<PAGE>
Goldman Sachs Funds
================================================================================
Taxable Investment Grade Funds Semiannual Report April 30, 1998
================================================================================
[PHOTO] Current income potential from
portfolios that invest in a
variety of fixed income securities.
[LOGO]
Goldman
Sachs
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Market Overview
Dear Shareholder,
Investors placed approximately $38.9 billion into bond funds over the
six-month period ended April 30, 1998 alone -- slightly less than 1.4 times
the amount invested in all of 1997.* Yet despite a renewed interest in
fixed income securities in the wake of market turbulence in Asia,
performance for bond markets across the globe was mixed.
o In the Dollar Bloc, the U.S. Bond Market Shines -- Late in 1997,
U.S. bond prices rose as fixed income securities became the
investment of choice in the aftermath of Asia's financial crisis.
The rally continued into 1998, helped along by, among other
factors, a strengthening U.S. dollar. By period-end, however, it
was apparent that Asia's impact was less severe than anticipated.
Interest in U.S. bonds waned as volatility in overseas markets
subsided. Elsewhere in the dollar bloc, Canadian bonds, after a
period of good performance, fared poorly as Canada's Central Bank
increased interest rates to support a declining dollar.
Australian and New Zealand markets also faltered, in part due to
New Zealand's declining dollar and a downgrade in Australia's
foreign debt rating.
o European Market Performance Was Generally Strong -- Early in the
period, Europe's bond markets rallied following an announcement
by German officials that European Monetary Union (EMU) short-term
interest rates would converge at the lower level of the core
markets. The rallies continued into the new year, reinforced in
part by "softer" retail sales data and lower-than-expected gross
domestic product data. Italy was the exception, as ongoing
concerns about its suitability as a member of EMU adversely
affected its bond market.
o Japan's Market Stumbled -- Continued troubles within the banking
sector were a significant factor behind Japan's poor bond market
performance early in the period. After a brief journey into
positive territory in December, the market would continue its
poor showing in the wake of the resignation of the Minister of
Finance and amid assumptions that measures of fiscal stimulus
were in the offing. When the long-awaited economic stimulus
package was finally released, it was viewed skeptically. Although
the package was larger than anticipated, significant doubt
remained as to whether it could lead to Japan's long-term
recovery.
o Outlook -- Near-Term Prospects for Most Markets Are Good -- In
the United States, the Federal Reserve Board has reassumed its
pre-Asian financial crisis bias to tighten. For now, though, we
expect interest rates to remain relatively stable. In Europe,
inflationary pressures remain muted, and it is likely that rates
will remain on hold until such pressures appear. Finally, in
Japan, economic weakness will continue to place downward pressure
on Japanese government bond yields. Short-term, however, these
pressures should be alleviated somewhat by the fiscal stimulus
measures currently in place.
We encourage you to maintain your long-term investment program,
and look forward to serving your investment needs in the years
ahead.
Sincerely,
/s/ David B. Ford /s/ John P. Mcnulty
David B. Ford John P. McNulty
Co-Head, Goldman Sachs Co-Head, Goldman Sachs
Asset Management Asset Management
/s/ Sharmin Mossavar-Rahmani
Sharmin Mossavar-Rahmani
CIO Fixed Income Investments,
Goldman Sachs Asset Management
May 29, 1998
* Source:The Investment Company Institute.
<PAGE>
FUND BASICS
Adjustable Rate Government Fund
as of April 30, 1998
Assets Under Management
-----------------------
$473 Million
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GSAMX
-----------------------
Institutional Shares
-----------------------
GSARX
-----------------------
Administration Shares
-----------------------
GSRAX
-----------------------
Service Shares
-----------------------
GSASX
-----------------------
================================================================================
PERFORMANCE REVIEW
================================================================================
<TABLE>
<CAPTION>
October 31, 1997- Fund Total Return 30-Day SEC 6-Month 1-Year
April 30, 1998 (based on NAV)(1) Yield(2) U.S. Treasury(3) U.S. Treasury(3)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 1.99% 5.28% 2.67% 2.68%
Institutional 2.12% 5.61% 2.67% 2.68%
Administration 1.99% 5.35% 2.67% 2.68%
Service 1.87% 5.11% 2.67% 2.68%
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares.
(2) The 30-Day SEC Yield of the Fund is calculated by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a 30-day period (ending on the stated
month-end date) by the maximum public offering price per share of the Fund
on the last day of the period. This number is compounded semiannually and
then annualized. This yield does not necessarily reflect income actually
earned and distributed by the Fund and, therefore, may not be correlated
with the dividends or other distributions paid to shareholders.
(3) The 6-Month and 1-Year U.S. Treasury securities reported by Merrill Lynch
do not reflect any fees or expenses.
================================================================================
SEC RETURNS
================================================================================
<TABLE>
<CAPTION>
For the period
ending 3/31/98 Class A Administration Institutional Service
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Year(4) 4.20% 5.90% 6.16% 5.63%
Five Years(4) N/A N/A 5.29% N/A
Since Inception(4) 5.57% 5.03% 5.49% 5.63%
(5/15/95) (4/15/93) (7/17/91) (3/27/97)
- ---------------------------------------------------------------------------------------------
</TABLE>
(4) The SEC Average Annualized Return is determined by computing the annual
percentage change in the value of $1,000 invested at the maximum public
offering price for specified periods, assuming reinvestment of all
distributions at NAV. The total return calculation reflects a maximum
initial sales charge of 1.5% for Class A shares. The public offering price
of the Class A shares on 3/31/98 was $9.98 and represents the NAV plus the
maximum sales charge of 1.5%.
================================================================================
PORTFOLIO COMPOSITION AS OF 4/30/98(5)
================================================================================
<TABLE>
<CAPTION>
Sector Allocation
- --------------------------------------------------------------------------------
<S> <C>
Adjustable Rate Mortgage Securities 76.7%
Collateralized Mortgage Obligations 9.6%
Small Business Administration (SBA) Floaters 5.6%
Fixed Rate Pass-Throughs 2.6%
Cash Equivalents 5.6%
- --------------------------------------------------------------------------------
</TABLE>
(5) Figures represent a percentage of net assets and may not sum to 100%. The
Fund is actively managed and, as such, its composition may differ over
time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers in effect. In their absence, performance would be
reduced.
1
<PAGE>
PERFORMANCE OVERVIEW
Adjustable Rate Government Fund
Dear Shareholders,
We are pleased to report on the performance of the Goldman Sachs Adjustable
Rate Government Fund for the six-month period ended April 30, 1998.
Performance Review: Slight Underperformance Relative to Benchmark
Over the six-month period ended April 30, 1998, the Fund slightly
underperformed its benchmarks, the six-month U.S. Treasury bill and
the one-year U.S. Treasury bill, which returned 2.67% and 2.68%,
respectively, over the same period.
The Fund's performance relative to the indices is primarily
attributable to heightened prepayment fears among investors in the
mortgage sector of the fixed income market. These fears placed
pressure on spreads, which caused adjustable rate mortgage securities
-- which constitute a major portion of the Fund -- to underperform
relative to Treasuries.
Investment Objective
The Fund seeks a high level of current income consistent with low
volatility of principal, primarily through investments in adjustable
rate mortgage securities that are issued by the U.S. government, its
agencies, instrumentalities or sponsored enterprises.
Portfolio Composition
As always, we maintained our strategy of focusing on securities that
we believe will fare well relative to the overall market, regardless
of the direction of interest rate movements. Rather than attempting to
forecast the direction of interest rates, we targeted the Fund's
duration (0.7 years as of April 30, 1998) to be approximately equal
that of a six-month to one-year U.S. Treasury security, and employed
Goldman, Sachs & Co.'s extensive research capabilities to identify
attractively valued securities offering incremental yield relative to
Treasuries.
Portfolio Highlights
o Adjustable Rate Mortgage Securities (ARMs) --Given that ARM product
became increasingly vulnerable to prepayment risk during the period,
we chose to emphasize seasoned ARMs issued prior to 1993. Seasoned
issues offer a greater degree of prepayment protection than those of
newer origination: seasoned borrowers are typically less responsive to
potential refinancing opportunities and have less economic incentive
to refinance due to lower loan balances.
As of the end of the period, the Fund held a 76.7% position in the
ARMs sector.
o Collateralized Mortgage Obligations (CMOs) -- We modestly increased
the Fund's position in CMOs (from 5.4% on October 31, 1997 to 9.6% on
April 30, 1998) as we identified securities that possessed attractive
yield enhancement and convexity characteristics.
2
<PAGE>
PERFORMANCE OVERVIEW
FIXED INCOME
INVESTMENT
PROCESS OVERVIEW
1
Security Selection
In selecting securities for each portfolio, our fixed income teams have access
to the vast resources of Goldman Sachs.
2
Sector Allocation
Our sector specialists work together to assess relative value among sectors and
create investment strategies to meet each fund's objectives.
3
Yield Curve Strategies
We adjust the term structure of our portfolios based on our expectations of the
relationship between short- and long-term interest rates, while keeping each
fund's duration close to its benchmark.
o Small Business Association (SBA) Floaters --The portfolio held a 5.6%
position in securities backed by SBA loans.
o Fixed Rate Pass-Throughs --The Fund maintained a 2.6% position in
fixed rate pass-throughs as of April 30, 1998.
o Cash Equivalents --As of the end of the period, 5.5% of the portfolio
was in cash equivalents.
Portfolio Outlook
We continue to closely monitor the ARM market. Prepayment fears --
driven by the flatter yield curve and low absolute interest rates
--will in all likelihood continue to place pressure on spreads. In
addition, should the current yield environment persist, further
ARM-to-fixed rate mortgage refinancing activity could materialize. As
a result, we will continue to focus on securities that possess
attractive prepayment protection (for example, seasoned ARMs).
We thank you for your investment and look forward to your continued
confidence.
Sincerely,
/s/ Jonathan A. Beinner /s/ Peter A. Dion
Jonathan A. Beinner Peter A. Dion
Portfolio Manager, Portfolio Manager,
Goldman Sachs Adjustable Rate Goldman Sachs Adjustable Rate
Government Fund Government Fund
/s/ James P. Mccarthy
James P. McCarthy
Portfolio Manager,
Goldman Sachs Adjustable Rate
Government Fund
May 29, 1998
3
<PAGE>
FUND BASICS
Short Duration Government Fund
as of April 30, 1998
Assets Under Management
-----------------------
$158.2 Million
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GSSDX
-----------------------
Class B Shares
-----------------------
GSDGX
-----------------------
Class C Shares
-----------------------
GSDCX
-----------------------
Institutional Shares
-----------------------
GSTGX
-----------------------
Administration Shares
-----------------------
GSDAX
-----------------------
Service Shares
-----------------------
GSDSX
-----------------------
================================================================================
PERFORMANCE REVIEW
================================================================================
<TABLE>
<CAPTION>
October 31, 1997- Fund Total Return 30-Day SEC 2-Year U.S.
April 30, 1998 (based on NAV)(1) Yield(2) Treasury Security(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 2.37% 5.17% 2.66%
Class B 2.06% 4.66% 2.66%
Class C 1.98% N/A 2.66%
Institutional 2.49% 5.53% 2.66%
Administration 2.26% 5.27% 2.66%
Service 2.24% 5.01% 2.66%
- --------------------------------------------------------------------------------
</TABLE>
(1) The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares.
(2) The 30-Day SEC Yield of the Fund is calculated by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a 30-day period (ending on the stated
month-end date) by the maximum public offering price per share of the Fund
on the last day of the period. This number is compounded semiannually and
then annualized. This yield does not necessarily reflect income actually
earned and distributed by the Fund and, therefore, may not be correlated
with the dividends or other distributions paid to shareholders.
(3) The 2-Year U.S. Treasury security does not reflect any fees or expenses.
================================================================================
SEC RETURNS
================================================================================
<TABLE>
<CAPTION>
For the period
ending 3/31/98 Class A Class B Class C Administration Institutional Service
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year(4) N/A N/A N/A 7.19% 7.57% 7.02%
Five Years(4) N/A N/A N/A N/A 5.64% N/A
Since Inception 4.07%(5) 1.41%(5) 1.98%(5) 6.14%(4) 7.13%(4) 6.55%(4)
(5/1/97) (5/1/97) (8/15/97) (2/28/96) (8/15/88) (4/10/96)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(4) The SEC Average Annualized Return is determined by computing the annual
percentage change in the value of $1,000 invested at the maximum public
offering price for specified periods, assuming reinvestment of all
distributions at NAV.
(5) The SEC Cumulative Total Return is determined by computing the percentage
change in the value of $1,000 invested at the maximum public offering price
for specified periods, assuming reinvestment of all distributions at NAV.
The total return calculation reflects a maximum initial sales charge of 2%
for Class A shares, the assumed deferred sales charge for Class B shares
(2% maximum declining to 0% after three years) and the assumed deferred
sales charge for Class C shares (1% if redeemed within 12 months of
purchase). The public offering price of the Class A shares on 3/31/98 was
$10.03 and represents the NAV plus the maximum sales charge of 2%.
================================================================================
PORTFOLIO COMPOSITION AS OF 4/30/98(6)
================================================================================
<TABLE>
<CAPTION>
Sector Allocation
- --------------------------------------------------------------------------------
<S> <C>
Collateralized Mortgage Obligations 55.9%
Adjustable Rate Mortgage Securities 22.2%
U.S. Treasuries 8.8%
U.S. Government Agency Obligations 6.1%
Fixed Rate Pass-Throughs 5.0%
Cash Equivalents 2.4%
- --------------------------------------------------------------------------------
</TABLE>
(6) Figures represent a percentage of net assets and may not sum to 100%. The
Fund is actively managed and, as such, its composition may differ over
time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers in effect. In their absence, performance would be
reduced.
4
<PAGE>
PERFORMANCE OVERVIEW
Short Duration Government Fund
Dear Shareholders,
We are pleased to report on the performance of the Goldman Sachs Short
Duration Government Fund for the six-month period ended April 30, 1998.
Performance Review: Slight Underperformance Relative to Benchmark
Over the six-month period ended April 30, 1998, the Fund slightly
underperformed its benchmark, the two-year U.S. Treasury note, which
returned 2.66%. This underperformance is primarily due to the impact
of expenses on the Fund's return.
Investment Objective
The Fund seeks a high level of current income and, secondarily, in
seeking current income, may also consider the potential for capital
appreciation, primarily through securities that are issued or
guaranteed by the U.S. government, its agencies, instrumentalities or
sponsored enterprises.
Portfolio Composition
We maintained our strategy of focusing on securities that we believe
will fare well relative to the overall market, regardless of the
direction of interest rate movements. Rather than attempting to
forecast interest rates, we targeted the Fund's duration (1.9 years as
of April 30, 1998) to that of the benchmark (1.87 years) and employed
Goldman, Sachs & Co.'s extensive research capabilities to identify
attractively valued securities offering incremental yield relative to
Treasuries within the mortgage and agency sectors.
Portfolio Highlights
o Adjustable Rate Mortgage Securities (ARMs) --During the period, we
increased the Fund's position in ARMs (from 15.5% on October 31, 1997
to 22.2% on April 30, 1998), a shift which brought us in line with our
target weighting for this sector. In the prevailing environment of
heightened prepayment risk, we focused on obtaining seasoned ARMs
originated prior to 1993, as these securities offer a lower degree of
prepayment risk than ARMs of newer origination.
o Collateralized Mortgage Obligations (CMOs) -- CMOs represented more
than half of the portfolio as of April 30, 1998 (55.9%), approximately
the same allocation as six months ago. Portfolio holdings were
concentrated in sequential and planned amortization class structures
with relatively low sensitivity to prepayment uncertainty.
5
<PAGE>
PERFORMANCE OVERVIEW
FIXED INCOME
INVESTMENT
PROCESS OVERVIEW
1
Security Selection
In selecting securities for each portfolio, our fixed income teams have access
to the vast resources of Goldman Sachs.
2
Sector Allocation
Our sector specialists work together to assess relative value among sectors and
create investment strategies to meet each fund's objectives.
3
Yield Curve Strategies
We adjust the term structure of our portfolios based on our expectations of the
relationship between short- and long-term interest rates, while keeping each
fund's duration close to its benchmark.
o U.S. Treasuries and Repurchase Agreements/Cash Equivalents --During
the period, we reduced the Fund's position in U.S. Treasuries, from
16.3% on October 31, 1997 to 8.8% on April 30, 1998, in order to
accommodate the Fund's ARM purchases. In addition, the Fund held 2.4%
in repurchase agreements/cash equivalents as of April 30, 1998.
Portfolio Outlook
Presently, our outlook for the ARM market is cautious. Heightened
prepayment fears --driven by the flatter yield curve and low absolute
interest rates -- continue to place pressure on spreads. In addition,
should the current yield environment persist, we anticipate a further
increase in ARM-to-fixed rate mortgage refinancing activity. Recent
reports of record prepayment speeds support these expectations.
In this somewhat more challenging environment, we will continue to
focus on seasoned ARMs originated prior to 1993. Seasoned issues offer
a greater degree of prepayment protection than those of newer
origination; seasoned borrowers are typically less responsive to
potential refinancing opportunities and also have less economic
incentive due to lower loan balances.
Our approach to investing in the CMO sector should remain constant
through the remainder of the year; we will look to enhance portfolio
returns through the identification of securities with attractive
yields and good cash flow stability.
We thank you for your investment and look forward to your continued
confidence.
Sincerely,
/s/ Jonathan A. Beinner /s/ James B. Clark
Jonathan A. Beinner James B. Clark
Portfolio Manager, Portfolio Manager,
Goldman Sachs Short Duration Goldman Sachs Short Duration
Government Fund Government Fund
May 29, 1998
6
<PAGE>
FUND BASICS
Government Income Fund
as of April 30, 1998
Assets Under Management
-----------------------
$116.7 Million
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GSGOX
-----------------------
Class B Shares
-----------------------
GSOBX
-----------------------
Class C Shares
-----------------------
GSOCX
-----------------------
Institutional Shares
-----------------------
GSOIX
-----------------------
Service Shares
-----------------------
GSOSX
-----------------------
================================================================================
PERFORMANCE REVIEW
================================================================================
<TABLE>
<CAPTION>
October 31, 1997- Fund Total Return 30-Day SEC Lehman Govt./
April 30, 1998 (based on NAV)(1) Yield(2) Mortgage Index(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 3.34% 5.23% 3.53%
Class B 2.96% 4.72% 3.53%
Class C 3.03% 4.71% 3.53%
Institutional 3.47% N/A 3.53%
Service 3.33% N/A 3.53%
- --------------------------------------------------------------------------------
</TABLE>
(1) The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares.
(2) The 30-Day SEC Yield of the Fund is calculated by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a 30-day period (ending on the stated
month-end date) by the maximum public offering price per share of the Fund
on the last day of the period. This number is compounded semiannually and
then annualized. This yield does not necessarily reflect income actually
earned and distributed by the Fund and, therefore, may not be correlated
with the dividends or other distributions paid to shareholders.
(3) The Lehman Brothers Government/Mortgage Index does not reflect any fees or
expenses. In addition, investors cannot invest directly in the Index.
================================================================================
SEC RETURNS
================================================================================
<TABLE>
<CAPTION>
For the period
ending 3/31/98 Class A Class B Class C Institutional Service
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year(4) 6.51% 5.40% N/A N/A N/A
Five Years(4) 5.76% N/A N/A N/A N/A
Since Inception 6.20%(4) 5.90%(4) 4.34%(5) 6.04%(5) 5.89%(5)
(2/10/93) (5/1/96) (8/15/97) (8/15/97) (8/15/97)
- --------------------------------------------------------------------------------
</TABLE>
(4) The SEC Average Annualized Return is determined by computing the annual
percentage change in the value of $1,000 invested at the maximum public
offering price for specified periods, assuming reinvestment of all
distributions at NAV. The total return calculation reflects a maximum
initial sales charge of 4.5% for Class A shares and the assumed deferred
sales charge for Class B shares (5% maximum declining to 0% after six
years). The public offering price of the Class A shares on 3/31/98 was
$15.27 and represents the NAV plus the maximum sales charge of 4.5%.
(5) The SEC Cumulative Total Return is determined by computing the percentage
change in the value of $1,000 invested at the maximum public offering price
for specified periods, assuming reinvestment of all distributions at NAV.
The total return calculation for Class C shares reflects the assumed
deferred sales charge (1% if redeemed within 12 months of purchase).
================================================================================
PORTFOLIO COMPOSITION AS OF 4/30/98(6)
================================================================================
<TABLE>
<CAPTION>
Sector Allocation
- --------------------------------------------------------------------------------
<S> <C>
Mortgage-Backed Securities 50.0%
U.S. Treasuries 21.7%
Asset-Backed Securities 18.3%
U.S. Government Agency Obligations 9.4%
Cash 5.4%
Insured Revenue Bonds 1.9%
- --------------------------------------------------------------------------------
</TABLE>
(6) Figures represent a percentage of net assets and may not sum to 100% . The
Fund is actively managed and, as such, its composition may differ over
time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers in effect. In their absence, performance would be
reduced.
7
<PAGE>
PERFORMANCE OVERVIEW
Government Income Fund
Dear Shareholders,
We are pleased to report on the performance of the Goldman Sachs Government
Income Fund for the six-month period ended April 30, 1998.
Performance Review: Slight Underperformance Relative to Benchmark
Over the six-month period ended April 30, 1998, the Fund's shares
slightly underperformed the 3.53% return of its benchmark, the Lehman
Government/Mortgage Index. The Fund's underperformance is primarily
attributable to the impact of expenses on the Fund's return.
Investment Objective
The Fund seeks a high level of current income consistent with safety
of principal, primarily through investments that include
mortgage-backed securities issued or guaranteed by the U.S.
government, its agencies, instrumentalities or sponsored enterprises.
Portfolio Composition
During the period, we maintained our strategy of focusing on
securities that we believe will perform well relative to the overall
market regardless of the direction of interest rates. Our investment
strategy is to match the Fund's duration (4.1 years as of April 30,
1998) to that of the benchmark (4.1 years), and seek excess return
over the benchmark through sector weightings and specific security
selection.
Portfolio Highlights
o Mortgage-Backed Securities -- The Fund's position in the
mortgage-backed sector -- which includes investments in fixed rate
mortgage pass-throughs and collateralized mortgage obligations --
remained substantially the same from six months earlier (48.2% of the
portfolio on October 31, 1997 versus 50% as of April 30, 1998).
o U.S. Treasuries and Cash Equivalents -- The Fund's positions in U.S.
Treasuries remained relatively unchanged (21.7% on April 30, 1998
versus 22.7% on October 31, 1997), while the cash position increased
over the six-month period (5.4% on April 30, 1998, compared to 0.3% on
October 31, 1997).
o Asset-Backed Securities (ABS) --After a spate of spread-widening at
year-end, ABS performed well as investor interest returned to the
sector. Holdings were concentrated fairly evenly among auto, credit
card and home equity collateral. As of April 30, 1998, the Fund was
18.3% invested in ABS.
8
<PAGE>
PERFORMANCE OVERVIEW
FIXED INCOME
INVESTMENT
PROCESS OVERVIEW
1
Security Selection
In selecting securities for each portfolio, our fixed income teams have access
to the vast resources of Goldman Sachs.
2
Sector Allocation
Our sector specialists work together to assess relative value among sectors and
create investment strategies to meet each fund's objectives.
3
Yield Curve Strategies
We adjust the term structure of our portfolios based on our expectations of the
relationship between short- and long-term interest rates, while keeping each
fund's duration close to its benchmark.
o U.S. Government Agency Obligations --The Fund's position in agency
obligations decreased slightly over the period (11.1% on October 31,
1997 versus 9.4% on April 30, 1998).
o Insured Revenue Bonds (Municipal Bonds) --We maintained a small
position in municipal bonds (1.9%) in order to take advantage of
seasonal supply imbalances in the municipal sector. We expect to
"unwind" this trade when equilibrium is restored.
Portfolio Outlook
Spreads in the mortgage sector have remained remarkably stable despite
persistently low interest rates and prepayment speeds not experienced
since the refinancing wave of 1993. The sector's resilience is
primarily attributable to a pause in the Treasury rally, diminished
volatility and an assumption that the worst of the prepayment spike is
behind us. Given our assessment that the mortgage market may be too
complacent, however, we intend to concentrate our portfolio holdings
in less prepayment-sensitive securities such as 30-year
cusp-to-discount securities within the pass-through subsector, and
commercial mortgage-backed and support bonds within the collateralized
mortgage obligations subsector. Within the ABS market, we intend to
focus on those areas of the market that we believe offer attractive
value. These include floaters, subprime auto securities (insured to
achieve AAA ratings) and selected home equity securities whose
prepayment sensitivities have been mispriced.
We thank you for your investment and look forward to your continued
confidence.
Sincerely,
/s/ Jonathan A. Beinner /s/ Erica Adelberg
Jonathan A. Beinner Erica Adelberg
Portfolio Manager, Portfolio Manager,
Goldman Sachs Goldman Sachs
Government Income Fund Government Income Fund
/s/ James B. Clark
James B. Clark
Portfolio Manager,
Goldman Sachs
Government Income Fund
May 29, 1998
9
<PAGE>
FUND BASICS
Core Fixed Income Fund
as of April 30, 1998
Assets Under Management
-----------------------
$206.3 Million
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GCFIX
-----------------------
Class B Shares
-----------------------
GCFBX
-----------------------
Class C Shares
-----------------------
GCFCX
-----------------------
Institutional Shares
-----------------------
GSFIX
-----------------------
Administrative Shares
-----------------------
GSFAX
-----------------------
Service Shares
-----------------------
GSCSX
-----------------------
================================================================================
PERFORMANCE REVIEW
================================================================================
<TABLE>
<CAPTION>
October 31, 1997- Fund Total Return 30-Day SEC Lehman
April 30, 1998 (based on NAV)(1) Yield(2) Aggregate Index(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 3.25% 5.47% 3.59%
Class B 2.86% 4.97% 3.59%
Class C 2.86% 4.94% 3.59%
Institutional 3.38% 5.98% 3.59%
Administration 3.35% 5.73% 3.59%
Service 3.12% 5.48% 3.59%
- --------------------------------------------------------------------------------
</TABLE>
(1) The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares.
(2) The 30-Day SEC Yield of the Fund is calculated by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a 30-day period (ending on the stated
month-end date) by the maximum public offering price per share of the Fund
on the last day of the period. This number is compounded semiannually and
then annualized. This yield does not necessarily reflect income actually
earned and distributed by the Fund and, therefore, may not be correlated
with the dividends or other distributions paid to shareholders.
(3) The Lehman Aggregate Bond Index does not reflect any fees or expenses. In
addition, investors cannot invest directly in the Index.
================================================================================
SEC RETURNS
================================================================================
<TABLE>
<CAPTION>
For the period
ending 3/31/98 Class A Class B Class C Administration Institutional Service
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year(4) N/A N/A N/A 11.60% 11.88% 11.32%
Since Inception 4.90%(5) 3.93%(5) 4.18%(5) 7.36%(4) 7.10%(4) 7.94%(4)
(5/1/97) (5/1/97) (8/15/97) (2/28/96) (1/5/94) (3/13/96)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(4) The SEC Average Annualized Return is determined by computing the annual
percentage change in the value of $1,000 invested at the maximum public
offering price for specified periods, assuming reinvestment of all
distributions at NAV.
(5) The SEC Cumulative Total Return is determined by computing the percentage
change in the value of $1,000 invested at the maximum public offering price
for specified periods, assuming reinvestment of all distributions at NAV.
The total return calculation reflects a maximum initial sales charge of
4.5% for Class A shares, the assumed deferred sales charge for Class B
shares (5% maximum declining to 0% after six years) and the assumed
deferred sales charge for Class C shares (1% if redeemed within 12 months
of purchase). The public offering price of the Class A shares on 3/31/98
was $10.49 and represents the NAV plus the maximum sales charge of 4.5%.
