<PAGE>
Goldman Sachs Funds
TAX-FREE FUNDS Semi-Annual Report April 30, 1999
High current income potential
from portfolios that invest primarily
[ART APPEARS HERE]
in municipal securities.
[LOGO OF GOLDMAN SACHS
APPEARS HERE]
<PAGE>
Goldman Sachs Tax-Free Funds
Market Overview
Dear Shareholder,
During the period under review, 1998's Treasury rally came to an end, while
ongoing momentum in the U.S. economy kept the Federal Reserve Board on hold
during the six-month period ended April 30, 1999.
Market Review
. The Bond Market: Treasury Rally Subsides, While Non-Treasuries Outperform --
The beginning of 1999 marked a pause in, if not an end to, 1998's powerful
Treasury rally. Although yields on nearly all U.S. fixed income securities
rose during the period, yields on non-Treasury securities rose less than
those of equal duration Treasuries. As a result, spreads narrowed
substantially, boosting the relative performance of non-Treasury investments.
The outperformance of non-Treasury sectors was attributable to both general
market- and sector-specific influences. With regards to general market
influences, virtually all non-Treasury sectors benefited from the gradual
stabilization of the global financial markets and investors' renewed
tolerance for risk. With regard to sector-specific influences, mortgages
benefited from reductions in prepayment expectations; corporates -- both
investment grade and high yield -- benefited from robust earnings prospects
and a strong U.S. equity market; and emerging market debt benefited from the
pending resolution of the Brazilian crisis and the rise in oil prices.
. The Economy: U.S. Economy Retains Momentum -- Despite widespread expectations
of moderating growth and declining interest rates, economic momentum
continued unabated into 1999. Robust equity markets and tight labor
conditions remained the primary drivers of domestic demand, while a general
lack of pricing power and persistent overcapacity among the nation's
producers kept the Federal Reserve Board from intervening to prevent a
buildup of inflationary pressures.
Outlook
. Prospects Positive for the Fixed Income Market and Economy -- Over the near
term, we expect the fixed income environment to remain relatively positive.
Treasury rates will likely vary within a 25- to 50-basis point range as
concerns regarding the inflationary potential of the economy vie with
occasional indications that gross domestic product is decelerating. As a
result, we expect that the Federal Reserve Board will maintain its neutral
bias and hold short-term rates steady. Outside the Treasury market, spreads
should narrow as the probability of marked swings in volatility, related to
both domestic interest rates and global disruptions, continues to diminish.
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 /s/ Sharmin Mossavar-Rahmani
David B. Ford John P. McNulty Sharmin Mossavar-Rahmani
Co-Head, Goldman Sachs Co-Head, Goldman Sachs CIO, Fixed Income Investments,
Asset Management Asset Management Goldman Sachs Asset Management
May 28, 1999
- ------------------
NOT FDIC-INSURED
- ------------------
May Lose Value
- ------------------
No Bank Guarantee
- ------------------
<PAGE>
Goldman Sachs Tax-Free Funds
Fixed Income Investment Process
- --------------------------------------------------------------------------------
Fixed Income Security Selection
- --------------------------------------------------------------------------------
[THE NUMBER 1 APPEARS HERE]
Sector
Allocation
|
|
----------------------------------------------------------------------
Our sector specialists work together to assess relative value among
sectors and create investment strategies to meet each fund's
objectives.
[DOWNWARD FACING ARROW APPEARS HERE]
[THE NUMBER 2 APPEARS HERE]
Security
Selection
|
|
----------------------------------------------------------------------
In selecting securities for each portfolio, our fixed income teams
have access to the vast resources of Goldman Sachs.
[DOWNWARD FACING ARROW APPEARS HERE]
[THE NUMBER 3 APPEARS HERE]
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.
With our fixed income portfolios, we seek consistent, strong performance. We
actively manage our funds within a research-intensive, risk-managed framework
instead of attempting to anticipate interest rate movements.
<PAGE>
Fund Basics
Short Duration Tax-Free Fund
as of April 30, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Performance Review
- -----------------------------------------------------------------------------------------------------------------
October 31, 1998- Fund Total Return 30-Day Taxable 30-Day Lehman 3-Year
April 30, 1999 (based on NAV)/1/ Equivalent Yield/2/ Standardized Yield/3/ Muni Index/4/
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 1.42% 6.77% 4.09% 1.91%
Class B 1.21% 5.94% 3.59% 1.91%
Class C 1.14% N/A N/A 1.91%
Institutional 1.72% 7.60% 4.59% 1.91%
Administration 1.69% 7.15% 4.32% 1.91%
Service 1.46% 6.77% 4.09% 1.91%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares.
/2/ The Taxable Equivalent Yield of the Fund is calculated by dividing the
current 30-day Standardized Yield by 1 minus the highest 1999 federal income
tax rate of 39.6%.
/3/ The 30-Day Standardized Yield of the Fund is calculated by dividing the net
investment income per share (as defined by securities industry regulations)
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.
/4/ The Lehman 3-Year Municipal Bond Index does not reflect any fees or
expenses.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Standardized Total Returns
- --------------------------------------------------------------------------------------------------------------------------
For the period ending 3/31/99 Class A Class B Class C Institutional Administration Service
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year/5/ 1.95% 1.58% 2.46% 4.50% 4.45% 4.08%
Five Years/5/ N/A N/A N/A 4.75% 4.52% N/A
Since Inception/5/ 3.94% 3.86% 3.79% 4.51% 4.04% 4.42%
(5/1/97) (5/1/97) (8/15/97) (10/1/92) (5/20/93) (9/20/94)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
/5/ The Standardized Total Returns are average annual returns as of the most
recent calendar quarter-end. They assume reinvestment of all distributions
at net asset value. These returns reflect 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). Because Institutional, Administration and Service shares do not
involve sales charges, such charges have not been applied to their
Standardized Total Returns.
- --------------------------------------------------------------------------------
Portfolio Composition as of 4/30/99/6/
- --------------------------------------------------------------------------------
Sector Allocation Credit Allocation
- --------------------------------------------------------------------------------
Revenue Bonds 59.0% AAA 44.0%
Insured Revenue Bonds 17.0% AA 21.0%
Pre-refunded 13.0% A 30.0%
Variable Rate Demand Notes 5.0% BBB 5.0%
Insured General Obligations 4.0%
General Obligations 2.0%
- --------------------------------------------------------------------------------
/6/ The Fund is actively managed and, as such, its composition may differ over
time. Figures represent a percentage of total portfolio investments that
have settled and include an offset to cash equivalents relating to all
unsettled trades and may not sum to 100%.
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 and expense limitations in effect. In their absence,
performance would be reduced.
Assets Under Management
$67.8 Million
NASDAQ Symbols
Class A Shares
GSDTX
Class B Shares
GSDBX
Class C Shares
GSTCX
Institutional Shares
GSDUX
Service Shares
GSTAX
Administration Shares
GSTAX
<PAGE>
Performance Overview
Short Duration Tax-Free Fund
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Short Duration
Tax-Free Fund for the six-month period ended April 30, 1999.
Performance Review
Over the 6-month period ended April 30, 1999, the Fund's A, B, C,
Institutional, Administration and Service share classes generated total
cumulative returns, at net asset value, of 1.42%, 1.21%, 1.14%, 1.72%, 1.69%
and 1.46%, respectively. Over the same time period, the Fund's benchmark,
the Lehman Brothers Three-Year Municipal Bond Index, generated a cumulative
total return of 1.91%.
Municipal Market Performance
At the start of the period under review, new issue supply declined -- a
positive trend since, heavy new issue supply was one reason municipal bonds
underperformed Treasuries for most of 1998. However, two other key causes of
municipal underperformance -- the attractiveness of equities and
historically low nominal yields -- did not change. These factors
significantly hindered demand for municipal bonds and, as a result, they
continued to underperform Treasuries.
Early in 1999, the relative performance picture shifted. The municipal
market's reluctance to follow Treasury market performance (a problem during
the rally of 1998) became an advantage when Treasury yields rose
dramatically in February of 1999. This municipal yield "stickiness" allowed
tax-exempts to experience their strongest relative performance in years. The
performance surge was bolstered by a strong demand for municipals when
supply was very thin, and abetted by municipals' year-long trend of not
responding to Treasury movements.
By March, new issue volume and secondary supply accelerated and, as a
result, the strong performance seen early in the year leveled off. Although
April saw a decline in new issue and secondary supply, demand fell slightly
as mutual funds experienced outflows-- an unusual occurrence in the past two
years. Municipal yields rose slightly and the relationship with Treasury
yields went unchanged.
Portfolio Composition
Although municipal credit spreads remained generally tight, we were able to
selectively purchase several holdings that offered above-market yields but
did not significantly decrease the Fund's overall credit quality. A result
of this shift was an increase in the weighting of revenue bonds in the
portfolio (from 32.9% on October 31, 1998 to 59.0% on April 30, 1999), since
the revenue sector tends to offer more bond variety than the more staid
general obligation market.
<PAGE>
Performance Overview
Portfolio Outlook
We presently believe the outlook for municipals appears bright. We have based
this outlook on several factors: mutual fund flows have been consistently
positive, near-term supply appears light and the combination of volatile equity
markets and higher rates may encourage individuals to increase their investment
in municipal bonds. Within the Fund, we expect to continue to emphasize the
higher yielding revenue sector. This strategy will be executed more through
careful security selection than through an allocation to lower-rated credits; we
believe that the general yield spreads between lower- and higher-rated credits
is still too narrow to overweight lower rated credits.
We thank you for your investment and look forward to your continued confidence.
Goldman Sachs U.S. Fixed Income -- Municipal Investment Management Team
May 28, 1999
The Goldman Sachs Short Duration Tax-Free Fund seeks current income, consistent
with low volatility of principal, that is exempt from regular federal income
tax, primarily through investments in municipal securities.
<PAGE>
Fund Basics
Municipal Income Fund
as of April 30, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Performance Review
- -------------------------------------------------------------------------------------------------------------
October 31, 1998- Fund Total Return 30-Day Taxable 30-Day Lehman 15-Year
April 30, 1999 (based on NAV)/1/ Equivalent Yield/2/ Standardized Yield/3/ Muni Index/4/
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 1.22% 6.44% 3.89% 1.96%
Class B 0.85% 5.50% 3.32% 1.96%
Class C 0.85% 5.50% 3.32% 1.96%
Institutional 1.42% 7.40% 4.47% 1.96%
Service 1.23% N/A N/A 1.96%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares.
