<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to have the opportunity to review the performance of the
Goldman Sachs Fixed Income Portfolios for the six-month period ended April 30,
1996. In addition to discussing the portfolios, we will also provide a brief
overview of the U.S. economy and the bond market during the period.
The Goldman Sachs Fixed Income Portfolios performed well relative to their
benchmarks during a challenging bond market environment. These favorable results
reflect well on our investment approach, which de-emphasizes strategies based on
anticipating the direction of interest rates in favor of relative value analysis
and a focus on total return. We seek to add value by focusing on factors such as
sector allocation, duration structure and individual security selection.
Bonds Slumped as Rates Rose...
In contrast to its robust performance last year, the U.S. bond market
started the period under review on a strong note, but weakened in February and
fell sharply by the end of April as the economy showed signs of strengthening.
(A strong economy is detrimental for bonds, partly because it can lead to higher
demand for loans, and hence higher interest rates.) The primary catalyst for the
bond market sell-off was an unexpected surge in job growth, which the market
feared would lead to upward pressure on wage inflation and interest rates.
During the six-month period ended April 30, 1996, the total return of the
30-year Treasury bond was approximately 5.0%.
...and the Economy Strengthened
The period under review began with the economy weak, in part due to bloated
inventories, anemic consumer spending and depressed capital spending.
Fourth-quarter real Gross Domestic Product (GDP) grew only 0.5% (annualized),
and the economy seemed to grind to a virtual halt in late 1995, reviving fears
of a potential recession. A number of temporary factors contributed to the
economic weakness, including a contraction in spending by the government due to
its shutdowns and a strike at Boeing aircraft.
During January and February, the government delays in releasing economic
data and the distorting effects of the harsh winter storms made it difficult to
get an accurate reading on the economy's health. However, when key indicators
were finally reported, it became clear that the economy experienced a marked
reversal, gaining momentum faster than expected. Despite the difficult winter
and a strike at General Motors, first-quarter real GDP was reported at 2.3%
(annualized), reflecting improved demand from consumers and businesses. A wide
range of indicators pointed to accelerating growth in the latter half of the
period, including trade, housing sales and starts, factory orders, automobile
sales and industrial production. Business inventories began to rise, marking the
end of the inventory correction cycle. Also notable, retail sales increased by
8.2% (annualized) during the first quarter of 1996. Though inflation fears
rattled the bond market during the latter half of the period, the April consumer
price index (CPI) was reported at 0.4%, indicating that inflation remained under
control.
- --------------------------------------------------------------------------------
Table of Contents
Market Overview 1
GS Adjustable Rate Government Fund 3
GS Short Duration Government Fund 8
GS Short Duration Tax-Free Fund 13
GS Core Fixed Income Fund 19
Financial Statements 25
Notes to Financial Statements 29
Financial Highlights 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------
Letter to Shareholders (continued)
- -----------------------------------------------------------
The Fed Eased in the First Half of the Period
The U.S. Federal Reserve Board continued its policy of monetary easing
initiated last July, cutting the Federal funds rate (the rate banks charge one
another for overnight borrowing) by 25 basis points in December 1995 and by
another 25 basis points in January 1996, to 5.25%.
During the period under review, the short end of the yield curve steepened
dramatically and the whole curve shifted upward as investors anticipated higher
rates in the second half of the year. The yield on six-month U.S. Treasury bills
declined slightly to 5.30% on April 30, 1996 from 5.55% on October 31, 1995.
However, the yield on the 30-year U.S. Treasury bond climbed significantly
during the same time period, to 6.90% from 6.33% six months ago. Bond prices,
which move in the opposite direction from yields, fell 7.87% for the 30-year
U.S. Treasury bond.
Historical Treasury Yield Curve
[HISTORICAL TREASURY YIELD CURVE CHART APPEARS HERE]
<TABLE>
<S> <C> <C>
Years to Maturity 10/31/95 4/30/96
- ----------------- -------- -------
3-Month 5.49% 5.15%
6-Month 5.55% 5.30%
1-Year 5.54% 5.61%
2-Year 5.61% 6.04%
3-Year 5.68% 6.18%
5-Year 5.81% 6.41%
10-Year 6.02% 6.67%
30-Year 6.33% 6.90%
</TABLE>
Source: Bloomberg, L.P.
The short end of the yield curve steepened dramatically and the curve shifted
upward. The yield spread between one-year and 30-year Treasuries widened
significantly.
Outlook: Further Strengthening Expected, Leading to Possible Fed Tightening
With almost every measure of economic activity coming in stronger than
expected, moderate economic growth appears to be on track for the remainder of
1996. Though inflation appears subdued, accelerating economic growth and a
potential rise in labor costs could push inflation gradually higher over the
remainder of the year. Opinion is divided as to whether, or when, the Fed may
begin to tighten. As of this writing, Goldman Sachs' economists believe the Fed
is likely to tighten by summer.
We thank you for your support during this period and look forward to
continuing to help you achieve your investment goals.
Sincerely,
/s/ David B. Ford
David B. Ford
Co-Head,
Goldman Sachs Asset Management
/s/ John P. McNulty
John P. McNulty
Co-Head,
Goldman Sachs Asset Management
/s/ Sharmin Mossavar-Rahmani
Sharmin Mossavar-Rahmani
Chief Investment Officer - Fixed Income Investments
Goldman Sachs Asset Management
June 7, 1996
- --------------------------------------------------------------------------------
2
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Fund
- --------------------------------------------------------------------------------
Investment Objective
The GS Adjustable Rate Government 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). Under normal interest rate
conditions, the fund's duration is expected to be in a range approximately equal
to that of a six-month to one-year U.S. Treasury security.
Special Event
The name of the GS Adjustable Rate Government Agency Fund was changed to
the GS Adjustable Rate Government Fund. The fund's objective and investment
focus remain the same.
The ARM Market Began Weak but Improved as Prepayments Slowed
The changing direction of interest rates had a significant impact on the
ARM market during the six-month period under review. In November 1995, yield
spreads between ARMs and Treasuries were relatively wide, due to high ARM
prepayment risk as homeowners opted for fixed rate mortgages to lock in
attractive rates. The ARM market reached a decisive turning point in January
1996, when long-term interest rates began to rise. From January through April,
the short end of the yield curve steepened and ARM prepayments began to
gradually decline, as it became less attractive for homeowners to refinance
their mortgages. By the end of the period under review, the ARM sector's
technical balance had greatly improved: secondary market supply was being met
with strong investor demand due to the attractive spreads ARMs offered relative
to other short-duration investments.
Performance Review
The fund's Institutional, Administration and Class A shares outperformed
both the six-month U.S. Treasury bill and the one-year U.S. Treasury bill during
the period under review. (As of April 30, the fund's duration was 0.8 years, in
between that of the six-month and the one-year U.S. Treasury bill.) The fund's
favorable performance was primarily due to the incremental yield of its ARM
position over similar-duration Treasuries and a tightening of ARM spreads
relative to Treasuries.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Summary: October 31, 1995 - April 30, 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Six-
Month One-Year
Institu- Adminis- Class Treasury Treasury
tional tration A Bill Bill
------ ------- - ---- ----
Total Return (based 3.20% 3.07% 3.07% 2.67% 2.55%
on net asset value)
- --------------------------------------------------------------------------------
Return From 3.10% 2.97% 2.97% NA NA
Monthly
Distributions
- --------------------------------------------------------------------------------
Return From Price 0.10% 0.10% 0.10% NA NA
Appreciation
- --------------------------------------------------------------------------------
NAV (4/30/96) $9.78 $9.78 $9.78 NA NA
- --------------------------------------------------------------------------------
NAV Change +$0.01 +$0.01 +$0.01 NA NA
- --------------------------------------------------------------------------------
</TABLE>
The fund performed well versus its peers. For the 12 months ended April 30,
1996, the fund's Institutional shares ranked 13th out of 58 funds in the
adjustable rate mortgage category, as tracked by Lipper Analytical Services,
Inc. (Lipper did not rank the fund's Administration and Class A shares. Please
note that Lipper rankings do not take sales charges into account and that past
performance is not a guarantee of future results.) In addition, as of April 30,
1996, the fund's Institutional shares were rated "five stars" by Morningstar,
Inc., its highest rating./1/
- ------------------------------------------
Source: (c) 1996 Morningstar, Inc. All rights reserved. Morningstar proprietary
ratings reflect historical risk-adjusted performance as of 4/30/96. The ratings
are subject to change every month. Morningstar ratings are calculated from a
fund's three-, five-, and ten-year average annual returns (where applicable) in
excess of 90-day Treasury bill returns with appropriate fee and sales charge
adjustments and a risk factor that reflects fund performance below 90-day
Treasury bill returns. Morningstar rates funds against their peers in the same
category. The GS Adjustable Rate Government Fund (Institutional) is rated
against 875 taxable bond funds for the three-year period; the fund's Class A and
Administration shares are not rated. In all, there are four Morningstar
categories (equity, fixed income, municipal and hybrid). Morningstar ratings
range from five stars (highest) to one star (lowest). Funds with five-star
ratings are in the top 10% of their category, four-star ratings in the next
22.5%, three stars the next 35%, two stars the next 22.5% and one star the
lowest 10% of their categories.
- --------------------------------------------------------------------------------
3
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Fund (continued)
- --------------------------------------------------------------------------------
Portfolio Composition and Investment Strategies
With the exception of a slight increase in the portfolio's ARM position and
a decrease in its collateralized mortgage obligation (CMO) position, the
portfolio's sector composition changed very little during the period under
review.
Portfolio Composition as of April 30, 1996*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
ARMs 83.9%
SBA Floaters 9.4%
CMOs 5.0%
Repos/Cash Equivalents 1.7%
</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. We modestly increased the fund's position in ARMs to 83.9%, up from
80.2% six months ago. We continued to emphasize seasoned, fully indexed,
one-year Constant Maturity Treasury (CMT) ARMs. These securities provide
attractive income stability and have low prepayment risk, and they added to the
portfolio's incremental return during the period.
. SBA Floaters. The fund's performance benefited from its second largest sector
position, securities backed by Small Business Administration (SBA) loans (9.4%).
These securities are attractive in a rising interest rate environment because
their coupons generally reset on a monthly basis and therefore have relatively
low interest rate risk.
. CMOs. CMOs accounted for 5.0% of the portfolio, down from 7.7% six months
ago. We reduced the fund's position in January, after tighter yield spreads made
CMOs fairly valued relative to equal-duration Treasuries while not offering
significant value over straight collateral pass-throughs, according to our
analysis. This position helped the fund's performance by adding incremental
yield over Treasuries and allowing us to exploit relative mispricing in the
marketplace. The fund's CMO position included CMO floaters (1.7% of the
portfolio), which added an incremental return over Treasuries, and sequential-
pay CMOs (0.8%), which provided relatively predictable cash flows. The remainder
of the CMO position was primarily in super floaters, discussed below.
. Prudent Use of Derivatives. During the period under review, we used higher
risk derivatives very sparingly to enhance returns without additional undue
risk. As of April 30, 1996, the fund held a 2.2% position in super floaters,
which are floating rate securities whose coupons reset higher and more quickly
than regular ARMs. Super floaters contributed to the fund's performance as
interest rates rose during the latter half of the period. The fund sold its
position in inverse floaters (1.4% as of October 31, 1995) after their prices
appreciated and became fairly valued as rates rose. In addition, the fund held
minor positions in interest-only (IO) and inverse IO securities.
. Duration. As of April 30, the duration of the fund was 0.8 years, little
changed from six months ago. We used financial futures as a tool to help manage
the portfolio's duration.
. Credit Quality. The fund continued to invest solely in securities issued by
the U.S. government and its agencies or instrumentalities, which are considered
to be of the highest credit quality.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Fund (continued)
- --------------------------------------------------------------------------------
ARM Outlook: Slowing Prepayments Continue to Benefit the ARM Market
We have a favorable view of the ARM sector in the near term. Though
homeowners' increasing preference for ARMs over fixed rate mortgages should
result in ARMs representing a higher percentage of new mortgage originations,
the absolute level of originations should remain low. In addition, we believe
any potential impact of higher primary issuance on ARM prices will be mitigated
by slowing prepayments in the coming months.
Distribution Policy
The fund's Institutional, Administration and Class A shares distributed
$0.30, $0.29 and $0.29 per share, respectively, for the six-month period ended
April 30.
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 net asset value (NAV) per share.
In conclusion, we appreciate your investment in the GS Adjustable Rate
Government Fund and will continue to seek attractive fixed income investments in
the months ahead.
Sincerely,
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ Peter D. Dion
Peter D. Dion
/s/ James P. McCarthy
James P. McCarthy
Portfolio Managers
GS Adjustable Rate Government Fund
June 7, 1996
- --------------------------------------------------------------------------------
5
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Fund
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
Mortgage Backed Obligations--98.0%
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)(a)--13.8%
<S> <C> <C> <C>
$ 2,105,872 7.97% 01/01/19 $ 2,175,008
5,818,073 7.88 05/01/20 5,995,524
32,084,093 7.90 02/01/22 33,203,828
4,570,295 7.52 08/01/22 4,681,490
11,258,891 7.80 06/01/24 11,532,707
7,000,000 7.37 06/01/26(d) 7,191,310
5,161,940 7.35 07/01/29 5,214,075
2,362,236 7.53 05/01/31 2,410,732
12,139,911 6.79 12/25/20 12,133,356
- --------------------------------------------------------------------------------
$84,538,030
- --------------------------------------------------------------------------------
Adjustable Rate Federal National Mortgage Association
(FNMA)(a)--62.6%
$ 7,066,936 6.84% 03/01/17 $ 7,131,245
4,020,719 7.60 03/01/17 4,132,294
4,706,055 6.43 03/01/18 4,723,562
7,380,873 7.42 04/01/18 7,602,152
896,430 7.80 05/01/18 918,626
5,745,017 7.54 07/01/18 5,909,497
7,964,885 7.78 07/01/18 8,217,212
7,077,251 7.44 08/01/18 7,233,870
4,050,013 7.73 08/01/18 4,192,857
4,222,292 7.61 10/01/18 4,343,091
7,441,654 7.55 11/01/18 7,627,546
1,047,001 7.29 12/01/18 1,071,532
14,334,969 7.67 12/01/18(e) 14,765,449
3,801,975 7.45 06/01/19 3,895,998
4,973,148 6.97 07/01/19 5,090,116
1,947,813 7.44 07/01/19 1,990,139
3,054,897 7.09 01/01/20 3,120,302
3,304,036 7.78 03/01/20 3,420,139
9,778,516 7.16 07/01/20 10,007,333
5,024,123 7.55 09/01/19 5,172,033
5,389,464 7.62 02/01/21 5,543,495
5,895,447 7.34 04/01/21 6,041,949
74,923,295 7.58 09/01/21(e) 77,413,745
4,652,669 7.88 11/01/21 4,759,866
24,309,171 7.66 02/01/22 25,062,512
16,365,740 7.69 06/01/22 16,931,503
7,501,084 7.77 08/01/22 7,726,041
41,924,394 7.76 09/01/22(e) 43,304,125
2,236,184 7.57 02/01/23 2,282,719
337,134 6.28 12/01/23 333,447
2,797,655 7.33 10/01/27 2,861,861
1,329,647 7.18 07/01/29 1,351,932
3,458,290 7.35 04/01/30 3,539,214
38,093,599 7.72 01/01/31(e) 39,261,548
36,834,928 6.28 02/01/31 36,662,246
- --------------------------------------------------------------------------------
$383,641,196
- --------------------------------------------------------------------------------
Adjustable Rate Government National Mortgage Association
(GNMA)(a)--7.3%
$ 25,000,000 6.00% 12/20/99 $ 24,875,000
1,648,914 6.75 03/20/16 1,662,881
14,216,578 6.00 06/20/25 14,315,668
3,679,880 6.00 11/20/25 3,677,267
- --------------------------------------------------------------------------------
$44,530,816
- --------------------------------------------------------------------------------
Adjustable Rate Small Business Administration (SBA)(a)--9.4%
$ 1,620,507 6.75% 10/25/14 $1,671,148
2,597,975 6.75 02/25/15 2,679,162
3,896,567 6.75 03/25/15 4,018,335
2,984,013 6.75 04/25/15 3,077,263
2,987,998 6.75 05/25/15 3,081,373
1,979,671 6.75 08/25/15 2,041,536
2,853,437 6.75 09/25/15 2,942,607
2,095,779 6.75 10/25/15 2,161,272
1,344,213 6.36 09/25/16 1,369,417
4,792,860 6.36 07/25/17 4,882,726
10,740,322 6.36 08/25/17 10,941,703
4,655,225 6.36 09/25/17 4,742,510
4,024,138 6.36 10/25/17 4,099,590
9,536,915 6.36 02/25/18 9,715,732
- --------------------------------------------------------------------------------
$57,424,374
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligations--4.9%
Inverse Floater(a)--0.0%
FNMA Remic Trust 1991-91, Class S
$ 190,624 17.45% 07/25/98 $ 207,142
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
6
<PAGE>
- --------------------------------------------------------------------------------
GS Adjustable Rate Government Fund
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
================================================================================
<S> <C> <C> <C>
Mortgage Backed Obligations(continued)
Collateralized Mortgage Obligations(continued)
Inverse Floating Rate - Interest Only(a)--0.0%
FNMA Remic Trust 1992-157, Class SA
$ 2,808,000(c) 13.76% 03/25/04 $ 246,121
- --------------------------------------------------------------------------------
Inverse IOette--0.0%
FHLMC Series 1164, Class O
$ 40,641(c) 32.36% 11/15/06 $ 505,421
- --------------------------------------------------------------------------------
IOette--0.2%
FNMA Remic Trust 1990-145, Class B
$ 29,831(c) 10.00% 12/25/20 $ 1,046,204
- --------------------------------------------------------------------------------
Regular Floater (a)--1.7%
FHLMC Series 1011, Class F
$ 10,024,584 6.46% 11/15/20 $ 10,176,908
- --------------------------------------------------------------------------------
Sequential Fixed Rate CMOs--0.8%
FHLMC Series 1056, Class G
$ 17,233 8.00% 12/15/18 $17,239
FHLMC Series 1098, Class F
397,173 8.00 03/15/05 396,609
FNMA Remic Trust 1990-65, Class U
1,213,417 9.50 11/25/06 1,224,689
FNMA Remic Trust 1991-140, Class C
525,908 8.50 05/25/20 526,424
FNMA Remic Trust 1991-37, Class E
2,667,717 8.50 04/25/05 2,686,578
- --------------------------------------------------------------------------------
$4,851,539
- --------------------------------------------------------------------------------
Super Floater CMOs(a)--2.2%
FNMA Remic Trust 1992-157, Class FA
$ 13,823,998 1.41% 03/25/04 $ 13,283,894
- --------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations $ 30,317,229
- --------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $605,682,691) $600,451,645
- --------------------------------------------------------------------------------
Repurchase Agreements--6.2%
Joint Repurchase Agreement Account(e)
$ 38,200,000 5.36% 05/01/96 $ 38,200,000
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $38,200,000) $ 38,200,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $643,882,691(b)) $638,651,645
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Futures contracts open at April 30, 1996:
Number of
Contracts Settlement Unrealized
Type Long Month Gain (Loss)
(Short)(f)
- ---------------------- ------------------ ----------------- --------------------
<S> <C> <C> <C>
Euro Dollars 741 June 1996 $(403,425)
Euro Dollars 190 September 1996 (95,250)
Euro Dollars 70 December 1996 (50,750)
Euro Dollars (50) March 1997 12,500
2-Year U.S. Treasury Notes 50 June 1996 (174,219)
5-Year U.S. Treasury Notes (258) June 1996 586,750
--------------------
$(124,394)
================================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 2,374,402
Gross unrealized loss for investments in which
cost exceeds value $(7,624,053)
- --------------------------------------------------------------------------------
Net unrealized loss $(5,249,651)
================================================================================
</TABLE>
(a)Variable rate security. Coupon rate disclosed is that which is in effect at
April 30, 1996.
(b)The aggregate cost for federal income tax purposes is $643,901,296.
(c)Represents security with notional or nominal principal amount. The actual
effective yield shown for this security is different than the stated rate due
to the amortization of related premiums.
(d)When issued security.
(e)Portions of these securities are being segregated for futures and when issued
securities.
(f)Each Euro Dollar contract represents $1,000,000 in notional par value. Each
2-Year U.S. Treasury Note contract represents $200,000 in notional par value.
Each 5-Year U.S. Treasury Note contract represents $100,000 in notional par
value. The total notional amount and market value at risk are $1,086,800,000
and $285,686,900, respectively.
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
7
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GS Short Duration Government Fund
- --------------------------------------------------------------------------------
Investment Objective
The GS Short Duration Government 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. Under normal interest rate
conditions, the fund's duration is expected to be within one-half year of its
benchmark, the two-year U.S. Treasury security.
Special Event
The name of the GS Short-Term Government Agency Fund was changed to the GS
Short Duration Government Fund. The fund's objective and investment focus remain
the same.
Performance Review
During the six-month period ended April 30, 1996, the fund's Institutional
shares outperformed its benchmark, the two-year U.S. Treasury security. The
fund's positive performance was primarily due to our emphasis on mortgage-backed
securities and the "barbelled" term structure of the portfolio relative to the
benchmark. During the period, the Institutional shares' net asset value (NAV)
fell $0.09 as interest rates rose. The fund's Administration shares, which
reopened on February 28, 1996, were affected by adverse bond market conditions
as well, with its NAV falling $0.12. From the inception of the fund's Service
shares (April 10, 1996) through the end of April, the fixed income market was
flat but the shares achieved a positive total return for that brief period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Summary
- --------------------------------------------------------------------------------
Institutional Administration* Service*
(10/31/95- (2/28/96- (4/10/96-
4/30/96) 4/30/96) 4/30/96)
-------- -------- --------
<S> <C> <C> <C>
Total Return (based on net 2.42% -0.21% 0.44%
asset value)
- --------------------------------------------------------------------------------
Return From Monthly 2.81% 1.00% 0.34%
Distributions
- --------------------------------------------------------------------------------
Return From Price -0.39% -1.21% 0.10%
Depreciation /
Appreciation
- --------------------------------------------------------------------------------
Total Return of Two-Year 1.87% -0.10% NA
U.S. Treasury
- --------------------------------------------------------------------------------
NAV (4/30/96) $9.73 $9.74 $9.73
- --------------------------------------------------------------------------------
NAV Change -$0.09 -$0.12 +$0.01
- --------------------------------------------------------------------------------
* New share class opened during the period.
</TABLE>
The fund performed well compared with its peers. The Institutional shares
ranked in the top third of short-intermediate U.S. government funds (26th out of
91) based on total return for the 12-month period ended April 30, 1996,
according to Lipper Analytical Services, Inc. (The Administration and Service
shares were not ranked because they were not in existence during the entire
12-month period. Please note that Lipper rankings do not take sales charges into
account and that past performance is not a guarantee of future results.)
Portfolio Composition and Investment Strategies
During the period, the fund significantly reduced its weighting in U.S.
Treasuries and increased its emphasis on mortgage-backed securities, which we
believed offered greater relative value.
8
<PAGE>
- ------------------------------------------------------------------------------
GS Short Duration Government Fund (continued)
- ------------------------------------------------------------------------------
Portfolio Composition as of April 30, 1996*
[PIE CHART APPEARS HERE]
CMOs 54.5%
ARMs 21.7%
Fixed Rate Mortgage Pass-Throughs 12.5%
U.S. Treasuries 10.6%
Repos/Cash Equivalents 0.7%
* 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.
. CMOs. During the six months ended April 30, 1996, we raised the fund's
collateralized mortgage obligations (CMOs) weighting to 54.5%. Specifically, we
increased the fund's weighting in sequential-pay CMOs to 24.8% from 10.4% six
months ago and planned amortization class (PAC) CMOs to 13.7% from 1.9%. These
securities were conservative, short-duration issues that offered incremental
yield potential over Treasuries and contributed to the fund's performance. In
general, CMOs became more expensive during the period due to a low level of CMO
originations and healthy investor demand. However, we continued to find
attractive investment opportunities in the sector.
. ARMs. The portfolio's 21.7% position in adjustable rate mortgage securities
(ARMs) contributed to its incremental yield over the benchmark. We emphasized
seasoned, fully indexed, one-year Constant Maturity Treasury (CMT) ARMs. These
securities provide attractive income stability and have low prepayment risk.
. Fixed Rate Mortgage Pass-Throughs. The fund's fixed rate pass-through
position accounted for 12.5% of the portfolio as of April 30, 1996, a slight
increase from its 9.1% allocation six months ago. Mortgage-backed securities
came under pressure during November and December when the level of mortgage
prepayments was high, but the sector improved when prepayments slowed from
January through April. When the period began, we favored seasoned premium
mortgages, which typically experience fewer prepayments relative to newly issued
mortgages. However, at the end of the period we started to seek investment
opportunities in current coupon and discount mortgages, as their performance has
lagged that of the premium sector.
. U.S. Treasuries and Cash Equivalents. During the period, we cut the fund's
position in U.S. Treasuries by more than two-thirds to 10.6% in favor of other
sectors that offered better relative value. We also reduced the fund's cash
equivalent position to 0.7%, down from 4.7% six months ago.
. Issuer Composition. The portfolio composition of the fund's mortgage-backed
security holdings by issuer was the Federal National Mortgage Association (FNMA)
(48.8%); the Federal Home Loan Mortgage Corporation (FHLMC) (37.1%); and the
Government National Mortgage Association (GNMA) (2.8%).
. Credit Quality. The fund invests exclusively in issues of the U.S. government
and its agencies or instrumentalities.
