<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
DEAR SHAREHOLDERS:
We are pleased to have the opportunity to review the performance and activity
of the Goldman Sachs Fixed Income Portfolios for the 12-month period ended
October 31, 1995. To help put the portfolios' performance in perspective, we are
also providing a brief overview of the U.S. economy and bond market during the
period.
BONDS RALLIED STRONGLY AS RATES FELL
The U.S. bond market began the period under review (November 1, 1994, through
October 31, 1995) still feeling the impact of rising rates. By year-end 1994,
however, the bond market showed signs of strength and gained further momentum in
1995, primarily due to the slowing economy and subdued inflation. For the 12
months ended October 31, bonds enjoyed one of their best years ever, with the
30-year Treasury recording a total return of approximately 29%, competitive with
the soaring stock market.
THE ECONOMY STARTED STRONG, SLOWED IN SPRING, THEN RECOVERED
The 12-month period began with the economy exhibiting robust growth and a wide
range of indicators pointing to continued acceleration. The 1994 fourth-quarter
real Gross Domestic Product (GDP) grew 5.1%, with employment, real disposable
income, consumer spending and sales of new and existing homes all displaying
impressive strength.
While 1995 began with real GDP increasing by 2.7% during the first quarter,
the pace of growth had clearly moderated. That trend became more pronounced as a
host of weak or declining indicators during the spring revealed that the economy
abruptly slowed during the second quarter of 1995. Significantly, the growth of
second-quarter real GDP was an anemic 1.3%.
By August, the economy appeared to revive. Employment, housing, construction
spending and several other indicators showed signs of improvement that persisted
into the fall. The flow of positive economic data appeared to indicate that the
prior slowdown was largely due to a short-term inventory correction.
Third-quarter GDP growth was reported at an unexpectedly high 4.2%, which many
interpreted as a result of one-time events. By the end of October, however, key
economic reports were sending mixed signals regarding the health of the economy
once again. Firmness in interest-rate-sensitive areas such as housing, motor
vehicle sales and durable goods orders suggested steady growth, but retail sales
and industrial output indicators were weak. Though the condition of the economy
appeared uncertain, most observers agreed that inflation remained contained,
with the Producer Price Index (PPI) and Consumer Price Index (CPI) up 2.6% and
2.8%, respectively, for the 12-month period ended October 31, 1995.
FED RAISED RATES TWICE DURING THE PERIOD, THEN CUT AS INFLATION FEARS EASED
The U.S. Federal Reserve Board raised the federal funds rate (the rates banks
charge one another for overnight borrowing) by 75 basis points in November 1994
and by 50 basis points in February 1995. Including those two hikes, the Fed
raised rates a total of seven times in its tightening cycle (from February 1994
through February 1995) by a total of 300 basis points to 6.00%.
The Fed remained neutral until early July 1995, when receding inflationary
pressures and a weakening economy prompted it to cut the federal funds rate 25
basis points to 5.75%.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
Market Overview 1 Financial Statements 22
Goldman Sachs Government Income Fund 3 Notes to Financial Statements 26
Goldman Sachs Global Income Fund 9 Financial Highlights 33
Goldman Sachs Municipal Income Fund 15
</TABLE>
<PAGE>
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LETTER TO SHAREHOLDERS (continued)
During the period under review, the yield curve flattened dramatically. The
yield on six-month Treasury bills declined only slightly, from 5.66% on October
31, 1994, to 5.55% on October 31, 1995. However, for the same time period the
yield on the 30-year U.S. Treasury bond fell more dramatically, from 7.97% a
year ago to 6.33%.
HISTORICAL TREASURY YIELD CURVE
[CHART]
Years to Maturity 10/31/94 10/31/95
----------------- -------- --------
3-Month 5.14% 5.49%
6-Month 5.66% 5.55%
1 6.14% 5.55%
2 6.82% 5.61%
3 7.05% 5.68%
5 7.48% 5.81%
10 7.81% 6.02%
30 7.97% 6.33%
Source: Bloomberg, L.P.
The yield curve flattened considerably as the yields on longer-term Treasuries
fell more than the yields on shorter-term Treasuries, which shifted the curve
downward at the longer end. The yield difference between two-year Treasury notes
and 30-year Treasury bonds narrowed significantly.
DOLLAR REBOUNDED AFTER FALLING TO POST-WORLD WAR II LOWS
The U.S. dollar remained relatively strong from November 1994 through year-end
1994, due in large part to the Federal Reserve's tightening, then weakened
signifi-cantly starting in January 1995. The U.S.-Japan trade imbalance, the
Mexican peso devaluation and weakness in the U.S. economy (which led to reduced
expectations of rising rates) contributed to the precipitous drop. By April, the
dollar had declined to new postwar lows against the Deutsche mark and Japanese
yen.
The dollar rallied against the yen and the Deutsche mark during the summer and
early fall. Among the factors contributing to the dollar's rebound were the
resolution of the U.S.-Japan trade dispute, the Japanese Ministry of Finance's
package of measures to encourage foreign investment, the intervention of U.S.
and foreign central banks in support of the dollar and Japan's discount rate
cut. The dollar rallied from its April levels by approx-imately 26% against the
yen and by approximately 4% against the Deutsche mark through the end of
October.
ECONOMIC OUTLOOK: SIGNALS MIXED AS ECONOMY MODERATES AND BUDGET DEBATE CONTINUES
While the economy continues to show relative strength in some sectors such as
housing, durable goods orders and employment, and the stock market remains
strong, evidence of weakness has begun to emerge. Most notably, retail sales
declined amid increasing levels of consumer debt, and industrial production was
basically flat in October. With inflation under control, many expect the Fed to
ease rates again in December if further weakening occurs. The favorable
resolution of the federal budget debate, anticipated by year-end, is also a key
factor in influencing further rate cuts. Near term, a healthy bond market is
likely to persist. Longer term, economic growth is generally expected to pick up
gradually by mid-1996.
We thank you for making the Goldman Sachs Fixed Income Portfolios part of your
investment program and we look forward to continuing to serve your investment
needs.
Sincerely,
/s/ David B. Ford
David B. Ford
Chief Executive Officer
/s/ Sharmin Mossavar-Rahmani
Sharmin Mossavar-Rahmani
Chief Investment Officer - Fixed Income Investments
Goldman Sachs Asset Management
November 30, 1995
2
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVE
The Goldman Sachs Government Income Fund seeks to provide shareholders with a
high level of current income consistent with safety of principal. Under normal
conditions, at least 65% of the portfolio's total assets will be invested in
U.S. government securities and in repurchase agreements collateralized by U.S.
government securities. The fund may also invest in securities of nongovernmental
issuers, including asset-backed securities, privately issued mortgage-backed
securities and corporate debt obligations. Such securities will be rated triple-
A at the time of investment or, if unrated, deemed to be of comparable quality
by Goldman Sachs Asset Management, the fund's investment adviser.
PERFORMANCE REVIEW
For the 12-month period ended October 31, the fund had a total return of
14.90% based on net asset value (NAV) (7.23% in monthly distributions and 7.67%
in share price appreciation) as compared with a return of 15.12% for the fund's
benchmark, the Lehman Brothers Government/Mortgage Index (the "Index"). The
fund's NAV rose $1.00 during the past 12 months as interest rates declined.
The fund underperformed the benchmark primarily due to its overweighting in
mortgage-backed securities (MBS) (47.5% versus 34.5% for the benchmark). MBSs
came under pressure as interest rates fell and homeowners opted to prepay their
mortgages, which in turn depressed mortgage-backed security prices. We believe
much of the prepayment risk has been factored into the market at this point and
the fund is well positioned for a rebound in this sector.
During the period, the fund performed well versus its peers. Based on total
return, the fund ranked 16th out of 93 (in the top 20%) intermediate U.S.
government income funds tracked by Lipper Analytical Services, Inc., for the 12
months ended October 31 and significantly outperform-ed the category average of
12.92%. (Please note that Lipper rankings do not take sales charges into account
and that past performance is not a guarantee of future results.)
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
As noted, the fund's sector weightings differed significantly from that of the
Index as of October 31, 1995. The greatest differences were the fund's
overweighting in mortgage-backed securities and underweighting in U.S.
Treasuries. In addition, the fund also held a position in asset-backed
securities, which are not included as part of the benchmark.
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 1995*
[GRAPHIC]
Fixed Rate Mortgage Pass-Throughs ...... 39.8%
U.S. Treasuries ........................ 31.5%
Asset-Backed Securities ................ 14.3%
CMOs ................................... 7.7%
Agency Debentures ...................... 4.1%
Repos/Cash Equivalents ................. 2.6%
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of Investments,
which reflect portfolio holdings as a percentage of net assets.
. Fixed Rate Mortgage Pass-Throughs. The fund was overweighted in this sector as
compared with the Index (39.8% versus 34.5%) in order to benefit from the
potentially higher return of mortgage-backed securities relative to similar-
duration securities. However, as mortgage-backed securities came under pressure
in the declining interest rate environment and prepayment risk increased, this
sector's performance was somewhat disappointing.
3
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS GOVERNMENT INCOME FUND (continued)
. U.S. Treasuries and Repurchase Agreements/Cash Equivalents. As was the case
last year, the fund's sector weighting in U.S. Treasuries on October 31, 1995
was significantly less than the Index (31.5% as compared with 57.0%). We used
U.S. Treasuries and repurchase agreements/cash equivalents (2.6%) to manage the
portfolio's duration, weighting one relative to the other according to our need
to shorten or lengthen the portfolio's duration to target the benchmark. Using
this strategy, the fund matched the benchmark's duration of 4.6 years at the end
of the period.
. Asset-Backed Securities (ABSs). The portfolio's 14.3% position in triple-A-
rated ABSs (including those backed by credit card debt and automobile and home
equity loans) reflected their attractive yields compared with equal-duration
Treasuries. The fund's ABS allocation, approximately the same as last year's,
was not included in the benchmark.
. Agency Debentures. During the year, we increased the fund's holdings in
agency debentures, because they represented attractive relative value versus
Treasuries. Despite increasing the allocation, the fund was still underweighted
relative to the benchmark (4.1% compared with 8.5%).
. Portfolio Composition by Issuer. The portfolio composition of the fund's
mortgage-backed security holdings by issuer was: the Federal Home Loan Mortgage
Corporation (26.6%), the Government National Mortgage Association (13.0%), the
Federal National Mortgage Association (4.9%) and non-agency (3.0%).
. Credit Quality. As of October 31, the fund was primarily invested in U.S.
government and agency securities (80.1%), with the remainder in triple-A-rated
securities (17.3%) and repurchase agreements/cash equivalents (2.6%).
. Prudent Use of Derivatives. As of October 31, the fund held a 6.3% position
in planned amortization class (PAC) CMOs that contributed incremental return
relative to Treasuries and pass-through mortgages. We also added a position in
inverse floaters (1.4%), whose yields move in the opposite direction from an
index, for their potential to add incremental yield to the fund. These
securities performed well as interest rates declined.
The fund has occasionally used mortgage dollar rolls to take advantage of
short-term supply and demand imbalances in the mortgage settlement process.
(Mortgage dollar rolls refer to transactions that involve selling mortgage
securities owned by the fund and simul-taneously contracting to buy back similar
mortgage securities with the same coupon on a specified future date - usually
one month forward.) At all times, we "cover" the mortgage dollar rolls by
keeping cash or high-grade liquid debt securities equal to the dollar amount of
the forward commitment in a segregated account with the fund's custodian.