/2/ The Taxable Equivalent Yield of the Fund is calculated by dividing the
current 30-day Standardized Yield by 1 minus the highest 1999 federal income
tax rate of 39.6%.
/3/ The 30-Day Standardized Yield of the Fund is calculated by dividing the net
investment income per share (as defined by securities industry regulations)
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.
/4/ The Lehman Brothers 15-Year Municipal Bond Index is a total return
performance benchmark for the 15-year maturity, investment-grade tax-exempt
bond market. Returns and attributes for the Index are calculated semi-
monthly using approximately 5,000 municipal bonds, which are priced by
Muller Data Corporation. Please note that the benchmark return reflects
performance data from the Fund's first full month of operation (8/1/93),
which does not directly correlate with the Fund's performance since its
inception. The Index figures do not reflect any fees or expenses.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Standardized Total Returns
- -------------------------------------------------------------------------------------------------------------
For the period ending 3/31/99 Class A Class B Class C Institutional Service
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OneYear/5/ 0.64% - 0.60% 3.57% 5.74% 5.26%
Five Years/5/ 6.53% N/A N/A N/A 7.48%
Since Inception/5/ 5.39% 6.13% 6.01% 7.17% 6.21%
(7/20/93) (5/1/96) (8/15/97) (8/15/97) (7/20/93)/6/
- -------------------------------------------------------------------------------------------------------------
</TABLE>
/5/ The Standardized Total Returns are average annual returns as of the most
recent calendar quarter-end. They assume reinvestment of all distributions
at net asset value. These returns reflect 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). Because Institutional and Service shares do not involve sales
charges, such charges have not been applied to their Standardized Total
Returns.
/6/ Performance data for Service shares prior to 8/15/97 is that of Class A
shares (excluding the impact of front-end sales charges applicable to Class
A shares since Service shares are not subject to any sales charges).
Performance of Class A shares in the Fund reflects the expenses applicable
to the Fund's Class A shares. The fees applicable to Service shares are
different from those applicable to Class A shares which impact performance
ratings and rankings for a class of shares.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Portfolio Composition as of 4/30/99/7/
- -------------------------------------------------------------------------------------------------------------
Sector Allocation Credit Allocation
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Revenue Bonds 39.0% AAA 65.0%
Revenue Bonds 28.0% AA 17.0%
Insured General Obligations 19.0% A 14.0%
General Obligations 9.0% BBB 4.0%
Variable Rate Demand Notes 4.0%
Pre-Refunded 1.0%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
/7/ The Fund is actively managed and, as such, its composition may differ over
time. Figures represent a percentage of total portfolio investments that
have settled and include an offset to cash equivalents relating to all
unsettled trades and may not sum to 100%.
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 and expense limitations in effect. In their absence,
performance would be reduced.
Assets Under Management
$115.7 Million
NASDAQ Symbols
Class A Shares
GSMIX
Class B Shares
GSMBX
Class C Shares
GSMUX
Institutional Shares
GSMTX
Service Shares
GSMEX
5
<PAGE>
Performance Overview
Municipal Income Fund
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Municipal
Income Fund for the six-month period ended April 30, 1999.
Performance Review
Over the six-month period ended April 30, 1999, the Fund's A, B, C,
Institutional and Service share classes generated cumulative total returns,
at net asset value, of 1.22%, 0.85%, 0.85%, 1.42% and 1.23%, respectively.
These returns underperformed the 1.96% return generated by the Fund's
benchmark, the Lehman Brothers 15-Year Municipal Bond Index. The Fund's
underperformance was primarily attributable to a few securities that
underperformed the market during the 6-month period, combined with
differences in yield curve exposure between the portfolio and the Lehman
15-year index.
Municipal Market Performance
At the start of the period under review, new issue supply declined -- a
positive trend since, heavy new issue supply was one reason municipal bonds
underperformed Treasuries for most of 1998. However, two other key causes
of municipal underperformance -- the attractiveness of equities and
historically low nominal yields -- did not change. These factors
significantly hindered demand for municipal bonds and, as a result, they
continued to underperform Treasuries.
Early in 1999, the relative performance picture shifted. The municipal
market's reluctance to follow Treasury market performance (a problem during
the rally of 1998) became an advantage when Treasury yields rose
dramatically in February of 1999. This municipal yield "stickiness" allowed
tax-exempts to experience their strongest relative performance in years.
The performance surge was bolstered by a strong demand for municipals when
supply was very thin, and abetted by municipals' year-long trend of not
responding to Treasury movements.
By March, new issue volume and secondary supply accelerated and, as a
result, the strong performance seen early in the year leveled off. Although
April saw a decline in new issue and secondary supply, demand fell slightly
as mutual funds experienced outflows -- an unusual occurrence in the past
two years. Municipal yields rose slightly and the relationship with
Treasury yields went unchanged.
Portfolio Composition
Portfolio composition remained relatively stable over the period, with the
exception of an increase in the Fund's position in insured general
obligation bonds (from 13.7% on October 31, 1998 to 19.0% on April 30,
1999). This increase accounted in part for the reduction in the Fund's
position in insured revenue bonds (from 53.9% on October 31, 1998 to 39.0%
on April 30, 1999). Broadly, the market prices both types of securities
performed similarly; thus shifts are the result of specific investment
decisions.
6
<PAGE>
Performance Overview
Portfolio Outlook
We presently believe the outlook for municipals appears bright. We have based
this outlook on several factors: mutual fund flows have been consistently
positive, near-term supply appears light and the combination of volatile equity
markets and higher rates may encourage individuals to increase their investment
in municipal bonds. Going forward, we will continue to emphasize selective
purchases in the higher yielding revenue bond sector and careful yield curve
management.
We thank you for your investment and look forward to your continued confidence.
Goldman Sachs U.S. Fixed Income -- Municipal Investment Management Team
May 28, 1999
The Goldman Sachs Municipal Income Fund seeks a high level of current income
exempt from regular federal income tax that is consistent with preservation of
capital, primarily through investments in municipal securities.
7
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
The Goldman Sachs Advantage
Founded in 1869, Goldman, Sachs & Co. is a premier financial services
firm traditionally known on Wall Street and around the world for its
institutional expertise.
Today, the firm's Asset Management Division provides individual
investors the opportunity to tap the resources of a global
institutional powerhouse -- and put this expertise to work in
their individual portfolios.
What Sets Goldman Sachs Funds Apart?
1
Resources and Relationships
Our porfolio management teams are located on-site, around the
world, in New York, London, Tokyo and Singapore. Their
understanding of local economies, markets, industries and
cultures helps deliver what many investors want: access to
global investment opportunities and consistent, risk-adjusted
performance.
2
In-Depth Research
Our portfolio management teams make on-site visits to hundreds
of companies each month, then construct selective portfolios
with an emphasis on their best ideas. Our teams also have
access to Goldman, Sachs & Co.'s Global Investment Research
Department.
3
Risk Management
In this, our institutional heritage is clear. Institutions, as
well as many individual investors, often look to us to manage
the risks of global investing over time in different market
environments.
To learn more about the Goldman Sachs Family of Funds, call your
investment professional today.
8
<PAGE>
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
Performance Summary
April 30, 1999 (Unaudited)
The following graph shows the value as of April 30, 1999, of a $10,000
investment made in Institutional shares on October 1, 1992 (commencement of
operations) of the Goldman Sachs Short Duration Tax-Free Fund. For
comparative purposes, the performance of the Fund's benchmark (the Lehman
Brothers 3-Year Municipal Bond Index ("Lehman 3-Year Muni Bond 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 the Institutional shares due to differences in fees and loads.
Short Duration Tax-Free Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested October 1, 1992 to
April 30, 1999.
[GRAPH APPEARS HERE]
Date SDTF MUNI
---- ---- ----
Oct-92 10,000 10,000
Oct-92 9,966 9,961
Nov-92 10,041 10,031
Dec-92 10,127 10,091
Jan-93 10,199 10,167
Feb-93 10,406 10,326
Mar-93 10,350 10,295
Apr-93 10,425 10,355
May-93 10,427 10,383
Jun-93 10,512 10,449
Jul-93 10,504 10,455
Aug-93 10,590 10,552
Sep-93 10,656 10,598
Oct-93 10,667 10,620
Nov-93 10,643 10,607
Dec-93 10,755 10,718
Jan-94 10,841 10,805
Feb-94 10,703 10,704
Mar-94 10,562 10,575
Apr-94 10,627 10,637
May-94 10,632 10,687
Jun-94 10,618 10,690
Jul-94 10,710 10,779
Aug-94 10,738 10,818
Sep-94 10,715 10,791
Oct-94 10,685 10,765
Nov-94 10,653 10,746
Dec-94 10,707 10,792
Jan-95 10,726 10,881
Feb-95 10,831 10,997
Mar-95 10,879 11,096
Apr-95 10,909 11,133
May-95 11,053 11,304
Jun-95 11,087 11,331
Jul-95 11,191 11,451
Aug-95 11,271 11,540
Sep-95 11,287 11,573
Oct-95 11,325 11,627
Nov-95 11,399 11,702
Dec-95 11,428 11,751
Jan-96 11,548 11,842
Feb-96 11,575 11,845
Mar-96 11,521 11,816
Apr-96 11,526 11,830
May-96 11,532 11,841
Jun-96 11,597 11,912
Jul-96 11,650 11,978
Aug-96 11,681 11,996
Sep-96 11,758 12,069
Oct-96 11,836 12,153
Nov-96 11,949 12,266
Dec-96 11,967 12,272
Jan-97 12,007 12,326
Feb-97 12,062 12,387
Mar-97 11,995 12,322
Apr-97 12,062 12,375
May-97 12,153 12,476
Jun-97 12,232 12,549
Jul-97 12,359 12,699
Aug-97 12,340 12,673
Sep-97 12,432 12,764
Oct-97 12,475 12,820
Nov-97 12,518 12,857
Dec-97 12,610 12,945
Jan-98 12,690 13,030
Feb-98 12,721 13,057
Mar-98 12,750 13,078
Apr-98 12,729 13,060
May-98 12,848 13,182
Jun-98 12,878 13,226
Jul-98 12,909 13,274
Aug-98 13,016 13,403
Sep-98 13,085 13,489
Oct-98 13,129 13,553
Nov-98 13,172 13,586
Dec-98 13,201 13,618
Jan-99 13,295 13,742
Feb-99 13,295 13,758
Mar-99 13,324 13,770
Apr-99 13,355 13,813
<TABLE>
<CAPTION>
Average Annual Total
Return through April 30,
1999 Since Inception Five Years One Year Six Months(a)
<S> <C> <C> <C> <C>
Class A (commenced May 1,
1997)
Excluding sales charges 4.91% n/a 4.56% 1.42%
Including sales charges 3.87% n/a 2.43% -0.63%
-----------------------------------------------------------------------------
Class B (commenced May 1,
1997)
Excluding contingent
deferred sales charges 4.28% n/a 3.94% 1.21%
Including contingent
deferred sales charges 3.77% n/a 1.88% -0.81%
-----------------------------------------------------------------------------
Class C (commenced August
15, 1997)
Excluding contingent
deferred sales charges 3.69% n/a 3.78% 1.14%
Including contingent
deferred sales charges 3.69% n/a 2.76% 0.13%
-----------------------------------------------------------------------------
Institutional Class (com-
menced October 1, 1992) 4.49% 4.67% 4.91% 1.72%
-----------------------------------------------------------------------------
Administration Class
(commenced May 20, 1993) 4.02% 4.44% 4.76% 1.69%
-----------------------------------------------------------------------------
Service Class (commenced
September 20, 1994) 4.38% n/a 4.50% 1.46%
-----------------------------------------------------------------------------
</TABLE>
(a) Not annualized.