. Prudent Use of Derivatives. As noted, the fund held positions in
sequential-pay CMOs (24.8%) and PAC CMOs (13.7%), which are generally considered
to be lower risk derivatives. We held an 11.5% fund position in CMO floaters
(floating rate securities whose coupons reset higher in a rising rate
environment) and a 2.2% position in inverse floaters. When floaters are held
along with inverse floaters, they can produce a position with a similar risk
- --------------------------------------------------------------------------------
9
9
<PAGE>
Letter to Shareholders
- -------------------------------------------------------------------------------
GS Short Duration Government Fund (continued)
- -------------------------------------------------------------------------------
profile as a fixed rate pass-through but provide a higher yield. The fund also
held a small position in interest-only PACs (PAC IOs) (1.9%), which are
considered to be higher risk derivatives. We invest in higher risk derivatives
sparingly in an effort to enhance returns without taking undue risk. In
addition, we used futures as a tool to help manage the portfolio's duration.
Fund Outlook
Overall, we believe that the mortgage-backed securities market will provide
a favorable investment environment in the coming months. Specifically, we are
constructive on the mortgage pass-through market. With refinancing expected to
decline dramatically in the next couple of months, and correspondingly
originations, mortgage technicals should be firm. Yield spreads on pass-throughs
remain attractive relative to most of the other high-credit-quality sectors.
Tempering our enthusiasm for pass-throughs, however, is the extent to which
their spreads tightened during the first quarter, which may limit the extent of
further near-term gains. As of the end of the period, we have a neutral outlook
for the CMO sector, which we believe represents fair value relative to mortgage
pass-throughs. However, we continue to find specific areas within the CMO market
that offer attractive investment opportunities, such as long discount supports
and recombinations. We have a constructive view of the ARM sector, where
secondary market supply continues to be met with strong investor demand due to
the attractive yield spreads available on ARMs relative to other short-duration
investments.
Distribution Policy
During the period under review, the fund's Institutional shares distributed
$0.33 per share. From their inceptions through April 30, 1996, the fund's
Administration and Service shares paid out $0.10 per share and $0.03 per share,
respectively. The Administration shares' inception date was February 28, 1996,
and the Service shares' inception date was April 10, 1996.) The fund distributes
substantially all of its investment company taxable income, as required by tax
law.
In conclusion, we thank you for your investment in the GS Short Duration
Government Fund and we look forward to continuing our relationship.
Sincerely,
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ James B. Clark
James B. Clark
Portfolio Managers
GS Short Duration Government Fund
June 7, 1996
10
<PAGE>
- -------------------------------------------------------------------
Statement of Investments
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
GS Short Duration Government Fund
April 30, 1996
(Unaudited)
- -------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
===================================================================
Mortgage Backed Obligations--88.0%
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)(a)--12.4%
<S> <C> <C> <C>
$ 2,232,583 7.54% 12/01/18 /(b)/ $2,288,129
9,436,498 7.90 02/01/22 /(b)/ 9,765,832
- --------------------------------------------------------------------
$12,053,961
- --------------------------------------------------------------------
Adjustable Rate Federal National Mortgage Association
(FNMA)(a)--13.6%
$477,114 9.00% 12/01/97 $489,939
577,013 6.00 10/01/08 551,769
1,177,822 6.00 06/01/09 1,126,292
2,200,407 6.00 10/01/09 2,104,139
2,993,016 7.96 11/01/14/(b)/ 3,092,833
2,084,410 7.85 07/01/19/(b)/ 2,143,149
3,646,150 7.79 08/01/22 3,714,041
- -------------------------------------------------------------------
$13,222,162
- -------------------------------------------------------------------
Fixed Rate Government National Mortgage Association--2.9%
$2,565,969 10.00% 12/15/99 $2,822,566
- --------------------------------------------------------------------
Collateralized Mortgage Obligations(CMOs)--59.1%
FNMA Interest-Only Stripped Securities--1.5%
FNMA Series 206, Class 2
$ 4,804,406/(c)/ 9.00% 04/01/22/(b)/ $1,504,211
- --------------------------------------------------------------------
FNMA Principal-Only Stripped Securities--3.6%
FNMA Remic Trust 1992-44, Class B
$ 3,868,448 5.47%/(d)/ 12/25/22 $2,606,057
FNMA Remic Trust 1992-68, Class A
914,971 4.89/(d)/ 12/25/22 880,687
- --------------------------------------------------------------------
$3,486,744
- --------------------------------------------------------------------
Inverse Floater(a)--4.7%
FHLMC Series 1296, Class J
$890,613 11.55% 07/15/99 $947,630
FHLMC Series 1325, Class B
2,416,565 6.19 07/15/97/(b)/ 2,427,043
FHLMC Series 1325, Class C
1,028,325 7.27 07/15/97/(b)/ 1,019,420
FNMA Remic Trust 1991-127, Class S
169,147 12.78 09/25/98 176,325
- -------------------------------------------------------------------
$4,570,418
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
- -------------------------------------------------------------------
<S> <C> <C> <C>
Principal Interest Maturity
Amount Rate Date Value
===================================================================
Mortgage Backed Obligations(continued)
Collateralized Mortgage Obligations(continued)
FHLMC Series 1684, Class JD
$ 3,136,874/(c)/ 3.52% 08/15/20 $206,030
FNMA Remic Trust 1993-110, Class SC
3,231,044/(c)/ 3.33 04/25/19 105,461
- -------------------------------------------------------------------
$311,491
- -------------------------------------------------------------------
Planned Amortization Class (PAC CMOs)--11.2%
FHLMC Series 1584, Class E
$ 3,000,000 5.75% 10/15/16 $2,922,990
FNMA Remic Trust 1992-138, Class A
734,420 6.00 08/25/13 731,130
FNMA Remic Trust 1992-138, Class C
2,350,000 6.00 12/25/18/(b)/ 2,296,937
FNMA Remic Trust 1993-86, Class D
5,000,000 5.50 05/25/04 4,922,250
- -------------------------------------------------------------------
$10,873,307
- -------------------------------------------------------------------
Planned Amortization Class Interest-Only (PAC IO) CMOs--1.0%
FHLMC Series 1552, Class JE
$13,372,148/(c)/ 7.00% 02/15/14/(b)/ $974,027
- -------------------------------------------------------------------
Planned Amortization Class IOette CMOs--0.7%
FNMA Remic Trust 1992-198, Class K
$ 51,750/(c)/12.04% 12/25/15 $726,159
- -------------------------------------------------------------------
Regular Floater (a)--11.3%
FHLMC Series 1684, Class F
$5,000,000 5.75% 08/15/20 $4,717,000
FHLMC Series 1684, Class JC
3,136,874 5.47 08/15/20 3,068,804
FNMA Remic Trust 1993-110, Class FC
3,231,045 5.67 04/25/19/(b)/ 3,218,799
- -------------------------------------------------------------------
$11,004,603
- -------------------------------------------------------------------
Sequential Fixed Rate CMOs--24.8%
FHLMC Series 1033, Class G
$2,000,000 8.00% 01/15/06/(b)/ $2,044,260
FHLMC Series 1187, Class F
2,898,697 7.00 06/15/05/(b)/ 2,898,581
FHLMC Series 1296, Class I
2,493,715 5.37 07/15/99/(b)/ 2,446,684
- -------------------------------------------------------------------
</TABLE>
11
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount(a) Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt Obligations--86.8%
Australian Dollar--0.8%
Commonwealth of Australia
AUD 3,000,000 7.50% 07/15/05 $ 2,185,637
- --------------------------------------------------------------------------------
Belgian Franc--2.3%
Kingdom of Belgium
BEF 185,000,000 6.50% 03/31/05 $ 5,873,809
- --------------------------------------------------------------------------------
British Pound Sterling--10.2%
United Kingdom Treasury
BPS 8,000,000 9.00% 03/03/00 $ 12,712,502
9,000,000 8.50 12/07/05 13,988,453
- --------------------------------------------------------------------------------
$ 26,700,955
- --------------------------------------------------------------------------------
Canadian Dollar--2.7%
Government of Canada
CAD 4,000,000 7.50% 09/01/00 $ 2,998,898
6,000,000 6.50 06/01/04 4,108,720
- --------------------------------------------------------------------------------
$ 7,107,618
- --------------------------------------------------------------------------------
Danish Krone--2.4%
Kingdom of Denmark
DKK 33,000,000 9.00% 11/15/00 $ 6,252,102
- --------------------------------------------------------------------------------
Deutsche mark--14.1%
Federal Republic of Germany
DEM 21,500,000 7.12% 12/20/02 $ 15,038,620
17,300,000 6.75 07/15/04 11,735,692
12,000,000 7.38 01/03/05 8,420,310
Federal Republic of Germany Unity Fund
2,000,000 8.75 07/20/00 1,476,835
- --------------------------------------------------------------------------------
$ 36,671,457
- --------------------------------------------------------------------------------
French Franc--1.9%
Government of France
FRF 10,000,000 7.00% 11/12/99 $ 2,055,780
13,000,000 8.50 03/28/00 2,803,512
- --------------------------------------------------------------------------------
$ 4,859,292
- --------------------------------------------------------------------------------
Irish Pound--2.5%
Republic of Ireland
IEP 4,000,000 8.00% 10/18/00 $ 6,518,288
- --------------------------------------------------------------------------------
Italian Lira--4.9%
Republic of Italy
ITL 19,000,000,000 10.50% 11/01/00 $ 12,803,572
- --------------------------------------------------------------------------------
Japanese Yen--3.9%
International Bank for Reconstruction & Development
JPY 700,000,000 6.75% 06/18/01 $ 7,972,417
Japanese Development Bank
200,000,000 6.50 09/20/01 2,264,688
- --------------------------------------------------------------------------------
$ 10,237,105
- --------------------------------------------------------------------------------
Spanish Peseta--1.9%
Government of Spain
ESP 450,000,000 10.00% 02/28/05 $ 3,721,026
Kingdom of Spain
150,000,000 10.15 01/31/06 1,251,899
- --------------------------------------------------------------------------------
$ 4,972,925
- --------------------------------------------------------------------------------
Swedish Krona--8.2%
Kingdom of Sweden
SEK 40,000,000 13.00% 06/15/01 $ 7,218,341
85,000,000 10.25 05/05/03 14,079,108
- --------------------------------------------------------------------------------
$ 21,297,449
- --------------------------------------------------------------------------------
United States Dollar--31.0%
United States Treasury Notes
USD 10,000,000 6.88% 07/31/99 $ 10,168,700
18,000,000 5.25 01/31/01 17,181,540
10,500,000 6.38 03/31/01 10,480,260
8,200,000 6.25 02/15/03 8,057,812
10,000,000 7.88 11/15/04 10,764,100
24,500,000 6.50 08/15/05 24,163,125
- --------------------------------------------------------------------------------
$ 80,815,537
- --------------------------------------------------------------------------------
Total Debt Obligations
(Cost $229,518,189) $226,295,746
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount(a) Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Obligations--9.7%
Euro-Time Deposit-Chemical Bank London
USD 25,291,098 5.25% 05/01/96 $ 25,291,098
- --------------------------------------------------------------------------------
Total Short-Term Obligations
(Cost $25,291,098) $ 25,291,098
- --------------------------------------------------------------------------------
Total Investments
(Cost $254,809,287(b)) $251,586,844
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost $ 2,388,403
Gross unrealized loss for investments in which cost
exceeds value (5,661,519)
- --------------------------------------------------------------------------------
Net unrealized loss $ (3,273,116)
- --------------------------------------------------------------------------------
</TABLE>
(a) The principal amount of each security is stated in the currency in which the
bond is denominated. See below.
AUD = Australian Dollar IEP = Irish Pound
BEF = Belgian Franc ITL = Italian Lira
BPS = British Pound Sterling JPY = Japanese Yen
CAD = Canadian Dollar ESP = Spanish Peseta
DKK = Danish Krone SEK = Swedish Krona
DEM = Deutsche mark USD = United States Dollar
FRF = French Franc
(b)The aggregate cost for federal income tax purposes is $254,859,960.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund
- --------------------------------------------------------------------------------
Investment Objective
The Goldman Sachs Municipal Income Fund seeks to provide a high level of
current income that is exempt from regular federal income tax, consistent with
the preservation of capital. In pursuit of its objective, the fund invests in a
diversified portfolio of municipal securities with a weighted average credit
quality of double-A or better. The fund buys only investment-grade securities
or, if unrated, deemed to be of comparable quality. Under normal interest rate
conditions, the fund's duration is expected to be within one year of its
benchmark, the Lehman Brothers 15-Year Municipal Bond Index. The fund's
approximate interest rate sensitivity is comparable to that of a 15-year bond.
Special Event
As of May 1, 1996, the fund added a new share class (Class B), which is
subject to a contingent deferred sales charge but no up-front sales charge.
Municipal Bonds Outperformed Treasuries
The municipal bond market provided positive returns during the six-month
period ended April 30, 1996, but as was the case with taxable bonds, municipals
came under pressure due to rising yields and falling prices. Even so, municipals
outperformed Treasuries as their prices depreciated less. The average price of a
15-year municipal bond (as calculated from data provided by Municipal Market
Data, an independent municipal market information provider) fell 2.08%, while
yields rose from 5.35% on October 31, 1995 to 5.55% on April 30, 1996.
The municipal bond market began the period under review in a holding
pattern. During November and December 1995, many investors shied away from
municipal bonds. Some were lured by the robust equity market, while others were
skittish amid talk of tax reform. While demand was declining, the supply of
municipal bonds significantly expanded due to an increase in refinancings of old
issues at lower rates and the desire of issuers to close transactions by
year-end. This pressure created an unfavorable technical balance and hurt
municipal bond prices. Conditions improved during January and February 1996. The
collapse of Steve Forbes's presidential campaign, which emphasized a flat tax,
diminished public debate on the subject and helped stimulate demand for
municipals. In addition, new supply fell off during the first two months of the
year, traditionally a period of low issuance, further helping the market's
technical balance. In March, an increase in secondary market supply briefly
overwhelmed demand. However, the municipal bond market reestablished its
technical balance during April, when supply eased once again.
By the end of the period, the slight steepening in the municipal bond yield
curve resulted in longer term municipal bonds suffering negative returns while
shorter term bonds eked out positive returns.
Municipal Bond Yield Curve
[MUNICIPAL BOND YIELD CHART APPEARS HERE]
Year of Maturity 4/30/96 10/31/95
- ---------------- ------- --------
1997 3.65 3.90
1998 4.05 4.10
1999 4.25 4.20
2000 4.45 4.30
2001 4.55 4.40
2002 4.65 4.50
2003 4.75 4.60
2004 4.85 4.70
2005 4.95 4.80
2006 5.05 4.95
2007 5.15 5.05
2008 5.25 5.15
2009 5.35 5.25
2010 5.45 5.35
2011 5.55 5.40
2012 5.60 5.45
2013 5.65 5.50
2014 5.70 5.55
2015 5.75 5.55
2016 5.75 5.55
2017 5.75 5.55
2018 5.75 5.55
2019 5.80 5.60
2020 5.80 5.60
2021 5.80 5.60
2022 5.80 5.60
2023 5.80 5.60
2024 5.80 5.60
2025 5.80 5.60
The yield curve shifted upward during the period as bond prices declined.
Performance Review
- --------------------------------------------------------------------------------
Performance Summary: October 31, 1995 - April 30, 1996
- --------------------------------------------------------------------------------
[S] [C] [C]
Lehman Brothers
15-Year Municipal
Fund Bond Index
---- ----------
Total Return (based on net asset value) 1.26% 1.15%
- --------------------------------------------------------------------------------
Return From Monthly Distributions 2.23% NA
- --------------------------------------------------------------------------------
Return From Price Depreciation -0.97% NA
- --------------------------------------------------------------------------------
NAV (as of 4/30/96) $14.03 NA
- --------------------------------------------------------------------------------
NAV Change -$0.14 NA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund (continued)
- --------------------------------------------------------------------------------
During the period under review, the fund outperformed its benchmark, the
Lehman Brothers 15-Year Municipal Bond Index (the "Index"), for two main
reasons: the positive performance of specific securities and the fund's targeted
term structure.
. The fund benefited from extensive fundamental research, which enabled us to
identify individual securities with particularly attractive potential. For
example, the fund invested in a number of "story" bonds with unique credit
characteristics or security structures. The value of these bonds went
unrecognized by the market because they were generally not well understood.
. During the period under review, the fund shifted from a "barbell" term
structure (emphasizing bonds with maturities of 20 years on the long end and
five years or less on the short end of the yield curve) to a more targeted term
structure. The fund purchased 10- to 15-year bonds when we determined they were
undervalued. They contributed to the fund's positive performance when
intermediate-term bonds outperformed other securities on a duration-weighted
basis. In late February, the fund reduced its intermediate-term bond position
and reestablished a "barbell" of shorter and longer term bonds, which has
neither hurt nor helped performance as of April 30. In addition, the fund
benefited from a position in financial futures, which were bought when they were
more attractively priced than similar-duration longer term bonds.
We are pleased to report that the fund did well compared with its peers.
For the 12 months ended April 30, 1996, the fund ranked 46th out of 227 funds
(the top quartile) in Lipper Analytical Services, Inc.'s general municipal debt
category. (Please note that Lipper rankings do not take sales charges into
account and that past performance is not a guarantee of future results.)
Portfolio Composition and Investment Strategies: Emphasis on Revenue Bonds
Over GOs
Portfolio Composition as of April 30, 1996*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Insured Revenue Bonds 46.0%
Revenue Bonds 28.0%
Insured General Obligations 12.0%
General Obligations 7.0%
Variable Rate Demand Notes 7.0%
</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.
. Revenue Bonds. As of the end of the period, insured and uninsured revenue
bonds accounted for 74% of the portfolio, up from 63.5% six months ago and
overweighted compared with the Index allocation of 54.0%. (Revenue bonds pay
interest and principal out of a specific revenue stream, such as sales taxes,
hospital charges, tolls, electric rates and airport fees. Revenue bonds
generally offer a wider range of credit qualities and higher incremental yield
than general obligation bonds.)
. General Obligation (GO) Bonds. The fund reduced its position in GOs, which
are backed by the general taxing power of a municipality, in order to stress
revenue bonds trading at wider yield spreads. At the end of the period, the fund
significantly underweighted the GO sector relative to the Index, 19% versus 46%.
- --------------------------------------------------------------------------------
15
<PAGE>
Letters to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund (continued)
- --------------------------------------------------------------------------------
. Variable Rate Demand Notes (VRDNs). The fund held a 7.0% position (nearly
unchanged from six months ago) in VRDNs, which are high-quality cash
equivalents. VRDNs were used along with futures to manage the portfolio's
duration to match that of the Index at 8.9 years.
. Credit Quality. During the period, we emphasized higher credit-quality debt
over lower quality. As of April 30, the fund's positions in triple-A-rated and
double-A-rated bonds were 72.0% and 24.0%, respectively, both increased since
six months ago, while the fund's allocation in single-A-rated securities was
reduced to 4.0% from 12.4%. We employed a credit quality "barbell" during the
period, investing in higher quality securities at the long end of the yield
curve and relatively lower quality securities at the short end. The fund's
average credit quality has remained double-A. Many of the fund's security-
specific strategies involved bonds with high credit ratings that were treated
poorly by the market. We perceived a better risk/return relationship in these
securities than alternative investments.
Market Outlook
Looking forward, we do not anticipate any substantial changes in the
municipal bond market's technical balance in the near term: both supply and
demand are relatively weak. On the demand side, we expect that retail investors
(who account for approximately 65% of owners of municipals either through mutual
funds or direct investment) will continue to focus on the equity market in lieu
of municipal bonds. Municipal bond supply is likely to remain weak as well, due
to a decline in existing supply and a lack of refunding issuance in the higher
interest rate environment. Until investor demand improves, we anticipate that
municipal bond performance will be similar to that of the Treasury market. We
will continue to actively research attractive investment opportunities.
Distribution Policy
The fund paid out distributions of $0.32 per share during the period under
review. Dividends are declared daily and paid on a monthly basis. The fund
intends to distribute substantially all of its investment company tax-exempt and
taxable income, as required by tax law.
We appreciate your investment in the Goldman Sachs Municipal Income Fund
and we look forward to continuing to serve your investment needs in the future.
Sincerely,
/s/ Benjamin S. Thompson
Benjamin S. Thompson
/s/ Elisabeth Schupf Lonsdale
Elisabeth Schupf Lonsdale
Portfolio Managers
Goldman Sachs Municipal Income Fund
June 7, 1996
- --------------------------------------------------------------------------------
16
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GS Short Duration Tax-Free Fund
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
==============================================================
Debt Obligations--105.5%
<S> <C> <C> <C>
Florida--22.5%
Florida State COPS Equipment Financing Program /(a)/(A+/A)
$1,115,000 5.90% 11/15/96 $1,127,276
Lakeland, FL Electric & Water RB (FGIC)/(b)/(AAA/Aaa)
5,415,000 5.25 10/01/98 5,522,704
Lakeland, FL Electric & Water Revenue Refunding, Jr. Sub Lien
/(b)/(FGIC) (AAA/Aaa)
2,640,000 5.25 10/01/97 2,682,187
- --------------------------------------------------------------
$9,332,167
- --------------------------------------------------------------
Illinois--3.1%
Chicago, IL Series B GO (FGIC) (AAA/Aaa)
$1,250,000 5.50% 01/01/01 $1,284,513
- --------------------------------------------------------------
Kentucky--5.5%
Kentucky State Property & Buildings Commission RB /(a)/(A+/A)
$2,150,000 6.00% 11/01/00 $2,262,015
- --------------------------------------------------------------
Louisiana--7.8%
Lafayette Parish, LA School Board Sales Tax RB (FGIC) (AAA/Aaa)
$2,130,000 6.00% 04/01/99 $2,216,755
Louisiana Offshore Deepwater Port Authority Term B RB (A/Baa1)
1,000,000 5.85 09/01/00 1,031,310
- --------------------------------------------------------------
$3,248,065
- --------------------------------------------------------------
Maryland--3.8%
University of Maryland Tuition Series A RB (AA+/Aa)
$1,500,000 6.90% 10/01/97 $1,556,940
- --------------------------------------------------------------
Mississippi--3.2%
Jackson, MS Public School RB (FGIC) (AAA/Aaa)
$1,280,000 5.25% 04/01/00 $1,311,258
- --------------------------------------------------------------
New Jersey--8.1%
New Jersey State Higher Education Facilities RB (MBIA) (AAA/Aaa)
$2,000,000 5.00% 09/01/98 $2,037,220
New Jersey State Turnpike Authority RB (MBIA) (AAA/Aaa)
1,250,000 6.30 01/01/01 1,324,250
- --------------------------------------------------------------
$3,361,470
- --------------------------------------------------------------
New York--5.7%
Syracuse, NY IDA RB (AA/NR)/(a)/
$2,365,000 4.60% 10/15/98 $2,367,105
- --------------------------------------------------------------
Oklahoma--11.8%
Enid, OK Hospital Authority RB /(a)/(Societe Generale LOC) (NR/Aa1)
$2,800,000 7.20%(c) 10/01/15 $2,852,192
Southern Oklahoma Memorial Hospital RB (A/A)
2,000,000 5.60 02/01/00 2,028,760
- --------------------------------------------------------------
$4,880,952
- --------------------------------------------------------------
Oregon--9.1%
Klamath Falls, OR Salt Caves Hydroelectric RB (SP1+/NR)
$2,000,000 4.50% 05/01/23 $1,999,980
Metro, OR Open Spaces Series C GO /(a)/(AA+/Aa)
1,665,000 6.00 09/01/99 1,750,181
- --------------------------------------------------------------
$3,750,161
- --------------------------------------------------------------
Pennsylvania--4.5%
Philadelphia, PA COPS RB (Asset Guaranty) (AA/NR)
$1,800,000 5.95% 04/01/00 $1,854,810
- --------------------------------------------------------------
Texas--5.3%
Port Neches, TX Independent School District RB(AAA/Aaa)
$1,000,000 7.00% 02/15/01 $1,096,250
1,000,000 7.00 02/15/02 1,108,950
- --------------------------------------------------------------
$2,205,200
- --------------------------------------------------------------
Virginia--4.3%
Petersburg, VA Hospital Authority RB (NR/A)
$1,760,000 5.50% 07/01/99 $1,782,739
- --------------------------------------------------------------
Washington--5.5%
Washington State Health Care Facilities Prerefunded RB /(a)(e)/(MBIA)
(AAA/Aaa)
$2,000,000 7.75% 05/01/15 $2,264,760
- --------------------------------------------------------------
Wyoming--5.3%
Uinta County, WY School District #1 Series A GO (Asset Guaranty)
(AA/NR)
$2,035,000 6.88% 06/01/00 $2,193,099
- --------------------------------------------------------------
Total Debt Obligations
(Cost $43,575,432) $43,655,254
==============================================================
</TABLE>
- --------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
17
<PAGE>
Statement of Investments
- ---------------------------------------------------------------
GS Short Duration Tax-Free Fund (continued)
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
===============================================================
<S> <C> <C> <C>
Short-Term Obligations--22.7%
Calcasieu Parish, LA IDB for Olin Corp. Series B (Wachovia Bank
LOC)(A-1+/NR)/(d)/
$ 900,000 4.05% 05/01/96 $ 900,000
California Pollution Control for Southern California Edison Series D
RB(A-1+/P-1)/(d)/
200,000 3.65 05/01/96 200,000
Illinois Health Facility Authority VRDN for Elmhurst Memorial
Hospital(NR/NR)/(d)/
1,000,000 3.50 05/01/96 1,000,000
Jasper County, IN PCRB Series A (UBS LOC) (A-1+/VMIG-1)/(d)/
1,000,000 4.10 05/01/96 1,000,000
New Hampshire State MF Hsg. (GE Capital LOC)(NR/VMIG-1)/(d)/
1,700,000 4.40 05/01/96 1,700,000
New York, NY Series C VRDN (Norinchukin Bank LOC)
(A-1+/VMIG-1)/(d)/
1,200,000 4.25 05/01/96 1,200,000
Ohio State Air Quality Development Authority RB Series A
(UBS LOC) (A-1+/NR)/(d)/
200,000 4.10 05/01/96 200,000
Ohio State Air Quality Development Authority RB Series B
(JP Morgan LOC) (A-1+/NR)/(d)/
1,700,000 4.10 05/01/96 1,700,000
Texas State Multi-Modal Water Development Board RB Series A
(Canadian Imperial Bank LOC)(A-1+/VMIG-1)/(d)/
600,000 4.20 05/01/96 600,000
Washington State Health Care Facilities Authority RB Series B (Morgan
Guaranty Trust LOC)(NR/VMIG-1)/(d)/
895,000 4.20 05/01/96 895,000
- ---------------------------------------------------------------
Total Short-Term Obligations
(Cost $9,395,000) $ 9,395,000
- ---------------------------------------------------------------
Total Investments
(Cost $52,970,432)(f) $53,050,254
===============================================================
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 229,174
Gross unrealized loss for investments in which
cost exceeds value (149,352)
- ---------------------------------------------------------------
Net unrealized gain $ 79,822
===============================================================
</TABLE>
(a)Portions of these securities are being segregated for
when-issued and extended settlement securities.
