<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 GS Core Fixed Income Fund 21
GS Adjustable Rate Government Agency Fund 3 Financial Statements 28
GS Short-Term Government Agency Fund 9 Notes to Financial Statements 32
GS Short Duration Tax-Free Fund 15 Financial Highlights 39
- -------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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 APPEARS HERE]
<TABLE>
<CAPTION>
10/31/94 10/31/95
<S> <C> <C>
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%
</TABLE>
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.
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
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Agency Fund
- --------------------------------------------------------------------------------
Investment Objective
The GS Adjustable Rate Government Agency Fund seeks a high level of current
income consistent with low volatility of principal. The portfolio ordinarily
invests substantially all of its assets in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, with primary emphasis on
adjustable rate mortgage securities (ARMs). The target duration of the fund is
between six months and one year.
Special Events
On April 28, 1995, the GS Government Agency Portfolio (for Financial
Institutions) was reorganized into the GS Adjustable Rate Government Agency
Fund. In addition, on May 15, 1995, the Goldman Sachs Adjustable Rate Mortgage
Fund (ARM Fund) was reorganized into the GS Adjustable Rate Government Agency
Fund. Shareholders of the ARM Fund were issued GS Adjustable Rate Government
Agency Class A shares in exchange for their ARM Fund shares.
A Challenging ARM Market
Interest rate fluctuations during the period under review had a direct
impact on the ARM market. As a result, ARMs experienced three distinct phases:
. At the start of the fund's fiscal year on November 1, 1994, spreads between
ARMs and Treasuries were relatively wide, due to a fear that ARMs would reach
their periodic caps (the maximum their coupons can be raised within a specified
time period) in the rising interest rate environment.
. That situation generally persisted through January 1995, at which point the
ARM market entered a second phase: interest rates stabilized, cap risk declined
and the prospects for ARMs brightened. This favorable ARM environment continued
through late spring, until interest rates began to decline.
. Starting approximately in June 1995, spreads between ARMs and Treasuries
began widening again, this time as a result of increased prepayment risk based
on the assumption homeowners would refinance their mortgages at lower rates. For
the first time since 1989, it became possible for homeowners to switch from an
ARM to a fixed-rate mortgage and lower their effective coupon payments. ARM
spreads continued to be wide as of the end of the period, though there were
indications of stabilization as winter's seasonably slower prepayment period
approached.
Performance Review
For the 12-month period ended October 31, 1995, the fund's Institutional
shares had a total return of 6.75% (6.39% in monthly distributions and 0.36% in
share price appreciation) and its Administration shares had a total return of
6.48% (6.12% in monthly distributions and 0.36% in share price appreciation).
Both share classes outperformed the 6.21% return of the six-month U.S. Treasury
bill but underperformed the 6.98% return of the one-year U.S. Treasury bill. As
of the end of the period, the fund maintained a duration of approximately 0.7
years, about midway between that of the six-month U.S. Treasury bill and the
one-year U.S. Treasury bill. When the yield curve flattened during the period,
the fund's performance benefited more from the rise in bond prices than the six-
month U.S. Treasury bill, but not as much as the one-year U.S. Treasury bill.
From their inception on May 15, 1995, through October 31, 1995, the fund's
Class A shares returned 2.74% based on NAV (2.93% in monthly distributions and
- -0.19% in share price depreciation). For the same period, the six-month Treasury
bill returned 2.81% and the one-year Treasury bill returned 3.08%. The fund's
Class A shares underperformed the six-month and one-year Treasury bills during
the five and a half months they have been available because the ARM market
experienced a high level of volatility and prepayment risk during that brief
period.
- --------------------------------------------------------------------------------
3
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Agency Fund (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAV NAV Change 30-Day SEC
Share Class (10/31/95) (10/31/94-10/31/95) Yield (10/31/95)
- ----------- ---------- ------------------- ----------------
<S> <C> <C> <C>
Institutional $9.77 +$0.03 6.12%
Administration $9.77 +$0.03 5.87%
Class A $9.77 -$0.02* 5.78%
</TABLE>
* From Class A shares' inception on May 15, 1995 through October 31, 1995.
Portfolio Composition and Investment Strategies
Portfolio composition remained quite similar to a year ago, with the
exception of a slight increase in the fund's repurchase agreement/cash
equivalent position and a decrease in its CMO position.
Portfolio Composition as of October 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 80.2%
Agency Debentures 8.9%
CMOs 7.7%
Repos/Cash Equivalents 3.2%
</TABLE>
* 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.
. ARMs. As of October 31, 1995, the fund's primary investment continued to be
in ARMs (80.2%), in approximately the same weighting as a year ago (78.6%). We
continued to stress fully indexed, one-year Constant Maturity Treasury (CMT)
ARMs. The rates on these CMT ARMs adjust annually, based on the yield of the
one-year U.S. Treasury bill and, as a result, they provide greater income
stability than ARMs linked to some other indexes.
We favored seasoned ARMs, which have lower prepayment risk than nonseasoned
ARMs. Seasoned ARMs are adjustable rate mortgages that have been in existence
for several years. They are preferred in a high-prepayment environment because
it is assumed that homeowners who did not refinance their mortgages in prior
periods of lower rates are less likely to refinance in the future.
. Agency Debentures. The fund's 8.9% position in agency debentures were
short-duration Small Business Administration (SBA) securities, held because they
offered attractive spreads relative to Treasuries.
. CMOs. The fund held a 7.7% position in collateralized mortgage obligations
(CMOs). We reduced the fund's position in sequential-pay CMOs to 1.9%, when they
became expensive relative to other sectors. The sequential-pay CMOs provided
diversification and relatively predictable cash flows that helped contribute to
the fund's principal stability.
The fund's CMO position also included CMO floaters (1.7% of the portfolio),
which added an incremental return over Treasuries. The remaining CMOs were
primarily super floaters and inverse floaters, as discussed below.
. Prudent Use of Derivatives. We used higher-risk derivatives very sparingly
during the period. As of October 31, 1995, the fund held super floaters and
inverse floaters representing 2.5% and 1.4% of the portfolio, respectively.
Super floaters are floating-rate securities whose coupons reset higher and more
quickly than regular ARMs. The super floaters performed well when rates were
rising at the beginning of the period under review, but they did not work in our
favor when rates declined. Inverse floaters were held for their potential
incremental yield and benefited the fund when rates fell. We also held small
positions in interest-only (IO) and inverse IOs.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Agency Fund (continued)
- --------------------------------------------------------------------------------
. Duration. As of October 31, 1995, the duration of the fund was 0.7 years,
approximately half its duration last year. Since January 13, 1995, the fund has
been permitted to hold financial futures, which we used as a tool to shorten the
fund's duration.
. Credit Quality. The fund invests solely in securities issued by the U.S.
government and its agencies or instrumentalities.
ARM Outlook
We are currently cautiously optimistic regarding the ARM market, but we
will continue to carefully monitor the sector's prepayment risk. Going forward,
we expect the recent spate of bank mergers to increase supply and further widen
yield spreads between ARMs and Treasuries. (Merging banks typically need to
raise funds, so they tend to securitize more of their mortgages.) Conversely,
because of the flattened yield curve, new ARM production is expected to be
stable or to decline, as homeowners opt for fixed-rate mortgages. As always, we
will use our proprietary models to identify individual ARM securities with
attractive coupons, average lives and option-adjusted spreads that are expected
to offer the most value for the fund.
Distribution Policy
The fund's Institutional and Administration shares distributed $0.60 per
share and $0.58 per share, respectively, for the 12-month period ended October
31. From their inception on May 15, 1995, through October 31, 1995, the fund's
Class A shares distributed $0.28 per share.
The fund distributes substantially all of its investment company taxable
income. The dividend is set at the start of each month, based on the income the
fund is expected to generate. However, because the fund invests primarily in
mortgage securities that are subject to prepayments, we cannot precisely predict
the amount of principal and interest that a portfolio will receive. Therefore,
at times a portfolio may distribute amounts above or below current income
levels. To date, however, our dividend policy has not affected the management of
the fund or significantly affected its NAV per share.
Thank you for your support during the past year's challenging ARM market.
Looking ahead, our team of experienced mortgage specialists will continue to do
their best to seek out attractive fixed income investment opportunities. We look
forward to serving your investment needs in the future.
Sincerely,
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ Theodore T. Sotir
Theodore T. Sotir
Portfolio Managers
GS Adjustable Rate Government Agency Fund
November 30, 1995
- --------------------------------------------------------------------------------
5
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Agency 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 GS Adjustable Rate Government Agency Fund based on each
classes normal minimum initial investment, is compared to its benchmarks--the
Lehman Brothers Mutual Fund Short (1-2) U.S. Government Index ("Lehman 1-2
Index") and the six month and one year U.S. Treasury Bills ("6-Month T-Bill / 1-
Year T-Bill). 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 INVESTMENTS(a)
Institutional Shares
<TABLE>
<CAPTION>
Institutional Shares Lehman 1-2 Index One Yr. T-Bill Six Mo. T-Bill
<S> <C> <C> <C> <C>
8/1/91 $50,000 $50,000 $50,000 $50,000
10/31/91 $51,041 $51,581 $51,179 $50,870
10/31/92 $54,171 $55,506 $54,161 $53,376
10/31/93 $56,408 $58,368 $56,198 $55,197
10/31/94 $57,468 $59,511 $57,744 $57,257
10/31/95 $61,347 $64,343 $61,766 $60,819
</TABLE>
Administration Shares
<TABLE>
<CAPTION>
Administration Shares Lehman 1-2 Index One Yr. T-Bill Six Mo. T-Bill
<S> <C> <C> <C> <C>
5/1/93 50,000 50,000 50,000 50,000
10/31/93 50,914 50,931 50,785 50,780
10/31/94 51,744 51,931 52,182 52,675
10/31/95 55,097 56,148 55,835 55,951
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
Class A Shares (no sales charge) Class A Shares (w/sales charge) Lehman 1-2 Index One Year T-Bill Six Month T-Bill
<S> <C> <C> <C> <C> <C>
6/1/95 $10,000 $ 9,850 $10,000 $10,000 $10,000
10/31/95 $10,222 $10,093 $10,277 $10,260 $10,246
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
Average Annual Total Return
-------------------------------
One Year Since Inception (b)
- ------------------------------------------------------------
<S> <C> <C>
Institutional Shares 6.75% 4.91%
- ------------------------------------------------------------
Administration Shares 6.48% 3.96%
- ------------------------------------------------------------
Class A Shares(c)
excluding sales charge N/A 2.74%
- ------------------------------------------------------------
Class A Shares(c)
including sales charge N/A 1.17%
- ------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on the
first day of the month following the commencement of operations.
(b) The Institutional, Administration and Class A shares commenced operations
July 17, 1991, April 15, 1993 and May 15, 1995, respectively.
(c) An aggregate total return (not annualized) is shown instead of an average
annual total return since the Class A shares have not completed a full
twelve months of operations. The maximum sales charge for Class A shares
is 1.5%.