9
<PAGE>
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
Statement of Investments
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - 127.7%
Alabama - 3.2%
Alabama Building Renovation Financing Authority RB Series 1990 (A2)
$1,000,000 7.40% 09/01/2006 $1,063,600
Scottsboro Alabama GO Warrants Series A (AAA/Aaa)
1,000,000 5.75 11/01/2011 1,077,080
--------------------------------------------------------------------------------------------------
$2,140,680
--------------------------------------------------------------------------------------------------
Alaska - 2.0%
Valdez Alaska Marine Terminal RB for Sohio Pipeline Series 1991 (AA+)
$1,250,000 7.13% 12/01/2025 $1,371,263
--------------------------------------------------------------------------------------------------
Arizona - 6.1%
Phoenix Street and Highway User RB Series 1993 (AA/A1)
$4,000,000 5.13% 07/01/2010 $4,125,720
--------------------------------------------------------------------------------------------------
California - 5.6%
ABAG Finance Authority for Non-Profit Corporations Refunding Bond (BBB)
$ 900,000 5.25% 10/01/2007 $ 917,334
Palmdale Civic Authority RB Series 1994 (MBIA) (AAA)
1,695,000 6.60 09/01/2034 1,895,722
Sacramento County Housing Authority MF Hsg. RB for Rancho Natomas
Apartments (LOC) (A1)
1,000,000 4.80 12/15/2007 1,000,000
--------------------------------------------------------------------------------------------------
$3,813,056
--------------------------------------------------------------------------------------------------
Colorado - 3.4%
Denver City & County Airport Prerefunded RB Series 1992 A (AAA/Baa1)
$2,000,000 7.50% 11/15/2006 $2,287,180
--------------------------------------------------------------------------------------------------
Connecticut - 8.6%
Bridgeport Connecticut GO Series 1992 A (AAA)
$2,250,000 6.13% 03/01/2005 $2,432,858
Connecticut State Health and Educational Facilities RB for Special Care
Issue Series 1997 B (BBB/Baa2)
3,365,000 5.13 07/01/2007 3,431,391
--------------------------------------------------------------------------------------------------
$5,864,249
--------------------------------------------------------------------------------------------------
Florida - 4.8%
Citrus County PCRB for Florida Power Corp. Crystal River Series 1992 B
(A+/Aa3)
$3,000,000 6.35% 02/01/2022 $3,231,390
--------------------------------------------------------------------------------------------------
Illinois - 13.2%
Chicago Metropolitan Housing Development Corp. RB Series 1992 8-A (AMBAC)
(AAA/Aaa)
$3,500,000 6.85% 07/01/2022 $3,783,850
Illinois Health Facilities Authority Highland Park Hospital Series A
(FGIC) (AAA/Aaa)
1,000,000 5.20 10/01/2001 1,033,490
Illinois Health Facilities Authority RB for University of Chicago
Hospitals Series A (AAA/Aaa)
1,950,000 5.38 08/15/2005 2,072,889
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - (continued)
Illinois - (continued)
Illinois Housing Development Authority Series 1991 A (A+/A1)
$1,000,000 7.90% 07/01/1999 $1,006,100
Southern Illinois University Housing & Auxiliary Facility RB Series 1996 A
(MBIA) (AAA/Aaa)
1,000,000 5.00 04/01/2003 1,039,820
--------------------------------------------------------------------------------------------------
$8,936,149
--------------------------------------------------------------------------------------------------
Indiana - 10.7%
Indiana Health Facilities Financing Authority Hospital RB for Methodist
Hospitals Series 1992 (A2)
$2,200,000 6.75% 09/15/2009 $2,389,090
Logansport Multi-Purpose School Building Corp. RB for First Mortgages
Series 1992 (A)
2,195,000 5.90 07/01/2005 2,341,889
Marion County Hospital Authority Facility RB for Methodist Hospitals of
Indiana Series 1989 (AAA/Aa3)
2,450,000 6.50 09/01/2013 2,518,404
--------------------------------------------------------------------------------------------------
$7,249,383
--------------------------------------------------------------------------------------------------
Kentucky - 3.1%
Kentucky State Property and Building Commission RB (A+/A2)
$2,000,000 6.10% 10/01/2001 $2,115,100
--------------------------------------------------------------------------------------------------
Louisiana - 1.5%
Louisiana Offshore Deepwater Port Terminal Authority RB Series B (A/Baa1)
$1,000,000 5.85% 09/01/2000 $1,023,010
--------------------------------------------------------------------------------------------------
Maryland - 3.9%
Maryland State Health and Higher Educational Facilities Authority RB (LOC)
(A)
$1,000,000 4.75% 07/01/2021 $1,015,460
Maryland State Health and Higher Educational Facilities Authority RB (A-)
1,600,000 5.50 01/01/2021 1,655,728
--------------------------------------------------------------------------------------------------
$2,671,188
--------------------------------------------------------------------------------------------------
Massachusetts - 4.3%
Boston Massachusetts RB for Boston City Hospital Series B (AA-/Aa)
$1,245,000 5.75% 02/15/2013 $1,291,971
Massachusetts Industrial Finance Agency RB for Brandeis College Series
1989 (AAA/Aaa)
1,550,000 6.80 10/01/2019 1,599,523
--------------------------------------------------------------------------------------------------
$2,891,494
--------------------------------------------------------------------------------------------------
Michigan - 3.7%
Bishop International Airport RB Series B (A)
$2,420,000 5.00% 12/01/2007 $2,505,644
--------------------------------------------------------------------------------------------------
Missouri - 2.5%
St. Louis Municipal Finance Leasehold RB Series A (LOC) (A/Aa3)
$1,655,000 5.30% 07/15/2002 $1,708,788
--------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - (continued)
Nebraska - 5.8%
Nebraska Investment Finance Authority MF Hsg. for Wycliffe West RB
(FNMA) (AAA)
$1,740,000 5.50% 12/01/2025 $ 1,841,860
Nebraska Public Power District RB Series 1998 A (MBIA) (AAA/Aaa)
2,000,000 5.00 01/01/2002 2,065,100
----------------------------------------------------------------------------------------------
$ 3,906,960
----------------------------------------------------------------------------------------------
New York - 4.8%
New York State Medical Care RB (MBIA) (AAA/Aaa)
$1,520,000 6.00% 08/15/2003 $ 1,647,011
Yonkers GO Series C (FGIC) (AAA/Aaa)
1,500,000 6.00 08/01/2003 1,623,660
----------------------------------------------------------------------------------------------
$ 3,270,671
----------------------------------------------------------------------------------------------
Ohio - 3.5%
Ohio State Building Authority RB Series 1996 A (AA-/Aa3)
$2,255,000 5.00% 10/01/2002 $ 2,345,719
----------------------------------------------------------------------------------------------
Pennsylvania - 6.0%
Pennsylvania Economic Development Financing Authority RB for
Northwestern Human Services Series A (A)
$1,950,000 4.60% 06/01/2004 $ 1,928,550
Philadelphia GO Series 1996 (MBIA) (AAA/Aaa)
2,005,000 6.00 05/15/2002 2,134,142
----------------------------------------------------------------------------------------------
$ 4,062,692
----------------------------------------------------------------------------------------------
South Carolina - 6.3%
Georgetown County PCRB for International Paper Company Series 1992
(BBB+/A3)
$4,000,000 6.25% 06/15/2005 $ 4,282,600
----------------------------------------------------------------------------------------------
Tennessee - 2.2%
Clarksville Public Building Authority RB for Pooled Loan Program Series
1993 (AA)
$1,500,000 4.75% 12/01/2000 $ 1,527,015
----------------------------------------------------------------------------------------------
Texas - 20.6%
Edinburg Consolidated Independent School District Public Facilities
Corp. Lease RB (AMBAC) (AAA)
$1,810,000 5.00% 08/15/2001 $ 1,862,852
Harris County RB for Toll Road Lien Series 1991 (AA/Aa2)
4,000,000 6.75 08/01/2014 4,335,040
Houston Water and Sewer System RB Series 1992 A (AAA/Aaa)
3,415,000 6.38 12/01/2022 3,724,911
Memorial Villages Water Authority RB (Aa)
760,000 7.00 09/01/2000 785,050
Titus County Fresh Water RB for Southwestern Electric Power Company
Series 1991 A (A1)
2,945,000 8.20 08/01/2011 3,273,132
----------------------------------------------------------------------------------------------
$13,980,985
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - (continued)
Wisconsin - 1.9%
Wisconsin State Health and Educational Facility RB for Medical College
of Wisconsin Series 1993 (A)
$1,240,000 5.30% 12/01/2003 $ 1,296,718
----------------------------------------------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $86,144,286) $86,607,654
----------------------------------------------------------------------------------
Short-Term Obligations(a) - 6.0%
California - 2.9%
Fontana COPS VRDN for Empire Center Project Series 1991 (BBB)
$2,000,000 5.10% 05/06/1999 $ 2,000,000
----------------------------------------------------------------------------------
District of Columbia - 3.1%
District of Columbia RB (AAA/Aaa)
$2,100,000 4.30% 05/03/1999 $ 2,100,000
----------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $4,100,000) $ 4,100,000
----------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $90,244,286)(b) $90,707,654
----------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which value
exceeds cost $ 555,988
Gross unrealized loss for investments in which cost
exceeds value (92,620)
----------------------------------------------------------------------------------
Net unrealized gain $ 463,368
----------------------------------------------------------------------------------
</TABLE>
(a) Securities with "Put" features with resetting interest rates. Maturity
dates disclosed are the next interest reset dates.
