<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders:
We welcome the opportunity to review the performance and the investment
activity of the Goldman Sachs Fixed Income Funds for the 12-month period ended
October 31, 1996. To help put the portfolios' performance in perspective, we
will also provide a brief overview of the U.S. economy and the bond market
during the period.
We are pleased to report that the Goldman Sachs Fixed Income Funds fared
well relative to their peers during the period.
The Bond Market Sold Off Amid Rising Rates, Then Stabilized
The U.S. fixed income market began the 12-month period under review with a
robust rally, fueled by weak economic data and low inflation. However, in
February 1996, the bond market began to come under pressure when stronger than
expected economic and job growth as well as surging commodity prices aroused
fears of higher inflation on the horizon. Bond market conditions significantly
worsened during March and April, when a sharp rise in interest rates triggered a
sell-off and increased volatility. By early May, long-term bond yields had
climbed above the psychologically important 7.0% level for the first time in
nearly a year. At the end of May, interest rates began to stabilize and Treasury
prices remained in a narrow trading range throughout the summer and fall. During
September and October, however, interest rates retreated and the bond market
strengthened. The rebound was primarily due to evidence of a slowing U.S.
economy and strong demand for Treasury bonds from the central banks of China,
Japan and Germany, which accelerated their purchases dramatically toward the end
of the period. By the end of October, prices of 30-year Treasuries broke out of
the trading range that had persisted for over six months.
After a Weak Start, Economic Growth Rebounded, Then Moderated
In late 1995, the economy was anemic, with weak consumer and capital
spending contributing to a fourth-quarter real Gross Domestic Product (GDP)
growth of only 0.3% (annualized). During the first quarter of 1996, harsh winter
weather and the General Motors strike continued to restrain economic growth.
Despite these adverse conditions, the economy advanced faster than expected,
with first-quarter real GDP growth reported at 2.0% (annualized). Momentum
accelerated more dramatically during the second quarter, as industrial activity,
automobile sales and home sales all showed significant improvement. As a result,
second-quarter GDP rose a robust 4.7% (annualized), its highest rate in two
years.
The economy's torrid growth cooled markedly during the third quarter, with
annualized real GDP at a revised 2.0%, largely due to lackluster consumer
spending and a widening U.S. trade deficit. In October some evidence of a
slowdown continued, with housing starts falling to their lowest level in a year
and U.S. capacity utilization also down. However, consumer confidence remained
high against a backdrop of low unemployment and higher household income. These
indicators led some economists to interpret October's retail sales numbers (up a
scant 0.2%) as a "breather" they expected to be followed by stronger holiday
shopping, while others were concerned about a more prolonged period of
restrained spending. Despite investors' earlier fears of increased inflationary
<TABLE>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Table of Contents
Market Overview 1 Financial Statements 24
Goldman Sachs Government Income Fund 4 Notes to Financial Statements 28
Goldman Sachs Global Income Fund 11 Financial Highlights 36
Goldman Sachs Municipal Income Fund 17
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
pressures and the fact that in October the producer and consumer price indexes
were up 0.4% and 0.3%, respectively, inflation remained subdued throughout the
period.
The Fed Remained Neutral After Easing in December and January
In response to generally poor year-end 1995 economic conditions, the U.S.
Federal Reserve cut the Federal funds rate by 25 basis points in December 1995
and an additional 25 basis points in January 1996. The Fed then remained neutral
from February through the end of the period, leaving the Federal funds rate at
5.25% as of October 31, 1996.
During the period under review, the yield curve shifted upward everywhere
but at the shortest end, where it steepened. The yield on six-month Treasury
bills fell from 5.55% on October 31, 1995 to approximately 5.26% on October 31,
1996. For the same time period, the yield on the 30-year U.S. Treasury bond rose
from 6.33% a year ago to 6.64%. For the 12-month period ended October 31, 1996,
the total returns of one-year and 30-year Treasuries were 5.84% and 0.72%,
respectively.
Historical Treasury Yield Curve
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
GS Retail Treasury Bar Chart
<S> <C> <C>
10/31/95 10/31/96
3-Month 5.49% 5.13
6-Month 5.55 5.26
1 5.54 5.4
2 5.61 5.73
3 5.68 5.86
5 5.81 6.07
10 6.02 6.34
30 6.33 6.64
</TABLE>
Source: Bloomberg, L.P.
The yield curve steepened on the short end and shifted upward on the longer
end.
The Dollar's Climb Versus the Mark and the Yen
Continued
During the period under review, the U.S. dollar appreciated against both the
Deutsche mark and Japanese yen, rising more against the yen. The dollar
strengthened relative to the mark as the Bundesbank progressively edged rates
lower during the period to stimulate the sluggish German economy, reaching a 15-
month high against the mark in May. By October, the dollar had retreated
slightly as further Bundesbank cuts became less likely. In contrast, the
dollar's climb against the yen continued through the end of October, when it
reached a three-and-a-half-year high. The yen's weakness was primarily due to
the softness in Japan's economic recovery. However, in November the yen rose
against the dollar as Japanese officials made it clear that they believed the
yen had weakened enough.
Outlook: Moderate Economic Growth for the Near Term
The recent economic weakness and the tame third-quarter labor cost report
increase the likelihood that the Fed will defer any changes in monetary policy
until 1997. Although a more extended slowdown is possible, as of this writing,
Goldman Sachs' economists believe a resumption of growth is likely if consumer
spending rebounds by year-end and the trade deficit does not significantly
widen. On the fiscal front, the bond market environment should benefit from the
recent election results with President Clinton balanced by a Republican-
controlled Congress, which points toward continued budgetary restraint.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
We appreciate your confidence in the Goldman Sachs Fixed Income Funds and we
look forward to continuing to serve your investment needs in the future.
Sincerely,
/s/ David B. Ford
David B. Ford
Co-Head, Goldman Sach 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
November 29, 1996
- --------------------------------------------------------------------------------
3
<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 to that of a five-year bond.
Mortgage-Backed Securities Strengthened Amid Slowing Prepayments
During the 12-month period under review, the performance of mortgage-backed
securities (MBSs) was closely linked to the changing direction of interest
rates. From November 1995 through February 1996, declining interest rates
spurred homeowners to switch to long-term, fixed rate mortgages, resulting in a
high level of refinancing activity and widening spreads between MBSs and
Treasuries. Long-term interest rates began to rise at the end of January and
prepayments peaked in February. Throughout the spring, the mortgage-backed
securities market strengthened due to declining prepayment fears, and adjustable
rate mortgages (ARMs) and fixed rate mortgage pass-throughs continued to do well
when rates stabilized during the summer. However, the direction of interest
rates reversed course beginning in September, and by the end of October, rates
on 30-year mortgages had slipped below 8%. The decline increased some
homeowners' incentive to refinance, but rates continued to be significantly
above their levels of a year earlier and "seasoned" mortgage-backed securities
(securities backed by older mortgages that typically have lower prepayment risk)
continued to do well. In addition, the market's technical balance remained
strong, with prices supported by healthy investor demand coupled with no
significant new issuance.
Performance Review: Fund Performed Well Due to Mortgage-and Asset-Backed
Securities
During the 12-month period ended October 31, the fund's Class A shares
outperformed the benchmark, the Lehman Brothers Government/Mortgage Index (the
"Index") due to favorable results from the fund's positions in collateralized
mortgage obligations (CMOs) and asset-backed securities (ABSs). The fund's Class
B shares, which opened on May 1, 1996 when interest rates were still rising,
also achieved positive returns.
The fund performed well compared with its peers. The fund's Class A shares
ranked eighth out of 124 intermediate U.S. government income funds based on
total return for the 12 months ended October 31, 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. Class B shares were not ranked for this period because they were in
existence less than 12 months.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Summary
- --------------------------------------------------------------------------------
Class A Class B*
(10/31/95- (5/1/96-
10/31/96) 10/31/96)
--------- ---------
<S> <C> <C>
Total Return (based on net asset value) 5.80% 4.85%
- --------------------------------------------------------------------------------
Return From Monthly Distributions 6.56% 3.01%
- --------------------------------------------------------------------------------
Return From Price Depreciation/ -0.76% 1.84%
Appreciation
- --------------------------------------------------------------------------------
Total Return of Lehman Brothers
Government/Mortgage Index 5.74% 5.12%
- --------------------------------------------------------------------------------
NAV (as of 10/31/96) $14.36 $14.37
- --------------------------------------------------------------------------------
NAV Change -$0.11 +$0.26
- --------------------------------------------------------------------------------
</TABLE>
* New share class opened during the period.
Portfolio Composition and Investment Strategies
During the period under review, we significantly reduced the portfolio's
holdings of U.S. Treasuries in favor of mortgage-backed and asset-backed
securities.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Government Income Fund (continued)
- --------------------------------------------------------------------------------
Portfolio Composition as of October 31, 1996*
[PIE CHART APPEARS HERE]
Agency Debentures 0.4%
Repos/Cash Equivalents 1.1%
U.S. Treasuries 16.2%
Asset-Backed Securities 19.9%
CMOs 22.0%
Fixed Rate Mortgage Pass-Throughs 40.4%
* 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. The fund's single largest position as of
October 31, 1996 was in fixed rate mortgage pass-throughs at 40.4% (nearly
unchanged from a year ago), which was overweighted relative to the Index
allocation of 36.4%. Overall, the fund benefited from the sector's incremental
yield compared with similar-duration Treasury securities. Although pass-throughs
suffered from a high rate of mortgage prepayments when the period began, the
sector improved when interest rates began to rise at the end of January.
During the period, we occasionally used mortgage dollar rolls, which helped
the portfolio to benefit from 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.
. CMOs. As of October 31, the fund's allocation in CMOs was 22.0%, up from
7.7% a year ago. These securities included sequential-pay/support CMOs (13.0%),
a position we initiated in February, which offered relative stability and
attractive spreads compared with Treasuries. We cut the portfolio's allocation
in planned amortization class (PAC) CMOs to 5.5% from 6.3% a year ago in favor
of other sectors that offered greater relative value. We also held very small
positions in inverse floaters, interest-only (IO) and principal-only (PO)
securities, discussed below.
. Asset-Backed Securities. The portfolio's ABS holdings, which were primarily
issues backed by credit card and automobile debt, represented 19.9% of the
portfolio, up from 14.3% a year ago. This position consisted of short-term,
triple-A-rated issues that offered attractive incremental yield over similar-
duration Treasuries. The ABS market began the period on a weak note, as concerns
surrounding credit card delinquencies impacted the sector during November and
December 1995. From January through the end of the period, these uncertainties
faded and the sector strengthened. Spreads between ABSs and Treasuries
tightened, as the ABS market benefited from strong investor demand from a
variety of sources: foreign banks, insurance companies and an increasing number
of corporate and CMO "crossover" accounts. ABS supply was robust as well, with a
wide variety of innovative new issues across a range of maturities, collateral
types and structures, but demand kept pace.
