<PAGE>
Goldman Sachs Funds
- --------------------------------------------------------------------------------
TAXABLE INVESTMENT GRADE FUNDS Annual Report October 31, 1999
- --------------------------------------------------------------------------------
Current income potential from
portfolios that invest in a
variety of fixed income securities.
[GRAPHIC]
[LOGO OF GOLDMAN SACHS]
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Market Overview
Dear Shareholder:
Over the course of the year ended October 31, 1999, the world's bond markets
demonstrated mixed performance.
Market Review
. The Dollar Bloc -- In the U.S., a weak global economy and few
signs of domestic inflation led the Federal Reserve Board (the
"Fed") to ease credit -- a stance that was reversed later in the
period amid higher-than-expected growth rates. In the ensuing
months, with no slowdown in growth, low unemployment and an
increase in commodity prices, the general consensus was that it
wouldn't be long before the Fed moved to raise rates. As a
result, interest rates rose significantly across the curve and
the move, when it came, had little impact on the bond market as a
whole. As the review period drew to a close, strong growth and
building inflationary pressures, particularly in the labor
market, pushed U.S. Treasuries yields higher.
Elsewhere, New Zealand, Canada and Australia initially
outperformed U.S. Treasuries, but with somewhat lackluster
results. For the remainder of the period, however, New Zealand
and Australia underperformed the U.S., while Canadian bonds
outpaced the U.S. market.
. Europe -- Initially, coordinated cuts in interest rates,
sometimes by larger-than-expected margins, helped the European
markets to outperform U.S. Treasuries. Thereafter, however, a
series of stronger-than-anticipated economic releases appeared
across Europe and the UK, and it soon became apparent that Europe
was in the midst of a broad-based recovery. Bond yields rose in
response to expectations that the European Central Bank would
move to raise rates.
. Japan -- At the start of the period, despite an extremely weak
economy and deflationary pressures, the Japanese bond market fell
sharply following a Government announcement that the
Institutional Bureau would no longer be purchasing government
bonds. This was followed by a prolonged rally that resulted from
a number of factors, including a softening of the Government
position, falling growth and increased confidence. More recently,
bond yields moved higher in the wake of improved economic
conditions and indications that further fiscal stimulus was in
the offing.
Outlook
Notwithstanding an improved global growth outlook, inflationary
pressures remain benign as productivity gains, brought about by
the introduction of technological advances such as the Worldwide
Web, continue to keep price pressures in check. Therefore--with
the exception of Japan, where the prospect of continued growth
and further fiscal stimulus will place pressure on yields--we
expect current yield levels will be maintained until well into
2000, and consequently maintain an overall neutral position on
the world's bond markets.
We encourage you to maintain your investment program, and we look
forward to serving your investment needs in the years to come.
Sincerely,
/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
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NOT FDIC-INSURED
- --------------------------------------------------------------------------------
May Lose Value
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No Bank Guarantee
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<PAGE>
FUND BASICS
Adjustable Rate Government Fund
as of October 31, 1999
Assets Under Management
$338.7 Million
NASDAQ SYMBOLS
Class A Shares
GSAMX
Institutional Shares
GSARX
Service Shares
GSASX
<TABLE>
<CAPTION>
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PERFORMANCE REVIEW
- -------------------------------------------------------------------------------------------------
October 31, 1998- Fund Total Return 30-Day 6-Month 1-Year
October 31, 1999 (based on NAV)/1/ Standardized Yield/2/ U.S. Treasury/3/ U.S. Treasury/3/
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A 4.65% 4.94% 4.54% 3.97%
Institutional 5.06% 5.43% 4.54% 3.97%
Service 4.65% 4.92% 4.54% 3.97%
- -------------------------------------------------------------------------------------------------
</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 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.
/3/ The 6-Month and 1-Year U.S. Treasury securities reported by Merrill Lynch
do not reflect any fees or expenses.
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STANDARDIZED TOTAL RETURNS
- --------------------------------------------------------------------------------
For the period ending 9/30/99 Class A Institutional Service
- --------------------------------------------------------------------------------
One Year/4/ 2.35% 4.44% 3.93%
Five Years/4/ N/A 5.80% N/A
Since Inception/4/ 5.04% 5.30% 4.62%
(5/15/95) (7/17/91) (3/27/97)
- --------------------------------------------------------------------------------
/4/ 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
1.5% for Class A shares. 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 10/31/99/5/
- --------------------------------------------------------------------------------
Sector Allocation
- --------------------------------------------------------------------------------
Adjustable Rate Mortgage Securities 71.7%
Collateralized Mortgage Obligations 14.1%
Fixed Rate Pass-Throughs 7.9%
Agency Debentures 3.0%
Cash Equivalents 2.8%
- --------------------------------------------------------------------------------
/5/ Figures represent a percentage of net assets and may not sum to 100%. The
Fund is actively managed and, as such, its composition may differ over
time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects expense limitations in effect. In their absence, performance would
be reduced.
1
<PAGE>
PERFORMANCE OVERVIEW
Adjustable Rate Government Fund
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Adjustable Rate
Government Fund for the year ended October 31, 1999.
Performance Review
Over the year ended October 31, 1999, the Fund's Institutional, A and
Service shares generated annual total returns, at net asset value, of
5.06%, 4.65% and 4.65%, respectively. These returns outperformed the
Fund's benchmarks, the six-month U.S. Treasury bill and the one-year
U.S. Treasury bill, which returned 4.54% and 3.97%, respectively.
Investment Objective
The Fund seeks a high level of current income consistent with low
volatility of principal, primarily through investments in securities
issued by the U.S. government, its agencies, instrumentalities or
sponsored enterprises that are adjustable rate mortgage pass-through
securities and other mortgage securities with periodic interest rate
resets.
Portfolio Composition
We maintained our strategy of focusing on sectors and securities that
we believe will generate a competitive total rate of return relative
to the benchmark, while de-emphasizing directional duration management
(when the Fund's duration is managed to closely follow that of its
benchmark).
Portfolio Highlights
. Adjustable Rate Mortgages (ARMs) (62.3% on October 31, 1998 to 71.7%
on October 31, 1999) -- As fundamental and technical influences turned
more positive -- mainly attributable to an improved prepayment
environment -- the Fund's allocation to ARMs increased substantially.
Toward the end of the period, strong investor demand provided
additional support for the sector.
. Collateralized Mortgage Obligations (CMOs) (12.2% on October 31, 1998
to 14.1% on October 31, 1999) -- The Fund's allocation to CMOs
remained relatively unchanged over the fiscal year. Holdings were
generally concentrated in floaters and short-duration planned
amortization class CMOs.
. Agency Debentures (3.2% on October 31, 1998 to 3.0% on October 31,
1999) - - We opportunistically reallocated out of the agency debenture
sector, into the adjustable rate mortgage sector.
2
<PAGE>
PERFORMANCE OVERVIEW
FIXED INCOME
INVESTMENT
PROCESS OVERVIEW
- --------------------------------------------------------------------------------
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.
Portfolio Outlook
Our outlook remains somewhat guarded, especially as we approach
year-end. We continue to expect that uncertainty surrounding Y2K may
add to existing investor skittishness and lead to pockets of spread
volatility going forward. As a result, we will continue to approach
the management of the Fund opportunistically -- reallocating assets
only where relative value exists.
We thank you for your investment and look forward to your continued
confidence.
Goldman Sachs U.S. Fixed Income Investment Management Team
November 30, 1999
3
<PAGE>
FUND BASICS
Short Duration Government Fund
as of October 31, 1999
Assets Under Management
$218.9 Million
NASDAQ SYMBOLS
Class A Shares
GSSDX
Class B Shares
GSDGX
Class C Shares
GSDCX
Institutional Shares
GSTGX
Service Shares
GSDSX
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
PERFORMANCE REVIEW
- ----------------------------------------------------------------------------------
October 31, 1998- Fund Total Return 30-Day 2-Year U.S.
October 31, 1999 (based on NAV)/1/ Standardized Yield/2/ Treasury Security/3/
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 1.97% 5.53% 1.47%
Class B 1.56% 5.04% 1.47%
Class C 1.21% 4.90% 1.47%
Institutional 2.49% 6.05% 1.47%
Service 1.97% 5.55% 1.47%
- ----------------------------------------------------------------------------------
</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 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.
/3/ The 2-Year U.S. Treasury security does not reflect any fees or expenses.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURNS
- ----------------------------------------------------------------------------------------
For the period ending 9/30/99 Class A Class B Class C Institutional Service
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year/4/ -0.21% -0.85% -0.09% 2.20% 1.69%
Five Years/4/ N/A N/A N/A 6.37% N/A
Ten Years/4/ N/A N/A N/A 6.50% N/A
Since Inception/4/ 4.22% 4.08% 3.71% 6.78% 5.41%
(5/1/97) (5/1/97) (8/15/97) (8/15/88) (4/10/96)
- ----------------------------------------------------------------------------------------
</TABLE>
/4/ 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 10/31/99/5/
- --------------------------------------------------------------------------------
Sector Allocation
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligations 41.4%
Fixed Rate Pass-Throughs 30.2%
Adjustable Rate Mortgage Securities 20.4%
Cash Equivalents 8.4%
Agency Debentures 6.9%
U.S. Treasuries 1.1%
- --------------------------------------------------------------------------------
/5/ Figures represent a percentage of net assets and may not sum to 100%. The
Fund is actively managed and, as such, its composition may differ over
time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers and expense limitations in effect. In their absence,
performance would be reduced.
4
<PAGE>
PERFORMANCE OVERVIEW
Short Duration Government Fund
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Short Duration
Government 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 total cumulative returns,
at net asset value, of 1.97%, 1.56%, 1.21%, 2.49%, and 1.97%,
respectively. These figures generally outperformed the 1.47% return of
the Fund's benchmark, the two-year U.S. Treasury security. The Fund's
performance relative to its benchmark is due to spread tightening that
occurred in non-Treasury sectors over the past year.
Investment Objective
The Fund seeks a high level of current income and, secondarily, in
seeking current income, may also consider the potential for capital
appreciation, primarily through investing in U.S. government
securities and repurchase agreements collateralized by such
securities.
Portfolio Composition
During the period, we maintained our strategy of focusing on sectors
and securities that we believe will generate a competitive total rate
of return relative to the benchmark, while de-emphasizing directional
duration management (when the Fund's duration is managed to closely
follow that of its benchmark).
Portfolio Highlights
. Collateralized Mortgage Obligations (CMOs) (39.8% on October 31, 1998
to 41.4% on October 31, 1999) and Fixed Rate Pass-Throughs (17.6% on
October 31, 1998 to 30.2% on October 31, 1999) -- We increased the
Fund's allocations to CMOs and Fixed Rate Pass-Throughs over the
period in response to the cheapening of the sector following 1998's
liquidity crisis. Holdings over the period were concentrated in
floaters and short-duration sequentials and planned amortization class
securities (PACs).
. Adjustable Rate Mortgage Securities (ARMs) (12.4% on October 31, 1998
to 20.4% on October 31, 1999) -- The Fund's allocation to ARMs
increased substantially during the period, as both fundamental and
technical influences turned more positive. That is, refinancing
incentives became less compelling and new issuance activity slowed.
Toward the end of the period, strong investor demand for floating rate
product provided additional support for the sector.
. U.S. Treasuries (19.6% on October 31, 1998 to 1.1% on October 31,
1999) -- We opportunistically allocated out of the Treasury sector
into spread sectors throughout the fiscal year.
5
<PAGE>
PERFORMANCE OVERVIEW
FIXED INCOME
INVESTMENT
PROCESS OVERVIEW
- --------------------------------------------------------------------------------
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.
Portfolio Outlook
Our outlook remains somewhat guarded, especially as we approach
year-end. We continue to expect that uncertainty surrounding Y2K may
add to existing investor skittishness and lead to pockets of spread
volatility going forward. As a result, we will continue to approach
the management of the Fund opportunistically -- reallocating assets
only where we believe relative value exists.
More specifically, although current spreads in the mortgage market are
providing less of a cushion against widening than they have in the
recent past, solid fundamentals -- stable-to-modestly higher Treasury
rates and diminished prepayment uncertainty -- argue against paring
back the Fund's exposure at this time. Therefore, we will continue to
emphasize lower volatility collateral within the pass-through sector,
and well-structured PACs and sequentials in the CMO sector.
We thank you for your investment and look forward to your continued
confidence.
Goldman Sachs U.S. Fixed Income Investment Management Team
November 30, 1999
6
<PAGE>
FUND BASICS
Government Income Fund
as of October 31, 1999
Assets Under Management
$117.8 Million
NASDAQ SYMBOLS
Class A Shares
GSGOX
Class B Shares
GSOBX
Class C Shares
GSOCX
Institutional Shares
GSOIX
Service Shares
GSOSX
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
PERFORMANCE REVIEW
- ----------------------------------------------------------------------------------
October 31, 1998- Fund Total Return 30-Day Lehman Govt./
October 31, 1999 (based on NAV)/1/ Standardized Yield/2/ Mortgage Index/3/
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A -0.63% 5.74% 0.50%
Class B -1.29% 5.26% 0.50%
Class C -1.29% 5.26% 0.50%
Institutional -0.23% N/A 0.50%
Service -1.01% N/A 0.50%
- --------------------------------------------------------------------------------
</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 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.
/3/ The Lehman Brothers Government/Mortgage Index does not reflect any fees or
expenses.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURNS
- ----------------------------------------------------------------------------------------
For the period ending 9/30/99 Class A Class B Class C Institutional Service
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year/4/ -5.81% -7.06% -3.16% -1.05% -2.02%
Five Years/4/ 6.39% N/A N/A N/A 7.20%
Since Inception/4/ 5.54% 4.68% 4.31% 5.43% 6.14%
(2/10/93) (5/1/96) (8/15/97) (8/15/97) (2/10/93)/5/
- ----------------------------------------------------------------------------------------
</TABLE>
/4/ 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.
/5/ 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 10/31/99/6/
- --------------------------------------------------------------------------------
Sector Allocation
- --------------------------------------------------------------------------------
Mortgage-Backed Securities 59.7%
Asset-Backed Securities 15.5%
Cash Equivalents 13.2%
U.S. Treasuries 12.2%
Agency Debentures 10.7%
Municipal Bonds 1.7%
- --------------------------------------------------------------------------------
/6/ Figures represent a percentage of net assets and may not sum to 100% . The
Fund is actively managed and, as such, its composition may differ over
time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers and expense limitations in effect. In their absence,
performance would be reduced.
7
<PAGE>
PERFORMANCE OVERVIEW
Government Income Fund
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Government
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 annual total returns, at
net asset value, of -0.63%, -1.29%, -1.29%, -0.23%, and -1.01%,
respectively. Over the same time period, the Fund's benchmark, the
Lehman Brothers Mutual Fund Government/Mortgage Index, generated a
0.50% annual total return.
Investment Objective
The Fund seeks a high level of current income consistent with safety
of principal, primarily through investing in U.S. government
securities and repurchase agreements collateralized by such
securities.
Portfolio Composition
During the period, we maintained our strategy of focusing on sectors
and securities that we believe will generate a competitive total rate
of return relative to the benchmark, while de-emphasizing directional
duration management (when the Fund's duration is managed to closely
follow that of its benchmark).
Portfolio Highlights
. Mortgage-Backed Securities (MBS) (58.1% on October 31, 1998 to 59.7%
on October 31, 1999) -- During the 12-month period, we slightly
increased the Fund's overweighting to mortgage securities in response
to the cheapening of the sector following 1998's liquidity crisis.
. U.S. Treasuries (16.1% on October 31, 1998 to 12.2% on October 31,
1999) -- We opportunistically allocated out of the Treasury sector
into other sectors throughout the fiscal year.
. Asset-Backed Securities (ABS) (15.8% on October 31, 1998 to 15.5% on
October 31, 1999) -- The Fund's position in asset-backed securities
remained relatively unchanged during the period under review.
. Insured Revenue Bonds (Municipal Bonds) (1.8% on October 31, 1998 to
1.7% on October 31, 1999) -- We maintained a small position in
municipal bonds during the period under review.
8
<PAGE>
PERFORMANCE OVERVIEW
FIXED INCOME
INVESTMENT
PROCESS OVERVIEW
- --------------------------------------------------------------------------------
Sector
Allocation
- --------------------------------------------------------------------------------
Our sector specialists work together to assess relative value among sectors and
create investment strategies to meet each fund's objectives.
- --------------------------------------------------------------------------------
Security
Selection
- --------------------------------------------------------------------------------
In selecting securities for each portfolio, our fixed income teams have access
to the vast resources of Goldman Sachs.
- --------------------------------------------------------------------------------
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.
Portfolio Outlook
Our outlook remains somewhat guarded, especially as we approach
year-end. We continue to expect that uncertainty surrounding Y2K may
add to existing investor skittishness and lead to pockets of spread
volatility going forward. As a result, we will continue to approach
the management of the Fund opportunistically -- reallocating assets
only where we believe relative value exists.
Over the long term, we favor mortgages, specifically seasoned
non-agency mortgages and, in particular, mortgage-related
non-amortizing (NAS) asset- backed securities offering strong upside
potential.
Over the short term, we anticipate that heavy issuance in the ABS
sector will place pressure on spreads. However, the resulting
increased supply should have a long-term positive influence on the
sector.
We thank you for your investment and look forward to your continued
confidence.
Goldman Sachs U.S. Fixed Income Investment Management Team
November 30, 1999
9
<PAGE>
FUND BASICS
Core Fixed Income Fund
as of October 31, 1999
Assets Under Management
$312.6 Million
NASDAQ SYMBOLS
Class A Shares
GCFIX
Class B Shares
GCFBX
Class C Shares
GCFCX
Institutional Shares
GSFIX
Service Shares
GSCSX
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
October 31, 1998- Fund Total Return 30-Day Lehman Aggregate
October 31, 1999 (based on NAV)/1/ Standardized Yield/2/ Bond Index/3/
- --------------------------------------------------------------------------------
Class A -0.68% 6.17% 0.54%
Class B -1.47% 5.71% 0.54%
Class C -1.51% 5.72% 0.54%
Institutional -0.37% 6.87% 0.54%
Service -0.87% 6.37% 0.54%
- --------------------------------------------------------------------------------
/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 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.
/3/The Lehman Aggregate Bond Index does not reflect any fees or expenses.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURNS
- ----------------------------------------------------------------------------------------
For the period ending 9/30/99 Class A Class B Class C Institutional Service
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year/4/ -6.06% -7.18% -3.40% -1.20% -1.70%
Since Inception/4/ 3.98% 3.94% 4.14% 6.15% 5.83%
(5/1/97) (5/1/97) (8/15/97) (1/5/94) (3/13/96)
- ----------------------------------------------------------------------------------------
</TABLE>
/4/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.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF 10/31/99/5/
- --------------------------------------------------------------------------------
Sector Allocation
- --------------------------------------------------------------------------------
Mortgage-Backed Securities 42.6% U.S. Treasuries 4.2%
Corporate Bonds 35.0% Emerging Market Debt 1.7%
Cash Equivalents 15.9% Sovereign Credit 1.3%
Asset-Backed Securities 9.6% Agency Debentures 0.7%
- --------------------------------------------------------------------------------
/5/Figures represent a percentage of net assets and may not sum to 100%. The
Fund is actively managed and, as such, its composition may differ over
time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers and expense limitations in effect. In their absence,
performance would be reduced.
10
<PAGE>
PERFORMANCE OVERVIEW
Core Fixed Income Fund
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Core Fixed
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 share classes generated annual total
returns, at net asset value, of -0.68%, -1.47%, -1.51%, -0.37%, and
-0.87%, respectively. Over the same time period, the Fund's benchmark,
the Lehman Brothers Aggregate Bond Index, generated a return of 0.54%.
Investment Objective
The Fund seeks total return consisting of capital appreciation and
income that exceeds that of the Lehman Brothers Aggregate Bond Index,
primarily through fixed-income securities, including securities issued
or guaranteed by the U.S. government, its agencies, instrumentalities
or sponsored enterprises, corporate debt securities, mortgage-backed
securities and asset-backed securities.
Portfolio Composition
During the period, we maintained our strategy of focusing on sectors
and securities that we believe will generate a competitive total rate
of return relative to the benchmark, while de-emphasizing directional
duration management (when the Fund's duration is managed to closely
follow that of its benchmark). Therefore, during the period under
review, we underweighted Treasury and agency securities relative to
the benchmark, and overweighted corporate, mortgage- and asset-backed,
and emerging market debt securities.
Portfolio Highlights
. Mortgage-Backed Securities (MBS) (39.2% on October 31, 1998 to 42.6%
on October 31, 1999) -- We increased the Fund's overweighting of
mortgage securities during the period in response to the cheapening
of the sector following 1998's liquidity crisis. Currently, MBS
remain attractive relative to the sector's historical long-term
trading range.
. Corporates (28.3% on October 31, 1998 to 35.0% on October 31, 1999)
-- We increased the Fund's allocation to corporates after spreads
widened dramatically in September and October 1998. Since then,
despite some supply pressures and Y2K-related issues, the position
has remained relatively unchanged as we believe that the corporate
sector represents attractive value.
. Asset-Backed Securities (ABS) (11.9% on October 31, 1998 to 9.6% on
October 31, 1999) -- The Fund's position in asset-backed securities
decreased slightly during the period as we opportunistically
allocated out of the sector into mortgage-backed securities and
corporates.
11
<PAGE>
PERFORMANCE OVERVIEW
FIXED INCOME
INVESTMENT
PROCESS OVERVIEW
- --------------------------------------------------------------------------------
Sector
Allocation
- --------------------------------------------------------------------------------
Our sector specialists work together to assess relative value among sectors and
create investment strategies to meet each fund's objectives.
- --------------------------------------------------------------------------------
Security
Selection
- --------------------------------------------------------------------------------
In selecting securities for each portfolio, our fixed income teams have access
to the vast resources of Goldman Sachs.
- --------------------------------------------------------------------------------
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.
. U.S. Treasuries (17.5% on October 31, 1998 to 4.2% on October 31,
1999) -- The Fund's position in U.S. Treasuries declined as we
increased holdings in spread sectors.
. Emerging Market Debt (EMD) (1.4% on October 31, 1998 to 1.7% on
October 31, 1999) -- Early in the period, we chose to increase
exposure to EMD as global risk factors such as Brazil, Asia and
commodities prices all pointed toward a more stable outlook for
spreads. Since then, we have reduced our exposure to Asia, as we
feel that most of the spread tightening has run its course there.
However, we remain very comfortable with credit fundamentals there
and in other emerging regions.
Portfolio Outlook
Going forward, we continue to expect that uncertainty surrounding Y2K
may increase investor nervousness and lead to pockets of spread
volatility going forward. As a result, we will continue to approach
the management of fixed income portfolios opportunistically -- that
is, reallocating assets based upon the results of relative value
analysis.
Based on our fundamental view of the corporate sector and the domestic
economy, we will continue to overweight corporates versus the
benchmark. Likewise, our outlook for the mortgage market remains
positive. We feel that these securities are attractively valued and,
therefore, we believe that we are well compensated for liquidity and
prepayment risks. In the EMD sector, given our outlook for a favorable
global macroeconomic landscape in 2000, we feel that there is some
additional potential for spread narrowing over the next 12 months.
Risks to this scenario include possible political uncertainty in
Mexico surrounding presidential elections in July 2000, and the
potential need for aggressive monetary policy tightening in the U.S.
and Europe should inflation exceed current expectations. Finally, we
believe the ABS sector is fairly valued relative to other sectors, but
cheap on a historical basis. We feel that spreads may improve as the
majority of new issuance is behind us.
We thank you for your investment and look forward to your continued
confidence.
Goldman Sachs U.S. Fixed Income Investment Management Team
November 30, 1999
12
<PAGE>
FUND BASICS
Global Income Fund
as of October 31, 1999
Assets Under Management
$577.1 Million
NASDAQ SYMBOLS
Class A Shares
GSGIX
Class B Shares
GSLBX
Class C Shares
GSLCX
Institutional Shares
GSGLX
Service Shares
GGISX
- --------------------------------------------------------------------------------
PERFORMANCE REVIEW
- --------------------------------------------------------------------------------
October 31, 1998- Fund Total Return 30-Day JPM Global Govt.
October 31, 1999 (based on NAV)1 Standardized Yield2 Bond Index3
- --------------------------------------------------------------------------------
Class A -1.14% 3.69% 1.09%
Class B -1.74% 3.37% 1.09%
Class C -1.68% 3.37% 1.09%
Institutional -0.49% 4.52% 1.09%
Service -1.06% 4.02% 1.09%
- --------------------------------------------------------------------------------
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 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.
3 The composition and characteristics of the securities in the JP Morgan
(JPM) Global Government Bond Index (hedged) are not identical to those of
the Fund. Also, unlike the Fund's return, the Index's return does not
reflect any fees or expenses.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURNS
- ----------------------------------------------------------------------------------------
For the period ending 9/30/99 Class A Class B Class C Institutional Service
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Year4 -6.45% -7.36% -3.46% -1.38% -1.94%
Five Years4 8.00% N/A N/A N/A 9.06%
Since Inception4 6.91% 6.09% 5.54% 8.95% 7.55%
(8/2/91) (5/1/96) (8/15/97) (8/1/95) (8/2/91)5
- ----------------------------------------------------------------------------------------
</TABLE>
4 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.
5 Performance data for Service shares prior to 3/12/97 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.
- --------------------------------------------------------------------------------
TOP POSITIONS AS OF 10/31/996
- --------------------------------------------------------------------------------
Bonds Denomination Bonds Denomination
- --------------------------------------------------------------------------------
1. U.S. Dollar 31.8% 6. Danish Krone 1.9%
2. Euro Currency 24.7% 7. Swedish Krona 1.7%
3. Japanese Yen 19.7% 8. New Zealand Dollar 1.7%
4. British Pound 10.3% 9. U.S. Dollar Cash Equivalents 1.6%
5. German Mark 3.4% 10. Australian Dollar 0.4%
- --------------------------------------------------------------------------------
6 Figures represent a percentage of net assets and may not sum to 100%. The
Fund is actively managed and, as such, its composition may differ over
time.
Total return figures represent past performance and do not indicate future
results, which will vary. The investment return and principal value of an
investment will fluctuate and, therefore, an investor's shares, when
redeemed, may be worth more or less than their original cost. Performance
reflects fee waivers and expense limitations in effect. In their absence
performance would be reduced.
13
<PAGE>
PERFORMANCE OVERVIEW
Global Income Fund
Dear Shareholder,
We are pleased to report on the performance of the Goldman Sachs Global
Income Fund for the 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 annual total returns, at
net asset value, of -1.14%, -1.74%, -1.68%, -0.49% and -1.06%,
respectively. Over the same time period, the Fund's benchmark, the JP
Morgan Global Government Bond Index (hedged into U.S. dollars),
generated a 1.09% return.