(b) The amount stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
<TABLE>
-------------------------------------------------------------
<C> <S>
Investment
Abbreviations:
AMBAC --Insured by American Municipal Bond Assurance Corp.
COPS --Certificates of Participation
FGIC --Insured by Financial Guaranty Insurance Co.
FNMA --Insured by Federal National Mortgage Association
GO --General Obligation
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors Assurance
MF Hsg. --Multi-Family Housing
PCRB --Pollution Control Revenue Bond
RB --Revenue Bond
VRDN --Variable Rate Demand Note
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
GOLDMAN SACHS MUNICIPAL INCOME FUND
Performance Summary
April 30, 1999 (Unaudited)
The following graph shows the value as of April 30, 1999, of a $10,000 in-
vestment made (with the maximum sales charge of 4.5%) in Class A shares on
August 1, 1993 of the Goldman Sachs Municipal Income Fund. For comparative
purposes, the performance of the Fund's benchmark (the Lehman Brothers 15-
Year Municipal Bond Index ("Lehman 15-Year Muni Index")) is shown. This per-
formance 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 B, Class C, Institutional and Service shares will vary from Class A
due to differences in fees and loads.
Municipal Income Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested August 1, 1993 to
April 30, 1999.(a)
[GRAPH APPEARS HERE]
MUNICIPAL LEHMAN
INCOME 15-YEAR
DATE FUND MUNI INDEX
Aug-93 9,550 10,000
Aug-93 9,786 10,237
Sep-93 9,926 10,374
Oct-93 9,983 10,389
Nov-93 9,891 10,293
Dec-93 10,082 10,538
Jan-94 10,202 10,677
Feb-94 9,933 10,355
Mar-94 9,459 9,863
Apr-94 9,514 9,974
May-94 9,591 10,077
Jun-94 9,542 10,003
Jul-94 9,753 10,201
Aug-94 9,776 10,233
Sep-94 9,613 10,061
Oct-94 9,433 9,862
Nov-94 9,245 9,651
Dec-94 9,468 9,889
Jan-95 9,774 10,223
Feb-95 9,972 10,560
Mar-95 10,085 10,691
Apr-95 10,105 10,695
May-95 10,406 11,066
Jun-95 10,277 10,940
Jul-95 10,348 11,045
Aug-95 10,494 11,213
Sep-95 10,573 11,314
Oct-95 10,734 11,478
Nov-95 10,936 11,682
Dec-95 11,068 11,804
Jan-96 11,224 11,913
Feb-96 11,134 11,836
Mar-96 10,920 11,662
Apr-96 10,870 11,611
May-96 10,851 11,601
Jun-96 10,981 11,733
Jul-96 11,071 11,857
Aug-96 11,074 11,855
Sep-96 11,235 12,009
Oct-96 11,394 12,169
Nov-96 11,621 12,422
Dec-96 11,570 12,353
Jan-97 11,608 12,398
Feb-97 11,741 12,526
Mar-97 11,584 12,349
Apr-97 11,687 12,471
May-97 11,833 12,669
Jun-97 11,993 12,823
Jul-97 12,390 13,236
Aug-97 12,214 13,086
Sep-97 12,392 13,252
Oct-97 12,446 13,340
Nov-97 12,534 13,428
Dec-97 12,777 13,657
Jan-98 12,907 13,825
Feb-98 12,912 13,821
Mar-98 12,899 13,832
Apr-98 12,822 13,767
May-98 13,045 14,012
Jun-98 13,087 14,074
Jul-98 13,098 14,100
Aug-98 13,297 14,347
Sep-98 13,447 14,556
Oct-98 13,416 14,537
Nov-98 13,449 14,590
Dec-98 13,488 14,646
Jan-99 13,660 14,870
Feb-99 13,572 14,750
Mar-99 13,594 14,770
Apr-99 13,580 14,822
<TABLE>
<CAPTION>
Average Annual Total
Return through April 30,
1999 Since Inception Five Years One Year Six Months(b)
<S> <C> <C> <C> <C>
Class A (commenced July
20, 1993)
Excluding sales charges 6.13% 7.37% 5.91% 1.22%
Including sales charges 5.29% 6.39% 1.15% -3.34%
-----------------------------------------------------------------------------
Class B (commenced May 1,
1996)
Excluding contingent
deferred sales charges 6.89% n/a 5.12% 0.85%
Including contingent
deferred sales charges 5.89% n/a -0.09% -4.20%
-----------------------------------------------------------------------------
Class C (commenced August
15, 1997)
Excluding contingent
deferred sales charges 5.61% n/a 5.12% 0.85%
Including contingent
deferred sales charges 5.61% n/a 4.08% -0.16%
-----------------------------------------------------------------------------
Institutional Class
(commenced August 15,
1997) 6.76% n/a 6.26% 1.42%
-----------------------------------------------------------------------------
Service Class (commenced
August 15, 1997) 6.55% n/a 5.86% 1.23%
-----------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following the commencement of operations.
(b) Not annualized.
12
<PAGE>
GOLDMAN SACHS MUNICIPAL INCOME FUND
Statement of Investments
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - 93.2%
Arizona - 4.1%
Maricopa County MF Hsg. IDA RB (A)
$1,795,000 5.85% 01/01/2008 $ 1,959,386
Maricopa County United School District No. 41 RB (FSA)
(AAA)
2,500,000 6.25 07/01/2015 2,782,325
----------------------------------------------------------------------------------------------
$ 4,741,711
----------------------------------------------------------------------------------------------
California - 3.4%
Carlsbad Unified School District GO Series 1997 (FGIC) (AAA/Aaa)(a)
$2,700,000 4.83% 11/01/2014 $ 1,279,989
City of Anaheim Public Financing RB (AAA/Aaa)(a)
2,590,000 5.27 09/01/2032 447,034
Orange County Public Finance Authority Waste Management Systems RB
(AMBAC) (Aaa)
2,110,000 5.25 12/01/2013 2,221,872
----------------------------------------------------------------------------------------------
$ 3,948,895
----------------------------------------------------------------------------------------------
Colorado - 1.8%
Aurora Centertech Metropolitan District VRDN Series 1998 C (A+)
$2,000,000 4.88% 12/01/2028 $ 2,030,340
----------------------------------------------------------------------------------------------
Connecticut - 1.0%
Mashantucket Western Pequot Tribe Prerefunded RB Series A (BBB-)(b)
$1,000,000 6.50% 09/01/2005 $ 1,136,570
----------------------------------------------------------------------------------------------
Florida - 2.4%
Santa Rosa Bay Bridge Authority RB (BBB-)
$2,500,000 6.25% 07/01/2028 $ 2,722,575
----------------------------------------------------------------------------------------------
Illinois - 12.7%
Chicago Midway Airport RB (MBIA) (AAA/Aaa)
$2,500,000 5.50% 01/01/2010 $ 2,659,825
Illinois Education Facilities Authority RB for Midwestern University
Series 1998 B (A)
3,000,000 5.50 05/15/2028 3,025,860
Lake County Unified School District No. 116 GO (FSA) (AAA)
1,000,000 7.60 02/01/2013 1,285,010
2,000,000 7.60 02/01/2014 2,586,560
Lake, Cook, Kane and McHenry County's Community Unit School District No.