(b)When-issued security.
(c)Variable rate security. Coupon rate disclosed is that which
is in effect at April 30, 1996.
(d)Securities with "Put" features with resetting interest rates.
Maturity dates disclosed are the next reset interest dates.
(e)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.
(f)The amount stated also represents aggregate cost for federal
income tax purposes.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- -
===============================================================
Investment Abbreviations:
COPS --Certificates of Participation
FGIC --Insured by Financial Guaranty Insurance Co.
GO --General Obligation
IDA --Industrial Development Authority
IDB --Industrial Development Bond
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors Assurance
NR --Not Rated
PCRB --Pollution Control Revenue Bond
RB --Revenue Bond
VRDN --Variable Rate Demand Note
===============================================================
- ---------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements
18
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GS Core Fixed Income Fund
- --------------------------------------------------------------------------------
Investment Objective
The GS Core Fixed Income Fund seeks to achieve a total return consisting of
capital appreciation and income that exceeds the total return of its benchmark,
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 non-dollar-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. The fund's
approximate interest rate sensitivity is expected to be comparable to that of a
five-year bond.
Performance Review
During the period under review, the fund's Institutional shares achieved a
positive total return but slightly underperformed the Index. The fund's
positions in corporate bonds and emerging market debt significantly contributed
to its performance. The fixed rate mortgage pass-throughs and asset-backed
securities sectors also benefited the fund, while the U.S. Treasury position
neither helped nor hurt the fund's total return relative to the Index. The
fund's Administration and Service shares, which opened on February 28, 1996 and
March 13, 1996, respectively, recorded negative returns due to the adverse bond
market environment during the brief period since their inceptions.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Summary
- --------------------------------------------------------------------------------
Institutional Administration* Service*
(10/31/95- (2/28/96- (3/13/96-
4/30/96) 4/30/96) 4/30/96)
-------- -------- --------
<S> <C> <C> <C>
Total Return (based on net 0.46% -1.64% -0.44%
asset value)
- --------------------------------------------------------------------------------
Return From Monthly 3.53% 0.99% 0.79%
Distributions
- --------------------------------------------------------------------------------
Return From Price -3.07% -2.63% -1.23%
Depreciation
- --------------------------------------------------------------------------------
Total Return of Lehman 0.52% -1.48% -0.33%
Brothers Aggregate
Bond Index
- --------------------------------------------------------------------------------
NAV (as of 4/30/96) $9.65 $9.65 $9.65
- --------------------------------------------------------------------------------
NAV Change -$0.35 -$0.26 -0.12
- --------------------------------------------------------------------------------
* New share class opened during the period.
</TABLE>
Portfolio Composition and Investment Strategies
Portfolio Composition as of April 30, 1996*
[PIE CHART APPEARS HERE]
Fixed Rate Mortgage Pass-Throughs 29.4%
Corporate Bonds 28.7%
U.S. Treasuries 16.8%
ABS 11.7%
Emerging Market Debt 4.7%
Agency Debentures 3.4%
CMOs 2.8%
Repos/Cash Equivalents 2.5%
* The percentages shown are of total portfolio investments that have settled and
include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of Investments,
which reflect portfolio holdings as a percentage of net assets.
- --------------------------------------------------------------------------------
19
<PAGE>
Letters to Shareholders
- --------------------------------------------------------------------------------
GS Core Fixed Income Fund (continued)
- --------------------------------------------------------------------------------
. Fixed Rate Mortgage Pass-Throughs. The fund's weighting in fixed rate
mortgage pass-throughs was approximately the same as that of the Index, 29.4%
versus 29.1%, and the position slightly helped the fund's total return. The
sector came under pressure due to high prepayments in November and December
1995, as homeowners refinanced their mortgages at attractive rates. However, the
sector's performance improved as interest rates began to rise, which caused
prepayments to decline from January through April. When the period began, we
favored seasoned premium mortgages, which have lower prepayment risk than
recently issued mortgages. At the end of the period, we began to seek investment
opportunities in current coupon and discount mortgages as their performance has
lagged that of the premium sector.
We 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 -- usually one month forward.) At all
times, we "cover" the mortgage dollar rolls by keeping cash or high-grade liquid
debt securities equal to the dollar amount of the forward commitment in a
segregated account with the fund's custodian.
. Corporate Bonds. As of April 30, the fund's position in corporates was
28.7%, overweighted compared with the Index's 17.4% allocation. However, because
the fund held shorter duration bonds than the Index, its effective corporate
bond exposure was not significantly higher than the Index's on a duration-
weighted basis. The corporate sector was weak during November and December due
to profit concerns stemming from the economic slowdown, but the sector improved
dramatically when the economy rebounded during the remainder of the period. For
the period as a whole, the fund's performance significantly benefited from its
position in corporate bonds. Within the sector, we preferred industrial and
financial issues over utilities, which have come under pressure due to increased
competition.
. U.S. Treasuries. We underweighted the fund's U.S. Treasury position
relative to the benchmark (16.8% compared with 45.8%) in favor of other sectors
that offered better relative value.
. Asset-Backed Securities (ABS). The ABS sector came under pressure during
November and December, mainly due to uncertainty surrounding increased credit
card delinquencies. However, the sector improved this year as record issuance
was met with strong investor demand. We increased the fund's ABS position during
the period to 11.7%, up from 9.9% six months ago, because of its incremental
yield over similar-duration Treasuries. Within the ABS sector, the fund
primarily held credit card receivables (8.9%), with smaller positions in
automobile loan receivables (2.0%) and other receivables (0.8%).
. Emerging Market Debt. We increased the fund's allocation in emerging market
debt to 4.7%, up from 2.6% six months ago, maintaining a conservative posture by
stressing higher credit-quality, short-duration bonds. The sector did well
during the period and was a major contributor to the fund's positive
performance. During the period, we added to the fund's allocation in Republic of
Colombia bonds and established a new position in Panamerican Beverage Inc.
(Panamco), a Latin American soft drink bottler with operations in Brazil,
Colombia and Mexico.
. Agency Debentures. The fund's position in agency debentures was 3.4%, up
from 2.1% six months ago. These securities were attractive because of their
incremental yield, and they also added to the portfolio's diversification.
. Duration. The fund's duration was 4.8 years as of April 30, matching the
duration of the Index. We used
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
GS Core Fixed Income Fund (continued)
- --------------------------------------------------------------------------------
financial futures as a tool to help manage the fund's duration.
. Credit Quality. As of April 30, the portfolio's credit quality allocation
was 49.0% in government and agency securities, 12.8% in triple-A-rated
securities and 2.5% in cash equivalents. During the period, we increased the
portfolio's positions in single-A- and triple-B-rated securities to 15.9% and
19.8%, respectively, to add potential incremental yield.
. Prudent Use of Derivatives. During the period under review, asset-backed
securities, which are considered to be a lower risk derivative, accounted for
11.7% of the portfolio. We also held small positions in collateralized mortgage
obligation (CMO) floaters and inverse floaters (1.8% and 1.0%, respectively).
When floaters are held along with inverse floaters, they can produce a position
with a similar risk profile as a fixed rate pass-through but provide a higher
yield.
Market Outlook
We have a generally favorable view of the mortgage pass-through market,
which should benefit from a dramatic decline in refinancings in the coming
months. Though yield spreads on pass-throughs are currently attractive relative
to most other high-credit-quality sectors, our enthusiasm for the sector is
tempered by the possibility that they may be vulnerable to widening in the event
of a bond rally. We are cautiously optimistic on the corporate sector, which is
experiencing heavy demand and slowing supply. Moderate economic and profit
growth bode well for corporates for the remainder of 1996. We also have a
cautiously optimistic view of the ABS sector, where innovations and a wide
variety of issue structures continue to generate strong investor interest.
Specifically, security lenders and foreign banks are becoming increasingly
important buyers in that market. In emerging market debt, our geographical focus
continues to be Latin America, where we believe economic recovery from 1995
levels is likely to result in a favorable bond market.
Distribution Policy
During the six-month period under review, the fund's Institutional shares
distributed $0.40 per share. From their inceptions through April 30, the fund's
Administration and Service shares paid out $0.10 and $0.08 per share,
respectively. (The Administration shares' inception date was on February 28,
1996, and the Service shares' inception date was on March 13, 1996.) Dividends
are declared daily and paid on a monthly basis. As required by tax law, the fund
distributes substantially all of its investment company taxable income.
In closing, we value your investment and will continue to seek attractive
fixed income investment opportunities in the months ahead.
Sincerely,
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ Richard Buckholz
Richard H. Buckholz
/s/ C. Richard Lucy
C. Richard Lucy
/s/ Stephen R. Warren
Stephen R. Warren
Portfolio Managers
GS Core Fixed Income Fund
June 7, 1996
- --------------------------------------------------------------------------------
21
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GS Core Fixed Income Fund
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds--29.8%
Finance Bonds--17.0%
Bancponce Financial Corp.
$ 500,000 5.17% 07/15/96 $ 499,215
BankAmerica Corp.
200,000 4.99 05/17/99 199,940
Capital One Bank
600,000 8.63 01/15/97 610,110
500,000 8.13 02/27/98 512,630
Chrysler Financial Corp
550,000 5.71 01/12/98 545,347
Comdisco Inc.
600,000 9.75 01/15/97 615,084
200,000 7.33 03/06/97 202,012
Conseco Inc.
340,000 10.50 12/15/04 380,887
Continental Bank N.A.
525,000 11.25 07/01/01 572,297
Countrywide Funding Corp.
125,000 6.08 07/14/99 122,385
250,000 8.43 11/16/99 262,043
250,000 7.75 08/10/01 256,508
476,809 6.04 03/25/09 333,680
1,266,438(a) 6.08 03/25/09 1,145,632
302,538 9.00 03/25/09 298,463
First USA
400,000 6.88 09/12/96 401,464
Ford Capital Corp.
200,000 9.38 01/01/98 209,396
600,000 9.50 07/01/01 663,906
General Motors Acceptance Corp.
275,000 7.63 03/09/98 281,152
200,000 7.13 05/10/00 202,598
500,000 9.63 12/15/01 559,330
Golden West Financial Corp.
600,000 8.62 08/30/98 625,980
Security Pacific Corp. (a)
995,000 11.50 11/15/00 1,166,349
Signet Banking Corp.
240,000 9.63 06/01/99 256,222
- --------------------------------------------------------------------------------
$ 10,922,630
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
Corporate Bonds (continued)
<S> <C> <C> <C>
Industrial Bonds--12.0%
360 Communications Co.
$ 825,000 7.12% 03/01/03 $ 789,847
Auburn Hills Trust
260,000 12.00 05/01/20 374,249
Ford Holdings, Inc.
300,000 9.25 03/01/00 323,238
News America Holdings, Inc.
350,000 9.13 10/15/99 374,315
800,000 7.50 03/01/00 812,944
RJR Nabisco Inc.
175,000 8.00 07/15/01 171,721
450,000 8.62 12/01/02 451,845
Tele-Communications, Inc.
400,000 6.10 05/15/96 400,056
135,000 9.88 04/01/98 141,647
Tenneco Inc.
1,175,000 10.00 08/01/98 1,256,639
Time Warner, Inc.
1,650,000 7.95 02/01/00 1,691,168
400,000 7.98 08/15/04 399,764
U.S. Air Inc.
575,000 6.76 04/15/08 530,282
- --------------------------------------------------------------------------------
$ 7,717,715
- --------------------------------------------------------------------------------
Utility Bonds--0.5%
Central Maine Power Co.
$ 330,000 7.45% 08/30/99 $ 322,153
- --------------------------------------------------------------------------------
$ 322,153
- --------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $19,143,339) $ 18,962,498
- --------------------------------------------------------------------------------
Asset-Backed Securities--11.6%
Airplanes Pass Through Trust Series 1, Class C(a)
$ 155,000 8.15% 03/15/19 $ 150,316
Chevy Chase Auto Receivables Trust Series 1995-2, Class A
292,478 5.80 06/15/02 290,229
Discover Card Master Trust, Series 1996-4, Class A
1,910,000 5.81 10/16/13 1,915,969
General Motors Acceptance Corp. Series 1995, Class A(a)
137,832 7.15 03/15/00 138,936
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GS Core Fixed Income Fund
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset-Backed Securities(continued)
Navistar Financial Corp. Owner Trust, Series 1995-A, Class A2
$ 393,678 6.55 11/20/01 $ 394,922
Olympic Automobile Receivables Trust, Series 1994-B, Class A2
402,166 6.85 06/15/01 405,042
Premier Auto Trust Series 1995-1, Class A4
360,000 7.85 09/04/98 364,932
Premier Auto Trust Series 1995-1, Class A5
80,000 7.90 05/04/99 81,590
Sears Credit Account Master Trust, Series 1995-2, Class A
550,000 8.10 06/15/04 575,163
Sears Credit Card Master Trust, Series 1995-3, Class A
300,000 7.00 10/15/04 302,748
Standard Credit Card Trust, Series 1990-3, Class A
1,120,000 9.50 07/10/98 1,156,747
Standard Credit Card Trust, Series 1990-6, Class B
900,000 9.63 09/10/98 937,917
Standard Credit Card Trust, Series 1994-4, Class A
680,000 8.25 11/07/03 720,487
- --------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $7,514,404) $ 7,434,998
- --------------------------------------------------------------------------------
Emerging Market Debt--4.6%
Corp. Andina de Fomento
$ 760,000 7.25% 04/30/98 $ 759,438
Empresa Col Petroleos
880,000 7.25 07/08/98 880,000
Financiera Energy Nacional
380,000 6.63 12/13/96 380,000
80,000 9.00 11/08/99 83,200
Panamerican Beverage Co.
220,000 8.13 04/01/03 215,021
Republic of Columbia
270,000 9.25 02/03/00 279,444
YPF Sociedad Anonima
382,591 7.50 10/26/02 382,246
- --------------------------------------------------------------------------------
Total Emerging Market Debt
(Cost $2,984,427) $ 2,979,349
- --------------------------------------------------------------------------------
Government Bonds--1.0%
Province of Quebec
$ 520,000 13.25% 09/15/14 $ 637,135
- --------------------------------------------------------------------------------
Total Government Bonds
(Cost $654,561) $ 637,135
================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Backed Obligations--33.5%
Federal Home Loan Mortgage Corp. (FHLMC) (e)
$ 3,500,000 7.50% TBA-30 year $ 3,461,721
1,000,000 9.00 TBA-30 year 1,043,438
Federal National Mortgage Association (FNMA) (e)
2,000,000 7.00 TBA-15 year 1,926,250
1,000,000 6.50 TBA-30 year 937,188
3,000,000 6.00 TBA-15 year 2,841,564
1,000,000 7.50 TBA-15 year 1,006,250
2,010,000 6.50 TBA-15 year 1,885,000
FNMA Remic Trust Series 189, Class 1 Principal-Only Stripped Securities(b)
459,463 5.51 11/25/19 356,976
FNMA Remic Trust Series 189, Class 2 Interest-Only Stripped Securities(c)
583,428 9.50 11/25/19 151,061
FNMA Remic Trust, Series 1993-58, Series G
500,000 5.50 12/25/20 462,630
GE Capital Mortgage Services, Inc. Series 1994-17, Class A10(a)
2,000,000 7.00 05/25/24 1,769,900
Government National Mortgage Association
1,000,000 7.00 TBA-30 year(e) 963,125
373,111 8.00 02/15/17 381,040
532,065 7.00 08/15/23 512,778
3,000,000 7.50 TBA-30 year(e) 2,963,436
813,433 9.00 TBA-30 year(e) 868,082
- --------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $21,624,496) $ 21,530,439
- --------------------------------------------------------------------------------
Sovereign Credit--0.4%
State of Israel
$ 270,000 6.38% 12/15/05 $ 251,465
- --------------------------------------------------------------------------------
Total Sovereign Credit
(Cost $267,782) $ 251,465
- --------------------------------------------------------------------------------
U.S. Government Agency Obligations--3.4%
FHLMC
$ 300,000 8.20% 01/16/98 $ 304,203
250,000 6.83% 09/18/02 244,550
FNMA
370,000 7.70% 08/10/04 373,989
FNMA Principal-Only Stripped Securities(b)
1,140,000 6.34 03/09/02 1,063,460
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GS Core Fixed Income Fund (continued)
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Agency Obligations(continued)
Resolution Funding Corp. Principal-Only Stripped Securities(b)
$ 1,140,000 7.45% 01/15/21 $ 187,541
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $2,218,496) $ 2,173,743
- --------------------------------------------------------------------------------
U.S. Treasury Obligations--16.4%
United States Treasury Bonds
$ 610,000(a) 8.75% 05/15/17 $ 720,276
700,000(a) 8.75 08/15/20 832,671
120,000 7.88 02/15/21 130,819
60,000(a) 8.00 11/15/21 66,365
United States Treasury Interest-Only Stripped Securities
2,250,000(c) 7.12 08/15/09 890,145
350,000(c) 7.18 11/15/10 125,685
United States Treasury Notes
3,000,000(a) 7.25 11/15/96 3,028,110
1,530,000(a) 7.50 10/31/99 1,585,707
United States Treasury Principal-Only Stripped Securities(b)
40,000 5.97 11/15/97 36,539
1,240,000 6.34 08/15/99 1,009,732
2,340,000(a) 6.83 11/15/04 1,320,415
1,010,000 7.33 05/15/20 179,588
3,960,000 7.33 08/15/20 691,456
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $10,734,427) $ 10,617,508
- --------------------------------------------------------------------------------
Repurchase Agreements--21.6%
Joint Repurchase Agreement Account(a)
$ 13,900,000 5.36% 05/01/96 $ 13,900,000
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $13,900,000) $ 13,900,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $79,041,932(d)) $ 78,487,135
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Futures contracts open at April 30, 1996:
Number of
Contracts Settlement Unrealized
Type Long(f) Month Loss
- ----------------- ---------------- ---------------- -------------
<S> <C> <C> <C>
Euro Dollars 5 September 1996 $(750)
Euro Dollars 5 December 1996 (1,125)
Euro Dollars 5 March 1997 (1,125)
Euro Dollars 5 June 1997 (1,125)
Euro Dollars 3 September 1997 (4,425)
Euro Dollars 3 December 1997 (4,575)
Euro Dollars 5 June 1998 (3,750)
2 Year U.S. Treasury
Notes 3 June 1996 (10,453)
5-Year U.S. Treasury
Notes 1 June 1996 (3,328)
10-Year U.S. Treasury
Notes 3 June 1996 0
U.S. Treasury Bond 29 June 1996 (129,531)
-------------
$(160,187)
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which $ 223,433
value exceeds cost
Gross unrealized loss for investments in which (814,309)
cost exceeds value
- --------------------------------------------------------------------------------
Net unrealized loss $(590,876)
- --------------------------------------------------------------------------------
</TABLE>
(a)Portions of these securities are being segregated for open TBA purchases,
mortgage dollar rolls and futures.
(b)The interest rate disclosed for these securities represents effective yields
to maturity.
(c)Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated rate due to the
amortization of related premiums.
(d)The aggregate cost for federal income tax purposes is $79,078,011.
(e)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.
(f)Each Euro Dollar contract represents $1,000,000 in notional par value.
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. The total notional
amount and market value at risk are $34,900,000 and $11,476,519,
respectively.
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.
24
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
GS Adjustable GS Short GS Short GS Core
Rate Duration Duration Fixed
Government Government Tax-Free Income
Fund Fund Fund Fund
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities, at value (cost $643,882,691,
$97,018,598, $52,970,432 and $79,041,932, respectively) $638,651,645 $ 97,096,044 $ 53,050,254 $ 78,487,135
Receivables:
Investment securities sold 1,335,600 241,280 4,972,485 15,292,230
Interest 4,203,164 961,013 450,359 806,447
Fund shares sold 2,218,677 70,613 6,000 6,950
Cash 763,061 105,673 142,676 113,963
Deferred organization expenses, net 6,199 -- 32,177 64,976
Other assets 222,429 134,988 55,560 94,640
- -----------------------------------------------------------------------------------------------------------------------------
Total assets 647,400,775 98,609,611 58,709,511 94,866,341
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payables:
Dividends 1,620,122 133,678 22,091 13,318
Investment securities purchased 32,210,271 -- 17,250,032 27,692,051
Fund shares repurchased 450,375 1,135,889 11,107 3,000
Variation margin 22,486 14,096 -- 26,559
Investment adviser fees 197,728 33,197 13,789 20,783
Transfer agent fees 62,380 -- 1,379 2,078
Covered securities sold short (cash received, $2,738,315) -- -- -- 2,729,376
Accrued expenses and other liabilities 61,153 26,411 24,884 35,855
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 34,624,515 1,343,271 17,323,282 30,523,020
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid in capital 668,758,176 111,441,982 45,431,444 65,089,304
Accumulated undistributed(distributions in excess of) net
investment income (3,081,245) 276,830 67,128 6,598
Accumulated net realized loss on investment and futures
transactions (47,545,231) (13,827,097) (4,192,165) (46,536)
Net unrealized gain (loss) on investments and futures (5,355,440) (625,375) 79,822 (706,045)
- -----------------------------------------------------------------------------------------------------------------------------
Net assets $612,776,260 $ 97,266,340 $41,386,229 $ 64,343,321
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
Institutional shares $9.78 $9.73 $9.91 $9.65
Administration shares $9.78 $9.74 $9.91 $9.65
Service shares -- $9.73 $9.92 $9.65
Class A shares (a) $9.78 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Shares Outstanding:
Institutional shares 61,015,027 9,991,092 4,134,999 6,636,157
Administration shares 430,960 15 4,704 32,618
Service shares -- 2,855 35,385 704
Class A shares 1,202,171 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total shares of beneficial interest outstanding, $.001 par
value (unlimited number of shares authorized) 62,648,158 9,993,962 4,175,088 6,669,479
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a)Maximum public offering price per share (NAV per share x 1.0152) for Class A
shares of GS Adjustable Rate Government Fund is $9.93.
