<PAGE>
GOLDMAN SACHS
GOVERNMENT AGENCY PORTFOLIO
(FOR FINANCIAL INSTITUTIONS)
Financial Statements
April 28, 1995
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Shareholders and Trustees of Goldman Sachs Government Agency Portfolio
(for Financial Institutions):
We have audited the accompanying statements of operations and changes in net
assets and the financial highlights of Goldman Sachs Government Agency Portfolio
(for Financial Institutions) (a portfolio of Goldman Sachs Trust, a
Massachusetts business trust) for 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 audits 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. 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
Goldman Sachs Government Agency Portfolio (for Financial Institutions) of
Goldman Sachs Trust for the periods presented, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts,
June 1, 1995
<PAGE>
GS GOVERNMENT AGENCY PORTFOLIO
(For Financial Institutions)
_______________
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED APRIL 28, 1995 /(a)/
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest income......................................... $ 940,816
-------------
Expenses:
Investment adviser fees................................. 62,794
Custodian fees.......................................... 25,660
Amortization of deferred organization expenses.......... 149,362
Transfer agent fees..................................... 6,279
Professional fees....................................... 34,912
Registration fees....................................... 24,243
Trustees fees........................................... 1,077
Other................................................... 86,907
-------------
Total expenses.................................... 391,234
Less--Expenses reimbursable by GSFM..................... (305,181)
-------------
Net expenses...................................... 86,053
Administration share fees......................... 1,903
-------------
Net expenses and share fees....................... 87,956
-------------
Net investment income..................................... 852,860
Net realized loss on investment transactions and futures.. (1,258,041)
Net change in unrealized loss on investments and futures.. 1,302,840
-------------
Net increase in net assets resulting from operations...... $ 897,659
=============
</TABLE>
/(a)/ For the period from November 1, 1994 to April 28, 1995.
The accompanying notes are an integral
part of these financial statements.
<PAGE>
GS GOVERNMENT AGENCY PORTFOLIO
(For Financial Institutions)
_______________
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEAR
ENDED ENDED
APRIL 28, 1995 /(a)/ OCTOBER 31, 1994
------------------------ ------------------
<S> <C> <C>
From Operations:
Net investment income..................................... $ 852,860 $ 4,572,866
Net realized loss on investment
transactions and futures................................. (1,258,041) (1,639,559)
Net change in unrealized loss on
investments and futures.................................. 1,302,840 (1,023,310)
---------- -----------
Net increase in net assets
resulting from operations................................ 897,659 1,909,997
---------- -----------
Distributions to Shareholders:
From net investment income
Institutional shares..................................... (569,614) (4,223,821)
Administration shares.................................... (28,371) (49,648)
In excess of net investment income
Institutional shares..................................... -- (435,990)
Administration shares.................................... -- --
Return of capital
Institutional shares..................................... (242,782) --
Administration shares.................................... (12,093) --
---------- -----------
Total distributions to shareholders....................... (852,860) (4,709,459)
---------- -----------
From Share Transactions:
Proceeds from sale of shares.............................. -- 89,736,852
Reinvestment of dividends................................. 514,996 2,530,792
Cost of shares repurchased................................ (44,804,845) (245,340,151)
Cost of shares exchanged in reorganization................ (20,385,309) --
---------- -----------
Decrease in net assets resulting
from share transactions................................. (64,675,158) (153,072,507)
---------- -----------
Total Decrease.............................................. (64,630,359) (155,871,969)
---------- -----------
Net Assets:
Beginning of period....................................... 64,630,359 220,502,328
---------- -----------
End of period............................................. $ -- $ 64,630,359
========== ===========
Distributions in excess of net investment income.......... $ -- $ (343,845)
========== ===========
Summary of Share Transactions:
Institutional shares:
Shares sold.............................................. -- 8,831,702
Reinvestment of dividends................................ 49,397 252,142
Shares repurchased....................................... (4,605,121) (24,595,392)
Shares exchanged in reorganization....................... (1,912,506) --
---------- -----------
(6,468,230) (15,511,548)
---------- -----------
Administration Shares:
Shares sold............................................. 3,383 150,075
Reinvestment of dividends............................... -- 5,203
Shares exchanged in reorganization...................... (158,661) --
---------- -----------
(155,278) 155,278
---------- -----------
Decrease in shares outstanding.............................. (6,623,508) (15,356,270)
========== ===========
</TABLE>
/(a)/ From the period from November 1, 1994 to April 28, 1995.