220 GO Bonds (FSA) (AAA/Aaa)
2,465,000 6.20 12/01/2012 2,840,493
Rock Island County School District No. 41 GO Series 1998 (FSA) (AAA)
2,300,000 5.13 12/01/2014 2,341,492
----------------------------------------------------------------------------------------------
$14,739,240
----------------------------------------------------------------------------------------------
Indiana - 3.7%
Indiana Bond Bank for Hendricks County RB (LOC) (AA-)
$1,420,000 6.00% 02/01/2012 $ 1,462,430
Indiana Transportation Airport Series A RB (AMBAC) (AAA/Aaa)
2,500,000 6.00 11/01/2011 2,826,575
----------------------------------------------------------------------------------------------
$ 4,289,005
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - (continued)
Kentucky - 0.9%
Nelson County Industrial Building Mabex Universal Corp. Project (AMT)
(LOC) (A3)
$1,000,000 6.50% 04/01/2005 $ 1,070,890
----------------------------------------------------------------------------------------------
Louisiana - 1.8%
Orleans Levee District Improvement Bonds (FSA) (AAA/Aaa)
$1,845,000 5.95% 11/01/2015 $ 2,036,917
----------------------------------------------------------------------------------------------
Maine - 0.5%
Maine Educational Loan Authority RB Series A-1 (AMT) (Aaa)
$ 570,000 6.80% 12/01/2007 $ 607,688
----------------------------------------------------------------------------------------------
Michigan - 7.7%
Michigan Higher Education Facility RB for the Thomas M. Cooley Law
School Series 1998 (LOC) (A+)
$4,000,000 5.40% 05/01/2018 $ 4,022,600
Oakland County Economic Development Corp. RB for Cranbrook Community Se-
ries 1998 (Aa2)
5,000,000 5.00 11/01/2017 4,934,300
----------------------------------------------------------------------------------------------
$ 8,956,900
----------------------------------------------------------------------------------------------
Mississippi - 4.5%
Mississippi State Capital Improvements GO Series A (AA/Aa3)
$5,000,000 5.40% 05/01/2011 $ 5,233,000
----------------------------------------------------------------------------------------------
Missouri - 1.9%
St. Louis Municipal Finance Leasehold Series A RB (LOC) (A/Aa3)
$2,100,000 5.30% 07/15/2002 $ 2,168,250
----------------------------------------------------------------------------------------------
New Mexico - 4.8%
New Mexico Finance Authority Anticipation RB for Federal Highway Grant
Series 1998 A (AMBAC) (AAA/Aaa)
$2,100,000 5.25% 09/01/2014 $ 2,169,174
Santa Fe County Correctional System RB (FSA) (AAA/Aaa)
3,000,000 6.00 02/01/2027 3,389,580
----------------------------------------------------------------------------------------------
$ 5,558,754
----------------------------------------------------------------------------------------------
New York - 8.8%
Babylon Waste Facilities GO Series 1993 (FGIC) (AAA/Aaa)
$3,500,000 9.00% 08/01/2011 $ 4,908,015
New York City Municipal Water Finance Authority Series B (MBIA)
(AAA/Aaa)
3,000,000 5.50 06/15/2027 3,091,470
New York State Dormitory RB for Department of Health Series 1996 (MBIA)
(AAA)
2,000,000 5.63 07/01/2012 2,144,500
----------------------------------------------------------------------------------------------
$10,143,985
----------------------------------------------------------------------------------------------
North Dakota - 1.9%
Mercer County PCRB for Basin Electric & Power 2nd Series (AMBAC)
(AAA/Aaa)
$2,000,000 6.05% 01/01/2019 $ 2,189,100
----------------------------------------------------------------------------------------------
Ohio - 0.5%
Cuyahoga County for Rock & Roll Hall of Fame RB
$600,000 5.45% 12/01/2005 $ 617,166
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
GOLDMAN SACHS MUNICIPAL INCOME FUND
Statement of Investments
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
Debt Obligations - (continued)
<S> <C> <C> <C>
Pennsylvania - 10.2%
Parkland School District GO Series 1998 (FGIC) (AAA/Aaa)
$3,000,000 5.00% 09/01/2013 $ 3,040,950
Pennsylvania Higher Education RB for University of Pennsylvania Series
1996 B (AA/A1)
2,900,000 5.88 01/01/2015 3,052,453
Pennsylvania Higher Education RB for University of Pennsylvania Health
Services Series 1998 A (MBIA) (AAA/Aaa)
2,040,000 5.38 01/01/2014 2,143,469
Philadelphia Gas Works RB Series 1998 B (FSA) (AAA/Aaa)
3,420,000 5.38 07/01/2015 3,546,985
-----------------------------------------------------------------------------------------------
$ 11,783,857
-----------------------------------------------------------------------------------------------
Tennessee - 1.3%
McMinnville Housing Authority RB (A2)
$1,375,000 6.00% 10/01/2009 $ 1,464,581
-----------------------------------------------------------------------------------------------
Texas - 14.5%
Boerne Independent School District Capital Appreciation GO Series 1999
(Aaa)(a)
$3,285,000 5.20% 02/01/2022 $ 998,016
Grapevine-Colleyville Independent School District Capital Appreciation GO
Series 1998 (AAA/Aaa)(a)
1,000,000 4.96 08/15/2013 494,870
2,000,000 5.01 08/15/2014 935,200
4,275,000 5.08 08/15/2015 1,877,965
Houston Water and Sewer Systems Capital Appreciation RB Series 1998 A
(FSA) (AAA/Aaa)(a)
10,000,000 5.22 12/01/2020 3,243,300
Lago Vista Independent School District Refunding Bonds Series 1997 (Aaa)
1,000,000 5.50 08/15/2027 1,028,800
Lubbock Health Facilities Development Corp. RB for St. Josephs Health
Systems Series 1998 (AA/Aa3)
5,000,000 5.25 07/01/2017 5,014,350
Tarrant County Health Facilities Development Corp. RB (MBIA) (AAA/Aaa)
3,000,000 5.75 02/15/2015 3,273,930
-----------------------------------------------------------------------------------------------
$ 16,866,431
-----------------------------------------------------------------------------------------------
Washington - 4.8%
Chelan County Public Utility RB (MBIA) (AAA/Aaa)
$2,500,000 6.35% 07/01/2028 $ 2,809,500
Washington State Public Power Supply System Series A RB (AMBAC) (AAA/Aaa)
2,500,000 5.70 07/01/2011 2,692,500
-----------------------------------------------------------------------------------------------
$ 5,502,000
-----------------------------------------------------------------------------------------------
TOTAL DEBT OBLIGATIONS
(cost $104,773,054) $107,807,855
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
Short-Term Obligations(c) - 5.1%
<S> <C> <C> <C>
California - 2.5%
Fontana COPS VRDN for Empire Center Project Series 1991 (BBB)
$2,900,000 5.10% 05/06/1999 $ 2,900,000
------------------------------------------------------------------------------------------------
Georgia - 1.6%
Burke County PCRB for Georgia Power Co. Fourth Series (A/A2)
$1,900,000 4.40% 05/03/1999 $ 1,900,000
------------------------------------------------------------------------------------------------
Texas - 1.0%
Harris County Health Facilities Development Corp. RB for Memorial
Hospital (AA)
$1,100,000 4.30% 05/03/1999 $ 1,100,000
------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(cost $5,900,000) $ 5,900,000
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $110,673,054)(d) $113,707,855
------------------------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost $ 3,249,359
Gross unrealized loss for investments in which
cost exceeds value (214,558)
------------------------------------------------------------------------------------------------
Net unrealized gain $ 3,034,801
------------------------------------------------------------------------------------------------
</TABLE>
(a) These securities are issued with a zero coupon. The interest rate
disclosed for these securities represents effective yield to maturity.
(b) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. Such securities may be resold, normally to qualified
institutional buyers in transactions exempt from registration. Total
market value of Rule 144A securities amounted to $1,136,570 as of April
30, 1999.
(c) Securities with "Put" features with resetting interest rates. Maturity
dates disclosed are the next interest reset dates.
(d) The amount stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
------------------------------------------------------------------------------
<TABLE>
<C> <S>
Investment Abbreviations:
AMBAC --Insured by American Municipal Bond Assurance Corp.
AMT --Alternative Minimum Tax
COPS --Certificates of Participation
FGIC --Insured by Financial Guaranty Insurance Co.
FSA --Insured by Financial Security Assurance Co.
GO --General Obligation
IDA --Industrial Development Authority
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors Assurance
MF Hsg. --Multi-Family Housing
PCRB --Pollution Control Revenue Bond
RB --Revenue Bond
VRDN --Variable Rate Demand Note
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Statements of Assets and Liabilities
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Short Duration Municipal
Tax-Free Fund Income Fund
Assets:
<S> <C> <C>
Investment in securities, at value (identified
cost $90,244,286 and $110,673,054) $90,707,654 $113,707,855
Cash 195,093 336,893
Receivables:
Investment securities sold -- 3,129,725
Interest 1,364,096 1,870,055
Fund shares sold 1,125,247 118,752
Other assets 25,316 10,975
------------------------------------------------------------------------------
Total assets 93,417,406 119,174,255
------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased -- 3,070,533
Income distribution 38,655 72,060
Fund shares repurchased 25,459,290 143,529
Amounts owed to affiliates 46,094 123,236
Accrued expenses and other liabilities 49,544 59,786
------------------------------------------------------------------------------
Total liabilities 25,593,583 3,469,144
------------------------------------------------------------------------------
Net Assets:
Paid-in capital 70,945,890 112,349,693
Accumulated undistributed (distributions in
excess of) net investment income 22,264 (3,343)
Accumulated net realized gain (loss) on
investment transactions and futures (3,607,699) 323,960
Net unrealized gain on investments 463,368 3,034,801
------------------------------------------------------------------------------
NET ASSETS $67,823,823 $115,705,111
------------------------------------------------------------------------------
Net asset value, offering and redemption price
per share(a)
Class A $10.16 $15.23
Class B $10.16 $15.23
Class C $10.16 $15.23
Institutional $10.16 $15.23
Administration $10.17 --
Service $10.16 $15.25
------------------------------------------------------------------------------
Shares outstanding:
Class A 1,935,739 6,095,132
Class B 150,379 581,059
Class C 308,166 324,485
Institutional 4,099,958 596,119
Administration 6,621 --
Service 174,280 109
------------------------------------------------------------------------------
Total shares outstanding, $.001 par value
(unlimited number of shares authorized) 6,675,143 7,596,904
------------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share (NAV per share multiplied by
1.0204 and 1.0471) for Class A shares of Short Duration Tax-Free and
Municipal Income is $10.37 and $15.95, respectively. At redemption, Class B
and Class C shares may be subject to a contingent sales charge, assessed on
the amount equal to the lesser of the current net asset value or the
original purchase price of the shares.
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Statements of Operations
For the Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Short Duration Municipal
Tax-Free Fund Income Fund
<S> <C> <C>
Investment income:
Interest $1,866,664 $ 2,863,000
-----------------------------------------------------------------------------
Total income 1,866,664 2,863,000
-----------------------------------------------------------------------------
Expenses:
Management fees 180,574 311,361
Distribution and service fees(a) 47,089 173,881
Transfer agent fees(b) 37,159 101,325
Custodian fees 32,673 25,574
Registration fees 23,465 15,326
Professional fees 32,635 24,821
Trustee fees 5,334 5,334
Administration share fees 158 --
Service share fees 4,941 --
Other 3,238 5,909
-----------------------------------------------------------------------------
Total expenses 367,266 663,531
-----------------------------------------------------------------------------
Less-expenses reimbursed and fees waived by
Goldman Sachs (119,091) (103,001)
-----------------------------------------------------------------------------
Net expenses 248,175 560,530
-----------------------------------------------------------------------------
NET INVESTMENT INCOME 1,618,489 2,302,470
-----------------------------------------------------------------------------
Realized and unrealized gain (loss) on invest-
ment and futures transactions:
Net realized gain from:
Investment transactions 47,313 854,661
Futures transactions -- 43,716
Net change in unrealized gain on:
Investments (180,091) (1,815,837)
Futures -- (24,920)
-----------------------------------------------------------------------------
Net realized and unrealized loss on investment
and futures transactions (132,778) (942,380)
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $1,485,711 $ 1,360,090
-----------------------------------------------------------------------------
</TABLE>
(a) Class A, Class B and Class C had distribution and service fees of
$26,752, $6,520 and $13,817 and $116,886, $38,779, and $18,216 for Short
Duration Tax-Free and Municipal Income Funds, respectively.
