<PAGE>
- -------------------------------------------------------------------------------
Letter to Shareholders
- -------------------------------------------------------------------------------
Dear Shareholders:
A return of robust economic growth during the period under review fueled
fears of higher inflation, which pushed Treasury yields higher across the
maturity spectrum. In this semiannual report, we will review the performance of
the Goldman Sachs Fixed Income Funds for the six-month period ended April 30,
1997, as well as provide a brief overview of the U.S. economy and the bond
market. We are pleased to note that during the period, the Goldman Sachs Fixed
Income Funds performed well compared with their peers.
Economic Activity Rebounded, Led by Consumer Spending
After a sluggish third quarter, the pace of economic growth strengthened
during the period. During November and December, consumer spending rebounded,
the trade deficit narrowed and industrial production climbed significantly. As a
result, fourth-quarter real Gross Domestic Product (GDP) growth was 3.8%
(annualized), up from 2.1% in the prior quarter.
Economic activity continued to gain momentum during the first quarter of
1997, with real GDP surging 5.8%, the largest jump in a decade. Signs of
strength were led by a sharp increase in consumer spending, which resulted in
solid sales gains for automobile manufacturers and retailers. In addition,
upbeat reports on factory orders and inventories, construction outlays and labor
market conditions all pointed towards economic acceleration. Despite the growth
spurt, reported inflation remained surprisingly mild during the period.
Furthermore, several economic reports for April came in at the low end of
consensus expectations, which suggested that the economy could moderate during
the second quarter.
The Bond Market Rallied, Then Fell as Inflation Fears Reemerged
The U.S. fixed income market came under pressure during the period under
review. In November, bonds performed well in anticipation of a continued
slowdown in U.S. economic growth. However, the market experienced a reversal in
December when better-than-expected economic data, in particular, robust
employment figures, triggered a sell-off and drove interest rates higher. In
early February, bond prices briefly rebounded, but later faltered as it became
increasingly likely that the U.S. Federal Reserve would raise short term
interest rates in March. By the end of March, the yield on the benchmark 30-year
Treasury bond rose above the psychologically important 7% threshold. Despite the
lackluster performance of the U.S. bond market for the period as a whole, a
sharp rebound at the end of April helped bonds recoup part of their earlier
losses.
The Fed Raised the Federal Funds Rate in March
In March 1997, the Fed raised the federal funds rate by 25 basis points to
5.50%. Though there were few signs of actual inflation, the Fed tightening was
prompted by the economy's pervasive strength. The Fed's action was its first
since a quarter-point cut in January 1996.
During the period under review, the yield curve shifted higher across all
maturities. The yield on six-month Treasury bills rose from 5.26% on October 31,
1996 to approximately 5.52% on April 30, 1997. For the same period, the yield on
the 30-year U.S. Treasury bond rose more dramatically, climbing from 6.64% to
6.95%.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Table of Contents
<S> <C>
Market Overview 1
Goldman Sachs Adjustable Rate Government Fund 3
Goldman Sachs Short Duration Government Fund 9
Goldman Sachs Short Duration Tax-Free Fund 14
Goldman Sachs Core Fixed Income Fund 20
Financial Statements 28
Notes to Financial Statements 32
Financial Highlights 39
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
1
<PAGE>
- -------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
Historical Treasury Yield Curve
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
10/31/96 4/30/97
<S> <C> <C>
3-Month 5.14% 5.23%
6-Month 5.26% 5.52%
1 5.40% 5.89%
2 5.73% 6.27%
3 5.86% 6.40%
5 6.07% 6.57%
10 6.34% 6.71%
15 6.64% 6.95%
</TABLE>
Source: Bloomberg, L.P.
The yield curve shifted upward across all maturities and steepened sharply at
the short end.
Outlook: Strengthening Economic Growth May
Trigger Further Preemptive Rate Hikes
Despite reports of economic moderation and minimal price acceleration, the
economy's broad-based fundamental strength and resilient equity market make
additional Fed rate increases likely this year. Goldman Sachs' economists
believe that the speed and extent of Fed tightening will depend in large part on
the emergence of conclusive signs that the economy is nearing maximum capacity,
rather than immediate evidence of increased inflationary pressures.
In conclusion, we thank you for your support of the Goldman Sachs Fixed
Income Funds and we look forward to continuing our relationship.
Sincerely,
/s/ David B. Ford
David B. Ford
Co-Head,
Goldman Sachs Asset Management
/s/ John P. McNulty
John P. McNulty
Co-Head,
Goldman Sachs Asset Management
/s/ Sharmin Mossavar-Rahmani
Sharmin Mossavar-Rahmani
Chief Investment Officer - Fixed Income Investments
Goldman Sachs Asset Management
May 30, 1997
- -------------------------------------------------------------------------------
2
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Adjustable Rate Government Fund
- --------------------------------------------------------------------------------
Investment Objective
The Goldman Sachs Adjustable Rate Government Fund seeks a high level
of current income consistent with low volatility of principal. The portfolio
ordinarily invests substantially all of its assets in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, with
primary emphasis on adjustable rate mortgage securities (ARMs). Under normal
interest rate conditions, the fund's duration is expected to be in a range
approximately equal to that of a six-month to one-year U.S. Treasury security.
Special Events
As of March 27, 1997, the fund opened a new share class (Service). In
addition, effective May 1, 1997, the name of the GS Adjustable Rate Government
Fund was changed to the Goldman Sachs Adjustable Rate Government Fund. The
fund's objective and investment focus remain the same.
ARM Market Performed Well, Buoyed by Low Volatility and Strong Investor Demand
The ARM market performed well during the period under review, supported by
low volatility and stable prepayments. In addition, investor interest in the
sector increased as opportunities in short-duration alternatives diminished. In
combination, these factors drove ARM spreads approximately 15 basis points
tighter over the period.
Performance Review
During the six-month period ended April 30, the fund's Institutional,
Administration and Class A shares all outperformed the six-month U.S. Treasury
bill and the one-year U.S. Treasury bill. (The fund's duration as of April 30
was 0.7 years, in between that of the six-month and the one-year U.S. Treasury
bill.) The fund's positive performance was due to the tightening of yield
spreads between ARMs and Treasuries, as well as the incremental yield of ARMs
over similar-duration Treasuries.
The fund also performed well compared with its peers. For the 12 months
ended April 30, 1997, the fund's Institutional shares ranked 11th out of 47
adjustable rate mortgage funds based on total return, as tracked by Lipper
Analytical Services, Inc. (Lipper does not rank the fund's Administration,
Service and Class A shares. Please note that Lipper rankings do not take sales
charges into account and that past performance is not a guarantee of future
results.)
We are pleased to announce that for the three- and five-year periods ended
April 30, 1997, the fund's Institutional shares were rated "five stars" (out of
1,193 taxable bond funds) and "four stars" (out of 641 taxable bond funds),
respectively, according to Morningstar, Inc., an independent rating agency. In
addition, as of April 30, Morningstar rated the fund's Administration shares
"five stars" for the one-year period (out of 1,709 taxable bond funds) and "four
stars" (out of 1,193 taxable bond funds) for the three-year period./1/
- ------------------------------------------------
/1/Source: (C) 1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of 4/30/97.
The ratings are subject to change every month. Past performance is no guarantee
of future results. Morningstar ratings are calculated from a fund's three-,
five-, and 10-year average annual returns (where applicable) in excess of 90-day
Treasury bill returns with appropriate fee and sales charge adjustments and a
risk factor that reflects fund performance below 90-day Treasury bill returns.
The one-year rating is calculated using the same methodology, but is not a
component of the overall rating. The fund's Institutional shares received "five
stars" for the one-year period and were rated among 1,709 taxable bond funds.
The Morningstar ratings apply only to the fund's Institutional and
Administration shares; the fund's Class A and Service shares have not been
rated. Class A and Service shares are subject to additional fees and expenses
which may have the effect of lowering performance and may affect any future
Morningstar rating. Morningstar rates each fund against its peers in the same
category. In all, there are four Morningstar categories (domestic equity,
international equity, taxable bond and municipal). Morningstar ratings range
from five stars (highest) to one star (lowest). Funds with five-star ratings are
in the top 10% of their category, four-star ratings in the next 22.5%, three
stars the next 35%, two stars the next 22.5% and one star the lowest 10% of
their categories.
- --------------------------------------------------------------------------------
3
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Adjustable Rate Government Fund (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Summary: October 31, 1996 - April 30, 1997
- --------------------------------------------------------------------------------
6-Month 1-Year
Institu- Adminis- Treasury Treasury
tional tration Class A Service* Bill Bill
------ ------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Return 3.28% 3.16% 3.16% 0.74% 2.65% 2.56%
(based on net
asset value)
- --------------------------------------------------------------------------------
Return From 2.97% 2.85% 2.85% 0.20% NA NA
Monthly
Distributions
- --------------------------------------------------------------------------------
Return From 0.31% 0.31% 0.31% 0.54% NA NA
Price
Appreciation
- --------------------------------------------------------------------------------
NAV (4/30/97) $9.86 $9.86 $9.86 $9.86 NA NA
- --------------------------------------------------------------------------------
NAV Change +$0.03 +$0.03 $0.03 $0.02 NA NA
- --------------------------------------------------------------------------------
</TABLE>
* New share class opened during the period. Performance and net asset value
(NAV) change are from its inception date on 3/27/97.
Portfolio Composition and Investment Strategies
Portfolio composition remained similar compared with six months ago, with
the exception of a slight reduction in collateralized mortgage obligations
(CMOs) and an increase in repurchase agreements/cash equivalents.
Portfolio Composition as of April 30, 1997*
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
ARMs 85.8%
SBA Floaters 7.4%
Repos/Cash Equivalents 4.8%
CMOs 2.0%
</TABLE>
* The percentages shown are of total portfolio investments that have settled and
include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of Investments,
which reflect portfolio holdings as a percentage of net assets.
.. ARMs. As of April 30, 1997, the fund's primary investment continued to be
in ARMs, which accounted for 85.8% of the portfolio. We emphasized seasoned,
fully indexed one-year Constant Maturity Treasury (CMT) securities that were
issued prior to 1990, which are attractive because of their lower prepayment
risk. (Seasoned issues are less likely to be impacted by prepayments than newly
issued mortgages because homeowners who did not refinance in earlier periods of
lower rates are generally less likely to refinance in the future.)
.. SBA Floaters. The portfolio's position in securities backed by Small
Business Administration (SBA) loans was 7.4%, approximately the same as six
months ago. The sector offered incremental yield over similar-duration
Treasuries and increased fund diversification.
.. CMOs. We reduced the portfolio's CMO allocation to 2.0%, down from 3.5%
last October. Within the sector, the fund's largest holding was a 1.1% position
in super floaters. Because super floaters are generally considered to be higher
risk than conventional floaters, we use them selectively in seeking to enhance
fund performance. The remainder of the CMO position (0.9%) was invested in a
variety of other structures.
.. Duration. We seek excess return over similar-duration U.S. Treasuries
through our sector weightings and specific security selection rather than
attempting to make interest rate predictions. Therefore, we manage the fund's
duration to approximate that of the Index, partly through the use of futures. As
of April 30, the fund's duration was 0.7 years, unchanged from six months ago.
Credit Quality. The fund invests exclusively in securities issued by the U.S.
government, its agencies or instrumentalities, which are considered to be of the
highest credit quality.
Market Outlook
Despite some suggestion of economic moderation, we continue to believe that
interest rates are likely to move higher during the balance of the year. This
expectation is
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Adjustable Rate Government Fund (continued)
- --------------------------------------------------------------------------------
predicated on the economy's broad-based fundamental strength, as well as the
Fed's well-publicized commitment to monetary discipline.
As of the end of the period, we have a neutral outlook for the ARM sector.
ARMs are currently trading at fair value, reflecting a stable prepayment
outlook. Seasoned one-year CMT ARMs remain attractive as a core holding due to
their prepayment stability in a falling rate environment and reduced cap risk in
a rising rate environment.
Distribution Policy
During the six-month period ended April 30, 1997, the fund's
Institutional, Administration and Class A shares distributed $0.29, $0.28 and
$0.28 per share, respectively. From their inception on March 27 through April
30, the fund's Service shares paid out $0.05 per share.
The fund distributes substantially all of its investment company taxable
income. The dividend is set at the start of each month, based on the income the
fund is expected to generate. However, because the fund invests primarily in
mortgage securities that are subject to prepayments, we cannot precisely predict
the amount of principal and interest that a portfolio will receive. Therefore,
at times a portfolio may distribute amounts above or below current income
levels. To date, however, our dividend policy has not affected the management of
the fund or significantly affected its NAV per share.
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ Peter D. Dion
Peter D. Dion
/s/ James P. McCarthy
James P. McCarthy
Portfolio Managers
Goldman Sachs Adjustable Rate Government Fund
May 30, 1997
- --------------------------------------------------------------------------------
5
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Adjustable Rate Government Fund (continued)
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Backed Obligations--94.4%
Adjustable Rate Federal Home Loan Mortgage Corp. (FHLMC)(a)--25.6%
$ 2,499,665 7.41% 07/01/18 $ 2,603,551
1,337,640 7.57 12/01/18 1,390,932
10,052,878 7.45 05/01/19 10,420,411
19,024,919 7.65 11/01/19/(b)/ 19,952,383
4,828,320 7.75 05/01/20 5,061,431
17,560,720 7.50 06/01/20/(b)/ 18,260,339
36,305,075 7.77 02/01/22/(b)/ 38,097,820
6,736,255 7.27 06/01/22 6,940,632
3,743,219 7.48 08/01/22 3,889,430
6,343,944 7.55 09/01/22 6,616,543
5,798,265 7.29 09/01/22 5,961,312
16,426,906 7.65 11/01/22 17,181,558
9,544,724 7.68 06/01/24 10,002,584
3,422,929 7.32 02/01/28 3,543,279
1,677,210 7.68 07/01/30 1,756,089
- -------------------------------------------------------------------------------
$ 151,678,294
- -------------------------------------------------------------------------------
Adjustable Rate Federal National Mortgage Association (FNMA)(a)--53.9%
$ 1,626,928 7.45% 04/01/03 $ 1,648,729
1,063,451 7.81 11/01/14 1,116,453
671,988 7.60 12/01/15 696,771
5,800,505 6.72 03/01/17 5,911,063
3,475,919 7.56 03/01/17 3,625,279
11,078,486 7.04 04/01/17 11,476,093
734,378 7.51 11/01/17 764,216
4,070,446 6.49 03/01/18 4,114,976
755,256 7.67 05/01/18 781,101
1,196,229 7.88 05/01/18 1,250,167
1,291,177 7.32 06/01/18/(c)/ 1,326,271
7,811,611 7.50 06/01/18 8,172,898
4,895,608 7.48 07/01/18 5,117,428
6,964,915 7.61 07/01/18 7,297,907
5,963,754 7.27 08/01/18 6,190,198
3,775,708 7.75 08/01/18 3,964,493
3,424,816 7.60 10/01/18 3,584,275
6,244,935 7.49 11/01/18 6,486,927
1,919,120 7.39 12/01/18 1,992,296
12,663,766 7.67 12/01/18/(b)/ 13,296,954
3,245,589 7.37 06/01/19 3,366,779
4,222,057 7.31 07/01/19 4,376,415
1,572,328 7.40 07/01/19 1,632,768
1,466,614 7.35 08/01/19 1,513,589
4,212,924 7.63 09/01/19 4,404,485
2,660,817 7.31 01/01/20 2,761,848
2,845,244 7.79 03/01/20 2,987,506
8,236,162 7.39 07/01/20 8,548,889
4,385,557 7.67 02/01/21 4,600,713
4,953,699 7.40 04/01/21 5,140,998
69,652,900 7.65 09/01/21/(b)/ 72,928,676
5,721,530 7.10 01/01/22 5,920,639
20,957,781 7.66 02/01/22/(b)/ 21,972,976
13,609,253 7.80 06/01/22 14,266,989
645,000 7.56 08/01/22 661,628
2,036,342 7.73 08/01/22 2,137,202
29,003,668 7.67 09/01/22/(b)/ 30,449,210
1,821,772 7.57 02/01/23 1,868,464
272,046 6.23 12/01/23 268,986
15,812,397 7.56 04/01/25 16,501,660
16,515,667 7.59 09/01/25 17,302,804
3,390,319 7.41 08/01/27 3,523,830
2,373,397 7.43 10/01/27 2,466,102
1,077,506 7.09 07/01/29 1,111,350
- -------------------------------------------------------------------------------
$ 319,529,001
- -------------------------------------------------------------------------------
Adjustable Rate Government National Mortgage Association (GNMA)(a)--3.9%
$ 1,430,321 7.00% 03/20/16 $ 1,462,732
1,877,843 7.13 08/20/17 1,929,784
975,525 7.13 08/20/18 1,004,186
6,329,270 7.00 02/20/21 6,492,439
3,551,234 6.50 01/20/22 3,624,282
4,539,525 7.13 04/20/22 4,679,978
3,724,927 7.00 03/20/23 3,816,299
- -------------------------------------------------------------------------------
$ 23,009,700
- -------------------------------------------------------------------------------
Adjustable Rate Small Business Administration (SBA)(a)--7.3%
$ 1,395,750 7.00% 10/25/14 $ 1,435,878
2,310,178 7.00 02/25/15 2,370,450
2,799,672 7.00 04/25/15 2,871,428
1,880,379 7.00 05/25/15 1,928,573
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Adjustable Rate Government Fund (continued)
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Backed Obligations(continued)
Adjustable Rate Small Business Administration
(SBA)(continued)
$ 1,022,753 7.00% 08/25/15 $ 1,055,992
1,661,578 7.00 09/25/15 1,709,348
2,041,631 7.00 10/25/15 2,094,591
1,059,044 6.62 09/25/16 1,070,302
4,076,904 6.62 07/25/17 4,121,505
4,036,805 6.62 08/25/17 4,080,967
2,744,035 6.62 08/25/17 2,774,055
1,756,376 6.62 08/25/17 1,775,590
3,752,990 6.62 09/25/17 3,794,048
1,761,608 6.62 10/25/17 1,781,144
1,774,313 6.62 10/25/17 1,793,990
8,582,508 6.62 02/25/18 8,677,688
- -------------------------------------------------------------------------------
$ 43,335,549
- -------------------------------------------------------------------------------
Collateralized Mortgage Obligations--3.7%
Adjustable Rate CMOs/(a)/ --1.8%
FNMA Remic Trust 1990-145, Class A
$ 10,348,000 6.58% 12/25/20 $ 10,437,510
- -------------------------------------------------------------------------------
$ 10,437,510
- -------------------------------------------------------------------------------
Inverse Floater/(a)/--0.0%
FNMA Remic Trust 1991-91, Class S
$ 138,928 8.55% 07/25/98 $ 149,631
- -------------------------------------------------------------------------------
$ 149,631
- -------------------------------------------------------------------------------
Inverse Floating Rate - Interest Only/(a)/--0.0%
FNMA Remic Trust 1992-157, Class SA
$ 1,384,066/(d)/ 55.35% 03/25/04 $ 86,712
- -------------------------------------------------------------------------------
$ 86,712
- -------------------------------------------------------------------------------
Inverse IOette--0.1%
FHLMC Series 1164, Class O
$ 33,045/(d)/ 19.07% 11/15/06 $ 431,596
- -------------------------------------------------------------------------------
$ 431,596
- -------------------------------------------------------------------------------
IOette--0.1%
FNMA Remic Trust 1990-145, Class B
$ 25,428/(d)/ 10.00% 12/25/20 $ 850,208
- -------------------------------------------------------------------------------
$ 850,208
- -------------------------------------------------------------------------------
Sequential Fixed Rate CMOs--0.6%
FHLMC Series 1645, Class B
$ 2,956,606 5.50% 01/15/08 $ 2,730,573
FNMA Remic Trust 1990-65, Class U
185,451 9.50 11/25/06 185,160
FNMA Remic Trust 1991-37, Class E
838,752 8.50 04/25/05 839,801
- -------------------------------------------------------------------------------
$ 3,755,534
- -------------------------------------------------------------------------------
Super Floater CMOs/(a)/ --1.1%
FNMA Remic Trust 1992-157, Class FA
$ 6,813,861 2.16% 03/25/04 $ 6,632,817
- -------------------------------------------------------------------------------
$ 6,632,817
- -------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations $ 22,344,009
- -------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $557,420,929) $ 559,896,552
- -------------------------------------------------------------------------------
Repurchase Agreement--6.2%
Joint Repurchase Agreement Account
$ 36,700,000 5.49% 05/01/97/(b)/ $ 36,700,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $36,700,000) $ 36,700,000
- -------------------------------------------------------------------------------
Total Investments
(Cost $594,120,929)/(e)/ $ 596,596,552
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Futures contracts open at April 30, 1997 are as follows:
Number of
Contracts Settlement Unrealized
Type Long (Short)(f) Month Gain (Loss)
- ---------------------------- ---------------- ----------------- -------------
<S> <C> <C> <C>
1-Month Libor 110 May 1997 $(20,500)
1-Month Libor 115 June 1997 21,563
Euro Dollars 325 June 1997 (210,188)
Euro Dollars 285 September 1997 (104,813)
Euro Dollars 145 December 1997 (50,000)
Euro Dollars 10 March 1998 (14,500)
Euro Dollars (20) December 1998 (14,000)
Euro Dollars 10 June 1999 (18,000)
Euro Dollars 20 September 1999 (33,000)
5 Year U.S. Treasury Notes 64 June 1997 (5,781)
10 Year U.S. Treasury Notes (281) June 1997 70,063
------------
$(379,156)
- -------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost $ 3,264,098
Gross unrealized loss for investments in which cost
exceeds value (925,961)
- -------------------------------------------------------------------------------
Net unrealized gain $ 2,338,137
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Adjustable Rate Government Fund (continued)
April 30, 1997
(Unaudited)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
/(a)/ Variable rate security. Coupon rate disclosed is that which is in effect
at April 30, 1997.
