<PAGE>
The Goldman Sachs
FIXED INCOME FUNDS
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
ANNUAL REPORT
October 31, 1997
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- -------------------------------- ---------------------------------------------
DEAR SHAREHOLDERS:
We are pleased to present the annual report for the Goldman Sachs Fixed
Income Funds for the fiscal year ended October 31, 1997. In addition to
reviewing the performance and activity of the Goldman Sachs Fixed Income Funds
during this period, we will also provide a brief overview of the economy and
bond market to help put their performance in perspective. Though the U.S.
economy continued to grow at a healthy pace, inflation remained subdued and the
fixed income markets achieved favorable results.
ECONOMIC REVIEW
The U.S. economy was strong throughout the period under review, but during
the summer and fall, growth cooled slightly from the torrid pace of earlier in
the year. Annualized real Gross Domestic Product (GDP) climbed 3.8% for the
fourth quarter of 1996 and a dramatic 4.9% for the first quarter of 1997,
fueled by a sharp increase in retail sales, rising factory orders and buoyant
const-ruction outlays. To curb potential overheating, the Federal Reserve
raised the Federal funds rate a quarter-percentage point to 5.50% at the end of
March. During the second quarter, real GDP moderated to a 3.3% rate
(annualized) when an unusually cool spring impacted weather-sensitive sectors
such as retail sales and construction. Though consumer consumption picked up
significantly during the summer, overall economic growth was somewhat
restrained because of weaker export growth and a slower rate of inventory
accumulation. As a result, third-quarter GDP expanded at a 3.3% annual rate,
the same pace as the prior quarter. In October, the pattern of economic
activity remained
robust, as retail sales held firm, consumer confidence remained high and the
unemployment rate sank to a 24-year low. Despite continued economic strength,
consumer inflation shrank to 2.1% over the 12-month period, its lowest level
since 1986.
FIXED INCOME MARKET REVIEW
When the Funds' fiscal year began in November 1996, bonds rallied on
expectations of a continuation of the slow-growth, low-inflation environment.
However, this optimistic view quickly soured when a steady flow of stronger-
than-expected economic data revived inflation fears. From December through
March, bond yields climbed as investors feared that the acceleration would
prompt the Fed to raise rates. When the Fed eventually increased the Federal
funds rate, the move was perceived as the first in a series of hikes.
During the second quarter of 1997, prospects for the bond market brightened
due to slowing economic growth. As the threat of inflation receded, the need
for additional rate hikes subsided and bonds began to recoup their earlier
losses. However, fixed income investors remained wary of reports suggesting
that the economy was reaccelerating. In this skittish environment, the bond
market came under renewed pressure when signs of strengthening activity emerged
during the summer. The decline proved to be short-lived: Bonds quickly
recovered on the back of reassuring inflation data and a surge of buying
interest. Treasury prices continued to rise sharply through the end of the
period, when demand soared as investors sought a safe haven in the wake of
steep sell-offs in global equity markets. By the end of October, Treasury
yields fell to 20-month lows.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Goldman Sachs Adjustable Rate Government Fund 3 Financial Statements 37
Goldman Sachs Short Duration Government Fund 11 Notes to Financial Statements 41
Goldman Sachs Short Duration Tax-Free Fund 19 Financial Highlights 49
Goldman Sachs Core Fixed Income Fund 27
</TABLE>
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1
<PAGE>
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- --------------------------------------- ---------------------------------------
THE YIELD CURVE SHIFTED LOWER FOR MOST MATURITIES
During the period under review, the yield on six-month Treasury bills rose
from 5.26% on October 31, 1996 to approximately 5.31% on October 31, 1997. For
the same period, the yield on the 30-year U.S. Treasury bond fell from 6.64% to
6.15%.
HISTORICAL TREASURY YIELD CURVE
[GRAPH]
10/31/96 10/31/97
3-Month 0.0514 0.0519
6-Month 0.0526 0.0531
1-Year 0.054 0.0535
2-Year 0.0573 0.0561
3-Year 0.0586 0.0568
5-Year 0.0607 0.0572
10-Year 0.0634 0.0583
30-Year 0.0664 0.0615
Source: Bloomberg, L.P.
The one- to 30-year portion of the yield curve shifted downward while the short
end of the curve rose slightly.
OUTLOOK: FED IS LIKELY TO REMAIN ON HOLD WHILE IT ASSESSES THE IMPACT OF THE
ASIAN FINANCIAL CRISIS
Uncertainty regarding the U.S. economic and financial outlook has climbed
sharply recently, as the tug-of-war between a strong domestic economy and the
expected trade drag from emerging market economies has intensified. Though most
domestic economic indicators continue to point toward considerable forward
momentum, Federal Reserve officials are likely to defer any rate hikes until
they can assess the potential impact of Asia's financial crisis on U.S.
economic activity. If evidence mounts that the repercussions from the recent
turmoil will be insufficient to slow U.S. growth to a sustainable long-term
pace, Goldman Sachs' economists expect the Fed to resume tightening in 1998.
We thank you for your investment in the Goldman Sachs Fixed Income Funds, and
we look forward to continuing to help you achieve your investment goals in the
future.
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
November 28, 1997
2
<PAGE>
Letter to Shareholders
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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.
NEW SHARE CLASS
To accommodate different clients' needs and preferences, the fund added
Service shares on March 27, 1997.
ARM PERFORMANCE BENEFITED FROM A FAVORABLE INTEREST RATE ENVIRONMENT
During the period under review, the ARM market benefited from a favorable
interest rate environment. Though rates fluctuated as perceptions of the
economy's health changed, in general, rates remained within a fairly narrow
range for much of the period. As a result, the
pace of mortgage refinancing remained subdued and there appeared to be little
risk of these securities being constrained by their periodic and lifetime rate
caps. (Periodic rate caps are the maximum that ARM interest rates can change
during an adjustment period. Lifetime caps establish the maximum rate to which
a security can reset during its entire lifetime.) The ARM-friendly conditions
drew a wide range of investors to the sector, who viewed these securities as
yield-enhanced alternatives to Treasuries. The ARM sector performed
particularly well during the first quarter of 1997, when yield spreads relative
to Treasuries narrowed. Although the sector's outperformance slowed during the
balance of the period, spreads remained firm due to low volatility and
continued attractiveness relative to other short-duration, high-quality
alternatives.
PERFORMANCE REVIEW
We are pleased to report that during the 12-month period ended October 31,
the fund's Institutional, PERFORMANCE SUMMARY 10/31/96--10/31/97
<TABLE>
<CAPTION>
SIX-MONTH ONE-YEAR
TREASURY TREASURY
INSTITUTIONAL ADMINISTRATION SERVICE* CLASS A BILL BILL
------------- -------------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Return (based on
net asset value [NAV]) 6.70% 6.43% 3.81% 6.43% 5.62% 6.02%
Return From Monthly
Distributions 6.17% 5.91% 3.66% 5.91% NA NA
Return From Price
Appreciation 0.53% 0.52% 0.15% 0.52% NA NA
NAV (10/31/97) $9.88 $9.88 $9.88 $9.88 NA NA
NAV Change +$0.05 +$0.05 +$0.04 +$0.05 NA NA
Total Distributions Paid
Per Share+ $0.59 $0.57 $0.33 $0.57 NA NA
</TABLE>
* New share class opened during the period. Performance and NAV change are
cumulative from inception date on 3/27/97.
+ 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.
The fund's NAV and yield are not guaranteed by the U.S. government or by its
agencies, instrumentalities or sponsored enterprises. All performance figures
represent past performance and in no way guarantee future results, which will
fluctuate as market conditions change. The investment return and principal
value of an investment in the fund will fluctuate, and therefore an investor's
shares when redeemed may be worth more or less than their original cost.
Goldman, Sachs & Co., the distributor of the fund, is not a bank, and fund
shares distributed by Goldman, Sachs & Co. are not deposits or obligations of,
or endorsed or guaranteed by, any bank or depository institution, nor are they
insured by the Federal Deposit Insurance Corporation (FDIC), the Federal
Reserve Board or any other government agency.
3
<PAGE>
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Administration and Class A shares all outperformed the six-month U.S. Treasury
bill and the one-year U.S. Treasury bill. This favorable performance was
primarily the result of tightening yield spreads between ARMs and Treasuries,
as well as the incremental yield of ARMs over similar-duration Treasuries.
The fund performed well compared with its peers. For the three-year period
ended October 31, 1997, the fund's Administration and Institutional shares
were rated four stars (in a universe of 1,338 taxable bond funds) by
Morningstar, Inc., an independent rating agency. In addition, Morningstar
rated the fund's Institutional shares four stars (in a universe of 732 taxable
bond funds) for the five year-period ended October 31./1/
The fund also fared well in Lipper Analytical Services' adjustable rate
mortgage category. According to Lipper, the fund's Institutional shares ranked
in the top third of its category (12th out of 44 adjustable rate mortgage
funds) based on total return for the 12-month period ended October 31, 1997.
For the five-year period ended October 31, 1997, the fund's Institutional
shares ranked 8th out of 28 funds in its category. (Class A shares ranked 18th
in the Lipper category for the 12-month period; Lipper did not rank the fund's
Administration and Service classes. Please note that Lipper rankings do not
take sales charges into account and that past performance is not a guarantee
of future results.)
- -------
/1/Source: (C) 1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
10/31/97. 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 ten-year average annual returns (where applicable)
in excess of 90-day Treasury bill returns with appropriate fee and sales
charge adjustments and a risk factor that reflects fund performance below 90-
day Treasury bill returns. 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.
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
As of the end of the period, the portfolio's sector allocation changed only
slightly relative to a year earlier. The primary composition changes included
a reduction in agency debentures (SBA floaters), an increase in collateralized
mortgage obligations (CMOs) and the initiation of a small position in U.S.
Treasuries.
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 1997*
[PIE CHART]
U.S. Treasuries 1.9%
Repos/Cash Equivalents 2.3%
SBA Floaters 5.2%
CMOs 5.4%
ARMs 84.2%
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of
Investments, which reflect portfolio holdings as a percentage of net assets.
. ARMs. As of October 31, 1997, 84.2% of the portfolio was invested in ARMs.
During the period, we adhered to our strategy of emphasizing ARM issues that
we believed would fare well relative to the overall ARM market regardless of
the direction of interest rate movements. As such, we focused on fully indexed
securities that were issued prior to 1993, which are attractive because of
their lower prepayment risk. (ARM securities that have been in existence for
several years are referred to as "seasoned" issues. "Seasoned" ARMs are
typically less impacted by prepayments than recently issued mortgages because
homeowners who did not refinance during earlier periods of lower rates are
less likely to refinance in the future.)
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4
<PAGE>
Letter to Shareholders
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GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND (continued)
- --------------------------------------- ---------------------------------------
. CMOs. The portfolio's allocation to CMOs was 5.4% as of the end of October,
slightly higher than its 3.5% weighting a year earlier. CMOs are multi-class
bonds that are collateralized by a pool of mortgage loans or mortgage pass-
through certificates. As was the case with other mortgage-backed securities,
CMOs performed well during the period due to low volatility and relatively
attractive spreads. Within the sector, sequential-pay/support CMOs and CMO
floaters represented the largest allocations, at 2.0% and 1.4% of the
portfolio, respectively.
. SBA Floaters. The portfolio held a 5.2% position in securities backed by
Small Business Administration (SBA) loans, which offered incremental yield over
similar-duration Treasuries. We trimmed the portfolio's allocation from 7.8% a
year ago when we took profits in the sector.
. Repurchase Agreements/Cash Equivalents and U.S. Treasuries. As of the end of
the period, 2.3% of the portfolio was in repurchase agreements/cash equivalents
and 1.9% was in U.S. Treasuries.
. Duration. We seek excess return over similar-duration U.S. Treasuries through
sector weightings and specific security selection, rather than attempting to
add value through interest rate predictions. Therefore, we manage the fund's
duration to approximate that of the benchmark, partly through the use of
futures. As of October 31, the fund's duration was 0.7 years, unchanged from a
year 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
We believe Federal Reserve officials are likely to keep monetary policy on
hold until the first half of 1998, when tight labor markets may generate
sufficient wage pressures to prompt the Fed to raise rates.
Our outlook for the ARM market remains neutral. Although we do not expect
dramatic movement in short-term interest rates, the rally in the Treasury
market and the flattening of the yield curve have left ARMs vulnerable to
ARM-to-fixed rate refinancing in the near term. Therefore, we expect to
continue to emphasize seasoned ARMs originated prior to 1993, which are
less vulnerable to prepayments than more recent issues.
/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
November 28, 1997
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5
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
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GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
October 31, 1997
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1997. The
performance for each class of the Goldman Sachs Adjustable Rate Government Fund
(assuming both the maximum sales charge of 1.5% and no sales charge for Class A
shares), is compared to its benchmarks--the Lehman Brothers Mutual Fund Short
(1-2) U.S. Government Index ("Lehman 1-2 Index") and the six month and one year
U.S. Treasury Bills ("six-Month T-Bill/one-Year T-Bill"). All performance data
shown represents past performance and should not be considered indicative of
future performance which will fluctuate as market conditions change. The
investment return and principal value of an investment will fluctuate with
changes in market conditions so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Institutional Shares(a)
[GRAPH]
Institutional Lehman One-Year Six-Month
Shares 1-2 Index T-Bill T-Bill
------------- --------- -------- ---------
8/1/91 50,000 50,000 50,000 50,000
10/31/91 51,047 51,581 51,179 50,870
10/31/92 54,176 55,506 54,161 53,376
10/31/93 56,414 58,368 56,198 55,197
10/31/94 57,475 59,511 57,744 57,257
10/31/95 61,355 64,343 61,766 60,819
10/31/96 65,576 68,197 65,373 64,158
10/31/97 69,970 72,473 69,308 67,765
Administration Shares(a)
[GRAPH]
Administration Lehman One-Year Six-Month
Shares 1-2 Index T-Bill T-Bill
-------------- --------- -------- ---------
5/1/93 50,000 50,000 50,000 50,000
10/31/93 51,917 50,931 50,785 50,780
10/31/94 51,747 51,931 52,182 52,675
10/31/95 55,100 56,148 55,835 55,951
10/31/96 58,742 59,511 59,096 59,023
10/31/97 62,519 63,242 62,417 62,576
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6
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
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GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
October 31, 1997
- --------------------------------------------------------------------------------
Service Shares
[GRAPH]
Service Lehman One-Year Six-Month
Shares 1-2 Index T-Bill T-Bill
--------- ----------- ---------- -----------
3/27/97 50,000 50,000 50,000 50,000
10/31/97 51,905 52,295 52,010 51,730
Class A Shares(a)
[GRAPH]
Class A Shares Class A Shares Lehman One-Year Six Month
(No Sales Charge) (W/Sales Charge) 1-2 Index T-Bill T-Bill
----------------- ---------------- --------- -------- ---------
6/1/95 10,000 9,850 10,000 10,000 10,000
10/31/95 10,222 10,069 10,277 10,260 10,246
10/31/96 10,898 10,735 10,893 10,859 10,809
10/31/97 11,599 11,425 11,576 11,513 11,416
Average Annual Total
Return
----------------------
Since
One Year Five Year Inception(b)
Institutional Shares 6.70% 5.25% 5.54%
-------------------------------------------------------------------------
Administration Shares 6.43% N/A 5.07%
-------------------------------------------------------------------------
Service Shares N/A N/A 3.81%(c)
-------------------------------------------------------------------------
Class A Shares, excluding sales charge 6.43% N/A 6.41%
-------------------------------------------------------------------------
Class A Shares, including sales charge 4.52% N/A 5.67%
(a) For comparative purposes, initial investments are assumed to be made on the
first day of the month following the commencement of operations.
(b) The Institutional, Administration, Service and Class A shares commenced
operations July 17, 1991, April 15, 1993, March 27, 1997 and May 15, 1995,
respectively.
(c) An aggregate total return (not annualized) is shown instead of an average
annual total return since these shares have not completed a full twelve
months of operations.
