-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H9DALedtKQQpr+OqH9gKxKvAu8msp+s6o/PSg1HWbmLFACp00ypK72VaT6k6huV3 Jtv7gPEyydj3jfG+Pwuhzg== 0000950130-98-005053.txt : 19981022 0000950130-98-005053.hdr.sgml : 19981022 ACCESSION NUMBER: 0000950130-98-005053 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19981021 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDMAN SACHS TRUST CENTRAL INDEX KEY: 0000822977 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05349 FILM NUMBER: 98728615 BUSINESS ADDRESS: STREET 1: 4900 SEARS TWR STREET 2: C/O GOLDMAN SACHS & CO CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126554400 MAIL ADDRESS: STREET 1: 85 BROAD ST STREET 2: 85 BROARD STREET CITY: NEW YORK STATE: NY ZIP: 10004 FORMER COMPANY: FORMER CONFORMED NAME: GOLDMAN SACHS SHORT INTERMEDIATE GOVERNMENT FUND DATE OF NAME CHANGE: 19910711 FORMER COMPANY: FORMER CONFORMED NAME: SHORT INTERMEDIATE GOVERNMENT FUND DATE OF NAME CHANGE: 19900104 N-30D 1 EMERGING MARKETS EQUITY FUND Goldman Sachs Funds EMERGING MARKETS EQUITY FUND Semi-Annual Report July 31, 1998 Long-term capital growth potential [GRAPHIC] through a diversified portfolio of emerging markets stocks. Goldman Sachs Fund Basics as of July 31, 1998 Assets Under Management $155.2 Million Number of Holdings 133 NASDAQ SYMBOLS Class A Shares GEMAX Class B Shares GEKBX Class C Shares GEMCX Institutional Shares GEMIX Service Shares GEMSX Mutual funds, annuities, and other investment products: . are not FDIC insured; . are not deposits or obligations of, or guaranteed by, any financial institution; . are subject to investment risks, including possible loss of the principal amount invested. - -------------------------------------------------------------------------------- PERFORMANCE REVIEW - -------------------------------------------------------------------------------- January 31, 1998- Fund Total Return MSCI EMF (Partial Domestic) July 31, 1998 (based on NAV)/1/ MSCI EMF Index/2/ - -------------------------------------------------------------------------------- Class A -9.29% -9.17% Class B -9.39% -9.17% Class C -9.38% -9.17% Institutional -8.87% -9.17% Service -11.04% -9.17% - -------------------------------------------------------------------------------- /1/ The net asset value represents the net assets of the Fund (ex-dividend) divided by the total number of shares. The Fund's performance assumes the investment of dividends and other distributions. /2/ The Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF) Index (with dividends reinvested) is a market capitalization-weighted composite of securities in over 30 emerging market countries, including Argentina, Botswana, Brazil, Chile, China, Colombia, the Czech Republic, Egypt, Greece, Hong Kong, Hungary, India, Israel, Jordan, Kenya, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Portugal, Russia, Singapore, South Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela and Zimbabwe. "Free" indicates an index that excludes shares in otherwise free markets that are not purchasable by foreigners. Investors cannot directly invest in the Index. The Index figures do not reflect any fees or expenses. - -------------------------------------------------------------------------------- SEC CUMULATIVE TOTAL RETURN/3/ - -------------------------------------------------------------------------------- For the period ended 7/31/98 Class A Class B Class C Institutional Service - -------------------------------------------------------------------------------- Last 6 Months -14.24% -13.92% -10.29% -8.87% -11.04% Since Inception -16.92% -16.59% -12.98% -11.60% -13.80% (12/15/97) - -------------------------------------------------------------------------------- /3/ The SEC Cumulative Total Return is determined by computing the percentage change in the value of $1,000 invested at the maximum public offering price for specified periods, assuming reinvestment of all distributions at NAV. The total return calculation reflects a maximum initial sales charge of 5.5% for Class A shares, the assumed deferred sales charge for Class B shares (5% maximum declining to 0% after six years) and the assumed deferred sales charge for Class C shares (1% if redeemed within 12 months of purchase). The public offering price of the Class A shares on 7/31/98 was $9.30 and represents the NAV plus the maximum sales charge of 5.5%. - -------------------------------------------------------------------------------- TOP 10 COMPANY HOLDINGS AS OF 7/31/98 - -------------------------------------------------------------------------------- % of Total Company Holding Net Assets Country Line of Business - -------------------------------------------------------------------------------- Telecommunicacoes Brasileiras 6.4% Brazil Telecommunications Telefonos de Mexico SA ADS 3.8% Mexico Telecommunications ITC Ltd. 2.9% India Consumer Goods Telec de Sao Paulo 2.6% Brazil Telecommunications Mahanagar Telephono Nigam GDR 2.5% India Telecommunications Petroleo Brasileiros 1.8% Brazil Oil & Gas Services South African Breweries, Ltd. 1.6% South Africa Beverages YPF Sociedad Anonima ADR 1.5% Argentina Oil and Gas Services Ranbaxy Laboratories Ltd. 1.5% India Health & Medical Services Cia Vale do Rio Doce 1.4% Brazil Mining - -------------------------------------------------------------------------------- The top 10 holdings may not be representative of the Fund's future investments. Total return figures represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor's shares, when redeemed, may be worth more or less than their original cost. GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Market Overview Dear Shareholder, The period under review was a difficult one for emerging markets around the world. Over the six-month period ended July 31, 1998, emerging markets, as measured by the Morgan Stanley Capital International Emerging Markets Free Index, generated a return of -9.17%. . Market Review: Emerging Markets Around the World Faltered -- In February, after a prolonged period of weakness instigated by the devaluation of the Thai baht, investors briefly renewed their interest in the Asian region. The rally, however, was short-lived. In the remaining months of the period, Asia's economies became further mired in recession in the wake of continuing regional political instability and a weakening Japanese economy. Latin America markets sold off strongly amid renewed fears over the currency crisis in Asia, increased political uncertainty in Colombia and Venezuela and continued weak commodity prices. In Russia, much anticipated capital inflows from privatizations never materialized. By period end, dwindling foreign currency reserves threatened to force the devaluation of the Russian ruble. In a preventative effort, the International Monetary Fund agreed to bestow a multibillion dollar aid package upon the beleaguered nation. South Africa's market also fared poorly. Early in the period, falling interest rates and major developments in corporate restructuring helped drive the South Africa market into positive territory. By mid-period, however, declining commodity prices and an uncertain interest rate policy placed pressure on the South African rand. This, in turn, led to its eventual devaluation, and South Africa's equity market fell significantly. . Market Outlook: Optimistically Cautious -- The increased interest shown by foreign corporates in purchasing Asian assets shows that long term investors are beginning to see value emerge in companies across the region. High debt levels, however, remain the key obstacle in solving the problems of Asian businesses. As a result, we remain cautious in Asia. In Latin America, we expect a slowdown in economic growth as a result of higher interest rates and budget cuts seen in Mexico, Chile and Venezuela. Up until now, the governments have been taking the necessary steps to prevent any major contagion from Asia. However, the recent turmoil in Russia and the world's financial markets has caused substantial reserve losses in Brazil and led to a significant increase in interest rates. We believe that it is key for the region that Brazil continues to use all of its fiscal and monetary policy tools to avoid a devaluation. Eastern European countries should continue to benefit from the convergence of bonds yields occurring in Europe ahead of the