- --------------------------------------------------------------------------------
6
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Agency Fund
October 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
================================================================================
Mortgage Backed Obligations--96.5%
Adjustable Rate Federal Home Loan Mortgage Corp. (FHLMC)(a)--9.8%
================================================================================
<S> <C> <C> <C>
$ 2,286,145 7.93% 01/01/19 $ 2,355,804
35,588,623 7.87 02/01/22 36,672,652
5,131,911 7.59 08/01/22 5,251,844
12,952,109 7.78 06/01/24 13,319,819
5,903,309 7.92 07/01/29 5,979,048
2,627,614 7.92 05/01/31 2,691,543
- --------------------------------------------------------------------------------
$ 66,270,710
- --------------------------------------------------------------------------------
<CAPTION>
Adjustable Rate Federal National Mortgage Association
(FNMA)(a)--63.4%
Principal Interest Maturity
Amount Rate Date Value
================================================================================
<S> <C> <C> <C>
$7,600,334 7.07% 03/01/17 $ 7,673,601
4,287,117 7.53 03/01/17 4,396,139
5,080,289 6.82 03/01/18 5,100,103
8,001,888 7.84 04/01/18 8,230,262
1,196,631 8.12 05/01/18 1,227,887
6,091,151 7.63 07/01/18 6,265,845
8,464,646 8.11 07/01/18 8,723,749
7,825,996 7.72 08/01/18 8,022,507
4,348,196 7.88 08/01/18 4,500,774
4,642,121 7.75 10/01/18 4,775,443
8,203,755 7.61 11/01/18 8,395,231
1,179,065 7.36 12/01/18 1,207,434
15,102,048 7.58 12/01/18 (b) 15,607,060
2,048,926 7.39 02/01/19 2,045,726
4,073,221 7.43 06/01/19 4,169,472
2,244,571 7.48 07/01/19 2,300,192
5,416,257 7.68 07/01/19 5,575,116
5,484,231 7.66 09/01/19 5,634,992
3,357,086 7.69 01/01/20 3,439,268
3,583,590 7.83 03/01/20 3,705,647
10,824,349 7.72 07/01/20 11,063,675
6,085,401 7.79 02/25/21 6,269,302
6,387,980 7.41 04/01/21 6,541,356
81,692,876 7.71 09/01/21 84,086,477
5,601,363 7.89 11/01/21 5,751,760
26,823,840 8.03 02/01/22 27,726,462
17,754,998 7.80 06/01/22 18,328,662
8,302,252 7.96 08/01/22 8,561,199
47,443,395 7.87 09/01/22 48,930,745
2,497,584 7.66 02/01/23 2,554,104
$ 342,692 6.39% 12/01/23 $ 343,442
3,020,694 7.45 10/01/27 3,092,738
1,515,283 7.59 07/01/29 1,544,209
3,943,016 7.56 04/01/30 4,036,623
71,072,722 7.82 01/01/31 73,466,451
15,159,963 6.39 02/01/31 15,212,083
- --------------------------------------------------------------------------------
$428,505,736
- --------------------------------------------------------------------------------
Adjustable Rate Government National
Mortgage Association
(GNMA)(a)--4.8%
$31,667,582 6.50% 06/20/25 $ 32,170,147
- --------------------------------------------------------------------------------
Adjustable Rate Small Business
Administration(a)--8.8%
$ 1,641,659 7.25% 10/25/14 $ 1,679,622
2,630,491 7.25 02/25/15 2,691,321
3,945,429 7.25 03/25/15 4,036,667
3,020,766 7.25 04/25/15 3,090,621
3,024,506 7.25 05/25/15 3,094,448
2,003,530 7.25 08/25/15 2,051,114
2,887,210 7.25 09/25/15 2,955,781
2,120,643 7.25 10/25/15 2,171,008
1,512,192 6.87 09/25/16 1,532,039
5,114,360 6.87 07/25/17 5,184,682
11,831,402 6.87 08/25/17 11,980,008
4,926,385 6.87 09/25/17 4,994,123
4,065,626 6.87 10/25/17 4,112,912
9,922,169 6.87 02/25/18 10,064,801
- --------------------------------------------------------------------------------
$59,639,147
- --------------------------------------------------------------------------------
Fixed Rate GNMA--0.0%
$57,790 9.00% 04/15/20 $ 61,040
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligations
(CMOs)--9.7%
Adjustable Rate CMOs(a)--2.0%
FNMA REMIC Trust 1990-145, Class A
$13,294,521 6.77% 12/25/20 $13,250,383
- --------------------------------------------------------------------------------
Inverse Floater CMOs(a)--1.5%
FHLMC Series 1134, Class H
$1,682,751 14.71% 09/15/96 $ 1,767,677
FHLMC Series 1727, Class O
11,000,000 3.56 05/15/24 5,993,999
FNMA REMIC Trust 1991-113, Class S
1,754,306 16.55 03/25/02 1,859,838
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Agency Fund (continued)
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
================================================================================
<S> <C> <C> <C>
Mortgage Backed Obligations (continued)
Collateralized Mortgage Obligations (CMOs) (continued)
Inverse Floater CMOs(a) (continued)
FNMA REMIC Trust 1991-91, Class S
$ 218,226 15.96% 07/25/98 $ 243,970
- --------------------------------------------------------------------------------
$ 9,865,484
- --------------------------------------------------------------------------------
Inverse Floating Rate - Interest Only(a)--0.0%
FNMA REMIC Trust 1992-157, Class SA
$ 3,636,650(c) 11.38% 03/25/04 $ 325,902
- --------------------------------------------------------------------------------
Inverse IOette--0.1%
FHLMC Series 1164, Class O
$ 45,215(c) 612.25% 11/15/06 $ 501,671
- --------------------------------------------------------------------------------
IOette--0.1%
FNMA REMIC Trust 1990-145, Class B
$ 32,669(c) 1005.00% 12/25/20 $ 841,215
- --------------------------------------------------------------------------------
Regular Floater CMOs(a)--1.7%
FHLMC Series 1011, Class F
$11,485,217 6.84% 11/15/20 $ 11,566,865
- --------------------------------------------------------------------------------
Sequential Fixed Rate CMOs--1.8%
FHLMC Series 1056, Class G
$ 41,612 8.00% 12/15/18 $ 41,747
FHLMC Series 1316, Class D
155,830 8.00 09/15/17 155,541
FHLMC Series 1098, Class F
1,319,769 8.00 03/15/05 1,322,725
FNMA REMIC Trust 1990-143, Class H
1,000,000 9.25 10/25/19 1,019,160
FNMA REMIC Trust 1990-65, Class U
1,850,249 9.50 11/25/06 1,878,688
FNMA REMIC Trust 1991-140, Class C
1,179,822 8.50 05/25/20 1,183,126
FNMA REMIC Trust 1991-37, Class E
3,936,872 8.50 04/25/05 3,982,461
FNMA REMIC Trust 1991-82, Class PH
2,916,118 8.00 11/25/18 2,906,116
- --------------------------------------------------------------------------------
$ 12,489,564
- --------------------------------------------------------------------------------
Super Floater CMOs(a)--2.5%
FNMA REMIC Trust 1992-157, Class FA
$17,903,510 2.72% 03/25/04 $ 17,032,448
- --------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations $ 65,873,532
- --------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $660,175,134) $652,520,312
- --------------------------------------------------------------------------------
Repurchase Agreement--2.4%
Joint Repurchase Agreement Account
$16,000,000 5.93% 11/01/95 $ 16,000,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $16,000,000) $ 16,000,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $676,175,134(d)) $668,520,312
================================================================================
</TABLE>
Futures contracts open at October 31, 1995 are as follows:
<TABLE>
<CAPTION>
Contracts Settlement Month Unrealized
Type Long (Short)(e) Gain (Loss)
- --------------------------- ----------------- --------------------------------
<S> <C> <C> <C>
Euro Dollars 807 December 1995 $(200,200)
Euro Dollars 350 March 1996 105,250
Euro Dollars 136 June 1996 28,050
Euro Dollars 90 September 1996 13,500
Euro Dollars (50) December 1996 (41,250)
Euro Dollars (50) March 1997 (41,250)
2-Year U.S. Treasury Notes 80 December 1995 80,000
5-Year U.S. Treasury Notes (183) December 1995 (194,516)
10-Year U.S. Treasury Notes (15) December 1995 (23,438)
U.S. Treasury Bond (122) December 1995 (400,312)
- --------------------------------------------------------------------------------
$(674,166)
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Federal Income Tax Information:
<S> <C>
Gross unrealized gain for investments in which value exceeds
cost $ 1,648,951
Gross unrealized loss for investments in which cost exceeds
value (9,507,811)
- --------------------------------------------------------------------------------
Net unrealized loss $(7,858,860)
================================================================================
</TABLE>
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at October 31, 1995.
(b) Portions of these securities are being segregated for futures margin
requirements.
(c) Represents security with notional or nominal principal amount. The actual
effective yields of these securities are different from the stated rates
due to the amortization of related premiums.
(d) The aggregate cost for federal income tax purposes is $676,379,172.
(e) Each 2-Year U.S. Treasury Note contract represents $200,000, in notional par
value. Each 5-Year U.S. Treasury Note, 10-Year U.S. Treasury Note and U.S.
Treasury Bond contract represents $100,000 in notional par value. Each Euro
Dollar contract represents $1,000,000 in notional par value. The total net
notional amount and net market value at risk are $1,267,000,000 and
$283,579,706, respectively. The determination of notional amounts does not
consider market risk factors and therefore notional amounts as presented
here are indicative only of volume of activity and not a measure of market
risk.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GS Short-Term Government Agency Fund
- --------------------------------------------------------------------------------
Investment Objective
The GS Short-Term Government Agency Fund's primary objective is to provide
a high level of current income by investing in a portfolio that consists of
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, including mortgage-backed securities as well as repurchase
agreements collateralized by such instruments. To enhance principal stability,
the fund has a two-year target duration and a maximum duration of three years.
Performance Review
For the 12 months ended October 31, the fund's Institutional shares had a
total return of 8.97% (7.00% in distributions and 1.97% from share price
appreciation) compared with 9.02% for the fund's benchmark, the two-year U.S.
Treasury security. During the period, the fund's net asset value (NAV) rose
$0.18 per share to $9.82 as the bond market rallied.
The fund's slight underperformance versus the benchmark was primarily due
to its large position in mortgage-backed securities (an allocation not reflected
in the benchmark), which felt the impact of rising prepayment risk during the
second half of the period.
The fund's term structure helped offset some of the decline. During the
period, the fund held mortgage-backed securities with a range of maturities that
provided cash flows along the yield curve. As the yield curve flattened, the
mortgage-backed securities at the longer end of the curve performed better than
Treasury securities concentrated in the two-year maturity range, thus benefiting
the fund.
Portfolio Composition and Investment Strategies
While the fund continued to emphasize mortgage-backed securities, which
accounted for 58.2% of the portfolio on October 31, its combined holdings in
Treasuries and repurchase agreements/cash equivalents approximately doubled
during the period to 41.8%.
- ------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
Portfolio Composition as of October 31, 1995*
Fixed Rate Mortgage
Pass Throughs 9.1%
Repos/Cash Equivalents 4.7%
U.S. Treasuries 37.1%
CMOs 25.4%
ARMs 23.7%
* 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. Treasuries and Repurchase Agreements/Cash Equivalents. We used these
positions to manage the portfolio's duration, weighting one relative to the
other according to our need to shorten or lengthen the portfolio's duration
relative to that of the benchmark, which were both 1.9 years as of October 31,
1995. At the end of the period, 37.1% of the portfolio was invested in U.S.
Treasuries and 4.7% was in repurchase agreements/cash equivalents, as compared
with no position in Treasuries and 20.9% in repurchase agreements/cash
equivalents last October.
. CMOs. We reduced the fund's collateralized mortgage obligations (CMO)
position during the first half of 1995 when CMOs appeared fully priced relative
to other sectors that offered greater yield and return potential. CMOs accounted
for 25.4% of the portfolio as of October 31, 1995, less than half the fund's
position a year ago. Within the CMO sector, 10.4% was invested in sequential-pay
CMOs (down from 28.5% last year) and
- --------------------------------------------------------------------------------
9
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GS Short-Term Government Agency Fund (continued)
- --------------------------------------------------------------------------------
1.9% was invested in planned amortization
class (PAC) CMOs (down from 26.7% last year). Sequentials and PACs added to the
portfolio's principal stability, due to their relatively stable cash flows.
. ARMs. During the past 12 months, we added to the fund's position in
adjustable rate mortgage securities (ARMs), particularly during May and June,
when they traded at attractive option-adjusted spreads relative to Treasuries
and appeared cheap. As of October 31, 1995, ARMs accounted for 23.7% of the
portfolio, compared with 13.1% a year ago. We focused on ARMs that are indexed
to the one-year Constant Maturity Treasury (CMT) Index and adjust faster to
changing interest rates than ARMs based on other indexes. Following our
purchases, however, ARM spreads continued to widen, making ARMs even cheaper. We
view this as a short-term decline resulting from prepayment fears (mortgage
prepayments tend to rise as interest rates fall) and expect ARMs to perform well
when prepayments slow. In the interim, ARMs added incremental yield over
Treasuries.
. Fixed Rate Mortgage Pass-Throughs. The fixed rate pass-through sector
accounted for 9.1% of the portfolio as of October 31, 1995, a slight increase
from last year's 7.3% allocation. We focused on seasoned mortgages, which are
attractive because they typically experience fewer prepayments relative to newly
issued mortgages.
. Issuer Composition. The portfolio's mortgage-backed securities composition by
issuer was: 27.0% in Federal National Mortgage Association (FNMA) issues, 22.8%
in Federal Home Loan Mortgage Corporation (FHLMC) issues and 8.4% in Government
National Mortgage Association (GNMA) issues.
. Credit Quality. The fund invests exclusively in securities issued by the U.S.
government and its agencies or instrumentalities.
. Prudent Use of Derivatives. The fund held selected lower-risk derivatives,
including sequential-pay CMOs (10.4%), floaters (6.3%) and PAC CMOs (1.9%). In
addition, the fund also took small positions in higher-risk securities,
including inverse floaters (4.1%) and PAC IOs (2.5%), which the fund held for
their incremental yield and potential incremental return. We used higher-risk
derivatives sparingly in an effort to enhance returns without taking undue risk.
During the declining rate environment of the second half of the period, the
inverse floaters performed well, while the PAC IOs were basically unchanged. We
have also 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 simultaneously contracting to buy back similar mortgage
securities with the same coupon on a specified future date.) 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. In addition, since September 29, 1995, the
fund has been permitted to hold futures, which we used in conjunction with
Treasuries and repurchase agreements/cash equivalents to manage the portfolio's
duration.
Fund Outlook
We expect to continue to emphasize mortgage-backed securities, because they
offer favorable performance potential, but we will carefully monitor potential
risks. These include rising prepayments, which we believe are largely reflected
in current prices, as well as an increased ARM supply resulting from bank
mergers. (Merging banks typically need to raise funds, so they tend to
securitize more of their mortgages.) Conversely, because of the flatter yield
curve, new ARM issuance is expected to stabilize or decline, which should help
offset other negative technical events. We are currently cautious regarding the
CMO sector, which has performed well in recent months and now appears fully
priced.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
GS Short-Term Government Agency Fund (continued)
- --------------------------------------------------------------------------------
Distribution Policy
During the period under review, the fund distributed $0.65 per share to
Institutional shareholders. Dividends are declared daily and paid on a monthly
basis. The fund intends to distribute substantially all of its investment
company taxable income, as required by tax law.
We value your continued confidence in the GS Short-Term Government Agency
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
GS Short-Term Government Agency Fund
November 30, 1995
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Trust
GS Short-Term Government Agency 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 GS Short-Term Government Agency Fund based on the Fund's
normal minimum initial investment of $50,000, is compared to its benchmarks, the
U.S. 2-Year Treasury Bill ("2-Year T-Bill") and the Lehman Brothers Mutual
Fund Short (1-3) U.S. Government Index ("Lehman Short (1-3) 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 $50,000 INVESTMENT(a)
<TABLE>
<CAPTION>
GS STGA Fund Lehman Short (1-3) 2 Year T-Bil
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
9/1/88 50000 50000 50000
10/31/88 51286 51091 51057
10/31/89 55943 55919 55412
10/31/90 60547 60861 59876
10/31/91 67165 67699 66615
10/31/92 71356 73208 72161
- --------------------------------------------------------------------------------
</TABLE>
Average Annual Total Return
- --------------------------------------------------------------------------------
One Year Five Year Since Inception (b)
- --------------------------------------------------------------------------------
8.97% 6.48% 7.31%
- --------------------------------------------------------------------------------
(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) The Institutional shares commenced operations August 15, 1988.
