N-30D 1 dn30d.htm GOLDMAN SACHS INTERNET TOLLKEEPER FUND Goldman Sachs Internet Tollkeeper Fund

GOLDMAN SACHS INTERNET TOLLKEEPER FUND

Market Overview

Dear Shareholder,
 Despite a strong showing during the second quarter of 2001, the overall equity market declined during the six-month reporting period. A weakening economy, falling corporate profits and the increased threat of a recession all took their toll on U.S. stock prices.

Economic Review

During the reporting period, economic activity in the U.S. has declined sharply. Initially, this took the form of weaker production, higher unemployment claims and lower consumer confidence. This information triggered the Federal Reserve Board (the “Fed”) to switch gears and officially move from a “tightening” to an “easing” bias as the reporting period began.

In January 2001, the Fed began a series of rapid interest rate cuts to reverse the economic slowdown. It began with an unexpected 50 basis point cut on January 3, 2001, and this unusual move was followed up by five additional easings during the period. This aggressive action, totaling 275 basis points of cuts in less than six months, demonstrated the Fed’s commitment to stimulate economic growth. In fact, during the 1990-91 recession, it took the Fed 17 months to lower rates a comparable amount.

Market Review

The weakness in the U.S. equity market that prevailed in 2000 continued unabated in the first quarter of 2001. During that time, the S&P 500 Index fell 11.86%, the Russell 2000 Index dropped 6.51% and the NASDAQ Composite Index plunged 25.51%. Virtually all sectors were flat to down, as investors fled to “safe-havens,” such as fixed income securities.

During the second quarter, the markets reversed course, with the S&P 500 Index rising 5.85%, the Russell 2000 Index leaping 14.41% and the NASDAQ Composite Index soaring 17.40%. Investor optimism grew, as concerns over weak corporate earnings slightly subsided. While companies continued to experience a sluggish business environment, this atmosphere did not deter stock prices. The reason for this was twofold. First, investors assumed that the multiple interest rate cuts would spur corporate investment in the near future. Second, investors had already anticipated negative earnings news and much of this was already reflected in the price of stocks.

In summary, the market gyrations we have experienced continue to emphasize the importance of maintaining a long-term approach with your investments. We also urge you to consult with your financial advisor during periods of extreme volatility. As always, we appreciate your confidence and look forward to serving your investment needs in the future.

  Sincerely,    
 
David B. Ford   David W. Blood
Co-Head, Goldman Sachs Asset Management   Co-Head, Goldman Sachs Asset Management
  July 12, 2001    

 

 

 

 

GOLDMAN SACHS INTERNET TOLLKEEPER FUND

What Differentiates Goldman Sachs
Internet Tollkeeper Investment Process?

The Goldman Sachs Internet Tollkeeper Fund seeks to provide investors with a unique solution to investing in the Internet. The Fund invests in established growth companies that are strategically positioned to benefit long-term from the growth of the Internet by providing media/content, backbone/infrastructure, and services to Internet companies and Internet users.

 

  Goldman Sachs’ Growth Equity Investment Process
   
 
   
 

Buy the business:
Make decisions with a view toward owning the business for decades to come

 

Buy high-quality growth businesses:
  • Long product life cycles
  • Brand names
  • Dominant market share
  • Long-term sustainability of earnings
Buy at a discount to the business’ true value
 
 
 
 

Team Based:
Input from each team member

Continuous Scrutiny:
Daily review of market, industry and company developments

Low Turnover:
A buy-and-hold strateg
 
 
 
 
     Growth stock portfolios that:
 
  • are strategically positioned for long-term growth
  • are style and capitalization-consistent
  • most investors would feel comfortable owning if the market closed for 10 years
This Strategy - Applied to the Internet:
  Media/Content Backbone/Infrastructure
  Services Improved Business Model

 

GOLDMAN SACHS INTERNET TOLLKEEPER FUND

Fund Basics
as of June 30, 2001

 

PERFORMANCE REVIEW
December 31, 2000–
June 30, 2001 		Fund Cumulative
Total Return (based on NAV)1 		S&P 500 Index2 NASDAQ
Composite Index2 		Goldman Sachs
Internet Index2
Class A –14.29% –6.70% –12.52% –24.15%
Class B –14.67 –6.70 –12.52 –24.15
Class C –14.60 –6.70 –12.52 –24.15
Institutional –14.12 –6.70 –12.52 –24.15
Service –14.31 –6.70 –12.52 –24.15
1The net asset value represents the net assets of the Fund (ex-dividend) divided by the total number of shares outstanding. The Fund’s performance reflects the investment of dividends and other distributions. Total return figures are not annualized.
2The Indices are unmanaged and do not reflect any fees or expenses. In addition, investors cannot invest directly in the Indices. The S&P 500 and NASDAQ Composite Indices reflect the reinvestment of dividends.
STANDARDIZED ANNUAL TOTAL RETURNS3
For the period ended 6/30/01 Class A Class B Class C Institutional Service
One Year –47.14% –47.27% –45.01% –43.84% –44.11%
Since Inception –1.22 –1.10 1.22 2.46 1.90
(10/1/99)

3 The Standardized Total Returns are average annual or cumulative total returns (only if the performance period is one year or less) as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 5.5% for Class A shares and 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). Because Institutional and Service shares do not involve a sales charge, such a charge is not applied to their respective Standardized Annual Total Returns.