/(b)/ Portions of these securities are being segregated for futures margin
requirements and when-issued securities.
/(c)/ When-issued security.
/(d)/ 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.
/(e)/ The aggregate cost for federal income tax purposes is $594,258,415.
/(f)/ Each Euro dollar contract represents $1,000,000 in notional par value.
Each 1-month Libor contract represents $3,000,000 in notional par value.
Each 5-Year and 10-year U.S. Treasury Note contract represents $100,000
in notional par value. The total notional amount and market value are
$1,524,500,000 and $281,048,344 respectively. The determination of
notional amounts and market value and presented here are indicative only
of volume of activity and not a measure of market risk.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Letter to Shareholders
- -------------------------------------------------------------------------------
Goldman Sachs Short Duration Government Fund
- -------------------------------------------------------------------------------
Investment Objective
The Goldman Sachs Short Duration Government Fund's primary objective is to
provide a high level of current income by investing in a portfolio that consists
of securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, including mortgage-backed securities as well as repurchase
agreements collateralized by such instruments. Secondarily, the fund may, in
seeking current income, also consider the potential for capital appreciation.
Under normal interest rate conditions, the fund's duration is expected to be
within one-half year of its benchmark, the two-year U.S. Treasury security.
Special Events
Effective May 1, 1997, the name of the GS Short Duration Government Fund
was changed to the Goldman Sachs Short Duration Government Fund. In addition, to
accommodate different clients' needs and preferences, the fund added two new
share classes as of May 1: Class A shares, which have a front-end load but no
contingent deferred sales charge (on amounts less than $1 million), and Class B
shares, which are subject to a contingent deferred sales charge but no up-front
sales charge. The fund's investment focus remains the same.
Performance Review
During the six-month period ended April 30, the fund's Institutional,
Administration and Service shares all outperformed their benchmark, the two-year
U.S. Treasury security. Despite a slight decline in net asset value (NAV) due to
the backup in interest rates, the fund's positions in collateralized mortgage
obligations (CMOs) and adjustable rate mortgage (ARM) securities significantly
contributed to performance.
The fund performed very well relative to its peers. For the 12-month period
ended April 30, 1997, the fund's Institutional and Administration shares ranked
third and fifth, respectively, out of 97 short-intermediate U.S. government
funds based on total return, according to Lipper Analytical Services, Inc. In
addition, the fund's Service shares ranked within the top 20% (14th out of 97)
for the same time period. (Please note that Lipper rankings do not take sales
charges into account and that past performance is not a guarantee of future
results.) In addition, the fund's Institutional shares were rated "four stars"
(out of 641 taxable bond funds) by Morningstar, Inc., an independent rating
agency, for the five years ended April 30./1/
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Performance Summary: October 31, 1996 - April 30, 1997
- -------------------------------------------------------------------------------
Institutional Administration Service
------------- -------------- -------
<S> <C> <C> <C>
Total Return (based on net 2.67% 2.55% 2.42%
asset value)
- -------------------------------------------------------------------------------
Return From Monthly 3.39% 3.27% 3.14%
Distributions
- -------------------------------------------------------------------------------
Return From Price -0.72% -0.72% -0.72%
Depreciation
- -------------------------------------------------------------------------------
Total Return of Two-Year 2.09% 2.09% 2.09%
U.S. Treasury
- -------------------------------------------------------------------------------
NAV (4/30/97) $9.76 $9.78 $9.75
- -------------------------------------------------------------------------------
NAV Change -$0.07 -$0.07 -$0.07
- -------------------------------------------------------------------------------
</TABLE>
- ----------------------------------------
/1/ Source: (C) 1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of 4/30/97.
The ratings are subject to change every month. Past performance is no guarantee
of future results. Morningstar ratings are calculated from a fund's three-,
five-, and 10-year average annual returns (where applicable) in excess of 90-day
Treasury bill returns with appropriate fee and sales charge adjustments and a
risk factor that reflects fund performance below 90-day Treasury bill returns.
The one-year rating is calculated using the same methodology, but is not a
component of the overall rating. The fund's Institutional shares received "four
stars" for both the three- and one-year periods and were rated among 1,193 and
1,709 taxable bond funds for the three- and one-year periods, respectively. The
Morningstar ratings apply only to the funds' Institutional shares; the fund's
Administration and Service shares have not been rated. The Administration and
Service shares are subject to additional fees and expenses that may have the
effect of lowering performance and may affect any future Morningstar rating.
Morningstar rates each fund against its peers in the same category. In all,
there are four Morningstar categories (domestic equity, international equity,
taxable bond and municipal). Morningstar ratings range from five stars (highest)
to one star (lowest). Funds with five-star ratings are in the top 10% of their
category, four-star ratings in the next 22.5%, three stars the next 35%, two
stars the next 22.5% and one star the lowest 10% of their categories.
- -------------------------------------------------------------------------------
9
<PAGE>
Letter to Shareholders
- -------------------------------------------------------------------------------
Goldman Sachs Short Duration Government Fund (continued)
- -------------------------------------------------------------------------------
Portfolio Composition and Investment Strategies
The most significant changes in the portfolio's sector composition
during the period were a reduction in U.S. Treasuries in favor of CMOs and a new
position in agency debentures.
Portfolio Composition as of April 30, 1997*
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
CMOs 61.8%
ARMS 19.0%
Fixed Rate Mortgage Pass-Throughs 9.7%
Agency Debentures 4.8%
U.S. Treasuries 3.6%
Repos/Cash Equivalents 1.1%
</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.
.. CMOs. CMOs accounted for 61.8% of the portfolio, up from 56.9% six
months ago. The CMO sector performed very well during the period, bolstered by
low volatility and strong investor demand. CMOs were particularly attractive to
investors because they offered substantial yield over similar-duration Treasury
and non-Treasury alternatives. Within the sector, the portfolio's positions
included sequential-pay/support CMOs (24.5%) and planned amortization class
(PAC) CMOs (21.2%). These securities were short duration issues that offered
relatively predictable cash flows.
.. ARMs. As of April 30, the fund's allocation to ARMs was 19.0%, unchanged
from last October. We emphasized seasoned, fully indexed one-year Constant
Maturity Treasury (CMT) securities that were issued prior to 1990, which are
attractive because of their lower prepayment risk. (Seasoned issues are less
likely to be impacted by prepayments than newly issued mortgages because
homeowners who did not refinance in earlier periods of lower rates are generally
less likely to refinance in the future.)
.. Fixed Rate Mortgage Pass-Throughs. The fixed rate mortgage pass-through
sector accounted for 9.7% of the portfolio, up from 7.2% six months ago. We
continued to favor the sector because of its attractive yield enhancement
potential.
.. Agency Debentures. We established a new 4.8% position in agency debentures,
which are bonds issued by agencies of the U.S. government. This sector offered
incremental yield over Treasuries and added to portfolio diversification.
.. U.S. Treasuries and Repurchase Agreements/Cash Equivalents. During the
period, we sold more than three-quarters of the fund's Treasury allocation in
favor of other sectors that offered better relative value. By April 30, the
fund's position in the sector was down to 3.6%, while repurchase agreements/cash
equivalents were 1.1%, unchanged from six months ago.
.. Issuer Composition. The portfolio's mortgage-backed security composition by
issuer was 47.6% in Federal National Mortgage Association (FNMA) issues, 37.0%
in Federal Home Loan Mortgage Corporation (FHLMC) issues and 5.8% in Government
National Mortgage Association (GNMA) issues.
.. Credit Quality. The fund invests exclusively in securities issued by the
U.S. government and its agencies or instrumentalities.
.. Prudent Use of Derivatives. The fund's CMO position included several
securities typically considered to be
- -------------------------------------------------------------------------------
10
<PAGE>
- -------------------------------------------------------------------------------
Goldman Sachs Short Duration Government Fund (continued)
- -------------------------------------------------------------------------------
lower risk derivatives. These included sequential-pay/support CMOs and PAC CMOs
(24.5% and 21.2% of the portfolio, respectively), as noted previously, and a
9.0% allocation in CMO floaters (whose coupons reset upward when interest rates
rise). The fund also held a 2.8% position in super floaters (whose coupons reset
higher than conventional floaters when rates rise), a 2.1% position in inverse
floaters (whose coupons reset in the opposite direction of interest rates), and
small positions in PAC interest-only (IO) and inverse IO securities. We invest
in these higher risk derivatives only when we believe such securities will
enhance returns without incurring undue risk. These positions contributed to the
fund's positive performance along with the other CMO securities. In addition, we
used futures as a tool to help manage the portfolio's duration.
Market Outlook
Our outlook is cautious for CMOs: the sector is now trading at fair spreads
relative to equal-duration Treasuries and does not appear to offer significant
tightening potential. Despite the lack of general value, we continue to look for
issues within the CMO market that offer favorable investment characteristics
that are not fully valued by the market. In the ARM market, seasoned one-year
CMT ARMs remain attractive as a core holding relative to other ARM sectors.
Distribution Policy
During the six-month period under review, the fund's Institutional,
Administration and Service shares paid out distributions of $0.33, $0.32 and
$0.30 per share, respectively. The fund distributes substantially all of its
investment company taxable income, as required by tax law.
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ James B. Clark
James B. Clark
Portfolio Managers
Goldman Sachs Short Duration Government Fund
May 30, 1997
- -------------------------------------------------------------------------------
11
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Short Duration Government Fund
April 30, 1997
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Backed Obligations--90.0%
Adjustable Rate Federal Home Loan Mortgage Corp. (FHLMC)(a)--13.8%
$ 1,862,421 7.38% 08/01/17/(b)/ $ 1,928,183
1,799,630 7.58 12/01/18/(b)/ 1,871,327
7,952,048 7.77 02/01/22/(b)/ 8,344,720
2,036,342 7.73 08/01/22/(b)/ 2,137,202
- -------------------------------------------------------------------------------
$ 14,281,432
- -------------------------------------------------------------------------------
Adjustable Rate Federal National Mortgage Association (FNMA)(a)--11.6%
$ 306,024 9.00% 12/01/97 $ 307,489
2,894,069 6.50 04/01/03/(b)/ 2,853,696
812,321 6.00 01/01/14 762,436
2,961,367 6.00 03/01/14/(b)/ 2,771,662
2,552,281 7.81 11/01/14/(b)/ 2,679,487
2,569,866 7.58 08/01/22 2,636,117
- -------------------------------------------------------------------------------
$ 12,010,887
- -------------------------------------------------------------------------------
Fixed Rate Federal National Mortgage Association (FNMA)--3.2%
$ 504,862 6.00% 10/01/08 $ 484,981
1,032,431 6.00 06/01/09 991,774
1,949,537 6.00 10/01/09/(b)/ 1,878,671
- -------------------------------------------------------------------------------
$ 3,355,426
- -------------------------------------------------------------------------------
Collateralized Mortgage Obligations (CMOs)--61.4%
Inverse Floater(a)--3.0%
FHLMC Series 1296, Class J
$ 890,613 12.15% 07/15/99 $ 954,683
FHLMC Series 1325, Class C
944,285 6.83 07/15/97 943,086
FNMA Remic Trust, Series 1992-62, Class S
1,212,115 9.27 05/25/99 1,217,824
- -------------------------------------------------------------------------------
$ 3,115,593
- -------------------------------------------------------------------------------
Inverse Floating Rate - Interest Only(a)--0.2%
FHLMC Series 1684, Class JD
$ 2,524,793/(c)/ 3.72% 08/15/20 $ 170,222
FNMA Remic Trust 1993-110, Class SC
2,010,905/(c)/ 3.52 04/25/19 74,564
- -------------------------------------------------------------------------------
$ 244,786
- -------------------------------------------------------------------------------
Planned Amortization - Accrual Bond--1.2%
FHLMC Series 1560, Class X
$ 1,245,394 6.00% 11/15/16 $ 1,234,885
- -------------------------------------------------------------------------------
Planned Amortization Class (PAC) CMOs--21.9%
FHLMC Series 1584, Class E
$ 3,000,000 5.75% 10/15/16/(b)/ $ 2,937,180
FHLMC Series 1684, Class F
5,000,000 5.75 08/15/20/(b)/ 4,756,650
FNMA Remic Trust 1992-138, Class C
2,375,000 6.00 12/25/18/(b)/ 2,351,986
FNMA Remic Trust, Series 1997-9, Class B
4,000,000 6.50 10/25/22/(b)/ 3,850,040
FNMA Series 1991-31, Class PJ
3,000,000 6.55 10/25/20 2,920,290
GNMA Remic Trust 1996-6, Class PB
6,000,000 6.50 06/16/09/(b)/ 5,982,420
- -------------------------------------------------------------------------------
$ 22,798,566
- -------------------------------------------------------------------------------
Planned Amortization Class Interest-Only (PAC IO) CMOs--1.3%
FHLMC Series 1552, Class JE
$ 7,308,380/(c)/ 7.00% 02/15/14 $ 313,822
FHLMC Series 1587, Class HA
9,090,222/(c)/ 6.50 10/15/08 1,032,104
- -------------------------------------------------------------------------------
$ 1,345,926
- -------------------------------------------------------------------------------
Planned Amortization Class Ioette CMOs--0.4%
FNMA Remic Trust 1992-198, Class K
$ 34,647/(c)/ 12.81% 12/25/15 $ 370,318
- -------------------------------------------------------------------------------
Regular Floater CMOs(a)--8.8%
FHLMC Series 1296, Class I
$ 2,493,715 5.16% 07/15/97/(b)/ $ 2,462,544
FHLMC Series 1325, Class B
2,219,071 6.38 07/15/97/(b)/ 2,219,759
FHLMC Series 1684, Class JC
2,524,793 5.28 08/15/20/(b)/ 2,472,706
FNMA Remic Trust 1993-110, Class FC
2,010,905 5.48 04/25/19/(b)/ 1,987,639
- -------------------------------------------------------------------------------
$ 9,142,648
- -------------------------------------------------------------------------------
Sequential Fixed Rate CMOs--24.6%
FHLMC Series 1033, Class G
$ 2,000,000 8.00% 01/15/06/(b)/ $ 2,046,860
FHLMC Series 1645, Class B
4,927,677 5.50 01/15/08/(b)/ 4,550,956
FNMA Remic Trust 1988-12, Class A
3,743,398 10.00 02/25/18/(b)/ 3,973,692
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Short Duration Government Fund (continued)
April 30, 1997
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage Backed Obligations(continued)
Collateralized Mortgage Obligations(continued)
Sequential Fixed Rate CMOs (continued)
FNMA Remic Trust 1988-12, Class B
$ 2,955,314 4.74% 02/25/18/(b)/ $ 2,840,796
FNMA Remic Trust 1989-12, Class X
1,588,415 10.00 12/25/14 1,642,024
FNMA Remic Trust 1989-18, Class B
1,051,388 9.50 01/25/04 1,081,279
FNMA Remic Trust 1989-59, Class H
3,840,291 7.75 10/25/18/(b)/ 3,882,265
FNMA Remic Trust 1992-44, Class CA
3,000,000 12.00 08/25/20/(b)/ 3,351,960
FNMA Series 1989-34, Class E
2,113,584 9.85 08/25/14/(b)/ 2,176,992
- -------------------------------------------------------------------------------
$ 25,546,824
- -------------------------------------------------------------------------------
Total Collateralized Mortgage Obligations $ 63,799,546
- -------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $93,441,725) $ 93,447,292
- -------------------------------------------------------------------------------
Agency Debentures--4.7%
Sri Lanka Aid/(a)/
$ 5,000,000 6.06% 02/21/16/(b)/ $ 4,928,150
- -------------------------------------------------------------------------------
Total Agency Debentures
(Cost $4,925,000) $ 4,928,150
- -------------------------------------------------------------------------------
U.S. Treasury Obligations--3.6%
United States Treasury Notes
$ 3,800,000 5.63% 11/30/00/(b)/ $ 3,696,678
- -------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $3,672,738) $ 3,696,678
- -------------------------------------------------------------------------------
Repurchase Agreement--0.6%
Joint Repurchase Agreement Account
$ 600,000 5.49% 05/01/97/(b)/ $ 600,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $600,000) $ 600,000
- -------------------------------------------------------------------------------
Total Investments
(Cost $102,639,463)/(d)/ $ 102,672,119
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Futures contracts open at April 30, 1997 are as follows:
Number of
Contracts
Long Unrealized
Type (Short)/(e)/ Settlement Month Gain (Loss)
- ----------------------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
1-Month Libor 14 June 1997 $2,625
1-Month Libor 15 May 1997 (4,125)
Euro Dollars 56 June 1997 (12,525)
Euro Dollars 53 September 1997 30,525
Euro Dollars 55 December 1997 21,750
Euro Dollars 45 March 1998 (23,125)
Euro Dollars 40 June 1998 (35,500)
Euro Dollars 35 September 1998 (15,250)
5 Year U.S. Treasury Notes (71) June 1997 (1,109)
2 Year U.S. Treasury Notes 71 June 1997 (53,250)
10 Year U.S. Treasury Notes (131) June 1997 101,500
U.S. Long Term Bond (4) June 1997 11,843
---------------
$23,359
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Federal Income Tax Information:
<S> <C>
Gross unrealized gain for investments in which value exceeds
cost $ 554,824
Gross unrealized loss for investments in which cost exceeds
value (522,168)
- -------------------------------------------------------------------------------
Net unrealized gain $ 32,656
- -------------------------------------------------------------------------------
</TABLE>
/(a)/ Variable rate security. Coupon rate disclosed is that which is in effect
at April 30, 1997.