- --------------------------------------------------------------------------------
12
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GS Short-Term Government Agency Fund
October 31, 1995
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
================================================================================
Mortgage Backed Obligations--57.7%
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)(a)--12.8%
$2,479,915 7.51% 12/01/18 $ 2,534,200
10,467,242 7.87 02/01/22 10,786,074
- --------------------------------------------------------------------------------
$13,320,274
- --------------------------------------------------------------------------------
Adjustable Rate Federal National Mortgage
Association (FNMA)(a)--10.8%
$3,255,463 7.93% 11/01/14 $ 3,361,265
2,320,167 7.93 07/01/19 2,381,280
5,309,603 7.91 08/01/22 (b) 5,429,494
- --------------------------------------------------------------------------------
$11,172,039
- --------------------------------------------------------------------------------
Fixed Rate
FNMA--0.7%
$688,776 9.00% 12/01/97 $ 704,919
- --------------------------------------------------------------------------------
Fixed Rate Government National Mortgage Association--8.3%
$2,845,341 10.00% 12/15/17 $ 3,113,870
5,108,882 9.50 05/15/25 5,530,364
- --------------------------------------------------------------------------------
$ 8,644,234
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligations (CMOs)--25.1%
Inverse Floater CMOs(a)--4.2%
FHLMC Series 1134, Class H
$631,031 14.71% 09/15/96 $ 662,879
FHLMC Series 1134, Class I
2,404,687 14.71 09/15/96 2,552,443
FHLMC Series 1325, Class C
1,028,325 6.39 07/15/97 1,034,752
FNMA REMIC Trust 1991-127, Class S
67,973 11.38 09/25/98 71,340
- --------------------------------------------------------------------------------
$ 4,321,414
- --------------------------------------------------------------------------------
Inverse Floating Rate - Interest Only--0.1%
FNMA REMIC Trust 1993-110, Class SC
$4,046,398(c) 3.17% 04/25/19 $ 161,366
- --------------------------------------------------------------------------------
Planned Amortization Class (PAC)
CMOs--1.9%
FNMA REMIC Trust 1992-138, Class A
$1,990,971 6.00% 08/25/13 $ 1,980,519
- --------------------------------------------------------------------------------
Planned Amortization Class Interest-
Only (PAC IO) CMOs--1.4%
FHLMC Series 1552, Class JE
$16,170,393 (c) 7.00% 02/15/14 $ 1,422,348
- --------------------------------------------------------------------------------
Planned Amortization Class IOette
CMOs--0.9%
FNMA REMIC Trust 1992-198, Class K
$61,237(c) 1008.00% 12/25/15 $ 895,808
- --------------------------------------------------------------------------------
Regular Floater CMOs(a)--6.2%
FHLMC Series 1325, Class B
$2,416,565 6.56% 07/15/97 $ 2,427,137
FNMA REMIC Trust 1993-110, Class FC
4,046,398 5.83 04/25/19 4,030,593
- --------------------------------------------------------------------------------
$ 6,457,730
- --------------------------------------------------------------------------------
Sequential Fixed Rate CMOs--10.4%
FHLMC Series 1033, Class G
$2,000,000 8.00% 01/15/06 $ 2,081,360
FNMA REMIC Trust 1988-12, Class A
2,635,634 10.00 02/25/18 2,834,783
FNMA REMIC Trust 1988-12, Class B
2,635,634 4.86 02/25/18 2,445,684
FNMA REMIC Trust 1992-44, Class CA
3,000,000 12.00 08/25/20 3,394,920
- --------------------------------------------------------------------------------
$10,756,747
- --------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations $25,995,932
- --------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $59,921,535) $59,837,398
- --------------------------------------------------------------------------------
U.S. Treasury Obligations--36.1%
United States Treasury Notes
$36,270,000 7.38% 11/15/97 $37,448,776
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $37,398,446) $37,448,776
- --------------------------------------------------------------------------------
Repurchase Agreement--0.5%
Joint Repurchase Agreement Account
$500,000 5.93% 11/01/95 $ 500,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $500,000) $ 500,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $97,819,981(d)) $97,786,174
================================================================================
- --------------------------------------------------------------------------------
13
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GS Short-Term Government Agency Fund (continued)
October 31, 1995
================================================================================
Futures contracts open at October 31, 1995 are as follows:
<TABLE>
<CAPTION>
Number of
Contracts Settlement Month
Long (Short) Unrealized
Type (e) Gain (Loss)
- ---------------------------- ------------ ----------------- ------------
<S> <C> <C> <C>
Euro Dollars 10 March 1997 $750
Euro Dollars 10 June 1997 250
2-Year U.S. Treasury Notes 284 December 1995 126,859
5-Year U.S. Treasury Notes (70) December 1995 (53,593)
- --------------------------------------------------------------------------------
$ 74,266
================================================================================
================================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 416,484
Gross unrealized loss for investments in which
cost exceeds value (450,291)
- --------------------------------------------------------------------------------
Net unrealized loss ($33,807)
================================================================================
</TABLE>
(a) Variable rate security. Coupon rate disclosed is that which is in
effect at October 31, 1995.
(b) Portions of these securities are being segregated for futures margin
requirements.
(c) Represents security with notional or nominal principal amount. The actual
effective yields of these securities are different from the stated rates due
to the amortization of related premiums.
(d) The amount stated also represents aggregate cost for federal
income tax purposes.
(e) Each 2-Year U.S. Treasury Note, 5-Year U.S. Treasury Note and Euro Dollar
contract represents $200,000, $100,000 and $1,000,000, respectively, in
notional par value. The total net notional amount and net market value at
risk for the futures contracts shown above are $69,800,000 and $56,296,812,
respectively. The determination of notional amounts does not consider market
risk factors and therefore notional amounts as presented here are indicative
only of volume of activity and not a measure of market risk.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
14
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GS Short Duration Tax-Free Fund
- --------------------------------------------------------------------------------
Investment Objective
The GS Short Duration Tax-Free Fund seeks to provide a high level of
current income exempt from regular federal income tax, consistent with
relatively low principal volatility, through investments in municipal securities
rated single-A or better or deemed to be of comparable quality. The portfolio
seeks to maintain an average duration of two to three years and invests in
securities with remaining effective maturities of five years or less.
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 three-
year municipal bond (as calculated from data provided by Municipal Market Data,
an independent municipal market information provider) rising approximately 2%,
while yields fell from 4.85% on November 1, 1994, to 4.10% on October 31, 1995.
During the past 12 months the yield curve for municipal bonds became quite steep
compared with Treasuries, and three-year municipal bonds outperformed 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 strong equity rally.
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. At 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 in terms of price.
Performance Review
For the 12 months ended October 31, 1995, the fund's Institutional shares
achieved a total return of 5.98% (4.42% from monthly distributions and 1.56%
from share price appreciation) compared with a return of 7.80% for the Lehman
Brothers Three-Year Municipal Bond Index (the "Index"), the fund's benchmark.
For the same period, the fund's Administration shares realized a total return of
5.76% (4.16% from monthly distributions and 1.60% from share price appreciation)
and its Service shares recorded a total return of 5.59% (3.90% from monthly
distributions and 1.69% from share price appreciation).
Though the fund performed well in the bond rally, it underperformed the
Index, primarily because it was more defensively positioned early in the period
in response to last year's volatility. We favored premium (higher coupon,
callable) bonds that offered greater liquidity and were less likely to suffer
from adverse tax consequences associated with short-term discount securities,
which can have a significant impact in the short-term market. Though premium
bonds typically retain principal better than discount bonds when interest rates
rise as they did in 1994, they tend to lag when rates fall, as was the case
during 1995. In contrast, the benchmark's allocation included a higher
percentage of discount bonds, which typically outperform as interest rates fall.
In general, higher coupon bonds were less desirable in the declining rate
environment because they tended to be called, shortening the portfolio's
duration at a time when it would have been more advantageous to extend it.
Another aspect of our defensive strategy was that we stressed higher credit
quality securities (triple- and double-A-rated) over lower quality. The Index,
however, held a greater percentage of lower-rated securities, which added to its
performance when credit spreads tightened during the year and lower-quality
bonds appreciated more than those of higher quality.
- --------------------------------------------------------------------------------
15
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GS Short Duration Tax-Free Fund (continued)
- --------------------------------------------------------------------------------
Portfolio Composition and Investment Strategies
Portfolio Composition as of October 31, 1995*
[PIE CHART APPEARS HERE]
Pre-refunded Bonds 9.8%
General Obligations 34.8%
Insured Revenue Bonds 18.2%
Insured General Obligations 16.2%
Revenue Bonds 11.0%
Variable Rate Demand Notes 10.0%
* 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. Insured municipal bonds
continued to be attractive 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. Also, there
was a larger supply of insured bonds in states with high taxes and high savings
rates. In general, we emphasized securities from California, New York and
Michigan that we determined to be undervalued due to a temporary lack of demand.
We anticipate that these securities will appreciate as demand improves and yield
spreads tighten. As of October 31, we had overweighted the fund's holdings in
insured bonds relative to the Index (34.4% versus 22.2%).
. General Obligation (GO) Bonds. GOs, which are typically higher credit
quality and lower yielding than revenue bonds, are backed by the general taxing
power of a municipality. When credit spreads tightened during the period, the
additional income from lower-quality bonds did not warrant taking additional
risk. As a result, we significantly increased the fund's investment in GOs to
34.8%, approximately four times the level of last year's allocation. Also, the
short-duration municipal bond market has a larger percentage of uninsured GOs
than uninsured revenue bonds, due to the nature of the issuers.
. Revenue Bonds. Noninsured revenue bonds, generally single-A- and double-A-
rated debt, accounted for 11.0% of the portfolio, half of the benchmark's
weighting in the sector. (Revenue bonds pay interest and principal out of a
specific revenue stream, which includes sales taxes, hospital charges, tolls,
electric rates and airport fees.) Revenue bond allocations reflect security-
specific opportunities, which are more closely tied to credit quality than
sector preference.
. Variable Rate Demand Notes (VRDNs). VRDNs, a 10.0% portfolio position, are
high-quality cash equivalents. We used VRDNs to manage the portfolio's duration
to be neutral to the Index.
. Pre-refunded Bonds. The portfolio was 9.8% invested in pre-refunded bonds
as of October 31, 1995 (versus just over 50% last year), slightly overweighted
versus the Index's 8.2%. We sold the majority of the fund's large position in
pre-refunded bonds during the past year as spreads of pre-refunded bonds over
other higher-grade debt tightened significantly and they provided little
relative value.
. Forward Contracts. During April, the fund bought a forward contract (a
commitment to take possession of a financial instrument at a specified date and
price), which functioned as a long-dated settlement of a purchase. Because of
its unconventional structure, the forward was available at a more attractive
price than a conventional bond.
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
GS Short Duration Tax-Free Fund (continued)
- --------------------------------------------------------------------------------
. Duration. As of October 31, the fund's duration was 2.86 years, slightly
longer than the Index's duration of 2.77 years. During the course of the year,
the fund's duration was neutral to the Index. In general, we manage the fund's
duration to approximate the Index's, rather than attempting to make interest
rate predictions. Instead, we look for opportunities to outperform the Index
through coupon, state, security and sector allocations.
. Credit Quality. The portfolio's overall credit quality was not
significantly changed during the period. As of October 31, the portfolio was
77.1% invested in triple-A-rated bonds, 16.1% in double-A's and 6.8% in single-
A's.
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 securities 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 our 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's Institutional, Administration and Service shares distributed
monthly distributions totaling approximately $0.42, $0.40 and $0.37 per share,
respectively, 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 tax-exempt income, as required by
tax law.
Your investment in the GS Short Duration Tax-Free 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
GS Short Duration Tax-Free Fund
November 30, 1995
- --------------------------------------------------------------------------------
17
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
GS Short Duration Tax-Free 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 GS Short Duration Tax-Free Fund based on the Fund's normal
minimum initial investment of $50,000, is compared to its benchmark, the Lehman
Brothers 3-Year Municipal Bond Index ("3-Year Bond 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.
<TABLE>
<CAPTION>
HYPOTHETICAL $50,000 INVESTMENT/(a)/
Institutional Shares
Institutional Shares 3-Year Bond Index
<S> <C> <C>
10/1/92 50,000 50,000
10/31/92 49,831 49,805
10/31/93 53,335 53,102
10/31/93 53,425 53,825
10/31/95 56,620 58,023
</TABLE>
<TABLE>
<CAPTION>
Administration Share
Administrative Shares 3-Year Bond Index
<S> <C> <C>
6/1/93 50,000 50,000
10/31/93 51,092 51,144
10/31/94 51,036 51,840
10/31/95 53,976 55,884
</TABLE>
<TABLE>
<CAPTION>
Service Shares
Service Shares 3-Year Bond Index
<S> <C> <C>
10/1/94 50,000 50,000
10/31/94 49,696 49,880
10/31/95 52,474 53,771
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
------------------------------
One Year Since Inception (b)
- ----------------------------------------------------------------
<S> <C> <C>
Institutional Shares 5.98% 4.12%
- ----------------------------------------------------------------
Administration Shares 5.76% 3.21%
- ----------------------------------------------------------------
Service Shares 5.59% 4.70%
- ----------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on the
first day of the month following the commencement of operations of the
Administration and Service share classes.
(b) The Institutional, Administration and Service shares commenced operations
October 1, 1992, May 20, 1993 and September 20, 1994, respectively.