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. Performance reflects expense limitations in effect. In their absence, performance would be reduced.

The Fund’s participation in the Initial Public Offering (IPO) market during its initial start-up phase may have had a magnified impact on the Fund’s performance because of its relatively small asset base at start up. As the Fund’s assets grow, it is probable that the effect of IPO investments on the Fund’s future performance will not be as significant.

TOP 10 HOLDINGS AS OF 6/30/014
Holding % of Total Net Assets Line of Business
AOL Time Warner, Inc. 6.7% Entertainment
Viacom, Inc. Class B 5.8 Entertainment
Sabre Holdings Corp. 5.4 Computer Software
Microsoft Corp. 5.2 Computer Software
Crown Castle International Corp. 4.6 Wireless
Clear Channel Communications, Inc. 4.2 Media
Comcast Corp. 4.0 Media
VeriSign, Inc. 3.9 Internet
Westwood One, Inc. 3.8 Media
AT&T Corp.–Liberty Media Corp. 3.3 Media
4 The top 10 holdings may not be representative of the Fund’s future investments.

 

GOLDMAN SACHS INTERNET TOLLKEEPER FUND

Performance Overview

Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Internet Tollkeeper FundSM. This semiannual report covers the six-month period ended June 30, 2001.

Performance Review

Over the six-month period that ended June 30, 2001, the Fund’s Class A, B, C, Institutional and Service classes generated, respectively –14.29%, –14.67%, –14.60%, –14.12% and –14.31% cumulative total returns. We measure performance relative to several indices, including the Goldman Sachs Internet Index, NASDAQ Composite Index (with dividends reinvested), and S&P 500 Index. During the past six-months these various benchmarks have generated cumulative total returns of –24.15%, –12.52%, and –6.70%, respectively.

Initially the period was characterized by periods of sharp volatility, led mostly by the Technology sector. During the first quarter of 2001 virtually all sectors were flat to down, however the focus was on the Technology sector. Within this area, it was the former “safe-havens” or blue chip technology stocks that had the worst performance.

In an effort to fuel the economy, the Federal Reserve Board cut interest rates six times, bringing the Federal Funds rate down to 3.75%. In addition, the Fed paved the way for future rate reductions, saying the risk of economic weakness outweighs the danger of inflation. However, investors remained wary about the likelihood of more corporate earnings warnings and the Fund was certainly not immune to the market’s overall decline. We would expect this, as the Fund takes a different — and potentially more conservative — approach to investing in the Internet.

Portfolio Positioning

The Fund invests primarily in established growth businesses within the media, telecommunications, technology and internet sectors.

Portfolio Highlights

  • AOL Time Warner, Inc. — The combination of AOL and Time Warner represented one of the biggest mergers in the media world. AOL will gain broadband access, a diversified revenue stream, proprietary content and numerous cross-selling opportunities. Time Warner gains access to the world’s leading Internet company.
  • AT&T Corp. — Liberty Media Corp. — Liberty Media Group (LMG) is a portfolio company that owns control, or influential equity stakes in over 150 sports and general interest cable TV programmers around the world. LMG owns stakes in a number of name brand franchises, such as The Discovery Channel, Learning Channel, Travel Channel, Fox Regional Sports Networks, Starz!, Encore, QVC, Home Shopping Network, TV Guide, and many other popular channels.

GOLDMAN SACHS INTERNET TOLLKEEPER FUND

 

  • Westwood One, Inc. — Westwood One is the largest provider of content to the U.S. radio industry. The company provides stations with traditional radio programming, as well as other content that includes weather and traffic. Westwood’s programming and commercials currently air on more than 7,500 radio and television stations.

Portfolio Outlook

While we neither make nor rely on economic forecasts to make investment decisions, we are generally bullish on the U.S. economy. Over the last decade, global communication has increased, resulting from significant technological advances as well as a generally peaceful world political environment. We believe that this trend, combined with favorable demographic trends, will benefit U.S. companies over the long term. More fundamentally, though, we continue to focus on the core business characteristics which provide a foundation for long-term growth, such as strength of franchise, quality of management, and free cash flow, along with favorable demographic trends. We believe that the enduring competitive advantage of the companies we own — based on the criteria mentioned above — will withstand even an uncertain market environment.

We thank you for your investment and look forward to your continued confidence.

Goldman Sachs Growth Equity Management Team

July 12, 2001

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

Performance Summary  
June 30, 2001 (Unaudited)  
 

 
The following graph shows the value as of June 30, 2001, of a $10,000 investment made on October 1, 1999 (commencement of operations) in Class A Shares (with the maximum sales charge of 5.5%) of the Goldman Sachs Internet Tollkeeper Fund. For comparative purposes, the performance of the Fund’s benchmarks (S&P 500 Index, NASDAQ Composite Index and Goldman Sachs Internet Index) are shown. This performance data represents past performance and should not be considered 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. Performance of Class B, Class C, Institutional and Service Shares will vary from Class A due to differences in fees and loads.  
 
 
Internet Tollkeeper Fund’s Lifetime Performance  
 
 
Growth of a $10,000 Investment, October 1, 1999 to June 30, 2001.  
 