FUND OUTLOOK
We will continue to utilize Goldman Sachs' extensive economic, fixed income
and mortgage research to help manage the fund and identify attractive
opportunities as they occur. In the near term, we are cautiously optimistic
about the mortgage pass-through sector. Though mortgage prepayments may
potentially rise at year-end, widening yield spreads of mortgage pass-throughs
relative to Treasuries may create attractive investment opportunities. When the
pace of prepayments slows, we expect to use our proprietary analytical models to
help us identify securities with the best potential for future gains.
Additionally, we have a neutral outlook for the ABS sector over the next
quarter. Near term, the sector may experience an increase in consumer debt
delinquencies and year-end selling. Strong investor demand, however, is likely
to support prices over the longer term.
4
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS GOVERNMENT INCOME FUND (continued)
DISTRIBUTION POLICY
The fund paid out monthly distributions of approximately $0.94 per share
during the 12-month period ended October 31, 1995. Dividends are declared daily
and paid on a monthly basis. The fund intends to distribute substantially all of
its investment company taxable income, as is required by tax law.
We value your continued confidence in the Goldman Sachs Government Income Fund
and look forward to reporting on the fund's progress in the coming year.
Sincerely,
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ Theodore T. Sotir
Theodore T. Sotir
Portfolio Managers
Goldman Sachs Government Income Fund
November 30, 1995
5
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
GOLDMAN SACHS GOVERNMENT INCOME FUND
October 31, 1995
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1995. The
performance for the Goldman Sachs Government Income Fund ("Goldman Sachs
Government Income") (assuming both the maximum sales charge of 4.5% and no sales
charge), is compared with its benchmarks--the Lehman Brothers Mutual Fund
Government/Mortgage Index ("Lehman Gov't/MBS Index") and the Lehman Brothers
Mutual Fund General U.S. Government Index ("Lehman U.S. Gov't Index"). All
performance data shown represents past performance and should not be considered
indicative of future performance which will fluctuate as market conditions
change. The investment return and principal value of an investment will
fluctuate with changes in market conditions so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
HYPOTHETICAL $10,000 INVESTMENT/(a)/
[CHART]
Goldman Sachs Goldman Sachs Lehman Lehman
Government Income Government Income Gov't/MBS U.S. Gov't
(no sales charge) (w/sales charge) Index Index
----------------- ----------------- --------- ----------
3/1/93 10,000 9,550 10,000 10,000
10/31/93 10,506 10,033 10,584 10,699
10/31/94 10,192 9,734 10,267 10,220
10/31/95 11,710 11,183 11,819 11,792
Average Annual Total Return
---------------------------------
One Year Since Inception/(b)/
-------- --------------------
GS Government Income, 14.90% 7.06%
excluding sales charge
GS Government Income, 9.76% 5.27%
including sales charge
/(a)/ For comparative purposes, initial investments are assumed to be made on
the first day of the month following the Fund's commencement of
operations.
/(b) Commenced operations February 10, 1993.
6
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS GOVERNMENT INCOME FUND
October 31, 1995
Principal Interest Maturity
Amount Rate Date Value
- ---------- -------- -------- -----------
MORTGAGE BACKED OBLIGATIONS--47.3%
FEDERAL HOME LOAN MORTGAGE CORP.--27.0%
$ 110,000 8.20% 01/16/98 $ 113,057
2,000,000 8.00 TBA-30 year/(a)/ 2,050,624
745,844 9.00 04/01/04 781,504
951,570 9.00 02/01/25 994,985
2,000,000 7.50 08/01/25 2,022,501
2,000,000 7.00 09/01/25 1,983,751
- -------------------------------------------------------------------------
$ 7,946,422
- -------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--12.7%
$ 654,909 9.00% 10/15/19 - 07/15/21 $ 691,748
928,887 9.50 05/15/25 1,005,521
1,998,192 8.00 09/15/25 2,057,515
- -------------------------------------------------------------------------
$ 3,754,784
- -------------------------------------------------------------------------
INVERSE FLOATER COLLATERALIZED MORTGAGE OBLIGATIONS--1.4%
Federal National Mortgage Association Remic Trust Series 1993-62,
Class S
$ 404,038 8.83% 05/25/99 $ 405,808
- -------------------------------------------------------------------------
FIXED RATE COLLATERALIZED MORTGAGE OBLIGATIONS--6.2%
Federal National Mortgage Association Remic Trust Series 1993-58,
Class G
$1,000,000 5.50% 12/25/20 $ 952,200
GE Capital Mortgage Services, Inc. 1994-11,
Class A1
882,484 6.50 03/25/24 883,111
- -------------------------------------------------------------------------
$ 1,835,311
- -------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(Cost $13,894,498) $13,942,325
- -------------------------------------------------------------------------
ASSET-BACKED SECURITIES--14.0%
Chemical Bank Master Credit Card Trust, Series 1995-2,
Class A
$ 720,000 6.23% 06/15/03 $ 722,153
First Chicago Master Trust II, Series 1992-E,
Class A
500,000 6.25 08/15/99 502,045
General Motors Acceptance Corp. Grantor Trust, Series 1994-A,
Class A
122,242 6.30 06/15/99 122,535
MBNA Master Credit Card Trust, Series
1991-1, Class A
490,000 7.75 10/15/98 497,355
Premier Auto Trust Series 1993-6,
Class A2
768,284 4.65 11/02/99 757,421
Premier Auto Trust Series 1994-1,
Class A3
640,000 4.75 02/02/00 632,665
Principal Interest Maturity
Amount Rate Date Value
- ---------- -------- -------- -----------
ASSET-BACKED SECURITIES(CONTINUED)
Standard Credit Card Trust, Series 1990-3,
Class A
860,000 9.50 07/10/98 903,284
- -------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $4,161,356) $ 4,137,458
- -------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--3.7%
Federal National Mortgage Association
$ 70,000 8.79% 01/30/02 $ 71,213
Student Loan Marketing Association
980,000 7.76 04/17/00 1,008,479
- -------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $1,051,036) $ 1,079,692
- -------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--31.4%
United States Treasury Bonds
$ 320,000 11.13% 08/15/03 $ 420,749
560,000 8.75 08/15/20 718,635
United States Treasury Notes
100,000 7.25 11/15/96 101,625
880,000 7.38 11/15/97 908,743
2,570,000 7.50 10/31/99 2,723,403
1,490,000 6.25 02/15/03 1,516,313
United States Treasury Principal-Only Stripped Securities/(b)/
3,100,000 6.17 11/15/04 1,790,715
5,550,000 6.63 08/15/20 1,100,564
- -------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $8,924,525) $ 9,280,747
- -------------------------------------------------------------------------
REPURCHASE AGREEMENT--9.8%
Joint Repurchase Agreement Account/(c)/
$2,900,000 5.93% 11/01/95 $ 2,900,000
- -------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $2,900,000) $ 2,900,000
- -------------------------------------------------------------------------
Total Investments
(Cost $30,931,415/(d)/) $31,340,222
=========================================================================
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS GOVERNMENT INCOME FUND (continued)
October 31, 1995
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost $ 456,535
Gross unrealized loss for investments in which cost exceeds
value (54,364)
- -------------------------------------------------------------------------
Net unrealized gain $ 402,171
=========================================================================
/(a)/ TBA (To Be Assigned) securities are purchased on a forward commitment
basis with an approximate (generally + / -2.5%) principal amount and no
definite maturity date. The actual principal amount and maturity date will
be determined upon settlement when the specific mortgage pools are
assigned.
/(b)/ The interest rate disclosed for these securities represents effective
yields to maturity.
/(c)/ Portions of these securities are being segregated for mortgage dollar
rolls and/or open TBA purchases.
/(d)/ The aggregate cost for federal income tax purposes is $30,938,051.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS GLOBAL INCOME FUND
INVESTMENT OBJECTIVE
The Goldman Sachs Global Income Fund seeks high total return, composed of both
current income and capital appreciation. The fund is permitted to invest in
govern-ment and other high-quality (double-A or better) fixed income securities
issued in the United States and in foreign markets. Since June 1, 1995, the fund
has had the additional flexibility to invest in sovereign (government) debt
rated single-A or better or deemed to be of comp-arable quality. In addition,
the maximum duration the fund can target has been increased to 7.5 years from
five years. Under normal market conditions, the fund's neutral position is to be
fully hedged into U.S. dollars to best serve the needs of U.S. shareholders.
However, the fund may engage in currency transactions, both to hedge exchange
rate risk and enhance returns. The fund added an Institutional share class on
August 1, 1995.
GLOBAL BOND MARKETS RALLIED
Foreign bond markets recorded impressive gains during the past 12 months,
following the lead of the U.S. bond market. Bond markets in dollar bloc
countries, including New Zealand and Canada, continued to perform well. In
Europe, the "core" and "near core" bond markets (e.g., Germany, Holland,
Belgium, France and Denmark) rallied, due to a supportive bond environment
characterized by slowing economic activity, relatively low inflation and
declining interest rates. In contrast, the European higher-yielding markets
(Italy, Spain and Sweden) were affected by political uncertainties and inflation
fears sparked by large budget deficits. The economic concerns of these and other
European countries triggered a flight to quality as investors sought the
perceived safety of the Deutsche mark and the Swiss franc. Currency weakness
raised doubts about the readiness of some countries, particularly Italy, to
participate in the European monetary union.
The Japanese economy remained weak during the period under review and appeared
in danger of falling into a deflationary spiral. The Japanese government
responded with a monetary and fiscal stimulus package, which included a discount
rate cut on September 8, 1995. The government's continuing efforts to introduce
liquidity into the Japanese economy triggered a market rally and resulted in the
yen's decline relative to the U.S. dollar.
PERFORMANCE REVIEW
For the 12 months ended October 31, 1995, the fund's Class A shares had a
total return of 15.08% based on net asset value (NAV) (7.23% from monthly
distributions and 7.85% from share price appreciation) compared with a return of
15.37% for the fund's benchmark, the J. P. Morgan Global Government Bond Index
(hedged into U.S. dollars) (the "Index").
From their inception on August 1, 1995, through October 31, 1995, the fund's
Institutional shares returned 4.42% (1.85% from monthly distributions and 2.57%
from share price appreciation) compared with 3.51% for the Index. The Index
covers 14 major bond markets and reflects their currency exposures.
NAV NAV Change 30-Day SEC
Share Class (10/31/95) (10/31/94-10/31/95) Yield (10/31/95)
- ----------- ---------- ------------------- ----------------
Class A $14.45 +$1.02 4.81%
Institutional $14.45 +$0.36* 5.54%
* From Institutional shares' inception on August 1, 1995 through October 31,
1995.
The fund performed well relative to its peers. According to Lipper Analytical
Services, Inc., the fund's Class A shares ranked 31st out of 131 general world
income funds, based on total return for the 12 months ended October 31, 1995.
The fund's Class A shares far outperformed the Lipper general world income fund
average of 11.52% for the period. (Please note that Lipper rankings do not take
sales charges into account and that past performance is not a guarantee of
future results. Institutional shares are not ranked by Lipper for this period
because they were not available for the full year.)
The fund's Class A shares slightly underperformed the Index, due to the
portfolio's underweighting in the higher-yielding bond markets of Europe. Though
the portfolio is typically fully hedged into dollars, we
9
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS GLOBAL INCOME FUND (continued)
employed several currency strategies during the period that contributed to the
fund's positive performance. In August, when the dollar appreciated against the
yen, the fund took a short position in the yen and a long position in the U.S.
dollar, successfully positioning the portfolio. Earlier in the period, we
correctly anticipated that the dollar would decline and unhedged part of the
fund's yen and Deutsche mark exposure.
