N-30D 1 dn30d.htm GOLDMAN SACHS INTERNET TOLLKEEPER FUND GOLDMAN SACHS INTERNET TOLLKEEPER FUND

GOLDMAN SACHS INTERNET TOLLKEEPER FUND

Market Overview

Dear Shareholder,

During the Fund’s reporting period the overall U.S. stock market experienced sharp and prolonged corrections. While there were pockets of opportunity, namely from value and mid-cap stocks, it was oftentimes difficult to avoid the downdraft.

Market Review

After generating very strong returns for a number of years, the equity markets reversed course in 2000. The correction began in March, as continued strong economic growth, inflationary pressures and rising interest rates unnerved investors. While other types of stocks were dragged down, high valuation technology issues, and many Internet stocks in particular, experienced the brunt of the fall.

The equity markets rebounded for a brief period during the summer. Investors were hopeful that signs of moderating economic growth would result in an end to interest rate hikes by the Federal Reserve Board. However, market sentiment shifted yet again, as uncertainty arose regarding the state of corporate profits in the face of an economic slowdown, and uncertainty over the presidential election. By the end of the year, the technology-laden NASDAQ was down 54.0% from its peak and 39.3% for the year — its worst performance since it was created in 1971. The S&P 500 Index fell 9.1%, its poorest showing since 1977.

Market leadership changed several times during the reporting period, as investors struggled to keep their heads, and portfolios, above water. By the end of 2000, value stocks had generated strong results, after years of underperforming their growth stock counterparts. In fact, 2000 was the worst year for absolute returns of the Russell 1000 Growth (–22.4%) and Russell 2000 Growth (–3.03%) indices. In contrast, the Russell 1000 Value and Russell 2000 Value Indices returned 7.0% and 22.8%, respectively. The disparity of returns was largely due to the higher percentage of technology stocks in the growth indices.

In summary, it has been an eventful period in the financial markets, one that we feel magnifies the importance of taking a long-term investment approach, and the value of professional investment management and advice. As always, we appreciate your confidence and look forward to serving your investment needs in the future.

Sincerely,

   

David B. Ford
Co-Head, Goldman Sachs Asset Management

David W. Blood
Co-Head, Goldman Sachs Asset Management

January 12, 2001

GOLDMAN SACHS INTERNET TOLLKEEPER FUND

Fund Basics

as of December 31, 2000

 

PERFORMANCE REVIEW
                   
December 31, 1999–
Fund Cumulative
  
S&P 500
 NASDAQ Goldman Sachs
December 31, 2000
Total Return (based on NAV)1
 
Index2
Composite Index2 Internet Index2
                   
Class A  
–37.24
%
    
–9.10
 %
–39.29
 %
–74.50
 %
Class B  
–37.65
      
–9.10
  
–39.29
  
–74.50
  
Class C  
–37.67
      
–9.10
  
–39.29
  
–74.50
  
Institutional  
–36.88
      
–9.10
  
–39.29
  
–74.50
  
Service  
–37.28
      
–9.10
  
–39.29
  
–74.50
  

1 The net asset value represents the net assets of the Class (ex-dividend) divided by the total number of shares of the Class outstanding. The Class’ performance reflects the reinvestment of dividends and other distributions.
2 The 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 have dividends reinvested.

STANDARDIZED TOTAL RETURNS3
                       
For the period ended 12/31/00  
Class A
 Class B Class C Institutional Service
                       
One Year  
–40.70
 %
–40.77
 %
–38.30
 %
–36.88
 %
–37.28
 %
Since Inception  
11.15
  
12.28
  
15.33
  
16.79
  
16.10
  
(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). The public offering price of the Class A shares on 12/31/00 was $12.59 and represents the NAV per share divided by 1.0 minus the maximum sales charge of 5.5%. Because Institutional and Service shares do not involve a sales charge, such a charge is not applied to their respective Standardized Total Returns.

The Fund’s performance reflected a period of sharply rising stock prices for “internet tollkeeper” stocks, a trend that is unlikely to continue indefinitely in the future.

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.

TOP 10 HOLDINGS AS OF 12/31/004
           
Holding     % of Total Net Assets
Line of Business
           
Crown Castle International Corp.  
5.9
 % Wireless
Time Warner, Inc.      
4.4
   Media
Sabre Holdings Corp.      
3.9
   Computer Software
VeriSign, Inc.      
3.9
   Internet
E.piphany, Inc.      
3.6
   Internet
Cablevision Systems Corp.    
3.6
   Media
Infinity Broadcasting Corp.    
3.5
   Media
Clear Channel Communications, Inc.
3.4
   Media
EMC Corp.      
3.3
   Computer Hardware
Comcast Corp.      
3.1
   Media

4 The top 10 holdings may not be representative of the Fund’s future investments.
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.