 
 
Average Annual Total Return through June 30, 2001  
   
Since Inception  
     
One Year  
     
Six Months(a)  
Class A (commenced October 1, 1999)  
           
Excluding sales charges  
     
2.01%  
         
-44.06%  
         
-14.29%  
  
Including sales charges  
     
-1.22%  
         
-47.14%  
         
-18.98%  
  
 
Class B (commenced October 1, 1999)  
           
Excluding contingent deferred sales charges  
     
1.22%  
         
-44.49%  
         
-14.67%  
  
Including contingent deferred sales charges  
     
-1.10%  
         
-47.27%  
         
-18.94%  
  
 
Class C (commenced October 1, 1999)  
           
Excluding contingent deferred sales charges  
     
1.22%  
         
-44.46%  
         
-14.60%  
  
Including contingent deferred sales charges  
     
1.22%  
         
-45.01%  
         
-15.46%  
  
 
Institutional Class (commenced October 1, 1999)  
     
2.46%  
         
-43.84%  
         
-14.12%  
  
 
Service Class (commenced October 1, 1999)  
     
1.90%  
         
-44.11%  
         
-14.31%  
  
 
 
(a)
 
Not annualized  

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

Statement of Investments  
June 30, 2001 (Unaudited)  
 
Shares  
  
Description  
  
Value  
Common Stocks – 98.0%  
Computer Hardware – 8.5%  
  
355,200  

  
Brocade Communications Systems, Inc. *  
  
$    15,625,248  
946,400  
  
Cisco Systems, Inc. *  
  
17,224,480  
  1,134,400  
  
EMC Corp.  
  
32,954,320  
508,540  
  
Emulex Corp. *  
  
20,545,016  
410,482  
  
JDS Uniphase Corp. *  
  
5,233,646  
764,346  
  
McDATA Corp. Class A *  
  
13,414,272  
900,300  
  
Sun Microsystems, Inc. *  
  
14,152,716  
   
   
   119,149,698  
Computer Software – 17.9%  
  
184,650  
  
Avocent Corp. *  
  
4,200,787  
1,362,200  
  
Interwoven, Inc. *  
  
23,021,180  
978,930  
  
Intuit, Inc. *  
  
39,147,411  
1,002,370  
  
Microsoft Corp. *  
  
73,173,010  
709,700  
  
Oracle Corp. *  
  
13,484,300  
1,528,310  
  
Sabre Holdings Corp.  
  
76,415,500  
333,510  
  
VERITAS Software Corp. *  
  
22,188,420  
   
   
251,630,608  
Electrical Equipment – 1.3%  
  
803,400  
  
American Tower Corp. *  
  
16,606,278  
181,260  
  
Avici Systems, Inc. *  
  
1,553,398  
   
   
18,159,676  
Electrical Utilities – 1.4%  
  
461,680  
  
The AES Corp. *  
  
19,875,324  
Entertainment – 13.2%  
  
1,788,350  
  
AOL Time Warner, Inc. *  
  
94,782,550  
415,700  
  
Metro-Goldwyn-Mayer, Inc. *  
  
9,415,605  
1,586,721  
  
Viacom, Inc. Class B *  
  
82,112,812  
   
   
186,310,967  
Home Products – 1.4%  
  
879,960  
  
Energizer Holdings, Inc. *  
  
20,195,082  
Information Services – 4.9%  
  
508,630  
  
First Data Corp.  
  
32,679,478  
121,300  
  
TMP Worldwide, Inc. *  
  
7,170,043  
925,540  
  
Travelocity.com, Inc. *  
  
28,414,078  
   
   
68,263,599  
Internet – 9.4%  
  
420,900  

  
Check Point SoftwareTechnologies Ltd.  
  
21,284,913  
491,500  
  
CheckFree Corp. *  
  
17,236,905  
620,960  
  
DoubleClick, Inc. *  
  
8,668,602  
1,313,590  
  
E.piphany, Inc. *  
  
13,346,074  
289,373  
  
Openwave Systems, Inc. *  
  
10,041,243  
910,877  
  
VeriSign, Inc. *  
  
54,661,729  
387,200  
  
Yahoo!, Inc. *  
  
7,740,128  
   
   
132,979,594  
Leisure – 0.5%  
  
357,900  
  
Cendant Corp. *  
  
6,979,050  
Shares  
  
Description  
  
Value  
Common Stocks – (continued)  
Media – 22.9%  
  
2,648,800  
  
AT&T Corp.-Liberty Media Corp. *  
  
$     46,327,512  
576,640  
  
Cablevision Systems Corp.  
  
33,733,440  
326,450  

  
Cablevision SystemsCorp.-Rainbow Media Group*  
  
8,422,410  
938,634  

  
Clear Channel Communications, Inc.*  
  
58,852,352  
1,302,180  
  
Comcast Corp. *  
  
56,514,612  
389,400  
  
EchoStar Communications Corp.*  
  
12,624,348  
599,597  

  
Gemstar-TV Guide International, Inc. *  
  
25,542,832  
711,300  
  
UnitedGlobalCom, Inc. *  
  
6,152,745  
461,100  
  
Univision Communications, Inc. *  
  
19,725,858  
1,468,500  
  
Westwood One, Inc. *  
  
54,114,225  
   
   
322,010,334  
Publishing – 1.1%  
  
1,245,384  
  
CNET Networks, Inc. *  
  
16,189,992  
Security/Asset Management – 1.3%  
  
1,217,450  
  
The Charles Schwab Corp.  
  