. U.S. Treasuries and Repurchase Agreements/Cash Equivalents. We reduced the
fund's allocation in U.S. Treasuries and repurchase agreements/cash equivalents
to take advantage of securities in other sectors that offered better relative
value. As of October 31, Treasuries accounted for 16.2% of the portfolio,
significantly
- --------------------------------------------------------------------------------
5
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Government Income Fund (continued)
- --------------------------------------------------------------------------------
underweighted relative to the Index (55.4%), while cash equivalents were a 1.1%
position.
. Agency Debentures. During the period, we reduced the fund's holdings in
agency debentures (bonds issued by agencies of the U.S. government) to a scant
0.4% because we determined that the sector's tight spreads compared with
Treasuries did not offer attractive return potential.
. Issuer Composition. The breakdown of the portfolio's mortgage-backed
security holdings by issuer was 23.3% in Federal National Mortgage Association
(FNMA) issues, 14.0% in Government National Mortgage Association (GNMA) issues,
9.8% in Federal Home Loan Mortgage Corporation (FHLMC) issues and 15.3% in
private issues.
. Credit Quality. As of October 31, U.S. government and agency securities
accounted for 66.6% of the portfolio, triple-A-rated securities were 32.3% of
the portfolio and cash equivalents were 1.1% of the portfolio.
. Prudent Use of Derivatives. As noted, sequential-pay/ support and PAC CMOs,
which are generally considered to be lower risk derivative instruments,
accounted for 13.0% and 5.5% of the portfolio, respectively. The portfolio also
held inverse floaters (1.3%) for their potential to add incremental yield, as
well as a "combo" consisting of minor positions in interest-only and principal-
only CMOs. When IOs are held along with POs, they can produce a position with a
similar risk profile as a fixed rate mortgage pass-through but with a higher
yield. In addition, we used futures as a tool to help manage the portfolio's
duration.
. Duration. The fund's duration as of October 31 was 4.5 years, in line with
the Index. We carefully manage the fund's duration to approximate that of the
Index rather than attempting to make interest rate predictions. Instead, we seek
excess return over the Index through our sector weightings and specific security
selection.
Fund Outlook
We have a cautiously optimistic view of the mortgage pass-through market in
general. Certain segments continue to be attractively valued, and we believe
that our current seasoned holdings should fare well relative to other sectors if
interest rates continue to fall and prepayments increase. We have a neutral
outlook for the CMO sector in general, which we believe does not offer
significant value over mortgage pass-throughs. However, we continue to identify
specific CMO securities that present attractive investment opportunities. In the
ABS market, significant spread premiums relative to comparably rated corporate
securities are expected to continue to buoy investor demand. In addition, Fed
surveys indicate that banks have been tightening their underwriting standards
over the last three quarters, which should help to allay lingering investor
concerns surrounding consumer credit card delinquencies. During the coming year,
we will continue to actively allocate the portfolio's assets among the various
fixed income sectors as their relative value changes.
Distribution Policy
The fund's Class A shares paid out monthly distributions of approximately
$0.92 per share during the 12-month period ended October 31, 1996. From their
inception on May 1, 1996 through October 31, 1996, the fund's Class B shares
paid out approximately $0.41 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.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Government Income Fund (continued)
- --------------------------------------------------------------------------------
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
November 29, 1996
- --------------------------------------------------------------------------------
7
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Goldman Sachs Government Income Fund
October 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1996. The
performance for the Goldman Sachs Government Income Fund (assuming both the
maximum sales charge of 4.5% and no sales charge for Class A shares and the
maximum redemption fee of 5% and no redemption fee for the Class B shares), is
compared with its benchmarks--the Lehman Brothers Mutual Fund
Government/Mortgage Index ("Lehman Gov't/MBS Index") and the Lehman Brothers
Mutual Fund General U.S. Government Index ("Lehman U.S. Gov't Index"). All
performance data shown represents past performance and should not be considered
indicative of future performance which will fluctuate as market conditions
change. The investment return and principal value of an investment will
fluctuate with changes in market conditions so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
HYPOTHETICAL $10,000 INVESTMENT
Class A/(a)/
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Class A Shares Class A Shares Lehman Lehman
(no sales (w/sales Gov't/MBS U.S. Gov't
Date charge) charge) Index Index
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/1/93 $10,000 $ 9,550 $10,000 $10,000
10/31/93 10,506 10,033 10,584 10,699
10/31/94 10,192 9,734 10,267 10,220
10/31/95 11,710 11,183 11,819 11,792
10/31/96 12,392 11,834 12,500 12,395
</TABLE>
Class B
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Class B Shares Class B Shares Lehman Lehman
(no redemption (w/redemption Gov't/MBS U.S. Gov't
Date charge) charge) Index Index
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5/1/96 $10,000 $10,000 $10,000 $10,000
10/31/96 10,485 9,985 10,512 10,508
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------
Average Annual Total Return
----------------------------------------
One Year Since Inception/(b)/
- -----------------------------------------------------------------------------
<S> <C> <C>
Class A, excluding sales 5.80% 6.72%
charge
- -----------------------------------------------------------------------------
Class A, including sales 1.06% 5.41%
charge
- -----------------------------------------------------------------------------
Class B, excluding
redemption charge N/A 4.85%/(c)/
- -----------------------------------------------------------------------------
Class B, including
redemption charge N/A (0.15%)/(c)/
- -----------------------------------------------------------------------------
</TABLE>
/a/ For comparative purposes, initial investments are assumed to be made on the
first day of the month following the Fund's commencement of operations.
/b/ Class A and Class B shares commenced operations February 10, 1993 and May 1,
1996, respectively.
/c/ An aggregate total return (not annualized) is shown instead of an average
annual total return since the B Class has not completed a full twelve months
of operations.
- --------------------------------------------------------------------------------
8
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Government Income Fund
October 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
================================================================================
<S> <C> <C> <C>
Mortgage Backed Obligations--55.5%
Federal Home Loan Mortgage Corp.(FHLMC)--10.3%
$ 3,000,000 7.50% TBA 30-Yr/(a)/ $ 3,010,290
- --------------------------------------------------------------------------------
Federal National Mortgage Association (FNMA)--16.5%
$ 989,360 7.00 02/01/26 $ 970,493
831,317 8.50 07/01/26 860,147
168,683 8.50 09/01/26 174,533
1,000,000 7.00 TBA 30-Yr/(a)/ 1,034,680
2,000,000 8.00 TBA 30-Yr/(a)/ 2,040,000
- --------------------------------------------------------------------------------
$ 5,079,853
- --------------------------------------------------------------------------------
Government National Mortgage Association
(GNMA)--14.1%
$ 939,735 7.00% 08/15/23 $ 927,115
353,966 9.00 TBA 30-Yr/(a)/ 377,748
1,363,733 7.50 TBA 30-Yr/(a)/ 995,228
2,000,000 8.00 TBA 30-Yr/(a)/ 2,045,000
- --------------------------------------------------------------------------------
$ 4,345,091
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligations--26.4%
Interest Only--0.7%
FNMA Interest-Only Stripped Security, Series 151, Class 2
$ 712,363/(b)/ 9.50% 07/25/22 $ 225,926
- --------------------------------------------------------------------------------
Inverse Floater--1.3%
FNMA Remic Trust, Series 1992-62, Class S
404,038 10.00%/(c)/ 05/25/99 413,699
- --------------------------------------------------------------------------------
Planned Amortization Class (PAC)--5.4%
FNMA Remic Trust, Series 1993-160, Class PG
1,000,000 6.30% 09/25/18 987,500
GE Capital Mortgage Services, Inc. Series 1994-11, Class A1
693,546 6.50 03/25/24 694,191
- --------------------------------------------------------------------------------
$ 1,681,691
- --------------------------------------------------------------------------------
Principal Only--1.4%
FNMA Remic Trust, Series G-35, Class N
575,000/(e)/ 5.28% 10/25/21 415,369
- --------------------------------------------------------------------------------
Sequential Fixed Rate CMOs--2.9%
Citicorp Mortgage Securities Series 1993-11, Class A6
907,177 6.25% 09/25/08 880,207
- --------------------------------------------------------------------------------
Support--13.2%
Bear Stearns Mortgage Securities, Inc., Series 1996-7, Class AD
$ 988,793 6.50% 11/27/23 900,395
GE Capital Mortgage Services, Inc. Series 1994-10, Class A22
996,703 6.50 03/25/24 874,966
Housing Securities, Inc. Series 1994-1, Class A13
1,455,585 6.50 03/25/09 1,370,928
Prudential Securities Series 1995-2, Class A
916,596 5.76 11/15/15 918,243
- --------------------------------------------------------------------------------
$ 4,064,532
- --------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations $ 7,681,424
- --------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $16,959,996) $17,106,368
- --------------------------------------------------------------------------------
Asset-Backed Securities--16.6%
Chemical Bank Master Credit Card Trust, Series 1995-2, Class A
$ 720,000 6.23% 06/15/03 $ 717,746
Fingerhut Master Trust, Series 1996-1, Class A
590,000 6.45 02/20/02 593,870
Ford Credit Auto Loan Master Trust, Series 1996-1, Class A
650,000 5.50 02/15/03 629,077
MBNA Master Credit Card Trust, Series 1991-1, Class A
245,000 7.75 10/15/98 245,688
Navistar Financial Corp. Owner Trust, Series 1995-A, Class A2
304,971 6.55 11/20/01 306,780
Olympic Automobile Receivables Trust, Series 1994-B, Class A2
540,182 6.85 06/15/01 544,666
Premier Auto Trust, Series 1993-6, Class A2
403,341 4.65 11/02/99 398,675
Premier Auto Trust, Series 1994-1, Class A3
310,533 4.75 02/02/00 308,592
Sears Credit Account Master Trust, Series 1995-2, Class A
460,000 8.10 06/15/04 483,000
Standard Credit Card Trust, Series 1990-3, Class A
860,000 9.50 07/10/98 875,583
- --------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $5,174,476) $ 5,103,677
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Government Income Fund (continued)
October 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
===============================================================================
<S> <C> <C> <C>
U.S. Government Agency Obligations--0.4%
Federal Home Loan Mortgage Corp. (FHLMC)
$ 110,000 8.20% 01/16/98 $ 110,636
- -------------------------------------------------------------------------------
Total Government Agency Obligations
(Cost $113,163) $ 110,636
- -------------------------------------------------------------------------------
U.S. Treasury Obligations--15.9%
United States Treasury Bonds/(d)/
$ 360,000 8.75% 05/15/17 $ 440,550
280,000 8.75 08/15/20 345,668
United States Treasury Notes/(d)/
2,210,000 7.38 11/15/97 2,249,360
700,000 5.88 04/30/98 702,184
700,000 6.88 08/31/99 717,500
United States Treasury Principal-Only Stripped Securities/(e)/
230,000 6.41 11/15/04 138,344
1,550,000 6.95 05/15/20 307,570
- -------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $4,910,644) $ 4,901,176
- -------------------------------------------------------------------------------
Repurchase Agreement--27.0%
Joint Repurchase Agreement Account/(d)/
$8,400,000 5.58% 11/01/96 $ 8,400,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $8,400,000) $ 8,400,000
- -------------------------------------------------------------------------------
Total Investments
(Cost $38,555,545/(f)/) $38,632,147
===============================================================================
Futures contracts open at October 31, 1996 are as follows:
Number of
Contracts Settlement Unrealized
Type Long(/g/) Month Gain
- -------------------------- ------------- ----------------- -----------
Euro Dollars 3 September 1997 $2,850
5 Year U.S. Treasury Notes 4 December 1996 3,000
10 Year U.S. Treasury Notes 2 December 1996 8,313
U.S. Long Term Bond 14 December 1996 60,437
------------
$74,600
===============================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 260,565
Gross unrealized loss for investments in which cost exceeds
value (195,408)
- -------------------------------------------------------------------------------
Net unrealized gain $ 65,157
===============================================================================
</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
October 31, 1996.