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GOLDMAN SACHS INTERNET TOLLKEEPER FUND

Performance Overview

Dear Shareholder,

We are pleased to report on the performance of the Goldman Sachs Internet Tollkeeper Fund. This annual report covers the year ended December 31, 2000.

Performance Review

Over the one-year period that ended December 31, 2000 the Fund’s Class A, B, C, Institutional and Service classes generated, respectively –37.24%, –37.65%, –37.67%, –36.88% and –37.28% cumulative total returns. Although the Fund does not have an official benchmark, we measure performance relative to several indices, including the Goldman Sachs Internet Index, NASDAQ Composite (with dividends reinvested) and S&P 500 Index. During the past year, these various benchmarks have generated cumulative total returns of –74.50%, –39.29% and –9.10%, respectively.

Portfolio Positioning

The Fund was launched based on the belief that investors seeking to capitalize on the growth of the Internet will be successful only through long term investment in high quality established businesses — not by making short-term bets on start-ups and new technologies. The Fund invests in high quality growth businesses, with sustainable business models, that are strategically positioned to benefit from the expansion of the Internet. We primarily target media, telecommunications, technology and Internet companies with excellent management teams and leadership positions in their respective industries.

Portfolio Highlights

The period under review was marked by volatility rarely seen in the financial markets. This was most pronounced in the Technology and Internet sectors, which rose rapidly early in the year, fell dramatically in mid-March through May, rebounded for a short period in the summer and ended the year with another sharp decline. While the Fund was certainly not immune to the market’s overall decline, on a relative basis it outperformed several Technology-heavy indices. We would expect these results, as the Fund takes a different — and potentially more conservative — approach to investing in the Internet.

  • Sabre Holdings Corp. — The Sabre Group is the Information Technology leader in the travel and transportation industries. As the travel distribution network consolidates, Sabre is well positioned to be the largest beneficiary.
  • QUALCOMM — QUALCOMM is a global leader in digital wireless communications, and it exemplifies our strategy, as we seek to hold the dominant players in industries such as Internet infrastructure and services. The firm held up relatively well during the technology decline in the fourth quarter, 2000.

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GOLDMAN SACHS INTERNET TOLLKEEPER FUND

  • Crown Castle — Crown Castle is the world’s largest independent telecommunications tower consolidator. As cellular phone usage increase, we believe the company is positioned in the sweet spot of the wireless world and will benefit regardless of who wins the wireless war.

Portfolio Outlook

While we neither make nor rely on economic forecasts to make investment decisions, we are generally bullish on the U.S. economy. Furthermore, we believe that the Internet remains in its early growth stages. 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, 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 and will enable our investors to capitalize on the growth of the Internet over the long term.

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

 

Goldman Sachs Growth Equity Management Team

January 12, 2001

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GOLDMAN SACHS INTERNET TOLLKEEPER FUND

The Goldman Sachs Advantage

Founded in 1869, Goldman, Sachs & Co. is a premier financial services firm traditionally known on Wall Street and around the world for its institutional expertise.

Today, the firm’s Investment Management Division provides individual investors the opportunity to tap the resources of a global institutional powerhouse — and put this expertise to work in their individual portfolios.

What Sets Goldman Sachs Funds Apart?

To learn more about the Goldman Sachs Funds, call your investment professional today.

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GOLDMAN SACHS INTERNET TOLLKEEPER FUND
Performance Summary
December 31, 2000

The following graph shows the value as of December 31, 2000, 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 December 31, 2000.
 