18,626,985  
Semiconductors – 6.6%  
  
  1,412,780  
  
Integrated Circuit Systems, Inc. *  
  
27,125,376  
221,800  
  
Intersil Corp. *  
  
8,073,520  
444,380  
  
PMC-Sierra, Inc. *  
  
13,806,887  
435,500  
  
QUALCOMM, Inc. *  
  
25,468,040  
443,600  
  
Xilinx, Inc. *  
  
18,294,064  
   
   
92,767,887  
Telephone – 1.4%  
  
555,825  
  
NTL, Inc. *  
  
6,697,691  
410,400  

  
Qwest Communications International, Inc.  
  
13,079,448  
   
   
19,777,139  
Wireless – 6.2%  
  
3,967,530  
  
Crown Castle International Corp. *  
  
65,067,492  
891,830  
  
Sprint Corp. (PCS Group) *  
  
21,537,694  
   
   
86,605,186  
TOTAL COMMON STOCKS  
(Cost $1,861,752,785)  
  
$1,379,521,121  
Principal
Amount  
   
Interest
Rate  
  
Maturity
Date  
  
Value  
Repurchase Agreement – 1.1%  
Joint Repurchase Agreement Account II^  
$16,300,000  
     
4.11
%  
    
07/02/2001  
  
$     16,300,000  
TOTAL REPURCHASE AGREEMENT  
(Cost $16,300,000)  
  
$     16,300,000  
TOTAL INVESTMENTS  
(Cost $1,878,052,785)  
  
$1,395,821,121  
 
*
 
Non-income producing security.  
 
Ù
 
Joint repurchase agreement was entered into on June 29, 2001.  
 
 
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.  
 

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

Statement of Assets and Liabilities  
June 30, 2001 (Unaudited)  
 

Assets:  
Investment in securities, at value (identified cost $1,878,052,785)  
   
$1,395,821,121
 
Cash, at value  
   
47,416
 
Receivables:  
   
 
    Investment securities sold  
   
15,173,739
 
    Fund shares sold  
   
709,989
 
    Dividends and interest, at value  
   
13,895
 
Total assets  
   
1,411,766,160
 
Liabilities:  
Payables:  
   
 
    Amounts owed to affiliates  
   
2,176,592
 
    Fund shares repurchased  
   
1,499,648
 
Accrued expenses and other liabilities  
   
62,712
 
Total liabilities  
   
3,738,952
 
Net Assets:  
Paid-in capital  
   
2,403,357,412
 
Accumulated undistributed net investment loss  
   
(12,826,646
)  
Accumulated net realized loss on investment transactions  
   
(500,271,894
)  
Net unrealized loss on investments  
   
(482,231,664
)  
NET ASSETS  
   
$1,408,027,208
 
Net asset value, offering and redemption price per share:(a)  
   
 
Class A  
   
$10.20
 
Class B  
   
$10.06
 
Class C  
   
$10.05
 
Institutional  
   
$10.27
 
Service  
   
$10.18
 
Shares outstanding:  
   
 
Class A  
   
52,880,530
 
Class B  
   
49,784,889
 
Class C  
   
26,046,978
 
Institutional  
   
10,306,080
 
Service  
   
39,151
 
Total shares outstanding, $.001 par value (unlimited number of shares authorized)  
   
139,057,628
 
 
 
(a)
 
Maximum public offering price per share (NAV per share multiplied by 1.0582) for Class A shares is $10.79. 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 purchase price of the shares.  

 
The accompanying notes are an integral part of these financial statements.  
 

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

Statement of Operations  
For the Six Months Ended June 30, 2001 (Unaudited)  
 
Investment income:  
Interest  
   
$    1,165,410
 
Dividends  
   
67,649
 
Total income  
   
1,233,059
 
Expenses:  
Management fees  
   
7,572,584
 
Distribution and Service fees(a)  
   
4,875,599
 
Transfer Agent fees(b)  
   
1,365,327
 
Custodian fees  
   
114,861
 
Registration fees  
   
75,447
 
Professional fees  
   
13,374
 
Trustee fees  
   
7,708
 
Service Share fees  
   
867
 
Other  
   
39,870
 
Total expenses  
   
14,065,637
 
Less — expense reductions  
   
(5,932
)  
Net expenses  
   
14,059,705
 
NET INVESTMENT LOSS  
   
(12,826,646
)  
Realized and unrealized gain (loss) on investment transactions:  
Net realized loss from investment transactions  
   
(347,467,837
)  
Net change in unrealized loss on investments  
   
99,845,951
 
Net realized and unrealized loss on investment transactions  
   
(247,621,886
)  
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS  
   
$(260,448,532
)  
 
 
(a)
 
Class A, Class B and Class C had Distribution and Service fees of $735,741, $2,699,181 and $1,440,677, respectively.  
 
(b)
 
Class A, Class B, Class C, Institutional Class and Service Class had Transfer Agent fees of $559,164, $512,844, $273,729, $19,498 and $92, respectively.  

 
The accompanying notes are an integral part of these financial statements.  
 