18
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
GS Short Duration Tax-Free Fund
October 31, 1995
- ----------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
============================================================================
Debt Obligations-- 104.9%
Alabama--3.6%
Alabama State GO/(a)/ (AA/Aa)
$2,000,000 5.90% 03/01/99 $2,094,940
- ----------------------------------------------------------------------------
California--13.4%
California State Revenue Anticipation
Warrants (Sp1/MIG1)
$1,500,000 5.75% 04/25/96 $1,514,280
Sacramento County, CA Tax and Revenue
Anticipation Notes(a) (Sp1+/MIG1)
3,000,000 4.75 10/04/96 3,024,270
San Francisco, CA City and County GO
Series 1995 A and B (FGIC) (AAA/Aaa)
1,450,000 7.25 06/15/99 1,607,644
1,570,000 7.25 06/15/00 1,771,211
- ----------------------------------------------------------------------------
$7,917,405
- ----------------------------------------------------------------------------
Connecticut--5.2%
Connecticut State Series A GO/(a)/
(AA-/Aa)
$3,000,000 5.00% 03/15/00 $3,077,520
- ----------------------------------------------------------------------------
Florida--15.9%
Florida State Certificates of
Participation Equipment Financing
Program (A+/A)
$1,115,000 5.90% 11/15/96 $1,132,929
Lakeland, FL Electric and Water RB
(FGIC)/(b)/ (AAA/Aaa)
2,640,000 5.25 10/01/97 2,679,626
5,415,000 5.25 10/01/98 5,521,460
- ----------------------------------------------------------------------------
$9,334,015
- ----------------------------------------------------------------------------
Illinois--3.8%
Illinois Health Facilities Authority
Revenue- Lutheran Healthcare System
Prerefunded/(c)/ (AAA/NR)
$2,000,000 7.50% 04/01/99 $2,232,140
- ----------------------------------------------------------------------------
Kansas--4.5%
Kansas City, KS GO Series A (MBIA)
(AAA/Aaa)
$1,000,000 5.25% 09/01/99 $1,037,780
Topeka, KS GO Notes (NR/MIG1)
1,620,000 4.25 07/15/96 1,624,082
- ----------------------------------------------------------------------------
$2,661,862
- ----------------------------------------------------------------------------
Louisiana--3.8%
Lafayette Parish, LA School Board Sales
Tax GO (FGIC) (AAA/Aaa)
$2,130,000 6.00% 04/01/99 $2,242,272
- ----------------------------------------------------------------------------
Massachusetts--5.4%
Boston, MA GO (A/A)
$ 595,000 9.50% 03/01/96 $ 604,199
Boston, MA GO (MBIA) (AAA/Aaa)
2,500,000 5.25 10/01/99 2,586,375
- ----------------------------------------------------------------------------
$3,190,574
- ----------------------------------------------------------------------------
Michigan--5.1%
Michigan Municipal Bond Authority
Revenue Notes (Sp1+/NR)
$3,000,000 5.00% 05/03/96 $3,018,570
- ----------------------------------------------------------------------------
Nevada--2.2%
Nevada State GO/(b)/ (AA/Aa)
$1,170,000 8.00% 11/01/99 $1,321,375
- ----------------------------------------------------------------------------
New Jersey--9.9%
New Jersey Healthcare Facilities
Financing Authority Prerefunded/(c)/
(AAA/Aaa)
$2,380,000 8.38% 02/01/98 $2,637,611
New Jersey State Turnpike Authority
Series A RB (A/A)
3,000,000 6.20 01/01/00 3,187,590
- ----------------------------------------------------------------------------
$5,825,201
- ----------------------------------------------------------------------------
New Mexico--2.1%
Albuquerque City, New Mexico GO Series
C (AA/Aa)
$1,200,000 5.10% 07/01/00 $1,231,980
- ----------------------------------------------------------------------------
New York--3.5%
Erie County, New York GO Series A
(MBIA)/(a)/ (AAA/Aaa)
$2,000,000 5.50% 06/01/99 $2,080,060
- ----------------------------------------------------------------------------
Ohio--2.6%
Ohio State Building Authorities Series
A Escrowed-To-Maturity/(c)/ (NR/Aaa)
$1,400,000 7.15% 08/01/99 $1,536,500
- ----------------------------------------------------------------------------
Oklahoma--6.7%
Enid, OK Hospital Authority RB (Societe
General LOC)/(a)/ (NR/Aa1)
$2,800,000 7.20%/(d)/ 10/01/15 $2,880,640
Oklahoma County, OK Independent School
District GO (A+/Aa)
1,000,000 5.40 02/01/99 1,034,440
- ----------------------------------------------------------------------------
$3,915,080
- ----------------------------------------------------------------------------
Pennsylvania--1.9%
Philadelphia, PA Water and Sewer RB
(MBIA) (AAA/Aaa)
$1,000,000 6.85% 10/01/99 $1,094,610
- ----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
GS Short Duration Tax-Free Fund (continued)
October 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
South Carolina--7.2%
Chester County, South Carolina School
District GO (AMBAC) (AAA/Aaa)
$1,275,000 6.50% 02/01/00 $ 1,384,102
South Carolina State GO (AA+/Aaa)
2,700,000 6.50 03/01/98 2,841,642
- -------------------------------------------------------------------------------
$ 4,225,744
- -------------------------------------------------------------------------------
Virginia--3.8%
Arlington County, Virginia GO (AAA/Aaa)
$2,160,000 5.00% 06/01/00 $ 2,216,743
- -------------------------------------------------------------------------------
Washington--4.3%
Clark County, Washington Public Utility
District (FGIC) (AAA/Aaa)
$2,500,000 5.00% 01/01/99 $ 2,545,875
- -------------------------------------------------------------------------------
Total Debt Obligations
(Cost $61,163,971) $61,762,466
===============================================================================
Short-Term Obligations-- 18.0%
Gulf Coast Waste Disposal Authority TX
VRDN/(e)/ (A-1+/VMIG-1)
$3,000,000 3.90% 11/01/95 $ 3,000,000
Harris County Health Facility, TX Healthcare
System VRDN/(e)/ (A-1+/NR)
1,800,000 4.00 11/01/95 1,800,000
Monroe County, GA Pollution Control VRDN/(e)/
(A-1/VMIG-1)
1,200,000 3.90 11/07/95 1,200,000
1,000,000 3.90 11/01/95 1,000,000
Nassau County, New York Industrial
Development VRDN/(e)/ (A-1+/NR)
300,000 3.95 11/01/95 300,000
New York , NY Series C VRDN/(e)/ (A-1+/VMIG-1)
3,300,000 4.05 11/01/95 3,300,000
- -------------------------------------------------------------------------------
Total Short-Term Obligations
(Cost $10,600,000) $10,600,000
===============================================================================
Total Investments
(Cost $71,763,971/(f)/) $72,362,466
===============================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in
which value exceeds cost $611,530
Gross unrealized loss for investments in
which cost exceeds value (13,035)
- -------------------------------------------------------------------------------
Net unrealized gain $598,495
===============================================================================
</TABLE>
/(a)/Portions of these securities are being segregated for when-issued
securities.
/(b)/When-issued security.
/(c)/Pre-refunded and escrowed-to-maturity bonds have been collateralized by
U.S. Treasury securities which are held in escrow and used to pay principal
and interest on the tax-exempt issue and to redeem the bonds in full upon
the refunding date. The maturity date shown for these securities is the
refunding date.
/(d)/Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1995.
/(e)/Securities with "Put" features with resetting interest rates. Maturity
dates disclosed are the next reset interest dates.
/(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.
FGIC -Insured by Financial Guaranty Insurance Co.
GO -General Obligation
LOC -Letter of Credit
MBIA -Insured by Municipal Bond Investors Assurance
NR -Not Rated
RB -Revenue Bond
VRDN -Variable Rate Demand Note
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Letter to Shareholders
- -------------------------------------------------------------------------------
GS Core Fixed Income Fund
Investment Objective
The GS Core Fixed Income Fund seeks to achieve a total return that exceeds
the total return of the Lehman Brothers Aggregate Bond Index (the "Index")
through a diversified portfolio of fixed income securities. The fund may invest
in U.S. Treasury, agency, corporate, mortgage-backed and asset-backed
securities, as well as in a limited amount of nondollar-denominated fixed income
securities. While the fund's performance will be measured against the Index, the
portfolio is not required to hold the same securities or match the sector
weightings of the Index. Every security in the portfolio must be rated at least
investment grade by an independent rating agency or be considered to be of
equivalent quality by Goldman Sachs Asset Management at the time it is
purchased.
Performance Review
For the 12 months ended October 31, 1995, the fund's total return was 15.72%
(7.20% from monthly distributions and 8.52% from share price appreciation)
compared with a return of 15.65% for the Lehman Brothers Aggregate Bond Index,
the fund's benchmark. The fund's NAV as of October 31 was $10.00 per share, up
$0.76 from last year.
The fund outperformed the Index by seven basis points during the period,
primarily due to its sector allocations. The fund was significantly overweighted
versus the benchmark in corporate bonds, which added incremental yield and
return as spreads tightened. The fund also held a small position in emerging
market debt that performed well, a sector not included in the benchmark. In
addition, the fund benefited from being significantly overweighted in asset-
backed securities, which also performed well during the period.
Portfolio Composition and Investment Strategies
Portfolio Composition as of October 31, 1995*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Fixed Rate Mortgage Pass-Throughs 30.2%
Corporate Bonds 28.1%
U.S. Treasuries 24.7%
Asset-Backed Securities 9.9%
Emerging Market Debt 2.6%
Agency Debentures 2.1%
CMOs 2.0%
Repos/Cash Equivalents 0.4%
</TABLE>
* 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. As of October 31, the portfolio's largest
sector holding was 30.2% in fixed rate mortgage pass-throughs, slightly
overweighting the Index allocation of 28.2%. We increased the fund's position in
fixed-rate mortgages when they became relatively inexpensive during the summer.
Subsequently, mortgages have continued to get even cheaper based on prepayment
fears. However, we still believe they represent good value that may be realized
when the rate of prepayments begins to slow. In our opinion, they continue to
offer attractive spreads relative to Treasuries.
21
<PAGE>
Letter to Shareholders
- -------------------------------------------------------------------------------
GS Core Fixed Income Fund (continued)
Our security selection within the sector continued to be significantly
different from that of the Index. During the early part of the period under
review, the fund underweighted 15-year mortgage-backed securities and
consequently didn't fully participate when the 15-year sector outperformed. We
also emphasized seasoned mortgages, which tended to help the portfolio,
particularly during the latter part of the period, because they are less prone
to prepayments than newly issued mortgages.
As anticipated in the April semiannual report, we shifted the fund's
emphasis to favor securities issued by the Government National Mortgage
Association (GNMA) and the Federal Home Loan Mortgage Corporation (FHLMC) over
the Federal National Mortgage Association (FNMA), as the former were more
attractively priced.
. Corporate Bonds. We continued to emphasize corporate bonds during the period
because they offered incremental yield. Corporates represented 28.1% of the
portfolio on October 31 compared with 17.1% for the Index.
. Asset-Backed Securities (ABSs). We found the ABS sector attractive due to
its high credit quality debt and incremental yield over Treasuries. As a result,
we overweighted the sector relative to the Index, 9.9% versus 1.3%. Our ABS
holdings included credit card receivables (5.8%) and automobile loan receivables
(4.1%).
. Emerging Market Debt. During the period, we added a 2.6% allocation in
emerging market debt. We intend to keep the position relatively small and to
carefully manage risk by emphasizing higher-credit, short-duration bonds
(typically with average maturities of under five years). Thus far we have
focused primarily on Latin American corporate debentures. In particular, we
stressed Colombian bonds that were inexpensive relative to comparably rated U.S.
credits. In our view, some Latin American debt had been unfairly penalized and
therefore offered attractively priced bonds that the fund continued to own as of
the end of the period. The fund also briefly held a Republic of Poland bond that
was subsequently sold at a profit.
. Agency Debentures. We established a small position in agency debentures
(2.1%) in April, because we believed that they represented better relative value
than Treasuries. During most of the period, the fund's underweighting in agency
debentures versus the Index worked in its favor, because this sector
underperformed Treasuries as spreads widened.
. PAC CMOs and ARMs. The fund's position in planned amortization class
collateralized mortgage obligations (PAC CMOs) declined from 1.7% of the
portfolio a year ago to 0.9% on October 31, 1995. The percentage of PAC
securities fell relative to total portfolio assets as the fund attracted new
investments. During the period, we liquidated the portfolio's 1.9% position in
adjustable rate mortgage securities (ARMs) in favor of other sectors that
appeared to offer greater yield and return potential.
. Duration. We have targeted the fund's duration to approximate that of the
Index. Both were 4.8 years as of October 31.
. Credit Quality. As of October 31, 58.9% of the portfolio was invested in
government and agency securities, 9.9% in AAA securities and 0.4% in cash
equivalents. To add incremental yield potential, 30.8% of the portfolio was
invested in A and BBB securities, a significant overweighting versus the Index.
. Prudent Use of Derivatives. As noted previously, the fund held a 9.9%
position in asset-backed securities and a 0.9% position in PAC CMOs, both
considered to be lower risk derivatives. During the period, we added very small
positions in higher risk interest only (IO) and principal only (PO) CMOs (0.3%
and 0.8% of the portfolio, respectively) for their potential incremental return.
The fund also used covered mortgage dollar rolls (where
22
<PAGE>
- -------------------------------------------------------------------------------
GS Core Fixed Income Fund (continued)
- -------------------------------------------------------------------------------
mortgage securities owned by the fund are sold and the fund simultaneously
contracts to buy back similar mortgage securities with the same coupon on a
specified future date) to provide incremental yield. 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.
Portfolio Outlook
Looking forward, we are still cautiously optimistic regarding the corporate
debt sector, based on the continuation of relatively strong corporate earnings
despite the softening economy. Within the sector, we continue to favor
industrial and financial issues over Yankees (dollar-denominated bonds issued in
the U.S. by foreign banks and corporations) and utility bonds. We are also
cautiously optimistic about the mortgage-backed securities market. Yield spreads
of mortgage pass-throughs relative to Treasuries are currently very wide, but we
remain concerned about prepayment risk. Additionally, we have a neutral outlook
for the ABS sector over the next quarter. Though strong investor demand is
likely to continue longer term, we believe the ABS sector may be affected by
increases in consumer debt delinquencies and by year-end selling.
We will continue to look for attractive investment opportunities in emerging
markets. For the near term, we tend to favor Latin American debt over
investment-grade bonds in Asia and eastern Europe, which we currently consider
too expensive.
Distribution Policy
During the 12-month period under review, the fund distributed $0.64 per
share. Dividends are declared daily and paid on a monthly basis. The fund
intends to distribute substantially all of its investment company taxable
income, as required by tax law.