 
Average Annual Total Return through December 31, 2000      Since Inception      One Year
 
Class A
Excluding sales charges      16.26%      -37.24%
Including sales charges      11.15%      -40.70%
Class B
Excluding contingent deferred sales charges      15.41%      -37.65%
Including contingent deferred sales charges      12.28%      -40.77%
Class C
Excluding contingent deferred sales charges      15.33%      -37.67%
Including contingent deferred sales charges      15.33%      -38.30%
Institutional Class      16.79%      -36.88%
Service Class      16.10%      -37.28%
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
 
Statement of Investments
December 31, 2000
 
Shares
    Description    Value
 
    Common Stocks – 98.2%
 
    Computer Hardware – 8.5%
213,600    Brocade Communications
Systems, Inc.*		    $   19,611,150
946,400    Cisco Systems, Inc.*    36,199,800
856,000    EMC Corp.*    56,924,000
1,207,900    Sun Microsystems, Inc.*    33,670,213
         
                146,405,163
    Computer Software – 14.9%
153,240    Avocent Corp.*    4,137,480
619,500    CheckFree Corp.*    26,677,219
599,597    Gemstar-TV Guide International,
Inc.*		    27,656,412
584,030    Intuit, Inc.*    23,032,683
1,244,670    Microsoft Corp.*    53,987,561
709,700    Oracle Corp.*    20,625,656
1,568,660    Sabre Holdings Corp.    67,648,462
333,510    VERITAS Software Corp.*    29,182,125
338,250    Witness Systems, Inc.*    4,566,375
         
                257,513,973
    Electrical Equipment – 6.5%
803,400    American Tower Corp.*    30,428,775
181,260    Avici Systems, Inc.*    4,463,528
236,240    Corning, Inc.    12,476,425
260,340    Corvis Corp.*    6,199,346
466,522    JDS Uniphase Corp.*    19,448,136
442,300    McDATA Corp. Class B*    24,215,925
116,600    QUALCOMM, Inc.*    9,583,062
138,000    Sycamore Networks, Inc.*    5,140,500
39,640    Transmeta Corp.*    931,540
         
                112,887,237
    Electrical Utilities – 1.5%
461,680    The AES Corp.*    25,565,530
    Entertainment – 2.5%
930,287    Viacom, Inc. Class B*    43,490,917
    Home Products – 1.1%
879,960    Energizer Holdings, Inc.*    18,809,145
    Information Services – 1.5%
508,630    First Data Corp.    26,798,443
    Internet – 20.8%
239,300    America Online, Inc.*    8,327,640
131,700    Ariba, Inc.*    7,062,412
559,250    Art Technology Group, Inc.*    17,092,078
838,630    BroadVision, Inc.*    9,906,317
280,600    Check Point Software
Technologies Ltd.*		    37,477,637
1,303,984    CNET Networks, Inc.*    20,843,369
551,180    Commerce One, Inc.*    13,951,744
2,708,650    DoubleClick, Inc.*    29,795,150
1,164,390    E.piphany, Inc.*    62,804,286
261,710    Expedia, Inc.*    2,502,602
1,686,560    Intertrust Technologies Corp.*    5,692,140
734,120    Interwoven, Inc.*    48,406,037
526,210    S1 Corp.*    2,762,603
668,800    Travelocity.com, Inc.*    8,109,200
351,100    Tumbleweed Communications
Corp.*		    6,007,102
Shares
    Description    Value
 
    Common Stocks – (continued)
 
    Internet – (continued)
910,877    VeriSign, Inc.*    $    67,575,687
387,200    Yahoo!, Inc.*    11,682,550
         
                359,998,554
    Media – 22.6%
728,900    Cablevision Systems Corp.*    61,910,944
1,219,534    Clear Channel Communications,
Inc.*		    59,071,178
1,302,180    Comcast Corp.*    54,366,015
389,400    EchoStar Communications Corp.*    8,858,850
2,153,775    Infinity Broadcasting Corp.*    60,171,089
626,700    Liberty Digital, Inc.*    3,172,669
1,449,500    Time Warner, Inc.    75,721,880
711,300    UnitedGlobalCom, Inc.*    9,691,463
744,600    Univision Communications, Inc.*    30,482,062
1,468,500    Westwood One, Inc.*    28,360,406
         
                391,806,556
    Security/Asset Management – 2.0%
1,217,450    The Charles Schwab Corp.    34,545,144
    Semiconductors – 5.9%
116,782    Applied Micro Circuits Corp.*    8,764,124
365,760    ARM Holdings PLC ADR*    8,252,460
1,016,410    Integrated Circuit Systems, Inc.*    16,834,291
444,380    PMC-Sierra, Inc.*    34,939,378
82,300    SDL, Inc.*    12,195,831
443,600    Xilinx, Inc.*    20,461,050
         
                101,447,134
    Telephone – 3.2%
2,753,100    AT&T Corp.-Liberty
Media Corp.*		    37,338,919
555,825    NTL, Inc.*    13,305,061
97,773    Openwave Systems, Inc.*    4,686,993
         
