Goldman Sachs Funds
| SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS | Annual Report October 31, 2006 |
 | Current income potential from portfolios that invest in a variety of fixed income securities. |
Goldman Sachs Single/Multi-Sector
Taxable Fixed Income Funds
Taxable Fixed Income Funds
| n | GOLDMAN SACHS GOVERNMENT INCOME FUND | |
| n | GOLDMAN SACHS U.S. MORTGAGES FUND | |
| n | GOLDMAN SACHS CORE FIXED INCOME FUND | |
| n | GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND |
| The Goldman Sachs Government Income Fund’s net asset value and yield are not guaranteed by the U.S. government or by its agencies, instrumentalities or sponsored enterprises. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid. |
The Goldman Sachs U.S. Mortgages Fund’s investment in mortgage-backed securities (MBS) is subject to prepayment risk, the risk that in a declining interest rate environment the Fund’s underlying mortgages may be prepaid, causing the Fund to have to reinvest at lower interest rates. This risk may result in greater share price volatility than a fixed income fund not invested in MBS. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk.
NOT FDIC-INSURED | May Lose Value | No Bank Guarantee | ||
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| The Goldman Sachs Core Fixed Income Fund’s investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid. |
The Goldman Sachs Investment Grade Credit Fund’s investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, options on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty; and the risks that transactions may not be liquid.
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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
What Distinguishes Goldman Sachs’
Fixed Income Investment Process?
Fixed Income Investment Process?
At Goldman Sachs Asset Management (“GSAM”), the goal of our fixed income investment process is to provide consistent, strong performance by actively managing our portfolios within a research-intensive, risk-managed framework.
| A key element of our fixed income investment philosophy is to evaluate the broadest global opportunity set to capture relative value across sectors and instruments. Our globally integrated investment process involves managing dynamically along the risk/return spectrum, as we continue to develop value-added strategies through:  n Assess relative value among sectors (such as mortgages and corporates) and sub-sectors n Leverage the vast resources of Goldman Sachs in selecting securities for each portfolio  n Team approach to decision making n Manage risk by avoiding significant sector and interest rate bets n Careful management of yield curve strategies — while closely managing portfolio duration  Fixed Income portfolios that: and access to areas of specialization n Capitalize on GSAM’s industry-renowned credit research capabilities n Use a risk-managed framework to seek total return, recognizing the importance of investors’ capital accumulation goals as well as their need for income | ||
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PORTFOLIO RESULTS
Government Income Fund
Dear Shareholder:
This report provides an overview on the performance of the Goldman Sachs Government Income Fund during the
one-year reporting period that ended October 31, 2006.
one-year reporting period that ended October 31, 2006.
Performance Review
| Over the one-year period that ended October 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 4.40%, 3.62%, 3.63%, 4.86% and 4.27%, respectively. These returns compare to the 5.12% cumulative total return of the Fund’s benchmark, the Lehman Brothers Government/ Mortgage Index, over the same time period. | |
| A combination of top-down and bottom-up strategies impacted the Fund’s performance relative to its benchmark. We maintained a defensive posture over the period, positioning the Fund to have a shorter duration versus its benchmark in anticipation of higher interest rates. This strategy contributed to returns as interest rates rose over the period. With regards to our cross-sector strategies, we continued to underweight the Fund’s mortgage exposure relative to the benchmark based on negative fundamentals in the mortgage market. Our mortgage underweight detracted from relative performance as the mortgage sector outperformed over the period. However, our security selection within mortgages helped to somewhat offset the negative impact from our mortgage underweight. In particular, selection of securities with less exposure to volatility, such as high quality floating rate adjustable rate mortgages (“ARMs”), contributed to relative performance. The Fund’s holdings of Treasury Inflation Protected Securities (“TIPS”) and select asset-backed auto securities also modestly detracted from the Fund’s performance relative to its benchmark. Offsetting this was the positive impact from our continued emphasis on short-dated agency securities. |
Market Review
| A number of continuing themes characterized the 12-month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields rose across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve. In the early part of the period, there was a rise in consumer confidence and strong manufacturing data. The latter half of the period was characterized by a slowdown in the housing market and moderating commodity prices, which lessened inflationary concerns and prompted the Fed to pause its tightening policy. During the reporting period, the 10-year Treasury yield rose five basis points, ending the period at 4.60%. Investment grade sectors continued to post strong outperformance relative to Treasuries over the reporting period, with the mortgage sector generating the best results. Credit spreads also tightened, supported by strong fundamentals and continued corporate profit growth. |
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PORTFOLIO RESULTS
Investment Objective
| The Fund seeks a high level of current income, consistent with safety of principal. |
Investment Strategies
| The Fund seeks to meet its objective by investing at least 80% of its net assets in U.S. government securities and in repurchase agreements collateralized by these securities, and in other securities of the highest credit quality. The Fund uses derivatives, including, but not limited to, Treasury futures, Eurodollar futures and swaps, primarily, as a tool to manage interest rate exposure, volatility, term structure, convexity (the rate of change in the portfolio’s duration as yields change), and sector exposure. The Fund may also use derivatives to express our interest rate outlook. | |
| We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, changing interest rates or changing mortgage durations. In addition, we believe that futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views. |
Portfolio Composition
| Over the period, the Fund’s investment strategy continued to focus on sectors and securities that we believed would generate a competitive total rate of return relative to the benchmark. As relative valuations changed over the period, we tactically adjusted the Fund’s exposures to take advantage of emerging opportunities. For example, we reduced the Fund’s Government exposure in favor of mortgage-backed securities that we felt offered more compelling relative values. We also took advantage of opportunities to add value in security-specific trades. In particular, we have been finding value in AAA rated ARMs and commercial mortgage-backed securities (“CMBS”). At the end of the reporting period, the Fund’s largest sector weight was in mortgage-backed securities. During the period, we maintained a short duration position relative to the Index based on the belief that interest rates would move higher. | |
| We thank you for your investment and look forward to your continued confidence. | |
| Goldman Sachs U.S. Fixed Income Investment Management Team | |
| November 20, 2006 |
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FUND BASICS
Government Income Fund
as of October 31, 2006
| PERFORMANCE REVIEW |
| November 1, 2005– | Fund Total Return | Lehman Govt./ | 30-Day | |||||||||||
| October 31, 2006 | (based on NAV)1 | Mortgage Index2 | Standardized Yield3 | |||||||||||
| Class A | 4.40% | 5.12% | 3.98% | |||||||||||
| Class B | 3.62 | 5.12 | 3.42 | |||||||||||
| Class C | 3.63 | 5.12 | 3.42 | |||||||||||
| Institutional | 4.86 | 5.12 | 4.54 | |||||||||||
| Service | 4.27 | 5.12 | 4.04 | |||||||||||
| 1 | The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges. |
| 2 | The Lehman Brothers Government/ Mortgage Index, an unmanaged index, does not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index. |
| 3 | The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is 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. |
| STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS4 |
| For the period ended 9/30/06 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||||||
| Class A | -1.38% | 3.20% | 5.36% | 5.61% | 2/10/93 | |||||||||||||||||
| Class B | -2.65 | 2.96 | 5.05 | 5.12 | 5/1/96 | |||||||||||||||||
| Class C | 1.45 | 3.38 | N/A | 4.75 | 8/15/97 | |||||||||||||||||
| Institutional | 3.70 | 4.58 | N/A | 5.94 | 8/15/97 | |||||||||||||||||
| Service | 3.12 | 4.05 | 5.725 | 5.875 | 2/10/93 | |||||||||||||||||
| 4 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years), and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
| 5 | Performance data for Service Shares prior to 8/15/97 (commencement of operations) 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. |
| The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
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FUND BASICS
| SECTOR ALLOCATION6 |
Percentage of Net Assets
| 6 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities. |
| 7 | “Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company. |
6
PORTFOLIO RESULTS
U.S. Mortgages Fund
Dear Shareholder,
This report provides an overview on the performance of the Goldman Sachs U.S. Mortgages Fund during the one-year reporting period that ended October 31, 2006.
Performance Review
| Over the one-year period that ended October 31, 2006, the Fund’s Class A, Institutional and Separate Account Institutional Shares generated cumulative total returns, without sales charges, of 5.21%, 5.56% and 5.73%, respectively. These returns compare to the 5.65% cumulative total return of the Fund’s benchmark, the Lehman Brothers Securitized Index, over the same time period. | |
| Over the period, we continued to target an underweight position in mortgages relative to the benchmark based on historically tight spread levels and low implied volatility. As mortgages outperformed the market during the reporting period, this underweight position detracted from performance. In contrast, our out-of-Index selection of high quality, floating rate adjustable-rate mortgages (“ARMs”), contributed positively to returns. A preference for high quality, floating rate asset-backed securities also enhanced results. The Fund’s performance relative to the benchmark was positively impacted by our short duration bias, as yields generally rose across the curve. |
Market Review
| Mortgages posted strong returns over the reporting period, outperforming both equal duration Treasuries and swaps. Spreads finished slightly tighter. Over the period, mortgage volatility rates declined. Fundamentals remain unattractive and implied volatility continues to remain near cyclical lows. |
Investment Objective
| The Fund seeks a high level of total return consisting of income and capital appreciation. |
Investment Strategies
| In seeking to meet the Fund’s investment objective, we invest at least 80% of its net assets in fixed income securities, including U.S. government and collateralized securities. Collateralized securities may include fixed rate pass-throughs, collateralized mortgage obligations (“CMOs”), ARMs, mortgage derivatives and asset-backed securities (“ABS”). To the extent we find them effective instruments to manage the duration of the portfolio, the Fund may employ the use of derivatives, including futures, swaps and Eurodollar futures contracts. |
7
PORTFOLIO RESULTS
| We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, changing interest rates or changing mortgage durations. In addition, we believe that futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities’ maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views. |
Portfolio Composition
| The Fund maintained a short duration position relative to its benchmark during the reporting period. Given its underweight position in mortgage pass-throughs, the Fund invested in other collateralized sectors, such as ARMs and CMOs. The Fund added to its government security allocation as a tactical substitute for pass-through exposure. The Fund continues to underweight exposure to fixed rate mortgage-backed security pass-throughs on the back of negative fundamentals. At the end of the reporting period, all of the Fund’s asset-backed security exposure was concentrated in short-term, high quality securities, which we consider to be cash equivalents. | |
| We thank you for your investment and look forward to your continued confidence. | |
| Goldman Sachs Fixed Income Investment Management Team | |
| November 20, 2006 |
8
FUND BASICS
U.S. Mortgages Fund
as of October 31, 2006
| PERFORMANCE REVIEW |
| November 1, 2005– | Fund Total Return | Lehman Brothers | 30-Day | |||||||||||
| October 31, 2006 | (based on NAV)1 | Securitized Index2 | Standardized Yield3 | |||||||||||
| Class A | 5.21 | % | 5.65 | % | 4.16 | % | ||||||||
| Institutional | 5.56 | 5.65 | 4.75 | |||||||||||
| Separate Account Institutional | 5.73 | 5.65 | 4.79 | |||||||||||
| 1 | The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges. |
| 2 | The Lehman Brothers Securitized Index is an unmanaged composite of asset-backed securities, collateralized mortgage-backed securities and fixed rate mortgage-backed securities. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index. |
| 3 | The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is 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. |
| STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS4 |
| For the period ended 9/30/06 | One Year | Since Inception | Inception Date | |||||||||
| Class A | -0.68 | % | 2.23 | % | 11/3/03 | |||||||
| Institutional | 4.38 | 4.30 | 11/3/03 | |||||||||
| Separate Account Institutional | 4.44 | 4.32 | 11/3/03 | |||||||||
| 4 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares. Because Institutional and Separate Account Institutional Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
| The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
9
FUND BASICS
| SECTOR ALLOCATION5 |
Percentage of Net Assets
| 5 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities. |
| 6 | “Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company. |
10
PORTFOLIO RESULTS
Core Fixed Income Fund
Dear Shareholder,
This report provides an overview on the performance of the Goldman Sachs Core Fixed Income Fund during the one-year reporting period that ended October 31, 2006.
Performance Review
| Over the one-year period that ended October 31, 2006, the Fund’s Class A, B, C, Institutional and Service Shares generated cumulative total returns, without sales charges, of 4.21%, 3.42%, 3.52%, 4.69% and 4.06%, respectively. These returns compare to the 5.19% cumulative total return of the Fund’s benchmark, the Lehman Brothers Aggregate Bond Index, over the same time period. | |
| Within our top down currency strategy, our overall positioning relative to the benchmark in the Great Britain pound and New Zealand dollar significantly detracted from performance over the reporting period. Overall our cross-sector strategy also had a negative impact on returns versus the benchmark. In particular, underweight exposures to the corporate and mortgage sectors detracted from performance as the sectors outperformed Treasuries over the period. However, our swap spread exposure enhanced results. Elsewhere, our security selection within mortgages helped performance relative to the benchmark, particularly within mortgage passthroughs, adjustable rate mortgages and mortgage derivatives. Within investment grade corporates, our selection of insurance sector credits, benefited returns versus the benchmark. The Fund’s performance relative to the benchmark was positively impacted by our overall short duration positioning as interest rates rose at the short region of the curve over the period. |
Market Review
| A number of continuing themes characterized the 12 month period that ended October 31, 2006. The Federal Reserve Board (the “Fed”) continued to raise interest rates in six more 25 basis point moves, bringing the targeted federal funds rate to 5.25%. Following the hike in rates, yields rose across the Treasury curve. However, short-term yields rose more dramatically than did long-term yields, leading to a further flattening of the yield curve. In the early part of the period, there was a rise in consumer confidence and strong manufacturing data. The latter half of the period was characterized by a slowdown in the housing market and moderating commodity prices, which lessened inflationary concerns and prompted the Fed to pause its tightening policy. Within currencies, the Great Britain pound appreciated against the U.S. dollar over the 12-month period. Credit spreads also continued to tighten over the reporting period, as the 10-year Treasury yield rose five basis points, ending the period at 4.60%. Emerging market debt and credit spreads also continued to tighten over the reporting period. |
Investment Objective
| The Fund seeks a total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index. |
11
PORTFOLIO RESULTS
Investment Strategies
| In seeking to meet the Fund’s investment objective, we invest at least 80% of its net assets in fixed income securities, including U.S. government, corporate securities, mortgage-backed securities, asset-backed securities and investment grade emerging market debt securities. In addition, to the extent we find them effective instruments to manage the overall duration of the portfolio, the Fund may employ the use of derivatives, including futures, swaps and Eurodollar futures contracts. | |
| We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, changing interest rates or changing mortgage durations. In addition, we believe that futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities’ maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views. |
Portfolio Composition
| During the period, the Fund continued to hold a short duration position relative to the benchmark based on our belief that rates will trend higher. The Fund increased its underweight in the mortgage sector based on historically tight spread levels and low implied volatility. However, we continued to take advantage of opportunities to add value in security-specific trades. In particular, we favored bonds with less exposure to implied volatility and housing turnover. These included seasoned 15-year mortgage-backed securities, super-senior AAA adjustable-rate mortgage floaters, and super-senior AAA collateralized mortgage-backed securities. The Fund held an underweight to the corporate sector as profit growth has been slowing and companies have been starting to re-lever their balance sheets. Finally, the Fund’s market value exposure to government securities decreased based on our constructive view of other high quality sectors at the shorter end of the curve, such as agencies. | |
| We thank you for your investment and look forward to your continued confidence. | |
| Goldman Sachs U.S. Fixed Income Investment Management Team | |
| November 20, 2006 |
12
FUND BASICS
Core Fixed Income Fund
as of October 31, 2006
| PERFORMANCE REVIEW |
| November 1, 2005– | Fund Total Return | Lehman Aggregate | 30-Day | |||||||||||
| October 31, 2006 | (based on NAV)1 | Bond Index2 | Standardized Yield3 | |||||||||||
| Class A | 4.21 | % | 5.19 | % | 4.30 | % | ||||||||
| Class B | 3.42 | 5.19 | 3.76 | |||||||||||
| Class C | 3.52 | 5.19 | 3.76 | |||||||||||
| Institutional | 4.69 | 5.19 | 4.87 | |||||||||||
| Service | 4.06 | 5.19 | 4.38 | |||||||||||
| 1 | The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges. |
| 2 | The Lehman Brothers Aggregate Bond Index represents an unmanaged diversified portfolio of fixed income securities, including U.S. Treasuries, investment-grade corporate bonds, and mortgage-backed and asset-backed securities. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index. |
| 3 | The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is 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. |
| STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS4 |
| For the period ended 9/30/06 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||||||
| Class A | -1.55 | % | 3.78 | % | N/A | 5.51 | % | 5/1/97 | ||||||||||||||
| Class B | -2.81 | 3.55 | N/A | 5.25 | 5/1/97 | |||||||||||||||||
| Class C | 1.28 | 3.97 | N/A | 4.99 | 8/15/97 | |||||||||||||||||
| Institutional | 3.35 | 5.14 | 6.47 | % | 6.31 | 1/5/94 | ||||||||||||||||
| Service | 2.94 | 4.64 | 5.95 | 5.89 | 3/13/96 | |||||||||||||||||
| 4 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares, the assumed contingent deferred sales charge for Class B Shares (5% maximum declining to 0% after six years) and the assumed contingent deferred sales charge for Class C Shares (1% if redeemed within 12 months of purchase). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
| The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
13
FUND BASICS
| SECTOR ALLOCATION5 |
Percentage of Net Assets
| 5 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities. |
| 6 | “Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company. |
14
PORTFOLIO RESULTS
Investment Grade Credit Fund
Dear Shareholder:
This report provides an overview on the performance of the Goldman Sachs Investment Grade Credit Fund during the one-year reporting period that ended October 31, 2006.
