,820,541 1,576,359
- ------------------------------------------------------------------------------------------------
Net Assets:
Paid-in capital 54,145,872 216,756,702
Accumulated undistributed net investment income (loss) 393,969 1,556,946
Accumulated undistributed (distributions in excess of) net realized
gain (loss) on investment, option and futures transactions 2,066,055 6,270,171
Accumulated net realized foreign currency gain (loss) -- --
Net unrealized gain on investments, options and futures 1,821,656 37,383,719
Net unrealized loss on translation of assets and liabilities
denominated in foreign currencies -- --
- ------------------------------------------------------------------------------------------------
Net assets $58,427,552 $261,967,538
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class A Class B Class A Class B
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total shares of beneficial interest outstanding,
$.001 par value (100,000,000 and 25,000,000
shares authorized for each Class A and B, 3,369,492 13,937 8,147,163 134,398
respectively)
Net asset and Class A redemption value per share (a) $17.27 $17.26 $19.93 $19.90
Maximum public offering price per share (Class A NAV
x 1.0582) $18.28 $17.26 $21.09 $19.90
Institutional Service Institutional Service
------------- ------------- ------------- -------------
Total shares of beneficial interest outstanding,
$.001 par value (50,000,000 shares per each class
authorized) -- -- 4,809,477 26,468
Net asset value, offering and redemption price per share -- -- $20.06 $19.93
- --------------------------------------------------------------------------------------------------------------------------------
(a) At redemption, Class B shares are subject to a contingent deferred sales charge assessed on the amount equal to the lesser
of the current net asset value or the original purchase price of the shares.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth and Capital Growth Small Cap Equity International Equity Asia Growth
Income Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$470,429,541 $824,978,282 $208,863,689 $453,616,125 $255,279,855
71,158 66,279 73,823 56,558 558,774
4,818,624 7,161,970 3,223,212 9,741,783 537,340
-- -- -- 488,116 --
978,191 370,783 286,579 2,877,628 2,697,975
490,285 864,244 68,859 640,303 314,271
28,955 -- 22,889 23,422 93,055
9,689 11,149 1,700 175,830 81,857
- ----------------------------------------------------------------------------------------------------------------------
476,826,443 833,452,707 212,540,751 467,619,765 259,563,127
- ----------------------------------------------------------------------------------------------------------------------
5,572,233 11,623,678 916,462 8,609,103 2,058,668
-- -- -- 2,338,180 --
454,950 652,481 82,149 439,209 1,284,130
400,160 939,694 287,906 521,966 341,005
81,810 28,887 100,648 402,542 961,011
- ----------------------------------------------------------------------------------------------------------------------
6,509,153 13,244,740 1,387,165 12,311,000 4,644,814
- ----------------------------------------------------------------------------------------------------------------------
401,130,451 650,246,137 197,394,219 382,033,487 255,141,353
1,608,067 3,918,068 (828,724) 1,089,493 (984,166)
28,763,093 81,054,296 11,267,052 5,976,907 (5,808,122)
-- -- -- 1,249,545 (224,011)
38,815,679 84,989,466 3,321,039 66,705,786 7,972,137
-- -- -- (1,746,453) (1,178,878)
- ----------------------------------------------------------------------------------------------------------------------
$470,317,290 $820,207,967 $211,153,586 $455,308,765 $254,918,313
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Class A Class B Class A Class B Class A Class B Class A Class B Class A Class B
---------- -------- ---------- --------- --------- ------- ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
23,131,801 106,312 54,480,662 57,043 9,946,293 33,923 22,437,524 194,806 16,092,733 94,577
$20.22 $20.18 $15.04 $15.02 $21.16 $21.12 $18.89 $18.87 $15.55 $15.53
$21.40 $20.18 $15.92 $15.02 $22.39 $21.12 $19.99 $18.87 $16.46 $15.53
<CAPTION>
Institutional Service Institutional Service Institutional Service Institutional Service Institutional Service
- ------------- ------- ------------- ------- ------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
624 30,041 -- -- -- -- 1,466,561 5,056 212,883 --
$20.21 $20.21 -- -- -- -- $18.94 $18.89 $15.59 --
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
47
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Operations
For the Six Months Ended July 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund Fund
--------------------------------
<S> <C> <C>
Investment income:
Dividends (net of withholding taxes)/(a)/ $ 461,958 $ 2,454,588
Interest 961,064 250,369
- ------------------------------------------------------------------------------------------------------------------------
Total income 1,423,022 2,704,957
- ------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 139,661 583,764
Administration fees 41,898 291,875
Distribution fees 69,972 192,385
Authorized dealer service fees 69,830 190,811
Custodian fees 42,313 39,661
Transfer agent fees 64,600 122,723
Registration fees 17,641 36,584
Professional fees 31,775 37,246
Amortization of deferred organization expenses 6,697 9,549
Directors' fees 450 1,777
Other 4,603 18,913
- ------------------------------------------------------------------------------------------------------------------------
Total expenses 489,440 1,525,288
Less--expenses reimbursable and fees waived by Goldman Sachs (209,904) (290,423)
- ------------------------------------------------------------------------------------------------------------------------
Net expenses 279,536 1,234,865
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1,143,486 1,470,092
- ------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment, option, futures and foreign
currency transactions:
Net realized gain (loss) from:
Investment transactions 1,382,527 4,788,835
Options transactions -- --
Futures transactions (69,740) (287,574)
Foreign currency related transactions -- --
Net change in unrealized gain (loss) on:
Investments (1,693,866) (4,316,083)
Options -- --
Futures (73,009) (24,625)
Translation of assets and liabilities denominated in foreign currencies -- --
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment, option, futures and foreign
currency transactions (454,088) 160,553
- ------------------------------------------------------------------------------------------------------------------------
Net increase(decrease) in net assets resulting from operations $ 689,398 $ 1,630,645
========================================================================================================================
</TABLE>
/(a)/ For the Balanced, Select Equity, Growth and Income, Capital Growth, Small
Cap Equity, International Equity and Asia Growth Funds, taxes withheld
were $159, $28,269, $3,030, $23,513, $4,211, $524,808 and $244,632,
respectively.