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

Statements of Changes in Net Assets  
 
  
For the Six
Months Ended
June 30,
2001
(Unaudited)  
   
For the Year  
Ended  
December 31,  
2000
      
From operations:  
     
 
    
 
Net investment loss  
     
$     (12,826,646
)  
     
$     (37,251,068
)  
Net realized loss on investment transactions  
     
(347,467,837
)  
     
(143,421,240
)  
Net change in unrealized gain (loss) on investments  
     
99,845,951
 
     
(927,470,699
)  
Net decrease in net assets resulting from operations  
     
(260,448,532
)  
     
(1,108,143,007
)  
Distributions to shareholders:  
     
 
    
 
From net realized gain on investment transactions  
     
 
    
 
    Class A shares  
     
—
 
     
(12,416,816
)  
    Class B shares  
     
—
 
     
(11,416,015
)  
    Class C shares  
     
—
 
     
(6,375,111
)  
    Institutional shares  
     
—
 
     
(1,864,030
)  
    Service shares  
     
—
 
     
(10,326
)  
Total distributions to shareholders  
     
—
 
     
(32,082,298
)  
From share transactions:  
     
 
    
 
Proceeds from sales of shares  
     
183,952,266
 
     
1,980,084,307
 
Reinvestment of dividends and distributions  
     
—
 
     
26,454,506
 
Cost of shares repurchased  
     
(246,888,977
)  
     
(645,181,450
)  
Net increase (decrease) in net assets resulting from share transactions  
     
(62,936,711
)  
     
1,361,357,363
 
TOTAL INCREASE (DECREASE)  
     
(323,385,243
)  
     
221,132,058
 
Net assets:  
     
 
    
 
Beginning of period  
     
1,731,412,451
 
     
1,510,280,393
 
End of period  
     
$1,408,027,208
 
     
$1,731,412,451
 
Accumulated undistributed net investment loss  
     
$     (12,826,646
)  
     
$                  —
 
 

 
The accompanying notes are an integral part of these financial statements.  
 

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

Notes to Financial Statements  
June 30, 2001 (Unaudited)  
 

 
1.  ORGANIZATION  
 
 
Goldman Sachs Trust (the “Trust”) is a Delaware business trust registered under the Investment Company Act of 1940 (as amended) as an open-end management investment company. The Trust includes the Goldman Sachs Internet Tollkeeper Fund (the “Fund”). The Fund is a diversified portfolio offering 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 consistently followed by the Fund. 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. Actual results could differ from those estimates.  
 
 
A.  Investment Valuation — Investments in securities traded on a U.S. or foreign securities exchange or the NASDAQ system are valued daily at their last sale price on the principal exchange on which they are traded. If no sale occurs, securities are valued at the last bid price. Unlisted equity and debt securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Short-term debt obligations maturing in sixty days or less are valued at amortized cost. Securities for which quotations are not readily available, are valued at fair value using methods approved by the Trust’s Board of Trustees.  
 
 
B.  Securities Transactions and Investment Income — Securities transactions are recorded as of the trade date. Realized gains and losses on sales of investments are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes where applicable. 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. 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.  
 
         Net investment income (other than class specific expenses) and unrealized and realized gains or losses are allocated daily to each class of shares of the Fund based upon the relative proportion of net assets of each class.  
 
 
C.  Expenses — Expenses incurred by the Trust which do not specifically relate to an individual fund of the Trust are allocated to the funds on a straight-line or pro-rata basis depending upon the nature of the expense.  
 
         Class A, Class B and Class C shareholders of the Fund bear all expenses and fees relating to their respective Distribution and Service Plans. Each class of shares separately bears its respective class-specific Transfer Agency fees. Shareholders of Service Shares bear all expenses and fees paid to service organizations.  
 
 
D.  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. Income and capital gain distributions, if any, are declared and paid annually.  
 
         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 investment income or net realized gain on investment transactions, or from paid-in-capital, depending on the type of book/tax differences that may exist.  
 
         Capital losses incurred after October 31 (post-October losses) within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. The Fund incurred and will elect to defer net capital losses of $125,877,481 for the fiscal year ended December 31, 2000. To the extent that the carryover losses are used to offset future capital gains, it is probable that the gain so offset will not be distributed to shareholders.  
 
         The Fund had no capital loss carryforwards for U.S. federal tax purposes.  

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

 

 
 
2.  SIGNIFICANT ACCOUNTING POLICIES (continued)  
 
 
         At June 30, 2001, the aggregate cost of portfolio securities for federal income tax purposes was $1,904,987,372. Accordingly, the gross unrealized gain on investments was $100,139,647 and the gross unrealized loss was $609,305,898, resulting in a net unrealized loss of $509,166,251.  
 
 
E.  Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. 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 at the Fund’s custodian.  
 
 
F.  Segregation Transactions — The Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, mortgage dollar rolls, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate liquid assets on the accounting records equal to or greater than the market value of the corresponding transactions.  
 
 
3.  AGREEMENTS  
 
 
Pursuant to the Investment Management Agreement (the “Agreement”), Goldman Sachs Asset Management (“GSAM”), a unit of the Investment Management Division of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund. Under the Agreement, GSAM, subject to the general supervision of the Trust’s Board of Trustees, manages the Fund’s portfolio. As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Fund’s business affairs, including providing facilities, GSAM is entitled to a fee, computed daily and payable monthly, at an annual rate equal to 1.00% of the average daily net assets of the Fund.  
 