The Fund's underperformance versus its benchmark is attributable to
several factors. A move to an underweight position in Japanese bonds
early in 1999 was detrimental to performance when that market
experienced an extended rally beginning mid-year. Additionally, an
overweighting to European bonds detracted from performance late in the
period when, despite a subdued inflationary environment, the market
reacted to signs that the economy was growing at a strong pace.
Finally, the UK had a negative impact on performance when the yield
curve underwent a sharp inversion. (From March 31, 1999 through
October 31, 1999, the 30-year yield remained unchanged, while the
five-year yield rose 1.50%.)
Investment Objective
The Fund seeks high total return, emphasizing current income, and, to
a lesser extent, providing opportunities for capital appreciation
primarily through investments in fixed income securities of U.S. and
foreign issuers and through transactions in foreign currencies.
Portfolio Positioning
The Fund began the year with an overweight position in the Dollar
bloc, but moved to an underweight position when analysis led us to
believe that the U.S. economy would grow at a fairly robust pace. We
added to our positions in Australia and New Zealand, a decision
supported by our favorable inflationary outlook for these countries
and the existence of tight monetary conditions.
We maintained an overweight position in Europe relative to the U.S.
for much of the period, given the presence of what we viewed as
positives for the bond market (weak growth, declining inflation and
poor business confidence). As discussed in the Performance Review
section, this stance proved detrimental to performance. In Japan, we
ended the period as we started it, positioned neutrally, after having
moved to an underweight position mid-year.
14
<PAGE>
PERFORMANCE OVERVIEW
FIXED INCOME
INVESTMENT
PROCESS OVERVIEW
- --------------------------------------------------------------------------------
Sector
Allocation
- --------------------------------------------------------------------------------
Our sector specialists work together to assess relative value among sectors and
create investment strategies to meet each fund's objectives.
- --------------------------------------------------------------------------------
Security
Selection
- --------------------------------------------------------------------------------
In selecting securities for each portfolio, our fixed income teams have access
to the vast resources of Goldman Sachs.
- --------------------------------------------------------------------------------
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.
Portfolio Outlook
We presently favor the U.S. bond market relative to the European bond
markets. This position is based on our opinion that the U.S. is at the
end of a growth cycle, while the European economies appear poised to
enter a period of sustained growth. Although a recent 50-basis-point
rate increase by the European Central Bank (ECB) is likely to leave
rates on hold through the new year, we believe continued growth will
reduce excess capacity. This will likely lead to further rate
increases by the ECB, which in turn will place further upward pressure
on yields, particularly in the shorter maturities.
In Japan, we expect continuing improvement in growth, combined with
further fiscal stimulus (in the form of a US$17 billion stimulus
package), will weigh heavily on the bond market. However, we do not
foresee a dramatic increase in Japanese interest rates, as the "zero
interest rate" policy adopted by the Bank of Japan is likely to remain
in place through much of 2000.
We thank you for your investment and look forward to your continued
confidence.
Goldman Sachs Global Fixed Income Investment Management Team
November 30, 1999
15
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
The Goldman Sachs Advantage
Founded in 1869, Goldman, Sachs & Co. is a premier financial services firm
traditionally known on Wall Street and around the world for its
institutional expertise.
Today, the firm's Asset Management Division provides individual
investors the opportunity to tap the resources of a global
institutional powerhouse -- and put this expertise to work in their
individual portfolios.
What Sets Goldman Sachs Funds Apart?
1
Resources and Relationships
Our porfolio management teams are located on-site, around the
world, in New York, London, Tokyo and Singapore. Their
understanding of local economies, markets, industries and
cultures helps deliver what many investors want: access to global
investment opportunities and consistent, risk-adjusted
performance.
2
In-Depth Research
Our 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 conduting 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.
3
Risk Management
In this, our institutional heritage is clear. Institutions, as
well as many individual investors, often look to us to manage the
risks of global investing over time in different market
environments.
To learn more about the Goldman Sachs Family of Funds, call your
investment professional today.
16
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT 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, 1991 in the Institutional shares of the Adjustable
Rate Government Fund. For comparative purposes, the performance of the Fund's
benchmarks, the six-month and one-year U.S. Treasury Bills ("Six-Month
T-Bill/One-Year T-Bill"), as well as the Lehman Brothers Mutual Fund Short
(1-2) U.S. Government Index ("Lehman 1-2 Index"), are shown. This performance
data represents past performance and should not be considered indicative of
future performance which will fluctuate with changes in market conditions.
These performance fluctuations will cause an investor's shares, when re-
deemed, to be worth more or less than their original cost. Performance of
Class A, Administration and Service shares will vary from Institutional
shares due to differences in fees and loads.
Adjustable Rate Government Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested August 1, 1991 to
October 31, 1999.(a)
[GRAPH]
Institutional Lehman 1-2 One Year Six Month
shares Index T - Bill T - Bill
8/1/91 10,000 10,000 10,000 10,000
Aug-91 10,074 10,120 10,083 10,060
Sep-91 10,136 10,213 10,157 10,117
Oct-91 10,208 10,316 10,235 10,174
Nov-91 10,277 10,415 10,313 10,234
Dec-91 10,333 10,554 10,407 10,300
Jan-92 10,389 10,556 10,435 10,335
Feb-92 10,441 10,588 10,462 10,365
Mar-92 10,474 10,600 10,489 10,397
Apr-92 10,522 10,694 10,550 10,450
May-92 10,588 10,777 10,592 10,489
Jun-92 10,661 10,870 10,648 10,531
Jul-92 10,724 10,979 10,726 10,583
Aug-92 10,779 11,056 10,776 10,617
Sep-92 10,833 11,149 10,845 10,665
Oct-92 10,834 11,100 10,832 10,675
Nov-92 10,843 11,092 10,841 10,698
Dec-92 10,911 11,190 10,901 10,740
Jan-93 10,947 11,288 10,957 10,780
Feb-93 10,996 11,361 10,996 10,808
Mar-93 11,020 11,393 11,027 10,841
Apr-93 11,065 11,455 11,066 10,870
May-93 11,086 11,433 11,056 10,887
Jun-93 11,148 11,505 11,109 10,920
Jul-93 11,188 11,533 11,137 10,949
Aug-93 11,238 11,610 11,187 10,984
Sep-93 11,264 11,647 11,220 11,015
Oct-93 11,282 11,672 11,239 11,039
Nov-93 11,292 11,686 11,260 11,067
Dec-93 11,323 11,728 11,300 11,106
Jan-94 11,355 11,796 11,345 11,142
Feb-94 11,375 11,746 11,333 11,152
Mar-94 11,369 11,717 11,334 11,180
Apr-94 11,352 11,688 11,324 11,197
May-94 11,359 11,709 11,339 11,228
Jun-94 11,384 11,742 11,376 11,277
Jul-94 11,441 11,836 11,445 11,324
Aug-94 11,478 11,876 11,485 11,369
Sep-94 11,485 11,866 11,502 11,400
Oct-94 11,494 11,900 11,547 11,452
Nov-94 11,492 11,861 11,541 11,486
Dec-94 11,543 11,891 11,580 11,536
Jan-95 11,659 12,036 11,696 11,611
Feb-95 11,748 12,178 11,798 11,679
Mar-95 11,804 12,248 11,867 11,739
Apr-95 11,879 12,347 11,935 11,801
May-95 11,991 12,518 12,041 11,872
Jun-95 12,006 12,585 12,111 11,935
Jul-95 12,072 12,644 12,171 11,995
Aug-95 12,139 12,713 12,228 12,054
Sep-95 12,191 12,771 12,279 12,104
Oct-95 12,270 12,865 12,353 12,164
Nov-95 12,346 12,960 12,426 12,223
Dec-95 12,424 13,051 12,496 12,291
Jan-96 12,515 13,154 12,575 12,352
Feb-96 12,549 13,125 12,590 12,396
Mar-96 12,600 13,133 12,625 12,438
Apr-96 12,662 13,158 12,669 12,489
May-96 12,740 13,198 12,715 12,540
Jun-96 12,790 13,286 12,782 12,594
Jul-96 12,855 13,338 12,831 12,649
Aug-96 12,920 13,393 12,891 12,705
Sep-96 13,023 13,500 12,979 12,771
Oct-96 13,114 13,635 13,074 12,832
Nov-96 13,191 13,722 13,139 12,889
Dec-96 13,257 13,744 13,183 12,943
Jan-97 13,323 13,808 13,248 13,000
Feb-97 13,383 13,849 13,297 13,060
Mar-97 13,436 13,854 13,330 13,111
Apr-97 13,545 13,958 13,409 13,173
May-97 13,643 14,051 13,492 13,244
Jun-97 13,712 14,140 13,572 13,308
Jul-97 13,797 14,269 13,669 13,370
Aug-97 13,853 14,297 13,712 13,424
Sep-97 13,921 14,394 13,785 13,493
Oct-97 13,992 14,489 13,861 13,554
Nov-97 14,032 14,529 13,902 13,602
Dec-97 14,087 14,621 13,968 13,665
Jan-98 14,172 14,745 14,058 13,735
Feb-98 14,207 14,769 14,094 13,786
Mar-98 14,264 14,829 14,166 13,854
Apr-98 14,289 14,899 14,232 13,915
May-98 14,346 14,975 14,290 13,976
Jun-98 14,415 15,050 14,359 14,043
Jul-98 14,457 15,121 14,426 14,110
Aug-98 14,530 15,277 14,543 14,183
Sep-98 14,583 15,451 14,661 14,268
Oct-98 14,565 15,531 14,737 14,328
Nov-98 14,558 15,526 14,738 14,366
Dec-98 14,658 15,585 14,790 14,427
Jan-99 14,728 15,643 14,842 14,482
Feb-99 14,761 15,604 14,850 14,521
Mar-99 14,908 15,707 14,940 14,588
Apr-99 14,977 15,759 14,994 14,637
May-99 15,063 15,768 15,034 14,687
Jun-99 15,115 15,816 15,098 14,740
Jul-99 15,139 15,873 15,159 14,805
Aug-99 15,163 15,914 15,206 14,849
Sep-99 15,231 16,008 15,286 14,922
Oct-99 15,302 16,057 15,322 14,978
<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 15, 1995)
Excluding sales charges 5.41% n/a 4.65%
Including sales charges 5.04% n/a 3.05%
-----------------------------------------------------------------------------
Institutional shares (commenced July
17, 1991) 5.30% 5.89% 5.06%
-----------------------------------------------------------------------------
Administration shares (commenced April
15, 1993)(b) 4.94% 5.58% 4.02%
-----------------------------------------------------------------------------
Service shares (commenced March 27,
1997) 4.64% n/a 4.65%
-----------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following commencement of operations.
(b) The Administration shares were liquidated on July 20, 1999. The returns
shown are through termination date. In addition, the one year return
number is not annualized.
17
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - 93.7%
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)# - 25.1%
$ 1,457,227 6.74% 07/01/2018 $ 1,492,972
3,006,727 7.57 11/01/2018 3,061,239
717,898 6.78 12/01/2018 736,520
4,520,413 6.54 05/01/2019 4,595,995
12,052,166 6.96 11/01/2019 12,351,180
6,353,637 6.61 01/01/2020 6,481,727
2,394,289 6.90 05/01/2020 2,463,867
12,591,158 6.64 06/01/2020 12,846,003
18,745,085 6.96 02/01/2022 19,210,713
3,558,783 6.50 06/01/2022 3,640,920
2,095,445 6.60 08/01/2022 2,134,735
2,840,640 6.46 09/01/2022 2,902,424
3,350,423 6.81 09/01/2022 3,433,647
4,780,226 6.77 06/01/2024 4,910,917
1,832,644 6.31 02/01/2028 1,860,701
2,931,282 6.80 07/01/2030 3,008,228
-----------
$85,131,788
------------------------------------------------------------------------------------------------
Adjustable Rate Federal National Mortgage Association
(FNMA)# - 43.7%
$ 724,246 7.30% 04/01/2003 $ 719,901
573,162 7.00 11/01/2014 587,044
3,344,265 5.88 03/01/2017 3,365,702
1,912,424 6.68 03/01/2017 1,966,221
7,154,332 6.82 04/01/2017 7,294,771
343,729 6.70 11/01/2017 352,913
2,601,337 5.59 03/01/2018 2,602,586
619,995 6.46 03/01/2018 632,400
504,891 6.85 05/01/2018 515,145
4,871,631 6.57 06/01/2018 5,009,790
2,653,090 6.56 07/01/2018 2,692,462
3,544,199 6.46 08/01/2018 3,621,569
2,067,465 6.87 08/01/2018 2,139,910
1,070,927 6.61 10/01/2018 1,094,519
98,911 6.47 11/01/2018 100,457
3,245,292 6.66 11/01/2018 3,315,780
8,050,174@ 6.49 12/01/2018 8,315,105
2,944,879 6.57 12/01/2018 3,014,370
1,806,206 6.40 06/01/2019 1,847,730
887,001 6.47 07/01/2019 905,158
2,216,684 7.06 07/01/2019 2,281,456
935,946 6.23 08/01/2019 953,495
1,467,291 6.85 03/01/2020 1,507,157
10,838,368 7.12 05/01/2020 11,077,137
4,903,774 6.72 07/01/2020 5,020,239
5,436,587 5.66 12/25/2020 5,390,974
3,035,347 6.85 01/01/2021 3,130,687
2,381,435 6.80 02/01/2021 2,452,188
2,885,569 6.51 04/01/2021 2,945,099
24,376,331 6.73 09/01/2021 25,073,250
11,033,852 6.92 02/01/2022 11,349,972
1,228,832 6.34 05/20/2022 1,237,852
4,195,278 6.90 06/01/2022 4,327,555
920,163 6.80 08/01/2022 942,164
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
Adjustable Rate Federal National Mortgage Association
(FNMA)# - (continued)
$ 3,521,061 6.80% 09/01/2022 $ 3,635,496
3,519,987 7.07 02/01/2023 3,646,495
174,074 6.22 12/01/2023 170,810
8,198,600 6.40 06/20/2024 8,267,222
383,943 6.79 09/01/2025 395,093
2,737,593 6.58 08/01/2027 2,796,616
1,341,839 6.65 10/01/2027 1,373,560
------------
$148,068,050
------------------------------------------------------------------------------------------------
Adjustable Rate Government National Mortgage Association (GNMA)# - 2.9%
$ 1,527,072 6.38% 03/20/2016 $ 1,549,031
2,999,110 6.63 08/20/2018 3,030,990
3,490,970 6.38 02/20/2021 3,540,053
1,723,747 6.38 06/20/2022 1,740,709
------------
$ 9,860,783
------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. (FHLMC) - 3.9%
$ 1,088,828 5.50% 01/01/2013 $ 1,025,031
370,857 5.50 03/01/2013 349,533
1,758,612 6.50 03/01/2013 1,725,093
100,184 5.50 04/01/2013 94,298
3,697,445 6.50 04/01/2013 3,626,972
1,494,627 6.50 05/01/2013 1,466,139
539,305 5.50 06/01/2013 507,621
3,090,531 6.50 06/01/2013 3,034,985
676,748 5.50 07/01/2013 636,989
786,038 5.50 08/01/2013 739,859
32,959 5.50 12/01/2013 31,022
------------
$ 13,237,542
------------------------------------------------------------------------------------------------
Federal National Mortgage Association (FNMA) - 2.9%
$ 5,460,590 7.00% 10/01/2002 $ 5,478,282
4,350,687 8.00 11/01/2017 4,459,411
------------
$ 9,937,693
------------------------------------------------------------------------------------------------
Government National Mortgage Association (GNMA) - 1.1%
$ 3,678,182 6.50% 08/15/2027 $ 3,537,933
------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations - 14.1%
Inverse Floater# - 1.1%
FNMA Series 1993-189, Class SA
$ 3,884,257 9.75% 10/25/2023 $ 3,806,028
------------------------------------------------------------------------------------------------
IOette. - 0.1%
FNMA Remic Trust Series 1990-145, Class B
$ 13,359 46.87% 12/25/2020 $ 278,794
------------------------------------------------------------------------------------------------
Planned Amortization Class (PAC) CMOs - 4.0%
FHLMC Series 1475, Class H
$ 4,000,000 6.75% 04/15/2006 $ 4,013,720
FHLMC Series 2055, Class OD
10,000,000 6.00 01/15/2012 9,534,300
------------
$ 13,548,020
------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
Regular Floater CMOs# - 1.1%
FHLMC Series 2130, Class FC
$ 3,880,205 5.76% 03/15/2029 $ 3,720,845
----------------------------------------------------------------------------------------
Sequential Fixed Rate CMOs - 7.8%
FHLMC Series 1169, Class D
$ 851,000 7.00% 05/15/2021 $ 851,528
FHLMC Series 2064, Class M
7,300,000 6.00 06/15/2028 6,716,657
FNMA Remic Trust Series 1993-14, Class A
2,951,873 6.00 02/25/2008 2,905,263
FNMA Remic Trust Series 1993-144, Class B
4,178,279 9.00 11/25/2017 4,185,006
FNMA Remic Trust Series G93-39, Class A
2,595,979 5.70 08/25/2016 2,569,681
FNMA Remic Trust Series G97-4, Class C
6,693,177 7.50 06/17/2024 6,702,882
FNMA Series 1996-22, Class B
2,502,605 7.25 02/25/2024 2,494,397
------------
$ 26,425,414
----------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS $ 47,779,101
----------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(Cost $322,856,317) $317,552,890
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
Agency Debentures - 3.0%
<S> <C> <C> <C>
Federal National Mortgage Association (FNMA)
$7,500,000 5.63% 04/24/2002 $ 7,350,000
3,000,000 6.17 01/15/2008 2,827,620
-----------------------------------------------------------------------------------------------
TOTAL AGENCY DEBENTURES
(Cost $10,175,964) $ 10,177,620
-----------------------------------------------------------------------------------------------
Repurchase Agreement - 2.8%
Joint Repurchase Agreement Account
$9,400,000 5.33% 11/01/1999 $ 9,400,000
-----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $9,400,000) $ 9,400,000
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $342,432,281) $337,130,510
-----------------------------------------------------------------------------------------------
</TABLE>
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1999.
@ A portion of this security is segregated as collateral for initial margin
requirement on futures transactions.
. Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated coupon due to
the amortization of related premiums.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT 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 September 1, 1988 in the Institutional shares of the Goldman
Sachs Short Duration Government Fund. For comparative purposes, the perfor-
mance of the Fund's benchmark (the U.S. 2-Year Treasury Bill ("Two-Year T-
Bill")), as well as the Lehman Brothers Mutual Fund Short (1-3) U.S.
Government Index ("Lehman Short (1-3) Gov't Index"), are shown. This perfor-
mance data represents past performance and should not be considered indica-
tive of future performance which will fluctuate with changes in market
conditions. These performance fluctuations will cause an investor's shares,
when redeemed, to be worth more or less than their original cost. Performance
of Class A, Class B, Class C, Administration and Service shares will vary
from Institutional shares due to differences in fees and loads.
Short Duration Government Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested September 1, 1988 to
October 31, 1999.(a)
[GRAPH]
Lehman Short
Institutional shares (1-3) Gov't Index Two-Year T-Bill
9/1/88 10,000 10,000 10,000
Sep-88 10,129 10,116 10,109
Oct-88 10,257 10,218 10,211
Nov-88 10,221 10,193 10,169
Dec-88 10,226 10,215 10,367
Jan-89 10,315 10,296 10,455
Feb-89 10,335 10,297 10,443
Mar-89 10,359 10,340 10,473
Apr-89 10,515 10,509 10,622
May-89 10,673 10,657 10,785
Jun-89 10,887 10,855 10,992
Jul-89 11,040 11,015 11,157
Aug-89 10,936 10,950 11,063
Sep-89 11,008 11,013 11,118
Oct-89 11,189 11,184 11,276
Nov-89 11,287 11,284 11,366
Dec-89 11,336 11,327 11,402
Jan-90 11,323 11,340 11,391
Feb-90 11,386 11,400 11,431
Mar-90 11,445 11,434 11,463
Apr-90 11,461 11,461 11,475
May-90 11,616 11,638 11,654
Jun-90 11,732 11,760 11,783
Jul-90 11,864 11,902 11,928
Aug-90 11,896 11,945 11,964
Sep-90 11,993 12,040 12,052
Oct-90 12,110 12,173 12,184
Nov-90 12,225 12,291 12,300
Dec-90 12,365 12,436 12,451
Jan-91 12,468 12,553 12,547
Feb-91 12,534 12,634 12,608
Mar-91 12,623 12,718 12,696
Apr-91 12,743 12,840 12,805
May-91 12,809 12,917 12,892
Jun-91 12,859 12,965 12,963
Jul-91 13,030 13,077 13,088
Aug-91 13,158 13,256 13,274
Sep-91 13,334 13,396 13,419
Oct-91 13,433 13,541 13,555
Nov-91 13,592 13,681 13,694
Dec-91 13,588 13,889 13,911
Jan-92 13,568 13,870 13,879
Feb-92 13,585 13,912 13,916
Mar-92 13,577 13,908 13,905
Apr-92 13,668 14,034 14,022
May-92 13,820 14,164 14,164
Jun-92 13,984 14,307 14,335
Jul-92 14,152 14,471 14,507
Aug-92 14,276 14,588 14,643
Sep-92 14,384 14,726 14,785
Oct-92 14,274 14,642 14,684
Nov-92 14,261 14,620 14,648
Dec-92 14,406 14,756 14,789
Jan-93 14,569 14,911 14,958
Feb-93 14,698 15,030 15,089
Mar-93 14,707 15,076 15,131
Apr-93 14,793 15,168 15,231
May-93 14,763 15,132 15,167
Jun-93 14,905 15,245 15,289
Jul-93 14,937 15,279 15,319
Aug-93 15,087 15,406 15,457
Sep-93 15,082 15,455 15,509
Oct-93 15,066 15,489 15,533
Nov-93 15,038 15,492 15,540
Dec-93 15,120 15,554 15,596
Jan-94 15,238 15,652 15,697
Feb-94 15,159 15,557 15,595
Mar-94 15,026 15,477 15,517
Apr-94 14,962 15,419 15,446
May-94 14,998 15,439 15,457
Jun-94 15,027 15,477 15,501
Jul-94 15,158 15,616 15,642
Aug-94 15,208 15,668 15,684
Sep-94 15,183 15,632 15,643
Oct-94 15,216 15,668 15,680
Nov-94 15,156 15,602 15,615
Dec-94 15,189 15,632 15,636
Jan-95 15,400 15,844 15,869
Feb-95 15,613 16,060 16,094
Mar-95 15,687 16,150 16,177
Apr-95 15,860 16,294 16,323
May-95 16,142 16,572 16,628
Jun-95 16,206 16,662 16,716
Jul-95 16,226 16,728 16,775
Aug-95 16,317 16,829 16,868
Sep-95 16,426 16,911 16,949
Oct-95 16,581 17,051 17,095
Nov-95 16,747 17,196 17,249
Dec-95 16,861 17,327 17,376
Jan-96 17,058 17,474 17,524
Feb-96 16,976 17,406 17,433
Mar-96 16,963 17,392 17,410
Apr-96 16,982 17,409 17,415
May-96 17,019 17,447 17,444
Jun-96 17,160 17,575 17,571
Jul-96 17,214 17,643 17,633
Aug-96 17,322 17,708 17,690
Sep-96 17,502 17,870 17,856
Oct-96 17,703 18,072 18,062
Nov-96 17,833 18,205 18,200
Dec-96 17,844 18,209 18,194
Jan-97 17,942 18,296 18,264
Feb-97 18,001 18,340 18,298
Mar-97 17,986 18,325 18,288
Apr-97 18,176 18,475 18,440
May-97 18,290 18,604 18,565
Jun-97 18,444 18,733 18,694
Jul-97 18,675 18,937 18,912
Aug-97 18,661 18,956 18,920
Sep-97 18,836 19,100 19,059
Oct-97 18,954 19,241 19,209
Nov-97 18,974 19,289 19,233
Dec-97 19,091 19,419 19,367
Jan-98 19,307 19,605 19,570
Feb-98 19,289 19,623 19,569
Mar-98 19,349 19,697 19,638
Apr-98 19,426 19,792 19,721
May-98 19,547 19,898 19,820
Jun-98 19,626 20,000 19,916
Jul-98 19,728 20,093 20,003
Aug-98 19,992 20,356 20,294
Sep-98 20,232 20,612 20,572
Oct-98 20,233 20,712 20,680
Nov-98 20,107 20,691 20,581
Dec-98 20,187 20,770 20,639
Jan-99 20,309 20,850 20,692
Feb-99 20,213 20,756 20,548
Mar-99 20,439 20,896 20,692
Apr-99 20,496 20,962 20,737
May-99 20,449 20,956 20,706
Jun-99 20,481 21,017 20,753
Jul-99 20,496 21,081 20,802
Aug-99 20,492 21,131 20,850
Sep-99 20,677 21,270 20,974
Oct-99 20,736 21,327 20,983
<TABLE>
<CAPTION>
Average Annual Total Return
through October 31, 1999 Since Inception Ten Years Five Years One Year
<S> <C> <C> <C> <C>
Class A shares (commenced May
1, 1997)
Excluding sales charges 4.99% n/a n/a 1.97%
Including sales charges 4.14% n/a n/a -0.04%
-----------------------------------------------------------------------------
Class B shares (commenced May
1, 1997)
Excluding contingent deferred
sales charges 4.44% n/a n/a 1.56%
Including contingent deferred
sales charges 4.02% n/a n/a -0.47%
-----------------------------------------------------------------------------
Class C shares (commenced Au-
gust 15, 1997)
Excluding contingent deferred
sales charges 3.65% n/a n/a 1.21%
Including contingent deferred
sales charges 3.65% n/a n/a 0.19%
-----------------------------------------------------------------------------
Institutional shares (com-
menced August 15, 1988) 6.75% 6.36% 6.38% 2.49%
-----------------------------------------------------------------------------
Administration shares (com-
menced February 28, 1996)(b) 5.52% n/a n/a 1.57%
-----------------------------------------------------------------------------
Service shares (commenced
April 10, 1996) 5.35% n/a n/a 1.97%
-----------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following commencement of operations.
(b) The Administration shares were liquidated on July 20, 1999. The returns
shown are through termination date. In addition, the one year return
number is not annualized.
20
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - 92.0%
Adjustable Rate Federal Home Loan Mortgage Corp.