We value your continued confidence in the GS Core Fixed 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/ Richard H. Buckholz
Richard H. Buckholz
/s/ C. Richard Lucy
C. Richard Lucy
/s/ Theodore T. Sotir
Theodore T. Sotir
Portfolio Managers
GS Core Fixed Income Fund
November 30, 1995
- -------------------------------------------------------------------------------
23
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
GS Core Fixed 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 GS Core Fixed Income Fund based on the Fund's normal minimum
initial investment of $50,000, is compared to its benchmark, the Lehman Brothers
Aggregate Bond Index ("Lehman Aggregate 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 $50,000 INVESTMENT/(a)/
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GS Core Lehman
Fixed Income Fund Aggregate Index
<S> <C> <C>
1/5/94 50,000 50,000
10/31/94 48,498 46,980
10/31/95 56,122 54,332
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
--------------------------------
One Year Since Inception/(a)/
--------------------------------
<S> <C>
15.72% 6.54%
</TABLE>
/(a)/ Commenced operations January 5, 1994.
- -------------------------------------------------------------------------------
24
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
GS Core Fixed Income Fund
October 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds--28.2%
Finance Bonds--19.1%
Bancponce Financial Corp.
$ 500,000 5.17% 07/15/96 $ 496,150
BankAmerica Corp.
200,000 4.99 05/17/99 199,118
Capital One Bank
600,000 8.63 01/15/97 616,830
500,000 8.13 02/27/98 518,910
Chrysler Financial Corp.
50,000 6.22 10/27/97 50,136
500,000 6.10 11/02/97 500,000
Comdisco Inc.
600,000 9.75 01/15/97 624,798
200,000 7.33 03/06/97 202,722
Continental Bank N.A.
525,000 11.25 07/01/01 586,924
Corp. Andina de Fomento
280,000 7.25 04/30/98 279,370
60,000 7.38 07/21/00 60,167
Countrywide Funding Corp.
125,000 6.08 07/14/99 123,881
250,000 8.43 11/16/99 267,858
Financiera Energy Nacional
530,000 6.63 12/13/96 526,025
First USA
200,000 5.05 12/27/95 199,674
400,000 5.05 12/29/95 399,324
400,000 6.88 09/12/96 402,804
Ford Capital Corp.
200,000 9.38 01/01/98 213,388
600,000 9.50 07/01/01 686,688
General Motors Acceptance Corp.
400,000 7.50 11/04/97 410,344
275,000 7.63 03/09/98 283,740
200,000 7.13 05/10/00 205,652
Golden West Financial Corp.
600,000 8.62 08/30/98 635,418
Maybank, New York
975,000 7.13 09/15/05 991,030
Security Pacific Corp.
695,000 11.50 11/15/00 843,070
Corporate Bonds (continued)
Finance Bonds (continued)
Signet Banking Corp.
$ 240,000 9.63% 06/01/99 $ 262,387
- -------------------------------------------------------------------------------
$10,586,408
- -------------------------------------------------------------------------------
Industrial Bonds--8.5%
Auburn Hills Trust
$ 360,000 12.00% 05/01/20 $ 539,770
Empresa Col Petroleos
250,000 7.25 07/08/98 245,000
News America Holdings Inc.
350,000 9.13 10/15/99 382,659
500,000 7.50 03/01/00 517,620
RJR Nabisco Inc.
175,000 8.00 07/15/01 176,444
350,000 8.62 12/01/02 359,594
Tele-Communications Inc.
400,000 6.10 05/15/96 399,532
Tenneco Inc.
575,000 10.00 08/01/98 628,320
Time Warner Inc.
1,225,000 7.95 02/01/00 1,273,473
175,000 7.98 08/15/04 179,776
- -------------------------------------------------------------------------------
$ 4,702,188
- -------------------------------------------------------------------------------
Utility Bonds--0.6%
Central Maine Power Co.
$ 330,000 7.45% 08/30/99 $ 335,521
- -------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $15,375,809) $15,624,117
- -------------------------------------------------------------------------------
Asset-Backed Securities--9.7%
Discover Card Trust Series 1991-C, Class A
$1,035,000 7.20% 04/16/98 $ 1,035,135
Ford Credit Auto Loan Master Trust Series
1995-1, Class A
650,000 6.50 08/15/02 657,378
General Motors Acceptance Corp. Series 1994,
Class A(a)
831,244 6.30 06/15/99 833,239
General Motors Acceptance Corp. Series 1995,
Class A
185,548 7.15 03/15/00 187,487
Premier Auto Trust Series 1994-1, Class A3
120,000 4.75 02/02/00 118,625
Premier Auto Trust Series 1995-1, Class A4
360,000 7.85 02/04/98 368,132
</TABLE>
25
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
GS Core Fixed Income Fund (continued)
October 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset-Backed Securities (continued)
Premier Auto Trust Series 1995-1, Class A5
$80,000 7.90% 05/04/99 $ 82,566
Sears Credit Card Master Trust, Series 1995-2, Class A
550,000 8.10 06/15/04 589,914
Sears Credit Card Master Trust, Series 1995-3, Class A
300,000 7.00 10/15/04 309,900
Standard Credit Card Trust, Series 1990-3, Class A
1,120,000 9.50 07/10/98 1,176,370
- -------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $5,346,628) $ 5,358,746
- -------------------------------------------------------------------------------
Government Bonds--1.2%
Province of Quebec
$ 520,000 13.25% 09/15/14 $ 656,250
- -------------------------------------------------------------------------------
Total Government Bonds
(Cost $656,517) $ 656,250
- -------------------------------------------------------------------------------
Mortgage Backed Obligations--32.0%
Federal Home Loan Mortgage Corp. (FHLMC)
$2,000,000 7.50% TBA-30 year(b) $ 2,050,624
3,000,002 7.00 09/01/25 2,975,627
500,000 7.50 10/01/25 505,625
1,000,000 8.00 10/15/25 1,025,313
2,000,000 8.00 TBA-30 year(b) 2,022,500
Federal National Mortgage Association (FNMA)
831,998 9.00 08/01/06 872,558
578,679 7.00 11/01/24 573,616
FNMA Remic Trust Series 1993-58, Class G
500,000 5.50 12/25/20 476,100
FNMA Remic Trust Series 189, Class 1 Principal Only Strips
519,544 4.55(c) 11/25/19 414,843
FNMA Remic Trust Series 189, Class 2 Principal Only Strips
660,175 9.50(c) 11/01/19 151,698
Government National Mortgage Association
1,000,000 7.50 TBA-30 year(b) 1,012,812
1,005,000 9.50 06/15/17 1,081,318
879,262 9.00 07/15/17 932,292
525,920 9.00 02/15/21 555,503
2,998,514 8.00 08/15/24 3,087,534
- --------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $17,570,371) $17,737,963
- --------------------------------------------------------------------------------
Sovereign Debt--0.5%
Republic of Colombia
$ 260,000 9.25% 02/15/00 $ 261,542
- --------------------------------------------------------------------------------
Total Sovereign Debt
(Cost $260,400) $ 261,542
- --------------------------------------------------------------------------------
U.S. Government Agency Obligations--2.1%
FHLMC
$ 300,000 8.20% 01/16/98 $ 308,337
250,000 6.83 09/18/02 252,455
FNMA Medium Term Notes
170,000 8.79 01/30/02 172,946
Resolution Funding Corp. Principal Only Strips(c)
1,160,000 6.78 10/15/20 219,194
1,140,000 6.78 01/15/21 212,359
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $1,116,619) $ 1,165,291
- --------------------------------------------------------------------------------
U.S. Treasury Obligations--24.7%
United States Treasury Bonds
$ 100,000 6.40% 08/15/20 $ 128,125
100,000 8.75 08/15/20 128,125
120,000 7.88 02/15/21 141,263
60,000 8.00 11/15/21(d) 71,719
United States Treasury Interest Only Stripped Securities(c)
2,250,000 6.43 08/15/09 943,313
350,000 6.48 11/15/10 134,537
United States Treasury Notes
750,000 7.25 11/15/96 762,188
2,790,000 7.38 11/15/97 2,881,121
830,000 7.75 01/31/00 889,528
2,080,000 6.25 02/15/03 2,116,733
United States Treasury Principal Only Stripped Securities(c)
40,000 5.65 11/15/97 35,706
400,000 6.15 11/15/04 231,060
6,320,000 6.17 11/15/04 3,650,748
1,010,000 6.63 05/15/20 203,576
6,940,000 6.63 08/15/20 1,376,203
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $13,147,205) $13,693,945
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
- -------------------------------------------------------------------------------
GS Core Fixed Income Fund (continued)
October 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreement--10.1%
Joint Repurchase Agreement Account(a)
$5,600,000 5.93% 11/01/95 $ 5,600,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $5,600,000) $ 5,600,000
- -------------------------------------------------------------------------------
Total Investments
(Cost $59,073,549(e)) $60,097,854
===============================================================================
</TABLE>
Futures contracts open at October 31, 1995 are as follows:
<TABLE>
<CAPTION>
Number of
Contracts
Long (Short) Settlement Month Unrealized
Type (f) Gain (Loss)
- ------------------------------ ------------- ------------------ -------------
<S> <C> <C> <C>
Euro Dollars 3 September 1997 ($150)
Euro Dollars 3 December 1997 (225)
2-Year U.S. Treasury Notes 3 December 1995 188
5-Year U.S. Treasury Notes 6 December 1995 5,281
10-Year U.S. Treasury Notes 12 December 1995 10,875
U..S. Treasury Bond (5) December 1995 (35,313)
- --------------------------------------------------------------------------------
($19,344)
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Federal Income Tax Information:
================================================================================
<S> <C>
Gross unrealized gain for investments in which value exceeds cost $1,035,697
Gross unrealized loss for investments in which cost exceeds value (15,571)
- --------------------------------------------------------------------------------
Net unrealized gain $1,020,126
================================================================================
</TABLE>
(a) Portions of these securities are being segregated for open TBA purchases and
mortgage dollar rolls.
(b) 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.
(c) The interest rate disclosed for these securitites represents effective
yields to maturity.
(d) Portions of these securities are being segregated for futures margin
requirements.
(e) The aggregate cost for federal income tax purposes is $59,077,728.
(f) Each 2-Year U.S. Treasury Note contract represents $200,000, in notional par
value. Each 5-Year U.S. Treasury Note, 10-Year U.S. Treasury Note and U.S.
