<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
DEAR SHAREHOLDERS:
We welcome this opportunity to review the performance of the Goldman Sachs
Adjustable Rate Mortgage Fund for the six-month period ended April 30, 1995. To
put the portfolio's performance in context, we will also provide you with a
brief analysis of the U.S. bond market during the period.
As you have been informed, on May 12 the Goldman Sachs Adjustable Rate
Mortgage Fund was reorganized into the GS Adjustable Rate Government Agency
Fund (Class A). Both funds share the same investment objective: to provide
shareholders with a high level of current income, consistent with low
volatility of principal, primarily through investments in adjustable rate
mortgage securities. However, the GS Adjustable Rate Government Agency Fund
offers several additional benefits: higher credit quality and lower management
and administrative expenses. Other differences: the GS Adjustable Rate
Government Agency Fund is rated AAAf by Standard & Poor's Ratings Group and can
invest only in U.S. government and agency securities while the Goldman Sachs
Adjustable Rate Mortgage Fund could invest in nongovernmental issues rated AA
or better.
SLOWER ECONOMIC GROWTH SET THE STAGE FOR A MAJOR BOND RALLY
The U.S. bond market strengthened markedly during the period under review
(October 31, 1994 through April 30, 1995) after last year's volatility. A rally
started in January and gained momentum at the end of April and into May. The
major impetus was data indicating that slower economic growth coupled with
relatively contained inflation meant that the "soft landing" many observers had
anticipated was at hand--at least for the moment. The only major surprise was
the timing of the slowdown, which was sooner than generally expected.
A snapshot of key economic indicators for the first quarter of 1995 follows:
. Gross Domestic Product (GDP) increased a relatively modest 2.8% compared with
5.1% for the fourth quarter of 1994.
. Inflation, as measured by the Consumer Price Index (CPI), increased gradually
to an annualized rate of 3.2% in the first quarter versus 2.6% for 1994.
. Auto sales were soft, declining due mainly to the rise in rates on auto
loans.
. Factory output slowed after a significant build-up in inventories and very
high plant capacity utilization during the fourth quarter of 1994.
. Orders for durable goods plunged 4% in April, the steepest drop since Decem-
ber 1991.
. Sales and starts of single-family homes declined during the period, each
reaching its lowest level in two years.
. Unemployment began to drift up slightly to 5.7% by February, retreated to
5.4% in March and ended in April at 5.8%.
AS GROWTH EASED AND INTEREST RATES DECLINED, THE FED REMAINED NEUTRAL
As is often the case, what was disappointing news for the economy was good
news for the bond market. After raising the federal funds rate (the rates banks
charge one another for overnight borrowing) for the seventh time on February 1,
1995 in the most recent tightening cycle, the Federal
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
Reserve has subsequently maintained a neutral stance thus far in 1995.
The yield on six-month Treasury bills increased from 5.66% on October 31 to
6.07% at the end of April. The movement in long-term interest rates (as
measured by the yield on the 30-year U.S. Treasury bond) was much more
dramatic, declining from just under 8% on October 31 to 7.33% on April 30.
Moving in the opposite direction of its yield, the price of the long bond
increased approximately 8% during the period, providing gains for bondholders.
HISTORICAL TREASURY YIELD CURVE
10/31/94 4/28/95
-------- -------
3 Mos 5.142% 5.849%
6 Mos 5.657% 6.071%
1 6.144% 6.303%
2 6.824% 6.585%
3 7.046% 6.684%
5 7.481% 6.874%
10 7.807% 7.053%
30 7.970% 7.334%
The short end of the yield curve flattened considerably during the period under
review as the spread between three-month and two-year Treasury bills tightened
and the curve shifted downward.