                55,330,973
    Wireless – 7.2%
3,758,170    Crown Castle International Corp.*    101,705,476
1,152,730    Sprint Corp. (PCS Group)*    23,558,919
         
                125,264,395
    TOTAL COMMON STOCKS
    (Cost $2,281,940,779)
   $1,699,863,164
 
Principal
Amount		    Interest
Rate		    Maturity
Date		    Value
 
        
Repurchase Agreement – 1.6%
 
Joint Repurchase Agreement Account II Ù  
$27,200,000   
6.48%
    01/02/2001    $    27,200,000
TOTAL REPURCHASE AGREEMENT
(Cost $27,200,000)    $    27,200,000
TOTAL INVESTMENTS
(Cost $2,309,140,779)    $1,727,063,164
 
The accompanying notes are an integral part of these financial statements.
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
 
 
* 
Non-income producing security.
 
Ù  
Joint repurchase agreement was entered into on December 29, 2000.
 
The percentage shown for each investment category reflects the value of investments in that category as a percentage of total net assets.
 
Investment Abbreviations:
ADR—American Depositary Receipt
 
 
The accompanying notes are an integral part of these financial statements.
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
 
Statement of Assets and Liabilities
December 31, 2000

Assets:
 
Investment in securities, at value (identified cost $2,309,140,779)      $1,727,063,164  
Cash      85,986  
Receivables:     
    Investment securities sold      29,442,093  
    Fund shares sold      7,096,440  
    Dividends and interest      24,865  
Total assets      1,763,712,548  
 
Liabilities:
 
Payables:
    Fund shares repurchased      23,817,282  
    Investment securities purchased      5,105,650  
    Amounts owed to affiliates      2,941,488  
Accrued expenses and other liabilities      435,677  
Total liabilities      32,300,097  
 
Net Assets:
 
Paid-in capital      2,466,294,123  
Accumulated net realized loss on investment transactions      (152,804,057 )
Net unrealized loss on investments      (582,077,615 )
NET ASSETS      $1,731,412,451  
Net asset value, offering and redemption price per share: (a)
Class A      $11.90  
Class B      $11.79  
Class C      $11.78  
Institutional      $11.97  
Service      $11.88  
Shares outstanding:
Class A      55,884,906  
Class B      52,757,295  
Class C      28,818,091  
Institutional      8,741,557  
Service      47,594  
Total shares outstanding, $.001 par value (unlimited number of shares authorized)      146,249,443  
 
(a)
Maximum public offering price per share (NAV per share multiplied by 1.0582) for Class A Shares is $12.59. 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 Year Ended December 31, 2000
 
Investment income:
 
Dividends (a)      $            944,268  
Interest      7,885,794  
Total income      8,830,062  
 
Expenses:
 
Management fees      24,341,896  
Distribution and Service fees (b)      15,932,165  
Transfer Agent fees (c)      4,426,223  
Registration fees      523,740  
Custodian fees      243,102  
Printing fees      239,038  
Professional fees      29,773  
Trustee fees      6,833  
Service Share fees      1,255  
Other      394,154  
Total expenses      46,138,179  
Less — expense reductions      (57,049 )
Net expenses      46,081,130  
NET INVESTMENT LOSS      (37,251,068 )
 
Realized and unrealized loss on investment transactions:
 
Net realized loss from investment transactions      (143,421,240 )
Net change in unrealized loss on investments      (927,470,699 )
Net realized and unrealized loss on investment transactions      (1,070,891,939 )
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS      $(1,108,143,007 )
 
(a)
Foreign taxes withheld on dividends were $24,401.
(b)
Class A, Class B and Class C had Distribution and Service fees of $2,361,606, $8,585,346 and $4,985,213, respectively.
(c)
Class A, Class B, Class C, Institutional Class and Service Class had Transfer Agent fees of $1,794,821, $1,631,216, $947,190, $52,896 and $100, 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 Year
Ended
December 31,
2000		      For the Period
Ended
December 31,
1999 (a)
 
From operations:          
 
Net investment loss      $      (37,251,068 )      $      (2,291,334 )
Net realized gain (loss) on investment transactions      (143,421,240 )      28,576,273  
Net change in unrealized gain (loss) on investments      (927,470,699 )      345,393,084  
Net increase (decrease) in net assets resulting from operations       (1,108,143,007 )      371,678,023  
 
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      1,980,084,307        1,167,201,530  
Reinvestment of dividends and distributions      26,454,506        —  
Cost of shares repurchased      (645,181,450 )      (28,599,160 )
Net increase in net assets resulting from share transactions      1,361,357,363        1,138,602,370  
TOTAL INCREASE      221,132,058        1,510,280,393  
 
Net assets:          
 
Beginning of year      1,510,280,393        —  
End of year      $  1,731,412,451        $1,510,280,393  
 
(a)
Commencement of operations was October 1, 1999 for all classes.
 