- -------------------------------------- ----------------------------------------
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth and Income Capital Growth Small Cap Equity International Equity Asia Growth
Fund Fund Fund Fund Fund
=============================================================================================================
<S> <C> <C> <C> <C>
$ 7,268,800 $ 7,774,644 $ 457,446 $ 3,516,075 $ 2,337,402
549,748 1,476,917 358,191 616,757 362,631
- -------------------------------------------------------------------------------------------------------------
7,818,548 9,251,561 815,637 4,132,832 2,700,033
- -------------------------------------------------------------------------------------------------------------
1,279,343 3,232,951 791,378 1,481,408 915,795
348,912 1,077,651 263,793 493,803 305,276
582,886 1,078,330 264,344 475,914 300,729
581,412 1,077,650 263,793 473,977 299,817
49,585 61,855 33,303 427,423 282,532
338,738 372,553 213,148 223,837 157,743
31,932 20,228 16,420 46,781 34,875
36,002 44,208 35,754 41,423 54,352
9,530 -- 9,320 8,754 15,769
3,341 6,713 1,894 3,187 1,872
34,824 46,024 14,732 32,158 19,406
- -------------------------------------------------------------------------------------------------------------
3,296,505 7,018,163 1,907,879 3,708,665 2,388,166
(548,885) (1,077,310) (263,518) (437,643) (334,503)
- -------------------------------------------------------------------------------------------------------------
2,747,620 5,940,853 1,644,361 3,271,022 2,053,663
- -------------------------------------------------------------------------------------------------------------
5,070,928 3,310,708 (828,724) 861,810 646,370
- -------------------------------------------------------------------------------------------------------------
22,277,285 27,575,231 19,749,069 14,537,093 2,547,872
(419,629) 858,142 1,007,493 (587,615) --
-- -- -- -- (141,910)
-- -- -- 2,520,028 (572,773)
(18,876,919) (22,201,331) 21,029,868 14,451,294 (19,219,123)
(73,842) (134,608) 599,225 -- --
-- -- -- -- --
-- -- -- 2,417,426 216,804
- -------------------------------------------------------------------------------------------------------------
2,906,895 6,097,434 42,385,655 33,338,226 (17,169,130)
- -------------------------------------------------------------------------------------------------------------
$ 7,977,823 $ 9,408,142 $ 41,556,931 $ 34,200,036 $(16,522,760 )
=============================================================================================================
</TABLE>
49
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Six Months Ended July 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Goldman Sachs Goldman Sachs
Balanced Select Equity
Fund Fund
---------------------------------------------
<S> <C> <C>
From operations:
Net investment income (loss) $ 1,143,486 $ 1,470,092
Net realized gain on investment, option and futures transactions 1,312,787 4,501,261
Net realized gain (loss) on foreign currency related transactions -- --
Net change in unrealized gain (loss) on investments, options and futures (1,766,875) (4,340,708)
Net change in unrealized gain on translation of assets and liabilities
denominated in foreign currencies -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 689,398 1,630,645
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income/(a)/ (874,821) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (874,821) --
- -----------------------------------------------------------------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 10,198,544 78,646,378
Reinvestment of dividends and distributions 799,342 --
Cost of shares repurchased (3,312,918) (12,183,963)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from share transactions 7,684,968 66,462,415
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) 7,499,545 68,093,060
Net assets:
Beginning of period 50,928,007 193,874,478
- ------------------------------------------------------------------------------------------------------------------------------------
End of period $58,427,552 $ 261,967,538
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed (distributions in excess of) net investment income(loss) $ 393,969 $ 1,556,946
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(a)/The Balanced Fund's Class A and Class B shares paid distributions of
$873,839 and $982, respectively. The Growth and Income Fund's Class A,
Class B, Institutional and Service shares paid distributions of $3,513,596,
$5,232, $38 and $82, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth and Income Capital Growth Small Cap International Asia Growth
Fund Fund Equity Fund Equity Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 5,070,928 $ 3,310,708 $ (828,724) $ 861,810 $ 646,370
21,857,656 28,433,373 20,756,562 13,949,478 2,405,962
-- -- -- 2,520,028 (572,773)
(18,950,761) (22,335,939) 21,629,093 14,451,294 (19,219,123)
-- -- -- 2,417,426 216,804
- -----------------------------------------------------------------------------------------------------------------------------------
7,977,823 9,408,142 41,556,931 34,200,036 (16,522,760)
- -----------------------------------------------------------------------------------------------------------------------------------
(3,518,948) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(3,518,948) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
58,633,617 38,935,492 24,723,368 131,962,517 86,102,997
3,297,083 -- -- -- --
(32,828,857) (109,191,731) (60,120,686) (41,713,609) (20,200,633)
- -----------------------------------------------------------------------------------------------------------------------------------
29,101,843 (70,256,239) (35,397,318) 90,248,908 65,902,364
- -----------------------------------------------------------------------------------------------------------------------------------
33,560,718 (60,848,097) 6,159,613 124,448,944 49,379,604
436,756,572 881,056,064 204,993,973 330,859,821 205,538,709
- ------------------------------------------------------------------------------------------------------------------------------------
$470,317,290 $820,207,967 $211,153,586 $455,308,765 $254,918,313
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,608,067 $ 3,918,068 $ (828,724) $ 1,089,493 $ (984,166)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
51
<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
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Summary of share transactions:
Class A 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.
52
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs Goldman Sachs
Growth and Income Capital Growth Small Cap International Asia Growth
Fund Fund Equity Fund Equity 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)
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class A Class A Class A Class A Class A
------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
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>
- -------------------------------------- ----------------------------------------
53
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements
July 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
1. Organization
Goldman Sachs Equity Portfolios, Inc. (the "Company") is a Maryland corporation
registered under the Investment Company Act of 1940, as amended, as an open-end,
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." The Select Equity, Growth and Income, International Equity and Asia
Growth Funds offer four classes of shares - Class A, Class B, Institutional and
Service. The Balanced, Capital Growth and Small Cap Equity Funds offer two
classes of shares - Class A and Class B.
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 may 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 with the exception of the Balanced Fund which does not amortize premiums.
In addition, it is the Funds' policy to accrue for estimated capital gains taxes
on foreign securities held by the Funds subject to such taxes.
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
- --------------------------------------------------------------------------------
54
<PAGE>
segregated account, until the settlement date, cash or liquid, high grade debt
securities in an amount equal to 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 if the
Fund intends to settle the contract prior to delivery. All commitments are
"marked-to-market" daily at the applicable translation rates and any resulting
unrealized gains or losses are recorded in the funds' financial statements. The
Funds record realized gains or losses at the time the forward contract is offset
by entry into a closing transaction or extinguished by delivery of the currency.
Risks may arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
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.
- --------------------------------------------------------------------------------
55
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
July 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
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.