/(b)/ Portions of these securities are being segregated for futures margin
requirements.
/(c)/ Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated rate due to
the amortization of related premiums.
/(d)/ The amount stated also represents aggregate cost for federal income tax
purposes.
/(e)/ Each Euro Dollar contract represents $1,000,000 in notional par value.
Each 1-Month Libor contract represents $3,000,000 in notional par value.
Each 2-Year U.S. Treasury Note contract represents $200,000 in notional
par value. Each 5-Year and 10-Year U.S. Treasury Note and each U.S. Long
Term Bond contract represents $100,000 in notional par value. The total
notional amount and market value are $405,800,000 and $109,850,675,
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 percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
Goldman Sachs Short Duration Tax-Free Fund
- --------------------------------------------------------------------------------
Investment Objective
The Goldman Sachs Short Duration Tax-Free Fund seeks to provide a high
level of current income exempt from regular federal income tax, consistent with
relatively low principal volatility, through investments in investment-grade
municipal securities. Under normal interest rate conditions, the fund's duration
will be within one-half year of its benchmark, the Lehman Brothers Three-Year
Municipal Bond Index. The fund's approximate interest rate sensitivity is
comparable to that of a three-year bond.
Special Event
The fund's name was changed to Goldman Sachs Short Duration Tax-Free Fund
from GS Short Duration Tax-Free Fund on May 1, 1997. In addition, Class A and
Class B shares have been added to the existing Institutional, Administration and
Service shares. The fund's focus and investment objective remain the same.
A Strong, Stable Municipal Bond Market
The municipal market has remained at relatively rich levels compared with
the taxable market since the end of 1996, as light primary and secondary supply
has been consumed easily by stable demand. The average price of a three-year
municipal bond (as calculated from data provided by Municipal Market Data, an
independent municipal market information provider) declined approximately 1.25%,
while yields rose from 4.15% on October 31, 1996 to 4.60% on April 30, 1997.
Supply increased throughout most of the period, though it remained light
compared with historical averages. In November, municipal bond issuance was up
30% versus the prior three-month average. As is typical, increased supply
continued in early December due to the approaching year-end. The 1997 new issue
supply has followed historical early-month patterns, with January and February
supply well below annual averages (slightly more than $10 billion each month)
and March and April supply closer to normal levels ($13 to $14 billion).
Demand from individual investors (who control approximately two-thirds of
municipal bond ownership either through mutual funds or direct investment)
remained stable, but not strong, as long-term municipal yields were below the
psychologically significant 6% level. While yields have not yet cracked that
barrier, President Clinton's reelection and the loss of Republican momentum have
put talk of tax reform and talk of significant changes in the tax-exempt status
of municipal bonds on the back burner, comforting some of the investors
concerned about the market. In addition, the emergence of "nontraditional"
buyers during April has helped support the long end of the market.
Municipal Bond Yield Curve
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
4/30/97 10/31/96
<S> <C> <C>
1998 3.85% 3.90%
1999 4.40% 4.15%
2000 4.60% 4.30%
2001 4.70% 4.40%
2002 4.80% 4.50%
2003 4.85% 4.60%
2004 4.90% 4.70%
2005 4.95% 4.80%
2006 5.00% 4.90%
2007 5.05% 5.00%
2008 5.10% 5.10%
2009 5.20% 5.20%
2010 5.30% 5.25%
2011 5.35% 5.30%
2012 5.40% 5.35%
2013 5.45% 5.40%
2014 5.50% 5.40%
2015 5.50% 5.45%
2016 5.55% 5.45%
2017 5.55% 5.45%
2018 5.55% 5.50%
2019 5.55% 5.50%
2020 5.60% 5.50%
2021 5.60% 5.50%
2022 5.60% 5.50%
2023 5.60% 5.50%
2024 5.60% 5.50%
2025 5.60% 5.50%
2026 5.60% 5.50%
2027 5.60% 5.50%
</TABLE>
The yield curve steepened and shifted upward at the short end, remained nearly
the same in the mid-range, and shifted marginally upward at the longer end, in
contrast to six months ago.
Performance Review
The performance of the fund's Institutional shares exceeded the benchmark,
the Lehman Brothers Three-Year Municipal Bond Index (the "Index"), for the
six-month period ended April 30, 1997. The Administration and Service shares
also performed well, but lagged the benchmark.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Performance Summary: October 31, 1996 - April 30, 1997
- -------------------------------------------------------------------------------
Institutional Administration Service
------------- -------------- -------
<S> <C> <C> <C>
Total Return (based on 1.91% 1.79% 1.56%
net asset value)
- -------------------------------------------------------------------------------
Return From 2.11% 1.99% 1.86%
Monthly Distributions
- -------------------------------------------------------------------------------
Return From Price -0.20% -0.20% - 0.30%
Depreciation
- -------------------------------------------------------------------------------
Lehman Brothers 3-Year 1.83% 1.83% 1.83%
Municipal Bond Index
- -------------------------------------------------------------------------------
NAV (as of 4/30/97) $9.94 $9.94 $9.94
- -------------------------------------------------------------------------------
NAV Change -$0.02 -$0.02 -$0.03
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
14
<PAGE>
- -------------------------------------------------------------------------------
Goldman Sachs Short Duration Tax-Free Fund (continued)
- --------------------------------------------------------------------------------
The fund's positive performance during the period was primarily due to our
emphasis on higher yielding revenue bonds, as well as successful selection of
specific securities and relative value trades. As always, we did not make any
bets on the direction of interest rates, but rather kept the fund's duration in
line with the Index, occasionally using Treasury futures to actively manage
sector allocation.
In our search for incremental yield, we focused on three types of bonds.
The first category was relatively generic, highly liquid securities; the second
included slightly less liquid issues such as insured hospital bonds and
letter-of-credit-backed debt; and the last area was "story" bonds, such as
uninsured hospital and electric utility issues and multifamily housing revenue
bonds, whose value is often unrecognized by the market because they are unique
or generally not well understood. We identified attractive investment
opportunities for the third category through our extensive credit analysis. One
example of this is our purchase of an A-rated hospital bond that our credit
analysis indicated would likely be defeased with the purchase of Treasury
securities placed in an escrow account, thereby significantly enhancing the
credit quality of the security. Our analysis proved correct and the fund
benefited from the appreciation associated with the higher quality.
We are pleased to report that the fund's Institutional shares ranked third
out of 28 funds in Lipper Analytical Services, Inc.'s short-intermediate
municipal debt category for the one-year period ended April 30, 1997 based on
total return. (Lipper did not rank the fund's Administration and Service shares.
Please note that Lipper rankings do not take sales charges into account and that
past performance is not a guarantee of future results.) In addition, as of April
30, 1997, the fund's Institutional and Administration shares were awarded a
"four-star" rating for the three-year period (out of 1,257 municipal bond funds)
by Morningstar, Inc. For the one-year period, the Institutional shares received
a "five-star" rating (out of 1,746 municipal bond funds)./1/
Portfolio Composition and Investment Strategies:
Emphasis on Revenue Bonds
Portfolio Composition as of April 30, 1997*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Revenue Bonds 56.1%
Insured Revenue Bonds 28.1%
Pre-Refunded Bonds 7.8%
Insured General Obligations 6.8%
Variable Rate Demand Notes 1.3%
</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.
- ------------------------------------------
/1/ Source: (C) 1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of 4/30/97.
The ratings are subject to change every month. Past performance is no guarantee
of future results. Morningstar ratings are calculated from a fund's three-,
five-, and 10-year average annual returns (where applicable) in excess of 90-day
Treasury bill returns with appropriate fee and sales charge adjustments and a
risk factor that reflects fund performance below 90-day Treasury bill returns.
The one-year rating is calculated using the same methodology, but is not a
component of the overall rating. For the one-year period, the Administration
shares received four stars and were rated among 1,746 municipal bond funds. Ten
percent of the funds receive the five-star rating. The Morningstar rating
applies only to the fund's Institutional and Administration shares; the fund's
Service shares have not been rated. Service shares are subject to additional
fees that may have the effect of lowering performance and may affect any future
Morningstar rating. Morningstar rates funds against their peers in the same
category. In all, there are four Morningstar categories (domestic equity,
international equity, taxable bond and municipal bond). Morningstar ratings
range from five stars (highest) to one star (lowest). Funds with five-star
ratings are in the top 10% of their category, four-star ratings in the next
22.5%, three stars the next 35%, two stars the next 22.5% and one star the
lowest 10% of their categories.
- -------------------------------------------------------------------------------
15
<PAGE>
- -------------------------------------------------------------------------------
Goldman Sachs Short Duration Tax-Free Fund (continued)
- -------------------------------------------------------------------------------
.. Revenue Bonds. As of April 30, the portfolio's combined position in insured
and uninsured revenue bonds was significantly overweighted compared with the
Index, 84.2% versus 31.7%. We increased the portfolio's total revenue bond
allocation from 79.7% six months ago because our emphasis on credit analysis
enabled us to identify attractive revenue bonds that offered higher incremental
yield than was available from general obligation bonds. (Revenue bonds pay
interest and principal out of a specific revenue stream, such as sales taxes,
hospital charges, tolls, electric rates and airport fees.)
.. Pre-refunded Bonds. Over the course of the year, we re-established the
fund's holdings in pre-refunded bonds to 7.8% from zero. The Index weighting of
pre-refunded bonds was 18.0%.
.. General Obligation (GO) Bonds. The fund's allocation in insured and
uninsured GO bonds was dramatically cut during the period to 6.8% of the
portfolio, down from 15.6% six months ago. The allocation as of April 30 was
significantly underweighted versus the Index's 50.2%. GOs are backed by the
general taxing power of a municipality and are typically higher credit quality
but lower yielding than revenue bonds.
.. Variable Rate Demand Notes (VRDNs). VRDNs are high-quality cash equivalents
that we use to manage the portfolio's excess liquidity. VRDNs represented 1.3%
of the fund, down from 4.7% six months ago.
.. Duration. As of April 30, the fund's duration was effectively in line with
that of the Index at 2.7 years.
.. Credit Quality. During the year, the fund's credit quality allocations
shifted. We continued the trend from the last reporting period by reducing the
portfolio's allocation in triple-A-rated GOs, shifting in favor of
double-A-rated revenue bonds. This allowed us to maintain the fund's targeted
double-A-rated average credit quality and liquidity while achieving higher
overall yields. We structured the portfolio's credit quality allocation like a
"barbell," emphasizing higher credit quality securities in the four- to
five-year maturity range and lower quality securities in the one- to three-year
maturity range. As of April 30, 42.7% of the portfolio was invested in
triple-A-rated bonds, while double-A- and single-A-rated securities accounted
for 30.2% and 27.1%, respectively.
Market Outlook
Our long-term outlook for municipal bond supply is essentially neutral, as
rates are at high levels compared with one year ago. As a result, the current
rate environment encourages neither supply (low rates bring refinancing) nor
demand (high rates attract buyers). At this point, the municipal market does not
perceive any real threats from the federal budget accord. Without any
fundamental problems in view for tax-exempts, we are left with technical forces
as the key driver in relative market performance.
Distribution Policy
Dividends are declared daily and paid on a monthly basis. During the
six-month period ended April 30, 1997, the fund's Institutional, Administration
and Service shares paid out monthly distributions totaling approximately $0.21,
$0.20 and $0.19 per share, respectively. The fund intends to distribute
substantially all of its investment company tax-exempt income, as required by
tax law.
- -------------------------------------------------------------------------------
16
<PAGE>
- -------------------------------------------------------------------------------
Goldman Sachs Short Duration Tax-Free Fund (continued)
- -------------------------------------------------------------------------------
We value your continued confidence in the Goldman Sachs Short Duration
Tax-Free Fund and 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 Short Duration Tax-Free Fund
May 30, 1997
- -------------------------------------------------------------------------------
17
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Short Duration Tax-Free Fund
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt Obligations--99.7%
Alabama--2.6%
Selma, AL IDB for International Paper Co. PCRB (A-/A3)
$ 1,000,000 4.15% 07/15/08 $ 1,000,000
- -------------------------------------------------------------------------------
Arizona--2.8%
Mesa, Arizona IDA Health Care Facilities (AAA/Aaa)
$ 1,000,000 7.50% 01/01/04 $ 1,055,940
- -------------------------------------------------------------------------------
Arkansas--3.5%
West Memphis, AK Public Utility System RB (MBIA) (AAA/Aaa)
$ 1,310,000 5.25% 12/01/00 $ 1,333,816
- -------------------------------------------------------------------------------
Connecticut--6.6%
Connecticut State Housing Mortgage Revenue Town Colony Project (NR/Aa3)
$ 1,000,000 5.00% 04/01/08 $ 1,000,260
Connecticut State Residential Recovery Authority, Series A RB (AA-/NR)
1,500,000 5.60 11/15/99 1,542,945
- -------------------------------------------------------------------------------
$ 2,543,205
- -------------------------------------------------------------------------------
District of Columbia--2.7%
DC Ref Series A (Big 1) Tcc (AAA/Aaa)
$ 1,000,000 7.70% 06/01/98 $ 1,032,600
- -------------------------------------------------------------------------------
Georgia--5.1%
Burke County, GA Development Authority Oglethorpe Power Corp. (A/A3)/(a)/
$ 2,000,000 4.35% 01/01/01 $ 1,961,500
- -------------------------------------------------------------------------------
Illinois--9.4%
Chicago, IL GO (MBIA) (AAA/Aaa)
$ 1,500,000 5.40% 10/31/00 $ 1,533,405
Illinois Health Facilities Authority Highland Park Hospital, Series A
(AAA/Aaa)
1,000,000 5.20 10/01/01 1,003,770
Illinois Housing Development Authority, Series 1991 A (A+/A1)
1,000,000 7.90 07/01/99 1,057,620
- -------------------------------------------------------------------------------
$ 3,594,795
- -------------------------------------------------------------------------------
Louisiana--2.7%
Louisiana Offshore Deepwater Port Authority Term B RB (A/Baa1)
$ 1,000,000 5.85% 09/01/00 $ 1,030,880
- -------------------------------------------------------------------------------
Maryland--4.2%
Maryland State Health and Higher Educational Facilities Authority
GO(A-/NR)/(c)/
$ 1,600,000 5.50% 01/01/02 $ 1,600,000
- -------------------------------------------------------------------------------
Michigan--3.6%
Wayne Charter County, MI Airport (AAA/Aaa)
$ 1,250,000 6.75% 12/01/19 $ 1,371,775
- -------------------------------------------------------------------------------
Missouri--7.1%
Kansas City Municipal Assistance Corp. (AAA/Aaa)
$ 1,000,000 5.88% 10/15/00 $ 1,036,930
St. Louis, MO Municipal Finance Corp., Series A (A/Aa3)
1,655,000 5.30 07/15/02 1,677,740
- -------------------------------------------------------------------------------
$ 2,714,670
- -------------------------------------------------------------------------------
New York--11.8%
Clifton Park, NY Water Authority System, Series A (AAA/Aaa)
$ 1,500,000 6.38% 10/01/11 $ 1,630,695
New York City Municipal Assistance Corp., Series 62 (AA-/Aa2)
1,500,000 5.50 07/01/08 1,503,885
Syracuse, NY IDA RB (AA/NR)
1,365,000 4.60 10/15/98 1,371,020
- -------------------------------------------------------------------------------
$ 4,505,600
- -------------------------------------------------------------------------------
Oklahoma--5.3%
Southern Oklahoma Memorial Hospital RB (A/A)/(a)/
$ 2,000,000 5.60% 02/01/00 $ 2,048,159
- -------------------------------------------------------------------------------
Pennsylvania--8.9%
Pennsylvania Intergovernmental Cooperative Authority Special Tax RB (FGIC)
(AAA/Aaa)
$ 1,500,000 5.75% 06/15/00 $ 1,545,870
Philadelphia, PA Gas Works COPS (FSA) (AAA/Aaa)
1,800,000 5.95 04/01/00 1,859,850
- -------------------------------------------------------------------------------
$ 3,405,720
- -------------------------------------------------------------------------------
Tennessee--3.9%
Clarksville, TN Public Building Authority (AA/NR)
$ 1,500,000 4.75% 12/01/00 $ 1,499,940
- -------------------------------------------------------------------------------
Texas--3.9%
Memorial Villages, TX Water Authority (NR/Aa)
$ 1,435,000 7.00% 09/01/00 $ 1,497,968
- -------------------------------------------------------------------------------
Virginia--4.7%
Petersburg, VA Hospital Authority RB GO (NR/A)
$ 1,760,000 5.50% 07/01/99 $ 1,795,658
- -------------------------------------------------------------------------------
Washington--4.2%
Washington State Public Power Supply System RB, Series B (AA-/Aa1)
$ 1,500,000 7.20% 07/01/02 $ 1,608,840
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Goldman Sachs Short Duration Tax-Free Fund (continued)
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Wisconsin--2.6%
Oshkosh, WI Water Rev., Series C (NR/MIG1)/(b)/
$ 1,000,000 4.88% 01/01/00 $ 998,090
- --------------------------------------------------------------------------------
Wyoming--4.1%
Uinta County, WY School District Series A (FSA) (AAA/Aaa)
$ 1,500,000 6.88% 06/01/00 $ 1,593,570
- --------------------------------------------------------------------------------
Total Debt Obligations
(Cost $38,115,334) $ 38,192,726
- --------------------------------------------------------------------------------
Short-Term Obligations--3.9%
New York City Municipal Water Finance Authority, Series A (A-1+/VMIG1)
$ 1,300,000 4.25% 05/01/97 $ 1,300,000
- --------------------------------------------------------------------------------
Wisconsin State Health Facilities Authority (A-1+/VMIG1)
200,000 4.50 05/01/97 200,000
- --------------------------------------------------------------------------------
Total Short-Term Obligations
(Cost $1,500,000) $ 1,500,000
- --------------------------------------------------------------------------------
Total Investments
(Cost $39,615,334)/(d)/ $ 39,692,726
- --------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost $ 140,632
Gross unrealized loss for investments in which cost
exceeds value (63,240)
- --------------------------------------------------------------------------------
Net unrealized gain $ 77,392
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Investment Abbreviations:
<S> <C>
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 Board
MBIA --Insured by Municipal Bond Investors Assurance
NR --Not Rated
PCRB --Pollution Control Revenue Bond
RB --Revenue Bond
- --------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
/(a)/ Portions of these securities are being segregated for when-issued
securities.