Performance Review
| Over the one-year period that ended October 31, 2006, the Fund’s Class A, Institutional and Separate Account Institutional Shares generated cumulative total returns, without sales charges, of 4.84%, 5.35%, and 5.30%, respectively. These returns compare to the 5.36% cumulative total return of the Fund’s benchmark, the Lehman Brothers U.S. Credit Index, over the same time period. | |
| The Fund’s overweight to lower quality credits and underweight to higher quality credits were the primary positive contributors to returns for the 12-month reporting period. Investor risk appetite was strong due to solid corporate earnings and a perceived end to the Federal Reserve Board’s (the “Fed’s”) tightening campaign. Security selection and an overweight to property & casualty bonds also enhanced results, as the industry outperformed the Lehman Brothers U.S. Credit Index for the period. The primary detractor from the Fund’s performance was an underweight to corporate credit relative to that of the benchmark. An underweight to emerging market corporates also detracted from returns, as their spreads tightened to almost record levels during the period. |
Market Review
| The Lehman Brothers U.S. Credit Index returned 5.36% over the trailing twelve-month period ended October 31, 2006, outperforming equal duration Treasuries. Lower quality credits outperformed higher quality credits, with A and BBB rated securities returning 5.36% and 5.59%, respectively. Despite a marked slowdown in the U.S. housing market and an increase in equity shareholder-friendly activity, risk appetite was strong during most of the period. This was due to strong corporate earnings, benign inflation, and the perceived end to the Fed’s raising short-term interest rates. Airlines (+10.3%), consumer services (+9.0%), and tobacco (+8.5%) were the top performing industries, while gaming (-2.5%) was the only industry to post a negative return in the Index for the period. |
Investment Objective
| The Fund seeks a high level total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers U.S. Credit Index. |
15
PORTFOLIO RESULTS
Investment Strategies
| In seeking to meet the Fund’s investment objective, we invest at least 80% of its net assets in investment grade fixed income securities, primarily corporate securities. The Fund may also invest in U.S. government securities, mortgage-backed securities, asset-backed securities, emerging market securities and non-U.S. dollar securities. In addition, to the extent we find them effective instruments to manage the overall duration of the portfolio, the Fund may employ the use of derivatives, including futures, swaps and Eurodollar futures contracts. The Fund also makes use of currency forwards for the purpose of hedging all non-U.S. dollar exposure back to the base U.S. dollar currency. | |
| We believe that using derivatives, including both futures and swaps, in the portfolio has been an effective portfolio management tool. Futures have been efficiently employed to hedge duration (interest rate sensitivity) drift that may occur due to the passage of time, or changing interest rates. In addition, we believe that futures allowed us to optimize security selection by giving us the flexibility to select the most attractive securities for the portfolio, regardless of the securities’ maturity/duration. Finally, futures and swaps were important tools in implementing certain interest rate and spread views. |
Portfolio Composition
| From a credit quality perspective, the Fund held a down-in-quality bias, reflected through its overweight to BBB-rated bonds versus the benchmark. The Fund continued to hold this position on the belief that lower quality credits still have the potential to benefit from balance sheet deleveraging and, in turn, remain less susceptible to equity shareholder-friendly activities (such as stock repurchases and one-time dividend payouts, which adversely impact bond prices). However, we have recently trimmed this position, as valuations are beginning to appear rich. In terms of sector positioning, the Fund had overweights in the insurance and media-cable securities, while holding underweights in consumer products, brokerage, banks, retail, and technology. | |
| We thank you for your investment and look forward to your continued confidence. | |
| Goldman Sachs Fixed Income Investment Management Team | |
| November 20, 2006 |
16
FUND BASICS
Investment Grade Credit Fund
as of October 31, 2006
| PERFORMANCE REVIEW |
| November 1, 2005– | Fund Total Return | Lehman Brothers | 30-Day | |||||||||||
| October 31, 2006 | (based on NAV)1 | U.S. Credit Index2 | Standardized Yield3 | |||||||||||
| Class A | 4.84 | % | 5.36 | % | 4.96 | % | ||||||||
| Institutional | 5.35 | 5.36 | 5.58 | |||||||||||
| Separate Account Institutional | 5.30 | 5.36 | 5.64 | |||||||||||
| 1 | The net asset value (NAV) represents the net assets of the class of the Fund (ex-dividend) divided by the total number of shares of the class outstanding. The Fund’s performance assumes the reinvestment of dividends and other distributions. The Fund’s performance does not reflect the deduction of any applicable sales charges. |
| 2 | The Lehman Brothers U.S. Credit Index is an unmanaged index which is unbundled into pure corporates (industrial, utility, and finance, including both U.S. and Non-U.S. corporations) and non-corporates (sovereign, supranational, foreign agencies, and foreign local governments). The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index. |
| 3 | The 30-Day Standardized Yield of the Fund is calculated by dividing the net investment income per share (as defined by securities industry regulations) earned by the Fund over a 30-day period (ending on the stated month-end date) by the maximum public offering price per share of the Fund on the last day of the period. This number is 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. |
| STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS4 |
| For the period ended 9/30/06 | One Year | Since Inception | Inception Date | |||||||||||
| Class A | -1.44 | % | 2.34 | % | 11/3/03 | |||||||||
| Institutional | 3.57 | 4.46 | 11/3/03 | |||||||||||
| Separate Account Institutional | 3.62 | 4.47 | 11/3/03 | |||||||||||
| 4 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at NAV. These returns reflect a maximum initial sales charge of 4.5% for Class A Shares. Because Institutional and Separate Account Institutional Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
| The returns represent past performance. Past performance does not guarantee future results. The Fund’s investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted above. Please visit our Web site at: www.goldmansachsfunds.com to obtain the most recent month-end returns. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
17
FUND BASICS
| SECTOR ALLOCATION5 |
Percentage of Net Assets
| 5 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term investments represent repurchase agreements. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities. |
| 6 | Please refer to the table below for Top Ten Industry Allocations in the corporate sector. |
| TOP TEN INDUSTRY ALLOCATIONS |
| Percentage of Net Assets | as of 10/31/06 | as of 10/31/05 | ||||||||
| Banks | 21.0 | % | 23.1 | % | ||||||
| Insurance | 14.0 | 10.8 | ||||||||
| REIT | 13.1 | 7.9 | ||||||||
| Financial | 8.6 | 7.3 | ||||||||
| Electric | 8.5 | 5.3 | ||||||||
| Communications | 6.7 | 12.7 | ||||||||
| Media | 4.2 | — | ||||||||
| Natural Gas | 3.3 | 4.1 | ||||||||
| Energy | 2.5 | 1.9 | ||||||||
| Technology | 1.8 | 0.9 | ||||||||
18
GOLDMAN SACHS GOVERNMENT INCOME FUND
Performance Summary
October 31, 2006 (Unaudited)
The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 1, 1996 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 Government/Mortgage Index (“Lehman Gov’t/MBS 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 reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class B, Class C, Institutional and Service Shares will vary from Class A Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover and subscription and redemption cash flows affecting the Fund.
| Government Income Fund’s 10 Year Performance |
Performance of a $10,000 Investment, Distributions Reinvested November 1, 1996 to October 31, 2006.
| Average Annual Total Return through October 31, 2006 | Since Inception | Ten Years | Five Years | One Year | ||||||||||||||
Class A (commenced February 10, 1993) | ||||||||||||||||||
| Excluding sales charges | 5.97% | 5.69% | 3.80% | 4.40% | ||||||||||||||
| Including sales charges | 5.61% | 5.20% | 2.85% | -0.32% | ||||||||||||||
Class B (commenced May 1, 1996) | ||||||||||||||||||
| Excluding contingent deferred sales charges | 5.12% | 4.89% | 3.02% | 3.62% | ||||||||||||||
| Including contingent deferred sales charges | 5.12% | 4.89% | 2.61% | -1.53% | ||||||||||||||
Class C (commenced August 15, 1997) | ||||||||||||||||||
| Excluding contingent deferred sales charges | 4.75% | n/a | 3.03% | 3.63% | ||||||||||||||
| Including contingent deferred sales charges | 4.75% | n/a | 3.03% | 2.59% | ||||||||||||||
Institutional Class (commenced August 15, 1997) | 5.95% | n/a | 4.22% | 4.86% | ||||||||||||||
Service Class (commenced August 15, 1997) | 5.41% | n/a | 3.69% | 4.27% | ||||||||||||||
19
GOLDMAN SACHS GOVERNMENT INCOME FUND
Schedule of Investments
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – 59.2% | ||||||||||||||||
| Adjustable Rate FHLMC(a) – 2.1% | ||||||||||||||||
| $ | 8,229,530 | 3.496% | 09/01/33 | $ | 7,908,438 | |||||||||||
| 5,702,418 | 4.583 | 08/01/35 | 5,574,518 | |||||||||||||
| 13,482,956 | ||||||||||||||||
| Adjustable Rate FNMA(a) – 4.4% | ||||||||||||||||
| 17,160,167 | 5.370 | 11/25/28 | 17,171,291 | |||||||||||||
| 242,634 | 4.486 | 03/01/33 | 243,873 | |||||||||||||
| 4,283,408 | 3.851 | 10/01/33 | 4,249,605 | |||||||||||||
| 6,476,914 | 4.330 | 01/01/35 | 6,308,326 | |||||||||||||
| 27,973,095 | ||||||||||||||||
| Adjustable Rate GNMA(a) – 2.3% | ||||||||||||||||
| 251,798 | 5.375 | 06/20/23 | 253,107 | |||||||||||||
| 121,495 | 4.750 | 07/20/23 | 122,392 | |||||||||||||
| 125,254 | 4.750 | 08/20/23 | 126,182 | |||||||||||||
| 317,859 | 4.750 | 09/20/23 | 320,213 | |||||||||||||
| 93,097 | 5.375 | 03/20/24 | 93,648 | |||||||||||||
| 860,732 | 5.375 | 04/20/24 | 864,721 | |||||||||||||
| 112,847 | 5.375 | 05/20/24 | 113,426 | |||||||||||||
| 855,164 | 5.375 | 06/20/24 | 860,650 | |||||||||||||
| 459,159 | 4.750 | 07/20/24 | 463,471 | |||||||||||||
| 657,685 | 4.750 | 08/20/24 | 664,293 | |||||||||||||
| 219,949 | 4.750 | 09/20/24 | 222,025 | |||||||||||||
| 240,159 | 5.125 | 11/20/24 | 242,364 | |||||||||||||
| 210,139 | 5.125 | 12/20/24 | 211,998 | |||||||||||||
| 175,871 | 5.375 | 01/20/25 | 177,328 | |||||||||||||
| 92,347 | �� | 5.375 | 02/20/25 | 93,117 | ||||||||||||
| 307,073 | 5.375 | 05/20/25 | 309,404 | |||||||||||||
| 197,888 | 4.750 | 07/20/25 | 200,051 | |||||||||||||
| 136,715 | 5.375 | 02/20/26 | 137,604 | |||||||||||||
| 5,755 | 4.750 | 07/20/26 | 5,810 | |||||||||||||
| 360,737 | 5.375 | 01/20/27 | 363,818 | |||||||||||||
| 126,373 | 5.375 | 02/20/27 | 127,222 | |||||||||||||
| 1,039,761 | 5.375 | 04/20/27 | 1,046,180 | |||||||||||||
| 114,205 | 5.375 | 05/20/27 | 114,806 | |||||||||||||
| 131,934 | 5.375 | 06/20/27 | 132,618 | |||||||||||||
| 35,583 | 5.125 | 11/20/27 | 35,839 | |||||||||||||
| 153,783 | 5.125 | 12/20/27 | 154,883 | |||||||||||||
| 309,731 | 5.375 | 01/20/28 | 311,976 | |||||||||||||
| 116,123 | 5.250 | 02/20/28 | 116,400 | |||||||||||||
| 116,048 | 5.375 | 03/20/28 | 116,850 | |||||||||||||
| 853,776 | 4.500 | 07/20/29 | 855,645 | |||||||||||||
| 318,126 | 4.500 | 08/20/29 | 318,824 | |||||||||||||
| 137,355 | 4.500 | 09/20/29 | 137,710 | |||||||||||||
| 373,869 | 5.125 | 10/20/29 | 377,169 | |||||||||||||
| 467,053 | 5.125 | 11/20/29 | 471,355 | |||||||||||||
| 128,195 | 5.125 | 12/20/29 | 129,337 | |||||||||||||
| 178,577 | 5.250 | 01/20/30 | 179,241 | |||||||||||||
| 89,016 | 5.250 | 02/20/30 | 89,346 | |||||||||||||
| 317,139 | 5.250 | 03/20/30 | 318,299 | |||||||||||||
| 578,142 | 5.375 | 04/20/30 | 582,543 | |||||||||||||
| 1,473,227 | 5.375 | 05/20/30 | 1,485,152 | |||||||||||||
| 131,968 | 5.375 | 06/20/30 | 132,803 | |||||||||||||
| 1,102,617 | 4.500 | 07/20/30 | 1,108,990 | |||||||||||||
| 149,600 | 4.500 | 09/20/30 | 150,478 | |||||||||||||
