<PAGE>
Goldman Sachs Funds
TAX-FREE FUNDS Annual Report October 31, 1999
High current income potential
[GRAPHIC]
from portfolios that invest primarily
in municipal securities.
[LOGO OF GOLDMAN SACHS]
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Market Overview
Dear Shareholder,
Over the course of the year ended October 31, 1999, bond market performance was
mixed as the Federal Reserve Board implemented rate hikes in the face of a
strong showing by the U.S. economy.
Market Review
. The Bond Market -- Initially, virtually all non-Treasury sectors
benefited from the gradual stabilization of the global financial
markets and investors' renewed tolerance for risk. Emerging
economic data that pointed to a stable economy further encouraged
bond market performance. Shortly thereafter, however, economic
indicators that are critical in determining the Federal Open
Market Committee's position on monetary policy came in higher
than expected.
Toward period end, the Federal Reserve Board (the "Fed") chose to
initiate a rate hike given Chairman Alan Greenspan's perception
that the economy was growing too quickly. The move was expected
and had little impact on the bond market as a whole. Rather, the
Fed's adoption of a post-rate hike neutral stance prompted a
market rally. Treasuries, in particular, performed well,
supported by equity market weakness and lower-than-expected
inflation data.
. The Economy -- Despite widespread expectations of stable to
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 Fed from intervening to
prevent a buildup of inflationary pressures.
A springtime lull in the economy was fueled, in large part, by a
soaring trade deficit. As a result, rate hike fears were briefly
allayed. However, although the deficit worsened in the ensuing
months, other factors, including strong consumer spending, helped
offset its negative impact. Over the course of the three months
ended September 1999, the economy grew by 4.8% -- the fastest
pace of the year to date. The Fed, as expected, initiated a rate
hike, while fears that another would follow were pervasive.
Outlook
In the current economic environment, the Fed has adopted a
tightening bias. However, another rate hike is a real possibility
should the economy be perceived as overheating. Within the bond
market, uncertainty surrounding Y2K may add to existing investor
skittishness. This, in turn, may increase spread volatility going
into year-end.
We encourage you to maintain your long-term investment program,
and we look forward to serving your investment needs in the years
ahead.
Sincerely,
<TABLE>
<S> <C> <C>
/s/ David B. Ford /s/ David W. Blood /s/ Sharmin Mossavar-Rahmani
David B. Ford David W. Blood Sharmin Mossavar-Rahmani
Co-Head, Goldman Sachs Co-Head, Goldman Sachs CIO, Fixed Income Investments,
Asset Management Asset Management Goldman Sachs Asset Management
November 30, 1999
</TABLE>
NOT FDIC-INSURED
May Lose Value
No Bank Guarantee
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Fixed Income Investment Process
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.
- --------------------------------------------------------------------------------
FIXED INCOME SECURITY SELECTION
- --------------------------------------------------------------------------------
1
SECTOR ALLOCATION
Our sector specialists work together to assess relative value among sectors and
create investment strategies to meet each fund's objectives.
2
SECURITY SELECTION
In selecting securities for each portfolio, our fixed income teams have access
to the vast resources of Goldman Sachs.
3
YIELD CURVE STRATEGIES
We adjust the term structure of our portfolios based on our expectations of the
relationship between short-and long-term interest rates, while keeping each
fund's duration close to its benchmark.
1
<PAGE>
FUND BASICS
Short Duration Tax-Free Fund
as of October 31, 1999
Assets Under Management
$104.7 Million
NASDAQ SYMBOLS
Class A Shares
GSDTX
Class B Shares
GSDBX
Class C Shares
GSTCX
Institutional Shares
GSDUX
Service Shares
GSTAX
- --------------------------------------------------------------------------------
Performance Review
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
October 31, 1998 Fund Total Return 30-Day Taxable 30-Day Lehman 3-Year
October 31, 1999 (based on NAV)/1/ Equivalent Yield/2/ Standardized Yield/3/ Muni Bond Index/4/
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 1.00% 7.48% 4.52% 2.17%
Class B 0.49% 6.62% 4.00% 2.17%
Class C 0.34% N/A N/A 2.17%
Institutional 1.50% 8.29% 5.01% 2.17%
Service 0.89% 7.47% 4.51% 2.17%
</TABLE>
/1/ The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares. The Fund's performance reflects the
reinvestment of dividends and other distributions.
/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.
- --------------------------------------------------------------------------------
Standardized Total Returns
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period ending 9/30/99 Class A Class B Class C Institutional Service
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year/5/ -0.46% -1.03% -0.17% 2.00% 1.49%
Five Years/5/ N/A N/A N/A 4.49% 3.94%
Since Inception/5/ 3.09% 2.90% 2.69% 4.21% 3.93%
(5/1/97) (5/1/97) (8/15/97) (10/1/92) (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 and Service shares do not involve sales
charges, such charges have not been applied to their Standardized Total
Returns.
- --------------------------------------------------------------------------------
Portfolio Composition as of 10/31/996
- --------------------------------------------------------------------------------
Sector Allocation Credit Allocation
- --------------------------------------------------------------------------------
Revenue Bonds 45.0% AAA 40.0%
Pre-refunded 23.0% AA 29.0%
Insured Revenue Bonds 18.0% A 25.0%
General Obligations 14.0% BBB 6.0%
- --------------------------------------------------------------------------------
/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.
2
<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 year ended October 31, 1999.
Performance Review
Over the year ended October 31, 1999, the Fund's A, B, C, Institutional and
Service share classes generated cumulative total returns, at net asset value, of
1.00%, 0.49%, 0.34%, 1.50% and 0.89%, respectively. Over the same time period,
the Fund's benchmark, the Lehman Brothers Three-Year Municipal Bond Index,
generated a cumulative total return of 2.17%.
Municipal Market Performance
Late in 1998, a decline in the pace of new issue supply, the attractiveness of
equities and historically low nominal yields all significantly hindered demand
for municipal bonds. As a result, municipal bonds underperformed Treasuries. By
early 1999, however, Treasury yields rose dramatically. The municipal market's
reluctance to follow Treasury market performance led tax-exempts to experience
their strongest relative performance in years. By mid-1999, market volatility,
in the form of rising rates, caused a slowdown in municipal bond issuance, while
demand for municipal bonds tapered off. Rates continued to rise through the
third quarter. As a result, municipals ended the period underperforming
Treasuries.
Portfolio Composition
Although municipal credit spreads remained generally tight, we were able to
selectively purchase several holdings that offered above-market yields, but this
did not bring about a significant decrease in the overall credit quality of the
Fund. 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 45.0% on October 31, 1999),
since the revenue sector tends to offer greater bond variety than the more staid
general obligation market. Beginning in the summer of 1999, we lowered our
exposure to insured revenue bonds and increased our weighting to general
obligation bond holdings. This move reflected the shift in Moody's and Fitch's
default models, which we believe is favorable for general obligation ratings. In
anticipation of upgrades to general obligation bonds, the Fund increased its
holdings of such bonds.
3
<PAGE>
PERFORMANCE OVERVIEW
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.
Portfolio Highlights
As we mentioned previously, Moody's and Fitch have recently re-evaluated their
default models. These models are a key part of the ratings methodology and
suggest that the rating agencies are likely to adjust their models to reflect
lower default rates, especially for general obligation bonds. In anticipation of
rating increases, we purchased general obligation bonds and bonds whose ratings
are based on an issuer's general obligation rating. For example, we bought $4
million Alabama State general obligation 5.5% bonds due 10/1/00 and
$3 million New York State certificate of participation bonds 5% due 9/1/01. If
these bonds are upgraded and absent any other unexpected events, their prices
should be expected to rise. In fact, New York State was recently upgraded to A+
by Standard & Poor's, and the rating on the New York certificates was raised to
A from BBB+ after the date of this report. We have not seen a material price
change on these bonds; it may take an upgrade by Moody's before this occurs.
These bonds also fit our objective of holding premium bonds with some protection
against rising interest rates.