================================================================================
PORTFOLIO COMPOSITION AS OF 4/30/98(6)
================================================================================
<TABLE>
<CAPTION>
Sector Allocation
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage-Backed Securities 34.4% Emerging Market Debt 2.1%
U.S. Treasuries 23.9% Municipal 1.3%
Corporates 21.2% Government Bonds 0.3%
Asset-Backed Securities 13.0% Sovereign Credits 0.2%
Cash Equivalents 7.7%
- --------------------------------------------------------------------------------
</TABLE>
(6) Figures represent a percentage of net assets and may not sum to 100% due to
rounding. The Fund is actively managed and, as such, its composition may
differ over time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers in effect. In their absence, performance would be
reduced.
10
<PAGE>
PERFORMANCE OVERVIEW
Core Fixed Income Fund
Dear Shareholders,
We are pleased to report on the performance of the Goldman Sachs Core Fixed
Income Fund for the six-month period ended April 30, 1998.
Performance Review: Underperformance Relative to Benchmark
Over the six-month period ended April 30, 1998, the Fund
underperformed the 3.59% return of the Fund's benchmark, the Lehman
Brothers Aggregate Bond Index. During the period, the Fund's positions
in corporate, mortgage and non-dollar securities had a positive impact
on performance. However, the Fund's emerging market debt position
detracted from performance, due to the negative impact of the Asian
currency crisis.
Investment Objective
The Fund seeks total return consisting of capital appreciation and
income that exceeds that of the Lehman Brothers Aggregate Bond Index,
primarily through fixed income securities, including securities issued
or guaranteed by the U.S. government, its agencies, instrumentalities
or sponsored enterprises, corporate securities, mortgage-backed
securities and asset-backed securities.
Portfolio Composition
Our general investment strategy de-emphasizes Treasuries in favor of
higher yielding fixed income alternatives with enhanced total return
potential. As such, over the past six months, we underweighted
Treasury and Agency securities relative to the benchmark and
overweighted corporate, mortgage, asset-backed and emerging market
debt securities. In addition, we implemented several tactical
allocations to the municipal and non-dollar sectors of the market.
Portfolio Highlights
o Mortgage-Backed Securities --During the period, the Fund's position in
the mortgage-backed sector --which includes fixed rate mortgage
pass-throughs and collateralized mortgage obligations --decreased
slightly from six months earlier (37.4% as of October 31, 1997 versus
34.4% as of April 30, 1998). The reduced allocation reflects our
cautious outlook for the sector given today's prepayment-sensitive
environment.
o Treasuries and Cash Equivalents --The Fund acquired a small cash
position (7.7% as of April 30, 1998) over the period, while its
position in U.S. Treasuries increased significantly (23.9% on April
30, 1998 versus 15.7% on October 31, 1997). Sales in the emerging
market debt and mortgage-backed sectors accounted for most of the
increase.
o Corporates --Early in the period, spreads in the corporate sector
widened in response to Asian influences, and we took advantage of the
buying opportunity this presented. Since then, positive fundamentals
have emerged, and investors have resumed their support of the sector.
As of April 30, 1998, the Fund held a 21.2% position in corporate
bonds, down from 28.8% six months ago. Strong cash inflows into the
Fund, combined with the fact that several bonds were called during the
period, are the primary reasons why this allocation decreased.
11
<PAGE>
PERFORMANCE OVERVIEW
FIXED INCOME
INVESTMENT
PROCESS OVERVIEW
1
Security Selection
In selecting securities for each portfolio, our fixed income teams have access
to the vast resources of Goldman Sachs.
2
Sector Allocation
Our sector specialists work together to assess relative value among sectors and
create investment strategies to meet each fund's objectives.
3
Yield Curve Strategies
We adjust the term structure of our portfolios based on our expectations of the
relationship between short- and long-term interest rates, while keeping each
fund's duration close to its benchmark.
o Asset-Backed Securities (ABS)--After a spate of spread-widening at
year-end, ABS performed well as investors demonstrated renewed
interest in the sector. As of April 30, 1998, the Fund was 13%
invested in ABS.
o Emerging Market Debt (EMD) --During the period under review, we
reduced the Fund's position in emerging market debt, from 5.0% on
October 31, 1997 to 2.1% on April 30, 1998. The allocation was lowered
during the period in response to increased concern over the crisis in
Asia and its impact on EMD performance. We controlled the Fund's
exposure to EMD by stressing high-credit-quality, short-duration
bonds. Most of the sector's holdings were in Latin America, where
structural and economic reforms are helping strengthen credit
fundamentals.
o Municipal Bonds --We maintained a small position in municipal bonds
(1.3%) in order to take advantage of seasonal supply imbalances in the
municipal sector. We expect to "unwind" this trade when equilibrium is
restored.
Portfolio Outlook
In the months ahead, we will keep a close eye on the mortgage
subsector. In our view, the market has not adequately discounted
either the sector's prepayment sensitivity or today's more efficient
refinancing environment. We are therefore maintaining an underweighted
allocation to the sector and are focusing the portfolio's holdings in
securities with relatively low prepayment sensitivities. Our outlook
for the corporate sector remains favorable, given our belief that the
recent pattern of moderate, noninflationary growth will persist, while
new issuance volume should subside. In the ABS market, we believe
there are segments that continue to offer attractive value; these
include floaters and selected mortgage-related ABS. Finally, emerging
market debt spreads are likely to remain volatile in the near term, as
investors remained focused on the fallout from the Asian crisis.
Continued weakness in the Japanese yen, coupled with soft domestic
demand across the Asian regions, is likely to result in continued
financial market instability there. However, we believe that current
spreads in investment grade emerging markets are attractive and thus
offer value over the medium term.
We thank you for your investment and look forward to your continued
confidence.
Sincerely,
/s/ Jonathan A. Beinner /s/ Richard H. Buckholz
Jonathan A. Beinner Richard H. Buckholz
Portfolio Manager, Portfolio Manager,
Goldman Sachs Core Goldman Sachs Core
Fixed Income Fund Fixed Income Fund
/s/ C. Richard Lucy /s/ Mark A. Van Wyk
C. Richard Lucy Mark A. Van Wyk
Portfolio Manager, Portfolio Manager,
Goldman Sachs Core Goldman Sachs Core
Fixed Income Fund Fixed Income Fund
May 29, 1998
12
<PAGE>
FUND BASICS
Global Income Fund
as of April 30, 1998
Assets Under Management
-----------------------
$250.8 Million
-----------------------
NASDAQ SYMBOLS
Class A Shares
-----------------------
GSGIX
-----------------------
Class B Shares
-----------------------
GSLBX
-----------------------
Class C Shares
-----------------------
GSLCX
-----------------------
Institutional Shares
-----------------------
GSGLX
-----------------------
Service Shares
-----------------------
GGISX
-----------------------
================================================================================
PERFORMANCE REVIEW
================================================================================
<TABLE>
<CAPTION>
October 31, 1997- Fund Total Return 30-Day SEC JPM Global Govt.
April 30, 1998 (based on NAV)(1) Yield(2) Bond Index(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 4.68% 3.76% 4.93%
Class B 4.36% 3.39% 4.93%
Class C 4.39% 3.41% 4.93%
Institutional 5.06% 4.52% 4.93%
Service 4.80% 4.02% 4.93%
- --------------------------------------------------------------------------------
</TABLE>
(1) The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares.
(2) The 30-Day SEC Yield of the Fund is calculated by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a 30-day period (ending on the stated
month-end date) by the maximum public offering price per share of the Fund
on the last day of the period. This number is compounded semiannually and
then annualized. This yield does not necessarily reflect income actually
earned and distributed by the Fund and, therefore, may not be correlated
with the dividends or other distributions paid to shareholders.
(3) The composition and characteristics of the securities in the JP Morgan
(JPM) Global Government Bond Index (hedged) are not identical to those of
the Fund. Also, unlike the Fund's return, the Index's return does not
reflect any fees or expenses. In addition, investors cannot invest directly
in the Index.
================================================================================
SEC RETURNS
================================================================================
<TABLE>
<CAPTION>
For the period
ending 3/31/98 Class A Class B Class C Institutional Service
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year(4) 6.84% 5.89% N/A 12.55% 12.01%
Five Years(4) 7.61% N/A N/A N/A N/A
Since Inception 7.66%(4) 8.01%(4) 6.07%(5) 11.66%(4) 10.44%(4)
(8/2/91) (5/1/96) (8/15/97) (8/1/95) (3/12/97)
- --------------------------------------------------------------------------------
</TABLE>
(4) The SEC Average Annualized Return is determined by computing the annual
percentage change in the value of $1,000 invested at the maximum public
offering price for specified periods, assuming reinvestment of all
distributions at NAV. The total return calculation reflects a maximum
initial sales charge of 4.5% for Class A shares and the assumed deferred
sales charge for Class B shares (5% maximum declining to 0% after six
years). The public offering price of the Class A shares on 3/31/98 was
$15.74 and represents the NAV plus the maximum sales charge of 4.5%.
(5) The SEC Cumulative Total Return is determined by computing the percentage
change in the value of $1,000 invested at the maximum public offering price
for specified periods, assuming reinvestment of all distributions at NAV.
The total return calculation reflects the assumed deferred sales charge for
Class C shares (1% if redeemed within 12 months of purchase).
================================================================================
TOP 10 HOLDINGS AS OF 4/30/98(6)
================================================================================
<TABLE>
<CAPTION>
Bonds Denomination
- --------------------------------------------------------------------------------
<S> <C>
1. U.S. Dollar 35.4%
2. German Mark 19.1%
3. Japanese Yen 12.3%
4. British Pound 9.6%
5. French Franc 6.8%
6. Italian Lira 5.9%
7. Spanish Peseta 3.4%
8. Canadian Dollar 2.2%
9. Danish Krone 1.3%
10. U.S. Dollar Cash 0.4%
- --------------------------------------------------------------------------------
</TABLE>
(6) Figures represent a percentage of net assets and may not sum to 100%. The
Fund is actively managed and, as such, its composition may differ over
time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers in effect. In their absence performance would be
reduced.
13
<PAGE>
PERFORMANCE OVERVIEW
Global Income Fund
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Global
Income Fund for the six-month period ended April 30, 1998.
Performance Review: Slight Outperformance Relative to Benchmark
Over the six-month period ended April 30, 1998, the Fund's
Institutional shares outperformed the 4.93% return of the Fund's
benchmark, the JP Morgan Global Government Bond Index (hedged into
U.S. dollars). The Fund's Class A, Class B, Class C and Service
shares, which have higher expenses, slightly underperformed the
benchmark.
The Fund's performance relative to the benchmark is attributable
to a generally positive stance in bond markets during a period of
healthy global bond market returns. European markets generated strong
results, with the bond markets in the UK and Sweden demonstrating
notable strength that contributed significantly to overall Fund
performance. Among the dollar bloc nations, markets in the United
States and Canada were driven by a flight-to-fixed-income rally in the
aftermath of the Asian crisis, adding favorably to performance
results.
Positions that exerted a negative effect on performance included
Japan, as the Fund wasn't positioned to benefit fully from a Japanese
bond market rally early in the period. The Fund's position in New
Zealand also hurt performance when the market's currency fell sharply
in the wake of events occurring in the Asian region.
Investment Objective
The Fund seeks high total return, emphasizing current income and, to a
lesser extent, providing opportunities for capital appreciation
primarily through investments in fixed income securities of U.S. and
foreign issuers and foreign currencies.
Portfolio Positioning
At the onset of the period, the Fund held a neutral position in Europe
relative to the benchmark. As the period drew to a close, the position
was increased to an overweighting to better situate the Fund to take
advantage of ongoing strength in the European bond markets. Likewise,
the Fund's position in the dollar bloc countries was neutral at the
start of the period. By period-end, however, the position decreased to
an underweighting as continued robust economic growth and labor market
strength led to concerns of increasing inflationary pressures in the
United States, thus setting the stage for a potential interest rate
hike. In Japan, the Fund's position was underweight versus the
benchmark early in the period, but was increased to an overweighting
in order to take advantage of the deterioration in Japanese economic
activity. At the close of the period, this position was
neutral-weighted, reflecting our preference to focus instead on the
opportunities in Europe.
Portfolio Highlights
o German 10-Year Maturities -- In the German market, we chose to invest
primarily in 10-year maturities -- and, in fact, overweighted the
market relative to other European markets
14
<PAGE>
PERFORMANCE OVERVIEW
Fixed Income
Investment Process Overview
1
Security Selection
In selecting securities for each portfolio, our fixed income teams have access
to the vast resources of Goldman Sachs.
2
Sector Allocation
Our sector specialists work together to assess relative value among sectors and
create investment strategies to meet each fund's objectives.
3
Yield Curve Strategies
We adjust the term structure of our portfolios based on our expectations of the
relationship between short- and long-term interest rates, while keeping each
fund's duration close to its benchmark.
-- as the relatively steep yield curve offered favorable running
yields (the difference between short rates and, in this case, 10-year
rates). This opportunity was due to the fact that the slope of the
curve reflected a 75-basis point rate increase discounted by the
market in anticipation of the introduction of the Euro on January 1,
1999.
o Danish Government Bonds -- Uncertainty regarding whether or not
Denmark will become an early member of European Monetary Union (EMU)
prompted a sell-off in this market during the period. We used this
situation to our advantage by purchasing Danish government bonds.
Recently, Danish citizens voted in favor of European integration. More
importantly, favorable economic fundamentals currently support a
tightening in the spread. Given these factors, we expect that Danish
bonds are likely to outperform over the near term.
o Japanese Bonds -- The Fund held a broad range of yen-denominated bonds
throughout the period. Despite yields reaching new all-time lows,
Japan faces enormous economic structural changes, which will continue
to place downward pressure on an already severely depressed economy.
In turn, this could lead to further deflationary pressures that could
force the Bank of Japan to maintain an accommodative monetary policy
stance in the foreseeable future. In view of this, we expect to
maintain our present neutral stance.
Key New Acquisitions
o European Spread Products -- We purchased European spread products
(non-government bonds issued by government-backed entities) during the
period, focusing on those that we believe will have broad-based appeal
as European countries are united under EMU. The elimination of
different currencies will put an end to exchange rate risk, and should
encourage investors to look beyond national boundaries to investments
in other countries. Among the issuers that should benefit are the
heavily government-owned utility companies, as well as banks that
provide export financing.
Portfolio Outlook
Going forward, we view the U.S. market cautiously, given an increase
in the risk that the Federal Reserve Board will move to raise interest
rates during the summer. With this in mind, we intend to continue to
underweight this position versus the benchmark. Conversely, we intend
to maintain our overweight position in Europe, as we view these
markets positively. Inflationary pressures are less obvious than those
in the United States, most notably in the labor market, and, as such,
interest rates are likely to remain on hold. Although Japanese yields
are at historic lows, our analysis suggests that the Bank of Japan
will continue to support the Japanese market. We therefore intend to
maintain a neutral position in this market at the present time.
We thank you for your investment and look forward to your continued
confidence.
Sincerely,
/s/ Stephen C. Fitzgerald /s/ Andrew F. Wilson
Stephen C. Fitzgerald Andrew F. Wilson
Portfolio Manager, Portfolio Manager,
Goldman Sachs Global Income Fund Goldman Sachs Global Income Fund
May 29, 1998
15
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Risk Management Through Fixed Income Investing
TODAY'S BOND
ADVANTAGE
The current economic picture suggests a positive backdrop against which bonds
can thrive.
1
Low inflation rates--Inflation rates are at historic lows -- 1.7% at the end of
1997 versus 2.9% at the end of 1991.(2)
2
Moderate economic growth--Despite historically low inflation, the U.S. economy
continues to grow at a moderate pace.
3
A strong dollar--Over the past year, the U.S. dollar has gained strength against
many other major currencies.
4
Budget deficit reductions--Over the past several years, the federal budget has
been significantly reduced and is expected to generate a substantial surplus in
fiscal year 1998.
Bonds Can Balance Portfolio Volatility
Given the stock market's record climb over the past several years,
many investors may have substantially increased the percentage of
their assets allocated to equity investments --often at the expense of
their fixed income allocation. While benefiting from the market's
strong showing, these investors may also have increased their
portfolios' vulnerability to intensifying levels of stock market
volatility.
Fixed income investments can diversify risk in an equities-laden
portfolio for two reasons:
1. Stock and Bond Prices Are Not Highly Correlated. Prior to an
expected recession or when the economy is slowing, stock prices
usually fall. Conversely, bond prices rise as interest rates
decline. The tendency of these two investments to react
differently in a given market environment, as illustrated below,
can help offset the effect of equity market fluctuations on a
portfolio.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
----------------------------------------------------------------------
S&P 500 Index vs. 10-Year U.S. Treasury Bonds (1977-1997)(1)
DATE S & P 500 10-YEAR US TSY. BOND
---- --------- --------------------
12/31/77 -11.50% 11.30%
12/31/78 1.06 17.12
12/31/79 12.31 15.49
12/31/80 25.77 24.21
12/31/81 -9.73 5.80
12/31/82 14.76 -22.34
12/31/83 17.27 11.40
12/31/84 1.40 -2.76
12/31/85 26.33 -19.17
12/31/86 14.62 -23.50
12/31/87 2.03 26.99
12/31/88 12.40 1.11
12/31/89 27.25 -13.90
12/31/90 -6.56 3.52
12/31/91 26.31 -12.41
12/31/92 4.46 -4.57
12/31/93 7.06 -14.84
12/31/94 -1.54 35.40
12/31/95 34.11 -26.78
12/31/96 20.26 9.95
12/31/97 31.01 -7.78
2. Bonds Generate Interest Income. During a stock market downturn,
the compounding effect of bonds' interest income can offset
declines in the equity portion of an overall portfolio.
For More Information
A fixed income mutual fund is a convenient way to access the potential
income and risk management benefits of fixed income investing. Goldman
Sachs Asset Management offers a broad spectrum of fixed income mutual
funds designed to help you meet your long-term investment needs. For
more information on these and other Goldman Sachs Funds, contact your
investment professional.
(1) Source: McGraw Hill Data Resources. Data covers period from
December 31, 1977 through December 31, 1997. Please note that
U.S. government bonds are backed by the full faith and credit of
the U.S. government, are less volatile than equity investments
and provide a guaranteed return of principal at maturity. The
chart is for illustrative purposes only and is not representative
of any Goldman Sachs Fund. Past performance is not indicative of
future results. Investors cannot invest directly in the Index.
(2) Source: The Bureau of Labor Statistics
16
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
Performance Summary
April 30, 1998 (Unaudited)
The following graph shows the value as of April 30, 1998, of a $10,000 in-
vestment made in Institutional shares on August 1, 1991. For comparative pur-
poses, the performance of the Fund's 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")) are
shown. This performance data represents past performance and should not be
considered indicative of future performance which will fluctuate with changes
in market conditions. These performance fluctuations will cause an investor's
shares, when redeemed, to be worth more or less than their original cost.
Performance of Class A, Administration and Service shares will vary from In-
stitutional shares due to differences in fees and loads.
ADJUSTABLE RATE GOVERNMENT FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, DISTRIBUTIONS REINVESTED AUGUST 1, 1991 TO
APRIL 30, 1998./(a)/
[LINE GRAPH APPEARS HERE]
Adjustable Rate
Period Begin Government Fund Lehman One Year Six Month
Date Institutional Shares 1 - 2 Index T - Bill T - Bill
8/1/91 10,000 10,000 10,000 10,000
Aug-91 10,074 10,120 10,083 10,060
Sep-91 10,136 10,213 10,158 10,117
Oct-91 10,208 10,316 10,236 10,174
Nov-91 10,277 10,415 10,314 10,234
Dec-91 10,333 10,554 10,407 10,300
Jan-92 10,389 10,556 10,436 10,335
Feb-92 10,441 10,588 10,463 10,365
Mar-92 10,474 10,600 10,489 10,397
Apr-92 10,522 10,694 10,550 10,450
May-92 10,588 10,777 10,592 10,489
Jun-92 10,661 10,870 10,648 10,531
Jul-92 10,724 10,979 10,726 10,583
Aug-92 10,779 11,056 10,775 10,617
Sep-92 10,833 11,149 10,844 10,665
Oct-92 10,834 11,100 10,832 10,675
Nov-92 10,843 11,092 10,841 10,698
Dec-92 10,911 11,190 10,900 10,740
Jan-93 10,947 11,288 10,957 10,780
Feb-93 10,996 11,361 10,995 10,808
Mar-93 11,020 11,393 11,027 10,841
Apr-93 11,065 11,455 11,066 10,870
May-93 11,086 11,433 11,055 10,887
Jun-93 11,148 11,505 11,109 10,920
Jul-93 11,188 11,533 11,137 10,949
Aug-93 11,238 11,610 11,187 10,984
Sep-93 11,264 11,647 11,219 11,015
Oct-93 11,282 11,672 11,240 11,039
Nov-93 11,292 11,686 11,261 11,067
Dec-93 11,323 11,728 11,301 11,106
Jan-94 11,355 11,796 11,347 11,142
Feb-94 11,375 11,746 11,334 11,152
Mar-94 11,369 11,717 11,336 11,180
Apr-94 11,352 11,688 11,326 11,197
May-94 11,359 11,709 11,341 11,228
Jun-94 11,384 11,742 11,378 11,277
Jul-94 11,441 11,836 11,448 11,324
Aug-94 11,478 11,876 11,487 11,369
Sep-94 11,485 11,866 11,504 11,400
Oct-94 11,494 11,900 11,549 11,452
Nov-94 11,492 11,861 11,543 11,486
Dec-94 11,543 11,891 11,582 11,536
Jan-95 11,659 12,036 11,698 11,611
Feb-95 11,748 12,178 11,800 11,679
Mar-95 11,804 12,248 11,869 11,739
Apr-95 11,879 12,347 11,937 11,801
May-95 11,991 12,518 12,044 11,872
Jun-95 12,006 12,585 12,113 11,935
Jul-95 12,072 12,644 12,173 11,995
Aug-95 12,139 12,713 12,231 12,054
Sep-95 12,191 12,771 12,281 12,104
Oct-95 12,270 12,865 12,355 12,164
Nov-95 12,346 12,960 12,429 12,223
Dec-95 12,424 13,051 12,498 12,291
Jan-96 12,515 13,154 12,578 12,352
Feb-96 12,549 13,125 12,593 12,396
Mar-96 12,600 13,133 12,627 12,438
Apr-96 12,662 13,158 12,671 12,489
May-96 12,740 13,198 12,716 12,540
Jun-96 12,790 13,286 12,784 12,594
Jul-96 12,855 13,338 12,832 12,649
Aug-96 12,920 13,393 12,893 12,705
Sep-96 13,023 13,500 12,980 12,771
Oct-96 13,114 13,635 13,076 12,832
Nov-96 13,191 13,722 13,140 12,889
Dec-96 13,257 13,744 13,185 12,943
Jan-97 13,323 13,808 13,250 13,000
Feb-97 13,383 13,849 13,299 13,060
Mar-97 13,436 13,854 13,332 13,111
Apr-97 13,545 13,958 13,410 13,173
May-97 13,643 14,051 13,493 13,244
Jun-97 13,712 14,140 13,572 13,308
Jul-97 13,797 14,269 13,670 13,370
Aug-97 13,853 14,297 13,712 13,424
Sep-97 13,921 14,394 13,785 13,493
Oct-97 13,992 14,489 13,861 13,554
Nov-97 14,032 14,529 13,901 13,602
Dec-97 14,087 14,621 13,966 13,665
Jan-98 14,172 14,745 14,057 13,735
Feb-98 14,207 14,769 14,094 13,786
Mar-98 14,264 14,829 14,165 13,854
Apr-98 14,289 14,899 14,232 13,915
<TABLE>
<CAPTION>
SINCE INCEPTION FIVE YEARS ONE YEAR SIX MONTHS/(b)/
AVERAGE ANNUAL TOTAL RETURN
THROUGH APRIL 30, 1998
<S> <C> <C> <C> <C>
CLASS A (COMMENCED MAY 15,
1995)
Excluding sales charges 6.02% n/a 5.23% 1.99%
Including sales charges 5.47% n/a 3.66% 0.47%
------------------------------------------------------------------------------
INSTITUTIONAL CLASS
(COMMENCED JULY 17, 1991) 5.45% 5.24% 5.49% 2.12%
------------------------------------------------------------------------------
ADMINISTRATION CLASS
(COMMENCED APRIL 15, 1993) 4.97% 4.98% 5.23% 1.99%
------------------------------------------------------------------------------
SERVICE CLASS (COMMENCED
MARCH 27, 1997) 5.23% n/a 4.97% 1.87%
------------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following commencement of operations.
(b) Not annualized.