/(b)/ When-issued securities.
/(c)/ Securities with "Put" features with resetting interest rates. Maturity
dates disclosed are the next reset interest dates.
/(d)/ The amount stated also represents aggregate cost for federal income tax
purposes.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Letter to Shareholders
- -------------------------------------------------------------------------------
Goldman Sachs Core Fixed Income Fund
- -------------------------------------------------------------------------------
Investment Objective
The Goldman Sachs Core Fixed Income Fund seeks to achieve a total
return consisting of capital appreciation and income that exceeds the total
return of its benchmark, the Lehman Brothers Aggregate Bond Index (the "Index"),
through a diversified portfolio of fixed income securities. The fund may invest
in U.S. Treasury, agency, corporate, mortgage-backed and asset-backed
securities, as well as in a limited amount of non-dollar-denominated fixed
income securities. While the fund's performance will be measured against the
Index, the portfolio is not required to hold the same securities or match the
sector weightings of the Index. Every security in the portfolio must be rated at
least investment grade by an independent rating agency or be considered to be of
equivalent quality by Goldman Sachs Asset Management at the time it is
purchased. The fund's approximate interest rate sensitivity is expected to be
comparable to that of a five-year bond.
Special Events
Effective May 1, 1997, the name of the GS Core Fixed Income Fund was
changed to the Goldman Sachs Core Fixed Income Fund. In addition, to accommodate
different clients' needs and preferences, the fund added two new share classes
as of May 1: Class A shares, which have a front-end load but no contingent
deferred sales charge (on amounts less than $1 million), and Class B shares,
which are subject to a contingent deferred sales charge but no up-front sales
charge. The fund's objective and investment focus remain the same.
Performance Review
We are pleased to report that the fund's Institutional and Administration
shares outperformed the Index during the period under review. The fund's
positive performance was primarily due to its overweighting in non-Treasury
sectors compared with the Index. Specifically, mortgage-backed securities and
corporate bonds were the most significant contributors to performance, and
asset-backed securities and emerging market debt also performed very well. The
fund's Service shares achieved positive results, but slightly lagged the
benchmark.
The fund performed well compared with its peers. For the three-year period
ended April 30, 1997, the fund's Institutional shares were rated "four stars"
(out of 1,193 taxable bond funds) by Morningstar, Inc., an independent rating
agency./1/
During the period, the net asset value (NAV) of the fund's Institutional,
Administration and Service shares each fell $0.14 due to rising interest rates.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Summary: October 31, 1996 - April 30, 1997
- --------------------------------------------------------------------------------
Institutional Administration Service
------------- -------------- -------
<S> <C> <C> <C>
Total Return (based on 1.87% 1.75% 1.63%
net asset value)
- --------------------------------------------------------------------------------
Return From Monthly 3.30% 3.18% 3.06%
Distributions
- --------------------------------------------------------------------------------
Return From Price -1.43% -1.43% -1.43%
Depreciation
- --------------------------------------------------------------------------------
Total Return of Lehman 1.70% 1.70% 1.70%
Brothers Aggregate
Bond Index
- --------------------------------------------------------------------------------
NAV (as of 4/30/97) $9.71 $9.70 $9.72
- --------------------------------------------------------------------------------
NAV Change -$0.14 -$0.14 -$0.14
- --------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------
/1/Source: (C) 1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of 4/30/97.
The ratings are subject to change every month. Past performance is no guarantee
of future results. Morningstar ratings are calculated from a fund's three-,
five-, and 10-year average annual returns (where applicable) in excess of 90-day
Treasury bill returns with appropriate fee and sales charge adjustments and a
risk factor that reflects fund performance below 90-day Treasury bill returns.
The one-year rating is calculated using the same methodology, but is not a
component of the overall rating. The fund's Institutional shares received "four
stars" for the one-year period and were rated among 1,709 taxable bond funds.
The Morningstar ratings apply only to the fund's Institutional shares; the
fund's Administration and Service shares have not been rated. The Administration
and Service shares are subject to additional fees and expenses that may have the
effect of lowering performance and may affect any future Morningstar rating.
Morningstar rates each fund against its peers in the same category. In all,
there are four Morningstar categories (domestic equity, international equity,
taxable bond and municipal). Morningstar ratings range from five stars (highest)
to one star (lowest). Funds with five-star ratings are in the top 10% of their
category, four-star ratings in the next 22.5%, three stars the next 35%, two
stars the next 22.5% and one star the lowest 10% of their categories.
- -------------------------------------------------------------------------------
20
<PAGE>
Letter to Shareholders
- -------------------------------------------------------------------------------
Goldman Sachs Core Fixed Income Fund (continued)
- -------------------------------------------------------------------------------
Portfolio Composition and Investment Strategies
Portfolio Composition as of April 30, 1997*
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Corporate Bonds 26.7%
Fixed Rate Mortgage Pass-Throughs 20.5%
U.S. Treasuries 17.1%
ABSs 13.2%
CMOs 13.2%
Emerging Market Debt 4.7%
Repos/Cash Equivalents 2.3%
Other Foreign Debt 2.3%
</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.
.. Corporate Bonds. Corporate bonds were the largest allocation at 26.7% of the
portfolio, overweighted compared with the Index (18.0%). The sector performed
well during the period as the healthy economy caused spreads to tighten across
subsectors. The fund's best performers were industrials, which included selected
cable issues that benefited from positive earnings trends (e.g., Time Warner,
Inc. and Tele-Communications, Inc.), as well as specific finance issues that
fared well due to continuing industry consolidation. We underweighted utilities
due to the regulatory and competitive pressures affecting that industry.
Fixed Rate Mortgage Pass-Throughs. The fund was underweighted in fixed rate
mortgage pass-throughs relative to the Index, 20.5% versus 29.9%. During the
period, the sector was supported by a combination of favorable trends, including
low volatility, range-bound interest rates, tight yield spreads on alternative
sectors, and light issuance of corporate and asset-backed securities (ABS).
After the sector rallied and became more fully priced, we trimmed the fund's
allocation in favor of securities that offered greater relative value.
During the period, we occasionally used mortgage dollar rolls 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 liquid assets equal to the dollar amount of the forward
commitment in a segregated account with the fund's custodian.
.. U.S. Treasuries. We significantly underweighted U.S. Treasuries relative to
the Index, 17.1% compared with 44.5%, to emphasize sectors that offered greater
return potential.
.. Asset-Backed Securities. As of April 30, the fund's ABS position was 13.2%,
approximately the same weighting as six months ago. Though negative credit
events among selected credit card and sub-prime auto lenders raised investor
uncertainty during the period, investor interest remained broad-based, ratings
held firm and, relative to similarly rated spread products, ABSs continued to
offer attractive yield enhancement opportunities.
.. CMOs. The fund's collateralized mortgage obligation (CMO) holdings performed
very well and significantly contributed to the fund's performance. During the
period, CMOs enjoyed strong demand from yield-seeking investors who found the
sector particularly compelling relative to other high-quality alternatives. As
of the end of the period, CMOs were a 13.2% allocation, up from 9.8% last
October. This increase was primarily in sequential-pay/support CMOs, which
accounted for 8.8% of the portfolio, while the balance was invested in planned
- -------------------------------------------------------------------------------
21
<PAGE>
Letter to Shareholders
- -------------------------------------------------------------------------------
Goldman Sachs Core Fixed Income Fund (continued)
- -------------------------------------------------------------------------------
amortization class (PAC) CMOs (3.3%) and floaters (1.1%). Sequential-pay/support
CMOs, PAC CMOs and floaters are typically considered to be lower risk derivative
securities.
.. Emerging Market Debt. As of April 30, 4.7% of the portfolio was invested in
emerging market debt. Our strategy in the sector is to control exposure by
stressing high-credit-quality, short-duration bonds. We continued to emphasize
Latin American issuers because structural and economic reforms in this region
are helping improve credit fundamentals. During the period, the fund held bonds
from Chile, Colombia, Mexico and the Andean region development bank, as well as
Indonesia. The sector also benefited from substantial global liquidity, which
has helped support the credit-sensitive areas of the lower grade bond markets.
.. Other Foreign Debt. During the period, we initiated a 2.3% position in a
10-year, fully hedged Australian government bond that offered attractive
incremental yield over U.S. Treasuries, as well as potential price appreciation
should Australian interest rates decline as we expect.
.. Agency Debentures. We sold the fund's allocation to agency debentures (1.5%
as of October 31, 1996) because their risk/reward profile indicated that we were
not being adequately compensated for holding the position.
.. Duration. As always, we seek to add incremental return over the Index
through sector weighting and individual security selection rather than
attempting to predict the direction of interest rates. Therefore, we manage the
fund's duration to approximate that of the Index, partly through the use of
financial futures. As of April 30, the fund's duration was in line with the
Index at 4.6 years.
.. Credit Quality. As of April 30, 39.7% of the portfolio was invested in
government and agency securities, 21.3% was invested in triple-A-rated
securities, 3.4% was invested in double-A-rated securities and 12.6% was
invested in single-A-rated securities. Triple-B-rated securities (20.7%) and
repurchase agreements/cash equivalents (2.3%) make up the remainder of the
portfolio.
Market Outlook
Though indications of economic moderation emerged in April, the economy's
fundamental strength remains intact, which leads us to believe that interest
rates will move higher during the balance of the year.
In terms of specific fixed income sectors, we have a neutral view of the
corporate market. While we anticipate no near-term deterioration in the
fundamental state of the economy, we are concerned that a series of Fed
tightenings may cause spreads to widen slightly in the near term. In the
mortgage-backed security market, spreads relative to Treasuries have remained
impressively resilient. Nonetheless, mortgage technicals may come under pressure
due to a potential increase in supply as the housing market accelerates during
the summer. We expect the portfolio's allocation to the ABS market to remain
stable in the near future, as it has become more challenging to identify
unrecognized value within the sector, particularly among the higher quality
issues that we tend to emphasize. Finally, we are optimistic regarding the
performance prospects of the emerging market debt sector, as credit trends
continue to improve and global liquidity remains plentiful. In the near future,
Latin America is likely to remain the fund's geographic focus; however, we will
actively seek attractive investment opportunities in other regions to increase
fund diversification.
- -------------------------------------------------------------------------------
22
<PAGE>
- -------------------------------------------------------------------------------
Goldman Sachs Core Fixed Income Fund (continued)
- -------------------------------------------------------------------------------
Distribution Policy
During the six-month period under review, the fund's Institutional,
Administration and Service shares distributed $0.32, $0.31 and $0.30 per share,
respectively. Dividends are declared daily and paid on a monthly basis. As
required by tax law, the fund distributes substantially all of its investment
company taxable income.
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ Richard H. Buckholz
Richard H. Buckholz
/s/ C. Richard Lucy
C. Richard Lucy
/s/ Mark A. Van Wyk
Mark A. Van Wyk
Portfolio Managers
Goldman Sachs Core Fixed Income Fund
May 30, 1997
- -------------------------------------------------------------------------------
23
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Core Fixed Income Fund
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds--25.4%
Finance Bonds--9.8%
BankAmerica Corp.
$ 200,000 6.03% 05/17/99 /(a)/ $ 205,042
300,000 7.75 07/15/02 305,466
Capital One Bank
600,000 6.66 02/03/00 593,580
400,000 6.88 04/24/00 399,284
800,000 6.58 04/17/01 780,976
500,000 6.60 08/20/01 487,010
Conseco Finance
170,000 8.70 11/15/26 169,252
Conseco Inc.
340,000 10.50 12/15/04 394,101
Continental Bank N.A.
525,000 11.25 07/01/01 551,565
Countrywide Funding Corp.
125,000 6.08 07/14/99 123,531
250,000 8.43 11/16/99 259,772
250,000 7.75 08/10/01 257,025
375,000 8.00 12/15/26 354,994
First U.S.A. Bank
160,000 6.13 10/30/97 159,872
Meditrust, Inc.
390,000 7.82 09/10/26 400,082
Mic Finance Trust
360,000 8.38 02/01/27 353,495
Phoenix RE Capital Trust
165,000 8.85 02/01/27 164,594
Security Pacific Corp.
995,000 11.50 11/15/00 /(a)/ 1,133,693
Signet Banking Corp.
240,000 9.63 06/01/99 252,629
Taubman Realty Group
480,000 8.00 07/30/01 489,811
Washington Real Estate Investment Trust
120,000 7.13 08/13/03 118,458
- -------------------------------------------------------------------------------
$ 7,954,232
- -------------------------------------------------------------------------------
Industrial Bonds--14.4%
360 Communications Co.
$ 525,000 7.13% 03/01/03 $ 515,949
Continental Airlines, Inc.
339,989 7.75% 07/02/14 348,451
553,994 8.56 07/02/14 590,857
Edison Mission Energy Funding Corp.
170,564 6.77 09/15/03 168,785
Ford Capital Corp.
300,000 9.50 07/01/01 326,253
Ford Motor Corp.
300,000 7.00 09/25/01 300,474
General Motors Acceptance Corp.
275,000 7.63 03/09/98 277,989
200,000 7.13 05/10/00 201,840
375,000 9.63 12/15/01 412,492
H + T Master Trust
550,000 8.18 08/15/02 550,000
Harrahs Operations, Inc.
300,000 8.75 03/15/00 301,500
Hertz Corp.
400,000 7.00 07/15/03 391,260
Mitchell Energy and Dev. Corp.
310,000 9.25 01/15/02 328,758
Northwest Airlines Corp.
163,540 8.26 03/10/06 170,804
567,358 8.97 01/02/15 588,117
NWCG Holding Crp
680,000 7.05 06/15/99 586,786
Panamerican Beverage Co.
130,000 8.13 04/01/03 133,416
RJR Nabisco Inc.
175,000 8.00 07/15/01 172,440
550,000 8.63 12/01/02 548,218
Tele-Communications, Inc.
100,000 7.13 02/02/98 100,396
300,000 8.25 01/15/03 304,011
1,135,000 6.27 09/15/03 1,132,912
50,000 6.82 09/15/10 49,846
Time Warner, Inc.
1,650,000 7.95 02/01/00 1,690,128
350,000 9.63 05/01/02 384,776
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Core Fixed Income Fund (continued)
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds(continued)
Industrial Bonds(continued)
Time Warner, Inc. (continued)
$ 400,000 7.98% 08/15/04 $ 406,440
U.S. Air Inc.
553,242 6.76 04/15/08 528,761
USI American Holdings Corp.
150,000 7.25 12/01/06 145,070
- -------------------------------------------------------------------------------
$ 11,656,729
- -------------------------------------------------------------------------------
Utility Bonds--1.1%
Central Maine Power Co.