Portfolio Outlook
We are optimistic about the outlook for municipals. We have based this outlook
on several factors: near-term supply appears light, interest rates have
stabilized, and the combination of volatile equity markets and higher rates has
encouraged individuals to increase their investment in municipal bonds. However,
mutual funds have experienced outflows, and Y2K fears may impact the remainder
of the year. Going forward, we will continue to emphasize selective purchases in
the higher yielding revenue bond sector, general obligation bonds that may
provide tightening opportunities, 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
November 30, 1999
4
<PAGE>
FUND BASICS
Municipal Income Fund
October 31, 1999
Assets Under Management
$120.4 Million
NASDAQ Symbols
Class A Shares
GSMIX
Class B Shares
GSMBX
Class C Shares
GSMUX
Institutional Shares
GSMTX
Service Shares
GSMEX
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
October 31, 1998 Fund Total Return 30-Day Taxable 30-Day Lehman 15-Year
October 31, 1999 (based on NAV)/1/ Equivalent Yield/2/ Standardized Yield/3/ Muni Bond Index/4/
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A -4.46% 7.37% 4.45% -2.48%
Class B -5.10% 6.46% 3.90% -2.48%
Class C -5.10% 6.46% 3.90% -2.48%
Institutional -4.07% 8.38% 5.06% -2.48%
Service -4.49% N/A N/A -2.48%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
/1/The net asset value represents the net assets of the Fund (ex-dividend)
divided by the total number of shares. The Fund's performance reflects the
reinvestment of dividends and other distributions.
/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.
- --------------------------------------------------------------------------------
Standardized Total Returns
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period ending 9/30/99 Class A Class B Class C Institutional Service
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year/5/ -7.47% -8.66% -4.75% -2.74% -3.11%
Five Years/5/ 5.29% N/A N/A N/A 6.22%
Since Inception/5/ 4.22% 3.73% 2.34% 3.44% 4.97%
(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.
- --------------------------------------------------------------------------------
Portfolio Composition as of 10/31/997
- --------------------------------------------------------------------------------
Sector Allocation Credit Allocation
- --------------------------------------------------------------------------------
Insured Revenue Bonds 34.0% AAA 51.0%
Revenue Bonds 29.0% AA 27.0%
Insured General Obligations 18.0% A 19.0%
General Obligations 18.0% BBB 3.0%
Pre-Refunded 1.0%
- --------------------------------------------------------------------------------
/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.
<PAGE>
Performance Overview
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Municipal
Income Fund for the year ended October 31, 1999.
Performance Review
Over the year ended October 31, 1999, the Fund's A, B, C, Institutional and
Service shares generated cumulative total returns, at net asset value, of
- -4.46%, -5.10% , -5.10%, -4.07% and -4.49%, respectively. These returns
underperformed the -2.48% return generated by the Fund's benchmark, the Lehman
Brothers 15-Year Municipal Bond Index.
The Fund's underperformance was partially attributable to our term structure, to
specific securities and to rising rates.
For most of the fiscal year the Fund was barbelled, concentrating assets in
five-to 10-year maturities and 20+-year maturities. The Index consists of bonds
due in 13 to 17 years. Throughout the period of time covered by this report, 15-
year maturities were the best performing part of the curve. Recently, the Fund
has assumed a maturity profile that is more in line with that of the Index.
Several securities in the Fund also underperformed. For example, the Fund held
several highly rated or insured health care bonds, a sector that has
significantly underperformed the market over the past year. In another instance,
the project backing a bond was declared in default. Although debt service on the
bond was fully guaranteed by a letter of credit, pricing weakened significantly.
However, we believe that the security is undervalued and continue to hold it.
Finally, rising rates also impacted the Fund as many bonds became discounts,
thus falling into a tax situation known as de minimus, a situation that
negatively impacts pricing. The implication of the de minimus rule is that the
impact of market discount will be greater for bonds with shorter maturities than
for bonds with longer maturities.
Municipal Market Performance
Municipal bond market performance demonstrated little consistency throughout the
period under review. Late in 1998, a decline in the pace of new issue supply,
the attractiveness of equities and historically low nominal yields all
significantly hindered demand. As a result, municipal bonds underperformed
Treasuries. By early 1999, however, Treasury yields rose dramatically. The
municipal market's reluctance to follow Treasury market performance led tax-
exempts to experience their strongest relative performance in years.
By mid-1999, market volatility, in the form of rising rates, caused a slowdown
in municipal bond issuance, while demand for municipal bonds tapered off. Rates
continued to rise through the third quarter. As a result, municipals ended the
period underperforming Treasuries.
6
<PAGE>
PERFORMANCE OVERVIEW
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.
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 18.0% on October 31, 1999), as well as
one in general obligation bonds (from 9.5% on October 31, 1998 to 18.0% on
October 31, 1999). The Fund increased its holdings of general obligation bonds
in anticipation of a shift in Moody's and Fitch's default model, which we
believe is favorable for general obligation ratings. This increase accounted in
part for the reduction in the Fund's position in insured revenue bonds (from
53.9% on October 21, 1998 to 34.0% on October 31, 1999).
Portfolio Highlights
As we mentioned previously, Moody's and Fitch recently re-evaluated their
default models. These models are a key part of the ratings methodology and
suggest that the rating agencies are likely to adjust their models to reflect
lower default rates, especially for general obligation bonds. In anticipation of
rating increases, we have purchased general obligation bonds. For example, we
bought $5.38 million Wisconsin State general obligation bonds 6.25% due 5/1/15
and $3.5 million Washington State general obligation bonds 5.9% due 7/1/15. If
these bonds are upgraded and absent any other unexpected events, their prices
should be expected to rise. These bonds also fit our term structure goals, which
are (1) to be bulleted around the 15 year part of the curve and (2) to hold
premium bonds with some protection against rising interest rates.
Portfolio Outlook
We are optimistic about the outlook for municipals. We have based this outlook
on several factors: near-term supply appears light, interest rates have
stabilized, and the combination of volatile equity markets and higher rates has
encouraged individuals to increase their investment in municipal bonds. However,
mutual funds have experienced outflows, and Y2K fears may impact the remainder
of the year. Going forward, we will continue to emphasize selective purchases in
the higher yielding revenue bond sector, general obligation bonds that may
provide tightening opportunities, and careful yield curve management.
We thank you for your investment and look forward to your continued confidence.
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?
Resources and Relationships
Our portfolio 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.
In-Depth Research
Our team-driven investment processes encourage us to share information,
challenge ideas and form fresh opinions that shape investment portfolios. Our
growth, value and international equity teams complement this process by
performing rigorous, fundamental research and by conducting on-site visits to
hundreds of companies each year. Our quantitative CORE equity team conducts its
own research and capitalizes on the resources of Goldman Sachs' Global
Investment Research Department.
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
October 31, 1999
The following graph shows the value as of October 31, 1999, of a $10,000
investment made on October 1, 1992 (commencement of operations) in the
Institutional shares 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
October 31, 1999.
[GRAPH]
Institutional Lehman 3-Year
Shares Muni Bond Index
10/1/92 10000 10000
Oct-92 9966 9961
Nov-92 10041 10031
Dec-92 10127 10091
Jan-93 10199 10167
Feb-93 10406 10326
Mar-93 10350 10295
Apr-93 10425 10355
May-93 10427 10383
Jun-93 10512 10449
Jul-93 10504 10455
Aug-93 10590 10552
Sep-93 10656 10598
Oct-93 10667 10620
Nov-93 10643 10607
Dec-93 10755 10718
Jan-94 10841 10805
Feb-94 10703 10704
Mar-94 10562 10575
Apr-94 10627 10637
May-94 10632 10687
Jun-94 10618 10690
Jul-94 10710 10779
Aug-94 10738 10818
Sep-94 10715 10791
Oct-94 10685 10765
Nov-94 10653 10746
Dec-94 10707 10792
Jan-95 10726 10881
Feb-95 10831 10997
Mar-95 10879 11096
Apr-95 10909 11133
May-95 11053 11304
Jun-95 11087 11331
Jul-95 11191 11451
Aug-95 11271 11540
Sep-95 11287 11573
Oct-95 11325 11627
Nov-95 11399 11702
Dec-95 11428 11751
Jan-96 11548 11842
Feb-96 11575 11845
Mar-96 11521 11816
Apr-96 11526 11830
May-96 11532 11841
Jun-96 11597 11912
Jul-96 11650 11978
Aug-96 11681 11996
Sep-96 11758 12069
Oct-96 11836 12153
Nov-96 11949 12266
Dec-96 11967 12272
Jan-97 12007 12326
Feb-97 12062 12387
Mar-97 11995 12322
Apr-97 12062 12375
May-97 12153 12476
Jun-97 12232 12549
Jul-97 12359 12699
Aug-97 12340 12673
Sep-97 12432 12764
Oct-97 12475 12820
Nov-97 12518 12857
Dec-97 12610 12945
Jan-98 12690 13030
Feb-98 12721 13057
Mar-98 12750 13078
Apr-98 12729 13060
May-98 12848 13182
Jun-98 12878 13226
Jul-98 12909 13274
Aug-98 13016 13403
Sep-98 13085 13489
Oct-98 13129 13553
Nov-98 13172 13586
Dec-98 13201 13618
Jan-99 13295 13742
Feb-99 13295 13758
Mar-99 13324 13770
Apr-99 13355 13813
May-99 13322 13793
Jun-99 13262 13711
Jul-99 13295 13778
Aug-99 13302 13794
Sep-99 13347 13847
Oct-99 13326 13848
<TABLE>
<CAPTION>
Average Annual Total Return through
October 31, 1999 Since Inception Five Years One Year
<S> <C> <C> <C>
Class A shares (commenced May 1, 1997)
Excluding sales charges 3.73% n/a 1.00%
Including sales charges 2.91% n/a -1.04%
-----------------------------------------------------------------------------
Class B shares (commenced May 1, 1997)
Excluding contingent deferred sales
charges 3.11% n/a 0.49%
Including contingent deferred sales
charges 2.70% n/a -1.52%
-----------------------------------------------------------------------------
Class C shares (commenced August 15,
1997)
Excluding contingent deferred sales
charges 2.47% n/a 0.34%
Including contingent deferred sales
charges 2.47% n/a -0.66%
-----------------------------------------------------------------------------
Institutional shares (commenced October
1, 1992) 4.13% 4.51% 1.50%
-----------------------------------------------------------------------------
Administration shares (commenced May
20, 1993)(a) 3.82% 4.25% 1.37%
-----------------------------------------------------------------------------
Service shares (commenced September 20,
1994) 3.82% 3.98% 0.89%
-----------------------------------------------------------------------------
</TABLE>
(a) The Administration shares were liquidated on July 20, 1999. The returns
shown are through termination date. In addition, the one year return is
not annualized.