Class A and Class B 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. Each class of Shares separately bears
their respective class-specific transfer agency fees. Service Shares separately
bear a service fee.
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. 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 using methods approved
by the Board of Directors of the Company.
- --------------------------------------------------------------------------------
56
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 and subadviser to the International
Equity Fund. Under the Investment Advisory and Subadvisory Agreements, GSAM,
GSFM and GSAM International (the "Investment Advisors"), subject to the general
supervision of the Company's Board of Directors, manage the Company's
portfolios. 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. 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.
Goldman Sachs has voluntarily agreed to reduce or limit certain "Other
Expenses" for the Balanced, Select Equity, Growth and Income, International
Equity and Asia Growth Funds (excluding advisory, administration, service,
distribution and authorized dealer service fees and litigation and
indemnification costs, taxes, interest, brokerage commissions and extraordinary
expenses and with the exception of the Balanced Fund, transfer agent fees) until
further notice to the extent such expenses exceed .10%, .06%, .11%, .24% and
.24% of the average daily net assets of the funds, respectively.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to
Distribution Agreements. Goldman Sachs may receive a portion of the Class A
sales load and Class B redemption fee imposed and has advised the Company that
it retained approximately $53,000, $192,000, $255,000, $170,000, $56,000,
$543,000 and $685,000 during the six months ended July 31, 1996 for the
Balanced, Select Equity, Growth and Income, Capital Growth, Small Cap Equity,
International Equity and Asia Growth Funds, respectively.
The Company, on behalf of each Fund, has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1. Under the Distribution Plan,
Goldman Sachs is entitled to a quarterly fee from each Fund for distribution
services equal, on an annual basis, to .25% and .75% of a Fund's average daily
net assets attributable to Class A and Class B shares, respectively.
The Company, on behalf of each Fund, has 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, on an annual basis, to .25%
of its average daily net assets attributable to Class A and Class B shares.
Goldman Sachs also serves as the Transfer Agent of the funds for a fee.
- --------------------------------------------------------------------------------
57
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
July 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
For the six months ended July 31, 1996, the advisors, administrator and
distributor have voluntarily agreed to waive certain fees and reimburse other
expenses as follows(in thousands):
<TABLE>
<CAPTION>
Reimburse-
Admin- Class A Reimburse- ment
Fund Adviser istrator 12b-1 ment Outstanding
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balanced -- -- 70 140 35
Select Equity 70 117 30 73 22
Growth and
Income -- -- 549 -- --
Capital
Growth -- -- 1,077 -- --
Small Cap
Equity -- -- 264 -- --
International
Equity 50 198 76 114 114
Asia Growth 49 122 48 116 80
</TABLE>
The Investment Advisors and Administrator may discontinue or modify such
waivers and limitations in the future at their discretion.
At July 31, 1996, the amounts owed to affiliates were as follows(in thousands):
<TABLE>
<CAPTION>
Authorized
Admin- Distri- Dealer Transfer
Fund Adviser istration bution Service Agent Total
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balanced 26 8 1 10 18 63
Select Equity 95 33 29 34 5 196
Growth and
Income 219 60 17 93 11 400
Capital
Growth 524 175 1 168 72 940
Small Cap
Equity 137 45 1 43 62 288
International
Equity 283 57 78 84 20 522
Asia Growth 160 34 48 49 50 341
</TABLE>
Purchases and proceeds of sales or maturities of securities (excluding
short-term investments, futures and options) for the six months ended July 31,
1996, were as follows:
<TABLE>
<CAPTION>
Sales or
Fund Purchases Maturities
- -------- ------------- -----------
<S> <C> <C>
Balanced $75,597,532 $65,655,564
Select Equity 104,988,645 35,448,084
Growth and Income 179,751,509 134,334,970
Capital Growth 207,867,619 283,523,196
Small Cap Equity 89,820,984 123,331,064
International Equity 172,086,871 87,844,726
Asia Growth 115,125,636 57,181,021
</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 $52,586,514 and $48,305,320,
respectively.
For the six months ended July 31, 1996, purchased option transactions in the
Growth and Income Fund were as follows:
<TABLE>
<CAPTION>
Put Options Purchased Cost
- ----------------------------------------------------------
<S> <C>
Balance outstanding, beginning of period $ --
Options purchased 857,534
Options expired (419,629)
Options sold --
- ----------------------------------------------------------
Cost at end of period $ 437,905
- ----------------------------------------------------------
</TABLE>
For the six months ended July 31, 1996, purchased option transactions in the
Capital Growth Fund were as follow:
<TABLE>
<CAPTION>
Put Options Purchased Cost
- -------------------------------------------------------
<S> <C>
Balance outstanding, beginning of period $ --
Options purchased 2,217,530
Options expired (620,663)
Options sold (985,696)
- ----------------------------------------------------------
Cost at end of period $ 611,171
- ----------------------------------------------------------
</TABLE>
For the six months ended July 31, 1996, purchased option transactions in the
Small Cap Equity Fund were as follows:
<TABLE>
<CAPTION>
Put Options Purchased Cost
- ---------------------------------------------------------
<S> <C>
Balance outstanding, beginning of period $ --
Options purchased 2,813,171
Options expired
Options sold (1,652,396)
- ----------------------------------------------------------
Cost at end of period $ 1,160,775
==========================================================
</TABLE>
58
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the six months ended July 31, 1996, purchased option transactions in the
International Equity Fund were as follows:
Put Options Purchased Cost
- ----------------------------------------------------------
Balance outstanding, beginning of period $ --
Options purchased 587,615
Options expired (587,615)
Options sold --
- ----------------------------------------------------------
Cost at end of period $ --
==========================================================
Certain risks arise related to call and put options from the possible
inability of counterparties to meet terms of their contracts.