(FHLMC)# - 5.1%
$ 950,768 6.50% 08/01/2017 $ 965,476
848,592@ 7.26 05/01/2018 848,176
2,674,998 6.80 06/01/2018 2,738,395
965,843 6.78 12/01/2018 990,897
4,230,013 6.96 02/01/2022 4,335,086
1,219,602 7.76 10/01/2025 1,246,226
------------
$ 11,124,256
---------------------------------------------------------------------------------------------
Adjustable Rate Federal National Mortgage
Association (FNMA)# - 15.3%
$ 1,375,589 7.00% 11/01/2014 $ 1,408,906
2,423,248 6.69 11/01/2017 2,461,948
2,830,042 7.36 02/01/2018 2,872,371
2,515,753 6.52 06/01/2018 2,539,804
2,386,872 6.87 03/01/2019 2,427,902
5,375,289 7.13 05/01/2020 5,493,707
3,399,219 6.71 12/01/2020 3,457,685
3,642,416 6.85 01/01/2021 3,756,824
920,163 6.81 08/01/2022 942,164
2,732,609 7.99 01/01/2023 2,789,650
3,469,960 6.51 07/01/2028 3,490,884
1,847,875 6.80 01/01/2031 1,904,752
------------
$ 33,546,597
---------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. (FHLMC) - 16.1%
$ 908,645 6.50% 04/01/2013 $ 891,317
1,841,891 6.50 05/01/2013 1,806,785
924,267 6.50 06/01/2013 906,641
5,942,776 5.50 01/01/2014 5,593,638
4,248,684 8.00 01/01/2028 4,336,292
758,462 7.00 08/01/2028 745,189
1,017,392 7.00 09/01/2028 999,588
6,994,245 7.00 09/01/2029 6,873,664
13,000,000 7.50 TBA-30 yr* 13,030,000
------------
$ 35,183,114
---------------------------------------------------------------------------------------------
Federal National Mortgage Association (FNMA) - 8.3%
$ 3,854,534 7.00% 10/01/2002 $ 3,867,022
1,004,396 8.50 05/01/2010 1,029,817
32,712 6.00 08/01/2010 31,669
31,015 6.00 11/01/2010 30,027
92,864 6.00 01/01/2011 89,730
141,407 6.00 02/01/2011 136,778
4,542,829 6.00 03/01/2011 4,395,900
1,926,070 6.00 04/01/2011 1,862,288
2,128,103 6.00 05/01/2011 2,056,280
331,372 6.00 06/01/2011 320,188
234,400 6.00 07/01/2011 226,489
661,331 6.00 09/01/2011 639,011
61,249 6.00 12/01/2011 59,181
67,423 6.00 01/01/2012 65,148
349,529 6.00 03/01/2012 337,733
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
Federal National Mortgage Association (FNMA) - (continued)
$ 253,206 6.00% 04/01/2013 $ 244,661
322,006 6.00 11/01/2013 311,138
553,742 6.00 01/01/2014 526,914
2,025,596 6.00 03/01/2014 1,885,703
------------
$ 18,115,677
------------------------------------------------------------------------------------------------
Government National Mortgage Association (GNMA) - 5.8%
$ 1,058,601 6.50% 06/15/2008 $ 1,045,983
609,251 6.50 07/15/2008 601,989
1,914,366 6.50 08/15/2008 1,891,547
1,159,194 6.50 09/15/2008 1,145,376
187,778 6.50 10/15/2008 185,539
53,699 6.50 11/15/2008 53,059
134,371 9.00 12/15/2008 140,630
95,095 6.50 01/15/2009 93,847
181,069 9.00 01/15/2009 189,767
15,761 6.50 03/15/2009 15,573
79,145 6.50 04/15/2009 78,106
814,805 6.50 05/15/2009 804,106
80,097 6.50 07/15/2009 79,046
81,580 6.50 11/15/2009 80,509
63,240 9.00 01/15/2010 66,429
578,502 9.00 07/15/2012 604,893
3,959,961 7.00 10/15/2023 3,910,461
1,839,091 6.50 08/15/2027 1,768,966
------------
$ 12,755,826
------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations - 41.4%
Interest Only. - 0.3%
FHLMC Series 1161, Class U
$ 23,190 12.00% 11/15/2021 $ 637,302
------------------------------------------------------------------------------------------------
Inverse Floater# - 2.0%
FNMA Remic Trust Series 1990-134, Class SC
$ 968,144 13.44% 11/25/2020 $ 1,045,295
FNMA Remic Trust Series 1991-42, Class S
392,814 8.16 05/25/2021 369,520
FNMA Remic Trust Series 1993-164, Class SD
1,500,000 7.07 09/25/2008 1,400,430
FNMA Remic Trust Series 1993-231, Class SA
1,681,686 6.19 12/25/2008 1,539,399
------------
$ 4,354,644
------------------------------------------------------------------------------------------------
Inverse Floating Rate - Interest Only#. - 0.0%
FHLMC Series 1684, Class JD
$ 1,190,506 3.94% 08/15/2020 $ 46,656
FNMA Remic Trust Series 1993-110, Class SC
331,660 3.74 04/25/2019 3,505
------------
$ 50,161
------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
Planned Amortization Class (PAC) CMOs - 15.5%
FHLMC Series 1556, Class G
$ 2,000,000 6.35% 10/15/2010 $ 1,990,620
FHLMC Series 16, Class PG
7,500,000 6.35 03/25/2018 7,474,200
FHLMC Series 1916, Class PC
3,700,000 6.75 12/15/2011 3,638,136
FHLMC Series 1987, Class L
4,000,000 6.20 08/25/2022 3,830,280
FHLMC Series 2055, Class OD
3,000,000 6.00 01/15/2012 2,860,290
FHLMC Series 2130, Class QY
2,810,256 8.50 02/15/2019 2,928,174
FHLMC Series 2149, Class TF
1,500,000 6.50 05/15/2024 1,439,565
FNMA Remic Trust Series 1997-84, Class PA
4,000,000 5.90 11/25/2021 3,803,720
FNMA Remic Trust Series G93-31, Class PJ
3,000,000 6.55 10/25/2020 2,960,970
FNMA Series G93-32, Class PH
3,000,000 6.50 11/25/2022 2,927,460
------------
$ 33,853,415
------------------------------------------------------------------------------------------------
Planned Amortization-Interest Only. - 0.2%
FHLMC Series 1587, Class HA
$ 4,410,726 6.50% 10/15/2008 $ 369,619
------------------------------------------------------------------------------------------------
Principal Only& - 1.3%
FNMA Remic Trust Series G92-28, Class A
$ 3,364,206 6.09% 05/25/2007 $ 2,828,524
------------------------------------------------------------------------------------------------
Regular Floater CMOs# - 0.7%
FHLMC Series 1684, Class JC
$ 1,190,506 5.06% 08/15/2020 $ 1,180,827
FNMA Remic Trust Series 1993-110, Class FC
331,660 5.26 04/25/2019 329,895
------------
$ 1,510,722
------------------------------------------------------------------------------------------------
Sequential Fixed Rate CMOs - 19.9%
FHLMC Series 1033, Class G
$ 1,238,318 8.00% 01/15/2006 $ 1,260,372
FHLMC Series 1468, Class ZB
5,026,891 9.00 02/15/2021 5,324,685
FHLMC Series 1812, Class D
1,213,885 6.00 07/15/2008 1,206,674
FHLMC Series 1998, Class DB
3,012,161 9.50 01/17/2025 3,128,611
FHLMC Series 2152, Class AB
2,965,868 6.25 01/15/2026 2,837,565
FNMA Remic Trust Series 1960-16, Class E
6,056,201 9.00 03/25/2020 6,357,254
FNMA Remic Trust Series 1989-74, Class J
1,607,403 9.80 10/25/2019 1,692,852
FNMA Remic Trust Series 1992-119, Class Z
3,565,208 8.00 07/25/2022 3,568,880
FNMA Remic Trust Series 1993-33, Class ZA
6,707,326 7.50 09/25/2021 6,730,735
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
Sequential Fixed Rate CMOs - (continued)
FNMA Remic Trust Series G97-4, Class C
$ 7,789,185 7.50% 06/17/2024 $ 7,800,479
FNMA Series 1988-12, Class A
2,089,166 10.00 02/25/2018 2,188,382
GNMA Remic Trust Series 1995-3, Class DQ
1,345,071 8.05 06/16/2025 1,375,469
------------
$ 43,471,958
--------------------------------------------------------------------------------------------
Super Floater# - 0.7%
FNMA Remic Trust Series 88-12, Class B
$ 1,649,342 2.98% 02/25/2018 $ 1,585,672
--------------------------------------------------------------------------------------------
Support - 0.8%
FHLMC Series 16, Class M
$ 2,000,000 7.00% 08/25/2023 $ 1,868,420
--------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS $ 90,530,437
--------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(Cost $204,106,315) $201,255,907
--------------------------------------------------------------------------------------------
Agency Debentures - 6.9%
Federal Farm Credit Bank
$ 3,600,000 5.88% 07/02/2001 $ 3,578,040
Federal Home Loan Bank
1,600,000 5.13 02/26/2002 1,559,280
Federal Home Loan Mortgage Corp.
3,000,000 5.63 02/20/2004 2,880,600
Federal National Mortgage Association
1,600,000 5.75 04/15/2003 1,570,125
Small Business Administration
1,379,731 7.20 06/01/2017 1,373,964
1,906,996 6.30 05/01/2018 1,808,482
2,397,019 6.30 06/01/2018 2,273,260
--------------------------------------------------------------------------------------------
TOTAL AGENCY DEBENTURES
(Cost $15,414,333) $ 15,043,751
--------------------------------------------------------------------------------------------
U.S. Treasury Obligation - 1.1%
United States Treasury Note
$ 2,500,000 5.75% 11/30/2002 $ 2,489,450
--------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATION
(Cost $2,495,312) $ 2,489,450
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Repurchase Agreement - 8.4%
Joint Repurchase Agreement Account
$18,300,000 5.33% 11/01/1999 $ 18,300,000
------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $18,300,000) $ 18,300,000
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $240,315,960) $237,089,108
------------------------------------------------------------------------------------------------
</TABLE>
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1999.
* TBA (To Be Assigned) securities are purchased on a forward commitment basis
with an approximate (generally +/ -2.5%) principal amount and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
. Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated coupon due to
the amortization of related premiums.
& Security is issued with a zero coupon. The interest rate disclosed
represents effective yield to maturity.
@ A portion of this security is segregated as collateral for initial margin
requirement on futures transactions.
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.
23
<PAGE>
GOLDMAN SACHS GOVERNMENT 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 March 1,1993 in Class A shares (with the maximum sales
charge of 4.5%) of the Goldman Sachs Government Income Fund. For comparative
purposes, the performance of the Fund's benchmark (the Lehman Brothers Mutual
Fund Government/Mortgage Index ("Lehman Gov't/MBS Index")), as well as the
Lehman Brothers Mutual Fund General U.S. Government Index ("Lehman U.S. Gov't
Index"), are shown. This performance data represents past performance and
should not be considered indicative of future performance which will fluctu-
ate 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 Serv-
ice shares will vary from Class A due to differences in fees and loads.
Government Income Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested March 1, 1993 to
October 31, 1999.(a)
[GRAPH]
Class A shares Lehman Gov't/MBS Index Lehman U.S. Gov't Index
3/1/93 9,550 10,000 10,000
Mar-93 9,565 10,043 10,033
Apr-93 9,658 10,111 10,110
May-93 9,621 10,124 10,099
Jun-93 9,793 10,296 10,323
Jul-93 9,856 10,351 10,386
Aug-93 9,995 10,518 10,618
Sep-93 10,009 10,547 10,658
Oct-93 10,036 10,584 10,699
Nov-93 9,963 10,502 10,581
Dec-93 10,019 10,557 10,622
Jan-94 10,145 10,688 10,768
Feb-94 10,028 10,514 10,540
Mar-94 9,776 10,265 10,302
Apr-94 9,695 10,186 10,221
May-94 9,701 10,192 10,208
Jun-94 9,702 10,168 10,184
Jul-94 9,866 10,362 10,372
Aug-94 9,874 10,374 10,374
Sep-94 9,744 10,228 10,227
Oct-94 9,737 10,221 10,219
Nov-94 9,717 10,197 10,201
Dec-94 9,813 10,266 10,263
Jan-95 9,993 10,468 10,454
Feb-95 10,216 10,707 10,679
Mar-95 10,267 10,768 10,746
Apr-95 10,407 10,914 10,887
May-95 10,786 11,321 11,326
Jun-95 10,852 11,400 11,413
Jul-95 10,836 11,380 11,371
Aug-95 10,941 11,508 11,505
Sep-95 11,052 11,615 11,615
Oct-95 11,187 11,766 11,792
Nov-95 11,338 11,933 11,976
Dec-95 11,493 12,096 12,146
Jan-96 11,568 12,175 12,221
Feb-96 11,373 11,979 11,972
Mar-96 11,307 11,899 11,872
Apr-96 11,256 11,838 11,796
May-96 11,231 11,813 11,776
Jun-96 11,389 11,969 11,928
Jul-96 11,419 12,004 11,958
Aug-96 11,418 11,987 11,932
Sep-96 11,602 12,186 12,130
Oct-96 11,838 12,444 12,397
Nov-96 12,035 12,646 12,612
Dec-96 11,930 12,540 12,484
Jan-97 11,968 12,583 12,497
Feb-97 11,994 12,609 12,515
Mar-97 11,881 12,481 12,382
Apr-97 12,054 12,668 12,560
May-97 12,143 12,783 12,668
Jun-97 12,282 12,929 12,810
Jul-97 12,608 13,250 13,174
Aug-97 12,510 13,156 13,043
Sep-97 12,681 13,342 13,239
Oct-97 12,870 13,542 13,468
Nov-97 12,907 13,602 13,536
Dec-97 13,042 13,737 13,678
Jan-98 13,223 13,917 13,884
Feb-98 13,206 13,905 13,846
Mar-98 13,252 13,951 13,885
Apr-98 13,300 14,020 13,947
May-98 13,422 14,145 14,091
Jun-98 13,534 14,270 14,251
Jul-98 13,574 14,311 14,273
Aug-98 13,846 14,589 14,644
Sep-98 14,108 14,897 15,039
Oct-98 14,025 14,858 14,988
Nov-98 14,004 14,890 14,993
Dec-98 14,040 14,936 15,026
Jan-99 14,124 15,030 15,113
Feb-99 13,900 14,793 14,754
Mar-99 13,994 14,868 14,812
Apr-99 14,027 14,916 14,846
May-99 13,903 14,805 14,715
Jun-99 13,844 14,766 14,685
Jul-99 13,787 14,710 14,664
Aug-99 13,760 14,710 14,664
Sep-99 13,913 14,882 14,783
Oct-99 13,937 14,933 14,807
<TABLE>
<CAPTION>
Average Annual Total Return through One
October 31, 1999 Since Inception Five Years Year
<S> <C> <C> <C>
Class A shares (commenced February 10,
1993)
Excluding sales charges 6.22% 7.43% -0.63%
Including sales charges 5.49% 6.46% -5.08%
--------------------------------------------------------------------------
Class B shares (commenced May 1, 1996)
Excluding contingent deferred sales
charges 5.53% n/a -1.29%
Including contingent deferred sales
charges 4.62% n/a -6.23%
--------------------------------------------------------------------------
Class C shares (commenced August 15,
1997)
Excluding contingent deferred sales
charges 4.23% n/a -1.29%
Including contingent deferred sales
charges 4.23% n/a -2.28%
--------------------------------------------------------------------------
Institutional shares (commenced August
15, 1997) 5.31% n/a -0.23%
--------------------------------------------------------------------------
Service shares (commenced August 15,
1997) 4.72% n/a -1.01%
--------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following commencement of operations.
24
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - 59.7%
Federal Home Loan Mortgage Corp. (FHLMC) - 27.3%
$ 2,717,899 6.50% 08/01/2010 $ 2,685,257
737,780 6.00 12/01/2013 710,113
6,933,244 5.50 01/01/2014 6,529,866
26,891 7.00 03/01/2024 26,547
80,967 7.00 04/01/2024 79,930
617,611 7.00 08/01/2028 606,803
800,220 7.00 09/01/2028 786,216
3,381,304 7.00 04/01/2029 3,322,248
999,183 7.00 09/01/2029 981,957
1,998,341 7.00 10/01/2029 1,963,889
3,000,000 7.00 TBA-30 yr* 2,947,500
11,500,000 7.50 TBA-30 yr* 11,521,563
------------
$ 32,161,889
------------------------------------------------------------------------------------------------
Federal National Mortgage Association (FNMA) - 4.1%
$ 348,545 6.50% 08/01/2025 $ 336,562
209,128 6.50 09/01/2025 201,676
210,038 6.50 10/01/2025 202,554
282,411 6.50 11/01/2025 272,967
361,374 6.50 12/01/2025 347,094
18,025 6.50 05/01/2026 17,383
39,108 6.50 03/01/2028 37,471
738,942 6.50 04/01/2028 707,995
952,159 6.50 05/01/2028 912,282
766,401 6.50 06/01/2028 734,305
909,894 6.50 07/01/2028 871,788
99,488 6.50 08/01/2028 95,322
101,179 6.50 09/01/2028 96,942
------------
$ 4,834,341
------------------------------------------------------------------------------------------------
Government National Mortgage Association (GNMA) - 12.2%
$ 83,773 9.00% 10/15/2019 $ 88,564
73,768 9.00 12/15/2019 77,986
195,381 7.00 03/15/2023 192,939
566,263 7.00 05/15/2023 559,184
190,239 7.00 06/15/2023 187,861
1,531,766 7.00 07/15/2023 1,512,619
552,095 7.00 08/15/2023 545,194
569,654 7.00 09/15/2023 562,534
1,253,015 7.00 10/15/2023 1,236,289
489,100 7.00 11/15/2023 482,987
580,818 7.00 12/15/2023 573,558
925,188 6.50 03/15/2028 884,129
973,729 6.50 10/15/2028 930,515
998,098 6.50 11/15/2028 954,562
480,467 6.50 01/15/2029 459,144
3,897,480 6.50 02/15/2029 3,724,510
471,805 6.50 03/15/2029 451,042
466,597 6.50 04/15/2029 445,889
426,401 6.50 05/15/2029 407,478
111,804 6.50 08/15/2029 106,893
------------
$ 14,383,877
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
Collateralized Mortgage Obligations - 16.1%
Interest Only. - 0.1%
FNMA Interest-Only Stripped Security Series 151, Class 2
$ 273,991 9.50% 07/01/2022 $ 78,173
--------------------------------------------------------------------------------------------
Inverse Floater# - 2.2%
FNMA Remic Trust Series 1993-164, Class SD
$ 500,000 7.07% 09/25/2008 $ 466,810
FNMA Remic Trust Series 1993-231, Class SA
1,261,264 6.19 12/25/2008 1,154,549
FNMA Remic Trust Series 1993-138, Class SM
921,052 9.47 12/25/2021 935,770
------------
$ 2,557,129
--------------------------------------------------------------------------------------------
Inverse Floating Rate--Interest Only#. - 0.2%
Salomon Brothers Mortgage Securities VII Series 1996-6E, Class A2
$ 7,535,771 3.66% 03/30/2025 $ 202,938
--------------------------------------------------------------------------------------------
Non-Agency CMOs - 1.2%
Commercial Mortgage Asset Trust Series 1999-C1, Class A3
$ 250,000 6.64% 09/17/2010 $ 236,388
CS First Boston Mortgage Securities Corp. Series 1997-C2, Class A2
800,000 6.52 07/17/2007 768,688
First Union-Lehman Brothers Commercial Mortgage Services Series 1997-
C1, Class A2
400,000 7.30 12/18/2006 400,308
------------
$ 1,405,384
--------------------------------------------------------------------------------------------
Planned Amortization Class (PAC) CMOs - 7.3%
FHLMC Series 2055, Class OD
$ 4,000,000 6.00% 01/15/2012 $ 3,813,720
FNMA Remic Trust Series 1997-84, Class PB
2,000,000 5.50 01/25/2008 1,889,360
GE Capital Mortgage Services, Inc. Series 1997-8, Class A13
2,923,705 7.25 10/25/2027 2,922,030
------------
$ 8,625,110
--------------------------------------------------------------------------------------------
Principal Only& - 0.1%
FNMA Remic Trust Series G-35, Class N
$ 233,517 6.22% 10/25/2021 $ 185,250
--------------------------------------------------------------------------------------------
Sequential Fixed Rate CMOs - 2.3%
Citicorp Mortgage Securities, Inc. Series 1993-11, Class A6
$ 400,489 6.25% 09/25/2008 $ 387,417
FNMA Remic Trust Series 1998-58, Class VA
917,663 6.00 10/25/2008 882,186
GE Capital Mortgage Services, Inc. Series 1995-1, Class A8
1,406,403 8.40 02/25/2025 1,407,121
------------
$ 2,676,724
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
Support - 2.7%
FHLMC Series 16, Class M
$ 1,000,000 7.00% 08/25/2023 $ 934,210
Housing Securities, Inc. Series 1994-1, Class A13
1,455,585 6.50 03/25/2009 1,324,218
Salomon Brothers Mortgage Securities VII Series 1996-6H, Class A1
1,000,000 6.00 09/30/2008 950,400
------------
$ 3,208,828
------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS $ 18,939,536
------------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(Cost $71,701,778) $ 70,319,643
------------------------------------------------------------------------------------------------
Agency Debentures - 10.7%
Federal Home Loan Bank
$ 1,000,000 5.68% 12/03/2007 $ 974,840
Federal Home Loan Mortgage Corp.
4,000,000 5.75 07/15/2003 3,898,680
Financing Corp. Stripped Securities - Principal Only&
2,000,000 7.10 03/07/2013 785,620
Small Business Administration
1,776,208 6.70 12/01/2016 1,722,868
1,504,151 7.15 03/01/2017 1,487,380
1,234,662 7.50 04/01/2017 1,243,687
713,773 7.30 05/01/2017 711,846
953,498 6.30 05/01/2018 904,241
958,808 6.30 06/01/2018 909,304
------------------------------------------------------------------------------------------------
TOTAL AGENCY DEBENTURES
(Cost $12,972,183) $ 12,638,466
------------------------------------------------------------------------------------------------
Asset-Backed Securities - 15.5%
Auto - 4.3%
Americredit Automobile Receivables Trust Series 1997-D, Class A3
$ 1,300,000 6.24% 09/05/2003 $ 1,288,702
Arcadia Automobile Receivables Trust Series 1998-C, Class A3
2,500,000 5.67 08/15/2006 2,450,391
CPS Auto Grantor Trust Series 1996-3, Class A
962,223 6.30 08/15/2002 957,113
Fasco Auto Trust Series 1996-1, Class A
234,017 6.65 11/15/2001 234,254
Olympic Automobile Receivables Trust Series 1994-B, Class A2
66,852 6.85 06/15/2001 66,862
------------
$ 4,997,322
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - (continued)
Credit Card - 6.1%
Discover Card Master Trust I Series 1999-2, Class A
$ 2,500,000 5.90% 10/15/2004 $ 2,488,425
Fingerhut Master Trust Series 1998-2, Class A
2,750,000 6.23 02/15/2007 2,703,168
MBNA Master Credit Card Trust Series 1998-C, Class A#
2,000,000 5.46 11/15/2005 1,992,500
Metris Master Trust Series 1996-1, Class A
39,333 6.45 02/20/2002 39,333
------------
$ 7,223,426
--------------------------------------------------------------------------------------------
Home Equity# - 1.5%
AFC Home Equity Loan Trust Series 1997-1, Class A
$ 438,233 5.63% 03/25/2027 $ 438,812
First Franklin Mortgage Loan Series 1997-FF2, Class A
482,102 5.68 08/25/2028 481,438
First Franklin Mortgage Loan Series 1997-FF3, Class A2
890,619 5.63 11/20/2027 886,192
------------
$ 1,806,442
--------------------------------------------------------------------------------------------
Lease - 2.9%
AESOP Funding II LLC Series 1998-1, Class A+
$ 2,000,000 6.14% 05/20/2006 $ 1,895,960
First Sierra Receivables Series 1998-1, Class A4
1,600,000 5.63 08/12/2004 1,555,808
------------
$ 3,451,768
--------------------------------------------------------------------------------------------
Manufactured Housing - 0.7%
Mid-State Trust Series 4, Class A
$ 801,461 8.33% 04/01/2030 $ 822,916
--------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $18,608,066) $ 18,301,874
--------------------------------------------------------------------------------------------
Insured Revenue Bond - 1.7%
New Jersey Economic Development Authority Series A
$ 2,000,000 7.43% 02/15/2029 $ 1,977,300
--------------------------------------------------------------------------------------------
TOTAL INSURED REVENUE BOND
(Cost $2,000,000) $ 1,977,300
--------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 12.2%
United States Treasury Interest-Only Stripped Securities.
$ 920,000 6.38% 05/15/2008 $ 537,271
2,000,000 6.56 05/15/2012 889,800
2,100,000 6.60 02/15/2014 828,114
United States Treasury Principal-Only Stripped Securities&
2,000,000 6.09 11/15/2004 1,467,520
3,900,000 6.26 08/15/2005 2,730,351
5,950,000 6.55 11/15/2009 3,112,623
5,450,000 6.60 05/15/2017 1,739,150
650,000 6.60 02/15/2019 185,250
3,400,000@ 6.57 05/15/2020 897,736
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
U.S. Treasury Obligations - (continued)
United States Treasury Bond
$ 1,400,000 7.88% 02/15/2021 $ 1,619,184
United States Treasury Note
350,000 5.75 11/30/2002 348,523
------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $15,197,486) $ 14,355,522
------------------------------------------------------------------------------------------------
Repurchase Agreement - 13.2%
Joint Repurchase Agreement Account
$15,500,000 5.33% 11/01/1999 $ 15,500,000
------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $15,500,000) $ 15,500,000
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $135,979,513) $133,092,805
------------------------------------------------------------------------------------------------
</TABLE>
* TBA (To Be Assigned) securities are purchased on a forward commitment basis
with an approximate (generally +/ -2.5%) principal amount and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
. Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated coupon due to
the amortization of related premiums.
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1999.
& Security is issued with a zero coupon. The interest rate disclosed represents
effective yield to maturity.
++Security is exempt from registration under Rule 144A of the Securities Act
of 1933. Such securities may be resold, normally to qualified institutional
buyers in transactions exempt from registration. Total market value of Rule
144A securities amounted to $1,895,960 as of October 31, 1999.
@ A portion of this security is segregated as collateral for initial margin
requirement on futures transactions.
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.
27
<PAGE>
GOLDMAN SACHS CORE FIXED 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 January 5, 1994 (commencement of operations) in the Institu-
tional shares of the Goldman Sachs Core Fixed Income Fund. For comparative
purposes, the performance of the Fund's benchmark (the Lehman Brothers Aggre-
gate Bond Index ("Lehman Aggregate Index")) is shown. This performance data
represents past performance and should not be considered indicative of future
performance which will fluctuate with changes in market conditions. These
performance fluctuations will cause an investor's shares, when redeemed, to
be worth more or less than their original cost. Performance of Class A,
Class B, Class C, Administration and Service shares will vary from Institu-
tional shares due to differences in fees and loads.
Core Fixed Income Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested January 5, 1994 to
October 31, 1999.