9
<PAGE>
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - 94.1%
Alabama - 5.8%
Alabama Building Renovation Financing Authority RB Series 1990 (A2)
$1,000,000 7.40% 09/01/2006 $ 1,047,110
Alabama State GO Bonds Series 1999 A (AA/Aa3)
4,000,000 5.50 10/01/2000 4,060,200
Scottsboro Alabama GO Bonds Warrants Series 1996 A (AMBAC) (AAA/Aaa)
1,000,000 5.75 11/01/2011 1,023,000
-----------------------------------------------------------------------------------------------
$ 6,130,310
-----------------------------------------------------------------------------------------------
Alaska - 1.3%
Valdez Alaska Marine Terminal RB for Sohio Pipeline Series 1991 (AA+)
$1,250,000 7.13% 12/01/2025 $ 1,333,263
-----------------------------------------------------------------------------------------------
Arizona - 2.0%
Arizona Transportation Board Highway RB Series 1991 A (AA/Aaa)
$2,000,000 6.55% 07/01/2007 $ 2,103,500
-----------------------------------------------------------------------------------------------
California - 6.8%
Palmdale Civic Authority RB Series 1994 (MBIA) (AAA/Aaa)
$1,695,000 6.60% 09/01/2034 $ 1,802,870
Sacramento County Housing Authority MF Hsg. RB for Rancho Natomas
Apartments Series 1 (LOC) (Baa1)
1,000,000 4.80 12/15/2007 1,000,000
San Francisco County International Airport RB Series 1993-2 (MBIA)
(AAA/Aaa)
4,000,000 6.75 05/01/2020 4,297,200
-----------------------------------------------------------------------------------------------
$ 7,100,070
-----------------------------------------------------------------------------------------------
Colorado - 1.2%
Larimer County School District COPS No. R1 Poudre Series 1991 D (A2)
$1,150,000 10.00% 12/01/2001 $ 1,274,051
-----------------------------------------------------------------------------------------------
Connecticut - 3.0%
Connecticut State Health and Educational Facilities RB for Special Care
Issue 1997 B (BBB/Baa2)
$3,365,000 5.13% 07/01/2007 $ 3,183,761
-----------------------------------------------------------------------------------------------
Florida - 5.9%
Citrus County PCRB for Florida Power Corp. Crystal River Series 1992 B
(A+/A1)
$2,000,000 6.35% 02/01/2022 $ 2,029,920
Jacksonville Florida Electric Authority RB for Bulk Power Scherer 4
Project Series 1993 A (AA/Aa2)
4,000,000 5.25 10/01/2021 4,133,680
-----------------------------------------------------------------------------------------------
$ 6,163,600
-----------------------------------------------------------------------------------------------
Illinois - 5.4%
Chicago Metropolitan Housing Development Corp. RB Series 1992-8 A (AMBAC)
(AAA/Aaa)
$2,500,000 6.85% 07/01/2022 $ 2,636,675
Illinois Health Facilities Authority RB for Highland Park Hospital Series
A (FGIC) (AAA/Aaa)
1,000,000 5.20 10/01/2001 1,015,570
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - (continued)
Illinois - (continued)
Illinois Health Facilities Authority RB for University of Chicago
Hospitals Series A (MBIA) (AAA/Aaa)
$1,950,000 5.38% 08/15/2005 $ 1,998,496
-----------------------------------------------------------------------------------------------
$ 5,650,741
-----------------------------------------------------------------------------------------------
Indiana - 6.8%
Indiana Health Facilities Financing Authority Hospital RB for Methodist
Hospitals Series 1992 (A2)
$2,200,000 6.75% 09/15/2009 $ 2,310,682
Logansport Multi-Purpose School Building Corp. First Mortgages Series
1992 (A)
2,195,000 5.90 07/01/2005 2,280,715
Marion County Hospital Authority Facility RB for Methodist Hospitals of
Indiana Series 1989 (AAA/Aa3)
2,450,000 6.50 09/01/2013 2,512,401
-----------------------------------------------------------------------------------------------
$ 7,103,798
-----------------------------------------------------------------------------------------------
Louisiana - 3.6%
Lake Charles Harbor and Terminal District Port Facilities RB for
Trunkline Long Project Series 1992 (A3)
$2,500,000 7.75% 08/15/2022 $ 2,719,075
Louisiana Offshore Deepwater Port Terminal RB Series 1992 B (A/A3)
1,000,000 5.85 09/01/2000 1,009,150
-----------------------------------------------------------------------------------------------
$ 3,728,225
-----------------------------------------------------------------------------------------------
Maryland - 2.5%
Maryland State Health and Higher Educational Facilities Authority RB
Series 1997 (A-)
$1,600,000 5.50% 01/01/2021 $ 1,612,816
Maryland State Health and Higher Educational Facilities Authority RB
Series 1997 (LOC) (A)
1,000,000 4.75 07/01/2021 998,540
-----------------------------------------------------------------------------------------------
$ 2,611,356
-----------------------------------------------------------------------------------------------
Massachusetts - 5.2%
Boston Massachusetts RB for Boston City Hospital Series 1993 B (FHA) (AA-
/Aa)
$1,245,000 5.75% 02/15/2013 $ 1,237,605
Massachusetts Industrial Finance Agency RB for Brandeis College Series
1989 C (MBIA) (AAA/Aaa)
1,550,000 6.80 10/01/2019 1,592,005
Massachusetts State GO Bonds Series 1995 A (AA-/Aa3)
2,500,000 6.25 07/01/2003 2,639,925
-----------------------------------------------------------------------------------------------
$ 5,469,535
-----------------------------------------------------------------------------------------------
Michigan - 2.3%
Bishop International Airport Authority RB Series 1999 B (ACA) (A)
$2,420,000 5.00% 12/01/2007 $ 2,371,213
-----------------------------------------------------------------------------------------------
Missouri - 1.6%
St. Louis Municipal Finance Leasehold RB Series 1993 A (AMBAC) (AAA/Aaa)
$1,655,000 5.30% 07/15/2002 $ 1,689,043
-----------------------------------------------------------------------------------------------
</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 - 1.7%
Nebraska Investment Finance Authority MF Hsg. for Wycliffe West RB Series
1995 A (FNMA) (AAA)
$1,730,000 5.50% 12/01/2025 $ 1,758,753
-----------------------------------------------------------------------------------------------
New Jersey - 8.5%
New Jersey Economic Development Authority RB First Mortgage Keswick Pines
Project Series 1993 (Aaa)
$2,000,000 8.75% 01/01/2024 $ 2,325,540
New Jersey Highway Authority Garden State Parkway RB Series 1992 (AA-/A1)
3,250,000 6.00 01/01/2005 3,380,747
New Jersey Transportation Corp. Capital Grant RB Series 1997 A (FSA)
(AAA/Aaa)
3,100,000 5.40 09/01/2002 3,166,991
-----------------------------------------------------------------------------------------------
$ 8,873,278
-----------------------------------------------------------------------------------------------
New York - 7.9%
New York GO Bonds Series 1994 H-1 (A-/A3)
$1,000,000 6.00% 08/01/2006 $ 1,051,000
New York State COPS Series 1999 (BBB+/Baa1)
3,000,000 5.00 09/01/2001 3,028,470
New York State Housing Finance Agency RB Prerefunded Series 1995 A
(BBB+/Aaa)
3,800,000 6.50 03/15/2025 4,200,634
-----------------------------------------------------------------------------------------------
$ 8,280,104
-----------------------------------------------------------------------------------------------
Pennsylvania - 2.5%
Pennsylvania GO Bonds Series 1992 (AA/Aa3)
$2,500,000 6.30% 09/15/2005 $ 2,625,475
-----------------------------------------------------------------------------------------------