At July 31, 1996, the International Equity Fund had the following
outstanding forward foreign currency exchange contracts:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
Value on Unrealized
Foreign Currency Settlement Current Gain
Sale Contracts Date Value (Loss)
- ----------------------------------------------------------
<S> <C> <C> <C>
Belgian Franc
expiring 9/9/96 $ 793,925 $ 800,233 $ (6,308)
Hong Kong Dollar
expiring 8/7/96 16,830,970 16,849,518 (18,548)
Japanese Yen
expiring 8/2/96 846,657 848,362 (1,705)
Swedish Krona
expiring 8/7/96 6,787,096 6,706,119 80,977
expiring 8/7/96 17,539,789 17,977,374 (437,585)
- ----------------------------------------------------------
Total Foreign
Currency Sale
Contracts $42,798,437 $43,181,606 $(383,169)
==========================================================
- ----------------------------------------------------------
<CAPTION>
Value on Unrealized
Foreign Currency Settlement Current Gain
Purchase Contracts Date Value (Loss)
- ----------------------------------------------------------
<S> <C> <C> <C>
Deutschemark
expiring 8/7/96 $ 6,787,096 $ 6,825,351 $ 38,255
expiring 9/4/96 14,521,834 14,805,230 283,396
expiring 9/9/96 2,994,171 3,015,235 21,064
- ----------------------------------------------------------
Total Foreign
Currency
Purchase Contracts $24,303,101 $24,645,816 $ 342,715
==========================================================
</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 July 31, 1996,
the International Equity Fund had sufficient cash and securities to cover any
commitments under these contracts.
The International Equity Fund has recorded a "Receivable for forward foreign
currency exchange contracts" and "Payable for forward foreign currency exchange
contracts" resulting from open and closed but not settled forward foreign
currency exchange contracts of $488,116 and $2,338,180, respectively, in the
accompanying Statements of Assets and Liabilities. Included in these amounts are
$64,424 and $1,874,034, respectively, related to forward contracts closed but
not settled as of July 31, 1996.
For the six months ended July 31, 1996, Goldman Sachs earned approximately
$4,000, $41,000, $258,000, $12,000 and $52,000 of brokerage commissions from
portfolio transactions executed on behalf of the Balanced, Select Equity, Growth
and Income, Capital Growth, Small Cap Equity, International Equity and Asia
Growth Funds, respectively.
5. Repurchase Agreements
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping in the customer-only account of State Street
Bank & Trust Co., the Company's custodian, or at sub-custodians. Goldman Sachs
monitors the market value of the underlying securities by pricing them daily.
6. Joint Repurchase Agreement Account
The Funds, together with other registered investment companies having advisory
agreements with GSAM or GSFM, transfer uninvested cash balances into joint
- --------------------------------------------------------------------------------
59
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
July 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
accounts, the daily aggregate balance of which is invested in one or more
repurchase agreements. The underlying securities for the repurchase agreements
are U.S. Treasury and agency obligations. At July 31, 1996, the Balanced, Select
Equity, Growth and Income, Capital Growth and Small Cap Equity Funds had a .83%,
.73%, 1.40%, 5.02% and .05%, respectively, undivided interest in the repurchase
agreements in the following joint account which equaled $7,700,000, $6,800,000,
$13,000,000 and $46,600,000 and $500,000, respectively, in principal amount. At
July 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>
Chase Securities, dated 07/31/96, repurchase price
$150,023,875 (U.S. Treasury Notes: $153,000,745, $4.75%-6.75%
02/15/97-03/31/97)
$150,000,000 5.73% 08/01/96 $ 150,000,000
Daiwa Securities, dated 07/31/96, repurchase price
$230,035,938 (U.S. Treasury Bills: $234,600,349,
12/12/96-01/09/97)
230,000,000 5.63 08/01/96 230,000,000
Lehman Government Securities, dated 07/31/96, repurchase
price $548,486,830 (U.S. Treasury Notes: $222,651,777,
5.50%-8.50%, 02/15/00-04/15/00; U.S. Treasury Stripped
Securities: $336,589,485, 11/15/96-02/15/03)
548,400,000 5.70 08/01/96 548,400,000
- ---------------------------------------------------------------
Total Joint Repurchase Agreement Account $ 928,400,000
- ---------------------------------------------------------------
</TABLE>
7. 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 six months ended July 31,
1996, the Funds did not have any borrowings under these facilities.
8. 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 six month period ended July 31, 1996, which are
considered to be affiliates of Small Cap Equity are as follows (dollar amounts
in thousands):
<TABLE>
<CAPTION>
Purchase Sales Realized Dividend Market
Affiliate Name at Cost Proceeds Gain/(Loss) Income Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Safety
Razor Co. $ -- $ 389 $ (91) $ -- $8,428
Alpine Lace
Brands, Inc. 1,129 -- -- -- 2,037
J. Baker, Inc. 98 1,266 (889) 27 5,528
Brookstone, Inc. -- 2,656 (734) -- 7,370
Congoleum Corp. -- 1,076 (54) -- 3,513
International
Post Ltd. -- 2,000 (3,573) -- 1,936
Morningstar
Group, Inc. -- 2,133 521 -- 7,496
Mortons Restaurant
Group, Inc. -- 4,106 1,625 -- 6,389
Opinion Research
Corp. -- -- -- -- 3,437
- --------------------------------------------------------------------------------
</TABLE>
9. Other Matters
As of July 31, 1996, Goldman, Sachs & Co. Employees Profit Sharing and
Retirement Income Plan was the beneficial owner of approximately 17% of the
outstanding shares of the Select Equity Fund.
