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GOLDMAN SACHS
ADJUSTABLE RATE MORTGAGE FUND
Financial Statements
May 12, 1995
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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To the Shareholders and Trustees of Goldman Sachs Adjustable Rate Mortgage Fund:
We have audited the accompanying statements of operations and changes in net
assets and the financial highlights of Goldman Sachs Adjustable Rate Mortgage
Fund (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 Adjustable Rate Mortgage Fund of Goldman Sachs Trust for the
periods presented, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts,
June 1, 1995
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Goldman Sachs Adjustable Rate Mortgage Fund
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STATEMENT OF OPERATIONS
For the Period Ended May 12, 1995 /(a)/
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<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest $ 593,457
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EXPENSES /(b)/:
Investment adviser fees 14,927
Administration fees --
Distribution fees 21,982
Transfer agent fees 29,875
Professional fees 30,951
Custodian fees 20,777
Printing fees 14,075
Registration fees 25,233
Amortization of deferred organization
expenses 66,156
Trustee fees 350
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TOTAL EXPENSES 224,326
Less--Expenses reimbursable by GSAM (189,955)
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NET EXPENSES 34,371
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NET INVESTMENT INCOME 559,086
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REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT AND FUTURES TRANSACTIONS:
Net realized loss on investment and
futures transactions (167,442)
Net change in unrealized gain on
investments and futures 180,662
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NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 572,306
=========
</TABLE>
/(a)/ For the period from November 1, 1994 to May 12, 1995.
/(b)/ During the period ended May 12, 1995, the effect of voluntary limitations
of fees by the investment adviser, administrator and distributor amounted
to $24,357, $13,094 and $21,982, respectively.
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The accompanying notes are an integral
part of these financial statements.
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Goldman Sachs Adjustable Rate Mortgage Fund
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STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
MAY 12, 1995 /(a)/ OCTOBER 31, 1994
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<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 559,086 $ 756,238
Net realized loss on investment and
futures transactions (167,442) (53,128)
Net change in unrealized gain (loss) on
investments and futures 180,662 (231,927)
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Net increase in net assets resulting
from operations 572,306 471,183
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (554,781) (756,238)
In excess of net investment income -- (13,829)
From net realized gain on investment
transactions -- (10,717)
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Total distributions to shareholders (554,781) (780,784)
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<CAPTION>
FROM SHARE TRANSACTIONS:
SHARES SHARES
------ ------
<S> <C> <C> <C> <C>
Net proceeds from sales of shares 1,228,701 5,944,714 7,313,331 35,744,023
Reinvestment of dividends and
distributions 140,514 679,883 153,544 748,859
Cost of shares repurchased (1,491,339) (7,211,989) (4,459,538) (21,697,344)
Cost of shares exchanged in
reorganization (3,552,167) (17,208,471) -- --
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Net increase (decrease) in net assets
resulting from share transactions (3,674,291) (17,795,863) 3,007,337 14,795,538
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Total decrease (increase) (17,778,338) 14,485,937
NET ASSETS:
Beginning of period 17,778,338 3,292,401
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End of period $ -- $ 17,778,338
============ ============
Accumulated undistributed net
investment income $ 0 $ 27,342
============ ============
</TABLE>
/(a)/ For the period from November 1, 1994 to May 12, 1995.
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The accompanying notes are an integral
part of these financial statements.
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Goldman Sachs Adjustable Rate Mortgage Fund
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FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout each Period
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<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
MAY 12, 1995 /(f)/ OCTOBER 31, 1994 OCTOBER 31, 1993 /(d)(e)/
------------------ ---------------- -------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 4.84 $ 4.94 $ 4.85
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INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.16 0.23 0.17
Net realized and unrealized gain (loss)
on investments and futures/(b)/ -- (0.08) 0.09
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Total income from investment operations 0.16 0.15 0.26
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.16) (0.23) (0.17)
Net realized gain on investment
transactions -- (0.02) --
------ ----------- ----------
Total distributions to shareholders (0.16) (0.25) (0.17)
------ ----------- ----------
Net decrease (increase) in net asset
value -- (0.10) 0.09
------ ----------- ----------
Net asset value, end of period $ 4.84 $ 4.84 $ 4.94
====== =========== ==========
Total return /(a)/ 3.42% 3.14% 5.37 %
Ratio of net expenses to average net
assets 0.40%/(c)/ 0.12% 0.00 %/(c)/
Ratio of net investment income to
average net assets 6.43%/(c)/ 4.88% 4.58 %/(c)/
Portfolio turnover rate 13.91% 44.62% 162.80 %
Net assets at end of period $ 0 $17,778,338 $3,292,401
Ratios assuming no waiver of fees or
expense limitations:
Ratio of expenses to average net
assets 3.27%/(c)/ 2.49% 23.97 %/(c)/
Ratio of net investment
income (loss) to average net
assets 3.56%/(c)/ 2.51% (19.39)%/(c)/
====== =========== ==========
</TABLE>
/(a)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charge. Total return would be reduced if a sales charge were taken
into account.