formation of a single currency; conversely, the outlook for Russia and South Africa is more muted given high interest rates following currency devalua- tions in both countries. We encourage you to maintain your diversified, long-term investment program, and look forward to serving your investment needs in the years ahead. Sincerely, /s/ David B. Ford /s/ John P. McNulty David B. Ford John P. McNulty Co-Head, Goldman Sachs Co-Head, Goldman Sachs Asset Management International Asset Management International August 31, 1998 1 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Performance Overview Dear Shareholder, We are pleased to report on the performance of the Goldman Sachs Emerging Markets Equity Fund for the six months ended July 31, 1998. Performance Review Emerging markets, with a few exceptions, fared poorly over the short time period covered by this report, a circumstance that is reflected in the Fund's performance. In general, the Fund's shares slightly underperformed the -9.17% cumulative total return of its benchmark, the Morgan Stanley Capital International Emerging Markets Free (MSCI EMF) Index. However, on a relative basis, the Fund's Institutional share class outperformed the benchmark with a cumulative total return of 8.87%. Regional Allocations At the end of the period, the Fund was underweight its position in Asia versus the benchmark, with much of the exposure concentrated in more stable economies such as India. Although our expectations for Asia are modest, we are beginning to expect that its performance relative to the rest of the emerging world will improve. Latin America was reduced to an underweight position, although the Fund maintained an overweight position in Brazil, which benefited Fund performance. Finally, overweight positions were maintained in emerging markets in Europe, the Middle East and Africa. Portfolio Highlights . Sasol Limited (South Africa) -- Sasol converts coal into refined oil products and petro-chemicals for domestic consumption and exports. The company should experience a significant boost in profits due to the depreciation of the rand, as products are priced in dollars, but costs are in local currency. Over the long term, the company should be able to exploit its world-leading gas-to-oil conversion technology in international joint ventures. . Telesp Celular SA (Brazil) -- Telesp is located in the state of Sao Paulo, the largest state in Brazil. The company was privatized in July 1998 and was bought by Telefonica International (TISA) from Spain. Telesp has significant growth prospects due to the large pent-up demand for telecom services in Sao Paulo. . Cia Vale do Rio Doce (Brazil) -- Vale do Rio Doce is the world's largest iron ore producer and the largest mining company in Brazil. The company was privatized in the first half of 1997 and, as a result, has been generating substantial earnings growth due to aggressive cost cutting. . Grupo Televisa (Mexico) -- Grupo Televisa is the leading broadcast company in Mexico, with an advertising market share of 78%. The company is presently undergoing a substantial cost-reduction program and should continue to benefit from growth in the advertising industry and a better pricing structure. 2 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND INVESTMENT PROCESS OVERVIEW The investment process for the Goldman Sachs Emerging Markets Equity Fund combines both qualitative and quantitative analysis, with an emphasis on portfolio manager input. Asset Allocation ---------------- Committee --------- . Proprietary Quantitative Model . Portfolio Manager Views [ARROW DOWN] Country Allocation ------------------ Company Visits -------------- Internal Research ----------------- Return Expectations [ARROW DOWN] Stock Selection Portfolio [SIDE ARROW] Construction . Stock & Industry Views Relative to Benchmark [ARROW DOWN] Portfolio Review & Analysis . Performance Measurement & Attribution . BARRA . Risk Analysis Key New Acquisitions . Magyr Tavkozlesi (Hungary) -- Matav is the monopoly telecommunications operator in Hungary. Demand for its value-added services to business customers and increased traffic are generating strong earnings growth. . Migros (Turkey) -- Migros, a Turkish food retailer, is growing rapidly by acquiring market share from the informal sector (stores that are privately owned and operated). Portfolio Outlook The two most significant risks to short- and medium-term returns in the emerging markets are the Russian economic and political situation and the direction and pace of change of the Japanese yen. Clearly, both of these situations have a significant risk of deterioration. Near term, we intend to keep a close eye on markets in Asia. Although we have seen some countries make progress with the implementation of bank restructuring and bankruptcy legislation, the economic weakness of Japan has again subjected regional currencies to considerable pressure. This will likely result in continuous volatility in the markets. As a result, we intend to maintain our defensive investment stance, focusing on companies with strong balance sheets and dominant business franchises. In Latin America, we remain cautious due to the expected slowdown in economic growth resulting from the high interest rate environment. We remain underweight in the region, with a focus on companies with strong balance sheets as well as cost-cutting potential following privatization. Finally, we will continue to overweight Europe and the Middle East, although not to the extent that these combined regions have been weighted in the near past. In South Africa, we expect to maintain the Fund's underweight position as a result of increasing interest rates and pressure on South Africa's currency. We thank you for your investment and look forward to your continued confidence. Goldman Sachs Emerging Markets Equity Investment Team New York, Singapore and London, August 31, 1998 3 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND An Action Plan for Volatile Markets When fear and uncertainty temporarily take hold of global markets, you can gain a greater sense of control over your own investment portfolio by making sound decisions. Whether you are a seasoned investor or a market neophyte, the following thoughts are intended to help you maintain some perspective during these volatile market times. Remember the factors you considered when you first began investing: your long-term objectives, time horizon, risk tolerance and financial needs. Stay on Course Don't let market directions dictate your investment decisions -- avoid the common mistake of basing decisions on emotions or uncertainty. Remember the factors you considered when you first began investing: your long-term objectives, time horizon, risk tolerance and financial needs. Stay Diversified Global diversification is one of the best defenses against uncertain markets. Because the world's countries have varying economies, growth rates and stages of development, they tend to offer strong performance at different times. Diversifying among equity markets enables you to capture a wide range of opportunities and seek maximum risk-adjusted returns. Stay Invested Investors often redeem at market lows because of concern or lack of information-and negatively impact their longer-term returns. With stock investing, the longer your holding period, the greater the likelihood of positive returns. Consult Your Financial Advisor Market declines provide a good opportunity to touch base with your advisor, gain confirmation that you are properly diversified and assess whether any recent life events necessitate a change in asset allocation policy. For More Information Goldman Sachs Asset Management offers a broad spectrum of equity mutual funds that can help you weather market ups and downs. For more information on Goldman Sachs Funds, contact your investment professional. 4 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Performance Summary July 31, 1998 (Unaudited) The following graph shows the value as of July 31, 1998, of a $10,000 invest- ment made (with the maximum sales charge of 5.5% for Class A and redemption charges of 5.0% and 1.0% for Class B and Class C, respectively, and at NAV for the Institutional and Service Classes) on December 15, 1997 (commencement of operations). For comparative purposes, the performance of the Fund's benchmark (Morgan Stanley Emerging Markets Free Index ("MSCI EMF")) is shown. All performance data shown represents past performance and should not be con- sidered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor's shares, when redeemed, to be worth more or less than their original cost. EMERGING MARKETS EQUITY FUND'S LIFETIME PERFORMANCE PERFORMANCE OF A $10,000 INVESTMENT, DISTRIBUTIONS REINVESTED DECEMBER 15, 1997 TO JULY 31, 1998 LOGO GS-Emerging Market Equity Cl A Inception Date: 12/15/97 Morgan Stanley Class A Class B Class C Institutional Service EMF Fund Fund Fund Class Class ----------------------------------------------------------------------- DEC 15/97 10,000 9,500 10,000 10,000 10,000 10,000 DEC 10,621 9,679 10,240 10,240 10,230 10,240 JAN '98 9,788 9,159 9,690 9,700 9,700 9,690 FEB 10,810 9,896 10,470 10,470 10,480 10,450 MAR 11,279 10,312 10,900 10,910 10,930 10,860 APR 11,156 10,369 10,960 10,970 11,000 10,890 MAY 9,628 8,875 9,380 9,390 9,420 9,290 JUNE 8,618 8,034 8,500 8,510 8,560 8,390 JULY 8,891 8,308 8,341 8,702 8,840 8,620