- --------------------------------------------------------------------------------
60
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10. Summary of Share Transactions
Share activity for the six months ended July 31, 1996 is as follows:
<TABLE>
<CAPTION>
Balanced Fund Select Equity Fund Growth and Income Fund Capital Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars Shares Dollars
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A shares
Shares sold 597,691 $9,955,212 2,049,844 $41,642,506 2,702,820 $55,678,284 2,470,590 $38,036,306
Reinvestment of
dividends and
distributions 45,813 798,533 -- -- 158,359 3,291,899 -- --
Shares repurchased (216,742) (3,312,657) (467,406) (9,516,465) (1,584,703) (32,727,245 (7,099,681) (109,190,989)
-----------------------------------------------------------------------------------------------------------
426,762 7,441,088 1,582,438 32,126,041 1,276,476 26,242,938 (4,629,091) (71,154,683)
-----------------------------------------------------------------------------------------------------------
Class B shares
Shares sold 13,906 243,332 134,459 2,764,483 107,333 2,238,635 57,092 899,186
Reinvestment of
dividends and
distributions 46 809 -- -- 243 5,102 -- --
Shares repurchased (15) (261) (61) (1,235) (1,264) (25,833) (49) (742)
-----------------------------------------------------------------------------------------------------------
13,937 243,880 134,398 2,763,248 106,312 2,217,904 57,043 898,444
-----------------------------------------------------------------------------------------------------------
Institutional shares
Shares sold -- -- 1,651,066 33,683,114 624 13,195 -- --
Reinvestment of
dividends and
distributions -- -- -- -- -- -- -- --
Shares repurchased -- -- (130,005) (2,666,263) -- -- -- --
-----------------------------------------------------------------------------------------------------------
-- -- 1,521,061 31,016,851 624 13,195 -- --
-----------------------------------------------------------------------------------------------------------
Service shares
Shares sold -- -- 26,468 556,275 33,786 703,503 -- --
Reinvestment of
dividends and
distributions -- -- -- -- 4 82 -- --
Shares repurchased -- -- -- -- (3,749) (75,779) -- --
----------------------------------------------------------------------------------------------------------
-- -- 26,468 556,275 30,041 627,806 -- --
-----------------------------------------------------------------------------------------------------------
Net increase (decrease)
in shares 440,699 $7,684,968 3,264,365 $66,462,415 1,413,453 $29,101,843 (4,572,048) $(70,256,239)
===========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
61
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
July 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Small Cap Equity Fund International Equity Fund Asia Growth Fund
- ---------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A shares
Shares sold 1,176,477 $23,976,523 5,392,053 $99,961,083 4,751,563 $79,570,807
Reinvestment of
dividends and
distributions -- -- -- -- -- --
Shares repurchased (3,085,056) (60,119,119) (2,195,650) (40,564,829) (1,126,546) (18,861,323)
--------------------------------------------------------------------------------
(1,908,579) (36,142,596) 3,196,403 59,396,254 3,625,017 60,709,484
Class B shares
Shares sold 33,996 746,845 195,265 3,712,178 96,248 1,624,824
Reinvestment of
dividends and
distributions -- -- -- -- -- --
Shares repurchased (73) (1,567) (459) (8,639) (1,671) (27,917)
--------------------------------------------------------------------------------
33,923 745,278 194,806 3,703,539 94,577 1,596,907
--------------------------------------------------------------------------------
Institutional shares
Shares sold -- -- 1,526,992 28,192,337 294,240 4,907,366
Reinvestment of
dividends and
distributions -- -- -- -- -- --
Shares repurchased -- -- (60,431) (1,140,088) (81,357) (1,311,393)
--------------------------------------------------------------------------------
-- -- 1,466,561 27,052,249 212,883 3,595,973
--------------------------------------------------------------------------------
Service shares
Shares sold -- -- 5,059 96,919 -- --
Reinvestment of
dividends and
distributions -- -- -- -- -- --
Shares repurchased -- -- (3) (53) -- --
--------------------------------------------------------------------------------
-- -- 5,056 96,866 -- --
--------------------------------------------------------------------------------
Net increase (decrease)
in shares (1,874,656) $(35,397,318) 4,862,826 $90,248,908 3,932,477 $65,902,364
================================================================================
</TABLE>
Share activity for the year ended January 31, 1996 is as follows:
<TABLE>
<CAPTION>
Select Equity Fund
- ----------------------------------------------------
Shares Dollars
-------------------------
<S> <C> <C>
Class A shares
Shares sold 2,479,285 $44,569,920
Reinvestment of dividends 161,481
and distributions 3,032,597
Shares repurchased (2,578,247) (45,692,944)
-------------------------
62,519 1,909,573
-------------------------
Institutional shares
Shares sold 3,220,915 57,579,398
Reinvestment of dividends
and distributions 97,993 1,847,978
Shares repurchased (30,492) (567,188)
-------------------------
3,288,416 $58,860,188
-------------------------
Net increase 3,350,935 $60,769,761
=========================
</TABLE>
- --------------------------------------------------------------------------------
62
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from Distribution to
Investment Operations shareholders
=====================================================
Net realized From
and unrealized net realized
Net asset gain (loss) on From gain on Net increase Net asset
value, Net investments, net investment (decrease) value,
beginning investment options and investment and futures in net end of Total
of period income futures income transactions asset value period return/(a)/
======================================================================================================
BALANCED FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
- ---------------------------------------------
1996 - Class A Shares .......... $17.31 $0.35 $(0.12) $(0.27) $ -- $(0.04) $17.27 1.32%/(c)/
1996 - Class B Shares/(b)/ ..... 17.46 0.14 (0.20) (0.14) -- (0.20) 17.26 (0.35)/(c)/
For the Year Ended January 31,
- ------------------------------
1996 - Class A Shares .......... 14.22 0.51 3.43 (0.50) (0.35) 3.09 17.31 28.10
For the Period Ended January 31,
- --------------------------------
1995 - Class A Shares/(d)/ ..... 14.18 0.10 0.02 (0.08) -- 0.04 14.22 0.87/(c)/
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio assuming no
voluntary waivers of fees
per expense limitations
=============================
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to Income to expenses to income (loss)
turnover commission period average net average net average to average
rate rate/(g)/ (in 000s) assets assets net assets net assets
========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996 - Class A Shares .......... 123.67%/(c)/ $ .0594 $58,187 1.00/(e)/ 4.09%/(e)/ 1.70%/(e)/ 3.39%/(e)/
1996 - Class B Shares/(b)/ ..... 123.67/(c)/ .0594 241 1.75/(e)/ 3.24/(e)/ 2.25/(e)/ 2.74/(e)/
For the Year Ended January 31,
==============================
1996 - Class A Shares .......... 197.10/(f)/ -- 50,928 1.00 3.65 1.90 2.75
For the Period Ended January 31,
================================
1995 - Class A Shares/(d)/ ..... 14.71/(c)/ -- 7,510 1.00/(e)/ 3.39/(e)/ 8.29/(e)/ (3.90)/(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
or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
/(b)/For the period from May 1, 1996 (commencement of operations) to July 31,
1996.
/(c)/Not annualized.
/(d)/For the period from October 12, 1994 (commencement of operations) to
January 31, 1995.
/(e)/Annualized.
/(f)/Includes the effect of mortgage dollar roll transactions.