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Operations
For the Six Months Ended April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
GS Adjustable GS Short GS Short GS Core
Rate Duration Duration Fixed
Government Government Tax-Free Income
Fund Fund Fund Fund
=========================================================
<S> <C> <C> <C> <C>
Investment income:
Interest, net (a) $19,980,392 $3,312,700 $1,082,843 $2,002,081
- -------------------------------------------------------------------------------------------------------------------------
Total income 19,980,392 3,312,700 1,082,843 2,002,081
- -------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment adviser fees 1,269,268 263,125 94,000 117,340
Transfer agent fees 138,752 -- 9,400 11,734
Custodian fees 64,912 32,240 28,613 39,507
Professional fees 49,785 28,553 27,582 27,835
Registration fees 34,974 17,303 15,476 20,709
Printing fees 33,221 13,698 11,896 14,299
Amortization of deferred organization expenses 14,649 -- 11,306 12,938
Trustees' fees 2,472 585 306 416
Class A distribution fees 17,086 -- -- --
Class A authorized dealer service fees 17,086 -- -- --
Administration share fees 5,084 13 58 83
Service share fees -- 8 1,023 2
Other 17,044 18,224 19,400 3,807
- -------------------------------------------------------------------------------------------------------------------------
Total expenses 1,664,333 373,749 219,060 248,670
Less--Expenses reimbursable and fees waived by Goldman Sachs (214,235) (136,915) (112,227) (116,575)
- -------------------------------------------------------------------------------------------------------------------------
Net expenses 1,450,098 236,834 106,833 132,095
- -------------------------------------------------------------------------------------------------------------------------
Net investment income 18,530,294 3,075,866 976,010 1,869,986
- -------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment and futures
transactions:
Net realized gain (loss) from:
Investment transactions 804,462 (175,826) 314,848 (1,222)
Futures transactions (1,770,147) 322,721 (35,506) (58,102)
Net change in unrealized gain (loss) on:
Investments 2,423,776 111,253 (518,673) (1,570,163)
Futures 549,772 (777,087) -- (140,843)
- -------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment and
futures transactions 2,007,863 (518,939) (239,331) (1,770,330)
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $20,538,157 $2,556,927 $736,679 $99,656
=========================================================================================================================
</TABLE>
(a) For the GS Core Fixed Income Fund, foreign taxes withheld were $1,217.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Six Months Ended April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
GS Adjustable GS Short GS Short GS Core
Rate Duration Duration Fixed
Government Government Tax-Free Income
Fund Fund Fund Fund
-------------------------------------------------------------
<S> <C> <C> <C> <C>
From Operations:
Net investment income $18,530,294 $3,075,866 $976,010 $1,869,986
Net realized gain (loss) from investment and futures
transactions (965,685) 146,895 279,342 (59,324)
Net change in unrealized gain (loss) on investments and
futures 2,973,548 (665,834) (518,673) (1,711,006)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 20,538,157 2,556,927 736,679 99,656
- -----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders From:
Net investment income
Institutional shares (18,034,559) (3,507,062) (967,872) (1,901,559)
Administration shares (113,668) (332) (901) (2,005)
Service shares -- (92) (7,507) (26)
Class A shares (382,067) -- -- --
In excess of net investment income
Institutional shares (924,771) -- -- --
Administration shares (6,041) -- -- --
Service shares -- -- -- --
Class A shares (20,531) -- -- --
Net realized gain on investment transactions
Institutional shares -- -- -- (450,016)
Administration shares -- -- -- --
Service shares -- -- -- --
Class A shares -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (19,481,637) (3,507,486) (976,280) (2,353,606)
- -----------------------------------------------------------------------------------------------------------------------------
From Share Transactions:
Net proceeds from sales of shares 219,101,435 19,618,767 11,340,973 9,583,619
Reinvestment of dividends and distributions 8,811,684 2,127,660 737,264 2,309,783
Cost of shares repurchased (292,326,397) (27,289,558) (29,341,716) (798,409)
- -----------------------------------------------------------------------------------------------------------------------------
Net (decrease)increase in net assets resulting from
share transactions (64,413,278) (5,543,131) (17,263,479) 11,094,993
- -----------------------------------------------------------------------------------------------------------------------------
Total (decrease)increase (63,356,758) (6,493,690) (17,503,080) 8,841,043
Net Assets:
Beginning of period 676,133,018 103,760,030 58,889,309 55,502,278
- -----------------------------------------------------------------------------------------------------------------------------
End of period $612,776,260 $97,266,340 $41,386,229 $64,343,321
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated (distributions in excess of)undistributed
net investment income $ (3,081,245) $ 276,830 $ 67,128 $ 6,598
- -----------------------------------------------------------------------------------------------------------------------------
Summary of Share Transactions:
Shares sold 22,386,937 1,989,546 1,132,269 967,844
Reinvestment of dividends and distributions 900,191 216,341 73,942 232,003
Shares repurchased (29,873,159) (2,779,451) (2,953,599) (80,058)
- -----------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in shares outstanding (6,586,031) (573,564) (1,747,388) 1,119,789
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
For the Year Ended October 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
GS Adjustable GS Short GS Short GS Core
Rate Duration Duration Fixed
Government Government Tax-Free Income
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 (decrease)increase in net assets resulting from
share transactions (274,581,092) (91,961,208) (29,523,115) 28,415,660
- -----------------------------------------------------------------------------------------------------------------------------
Total (decrease)increase (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 (distributions in excess of) undistributed
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 (decrease)increase 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.
28
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
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 Fund, GS Short Duration
Government 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 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. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts.
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 ("OID") 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. OID amortization on
mortgage backed REMIC securities is initially recorded based on estimates of
principal paydowns using the most recent OID factors available from the issuer.
Recorded amortization amounts are adjusted when actual OID factors are received.
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
- --------------------------------------------------------------------------------
29
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
price for the future purchase (often referred to as the "drop") or fee income
plus the interest earned on the cash proceeds of the securities sold until the
settlement date of the forward purchase. The Fund will hold and maintain in a
segregated account, until the settlement date, cash or liquid, high grade debt
securities in an amount equal to the forward purchase price. For financial
reporting and tax reporting purposes, the Fund treats mortgage dollar rolls as
two separate transactions; one involving the purchase of a security and a
separate transaction involving a sale.
D. Futures Contracts
---------------------
The Funds may enter into futures transactions in order to hedge against
changes in interest rates, securities prices, currency exchange rates in the
case of GS Core Fixed Income Fund or to seek to increase total return. A Fund
will engage in futures transactions only for bona fide hedging purposes as
defined in regulations of the CFTC or to seek to increase total return to the
extent permitted by such regulations. 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.
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. Short Securities Positions
- ------------------------------
The Funds may enter into covered short sales. Short securities positions are
accounted for at cost and subsequently marked to market to reflect the current
market value of the position. The market value of the short position is recorded
as a liability on the fund's records and any difference between this market
value and cash received is reported as unrealized gain or loss. Gains and losses
are realized when a short position is closed out by delivering securities back
to the broker.
At April 30, 1996, Core Fixed Income Income had the following covered short
positions open:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Short Position
<S> <C> <C>
Issuer Par Value Market Value
- ------------------- ------------ --------------
FNMA TBA 30-Year $2,000,000 $1,875,624
GNMA TBA 30-Year 800,000 853,752
- --------------------------------------------------------------------------------
</TABLE>
F. Deferred Organization Expenses
----------------------------------
Organization-related costs are being amortized on a straight-line basis
over a period of five years.
G. 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.
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
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.
H. Federal Taxes
-----------------
It is each Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute each
year substantially all 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.
At April 30, 1996, 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 Fund $45,767,000 2000-2003
GS Short Duration Government
Fund $13,607,000 2002-2003
GS Short Duration Tax-Free
Fund $4,219,000 2002-2003
</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 and GS Short Duration Government 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,
GS Short Duration Tax-Free and GS Core Fixed Income Funds and .50% of average
daily net assets of GS Short Duration Government Fund. Until further notice,
GSFM has voluntarily agreed not to impose .10% of its investment advisory fee
for the GS Short Duration Government Fund. For the period ended April 30, 1996,
investment advisory fees of $52,625 were waived for the GS Short Duration
Government 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 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
six months ended April 30, 1996, the amount of reimbursed expenses for the GS
Adjustable Rate Government, GS Short Duration Government, GS Short Duration
Tax-Free and GS Core Fixed Income Funds were $197,149, $84,290, $112,227 and
$116,575, respectively. The
- --------------------------------------------------------------------------------
31
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
amounts reimbursable to the GS Adjustable Rate Government, GS Short Duration
Government, GS Short Duration Tax-Free and the GS Core Fixed Income Funds at
April 30, 1996 were approximately $25,000, $6,000, $19,000 and $38,000,
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 Fund Class A shares. At April 30,
1996, Goldman Sachs retained approximately $25,000 of sales load related to
Class A shares. Goldman Sachs also serves as Transfer Agent of the Funds for a
fee.
The Trust, on behalf of the GS Adjustable Rate Government 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 $17,086.
The Trust, on behalf of the GS Adjustable Rate Government 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 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 six months ended April 30, 1996, GS Adjustable Rate Government
Fund, GS Short Duration Government Fund, GS Short Duration Tax-Free Fund and GS
Core Fixed Income Fund incurred commissions expenses of approximately $52,000,
$12,500, $1,000 and $3,000, respectively, in connection with futures contracts
entered into with Goldman Sachs. At April 30, 1996 GS Adjustable Rate
Government, GS Short Duration Government and GS Core Fixed Income owe
approximately $22,000, $14,000 and $27,000 to Goldman Sachs related to variation
margin on futures contracts.
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 six months ended
April 30, 1996, 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 six months ended April 30, 1996, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
GS GS GS
Adjustable Short Short GS
Rate Duration Duration Core Fixed
Government Government Tax-Free Income
Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases of U.S.
Government and
agency obligations $116,965,453 $73,570,512 -- $121,667,819
- ---------------------------------------------------------------------------------------
Purchases (excluding
U.S. Government and
agency obligations) -- -- $54,774,178 23,591,490
- ---------------------------------------------------------------------------------------
Sales or maturities of
U.S. Government and
agency obligations 169,472,407 72,619,464 -- 127,910,004
- ---------------------------------------------------------------------------------------
Sales or maturities
(excluding U.S.
Government and
agency obligations) -- -- 72,523,875 5,761,970
- ---------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. Summary of Share Transactions
Share activity for the six months ended April 30, 1996 is as follows:
<TABLE>
<CAPTION>
Fund Dollars Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
GS Adjustable Rate Government Fund
Institutional Shares:
Shares sold $ 212,617,141 21,725,067
Reinvestment of dividends and
distributions 8,381,064 856,215
Shares repurchased (282,576,765) (28,878,418)
-------------------------------------
(61,578,560) (6,297,136)
-------------------------------------
Administration Shares:
Shares sold 1,193,114 121,942
Reinvestment of dividends and
distributions 47,149 4,815
Shares repurchased (602,271) (61,522)
-------------------------------------
637,992 65,235
-------------------------------------
Class A Shares:
Shares sold 5,291,180 539,928
Reinvestment of dividends and
distributions 383,471 39,161
Shares repurchased (9,147,361) (933,219)
-------------------------------------
(3,472,710) (354,130)
-------------------------------------
Total $ (64,413,278) (6,586,031)
=====================================
GS Short Duration Government Fund
Institutional Shares:
Shares sold $ 19,515,025 1,978,943
Reinvestment of dividends and
distributions 2,127,473 216,322
Shares repurchased (27,213,895) (2,771,699)
-------------------------------------
(5,571,397) (576,434)
=====================================
Administration Shares:
Shares sold 76,058 7,758
Reinvestment of dividends and
distributions 95 9
Shares repurchased (75,663) (7,752)
-------------------------------------
490 15
-------------------------------------
Service Shares:
Shares sold 27,684 2,845
Reinvestment of dividends and
distributions 92 10
Shares repurchased -- --
-------------------------------------
27,776 2,855
-------------------------------------
Total $ (5,543,131) (573,564)
=====================================
</TABLE>
<TABLE>
<CAPTION>
Fund: Dollars Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
GS Short Duration Tax-Free Fund
Institutional Shares:
Shares sold $10,811,974 1,079,196
Reinvestment of dividends and
distributions 729,582 73,172
Shares repurchased (28,701,009) (2,889,263)
-------------------------------------
(17,159,453) (1,736,895)
=====================================
Administration Shares:
Shares sold -- --
Reinvestment of dividends and
distributions 901 90
Shares repurchased -- --
-------------------------------------
901 90
-------------------------------------
Service Shares:
Shares sold 528,999 53,073
Reinvestment of dividends and
distributions 6,781 680
Shares repurchased (640,707) (64,336)
-------------------------------------
(104,927) (10,583)
-------------------------------------
Total $ (17,263,479) (1,747,388)
=====================================
GS Core Fixed Income Fund
Institutional Shares:
Shares sold $9,259,673 934,708
Reinvestment of dividends and
distributions 2,307,982 231,817
Shares repurchased (798,409) (80,058)
-------------------------------------
10,769,246 1,086,467
-------------------------------------
Administration Shares:
Shares sold 317,120 32,435
Reinvestment of dividends and
distributions 1,775 183
Shares repurchased -- --
-------------------------------------
318,895 32,618
-------------------------------------
Service Shares:
Shares sold 6,826 701
Reinvestment of dividends and
distributions 26 3
Shares repurchased -- --
-------------------------------------
6,852 704
-------------------------------------
Total $ 11,094,993 1,119,789
=====================================
=========================================================================
- -------------------------------------------------------------------------
</TABLE>
33
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Share activity for the year ended October 31, 1995 is as follows:
Fund Dollars Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
GS Adjustable Rate Government 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
------------------------------------
Total $ (274,581,092) (28,292,158)
====================================
GS Short Duration Government 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
distribution 218 23
Shares repurchased (728,374) (75,889)
------------------------------------
(726,552) (75,701)
------------------------------------
Total $ (91,961,208) (9,547,455)
====================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fund: Dollars Shares
- --------------------------------------------------------------------------------
<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
------------------------------------
Total $ (29,523,115) (3,025,970)
- --------------------------------------------------------------------------------
</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 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 April 30, 1996, the GS Adjustable
34
<PAGE>
- --------------------------------------------------------------------------------
Rate Government, GS Short Duration Government and GS Core Fixed Income Funds had
an 5.1%, 0.0% and 1.9%, respectively, undivided interest in the repurchase
agreements in the following joint account which equaled $38,200,000, $300,000
and $13,900,000, respectively, in principal amount.
As of April 30, 1996, the repurchase agreement in the joint account along
with the corresponding underlying securities (including the type of security,
market value, interest rate and maturity date) were as follows:
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Lehman Brothers, dated 04/30/96, repurchase price $450,967,009 (Treasury Notes:
$413,388,579, 6.38%, 03/31/01; U.S. Treasury Interest Only Stripped
Securities: $14,254,567, 05/15/02-02/15/03; U.S. Treasury Principal Only
Stripped Securities: $32,250,411, 6.25%-8.00%, 05/15/01-02/15/03)
$450,900,000 5.35% 05/01/96 $450,900,000
Nomura Securities International, Inc. dated 04/30/96, repurchase price
$300,044,667 (FNMA: $ 171,668,955, 6.50%-9.00%, 02/01/26-04/01/26; FHLMC
$149,950,399, 7.00%-9.50%, 06/01/25-04/01/26)
$300,000,000 5.36% 05/01/96 $300,000,000
- --------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $750,900,000
- --------------------------------------------------------------------------------
</TABLE>
9. Administration and Service Plans
The Funds have 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 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 Fund and (ii)
the assumption by GS Adjustable Rate Government 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 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 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
(For Financial GS Adjustable GS Adjustable
Institutions) Rate Government Rate Government
(Pre- Fund (Pre- Fund (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>
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 Fund. GS
Adjustable Rate Mortgage Fund's assets were acquired by GS Adjustable Rate
Government Fund in exchange solely for (i) the issuance of Class A shares of
beneficial interest of GS Adjustable Rate Government Fund and (ii) the
assumption by GS Adjustable Rate Government Fund of the liabilities
- --------------------------------------------------------------------------------
35
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
of GS Adjustable Rate Mortgage Fund. Following this transfer, GS Adjustable Rate
Mortgage Fund was liquidated and the GS Adjustable Rate Government 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 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
Rate Mortgage GS Adjustable GS Adjustable
Fund Rate Government Rate Government
(Pre- Fund (Pre- Fund (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 Fund due to these reorganizations was
approximately $3,154,000.
As of April 30, 1996, the Goldman, Sachs & Co. Employees Profit Sharing and
Retirement Income Plan was the beneficial owner of approximately 31% of the
outstanding shares of the GS Short Duration Government Fund.
- --------------------------------------------------------------------------------
36
<PAGE>
<TABLE>
<CAPTION>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
Income (loss) from investment operations Distributions to Shareholders
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net realized Net realized In excess of
and unrealized and unrealized Total From net realized
gain (loss) gain (loss) income realized gain In gain on Total
Net asset on investment, on foreign (loss) on investment, excess investment, From distri-
value at Net option and currency from From net option of net option and paid butions
beginning investment futures related investment investment and futures investment futures in share-
of period income transactions transactions operations income transactions income transactions capital holders
- ------------------------------------------------------------------------------------------------------------------------------------
GS ADJUSTABLE RATE GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended April 30, (Unaudited)
- ----------------------------------------------
1996-Institutional
Shares.......... $9.77 $0.2846/(c)/ $0.0244/(c)/ $-- $0.3090/(c)/ $(0.2846) $-- $(0.0144) $-- $-- $(0.2990)
1996-Administration
Shares.......... 9.77 0.2721/(c)/ 0.0248/(c)/ -- 0.2969/(c)/ (0.2721) -- (0.0148) -- -- (0.2869)
1996-Class A
Shares.......... 9.77 0.2724/(c)/ 0.0245/(c)/ -- 0.2969/(c)/ (0.2724) -- (0.0145) -- -- (0.2869)
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares.......... 9.74 0.5630/(c)/ 0.0717/(c)/ -- 0.6347/(c)/ (0.5759) -- (0.0287) -- -- (0.6046)
1995-Administration
Shares.......... 9.74 0.5366/(c)/ 0.0737/(c)/ -- 0.6103/(c)/ (0.5528) -- (0.0275) -- -- (0.5803)
1995-Class A
Shares/(e)/..... 9.79 0.2721/(c)/ (0.0090)/(c)/ -- 0.2631/(c)/ (0.2697) -- (0.0134) -- -- (0.2831)
1994-Institutional
Shares.......... 10.00 0.4341/(c)/ (0.2455)/(c)/ -- 0.1886/(c)/ (0.4486) -- -- -- -- (0.4486)
1994-Administration
Shares.......... 10.00 0.4211/(c) (0.2572)/(c)/ -- 0.1639/(c)/ (0.4239) -- -- -- -- (0.4239)
1993-Institutional
Shares.......... 10.04 0.4397 (0.0376)/(f)/ -- 0.4021 (0.4397) -- (0.0024) -- -- (0.4421)
1993-Administration
Shares/(g)/..... 10.02 0.2146 (0.0173)/(f)/ -- 0.1973 (0.2146) -- (0.0027) -- -- (0.2173)
1992-Institutional
Shares.......... 10.03 0.5599 (0.0029)/(f)/ -- 0.5570 (0.5470) -- -- -- -- (0.5470)
For the Period July 17, 1991/(i)/ through October 31,
- -----------------------------------------------------
1991-Institutional
Shares.......... 10.00 0.1531 0.0322/(f)/ -- 0.1853 (0.1553) -- -- -- -- (0.1553)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios assuming
no voluntary waiver of
fees or expense
limitations
-------------------------------
Net Ratio of Ratio of
increase Ratio of net Net net
(decrease) Net asset net investment assets Ratio of investment
in net value at expenses income (loss) Portfolio at end expenses income (loss)
asset end of Total to average to average turnover of period to average to average
value period return/(a)/ net assets net assets rate/(b)/ (in 000s) net assets net assets
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended April 30, (Unaudited)
- ----------------------------------------------
1996-Institutional
Shares.......... $0.0100 $9.78 3.20% 0.45%/(d)/ 5.85%/(d)/ 18.99% $596,799 0.51%/(d)/ 5.79%/(d)/
1996-Administration
Shares.......... 0.0100 9.78 3.07 0.70/(d)/ 5.60/(d)/ 18.99 4,126 0.76/(d)/ 5.54/(d)/
1996-Class A
Shares.......... 0.0100 9.78 3.07 0.70/(d)/ 5.60/(d)/ 18.99 11,761 1.01/(d)/ 5.29/(d)/
For the Years Ended October 31,
- -------------------------------
1995-Institutional
Shares.......... $0.0301 9.77 6.75 0.46 5.77 24.12 657,358 0.53 5.70
1995-Administration
Shares.......... 0.0300 9.77 6.48 0.71 5.50 24.12 3,572 0.78 5.43
1995-Class A
Shares/(e)/..... (0.0200) 9.77 2.74 0.69/(d)/ 5.87/(d)/ 24.12 15,203 1.01/(d)/ 5.55/(d)/
1994-Institutional
Shares.......... (0.2600) 9.74 1.88 0.46 4.38 37.81 942,523 0.49 4.35
1994-Administration
Shares.......... (0.2600) 9.74 1.63 0.71 4.27 37.81 6,960 0.74 4.24
1993-Institutional
Shares.......... (0.0400) 10.00 4.13 0.45 4.36 103.74 2,760,871 0.48 4.33
1993-Administration
Shares/(g)/..... (0.0200) 10.00 2.01/(h)/ 0.70/(d)/ 3.81/(d)/ 103.74 5,326 0.73/(d)/ 3.78/(d)/
1992-Institutional
Shares.......... 0.0100 10.04 6.12 0.42 5.61 286.40 2,145,064 0.55 5.48
For the Period July 17, 1991/(i)/ through October 31,
- -----------------------------------------------------
1991-Institutional
Shares.......... 0.0300 10.03 2.14/(h)/ 0.20/(d)/ 7.31/(d) 145.67/(d)/ 239,642 1.02/(d)/ 6.49/(d)/
</TABLE>
- --------------------------------------------------------------------------------
The accompanying nots are an integral part of these financial statements.