South Carolina - 5.2%
Georgetown County PCRB for International Paper Company Project Series
1992 (BBB+/A3)
$2,500,000 6.25% 06/15/2005 $ 2,604,250
South Carolina Public Service Authority RB Series 1991 B (AMBAC)
(AAA/Aaa)
2,700,000 7.10 07/01/2021 2,873,664
-----------------------------------------------------------------------------------------------
$ 5,477,914
-----------------------------------------------------------------------------------------------
Tennessee - 4.3%
Clarksville Public Building Authority RB for Pooled Loan Program Series
1993 (AA)
$1,500,000 4.75% 12/01/2000 $ 1,510,920
Tennessee GO Bonds Series 1991 B (AAA/Aaa)
2,800,000 6.85 06/01/2010 2,952,656
-----------------------------------------------------------------------------------------------
$ 4,463,576
-----------------------------------------------------------------------------------------------
Texas - 5.4%
Houston Water and Sewer System RB Series 1992 A (MBIA) (AAA/Aaa)
$2,000,000 6.38% 12/01/2022 $ 2,073,120
Memorial Villages Water Authority GO Bonds Series 1990 (Aa3)
390,000 7.00 09/01/2000 396,560
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - (continued)
Texas - (continued)
Titus County Fresh Water RB for Southwestern Electric Power Company
Series 1991 A (Aa3)
$2,945,000 8.20% 08/01/2011 $ 3,174,327
-----------------------------------------------------------------------------------------------
$ 5,644,007
-----------------------------------------------------------------------------------------------
Wisconsin - 5.2%
Wisconsin GO Bonds Series 1992 (AA/Aa2)
$4,000,000 6.10% 05/01/2004 $ 4,221,160
Wisconsin State Health and Educational Facility RB for Medical College of
Wisconsin Series 1993 (A)
1,240,000 5.30 12/01/2003 1,256,529
-----------------------------------------------------------------------------------------------
$ 5,477,689
-----------------------------------------------------------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $99,861,743) $ 98,513,262
-----------------------------------------------------------------------------------------------
Short-Term Obligations\/ - 7.2%
Alabama - 0.9%
Phoenix County Industrial Development Board Environmental Improvement RB
for Georgia Kraft Project Series 1985 (LOC) (P-1)
$ 900,000 3.60% 11/01/1999 $ 900,000
-----------------------------------------------------------------------------------------------
Texas - 3.2%
Grapevine Texas Industrial Development Corp. VRDN RB American Airlines-B2
Series 1984 (LOC) (Aa3)
$3,100,000 3.65% 11/01/1999 $ 3,100,000
Harris County Health Facilities Development Corp. VRDN RB St. Luke's
Episcopal Hospital Series 1997 B (SPA) (AA)
230,000 3.65 11/01/1999 230,000
-----------------------------------------------------------------------------------------------
$ 3,330,000
-----------------------------------------------------------------------------------------------
Virginia - 2.0%
Roanoke IDA Hospital VRDN RB Roanoke Memorial Hospital Series 1995 A (AA-
/Aa3)
$2,100,000 3.60% 11/01/1999 $ 2,100,000
-----------------------------------------------------------------------------------------------
Washington - 1.1%
Washington State Health Care Facilities Authority VRDN RB Virginia Mason
Medical Center Series 1997 B (AAA/Aaa)
$1,200,000 3.65% 11/01/1999 $ 1,200,000
-----------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $7,530,000) $ 7,530,000
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $107,391,743) $106,043,262
-----------------------------------------------------------------------------------------------
</TABLE>
\/ Security with "Put" features with resetting interest rates. Maturity dates
disclosed are the next interest reset dates.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
-------------------------------------------------------------
<C> <S>
Investment Abbreviations:
ACA --Insured by American Capital Access
AMBAC --Insured by American Municipal Bond Assurance Corp.
COPS --Certificates of Participation
FGIC --Insured by Financial Guaranty Insurance Co.
FHA --Insured by Federal Housing Administration
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
SPA --Stand-by Purchase Agreement
VRDN --Variable Rate Demand Note
-------------------------------------------------------------
</TABLE>
Security ratings are unaudited.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
GOLDMAN SACHS MUNICIPAL INCOME FUND
Performance Summary
October 31, 1999
The following graph shows the value as of October 31, 1999, of a $10,000 in-
vestment made on August 1, 1993 in Class A shares (with the maximum sales
charge of 4.5%) 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
shares 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
October 31, 1999.(a)
[GRAPH APPEARS HERE]
Class A Lehman 15-Year
Shares Muni Index
8/1/93 9550 10000
Aug-93 9786 10237
Sep-93 9926 10374
Oct-93 9983 10389
Nov-93 9891 10293
Dec-93 10082 10538
Jan-94 10202 10677
Feb-94 9933 10355
Mar-94 9459 9863
Apr-94 9514 9974
May-94 9591 10077
Jun-94 9542 10003
Jul-94 9753 10201
Aug-94 9776 10233
Sep-94 9613 10061
Oct-94 9433 9862
Nov-94 9245 9651
Dec-94 9468 9889
Jan-95 9774 10223
Feb-95 9972 10560
Mar-95 10085 10691
Apr-95 10105 10695
May-95 10406 11066
Jun-95 10277 10940
Jul-95 10348 11045
Aug-95 10494 11213
Sep-95 10573 11314
Oct-95 10734 11478
Nov-95 10936 11682
Dec-95 11068 11804
Jan-96 11224 11913
Feb-96 11134 11836
Mar-96 10920 11662
Apr-96 10870 11611
May-96 10851 11601
Jun-96 10981 11733
Jul-96 11071 11857
Aug-96 11074 11855
Sep-96 11235 12009
Oct-96 11394 12169
Nov-96 11621 12422
Dec-96 11570 12353
Jan-97 11608 12398
Feb-97 11741 12526
Mar-97 11584 12349
Apr-97 11687 12471
May-97 11833 12669
Jun-97 11993 12823
Jul-97 12390 13236
Aug-97 12214 13086
Sep-97 12392 13252
Oct-97 12446 13340
Nov-97 12534 13428
Dec-97 12777 13657
Jan-98 12907 13825
Feb-98 12912 13821
Mar-98 12899 13832
Apr-98 12822 13767
May-98 13045 14012
Jun-98 13087 14074
Jul-98 13098 14100
Aug-98 13297 14347
Sep-98 13447 14556
Oct-98 13416 14537
Nov-98 13449 14590
Dec-98 13488 14646
Jan-99 13660 14870
Feb-99 13572 14750
Mar-99 13594 14770
Apr-99 13580 14822
May-99 13450 14707
Jun-99 13201 14458
Jul-99 13204 14510
Aug-99 13025 14378
Sep-99 13026 14375
Oct-99 12818 14177
<TABLE>
<CAPTION>
Average Annual Total Return through
October 31, 1999 Since Inception Five Years One Year
<S> <C> <C> <C>
Class A shares (commenced July 20,
1993)
Excluding sales charges 4.66% 6.32% -4.46%
Including sales charges 3.90% 5.34% -8.76%
----------------------------------------------------------------------------
Class B shares (commenced May 1, 1996)
Excluding contingent deferred sales
charges 4.04% n/a -5.10%
Including contingent deferred sales
charges 3.15% n/a -9.85%
----------------------------------------------------------------------------
Class C shares (commenced August 15,
1997)
Excluding contingent deferred sales
charges 1.48% n/a -5.10%
Including contingent deferred sales
charges 1.48% n/a -6.05%
----------------------------------------------------------------------------
Institutional shares (commenced August
15, 1997) 2.57% n/a -4.07%
----------------------------------------------------------------------------
Service shares (commenced August 15,
1997) 2.23% n/a -4.49%
----------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following the commencement of operations.