SINCE INCEPTION(A) OF CLASS SIX MONTHS AVERAGE ANNUAL TOTAL RETURN THROUGH JULY 31, 1998(B) CLASS A Excluding sales charges -12.10% -9.29% Including sales charges -16.92% -14.24% ------------------------------------------------------------ CLASS B Excluding redemption charges -12.20% -9.39% Including redemption charges -16.59% -13.92% ------------------------------------------------------------ CLASS C Excluding redemption charges -12.10% -9.38% Including redemption charges -12.98% -10.29% ------------------------------------------------------------ INSTITUTIONAL CLASS -11.60% -8.87% ------------------------------------------------------------ SERVICE CLASS -13.80% -11.04% ------------------------------------------------------------
(a) Represents the cumulative total return since the class has not been in operation for a full 12 months. (b) All classes commenced operations on December 15, 1997. 5 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Statement of Investments July 31, 1998 (Unaudited) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SHARES DESCRIPTION VALUE COMMON STOCKS - 81.9% ARGENTINE PESO - 4.9% 57,037 Banco de Galicia ADR (Commercial Banks) $ 1,169,259 20,600 Cresud S.A. Cifya ADR* (Agriculture) 370,800 23,750 Irsa Inversiones y Representos GDR (Recreational Services) 883,203 136,700 Perez Compac SA (Diversified Industrial Manufacturing) 793,261 56,100 Telefonica de Argentina ADR (Utility) 2,030,119 82,050 YPF Sociedad Anonima ADR (Oil & Gas Services) 2,399,963 ---------------------------------------------------- 7,646,605 ----------------------------------------------------------------------------- BRAZILIAN REAL - 13.2% 6,486 Cemig-Cia de Energetica Minas Gerais* (Utility) 220,523 319,262,200 Cia Energetica (Utility) 1,098,017 1,508,730 Cia Rio Telecom (Telecommunications) 1,375,052 98,000 Cia Vale do Rio Doce (Mining) 2,022,269 10,600 Cia Vale do Rio Doce ADR* (Mining) 227,900 89,000 Companhia Cervejaria Brahma ADR* (Food & Beverages) 1,279,375 61,296,800 Electrobras PN (Utility) 1,949,502 195,526,000 Gerasul Centrais G* (Utility) 331,186 33,341,000 Lojas Americanas SA* (Retail Trade) 157,668 83,394,000 Paranaense Energy (Utility) 902,022 81,500 Telecomunicacoes Brasileiras ADR (Telecommunications) 9,866,594 10,732,900 Telesp Celular SA (Telecommunications) 1,102,774 ---------------------------------------------------- 20,532,882 ----------------------------------------------------------------------------- CHILEAN PESO - 1.1% 17,800 Cia de Telecomunicaciones Chile (Utilities) 392,713 16,200 Distribucion Y Servicio ADR* (Retail) 253,125 14,300 Embotelladora Andina ADR (Beverages) 244,888 6,400 Empresa Nacional de Electricidad SA ADR (Utility) 89,600 21,900 Enersis SA ADR (Utility) 610,463 5,600 Quinenco S.A. ADR (Diversified) 53,900 ---------------------------------------------------- 1,644,689 ----------------------------------------------------------------------------- COLOMBIAN PESO - 1.0% 115,700 Banco Colombiano SA ADR* (Commercial Banks) 1,214,850 51,200 Cementos Diamante GDR* (Building Materials) 412,800 ---------------------------------------------------- 1,627,650 -----------------------------------------------------------------------------
SHARES DESCRIPTION VALUE COMMON STOCKS - (CONTINUED) CZECH KORUNA - 1.6% 2,939 Ceske Radiomunikace AS GDR* (Telecommunications) $ 90,668 9,790 Ckd Praha* (Engineering) 262,962 14,161 Galena* (Health Care) 498,572 6,320 Restitucni (Investment Fund) 207,731 57,400 Sporitelni* (Investment Fund) 743,484 45,405 Zivnobanka Fond(b) (Investment Fund) 660,672 -------------------------------------------------- 2,464,089 --------------------------------------------------------------------------- GEORGIAN COUPON - 0.1% 1,750 Stet Hellas Telecom SA A* (Utility) 75,797 --------------------------------------------------------------------------- GREEK DRACHMA - 3.0% 8,610 Alpha Credit Bank* (Financial Services) 867,026 22,755 Attica Enterprises (Transportation-Marine) 383,956 25,585 Hellenic Bottling (Beverages) 852,170 3,666 National Bank of Greece* (Financial Services) 692,341 49,780 Ote Greek Telecom (Telecommunications) 1,413,965 15,530 Strintzis Shipping (Shipping and Freight) 110,542 4,045 Titan Cementos Co. (Communications) 325,400 -------------------------------------------------- 4,645,400 --------------------------------------------------------------------------- HONG KONG DOLLAR - 1.4% 1,555,000 Beijing Datang Power Gen-H* (Utility) 367,252 19,200 HSBC Holdings (Commercial Banks) 468,323 158,000 Hutchison Whampoa (Diversified) 758,547 964,000 Legend Holdings (Electronics) 216,475 2,549,000 Zhejiang Expressway* (Construction) 381,602 -------------------------------------------------- 2,192,199 --------------------------------------------------------------------------- HUNGARIAN FORINT - 4.9% 57,278 Elektrim (Electronics) 820,759 14,607 Gedeon Richter Ltd. ADR (Drugs) 1,172,212 41,825 Graboplast (Textiles) 166,254 62,683 Magyar Olaj Es Gaz GDR (Oil & Gas) 1,921,234 67,525 Magyr Tavkozlesi ADR* (Telecommunications) 2,156,580 20,580 OTP Bank Rt. (Banking) 1,121,610 28,829 Zalakeramia GDR (Building Materials) 186,668 -------------------------------------------------- 7,545,317 ---------------------------------------------------------------------------
6 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SHARES DESCRIPTION VALUE COMMON STOCKS - (CONTINUED) INDIAN RUPEE - 7.3% 67,000 Bank India GDR (Financial Services) $ 737,000 253,600 ITC Ltd. ADR (Consumer Goods) 4,476,040 322,250 Mahanagar Telephono Nigam GDR* (Telecommunications) 3,907,281 134,380 Ranbaxy Laboratories Ltd. GDR (Health & Medical Services) 2,250,865 ----------------------------------------------------- 11,371,186 ------------------------------------------------------------------------------ INDONESIAN RUPIAH - 0.9% 786,240 Daya Guna Samudera (Food & Beverages) 562,027 492,000 Gudang Garam (Tobacco) 332,989 1,473,000 PT Telekomunikasi (Telecommunications) 487,266 ----------------------------------------------------- 1,382,282 ------------------------------------------------------------------------------ ISRAELI SHEKEL - 3.8% 226,540 Bank Hapoalim (Banking) 664,695 679,012 Bank Leumi (Banking) 1,320,133 117,587 First International Bank (Banking) 860,924 425,517 ICL Israel Chemical (Chemical Products) 533,245 29,033 Koors Industries Ltd. ADR* (Utility) 671,388 14,528 Nice Systems Ltd. ADR* (Telecommunications) 559,328 415,057 Super Sol (Retail Trade) 1,360,096 ----------------------------------------------------- 5,969,809 ------------------------------------------------------------------------------ MALAYSIAN RINGGIT - 1.3% 283,000 Rothmans Industries Limited (Tobacco) 1,999,360 ------------------------------------------------------------------------------ MEXICAN PESO - 13.4% 8,594 Cemex SA (Building Materials) 31,714 368,450 Cemex SA Class B (Building Materials) 1,487,852 1,350,000 Cifra Ser C* (Financial Services) 1,968,592 46,100 Coca Cola Femsa SA CV (Food & Beverages) 815,394 20,520 Fomento Economico ADR* (Beverages) 636,120 1,016,300 Groupo Financiero Banamex -Accivl - Class B (Financial Services) 2,033,740 326,500 Grupo Carso SA (Financial Services) 1,391,699 229,000 Grupo Modelo SA (Beverages/ Tobacco) 2,057,532 59,700 Grupo Televisa GDR* (Broadcast Media) 