[GRAPH]
Institutional shares Lehman Aggregate Index
1/5/94 10,000 10,000
Jan-94 10,157 10,135
Feb-94 9,964 9,959
Mar-94 9,759 9,713
Apr-94 9,678 9,635
May-94 9,672 9,634
Jun-94 9,644 9,613
Jul-94 9,825 9,804
Aug-94 9,842 9,816
Sep-94 9,710 9,672
Oct-94 9,700 9,663
Nov-94 9,680 9,642
Dec-94 9,780 9,708
Jan-95 9,957 9,900
Feb-95 10,186 10,136
Mar-95 10,248 10,198
Apr-95 10,388 10,341
May-95 10,788 10,741
Jun-95 10,862 10,819
Jul-95 10,843 10,795
Aug-95 10,979 10,926
Sep-95 11,080 11,032
Oct-95 11,224 11,175
Nov-95 11,393 11,343
Dec-95 11,550 11,502
Jan-96 11,621 11,578
Feb-96 11,424 11,376
Mar-96 11,332 11,297
Apr-96 11,276 11,233
May-96 11,268 11,211
Jun-96 11,436 11,361
Jul-96 11,464 11,392
Aug-96 11,457 11,372
Sep-96 11,653 11,570
Oct-96 11,898 11,827
Nov-96 12,120 12,029
Dec-96 12,016 11,918
Jan-97 12,057 11,955
Feb-97 12,085 11,984
Mar-97 11,955 11,851
Apr-97 12,121 12,029
May-97 12,225 12,143
Jun-97 12,380 12,288
Jul-97 12,726 12,620
Aug-97 12,615 12,512
Sep-97 12,808 12,696
Oct-97 12,991 12,880
Nov-97 13,020 12,940
Dec-97 13,159 13,070
Jan-98 13,332 13,238
Feb-98 13,320 13,227
Mar-98 13,374 13,273
Apr-98 13,430 13,342
May-98 13,568 13,469
Jun-98 13,692 13,583
Jul-98 13,722 13,612
Aug-98 13,971 13,834
Sep-98 14,258 14,157
Oct-98 14,180 14,083
Nov-98 14,138 14,162
Dec-98 14,206 14,205
Jan-99 14,305 14,307
Feb-99 14,042 14,057
Mar-99 14,155 14,135
Apr-99 14,209 14,179
May-99 14,076 14,055
Jun-99 13,997 14,010
Jul-99 13,964 13,952
Aug-99 13,931 13,944
Sep-99 14,087 14,106
Oct-99 14,127 14,158
<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 5.93% n/a -0.68%
Including sales charges 3.99% n/a -5.13%
-----------------------------------------------------------------------------
Class B shares (commenced May 1, 1997)
Excluding contingent deferred sales
charges 5.15% n/a -1.47%
Including contingent deferred sales
charges 3.88% n/a -6.40%
-----------------------------------------------------------------------------
Class C shares (commenced August 15,
1997)
Excluding contingent deferred sales
charges 4.06% n/a -1.51%
Including contingent deferred sales
charges 4.06% n/a -2.49%
-----------------------------------------------------------------------------
Institutional shares (commenced January
5, 1994) 6.11% 7.81% -0.37%
-----------------------------------------------------------------------------
Administration shares (commenced Febru-
ary 28, 1996)(a) 6.19% n/a -0.13%
-----------------------------------------------------------------------------
Service shares (commenced March 13,
1996) 5.76% n/a -0.87%
-----------------------------------------------------------------------------
</TABLE>
(a) The Administration shares were liquidated on July 20, 1999. The returns
shown are through termination date. In addition, the one year return
number is not annualized.
28
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------
Corporate Bonds - 35.0%
------------------------------------------------------------------------------------------------
Aerospace/Defense - 0.5%
Raytheon Co.
$ 250,000 6.45% 08/15/2002 $ 244,800
1,300,000 5.70 11/01/2003 1,226,264
------------
$ 1,471,064
------------------------------------------------------------------------------------------------
Airlines - 1.1%
Continental Airlines, Inc.
$ 325,234 7.75% 07/02/2014 $ 326,388
529,965 8.56 07/02/2014 547,814
Northwest Airlines, Inc.
1,989,581 8.97 01/02/2015 2,010,590
NWA Trust
136,715 8.26 03/10/2006 137,332
US Airways, Inc.
522,974 6.76 04/15/2008 486,167
------------
$ 3,508,291
------------------------------------------------------------------------------------------------
Automotive - 2.9%
Chrysler Financial Corp.
$ 430,000 6.09% 04/06/2001 $ 428,280
DaimlerChrysler NA Holding Corp.
1,000,000 6.90 09/01/2004 997,240
Ford Capital BV
325,000 9.88 05/15/2002 347,958
Ford Motor Co.
500,000 6.63 10/01/2028 444,785
Ford Motor Credit Co.
150,000 6.00 01/14/2003 146,530
740,000 6.13 04/28/2003 722,899
General Motors Acceptance Corp.
1,500,000 6.10 06/01/2001 1,484,226
375,000 9.63 12/15/2001 396,555
1,500,000 5.91 03/11/2002 1,472,505
The Hertz Corp.
1,075,000 6.70 06/15/2002 1,070,550
1,200,000 6.00 01/15/2003 1,166,976
500,000 7.00 07/15/2003 495,670
------------
$ 9,174,174
------------------------------------------------------------------------------------------------
Automotive Parts - 0.7%
The Pep Boys-Manny, Moe & Jack
$ 550,000 6.75% 03/10/2004 $ 506,897
100,000 6.52 07/16/2007 94,988
TRW, Inc.++
1,600,000 6.63 06/01/2004 1,552,379
------------
$ 2,154,264
------------------------------------------------------------------------------------------------
Broker Dealer - 0.1%
World Financial Properties++
$ 473,237 6.91% 09/01/2013 $ 450,806
------------------------------------------------------------------------------------------------
Building Materials - 0.5%
Owens Corning
$ 1,445,000 7.50% 05/01/2005 $ 1,391,636
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------
Corporate Bonds - (continued)
------------------------------------------------------------------------------------------------
Commercial Banks - 5.0%
Bank of America Corp.
$ 110,000 7.75% 07/15/2002 $ 112,593
400,000 7.50 10/15/2002 407,004
730,000 7.88 12/01/2002 749,761
1,200,000 9.20 05/15/2003 1,286,995
700,000 6.38 05/15/2005 678,776
810,000 7.25 10/15/2025 757,293
Bayerische Landesbank Girozentrale
600,000 5.88 12/01/2008 547,524
Citicorp
900,000 8.00 02/01/2003 930,078
Dime Bancorp, Inc.
810,000 6.38 01/30/2001 802,767
First Union Corp.
1,200,000 7.10 08/15/2004 1,205,112
Long Island Savings Bank
2,650,000 6.20 04/02/2001 2,610,488
Merita Bank Ltd.
650,000 6.50 04/01/2009 599,710
National Westminster Bank PLC
790,000 7.38 10/01/2009 783,688
Security Pacific Corp.
995,000 11.50 11/15/2000 1,042,850
The Bank of New York Co., Inc.
1,100,000 7.88 11/15/2002 1,135,167
The Money Store, Inc.
630,000 7.30 12/01/2002 636,206
Wells Fargo & Co.
1,440,000 6.63 07/15/2004 1,427,774
------------
$ 15,713,786
-----------------------------------------------------------------------------------------------
Conglomerates - 0.9%
Tyco International Group SA
$ 975,000 5.88% 11/01/2004 $ 918,060
1,850,000 6.38 06/15/2005 1,766,399
------------
$ 2,684,459
-----------------------------------------------------------------------------------------------
Consumer Cyclicals - 0.4%
Cendant Corp.
$1,100,000 7.50% 12/01/2000 $ 1,102,486
USI American Holdings, Inc.
150,000 7.25 12/01/2006 138,734
------------
$ 1,241,220
-----------------------------------------------------------------------------------------------
Consumer Non-Durables - 0.2%
AMETEK, Inc.
$ 600,000 7.20% 07/15/2008 $ 546,312
-----------------------------------------------------------------------------------------------
Consumer Products - 0.5%
Nabisco, Inc.
$1,650,000 6.00% 02/15/2001 $ 1,629,095
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------
Corporate Bonds - (continued)
------------------------------------------------------------------------------------------------
Credit Card Banks - 1.5%
Capital One Bank
$ 600,000 6.66% 02/03/2000 $ 600,090
400,000 6.88 04/24/2000 400,212
800,000 6.58 04/17/2001 798,160
650,000 6.15 06/01/2001 639,931
1,000,000 6.48 01/28/2002 983,330
350,000 6.38 02/15/2003 337,505
Capital One Financial Corp.
355,000 7.25 12/01/2003 346,278
Providian National Bank
705,000 6.65 02/01/2004 677,519
------------
$ 4,783,025
------------------------------------------------------------------------------------------------
Electric - 0.8%
Cal Energy Corp.++
$ 116,825 6.77% 09/15/2003 $ 113,742
Mid American Energy Holdings Corp.
1,000,000 7.23 09/15/2005 989,420
Niagara Mohawk Power Corp.
650,000 6.88 04/01/2003 652,067
400,000 7.38 08/01/2003 401,728
314,000 8.00 06/01/2004 322,808
Salton Sea Funding Corp.
56,550 7.02 05/30/2000 56,644
------------
$ 2,536,409
------------------------------------------------------------------------------------------------
Energy - 1.1%
Norsk Hydro ASA
$ 260,000 7.15% 01/15/2029 $ 232,830
Occidental Petroleum Corp.
505,000 6.50 04/01/2005 487,365
425,000 7.65 02/15/2006 421,851
375,000 7.20 04/01/2028 335,730
The Williams Cos., Inc.
2,030,000 6.13 02/15/2002 1,996,119
------------
$ 3,473,895
------------------------------------------------------------------------------------------------
Finance Companies - 1.8%
Associates Corp. of North America
$ 950,000 5.75% 11/01/2003 $ 914,686
1,000,000 6.00 07/15/2005 950,800
Comdisco, Inc.
3,000,000 6.13 01/15/2003 2,881,620
Household Finance Corp.
900,000 5.88 11/01/2002 872,859
------------
$ 5,619,965
------------------------------------------------------------------------------------------------
Environmental - 1.0%
Republic Services, Inc.
$ 1,545,000 6.63% 05/15/2004 $ 1,413,969
Waste Management, Inc.
1,225,000 6.25 10/15/2000 1,182,725
700,000 6.38 12/01/2003 607,845
------------
$ 3,204,539
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------
Corporate Bonds - (continued)
------------------------------------------------------------------------------------------------
Insurance Companies - 1.2%
American General Finance Corp.
$1,200,000 6.55% 06/24/2002 $ 1,191,540
780,000 5.75 11/01/2003 746,460
Conseco, Inc.
1,190,000 8.50 10/15/2002 1,191,011
MIC Financing Trust I++
360,000 8.38 02/01/2027 330,578
PXRE Capital Trust I
165,000 8.85 02/01/2027 120,775
-----------
$ 3,580,364
----------------------------------------------------------------------------------------------
Media-Cable - 1.4%
Time Warner Entertainment Co.
$2,850,000 9.63% 05/01/2002 $ 3,016,411
Time Warner, Inc.
400,000 7.98 08/15/2004 411,632
1,000,000 6.85 01/15/2026 993,330
-----------
$ 4,421,373
----------------------------------------------------------------------------------------------
Media-Non Cable - 3.3%
CBS Corp.
$ 665,000 6.88% 09/01/2003 $ 656,242
J. Seagram & Sons, Inc.
1,050,000 6.25 12/15/2001 1,034,019
News America Holdings, Inc.
1,000,000 8.63 02/01/2003 1,034,110
1,500,000 8.50 02/15/2005 1,557,570
400,000 8.00 10/17/2016 394,176
600,000 7.13 04/08/2028 525,408
PanAmSat Corp.
2,650,000 6.13 01/15/2005 2,369,497
Viacom, Inc.
2,250,000 6.75 01/15/2003 2,221,448
455,000 7.75 06/01/2005 461,115
-----------
$10,253,585
----------------------------------------------------------------------------------------------
Mortgage Banks - 1.8%
Countrywide Capital Corp. III
$1,080,000 8.05% 06/15/2027 $ 1,032,296
Countrywide Funding Corp.
1,000,000 6.97 03/28/2003 999,720
Countrywide Home Loans, Inc.
400,000 6.45 02/27/2003 393,772
200,000 6.70 03/10/2005 193,724
Homeside Lending, Inc.
1,760,000 6.20 05/15/2003 1,702,378
1,360,000 6.75 08/01/2004 1,331,290
-----------
$ 5,653,180
----------------------------------------------------------------------------------------------
REIT - 1.5%
Developers Diversified Realty Corp.
$1,400,000 6.84% 12/16/2004 $ 1,305,388
Highwoods Properties, Inc.
835,000 6.75 12/01/2003 787,179
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Corporate Bonds - (continued)
REIT - (continued)
Liberty Property LP
$ 115,000 7.10% 08/15/2004 $ 109,896
Meditrust Cos.
750,000 7.38 07/15/2000 732,285
390,000 7.82 09/10/2026 345,205
Simon Property Group LP
1,495,000 6.63 06/15/2003 1,436,924
-----------
$ 4,716,877
---------------------------------------------------------------------------------------------
Retailers - 0.6%
Federated Department Stores, Inc.
$ 1,400,000 8.50% 06/15/2003 $ 1,456,140
Sears Roebuck Acceptance Corp.
500,000 6.41 11/19/2002 489,345
-----------
$ 1,945,485
---------------------------------------------------------------------------------------------
Supermarkets - 0.7%
Fred Meyer, Inc.
$ 700,000 7.38% 03/01/2005 $ 692,643
Safeway, Inc.
1,565,000 6.05 11/15/2003 1,504,685
-----------
$ 2,197,328
---------------------------------------------------------------------------------------------
Telecommunications - 4.3%
360 Communications Co.
$ 1,015,000 7.13% 03/01/2003 $ 1,017,943
Metronet Communications Corp.+
1,045,000 0.00/9.95 06/15/2008 812,487
Cable & Wireless Communications PLC
1,360,000 6.38 03/06/2003 1,355,485
MCI Worldcom, Inc.
1,400,000 6.25 08/15/2003 1,370,404
1,125,000 6.40 08/15/2005 1,095,750
450,000 8.88 01/15/2006 473,742
Sprint Capital Corp.
1,440,000 5.88 05/01/2004 1,376,309
400,000 6.88 11/15/2028 361,036
Tele-Communications, Inc.
100,000 7.38 02/15/2000 100,390
Telecom de Puerto Rico+
470,000 6.15 05/15/2002 459,519
590,000 6.65 05/15/2006 559,639
TKR Cable, Inc.
2,195,000 10.50 10/30/2007 2,310,457
US West Capital Funding, Inc.
1,500,000 6.88+ 08/15/2001 1,496,220
600,000 6.88 07/15/2028 528,258
-----------
$13,317,639
---------------------------------------------------------------------------------------------
Tobacco - 1.2%
Philip Morris Cos., Inc.
$ 550,000 8.75% 06/01/2001 $ 562,289
2,250,000 7.13 08/15/2002 2,253,532
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Corporate Bonds - (continued)
Tobacco - (continued)
R.J. Reynolds Tobacco Holdings, Inc.+
$1,030,000 7.38% 05/15/2003 $ 1,011,254
------------
$ 3,827,075
-----------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $112,772,087) $109,495,846
-----------------------------------------------------------------------------------------------
Agency Debentures - 0.7%
Small Business Administration
$2,397,019 6.30% 06/01/2018 $ 2,273,261
-----------------------------------------------------------------------------------------------
TOTAL AGENCY DEBENTURES
(Cost $2,397,019) $ 2,273,261
-----------------------------------------------------------------------------------------------
Asset-Backed Securities - 9.6%
Auto - 3.2%
Americredit Automobile Receivables Trust Series 1998-A, Class A3
$2,500,000 5.88% 12/05/2003 $ 2,467,188
Chevy Chase Auto Receivables Trust Series 1995-2 Class A
20,915 5.80 06/15/2002 20,869
Olympic Automobile Receivables Trust Series 1994-B, Class A2
38,943 6.85 06/15/2001 38,949
Onyx Acceptance Auto Trust Series 1999-D, Class A4
2,600,000 7.00 11/15/2004 2,599,350
Union Acceptance Corp. Series 1999-A, Class A5#
5,000,000 5.87 09/08/2006 4,887,250
------------
$ 10,013,606
-----------------------------------------------------------------------------------------------
Credit Card - 0.3%
Discover Card Master Trust I Series 1996-4, Class B#
$ 850,000 5.96% 10/16/2013 $ 838,576
-----------------------------------------------------------------------------------------------
Home Equity - 3.0%
Aames Mortgage Trust Series 1998-B, Class A6F
$3,500,000 6.45% 09/15/2028 $ 3,349,360
AFC Home Equity Loan Trust Series 1997-1, Class A#
321,371 5.63 07/25/2027 321,795
First Franklin Mortgage Loan Series 1997-FF3, Class A2
556,826 5.61 11/20/2027 554,058
IMC Home Equity Loan Trust Series 1998-3, Class A8
5,200,000 6.34 08/20/2029 4,995,796
------------
$ 9,221,009
-----------------------------------------------------------------------------------------------
Lease - 1.0%
AESOP Funding II LLC Series 1998-1, Class A+
$3,400,000 6.14% 05/20/2006 $ 3,223,132
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - (continued)
Manufactured Housing - 2.1%
Green Tree Financial Corp. Series 1998-6 Class M1
$4,250,000 6.63% 06/01/2030 $ 3,862,187
Mid-State Trust Series 4, Class A
2,671,564 8.33 04/01/2030 2,743,082
-----------
$ 6,605,269
-----------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $31,151,571) $29,901,592
-----------------------------------------------------------------------------------------------
Emerging Market Debt - 1.7%
Korea Electric Power Corp.
$ 760,000 7.75% 04/01/2013 $ 666,642
Pemex Finance Ltd.
200,000 8.02 05/15/2007 180,948
400,000 8.02++ 05/15/2007 361,896
230,000 9.15 11/15/2018 224,951
470,000 9.15++ 11/15/2018 431,391
Republic of Korea
620,000 8.88 04/15/2008 648,427
Republic of Poland#
310,000 4.00 10/27/2024 202,275
1,260,000 5.00 10/27/2014 1,115,100
YPF Sociedad Anonima
70,244 7.00 10/26/2002 69,473
1,264,809 7.50 10/26/2002 1,263,899
-----------------------------------------------------------------------------------------------
TOTAL EMERGING MARKET DEBT
(Cost $5,400,600) $ 5,165,002
-----------------------------------------------------------------------------------------------
Mortgage Backed Obiligations - 42.6%
Federal Home Loan Mortgage Corp. (FHLMC) - 14.7%
$ 148,163 8.00% 08/01/2010 $ 151,452
248,005 6.00 03/01/2014 238,705
1,649,660 6.00 06/01/2014 1,587,798
119,651 7.00 10/01/2017 118,006
401,717 7.50 06/01/2024 404,477
671,403 7.00 10/01/2027 663,641
1,030,389 7.00 06/01/2028 1,012,358
1,887,552 7.00 07/01/2028 1,854,520
676,521 7.00 08/01/2028 664,682
219,857 7.00 11/01/2028 216,009
1,011,941 7.00 12/01/2028 994,232
1,470,388 7.00 01/01/2029 1,444,656
907,817 7.00 04/01/2029 892,167
5,994,409 7.00 09/01/2029 5,891,066
1,998,341 7.00 10/01/2029 1,963,889
6,000,000 7.00 TBA-30 yr* 5,895,000
22,000,000 7.50 TBA-30 yr* 22,045,000
-----------
$46,037,658
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obiligations - (continued)
Federal National Mortgage Association (FNMA) - 8.3%
$ 69,120 6.50% 02/01/2026 $ 66,592
220,327 6.50 08/01/2026 212,477
157,200 6.50 09/01/2027 150,764
292,595 6.50 10/01/2027 280,616
1,898,656 6.50 11/01/2027 1,819,633
2,225,839 6.50 12/01/2027 2,132,745
730,672 6.50 02/01/2028 700,759
722,260 6.50 04/01/2028 692,012
314,068 6.50 06/01/2028 300,915
1,113,837 6.50 07/01/2028 1,067,269
166,225 6.50 08/01/2028 159,264
987,357 6.50 09/01/2028 946,006
18,000,000 6.50 TBA-30 yr* 17,247,600
-----------
$25,776,652
------------------------------------------------------------------------------------------------
Government National Mortgage Association (GNMA) - 9.0%
$ 176,158 8.00% 02/15/2017 $ 181,166
20,646 7.00 11/15/2022 20,391
791,751 7.00 12/15/2022 781,981
500,643 7.00 01/15/2023 493,929
118,676 7.00 03/15/2023 117,119
718,674 7.00 04/15/2023 709,691
1,629,611 7.00 05/15/2023 1,609,240
57,903 7.00 06/15/2023 57,180
1,613,252 7.00 07/15/2023 1,591,963
849,875 7.00 08/15/2023 839,251
2,047,932 7.00 10/15/2023 2,018,733
30,761 7.00 11/15/2023 30,376
956,617 7.00 12/15/2023 942,206
272,006 6.50 06/15/2028 259,935
286,895 6.50 09/15/2028 274,163
2,966,198 6.50 10/15/2028 2,836,068
8,916,302 6.50 11/15/2028 8,525,855
2,466,905 6.50 01/15/2029 2,357,688
2,110,724 6.50 02/15/2029 2,017,313
490,193 6.50 04/15/2029 468,438
755,382 7.00 04/15/2029 740,747
750,481 7.00 05/15/2029 735,940
163,839 6.50 07/15/2029 156,568
249,520 7.00 08/15/2029 244,761
244,618 7.00 10/15/2029 239,878
-----------
$28,250,580
------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations - 10.6%
Remic Trust Floater# - 1.3%
FNMA Series 1993-138, Class SM
$ 3,000,000 9.62% 12/25/2021 $ 3,047,940
Prudential Home Mortgage Securities Co. Series 1992-99, Class A5
1,000,000 7.87 12/25/2007 1,007,360
-----------
$ 4,055,300
------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
IOette. - 0.1%
FNMA Series 1992-24, Class N
$ 15,722 15.04% 03/25/2007 $ 252,813
-----------------------------------------------------------------------------------------------
Non-Agency CMOs - 6.5%
Asset Securitization Corp. Series 1997-D4, Class A1D
$ 900,000 7.49% 04/14/2029 $ 913,374
Chase Commercial Mortgage Securities Corp. Series 1997-2 Class A2
3,100,000 6.60 11/19/2007 2,983,998
Chase Commercial Mortgage Securities Corp. Series 1998-1, Class A2
3,000,000 6.56 05/18/2008 2,870,400
Commercial Mortgage Acceptance Corp. Series 1998-C1, Class A2
2,200,000 6.49 05/15/2008 2,106,390
Commercial Mortgage Asset Trust Series 1999-C1, Class A3
400,000 6.64 09/17/2010 378,220
CS First Boston Mortgage Sercurities Corp. Series 1997-C2, Class A3
3,250,000 6.55 11/17/2007 3,087,143
First Union-Lehman Brothers Commercial Mortgage Services Series 1997-C1,
Class A2
600,000 7.30 12/18/2006 600,462
First Union-Lehman Brothers Commercial Mortgage Services Series 1997-C2,
Class A2
1,000,000 6.60 05/18/2007 969,030
JP Morgan Commercial Mortgage Finance Corp. Series 1999-C8, Class A2
3,000,000 7.40 07/15/2031 2,983,301
Merrill Lynch Mortgage Investors, Inc. Series 1998-C2 Class A2
3,690,000 6.39 02/15/2030 3,498,858
------------
$ 20,391,176
-----------------------------------------------------------------------------------------------
Planned Amortization Class (PAC) CMOs - 1.5%
FHLMC Series 16, Class PG
$1,000,000 6.35% 03/25/2018 $ 996,560
FHLMC Series 2055, Class OD
2,000,000 6.00 01/15/2012 1,906,860
FHLMC Series 2149, Class TF
1,250,000 6.50 05/15/2024 1,199,637
FNMA Remic Trust Series G93-31, Class PJ
750,000 6.55 10/25/2020 740,243
------------
$ 4,843,300
-----------------------------------------------------------------------------------------------
Sequential Fixed Rate CMOs - 1.2%
Collateralized Mortgage Obligation Trust Series 1963, Class Z
$ 670,805 9.00% 10/20/2020 $ 695,537
Residential Asset Securitization Trust Series 1997-A3, Class A4
3,000,000 7.75 05/25/2027 3,001,860
------------
$3,697,397
-----------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS $ 33,239,986
-----------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(Cost $135,222,088) $133,304,876
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Sovereign Credit - 1.3%
Province of Quebec
$2,185,000 7.50% 07/15/2023 $ 2,182,706
320,000 5.74# 03/02/2026 318,089
Province of Saskatchewan
275,000 8.50 07/15/2022 301,598
State of Israel&
6,000,000 6.66 05/15/2023 1,255,020
-----------------------------------------------------------------------------------------------
TOTAL SOVEREIGN CREDIT
(Cost $4,410,837) $4,057,413
-----------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 4.2%
United States Treasury Interest-Only Stripped Securities.
$5,600,000 6.49% 05/15/2008 $ 3,270,344
2,000,000 6.33 08/15/2008 1,148,740
United States Treasury Principal-Only Stripped Securities&
4,550,000@ 6.59 05/15/2017 1,451,951
4,900,000 6.59 05/15/2018 1,465,051
4,000,000 6.34 08/15/2025 795,840
6,500,000 6.33 08/15/2026 1,222,780
United States Treasury Note
3,000,000 6.63 07/31/2001 3,039,840
United States Treasury Bond
500,000 7.88 02/15/2021 578,280
-----------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $13,102,902) $12,972,826
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Repurchase Agreement - 15.9%
Joint Repurchase Agreement Account
$49,700,000 5.33% 11/01/1999 $ 49,700,000
------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $49,700,000) $ 49,700,000
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $354,157,104) $346,870,816
------------------------------------------------------------------------------------------------
</TABLE>
++ Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. Such securities may be resold, normally to qualified
institutional buyers in transactions exempt from registration. Total market
value of Rule 144A securities amounted to $9,990,556 as of October 31,
1999.
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1999.
* TBA (To Be Assigned) securities are purchased on a forward commitment basis
with an approximate (generally +/ -2.5%) principal amount and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
. Represents security with notional or nominal principal amount. The actual
effective yield of this security is different than the stated coupon due to
amortization of related premiums.
+ These securities are issued with a zero coupon which increases to the
stated rate at a set date in the future.
& This security is issued with a zero coupon. The interest rate disclosed for
this security represents effective yield to maturity.
@ A portion of this security is segregated as collateral for initial margin
requirement on futures transactions.
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.