13
<PAGE>
GOLDMAN SACHS MUNICIPAL INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - 95.7%
Alabama - 3.3%
Alabama Public School and College Authority RB for Capital Improvement
Series 1999 C (AA/Aa3)
$4,000,000 5.75% 07/01/2017 $ 3,933,680
----------------------------------------------------------------------------------------------
Arizona - 7.9%
Maricopa County MF Hsg. IDA RB for Place Five and Greenery Apartments
Series 1996 A (AAA)
$1,795,000 5.85% 01/01/2008 $ 1,856,138
Maricopa County United School District No. 41 RB (FSA) (AAA/Aaa)
2,500,000 6.25 07/01/2015 2,593,075
Maricopa County United School District No. 48 RB Scottsdale Project of
1997 Series 1999 D (AA/Aa2)
4,550,000 6.50 07/01/2010 5,012,735
----------------------------------------------------------------------------------------------
$ 9,461,948
----------------------------------------------------------------------------------------------
California - 2.9%
Anaheim Public Financing RB for Public Improvements Project Series 1997
C (FSA) (AAA/Aaa)@
$2,590,000 6.04% 09/01/2032 $ 344,626
Carlsbad Unified School District GO Bonds Series 1997 (FGIC) (AAA/Aaa)@
2,700,000 5.63 11/01/2014 1,148,931
Orange County Public Finance Authority Waste Management Systems RB Se-
ries 1997 (AMT) (AMBAC) (Aaa)
2,110,000 5.25 12/01/2013 2,026,064
----------------------------------------------------------------------------------------------
$ 3,519,621
----------------------------------------------------------------------------------------------
Colorado - 1.6%
Aurora Centretech Metropolitan District VRDN Series 1998 C (LOC) (A+)
$2,000,000 4.88% 12/01/2028 $ 1,922,840
----------------------------------------------------------------------------------------------
Connecticut - 0.9%
Mashantucket Western Pequot Tribe Prerefunded RB Series 1996 A
(AAA/Aaa)+
$1,000,000 6.50% 09/01/2005 $ 1,089,690
----------------------------------------------------------------------------------------------
Florida - 2.1%
Santa Rosa Bay Bridge Authority RB Series 1996 (BBB-)
$2,500,000 6.25% 07/01/2028 $ 2,490,000
----------------------------------------------------------------------------------------------
Illinois - 14.7%
Chicago Midway Airport RB Series 1996 A (MBIA) (AAA/Aaa)
$2,500,000 5.50% 01/01/2010 $ 2,519,950
Illinois Education Facilities Authority RB for Midwestern University
Series 1998 B (ACA) (A)
2,500,000 5.50 05/15/2028 2,242,525
Lake County Community Consolidated School District No. 041 GO Bonds Se-
ries 1999 A (FSA) (AAA/Aaa)
2,725,000 9.00 11/01/2016 3,602,695
Lake County Forest Preservation District GO Bonds for Land Acquisition
and Development Bonds Series 1999 (AA+/Aa1)
3,255,000 5.63 12/15/2015 3,188,240
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Debt Obligations - (continued)
Illinois - (continued)
Lake County Unified School District No. 116 Round Lake GO Bonds Series
1996 (FSA) (AAA/Aaa)
$1,000,000 7.60% 02/01/2013 $ 1,174,630
2,000,000 7.60 02/01/2014 2,343,020
Lake, Cook, Kane and McHenry Counties Community Unified School District
No. 220 GO Bonds Series 1998 (FSA) (AAA/Aaa)
2,465,000 6.20 12/01/2012 2,602,325
----------------------------------------------------------------------------------------------
$17,673,385
----------------------------------------------------------------------------------------------
Indiana - 3.3%
Indiana Bond Bank for Hendricks County RB Series 1997 B (LOC) (AA-)
$1,420,000 6.00% 02/01/2012 $ 1,377,372
Indiana Transportation Finance Authority Airport Facilities RB Series
1996 A (AMBAC) (AAA/Aaa)
2,500,000 6.00 11/01/2011 2,616,775
----------------------------------------------------------------------------------------------
$ 3,994,147
----------------------------------------------------------------------------------------------
Kentucky - 0.9%
Nelson County Industrial Building RB for Mabex Universal Corp. Project
Series 1995 (AMT) (LOC) (A3)
$1,000,000 6.50% 04/01/2005 $ 1,033,610
----------------------------------------------------------------------------------------------
Louisiana - 1.6%
Orleans Levee District Public Improvement RB Series 1995 (FSA) (AAA/Aaa)
$1,845,000 5.95% 11/01/2015 $ 1,894,667
----------------------------------------------------------------------------------------------
Maine - 0.5%
Maine Educational Loan Authority RB Series 1992 A-1 (AMT) (Aaa)
$ 570,000 6.80% 12/01/2007 $ 595,872
----------------------------------------------------------------------------------------------
Michigan - 4.6%
Bishop International Airport Authority RB Series 1999 B (ACA) (A)
$1,085,000 5.25% 12/01/2012 $ 1,024,663
Michigan Higher Education Facilities RB for the Thomas M. Cooley Law
School Series 1998 (LOC) (A+)
4,000,000 5.40 05/01/2018 3,674,560
Oakland County Economic Development Corp. RB for Cranbrook Community Se-
ries 1998 (Aa2)
1,000,000 5.00 11/01/2017 882,570
----------------------------------------------------------------------------------------------
$ 5,581,793
----------------------------------------------------------------------------------------------
Missouri - 1.8%
St. Louis Municipal Finance Leasehold RB Series 1993 A (AMBAC) (AAA/Aaa)
$2,100,000 5.30% 07/15/2002 $ 2,143,197
----------------------------------------------------------------------------------------------
New Mexico - 1.6%
New Mexico Finance Authority RB for Federal Highway Grant Series 1998 A
(AMBAC) (AAA/Aaa)
$2,100,000 5.25% 09/01/2014 $ 1,981,371
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
GOLDMAN SACHS MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
Debt Obligations - (continued)
<S> <C> <C> <C>
New York - 11.4%
Babylon Waste Facilites GO Bonds Series 1993 (FGIC) (AAA/Aaa)
$3,500,000 9.00% 08/01/2011 $ 4,562,530
New York GO Bonds Series 1999 J (A-/A3)
2,310,000 5.00 05/15/2001 2,330,628
New York State Dormitory Authority RB for Department of Health Series
1996 (MBIA) (AAA/Aaa)
2,000,000 5.63 07/01/2012 2,013,000
New York State Dormitory Authority RB for State University Educational
Facilities Series 1998 A (MBIA) (AAA/Aaa)
5,000,000 5.25 05/15/2013 4,787,950
----------------------------------------------------------------------------------------------
$13,694,108
----------------------------------------------------------------------------------------------
North Dakota - 1.7%
Mercer County PCRB for Basin Electric & Power 2nd Series 1995-2 (AMBAC)
(AAA/Aaa)
$2,000,000 6.05% 01/01/2019 $ 2,005,360
----------------------------------------------------------------------------------------------
Ohio - 0.5%
Cuyahoga County Port Authority RB for Rock & Roll Hall of Fame Series
1997
$ 600,000 5.45% 12/01/2005 $ 592,974
----------------------------------------------------------------------------------------------
Pennsylvania - 3.9%
Pennsylvania Higher Educational Facilities RB for University of Pennsyl-
vania Health Services Series 1998 A (MBIA) (AAA/Aaa)
$2,040,000 5.38% 01/01/2014 $ 1,971,517
Pennsylvania Higher Educational Facilities RB for University of Pennsyl-
vania Series 1996 B (A/A3)
2,900,000 5.88 01/01/2015 2,763,236
----------------------------------------------------------------------------------------------
$ 4,734,753
----------------------------------------------------------------------------------------------
Tennessee - 1.1%
McMinnville Housing Authority RB for First Mortgage Series 1997 (A2)
$1,325,000 6.00% 10/01/2009 $ 1,339,761
----------------------------------------------------------------------------------------------
Texas - 10.2%
Harris County MF Hsg. RB for Windfern Apartments Series 1999 A (A)
$4,000,000 5.90% 07/01/2019 $ 3,828,040
Lago Vista Independent School District GO Bonds Series 1997 (PSF) (Aaa)
1,000,000 5.50 08/15/2027 930,170
Lubbock Health Facilities Development RB for St. Josephs Health Systems
Series 1998 (AA/Aa3)
5,000,000 5.25 07/01/2017 4,487,800
Tarrant County Health Facilities RB Series 1997 A (MBIA) (AAA/Aaa)
3,000,000 5.75 02/15/2015 2,995,950
----------------------------------------------------------------------------------------------
$12,241,960
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
Debt Obligations - (continued)
<S> <C> <C> <C>
Washington - 14.6%
Chelan County Public Utilities District No. 001 RB for Chelan Hydro Proj-
ect Series 1997 D (AMT) (MBIA) (AAA/Aaa)
$2,500,000 6.35% 07/01/2028 $ 2,574,850
Clark County School District No. 117 Camas GO Bonds Series 1999 (FSA)
(Aaa)
2,300,000 5.50 12/01/2017 2,185,759