| 328,440 | 4.875 | 10/20/30 | 328,896 | |||||||||||||
| 14,668,184 | ||||||||||||||||
| Adjustable Rate Non-Agency(a) – 7.3% | ||||||||||||||||
| Bear Stearns Adjustable Rate Mortgage Trust Series 2003-5, Class 1A1 | ||||||||||||||||
| 116,362 | 5.969 | 08/25/33 | 117,928 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-59, Class 1A1 | ||||||||||||||||
| 4,881,808 | 5.660 | 11/20/35 | 4,897,938 | |||||||||||||
| Countrywide Home Loans Series 2003-37, Class 1A1 | ||||||||||||||||
| 148,854 | 5.875 | 08/25/33 | 148,610 | |||||||||||||
| Countrywide Securities Corp. Series 2006-OA19, Class A1 | ||||||||||||||||
| 6,500,000 | 5.525 | 12/25/46 | 6,500,000 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-AR9, Class 2A2 | ||||||||||||||||
| 505,224 | 5.100 | 03/25/33 | 502,917 | |||||||||||||
| Harborview Mortgage Loan Trust Series 2005-10, Class 2A1A | ||||||||||||||||
| 1,547,678 | 5.630 | 11/19/35 | 1,552,407 | |||||||||||||
| Harborview Mortgage Loan Trust Series 2005-16, Class 2A1A | ||||||||||||||||
| 1,860,976 | 5.560 | 01/19/36 | 1,866,055 | |||||||||||||
| Impac CMB Trust Series 2004-8, Class 1A | ||||||||||||||||
| 1,299,583 | 5.680 | 10/25/34 | 1,307,083 | |||||||||||||
| Master Adjustable Rate Mortgages Trust Series 2004-9, Class 2A1 | ||||||||||||||||
| 457,573 | 5.700 | 11/25/34 | 459,938 | |||||||||||||
| MLCC Mortgage Investors, Inc. Series 2004-E, Class A2B | ||||||||||||||||
| 3,115,908 | 5.780 | 11/25/29 | 3,117,854 | |||||||||||||
| Sequoia Mortgage Trust Series 2004-09, Class A2 | ||||||||||||||||
| 1,975,951 | 5.799 | 10/20/34 | 1,981,681 | |||||||||||||
| Structured Adjustable Rate Mortgage Loan Series 2004-1, Class 3A3 | ||||||||||||||||
| 240,556 | 4.655 | 02/25/34 | 244,594 | |||||||||||||
| Structured Adjustable Rate Mortgage Loan Series 2004-5, Class 1A | ||||||||||||||||
| 2,189,423 | 4.47 | 05/25/34 | 2,189,461 | |||||||||||||
| Structured Asset Securities Corp. Series 2003-24A, Class 1A3 | ||||||||||||||||
| 1,182,147 | 5.000 | 07/25/33 | 1,185,824 | |||||||||||||
| Structured Asset Securities Corp. Series 2003-34A, Class 3A3 | ||||||||||||||||
| 1,832,474 | 4.700 | 11/25/33 | 1,825,952 | |||||||||||||
| Washington Mutual Series 2005-AR11, Class A1A | ||||||||||||||||
| 4,454,170 | 5.640 | 08/25/45 | 4,467,390 | |||||||||||||
| Washington Mutual Series 2006-AR13, Class 1A | ||||||||||||||||
| 4,370,814 | 5.544 | 10/25/46 | 4,369,278 | |||||||||||||
| Wells Fargo Mortgage Backed Securities Trust Series 2005-AR16, Class 1A1 | ||||||||||||||||
| 5,923,106 | 4.977 | 10/25/35 | 5,929,933 | |||||||||||||
| Wells Fargo Mortgage Backed Securities Trust Series 2006-AR10, Class 5A3 | ||||||||||||||||
| 3,809,179 | 5.606 | 07/25/36 | 3,800,145 | |||||||||||||
| 46,464,988 | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
20
GOLDMAN SACHS GOVERNMENT INCOME FUND
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| CMBS – 3.4% | ||||||||||||||||
| Interest Only(a)(b) – 0.4% | ||||||||||||||||
| Bear Stearns Commercial Mortgage Securities, Inc. Series 2003-T10, Class X2(c) | ||||||||||||||||
| $ | 19,672,041 | 1.42% | 03/13/40 | $ | 781,094 | |||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-C3, Class ASP(c) | ||||||||||||||||
| 12,736,999 | 1.765 | 05/15/38 | 564,906 | |||||||||||||
| JP Morgan Chase Commercial Mortgage Securities Corp. Series 2004-C1, Class X2(c) | ||||||||||||||||
| 21,988,469 | 1.17 | 01/15/38 | 680,616 | |||||||||||||
| Prudential Commercial Mortgage Trust Series 2003-PWR1, Class X2(c) | ||||||||||||||||
| 23,010,567 | 1.66 | 02/11/36 | 1,057,055 | |||||||||||||
| 3,083,671 | ||||||||||||||||
| Sequential Fixed Rate – 3.0% | ||||||||||||||||
| CS First Boston Mortgage Securities Corp. Series 1997-C2, Class A3 | ||||||||||||||||
| 561,654 | 6.550 | 01/17/35 | 566,773 | |||||||||||||
| First Union National Bank Commercial Mortgage Trust Series 2000-C2, Class A2 | ||||||||||||||||
| 9,500,000 | 7.202 | 10/15/32 | 10,104,993 | |||||||||||||
| GMAC Commercial Mortgage Securities, Inc. Series 2002-C1, Class A2 | ||||||||||||||||
| 8,000,000 | 6.278 | 11/15/39 | 8,356,382 | |||||||||||||
| 19,028,148 | ||||||||||||||||
| TOTAL CMBS | 22,111,819 | |||||||||||||||
| CMO – 6.4% | ||||||||||||||||
| Interest Only(b) – 0.1% | ||||||||||||||||
| Countrywide Home Loan Trust Series 2003-42, Class 2X1(a) | ||||||||||||||||
| 961,853 | 0.368 | 10/25/33 | 4,701 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-11, Class 1A2 | ||||||||||||||||
| 155,952 | 5.500 | 06/25/33 | 9,912 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-AR18, Class 2X(a) | ||||||||||||||||
| 293,502 | 0.782 | 07/25/33 | 1,931 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-AR20, Class 2X(a) | ||||||||||||||||
| 331,681 | 0.605 | 08/25/33 | 2,120 | |||||||||||||
| FNMA Series 151, Class 2 | ||||||||||||||||
| 29,444 | 9.500 | 07/25/22 | 7,876 | |||||||||||||
| FNMA Series 2004-47, Class EI(a) | ||||||||||||||||
| 3,805,708 | 0.000 | 06/25/34 | 153,774 | |||||||||||||
| FNMA Series 2004-62, Class DI(a) | ||||||||||||||||
| 1,675,304 | 0.000 | 07/25/33 | 68,578 | |||||||||||||
| FNMA Series 2004-71, Class DI(a) | ||||||||||||||||
| 2,828,514 | 0.000 | 04/25/34 | 73,841 | |||||||||||||
| Master Adjustable Rate Mortgages Trust Series 2003-2, Class 3AX(a) | ||||||||||||||||
| 105,047 | 0.679 | 08/25/33 | 890 | |||||||||||||
| Master Adjustable Rate Mortgages Trust Series 2003-2, Class 4AX(a) | ||||||||||||||||
| 37,305 | 1.158 | 07/25/33 | 660 | |||||||||||||
| Washington Mutual Series 2003-AR04, Class X1(a) | ||||||||||||||||
| 2,406,096 | 1.181 | 01/25/08 | 26,923 | |||||||||||||
| Washington Mutual Series 2003-AR07, Class X(a) | ||||||||||||||||
| 1,361,986 | 0.940 | 06/25/08 | 14,424 | |||||||||||||
| Washington Mutual Series 2003-AR12, Class X(a) | ||||||||||||||||
| 5,991,240 | 0.488 | 02/25/34 | 41,955 | |||||||||||||
| 407,585 | ||||||||||||||||
| Inverse Floaters(a) – 0.1% | ||||||||||||||||
| GNMA Series 2001-48, Class SA | ||||||||||||||||
| 98,564 | 9.198 | 10/16/31 | 111,828 | |||||||||||||
| GNMA Series 2001-51, Class SA | ||||||||||||||||
| 78,557 | 9.447 | 10/16/31 | 90,571 | |||||||||||||
| GNMA Series 2001-51, Class SB | ||||||||||||||||
| 98,581 | 9.198 | 10/16/31 | 111,124 | |||||||||||||
| GNMA Series 2001-59, Class SA | ||||||||||||||||
| 84,624 | 9.035 | 11/16/24 | 96,033 | |||||||||||||
| GNMA Series 2002-13, Class SB | ||||||||||||||||
| 336,391 | 12.740 | 02/16/32 | 420,300 | |||||||||||||
| 829,856 | ||||||||||||||||
| PAC – 0.3% | ||||||||||||||||
| FHLMC Series 2590, Class NV | ||||||||||||||||
| 2,000,000 | 5.000 | 03/15/18 | 1,973,820 | |||||||||||||
| Principal Only(d) – 1.2% | ||||||||||||||||
| FHLMC Series 235, Class PO | ||||||||||||||||
| 4,778,298 | 0.000 | 02/01/36 | 3,544,864 | |||||||||||||
| FNMA REMIC Trust Series G-35, Class N | ||||||||||||||||
| 24,871 | 0.000 | 10/25/21 | 20,136 | |||||||||||||
| FNMA Series 363, Class 1 | ||||||||||||||||
| 5,144,881 | 0.000 | 11/01/35 | 3,854,501 | |||||||||||||
| 7,419,501 | ||||||||||||||||
| Regular Floater CMO(a) – 0.0% | ||||||||||||||||
| FHLMC Series 1760, Class ZB | ||||||||||||||||
| 284,527 | 4.110 | 05/15/24 | 276,506 | |||||||||||||
| Sequential Fixed Rate – 4.7% | ||||||||||||||||
| Banc of America Commercial Mortgage, Inc. Series 2005-6, Class A4 | ||||||||||||||||
| 10,000,000 | 5.354 | 09/10/47 | 9,967,196 | |||||||||||||
| Citigroup/Deutsche Bank Commercial Mortgage Trust(a) | ||||||||||||||||
| 10,000,000 | 5.226 | 07/15/44 | 10,007,509 | |||||||||||||
| FHLMC Series 2329, Class ZA | ||||||||||||||||
| 5,512,564 | 6.500 | 06/15/31 | 5,684,368 | |||||||||||||
| FNMA REMIC Trust Series 1993-78, Class H | ||||||||||||||||
| 34,802 | 6.500 | 06/25/08 | 34,905 | |||||||||||||
| FNMA REMIC Trust Series 1994-42, Class ZQ | ||||||||||||||||
| 3,241,601 | 7.000 | 04/25/24 | 3,359,960 | |||||||||||||
| FNMA Series 2001-53, Class GH | ||||||||||||||||
| 801,083 | 8.000 | 09/25/16 | 845,327 | |||||||||||||
| 29,899,265 | ||||||||||||||||
| TOTAL CMO | 40,806,533 | |||||||||||||||
The accompanying notes are an integral part of these financial statements.
21
GOLDMAN SACHS GOVERNMENT INCOME FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| FHLMC – 13.0% | ||||||||||||||||
| $ | 1,967,808 | 5.500% | 12/01/08 | $ | 1,963,960 | |||||||||||
| 156,164 | 7.000 | 06/01/09 | 157,929 | |||||||||||||
| 1,335,342 | 6.500 | 12/01/13 | 1,362,409 | |||||||||||||
| 35,195 | 6.500 | 02/01/14 | 35,908 | |||||||||||||
| 5,032,578 | 7.500 | 11/01/14 | 5,247,888 | |||||||||||||
| 22,294 | 7.000 | 02/01/15 | 22,881 | |||||||||||||
| 2,362,233 | 5.500 | 07/01/15 | 2,372,355 | |||||||||||||
| 232,488 | 8.000 | 07/01/15 | 244,985 | |||||||||||||
| 35,246 | 7.000 | 01/01/16 | 36,153 | |||||||||||||
| 88,269 | 7.000 | 02/01/16 | 90,540 | |||||||||||||
| 672,913 | 4.500 | 05/01/18 | 651,540 | |||||||||||||
| 574,287 | 5.500 | 05/01/18 | 575,892 | |||||||||||||
| 158,999 | 4.500 | 06/01/18 | 153,960 | |||||||||||||
| 3,099,820 | 5.500 | 06/01/18 | 3,108,487 | |||||||||||||
| 647,166 | 4.500 | 09/01/18 | 626,655 | |||||||||||||
| 470,504 | 4.500 | 10/01/18 | 455,582 | |||||||||||||
| 484,979 | 4.500 | 11/01/18 | 469,593 | |||||||||||||
| 12,187,542 | 4.500 | 12/01/18 | 11,801,285 | |||||||||||||
| 2,475,156 | 5.000 | 12/01/18 | 2,442,130 | |||||||||||||
| 176,528 | 4.500 | 01/01/19 | 170,933 | |||||||||||||
| 350,732 | 4.500 | 03/01/19 | 339,580 | |||||||||||||
| 14,342,903 | 4.000 | 06/01/19 | 13,582,048 | |||||||||||||
| 8,796,067 | 4.500 | 06/01/19 | 8,517,296 | |||||||||||||
| 707,572 | 5.000 | 06/01/19 | 697,355 | |||||||||||||
| 7,097,215 | 5.000 | 11/01/19 | 7,002,511 | |||||||||||||
| 974,329 | 4.500 | 02/01/20 | 943,450 | |||||||||||||
| 30,769 | 6.500 | 08/01/22 | 31,437 | |||||||||||||
| 1,836,691 | 4.500 | 10/01/23 | 1,754,526 | |||||||||||||
| 7,134,567 | 5.500 | 11/01/23 | 7,125,840 | |||||||||||||
| 22,961 | 7.500 | 03/01/27 | 23,762 | |||||||||||||
| 1,188,731 | 6.500 | 07/01/28 | 1,211,671 | |||||||||||||
| 6,405,077 | 6.500 | 12/01/29 | 6,573,738 | |||||||||||||
| 19,358 | 8.000 | 07/01/30 | 20,247 | |||||||||||||
| 58,551 | 7.500 | 12/01/30 | 60,591 | |||||||||||||
| 6,163 | 7.500 | 01/01/31 | 6,377 | |||||||||||||
| 491,003 | 7.000 | 04/01/31 | 508,536 | |||||||||||||
| 295,530 | 6.500 | 07/01/31 | 303,312 | |||||||||||||
| 1,985,869 | 6.000 | 05/01/33 | 2,003,965 | |||||||||||||
| 82,697,307 | ||||||||||||||||
| FNMA – 20.3% | ||||||||||||||||
| 5,005,721 | 6.255 | 12/01/08 | 5,065,818 | |||||||||||||
| 775,740 | 5.500 | 05/01/09 | 762,265 | |||||||||||||
| 593,730 | 4.500 | 03/01/13 | 581,899 | |||||||||||||
| 266,076 | 4.500 | 05/01/13 | 260,668 | |||||||||||||
| 347,085 | 4.000 | 06/01/13 | 335,812 | |||||||||||||
| 557,518 | 4.500 | 06/01/13 | 546,071 | |||||||||||||
| 463,946 | 4.000 | 07/01/13 | 448,762 | |||||||||||||
| 578,823 | 4.500 | 07/01/13 | 566,814 | |||||||||||||
| 641,395 | 4.000 | 08/01/13 | 620,426 | |||||||||||||
| 273,230 | 4.500 | 08/01/13 | 267,505 | |||||||||||||
| 943,590 | 4.000 | 09/01/13 | 912,525 | |||||||||||||
| 1,140,067 | 4.500 | 09/01/13 | 1,115,970 | |||||||||||||
| 1,909,758 | 4.000 | 10/01/13 | 1,846,390 | |||||||||||||
| 933,294 | 4.000 | 04/01/14 | 900,592 | |||||||||||||
| 4,499,828 | 5.500 | 09/01/14 | 4,519,017 | |||||||||||||
| 144,503 | 7.000 | 03/01/15 | 147,584 | |||||||||||||
| 46,026 | 8.000 | 01/01/16 | 48,294 | |||||||||||||
| 759,971 | 5.000 | 11/01/17 | 750,369 | |||||||||||||
| 25,299,851 | 5.000 | 12/01/17 | 24,980,229 | |||||||||||||
| 4,607,194 | 5.000 | 01/01/18 | 4,548,989 | |||||||||||||
| 5,795,184 | 5.000 | 02/01/18 | 5,721,830 | |||||||||||||
| 5,099,173 | 5.000 | 03/01/18 | 5,033,502 | |||||||||||||
| 684,167 | 4.500 | 04/01/18 | 663,319 | |||||||||||||
| 1,851,419 | 5.000 | 04/01/18 | 1,827,575 | |||||||||||||
| 3,113,190 | 4.500 | 05/01/18 | 3,018,325 | |||||||||||||
| 674,598 | 5.000 | 05/01/18 | 665,911 | |||||||||||||
| 5,721,833 | 4.500 | 06/01/18 | 5,547,480 | |||||||||||||
| 3,050,756 | 5.000 | 06/01/18 | 3,011,510 | |||||||||||||
| 445,628 | 4.500 | 07/01/18 | 432,050 | |||||||||||||
| 146,811 | 5.000 | 07/01/18 | 144,921 | |||||||||||||
| 12,224,762 | 4.000 | 08/01/18 | 11,611,784 | |||||||||||||
| 531,560 | 4.500 | 08/01/18 | 515,362 | |||||||||||||
| 126,679 | 5.000 | 08/01/18 | 125,048 | |||||||||||||
| 890,326 | 4.500 | 09/01/18 | 863,196 | |||||||||||||
| 1,762,087 | 5.000 | 09/01/18 | 1,739,946 | |||||||||||||