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7
<PAGE>
Statement of Investments
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GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
October 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE BACKED OBLIGATIONS--95.4%
ADJUSTABLE RATE FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)(B)--29.3%
$ 2,223,517 7.48% 07/01/18 $ 2,322,530
1,210,343 7.55 12/01/18 1,259,132
9,013,669 7.51 05/01/19(a) 9,369,979
17,838,225 7.79 11/01/19 18,788,645
10,702,752 7.53 01/01/20 11,107,423
4,400,254 7.83 05/01/20 4,631,267
15,895,232 7.58 06/01/20(a) 16,607,974
33,041,610 7.86 02/01/22(a) 34,745,236
6,124,002 7.49 06/01/22 6,337,056
3,384,390 7.54 08/01/22 3,524,538
5,300,601 7.47 09/01/22 5,478,489
5,864,606 7.70 09/01/22 6,145,931
14,855,692 7.76 11/01/22 15,607,836
8,594,891 7.78 06/01/24 9,026,010
3,048,728 7.35 02/01/28 3,152,567
1,525,453 7.77 07/01/30 1,603,633
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$149,708,246
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ADJUSTABLE RATE FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)(B)--49.2%
$ 1,593,175 7.43% 04/01/03 $ 1,618,379
954,358 7.84 11/01/14 1,001,179
642,600 7.52 12/01/15 667,302
5,375,190 6.87 03/01/17 5,498,658
3,004,775 7.58 03/01/17 3,144,226
10,422,695 7.10 04/01/17 10,771,855
765,651 7.61 11/01/17 797,716
3,529,684 6.61 03/01/18 3,583,194
1,072,159 7.33 03/01/18 1,115,721
659,826 7.76 05/01/18 677,971
1,186,769 7.48 06/01/18 1,229,315
7,289,895 7.60 06/01/18 7,664,668
4,578,620 7.58 07/01/18 4,795,371
5,466,744 7.47 08/01/18 5,699,956
3,579,734 7.80 08/01/18 3,776,619
1,728,032 7.46 10/01/18 1,791,796
2,904,804 7.65 10/01/18 3,034,155
188,921 7.40 11/01/18 195,444
5,664,992 7.53 11/01/18 5,898,673
1,747,028 7.35 12/01/18 1,816,630
11,420,431 7.67 12/01/18 12,048,555
2,985,079 7.42 06/01/19 3,105,885
3,874,553 7.42 07/01/19 4,034,378
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE BACKED OBLIGATIONS (CONTINUED)
ADJUSTABLE RATE FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (CONTINUED)
$ 1,490,807 7.43% 07/01/19 $ 1,553,928
1,447,904 7.33 08/01/19 1,498,580
3,789,047 7.63 09/01/19 3,974,369
2,639,072 7.83 03/01/20 2,784,221
7,679,259 7.54 07/01/20 7,985,201
4,167,783 7.68 02/01/21 4,388,550
4,608,066 7.40 04/01/21 4,799,577
63,900,621 7.65 09/01/21(a) 67,015,776
19,370,852 7.68 02/01/22(a) 20,384,723
12,311,450 7.75 06/01/22 12,945,120
1,801,456 7.68 08/01/22 1,894,915
266,672 6.23 12/01/23 266,088
14,049,198 7.04 06/01/24 14,454,939
14,417,119 7.58 04/01/25 15,074,540
742,823 7.73 09/01/25 780,774
3,654,814 7.38 08/01/27 3,811,277
2,211,792 7.35 10/01/27 2,306,147
948,534 7.19 07/01/29 980,395
- -------------------------------------------------------------------------------------------------
$250,866,766
- -------------------------------------------------------------------------------------------------
ADJUSTABLE RATE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)(B)--3.4%
$ 1,313,760 7.00% 03/20/16 $ 1,349,889
885,299 7.00 08/20/18 910,751
5,638,287 7.00 02/20/21 5,816,231
3,228,227 7.00 01/20/22 3,326,075
3,398,816 7.00 03/20/23 3,502,921
2,484,829 5.50 06/20/27 2,512,013
- -------------------------------------------------------------------------------------------------
$ 17,417,880
- -------------------------------------------------------------------------------------------------
ADJUSTABLE RATE SMALL BUSINESS ADMINISTRATION (SBA)(B)--5.2%
$ 996,142 6.63% 09/25/16 $ 1,004,858
3,569,972 6.63 07/25/17 3,601,210
7,525,017 6.63 08/25/17 7,590,860
3,051,680 6.63 09/25/17 3,078,383
3,494,298 6.63 10/25/17 3,524,873
7,467,983 6.63 02/25/18 7,533,328
- -------------------------------------------------------------------------------------------------
$ 26,333,512
- -------------------------------------------------------------------------------------------------
</TABLE>
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The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND (continued)
October 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE BACKED OBLIGATIONS (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)--1.0%
$ 548,875 7.00% 05/15/23 $ 553,502
623,288 7.00 06/15/23 628,543
1,457,690 7.00 07/15/23 1,469,977
489,634 7.00 09/15/23 493,761
1,364,142 7.00 10/15/23 1,375,643
517,086 7.00 11/15/23 521,445
- -----------------------------------------------------------------------------------------------
$ 5,042,871
- -----------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--7.3%
ADJUSTABLE RATE CMOS(B)--1.9%
FNMA Remic Trust 1990-145, Class A
$9,391,114 6.72% 12/25/20(a) $ 9,478,639
- -----------------------------------------------------------------------------------------------
$ 9,478,639
- -----------------------------------------------------------------------------------------------
INVERSE FLOATER(B)--0.0%
FNMA Remic Trust 1991-91, Class S
$ 111,049 16.81% 07/25/98 $ 117,008
- -----------------------------------------------------------------------------------------------
$ 117,008
- -----------------------------------------------------------------------------------------------
INVERSE FLOATING RATE-INTEREST ONLY(B)--0.0%
FNMA Remic Trust 1992-157, Class SA
$ 674,929(c) 12.74% 03/25/04 $ 21,112
- -----------------------------------------------------------------------------------------------
$ 21,112
- -----------------------------------------------------------------------------------------------
IOETTE--0.2%
FNMA Remic Trust 1990-145, Class B
$ 23,077(c) 10.00% 12/25/20 $ 774,099
- -----------------------------------------------------------------------------------------------
$ 774,099
- -----------------------------------------------------------------------------------------------
PLANNED AMORTIZATION-ACCRUAL BOND--1.2%
FNMA Remic Trust 188B, Class ZA
$6,259,551 5.75% 09/25/10 $ 6,198,457
- -----------------------------------------------------------------------------------------------
$ 6,198,457
- -----------------------------------------------------------------------------------------------
REGULAR FLOATER CMOS(B)--1.4%
FNMA Remic Trust 169B, Class FA
$2,536,413 6.06% 09/25/00 $ 2,550,668
FNMA Remic Trust X-225C, Class FG
4,500,000 6.81 12/25/23 4,644,810
- -----------------------------------------------------------------------------------------------
$ 7,195,478
- -----------------------------------------------------------------------------------------------
</TABLE>
<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--0.0%
FNMA Remic Trust 1991-37, Class E
$ 119,493 8.50% 04/25/05 $ 119,268
- ----------------------------------------------------------------------------------------------
$ 119,268
- ----------------------------------------------------------------------------------------------
SUPER FLOATER CMOS(B)--0.6%
FNMA Remic Trust 1992-157, Class FA
$3,323,177(c) 1.97% 03/25/04 $ 3,272,265
- ----------------------------------------------------------------------------------------------
$ 3,272,265
- ----------------------------------------------------------------------------------------------
SUPPORT--2.0%
FHLMC Series 1645, Class B
$2,956,606 5.50% 01/15/08 $ 2,853,215
FNMA Remic Trust G94 13, Class ZB
7,354,651 7.00 11/17/24 7,239,698
- ----------------------------------------------------------------------------------------------
$ 10,092,913
- ----------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS $ 37,269,239
- ----------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(COST $483,614,604) $486,638,514
- ----------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--1.8%
United States Treasury Bonds--1.8%
$6,900,000 15.75% 11/15/01 $ 9,352,743
- ----------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $9,301,523) $ 9,352,743
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--1.3%
Joint Repurchase Agreement Account
$6,500,000 5.76% 11/03/97(a) $ 6,500,000
- ----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $6,500,000) $ 6,500,000
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $499,416,127(D)) $502,491,257
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
Futures contracts open at October 31, 1997 are as follows:
<TABLE>
<CAPTION>
Number of
Contracts Settlement Unrealized
Type Long (Short)(e) Month Gain (Loss)
- --------------------------- --------------- ------------- -----------
<S> <C> <C> <C>
Euro Dollars 520 December 1997 $ 345,750
Euro Dollars 290 March 1998 95,875
Euro Dollars 180 June 1998 71,250
Euro Dollars (20) December 1998 (54,500)
5 Year U.S. Treasury Notes 15 December 1997 20,391
10 Year U.S. Treasury Notes (295) December 1997 (912,719)
---------
$(433,953)
</TABLE>
<TABLE>
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FEDERAL INCOME TAX
INFORMATION:
Gross unrealized
gain for
investments in
which value
exceeds cost $3,465,455
Gross unrealized
loss for
investments in
which cost
exceeds value (442,377)
- ---------------------------------------------
Net unrealized
gain $3,023,078
- ---------------------------------------------
</TABLE>
(a) Portions of these securities are being segregated for futures margin
requirements.
(b) Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1997.
(c) Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the coupon rate due to
the amortization of related premiums.
(d) The aggregate cost for federal income tax purposes is $499,468,179.
(e) Each Euro Dollar contract represents $1,000,000 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 at risk are
$1,041,000,000 and $272,543,093, respectively. The determination of
notional amounts as presented here are indicative only of volume of
activity and not a measure of market risk.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
10
<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.
NEW SHARE CLASSES
To accommodate different clients' needs and preferences, the fund added Class
A and B shares on May 1, 1997 and Class C shares on August 15, 1997.
PERFORMANCE REVIEW
During the period under review, the fund's Institutional, Administration and
Service shares outperformed their benchmark. The fund's investments in
collateralized mortgage obligations (CMOs) and adjustable-rate mortgage (ARM)
securities were the largest contributors to performance, particularly during
the first half of the period when these sectors' yield spreads relative to
Treasuries narrowed. However, the performance of Class A, B and C shares lagged
the benchmark, primarily because they began operations during the latter half
of the fiscal year after most of the gains in CMOs and ARMs had already been
achieved. By mid-1997, yield spreads were tight, which left them vulnerable to
pressures related to the Asian financial crisis.
PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
INSTITUTIONAL ADMINISTRATION SERVICE CLASS A* CLASS B* CLASS C*
(10/31/96 - (10/31/96 - (10/31/96 - (5/1/97 - (5/1/97 - (8/15/97 -
10/31/97) 10/31/97) 10/31/97) 10/31/97) 10/31/97) 10/31/97)
------------- -------------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total Return (based on
net asset value [NAV]) 7.07% 6.91% 6.63% 4.14% 3.94% 1.44%
Return From Monthly
Distributions 6.75% 6.49% 6.21% 3.11% 2.80% 1.13%
Return From Price
Appreciation 0.32% 0.42% 0.42% 1.03% 1.14% 0.31%
Two-Year U.S. Treasury
Security Total Return 6.35% 6.35% 6.35% 4.17% 4.17% 1.53%
NAV (10/31/97) $9.86 $9.89 $9.86 $9.88 $9.86 $9.86
NAV Change +$0.03 +$0.04 +$0.04 +$0.10 +$0.11 +$0.03
Total Distributions Paid
Per Share+ $0.64 $0.62 $0.59 $0.30 $0.27 $0.11
</TABLE>
* New share class opened during the period. Performance and NAV change are
cumulative from inception date.
+ The fund distributes substantially all of its investment company taxable
income, as required by tax law.
The fund's NAV and yield are not guaranteed by the U.S. government or by its
agencies, instrumentalities or sponsored enterprises. All performance figures
represent past performance and in no way guarantee future results, which will
fluctuate as market conditions change. The investment return and principal
value of an investment in the fund will fluctuate, and therefore an investor's
shares when redeemed may be worth more or less than their original cost.
Goldman, Sachs & Co., the distributor of the fund, is not a bank, and fund
shares distributed by Goldman, Sachs & Co. are not deposits or obligations of,
or endorsed or guaranteed by, any bank or depository institution, nor are they
insured by the Federal Deposit Insurance Corporation (FDIC), the Federal
Reserve Board or any other government agency.
11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
We are pleased to report that the fund performed well relative to its peers.
According to Morningstar, Inc., an independent rating agency, the fund's
Institutional shares were rated four stars for the five-year period ended
October 31 (in a universe of 732 taxable bond funds)./1/
The fund also fared well compared with other funds in Lipper Analytical
Services, Inc.'s short-intermediate U.S. government category. For the 12-month
period ended October 31, 1997, the fund's Institutional and Administration
shares ranked in the top quartile (19th and 22nd, respectively) of the 95 funds
in the Lipper group based on total return. For the five-year period ended
October 31, 1997, the fund's Institutional shares ranked 12th out of 40 funds
in its category. (The fund's Service shares ranked 34th in the Lipper category
for the 12-month period; Lipper did not rank the fund's Class A, B and C shares
for this period because they have been in existence less than 12 months. Please
note that Lipper rankings do not take sales charges into account and that past
performance is not a guarantee of future results.)
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
During the period, we maintained our strategy of focusing on securities that
we believed would fare well relative to the overall market regardless of the
direction of interest rate movements. Rather than attempting to forecast
interest rates, we matched the fund's duration to
- --------
/1/Source: (C) 1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
10/31/97. 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 ten-year average annual returns (where applicable) in excess
of 90-day Treasury bill returns with appropriate fee and sales charge
adjustments and a risk factor that reflects fund performance below 90-day
Treasury bill returns. The fund's Institutional shares received four stars for
the three-year period and were rated among 1,338 taxable bond funds. The
Morningstar ratings apply only to the fund's Institutional shares; the fund's
Administration, Service, A, B and C shares have not been rated. The
Administration, Service, A, B and C 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.
that of the benchmark (1.9 years as of October 31) and used extensive research
to identify attractive securities that offered incremental yield relative to
Treasuries. The largest changes in the portfolio's sector composition compared
with a year ago were a new allocation in agency debentures and a reduction in
ARM securities.
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 1997*
[PIE CHART]
Repos/Cash Equivalents 1.4%
Agency Debentures 4.0%
Fixed Rate Mortgage Pass Throughs 5.6%
ARMs 15.5%
U.S. Treasuries 16.3%
CMOs 57.2%
* 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 represented more than half of the portfolio as of October 31
(57.2%), approximately the same allocation as a year ago. CMOs, which are
multi-class bonds collateralized by a pool of mortgage loans or mortgage pass-
through certificates, performed well during the period due to the favorable
interest rate environment. When interest rates remained within a relatively
narrow range, CMO securities experienced strong demand from yield-seeking
investors. Sequential-pay/support CMOs and planned amortization class (PAC)
CMOs constituted the majority of the fund's allocation in the sector, at 24.1%
and 19.9% of the portfolio, respectively. The fund's third largest allocation
within the sector was CMO floaters (7.8%), which are floating rate securities
whose coupons reset as interest rates change.
- --------------------------------------- ---------------------------------------
12
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
. ARMs. As of the end of the fiscal year, ARMs accounted for 15.5% of the
portfolio. We trimmed the fund's allocation in the sector from 19.0% a year
earlier as ARMs "richened" and we identified securities in other sectors that
offered more compelling risk-adjusted return potential. We focused on fully
indexed ARMs because these securities provide stable current income. We
continued to emphasize "seasoned" ARMs, which have lower prepayment risk than
recently issued ARMs. ("Seasoned" issues are securities that have been in
existence for several years; it is assumed that homeowners who did not
refinance during earlier periods of lower rates are less likely to refinance in
the future.)
. Fixed Rate Mortgage Pass-Throughs. The fund held a 5.6% weighting in fixed
rate mortgage pass-throughs, down slightly from a 7.2% allocation a year ago.
As was the case with other mortgage-backed security sectors, pass-throughs
performed well during the period, primarily due to low volatility and healthy
demand. As pass-throughs' yield spreads narrowed relative to Treasuries, we
trimmed the allocation in favor of other sectors that offered greater yield
enhancement.
. Agency Debentures. Agency debentures, a 4.0% position as of October 31, are
bonds issued by agencies of the U.S. government. This sector was attractive
because it offered incremental yield over Treasuries.
. U.S. Treasuries and Repurchase Agreements/Cash Equivalents. During the first
half of the period, we significantly cut the fund's allocation to U.S.
Treasuries in favor of other sectors that offered better relative value. After
the yield spreads of Treasury alternatives tightened significantly, however, we
increased Treasuries to 16.3%, approximately the same weighting as the
beginning of the fiscal year. In addition, the fund held 1.4% in repurchase
agreements/cash equivalents as of October 31, nearly unchanged from last year.
. Issuer Composition. The composition of the portfolio's mortgage-backed
security allocation by issuer was 39.8% in Federal Home Loan Mortgage
Corporation (FHLMC) issues and 38.6% in Federal National Mortgage Association
(FNMA) issues.
. Credit Quality. The fund invests exclusively in securities issued by the U.S.
government and its agencies or instrumentalities.
. Use of Derivatives. As noted, the fund held sequential-pay/support CMOs, PAC
CMOs and CMO floaters, securities typically considered to be lower risk
derivatives. The fund's CMO allocation also included small positions in super
floaters (2.3%), whose coupons reset higher than conventional floaters when
rates rise; inverse floaters (2.1%), whose coupons reset in the opposite
direction of interest rates; and PAC interest-only (IO) securities (1.0%),
whose cash flows are made up only of the interest payments of their underlying
mortgages. We invest in these higher risk derivatives only when we believe they
will enhance returns without incurring undue risk. In the favorable rate
environment, the fund's performance benefited from these holdings. In addition,
we used futures as a tool to help manage the portfolio's duration.
MARKET OUTLOOK
During October, all mortgage-backed securities gave up ground amid turmoil in
global financial markets. However, the extent of their underperformance was
significantly less than that of the credit sectors (e.g., corporate and asset-
backed securities). The degree to which yield spreads widened among CMOs is
currently somewhat uncertain--there was very little trading in the sector at
the end of the period because investor attention was directed elsewhere. In the
ARM market, the flattening of the yield curve and the rally in the Treasuries
have left ARMs vulnerable to ARM-to-fixed rate refinancing in the near term. In
general, we currently
13
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
have a cautious view of the mortgage-backed securities sectors, and intend to
remain focused on securities that are less vulnerable to rate swings than the
broader market.
/s/ Jonathan A. Beinner
Jonathan A. Beinner
/s/ James B. Clark
James B. Clark
Portfolio Managers
Goldman Sachs Short Duration Government Fund
November 28, 1997
- --------------------------------------- ---------------------------------------
14
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
October 31, 1997
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1997. The
performance for each class of the Goldman Sachs Short Duration Government Fund
(assuming both the maximum sales charge of 2.0% and no sales charge for Class A
shares and the appropriate redemption fee and no redemption fee for the Class B
and Class C shares) is compared to its benchmarks, the U.S. 2-Year Treasury
Bill ("Two-Year T-Bill") and the Lehman Brothers Mutual Fund Short (1-3) U.S.
Government Index ("Lehman Short (1-3) Gov't Index"). All performance data shown
represents past performance and should not be considered indicative of future
performance which will fluctuate as market conditions change. The investment
return and principal value of an investment will fluctuate with changes in
market conditions so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
Institutional Shares(a)
[GRAPH]
Institutional Two Year Lehman Short 1-3
Shares T-Bill Gov't Index
------ ------ -----------
9/1/88 $50,000 $50,000 $50,000
10/31/88 $51,283 $51,057 $51,091
10/31/89 $55,940 $55,412 $55,919
10/31/90 $60,543 $59,876 $60,861
10/31/91 $67,161 $66,615 $67,699
10/31/92 $71,365 $72,161 $73,208
10/31/93 $75,326 $76,335 $77,446
10/31/94 $76,072 $77,058 $78,339
10/31/95 $82,895 $84,009 $85,256
10/31/96 $88,507 $88,756 $90,346
10/31/97 $94,764 $94,392 $96,200
Administration Shares
[GRAPH]
Administration Lehman Short Two Year
Shares 1-3 Gov't Index T-Bill
2/28/96 50,000 50,000 50,000
10/31/96 52,000 51,760 51,805
10/31/97 55,593 55,115 55,095
Service Shares
[GRAPH]
Service Lehman Short Two Year
Shares 1-3 Gov't Index T-Bill
4/10/96 50,000 50,000 50,000
10/31/96 52,175 52,110 51,855
10/31/97 55,634 55,485 55,150
- --------------------------------------- ---------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares
[GRAPH]
Class A Shares Class A Shares Two-Year Lehman Short
(No Sales Charge) (W/Sales Charge) T-Bill 1-3 Gov't Index
----------------- ---------------- -------- ---------------
5/1/97 10,000 9,800 10,000 10,000
10/31/97 10,414 10,206 10,417 10,415
Class B Shares
[GRAPH]
Class B Shares Class B Shares Two-Year Lehman Short
(w/out redempt.charge) (w/redempt.charge) T-Bill 1-3 Gov't Index
---------------------- ------------------ -------- ---------------
5/1/97 10,000 10,000 10,000 10,000
10/31/97 10,394 10,194 10,417 10,415
Class C Shares
[GRAPH]
Class C Shares Class C Shares Two-Year Lehman Short
(w/out redempt.charge) (w/redempt.charge) T-Bill 1-3 Gov't Index
---------------------- ------------------ -------- ---------------
8/15/97 10,000 10,000 10,000 10,000
10/31/97 10,144 10,044 10,153 10,151
Average Annual Total
Return
----------------------
Since
One Year Five Year Inception(b)
Institutional Shares 7.07% 5.83% 7.22%
-------------------------------------------------------------------------
Administration Shares 6.91% N/A 6.53%
-------------------------------------------------------------------------
Service Shares 6.63% N/A 7.07%
-------------------------------------------------------------------------
Class A Shares, excluding sales charge N/A N/A 4.14%(c)
-------------------------------------------------------------------------
Class A Shares, including sales charge N/A N/A 2.06%(c)
-------------------------------------------------------------------------
Class B Shares, excluding redemption
charge N/A N/A 3.94%(c)
-------------------------------------------------------------------------
Class B Shares, including redemption
charge N/A N/A 1.94%(c)
-------------------------------------------------------------------------
Class C Shares, excluding redemption
charge N/A N/A 1.44%(c)
-------------------------------------------------------------------------
Class C Shares, including redemption
charge N/A N/A 0.44%(c)
(a) For comparative purposes, initial investments are assumed to be made on the
first day of the month following the commencement of operations of the
Institutional, Administration and Service shares.