OUTLOOK: RESUMPTION OF GROWTH BY YEAR END A POSSIBILITY
Clear evidence of economic slowdown is adding to sentiment that the Fed may
ease rates this summer. However, opinion is divided regarding whether the
economy will resume its ascent later in the year as a consequence of a variety
of factors including the decrease in long-term interest rates, which could
eventually strengthen home building and other interest rate-sensitive sectors;
the potential for U.S. export growth to continue; and indications that a
stimulative fiscal policy may be adopted based on the continuing discussions in
Congress regarding tax reform.
We appreciate your support and want to assure you that we will continue to
strive to meet your investment needs.
Sincerely,
/s/ David B. Ford
David B. Ford
Chairman, Chief Executive Officer
/s/ Sharmin Mossavar-Rahmani
Sharmin Mossavar-Rahmani
Chief Investment Officer
Fixed Income Products
Goldman Sachs Asset Management
June 12, 1995
2
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS ADJUSTABLE RATE MORTGAGE FUND
THE ARM MARKET
The supply of adjustable rate mortgages (ARMs) decreased during the period
under review, along with mortgage issuance in general, reflecting the slowdown
in the housing market. The technical balance between supply and demand has been
generally supportive of ARM prices during the period. In the declining rate
environment, the prices of ARMs rose.
PERFORMANCE REVIEW
For the six-month period ended on April 30, the fund had a total return of
3.16% based on net asset value (all of it from monthly distributions),
outperforming its benchmark, the six-month U.S. Treasury bill, which had a
return of 3.04%.
We are pleased to report that the Goldman Sachs Adjustable Rate Mortgage Fund
placed in the top 20% of its peers, ranking 16 out of 79 adjustable rate
mortgage funds based on total return for the 12-month period ended on April 30,
1995, according to Lipper Analytical Services, Inc. (Lipper rankings do not
take sales charges into account.) In addition, the Fund waived certain fees
without which the ranking would have been lower.
The fund's positive performance was the result of several factors:
. As interest rates declined, we shortened the fund's duration from 0.7 years
to 0.5 years, approximately the same as the benchmark. (Duration measures the
fund's sensitivity to interest rate changes; the lower the duration, the less
the fund's net asset value will move in relation to interest rate fluctua-
tions.)
. In general during the period, ARM spreads tightened relative to comparable-
duration Treasuries, which benefited the fund.
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
The fund's portfolio composition and a review of the investment strategies we
used during the period follows:
PORTFOLIO COMPOSITION AS OF APRIL 30, 1995*
ARMs 30%
Cash Equilavents 55%
CMO's 15.0 15%
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages differ from those in the accompanying Statement of Investments,
which reflect portfolio holdings as percentage of net assets.
. As of April 30, approximately 30% of the portfolio was invested in ARMs, down
from approximately 76% on November 1. Through March, over 70% of the fund's
investments were in fully indexed, one-year Constant Maturity Treasury (CMT)
ARMs, which adjust more quickly to changes in interest rates than other types
of ARMs and therefore are expected to help NAV stability. During April, we
sold most of our double-A-rated nonagency ARMs in preparation for the fund's
reorganization into the GS Adjustable Rate Government Agency Fund, which in-
vests only in government securities.
3
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS ADJUSTABLE RATE MORTGAGE FUND (continued)
. The proceeds from the sale of ARMs were held in cash equivalents that reached
55.0% by April 30. (By way of comparison, through March 31, the fund's cash
position of 12% had been relatively stable since October 31.)
. Approximately 15.0% of the portfolio was invested in collateralized mortgage
obligations (CMOs), up from the 10.7% they represented on October 31. These
CMOs are relatively stable securities that offer generally higher yields than
Treasuries of comparable duration and are expected to help diversify the
portfolio.
PRUDENT USE OF DERIVATIVES
During the past six months, there has been a great deal of investor concern
regarding derivatives. In the broadest sense, any security that derives its
value from another underlying security may be called a derivative. Derivatives
vary with respect to risk. Mortgage derivatives can be divided into two
categories: those with lower volatility risk (such as sequential pay CMOs and
floating rate CMOs) which accounted for approximately 15% of the fund's assets,
and those with higher risk (such as inverse floaters and super floaters) of
which the fund held none. For hedging purposes, the fund also used futures
contracts as part of a defensive strategy to help reduce the fund's interest
rate sensitivity.