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 1995*
[GRAPH]
U.S. ...................... 27.5%
Cash Equivalents .......... 16.4%
U.K. ...................... 13.2%
Japan ..................... 12.2%
France .................... 8.1%
Canada .................... 7.7%
Germany ................... 6.4%
Spain ..................... 5.0%
Belgium ................... 3.5%
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of Investments,
which reflect portfolio holdings as a percentage of net assets.
. U.S. As was the case a year ago, the fund's single largest country position
continued to be in U.S. Treasury notes, which represented 27.5% of the portfolio
as of October 31, 1995. The fund is still significantly under-weighted versus
the Index, which allocates 39.2% to the United States, because we believe that
U.S. bond yields do not adequately compensate the fund for the inflationary risk
given the pickup in commodity prices and the growth in the U.S. economy.
. Other Dollar Bloc Countries. In general, during the period we favored dollar
bloc countries, with a preference for Canada and New Zealand based on the yield
advantage they offered over U.S. Treasuries. As of October 31, the fund had a
7.7% position in Canada, significantly overweighting the Index (2.7%) but lower
than its 12% position six months ago. At the time of the Quebec referendum in
late October, the fund sold its Canadian holdings, because we determined that
the Canadian bond risk/return trade-off had become unattractive during the
Quebec election period. Following the Quebec vote, we reestablished the fund's
position in the belief that the Canadian bond environment appeared favorable.
Due in part to our concern about Australia's large current account deficit, we
sold the fund's position in that country in March. In contrast, although the
fund is not currently invested in New Zealand, it has held New Zealand bonds at
various times during the past 12 months and we view its bond market favorably.
. Europe. Bond markets throughout Europe were affected by a number of
uncertainties, ranging from perceived government instability to potential
inflationary pressures. As a result of the unfavorable risk/return trade-off, we
reduced last year's overweighting in Europe to 36.2% of the fund (as of October
31) compared with 41.4% for the benchmark.
[RIGHT ARROW] Germany. We view Germany, the leading "core" European market, as
attractive, due to its relatively low inflation and weak monetary growth. The
fund was underweighted in Germany relative to the Index (6.4% compared with
9.7%), however, because we favored the "near core" European markets of France
and Belgium. We believe these countries offer better value than Germany and will
behave as proxies in the event of a German bond rally.
10
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS GLOBAL INCOME FUND (continued)
[RIGHT ARROW] U.K. In October, the fund had a 13.2% position in the U.K.,
overweighted versus the Index position of 5.9%. During the period, the U.K. was
attractive due to its slowing economic growth and subdued inflation, which
created a supportive environment for bonds.
[RIGHT ARROW] France. France's political instability caused us to cut the fund's
position approximately in half during the past six months. The fund is still
slightly overweighted in France with an 8.1% position, compared with 7.4% for
the Index. Going forward, we are somewhat encouraged by President Chirac's
apparent commitment to reduce France's budget deficit and reform its Social
Security system.
[RIGHT ARROW] Belgium. We expect Belgium (3.5%) to emerge as one of the key
members of the European monetary union and therefore added a small position in
June.
[RIGHT ARROW] Italy and Spain. We remain cautious about European higher-yielding
bonds in general. However, we added a 5.0% position in Spain in October, because
we believe Spain's economic and political risks are fully reflected in its bond
prices. We sold the fund's position in Italy, due to that country's political
and economic uncertainty.
- - Japan. We increased the fund's position in Japan during the past year, because
its weak economy and low inflation appeared favorable for Japanese bonds. As of
October 31, the fund had a 12.2% position in Japanese bonds, slightly
underweighted versus the Index allocation of 15.5%. We have recently been
reducing the fund's Japanese holdings, however, due to the government's
aggressive monetary easing and expansionist fiscal policy. In addition, we are
concerned by the extent to which the Bank of Japan has become the dominant buyer
of Japanese bonds, creating artificial support for the market that may be
unsustainable.
. Cash Equivalents. During the period, we raised the fund's cash equivalent
position to 16.4%, up from 3.5% a year earlier, as a defensive move which also
helped reduce the fund's duration. Going forward, we expect to reduce this
position as attractive opportunities arise.
. Credit Quality. The portfolio was 100% invested in triple-A-rated securities
as of October 31, and we will continue to stress high-quality bonds.
. Duration. As of October 31, the fund's duration was shorter than that of the
Index (4.33 years compared with 4.94 years), largely due to its underweighting
in Japan and its cash equivalent position. (Duration is a measurement of the
fund's sensitivity to interest rate movements; the shorter the duration, the
less the fund's NAV will move in relation to interest rate fluctuations.)
DISTRIBUTION POLICY
The fund declares and pays dividends on a monthly basis. During the period
under review, the fund's Class A shares paid out distributions of $0.94 per
share. From its inception on August 1, 1995, through October 31, 1995, the
fund's Institutional shares paid out distributions of $0.26 per share. The fund
intends to distribute substantially all of its investment company taxable
income, as is required by tax law.
FUND OUTLOOK
Due to uncertainty concerning U.S. bond yield levels, for the near term we
intend to keep the fund underweighted in U.S. Treasuries. Within the dollar
bloc, we continue to prefer Canada and New Zealand, because of their wide yield
spreads over U.S. Treasuries. In our opinion, New Zealand is particularly
attractive and therefore we anticipate reestablishing the fund's position there.
After three years of strong growth, that economy is showing signs of slowing and
it has a credible central bank. In general, Europe appears poised for a rally as
11
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS GLOBAL INCOME FUND (continued)
economic growth slows. We intend to keep a neutral weighting in Europe compared
with the benchmark, and we currently favor Belgium and France. In the U.K.,
financial markets may be affected by political instability stemming from the
unpopularity of the Conservative government and the possibility of increased
wage-based inflation. Consequently, we expect to reduce the fund's U.K. position
to be approximately in line with the benchmark. We also anticipate continuing to
reduce the fund's exposure in Japan, based on our concern that the government's
economic stimulus may lead to economic growth and higher interest rates, which
would further erode bond prices.
We will continue to utilize the resources of Goldman, Sachs & Co.'s London-based
Economics Research Group for economic and market trend analysis, as well as the
Goldman Sachs Asset Allocation Model to allocate the portfolio's assets and
manage risk. We value your investment in the Goldman Sachs Global Income Fund
and look forward to continuing our relationship in the future.
Sincerely,
/s/ Stephen C. Fitzgerald
Stephen C. Fitzgerald
Portfolio Manager, Fixed Income Investments
/s/ Gareth I. Evans
Gareth I. Evans
Portfolio Manager, Currency
Goldman Sachs Global Income Fund
London, November 30, 1995
12
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
GOLDMAN SACHS GLOBAL INCOME FUND
October 31, 1995
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1995. The
performance for the Goldman Sachs Global Income Fund (assuming both the maximum
sales charge of 4.5% and no sales charge for the Class A shares and at net asset
value for the Institutional shares), is compared with its benchmark--the J.P.
Morgan Global Government Bond Index hedged to U.S. Dollars ("J.P. Morgan GGB
Index-$ Hedged"). All performance data shown represents past performance and
should not be considered indicative of future performance which will fluctuate
as market conditions change. The investment return and principal value of an
investment will fluctuate with changes in market conditions so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
<TABLE>
<CAPTION>
HYPOTHETICAL $10,000 INVESTMENT/(a)/ HYPOTHETICAL $10,000 INVESTMENT
Class A Shares Institutional Shares
[CHART] [CHART]
J.P. Morgan J.P. Morgan
Class A Shares Class A Shares GGB Index- Institutional GGB Index-
(no sales charge) (w/sales charge) $ Hedged Shares $ Hedged
----------------- ---------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
9/1/91 10,000 9,550 10,000 8/1/95 10,000 10,000
10/31/91 10,144 9,688 10,263 10/31/95 10,442 10,351
10/31/92 11,094 10,594 11,156
10/31/93 12,286 11,733 12,509
10/31/94 11,734 11,206 12,051
10/31/95 13,503 12,895 13,903
</TABLE>
Average Annual Total Return
--------------------------------
One Year Since Inception/(b)/
-------- --------------------
GS Global Income-Class A,
excluding sales charge 15.08% 7.32%
GS Global Income-Class A,
including sales charge 9.92% 6.16%
GS Global Income,
Institutional Class N/A 4.42%/(c)/
/(a)/ For comparative purposes, initial investments are assumed to be made on
the first day of the month following the Fund's commencement of operations
of the Class A shares.
/(b)/ The Class A shares commenced operations August 2, 1991 and the
Institutional shares commenced operations on August 1, 1995.
/(c)/ An aggregate total return (not annualized) is shown instead of an average
annual total return since the Institutional Class has not completed a full
twelve months of operations.
13
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS GLOBAL INCOME FUND
October 31, 1995
Principal Interest Maturity
Amount/(a)/ Rate Date Value
- ----------- -------- -------- ------------
DEBT OBLIGATIONS--81.7%
BELGIAN FRANC--3.3%
Kingdom of Belgium
BEF 277,000,000 6.50% 03/31/05 $ 9,265,385
- -------------------------------------------------------------------------
BRITISH POUND STERLING--12.9%
United Kingdom Conversion
BPS 4,000,000 9.00% 03/03/00 $ 6,698,546
United Kingdom Treasury
17,700,000 8.50 12/07/05 29,046,495
- -------------------------------------------------------------------------
$ 35,745,041
- -------------------------------------------------------------------------
CANADIAN DOLLAR--7.6%
Government of Canada
CAD 28,000,000 7.50% 09/01/00 $ 21,191,223
- -------------------------------------------------------------------------
DEUTSCHE MARK--6.2%
Government of Germany
DEM 21,750,000 8.38% 05/21/01 $ 17,299,872
- -------------------------------------------------------------------------
FRENCH FRANC--7.7%
Government of France
FRF 58,000,000 8.50% 03/28/00 $ 12,741,948
39,500,000 8.25 02/27/04 8,614,701
- -------------------------------------------------------------------------
$ 21,356,649
- -------------------------------------------------------------------------
JAPANESE YEN--12.1%
Japanese Development Bank
JPY 1,820,000,000 6.60% 06/20/01 $ 21,924,730
1,100,000,000 4.10 12/22/03 11,705,218
- -------------------------------------------------------------------------
$ 33,629,948
- -------------------------------------------------------------------------
SPANISH PESETA--4.7%
Government of Spain
ESP 1,670,000,000 10.00% 02/28/05 $ 12,922,986
- -------------------------------------------------------------------------
UNITED STATES DOLLAR--27.2%
United States Treasury Notes
USD 10,000,000 6.88% 07/31/99 $ 10,360,900
16,700,000 6.25 05/31/00 16,984,401
22,000,000 6.13 09/30/00 22,271,478
14,200,000 6.25 02/15/03 14,450,772
10,000,000 7.88 11/15/04 11,270,300
- -------------------------------------------------------------------------
$ 75,337,851
- -------------------------------------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $227,304,485) $226,748,955
- -------------------------------------------------------------------------
Principal Interest Maturity
Amount/(a)/ Rate Date Value
- ----------- -------- -------- ------------
SHORT-TERM OBLIGATIONS--16.7%
Euro-Time Deposit-State Street Bank & Trust Co.