$ 330,000 7.45% 08/30/99 $ 326,215
Salton Sea Funding
580,000 7.02 05/30/00 580,922
- -------------------------------------------------------------------------------
$ 907,137
- -------------------------------------------------------------------------------
Total Corporate Bonds
(Cost $20,576,762) $ 20,518,098
- -------------------------------------------------------------------------------
Asset-Backed Securities--14.1%
Airplanes Pass Through Trust Series 1, Class C
$ 155,000 8.15% 03/15/19 /(a)/ $ 157,232
Asset Securitization Corp., Series 1996, Class A1
600,000 6.88 11/13/26 /(a)/ 591,398
Asset Securitization Corp., Series 4, Class A
900,000 7.49 04/14/27 914,800
Chevy Chase Auto Receivables Trust Series 1995-2, Class A
177,654 5.80 06/15/02 176,876
Discover Card Master Trust 1996-4, Class A
1,910,000 6.06 10/16/13 /(a)/ 1,942,222
Discover Card Master Trust 1996-4, Class B
1,100,000 6.24 10/16/13 1,108,250
DVI Equipment Lease Trust Series 1996-1, Class A
1,011,139 6.55 07/10/04 1,006,286
General Motors Acceptance Corp. Series 1995, Class A
69,659 7.15 03/15/00 70,203
Navistar Financial Trust, Series 1995-A, Class A2
214,878 6.55 11/20/01 215,549
Olympic Automobile Receivables Trust, Series 1994-B, Class A2
245,032 6.85 06/15/01 247,048
Premier Auto Trust Series 1995-1, Class A4
123,449 7.85 09/04/98 123,680
Premier Auto Trust Series 1995-1, Class A5
80,000 7.90 05/04/99 80,625
Sears Credit Account Master Trust, Series 1996-1, Class A
680,000 6.20% 02/16/06 667,250
Sears Credit Account Master Trust, Series 1995-2, Class A
550,000 8.10 06/15/04 565,983
Sears Credit Account Master Trust, Series 1995-3, Class A
300,000 7.00 10/15/04 302,718
Standard Credit Card Master Trust, Series 1994-4, Class A
680,000 8.25 11/07/03 714,422
Standard Credit Card Trust, Series 1990-3, Class A
1,120,000 9.50 07/10/98 1,120,694
Standard Credit Card Trust, Series 1990-6, Class B
900,000 9.63 09/10/98 910,683
World Financial Tower B Series 1996, Class B
498,093 6.91 09/01/13 483,679
- -------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $11,543,903) $ 11,399,598
- -------------------------------------------------------------------------------
Emerging Market Debt--4.4%
Bancoldex
$ 60,000 8.63% 06/02/00 $ 61,372
BCO De Colombia
110,000 8.63 06/02/00 112,516
Bridas Corp.
110,000 12.50 11/15/99 118,581
Empresa Col Petroleos
900,000 7.25 07/08/98 903,438
Financiera Energy Nacional
50,000 9.38 06/15/06 50,504
90,000 9.38 06/15/06 94,271
Instituto de Fomento Industrial
140,000 8.38 07/29/01 141,558
130,000 8.38 07/29/01 131,447
Republic of Colombia
30,000 7.13 05/11/98 30,139
Republic of Croatia
210,000 7.00 02/27/02 204,091
Sampoerna International
120,000 8.38 06/15/06 120,164
United Mexican States
180,000 7.56 08/06/01 181,940
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Core Fixed Income Fund (continued)
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Emerging Market Debt(continued)
United Mexican States (continued)
$ 650,000 7.62% 08/06/01 $ 657,007
YPF Sociedad Anonima
633,003 7.50 10/26/02 637,687
118,531 7.00 10/26/02 118,835
- -------------------------------------------------------------------------------
Total Emerging Market Debt
(Cost $3,558,558) $ 3,563,550
- -------------------------------------------------------------------------------
Government Bonds--3.0%
Australia Commonwealth
AUD 2,400,000 7.50% 07/15/05 $ 1,845,509
Province of Quebec
$ 520,000 13.25 09/15/14 611,666
- -------------------------------------------------------------------------------
Total Government Bonds
(Cost $2,524,905) $ 2,457,175
- -------------------------------------------------------------------------------
Mortgage Backed Obligations--31.9%
Bear Stearns Mortgage Securities, Inc.
$ 2,045,784 6.50% 03/28/09/(a)/ $ 1,883,062
Federal Home Loan Mortgage Corp. (FHLMC)
1,000,000 7.00 TBA-15 Yr./(b)/ 990,938
1,245,394 6.00 11/15/16 1,234,885
1,000,000 6.35 03/25/18 976,870
Federal National Mortgage Association (FNMA)
1,000,000 6.50 TBA-7 Yr./(b)/ 981,560
1,000,000 7.00 TBA-30 Yr./(b)/ 968,750
4,500,000 7.50 TBA-30 Yr./(b)/ 4,466,250
500,000 6.25 07/25/18 486,875
GE Capital Mortgage Services, Inc. Series 1994-17, Class A10
2,000,000 7.00 05/25/24/(a)/ 1,771,240
Government National Mortgage Association (GNMA)
3,000,000 7.50 TBA-30 Yr./(b)/ 2,973,750
3,000,000 8.00 TBA-30 Yr./(b)/ 3,040,290
335,213 8.00 02/15/17 344,240
30,057 7.00 11/15/22 29,296
362,778 7.00 12/15/22 353,592
596,838 7.00 12/15/22 581,726
184,742 7.00 01/15/23 179,892
787,526 7.50 03/15/23 785,313
779,931 7.00 05/15/23 759,457
120,766 7.50 08/15/23 120,427
39,068 7.00 11/15/23 38,042
JP Morgan Commercial Mortgage Finance Corp., Series 1997-C4
1,000,000 7.32% 12/26/28 997,227
Morgan Stanley Capital Commercial Mortgage, Inc. Series 1997-C1
900,000 7.46 05/15/06 912,375
Prudential Home Mortgage Securities Corp. 1992-39 A8
1,000,000 7.11 12/25/07 860,550
- -------------------------------------------------------------------------------
Total Mortgage Backed Obligations
(Cost $25,637,886) $ 25,736,607
- -------------------------------------------------------------------------------
Sovereign Credit--0.4%
State of Israel
$ 370,000 6.38% 12/15/05 $ 343,748
- -------------------------------------------------------------------------------
Total Sovereign Credit
(Cost $346,061) $ 343,748
- -------------------------------------------------------------------------------
U.S. Treasury Obligations--17.0%
United States Treasury Bonds
$ 330,000 8.75% 05/15/17 $ 390,070
550,000 8.88 08/15/17/(a)/ 657,938
2,230,000 8.75 05/15/20 2,656,488
120,000 7.88 02/15/21/(a)/ 131,174
2,240,000 7.63 02/15/25 2,402,400
United States Treasury Interest-Only Stripped Securities/(c)/
2,250,000 6.99 08/15/09 966,893
350,000 7.04 11/15/10 136,808
United States Treasury Notes
4,000,000 6.88 08/31/99 4,044,360
280,000 5.63 11/30/00 272,387
590,000 7.88 11/15/04/(a)/ 630,380
United States Treasury Principal-Only Stripped Securities/(d)/
40,000 5.78 11/15/97 38,781
410,000 6.81 11/15/04/(a)/ 247,566
5,730,000 7.22 05/15/20 1,119,356
- -------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $13,742,043) $ 13,694,601
- -------------------------------------------------------------------------------
Yankee Bonds--0.3%
Korea Electric Power
$ 263,790 7.40% 04/01/16 $ 265,088
- -------------------------------------------------------------------------------
Total Yankee Bonds
(Cost $255,077) $ 265,088
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
Goldman Sachs Core Fixed Income Fund (continued)
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreement--20.1%
Joint Repurchase Agreement Account/(a)/
$ 16,200,000 5.49% 05/01/97 $ 16,200,000
- -------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $16,200,000) $ 16,200,000
- -------------------------------------------------------------------------------
Total Investments
(Cost $94,385,195)/(e)/ $ 94,178,465
- -------------------------------------------------------------------------------
Futures contracts open at April 30, 1997 are as follows:
Number of
Contracts
Long Settlement Unrealized
Type (Short)(f) Month Gain (Loss)
- ---------------------------- -------------- ----------------- -------------
Euro Dollars 5 June 1997 $4,250
Euro Dollars 8 September 1997 (2,338)
Euro Dollars 5 December 1997 (1,000)
Euro Dollars 5 June 1998 (2,250)
5 Year U.S. Treasury Notes 10 June 1997 (2,828)
10 Year U.S. Treasury Notes 17 June 1997 (12,750)
U.S. Long Term Bond (14) June 1997 42,682
-------------
$25,766
- -------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost $382,996
Gross unrealized loss for investments in which cost
exceeds value (704,905)
- ------------------------------------------------------------------------------
Net unrealized loss $(321,909)
- --------------------------------------------------------------------------------
</TABLE>
/(a)/Portions of these securities are being segregated for open TBA purchases,
mortgage dollar rolls, and futures.
/(b)/TBA (To Be Assigned) securities are purchased on a forward commitment basis
with an approximate (generally + / -2.5%) principal amount and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
/(c)/Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated rate due to
the amortization of related premiums.
/(d)/The interest rate disclosed for these securitites represents effective
yields to maturity.
/(e)/The aggregate cost for federal income tax purposes is $94,500,374.
/(f)/Each Euro Dollar contract represents $1,000,000 in notional par value. Each
5-Year and 10-Year U.S. Treasury Note and each U.S. Long Term Bond contract
represents $100,000 in notional par value. The total notional amount and
market value are $27,100,000 and $9,088,344, 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 percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Statements of Assets and Liabilities
April 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Adjustable
Rate Short Duration
Government Government
Fund Fund
--------------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value (cost $594,120,929, $102,639,463, $39,615,334
and $94,385,195, respectively) $ 596,596,552 $ 102,672,119
Cash 57,183 89,184
Receivables:
Investment securities sold 295,632 --
Interest 6,240,961 1,042,023
Forward foreign currency exchange contracts -- --
Fund shares sold 2,978,910 203,746
Variation margin -- --
Deferred organization expenses, net -- --
Other assets 64,048 50,879
- ------------------------------------------------------------------------------------------------------------------------------
Total assets 606,233,286 104,057,951
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payables:
Dividends 1,032,523 109,251
Investment securities purchased 1,331,393 --
Fund shares repurchased 10,604,905 1,707
Investment adviser fees 191,592 34,620
Transfer agent fees 42,054 --
Authorized dealer service fees 6,616 --
Variation margin 87,000 46,971
Accrued expenses and other liabilities 59,487 15,162
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 13,355,570 207,711
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid in capital 643,684,171 117,737,007
Accumulated undistributed (distributions in excess of) net investment income (2,943,415) 599,277
Accumulated net realized loss on investment and futures transactions (49,959,507) (14,542,059)
Accumulated net realized foreign currency loss -- --
Net unrealized gain (loss) on investments and futures 2,096,467 56,015
Net unrealized gain on translation of assets and liabilities denominated in
foreign currencies -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net assets $ 592,877,716 $ 103,850,240
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share:
Institutional shares $9.86 $9.76
Administration shares $9.86 $9.78
Service shares $9.86 $9.75
Class A shares (a) $9.86 --
- ------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding:
Institutional shares 55,732,381 10,231,208
Administration shares 424,079 153,792
Service shares 2,171 258,644
Class A shares 3,960,437 --
- ------------------------------------------------------------------------------------------------------------------------------
Total shares of beneficial interest outstanding, $.001 par value (unlimited
number of shares authorized) 60,119,068 10,643,644
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Short Core
Duration Fixed
Tax-Free Income
Fund Fund
---------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value (cost $594,120,929, $102,639,463, $39,615,334
and $94,385,195, respectively) $ 39,692,726 $ 94,178,465
Cash 91,511 94,989
Receivables:
Investment securities sold 145,393 1,331,207
Interest 554,155 1,045,248
Forward foreign currency exchange contracts -- 34,692
Fund shares sold -- 60,750
Variation margin -- 6,750
Deferred organization expenses, net 10,458 41,206
Other assets 51,608 29,277
- -------------------------------------------------------------------------------------------------------------------------
Total assets 40,545,851 96,822,584
- -------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payables:
Dividends 18,312 43,289
Investment securities purchased 2,144,574 15,935,315
Fund shares repurchased 10,296 --
Investment adviser fees 11,244 26,250
Transfer agent fees 12,983 2,771
Authorized dealer service fees -- --
Variation margin -- --
Accrued expenses and other liabilities 31,430 30,169
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,228,839 16,037,794
- -------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid in capital 42,243,143 81,193,439
Accumulated undistributed (distributions in excess of) net investment income 90,133 36,949
Accumulated net realized loss on investment and futures transactions (4,093,656) (267,089)
Accumulated net realized foreign currency loss -- (32,353)
Net unrealized gain (loss) on investments and futures 77,392 (175,768)
Net unrealized gain on translation of assets and liabilities denominated in
foreign currencies -- 29,612
- -------------------------------------------------------------------------------------------------------------------------
Net assets $ 38,317,012 $ 80,784,790
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share:
Institutional shares $9.94 $9.71
Administration shares $9.94 $9.70
Service shares $9.94 $9.72
Class A shares (a) -- --
- -------------------------------------------------------------------------------------------------------------------------
Shares Outstanding:
Institutional shares 3,738,166 7,565,340
Administration shares 11,363 638,323
Service shares 105,100 114,034
Class A shares -- --
- -------------------------------------------------------------------------------------------------------------------------
Total shares of beneficial interest outstanding, $.001 par value (unlimited
number of shares authorized) 3,854,629 8,317,697
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share (NAV per share x 1.0152) for Class A
shares of GS Adjustable Rate Government Fund is $10.01.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Statements of Operations
For the Six Months Ended April 30, 1997
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Adjustable Short
Rate Duration
Government Government
Fund Fund
-----------------------------------
<S> <C> <C>
Investment income:
Interest/(a)/ $ 19,521,515 $ 3,571,901
- -----------------------------------------------------------------------------------------------------------------------------------
Total income 19,521,515 3,571,901
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment adviser fees 1,196,772 259,279
Distribution fees 24,001 --
Authorized dealer service fees 24,001 --
Administration share fees 5,231 1,118
Service share fees 10 5,244
Transfer agent fees 143,729 --
Custodian fees 65,396 32,437
Professional fees 30,592 30,169
Registration fees 31,419 29,736
Amortization of deferred organization expenses -- --
Trustees' fees 5,754 990
Other 64,428 26,459
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses 1,591,333 385,432
Less--Expenses reimbursable and fees waived by Goldman Sachs (215,722) (145,719)
- -----------------------------------------------------------------------------------------------------------------------------------
Net expenses 1,375,611 239,713
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 18,145,904 3,332,188
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment and
futures transactions:
Net realized gain (loss) from:
Investment transactions (301,736) 77,934
Futures transactions (575,601) (78,182)
Foreign currency related transactions -- --
Net change in unrealized gain (loss) on:
Investments 3,237,459 (594,540)
Futures (523,110) (9,522)
Translation of assets and liabilities denominated in foreign currencies -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment and futures
transactions 1,837,012 (604,310)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 19,982,916 $ 2,727,878
- -----------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Short Core
Duration Fixed
Tax-Free Income
Fund Fund
-----------------------------
<S> <C> <C>
Investment income:
Interest/(a)/ $ 846,820 $ 2,713,928
- --------------------------------------------------------------------------------------------------------------------------
Total income 846,820 2,713,928
- --------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment adviser fees 72,141 152,651
Distribution fees -- --
Authorized dealer service fees -- --
Administration share fees 79 4,929
Service share fees 2,452 1,908
Transfer agent fees 7,214 15,265
Custodian fees 24,930 43,131
Professional fees 30,238 29,501
Registration fees 29,353 29,627
Amortization of deferred organization expenses 10,290 12,146
Trustees' fees 332 775
Other 15,581 8,570
- --------------------------------------------------------------------------------------------------------------------------
Total expenses 192,610 298,503
Less--Expenses reimbursable and fees waived by Goldman Sachs (108,922) (119,934)
- --------------------------------------------------------------------------------------------------------------------------
Net expenses 83,688 178,569
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 763,132 2,535,359
- --------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment and
futures transactions:
Net realized gain (loss) from:
Investment transactions 46,213 (11,091)
Futures transactions -- (15,366)
Foreign currency related transactions -- (32,353)
Net change in unrealized gain (loss) on:
Investments (125,032) (1,032,929)
Futures -- (72,450)
Translation of assets and liabilities denominated in foreign currencies -- 29,612
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment and futures
transactions (78,819) (1,134,577)
- --------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 684,313 $ 1,400,782
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(a)/ Net of $4,391 in foreign withholding tax for the Core Fixed Income Fund.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Six Months Ended April 30, 1997
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Adjustable Short
Rate Duration
Government Government
Fund Fund
--------------------------------
<S> <C> <C>
From Operations:
Net investment income $ 18,145,904 $ 3,332,188
Net realized gain (loss) from investment and futures transactions (877,337) (248)
Net realized loss from foreign currency related transactions -- --
Net change in unrealized gain (loss) on investments and futures 2,714,349 (604,062)
Net change in unrealized gain on translation of assets and liabilities
denominated in foreign currencies -- --
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 19,982,916 2,727,878
- ----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income
Institutional shares (16,997,708) (3,409,055)
Administration shares (118,601) (29,022)
Service shares (107) (65,458)
Class A shares (531,120) --
- ----------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (17,647,536) (3,503,535)
- ----------------------------------------------------------------------------------------------------------------
From Share Transactions:
Net proceeds from sales of shares 224,637,176 17,764,086
Reinvestment of dividends and distributions 10,493,073 2,378,322
Cost of shares repurchased (272,256,791) (17,534,072)
- ----------------------------------------------------------------------------------------------------------------
Net (decrease) increase in net assets resulting from shares transactions (37,126,542) 2,608,336
- ----------------------------------------------------------------------------------------------------------------
Total (decrease) increase (34,791,162) 1,832,679
Net Assets:
- ----------------------------------------------------------------------------------------------------------------
Beginning of period $ 627,668,878 $ 102,017,561
- ----------------------------------------------------------------------------------------------------------------
End of period $ 592,877,716 $ 103,850,240
- ----------------------------------------------------------------------------------------------------------------
Accumulated undistributed (distributions in excess of) net investment income $ (2,943,415) $ 599,277
- ----------------------------------------------------------------------------------------------------------------
Summary of Share Transactions:
Shares sold 22,833,196 1,813,884
Reinvestment of dividends and distributions 1,066,128 243,233
Shares repurchased (27,664,736) (1,793,383)
- ----------------------------------------------------------------------------------------------------------------
Net (decrease) increase in shares outstanding (3,765,412) 263,734
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Short Core
Duration Fixed
Tax-Free Income
Fund Fund
--------------------------------
<S> <C> <C>
From Operations:
Net investment income $ 763,132 $ 2,535,359
Net realized gain (loss) from investment and futures transactions 46,213 (26,457)
Net realized loss from foreign currency related transactions -- (32,353)
Net change in unrealized gain (loss) on investments and futures (125,032) (1,105,379)
Net change in unrealized gain on translation of assets and liabilities
denominated in foreign currencies -- 29,612
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 684,313 1,400,782
- ----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income
Institutional shares (743,379) (2,380,508)
Administration shares (1,285) (127,789)
Service shares (18,468) (23,664)
Class A shares -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (763,132) (2,531,961)
- ----------------------------------------------------------------------------------------------------------------
From Share Transactions:
Net proceeds from sales of shares 15,143,248 8,630,772
Reinvestment of dividends and distributions 633,411 2,308,481
Cost of shares repurchased (12,937,480) (2,167,703)
- ----------------------------------------------------------------------------------------------------------------
Net (decrease) increase in net assets resulting from shares transactions 2,839,179 8,771,550