/(d)/Portions of these securities are being segregated for open TBA purchases,
open futures contracts and futures margin requirements.
/(e)/The interest rate disclosed for these securities represents effective
yields to maturity.
/(f)/The aggregate cost for federal income tax purposes is $38,566,990.
/(g)/Each 10-Year U.S. Treasury Note, 5-Year 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 are $5,000,000 and $2,936,825, respectively. The
determination of notional amounts and market value as presented here are
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.
10
<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 and its approximate interest rate sensitivity is comparable to 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.
European Bond Markets Achieved the Strongest Performance While Treasuries Lagged
During the 12 months ended October 31, 1996, global bonds generally
performed well, particularly during the second half of the period, with a number
of markets achieving extremely strong returns. Most international bond markets
have outperformed the United States, thus illustrating the benefits of
diversification.
The European higher yielding bonds (Italy, Spain and Sweden) were the best
performers of all the major bond markets during the period, while most of the
other European bond markets achieved good, albeit more modest, returns (hedged
into U.S. dollars). In general, European bond markets benefited from an
accommodative environment of sluggish economic growth and low inflation.
European bonds were also buoyed by tighter fiscal policies, as several European
countries attempted to reduce their deficits enough to qualify for European
monetary union. To counter less government spending, several countries (notably
Germany) attempted to stimulate economic growth by lowering their interest
rates.
The total return of Japanese Government Bonds (JGBs) during the period
under review was lower than those of most European bond markets but still
favorable (hedged into U.S. dollars). After lackluster performance during the
first half of the period amid fears of accelerating growth, JGBs experienced a
volatile, halting recovery when Japan's economy showed signs of weakening during
the summer and fall of 1996.
U.S. Treasuries underperformed all of the major bond markets. Though
Treasuries performed well in November and December 1995, accelerating economic
growth triggered a sharp correction from January through May 1996. The U.S. bond
market partially recovered when it rallied during September and October, but it
continued to lag. Within the dollar bloc, Canadian bonds did particularly well
during the period, reflecting a continuing easing of monetary policy by the Bank
of Canada, a strong currency and a relatively weak economy.
Performance Review: Favorable Country Allocations Benefited Fund Performance
During the period under review, the Goldman Sachs Global Income Fund's
Class A and Institutional shares outperformed the fund's benchmark, the J.P.
Morgan Global Government Bond Index (hedged into U.S. dollars) (the "Index").
The Index covers 14 major bond markets and reflects their currency exposures.
That favorable performance relative to the benchmark was primarily due to the
fact that during most of the period the fund was overweighted in European bonds
and moderately underweighted in U.S. Treasuries.
The fund's Class B shares, which began operations on May 1, 1996 while U.S.
interest rates were still rising, underperformed the benchmark.
- --------------------------------------------------------------------------------
11
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Summary
- --------------------------------------------------------------------------------
Class A Class B* Institutional
(10/31/95- (5/1/96- (10/31/95-
10/31/96) 10/31/96) 10/31/96)
-------- -------- --------
<S> <C> <C> <C>
Total Return (based on net asset 11.05% 6.24% 11.55%
value)
- --------------------------------------------------------------------------------
Return From Monthly 10.50% 2.68% 11.07%
Distributions
- --------------------------------------------------------------------------------
Return From Price Appreciation 0.55% 3.56% 0.48%
- --------------------------------------------------------------------------------
Total Return of J.P. Morgan 10.06% 6.53% 10.06%
Global Government Bond Index
- --------------------------------------------------------------------------------
NAV (as of 10/31/96) $14.53 $14.53 $14.52
- --------------------------------------------------------------------------------
NAV Change +$0.08 +$0.50 +$0.07
- --------------------------------------------------------------------------------
</TABLE>
* New share class opened during the period.
Though the portfolio is typically fully hedged into U.S. dollars, we
occasionally employed currency strategies during the period. These included the
initiation of a long position in the U.S. dollar against the yen and European
currencies, which helped the fund's performance when the dollar strengthened
during the period.
Portfolio Composition and Investment Strategies
Portfolio Composition as of October 31, 1996*
<TABLE>
<CAPTION>
[PIE CHART APPEARS HERE]
<S> <C>
Sweden 1.9%
Denmark 2.5%
Spain 2.6%
Netherlands 2.6%
Ireland 2.7%
Italy 5.7%
U.K. 6.3%
Japan 9.0%
Germany 15.0%
Cash 15.4%
U.S. 36.3%
</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.
. Dollar Bloc. As of October 31, 1996, U.S. Treasuries were the fund's sole
allocation in the dollar bloc countries. However, during the period, we
intermittently held positions in Canadian and Australian bonds.
U.S. During most of the period, the portfolio was underweighted in U.S.
Treasuries relative to the benchmark, which worked to its advantage when the
U.S. market was impacted by rising interest rates. In September and October, we
raised the fund's Treasury allocation, and the shift helped performance when the
Treasury market rallied during those months. As of October 31, the portfolio
held a 36.3% Treasury allocation, in line with the benchmark.
Other Dollar Bloc. The fund began the period overweighted in Canada (7.7%
as of October 31, 1995). However, we reduced the position in January and
liquidated the remainder in May on the expectation that Canada's current round
of interest rate easing had run its course, which proved not to be the case. In
July, we reestablished an overweighting in Canada, then sold the position the
following month after the market rallied. During September and October, the
Canadian bond market rose again on weaker economic news, but the fund did not
participate. Though the fund was not invested in Australia as of October 31, it
held an overweighted position at times during the period, which contributed to
performance when the market strengthened in anticipation of easing monetary
policy.
. Europe. The fund benefited from being overweighted in Europe during much of
the period. After we sold part of the allocation in the region at a profit, the
fund was slightly underweighted in European bonds relative to the Index, 39.3%
versus 43.9%, as of October 31.
Germany. Germany's economic growth was anemic during the first half of the
period, with real GDP declining during the fourth quarter of 1995 and the first
quarter of 1996. To help stimulate growth amid a tight fiscal policy, the
Bundesbank aggressively cut interest rates, which proved only modestly
successful as high unemployment and weak manufacturing activity continued to
persist. To
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund (continued)
- --------------------------------------------------------------------------------
participate in Germany's favorable bond market environment, we significantly
overweighted our holdings at 15.0% (versus 9.6% for the Index), preferring
Germany over France in the core European markets.
Italy, Spain and Sweden. During the period, we increased the fund's
allocation in the higher yielding European markets, then trimmed its exposure
after these markets became less favorably valued. In January, we initiated a
position in Italy, which was attractive due to its tight fiscal policy, expected
interest rate cuts and better than anticipated inflation data. As of October 31,
Italy was overweighted relative to the benchmark, 5.7% versus 5.2%, and it
significantly benefited the fund as it proved to be the best performing bond
market during the period. Spain, another top-performing bond market, was cut to
a 2.6% position as of October 31 after we determined the market fully reflected
expectations that Spain would meet the criteria for European monetary union. We
also benefited by establishing and maintaining an overweighted position in
Sweden during most of the period, then subsequently reduced the position to
1.9%, nearly in line with the benchmark.
U.K. The U.K.'s economy was sluggish during much of the period, but by
September economic activity began to rebound, particularly in the consumer
sector. In anticipation of renewed inflationary pressures, as well as political
uncertainty related to the forthcoming general election, we sold approximately
half of the portfolio's U.K. position during the period. As of October 31, the
portfolio's 6.3% U.K. weighting was in line with the benchmark.
Ireland, the Netherlands and Denmark. Small, new positions added during the
period included Ireland (2.7%), the Netherlands (2.6%) and Denmark (2.5%). Like
the rest of Europe, these countries had attractive bond market environments, and
they contributed to the fund's performance. We believe Ireland is particularly
attractive as it has an exemption on its debt level, enabling it to join
European monetary union (EMU) on the first round.
France. Over the course of the year we reduced the fund's position in
France, finally liquidating our remaining holdings in July, in favor of German
bonds that we believed were more attractively valued. Unfortunately, this
strategy was not successful when France subsequently outperformed Germany.
Belgium. Belgium, a 3.5% allocation last year, performed well and we
trimmed the position over the course of the year. In October, we sold the fund's
remaining holdings in Belgium in favor of the Netherlands, which our analysis
determined offered greater total return potential.
. Japan. JGBs accounted for 9.0% of the portfolio, significantly
underweighted compared with the benchmark (15.1%), which benefited the fund when
JGBs were weak during the first half of the period, but did not work in its
favor when JGBs rebounded in the second half of the year. However, the fund
partially participated in the Japanese bond rally through a call option on JGBs,
as well as its direct investments.
. Cash Equivalents. The fund's allocation in cash equivalents was 15.4%,
approximately the same as a year ago (16.4%). We anticipate reducing the
position as we identify attractive investment opportunities.
. Credit Quality. The portfolio was 100% invested in triple-A-rated
securities as of the end of the period.
. Duration. As of October 31, the fund's duration of 4.4 years was
approximately a half year lower than that of the benchmark. (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.) The duration difference was primarily due to the
portfolio's cash equivalent position and its underweighting in Japan.
- --------------------------------------------------------------------------------
13
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund (continued)
- --------------------------------------------------------------------------------
Fund Outlook
Going forward, we expect European bonds to continue to outperform U.S.
Treasuries, in terms of both capital gains and yields. In general, European
economies are weaker than that of the United States, with slow growth, high
unemployment and tight fiscal policies. Germany's economic recovery appears
intact, which makes us somewhat more cautious on German bonds at current low
yield levels. Nevertheless, German bonds still offer excess returns over cash,
provided German monetary policy remains on hold. Longer term, we favor the U.K.
gilt, as we believe the market has overreacted to the U.K.'s lack of
participation in European monetary union and its recent political uncertainty.
We also have a positive longer term view of the higher yielding markets of Italy
and Spain, though they have not offered investors a sufficient risk premium in
recent months. As of this writing, we are neutral on U.S. Treasuries, but we
will be watching for signs that the U.S. Federal Reserve expects to preempt any
potential inflationary pressure with tighter monetary policy in the near future.