King County Sewer RB Series 1999-2 (FGIC) (AAA/Aaa)<>
3,965,000 6.25 01/01/2016 4,068,685
Washington GO Bonds Series 1995 C (AA+/Aa1)
3,500,000 5.90 07/01/2015 3,506,965
Washington Public Power Supply System RB for Nuclear Project No. 2 Series
1996 A (AMBAC) (AAA/Aaa)
2,500,000 5.70 07/01/2011 2,534,200
Washington Public Power Supply System RB for Nuclear Project No. 3 Series
1993 C (MBIA) (AAA/Aaa)@
7,500,000 5.88 07/01/2016 2,764,500
-----------------------------------------------------------------------------------------------
$ 17,634,959
-----------------------------------------------------------------------------------------------
Wisconsin - 4.6%
Wisconsin State GO Bonds Series 1999 C (AA/Aa2)<>
$5,380,000 6.25% 05/01/2015 $ 5,600,257
-----------------------------------------------------------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $119,265,198) $115,159,953
-----------------------------------------------------------------------------------------------
Short-Term Obligations\/ - 6.3%
New York - 2.4%
Long Island Power Authority Electric Systems VRDN RB Series 1998-6
(AA/Aa3)
$1,400,000 3.65% 11/01/1999 $ 1,400,000
New York State Dormitory Authority VRDN RB Cornell Unversity Series 1990
B (AA/Aa2)
1,500,000 3.55 11/01/1999 1,500,000
-----------------------------------------------------------------------------------------------
$ 2,900,000
-----------------------------------------------------------------------------------------------
Texas - 1.8%
Harris County Health Facilities Development Corp. VRDN RB St. Luke's
Episcopal Hospital Series 1997 A (AA)
$2,200,000 3.65% 11/01/1999 $ 2,200,000
-----------------------------------------------------------------------------------------------
Virginia - 0.8%
Roanoke IDA Hospital VRDN RB for Carilion Health Systems Series 1997 A
(SPA) (AA-/Aa3)
$1,000,000 3.60% 11/01/1999 $ 1,000,000
-----------------------------------------------------------------------------------------------
District of Columbia - 1.3%
District of Columbia VRDN GO Bonds General Recovery Fund Series 1991 B-1
(LOC) (AA-/Aa3)
$1,550,000 3.75% 11/01/1999 $ 1,550,000
-----------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $7,650,000) $ 7,650,000
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $126,915,198) $122,809,953
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
GOLDMAN SACHS MUNICIPAL INCOME FUND
Statement of Investments (continued)
October 31, 1999
------------------------------------------------------------------------------
+ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. Such security may be resold, normally to qualified institutional
buyers in transactions exempt from registration. Total market value of Rule
144A securities amounted to $1,089,690 as of October 31, 1999.
@ Security is issued with a zero coupon. The interest rate disclosed for this
security represents effective yield to maturity
<> When-issued security.
\/ Securities with "Put" features with resetting interest rates. Maturity
dates disclosed are the next interest reset dates.
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:
ACA --Insured by American Capital Access
AMBAC --Insured by American Municipal Bond Assurance Corp.
AMT --Alternative Minimum Tax
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
PSF --Guaranteed by Permanent School Fund
RB --Revenue Bond
VRDN --Variable Rate Demand Note
-------------------------------------------------------------
</TABLE>
Security ratings are unaudited.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Statements of Assets and Liabilities
October 31, 1999
<TABLE>
<CAPTION>
Short Duration Municipal
Tax-Free Fund Income Fund
Assets:
<S> <C> <C>
Investment in securities, at value (identified
cost $107,391,743 and $126,915,198,
respectively) $106,043,262 $122,809,953
Cash 13,492 152,913
Receivables:
Investment securities sold -- 5,437,467
Interest 1,673,381 2,006,755
Fund shares sold 152,489 239,594
Reimbursement from advisor 9,941 17,890
Other assets 2,139 9,725
------------------------------------------------------------------------------
Total assets 107,894,704 130,674,297
------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased 3,026,907 9,631,252
Income distribution 50,572 125,408
Fund shares repurchased 55,945 415,528
Amounts owed to affiliates 47,231 100,195
Accrued expenses and other liabilities 45,830 46,626
------------------------------------------------------------------------------
Total liabilities 3,226,485 10,319,009
------------------------------------------------------------------------------
Net Assets:
Paid-in capital 109,995,857 126,544,365
Accumulated distributions in excess of net
investment income (136,128) (39,224)
Accumulated net realized loss on investment
and futures transactions (3,843,029) (2,044,608)
Net unrealized loss on investments (1,348,481) (4,105,245)
------------------------------------------------------------------------------
NET ASSETS $104,668,219 $120,355,288
------------------------------------------------------------------------------
Net asset value, offering and redemption price
per share(a)
Class A $9.93 $14.07
Class B $9.93 $14.08
Class C $9.93 $14.08
Institutional $9.93 $14.07
Service $9.92 $14.09
------------------------------------------------------------------------------
Shares outstanding:
Class A 2,306,456 6,426,935
Class B 201,522 663,175
Class C 208,550 310,980
Institutional 7,810,472 1,150,851
Service 17,410 111
------------------------------------------------------------------------------
Total shares outstanding, $.001 par value
(unlimited number of shares authorized) 10,544,410 8,552,052
------------------------------------------------------------------------------
</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 $10.13 and $14.73, respectively. At redemption, Class B
and Class C shares may be subject to a contingent deferred sales charge,
assessed on the amount equal to the lesser of the current net asset value or
the original purchase price of the shares.
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Statements of Operations
For the Year Ended October 31, 1999
<TABLE>
<CAPTION>
Short Duration Municipal
Tax-Free Fund Income Fund
<S> <C> <C>
Investment income:
Interest $ 3,965,042 $ 5,996,912
------------------------------------------------------------------------------
Total income 3,965,042 5,996,912
------------------------------------------------------------------------------
Expenses:
Management fees 379,825 646,968
Distribution and service fees(a) 99,717 359,241
Transfer agent fees(b) 77,953 205,929
Custodian fees 61,178 71,361
Registration fees 66,926 49,590
Professional fees 65,491 52,720
Trustee fees 10,418 9,693
Administration share fees 192 --
Service share fees 6,221 7
Other 9,425 573
------------------------------------------------------------------------------
Total expenses 777,346 1,396,082
------------------------------------------------------------------------------
Less-expenses reimbursed and fees waived (259,475) (238,048)
------------------------------------------------------------------------------
Net expenses 517,871 1,158,034
------------------------------------------------------------------------------
NET INVESTMENT INCOME 3,447,171 4,838,878
------------------------------------------------------------------------------
Realized and unrealized loss on investment and
futures transactions:
Net realized loss from:
Investment transactions (188,017) (1,466,733)
Futures transactions -- (4,683)
Net change in unrealized gain on:
Investments (1,991,940) (8,955,883)
Futures -- (24,920)
------------------------------------------------------------------------------
Net realized and unrealized loss on investment
and futures transactions (2,179,957) (10,452,219)
------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,267,214 $ (5,613,341)
------------------------------------------------------------------------------
</TABLE>
(a) Class A, Class B, and Class C of the following funds had distribution and
service fees of:
Short Duration Tax-Free Fund -- $55,585, $15,715, and $28,417, respectively.
Municipal Income Fund -- $233,311, $83,700, and $42,230, respectively.
(b) The following funds had transfer agency fees of:
Short Duration Tax-Free Fund -- $42,244, $2,986, $5,399, $26,795, $31 and
$498 for Class A, Class B, Class C, Institutional Class, Administration
Class, and Service Class, respectively.