Treasury Bond contract represents $100,000 in notional par value. Each Euro
Dollar contract represents $1,000,000 in notional par value. The total net
notional amount and net market value at risk for the futures contracts shown
above are $7,900,000 and $3,447,201, respectively. The determination of
notional amounts does not consider market risk factors and therefore
notional amounts as presented here are indicative only of volume of activity
and not a measure of market risk.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GS Adjustable GS Short-Term GS Short GS Core
Rate Government Duration Fixed
Government Agency Tax-Free Income
Agency Fund Fund Fund Fund
=======================================================
<S> <C> <C> <C> <C>
Assets:
Investments in securities, at value (cost $676,175,134, $97,819,981,
$71,763,971 and $59,073,549, respectively) $668,520,312 $ 97,786,174 $72,362,466 $60,097,854
Receivables:
Investment securities sold 2,522,537 7,389,364 7,084,752 501,611
Interest 4,758,629 1,877,430 810,907 693,394
Fund shares sold 1,816,089 -- -- --
Cash 834,124 24,111 58,457 46,820
Deferred organization expenses, net 20,848 -- 43,483 77,914
Other assets 363,405 227,642 116,718 76,278
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets 678,835,944 107,304,721 80,476,783 61,493,871
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payables:
Dividends 1,964,420 262,952 80,916 --
Investment securities purchased -- 3,077,455 21,417,313 5,942,377
Fund shares repurchased 350,373 139,117 1,099 --
Investment adviser fees 230,618 35,221 20,005 18,684
Transfer agent fees 79,466 -- 2,000 1,868
Authorized dealer service fees 3,162 -- -- --
Accrued expenses and other liabilities 74,887 29,946 66,141 28,664
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,702,926 3,544,691 21,587,474 5,991,593
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid in capital 733,171,454 116,985,113 62,694,923 53,994,311
Accumulated undistributed (distributions in excess of) net
investment income (2,129,902) 708,450 67,398 40,202
Accumulated net realized gain (loss) on investment and futures
transactions (46,579,546) (13,973,992) (4,471,507) 462,804
Net unrealized gain (loss) on investments and futures (8,328,988) 40,459 598,495 1,004,961
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets $676,133,018 $103,760,030 $58,889,309 $55,502,278
==================================================================================================================================
Net asset value, offering and redemption price per share
Institutional shares $9.77 $9.82 $9.94 $10.00
Administration shares $9.77 -- $9.94 --
Service shares -- -- $9.95 --
Class A shares(a) $9.77 -- -- --
==================================================================================================================================
Shares Outstanding:
Institutional shares 67,312,163 10,567,526 5,871,894 5,549,690
Administration shares 365,725 -- 4,614 --
Service shares -- -- 45,968 --
Class A shares 1,556,301 -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total shares of beneficial interest outstanding, $.001 par value
(unlimited number of shares authorized) 69,234,189 10,567,526 5,922,476 5,549,690
==================================================================================================================================
</TABLE>
(a) Maximum public offering price per share (NAV per share *1.0152) for Class A
shares of GS Adjustable Rate Government Agency Fund is $9.92.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GS Adjustable GS Short-Term GS Short GS Core
Rate Government Duration Fixed
Government Agency Tax-Free Income
Agency Fund Fund Fund Fund
=======================================================
<S> <C> <C> <C> <C>
Investment income:
Interest $45,991,431 $ 9,467,818 $3,112,135 $2,402,498
- ---------------------------------------------------------------------------------------------------------------------------------
Total income 45,991,431 9,467,818 3,112,135 2,402,498
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment adviser fees 2,947,492 646,364 260,970 137,158
Distribution fees 17,967 -- -- --
Authorized dealer service fees 17,967 -- -- --
Administration share fees 12,632 425 1,244 --
Service share fees -- -- 2,847 --
Transfer agent fees 306,662 -- 26,098 13,716
Custodian fees 202,330 53,175 40,586 46,412
Professional fees 73,276 79,913 37,300 49,918
Printing fees 84,609 30,942 42,972 37,167
Registration fees 7,192 71,103 42,630 12,708
Amortization of deferred organization expenses 29,381 -- 22,673 25,947
Trustees' fees 53,525 6,783 1,989 690
Other 221,317 42,713 31,511 7,056
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses 3,974,350 931,418 510,820 330,772
Less--expenses reimbursable and fees waived by Goldman Sachs (569,372) (349,267) (213,139) (176,469)
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses 3,404,978 582,151 297,681 154,303
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 42,586,453 8,885,667 2,814,454 2,248,195
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment and
futures transactions:
Net realized gain (loss) from:
Investment transactions (6,834,903) (4,027,343) (472,312) 908,346
Futures transactions (5,165,576) (2,831) -- 12,784
Net change in unrealized gain (loss) on:
Investments 16,816,889 5,661,425 1,270,197 1,682,520
Futures (678,522) 74,266 -- (19,344)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investment and futures
transactions 4,137,888 1,705,517 797,885 2,584,306
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $46,724,341 $10,591,184 $3,612,339 $4,832,501
=================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GS Adjustable GS Short-Term GS Short GS Core
Rate Government Duration Fixed
Government Agency Tax-Free Income
Agency Fund Fund Fund Fund
===========================================================
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 42,586,453 $ 8,885,667 $ 2,814,454 $ 2,248,195
Net realized gain (loss) from investment and futures transactions (12,000,479) (4,030,174) (472,312) 921,130
Net change in unrealized gain on investments and futures 16,138,367 5,735,691 1,270,197 1,663,176
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 46,724,341 10,591,184 3,612,339 4,832,501
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income
Institutional shares (42,629,917) (8,684,213) (2,771,793) (2,253,625)
Administration shares (278,448) (11,164) (20,584) --
Service shares -- -- (22,077) --
Class A shares (425,863) -- -- --
In excess of net investment income
Institutional shares (2,124,188) -- -- --
Administration shares (13,875) -- -- --
Class A shares (21,220) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (45,493,511) (8,695,377) (2,814,454) (2,253,625)
- ----------------------------------------------------------------------------------------------------------------------------------
From Share Transactions:
Net proceeds from sales of shares 456,762,969 49,034,023 36,468,900 30,256,879
Proceeds from reorganizations 37,593,780 -- -- --
Reinvestment of dividends and distributions 21,273,685 4,993,443 1,873,154 2,232,160
Cost of shares repurchased (790,211,526) (145,988,674) (67,865,169) (4,073,379)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
shares transactions (274,581,092) (91,961,208) (29,523,115) 28,415,660
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) (273,350,262) (90,065,401) (28,725,230) 30,994,536
Net Assets:
Beginning of year 949,483,280 193,825,431 87,614,539 24,507,742
- ----------------------------------------------------------------------------------------------------------------------------------
End of year $ 676,133,018 $ 103,760,030 $ 58,889,309 $55,502,278
==================================================================================================================================
Accumulated undistributed (distributions in excess of) net investment
income $ (2,129,902) $ 708,450 $ 67,398 $ 40,202
==================================================================================================================================
Summary of Share Transactions:
Shares sold 46,809,171 5,072,030 3,733,382 3,077,397
Shares exchanged in reorganizations 3,843,169 -- -- --
Reinvestment of dividends and distributions 2,181,117 516,178 190,942 230,595
Shares repurchased (81,125,615) (15,135,663) (6,950,294) (411,156)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (28,292,158) (9,547,455) (3,025,970) 2,896,836
==================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets (continued)
For the Year Ended October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GS Adjustable GS Short-Term GS Short GS Core
Rate Government Duration Fixed
Government Agency Tax-Free Income
Agency Fund Fund Fund Fund(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $ 74,486,356 $ 15,104,529 $ 4,367,575 $ 912,083
Net realized loss from
investment and futures
transactions (21,946,744) (9,489,099) (3,998,966) (458,326)
Net change in unrealized
loss on investments (23,081,906) (3,394,603) (773,951) (658,215)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
operations 29,457,706 2,220,827 (405,342) (204,458)
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to
Shareholders from:
Net investment income
Institutional shares (73,960,549) (14,220,333) (4,170,854) (912,083)
Administration shares (304,939) (674,883) (193,928) --
Service shares -- -- (2,793) --
Net realized gain on
investment and futures
transactions
Institutional shares -- (1,416,326) (931,790) --
Administration shares -- (66,034) (784) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (74,265,488) (16,377,576) (5,300,149) (912,083)
- ----------------------------------------------------------------------------------------------------------------------------------
From Share Transactions:
Proceeds from sales of
shares 1,013,097,417 97,865,803 117,286,528 24,765,017
Reinvestment of dividends
and distributions 30,771,600 10,376,478 4,009,244 911,363
Cost of shares repurchased (2,815,775,329) (276,458,244) (144,689,428) (52,097)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
share transactions (1,771,906,312) (168,215,963) (23,393,656) 25,624,283
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) (1,816,714,094) (182,372,712) (29,099,147) 24,507,742
Net Assets:
Beginning of period 2,766,197,374 376,198,143 116,713,686 --
- ----------------------------------------------------------------------------------------------------------------------------------
End of period $ 949,483,280 $ 193,825,431 $ 87,614,539 $24,507,742
==================================================================================================================================
Accumulated undistributed
net investment income $ 747,775 $ 481,675 $ 44,725 $ 20,085
==================================================================================================================================
Summary of Share
Transactions:
Shares sold 102,107,323 9,829,690 11,568,942 2,561,774
Reinvestment of dividends
and distributions 3,113,434 1,051,206 400,203 96,676
Shares repurchased (284,303,787) (27,853,643) (14,425,718) (5,596)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in shares outstanding (179,083,030) (16,972,747) (2,456,573) 2,652,854
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a)For the period from January 5, 1994 (Commencement of Operations) to October
31, 1994.
The accompanying notes are an integral part of these financial statements.
31
<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 GS Adjustable Rate Government Agency Fund, GS Short-Term
Government Agency Fund, GS Short Duration Tax-Free Fund and GS Core Fixed Income
Fund, collectively, ("the Funds"). The Funds are diversified portfolios of the
Trust offering three classes of shares - Institutional shares, Administration
shares and Service shares. In addition, the GS Adjustable Rate Government Agency
Fund offers Class A 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 mortgage backed, asset 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 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 actual 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
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. Market premiums resulting from the
purchase of long-term debt securities are amortized to interest income over the
life of the security with a corresponding decrease in the cost basis of that
security for GS Short Duration Tax-Free Fund. Market discounts and market
premiums on debt securities, other than mortgage backed securities, are
amortized to interest income over the life of the security with a corresponding
adjustment in the cost basis of that security for GS Core Fixed Income Fund.
C. Mortgage Dollar Rolls
-------------------------
The Funds, with the exception of the GS Short Duration Tax-Free 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 reporting and
32
<PAGE>
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.
D. Futures Contracts
---------------------
The Funds may enter into futures transactions for hedging purposes or,
except for futures transactions on currencies by the GS Core Fixed Income Fund,
to seek to increase total return as permitted by CFTC regulations. The Funds may
also use futures contracts to manage their exposure to fluctuations in interest
rates and in the case of the GS Core Fixed Income Fund, currency values. The use
of futures contracts involve, to varying degrees, elements of market risk which
may exceed the amounts recognized in the Statements of Assets and Liabilities.
The underlying total net notional amount and net market value at risk for
outstanding futures contracts at October 31, 1995 are noted on the appropriate
Schedules of Investments.
Upon entering into a futures contract, a 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 contract, 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.
Certain risks may arise upon entering into futures contracts. The
predominant risk is that the changes in the value of the futures contract may
not directly correlate with changes in the value of the underlying securities.
This risk may decrease the effectiveness of the Funds' hedging strategies and
may also result in a loss to the Funds.
E. Deferred Organization Expenses
----------------------------------
Organization-related costs are being amortized on a straight-line basis over
a period of five years.
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 shares and Service shares 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. For the GS Adjustable Rate Government
Agency Fund, shareholders of Class A shares 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.
G. 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 of its investment company taxable and tax-exempt income
to its shareholders. Accordingly, no federal tax provisions are required. The
characterization of distributions to shareholders for financial statement
purposes as either from or in excess of net investment income or net realized
gain on investment transactions, or from capital, depends on the type of
book/tax differences that may exist as well as timing differences associated
with having different book and tax year ends.
33
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Notes to Financial Statements (continued)
October 31, 1995
- -------------------------------------------------------------------------------
At October 31, 1995, the Funds had approximately the following amounts of
capital loss carryforward for U.S. Federal tax purposes:
<TABLE>
<CAPTION>
Years of
Fund Amount Expiration
- ------------------------------ ----------- -----------
<S> <C> <C>
GS Adjustable Rate
Government Agency Fund $38,311,000 2000-2002
GS Short-Term Government
Agency Fund $11,136,000 2002
GS Short Duration Tax-Free
Fund $ 3,999,000 2002
</TABLE>
These amounts are available to be carried forward to offset future capital
gains to the extent permitted by applicable laws or regulations.
3. Agreements
Goldman Sachs Funds Management, L.P. ("GSFM"), an affiliate of Goldman,
Sachs & Co. ("Goldman Sachs"), serves as the investment adviser for the GS
Adjustable Rate Government Agency and GS Short-Term Government Agency Funds
pursuant to Investment Advisory Agreements. Goldman Sachs Asset Management
("GSAM"), a separate operating division of Goldman Sachs, serves as the
investment adviser for the GS Short Duration Tax-Free and GS Core Fixed Income
Funds pursuant to Investment Advisory Agreements. Under the Investment Advisory
Agreements, the adviser, subject to the general supervision of the Trust's Board
of Trustees, manages the Funds' portfolios and provides for the administration
of the Funds' other affairs. As compensation for the services rendered under the
Investment Advisory Agreements and the assumption of the expenses related
thereto, the adviser is entitled to a fee, computed daily and payable monthly at
an annual rate equal to .40% of average daily net assets of GS Adjustable Rate
Government Agency, GS Short Duration Tax-Free and GS Core Fixed Income Funds and
.50% of average daily net assets of GS Short-Term Government Agency Fund. Until
further notice, GSFM has voluntarily agreed not to impose .10% of its investment
advisory fee for the GS Short-Term Government Agency Fund. For the period ended
October 31, 1995, investment advisory fees of $129,273 were waived for the GS
Short-Term Government Agency Fund.
The adviser has voluntarily agreed to limit certain of the Funds' expenses
(excluding investment advisory fees, taxes, interest, brokerage, litigation,
administrative and service fees, indemnification and other extraordinary
expenses and with respect to GS Adjustable Rate Government Agency Class A
shares, distribution and authorized dealer service fees) to the extent that such
expenses exceed .05% per annum of each Fund's average daily net assets. For the
year ended October 31, 1995, the amount of reimbursed expenses for the GS
Adjustable Rate Government Agency, GS Short-Term Government Agency, GS Short
Duration Tax-Free and GS Core Fixed Income Funds were $551,405, $219,994,
$213,139 and $176,469, respectively. The amounts reimbursable to the GS
Adjustable Rate Government Agency, GS Short-Term Government Agency, GS Short
Duration Tax-Free and the GS Core Fixed Income Funds at October 31, 1995 were
approximately $178,000, $79,000, $18,000 and $41,000, respectively, and are
included in "Other assets" in the accompanying Statements of Assets and
Liabilities.
Goldman Sachs serves as Distributor of the shares of the Funds pursuant to a
Distribution Agreement and receives no compensation in this capacity with the
exception of GS Adjustable Rate Government Agency Fund Class A shares. At
October 31, 1995, Goldman Sachs retained approximately $40,000 of sales load
related to Class A shares. Goldman Sachs also serves as Transfer Agent of the
Funds.
The Trust, on behalf of the GS Adjustable Rate Government Agency Fund, has
adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 for the Class A
shares. Under the Plan, Goldman Sachs is entitled to receive a quarterly
distribution fee equal, on an annual basis, to .25% of the average daily net
assets of Class A shares. Currently, Goldman Sachs has agreed to voluntarily
waive this distribution fee. Distribution fees waived for the period amounted
to $17,967.
34
<PAGE>
The Trust, on behalf of the GS Adjustable Rate Government Agency Fund, has
adopted a non-Rule 12b-1 Authorized Dealer Service Plan (the "Service Plan")
pursuant to which Goldman Sachs and Authorized Dealers are compensated for
providing personal and account maintenance services. GS Adjustable Rate
Government Agency Fund pays a fee under the Service Plan equal, on an annual
basis, to .25% of its average daily net assets attributable to Class A shares.
For the period ended October 31, 1995, GS Adjustable Rate Government Agency
Fund, GS Short-Term Government Agency Fund and GS Core Fixed Income Fund
incurred commissions expense of approximately $91,000, $2,800, and $900,
respectively, in connection with futures contracts entered into with Goldman
Sachs.
4. Line of Credit Facility
The Funds participate in a $100,000,000 uncommitted, unsecured revolving
line of credit facility to be used solely for temporary or emergency purposes.
Under the most restrictive arrangement, each fund must own securities having a
market value in excess of 300% of the total bank borrowings. The interest rate
on the borrowings is based on the Federal Funds rate. During fiscal year 1995,
the Funds did not have any borrowings under this facility.
5. Investment Transactions
Purchases and proceeds of sales or maturities of long-term securities for
the year ended October 31, 1995, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
GS Adjustable GS GS
Rate Short-Term Short GS
Government Government Duration Core Fixed
Agency Agency Tax-Free Income
Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases of U.S.
Government and
agency obligations $ 168,570,797 $363,854,703 $ -- $132,227,192
- ----------------------------------------------------------------------------------------------
Purchases (excluding
U.S. Government and
agency obligations) -- -- 160,557,538 26,393,743
- ----------------------------------------------------------------------------------------------
Sales or maturities of
U.S. Government and
agency obligations 496,940,962 420,674,507 -- 114,081,532
- ----------------------------------------------------------------------------------------------
Sales or maturities
(excluding U.S.