34
<PAGE>
GOLDMAN SACHS GLOBAL 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 September 1, 1991 in Class A shares (with the maximum sales
charge of 4.5%) of the Goldman Sachs Global Income Fund. For comparative pur-
poses, the performance of the Fund's benchmark (the J.P. Morgan Global Gov-
ernment Bond Index hedged to U.S. Dollars (the "J.P. Morgan GGB Index - $
Hedged")) is shown. This performance data represents past performance and
should not be considered indicative of future performance which will fluctu-
ate 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 Serv-
ice shares will vary from Class A due to differences in fees and loads.
Global Income Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested September 1, 1991 to
October 31, 1999.(a)
[GRAPH]
Class A shares J.P. Morgan GGB Index-$ Hedged
9/1/91 9,500 10,000
Sep-91 9,640 10,174
Oct-91 9,686 10,263
Nov-91 9,689 10,327
Dec-91 9,810 10,583
Jan-92 9,857 10,546
Feb-92 9,857 10,584
Mar-92 9,768 10,517
Apr-92 9,827 10,578
May-92 9,896 10,721
Jun-92 10,125 10,799
Jul-92 10,357 10,918
Aug-92 10,678 10,974
Sep-92 10,550 11,129
Oct-92 10,536 11,156
Nov-92 10,514 11,130
Dec-92 10,545 11,288
Jan-93 10,623 11,457
Feb-93 10,886 11,671
Mar-93 10,763 11,695
Apr-93 10,849 11,745
May-93 10,928 11,766
Jun-93 11,193 12,006
Jul-93 11,338 12,103
Aug-93 11,483 12,352
Sep-93 11,491 12,404
Oct-93 11,668 12,509
Nov-93 11,633 12,500
Dec-93 11,878 12,660
Jan-94 11,957 12,702
Feb-94 11,561 12,433
Mar-94 11,362 12,259
Apr-94 11,298 12,168
May-94 11,217 12,090
Jun-94 11,136 12,014
Jul-94 11,250 12,146
Aug-94 11,185 12,087
Sep-94 11,152 12,029
Oct-94 11,144 12,051
Nov-94 11,202 12,133
Dec-94 11,252 12,149
Jan-95 11,369 12,316
Feb-95 11,580 12,518
Mar-95 11,826 12,699
Apr-95 11,963 12,882
May-95 12,340 13,326
Jun-95 12,288 13,342
Jul-95 12,297 13,432
Aug-95 12,489 13,558
Sep-95 12,612 13,734
Oct-95 12,824 13,903
Nov-95 13,073 14,169
Dec-95 13,251 14,323
Jan-96 13,471 14,467
Feb-96 13,250 14,260
Mar-96 13,255 14,290
Apr-96 13,383 14,367
May-96 13,426 14,421
Jun-96 13,546 14,557
Jul-96 13,609 14,639
Aug-96 13,720 14,756
Sep-96 14,026 15,037
Oct-96 14,246 15,306
Nov-96 14,525 15,591
Dec-96 14,500 15,553
Jan-97 14,569 15,686
Feb-97 14,669 15,756
Mar-97 14,549 15,645
Apr-97 14,704 15,837
May-97 14,730 15,942
Jun-97 14,968 16,178
Jul-97 15,258 16,522
Aug-97 15,202 16,464
Sep-97 15,535 16,741
Oct-97 15,622 16,925
Nov-97 15,710 17,034
Dec-97 15,897 17,243
Jan-98 16,068 17,487
Feb-98 16,100 17,559
Mar-98 16,273 17,674
Apr-98 16,354 17,760
May-98 16,566 17,983
Jun-98 16,604 18,112
Jul-98 16,719 18,227
Aug-98 17,043 18,643
Sep-98 17,523 19,118
Oct-98 17,374 19,075
Nov-98 17,491 19,211
Dec-98 17,514 19,210
Jan-99 17,702 19,404
Feb-99 17,388 19,144
Mar-99 17,520 19,320
Apr-99 17,641 19,501
May-99 17,473 19,384
Jun-99 17,212 19,165
Jul-99 17,157 19,126
Aug-99 17,105 19,147
Sep-99 17,169 19,245
Oct-99 17,176 19,282
<TABLE>
<CAPTION>
Average Annual Total Return through
October 31, 1999 Since Inception Five Years One Year
<S> <C> <C> <C>
Class A shares (commenced August 2,
1991)
Excluding sales charges 7.44% 9.03% -1.14%
Including sales charges 6.84% 8.04% -5.60%
----------------------------------------------------------------------------
Class B shares (commenced May 1, 1996)
Excluding contingent deferred sales
charges 6.81% n/a -1.74%
Including contingent deferred sales
charges 5.91% n/a -6.65%
----------------------------------------------------------------------------
Class C shares (commenced August 15,
1997)
Excluding contingent deferred sales
charges 5.29% n/a -1.68%
Including contingent deferred sales
charges 5.29% n/a -2.66%
----------------------------------------------------------------------------
Institutional shares (commenced August
1, 1995) 8.79% n/a -0.49%
----------------------------------------------------------------------------
Service shares (commenced March 12,
1997) 6.24% n/a -1.06%
----------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following commencement of operations.
35
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount! Rate Date Value
<S> <C> <C> <C>
Foreign Debt Obligations - 63.8%
Australian Dollar - 0.4%
Government of Australia
AUD 3,100,000 8.75% 08/15/2008 $ 2,250,767
---------------------------------------------------------------------------------------------
British Pound Sterling - 10.3%
Abbey National Treasury
GBP 4,000,000 8.00% 04/02/2003 $ 6,751,603
Bank Nederlandse Gemeenten
2,500,000 6.38 03/30/2005 4,043,806
Lehman Brothers Holdings PLC
2,900,000 6.95 06/22/2004 4,570,854
Lloyds Bank PLC
2,900,000 7.75 06/18/2007 4,948,211
North American Capital Corp.
1,300,000 8.25 11/17/2003 2,156,617
United Kingdom Treasury
23,574,000 5.00 06/07/2004 37,162,124
------------
$ 59,633,215
---------------------------------------------------------------------------------------------
Danish Krone - 1.9%
Kingdom of Denmark
DKK69,000,000 8.00% 05/15/2003 $ 10,733,348
---------------------------------------------------------------------------------------------
Euro Currency - 24.7%
Federal Republic of Germany
EUR 5,000,000 3.00% 06/15/2001 $ 5,196,228
23,000,000 4.50 08/19/2002 24,323,768
9,500,000 5.25 01/04/2008 10,101,593
6,000,000 6.25 01/04/2024 6,670,548
General Motors Acceptance Corp.++
4,800,000 5.00 01/18/2005 5,036,762
Government of France
19,000,000 4.50 07/12/2003 19,909,164
14,600,000 8.50 04/25/2023 20,511,174
Republic of Italy
32,200,000 4.00 07/15/2004 32,673,971
14,600,000 6.50 11/01/2027 16,296,089
Tecnost International NV
2,200,000 5.38 07/30/2004 2,273,030
------------
$142,992,327
---------------------------------------------------------------------------------------------
German Mark - 3.4%
Baden Wuerttemberg Finance
DEM10,000,000 5.38% 02/05/2010 $ 5,255,797
Citicorp
4,500,000 6.25 09/19/2009 2,474,563
1,100,000 5.50 06/30/2010 569,576
Gallaher Group
10,300,000 5.88 08/06/2008 5,257,848
Halifax Group PLC
5,000,000 5.63 07/23/2007 2,694,427
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount! Rate Date Value
<S> <C> <C> <C>
Foreign Debt Obligations - (continued)
German Mark - (continued)
Merrill Lynch Co., Inc.
DEM 2,500,000 5.38% 01/04/2009 $ 1,279,969
Royal Bank of Scotland PLC
3,700,000 5.25 07/22/2008 1,876,048
------------
$ 19,408,228
-------------------------------------------------------------------------------------------
Japanese Yen - 19.7%
Asian Development Bank
JPY1,300,000,000 5.63% 02/18/2002 $ 13,992,523
European Investment Bank
700,000,000 2.13 09/20/2007 6,976,396
Federal National Mortgage Assn.
650,000,000 2.13 10/09/2007 6,455,116
Government of Japan
7,960,000,000 0.90 12/22/2008 70,014,484
International Bank for Reconstruction & Development
400,000,000 4.50 06/20/2000 3,944,217
350,000,000 5.25 03/20/2002 3,756,114
Republic of Italy
550,000,000 5.13 07/29/2003 6,151,339
200,000,000 3.80 03/27/2008 2,217,048
------------
$113,507,237
-------------------------------------------------------------------------------------------
New Zealand Dollar - 1.7%
Government of New Zealand
NZD 17,900,000 8.00% 11/15/2006 $ 9,575,618
-------------------------------------------------------------------------------------------
Swedish Krona - 1.7%
Stadshypotek AB
SEK 85,000,000 5.00% 12/17/2003 $ 9,873,808
-------------------------------------------------------------------------------------------
TOTAL FOREIGN DEBT OBLIGATIONS
(Cost $370,630,402) $367,974,548
-------------------------------------------------------------------------------------------
Asset-Backed Securities - 2.7%
Auto - 0.7%
ALAC Automobile Receivables Trust Series 1997-1, Class A++
USD 133,142 6.29% 12/15/2002 $ 132,508
Americredit Automobile Receivables Trust Series 1997-D, Class A3
450,000 6.24 09/05/2003 446,089
Arcadia Automobile Receivables Series 1997-D, Class A4
950,000 6.35 11/15/2005 942,819
Arcadia Automobile Receivables Series 1998-C, Class A3
1,000,000 5.67 08/15/2006 980,156
Arcadia Automobile Receivables Series 1999-C, Class A3
1,500,000 7.20 06/15/2007 1,513,594
------------
$ 4,015,166
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount! Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - (continued)
Credit Card - 0.4%
Citibank Credit Card Master Trust I Series 1998-3, Class A
USD 1,000,000 5.80% 02/07/2005 $ 974,370
Fingerhut Master Trust Series 1998-2, Class A
1,000,000 6.23 02/15/2007 982,970
------------
$ 1,957,340
---------------------------------------------------------------------------------------------
Home Equity - 0.8%
AFC Home Equity Loan Trust Series 1997-1, Class A#
USD 438,233 5.63% 03/25/2027 $ 438,812
American Business Financial Services Series 1998-2, Class A6
2,250,000 6.46 09/25/2029 2,157,187
BankBoston Home Equity Loan Trust Series 1998-2, Class A7
1,750,000 6.14 06/25/2013 1,623,825
UCFC Home Equity Loan Trust Series 1997-D, Class A8#
494,427 5.66 12/15/2027 490,348
------------
$ 4,710,172
---------------------------------------------------------------------------------------------
Lease - 0.3%
AESOP Funding II LLC Series 1998-1, Class A+
USD 1,000,000 6.14% 05/20/2006 $ 947,980
First Sierra Receivables Series 1998-1, Class A4
900,000 5.63 08/12/2004 875,142
------------
$ 1,823,122
---------------------------------------------------------------------------------------------
Manufactured Housing - 0.2%
Mid-State Trust Series 4, Class A
USD 1,187,362 8.33% 04/01/2030 $ 1,219,148
---------------------------------------------------------------------------------------------
Student Loans - 0.3%
Union Financial Services Series 1998-A, Class A9
USD 2,000,000 5.73% 12/01/2005 $ 1,955,480
---------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $16,105,034) $ 15,680,428
---------------------------------------------------------------------------------------------
Corporate Bonds - 15.5%
Aerospace/Defense - 0.1%
Raytheon Co.
USD 85,000 6.30% 08/15/2000 $ 84,833
310,000 5.70 11/01/2003 292,417
------------
$ 377,250
---------------------------------------------------------------------------------------------
Airlines - 0.2%
Continental Airlines, Inc.
USD 288,876 6.54% 09/15/2009 $ 277,526
Northwest Airlines, Inc.
268,423 7.67 01/02/2015 266,609
236,855 8.97 01/02/2015 239,356
U.S. Airways
250,000 6.82 07/30/2014 214,995
------------
$ 998,486
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount! Rate Date Value
<S> <C> <C> <C>
Corporate Bonds - (continued)
Automotive - 1.6%
Chrysler Financial Corp.
USD 445,000 6.09% 04/06/2001 $ 443,220
Ford Motor Credit Co.
5,000,000 6.13 04/28/2003 4,884,450
General Motors Acceptance Corp.
2,500,000 5.50 01/14/2002 2,439,400
770,000 5.75 11/10/2003 739,839
The Hertz Corp.
485,000 6.70 06/15/2002 482,992
250,000 6.00 01/15/2003 243,120
-----------
$ 9,233,021
------------------------------------------------------------------------------------------------
Automotive Parts - 0.5%
The Pep Boys-Manny, Moe & Jack
USD 480,000 6.75% 03/10/2004 $ 442,382
TRW, Inc.+
375,000 6.63 06/01/2004 363,839
2,000,000 7.13 06/01/2009 1,942,200
-----------
$ 2,748,421
------------------------------------------------------------------------------------------------
Banks - 1.9%
Banque et Case D E'sparge&
USD3,000,000 6.20% 01/21/2000 $ 2,944,544
Bayerische Landesbank Girozentrale
250,000 5.88 12/01/2008 228,135
Merita Bank Ltd.
200,000 6.50 04/01/2009 184,526
National Westminster Bank PLC
7,500,000 7.38 10/01/2009 7,440,075
-----------
$10,797,280
------------------------------------------------------------------------------------------------
Building Materials - 0.1%
Owens Corning
USD 375,000 7.50% 05/01/2005 $ 361,151
------------------------------------------------------------------------------------------------
Commercial Banks - 3.5%
Bank of America Corp.
USD 320,000 7.75% 07/15/2002 $ 327,542
300,000 9.20 05/15/2003 321,749
2,000,000 6.63 06/15/2004 1,979,460
200,000 6.38 05/15/2005 193,936
150,000 7.25 10/15/2025 140,240
Citicorp
300,000 8.00 02/01/2003 310,026
DBS Group Holdings Ltd.
4,000,000 7.88 08/10/2009 4,069,600
Deutsche Bank&
6,000,000 6.20 01/20/2000 5,890,052
Dime Bancorp, Inc.
215,000 6.38 01/30/2001 213,080
First Union Corp.
200,000 7.10 08/15/2004 200,852
------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount! Rate Date Value
<S> <C> <C> <C>
Corporate Bonds - (continued)
Commercial Banks - (continued)
Long Island Savings Bank
USD 300,000 7.00% 06/13/2002 $ 296,631
Rabobank Nederland&
6,000,000 6.20 01/20/2000 5,890,052
The Money Store, Inc.
225,000 7.30 12/01/2002 227,216
Wells Fargo & Co.
360,000 6.63 07/15/2004 356,944
------------
$ 20,417,380
---------------------------------------------------------------------------------------------
Conglomerates - 0.6%
Tyco International Group SA
USD 385,000 5.88% 11/01/2004 $ 362,516
190,000 6.38 06/15/2005 181,414
3,000,000 6.13 11/01/2008 2,728,050
------------
$ 3,271,980
---------------------------------------------------------------------------------------------
Consumer Cyclicals - 0.0%
Cendant Corp.
USD 310,000 7.50% 12/01/2000 $ 310,701
---------------------------------------------------------------------------------------------
Consumer Non-Durables - 0.0%
AMETEK, Inc.
USD 130,000 7.20% 07/15/2008 $ 118,368
---------------------------------------------------------------------------------------------
Consumer Products - 0.1%
Nabisco, Inc.#
USD 700,000 6.00% 02/15/2001 $ 691,131
---------------------------------------------------------------------------------------------
Credit Card Banks - 0.1%
Capital One Bank
USD 275,000 6.39% 03/05/2001 $ 273,889
250,000 6.48 01/28/2002 245,832
180,000 6.48 06/28/2002 175,653
Providian National Bank
250,000 6.65 02/01/2004 240,255
------------
$ 935,629
---------------------------------------------------------------------------------------------
Electric - 0.1%
Mid American Energy Holdings Corp.
USD 180,000 7.23% 09/15/2005 $ 178,096
Niagara Mohawk Power Corp.
250,000 6.88 04/01/2003 250,795
275,000 8.00 06/01/2004 282,714
Salton Sea Funding Corp.
71,663 7.02 05/30/2000 71,782
------------
$ 783,387
---------------------------------------------------------------------------------------------
Energy - 0.7%
Conoco, Inc.
USD 3,100,000 5.90% 04/15/2004 $ 2,984,308
Norsk Hydro ASA
60,000 7.15 01/15/2029 53,717
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount! Rate Date Value
<S> <C> <C> <C>
Corporate Bonds - (continued)
Energy - (continued)
Occidental Petroleum Corp.
USD 115,000 6.50% 04/01/2005 $ 110,984
75,000 7.65 02/15/2006 74,445
90,000 7.20 04/01/2028 80,575
Oryx Energy Co.
155,000 9.50 11/01/1999 155,029
The Williams Cos., Inc.
200,000 6.13 02/01/2001 198,564
390,000 6.13 02/15/2012 383,491
------------
$ 4,041,113
---------------------------------------------------------------------------------------------
Finance Companies - 2.1%
Associates Corp. of North America
USD 750,000 5.75% 11/01/2003 $ 722,121
Beneficial Corp.
500,000 6.43 04/10/2002 496,625
Comdisco, Inc.
450,000 6.13 01/15/2003 432,243
Household Financial Corp.
6,000,000 6.00 05/01/2004 5,750,340
MEPC Finance, Inc.
1,500,000 7.50 05/01/2003 1,515,225
Merrill Lynch Co., Inc.
3,400,000 6.00 02/12/2003 3,328,056
------------
$ 12,244,610
---------------------------------------------------------------------------------------------
Environmental - 0.1%
Republic Services, Inc.
USD 430,000 6.63% 05/15/2004 $ 393,532
---------------------------------------------------------------------------------------------
Insurance Companies - 0.7%
American General Finance Corp.
USD 490,000 5.75% 11/01/2003 $ 468,930
Conseco, Inc.
225,000 8.50 10/15/2002 225,191
Prudential Insurance Company of America
3,500,000 6.38 07/23/2006 3,301,900
------------
$ 3,996,021
---------------------------------------------------------------------------------------------
Media-Cable - 0.3%
Time Warner Entertainment Co.
USD 900,000 9.63% 05/01/2002 $ 952,551
Time Warner, Inc.
450,000 7.95 02/01/2000 452,011
250,000 6.85 01/15/2026 248,333
------------
$ 1,652,895
---------------------------------------------------------------------------------------------
Media-Non Cable - 0.4%
CBS Corp.
USD 170,000 6.88% 09/01/2003 $ 167,761
J. Seagram & Sons, Inc.
175,000 6.25 12/15/2001 172,336
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount! Rate Date Value
<S> <C> <C> <C>
Corporate Bonds - (continued)
Media-Non Cable - (continued)
News America Holdings, Inc.
USD 400,000 8.50% 02/15/2005 $ 415,352
65,000 8.00 10/17/2016 64,054
200,000 7.43 10/01/2026 195,854
100,000 7.13 04/08/2028 87,568
PanAmSat Corp.
755,000 6.13 01/15/2005 675,083
Paramount Communications, Inc.
300,000 7.50 01/15/2002 303,075
Viacom, Inc.
450,000 7.75 06/01/2005 456,048
------------
$ 2,537,131
------------------------------------------------------------------------------------------
Mortgage Banks - 0.2%
Countrywide Home Loans, Inc.
USD 450,000 6.45% 02/27/2003 $ 442,994
200,000 6.84 10/22/2004 197,586
Homeside Lending, Inc.
400,000 6.20 05/15/2003 386,904
------------
$ 1,027,484
------------------------------------------------------------------------------------------
REIT - 0.2%
Chelsea GCA Realty, Inc.
USD 250,000 7.75% 01/26/2001 $ 249,407
Developers Diversified Realty Corp.
125,000 6.84 12/16/2004 116,553
Liberty Property LP
235,000 6.97 12/11/2003 223,466
Simon Property Group LP
450,000 6.63 06/15/2003 432,519
------------
$ 1,021,945
------------------------------------------------------------------------------------------
Retailers - 0.1%
Federated Department Stores, Inc.
USD 350,000 8.13% 10/15/2002 $ 359,576
Sears Roebuck Acceptance Corp.
240,000 6.72 09/17/2003 235,637
------------
$ 595,213
------------------------------------------------------------------------------------------
Supermarkets - 0.1%
Safeway, Inc.
USD 315,000 5.88% 11/15/2001 $ 309,006
170,000 6.05 11/15/2003 163,448
------------
$ 472,454
------------------------------------------------------------------------------------------
Telecommunications - 0.6%
360 Communications Co.
USD 300,000 7.13% 03/01/2003 $ 300,870
Metronet Communications Corp.+
240,000 0.00/9.95 06/15/2008 186,600
Cable & Wireless Communications PLC
565,000 6.38 03/06/2003 563,124
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount! Rate Date Value
<S> <C> <C> <C>
Corporate Bonds - (continued)
Telecommunications - (continued)
MCI Worldcom, Inc.
USD 405,000 6.13% 08/15/2001 $ 401,671
380,000 6.40 08/15/2005 370,120
Sprint Capital Corp.
350,000 5.70 11/15/2003 335,171
Tele-Communications, Inc.
280,000 8.25 01/15/2003 291,575
Telecom de Puerto Rico++
135,000 6.15 05/15/2002 131,989
155,000 6.65 05/15/2006 147,024
TKR Cable, Inc.
220,000 10.50 10/30/2007 231,572
US West Capital Funding, Inc.++
400,000 6.88 08/15/2001 398,992
150,000 6.88 07/15/2028 132,064
-----------
$ 3,490,772
--------------------------------------------------------------------------------------------
Tobacco - 1.2%
Imperial Tobacco Overseas BV
USD 2,800,000 7.13% 04/01/2009 $ 2,567,880
Netherlands Holdings BV
3,300,000 6.50 05/06/2003 3,189,780
Philip Morris Cos., Inc.
180,000 9.00 01/01/2001 183,587
100,000 8.75 06/01/2001 102,234
350,000 7.00 07/15/2005 336,091
95,000 6.95 06/01/2006 95,143
R.J. Reynolds Tobacco Holdings, Inc.++
285,000 7.38 05/15/2003 279,813
-----------
$ 6,754,528
--------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost $91,777,197) $89,271,883
--------------------------------------------------------------------------------------------
Mortgage Backed Obligations - 4.3%
Federal Home Loan Mortgage Corp. (FHLMC) - 0.2%
USD 982,211 6.00% 06/01/2014 $ 945,378
--------------------------------------------------------------------------------------------
Government National Mortgage Association (GNMA) - 1.5%
USD 77,175 9.00% 03/15/2005 $ 79,828
106,848 9.00 02/15/2006 110,588
381,748 9.00 02/15/2010 395,586
724,056 6.00 01/15/2011 704,144
534,292 7.00 07/15/2023 527,614
552,620 7.00 08/15/2023 545,712
294,520 7.00 09/15/2023 290,839
402,062 7.00 10/15/2023 397,037
219,047 7.00 11/15/2023 216,309
1,473,702 6.00 11/15/2028 1,367,772
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount! Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
Government National Mortgage Association (GNMA) - (continued)
USD 3,357,236 6.00% 12/15/2028 $ 3,115,918
27,362 6.50 01/15/2029 26,160
398,804 6.50 04/15/2029 381,290
571,148 6.50 06/15/2029 546,065
------------
$ 8,704,862
---------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations - 2.6%
Inverse Floater# - 0.3%
FNMA Remic Trust Series 1993-164, Class SD
USD 500,000 7.07% 09/25/2008 $ 466,810
FNMA Remic Trust Series 1994-13, Class SH
962,660 6.58 02/25/2009 873,008
GE Capital Mortgage Services Series 1994-2, Class A9
564,879 5.25 01/25/2009 515,853
------------
$ 1,855,671
---------------------------------------------------------------------------------------------
Non-Agency CMOs - 1.0%
Asset Securitization Corp. Series 1997-D5, Class A1B
USD 450,000 6.66% 02/14/2041 $ 439,430
Chase Commercial Mortgage Securities Corp. Series 1997-1, Class A2
300,000 7.37 02/19/2007 301,623
Chase Commercial Mortgage Securities Corp. Series 1997-2 Class A2
2,300,000 6.60 11/19/2007 2,213,934
Commercial Mortgage Asset Trust Series 1999-C1, Class A3
250,000 6.64 09/17/2010 236,388
First Union Commercial Mortgage Trust Series 1999-C1, Class A2
1,500,000 6.07 10/15/2008 1,381,957
First Union-Lehman Brothers Commercial Mortgage
Services Series 1997-C1, Class A2
200,000 7.30 12/18/2006 200,154
GMAC Commercial Mortgage Securities, Inc. Series 1997-C1, Class A2
450,000 6.85 09/15/2006 444,280
Merrill Lynch Mortgage Investors, Inc. Series 1998-C2 Class A2
750,000 6.39 02/15/2030 711,150
------------
$ 5,928,916
---------------------------------------------------------------------------------------------
Planned Amortization Class (PAC) CMOs - 0.4%
CMC Securities Corp. IV Series 1997-2, Class IA13
USD 416,628 6.60% 11/25/2027 $ 415,066
Structured Mortgage Securities Corp. Series 1994-1, Class A1
2,000,000 6.58 05/25/2009 1,987,760
------------
$ 2,402,826
---------------------------------------------------------------------------------------------
Regular Floater CMOs# - 0.2%
GE Capital Mortgage Services Series 1994-2, Class A8
USD 968,367 6.44% 01/25/2009 $ 992,576
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount! Interest Rate Date Value
<S> <C> <C> <C>
Mortgage Backed Obligations - (continued)
Sequential Fixed Rate CMOs - 0.5%
FHLMC Series 2152, Class AB
USD 2,922,230 6.25% 01/15/2026 $ 2,795,814
-------------------------------------------------------------------------------
Target Amortization Class (TAC) - 0.2%
Countrywide Funding Corp. Series 1994-2, Class A10A
USD 1,000,000 6.50% 02/25/2009 $ 983,750
-------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS $14,959,553
-------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED OBLIGATIONS
(Cost $25,417,687) $24,609,793
-------------------------------------------------------------------------------
Sovereign Credit - 0.1%
Province of Quebec
USD 585,000 7.50% 07/15/2023 $ 584,386
80,000 5.74# 03/02/2026 79,522
Province of Saskatchewan
65,000 8.50 07/15/2022 71,287
-------------------------------------------------------------------------------
TOTAL SOVEREIGN CREDIT
(Cost $779,204) $ 735,195
-------------------------------------------------------------------------------
U.S. Treasury Obligations - 9.2%
United States Treasury Interest-Only Stripped Securities.