         Goldman Sachs has voluntarily agreed to limit “Other Expenses” for the Fund (excluding Management fees, Service Share fees, Distribution and Service fees, Transfer Agent fees, litigation and indemnification costs, taxes, interest, brokerage commissions, and extraordinary expenses) to the extent such expenses exceed .06% of the average daily net assets of the Fund. For the six months ended June 30, 2001, there was no expense reimbursement. However, the Fund has entered into certain expense offset arrangements with the custodian resulting in a reduction in the Fund’s expenses. For the six months ended June 30, 2001, the custody fees were reduced by approximately $6,000 under such arrangements.  
 
         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 charges and has advised the Fund that it retained approximately $401,000 for the six months ended June 30, 2001.  
 
         The Trust, on behalf of the Fund, has adopted Distribution and Service plans. Under the Distribution and Service plans, Goldman Sachs and/or Authorized Dealers are entitled to a monthly fee for distribution and shareholder maintenance services equal, on an annual basis, to .25%, 1.00% and 1.00% of the average daily net assets attributable to Class A, Class B and Class C Shares, respectively.  
 
         The Trust, on behalf of the Fund, has adopted a Service Plan. This Plan allows for Service Shares to compensate service organizations for providing varying 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 an annualized basis), of the average daily net asset value of the Service Shares.  
 
         Goldman Sachs also serves as the Transfer Agent of the Fund for a fee. Fees charged for such Transfer Agency services are calculated daily and payable monthly at an annual rate as follows: .19% of the average daily net assets for Class A, Class B and Class C Shares and .04% of the average daily net assets for Institutional and Service Shares.  

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

 
Notes to Financial Statements (continued)  
June 30, 2001 (Unaudited)  
 

 
 
3.  AGREEMENTS (continued)  
 
 
         At June 30, 2001, the Fund owed approximately $1,246,000, $727,000 and $204,000 for Management, Distribution and Service and Transfer Agent fees, respectively.  
 
 
4.  PORTFOLIO SECURITIES TRANSACTIONS  
 
 
The cost of purchases and proceeds of sales and maturities of securities (excluding short-term investments) for the six months ended June 30, 2001, were $201,682,581 and $274,409,285, respectively. For the six months ended June 30, 2001, Goldman Sachs earned approximately $4,000 of brokerage commissions from portfolio transactions.  
 
 
5.  JOINT REPURCHASE AGREEMENT ACCOUNT  
 
 
The Fund, together with other registered investment companies having management agreements with GSAM or its affiliates, transfers uninvested cash into joint accounts, the daily aggregate balance of which is invested in one or more repurchase agreements.  
 
         At June 30, 2001, the Fund had an undivided interest in the repurchase agreement in the following joint account which equaled $16,300,000 in principal amount. At June 30, 2001, the following repurchase agreements held in this joint account were fully collateralized by Federal Agency obligations.  
 
Repurchase Agreements  
   
Principal  
Amount  
   
Interest  
Rate  
   
Maturity  
Date  
   
Amortized  
Cost  
   
Maturity  
Value  
Banc of America Securities LLC  
   
$    500,000,000  
     
4.14
%  
     
07/02/2001  
   
$    500,000,000  
   
$    500,172,500  
Barclays Capital, Inc.  
   
1,000,000,000  
     
4.12
 
     
07/02/2001  
   
1,000,000,000  
   
1,000,343,333  
Bear Stearns Companies, Inc.  
   
1,000,000,000  
     
4.12
 
     
07/02/2001  
   
1,000,000,000  
   
1,000,343,333  
Chase Securities, Inc.  
   
2,000,000,000  
     
4.10
 
     
07/02/2001  
   
2,000,000,000  
   
2,000,683,333  
Credit Suisse First Boston Corp.  
   
1,000,000,000  
     
4.10
 
     
07/02/2001  
   
1,000,000,000  
   
1,000,341,667  
Greenwich Capital Markets  
   
100,000,000  
     
4.10
 
     
07/02/2001  
   
100,000,000  
   
100,034,167  
Lehman Brothers  
   
1,000,000,000  
     
4.10
 
     
07/02/2001  
   
1,000,000,000  
   
1,000,341,667  
Salomon Smith Barney Holdings, Inc.  
   
1,000,000,000  
     
4.10
 
     
07/02/2001  
   
1,000,000,000  
   
1,000,341,667  
UBS Warburg LLC  
   
1,399,500,000  
     
4.12
 
     
07/02/2001  
   
1,399,500,000  
   
1,399,980,495  
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT II  
   
$8,999,500,000  
   
$9,002,582,162  
 
 
6.  LINE OF CREDIT FACILITY  
 
 
The Fund participates in a $350,000,000 committed, unsecured revolving line of credit facility. Under the most restrictive arrangement, the Fund must own securities having a market value in excess of 400% of the total bank borrowings. This facility is to be used solely for temporary or emergency purposes. The interest rate on borrowings is based on the Federal Funds rate. This facility also requires a fee to be paid by the Fund based on the amount of the commitment which has not been utilized. During the six months ended June 30, 2001, the Fund did not have any borrowings under this facility.  