Government and
agency obligations) -- -- 185,231,508 16,705,497
- ----------------------------------------------------------------------------------------------
</TABLE>
6. Summary of Share Transactions
Share activity for the period ended October 31, 1995 is as follows:
<TABLE>
<CAPTION>
Fund Dollars Shares
- --------------------------------------------------------------------------------------
<S> <C> <C>
GS Adjustable Rate Government Agency Fund
Institutional Shares:
Shares sold $ 445,293,934 45,635,666
Shares exchanged in reorganization 18,823,725 1,926,438
Reinvestment of dividends and distributions 20,730,137 2,125,494
Shares repurchased (771,265,543) (79,186,935)
----------------------------
(286,417,747) (29,499,337)
----------------------------
Administration Shares:
Shares sold 648,042 66,628
Shares exchanged in reorganization 1,561,584 159,814
Reinvestment of dividends and distributions 124,368 12,743
Shares repurchased (5,731,937) (588,307)
----------------------------
(3,397,943) (349,122)
----------------------------
Class A Shares:
Shares sold 10,820,993 1,106,877
Shares exchanged in reorganization 17,208,471 1,756,917
Reinvestment of dividends and distributions 419,180 42,880
Shares repurchased (13,214,046) (1,350,373)
----------------------------
15,234,598 1,556,301
----------------------------
$(274,581,092) (28,292,158)
============================
GS Short-Term Government Agency Fund
Institutional Shares:
Shares sold $ 49,032,419 5,071,865
Reinvestment of dividends and distributions 4,993,225 516,155
Shares repurchased (145,260,300) (15,059,774)
----------------------------
(91,234,656) (9,471,754)
----------------------------
Administration Shares:
Shares sold 1,604 165
Reinvestment of dividends and distributions 218 23
Shares repurchased (728,374) (75,889)
----------------------------
(726,552) (75,701)
----------------------------
$ (91,961,208) (9,547,455)
============================
</TABLE>
35
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
GS Short Duration Tax-Free Fund
Institutional Shares:
Shares sold $ 18,780,011 1,920,432
Reinvestment of dividends and distributions 1,860,104 189,624
Shares repurchased (46,762,899) (4,787,105)
------------------------------
(26,122,784) (2,677,049)
------------------------------
Administration Shares:
Shares sold -- --
Reinvestment of dividends and distributions 2,483 246
Shares repurchased (3,800,930) (390,639)
------------------------------
(3,798,447) (390,393)
------------------------------
Service Shares:
Shares sold 17,688,889 1,812,950
Reinvestment of dividends and distributions 10,567 1,072
Shares repurchased (17,301,340) (1,772,550)
------------------------------
398,116 41,472
------------------------------
$ (29,523,115) (3,025,970)
==============================
</TABLE>
- -------------------------------------------------------------------------------
Share activity for the year ended October 31, 1994 is as follows:
<TABLE>
<CAPTION>
Fund Dollars Shares
- -------------------------------------------------------------------------------
<S> <C> <C>
GS Adjustable Rate Government Agency Fund
Institutional Shares:
Shares sold $ 1,004,949,426 101,283,294
Reinvestment of dividends and distributions 30,671,269 3,103,267
Shares repurchased (2,809,311,423) (283,651,840)
------------------------------
(1,773,690,728) (179,265,279)
------------------------------
Administration Shares:
Shares sold 8,147,991 824,029
Reinvestment of dividends and distributions 100,331 10,167
Shares repurchased (6,463,906) (651,947)
------------------------------
1,784,416 182,249
------------------------------
$(1,771,906,312) (179,083,030)
==============================
GS Short-Term Government Agency Fund
Institutional Shares:
Shares sold $ 97,738,708 9,816,887
Reinvestment of dividends and distributions 10,373,791 1,050,930
Shares repurchased (261,183,718) (26,290,525)
------------------------------
$ (153,071,219) (15,422,708)
------------------------------
Administration Shares:
Shares sold $ 127,095 12,803
Reinvestment of dividends and distributions 2,687 276
Shares repurchased (15,274,526) (1,563,118)
------------------------------
(15,144,744) (1,550,039)
------------------------------
$ (168,215,963) (16,972,747)
==============================
GS Short Duration Tax-Free Fund
Institutional Shares:
Shares sold $ 100,275,689 9,879,219
Reinvestment of dividends and distributions 4,003,867 399,664
Shares repurchased (130,867,805) (13,045,936)
------------------------------
(26,588,249) (2,767,053)
------------------------------
Administration Shares:
Shares sold 12,399,454 1,221,381
Reinvestment of dividends and distributions 5,160 517
Shares repurchased (9,256,757) (915,914)
------------------------------
3,147,857 305,984
------------------------------
Service Shares:
Shares sold 4,611,385 468,342
Reinvestment of dividends and distributions 217 22
Shares repurchased (4,564,866) (463,868)
------------------------------
46,736 4,496
------------------------------
$ (23,393,656) (2,456,573)
==============================
</TABLE>
7. 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. GSFM and GSAM
monitor the market value of the underlying securities by pricing them daily.
8. Joint Repurchase Agreement Account
The Funds, together with other registered investment companies having
advisory agreements with GSFM and
36
<PAGE>
GSAM or their affiliates, transfer 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 GS
Adjustable Rate Government Agency, GS Short-Term Government Agency and GS Core
Fixed Income Funds had an 0.89%, 0.03% and 0.31%, respectively, undivided
interest in the repurchase agreements in the following joint account which
equaled $16,000,000, $500,000 and $5,600,000, respectively, in principal amount.
As of October 31, 1995, the repurchase agreements 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. 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.
10. Other Matters
On April 28, 1995, the GS Adjustable Rate Government Agency Fund acquired
the assets of GS Government Agency Portfolio (For Financial Institutions) in
exchange solely for (i) the issuance of Institutional shares and Administration
shares of beneficial interest of the GS Adjustable Rate Government Agency Fund
and (ii) the assumption by GS Adjustable Rate Government Agency Fund of the
liabilities of GS Government Agency Portfolio (For Financial Institutions).
Following this transfer, GS Government Agency Portfolio (For Financial
Institutions) was liquidated and GS Adjustable Rate Government Agency Fund's
Institutional and Administration shares were distributed to the former
shareholders of GS Government Agency Portfolio (For Financial Institutions).
The Reorganization was accomplished by a tax-free transfer of assets whereby
each shareholder of GS Government Agency Portfolio (For Financial Institutions)
received a number of full and fractional shares of GS Adjustable Rate Government
Agency Fund having a total net asset value of their shares of GS Government
Agency Portfolio (For Financial Institutions) held on April 28, 1995. The net
assets, including $370,489 of unrealized depreciation for the GS Government
Agency Portfolio (For Financial Institutions), net asset values per share and
shares outstanding as of April 28, 1995 were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
GS Government
Agency
Portfolio GS Adjustable GS Adjustable
(For Financial Rate Government Rate Government
Institutions) Agency Fund Agency Fund
(Pre- (Pre- (Post-
Reorganization) Reorganization) Reorganization)
--------------- --------------- ---------------
<S> <C> <C> <C>
Net Assets $20,385,309 $673,292,455 $693,677,764
Shares Outstanding
Institutional Shares 1,912,506 68,506,367 70,432,805
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>
37
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
October 31, 1995
- --------------------------------------------------------------------------------
On May 11, 1995, shareholders of the GS Adjustable Rate Mortgage Fund
approved a Plan of Reorganization (the Plan) which was completed on May 12,
1995. Under the Plan, GS Adjustable Rate Mortgage Fund was reorganized as a
separate class (Class A) of the GS Adjustable Rate Government Agency Fund. GS
Adjustable Rate Mortgage Fund's assets were acquired by GS Adjustable Rate
Government Agency Fund in exchange solely for (i) the issuance of Class A shares
of beneficial interest of GS Adjustable Rate Government Agency Fund and (ii) the
assumption by GS Adjustable Rate Government Agency Fund of the liabilities of GS
Adjustable Rate Mortgage Fund. Following this transfer, GS Adjustable Rate
Mortgage Fund was liquidated and the GS Adjustable Rate Government Agency Fund
Class A shares were distributed to the former shareholders of GS Adjustable Rate
Mortgage Fund.
The Reorganization was accomplished by a tax-free transfer of assets whereby
each shareholder of GS Adjustable Rate Mortgage Fund received a number of Class
A full and fractional shares of GS Adjustable Rate Government Agency Fund having
a total net asset value of their shares of GS Adjustable Rate Mortgage Fund held
as of May 12, 1995. The net assets, including $45,684 of net unrealized
depreciation for the GS Adjustable Rate Mortgage Fund, net asset values per
share and shares outstanding as of May 12, 1995 were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
GS Adjustable GS Adjustable GS Adjustable
Rate Mortgage Rate Government Rate Government
Fund Agency Fund Agency Fund
(Pre- (Pre- (Post-
Reorganization) Reorganization) Reorganization)
--------------- --------------- ---------------
<S> <C> <C> <C>
Net Assets $17,208,471 $727,300,372 $744,508,843
Shares Outstanding
Institutional Shares -- 73,743,084 73,743,084
Administration Shares -- 561,352 561,352
Class A Shares 3,552,167 -- 1,756,917
Net Asset Value Per Share
Institutional Shares -- 9.79 9.79
Administration Shares -- 9.79 9.79
Class A Shares 4.84 -- 9.79
- -------------------------------------------------------------------------------
</TABLE>
The total amount of capital loss carryforward brought on to the books of the
GS Adjustable Rate Government Agency Fund due to these reorganizations was
approximately $3,154,000.
For the period ended October 31, 1994, $15.9 million of the GS Core Fixed
Income Fund shareholder subscriptions were made through in-kind contributions of
securities.
As of October 31, 1995, the Goldman, Sachs & Co. Employees Profit Sharing
and Retirement Income Plan and the Goldman Sachs Asset Management Retirement
Plan were the beneficial owners of approximately 31% of the outstanding shares
of the GS Short-Term Government Agency Fund.
11. Certain Reclassifications
In accordance with Statement of Position 93-2, the GS Adjustable Rate
Government Agency Fund, GS Short-Term Government Agency Fund, GS Short Duration
Tax-Free Fund and GS Core Fixed Income Fund have reclassified $29,381, $36,485,
$22,673 and $25,547, respectively, from paid-in capital to accumulated
undistributed net investment income. These reclassifications have no impact on
the net asset value of the Fund and are designed to present the Funds' capital
accounts on a tax basis.