37
<PAGE>
<TABLE>
<CAPTION>
Goldman Sachs Trust
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
---------------------------------------------------------------------------------
Net realized Net realized
and unrealized and unrealized Total
gain (loss) gain (loss) income
Net asset on investment, on foreign (loss)
value at Net option and currency from
beginning investment futures related investment
of period income transactions transactions operations
----------------------------------------------------------------------------------------------------
GS SHORT DURATION GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended April 30, (Unaudited)
- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
1996-Institutional
Shares................... $9.82 $0.2862/(c)/ ($0.0499)/(c)/ $---- $0.2363/(c)/
1996-Administration
Shares/(k)/.............. 9.86 0.0590/(c)/ (0.0802)/(c)/ ---- (0.0212)/(c)/
1996-Service
Shares/(j)/.............. 9.72 (0.0071)/(c)/ 0.0499/(c)/ ---- 0.0428/(c)/
For the Years Ended October 31,
- -------------------------------
<S> <C> <C> <C> <C> <C>
1995-Institutional
Shares................... 9.64 0.6652/(c)/ 0.1666/(c)/ ---- 0.8318/(c)/
1995-Administration
Shares................... 9.64 0.2384/(c)/ (0.0433)/(c)/ ---- 0.1951/(c)/
1994-Institutional
Shares................... 10.14 0.5628/(c)/ (0.4592)/(c)/ ---- 0.1036/(c)/
1994-Administration
Shares................... 10.14 0.5329/(c)/ (0.4539/(c)/ ---- 0.0790/(c)/
1993-Institutional
Shares................... 10.16 0.5627/(c)/ (0.0135)/(f)/ ---- 0.5492
1993-Administration
Shares/(g)/.............. 10.23 0.2725 (0.0900/(f)/ ---- 0.1825
1992-Institutional
Shares................... 10.22 0.6703 (0.0600)/(f)/ ---- 0.6103
1991-Institutional
Shares................... 10.00 0.8020 0.2200/(f)/ ---- 1.0220
1990-Institutional
Shares................... 10.07 0.8300 (0.0700)/(f)/ ---- 0.7600
1989-Institutional
Shares................... 10.10 0.8800 ---- ---- 0.8800
<CAPTION>
For the Period August 15, 1988(/i/) through October 31,
- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1988-Institutional
Shares................... 10.00 0.1800 0.1000/(f)/ ---- 0.2800
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
----------------------------------------------------------------------------------------------------
In excess of
From net net realized
realized gain gain on
on investment, In excess investment, From Total
From net option of net option and paid distributions
investment and futures investment futures in to
income transactions income trancactions capital shareholders
- ------------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended April 30, (Unaudited)
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996-Institutional
Shares................... $(0.3263) $---- $---- $---- $---- $(0.3263)
1996-Administration
Shares(/k/).............. (O.O988) ---- ---- ---- ---- (0.0988)
1996-Service
Shares(/j/).............. (0.0328) ---- ---- ---- ---- (0.0328)
For the Years Ended October 31,
- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995-Institutional
Shares................... (0.6518) ---- ---- ---- ---- (0.6518)
1995-Administration
Shares................... (0.2051) ---- ---- ---- ---- (0.2051)
1994-Institutional
Shares................... (0.5598) (0.0438) ---- ---- ---- (0.6036)
1994-Administration
Shares................... (0.5352) (0.0438) ---- ---- ---- (0.5790)
1993-Institutional
Shares................... (0.5627) ---- (0.0065) ---- ---- (0.5692)
1993-Administration
Shares/(g)/.............. (0.2725) ---- ---- ---- ---- (0.2725)
1992-Institutional
Shares................... (0.6703) ---- ---- ---- ---- (0.6703)
1991-Institutional
Shares................... (0.8020) ---- ---- ---- ---- (0.8020)
1990-Institutional
Shares................... (0.8300) ---- ---- ---- ---- (0.8300)
1989-Institutional
Shares................... (0.8800) ---- ---- ---- (0.0300) (0.9100)
<CAPTION>
For the Period August 15, 1988/(i)/ through October 31,
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1988-Institutional
Shares................... (0.1800) ---- ---- ---- ---- (0.1800)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of
Net net
increase Ratio of investment
(decrease) Net asset net income
in net value at expenses (loss)
asset end of Total to average to average
value period return/a/ net assets net assets
- ------------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended April 30, (Unaudited)
- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
1996-Institutional
Shares................... $(0.0900) $9.73 2.42% 0.45%/(d)/ 5.85%/(d)/
1996-Administration
Shares/(k)/.............. (0.1200) 9.74 (0.21) 0.70/(d)/ 3.62/(d)/
1996-Service
Shares/(j)/.............. 0.0100 9.73 0.44 0.95/(d)/ (1.27)/(d)/
For the Years Ended October 31,
- -------------------------------
<S> <C> <C> <C> <C> <C>
1995-Institutional
Shares................... 0.1800 9.82 8.97 0.45 6.87
1995-Administration
Shares................... (0.0100) 9.63/(k)/ 2.10 0.70/(d)/ 7.91/(d)/
1994-Institutional
Shares................... (0.5000) 9.64 0.99 0.45 5.69
1994-Administration
Shares................... (0.5000) 9.64 0.73 0.70 5.38
1993-Institutional
Shares................... (0.0200) 10.14 5.55 0.45 5.46
1993-Administration
Shares/(g)/.............. (0.0900) 10.14 1.74 0.70/(d)/ 4.84/(d)/
1992-Institutional
Shares................... (0.0600) 10.16 6.24 0.45 6.60
1991-Institutional
Shares................... 0.2200 10.22 10.93 0.45 8.25
1990-Institutional
Shares................... (0.0700) 10.00 8.23 0.45 8.62
1989-Institutional
Shares................... (0.0300) 10.07 9.08 0.46 8.71
<CAPTION>
For the Period August 15, 1988/(i)/ through October 31,
- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1988-Institutional
Shares................... 0.1000 10.10 3.30 0.55/(d)/ 8.55/(d)/
- ------------------------------------------------------------------------------------------------------------------------------------
<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/b/ (in 000s) net assets net assets
- ------------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended April 30, (Unaudited)
- -----------------------------------------------
<S> <C> <C> <C> <C>
1996-Institutional
Shares................... 71.19% $97,238 0.71%/(d)/ 5.59%/(d)/
1996-Administration
Shares(/k/).............. 71.19 ---- 0.99/(d)/ 3.33/(d)/
1996-Service
Shares(/j/).............. 71.19 28 1.08/(d)/ (1.40)/(d)/
For the Years Ended October 31,
- -------------------------------
<S> <C> <C> <C> <C>
1995-Institutional
Shares................... 292.56 103,760 0.72 6.60
1995-Administration
Shares................... 292.56 ---- 0.90/(d)/ 7.71/(d)/
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(/g/).............. 411.66 16,490 0.80/(d)/ 4.74/(d)/
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
<CAPTION>
For the Period August 15, 1988/(i)/ through October 31,
- -------------------------------------------------------
<S> <C> <C> <C> <C>
1988-Institutional
Shares................... 167.00/d/ 39,052 1.42/(d)/ 7.68/(d)/
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations
=========================================================== ==================================
Net realized Net realized
and unrealized and unrealized Total From net
gain (loss) gain (loss) income realized gain
Net asset on investment on foreign (loss) on investment
value at Net option and currency from From net option
beginning investment futures related investment investment and futures
of period income transactions transactions operations income transactions
==================================================================================================================
GS SHORT DURATION TAX-FREE FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, (unaudited)
===============================================
1996-Institutional
Shares $9.94 $0.2060/(c)/ ($0.0300)/(c)/ $---- $0.1760/(c)/ $(0.2060) $----
1996-Administration
Shares 9.94 0.1937/(c)/ (0.0300)/(c)/ ---- 0.1637/(c)/ (0.1937) ----
1996-Service
Shares 9.95 0.1813/(c)/ (0.0300)/(c)/ ---- 0.1513/(c)/ (0.1813) ----
For the Years Ended October 31,
===============================
1995-Institutional
Shares 9.79 0.4235/(c)/ (1.5000)/(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/(1)/ 9.86 0.0475/(c)/ (0.0700)/(c)/ ---- (0.0225)/(c)/ (0.0475) ----
1993-Institutional
Shares 9.93 0.3834 0.3000/(f)/ ---- 0.6834 (0.3834) ----
1993-Administration
Shares/(1)/ 10.16 0.1555 0.0720/(f)/ ---- 0.2275 (0.1555) ----
For the Period October 1, 1992/(i)/through October 31,
======================================================
1992-Institutional
Shares 10.00 0.0341 (0.0700)/(f)/ ---- (0.0359) (0.0341) ----
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
============================================================
In excess of
net realized Net
gain on increase
In excess investment, From Total (decrease) Net asset
of net option and paid distributors in net value at
investment futures in to asset end of Total
income transactions capital shareholders value period return/(a)/
==================================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, (unaudited)
===============================================
1996-Institutional
Shares $---- $---- $---- $(0.2060) $(0.0300) $9.91 1.78%
1996-Administration
Shares ---- ---- ---- (0.1937) (0.0300) 9.91 1.65
1996-Service
Shares ---- ---- ---- (0.1813) (0.0300) 9.92 1.52
For the Years Ended October 31,
===============================
1995-Institutional
Shares ---- ---- ---- (0.4235) 0.1500 9.94 5.98
1995-Administration
Shares ---- ---- ---- (0.3989) 0.1500 9.94 5.76
1995-Service Shares ---- ---- ---- (0.3744) 0.1600 9.95 5.59
1994-Institutional
Shares ---- ---- ---- (0.4612) (0.4400) 9.79 0.17
1994-Administration
Shares ---- ---- ---- (0.4362) (0.4400) 9.79 (0.11)
1994-Service
Shares/(1)/ ---- ---- ---- (0.0475) (0.0700) 9.79 (0.32)/(h)/
1993-Institutional
Shares ---- ---- ---- (0.3834) 0.3000 10.23 7.03
1993-Administration
Shares/(1)/ ---- ---- ---- (0.1555) 0.0720 10.23 2.28/(h)/
For the Period October 1, 1992/(i)/through October 31,
======================================================
1992-Institutional
Shares ---- ---- ---- (0.0341) (0.0700) 9.93 (0.34)/(h)/
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios assuming
no voluntary waiver
of fees or
expense limitations
==============================
Ratio of Ratio
net Net net
Ratio of investment assets investment
net income at end Ratio of income
expenses (loss) Portfolio of expenses (loss)
to average to average turnover period to average to average
net assets net assets rate/(b)/ (in 000s) net assets net assets
==============================================================================================================
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, (unaudited)
===============================================
1996-Institutional
Shares 0.45%/(d)/ 4.15%/(d)/ 110.13% $40,989 $0.90%/(d)/ 3.70%/(d)/
1996-Administration
Shares 0.70/(d)/ 3.90/(d)/ 110.13 46 1.15/(d)/ 3.45/(d)/
1996-Service
Shares 0.95/(d)/ 3.65/(d)/ 110.13 351 1.40/(d)/ 3.20/(d)/
For the Years Ended October 31,
===============================
1995-Institutional
Shares 0.45 4.31 259.52 58,389 0.77 3.99
1995-Administration
Shares 0.70 4.14 259.52 46 1.02 3.82
1995-Service Shares 0.95 3.87 259.52 454 1.27 3.55
1994-Institutional
Shares 0.45 3.74 354.00 83,704 0.61 3.58
1994-Administration
Shares 0.70 3.51 354.00 3,866 0.86 3.35
1994-Service
Shares/(1)/ 0.95/(d)/ 4.30/(d)/ 354.00 44 1.11/(d)/ 4.14/(d)/
1993-Institutional
Shares 0.41 3.70 404.60 115,803 1.06 3.05
1993-Administration
Shares/(1)/ 0.70/(d)/ 3.32/(d)/ 404.60 911 1.07/(d)/ 2.95/(d)/
For the Period October 1, 1992/(i)/through October 31,
======================================================
1992-Institutional
Shares 0.05/(d)/ 4.58/(d)/ 31.19/(h)/ 14,601 2.68/(d)/ 1.95/(d)/
</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
----------------------------------------------------------- --------------------------------
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,
value at Net option and currency from From net option
beginning investment futures related investment investment and futures
of period income transactions transactions operations income transactions
---------------------------------------------------------------------------------------------------------
GS CORE FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, (Unaudited)
================================================
1996-Institutional
Shares ............... $10.00 $0.3154 $(0.2629) -- $0.0525 $(0.3219) $(0.0806)
1996-Administrative
Shares/(m)/ .......... 9.91 0.0982 (0.2600) -- (0.1618) (0.0982) --
1996-Service
Shares/(m)/ .......... 9.77 0.0771 (0.1200) -- (0.0429) (0.0771) --
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/(i)/ through October 31,
- ---------------------------------------------------------
1994-Institutional
Shares ............... 10.00 0.4648 (0.7617) -- (0.2969) (0.4648) --
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
------------------------------------------------------
In excess of
net realized Net
gain on increase
In excess investment From Total (decrease) Net asset
of net option and paid distributions in net value at
investment futures in to asset end of Total
income transactions capital shareholders value period return/(a)/
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, (Unaudited)
- ------------------------------------------------
1996-Institutional
Shares ............... -- -- -- $(0.4025) $(0.3500) $9.65 0.46%
1996-Administrative
Shares/(m)/ .......... -- -- -- (0.0982) (0.2600) 9.65 (1.64)
1996-Service
Shares/(m)/ .......... -- -- -- (0.0771) (0.1200) 9.65 (0.44)
For the Year Ended October 31,
- --------------------------------
1995-Institutional
Shares ............... -- -- -- (0.6433) 0.7600 10.00 15.72
For the Period January 5, 1994/(i)/ through October 31,
- ---------------------------------------------------------
1994-Institutional
Shares ............... -- -- -- (0.4648) (0.7617) 9.24 (3.00)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Ratios assuming
no voluntary waiver
of fees or
expense limitations
---------------------------
Ratio of Ratio of
net Net net
Ratio of investment assets investment
net income at end Ratio of income
expenses (loss) Portfolio of expenses (loss)
to average to average turnover period to average to average
net assets net assets rate/(b)/ (in 000s) net assets net assets
---------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, (Unaudited)
- ------------------------------------------------
1996-Institutional
Shares ............... 0.45%/(d)/ 6.37%/(d)/ 230.30% $64,021 0.85%/(d)/ 5.97%/(d)/
1996-Administrative
Shares/(m)/ .......... 0.70/(d)/ 6.28/(d)/ 230.30 315 1.35/(d)/ 5.63/(d)/
1996-Service
Shares/(m)/ .......... 0.95/(d)/ 6.29/(d)/ 230.30 7 1.86/(d)/ 5.38/(d)/
For the Year Ended October 31,
- --------------------------------
1995-Institutional
Shares ............... 0.45 6.56 383.26 55,502 0.96 6.05
For the Period January 5, 1994/(i)/ through October 31,
- ---------------------------------------------------------
1994-Institutional
Shares ............... 0.45(d) 6.48(d) 288.25 24,508 1.46/(d)/ 5.47/(d)/
- --------------------
</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
charges. For Class A shares only, total return would be reduced if a sales
charge were taken into account.
/(b)/Includes the effect of mortgage dollar roll transactions.
/(c)/Calculated based on the average shares outstanding methodology.
/(d)/Annualized.
/(e)/Class A share activity commenced on May 15, 1995.
/(f)/Includes the balancing effect of calculating per share amounts.
/(g)/Administration share activity commenced on April 15,1993.
/(h)/Not annualized.
/(i)/Commencement of operations.
/(j)/Service share activity commenced on April 10, 1996.
/(k)/GS Short Duration Government Fund Administration shares were redeemed in
full on February 23, 1995. Amount shown represents net asset value on
February 23, 1995. Activity re-commenced on February 28, 1996 at $9.86.
/(l)/Administration and Service share activity commenced on May 20, 1993 and
September 20, 1994 respectively.
/(m)/Administration and Service share activity commenced on February 28, 1996
and March 13, 1996, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
[This Page Intentionally Left Blank]
41
<PAGE>
[This Page Intentionally Left Blank]
42
<PAGE>
- -------------------------------------------------------------------------------
This Semiannual Report is authorized for distribution to prospective investors
only when preceded or accompanied bya Goldman Sachs Trust Institutional Funds
Prospectus which contains facts concerning each Fund's objectives and policies,
management, expenses and other information.
- -------------------------------------------------------------------------------
<PAGE>
Goldman Sachs
1 New York Plaza
New York, NY 10004
Trustees
Paul C. Nagel, Jr., Chairman
Ashok N. Bakhru
David B. Ford
Doug Grip
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Doug Grip, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Goldman Sachs
Investment Adviser, Administrator,
Distributor and Transfer Agent
[OBJECT OMITTED]
The Goldman Sachs
Fixed Income
Portfolios
[-----------------------]
Semiannual Report
April 30, 1996
GS Adjustable Rate Government Fund
GS Short Duration Government Fund
GS Short Duration Tax-Free Fund
GS Core Fixed Income Fund
[LETTERHEAD OF GOLDMAN SACHS APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to have the opportunity to review the performance of the
Goldman Sachs Fixed Income Portfolios for the six-month period ended April 30,
1996. In addition to discussing the portfolios, we will also provide a brief
overview of the U.S. economy and the bond market during the period.
The Goldman Sachs Fixed Income Portfolios performed well relative to their
benchmarks during a challenging bond market environment. These favorable results
reflect well on our investment approach, which de-emphasizes strategies based on
anticipating the direction of interest rates in favor of relative value analysis
and a focus on total return. We seek to add value by focusing on factors such as
sector allocation, duration structure and individual security selection.
Bonds Slumped as Rates Rose...
In contrast to its robust performance last year, the U.S. bond market
started the period under review on a strong note, but weakened in February and
fell sharply by the end of April as the economy showed signs of strengthening.
(A strong economy is detrimental for bonds, partly because it can lead to higher
demand for loans, and hence higher interest rates.) The primary catalyst for the
bond market sell-off was an unexpected surge in job growth, which the market
feared would lead to upward pressure on wage inflation and interest rates.
During the six-month period ended April 30, 1996, the total return of the
30-year Treasury bond was approximately -5.0%.
...and the Economy Strengthened
The period under review began with the economy weak, in part due to bloated
inventories, anemic consumer spending and depressed capital spending.
Fourth-quarter real Gross Domestic Product (GDP) grew only 0.5% (annualized),
and the economy seemed to grind to a virtual halt in late 1995, reviving fears
of a potential recession. A number of temporary factors contributed to the
economic weakness, including a contraction in spending by the government due to
its shutdowns and a strike at Boeing aircraft.
During January and February, the government delays in releasing economic
data and the distorting effects of the harsh winter storms made it difficult to
get an accurate reading on the economy's health. However, when key indicators
were finally reported, it became clear that the economy experienced a marked
reversal, gaining momentum faster than expected. Despite the difficult winter
and a strike at General Motors, first-quarter real GDP was reported at 2.3%
(annualized), reflecting improved demand from consumers and businesses. A wide
range of indicators pointed to accelerating growth in the latter half of the
period, including trade, housing sales and starts, factory orders, automobile
sales and industrial production. Business inventories began to rise, marking the
end of the inventory correction cycle. Also notable, retail sales increased by
8.2% (annualized) during the first quarter of 1996. Though inflation fears
rattled the bond market during the latter half of the period, the April consumer
price index (CPI) was reported at 0.4%, indicating that inflation remained under
control.
The Fed Eased in the First Half of the Period
The U.S. Federal Reserve Board continued its policy of monetary easing
initiated last July, cutting the Federal funds rate (the rate banks charge one
another for overnight borrowing) by 25 basis points in December 1995 and by
another 25 basis points in January 1996, to 5.25%.
- --------------------------------------------------------------------------------
Table of Contents
Market Overview 1
Goldman Sachs Government Income Fund 3
Goldman Sachs Global Income Fund 8
Goldman Sachs Municipal Income Fund 14
Financial Statements 19
Notes to Financial Statements 23
Financial Highlights 31
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
During the period under review, the short end of the yield curve steepened
dramatically and the whole curve shifted upward as investors anticipated higher
rates in the second half of the year. The yield on six-month U.S. Treasury bills
declined slightly to 5.30% on April 30, 1996 from 5.55% on October 31, 1995.
However, the yield on the 30-year U.S. Treasury bond climbed significantly
during the same time period, to 6.90% from 6.33% six months ago. Bond prices,
which move in the opposite direction from yields, fell 7.87% for the 30-year
U.S. Treasury bond.
Historical Treasury Yield Curve
[HISTORICAL TREASURY YIELD CURVE CHART APPEARS HERE]
<TABLE>
<CAPTION>
10/31/95 4/30/96
-------- -------
<S> <C> <C>
3-Month 5.49% 5.15%
6-Month 5.55% 5.30%
1-Year 5.54% 5.61%
2-Year 5.61% 6.04%
3-Year 5.68% 6.18%
5-Year 5.81% 6.41%
10-Year 6.02% 6.67%
30-Year 6.33% 6.90%
</TABLE>
Source: Bloomberg, L.P.
The short end of the yield curve steepened dramatically and the curve shifted
upward. The yield spread between one-year and 30-year Treasuries widened
significantly.
The Dollar Continued to Rally Against the Yen and Mark
Along with the economy, the U.S. dollar strengthened against the Deutsche
mark and Japanese yen during the period under review. By the end of the period,
the dollar reached a 14-month high against the mark. Germany's economic weakness
caused the Bundesbank to cut rates and supports the likelihood of further
easing, making U.S. currency relatively more attractive. In April, the dollar
rose to a 26-month high against the yen, which suffered from additional problems
in the Japanese banking system. However, economic growth picked up in Japan,
stimulating talk of increasing rates, albeit from a very low base.
Outlook: Further Strengthening Expected, Leading to Possible Fed Tightening
With almost every measure of economic activity coming in stronger than
expected, moderate economic growth appears to be on track for the remainder of
1996. Though inflation appears subdued, accelerating economic growth and a
potential rise in labor costs could push inflation gradually higher over the
remainder of the year. Opinion is divided as to whether, or when, the Fed may
begin to tighten. As of this writing, Goldman Sachs' economists believe the Fed
is likely to tighten by summer.
We thank you for your support during this period and look forward to
continuing to help you achieve your investment goals.
Sincerely,
/s/ David B. Ford
David B. Ford
Co-Head, Goldman Sach Asset Management
/s/ John R. McNulty
John P. McNulty
Co-Head, Goldman Sachs Asset Management
/s/ Sharmin Mossavar-Rahmani
Sharmin Mossavar-Rahmani
Chief Investment Officer - Fixed Income Investments
Goldman Sachs Asset Management
June 7, 1996
- --------------------------------------------------------------------------------
2
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Government Income Fund
- --------------------------------------------------------------------------------
Investment Objective
The Goldman Sachs Government Income Fund seeks to provide shareholders with
a high level of current income consistent with safety of principal. Under normal
conditions, at least 65% of the portfolio's total assets will be invested in
U.S. government securities and in repurchase agreements collateralized by such
securities. The fund may also invest in securities of nongovernmental issuers,
including asset-backed securities, privately issued mortgage-backed securities
and corporate debt obligations. Such securities will be rated triple-A at the
time of investment or, if unrated, deemed to be of comparable quality by Goldman
Sachs Asset Management, the fund's investment adviser. The fund's interest rate
sensitivity is expected to be comparable with that of a five-year bond.
Special Event
As of May 1, 1996, the fund added a new share class (Class B), which is
subject to a contingent deferred sales charge but no up-front sales charge.
Mortgage-Backed Security Market Strengthened
During the six-month period ended April 30, 1996, the most significant
factor affecting the mortgage-backed securities (MBS) market was prepayment
risk. In November and December, these securities came under pressure due to a
high level of mortgage prepayments, when many homeowners refinanced their
mortgages at attractive interest rates. However, the MBS market began to turn
around in January, with the rise in long-term rates. From January through April,
mortgage prepayments gradually declined, which resulted in strengthening
investor demand for mortgage-backed securities. By the end of April, the yield
spreads of mortgage-backed securities relative to Treasuries had tightened
significantly.
Performance Review
The fund's total return was in line with its benchmark, the Lehman Brothers
Government/Mortgage Index (the "Index"), during the six-month period ended April
30, 1996. Despite a decline in net asset value (NAV) due to the backup in
interest rates, the fund achieved a positive total return. During the period,
the fund's position in collateralized mortgage obligations (CMOs) contributed to
its performance, while its holdings in fixed rate mortgage pass-throughs and
asset-backed securities neither helped nor hurt its total return.
The fund performed well compared with its peers, ranking 16th out of 114
intermediate U.S. government income funds based on total return for the 12
months ended April 30, 1996, according to Lipper Analytical Services, Inc.
(Please note that Lipper rankings do not take sales charges into account and
that past performance is not a guarantee of future results.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Summary: October 31, 1995 - April 30, 1996
- --------------------------------------------------------------------------------
Lehman Brothers
Government/
Fund Mortgage Index
---- --------------
<S> <C> <C>
Total Return (based on net asset value) 0.62% 0.61%
- --------------------------------------------------------------------------------
Return From Monthly Distributions 2.97% NA
- --------------------------------------------------------------------------------
Return From Price Depreciation -2.35% NA
- --------------------------------------------------------------------------------
NAV (as of 4/30/96) $14.11 NA
- --------------------------------------------------------------------------------
NAV Change -$0.36 NA
- --------------------------------------------------------------------------------
</TABLE>
Portfolio Composition and Investment Strategies
The primary changes to the portfolio's sector allocations during the period
under review were a decreased weighting in U.S. Treasuries and an increase in
fixed rate mortgage pass-throughs and asset-backed securities.
- --------------------------------------------------------------------------------
3
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Government Income Fund (continued)
- --------------------------------------------------------------------------------
Portfolio Composition as of April 30, 1996*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Fixed Rate Mortgage Pass-Throughs 44.0%
Asset-Backed Securities 23.5%
U.S. Treasuries 20.0%
CMOs 10.8%
Agency Debentures 1.4%
Repos/Cash Equivalents 0.3%
</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. Fixed rate mortgage pass-throughs
accounted for 44.0% of the portfolio, up from 39.8% six months ago. We
overweighted the fund's position in the sector relative to the benchmark (35.8%)
because mortgage-backed securities offer incremental yield over similar-duration
Treasuries, as well as the opportunity to exploit pricing inefficiencies that
can occur in this market. When the period under review began, mortgage-backed
securities were hurt by a high rate of mortgage prepayments, as many homeowners
decided to refinance their mortgages at attractive rates. However, the sector
strengthened when long-term rates rose from January through the end of April,
causing prepayment risk to decline.
We 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 -- usually one month forward.) At all
times, we "cover" the mortgage dollar rolls by keeping cash or high-grade liquid
debt securities equal to the dollar amount of the forward commitment in a
segregated account with the fund's custodian.
. Asset-Backed Securities (ABS). We significantly increased the fund's
position in triple-A-rated ABS (which included issues backed by credit card debt
and automobile loans) to 23.5%, up from 14.3% six months ago. The ABS sector
came under pressure during November and December 1995, primarily due to
uncertainty surrounding increased credit card debt delinquencies and a number of
negative credit events. However, the ABS market improved from January through
April, as these concerns eased and the market's technical balance strengthened.
A record level of ABS issuance was met with strong demand from a range of
investors, including security lenders and foreign banks. We favored the sector
because its short-term paper offered good incremental yield over equal-duration
Treasuries.
. U.S. Treasuries and Cash Equivalents. As of April 30, the portfolio was
underweighted in U.S. Treasuries compared with the Index (20.0% versus 56.2%).
We reduced the U.S. Treasury position and the cash equivalents (0.3%) position
during the period in favor of other sectors that offered better relative value.
. Agency Debentures. As of April 30, the fund's position in agency debentures
(bonds issued by agencies of the U.S. government) was 1.4%. This sector offered
incremental yield over Treasuries and added to the portfolio's diversification.
. Portfolio Composition by Issuer. The fund's portfolio breakdown by issuer
was the Federal National Mortgage Association (FNMA) (27.7%); the Federal Home
Loan Mortgage Corporation (FHLMC) (8.8%); and the Government National Mortgage
Association (GNMA) (8.1%).
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Government Income Fund (continued)
- --------------------------------------------------------------------------------
. Credit Quality. As of April 30, 66.9% of the portfolio was invested in U.S.
government and agency securities and 33.1% was invested in triple-A-rated
securities.
. Prudent Use of Derivatives. During the period, we established a 4.6% fund
position in sequential-pay collateralized mortgage obligations (CMOs), which are
generally considered to be a lower risk derivative instrument. We favored
sequentials for their incremental yield over Treasuries, and the position
contributed to the portfolio's return. The fund also held a 1.4% position in
inverse floaters, for their potential to add incremental yield. We sold more
than half of the fund's position in planned amortization class (PAC) CMOs (2.7%
as of April 30) in favor of other sectors that offered greater relative value,
and added small positions in interest-only (IO) and principal-only (PO) CMOs for
their incremental yield and potential price appreciation. In addition, we used
futures as a tool to help manage the portfolio's duration.
Fund Outlook
We are constructive on the mortgage pass-through market. With refinancing
expected to decline dramatically in the next couple of months, and
correspondingly originations, mortgage technicals should be firm. However, the
sector became more expensive in April, which may limit the extent of further
near-term gains. We have a cautiously optimistic outlook for the ABS sector,
where we believe recent innovations, such as new issues backed by aircraft
leases, will continue to generate a high level of investor demand. We are
neutral on the CMO sector, which we believe represents fair value relative to
pass-throughs. However, we continue to find specific areas within the CMO market
that offer attractive investment opportunities. Overall, we foresee a favorable
investment environment for the mortgage-backed securities market over the next
several months.
Distribution Policy
During the six-month period ended April 30, 1996, the fund paid out monthly
distributions of approximately $0.45 per share. Dividends are declared daily and
paid on a monthly basis. The fund distributes substantially all of its taxable
income, as is required for all investment companies.
We thank you for your support and look forward to continuing to serve your
investment needs in the future.