(b) Class A, Class B, Class C, Institutional Class, Administration Class
(Short Duration Tax Free only), and Service Class had transfer agent fees
of $20,332, $1,239, $2,625, $12,543, $25, and $395 and $88,833, $7,368,
$3,461, $1,663, and $0 for Short Duration Tax-Free and Municipal Income
Funds, respectively.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Statement of Changes in Net Assets
For the Six Months Ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Short Duration Municipal
Tax-Free Fund Income Fund
<S> <C> <C>
From operations:
Net investment income $ 1,618,489 $ 2,302,470
Net realized gain on investment and futures 47,313 898,377
Net change in unrealized gain on investments
and futures (180,091) (1,840,757)
----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,485,711 1,360,090
----------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A shares (364,993) (2,038,089)
Class B shares (18,479) (139,440)
Class C shares (36,700) (65,254)
Institutional shares (1,203,010) (198,045)
Administration shares (2,298) --
Service shares (32,791) (35)
In excess of net investment income
Class A shares -- (2,792)
Class B shares -- (191)
Class C shares -- (89)
Institutional shares -- (271)
Administration shares -- --
Service shares -- --
From net realized gain on investment and
futures transactions
Class A shares -- (577,454)
Class B shares -- (47,276)
Class C shares -- (18,715)
Institutional shares -- (49,863)
Administration shares -- --
Service shares -- (10)
----------------------------------------------------------------------------
Total distributions to shareholders (1,658,271) (3,137,524)
----------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 44,960,139 27,020,101
Reinvestment of dividends and distributions 1,493,514 2,431,292
Cost of shares repurchased (62,300,396) (18,866,949)
----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from share transactions (15,846,743) 10,584,444
----------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) (16,019,303) 8,807,010
----------------------------------------------------------------------------
Net assets:
Beginning of period 83,843,126 106,898,101
----------------------------------------------------------------------------
End of period $ 67,823,823 $115,705,111
----------------------------------------------------------------------------
Accumulated undistributed (distributions in
excess of) net investment income $ 22,264 $ (3,343)
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Statements of Changes in Net Assets
For the Year Ended October 31, 1998
<TABLE>
<CAPTION>
Short
Duration
Tax-Free Municipal
Fund Income Fund
<S> <C> <C>
From operations:
Net investment income $ 1,788,889 $ 3,571,600
Net realized gain from investment and futures
transactions 269,867 142,526
Net change in unrealized gain on investments and
futures 263,420 2,435,958
-----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 2,322,176 6,150,084
-----------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A shares (420,239) (3,301,234)
Class B shares (9,424) (125,487)
Class C shares (36,571) (41,577)
Institutional shares (1,297,489) (34,610)
Administration shares (9,873) --
Service shares (70,477) (64)
From net realized gain on investment and futures
transactions
Class A shares -- (123,858)
Class B shares -- (3,541)
Class C shares -- (467)
Institutional shares -- (658)
Administration shares -- --
Service shares -- (3)
-----------------------------------------------------------------------------
Total distributions to shareholders (1,844,073) (3,631,499)
-----------------------------------------------------------------------------
From share transactions:
Net proceeds from sales of shares 79,620,422 50,919,586
Reinvestment of dividends and distributions 1,551,849 2,344,160
Cost of shares repurchased (32,887,113) (15,670,581)
-----------------------------------------------------------------------------
Net increase in net assets resulting from share
transactions 48,285,158 37,593,165
-----------------------------------------------------------------------------
TOTAL INCREASE 48,763,261 40,111,750
-----------------------------------------------------------------------------
Net assets:
Beginning of year 35,079,865 66,786,351
-----------------------------------------------------------------------------
End of year $83,843,126 $106,898,101
-----------------------------------------------------------------------------
Accumulated undistributed net investment income $ 62,046 $ 138,393
-----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Notes to Financial Statements
April 30, 1999 (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 the Goldman Sachs Short Duration
Tax-Free Fund (Short Duration Tax-Free) and the Goldman Sachs Municipal In-
come Fund (Municipal Income), collectively, "the Funds" or individually a
"Fund." Short Duration Tax-Free is a diversified portfolio offering six clas-
ses of shares -- Class A, Class B, Class C, Institutional, Administration,
and Service. Municipal Income, also a diversified portfolio, offers five
classes of shares -- Class A, Class B, Class C, Institutional and Service.
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. Actual results
could differ from estimates and assumptions.
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 as of the trade date. Realized gains and losses on sales of portfo-
lio securities are calculated using the identified cost basis. Interest in-
come is recorded on the basis of interest accrued. Market premiums resulting
from the purchase of long-term debt securities are amortized to interest in-
come over the life of the security with a corresponding decrease in the cost
basis of the security.
C. 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 tax-ex-
empt and taxable income and capital gains to its shareholders. Accordingly,
no federal tax provisions 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.
The Short Duration Tax-Free Fund, at its most recent tax year-end of Decem-
ber 31, 1998 had approximately the following amount of capital loss
carryforwards for U.S. federal tax purposes. This amount is available to be
carried forward to offset future capital gains to the extent permitted by ap-
plicable laws or regulations.
<TABLE>
<CAPTION>
Years of
Fund Amount Expiration
-----------------------------------------------
<S> <C> <C>
Short Duration Tax-Free $3,655,000 2002-2003
-----------------------------------------------
</TABLE>
D. Expenses -- Expenses incurred by the Trust that do not specifically relate
to an individual Fund of the Trust are allocated to the Funds on a straight-
line or pro rata basis depending upon the nature of the expense.
Class A, Class B and Class C shareholders of the Funds bear all expenses
and fees relating to their respective Distribution and Service plans. Share-
holders of Service and Administration shares bear all expenses and fees paid
to service organizations. Each class of shares of the Funds separately bears
its respective class-specific transfer agency fees.
19
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Notes to Financial Statements (continued)
April 30, 1999 (Unaudited)
E. Futures Contracts -- The Funds may enter into futures transactions in or-
der to hedge against changes in interest rates, securities prices or to seek
to increase total return.
Upon entering into a futures contract, the Funds are required to deposit
with a broker an amount of cash or securities equal to the minimum "initial
margin" requirement of the associated futures exchange. Subsequent payments
for futures contracts ("variation margin") are paid or received by the Funds
daily, dependent on the daily fluctuations in the value of the contracts, and
are recorded for financial reporting purposes as unrealized gains or losses.
When contracts are closed, the Funds realize a gain or loss which is 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 directly correlate with changes in the value of the under-
lying securities. This risk may decrease the effectiveness of the Funds'
hedging strategies and potentially result in a loss.
F. Option Accounting Principles -- Upon the purchase of a call option or a
protective put option by the Funds, the premium paid is recorded as an in-
vestment and subsequently marked-to-market to reflect the current market
value of the option. If an option which the Funds have purchased expires on
the stipulated expiration date, the Funds will realize a loss in the amount
of the cost of the option. If the Funds enter into a closing sale transac-
tion, the Funds will realize a gain or loss, depending on whether the sale
proceeds for the closing sale transaction are greater or less than the cost
of the option. If the Funds exercise a purchased put option, the Funds will
realize a gain or loss from the sale of the underlying security, and the pro-
ceeds from such sale will be decreased by the premium originally paid. If the
Funds exercise a purchased call option, the cost of the security which the
Funds purchase upon exercise will be increased by the premium originally
paid.
3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as each Fund's investment ad-
viser pursuant to Investment Management Agreements (the "Agreements"). Under
the Agreements, GSAM, subject to the general supervision of the Trust's Board
of Trustees, manages the Funds' portfolios. As compensation for the services
rendered pursuant to the Agreements and the assumption of the expenses re-
lated thereto and administering the Funds' business affairs, including pro-
viding facilities, GSAM is entitled to a fee, computed daily and payable
monthly at an annual rate equal to .40% and .55% of average daily net assets
of Short Duration Tax-Free and Municipal Income, respectively. GSAM has vol-
untarily agreed to waive a portion of its management fee equal annually to
.05% of the average daily net assets of each Fund. For the period ended April
30, 1999, GSAM waived approximately $23,000 and $28,000 of its management fee
attributable to the Short Duration Tax-Free and Municipal Income Funds, re-
spectively. GSAM may discontinue or modify these waivers in the future at its
discretion.
GSAM has voluntarily agreed to limit "Other Expenses" (excluding manage-
ment, distribution and service fees, transfer agent fees, Administration and
Service share fees, taxes, interest, brokerage, litigation, indemnification
costs and other extraordinary expenses) to the extent such expenses exceeded,
on an annual basis, .00% of the average daily net assets of each Fund. For
the period ended April 30, 1999, Goldman Sachs reimbursed approximately
$95,000 and $75,000 to Short Duration Tax-Free and Municipal Income, respec-
tively.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to
a Distribution Agreement. 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 $13,000 and $31,000 for the
period ended April 30, 1999 for Short Duration Tax-Free and Municipal Income,
respectively.
20
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
The Trust, on behalf of each Fund, has adopted Distribution and Service
Plans. Under the Distribution and Service Plans, Goldman Sachs and/or Autho-
rized Dealers are entitled to a monthly fee from each fund for distribution
and shareholder maintenance services equal, on an annual basis, to .25%,
1.00% and 1.00% of the average daily net assets attributable to Class A,
Class B and Class C shares, respectively. Goldman Sachs has voluntarily
agreed to waive a portion of the distribution and Service Fees equal to .15%
of the average daily net assets attributable to the Class B shares of Short
Duration Tax-Free. For the period ended April 30, 1999, Goldman Sachs has
waived approximately $1,000 of the distribution and service fees attributable
to the Class B shares of Short Duration Tax-Free. Goldman Sachs may discon-
tinue or modify this waiver in the future at its discretion.
Goldman Sachs also serves as the Transfer Agent of the Funds for a fee.
Fees charged for such transfer agency services are calculated daily and pay-
able monthly at an annual rate as follows: .19% of average daily net assets
for Class A, Class B and Class C shares and .04% of average daily net assets
for Institutional, Service and Administration shares.