(b) The Institutional, Administration, Service, Class A, Class B and Class C
shares commenced operations August 15, 1988, February 28, 1996, April 10,
1996, May 1, 1997, May 1, 1997 and August 15, 1997, respectively.
(c) An aggregate total return (not annualized) is shown instead of an average
annual total return since these shares have not completed a full twelve
months of operations.
- --------------------------------------------------------------------------------
16
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
October 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE BACKED OBLIGATIONS--77.8%
ADJUSTABLE RATE FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) (A)--10.4%
$ 1,670,748 7.63% 08/01/17(b) $ 1,728,439
1,254,549 7.31 05/01/18 1,271,799
1,628,367 7.55 12/01/18(b) 1,694,007
7,237,238 7.86 02/01/22(b) 7,610,390
- ---------------------------------------------------------------------------------------------
$ 12,304,635
- ---------------------------------------------------------------------------------------------
ADJUSTABLE RATE FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (A)--5.0%
$ 2,290,460 7.84% 11/01/14 $ 2,402,830
1,801,456 7.68 08/01/22 1,894,915
1,563,791 7.77 01/01/31 1,640,511
- ---------------------------------------------------------------------------------------------
$ 5,938,256
- ---------------------------------------------------------------------------------------------
FIXED RATE FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC)--2.5%
$ 2,943,034 6.50% 12/01/00 $ 2,954,218
- ---------------------------------------------------------------------------------------------
FIXED RATE FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)--3.0%
$ 73,609 9.00% 12/01/97 $ 73,825
769,822 6.00 01/01/14 749,637
2,853,210 6.00 03/01/14 2,798,828
- ---------------------------------------------------------------------------------------------
$ 3,622,290
- ---------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)--56.9%
INVERSE FLOATER(A)--1.8%
FHLMC Series 1296, Class J
$ 890,613(c) 11.75% 07/15/99(b) $ 959,973
FNMA Remic Trust 1992-62, Class S
1,212,115(c) 9.42 05/25/99(b) 1,230,661
- ---------------------------------------------------------------------------------------------
$ 2,190,634
- ---------------------------------------------------------------------------------------------
INVERSE FLOATING RATE-INTEREST ONLY(A)--0.2%
FHLMC Series 1684, Class JD
$ 2,192,026 3.60% 08/15/20(b) $ 172,644
FNMA Remic Trust 1993-110, Class SC
1,548,475(c) 3.40 04/25/19 61,258
- ---------------------------------------------------------------------------------------------
$ 233,902
- ---------------------------------------------------------------------------------------------
PLANNED AMORTIZATION CLASS (PAC) CMOS--19.8%
FHLMC Series 1584, Class E
$ 3,000,000 5.75% 10/15/16(b) $ 2,986,860
FHLMC Series 1645, Class ZA
2,221,401 5.50 04/15/05(b) 2,185,992
FHLMC Series 1985, Class PC
6,000,000 6.35 05/17/18(b) 6,031,860
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE BACKED OBLIGATIONS (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
PLANNED AMORTIZATION CLASS (PAC) CMOS (CONTINUED)
FHLMC Series 1987, Class L
$ 4,000,000 6.20% 08/25/22(b) $ 3,958,976
FNMA Remic Trust 1991-31, Class PJ
3,000,000 6.55 10/25/20 3,034,680
FNMA Remic Trust 1997-70, Class AB
1,250,000 6.50 09/25/22 1,244,125
FNMA Remic Trust 1997-9, Class B
4,000,000 6.50 10/25/22 4,022,320
- -----------------------------------------------------------------------------------------------
$ 23,464,813
- -----------------------------------------------------------------------------------------------
PLANNED AMORTIZATION CLASS INTEREST-ONLY (PAC IO) CMOS--0.8%
FHLMC Series 1552, Class JE
$ 4,451,833(c) 7.00% 02/15/14(b) $ 129,370
FHLMC Series 1587, Class HA
7,417,830(c) 6.50 10/15/08(b) 831,019
- -----------------------------------------------------------------------------------------------
$ 960,389
- -----------------------------------------------------------------------------------------------
PLANNED AMORTIZATION CLASS IOETTE CMOS--0.2%
FNMA Remic Trust 1992-198, Class K
$ 26,073(c) 9.69% 12/25/15 $ 236,624
- -----------------------------------------------------------------------------------------------
REGULAR FLOATER CMOS(A)--7.8%
FHLMC Series 1296, Class I
$ 2,493,715 5.30% 07/15/99(b) $ 2,469,551
FHLMC Series 1634, Class FH
3,000,000 6.78 12/15/23(b) 3,062,160
FHLMC Series 1684, Class JC
2,192,026 5.40 08/15/20(b) 2,148,865
FNMA Remic Trust 1993-110, Class FC
1,548,474 5.60 04/25/19(b) 1,531,054
- -----------------------------------------------------------------------------------------------
$ 9,211,630
- -----------------------------------------------------------------------------------------------
SEQUENTIAL FIXED RATE CMOS--26.3%
FHLMC Series 1033, Class G
$ 2,000,000 8.00% 01/15/06(b) $ 2,113,740
FHLMC Series 1645, Class B
4,927,677 5.50 01/15/08(b) 4,755,356
FNMA Remic Trust 1988-12, Class A
3,468,817 10.00 02/25/18 3,689,659
FNMA Remic Trust 1988-12, Class B
2,738,540 4.73 02/25/18 2,634,823
FNMA Remic Trust 1989-12, Class X
1,212,342 10.00 12/25/14 1,255,525
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE BACKED OBLIGATIONS (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
SEQUENTIAL FIXED RATE CMOS (CONTINUED)
FNMA Remic Trust 1989-18, Class B
$ 787,911 9.50% 01/25/04 $ 813,266
FNMA Remic Trust 1989-59, Class H
2,777,301 7.75 10/25/18 2,812,878
FNMA Remic Trust 1991-133, Class Z
4,872,777 8.00 09/25/06(b) 5,084,888
FNMA Remic Trust 1992-44, Class CA
3,000,000 12.00 08/25/20(b) 3,298,560
FNMA Remic Trust 1993-188, Class TC
2,400,000 6.50 10/25/13 2,403,144
FNMA Remic Trust 1989-34, Class E
2,196,095 9.85 08/25/14 2,277,065
- -------------------------------------------------------------------------------------------------
$ 31,138,904
- -------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS $ 67,436,896
- -------------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS (COST
$91,144,815) $ 92,256,295
- -------------------------------------------------------------------------------------------------
AGENCY DEBENTURES--4.0%
Sri Lanka Aid(a)
$ 4,750,000 5.84% 02/21/16 $ 4,712,000
- -------------------------------------------------------------------------------------------------
TOTAL AGENCY DEBENTURES
(COST $4,678,750) $ 4,712,000
- -------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--16.0%
United States Treasury Notes
$13,500,000 6.00% 08/15/99(b) $ 13,578,030
5,400,000 5.63 11/30/00(b) 5,383,961
- -------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $18,920,441) $ 18,961,991
- -------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--4.0%
Joint Repurchase Agreement Account
$ 4,700,000 5.76% 11/03/97(b) $ 4,700,000
- -------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $4,700,000) $ 4,700,000
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $119,444,006(D)) $120,630,286
- -------------------------------------------------------------------------------------------------
</TABLE>
Futures contracts open at October 31, 1997 are as follows:
<TABLE>
<CAPTION>
Number of
Contracts Settlement Unrealized
Type Long (Short)(e) Month Gain (Loss)
- --------------------------- --------------- -------------- -----------
<S> <C> <C> <C>
Euro Dollars 81 December 1997 $ 120,975
Euro Dollars 64 March 1998 81,775
Euro Dollars 66 June 1998 54,500
Euro Dollars 61 September 1998 76,575
Euro Dollars 56 December 1998 73,750
Euro Dollars 31 March 1999 17,000
Euro Dollars 21 June 1999 4,500
Euro Dollars 6 September 1999 4,650
2 Year U.S. Treasury Notes 71 December 1997 120,921
5 Year U.S. Treasury Notes (93) December1997 (169,906)
10 Year U.S. Treasury Notes (132) December 1997 (387,656)
U.S. 20 Year Long Term Bond (7) December 1997 (38,281)
---------
$ (41,197)
- -----------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Gross unrealized
gain for
investments in
which value
exceeds cost $1,517,519
Gross unrealized
loss for
investments in
which cost
exceeds value (331,239)
- -----------------------------
Net unrealized
gain $1,186,280
- -----------------------------
</TABLE>
(a) Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 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 coupon rate due to
the amortization of related premiums.
(d) The amount stated also represents the aggregate cost for federal income tax
purposes.
(e) Each Euro Dollar contract represents $1,000,000 in notional par value. Each
2-Year U.S. Treasury Note contract represents $200,000 in notional par
value. Each 5-Year and 10-Year U.S. Treasury Note and each U.S. 20-Year
Long Term Bond contract represents $100,000 in notional par value. The
total notional amount and market value at risk are $423,400,000 and
$131,267,113, respectively. The determination of notional amounts as
presented here are indicative only of volume of activity and not a measure
of market risk.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
18
<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.
NEW SHARE CLASSES ADDED
Class A and Class B Shares were introduced on May 1, 1997, and Class C Shares
were added on August 15, 1997, to the existing Institutional, Administration
and Service shares.
MUNICIPAL BOND MARKET SHOWS SIGNS OF STRENGTH AND STABILITY
The municipal market remained at relatively strong levels compared with the
taxable market for much of the year, including four consecutive months of
rallying from April through July. A typical August slowdown, some rallying in
September, and mixed performance for municipals during October, capped off a
year that saw overall municipal prices rise. The average price of a three-year
municipal bond (as calculated from data provided by Municipal Market Data, an
independent municipal market information provider) increased, while yields fell
from 4.15% on October 31, 1996 to 3.95% on October 31, 1997.
New issue supply increased during 1997 vs. 1996, up a solid 5% through
October, versus the first ten months of 1996. 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). Spikes in new issue
supply to $21.9 billion in June and $20.6 billion in September were
approximately 50% greater than the monthly average for the rest of 1997, and
contributed significantly to the year's overall supply increase. Heavy June and
July coupon and principal payments flooded the market with enough reinvestment
cash to absorb most of the new issue supply during the summer, but heavy fall
supply has weakened the municipal market relative to treasuries.
Demand from individual investors, who control approximately two-thirds of
municipal bond ownership either through mutual funds or direct investment,
continued to dominate the market, though municipal rates below the
psychologically key 6% level may have discouraged some investors. The budget
bill, passed in August, was favorable to municipals both on the demand side--an
exemption allowing corporations with outstanding debt to invest in the
municipal market was left intact--as well as on the supply side, where
restrictions on the amount that private universities can issue were loosened.
MUNICIPAL BOND YIELD CURVE
[GRAPH]
10/31/97 10/31/96
1998 3.70% 3.90%
1999 3.85 4.15
2000 3.95 4.30
2001 4.05 4.40
2002 4.15 4.50
2003 4.25 4.60
2004 4.35 4.70
2005 4.45 4.80
2006 4.50 4.90
2007 4.55 5.00
2008 4.65 5.10
2009 4.75 5.20
2010 4.85 5.25
2011 4.93 5.30
2012 4.98 5.35
2013 5.03 5.40
2014 5.08 5.40
2015 5.13 5.45
2016 5.15 5.45
2017 5.15 5.45
2018 5.18 5.50
2019 5.18 5.50
2020 5.20 5.50
2021 5.20 5.50
2022 5.20 5.50
2023 5.20 5.50
2024 5.20 5.50
2025 5.23 5.50
2026 5.23 5.50
2027 5.23 5.50
The yield curve experienced a downward parallel shift in contrast to one year
ago.
Source: Municipal Market Data
19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
PERFORMANCE SUMMARY
We are pleased to report that the
fund's Institutional shares ranked
tenth out of 33 funds in Lipper
Analytical Services, Inc.'s short-
intermediate municipal debt category
for the one-year period ended October
31, 1997 based on total return.
(Lipper did not rank the fund's Class
A, Class B, Class C, Administration or
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.)
The fund's positive performance during the period was primarily due to our
emphasis on higher yielding revenue bonds (73% of the portfolio), 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 that may offer high quality and attractive
returns, such as insured hospital bonds and letter-of-credit-backed debt; and
the last area was "story" 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 Maryland
Health & Higher Education Facilities bonds for Pickersgill, a 169-bed nursing
home that has been in operation for 150 years. Demand for the facility is
strong, with a waiting list despite competition in the Baltimore area, and
financial results have been strong with sound debt service coverage and
significant unreserved funds. We continue to hold the security as an attractive
addition to the portfolio. As of October 31, 1997, the Fund owned approximately
4.8% of the outstanding issue.
<TABLE>
<CAPTION>
INSTITUTIONAL* ADMINISTRATION SERVICE* CLASS A CLASS B CLASS C*
(10/31/96- (10/31/96- (10/31/96- (5/01/97- (5/01/97- (8/15/97-
10/31/97) 10/31/97) 10/31/97) 10/31/97) 10/31/97) 10/31/97)
-------------- -------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total Return (based on
net asset value [NAV]) 5.40% 5.14% 4.77% 3.39% 3.07% 0.97%
Return From Monthly
Distributions 4.27% 4.01% 3.75% 1.97% 1.65% 0.67%
Return From Price
Appreciation 1.13% 1.13% 1.02% 1.42% 1.42% 0.30%
Lehman Brothers 3-Year
Municipal Bond Index 5.49% 5.49% 5.49% 3.60% 3.60% 1.16%
NAV (as of 10/31/97) $10.07 $10.07 $10.07 $10.08 $10.08 $10.07
NAV Change +$0.11 +$0.11 +$0.10 +$0.14 +$0.14 +$0.03
Total Distributions Paid
Per Share+ $0.42 $0.39 $0.37 $0.20 $0.16 $0.07
</TABLE>
* New share class opened during the period. Performance and NAV change are
cumulative from inception date.
+ Dividends are declared daily and paid on a monthly basis. The fund intends to
distribute substantially all of its investment company tax-exempt and taxable
income, as required by tax law.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by a bank or other insured depository institution, and are not insured
by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board,
or any other government agency, and an investment in a Fund involves risk,
including possible loss of principal. All performance figures represent past
performance and in no way guarantee future results, which will fluctuate as
market conditions change. The investment return and principal value of an
investment in a Fund will fluctuate and, therefore, an investor's shares when
redeemed, may be worth more or less than their original cost. The Fund may
invest up to 20% in private activity bonds the interest from which is subject
to the alternative minimum tax (AMT).
20
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND (continued)
- --------------------------------------- ---------------------------------------
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES:
EMPHASIS ON REVENUE BONDS
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 1997*
[PIE CHART]
Revenue Bonds 52.5%
Insured Revenue Bonds 23.9%
General Obligation 9.8%
Insured General Obligation 9.0%
Pre-refunded Bonds 4.5%
Variable Rate Demand Notes 0.3%
* The percentages shown are of total portfolio investments that have settled
and include an offset to cash equivalents relating to unsettled trades. These
percentages may differ from those in the accompanying Statement of Investments,
which reflect portfolio holdings as a percentage of net assets.
. Revenue Bonds. As of October 31, the portfolio's combined position in insured
and uninsured revenue bonds was bonds was decreased slightly to 76.4% of the
portfolio, from 79.7% one year ago. The allocation was significantly
overweighted compared with the Index' 26.9%. (Revenue bonds pay interest and
principal out of a specific revenue stream, such as sales taxes, hospital
charges, tolls, electric rates and airport fees.)
. General Obligation (GO) Bonds. As of October 31, the fund's allocation in
insured and uninsured GO bonds was increased slightly to 18.8% of the
portfolio, from 15.6% one year ago. The allocation was significantly
underweighted versus the Index's 40.6%. GOs are backed by the general taxing
power of a municipality and are typically higher credit quality but lower
yielding than revenue bonds.
. Pre-refunded Bonds. Over the course of the year, we re-established the fund's
holdings in pre-refunded bonds to 4.5% from zero. The Index weighting of pre-
refunded bonds was 32.5%.
. Variable Rate Demand Notes (VRDNs). VRDNs are high-quality cash equivalents
that we use to manage the portfolio's excess liquidity. VRDNs represented 0.3%
of the fund, down from 4.7% one year ago. The Index contains no VRDNs.
. Duration. As of October 31, the fund's duration was effectively in line with
that of the Index at 2.9 years. Duration is a measurement of the Fund's
sensitivity to interest rate movements; the shorter the duration, the less the
Fund's net asset value (NAV) should move in relation to interest rate
fluctuations.
. 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, in favor of double-A-rated
revenue bonds. This is consistent with our goal of maintaining the fund's
targeted double-A-rated average credit quality and liquidity while achieving
high 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 October 31, 40.5% of the portfolio was invested in
triple-A-rated bonds, while double-A-, single-A-, and BBB-rated securities
accounted for 32.3%, 21.5%, and 5.7%, respectively.
MARKET OUTLOOK
Our long-term outlook for municipal bonds is essentially bullish. With
municipals escaping unscathed from the federal budget accord, we do not see any
near-term fundamental problems for tax-exempts, and are left with technical
forces as the key driver in relative market performance. The recent cheapening
of the market was more related to the heavy seasonal new issue supply and
weaker demand than from the global volatility that affected the taxable
sectors; we do not feel that
- --------------------------------------- ---------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
municipals are at risk to cheapen much more. In anticipation of near-term
outperformance, we feel that municipals are attractive enough to warrant an
allocation from investors who do not currently benefit from tax-exempt income.