USD 46,196,597 5.81% 11/01/95 $ 46,196,597
- -------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $46,196,597) $ 46,196,597
- -------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $273,501,082/(b)/) $272,945,552
=========================================================================
=========================================================================
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost $ 5,186,935
Gross unrealized loss for investments in which cost
exceeds value (5,893,905)
- -------------------------------------------------------------------------
Net unrealized loss $ (706,970)
=========================================================================
/(a)/ The principal amount of each security is stated in the currency in which
the bond is denominated. See below.
BEF = Belgian Franc FRF = French Franc
BPS = British Pound Sterling JPY = Japanese Yen
CAD = Canadian Dollar ESP = Spanish Peseta
DEM = Deutsche mark USD = United States Dollar
/(b)/ The aggregate cost for federal income tax purposes is $273,652,522.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Letters to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS MUNICIPAL INCOME FUND
INVESTMENT OBJECTIVE
The Goldman Sachs Municipal Income Fund seeks to provide a high level of
current income that is exempt from regular federal income tax, consistent with
the preser-vation of capital. In pursuit of its objective, the fund invests in a
diversified portfolio of municipal securities with an average credit quality of
double-A or better. Under normal market conditions the fund will maintain an
average portfolio maturity approximately equal to the average maturity of the
Lehman Brothers 15-Year Municipal Bond Index.
MUNICIPAL BONDS RALLY AMID UNCERTAINTY
The municipal bond market performed well during the period under review
(November 1, 1994, through October 31, 1995), with the average price of a 15-
year municipal bond (as calculated from data provided by Municipal Market Data,
an independent municipal market information provider) rising 9% while yields
fell from 6.30% on November 1, 1994, to 5.35% on October 31, 1995. However,
during the past 12 months the yield curve for municipal bonds became quite steep
compared with Treasuries, and 15-year municipal bonds underperformed similar-
duration Treasuries.
The first month of the fund's fiscal year coincided with the bottom of the
1994 bear market, as 30-year U.S. Treasury yields rose to 8.13% and long-term
municipal bond yields rose to over 7%. In December 1994, however, the bond
market stabilized. Fueled by strong municipal bond demand and a significant
decrease in supply, municipal bonds surged from January through early April.
Though municipals continued to record positive performance, the rally's momentum
slowed from mid-April onward, reflecting investors' concern surrounding various
tax reform proposals (e.g., the flat tax and a reduction in capital gains taxes)
and the growing allure of the rallying equity market.
By midyear, short-term municipal bonds became more expensive as investors
favored defensive maturities that provided greater liquidity, while demand for
long-term bonds stagnated. By the end of October, however, growing bullish
sentiment in the municipal bond market and a flattening municipal bond yield
curve made longer term bonds increasingly attractive.
PERFORMANCE REVIEW
For the 12-month period ended October 31, 1995, the fund had a total return of
13.79%, based on net asset value (NAV) (5.26% from income distributions and
8.53% from share price appreciation) compared with a return of 15.76% for the
Lehman Brothers 15-Year Municipal Bond Index (the "Index"), the fund's
benchmark. The fund's NAV rose $1.09 during the period to $14.17 as of October
31, 1995, benefiting from the rallying bond market.
The portfolio underperformed the Index, primarily because it was defensively
positioned early in the period in response to last year's volatility. The
portfolio held a higher percentage of premium coupon bonds, which tend to
perform well in a declining bond market. These premiums, which typically have
optional call features, performed like shorter-maturity bonds when interest
rates fell this year, because of the increased likelihood of their calls being
exercised prior to maturity. As this occurred, the durations of the callable
bonds shortened, which was undesirable because longer duration bonds appreciated
faster than those with shorter durations. In contrast, the Index held a higher
percentage of deeper discount bonds, which outperformed premium bonds as
interest rates fell.
15
<PAGE>
Letters to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS MUNICIPAL INCOME FUND (continued)
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 1995*
[GRAPHIC]
Insured Revenue Bonds ......... 40.1%
Revenue Bonds ................. 23.4%
General Obligations............ 16.6%
Insured General Obligations.... 12.6%
Variable Rate Demand Notes..... 7.3%
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of Investments,
which reflect portfolio holdings as a percentage of net assets.
. Insured Revenue and General Obligation Bonds. During the period, we continued
to emphasize insured bonds because of their liquidity and availability. Insured
bonds allow the portfolio to capitalize on a security's other features such as
coupon and callability, while removing the credit quality variable. We stressed
securities from Texas and New York that we determined to be undervalued due to a
temporary lack of demand. We anticipate that these securities will appreciate as
supplies tighten and flat tax issues are resolved. As of October 31, we
overweighted the fund's holdings in insured bonds relative to the Index (52.7%
as compared with 32.0%), approximately the same allocation as a year ago.
. Revenue Bonds. Noninsured revenue bonds, generally single-A- and
double-A-rated debt, accounted for 23.4% of the portfolio, underweighted
compared with the benchmark allocation of 31.0%. (Revenue bonds pay interest and
principal out of a specific revenue stream, which includes sales taxes, hospital
charges, tolls, electric rates and airport fees.) The allocation to sectors with
high credit sensitivity fluctuates over time, based on specific securities and
overall credit spreads. We currently view overall credit spreads as rich, and
beyond unique situations we are not emphasizing credit-sensitive sectors.
. General Obligation (GO) Bonds. When credit quality spreads tightened during
the period, we dramatically increased the fund's investment in the GO sector to
16.6%, tripling last year's position. Uninsured GOs are generally of higher
credit quality than uninsured revenue bonds, because they are backed by the
general taxing power of the municipality.
. Variable Rate Demand Notes (VRDNs). VRDNs are high-quality cash equivalents
and were used to manage the portfolio's duration to approximate that of the
Index at 8.76 years.
. Credit Quality. During the period, we emphasized higher credit quality debt
over lower quality. As of October 31, 69.6% of the portfolio was invested in
triple-A-rated bonds, up from approximately 59% a year ago, while the positions
in double-A-rated securities (18.0%) and single-A-rated securities (12.4%) were
reduced since last year. The bias toward triple-A-rated securities is the direct
result of the emphasis on insured bonds.
. Term Structure. The portfolio's term structure contributed to its performance
in the declining interest rate environment. The portfolio was "barbelled,"
emphasizing bonds with maturities of 20 years on the long end and bonds with
maturities of five years or less on the short end. Approximately one-third of
the portfolio was invested in maturities of 18 years or longer, a segment which
performed well when the yield curve flattened during the period.
16
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS MUNICIPAL INCOME FUND (continued)
. We added a very small position in a call option in March (less than 1% of the
portfolio) for its potential incremental return. This position contributed to
the portfolio's positive performance during the period and the fund continues to
hold it.
MARKET OUTLOOK: IMPROVED TECHNICALS EXPECTED
Going forward, the municipal bond market appears to be entering a period of
potential technical strength. We estimate that over $80 billion in coupon and
principal payments will be distributed to municipal investors between November
1995 and February 1996, a significant percentage of which may be reinvested into
municipal bonds. In contrast, we expect just over $37 billion in new municipal
debt to be issued over the same four-month period, creating a potential supply
and demand imbalance that could increase municipal bond prices. That scenario,
coupled with the likelihood of an even flatter yield curve near term, should
benefit the fund's longer-term bonds. In addition, yields on long-term
municipals are relatively high in relation to Treasury securities and short-term
municipals. Regarding security selection, we anticipate concentrating on bonds
issued by states that have high taxes, high wealth concentration and large
populations (e.g., New York, California and Michigan).
Distribution Policy
The fund paid out distributions of $0.67 per share during the period under
review. Dividends are declared daily and paid on a monthly basis. The fund
intends to distribute substantially all of its investment company tax-exempt and
taxable income, as required by tax law.
Your investment in the Goldman Sachs Municipal Income Fund means a great deal
to us and we look forward to continuing our relationship.
Sincerely,
/s/ Benjamin S. Thompson
Benjamin S. Thompson
/s/ Theodore T. Sotir
Theodore T. Sotir
Portfolio Managers
Goldman Sachs Municipal Income Fund
November 30, 1995
17
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
GOLDMAN SACHS MUNICIPAL INCOME FUND
October 31, 1995
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1995. The
performance for the Goldman Sachs Municipal Income Fund ("Goldman Sachs
Municipal Income") (assuming both the maximum sales charge of 4.5% and no sales
charge), is compared with its benchmark--the Lehman Brothers 15-Year Municipal
Bond Index ("Lehman 15-Year Muni Index"). All performance data shown represents
past performance and should not be considered indicative of future performance
which will fluctuate as market conditions change. The investment return and
principal value of an investment will fluctuate with changes in market
conditions so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
HYPOTHETICAL $10,000 INVESTMENT/(a)/
[CHART]
GOLDMAN SACHS GOLD SACHS
MUNICIPAL INCOME MUNICIPAL INCOME LEHMAN 15-YEAR
(NO SALES CHARGE) (W/SALES CHARGE) MUNI INDEX
----------------- ---------------- ---------------
8/1/93 10,000 9,550 10,000
10/31/93 10,454 9,984 10,385
10/31/94 9,879 9,434 9,860
10/31/95 11,241 10,735 11,414
Average Annual Total Return
--------------------------------
One Year Since Inception/(b)/
-------- --------------------
GS Muni Income,
excluding sales charge 13.79% 4.89%
GS Muni Income,
including sales charge 8.64% 2.80%
/(a)/ For comparative purposes, initial investments are assumed to be made on
the first day of the month following the Fund's commencement of
operations.
/(b)/ Commenced operations July 20, 1993.