/(g)/For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from Distribution to
Investment Operations shareholders
=========================== ========================
Net realized From
and unrealized net realized
Net asset gain (loss) on From gain on Net increase Net asset
value, Net investments, net investment (decrease) value,
beginning investment options and investment and futures in net end of Total
of period income futures income transactions asset value period return/(a)/
======================================================================================================
SELECT EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996 - Class A Shares ........ $19.66 $0.09 $0.18 $ -- $ -- $0.27 $19.93 1.37%/(b)/
1996 - Class B Shares/(f)/ ... 20.44 0.01 (0.55) -- -- (0.54) 19.90 (2.64)/(b)/
1996 - Institutional Shares .. 19.71 0.16 0.19 -- -- 0.35 20.06 1.78/(b)/
1996 - Service Shares/(f)/ ... 21.02 0.01 (1.10) -- -- (1.09) 19.93 (5.19)/(b)/
For the Year Ended January 31,
==============================
1996 - Class A Shares ........ 14.61 0.19 5.43 (0.16) (0.41) 5.05 19.66 38.63
1996 - Institutional
Shares/(d)/ ........... 16.97 0.16 3.23 (0.24) (0.41) 2.74 19.71 20.14/(b)/
1995 - Class A Shares ........ 15.93 0.20 (0.38) (0.20) (0.94) (1.32) 14.61 (1.10)
1994 - Class A Shares ........ 15.46 0.17 2.08 (0.17) (1.61) 0.47 15.93 15.12
1993 - Class A Shares ........ 15.05 0.22 0.41 (0.22) -- 0.41 15.46 4.30
For the Period Ended January 31,
================================
1992 - Class A Shares/(e)/ ... 14.17 0.11 0.88 (0.11) -- 0.88 15.05 7.01/(b)/
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio assuming no
voluntary waivers of fees
per expense limitations
=============================
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to Income to expenses to income (loss)
turnover commission period average net average net average to average
rate rate/(g)/ (in 000s) assets assets net assets net assets
========================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996 - Class A Shares ..................... 15.54%/(b)/ $.0392 $162,373 1.26%/(c)/ 1.06%/(c)/ 1.52%/(c)/ 0.80%/(c)/
1996 - Class B Shares/(f)/ ................ 15.54/(b)/ .0392 2,606 1.80/(c)/ 0.31/(c)/ 2.03/(c)/ 0.08/(c)/
1996 - Institutional Shares ............... 15.54/(b)/ .0392 96,461 0.65/(c)/ 1.64/(c)/ 0.87/(c)/ 1.42/(c)/
1996 - Service Shares/(f)/ ................ 15.54/(b)/ .0392 528 1.15/(c)/ 0.39/(c)/ 1.43/(c)/ 0.11/(c)/
For the Year Ended January 31,
==============================
1996 - Class A Shares ..................... 39.35 -- 129,045 1.25 1.01 1.55 0.71
1996 - Institutional Shares/(d)/ .......... 39.35/(b)/ -- 64,829 0.65/(c)/ 1.49/(c)/ 0.96/(c)/ 1.18/(c)/
1995 - Class A Shares ..................... 56.18 -- 94,968 1.38 1.33 1.63 1.08
1994 - Class A Shares ..................... 87.73 -- 92,769 1.42 0.92 1.67 0.67
1993 - Class A Shares ..................... 144.93 -- 117,757 1.28 1.30 1.53 1.05
For the Period Ended January 31,
================================
1992 - Class A Shares/(e)/ ................ 135.02/(c)/ -- 151,142 1.57/(c)/ 1.24/(c)/ 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
or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
/(b)/Not annualized.
/(c)/Annualized.
/(d)/For the period from June 15, 1995 (commencement of operations) to January
31, 1996. (e)For the period from May 24, 1991 (commencement of operations)
to January 31, 1992.
/(f)/For the period from May 1 and June 7, 1996 (commencement of operations) to
July 31, 1996 for Class B and Service share classes, respectively.
/(g)/For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
Goldman Sachs Equity Portfolios, Inc.
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
Investment Operations Distribution to shareholders
========================== ====================================
From net
Net realized realized
Net asset and unrealized From gain on In excess Net increase
value, Net gain(loss) on net investment of net Additioanl (decrease)
beginning investment investments, investment and option investment paid-in in notional
of period income and options income transactions income capital value
======================================================================================================
GROWTH AND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996 - Class A Shares .......... $19.98 $0.22 $0.18 $(0.16) $ -- $ -- $ -- $0.24
1996 - Class B Shares/(f)/ ..... 20.82 0.04 (0.60) (0.08) -- -- -- (0.64)
1996 - Institutional Shares/(f)/ 21.25 0.07 (1.01) (0.10) -- -- -- (1.04)
1996 - Service Shares/(f)/ ..... 20.71 0.15 (0.50) (0.15) -- -- -- (0.50)
For the Year Ended January 31,
==============================
1996 - Class A Shares .......... 15.80 0.33 4.75 (0.30) (0.60) -- -- 4.18
1995 - Class A Shares .......... 15.79 0.20/(b)/ 0.30/(b)/ (0.20) (0.33) (0.07) 0.11/(b)/ 0.01
For the Period Ended January 31,
================================
1994 - Class A Shares/(c)/ ..... 14.18 0.15 1.68 (0.15) (0.06) (0.01) -- 1.61
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
===========================
Net Ratio of Ratio of net Ratio of net
Net asset assets at net investment Ratio of investment
value, Portfolio Average end of expenses to Income to expenses to income (loss)
end of Total turnover commission period average net average net average to average
period return/(a)/ rate rate/(g)/ (in 000s) assets assets net assets net assets
============================================================================================================
GROWTH AND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended July 31, (unaudited)
=============================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 - Class A Shares .... $20.22 1.96%/(d)/ 25.25%/(d)/ $.0591 $467,552 1.18%/(e)/ 2.19%/(e)/ 1.42%/(e)/ 1.95%/(e)/
1996 - Class B Shares/(f)/ 20.18 (2.72)/(d)/ 25.25/(d)/ .0591 2,145 1.96/(e)/ 0.51/(e)/ 1.96/(e)/ 0.51/(e)/
1996 - Institutional
Shares/(f)/ ....... 20.21 (4.45)/(d)/ 25.25/(d)/ .0591 13 0.77/(e)/ 1.22/(e)/ 0.77/(e)/ 1.22/(e)/
1996 - Service Shares/(f)/ 20.21 (1.71)/(d)/ 25.25/(d)/ .0591 607 1.27/(e)/ 0.43/(e)/ 1.27/(e)/ 0.43/(e)/
For the Year Ended January 31,
==============================
1996 - Class A Shares .... 19.98 32.45 57.93 -- 436,757 1.20 1.67 1.45 1.42
1995 - Class A Shares .... 15.80 3.97 71.80 -- 193,772 1.25 1.28 1.58 0.95
For the Period Ended January 31,
================================
1994 - Class A Shares/(c)/ 15.79 13.08/(d)/ 102.23/(d)/ -- 41,528 1.25/(e)/ 1.23/(e)/ 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
or redemption charges. Total return would be reduced if a sales or
redemption 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.
/(f)/For the period from March 6, May 1 and June 3, 1996 (commencement of
operations) to July 31, 1996 for Service, Class B and Institutional classes
of shares, respectively.