- ----------------------------------------------------------------------------------------------------------------
Total (decrease) increase 2,760,360 7,640,371
Net Assets:
- ----------------------------------------------------------------------------------------------------------------
Beginning of period $ 35,556,652 $ 73,144,419
- ----------------------------------------------------------------------------------------------------------------
End of period $ 38,317,012 $ 80,784,790
- ----------------------------------------------------------------------------------------------------------------
Accumulated undistributed (distributions in excess of) net investment income $ 90,133 $ 36,949
- ----------------------------------------------------------------------------------------------------------------
Summary of Share Transactions:
Shares sold 1,519,494 880,108
Reinvestment of dividends and distributions 63,471 235,763
Shares repurchased (1,297,285) (220,518)
- ----------------------------------------------------------------------------------------------------------------
Net (decrease) increase in shares outstanding 285,680 895,353
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended October 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Adjustable Short
Rate Duration
Government Government
Fund Fund
--------------------------------
<S> <C> <C>
From Operations:
Net investment income $ 37,031,818 $ 6,604,446
Net realized gain (loss) from investment and futures transactions (2,502,624) (567,819)
Net change in unrealized gain (loss) on investments and futures 7,711,106 619,618
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 42,240,300 6,656,245
- ----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income
Institutional shares (36,233,589) (6,561,519)
Administration shares (220,450) (2,548)
Service shares -- (14,792)
Class A shares (577,779) --
In excess of net investment income
Institutional shares (1,304,006) --
Administration shares (7,930) --
Class A shares (20,794) --
Net realized gain (loss) on investment, and future transactions
Institutional shares -- --
- ----------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (38,364,548) (6,578,859)
- ----------------------------------------------------------------------------------------------------------------
From Share Transactions:
Net proceeds from sales of shares 406,586,374 42,019,441
Reinvestment of dividends and distributions 18,181,648 4,153,816
Cost of shares repurchased (477,107,914) (47,993,112)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from shares transactions (52,339,892) (1,819,855)
- ----------------------------------------------------------------------------------------------------------------
Total (decrease) increase (48,464,140) (1,742,469)
Net Assets:
- ----------------------------------------------------------------------------------------------------------------
Beginning of year $ 676,133,018 $ 103,760,030
- ----------------------------------------------------------------------------------------------------------------
End of year $ 627,668,878 $ 102,017,561
- ----------------------------------------------------------------------------------------------------------------
Accumulated (distributions in excess of) undistributed net investment income $ (3,441,783) $ 770,624
- ----------------------------------------------------------------------------------------------------------------
Summary of Share Transactions:
Shares sold 41,534,978 4,293,467
Reinvestment of dividends and distributions 1,856,783 424,274
Shares repurchased (48,741,470) (4,905,357)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (5,349,709) (187,616)
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Short Core
Duration Fixed
Tax-Free Income
Fund Fund
--------------------------------
<S> <C> <C>
From Operations:
Net investment income $ 1,786,304 $ 4,013,477
Net realized gain (loss) from investment and futures transactions 331,638 (253,420)
Net change in unrealized gain (loss) on investments and futures (396,071) (75,350)
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,721,871 3,684,707
- ----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income
Institutional shares (1,766,892) (4,019,797)
Administration shares (2,032) (19,144)
Service shares (17,380) (5,349)
Class A shares -- --
In excess of net investment income
Institutional shares -- --
Administration shares -- --
Class A shares -- --
Net realized gain (loss) on investment, and future transactions
Institutional shares -- (450,016)
- ----------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1,786,304) (4,494,306)
- ----------------------------------------------------------------------------------------------------------------
From Share Transactions:
Net proceeds from sales of shares 22,248,684 21,976,567
Reinvestment of dividends and distributions 1,401,492 4,315,748
Cost of shares repurchased (46,918,400) (7,840,575)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from shares transactions (23,268,224) 18,451,740
- ----------------------------------------------------------------------------------------------------------------
Total (decrease) increase (23,332,657) 17,642,141
Net Assets:
- ----------------------------------------------------------------------------------------------------------------
Beginning of year $ 58,889,309 55,502,278
- ----------------------------------------------------------------------------------------------------------------
End of year $ 35,556,652 $ 73,144,419
- ----------------------------------------------------------------------------------------------------------------
Accumulated (distributions in excess of) undistributed net investment income $ 90,133 $ 33,551
- ----------------------------------------------------------------------------------------------------------------
Summary of Share Transactions:
Shares sold 2,233,482 2,244,430
Reinvestment of dividends and distributions 140,950 439,299
Shares repurchased (4,727,959) (811,075)
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (2,353,527) 1,872,654
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
1. Organization
Goldman Sachs Trust (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end, management
investment company. Included in this report are the financial statements for the
Goldman Sachs Adjustable Rate Government Fund (Adjustable Rate Government),
Goldman Sachs Short Duration Government Fund (Short Duration Government),
Goldman Sachs Short Duration Tax-Free Fund (Short Duration Tax-Free) and Goldman
Sachs Core Fixed Income Fund (Core Fixed Income), collectively, ("the Funds") or
individually a ("Fund"). The Funds are diversified portfolios of the Trust
offering three classes of shares - Institutional shares, Administration shares
and Service shares. In addition, the Adjustable Rate Government Fund offers
Class A shares. Effective May 1, 1997, the Trust was reorganized from a
Massachusetts business trust to a Delaware business trust and various
operational changes were approved, including updating certain investment
restrictions and amending the management contracts. In addition, Short Duration
Government, Short Duration Tax-Free, and Core Fixed Income added two new share
classes, Class A and Class B, as of May 1.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Funds. 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 mortgage backed, asset backed and U.S. Treasury obligations for
which accurate market quotations are readily available are valued on the basis
of quotations furnished by a pricing service or provided by dealers in such
securities. Portfolio securities for which accurate market quotations are not
readily available are valued based on yield equivalents, pricing matrix or other
sources, under valuation procedures established by the Trust's Board of
Trustees. Short-term debt obligations maturing in sixty days or less are valued
at amortized cost.
B. Security Transactions and Investment Income
- ----------------------------------------------
Security transactions are recorded on trade date. Realized gains and losses on
sales of portfolio securities are calculated on the identified cost basis.
Interest income is recorded on the basis of interest accrued. Premiums on
interest-only securities and on collateralized mortgage obligations with nominal
principal amounts are amortized, on an effective yield basis, over the expected
lives of the respective securities, taking into account actual principal
prepayment experience and estimates of future principal prepayments. Certain
mortgage security paydown gains and losses are taxable as ordinary income. Such
paydown gains and losses increase or decrease taxable ordinary income available
for distribution and are classified as interest income in the accompanying
Statements of Operations. Original issue discounts ("OID") on debt securities
are amortized to interest income over the life of the security with a
corresponding increase in the cost basis of that security. OID amortization on
mortgage backed REMIC securities is initially recorded based on estimates of
principal paydowns using the most recent OID factors available from the issuer.
Recorded amortization amounts are adjusted when actual OID factors are received.
Market premiums resulting from the purchase of long-term debt securities are
amortized to interest income over the life of the security with a corresponding
decrease in the cost basis of that security for Short Duration Tax-Free. Market
discounts and market premiums on debt securities, other than mortgage backed
securities, are amortized to interest income over the life of the security with
a corresponding adjustment in the cost basis of that security for Core Fixed
Income Fund.
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.
- --------------------------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
- ----------------------------------------------
Core Fixed 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. Core Fixed 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
- ------------------------
The Funds, with the exception of Short Duration Tax-Free, may enter into
mortgage "dollar rolls" in which the Fund sells securities in the current month
for delivery and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical securities
on a specified future date. The Fund loses the right to receive principal and
interest paid on the securities sold. However, the Fund benefits to the extent
of any price received for the securities sold and the lower forward price for
the future purchase (often referred to as the "drop") or fee income plus the
interest earned on the cash proceeds of the securities sold until the settlement
date of the forward purchase. The Fund will hold and maintain in a segregated
account, until the settlement date, cash or liquid, high-grade debt securities
in an amount equal to the forward purchase price. For financial reporting and
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.
F. Futures Contracts
- --------------------
The Funds may enter into futures transactions to hedge against changes in
interest rates, securities prices, currency exchange rates (in the case of Core
Fixed Income) or to seek to increase total return.
Upon entering into a futures contract, the Funds are required to deposit
with a broker an amount of cash or securities equal to the minimum "initial
margin" requirement of the futures exchange on which the contract is traded.
Payments for futures contracts ("variation margin") are paid or received by the
Funds daily, dependent on the daily fluctuations in the value of the contracts,
and are recorded for financial reporting purposes as unrealized gains or losses.
When contracts are closed, the Funds realize a gain or loss equal to the
difference between the value of the futures contract to sell and the value of
futures contract to buy. Gains and losses are reported in the Statement of
Operations.
The use of futures contracts involve, to varying degrees, elements of
market and counterparty risk which may exceed the amounts recognized in the
Statements of Assets and Liabilities. Changes in the value of the futures
contract may not directly correlate with changes in the value of the underlying
securities. This risk may decrease the effectiveness of the Funds' hedging
strategies and potentially result in a loss.
G. Deferred Organization Expenses
- ---------------------------------
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
H. Expenses
- -----------
Expenses incurred by the Trust that do not specifically relate to an individual
portfolio of the Trust are generally allocated to the portfolios based on
each portfolio's relative average net assets for the period.
- --------------------------------------------------------------------------------
33
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Shareholders of Administration shares and Service shares bear all expenses
and fees paid to service organizations for their services with respect to such
shares as well as other expenses (subject to expense limitations) which are
directly attributable to such shares. For the Adjustable Rate Government Fund,
shareholders of Class A shares bear all expenses and fees relating to the
distribution and authorized dealer service plans as well as other expenses which
are directly attributable to such shares.
I. Federal Taxes
- ----------------
It is each Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute each year
substantially all of its investment company taxable and tax-exempt income to its
shareholders. Accordingly, no federal tax provisions are required.
The characterization of distributions to shareholders for financial
statement purposes as either from or in excess of net investment income or net
realized gain on investment transactions, or from capital, depends on the type
of book/tax differences that may exist as well as timing differences associated
with having different book and tax year ends.
The Funds, at their most recent tax year-ends (October 31, 1996 for Core
Fixed Income and December 31, 1996 for Adjustable Rate Government, Short
Duration Government and Short Duration Tax-Free) had approximately the following
amounts of capital loss carryforward for U.S. federal tax purposes:
<TABLE>
<CAPTION>
Years of
Fund Amount Expiration
- ------------------------------------ ------------- -------------
<S> <C> <C>
Adjustable Rate Government $49,069,000 2000-2004
Short Duration Government $14,141,000 2002-2004
Short Duration Tax-Free $4,058,000 2002-2003
Core Fixed Income $77,000 2004
</TABLE>
These amounts are available to be carried forward to offset future capital
gains to the extent permitted by applicable laws or regulations.
3. Agreements
Goldman Sachs Funds Management, L.P. ("GSFM"), an affiliate of Goldman, Sachs &
Co. ("Goldman Sachs"), serves as the investment adviser for the Adjustable Rate
Government and Short Duration Government Funds pursuant to Investment Advisory
Agreements. Goldman Sachs Asset Management ("GSAM"), a separate operating
division of Goldman Sachs, serves as the investment adviser for the Short
Duration Tax-Free and Core Fixed Income Funds pursuant to Investment Advisory
Agreements. Under the Investment Advisory Agreements, the adviser, subject to
the general supervision of the Trust's Board of Trustees, manages the Funds'
portfolios and provides for the administration of the Funds' other affairs. As
compensation for the services rendered under the Investment Advisory Agreements
and the assumption of the expenses related thereto, the adviser is entitled to a
fee, computed daily and payable monthly at an annual rate equal to .40% of
average daily net assets of Adjustable Rate Government, Short Duration Tax-Free
and Core Fixed Income and .50% of average daily net assets of Short Duration
Government. Until further notice, GSFM has voluntarily agreed not to impose .10%
of its investment advisory fee for Short Duration Government.
The adviser has voluntarily agreed to limit certain of the Funds' expenses
(excluding investment advisory fees, taxes, interest, brokerage, litigation,
Administrative and Service Share fees, indemnification and other extraordinary
expenses and with respect to Adjustable Rate Government Class A shares,
distribution and authorized dealer service fees) to the extent that such
expenses exceed .05% per annum of each Fund's average daily net assets.
Goldman Sachs serves as Distributor of the shares of the Funds pursuant to
a Distribution Agreement and receives no compensation in this capacity with the
exception of Adjustable Rate Government Class A shares. During the period ended
April 30, 1997, Goldman Sachs retained approximately $110,300 of sales load
related to Class A shares. Goldman Sachs also serves as Transfer Agent of the
Funds for a fee.
The Trust, on behalf of Adjustable Rate Government, has adopted a
Distribution Plan (the "Plan") pursuant to Rule 12b-1 for the Class A shares.
Under the Plan, Goldman Sachs
- --------------------------------------------------------------------------------
34
<PAGE>
- --------------------------------------------------------------------------------
is entitled to receive a quarterly distribution fee equal, on an annual basis,
to .25% of the average daily net assets of Class A shares. Currently, Goldman
Sachs has agreed to voluntarily waive this distribution fee.
The Trust, on behalf of Adjustable Rate Government, has adopted a non-Rule
12b-1 Authorized Dealer Service Plan (the "Service Plan") pursuant to which
Goldman Sachs and Authorized Dealers are compensated for providing personal and
account maintenance services. Adjustable Rate Government pays a fee under the
Service Plan equal, on an annual basis, to .25% of its average daily net assets
attributable to Class A shares.
For the period ended April 30, 1997, the advisors and distributor have
voluntarily agreed to waive certain fees and reimburse other expenses as
follows(in thousands):
<TABLE>
<CAPTION>
Waivers
---------------
Reimburse-
Class A Reimburse- ment
Fund Advisor 12b-1 ment Outstanding
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate
Government -- $24 $192 $22
Short Duration
Government $52 -- 94 14
Short Duration
Tax-Free -- -- 109 28
Core Fixed
Income -- -- 120 28
</TABLE>
For the period ended April 30, 1997, Adjustable Rate Government, Short
Duration Government, and Core Fixed Income incurred commission expenses of
approximately $35,000, $8,500, and $900, respectively, in connection with
futures contracts entered into with Goldman Sachs. At April 30, 1997, Adjustable
Rate Government and Short Duration Government had approximately $87,000 and
$47,000, respectively, payable to Goldman Sachs related to variation margin on
futures contracts. Approximately $7,000 relating to variation margin was due to
Core Fixed Income from Goldman Sachs.
As of May 1, 1997, the Funds advisory agreements were changed to management
agreements encompassing the same services and fee structure.
4. Line of Credit Facility
The Funds participate in a $250,000,000 uncommitted, unsecured revolving line of
credit facility to be used solely for temporary or emergency purposes. Under the
most restrictive arrangement, each fund must own securities having a market
value in excess of 300% of the total bank borrowings. The interest rate on the
borrowings is based on the federal funds rate. During the six months ended April
30, 1997, the Funds did not have any borrowings under this facility.
5. Investment Transactions
Purchases and proceeds of sales or maturities of long-term securities for the
six months ended April 30, 1997, were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Short
Adjustable Rate Short Duration Duration Core Fixed
Government Government Tax-Free Income
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases of U.S.
Government and agency
obligations $ 150,343,674 $46,763,342 -- $115,895,051
- -----------------------------------------------------------------------------------------------
Purchases (excluding U.S.
Government and agency
obligations) -- -- $39,438,868 22,633,489
- -----------------------------------------------------------------------------------------------
Sales or maturities of
U.S. Government and
agency obligations 198,396,859 44,501,257 -- 118,193,576
- -----------------------------------------------------------------------------------------------
Sales or maturities
(excluding U.S.
Government and agency
obligations) -- -- 35,970,076 12,305,124
- -----------------------------------------------------------------------------------------------
</TABLE>
At April 30, 1997, Core Fixed Income had an outstanding forward foreign
currency exchange contract, to sell foreign currency as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Value on
Foreign Currency Settlement Current Unrealized
Sell Contract Date Value Gain
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Australian Dollar
Expiring 6/16/97 $ 1,897,856 $ 1,863,164 $ 34,692
- -----------------------------------------------------------------------------------------------
</TABLE>
The contractual amounts of forward foreign currency exchange contracts do
not necessarily represent the amounts
- --------------------------------------------------------------------------------
35
<PAGE>
Goldman Sachs Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(Unaudited)
- --------------------------------------------------------------------------------
potentially subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions are
considered.
6. Administration and Service Plans
The Funds have adopted Administration and Service Plans. These plans allow for
Administration shares and Service shares, respectively, to compensate service
organizations for providing varying levels of account administration and
shareholder liaison services to their customers who are beneficial owners of
such shares. The Administration and Service Plans provide for compensation to
the service organizations in an amount up to .25% and .50% (on an annualized
basis), respectively, of the average daily net asset value of the respective
shares.