38
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations Distributions to shareholders
--------------------------------------------------------- --------------------------------------
Net realized Net realized
and unrealized and unrealized Total From net
gain (loss) gain (loss) income realized gain
Net asset on investment, on foreign (loss) on investment, In excess
value at Net option and currency from From net option of net
beginning investment futures related investment investment and futures investment
of period income transactions transactions operations income transactions income
------------------------------------------------------------------------------------------------------------
GS Adjustable Rate Government Agency Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares........... $ 9.74 $0.5630/(c)/ $0.0717/(c)/ - $0.6347(c) $(0.5759) $ -- $(0.0287)
1995-Administration
Shares........... 9.74 0.5366/(c)/ 0.0737/(c)/ - 0.6103(c) (0.5528) -- (0.0275)
1995-Class A
Shares/(d)/...... 9.79 0.2721/(c)/ (0.0090)/(c)/ - 0.2631(c) (0.2697) -- (0.0134)
1994-Institutional
Shares........... 10.00 0.4341/(c)/ (0.2455)/(c)/ - 0.1886(c) (0.4486) -- --
1994-Administration
Shares........... 10.00 0.4211/(c)/ (0.2572)/(c)/ - 0.1639(c) (0.4239) -- --
1993-Institutional
Shares........... 10.04 0.4397 (0.0376)/(a)/ - 0.4021 (0.4397) -- (0.0024)
1993-Administration
Shares/(f)/...... 10.02 0.2146 (0.0173)/(a)/ - 0.1973 (0.2146) 0.0000 (0.0027)
1992-Institutional
Shares........... 10.03 0.5599 (0.0029)/(a) - 0.5570 (0.5470) -- --
For the Period July 17, 1991/(g)/through October 31,
- ----------------------------------------------------
1991-Institutional
Shares........... 10.00 0.1531 0.0322/(a)/ - 0.1853 (0.1553) -- --
<CAPTION>
Distributions to shareholders
-------------------------------------
In excess of Ratio of
net realized Net net
gain on increase Ratio of investment
investment, From Total (decrease) Net asset net income
option and paid distributions in net value at expenses (loss)
futures in to asset end of Total to average to average
transactions capital shareholders value period return/(b)/ net assets net assets
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares........... $ -- $ -- $(0.6046) $ 0.0301 $ 9.77 6.75% 0.46% 5.77%
1995-Administration
Shares........... -- -- (0.5803) 0.0300 9.77 6.48 0.71 5.50
1995-Class A
Shares/(d)/...... -- -- (0.2831) (0.0200) 9.77 2.74 0.69/(e)/ 5.87/(e)/
1994-Institutional
Shares........... -- -- (0.4486) (0.2600) 9.74 1.88 0.46 4.38
1994-Administration
Shares........... -- -- (0.4239) (0.2600) 9.74 1.63 0.71 4.27
1993-Institutional
Shares........... -- -- (0.4421) (0.0400) 10.00 4.13 0.45 4.36
1993-Administration
Shares/(f)/...... -- -- (0.2173) (0.0200) 10.00 2.01/(k)/ 0.70/(e)/ 3.81/(e)/
1992-Institutional
Shares........... -- -- (0.5470) 0.0100 10.04 6.12 0.42 5.61
For the Period July 17, 1991/(g)/through October 31,
- ----------------------------------------------------
1991-Institutional
Shares........... -- -- (0.1553) 0.0300 10.03 2.14(k) 0.20/(e)/ 7.31/(e)/
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
-----------------------
Ratio of
Net net
assets investment
at end Ratio of income
Portfolio of expenses (loss)
turnover period to average to average
rate/(j)/ (in 000s) net assets net assets
------------------------------------------------
<S> <C> <C> <C> <C>
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares........... 24.12% $ 657,358 0.53% 5.70%
1995-Administration
Shares........... 24.12 3,572 0.78 5.43
1995-Class A
Shares/(d)/...... 24.12 15,203 1.01/(e)/ 5.55/(e)/
1994-Institutional
Shares........... 37.81 942,523 0.49 4.35
1994-Administration
Shares........... 37.81 6,960 0.74 4.24
1993-Institutional
Shares........... 103.74 2,760,871 0.48 4.33
1993-Administration
Shares/(f)/...... 103.74 5,326 0.73/(e)/ 3.78/(e)/
1992-Institutional
Shares........... 286.40 2,145,064 0.55 5.48
For the Period July 17, 1991/(g)/through October 31,
- ----------------------------------------------------
1991-Institutional
Shares........... 145.67/(e)/ 239,642 1.02(e) 6.49/(e)/
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations Distributions to shareholders
--------------------------------------------------------- --------------------------------------
Net realized Net realized
and unrealized and unrealized Total From net
gain (loss) gain (loss) income realized gain
Net asset on investment, on foreign (loss) on investment, In excess
value at Net option and currency from From net option of net
beginning investment futures related investment investment and futures investment
of period income transactions transactions operations income transactions income
------------------------------------------------------------------------------------------------------------
GS SHORT-TERM GOVERNMENT AGENCY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares........... $ 9.64 $0.6652/(c)/ $ 0.1666/(c)/ $ -- $0.8318/(c)/ $(0.6518) $-- $--
1995-Administration
Shares........... 9.64 0.2384/(c)/ (0.0433)/(c)/ -- 0.1951/(c)/ (0.2051) -- --
1994-Institutional
Shares........... 10.14 0.5628/(c)/ (0.4592)/(c)/ -- 0.1036/(c)/ (0.5598) (0.0438) --
1994-Administration
Shares........... 10.14 0.5329/(c)/ (0.4539)/(c)/ -- 0.0790/(c)/ (0.5352) (0.0438) --
1993-Institutional
Shares........... 10.16 0.5627 (0.0135)/(a)/ -- 0.5492 (0.5627) -- (0.0065)
1993-Administration
Shares/(f)/...... 10.23 0.2725 (0.0900)/(a)/ -- 0.1825 (0.2725) -- --
1992-Institutional
Shares........... 10.22 0.6703 (0.0600)/(a)/ -- 0.6103 (0.6703) -- --
1991-Institutional
Shares........... 10.00 0.8020 0.2200/(a)/ -- 1.0220 (0.8020) -- --
1990-Institutional
Shares........... 10.07 0.8300 (0.0700)/(a)/ -- 0.7600 (0.8300) -- --
1989-Institutional
Shares........... 10.10 0.8800 -- -- 0.8800 (0.8800) -- --
For the Period August 15, 1988/(g)/through October 31,
- ------------------------------------------------------
1988-Institutional
Shares........... 10.00 0.1800 0.1000/(a)/ -- 0.2800 (0.1800) -- --
<CAPTION>
In excess of Ratio of
net realized Net net
gain on increase Ratio of investment
investment, From Total (decrease) Net asset net income
option and paid distributions in net value at expenses (loss)
futures in to asset end of Total to average to average
transactions capital shareholders value period return/(b)/ net assets net assets
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares........... $ -- $-- $(0.6518) $ 0.1800 $ 9.82 8.97% 0.45% 6.87%
1995-Administration
Shares........... -- -- (0.2051) (0.0100) 9.63/(h)/ 2.10 0.70/(e)/ 7.91/(e)/
1994-Institutional
Shares........... -- -- (0.6036) (0.5000) 9.64 0.99 0.45 5.69
1994-Administration
Shares........... -- -- (0.5790) (0.5000) 9.64 0.73 0.70 5.38
1993-Institutional
Shares........... -- -- (0.5692) (0.0200) 10.14 5.55 0.45 5.46
1993-Administration
Shares/(f)/...... -- -- (0.2725) (0.0900) 10.14 1.74 0.70/(e)/ 4.84/(e)/
1992-Institutional
Shares........... -- -- (0.6703) (0.0600) 10.16 6.24 0.45 6.60
1991-Institutional
Shares........... -- -- (0.8020) 0.2200 10.22 10.93 0.45 8.25
1990-Institutional
Shares........... -- -- (0.8300) (0.0700) 10.00 8.23 0.45 8.62
1989-Institutional
Shares........... -- (0.0300) (0.9100) (0.0300) 10.07 9.08 0.46 8.71
For the Period August 15, 1988/(g)/through October 31,
- ------------------------------------------------------
1988-Institutional
Shares........... -- -- (0.1800) 0.1000 10.10 3.30 0.55/(e)/ 8.55/(e)/
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
-----------------------
Ratio of
Net net
assets investment
at end Ratio of income
Portfolio of expenses (loss)
turnover period to average to average
rate/(j)/ (in 000s) net assets net assets
------------------------------------------------
<S> <C> <C> <C> <C>
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares........... 292.56% $103,760 0.72% 6.60%
1995-Administration
Shares........... 292.56 -- 0.90/(e)/ 7.71/(e)/
1994-Institutional
Shares........... 289.79 193,095 0.59 5.55
1994-Administration
Shares........... 289.79 730 0.84 5.24
1993-Institutional
Shares........... 411.66 359,708 0.64 5.31
1993-Administration
Shares/(f)/...... 411.66 16,490 0.80/(e)/ 4.74/(e)/
1992-Institutional
Shares........... 216.07 277,927 0.69 6.36
1991-Institutional
Shares........... 155.44 158,848 0.79 7.91
1990-Institutional
Shares........... 173.21 68,995 0.95 8.12
1989-Institutional
Shares........... 137.37 31,015 1.39 7.78
For the Period August 15, 1988/(g)/through October 31,
- ------------------------------------------------------
1988-Institutional
Shares........... 167.00(e) 39,052 1.42/(e)/ 7.68/(e)/
</TABLE>
40
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations Distributions to shareholders
--------------------------------------------------------- --------------------------------------
Net realized Net realized
and unrealized and unrealized Total From net
gain (loss) gain (loss) income realized gain
Net asset on investment, on foreign (loss) on investment, In excess
value at Net option and currency from From net option of net
beginning investment futures related investment investment and futures investment
of period income transactions transactions operations income transactions income
------------------------------------------------------------------------------------------------------------
GS Short Duration Tax-Free Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares........... $ 9.79 $0.4235/(c)/ $0.1500/(c)/ $ -- $0.5735/(c)/ $(0.4235) $-- $ --
1995-Administration
Shares........... 9.79 0.3989/(c)/ 0.1500/(c)/ -- 0.5489/(c)/ (0.3989) -- --
1995-Service Shares.. 9.79 0.3744/(c)/ 0.1600/(c)/ -- 0.5344/(c)/ (0.3744) -- --
1994-Institutional
Shares........... 10.23 0.3787/(c)/ (0.3575)/(c)/ -- 0.0212/(c)/ (0.3787) (0.0825) --
1994-Administration
Shares........... 10.23 0.3537/(c)/ (0.3575)/(c)/ -- (0.0038)/(c)/ (0.3537) (0.0825) --
1994-Service
Shares/(i)/...... 9.86 0.0475/(c)/ (0.0700)/(c)/ -- (0.0225)/(c)/ (0.0475) -- --
1993-Institutional
Shares........... 9.93 0.3834 0.3000/(a)/ -- 0.6834 (0.3834) -- --
1993-Administration
Shares/(i)/...... 10.16 0.1555 0.0720/(a)/ -- 0.2275 (0.1555) -- --
For the Period October 1, 1992/(g)/through October 31,
- ------------------------------------------------------
1992-Institutional
Shares........... 10.00 0.0341 (0.0700)/(a)/ -- (0.0359) (0.0341) -- --
<CAPTION>
In excess of Ratio of
net realized Net net
gain on increase Ratio of investment
investment, From Total (decrease) Net asset net income
option and paid distributions in net value at expenses (loss)
futures in to asset end of Total to average to average
transactions capital shareholders value period return/(b)/ net assets net assets
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares........... $ -- $ -- $(0.4235) $ 0.1500 $ 9.94 5.98% 0.45% 4.31%
1995-Administration
Shares........... -- -- (0.3989) 0.1500 9.94 5.76 0.70 4.14
1995-Service Shares.. -- -- (0.3744) 0.1600 9.95 5.59 0.95 3.87
1994-Institutional
Shares........... -- -- (0.4612) (0.4400) 9.79 0.17 0.45 3.74
1994-Administration
Shares........... -- -- (0.4362) (0.4400) 9.79 (0.11) 0.70 3.51
1994-Service
Shares/(i)/...... -- -- (0.0475) (0.0700) 9.79 (0.32)/(k)/ 0.95/(e)/ 4.30/(e)/
1993-Institutional
Shares........... -- -- (0.3834) 0.3000 10.23 7.03 0.41 3.70
1993-Administration
Shares/(i)/...... -- -- (0.1555) 0.0720 10.23 2.28/(k)/ 0.70/(e)/ 3.32/(e)/
For the Period October 1, 1992/(g)/ through October 31,
- -------------------------------------------------------
1992-Institutional
Shares........... -- -- (0.0341) (0.0700) 9.93 (0.34)/(k)/ 0.05/(e)/ 4.58/(e)/
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
-----------------------
Ratio of
Net net
assets investment
at end Ratio of income
Portfolio of expenses (loss)
turnover period to average to average
rate/(j)/ (in 000s) net assets net assets
------------------------------------------------
<S> <C> <C> <C> <C>
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares........... 259.52% $ 58,389 0.77% 3.99%
1995-Administration
Shares........... 259.52 46 1.02 3.82
1995-Service Shares.. 259.52 454 1.27 3.55
1994-Institutional
Shares........... 354.00 83,704 0.61 3.58
1994-Administration
Shares........... 354.00 3,866 0.86 3.35
1994-Service
Shares/(i)/...... 354.00 44 1.11/(e)/ 4.14/(e)/
1993-Institutional
Shares........... 404.60 115,803 1.06 3.05
1993-Administration
Shares/(i)/...... 404.60 911 1.07/(e)/ 2.95/(e)/
For the Period October 1, 1992/(g)/ through October 31,
- -------------------------------------------------------
1992-Institutional
Shares........... 31.19/(k)/ 14,601 2.68/(e)/ 1.95/(e)/
</TABLE>
41
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations Distributions to shareholders
--------------------------------------------------------- --------------------------------------
Net realized Net realized
and unrealized and unrealized Total From net
gain (loss) gain (loss) income realized gain
Net asset on investment, on foreign (loss) on investment, In excess
value at Net option and currency from From net option of net
beginning investment futures related investment investment and futures investment
of period income transactions transactions operations income transactions income
------------------------------------------------------------------------------------------------------------
GS Core Fixed Income Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended October 31,
- ------------------------------
1995-Institutional
Shares........... $ 9.24 $0.6423 $ 0.7610 $ -- $ 1.4033 $(0.6433) $ -- $ --
For the Period January 5, 1994/(g)/ through October 31,
- -------------------------------------------------------
1994-Institutional
Shares........... 10.00 0.4648 (0.7617) -- (0.2969) (0.4648) -- --
<CAPTION>
In excess of Ratio of
net realized Net net
gain on increase Ratio of investment
investment, From Total (decrease) Net asset net income
option and paid distributions in net value at expenses (loss)
futures in to asset end of Total to average to average
transactions capital shareholders value period return/(b)/ net assets net assets
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended October 31,
- ------------------------------
1995-Institutional
Shares........... $ -- $ -- $(0.6433) $ 0.7600 $10.00 15.72% 0.45% 6.56%
For the Period January 5, 1994/(g)/ through October 31,
- -------------------------------------------------------
1994-Institutional
Shares........... -- -- (0.4648) (0.7617) 9.24 (3.00) 0.45/(e)/ 6.48/(e)/
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
-----------------------
Ratio of
Net net
assets investment
at end Ratio of income
Portfolio of expenses (loss)
turnover period to average to average
rate/(j)/ (in 000s) net assets net assets
------------------------------------------------
<S> <C> <C> <C> <C>
For the Year Ended October 31,
- ------------------------------
1995-Institutional
Shares........... 383.26% $55,502 0.96% 6.05%
For the Period January 5, 1994/(g)/ through October 31,
- -------------------------------------------------------
1994-Institutional
Shares........... 288.25 24,508 1.46/(e)/ 5.47/(e)/
</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. For Class A
shares only, total return would be reduced if a sales charge were taken into
account.
(c) Calculated based on the average shares outstanding methodology.
(d) Class A shares commenced operations on May 15, 1995.
(e) Annualized.
(f) Administration share activity commenced on April 15, 1993.
(g) Commencement of operations.
(h) GS Short-Term Government Agency Administration shares were redeemed in full
on February 23, 1995. Amount shown represents net asset value on February
23, 1995.
(i) Administration and service share activity commenced on May 20, 1993 and
September 20, 1994, respectively.
(j) Includes the effect of mortgage dollar roll transactions.
(k) Not annualized.
42
<PAGE>
- -------------------------------------------------------------------------------
Report of Independent Public Accountants
- -------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of the GS Adjustable Rate Government
Agency Fund, GS Short-Term Government Agency Fund, GS Short Duration Tax-Free
Fund and GS Core Fixed Income Fund:
We have audited the accompanying statements of assets and liabilities of the
GS Adjustable Rate Government Agency Fund, GS Short-Term Government Agency Fund,
GS Short Duration Tax-Free Fund and GS Core Fixed 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
GS Adjustable Rate Government Agency Fund, GS Short-Term Government Agency Fund,
GS Short Duration Tax-Free Fund and GS Core Fixed 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
43
<PAGE>
[This Page Intentionally Left Blank]
44
<PAGE>
[This Page Intentionally Left Blank]
45
<PAGE>
[This Page Intentionally Left Blank]
46
<PAGE>
- -------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Trust Institutional Funds
Prospectus which contains facts concerning each Fund's objectives and policies,
management, expenses and other information.
- -------------------------------------------------------------------------------
47
<PAGE>
The Goldman Sachs
Fixed Income
Portfolios
Annual Report
October 31, 1995
[ ]
GS Adjustable Rate Government Agency Fund
GS Short-Term Government Agency Fund
GS Short Duration Tax-Free Fund
GS Core Fixed Income Fund
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(INST)
===============================================================================