2,104,425 512,000 Kimberly Clark (Health/ Personal Care) 1,493,214 26,400 Panamerican Beverages (Beverages/ Tobacco) 820,050 118,900 Telefonos de Mexico SA ADR (Telecommunications) 5,945,000 ----------------------------------------------------- 20,785,332 ------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE COMMON STOCKS - (CONTINUED) NEW TAIWAN DOLLAR - 2.3% 304,000 Hon Hai Precision* (Electronic Connectors) $ 2,016,936 453,480 Siliconware Precis* (Technology) 778,563 347,750 Taiwan Semiconductor* (Technology) 789,306 ----------------------------------------------- 3,584,805 ------------------------------------------------------------------------ PAKISTAN RUPEE - 0.3% 449,000 Fauji Fertilizer (Chemical Products) 394,556 ------------------------------------------------------------------------ PHILIPPINE PESO - 2.2% 5,269,300 Ayala Land Inc. (Real Estate) 1,345,486 287,700 Manila Electric Co. (Utility) 697,040 61,600 Philippine Long Distance (Telecommunications) 1,353,444 ----------------------------------------------- 3,395,970 ------------------------------------------------------------------------ POLISH ZLOTY - 0.6% 17,635 Lentex* (Building Materials) 138,676 23,551 MPP Vouchers (Investment Fund) 733,932 ----------------------------------------------- 872,608 ------------------------------------------------------------------------ RUSSIAN RUBLE - 2.5% 77,923 Ao Mosenergo ADR* (Oil & Gas) 448,057 4,615,746 Irkutskenergo ADR (Utility) 437,765 36,783 Lukoil Co. ADR* (Oil & Gas Services) 1,223,035 17,455 Rao Gazprom ADR* (Energy) 190,260 77,495 Surgutneftegaz* (Oil & Gas) 426,223 7,595 Unified Energy System ADR* (Utility) 98,735 77,127 Unified Energy System GDR* (Utility) 1,020,728 ----------------------------------------------- 3,844,803 ------------------------------------------------------------------------ SOUTH AFRICAN RAND - 9.5% 300,481 ABSA Group Ltd. (Financial Services) 1,646,135 48,260 Anglo American Industries (Diversified) 866,549 42,721 Anglogold (Natural Resources) 1,809,442 151,591 Barlow Ltd. (Industrial Machinery) 751,138 69,554 De Beers Centenary (Natural Resources) 1,148,807 108,708 Liberty Life Association (Insurance Services) 1,987,499 225,918 Rembrandt Group (Diversified) 1,422,378 284,525 Sasol Ltd. (Oil & Gas Services) 1,779,735 126,933 South African Breweries Ltd. (Beverages) 2,515,827 86,673 Tiger Oats (Food & Beverages) 771,057 ----------------------------------------------- 14,698,567 ------------------------------------------------------------------------ THAILAND BAHT - 1.4% 263,200 PTT Exploration & Production* (Energy) 2,193,333 ------------------------------------------------------------------------
7 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Statement of Investments (continued) July 31, 1998 (Unaudited) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
SHARES DESCRIPTION VALUE COMMON STOCKS - (CONTINUED) TURKISH LIRA - 4.4% 14,661,724 Adana Cimento - Class A (Building Materials) $ 567,446 46,933,151 Akbank (Commercial Banks) 1,418,547 25,225,230 IS Bankasi (Commercial Banks) 1,046,015 1,504,380 Migros (Food & Beverages) 1,608,073 2,078,005 Netas Telekomunik* (Telecommunications) 124,466 2,078,005 Netas Telekomunik Rights exp. 08/11/98* (Telecommunications) 490,587 27,646,808 Yapi Kredi Bankesi (Commercial Banks) 856,001 25,392,974 Yapi Kredi Bankesi (Commercial Banks) 786,218 --------------------------------------------------- 6,897,353 ---------------------------------------------------------------------------- VENEZUELAN BOLIVAR - 0.8% 40,950 Cia Anonima Nacional Tele Venezuela ADR (Telecommunications) 926,494 790,576 Venezolana de Cementos (Building Materials) 337,133 105,410 Venezolana de Cementos (Building Materials) 40,812 --------------------------------------------------- 1,304,439 ---------------------------------------------------------------------------- TOTAL COMMON STOCKS (COST $152,458,312) $127,069,031 ---------------------------------------------------------------------------- PREFERRED STOCKS - 6.9% BRAZILIAN REAL - 6.7% 188,009,000 Banco Bradesco SA (Banking) $ 1,584,187 5,169,865 Banco Bradesco SA Rights exp. 09/14/98 (Banking) 12,446 54,000 Brahma (Food & Grocery) 38,769 54,736,623 Cemig - Cia Energetica Minas Gerais (Electrical Services) 1,858,989 61,296,800 Gerasul Centrais G (Utility) 108,042 12,709,800 Petroleo Brasileiros (Oil & Gas Services) 2,786,638 16,221,912 Telec de Sao Paulo (Telecommunications) 4,017,087 --------------------------------------------------- 10,406,158 ---------------------------------------------------------------------------- RUSSIAN RUBLE - 0.2% 42,155 Lukoil ADR (Oil & Gas Services) 321,432 ---------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (COST $11,638,650) $ 10,727,590 ----------------------------------------------------------------------------
UNITS/SHARES DESCRIPTION VALUE STRUCTURED NOTES - 5.0% UNITED STATES DOLLAR - 5.0% 6,709 Kuala Lumpur Composite Index Linked Note* $ 631,116 23,116 Kuala Lumpur Composite Index Linked Note* 2,202,724 62,512,592 Merrill Lynch Call Warrant on Korean Stock Price Index 200* 1,806,614 61,071,086 Merrill Lynch Call Warrant on Korean Stock Price Index 200* 1,801,597 161,679 Taiwan Index Linked Note* 1,295,049 ---------------------------------------------------- 7,737,100 ----------------------------------------------------------------------------- TOTAL STRUCTURED NOTES (COST $8,073,993) $ 7,737,100 ----------------------------------------------------------------------------- OPTIONS - 0.4% BRAZILIAN REAL 24,200 RCA Option V9M $ 576,364 ----------------------------------------------------------------------------- TOTAL OPTIONS (COST $338,513) $ 576,364 -----------------------------------------------------------------------------
PRINCIPAL INTEREST MATURITY AMOUNT RATE DATE VALUE BOND - 1.1% RUSSIAN RUBLE Inter American Development Bank 17,900,000 31.0% 05/08/00 $ 1,711,515 -------------------------------------------------------------------------------------------------- TOTAL BONDS (COST $1,856,802) $ 1,711,515 -------------------------------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS - 2.3% POLISH ZLOTY Poland Treasury Bill 8,700,000 17.2% 02/24/99 $ 2,308,823 5,000,000 17.2% 02/10/99 1,335,047 -------------------------------------------------------------------------------------------------- TOTAL SHORT-TERM OBLIGATIONS (COST $3,588,612) $ 3,643,870 -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (COST $177,954,882)(A) $151,465,470 --------------------------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: Gross unrealized gain for investments in which value exceeds cost $ 4,855,688 Gross unrealized loss for investments in which cost exceeds value (33,750,495) -------------------------------- Net unrealized loss $(28,894,807) --------------------------------
* Non-income producing security. (a) The aggregate cost for federal income tax purposes is $180,360,277. (b) A portion of cash, $54,498, has been segregated for extended settlement of this security. The percentage shown for each investment category reflects the value of investments in that category as a percentage of total net assets. 8 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. PERCENTAGE OF TOTAL NET ASSETS COMMON AND PREFERRED STOCK INDUSTRY CONCENTRATIONS Agriculture 0.2% Banking 3.6 Beverages 2.7 Beverages/Tobacco 1.8 Broadcast Media 1.4 Building Materials 2.1 Chemical Products 0.6 Commercial Banks 4.5 Communications 0.2 Construction 0.2 Consumer Goods 2.9 Diversified 2.0 Diversified Industrial Manufacturing 0.5 Drugs 0.8 Electrical Services 1.2 Electronic Connectors 1.3 Electronics 0.7 Energy 1.5 Engineering 0.2 Financial Services 6.0 Food & Beverages 3.2 Food & Grocery 0.0 Health & Medical Services 1.4 Health Care 0.3 Health/Personal Care 1.0 Industrial Machinery 0.5 Insurance Services 1.3 Investment Fund 1.5 Mining 1.4 Natural Resources 1.9 Oil & Gas 1.8 Oil & Gas Services 5.5 Real Estate 0.9 Recreational Services 0.6 Retail 0.2 Retail-Trade 1.0 Shipping & Freight 0.1 Technology 1.0 Telecommunications 21.8 Textiles 0.1 Tobacco 1.5 Transportation-Marine 0.2 Utility 7.2 ---------------------------------------------------------------- TOTAL COMMON AND PREFERRED STOCK 88.8% ----------------------------------------------------------------