Our analysis indicates that after their spectacular run, Canadian bonds do not
offer attractive relative value, but we are considering reestablishing a
position in Australia, which is experiencing slowing growth and waning
inflationary pressures. We expect to remain underweighted in Japan because we
anticipate that its economic recovery will resume despite recent weakness,
opening the possibility for monetary tightening. With JGBs currently yielding
just under 3%, our analysis indicates that we would not be adequately
compensated for their level of risk.
Distribution Policy
During the 12-month period under review, the fund's Class A and
Institutional shares paid out distributions of $1.43 and $1.50 per share,
respectively. From their inception on May 1, 1996 through October 31, 1996, the
fund's Class B shares paid out $0.36 per share. The fund declares and pays
dividends on a monthly basis. The fund distributes substantially all of its
taxable income, as is required for all investment companies.
As always, we will utilize the resources of Goldman, Sachs & Co.'s London-
based Economics Research Group for economic and market trend analysis as we
continue to seek out attractive global bond investment opportunities. We
appreciate your investment in the Goldman Sachs Global Income Fund and look
forward to continuing to help you achieve your investment goals.
Sincerely,
/s/ Stephen C. Fitzgerald
Stephen C. Fitzgerald
Portfolio Manager, Fixed Income Investments
/s/ Andrew F. Wilson
Andrew F. Wilson
Portfolio Manager, Fixed Income Investments
/s/ Gareth I. Evans
Gareth I. Evans
Portfolio Manager, Currency
Goldman Sachs Global Income Fund
London, November 29, 1996
- --------------------------------------------------------------------------------
14
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund
October 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1996. The
performance for the Goldman Sachs Global Income Fund (assuming both the maximum
sales charge of 4.5% and no sales charge for the Class A shares, the first year
maximum redemption fee of 5% and no redemption fee for the Class B shares and
net asset value for the Institutional shares) is compared with its benchmark--
the J.P. Morgan Global Government Bond Index hedged to U.S. Dollars ("J.P.
Morgan GGB Index-$ Hedged"). All performance data shown represents past
performance and should not be considered indicative of future performance which
will fluctuate as market conditions change. The investment return and principal
value of an investment will fluctuate with changes in market conditions so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
HYPOTHETICAL $10,000 INVESTMENT
[CHART APPEARS HERE]
Class A Shares (a)
<TABLE>
<CAPTION>
Class A Shares Class A Shares J.P. Morgan GGB Index-
(no sales charge) (w/sales charge) $ Hedged
<S> <C> <C> <C>
09/01/91 $10,000 $9,500 $10,000
10/31/91 $10,145 $9,688 $10,263
10/31/92 $11,034 $10,538 $11,156
10/31/93 $12,220 $11,670 $12,509
10/31/94 $11,672 $11,146 $12,051
10/31/95 $13,432 $12,827 $13,903
10/31/96 $14,921 $14,250 $15,306
</TABLE>
Class B Shares
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Class B Shares Class B Shares J.P. Morgan GGB
(no redemption charge) (w/redemption charge) Index-$ Hedged
<S> <C> <C> <C>
05/01/96 $10,000 $10,000 $10,000
10/31/96 $10,624 $10,124 $10,653
</TABLE>
Institutional shares
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Institutional J.P. Morgan GGB
Shares Index-$ Hedged
<S> <C> <C>
08/01/95 $10,000 $10,000
10/31/95 $10,442 $10,351
10/31/96 $11,651 $11,395
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------
Average Annual Total Return
----------------------------------------------------
One Year Five Year Since Inception(b)
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Class A, excluding
sales charge 11.05% 8.01% 8.02%
- ---------------------------------------------------------------------------
Class A, including
sales charge 6.08% 7.02% 7.08%
- ---------------------------------------------------------------------------
Class B, excluding
redemption charge N/A N/A 6.24%(c)
- ---------------------------------------------------------------------------
Class B, including
redemption charge N/A N/A 1.24%(c)
- ---------------------------------------------------------------------------
Institutional Class 11.55% N/A 12.95%
- ---------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on the
first day of the month following the Fund's commencement of operations of
the Class A shares.
(b) The Class A, Class B and Institutional shares commenced operations August 2,
1991, May 1, 1996 and August 1, 1995, respectively.
(c) An aggregate total return (not annualized) is shown instead of an average
annual total return since the B Class has not completed a full twelve months
of operations.
- --------------------------------------------------------------------------------
15
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Global Income Fund
October 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount (a) Rate Date Value
================================================================================
<S> <C> <C> <C>
Debt Obligations--83.2%
British Pound Sterling--6.2%
United Kingdom Treasury
BPS 9,000,000 8.50% 12/07/05 $ 15,573,120
- --------------------------------------------------------------------------------
Danish Krone--2.5%
Kingdom of Denmark
DKK 33,000,000 9.00% 11/15/00 $ 6,415,484
- --------------------------------------------------------------------------------
Deutschemark--14.8%
Federal Republic of Germany
DEM 8,000,000 7.12% 12/20/02 $ 5,742,980
7,500,000 6.75 07/15/04 5,245,292
33,000,000 6.50 10/14/05 22,549,455
3,500,000 7.38 01/03/05 2,528,510
Treuhandanstalt
2,000,000 6.50 04/23/03 1,388,437
- --------------------------------------------------------------------------------
$ 37,454,674
- --------------------------------------------------------------------------------
Irish Pound--2.7%
Republic of Ireland
IEP 4,000,000 8.00% 10/18/00 $ 6,905,421
- --------------------------------------------------------------------------------
Italian Lira--5.4%
Republic of Italy
ITL 19,000,000,000 10.50% 11/01/00 $ 13,851,419
- --------------------------------------------------------------------------------
Japanese Yen--8.9%
International Bank for Reconstruction &
Development
JPY 700,000,000 6.75% 06/18/01 $ 7,536,474
Japanese Developmental Bank
1,400,000,000 6.50 09/20/01 15,019,116
- --------------------------------------------------------------------------------
$ 22,555,590
- --------------------------------------------------------------------------------
Netherlands Guilder--2.5%
Dutch Government Bond
NLG 10,000,000 7.00% 06/15/05 $ 6,350,937
- --------------------------------------------------------------------------------
Spanish Peseta--2.5%
Government of Spain
ESP 500,000,000 10.30% 06/15/02 $ 4,448,842
Kingdom of Spain
200,000,000 10.15 01/31/06 1,804,930
- --------------------------------------------------------------------------------
$ 6,253,772
- --------------------------------------------------------------------------------
Swedish Krona--1.8%
Kingdom of Sweden
SEK 32,000,000 6.00% 02/09/05 $ 4,489,558
- --------------------------------------------------------------------------------
United States Dollar--35.9%
United States Treasury Notes
USD 10,000,000 6.88% 07/31/99 $ 10,243,700
18,000,000 5.25 01/31/01 17,507,880
17,000,000 6.38 03/31/01 17,196,520
8,200,000 6.25 02/15/03 8,229,438
10,000,000 7.88 11/15/04 10,975,000
12,000,000 6.50 08/15/05 12,125,640
14,000,000 7.00 07/15/06 14,616,840
- --------------------------------------------------------------------------------
$ 90,895,018
- --------------------------------------------------------------------------------
Total Debt Obligations
(Cost $206,293,080) $210,744,993
- --------------------------------------------------------------------------------
Short-Term Obligations--15.4%
Euro-Time Deposit
USD 38,987,507 5.50% 11/01/96 38,987,507
- --------------------------------------------------------------------------------
Total Short-Term Obligations
(Cost $38,987,507) $ 38,987,507
- --------------------------------------------------------------------------------
Total Investments
(Cost $245,280,587/(b)/ ) $249,732,500
================================================================================
================================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $6,414,087
Gross unrealized loss for investments in which cost
exceeds value (2,188,683)
- --------------------------------------------------------------------------------
Net unrealized gain $4,225,404
================================================================================
</TABLE>
/(a)/ The principal amount of each security is stated in the currency in which
the bond is denominated. See below.
BPS = British Pound Sterling ITL = Italian Lira
NLG = Netherlands Guilder JPY = Japanese Yen
DKK = Danish Krone ESP = Spanish Peseta
DEM = Deutschemark SEK = Swedish Krona
IEP = Irish Pound USD = United States Dollar
/(b)/ The aggregate cost for federal income tax purposes is $245,507,096. 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.
16
<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.
After a Weak Start, the Municipal Bond Market Strengthened
The municipal bond market outperformed Treasuries during the 12-month
period under review, though both markets came under pressure when rates rose
during the first half of 1996. The average price of a 15-year municipal bond (as
calculated from data provided by Municipal Market Data, an independent municipal
market information provider) rose approximately 0.50%, while yields declined
from 5.35% on October 31, 1995 to 5.30% on October 31, 1996.
The municipal bond market began the period under review on a weak note. Tax
reform uncertainty impacted investor demand during November and December 1995,
while municipal bond supply was high due to seasonably heavy year-end issuance
and relatively low interest rates. The market environment improved during
January and February 1996, when fading tax reform concerns helped to revive
investor interest in the sector and issuance declined. From March through the
end of the period, the market's technical balance was generally healthy, though
occasional spikes in supply periodically overwhelmed demand and briefly impacted
performance. The largest of these surges occurred in June when supply rose to
its highest level since late 1995, but subsequently both new issuance and
secondary supply fell dramatically from July through September.
On the demand side, interest in municipal bonds was generally stable until
late summer and early fall. Demand from individual investors (who control
approximately 65% of municipal bond ownership either through mutual funds or
direct investment) began to decline when interest rates declined and municipal
yields fell below the psychologically significant 6% level. In addition,
property/casualty companies (who control approximately 10% of municipal bond
ownership) also dropped out of the market because the sector had become somewhat
unattractive relative to Treasuries. The supply drought finally abated in
October when many issuers sought to take advantage of lower interest rates, and
a continued weakness in demand caused municipals to underperform taxable bonds
for the month.
Municipal Bond Yield Curve
[YIELD CURVE LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Year of Maturity 10/31/96 10/31/95
---------------- -------- --------
<S> <C> <C>
1997 3.6 3.9
1998 3.9 4.1
1999 4.15 4.2
2000 4.3 4.3
2001 4.4 4.4
2002 4.5 4.5
2003 4.6 4.6
2004 4.7 4.7
2005 4.8 4.8
2006 4.9 4.95
2007 5 5.05
2008 5.1 5.15
2009 5.2 5.25
2010 5.25 5.35
2011 5.3 5.4
2012 5.35 5.45
2013 5.4 5.5
2014 5.4 5.55
2015 5.45 5.55
2016 5.45 5.55
2017 5.45 5.55
2018 5.5 5.55
2019 5.5 5.6
2020 5.5 5.6
2021 5.5 5.6
2022 5.5 5.6
2023 5.5 5.6
2024 5.5 5.6
2025 5.5 5.6
</TABLE>
The yield curve steepened at the short end and shifted downward at the longer
end.