| 9,070,226 | 5.000 | 10/01/18 | 8,956,254 | |||||||||||||
| 4,303,468 | 5.000 | 11/01/18 | 4,248,045 | |||||||||||||
| 31,503 | 4.500 | 12/01/18 | 30,543 | |||||||||||||
| 1,794,910 | 5.500 | 12/01/18 | 1,801,736 | |||||||||||||
| 3,442,630 | 5.000 | 04/01/19 | 3,398,294 | |||||||||||||
| 1,126,876 | 4.500 | 06/01/19 | 1,091,473 | |||||||||||||
| 3,709,167 | 5.000 | 06/01/19 | 3,661,399 | |||||||||||||
| 6,438,166 | 4.500 | 10/01/23 | 6,118,829 | |||||||||||||
| 57,064 | 6.500 | 10/01/28 | 58,637 | |||||||||||||
| 59,987 | 6.500 | 11/01/28 | 61,637 | |||||||||||||
| 25,129 | 7.500 | 07/01/29 | 25,968 | |||||||||||||
| 1,858 | 7.500 | 08/01/29 | 1,920 | |||||||||||||
| 12,266 | 7.500 | 10/01/29 | 12,675 | |||||||||||||
| 69 | 7.500 | 01/01/30 | 71 | |||||||||||||
| 3,787 | 7.500 | 02/01/30 | 3,913 | |||||||||||||
| 777,212 | 7.000 | 07/01/31 | 799,205 | |||||||||||||
| 14,789 | 6.500 | 01/01/34 | 15,155 | |||||||||||||
| 5,000,000 | 7.000 | TBA-15yr | (e) | 5,140,625 | ||||||||||||
| 4,000,000 | 7.500 | TBA-15yr | (e) | 4,146,248 | ||||||||||||
| 129,720,385 | ||||||||||||||||
| TOTAL MORTGAGE-BACKED OBLIGATIONS | ||||||||||||||||
| (Cost $379,463,341) | $ | 377,925,267 | ||||||||||||||
Agency Debentures – 18.4% | ||||||||||||||||
| FFCB | ||||||||||||||||
| $ | 6,838,000 | 4.100% | 07/21/08 | $ | 6,745,325 | |||||||||||
| 10,000,000 | 4.200 | 02/23/09 | 9,854,180 | |||||||||||||
| 11,000,000 | 4.450 | 06/11/09 | 10,892,200 | |||||||||||||
| 7,000,000 | 7.375 | 02/09/10 | 7,539,112 | |||||||||||||
| 9,000,000 | 4.750 | 11/06/12 | 8,925,318 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
22
GOLDMAN SACHS GOVERNMENT INCOME FUND
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Agency Debentures – (continued) | ||||||||||||||||
| FHLB | ||||||||||||||||
| $ | 1,000,000 | 5.680 | %(f) | 12/03/07 | $ | 1,005,963 | ||||||||||
| 15,560,000 | 4.100 | 06/13/08 | 15,363,197 | |||||||||||||
| 3,900,000 | 3.500 | 02/13/09 | 3,781,017 | |||||||||||||
| 1,500,000 | 7.625 | 05/14/10 | 1,631,130 | |||||||||||||
| 8,400,000 | 4.500 | 09/14/12 | 8,215,648 | |||||||||||||
| FHLMC | ||||||||||||||||
| 10,390,000 | 4.250 | 06/23/08 | 10,279,409 | |||||||||||||
| 11,000,000 | 4.480 | 09/19/08 | 10,906,265 | |||||||||||||
| FNMA | ||||||||||||||||
| 5,000,000 | 6.625 | 09/15/09 | 5,233,724 | |||||||||||||
| 1,200,000 | 6.000 | 05/15/11 | 1,254,101 | |||||||||||||
| New Valley Generation II | ||||||||||||||||
| 3,416,362 | 5.572 | 05/01/20 | 3,444,368 | |||||||||||||
| Small Business Administration | ||||||||||||||||
| 574,939 | 6.700 | 12/01/16 | 592,681 | |||||||||||||
| 433,271 | 7.150 | 03/01/17 | 450,725 | |||||||||||||
| 329,548 | 7.500 | 04/01/17 | 345,040 | |||||||||||||
| 195,788 | 7.300 | 05/01/17 | 203,984 | |||||||||||||
| 140,645 | 6.800 | 08/01/17 | 145,564 | |||||||||||||
| 358,500 | 6.300 | 05/01/18 | 368,207 | |||||||||||||
| 356,024 | 6.300 | 06/01/18 | 365,773 | |||||||||||||
| Tennessee Valley Authority | ||||||||||||||||
| 6,000,000 | 4.875 | (f) | 12/15/16 | 5,993,947 | ||||||||||||
| 4,000,000 | 5.375 | 04/01/56 | 4,123,760 | |||||||||||||
| TOTAL AGENCY DEBENTURES | ||||||||||||||||
| (Cost $119,153,443) | $ | 117,660,638 | ||||||||||||||
Asset-Backed Securities – 2.2% | ||||||||||||||||
| Home Equity(a) – 2.1% | ||||||||||||||||
| Carrington Mortgage Loan Trust Series 2005-OPT2, Class A1B | ||||||||||||||||
| $ | 1,442,444 | 5.470% | 05/25/35 | $ | 1,442,669 | |||||||||||
| Citigroup Mortgage Loan Trust, Inc. Series 2004-OPT1, Class A2 | ||||||||||||||||
| 1,439,086 | 5.680 | 10/25/34 | 1,439,148 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-I, Class A | ||||||||||||||||
| 1,508,844 | 5.610 | 02/15/34 | 1,513,323 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-Q, Class 2A | ||||||||||||||||
| 1,631,291 | 5.620 | 12/15/33 | 1,635,695 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2005-B, Class 2A | ||||||||||||||||
| 1,759,147 | 5.500 | 05/15/35 | 1,760,796 | |||||||||||||
| Master Asset Backed Securities Trust Series 2005-WMC1, Class A4 | ||||||||||||||||
| 4,563,430 | 5.510 | 03/25/35 | 4,565,269 | |||||||||||||
| Popular Asset Backed Securities Mortgage Pass-Through Trust Series 2004-5, Class AV2 | ||||||||||||||||
| 1,019,791 | 5.660 | 12/25/34 | 1,020,907 | |||||||||||||
| Securitized Asset Backed Receivables LLC Trust Series 2004-OP2, Class A2 | ||||||||||||||||
| 304,878 | 5.670 | 08/25/34 | 305,216 | |||||||||||||
| 13,683,023 | ||||||||||||||||
| Manufactured Housing – 0.1% | ||||||||||||||||
| Mid-State Trust Series 4, Class A | ||||||||||||||||
| 292,402 | 8.330 | 04/01/30 | 301,735 | |||||||||||||
| TOTAL ASSET-BACKED SECURITIES | ||||||||||||||||
| (Cost $13,973,576) | $ | 13,984,758 | ||||||||||||||
U.S. Treasury Obligations – 2.7% | ||||||||||||||||
| United States Treasury Inflation Protected Securities | ||||||||||||||||
| $ | 1,887,187 | 1.875% | 07/15/13 | $ | 1,827,475 | |||||||||||
| 3,089,632 | 2.000 | 01/15/14 | 3,011,304 | |||||||||||||
| 2,812,290 | 2.000 | 07/15/14 | 2,739,345 | |||||||||||||
| 5,031,408 | 1.875 | 07/15/15 | 4,845,497 | |||||||||||||
| 308,178 | 2.000 | 01/15/16 | 299,390 | |||||||||||||
| 4,644,068 | 2.500 | 07/15/16 | 4,710,826 | |||||||||||||
| TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||||
| (Cost $17,533,818) | $ | 17,433,837 | ||||||||||||||
Insured Revenue Bonds – 1.2% | ||||||||||||||||
| New Jersey Economic Development Authority Series A (MBIA) | ||||||||||||||||
| $ | 2,000,000 | 7.425% | 02/15/29 | $ | 2,490,080 | |||||||||||
| Sales Tax Asset Receivable Taxable Series B (FSA) | ||||||||||||||||
| 5,500,000 | 3.600 | 10/15/08 | 5,349,575 | |||||||||||||
| TOTAL INSURED REVENUE BONDS | ||||||||||||||||
| (Cost $7,500,000) | 7,839,655 | |||||||||||||||
| TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT – 83.7% | ||||||||||||||||
| (Cost $537,624,178) | $ | 534,844,155 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
23
GOLDMAN SACHS GOVERNMENT INCOME FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Repurchase Agreement(g) – 17.6% | ||||||||||||||||
| Joint Repurchase Agreement Account II | ||||||||||||||||
| $ | 112,200,000 | 5.316 | % | 11/01/06 | $ | 112,200,000 | ||||||||||
| Maturity Value: $112,216,568 | ||||||||||||||||
| (Cost $112,200,000) | ||||||||||||||||
| TOTAL INVESTMENTS – 101.3% | ||||||||||||||||
| (Cost $649,824,178) | 647,044,155 | |||||||||||||||
| LIABILITIES IN EXCESS OF OTHER | ||||||||||||||||
| ASSETS – (1.3)% | (8,393,301 | ) | ||||||||||||||
| NET ASSETS – 100.0% | $ | 638,650,854 | ||||||||||||||
| The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. |
| (a) | Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006. |
| (b) | Represents security with notional principal amount. The actual effective yield of this security is different than the stated interest rate. |
| (c) | Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $3,083,671, which represents approximately 0.5% of net assets as of October 31, 2006. |
| (d) | Security issued with a zero coupon. Income is recognized through the accretion of discount. |
| (e) | TBA (To Be Announced) securities are purchased on a forward commitment basis with an approximate principal amount and no defined maturity date. The actual principal and maturity date will be determined upon settlement when the specific mortgage pools are assigned. Total market value of TBA securities amounts to $9,286,873 which represents approximately 1.5% of net assets as of October 31, 2006. |
| (f) | Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the final maturity dates. |
| (g) | Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 55. |
| Investment Abbreviations: | ||||||
| CMBS | — | Commercial Mortgage Backed Securities | ||||
| CMO | — | Collateralized Mortgage Obligations | ||||
| FFCB | — | Federal Farm Credit Bank | ||||
| FHLB | — | Federal Home Loan Bank | ||||
| FHLMC | — | Federal Home Loan Mortgage Corp. | ||||
| FNMA | — | Federal National Mortgage Association | ||||
| FSA | — | Insured by Financial Security Assurance Co. | ||||
| GNMA | — | Government National Mortgage Association | ||||
| MBIA | — | Insured by Municipal Bond Investors Assurance | ||||
| PAC | — | Planned Amortization Class | ||||
| REMIC | — | Real Estate Mortgage Investment Conduit | ||||
The accompanying notes are an integral part of these financial statements.
24
GOLDMAN SACHS GOVERNMENT INCOME FUND
| ADDITIONAL INVESTMENT INFORMATION |
FUTURES CONTRACTS — At October 31, 2006, the following futures contacts were open:
| Number of | ||||||||||||||||
| Contracts | Settlement | Market | Unrealized | |||||||||||||
| Type | Long (Short) | Month | Value | Gain (Loss) | ||||||||||||
| Eurodollars | 78 | December 2006 | $ | 18,453,825 | $ | (220,677 | ) | |||||||||
| U.S. Treasury Bonds | 731 | December 2006 | 82,351,719 | 1,544,619 | ||||||||||||
| 2 Year U.S. Treasury Notes | (88 | ) | December 2006 | (17,987,750 | ) | 30,092 | ||||||||||
| 5 Year U.S. Treasury Notes | (555 | ) | December 2006 | (58,587,188 | ) | (118,046 | ) | |||||||||
| 10 Year U.S. Treasury Notes | (724 | ) | December 2006 | (78,350,375 | ) | (752,735 | ) | |||||||||
TOTAL | $ | (54,119,769 | ) | $ | 483,253 | |||||||||||
INTEREST RATE SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:
| Rates Exchanged | ||||||||||||||||||||||||
| Notional | Payments | Payments | Upfront | |||||||||||||||||||||
| Swap | Amount | Termination | received by | made by | Payments made | Unrealized | ||||||||||||||||||
| Counterparty | (000s) | Date | the Fund | the Fund | by the Fund | Gain (Loss) | ||||||||||||||||||
| Bank of America Securities LLC | $ | 20,000 | 12/27/06 | 3.427% | 3 month LIBOR | $ | — | $ | 68,376 | |||||||||||||||
| Bank of America Securities LLC | 30,000 | 04/07/08 | 4.339 | 3 month LIBOR | — | (370,458 | ) | |||||||||||||||||
| Bank of America Securities LLC | 35,000 | 09/02/10 | 4.309 | 3 month LIBOR | — | (929,881 | ) | |||||||||||||||||
| Bank of America Securities LLC | 25,000 | 10/06/10 | 4.702 | 3 month LIBOR | — | (296,180 | ) | |||||||||||||||||
Deutsche Bank Securities(a) | 20,000 | 12/20/11 | 5.600 | 3 month LIBOR | 393,569 | 103,529 | ||||||||||||||||||
Bank of America Securities LLC (a) | 31,000 | 12/20/11 | 5.600 | 3 month LIBOR | 572,997 | 199,263 | ||||||||||||||||||
Deutsche Bank Securities(a) | 54,600 | 12/20/13 | 5.650 | 3 month LIBOR | 1,271,549 | 553,772 | ||||||||||||||||||
J.P. Morgan Securities, Inc.(a) | 28,000 | 12/20/13 | 5.650 | 3 month LIBOR | 527,100 | 408,688 | ||||||||||||||||||
| Bank of America Securities LLC | 30,000 | 12/09/14 | 4.641 | 3 month LIBOR | — | (600,069 | ) | |||||||||||||||||
| Bank of America Securities LLC | 9,000 | 05/26/15 | 4.532 | 3 month LIBOR | — | (272,423 | ) | |||||||||||||||||
| J.P. Morgan Securities, Inc. | 30,000 | 03/07/16 | 3 month LIBOR | 5.183% | — | (121,653 | ) | |||||||||||||||||
J.P. Morgan Securities, Inc.(a) | 22,000 | 12/20/16 | 5.700 | 3 month LIBOR | 571,560 | 390,850 | ||||||||||||||||||
| Bank of America Securities LLC | 43,000 | 11/04/19 | 3 month LIBOR | 4.865 | — | 845,011 | ||||||||||||||||||
| Bank of America Securities LLC | 20,000 | 11/12/19 | 3 month LIBOR | 5.068 | — | (14,427 | ) | |||||||||||||||||
| Bank of America Securities LLC | 13,200 | 04/09/35 | 5.265 | 3 month LIBOR | — | 9,249 | ||||||||||||||||||
TOTAL | $ | 3,336,775 | $ | (26,353 | ) | |||||||||||||||||||
| (a) | Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to October 31, 2006. |
LIBOR — London Interbank Offered Rate
The accompanying notes are an integral part of these financial statements.
25
GOLDMAN SACHS U.S. MORTGAGES FUND
Performance Summary
October 31, 2006 (Unaudited)
The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 3, 2003 (commencement of operations) in the Separate Account Institutional Shares of the Goldman Sachs U.S. Mortgages Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers Securitized Index (the “Lehman Securitized 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 reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A and Institutional Shares will vary from Separate Account Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/ industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover and subscription and redemption cash flows affecting the Fund.
| U.S. Mortgages Fund’s Lifetime Performance |
Performance of a $10,000 Investment, Distributions Reinvested November, 3, 2003 to October 31, 2006.