Municipal Income Fund -- $177,316, $15,903, $8,024, $4,685, and $1 for Class
A, Class B, Class C, Institutional Class, and Service Class, respectively.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Statements of Changes in Net Assets
For the Year Ended October 31, 1999
<TABLE>
<CAPTION>
Short Duration Municipal
Tax-Free Fund Income Fund
<S> <C> <C>
From operations:
Net investment income $ 3,447,171 $ 4,838,878
Net realized loss on investment and futures (188,017) (1,471,416)
Net change in unrealized gain on investments
and futures (1,991,940) (8,980,803)
----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,267,214 (5,613,341)
----------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A shares (764,670) (3,988,967)
Class B shares (45,605) (294,527)
Class C shares (77,388) (148,156)
Institutional shares (2,578,390) (545,553)
Administration shares (2,735) --
Service shares (40,429) (68)
In excess of net investment income
Class A shares (27,843) (30,293)
Class B shares (1,661) (2,237)
Class C shares (2,818) (1,125)
Institutional shares (93,883) (4,143)
Administration shares (100) --
Service shares (1,472) (1)
From net realized gain on investment and
futures transactions
Class A shares -- (577,455)
Class B shares -- (47,276)
Class C shares -- (18,715)
Institutional shares -- (49,863)
Administration shares -- --
Service shares -- (10)
----------------------------------------------------------------------------
Total distributions to shareholders (3,636,994) (5,708,389)
----------------------------------------------------------------------------
From share transactions:
Proceeds from sales of shares 113,638,321 58,714,045
Reinvestment of dividends and distributions 3,252,382 4,377,689
Cost of shares repurchased (93,695,830) (38,312,817)
----------------------------------------------------------------------------
Net increase in net assets resulting from
share transactions 23,194,873 24,778,917
----------------------------------------------------------------------------
TOTAL INCREASE 20,825,093 13,457,187
----------------------------------------------------------------------------
Net assets:
Beginning of year 83,843,126 106,898,101
----------------------------------------------------------------------------
End of year $104,668,219 $120,355,288
----------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income $ (136,128) $ (39,224)
----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Statements of Changes in Net Assets
For the Year Ended October 31, 1998
<TABLE>
<CAPTION>
Short Duration Municipal
Tax-Free 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:
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.
20
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Notes to Financial Statements
October 31, 1999
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 and Municipal Income are diversified portfo-
lios offering five classes of shares -- Class A, Class B, Class C, Institu-
tional and Service. On July 20, 1999, the Administration Class shares of the
Short Duration Tax-Free Fund were liquidated and are no longer offered.
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 those estimates.
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.
21
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Notes to Financial Statements (continued)
October 31, 1999
The Short Duration Tax-Free and Municipal Income Funds, at their most re-
cent tax year-ends of October 31, 1999, had approximately the following
amount of capital loss carryforwards for U.S. federal tax purposes. These
amounts are available to be carried forward to offset future capital gains to
the extent permitted by applicable laws or regulations.
<TABLE>
<CAPTION>
Years of
Fund Amount Expiration
-------------------------------------------------------------------------------
<S> <C> <C>
Short Duration Tax-Free $3,843,000 2002-2007
-------------------------------------------------------------------------------
Municipal Income 2,045,000 2007
-------------------------------------------------------------------------------
</TABLE>
At October 31, 1999 the Funds' aggregate unrealized gains and losses based
on cost for federal income tax purposes was as follows:
<TABLE>
<CAPTION>
Tax Gross Gross Net Unrealized
Fund Cost Unrealized Gain Unrealized Loss Loss
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short Duration
Tax-Free $107,391,743 $107,488 $(1,455,969) $(1,348,481)
------------------------------------------------------------------------------
Municipal Income 126,915,198 530,389 (4,635,634) (4,105,245)
------------------------------------------------------------------------------
</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.
E. Segregation Transactions -- The Funds may enter into certain derivative
transactions to seek to increase total return. Forward foreign currency ex-
change contracts, futures contracts, written options, mortgage dollar rolls,
when-issued securities and forward commitments represent examples of such
transactions. As a result of entering into those transactions, the Funds are
required to segregate liquid assets on the accounting records equal to or
greater than the market value of the corresponding transactions.
3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a unit of the Investment Management
Division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as each Fund's in-
vestment adviser pursuant to Investment Management Agreements (the "Agree-
ments"). 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 related thereto and administering the Funds' business affairs,
including providing facilities, GSAM is entitled to a fee, computed daily and
payable monthly at an annual rate equal to .40% and .55% of the average daily
net assets of Short Duration Tax-Free and Municipal Income, respectively.
GSAM has voluntarily agreed to waive a portion of its management fee equal
annually to .05% of the average daily net assets of each Fund. For the year
ended October 31, 1999, GSAM waived approximately $47,000 and $59,000 of its
management fee attributable to the Short Duration Tax-Free and Municipal In-
come Funds, respectively. GSAM may discontinue or modify these waivers in the
future at its discretion.
22
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
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 exceed,
on an annual basis, .00% of the average daily net assets of each Fund. For
the year ended October 31, 1999, Goldman Sachs has agreed to reimburse ap-
proximately $210,000 and $179,000 to Short Duration Tax-Free and Municipal
Income, respectively.
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 $39,000 and $48,000 for the
year ended October 31, 1999 for Short Duration Tax-Free and Municipal Income,
respectively.
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 year ended October 31, 1999, Goldman Sachs has
waived approximately $2,000 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 the average daily net as-
sets for Class A, Class B and Class C shares and .04% of the 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 July 21, 1999, the Administra-
tion Plan was terminated due to the liquidation of the Administration Class
shares on July 20, 1999.
At October 31, 1999, the amounts owed to affiliates were as follows (in
thousands):
<TABLE>
<CAPTION>
Distribution Transfer
Management and Service Agent
Fund Fees Fees Fees Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short Duration Tax-Free $32 $ 8 $ 7 $ 47
------------------------------------------------------------------------------
Municipal Income 52 31 17 100
------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Notes to Financial Statements (continued)
October 31, 1999
4. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and proceeds of sales or maturities of long-term securities for the
year ended October 31, 1999, were as follows:
<TABLE>
<CAPTION>
Sales or
Fund Purchases Maturities
-------------------------------------------------------------------------------
<S> <C> <C>
Short Duration Tax-Free $162,196,358 $129,320,295
-------------------------------------------------------------------------------
Municipal Income 99,174,878 78,401,535
-------------------------------------------------------------------------------
</TABLE>
For the year ended October 31, 1999, Municipal Income incurred commission
expenses of approximately $1,000 in connection with futures contracts entered
into with Goldman Sachs.
Futures Contracts -- The Funds may enter into futures transactions in order
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'
strategies and potentially result in a loss. At October 31, 1999, neither
Fund had open futures contracts.
5. LINE OF CREDIT FACILITY
The Funds participated in a $250,000,000 uncommitted, unsecured revolving
line of credit facility which was terminated on April 30, 1999. Under the
most restrictive arrangement, each Fund must have owned securities having a
market value in excess of 300% of the total 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 mar-
ket 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 year ended October 31, 1999, the
Funds did not have any borrowings under any of these facilities.
6. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, Short Duration Tax-Free has
reclassified $8,351 from distributions in excess of net investment income to
paid-in capital. Municipal Income Fund has reclassified $199 and $1,226 from
distributions in excess of net investment income to paid-in capital and accu-
mulated net realized loss, respectively.
These reclassifications have no impact on the net asset value of the Funds
and are designed to present the Fund's capital accounts on a tax basis.
24
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
7. OTHER MATTERS (UNAUDITED)
During the year ended October 31, 1999, 100% of the distributions from net
investment income paid by Goldman Sachs Short Duration Tax-Free Fund and
Goldman Sachs Municipal Income Fund were exempt-interest dividends and as
such, are not subject to U.S. federal income tax.
8. CHANGE IN INDEPENDENT AUDITORS
On October 26, 1999 the Board of Trustees of the Funds, upon the recommenda-
tion of the Board's audit committee, determined not to retain Arthur Andersen
LLP and approved a change of the Funds' independent auditors to Ernst & Young
LLP. For the fiscal years ended October 31, 1999 and October 31, 1998, Arthur
Andersen LLP's audit reports contained no adverse opinion or disclaimer of
opinion; nor were their reports qualified or modified as to uncertainty, au-
dit scope, or accounting principles. Further, there were no disagreements be-
tween the Funds and Arthur Andersen LLP on accounting principles or
practices, financial statement disclosure or audit scope or procedure, which
if not resolved to the satisfaction of Arthur Andersen LLP would have caused
them to make reference to the disagreement in their report.