DISTRIBUTION POLICY
During the six months ended April 30, 1995, the fund distributed $0.15 per
share compared with $0.12 per share for the six months ended on October 31,
1994. As of April 30, the fund's 30-day distribution rate had increased to
6.26%; its 30-day SEC yield was 6.50%.
The fund distributes substantially all of its taxable income as is required
for all investment companies. At the beginning of each month, we set the
dividend amount to be distributed based on the income that 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 the fund will receive. Therefore, at times, the
portfolio may distribute amounts above or below current income levels. To date,
however, this dividend policy and the method we use to estimate prepayments
have not affected the management of the fund nor significantly affected its net
asset value per share.
In conclusion, we thank you for your support. We look forward to continuing to
serve you as a shareholder in the GS Adjustable Rate Government Agency Fund
(Class A) in the future.
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ Theodore T. Sotir
Theodore T. Sotir
Portfolio Managers
Goldman Sachs Adjustable Rate Mortgage Fund
June 12, 1995
4
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS ADJUSTABLE RATE MORTGAGE FUND
April 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS (37.8%)
ADJUSTABLE RATE MORTGAGE OBLIGATIONS (ARMS)(a) (24.9%)
Federal Home Loan Mortgage Corp. (FHLMC)
$1,493,106 6.95% 08/01/22 $ 1,523,983
Federal National Mortgage Association (FNMA)
1,257,170 7.17 12/01/18(c) 1,281,370
884,547 7.35 09/01/21 908,952
537,038 7.37 01/01/31 553,053
- -----------------------------------------------------------------------------------------------
TOTAL ARMS $ 4,267,358
- -----------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) (12.9%)
ADJUSTABLE RATE CMOS(a) (3.8%)
FNMA, Series 1990-145, Class A
$ 656,527 6.28% 12/25/20 $ 656,737
- -----------------------------------------------------------------------------------------------
FIXED RATE SEQUENTIAL CMOS (9.1%)
FNMA, Series 1990-143, Class H
$1,000,000 9.25% 10/25/19 $ 1,026,460
FHLMC, Series 1316, Class D
477,067 8.00 09/15/17 477,583
FHLMC, Series 1056, Series G
61,287 8.00 12/15/18 61,589
- -----------------------------------------------------------------------------------------------
$ 1,565,632
- -----------------------------------------------------------------------------------------------
TOTAL CMOS $ 2,222,369
- -----------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(cost $6,567,683) $ 6,489,727
- -----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (46.0%)
Joint Repurchase Agreement Account
$ 7,900,000 5.96% 05/01/95 $ 7,900,000
- -----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(cost $7,900,000) $ 7,900,000
- -----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $14,467,683(b)) $14,389,727
- -----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Futures contracts open at April 30, 1995 are as follows:
<TABLE>
<CAPTION>
Number of
Contracts(d) Settlement Unrealized
Type Short Month Gain (Loss)
- -------------------------- ------------ ---------- -----------
<S> <C> <C> <C>
5-year U.S. Treasury Notes 2 June 1995 $ 0
Euro Dollars 3 June 1995 0
--------
$ 0
- ---------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which
value exceeds cost $10,666
Gross unrealized loss for investments in which
cost exceeds value (88,622)
- ---------------------------------------------------------------
Net unrealized loss $(77,956)
- ---------------------------------------------------------------
</TABLE>
(a) Variable rate securities. Coupon rate disclosed is that which is in effect
at April 30, 1995.
(b) The amount stated also represents aggregate cost for federal income tax
purposes.
(c) Portions of these securities are segregated as collateral for open futures
contracts.