18
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS MUNICIPAL INCOME FUND
October 31, 1995
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------
DEBT OBLIGATIONS--105.8%
ALABAMA--2.3%
Alabama Mental Health Finance Authority RB (MBIA)
(AAA/Aaa)
$1,200,000 5.00% 05/01/04 $ 1,215,912
- -------------------------------------------------------------------------
CALIFORNIA--6.7%
Rancho, CA Water District Financing Authority RB (FGIC)
(AAA/Aaa)
$1,000,000 5.88% 11/01/10 $ 1,036,700
Riverside County, CA Transportation Services (AMBAC)
(AAA/Aaa)
2,400,000 6.50 06/01/09 2,577,456
- -------------------------------------------------------------------------
$ 3,614,156
- -------------------------------------------------------------------------
COLORADO--4.0%
Westminster County Multi Family Housing (FNMA)
(AAA/Aaa)/(a)/
$2,145,000 5.35% 12/01/25 $ 2,139,530
- -------------------------------------------------------------------------
DISTRICT OF COLUMBIA--2.6%
District of Columbia, Series E- Insured GO (MBIA)
(AAA/Aaa)
$1,370,000 6.00% 06/01/10 $ 1,384,399
- -------------------------------------------------------------------------
FLORIDA--16.5%
Dade County, FL Guaranteed Entitlement Pre-refunded zero
coupon RB (AMBAC) (AAA/Aaa)
$3,500,000 5.15/(b)/% 08/01/10 $ 1,548,925
Escambia County, FL Housing Financing Authority, Single
Family Multi-County Progress (GNMA/FNMA)
(NR/Aaa)
2,300,000 6.80 10/01/15 2,419,232
Florida Board of Education GO (AA/Aa)
2,330,000 5.75 01/01/13 2,357,075
Lakeland, FL Electric & Water Revenue Refunding, Jr. Sub
Lien (FGIC) (AAA/Aaa)/(a)/
2,500,000 5.25 10/01/97 2,537,525
- -------------------------------------------------------------------------
$ 8,862,757
- -------------------------------------------------------------------------
ILLINOIS--4.0%
Illinois Health Facilities Authority RB (MBIA) (AAA/Aaa)/(c)/
$2,000,000 6.25% 08/15/13 $ 2,130,818
- -------------------------------------------------------------------------
KENTUCKY--3.8%
Nelson County, KY Industrial Building RB for Mabex
Universal Corp. Project AMT (NR/A3)/(c)/
$1,900,000 6.50% 04/01/05 $ 2,034,710
- -------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------
DEBT OBLIGATIONS (CONTINUED)
MAINE--1.7%
Maine Educational Loan Authority, RB Series A-1 (NR/Aaa)/(c)/
$ 845,000 6.80% 12/01/07 $ 895,489
- -------------------------------------------------------------------------
MASSACHUSETTS--1.8%
Lowell, MA Series B GO (FSA) (AAA/Aaa)
$1,000,000 5.60% 11/01/12 $ 989,920
- -------------------------------------------------------------------------
MICHIGAN--5.3%
Goodrich Area School District Refunding GO (AMBAC)
(AAA/Aaa)
$1,000,000 7.65% 05/01/11 $ 1,194,040
Grand Ledge Public Schools District GO (MBIA)
(AAA/Aaa)/(a)/
1,640,000 5.45 05/01/11 1,642,821
- -------------------------------------------------------------------------
$ 2,836,861
- -------------------------------------------------------------------------
NEBRASKA--0.9%
Omaha, NE Package Facilities Corp. RB (AAA/Aa1)
$ 500,000 5.70% 09/15/15 $ 507,340
- -------------------------------------------------------------------------
NEW JERSEY--1.9%
New Jersey Turnpike Authority Series A RB (A/A)
$1,000,000 5.70% 01/01/01 $ 1,046,360
- -------------------------------------------------------------------------
NEW YORK--10.2%
New York City IDA USTA National Tennis Control Project
AMT (FSA) (AAA/Aaa)
$ 800,000 6.60% 11/15/11 $ 879,408
New York State GO (A-/A)
2,000,000 5.63 03/01/13 1,983,440
New York State Local Government Assistance Corp.
(A+/A)/(c)/
2,575,000 5.90 04/01/13 2,609,016
- -------------------------------------------------------------------------
$ 5,471,864
- -------------------------------------------------------------------------
OHIO--4.6%
Ohio State Water Development Authority Pollution Control
Facilities (MBIA) (AAA/Aaa)
$2,500,000 5.25% 12/01/09 $ 2,469,725
- -------------------------------------------------------------------------
OKLAHOMA--8.1%
Grand River Dam Authority RB (MBIA) (AAA/Aaa)
$3,000,000 5.50% 06/01/03 $ 3,169,200
19
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS MUNICIPAL INCOME FUND (continued)
October 31, 1995
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------
DEBT OBLIGATIONS (CONTINUED)
OKLAHOMA (CONTINUED)
Tulsa, OK GO (AA/Aa)
$1,140,000 6.50% 02/01/15 $ 1,217,360
- -------------------------------------------------------------------------
$ 4,386,560
- -------------------------------------------------------------------------
PENNSYLVANIA--4.1%
Delaware River Bridge Authority RB (AMBAC) (AAA/Aaa)
$2,000,000 7.38% 01/01/07 $ 2,219,800
- -------------------------------------------------------------------------
TEXAS--18.6%
Bexar County, TX Health Facilities Development Corp,
Revenue Refunding- Baptist Memorial Hospital Systems
Project RB (MBIA) (AAA/Aaa)
$1,245,000 6.90% 08/15/14 $ 1,368,803
Goose Creek Independent School District GO (PSF)
(AAA/Aaa)
2,825,000 5.00 02/15/16 2,600,865
Richardson, TX GO (AA/Aa)
3,260,000 5.00 02/15/11 3,120,309
Southwestern Texas State University RB (CAPGTY)
(AAA/Aaa)
1,375,000 5.10 08/15/14 1,285,006
Texas State AMT- Veterans Land GO (AA/Aa)/(c)/
1,555,000 6.30 12/01/14 1,614,199
- -------------------------------------------------------------------------
$ 9,989,182
- -------------------------------------------------------------------------
VERMONT--4.4%
Vermont Student Assistance Corp., Education Loan RB,
Series B (FSA) (AAA/Aaa)
$2,250,000 6.70% 12/15/12 $ 2,377,418
- -------------------------------------------------------------------------
WISCONSIN--4.3%
Wisconsin Housing & Economic Development Authority,
Series B AMT (AA/Aa)
$2,200,000 7.10% 09/01/15 $ 2,326,544
- -------------------------------------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $55,551,381) $56,899,345
- -------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS--8.4%
Harris County, TX Health Facilities Hospital
VRDN (A-1+/NR)
$ 700,000 4.00%/(d)/ 11/01/95 $ 700,000
200,000 4.00/(d)/ 11/07/95 200,000
Monroe County, GA Pollution Control
VRDN (A-1/VMIG-1)
1,100,000 3.90/(d)/ 11/07/95 1,100,000
- -------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS (CONTINUED)
New York, NY Series VRDN (A-1+/VMIG-1)
$1,000,000 4.05%/(d)/ 11/01/95 $ 1,000,000
New York City Muni Water Finance Authority VRDN Fiscal
1993 Series C (FGIC) (A-1+/MIG-1)
1,500,000 4.00/(d)/ 11/01/95 1,500,000
- -------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $4,500,000) $ 4,500,000
- -------------------------------------------------------------------------
WARRANTS--0.9%
$5,000,000 Intermountain Power Agency, Utah
Certificates of Beneficial Interest @
90.306 expiring 05/07/96/(e)/ $ 500,000
- -------------------------------------------------------------------------
TOTAL WARRANTS
(Cost $343,750) $ 500,000
- -------------------------------------------------------------------------
Total Investments
(Cost $60,395,131/(f)/) $61,899,345
=========================================================================
=========================================================================
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost $ 1,544,592
Gross unrealized loss for investments in which cost exceeds
value (40,378)
- -------------------------------------------------------------------------
Net unrealized gain $ 1,504,214
=========================================================================
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS MUNICIPAL INCOME FUND (continued)
October 31, 1995
/(a)/ When issued security.
/(b)/ The interest rate disclosed for this security represents effective yield
to maturity.
/(c)/ Portions of these securities are being segregated for when-issued
securities.
/(d)/ Variable rate security. Coupon rate disclosed is that which is in effect
at October 31, 1995.
/(e)/ Non-income producing security.
/(f)/ The amount stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
INVESTMENT ABBREVIATIONS:
AMBAC - Insured by American Municipal Bond Assurance Corp.
AMT - Alternative Minimum Tax
CAPGTY - Capital Guaranty Insurance Co.
FGIC - Insured by Financial Guaranty Insurance Co.
FNMA - Federal National Mortgage Association
FSA - Financial Security Assurance Co.
GNMA - Government National Mortgage Association
GO - General Obligation
IDA - Industrial Development Authority
MBIA - Insured by Municipal Bond Investors Assurance
NR - Not rated
PSF - Permanent School Fund
RB - Revenue Bond
VRDN - Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<CAPTION>
GOLDMAN GOLDMAN GOLDMAN
SACHS SACHS SACHS
GOVERNMENT GLOBAL MUNICIPAL
INCOME INCOME INCOME
FUND FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(cost $30,931,415, $273,501,082 and $60,395,131) $ 31,340,222 $272,945,552 $61,899,345
Receivables:
Investment securities sold -- 20,579,927 5,791,250
Interest 210,018 5,814,585 851,486
Forward foreign currency exchange contracts -- 2,950,813 --
Foreign tax withheld -- 675,843 --
Fund shares sold 59,203 51,644 71,355
Cash 4,974 1,232 42,845
Deferred organization expenses, net 42,846 46,256 47,683
Other assets 79,092 111,218 56,881
------------ ------------ -----------
Total assets 31,736,355 303,177,070 68,760,845
------------ ------------ -----------
LIABILITIES:
Payables:
Investment securities purchased 2,144,668 21,461,760 14,753,768
Forward foreign currency exchange contracts -- 3,825,677 --
Fund shares repurchased 11,371 50,000 44,777
Investment adviser fees 6,127 93,769 18,167
Administration fees -- 35,163 6,813
Authorized dealer service fees 6,127 51,936 11,354
Distribution fees -- 51,936 --
Transfer agent fees 13,928 26,305 13,779
Accrued expenses and other liabilities 51,535 126,175 114,953
------------ ------------ -----------
Total liabilities 2,233,756 25,722,721 14,963,611
------------ ------------ -----------
NET ASSETS:
Paid in capital 29,150,881 272,761,135 54,514,862
Accumulated undistributed net investment income 36,251 16,641,827 42,738
Accumulated net realized loss on investment
transactions (93,340) (13,043,346) (2,264,580)
Accumulated net realized foreign currency gain -- 2,443,547 --
Net unrealized gain on investments 408,807 4,810,713 1,504,214
Net unrealized loss on translation of assets and
liabilities denominated in foreign currencies -- (6,159,527) --
----------- ------------ -----------
Net assets $29,502,599 $277,454,349 $53,797,234
=========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
CLASS A INSTITUTIONAL
------- -------------
<S> <C> <C> <C> <C>
Net asset value and redemption price per share
(net assets/shares outstanding) $14.47 $14.45 $14.45 $14.17
========= ========== ========= =========
Maximum public offering price per share
(NAV per share x 1.0471)/(a)/ $15.15 $15.13 $14.45 $14.84
========= ========== ========= =========
Shares outstanding, $.001 par value
(unlimited number of shares authorized) 2,038,356 17,008,968 2,188,371 3,796,312
========= ========== ========= =========
</TABLE>
/(a)/ The Goldman Sachs Global Income Fund's Institutional shares maximum public
offering price per share is equivalent to the net asset value per share.
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended October 31, 1995
<TABLE>
<CAPTION>
GOLDMAN GOLDMAN GOLDMAN
SACHS SACHS SACHS
GOVERNMENT GLOBAL MUNICIPAL
INCOME INCOME INCOME
FUND FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest/(a)/ $1,452,092 $ 23,662,535 $2,846,866
---------- ------------ ----------
Total income 1,452,092 23,662,535 2,846,866
---------- ------------ ----------
EXPENSES:
Investment adviser fees 101,737 2,367,381 200,207
Administration fees 30,521 473,476 75,077
Authorized dealer service fees 25,239 281,949 55,106
Distribution fees 76,499 1,257,211 195,152
Custodian fees 36,551 179,346 25,915
Transfer agent fees 94,095 106,764 63,695
Professional fees 39,836 70,511 53,407
Registration fees 37,256 75,289 21,406
Amortization of deferred organization expenses 18,796 61,394 17,545
Trustee fees 597 11,034 1,258
Other 14,808 49,443 38,062
---------- ------------ ----------
TOTAL EXPENSES 475,935 4,933,798 746,830
Less--expenses reimbursable and fees waived
by Goldman Sachs (381,105) (930,147) (366,894)
---------- ------------ ----------
NET EXPENSES 94,830 4,003,651 379,936
---------- ------------ ----------
NET INVESTMENT INCOME 1,357,262 19,658,884 2,466,930
---------- ------------ ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT,
OPTIONS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Investment transactions 603,048 5,556,002 938,332
Foreign currency related transactions -- 18,804,029 --
Net change in unrealized gain (loss) on:
Investments 902,391 14,759,004 3,055,111
Translation of assets and liabilities denominated
in foreign currencies -- (15,288,240) --
---------- ------------ ----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENT,
OPTIONS AND FOREIGN CURRENCY TRANSACTIONS 1,505,439 23,830,795 3,993,443
---------- ------------ ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,862,701 $ 43,489,679 $6,460,373
========== ============ ==========
</TABLE>
/(a)/ Net of $101,514 in foreign withholding tax for the Global Income Fund.