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 at the Funds' custodian.
8. Joint Repurchase Agreement Account
The Funds, together with other registered investment companies having advisory
agreements with GSFM and GSAM or their affiliates, transfer uninvested cash
balances into a joint account, the daily aggregate balance of which is invested
in one or more repurchase agreements. The underlying securities for the
repurchase agreements are U.S. Treasury obligations and mortgage-related
securities issued by the U.S. Government, its agencies or instrumentalities. As
of April 30, 1997, Adjustable Rate Government, Short Duration Government and
Core Fixed Income had undivided interests in the repurchase agreements in the
following joint account which equaled $36,700,000, $600,000 and $16,200,000,
respectively, in principal amount.
As of April 30, 1997, the repurchase agreement in the joint account along
with the corresponding underlying securities (including the type of security,
market value, interest rate and maturity data) were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bear Stearns & Co., dated 4/30/97, repurchase price $680,103,889 (GNMA:
$59,497,211, 7.50%-9.00%, 12/15/21-12/15/26; FNMA: $267,568,394, 5.50%-8.00%,
02/01/09-04/01/27; FHLMC: $373,405,594, 5.50%-7.50%, 2/01/98-4/01/27)
$680,000,000 5.50% 5/01/97 $680,000,000
Nomura Securities International, Inc. dated 4/30/97, repurchase price $300,045,833
(FNMA: $182,812,268, 5.94%-8.01%, 7/22/97-5/11/05; FHLMC: $38,631,543, 6.02%-
6.75%, 1/28/00-12/04/01, FCSB: $49,581,430, 6.05%-6.25%, 5/10/99-12/03/99,
SLMA: $29,222,430, 6.00%, 1/16/01)
300,000,000 5.50 5/01/97 300,000,000
Credit Suisse First Boston, dated 4/30/97, repurchase price $52,307,845 (U.S.
Treasury Bill: $53,475,803, 2/05/98)
52,300,000 5.40 5/01/97 52,300,000
- ---------------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $1,032,300,000
- ---------------------------------------------------------------------------------------
</TABLE>
9. Other Matters
As of April 30, 1997, the Goldman, Sachs & Co. Employees Profit Sharing and
Retirement Income Plan was the beneficial owner of approximately 33% of the
outstanding shares of the Short Duration Government Fund.
- --------------------------------------------------------------------------------
36
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
10. Summary of Share Transactions
Share activity for the six months ended April 30, 1997 is as follows:
<TABLE>
<CAPTION>
Adjustable Rate Government Short Duration Government
- ---------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional shares
Shares sold 18,594,775 $182,930,563 1,584,839 $15,518,375
Reinvestment of dividends
and distributions 1,001,545 9,856,991 234,064 2,288,677
Shares repurchased (26,271,346) (258,542,996) (1,756,576) (17,174,153)
-------------------------------------------------------------
(6,675,026) (65,755,442) 62,327 632,899
-------------------------------------------------------------
Administration shares
Shares sold 105,099 1,034,098 136,265 1,337,724
Reinvestment of dividends
and distributions 5,632 55,427 2,467 24,158
Shares repurchased (72,390) (712,347) (10,477) (102,683)
-------------------------------------------------------------
38,341 377,178 128,255 1,259,199
-------------------------------------------------------------
Service shares
Shares sold 2,161 21,270 92,780 907,987
Reinvestment of dividends
and distributions 11 107 6,702 65,487
Shares repurchased (1) (10) (26,330) (257,236)
-------------------------------------------------------------
2,171 21,367 73,152 716,238
-------------------------------------------------------------
Class A shares
Shares sold 4,131,161 40,651,245 -- --
Reinvestment of dividends
and distributions 58,940 580,548 -- --
Shares repurchased (1,320,999) (13,001,438) -- --
-------------------------------------------------------------
2,869,102 28,230,355 -- --
-------------------------------------------------------------
Net increase (decrease) (3,765,412) $(37,126,542) 263,734 $2,608,336
==============================================================
<CAPTION>
Short Duration Tax-Free Core Fixed Income
-------------------------------------------------------------
Shares Dollars Shares Dollars
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional shares
Shares sold 1,341,295 $13,363,572 212,032 $2,070,524
Reinvestment of dividends
and distributions 61,868 617,418 227,665 2,229,551
Shares repurchased (1,159,405) (11,559,759) (186,679) (1,835,467)
-------------------------------------------------------------
243,758 2,421,231 253,018 2,464,608
-------------------------------------------------------------
Administration shares
Shares sold 6,402 63,690 579,102 5,684,739
Reinvestment of dividends
and distributions 116 1,153 5,675 55,281
Shares repurchased -- -- (17,694) (174,314)
-------------------------------------------------------------
6,518 64,843 567,083 5,565,706
-------------------------------------------------------------
Service shares
Shares sold 171,797 1,715,986 88,974 875,509
Reinvestment of dividends
and distributions 1,487 14,840 2,423 23,649
Shares repurchased (137,880) (1,377,721) (16,145) (157,922)
-------------------------------------------------------------
35,404 353,105 75,252 741,236
-------------------------------------------------------------
Class A shares
Shares sold -- -- -- --
Reinvestment of dividends
and distributions -- -- -- --
Shares repurchased -- -- -- --
-------------------------------------------------------------
-- -- -- --
-------------------------------------------------------------
Net increase (decrease) 285,680 $2,839,179 895,353 $8,771,550
============================================================
</TABLE>
37
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Notes to Financial Statements (continued)
April 30, 1996
(unaudited)
- -------------------------------------------------------------------------------
Share activity for the year ended October 31, 1996 is as follows:
<TABLE>
<CAPTION>
Adjustable Rate Government Short Duration Government
- ---------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional shares
Shares sold 39,981,299 $391,363,204 4,072,082 $39,855,638
Reinvestment of dividends
and distributions 1,780,288 17,432,484 422,559 4,137,041
Shares repurchased (46,666,343) (456,776,795) (4,893,286) (47,875,174)
- ---------------------------------------------------------------------------------------------
(4,904,756) (47,981,107) (398,645) (3,882,495)
- ---------------------------------------------------------------------------------------------
Administration shares
Shares sold 148,981 1,457,872 33,251 326,101
Reinvestment of dividends
and distributions 9,641 94,420 207 2,032
Shares repurchased (138,609) (1,356,764) (7,921) (77,312)
- ---------------------------------------------------------------------------------------------
20,013 195,528 25,537 250,821
- ---------------------------------------------------------------------------------------------
Service shares
Shares sold -- -- 188,134 1,837,702
Reinvestment of dividends
and distributions -- -- 1,508 14,743
Shares repurchased -- -- (4,150) (40,626)
- ---------------------------------------------------------------------------------------------
-- -- 185,492 1,811,819
- ---------------------------------------------------------------------------------------------
Class A shares
Shares sold 1,404,698 13,765,298 -- --
Reinvestment of dividends
and distributions 66,854 654,744 -- --
Shares repurchased (1,936,518) (18,974,355) -- --
- ---------------------------------------------------------------------------------------------
(464,966) (4,554,313) -- --
- ---------------------------------------------------------------------------------------------
Net increase (decrease) (5,349,709) $(52,339,892) (187,616) $(1,819,855)
=============================================================================================
<CAPTION>
Short Duration Tax-Free Core Fixed Income
- ---------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional shares
Shares sold 2,085,253 $20,777,050 2,094,833 $20,524,422
Reinvestment of dividends
and distributions 139,126 1,383,351 436,903 4,292,533
Shares repurchased (4,601,865) (45,664,878) (769,104) (7,431,360)
- ---------------------------------------------------------------------------------------------
(2,377,486) (23,504,477) 1,762,632 17,385,595
- ---------------------------------------------------------------------------------------------
Administration shares
Shares sold 10,672 105,302 106,074 1,029,912
Reinvestment of dividends
and distributions 203 2,017 1,847 17,883
Shares repurchased (10,644) (105,478) (36,681) (358,284)
- ---------------------------------------------------------------------------------------------
231 1,841 71,240 689,511
- ---------------------------------------------------------------------------------------------
Service shares
Shares sold 137,557 1,366,332 43,525 422,233
Reinvestment of dividends
and distributions 1,621 16,124 549 5,332
Shares repurchased (115,450) (1,148,044) (5,292) (50,931)
- ---------------------------------------------------------------------------------------------
23,728 234,412 38,782 376,634
- ---------------------------------------------------------------------------------------------
Class A shares
Shares sold -- -- -- --
Reinvestment of dividends
and distributions -- -- -- --
Shares repurchased -- -- -- --
- ---------------------------------------------------------------------------------------------
-- -- -- --
- ---------------------------------------------------------------------------------------------
Net increase (decrease) (2,353,527) $(23,268,224) 1,872,654 $18,451,740
=============================================================================================
</TABLE>
- -------------------------------------------------------------------------------
38
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations/(n)/ 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,
value at Net option and currency from From net option
beginning investment futures related investment investment and futures
of period income transactions transactions operations income transactions
--------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE GOVERNMENT FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- ------------------------------------------------------
1997-Institutional
Shares .............. $9.83 $0.2971/(a)/ $0.0216/(a)/ -- $0.3187 $(0.2887) --
1997-Administration
Shares .............. 9.83 0.2844/(a)/ 0.0221/(a)/ -- 0.3065 (0.2765) --
1997-Service
Shares/(m)/ ......... 9.84 0.0527/(a)/ 0.0200/(a)/ -- 0.0727 (0.0527) --
1997-Class A Shares ...... 9.83 0.2766/(a)/ 0.0300/(a)/ -- 0.3066 (0.2766) --
For the Year Ended October 31,
- ------------------------------------------------------
1996-Institutional
Shares .............. 9.77 0.5759/(a)/ 0.0772/(a)/ -- 0.6531 (0.5725) --
1996-Administration
Shares .............. 9.77 0.5489/(a)/ 0.0797/(a)/ -- 0.6286 (0.5489) --
1996-Class A Shares ...... 9.77 0.5481/(a)/ 0.0806/(a)/ -- 0.6287 (0.5489) --
1995-Institutional
Shares .............. 9.74 0.5630/(a)/ 0.0717/(a)/ -- 0.6347 (0.5759) --
1995-Administration
Shares .............. 9.74 0.5366/(a)/ 0.0737/(a)/ -- 0.6103 (0.5528) --
1995-Class A
Shares/(c)/.......... 9.79 0.2721/(a)/ (0.0090)/(a) / -- 0.2631 (0.2697) --
1994-Institutional
Shares .............. 10.00 0.4341/(a)/ (0.2455)/(a) / -- 0.1886 (0.4486) --
1994-Administration
Shares .............. 10.00 0.4211/(a)/ (0.2572)/(a) / -- 0.1639 (0.4239) --
1993-Institutional
Shares .............. 10.04 0.4397 (0.0376)/(d) / -- 0.4021 (0.4397) --
1993-Administration
Shares/(e)/.......... 10.02 0.2146 (0.0173)/(d) / -- 0.1973 (0.2146) --
1992-Institutional
Shares .............. 10.03 0.5599 (0.0029)/(d) / -- 0.5570 (0.5470) --
For the Period July 17, 1991/(g)/through October 31,
- ------------------------------------------------------
1991-Institutional
Shares .............. 10.00 0.1531 0.0322/(d)/ -- 0.1853 (0.1553) --
<CAPTION>
Distributions to shareholders
----------------------------------------------------------
In excess of
net realized Net
gain on increase
In excess investment, From Total (decrease) Net asset
of net option and paid distributions in net value at
investment futures in to asset end of Total
income transactions capital shareholders value period return/(k)/
----------------------------------------------------------------------------------------------------
ADJUSTABLE RATE GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- ------------------------------------------------------
1997-Institutional
Shares .............. -- -- -- $(0.2887) $0.0300 $9.86 3.28%/(f)/
1997-Administration
Shares .............. -- -- -- (0.2765) 0.0300 9.86 3.16/(f)/
1997-Service
Shares/(m)/ ......... -- -- -- (0.0527) 0.0200 9.86 0.74/(f)/
1997-Class A Shares ...... -- -- -- (0.2766) 0.0300 9.86 3.16/(f)/
For the Year Ended October 31,
- ------------------------------------------------------
1996-Institutional
Shares .............. (0.0206) -- -- (0.5931) 0.0600 9.83 6.86
1996-Administration
Shares .............. (0.0198) -- -- (0.5687) 0.0600 9.83 6.60
1996-Class A Shares ...... (0.0198) -- -- (0.5687) 0.0600 9.83 6.60
1995-Institutional
Shares .............. (0.0287) -- -- (0.6046) 0.0301 9.77 6.75
1995-Administration
Shares .............. (0.0275) -- -- (0.5803) 0.0300 9.77 6.48
1995-Class A
Shares/(c)/.......... (0.0134) -- -- (0.2831) (0.0200) 9.77 2.74/(f)/
1994-Institutional
Shares .............. -- -- -- (0.4486) (0.2600) 9.74 1.88
1994-Administration
Shares .............. -- -- -- (0.4239) (0.2600) 9.74 1.63
1993-Institutional
Shares .............. (0.0024) -- -- (0.4421) (0.0400) 10.00 4.13
1993-Administration
Shares/(e)/.......... (0.0027) -- -- (0.2173) (0.0200) 10.00 2.01/(f)/
1992-Institutional
Shares .............. -- -- -- (0.5470) 0.0100 10.04 6.12
For the Period July 17, 1991/(g)/through October 31
- ------------------------------------------------------
1991-Institutional Shares. -- -- -- (0.1553) 0.0300 10.03 2.14/(f)/
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
----------------------------
Ratio of Ratio of
net Net net
Ratio of investment assets investment
net income at end Ratio of income
expenses (loss) Portfolio of expenses (loss)
to average to average turnover period to average to average
net assets net assets rate/(d)/ (in 000s) net assets net assets
---------------------------------------------------------------------------------
ADJUSTABLE RATE GOVERNMENT FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- ------------------------------------------------------
1997-Institutional
Shares .............. 0.45%/(b)/ 6.08%/(b)/ 25.64% $549,611 0.51%/(b)/ 6.02%/(b)/
1997-Administration
Shares .............. 0.70/(b)/ 5.83/(b)/ 25.64 4,182 0.76/(b)/ 5.77/(b)/
1997-Service
Shares/(m)/ ......... 0.95/(b)/ 5.64/(b)/ 25.64 22 1.01/(b)/ 5.58/(b)/
1997-Class A Shares ...... 0.70/(b)/ 5.61/(b)/ 25.64 39,063 1.01/(b)/ 5.30/(b)/
For the Year Ended October 31,
- ------------------------------------------------------
1996-Institutional
Shares .............. 0.45 5.85 52.36 613,149 0.51 5.79
1996-Administration
Shares .............. 0.70 5.59 52.36 3,792 0.76 5.53
1996-Class A Shares ...... 0.70 5.59 52.36 10,728 1.01 5.28
1995-Institutional
Shares .............. 0.46 5.77 24.12 657,358 0.53 5.70
1995-Administration
Shares .............. 0.71 5.50 24.12 3,572 0.78 5.43
1995-Class A
Shares/(c)/.......... 0.69/(b)/ 5.87/(b)/ 24.12 15,203 1.01/(b)/ 5.55/(b)/
1994-Institutional
Shares .............. 0.46 4.38 37.81 942,523 0.49 4.35
1994-Administration
Shares .............. 0.71 4.27 37.81 6,960 0.74 4.24
1993-Institutional
Shares .............. 0.45 4.36 103.74 2,760,871 0.48 4.33
1993-Administration
Shares/(e)/.......... 0.70/(b)/ 3.81/(b)/ 103.74 5,326 0.73/(b)/ 3.78/(b)/
1992-Institutional
Shares .............. 0.42 5.61 286.40 2,145,064 0.55 5.48
For the Period July 17, 1991(g)through October 31,
- ------------------------------------------------------
1991-Institutional
Shares .............. 0.20/(b)/ 7.31/(b)/ 145.67/(b)/ 239,642 1.02/(b)/ 6.49/(b)/
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations/(n)/ 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,
value at Net option and currency from From net option
beginning investment futures related investment investment and futures
of period income transactions transactions operations income transactions
-------------------------------------------------------------------------------------------------------
SHORT DURATION GOVERNMENT FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- ---------------------------------------------------------------
1997-Institutional Shares. $9.83 $0.3287/(a)/ $(0.0700)/(a)/ -- $0.2587 $(0.3287) --
1997-Administration
Shares .............. 9.85 0.3175/(a)/ (0.0700)/(a)/ -- 0.2475 (0.3175) --
1997-Service Shares ...... 9.82 0.3043/(a)/ (0.0700)/(a)/ -- 0.2343 (0.3043) --
For the Year Ended October 31,
- ---------------------------------------------------------------
1996-Institutional Shares. 9.82 0.6290/(a)/ 0.0136/(a)/ -- 0.6426 (0.6326) --
1996-Administration
Shares/(h)/.......... 9.86 0.3837/(a)/ 0.0003/(a)/ -- 0.3840 (0.3940) --
1996-Service
Shares/(i)/.......... 9.72 0.3134/(a)/ 0.1018/(a)/ -- 0.4152 (0.3152) --
1995-Institutional Shares. 9.64 0.6652/(a)/ 0.1666/(a)/ -- 0.8318 (0.6518) --