/(g)/For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
65
<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 realized gain In excess Net increase Net asset
value, Net investments, From net on investments, of net (decrease) value,
beginning investment options and investment options investment in net end of
of period income futures income and futures income asset value period
====================================================================================================
CAPITAL GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996 - Class A Shares....... $14.91 $0.06 $0.07 $ -- $ -- $ -- $0.13 $15.04
1996 - Class B Shares/(b)/.. 15.67 0.00 (0.65) -- -- -- (0.65) 15.02
For the Year Ended January 31,
==============================
1996 - Class A Shares....... 13.67 0.12 3.93 (0.12) (2.69) -- 1.24 14.91
1995 - Class A Shares....... 15.96 0.03 (0.69) (0.01) (1.62) -- (2.29) 13.67
1994 - Class A Shares....... 14.64 0.02 2.40 (0.01) (1.07) (0.02) 1.32 15.96
1993 - Class A Shares....... 13.65 0.06 2.28 (0.07) (1.28) -- 0.99 14.64
1992 - Class A Shares....... 11.10 0.28 2.90 (0.31) (0.32) -- 2.55 13.65
For the Period Ended January 31,
================================
1991 - Class A Shares/(c)/.. 11.34 0.34 (0.27) (0.31) -- -- (0.24) 11.10
<CAPTION>
Ratios assuming no
voluntary waiver of fees
============================
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to income loss expenses to income (loss)
Total turnover commission period average net to average average to average
return/(a)/ rate rate/(g)/ (in 000s) assets net assets net assets net assets
====================================================================================================
CAPITAL GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996 - Class A Shares....... 0.87%/(d)/ 25.54%/(d)/ $.0555 $819,351 1.38%/(e)/ 0.77%/(e)/ 1.63%/(e)/ 0.52%/(e)/
1996 - Class B Shares/(b)/.. (4.15)/(d)/ 25.54/(d)/ .0555 857 2.13/(e)/ (0.13)/(e)/ 2.13/(e)/ (0.13)/(e)/
For the Year Ended January 31,
==============================
1996 - Class A Shares....... 30.45 63.90 -- 881,056 1.36 0.65 1.61 0.40
1995 - Class A Shares....... (4.38) 38.36 -- 862,105 1.38 0.16 1.63 (0.09)
1994 - Class A Shares....... 16.89 36.12 -- 833,682 1.38 0.13 1.63 (0.12)
1993 - Class A Shares....... 18.01 58.93 -- 665,976 1.41 0.42 1.66 0.17
1992 - Class A Shares....... 29.31 48.93 -- 500,307 1.53 2.09 1.78 1.84
For the Period Ended January 31,
================================
1991 - Class A Shares/(c)/.. 0.84/(d)/ 35.63/(d)/ -- 437,533 1.27/(d)/ 3.24/(d)/ 1.47/(d)/ 3.04/(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
or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
/(b)/For the period from May 1, 1996 (commencement of operations) to July 31,
1996.
/(c)/For the period from April 20, 1990 (commencement of operations) to January
31, 1991.
/(d)/Not annualized.
/(e)/Annualized.
/(f)/For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
- --------------------------------------------------------------------------------
The accompanying notes are an integral 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 Distribution to
Investment Operations shareholders
====================================== =====================================
From In excess
Net realized net realized of realized
and unrealized gain on gains on
Net asset Net gain (loss) on From investment, investment, Net increase Net asset
value, investment investments, net options and options and (decrease) value,
beginning income options and investment futures futures in net end of
of period (loss) futures income transactions transactions asset value period
======================================================================================================
SMALL CAP EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended
July 31, (unaudited)
=============================
1996 - Class A Shares ....... $17.29 $(0.15) $4.02 $ -- $ -- $ -- $3.87 $21.16
1996 - Class B Shares/(b)/... 20.79 (0.04) 0.37 -- -- -- 0.33 21.12
For the Year Ended January 31,
==============================
1996 - Class A Shares ....... 16.14 (0.23) 1.39 -- (0.01) -- 1.15 17.29
1995 - Class A Shares ....... 20.67 (0.07) (3.53) -- (0.69) (0.24) (4.53) 16.14
1994 - Class A Shares ....... 16.68 (0.04) 5.03 -- (1.00) -- 3.99 20.67
For the Period Ended January 31,
================================
1993 - Class A Shares/(c)/... 14.18 0.03 2.50 (0.03) -- -- 2.50 16.68
<CAPTION>
Ratios assuming no
voluntary waiver of fees
=============================
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to income loss expenses to income (loss)
Total turnover commission period average net to average average to average
return/a/ rate rate /(g)/ (in 000s) assets net assets net assets net assets
===================================================================================================
SMALL CAP EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31,
(unaudited)
=================================
1996 - Class A Shares .......... 22.38%/(d)/ 45.30%/(d)/ $.0481 $210,437 1.56%/(e)/ (0.78)%/(e)/ 1.81%/(e)/ (1.03)%/(e)/
1996 - Class B Shares/(b)/...... 1.59/(d)/ 45.30/(d)/ .0481 717 2.31/(e)/ (1.38)/(e)/ 2.31/(e)/ (1.38)/(e)/
For the Year Ended January 31,
==============================
1996 - Class A Shares .......... 7.20 57.58 -- 204,994 1.41 (0.59) 1.66 (0.84)
1995 - Class A Shares .......... (17.53) 43.67 -- 319,487 1.53 (0.53) 1.78 (0.78)
1994 - Class A Shares .......... 30.13 56.81 -- 261,074 1.60 (0.45) 1.85 (0.70)
For the Period Ended January 31,
================================
1993 - Class A Shares/(c)...... 17.86/(d)/ 7.12/(e)/ -- 59,339 1.65/(e)/ 0.62/(e)/ 2.70/(e)/ (0.43)/(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
or redemption charges. Total return would be reduced if a sales or
redemption charge were taken into account.
/(b)/For the period from May 1, 1996 (commencement of operations) to July 31,
1996.
/(c)/For the period from October 22, 1992 (commencement of operations)
to January 31, 1993.
/(d)/Not annualized.
/(e)/Annualized.