The accompanying notes are an integral
part of these financial statements.
<PAGE>
GS GOVERNMENT AGENCY PORTFOLIO
(For Financial Institutions)
_______________
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DISTRIBUTIONS
INCOME FROM INVESTMENT OPERATIONS TO SHAREHOLDERS
------------------------------------------- ------------------------
NET REALIZED
NET ASSET AND UNREALIZED TOTAL IN EXCESS OF NET ASSET
VALUE AT NET GAIN (LOSS) ON INCOME FROM FROM NET NET VALUE AT
BEGINNING INVESTMENT INVESTMENTS INVESTMENT INVESTMENT INVESTMENT RETURN OF END OF
OF PERIOD INCOME AND FUTURES/(b)/ OPERATIONS INCOME INCOME CAPITAL PERIOD
--------- ---------- ---------------- ----------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED APRIL 28, 1995 /(h)/
- -----------------------------------------
Institutional Shares $ 9.76 $0.2678/(g)/ $0.0800/(g)/ $0.3478/(g)/ $0.1878 $ -- $0.0800 $9.84/(f)/
Administration Shares 9.76 0.2557/(g)/ 0.0800/(g)/ 0.3357/(g)/ 0.1793 -- 0.0764 9.84/(f)/
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1994
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Shares 10.03 0.4161/(g)/ (0.2431)/(g)/ 0.1730/(g)/ (0.4016) (0.0414) -- 9.76
Administration Shares /(a)/ 9.98 0.3321/(g)/ (0.2160)/(g)/ 0.1161/(g)/ (0.3361) -- -- 9.76
<CAPTION>
FOR THE PERIOD DECEMBER 1, 1992 (COMMENCEMENT OF OPERATIONS) THROUGH OCTOBER 31, 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Shares 10.00 0.4172 0.0436 0.4608 (0.4172) (0.0136) -- 10.03
<CAPTION>
RATIOS ASSUMING NO
EXPENSE LIMITATIONS
-------------------------
RATIO OF NET RATIO OF NET
RATIO OF NET INVESTMENT RATIO OF INVESTMENT
EXPENSES TO INCOME TO NET ASSETS AT EXPENSES TO INCOME TO
TOTAL AVERAGE NET AVERAGE NET PORTFOLIO END OF PERIOD AVERAGE NET AVERAGE NET
RETURN/(c)/ ASSETS ASSETS TURNOVER RATE/(d)/ (IN THOUSANDS) ASSETS ASSETS
----------- ------------ ----------- ------------------- -------------- ----------- ------------
FOR THE PERIOD ENDED APRIL 28, 1995/(H)/
- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Institutional Shares 3.65% 0.47%/(e)/ 5.52%/(e)/ 0.00% $ -- 2.49%/(e)/ 2.75%/(e)/
Administration Shares 3.53 0.73/(e)/ 5.40 /(e)/ 0.00 -- 3.49/(e)/ 3.38/(e)/
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1994
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Institutional Shares 1.72 0.45 4.19 110.98 63,115 0.67 3.97
Administration Shares/(a)/ 1.00 0.70/(e)/ 4.32/(e)/ 110.98 1,515 0.91/e/ 4.10/(e)/
<CAPTION>
FOR THE PERIOD DECEMBER 1, 1992 (COMMENCEMENT OF OPERATIONS) THROUGH OCTOBER 31, 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Institutional Shares 4.70/(e)/ 0.45/(e)/ 3.91/(e)/ 441.04 220,502 1.03/(e)/ 3.32/(e)/
</TABLE>
________
/(a)/ Administration share activity commenced on January 20, 1994.