The Trust, on behalf of the Funds, has adopted Service Plans. In addition,
the Trust, on behalf of Short Duration Tax-Free, has adopted an Administra-
tion Plan. These plans allow for Administration shares and Service shares,
respectively, to compensate service organizations for providing varying lev-
els of account administration and shareholder liaison services to their cus-
tomers who are beneficial owners of such shares. The Administration and
Service Plans provide for compensation to the service organizations in an
amount up to, on an annual basis, .25% and .50%, respectively, of the average
daily net asset value of each share class. On or about July 15, 1999, Admin-
istration class shares will be terminated.
At April 30, 1999, the amounts owed to affiliates were as follows (in thou-
sands):
<TABLE>
<CAPTION>
Over Reimbursement
Distribution Transfer of "Other
Fund Management and Service Agent Expenses"
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short Duration Tax-Free $28 $ 8 $ 6 $ 4
-----------------------------------------------------------------------------
Municipal Income 48 30 17 28
-----------------------------------------------------------------------------
</TABLE>
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of long-term securities for the
six months ended April 30, 1999, were as follows:
<TABLE>
<CAPTION>
Sales or
Fund Purchases Maturities
-------------------------------------------------
<S> <C> <C>
Short Duration Tax-Free $75,354,649 $57,056,634
-------------------------------------------------
Municipal Income 46,614,413 42,645,545
-------------------------------------------------
</TABLE>
For the six months ended April 30, 1999, Municipal Income incurred commis-
sion expenses of approximately $300 in connection with futures contracts en-
tered into with Goldman Sachs.
5. LINE OF CREDIT FACILITY
The Funds participated in a $250,000,000 uncommitted, unsecured revolving
line of credit facility. Under the most restrictive arrangement, each Fund
must have owned securities having a market value in excess of 300% of the to-
tal bank borrowings. Effective April 30, 1999, the Funds now participate in a
$250,000,000 uncommitted and a $250,000,000 committed, unsecured revolving
line of credit facility. Under the most restrictive arrangement, each Fund
must own securities having a market value in excess of 400% of the total bank
borrowings. These facilities are to be used solely for temporary or emergency
purposes. The interest rate on borrowings is based on the Federal Funds rate.
The committed facility also requires a fee to be paid by the Funds based on
the amount of the commitment which has not been utilized. During the six
months ended April 30, 1999, the Funds did not have any borrowings under any
of these facilities.
21
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Notes to Financial Statements (continued)
April 30, 1999 (Unaudited)
6. SUMMARY OF SHARE TRANSACTIONS
Share activity for the six months ended April 30, 1999 is as follows:
<TABLE>
<CAPTION>
Short Duration Tax-Free
Fund Municipal Income Fund
---------------------------------------------------
Shares Dollars Shares Dollars
---------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold 1,483,664 $ 15,104,037 1,182,978 $ 18,188,294
Reinvestment of dividends
and distributions 28,855 293,742 131,109 2,012,130
Shares repurchased (1,528,489) (15,556,015) (1,109,998) (17,058,957)
---------------------------------------------------
(15,970) (158,236) 204,089 3,141,467
------------------------------------------------------------------------------
Class B Shares
Shares sold 92,066 936,972 185,688 2,858,299
Reinvestment of dividends
and distributions 1,416 14,409 8,076 123,924
Shares repurchased (38,764) (394,851) (47,113) (724,451)
---------------------------------------------------
54,718 556,530 146,651 2,257,772
------------------------------------------------------------------------------
Class C Shares
Shares sold 277,294 2,822,214 150,031 2,301,034
Reinvestment of dividends
and distributions 3,234 32,906 4,169 63,977
Shares repurchased (193,905) (1,973,298) (14,669) (225,534)
---------------------------------------------------
86,623 881,822 139,531 2,139,477
------------------------------------------------------------------------------
Institutional Shares
Shares sold 2,538,262 25,791,958 239,341 3,672,474
Reinvestment of dividends
and distributions 109,976 1,119,250 15,065 231,216
Shares repurchased (4,209,097) (42,795,855) (56,018) (858,007)
---------------------------------------------------
(1,560,859) (15,884,647) 198,388 3,045,683
------------------------------------------------------------------------------
Administration Shares
Shares sold 130 1,467 -- --
Reinvestment of dividends
and distributions 138 1,401 -- --
Shares repurchased (45,184) (459,577) -- --
---------------------------------------------------
(44,916) (456,709) -- --
------------------------------------------------------------------------------
Service Shares
Shares sold 29,824 303,491 -- --
Reinvestment of dividends
and distributions 3,126 31,806 3 45
Shares repurchased (110,175) (1,120,800) -- --
---------------------------------------------------
(77,225) (785,503) 3 45
------------------------------------------------------------------------------
NET INCREASE (DECREASE) (1,557,629) $(15,846,743) 688,662 $ 10,584,444
------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Share activity for the year ended October 31, 1998 is as follows:
<TABLE>
<CAPTION>
Short Duration Tax-
Free Fund Municipal Income Fund
-----------------------------------------------
Shares Dollars Shares Dollars
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold 2,956,094 $29,981,070 2,331,248 $35,680,920
Reinvestment of dividends
and distributions 36,408 369,107 144,878 2,217,736
Shares repurchased (1,439,779) (14,600,893) (890,339) (13,671,669)
-----------------------------------------------
1,552,723 15,749,284 1,585,787 24,226,987
---------------------------------------------------------------------------
Class B Shares
Shares sold 113,668 1,154,981 363,405 5,570,533
Reinvestment of dividends
and distributions 716 7,572 4,818 73,917
Shares repurchased (29,252) (296,080) (50,499) (771,483)
-----------------------------------------------
85,132 866,473 317,724 4,872,967
---------------------------------------------------------------------------
Class C Shares
Shares sold 260,602 2,643,664 236,415 3,613,212
Reinvestment of dividends
and distributions 3,289 33,332 2,421 37,200
Shares repurchased (42,508) (430,853) (62,563) (957,474)
-----------------------------------------------
221,383 2,246,143 176,273 2,692,938
---------------------------------------------------------------------------
Institutional Shares
Shares sold 4,094,699 41,604,670 391,005 6,054,921
Reinvestment of dividends
and distributions 105,149 1,065,181 988 15,243
Shares repurchased (1,399,986) (14,177,195) (17,697) (269,955)
-----------------------------------------------
2,799,862 28,492,656 374,296 5,800,209
---------------------------------------------------------------------------
Administration Shares
Shares sold 45,558 460,529 -- --
Reinvestment of dividends
and distributions 948 9,613 -- --
Shares repurchased (2,644) (26,596) -- --
-----------------------------------------------
43,862 443,546 -- --
---------------------------------------------------------------------------
Service Shares
Shares sold 373,021 3,775,508 -- --
Reinvestment of dividends
and distributions 6,622 67,044 4 64
Shares repurchased (331,731) (3,355,496) -- --
-----------------------------------------------
47,912 487,056 4 64
---------------------------------------------------------------------------
NET INCREASE 4,750,874 $48,285,158 2,454,084 $37,593,165
---------------------------------------------------------------------------
</TABLE>
23
<PAGE>
GOLDMAN SACHS SHORT DURATION TAX-FREE 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
and unrealized From net Net
Net asset gain (loss) In excess realized gain increase
value, Net on investment From net of net on investment (decrease)
beginning investment and futures investment investment and futures in net
of period income transactions income income transactions asset value
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $10.19 $0.17 $(0.03) $(0.17) $-- $ -- $(0.03)
1999 - Class B Shares 10.18 0.14 (0.02) (0.14) -- -- (0.02)
1999 - Class C Shares 10.18 0.14 (0.02) (0.14) -- -- (0.02)
1999 - Institutional
Shares 10.18 0.19 (0.02) (0.19) -- -- (0.02)
1999 - Administration
Shares 10.18 0.18 (0.01) (0.18) -- -- (0.01)
1999 - Service Shares 10.18 0.16 (0.02) (0.16) -- -- (0.02)
FOR THE YEARS ENDED OCTOBER 31,
1998 - Class A Shares 10.08 0.36(e) 0.13(e) (0.38) -- -- 0.11
1998 - Class B Shares 10.08 0.30(e) 0.12(e) (0.32) -- -- 0.10
1998 - Class C Shares 10.07 0.28(e) 0.14(e) (0.31) -- -- 0.11
1998 - Institutional
Shares 10.07 0.39(e) 0.13(e) (0.41) -- -- 0.11
1998 - Administration
Shares 10.07 0.36(e) 0.13(e) (0.38) -- -- 0.11
1998 - Service Shares 10.07 0.34(e) 0.13(e) (0.36) -- -- 0.11
---------------------------------------------------------------------------------------------------------------
1997 - Class A Shares
(commenced May 1) 9.94 0.20(e) 0.14(e) (0.20) -- -- 0.14
1997 - Class B Shares
(commenced May 1) 9.94 0.16(e) 0.14(e) (0.16) -- -- 0.14
1997 - Class C Shares
(commenced August 15) 10.04 0.07(e) 0.03(e) (0.07) -- -- 0.03
1997 - Institutional
Shares 9.96 0.42(e) 0.11(e) (0.42) -- -- 0.11
1997 - Administration
Shares 9.96 0.39(e) 0.11(e) (0.39) -- -- 0.11
1997 - Service Shares 9.97 0.37(e) 0.10(e) (0.37) -- -- 0.10
---------------------------------------------------------------------------------------------------------------
1996 - Institutional
Shares 9.94 0.42(e) 0.02(e) (0.42) -- -- 0.02
1996 - Administration
Shares 9.94 0.39(e) 0.02(e) (0.39) -- -- 0.02
1996 - Service Shares 9.95 0.37(e) 0.02(e) (0.37) -- -- 0.02
---------------------------------------------------------------------------------------------------------------
1995 - Institutional
Shares 9.79 0.42(e) 0.15(e) (0.42) -- -- 0.15
1995 - Administration
Shares 9.79 0.40(e) 0.15(e) (0.40) -- -- 0.15
1995 - Service Shares 9.79 0.37(e) 0.16(e) (0.37) -- -- 0.16
---------------------------------------------------------------------------------------------------------------
1994 - Institutional
Shares 10.23 0.38(e) (0.36)(e) (0.38) -- (0.08) (0.44)
1994 - Administration
Shares 10.23 0.35(e) (0.36)(e) (0.35) -- (0.08) (0.44)
1994 - Service Shares
(commenced September 20) 9.86 0.05(e) (0.07)(e) (0.05) -- -- (0.07)
---------------------------------------------------------------------------------------------------------------
</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) Calculated based on the average shares outstanding methodology.