(d) Each U.S. Treasury Note and Euro Dollar contract represents $100,000 and
$250,000, respectively, in par value.
The percentage shown for each investment category reflects the value of invest-
ments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Goldman Sachs Adjustable Rate Mortgage Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(cost $14,467,683) $14,389,727
Receivables:
Fund shares sold 174,036
Interest 47,469
Investment securities sold 18,752
Cash 2,597,054
Margin deposit with broker 1,080
Other assets 117,239
- -------------------------------------------------------------------------------
TOTAL ASSETS 17,345,357
- -------------------------------------------------------------------------------
LIABILITIES:
Payables:
Fund shares repurchased 76,678
Transfer agent fees 26,481
Dividends 8,504
Investment adviser fees 3,333
Distribution fees 3,043
Accrued expenses and other liabilities 57,074
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 175,113
- -------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital applicable to 3,550,088 outstanding shares, par
value $.001 per share (unlimited number of shares authorized) 17,437,468
Accumulated undistributed net investment income 26,778
Accumulated net realized loss on investment and futures
transactions (216,046)
Net unrealized loss on investments (77,956)
- -------------------------------------------------------------------------------
NET ASSETS $17,170,244
- -------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE (NET ASSETS/SHARES
OUTSTANDING) $ 4.84
- -------------------------------------------------------------------------------
MAXIMUM PUBLIC OFFERING PRICE PER SHARE
(NAV PER SHARE X 1.0152) $ 4.91
- -------------------------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1995
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 548,407
- -------------------------------------------------------------------------
EXPENSES(a):
Investment adviser fees 13,283
Administration fees --
Distribution fees 20,338
Transfer agent fees 27,730
Professional fees 28,244
Custodian fees 19,285
Printing fees 19,157
Registration fees 23,421
Amortization of deferred organization expenses 61,406
Trustee fees 325
- -------------------------------------------------------------------------
TOTAL EXPENSES 213,189
Less--Expenses reimbursable by GSAM (176,318)
- -------------------------------------------------------------------------
NET EXPENSES 36,871
- -------------------------------------------------------------------------
NET INVESTMENT INCOME 511,536
- -------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FUTURES
TRANSACTIONS:
Net realized loss on investment and futures transactions (162,918)
Net change in unrealized gain on investments and futures 152,560
- -------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 501,178
- -------------------------------------------------------------------------
</TABLE>
(a) During the six months ended April 30, 1995, the effect of voluntary
limitations of fees by the investment adviser, administrator and
distributor amounted to $23,325, $12,202, and $20,338, respectively.
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
----------------------- -----------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 511,536 $ 756,238
Net realized loss on
investment and futures
transactions (162,918) (53,128)
Net change in unrealized
gain (loss) on investments
and futures 152,560 (231,927)
- ------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 501,178 471,183
- ------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (512,100) (756,238)
In excess of net investment
income -- (13,829)
From net realized gain on
investment transactions -- (10,717)
- ------------------------------------------------------------------------------
Total distributions to
shareholders (512,100) (780,784)
- ------------------------------------------------------------------------------
<CAPTION>
FROM SHARE TRANSACTIONS:
SHARES SHARES
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net proceeds from sales of
shares 1,182,172 5,719,588 7,313,331 35,744,023
Reinvestment of dividends
and distributions 106,986 517,439 153,544 748,859
Cost of shares repurchased (1,413,361) (6,834,199) (4,459,538) (21,697,344)
- ------------------------------------------------------------------------------
Net (decrease) increase in
net assets resulting from
share transactions (124,203) (597,172) 3,007,337 14,795,538
- ------------------------------------------------------------------------------
Total (decrease) increase (608,094) 14,485,937