Performance Review: Term Structure, Sector Weightings and Security Selection
Contributed to the Fund's Favorable Performance
During the period under review, the fund's Class A shares outperformed
their benchmark, the Lehman Brothers 15-Year Municipal Bond Index (the "Index").
The fund's Class B shares, which opened on May 1, 1996 while interest rates were
still rising, also performed well but slightly lagged the benchmark.
- --------------------------------------------------------------------------------
17
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund (continued)
- --------------------------------------------------------------------------------
We are pleased to report that the fund's Class A shares outperformed most of
their peers. For the 12 months ended October 31, 1996, Class A shares ranked in
the top 20% of general municipal debt funds (36 out of 228) based on total
return, 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. Class B shares were not included because they
were not in existence during the entire 12-month period.)
- --------------------------------------------------------------------------------
Performance Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B*
(10/31/95- (5/1/96-
10/31/96) 10/31/96)
-------- --------
<S> <C> <C>
Total Return (based on net asset value) 6.13% 4.40%
- --------------------------------------------------------------------------------
Return From Monthly Distributions 4.72% 1.98%
- --------------------------------------------------------------------------------
Return From Price Appreciation 1.41% 2.42%
- --------------------------------------------------------------------------------
Lehman Brothers 15-Year Municipal
Bond Index 5.99% 4.80%
- --------------------------------------------------------------------------------
NAV (as of 10/31/96) $14.37 $14.37
- --------------------------------------------------------------------------------
NAV Change +$0.20 +$0.34
- --------------------------------------------------------------------------------
</TABLE>
* New share class opened during the period.
The fund's positive performance during the period can be attributed to our
term structure management, sector weightings and specific security selections.
. The portfolio's neutral term structure is "credit-barbelled," emphasizing
high-quality bonds with maturities of 20 to 30 years on the long end of the
yield curve and lower quality bonds with four to ten year maturities on the
short end of the curve. However, during the period, we regularly adjusted the
term structure to take advantage of changing market conditions. For example,
when the municipal bond yield curve flattened during September and the beginning
of October, we sold securities in the 20- to 30-year range in favor of 15- to
20-year bonds. In mid-October, the yield curve steepened as we anticipated, and
the fund's 15- to 20-year bonds outperformed 20- to 30-year bonds. By the end of
the month, when longer maturity bonds had become more attractively valued, we
reestablished a more evenly distributed maturity structure.
. In September, we underweighted the fund's municipal bond position relative
to the Index when our analysis indicated that municipal bonds had become
expensive compared with Treasuries. We replaced a small percentage of the fund's
duration with U.S. Treasury bond futures contracts, which we preferred over
buying Treasuries directly because they allowed us to participate in a Treasury
rally without incurring taxable net investment income. This strategy proved
successful when municipal bonds underperformed Treasuries in October, and we
returned the fund to its 100% municipal bond weighting after municipals had
cheapened to an attractive level at the end of the month.
. The fund's performance also benefited from our extensive credit analysis.
Our research helped us identify specific investment opportunities, such as
"story" bonds. These securities are often misunderstood or incorrectly valued,
but can have unique security structures and attractive yield potential.
Portfolio Composition and Investment Strategies:
Revenue Bonds Were Stressed Over GOs
Portfolio Composition as of October 31, 1996*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Variable Rate Demand Notes 7.6%
General Obligations 5.5%
Insured Revenue Bonds 34.7%
Revenue Bonds 27.9%
Insured General Obligations 24.3%
</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.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund (continued)
- --------------------------------------------------------------------------------
. Revenue Bonds. We emphasized revenue bonds over general obligation bonds
because the sector offers higher yields and better price appreciation potential.
As of October 31, the fund held a 62.6% position in a combination of insured and
uninsured revenue bonds, overweighted compared with the Index (53.9%). (Revenue
bonds pay interest and principal out of a specific revenue stream, such as sales
taxes, hospital charges, tolls, electric rates and airport fees.)
. General Obligation (GO) Bonds. As of October 31, the fund's GO holdings,
which are backed by the general taxing power of a municipality, were
underweighted relative to the Index, 29.8% versus 45.6%. Though the fund's total
GO allocation was little changed from a year ago, we did increase its weighting
in insured GOs (to 24.3% versus 12.6% last year) and reduced uninsured GOs (to
5.5% versus 16.6% last year) due to security-specific investment opportunities.
. Variable Rate Demand Notes (VRDNs). VRDNs, which are high-quality cash
equivalents, were used to manage the portfolio's excess liquidity. The position
accounted for 7.6% of the portfolio, nearly unchanged from last year.
. Credit Quality. During the period, the fund's average credit quality has
remained double-A. However, in contrast to last year's emphasis on triple-A-
rated bonds, this year the fund's credit quality was structured like a
"barbell," with higher quality securities at the long end of the yield curve and
lower quality securities (but still investment grade) at the short end. As of
October 31, 70.5% of the fund was invested in triple-A-rated securities, nearly
the same as a year ago, while double-A- and single-A-rated securities were
reduced to 9.3% and 1.8%, respectively. In the late spring of 1996, we initiated
a new position in triple-B-rated securities (the lowest credit category for
investment-grade securities), which accounted for 18.4% of the portfolio by the
end of the period. We used extensive credit research to identify specific
securities that offered higher yields than average triple-B-rated securities,
but still were of sound credit quality. The triple-B-rated position benefited
the fund's performance during the period by enabling us to lock in above-market
yields and providing greater price appreciation potential relative to the
market. Each of these positions is monitored carefully, and we will remain
vigilant for any changes in their credit quality.
Market Outlook
We have a bullish long-term outlook for municipal bond supply, since new
money issuance (bonds issued for purposes other than refunding older debt) tends
to be stable and grows at the same rate as GDP. In addition, we do not
anticipate a significant increase in refunding unless interest rates drop
substantially. On the demand side, investor interest is likely to remain
healthy, as we believe that two to four more years of divided government (a
Democratic president and a Republican-controlled Congress) should avert any
significant tax reform that would threaten municipal bonds' tax-exempt status.
Distribution Policy
During the period under review, the fund's Class A shares paid out
distributions of $0.65 per share. The fund's Class B shares, which opened on May
1, 1996, paid out $0.27 per share from their inception through October 31, 1996.
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.
- --------------------------------------------------------------------------------
19
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund (continued)
- --------------------------------------------------------------------------------
We value your investment in the Goldman Sachs Municipal Income Fund and we
look forward to reporting on the fund's progress in the coming year.
Sincerely,
/s/ Benjamin S. Thompson
Benjamin S. Thompson
/s/ Elisabeth Schupf Lonsdale
Elisabeth Schupf Lonsdale
Portfolio Managers
Goldman Sachs Municipal Income Fund
November 29, 1996
- --------------------------------------------------------------------------------
20
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund
October 31, 1996
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1996. The
performance for the Goldman Sachs Municipal Income Fund (assuming both the
maximum sales charge of 4.5% and no sales charge for Class A shares and the
maximum redemption fee of 5% and no redemption fee for the Class B shares) is
compared with its benchmark--the Lehman Brothers 15-Year Municipal Bond Index
("Lehman 15-Year Muni Index"). All performance data shown represents past
performance and should not be considered indicative of future performance which
will fluctuate as market conditions change. The investment return and principal
value of an investment will fluctuate with changes in market conditions so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
HYPOTHETICAL $10,000 INVESTMENT
Class A /(a)/
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Class A Shares Class A Shares Lehman 15-year
Date (no sales charge) (w/sales charge) Muni Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
8/1/93 $10,000 $9,550 $10,000
- --------------------------------------------------------------------------------
10/31/93 $10,455 $9,984 $10,385
- --------------------------------------------------------------------------------
10/31/94 $9,878 $9,434 $9,860
- --------------------------------------------------------------------------------
10/31/95 $11,241 $10,735 $11,414
- --------------------------------------------------------------------------------
10/31/96 $11,933 $11,395 $12,100
- --------------------------------------------------------------------------------
</TABLE>
Class B
[LINE CHART APPEARS HERE]
<TABLE>
<CAPTION>
Class A Shares Class A Shares Lehman
(no redemption (w/redemption 15-year
Date charge) charge) Muni Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
5/1/96 10,000 10,000 10,000
- --------------------------------------------------------------------------------
Oct 31, 96 10,440 9,940 10,480
- --------------------------------------------------------------------------------
</TABLE>
-----------------------------------
Average Annual Total Return
-----------------------------------
One Year Since Inception/(b)/
--------------------------------------------------------
Class A, excluding
sales charge 6.13% 5.27%
--------------------------------------------------------
Class A, including
sales charge 1.35% 3.80%
--------------------------------------------------------
Class B, excluding
redemption charge N/A 4.40%/(c)/
--------------------------------------------------------
Class B, including
redemption charge N/A (0.60%)/(c)/
--------------------------------------------------------
/(a)/For comparative purposes, Class A initial investment is assumed to be made
on the first day of the month following the Fund's commencement of
operations.
/(b)/Class A and Class B commenced operations July 20, 1993 and May 1, 1996,
respectively.
/(c)/An aggregate total return (not annualized) is shown instead of an average
annual total return since the B Class has not completed a full twelve
months of operations.