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
November 28, 1997
- --------------------------------------- ---------------------------------------
22
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
October 31, 1997
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1997. The
performance for each class of the Goldman Sachs Short Duration Tax-Free Fund
(assuming both the maximum sales charge of 2.0% and no sales charge for Class A
shares and the appropriate redemption fee and no redemption fee for the Class B
and Class C shares) is compared to its benchmark, the Lehman Brothers 3-Year
Municipal Bond Index ("Lehman Three-Year Bond Index"). All performance data
shown represents past performance and should not be considered indicative of
future performance which will fluctuate as market conditions change. The
investment return and principal value of an investment will fluctuate with
changes in market conditions so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Institutional Shares
[GRAPH]
Lehman 3 Year
Institutional Shares Muni Bond Index
10/1/92 50,000 50,000
10/31/92 49,830 49,805
10/31/93 53,333 53,102
10/31/94 53,424 53,825
10/31/95 56,618 58,023
10/31/96 59,172 60,646
10/31/97 62,375 63,975
Administration Shares
[GRAPH]
Lehman 3 Year
Administration Shares(a) Muni Bond Index
6/1/93 50,000 50,000
10/31/93 51,088 51,144
10/31/94 51,031 51,840
10/31/95 53,971 55,884
10/31/96 56,265 58,410
10/31/97 59,157 61,617
Service Shares
[GRAPH]
Lehman 3 Year
Service Shares(a) Muni Bond Index
10/1/94 50,000 50,000
10/31/94 49,810 49,880
10/31/95 52,594 53,771
10/31/96 54,693 56,201
10/31/97 57,302 59,286
- --------------------------------------- ---------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
Class A Shares
[GRAPH]
Class A Shares Class A Shares Lehman 3 Year
(No Sales Charge) (W/Sales Charge) Muni Bond Index
----------------- ---------------- ---------------
5/1/97 10,000 9,800 10,000
10/31/97 10,339 10,132 10,360
Class B Shares
[GRAPH]
Class B Shares Class B Shares Lehman 3 Year
(No Sales Charge) (W/Sales Charge) Muni Bond Index
----------------- ---------------- ---------------
5/1/97 10,000 10,000 10,000
10/31/97 10,307 10,107 10,360
Class C Shares
[GRAPH]
Class C Shares Class C Shares Lehman 3 Year
(No Sales Charge) (W/Sales Charge) Muni Bond Index
----------------- ---------------- ---------------
8/15/97 10,000 10,000 10,000
10/31/97 10,097 9,997 10,116
<TABLE>
---------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
ONE YEAR FIVE YEAR SINCE INCEPTION(B)
--------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Shares 5.40% 4.59% 4.44 %
--------------------------------------------------------------------
Administration Shares 5.14% N/A 3.87 %
--------------------------------------------------------------------
Service Shares 4.77% N/A 4.49 %
--------------------------------------------------------------------
Class A Shares, excluding sales
charge N/A N/A 3.39 %(c)
--------------------------------------------------------------------
Class A Shares, including sales
charge N/A N/A 1.68 %(c)
--------------------------------------------------------------------
Class B Shares, excluding
redemption charge N/A N/A 3.07 %(c)
--------------------------------------------------------------------
Class B Shares, including
redemption charge N/A N/A 1.07 %(c)
--------------------------------------------------------------------
Class C Shares, excluding
redemption charge N/A N/A 0.97 %(c)
--------------------------------------------------------------------
Class C Shares, including
redemption charge N/A N/A (0.03)%(c)
--------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on the
first day of the month following the commencement of operations of the
Administration and Service share classes.
(b) The Institutional, Administration, Service, Class A, Class B and Class C
shares commenced operations October 1, 1992, May 20, 1993, September 20,
1994, May 1, 1997, May 1, 1997 and August 15, 1997, respectively.
(c) An aggregate total return (not annualized) is shown instead of an average
annual total return since these shares have not completed a full twelve
months of operations.
24
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
October 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
DEBT OBLIGATIONS--101.1%
ARIZONA--3.0%
Mesa, Arizona IDA Health Care Facilities (BIGI) (AAA/Aaa)
$1,000,000 7.50% 01/01/04 $1,053,830
- -----------------------------------------------------------------------------------------------------
CALIFORNIA--2.9%
Abag Finance Authority for Non-Profit Corporations Refunding Bond (BBB)
$1,000,000 5.25% 10/01/07 $1,001,280
- -----------------------------------------------------------------------------------------------------
CONNECTICUT--7.3%
Connecticut State Housing Mortgage Revenue Town Colony Project (Aa3)
$ 995,000 5.00% 04/01/08 $ 997,129
Connecticut State Residential Recovery Authority, Series A RB (AA-)
1,500,000 5.60 11/15/99 1,549,230
- -----------------------------------------------------------------------------------------------------
$2,546,359
- -----------------------------------------------------------------------------------------------------
FLORIDA--4.3%
Dade County Solid Waste System BANS (MIG2/SP2)
$1,500,000 4.75% 09/01/98 $1,507,740
- -----------------------------------------------------------------------------------------------------
ILLINOIS--5.9%
Illinois Health Facilities Authority Highland Park Hospital, Series A
(AAA/Aaa)
$1,000,000 5.20% 10/01/01 $1,031,270
Illinois Housing Development Authority, Series 1991 A (A+/A1)
1,000,000 7.90 07/01/99 1,054,550
- -----------------------------------------------------------------------------------------------------
$2,085,820
- -----------------------------------------------------------------------------------------------------
LOUISIANA--3.0%
Louisiana Offshore Deepwater Port Authority Term B RB (A/Baa1)
$1,000,000 5.85% 09/01/00 $1,038,010
- -----------------------------------------------------------------------------------------------------
MARYLAND--7.6%
Maryland Health and Higher Educational Facilities Authority RB (A-)
$1,600,000 5.50% 01/01/21 $1,665,920
1,000,000 4.75 07/01/21 1,004,510
- -----------------------------------------------------------------------------------------------------
$2,670,430
- -----------------------------------------------------------------------------------------------------
MICHIGAN--2.9%
Detroit Self Insurance Series A (BBB-)
$1,000,000 5.60% 05/01/01 $1,027,990
- -----------------------------------------------------------------------------------------------------
MISSOURI--4.9%
St. Louis, MO Municipal Finance Corp., Series A (A/Aa3)
$1,655,000 5.30% 07/15/02 $1,710,393
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
DEBT OBLIGATIONS (CONTINUED)
NEW YORK--8.5%
Syracuse, NY IDA RB (AA)
$1,365,000 4.60% 10/15/98 $1,376,261
Yonkers GO Series C (FGIC) (AAA/Aaa)
1,500,000 6.00 08/01/03 1,618,560
- -----------------------------------------------------------------------------------------------------
$2,994,821
- -----------------------------------------------------------------------------------------------------
PENNSYLVANIA--9.8%
Pennsylvania Intergovernmental Coop Authority Special Tax RB (FGIC) (AAA)
$1,500,000 5.75% 06/15/00 $1,561,740
Philadelphia, PA Gas Works COPS (FSA) (AAA/Aaa)
1,800,000 5.95 04/01/00 1,872,108
- -----------------------------------------------------------------------------------------------------
$3,433,848
- -----------------------------------------------------------------------------------------------------
PUERTO RICO--3.3%
Puerto Rico Commonwealth (A/Baa1)
$1,105,000 8.00% 07/01/06 $1,152,438
- -----------------------------------------------------------------------------------------------------
RHODE ISLAND--4.6%
Rhode Island Clean Water Finance Agency (AAA/Aaa)
$1,385,000 9.20% 10/01/01 $1,622,694
- -----------------------------------------------------------------------------------------------------
TENNESSEE--4.3%
Clarksville, TN Public Building Authority (AA)
$1,500,000 4.75% 12/01/00 $1,522,635
- -----------------------------------------------------------------------------------------------------
TEXAS--11.6%
Arlington GO Refunding Bonds (AA/Aa)
$1,270,000 5.20% 08/15/05 $1,331,214
Memorial Villages, TX Water Authority (Aa)
1,110,000 7.00 09/01/00 1,165,211
Tarrant County Health Facilities Development Corp. (AAA/Aaa)
1,500,000 5.50 02/15/03 1,573,530
- -----------------------------------------------------------------------------------------------------
$4,069,955
- -----------------------------------------------------------------------------------------------------
VIRGINIA--5.1%
Petersburg, VA Hospital Authority RB (A)
$1,760,000 5.50% 07/01/99 $1,800,075
- -----------------------------------------------------------------------------------------------------
WASHINGTON--4.6%
Washington State Public Power Supply System RB, Series B (AA-/Aa)
$1,500,000 7.20% 07/01/02 $1,615,245
- -----------------------------------------------------------------------------------------------------
WISCONSIN--2.9%
Oshkosh, WI Water Rev. BANS Series C (MIG1)
$1,000,000 4.88% 01/01/00 $1,005,870
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
DEBT OBLIGATIONS (CONTINUED)
WYOMING--4.6%
Uinta County, WY School District Series A (FSA) (AAA/Aaa)
$1,500,000 6.88% 06/01/00 $ 1,597,935
- ---------------------------------------------------------------------------------------------------
Total Debt Obligations (Cost $35,077,329) $35,457,368
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $35,077,329)(A) $35,457,368
- ---------------------------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which
value exceeds cost $385,094
Gross unrealized loss for investments in which cost
exceeds value (5,055)
- ---------------------------------------------------------------------------------------------------
Net unrealized gain $380,039
- ---------------------------------------------------------------------------------------------------
</TABLE>
(a) The amount stated also represents aggregate cost for federal income tax
purposes.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
INVESTMENT ABBREVIATIONS:
BANS--Bond Anticipation Notes
BIGI--Bond Investors Guaranty Corporation
COPS--Certificates of Participation
FGIC--Insured by Financial GuarantyInsurance Co.
FSA --Financial Security Assurance Co.
GO --General Obligation
IDA --Industrial Development Authority
RB --Revenue Bond
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<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.
NEW SHARE CLASSES
To accommodate different clients' needs and preferences, the fund added three
new share classes during the period under review. Class A and B shares opened
on May 1, 1997 and C shares opened on August 15, 1997.
PERFORMANCE REVIEW
During the period under review, the fund's Institutional and Administration
shares outperformed the Index. The strongest performing sectors were
collateralized mortgage obligations (CMOs) and corporate bonds, which benefited
from an accommodative economic environment and high investor demand. The fund's
newer share classes -- Class A, B and C -- also recorded positive results.
However, the relative returns of these classes lagged because they began
operations during the second half of the fiscal year, after most of the gains
from corporate, mortgage and emerging market debt had been achieved. In
addition, the fund's Service shares recorded a positive return, but trailed the
benchmark.
We are pleased to report that the fund performed well relative to its peers.
For the three-year period ended October 31, 1997, the fund's Institutional
shares were
PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
INSTITUTIONAL ADMINISTRATION SERVICE CLASS A* CLASS B* CLASS C*
(10/31/96- (10/31/96- (10/31/96- (5/1/97- (5/1/97- (8/15/97-
10/31/97) 10/31/97) 10/31/97 10/31/97) 10/31/97) 10/31/97)
------------- -------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total Return (based on
net asset value [NAV]) 9.19% 8.92% 8.65% 6.94% 6.63% 2.74%
Return From Monthly
Distributions 6.76% 6.50% 6.23% 3.18% 2.78% 1.12%
Return From Price
Appreciation 2.43% 2.42% 2.42% 3.76% 3.85% 1.62%
Lehman Brothers
Aggregate Bond Index
Total Return 8.89% 8.89% 8.89% 7.07% 7.07% 2.95%
NAV (as of 10/31/97) $10.08 $10.07 $10.09 $10.06 $10.09 $10.09
NAV Change +$0.23 +$0.23 +$0.23 +$0.36 +$0.37 +$0.16
Total Distributions Paid
Per Share+ $0.64 $0.62 $0.59 $0.30 $0.27 $0.11
</TABLE>
* New share class opened during the period. Performance and NAV change are
cumulative from inception date.
+ 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.
All performance figures represent past performance and in no way guarantee
future results, which will fluctuate as market conditions change. The
investment return and principal value of an investment in the fund will
fluctuate, and therefore an investor's shares when redeemed may be worth more
or less than their original cost. Goldman, Sachs & Co., the distributor of the
fund, is not a bank, and fund shares distributed by Goldman, Sachs & Co. are
not deposits or obligations of, or endorsed or guaranteed by, any bank or
depository institution, nor are they insured by the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board or any other government agency.
27
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
rated four stars (in a universe of 1,338 taxable bond funds) by Morningstar,
Inc., an independent rating agency./1/
The fund also fared well versus its peers in Lipper Analytical Services,
Inc.'s intermediate investment-grade debt fund category. For the 12-month
period ended October 31, the fund's Institutional and Administration shares
both ranked within the top 20% of their peer group (26th and 36th,
respectively, out of 195 funds). The fund's Service shares also did well,
placing within the top quartile of the Lipper category (44th of 195 funds).
(Lipper did not rank the fund's Class A, B and C shares for the 12-month period
because they have been in existence less than 12 months. Please note that
Lipper rankings do not take sales charges into account and that past
performance is no guarantee of future results.)
PORTFOLIO COMPOSITION AND INVESTMENT STRATEGIES
During the period, we continued to emphasize securities that are
fundamentally good credit quality and/or have relatively limited exposure to
interest rate movements, such as seasoned mortgage-backed issues. Within this
overall strategy, we actively used our extensive research resources to identify
attractive sectors and securities that enabled us to add incremental yield
relative to Treasuries.
- --------
/1/Source: (C)1997 Morningstar, Inc. All rights reserved. Morningstar
proprietary ratings reflect historical risk-adjusted performance as of
10/31/97. 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 ten-year average annual returns (where applicable) in excess
of 90-day Treasury bill returns with appropriate fee and sales charge
adjustments and a risk factor that reflects fund performance below 90-day
Treasury bill returns. The Morningstar ratings apply only to the fund's
Institutional shares; the fund's Administration, Service, A, B and C shares
have not been rated. The Administration, Service, A, B and C 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.
PORTFOLIO COMPOSITION AS OF OCTOBER 31, 1997*
[PIE CHART]
Emerging Market Debt 5.0%
CMOs 12.6%
ABSs 13.1%
U.S. Treasury 15.7%
Fixed Rate Mortgage Pass-Throughs 24.8%
Corporate Bonds 28.8%
*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. As of October 31, the portfolio held a 28.8% position in
corporate bonds, compared with the Index's 19.2% allocation. During the last 12
months, corporate spreads widened significantly, almost entirely due to the
sector coming under pressure in October in the wake of the financial turmoil in
Asia. However, the fund's investments in the sector benefited its 12-month
performance. As is our investment philosophy, we focused on shorter duration
bonds than the Index to add incremental yield without significantly increasing
overall volatility, and these securities fared well relative to the overall
sector. The fund's corporate holdings consisted primarily of financial issues,
such as CAPITAL ONE BANK (1.9% of the portfolio as of October 31) and
COUNTRYWIDE FUNDING CORP. (1.1%), and industrial issues, such as TIME WARNER
INC. (3.1%) and TCI COMMUNICATIONS, INC. (1.0%).
. Fixed Rate Mortgage Pass-Throughs. The fund held a 24.8% position in fixed
rate mortgage pass-throughs at the end of the period, approximately the same
weighting as a year earlier. We continued to underweight the sector relative to
the Index (29.8%),
- --------------------------------------- ---------------------------------------
28
<PAGE>
Letter to Shareholders
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE FIXED INCOME FUND (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
as yield spreads narrowed from already tight levels and upside potential
appeared limited.
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 high-grade liquid debt securities equal to the dollar amount of
the forward commitment in a segregated account with the fund's custodian.
. U.S. Treasuries. U.S. Treasuries represented 15.7% of the portfolio as of the
end of the period. We significantly underweighted Treasuries compared with the
Index (43.5%) in favor of "spread" sectors such as corporate bonds and asset-
backed securities that offered more compelling return potential.
. Asset-Backed Securities (ABS). As of October 31, the portfolio was
significantly overweighted in ABS securities in relation to the Index, 13.1%
versus 1.0%. ABSs continued to perform well during the period, but heavy
issuance during the second half of the period caused yield spreads to widen and
restrained the sector's relative performance. Within the sector, the fund held
primarily credit card receivables (7.5%), with smaller positions in home equity
receivables (3.0%) and other receivables (2.6%).
. CMOs. The fund's CMO weighting was 12.6%, up from 9.8% a year earlier. CMOs
appeared increasingly attractive during the period because of diminishing
yield-enhancement opportunities in other sectors, such as fixed rate mortgage
pass-throughs, where spreads remained tight. Within the sector, 7.9% were
sequential-pay/support CMOs, 3.7% were planned amortization class (PAC) CMOs
and 1.0% were PAC interest-only (IO) securities.
. Emerging Market Debt. As of October 31, emerging market debt represented 5.0%
of the portfolio. During the period, we controlled the fund's exposure in the
sector by stressing high-credit-quality, short-duration bonds. Geographically,
most of the sector's holdings were in Latin America, which was attractive
because structural and economic reforms in this region are helping strengthen
credit fundamentals. Though the fund's investments in emerging market debt
contributed to performance during most of the period, the sector more than gave
up its gains in October, when financial turmoil in Asia spread to other
emerging markets.
. Duration. During the period, we continued to match the fund's duration to
that of the Index, partly through the use of financial futures. Rather than
attempting to predict the direction of interest rates, we seek to add
incremental return over the Index through our sector weightings, as well as
individual security selection. As of October 31, the fund's duration was 4.6
years, in line with the Index (4.4 years).
. Credit Quality. As of October 31, nearly half of the portfolio was invested
in government and agency securities (44.3%), with another 19.1% invested in
triple-A-rated securities. The remainder of the portfolio was made up of
double-A-rated securities (2.5%), single-A-rated securities (12.1%) and triple-
B-rated securities (22.0%).
MARKET OUTLOOK
Although the economy and interest rate movements continue to appear
supportive of the fixed income market, recent volatility emanating from
Southeast Asia has altered the sector-to-sector relationships that have
persisted through most of the past year.
In the corporate market, Asia-related uncertainty has put pressure on yield
spreads, and the sector may continue to experience selling pressure arising
from year-end window dressing. Though we have a somewhat cautious view of
corporates, we view the sector's recent
29
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
underperformance as a potential buying opportunity, particularly for securities
with no exposure to Asia. In addition, we expect some spread compression over
the next three to six months based on positive company fundamentals.
The spillover from Asia also caused the spreads of mortgage-backed securities
to widen somewhat relative to Treasuries, but the sector generally held up
better than corporate and emerging market debt. Therefore, these securities may
be less compelling near term than they were previously. In the mortgage pass-
through sector, lower coupon pass-throughs underperformed higher coupon pass-
throughs during this volatile period and, as a result, currently represent a
more attractive risk/return trade-off.
Similarly, the ABS sector was impacted at the end of the period. Although
investors have been buying selectively at these wider yield spread levels, we
believe the sector may remain soft through year-end due to heavy issuance and
the Asian situation. Finally, we believe that fundamentals remain sound in most
of the emerging markets in which the fund has invested. Given a period of
recovery and stability in global equity markets, we expect yield spreads in the
sector to recover from their recent slide.