USD 400,000 6.56% 02/15/2014 $ 157,736
United States Treasury Principal-Only Stripped Securities&
3,000,000 6.59 05/15/2017 957,330
4,100,000 6.59 11/15/2018 1,186,581
1,600,000 6.58 02/15/2019 456,000
8,660,000@ 6.57 05/15/2020 2,286,586
3,200,000 6.33 08/15/2026 601,984
United States Treasury Note
12,000,000 7.00 07/15/2006 12,536,280
United States Inflation-Indexed Treasury Note
5,789,056 3.63 01/15/2008 5,584,645
United States Treasury Bonds
3,000,000 11.25 02/15/2015 4,379,520
11,200,000 6.75 08/15/2026 11,676,000
14,000,000 6.13 11/15/2027 13,534,080
-------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $54,056,503) $53,356,742
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount! Interest Rate Maturity Date Value
<S> <C> <C> <C>
Short-Term Obligation - 1.6%
State Street Bank & Trust Euro-Time Deposit
USD 9,295,000 5.25% 11/01/1999 $ 9,295,000
-------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATION
(Cost $9,295,000) $ 9,295,000
-------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $568,061,027) $560,923,589
-------------------------------------------------------------------------------------------
</TABLE>
! The principal amount of each security is stated in the currency in which the
bond is denominated. See below.
AUD=Australian Dollar
DKK=Danish Krone
DEM=German Mark
EUR=Euro Currency
GBP=Great British Pound
JPY=Japanese Yen
NZD=New Zealand Dollar
SEK=Swedish Krona
USD=United States Dollar
++ Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. Such securities may be resold, normally to qualified
institutional buyers in transactions exempt from registration. Total market
value of Rule 144A securities amounted to $9,513,171 as of October 31,
1999.
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1999.
+ These securities are issued with a zero coupon rate which increases to the
stated rate at a set date in the future.
. Represents security with notional or nominal amount. The actual effective
yield of this security is different than the stated coupon due to the
amortization of related premiums.
& Security is issued with a zero coupon. The interest rate disclosed for
this security represents effective yield to maturity.
@ A portion of this security is segregated as collateral for initial margin
requirement on futures transactions.
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.
41
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Statements of Assets and Liabilities
October 31, 1999
<TABLE>
<CAPTION>
Adjustable Rate
Government Fund
Assets:
<S> <C>
Investment in securities, at value (identified cost
$342,432,281, $240,315,960, $135,979,513, $354,157,104,
and $568,061,027, respectively) $337,130,510
Cash, at value --
Receivables:
Investment securities sold, at value 1,459,569
Interest, at value 2,309,456
Fund shares sold 353,723
Forward foreign currency exchange contracts, at value --
Variation margin --
Reimbursement from adviser 17,802
Other assets 8,393
---------------------------------------------------------------------------
Total assets 341,279,453
---------------------------------------------------------------------------
Liabilities:
Due to bank 104,446
Payables:
Investment securities purchased --
Income distribution --
Fund shares repurchased 2,074,129
Amounts owed to affiliates 136,283
Forward foreign currency exchange contracts, at value --
Variation margin 233,943
Accrued expenses and other liabilities, at value 47,853
---------------------------------------------------------------------------
Total liabilities 2,596,654
---------------------------------------------------------------------------
Net Assets:
Paid-in capital 394,041,939
Accumulated undistributed net investment income --
Accumulated net realized loss on investment, futures and
foreign currency related transactions (49,853,742)
Net unrealized loss on investments, futures and
translation of assets and liabilities denominated in
foreign currencies (5,505,398)
---------------------------------------------------------------------------
NET ASSETS $338,682,799
---------------------------------------------------------------------------
Net asset value, offering and redemption price per
share(a)
Class A $9.63
Class B --
Class C --
Institutional $9.64
Service $9.65
---------------------------------------------------------------------------
Shares outstanding:
Class A 2,373,858
Class B --
Class C --
Institutional 32,666,147
Service 82,551
---------------------------------------------------------------------------
Total shares outstanding, $.001 par value (unlimited
number of shares authorized) 35,122,556
---------------------------------------------------------------------------
</TABLE>
(a) Maximum public offering price per share (NAV per share multiplied by
1.0152) for Class A shares of Adjustable Rate Government, (NAV per share
multiplied by $1.02041) for Class A shares of Short Duration Government,
and (NAV per share multiplied by 1.0471) for Class A shares of Government
Income, Core Fixed Income, and Global Income is $9.78, $9.77, $14.35,
$9.95, and $15.17, respectively. At redemption, Class B and Class C
shares may be subject to a contingent sales charge, assessed on the
amount equal to the lesser of the current net asset value or the original
purchase price of the shares.
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
Short Duration Government Core Fixed Global
Government Fund Income Fund Income Fund Income Fund
<S> <C> <C> <C>
$237,089,108 $133,092,805 $346,870,816 $560,923,589
-- 63,390 53,559 930
1,937,032 1,487,410 17,161,242 28,931,845
1,607,023 772,448 3,324,271 9,718,563
324,655 134,222 1,553,692 1,761,204
-- -- -- 6,161,908
-- 26,721 304,108 756,121
24,062 30,990 25,145 105,938
9,260 10,427 71,809 20,116
-------------------------------------------------------------------------------------
240,991,140 135,618,413 369,364,642 608,380,214
-------------------------------------------------------------------------------------
2,035 -- -- --
18,643,284 15,994,998 55,605,182 21,482,035
305,639 68,843 493,247 --
2,746,824 1,639,593 359,494 1,177,436
132,068 116,985 158,153 511,794
-- -- 61,842 7,917,291
239,047 -- -- --
54,256 45,180 76,855 213,202
-------------------------------------------------------------------------------------
22,123,153 17,865,599 56,754,773 31,301,758
-------------------------------------------------------------------------------------
238,577,947 123,070,464 326,748,909 588,755,245
615,596 49,258 122,700 2,395,515
(16,419,016) (2,436,452) (6,870,617) (5,583,499)
(3,906,540) (2,930,456) (7,391,123) (8,488,805)
-------------------------------------------------------------------------------------
$218,867,987 $117,752,814 $312,609,869 $577,078,456
-------------------------------------------------------------------------------------
$9.57 $13.70 $9.50 $14.49
$9.56 $13.72 $9.52 $14.45
$9.54 $13.71 $9.52 $14.43
$9.57 $13.69 $9.52 $14.48
$9.56 $13.63 $9.52 $14.47
-------------------------------------------------------------------------------------
5,457,522 5,990,696 6,884,002 18,763,477
726,082 1,435,163 1,539,179 1,157,040
736,877 733,457 781,565 539,441
15,270,025 430,809 22,796,484 19,314,962
691,130 1,108 858,321 77,059
-------------------------------------------------------------------------------------
22,881,636 8,591,233 32,859,551 39,851,979
-------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Statements of Operations
For the Year Ended October 31, 1999
<TABLE>
<CAPTION>
Adjustable Rate
Government Fund
<S> <C>
Investment income:
Interest(a) $23,854,240
----------------------------------------------------------------------------
Total income 23,854,240
----------------------------------------------------------------------------
Expenses:
Management fees 1,591,935
Distribution and service fees(b) 83,944
Transfer agent fees(c) 209,559
Custodian fees 142,859
Registration fees 105,604
Professional fees 64,010
Trustee fees 9,605
Administration share fees 8,232
Service share fees 3,765
Amortization of deferred organization expenses --
Other 47,535
----------------------------------------------------------------------------
Total expenses 2,267,048
----------------------------------------------------------------------------
Less -- expenses reimbursed and fees waived (154,703)
----------------------------------------------------------------------------
Net Expenses 2,112,345
----------------------------------------------------------------------------
NET INVESTMENT INCOME 21,741,895
----------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment, futures and foreign cur-
rency transactions:
Net realized gain (loss) from:
Investment transactions (1,434,338)
Futures transactions 681,758
Foreign currency related transactions --
Net change in unrealized gain (loss) on:
Investments (208,230)
Futures (1,011,241)
Translation of assets and liabilities
denominated in foreign currencies --
----------------------------------------------------------------------------
Net realized and unrealized loss on investment,
futures and foreign currency transactions: (1,972,051)
----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $19,769,844
----------------------------------------------------------------------------
</TABLE>
(a) Net of $1,344 and $83,125 in foreign withholding tax for the Core Fixed
Income and Global Income Funds, respectively.
(b) Class A, Class B and Class C of the following funds had distribution and
service fees of:
Adjustable Rate Government Fund -- $83,944 for Class A only.
Short Duration Government Fund -- $132,906, $55,049, and $67,893,
respectively.
Government Income Fund -- $215,650, $187,747, and $104,190, respectively.
Core Fixed Income Fund -- $142,505, $122,578, and $71,888, respectively.
Global Income Fund -- $1,269,380, $120,645, and $70,592, respectively.
(c) The following funds had transfer agency fees of:
Adjustable Rate Government Fund -- $63,797, $144,144, $1,317, and $301 for
Class A, Institutional Class, Administrative Class and Service Class,
respectively.
Short Duration Government Fund -- $101,009, $10,459, $12,900, $60,679,
$1,988, and $2,550 for Class A, Class B, Class C, Institutional Class,
Administration Class, and Service Class, respectively.
Government Income Fund -- $163,893, $35,672, $19,796, $1,824, and $4 for
Class A, Class B, Class C, Institutional Class and Service Class,
respectively.
Core Fixed Income Fund -- $108,303, $23,290, $13,659, $80,696, $3,548, and
$2,754 for Class A, Class B, Class C, Institutional Class, Administration
Class, and Service Class, respectively.
Global Income Fund -- $482,364, $22,923, $13,411, $96,357, and $377 for
Class A, Class B, Class C, Institutional Class and Service Class,
respectively.
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
Short Duration Government Core Fixed Global
Government Fund Income Fund Income Fund Income Fund
<S> <C> <C> <C>
$15,013,183 $ 7,945,055 $ 19,137,123 $ 28,082,990
------------------------------------------------------------------------------------
15,013,183 7,945,055 19,137,123 28,082,990
------------------------------------------------------------------------------------
1,142,521 780,149 1,175,776 4,633,504
255,848 507,587 336,971 1,460,617
189,585 221,189 232,250 615,432
123,904 115,845 183,400 411,155
61,701 62,298 84,010 126,906
66,906 63,676 62,146 93,939
9,766 9,618 9,737 9,719
12,426 -- 22,173 --
31,877 45 34,419 4,708
-- -- 4,362 --
51,631 38,015 65,539 41,329
------------------------------------------------------------------------------------
1,946,165 1,798,422 2,210,783 7,397,309
------------------------------------------------------------------------------------
(313,026) (416,676) (103,492) (1,949,538)
------------------------------------------------------------------------------------
1,633,139 1,381,746 2,107,291 5,447,771
------------------------------------------------------------------------------------
13,380,044 6,563,309 17,029,832 22,635,219
------------------------------------------------------------------------------------
(2,653,310) (1,694,434) (5,230,345) (3,684,004)
686,607 (537,611) (1,265,780) (994,608)
-- -- 61,387 (1,422,955)
(4,468,745) (4,991,411) (11,201,102) (23,571,113)
(1,796,301) (240,398) (692,824) (3,270)
-- -- 5,048 656,373
------------------------------------------------------------------------------------
(8,231,749) (7,463,854) (18,323,616) (29,019,577)
------------------------------------------------------------------------------------
$ 5,148,295 $ (900,545) $ (1,293,784) $ (6,384,358)
------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Statements of Changes in Net Assets
For the Year Ended October 31, 1999
<TABLE>
<CAPTION>
Adjustable Rate
Government Fund
<S> <C>
From operations:
Net investment income $21,741,895
Net realized loss on investment, futures and foreign
currency related transactions (752,580)
Net change in unrealized gain (loss) on investments, futures
and translation of assets and liabilities denominated in
foreign currencies (1,219,471)
------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 19,769,844
------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A shares (1,554,543)
Class B shares --
Class C shares --
Institutional shares (17,799,251)
Administration shares (156,305)
Service shares (33,888)
From capital
Class A shares (199,076)
Class B shares --
Class C shares --
Institutional shares (2,279,391)
Administration shares (20,017)
Service shares (4,340)
From net realized gain on investment, futures and foreign
currency transactions
Class A shares --
Class B shares --
Class C shares --
Institutional shares --
Administration shares --
Service shares --
------------------------------------------------------------------------------
Total distributions to shareholders (22,046,811)
------------------------------------------------------------------------------
From share transactions:
Proceeds from sales of shares 505,773,211
Reinvestment of dividends and distributions 11,575,172
Cost of shares repurchased (685,219,828)
------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from share
transactions (167,871,445)
------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) (170,148,412)
------------------------------------------------------------------------------
Net assets:
Beginning of year 508,831,211
------------------------------------------------------------------------------
End of year $338,682,799
------------------------------------------------------------------------------
Accumulated undistributed net investment income $ --
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
Short Duration Government Core Fixed Global
Government Fund Income Fund Income Fund Income Fund
<S> <C> <C> <C>
$ 13,380,044 $ 6,563,309 $ 17,029,832 $ 22,635,219
(1,966,703) (2,232,045) (6,434,738) (6,101,567)
(6,265,046) (5,231,809) (11,888,878) (22,918,010)
-------------------------------------------------------------------------------------
5,148,295 (900,545) (1,293,784) (6,384,358)
-------------------------------------------------------------------------------------
(2,885,366) (4,701,931) (3,111,344) (10,433,058)
(267,022) (881,113) (579,641) (456,703)
(316,483) (489,690) (337,695) (263,007)
(8,877,237) (267,417) (11,800,204) (11,462,739)
(278,181) -- (495,974) --
(341,400) (484) (368,926) (40,207)
-- -- -- (457,628)
-- -- -- (20,032)
-- -- -- (11,536)
-- -- -- (502,793)
-- -- -- --
-- -- -- (1,764)
-- (1,930,242) (896,935) (5,398,726)
-- (406,494) (144,240) (219,025)
-- (228,993) (92,870) (129,352)
-- (63,106) (2,576,039) (4,630,914)
-- -- (181,000) --
-- (39) (84,628) (17,604)
-------------------------------------------------------------------------------------
(12,965,689) (8,969,509) (20,669,496) (34,045,088)
-------------------------------------------------------------------------------------
285,443,513 249,312,834 303,446,837 348,114,845
8,005,144 7,441,375 13,487,926 20,654,882
(292,142,829) (258,554,530) (265,160,385) (160,439,290)
-------------------------------------------------------------------------------------
1,305,828 (1,800,321) 51,774,378 208,330,437
-------------------------------------------------------------------------------------
(6,511,566) (11,670,375) 29,811,098 167,900,991
-------------------------------------------------------------------------------------
225,379,553 129,423,189 282,798,771 409,177,465
-------------------------------------------------------------------------------------
$218,867,987 $117,752,814 $312,609,869 $577,078,456
-------------------------------------------------------------------------------------
$ 615,596 $ 49,258 $ 122,700 $ 2,395,515
-------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Statements of Changes in Net Assets
For the Year Ended October 31, 1998
<TABLE>
<CAPTION>
Adjustable
Rate
Government
Fund
<S> <C>
From operations:
Net investment income $ 27,751,730
Net realized gain (loss) on investment, futures and foreign
currency related transactions (1,432,798)
Net change in unrealized gain (loss) on investments, futures
and translation of assets and liabilities denominated in
foreign currencies (6,927,104)
-----------------------------------------------------------------------------
Net increase in net assets resulting from operations 19,391,828
-----------------------------------------------------------------------------
Distributions to shareholders:
From net investment income
Class A shares (2,487,566)
Class B shares --
Class C shares --
Institutional shares (25,001,833)
Administration shares (234,475)
Service shares (27,856)
In excess of net investment income
Class A shares (98,798)
Class B shares --
Class C shares --
Institutional shares (992,993)
Administration shares (9,313)
Service shares (1,106)
From net realized gain on investment, futures and foreign
currency transactions
Class A shares --
Class B shares --
Class C shares --
Institutional shares --
Administration shares --
Service shares --
-----------------------------------------------------------------------------
Total distributions to shareholders (28,853,940)
-----------------------------------------------------------------------------
From share transactions:
Proceeds from sales of shares 480,828,950
Reinvestment of dividends and distributions 20,351,273
Cost of shares repurchased (492,929,797)
-----------------------------------------------------------------------------
Net increase in net assets resulting from share transactions 8,250,426
-----------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) (1,211,686)
-----------------------------------------------------------------------------
Net assets:
Beginning of year 510,042,897
-----------------------------------------------------------------------------
End of year $ 508,831,211
-----------------------------------------------------------------------------
Accumulated undistributed (distributions in excess of) net
investment income $ (3,550,919)
-----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
Short Duration Government Core Fixed Global
Government Fund Income Fund Income Fund Income Fund
<S> <C> <C> <C>
$ 9,612,953 $ 6,235,094 $ 10,922,376 $ 14,339,751
(360,410) 2,722,191 3,888,127 3,580,157
1,213,423 787,495 2,127,689 14,771,995
-----------------------------------------------------------------------------------
10,465,966 9,744,780 16,938,192 32,691,903
-----------------------------------------------------------------------------------
(1,420,203) (5,471,980) (1,853,415) (11,773,305)
(124,011) (589,599) (152,279) (310,470)
(88,564) (181,328) (150,232) (116,153)
(7,578,309) (126,383) (8,016,713) (6,720,480)
(270,953) -- (664,748) --
(265,819) (114) (176,911) (25,498)
-- (316,755) (75,186) --
-- (34,130) (6,177) --
-- (10,497) (6,094) --
-- (7,316) (325,203) --
-- -- (26,966) --
-- (7) (7,176) --
-- (336,409) (84,830) (628,833)
-- (41,187) (8,016) (15,200)
-- (9,732) (4,098) (4,258)
-- (8,246) (459,667) (240,253)
-- -- (51,390) --
-- (7) (10,588) (604)
-----------------------------------------------------------------------------------
(9,747,859) (7,133,690) (12,079,689) (19,835,054)
-----------------------------------------------------------------------------------
301,176,652 174,396,555 274,106,821 254,174,010
6,473,398 5,523,470 8,519,118 13,914,727
(201,542,539) (133,099,760) (102,188,552) (103,905,121)
-----------------------------------------------------------------------------------
106,107,511 46,820,265 180,437,387 164,183,616
-----------------------------------------------------------------------------------
106,825,618 49,431,355 185,295,890 177,040,465
-----------------------------------------------------------------------------------
118,553,935 79,991,834 97,502,881 232,137,000
-----------------------------------------------------------------------------------
$ 225,379,553 $ 129,423,189 $ 282,798,771 $ 409,177,465
-----------------------------------------------------------------------------------
$ 567,164 $ (202,850) $ -- $ 4,880,723
-----------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE 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 Goldman Sachs Adjustable Rate
Government Fund (Adjustable Rate Government), Goldman Sachs Short Duration
Government Fund (Short Duration Government), Goldman Sachs Government Income
Fund (Government Income), Goldman Sachs Core Fixed Income Fund (Core Fixed
Income) and Goldman Sachs Global Income Fund (Global Income), collectively,
"the Funds" or individually a "Fund." Adjustable Rate Government, Short Dura-
tion Government, Government Income, and Core Fixed Income are diversified
portfolios of the Trust whereas Global Income is a non-diversified portfolio.
Adjustable Rate Government offers three classes of shares -- Class A, Insti-
tutional and Service. Government Income, Short Duration Government, Core
Fixed Income and Global Income offer five classes of shares -- Class A, Class
B, Class C, Institutional and Service. On July 20, 1999, Administration Class
shares for Adjustable Rate Government, Short Duration Government, and Core
Fixed Income 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. Premiums on interest-only
securities and on collateralized mortgage obligations with nominal principal
amounts are amortized, on an effective yield basis, over the expected lives
of the respective securities.
Certain mortgage security paydown gains and losses are taxable as ordinary
income. Such paydown gains and losses increase or decrease taxable ordinary
income available for distribution and are classified as interest income in
the accompanying Statements of Operations. Original issue discounts ("OID")
on debt securities are amortized to interest income over the life of the se-
curity with a corresponding increase in the cost basis of that security. OID
amortization on mortgage backed REMIC securities is initially recorded based
on estimates of principal paydowns using the most recent OID factors avail-
able from the issuer. Recorded amortization amounts are adjusted when actual
OID factors are received. Market discounts and market premiums on debt secu-
rities, other than mortgage backed REMIC securities, are amortized to inter-
est income over the life of the security with a corresponding adjustment in
the cost basis of that security for Core Fixed Income. Global Income amor-
tizes only market discounts on debt securities other than REMIC mortgage
backed securities.
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 taxable
and tax- exempt income and capital gains to its shareholders. Accordingly, no
federal tax provisions are required.
50
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
The characterization of distributions to shareholders for financial report-
ing purposes is determined in accordance with income tax rules. Therefore,
the source of a Fund's distributions may be shown in the accompanying finan-
cial statements as either from or in excess of net investment income or net
realized gain on investment transactions, or from paid-in-capital, depending
on the type of book/tax differences that may exist.
The Funds, at their most recent tax year-ends of October 31, 1999, had ap-
proximately the following amounts of capital loss carryforward for U.S. fed-
eral 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>
Adjustable Rate Government $50,033,000 2000-2007
-----------------------------------------------------------------------------------------
Short Duration Government 17,097,000 2002-2007
-----------------------------------------------------------------------------------------
Government Income 2,397,000 2007
-----------------------------------------------------------------------------------------
Core Fixed Income 6,931,000 2007
-----------------------------------------------------------------------------------------
Global Income 4,047,000 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>
Gross Gross Net Unrealized
Fund Tax Cost Unrealized Gain Unrealized Loss Loss
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate
Government $342,456,781 $ 136,354 $ (5,462,625) $(5,326,271)
------------------------------------------------------------------------------
Short Duration
Government 240,317,246 419,507 (3,647,645) (3,228,138)
------------------------------------------------------------------------------
Government Income 136,062,952 181,303 (3,151,450) (2,970,147)
------------------------------------------------------------------------------
Core Fixed Income 354,206,579 622,301 (7,958,064) (7,335,763)
------------------------------------------------------------------------------
Global Income 569,282,561 12,036,946 (20,395,918) (8,358,972)
------------------------------------------------------------------------------
</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. Deferred Organization Expenses -- Organization-related costs were amor-
tized on a straight-line basis over a period of five years. The amortization
costs of all funds are fully amortized.
F. Foreign Currency Translations -- The books and records of the Funds are
maintained in U.S. dollars. Amounts denominated in foreign currencies are
translated into U.S. dollars on the following basis: (i) investment valua-
tions, foreign currency and other assets and liabilities initially expressed
in foreign currencies are converted each business day into U.S. dollars based
upon current exchange rates; (ii) purchases and sales of foreign investments,
income and expenses are converted into U.S. dollars based upon currency ex-
change rates prevailing on the respective dates of such transactions.
51
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
October 31, 1999
Net realized and unrealized gain (loss) on foreign currency transactions
will represent: (i) foreign exchange gains and losses from the sale and hold-
ings of foreign currencies and sale of investments; (ii) gains and losses be-
tween trade date and settlement date on investment securities transactions
and forward exchange contracts; and (iii) gains and losses from the differ-
ence between amounts of interest recorded and the amounts actually received.
G. Mortgage Dollar Rolls -- The Funds may enter into mortgage "dollar rolls"
in which the Funds sell securities in the current month for delivery and si-
multaneously contract with the same counterparty to repurchase similar (same
type, coupon and maturity) but not identical securities on a specified future
date. For financial reporting and tax reporting purposes, the Funds treat
mortgage dollar rolls as two separate transactions; one involving the pur-
chase of a security and a separate transaction involving a sale.
H. 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
Pursuant to the Investment Management Agreements (the "Agreements"), Goldman
Sachs Funds Management, L.P. ("GSFM"), an affiliate of Goldman, Sachs & Co.
("Goldman Sachs"), serves as the investment adviser for Adjustable Rate Gov-
ernment and Short Duration Government. Goldman Sachs Asset Management
("GSAM"), a unit of the Investment Management Division of Goldman Sachs,
serves as the investment adviser for Government Income and Core Fixed Income.
Goldman Sachs Asset Management International ("GSAMI"), an affiliate of GSAM,
serves as the investment adviser for Global Income. Under the Agreements, the
respective adviser, 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, the assumption of the expenses related
thereto and administering the Funds' business affairs, including providing
facilities, the adviser is entitled to a fee, computed daily and payable
monthly at an annual rate equal to .40%, .50%, .65%, .40% and .90% of average
daily net assets of Adjustable Rate Government, Short Duration Government,
Government Income, Core Fixed Income and Global Income, respectively. For the
year ended October 31, 1999 the advisers for Government Income and Global In-
come voluntarily have agreed to waive a portion of their management fee equal
annually to .11% and .25%, respectively, of each Fund's average daily net as-
sets. The advisers may discontinue or modify these waivers in the future at
their discretion.
Each adviser has voluntarily agreed to limit "Other Expenses" (excluding
management fees, distribution and service fees, transfer agent fees, taxes,
interest, brokerage, litigation, Administrative and Service share fees, in-
demnification costs and other extraordinary expenses) to the extent that such
expenses exceed, on an annual basis, .05%, .00%, .00%, .10% and .00% of the
average daily net assets of Adjustable Rate Government, Short Duration Gov-
ernment, Government Income, Core Fixed Income and Global Income, respective-
ly.
Goldman Sachs serves as Distributor of the 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 $11,000, $38,000, $111,000,
$59,000 and $233,000 for the year ended October 31, 1999 for Adjustable Rate
Government, Short Duration Government, Government Income, Core Fixed Income
and Global 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
services and shareholder maintenance equal, on an annual basis, to .50%,
1.00% and 1.00% for Global Income and .25%, 1.00% and
52
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
1.00% of each of the other funds' average daily net assets attributable to
Class A, Class B and Class C shares, respectively. For the year ended October
31, 1999, Goldman Sachs has voluntarily agreed to waive a portion of the Dis-
tribution and Service fees equal to .15% of the average daily net assets at-
tributable to the Class B shares of Short Duration Government. Goldman Sachs
may discontinue or modify this waiver in the future at its discretion.
Goldman Sachs also serves as Transfer Agent of the Funds for a fee. Fees
charged for such transfer agency services are calculated daily and payable
monthly at an annual rate as follows: .19% of the average daily net assets
for Class A, Class B and Class C shares and .04% of the average daily net as-
sets for Institutional, Service and Administration Shares.
The Trust, on behalf of the Funds, has adopted Service Plans. In addition,
the Trust, on behalf of Adjustable Rate Government, Short Duration Government
and Core Fixed Income, has adopted Administration Plans. These plans allow
for Administration shares and Service shares, respectively, to compensate
service organizations for providing varying levels of account administration
and shareholder liaison services to their customers who are beneficial owners
of such shares. The Administration and Service Plans provide for compensation
to the service organizations in an amount up to, on an annual basis, .25% and
.50%, respectively, of the average daily net asset value of each share class.
On July 21, 1999, the Administration Plan was terminated due to the liquida-
tion of the Administration Class shares on July 20, 1999.