/(f)/For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
- --------------------------------------------------------------------------------
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 (loss) from Distributions to
investment operations shareholders
============================ ==========================
Net Net realized From net
realized and unrealized realized
and unrealized gain (loss) gain on
Net asset gain (loss) on on foreign From investment, Net increase Net asset
value, Net investments, currency net option and (decrease) value,
beginning investment options and related investment futures in net end of
of period income (loss) futures transactions income transactions asset value period
======================================================================================================
INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996-Class A Shares .......... $17.20 $0.09 $1.01 $ 0.59 $ --- $ --- $ 1.69 $18.89
1996-Class B Shares/(e)/ ..... 18.91 --- (0.04) --- --- --- (0.04) 18.87
1996-Institutional Shares/(e)/ 17.45 0.06 0.78 0.65 --- --- 1.49 18.94
1996-Service Shares/(e)/ ..... 17.70 1.01 1.21 (0.03) --- --- 1.19 18.89
For the Year Ended January 31,
==============================
1996-Class A Shares .......... 14.52 0.13 2.58 1.42 (0.58) (0.87) 2.68 17.20
1995-Class A Shares .......... 18.10 0.06 (3.04) (0.01) --- (0.59) (3.58) 14.52
1994-Class A Shares .......... 14.35 0.05 4.08 (0.38) --- --- 3.75 18.10
For the Period Ended January 31,
================================
1993-Class A Shares/(b)/ ..... 14.18 (0.01) 0.29 (0.11) --- --- 0.17 14.35
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios assuming no
voluntary waiver of fees
or expense limitations
=============================
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to Income to expenses to income (loss)
Total turnover commission period average net average net average to average
return/(a)/ rate rate/(g)/ (in 000s) assets assets net assets net assets
======================================================================================================
INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996-Class A Shares........... 9.83/(c)/ 24.37/(c)/ $.0323 $423,758 1.68%/(d)/ 0.41%/(d)/ 1.92%/(d)/ 0.17%/(d)/
1996-Class B Shares/(e)/...... (0.21)/(c)/ 24.37/(c)/ .0323 3,676 2.22/(d)/ 0.07/(d)/ 2.48/(d)/ (0.19)/(d)/
1996-Institutional Shares/(e)/ 8.54/(c)/ 24.37/(c)/ .0323 27,779 1.10/(d)/ 1.16/(d)/ 1.30/(d)/ 0.96/(d)/
1996-Service Shares/(e)/...... 6.72/(c)/ 24.37/(c)/ .0323 96 1.60/(d)/ 0.56/(d)/ 1.87/(d)/ 0.29/(d)/
For the Year Ended January 31,
==============================
1996-Class A Shares........... 28.68 68.48 --- 330,860 1.52 0.26 1.77 0.01
1995-Class A Shares........... (16.65) 84.54 --- 275,086 1.73 0.40 1.98 0.15
1994-Class A Shares........... 26.13 60.04 --- 269,091 1.76 0.51 2.01 0.26
For the Period Ended January 31,
================================
1993-Class A Shares/(b)/...... 1.23/(c)/ 0.00 --- 66,063 1.80/(d)/ (0.42)/(d)/ 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 or redemption charges. Total return would be reduced if a sales
or redemption 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.
/(e)/For the period from February 7, March 6 and May 1, 1996 (commencement of
operations) to July 31, 1996 for Institutional, Service and Class B
classes, respectively.
/(f)/For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
- --------------------------------------------------------------------------------
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 Distribution to
Investment Operations shareholders
=====================================================
Net
realized and
unrealized
gain on
Net asset Net Net realized Foreign From In excess Net increase Net asset
value, investment and unrealized currency net of net (decrease) value,
beginning income gain (loss) on related investment investment in net end of
of period (loss) investments transactions income income asset value period
======================================================================================================
ASIA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996 - Class A Shares......... $16.49 $0.07 $(0.99) $(0.02) $ -- $ -- $(0.94) $15.55
1996 - Class B Shares/(e)/.... 17.31 (0.01) (1.73) (0.04) -- -- (1.78) 15.53
1996 - Institutional
Shares/(e)/............ 16.61 0.11 (1.11) (0.02) -- -- (1.02) 15.59
For the Year Ended January 31,
==============================
1996 - Class A Shares......... 13.31 0.17 3.44 (0.12) (0.17) (0.14) 3.18 16.49
For the Period Ended January 31,
================================
1995 - Class A Shares/(b)/.... 14.18 0.11 (0.89) 0.01 (0.10) -- (0.87) 13.31
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios assuming no
voluntary waiver of fees
or expense limitations
=============================
Net Ratio of Ratio of net Ratio of net
assets at net investment Ratio of investment
Portfolio Average end of expenses to income (loss) expenses to income (loss)
Total turnover commission period average net to average net average to average
return/(a)/ rate rate/(g)/ (000s) assets net assets net assets net assets
====================================================================================================
ASIA GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended July 31, (unaudited)
=============================================
1996 - Class A Shares............ (5.70%)/(c)/ 24.53%/(c)/ $.0157 $250,130 1.69%/(d)/ 0.52%/(d)/ 1.97%/(d)/ 0.24%/(d)/
1996 - Class B Shares/(e)/....... (10.28)/(c)/ 24.53/(c)/ .0157 1,469 2.27/(d)/ (0.75)/(d)/ 2.51/(d)/ (0.99)/(d)/
1996 - Institutional Shares/(e)/. (6.14)/(c)/ 24.53/(c)/ .0157 3,319 1.10/(d)/ 1.08/(d)/ 1.33/(d)/ 0.85/(d)/
For the Year Ended January 31,
==============================
1996 - Class A Shares............ 26.49 88.80 -- 205,539 1.77 1.05 2.02 0.80
For the Period Ended January 31,
================================
1995 - Class A Shares/(b)/....... (5.46)/(c)/ 36.08/(c)/ -- 124,298 1.90(d) 1.83/(d)/ 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
or redemption charges. Total return would be reduced if a sales or
redemption 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.
/(e)/For the period from February 2 and May 1, 1996 (commencement of operations)
to July 31, 1996 for Institutional and Class B classes of shares,
respectively.
/(f)/For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[This Page Intentionally Left Blank]
- -------------------------------------------------------------------------------
70
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Semiannual Report is authorized for distribution to prospective investors
only when preceded or accompanied by a Goldman Sachs Equity Portfolios, Inc.
Prospectus which contains facts concerning the Fund's objectives and policies,
management, expenses and other information.
- -------------------------------------------------------------------------------
71
<PAGE>
================================================================================
================================================================================
Goldman Sachs
One New York Plaza
New York, NY 10004
Directors
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Douglas C. Grip, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Goldman Sachs
Investment Adviser, Administrator,
Distributor and Transfer Agent
The Goldman Sachs
Equity Portfolios
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Semiannual Report
July 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]
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