Sincerely,
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/Erica Adelberg
Erica Adelberg
/s/ James B. Clark
James B. Clark
Portfolio Managers
Goldman Sachs Government Income Fund
June 7, 1996
- --------------------------------------------------------------------------------
5
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Government Income Fund
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Backed Obligations--57.6%
Federal Home Loan Mortgage Corp.(a)--6.8%
$ 2,000,000 7.50% TBA 30-Yr $ 1,978,126
- --------------------------------------------------------------------------------
Federal National Mortgage Association (FNMA) (a)--23.0%
$ 1,000,000 7.00% TBA 15-Yr $ 963,125
3,000,000 6.00 TBA 15-Yr 2,841,564
1,000,000 7.50 TBA 15-Yr 1,006,250
1,000,000 7.00 TBA 30-Yr 963,750
1,005,000 6.50 TBA 30-Yr 942,501
- --------------------------------------------------------------------------------
$ 6,717,190
- --------------------------------------------------------------------------------
Government National Mortgage Association--8.0%
$ 383,179 9.00% 12/15/19 $ 406,529
975,452 7.00 08/15/23 940,092
1,000,000 7.50 TBA 30-Yr(a) 987,812
- --------------------------------------------------------------------------------
$ 2,334,433
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligations--19.8%
Interest Only--0.8%
FNMA Interest-Only Stripped Security, Series 151, Class 2
$ 807,110(b) 9.50% 07/25/22 $ 240,769
- --------------------------------------------------------------------------------
Inverse Floater--2.1%
FNMA Remic Trust, Series 1992-62, Class S
$ 404,038 9.85%(c) 05/25/99 $ 392,564
GE Capital Mortgage Services, Inc. Series 1993-17, Class A16
229,562 5.97(c) 11/25/23 171,487
GE Capital Mortgage Services, Inc. Series 1993-17, Class A17
82,689 9.00(c) 11/25/23 44,287
- --------------------------------------------------------------------------------
$ 608,338
- --------------------------------------------------------------------------------
Planned Amortization Class--5.9%
FNMA Remic Trust, Series 1993-58, Series G(e)
$ 1,000,000 5.50% 12/25/20 $ 925,260
GE Capital Mortgage Services, Inc. Series 1994-11, Class A1
794,285 6.50 03/25/24 786,334
- --------------------------------------------------------------------------------
$ 1,711,594
- --------------------------------------------------------------------------------
Principal Only--1.3%
FNMA Remic Trust, Series G-35, Class N
$ 575,000 6.05%(d) 10/25/21 $ 381,697
- --------------------------------------------------------------------------------
Regular Floater--2.3%
GE Capital Mortgage Services, Inc. Series 1993-17, Class A15
$ 676,542 6.37%(c) 12/25/23 $ 669,195
- --------------------------------------------------------------------------------
Support--7.4%
GE Capital Mortgage Services, Inc. Series 1994-10, Class A22
$ 996,703 6.50% 03/25/24 $ 854,244
Housing Securities, Inc. Series 1994-1, Class A13
1,455,585 6.50 03/25/09 1,308,658
- --------------------------------------------------------------------------------
$ 2,162,902
- --------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations $ 5,774,495
- --------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $17,062,591)
$16,804,244
- --------------------------------------------------------------------------------
Asset-Backed Securities--23.3%
Chemical Bank Master Credit Card Trust, Series 1995-2, Class A
$ 720,000 6.23% 06/15/03 $ 706,750
Discover Card Master Trust, Series 1996-4, Class A
880,000 5.81 10/16/13 882,750
Fingerhut Master Trust, Series 1996-1, Class A
590,000 6.45 02/02/02 585,463
Ford Credit Auto Loan Master Trust, Series 1996-1, Class A
650,000 5.50 02/15/03 615,797
MBNA Master Credit Card Trust, Series 1991-1, Class A
490,000 7.75 10/15/98 493,063
Navistar Financial Corp. Owner Trust, Series 1995-A, Class A2
411,174 6.55 11/20/01 412,474
Olympic Automobile Receivables Trust, Series 1994-B, Class A2
690,385 6.85 06/15/01 695,321
Premier Auto Trust, Series 1993-6, Class A2
571,655 4.65 11/02/99 564,218
Premier Auto Trust, Series 1994-1, Class A3
478,461 4.75 02/02/00 473,720
Sears Credit Account Master Trust, Series 1995-2, Class A
460,000 8.10 06/15/04 481,045
Standard Credit Card Trust, Series 1990-3, Class A
860,000 9.50 07/10/98 888,217
- --------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $6,900,660) $ 6,798,818
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Government Income Fund (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Agency Obligations--1.3%
Federal Home Loan Mortgage Corp.
$ 110,000 8.20% 01/16/98 $ 111,541
Federal National Mortgage Association
280,000 7.70 08/10/04 280,871
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $404,669) $ 392,412
- --------------------------------------------------------------------------------
U.S. Treasury Obligations--19.6%
United States Treasury Bonds
$ 170,000 8.75% 05/15/17 $ 200,733
280,000 8.75 08/15/20 333,068
United States Treasury Notes(e)
500,000 5.63 10/31/97 497,810
2,280,000 7.38 11/15/97 2,326,307
1,410,000 7.50 10/31/99 1,461,338
450,000 7.75 11/30/99 470,178
United States Treasury Principal-Only Stripped Securities(d)
100,000 6.83 11/15/04 56,428
2,050,000 7.33 08/15/20 357,951
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $5,849,105) $ 5,703,813
- --------------------------------------------------------------------------------
Repurchase Agreement--30.2%
Joint Repurchase Agreement Account(e)
$ 8,800,000 5.36% 05/01/96 $ 8,800,000
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $8,800,000) $ 8,800,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $39,017,025/(f))/ $38,499,287
- --------------------------------------------------------------------------------
Futures contracts open at April 30, 1996 are as follows:
Number of
Contracts Settlement Unrealized
Type Long (Short)/(g/) Month Gain (Loss)
- --------------- --------------- ---------------- -----------------
Euro Dollars (2) September 1996 5,600
Euro Dollars 3 September 1997 (2,400)
10 Year U.S.
Treasury Notes (5) June 1996 33,000
U.S. Treasury
Bond 13 June 1996 (60,125)
-----------------
($23,925)
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost $ 41,442
Gross unrealized loss for investments in which cost
exceeds value (559,180)
- --------------------------------------------------------------------------------
Net unrealized loss $ (517,738)
- --------------------------------------------------------------------------------
</TABLE>
(a)TBA (To Be Assigned) securities are purchased on a forward commitment basis
with an approximate (generally + / -2.5%) principal amount and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
(b)Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated rate due to the
amortization of related premiums.
(c)Variable rate security. Coupon rate disclosed is that which is in effect at
April 30, 1996.
(d)The interest rate disclosed for these securities represents effective yields
to maturity.
(e)Portions of these securities are being segregated for open TBA purchases,
mortgage dollar rolls, open futures contracts and futures margin
requirements.
(f)The amount stated also represents aggregate cost for federal income tax
purposes.
(g)Each 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 notional amount and market value
at risk are $6,800,000 and $3,129,306, respectively. The determination of
notional amounts as presented here is indicative only of volume of activity
and not a measure of market risk.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund
- --------------------------------------------------------------------------------
Investment Objective
The Goldman Sachs Global Income Fund seeks high total return, composed of
both current income and capital appreciation. The fund is permitted to invest in
government and other high-quality (double-A or better) fixed income securities
issued in the United States and in foreign markets. The fund has the additional
flexibility to invest in sovereign (government) debt rated single-A (or better)
or deemed to be of comparable quality. The maximum duration of the fund is 7.5
years. The fund's approximate interest rate sensitivity is comparable with that
of a six-year bond. Under normal market conditions, the fund's neutral position
is to be fully hedged into U.S. dollars to best serve the needs of U.S.
shareholders. However, the fund may engage in currency transactions, both to
hedge exchange rate risk and to seek to enhance returns.
Special Event
As of May 1, 1996, the fund added a new share class (Class B), which is
subject to a contingent deferred sales charge but no up-front sales charge.
Global Bond Markets Began the Period Strong, Then Weakened
The performance of the global bond markets during the six months ended
April 30, 1996 was positive, but returns were more subdued than last year's
robust gains. When the period under review began, moderate economic growth and
interest rate cuts in the United States and Europe helped stimulate global
bonds, but some of the major markets lost momentum during the latter half of the
period.
For the period as a whole, U.S. Treasuries recorded the weakest performance
of all the major bond markets (in U.S. dollar terms). Canadian and Australian
bonds also weakened, but fared somewhat better despite an expected spillover
effect from the weakness in U.S. Treasuries. European markets were volatile
during the period, but weak economic growth and low inflation enabled European
bonds to generally outperform those of the dollar bloc countries. Within Europe,
some of the higher yielding European markets (e.g., Spain and Sweden)
outperformed the U.K. and the "core" European markets (e.g., Germany and
Belgium). Japanese Government Bonds (JGBs) lagged most major markets, primarily
due to an accelerating economy and expectations of higher short-term interest
rates.
Performance Review: Regional Allocations Contributed to Favorable Performance
During the period under review, the Goldman Sachs Global Income Fund's
Class A and Institutional shares outperformed their benchmark, the J.P. Morgan
Global Government Bond Index (hedged into U.S. dollars) (the "Index") by 102
basis points and 121 basis points, respectively. The Index covers 14 major bond
markets and reflects their currency exposures.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Summary: October 31, 1995 - April 30, 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
J.P. Morgan
Global Gov't
Class A Institutional Bond Index
------- ------------- ----------
Total Return (based on net 4.36% 4.55% 3.34%
asset value)
- --------------------------------------------------------------------------------
Return From Monthly 7.32% 7.59% NA
Distributions
- --------------------------------------------------------------------------------
Return From Price -2.96% -3.04% NA
Depreciation
- --------------------------------------------------------------------------------
NAV (as of 4/30/96) $14.03 $14.02 NA
- --------------------------------------------------------------------------------
NAV Change -$0.42 -$0.43 NA
- --------------------------------------------------------------------------------
</TABLE>
The fund's strong relative performance can be primarily attributed to its
overweighting in European bonds, its underweighting in Japanese bonds and its
moderate underweighting in U.S. Treasuries.
Though the portfolio is typically fully hedged into U.S. dollars, we
employed several currency strategies during the period. For example, the fund
took a long position in the U.S. dollar against the yen and European currencies,
which contributed to the fund's positive performance as the dollar strengthened.
We also shorted the French franc versus the Deutsche mark, a strategy that
resulted in a small loss.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund (continued)
- --------------------------------------------------------------------------------
The fund performed well relative to its peers. For the 12 months ended
April 30, 1996, the fund ranked in the top third (44th out of 150) in Lipper
Analytical Services, Inc.'s general world income category. (Please note that
Lipper rankings do not take sales charges into account and that past performance
is not a guarantee of future results.) In addition, as of April 30, 1996, the
fund's Class A shares were rated "four stars" by Morningstar, Inc.1
Portfolio Composition and Investment Strategies
Portfolio Composition as of April 30, 1996*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
U.S. 31.5%
Germany 14.4%
Cash 11.0%
U.K. 10.4%
Sweden 8.9%
Italy 4.9%
Japan 4.1%
Canada 2.8%
Ireland 2.6%
Denmark 2.5%
Belgium 2.3%
Spain 1.9%
France 1.9%
Australia 0.8%
</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.
- ---------------------------
/1/ Source: (c) 1996 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of 4/30/96.
The ratings are subject to change every month. Morningstar ratings are
calculated from a fund's three-, five-, and ten-year average annual returns
(where applicable) in excess of 90-day Treasury bill returns with appropriate
fee and sales charge adjustments and a risk factor that reflects fund
performance below 90-day Treasury bill returns. Morningstar rates funds against
their peers in the same category. The Goldman Sachs Global Income Fund (Class
A) is rated against 875 taxable bond funds for the three-year period; the fund's
Institutional shares are not rated. In all, there are four Morningstar
categories (equity, fixed income, municipal and hybrid). Morningstar ratings
range from five stars (highest) to one star (lowest). Funds with five-star
ratings are in the top 10% of their category, four-star ratings in the next
22.5%, three stars the next 35%, two stars the next 22.5% and one star the
lowest 10% of their categories.
. Dollar Bloc. As of April 30, the fund was underweighted in the dollar bloc
countries relative to the Index (35.1% compared with 41.8%).
U.S. Although U.S. Treasuries remain the fund's largest position at 31.5%,
they were significantly underweighted relative to the Index (37.7%), a strategy
that worked in the fund's favor when Treasuries were hurt by rising rates during
the latter half of the period.
Other Dollar Bloc. We reduced the fund's position in Canada to 2.8%, nearly
in line with the Index (2.9%), and held a minor position in Australia (0.8%) as
of April 30.
. Europe. European bonds were among the best performers during the period. As
a result, the fund's 49.8% European position, which was overweighted relative to
the Index (43.1%), generally contributed to the fund's positive performance.
Germany. Germany, the leading "core" European economy, is experiencing a
cyclical economic downturn. To stimulate economic growth while maintaining a
tight fiscal policy, Germany aggressively eased its monetary policy during the
period, lowering yields on both short- and long-term fixed income securities.
The fund's position in German bonds has more than doubled to 14.4%, overweighted
versus the Index allocation of 10.2%.
Sweden, Italy and Spain. During the period, we increased the fund's overall
weighting in the higher yielding European bonds by establishing positions in
Sweden and Italy. We significantly overweighted Sweden relative to the Index
(8.9% versus 2.0%), due to its accommodative monetary policy and unexpectedly
low rate of inflation. We were also generally positive on Italian bonds (4.9%),
and reestablished a position approximately in line with the Index (4.7%).
However, political uncertainty caused us to reduce the fund's position in Spain,
another higher yielding bond market, to 1.9% from 5.0% six months ago. By the
end of April, with elections over, both Italy and Spain were enjoying bond
rallies.
U.K. We aggressively cut the fund's position in the U.K. in December and
January as the Conservative
- --------------------------------------------------------------------------------
9
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund (continued)
- --------------------------------------------------------------------------------
government lost popularity and the economy responded to an uptick in retail
spending. However, by the end of the period we began rebuilding the fund's
position in the U.K. in anticipation of a slowdown in the U.K.'s economic
recovery, which would help valuations of U.K. bonds relative to other European
bonds. As of April 30, the fund was overweighted in the U.K. relative to the
Index (10.4% versus 5.9%).
Ireland. In April, we added a small fund position in Ireland (2.6%) to
participate in its promising bond market, which contributed to the fund's
performance in that brief period.
Denmark. To benefit from Denmark's favorable bond market environment of
moderate economic growth, low inflation and monetary policy easing, we
established a new 2.5% portfolio position, which was basically in line with the
Index (2.0%).
Belgium. Belgium, a 2.3% position, was underweighted compared with the
Index allocation of 3.4%. We expect Belgium's bond market to benefit when the
European monetary union is formed.
France. We dramatically cut the fund's position in France to 1.9% from 8.1%
six months ago because our analysis indicated that French bonds did not offer
investors a sufficient risk premium.
. Japan. We continued to have an unfavorable view of Japanese bonds during
the period and consequently cut the fund's position in JGBs to 4.1%, down
approximately two-thirds from six months ago, and significantly underweighted
compared with the Index's 15.1% allocation. This strategy helped our performance
relative to the benchmark's as the Japanese market came under pressure due to
its strengthening economy, widening fiscal deficit and weakening yen.
. Cash Equivalents. We reduced the fund's position in cash equivalents to
11.0%, down from 16.4% six months ago, in order to take advantage of attractive
investment opportunities.
. Credit Quality. The portfolio was 100% invested in triple-A-rated
securities as of April 30.
. Duration. As of April 30, the fund's duration was 4.90 years (nearly the
same as the Index's duration of 4.91 years), primarily due to its underweighting
in Japan and its cash equivalent position. (Duration is a measurement of the
fund's sensitivity to interest rate movements; the shorter the duration, the
less the fund's net asset value [NAV] should move in relation to interest rate
fluctuations.)
Distribution Policy
The fund declares and pays dividends on a monthly basis. During the period
under review, the fund's Class A and Institutional shares paid out distributions
of $1.04 and $1.07 per share, respectively. The fund distributes substantially
all of its taxable income, as is required for all investment companies.
Fund Outlook: European Markets Favored
In general, we have a moderately positive view of European bonds based on
expectations for lower interest rates and relative economic weakness. In the
near term, we expect to remain overweighted in the "core" European markets such
as Germany because of their weak economies. In the higher yielding European
markets (e.g., Italy and Spain), our strategy is to take advantage of attractive
opportunities while remaining vigilant in monitoring political and economic
risks. In addition, we believe that the U.K. and Ireland have the potential to
outperform in the medium term. Longer term, European bond performance may be
significantly affected by whether the European monetary union takes place. At
this point, we believe that the monetary union will go forward on schedule for
political reasons, which would potentially benefit the bond markets of those
countries that are admitted.
In the dollar bloc, we are neutral on U.S. Treasuries, which we believe are
fairly valued, and are negative on Canada. We will consider increasing the
fund's small
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund (continued)
- --------------------------------------------------------------------------------
position in Australian bonds if and when the Australian market's risk/return
trade-off improves. Finally, in Japan we expect bond yields to move higher in
the near term and therefore remain underweighted, but we will watch the Japanese
bond market closely for indications of improving conditions.
We appreciate your investment in the Goldman Sachs Global Income Fund and
look forward to continuing to help you achieve your investment goals.
Sincerely,
/s/ Stephen C. Fitzgerald
Stephen C. Fitzgerald
Portfolio Manager, Fixed Income Investments
/s/ Andrew F. Wilson
Andrew F. Wilson
Portfolio Manager, Fixed Income Investments
/s/ Gareth I. Evans
Gareth I. Evans
Portfolio Manager, Currency
Goldman Sachs Global Income Fund
London, June 7, 1996
- --------------------------------------------------------------------------------
11
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount(a) Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt Obligations--86.8%
Australian Dollar--0.8%
Commonwealth of Australia
AUD 3,000,000 7.50% 07/15/05 $ 2,185,637
- --------------------------------------------------------------------------------
Belgian Franc--2.3%
Kingdom of Belgium
BEF 185,000,000 6.50% 03/31/05 $ 5,873,809
- --------------------------------------------------------------------------------
British Pound Sterling--10.2%
United Kingdom Treasury
BPS 8,000,000 9.00% 03/03/00 $ 12,712,502
9,000,000 8.50 12/07/05 13,988,453
- --------------------------------------------------------------------------------
$ 26,700,955
- --------------------------------------------------------------------------------
Canadian Dollar--2.7%
Government of Canada
CAD 4,000,000 7.50% 09/01/00 $ 2,998,898
6,000,000 6.50 06/01/04 4,108,720
- --------------------------------------------------------------------------------
$ 7,107,618
- --------------------------------------------------------------------------------
Danish Krone--2.4%
Kingdom of Denmark
DKK 33,000,000 9.00% 11/15/00 $ 6,252,102
- --------------------------------------------------------------------------------
Deutsche mark--14.1%
Federal Republic of Germany
DEM 21,500,000 7.12% 12/20/02 $ 15,038,620
17,300,000 6.75 07/15/04 11,735,692
12,000,000 7.38 01/03/05 8,420,310
Federal Republic of Germany Unity Fund
2,000,000 8.75 07/20/00 1,476,835
- --------------------------------------------------------------------------------
$ 36,671,457
- --------------------------------------------------------------------------------
French Franc--1.9%
Government of France
FRF 10,000,000 7.00% 11/12/99 $ 2,055,780
13,000,000 8.50 03/28/00 2,803,512
- --------------------------------------------------------------------------------
$ 4,859,292
- --------------------------------------------------------------------------------
Irish Pound--2.5%
Republic of Ireland
IEP 4,000,000 8.00% 10/18/00 $ 6,518,288
- --------------------------------------------------------------------------------
Italian Lira--4.9%
Republic of Italy
ITL 19,000,000,000 10.50% 11/01/00 $ 12,803,572
- --------------------------------------------------------------------------------
Japanese Yen--3.9%
International Bank for Reconstruction & Development
JPY 700,000,000 6.75% 06/18/01 $ 7,972,417
Japanese Development Bank
200,000,000 6.50 09/20/01 2,264,688
- --------------------------------------------------------------------------------
$ 10,237,105
- --------------------------------------------------------------------------------
Spanish Peseta--1.9%
Government of Spain
ESP 450,000,000 10.00% 02/28/05 $ 3,721,026
Kingdom of Spain
150,000,000 10.15 01/31/06 1,251,899
- --------------------------------------------------------------------------------
$ 4,972,925
- --------------------------------------------------------------------------------
Swedish Krona--8.2%
Kingdom of Sweden
SEK 40,000,000 13.00% 06/15/01 $ 7,218,341
85,000,000 10.25 05/05/03 14,079,108
- --------------------------------------------------------------------------------
$ 21,297,449
- --------------------------------------------------------------------------------
United States Dollar--31.0%
United States Treasury Notes
USD 10,000,000 6.88% 07/31/99 $ 10,168,700
18,000,000 5.25 01/31/01 17,181,540
10,500,000 6.38 03/31/01 10,480,260
8,200,000 6.25 02/15/03 8,057,812
10,000,000 7.88 11/15/04 10,764,100
24,500,000 6.50 08/15/05 24,163,125
- --------------------------------------------------------------------------------
$ 80,815,537
- --------------------------------------------------------------------------------
Total Debt Obligations
(Cost $229,518,189) $226,295,746
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount(a) Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Obligations--9.7%
Euro-Time Deposit-Chemical Bank London
USD 25,291,098 5.25% 05/01/96 $ 25,291,098
- --------------------------------------------------------------------------------
Total Short-Term Obligations
(Cost $25,291,098) $ 25,291,098
- --------------------------------------------------------------------------------
Total Investments
(Cost $254,809,287(b)) $251,586,844
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost $ 2,388,403
Gross unrealized loss for investments in which cost
exceeds value (5,661,519)
- --------------------------------------------------------------------------------
Net unrealized loss $ (3,273,116)
- --------------------------------------------------------------------------------
</TABLE>
(a) The principal amount of each security is stated in the currency in which the
bond is denominated. See below.
AUD = Australian Dollar IEP = Irish Pound
BEF = Belgian Franc ITL = Italian Lira
BPS = British Pound Sterling JPY = Japanese Yen
CAD = Canadian Dollar ESP = Spanish Peseta
DKK = Danish Krone SEK = Swedish Krona
DEM = Deutsche mark USD = United States Dollar
FRF = French Franc
(b)The aggregate cost for federal income tax purposes is $254,859,960.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund
- --------------------------------------------------------------------------------
Investment Objective
The Goldman Sachs Municipal Income Fund seeks to provide a high level of
current income that is exempt from regular federal income tax, consistent with
the preservation of capital. In pursuit of its objective, the fund invests in a
diversified portfolio of municipal securities with a weighted average credit
quality of double-A or better. The fund buys only investment-grade securities
or, if unrated, deemed to be of comparable quality. Under normal interest rate
conditions, the fund's duration is expected to be within one year of its
benchmark, the Lehman Brothers 15-Year Municipal Bond Index. The fund's
approximate interest rate sensitivity is comparable to that of a 15-year bond.
Special Event
As of May 1, 1996, the fund added a new share class (Class B), which is
subject to a contingent deferred sales charge but no up-front sales charge.
Municipal Bonds Outperformed Treasuries
The municipal bond market provided positive returns during the six-month
period ended April 30, 1996, but as was the case with taxable bonds, municipals
came under pressure due to rising yields and falling prices. Even so, municipals
outperformed Treasuries as their prices depreciated less. The average price of a
15-year municipal bond (as calculated from data provided by Municipal Market
Data, an independent municipal market information provider) fell 2.08%, while
yields rose from 5.35% on October 31, 1995 to 5.55% on April 30, 1996.
The municipal bond market began the period under review in a holding
pattern. During November and December 1995, many investors shied away from
municipal bonds. Some were lured by the robust equity market, while others were
skittish amid talk of tax reform. While demand was declining, the supply of
municipal bonds significantly expanded due to an increase in refinancings of old
issues at lower rates and the desire of issuers to close transactions by
year-end. This pressure created an unfavorable technical balance and hurt
municipal bond prices. Conditions improved during January and February 1996. The
collapse of Steve Forbes's presidential campaign, which emphasized a flat tax,
diminished public debate on the subject and helped stimulate demand for
municipals. In addition, new supply fell off during the first two months of the
year, traditionally a period of low issuance, further helping the market's
technical balance. In March, an increase in secondary market supply briefly
overwhelmed demand. However, the municipal bond market reestablished its
technical balance during April, when supply eased once again.
By the end of the period, the slight steepening in the municipal bond yield
curve resulted in longer term municipal bonds suffering negative returns while
shorter term bonds eked out positive returns.
Municipal Bond Yield Curve
[MUNICIPAL BOND YIELD CHART APPEARS HERE]
<TABLE>
<CAPTION>
4/30/96 10/31/95
------- --------
<S> <C> <C>
1997 3.65 3.90
1998 4.05 4.10
1999 4.25 4.20
2000 4.45 4.30
2001 4.55 4.40
2002 4.65 4.50
2003 4.75 4.60
2004 4.85 4.70
2005 4.95 4.80
2006 5.05 4.95
2007 5.15 5.05
2008 5.25 5.15
2009 5.35 5.25
2010 5.45 5.35
2011 5.55 5.40
2012 5.60 5.45
2013 5.65 5.50
2014 5.70 5.55
2015 5.75 5.55
2016 5.75 5.55
2017 5.75 5.55
2018 5.75 5.55
2019 5.80 5.60
2020 5.80 5.60
2021 5.80 5.60
2022 5.80 5.60
2023 5.80 5.60
2024 5.80 5.60
2025 5.80 5.60
</TABLE>
The yield curve shifted upward during the period as bond prices declined.
Performance Review
- --------------------------------------------------------------------------------
Performance Summary: October 31, 1995 - April 30, 1996
- --------------------------------------------------------------------------------
[S] [C] [C]
Lehman Brothers
15-Year Municipal
Fund Bond Index
---- ----------
Total Return (based on net asset value) 1.26% 1.15%
- --------------------------------------------------------------------------------
Return From Monthly Distributions 2.23% NA
- --------------------------------------------------------------------------------
Return From Price Depreciation -0.97% NA
- --------------------------------------------------------------------------------
NAV (as of 4/30/96) $14.03 NA
- --------------------------------------------------------------------------------
NAV Change -$0.14 NA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund (continued)
- --------------------------------------------------------------------------------
During the period under review, the fund outperformed its benchmark, the
Lehman Brothers 15-Year Municipal Bond Index (the "Index"), for two main
reasons: the positive performance of specific securities and the fund's targeted
term structure.
. The fund benefited from extensive fundamental research, which enabled us to
identify individual securities with particularly attractive potential. For
example, the fund invested in a number of "story" bonds with unique credit
characteristics or security structures. The value of these bonds went
unrecognized by the market because they were generally not well understood.
. During the period under review, the fund shifted from a "barbell" term
structure (emphasizing bonds with maturities of 20 years on the long end and
five years or less on the short end of the yield curve) to a more targeted term
structure. The fund purchased 10- to 15-year bonds when we determined they were
undervalued. They contributed to the fund's positive performance when
intermediate-term bonds outperformed other securities on a duration-weighted
basis. In late February, the fund reduced its intermediate-term bond position
and reestablished a "barbell" of shorter and longer term bonds, which has
neither hurt nor helped performance as of April 30. In addition, the fund
benefited from a position in financial futures, which were bought when they were
more attractively priced than similar-duration longer term bonds.