- --------------------------------------------------------------------------------
21
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund
October 31, 1996
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
================================================================================
Debt Obligations--102.2%
Arizona--5.1%
Maricopa County, AZ Unified School District No. 41 GO
(FSA)(AAA/Aaa)
$2,500,000 6.25% 07/01/15 $ 2,653,300
- --------------------------------------------------------------------------------
California--8.1%
Contra Costa, CA Water District Series G RB (MBIA)
(AAA/Aaa)
$2,000,000 5.75% 10/01/14 $ 2,022,980
San Buenaventura, CA Sewer Revenue RB (FGIC)
(AAA/Aaa)
2,255,000 5.50 03/01/15 2,231,435
- --------------------------------------------------------------------------------
$ 4,254,415
- --------------------------------------------------------------------------------
Colorado--4.8%
Englewood MFH RB (BBB)
$2,500,000 6.65% 12/01/26 $ 2,499,750
- --------------------------------------------------------------------------------
Connecticut--3.9%
Mashantucket Western Pequot Tribe RB (BBB/Baa)
$2,000,000 6.50% 09/01/05 $ 2,072,220
- --------------------------------------------------------------------------------
Florida--2.8%
Escambia County, FL Housing Authority, Single Family
(GNMA/FNMA)(Aaa)
$1,390,000 6.80% 10/01/15 $ 1,464,949
- --------------------------------------------------------------------------------
Illinois--19.1%
Chicago, IL GO Series A-2 (AMBAC) (AAA/Aaa) (e)
$1,750,000 6.25% 01/01/14 $ 1,877,873
Cook County, IL GO(FGIC) (AAA/Aaa)
2,000,000 5.75 11/15/12 2,015,720
Lake County, IL Unified School District No. 116 GO (FSA) (AAA/Aaa)
2,000,000 7.60 02/01/14 2,428,340
1,525,000 6.10 02/01/16 1,588,089
O'Hare International Airport RB (MBIA)(AAA/Aaa)
2,000,000 6.38 01/01/15 2,109,780
- --------------------------------------------------------------------------------
$10,019,802
- --------------------------------------------------------------------------------
Indiana--9.5%
East Allen, IN Elementary School Building Corp. RB (FSA)
(AAA/Aaa)
$3,115,000 5.88% 07/01/12 $ 3,178,079
Indiana Transportation Finance Authority RB Series A
(MBIA) (AAA/Aaa)
1,500,000 7.25 06/01/15 1,789,305
- --------------------------------------------------------------------------------
$ 4,967,384
================================================================================
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
================================================================================
Kentucky--2.0%
Nelson County, KY Industrial Building RB for Mabex
Universal Corp. Project AMT (A3)
$1,000,000 6.50% 04/01/05 $ 1,066,790
- --------------------------------------------------------------------------------
Maine--1.5%
Maine Educational Loan Authority RB Series A-1 (Aaa)
$ 725,000 6.80% 12/01/07 $ 765,462
- --------------------------------------------------------------------------------
Michigan--3.6%
Detroit, MI GO (BBB-)
$1,885,000 5.70% 05/01/02 $ 1,907,714
- --------------------------------------------------------------------------------
New York--9.0%
New York State Municipal Bond Agency RB, Series A (BBB+)
$1,610,000 6.60% 03/15/01 $ 1,699,854
New York State Thruway Authority Highway & Bridges RB
(BBB/Baa1)
1,000,000 5.25 04/01/03 1,004,630
Syracuse, NY IDA RB (AA)
2,000,000 5.13 10/15/02 2,005,600
- --------------------------------------------------------------------------------
$ 4,710,084
- --------------------------------------------------------------------------------
North Dakota--3.8%
Mercer County, ND PCRB for Basin Electric Power 2nd
Series (AMBAC) (AAA/Aaa) (e)
$2,000,000 6.05% 01/01/19 $ 2,055,380
- --------------------------------------------------------------------------------
Ohio--8.9% Akron, OH COPs (a) (BBB) (c)
$2,000,000 6.90% 12/01/16 $ 1,438,500
Kent State University RB (MBIA) (AAA/Aaa)
2,280,000 5.50 05/01/28 2,181,504
Trumbull County, OH GO (AMBAC) (AAA/Aaa)
1,000,000 5.75 12/01/03 1,061,870
- --------------------------------------------------------------------------------
$ 4,681,874
- --------------------------------------------------------------------------------
Texas--8.8%
Denison, TX Waterworks & Sewer RB (AAA/Aaa)
$1,250,000 5.50% 09/01/08 $ 1,258,525
1,250,000 5.40 09/01/09 $ 1,258,475
East Texas Criminal Justice Facilities Financing Corp. RB
(AMBAC) (AAA/Aaa)
$2,000,000 5.75 11/01/09 $ 2,032,560
Fort Bend, TX Independent School District RB (AAA/Aaa)
50,000 5.00 02/15/18 46,226
- --------------------------------------------------------------------------------
$ 4,595,786
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
22
22
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Municipal Income Fund (continued)
October 31, 1996
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
================================================================================
Debt Obligations(continued)
Washington--7.1%
Chelan County, WA Public Utility RB (AAA/Aaa)/c/
$2,500,000 6.35% 07/01/28 $ 2,540,125
Washington State Series C GO (AA/Aa)
1,155,000 6.50 07/01/00 1,232,373
- --------------------------------------------------------------------------------
$ 3,772,498
- --------------------------------------------------------------------------------
Wisconsin--4.2%
Wisconsin Housing & Economic Development Authority RB,
Series B (AA/Aa)/e/
$2,060,000 7.10% 09/01/15 $ 2,181,623
- --------------------------------------------------------------------------------
Total Debt Obligations
(Cost $52,677,902) $53,669,031
- --------------------------------------------------------------------------------
Short-Term Obligations--8.4%
Alabama--6.5%
Columbia County, AL IDB/b/ (A/A2)
$1,200,000 3.65% 11/01/96 $ 1,200,000
Parrish, AL IDB/b/ (A/A1)
2,200,000 3.65 11/01/96 2,200,000
- --------------------------------------------------------------------------------
$ 3,400,000
- --------------------------------------------------------------------------------
Wyoming--1.9%
Converse, WY PCRB/b/ (AAA)
$1,000,000 3.65% 11/01/96 $ 1,000,000
- --------------------------------------------------------------------------------
Total Short-Term Obligations
(Cost $4,400,000) $ 4,400,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $57,077,902/d/) $58,069,031
================================================================================
- --------------------------------------------------------------------------------
================================================================================
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost $ 1,018,643
Gross unrealized loss for investments in which cost
exceeds value (27,514)
- --------------------------------------------------------------------------------
Net unrealized gain $ 991,129
================================================================================
/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 interest reset dates.
/c/When-issued security.
/d/The amount stated also represents aggregate cost for federal income tax
purposes.
/e/Portions of these securities are being segregated for when-issued securities.
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.
COPS --Certificates of Participation
FGIC --Insured by Financial Guaranty
Insurance Co.
FSA --Financial Security Assurance Co.
GO --General Obligation
IDA --Industrial Development Authority
IDB --Industrial Development Bond
MBIA --Insured by Municipal Bond Investors
Assurance
MFH --Multi-Family Housing
PCRB --Pollution Control Revenue Bond
RB --Revenue Bond
================================================================================
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
23
23
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Global Municipal
Income Income Income
Fund Fund Fund
========================================
<S> <C> <C> <C>
Assets:
Investments in securities, at value (cost $38,555,545, $245,280,587
and $57,077,902) $38,632,147 $249,732,500 $58,069,031
Receivables:
Investment securities sold 3,011,458 -- --
Interest 255,950 4,572,733 688,717
Forward foreign currency exchange contracts -- 1,073,237 --
Fund shares sold 38,729 23,757 12,145
Foreign tax withheld -- 100,251 --
Cash 17,149 248 48,127
Variation margin 6,788 -- --
Deferred organization expenses, net 23,998 -- 30,090
Other assets 65,284 31,883 29,773
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets 42,051,503 255,534,609 58,877,883
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased 11,129,422 -- 6,076,685
Forward foreign currency exchange contracts -- 1,816,332 --
Fund shares repurchased 14,381 124,500 128,184
Investment adviser fees 6,423 94,713 18,124
Administration fees -- 32,334 6,857
Authorized dealer service fees 6,166 44,409 9,224
Distribution fees 151 35,488 154
Accrued expenses and other liabilities 57,538 211,388 116,255
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 11,214,081 2,359,164 6,355,483
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets:
Paid in capital 30,678,648 247,410,169 52,495,830
Accumulated undistributed net investment income 53,331 6,704,225 60,331
Accumulated net realized loss on investment transactions (45,759) (4,636,687) (1,024,890)
Accumulated net realized foreign currency gain -- 43,634 --
Net unrealized gain on investments and futures 151,202 4,864,862 991,129
Net unrealized loss on translation of assets and liabilities denominated in foreign
currencies -- (1,210,758) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets $30,837,422 $253,175,445 $52,522,400
==================================================================================================================================
Net asset value, offering /(a)/ and redemption price per share
Class A $14.36 $14.53 $14.37
Class B $14.37 $14.53 $14.37
Institutional -- $14.52 --
==================================================================================================================================
Shares Outstanding
Class A 2,131,467 13,670,270 3,637,437
Class B 16,317 17,603 17,778
Institutional -- 3,735,251 --
- ----------------------------------------------------------------------------------------------------------------------------------
Total shares outstanding, $.001 par value (unlimited number of shares authorized) 2,147,784 17,423,124 3,655,215
==================================================================================================================================
</TABLE>
/(a)/Maximum public offering price per share (NAV per share x 1.0471) for Class
A shares is $15.04, $15.21 and $15.05 for Government Income, Global Income
and Municipal Income, respectively. At redemption, Class B shares are
subject to a contingent deferred sales charge, assessed on the amount equal
to the lesser of the current net asset value or the original purchase price
of the shares.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Goldman Sachs Trust
- ------------------------------------------------------------------------------
Statements of Operations
For the Year Ended October 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Global Municipal
Income Income Income
Fund Fund Fund
======================================
<S> <C> <C> <C>
Investment income:
Interest/(a)/ $2,048,891 $18,287,214 $2,869,729
- ------------------------------------------------------------------------------
Total income 2,048,891 18,287,214 2,869,729
- ------------------------------------------------------------------------------
Expenses:
Investment adviser fees 148,120 1,965,605 211,283
Administration fees 44,433 393,263 79,231
Authorized dealer service fees 74,171 549,289 132,051
Distribution fees 74,281 549,538 132,304
Custodian fees 44,987 210,420 36,172
Transfer agent fees 72,237 121,212 90,284
Professional fees 58,897 92,538 60,094
Registration fees 14,992 63,673 32,549
Amortization of deferred organization
expenses 18,848 46,256 17,593
Trustee fees 478 3,073 707
Other 8,763 78,430 27,214
- ------------------------------------------------------------------------------
Total expenses 560,207 4,073,297 819,482
Less--expenses reimbursable and fees
waived by Goldman Sachs (411,644) (1,241,452) (370,128)
- ------------------------------------------------------------------------------
Net expenses 148,563 2,831,845 449,354
- ------------------------------------------------------------------------------
Net investment income 1,900,328 15,455,369 2,420,375
- ------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investment, options, futures and
foreign currency transactions:
Net realized gain (loss) from:
Investment transactions 115,970 9,268,666 1,390,846
Futures transactions (68,389) -- (151,156)
Foreign currency related transactions -- (2,192,328) --
Net change in unrealized gain (loss) on:
Investments and options (332,205) 54,149 (513,085)
Futures 74,600 -- --
Translation of assets and liabilities
denominated in foreign currencies -- 4,948,769 --
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment, options, futures and
foreign currency transactions (210,024) 12,079,256 726,605
- ------------------------------------------------------------------------------
Net increase in net assets resulting
from operations $1,690,304 $27,534,625 $3,146,980
==============================================================================
</TABLE>
/(a)/Net of $96,252 in foreign withholding tax for the Global Income
Fund.