17
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS - 94.5%
ADJUSTABLE RATE FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)(A) - 37.1%
$ 542,660 7.35% 12/01/2015 $ 556,460
9,593,246 7.05 04/01/2017 9,814,083
701,808 7.35 11/01/2017 724,806
938,428 7.32 03/01/2018 962,911
310,358 7.32 06/01/2018 319,492
1,064,298 7.32 06/01/2018 1,096,248
6,665,714 7.47 06/01/2018 6,921,078
2,033,919 7.46 07/01/2018 2,104,516
1,540,727 7.46 10/01/2018 1,581,172
161,936 7.33 11/01/2018 166,845
1,012,072 7.47 12/01/2018 1,039,974
7,846,174 7.45 05/01/2019 8,039,268
1,224,139 7.27 08/01/2019 1,259,333
16,928,422(b) 7.72 11/01/2019 17,607,928
9,630,747 7.50 01/01/2020 9,946,732
4,037,124 7.77 05/01/2020 4,195,097
14,009,188 7.50 06/01/2020 14,488,582
29,652,585(b) 7.78 02/01/2022 31,005,632
5,588,349 7.41 06/01/2022 5,766,338
3,366,456 7.43 08/01/2022 3,456,913
1,577,686 7.57 08/01/2022 1,632,353
4,741,611 7.15 09/01/2022 4,874,660
5,246,253 7.66 09/01/2022 5,443,197
7,744,031 7.71 06/01/2024 8,071,913
12,599,513 7.08 06/20/2024 12,934,282
12,275,695 7.46 04/01/2025 12,652,558
660,286 7.64 09/01/2025 685,027
3,333,172 7.36 08/01/2027 3,442,666
2,885,411 7.28 02/01/2028 2,977,946
1,370,875 7.70 07/01/2030 1,429,562
------------
$175,197,572
----------------------------------------------------------------------------------------------
ADJUSTABLE RATE FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)(A) - 38.0%
$ 1,478,135 7.44% 04/01/2003 $ 1,491,542
823,642 7.81 11/01/2014 853,120
4,824,318 6.83 03/01/2017 4,896,055
2,821,180 7.51 03/01/2017 2,903,587
3,184,183 6.54 03/01/2018 3,206,122
643,175 7.76 05/01/2018 665,885
4,129,234 7.52 07/01/2018 4,264,054
4,967,828 7.45 08/01/2018 5,116,913
3,242,142 7.76 08/01/2018 3,420,460
2,806,680 7.53 10/01/2018 2,912,997
5,055,354 7.49 11/01/2018 5,209,744
1,535,784 7.29 12/01/2018 1,579,278
10,664,404(b) 7.62 12/01/2018 11,122,653
2,709,838 7.35 06/01/2019 2,784,792
3,450,103 7.08 07/01/2019 3,549,811
1,270,482 7.40 07/01/2019 1,308,418
2,448,826 7.77 03/01/2020 2,554,616
6,955,998 7.27 07/01/2020 7,200,710
3,497,252 7.58 09/01/2020 3,617,278
17,155,713 7.77 01/01/2021 17,527,821
3,709,126 7.60 02/01/2021 3,845,955
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
MORTGAGE BACKED OBLIGATIONS - (CONTINUED)
<S> <C> <C> <C>
ADJUSTABLE RATE FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) - (CONTINUED)
$ 4,213,094 7.33% 04/01/2021 $ 4,336,958
57,355,548(b) 7.57 09/01/2021 60,044,376
16,922,527 7.63 02/01/2022 17,504,831
5,306,478 7.67 06/01/2022 5,488,702
262,080 6.23 12/01/2023 263,390
2,050,908 7.31 10/01/2027 2,114,240
------------
$179,784,308
----------------------------------------------------------------------------------------------
ADJUSTABLE RATE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA)(A) - 1.6%
$ 1,208,778 7.19% 03/20/2016 $ 1,240,315
817,707 7.44 08/20/2018 840,448
5,156,969 7.00 02/20/2021 5,293,938
------------
$ 7,374,701
----------------------------------------------------------------------------------------------
ADJUSTABLE RATE SMALL BUSINESS ADMINISTRATION (SBA)(A) - 5.6%
$ 877,756 6.62% 09/25/2016 $ 890,923
3,417,952 6.62 07/25/2017 3,469,221
3,639,493 6.62 08/25/2017 3,694,086
2,382,434 6.62 08/25/2017 2,418,171
1,122,846 6.62 08/25/2017 1,139,689
2,872,399 6.62 09/25/2017 2,915,485
1,621,043 6.62 10/25/2017 1,645,358
1,731,839 6.62 10/25/2017 1,757,817
6,736,183 6.62 02/25/2018 6,837,225
1,896,025 6.37 11/25/2018 1,906,097
------------
$ 26,674,072
----------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) - 1.6%
$ 7,571,673 7.00% 12/01/2099 $ 7,678,146
----------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 1.0%
$ 545,185 7.00% 05/15/2023 $ 552,854
559,360 7.00 06/15/2023 567,225
1,447,214 7.00 07/15/2023 1,467,562
475,269 7.00 09/15/2023 481,951
1,291,219 7.00 10/15/2023 1,309,373
500,631 7.00 11/15/2023 507,670
------------
$ 4,886,635
----------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) - 9.6%
ADJUSTABLE RATE CMOS(A) - 1.8%
FNMA Remic Trust 1990-145, Class A
$ 8,256,270(b) 6.64% 12/25/2020 $ 8,297,056
----------------------------------------------------------------------------------------------
</TABLE>
18 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
MORTGAGE BACKED OBLIGATIONS - (CONTINUED)
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS - (CONTINUED)
INVERSE FLOATER(A) - 0.0%
FNMA Remic Trust 1991-91, Class S
$ 64,807 16.49% 07/25/1998 $ 65,921
----------------------------------------------------------------------------------------------
IOETTE - 0.1%
FNMA Remic Trust 1990-145, Class B
$ 20,288(c) 34.12% 12/25/2020 $ 575,188
----------------------------------------------------------------------------------------------
PLANNED AMORTIZATION CLASS (PAC) CMOS - 5.0%
FHLMC Series 1560, Class X
$17,519,243(b) 6.00% 11/15/2016 $ 17,479,474
FNMA REMIC Trust X-188B, Class ZA
6,472,549 5.75 09/25/2010 6,402,969
------------
$ 23,882,443
----------------------------------------------------------------------------------------------
REGULAR FLOATER CMOS(A) - 0.5%
FNMA Remic Trust 1993-169B, Class FA
$ 2,207,974(b) 6.15% 09/25/2000 $ 2,209,343
----------------------------------------------------------------------------------------------
SUPPORT - 2.2%
FHLMC Series 1645, Class B
$ 2,956,606 5.50% 01/15/2008 $ 2,856,613
FNMA Remic Trust G94 13, Class ZB
7,615,847 7.00 11/17/2024 7,476,706
------------
$ 10,333,319
----------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS $ 45,363,270
----------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(COST $447,861,253) $446,958,704
----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 5.5%
Joint Repurchase Agreement Account(b)
$26,100,000 5.56% 05/01/1998 $ 26,100,000
----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $26,100,000) $ 26,100,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $473,961,253)(D) $473,058,704
----------------------------------------------------------------------------------------------
</TABLE>
Futures contracts open at April 30, 1998 are as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS SETTLEMENT UNREALIZED
TYPE LONG (SHORT)(E) MONTH GAIN (LOSS)
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Euro Dollars 310 June 1998 $ 109,080
Euro Dollars 85 September 1998 (9,062)
Euro Dollars 215 December 1998 (97,625)
Euro Dollars (20) December 1999 1,000
Euro Dollars (20) September 1999 1,000
1 Month LIBOR 75 May 1998 0
1 Month LIBOR 75 June 1998 (1,875)
5 Year U.S.
Treasury Notes 75 June 1998 (3,516)
10 Year U.S.
Treasury Notes (90) June 1998 (44,328)
-------------------------------------------------------------------------------------
$ (45,326)
-------------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost $ 1,279,826
Gross unrealized loss for investments in which cost ex-
ceeds value (2,236,802)
-------------------------------------------------------------------------------------
Net unrealized loss $ (956,976)
-------------------------------------------------------------------------------------
</TABLE>
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at April 30, 1998.
(b) Portions of these securities are being segregated for open futures
contracts and futures margin requirements.
(c) Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated rate due to
the amortization of related premiums.
(d) The aggregate cost for federal income tax purposes is $474,015,680.
(e) Each Euro Dollar contract represents $1,000,000 in notional par value.
Each 1-Month LIBOR contract represents $3,000,000 in notional par value.
Each 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 $1,116,500,000 and $206,775,172, 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. 19
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
Performance Summary
April 30, 1998 (Unaudited)
The following graph shows the value as of April 30, 1998, of a $10,000 in-
vestment made in Institutional shares on September 1, 1988. For comparative
purposes, the performance of the Fund's 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")) are shown. This perfor-
mance data represents past performance and should not be considered indica-
tive of future performance which will fluctuate with changes in market
conditions. These performance fluctuations will cause an investor's shares,
when redeemed, to be worth more or less than their original cost. Performance
of Class A, Class B, Class C, Administration and Service shares will vary
from Institutional Shares due to differences in fees and loads.
SHORT DURATION GOVERNMENT FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, DISTRIBUTIONS REINVESTED SEPTEMBER 1, 1988 TO
APRIL 30, 1998./(a)/
[LINE GRAPH APPEARS HERE]
Short Duration
Government Fund Lehman Short Two-Year
Institutional Shares (1-3) Gov't Index T-Bill
9/1/88 10,000 10,000 10,000
Sep-88 10,129 10,116 10,109
Oct-88 10,257 10,218 10,211
Nov-88 10,221 10,193 10,169
Dec-88 10,226 10,215 10,367
Jan-89 10,315 10,296 10,455
Feb-89 10,335 10,297 10,443
Mar-89 10,359 10,340 10,474
Apr-89 10,515 10,509 10,623
May-89 10,673 10,657 10,786
Jun-89 10,887 10,855 10,992
Jul-89 11,040 11,015 11,158
Aug-89 10,936 10,950 11,064
Sep-89 11,008 11,013 11,119
Oct-89 11,189 11,184 11,276
Nov-89 11,287 11,284 11,367
Dec-89 11,336 11,327 11,402
Jan-90 11,323 11,340 11,391
Feb-90 11,386 11,400 11,432
Mar-90 11,445 11,434 11,464
Apr-90 11,461 11,461 11,476
May-90 11,616 11,638 11,655
Jun-90 11,732 11,760 11,783
Jul-90 11,864 11,902 11,929
Aug-90 11,896 11,945 11,964
Sep-90 11,993 12,040 12,052
Oct-90 12,110 12,173 12,184
Nov-90 12,225 12,291 12,301
Dec-90 12,365 12,436 12,451
Jan-91 12,468 12,553 12,548
Feb-91 12,534 12,634 12,608
Mar-91 12,623 12,718 12,696
Apr-91 12,743 12,840 12,806
May-91 12,809 12,917 12,893
Jun-91 12,859 12,965 12,964
Jul-91 13,030 13,077 13,089
Aug-91 13,158 13,256 13,275
Sep-91 13,334 13,396 13,420
Oct-91 13,433 13,541 13,556
Nov-91 13,592 13,681 13,694
Dec-91 13,588 13,889 13,912
Jan-92 13,568 13,870 13,880
Feb-92 13,585 13,912 13,917
Mar-92 13,577 13,908 13,905
Apr-92 13,668 14,034 14,023
May-92 13,820 14,164 14,165
Jun-92 13,984 14,307 14,336
Jul-92 14,152 14,471 14,508
Aug-92 14,276 14,588 14,643
Sep-92 14,384 14,726 14,786
Oct-92 14,274 14,642 14,684
Nov-92 14,261 14,620 14,649
Dec-92 14,406 14,756 14,789
Jan-93 14,569 14,911 14,959
Feb-93 14,698 15,030 15,090
Mar-93 14,707 15,076 15,132
Apr-93 14,793 15,168 15,232
May-93 14,763 15,132 15,168
Jun-93 14,905 15,245 15,290
Jul-93 14,937 15,279 15,319
Aug-93 15,087 15,406 15,458
Sep-93 15,082 15,455 15,510
Oct-93 15,066 15,489 15,534
Nov-93 15,038 15,492 15,541
Dec-93 15,120 15,554 15,597
Jan-94 15,238 15,652 15,697
Feb-94 15,159 15,557 15,596
Mar-94 15,026 15,477 15,518
Apr-94 14,962 15,419 15,447
May-94 14,998 15,439 15,458
Jun-94 15,027 15,477 15,502
Jul-94 15,158 15,616 15,643
Aug-94 15,208 15,668 15,685
Sep-94 15,183 15,632 15,643
Oct-94 15,216 15,668 15,681
Nov-94 15,156 15,602 15,616
Dec-94 15,189 15,632 15,637
Jan-95 15,400 15,844 15,870
Feb-95 15,613 16,060 16,095
Mar-95 15,687 16,150 16,178
Apr-95 15,860 16,294 16,324
May-95 16,142 16,572 16,629
Jun-95 16,206 16,662 16,717
Jul-95 16,226 16,728 16,776
Aug-95 16,317 16,829 16,869
Sep-95 16,426 16,911 16,949
Oct-95 16,581 17,051 17,096
Nov-95 16,747 17,196 17,250
Dec-95 16,861 17,327 17,377
Jan-96 17,058 17,474 17,525
Feb-96 16,976 17,406 17,434
Mar-96 16,963 17,392 17,411
Apr-96 16,982 17,409 17,416
May-96 17,019 17,447 17,446
Jun-96 17,160 17,575 17,573
Jul-96 17,214 17,643 17,635
Aug-96 17,322 17,708 17,691
Sep-96 17,502 17,870 17,856
Oct-96 17,703 18,072 18,061
Nov-96 17,833 18,205 18,200
Dec-96 17,844 18,209 18,195
Jan-97 17,942 18,296 18,264
Feb-97 18,001 18,340 18,298
Mar-97 17,986 18,325 18,289
Apr-97 18,176 18,475 18,440
May-97 18,290 18,604 18,565
Jun-97 18,444 18,733 18,695
Jul-97 18,675 18,937 18,912
Aug-97 18,661 18,956 18,920
Sep-97 18,836 19,100 19,060
Oct-97 18,954 19,241 19,210
Nov-97 18,974 19,289 19,233
Dec-97 19,091 19,419 19,368
Jan-98 19,307 19,605 19,571
Feb-98 19,289 19,623 19,569
Mar-98 19,349 19,697 19,638
Apr-98 19,426 19,792 19,720
<TABLE>
<CAPTION>
SINCE INCEPTION FIVE YEARS ONE YEAR SIX MONTHS/(b)/
AVERAGE ANNUAL TOTAL
RETURN THROUGH APRIL 30,
1998
<S> <C> <C> <C> <C>
CLASS A (COMMENCED MAY 1,
1997)
Excluding sales charges 6.61% n/a 6.61% 2.37%
Including sales charges 4.47% n/a 4.47% 0.34%
-----------------------------------------------------------------------------
CLASS B (COMMENCED MAY 1,
1997)
Excluding sales charges 6.08% n/a 6.08% 2.06%
Including sales charges 3.97% n/a 1.86% 0.02%
-----------------------------------------------------------------------------
CLASS C (COMMENCED AUGUST
15, 1997)
Excluding sales charges 3.45% n/a n/a 1.98%
Including sales charges 2.41% n/a n/a 0.96%
-----------------------------------------------------------------------------
INSTITUTIONAL CLASS (COM-
MENCED AUGUST 15, 1988) 7.11% 5.60% 6.88% 2.49%
-----------------------------------------------------------------------------
ADMINISTRATION CLASS
(COMMENCED FEBRUARY 28,
1996) 6.09% n/a 6.61% 2.26%
-----------------------------------------------------------------------------
SERVICE CLASS (COMMENCED
APRIL 10, 1996) 6.46% n/a 6.44% 2.24%
-----------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following commencement of operations.
(b) Not annualized.
20
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS - 83.1%
ADJUSTABLE RATE FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)(A) - 8.6%
$ 1,517,604(b) 7.62% 08/01/2017 $ 1,564,559
1,361,617(b) 7.47 12/01/2018 1,412,038
1,143,536(b) 7.30 05/01/2018 1,155,292
6,691,398(b) 7.78 02/01/2022 6,996,726
2,291,492(b) 8.20 10/01/2025 2,392,615
------------
$ 13,521,230
--------------------------------------------------------------------------------------------
ADJUSTABLE RATE FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA)(A) - 9.5%
$ 1,976,740 7.81% 11/01/2014 $ 2,047,487
3,864,064 7.11 06/01/2018 3,965,921
5,896,648 7.73 01/01/2021 6,024,546
1,577,686 7.54 08/01/2022 1,632,353
1,367,859(b) 7.68 01/01/2031 1,424,926
------------
$ 15,095,233
--------------------------------------------------------------------------------------------
ADJUSTABLE RATE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)(A) -
4.1%
$ 6,318,569(b) 5.50% 07/20/2027 $ 6,410,377
--------------------------------------------------------------------------------------------
FIXED RATE FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) - 1.6%
$ 2,555,991(b) 6.50% 12/01/2000 $ 2,568,184
--------------------------------------------------------------------------------------------
FIXED RATE FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 3.4%
$ 2,009,457 8.50% 05/01/2010 $ 2,103,640
720,458 6.00 01/01/2014 702,677
2,665,098 6.00 03/01/2014 2,618,459
------------
$ 5,424,776
--------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 55.9%
INVERSE FLOATER(A) - 4.4%
FHLMC Series 1296, Class I
$ 2,493,715(b)(c) 5.37% 07/15/1999 $ 2,472,668
FHLMC Series 1296, Class J
890,613(b)(c) 11.57 07/15/1999 925,533
FNMA Remic Trust 1990-134, Class S
2,106,843(b)(c) 13.07 11/25/2020 2,350,289
FNMA Remic Trust 1992-62, Class S
1,136,585(b)(c) 9.34 05/25/1999 1,141,222
------------
$ 6,889,712
--------------------------------------------------------------------------------------------
INVERSE FLOATING RATE-INTEREST ONLY(A) - 0.1%
FHLMC Series 1684, Class JD
$ 1,907,610(b)(c) 11.74% 08/15/2020 $ 122,564
FNMA Remic Trust 1993-110, Class SC
1,167,348(c) 15.03 04/25/2019 36,713
------------
$ 159,277
--------------------------------------------------------------------------------------------
PLANNED AMORTIZATION-INTEREST ONLY - 0.4%
FHLMC Series 1587, Class HA
$ 6,043,038(b)(c) 6.50% 10/15/2008 $ 600,074
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS - (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS - (CONTINUED)
PLANNED AMORTIZATION CLASS (PAC) CMOS - 27.6%
FHLMC Series 1556, Class G
$ 2,000,000(b) 6.35% 10/15/2010 $ 2,010,620
FHLMC Series 1560, Class X
3,966,621(b) 6.00 11/15/2016 3,957,617
FHLMC Series 1645, Class ZA
6,722,738(b) 5.50 04/15/2005 6,651,276
FHLMC Series 1985, Class PC
6,000,000(b) 6.35 05/17/2018 6,035,580
FHLMC Series 1987, Class L
4,000,000(b) 6.20 08/25/2022 3,968,764
FHLMC Series 2055, Class OD(d)
3,000,000 6.00 05/01/2013 2,925,000
FHLMC Series 21, Class Z
2,867,341(b) 5.40 05/25/2016 2,831,499
FNMA Remic Trust 1997-70, Class AB
1,250,000(b) 6.50 09/25/2022 1,247,550
FNMA Remic Trust 1997-84, Class PA
4,000,000 5.90 11/25/2021 3,959,880
FNMA Remic Trust 1991-31, Class PJ
3,000,000(b) 6.55 10/25/2020 3,034,680
FNMA Remic Trust 1997-9, Class B
4,000,000(b) 6.50 10/25/2022 4,025,092
FNMA Series 1993-32, Class PH
3,000,000(b) 6.50 11/25/2022 3,018,420
------------
$ 43,665,978
------------------------------------------------------------------------------------------
PLANNED AMORTIZATION CLASS INTEREST-ONLY (PAC IO) CMOS - 0.0%
FHLMC Series 1552, Class JE
$ 2,057,075(a)(b)(c) 7.00% 02/15/2014 $ 25,590
------------------------------------------------------------------------------------------
REGULAR FLOATER CMOS(A) - 3.9%
FHLMC Series 1684, Class JC
$ 1,907,610(b) 5.47% 08/15/2020 $ 1,873,025
FNMA Remic Trust 1993-110, Class FC
1,167,348(b) 5.67 04/25/2019 1,156,036
FNMA Remic Trust 1997-21, Class FA
3,207,146 6.44 04/18/2027 3,213,175
------------
$ 6,242,236
------------------------------------------------------------------------------------------
SEQUENTIAL FIXED RATE CMOS - 13.7%
FHLMC Series 1033, Class G
$ 2,000,000(b) 8.00% 01/15/2006 $ 2,081,240
FNMA Remic Trust 1988-12, Class A
3,137,203(b) 10.00 02/25/2018 3,450,152
FNMA Remic Trust 1989-12, Class X
817,172(b) 10.00 12/25/2014 838,623
FNMA Remic Trust 1989-18, Class B
541,793 9.50 01/25/2004 551,610
FNMA Remic Trust 1989-59, Class H
1,458,938(b) 7.75 10/25/2018 1,460,761
------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 21
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS - (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS - (CONTINUED)
SEQUENTIAL FIXED RATE CMOS - (CONTINUED)
FNMA Remic Trust 1989-74, Class J
$ 1,407,230 9.80% 10/25/2019 $ 1,525,466
FNMA Remic Trust 1991-133, Class Z
4,889,838(b) 8.00 09/25/2006 5,046,802
FNMA Remic Trust 1992-44, Class CA
2,800,684 12.00 08/25/2020 2,907,642
FNMA Remic Trust G92-43, Class D
2,501,343 7.50 01/25/2003 2,503,644
FNMA Remic Trust 1989-34, Class E
1,337,402(b) 9.85 08/25/2014 1,357,035
------------
$ 21,722,975
------------------------------------------------------------------------------------
SUPER FLOATER(A) - 1.5%
FNMA Remic Trust 1988-12, Class B
$ 2,476,740(b) 4.63% 02/25/2018 $ 2,402,821
------------------------------------------------------------------------------------
SUPPORT - 4.3%
FHLMC Series 16, Class M
$ 2,000,000(b) 7.00% 08/25/2023 $ 1,982,680
FHLMC Series 1645, Class B
4,927,677(b) 5.50 01/15/2008 4,761,022
------------
$ 6,743,702
------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS $ 88,452,365
------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(COST $131,162,868) $131,472,165
------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 6.1%
Federal National Mortgage Association
$ 5,200,000 5.63% 03/15/2001 $ 5,178,889
Sri Lanka Aid(a)(b)
4,500,000 5.83 02/21/2016 4,477,500
------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST
$9,604,857) $ 9,656,389
------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 8.8%
United States Treasury Notes
$ 12,100,000(b) 5.63% 11/30/2000 $ 12,101,936
1,700,000(b) 6.63 07/31/2001 1,748,348
------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $13,861,438) $ 13,850,284
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
REPURCHASE AGREEMENT - 2.4%
Joint Repurchase Agreement Account
$ 3,800,000(b) 5.56% 05/01/1998 $ 3,800,000
----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $3,800,000) $ 3,800,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $158,429,163)(E) $158,778,838
----------------------------------------------------------------------------------------------
</TABLE>
Futures contracts open at April 30, 1998 are as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS SETTLEMENT UNREALIZED
TYPE LONG (SHORT)(F) MONTH GAIN (LOSS)
------------------------------------------------------------------------
<S> <C> <C> <C>
Euro Dollars 71 March 1999 $ 32,650
Euro Dollars 86 June 1998 67,749
Euro Dollars 91 June 1999 21,600
Euro Dollars 61 September 1998 98,687
Euro Dollars 51 September 1999 22,225
Euro Dollars 66 December 1998 96,750
Euro Dollars 45 December 1999 (7,500)
1 Month LIBOR 20 May 1998 0
1 Month LIBOR 20 June 1998 (500)
2 year U.S. Treasury Note 71 June 1998 7,766
5 Year U.S. Treasury Notes (135) June 1998 (38,500)
10 Year U.S. Treasury Notes (106) June 1998 (53,016)
20 Year Long Term Bond (7) June 1998 12,469
------------------------------------------------------------------------
$ 260,380
------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which
value exceeds cost $1,307,900
Gross unrealized loss for investments in which
cost exceeds value (982,210)
------------------------------------------------------------------------
Net unrealized gain $ 325,690
------------------------------------------------------------------------
</TABLE>
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at April, 30 1998.
(b) Portions of these securities are being segregated for open futures
contracts and futures margin requirements and open purchases.
(c) Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated rate due to
the amortization of related premiums.
(d) When-issued Security.
(e) The aggregate cost for federal income tax purposes is $158,453,148.
(f) Each Euro Dollar contract represents $1,000,000 in notional par value.
Each 1-Month LIBOR contract represents $3,000,000 in notional par value.
Each 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 $630,000,000 and
$162,534,613, respectively. The determination of notional amounts as
presented here are indicative only of volume of activity and not
a measure of market risk.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
22 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
Performance Summary
April 30, 1998 (Unaudited)
The following graph shows the value as of April 30, 1998, of a $10,000 in-
vestment made (with the maximum sales charge of 4.5%) in Class A shares on
March 1, 1993. For comparative purposes, the performance of the Fund's bench-
marks (the Lehman Brothers Mutual Fund Government/Mortgage Index ("Lehman
Gov't/MBS Index") and the Lehman Brothers Mutual Fund General U.S. Government
Index ("Lehman U.S. Gov't Index")) is shown. This performance data represents
past performance and should not be considered indicative of future perfor-
mance which will fluctuate with changes in market conditions. These perfor-
mance fluctuations will cause an investor's shares, when redeemed, to be
worth more or less than their original cost. Performance of Class B, Class C,
Institutional and Service shares will vary from Class A due to differences in
fees and loads.
GOVERNMENT INCOME FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, DISTRIBUTIONS REINVESTED MARCH 1, 1993 TO
APRIL 30, 1998./(a)/
[LINE GRAPH APPEARS HERE]
Government Lehman Lehman
Income Fund Gov't/MBS U.S. Gov't
Class A Index Index
3/1/93 9,550 10,000 10,000
Mar-93 9,565 10,043 10,033
Apr-93 9,658 10,111 10,110
May-93 9,621 10,124 10,099
Jun-93 9,793 10,296 10,323
Jul-93 9,856 10,351 10,386
Aug-93 9,995 10,518 10,618
Sep-93 10,009 10,547 10,658
Oct-93 10,036 10,585 10,699
Nov-93 9,963 10,502 10,581
Dec-93 10,019 10,558 10,622
Jan-94 10,145 10,689 10,768
Feb-94 10,028 10,514 10,540
Mar-94 9,776 10,265 10,302
Apr-94 9,695 10,186 10,221
May-94 9,701 10,192 10,208
Jun-94 9,702 10,169 10,184
Jul-94 9,866 10,362 10,372
Aug-94 9,874 10,374 10,374
Sep-94 9,744 10,228 10,227
Oct-94 9,737 10,221 10,219
Nov-94 9,717 10,197 10,201
Dec-94 9,813 10,267 10,263
Jan-95 9,993 10,468 10,454
Feb-95 10,216 10,708 10,679
Mar-95 10,267 10,769 10,746
Apr-95 10,407 10,914 10,887
May-95 10,786 11,321 11,326
Jun-95 10,852 11,401 11,413
Jul-95 10,836 11,380 11,371
Aug-95 10,941 11,509 11,505
Sep-95 11,052 11,616 11,615
Oct-95 11,187 11,767 11,792
Nov-95 11,338 11,934 11,976
Dec-95 11,493 12,096 12,146
Jan-96 11,568 12,176 12,221
Feb-96 11,373 11,979 11,972
Mar-96 11,307 11,898 11,872
Apr-96 11,256 11,838 11,796
May-96 11,231 11,813 11,776
Jun-96 11,389 11,969 11,928
Jul-96 11,419 12,003 11,958
Aug-96 11,418 11,987 11,932
Sep-96 11,602 12,187 12,130
Oct-96 11,838 12,444 12,397
Nov-96 12,035 12,647 12,612
Dec-96 11,930 12,541 12,484
Jan-97 11,968 12,583 12,497
Feb-97 11,994 12,610 12,515
Mar-97 11,881 12,481 12,382
Apr-97 12,054 12,668 12,560
May-97 12,143 12,784 12,668
Jun-97 12,282 12,929 12,810
Jul-97 12,608 13,250 13,174
Aug-97 12,510 13,156 13,043
Sep-97 12,681 13,343 13,239
Oct-97 12,870 13,543 13,468
Nov-97 12,907 13,602 13,536
Dec-97 13,042 13,737 13,678
Jan-98 13,223 13,917 13,884
Feb-98 13,206 13,904 13,846
Mar-98 13,252 13,952 13,885
Apr-98 13,300 14,020 13,947
<TABLE>
<CAPTION>
SINCE INCEPTION FIVE YEARS ONE YEAR SIX MONTHS/(b)/
AVERAGE ANNUAL TOTAL
RETURN THROUGH APRIL 30, 1998
<S> <C> <C> <C> <C>
CLASS A (COMMENCED FEBRU-
ARY 10, 1993)
Excluding sales charges 7.11% 6.60% 10.33% 3.34%
Including sales charges 6.17% 5.63% 5.40% -1.33%
-----------------------------------------------------------------------------
CLASS B (COMMENCED MAY 1,
1996)
Excluding sales charges 7.96% n/a 9.58% 2.96%
Including sales charges 5.85% n/a 4.28% -2.19%
-----------------------------------------------------------------------------
CLASS C (COMMENCED AUGUST
15, 1997)
Excluding sales charges 5.83% n/a n/a 3.03%
Including sales charges 4.79% n/a n/a 2.00%
-----------------------------------------------------------------------------
INSTITUTIONAL CLASS (COM-
MENCED AUGUST 15, 1997) 6.51% n/a n/a 3.47%
-----------------------------------------------------------------------------
SERVICE CLASS (COMMENCED
AUGUST 15, 1997) 6.27% n/a n/a 3.33%
-----------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following commencement of operations.