/(b)/ Includes balancing effect of calculating per share amounts.
/(c)/ Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period.
/(d)/ Includes effect of mortgage dollar roll transactions.
/(e)/ Annualized.
/(f)/ Represents final net asset value determined immediately preceeding the
Fund's reorganization into the GS Adjustable Rate Government Agency Fund
on April 28, 1995.
/(g)/ Calculated based on the average shares outstanding methodology.
/(h)/ For the period from November 1, 1994 to April 28, 1995.
The accompanying notes are an integral
part of these financial statements.
<PAGE>
GS GOVERNMENT AGENCY PORTFOLIO
(FOR FINANCIAL INSTITUTIONS)
_______________
NOTES TO FINANCIAL STATEMENTS
APRIL 28, 1995
1. ORGANIZATION
The GS Government Agency Portfolio (For Financial Institutions) (the "Fund")
is a no-load, diversified portfolio of Goldman Sachs Trust (the "Trust"), a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940 (as amended) as an open-end, management investment company.
The Fund offers three classes of shares: Institutional shares, Administration
shares and Service shares. On April 27, 1995, shareholders of the Fund approved
a Plan of Reorganization (the Reorganization) which was completed after the
close of business on April 28, 1995 (Closing Date). Under the Reorganization,
all assets of the Fund were acquired by GS Adjustable Rate Government Agency
Fund (ARGAF) in exchange solely for (i) the issuance of Institutional shares and
Administration shares of beneficial interest of ARGAF and (ii) the assumption by
ARGAF of the liabilities of the Fund. Following this transfer, the Fund was
liquidated and dissolved and the Institutional and Administration shares were
distributed to the former shareholders of the Fund.
The Reorganization was accomplished by a tax-free transfer of assets whereby
each shareholder of the Fund received a number of full and fractional shares of
ARGAF having a total net asset value of their shares of the Fund held as of the
Closing Date. The net assets, net asset value per share and shares outstanding
as of the Closing Date were:
<TABLE>
<CAPTION>
GS Adjustable Rate GS Adjustable Rate
GS Government Government Agency Government Agency
Agency Portfolio (For Fund Fund
Financial Institutions) (Pre-Reorganization) (Post-Reorganization)
------------------------- -------------------- ---------------------
<S> <C> <C> <C>
Net Assets $20,385,309 $673,292,455 $693,677,761
Shares Outstanding
Institutional Shares 1,912,506 68,506,367 70,432,803
Administration Shares 158,661 401,122 560,936
Net Asset Value Per Share
Institutional Shares $ 9.84 $ 9.77 $ 9.77
Administration Shares $ 9.84 $ 9.77 $ 9.77
</TABLE>
<PAGE>
GS GOVERNMENT AGENCY PORTFOLIO
(FOR FINANCIAL INSTITUTIONS)
_______________
NOTES TO FINANCIAL STATEMENTS--(CONTINUED
APRIL 28, 1995
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund, which are in conformity with those generally accepted in the
investment company industry:
A. Investment Valuation
-----------------------
Investments in mortgage backed and U.S. Treasury obligations are valued
based on yield equivalents, a pricing matrix or other sources, under valuation
procedures established by the Trust's Board of Trustees. Other portfolio
securities 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 for which accurate market quotations
are not readily available are valued in accordance with the Trust's valuation
procedures. Short-term debt obligations maturing in sixty days or less are
valued at amortized cost.
B. Security Transactions 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. Certain
mortgage security paydown gains and losses increase or decrease taxable ordinary
income available for distribution and are classified as interest income in the
accompanying Statement 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.