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Global Municipal
Income Income Income
Fund Fund Fund
=============================================
<S> <C> <C> <C>
From operations:
Net investment income $ 1,900,328 $ 15,455,369 $ 2,420,375
Net realized gain from investment transactions 47,581 9,268,666 1,239,690
Net realized loss from foreign currency related transactions -- (2,192,328) --
Net change in unrealized gain (loss) on investments, futures and options (257,605) 54,149 (513,085)
Net change in unrealized loss on translation of assets and liabilities
denominated in foreign currencies -- 4,948,769 --
- ------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,690,304 27,534,625 3,146,980
- ------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (1,898,372) (22,455,377) (2,418,570)
Class B (3,324) (3,052) (1,805)
Institutional Class -- (4,050,770) --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1,901,696) (26,509,199) (2,420,375)
- ------------------------------------------------------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 8,922,548 39,747,372 6,389,765
Reinvestment of dividends and distributions 1,614,587 16,968,046 1,484,778
Cost of shares repurchased (8,990,920) (82,019,748) (9,875,982)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from share transactions 1,546,215 (25,304,330) (2,001,439)
- ------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) 1,334,823 (24,278,904) (1,274,834)
Net assets:
Beginning of year 29,502,599 277,454,349 53,797,234
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 30,837,422 $ 253,175,445 $ 52,522,400
========================================================================================================================
Accumulated undistributed net investment income $ 53,331 $ 6,704,225 $ 60,331
========================================================================================================================
Summary of share transactions:
Shares sold 624,626 2,811,314 449,496
Reinvestment of dividends and distributions 112,977 1,198,568 104,201
Shares repurchased (628,175) (5,784,097) (694,794)
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 109,428 (1,774,215) (141,097)
========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<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.
27
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements
October 31, 1996
- --------------------------------------------------------------------------------
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 October 31, 1996, the Funds offer
Class A and Class B shares. In addition, Global Income offers Institutional and
Service shares. As of October 31, 1996, there outstanding no Service 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 may affect the reported amounts.
A. Investment Valuation
- -----------------------
Investments in debt securities, other than money market instruments, held by the
Funds 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
- --------------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 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 rolls as two separate transactions;
one involving the purchase of a security and a separate transaction involving a
sale.
- --------------------------------------------------------------------------------
29
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
October 31, 1996
- --------------------------------------------------------------------------------
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.
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.
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.
Payments for futures contracts ("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. 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.
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At October 31, 1996, the Funds had approximately the following amounts of
capital loss carryforward for U.S. Federal tax purposes:
<TABLE>
<CAPTION>
Year of
Fund Amount Expiration
- ----------------------------------- ------------ ----------------
<S> <C> <C>
Global Income $4,471,734 2002
Municipal Income $1,534,884 2002
</TABLE>
I. Deferred Organization Expenses
- ---------------------------------
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
J. 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 and Class B shareholders of the Funds bear all expenses and fees
relating to their respective distribution and authorized dealer service plans as
well as other expenses which are directly attributable to such shares. Transfer
agent fees are subject to separate arrangements for each class.
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.
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.
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.
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 year ended October 31, 1996,
Goldman Sachs retained approximately $17,300, $52,600 and $24,900 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% and .75% of each Fund's average
daily net assets attributable to Class A and Class B shares, respectively.
- --------------------------------------------------------------------------------
31
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
October 31, 1996
- --------------------------------------------------------------------------------
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, up to .25% of the
average daily net assets attributable to the Class A and Class B shares. Goldman
Sachs also serves as the Transfer Agent of the Funds for a fee.
For the year ended October 31, 1996, the advisors, administrators and
distributor have voluntarily agreed to waive certain fees and reimburse other
expenses as follows (in thousands):
<TABLE>
<CAPTION>
Waivers
--------------------------------------
Reimburse-
Admin- Class A Reimburse- ment
Fund Advisor istrator 12b-1 ment Outstanding
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Government
Income 74 44 74 220 27
Global
Income 848 -- 56 337 7
Municipal
Income -- -- 132 238 30
</TABLE>
The Investment Advisors and Administrator may discontinue or modify such waivers
and limitations in the future at their discretion.
For the year ended October 31, 1996, Government Income and Municipal Income
incurred commissions expense of approximately $1,200 and $2,750 respectively, in
connection with futures contracts entered into with Goldman Sachs. At October
31, 1996, Goldman Sachs owes approximately $7,000 to Government Income 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 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 year
ended October 31, 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
year ended October 31, 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 $133,097,699 $117,740,548 $ --
- --------------------------------------------------------------------------------
Purchases (excluding
U.S. Government and
agency obligations) 9,741,716 410,144,747 184,788,273
- --------------------------------------------------------------------------------
Sales or maturities of
U.S. Government and
agency obligations 136,922,990 102,151,633 --
- --------------------------------------------------------------------------------
Sales or maturities
(excluding U.S.
Government and
agency obligations) 3,909,735 446,269,068 189,391,870
================================================================================
</TABLE>
For the year ended October 31, 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>
32
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
At October 31, 1996, Global Income had outstanding forward foreign currency
exchange contracts to sell foreign currencies as follows:
<TABLE>
<CAPTION>
===============================================================================
Value on
Foreign Currency Settlement Current Unrealized
Sale Contracts Date Value Gain/(Loss)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Danish Krone
Expiring 1/22/97 $ 6,348,652 $ 6,443,676 $ (95,024)
Deutschemark
Expiring 11/27/96 37,735,809 38,044,516 (308,707)
Expiring 2/27/97 12,671,000 12,775,513 (104,513)
British Pound Sterling
Expiring 11/14/96 15,423,575 16,184,359 (760,784)
Irish Pound
Expiring 1/8/97 6,842,743 6,964,425 (121,682)
Italian Lira
Expiring 1/29/97 1,326,853 1,335,737 (8,884)
Japanese Yen
Expiring 1/24/97 23,059,781 22,755,697 304,084
Netherlands Guilder
Expiring 1/9/97 6,442,727 6,510,658 (67,931)
Spanish Peseta
Expiring 1/16/97 6,543,897 6,612,046 (68,149)
Swedish Krona
Expiring 1/28/97 4,708,899 4,736,457 (27,558)
Swiss Franc
Expiring 1/29/97 12,952,107 12,453,735 498,372
Expiring 1/29/97 12,083,214 12,109,196 (25,982)
- -------------------------------------------------------------------------------
Total Foreign Currency
Sale Contracts $146,139,257 $146,926,015 $(786,758)
===============================================================================
</TABLE>
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 October 31, 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 $1,073,237 and $1,816,332 respectively, in the accompanying
Statement of Assets and Liabilities. Included in the "Receivable and Payable for
forward foreign currency exchange contracts" are $270,781 and $227,118
respectively, related to forward contracts closed but not settled as of
October 31, 1996.
6. Summary of Share Transactions
Share activity for the year ended October 31, 1996 is as follows:
<TABLE>
<CAPTION>
Government Income Fund Dollars Shares
===============================================================================
<S> <C> <C>
Class A Shares:
Shares sold $8,675,868 607,156
Reinvestment of dividends and
distributions 1,611,387 112,752
Shares repurchased (8,971,389) (626,797)
----------------------------------
1,315,866 93,111
----------------------------------
Class B Shares
Shares sold 246,680 17,470
Reinvestment of dividends
and distributions 3,200 225
Shares repurchased (19,531) (1,378)
----------------------------------
230,349 16,317
- -------------------------------------------------------------------------------
$1,546,215 109,428
===============================================================================
<CAPTION>
Global Income Fund Dollars Shares
===============================================================================
<S> <C> <C>
Class A Shares:
Shares sold $ 15,545,777 1,089,521
Reinvestment of dividends
and distributions 13,419,614 947,846
Shares repurchased (76,216,894) (5,376,065)
----------------------------------
(47,251,503) (3,338,698)
----------------------------------
Class B Shares
Shares sold 265,053 18,628
Reinvestment of dividends
and distributions 1,708 119
Shares repurchased (16,373) (1,144)
----------------------------------
250,388 17,603
----------------------------------
Institutional Shares:
Shares sold 23,936,542 1,703,165
Reinvestment of dividends
and distributions 3,546,724 250,603
Shares repurchased (5,786,481) (406,888)
----------------------------------
21,696,785 1,546,880
- -------------------------------------------------------------------------------
$(25,304,330) (1,774,215)
================================================================================
</TABLE>
33
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
October 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Municipal Income Fund Dollars Shares
================================================================================
<S> <C> <C>
Class A Shares:
Shares sold $ 6,139,212 431,736
Reinvestment of dividends
and distributions 1,482,976 104,074
Shares repurchased (9,874,431) (694,685)
------------------------------------
(2,252,243) (158,875)
------------------------------------
Class B Shares
Shares sold 250,553 17,760
Reinvestment of dividends
and distributions 1,802 127
Shares repurchased (1,551) (109)
------------------------------------
250,804 17,778
- --------------------------------------------------------------------------------
$ (2,001,439) (141,097)
================================================================================
</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 October 31, 1996, Government Income had a 0.3% undivided interest in the
repurchase agreement in the joint account which equaled $8,400,000 in principal
amount. As of October 31, 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>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
===============================================================================
<S> <C> <C> <C>
Bear Stearns & Co., dated 10/31/96, repurchase price $700,108,500 (FNMA:
$555,686,102, 5.50%-8.50%, 2/1/09-6/1/26; FHLMC: $166,359,033, 5.50%-8.50%,
9/1/98-8/1/26)
$700,000,000 5.58% 11/01/96 $700,000,000
Lehman Brothers, Inc. dated 10/31/96, repurchase price $924,843,329 (Treasury
Notes: $942,903,967, 4.38%-8.50%, 11/15/96-8/15/03)
924,700,00 5.58 11/01/96 924,700,000
Nomura Securities International, Inc. dated 10/31/96, repurchase price
$700,108,500 (FNMA: $256,658,433, 5.50%-8.00%, 6/1/03-10/1/26; FHLMC:
$465,441,174, 6.00%-9.00%, 9/1/1-10/1/26)
700,000,000 5.58 11/01/96 700,000,000
Smith Barney, Inc. dated 10/31/96, repurchase price $170,026,161 (U.S
Treasury Interest Only Stripped Securities: $11,653,277, 2/15/98-5/15/02; U.S.
Treasury Notes: $85,997,728, 5.25%-7.75%, 5/15/97-10/15/06; U.S. Treasury
Principal Only Stripped Securities: $33,993,571, 5/15/97-5/15/05; U.S.
Treasury Bills: $41,756,285, 12/12/96-3/20/97)
170,000,000 5.54 11/01/96 170,000,000
Union Bank of Switzerland, Inc. dated 10/31/96, repurchase price $175,026,979
(U.S. Treasury Notes: $178,694,649, 6.88%-7.75%, 8/31/99-1/31/00)
175,000,000 5.55 11/01/96 175,000,000
- -------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $2,669,700,000
===============================================================================
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
9. Certain Reclassifications
In accordance with Statement of Position 93-2, the Government Income, Global
Income and Municipal Income Funds have reclassified $18,448, $46,256 and
$17,593, respectively, from paid-in capital to accumulated undistributed net
investment income. Additionally, the Global Income Fund has reclassified
$862,007, $207,585 and $380 from accumulated net realized gain, accumulated net
realized foreign currency gain and paid in capital, respectively to accumulated
undistributed net investment income. These reclassifications have no impact on
net asset values of the Funds and are designed to present the Funds' capital
accounts on a tax basis.
10. Other
As of October 31, 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.