| Average Annual Total Return through October 31, 2006 | Since Inception | One Year | ||||||||
Class A (commenced November 3, 2003) | ||||||||||
| Excluding sales charges | 3.92% | 5.21% | ||||||||
| Including sales charges | 0.50% | 2.34% | ||||||||
Institutional Class (commenced November 3, 2003) | 4.36% | 5.56% | ||||||||
Separate Account Institutional (commenced November 3, 2003) | 4.42% | 5.73% | ||||||||
26
GOLDMAN SACHS U.S. MORTGAGES FUND
Schedule of Investments
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – 104.2% | ||||||||||||||||
| Adjustable Rate FHLMC(a) – 0.2% | ||||||||||||||||
| $ | 984,932 | 4.263 | % | 04/01/33 | $ | 971,621 | ||||||||||
| Adjustable Rate FNMA(a) – 3.9% | ||||||||||||||||
| 40,431 | 5.134 | 07/01/22 | 40,764 | |||||||||||||
| 57,669 | 5.427 | 07/01/27 | 57,962 | |||||||||||||
| 108,870 | 5.427 | 11/01/27 | 109,422 | |||||||||||||
| 18,135 | 5.427 | 01/01/31 | 18,276 | |||||||||||||
| 22,800 | 5.427 | 06/01/32 | 23,114 | |||||||||||||
| 42,598 | 5.134 | 08/01/32 | 42,848 | |||||||||||||
| 4,156,888 | 4.482 | 05/01/33 | 4,101,509 | |||||||||||||
| 115,143 | 5.134 | 05/01/33 | 115,660 | |||||||||||||
| 802,181 | 4.847 | 06/01/33 | 803,057 | |||||||||||||
| 2,570,045 | 3.851 | 10/01/33 | 2,549,763 | |||||||||||||
| 943,572 | 4.389 | 12/01/33 | 934,127 | |||||||||||||
| 1,721,267 | 4.602 | 08/01/34 | 1,694,526 | |||||||||||||
| 6,017,852 | 4.572 | 02/01/35 | 5,918,202 | |||||||||||||
| 51,093 | 5.427 | 11/01/35 | 51,461 | |||||||||||||
| 233,325 | 5.427 | 12/01/37 | 235,030 | |||||||||||||
| 101,182 | 5.427 | 01/01/38 | 101,925 | |||||||||||||
| 78,920 | 5.427 | 11/01/40 | 79,506 | |||||||||||||
| 16,877,152 | ||||||||||||||||
| Adjustable Rate GNMA(a) – 1.7% | ||||||||||||||||
| 108,731 | 5.375 | 06/20/23 | 109,296 | |||||||||||||
| 53,998 | 4.750 | 07/20/23 | 54,396 | |||||||||||||
| 55,669 | 4.750 | 08/20/23 | 56,081 | |||||||||||||
| 141,271 | 4.750 | 09/20/23 | 142,317 | |||||||||||||
| 40,201 | 5.375 | 03/20/24 | 40,439 | |||||||||||||
| 371,679 | 5.375 | 04/20/24 | 373,403 | |||||||||||||
| 48,730 | 5.375 | 05/20/24 | 48,980 | |||||||||||||
| 369,276 | 5.375 | 06/20/24 | 371,644 | |||||||||||||
| 204,071 | 4.750 | 07/20/24 | 205,987 | |||||||||||||
| 292,305 | 4.750 | 08/20/24 | 295,242 | |||||||||||||
| 97,755 | 4.750 | 09/20/24 | 98,678 | |||||||||||||
| 103,705 | 5.125 | 11/20/24 | 104,657 | |||||||||||||
| 90,742 | 5.125 | 12/20/24 | 91,545 | |||||||||||||
| 75,944 | 5.375 | 01/20/25 | 76,573 | |||||||||||||
| 39,877 | 5.375 | 02/20/25 | 40,209 | |||||||||||||
| 132,600 | 5.375 | 05/20/25 | 133,606 | |||||||||||||
| 87,950 | 4.750 | 07/20/25 | 88,912 | |||||||||||||
| 59,036 | 5.375 | 02/20/26 | 59,420 | |||||||||||||
| 2,558 | 4.750 | 07/20/26 | 2,582 | |||||||||||||
| 155,772 | 5.375 | 01/20/27 | 157,103 | |||||||||||||
| 54,570 | 5.375 | 02/20/27 | 54,937 | |||||||||||||
| 448,987 | 5.375 | 04/20/27 | 451,759 | |||||||||||||
| 49,316 | 5.375 | 05/20/27 | 49,575 | |||||||||||||
| 56,972 | 5.375 | 06/20/27 | 57,267 | |||||||||||||
| 15,015 | 5.125 | 11/20/27 | 15,122 | |||||||||||||
| 66,406 | 5.125 | 12/20/27 | 66,881 | |||||||||||||
| 133,748 | 5.375 | 01/20/28 | 134,717 | |||||||||||||
| 51,610 | 5.250 | 02/20/28 | 51,733 | |||||||||||||
| 50,112 | 5.375 | 03/20/28 | 50,458 | |||||||||||||
| 379,456 | 4.500 | 07/20/29 | 380,287 | |||||||||||||
| 141,389 | 4.500 | 08/20/29 | 141,700 | |||||||||||||
| 61,047 | 4.500 | 09/20/29 | 61,204 | |||||||||||||
| 161,443 | 5.125 | 10/20/29 | 162,869 | |||||||||||||
| 201,682 | 5.125 | 11/20/29 | 203,540 | |||||||||||||
| 55,357 | 5.125 | 12/20/29 | 55,850 | |||||||||||||
| 79,367 | 5.250 | 01/20/30 | 79,663 | |||||||||||||
| 39,563 | 5.250 | �� | 02/20/30 | 39,709 | ||||||||||||
| 140,951 | 5.250 | 03/20/30 | 141,466 | |||||||||||||
| 249,653 | 5.375 | 04/20/30 | 251,552 | |||||||||||||
| 636,167 | 5.375 | 05/20/30 | 641,317 | |||||||||||||
| 56,986 | 5.375 | 06/20/30 | 57,347 | |||||||||||||
| 490,052 | 4.500 | 07/20/30 | 492,884 | |||||||||||||
| 66,489 | 4.500 | 09/20/30 | 66,879 | |||||||||||||
| 141,826 | 4.875 | 10/20/30 | 142,023 | |||||||||||||
| 671,049 | 4.500 | 12/20/34 | 668,698 | |||||||||||||
| 7,070,507 | ||||||||||||||||
| Adjustable Rate Non-Agency(a) – 18.5% | ||||||||||||||||
| American Home Mortgage Investment Trust Series 2004-3, Class 1A | ||||||||||||||||
| 166,911 | 5.690 | 10/25/34 | 167,272 | |||||||||||||
| Bear Stearns Alt-A Trust Series 2004-3, Class A1 | ||||||||||||||||
| 230,880 | 5.640 | 04/25/34 | 231,043 | |||||||||||||
| Bear Stearns Mortgage Funding Trust Series 2006-AR2, Class 1A1 | ||||||||||||||||
| 4,494,111 | 5.520 | 09/25/36 | 4,494,111 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-38, Class A3 | ||||||||||||||||
| 3,266,021 | 5.670 | 09/25/35 | 3,278,566 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-51, Class 1A1 | ||||||||||||||||
| 2,310,424 | 5.640 | 11/20/35 | 2,320,973 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-59, Class 1A1 | ||||||||||||||||
| 2,219,004 | 5.660 | 11/20/35 | 2,226,336 | |||||||||||||
| Countrywide Securities Corp. Series 2006-OA19, Class A1 | ||||||||||||||||
| 4,250,000 | 5.525 | 12/25/46 | 4,250,000 | |||||||||||||
| Harborside Mortgage Loan Trust Capital Series 2006-12, Class 2A2A | ||||||||||||||||
| 5,000,000 | 5.500 | 12/19/45 | 5,000,000 | |||||||||||||
| Harborview Mortgage Loan Trust Series 2005-15, Class 2A11 | ||||||||||||||||
| 2,071,192 | 5.590 | 10/20/45 | 2,077,280 | |||||||||||||
| Harborview Mortgage Loan Trust Series 2005-16, Class 2A1A | ||||||||||||||||
| 1,240,651 | 5.560 | 01/19/36 | 1,244,037 | |||||||||||||
| Impac CMB Trust Series 2004-6, Class 1A2 | ||||||||||||||||
| 878,335 | 5.710 | 10/25/34 | 879,887 | |||||||||||||
| Impac CMB Trust Series 2004-8, Class 1A | ||||||||||||||||
| 487,344 | 5.680 | 10/25/34 | 490,156 | |||||||||||||
| Impac CMB Trust Series 2005-6, Class 1A1 | ||||||||||||||||
| 3,624,215 | 5.570 | 10/25/35 | 3,626,820 | |||||||||||||
| Impac Secured Assets Corp. Series 2004-3, Class 1A4 | ||||||||||||||||
| 387,409 | 5.720 | 11/25/34 | 388,418 | |||||||||||||
| Impac Secured Assets Corp. Series 2005-2, Class A1W | ||||||||||||||||
| 4,170,415 | 5.570 | 03/25/36 | 4,175,546 | |||||||||||||
| Lehman XS Trust Series 2005-5N, Class 3A1A | ||||||||||||||||
| 2,732,411 | 5.620 | 11/25/35 | 2,734,745 | |||||||||||||
| Lehman XS Trust Series 2006-2N, Class 1A1 | ||||||||||||||||
| 3,455,355 | 5.580 | 02/25/46 | 3,462,019 | |||||||||||||
| Mortgage IT Trust Series 2005-5, Class A1 | ||||||||||||||||
| 1,726,502 | 5.590 | 12/25/35 | 1,728,223 | |||||||||||||
| Sequoia Mortgage Trust Series 2004-09, Class A2 | ||||||||||||||||
| 1,215,970 | 5.799 | 10/20/34 | 1,219,496 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
27
GOLDMAN SACHS U.S. MORTGAGES FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| Adjustable Rate Non-Agency(a) – (continued) | ||||||||||||||||
| Structured Adjustable Rate Mortgage Loan Series 2004-6, Class 3A2 | ||||||||||||||||
| $ | 1,529,398 | 4.725 | % | 06/25/34 | $ | 1,519,250 | ||||||||||
| Structured Adjustable Rate Mortgage Loan Series 2004-19, Class 2A2 | ||||||||||||||||
| 385,836 | 6.827 | 01/25/35 | 390,911 | |||||||||||||
| Structured Asset Mortgage Investments, Inc. Series 2006-AR8, Class AR8 | ||||||||||||||||
| 3,500,000 | 5.520 | 03/25/36 | 3,500,000 | |||||||||||||
| Structured Asset Securities Corp. Series 2003-34A, Class 3A3 | ||||||||||||||||
| 91,624 | 4.700 | 11/25/33 | 91,298 | |||||||||||||
| Structured Asset Securities Corp. Series 2003-37A, Class 3A7 | ||||||||||||||||
| 343,877 | 4.520 | 12/25/33 | 341,479 | |||||||||||||
| UBS Warburg LLC Series 2006-0A2, Class 4A1 | ||||||||||||||||
| 2,879,287 | 5.640 | 11/25/46 | 2,877,938 | |||||||||||||
| Washington Mutual Series 2005-AR11, Class A1A | ||||||||||||||||
| 2,545,240 | 5.640 | 08/25/45 | 2,552,794 | |||||||||||||
| Washington Mutual Series 2005-AR13, Class A1A1 | ||||||||||||||||
| 3,527,141 | 5.610 | 10/25/45 | 3,546,704 | |||||||||||||
| Washington Mutual Series 2006-AR13, Class 1A | ||||||||||||||||
| 2,921,017 | 5.544 | 10/25/46 | 2,919,990 | |||||||||||||
| Washington Mutual Series 2006-AR17, Class 1A | ||||||||||||||||
| 2,000,000 | 5.504 | 11/25/46 | 2,000,000 | |||||||||||||
| Wells Fargo Mortgage Backed Securities Trust Series 2005-AR16, Class 1A1 | ||||||||||||||||
| 2,961,553 | 4.977 | 10/25/35 | 2,964,967 | |||||||||||||
| Wells Fargo Mortgage Backed Securities Trust Series 2006-AR2, Class 2A3 | ||||||||||||||||
| 6,488,742 | 5.092 | 03/25/36 | 6,450,992 | |||||||||||||
| WMALT Mortgage Pass-Through Certificates Series 2006-AR7, Class A1A | ||||||||||||||||
| 2,841,328 | 5.584 | 09/25/46 | 2,845,212 | |||||||||||||
| WMALT Mortgage Pass-Through Certificates Series 2006-AR9, Class 2A | ||||||||||||||||
| 4,000,000 | 5.504 | 11/25/46 | 4,000,000 | |||||||||||||
| 79,996,463 | ||||||||||||||||
| CMBS – 9.8% | ||||||||||||||||
| Interest Only(a)(b)(c) – 0.2% | ||||||||||||||||
| Bear Stearns Commercial Mortgage Securities, Inc. Series 2003-T10, Class X2 | ||||||||||||||||
| 5,559,490 | 1.246 | 03/13/40 | 220,744 | |||||||||||||
| JP Morgan Chase Commercial Mortgage Securities Corp. Series 2004-C1, Class X2 | ||||||||||||||||
| 5,774,749 | 0.993 | 01/15/38 | 178,748 | |||||||||||||
| Prudential Commercial Mortgage Trust Series 2003-PWR1, Class X2 | ||||||||||||||||
| 6,078,263 | 1.481 | 02/11/36 | 279,222 | |||||||||||||
| 678,714 | ||||||||||||||||
| Sequential Fixed Rate – 9.6% | ||||||||||||||||
| Banc of America Commercial Mortgage, Inc. Series 2005-5, Class A4 | ||||||||||||||||
| 4,000,000 | 5.115 | 10/10/45 | 3,951,388 | |||||||||||||
| Banc of America Commercial Mortgage, Inc. Series 2005-6, Class A4 | ||||||||||||||||
| 5,000,000 | 5.182 | 09/10/47 | 4,983,598 | |||||||||||||
| Banc of America Commercial Mortgage, Inc. Series 2006-4 Class A4 | ||||||||||||||||
| 2,000,000 | 5.634 | 07/10/46 | 2,049,548 | |||||||||||||
| Bear Stearns Commercial Mortgage Securities, Inc. Series 2005-PW10, Class A4 | ||||||||||||||||
| 5,000,000 | 5.405 | 12/11/40 | 5,040,281 | |||||||||||||
| Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2006-C02, Class A4 | ||||||||||||||||
| 3,500,000 | 5.362 | 01/15/46 | 3,531,692 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 1997-C2, Class A3 | ||||||||||||||||
| 313,590 | 6.550 | 01/17/35 | 316,448 | |||||||||||||
| GE Capital Commercial Mortgage Corp. Series 2005-C4, Class A4 | ||||||||||||||||
| 5,000,000 | 5.333 | 11/10/45 | 5,037,887 | |||||||||||||
| LB-UBS Commercial Mortgage Trust Series 2002-C1, Class A2 | ||||||||||||||||
| 313,797 | 5.969 | 03/15/26 | 314,520 | |||||||||||||
| LB-UBS Commercial Mortgage Trust Series 2005-C5, Class A4 | ||||||||||||||||
| 2,000,000 | 4.954 | 09/15/30 | 1,957,071 | |||||||||||||
| LB-UBS Commercial Mortgage Trust Series 2005-C7, Class A4 | ||||||||||||||||
| 2,000,000 | 5.197 | 11/15/30 | 1,989,874 | |||||||||||||
| LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4 | ||||||||||||||||
| 3,500,000 | 5.156 | 02/15/31 | 3,458,165 | |||||||||||||
| Morgan Stanley Capital I Series 2006-T21, Class A4 | ||||||||||||||||
| 5,000,000 | 5.162 | 10/12/52 | 4,955,370 | |||||||||||||
| Wachovia Bank Commercial Mortgage Trust Series 2005-C21, Class A4 | ||||||||||||||||
| 4,000,000 | 5.196 | 10/15/44 | 3,992,846 | |||||||||||||
| 41,578,688 | ||||||||||||||||
| TOTAL CMBS | 42,257,402 | |||||||||||||||
| CMO – 4.6% | ||||||||||||||||
| Interest Only(b) – 0.1% | ||||||||||||||||
| ABN AMRO Mortgage Corp. Series 2003-5, Class A2 | ||||||||||||||||
| 64,516 | 5.500 | 04/25/33 | 6,446 | |||||||||||||
| ABN AMRO Mortgage Corp. Series 2003-8, Class A2 | ||||||||||||||||
| 423,512 | 5.500 | 06/25/33 | 45,823 | |||||||||||||
| Countrywide Home Loan Trust Series 2003-42, Class 2X1(a) | ||||||||||||||||
| 627,295 | 0.368 | 10/25/33 | 3,066 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2002-AR31, Class 5X(a) | ||||||||||||||||
| 317,037 | 0.000 | 11/25/32 | 190 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-08, Class 3A2 | ||||||||||||||||
| 9,142 | 5.500 | 04/25/33 | 498 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-10, Class 3A13 | ||||||||||||||||
| 7,838 | 5.750 | 05/25/33 | 307 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
28
GOLDMAN SACHS U.S. MORTGAGES FUND
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| Interest Only(b) – (continued) | ||||||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-11, Class 1A2 | ||||||||||||||||
| $ | 31,190 | 5.500 | % | 06/25/33 | $ | 1,982 | ||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-19, Class 1A2 | ||||||||||||||||
| 489,606 | 5.250 | 07/25/33 | 51,847 | |||||||||||||
| FHLMC Series 2575, Class IB | ||||||||||||||||
| 281,178 | 5.500 | 08/15/30 | 27,902 | |||||||||||||
| FNMA Series 2004-47, Class EI(a) | ||||||||||||||||