/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
November 28, 1997
- --------------------------------------- ---------------------------------------
30
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE FIXED INCOME FUND
October 31, 1997
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1997. The
performance for each class of the Goldman Sachs Core Fixed Income Fund
(assuming both the maximum sales charge of 4.5% and no sales charge for Class A
shares and the appropriate redemption fee and no redemption fee for the Class B
and Class C shares), is compared to its benchmark, the Lehman Brothers
Aggregate Bond Index ("Lehman Aggregate Index"). All performance data shown
represents past performance and should not be considered indicative of future
performance which will fluctuate as market conditions change. The investment
return and principal value of an investment will fluctuate with changes in
market conditions so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
Institutional Shares
[GRAPH]
Institutional Shares Lehman Aggregate
Index
-------------------- ----------------
5/1/94 50,000 50,000
10/31/94 48,500 46,980
10/31/95 56,124 54,332
10/31/96 59,492 57,505
10/31/97 64,955 62,617
Administration Shares
[GRAPH]
Administration Shares Lehman Aggregate
Index
--------------------- ----------------
2/28/96 50,000 50,000
10/31/96 51,780 51,870
10/31/97 56,400 56,480
Service Shares
[GRAPH]
Service Shares Lehman Aggregate
Index
-------------- ----------------
3/13/96 50,000 50,000
10/31/96 52,450 52,470
10/31/97 56,985 57,140
- --------------------------------------- ---------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares
[GRAPH]
Class A Shares Class A Shares Lehman Aggregate
(No Sales Charge) (W/Sales Charge) Index
----------------- ---------------- ---------------
5/1/97 10,000 9,550 10,000
10/31/97 10,694 10,213 10,707
Class B Shares
[GRAPH]
Class B Shares Class B Shares Lehman Aggregate
(No Sales Charge) (W/Sales Charge) Index
----------------- ---------------- ---------------
5/1/97 10,000 10,000 10,000
10/31/97 10,663 10,163 10,707
Class C Shares
[GRAPH]
Class C Shares Class C Shares Lehman Aggregate
(No Sales Charge) (W/Sales Charge) Index
----------------- ---------------- ---------------
8/15/97 10,000 10,000 10,000
10/31/97 10,274 10,174 10,295
<TABLE>
-------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-------------------
ONE YEAR SINCE INCEPTION(A)
--------------------------------------------------
<S> <C> <C>
Institutional Shares 9.19% 7.08%
--------------------------------------------------
Administration Shares 8.92% 7.45%
--------------------------------------------------
Service Shares 8.65% 8.31%
--------------------------------------------------
Class A Shares, excluding
sales charge N/A 6.94%(b)
--------------------------------------------------
Class A Shares, including
sales charge N/A 2.31%(b)
--------------------------------------------------
Class B Shares, excluding
redemption charge N/A 6.63%(b)
--------------------------------------------------
Class B Shares, including
redemption charge N/A 1.63%(b)
--------------------------------------------------
Class C Shares, excluding
redemption charge N/A 2.74%(b)
--------------------------------------------------
Class C Shares, including
redemption charge N/A 1.74%(b)
--------------------------------------------------
</TABLE>
(a) The Institutional, Administration, Service Class A, Class B and Class C
shares commenced operations January 5, 1994, February 28, 1996, March 13,
1996, May 1, 1997, May 1, 1997 and August 15, 1997, respectively.
(b) An aggregate total return (not annualized) is shown instead of an average
annual total return since these shares have not completed a full twelve
months of operations.
- --------------------------------------- ---------------------------------------
32
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE FIXED INCOME FUND
October 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS--27.3%
FINANCE BONDS--11.2%
Advanta National Bank U.S.A.
$ 345,000 6.43% 04/30/98 $ 345,169
BankAmerica Corp.
300,000 7.75 07/15/02 317,286
Capital One Bank
600,000 6.66 02/03/00 604,032
400,000 6.88 04/24/00 406,476
800,000 6.58 04/17/01 802,552
500,000 6.60 08/20/01 501,645
Capital One Financial Corp.
355,000 7.25 12/01/03 360,236
Conseco, Inc.
340,000 10.50 12/15/04 410,683
170,000 8.70 11/15/26 183,806
Continental Bank N.A.
525,000 11.25 07/01/01 542,173
Countrywide Capital Corp.
325,000 8.05 06/15/27 339,037
Countrywide Funding Corp.
125,000 6.08 07/14/99 125,358
250,000 8.43 11/16/99 261,593
250,000 7.75 08/10/01 263,278
700,000 6.38 10/08/02 705,957
Ford Capital Corp.
300,000 9.50 07/01/01 330,795
General Motors Acceptance Corp.
275,000 7.63 03/09/98 276,653
200,000 7.13 05/10/00 204,470
375,000 9.63 12/15/01 417,956
Meditrust, Inc.
390,000 7.82 09/10/26 420,467
MIC Finance Trust(f)
360,000 8.38 02/01/27 382,338
PXRE Capital Trust I
165,000 8.85 02/01/27 180,205
Sears Roebuck Acceptance Corp.
500,000 6.93 10/03/02 510,400
Security Pacific Corp.(a)
995,000 11.50 11/15/00 1,137,812
Signet Banking Corp.
240,000 9.63 06/01/99 252,698
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS (CONTINUED)
FINANCE BONDS (CONTINUED)
Taubman Realty Group
$ 480,000 8.00% 07/30/01 $ 501,998
Washington Real Estate Investment Trust
120,000 7.13 08/13/03 123,164
- ---------------------------------------------------------------------------------------------------
$10,908,237
- ---------------------------------------------------------------------------------------------------
INDUSTRIAL BONDS--14.5%
360 Communications Co.
$ 525,000 7.13% 03/01/03 $ 531,536
Comcast Cable Communications
400,000 8.13 05/01/04 432,112
Continental Airlines, Inc.
339,989 7.75 07/02/14 367,487
553,994 8.56 07/02/14 621,554
Edison Mission Energy Funding Corp.(f)
161,128 6.77 09/15/03 163,191
Global Marine, Inc.
490,000 12.75 12/15/99 505,313
Harrahs Oper, Inc.
300,000 8.75 03/15/00 308,250
Hertz Corp.
200,000 6.00 01/15/03 197,192
500,000 7.00 07/15/03 513,845
Liberty Property LP
340,000 7.10 08/15/04 347,579
Manor Care, Inc.
350,000 9.50 11/15/02 364,000
Northwest Airlines Corp.
158,915 8.26 03/10/06 170,605
564,827 8.97 01/02/15 615,430
RJR Nabisco Inc.
375,000 8.00 07/15/01 387,443
550,000 8.63 12/01/02 585,866
Sci Television, Inc.
700,000 11.00 06/30/05 740,250
TCI Communications, Inc.
560,000 8.00 08/01/05 593,034
275,000 6.82 09/15/10 276,306
290,000 8.75 08/01/15 319,017
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CORPORATE BONDS (CONTINUED)
INDUSTRIAL BONDS (CONTINUED)
Tele-Communications, Inc.
$ 100,000 7.13% 02/02/98 $ 100,176
300,000 8.25 01/15/03 318,423
Time Warner, Inc.
1,650,000 7.95 02/01/00 1,704,830
1,350,000 9.63 05/01/02 1,509,773
400,000 7.98 08/15/04 424,560
U.S. Airways Inc.
546,412 6.76 04/15/08 556,099
USI American Holdings
150,000 7.25 12/01/06 154,859
Viacom, Inc.
500,000 6.75 01/15/03 489,500
Worldcom, Inc.
300,000 9.38 01/15/04 319,518
450,000 8.88 01/15/06 490,820
- ---------------------------------------------------------------------------------------------------
$14,108,568
- ---------------------------------------------------------------------------------------------------
UTILITY BONDS--1.6%
California Energy, Inc.
$ 735,000 10.25% 01/15/04 $ 805,237
Central Maine Power Co.
330,000 7.45 08/30/99 333,752
Salton Sea Funding
472,907 7.02 05/30/00 476,705
- ---------------------------------------------------------------------------------------------------
$ 1,615,694
- ---------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $26,055,654) $26,632,499
- ---------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--13.7%
AFC Series 1997-1, Class A
$ 958,488 5.88% 07/25/27 $ 955,190
Airplanes Pass Through Trust Series 1, Class C
155,000 8.15 03/15/19 164,081
Chevy Chase Auto Receivables Trust Series 1995-2, Class A
129,808 5.80 06/15/02 129,604
Discover Card Master Trust 1996-4, Class A(a)
1,910,000 6.00 10/16/13 1,932,080
Discover Card Master Trust 1996-4, Class B
1,100,000 6.18 10/16/13 1,103,091
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
DVI Equipment Lease Trust Series 1996-1, Class A(f)
$ 882,127 6.55% 07/10/04 $ 889,025
EQCC Home Equity Loan Trust Series 1997-3, Class A
1,829,645 5.80 11/15/28 1,829,645
General Motors Acceptance Corp. Series 1995, Class A
45,590 7.15 03/15/00 45,860
General Motors Acceptance Corp. Series 1997-C1, Class A3
1,000,000 6.87 08/15/07 1,042,460
H + T Master Trust(f)
550,000 8.06 08/15/02 549,483
MBNA Credit Card Master Trust
1,750,000 5.88 04/15/09 1,745,065
Olympic Automobile Receivables Trust, Series 1994-B, Class A2
182,886 6.85 06/15/01 185,774
Premier Auto Trust Series 1995-1, Class A5
15,449 7.90 05/04/99 15,473
Sears Credit Account Master Trust, Series 1996-1, Class A
680,000 6.20 02/16/06 679,572
Sears Credit Account Master Trust, Series 1995-2, Class A
550,000 8.10 06/15/04 569,074
Sears Credit Card Master Trust, Series 1995-3, Class A
300,000 7.00 10/15/04 305,718
Standard Credit Card Master Trust, Series 1994-4, Class A
680,000 8.25 11/07/03 726,961
World Financial Tower B Series 1996, Class B
495,732 6.91 09/01/13 513,995
- --------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $13,331,331) $13,382,151
- --------------------------------------------------------------------------------------------------
EMERGING MARKET DEBT--4.8%
Bancoldex
$ 490,000 8.63% 06/02/00 $ 507,929
Bridas Corp.
110,000 12.50 11/15/99 117,700
120,000 12.50 06/10/03 147,590
Corp. Andina de Fomento
500,000 6.63 10/14/98 502,240
Empresa Columbiana de Petroleos
1,040,000 7.25 07/08/98 1,045,647
Financiera Energy Nacional(f)
400,000 9.38 06/15/06 436,440
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
GOLDMAN SACHS CORE FIXED INCOME FUND (continued)
October 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
EMERGING MARKET DEBT (CONTINUED)
Instituto de Fomento Industrial
$ 90,000 8.38% 07/29/01 $ 93,803
Perez Companc
510,000 9.00 01/30/04 543,941
Republic of Colombia
30,000 7.12 05/11/98 30,117
Republic of Croatia(f)
310,000 7.00 02/27/02 308,081
Sampoerna International Finance Co.(f)
200,000 8.38 06/15/06 188,146
YPF Sociedad Anonima
585,602 7.50 10/26/02 598,778
109,536 7.00 10/26/02 111,785
- -------------------------------------------------------------------------------------------------
TOTAL EMERGING MARKET DEBT
(COST $4,600,060) $ 4,632,197
- -------------------------------------------------------------------------------------------------
GOVERNMENT BONDS--0.6%
Province of Quebec
$ 520,000 13.25% 09/15/14 $ 605,956
- -------------------------------------------------------------------------------------------------
TOTAL GOVERNMENT BONDS
(COST $651,597) $ 605,956
- -------------------------------------------------------------------------------------------------
MORTGAGE BACKED OBLIGATIONS--35.7%
Asset Securitization Corp. Series 4, Class A
$ 900,000 7.49% 04/14/27 $ 969,398
Collateralized Mortgage Obligation Trust Series 63, Class Z
943,625 9.00 10/20/20 1,027,957
Federal Home Loan Mortgage Corp. (FHLMC)
1,000,000 6.35 03/25/18 1,004,680
1,000,000 7.00 TBA-15 Yr(b) 1,014,060
1,000,000 6.50 TBA-15 Yr(b) 999,680
2,500,000 7.50 TBA-30 Yr(b) 2,556,250
Federal Home Loan Mortgage Corp. Series 21, Class Z
496,200 5.40 05/25/16 485,964
Federal National Mortgage Association (FNMA)
1,997,933 6.50 11/01/26 1,967,345
2,000,000 6.50 TBA-7 Yr(b) 2,004,360
1,000,000 7.50 TBA-15 Yr(b) 1,025,620
6,000,000 7.00 TBA-30-Yr(b) 6,018,720
First Union-Lehman Brothers Commercial Mortgage Services Series 1997-C1,
Class A2
600,000 7.30 12/18/06 633,703
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE BACKED OBLIGATIONS (CONTINUED)
FNMA Remic Trust Series 1997-70, Class AB
$1,250,000 6.50% 09/25/22 $ 1,244,125
FNMA Remic Trust Series 31, Class PJ
750,000 6.55 10/25/20 758,670
GE Capital Mortgage Services, Inc. Series 1994-17, Class A10(a)
2,000,000 7.00 05/25/24 1,926,860
Government National Mortgage Association (GNMA)
309,342 8.00 02/15/17 325,174
27,346 7.00 11/15/22 27,590
350,954 7.00 12/15/22 354,134
592,628 7.00 12/15/22 597,997
172,753 7.00 01/15/23 174,209
747,912 7.50 03/15/23 767,072
737,159 7.00 05/15/23 743,373
113,223 7.50 08/15/23 116,124
36,858 7.00 11/15/23 37,168
2,000,000 7.00 TBA-30 Yr(b) 2,011,240
3,000,000 7.50 TBA-30 Yr(b) 3,067,500
JP Morgan Commercial Mortgage Finance Corp., Series 1997-C4
1,000,000 7.32 12/26/28 1,045,625
Morgan Stanley Capital Commercial Mortgage, Inc. Series 1997-C1
900,000 7.46 05/15/06 943,313
Prudential Home Mortgage Securities Corp. 1992-39 A8
1,000,000 7.23 12/25/07 933,310
- -----------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(COST $34,183,128) $34,781,221
- -----------------------------------------------------------------------------------------------
SOVEREIGN CREDIT--0.4%
State of Israel
$ 370,000 6.38% 12/15/05 $ 363,177
- -----------------------------------------------------------------------------------------------
TOTAL SOVEREIGN CREDIT
(COST $347,343) $ 363,177
- -----------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--15.5%
United States Treasury Bonds
$1,800,000 7.50% 11/15/16 $ 2,059,596
1,600,000 8.75 05/15/20 2,086,000
1,400,000 7.88 02/15/21 1,680,224
1,740,000(a) 7.63 02/15/25 2,060,264
United States Treasury Interest-Only Stripped Securities(c)
2,250,000 6.14 08/15/09 1,103,985
350,000 6.20 11/15/10 158,235
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATIONS (CONTINUED)
United States Treasury Notes
$ 1,750,000 6.88% 08/31/99 $ 1,786,645
1,530,000(a) 5.63 11/30/00 1,525,456
United States Treasury Principal-Only Stripped Securities(d)
40,000 4.59 11/15/97 39,928
1,900,000 5.86 11/15/04 1,260,137
5,730,000 6.35 05/15/20 1,396,344
- ----------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $14,136,252) $ 15,156,814
- ----------------------------------------------------------------------------------------------
YANKEE BONDS--0.3%
Korea Electric Power
$ 260,512 7.40% 04/01/16 $ 280,113
- ----------------------------------------------------------------------------------------------
TOTAL YANKEE BONDS
(COST $251,907) $ 280,113
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--23.6%
Joint Repurchase Agreement Account(a)
$ 23,000,000 5.76% 11/03/97 $ 23,000,000
- ----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $23,000,000) $ 23,000,000
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $116,557,272(E)) $118,834,128
- ----------------------------------------------------------------------------------------------
</TABLE>
Futures contracts open at October 31, 1997 are as follows:
<TABLE>
<CAPTION>
Number of
Contracts Settlement Unrealized
Type Long(g) Month Gain
- --------------------------- --------- ------------- ----------
<S> <C> <C> <C>
Euro Dollars 8 March 1998 $ 7,100
Euro Dollars 5 June 1998 7,687
Euro Dollars 13 December 1997 10,838
U.S. 20 Year Long Term Bond 12 December 1997 67,243
-------
$92,878
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
FEDERAL INCOME TAX
INFORMATION:
Gross unrealized
gain for
investments in
which value
exceeds cost $2,430,736
Gross unrealized
loss for
investments in
which cost
exceeds value (154,123)
- -----------------------------
Net unrealized
gain $2,276,613
- -----------------------------
</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 coupon rate due to
the amortization of related premiums.
(d) The interest rate disclosed for these securities represents effective
yields to maturity.
(e) The aggregate cost for federal income tax purposes is $116,557,515.
(f) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. Such securities may be resold, normally to qualified
institutional buyers in transactions exempt from registration. Total market
value of Rule 144A securities amounted to $2,916,704, as of October 31,
1997.