NET ASSETS:
Beginning of period 17,778,338 3,292,401
- ------------------------------------------------------------------------------
End of period $17,170,244 $17,778,338
- ------------------------------------------------------------------------------
Accumulated undistributed
net investment income $26,778 $27,342
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Goldman Sachs Adjustable Rate Mortgage Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
APRIL 30, 1995 YEAR ENDED FOR THE PERIOD ENDED
(UNAUDITED) OCTOBER 31, 1994 OCTOBER 31, 1993(d)(e)
---------------- ---------------- ----------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $4.84 $4.94 $4.85
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.15 0.23 0.17
Net realized and
unrealized gain (loss)
on investments
and futures(b) -- (0.08) 0.09
- ------------------------------------------------------------------------------------
Total income from
investment operations 0.15 0.15 0.26
- ------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.15) (0.23) (0.17)
Net realized gain on
investment transactions -- (0.02) --
- ------------------------------------------------------------------------------------
Total distributions to
shareholders (0.15) (0.25) (0.17)
- ------------------------------------------------------------------------------------
Net increase (decrease)
in net asset value -- (0.10) 0.09
- ------------------------------------------------------------------------------------
Net asset value, end of
period $4.84 $4.84 $4.94
====================================================================================
Total return(a) 3.16% 3.14% 5.37 %
Ratio of net expenses to
average net assets 0.45%(c) 0.12% 0.00 %(c)
Ratio of net investment
income to average net
assets 6.29%(c) 4.88% 4.58 %(c)
Portfolio turnover rate 13.91% 44.62% 162.80 %
Net assets at end of
period $17,170,244 $17,778,338 $3,292,401
Ratios assuming no
waiver of fees or
expense limitations:
Ratio of expenses to
average net assets 3.31%(c) 2.49% 23.97 %(c)
Ratio of net investment
income to average net
assets 3.43%(c) 2.51% (19.39)%(c)
====================================================================================
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charge. Total return would be reduced if a sales charge were taken into ac-
count.
(b) Includes balancing effect of calculating per share amounts.
(c) Annualized.
(d) For the period from February 10, 1993 (commencement of operations) to Octo-
ber 31, 1993.
(e) On February 4, 1994, the Fund effected a three for one stock split. The
above information has been restated to reflect this stock split.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
April 30, 1995
(Unaudited)
1. ORGANIZATION
Goldman Sachs Adjustable Rate Mortgage Fund (the "Fund") is a separate diversi-
fied portfolio of Goldman Sachs Trust (the "Trust"), a Massachusetts business
trust. The Trust is registered under the Investment Company Act of 1940 (as
amended) as an open-end, management investment company.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund which are in conformity with those generally accepted in the investment
company industry:
A. Investment Valuation
Investments in U.S. Treasury, mortgage backed and asset backed obligations are
valued based on yield equivalents, a pricing matrix or other sources, under
valuation procedures established by the Trust's Board of Trustees. Other port-
folio 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 quo-
tations are not readily available are valued in accordance with the Trust's
valuation procedures. Short-term debt obligations maturing in sixty days or
less are valued at amortized cost.
B. Security Transactions and Investment Income
Security transactions are recorded on the trade date. Realized gains and losses
on sales of portfolio securities are calculated on the identified cost basis.
Interest income is recorded on the basis of interest accrued. Certain mortgage
security paydown gains and losses 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 State-
ment of Operations. Original issue discounts on debt securities are amortized
to interest income over the life of the security with a corresponding increase
in the cost basis of that security.
C. Federal Taxes
It is the Fund's policy to comply with the requirements of the Internal Reve-
nue Code applicable to regulated investment companies and to distribute each
year substantially all of its investment company taxable income to its share-
holders. Accordingly, no federal tax provisions are required.