For the year ended October 31, 1999, the advisors and distributor have vol-
untarily agreed to waive certain fees and reimburse other expenses as follows
(in thousands):
<TABLE>
<CAPTION>
Waivers
--------------------------
Class B
Distribution Expense
Fund Management and Service Reimbursement Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Government $ -- $ -- $155 $ 155
-------------------------------------------------------------------------------
Short Duration Government -- 8 305 313
-------------------------------------------------------------------------------
Government Income 132 -- 285 417
-------------------------------------------------------------------------------
Core Fixed Income -- -- 103 103
-------------------------------------------------------------------------------
Global Income 1,288 -- 662 1,950
-------------------------------------------------------------------------------
</TABLE>
At October 31, 1999, the amounts owed to affiliates were as follows (in
thousands):
<TABLE>
<CAPTION>
Distribution Transfer
Fund Management and Service Agent Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Government $117 $ 5 $14 $136
-------------------------------------------------------------------------------
Short Duration Government 94 22 16 132
-------------------------------------------------------------------------------
Government Income 55 44 18 117
-------------------------------------------------------------------------------
Core Fixed Income 105 32 21 158
-------------------------------------------------------------------------------
Global Income 319 136 57 512
-------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
October 31, 1999
4. PORTFOLIO SECURITY 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 Sales or maturities
Purchases of Purchases maturities of (excluding
U.S. Government (excluding U.S. Government U.S. Government and
and agency U.S. Government and and agency agency
Fund obligations agency obligations) obligations obligations)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable
Rate Gov-
ernment $146,642,706 $ -- $269,031,404 $ --
-----------------------------------------------------------------------------------
Short Du-
ration Gov-
ernment 392,709,173 -- 385,148,495 --
-----------------------------------------------------------------------------------
Government
Income 318,882,509 8,767,513 319,451,630 15,364,468
-----------------------------------------------------------------------------------
Core Fixed
Income 700,272,578 129,615,546 711,768,271 86,186,112
-----------------------------------------------------------------------------------
Global In-
come 225,175,491 730,667,755 258,731,027 496,731,425
-----------------------------------------------------------------------------------
</TABLE>
Forward Foreign Currency Exchange Contracts -- Core Fixed Income and Global
Income may enter into forward foreign currency exchange contracts for the
purchase or sale of a specific foreign currency at a fixed price on a future
date as a hedge or cross-hedge against either specific transactions or port-
folio positions. Core Fixed Income and Global Income may also purchase and
sell forward contracts to seek to increase total return. All commitments are
"marked-to-market" daily at the applicable translation rates and any result-
ing unrealized gains or losses are recorded in the Funds' financial state-
ments. The Funds record realized gains or losses at the time a forward
contract is offset by entry into a closing transaction or extinguished by de-
livery of the currency. Risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At October 31, 1999, Core Fixed Income had outstanding forward foreign ex-
change contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
Open Foreign Currency Value on Current Unrealized Unrealized
Sale Contracts Settlement Date Value Gain Loss
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Euro Currency
expiring 11/15/1999 $7,686,580 $7,691,558 $ -- $ 4,978
------------------------------------------------------------------------------
Total Open Foreign Currency
Sale Contracts $7,686,580 $7,691,558 $ -- $ 4,978
------------------------------------------------------------------------------
<CAPTION>
Closed but Unsettled
Foreign Realized Realized
Currency Contracts Purchase Value Sale Value Gain Loss
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollar
expiring 12/13/1999 $4,007,653 $3,950,789 $ -- $56,864
------------------------------------------------------------------------------
Total Closed but Unsettled
Foreign Currency Contracts $4,007,653 $3,950,789 $ -- $56,864
------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
At October 31, 1999, Global Income had outstanding forward foreign currency
exchange contracts, both to purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
Open Foreign Currency Value on Unrealized Unrealized
Purchase Contracts Settlement Date Current Value Gain Loss
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollar
expiring 12/13/1999 $ 4,835,986 $ 4,669,305 $ -- $ 166,681
Canadian Dollar
expiring 11/30/1999 14,117,329 14,259,515 142,186 --
expiring 12/7/1999 14,177,000 14,294,888 117,888 --
Japanese Yen
expiring 12/2/1999 7,105,000 7,389,092 284,092 --
Swedish Krona
expiring 12/1/1999 3,950,598 3,950,006 -- 592
-----------------------------------------------------------------------------
Total Open Foreign Cur-
rency
Purchase Contracts $ 44,185,913 $ 44,562,806 $ 544,166 $ 167,273
-----------------------------------------------------------------------------
<CAPTION>
Open Foreign Currency Value on Unrealized Unrealized
Sale Contracts Settlement Date Current Value Gain Loss
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Danish Krone
expiring 1/21/2000 $ 11,345,187 $ 11,183,702 $ 161,485 $ --
Euro Currency
expiring 12/6/1999 20,254,650 20,340,166 -- 85,516
expiring 1/26/2000 176,251,300 172,003,458 4,247,842 --
Great British Pound
expiring 12/6/1999 39,499,415 39,463,874 35,541 --
Japanese Yen
expiring 11/18/1999 71,507,082 76,993,551 -- 5,486,469
expiring 12/3/1999 23,483,365 23,342,371 140,994 --
expiring 12/20/1999 12,397,938 13,886,375 -- 1,488,437
New Zealand Dollar
expiring 11/15/1999 10,664,420 10,185,180 479,240 --
-----------------------------------------------------------------------------
Total Open Foreign Cur-
rency
Sale Contracts $365,403,357 $367,398,677 $5,065,102 $7,060,422
-----------------------------------------------------------------------------
</TABLE>
55
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
October 31, 1999
<TABLE>
<CAPTION>
Closed but Unsettled
Foreign Purchase Realized Realized
Currency Contracts Value Sale Value Gain Loss
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Japanese Yen
expiring 11/18/1999 $28,678,000 $28,200,123 $ -- $477,877
expiring 11/18/1999 7,260,000 7,320,758 60,758 --
expiring 11/30/1999 7,210,504 7,226,000 15,496 --
expiring 12/3/1999 14,140,000 14,562,224 422,224 --
Great British Pound
expiring 12/6/1999 7,200,000 7,153,296 -- 46,704
Australian Dollar
expiring 12/13/1999 9,826,115 9,661,100 -- 165,015
Euro Currency
expiring 1/26/2000 5,360,574 5,414,736 54,162 --
----------------------------------------------------------------------
Total Closed but Unsettled
Foreign Currency Contracts $79,675,193 $79,538,237 $552,640 $689,596
----------------------------------------------------------------------
</TABLE>
The contractual amounts of forward foreign currency exchange contracts do
not necessarily represent the amounts potentially subject to risk. The mea-
surement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. At October 31,
1999, Global Income and Core Fixed Income had sufficient cash and/or securi-
ties to cover any commitments under these contracts.
Global Income has recorded a "Receivable for forward foreign currency ex-
change contracts" and "Payable for forward foreign currency exchange con-
tracts" resulting from open and closed but not settled forward foreign
currency exchange contracts of $6,161,908 and $7,917,291, respectively, in
the accompanying Statement of Assets and Liabilities.
Core Fixed Income has recorded a "Payable for forward foreign currency ex-
change contracts" resulting from open and closed but not settled forward for-
eign currency exchange contracts of $61,842 in the accompanying Statement of
Assets and Liabilities.
Futures Contracts -- The Funds may enter into futures transactions to hedge
against changes in interest rates, securities prices, currency exchange rates
(in the case of Core Fixed Income and Global Income) or to seek to 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 con-
tracts, and are recorded for financial reporting purposes as unrealized gains
or losses. When contracts are closed, the Funds realize a gain or loss 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.
For the year ended October 31, 1999, Adjustable Rate Government, Short Du-
ration Government, Government Income, Core Fixed Income and Global Income in-
curred commission expenses of approximately $51,000, $44,000, $14,000,
$39,000 and $19,000, respectively, in connection with futures contracts en-
tered into with Goldman Sachs.
56
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
At October 31, 1999, open futures contracts were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Settlement Unrealized
Fund Type Long (Short) Month Market Value Gain (Loss)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Adjustable Rate Govern-
ment Fund Euro Dollars 215 December 1999 $ 50,514,250 $ (85,664)
Euro Dollars 97 March 2000 22,814,400 (14,380)
Euro Dollars 60 June 2000 14,085,750 10,135
Euro Dollars (20) September 2000 (4,688,500) (3,377)
Euro Dollars (20) December 2000 (4,680,250) (6,877)
Euro Dollars (20) March 2001 (4,678,500) (4,877)
5 Year U.S. Treasury Notes (120) December 1999 (12,954,375) (38,856)
10 Year U.S. Treasury Notes (233) December 1999 (25,564,469) (33,458)
20 Year U.S. Treasury Bond (14) December 1999 (1,590,312) (26,273)
-----------------------
$ 33,257,994 $(203,627)
----------------------------------------------------------------------------------------------------------
Short Duration Govern-
ment Fund Euro Dollars 55 December 1999 $ 12,922,250 $ (60,879)
Euro Dollars 35 March 2000 8,232,000 (36,160)
Euro Dollars 65 June 2000 15,259,563 (197,850)
Euro Dollars 85 September 2000 19,926,125 (269,790)
2 Year U.S. Treasury Notes 261 December 1999 54,039,234 (50,527)
5 Year U.S. Treasury Notes (259) December 1999 (27,959,859) (34,757)
10 Year U.S. Treasury Notes (193) December 1999 (21,175,719) (15,152)
20 Year U.S. Treasury Bond (89) December 1999 (10,109,844) (14,573)
-----------------------
$ 51,133,750 $(679,688)
----------------------------------------------------------------------------------------------------------
Government Income Fund Euro Dollars 10 December 1999 $ 2,349,500 $ (26,189)
Euro Dollars 10 March 2000 2,352,000 562
Euro Dollars 10 September 2000 2,344,250 (16,564)
2 Year U.S. Treasury Notes 5 December 1999 1,035,234 (968)
5 Year U.S. Treasury Notes (33) December 1999 (3,562,453) (5,427)
10 Year U.S. Treasury Notes 20 December 1999 2,194,375 (1,653)
20 Year U.S. Treasury Bond 22 December 1999 2,499,063 6,491
-----------------------
$ 9,211,969 $ (43,748)
----------------------------------------------------------------------------------------------------------
Core Fixed Income Fund Euro Dollars 20 December 1999 $ 4,699,000 $ (67,252)
Euro Dollars 25 March 2000 5,880,000 (40,408)
5 Year U.S. Treasury Notes (233) December 1999 (25,153,078) (35,982)
10 Year U.S. Treasury Notes (40) December 1999 (4,388,750) (4,382)
20 Year U.S. Treasury Bond 360 December 1999 40,893,750 37,792
-----------------------
$(21,930,922) $(110,232)
----------------------------------------------------------------------------------------------------------
Global Income Fund Euro Dollars 12 December 1999 $ 2,819,400 $ (4,800)
Euro Dollars 9 March 2000 2,116,800 1,575
Euro Dollars 7 June 2000 1,643,338 1,225
5 Year U.S. Treasury Notes (116) December 1999 (12,522,562) 10,062
10 Year U.S. Treasury Notes (252) December 1999 (27,649,124) 209,220
20 Year U.S. Treasury Bond 240 December 1999 27,262,500 (39,688)
-----------------------
$ (6,329,648) $ 177,594
----------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
October 31, 1999
5. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying secu-
rities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping by a bank custodian.
6. JOINT REPURCHASE AGREEMENT ACCOUNT
The Funds, together with other registered investment companies having manage-
ment agreements with GSFM, GSAMI and GSAM or their affiliates, transfer
uninvested cash into joint accounts, the daily aggregate balance of which is
invested in one or more repurchase agreements.
At October 31, 1999, Adjustable Rate Government, Short Duration Government,
Government Income and Core Fixed Income had undivided interests in the repur-
chase agreements in the following joint account which equaled $9,400,000,
$18,300,000, $15,500,000, and $49,700,000, respectively, in principal amount.
At October 31, 1999, the following repurchase agreements held in this joint
account were fully collateralized by Federal Agency obligations.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Repurchase Agreements Amount Rate Date Cost
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ABN/AMRO, Inc. $ 420,000,000 5.33% 11/01/1999 $ 420,000,000
-----------------------------------------------------------------------------------------
Bear Stearns Companies, Inc. 200,000,000 5.33 11/01/1999 200,000,000
-----------------------------------------------------------------------------------------
Deutsche Morgan Grenfell 318,700,000 5.33 11/01/1999 318,700,000
-----------------------------------------------------------------------------------------
Banc of America Securities 1,000,000,000 5.33 11/01/1999 1,000,000,000
-----------------------------------------------------------------------------------------
SG Cowen Securities 400,000,000 5.33 11/01/1999 400,000,000
-----------------------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $2,338,700,000
-----------------------------------------------------------------------------------------
</TABLE>
7. 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. In addition,
Global Income participated in a $50,000,000 committed, unsecured revolving
line of credit facility. Under the most restrictive arrangement, each Fund
must have owned securities having a market value in excess of 300% of the to-
tal bank borrowings. Effective April 30, 1999, the Funds now participate in a
$250,000,000 uncommitted and a $250,000,000 committed, unsecured revolving
line of credit facility. Under the most restrictive arrangement, each Fund
must own securities having a market value in excess of 400% of the total bank
borrowings. These facilities are to be used solely for temporary or emergency
purposes. The interest rate on borrowings is based on the Federal Funds rate.
The committed facility also requires a fee to be paid by the Funds based on
the amount of the commitment which has not been utilized. During the year
ended October 31, 1999, the Funds did not have any borrowings under any of
these facilities.
8. OTHER MATTERS
As of October 31, 1999, the Goldman, Sachs & Co. Profit Sharing Master Trust
was the beneficial owner of approximately 20% and 10% of the outstanding
shares of Short Duration Government and Global Income, respectively. The
Goldman Sachs Balanced Strategy Portfolio was the beneficial owner of approx-
imately 16% of Short Duration Government. The Goldman
58
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Sachs Growth and Income Strategy Portfolio was the beneficial owner of ap-
proximately 16% and 16% of Core Fixed Income and Global Income, respectively.
The Goldman Sachs Growth Strategy Portfolio was the beneficial owner of ap-
proximately 7% of Global Income.
9. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, Adjustable Rate Government has
reclassified $73,291 and $3,782,544 from accumulated net realized gain and
paid-in capital, respectively, to accumulated undistributed net investment
income. Short Duration Government has reclassified $365,923 and $80,351 from
accumulated undistributed net investment income and paid-in capital, respec-
tively, to accumulated net realized loss. Government Income Fund has reclas-
sified $6,901 and $22,533 from accumulated net realized gain and paid-in
capital, respectively, to accumulated undistributed net investment income.
Core Fixed Income has reclassified $213,348 and $6,123 from accumulated un-
distributed net investment income and paid-in capital, respectively, to accu-
mulated net realized loss. Global Income Fund has reclassified $237,235 and
$1,470,960 from paid-in capital and accumulated undistributed net investment
income, respectively, to accumulated net realized gain.
These reclassifications have no impact on the net asset value of each Fund
and are designed to present each Fund's capital accounts on a tax basis.
10. 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.
59
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
October 31, 1999
11. SUMMARY OF SHARE TRANSACTIONS
Share activity for the year ended October 31, 1999 is as follows:
<TABLE>
<CAPTION>
Adjustable Rate
Government Short Duration Government
--------------------------------------------------------
Shares Dollars Shares Dollars
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold 31,904,130 $ 307,792,374 10,095,040 $ 98,117,271
Reinvestment of divi-
dends and distributions 119,965 1,158,237 216,498 2,098,601
Shares repurchased (35,923,098) (346,731,900) (10,580,288) (102,834,224)
--------------------------------------------------------
(3,899,003) (37,781,289) (268,750) (2,618,352)
--------------------------------------------------------------------------------
Class B Shares
Shares sold -- -- 536,977 5,189,723
Reinvestment of divi-
dends and distributions -- -- 19,167 185,709
Shares repurchased -- -- (338,423) (3,279,805)
--------------------------------------------------------
-- -- 217,721 2,095,627
--------------------------------------------------------------------------------
Class C Shares
Shares sold -- -- 8,886,376 86,234,626
Reinvestment of divi-
dends and distributions -- -- 20,160 197,199
Shares repurchased -- -- (8,627,888) (83,700,711)
--------------------------------------------------------
-- -- 278,648 2,731,114
--------------------------------------------------------------------------------
Institutional Shares
Shares sold 20,323,432 196,917,377 9,547,581 92,884,069
Reinvestment of divi-
dends and distributions 1,061,620 10,265,385 513,104 4,969,995
Shares repurchased (34,221,185) (331,249,902) (9,495,933) (92,157,561)
--------------------------------------------------------
(12,836,133) (124,067,140) 564,752 5,696,503
--------------------------------------------------------------------------------
Administration Shares
Shares sold 68,624 664,460 89,932 879,455
Reinvestment of divi-
dends and distributions 11,849 114,653 21,750 212,241
Shares repurchased (699,098) (6,780,446) (853,809) (8,273,964)
--------------------------------------------------------
(618,625) (6,001,333) (742,127) (7,182,268)
--------------------------------------------------------------------------------
Service Shares
Shares sold 41,184 399,000 220,831 2,138,369
Reinvestment of divi-
dends and distributions 3,813 36,897 35,301 341,399
Shares repurchased (47,218) (457,580) (195,427) (1,896,564)
--------------------------------------------------------
(2,221) (21,683) 60,705 583,204
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) (17,355,982) $(167,871,445) 110,949 $ 1,305,828
--------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
Government Income Core Fixed Income Global Income
- -----------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
15,480,704 $ 221,875,202 15,664,674 $ 153,790,343 11,408,207 $ 172,565,659
399,303 5,661,524 364,578 3,579,460 893,424 13,446,916
(16,666,682) (239,289,704) (14,632,982) (143,984,124) (7,423,402) (111,559,802)
- -----------------------------------------------------------------------------------
(786,675) (11,752,978) 1,396,270 13,385,679 4,878,229 74,452,773
- -----------------------------------------------------------------------------------
995,374 14,092,144 1,292,427 12,801,294 799,694 11,962,762
63,277 898,159 45,231 443,248 37,347 559,007
(704,136) (9,886,884) (499,533) (4,888,859) (200,617) (2,973,643)
- -----------------------------------------------------------------------------------
354,515 5,103,419 838,125 8,355,683 636,424 9,548,126
- -----------------------------------------------------------------------------------
584,857 8,274,255 731,786 7,234,043 427,735 6,481,148
44,022 624,389 26,464 260,185 19,764 296,195
(541,898) (7,636,754) (519,952) (5,098,447) (170,181) (2,517,755)
- -----------------------------------------------------------------------------------
86,981 1,261,890 238,298 2,395,781 277,318 4,259,588
- -----------------------------------------------------------------------------------
357,908 5,057,233 12,407,934 122,028,595 10,355,146 156,504,371
18,233 257,175 849,565 8,328,838 419,045 6,293,031
(122,650) (1,741,188) (9,506,792) (94,135,666) (2,870,867) (42,857,412)
- -----------------------------------------------------------------------------------
253,491 3,573,220 3,750,707 36,221,767 7,903,324 119,939,990
- -----------------------------------------------------------------------------------
-- -- 285,215 2,874,182 -- --
-- -- 43,863 435,986 -- --
-- -- (1,569,648) (15,306,734) -- --
- -----------------------------------------------------------------------------------
-- -- (1,240,570) (11,996,566) -- --
- -----------------------------------------------------------------------------------
987 14,000 480,043 4,718,380 39,802 600,905
9 128 44,910 440,209 3,980 59,733
-- -- (178,571) (1,746,555) (34,363) (530,678)
- -----------------------------------------------------------------------------------
996 14,128 346,382 3,412,034 9,419 129,960
- -----------------------------------------------------------------------------------
(90,692) $ (1,800,321) 5,329,212 $ 51,774,378 13,704,714 $ 208,330,437
- -----------------------------------------------------------------------------------
</TABLE>
61
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
Notes to Financial Statements
October 31, 1999
11. SUMMARY OF SHARE TRANSACTIONS
Share activity for the year ended October 31, 1998 is as follows:
<TABLE>
<CAPTION>
Adjustable Rate
Government Short Duration Government
------------------------------------------------------
Shares Dollars Shares Dollars
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares
Shares sold 19,932,653 $ 194,697,319 16,985,961 $ 167,624,322
Reinvestments of dividends and distributions 604,097 5,945,679 120,111 1,185,808
Shares repurchased (18,654,663) (182,295,231) (12,340,018) (121,740,352)
------------------------------------------------------
1,882,087 18,347,767 4,766,054 47,069,778
-------------------------------------------------------------------------------------------------------------------------------
Class B Shares
Shares sold -- -- 603,049 5,943,625
Reinvestments of dividends and distributions -- -- 7,568 74,540
Shares repurchased -- -- (177,997) (1,755,511)
------------------------------------------------------
-- -- 432,620 4,262,654
-------------------------------------------------------------------------------------------------------------------------------
Class C Shares
Shares sold -- -- 2,838,549 27,966,526
Reinvestments of dividends and distributions -- -- 4,686 46,150
Shares repurchased -- -- (2,404,324) (23,689,726)
------------------------------------------------------
-- -- 438,911 4,322,950
-------------------------------------------------------------------------------------------------------------------------------
Institutional Shares
Shares sold 28,576,509 280,382,576 8,996,219 88,597,711
Reinvestments of dividends and distributions 1,450,779 14,219,494 476,030 4,685,919
Shares repurchased (31,436,222) (308,484,524) (5,282,160) (51,951,739)
------------------------------------------------------
(1,408,934) (13,882,454) 4,190,089 41,331,891
-------------------------------------------------------------------------------------------------------------------------------
Administration Shares
Shares sold 526,967 5,168,122 643,992 6,337,403
Reinvestments of dividends and distributions 16,347 159,947 21,813 215,247
Shares repurchased (207,333) (2,030,808) (30,888) (304,789)
------------------------------------------------------
335,981 3,297,261 634,917 6,247,861
-------------------------------------------------------------------------------------------------------------------------------
Service Shares
Shares sold 59,251 580,933 478,854 4,707,065
Reinvestments of dividends and distributions 2,671 26,153 26,999 265,734
Shares repurchased (12,170) (119,234) (213,862) (2,100,422)
------------------------------------------------------
49,752 487,852 291,991 2,872,377
-------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 858,886 $ 8,250,426 10,754,582 $ 106,107,511
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE>
GOLDMAN SACHS TAXABLE INVESTMENT GRADE FUNDS
<TABLE>
<CAPTION>
Government Income Core Fixed Income Global Income
---------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10,117,601 $ 148,936,815 8,313,076 $ 84,205,066 6,208,388 $ 94,795,767
317,568 4,667,254 192,581 1,951,173 644,423 9,725,285
(8,375,782) (123,588,302) (3,945,813) (40,108,401) (4,034,417) (61,329,954)
---------------------------------------------------------------------------------
2,059,387 30,015,767 4,559,844 46,047,838 2,818,394 43,191,098
---------------------------------------------------------------------------------
988,916 14,582,947 762,323 7,750,260 358,077 5,463,974
36,689 539,851 10,510 106,863 16,608 250,647
(495,310) (7,326,615) (133,282) (1,356,868) (83,968) (1,277,096)
---------------------------------------------------------------------------------
530,295 7,796,183 639,551 6,500,255 290,717 4,437,525
---------------------------------------------------------------------------------
695,338 10,239,137 641,726 6,499,362 284,497 4,320,887
12,307 181,980 10,040 102,303 6,328 95,885
(143,057) (2,112,718) (135,503) (1,377,439) (61,616) (932,193)
---------------------------------------------------------------------------------
564,588 8,308,399 516,263 5,224,226 229,209 3,484,579
---------------------------------------------------------------------------------
43,336 637,656 16,206,866 163,978,142 9,752,852 148,646,615
9,140 134,281 558,960 5,664,936 252,867 3,816,828
(4,930) (72,125) (5,578,137) (56,603,166) (2,632,348) (40,270,900)
---------------------------------------------------------------------------------
47,546 699,812 11,187,689 113,039,912 7,373,371 112,192,543
---------------------------------------------------------------------------------
-- -- 779,791 7,866,673 -- --
-- -- 49,361 499,933 -- --
-- -- (201,424) (2,053,871) -- --
---------------------------------------------------------------------------------
-- -- 627,728 6,312,735 -- --
---------------------------------------------------------------------------------
-- -- 375,085 3,807,318 62,146 946,767
7 104 19,089 193,910 1,707 26,082
-- -- (67,401) (688,807) (6,198) (94,978)
---------------------------------------------------------------------------------
7 104 326,773 3,312,421 57,655 877,871
---------------------------------------------------------------------------------
3,201,823 $ 46,820,265 17,857,848 $180,437,387 10,769,346 $164,183,616
---------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income (loss) from
investment
operations(a) Distributions to shareholders
---------------------- -----------------------------
Net Net
realized increase
Net asset and In excess (decrease)
value at Net unrealized From net of net in net
beginning investment gain investment investment From asset
of period income (loss) income income capital value
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $9.69 $0.49 $(0.05) $(0.44) $ -- $(0.06) $(0.06)
1999 - Institutional
Shares 9.70 0.53 (0.05) (0.48) -- (0.06) (0.06)
1999 - Administration
Shares(g) 9.70 0.37(f) 0.01 (f) (0.33) -- (0.04) 0.01
1999 - Service Shares 9.70 0.48 (0.04) (0.43) -- (0.06) (0.05)
--------------------------------------------------------------------------------------------------
1998 - Class A Shares 9.88 0.53 (0.17) (0.53) (0.02) -- (0.19)
1998 - Institutional
Shares 9.88 0.55 (0.16) (0.55) (0.02) -- (0.18)
1998 - Administration
Shares 9.88 0.53 (0.16) (0.53) (0.02) -- (0.18)
1998 - Service Shares 9.88 0.51 (0.16) (0.51) (0.02) -- (0.18)
--------------------------------------------------------------------------------------------------
1997 - Class A Shares 9.83 0.57(f) 0.05 (f) (0.57) -- -- 0.05
1997 - Institutional
Shares 9.83 0.59(f) 0.05 (f) (0.59) -- -- 0.05
1997 - Administration
Shares 9.83 0.57(f) 0.05 (f) (0.57) -- -- 0.05
1997 - Service Shares
(commenced March 27) 9.84 0.33(f) 0.04 (f) (0.33) -- -- 0.04
--------------------------------------------------------------------------------------------------
1996 - Class A Shares 9.77 0.55(f) 0.08 (f) (0.55) (0.02) -- 0.06
1996 - Institutional
Shares 9.77 0.57(f) 0.08 (f) (0.57) (0.02) -- 0.06
1996 - Administration
Shares 9.77 0.55(f) 0.08 (f) (0.55) (0.02) -- 0.06
--------------------------------------------------------------------------------------------------
1995 - Class A Shares
(commenced May 15) 9.79 0.27(f) (0.01)(f) (0.27) (0.01) -- (0.02)
1995 - Institutional
Shares 9.74 0.56(f) 0.07 (f) (0.57) (0.03) -- 0.03
1995 - Administration
Shares 9.74 0.54(f) 0.07 (f) (0.55) (0.03) -- 0.03
--------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of period and no sales
charge. Total return would be reduced if a sales charge for Class A
shares were taken into account.