We are pleased to report that the fund did well compared with its peers.
For the 12 months ended April 30, 1996, the fund ranked 46th out of 227 funds
(the top quartile) in Lipper Analytical Services, Inc.'s general municipal debt
category. (Please note that Lipper rankings do not take sales charges into
account and that past performance is not a guarantee of future results.)
Portfolio Composition and Investment Strategies: Emphasis on Revenue Bonds
Over GOs
Portfolio Composition as of April 30, 1996*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Insured Revenue Bonds 46.0%
Revenue Bonds 28.0%
Insured General Obligations 12.0%
General Obligations 7.0%
Variable Rate Demand Notes 7.0%
</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.
. Revenue Bonds. As of the end of the period, insured and uninsured revenue
bonds accounted for 74% of the portfolio, up from 63.5% six months ago and
overweighted compared with the Index allocation of 54.0%. (Revenue bonds pay
interest and principal out of a specific revenue stream, such as sales taxes,
hospital charges, tolls, electric rates and airport fees. Revenue bonds
generally offer a wider range of credit qualities and higher incremental yield
than general obligation bonds.)
. General Obligation (GO) Bonds. The fund reduced its position in GOs, which
are backed by the general taxing power of a municipality, in order to stress
revenue bonds trading at wider yield spreads. At the end of the period, the fund
significantly underweighted the GO sector relative to the Index, 19% versus 46%.
- --------------------------------------------------------------------------------
15
<PAGE>
Letters to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund (continued)
- --------------------------------------------------------------------------------
. Variable Rate Demand Notes (VRDNs). The fund held a 7.0% position (nearly
unchanged from six months ago) in VRDNs, which are high-quality cash
equivalents. VRDNs were used along with futures to manage the portfolio's
duration to match that of the Index at 8.9 years.
. Credit Quality. During the period, we emphasized higher credit-quality debt
over lower quality. As of April 30, the fund's positions in triple-A-rated and
double-A-rated bonds were 72.0% and 24.0%, respectively, both increased since
six months ago, while the fund's allocation in single-A-rated securities was
reduced to 4.0% from 12.4%. We employed a credit quality "barbell" during the
period, investing in higher quality securities at the long end of the yield
curve and relatively lower quality securities at the short end. The fund's
average credit quality has remained double-A. Many of the fund's security-
specific strategies involved bonds with high credit ratings that were treated
poorly by the market. We perceived a better risk/return relationship in these
securities than alternative investments.
Market Outlook
Looking forward, we do not anticipate any substantial changes in the
municipal bond market's technical balance in the near term: both supply and
demand are relatively weak. On the demand side, we expect that retail investors
(who account for approximately 65% of owners of municipals either through mutual
funds or direct investment) will continue to focus on the equity market in lieu
of municipal bonds. Municipal bond supply is likely to remain weak as well, due
to a decline in existing supply and a lack of refunding issuance in the higher
interest rate environment. Until investor demand improves, we anticipate that
municipal bond performance will be similar to that of the Treasury market. We
will continue to actively research attractive investment opportunities.
Distribution Policy
The fund paid out distributions of $0.32 per share during the period under
review. Dividends are declared daily and paid on a monthly basis. The fund
intends to distribute substantially all of its investment company tax-exempt and
taxable income, as required by tax law.
We appreciate your investment in the Goldman Sachs Municipal Income Fund
and we look forward to continuing to serve your investment needs in the future.
Sincerely,
/s/ Benjamin S. Thompson
Benjamin S. Thompson
/s/ Elisabeth Schupf Lonsdale
Elisabeth Schupf Lonsdale
Portfolio Managers
Goldman Sachs Municipal Income Fund
June 7, 1996
- --------------------------------------------------------------------------------
16
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt Obligations--98.1%
California--3.9%
San Francisco, CA City & County Apartments RB 2nd Series 8-B (FGIC) (AAA/Aaa)
$ 2,000,000 6.10% 05/01/25 $ 2,030,660
- --------------------------------------------------------------------------------
Florida--19.6%
Dade County, FL Guaranteed Entitlement Pre-refunded
Zero Coupon RB (AMBAC) (AAA/Aaa) (a)
$ 3,500,000 5.30% 08/01/10 $ 1,566,355
Escambia County, FL Housing Authority, Single Family
Multi-County Progress (Aaa)
2,300,000 6.80 10/01/15 2,396,761
Florida State Department of Transportation GO (AA/Aa)
2,205,000 5.80 07/01/21 2,153,579
Lakeland, FL Electric & Water Revenue Refunding, Jr. Sub
Lien (FGIC) (AAA/Aaa) (c)
2,500,000 5.25 10/01/97 2,539,951
Miami Beach Florida Resort Tax RB (AMBAC) (AAA/Aaa) (c)
1,470,000 6.25 10/01/22 1,558,685
- --------------------------------------------------------------------------------
$ 10,215,331
- --------------------------------------------------------------------------------
Georgia--3.3%
Fulton County, GA Water & Sewer RB (FGIC) (AAA/Aaa)
$ 1,610,000 6.25% 01/01/09 $ 1,735,258
- --------------------------------------------------------------------------------
Illinois--5.3%
Chicago, Il GO Series A-2 (AMBAC) (AAA/Aaa)
$ 1,750,000 6.25% 01/01/14 $ 1,845,708
Chicago, Il GO Series B (AMBAC) (AAA/Aaa)
1,000,000 5.13 01/01/15 928,620
- --------------------------------------------------------------------------------
$ 2,774,328
- --------------------------------------------------------------------------------
Indiana--6.5%
Indiana Transportation & Finance Authority RB Series A
(MBIA) (AAA/Aaa) (d)
$ 1,500,000 7.25% 06/01/15 $ 1,741,305
Indianapolis, IN Bond Bank RB Series A (AAA/Aaa) (d)
1,500,000 6.50 01/01/13 1,619,220
- --------------------------------------------------------------------------------
$ 3,360,525
- --------------------------------------------------------------------------------
Kentucky--3.8%
Nelson County, KY Industrial Building RB for Mabex
Universal Corp. Project (A3)
$ 1,900,000 6.50% 04/01/05 $ 2,002,885
- --------------------------------------------------------------------------------
Maine--1.5%
Maine Educational Loan Authority RB Series A-1 (Aaa)
$ 725,000 6.80% 12/01/07 $ 760,061
- --------------------------------------------------------------------------------
Michigan--3.2%
Williamston, MI Community School District GO (MBIA)
(AAA) (d)
$ 1,725,000 5.50% 05/01/25 $ 1,643,804
- --------------------------------------------------------------------------------
Missouri--3.3%
Kansas City, MO Municipal Assistance Corp. RB (MBIA)
(AAA/Aaa)
$ 1,745,000 4.70% 04/15/05 $ 1,704,132
- --------------------------------------------------------------------------------
Nebraska--4.4%
Nebraska Investment Finance Authority MF Hsg.
for Wycliffe West RB (FNMA) (AAA)
$ 1,790,000 5.50% 12/01/25 $ 1,784,630
Omaha, NE Package Facilities Corp. RB (AAA/Aa1)
500,000 5.70 09/15/15 493,510
- --------------------------------------------------------------------------------
$ 2,278,140
- --------------------------------------------------------------------------------
New York--14.5%
New York City GO Series G (FSA) (AAA)
$ 2,000,000 5.90% 02/01/05 $ 2,089,320
New York State Environmental Facilities Corp. PCR for
Water Revolving Fund (A-/Aa)
1,000,000 5.88 06/15/14 988,080
Port Authority of New York/New Jersey RB (AMBAC)
(AAA/Aaa)
3,000,000 4.75 01/15/26 2,489,760
Syracuse University IDA RB (AA)
2,000,000 5.13 10/15/02 1,992,220
- --------------------------------------------------------------------------------
$ 7,559,380
- --------------------------------------------------------------------------------
North Dakota--3.9%
Mercer County, ND PCR for Basin Electric & Power 2nd
Series (AMBAC) (AAA/Aaa)
$ 2,000,000 6.05% 01/01/19 $ 2,009,780
- --------------------------------------------------------------------------------
Pennsylvania--3.6%
Philadelphia, PA Municipal Authority COPs for
Philadelphia Gas Works (ASSETGTY) (AA)
$ 1,800,000 5.95% 10/01/00 $ 1,862,424
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt Obligations (continued)
Texas--12.4%
Lower Neches Valley, TX Industrial Development Corp. for
Mobil Oil RB (AA/Aa2)
$ 2,500,000 6.35% 04/01/26 $ 2,508,075
San Antonio, TX Electric & Gas Systems RB Series 1995
(MBIA) (AAA/Aaa)
2,500,000 5.38 02/01/16 2,361,450
Texas State AMT-Veterans Land GO (AA/Aa)
1,555,000 6.30 12/01/14 1,587,157
- --------------------------------------------------------------------------------
$ 6,456,682
- --------------------------------------------------------------------------------
Vermont--4.5%
Vermont Student Assistance Corp., Education Loan RB,
Series B (FSA) (AAA/Aaa)
$ 2,250,000 6.70% 12/15/12 $ 2,352,330
- --------------------------------------------------------------------------------
Wisconsin--4.4%
Wisconsin Housing & Economic Development Authority RB,
Series B (AA/Aa)(d)
$ 2,200,000 7.10% 09/01/15 $ 2,304,984
- --------------------------------------------------------------------------------
Total Debt Obligations
(Cost $51,075,020) $ 51,050,704
- --------------------------------------------------------------------------------
Short-Term Obligations--8.1%
Burke County, GA PCR Adjustable 2nd Series for Georgia Power
Co.(b) (A+/A1)
$ 1,800,000 4.16% 05/01/96 $ 1,800,000
Columbia, Al IDB Adj. Refunding Series C for Alabama
Power Co. Project(b) (A/A2)
1,400,000 3.72 05/01/96 1,400,000
Illinois Health Facility Authority VRDN for Elmhurst
Memorial Hospital(b) (A1)
700,000 3.50 05/01/96 700,000
City of Forsyth, Rosebud County, MT PCR for Pacificorp
(Industrial Bank of Japan LOC)(b) (A+/A1)
200,000 3.55 05/01/96 200,000
New York City GO Series E-5(b) (A/A1)
100,000 3.35 05/01/96 100,000
- --------------------------------------------------------------------------------
Total Short-Term Obligations
(Cost $4,200,000) $ 4,200,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $55,275,021(e)) $ 55,250,704
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value $ 528,113
exceeds cost
Gross unrealized loss for investments in which cost (561,380)
exceeds value
- --------------------------------------------------------------------------------
Net unrealized loss $ (33,267)
- --------------------------------------------------------------------------------
</TABLE>
(a)The interest rate disclosed for these securities represents effective yields
to maturity.
(b)Securities with "Put" features with resetting interest rates. Maturity dates
disclosed are the next reset interest dates.
(c)When-issued securities.
(d)Portions of these securities are being segregated for when-issued securities.
(e)The aggregate cost for federal income tax purposes is $55,283,971.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
- --------------------------------------------------------------------------------
Investment Abbreviations:
AMBAC -- Insured by American Municipal Bond
Assurance Corp.
AMT -- Alternative Minimum Tax
ASSETGTY -- Asset Guaranty
COP -- Certificate of Participation
FGIC -- Insured by Financial Guaranty Insurance Co.
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance Co.
GO -- General Obligation Bond
IDA -- Industrial Development Authority
IDB -- Industrial Development Bond
LOC -- Letter of Credit
MBIA -- Insured by Municipal Bond Investors
Assurance
MF Hsg. -- Multi-Family Housing
PCR -- Pollution Control Revenue
RB -- Revenue Bond
VRDN -- Variable Rate Demand Note
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Global Municipal
Income Income Income
Fund Fund Fund
--------------------------------------
<S> <C> <C> <C>
Assets:
Investments in securities, at value
(cost $39,017,025, $254,809,287
and $55,275,021) $38,499,287 $251,586,844 $55,250,704
Receivables:
Investment securities sold 5,953,430 -- 3,746,873
Interest 246,842 7,030,695 710,472
Forward foreign currency exchange
contracts -- 3,851,130 --
Fund shares sold 15,740 22,716 118,733
Cash 138,015 477,884 140,334
Deferred organization expenses, net 33,473 15,644 38,935
Other assets 74,591 26,882 43,931
- -------------------------------------------------------------------------------
Total assets 44,961,378 263,011,795 60,049,982
- -------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased 14,730,163 -- 7,811,253
Covered short sale (proceeds
received $943,281) 937,812 -- --
Forward foreign currency exchange
contracts -- 1,936,613 --
Fund shares repurchased 35,478 37,783 28,184
Variation margin 7,487 -- --
Investment adviser fees 5,985 94,318 17,111
Administration fees -- 32,154 6,417
Authorized dealer service fees 5,985 46,558 10,694
Distribution fees -- 39,108 --
Transfer agent fees 24,592 38,103 25,745
Accrued expenses and other liabilities 64,394 80,564 102,763
- -------------------------------------------------------------------------------
Total liabilities 15,811,896 2,305,201 8,002,167
- -------------------------------------------------------------------------------
Net assets:
Paid in capital 29,540,167 263,918,785 53,277,678
Accumulated undistributed net
investment income 32,212 5,035,425 42,738
Accumulated net realized gain (loss)
on investment, options and futures
transactions 113,297 (8,237,148) (1,248,284)
Accumulated net realized foreign
currency gain -- 1,970,115 --
Net unrealized gain (loss) on
investments and futures (536,194) 1,890,892 (24,317)
Net unrealized loss on translation
of assets and liabilities denominated
in foreign currencies -- (3,871,475) --
- -------------------------------------------------------------------------------
Net assets $29,149,482 $260,706,594 $52,047,815
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class A Institutional
------- -------------
<S> <C> <C> <C> <C>
Net asset value and redemption price
per share (net assets/shares
outstanding) $14.11 $14.03 $14.02 $14.03
- -------------------------------------------------------------------------------
Maximum public offering price per
share (NAV per share x 1.0471)(a) $14.77 $14.69 $14.02 $14.69
- -------------------------------------------------------------------------------
Shares outstanding, $.001 par value
(unlimited number of shares
authorized) 2,066,550 16,060,823 2,526,233 3,710,021
- -------------------------------------------------------------------------------
(a) The Global Income Fund's Institutional shares maximum public offering price
is equivalent to the net asset value per share.
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Operations
For the Six Months Ended April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Global Municipal
Income Income Income
Fund Fund Fund
--------------------------------------
<S> <C> <C> <C>
Investment income:
Interest/(a)/ $1,015,004 $9,319,568 $1,448,643
- -------------------------------------------------------------------------------
Total income 1,015,004 9,319,568 1,448,643
- -------------------------------------------------------------------------------
Expenses:
Investment adviser fees 74,833 1,011,749 107,597
Administration fees 22,450 202,349 40,349
Authorized dealer service fees 37,417 294,710 67,248
Distribution fees 37,417 294,710 67,248
Custodian fees 19,857 109,714 17,373
Transfer agent fees 42,225 63,429 47,389
Professional fees 27,661 61,310 27,320
Amortization of deferred organization
expenses 9,373 30,612 8,748
Trustee fees 206 1,505 363
Other 5,188 64,783 25,014
- -------------------------------------------------------------------------------
Total expenses 276,627 2,134,871 408,649
Less--expenses reimbursable and fees
waived by Goldman Sachs (201,794) (653,411) (180,005)
- -------------------------------------------------------------------------------
Net expenses 74,833 1,481,460 228,644
- -------------------------------------------------------------------------------
Net investment income 940,171 7,838,108 1,219,999
- -------------------------------------------------------------------------------
Realized and unrealized gain (loss) on
investment, options, futures and foreign
currency transactions:
Net realized gain (loss) from:
Investment transactions 269,717 5,008,358 1,300,751
Option transactions -- (202,160) --
Futures transactions (63,080) -- (284,455)
Foreign currency related transactions -- (473,432) --
Net change in unrealized gain (loss) on:
Investments (921,076) (2,919,821) (1,528,531)
Futures (23,925) -- --
Translation of assets and liabilities
denominated in foreign currencies -- 2,288,052 --
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment, options, futures and
foreign currency transactions (738,364) 3,700,997 (512,235)
- -------------------------------------------------------------------------------
Net increase in net assets resulting
from operations $201,807 $11,539,105 $707,764
- -------------------------------------------------------------------------------
</TABLE>
/(a)/Net of $5,901 in foreign withholding tax for the Global Income Fund.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Six Months Ended April 30, 1996
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Government Global Municipal
Income Income Income
Fund Fund Fund
----------------------------------------------
<S> <C> <C> <C>
From operations:
Net investment income $ 940,171 $ 7,838,108 $ 1,219,999
Net realized gain from investment, options and futures transactions 206,637 4,806,198 1,016,296
Net realized loss from foreign currency related transactions -- (473,432) --
Net change in unrealized loss on investments and futures (945,001) (2,919,821) (1,528,531)
Net change in unrealized gain on translation of assets and
liabilities denominated in foreign currencies -- 2,288,052 --
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 201,807 11,539,105 707,764
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (944,210) (19,444,510)(a) (1,219,999)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (944,210) (19,444,510) (1,219,999)
- ----------------------------------------------------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 3,914,529 11,727,147 4,043,896
Reinvestment of dividends and distributions 805,311 12,422,844 770,419
Cost of shares repurchased (4,330,554) (32,992,341) (6,051,499)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
share transactions 389,286 (8,842,350) (1,237,184)
- ----------------------------------------------------------------------------------------------------------------------
Total decrease (353,117) (16,747,755) (1,749,419)
Net assets:
Beginning of period 29,502,599 277,454,349 53,797,234
- ----------------------------------------------------------------------------------------------------------------------
End of period $29,149,482 $260,706,594 $ 52,047,815
- ----------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income $ 32,212 $ 5,035,425 $ 42,738
- ----------------------------------------------------------------------------------------------------------------------
Summary of share transactions:
Shares sold 269,811 821,816 281,950
Reinvestment of dividends and distributions 55,660 877,975 53,627
Shares repurchased (297,277) (2,310,074) (421,868)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 28,194 (610,283) (86,291)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Global Income Fund distributed $16,972,035 and $2,472,475 from net
investment income for the Class A and Institutional class of shares,
respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended October 31, 1995
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Government Global Municipal
Income Income Income
Fund Fund Fund
----------------------------------------
<S> <C> <C> <C>
From operations:
Net investment income $1,357,262 $19,658,884 $2,466,930
Net realized gain from investment transactions 603,048 5,556,002 938,332
Net realized gain from foreign currency related transactions -- 18,804,029 --
Net change in unrealized gain on investments 902,391 14,759,004 3,055,111
Net change in unrealized loss on translation of assets and liabilities
denominated in foreign currencies -- (15,288,240) --
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,862,701 43,489,679 6,460,373
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (1,361,620) (20,883,123)(a) (2,466,930)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1,361,620) (20,883,123) (2,466,930)
- ----------------------------------------------------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 15,973,014 53,349,100 11,879,853
Reinvestment of dividends and distributions 1,123,498 13,008,610 1,551,121
Cost of shares repurchased (3,546,816) (208,094,050) (11,000,210)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from share transactions 13,549,696 (141,736,340) 2,430,764
- ----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) 15,050,777 (119,129,784) 6,424,207
Net assets:
Beginning of year 14,451,822 396,584,133 47,373,027
- ----------------------------------------------------------------------------------------------------------------------
End of year $29,502,599 $277,454,349 $53,797,234
- ----------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income $ 36,251 $ 16,641,827 $ 42,738
- ----------------------------------------------------------------------------------------------------------------------
Summary of share transactions:
Shares sold 1,139,008 3,822,903 876,447
Reinvestment of dividends and distributions 80,152 935,191 113,767
Shares repurchased (253,583) (15,079,626) (816,569)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 965,577 (10,321,532) 173,645
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Global Income Fund distributed $20,322,640 and $560,483 from net
investment income for the Class A and Institutional class of shares,
respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
1. Organization
Goldman Sachs Trust (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end, management
investment company. Included in this report are the financial statements for the
Goldman Sachs Government Income Fund (Government Income), the Goldman Sachs
Global Income Fund (Global Income) and the Goldman Sachs Municipal Income Fund
(Municipal Income), collectively, "the Funds" or individually a "Fund."
Government Income and Municipal Income are diversified portfolios whereas Global
Income is a non-diversified portfolio. As of April 30, 1996, Global Income
currently offers three classes of shares - Class A, Institutional and Service
shares. However, no Service shares are outstanding.
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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts.
A. Investment Valuation
- ------------------------
Investments in debt securities, other than money market instruments, held by
Global Income are valued on the basis of dealer-supplied quotations or by a
pricing service approved by the Board of Trustees if such prices are believed by
the investment adviser to accurately represent market value. The prices derived
by a pricing agent reflect broker/dealer-supplied valuations and electronic data
processing techniques. If those prices are not deemed by the Fund's Investment
Adviser to be representative of the market values at the time the net asset
value is calculated, then such securities will be valued at fair value as
described below. Options and futures contracts are valued at the last sale price
on the market where any such option or futures contract is principally traded.
Forward foreign currency exchange contracts are valued at the mean between the
last bid and asked quotations supplied by a dealer in such contracts. All other
securities and other assets, including debt securities, for which prices are
supplied by a pricing agent but are not deemed by the Fund's Investment Adviser
to be representative of market values, restricted securities and securities for
which no market quotation is available, but excluding money market instruments
with a remaining maturity of sixty days or less, are valued at fair value as
determined in good faith pursuant to procedures established by the Board of
Trustees. Money market instruments held by the Fund with a remaining maturity of
sixty days or less will be valued by the amortized cost method, which
approximates market value.
Investments in portfolio securities held by Government Income and Municipal
Income for which accurate market quotations are readily available are valued on
the basis of quotations furnished by a pricing service or provided by dealers in
such securities. Portfolio securities held by Government Income and Municipal
Income, for which accurate market quotations are not readily available are
valued at fair value using methods determined in good faith under procedures
established by the Trust's Board of Trustees and may include yield equivalents
or a pricing matrix. Exchange traded options and futures contracts will be
valued by the investment adviser at the last sale price on the exchange where
such contracts and options are principally traded. Short-term debt obligations
maturing in sixty days or less are valued at amortized cost.
B. 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. Premiums on
interest-only securities and on collateralized mortgage obligations with
nominal
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
principal amounts are amortized, on an effective yield basis, over the expected
lives of the respective securities, taking into account principal prepayment
experience and estimates of future principal prepayments. Certain mortgage
security paydown gains and losses are taxable as ordinary income. Such paydown
gains and losses increase or decrease taxable ordinary income available for
distribution and are classified as interest income in the accompanying
Statements of Operations. Original issue discounts ("OID") 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. OID amortization on
mortgage backed REMIC securities is initially recorded based on estimates of
principal paydowns using the most recent OID factors available from the issuer.
Recorded amortization amounts are adjusted when actual OID factors are received.
For Municipal Income, market premiums on other long-term debt securities are
amortized to interest income while for Global Income, market discounts on other
long-term debt securities are accreted to interest income.
C. Foreign Currency Translations
- ---------------------------------
Amounts denominated in foreign currencies are translated into U.S. dollars on
the following basis: (i) investment valuations, other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based upon current exchange rates; (ii) purchases and sales of
foreign investments, income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Net realized and unrealized gain (loss) on foreign currency transactions will
represent: (i) foreign exchange gains and losses from the sale and holdings of
foreign currencies and investments; (ii) gains and losses between trade date and
settlement date on investment securities transactions and forward exchange
contracts; and (iii) gains and losses from the difference between amounts of
interest recorded and the amounts actually received.
D. Forward Foreign Currency Exchange Contracts
- -----------------------------------------------
Global Income may enter into forward foreign exchange contracts for the purchase
or sale of a specific foreign currency at a fixed price on a future date as a
hedge or cross-hedge against either specific transactions or portfolio
positions. Global Income may also purchase and sell forward contracts to seek to
increase total return. The aggregate principal amounts of the contracts for
which delivery is anticipated are reflected in the Fund's accounts, while the
aggregate principal amounts are reflected net in the accompanying Statements of
Assets and Liabilities if the Fund intends to settle the contract prior to
delivery. All commitments are "marked-to-market" daily at the applicable
translation rates and any resulting unrealized gains or losses are recorded in
the Fund's financial statements. The Fund records realized gains or losses at
the time the forward contract is offset by entry into a closing transaction or
extinguished by delivery of the currency. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
E. Mortgage Dollar Rolls
- -------------------------
Government Income and Global Income may enter into mortgage "dollar rolls" in
which the Fund sells securities in the current month for delivery and
simultaneously contracts with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Fund loses the right to receive principal and interest paid on the
securities sold but benefits to the extent of any price received for the
securities sold and the lower forward price for the future purchase (often
referred to as the "drop") or fee income plus the interest earned on the cash
proceeds of the securities sold until the settlement date of the forward
purchase. The Fund will hold and maintain in a segregated account, until the
settlement date, cash or liquid, high grade debt securities in an amount equal
to the forward purchase price. For financial reporting and tax reporting
purposes, the Fund treats mortgage dollar
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
rolls as two separate transactions; one involving the purchase of a security and
a separate transaction involving a sale.
F. Option Accounting Principles
- --------------------------------
When call or put options are written, an amount equal to the premium received is
recorded as an asset and as an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. When a written option expires on its stipulated expiration date,
or a closing purchase transaction has been entered into, a gain or loss is
realized without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. When a
written call option is exercised, a gain or loss is realized from the sale of
the underlying security, and the proceeds of the sale are increased by the
premium originally received. When a written put option is exercised, the amount
of the premium originally received will reduce the cost of the security
purchased upon exercise. There is a risk of loss from a change in value of such
options which may exceed the related premiums received.