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
<TABLE>
<CAPTION>
Ratios assuming no
voluntary waiver of
fees or expense
limitations
------------------------
Net Ratio of net Ratio of net
assets Ratio of investment Ratio of investment
Net asset at end of net expenses income expenses income Portfolio
value, Total period to average to average to average to average turnover
end of period return(b) (in 000s) net assets net assets net assets net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$10.16 1.42%(d) $19,676 0.79%(c) 3.32%(c) 1.05%(c) 3.06%(c) 68.53%(d)
10.16 1.21(d) 1,528 1.39(c) 2.77(c) 1.80(c) 2.36(c) 68.53(d)
10.16 1.14(d) 3,130 1.54(c) 2.57(c) 1.80(c) 2.31(c) 68.53(d)
10.16 1.72(d) 41,653 0.39(c) 3.75(c) 0.65(c) 3.49(c) 68.53(d)
10.17 1.69(d) 67 0.64(c) 3.57(c) 0.90(c) 3.31(c) 68.53(d)
10.16 1.46(d) 1,770 0.89(c) 3.22(c) 1.15(c) 2.96(c) 68.53(d)
10.19 4.97 19,881 0.71 3.54 1.74 2.51 140.72
10.18 4.25 974 1.31 3.06 2.27 2.10 140.72
10.18 4.19 2,256 1.46 2.82 2.27 2.01 140.72
10.18 5.25 57,647 0.45 3.92 1.26 3.11 140.72
10.18 4.99 525 0.70 3.58 1.51 2.77 140.72
10.18 4.73 2,560 0.95 3.44 1.76 2.63 140.72
------------------------------------------------------------------------------------------------------
10.08 3.39(d) 4,023 0.70(c) 3.81(c) 1.73(c) 2.78(c) 194.75
10.08 3.07(d) 106 1.30(c) 3.31(c) 2.23(c) 2.38(c) 194.75
10.07 0.97(d) 2 1.45(c) 2.60(c) 2.23(c) 1.82(c) 194.75
10.07 5.40 28,821 0.45 4.18 1.23 3.40 194.75
10.07 5.14 77 0.70 3.91 1.48 3.13 194.75
10.07 4.77 2,051 0.95 3.66 1.73 2.88 194.75
------------------------------------------------------------------------------------------------------
9.96 4.50 34,814 0.45 4.21 1.01 3.65 231.65
9.96 4.24 48 0.70 3.96 1.26 3.40 231.65
9.97 3.98 695 0.95 3.74 1.51 3.18 231.65
------------------------------------------------------------------------------------------------------
9.94 5.98 58,389 0.45 4.31 0.77 3.99 259.52
9.94 5.76 46 0.70 4.14 1.02 3.82 259.52
9.95 5.59 454 0.95 3.87 1.27 3.55 259.52
------------------------------------------------------------------------------------------------------
9.79 0.17 83,704 0.45 3.74 0.61 3.58 354.00
9.79 (0.11) 3,866 0.70 3.51 0.86 3.35 354.00
9.79 (0.32)(d) 440 0.95(c) 4.30(c) 1.11(c) 4.14(c) 354.00
------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
GOLDMAN SACHS MUNICIPAL 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
and unrealized net realized Net
Net asset gain (loss) on From In excess gain on increase
value, Net investment and net of net investment (decrease)
beginning investment futures investment investment and futures in net
of period income transactions income income transactions asset value
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $15.47 $0.31 $(0.13) $(0.33) $-- $(0.09) $(0.24)
1999 - Class B Shares 15.47 0.26 (0.13) (0.28) -- (0.09) (0.24)
1999 - Class C Shares 15.47 0.27 (0.14) (0.28) -- (0.09) (0.24)
1999 - Institutional
Shares 15.47 0.34 (0.13) (0.36) -- (0.09) (0.24)
1999 - Service Shares 15.48 0.32 (0.14) (0.32) -- (0.09) (0.23)
FOR THE YEARS ENDED OCTOBER 31,
1998 - Class A Shares 14.99 0.65 0.50 (0.64) -- (0.03) 0.48
1998 - Class B Shares 15.00 0.53 0.49 (0.52) -- (0.03) 0.47
1998 - Class C Shares 14.99 0.53 0.50 (0.52) -- (0.03) 0.48
1998 - Institutional
Shares 15.00 0.68 0.50 (0.68) -- (0.03) 0.47
1998 - Service Shares 14.99 0.64 0.49 (0.61) -- (0.03) 0.49
-------------------------------------------------------------------------------------------------------------
1997 - Class A Shares 14.37 0.67 0.62 (0.67) -- -- 0.62
1997 - Class B Shares 14.37 0.56 0.63 (0.56) -- -- 0.63
1997 - Class C Shares
(commenced August 15) 14.85 0.12 0.14 (0.12) -- -- 0.14
1997 - Institutional
Shares (commenced August
15) 14.84 0.15 0.16 (0.15) -- -- 0.16
1997 - Service Shares
(commenced August 15) 14.84 0.14 0.15 (0.14) -- -- 0.15
-------------------------------------------------------------------------------------------------------------
1996 - Class A Shares 14.17 0.65 0.20 (0.65) -- -- 0.20
1996 - Class B Shares
(commenced May 1) 14.03 0.27 0.34 (0.27) -- -- 0.34
-------------------------------------------------------------------------------------------------------------
1995 - Class A Shares 13.08 0.67 1.09 (0.67) -- -- 1.09
-------------------------------------------------------------------------------------------------------------
1994 - Class A Shares 14.64 0.73 (1.51) (0.73) -- (0.05) (1.56)
-------------------------------------------------------------------------------------------------------------
</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.
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
GOLDMAN SACHS MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
Ratios assuming no
voluntary waiver of fees
or expense limitations
---------------------------------
Ratio of net Ratio of net
Net assets Ratio of investment Ratio of investment
Net asset at end of net expenses income expenses income Portfolio
value, Total period to average to average to average to average turnover
end of period return(b) (in 000s) net assets net assets net assets net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$15.23 1.22%(d) $92,830 0.94%(c) 4.11%(c) 1.12%(c) 3.93%(c) 38.90%(d)
15.23 0.85(d) 8,851 1.69(c) 3.36(c) 1.87(c) 3.18(c) 38.90(d)
15.23 0.85(d) 4,943 1.69(c) 3.36(c) 1.87(c) 3.18(c) 38.90(d)
15.23 1.42(d) 9,079 0.54(c) 4.53(c) 0.72(c) 4.35(c) 38.90(d)
15.25 1.23(d) 2 1.04(c) 4.26(c) 1.22(c) 4.08(c) 38.90(d)
15.47 7.79 91,158 0.87 4.25 1.64 3.48 56.51
15.47 6.91 6,722 1.62 3.44 2.16 2.90 56.51
15.47 6.98 2,862 1.62 3.38 2.16 2.84 56.51
15.47 8.00 6,154 0.58 4.41 1.12 3.87 56.51
15.48 7.68 2 1.08 4.21 1.62 3.67 56.51
- ----------------------------------------------------------------------------------------------------------------------
14.99 9.23 64,553 0.85 4.60 1.62 3.83 153.12
15.00 8.48 1,750 1.60 3.74 2.12 3.22 153.12
14.99 1.75(d) 130 1.60(c) 3.24(c) 2.12(c) 2.72(c) 153.12
15.00 2.10(d) 351 0.60(c) 4.41(c) 1.12(c) 3.89(c) 153.12
14.99 1.93(d) 2 1.10(c) 4.24(c) 1.62(c) 3.72(c) 153.12
- ----------------------------------------------------------------------------------------------------------------------
14.37 6.13 52,267 0.85 4.58 1.55 3.88 344.13
14.37 4.40(d) 255 1.60(c) 3.55(c) 2.05(c) 3.10(c) 344.13
- ----------------------------------------------------------------------------------------------------------------------
14.17 13.79 53,797 0.76 4.93 1.49 4.20 335.55
- ----------------------------------------------------------------------------------------------------------------------
13.08 (5.51) 47,373 0.45 5.28 1.55 4.18 357.54
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs Tax-Free Funds
In general, tax-free fixed income investments have the potential to offer more
attractive after-tax yields than many taxable fixed income investments.
Goldman Sachs Tax-Free Funds offer investors access to the benefits associated
with tax-free investing. The Funds seek high levels of current income exempt
from regular federal income tax, primarily through investments in municipal
securities.
Target Your Needs
The Goldman Sachs Tax-Free 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
[ART APPEARS HERE]
- -------------------------------------------------------------------------------
For More Information
To learn more about Goldman Sachs Tax-Free Funds and other Goldman Sachs
Funds, call your investment professional today.
THE GOLDMAN SACHS ADVANTAGE
When you invest in Goldman Sachs Tax-Free Funds, you can capitalize on Goldman
Sachs' 130-year history of excellence while benefiting from the firm's
leadership in three areas:
Global Resources
With professionals based throughout the Americas, Europe and Asia, Goldman Sachs
possesses first-hand knowledge of the world's markets and economies.
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.
Risk Management
Goldman, Sachs & Co. excels in understanding, monitoring and managing investment
risk -- a process that is integrated into all Goldman Sachs investment
products.
*The exchange privilege is subject to termination and its terms are subject to
change.
<PAGE>
[GOLDMAN SACHS ADDRESS APPEARS HERE]
TRUSTEES
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
John P. McNulty
Mary P. McPherson
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
OFFICERS
Douglas C. Grip, President
Jesse H. Cole, Vice President
James A. Fitzpatrick, Vice President
Anne E. Marcel, Vice President
John M. Perlowski, Treasurer
Adrien E. Deberghes, Jr., Assistant Treasurer
Philip V. Giuca, Jr., Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Valerie A. Zondorak, Assistant Secretary
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT
Investment Adviser
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. is the distributor of the Fund.
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 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.
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 investments in higher rated fixed income securities.
Goldman Sachs High Yield Fund's, Goldman Sachs Global Income 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 Fund may incur losses because of changes in
securities prices expressed in local currencies, movements in exchange rates, or
both.
(c)Copyright 1999 Goldman, Sachs & Co. All rights reserved.
Date of first use: June 30, 1999
FI/TFSAR / 11K / 6-99