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

 

 
 
7.  SUMMARY OF SHARE TRANSACTIONS  
 
 
Share activity is as follows:  
 
    
For the Six Months Ended  
June 30, 2001 (Unaudited)  
     
For the Year Ended  
December 31, 2000  
    
Shares  
     
Dollars  
     
Shares  
     
Dollars  
    
    
Class A Shares  
     
 
    
 
    
 
    
 
Shares sold  
     
8,685,196
 
     
$   95,330,365
 
     
45,608,881
 
     
$    853,013,004
 
Reinvestment of dividends and distributions  
     
—
 
     
—
 
     
748,039
 
     
10,524,915
 
Shares repurchased  
     
(11,689,572
)  
     
(120,380,889
)  
     
(20,372,806
)  
     
(327,255,413
)  
    
    
(3,004,376
)  
     
(25,050,524
)  
     
25,984,114
 
     
536,282,506
 
Class B Shares  
     
 
    
 
    
 
    
 
Shares sold  
     
2,509,266
 
     
27,118,093
 
     
32,824,493
 
     
615,775,310
 
Reinvestment of dividends and distributions  
     
—
 
     
—
 
     
667,484
 
     
9,313,505
 
Shares repurchased  
     
(5,481,672
)  
     
(55,980,205
)  
     
(8,708,908
)  
     
(138,973,664
)  
    
    
(2,972,406
)  
     
(28,862,112
)  
     
24,783,069
 
     
486,115,151
 
Class C Shares  
     
 
    
 
    
 
    
 
Shares sold  
     
1,522,885
 
     
16,309,941
 
     
19,106,783
 
     
358,830,187
 
Reinvestment of dividends and distributions  
     
—
 
     
—
 
     
352,847
 
     
4,915,377
 
Shares repurchased  
     
(4,293,998
)  
     
(44,010,687
)  
     
(7,791,870
)  
     
(126,281,702
)  
    
    
(2,771,113
)  
     
(27,700,746
)  
     
11,667,760
 
     
237,463,862
 
Institutional Shares  
     
 
    
 
    
 
    
 
Shares sold  
     
4,075,754
 
     
45,152,624
 
     
8,391,336
 
     
151,507,146
 
Reinvestment of dividends and distributions  
     
—
 
     
—
 
     
119,474
 
     
1,690,559
 
Shares repurchased  
     
(2,511,231
)  
     
(26,386,930
)  
     
(3,315,319
)  
     
(52,404,910
)  
    
    
1,564,523
 
     
18,765,694
 
     
5,195,491
 
     
100,792,795
 
Service Shares  
     
 
    
 
    
 
    
 
Shares sold  
     
3,885
 
     
41,243
 
     
64,279
 
     
958,660
 
Reinvestment of dividends and distributions  
     
—
 
     
—
 
     
722
 
     
10,150
 
Shares repurchased  
     
(12,328
)  
     
(130,266
)  
     
(20,171
)  
     
(265,761
)  
    
    
(8,443
)  
     
(89,023
)  
     
44,830
 
     
703,049
 
NET INCREASE (DECREASE)  
     
(7,191,815
)  
     
$  (62,936,711
)  
     
67,675,264
 
     
$1,361,357,363
 
 

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

Financial Highlights  
Selected Data for a Share Outstanding Throughout Each Period  
 
     
Income (loss) from  
investment operations  
   
Total  
distributions  
to  
shareholders  
from net  
realized  
gains  
   
  
Net asset  
value,  
beginning  
of period  
   
Net  
investment  
loss(c)  
   
Net realized  
and unrealized  
gain (loss)  
   
Total  
from  
investment  
operations  
      
Net asset  
value,  
end of  
period  
      FOR THE SIX MONTHS ENDED JUNE 30, (Unaudited)  
         
      2001 - Class A Shares  
     
$11.90  
       
$(0.07
)  
       
$(1.63
)  
       
$(1.70
)  
       
$—
 
       
$10.20  
  
      2001 - Class B Shares  
     
11.79  
       
(0.11
)  
       
(1.62
)  
       
(1.73
)  
       
—
 
       
10.06  
  
      2001 - Class C Shares  
     
11.78  
       
(0.11
)  
       
(1.62
)  
       
(1.73
)  
       
—
 
       
10.05  
  
      2001 - Institutional Shares  
     
11.97  
       
(0.05
)  
       
(1.65
)  
       
(1.70
)  
       
—
 
       
10.27  
  
      2001 - Service Shares  
     
11.88  
       
(0.07
)  
       
(1.63
)  
       
(1.70
)  
       
—
 
       
10.18  
  
 
      FOR THE YEAR ENDED DECEMBER 31,  
         
      2000 - Class A Shares  
     
19.25  
       
(0.20
)  
       
(6.94
)  
       
(7.14
)  
       
(0.21
)  
       
11.90  
  
      2000 - Class B Shares  
     
19.20  
       
(0.33
)  
       
(6.87
)  
       
(7.20
)  
       
(0.21
)  
       
11.79  
  
      2000 - Class C Shares  
     
19.19  
       
(0.33
)  
       
(6.87
)  
       
(7.20
)  
       
(0.21
)  
       
11.78  
  
      2000 - Institutional Shares  
     
19.25  
       
(0.13
)  
       
(6.94
)  
       
(7.07
)  
       