C. Mortgage Dollar Rolls
------------------------
The Fund may enter into mortgage "dollar rolls" in which the Fund sells
securities in the current month for delivery and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon and maturity) but
not identical securities on a specified future date. The Fund loses the right
to receive principal and interest paid on the securities sold. However, the
Fund benefits to the extent of any price received for the securities sold and
the lower forward price for the future purchase (often referred to as the
"drop") or fee income plus the interest earned on the cash proceeds of the
securities sold until the settlement date of the forward purchase. The Fund
will hold and maintain in a segregated account, until the settlement date, cash
or liquid, high grade debt securities in an amount equal to the forward purchase
price. For financial 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.
<PAGE>
GS GOVERNMENT AGENCY PORTFOLIO
(FOR FINANCIAL INSTITUTIONS)
_______________
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 28, 1995
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
D. Federal Taxes
----------------
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute each
year substantially all investment company 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 capital, depending on the type of book/tax differences
that may exist as well as timing differences associated with having different
book and tax year ends.
E. Deferred Organization Expenses
--------------------------------
Organization-related costs have been fully amortized as of April 28, 1995.
F. 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.
Shareholders of Administration and Service shares will bear all expenses and
fees paid to service organizations for their services with respect to such
shares as well as other expenses (subject to expense limitations) which are
directly attributable to such shares.
G. Futures Contracts
--------------------
Upon entering into a futures contract, the Fund is required to deposit with
a broker an amount of cash or securities equal to the minimum "initial margin"
requirement of the futures exchange on which the contract is traded. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying index, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize, for
book purposes, 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 Board of Trustees.
<PAGE>
GS GOVERNMENT AGENCY PORTFOLIO
(FOR FINANCIAL INSTITUTIONS)
_______________
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 28, 1995
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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.
3. AGREEMENTS
Goldman Sachs Funds Management, L.P. ("GSFM"), an affiliate of Goldman,
Sachs & Co. ("Goldman Sachs"), serves as the Fund's investment adviser pursuant
to an Investment Advisory Agreement. Under the Investment Advisory Agreement,
GSFM, subject to general supervision of the Trust's Board of Trustees, manages
the Fund's portfolio and provides for the administration of the Fund's other
affairs. As compensation for the services rendered under the Investment Advisory
Agreement and the assumption of the expenses related thereto, GSFM is entitled
to a fee, computed daily and payable monthly, at an annual rate equal to .40% of
the Fund's average daily net assets.
GSFM has voluntarily agreed to limit certain of the Fund's expenses
(excluding the investment advisory fee payable to GSFM, taxes, interest,
brokerage, litigation, indemnification, fees paid to service organizations and
other extraordinary expenses) to the extent that such expenses exceed .05% per
annum of the Fund's average daily net assets.
Goldman Sachs serves as Distributor of the shares of the Fund pursuant to a
Distribution Agreement and receives no compensation in this capacity. Goldman
Sachs also serves as Transfer Agent of the Fund for a fee.
For the period ended April 28, 1995, the Fund incurred commission expenses
of approximately $7,800 in connection with futures contracts entered into with
Goldman Sachs.
4. INVESTMENT TRANSACTIONS
Purchase and proceeds of sales or maturities of long-term securities for the
period ended April 28, 1995 were as follows:
<TABLE>
<S> <C>
Purchase of U.S. Government and agency obligations.................. $ 0
Sales or maturities of U.S. Government and agency obligations....... $41,991,688
</TABLE>
<PAGE>
GS GOVERNMENT AGENCY PORTFOLIO
(FOR FINANCIAL INSTITUTIONS)
_______________
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 28, 1995
5. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping in the customer-only account of State Street
Bank & Trust Co., the Fund's custodian, or subcustodians. GSFM monitors the
market value of the underlying securities by pricing them daily.
6. ADMINISTRATION AND SERVICE PLANS
The Fund has adopted Administration and Service Plans. These plans allow for
Administration shares and Service shares, respectively, to compensate service
organizations for providing varying levels of account administration and
shareholder liaison services to their customers who are beneficial owners of
such shares. The Administration and Service Plans provide for compensation to
the service organizations in an amount up to .25% and .50% (on an annualized
basis), respectively, of the average daily net asset value of the respective
shares.
<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