(c) Annualized.
(d) Not annualized.
(e) Includes the effect of mortgage dollar roll transactions.
(f) Calculated based on the average shares outstanding methodology.
(g) 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.
64
<PAGE>
GOLDMAN SACHS ADJUSTABLE RATE GOVERNMENT FUND
<TABLE>
<CAPTION>
Ratios assuming no voluntary waiver
of fees or expense limitations
-------------------------------------
Net assets Ratio of Ratio of
Net asset at end of Ratio of net investment Ratio of net investment Portfolio
value, end Total period net expenses to income to expenses to income to turnover
of period return(b) (in 000s) average net assets average net assets average net assets average net assets rate(e)
<S> <C> <C> <C> <C> <C> <C> <C>
$9.63 4.65% $ 22,862 0.89% 5.15% 0.93% 5.11% 38.86%
9.64 5.06 315,024 0.49 5.49 0.53 5.45 38.86
9.71(g) 4.02(d) -- 0.74(c) 5.35(c) 0.78(c) 5.31(c) 38.86
9.65 4.65 797 0.99 4.99 1.03 4.95 38.86
-------------------------------------------------------------------------------------------------------------------------
9.69 3.71 60,782 0.80 5.40 1.02 5.18 33.64
9.70 4.09 441,228 0.53 5.63 0.53 5.63 33.64
9.70 3.83 5,999 0.78 5.33 0.78 5.33 33.64
9.70 3.57 822 1.03 5.09 1.03 5.09 33.64
-------------------------------------------------------------------------------------------------------------------------
9.88 6.43 43,393 0.74 5.60 1.02 5.32 46.58
9.88 6.70 463,511 0.49 5.99 0.52 5.96 46.58
9.88 6.43 2,793 0.74 5.73 0.77 5.70 46.58
9.88 3.81(d) 346 1.05(c) 5.64(c) 1.08(c) 5.61(c) 46.58
-------------------------------------------------------------------------------------------------------------------------
9.83 6.60 10,728 0.70 5.59 1.01 5.28 52.36
9.83 6.86 613,149 0.45 5.85 0.51 5.79 52.36
9.83 6.60 3,792 0.70 5.59 0.76 5.53 52.36
-------------------------------------------------------------------------------------------------------------------------
9.77 2.74(d) 15,203 0.69(c) 5.87(c) 1.01(c) 5.55(c) 24.12
9.77 6.75 657,358 0.46 5.77 0.53 5.70 24.12
9.77 6.48 3,572 0.71 5.50 0.78 5.43 24.12
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income (loss) from Distributions to
investment operations(a) shareholders
-------------------------- ----------------
Net asset Net increase
value at Net Net realized From net (decrease)
beginning investment and unrealized investment in net asset
of period income gain (loss) income value
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C>
1999 - Class A Shares $9.91 $0.55 $(0.36) $(0.53) $(0.34)
1999 - Class B Shares 9.88 0.48 (0.33) (0.47) (0.32)
1999 - Class C Shares 9.88 0.47 (0.36) (0.45) (0.34)
1999 - Institutional
Shares 9.90 0.59 (0.35) (0.57) (0.33)
1999 - Administration
Shares(h) 9.91 0.40(f) (0.25)(f) (0.39) (0.24)
1999 - Service Shares 9.89 0.54 (0.35) (0.52) (0.33)
-----------------------------------------------------------------------------------------
1998 - Class A Shares 9.88 0.57 0.04 (0.58) 0.03
1998 - Class B Shares 9.86 0.51 0.03 (0.52) 0.02
1998 - Class C Shares 9.86 0.49 0.03 (0.50) 0.02
1998 - Institutional
Shares 9.86 0.58 0.06 (0.60) 0.04
1998 - Administration
Shares 9.89 0.55 0.05 (0.58) 0.02
1998 - Service Shares 9.86 0.55 0.04 (0.56) 0.03
-----------------------------------------------------------------------------------------
1997 - Class A Shares
(commenced May 1) 9.78 0.31(f) 0.09 (f) (0.30) 0.10
1997 - Class B Shares
(commenced May 1) 9.75 0.28(f) 0.10 (f) (0.27) 0.11
1997 - Class C Shares
(commenced August 15) 9.83 0.12(f) 0.02 (f) (0.11) 0.03
1997 - Institutional
Shares 9.83 0.64(f) 0.03 (f) (0.64) 0.03
1997 - Administration
Shares 9.85 0.62(f) 0.04 (f) (0.62) 0.04
1997 - Service Shares 9.82 0.59(f) 0.04 (f) (0.59) 0.04
-----------------------------------------------------------------------------------------
1996 - Institutional
Shares 9.82 0.63(f) 0.01 (f) (0.63) 0.01
1996 - Administration
Shares(g) 9.86 0.38(f) -- (f) (0.39) (0.01)
1996 - Service Shares
(Commenced April 10) 9.72 0.31(f) 0.10 (f) (0.31) 0.10
-----------------------------------------------------------------------------------------
1995 - Institutional
Shares 9.64 0.66(f) 0.17 (f) (0.65) 0.18
1995 - Administration
Shares(g) 9.64 0.24(f) (0.04)(f) (0.21) (0.01)
-----------------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of the period and no sales
charge. Total return would be reduced if a sales or redemption charge
were taken into account.
(c) Annualized.
(d) Not annualized.
(e) Includes the effect of mortgage dollar roll transactions.
(f) Calculated based on the average shares outstanding methodology.
(g) Short Duration Government Fund Administration shares commenced activity
on April 15, 1993, were redeemed in full on February 23, 1995 and re-
commenced on February 28, 1996 at $9.86.
(h) 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.
66
<PAGE>
GOLDMAN SACHS SHORT DURATION GOVERNMENT FUND
<TABLE>
<CAPTION>
Ratios assuming no voluntary waiver
of fees or expense limitations
---------------------------------------
Net assets Ratio of Ratio of
Net asset at end of Ratio of net investment Ratio of net investment Portfolio
value, end Total period net expenses to income to expenses to income to turnover
of period return(b) (in 000s) average net assets average net assets average net assets average net assets rate(e)
<S> <C> <C> <C> <C> <C> <C> <C>
$9.57 1.97% $ 52,235 0.94% 5.61% 1.07% 5.48% 172.61%
9.56 1.56 6,937 1.54 5.04 1.82 4.76 172.61
9.54 1.21 7,029 1.69 4.83 1.82 4.70 172.61
9.57 2.49 146,062 0.54 6.03 0.67 5.90 172.61
9.67(h) 1.57(d) -- 0.79(c) 5.76(c) 0.92(c) 5.63(c) 172.61
9.56 1.97 6,605 1.04 5.54 1.17 5.41 172.61
-----------------------------------------------------------------------------------------------------------------------------
9.91 6.36 56,725 0.81 5.68 1.32 5.17 119.89
9.88 5.62 5,025 1.41 5.12 1.87 4.66 119.89
9.88 5.46 4,527 1.56 4.64 1.87 4.33 119.89
9.90 6.75 145,514 0.53 6.06 0.84 5.75 119.89
9.91 6.27 7,357 0.78 5.76 1.09 5.45 119.89
9.89 6.12 6,232 1.03 5.56 1.34 5.25 119.89
-----------------------------------------------------------------------------------------------------------------------------
9.88 4.14(d) 9,491 0.70(c) 6.05(c) 1.32(c) 5.43(c) 102.58
9.86 3.94(d) 747 1.30(c) 5.52(c) 1.82(c) 5.00(c) 102.58
9.86 1.44(d) 190 1.45(c) 5.52(c) 1.82(c) 5.15(c) 102.58
9.86 7.07 103,729 0.45 6.43 0.82 6.06 102.58
9.89 6.91 1,060 0.70 6.19 1.07 5.82 102.58
9.86 6.63 3,337 0.95 5.92 1.32 5.55 102.58
-----------------------------------------------------------------------------------------------------------------------------
9.83 6.75 99,944 0.45 6.44 0.71 6.18 115.45
9.85 4.00(d) 252 0.70(c) 5.97(c) 0.96(c) 5.71(c) 115.45
9.82 4.35(d) 1,822 0.95(c) 6.05(c) 1.21(c) 5.79(c) 115.45
-----------------------------------------------------------------------------------------------------------------------------
9.82 8.97 103,760 0.45 6.87 0.72 6.60 292.56
9.63 2.10(d) -- 0.70(c) 7.91(c) 0.90(c) 7.71(c) 292.56
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income (loss) from
investment operations(a) Distributions to shareholders
------------------------- ------------------------------------------
Net asset In excess
value, Net Net realized From net of net From
beginning investment and unrealized investment investment net realized
of period income gain (loss) income income gains
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $14.91 $0.80 $(0.89) $(0.77) $ -- $(0.35)
1999 - Class B Shares 14.92 0.69 (0.87) (0.67) -- (0.35)
1999 - Class C Shares 14.91 0.69 (0.88) (0.66) -- (0.35)
1999 - Institutional
Shares 14.90 0.85 (0.88) (0.83) -- (0.35)
1999 - Service Shares 14.88 0.77 (0.92) (0.75) -- (0.35)
----------------------------------------------------------------------------------------------------
1998 - Class A Shares 14.59 0.81 0.45 (0.81) (0.07) (0.06)
1998 - Class B Shares 14.61 0.72 0.42 (0.72) (0.05) (0.06)
1998 - Class C Shares 14.60 0.74 0.40 (0.74) (0.03) (0.06)
1998 - Institutional
Shares 14.59 0.87 0.42 (0.87) (0.05) (0.06)
1998 - Service Shares 14.59 0.80 0.40 (0.80) (0.05) (0.06)
----------------------------------------------------------------------------------------------------
1997 - Class A Shares 14.36 0.91 0.29 (0.90) -- (0.07)
1997 - Class B Shares 14.37 0.80 0.30 (0.79) -- (0.07)
1997 - Class C Shares
(commenced August 15) 14.38 0.17 0.22 (0.17) -- --
1997 - Institutional
Shares (commenced
August 15) 14.37 0.20 0.22 (0.20) -- --
1997 - Service Shares
(commenced August 15) 14.37 0.20 0.21 (0.19) -- --
----------------------------------------------------------------------------------------------------
1996 - Class A shares 14.47 0.92 (0.11) (0.92) -- --
1996 - Class B shares
(commenced May 1) 14.11 0.41 0.26 (0.41) -- --
----------------------------------------------------------------------------------------------------
1995 - Class A shares 13.47 0.94 1.00 (0.94) -- --
----------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of the period and no sales
charge. Total return would be reduced if a sales or redemption charge
were taken into account.
(c) Annualized.
(d) Not annualized.
(e) Includes the effect of mortgage dollar roll transactions.
The accompanying notes are an integral part of these financial statements.
68
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
Ratios assuming no voluntary waiver
of fees or expense limitations
------------------------------------
Ratio of Ratio of
Net increase Net assets Ratio of net investment Ratio of net investment
(decrease) Net asset at end of net expenses to income to expenses to income to Portfolio
in net asset value, end Total period average average average average turnover
value of period return(b) (in 000s) net assets net assets net assets net assets rate(e)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(1.21) $13.70 (0.63)% $ 82,102 0.98% 5.63% 1.33% 5.28% 277.64%
(1.20) 13.72 (1.29) 19,684 1.73 4.88 2.08 4.53 277.64
(1.20) 13.71 (1.29) 10,053 1.73 4.89 2.08 4.54 277.64
(1.21) 13.69 (0.23) 5,899 0.58 6.07 0.93 5.72 277.64
(1.25) 13.63 (1.01) 15 1.08 5.56 1.43 5.21 277.64
- --------------------------------------------------------------------------------------------------------------------------------
0.32 14.91 8.98 101,015 0.76 5.53 1.53 4.76 315.43
0.31 14.92 8.09 16,125 1.51 4.76 2.05 4.22 315.43
0.31 14.91 8.09 9,639 1.51 4.59 2.05 4.05 315.43
0.31 14.90 9.19 2,642 0.51 5.82 1.05 5.28 315.43
0.29 14.88 8.53 2 1.01 5.48 1.55 4.94 315.43
- --------------------------------------------------------------------------------------------------------------------------------
0.23 14.59 8.72 68,859 0.50 6.38 1.82 5.06 395.75
0.24 14.61 7.96 8,041 1.25 5.59 2.32 4.52 395.75
0.22 14.60 2.72(d) 1,196 1.25(c) 5.45(c) 2.32(c) 4.38(c) 395.75
0.22 14.59 2.94(d) 1,894 0.25(c) 7.03(c) 1.32(c) 5.96(c) 395.75
0.22 14.59 2.85(d) 2 0.75(c) 6.49(c) 1.82(c) 5.42(c) 395.75
- --------------------------------------------------------------------------------------------------------------------------------
(0.11) 14.36 5.80 30,603 0.50 6.42 1.89 5.03 485.09
0.26 14.37 4.85(d) 234 1.25(c) 5.65(c) 2.39(c) 4.51(c) 485.09
- --------------------------------------------------------------------------------------------------------------------------------
1.00 14.47 14.90 29,503 0.47 6.67 2.34 4.80 449.53
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income (loss) from
investment operations(a) Distributions to shareholders
-------------------------- ------------------------------
Net asset In excess Net increase
value at Net Net realized From net of net From net (decrease)
beginning investment and unrealized investment investment realized in net asset
of period income gain (loss) income income gains value
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $10.25 $0.54 $(0.61) $(0.53) $ -- $(0.15) $(0.75)
1999 - Class B Shares 10.28 0.48 (0.62) (0.47) -- (0.15) (0.76)
1999 - Class C Shares 10.28 0.47 (0.62) (0.46) -- (0.15) (0.76)
1999 - Institutional
Shares 10.28 0.58 (0.62) (0.57) -- (0.15) (0.76)
1999 - Administration
Shares(g) 10.27 0.40(f) (0.41)(f) (0.40) -- (0.15) (0.56)
1999 - Service Shares 10.28 0.54 (0.62) (0.53) -- (0.15) (0.76)
---------------------------------------------------------------------------------------------------------
1998 - Class A Shares 10.06 0.59 0.27 (0.59) (0.02) (0.06) 0.19
1998 - Class B Shares 10.09 0.52 0.27 (0.52) (0.02) (0.06) 0.19
1998 - Class C Shares 10.09 0.52 0.27 (0.52) (0.02) (0.06) 0.19
1998 - Institutional
Shares 10.08 0.61 0.29 (0.61) (0.03) (0.06) 0.20
1998 - Administration
Shares 10.07 0.57 0.29 (0.57) (0.03) (0.06) 0.20
1998 - Service Shares 10.09 0.56 0.27 (0.56) (0.02) (0.06) 0.19
---------------------------------------------------------------------------------------------------------
1997 - Class A Shares
(commenced May 1) 9.70 0.30 0.36 (0.30) -- -- 0.36
1997 - Class B Shares
(commenced May 1) 9.72 0.27 0.37 (0.27) -- -- 0.37
1997 - Class C Shares
(commenced August 15) 9.93 0.11 0.16 (0.11) -- -- 0.16
1997 - Institutional
Shares 9.85 0.64 0.23 (0.64) -- -- 0.23
1997 - Administration
Shares 9.84 0.62 0.23 (0.62) -- -- 0.23
1997 - Service Shares 9.86 0.59 0.23 (0.59) -- -- 0.23
---------------------------------------------------------------------------------------------------------
1996 - Institutional
Shares 10.00 0.64 (0.07) (0.64) -- (0.08) (0.15)
1996 - Administrative
Shares (commenced
February 28) 9.91 0.41 (0.07) (0.41) -- -- (0.07)
1996 - Service Shares
(commenced March 13) 9.77 0.38 0.09 (0.38) -- -- 0.09
---------------------------------------------------------------------------------------------------------
1995 - Institutional
Shares 9.24 0.64 0.76 (0.64) -- -- 0.76
---------------------------------------------------------------------------------------------------------
</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) Includes the effect of mortgage dollar roll transactions.
(f) Calculated based on average shares outstanding methodology.
(g) 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.
70
<PAGE>
GOLDMAN SACHS CORE FIXED INCOME FUND
<TABLE>
<CAPTION>
Ratios assuming no voluntary waiver
of fees or expense limitations
-------------------------------------
Net
assets Ratio of Ratio of
Net asset at end of Ratio of net investment Ratio of net investment Portfolio
value, end Total period net expenses to income to expenses to income to turnover
of period return(b) (in 000s) average net assets average net assets average net assets average net assets rate(e)
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.50 (0.68)% $ 65,368 0.94% 5.57% 0.98% 5.53% 279.67%
9.52 (1.47) 14,654 1.69 4.83 1.73 4.79 279.67
9.52 (1.51) 7,443 1.69 4.82 1.73 4.78 279.67
9.52 (0.37) 216,973 0.54 5.97 0.58 5.93 279.67
9.71(g) (0.13)(d) -- 0.79(c) 5.63(c) 0.83(c) 5.59(c) 279.67
9.52 (0.87) 8,172 1.04 5.50 1.08 5.46 279.67
- --------------------------------------------------------------------------------------------------------------------------
10.25 8.76 56,267 0.74 5.58 1.21 5.11 271.50
10.28 7.94 7,209 1.49 4.82 1.75 4.56 271.50
10.28 7.94 5,587 1.49 4.81 1.75 4.55 271.50
10.28 9.15 195,730 0.46 5.95 0.72 5.69 271.50
10.27 8.88 12,743 0.71 5.70 0.97 5.44 271.50
10.28 8.50 5,263 0.96 5.44 1.22 5.18 271.50
- --------------------------------------------------------------------------------------------------------------------------
10.06 6.94 (d) 9,336 0.70(c) 6.13(c) 1.33(c) 5.50(c) 361.27
10.09 6.63 (d) 621 1.45(c) 5.28(c) 1.83(c) 4.90(c) 361.27
10.09 2.74 (d) 272 1.45(c) 4.84(c) 1.83(c) 4.46(c) 361.27
10.08 9.19 79,230 0.45 6.53 0.83 6.15 361.27
10.07 8.92 6,176 0.70 6.27 1.08 5.89 361.27
10.09 8.65 1,868 0.95 6.00 1.33 5.62 361.27
- --------------------------------------------------------------------------------------------------------------------------
9.85 5.98 72,061 0.45 6.51 0.83 6.13 414.20
9.84 3.56 (d) 702 0.70(c) 6.41(c) 1.08(c) 6.03(c) 414.20
9.86 4.90 (d) 381 0.95(c) 6.37(c) 1.33(c) 5.99(c) 414.20
- --------------------------------------------------------------------------------------------------------------------------
10.00 15.72 55,502 0.45 6.56 0.96 6.05 382.26
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income (loss) from
investment operations(a) Distributions to shareholders
-------------------------- --------------------------------
Net asset Net increase
value, Net Net realized From net From (decrease)
beginning investment and unrealized investment From net realized in net asset
of period income gain (loss) income capital gains value
FOR THE YEARS ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - Class A Shares $15.65 $0.62(e) $(0.78)(e) $(0.61) $(0.03) $(0.36) $(1.16)
1999 - Class B Shares 15.63 0.53 (0.78) (0.55) (0.02) (0.36) (1.18)
1999 - Class C Shares 15.60 0.53 (0.77) (0.55) (0.02) (0.36) (1.17)
1999 - Institutional
Shares 15.64 0.71 (0.77) (0.71) (0.03) (0.36) (1.16)
1999 - Service Shares 15.64 0.64 (0.79) (0.63) (0.03) (0.36) (1.17)
----------------------------------------------------------------------------------------------------------------------
1998 - Class A Shares 15.10 0.72(e) 0.90(e) (1.01) -- (0.06) 0.55
1998 - Class B Shares 15.08 0.63(e) 0.92(e) (0.94) -- (0.06) 0.55
1998 - Class C Shares 15.06 0.63(e) 0.91(e) (0.94) -- (0.06) 0.54
1998 - Institutional
Shares 15.09 0.82(e) 0.90(e) (1.11) -- (0.06) 0.55
1998 - Service Shares 15.09 0.74(e) 0.91(e) (1.04) -- (0.06) 0.55
----------------------------------------------------------------------------------------------------------------------
1997 - Class A shares 14.53 0.59 0.77 (0.79) -- -- 0.57
1997 - Class B shares 14.53 0.72 0.56 (0.73) -- -- 0.55
1997 - Class C shares
(commenced August 15) 14.80 0.16 0.29 (0.19) -- -- 0.26
1997 - Institutional
Shares 14.52 0.88 0.56 (0.87) -- -- 0.57
1997 - Service Shares
(commenced March 12) 14.69 0.53 0.39 (0.52) -- -- 0.40
----------------------------------------------------------------------------------------------------------------------
1996 - Class A shares 14.45 0.71 0.80 (1.43) -- -- 0.08
1996 - Class B shares
(commenced May 1) 14.03 0.34 0.52 (0.36) -- -- 0.50
1996 - Institutional
shares 14.45 1.15 0.42 (1.50) -- -- 0.07
----------------------------------------------------------------------------------------------------------------------
1995 - Class A shares 13.43 0.89 1.07 (0.94) -- -- 1.02
1995 - Institutional
shares (commenced August
1) 14.09 0.22 0.40 (0.26) -- -- 0.36
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions, a complete redemption of the
investment at the net asset value at the end of period and no sales
charge. Total return would be reduced if a sales or redemption charge
were taken into account.
(c) Annualized.
(d) Not annualized.
(e) Calculated based on the average shares outstanding methodology.
The accompanying notes are an integral part of these financial statements.
72
<PAGE>
GOLDMAN SACHS GLOBAL INCOME FUND
<TABLE>
<CAPTION>
Ratios assuming no voluntary waiver
of fees or expense limitations
-------------------------------------
Net assets Ratio of Ratio of
Net asset at end of Ratio of net investment Ratio of net investment Portfolio
value, end Total period net expenses to income to expenses to income to turnover
of period return(b) (in 000s) average net assets average net assets average net assets average net assets rate
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$14.49 (1.14)% $271,832 1.34% 4.12% 1.72% 3.74% 158.27%
14.45 (1.74) 16,724 1.84 3.60 2.22 3.22 158.27
14.43 (1.68) 7,786 1.84 3.60 2.22 3.22 158.27
14.48 (0.49) 279,621 0.69 4.75 1.07 4.37 158.27
14.47 (1.06) 1,115 1.19 4.28 1.57 3.90 158.27
- --------------------------------------------------------------------------------------------------------------------------
15.65 11.21 217,362 1.31 4.71 1.75 4.27 229.91
15.63 10.66 8,135 1.83 4.19 2.24 3.78 229.91
15.60 10.65 4,090 1.83 4.20 2.24 3.79 229.91
15.64 11.95 178,532 0.66 5.40 1.07 4.99 229.91
15.64 11.43 1,058 1.16 4.92 1.57 4.51 229.91
- --------------------------------------------------------------------------------------------------------------------------
15.10 9.66 167,096 1.17 5.19 1.60 4.76 383.72
15.08 9.04 3,465 1.71 4.76 2.10 4.37 383.72
15.06 3.03(d) 496 1.71(c) 4.98(c) 2.10(c) 4.59(c) 383.72
15.09 10.26 60,929 0.65 5.72 1.04 5.33 383.72
15.09 6.42(d) 151 1.15(c) 5.33(c) 1.54(c) 4.94(c) 383.72
- --------------------------------------------------------------------------------------------------------------------------
14.53 11.05 198,665 1.16 5.81 1.64 5.33 232.15
14.53 6.24(d) 256 1.70(c) 5.16(c) 2.14(c) 4.72(c) 232.15
14.52 11.55 54,254 0.65 6.35 1.11 5.89 232.15
- --------------------------------------------------------------------------------------------------------------------------
14.45 15.08 245,835 1.29 6.23 1.58 5.94 265.86
14.45 4.42(d) 31,619 0.65(c) 6.01(c) 1.08(c) 5.58(c) 265.86
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
GOLDMAN SACHS TRUST TAXABLE INVESTMENT GRADE FUNDS
Report of Independent Public Accountants
To the Shareholders and Board of Trustees of Goldman Sachs Trust -- Taxable
Investment Grade Fixed Income Funds:
We have audited the accompanying statements of assets and liabilities of
Goldman Sachs Adjustable Rate Government Fund, Short Duration Government
Fund, Government Income Fund, Core Fixed Income Fund and Global Income Fund,
five of the portfolios constituting Goldman Sachs Trust -- Fixed Income Funds
(a Delaware 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 responsibil-
ity 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 stan-
dards. 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 finan-
cial statements. Our procedures included confirmation of securities owned as
of October 31, 1999 by correspondence with the custodian and brokers. An au-
dit 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 re-
ferred to above present fairly, in all material respects, the financial posi-
tion of Goldman Sachs Adjustable Rate Government Fund, Short Duration
Government Fund, Government Income Fund, Core Fixed Income Fund and Global
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 pre-
sented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 10, 1999
74
<PAGE>
GOLDMAN SACHS FUND PROFILE
Goldman Sachs
Taxable Investment Grade Funds
THE GOLDMAN
SACHS ADVANTAGE
When you invest in Goldman Sachs Taxable Investment Grade Funds, you can
capitalize on Goldman Sachs' 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.
Generally speaking, bond investments may help individuals mitigate
overall portfolio volatility, without sacrificing attractive returns.
Goldman Sachs Taxable Investment Grade Funds offer investors access to
the benefits associated with fixed income investing. The Funds seek
current income from portfolios that invest in a variety of fixed
income securities.
Target Your Needs
Goldman Sachs Taxable Investment Grade Funds have distinct investment
objectives and defined positions on the risk/return spectrum. As your
investment objectives change, you can exchange shares within Goldman
Sachs Funds without any additional charge. (Please note: in general,
greater returns are associated with greater risk.)/*/
- --------------------------------------------------------------------------------
Goldman Sachs Fixed Income Funds
[CHART]
High Risk/Return
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
Lower Risk/Return
For More Information
To learn more about Goldman Sachs Taxable Investment Grade Funds and
other Goldman Sachs Funds, call your investment professional today.
* The exchange privilege is subject to termination and its terms are
subject to change.
<PAGE>
- --------------------------------------------------------------------------------
GOLDMAN SACHS ASSET MANAGEMENT 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
GOLDMAN SACHS INTERNATIONAL
133 Peterborough Court
London, England EC4A 2BB
Visit our internet address: www.gs.com/funds
This material is not authorized for distribution to prospective investors unless
preceded or accompanied by a current Prospectus. Investors should read the
Prospectus carefully before investing or sending money.
Goldman, Sachs & Co. is the distributor of the Funds.
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.