1995-Administration
Shares .............. 9.64 0.2384/(a)/ (0.0433)/(a)/ -- 0.1951 (0.2051) --
1994-Institutional Shares. 10.14 0.5628/(a)/ (0.4592)/(a)/ -- 0.1036 (0.5598) (0.0438)
1994-Administration
Shares .............. 10.14 0.5329/(a)/ (0.4539)/(a)/ -- 0.0790 (0.5352) (0.0438)
1993-Institutional Shares. 10.16 0.5627 (0.0135)/(d)/ -- 0.5492 (0.5627) --
1993-Administration
Shares/(e)/.......... 10.23 0.2725 (0.0900)/(d)/ -- 0.1825 (0.2725) --
1992-Institutional Shares. 10.22 0.6703 (0.0600)/(d)/ -- 0.6103 (0.6703) --
1991-Institutional Shares. 10.00 0.8020 0.2200/(d)/ -- 1.0220 (0.8020) --
1990-Institutional Shares. 10.07 0.8300 (0.0700)/(d)/ -- 0.7600 (0.8300) --
1989-Institutional Shares. 10.10 0.8800 -- -- 0.8800 (0.8800) --
For the Period August 15, 1988/(g)/through October 31,
- ---------------------------------------------------------------
1988-Institutional Shares. 10.00 0.1800 0.1000/(d)/ -- 0.2800 (0.1800) --
<CAPTION>
Distributions to shareholders
-----------------------------------------------------------
In excess of
net realized Net
gain on increase
In excess investment, From Total (decrease) Net asset
of net option and paid distributions in net value at
investment futures in to asset end of Total
income transactions capital shareholders value period return/(k)/
----------------------------------------------------------------------------------------------------
SHORT DURATION GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- ---------------------------------------------------------------
1997-Institutional Shares. -- -- -- $(0.3287) $(0.0700) $9.76 2.67%/(f)/
1997-Administration
Shares .............. -- -- -- (0.3175) (0.0700) 9.78 2.55/(f)/
1997-Service Shares ...... -- -- -- (0.3043) (0.0700) 9.75 2.42/(f)/
For the Year Ended October 31,
- ---------------------------------------------------------------
1996-Institutional Shares. -- -- -- (0.6326) 0.0100 9.83 6.75
1996-Administration
Shares/(h)/.......... -- -- -- (0.3940) (0.0100) 9.85 4.00/(f)/
1996-Service
Shares/(i)/.......... -- -- -- (0.3152) 0.1000 9.82 4.35/(f)/
1995-Institutional Shares. -- -- -- (0.6518) 0.1800 9.82 8.97
1995-Administration
Shares .............. -- -- -- (0.2051) (0.0100) 9.63/(h)/ 2.10
1994-Institutional Shares. -- -- -- (0.6036) (0.5000) 9.64 0.99
1994-Administration
Shares .............. -- -- -- (0.5790) (0.5000) 9.64 0.73
1993-Institutional Shares. (0.0065) -- -- (0.5692) (0.0200) 10.14 5.55
1993-Administration
Shares/(e)/.......... -- -- -- (0.2725) (0.0900) 10.14 1.74
1992-Institutional Shares. -- -- -- (0.6703) (0.0600) 10.16 6.24
1991-Institutional Shares. -- -- -- (0.8020) 0.2200 10.22 10.93
1990-Institutional Shares. -- -- -- (0.8300) (0.0700) 10.00 8.23
1989-Institutional Shares. -- -- (0.0300) (0.9100) (0.0300) 10.07 9.08
For the Period August 15, 1988/(g)/through October 31
- ---------------------------------------------------------------
1988-Institutional Shares. -- -- -- (0.1800) 0.1000 10.10 3.30/(f)/
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
----------------------------
Ratio of Ratio of
net Net net
Ratio of investment assets investment
net income at end Ratio of income
expenses (loss) Portfolio of expenses (loss)
to average to average turnover period to average to average
net assets net assets rate/(d)/ (in 000s) net assets net assets
-----------------------------------------------------------------------------------
SHORT DURATION GOVERNMENT FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- ---------------------------------------------------------------
1997-Institutional Shares. 0.45%/(b)/ 6.44%/(b)/ 43.72% $99,824 0.73%/(b)/ 6.16%/(b)/
1997-Administration
Shares .............. 0.70/(b)/ 6.22/(b)/ 43.72 1,504 0.98/(b)/ 5.94/(b)/
1997-Service Shares ...... 0.95/(b)/ 5.94/(b)/ 43.72 2,522 1.23/(b)/ 5.66/(b)/
For the Year Ended October 31,
- ---------------------------------------------------------------
1996-Institutional Shares. 0.45 6.44 115.45 99,944 0.71 6.18
1996-Administration
Shares/(h)/.......... 0.70/(b)/ 5.97/(b)/ 115.45 252 0.96/(b)/ 5.71/(b)/
1996-Service
Shares/(i)/.......... 0.95/(b)/ 6.05/(b)/ 115.45 1,822 1.21/(b)/ 5.79/(b)/
1995-Institutional Shares. 0.45 6.87 292.56 103,760 0.72 6.60
1995-Administration
Shares .............. 0.70/(b)/ 7.91/(b)/ 292.56 -- 0.90/(b)/ 7.71/(b)/
1994-Institutional Shares. 0.45 5.69 289.79 193,095 0.59 5.55
1994-Administration
Shares .............. 0.70 5.38 289.79 730 0.84 5.24
1993-Institutional Shares. 0.45 5.46 411.66 359,708 0.64 5.31
1993-Administration
Shares/(e)/.......... 0.70/(b)/ 4.84/(b)/ 411.66 16,490 0.80/(b)/ 4.74/(b)/
1992-Institutional Shares. 0.45 6.60 216.07 277,927 0.69 6.36
1991-Institutional Shares. 0.45 8.25 155.44 158,848 0.79 7.91
1990-Institutional Shares. 0.45 8.62 173.21 68,995 0.95 8.12
1989-Institutional Shares. 0.46 8.71 137.37 31,015 1.39 7.78+
For the Period August 15, 1988/(g)/through October 31
- ---------------------------------------------------------------
1988-Institutional Shares. 0.55/(b)/ 8.55/(b)/ 167.00/(b)/ 39,052 1.42/(b)/ 7.68/(b)/
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations/(n)/ 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,
value at Net option and currency from From net option
beginning investment futures related investment investment and futures
of period income transactions transactions operations income transactions
-------------------------------------------------------------------------------------------------------
SHORT DURATION TAX-FREE FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- ---------------------------------------------------------------
1997-Institutional Shares. $9.96 $0.2097/(a)/ $(0.0200)/(a)/ -- $0.1897 $(0.2097) --
1997-Administration
Shares ................ 9.96 0.1976/(a)/ (0.0200)/(a)/ -- 0.1776 (0.1976) --
1997-Service Shares....... 9.97 0.1852/(a)/ (0.0300)/(a)/ -- 0.1552 (0.1852) --
For the Year Ended October 31,
- ---------------------------------------------------------------
1996-Institutional Shares. 9.94 0.4192/(a)/ 0.0200/(a)/ -- 0.4392 (0.4192) --
1996-Administration
Shares ................ 9.94 0.3944/(a)/ 0.0200/(a)/ -- 0.4144 (0.3944) --
1996-Service Shares....... 9.95 0.3697/(a)/ 0.0200/(a)/ -- 0.3897 (0.3697) --
1995-Institutional Shares. 9.79 0.4235/(a)/ 0.1500/(a)/ -- 0.5735 (0.4235) --
1995-Administration
Shares ................ 9.79 0.3989/(a)/ 0.1500/(a)/ -- 0.5489 (0.3989) --
1995-Service Shares ...... 9.79 0.3744/(a)/ 0.1600/(a)/ -- 0.5344 (0.3744) --
1994-Institutional Shares. 10.23 0.3787/(a)/ (0.3575)/(a)/ -- 0.0212 (0.3787) (0.0825)
1994-Administration
Shares ................ 10.23 0.3537/(a)/ (0.3575)/(a)/ -- (0.0038) (0.3537) (0.0825)
1994-Service Shares/(j)/.. 9.86 0.0475/(a)/ (0.0700)/(a)/ -- (0.0225) (0.0475) --
1993-Institutional Shares. 9.93 0.3834 0.3000/(d)/ -- 0.6834 (0.3834) --
1993-Administration
Shares/(j)/............ 10.16 0.1555 0.0720/(d)/ -- 0.2275 (0.1555) --
For the Period October 1, 1992/(g)/through October 31,
- -------------------------------------------------------------------
1992-Institutional Shares. 10.00 0.0341 (0.0700)/(d)/ -- (0.0359) (0.0341) --
<CAPTION>
Distributions to shareholders
---------------------------------------------------------
In excess of
net realized Net
gain on increase
In excess investment, From Total (decrease) Net asset
of net option and paid distributions in net value at
investment futures in to asset end of Total
income transactions capital shareholders value period return/(k)/
----------------------------------------------------------------------------------------------------
SHORT DURATION TAX-FREE FUND
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- -------------------------------------------------------------------
1997-Institutional Shares. -- -- -- $(0.2097) $(0.0200) $9.94 1.91%/(f)/
1997-Administration
Shares ................ -- -- -- (0.1976) (0.0200) 9.94 1.79/(f)/
1997-Service Shares....... -- -- -- (0.1852) (0.0300) 9.94 1.56/(f)/
For the Year Ended October 31,
- -------------------------------------------------------------------
1996-Institutional Shares. -- -- -- (0.4192) 0.0300 9.96 4.50
1996-Administration
Shares ................ -- -- -- (0.3944) 0.0300 9.96 4.24
1996-Service Shares....... -- -- -- (0.3697) 0.0200 9.97 3.98
1995-Institutional Shares. -- -- -- (0.4235) 0.1500 9.94 5.98
1995-Administration
Shares ................ -- -- -- (0.3989) 0.1500 9.94 5.76
1995-Service Shares ...... -- -- -- (0.3744) 0.1600 9.95 5.59
1994-Institutional Shares. -- -- -- (0.4612) (0.4400) 9.79 0.17
1994-Administration
Shares ................ -- -- -- (0.4362) (0.4400) 9.79 (0.11)
1994-Service Shares/(j)/.. -- -- -- (0.0475) (0.0700) 9.79 (0.32)/(f)/
1993-Institutional Shares. -- -- -- (0.3834) 0.3000 10.23 7.03
1993-Administration
Shares/(j)/............ -- -- -- (0.1555) 0.0720 10.23 2.28/(f)/
For the Period October 1, 1992/(g)/through October 31,
- -------------------------------------------------------------------
1992-Institutional Shares. -- -- -- (0.0341) (0.0700) 9.93 (0.34)/(f)/
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
----------------------------
Ratio of Ratio of
net Net net
Ratio of investment assets investment
net income at end Ratio of income
expenses (loss) Portfolio of expenses (loss)
to average to average turnover period to average to average
net assets net assets rate/(d)/ (in 000s) net assets net assets
-----------------------------------------------------------------------------------
SHORT DURATION TAX-FREE FUND
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- -------------------------------------------------------------------
1997-Institutional Shares. 0.45%/(b)/ 4.24%/(b)/ 99.59% $37,159 1.05%/(b)/ 3.64%/(b)/
1997-Administration
Shares ................ 0.70/(b)/ 4.03/(b)/ 99.59 113 1.30/(b)/ 3.43/(b)/
1997-Service Shares....... 0.95/(b)/ 3.77/(b)/ 99.59 1,045 1.55/(b)/ 3.17/(b)/
For the Year Ended October 31,
- -------------------------------------------------------------------
1996-Institutional Shares. 0.45 4.21 231.65 34,814 1.01 3.65
1996-Administration
Shares ................ 0.70 3.96 231.65 48 1.26 3.40
1996-Service Shares....... 0.95 3.74 231.65 695 1.51 3.18
1995-Institutional Shares. 0.45 4.31 259.52 58,389 0.77 3.99
1995-Administration
Shares ................ 0.70 4.14 259.52 46 1.02 3.82
1995-Service Shares ...... 0.95 3.87 259.52 454 1.27 3.55
1994-Institutional Shares. 0.45 3.74 354.00 83,704 0.61 3.58
1994-Administration
Shares ................ 0.70 3.51 354.00 3,866 0.86 3.35
1994-Service Shares/(j)/.. 0.95/(b)/ 4.30/(b)/ 354.00 440 1.11/(b)/ 4.14/(b)/
1993-Institutional Shares. 0.41 3.70 404.60 115,803 1.06 3.05
1993-Administration
Shares/(j)/............ 0.70/(b)/ 3.32/(b)/ 404.60 911 1.07/(b)/ 2.95/(b)/
For the Period October 1, 1992/(g)/through October 31,
- -------------------------------------------------------------------
1992-Institutional Shares. 0.05/(b)/ 4.58/(b)/ 31.19/(f)/ 14,601 2.68/(b)/ 1.95/(b)/
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
Goldman Sachs Trust
- -------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations/(n)/ 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,
value at Net option and currency from From net option
beginning investment futures related investment investment and futures
of period income transactions transactions operations income transactions
-------------------------------------------------------------------------------------------------------
CORE FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- ------------------------------------------------------
1997-Institutional
Shares .............. $9.85 $0.3236 $(0.1403) $(0.0003) $0.1830 $(0.3230) --
1997-Administrative
Shares .............. 9.84 0.3108 (0.1398) (0.0003) 0.1707 (0.3107) --
1997-Service Shares ..... 9.86 0.2991 (0.1399) (0.0003) 0.1589 (0.2989) --
For the Year Ended October 31,
- ------------------------------------------------------
1996-Institutional
Shares .............. 10.00 0.6448 (0.0704) -- 0.5744 (0.6438) (0.0806)
1996-Administrative
Shares/(l)/ ......... 9.91 0.4083 (0.0703) -- 0.3380 (0.4080) --
1996-Service
Shares/(l)/ ......... 9.77 0.3756 0.0898 -- 0.4654 (0.3754) --
1995-Institutional
Shares .............. 9.24 0.6423 0.7610 -- 1.4033 (0.6433) --
For the Period January 5, 1994/(g)/through October 31,
- ------------------------------------------------------
1994-Institutional Shares. 10.00 0.4648 (0.7617) -- (0.2969) (0.4648) --
<CAPTION>
Distributions to shareholders
-----------------------------------------------------------
In excess of
net realized Net
gain on increase
In excess investment, From Total (decrease) Net asset
of net option and paid distributions in net value at
investment futures in to asset end of Total
income transactions capital shareholders value period return/(k)/
------------------------------------------------------------------------------------------------------
CORE FIXED INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- -------------------------------------------------------
1997-Institutional
Shares .............. -- -- -- $(0.3230) $(0.1400) $9.71 1.87%/(f)/
1997-Administrative
Shares .............. -- -- -- (0.3107) (0.1400) 9.70 1.75/(f)/
1997-Service Shares ..... -- -- -- (0.2989) (0.1400) 9.72 1.63/(f)/
For the Year Ended October 31,
- -------------------------------------------------------
1996-Institutional
Shares .............. -- -- -- (0.7244) (0.1500) 9.85 5.98
1996-Administrative
Shares/(l)/ ......... -- -- -- (0.4080) (0.0700) 9.84 3.56/(f)/
1996-Service
Shares/(l)/ ......... -- -- -- (0.3754) 0.0900 9.86 4.90/(f)/
1995-Institutional
Shares .............. -- -- -- (0.6433) 0.7600 10.00 15.72
For the Period January 5, 1994/(g)/through October 31,
- -------------------------------------------------------
1994-Institutional Shares. -- -- -- (0.4648) (0.7617) 9.24 (3.00)
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
----------------------------
Ratio of Ratio of
net Net net
Ratio of investment assets investment
net income at end Ratio of income
expenses (loss) Portfolio of expenses (loss)
to average to average turnover period to average to average
net assets net assets rate/(d)/ (in 000s) net assets net assets
------------------------------------------------------------------------------------
CORE FIXED INCOME FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30,
- ------------------------------------------------------
1997-Institutional
Shares .............. 0.45%/(b)/ 6.66%/(b)/ 174.52% $73,483 0.76%/(b)/ 6.35%/(b)/
1997-Administrative
Shares .............. 0.70/(b)/ 6.49/(b)/ 174.52 6,194 1.01/(b)/ 6.18/(b)/
1997-Service Shares ..... 0.95/(b)/ 6.22/(b)/ 174.52 1,108 1.26/(b)/ 5.91/(b)/
For the Year Ended October 31,
- ------------------------------------------------------
1996-Institutional
Shares .............. 0.45 6.51 414.20 72,061 0.83 6.13
1996-Administrative
Shares/(l)/ ......... 0.70/(b)/ 6.41/(b)/ 414.20 702 1.08/(b)/ 6.03/(b)/
1996-Service
Shares/(l)/ ......... 0.95/(b)/ 6.37/(b)/ 414.20 381 1.33/(b)/ 5.99/(b)/
1995-Institutional
Shares .............. 0.45 6.56 383.26 55,502 0.96 6.05
For the Period January 5, 1994/(g)/through October 31,
- ------------------------------------------------------
1994-Institutional
Shares .............. 0.45/(b)/ 6.48/(b)/ 288.25 24,508 1.46/(b)/ 5.47/(b)/
</TABLE>
/(a)/ Calculated based on the average shares outstanding methodology.
/(b)/ Annualized.
/(c)/ Class A share activity commenced on May 15, 1995.
/(d)/ Includes the effect of mortgage dollar roll transactions.
/(e)/ Administration share activity commenced on April 15, 1993.
/(f)/ Not annualized.
/(g)/ Commencement of operations.
/(h)/ Short Duration Government Fund Administration shares were redeemed in full
on February 23, 1995 and re-commenced on February 28, 1996 at $9.86.
/(i)/ Service share activity commenced on April 10, 1996.
/(j)/ Administration and service share activity commenced on May 20, 1993 and
September 20, 1994 respectively.
/(k)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. For Class A shares only, total return would be reduced if a
sales charge were taken into account.
/(l)/ Administration and Service share activity commenced on February 28, 1996
and March 13, 1996 respectively.
/(m)/ Service share activity commenced on March 27, 1997.
/(n)/ Includes the balancing effect of calculating per share amounts.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
- -------------------------------------------------------------------------------
This Semiannual Report is authorized for distribution to prospective investors
only when preceded or accompanied by a Goldman Sachs Trust Prospectus which
contains facts concerning each 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
John P. McNulty
Mary P. McPherson
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,
Distributor and Transfer Agent
FISARINST
- ------------------------------------------------------------------------------
The Goldman Sachs
Fixed Income Funds
- ------------------------------------------------------------------------------
Semiannual Report
April 30, 1997
Goldman Sachs Adjustable Rate Government Fund
Goldman Sachs Short Duration Government Fund
Goldman Sachs Short Duration Tax-Free Fund
Goldman Sachs Core Fixed Income Fund
[LOGO OF GOLDMAN SACHS APPEARS HERE]
- ------------------------------------------------------------------------------