Upon the purchase of a call option or a protective put option, the premium paid
is recorded as an investment, and subsequently marked-to-market to reflect the
current market value of the option. If an option which has been purchased
expires on the stipulated expiration date, a loss is realized in the amount of
the cost of the option. If a closing sale transaction has been entered into, a
gain or loss is realized, depending on whether the sale proceeds from the
closing sale transaction are greater or less than the cost of the option. If a
purchased put option is exercised, a gain or loss from the sale of the
underlying security is realized, and the proceeds from such sale will be
decreased by the premium originally paid. If a purchased call option is
exercised, the cost of the security purchased upon exercise will be increased by
the premium originally paid.
G. Futures Contracts
- ---------------------
The Funds may enter into futures transactions in order to hedge against changes
in interest rates, securities prices, currency exchange rates in the case of
Global Income or to seek to increase total return. A Fund will engage in futures
transactions only for bona fide hedging purposes as defined in regulations of
the CFTC or to seek to increase total return to the extent permitted by such
regulations. 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.
Upon entering into a futures contract, the Funds are required to deposit with a
broker an amount of cash or securities equal to the minimum "initial margin"
requirement of the futures exchange on which the contract is traded. Subsequent
payments ("variation margin") are made or received by the Funds each day,
dependent on the daily fluctuations in the value of the contract, and are
recorded for financial reporting purposes, as unrealized gains or losses. When
entering into a closing transaction, the Funds will realize a gain or loss equal
to the difference between the value of the futures contract to sell and the
futures contract to buy. Futures contracts are valued at the most recent
settlement price, unless such price does not reflect the fair market value of
the contract, in which case the position will be valued using methods as
approved by the Funds' Board of Trustees.
Certain risks may arise upon entering into futures contracts. The predominant
risk is that changes in the value of the futures contract that may not directly
correlate with changes in the value of the underlying securities. The risk may
decrease the effectiveness of the Funds' hedging strategies and may also result
in a loss to the Funds.
H. Short Securities Positions
- ------------------------------
The Funds may enter into covered short sales. Short securities positions are
accounted for at cost and subsequently marked to market to reflect the current
- --------------------------------------------------------------------------------
25
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
market value of the position. The market value of the short position is recorded
as a liability on the fund's records and any difference between this market
value and cash received is reported as unrealized gain or loss. Gains and losses
are realized when a short position is closed out by delivering securities back
to the broker.
At April 30, 1996, Government Income had the following short position open:
- ---------------------------------------------------
Short Position
Issuer Par Value Market Value
- -------------------- ---------- ------------
FNMA TBA 30-Year $1,000,000 $937,812
- ---------------------------------------------------
I. Federal Taxes
- -----------------
It is each Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute each year
substantially all investment company tax-exempt and taxable income to its
shareholders. Accordingly, no federal tax provisions are required.
The characterization of distributions to shareholders for financial reporting
purposes is determined in accordance with income tax rules. Therefore, the
source of a portfolio's distributions may be shown in the accompanying financial
statements as either from or in excess of net investment income or net realized
gain on investment transactions, or from paid-in capital, depending on the type
of book/tax differences that may exist.
At April 30, 1996, the Funds had approximately the following amounts of capital
loss carryforward for U.S. Federal tax purposes:
Year of
Fund Amount Expiration
- --------------------------- ----------- ----------
Government Income $62,478 2002
Global Income $10,295,502 2002
Municipal Income $1,534,882 2002
J. Deferred Organization Expenses
- ----------------------------------
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
K. Expenses
- ------------
Expenses incurred by the Trust that do not specifically relate to an individual
portfolio of the Trust are allocated to the portfolios based on each portfolio's
relative average net assets for the period.
Class A shareholders of Global Income 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. Each class has its own transfer agency
fee arrangement with the Fund.
3. Agreements
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as each Fund's investment adviser
pursuant to Investment Advisory Agreements. Goldman Sachs Asset Management
International ("GSAM International"), an affiliate of Goldman Sachs, acts as
subadviser under a Subadvisory Agreement for Global Income. Under the Investment
Advisory and Subadvisory Agreements, GSAM and GSAM International, subject to the
general supervision of the Trust's Board of Trustees, manage the Funds'
portfolios. As compensation for the services rendered pursuant to the Investment
Advisory Agreements and the assumption of the expenses related thereto, GSAM is
entitled to a fee, computed daily and payable monthly at an annual rate equal to
.50%, .25% and .40% of average daily net assets of Government Income, Global
Income and Municipal Income, respectively. As compensation for the services
rendered pursuant to the Subadvisory Agreement, GSAM International is entitled
to a subadvisory fee from Global Income of .50% of the average daily net assets.
For the period ended April 30, 1996, GSAM voluntarily agreed to waive a portion
of its investment advisory fees amounting to approximately
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$37,400 and $454,000 for Government Income and Global Income, respectively.
GSAM serves as each Fund's administrator pursuant to an Administration
Agreement. Under the Administration Agreement, GSAM administers the Funds'
business affairs, including providing facilities. As compensation for the
services rendered pursuant to the Administration Agreement, GSAM is entitled to
a fee, computed daily and payable monthly at an annual rate equal to .15% of
each Fund's average daily net assets. For the period ended April 30, 1996, GSAM
voluntarily agreed to waive a portion of its administration fee amounting to
approximately $22,500 for Government Income.
GSAM has voluntarily agreed to limit certain of the Funds' expenses (excluding
advisory, administration, distribution and authorized dealer service fees,
taxes, interest, brokerage, litigation, indemnification and other extraordinary
expenses and with respect to Global Income, transfer agent fees) to the extent
such expenses exceed .00%, .06% and .05% per annum of Government Income, Global
Income and Municipal Income, respectively. For the period ended April 30, 1996
the amount of reimbursed expenses for Government Income, Global Income and
Municipal Income were approximately $105,000, $184,000 and $113,000,
respectively. The amounts reimbursable to Government Income, Global Income and
Municipal Income at April 30, 1996 are approximately $13,000, $16,000 and
$39,000, respectively, and are included in the accompanying Statements of Assets
and Liabilities.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to a
Distribution Agreement and as such may receive a portion of the sales load
imposed on the sale of Fund shares. During the period ended April 30, 1996,
Goldman Sachs retained approximately $5,800, $7,300 and $17,500 of sales loads
related to Government Income, Global Income and Municipal Income, respectively.
The Trust, on behalf of each Fund, has adopted a Distribution Plan (the
"Distribution Plan") pursuant to Rule 12b-1. Under the Distribution Plan,
Goldman Sachs is entitled to a quarterly fee from each Fund for distribution
services equal, on an annual basis, to .25% of each Fund's average daily net
assets (or, in the case of Global Income Fund, the average daily net assets
attributable to the Class A shares). Currently, Goldman Sachs has voluntarily
agreed to waive the entire amount of such fee for Government Income and
Municipal Income and a portion of this fee for Global Income. Distribution fees
waived for the period amounted to approximately $37,000, $15,000 and $67,000 for
Government Income, Global Income and Municipal Income, respectively.
The Trust, on behalf of each Fund, has adopted an Authorized Dealer Service Plan
(the "Service Plan") pursuant to which Goldman Sachs and Authorized Dealers are
compensated for providing personal and account maintenance services. Each Fund
pays a fee under its Service Plan equal, on an annual basis, to .25% of each
Fund's average daily net assets (or, in the case of Global Income, the average
daily net assets attributable solely to the Class A shares). Goldman Sachs also
serves as the Transfer Agent of the Funds for a fee.
For the period ended April 30, 1996, Government Income and Municipal Income
incurred commissions expense of approximately $500 and $2,100 respectively, in
connection with futures contracts entered into with Goldman Sachs. At April 30,
1996, Government Income owes approximately $7,500 to Goldman Sachs related to
variation margin on futures contracts.
4. Line of Credit Facility
The Funds participate in a $100,000,000 uncommitted, unsecured revolving line of
credit facility. In addition, Global Income participates in a $50,000,000
committed, unsecured revolving line of credit facility. Both facilities
- --------------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
are 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 borrowings is
based on the federal funds rate. The committed facility also requires a fee to
be paid based on the amount of the commitment which has not been utilized. For
the period ended April 30, 1996, the Funds did not have any borrowings under
these facilities.
5. Investment Transactions
Purchases and proceeds of sales or maturities of long-term securities for the
period ended April 30, 1996, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Government Global Municipal
Fund Income Income Income
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases of U.S.
Government and
agency obligations $70,459,852 $ 69,341,814 $ --
- --------------------------------------------------------------------------------
Purchases (excluding
U.S. Government and
agency obligations) 7,042,470 248,635,965 97,023,121
- --------------------------------------------------------------------------------
Sales or maturities of
U.S. Government and
agency obligations 73,509,938 61,626,852 --
- --------------------------------------------------------------------------------
Sales or maturities
(excluding U.S.
Government and
agency obligations) 2,136,187 252,117,090 103,150,943
- --------------------------------------------------------------------------------
</TABLE>
For the period ended April 30, 1996, option transactions in Global Income were
as follows:
<TABLE>
<CAPTION>
Options Purchased Cost
- --------------------------------------------------------------------------------
<S> <C>
Balance outstanding, beginning of period $ --
Options purchased 202,160
Options expired (202,160)
- --------------------------------------------------------------------------------
Balance outstanding, end of period $ --
- --------------------------------------------------------------------------------
</TABLE>
At April 30, 1996, Global Income had outstanding forward foreign currency
exchange contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Value on
Foreign Currency Settlement Current Unrealized
Purchase Contracts Date Value Gain/(Loss)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Deutsche mark
Expiring 9/9/96 $ 13,497,679 $ 13,159,703 $ (337,976)
- ----------------------------------------------------------------------------
Total Foreign Currency
Purchase Contracts $ 13,497,679 $ 13,159,703 $ (337,976)
- ----------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------
Value on
Foreign Currency Settlement Current Unrealized
Sale Contracts Date Value Gain/(Loss)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Australian Dollar
Expiring 7/30/96 $ 2,252,112 $ 2,236,487 $ 15,625
Belgian Franc
Expiring 6/5/96 5,569,219 5,279,186 290,033
Expiring 9/9/96 13,500,498 13,203,397 297,101
Canadian Dollar
Expiring 5/10/96 7,368,883 7,442,985 (74,102)
Danish Krone
Expiring 7/22/96 6,310,802 6,211,892 98,910
Deutsche mark
Expiring 6/4/96 53,347,855 51,406,201 1,941,654
French Franc
Expiring 7/23/96 5,168,344 5,097,191 71,153
British Pound Sterling
Expiring 8/14/96 27,766,233 27,313,492 452,741
Irish Pound
Expiring 7/1/96 6,690,772 6,683,848 6,924
Italian Lira
Expiring 7/15/96 12,631,469 12,749,364 (117,895)
Japanese Yen
Expiring 7/17/96 23,770,150 24,599,555 (829,405)
Spanish Peseta
Expiring 7/16/96 5,023,802 4,944,792 79,010
Swedish Krona
Expiring 5/14/96 22,004,531 22,546,279 (541,748)
- ----------------------------------------------------------------------------
Total Foreign Currency
Sale Contracts $191,404,670 $189,714,669 $1,690,001
- ----------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------
Foreign Currency Purchase Sale
Cross Contracts Current Current Unrealized
(Purchase/Sale) Value Value Gain/(Loss)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Deutsche mark/Beglian Franc
Expiring 9/9/96 $901,209 $900,639 $ 570
- ----------------------------------------------------------------------------
Total Foreign Currency
Cross Contracts $901,209 $900,639 $ 570
- ----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
At April 30,1996, Global Income had sufficient cash and/or securities to cover
any commitments under these contracts.
Global Income has recorded a "Receivable for forward foreign currency exchange
contracts" and "Payable for forward foreign currency exchange contracts"
resulting from open and closed but not settled forward foreign currency exchange
contracts of $3,851,130 and $1,936,613, respectively, in the accompanying
Statement of Assets and Liabilities. Included in the "Receivable and payable for
forward foreign currency exchange contracts" are $590,424 and $28,502,
respectively, related to forward contracts closed but not settled as of April
30, 1996.
6. Summary of Share Transactions
Share activity for the period ended April 30, 1996 is as follows:
<TABLE>
<CAPTION>
Global Income Fund Dollars Shares
- -------------------------------------------------------------------
<S> <C> <C>
Class A Shares:
Shares sold $ 8,190,729 573,108
Reinvestment of dividends
and distributions 9,950,393 703,179
Shares repurchased (31,781,722) (2,224,432)
-----------------------------------
(13,640,600) (948,145)
Institutional Shares:
Shares sold 3,536,418 248,708
Reinvestment of dividends
and distributions 2,472,451 174,796
Shares repurchased (1,210,619) (85,642)
-----------------------------------
4,798,250 337,862
- ------------------------------------------------------------------
$(8,842,350) (610,283)
- ------------------------------------------------------------------
</TABLE>
Share activity for the year ended October 31, 1995 is as follows:
<TABLE>
<CAPTION>
Global Income Fund Dollars Shares
- ------------------------------------------------------------------
<S> <C> <C>
Class A Shares:
Shares sold $22,864,336 1,659,380
Reinvestment of dividends
and distributions 12,448,128 895,996
Shares repurchased (207,889,246) (15,065,279)
-----------------------------------
(172,576,782) (12,509,903)
-----------------------------------
Institutional Shares:
Shares sold 30,484,764 2,163,523
Reinvestment of dividends
and distributions 560,482 39,195
Shares repurchased (204,804) (14,347)
-----------------------------------
30,840,442 2,188,371
- ------------------------------------------------------------------
$(141,736,340) (10,321,532)
- ------------------------------------------------------------------
</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 Funds' custodian, or at subcustodians. GSAM monitors the
market value of the underlying securities by pricing them daily.
8. Joint Repurchase Agreement Account
Government Income, together with other registered investment companies having
advisory agreements with GSAM or its affiliates, transfers uninvested cash
balances into a joint account, the daily aggregate balance of which is invested
in one or more repurchase agreements. The underlying securities for the
repurchase agreements are U.S. Treasury obligations and mortgage-related
securities issued by the U.S. Government, its agencies or instrumentalities. As
of April 30, 1996, Government Income had a 1.2% undivided interest in the
repurchase agreement in the joint account which equaled $8,800,000,
- --------------------------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
in principal amount. As of April 30, 1996, 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:
<TABLE>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lehman Brothers, dated 04/30/96, repurchase price $450,967,009 (Treasury Notes:
$413,388,579, 6.38%, 03/31/01; U.S. Treasury Interest Only Stripped Securities:
$14,254,567, 05/15/02-02/15/03; U.S. Treasury Principal Only Stripped Securities:
$32,250,411, 6.25%-8.00%, 05/15/01-02/15/03)
$450,900,000 5.35% 05/01/96 $450,900,000
Nomura Securities International, Inc. dated 04/30/96, repurchase price $300,044,667
(FNMA: $171,668,955, 6.50%-9.00%, 02/01/26-04/01/26; FHLMC: $149,950,399,
7.00%-9.50%, 06/01/25-04/01/26)
$300,000,000 5.36% 05/01/96 $300,000,000
- ----------------------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $750,900,000
- ----------------------------------------------------------------------------------------------
</TABLE>
9. Other
As of April 30, 1996, the Goldman, Sachs & Co. Employees Profit Sharing and
Retirement Income Plan was the beneficial owner of approximately 14% of the
outstanding shares of Global Income.
- --------------------------------------------------------------------------------
30
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations/(a)/ Distributions to shareholders
----------------------------------------------------------- --------------------------------------------------
Net realized Net realized In excess of
and unrealized and unrealized Total From net net realized
gain (loss) gain (loss) Income realized gain gain on
Net asset on investment, on foreign (loss) on investment In excess investment
value at Net option and currency from From net option of net option and
beginning investment futures related investment investment and future investment futures
of period income transactions transactions operations income transactions income transactions
====================================================================================================================================
GOVERNMENT INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Period Ended April 30, (Unaudited)
- ----------------------------------------------------------
1996....... $14.47 $0.45 ($0.36) -- $0.09 ($0.45) -- -- --
For the Years Ended October 31,
- ----------------------------------------------------------
1995....... 13.47 0.94 1.00 -- 1.94 (0.94) -- -- --
1994....... 14.90 0.85 (1.28) -- (0.43) (0.85) (0.12) (0.02) (0.01)
For the Period February 10, 1993/e/through October 31,
- ----------------------------------------------------------
1993....... 14.32 0.56 0.58 -- 1.14 (0.56) -- -- --
<CAPTION>
Ratio of
Net net Net
increase Ratio of investment assets
From Total (decrease) Net asset net income at end
paid distributions in net value at expenses (loss) Portfolio of
in to asset end of Total on average to average turnover period
capital shareholders value period return/(b)/ net assets net assets rate/(d)/ (in 000s)
====================================================================================================================================
For the Period Ended April 30, (Unaudited)
- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996....... -- ($0.45) ($0.36) $14.11 0.62% 0.50%/c/ 6.28%/c/ 257.10% $29,149
For the Years Ended October 31,
- ----------------------------------------------------------
1995....... -- (0.94) 1.00 14.47 14.90 0.47 6.67 449.53 29,503
1994....... -- (1.00) (1.43) 13.47 (2.98) 0.11 6.06 654.90 14,452
For the Period July 20, 1993(e)through October 31,
- ----------------------------------------------------------
1993....... -- (0.56) 0.58 14.90 8.03 0.00/c/ 4.87/c/ 725.41 12,860
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
-----------------------------
Ratio of
Net
investment
Ratio of income
expenses (loss)
to average to average
net asset net assets
=============================
For the Period Ended April 30, (Unaudited)
- ----------------------------------------------------------
<S> <C> <C>
1996....... 1.85%/c/ 4.93%/c/
For the Years Ended October 31,
- ----------------------------------------------------------
1995....... 2.34 4.80
1994....... 2.86 3.31
For the Period July 20, 1993(e)through October 31,
- ----------------------------------------------------------
1993....... 4.00/c/ 0.87/c/
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations/(a)/ Distributions to shareholders
----------------------------------------------------------- --------------------------------------------------
Net realized Net realized In excess of
and unrealized and unrealized Total From net net realized
gain (loss) gain (loss) income realized gain gain on
Net asset on investment, on foreign (loss) on investment, In excess investment
value at Net option and currency from From net option of net option and
beginning investment futures related investment investment and futures investment futures
of period income transactions transactions operations income transactions Income transactions
====================================================================================================================================
GLOBAL INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
For the Period Ended April 30, (Unaudited)
- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996-Class A shares $14.45 $0.40 $0.11 $0.11 $0.62 ($1.04) -- -- --
1996-Institutional 14.45 0.52 0.06 0.06 0.64 (1.07) -- -- --
shares
For the Years Ended October 31,
- ----------------------------------------------------------
1995-Class A shares 13.63 0.89 0.92 0.15 1.96 (0.94) -- -- --
1995-Institutional 14.09 0.22 0.34 0.06 0.62 (0.26) -- -- --
shares /(f)/
1994-Class A shares 15.07 0.84 (1.37) (0.12) (0.65) (0.22) (0.16) -- --
1993-Class A shares 14.69 0.85 1.07 (0.42) 1.50 (0.85) (0.27) -- --
1992-Class A shares 14.60 1.14 0.45 (0.36) 1.23 (1.14) -- -- --
For the Period August 2, 1991(e) through October 31,
- ----------------------------------------------------------
1991-Class A shares 14.55 0.25 0.23 (0.19) 0.29 (0.24) -- -- --
<CAPTION>
Ratio of
Net net Net
increase Ratio of investment assets
From Total (decrease) Net asset net income at end
paid distributions in net value at expenses (loss) Portfolio of
in to asset end of Total to average on average turnover period
capital shareholders value period return/(b)/ net assets net assets rate/(d)/ (in 000s)
====================================================================================================================================
For the Period Ended April 30, (Unaudited)
- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996-Class A shares -- ($1.04) ($0.42) $14.03 4.36% 1.16%(c) 5.74%(c) 128.30% $225,301
1996-Institutional -- (1.07) (0.43) 14.02 4.55 0.65(c) 6.26(c) 128.30 35,406
shares
For the Years Ended October 31,
- ----------------------------------------------------------
1995-Class A shares -- (0.94) 1.02 14.45 15.08 1.29 6.23 265.86 245,835
1995-Institutional -- (0.26) 0.36 14.45 4.42 0.65(c) 6.01(c) 265.86 31,619
shares /(f)/
1994-Class A shares (0.61) (0.99) (1.64) 13.43 (4.49) 1.28 5.73 343.74 396,584
1993-Class A shares -- (1.12) 0.38 15.07 10.75 1.30 5.78 313.88 675,662
1992-Class A shares -- (1.14) 0.09 14.69 8.77 1.37 7.85 270.75 588,893
For the Period August 20, 1991(e) through October 31,
- ----------------------------------------------------------
1991-Class A shares -- (0.24) 0.05 14.60 2.00 0.38(g) 1.72(g) 34.22 388,744
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
-----------------------------
Ratio of
Net
investment
Ratio of income
expenses (loss)
to average to average
net asset net assets
=============================
For the Period Ended April 30, (Unaudited)
- ----------------------------------------------------------
<S> <C> <C>
1996-Class A shares 1.65%(c) 5.25%(c)
1996-Institutional
shares 1.12(c) 5.79%
For the Year Ended October 31,
- ----------------------------------------------------------
1995-Class A shares 1.58 5.94
1995-Institutional 1.08(c) 5.58(c)
shares /(f)/
1994-Class A shares 1.53 5.48
1993-Class A shares 1.55 5.53
1992-Class A shares 1.62 7.60
For the Period July 20, 1991(e) through October 31,
- ----------------------------------------------------------
1991-Class A shares 0.44(g) 1.66(g)
</TABLE>
32
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations/(a)/ Distributions to shareholders
----------------------------------------------------------- --------------------------------------------------
Net realized Net realized In excess of
and unrealized and unrealized Total From net net gained on
gain (loss) gain (loss) Income realized gain realized
Net asset on investment, on foreign (loss) on investment In excess investment
value at Net option and currency from From net option of net option and
beginning investment future related investment investment and future investment futures
of period income transactions transactions operations income transactions Income transactions
====================================================================================================================================
MUNICIPAL INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
For the Period Ended April 30, (Unaudited)
- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996....... $14.17 $0.32 ($0.14) -- $0.18 ($0.32) -- -- --
For the Years Ended October 31,
- ----------------------------------------------------------
1995....... 13.08 0.67 1.09 -- 1.76 (0.67) -- -- --
1994....... 14.64 0.73 (1.51) -- (0.78) (0.73) (0.05) -- --
For the Period July 20, 1993/(e)/through October 31,
- ----------------------------------------------------------
1993....... 14.32 0.22 0.32 -- 0.54 (0.22) -- -- --
<CAPTION>
Ratio of
Net net Net
increase Ratio of investment assets
From Total (decrease) Net asset net income at end
paid distributions in net value at expenses (loss) Portfolio of
in to asset end of Total to average to average turnover period
Capital shareholders value period return/(b)/ net assets net assets rate/(d)/ (in 000s)
=============================================================================================================================
For the Period Ended April 30, (Unaudited)
- ---------------------------------------------------------------
1996..... - ($0.32) ($0.14) $14.03 1.26% 0.85%/(c)/ 4.54%/(c)/ 170.49% $52,048
For the Years Ended October 31,
- ---------------------------------------------------------------
1995..... - (0.67) 1.09 14.17 13.79 0.76 4.93 335.55 53,797
1994..... - (0.78) (1.56) 13.08 (5.51) 0.45 5.28 357.54 47,373
For the Period July 20, 1993/(e)/through October 31,
- ----------------------------------------------------------
1993..... - (0.22) 0.32 14.64 3.73 0.00/(c)/ 5.15/(c)/ 99.99 30,166
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
-----------------------------
Ratio of
Net
investment
Ratio of income
expenses (loss)
to average to average
net asset net assets
=============================
For the Period Ended April 30, (Unaudited)
- ----------------------------------------------------------
1996....... 1.52%/(c)/ 3.87%/(c)/
For the Years Ended October 31,
- ----------------------------------------------------------
1995....... 1.49 4.20
1994....... 1.55 4.18
For the Period July 20, 1993/(e)/through October 31,
- ----------------------------------------------------------
1993....... 2.42/(c)/ 2.73/(c)/
</TABLE>
- --------------------------
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charge. For Class A, total return would be reduced if a sales charge were
taken into account.
(c) Annualized.
(d) Includes the effect of mortgage dollar roll transactions for the Government
Income Fund.
(e) Commencement of operations.
(f) Institutional shares commenced operations on August 1, 1995.
(g) Not annualized.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
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[This Page Intentionally Left Blank]
- --------------------------------------------------------------------------------
34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Semiannual Report is authorized for distribution to prospective investors
only when preceded or accompanied by a Goldman Sachs Trust Prospectus which
contains facts concerning the Fund's objectives and policies, management,
expenses and other information.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Goldman Sachs
1 New York Plaza
New York, NY 10004
Trustees
Paul C. Nagel, Jr., Chairman
Ashok N. Bakhru
David B. Ford
Doug Grip
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Doug Grip, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Goldman Sachs
Investment Adviser, Administrator,
Distributor and Transfer Agent
GST/SAR/0496(RET)
THE GOLDMAN SACHS
FIXED INCOME
PORTFOLIOS
- ---------------------
Semiannual Report
April 30, 1996
Goldman Sachs Government Income Fund
Goldman Sachs Global Income Fund
Goldman Sachs Municipal Income Fund
[LOGO OF GOLDMAN
SACHS APPEARS HERE]
- --------------------------------------------------------------------------------