| 1,709,811 | 0.000 | 06/25/34 | 69,087 | |||||||||||||
| FNMA Series 2004-62, Class DI(a) | ||||||||||||||||
| 744,580 | 0.000 | 07/25/33 | 30,479 | |||||||||||||
| FNMA Series E, Class E2 | ||||||||||||||||
| 1,298 | 506.000 | 09/01/10 | 10,002 | |||||||||||||
| Master Adjustable Rate Mortgages Trust Series 2003-2, Class 3AX(a) | ||||||||||||||||
| 70,031 | 0.679 | 08/25/33 | 594 | |||||||||||||
| Master Adjustable Rate Mortgages Trust Series 2003-2, Class 4AX(a) | ||||||||||||||||
| 18,653 | 1.158 | 07/25/33 | 330 | |||||||||||||
| Washington Mutual Series 2003-AR04, Class X1(a) | ||||||||||||||||
| 401,016 | 1.181 | 01/25/08 | 4,487 | |||||||||||||
| Washington Mutual Series 2003-AR12, Class X(a) | ||||||||||||||||
| 1,012,034 | 0.488 | 02/25/34 | 7,087 | |||||||||||||
| Washington Mutual Series 2003-S3, Class 1A41 | ||||||||||||||||
| 341,172 | 5.500 | 06/25/33 | 35,032 | |||||||||||||
| 295,159 | ||||||||||||||||
| Inverse Floaters(a) – 0.0% | ||||||||||||||||
| FHLMC Series 1544, Class M | ||||||||||||||||
| 11,092 | 11.206 | 07/15/08 | 11,409 | |||||||||||||
| FNMA Series 1993-072, Class SA | ||||||||||||||||
| 2,481 | 9.123 | 05/25/08 | 2,548 | |||||||||||||
| FNMA Series 1993-093, Class SA | ||||||||||||||||
| 5,271 | 11.994 | 05/25/08 | 5,495 | |||||||||||||
| FNMA Series 1993-095, Class SE | ||||||||||||||||
| 6,553 | 12.303 | 06/25/08 | 6,867 | |||||||||||||
| FNMA Series 1993-135, Class S | ||||||||||||||||
| 15,195 | 6.500 | 07/25/08 | 15,557 | |||||||||||||
| GNMA Series 2001-48, Class SA | ||||||||||||||||
| 32,855 | 9.165 | 10/16/31 | 37,276 | |||||||||||||
| GNMA Series 2001-51, Class SB | ||||||||||||||||
| 32,860 | 9.197 | 10/16/31 | 37,041 | |||||||||||||
| GNMA Series 2001-59, Class SA | ||||||||||||||||
| 48,580 | 9.035 | 11/16/24 | 55,130 | |||||||||||||
| 171,323 | ||||||||||||||||
| PAC – 1.1% | ||||||||||||||||
| FNMA Series 1993-63, Class PK | ||||||||||||||||
| 26,515 | 6.500 | 05/25/08 | 26,579 | |||||||||||||
| FNMA Series 2003-88, Class TH | ||||||||||||||||
| 5,000,000 | 4.500 | 09/25/18 | 4,760,476 | |||||||||||||
| 4,787,055 | ||||||||||||||||
| Principal Only(d) – 0.8% | ||||||||||||||||
| FHLMC Series 235, Class PO | ||||||||||||||||
| 2,198,017 | 0.000 | 02/01/36 | 1,630,638 | |||||||||||||
| FNMA Series 363, Class 1 | ||||||||||||||||
| 2,296,822 | 0.000 | 11/01/35 | 1,720,759 | |||||||||||||
| 3,351,397 | ||||||||||||||||
| Sequential Fixed Rate – 2.6% | ||||||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2002-5, Class PPA1 | ||||||||||||||||
| 211,614 | 6.500 | 03/25/32 | 210,726 | |||||||||||||
| FHLMC Series 1703, Class GC | ||||||||||||||||
| 2,500,000 | 6.500 | 04/15/09 | 2,510,885 | |||||||||||||
| FHLMC Series 1823, Class A | ||||||||||||||||
| 1,282,867 | 6.500 | 08/15/23 | 1,290,491 | |||||||||||||
| FHLMC Series 2042, Class N | ||||||||||||||||
| 967,761 | 6.500 | 03/15/28 | 989,660 | |||||||||||||
| FHLMC Series 2458, Class OD | ||||||||||||||||
| 128,878 | 6.000 | 04/15/16 | 129,001 | |||||||||||||
| FHLMC Series 2590, Class NV | ||||||||||||||||
| 1,000,000 | 5.000 | 03/15/18 | 986,910 | |||||||||||||
| FNMA REMIC Trust Series 1993-101, Class PJ | ||||||||||||||||
| 305,403 | 7.000 | 06/25/08 | 306,812 | |||||||||||||
| FNMA REMIC Trust Series 2002-24, Class AE | ||||||||||||||||
| 434,262 | 6.000 | 04/25/16 | 432,993 | |||||||||||||
| FNMA Series 1993-76, Class PJ | ||||||||||||||||
| 75,779 | 6.000 | 06/25/08 | 75,771 | |||||||||||||
| FNMA Series 1994-42, Class K | ||||||||||||||||
| 3,000,000 | 6.500 | 04/25/24 | 3,042,282 | |||||||||||||
| FNMA Series 1994-75, Class J | ||||||||||||||||
| 20,859 | 7.000 | 10/25/23 | 20,795 | |||||||||||||
| FNMA Series 2000-16, Class ZG | ||||||||||||||||
| 1,311,994 | 8.500 | 06/25/30 | 1,403,150 | |||||||||||||
| 11,399,476 | ||||||||||||||||
| TOTAL CMO | 20,004,410 | |||||||||||||||
| FHLMC – 27.2% | ||||||||||||||||
| 307,624 | 5.000 | 12/01/12 | 305,919 | |||||||||||||
| 28,896 | 7.000 | 04/01/15 | 29,537 | |||||||||||||
| 26,532 | 7.000 | 02/01/16 | 27,215 | |||||||||||||
| 132,573 | 6.000 | 03/01/16 | 134,078 | |||||||||||||
| 448,608 | 4.500 | 05/01/18 | 434,359 | |||||||||||||
| 106,000 | 4.500 | 06/01/18 | 102,640 | |||||||||||||
| 18,508 | 4.500 | 08/01/18 | 17,922 | |||||||||||||
| 431,444 | 4.500 | 09/01/18 | 417,770 | |||||||||||||
| 313,669 | 4.500 | 10/01/18 | 303,721 | |||||||||||||
| 807,183 | 4.500 | 11/01/18 | 781,592 | |||||||||||||
| 9,689,795 | 4.500 | 12/01/18 | 9,382,699 | |||||||||||||
| 8,213,490 | 5.000 | 12/01/18 | 8,103,898 | |||||||||||||
| 523,299 | 4.500 | 01/01/19 | 506,714 | |||||||||||||
| 819,179 | 5.000 | 01/01/19 | 808,248 | |||||||||||||
| 21,170 | 4.500 | 02/01/19 | 20,497 | |||||||||||||
| 1,002,166 | 5.000 | 02/01/19 | 988,022 | |||||||||||||
| 2,269,605 | 4.500 | 03/01/19 | 2,195,034 | |||||||||||||
| 776,138 | 4.000 | 04/01/19 | 735,374 | |||||||||||||
| 44,884 | 4.500 | 04/01/19 | 43,403 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
29
GOLDMAN SACHS U.S. MORTGAGES FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| FHLMC – (continued) | ||||||||||||||||
| $ | 121,555 | 5.000 | % | 04/01/19 | $ | 119,800 | ||||||||||
| 4,870,370 | 4.500 | 06/01/19 | 4,716,015 | |||||||||||||
| 707,572 | 5.000 | 06/01/19 | 697,355 | |||||||||||||
| 42,377 | 4.500 | 11/01/19 | 40,979 | |||||||||||||
| 2,013,631 | 4.500 | 02/01/20 | 1,949,813 | |||||||||||||
| 25,091,307 | 4.500 | 08/01/20 | 24,272,008 | |||||||||||||
| 5,700,113 | 5.500 | 05/01/21 | 5,703,795 | |||||||||||||
| 3,672,772 | 4.500 | 08/01/23 | 3,508,468 | |||||||||||||
| 3,567,284 | 5.500 | 11/01/23 | 3,562,920 | |||||||||||||
| 62,412 | 7.500 | 03/01/27 | 64,589 | |||||||||||||
| 3,071,818 | 6.500 | 01/01/29 | 3,156,753 | |||||||||||||
| 1,087,330 | 6.500 | 04/01/29 | 1,116,661 | |||||||||||||
| 542,803 | 6.500 | 12/01/29 | 557,096 | |||||||||||||
| 491,003 | 7.000 | 04/01/31 | 508,536 | |||||||||||||
| 3,600,300 | 7.000 | 09/01/31 | 3,729,455 | |||||||||||||
| 1,705,745 | 7.000 | 04/01/32 | 1,756,482 | |||||||||||||
| 3,075,660 | 7.000 | 05/01/32 | 3,167,146 | |||||||||||||
| 1,077,080 | 6.000 | 05/01/33 | 1,086,894 | |||||||||||||
| 495,867 | 6.500 | 08/01/33 | 507,847 | |||||||||||||
| 25,000,000 | 5.500 | TBA-15yr | (e) | 25,007,800 | ||||||||||||
| 7,000,000 | 6.000 | TBA-15yr | (e) | 7,098,434 | ||||||||||||
| 117,667,488 | ||||||||||||||||
| FNMA – 38.3% | ||||||||||||||||
| 115,695 | 4.000 | 06/01/13 | 111,937 | |||||||||||||
| 154,649 | 4.000 | 07/01/13 | 149,587 | |||||||||||||
| 213,799 | 4.000 | 08/01/13 | 206,809 | |||||||||||||
| 403,370 | 4.000 | 09/01/13 | 390,091 | |||||||||||||
| 835,663 | 4.000 | 10/01/13 | 807,934 | |||||||||||||
| 622,196 | 4.000 | 04/01/14 | 600,395 | |||||||||||||
| 9,551 | 5.500 | 04/01/16 | 9,591 | |||||||||||||
| 10,675 | 5.500 | 08/01/16 | 10,720 | |||||||||||||
| 122,238 | 5.500 | 11/01/16 | 122,762 | |||||||||||||
| 103,871 | 5.500 | 12/01/16 | 104,317 | |||||||||||||
| 145,938 | 5.500 | 01/01/17 | 146,564 | |||||||||||||
| 16,846,282 | 5.000 | 10/01/17 | 16,633,457 | |||||||||||||
| 4,243,606 | 5.000 | 11/01/17 | 4,189,995 | |||||||||||||
| 13,166,436 | 5.000 | 12/01/17 | 13,000,099 | |||||||||||||
| 289,565 | 4.500 | 01/01/18 | 280,721 | |||||||||||||
| 5,927,228 | 5.000 | 01/01/18 | 5,852,347 | |||||||||||||
| 3,896,540 | 5.000 | 02/01/18 | 3,846,895 | |||||||||||||
| 7,358 | 6.000 | 02/01/18 | 7,434 | |||||||||||||
| 566,878 | 4.500 | 03/01/18 | 549,604 | |||||||||||||
| 10,570,418 | 5.000 | 03/01/18 | 10,434,763 | |||||||||||||
| 785,969 | 4.500 | 04/01/18 | 762,020 | |||||||||||||
| 6,078,091 | 5.000 | 04/01/18 | 5,999,814 | |||||||||||||
| 2,880,677 | 4.500 | 05/01/18 | 2,792,900 | |||||||||||||
| 5,652,626 | 5.000 | 05/01/18 | 5,580,778 | |||||||||||||
| 92,263 | 6.000 | 05/01/18 | 93,205 | |||||||||||||
| 3,623,086 | 4.500 | 06/01/18 | 3,512,686 | |||||||||||||
| 7,075,756 | 5.000 | 06/01/18 | 6,985,190 | |||||||||||||
| 617,427 | 4.500 | 07/01/18 | 598,615 | |||||||||||||
| 877,381 | 5.000 | 07/01/18 | 866,089 | |||||||||||||
| 653,582 | 4.000 | 08/01/18 | 620,810 | |||||||||||||
| 1,429,594 | 4.500 | 08/01/18 | 1,386,032 | |||||||||||||
| 425,106 | 5.000 | 08/01/18 | 419,632 | |||||||||||||
| 141,587 | 5.000 | 09/01/18 | 139,763 | |||||||||||||
| 2,177,787 | 4.500 | 10/01/18 | 2,111,428 | |||||||||||||
| 1,369,888 | 5.000 | 10/01/18 | 1,352,246 | |||||||||||||
| 9,056,557 | 5.000 | 11/01/18 | 8,940,101 | |||||||||||||
| 491,285 | 6.000 | 11/01/18 | 496,300 | |||||||||||||
| 852,817 | 7.000 | 11/01/18 | 877,209 | |||||||||||||
| 694,067 | 4.000 | 12/01/18 | 659,265 | |||||||||||||
| 63,007 | 4.500 | 12/01/18 | 61,087 | |||||||||||||
| 5,987,994 | 5.000 | 12/01/18 | 5,910,877 | |||||||||||||
| 1,794,910 | 5.500 | 12/01/18 | 1,801,736 | |||||||||||||
| 896,571 | 6.000 | 12/01/18 | 905,725 | |||||||||||||
| 287,590 | 5.000 | 01/01/19 | 283,886 | |||||||||||||
| 733,141 | 6.000 | 01/01/19 | 740,626 | |||||||||||||
| 254,865 | 4.500 | 02/01/19 | 246,820 | |||||||||||||
| 413,683 | 5.000 | 02/01/19 | 408,191 | |||||||||||||
| 2,373,483 | 4.500 | 04/01/19 | 2,298,565 | |||||||||||||
| 5,661,431 | 5.000 | 04/01/19 | 5,588,520 | |||||||||||||
| 257,814 | 6.000 | 04/01/19 | 261,198 | |||||||||||||
| 327,273 | 4.000 | 05/01/19 | 310,469 | |||||||||||||
| 696,678 | 4.500 | 05/01/19 | 674,687 | |||||||||||||
| 52,657 | 6.000 | 05/01/19 | 53,562 | |||||||||||||
| 788,603 | 4.500 | 06/01/19 | 764,043 | |||||||||||||
| 111,427 | 5.500 | 07/01/19 | 111,672 | |||||||||||||
| 284,693 | 5.500 | 08/01/19 | 285,319 | |||||||||||||
| 133,808 | 5.500 | 09/01/19 | 134,102 | |||||||||||||
| 1,613,170 | 4.000 | 10/01/19 | 1,530,341 | |||||||||||||
| 289,974 | 5.500 | 10/01/19 | 290,610 | |||||||||||||
| 86,653 | 5.500 | 11/01/19 | 86,843 | |||||||||||||
| 32,335 | 5.000 | 12/01/19 | 32,406 | |||||||||||||
| 30,303 | 5.500 | 12/01/19 | 30,369 | |||||||||||||
| 183,426 | 7.000 | 09/01/21 | 190,070 | |||||||||||||
| 565,212 | 7.000 | 06/01/22 | 585,346 | |||||||||||||
| 259,609 | 7.000 | 07/01/22 | 268,857 | |||||||||||||
| 526,975 | 5.500 | 08/01/23 | 525,850 | |||||||||||||
| 12,876,332 | 4.500 | 10/01/23 | 12,237,658 | |||||||||||||
| 81,559 | 6.500 | 01/01/29 | 83,727 | |||||||||||||
| 138,909 | 6.500 | 04/01/29 | 142,522 | |||||||||||||
| 117,071 | 6.500 | 05/01/29 | 120,116 | |||||||||||||
| 1,077,188 | 6.500 | 06/01/29 | 1,105,206 | |||||||||||||
| 605,182 | 6.500 | 07/01/29 | 620,924 | |||||||||||||
| 68,871 | 6.500 | 09/01/29 | 70,662 | |||||||||||||
| 158,064 | 7.000 | 08/01/31 | 162,570 | |||||||||||||
| 8,987 | 6.500 | 08/01/32 | 9,204 | |||||||||||||
| 341,847 | 6.500 | 11/01/32 | 350,092 | |||||||||||||
| 281,552 | 6.000 | 01/01/33 | 284,002 | |||||||||||||
| 5,467 | 6.000 | 02/01/33 | 5,515 | |||||||||||||
| 155,282 | 6.000 | 06/01/33 | 156,535 | |||||||||||||
| 51,911 | 6.000 | 07/01/33 | 52,330 | |||||||||||||
| 137,886 | 6.000 | 09/01/33 | 138,998 | |||||||||||||
| 37,742 | 6.000 | 10/01/33 | 38,046 | |||||||||||||
| 967,110 | 5.500 | 02/01/34 | 957,200 | |||||||||||||
| 280,719 | 5.500 | 07/01/34 | 277,842 | |||||||||||||
| 79,471 | 6.000 | 11/01/34 | 80,039 | |||||||||||||
| 2,228,348 | 6.000 | 12/01/34 | 2,244,259 | |||||||||||||
| 3,000,000 | 5.500 | TBA-15yr | (e) | 3,002,814 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
30
GOLDMAN SACHS U.S. MORTGAGES FUND
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| FNMA – (continued) | ||||||||||||||||
| $ | 13,000,000 | 7.000 | % | TBA-15yr | (e) | $ | 13,365,625 | |||||||||
| 4,000,000 | 7.500 | TBA-15yr | (e) | 4,146,248 | ||||||||||||
| 165,684,016 | ||||||||||||||||
| GNMA – 0.0% | ||||||||||||||||
| 1,089 | 6.000 | 12/15/23 | 1,104 | |||||||||||||
| 35,280 | 6.000 | 03/15/26 | 35,865 | |||||||||||||
| 41,969 | 6.000 | 04/15/26 | 42,664 | |||||||||||||
| 79,633 | ||||||||||||||||
| TOTAL MORTGAGE-BACKED OBLIGATIONS | ||||||||||||||||
| (Cost $451,941,574) | $ | 450,608,692 | ||||||||||||||
Agency Debenture – 0.6% | ||||||||||||||||
| Tennessee Valley Authority | ||||||||||||||||
| $ | 2,800,000 | 5.375 | % | 04/01/56 | $ | 2,886,632 | ||||||||||
| (Cost $2,791,639) | ||||||||||||||||
Asset-Backed Securities(a) – 3.4% | ||||||||||||||||
| Home Equity – 3.4% | ||||||||||||||||
| Carrington Mortgage Loan Trust Series 2005-OPT2, Class A1B | ||||||||||||||||
| $ | 961,629 | 5.470 | % | 05/25/35 | $ | 961,779 | ||||||||||
| ContiMortgage Home Equity Loan Trust Series 1999-1, Class A7 | ||||||||||||||||
| 66,561 | 6.970 | 12/25/13 | 66,437 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2002-E, Class A | ||||||||||||||||
| 112,691 | 5.580 | 10/15/28 | 113,048 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2003-A, Class A | ||||||||||||||||
| 1,488,605 | 5.670 | 03/15/29 | 1,492,191 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2003-D, Class A | ||||||||||||||||