25
<PAGE>
GOLDMAN SACHS TAX-FREE FUNDS
Notes to Financial Statements (continued)
October 31, 1999
9. SUMMARY OF SHARE TRANSACTIONS
Share activity for the year ended October 31, 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 2,642,831 $ 26,739,478 2,487,407 $ 37,239,582
Reinvestment of dividends
and distributions 60,149 606,852 236,715 3,547,213
Shares repurchased (2,348,233) (23,756,336) (2,188,230) (32,704,920)
-------------------------------------
354,747 3,589,994 535,892 8,081,875
------------------------------------------------------------------------------
Class B Shares
Shares sold 143,414 1,452,458 311,533 4,688,547
Reinvestment of dividends
and distributions 3,915 39,401 15,176 227,116
Shares repurchased (41,468) (421,907) (97,942) (1,472,016)
-------------------------------------
105,861 1,069,952 228,767 3,443,647
------------------------------------------------------------------------------
Class C Shares
Shares sold 913,925 9,182,624 200,328 3,041,377
Reinvestment of dividends
and distributions 6,945 70,046 7,806 116,917
Shares repurchased (933,863) (9,362,292) (82,108) (1,208,599)
-------------------------------------
(12,993) (109,622) 126,026 1,949,695
------------------------------------------------------------------------------
Institutional Shares
Shares sold 7,455,342 75,314,086 919,438 13,744,539
Reinvestment of dividends
and distributions 247,700 2,495,701 32,665 486,364
Shares repurchased (5,553,387) (56,277,910) (198,983) (2,927,282)
-------------------------------------
2,149,655 21,531,877 753,120 11,303,621
------------------------------------------------------------------------------
Administration Shares(a)
Shares sold 42,409 431,432 -- --
Reinvestment of dividends
and distributions 155 1,575 -- --
Shares repurchased (94,101) (956,228) -- --
-------------------------------------
(51,537) (523,221) -- --
------------------------------------------------------------------------------
Service Shares
Shares sold 51,278 518,243 -- --
Reinvestment of dividends
and distributions 3,822 38,807 5 79
Shares repurchased (289,195) (2,921,157) -- --
-------------------------------------
(234,095) (2,364,107) 5 79
------------------------------------------------------------------------------
NET INCREASE 2,311,638 $ 23,194,873 1,643,810 $ 24,778,917
------------------------------------------------------------------------------
</TABLE>
(a) Short Duration Tax-Free Administration Class shares were liquidated on
July 20, 1999.
26
<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>
27
<PAGE>
GOLDMAN SACHS SHORT DURATION TAX-FREE FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income (loss) from Distributions to
investment operations(a) shareholders
-------------------------- ---------------------
Net realized
and unrealized Net
Net asset gain (loss) In excess increase
value, Net on investment From net of net (decrease)
beginning investment and futures investment investment in net
of period income transactions income income asset value
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C>
1999 - Class A
Shares $10.19 $0.34 $(0.24) $(0.34) $(0.02) $(0.26)
1999 - Class B
Shares 10.18 0.28 (0.23) (0.28) (0.02) (0.25)
1999 - Class C
Shares 10.18 0.26 (0.22) (0.26) (0.03) (0.25)
1999 - Institutional
Shares 10.18 0.38 (0.23) (0.39) (0.01) (0.25)
1999 -
Administration
Shares(f) 10.18 0.26(e) (0.12)(e) (0.27) -- (0.13)
1999 - Service Shares 10.18 0.33(e) (0.24)(e) (0.33) (0.02) (0.26)
----------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------
</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.
(f) Administration Class shares were liquidated on July 20, 1999. Ending net
asset value shown as of July 20, 1999.
The accompanying notes are an integral part of these financial statements.
28
<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>
$ 9.93 1.00% $22,903 0.79% 3.37% 1.06% 3.10% 147.20%
9.93 0.49 2,000 1.39 2.80 1.81 2.38 147.20
9.93 0.34 2,070 1.54 2.62 1.81 2.35 147.20
9.93 1.50 77,522 0.39 3.79 0.66 3.52 147.20
10.05(f) 1.37(d) -- 0.64(c) 3.56(c) 0.91(c) 3.29(c) 147.20
9.92 0.89 173 0.89 3.23 1.16 2.96 147.20
--------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------------------
</TABLE>
29
<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 YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $15.47 $0.63 $(1.29) $(0.65) $ -- $(0.09) $(1.40)
1999 - Class B Shares 15.47 0.51 (1.28) (0.52) (0.01) (0.09) (1.39)
1999 - Class C Shares 15.47 0.51 (1.28) (0.51) (0.02) (0.09) (1.39)
1999 - Institutional
Shares 15.47 0.70 (1.30) (0.70) (0.01) (0.09) (1.40)
1999 - Service Shares 15.48 0.65 (1.32) (0.63) -- (0.09) (1.39)
-------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------
</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.
30
<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>
$14.07 (4.46)% $90,443 0.94% 4.15% 1.14% 3.95% 70.31%
14.08 (5.10) 9,334 1.69 3.40 1.89 3.20 70.31
14.08 (5.10) 4,379 1.69 3.40 1.89 3.20 70.31
14.07 (4.07) 16,197 0.54 4.58 0.74 4.38 70.31
14.09 (4.49) 2 1.04 4.35 1.24 4.15 70.31
- -----------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
GOLDMAN SACHS TRUST - TAX-FREE FUNDS
Report of Independent Public Accountants
To the Shareholders and Board of Trustees of Goldman Sachs Trust -- Tax-Free
Fixed Income Funds:
We have audited the accompanying statements of assets and liabilities of
Goldman Sachs Short Duration Tax-Free Fund and Municipal Income Fund, two of
the portfolios constituting Goldman Sachs Trust -- Fixed Income Funds (a Del-
aware Business Trust), including the statements of investments, as of October
31, 1999, and the related statements of operations, the statements of changes
in net assets and the financial highlights for the periods presented. These
financial statements and the financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and the
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1999 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of Goldman Sachs Short Duration Tax-Free Fund and Municipal Income
Fund as of October 31, 1999, the results of their operations, the changes in
their net assets and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 10, 1999
32
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs Tax-Free Funds
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:
1 Global Resources
With professionals based throughout the Americas, Europe and Asia, Goldman Sachs
possesses first-hand knowledge of the world's markets and economies.
2 Fundamental Research
Goldman Sachs is recognized by the managements of corporations worldwide as a
leader in investment research. As a result, we obtain face-to-face meetings with
managers on a timely, regular basis.
3 Risk Management
Goldman, Sachs & Co. excels in understanding, monitoring and managing investment
risk -- a process that is integrated into all Goldman Sachs investment products.
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
[CHART]
HIGH YIELD
. High Yield Fund
TAXABLE
. Global Income Fund
. Core Fixed Income Fund
. Government Income Fund
. Short Duration Government Fund
. Adjustable Rate Government Fund
TAX-FREE
. Municipal Income Fund
. Short Duration Tax-Free Fund
For More Information
To learn more about Goldman Sachs Tax-Free Funds and other Goldman Sachs Funds,
call your investment professional today.
* The exchange privilege is subject to termination and its terms are subject to
change.
<PAGE>
GOLDMAN SACHS ASSET MANAGEMENT 32 OLD SLIP, 17TH FLOOR, NEW YORK, NEW YORK 10005
TRUSTEES OFFICERS
Ashok N. Bakhru, Chairman Douglas C. Grip, President
David B. Ford Jesse H. Cole, Vice President
Douglas C. Grip James A. Fitzpatrick, Vice President
John P. McNulty Nancy L. Mucker, Vice President
Mary P. McPherson John M. Perlowski, Treasurer
Alan A. Shuch Adrien E. Deberghes, Jr., Assistant Treasurer
Jackson W. Smart, Jr. Philip V. Giuca, Jr., Assistant Treasurer
William H. Springer Michael J. Richman, Secretary
Richard P. Strubel Amy E. Belanger, Assistant Secretary
Howard B. Surloff, Assistant Secretary
Kaysie Uniacke, 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 High Yield Fund invests primarily in high yield, lower rated
securities which involve greater price volatility and present greater risks than
higher rated fixed income securities. At times, the Fund may be unable to sell
certain of its portfolio securities without a substantial drop in price, if at
all.
Goldman Sachs Global Income Fund's, Goldman Sachs High Yield Fund's and Goldman
Sachs Core Fixed Income Fund's foreign investments may be more volatile than an
investment in U.S. securities and are subject to the risks of currency
fluctuations and political developments.
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.
Investment income may be subject to state income taxes.
(c) Copyright 1999 Goldman, Sachs & Co. All rights reserved. Date of first use:
December 31, 1999 FI/TFAR / 7K /12-99