D. 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.
E. Futures Contracts
Upon entering into a futures contract, the Fund is required to deposit with a
broker an amount of cash or securities equal to the minimum "initial margin"
requirement of the futures exchange on which the contract is traded. Subsequent
payments ("variation margin") are made or received by the Fund each day, depen-
dent on the daily fluctuations in the value of the underlying index, and are
recorded for financial reporting purposes as unrealized gains or losses by the
Fund. When entering into a closing transaction, for book purposes, the Fund
will realize a gain or loss equal to the difference between the value of the
futures contract to sell and the futures contract to buy. Futures contracts are
valued at the most recent settlement price, unless such price does
not reflect the fair market value of the contract, in which case the position
will be valued using methods approved by the Board of Trustees.
9
<PAGE>
Goldman Sachs Adjustable Rate Mortgage Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1995
(Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
E. Futures Contracts (continued)
- --------------------------------
Certain risks may arise upon entering into futures contracts. These risks may
include changes in the value of the futures contract that may not directly
correlate with changes in the value of the underlying securities, or that the
counterparty to a contract may default on its obligations to perform.
3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Fund's investment adviser
pursuant to an Investment Advisory Agreement. Under the Investment Advisory
Agreement, GSAM, subject to general supervision of the Trust's Board of
Trustees, manages the Fund's portfolio. As compensation for the services
rendered under the Investment Advisory Agreement and the assumption of the
expenses related thereto, GSAM is entitled to a fee, computed daily and payable
monthly, at an annual rate equal to .45% of the Fund's average daily net
assets. For the six months ended April 30, 1995, GSAM voluntarily agreed to
waive a portion of its investment advisory fee amounting to $23,325 for such
period.
GSAM serves as the Fund's administrator pursuant to an Administration
Agreement. Under the Administration Agreement, GSAM administers the Fund's
business affairs including providing facilities. As compensation for its
services rendered under the Administration Agreement, GSAM is entitled to a
fee, computed daily and payable monthly, at an annual rate equal to .15% of the
Fund's average daily net assets. For the six months ended April 30, 1995, GSAM
voluntarily agreed to waive its administration fee amounting to $12,202 for
such period.
GSAM has voluntarily agreed to limit certain of the Fund's expenses (excluding
advisory, administration and distribution fees and taxes, interest, brokerage
litigation, indemnification and other extraordinary expenses) to the extent
such expenses exceed .05% per annum of the Fund's average daily net assets. For
the six months ended April 30, 1995, GSAM voluntarily agreed to reimburse all
such expenses. The amount reimbursable to the Fund at April 30, 1995 is
approximately $87,000 and is included in "Other assets" in the accompanying
Statement of Assets and Liabilities.
Goldman Sachs serves as the Distributor of shares of the Fund pursuant to a
Distribution Agreement. Goldman Sachs may receive a portion of the sales load
imposed on the sale of Fund shares and has advised the Fund that it retained
approximately $9,400 during the six months ended April 30, 1995.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1.
Under the Plan, Goldman Sachs is entitled to receive a quarterly distribution
fee equal to, on an annual basis, .50% of the Fund's average daily net assets.
Currently, Goldman Sachs has voluntarily agreed to limit the amount of the dis-
tribution fee to .25% of the Fund's average daily net assets. For the six
months ended April 30, 1995, Goldman Sachs voluntarily agreed to waive a por-
tion of its distribution fee amounting to $20,338 for such period. Goldman
Sachs also serves as the Transfer Agent of the Fund for a fee.
For the six months ended April 30, 1995, the Fund incurred commission expense
of approximately $2,250 in connection with futures contracts entered into with
Goldman Sachs.
10
<PAGE>
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Purchases and proceeds of sales or maturities of long-term securities for the
six months ended April 30, 1995, were as follows:
<TABLE>
<S> <C>
Purchases of U.S. Government and agency
obligations $ 553,584
Purchases (excluding U.S. Government and agency obligations) $1,324,121
Sales or maturities of U.S. Government and
agency obligations $2,478,625
Sales or maturities (excluding U.S. Government and agency
obligations) $8,208,415
</TABLE>
5. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying securi-
ties, including accrued interest, is required to equal or exceed the value of
the repurchase agreement. The underlying securities for all repurchase agree-
ments are held in safekeeping in the customer-only account of State Street Bank
& Trust Co., the Fund's custodian, or at subcustodians. GSAM monitors the mar-
ket value of the underlying securities by pricing them daily.