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended October 31, 1995
<TABLE>
<CAPTION>
GOLDMAN GOLDMAN GOLDMAN
SACHS SACHS SACHS
GOVERNMENT GLOBAL MUNICIPAL
INCOME INCOME INCOME
FUND FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 1,357,262 $ 19,658,884 $ 2,466,930
Net realized gain from investment transactions 603,048 5,556,002 938,332
Net realized gain from foreign currency
related transactions -- 18,804,029 --
Net change in unrealized gain on investments 902,391 14,759,004 3,055,111
Net change in unrealized loss on translation of
assets and liabilities denominated
in foreign currencies -- (15,288,240) --
----------- ------------ -----------
Net increase in net assets resulting
from operations 2,862,701 43,489,679 6,460,373
----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,361,620) (20,883,123)/(a)/ (2,466,930)
----------- ------------ -----------
Total distributions to shareholders (1,361,620) (20,883,123) (2,466,930)
----------- ------------ -----------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 15,973,014 53,349,100 11,879,853
Reinvestment of dividends and distributions 1,123,498 13,008,610 1,551,121
Cost of shares repurchased (3,546,816) (208,094,050) (11,000,210)
----------- ------------ -----------
Net increase (decrease) in net assets
resulting from share transactions 13,549,696 (141,736,340) 2,430,764
----------- ------------ -----------
Total increase (decrease) 15,050,777 (119,129,784) 6,424,207
----------- ------------ -----------
NET ASSETS:
Beginning of year 14,451,822 396,584,133 47,373,027
----------- ------------ -----------
End of year $29,502,599 $277,454,349 $53,797,234
=========== ============ ===========
Accumulated undistributed net investment income $ 36,251 $ 16,641,827 $ 42,738
=========== ============ ===========
SUMMARY OF SHARE TRANSACTIONS:
Shares sold 1,139,008 3,822,903 876,447
Reinvestment of dividends and distributions 80,152 935,191 113,767
Shares repurchased (253,583 ) (15,079,626) (816,569)
----------- ------------ -----------
Net increase (decrease) in shares outstanding 965,577 (10,321,532) 173,645
=========== ============ ===========
</TABLE>
/(a)/ The Global Income Fund distributed $20,322,640 and $560,483 from net
investment income for the Class A and Institutional class of shares,
respectively.
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (continued)
For the Year Ended October 31, 1994
<TABLE>
<CAPTION>
GOLDMAN GOLDMAN GOLDMAN
SACHS SACHS SACHS
GOVERNMENT GLOBAL MUNICIPAL
INCOME INCOME INCOME
FUND FUND/(a)/ FUND
------------ ------------ -----------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 794,938 $ 34,832,452 $ 2,300,535
Net realized loss from investment,
option and futures transactions (693,341) (29,399,159) (3,202,912)
Net realized loss from foreign currency
related transactions -- (12,649,508) --
Net change in unrealized loss on
investments and options (502,522) (31,154,593) (1,799,359)
Net change in unrealized gain on translation
of assets and liabilities denominated in
foreign currencies -- 7,363,987 --
----------- ------------- ------------
Net decrease in net assets resulting
from operations (400,925) (31,006,821) (2,701,736)
----------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (794,938) (8,807,313) (2,300,535)
In excess of net investment income (17,584) -- --
Net realized gain on investment,
option and futures transactions (106,548) (7,198,898) (108,139)
In excess of net realized gain on investment,
option and futures transactions (3,047) -- --
Paid-in capital -- (25,765,213) --
----------- ------------- ------------
Total distributions to shareholders (922,117) (41,771,424) (2,408,674)
----------- ------------- ------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 8,616,512 133,966,890 40,579,374
Reinvestment of dividends and distributions 762,895 26,726,504 1,557,330
Cost of shares repurchased (6,464,527) (366,992,820) (19,819,419)
----------- ------------- ------------
Net increase (decrease) in net assets
resulting from share transactions 2,914,880 (206,299,426) 22,317,285
----------- ------------- ------------
Total increase (decrease) 1,591,838 (279,077,671) 17,206,875
NET ASSETS:
Beginning of year 12,859,984 675,661,804 30,166,152
----------- ------------- ------------
End of year $14,451,822 $ 396,584,133 $ 47,373,027
=========== ============= ============
Accumulated undistributed net investment income $ 22,212 $ 1,318,755 $ 25,593
=========== ============= ============
SUMMARY OF SHARE TRANSACTIONS:
Shares sold 615,568 9,067,823 2,852,822
Reinvestment of dividends and distributions 54,242 1,870,918 112,990
Shares repurchased (460,162) (26,266,551) (1,404,132)
----------- ------------- ------------
Net increase (decrease) in shares outstanding 209,648 (15,327,810) 1,561,680
=========== ============= ============
</TABLE>
/(a)/ For the year ended October 31, 1994 only Class A shares were outstanding.
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
1. ORGANIZATION
Goldman Sachs Trust (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end, management
investment company. Included in this report are the financial statements for
the Goldman Sachs Government Income Fund (Government Income), the Goldman Sachs
Global Income Fund (Global Income) and the Goldman Sachs Municipal Income Fund
(Municipal Income), collectively, "the Funds" or individually a "Fund".
Government Income and Municipal Income are diversified portfolios whereas Global
Income is a separate non-diversified portfolio. The Global Income Fund currently
offers two classes of shares - Class A and Institutional shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds which are in conformity with those generally accepted in
the investment company industry:
A. Investment Valuation
- ------------------------
Investments in debt securities, other than money market instruments, held by
Global Income are valued on the basis of dealer-supplied quotations or by a
pricing service approved by the Board of Trustees if such prices are believed by
the investment adviser to accurately represent market value. The prices derived
by a pricing agent reflect broker/dealer-supplied valuations and electronic data
processing techniques. If those prices are not deemed by the Fund's Investment
Adviser to be representative of the market values at the time the net asset
value is calculated, then such securities will be valued at fair value as
described below. Options and futures contracts are valued at the last sale
price on the market where any such option or futures contract is principally
traded. Forward foreign currency exchange contracts are valued at the mean
between the last bid and asked quotations supplied by a dealer in such
contracts. All other securities and other assets, including debt securities,
for which prices are supplied by a pricing agent but are not deemed by the
Fund's Investment Adviser to be representative of market values, restricted
securities and securities for which no market quotation is available, but
excluding money market instruments with a remaining maturity of sixty days or
less, are valued at fair value as determined in good faith pursuant to
procedures established by the Board of Trustees. Money market instruments held
by the Fund with a remaining maturity of sixty days or less will be valued by
the amortized cost method, which approximates market value.
Investments in portfolio securities held by the Government Income and Municipal
Income Funds for which accurate market quotations are readily available are
valued on the basis of quotations furnished by a pricing service or provided by
dealers in such securities. Portfolio securities held by the Government Income
and Municipal Income Funds, for which accurate market quotations are not readily
available are valued at fair value using methods determined in good faith under
procedures established by the Trust's Board of Trustees and may include yield
equivalents or a pricing matrix. Exchange traded options and futures contracts
will be valued by the investment adviser at the last sale price on the exchange
where such contracts and options are principally traded. Short-term debt
obligations maturing in sixty days or less are valued at amortized cost.
B. SecurityTransactions and Investment Income
- ----------------------------------------------
Security transactions are recorded on the trade date. Realized gains and losses
on sales of portfolio securities are calculated on the identified cost basis.
Interest income is recorded on the basis of interest accrued. Premiums on
interest-only securities and on collateralized mortgage obligations with nominal
principal amounts are amortized, on an effective yield basis, over the expected
lives of the respective securities, taking into account principal prepayment
experience and estimates of future principal prepayments. Certain mortgage
security paydown gains and losses are taxable as ordinary income. Such paydown
gains and losses increase or decrease taxable ordinary income available
26
<PAGE>
for distribution and are classified as interest income in the accompanying
Statements of Operations. Original issue discounts on debt securities are
amortized to interest income over the life of the security with a corresponding
increase in the cost basis of that security. For the Municipal Income Fund,
market premiums on other long-term debt securities are amortized to interest
income while for the Global Income Fund, market discounts on other long-term
debt securities are accreted to interest income.
C. Foreign Currency Translations
- ---------------------------------
Amounts denominated in foreign currencies are translated into U.S. dollars on
the following basis: (i) investment valuations, other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based upon current exchange rates; (ii) purchases and sales of
foreign investments, income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Net realized and unrealized gain (loss) on foreign currency transactions will
represent: (i) foreign exchange gains and losses from the sale and holdings of
foreign currencies and investments; (ii) gains and losses between trade date and
settlement date on investment securities transactions and forward exchange
contracts; and (iii) gains and losses from the difference between amounts of
interest recorded and the amounts actually received.
D. Forward Foreign Currency Exchange Contracts
- -----------------------------------------------
The Global Income Fund may enter into forward foreign exchange contracts for the
purchase or sale of a specific foreign currency at a fixed price on a future
date as a hedge or cross-hedge against either specific transactions or portfolio
positions. The Global Income Fund may also purchase and sell forward contracts
to seek to increase total return. The aggregate principal amounts of the
contracts for which delivery is anticipated are reflected in the Fund's
accounts, while the aggregate principal amounts are reflected net in the
accompanying Statements of Assets and Liabilities if the Fund intends to settle
the contract prior to delivery. All commitments are "marked-to-market" daily at
the applicable translation rates and any resulting unrealized gains or losses
are recorded in the Fund's financial statements. The Fund records realized
gains or losses at the time the forward contract is offset by entry into a
closing transaction or extinguished by delivery of the currency. Risks may
arise upon entering into 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. Mortgage Dollar Rolls
- -------------------------
The Government Income Fund may enter into mortgage "dollar rolls" in which the
Fund sells securities in the current month for delivery and simultaneously
contracts with the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future date. The Fund
loses the right to receive principal and interest paid on the securities sold
but benefits to the extent of any price received for the securities sold and the
lower forward price for the future purchase (often referred to as the "drop") or
fee income plus the interest earned on the cash proceeds of the securities sold
until the settlement date of the forward purchase. The Fund will hold and
maintain in a segregated account, until the settlement date, cash or liquid,
high grade debt securities in an amount equal to the forward purchase price.
For financial reporting and tax reporting purposes, the Fund treats mortgage
dollar rolls as two separate transactions; one involving the purchase of a
security and a separate transaction involving a sale.
F. Options
- -----------
When call or put options are written, 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 a closing
27
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1995
purchase transaction has been entered into, a gain or loss is realized
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. When a written call
option is exercised, a gain or loss is realized from the sale of the underlying
security, and the proceeds of the sale are increased by the premium originally
received. When a written put option is exercised, the amount of the premium
originally received will reduce the cost of the security purchased upon
exercise.