(b) Not annualized
23
+++
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS - 50.0%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) - 11.3%
$ 321,111 6.00% 03/01/2013 $ 316,696
678,890 6.00 03/01/2013 669,555
2,000,000 6.00 04/01/2013 1,972,500
2,000,001 7.50 09/01/2026 2,050,621
922,234 7.50 11/01/2027 945,576
521,828 7.50 12/01/2027 535,036
478,172 7.50 12/01/2027 490,275
2,009,998 7.50 02/01/2028 2,060,876
1,000,000 6.00 TBA-15 Yr(b) 986,406
3,000,000 8.00 TBA-30 Yr(b) 3,105,938
------------
$ 13,133,479
---------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 8.4%
$ 255,521 6.00% 04/01/2013 $ 251,767
745,200 6.00 04/01/2013 734,253
987,261 6.00 04/01/2013 972,758
1,027,018 6.00 05/01/2013 1,011,931
489,596 6.50 08/01/2025 486,996
262,217 6.50 09/01/2025 260,086
301,154 6.50 10/01/2025 298,705
361,164 6.50 11/01/2025 358,344
66,624 6.50 12/01/2025 66,082
390,544 6.50 12/01/2025 387,982
2,000,000 6.50 TBA-30 Yr(b) 1,979,374
3,000,000 7.00 TBA-30 Yr(b) 3,032,790
------------
$ 9,841,068
---------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 14.2%
$ 196,805 9.00% 10/15/2019 $ 212,549
85,369 9.00 12/15/2019 92,199
253,008 7.00 03/15/2023 256,565
263,484 7.50 04/15/2023 271,222
86,997 7.00 05/15/2023 88,220
291,074 7.00 05/15/2023 295,166
294,781 7.00 06/15/2023 298,926
172,310 7.00 07/15/2023 174,733
304,440 7.00 07/15/2023 308,720
121,071 7.00 07/15/2023 122,773
479,935 7.50 07/15/2023 494,030
62,631 7.00 08/15/2023 63,512
779,968 7.00 09/15/2023 790,935
226,955 7.00 10/15/2023 230,146
680,627 7.00 11/15/2023 690,197
559,087 7.00 12/15/2023 566,948
388,425 7.50 04/15/2026 398,982
152,951 8.00 09/15/2026 158,686
176,671 8.00 10/15/2026 183,296
151,866 8.00 12/15/2026 157,561
378,731 8.00 12/15/2026 392,933
286,778 8.00 12/15/2026 297,710
118,332 7.50 03/15/2027 121,548
411,290 7.50 03/15/2027 422,469
415,325 7.50 04/15/2027 426,613
615,180 8.00 06/15/2027 638,249
348,686 7.50 08/15/2027 358,164
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
MORTGAGE BACKED OBLIGATIONS - (CONTINUED)
<S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - (CONTINUED)
$ 304,596 7.50% 09/15/2027 $ 312,875
930,500 7.50 09/15/2027 955,791
291,198 7.50 10/15/2027 299,113
395,548 7.50 10/15/2027 406,299
580,124 7.50 12/15/2027 595,892
1,287,138 7.50 12/15/2027 1,322,123
184,986 7.50 01/15/2028 190,014
1,000,000 6.50 TBA-30 Yr(b) 1,010,930
3,000,000 6.50 TBA-30 Yr(b) 2,976,876
------------
$ 16,582,965
-------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 16.1%
INTEREST ONLY - 0.1%
FNMA Interest-Only Stripped Security Series 151, Class 2
$ 496,507 9.50%(c) 07/25/2022 $ 135,397
-------------------------------------------------------------------------------------------
INVERSE FLOATER(A) - 1.2%
FNMA Remic Trust, Series 1992-62, Class S
$ 378,862 9.34% 05/25/1999 $ 380,407
FNMA Series 1993-138, Class SM
921,052 10.01 12/25/2021 974,666
------------
$ 1,355,073
-------------------------------------------------------------------------------------------
NON-AGENCY COMMERCIAL MBS - 1.0%
First Union-Lehman Brothers Commercial Mortgage Services Series
1997-C1, Class A2
$ 400,000 7.30% 12/18/2006 $ 417,828
First Union-Lehman Brothers Commercial Mortgage Services Series
1997-C2, Class A2
800,000 6.60 11/18/2029 808,360
------------
$ 1,226,188
-------------------------------------------------------------------------------------------
PLANNED AMORTIZATION CLASS (PAC) CMOS - 8.8%
FHLMC Series 1522, Class E
$1,000,000 5.00% 10/15/2020 $ 951,240
FHLMC Series 1560, Class X
1,322,207 6.00 11/15/2016 1,319,206
FHLMC Series 1919, Class D
3,000,000 6.50 06/15/2022 3,020,316
FNMA Remic Trust 1997-84, Class PB
2,000,000 5.50 01/25/2008 1,921,260
FNMA Remic Trust 1997-9, Class B
1,000,000 6.50 10/25/2022 1,006,273
GE Capital Mortgage Services, Inc. 1997-8, Class A13
2,000,000 7.25 03/25/2027 2,044,806
------------
$ 10,263,101
-------------------------------------------------------------------------------------------
PRINCIPAL ONLY - 0.3%
FNMA Remic Trust, Series G-35, Class N
$ 444,559 5.53%(d) 10/25/2021 $ 358,194
-------------------------------------------------------------------------------------------
</TABLE>
24 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
<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 - 1.4%
Citicorp Mortgage Securities, Series 1993-11, Class A6
$ 659,481 6.25% 09/25/2008 $ 652,886
GE Capital Mortgage Services, Inc., Series 1994-10, Class A22
996,703 6.50 03/25/2024 960,672
------------
$ 1,613,558
-----------------------------------------------------------------------------------------------
SUPPORT - 3.3%
FHLMC Series 16, Class M
$1,000,000 7.00% 08/25/2023 $ 991,340
Housing Securities, Inc., Series 1994-1, Class A13
1,455,585 6.50 03/25/2009 1,429,326
Prudential Securities, Series 1995-2, Class A
496,282 6.02 11/15/2015 497,076
Salomon Brothers Mortgage Securities Series 1996-6H,
Class A1
1,000,000 6.00 09/25/2008 964,160
------------
$ 3,881,902
-----------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS $ 18,833,413
-----------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(COST $57,968,979) $ 58,390,925
-----------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 18.3%
AESOP Funding Series 1998-1, Class A(e)
$2,000,000 6.14% 05/20/2006 $ 1,986,797
AFC Series 1997-1, Class A
1,029,417 5.91 03/25/2027 1,030,056
ALAC Automobile Receivables Series 1998-1, Class A(e)
2,015,662 6.12 06/15/2003 2,013,405
Americredit Automobile Receivables Series 1997-D, Class A3
1,300,000 6.24 09/05/2003 1,309,344
BA Master Credit Card Trust Series 1998-A, Class A
2,000,000 5.80 04/15/2005 1,996,320
CPS Auto Grantor Trust Series 1996-3, Class A
592,620 6.30 08/15/2002 594,066
Fasco Auto Trust, Series 1996-1
723,596 6.65 11/15/2001 732,851
Fingerhut Master Trust, Series 1996-1, Class A
590,000 6.45 02/20/2002 593,688
First Merchants Auto Trust Series 1996-B, Class A1(e)
463,577 5.81 03/15/2000 463,155
First USA Credit Card Master Trust Series 1997-6, Class A
1,600,000 6.42 03/17/2005 1,623,488
Ford Credit Auto Loan Master Trust, Series 1996-1, Class A
650,000 5.50 02/15/2003 643,097
Mid-State Trust Series 4, Class A
1,089,095 8.33 04/01/2030 1,177,889
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES - (CONTINUED)
Merrill Lynch Mortgage Investments, Inc. Series 1997-FF2, Class A
$2,073,368 5.93% 08/25/2028 $ 2,074,197
Merrill Lynch Mortgage Investments, Inc. Series 1997-FF3, Class A2
2,757,848 6.06 11/20/2027 2,757,296
Morgan Stanley Capital Commercial Mortgage, Inc. Series 1997-C1, Class
A1B
500,000 7.46 02/15/2020 523,185
Olympic Automobile Receivables Trust, Series 1994-B, Class A2
229,789 6.85 06/15/2001 233,190
Premier Auto Trust, Series 1993-6, Class A2
84,441 4.65 11/02/1999 84,045
Sears Credit Account Master Trust, Series 1995-2, Class A
460,000 8.10 06/15/2004 473,653
The Money Store Home Equity Trust Series 1997-C, Class AF7
1,100,000 6.95 01/15/2039 1,105,500
----------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(COST $21,371,470) $ 21,415,222
----------------------------------------------------------------------------------------------
INSURED REVENUE BONDS - 1.9%
New Jersey Economic Development Authority Series A
$2,000,000 7.43% 02/15/2029 $ 2,201,640
----------------------------------------------------------------------------------------------
TOTAL INSURED REVENUE BONDS
(COST $2,000,000) $ 2,201,640
----------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 9.4%
Federal Home Loan Bank
$1,000,000 5.68% 12/03/2007 $ 964,140
Federal National Mortgage Association
3,800,000(f) 5.63 03/15/2001 3,784,572
Small Business Administration
1,631,941 7.15 03/01/2017 1,698,149
1,358,158 7.50 04/01/2017 1,441,670
788,850 7.30 05/01/2017 825,516
Sri Lanka Aid
2,250,000 5.83(a) 02/21/2016 2,238,750
----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $10,774,288) $ 10,952,797
----------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
25
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 21.7%
United States Treasury Notes
$8,900,000(f) 5.63% 11/30/2000 $ 8,901,424
4,000,000 6.63 07/31/2001 4,113,760
United States Treasury Bonds
4,100,000 8.75 05/15/2020 5,441,479
4,500,000(f) 7.88 02/15/2021 5,508,270
100,000(f) 8.13 08/15/2021 125,672
730,000 6.88 08/15/2025 811,329
United States Treasury Principal-Only Stripped Securities(d)
1,890,000 6.17 08/15/2021 460,480
---------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $25,411,883) $ 25,362,414
---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 5.4%
Joint Repurchase Agreement Account
$6,300,000(f) 5.56% 05/01/1998 $ 6,300,000
---------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(COST $6,300,000) $ 6,300,000
---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $123,826,620)(G) $124,622,998
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Futures contracts open at April 30, 1998 are as follows:
<CAPTION>
NUMBER OF
CONTRACTS SETTLEMENT UNREALIZED
TYPE LONG(H) MONTH GAIN (LOSS)
--------------------------------------------------------------
<S> <C> <C> <C>
2 year U.S. Treasury Note 15 June 1998 $ 1,545
5 Year U.S. Treasury Notes 19 June 1998 (1,402)
10 Year U.S. Treasury Notes 17 June 1998 (10,170)
--------------------------------------------------------------
$(10,027)
--------------------------------------------------------------
</TABLE>
<TABLE>
-----------------------------------------------------
<S> <C> <C> <C>
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments
in which value exceeds cost $1,062,728
Gross unrealized loss for investments
in which cost exceeds value (294,243)
-----------------------------------------------------
Net unrealized gain $ 768,485
-----------------------------------------------------
</TABLE>
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at April 30, 1998.
(b) TBA (To Be Assigned) securities are purchased on a forward commitment
basis with an approximate (generally + /--2.5%) principal amount and no
definite maturity date. The actual principal amount and maturity date
will be determined upon settlement when the specific mortgage pools are
assigned.
(c) Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated coupon due
to the amortization of related premiums.
(d) The interest rate disclosed for these securities represents effective
yields to maturity.
(e) Security is 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 the Rule 144A securities amounted to $4,463,357 as of
April 30, 1998.
(f) Portions of these securities are being segregated for open TBA purchases,
open futures contracts and futures margin requirements.
(g) The aggregate cost for federal income tax purposes is $123,854,513.
(h) Each 5-Year and 10-Year U.S. Treasury Note contract represents $100,000
in notional par value. Each 2-Year U.S. Treasury Note contract represents
$200,000 in notional par value. The total notional amount and market
value at risk are $6,600,000 and $7,097,531, respectively. The
determination of notional amounts as presented here are indicative only
of volume of activity and not a measure of market risk.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
26 The accompanying notes are an integral part of these financial statements.
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Performance Summary
April 30, 1998 (Unaudited)
The following graph shows the value as of April 30, 1998, of a $10,000 in-
vestment made in Institutional shares on January 5, 1994. For comparative
purposes, the performance of the Fund's benchmark (the Lehman Brothers Aggre-
gate Bond Index ("Lehman Aggregate Index")) is shown. This performance data
represents past performance and should not be considered indicative of future
performance which will fluctuate with changes in market conditions. These
performance fluctuations will cause an investor's shares, when redeemed, to
be worth more or less than their original cost. Performance of Class A,
Class B, Class C, Administration and Service shares will vary from Institu-
tional shares due to differences in fees and loads.
[LINE GRAPH APPEARS HERE]
CORE FIXED INCOME FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, DISTRIBUTIONS REINVESTED JANUARY 5, 1994 TO
APRIL 30, 1998.
- ------------------------------10,000
Core Fixed Income Lehman
Period Begin Institutional Aggregate
Date Class Index
1/5/94 10,000 10,000
Jan-94 10,157 10,135
Feb-94 9,964 9,959
Mar-94 9,759 9,713
Apr-94 9,678 9,635
May-94 9,672 9,634
Jun-94 9,644 9,613
Jul-94 9,825 9,804
Aug-94 9,842 9,816
Sep-94 9,710 9,672
Oct-94 9,700 9,663
Nov-94 9,680 9,642
Dec-94 9,780 9,708
Jan-95 9,957 9,900
Feb-95 10,186 10,136
Mar-95 10,248 10,198
Apr-95 10,388 10,341
May-95 10,788 10,741
Jun-95 10,862 10,819
Jul-95 10,843 10,795
Aug-95 10,979 10,926
Sep-95 11,080 11,032
Oct-95 11,224 11,175
Nov-95 11,393 11,343
Dec-95 11,550 11,502
Jan-96 11,621 11,578
Feb-96 11,424 11,376
Mar-96 11,332 11,297
Apr-96 11,276 11,233
May-96 11,268 11,211
Jun-96 11,436 11,361
Jul-96 11,464 11,392
Aug-96 11,457 11,372
Sep-96 11,653 11,570
Oct-96 11,898 11,827
Nov-96 12,120 12,029
Dec-96 12,016 11,918
Jan-97 12,057 11,955
Feb-97 12,085 11,984
Mar-97 11,955 11,851
Apr-97 12,121 12,029
May-97 12,225 12,143
Jun-97 12,380 12,288
Jul-97 12,726 12,620
Aug-97 12,615 12,512
Sep-97 12,808 12,696
Oct-97 12,991 12,880
Nov-97 13,020 12,940
Dec-97 13,159 13,070
Jan-98 13,332 13,238
Feb-98 13,320 13,227
Mar-98 13,374 13,273
Apr-98 13,430 13,342
<TABLE>
<CAPTION>
SINCE INCEPTION FIVE YEARS ONE YEAR SIX MONTHS/(a)/
AVERAGE ANNUAL TOTAL RETURN
THROUGH APRIL 30, 1998
<S> <C> <C> <C> <C>
CLASS A (COMMENCED MAY 1,
1997)
Excluding sales charges 10.42% n/a 10.42% 3.25%
Including sales charges 5.42% n/a 5.42% -1.36%
------------------------------------------------------------------------------
CLASS B (COMMENCED MAY 1,
1997)
Excluding sales charges 9.68% n/a 9.68% 2.86%
Including sales charges 4.38% n/a 4.38% -2.28%
------------------------------------------------------------------------------
CLASS C (COMMENCED AUGUST
15, 1997)
Excluding sales charges 5.68% n/a n/a 2.86%
Including sales charges 4.63% n/a n/a 1.83%
------------------------------------------------------------------------------
INSTITUTIONAL CLASS (COM-
MENCED JANUARY 5, 1994) 7.06% n/a 10.80% 3.38%
------------------------------------------------------------------------------
ADMINISTRATION CLASS (COM-
MENCED FEBRUARY 28, 1996) 7.32% n/a 10.64% 3.35%
------------------------------------------------------------------------------
SERVICE CLASS (COMMENCED
MARCH 13, 1996) 7.86% n/a 10.25% 3.12%
------------------------------------------------------------------------------
</TABLE>
(a) Not annualized.
27
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
CORPORATE BONDS - 21.2%
FINANCE BONDS - 7.9%
Bank of New York, Inc.
$ 1,100,000 7.88% 11/15/2002 $ 1,172,809
BankAmerica Corp.
300,000 7.75 07/15/2002 315,678
Capital One Bank
600,000 6.66 02/03/2000 603,858
400,000 6.88 04/24/2000 405,952
800,000 6.58 04/17/2001 803,528
75,000 6.60 08/20/2001 75,384
330,000 7.15 09/15/2006 334,274
Capital One Financial Corp.
355,000 7.25 12/01/2003 363,627
Comdisco, Inc.
1,100,000 6.13 01/15/2003 1,083,665
Conseco, Inc.
260,000 6.40 02/10/2003 257,650
170,000 8.70 11/15/2026 188,408
Continental Bank N.A.
525,000 11.25 07/01/2001 529,268
Countrywide Capital Corp.
325,000 8.05 06/15/2027 358,163
Countrywide Funding Corp.
125,000 6.08 07/14/1999 125,263
250,000 8.43 11/16/1999 258,925
Countrywide Home Loans, Inc.
950,000 6.45 02/27/2003 951,805
Edison Mission Energy Funding Corp.
149,706 6.77 09/15/2003 151,489
Ford Capital Corp.
300,000 9.50 07/01/2001 327,969
Ford Motor Credit
900,000 6.00 01/14/2003 891,729
General Motors Acceptance Corp.
375,000 9.63 12/15/2001 416,096
100,000 5.88 01/22/2003 98,714
Homeside Lending, Inc.
1,750,000 6.75 08/01/2004 1,779,173
Long Island Savings Bank
850,000 6.20 04/02/2001 846,116
Meditrust, Inc.
450,000 7.38 07/15/2000 454,572
390,000 7.82 09/10/2026 403,806
MIC Finance Trust
360,000 8.38 02/01/2027 370,444
Security Pacific Corp.
995,000 11.50 11/15/2000 1,119,047
Signet Banking Corp.
240,000 9.63 06/01/1999 248,513
The Money Store, Inc.
630,000 7.30 12/01/2002 651,622
Washington Real Estate
120,000 7.12 08/13/2003 122,707
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
CORPORATE BONDS - (CONTINUED)
FINANCE BONDS - (CONTINUED)
World Financial Properties(d)
$ 493,287 6.91% 09/01/2013 $ 499,221
------------
$ 16,209,475
----------------------------------------------------------------------------------------------
INDUSTRIAL BONDS - 11.5%
360 Communications Co.
$ 1,015,000 7.12% 03/01/2003 $ 1,047,297
Comcast Cable Communications
455,000 8.13 05/01/2004 489,707
Continental Airlines, Inc.
331,876 7.75 07/02/2014 359,687
540,781 8.56 07/02/2014 616,036
H + T Master Trust(d)
550,000 8.06 03/15/2000 550,880
Harrahs Oper, Inc.
600,000 8.75 03/15/2000 612,012
Hertz Corp.
200,000 6.00 01/15/2003 195,862
500,000(e) 7.00 07/15/2003 508,850
Highwoods/Forsyth LP
835,000 6.75 12/01/2003 831,660
Liberty Property LP
340,000 7.10 08/15/2004 343,040
Nabsico, Inc.
1,650,000 6.00 02/15/2011 1,635,134
News America, Inc.
600,000 7.12 04/08/2028 581,508
Northwest Airlines Corp.
153,920 8.26 03/10/2006 162,415
561,805 8.97 01/02/2015 615,233
Panamsat Corp.
1,750,000 6.13 01/15/2005 1,721,703
Pep Boys-Manny, Moe & Jack
550,000 6.75 03/10/2004 552,580
R & B Falcon Corp.(d)
900,000 6.75 04/15/2005 899,379
RJR Nabisco Inc.
375,000 8.00 07/15/2001 384,956
Sci Television, Inc.
700,000 11.00 06/30/2005 712,229
Sears Roebuk Acceptance Corp.
500,000 6.41 11/19/2002 502,820
Taubman Realty Group, Inc.
735,000 8.00 07/30/2001 765,326
TCI Communications, Inc.
1,725,000 8.00 08/01/2005 1,859,723
290,000 8.75 08/01/2015 336,858
Tele-Communications, Inc.
100,000 7.38 02/15/2000 102,037
750,000 8.25 01/15/2003 804,585
275,000 6.82 09/15/2010 275,660
----------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
28
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
CORPORATE BONDS - (CONTINUED)
INDUSTRIAL BONDS - (CONTINUED)
Time Warner, Inc.
$ 1,650,000 7.95% 02/01/2000 $ 1,695,161
1,350,000 9.63 05/01/2002 1,507,464
400,000 7.98 08/15/2004 427,432
U.S. Air Inc.
540,264 6.76 04/15/2008 542,868
U.S. Surgical Corp.
515,000 7.25 03/15/2008 508,882
USI American Holdings
150,000 7.25 12/01/2006 152,277
Viacom, Inc.
500,000 6.75 01/15/2003 501,210
Williams Communications Solutions, Inc.
1,030,000 6.13 02/16/2002 1,022,100
------------
$ 23,824,571
------------------------------------------------------------------------------------------------
UTILITY BONDS - 1.8%
California Energy, Inc.
$ 735,000 10.25% 01/15/2004 $ 788,582
CE Electric UK Funding Co.(d)
400,000 6.85 12/30/2004 405,720
Central Maine Power Co.
330,000 7.45 08/30/1999 333,092
Niagara Mohawk Power Corp.
650,000 6.88 04/01/2003 656,370
Salton Sea Funding
365,814 7.02 05/30/2000 368,902
Worldcom, Inc.
650,000 9.38 01/15/2004 689,982
450,000 8.88 01/15/2006 490,487
------------
$ 3,733,135
------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $43,659,928) $ 43,767,181
------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 13.0%
Aesop Funding Series 1998-1, Class A(d)(e)
$ 3,400,000 6.14% 05/20/2006 $ 3,370,219
AFC Series 1997-1, Class A
754,906 5.91 03/25/2027 755,374
Americredit Automobile Receivables Trust Series 1998-A, Class A3(e)
2,500,000 5.88 12/15/2003 2,501,833
Chevy Chase Auto Receivables Trust Series 1995-2, Class A
91,270 5.80 06/15/2002 91,241
Discover Card Master Trust Series 1996-4, Class A(e)
1,010,000 6.03 10/16/2013 1,020,726
Discover Card Master Trust Series 1996-4, Class B
1,100,000 6.21 10/16/2013 1,102,057
Discover Card Master Trust Series 1997-3, Class A(e)
2,000,000 5.79 04/17/2007 2,000,000
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES - (CONTINUED)
DVI Equipment Lease Trust 1996-1, Class A(d)
$ 779,833 6.55% 07/10/2004 $ 780,691
EQCC Home Equity Loan Trust Series 1997-3, Class A
1,558,950 5.83 11/15/2028 1,558,483
Fingerhut Master Trust Series 1998-2, Class A
3,600,000 6.23 02/15/2007 3,640,032
First USA Credit Card Master Trust Series 1997-6, Class A
1,850,000 6.42 03/17/2005 1,877,158
General Motors Acceptance Corp. Series 1995, Class A
28,072 7.15 03/15/2000 28,124
General Motors Acceptance Corp. Series 1997-C1, Class A3
1,000,000 6.87 08/15/2007 1,030,070
MBNA Credit Card Master Trust Series 1996-M, Class A
1,750,000 5.75 04/15/2009 1,746,168
Merrill Lynch Mortgage Investments, Inc. Series 1997-FF3, Class A2
1,723,655 6.06 11/20/2027 1,723,310
Morgan Stanley Capital Commercial Mortgage, Inc. Series 1997-C1, Class
A1B
900,000 7.46 02/15/2020 941,733
Olympic Automobile Receivables Trust, Series 1994-B, Class A2
133,858 6.85 06/15/2001 135,839
PXRE Capital Trust I
165,000 8.85 02/01/2027 174,065
Sears Credit Account Master Trust, Series 1996-1, Class A
680,000 6.20 02/16/2006 682,332
Sears Credit Account Master Trust, Series 1995-2, Class A
550,000 8.10 06/15/2004 566,324
Sears Credit Card Master Trust, Series 1995-3, Class A
300,000 7.00 10/15/2004 306,000
Standard Credit Card Master Trust, Series 1994-4, Class A
680,000 8.25 11/07/2003 725,472
----------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(COST $26,337,479) $ 26,757,251
----------------------------------------------------------------------------------------------
EMERGING MARKET DEBT - 2.1%
Bancoldex(d)
$ 60,000 8.62% 06/02/2000 $ 61,127
BCO de Colombia
430,000 8.62 06/02/2000 438,080
Bridas Corp.