- --------------------------------------------------------------------------------
35
<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
and unrealized and unrealized Total From net
gain (loss) gain (loss) income realized gain
Net asset on investment, on foreign (loss) on investment, In excess
value at Net option and currency from From net option and of net
beginning investment futures related investment investment futures investment
of period income transactions transactions operations income transactions income
GOVERNMENT INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended October 31,
=========================================================
1996-Class A shares $14.47 $0.92 $(0.11) -- $0.81 $(0.92) -- --
1996-Class B shares/(c)/ 14.11 0.41 0.26 -- 0.67 (0.41) -- --
1995-Class A shares 13.47 0.94 1.00 -- 1.94 (0.94) -- --
1994-Class A shares 14.90 0.85 (1.28) -- (0.43) (0.85) (0.12) (0.02)
For the Period February 10, 1993/(d)/ through October 31,
=========================================================
1993-Class A shares 14.32 0.56 0.58 -- 1.14 (0.56) -- --
GLOBAL INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
For the Years Ended October 31,
=========================================================
1996-Class A shares $14.45 $0.71 $0.62 $0.18 $1.51 $(1.43) -- --
1996-Class B shares/(c)/ 14.03 0.34 0.41 0.11 0.86 (0.36) -- --
1996-Institutional
shares 14.45 1.15 0.32 0.10 1.57 (1.50) -- --
1995-Class A shares 13.43 0.89 0.92 0.15 1.96 (0.94) -- --
1995- Institutional
shares/(f)/ 14.09 0.22 0.34 0.06 0.62 (0.26) -- --
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/(d)/ through October 31,
=========================================================
1991-Class A shares 14.55 0.25 0.23 (0.19) 0.29 (0.24) -- --
<CAPTION>
In excess of
net realized Net
gain on increase
investment, From Total (decrease) Net asset
option and paid distributions in net value at
futures in to asset end of
transactions capital shareholders value period
- -----------------------------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Years Ended October 31,
=========================================================
1996-Class A shares -- -- $(0.92) $(0.11) $14.36
1996-Class B shares/(c)/ -- -- (0.41) 0.26 14.37
1995-Class A shares -- -- (0.94) 1.00 14.47
1994-Class A shares (0.01) -- (1.00) (1.43) 13.47
For the Period February 10, 1993 /(d)/ through October 31,
==========================================================
1993-Class A shares -- -- (0.56) 0.58 14.90
GLOBAL INCOME FUND
- -----------------------------------------------------------------------------------------------------
For the Years Ended October 31,
===========================================================
1996-Class A shares -- -- $(1.43) $0.08 $14.53
1996-Class B shares/(c)/ -- -- (0.36) 0.50 14.53
1996-Institutional
shares -- -- (1.50) 0.07 14.52
1995-Class A shares -- -- (0.94) 1.02 14.45
1995-Institutional
shares/(f)/ -- -- (0.26) 0.36 14.45
1994-Class A shares -- (0.61) (0.99) (1.64) 13.43
1993-Class A shares -- -- (1.12) 0.38 15.07
1992-Class A shares -- -- (1.14) 0.09 14.69
For the Period August 2, 1991 (d) through October 31,
============================================================
1991-Class A shares -- -- (0.24) 0.05 14.60
<CAPTION>
Ratio of Net
Ratio of net assets
net investment at end
expenses income Portfolio of
Total to average to average turnover period
return /(b/) net assets net assets rate /(h)/ (in 000s)
===================================================================================================
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Years Ended October 31,
=========================================================
1996-Class A shares 5.80% 0.50% 6.42% 485.09% $30,603
1996-Class B shares/(c)/ 4.85/(g)/ 1.25/(e)/ 5.65/(e)/ 485.09 234
1995-Class A shares 14.90 0.47 6.67 449.53 29,503
1994-Class A shares (2.98) 0.11 6.06 654.90 14,452
For the Period February 10, 1993/(d)/ through October 31,
=========================================================
1993-Class A shares 8.03/(g)/ 0.00/(e)/ 4.87/(e)/ 725.41/(g/ 12,860
- ---------------------------------------------------------------------------------------------------
For the Years Ended October 31,
=========================================================
1996-Class A shares 11.05% 1.16% 5.81% 232.15% $198,665
1996-Class B shares/(c)/ 6.24/(g)/ 1.70/(e)/ 5.16/(e)/ 232.15 256
1996-Institutional
shares 11.55 0.65 6.35 232.15 54,254
1995-Class A shares 15.08 1.29 6.23 265.86 245,835
1995-Institutional
shares/(f)/ 4.42/(g)/ 0.65/(e)/ 6.01/(e)/ 265.86 31,619
1994-Class A shares (4.49) 1.28 5.73 343.74 396,584
1993-Class A shares 10.75 1.30 5.78 313.88 675,662
1992-Class A shares 8.77 1.37 7.85 270.75 588,893
For the Period August 2, 1991 (d) through October 31,
=========================================================
1991- Class A shares 2.00 0.38 /(g)/ 1.72 /(g)/ 34.22 /(g)/ 388,744
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
------------------------------
Ratio of
net
Ratio of investment
expenses income
to average to average
net assets net assets
==============================================================
- --------------------------------------------------------------
<S> <C> <C>
For the Years Ended October 31,
==========================================================
1996-Class A shares 1.89% 5.03%
1996-Class B shares/(c)/ 2.39/(e)/ 4 .51/(e)/
1995-Class A shares 2.34 4.80
1994-Class A shares 2.86 3.31
For the Period February 10, 1993 /(d)/ through October 31,
==========================================================
1993-Class A shares 4.00/(e)/ 0.87/(e)/
- ------------------------------------------------------------
For the Years Ended October 31,
==========================================================
1996-Class A shares 1.64% 5.33%
1996-Class B shares/(c)/ 2.14 /(e)/ 4.72/(e)/
1996-Institutional
shares 1.11 5.89
1995-Class A shares 1.58 5.94
1995-Institutional
shares/(f)/ 1.08/(e)/ 5.58/(e)/
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 August 2, 1991 (d) through October 31,
==========================================================
1991-Class A shares 0.44/(g)/ 1.66/(g)/
- ------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<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
and unrealized and unrealized Total From net
gain (loss) gain (loss) income realized gain
Net asset on investment, on foreign (loss) on investment, In excess
value at Net option and currency from From net option and of net
beginning investment futures related investment investment futures investment
of period income transactions transactions operations income transactions income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL INCOME FUND
For the Years Ended October 31,
1996- Class A shares $14.17 $0.65 $0.20 -- $0.85 $(0.65) -- --
1996- Class B shares /(c)/ 14.03 0.27 0.34 -- 0.61 (0.27) -- --
1995- Class A shares 13.08 0.67 1.09 -- 1.76 (0.67) -- --
1994- Class A shares 14.64 0.73 (1.51) -- (0.78) (0.73) (0.05) --
For the Period July 20, 1993 (d) through October 31,
1993- Class A shares 14.32 0.22 0.32 -- 0.54 (0.22) -- --
<CAPTION>
Distributions to shareholders
----------------------------------------
In excess of
net realized Net
gain on increase
investment, From Total (decrease) Net asset
option and paid distributions in net value at
futures in to asset end of
transactions capital shareholders value period
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL INCOME FUND
For the Years Ended October 31,
1996- Class A shares -- -- $(0.65) $0.20 $14.37
1996- Class B shares /(c)/ -- -- (0.27) 0.34 14.37
1995- Class A shares -- -- (0.67) 1.09 14.17
1994- Class A shares -- -- (0.78) (1.56) 13.08
For the Period July 20, 1993
1993- Class A shares -- -- (0.22) 0.32 14.64
<CAPTION>
Ratio of
Ratio of net
net investment
expenses income Portfolio
Total to average to average turnover
return /(b/) net assets net assets rate /(h)/
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL INCOME FUND
For the Years Ended October 31,
1996- Class A shares 6.13% 0.85% 4.58% 344.13%
1996- Class B shares /(c)/ 4.40 /(g)/ 1.60 /(e)/ 3.55 /(e)/ 344.13
1995- Class A shares 13.79 0.76 4.93 335.55
1994- Class A shares (5.51) 0.45 5.28 357.54
For the Period July 20, 1993 (d) through October 31,
1993- Class A shares 3.73 /(g)/ 0.00 /(e)/ 5.15 /(e)/ 99.99 /(g)/
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
---------------------
Net Ratio of
assets net
at end Ratio of investment
of expenses income
period to average to average
(in 000s) net assets net assets
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
MUNICIPAL INCOME FUND
For the Years Ended October 31,
1996- Class A shares $52,267 1.55% 3.88%
1996- Class B shares /(c)/ 255 2.05 /(e)/ 3.10 /(e)/
1995- Class A shares 53,797 1.49 4.20
1994- Class A shares 47,373 1.55 4.18
For the Period July 20, 1993 (d) through October 31,
1993- Class A shares 30,166 2.42 /(e)/ 2.73 /(e)/
</TABLE>
- ---------------
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the investment
at the net asset value at the end of period and no sales charge. Total
return would be reduced if a sales charge for Class A shares or a contingent
deferred sales charge for Class B shares were taken into account.
(c) Class B shares commenced operations on May 1, 1996.
(d) Commencement of operations.
(e) Annualized.
(f) Institutional shares commenced operations on June 1, 1995.
(g) Not annualized.
(h) Includes the effect of mortgage dollar roll transactions for the Government
Income Fund.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of the Goldman Sachs Government Income
Fund, Goldman Sachs Global Income Fund and Goldman Sachs Municipal Income Fund:
We have audited the accompanying statements of assets and liabilities of the
Goldman Sachs Government Income Fund, Goldman Sachs Global Income Fund and
Goldman Sachs Municipal Income Fund (portfolios of Goldman Sachs Trust, a
Massachusetts Business Trust), including the statements of investments, as of
October 31, 1996, and the related statements of operations, the statements of
changes in net assets and the financial highlights for each of the periods
presented. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of the
Goldman Sachs Government Income Fund, Goldman Sachs Global Income Fund and
Goldman Sachs Municipal Income Fund as of October 31, 1996, the results of their
operations and the changes in their net assets and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
December 12, 1996
- --------------------------------------------------------------------------------
38
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Annual 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
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Douglas C. 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
The Goldman Sachs
Fixed Income Funds
- -------------------------------------
Annual Report
October 31, 1996
Goldman Sachs Government Income Fund
Goldman Sachs Global Income Fund
Goldman Sachs Municipal Income Fund
[LOGO OF GOLDMAN SACHS APPEARS HERE]
================================================================================
<PAGE>
Goldman Sachs
1 New York Plaza
New York, NY 10004
Trustees
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Douglas C. 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
The Goldman Sachs
Fixed Income Funds
- -------------------------
Annual Report
October 31, 1996
Goldman Sachs Government Income Fund
Goldman Sachs Global Income Fund
Goldman Sachs Municipal Income Fund
[GOLDMAN SACHS LOGO APPEARS HERE]
================================================================================