| 456,653 | 5.580 | 06/15/29 | 457,640 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-G, Class 2A | ||||||||||||||||
| 261,453 | 5.540 | 12/15/29 | 262,026 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-I, Class A | ||||||||||||||||
| 1,508,843 | 5.610 | 02/15/34 | 1,513,321 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-J, Class 2A | ||||||||||||||||
| 185,427 | 5.610 | 12/15/33 | 185,833 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-O, Class 1A | ||||||||||||||||
| 605,635 | 5.600 | 02/15/34 | 606,916 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-Q, Class 2A | ||||||||||||||||
| 543,764 | 5.620 | 12/15/33 | 545,232 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-S, Class 1A | ||||||||||||||||
| 276,033 | 5.560 | 02/15/30 | 276,395 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2005-A, Class 2A | ||||||||||||||||
| 998,091 | 5.560 | 04/15/35 | 1,000,274 | |||||||||||||
| Master Asset Backed Securities Trust Series 2005-WMC1, Class A4 | ||||||||||||||||
| 2,281,715 | 5.510 | 03/25/35 | 2,282,635 | |||||||||||||
| Morgan Stanley ABS Capital I Series 2004-HE1, Class A4 | ||||||||||||||||
| 1,129,867 | 5.690 | 01/25/34 | 1,132,304 | |||||||||||||
| Ownit Mortgage Loan Asset-Backed Certificates Series 2005-4, Class A2A1 | ||||||||||||||||
| 2,650,842 | 5.440 | 08/25/36 | 2,651,256 | |||||||||||||
| Popular ABS Mortgage Pass-Through Trust Series 2004-5, Class AV2 | ||||||||||||||||
| 268,366 | 5.660 | 12/25/34 | 268,660 | |||||||||||||
| Residential Asset Mortgage Products, Inc. Series 2004-RZ1, Class AII | ||||||||||||||||
| 414,592 | 5.560 | 03/25/34 | 415,091 | |||||||||||||
| Residential Funding Mortgage Securities, Inc. Series 2004-HS2, Class AII | ||||||||||||||||
| 464,217 | 5.550 | 06/25/29 | 464,829 | |||||||||||||
| 14,695,867 | ||||||||||||||||
| TOTAL ASSET-BACKED SECURITIES | ||||||||||||||||
| (Cost $14,678,190) | $ | 14,695,867 | ||||||||||||||
U.S. Treasury Obligations – 3.1% | ||||||||||||||||
| United States Treasury Bonds | ||||||||||||||||
| $ | 1,000,000 | 4.500 | % | 02/15/36 | $ | 965,156 | ||||||||||
| United States Treasury Inflation Protected Securities | ||||||||||||||||
| 1,332,132 | 1.875 | 07/15/13 | 1,289,982 | |||||||||||||
| 1,434,472 | 2.000 | 01/15/14 | 1,398,105 | |||||||||||||
| 2,055,135 | 2.000 | 07/15/14 | 2,001,829 | |||||||||||||
| 3,039,809 | 1.875 | 07/15/15 | 2,927,488 | |||||||||||||
| 1,027,260 | 2.000 | 01/15/16 | 997,967 | |||||||||||||
| 2,120,118 | 2.500 | 07/15/16 | 2,150,595 | |||||||||||||
| United States Treasury Notes | ||||||||||||||||
| 1,400,000 | 5.125 | 05/15/16 | 1,455,343 | |||||||||||||
| United States Treasury Principal-Only STRIPS(d) | ||||||||||||||||
| 200,000 | 0.000 | 11/15/21 | 96,714 | |||||||||||||
| TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||||
| (Cost $13,283,336) | $ | 13,283,179 | ||||||||||||||
| TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT — 111.3% | ||||||||||||||||
| (Cost $482,694,739) | $ | 481,474,370 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
31
GOLDMAN SACHS U.S. MORTGAGES FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount | Rate | Date | Value | |||||||||||||
Repurchase Agreement(f) – 3.4% | ||||||||||||||||
| Joint Repurchase Agreement Account II | ||||||||||||||||
| $ | 14,600,000 | 5.316 | % | 11/01/06 | $ | 14,600,000 | ||||||||||
| Maturity Value: $14,602,156 | ||||||||||||||||
| (Cost $14,600,000) | ||||||||||||||||
| TOTAL INVESTMENTS – 114.7% | ||||||||||||||||
| (Cost $497,294,739) | $ | 496,074,370 | ||||||||||||||
| LIABILITIES IN EXCESS OF OTHER ASSETS – (14.7)% | (63,669,132 | ) | ||||||||||||||
| NET ASSETS – 100.0% | $ | 432,405,238 | ||||||||||||||
| The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. |
| (a) | Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006. |
| (b) | Represents security with notional principal amount. The actual effective yield of this security is different than the stated interest rate due to the amortization of related premiums or accretion of discounts. |
| (c) | Securities are exempt from registration under rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounted to $678,714, which represents approximately 0.2% of net assets as of October 31, 2006. |
| (d) | Security issued with a zero coupon. Income is recognized through the accretion of discount. |
| (e) | TBA (To Be Announced) securities are purchased on a forward commitment basis with an approximate principal amount and no defined maturity date. The actual principal and maturity date will be determined upon settlement when the specific mortgage pools are assigned. Total market value of TBA securities amounts to $52,620,921 which represents approximately 12.2% of net assets as of October 31, 2006. |
| (f) | Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 55. |
| Investment Abbreviations: | ||||||
| CMBS | — | Commercial Mortgage Backed Securities | ||||
| CMO | — | Collateralized Mortgage Obligations | ||||
| FHLMC | — | Federal Home Loan Mortgage Corp. | ||||
| FNMA | — | Federal National Mortgage Association | ||||
| GNMA | — | Government National Mortgage Association | ||||
| PAC | — | Planned Amortization Class | ||||
| REMIC | — | Real Estate Mortgage Investment Conduit | ||||
| STRIPS | — | Separate Trading of Registered Interest and Principal of Securities | ||||
The accompanying notes are an integral part of these financial statements.
32
GOLDMAN SACHS U.S. MORTGAGES FUND
| ADDITIONAL INVESTMENT INFORMATION |
FUTURES CONTRACTS — At October 31, 2006, the following futures contracts were open:
| Number of | ||||||||||||||
| Contracts | Settlement | Market | Unrealized | |||||||||||
| Type | Long (Short) | Month | Value | Gain (Loss) | ||||||||||
| Eurodollars | 43 | December 2006 | $ | 10,173,263 | $ | 1,668 | ||||||||
| Eurodollars | 25 | March 2007 | 5,923,750 | 2,490 | ||||||||||
| Eurodollars | 45 | June 2007 | 10,681,875 | 8,297 | ||||||||||
| Eurodollars | 35 | September 2007 | 8,323,437 | 11,481 | ||||||||||
| Eurodollars | 35 | December 2007 | 8,333,938 | 16,293 | ||||||||||
| Eurodollars | 36 | March 2008 | 8,575,650 | 18,778 | ||||||||||
| Eurodollars | 22 | June 2008 | 5,239,575 | 10,925 | ||||||||||
| U.S. Treasury Bonds | 41 | December 2006 | 4,618,906 | 13,895 | ||||||||||
| 2 Year U.S. Treasury Notes | (97 | ) | December 2006 | (19,827,406 | ) | (3,159 | ) | |||||||
| 5 Year U.S. Treasury Notes | (303 | ) | December 2006 | (31,985,438 | ) | (123,889 | ) | |||||||
| 10 Year U.S. Treasury Notes | (297 | ) | December 2006 | (32,140,969 | ) | (297,709 | ) | |||||||
TOTAL | $ | (22,083,419 | ) | $ | (340,930 | ) | ||||||||
SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:
INTEREST RATE SWAP CONTRACTS
| Rates Exchanged | ||||||||||||||||||
| Upfront | ||||||||||||||||||
| Notional | Payments | Payments | Payments | |||||||||||||||
| Swap | Amount | Termination | received by | made by | made by the | Unrealized | ||||||||||||
| Counterparty | (000s) | Date | the Fund | the Fund | Fund | Gain (Loss) | ||||||||||||
| Banc of America Securities LLC | $ | 12,000 | 09/02/10 | 4.309% | 3 month LIBOR | $ | — | $ | (315,766 | ) | ||||||||
| Banc of America Securities LLC | 15,000 | 10/06/10 | 4.703 | 3 month LIBOR | — | (178,961 | ) | |||||||||||
Banc of America Securities LLC(a) | 16,500 | 12/20/11 | 5.600 | 3 month LIBOR | 304,982 | 106,059 | ||||||||||||
| Banc of America Securities LLC | 11,000 | 05/23/12 | 4.374 | 3 month LIBOR | — | (257,305 | ) | |||||||||||
Deutsche Bank Securities(a) | 30,900 | 12/20/13 | 5.650 | 3 month LIBOR | 687,137 | 345,809 | ||||||||||||
| J.P. Morgan Securities, Inc. | 10,000 | 03/07/16 | 3 month LIBOR | 5.183% | — | (41,489 | ) | |||||||||||
TOTAL | $ | 992,119 | $ | (341,653 | ) | |||||||||||||
| (a) | Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to October 31, 2006. |
LIBOR — London Interbank Offered Rate
The accompanying notes are an integral part of these financial statements.
33
GOLDMAN SACHS U.S. MORTGAGES FUND
Schedule of Investments (continued)
October 31, 2006
| ADDITIONAL INVESTMENT INFORMATION (continued) |
TOTAL RETURN INDEX SWAP CONTRACTS
| Rates Exchanged | ||||||||||||||||||
| Notional | Payments | Payments | ||||||||||||||||
| Swap | Amount | Termination | Reference | received by | made by | Unrealized | ||||||||||||
| Counterparty | (000s) | Date | Underlying | the Fund | the Fund | Gain | ||||||||||||
| Banc of America Securities LLC | $ | 7,500 | 1/31/07 | Banc of America Securities LLC CMBS AAA 10 Yr Index | Any positive monthly duration adjusted return on the underlying index | Any negative monthly duration adjusted return on the underlying index | $ | 4,067 | ||||||||||
| Banc of America Securities LLC | 5,500 | 1/31/07 | Banc of America Securities LLC CMBS AAA 10 Yr Index | Any positive monthly duration adjusted return on the underlying index | Any negative monthly duration adjusted return on the underlying index | 3,829 | ||||||||||||
TOTAL | $ | 7,896 | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
34
GOLDMAN SACHS CORE FIXED INCOME FUND
Performance Summary
October 31, 2006 (Unaudited)
The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 1, 1996 in the Institutional Shares of the Goldman Sachs Core Fixed Income Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers Aggregate Bond Index (“Lehman Aggregate Bond Index”), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations will cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A, Class B, Class C, and Service Shares will vary from Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/industry/country investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover and subscription and redemption cash flows affecting the Fund.
| Core Fixed Income Fund’s 10 Year Performance |
Performance of a $10,000 Investment, Distributions Reinvested November 1, 1996 to October 31, 2006.
| Average Annual Total Return through October 31, 2006 | Since Inception | Ten Years | Five Years | One Year | ||||||||||||||
Class A (commenced May 1, 1997) | ||||||||||||||||||
| Excluding sales charges | 6.02% | n/a | 4.42% | 4.21% | ||||||||||||||
| Including sales charges | 5.50% | n/a | 3.47% | -0.52% | ||||||||||||||
Class B (commenced May 1, 1997) | ||||||||||||||||||
| Excluding contingent deferred sales charges | 5.24% | n/a | 3.62% | 3.42% | ||||||||||||||
| Including contingent deferred sales charges | 5.24% | n/a | 3.21% | -1.75% | ||||||||||||||
Class C (commenced August 15, 1997) | ||||||||||||||||||
| Excluding contingent deferred sales charges | 4.99% | n/a | 3.64% | 3.52% | ||||||||||||||
| Including contingent deferred sales charges | 4.99% | n/a | 3.64% | 2.49% | ||||||||||||||
Institutional Class (commenced January 5, 1994) | 6.31% | 6.30% | 4.83% | 4.69% | ||||||||||||||
Service Class (commenced March 13, 1996) | 5.89% | 5.77% | 4.31% | 4.06% | ||||||||||||||
35
GOLDMAN SACHS CORE FIXED INCOME FUND
Schedule of Investments
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Corporate Bonds – 15.7% | ||||||||||||||||
| Automotive – 0.1% | ||||||||||||||||
| General Motors Acceptance Corp. | ||||||||||||||||
| $ | 2,900,000 | 6.875 | % | 09/15/11 | $ | 2,922,649 | ||||||||||
| Banks – 3.1% | ||||||||||||||||
| ANZ Capital Trust I(a) | ||||||||||||||||
| 3,500,000 | 5.360 | 12/29/49 | 3,411,397 | |||||||||||||
| Associates Corp. NA | ||||||||||||||||
| 2,000,000 | 8.550 | 07/15/09 | 2,167,968 | |||||||||||||
| Astoria Financial Corp. | ||||||||||||||||
| 4,600,000 | 5.750 | 10/15/12 | 4,632,855 | |||||||||||||
| Citigroup, Inc. | ||||||||||||||||
| 2,000,000 | 7.250 | 10/15/11 | 2,166,578 | |||||||||||||
| Commonwealth Bank of Australia(a)(b) | ||||||||||||||||
| 2,875,000 | 6.024 | 03/29/49 | 2,882,242 | |||||||||||||
| Fleet Boston Financial Corp. | ||||||||||||||||
| 450,000 | 7.375 | 12/01/09 | 478,197 | |||||||||||||
| Greater Bay Bancorp Series D | ||||||||||||||||
| 2,900,000 | 5.125 | 04/15/10 | 2,870,951 | |||||||||||||
| GreenPoint Financial Corp. | ||||||||||||||||
| 2,400,000 | 3.200 | 06/06/08 | 2,324,384 | |||||||||||||
| HBOS Capital Funding LP(a)(b) | ||||||||||||||||
| 4,325,000 | 6.071 | 06/27/49 | 4,407,495 | |||||||||||||
| J.P. Morgan Chase & Co. | ||||||||||||||||
| 4,065,000 | 5.250 | 05/30/07 | 4,062,760 | |||||||||||||
| KeyBank NA | ||||||||||||||||
| 5,500,000 | 5.000 | 07/17/07 | 5,477,010 | |||||||||||||
| Mizuho JGB Investment LLC(a)(b) | ||||||||||||||||
| 1,600,000 | 9.870 | 06/30/49 | 1,709,237 | |||||||||||||
| MUFG Capital Finance 1 Ltd.(b) | ||||||||||||||||
| 5,250,000 | 6.346 | 07/25/49 | 5,301,943 | |||||||||||||
| National Australia Bank Ltd. | ||||||||||||||||
| 2,000,000 | 8.600 | 05/19/10 | 2,218,674 | |||||||||||||
| Popular North America, Inc. | ||||||||||||||||
| 4,125,000 | 5.200 | 12/12/07 | 4,109,152 | |||||||||||||
| Regions Bank | ||||||||||||||||
| 2,530,000 | 2.900 | 12/15/06 | 2,522,671 | |||||||||||||