110,000 12.50 11/15/1999 116,600
Corp. Andina de Fomento
500,000 6.63 10/14/1998 500,150
690,000(d) 8.38 07/29/2001 697,687
Empresa Colombiana de Petroleos(d)
1,290,000 7.25 07/08/1998 1,293,056
Financiera Energy Nacional(d)
600,000 9.38 06/15/2006 621,476
----------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 29
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
EMERGING MARKET DEBT - (CONTINUED)
Republic of Colombia
$ 30,000 7.12% 05/11/1998 $ 29,996
YPF Sociedad Anonima
100,221 7.00 10/26/2002 100,604
536,395 7.50 10/26/2002 544,392
----------------------------------------------------------------------------------------------
TOTAL EMERGING MARKET DEBT
(COST $4,423,027) $ 4,403,168
----------------------------------------------------------------------------------------------
GOVERNMENT BONDS - 0.3%
Province of Quebec
$ 520,000 13.25% 09/15/2014 $ 589,935
----------------------------------------------------------------------------------------------
TOTAL GOVERNMENT BONDS
(COST $650,482) $ 589,935
----------------------------------------------------------------------------------------------
MORTGAGE BACKED OBLIGATIONS - 34.4%
Asset Securitization Corp. Series 1997-D4, Class A1D
$ 900,000 7.49% 04/14/2029 $ 953,424
Chase Commercial Mortgage Securities Corp. Series 1997-2, Class A2(e)
3,100,000 6.60 11/19/2007 3,102,418
Collateralized Mortgage Obligation Trust Series 63, Class Z
979,546 9.00 10/20/2020 1,048,114
Federal Home Loan Mortgage Corp.(FHLMC)
414,150 6.00 11/01/2012 408,456
585,850 6.00 11/01/2012 577,795
2,000,000 6.00 04/01/2013 1,972,500
2,000,000 6.00 04/01/2013 1,972,500
1,000,000 6.35 03/25/2018 1,004,680
584,779 7.50 09/01/2025 599,761
737,172 7.50 09/01/2026 755,830
263,235 7.50 10/01/2026 269,897
1,000,001 7.50 05/01/2027 1,025,311
947,329 7.50 01/01/2028 971,305
2,009,998 7.50 02/01/2028 2,060,876
500,001 7.50 03/01/2028 512,656
415,222 7.50 03/01/2028 425,731
1,000,000 6.00 TBA-15 Yr(a) 986,406
3,000,000 8.00 TBA-30 Yr(a) 3,105,938
2,000,000 7.50 TBA-30 Yr(a) 2,051,874
Federal National Mortgage Association (FNMA)
1,009,344 6.00 04/01/2013 994,517
826,773 6.00 04/01/2013 814,628
1,178,883 6.00 04/01/2013 1,161,565
267,658 6.50 08/01/2026 265,482
180,011 6.50 09/01/2027 178,153
1,181,047 6.50 11/01/2027 1,168,858
271,316 6.50 11/01/2027 268,516
282,639 6.50 11/01/2027 279,722
56,954 6.50 11/01/2027 56,366
496,828 6.50 11/01/2027 491,701
1,235,488 6.50 12/01/2027 1,222,738
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS - (CONTINUED)
$ 53,380 6.50% 12/01/2027 $ 52,829
271,618 6.50 12/01/2027 268,815
157,327 6.50 12/01/2027 155,704
881,094 6.50 12/01/2027 872,001
2,000,000 6.50 TBA-30 Yr(a) 1,978,750
3,000,000 7.00 TBA-30 Yr(a) 3,032,813
FHLMC Series 2055, Class OD(h)
2,000,000 6.00 05/01/2013 1,950,000
FHLMC Series 21, Class Z
509,749 5.40 05/25/2016 503,378
First Union-Lehman Brothers Commercial Mortgage Services Series 1997-
C1, Class A2
600,000 7.30 12/18/2006 626,742
First Union-Lehman Brothers Commercial Mortgage Services Series 1997-
C2, Class A2
1,000,000 6.60 11/18/2029 1,010,450
First Union-Lehman Brothers Commercial Mortgage Services Series 1997-
C2, Class A3(e)
2,200,000 6.65 12/18/2007 2,209,878
FNMA Remic Trust Series 31, Class PJ
750,000 6.55 10/25/2020 758,670
FNMA Remic Trust, Series 1997-70, Class AB
1,250,000 6.50 09/25/2022 1,247,550
GE Capital Mortgage Services, Inc. Series 1994-17, Class A10
2,000,000 7.00 05/25/2024 1,955,000
Government National Mortgage Association (GNMA)
288,542 8.00 02/15/2017 303,419
25,767 7.00 11/15/2022 26,145
348,160 7.00 12/15/2022 353,271
581,048 7.00 12/15/2022 589,577
171,303 7.00 01/15/2023 173,711
662,362 7.50 03/15/2023 681,816
133,804 7.00 05/15/2023 135,685
687,393 7.00 05/15/2023 697,058
224,399 7.00 05/15/2023 227,554
527,538 7.00 07/15/2023 534,955
524,409 7.00 07/15/2023 531,782
205,370 7.00 07/15/2023 208,258
267,824 7.00 08/15/2023 271,590
107,145 7.50 08/15/2023 110,291
36,536 7.00 11/15/2023 37,049
93,435 7.50 08/15/2026 95,974
128,993 8.00 08/15/2026 133,831
34,357 8.00 11/15/2026 35,645
119,999 7.50 01/15/2027 123,260
559,688 7.50 03/15/2027 574,900
186,610 8.00 04/15/2027 193,608
289,790 7.50 05/15/2027 297,666
23,563 8.00 05/15/2027 24,446
202,752 7.50 08/15/2027 208,262
187,454 7.50 08/15/2027 192,549
619,794 7.50 08/15/2027 636,640
192,752 7.50 11/15/2027 197,991
996,819 7.50 11/15/2027 1,023,913
676,438 7.50 11/15/2027 694,824
----------------------------------------------------------------------------------------------
</TABLE>
30 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS - (CONTINUED)
$ 378,130 7.50% 12/15/2027 $ 388,407
591,266 7.50 12/15/2027 607,336
751,365 8.00 12/15/2027 779,542
848,693 8.00 01/15/2028 880,519
1,000,000 8.00 TBA-30 Yr(a) 1,037,813
2,000,000 7.00 TBA-30 Yr(a) 2,023,740
5,000,000 6.50 TBA-30 Yr(a) 4,961,460
Merrill Lynch Mortgage Investors, Inc. Series 1998-C2, Class A2
2,600,000 6.39 02/15/2030 2,603,494
Prudential Home Mortgage Securities Corp. Series 1992-39, Class A8
1,000,000 7.11 12/25/2007 938,050
----------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(COST $70,405,828) $ 70,866,329
----------------------------------------------------------------------------------------------
MUNICIPAL BOND OBLIGATIONS - 1.3%
Anaheim Public Finance Authority RB Series A (AAA/Aaa)
$ 405,000 5.00% 03/01/2037 $ 380,121
Chicago Midway Airport RB (MBIA) (AAA/Aaa)
290,000 5.50 01/01/2029 292,642
Chicago Skyway Toll Bridge RB (AAA/Aaa)
295,000 5.50 01/01/2023 297,449
District of Columbia Water and Sewer Authority Public Utility RB
(AAA/Aaa)
170,000 5.50 10/01/2023 176,190
Indiana Health Facility Financing Authority Hospital RB for Sisters of
St. Francis Health Services (AAA/Aaa)
215,000 5.13 11/01/2017 209,425
Marion County Convention and Recreational Facilities Authority Excise
Tax RB (AAA/Aaa)
290,000 5.00 06/01/2027 272,707
Nevada State Municipal Bond Bank Project GO Nos. 65 & R6 (AA/Aa2)
275,000 5.00 05/15/2014 271,070
New York City Municipal Water Finance Authority Water and Sewer Systems
RB Series B (A-/A2)
225,000 5.75 06/15/2026 234,340
New York City Transitional Finance Authority Future Tax Secured RB
Series A (AA/Aa3)
220,000 5.00 08/15/2013 215,107
New York City Water Finance Authority Water and Sewer Systems RB Series
A (A-/A2)
225,000 5.13 06/15/2021 216,878
North Central Texas Health Facility Development Corp. RB Series B
(AAA/Aaa)
200,000 5.13 02/15/2022 193,456
----------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BOND OBLIGATIONS
(COST $2,757,051) $ 2,759,385
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
<S> <C> <C> <C>
SOVEREIGN CREDIT - 0.2%
State of Israel
$ 370,000 6.38% 12/15/2005 $ 364,354
-------------------------------------------------------------------------------
TOTAL SOVEREIGN CREDIT
(COST $348,619) $ 364,354
-------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 23.9%
United States Treasury Bonds
$ 1,750,000 8.75% 05/15/2020 $ 2,322,583
15,700,000 7.88 02/15/2021 19,217,742
1,370,000 6.88 08/15/2025 1,522,632
United States Treasury Interest-Only Stripped Securities(b)
2,250,000 5.98 08/15/2009 1,158,548
350,000 6.02 11/15/2010 166,478
United States Treasury Notes
21,400,000 5.63 11/30/2000 21,403,424
1,500,000 6.63 07/31/2001 1,542,660
United States Treasury Principal-Only Stripped Securities(c)
1,290,000 6.00 08/15/2014 484,253
2,500,000 6.17 05/15/2020 658,625
3,310,000 6.17 08/15/2021 806,448
-------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $48,805,728) $ 49,283,393
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 7.7%
Joint Repurchase Agreement Account(e)
$15,900,000 5.56% 05/01/1998 $ 15,900,000
-------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $15,900,000) $ 15,900,000
-------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $213,288,142)(F) $214,690,996
-------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION:
Gross unrealized gain for investments in which value
exceeds cost $ 1,856,735
Gross unrealized loss for investments in which cost
exceeds value (482,707)
-------------------------------------------------------------------------------
Net unrealized gain $ 1,374,028
-------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 31
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C> <C>
Futures contracts open at April 30, 1998 are as follows:
<CAPTION>
NUMBER OF
CONTRACTS SETTLEMENT UNREALIZED
TYPE LONG (SHORT)(G) MONTH GAIN (LOSS)
------------------------------------------------------------------------
<S> <C> <C> <C>
Euro Dollars 8 March 1999 $ (951)
Euro Dollars 5 June 1998 9,023
Euro Dollars 8 June 1999 (850)
Euro Dollars 8 September 1998 3,049
Euro Dollars 8 September 1999 (1,051)
Euro Dollars 8 December 1998 2,549
10 Year U.S. Treasury Notes (15) June 1998 8,438
------------------------------------------------------------------------
$20,207
------------------------------------------------------------------------
</TABLE>
(a) TBA (To Be Assigned) securities are purchased on a forward commitment
basis with an approximate (generally + / -2.5%) principal amount and no
definite maturity date. The actual principal amount and maturity date
will be determined upon settlement when the specific mortgage pools are
assigned.
(b) Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated rate due to
the amortization of related premiums.
(c) The interest rate disclosed for these securities represents effective
yields to maturity.
(d) Security is 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 the Rule 144A securities amounted to $9,179,456 as of
April 30, 1998.
(e) Portions of these securities are being segregated for open TBA purchases,
open purchases, mortgage dollar rolls, open futures contracts and futures
margin requirements.
(f) The aggregate cost for federal income tax purposes is $213,316,968.
(g) Each Euro Dollar contract represents $1,000,000 in notional par value.
Each 10-Year U.S. Treasury Note represents $100,000 in notional par
value. The total notional amount and market value at risk are $46,500,000
and $12,279,913, respectively. The determination of notional amounts as
presented here are indicative only of volume of activity and not a
measure of market risk.
(h) When-issued security.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS:
GO--General Obligation
MBIA--Insured by Municipal Bond Investors Assurance
RB--Revenue Bond
------------------------------------------------------------------------------
32 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
Performance Summary
April 30, 1998 (Unaudited)
The following graph shows the value as of April 30, 1998, of a $10,000 in-
vestment made (with the maximum sales charge of 4.5%) in Class A shares on
September 1, 1991. For comparative purposes, the performance of the Fund's
benchmark (the J.P. Morgan Global Government Bond Index hedged to U.S. Dol-
lars (the "J.P. Morgan GGB Index - $ Hedged")) is shown. This performance
data represents past performance and should not be considered indicative of
future performance which will fluctuate with changes in market conditions.
These performance fluctuations will cause an investor's shares, when re-
deemed, to be worth more or less than their original cost. Performance of
Class B, Class C, Institutional and Service shares will vary from Class A due
to differences in fees and loads.
GLOBAL INCOME FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT, DISTRIBUTIONS REINVESTED SEPTEMBER 1, 1991 TO
APRIL 30, 1998./(a)/
[LINE GRAPH APPEARS HERE]
Global J.P. Morgan
Income Fund GGB Index-
Class A $ Hedged
9/1/91 9,500 10,000
Sep-91 9,640 10,174
Oct-91 9,686 10,263
Nov-91 9,689 10,327
Dec-91 9,810 10,583
Jan-92 9,857 10,546
Feb-92 9,857 10,584
Mar-92 9,768 10,517
Apr-92 9,827 10,578
May-92 9,896 10,721
Jun-92 10,125 10,799
Jul-92 10,357 10,918
Aug-92 10,678 10,974
Sep-92 10,550 11,129
Oct-92 10,536 11,156
Nov-92 10,514 11,130
Dec-92 10,545 11,288
Jan-93 10,623 11,457
Feb-93 10,886 11,671
Mar-93 10,763 11,695
Apr-93 10,849 11,745
May-93 10,928 11,766
Jun-93 11,193 12,006
Jul-93 11,338 12,103
Aug-93 11,483 12,352
Sep-93 11,491 12,404
Oct-93 11,668 12,509
Nov-93 11,633 12,500
Dec-93 11,878 12,660
Jan-94 11,957 12,702
Feb-94 11,561 12,432
Mar-94 11,362 12,258
Apr-94 11,298 12,167
May-94 11,217 12,089
Jun-94 11,136 12,013
Jul-94 11,250 12,145
Aug-94 11,185 12,085
Sep-94 11,152 12,027
Oct-94 11,144 12,050
Nov-94 11,202 12,132
Dec-94 11,252 12,147
Jan-95 11,369 12,314
Feb-95 11,580 12,516
Mar-95 11,826 12,697
Apr-95 11,963 12,880
May-95 12,340 13,324
Jun-95 12,288 13,340
Jul-95 12,297 13,430
Aug-95 12,489 13,556
Sep-95 12,612 13,732
Oct-95 12,824 13,901
Nov-95 13,073 14,167
Dec-95 13,251 14,321
Jan-96 13,471 14,465
Feb-96 13,250 14,258
Mar-96 13,255 14,288
Apr-96 13,383 14,365
May-96 13,426 14,418
Jun-96 13,546 14,555
Jul-96 13,609 14,636
Aug-96 13,720 14,753
Sep-96 14,026 15,034
Oct-96 14,246 15,303
Nov-96 14,525 15,589
Dec-96 14,500 15,552
Jan-97 14,569 15,684
Feb-97 14,669 15,754
Mar-97 14,549 15,644
Apr-97 14,704 15,835
May-97 14,730 15,941
Jun-97 14,968 16,177
Jul-97 15,258 16,522
Aug-97 15,202 16,464
Sep-97 15,535 16,740
Oct-97 15,622 16,925
Nov-97 15,710 17,033
Dec-97 15,897 17,242
Jan-98 16,068 17,487
Feb-98 16,100 17,559
Mar-98 16,273 17,674
Apr-98 16,354 17,760
<TABLE>
<CAPTION>
SINCE INCEPTION FIVE YEARS ONE YEAR SIX MONTHS /(b)/
AVERAGE ANNUAL TOTAL RETURN THROUGH APRIL 30, 1998
<S> <C> <C> <C> <C>
CLASS A (COMMENCED AUGUST
2, 1991)
Excluding sales charges 8.39% 8.55% 11.22% 4.68%
Including sales charges 7.64% 7.55% 6.20% -0.02%
-----------------------------------------------------------------------------
CLASS B (COMMENCED MAY 1,
1996)
Excluding sales charges 9.95% n/a 10.55% 4.36%
Including sales charges 7.88% n/a 5.18% -0.86%
-----------------------------------------------------------------------------
CLASS C (COMMENCED AUGUST
15, 1997)
Excluding sales charges 7.56% n/a n/a 4.39%
Including sales charges 6.50% n/a n/a 3.35%
-----------------------------------------------------------------------------
INSTITUTIONAL CLASS (COM-
MENCED AUGUST 1, 1995) 11.52% n/a 11.91% 5.06%
-----------------------------------------------------------------------------
SERVICE CLASS (COMMENCED
MARCH 12, 1997) 10.07% n/a 11.30% 4.80%
-----------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following commencement of operations.
(b) Not annualized.
33
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT(A) RATE DATE VALUE
DEBT OBLIGATIONS - 61.3%
<C> <S> <C> <C>
AUSTRALIAN DOLLAR - 0.7%
Commonwealth of Australia(c)
AUD 2,200,000 8.75% 08/15/2008 $ 1,748,200
-----------------------------------------------------------------------------------------
BRITISH POUND STERLING - 9.6%
Abbey National Treasury
BPS 3,400,000 8.00% 04/02/2003 $ 6,017,746
United Kingdom Treasury
10,300,000 6.75 11/26/2004 18,014,869
----------------------------------------------------------------
$ 24,032,615
-----------------------------------------------------------------------------------------
CANADIAN DOLLAR - 2.2%
Government of Canada(c)
CAD 7,500,000 6.00% 06/01/2008 $ 5,489,353
-----------------------------------------------------------------------------------------
DANISH KRONE - 1.3%
Kingdom of Denmark
DKK 19,000,000 8.00% 03/15/2006 $ 3,262,386
-----------------------------------------------------------------------------------------
DEUTSCHEMARK - 19.1%
Baden Wuerttemberg Finance
DEM 10,000,000 5.38% 02/05/2010 $ 5,609,206
Federal Republic of Germany(c)
26,500,000 6.50 07/15/2003 15,937,951
18,000,000 6.00 01/04/2007 10,679,335
13,400,000 6.25 01/04/2024 8,139,088
Kreditanstalt Fuer Wiederaufbau Finance, Inc.
8,300,000 5.00 01/04/2009 4,571,464
Treuhandanstalt
5,000,000 6.38 07/01/1999 2,859,491
----------------------------------------------------------------
$ 47,796,535
-----------------------------------------------------------------------------------------
FRENCH FRANC - 6.8%
Government of France
FRF 40,000,000 4.75% 03/12/2002 $ 6,693,728
60,000,000 5.50 10/25/2007 10,331,060
----------------------------------------------------------------
$ 17,024,788
-----------------------------------------------------------------------------------------
ITALIAN LIRA - 5.9%
Republic of Italy(c)
ITL 19,000,000,000 8.50% 08/01/2004 $ 12,666,667
3,500,000,000 6.75 07/01/2007 2,200,356
----------------------------------------------------------------
$ 14,867,023
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT(A) RATE DATE VALUE
DEBT OBLIGATIONS - (CONTINUED)
<S> <C> <C> <C>
JAPANESE YEN - 12.3%
Asian Development Bank
JPY 650,000,000 5.63% 02/18/2002 $ 5,758,841
European Investment Bank
330,000,000 2.13 09/20/2007 2,573,372
Federal National Mortgage Association
1,320,000,000 2.13 10/09/2007 10,288,500
Government of Spain(c)
780,000,000 3.10 09/20/2006 6,556,975
International Bank For Reconstruction and Development(c)
100,000,000 2.00 02/18/2008 773,311
Republic of Italy
550,000,000 5.13 07/29/2003 4,971,570
-------------------------------------------------------------------
$ 30,922,569
--------------------------------------------------------------------------------------------
SPANISH PESETA - 3.4%
Government of Spain(c)
ESP 1,100,000,000 10.30% 06/15/2002 $ 8,710,441
--------------------------------------------------------------------------------------------
TOTAL DEBT OBLIGATIONS
(COST $154,561,998) $153,853,910
--------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 5.1%
AESOP Funding Series 1998-1, Class A(b)
USD 1,000,000 6.14% 05/20/2006 $ 993,398
AFC Series 1997-1, Class A
1,029,417 5.91 03/25/2027 1,030,056
ALAC Automobile Receivable Series 1997-1, Class A
326,642 6.29 12/15/2002 326,805
ALAC Automobile Receivables Series 1998-1, Class A(b)
895,850 6.12 06/15/2003 894,847
Americredit Automobile Receivables Series 1997-D, Class A3
450,000 6.24 09/05/2003 453,235
Arcadia Automobile Receivables Series 1997-D, Class A4
950,000 6.35 11/15/2005 955,492
Asset Securitization Corp. Series 1997-D5, Class A1
450,000 6.66 02/14/2041 458,195
California Infrastructure and Economic Development Bank PG&E-1 Series
1997-1, Class A6
1,000,000 6.32 09/25/2005 1,010,130
CIT RV Trust Series 1995-B, Class A
212,700 6.50 04/15/2011 213,840
--------------------------------------------------------------------------------------------
</TABLE>
34 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT(A) RATE DATe VALUE
<S> <C> <C> <C>
ASSET-BACKED SECURITIES - (CONTINUED)
Citibank Credit Card Master Trust I Series 1998-3, Class A
USD 1,000,000 5.80% 02/07/2005 $ 987,180
EQCC Home Equity Loan Trust Series 1997-3, Class A
758,408 5.83 11/15/2028 758,181
Fingerhut Master Trust Series 1998-2, Class A
1,000,000 6.23 02/15/2007 1,011,120
First USA Credit Card Master Trust Series 1997-6, Class A
900,000 6.42 03/17/2005 913,212
General Motors Acceptance Corp. Series 1997-C1, Class A
450,000 6.85 09/15/2006 462,726
Morgan Stanley Capital Commercial Mortgage, Inc. Series 1997-C1, Class
A1B
650,000 7.46 02/15/2020 680,141
Nissan Auto Receivables Series 1995-A, Class A
702,099 6.10 08/15/2001 702,317
UCFC Home Equity Loan Trust Series 1997-D, Class A8
861,594 5.91 12/15/2027 861,594
---------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(COST $12,666,009) $ 12,712,469
---------------------------------------------------------------------------------------------
CORPORATE BONDS - 18.4%
360 Communications Co.
USD 300,000 7.12% 03/01/2003 $ 309,546
Ameritech Capital Funding
5,500,000 5.88 02/19/2003 5,441,700
BankAmerica Corp.
900,000 7.75 07/15/2002 947,034
Bayerische Landesbank Girozent
500,000 6.63 06/25/2007 515,400
Beneficial Corp.
500,000 6.43 04/10/2002 502,615
Capital One Bank
1,000,000 7.35 06/20/2000 1,018,510
275,000 6.39 03/05/2001 273,963
CE Electric UK Funding Co.(b)
180,000 6.85 12/30/2004 182,574
Chelsea GCA Realty
250,000 7.75 01/26/2001 256,563
Comdisco, Inc.
450,000 6.13 01/15/2003 443,318
Conseco, Inc.
400,000 6.40 02/10/2003 396,384
Continental Airlines, Inc.
315,000 6.54 03/15/2008 312,335
Countrywide Home Loans, Inc.
450,000 6.45 02/27/2003 450,855
200,000 6.84 10/22/2004 202,762
Ford Motor Credit Corp.
5,000,000 6.13 04/28/2003 4,983,850
7,500,000 5.88 04/28/2005 7,492,500
Harrahs Oper, Inc.
200,000 8.75 03/15/2000 203,760
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT(A) RATE DATE VALUE
<S> <C> <C> <C>
CORPORATE BONDS - (CONTINUED)
Liberty Property LP
USD 235,000 6.97% 12/11/2003 $ 239,120
Long Island Savings Bank
300,000 7.00 06/13/2002 305,523
Merrill Lynch and Co., Inc.
3,400,000 6.00 02/12/2003 3,372,426
Nabisco, Inc.
700,000 6.00 02/15/2011 693,693
Nederlandse Waterschapsbank
5,000,000 6.13 02/13/2008 4,974,500
News America Holdings, Inc.
100,000 9.25 02/01/2013 120,202
Niagara Mohawk Power Corp.
250,000 6.88 04/01/2003 252,450
Northwest Airlines Corp.
273,291 7.67 01/02/2015 294,064
Ontario Hydro
5,000,000 6.10 01/30/2008 4,961,500
Panamsat Corp.
515,000 6.13 01/15/2005 506,672
Paramount Communications
300,000 7.50 01/15/2002 307,326
Pep Boys-Manny, Moe & Jack
480,000 6.75 03/10/2004 482,251
R & B Falcon Corp.(b)
240,000 6.75 04/15/2005 239,834
RJR Nabisco, Inc.
190,000 8.00 07/15/2001 195,045
420,000 8.25 07/01/2004 433,175
Salomon Smith Barney, Inc.
655,000 6.46 08/15/2000 658,445
Salton Sea Funding
463,575 7.02 05/30/2000 467,488
Sci Television, Inc.
300,000 11.00 06/30/2005 305,241
Sears Roebuck Acceptance Corp.
240,000 6.72 09/17/2003 244,301
Taubman Realty Group
340,000 7.00 10/01/2003 343,223
Tele-Communications, Inc.
850,000 8.25 01/15/2003 911,863
The Money Store, Inc.
225,000 7.30 12/01/2002 232,722
Time Warner, Inc.
450,000 7.95 02/01/2000 462,317
250,000 7.25 10/15/2017 254,298
U.S. Surgical Corp.
190,000 7.25 03/15/2008 187,743
Williams Communications Solutions, Inc.
390,000 6.13 02/15/2002 387,009
Worldcom, Inc.
350,000 9.38 01/15/2004 371,529
------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $46,270,889) $ 46,137,629
------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 35
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
Statement of Investments
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT(A) RATE DATE VALUE
<S> <C> <C> <C>
MORTGAGE BACKED OBLIGATIONS - 7.1%
Chase Commercial Mortgage Securities Corp. Series 1997-2, Class A2
USD 1,400,000 6.60% 11/19/2007 $ 1,401,092
CMC Securities Corp. IV 1997-2, Class IA13
2,450,000 6.60 03/25/2027 2,460,724
Country Wide Funding Corp. Series 1994-2, Class A
1,000,000 6.50 02/25/2009 986,870
Country Wide Funding Corp. Series 1994-I, Class A
2,000,000 6.25 07/25/2009 2,001,240
FHLMC Series 1522, Class E
2,000,000 5.00 10/15/2020 1,902,480
General Electric Capital Mortgage Services Series 1994-2, Class A
564,879 4.82 01/25/2009 496,817
968,367 6.69 01/25/2009 990,455
Government National Mortgage Association (GNMA)
255,854 9.00 03/15/2005 270,660
179,704 9.00 02/15/2006 190,085
649,225 9.00 02/15/2010 686,523
982,595 6.00 01/15/2011 978,291
649,057 7.50 01/15/2023 668,120
138,237 7.50 04/15/2023 142,297
117,745 7.50 05/15/2023 121,203
648,517 7.00 07/15/2023 657,635
86,343 7.00 07/15/2023 87,557
236,795 7.00 08/15/2023 240,124
497,701 7.00 08/15/2023 504,699
239,637 7.50 08/15/2023 246,675
212,405 7.00 09/15/2023 215,391
323,268 7.00 09/15/2023 327,813
356,091 7.00 10/15/2023 361,097
190,533 7.00 10/15/2023 193,212
285,425 7.00 11/15/2023 289,438
465,239 7.50 12/15/2023 478,903
234,221 7.50 12/15/2023 241,173
Merrill Lynch Mortgage Investors, Inc. Series 1998-C2, Class A2
750,000 6.39 02/15/2030 751,002
----------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(COST $17,778,374) $ 17,891,576
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT(A) RATE DATE VALUE
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 3.6%
United States Treasury Bonds
USD 800,000(c) 6.88% 08/15/2025 $ 889,128
6,000,000 6.75 08/15/2026 6,580,320
United States Treasury Principal-Only Stripped Securities(d)
2,960,000 6.17 05/15/2020 779,812
3,430,000 6.16 08/15/2020 889,845
-------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $8,629,471) $ 9,139,105
-------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 0.4%
State Street Bank & Trust Euro-Time Deposit
USD 1,020,157 5.50% 05/01/1998 $ 1,020,157
-------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(COST $1,020,157) $ 1,020,157
-------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $240,926,898)(E) $240,754,846
-------------------------------------------------------------------------------------------
</TABLE>
Futures contracts open at April 30, 1998 are as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS SETTLEMENT UNREALIZED
TYPE LONG (SHORT)(F) MONTH GAIN
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
5 Year U.S. Treasury
Notes (45) June 1998 10,531
10 Year U.S. Treasury
Notes (4) June 1998 1,813
20 Year Long Term
Bond 79 June 1998 96,750
--------------------------------------------------------------------------------------
$109,094
--------------------------------------------------------------------------------------
</TABLE>
36 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
<TABLE>
-------------------------------
<S> <C> <C> <C>
FEDERAL INCOME
TAX INFORMATION:
Gross unrealized
gain for invest-
ments in which
value exceeds
cost $ 2,398,022
Gross unrealized
loss for invest-
ments in which
cost exceeds
value (2,732,082)
-------------------------------
Net unrealized
loss $ (334,060)
-------------------------------
</TABLE>
(a) The principal amount of each security is stated in the currency in which
the bond is denominated. See below.
AUD=Australian DollarFRF=French Franc
BPS=British Pound SterlingITL=Italian Lira
CAD=Canadian DollarJPY=Japanese Yen
DKK=Danish KroneESP=Spanish Peseta
DEM=DeutschemarkUSD=United States Dollar
(b) Security is 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 the Rule 144A securities amounted to $2,310,653 as of
April 30, 1998.
(c) Portions of these securities are being segregated for open futures
contracts and futures margin requirements.
(d) The interest rate disclosed for these securities represents effective
yields to maturity.
(e) The aggregate cost for federal income tax purposes is $241,088,906.
(f) 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 $12,800,000 and $14,846,609,
respectively. The determination of notional amounts as presented here are
indicative only of volume of activity and not a measure of market risk.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 37
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Statements of Assets and Liabilities
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
ADJUSTABLE RATE
GOVERNMENT FUND
ASSETS:
<S> <C>
Investments in securities, at value (cost $473,961,253,
$158,429,163, $123,826,620, $213,288,142 and
$240,926,898) $473,058,704
Cash, at value 233,943
Receivables:
Investment securities sold 665,834
Interest 5,920,726
Forward foreign currency exchange contracts --
Fund shares sold 314,560
Foreign tax withheld --
Variation Margin 94,823
Deferred organization expenses, net --
Other assets 151,431
--------------------------------------------------------------------------
TOTAL ASSETS 480,440,021
--------------------------------------------------------------------------
LIABILITIES:
Payables:
Dividends 915,900
Investment securities purchased --
Forward foreign currency exchange contracts --
Fund shares repurchased 6,271,246
Management fees 153,631
Authorized dealer service fees 21,420
Transfer agent fees 50,858
Distribution fees --
Extended settlement sale --
Accrued expenses and other liabilities 49,584
--------------------------------------------------------------------------
TOTAL LIABILITIES 7,462,639
--------------------------------------------------------------------------
NET ASSETS:
Paid in capital 526,810,384
Accumulated undistributed (distributions in excess of)
net investment income (3,447,435)
Accumulated net realized gain (loss) on investment and
futures transactions (49,437,692)
Accumulated net realized foreign currency loss --
Net unrealized gain (loss) on investments and futures (947,875)
Net unrealized gain on translation of assets and
liabilities denominated in foreign currencies --
--------------------------------------------------------------------------
NET ASSETS $472,977,382
--------------------------------------------------------------------------
Net asset value, offering and redemption price per
share(a)
Class A $9.80
Class B --
Class C --
Institutional $9.80
Administration $9.80
Service $9.80
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Shares outstanding:
Class A 4,349,458
Class B --
Class C --
Institutional 43,380,558
Administration 486,214
Service 54,752
---------------------------------------------------------------------------
Total shares outstanding, $.001 par value (unlimited number of
shares authorized) 48,270,982
---------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share for Class A shares is $9.95 (NAV
per share X 1.0152), $10.02 (NAV per share X 1.0205), $15.25 (NAV per
share X 1.0471), $10.49 (NAV per share X 1.0467) and $15.76 (NAV per
share X 1.0471) for Adjustable Rate Government Short Duration Government,
Government Income, Core Fixed Income and Global Income, 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.