The accompanying notes are an integral part of these financial statements.
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
 
Notes to Financial Statements
December 31, 2000
 
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 Trust had no capital loss carryforwards for federal tax purposes.
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
 
Notes to Financial Statements (continued)
December 31, 2000
 
 
2.  SIGNIFICANT ACCOUNTING POLICIES (continued)
 
        At December 31, 2000, the aggregate cost of portfolio securities for federal income tax purposes is $2,336,075,366. Accordingly, the gross unrealized gain on investments was $85,323,684 and the gross unrealized loss was $694,335,886, resulting in a net unrealized loss of $609,012,202.
 
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 year ended December 31, 2000, 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 year ended December 31, 2000, the Custody fees were reduced by approximately $57,000 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 $4,745,000 for the year ended December 31, 2000.
        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
 
 
 
3.  AGREEMENTS (continued)
 
        At December 31, 2000, the Fund owed approximately $1,608,000, $1,042,000 and $291,000 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 year ended December 31, 2000, were $3,190,825,460 and $1,844,996,118, respectively. For the year ended December 31, 2000, Goldman Sachs earned approximately $45,000 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 December 31, 2000, the Fund had an undivided interest in the repurchase agreement in the following joint account which equaled $27,200,000 in principal amount. At December 31, 2000 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   
$900,000,000
   
6.50%
   
01/02/2001
   
$  900,000,000
   
$  900,650,000
Barclays Capital, Inc.   
300,000,000
   
6.47 
   
01/02/2001
   
300,000,000
   
300,215,667
Bear Stearns Companies, Inc.   
500,000,000
   
6.48 
   
01/02/2001
   
500,000,000
   
500,360,000
Deutsche Bank Securities   
250,000,000
   
6.45 
   
01/02/2001
   
250,000,000
   
250,179,167
Morgan Stanley Dean Witter   
500,000,000
   
6.48 
   
01/02/2001
   
500,000,000
   
500,360,000
Salomon Smith Barney Holdings, Inc.   
301,300,000
   
6.47 
   
01/02/2001
   
301,300,000
   
301,516,601
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT II   
$2,751,300,000
   
$2,753,281,435
 
6.  CERTAIN RECLASSIFICATIONS
 
In accordance with AICPA Statement of Position 93-2, the Fund has reclassified $32,970,612 from paid-in capital to accumulated net investment loss and $4,280,456 from accumulated net realized loss on investment transactions to accumulated net investment loss. These reclassifications have no impact on the net asset value of the Fund and are designed to present the Fund’s capital accounts on a tax basis. Reclassifications result primarily from the difference in the tax treatment of net operating losses and organization costs.
 
7.  LINE OF CREDIT FACILITY
 
Effective May 31, 2000, the Fund participates in a $350,000,000 committed, unsecured revolving line of credit facility. Prior thereto, the Fund participated in a $250,000,000 uncommitted and a $250,000,000 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 7.  LINE OF CREDIT FACILITY (continued)
 
on borrowings is based on the Federal Funds rate. The committed 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 year ended December 31, 2000, the Fund did not have any borrowings under these facilities.
 
8.  CHANGE IN INDEPENDENT AUDITOR
 
On October 26, 1999, the Board of Trustees of the Fund, upon the recommendation of the Board’s audit committee, determined not to retain Arthur Andersen LLP and approved a change of the Fund’s independent auditors to Ernst & Young LLP. For the fiscal year ended December 31, 1999, Arthur Andersen LLP’s audit report contained no adverse opinion or disclaimer of opinion; nor was their report qualified or modified as to uncertainty, audit scope, or accounting principles. Further, there were no disagreements between the Fund and Arthur Andersen LLP on accounting principles or practices, financial statement disclosure or audit scope or procedure, which if not resolved to the satisfaction of Arthur Andersen LLP would have caused them to make reference to the disagreement in their report.
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
 
 
 
9.  SUMMARY OF SHARE TRANSACTIONS
 
Share activity is as follows:
 