(0.21
)  
       
11.97  
  
      2000 - Service Shares  
     
19.23  
       
(0.21
)  
       
(6.93
)  
       
(7.14
)  
       
(0.21
)  
       
11.88  
  
 
      FOR THE PERIOD ENDED DECEMBER 31,  
  
      1999 - Class A Shares (Commenced October 1)  
     
10.00  
       
(0.05
)  
       
9.30
 
       
9.25
 
       
—
 
       
19.25  
  
      1999 - Class B Shares (Commenced October 1)  
     
10.00  
       
(0.08
)  
       
9.28
 
       
9.20
 
       
—
 
       
19.20  
  
      1999 - Class C Shares (Commenced October 1)  
     
10.00  
       
(0.08
)  
       
9.27
 
       
9.19
 
       
—
 
       
19.19  
  
      1999 - Institutional Shares (Commenced October 1)  
     
10.00  
       
(0.03
)  
       
9.28
 
       
9.25
 
       
—
 
       
19.25  
  
      1999 - Service Shares (Commenced October 1)  
     
10.00  
       
(0.05
)  
       
9.28
 
       
9.23
 
       
—
 
       
19.23  
  
 
 
 
(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. Total returns for periods less than one full year are not annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.  
 
(b)
 
Annualized.  
 
(c)
 
Calculated based on the average shares outstanding methodology.  

 
The accompanying notes are an integral part of these financial statements.  
 

GOLDMAN SACHS INTERNET TOLLKEEPER FUND  
 

 
                 
    
Ratios assuming no expense reductions  
     
Total  
return(a)  
   
Net assets  
at end of  
period  
(in 000s)  
     
Ratio of  
net expenses to  
average net assets  
     
Ratio of  
net investment  
loss to  
average net assets  
     
Ratio of  
expenses to  
average net assets  
     
Ratio of  
net investment  
loss to  
average net assets  
     
Portfolio  
turnover  
rate  
                                                   
(14.29
)%  
     
$539,202  
         
1.47
%(b)  
         
(1.31)
%(b)  
         
1.47
%(b)  
         
(1.31)
%(b)  
         
14
%  
  
(14.67
)  
     
500,776  
         
2.22
(b)  
         
(2.06)
(b)  
         
2.22
(b)  
         
(2.06)
(b)  
         
14
 
  
(14.60
)  
     
261,770  
         
2.22
(b)  
         
(2.06)
(b)  
         
2.22
(b)  
         
(2.06)
(b)  
         
14
 
  
(14.12
)  
     
105,881  
         
1.07
(b)  
         
(0.91)
(b)  
         
1.07
(b)  
         
(0.91)
(b)  
         
14
 
  
(14.31
)  
     
398  
         
1.57
(b)  
         
(1.29)
(b)  
         
1.57
(b)  
         
(1.29)
(b)  
         
14
 
  
                                                   
(37.24
)  
     
664,994  
         
1.50
 
         
(1.13)
 
         
1.50
 
         
(1.13)
 
         
82
 
  
(37.65
)  
     
621,790  
         
2.25
 
         
(1.88)
 
         
2.25
 
         
(1.88)
 
         
82
 
  
(37.67
)  
     
339,431  
         
2.25
 
         
(1.88)
 
         
2.25
 
         
(1.88)
 
         
82
 
  
(36.88
)  
     
104,631  
         
1.10
 
         
(0.74)
 
         
1.10
 
         
(0.74)
 
         
82
 
  
(37.28
)  
     
566  
         
1.60
 
         
(1.29)
 
         
1.60
 
         
(1.29)
 
         
82
 
  
                                                   
92.50
 
     
575,535  
         
1.50
(b)  
         
(1.29)
(b)  
         
1.79
(b)  
         
(1.58)
(b)  
         
16
 
  
92.00
 
     
537,282  
         
2.25
(b)  
         
(2.04)
(b)  
         
2.54
(b)  
         
(2.33)
(b)  
         
16
 
  
91.90
 
     
329,135  
         
2.25
(b)  
         
(2.05)
(b)  
         
2.54
(b)  
         
(2.34)
(b)  
         
16
 
  
92.50
 
     
68,275  
         
1.10
(b)  
         
(0.88)
(b)  
         
1.39
(b)  
         
(1.17)
(b)  
         
16
 
  
92.30
 
     
53  
         
1.60
(b)  
         
(1.35)
(b)  
         
1.89
(b)  
         
(1.64)
(b)  
         
16
 
  
 
 

FUNDS PROFILE

Goldman Sachs Funds

 

Goldman Sachs is a premier financial services firm, known since 1869 for creating thoughtful and customized investment solutions in complex global markets.

Today, the Investment Management Division of Goldman Sachs serves a diverse set of clients worldwide, including private institutions, public entities and individuals. With portfolio management teams located around the world — and more than $295 billion as of June 30, 2001, in assets under management, our investment professionals bring firsthand knowledge of local markets to every investment decision, making us one of the few truly global asset managers.

  
 
 
   

1 An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

The Goldman Sachs Research Select FundSM, Internet Tollkeeper FundSM and the CORESM Funds are service marks of Goldman, Sachs & Co.

*Goldman Sachs International Growth Opportunities Fund was formerly Goldman Sachs International Small Cap Fund.