38 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
SHORT DURATION GOVERNMENT CORE FIXED GLOBAL
GOVERNMENT FUND INCOME FUND INCOME FUND INCOME FUND
<S> <C> <C> <C>
$158,778,838 $ 124,622,998 $214,690,996 $240,754,846
13,238 24,551 45,740 131,758
1,292,990 12,351,386 7,827,361 4,707,840
1,519,620 1,092,248 2,364,154 4,454,176
-- -- 65,552 1,237,309
1,520,526 2,587,267 10,659,162 8,506,812
-- -- 11,926 61,201
16,725 31,417 2,364 93,116
-- -- 16,710 --
82,880 77,104 71,552 56,150
--------------------------------------------------------------------------------------
163,224,817 140,786,971 235,755,517 260,003,208
--------------------------------------------------------------------------------------
184,220 105,967 306,093 --
4,467,202 20,532,528 26,334,795 4,487,862
-- -- -- 610,528
187,738 68,636 89,372 3,640,198
63,807 62,060 57,922 124,070
21,389 66,817 16,070 111,247
42,508 57,629 35,819 60,523
3,892 23,569 8,055 102,784
-- 3,089,688 2,574,740 --
28,898 35,142 27,256 61,593
--------------------------------------------------------------------------------------
4,999,654 24,040,036 29,450,122 9,198,805
--------------------------------------------------------------------------------------
171,783,897 115,207,111 203,915,683 236,400,020
688,148 (50,945) (56,840) 10,913,174
(14,856,937) 804,418 1,041,515 7,269,954
-- -- (18,366) (4,075,605)
610,055 786,351 1,423,061 (62,958)
-- -- 342 359,818
--------------------------------------------------------------------------------------
$158,225,163 $ 116,746,935 $206,305,395 $250,804,403
--------------------------------------------------------------------------------------
$9.82 $14.56 $10.02 $15.05
$9.80 $14.58 $10.05 $15.02
$9.80 $14.58 $10.05 $15.00
$9.80 $14.56 $10.04 $15.04
$9.82 -- $10.04 --
$9.80 $14.57 $10.05 $15.04
--------------------------------------------------------------------------------------
1,929,097 6,951,461 3,983,840 10,998,173
239,425 786,986 282,934 356,404
117,734 139,025 389,157 142,049
12,871,936 137,175 14,269,616 5,150,664
537,008 -- 1,372,507 --
441,002 109 253,859 20,319
--------------------------------------------------------------------------------------
16,136,202 8,014,756 20,551,913 16,667,609
--------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Statements of Operations
For the Six Months Ended April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
ADJUSTABLE RATE
GOVERNMENT FUND
<S> <C>
INVESTMENT INCOME:
Interest(a) $15,439,839
-------------------------------------------------------------------------------
TOTAL INCOME 15,439,839
-------------------------------------------------------------------------------
EXPENSES:
Management fees 966,159
Distribution fees 54,003
Authorized dealer service fees 54,003
Transfer agent fees 124,875
Administration share fees 4,115
Service share fees 1,009
Custodian fees 58,623
Registration fees 25,945
Professional fees 33,405
Amortization of deferred organization expenses --
Trustee fees 2,860
Other 110,985
-------------------------------------------------------------------------------
TOTAL EXPENSES 1,435,982
------------------------------------------------------------------------------
Less -- expenses reimbursable and fees waived by
Goldman Sachs (54,003)
------------------------------------------------------------------------------
NET EXPENSES 1,381,979
-------------------------------------------------------------------------------
NET INVESTMENT INCOME 14,057,860
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES AND FOREIGN CUR-
RENCY TRANSACTIONS:
Net realized gain (loss) from:
Investment transactions (3,413)
Futures transactions (429,055)
Foreign currency related transactions --
Net change in unrealized gain (loss) on:
Investments (3,977,679)
Futures 388,627
Foreign currency related transactions --
-------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT, FUTURES AND FOREIGN CURRENCY
TRANSACTIONS (4,021,520)
-------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $10,036,340
-------------------------------------------------------------------------------
</TABLE>
(a) Net of $125 and $2,648 in foreign withholding tax for the Core Fixed
Income and Global Income Funds, respectively.
40 The accompanying notes are an integral part of these financial statements.
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
SHORT DURATION GOVERNMENT CORE FIXED GLOBAL
GOVERNMENT FUND INCOME FUND INCOME FUND INCOME FUND
<S> <C> <C> <C>
$4,495,818 $3,207,340 $4,166,643 $ 7,568,156
---------------------------------------------------------------------------------------
4,495,818 3,207,340 4,166,643 7,568,156
---------------------------------------------------------------------------------------
336,427 326,127 252,409 1,110,209
27,761 152,624 33,299 235,941
23,029 123,024 25,603 221,644
94,781 98,085 91,965 223,018
2,519 -- 12,120 --
10,564 6 5,233 486
37,912 47,912 51,696 95,864
36,248 42,512 25,713 27,856
35,414 28,978 30,027 38,692
-- 5,201 12,146 --
738 554 646 1,384
67,240 28,753 27,469 13,099
---------------------------------------------------------------------------------------
672,633 853,776 568,326 1,968,193
---------------------------------------------------------------------------------------
(298,816) (493,979) (229,867) (519,604)
---------------------------------------------------------------------------------------
373,817 359,797 338,459 1,448,589
---------------------------------------------------------------------------------------
4,122,001 2,847,543 3,828,184 6,119,567
---------------------------------------------------------------------------------------
54,363 825,893 1,076,200 4,956,173
(415,003) 89,445 87,336 (63,301)
-- -- 2,377 (32,863)
(836,605) (658,662) (874,334) (3,289,033)
301,577 (68,845) (72,671) 109,094
-- -- 342 3,819,589
---------------------------------------------------------------------------------------
(895,668) 187,831 219,250 5,499,659
---------------------------------------------------------------------------------------
$3,226,333 $3,035,374 $4,047,434 $11,619,226
---------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Statements of Changes in Net Assets
For the Six Months Ended April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
ADJUSTABLE
RATE
GOVERNMENT
FUND
<S> <C>
FROM OPERATIONS:
Net investment income $ 14,057,860
Net realized gain (loss) from investment and futures
transactions (432,468)
Net realized gain (loss) from foreign currency related
transactions --
Net change in unrealized gain (loss) on investments and
futures (3,589,052)
Net change in unrealized gain (loss) on translation of assets
and liabilities denominated in foreign currencies --
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 10,036,340
------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (1,208,557)
Class B --
Class C --
Institutional shares (12,746,356)
Administration shares (92,100)
Service shares (10,847)
In excess of net investment income
Class A (5,159)
Class B --
Class C --
Institutional shares (54,409)
Administration shares (360)
Service shares (60)
Net realized gain on investment transactions
Class A --
Class B --
Class C --
Institutional shares --
Administration shares --
Service shares --
------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (14,117,848)
------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 139,485,604
Reinvestment of dividends and distributions 12,023,105
Cost of shares repurchased (184,492,716)
------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE
TRANSACTIONS (32,984,007)
------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) (37,065,515)
------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 510,042,897
------------------------------------------------------------------------------
End of period $ 472,977,382
------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET
INVESTMENT INCOME $ (3,447,435)
------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
42
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
SHORT DURATION GOVERNMENT CORE FIXED GLOBAL
GOVERNMENT FUND INCOME FUND INCOME FUND INCOME FUND
<S> <C> <C> <C>
$ 4,122,001 $ 2,847,543 $ 3,828,184 $ 6,119,567
(360,640) 915,338 1,163,536 4,892,872
-- -- 2,377 (32,863)
(535,028) (727,507) (947,005) (3,179,939)
-- -- 342 3,819,589
-------------------------------------------------------------------------------------
3,226,333 3,035,374 4,047,434 11,619,226
-------------------------------------------------------------------------------------
(484,864) (2,606,135) (517,895) (7,655,754)
(39,728) (264,864) (43,624) (184,036)
(9,747) (49,878) (35,207) (54,757)
(3,395,551) (60,901) (2,969,053) (3,324,799)
(77,046) -- (293,740) --
(120,791) (75) (60,587) (8,379)
-- (44,526) (7,503) --
-- (4,534) (625) --
-- (866) (512) --
-- -- (43,028) --
-- (1,019) (4,263) --
-- -- (909) --
-- (336,409) (84,830) (628,833)
-- (41,187) (8,016) (15,200)
-- (9,732) (4,098) (4,258)
-- (8,246) (459,667) (240,253)
-- -- (51,390) --
-- (7) (10,588) (604)
-------------------------------------------------------------------------------------
(4,127,727) (3,428,379) (4,595,535) (12,116,873)
-------------------------------------------------------------------------------------
90,459,511 94,489,745 115,895,628 77,862,107
2,908,921 2,563,627 3,690,492 8,999,076
(52,795,810) (59,905,266) (10,235,505) (67,696,133)
-------------------------------------------------------------------------------------
40,572,622 37,148,106 109,350,615 19,165,050
-------------------------------------------------------------------------------------
39,671,228 36,755,101 108,802,514 18,667,403
-------------------------------------------------------------------------------------
118,553,935 79,991,834 97,502,881 232,137,000
-------------------------------------------------------------------------------------
$158,225,163 $116,746,935 $206,305,395 $250,804,403
-------------------------------------------------------------------------------------
$ 688,148 $ (50,945) $ (56,840) $ 10,913,174
-------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Statements of Changes in Net Assets
For the Year Ended October 31, 1997
<TABLE>
<CAPTION>
ADJUSTABLE
RATE
GOVERNMENT
FUND
<S> <C>
FROM OPERATIONS:
Net investment income $ 34,206,530
Net realized gain from investment transactions 76,946
Net realized gain from foreign currency related transactions --
Net change in unrealized gain (loss) on investments and
futures 3,259,059
Net change in unrealized loss on translation of assets and
liabilities denominated in foreign currencies --
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 37,542,535
-----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (1,858,740)
Class B --
Class C --
Institutional shares (32,067,893)
Administration shares (222,274)
Service shares (3,287)
Net realized gain on investment transactions
Class A --
Class B --
Class C --
Institutional shares --
Administration shares --
Service shares --
-----------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (34,152,194)
-----------------------------------------------------------------------------
FROM SHARE TRANSACTIONS:
Net proceeds from sales of shares 398,400,844
Reinvestment of dividends and distributions 20,070,536
Cost of shares repurchased (539,487,702)
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE
TRANSACTIONS (121,016,322)
-----------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) (117,625,981)
-----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 627,668,878
-----------------------------------------------------------------------------
End of period $ 510,042,897
-----------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET
INVESTMENT INCOME $ (3,387,447)
-----------------------------------------------------------------------------
</TABLE>
44 The accompanying notes are an integral part of these financial statements.
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
GLOBAL
SHORT DURATION GOVERNMENT CORE FIXED INCOME
GOVERNMENT FUND INCOME FUND INCOME FUND FUND
<S> <C> <C> <C>
$ 6,770,045 $ 3,409,797 $ 5,427,639 $ 12,745,232
45,514 489,671 732,174 7,902,917
-- -- -- 5,653,361
485,006 1,362,656 1,440,455 (1,747,881)
-- -- -- (2,249,013)
-------------------------------------------------------------------------------------
7,300,565 5,262,124 7,600,268 22,304,616
-------------------------------------------------------------------------------------
(85,889) (3,152,235) (107,876) (9,752,023)
(12,146) (186,284) (7,255) (74,972)
(632) (5,823) (778) (2,823)
(6,559,922) (2,853) (4,853,239) (3,332,259)
(79,521) -- (365,897) --
(145,168) (20) (74,035) (5,785)
-- (157,471) -- --
-- (1,780) -- --
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
-------------------------------------------------------------------------------------
(6,883,278) (3,506,466) (5,409,080) (13,167,862)
-------------------------------------------------------------------------------------
61,888,188 69,513,073 38,830,106 56,787,564
4,611,022 2,614,489 4,813,853 9,138,023
(50,380,123) (24,728,808) (21,476,685) (96,100,786)
-------------------------------------------------------------------------------------
16,119,087 47,398,754 22,167,274 (30,175,199)
-------------------------------------------------------------------------------------
16,536,374 49,154,412 24,358,462 (21,038,445)
-------------------------------------------------------------------------------------
102,017,561 30,837,422 73,144,419 253,175,445
-------------------------------------------------------------------------------------
$118,553,935 $ 79,991,834 $ 97,502,881 $232,137,000
-------------------------------------------------------------------------------------
$ 693,874 $ 134,310 $ 91,922 $ 16,036,268
-------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
April 30, 1998 (Unaudited)
1. ORGANIZATION
Goldman Sachs Trust (the "Trust") is a Delaware business trust registered un-
der the Investment Company Act of 1940 (as amended) as an open-end, manage-
ment investment company. The Trust includes Goldman Sachs Adjustable Rate
Government Fund (Adjustable Rate Government), Goldman Sachs Short Duration
Government Fund (Short Duration Government), Goldman Sachs Government Income
Fund (Government Income), Goldman Sachs Core Fixed Income Fund (Core Fixed
Income) and Goldman Sachs Global Income Fund (Global Income), collectively,
"the Funds" or individually a "Fund". Adjustable Rate Government, Short Dura-
tion Government, Government Income, and Core Fixed Income are diversified
portfolios of the Trust whereas Global Income is a non-diversified portfolio.
Adjustable Rate Government offers four classes of shares -- Class A, Institu-
tional, Administration and Service. Government Income and Global Income offer
five classes of shares -- Class A, Class B, Class C, Institutional and Serv-
ice. Short Duration Government and Core Fixed Income offer six classes of
shares -- Class A, Class B, Class C, Institutional, Administration and Serv-
ice.
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 es-
timates 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 fur-
nished by a pricing service or provided by dealers in such securities. Port-
folio securities for which accurate market quotations are not readily
available are valued based on yield equivalents, pricing matrices 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 val-
ued at amortized cost.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
recorded on trade date. Realized gains and losses on sales of portfolio secu-
rities are calculated on the identified cost basis. Interest income is re-
corded 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 re-
spective securities, taking into account actual principal prepayment experi-
ence 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 distri-
bution and are classified as interest income in the accompanying Statements
of Operations. Original issue discounts ("OID") on debt securities are amor-
tized 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. Re-
corded amortization amounts are adjusted when actual OID factors are re-
ceived. Market discounts and market premiums on debt securities, other than
mortgage backed REMIC 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. Global Income amortizes only market dis-
counts on debt securities other than REMIC mortgage backed securities.
46
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
C. FOREIGN CURRENCY TRANSLATIONS -- The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in foreign currencies are
translated into U.S. dollars on the following basis: (i) investment valua-
tions, foreign currency and 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 ex-
change 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 hold-
ings of foreign currencies and investments; (ii) gains and losses between
trade date and settlement date on investment securities transactions and for-
ward exchange contracts; and (iii) gains and losses from the difference be-
tween amounts of interest recorded and the amounts actually received.
D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- Core Fixed Income and
Global Income may enter into forward foreign currency exchange contracts for
the purchase or sale of a specific foreign currency at a fixed price on a fu-
ture date as a hedge or cross-hedge against either specific transactions or
portfolio positions. Core Fixed Income and Global Income may also purchase
and sell forward contracts to seek to increase total return. All commitments
are "marked-to-market" daily at the applicable translation rates and any re-
sulting unrealized gains or losses are recorded in the Funds' financial
statements. The Funds record realized gains or losses at the time a forward
contract is offset by entry into a closing transaction or extinguished by de-
livery 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 may enter into mortgage "dollar rolls"
in which the Funds sell securities in the current month for delivery and si-
multaneously contract with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. The Funds lose the right to receive principal and interest paid on the
securities sold. However, the Funds benefit to the extent that the price re-
ceived for the securities sold is higher than the price of the future pur-
chase (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 Funds will segregate until the settlement date,
cash or liquid, high-grade debt securities in an amount equal to the forward
purchase price. For financial reporting and tax reporting purposes, the Funds
treat 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 and Global Income) or to seek to in-
crease 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 con-
tracts, 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 the futures contract to buy. Gains and losses are reported in the
Statements of Operations.
The use of futures contracts involve, to varying degrees, elements of mar-
ket 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
47
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
April 30, 1998 (Unaudited)
directly correlate with changes in the value of the underlying securities.
This risk may decrease the effectiveness of the Funds' hedging strategies and
potentially result in a loss.
G. 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 pro-
visions are required.
The characterization of distributions to shareholders for financial report-
ing purposes is determined in accordance with income tax rules. Therefore,
the source of a portfolio's distributions may be shown in the accompanying
financial statements as either from or in excess of net investment income or
net realized gain on investment transactions, or from paid-in-capital, de-
pending on the type of book/tax differences that may exist as well as timing
differences associated with having different book and tax year ends.
Adjustable Rate Government and Short Duration Government, at their most re-
cent tax year-ends of December 31, 1997, 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 $46,315,000 2000-2005
-----------------------------------------------------------------------------------------
Short Duration Government $14,603,000 2002-2005
-----------------------------------------------------------------------------------------
</TABLE>
These amounts are available to be carried forward to offset future capital
gains to the extent permitted by applicable laws or regulations.
H. DEFERRED ORGANIZATION EXPENSES -- Organization-related costs are being am-
ortized on a straight-line basis over a period of five years. The amortiza-
tion costs of Adjustable Rate Government, Short Duration Government,
Government Income and Global Income are fully amortized.
I. EXPENSES -- Expenses incurred by the Trust that do not specifically relate
to an individual portfolio of the Trust are generally allocated to the port-
folios based on each portfolio's relative average net assets for the period.
Class A, Class B and Class C shareholders of the Funds bear all expenses
and fees relating to their respective distribution and authorized dealer
service plans. Shareholders of Service and Administration shares bear all ex-
penses and fees paid to service organizations for their services with respect
to such shares.
48
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
3. AGREEMENTS
Pursuant to the Investment Management Agreement (the "Agreement"), Goldman
Sachs Funds Management, L.P. ("GSFM"), an affiliate of Goldman, Sachs & Co.
("Goldman Sachs"), serves as the investment adviser for Adjustable Rate Gov-
ernment and Short Duration Government. Goldman Sachs Asset Management
("GSAM"), a separate operating division of Goldman Sachs, serves as the in-
vestment adviser for Government Income and Core Fixed Income. Goldman Sachs
Asset Management International ("GSAMI"), an affiliate of GSAM, serves as the
investment adviser for Global Income. Under the Agreement, the adviser, sub-
ject to the general supervision of the Trust's Board of Trustees, manages the
Funds' portfolios. As compensation for the services rendered pursuant to the
Agreement, the assumption of the expenses related thereto and administering
the Funds' business affairs, including providing facilities, the adviser is
entitled to a fee, computed daily and payable monthly at an annual rate equal
to .40%, .50%, .65%, .40% and .90% of average daily net assets of Adjustable
Rate Government, Short Duration Government, Government Income, Core Fixed In-
come and Global Income, respectively.
The adviser has voluntarily agreed to limit "Other Expenses", with the ex-
ception of Adjustable Rate Government, (excluding management fees, distribu-
tion and authorized dealer service fees, taxes, interest, brokerage,
litigation, Administrative and Service share fees, indemnification costs and
other extraordinary expenses and with respect to Global Income, transfer
agent fees) to the extent that such expenses exceed .05%, .00%, .05% and .06%
of the average daily net assets of Short Duration Government, Government In-
come, Core Fixed Income and Global Income, respectively.
Goldman Sachs serves as Distributor of the shares of the Funds pursuant to
Distribution Agreements. Goldman Sachs may receive a portion of the Class A
sales load and Class B and Class C contingent deferred sales charges and has
advised the Funds that it retained approximately $14,000, $4,000, $166,000,
$26,000 and $43,000 for the six months ended April 30, 1998 for Adjustable
Rate Government, Short Duration Government, Government Income, Core Fixed In-
come and Global Income, respectively.
The Trust, on behalf of each Fund, has adopted Distribution Plans (the
"Distribution Plans") pursuant to Rule 12b-1. Under the Distribution Plans,
Goldman Sachs is entitled to a quarterly fee from each Fund for distribution
services equal, on an annual basis, to .25%, .75% and .75% of the average
daily net assets attributable to Class A, Class B and Class C shares, respec-
tively.
The Trust, on behalf of each Fund, has adopted Authorized Dealer Service
Plans (the "Dealer Service Plans") pursuant to which Goldman Sachs and Autho-
rized Dealers are compensated for providing personal and account maintenance
services. Each Fund pays a fee under the Dealer Service Plan equal, on an an-
nual basis, up to .25% of its average daily net assets attributable to Class
A, Class B and Class C shares. Goldman Sachs also serves as Transfer Agent of
the Funds for a fee.
49
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
April 30, 1998 (Unaudited)
For the six months ended April 30, 1998, the advisors and distributor have
voluntarily agreed to waive certain fees and reimburse other expenses as fol-
lows (in thousands):
<TABLE>
<CAPTION>
WAIVERS
--------------------------
CLASS A CLASS B REIMBURSEMENT
FUND MANAGEMENT 12B-1 12B-1 REIMBURSEMENT OUTSTANDING
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Adjustable Rate Govern-
ment -- $ 54 -- -- --
-------------------------------------------------------------------------------
Short Duration Govern-
ment $ 42 21 $ 1 $235 $81
-------------------------------------------------------------------------------
Government Income 139 108 -- 247 77
-------------------------------------------------------------------------------
Core Fixed Income -- 22 -- 208 71
-------------------------------------------------------------------------------
Global Income 382 35 -- 103 54
-------------------------------------------------------------------------------
</TABLE>
4. PORTFOLIO SECURITY TRANSACTIONS
Purchases and proceeds of sales or maturities of long-term securities for the
six months ended April 30, 1998, were as follows:
<TABLE>
<CAPTION>
SALES OR SALES OR MATURITIES
PURCHASES OF PURCHASES MATURITIES OF (EXCLUDING
U.S. GOVERNMENT (EXCLUDING U.S. GOVERNMENT U.S. GOVERNMENT AND
AND AGENCY U.S. GOVERNMENT AND AND AGENCY AGENCY
OBLIGATIONS AGENCY OBLIGATIONS) OBLIGATIONS OBLIGATIONS)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable
Rate Gov-
ernment $ 61,604,570 -- $108,564,409 --
-----------------------------------------------------------------------------------
Short Du-
ration Gov-
ernment 111,823,270 -- 73,613,654 --
-----------------------------------------------------------------------------------
Government
Income 198,708,422 $ 12,241,313 168,707,075 $ 2,091,189
-----------------------------------------------------------------------------------
Core Fixed
Income 210,524,059 52,990,292 146,771,214 16,487,792
-----------------------------------------------------------------------------------
Global In-
come 64,272,216 269,875,618 82,976,285 229,778,599
-----------------------------------------------------------------------------------
</TABLE>
50
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
At April 30, 1998, Global Income had outstanding forward foreign currency
exchange contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
FOREIGN CURRENCY CONTRACTUAL CURRENT UNREALIZED
PURCHASE CONTRACTS VALUE VALUE GAIN/(LOSS)
------------------------------------------------------------------------------
<S> <C> <C> <C>
Canadian Dollar Expiring 5/22/98 7,300,431 7,295,026 (5,405)
New Zealand Dollar Expiring 10/21/98 6,327,588 6,298,156 (29,432)
South Korean Won Expiring 09/25/98 1,816,403 1,880,996 64,593
Swedish Krona Expiring 07/16/98 8,037,923 8,060,411 22,488
Thailand Baht Expiring 09/22/98 2,200,000 2,225,872 25,872
------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY SALES CON-
TRACTS $ 25,682,345 $ 25,760,461 $ 78,116
------------------------------------------------------------------------------
------------------------------------------------------------------------------
<CAPTION>
FOREIGN CURRENCY CONTRACTUAL CURRENT UNREALIZED
SALE CONTRACTS VALUE VALUE GAIN/(LOSS)
------------------------------------------------------------------------------
<S> <C> <C> <C>
Australian Dollar Expiring 06/18/98 $ 1,589,465 $ 1,545,326 $ 44,139
British Pound Sterling Expiring
06/29/98 24,359,487 24,465,430 (105,943)
Deutsche Mark Expiring 07/23/98 42,000,765 41,823,850 176,915
French Franc Expiring 07/30/98 17,532,146 17,478,632 53,514
Italian Lira Expiring 05/13/98 14,793,595 15,027,393 (233,798)
Japanese Yen Expiring 07/23/98 3,180,772 3,123,258 57,514
Expiring 07/24/98 34,743,957 34,694,478 49,479
Malaysian Ringgit Expiring 09/22/98 2,200,000 2,138,292 61,708
Singapore Dollar Expiring 09/25/98 4,433,000 4,500,434 (67,434)
Spanish Peseta Expiring 06/10/98 9,181,746 9,336,392 (154,646)
Swiss Franc Expiring 05/29/98 12,632,633 12,233,670 398,963
------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY SALE CONTRACTS $166,647,566 $166,367,155 $ 280,411
------------------------------------------------------------------------------
</TABLE>
The contractual amounts of forward foreign currency exchange contracts do
not necessarily represent the amounts potentially subject to risk. The mea-
surement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. At April 30,
1998, Core Fixed Income and Global Income had sufficient cash and/or securi-
ties to cover any commitments under these contracts.
Core Fixed Income has recorded a "Receivable for forward foreign currency
exchange contracts" resulting from closed but not settled forward foreign
currency exchange contracts as of April 30, 1998 of $65,552 in the accompany-
ing Statement of Assets and Liabilities.
Global Income has recorded a "Receivable for forward foreign currency ex-
change contracts" and "Payable for forward foreign currency exchange con-
tracts" resulting from open and closed but not settled forward foreign
currency exchange contracts of $1,237,309 and $610,528, respectively, in the
accompanying Statement of Assets and Liabilities. Included in the Global In-
come "Receivable and Payable for forward foreign currency exchange contracts"
are $282,124 and $13,870, respectively, related to forward contracts closed
but not settled as of April 30, 1998.
For the six months ended April 30, 1998, Adjustable Rate Government, Short
Duration Government, Government Income, Core Fixed Income and Global Income
incurred commission expenses of approximately $23,000, $13,000, $3,000,
$1,000 and $3,000, respectively, in connection with futures contracts entered
into with Goldman Sachs. At April 30, 1998, Goldman Sachs owed approximately
$95,000, $17,000, $31,000, $2,000 and $93,000 to Adjustable Rate Government,
Short Duration Government, Government Income, Core Fixed Income and Global
Income, respectively, related to variation margin on futures contracts.
51
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
April 30, 1998 (Unaudited)
5. SERVICE AND ADMINISTRATION PLANS
The Trust, on behalf of the Funds, has adopted a Service Plan. In addition,
the Trust, on behalf of Adjustable Rate Government, Short Duration Government
and Core Fixed Income, has adopted an Administration Plan. These plans allow
for Service shares and Administration 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 Service and Administration Plans provide for compensation
to the service organizations in an amount up to .50% and .25% (on an
annualized basis), respectively, of the average daily net asset value of the
respective shares.
6. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying secu-
rities, 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.