/(b)/ Includes the balancing effect of calculating per share amounts.
/(c)/ Annualized
/(d)/ For the period from February 10, 1993 (commencement of operations) to
October 31, 1993.
/(e)/ On February 4, 1994, the Fund effected a three for one stock split. The
above information has been restated to reflect this stock split.
/(f)/ For the period from November 1, 1994 to May 12, 1995.
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The accompanying notes are an integral
part of these financial statements.
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Goldman Sachs Adjustable Rate Mortgage Fund
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NOTES TO FINANCIAL STATEMENTS
May 12, 1995
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1. ORGANIZATION
Goldman Sachs Adjustable Rate Mortgage Fund (the "Fund") is a separate
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.
On May 11, 1995, shareholders of the Fund approved a Plan of Reorganization (the
Reorganization) which was completed on May 12, 1995 (Closing Date). As of the
Closing Date, the Fund was Reorganized as a separate class (Class A) of the GS
Adjustable Rate Government Agency Fund (ARGAF). The Fund reorganized its shares
into shares of the new ARGAF Class A shares by using the ARGAF Institutional
shares net asset value per share as of the Closing Date. Under the
Reorganization, all assets of the Fund were acquired by ARGAF in exchange solely
for (i) the issuance of Class A 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 ARGAF Class A 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. On May 12, 1995, shareholders of the Fund exchanged 3,552,167
shares of the Fund with Net Asset Value per share of $4.84 for 1,756,917 ARGAF
Class A shares with a net asset value per share of $9.79.
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
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Investments in U.S. Treasury, mortgage backed and asset backed 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 or 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.
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Goldman Sachs Adjustable Rate Mortgage Fund
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NOTES TO FINANCIAL STATEMENTS (continued)
May 12, 1995
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
B. Security Transactions and Investment Income
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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 are taxable as ordinary income. Such 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. Federal Taxes
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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 of its investment company taxable income to its shareholders.
Accordingly, no federal tax provisions are required.
D. Expenses
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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.
E. Futures Contracts
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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, for book purposes, the Fund
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 approved by the 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.
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Goldman Sachs Adjustable Rate Mortgage Fund
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NOTES TO FINANCIAL STATEMENTS (continued)
May 12, 1995
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3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Fund's investment adviser
pursuant to an Investment Advisory Agreement. Under the Investment Advisory
Agreement, GSAM, subject to general supervision of the Trust's Board of
Trustees, manages each Fund's portfolio. As compensation for the services
rendered under the Investment Advisory Agreement 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 .45% of each Fund's average daily net
assets. For the period ended May 12, 1995, GSAM voluntarily agreed to waive a
portion of its investment advisory fee amounting to $24,357 for such period.
Goldman Sachs serves as the Fund's administrator pursuant to an Administration
Agreement. Under the Administration Agreement, GSAM administers the Fund's
business affairs including providing facilities. As compensation for its
services rendered under the Administration Agreement, GSAM is entitled to a fee,
computed daily and payable monthly, at an annual rate equal to .15% of the
Fund's average daily net assets. For the period ended May 12, 1995, GSAM
voluntarily agreed to waive its administration fee amounting to $13,094 for such
period.
GSAM has voluntarily agreed to limit certain of the Fund's expenses (excluding
advisory, administration and distribution fees and taxes, interest, brokerage
litigation, indemnification 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 the Distributor of shares of the Fund pursuant to a
Distribution Agreement. Goldman Sachs may receive a portion of the sales load
imposed on the sale of Fund shares and has advised the Fund that it retained
approximately $9,400 during the period ended May 12, 1995.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1.
Under the Plan, Goldman Sachs is entitled to receive a quarterly distribution
fee equal to, on an annual basis, .50% of the Fund's average daily net assets.
Currently, Goldman Sachs has voluntarily agreed to limit the amount of the
distribution fee to .25% of the Fund's average daily net assets. For the period
ended May 12, 1995, Goldman Sachs voluntarily agreed to waive a portion of its
distribution fee amounting to $21,982 for such period. Goldman Sachs also
serves as the Transfer Agent of the Fund for a fee.
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Goldman Sachs Adjustable Rate Mortgage Fund
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NOTES TO FINANCIAL STATEMENTS (continued)
May 12, 1995
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3. AGREEMENTS (continued)
For the period ended May 12, 1995, the Fund incurred commission expense of
approximately $2,250 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 May 12, 1995, were as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchases of U.S. Government and agency
obligations $ 553,584
Purchases (excluding U.S. Government
and agency obligations) $1,324,121
Sales or maturities of U.S. Government
and agency obligations $2,478,625
Sales or maturities (excluding U.S.
Government and agency obligations) $8,208,415
</TABLE>
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 at subcustodians. GSAM monitors the
market value of the underlying securities by pricing them daily.
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The 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.
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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