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The Fund, together with other registered investment companies having advisory
agreements with GSAM or its affiliates, transfers uninvested cash balances into
a joint account, the daily aggregate balance of which is invested in one or
more repurchase agreements. The underlying securities for the repurchase agree-
ments are U.S. Treasury obligations and mortgage-related securities issued by
the U.S. Government, its agencies or instrumentalities. As of April 30, 1995,
the Fund had a 2.28% undivided interest in the repurchase agreement in the
joint account which equalled $7,900,000 in principal amount. As of April 30,
1995, the repurchase agreement in the joint account along with the correspond-
ing underlying securities (including the type of security, principal amount,
interest rate and maturity date) were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTEREST MATURITY AMORTIZED
PRINCIPAL AMOUNT RATE DATE COST
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lehman Brothers, Inc., dated 4/28/95, repurchase price $347,272,393 (U.S.
Treasury Notes: $351,926,000, 4.00%-9.25%, 12/31/95-3/31/96)
$347,100,000 5.96% 5/01/95 $347,100,000
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TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $347,100,000
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</TABLE>
7. OTHER
On February 4, 1994, the Fund effected a three for one stock split. The finan-
cial information in the accompanying statements has been restated to reflect
this stock split.
8. SUBSEQUENT EVENT
On May 11, 1995, shareholders of the Fund approved a Plan of Reorganization
(the "Reorganization") which was completed on May 12, 1995 ("Closing Date"). As
of the Closing Date, the Fund was Reorganized as a separate class ("Class A")
of the GS Adjustable Rate Government Agency Fund ("ARGAF"). The Fund reorga-
nized its shares into shares of the new ARGAF Class A shares by using the ARGAF
Institutional shares net asset value per share as of the Closing Date. Under
the Reorganization, all assets of the Fund were acquired by ARGAF in exchange
solely for (i) the issuance of Class A shares of beneficial interest of ARGAF
and (ii) the assumption by ARGAF of the liabilities of the Fund. Following this
transfer, the Fund was liquidated and dissolved and the ARGAF Class A shares
were distributed to the former shareholders of the Fund.
11
<PAGE>
Goldman Sachs Adjustable Rate Mortgage Fund
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NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1995
(Unaudited)
8. SUBSEQUENT EVENT (continued)
The Reorganization was accomplished by a tax-free transfer of assets whereby
each shareholder of the Fund received a number of full and fractional shares of
ARGAF having a total net asset value of their shares of the Fund held as of the
Closing Date. On May 12, 1995, shareholders of the Fund exchanged 3,552,167
shares of the Fund with a Net Asset Value per share of $4.84 for 1,756,917
ARGAF Class A shares with a net asset value per share of $9.79.
12
<PAGE>
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13
<PAGE>
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14
<PAGE>
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This Semi-Annual Report is authorized for distribution to prospective
investors only when preceded or accompanied by a Goldman Sachs Adjust-
able Rate Mortgage Fund Prospectus which contains facts concerning the
Fund's objectives and policies, management, expenses and other informa-
tion.
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15
<PAGE>
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Goldman Sachs
1 New York Plaza
New York, NY 10004
TRUSTEES
Paul C. Nagel, Jr., Chairman
Ashok N. Bakhru
Marcia L. Beck
David B. Ford
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
OFFICERS
Marcia L. Beck, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
GOLDMAN SACHS
Investment Adviser, Administrator,
Distributor and Transfer Agent
ARM/SAR/0495
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GOLDMAN SACHS
ADJUSTABLE RATE
MORTGAGE FUND
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SEMI-ANNUAL REPORT APRIL 30, 1995
[LOGO] GOLDMAN SACHS
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