7. JOINT REPURCHASE AGREEMENT ACCOUNT
The Funds, together with other registered investment companies having manage-
ment agreements with GSFM, GSAMI and GSAM or their affiliates, transfer
uninvested cash into joint accounts, 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 and agency obligations. At April
30, 1998, Adjustable Rate Government, Short Duration Government, Government
Income and Core Fixed Income had undivided interests in the repurchase agree-
ments in the following joint account which equaled $26,100,000, $3,800,000,
$6,300,000 and $15,900,000, respectively, in principal amount. At April 30,
1998, the repurchase agreements in the joint account along with the corre-
sponding underlying securities (including the type of security, market value,
interest rate and maturity date) were as follows:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY AMORTIZED
AMOUNT RATE DATE COST
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NOMURA SECURITIES INTERNATIONAL, INC.,
$100,000,000 5.57% 05/01/98 $ 100,000,000
dated 4/30/98, repurchase price $100,015,472 (total collateral value $102,000,001
consisting of FNMA: 6.00%-8.50%, 2/01/25-5/01/28; FHLMC: 5.50%-8.50%, 4/01/03-
5/01/28)
-------------------------------------------------------------------------------------
NOMURA SECURITIES INTERNATIONAL, INC.,
300,000,000 5.56 05/01/98 300,000,000
dated 4/30/98, repurchase price $300,046,333 (total collateral value $306,000,620
consisting of FNMA: 5.82%-7.10%, 05/08/02-12/27/06; FHLMC: 0.00%-7.75%, 7/07/00-
3/12/08; FHLB: 5.77%-6.58%, 01/18/99-03/24/03; FFCB: 5.70%, 03/27/01)
-------------------------------------------------------------------------------------
LEHMAN BROTHERS, INC., 250,000,000 5.52 05/01/98 250,000,000
dated 04/30/98, repurchase price $250,038,333 (total collateral value $254,999,316
consisting of FHLMC: 6.50%-10.50%, 09/01/99-05/01/27; FNMA: 6.00%-11.00%, 03/01/99-
03/01/28)
-------------------------------------------------------------------------------------
SALOMON SMITH BARNEY, 311,000,000 5.56 05/01/98 311,000,000
dated 04/30/98, repurchase price $311,048,032 (total collateral value $317,222,200
consisting of FNMA: 7.00%, 09/01/27; FHLMC: 6.00%-8.50%, 04/01/13-12/01/27)
-------------------------------------------------------------------------------------
NATIONSBANC MONTGOMERY SECURITIES LLC,
100,000,000 5.57 05/01/98 100,000,000
dated 04/30/98, repurchase price $100,015,472 (total collateral value $103,014,167
consisting of FNMA: 7.50%, 06/01/12)
-------------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE, INC., 265,000,000 5.57 05/01/98 265,000,000
dated 04/30/98, repurchase price $265,041,001 (total collateral value $271,826,957
consisting of FNMA: 6.50%-7.00%, 12/01/27-1/1/28; FHLMC: 6.50%-7.00%, 05/01/26-
12/01/27)
-------------------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,326,000,000
-------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
8. LINE OF CREDIT FACILITY
The Funds participate in a $250,000,000 uncommitted, unsecured revolving line
of credit facility. In addition, Global Income participates in a $50,000,000
committed, unsecured revolving line of credit facility. Both facilities are
to be used solely for temporary or emergency purposes. Under the most re-
strictive 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. The committed facility also
requires a fee to be paid by the Fund based on the amount of the commitment
which has not been utilized. During the six months ended April 30, 1998, the
Funds did not have any borrowings under these facilities.
9. OTHER MATTERS
As of April 30, 1998, the Goldman, Sachs & Co. Profit Sharing Master Trust
was the beneficial owner of approximately 22% and 19% of the outstanding
shares of Short Duration Government and Global Income, respectively.
53
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
April 30, 1998 (Unaudited)
10. SUMMARY OF SHARE TRANSACTIONS
Share activity for the six months ended April 30, 1998 is as follows:
<TABLE>
<CAPTION>
ADJUSTABLE RATE SHORT DURATION
GOVERNMENT GOVERNMENT
---------------------------------------------------
SHARES DOLLARS SHARES DOLLARS
---------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 981,194 $ 9,671,185 3,637,341 $35,830,006
Reinvestments of divi-
dends and distributions 496,042 4,891,055 44,389 437,062
Shares repurchased (1,518,552) (14,972,641) (2,712,851) (26,721,952)
---------------------------------------------------
(41,316) (410,401) 968,879 9,545,116
----------------------------------------------------------------------------
CLASS B SHARES
Shares sold -- -- 184,300 1,811,810
Reinvestments of divi-
dends and distributions -- -- 1,904 18,697
Shares repurchased -- -- (22,520) (222,143)
---------------------------------------------------
-- -- 163,684 1,608,364
----------------------------------------------------------------------------
CLASS C SHARES
Shares sold -- -- 122,668 1,205,135
Reinvestments of divi-
dends and distributions -- -- 735 7,215
Shares repurchased -- -- (24,987) (245,739)
----------------------------------------------------------------------------
-- -- 98,416 966,611
----------------------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 12,888,495 126,940,260 4,583,138 45,103,467
Reinvestments of divi-
dends and distributions 718,708 7,072,501 231,753 2,278,067
Shares repurchased (17,137,859) (168,783,303) (2,458,139) (24,172,001)
---------------------------------------------------
(3,530,656) (34,770,542) 2,356,752 23,209,533
----------------------------------------------------------------------------
ADMINISTRATION SHARES
Shares sold 270,349 2,660,778 448,306 4,414,557
Reinvestments of divi-
dends and distributions 5,091 50,058 4,786 47,092
Shares repurchased (71,870) (708,150) (23,294) (230,121)
---------------------------------------------------
203,570 2,002,686 429,798 4,231,528
----------------------------------------------------------------------------
SERVICE SHARES
Shares sold 21,672 213,381 212,923 2,094,536
Reinvestments of divi-
dends and distributions 964 9,491 12,292 120,788
Shares repurchased (2,904) (28,622) (122,647) (1,203,854)
---------------------------------------------------
19,732 194,250 102,568 1,011,470
----------------------------------------------------------------------------
NET INCREASE (DECREASE) (3,348,670) $(32,984,007) 4,120,097 $40,572,622
----------------------------------------------------------------------------
</TABLE>
54
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
GOVERNMENT INCOME CORE FIXED INCOME GLOBAL INCOME
------------------------------------------------------------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5,920,005 $86,590,824 3,460,361 $ 34,683,257 2,228,510 $33,498,959
149,301 2,177,866 59,334 595,178 430,091 6,421,408
(3,835,829) (56,025,468) (463,743) (4,669,205) (2,727,282) (41,138,232)
------------------------------------------------------------------------------
2,233,477 32,743,222 3,055,952 30,609,230 (68,681) (1,217,865)
------------------------------------------------------------------------------
397,436 5,816,714 274,161 2,761,931 153,487 2,310,530
18,101 264,346 3,704 37,259 10,206 152,074
(178,904) (2,618,746) (56,434) (570,130) (37,188) (559,946)
------------------------------------------------------------------------------
236,633 3,462,314 221,431 2,229,060 126,505 1,902,658
------------------------------------------------------------------------------
136,439 1,995,801 365,914 3,686,076 146,989 2,210,559
3,623 52,874 1,580 15,892 2,911 43,312
(82,925) (1,214,137) (5,341) (53,811) (40,765) (611,428)
------------------------------------------------------------------------------
57,137 834,538 362,153 3,648,157 109,135 1,642,443
------------------------------------------------------------------------------
5,945 86,681 6,588,100 66,301,563 2,638,667 39,654,149
4,695 68,483 272,834 2,743,744 159,100 2,373,299
(3,237) (46,915) (449,406) (4,531,517) (1,685,370) (25,344,717)
------------------------------------------------------------------------------
7,403 108,249 6,411,528 64,513,790 1,112,397 16,682,731
------------------------------------------------------------------------------
-- -- 771,099 7,771,785 -- --
-- -- 22,488 226,041 -- --
-- -- (33,922) (341,993) -- --
------------------------------------------------------------------------------
-- -- 759,665 7,655,833 -- --
------------------------------------------------------------------------------
-- (275) 68,336 691,016 12,515 187,910
4 58 7,193 72,378 602 8,983
-- -- (6,836) (68,849) (2,783) (41,810)
------------------------------------------------------------------------------
4 (217) 68,693 694,545 10,334 155,083
------------------------------------------------------------------------------
2,534,654 $37,148,106 10,879,422 $109,350,615 1,289,690 $19,165,050
------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
April 30, 1998 (Unaudited)
10. SUMMARY OF SHARE TRANSACTIONS
Share activity for the year ended October 31, 1997 is as follows:
<TABLE>
<CAPTION>
ADJUSTABLE RATE SHORT DURATION
GOVERNMENT GOVERNMENT
------------------------------------------------------
SHARES DOLLARS SHARES DOLLARS
------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Shares sold 7,590,281 $ 74,855,744 1,141,319 $ 11,256,436
Reinvestments of divi-
dends and distributions 194,263 1,918,232 8,343 82,332
Shares repurchased (4,485,105) (44,283,044) (189,444) (1,867,761)
------------------------------------------------------
3,299,439 32,490,932 960,218 9,471,007
------------------------------------------------------------------------------
CLASS B SHARES
Shares sold -- -- 95,322 934,856
Reinvestments of divi-
dends and distributions -- -- 449 4,421
Shares repurchased -- -- (20,030) (196,887)
------------------------------------------------------
-- -- 75,741 742,390
------------------------------------------------------------------------------
CLASS C SHARES
Shares sold -- -- 21,033 207,264
Reinvestments of divi-
dends and distributions -- -- 63 625
Shares repurchased -- -- (1,778) (17,517)
------------------------------------------------------
-- -- 19,318 190,372
------------------------------------------------------------------------------
INSTITUTIONAL SHARES
Shares sold 32,562,840 321,007,102 4,524,108 44,408,312
Reinvestments of divi-
dends and distributions 1,830,181 18,045,430 440,142 4,313,493
Shares repurchased (49,889,214) (491,883,845) (4,617,947) (45,299,315)
------------------------------------------------------
(15,496,193) (152,831,313) 346,303 3,422,490
------------------------------------------------------------------------------
ADMINISTRATION SHARES
Shares sold 209,261 2,063,528 325,429 3,199,356
Reinvestment of divi-
dends and distributions 10,639 104,909 6,605 64,920
Shares repurchased (322,994) (3,190,328) (250,361) (2,471,239)
------------------------------------------------------
(103,094) (1,021,891) 81,673 793,037
------------------------------------------------------------------------------
SERVICE SHARES
Shares sold 48,034 474,470 191,963 1,881,964
Reinvestment of divi-
dends and distributions 199 1,965 14,820 145,231
Shares repurchased (13,213) (130,485) (53,841) (527,404)
------------------------------------------------------
35,020 345,950 152,942 1,499,791
------------------------------------------------------------------------------
NET INCREASE (DECREASE) (12,264,828) $(121,016,322) 1,636,195 $ 16,119,087
------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
56
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
GOVERNMENT INCOME CORE FIXED INCOME GLOBAL INCOME
-------------------------------------------------------------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4,037,141 $57,488,835 1,104,533 $ 11,020,182 3,015,583 $ 44,585,997
171,093 2,446,417 10,252 102,270 467,859 6,894,169
(1,621,717) (23,201,046) (186,897) (1,876,109) (6,086,858) (89,969,794)
-------------------------------------------------------------------------------
2,586,517 36,734,206 927,888 9,246,343 (2,603,416) (38,489,628)
-------------------------------------------------------------------------------
616,145 8,785,642 71,697 712,089 234,541 3,469,609
11,108 159,730 635 6,353 3,715 55,069
(93,217) (1,338,822) (10,829) (107,884) (25,960) (383,982)
-------------------------------------------------------------------------------
534,036 7,606,550 61,503 610,558 212,296 3,140,696
-------------------------------------------------------------------------------
94,585 1,365,823 28,196 281,946 39,328 589,195
379 5,517 8 78 183 2,750
(13,076) (188,940) (1,200) (12,024) (6,597) (98,680)
-------------------------------------------------------------------------------
81,888 1,182,400 27,004 270,000 32,914 493,265
-------------------------------------------------------------------------------
129,579 1,871,267 1,146,499 11,325,306 520,054 7,743,275
193 2,806 450,657 4,441,709 148,072 2,180,251
-- -- (1,051,390) (10,391,058) (365,110) (5,385,751)
-------------------------------------------------------------------------------
129,772 1,874,073 545,766 5,375,957 303,016 4,537,775
-------------------------------------------------------------------------------
-- -- 1,366,455 13,474,489 -- --
-- -- 19,189 189,462 -- --
-- -- (844,042) (8,441,000) -- --
-------------------------------------------------------------------------------
-- -- 541,602 5,222,951 -- --
-------------------------------------------------------------------------------
104 1,506 204,087 2,016,094 27,005 399,488
1 19 7,480 73,981 390 5,784
-- -- (65,183) (648,610) (17,410) (262,579)
-------------------------------------------------------------------------------
105 1,525 146,384 1,441,465 9,985 142,693
-------------------------------------------------------------------------------
3,332,318 $47,398,754 2,250,147 $22,167,274 (2,045,205) $(30,175,199)
-------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS(A)
------------------------------------------------------
NET REALIZED
AND UNREALIZED TOTAL
GAIN (LOSS) INCOME
NET ASSET ON INVESTMENT, (LOSS)
VALUE AT NET OPTION AND FROM
BEGINNING INVESTMENT FUTURES INVESTMENT
OF PERIOD INCOME(G) TRANSACTIONS(G) OPERATIONS
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED APRIL 30 (UNAUDITED),
-----------------------------------------------------------------------------------
1998 - Class A
Shares $ 9.88 $0.27 $(0.08) $0.19
1998 -
Institutional
Shares 9.88 0.29 (0.08) 0.21
1998 -
Administration
Shares 9.88 0.27 (0.08) 0.19
1998 - Service
Shares 9.88 0.26 (0.08) 0.18
-----------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1997 - Class A
Shares 9.83 0.57 0.05 0.62
1997 -
Institutional
Shares 9.83 0.59 0.05 0.64
1997 -
Administration
Shares 9.83 0.57 0.05 0.62
1997 - Service
Shares(e) 9.84 0.33 0.04 0.37
-----------------------------------------------------------------------------------
1996 - Class A
Shares 9.77 0.55 0.08 0.63
1996 -
Institutional
Shares 9.77 0.57 0.08 0.65
1996 -
Administration
Shares 9.77 0.55 0.08 0.63
-----------------------------------------------------------------------------------
1995 - Class A
Shares(e) 9.79 0.27 (0.01) 0.26
1995 -
Institutional
Shares 9.74 0.56 0.07 0.63
1995 -
Administration
Shares 9.74 0.54 0.07 0.61
-----------------------------------------------------------------------------------
1994 -
Institutional
Shares 10.00 0.43 (0.24) 0.19
1994 -
Administration
Shares 10.00 0.42 (0.26) 0.16
-----------------------------------------------------------------------------------
1993 -
Institutional
Shares 10.04 0.44 (0.04) 0.40
1993 -
Administration
Shares(e) 10.02 0.21 (0.02) 0.19
-----------------------------------------------------------------------------------
1992 -
Institutional
Shares 10.03 0.56 -- 0.56
-----------------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1991 -
Institutional
Shares(e) 10.00 0.15 0.03 0.18
-----------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------
IN EXCESS OF
FROM NET NET REALIZED
REALIZED GAIN GAIN ON
ON INVESTMENT, IN EXCESS INVESTMENT,
FROM NET OPTION OF NET OPTION AND TOTAL
INVESTMENT AND FUTURES INVESTMENT FUTURES DISTRIBUTIONS TO
INCOME TRANSACTIONS INCOME TRANSACTIONS SHAREHOLDERS
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED APRIL 30 (UNAUDITED),
-----------------------------------------------------------------------------------
1998 - Class A
Shares $(0.27) -- $ -- -- $(0.27)
1998 -
Institutional
Shares (0.29) -- -- -- (0.29)
1998 -
Administration
Shares (0.27) -- -- -- (0.27)
1998 - Service
Shares (0.26) -- -- -- (0.26)
-----------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1997 - Class A
Shares (0.57) -- -- -- (0.57)
1997 -
Institutional
Shares (0.59) -- -- -- (0.59)
1997 -
Administration
Shares (0.57) -- -- -- (0.57)
1997 - Service
Shares(e) (0.33) -- -- -- (0.33)
-----------------------------------------------------------------------------------
1996 - Class A
Shares (0.55) -- (0.02) -- (0.57)
1996 -
Institutional
Shares (0.57) -- (0.02) -- (0.59)
1996 -
Administration
Shares (0.55) -- (0.02) -- (0.57)
-----------------------------------------------------------------------------------
1995 - Class A
Shares(e) (0.27) -- (0.01) -- (0.28)
1995 -
Institutional
Shares (0.57) -- (0.03) -- (0.60)
1995 -
Administration
Shares (0.55) -- (0.03) -- (0.58)
-----------------------------------------------------------------------------------
1994 -
Institutional
Shares (0.45) -- -- -- (0.45)
1994 -
Administration
Shares (0.42) -- -- -- (0.42)
-----------------------------------------------------------------------------------
1993 -
Institutional
Shares (0.44) -- -- -- (0.44)
1993 -
Administration
Shares(e) (0.21) -- -- -- (0.21)
-----------------------------------------------------------------------------------
1992 -
Institutional
Shares (0.55) -- -- -- (0.55)
-----------------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1991 -
Institutional
Shares(e) (0.15) -- -- -- (0.15)
-----------------------------------------------------------------------------------
</TABLE>
(a)Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of period and no sales
charge. Total return would be reduced if a sales charge for Class A
shares were taken into account.
(c)Annualized.
(d)Not annualized.
(e)Class A, Institutional, Administration and Service share activity
commenced May 15, 1995, July 17, 1991, April 15, 1993 and March 27, 1997,
respectively.
(f)Includes the effect of mortgage dollar roll transactions.
(g)Calculated based on the average shares outstanding methodology.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
58
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
<TABLE>
<CAPTION>
RATIOS ASSUMING
NO VOLUNTARY WAIVER
OF FEES OR
EXPENSE LIMITATIONS
----------------------
NET RATIO OF NET RATIO OF
INCREASE RATIO OF NET ASSETS NET
(DECREASE) NET ASSET NET INVESTMENT AT END RATIO OF INVESTMENT
IN NET VALUE, EXPENSES INCOME PORTFOLIO OF EXPENSES INCOME
ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
VALUE PERIOD RETURN(B) NET ASSETS NET ASSETS RATE(F) (IN 000S) NET ASSETS NET ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(0.08) $ 9.80 1.99%(d) 0.80%(c) 5.59%(c) 13.21%(d) $42,626 1.05%(c) 5.34%(c)
(0.08) 9.80 2.12(d) 0.55(c) 5.84(c) 13.21(d) 425,050 0.55(c) 5.84(c)
(0.08) 9.80 1.99(d) 0.80(c) 5.58(c) 13.21(d) 4,764 0.80(c) 5.58(c)
(0.08) 9.80 1.87(d) 1.05(c) 5.37(c) 13.21(d) 537 1.05(c) 5.37(c)
----------------------------------------------------------------------------------------------------------
0.05 9.88 6.43 0.74 5.60 46.58 43,393 1.02 5.32
0.05 9.88 6.70 0.49 5.99 46.58 463,511 0.52 5.96
0.05 9.88 6.43 0.74 5.73 46.58 2,793 0.77 5.70
0.04 9.88 3.81(d) 1.05(c) 5.64(c) 46.58 346 1.08(c) 5.61(c)
----------------------------------------------------------------------------------------------------------
0.06 9.83 6.60 0.70 5.59 52.36 10,728 1.01 5.28
0.06 9.83 6.86 0.45 5.85 52.36 613,149 0.51 5.79
0.06 9.83 6.60 0.70 5.59 52.36 3,792 0.76 5.53
----------------------------------------------------------------------------------------------------------
(0.02) 9.77 2.74(d) 0.69(c) 5.87(c) 24.12 15,203 1.01(c) 5.55(c)
0.03 9.77 6.75 0.46 5.77 24.12 657,358 0.53 5.70
0.03 9.77 6.48 0.71 5.50 24.12 3,572 0.78 5.43
----------------------------------------------------------------------------------------------------------
(0.26) 9.74 1.88 0.46 4.38 37.81 942,523 0.49 4.35
(0.26) 9.74 1.63 0.71 4.27 37.81 6,960 0.74 4.24
----------------------------------------------------------------------------------------------------------
(0.04) 10.00 4.13 0.45 4.36 103.74 2,760,871 0.48 4.33
(0.02) 10.00 2.01(d) 0.70(c) 3.81(c) 103.74 5,326 0.73(c) 3.78(c)
----------------------------------------------------------------------------------------------------------
0.01 10.04 6.12 0.42 5.61 286.40 2,145,064 0.55 5.48
----------------------------------------------------------------------------------------------------------
0.03 10.03 2.14(d) 0.20(c) 7.31(c) 145.67(d) 239,642 1.02(c) 6.49(c)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS(A)
-----------------------------------------------------
NET REALIZED TOTAL
AND UNREALIZED INCOME
NET ASSET GAIN (LOSS) ON (LOSS)
VALUE AT NET INVESTMENT, OPTION FROM
BEGINNING INVESTMENT AND FUTURES INVESTMENT
OF PERIOD INCOME(G) TRANSACTIONS(G) OPERATIONS
-----------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED APRIL 30 (UNAUDITED),
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 - Class A
Shares $ 9.88 $0.29 $ (0.06) $0.23
1998 - Class B
Shares 9.86 0.26 (0.06) 0.20
1998 - Class C
Shares 9.86 0.25 (0.06) 0.19
1998 -
Institutional
Shares 9.86 0.30 (0.06) 0.24
1998 -
Administration
Shares 9.89 0.29 (0.07) 0.22
1998 - Service
Shares 9.86 0.28 (0.06) 0.22
-----------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------------
1997 - Class A
Shares(e) 9.78 0.31 0.09 0.40
1997 - Class B
Shares(e) 9.75 0.28 0.10 0.38
1997 - Class C
Shares(e) 9.83 0.12 0.02 0.14
1997 -
Institutional
Shares 9.83 0.64 0.03 0.67
1997 -
Administration
Shares 9.85 0.62 0.04 0.66
1997 - Service
Shares 9.82 0.59 0.04 0.63
-----------------------------------------------------------------------------------------------
1996 -
Institutional
Shares 9.82 0.63 0.01 0.64
1996 -
Administration
Shares(h) 9.86 0.38 -- 0.38
1996 - Service
Shares(e) 9.72 0.31 0.10 0.41
-----------------------------------------------------------------------------------------------
1995 -
Institutional
Shares 9.64 0.66 0.17 0.83
1995 -
Administration
Shares(h) 9.64 0.24 (0.04) 0.20
-----------------------------------------------------------------------------------------------
1994 -
Institutional
Shares 10.14 0.56 (0.46) 0.10
1994 -
Administration
Shares 10.14 0.53 (0.45) 0.08
-----------------------------------------------------------------------------------------------
1993 -
Institutional
Shares 10.16 0.56 (0.01) 0.55
1993 -
Administration
Shares(h) 10.23 0.27 (0.09) 0.18
-----------------------------------------------------------------------------------------------
1992 -
Institutional
Shares 10.22 0.67 (0.06) 0.61
-----------------------------------------------------------------------------------------------
1991 -
Institutional
Shares 10.00 0.80 0.22 1.02
-----------------------------------------------------------------------------------------------
1990 -
Institutional
Shares 10.07 0.83 (0.07) 0.76
-----------------------------------------------------------------------------------------------
1989 -
Institutional
Shares 10.10 0.88 -- 0.88
-----------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------------
1988 -
Institutional
Shares(e) 10.00 0.18 0.10 0.28
-----------------------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------------------
FROM NET IN EXCESS OF NET
REALIZED GAIN REALIZED GAIN
ON INVESTMENT, IN EXCESS ON INVESTMENT,
FROM NET OPTION OF NET OPTION AND FROM TOTAL
INVESTMENT AND FUTURES INVESTMENT FUTURES PAID IN DISTRIBUTIONS TO
INCOME TRANSACTIONS INCOME TRANSACTIONS CAPITAL SHAREHOLDERS
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998 - Class A
Shares $(0.29) $ -- $ -- -- $ -- $(0.29)
1998 - Class B
Shares (0.26) -- -- -- -- (0.26)
1998 - Class C
Shares (0.25) -- -- -- -- (0.25)
1998 -
Institutional
Shares (0.30) -- -- -- -- (0.30)
1998 -
Administration
Shares (0.29) -- -- -- -- (0.29)
1998 - Service
Shares (0.28) -- -- -- -- (0.28)
-----------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------------
1997 - Class A
Shares(e) (0.30) -- -- -- -- (0.30)
1997 - Class B
Shares(e) (0.27) -- -- -- -- (0.27)
1997 - Class C
Shares(e) (0.11) -- -- -- -- (0.11)
1997 -
Institutional
Shares (0.64) -- -- -- -- (0.64)
1997 -
Administration
Shares (0.62) -- -- -- -- (0.62)
1997 - Service
Shares (0.59) -- -- -- -- (0.59)
-----------------------------------------------------------------------------------------------
1996 -
Institutional
Shares (0.63) -- -- -- -- (0.63)
1996 -
Administration
Shares(h) (0.39) -- -- -- -- (0.39)
1996 - Service
Shares(e) (0.31) -- -- -- -- (0.31)
-----------------------------------------------------------------------------------------------
1995 -
Institutional
Shares (0.65) -- -- -- -- (0.65)
1995 -
Administration
Shares(h) (0.21) -- -- -- -- (0.21)
-----------------------------------------------------------------------------------------------
1994 -
Institutional
Shares (0.56) (0.04) -- -- -- (0.60)
1994 -
Administration
Shares (0.54) (0.04) -- -- -- (0.58)
-----------------------------------------------------------------------------------------------
1993 -
Institutional
Shares (0.56) -- (0.01) -- -- (0.57)
1993 -
Administration
Shares(h) (0.27) -- -- -- -- (0.27)
-----------------------------------------------------------------------------------------------
1992 -
Institutional
Shares (0.67) -- -- -- -- (0.67)
-----------------------------------------------------------------------------------------------
1991 -
Institutional
Shares (0.80) -- -- -- -- (0.80)
-----------------------------------------------------------------------------------------------
1990 -
Institutional
Shares (0.83) -- -- -- -- (0.83)
-----------------------------------------------------------------------------------------------
1989 -
Institutional
Shares (0.88) -- -- -- (0.03) (0.91)
-----------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31,
-----------------------------------------------------------------------------------------------
1988 -
Institutional
Shares(e) (0.18) -- -- -- -- (0.18)
-----------------------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of the period and no sales
charge. Total return would be reduced if a sales or redemption charge
were taken into account.
(c) Annualized.
(d) Not annualized.
(e) Class A, Class B, Class C, Institutional and Service share activity
commenced on May 1, 1997, May 1, 1997, August 15, 1997, August 15, 1988
and April 10, 1996, respectively.
(f) Includes the effect of mortgage dollar roll transactions.
(g) Calculated based on the average shares outstanding methodology.