(g) Each Euro Dollar contract represents $1,000,000 in notional par value. Each
U.S. 20 Year Long Term Bond contract represents $100,000 in notional par
value. The total notional amount and market value at risk are $27,200,000
and $7,547,450, respectively. The determination of notional amounts as
presented here are indicative only of volume of activity and not a measure
of market risk.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
Goldman Sachs Trust-Fixed Income Funds
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADJUSTABLE SHORT SHORT
RATE DURATION DURATION CORE FIXED
GOVERNMENT GOVERNMENT TAX-FREE INCOME
FUND FUND FUND FUND
-----------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in
securities, at value
(cost $499,416,127,
$119,444,006,
$35,077,329 and
$116,557,272) $502,491,257 $120,630,286 $35,457,368 $118,834,128
Cash, at value 1,002,701 48,600 100,138 101,219
Receivables:
Investment securities
sold 481,728 -- -- 11,510,991
Interest 6,932,682 1,239,579 492,577 1,200,720
Forward foreign
currency exchange
contracts -- -- -- 28,856
Fund shares sold 1,193,824 291,539 63,759 2,590,249
Variation margin -- -- -- 3,750
Foreign tax withheld -- -- -- 11,701
Deferred organization
expenses, net -- -- -- 28,857
Other assets 144,366 168,332 106,594 106,187
- --------------------------------------------------------------------------------
Total assets 512,246,558 122,378,336 36,220,436 134,416,658
- --------------------------------------------------------------------------------
LIABILITIES:
Payables:
Dividends 1,140,745 122,452 20,503 81,756
Investment securities
purchased -- -- 1,029,971 32,185,322
Fund shares repurchased 753,042 3,572,776 3,580 4,539,342
Management fees 175,884 38,181 10,743 34,029
Authorized dealer
service fees 28,171 3,946 1,807 4,380
Transfer agent fees 38,225 35,000 25,000 29,000
Variation margin 23,556 16,631 -- --
Accrued expenses and
other liabilities 44,038 35,415 48,967 39,948
- --------------------------------------------------------------------------------
Total liabilities 2,203,661 3,824,401 1,140,571 36,913,777
- --------------------------------------------------------------------------------
NET ASSETS:
Paid in capital 559,794,391 131,211,275 38,514,053 94,565,068
Accumulated
undistributed
(distributions in
excess of) net
investment income (3,387,447) 693,874 110,881 91,922
Accumulated net realized
gain (loss) on
investment transactions (49,005,224) (14,496,297) (3,925,108) 496,568
Accumulated net realized
foreign currency loss -- -- -- (20,743)
Net unrealized gain on
investments and futures 2,641,177 1,145,083 380,039 2,370,066
- --------------------------------------------------------------------------------
Net assets $510,042,897 $118,553,935 $35,079,865 $ 97,502,881
- --------------------------------------------------------------------------------
NET ASSET VALUE,
OFFERING AND REDEMPTION
PRICE PER SHARE:(A)
Institutional $9.88 $9.86 $10.07 $10.08
Administration $9.88 $9.89 $10.07 $10.07
Service $9.88 $9.86 $10.07 $10.09
Class A $9.88 $9.88 $10.08 $10.06
Class B -- $9.86 $10.08 $10.09
Class C -- $9.86 $10.07 $10.09
- --------------------------------------------------------------------------------
SHARES OUTSTANDING:
Institutional 46,911,214 10,515,184 2,860,956 7,858,088
Administration 282,644 107,210 7,675 612,842
Service 35,020 338,434 203,593 185,166
Class A 4,390,774 960,218 398,986 927,888
Class B -- 75,741 10,529 61,503
Class C -- 19,318 160 27,004
- --------------------------------------------------------------------------------
Total shares
outstanding, $.001 par
value (unlimited number
of shares authorized) 51,619,652 12,016,105 3,481,899 9,672,491
- --------------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share for Class A shares is $10.03
(NAV x 1.0152), $10.08 (NAV x 1.0205), $10.29 (NAV x 1.0205) and $10.53
(NAV x 1.0467) for Adjustable Rate Government Fund, Short Duration
Government Fund, Short Duration Tax-Free Fund and Core Fixed Income Fund,
respectively. At redemption, Class B and Class C shares may be subject to a
contingent deferred sales charge, assessed on the amount equal to the
lesser of the current net asset value or the original purchase price of the
shares.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADJUSTABLE SHORT SHORT
RATE DURATION DURATION CORE FIXED
GOVERNMENT GOVERNMENT TAX-FREE INCOME
FUND FUND FUND FUND
-----------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest(a) $37,092,868 $7,267,514 $1,667,490 $5,835,747
- --------------------------------------------------------------------------------
TOTAL INCOME 37,092,868 7,267,514 1,667,490 5,835,747
- --------------------------------------------------------------------------------
EXPENSES:
Management fees 2,293,118 528,290 144,157 334,580
Distribution fees 81,928 5,496 2,562 5,597
Authorized dealer service fees 81,928 4,313 2,430 4,832
Administration fees 9,699 3,203 222 14,647
Service share fees 292 12,087 6,435 6,207
Custodian fees 142,225 78,176 61,325 99,826
Transfer agent fees 272,449 77,989 61,185 85,882
Professional fees 61,689 61,175 60,977 59,491
Registration fees 63,360 60,298 59,192 59,746
Amortization of deferred
organization expenses -- -- 20,748 24,495
Trustee fees 11,603 2,008 669 1,562
Other 141,714 59,471 37,171 27,023
- --------------------------------------------------------------------------------
TOTAL EXPENSES 3,160,005 892,506 457,073 723,888
LESS--EXPENSES REIMBURSABLE
AND FEES WAIVED BY GOLDMAN
SACHS (273,667) (395,037) (284,692) (315,780)
- --------------------------------------------------------------------------------
NET EXPENSES 2,886,338 497,469 172,381 408,108
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 34,206,530 6,770,045 1,495,109 5,427,639
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS,
FUTURES AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) from:
Investment transactions 992,797 425,241 188,340 757,880
Futures transactions (915,851) (379,727) 26,421 (25,706)
Net change in unrealized gain
(loss) on:
Investments 3,836,966 559,084 177,615 1,445,461
Futures (577,907) (74,078) -- (5,006)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENT, FUTURES
AND FOREIGN CURRENCY
TRANSACTIONS 3,336,005 530,520 392,376 2,172,629
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $37,542,535 $7,300,565 $1,887,485 $7,600,268
- --------------------------------------------------------------------------------
</TABLE>
(a)Net of $3,396 in foreign withholding tax for the Core Fixed Income Fund.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADJUSTABLE SHORT SHORT
RATE DURATION DURATION
GOVERNMENT GOVERNMENT TAX-FREE CORE FIXED
FUND FUND FUND INCOME FUND
-------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 34,206,530 $ 6,770,045 $ 1,495,109 $ 5,427,639
Net realized gain from
investment and futures
transactions 76,946 45,514 214,761 732,174
Net change in unrealized
gain (loss) on
investments and futures 3,259,059 485,006 177,615 1,440,455
- ----------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations 37,542,535 7,300,565 1,887,485 7,600,268
- ----------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Institutional Shares (32,067,893) (6,559,922) (1,407,585) (4,853,239)
Administration Shares (222,274) (79,521) (3,501) (365,897)
Service Shares (3,287) (145,168) (47,115) (74,035)
Class A (1,858,740) (85,889) (36,026) (107,876)
Class B -- (12,146) (864) (7,255)
Class C -- (632) (18) (778)
- ----------------------------------------------------------------------------------
Total distributions to
shareholders (34,152,194) (6,883,278) (1,495,109) (5,409,080)
- ----------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales
of shares 398,400,844 61,888,188 28,091,361 38,830,106
Reinvestment of
dividends and
distributions 20,070,536 4,611,022 1,232,957 4,813,853
Cost of shares
repurchased (539,487,702) (50,380,123) (30,193,481) (21,476,685)
- ----------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting from
share transactions (121,016,322) 16,119,087 (869,163) 22,167,274
- ----------------------------------------------------------------------------------
Total increase
(decrease) (117,625,981) 16,536,374 (476,787) 24,358,462
NET ASSETS:
Beginning of year $ 627,668,878 $102,017,561 $ 35,556,652 $ 73,144,419
- ----------------------------------------------------------------------------------
End of year $ 510,042,897 $118,553,935 $ 35,079,865 $ 97,502,881
- ----------------------------------------------------------------------------------
Accumulated
undistributed
(distributions in
excess of) net
investment income $ (3,387,447) $ 693,874 $ 110,811 $ 91,922
- ----------------------------------------------------------------------------------
SUMMARY OF SHARE
TRANSACTIONS:
Shares sold 40,410,416 6,299,174 2,811,858 3,921,467
Reinvestment of
dividends and
distributions 2,035,282 470,422 123,190 488,221
Shares repurchased (54,710,526) (5,133,401) (3,022,098) (2,159,541)
- ----------------------------------------------------------------------------------
Net increase (decrease)
in shares outstanding (12,264,828) 1,636,195 (87,050) 2,250,147
- ----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADJUSTABLE SHORT SHORT
RATE DURATION DURATION
GOVERNMENT GOVERNMENT TAX-FREE CORE FIXED
FUND FUND FUND INCOME FUND
----------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 37,031,818 $ 6,604,446 $ 1,786,304 $ 4,013,477
Net realized gain (loss)
from investment and
futures transactions (2,502,624) (567,819) 331,638 (253,420)
Net change in unrealized
gain (loss) on
investments and futures 7,711,106 619,618 (396,071) (75,350)
- -------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations 42,240,300 6,656,245 1,721,871 3,684,707
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Institutional shares (36,233,589) (6,561,519) (1,766,892) (4,019,797)
Administration shares (220,450) (2,548) (2,032) (19,144)
Service shares -- (14,792) (17,380) (5,349)
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 -- -- -- (450,016)
- -------------------------------------------------------------------------------
Total distributions to
shareholders (38,364,548) (6,578,859) (1,786,304) (4,494,306)
- -------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales
of shares 406,586,374 42,019,441 22,248,684 21,976,567
Reinvestment of
dividends and
distributions 18,181,648 4,153,816 1,401,492 4,315,748
Cost of shares
repurchased (477,107,914) (47,993,112) (46,918,400) (7,840,575)
- -------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting from
share transactions (52,339,892) (1,819,855) (23,268,224) 18,451,740
- -------------------------------------------------------------------------------
Total increase
(decrease) (48,464,140) (1,742,469) (23,332,657) 17,642,141
NET ASSETS:
Beginning of year $676,133,018 $103,760,030 $58,889,309 $55,502,278
- -------------------------------------------------------------------------------
End of year $627,668,878 $102,017,561 $35,556,652 $73,144,419
- -------------------------------------------------------------------------------
Accumulated
undistributed
(distributions in
excess of) net
investment income $ (3,441,783) $ 770,624 $ 90,133 $ 33,551
- -------------------------------------------------------------------------------
SUMMARY OF SHARE
TRANSACTIONS:
Shares sold 41,534,978 4,293,467 2,233,482 2,244,430
Reinvestment of
dividends and
distributions 1,856,783 424,274 140,950 439,299
Shares repurchased (48,741,470) (4,905,357) (4,727,959) (811,075)
- -------------------------------------------------------------------------------
Net increase (decrease)
in shares outstanding (5,349,709) (187,616) (2,353,527) 1,872,654
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
1. ORGANIZATION
Goldman Sachs Trust (the "Trust") is 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". Short
Duration Government, Short Duration Tax-Free and Core Fixed Income are
diversified portfolios of the Trust offering six classes of shares--
Institutional shares, Administration shares, Service shares, Class A shares,
Class B shares and Class C shares. The Adjustable Rate Government Fund is a
diversified portfolio of the Trust offering four classes of shares--
Institutional, Administration, Service and 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 of certain of the funds.
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
Portfolio securities for which accurate market quotations are readily available
are valued on the basis of quotations furnished by a pricing service or
provided by dealers in such securities. Portfolio securities for which accurate
market quotations are not readily available are valued 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.
C. Foreign Currency Translations
Amounts denominated in foreign currencies are translated into U.S. dollars on
the following basis:
41
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
(i) investment valuations, other assets and liabilities initially expressed in
foreign currencies are converted each business day into U.S. dollars based upon
current exchange rates; (ii) purchases and sales of foreign investments, income
and expenses are converted into U.S. dollars based upon currency exchange rates
prevailing on the respective dates of such transactions.
Net realized and unrealized gain (loss) on foreign currency transactions will
represent: (i) foreign exchange gains and losses from the sale and holdings of
foreign currencies and investments; (ii) gains and losses between trade date
and settlement date on investment securities transactions and forward exchange
contracts; and (iii) gains and losses from the difference between amounts of
interest recorded and the amounts actually received.
D. Forward Foreign Currency Exchange Contracts
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
assets 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
42
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1997
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
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.
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. Shareholders of Class A, Class B and
Class C 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, 1997 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 $14,144,000 2002-2004
Short Duration Tax-Free $ 4,058,000 2002-2003
</TABLE>
These amounts are available to be carried forward to offset future capital
gains to the extent permitted by applicable laws or regulations.
3. AGREEMENTS
Goldman Sachs Funds Management, L.P. ("GSFM"), an affiliate of Goldman, Sachs
& Co. ("Goldman Sachs"), serves as the investment adviser for Adjustable Rate
Government and Short Duration Government pursuant to the Agreements. Goldman
Sachs Asset Management ("GSAM"), a separate operating division of Goldman
Sachs, serves as the investment adviser for Short Duration Tax-Free and Core
Fixed Income pursuant to the Agreements. Under the 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 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 fee for Short Duration Government.
The adviser has voluntarily agreed to limit certain of the Funds' expenses,
with the exception of the Adjustable Rate Government Fund, (excluding
management fees, taxes, interest, brokerage, litigation, Administrative and
Service Share fees, indemnification and other
43
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
extraordinary expenses and with respect to Class A, Class B and Class C 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 Class A, Class B and Class C shares. During the year ended October
31, 1997, Goldman Sachs retained approximately $156,000, $63,000, $6,000 and
$14,000 of sales load related to Class A shares of Adjustable Rate Government,
Short Duration Government, Short Duration Tax-Free and Core Fixed Income,
respectively. Goldman Sachs also serves as Transfer Agent of the Funds for a
fee.
The Trust, on behalf of the Funds, has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 for the Class A, Class B and Class C shares.
Class B and Class C shares are not applicable for the Adjustable Rate
Government Fund. Under the Plan, Goldman Sachs is entitled to receive a
quarterly distribution fee equal, on an annual basis, to .25% of the average
daily net assets of Class A shares and .75% of the average daily net assets of
the Class B and Class C shares. Currently, Goldman Sachs has agreed to
voluntarily waive the distribution fee relating to the Class A shares and .15%
relating to the Class B shares of Short Duration Government and Short Duration
Tax-Free.
The Trust 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. The Funds
pay a fee under the Service Plan equal, on an annual basis, to .25% of its
average daily net assets attributable to Class A, Class B and Class C shares.
Class B and Class C shares are not applicable for the Adjustable Rate
Government Fund.
For the year ended October 31, 1997, the advisers 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 Management 12b-1 ment Outstanding
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate
Government -- $82 $192 --
Short Duration
Government $106 4 285 99
Short Duration
Tax-Free -- 3 282 85
Core Fixed
Income -- 5 311 94
</TABLE>
For the year ended October 31, 1997, Adjustable Rate Government, Short
Duration Government, and Core Fixed Income incurred commission expenses of
approximately $61,000, $19,000, and $3,000, respectively, in connection with
futures contracts entered into with Goldman Sachs. At October 31, 1997,
Adjustable Rate Government and Short Duration Government had approximately
$24,000 and $17,000, respectively, payable to Goldman Sachs related to
variation margin on futures contracts. Approximately $12,000 relating to
variation margin was due to Core Fixed Income from Goldman Sachs.
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 year ended October
31, 1997, the Funds did not have any borrowings under this facility.
44
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
5. INVESTMENT TRANSACTIONS
Purchases and proceeds of sales or maturities of long-term securities for the
year ended October 31, 1997, were as follows:
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
ADJUSTABLE SHORT SHORT
RATE DURATION DURATION CORE FIXED
GOVERNMENT GOVERNMENT TAX-FREE INCOME
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases of U.S. Government
and agency obligations $258,673,340 $119,545,404 $ -- $266,525,624
- -------------------------------------------------------------------------------
Purchases (excluding
U.S. Government and agency
obligations) -- -- 69,946,385 48,122,767
- -------------------------------------------------------------------------------
Sales or maturities of
U.S. Government and agency
obligations 372,612,281 105,651,126 -- 261,448,104
- -------------------------------------------------------------------------------
Sales or maturities
(excluding U.S. Government
and agency obligations) -- -- 69,512,138 30,638,111
- -------------------------------------------------------------------------------
</TABLE>
At October 31, 1997, Core Fixed Income had recorded a receivable for forward
foreign currency exchange contracts which were closed but not settled of
$28,856.
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 October 31, 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 $6,500,000, $4,700,000 and $23,000,000
respectively, in principal amount.
As of October 31, 1997, the repurchase agreement in the joint account along
with the corresponding underlying securities (including the type of security,
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 October 31, 1997, repurchase price $300,144,250
(total collateral value $309,849,518 consisting of FHLMC: 6.50%, 12/01/23;
FNMA: 6.00%, 6/01/11; GNMA: 7.00%-8.00%, 2/15/25-10/15/27)
$300,000,000 5.77% 11/30/97 $300,000,000
Lehman Brothers, Inc., dated October 31, 1997, repurchase price $241,215,728
(total collateral value $245,922,019 consisting of FHLMC: 6.50%-10.25%,
3/01/01-10/01/27; FNMA: 6.00%-11.25%, 11/01/01-10/01/27)
$241,100,000 5.76% 11/03/97 $241,100,000
Nomura Securities International, Inc., dated October 31, 1997, repurchase
price $200,096,167 (total collateral value $204,000,900 consisting of
FHLMC: 6.02%-7.53%, 9/25/00-8/21/07; FNMA: 6.11%-7.73%, 6/22/99-2/07/07;
U.S. Treasury Note: 5.75%-9.00%, 5/15/98-2/15/07; U.S. Treasury Principal
Only Stripped Security: 5/15/00)
$200,000,000 5.77% 11/03/97 $200,000,000
Nomura Securities International, Inc., dated October 31, 1997, repurchase
price $100,047,500 (total collateral value $102,000,449 consisting of
FHLMC: 6.02%-7.53%, 9/25/00-8/21/07; FNMA: 6.11%-7.73%, 6/22/99-2/07/07;
U.S. Treasury Note: 5.75%-9.00%, 5/15/98-2/15/07; U.S. Treasury Principal
Only Stripped Security: 5/15/00)
$100,000,000 5.70% 11/03/97 $100,000,000
- ---------------------------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $841,100,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
9. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, Short Duration Government, Short
Duration Tax-Free, and Core Fixed Income have reclassified $36,483, $20,748,
and $24,095, respectively, from paid-in capital to accumulated undistributed
net investment income. Additionally, Core Fixed Income has reclassified $15,717
from accumulated net realized gain to accumulated undistributed net investment
income. These reclassifications have no impact on the net asset value of the
Funds and are designed to present the Fund's capital accounts on a tax basis.
10. OTHER MATTERS
As of October 31, 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.