9 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Statement of Assets and Liabilities July 31, 1998 (Unaudited) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. ASSETS: Investment in securities, at value (identified cost $177,954,882) $151,465,470 Cash, at value 3,012,499 Receivables: Investment securities sold 622,408 Forward foreign currency exchange contracts 40,322 Fund shares sold 347,650 Dividends and interest, at value 592,074 Deferred organization expenses, net 13,607 Other assets 191,740 ------------------------------------------------------------------------------- TOTAL ASSETS 156,285,770 ------------------------------------------------------------------------------- LIABILITIES: Payables: Investment securities purchased 553,408 Forward foreign currency exchange contracts 137,469 Fund shares repurchased 210 Amounts owed to affiliates 250,984 Accrued expenses and other liabilities 138,650 ------------------------------------------------------------------------------- TOTAL LIABILITIES 1,080,721 ------------------------------------------------------------------------------- NET ASSETS: Paid-in capital 180,231,729 Accumulated undistributed net investment income 1,078,534 Accumulated undistributed net realized gain on investment and foreign currency transactions 510,450 Net unrealized loss on investments and translation of assets and liabilities denominated in foreign currencies (26,615,664) ------------------------------------------------------------------------------- NET ASSETS $155,205,049 -------------------------------------------------------------------------------
CLASS A CLASS B CLASS C ------------------------------------------------------------------------------- Total shares of beneficial interest outstanding, $.001 par value (unlimited shares authorized) 5,957,974 49,880 28,661 Net asset and Class A redemption value per share(a) $8.79 $8.78 $8.79 ------------------------------------------------------------------------------- INSTITUTIONAL SERVICE ------------------------------------------------------------------------------- Total shares of beneficial interest outstanding, $.001 par value (unlimited shares authorized) 11,546,320 160 Net asset value, offering and redemption price per share $8.84 $8.62 -------------------------------------------------------------------------------
(a) Maximum public offering price per share (NAV per share X 1.0582) for Class A shares is $9.30. At redemption, Class B and Class C shares may be subject to a contingent deferred sales charge assessed on the amount equal to the lesser of the current net asset value or the original pur- chase price of the shares. 10 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Statement of Operations For the Six Months Ended July 31, 1998 (Unaudited) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. INVESTMENT INCOME: Dividends(a) $ 1,485,665 Interest 446,293 ------------------------------------------------------------------------------ TOTAL INCOME 1,931,958 ------------------------------------------------------------------------------ EXPENSES: Management fees 642,999 Custodian fees 211,954 Transfer agent fees 95,593 Distribution fees 51,779 Authorized dealer service fees 50,747 Registration fees 43,412 Professional fees 31,988 Trustee fees 2,579 Amortization of deferred organization expenses 970 Other 19,751 ------------------------------------------------------------------------------ TOTAL EXPENSES 1,151,772 ------------------------------------------------------------------------------ Less -- expenses reimbursed and fees waived by Goldman Sachs (278,476) ------------------------------------------------------------------------------ NET EXPENSES 873,296 ------------------------------------------------------------------------------ NET INVESTMENT INCOME 1,058,662 ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) from: Investment transactions (4,821,082) Foreign currency related transactions 5,353,986 Net change in unrealized loss on: Investments (25,633,792) Translation of assets and liabilities denominated in foreign currencies (118,309) ------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED LOSS ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS (25,219,197) ------------------------------------------------------------------------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (24,160,535) ------------------------------------------------------------------------------
(a) Taxes withheld on dividends were $100,286. 11 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Statement of Changes in Net Assets THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
FOR THE SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED) FROM OPERATIONS: Net investment income $ 1,058,662 Net realized gain on investment and foreign currency related transactions 532,904 Net change in unrealized loss on investments and translation of assets and liabilities denominated in foreign currencies (25,752,101) ------------------------------------------------------------------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (24,160,535) ------------------------------------------------------------------------ FROM SHARE TRANSACTIONS: Net proceeds from sales of shares 163,420,362 Cost of shares repurchased (20,993,816) ------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 142,426,546 ------------------------------------------------------------------------ TOTAL INCREASE 118,266,011 ------------------------------------------------------------------------ NET ASSETS: Beginning of year 36,939,038 ------------------------------------------------------------------------ End of period $155,205,049 ------------------------------------------------------------------------ ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $ 1,078,534 ------------------------------------------------------------------------
12 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Statement of Changes in Net Assets THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
FOR THE PERIOD ENDED JANUARY 31,1998(A) FROM OPERATIONS: Net investment income $ 19,872 Net realized loss on investment and foreign currency related transactions (22,454) Net change in unrealized loss on investments and translation of assets and liabilities denominated in foreign currencies (863,563) -------------------------------------------------------------------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (866,145) -------------------------------------------------------------------------- FROM SHARE TRANSACTIONS: Net proceeds from sales of shares 37,824,117 Cost of shares repurchased (18,934) -------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 37,805,183 -------------------------------------------------------------------------- TOTAL INCREASE 36,939,038 -------------------------------------------------------------------------- NET ASSETS: Beginning of period -- -------------------------------------------------------------------------- End of period $36,939,038 -------------------------------------------------------------------------- ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $ 19,872 --------------------------------------------------------------------------
(a) The Fund commenced operations on December 15, 1997. 13 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Financial Highlights Selected Data for a Share Outstanding Throughout Each Period THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
INCOME FROM INVESTMENT OPERATIONS(E) DISTRIBUTIONS TO SHAREHOLDERS ------------------------- ----------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM NET NET ASSET AND FOREIGN REALIZED GAIN IN EXCESS VALUE, NET CURRENCY FROM NET ON INVESTMENT OF NET NET DECREASE BEGINNING INVESTMENT RELATED INVESTMENT AND OPTIONS INVESTMENT IN NET ASSET OF PERIOD INCOME TRANSACTIONS INCOME TRANSACTIONS INCOME VALUE FOR THE SIX MONTHS ENDED JULY 31 (UNAUDITED), 1998 - Class A Shares $ 9.69 $ 0.04 $(0.94) -- -- -- $(0.90) 1998 - Class B Shares 9.69 0.02 (0.93) -- -- -- (0.91) 1998 - Class C Shares 9.70 0.03 (0.94) -- -- -- (0.91) 1998 - Institutional Shares 9.70 0.06 (0.92) -- -- -- (0.86) 1998 - Service Shares 9.69 (0.13) (0.94) -- -- -- (1.07) FOR THE PERIOD ENDED JANUARY 31,(B) 1998 - Class A Shares 10.00 -- (0.31) -- -- -- (0.31) 1998 - Class B Shares 10.00 -- (0.31) -- -- -- (0.31) 1998 - Class C Shares 10.00 -- (0.30) -- -- -- (0.30) 1998 - Institutional Shares 10.00 0.01 (0.31) -- -- -- (0.30) 1998 - Service Shares 10.00 -- (0.31) -- -- -- (0.31) ------------------------------------------------------------------------------------------------------------