(h) Short Duration Government Fund Administration shares commenced activity
on April 15, 1993, were redeemed in full on February 23, 1995 and re-
commenced on February 28, 1996 at $9.86.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
60
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
<TABLE>
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER OF
FEES
OR EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET RATIO OF NET
INCREASE NET ASSET RATIO OF NET INVESTMENT NET ASSETS RATIO OF INVESTMENT
(DECREASE) VALUE, EXPENSES INCOME PORTFOLIO AT END OF EXPENSES INCOME
IN NET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
ASSET VALUE PERIOD RETURN(B) NET ASSETS NET ASSETS RATE(F) (IN 000S) NET ASSETS NET ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (0.06) $ 9.82 2.37%(d) 0.74%(c) 5.86%(c) 55.61%(d) $ 18,942 1.40%(c) 5.20%(c)
(0.06) 9.80 2.06(d) 1.34(c) 5.28(c) 55.61(d) 2,345 1.90(c) 4.72(c)
(0.06) 9.80 1.98(d) 1.49(c) 5.04(c) 55.61(d) 1,153 1.90(c) 4.63(c)
(0.06) 9.80 2.49(d) 0.49(c) 6.20(c) 55.61(d) 126,188 0.90(c) 5.79(c)
(0.07) 9.82 2.26(d) 0.74(c) 5.97(c) 55.61(d) 5,276 1.15(c) 5.56(c)
(0.06) 9.80 2.24(d) 0.99(c) 5.70(c) 55.61(d) 4,321 1.40(c) 5.29(c)
---------------------------------------------------------------------------------------------------------------
0.10 9.88 4.14(d) 0.70(c) 6.05(c) 102.58 9,491 1.32(c) 5.43(c)
0.11 9.86 3.94(d) 1.30(c) 5.52(c) 102.58 747 1.82(c) 5.00(c)
0.03 9.86 1.44(d) 1.45(c) 5.52(c) 102.58 190 1.82(c) 5.15(c)
0.03 9.86 7.07 0.45 6.43 102.58 103,729 0.82 6.06
0.04 9.89 6.91 0.70 6.19 102.58 1,060 1.07 5.82
0.04 9.86 6.63 0.95 5.92 102.58 3,337 1.32 5.55
---------------------------------------------------------------------------------------------------------------
0.01 9.83 6.75 0.45 6.44 115.45 99,944 0.71 6.18
(0.01) 9.85 4.00(d) 0.70(c) 5.97(c) 115.45 252 0.96(c) 5.71(c)
0.10 9.82 4.35(d) 0.95(c) 6.05(c) 115.45 1,822 1.21(c) 5.79(c)
---------------------------------------------------------------------------------------------------------------
0.18 9.82 8.97 0.45 6.87 292.56 103,760 0.72 6.60
(0.01) 9.63 2.10(d) 0.70(c) 7.91(c) 292.56 -- 0.90(c) 7.71(c)
---------------------------------------------------------------------------------------------------------------
(0.50) 9.64 0.99 0.45 5.69 289.79 193,095 0.59 5.55
(0.50) 9.64 0.73 0.70 5.38 289.79 730 0.84 5.24
---------------------------------------------------------------------------------------------------------------
(0.02) 10.14 5.55 0.45 5.46 411.66 359,708 0.64 5.31
(0.09) 10.14 1.74(d) 0.70(c) 4.84(c) 411.66 16,490 0.80(c) 4.74(c)
---------------------------------------------------------------------------------------------------------------
(0.06) 10.16 6.24 0.45 6.60 216.07 277,927 0.69 6.36
---------------------------------------------------------------------------------------------------------------
0.22 10.22 10.93 0.45 8.25 155.44 158,848 0.79 7.91
---------------------------------------------------------------------------------------------------------------
(0.07) 10.00 8.23 0.45 8.62 173.21 68,995 0.95 8.12
---------------------------------------------------------------------------------------------------------------
(0.03) 10.07 9.08 0.46 8.71 137.37 31,015 1.39 7.78
---------------------------------------------------------------------------------------------------------------
0.10 10.10 3.30(d) 0.55(c) 8.55(c) 167.00(d) 39,052 1.42(c) 7.68(c)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
61
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS(A) DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------ -----------------------------------------------------------
NET REALIZED FROM IN EXCESS OF
AND UNREALIZED TOTAL NET REALIZED NET REALIZED
GAIN (LOSS) ON INCOME GAIN ON GAIN ON
NET ASSET INVESTMENT, (LOSS) INVESTMENT, IN EXCESS INVESTMENT,
VALUE, NET OPTION AND FROM FROM NET OPTION AND OF NET OPTION AND
BEGINNING INVESTMENT FUTURES INVESTMENT INVESTMENT FUTURES INVESTMENT FUTURES
OF PERIOD INCOME TRANSACTIONS OPERATIONS INCOME TRANSACTIONS INCOME TRANSACTIONS
---------------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED APRIL 30 (UNAUDITED),
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 - Class A
Shares $14.59 $0.42 $0.06 $0.48 $(0.42) $(0.06) $(0.03) $ --
1998 - Class B
Shares 14.61 0.37 0.06 0.43 (0.37) (0.06) (0.03) --
1998 - Class C
Shares 14.60 0.37 0.07 0.44 (0.37) (0.06) (0.03) --
1998 -
Institutional
Shares 14.59 0.44 0.06 0.50 (0.44) (0.06) (0.03) --
1998 - Service
Shares 14.59 0.40 0.08 0.48 (0.40) (0.06) (0.04) --
---------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
---------------------------------------------------------------------------------------------------------------------------
1997 - Class A
Shares 14.36 0.91 0.29 1.20 (0.90) (0.07) -- --
1997 - Class B
Shares 14.37 0.80 0.30 1.10 (0.79) (0.07) -- --
1997 - Class C
Shares(e) 14.38 0.17 0.22 0.39 (0.17) -- -- --
1997 -
Institutional
Shares(e) 14.37 0.20 0.22 0.42 (0.20) -- -- --
1997 - Service
Shares(e) 14.37 0.20 0.21 0.41 (0.19) -- -- --
---------------------------------------------------------------------------------------------------------------------------
1996 - Class A
shares 14.47 0.92 (0.11) 0.81 (0.92) -- -- --
1996 - Class B
shares(e) 4.11 0.41 0.26 0.67 (0.41) -- -- --
---------------------------------------------------------------------------------------------------------------------------
1995 - Class A
shares 13.47 0.94 1.00 1.94 (0.94) -- -- --
---------------------------------------------------------------------------------------------------------------------------
1994 - Class A
shares 14.90 0.85 (1.28) (0.43) (0.85) (0.12) (0.02) (0.01)
---------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31,
---------------------------------------------------------------------------------------------------------------------------
1993 - Class A
shares(e) 14.32 0.56 0.58 1.14 (0.56) -- -- --
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of the period and no sales
charge. Total return would be reduced if a sales or redemption charge
were taken into account.
(c) Annualized.
(d) Not annualized.
(e) Class A, Class B, Class C, Institutional and Service share activity
commenced on February 10, 1993, May 1, 1996, August 15, 1997, August 15,
1997 and August 15, 1997, respectively.
(f) Includes the effect of mortgage dollar roll transactions.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
62
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RATIO OF
NET NET
INCREASE NET ASSET RATIO OF INVESTMENT NET ASSETS
TOTAL (DECREASE) VALUE, NET EXPENSES INCOME PORTFOLIO AT END OF
DISTRIBUTIONS TO IN NET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD
SHAREHOLDERS ASSET VALUE PERIOD RETURN(B) NET ASSETS NET ASSETS RATE(F) (IN 000S)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.51) $(0.03) $14.56 3.34%(d) 0.63%(c) 5.76%(c) 173.77%(d) $101,244
(0.46) (0.03) 14.58 2.96(d) 1.38(c) 5.02(c) 173.77(d) 11,477
(0.46) (0.02) 14.58 3.03(d) 1.38(c) 5.02(c) 173.77(d) 2,027
(0.53) (0.03) 14.56 3.47(d) 0.38(c) 6.05(c) 173.77(d) 1,997
(0.50) (0.02) 14.57 3.33(d) 0.88(c) 5.61(c) 173.77(d) 2
- ----------------------------------------------------------------------------------------------------
(0.97) 0.23 14.59 8.72 0.50 6.38 395.75 68,859
(0.86) 0.24 14.61 7.96 1.25 5.59 395.75 8,041
(0.17) 0.22 14.60 2.72(d) 1.25(c) 5.45(c) 395.75 1,196
(0.20) 0.22 14.59 2.94(d) 0.25(c) 7.03(c) 395.75 1,894
(0.19) 0.22 14.59 2.85(d) 0.75(c) 6.49(c) 395.75 2
- ----------------------------------------------------------------------------------------------------
(0.92) (0.11) 14.36 5.80 0.50 6.42 485.09 30,603
(0.41) 0.26 14.37 4.85(d) 1.25(c) 5.65(c) 485.09 234
- ----------------------------------------------------------------------------------------------------
(0.94) 1.00 14.47 14.90 0.47 6.67 449.53 29,503
- ----------------------------------------------------------------------------------------------------
(1.00) (1.43) 13.47 (2.98) 0.11 6.06 654.90 14,452
- ----------------------------------------------------------------------------------------------------
(0.56) 0.58 14.90 8.03(d) 0.00(c) 4.87(c) 725.41(d) 12,860
- ----------------------------------------------------------------------------------------------------
</TABLE>
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
- ---------------------------------------
1.65%(c) 4.74%(c)
2.15(c) 4.25(c)
2.15(c) 4.25(c)
1.15(c) 5.28(c)
1.65(c) 4.84(c)
- ---------------------------------------
1.82 5.06
2.32 4.52
2.32(c) 4.38(c)
1.32(c) 5.96(c)
1.82(c) 5.42(c)
- ---------------------------------------
1.89 5.03
2.39(c) 4.51(c)
- ---------------------------------------
2.34 4.80
- ---------------------------------------
2.86 3.31
- ---------------------------------------
4.00(c) 0.87(c)
63
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS(A)
---------------------------------------------------
NET REALIZED NET REALIZED
AND UNREALIZED AND UNREALIZED TOTAL
GAIN (LOSS) ON GAIN (LOSS) INCOME
NET ASSET INVESTMENT, ON FOREIGN (LOSS)
VALUE AT NET OPTION AND CURRENCY FROM
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OPERATIONS
-----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED APRIL 30 (UNAUDITED),
<S> <C> <C> <C> <C> <C>
1998 - Class A
Shares $10.06 $0.30 $ 0.02 -- $0.32
1998 - Class B
Shares 10.09 0.26 0.02 -- 0.28
1998 - Class C
Shares 10.09 0.26 0.02 -- 0.28
1998 -
Institutional
Shares 10.08 0.31 0.02 -- 0.33
1998 -
Administration
Shares 10.07 0.30 0.03 -- 0.33
1998 - Service
Shares 10.09 0.29 0.02 -- 0.31
-----------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
-----------------------------------------------------------------------------
1997 - Class A
Shares(e) 9.70 0.30 0.36 -- 0.66
1997 - Class B
Shares(e) 9.72 0.27 0.37 -- 0.64
1997 - Class C
Shares(e) 9.93 0.11 0.16 -- 0.27
1997 -
Institutional
Shares 9.85 0.64 0.23 -- 0.87
1997 -
Administration
Shares 9.84 0.62 0.23 -- 0.85
1997 - Service
Shares 9.86 0.59 0.23 -- 0.82
-----------------------------------------------------------------------------
1996 -
Institutional
Shares 10.00 0.64 (0.07) -- 0.57
1996 -
Administrative
Shares(e) 9.91 0.41 (0.07) -- 0.34
1996 - Service
Shares(e) 9.77 0.38 0.09 -- 0.47
-----------------------------------------------------------------------------
1995 -
Institutional
Shares 9.24 0.64 0.76 -- 1.40
-----------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31,
-----------------------------------------------------------------------------
1994 -
Institutional
Shares(e) 10.00 0.46 (0.76) -- (0.30)
-----------------------------------------------------------------------------
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS
-----------------------------------------------------------
FROM NET IN EXCESS OF
REALIZED NET REALIZED
GAIN ON GAIN ON
INVESTMENT, IN EXCESS INVESTMENT,
FROM NET OPTION AND OF NET OPTION AND
INVESTMENT FUTURES INVESTMENT FUTURES
INCOME TRANSACTIONS INCOME TRANSACTIONS
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 - Class A
Shares $(0.30) $(0.05) $(0.01) --
1998 - Class B
Shares (0.26) (0.05) (0.01) --
1998 - Class C
Shares (0.26) (0.05) (0.01) --
1998 -
Institutional
Shares (0.31) (0.05) (0.01) --
1998 -
Administration
Shares (0.30) (0.05) (0.01) --
1998 - Service
Shares (0.29) (0.05) (0.01) --
- ----------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
- ----------------------------------------------------------------------------
1997 - Class A
Shares(e) (0.30) -- -- --
1997 - Class B
Shares(e) (0.27) -- -- --
1997 - Class C
Shares(e) (0.11) -- -- --
1997 -
Institutional
Shares (0.64) -- -- --
1997 -
Administration
Shares (0.62) -- -- --
1997 - Service
Shares (0.59) -- -- --
- ----------------------------------------------------------------------------
1996 -
Institutional
Shares (0.64) (0.08) -- --
1996 -
Administrative
Shares(e) (0.41) -- -- --
1996 - Service
Shares(e) (0.38) -- -- --
- ----------------------------------------------------------------------------
1995 -
Institutional
Shares (0.64) -- -- --
- ----------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31,
- ----------------------------------------------------------------------------
1994 -
Institutional
Shares(e) (0.46) -- -- --
- ----------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of period and no sales
charge. Total return would be reduced if a sales or redemption charge
were taken into account.
(c) Annualized.
(d) Not annualized.
(e) Class A, Class B, Class C, Institutional, Administration and Service
share activity commenced on May 1, 1997, May 1, 1997, August 15, 1997,
January 5, 1994, February 28, 1996 and March 13, 1996, respectively.
(f) Includes the effect of mortgage dollar roll transactions.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
64
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
<TABLE>
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER OF
FEES
OR EXPENSE
LIMITATIONS
----------------------
NET RATIO OF NET RATIO OF
INCREASE RATIO OF NET ASSETS NET
(DECREASE) NET ASSET NET INVESTMENT AT END RATIO OF INVESTMENT
TOTAL IN NET VALUE, EXPENSES INCOME PORTFOLIO OF EXPENSES INCOME
DISTRIBUTIONS TO ASSET END OF TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD TO AVERAGE TO AVERAGE
SHAREHOLDERS VALUE PERIOD RETURN(B) NET ASSETS NET ASSETS RATE(F) (IN 000S) NET ASSETS NET ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$(0.36) $(0.04) $10.02 3.25%(d) 0.70%(c) 5.79%(c) 128.90%(d) $39,916 1.28%(c) 5.21%(c)
(0.32) (0.04) 10.05 2.86(d) 1.45(c) 5.04(c) 128.90(d) 2,843 1.78(c) 4.71(c)
(0.32) (0.04) 10.05 2.86(d) 1.45(c) 4.99(c) 128.90(d) 3,911 1.78(c) 4.66(c)
(0.37) (0.04) 10.04 3.38(d) 0.45(c) 6.18(c) 128.90(d) 143,305 0.78(c) 5.85(c)
(0.36) (0.03) 10.04 3.35(d) 0.70(c) 5.89(c) 128.90(d) 13,779 1.03(c) 5.56(c)
(0.35) (0.04) 10.05 3.12(d) 0.95(c) 5.68(c) 128.90(d) 2,551 1.28(c) 5.35(c)
(0.30) 0.36 10.06 6.94(d) 0.70(c) 6.13(c) 361.27 9,336 1.33(c) 5.50(c)
(0.27) 0.37 10.09 6.63(d) 1.45(c) 5.28(c) 361.27 621 1.83(c) 4.90(c)
(0.11) 0.16 10.09 2.74(d) 1.45(c) 4.84(c) 361.27 272 1.83(c) 4.46(c)
(0.64) 0.23 10.08 9.19 0.45 6.53 361.27 79,230 0.83 6.15
(0.62) 0.23 10.07 8.92 0.70 6.27 361.27 6,176 1.08 5.89
(0.59) 0.23 10.09 8.65 0.95 6.00 361.27 1,868 1.33 5.62
---------------------------------------------------------------------------------------------------------------------------
(0.72) (0.15) 9.85 5.98 0.45 6.51 414.20 72,061 0.83 6.13
(0.41) (0.07) 9.84 3.56(d) 0.70(c) 6.41(c) 414.20 702 1.08(c) 6.03(c)
(0.38) 0.09 9.86 4.90(d) 0.95(c) 6.37(c) 414.20 381 1.33(c) 5.99(c)
---------------------------------------------------------------------------------------------------------------------------
(0.64) 0.76 10.00 15.72 0.45 6.56 382.26 55,502 0.96 6.05
(0.46) (0.76) 9.24 (3.00)(d) 0.45(c) 6.48(c) 285.25 24,508 1.46(c) 5.47(c)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT OPERATIONS(A)
----------------------------------------------------
NET REALIZED NET REALIZED
AND UNREALIZED AND UNREALIZED TOTAL
GAIN (LOSS) ON GAIN (LOSS) INCOME
NET ASSET INVESTMENT, ON FOREIGN (LOSS)
VALUE, FROM NET OPTION AND CURRENCY FROM
BEGINNING INVESTMENT FUTURES RELATED INVESTMENT
OF PERIOD INCOME TRANSACTIONS TRANSACTIONS OPERATIONS
- -------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED APRIL 30 (UNAUDITED),
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 - Class A
Shares $15.10 $0.68 $ 0.01 $ -- $0.69
1998 - Class B
Shares 15.08 0.64 -- -- 0.64
1998 - Class C
Shares 15.06 0.65 -- -- 0.65
1998 -
Institutional
Shares 15.09 0.73 0.01 -- 0.74
1998 - Service
Shares 15.09 0.70 0.01 -- 0.71
- -------------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
- -------------------------------------------------------------------------------
1997 - Class A
shares 14.53 0.59 0.50 $ 0.27 1.36
1997 - Class B
shares 14.53 0.72 0.36 0.20 1.28
1997 - Class C
shares(e) 14.80 0.16 0.19 0.10 0.45
1997 -
Institutional
Shares 14.52 0.88 0.37 0.19 1.44
1997 - Service
Shares(e) 14.69 0.53 0.25 0.14 0.92
- -------------------------------------------------------------------------------
1996 - Class A
shares 14.45 0.71 0.62 0.18 1.51
1996 - Class B
shares(e) 14.03 0.34 0.41 0.11 0.86
1996 -
Institutional
shares 14.45 1.15 0.32 0.10 1.57
- -------------------------------------------------------------------------------
1995 - Class A
shares 13.43 0.89 0.92 0.15 1.96
1995 -
Institutional
shares(e) 14.09 0.22 0.34 0.06 0.62
- -------------------------------------------------------------------------------
1994 - Class A
shares 15.07 0.84 (1.37) (0.12) (0.65)
- -------------------------------------------------------------------------------
1993 - Class A
shares 14.69 0.85 1.07 (0.42) 1.50
- -------------------------------------------------------------------------------
1992 - Class A
shares 14.60 1.14 0.45 (0.36) 1.23
- -------------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31,
- -------------------------------------------------------------------------------
1991 - Class A
shares(e) 14.55 0.25 0.23 (0.19) 0.29
- -------------------------------------------------------------------------------
<CAPTION>
DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------------------------
FROM IN EXCESS OF
NET REALIZED NET REALIZED
GAIN ON GAIN ON
INVESTMENT, IN EXCESS INVESTMENT,
FROM NET OPTION AND OF NET OPTION AND FROM
INVESTMENT FUTURES INVESTMENT FUTURES PAID IN
INCOME TRANSACTIONS INCOME TRANSACTIONS CAPITAL
- -------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED APRIL 30 (UNAUDITED),
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 - Class A
Shares $(0.68) $(0.06) -- -- $ --
1998 - Class B
Shares (0.64) (0.06) -- -- --
1998 - Class C
Shares (0.65) (0.06) -- -- --
1998 -
Institutional
Shares (0.73) (0.06) -- -- --
1998 - Service
Shares (0.70) (0.06) -- -- --
- -------------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
- -------------------------------------------------------------------------
1997 - Class A
shares (0.79) -- -- -- --
1997 - Class B
shares (0.73) -- -- -- --
1997 - Class C
shares(e) (0.19) -- -- -- --
1997 -
Institutional
Shares (0.87) -- -- -- --
1997 - Service
Shares(e) (0.52) -- -- -- --
- -------------------------------------------------------------------------
1996 - Class A
shares (1.43) -- -- -- --
1996 - Class B
shares(e) (0.36) -- -- -- --
1996 -
Institutional
shares (1.50) -- -- -- --
- -------------------------------------------------------------------------
1995 - Class A
shares (0.94) -- -- -- --
1995 -
Institutional
shares(e) (0.26) -- -- -- --
- -------------------------------------------------------------------------
1994 - Class A
shares (0.22) (0.16) -- -- (0.61)
- -------------------------------------------------------------------------
1993 - Class A
shares (0.85) (0.27) -- -- --
- -------------------------------------------------------------------------
1992 - Class A
shares (1.14) -- -- -- --
- -------------------------------------------------------------------------
FOR THE PERIOD ENDED OCTOBER 31,
- -------------------------------------------------------------------------
1991 - Class A
shares(e) (0.24) -- -- -- --
- -------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of period and no sales
charge. Total return would be reduced if a sales or redemption charge
were taken into account.
(c) Annualized.
(d) Not annualized.
(e) Class A, Class B, Class C, Institutional and Service share activity
commenced on August 2, 1991, May 1, 1996, August 15, 1997, August 1, 1995
and March 12, 1997, respectively.
66 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
<TABLE>
<CAPTION>
NET RATIO OF NET
INCREASE RATIO OF INVESTMENT NET ASSETS
TOTAL (DECREASE) NET ASSET NET EXPENSES INCOME PORTFOLIO AT END OF
DISTRIBUTIONS TO IN NET VALUE, TOTAL TO AVERAGE TO AVERAGE TURNOVER PERIOD
SHAREHOLDERS ASSET VALUE END OF PERIOD RETURN(B) NET ASSETS NET ASSETS RATE (IN 000S)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.74) $(0.05) $15.05 4.68%(d) 1.36%(c) 4.78%(c) 137.07%(d) $165,542
(0.70) (0.06) 15.02 4.36(d) 1.90(c) 4.24(c) 137.07(d) 5,355
(0.71) (0.06) 15.00 4.39(d) 1.90(c) 4.29(c) 137.07(d) 2,131
(0.79) (0.05) 15.04 5.06(d) 0.65(c) 5.48(c) 137.07(d) 77,470
(0.76) (0.05) 15.04 4.80(d) 1.15(c) 4.89(c) 137.07(d) 306
- -------------------------------------------------------------------------------------------------------------------------------
(0.79) 0.57 15.10 9.66 1.17 5.19 383.72 167,096
(0.73) 0.55 15.08 9.04 1.71 4.76 383.72 3,465
(0.19) 0.26 15.06 3.03(d) 1.71(c) 4.98(c) 383.72 496
(0.87) 0.57 15.09 10.26 0.65 5.72 383.72 60,929
(0.52) 0.40 15.09 6.42(d) 1.15(c) 5.33(c) 383.72 151
- -------------------------------------------------------------------------------------------------------------------------------
(1.43) 0.08 14.53 11.05 1.16 5.81 232.15 198,665
(0.36) 0.50 14.53 6.24(d) 1.70(c) 5.16(c) 232.15 256
(1.50) 0.07 14.52 11.55 0.65 6.35 232.15 54,254
- -------------------------------------------------------------------------------------------------------------------------------
(0.94) 1.02 14.45 15.08 1.29 6.23 265.86 245,835
(0.26) 0.36 14.45 4.42(d) 0.65(c) 6.01(c) 265.86 31,619
- -------------------------------------------------------------------------------------------------------------------------------
(0.99) (1.64) 13.43 (4.49) 1.28 5.73 343.74 396,584
- -------------------------------------------------------------------------------------------------------------------------------
(1.12) 0.38 15.07 10.75 1.30 5.78 313.88 675,662
- -------------------------------------------------------------------------------------------------------------------------------
(1.14) 0.09 14.69 8.77 1.37 7.85 270.75 588,893
- -------------------------------------------------------------------------------------------------------------------------------
(0.24) 0.05 14.60 2.00(d) 0.38(d) 1.72(d) 34.22(d) 388,744
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIOS ASSUMING NO
VOLUNTARY WAIVER OF FEES
OR EXPENSE LIMITATIONS
--------------------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS
--------------------------------
<S> <C>
1.79%(c) 4.35%(c)
2.29(c) 3.85(c)
2.29(c) 3.90(c)
1.04(c) 5.09(c)
1.54(c) 4.50(c)
--------------------------------
1.60 4.76
2.10 4.37
2.10(c) 4.59(c)
1.04 5.33
1.54(c) 4.94(c)
--------------------------------
1.64 5.33
2.14(c) 4.72(c)
1.11 5.89
--------------------------------
1.58 5.94
1.08(c) 5.58(c)
--------------------------------
1.53 5.48
--------------------------------
1.55 5.53
--------------------------------
1.62 7.60
--------------------------------
0.44(d) 1.66(d)
--------------------------------
</TABLE>
67
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs
Taxable Investment Grade Funds
THE GOLDMAN
SACHS ADVANTAGE
When you invest in Goldman Sachs Taxable Investment Grade Funds, you can
capitalize on Goldman Sachs' 129-year history of excellence while benefiting
from the firm's leadership in three areas:
1
Global Resources
With professionals based throughout the Americas, Europe and Asia, Goldman Sachs
possesses first-hand knowledge of the world's markets and economies.
2
Fundamental Research
Goldman Sachs is recognized by the managements of corporations worldwide as a
leader in investment research. As a result, we obtain face-to-face meetings with
managers on a timely, regular basis.
3
Risk Management
Goldman, Sachs & Co. excels in understanding, monitoring and managing investment
risk -- a process that is integrated into all Goldman Sachs investment products.
Generally speaking, bond investments can help individuals mitigate
overall portfolio volatility, without sacrificing attractive returns.
Goldman Sachs Taxable Investment Grade Funds offer investors access to
the benefits associated with fixed income investing. The Funds seek
current income from portfolios that invest in a variety of fixed
income securities.
Target Your Needs
Goldman Sachs Taxable Investment Grade Funds have distinct investment
objectives and defined positions on the risk/return spectrum. As your
investment objectives change, you can exchange shares within Goldman
Sachs Funds without any additional charge. (Please note: in general,
greater returns are associated with greater risk.)*
----------------------------------------------------------------------
Goldman Sachs Fixed Income Funds
HIGH YIELD
Higher o High Yield Fund
Risk/Return
TAXABLE
o Global Income Fund
o Core Fixed Income Fund
o Government Income Fund
o Short Duration Government Fund
o Adjustable Rate Government Fund
TAX-FREE
Lower o Municipal Income Fund
Risk/Return o Short Duration Tax-Free Fund
For More Information
To learn more about Goldman Sachs Taxable Investment Grade Funds and
other Goldman Sachs Funds, call your investment professional today.
* The exchange privilege is subject to termination and its terms
are subject to change.
<PAGE>
================================================================================
GOLDMAN SACHS ASSET MANAGEMENT
ONE NEW YORK PLAZA, 42ND FLOOR, NEW YORK, NEW YORK 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 B. Strubel
OFFICERS
Douglas C. Grip, President
James A. Fitzpatrick, Vice 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
Valerie A. Zondorak, Assistant Secretary
GOLDMAN SACHS
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT
Investment Advisor
GOLDMAN SACHS INTERNATIONAL
133 Peterborough Court
London, England EC4A 2BB
Visit our internet address: www.gs.com/funds
This material is not authorized for distribution to prospective investors unless
preceded or accompanied by a current Prospectus. Investors should read the
Prospectus carefully before investing or sending money.
Goldman, Sachs & Co., distributor of the Fund, is not a bank, and Fund shares
distributed by it are neither bank deposits nor obligations of, nor endorsed,
nor guaranteed by any bank or other insured depository institution, nor are they
insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve
Board, or any other government agency. Investment in the Fund involves risks,
including possible loss of the principal amount invested.
Goldman Sachs Government Income Fund's, Goldman Sachs Short Duration Government
Fund's and Goldman Sachs Adjustable Rate Government Fund's net asset values and
yields are not guaranteed by the U.S. Government or by its agencies,
instrumentalities or sponsored enterprises.
Goldman Sachs High Yield Fund invests primarily in high yield, fixed income
securities rated below investment grade that are considered speculative and
generally involve greater price volatility and greater risk of loss of principal
and interest than investment in higher rated fixed income securities.
Goldman Sachs Global Income Fund's, Goldman Sachs High Yield Fund's and Goldman
Sachs Core Fixed Income Fund's foreign investments and active management
techniques entail risks in addition to those customarily associated with
investing in dollar-denominated securities of U.S. issuers. Compared with U.S.
securities markets, foreign markets may be less liquid, more volatile and less
subject to governmental regulation, and may make available less public
information about issuers. The Funds may incur losses because of changes in
securities prices expressed in local currencies, movements in exchange rates, or
both.
Goldman Sachs Municipal Income Fund and Goldman Sachs Short Duration Tax-Free
Fund can invest up to 100% and 20%, respectively, in private activity bonds, the
interest from which is subject to the federal alternative minimum tax.
(C)Copyright 1998 Goldman, Sachs & Co. All rights reserved.
Date of first use: March 31, 1998 FI/INVGRSAR/42K/6-98