Upon the purchase of a call option or a protective put option, the premium paid
is recorded as an investment, and subsequently marked-to-market to reflect the
current market value of the option. If an option which has been purchased
expires on the stipulated expiration date, a loss is realized in the amount of
the cost of the option. If a closing sale transaction has been entered into, a
gain or loss is realized, depending on whether the sale proceeds from the
closing sale transaction are greater or less than the cost of the option. If a
purchased put option is exercised, a gain or loss from the sale of the
underlying security is realized, and the proceeds from such sale will be
decreased by the premium originally paid. If a purchased call option is
exercised, the cost of the security purchased upon exercise will be increased by
the premium originally paid. In the case of index options, there is a risk of
loss from a change in value of such options which may exceed the related
premiums received.
G. Futures Contracts
- ---------------------
Upon entering into a futures contract, the Funds are required to deposit with a
broker an amount of cash or securities equal to the minimum "initial margin"
requirement of the futures exchange on which the contract is traded. Subsequent
payments ("variation margin") are made or received by the Funds each day,
dependent on the daily fluctuations in the value of the contract, and are
recorded for financial reporting purposes, as unrealized gains or losses. When
entering into a closing transaction, the Funds will realize a gain or loss equal
to the difference between the value of the futures contract to sell and the
futures contract to buy. Futures contracts are valued at the most recent
settlement price, unless such price does not reflect the fair market value of
the contract, in which case the position will be valued using methods as
approved by the Funds' Board of Trustees. Certain risks may arise upon entering
into futures contracts. These risks may include changes in the value of the
futures contract that may not directly correlate with changes in the value of
the underlying securities, or that the counterparty to a contract may default on
its obligations to perform.
H. Federal Taxes
- -----------------
It is each 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 investment company tax-exempt and taxable income to its
shareholders. Accordingly, no federal tax provisions are required.
The characterization of distributions to shareholders for financial reporting
purposes is determined in accordance with income tax rules. Therefore, the
source of a portfolio'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.
At October 31, 1995, the Funds had approximately the following amounts of
capital loss carryforward for U.S. Federal tax purposes:
Fund Amount Year of Expiration
- ---- ----------- ------------------
Government Income Fund $ 735,561 2002
Global Income Fund $10,295,502 2002
Municipal Income Fund $ 3,202,911 2002
28
<PAGE>
I. Deferred Organization Expenses
- ----------------------------------
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
J. Expenses
- ------------
Expenses incurred by the Trust that do not specifically relate to an individual
portfolio of the Trust are allocated to the portfolios based on each portfolio's
relative average net assets for the period.
Class A shareholders of the Global Income Fund bear all expenses and fees
relating to the distribution and authorized dealer service plans as well as
other expenses which are directly attributable to such shares. The Class A and
Institutional shareholders separately bear transfer agency fees.
3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as each Fund's investment adviser
pursuant to Investment Advisory Agreements. Goldman Sachs Asset Management
International ("GSAM International"), an affiliate of Goldman Sachs, acts as
subadviser under a Subadvisory Agreement for the Global Income Fund. Under the
Investment Advisory and Subadvisory Agreements, GSAM and GSAM International,
subject to the general supervision of the Trust's Board of Trustees, manage the
Funds' portfolios. As compensation for the services rendered pursuant to the
Investment Advisory Agreements and the assumption of the expenses related
thereto, GSAM is entitled to a fee, computed daily and payable monthly at an
annual rate equal to .50%, .25% and .40% of average daily net assets of the
Government Income, Global Income and Municipal Income Funds, respectively. As
compensation for the services rendered pursuant to the Subadvisory Agreement,
GSAM International is entitled to a subadvisory fee from the Global Income Fund
of .50% of the average daily net assets. For the year ended October 31, 1995,
GSAM voluntarily agreed to waive a portion of its investment advisory fees
amounting to approximately $57,700, $248,000 and $45,500 for the Government
Income, Global Income and Municipal Income Funds, respectively.
GSAM serves as each Fund's administrator pursuant to an Administration
Agreement. Under the Administration Agreement, GSAM administers the Funds'
business affairs, including providing facilities. As compensation for the
services rendered pursuant to the Administration Agreement, GSAM is entitled to
a fee, computed daily and payable monthly at an annual rate equal to .15% of
each Fund's average daily net assets. For the year ended October 31, 1995, GSAM
voluntarily agreed to waive a portion of its administration fee amounting to
approximately $30,500 for the Government Income Fund.
GSAM has voluntarily agreed to limit certain of the Funds'expenses (excluding
advisory, administration, distribution and authorized dealer service fees,
taxes, interest, brokerage, litigation, indemnification and other extraordinary
expenses and with respect to the Global Income Fund, transfer agent fees) to the
extent such expenses exceed .30%, .06% and .05% per annum of the Government
Income, Global Income and Municipal Income Funds, respectively. For the year
ended October 31, 1995, GSAM voluntarily agreed to reimburse all such expenses
for the Government Income Fund. For the year ended October 31, 1995 the amount
of reimbursed expenses for the Government Income, Global Income and Municipal
Income Funds were approximately $242,000, $70,000 and $196,000, respectively.
The amounts reimbursable to the Government Income, Global Income and Municipal
Income Funds at October 31, 1995 are approximately $49,000, $40,000 and $54,000,
respectively, and are included in "Other Assets" on the accompanying Statements
of Assets and Liabilities.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to a
Distribution Agreement and as such may receive a portion of the sales load
imposed on the sale of Fund shares. During the year ended October 31, 1995,
29
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1995
Goldman Sachs retained approximately $22,000, $15,000 and $48,000 of sales loads
related to the Government Income, Global Income and Municipal Income Funds,
respectively.
The Trust, on behalf of each Fund, has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1. Under the Distribution Plan,
Goldman Sachs is entitled to a quarterly fee from each Fund for distribution
services equal, on an annual basis, to .25% of each Fund's average daily net
assets (or, in the case of Global Income Fund, the average daily net assets
attributable to the Class A shares). Currently, Goldman Sachs has voluntarily
agreed to waive the entire amount of such fee for the Government Income and
Municipal Income Funds. Effective June 1, 1995, each Fund's Distribution Plan
was amended to reduce the contractual fee from .50% to .25% of average daily net
assets and to eliminate the provision of certain services under the Distribution
Plan which are currently provided under the Authorized Dealer Service Plan.
Distribution fees waived for the period amounted to $50,869, $611,952 and
$125,129 for the Government Income, Global Income and Municipal Income Funds,
respectively.
Effective June 1, 1995, the Company on behalf of each Fund adopted an Authorized
Dealer Service Plan (the "Service Plan") pursuant to which Goldman Sachs and
Authorized Dealers are compensated for providing personal and account
maintenance services. Each Fund pays a fee under its Service Plan equal, to on
an annual basis, to .25% of each Fund's average daily net assets (or, in the
case of Global Income Fund, the average daily net assets attributable solely to
the Class A shares). Goldman Sachs also serves as the Transfer Agent of the
Funds for a fee.
4. LINE OF CREDIT FACILITY
The Funds participate in a $100,000,000 uncommitted, unsecured revolving line of
credit facility. In addition, the Global Income Fund has an $8,000,000
committed, unsecured revolving line of credit facility available. Both
facilities are to be used solely for temporary or emergency purposes. The
interest rate on 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. For the year ended October 31, 1995, the Funds did
not have any borrowings under these facilities.
5. INVESTMENT TRANSACTIONS
Purchases and proceeds of sales or maturities of long-term securities for the
year ended October 31, 1995, were as follows:
GOVERNMENT GLOBAL MUNICIPAL
FUND INCOME INCOME INCOME
- ----------------------------------------------------------------------------
Purchases of U.S.
Government and
agency obligations $100,296,354 $ 83,722,782 $ --
- ----------------------------------------------------------------------------
Purchases (excluding
U.S. Government and
agency obligations) 3,011,921 656,349,335 174,160,831
- ----------------------------------------------------------------------------
Sales or maturities of
U.S. Government and
agency obligations 87,845,570 196,872,555 --
- ----------------------------------------------------------------------------
Sales or maturities
(excluding U.S.
Government and
agency obligations) 1,887,472 704,661,927 166,318,514
- ----------------------------------------------------------------------------
For the year ended October 31, 1995, option transactions in the Global Income
Fund were as follows:
PREMIUMS
OPTIONS WRITTEN RECEIVED
- ----------------------------------------------------------------------------
Balance outstanding, beginning of year $ --
Options written 130,440
Options exercised (130,440)
- ----------------------------------------------------------------------------
Balance outstanding, end of year $ --
- ----------------------------------------------------------------------------
30
<PAGE>
OPTIONS PURCHASED COST
- ----------------------------------------------------------------------------
Balance outstanding, beginning of year $ --
Options purchased 84,446
Options exercised (84,446)
- ----------------------------------------------------------------------------
Balance outstanding, end of year $ --
============================================================================
Certain risks related to written call or put options arise from the possible
inability of counterparties to meet the terms of their contracts and from
movement in currency values and interest rates.
At October 31, 1995, the Global Income Fund had outstanding forward foreign
currency exchange contracts, both to purchase and sell foreign currencies as
follows:
VALUE ON
FOREIGN CURRENCY SETTLEMENT CURRENT UNREALIZED
PURCHASE CONTRACTS DATE VALUE GAIN/(LOSS)
- ----------------------------------------------------------------------------
DEUTSCHE MARK
Expiring 11/16/95 $ 268,323 $ 281,721 $ 13,398
Expiring 9/9/96/(a)/ 14,435,171 15,391,612 956,441
- ----------------------------------------------------------------------------
Total Foreign Currency
Purchase Contracts $ 14,703,494 $ 15,673,333 $ 969,839
============================================================================
============================================================================
VALUE ON
FOREIGN CURRENCY SETTLEMENT CURRENT UNREALIZED
PURCHASE CONTRACTS DATE VALUE GAIN/(LOSS)
- ----------------------------------------------------------------------------
BELGIAN FRANC
Expiring 2/28/96 $ 9,255,202 $ 9,165,116 $ 90,086
Expiring 9/9/96/(a)/ 14,435,171 15,409,951 (974,780)
BRITISH POUND STERLING
Expiring 12/11/95 35,559,013 36,300,525 (741,512)
DEUTSCHE MARK
Expiring 1/24/96 18,148,618 18,165,060 (16,442)
Expiring 1/31/96 144,844 144,844 --
FRENCH FRANC
Expiring 11/30/95 21,550,856 22,041,337 (490,481)
JAPANESE YEN
Expiring 12/18/95 13,687,026 13,561,625 125,401
Expiring 1/17/96 34,125,931 33,541,512 584,419
SPANISH PESETA
Expiring 11/27/95 13,646,350 13,953,670 (307,320)
- ----------------------------------------------------------------------------
Total Foreign Currency
Sale Contracts $160,553,011 $162,283,640 $(1,730,629)
============================================================================
/(a)/ Represents a cross-currency forward foreign exchange contract.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
At October 31,1995, the Global Income Fund had sufficient cash and/or securities
to cover any commitments under these contracts.
The Global Income Fund has recorded a "Receivable for forward foreign currency
exchange contracts" and "Payable for forward foreign currency exchange
contracts" resulting from open and closed but not settled forward foreign
currency exchange contracts of $2,950,813 and $3,825,677, respectively, in the
accompanying Statement of Assets and Liabilities. Included in the "Receivable
and payable for forward foreign currency exchange contracts" are $1,181,068 and
$1,295,142, respectively, related to forward contracts closed but not settled as
of October 31, 1995.