46
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
11. SUMMARY OF SHARE TRANSACTIONS
Share activity for the year ended October 31, 1997 is as follows:
<TABLE>
<CAPTION>
Adjustable Rate Government Short Duration Government Short Duration Tax-Free Core Fixed Income
- ------------------------------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars Shares Dollars
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL
SHARES
Shares sold 32,562,840 $ 321,007,102 4,524,108 $ 44,408,312 1,897,550 $ 18,922,030 1,146,499 $ 11,325,306
Reinvestment of
dividends and
distributions 1,830,181 18,045,430 440,142 4,313,493 115,179 1,152,524 450,657 4,441,709
Shares
repurchased (49,889,214) (491,883,845) (4,617,947) (45,299,315) (2,646,181) (26,425,414) (1,051,390) (10,391,058)
-----------------------------------------------------------------------------------------------------
(15,496,193) (152,831,313) 346,303 3,422,490 (633,452) (6,350,860) 545,766 5,375,957
-----------------------------------------------------------------------------------------------------
ADMINISTRATION
SHARES
Shares sold 209,261 2,063,528 325,429 3,199,356 33,608 336,065 1,366,455 13,474,489
Reinvestment of
dividends and
distributions 10,639 104,909 6,605 64,920 281 2,813 19,189 189,462
Shares
repurchased (322,994) (3,190,328) (250,361) (2,471,239) (31,059) (312,126) (844,042) (8,441,000)
-----------------------------------------------------------------------------------------------------
(103,094) (1,021,891) 81,673 793,037 2,830 26,752 541,602 5,222,951
-----------------------------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 48,034 474,470 191,963 1,881,964 373,847 3,741,754 204,087 2,016,094
Reinvestment of
dividends and
distributions 199 1,965 14,820 145,231 4,184 41,937 7,480 73,981
Shares
repurchased (13,213) (130,485) (53,841) (527,404) (244,134) (2,443,102) (65,183) (648,610)
-----------------------------------------------------------------------------------------------------
35,020 345,950 152,942 1,499,791 133,897 1,340,589 146,384 1,441,465
-----------------------------------------------------------------------------------------------------
CLASS A SHARES
Shares sold 7,590,281 74,855,744 1,141,319 11,256,436 492,769 4,950,140 1,104,533 11,020,182
Reinvestment of
dividends and
distributions 194,263 1,918,232 8,343 82,332 3,459 34,811 10,252 102,270
Shares
repurchased (4,485,105) (44,283,044) (189,444) (1,867,761) (97,242) (977,758) (186,897) (1,876,109)
-----------------------------------------------------------------------------------------------------
3,299,439 32,490,932 960,218 9,471,007 398,986 4,007,193 927,888 9,246,343
-----------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold -- -- 95,322 934,856 11,933 119,768 71,697 712,089
Reinvestment of
dividends and
distributions -- -- 449 4,421 86 861 635 6,353
Shares
repurchased -- -- (20,030) (196,887) (1,490) (15,000) (10,829) (107,884)
-----------------------------------------------------------------------------------------------------
-- -- 75,741 742,390 10,529 105,629 61,503 610,558
-----------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold -- -- 21,033 207,264 2,151 21,604 28,196 281,946
Reinvestment of
dividends and
distributions -- -- 63 625 1 10 8 78
Shares
repurchased -- -- (1,778) (17,517) (1,992) (20,080) (1,200) (12,024)
-----------------------------------------------------------------------------------------------------
-- -- 19,318 190,372 160 1,534 27,004 270,000
-----------------------------------------------------------------------------------------------------
Net increase
(decrease) (12,264,828) $ (121,016,322) 1,636,195 $ 16,119,087 (87,050) $ (869,163) 2,250,147 $ 22,167,274
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
Share activity for the year ended October 31, 1996 is as follows:
<TABLE>
<CAPTION>
Adjustable Rate Government Short Duration Government Short Duration Tax-Free Core Fixed Income
- ----------------------------------------------------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars Shares Dollars
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL
SHARES
Shares sold 39,981,299 $ 391,363,204 4,072,082 $ 39,855,638 2,085,253 $ 20,777,050 2,094,833 $20,524,422
Reinvestment of
dividends and
distributions 1,780,288 17,432,484 422,559 4,137,041 139,126 1,383,351 436,903 4,292,533
Shares
repurchased (46,666,343) (456,776,795) (4,893,286) (47,875,174) (4,601,865) (45,664,878) (769,104) (7,431,360)
<CAPTION>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(4,904,756) (47,981,107) (398,645) (3,882,495) (2,377,486) (23,504,477) 1,762,632 17,385,595
<CAPTION>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ADMINISTRATION
SHARES
Shares sold 148,981 1,457,872 33,251 326,101 10,672 105,302 106,074 1,029,912
Reinvestment of
dividends and
distributions 9,641 94,420 207 2,032 203 2,017 1,847 17,883
Shares
repurchased (138,609) (1,356,764) (7,921) (77,312) (10,644) (105,478) (36,681) (358,284)
<CAPTION>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20,013 195,528 25,537 250,821 231 1,841 71,240 689,511
<CAPTION>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICE SHARES
Shares sold -- -- 188,134 1,837,702 137,557 1,366,332 43,525 422,233
Reinvestment of
dividends and
distributions -- -- 1,508 14,743 1,621 16,124 549 5,332
Shares
repurchased -- -- (4,150) (40,626) (115,450) (1,148,044) (5,292) (50,931)
<CAPTION>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- 185,492 1,811,819 23,728 234,412 38,782 376,634
<CAPTION>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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) -- -- -- -- -- --
<CAPTION>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(464,966) (4,554,313) -- -- -- -- -- --
<CAPTION>
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net increase
(decrease) (5,349,709) $ (52,339,892) (187,616) $ (1,819,855) (2,353,527) $(23,268,224) 1,872,654 $18,451,740
<CAPTION>
==========================================================================================================
</TABLE>
48
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
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 In excess of
and unrealized and unrealized Total From net net realized
gain (loss) gain (loss) income realized gain gain on
Net asset on investment, on foreign (loss) on investment, In excess investment,
value at Net option and currency from From net option of net option and
beginning investment futures related investment investment and futures investment futures
of period income transactions transactions operations income transactions income transactions
-----------------------------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE GOVERNMENT FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
- -------------------------------
1997-
Institutional
Shares.......... $ 9.83 $0.5914(a) $ 0.0494(a) -- $0.6408 $(0.5908) -- -- --
1997-
Administration
Shares.......... 9.83 0.5665(a) 0.0497(a) -- 0.6162 (0.5662) -- -- --
1997-Service
Shares(m)....... 9.84 0.3298(a) 0.0400(a) -- 0.3698 (0.3298) -- -- --
1997-Class A
Shares.......... 9.83 0.5662(a) 0.0500(a) -- 0.6162 (0.5662) -- -- --
1996-
Institutional
Shares.......... 9.77 0.5759(a) 0.0772(a) -- 0.6531 (0.5725) -- (0.0206) --
1996-
Administration
Shares.......... 9.77 0.5489(a) 0.0797(a) -- 0.6286 (0.5489) -- (0.0198) --
1996-Class A
Shares.......... 9.77 0.5481(a) 0.0806(a) -- 0.6287 (0.5489) -- (0.0198) --
1995-
Institutional
Shares.......... 9.74 0.5630(a) 0.0717(a) -- 0.6347 (0.5759) -- (0.0287) --
1995-
Administration
Shares.......... 9.74 0.5366(a) 0.0737(a) -- 0.6103 (0.5528) -- (0.0275) --
1995-Class A
Shares(c)....... 9.79 0.2721(a) (0.0090)(a) -- 0.2631 (0.2697) -- (0.0134) --
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) -- (0.0024) --
1993-
Administration
Shares(e)....... 10.02 0.2146 (0.0173)(d) -- 0.1973 (0.2146) -- (0.0027) --
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>
Distribution to
Shareholders Net Ratio of Net
-------------------- increase Ratio of net assets
From Total (decrease) Net asset net investment at end
paid distributions in net value at expenses income Portfolio of
in to asset end of Total to average to average turnover period
capital shareholders value period return(k) net assets net assets rate(d) (in 000s)
--------------------------------------------------------------------------------------------------------
ADJUSTABLE RATE GOVERNMENT FUND
--------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
- -------------------------------
1997-
Institutional
Shares.......... -- $(0.5908) $ 0.0500 $ 9.88 6.70% 0.49% 5.99% 46.58% $ 463,511
1997-
Administration
Shares.......... -- (0.5662) 0.0500 9.88 6.43 0.74 5.73 46.58 2,793
1997-Service
Shares(m)....... -- (0.3298) 0.0400 9.88 3.81(f) 1.05(b) 5.64(b) 46.58(f) 346
1997-Class A
Shares.......... -- (0.5662) 0.0500 9.88 6.43 0.74 5.60 46.58 43,393
1996-
Institutional
Shares.......... -- (0.5931) 0.0600 9.83 6.86 0.45 5.85 52.36 613,149
1996-
Administration
Shares.......... -- (0.5687) 0.0600 9.83 6.60 0.70 5.59 52.36 3,792
1996-Class A
Shares.......... -- (0.5687) 0.0600 9.83 6.60 0.70 5.59 52.36 10,728
1995-
Institutional
Shares.......... -- (0.6046) 0.0301 9.77 6.75 0.46 5.77 24.12 657,358
1995-
Administration
Shares.......... -- (0.5803) 0.0300 9.77 6.48 0.71 5.50 24.12 3,572
1995-Class A
Shares(c)....... -- (0.2831) (0.0200) 9.77 2.74(f) 0.69(b) 5.87(b) 24.12(f) 15,203
1994-
Institutional
Shares.......... -- (0.4486) (0.2600) 9.74 1.88 0.46 4.38 37.81 942,523
1994-
Administration
Shares.......... -- (0.4239) (0.2600) 9.74 1.63 0.71 4.27 37.81 6,960
1993-
Institutional
Shares.......... -- (0.4421) (0.0400) 10.00 4.13 0.45 4.36 103.74 2,760,871
1993-
Administration
Shares(e)....... -- (0.2173) (0.0200) 10.00 2.01(f) 0.70(b) 3.81(b) 103.74(f) 5,326
1992-
Institutional
Shares.......... -- (0.5470) 0.0100 10.04 6.12 0.42 5.61 286.40 2,145,064
FOR THE PERIOD JULY 17, 1991(g) through OCTOBER 31,
- --------------------------------------------------
1991-
Institutional
Shares.......... -- (0.1553) 0.0300 10.03 2.14(f) 0.20(b) 7.31(b) 145.67(f) 239,642
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
-----------------------
Ratio of
net
Ratio of investment
expenses income
to average to average
net assets net assets
-------------------------------
ADJUSTABLE RATE GOVERNMENT FUND
-------------------------------
<C> <C>
1997-
Institutional
Shares.......... 0.52% 5.96%
1997-
Administration
Shares.......... 0.77 5.70
1997-Service
Shares(m)....... 1.08(b) 5.61(b)
1997-Class A
Shares.......... 1.02 5.32
1996-
Institutional
Shares.......... 0.51 5.79
1996-
Administration
Shares.......... 0.76 5.53
1996-Class A
Shares.......... 1.01 5.28
1995-
Institutional
Shares.......... 0.53 5.70
1995-
Administration
Shares.......... 0.78 5.43
1995-Class A
Shares(c)....... 1.01(b) 5.55(b)
1994-
Institutional
Shares.......... 0.49 4.35
1994-
Administration
Shares.......... 0.74 4.24
1993-
Institutional
Shares.......... 0.48 4.33
1993-
Administration
Shares(e)....... 0.73(b) 3.78(b)
1992-
Institutional
Shares.......... 0.55 5.48
FOR THE PERIOD JULY 17, 1991(g) THROUGH OCTOBER 31,
- --------------------------------------------------
1991-
Institutional
Shares.......... 1.02(b) 6.49(b)
- --------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
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 In excess of
and unrealized and unrealized Total From net net realized
gain (loss) gain (loss) income realized gain gain on
Net asset on investment, on foreign (loss) on investment, In excess investment,
value at Net option and currency from From net option of net option and
beginning investment futures related investment investment and futures investment futures
of period income transactions transactions operations income transactions income transactions
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT DURATION GOVERNMENT FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
- -------------------------------
1997-
Institutional
Shares.......... $ 9.83 $0.6412(a) $ 0.0300(a) -- $ 0.6712 $(0.6412) -- -- --
1997-
Administration
Shares.......... 9.85 0.6183(a) 0.0400(a) -- 0.6583 (0.6183) -- -- --
1997-Service
Shares.......... 9.82 0.5904(a) 0.0401(a) -- 0.6305 (0.5904) -- -- --
1997-Class A
Shares(o)....... 9.78 0.3121(a) 0.0883(a) -- 0.4004 (0.3004) -- -- --
1997-Class B
Shares(o)....... 9.75 0.2787(a) 0.1011(a) -- 0.3798 (0.2698) -- -- --
1997-Class C
Shares(p)....... 9.83 0.1185(a) 0.0225(a) -- 0.1410 (0.1110) -- -- --
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)(d) -- 0.0790 (0.5352) (0.0438) -- --
1993-
Institutional
Shares.......... 10.16 0.5627 (0.0135)(d) -- 0.5492 (0.5627) -- (0.0065) --
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>
Distribution
to
shareholders Net Ratio of Net
-------------------- increase Ratio of net assets
From Total (decrease) Net asset net investment at end
paid distributions in net value at expenses income Portfolio of
in to asset end of Total to average to average turnover period
capital shareholders value period return(k) net assets net assets rate(d) (in 000s)
--------------------------------------------------------------------------------------------------------
SHORT DURATION GOVERNMENT FUND
--------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
- -------------------------------
1997-
Institutional
Shares.......... -- ($0.6412) $0.0300 $9.86 7.07% 0.45% 6.43% 102.58% $103,729
1997-
Administration
Shares.......... -- (0.6183) 0.0400 9.89 6.91 0.70 6.19 102.58 1,060
1997-Service
Shares.......... -- (0.5904) 0.0401 9.86 6.63 0.95 5.92 102.58 3,337
1997-Class A
Shares(o)....... -- (0.3004) 0.1000 9.88 4.14(f) 0.70(b) 6.05(b) 102.58(f) 9,491
1997-Class B
Shares(o)....... -- (0.2698) 0.1100 9.86 3.94(f) 1.30(b) 5.52(b) 102.58(f) 747
1997-Class C
Shares(p)....... -- (0.1100) 0.0300 9.86 1.44(f) 1.45(b) 5.52(b) 102.58(f) 190
1996-
Institutional
Shares.......... -- (0.6326) 0.0100 9.83 6.75 0.45 6.44 115.45 99,944
1996-
Administration
Shares(h)....... -- (0.3940) (0.0100) 9.85 4.00(f) 0.70(b) 5.97(b) 115.45 252
1996-Service
Shares(i)....... -- (0.3152) 0.1000 9.82 4.35(f) 0.95(b) 6.05(b) 115.45 1,822
1995-
Institutional
Shares.......... -- (0.6518) 0.1800 9.82 8.97 0.45 6.87 292.56 103,760
1995-
Administration
Shares.......... -- (0.2051) (0.0100) 9.63(h) 2.10 0.70(b) 7.91(b) 292.56 --
1994-
Institutional
Shares.......... -- (0.6036) (0.5000) 9.64 0.99 0.45 5.69 289.79 193,095
1994-
Administration
Shares.......... -- (0.5790) (0.5000) 9.64 0.73 0.70 5.38 289.79 730
1993-
Institutional
Shares.......... -- (0.5692) (0.0200) 10.14 5.55 0.45 5.46 411.66 359,708
1993-
Administration
Shares(e)....... -- (0.2725) (0.0900) 10.14 1.74(f) 0.70(b) 4.84(b) 411.66 16,490
1992-
Institutional
Shares......... -- (0.6703) (0.0600) 10.16 6.24 0.45 6.60 216.07 277,927
1991-
Institutional
Shares.......... -- (0.8020) 0.2200 10.22 10.93 0.45 8.25 155.44 158,848
1990-
Institutional
Shares.......... -- (0.8300) (0.0700) 10.00 8.23 0.45 8.62 173.21 68,995
1989-
Institutional
Shares.......... (0.0300) 0.9100 (0.0300) 10.07 9.08 0.46 8.71 137.37 31,015
FOR THE PERIOD AUGUST 15, THROUGH OCTOBER 31,
- ---------------------------------------------
1988-
Institutional
Shares.......... -- (0.1800) 0.1000 10.10 3.30(f) 0.55(b) 8.55(b) 167.00(f) 39,052
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
------------------------
Ratio of
net
Ratio of investment
expenses income
to average to average
net assets net assets
-------------------------------
SHORT DURATION GOVERNMENT FUND
-------------------------------
<C> <C>
FOR THE YEARS ENDED OCTOBER 31,
- -------------------------------
1997-
Institutional
Shares.......... 0.82% 6.06%
1997-
Administration
Shares.......... 1.07 5.82
1997-Service
Shares.......... 1.32 5.55
1997-Class A
Shares(o)....... 1.32(b) 5.43(b)
1997-Class B
Shares(o)....... 1.82(b) 5.00(b)
1997-Class C
Shares(p)....... 1.82(b) 5.15(b)
1996-
Institutional
Shares.......... 0.71 6.18
1996-
Administration
Shares(h)....... 0.96(b) 5.71(b)
1996-Service
Shares(i)....... 1.21(b) 5.79(b)
1995-
Institutional
Shares.......... 0.72 6.60
1995-
Administration
Shares.......... 0.90(b) 7.71(b)
1994-
Institutional
Shares.......... 0.59 5.55
1994-
Administration
Shares.......... 0.84 5.24
1993-
Institutional
Shares.......... 0.64 5.31
1993-
Administration
Shares(e)....... 0.80(b) 4.74(b)
1992-
Institutional
Shares......... 0.69 6.36
1991-
Institutional
Shares.......... 0.79 7.91
1990-
Institutional
Shares.......... 0.95 8.12
1989-
Institutional
Shares.......... 1.39 7.78
FOR THE PERIOD AUGUST 15, 1988(g) THROUGH OCTOBER 31,
- -----------------------------------------------------
1988-
Institutional
Shares.......... 1.42(b) 7.68(b)
- -----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations(n)
------------------------------------------------------
Net realized Net realized
and unrealized and unrealized Total
gain (loss) gain (loss) income
Net asset on investment, on foreign (loss)
value at Net option and currency from From net
beginning investment futures related investment investment
of period income transactions transactions operations income
- --------------------------------------------------------------------------------------------
SHORT DURATION TAX-FREE FUND
- --------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C>
1997-
Institutional
Shares.......... $ 9.96 $0.4181(a) $ 0.1091(a) -- $ 0.5272 $(0.4172)
1997-
Administration
Shares.......... 9.96 0.3924(a) 0.1100(a) -- 0.5024 (0.3924)
1997-Service
Shares.......... 9.97 0.3675(a) 0.1000(a) -- 0.4675 (0.3675)
1997-Class A
Shares(o)....... 9.94 0.1950(a) 0.1400(a) -- 0.3350 (0.1950)
1997-Class B
Shares(o)....... 9.94 0.1663(a) 0.1368(a) -- 0.3031 (0.1631)
1997-Class C
Shares(p)....... 10.04 0.0670(a) 0.0300(a) -- 0.0970 (0.0670)
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)
1994-
Administration
Shares.......... 10.23 0.3537(a) (0.3575)(a) -- (0.0038) (0.3537)
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
From net net realized Net
realized gain gain on increase Ratio of
on investment, In excess investment, From Total (decrease) Net asset net
option of net option and paid distributions in net value at expenses
and futures investment futures in to asset end of Total to average
transactions income transactions capital shareholders value period return(k) net assets
--------------------------------------------------------------------------------------------------------------------
SHORT DURATION TAX-FREE FUND
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997-
Institutional
Shares.......... -- -- -- -- $(0.4172) $ 0.1100 $10.07 5.40% 0.45%
1997-
Administration
Shares.......... -- -- -- -- (0.3924) 0.1100 10.07 5.14 0.70
1997-Service
Shares.......... -- -- -- -- (0.3675) 0.1000 10.07 4.77 0.95
1997-Class A
Shares(o)....... -- -- -- -- (0.1950) 0.1400 10.08 3.39(f) 0.70(b)
1997-Class B
Shares(o)....... -- -- -- -- (0.1631) 0.1400 10.08 3.07(f) 1.30(b)
1997-Class C
Shares(p)....... -- -- -- -- (0.0670) 0.0300 10.07 0.97(f) 1.45(b)
1996-
Institutional
Shares.......... -- -- -- -- (0.4192) 0.0300 9.96 4.50 0.45
1996-
Administration
Shares.......... -- -- -- -- (0.3944) 0.0300 9.96 4.24 0.70
1996-Service
Shares.......... -- -- -- -- (0.3697) 0.0200 9.97 3.98 0.95
1995-
Institutional
Shares.......... -- -- -- -- (0.4235) 0.1500 9.94 5.98 0.45
1995-
Administration
Shares.......... -- -- -- -- (0.3989) 0.1500 9.94 5.76 0.70
1995-Service
Shares.......... -- -- -- -- (0.3744) 0.1600 9.95 5.59 0.95
1994-
Institutional
Shares.......... (0.0825) -- -- -- (0.4612) (0.4400) 9.79 0.17 0.45
1994-
Administration
Shares.......... (0.0825) -- -- -- (0.4362) (0.4400) 9.79 (0.11) 0.70
1994-Service
Shares(j)....... -- -- -- -- (0.0475) (0.0700) 9.79 (0.32)(f) 0.95(b)
1993-
Institutional
Shares.......... -- -- -- -- (0.3834) 0.3000 10.23 7.03 0.41
1993-
Administration
Shares(j)....... -- -- -- -- (0.1555) 0.0720 10.23 2.28(f) 0.70(b)
FOR THE PERIOD OCTOBER 1, 1992(G) THROUGH OCTOBER 31,
- ----------------------------------------------------
1992-
Institutional
Shares.......... -- -- -- -- (0.0341) (0.0700) 9.93 (0.34)(f) 0.05(b)
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios assuming
no voluntary waiver
of fees or
expense limitations
---------------------
Ratio of Net Ratio of
net assets net
investment at end Ratio of investment
income Portfolio of expenses income
to average turnover period to average to average
net assets rate(d) (in 000s) net assets net assets
-----------------------------------------------------------------
SHORT DURATION TAX-FREE FUND
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997-
Institutional
Shares.......... 4.18% 194.75% $ 28,821 1.23% 3.40%
1997-
Administration
Shares.......... 3.91 194.75 77 1.48 3.13
1997-Service
Shares.......... 3.66 194.75 2,051 1.73 2.88
1997-Class A
Shares(o)....... 3.81(b) 194.75(f) 4,023 1.73(b) 2.78(b)
1997-Class B
Shares(o)....... 3.31(b) 194.75(f) 106 2.23(b) 2.38(b)
1997-Class C
Shares(p)....... 2.60(b) 194.75(f) 2 2.23(b) 1.82(b)
1996-
Institutional
Shares.......... 4.21 231.65 34,814 1.01 3.65
1996-
Administration
Shares.......... 3.96 231.65 48 1.26 3.40
1996-Service
Shares.......... 3.74 231.65 695 1.51 3.18
1995-
Institutional
Shares.......... 4.31 259.52 58,389 0.77 3.99
1995-
Administration
Shares.......... 4.14 259.52 46 1.02 3.82
1995-Service
Shares.......... 3.87 259.52 454 1.27 3.55
1994-
Institutional
Shares.......... 3.74 354.00 83,704 0.61 3.58
1994-
Administration
Shares.......... 3.51 354.00 3,866 0.86 3.35
1994-Service
Shares(j)....... 4.30(b) 354.00 440 1.11(b) 4.14(b)
1993-
Institutional
Shares.......... 3.70 404.60 115,803 1.06 3.05
1993-
Administration
Shares(j)....... 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.......... 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.