(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) Class A, Class B, Class C, Institutional and Service share activity commenced on December 15, 1997. (c) Annualized. (d) Not annualized. (e) Includes the balancing effect of calculating per share amounts. 14 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND
RATIO OF NET ASSETS RATIO OF NET INVESTMENT NET ASSET PORTFOLIO AT END OF NET EXPENSES INCOME (LOSS) VALUE, END TOTAL TURNOVER PERIOD TO AVERAGE TO AVERAGE OF PERIOD RETURN(A) RATE (IN 000S) NET ASSETS NET ASSETS - ---------------------------------------------------------------------------- $8.79 (9.29)%(d) 35.27%(d) $ 52,362 2.17%(c) 1.36%(c) 8.78 (9.39)(d) 35.27(d) 438 2.67(c) 0.69(c) 8.79 (9.38)(d) 35.27(d) 252 2.67(c) 0.92(c) 8.84 (8.87)(d) 35.27(d) 102,151 1.30(c) 2.35(c) 8.62 (11.04)(d) 35.27(d) 2 1.80(c) (2.71)(c) - ---------------------------------------------------------------------------- 9.69 (3.10)(d) 3.35 17,681 1.90(c) 0.55(c) 9.69 (3.10)(d) 3.35 64 2.41(c) 0.05(c) 9.70 (3.00)(d) 3.35 73 2.48(c) (0.27)(c) 9.70 (3.00)(d) 3.35 19,120 1.30(c) 0.80(c) 9.69 (3.10)(d) 3.35 2 2.72(c) (0.05)(c) - ---------------------------------------------------------------------------- RATIOS ASSUMING NO VOLUNTARY WAIVER OF FEES OR EXPENSE LIMITATIONS ----------------------------------- RATIO OF RATIO OF NET NET ASSET EXPENSES TO INVESTMENT INCOME VALUE, END AVERAGE NET (LOSS) TO AVERAGE OF PERIOD ASSETS NET ASSETS - ---------------------------------------------------------------------------- $8.79 2.69%(c) 0.84%(c) 8.78 3.19(c) 0.17(c) 8.79 3.19(c) 0.40(c) 8.84 1.82(c) 1.83(c) 8.62 2.32(c) (3.23)(c) - ---------------------------------------------------------------------------- 9.69 5.88(c) (3.43)(c) 9.69 6.39(c) (3.93)(c) 9.70 6.46(c) (4.25)(c) 9.70 5.28(c) (3.18)(c) 9.69 6.70(c) (4.03)(c) - ----------------------------------------------------------------------------
15 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Notes to Financial Statements July 31, 1998 (Unaudited) 1. ORGANIZATION Goldman Sachs Trust (the "Trust"), a Delaware business trust registered under the Investment Company Act of 1940 (as amended) as an open-end management in- vestment company. The Trust includes the Goldman Sachs Emerging Markets Equity Fund (the "Fund"). At July 31, 1998, the Fund offered five classes of shares -- Class A, Class B, Class C, Institutional and Service. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consist- ently followed by the Fund. The preparation of financial statements in con- formity with generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Certain reclassifications have been made to the prior periods' amounts to conform with the current period presentation. Such reclassifications have no effect on previously reported net asset values of the Fund. A. Investment Valuation -- Investments in securities traded on a U.S. or for- eign securities exchange or the NASDAQ system are valued daily at their last sale or closing price on the principal exchange on which they are traded or NASDAQ. 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 the securi- ties 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 se- curities 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 am- ortized cost. Restricted securities, and other securities for which quota- tions are not readily available, are valued at fair value using methods approved by the Board of Trustees of the Trust. Investing in emerging markets may involve special risks and considerations not typically associated with investing in the United States. These risks in- clude revaluation of currencies, high rates of inflation, repatriation re- strictions on income and capital, and future adverse political and economic developments. Moreover, securities issued in these markets may be less liq- uid, subject to government ownership controls, delayed settlements, and their prices more volatile than those of comparable securities in the United States. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are recorded on the trade date. Realized gains and losses on sales of invest- ments are calculated on the identified-cost basis. Dividend income is re- corded on the ex-dividend date. Dividends for which the Fund has the choice to receive either cash or stock are recognized as investment income in an amount equal to the cash dividend. Interest income is determined on the basis of interest accrued, premium amortized and discount earned. It is the Fund's policy, where necessary, to accrue for estimated capital gains taxes on ap- preciated foreign securities. C. FOREIGN CURRENCY TRANSLATIONS -- The books and records of the Fund are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investment valua- tions, 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 hold- ings of foreign currencies; (ii) gains and losses between trade date and set- tlement 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. 16 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Fund is 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 or to seek to increase total return. All commitments are "marked-to-market" daily at the applicable translation rates and any resulting unrealized gains or losses are recorded in the Fund's financial statements. The Fund records re- alized gains or losses at the time the forward contract is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. E. DERIVATIVE FINANCIAL INSTRUMENTS -- STRUCTURED NOTES Subject to its investment restrictions, the Fund may utilize derivative fi- nancial instruments such as structured notes. Such instruments are used by the Fund as a means of investing in a particular market or of increasing the return on the Fund's investments or both. The value of the principal of and/or interest on such securities is determined by reference to changes in the value of the financial indicators including, but not limited to indices, currencies or interest rates. These financial instruments may subject the fund to a greater degree of market risk and loss than other types of fixed income securities. F. SHORT SECURITIES POSITIONS -- The Fund may enter into covered short sales. Short securities positions are accounted for at cost and subsequently marked to market to reflect the current market value of the position. The market value of the short position is recorded as a liability on the Fund's records and any difference between this market value and the cash received is re- ported as unrealized gain or loss. Gains and losses are realized when a short position is closed out by delivering securities back to the broker. G. FEDERAL TAXES -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provision is required. The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with income tax rules. Therefore, the source of the Fund's distributions may be shown in the accompanying financial statements as either from or in excess of net invest- ment 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 tim- ing differences associated with having different book and tax year ends. H. DEFERRED ORGANIZATION EXPENSES -- Organization-related costs are amortized on a straight-line basis over a period of five years. I. EXPENSES -- Expenses incurred by the Trust which do not specifically re- late to an individual fund of the Trust are allocated to the funds based on each Fund's relative average net assets for the period. Class A, Class B and Class C shares bear all expenses and fees relating to distribution and authorized dealer service plans. Each class of shares sepa- rately bears their respective class-specific transfer agency fees. Service shares separately bear a service class fee payable monthly to service organi- zations for their services. J. OPTION ACCOUNTING PRINCIPLES -- When the Fund writes call or put options, an amount equal to the premium received is recorded as an asset and as an equivalent liability. The amount of the liability is subsequently marked-to- market to reflect the current market value of the option written. When a written option expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain or loss without regard to any unrealized gain or loss on the underlying security, and the li- ability related to such option is extinguished. When a written call option is exercised, the Fund realizes a gain or loss from the sale of the underlying security, and the proceeds of the sale are increased by the premium origi- nally received. When a written put option is exercised, the amount of the premium originally received will reduce the cost of the security which the Fund purchases upon exercise. There is a risk of loss from a change in value of such options which may exceed the related premiums received. 