6. SUMMARY OF SHARE TRANSACTIONS
GLOBAL INCOME FUND DOLLARS SHARES
- -----------------------------------------------------------------------------
Class A Shares:
Shares sold $ 22,864,336 1,659,380
Reinvestment of dividends and distributions 12,448,128 895,996
Shares repurchased (207,889,246) (15,065,279)
------------- -----------
(172,576,782) (12,509,903)
------------- -----------
Institutional Shares:
Shares sold 30,484,764 2,163,523
Reinvestment of dividends and distributions 560,482 39,195
Shares repurchased (204,804) (14,347)
------------- -----------
30,840,442 2,188,371
------------- -----------
Total $(141,736,340) (10,321,532)
============= ===========
7. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is
31
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1995
required to equal or exceed the value of the repurchase agreement. The
underlying securities for all repurchase agreements are held in safekeeping in
the customer-only account of State Street Bank & Trust Co., the Funds'
custodian, or at subcustodians. GSAM monitors the market value of the underlying
securities by pricing them daily.
8. JOINT REPURCHASE AGREEMENT ACCOUNT
The Government Income Fund, together with other registered investment companies
having advisory agreements with GSAM or its affiliates, transfers uninvested
cash balances into a joint account, the daily aggregate balance of which is
invested in one or more repurchase agreements. The underlying securities for the
repurchase agreements are U.S. Treasury obligations and mortgage-related
securities issued by the U.S. Government, its agencies or instrumentalities. As
of October 31, 1995, the Government Income Fund had a 0.16% undivided interest
in the repurchase agreement in the joint account which equaled $2,900,000, in
principal amount. As of October 31, 1995, the repurchase agreement in the joint
account along with the corresponding underlying securities (including the type
of security, market value, interest rate and maturity date) were as follows:
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
- --------------------------------------------------------------------------------
Lehman Brothers, Inc. dated 10/31/95, repurchase price $965,159,225 (U.S.
Treasury Notes: $955,186,569, 4.25%-9.50%, 11/15/95-08/15/02; U.S. Treasury
Interest-Only Strips:$19,548,855, 11/15/00-08/15/02; U.S. Treasury Principal-
Only Strips:$6,376,719, 6.38%-8.50%, 11/15/00-08/15/02))
$965,000,000 5.94% 11/01/95 $ 965,000,000
Salomon Brothers, Inc. dated 10/31/95, repurchase price $830,136,489 (U.S.
Treasury Notes: $383,210,541, 4.25%-8.87%, 11/15/95-08/31/00; U.S. Treasury
Interest-Only Strips: $356,333,527, 11/15/95-08/15/02; U.S. Treasury
Principal-Only Strips: $107,445,042, 6.38%-9.50%, 11/15/95-08/15/02)
830,000,000 5.92 11/01/95 830,000,000
- --------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $1,795,000,000
================================================================================
9. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, the Government Income, Global
Income and Municipal Income Funds have reclassified $18,397, $61,394 and
$17,145, respectively, from paid-in capital to accumulated undistributed net
investment income. Additionally, the Global Income Fund has reclassified
$16,485,917 from accumulated net realized foreign currency gain to accumulated
undistributed net investment income. These reclassifications have no impact on
the net asset values of the Funds and are designed to present the Funds' capital
accounts on a tax basis.
10. OTHER
As of October 31, 1995, Goldman, Sachs & Co. Employees Profit Sharing and
Retirement Income Plan was the beneficial owner of approximately 9% of the
outstanding shares of the Goldman Sachs Global Income Fund.
32
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS
-----------------------------------------------------------------------------------
NET REALIZED NET REALIZED
AND UNREALIZED AND UNREALIZED TOTAL
GAIN (LOSS) GAIN (LOSS) INCOME
NET ASSET ON INVESTMENT, ON FOREIGN (LOSS)
VALUE AT NET OPTION AND CURRENCY FROM
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT
OF PERIOD INCOME TRANSACTIONS/(a)/ TRANSACTIONS/(a)/ OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Years Ended
October 31,
- --------------------------
1995...................... $13.47 $ 0.94 $ 1.00 $ -- $ 1.94
1994...................... 14.90 0.85 (1.28) -- (0.43)
For the Period February
10, 1993/(e)/ through
October 31,
- --------------------------
1993...................... 14.32 0.56 0.58 -- 1.14
<CAPTION>
GLOBAL INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Years Ended
October 31,
- --------------------------
1995 - Class A shares 13.43 0.89 0.92 0.15 1.96
1995 - Institutional
shares/(f)/ 14.09 0.22 0.34 0.06 0.62
1994 - Class A shares 15.07 0.84 (1.37) (0.12) (0.65)
1993 - Class A shares 14.69 0.85 1.07 (0.42) 1.50
1992 - Class A shares 14.60 1.14 0.45 (0.36) 1.23
For the Period August 2,
1991/(e)/ through
October 31,
- --------------------------
1991 - Class A shares 14.55 0.25 0.23 (0.19) 0.29
<CAPTION>
MUNICIPAL INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Years Ended
October 31,
- --------------------------
1995...................... 13.08 0.67 1.09 -- 1.76
1994...................... 14.64 0.73 (1.51) -- (0.78)
For the Period July 20,
1993/(e)/ through
October 31,
- --------------------------
1993...................... 14.32 0.22 0.32 -- 0.54
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------
IN EXCESS OF
FROM NET NET REALIZED
REALIZED GAIN GAIN ON
ON INVESTMENT, IN EXCESS INVESTMENT, FROM TOTAL
FROM NET OPTION OF NET OPTION AND PAID DISTRIBUTIONS
INVESTMENT AND FUTURES INVESTMENT FUTURES IN TO
INCOME TRANSACTIONS INCOME TRANSACTIONS CAPITAL SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended
October 31,
- --------------------------
1995...................... $(0.94) $ -- $ -- $ -- $ -- $(0.94)
1994...................... (0.85) (0.12) (0.02) (0.01) -- (1.00)
For the Period February
10, 1993/(e)/ through
October 31,
- --------------------------
1993...................... (0.56) -- -- -- -- (0.56)
<CAPTION>
GLOBAL INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended
October 31,
- --------------------------
1995 - Class A shares (0.94) -- -- -- -- (0.94)
1995 - Institutional
shares/(f)/ (0.26) -- -- -- -- (0.26)
1994 - Class A shares (0.22) (0.16) -- -- (0.61) (0.99)
1993 - Class A shares (0.85) (0.27) -- -- -- (1.12)
1992 - Class A shares (1.14) -- -- -- -- (1.14)
For the Period August 2,
1991/(e)/ through
October 31,
- --------------------------
1991 - Class A shares (0.24) -- -- -- -- (0.24)
<CAPTION>
MUNICIPAL INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended
October 31,
- --------------------------
1995...................... (0.67) -- -- -- -- (0.67)
1994...................... (0.73) (0.05) -- -- -- (0.78)
For the Period July 20,
1993/(e)/ through
October 31,
- --------------------------
1993...................... (0.22) -- -- -- -- (0.22)
</TABLE>
<TABLE>
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
------------------------
RATIO OF RATIO OF
NET NET NET NET
INCREASE RATIO OF INVESTMENT ASSETS INVESTMENT
(DECREASE) NET ASSET NET INCOME AT END RATIO OF INCOME
IN NET VALUE AT EXPENSES (LOSS) PORTFOLIO OF EXPENSES (LOSS)
ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
VALUE PERIOD RETURN/(b)/ NET ASSETS NET ASSETS RATE/(d)/ (IN 000S) NET ASSETS NET ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended
October 31,
- --------------------------
1995...................... $ 1.00 $14.47 14.90% 0.47% 6.67% 449.53% $ 29,503 2.34% 4.80%
1994...................... (1.43) 13.47 (2.98) 0.11 6.06 654.90 14,452 2.86 3.31
For the Period February
10, 1993/(e)/ through
October 31,
- --------------------------
1993...................... 0.58 14.90 8.03 0.00/(c)/ 4.87/(c)/ 725.41 12,860 4.00/(c)/ 0.87/(c)/
<CAPTION>
GLOBAL INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended
October 31,
- --------------------------
1995 - Class A shares 1.02 14.45 15.08 1.29 6.23 265.86 245,835 1.58 5.94
1995 - Institutional
shares/(f)/ 0.36 14.45 4.42 0.65/(c)/ 6.01/(c)/ 265.86 31,619 1.08/(c)/ 5.58/(c)/
1994 - Class A shares (1.64) 13.43 (4.49) 1.28 5.73 343.74 396,584 1.53 5.48
1993 - Class A shares 0.38 15.07 10.75 1.30 5.78 313.88 675,662 1.55 5.53
1992 - Class A shares 0.09 14.69 8.77 1.37 7.85 270.75 588,893 1.62 7.60
For the Period August 2,
1991/(e)/ through
October 31,
- --------------------------
1991 - Class A shares 0.05 14.60 2.00 0.38/(g)/ 1.72/(g)/ 34.22 388,744 0.44/(g)/ 1.66/(g)/
<CAPTION>
MUNICIPAL INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended
October 31,
1995...................... 1.09 14.17 13.79 0.76 4.93 335.55 53,797 1.49 4.20
1994...................... (1.56) 13.08 (5.51) 0.45 5.28 357.54 47,373 1.55 4.18
For the Period July 20,
1993/(e)/ through
October 31,
- --------------------------
1993...................... 0.32 14.64 3.73 0.00/(c)/ 5.15/(c)/ 99.99 30,166 2.42/(c)/ 2.73/(c)/
</TABLE>
/(a)/ Includes the balancing effect of calculating per share amounts.
/(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. For the Retail classes total return would be reduced if a
sales charge were taken into account.
/(c)/ Annualized.
/(d)/ Includes effect of mortgage dollar roll transactions for the Government
Income Fund.
/(e)/ Commencement of operations.
/(f)/ Institutional shares commenced operations on August 1, 1995.
/(g)/ Not annualized.
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of the Goldman Sachs Government Income
Fund, Goldman Sachs Global Income Fund and Goldman Sachs Municipal Income Fund:
We have audited the accompanying statements of assets and liabilities of the
Goldman Sachs Government Income Fund, Goldman Sachs Global Income Fund and
Goldman Sachs Municipal Income Fund, (portfolios of Goldman Sachs Trust, a
Massachusetts Business Trust) including the statements of investments, as of
October 31, 1995, and the related statements of operations, the statements of
changes in net assets and the financial highlights for each of the periods
presented. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of the
Goldman Sachs Government Income Fund, Goldman Sachs Global Income Fund and
Goldman Sachs Municipal Income Fund as of October 31, 1995, the results of their
operations and the changes in their net assets and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
December 8, 1995
34
<PAGE>
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Trust Prospectus which contains
facts concerning the Fund's objectives and policies, management, expenses and
other information.
- --------------------------------------------------------------------------------
35
<PAGE>
Goldman Sachs
1 New York Plaza
New York, NY 10004
TRUSTEES
Paul C. Nagel, Jr., Chairman
Ashok N. Bakhru
Marcia L. Beck
David B. Ford
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
OFFICERS
Marcia L. Beck, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
GOLDMAN SACHS
Investment Adviser, Administrator,
Distributor and Transfer Agent
GST/AR/1095(RET)
The Goldman Sachs
Fixed Income
Portfolios
- -------------------------
Annual Report
October 31, 1995
Goldman Sachs Government Income Fund
Goldman Sachs Global Income Fund
Goldman Sachs Municipal Income Fund
Goldman
Sachs
36