 
       For the Year Ended December 31, 2000
      For the Period Ended December 31, 1999 (a)
       Shares      Dollars      Shares      Dollars
Class A Shares
Shares sold      45,608,881        $  853,013,004         30,877,360        $  446,765,899  
Reinvestment of dividends and distributions      748,039        10,524,915        —        —  
Shares repurchased       (20,372,806 )      (327,255,413 )      (976,568 )      (15,181,934 )
          25,984,114        536,282,506        29,900,792        431,583,965  
Class B Shares
Shares sold      32,824,493        615,775,310        28,306,620        410,588,840  
Reinvestment of dividends and distributions      667,484        9,313,505        —        —  
Shares repurchased      (8,708,908 )      (138,973,664 )      (332,394 )      (5,542,861 )
          24,783,069        486,115,151        27,974,226        405,045,979  
Class C Shares
Shares sold      19,106,783        358,830,187        17,453,014        255,619,532  
Reinvestment of dividends and distributions      352,847        4,915,377        —        —  
Shares repurchased      (7,791,870 )      (126,281,702 )      (302,683 )      (4,835,240 )
          11,667,760        237,463,862        17,150,331        250,784,292  
Institutional Shares
Shares sold      8,391,336        151,507,146        3,805,337        54,197,768  
Reinvestment of dividends and distributions      119,474        1,690,559        —        —  
Shares repurchased      (3,315,319 )      (52,404,910 )      (259,271 )      (3,039,125 )
          5,195,491        100,792,795        3,546,066        51,158,643  
Service Shares
Shares sold      64,279        958,660        2,764        29,491  
Reinvestment of dividends and distributions      722        10,150        —        —  
Shares repurchased      (20,171 )      (265,761 )      —        —  
          44,830        703,049        2,764        29,491  
NET INCREASE      67,675,264        $1,361,357,363        78,574,179        $1,138,602,370  
 
(a)
Commencement of operations was October 1, 1999 for all classes.
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
 
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
 
 
    
 
         
Income (loss) from
investment operations
             
   
Net asset
value,
beginning
of period
     Net
investment
   loss (c) 		    Net realized
and unrealized
gain (loss)		     Total
income
(loss) from
investment
operations		     Total
distributions
to
shareholders
from net
realized
gains		     Net asset
value,
end of
period		  
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.
(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
 
 
 
(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  
 
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
 
Report of Ernst & Young LLP, Independent Auditors
 
 
 
To the Shareholders and Board of Trustees
Goldman Sachs Trust
 
We have audited the accompanying statement of assets and liabilities of the Goldman Sachs Internet Tollkeeper Fund (one of the funds comprising the Goldman Sachs Trust) (the “Fund”), including the statement of investments, as of December 31, 2000, and the related statement of operations, the statement of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and the financial highlights for the period ended December 31, 1999 were audited by other auditors whose report, dated February 17, 2000, expressed an unqualified opinion on the statement and financial highlights.
 
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2000 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the 2000 financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Goldman Sachs Internet Tollkeeper Fund at December 31, 2000, the results of its operations, the changes in its net assets, and the financial highlights for the year then ended in conformity with accounting principles generally accepted in the United States.
 
 
New York, New York
February 5, 2001
 
GOLDMAN SACHS INTERNET TOLLKEEPER FUND
 
 
 
Goldman Sachs Internet Tollkeeper Fund — Tax Information (unaudited)
 
        For the year ended December 31, 2000, 0.06% of the dividends paid from net investment company taxable income by the Internet Tollkeeper Fund, qualify for the dividends received deduction available to corporations.
        Pursuant to Section 852 of the Internal Revenue Code, the Fund designated $4,627,848 as capital gain dividends paid during its year ended December 31, 2000.

 

GOLDMAN SACHS FUND PROFILE

Goldman Sachs Internet Tollkeeper Fund

An Investment Idea for the Long Term

The Internet may be one of the most transforming events in global economic history. It is changing the way consumers and businesses communicate, transact commerce, and compete with each other — and will likely result in decades of wealth creation.

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, infrastructure/backbone, and services to Internet companies and Internet users.

Target Your Needs

The Goldman Sachs Internet Tollkeeper 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 the Goldman Sachs Funds without an additional charge.* (Please note: in general, greater returns are associated with greater risk.)

For More Information

To learn more about the Goldman Sachs Internet Tollkeeper Fund and other Goldman Sachs Funds, please call your investment professional today.

*The exchange privilege is subject to termination and its terms are subject to change.
Goldman Sachs Internet Tollkeeper Fund is a service mark of Goldman, Sachs & Co.