51
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income (loss) from investment operations(n)
---------------------------------------------------
Net realized Net realized
and unrealized and unrealized Total
gain (loss) gain (loss) income
Net asset on investment, on foreign (loss)
value at Net option and currency from From net
beginning investment futures related investment investment
of period income transactions transactions operations income
- ----------------------------------------------------------------------------------------------------------
CORE FIXED INCOME FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
- -------------------------------
1997-
Institutional
Shares.......... $ 9.85 $0.6431 $0.2282 $(0.0005) $ 0.8708 $(0.6408)
1997-
Administration
Shares.......... 9.84 0.6182 0.2380 (0.0005) 0.8557 (0.6157)
1997-Service
Shares.......... 9.86 0.5937 0.2287 (0.0005) 0.8219 (0.5919)
1997-Class A
Shares(o)....... 9.70 0.3059 0.3596 (0.0008) 0.6647 (0.3048)
1997-Class B
Shares(o)....... 9.72 0.2686 0.3695 (0.0008) 0.6373 (0.2673)
1997-Class C
Shares(p)....... 9.93 0.1118 0.1591 (0.0003) 0.2706 (0.1107)
1996-
Institutional
Shares.......... 10.00 0.6448 (0.0704) -- 0.5744 (0.6438)
1996-
Administrative
Shares(/1/)..... 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
From net net realized Net
realized gain gain on increase
on investment, In excess investment, From Total (decrease) Net asset
option of net option and paid distributions in net value at
and futures investment futures in to asset end of Total
transactions income transactions capital shareholders value period return(k)
- -----------------------------------------------------------------------------------------------------------------------------
CORE FIXED INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED OCTOBER 31,
- ------------
1997-
Institutional
Shares.......... -- -- -- -- $(0.6408) $ 0.2300 $10.08 9.19%
1997-
Administration
Shares.......... -- -- -- -- (0.6157) 0.2300 10.07 8.92
1997-Service
Shares.......... -- -- -- -- (0.5919) 0.2300 10.09 8.65
1997-Class A
Shares(o)....... -- -- -- -- (0.3048) 0.3599 10.06 6.94(f)
1997-Class B
Shares(o)....... -- -- -- -- (0.2673) 0.3700 10.09 6.63(f)
1997-Class C
Shares(p)....... -- -- -- -- (0.1107) 0.1599 10.09 2.74(f)
1996-
Institutional
Shares.......... (0.0806) -- -- -- (0.7244) (0.1500) 9.85 5.98
1996-
Administrative
Shares(/1/)..... -- -- -- -- (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 Net Ratio of
Ratio of net assets net
net investment at end Ratio of investment
expenses income Portfolio of expenses income
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 YEARS ENDED OCTOBER 31,
- ------------
1997-
Institutional
Shares.......... 0.45% 6.53% 361.27% $79,230 0.83% 6.15%
1997-
Administration
Shares.......... 0.70 6.27 361.27 6,176 1.08 5.89
1997-Service
Shares.......... 0.95 6.00 361.27 1,868 1.33 5.62
1997-Class A
Shares(o)....... 0.70(b) 6.13(b) 361.27(f) 9,336 1.33(b) 5.50(b)
1997-Class B
Shares(o)....... 1.45(b) 5.28(b) 361.27(f) 621 1.83(b) 4.90(b)
1997-Class C
Shares(p)....... 1.45(b) 4.84(b) 361.27(f) 272 1.83(b) 4.46(b)
1996-
Institutional
Shares.......... 0.45 6.51 414.20 72,061 0.83 6.13
1996-
Administrative
Shares(/1/)..... 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 6.56 382.26 55,502 0.96 6.05
FOR THE PERIOD JANUARY 5, 1994(G)
- --------------------
1994-
Institutional
Shares.......... 0.45(b) 6.48(b) 285.25 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. Total return would be reduced if a sales charge for Class A
shares or a contingent deferred sales charge for Class B and Class C
shares 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.
(o) Class A and Class B share activity commenced on May 1, 1997.
(p) Class C share activity commenced on August 15, 1997.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
Goldman Sachs Trust--Fixed Income Funds
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------- ---------------------------------------
To the Shareholders and Board of Trustees of the Goldman Sachs Adjustable Rate
Government Fund, Goldman Sachs Short Duration Government Fund, Goldman Sachs
Short Duration Tax-Free Fund and Goldman Sachs Core Fixed Income Fund:
We have audited the accompanying statements of assets and liabilities of the
Goldman Sachs Adjustable Rate Government Fund, Goldman Sachs Short Duration
Government Fund, Goldman Sachs Short Duration Tax-Free Fund and Goldman Sachs
Core Fixed Income Fund (portfolios of Goldman Sachs Trust, a Delaware Business
Trust) including the statements of investments, as of October 31, 1997, and the
related statements of operations, the statements of changes in net assets and
the financial highlights for each of the periods presented. These financial
statements and the financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
the Goldman Sachs Adjustable Rate Government Fund, Goldman Sachs Short Duration
Government Fund, Goldman Sachs Short Duration Tax-Free Fund and Goldman Sachs
Core Fixed Income Fund as of October 31, 1997, the results of their operations
and the changes in their net assets and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
December 12, 1997
- --------------------------------------- ---------------------------------------
53
<PAGE>
VOTING RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
The proposals described below were submitted to a vote of shareholders of
Goldman Sachs Trust (the "Company") at a Special Meeting of Shareholders held
on April 1, 1997 (the "Meeting"):
- --------------------------------------------------------------------------------
PROPOSAL NO. 1--ELECTION OF NINE TRUSTEES:
- --------------------------------------------------------------------------------
At the Meeting, Ashok Bakhru, David B. Ford, Douglas Grip, John McNulty, Mary
McPherson, Richard Strubel, Alan Shuch, Jackson Smart and William Springer were
elected to the Company's Board of Trustees. In electing the Trustees, the
Company's shareholders voted as follows:
<TABLE>
<CAPTION>
TRUSTEE FOR AGAINST ABSTAIN BROKER NON-VOTES
------- --------------- ------- -------------- ----------------
<S> <C> <C> <C> <C>
Ashok Bakhru............ 59,699,988.0890 0 993,484.8850 0
David B. Ford........... 59,362,764.7000 0 1,330,708.2740 0
Douglas Grip............ 59,477,956.3930 0 1,215,516.5810 0
John McNulty............ 59,362,764.7000 0 1,330,708.2740 0
Mary McPherson.......... 59,705,150.0290 0 988,322.9450 0
Richard Strubel......... 59,727,715.4610 0 965,757.5130 0
Alan Shuch.............. 59,362,764.7000 0 1,330,708.2740 0
Jackson Smart........... 59,706,199.9810 0 987,272.9930 0
William Springer........ 59,729,198.2540 0 964,274.7200 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 2--RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE
INDEPENDENT ACCOUNTANTS OF THE TRUST OR THE CORPORATION FOR THE
FISCAL YEARS ENDING OCTOBER 31, 1997 AND JANUARY 31, 1998,
RESPECTIVELY:
- --------------------------------------------------------------------------------
At the Meeting, the Company's shareholders approved Proposal No. 2 as
follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
- --------------- -------------- -------------- ----------------
<S> <C> <C> <C>
55,747,113.1630 37,028.3220 4,909,331.4890 0
- --------------------------------------------------------------------------------
PROPOSAL NO. 4(B)--APPROVAL OF AN AMENDMENT TO THE TRUST'S DECLARATION OF TRUST
TO PERMIT INVESTMENT OF EACH FUND'S ASSETS IN ANOTHER OPEN-END
INVESTMENT COMPANY:
- --------------------------------------------------------------------------------
At the Meeting, the Company's shareholders approved Proposal No. 4(B) as
follows:
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
- --------------- -------------- -------------- ----------------
<S> <C> <C> <C>
52,375,742.4380 1,978,971.9450 6,267,663.5910 71,095.0000
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 3--APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each of the Company's portfolios (each, a
"Fund" and collectively, the "Funds") approved Proposal No. 3 as follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,256,266.2380 249,187.0120 0 0
G.S. Adjustable Rate
Government............. 30,840,046.7270 205,007.3510 4,029,816.1740 64,115.0000
G.S. Short Duration Tax
Free................... 2,017,550.0780 16,321.0250 527.7150 0
G.S. Core Fixed Income.. 4,761,964.9270 1,055.6280 0 0
G.S. Global Income...... 7,475,140.0900 216,569.4820 1,108,286.2630 0
G.S. Government Income.. 1,419,426.1060 19,927.7870 2,736.8010 6,980.0000
G.S. Municipal Income... 1,871,247.5330 13,820.1290 117,480.9080 0
</TABLE>
54
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 4(A)--APPROVAL OF AN AMENDMENT TO THE FUND'S INVESTMENT
RESTRICTIONS TO PERMIT EACH FUND TO INVEST ALL ITS ASSETS IN
ANOTHER OPEN-END INVESTMENT COMPANY:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 4(A) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,249,924.1230 255,529.1270 0 0
G.S. Adjustable Rate
Government............. 29,300,183.4090 738,971.8930 5,035,714.9500 64,115.0000
G.S. Short Duration Tax
Free................... 1,707,256.5030 326,614.6000 527.7150 0
G.S. Core Fixed Income.. 4,761,964.9270 1,055.6280 0 0
G.S. Global Income...... 7,338,642.1730 350,819.2200 1,110,534.4420 0
G.S. Government Income.. 1,409,107.5260 30,246.3670 2,736.8010 6,980.0000
G.S. Municipal Income... 1,850,690.6070 29,828.2390 122,029.7240 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(A)--INVESTMENT POLICY ON ISSUER DIVERSIFICATION:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 5(A) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,249,924.1230 249,187.0120 6,342.1150 0
G.S. Adjustable Rate
Government............. 29,997,087.3250 43,548.7280 5,034,234.1990 64,115.0000
G.S. Short Duration Tax
Free................... 2,023,592.0760 1,190.2710 9,616.4710 0
G.S. Core Fixed Income.. 4,763,020.5550 0 0 0
G.S. Global Income...... 7,302,111.2200 337,094.6510 1,160,789.9640 0
G.S. Government Income.. 1,432,220.1140 3,231.1630 6,639.4170 6,980.0000
G.S. Municipal Income... 1,872,473.5900 16,237.5860 113,837.3940 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(B)--INVESTMENT POLICY ON INDUSTRY CONCENTRATION:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 5(B) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,249,924.1230 249,187.0120 6,342.1150 0
G.S. Adjustable Rate
Government............. 29,717,448.6200 48,100.0560 5,309,321.5760 64,115.0000
G.S. Short Duration Tax
Free................... 2,023,592.0760 1,190.2710 9,616.4710 0
G.S. Core Fixed Income.. 4,763,020.5550 0 0 0
G.S. Global Income...... 7,308,203.5950 364,153.7540 1,127,638.4860 0
G.S. Government Income.. 1,435,859.2330 3,462.0620 2,769.3990 6,980.0000
G.S. Municipal Income... 1,869,373.6660 12,600.7210 120,574.1830 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(C)--INVESTMENT POLICIES ON BORROWING, MARGIN PURCHASES AND
PLEDGING ASSETS:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 5(C) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,249,924.1230 249,187.0120 6,342.1150 0
G.S. Adjustable Rate
Government............. 29,536,226.5180 496,829.5350 5,041,814.1990 64,115.0000
G.S. Short Duration Tax
Free................... 2,024,782.3470 0 9,616.4710 0
G.S. Core Fixed Income.. 4,761,964.9270 1,055.6280 0 0
G.S. Global Income...... 7,216,046.8580 429,048.0000 1,154,900.9770 0
G.S. Government Income.. 1,382,429.7560 55,980.6910 3,680.2470 6,980.0000
G.S. Municipal Income... 1,852,339.5570 25,565.3640 124,643.6490 0
</TABLE>
55
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(D)--INVESTMENT POLICY ON LOANS:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 5(D) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,249,924.1230 249,187.0120 6,342.1150 0
G.S. Adjustable Rate
Government............. 29,791,225.9940 241,830.0590 5,041,814.1990 64,115.0000
G.S. Short Duration Tax
Free................... 2,024,782.3470 0 9,616.4710 0
G.S. Core Fixed Income.. 4,761,964.9270 1,055.6280 0 0
G.S. Global Income...... 7,246,088.4970 387,925.7060 1,165,981.6320 0
G.S. Government Income.. 1,418,199.0540 16,793.6490 7,097.9910 6,980.0000
G.S. Municipal Income... 1,855,997.7160 18,603.7770 127,947.0770 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(E)--INVESTMENT POLICY ON UNDERWRITING:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 5(E) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,499,008.6670 102.4680 6,342.1150 0
G.S. Adjustable Rate
Government............. 24,563,621.2260 203,940.9210 10,307,308.1050 64,115.0000
G.S. Short Duration Tax
Free................... 2,024,782.3470 0 9,616.4710 0
G.S. Core Fixed Income.. 4,763,020.5550 0 0 0
G.S. Global Income...... 7,277,794.5270 358,843.4350 1,163,357.8730 0
G.S. Government Income.. 1,430,965.7480 7,444.6990 3,680.2470 6,980.0000
G.S. Municipal Income... 1,848,511.9770 12,976.0140 141,060.5790 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(F)--INVESTMENT POLICY ON REAL ESTATE AND OIL AND GAS:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 5(F) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,249,924.1230 249,187.0120 6,342.1150 0
G.S. Adjustable Rate
Government............. 24,526,695.5880 240,866.5590 10,307,308.1050 64,115.0000
G.S. Short Duration Tax
Free................... 1,990,762.3590 34,019.9880 9,616.4710 0
G.S. Core Fixed Income.. 1,125,872.4290 0 3,637,148.1260 0
G.S. Global Income...... 7,327,402.6000 291,544.8020 1,181,048.4330 0
G.S. Government Income.. 1,432,561.1600 5,849.2870 3,680.2470 6,980.0000
G.S. Municipal Income... 1,867,044.1890 15,154.4890 120,349.8920 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(G)--INVESTMENT POLICY ON COMMODITIES:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 5(G) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,256,266.2380 102.4680 249,084.5440 0
G.S. Adjustable Rate
Government............. 24,259,310.5330 258,550.2170 10,557,009.5020 64,115.0000
G.S. Short Duration Tax
Free................... 1,999,851.1150 34,019.9880 527.7150 0
G.S. Core Fixed Income.. 4,761,964.9270 0 1,055.6280 0
G.S. Global Income...... 7,242,067.7760 391,426.1320 1,166,501.9270 0
G.S. Government Income.. 1,402,158.5440 35,125.1420 4,807.0080 6,980.0000
G.S. Municipal Income... 1,864,355.0900 15,677.0190 122,516.4610 0
</TABLE>
56
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(H)--INVESTMENT POLICY ON SENIOR SECURITIES:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 5(H) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,249,296.2850 7,072.4210 249,084.5440 0
G.S. Adjustable Rate
Government............. 24,588,889.6270 204,058.5000 10,281,922.1250 64,115.0000
G.S. Short Duration Tax
Free................... 2,032,680.8320 1,190.2710 527.7150 0
G.S. Core Fixed Income.. 4,763,020.5550 0 0 0
G.S. Global Income...... 7,317,507.8520 317,794.9290 1,164,693.0540 0
G.S. Government Income.. 1,369,235.2830 67,017.8840 5,837.5270 6,980.0000
G.S. Municipal Income... 1,861,721.6030 14,498.0260 126,328.9410 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(I)--INVESTMENT POLICY CONCERNING SHORT SALES OF SECURITIES:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 5(I) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- ------------ -------------- ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,243,445.2950 12,923.4110 249,084.5440 0
G.S. Adjustable Rate
Government............. 29,554,106.4250 236,098.2310 5,284,665.5960 64,115.0000
G.S. Short Duration Tax
Free................... 1,994,403.9380 39,467.1650 527.7150 0
G.S. Core Fixed Income.. 4,761,964.9270 0 1,055.6280 0
G.S. Global Income...... 7,221,712.5330 412,993.5060 1,165,289.7960 0
G.S. Government Income.. 1,365,080.4460 68,785.4960 8,224.7520 6,980.0000
G.S. Municipal Income... 1,839,955.6770 27,482.8450 135,110.0480 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(J)--GS SHORT DURATION GOVERNMENT FUND'S POLICY ON OPTIONS:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of GS Short Duration Government approved
Proposal No. 5(J) as follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- -------------- -------- ------------ ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,249,924.1230 102.4680 255,426.6590 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(K)--GS SHORT DURATION GOVERNMENT FUND'S POLICY ON INVESTMENTS TO
EXERCISE CONTROL:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of GS Short Duration Fund approved Proposal
No. 5(K) as follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- -------------- ---------- ------------ ----------------
<S> <C> <C> <C> <C>
G.S. Short Duration Gov-
ernment................ 6,249,924.1030 6,444.5830 249,084.5440 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 6--APPROVAL OF AMENDED AND RESTATED MANAGEMENT AGREEMENTS:
- --------------------------------------------------------------------------------
At the Meeting, the Shareholders of each Fund approved Proposal No. 6 as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
G.S. Global Income...... 7,767,511.0190 285,099.7120 747,385.1040 0
G.S. Government Income.. 1,417,140.3790 20,595.5810 4,354.7340 6,980.0000
G.S. Municipal Income... 1,868,303.5900 12,832.0000 121,412.9800 0
</TABLE>
57
<PAGE>
This page is intentionally left blank
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Trust Prospectus which contains
facts concerning the Fund's objectives and policies, management, expenses and
other information.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------- ---------------------------------------------
- ------------------------------- ---------------------------------------------
THE GOLDMAN SACHS
FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1997
GOLDMAN SACHS ADJUSTABLE RATEGOVERNMENT FUND
GOLDMAN SACHS SHORT DURATIONGOVERNMENT FUND
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
GOLDMAN SACHS CORE FIXED INCOME FUND
GOLDMAN SACHS
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
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
FIA97/128K/1097