17 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Notes to Financial Statements (continued) July 31, 1998 (Unaudited) Upon the purchase of a call option or a protective put option by the Fund, the premium paid is recorded as an investment and subsequently marked-to-mar- ket to reflect the current market value of the option. If an option which the Fund has purchased expires on the stipulated expiration date, the Fund will realize a loss in the amount of the cost of the option. If the Fund enters into a closing sale transaction, the Fund will realize a gain or loss, de- pending on whether the sale proceeds for the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a pur- chased put option, the Fund will realize a gain or loss from the sale of the underlying security, and the proceeds from such sale will be decreased by the premium originally paid. If the Fund exercises a purchased call option, the cost of the security which the Fund purchases upon exercise will be increased by the premium originally paid. K. FUTURES CONTRACTS -- The Fund may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Upon entering into a futures contract, the Fund is required to deposit with a broker an amount of cash or securities equal to the minimum "initial mar- gin" requirement of the respective futures exchange. Subsequent payments for futures contracts ("variation margin") are paid or received by the Fund dai- ly, dependent on the daily fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Fund realizes a gain or loss which is reported in the Statement of Operations. The use of futures contracts involve, to varying degrees, elements of mar- ket and counterparty risk which may exceed the amounts recognized in the Statement of Assets and Liabilities. Changes in the value of the futures con- tract may not directly correlate with changes in the value of the underlying securities. This risk may decrease the effectiveness of the Fund's hedging strategies and potentially result in a loss. 3. AGREEMENTS Goldman Sachs Asset Management International ("GSAM International"), an af- filiate of Goldman, Sachs & Co. ("Goldman Sachs"), acts as the Fund's invest- ment adviser pursuant to an Investment Management Agreement (the "Agreement"). Under the Agreement, GSAM International, subject to the general supervision of the Trust's Board of Trustees, manages the Fund's portfolio. As compensation for the services rendered under the Agreement, the assumption of the expenses related thereto and administering the Fund's business af- fairs, including providing facilities, GSAM International is entitled to a fee, computed daily and payable monthly, at an annual rate equal to 1.20% of the average daily net assets of the Fund. For the six months ended July 31, 1998, GSAM International has voluntarily agreed to waive approximately $53,000 of its Management Fee. GSAM International may discontinue or modify this waiver in the future at its discretion. For the six months ended July 31, 1998, Goldman Sachs voluntarily agreed to reduce or limit certain "Other Expenses" for the Fund (excluding management, service, distribution and authorized dealer service fees and litigation and indemnification costs, taxes, interest, brokerage commissions, transfer agent fees and extraordinary expenses) to the extent such expenses exceeded .16% of the average daily net assets of the Fund. For the six months ended July 31, 1998, Goldman Sachs has reimbursed approximately $225,000. At July 31, 1998, approximately $159,000 is owed to the Fund. Effective September 1, 1998, this expense limitation has been modified. Goldman Sachs serves as the Distributor of shares of the Fund pursuant to a Distribution Agreement. Goldman Sachs may receive a portion of the Class A sales load and Class B and Class C contingent deferred sales charge and has advised the Trust that it has retained approximately $463,000 during the six months ended July 31, 1998. The Trust, on behalf of the Fund, has adopted Distribution Plans (the "Dis- tribution Plans") pursuant to Rule 12b-1. Under the Distribution Plans, Goldman Sachs is entitled to a quarterly fee from the Fund for distribution services equal, on an annual basis, to .25%, .75% and .75% of the Fund's av- erage daily net assets attributable to Class A, Class B and Class C shares, respectively. 18 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND The Trust, on behalf of the Fund, has adopted Authorized Dealer Service Plans (the "Service Plans") pursuant to which Goldman Sachs and Authorized Dealers are compensated for providing personal and account maintenance serv- ices. The 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, Class B and Class C shares. Goldman Sachs also serves as the Transfer Agent of the Fund for a fee. Effective September 1, 1998 fees charged for such transfer agent services are as follows: 0.19% of average daily net assets for Class A, Class B and Class C Shares and 0.04% of average daily net assets for Institutional and Service Class Shares. The Trust, on behalf of the Fund, has adopted a Service Plan. This plan al- lows for Service shares to compensate service organizations for providing va- rying levels of account administration and shareholder liaison services to their customers who are beneficial owners of such shares. The Service Plan provides for compensation to the service organizations in an amount up to .50% (on a annualized basis), of the average daily net asset value of the Service shares. At July 31, 1998, the Fund owed approximately $142,000, $33,000, $31,000 and $45,000 for Management, Distribution, Authorized Dealer Service and Transfer Agent fees, respectively. 4. PORTFOLIO SECURITIES TRANSACTIONS Purchases and proceeds of sales or maturities of securities (excluding short- term investments and futures) for the six months ended July 31, 1998, were $183,181,503 and $34,310,684, respectively. At July 31, 1998, the Fund had the following outstanding forward foreign currency exchange contracts:
VALUE ON FOREIGN CURRENCY SETTLEMENT CURRENT UNREALIZED SALE CONTRACTS DATE VALUE LOSS ---------------------------------------------------------------------------- Deutsche Mark expiring 10/7/98 $2,013,823 $2,056,964 $ (43,141) Russian Ruble expiring 8/10/98 936,250 1,014,843 (78,593) ---------------------------------------------------------------------------- TOTAL FOREIGN CURRENCY SALE CONTRACTS $2,950,073 $3,071,807 $(121,734) ----------------------------------------------------------------------------
The contractual amounts of forward foreign currency exchange contracts do not necessarily represent the amounts potentially subject to risk. The mea- surement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered. At July 31, 1998, the Fund had sufficient cash and securities to cover any commitments under these contracts. The Fund has recorded a "Receivable for forward foreign currency exchange contracts" and "Payable for forward foreign currency exchange contracts" of $40,322 ($40,322 of realized gains relating to forward foreign currency ex- change contracts closed but not settled as of July 31, 1998) and $137,469 (comprised of $15,735 of realized losses relating to forward foreign currency exchange contracts closed but not settled as of July 31, 1998 and $121,734 of unrealized losses relating to open forward foreign currency exchange con- tracts as detailed in the table above), respectively, in the accompanying Statement of Assets and Liabilities. For the six months ended July 31, 1998, Goldman Sachs earned approximately $25,000 of brokerage commissions from portfolio transactions. 5. LINE OF CREDIT FACILITY The Fund participates in a $250,000,000 uncommitted, unsecured revolving line of credit facility. In addition, the Fund participates in a $50,000,000 com- mitted, unsecured revolving line of credit facility. Both facilities are to be used solely for temporary or emergency purposes. Under the most restric- tive arrangement, the Fund must own securities having a market value in ex- cess 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, 1998, the Fund did not have any borrowings under these facilities. 19 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND Notes to Financial Statements (continued) July 31, 1998 (Unaudited) 6. SUMMARY OF SHARE TRANSACTIONS Share activity for the periods ended July 31, 1998 and January 31, 1998 are as follows:
FOR THE SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED) FOR THE PERIOD ENDED JANUARY 31, 1998 -------------------------------- --------------------------------------------- SHARES DOLLARS SHARES DOLLARS ------------------------------------------------------------------------------------------------------- CLASS A SHARES Shares sold 5,166,538 $ 52,545,655 1,824,207 $ 17,866,344 Shares repurchased (1,032,771) (10,081,607) -- -- -------------------------------- --------------------------------------------- 4,133,767 42,464,048 1,824,207 17,866,344 ------------------------------------------------------------------------------------------------------- CLASS B SHARES Shares sold 45,829 440,950 6,579 64,645 Shares repurchased (2,528) (23,339) -- -- -------------------------------- --------------------------------------------- 43,301 417,611 6,579 64,645 ------------------------------------------------------------------------------------------------------- CLASS C SHARES Shares sold 24,991 248,016 7,520 72,494 Shares repurchased (3,850) (37,625) -- -- -------------------------------- --------------------------------------------- 21,141 210,391 7,520 72,494 ------------------------------------------------------------------------------------------------------- INSTITUTIONAL SHARES Shares sold 10,666,551 110,185,741 1,973,802 19,819,033 Shares repurchased (1,092,081) (10,851,245) (1,952) (18,934) -------------------------------- --------------------------------------------- 9,574,470 99,334,496 1,971,850 19,800,099 ------------------------------------------------------------------------------------------------------- SERVICE SHARES Shares sold -- -- 160 1,601 -------------------------------- --------------------------------------------- -- -- 160 1,601 ------------------------------------------------------------------------------------------------------- NET INCREASE 13,772,679 $ 142,426,546 3,810,316 $ 37,805,183 -------------------------------------------------------------------------------------------------------
20 GOLDMAN SACHS EMERGING MARKETS EQUITY FUND THE GOLDMAN SACHS ADVANTAGE When you invest in the Goldman Sachs Emerging Markets Equity Fund, you can capitalize on Goldman Sachs' history of excellence while benefiting from the firm's leadership in three areas: 1 Global Resources With professionals based in offices throughout the Americas, Europe and Asia, Goldman Sachs possesses first-hand knowledge of the world's markets and economies. 2 Fundamental Research Goldman Sachs is recognized by the managements of corporations worldwide as a leader in investment research. As a result, we obtain face-to-face meetings with managers on a timely, regular basis. 3 Risk Management Goldman, Sachs & Co. excels in understanding, monitoring and managing investment risk -- a process that is integrated into all Goldman Sachs investment products. An Investment Idea for the Long Term History has shown that a long-term plan that includes stocks of emerging market countries is more likely to provide greater returns and reduce overall portfolio volatility over time than a portfolio that invests only in U.S.-based stocks. Goldman Sachs Emerging Markets Equity Fund offers investors access to the benefits associated with emerging market investing. The Fund seeks long-term capital appreciation, primarily through equity securities of emerging country issuers. Target Your Needs The Goldman Sachs Emerging Markets Equity Fund has a distinct investment objective and a defined place on the risk/return spectrum. As your investment objectives change, you can exchange shares within Goldman Sachs Funds without an additional charge.* (Please note: in general, greater returns are associated with greater risk.) - -------------------------------------------------------------------------------- Goldman Sachs Funds ASSET ALLOCATION Higher Risk/Return Lower Risk/Return - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY DOMESTIC FIXED MONEY . Goldman Sachs EQUITY INCOME MARKET Emerging Markets Equity Fund For More Information To learn more about the Goldman Sachs Emerging Markets Equity Fund and other Goldman Sachs Funds, call your investment professional today. /*/The exchange privilege is subject to termination and its terms are subject to change. GOLDMAN SACHS ASSET MANAGEMENT ONE NEW YORK PLAZA, 42ND FLOOR, NEW YORK, NEW YORK 10004 TRUSTEES Ashok N. Bakhru, Chairman David B. Ford Douglas C. Grip John P. McNulty Mary P. McPherson Alan A. Shuch Jackson W. Smart, Jr. William H. Springer Richard B. Strubel OFFICERS Douglas C. Grip, President Jesse Cole, Vice President James A. Fitzpatrick, Vice President Anne Marcel, Vice President Nancy L. Mucker, Vice President John M. Perlowski, Treasurer Philip V. Giuca, Jr., Assistant Treasurer Michael J. Richman, Secretary Howard B. Surloff, Assistant Secretary Valerie A. Zondorak, Assistant Secretary GOLDMAN, SACHS & CO. Distributor and Transfer Agent GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL Investment Adviser GOLDMAN SACHS INTERNATIONAL Peterborough Court, 133 Fleet Street London EC4A 2BB, England Visit our internet address: www.gs.com/funds This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Investors should read the Prospectus carefully before investing or sending money. Goldman, Sachs & Co., distributor of the Fund, is not a bank, and Fund shares distributed by it are neither bank deposits nor obligations of, nor endorsed, nor guaranteed by any bank or other insured depository institution, nor are they insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any other government agency. Investment in the Fund involves risks, including possible loss of the principal amount invested. Asia Growth Fund's, Emerging Markets Equity Fund's and International Equity Fund's investment in securities of foreign issuers and foreign currencies entails certain risks not customarily associated with investing in securities of U.S. issuers quoted in U.S. dollars. In particular, the securities market of emerging countries in which the Funds may invest without limit are less liquid, are subject to greater price volatility, have smaller market capitalizations, have problems with share registration and custody, have less government regulation, and are not subject to as extensive and frequent accounting, financial and other reporting requirements as the securities markets of more developed countries. Asia Growth Fund's, Japanese Equity Fund's, International Small Cap Equity Fund's and CORE International Equity Fund's foreign investments and active management techniques entail risks in addition to those customarily associated with investing in dollar-denominated securities of U.S issuers. Compared with domestic securities markets, foreign markets may be less liquid, more volatile and less subject to government regulation, and may make available less public information about issuers. The Funds may incur losses because of changes in securities prices expressed in local currencies, movements in exchange rates or both. Concentration of the Japanese Equity and Asia Growth Fund's assets in one or a few countries and currencies will subject the Fund to greater risk than if a Fund's assets were not geographically concentrated. The stocks of smaller companies are often associated with higher risks, including greater volatility, than stocks of larger companies. An investment in a money market fund is neither insured nor guaranteed by the U.S. government and there can be no assurance that any money market fund will be able to maintain a net asset value of $1.00 per share. (C) Copyright 1998 Goldman, Sachs & Co. All rights reserved. Date of first use: September 30, 1998 EMESAR /31K / 9-98 -----END PRIVACY-ENHANCED MESSAGE-----