| Regions Financial Corp. | ||||||||||||||||
| 4,500,000 | 7.000 | 03/01/11 | 4,803,649 | |||||||||||||
| Resona Bank Ltd.(a) | ||||||||||||||||
| 3,500,000 | 5.850 | (b) | 04/15/49 | 3,428,407 | ||||||||||||
| EUR2,675,000 | 4.125 | 09/27/49 | 3,322,696 | |||||||||||||
| Sovereign Bank | ||||||||||||||||
| $ | 1,000,000 | 4.000 | 02/01/08 | 983,325 | ||||||||||||
| 375,000 | 5.125 | 03/15/13 | 368,211 | |||||||||||||
| 2,550,000 | 4.375 | (b) | 08/01/13 | 2,499,382 | ||||||||||||
| Union Planters Corp. | ||||||||||||||||
| 150,000 | 7.750 | 03/01/11 | 164,249 | |||||||||||||
| Wachovia Bank NA | ||||||||||||||||
| 5,000,000 | 7.875 | 02/15/10 | 5,408,910 | |||||||||||||
| Wells Fargo Bank NA | ||||||||||||||||
| 1,000,000 | 6.450 | 02/01/11 | 1,049,087 | |||||||||||||
| 72,771,430 | ||||||||||||||||
| Brokerage – 0.6% | ||||||||||||||||
| Bear Stearns Co., Inc. | ||||||||||||||||
| 6,330,000 | 5.700 | 01/15/07 | 6,332,025 | |||||||||||||
| Lehman Brothers Holdings, Inc. | ||||||||||||||||
| 4,500,000 | 6.625 | 01/18/12 | 4,775,079 | |||||||||||||
| Morgan Stanley | ||||||||||||||||
| 3,000,000 | 5.050 | 01/21/11 | 2,983,626 | |||||||||||||
| 14,090,730 | ||||||||||||||||
| Captive Financial – 0.1% | ||||||||||||||||
| Nelnet, Inc. | ||||||||||||||||
| 2,580,000 | 5.125 | 06/01/10 | 2,526,146 | |||||||||||||
| Diversified Manufacturing(a) – 0.1% | ||||||||||||||||
| Tyco International Group Participation Certificate | ||||||||||||||||
| 3,525,000 | 4.436 | 06/15/07 | 3,500,579 | |||||||||||||
| Electric – 1.2% | ||||||||||||||||
| Calenergy, Inc. | ||||||||||||||||
| 1,500,000 | 7.630 | 10/15/07 | 1,531,155 | |||||||||||||
| 2,210,000 | 7.520 | 09/15/08 | 2,298,196 | |||||||||||||
| CenterPoint Energy, Inc. Series B | ||||||||||||||||
| 550,000 | 7.250 | 09/01/10 | 582,020 | |||||||||||||
| FirstEnergy Corp. Series C | ||||||||||||||||
| 4,050,000 | 7.375 | 11/15/31 | 4,726,104 | |||||||||||||
| MidAmerican Energy Holdings Co. | ||||||||||||||||
| 6,125,000 | 6.125 | 04/01/36 | 6,298,564 | |||||||||||||
| Nisource Finance Corp.(b) | ||||||||||||||||
| 5,000,000 | 5.968 | 11/23/09 | 4,999,545 | |||||||||||||
| Progress Energy, Inc. | ||||||||||||||||
| 50,000 | 5.625 | 01/15/16 | 50,127 | |||||||||||||
| 3,000,000 | 7.750 | 03/01/31 | 3,653,658 | |||||||||||||
| TXU Corp. Series O | ||||||||||||||||
| 5,250,000 | 4.800 | 11/15/09 | 5,131,067 | |||||||||||||
| 29,270,436 | ||||||||||||||||
| Entertainment – 0.1% | ||||||||||||||||
| Time Warner Entertainment Co. | ||||||||||||||||
| 2,175,000 | 8.375 | 03/15/23 | 2,529,003 | |||||||||||||
| Environmental – 0.1% | ||||||||||||||||
| Waste Management, Inc. | ||||||||||||||||
| 2,000,000 | 7.375 | 08/01/10 | 2,137,366 | |||||||||||||
| Gaming – 0.3% | ||||||||||||||||
| Caesars Entertainment, Inc. | ||||||||||||||||
| 1,745,000 | 7.500 | 09/01/09 | 1,810,124 | |||||||||||||
| Harrahs Operating Co., Inc. | ||||||||||||||||
| 2,475,000 | 5.500 | 07/01/10 | 2,397,748 | |||||||||||||
| MGM Mirage, Inc. | ||||||||||||||||
| 850,000 | 8.500 | 09/15/10 | 898,875 | |||||||||||||
| Park Place Entertainment Corp. | ||||||||||||||||
| 950,000 | 8.500 | 11/15/06 | 950,774 | |||||||||||||
| 6,057,521 | ||||||||||||||||
| Integrated – 0.5% | ||||||||||||||||
| Hess Corp. | ||||||||||||||||
| 5,500,000 | 7.125 | 03/15/33 | 6,125,113 | |||||||||||||
| Kerr-McGee Corp. | ||||||||||||||||
| 4,575,000 | 6.950 | 07/01/24 | 4,960,252 | |||||||||||||
| 11,085,365 | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
36
GOLDMAN SACHS CORE FIXED INCOME FUND
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||||
| Life Insurance – 0.5% | ||||||||||||||||
| Americo Life, Inc.(a) | ||||||||||||||||
| $ | 1,600,000 | 7.875 | % | 05/01/13 | $ | 1,613,440 | ||||||||||
| AmerUs Group Co. | ||||||||||||||||
| 4,025,000 | 5.950 | 08/15/15 | 4,125,815 | |||||||||||||
| Hartford Life, Inc. | ||||||||||||||||
| 200,000 | 7.100 | 06/15/07 | 202,018 | |||||||||||||
| Phoenix Life Insurance Co.(a) | ||||||||||||||||
| 3,200,000 | 7.150 | 12/15/34 | 3,457,965 | |||||||||||||
| Principal Financial Group Australia(a) | ||||||||||||||||
| 2,750,000 | 8.200 | 08/15/09 | 2,962,168 | |||||||||||||
| Reinsurance Group of America, Inc. | ||||||||||||||||
| 550,000 | 6.750 | 12/15/11 | 577,966 | |||||||||||||
| 12,939,372 | ||||||||||||||||
| Media – Cable – 1.1% | ||||||||||||||||
| Comcast Cable Communications Holdings, Inc. | ||||||||||||||||
| 7,395,000 | 8.375 | 03/15/13 | 8,446,581 | |||||||||||||
| 2,050,000 | 9.455 | 11/15/22 | 2,662,537 | |||||||||||||
| Cox Communications, Inc. | ||||||||||||||||
| 7,211,000 | 4.625 | 01/15/10 | 7,042,457 | |||||||||||||
| Cox Enterprises, Inc.(a) | ||||||||||||||||
| 2,825,000 | 4.375 | 05/01/08 | 2,773,667 | |||||||||||||
| Rogers Cable, Inc. | ||||||||||||||||
| 1,575,000 | 5.500 | 03/15/14 | 1,480,500 | |||||||||||||
| Viacom, Inc. | ||||||||||||||||
| 1,975,000 | 5.750 | 04/30/11 | 1,977,459 | |||||||||||||
| 1,400,000 | 6.875 | 04/30/36 | 1,409,715 | |||||||||||||
| 25,792,916 | ||||||||||||||||
| Media – Non Cable – 0.4% | ||||||||||||||||
| Clear Channel Communications, Inc. | ||||||||||||||||
| 5,325,000 | 8.000 | 11/01/08 | 5,551,741 | |||||||||||||
| News America, Inc. | ||||||||||||||||
| 2,750,000 | 6.400 | 12/15/35 | 2,757,433 | |||||||||||||
| 8,309,174 | ||||||||||||||||
| Noncaptive – Financial – 1.2% | ||||||||||||||||
| GATX Financial Corp. | ||||||||||||||||
| 5,775,000 | 5.125 | 04/15/10 | 5,711,481 | |||||||||||||
| General Electric Capital Corp. | ||||||||||||||||
| 3,000,000 | 7.375 | 01/19/10 | 3,201,935 | |||||||||||||
| HSBC Finance Corp. | ||||||||||||||||
| 8,375,000 | 5.700 | 06/01/11 | 8,545,816 | |||||||||||||
| 1,000,000 | 6.375 | 10/15/11 | 1,049,537 | |||||||||||||
| PHH Corp. | ||||||||||||||||
| 7,950,000 | 6.000 | 03/01/08 | 7,967,562 | |||||||||||||
| 1,900,000 | 7.125 | 03/01/13 | 1,940,852 | |||||||||||||
| 28,417,183 | ||||||||||||||||
| Pipelines – 0.8% | ||||||||||||||||
| CenterPoint Energy Resources Corp. Series B | ||||||||||||||||
| 4,075,000 | 5.950 | 01/15/14 | 4,108,240 | |||||||||||||
| Energy Transfer Partners | ||||||||||||||||
| 5,850,000 | 5.650 | 08/01/12 | 5,859,377 | |||||||||||||
| 2,775,000 | 5.950 | 02/01/15 | 2,800,961 | |||||||||||||
| Enterprise Products Operating LP | ||||||||||||||||
| 3,525,000 | 5.600 | 10/15/14 | 3,478,562 | |||||||||||||
| Enterprise Products Partners LP | ||||||||||||||||
| 2,450,000 | 5.000 | 03/01/15 | 2,315,598 | |||||||||||||
| Panhandle Eastern Pipeline | ||||||||||||||||
| 1,350,000 | 4.800 | 08/15/08 | 1,338,091 | |||||||||||||
| 19,900,829 | ||||||||||||||||
| Property/Casualty Insurance – 1.8% | ||||||||||||||||
| ACE Ltd. | ||||||||||||||||
| 6,575,000 | 6.000 | 04/01/07 | 6,586,381 | |||||||||||||
| AON Capital Trust A | ||||||||||||||||
| 1,852,000 | 8.205 | 01/01/27 | 2,153,022 | |||||||||||||
| Arch Capital Group Ltd. | ||||||||||||||||
| 3,200,000 | 7.350 | 05/01/34 | 3,506,794 | |||||||||||||
| Aspen Insurance Holdings Ltd. | ||||||||||||||||
| 1,525,000 | 6.000 | 08/15/14 | 1,492,589 | |||||||||||||
| CNA Financial Corp. | ||||||||||||||||
| 1,375,000 | 6.750 | 11/15/06 | 1,375,470 | |||||||||||||
| 98,000 | 6.600 | 12/15/08 | 100,360 | |||||||||||||
| 500,000 | 5.850 | 12/15/14 | 503,040 | |||||||||||||
| Endurance Specialty Holdings Ltd. | ||||||||||||||||
| 2,975,000 | 6.150 | 10/15/15 | 2,963,296 | |||||||||||||
| 750,000 | 7.000 | 07/15/34 | 778,353 | |||||||||||||
| Hartford Financial Services Group, Inc. | ||||||||||||||||
| 2,000,000 | 7.900 | 06/15/10 | 2,178,317 | |||||||||||||
| Liberty Mutual Group(a) | ||||||||||||||||
| 3,700,000 | 7.000 | 03/15/34 | 3,828,314 | |||||||||||||
| 550,000 | 6.500 | 03/15/35 | 542,931 | |||||||||||||
| 3,430,000 | 7.500 | 08/15/36 | 3,815,066 | |||||||||||||
| QBE Insurance Group Ltd.(a)(b) | ||||||||||||||||
| 3,150,000 | 5.647 | 07/01/23 | 3,071,206 | |||||||||||||
| Royal & Sun Alliance Insurance Group PLC | ||||||||||||||||
| 1,225,000 | 8.500 | 07/29/49 | 2,700,111 | |||||||||||||
| SAFECO Corp. | ||||||||||||||||
| 5,000,000 | 6.875 | 07/15/07 | 5,051,435 | |||||||||||||
| Zurich Capital Trust I(a) | ||||||||||||||||
| 2,500,000 | 8.376 | 06/01/37 | 2,626,948 | |||||||||||||
| 43,273,633 | ||||||||||||||||
| REIT – 0.6% | ||||||||||||||||
| Brandywine Operating Partnership LP | ||||||||||||||||
| 3,740,000 | 4.500 | 11/01/09 | 3,632,946 | |||||||||||||
| EOP Operating LP | ||||||||||||||||
| 1,500,000 | 7.750 | 11/15/07 | 1,534,995 | |||||||||||||
| iStar Financial, Inc. | ||||||||||||||||
| 2,200,000 | 5.650 | 09/15/11 | 2,204,814 | |||||||||||||
| iStar Financial, Inc. Series B | ||||||||||||||||
| 3,275,000 | 5.700 | 03/01/14 | 3,261,815 | |||||||||||||
| Liberty Property LP | ||||||||||||||||
| 1,100,000 | 7.250 | 03/15/11 | 1,168,263 | |||||||||||||
| Simon Property Group LP | ||||||||||||||||
| 1,625,000 | 7.000 | 06/15/08 | 1,667,003 | |||||||||||||
| 13,469,836 | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
37
GOLDMAN SACHS CORE FIXED INCOME FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||||
| Technology – 0.2% | ||||||||||||||||
| First Data Corp. | ||||||||||||||||
| $ | 4,075,000 | 5.625 | % | 11/01/11 | $ | 4,164,679 | ||||||||||
| Tobacco – 0.2% | ||||||||||||||||
| Altria Group, Inc. | ||||||||||||||||
| 475,000 | 7.000 | 11/04/13 | 520,187 | |||||||||||||
| 2,745,000 | 7.750 | 01/15/27 | 3,367,670 | |||||||||||||
| 3,887,857 | ||||||||||||||||
| Wireless Telecommunications – 0.7% | ||||||||||||||||
| America Movil SA de CV | ||||||||||||||||
| 1,800,000 | 5.500 | 03/01/14 | 1,758,168 | |||||||||||||
| AT&T Wireless Services, Inc. | ||||||||||||||||
| 5,775,000 | 7.875 | 03/01/11 | 6,337,179 | |||||||||||||
| Intelsat | ||||||||||||||||
| 3,850,000 | 5.250 | 11/01/08 | 3,724,875 | |||||||||||||
| Telecom Italia Capital SA | ||||||||||||||||
| 2,475,000 | 4.875 | 10/01/10 | 2,411,952 | |||||||||||||
| Verizon Wireless Capital LLC | ||||||||||||||||
| 3,000,000 | 5.375 | 12/15/06 | 2,999,358 | |||||||||||||
| 17,231,532 | ||||||||||||||||
| Wirelines Telecommunications – 2.0% | ||||||||||||||||
| Ameritech Capital Funding | ||||||||||||||||
| 775,000 | 6.250 | 05/18/09 | 786,655 | |||||||||||||
| BellSouth Corp. | ||||||||||||||||
| 7,000,000 | 6.000 | 10/15/11 | 7,189,840 | |||||||||||||
| Deutsche Telekom International Finance BV | ||||||||||||||||
| 2,800,000 | 5.375 | 03/23/11 | 2,795,178 | |||||||||||||
| 4,075,000 | 8.250 | 06/15/30 | 5,056,520 | |||||||||||||
| Embarq Corp. | ||||||||||||||||
| 1,500,000 | 7.995 | 06/01/36 | 1,595,102 | |||||||||||||
| France Telecom SA | ||||||||||||||||
| 5,750,000 | 7.750 | 03/01/11 | 6,316,231 | |||||||||||||
| Qwest Capital Funding, Inc. | ||||||||||||||||
| 500,000 | 7.900 | 08/15/10 | 516,250 | |||||||||||||
| SBC Communications, Inc. | ||||||||||||||||
| 2,725,000 | 4.125 | 09/15/09 | 2,644,183 | |||||||||||||
| Sprint Capital Corp. | ||||||||||||||||
| 300,000 | 6.000 | 01/15/07 | 300,149 | |||||||||||||
| 3,050,000 | 6.875 | 11/15/28 | 3,128,889 | |||||||||||||
| Telecom Italia Capital | ||||||||||||||||
| 3,050,000 | 4.000 | 01/15/10 | 2,905,027 | |||||||||||||
| 2,625,000 | 4.950 | 09/30/14 | 2,434,871 | |||||||||||||
| Telecomunicaciones de Puerto Rico, Inc. | ||||||||||||||||
| 2,650,000 | 6.800 | 05/15/09 | 2,713,279 | |||||||||||||
| Telefonica Europe BV | ||||||||||||||||
| 2,575,000 | 7.750 | 09/15/10 | 2,786,369 | |||||||||||||
| TPSA Finance BV(a) | ||||||||||||||||
| 2,200,000 | 7.750 | 12/10/08 | 2,297,836 | |||||||||||||
| TPSA Finance BV | ||||||||||||||||
| 3,100,000 | 7.625 | 01/30/11 | 3,341,663 | |||||||||||||
| 46,808,042 | ||||||||||||||||
| TOTAL CORPORATE BONDS | ||||||||||||||||
| (Cost $367,240,784) | $ | 371,086,278 | ||||||||||||||
Mortgage-Backed Obligations – 49.4% | ||||||||||||||||
| Adjustable Rate FNMA(b) – 0.4% | ||||||||||||||||
| $ | 80,878 | 4.486 | % | 03/01/33 | 81,291 | |||||||||||
| 10,280,179 | 3.851 | 10/01/33 | 10,199,051 | |||||||||||||
| 10,280,342 | ||||||||||||||||
| Adjustable Rate Non-Agency(b) – 25.2% | ||||||||||||||||
| Bear Stearns Adjustable Rate Mortgage Trust Series 2003-5, Class 1A1 | ||||||||||||||||
| 232,723 | 5.979 | 08/25/33 | 235,856 | |||||||||||||
| Bear Stearns Alternative-A Trust Series 2005-8, Class 11A1 | ||||||||||||||||
| 3,868,524 | 5.590 | 10/25/35 | 3,882,685 | |||||||||||||
| Bear Stearns Mortgage Funding Trust Series 2006-AR2, Class 1A1 | ||||||||||||||||
| 22,882,018 | 5.520 | 09/25/36 | 22,882,018 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-51, Class 1A1 | ||||||||||||||||
| 8,579,656 | 5.640 | 11/20/35 | 8,618,830 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-51, Class 2A1 | ||||||||||||||||
| 12,119,976 | 5.620 | 11/20/35 | 12,172,279 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-51, Class 4A1 | ||||||||||||||||
| 10,243,254 | 5.640 | 11/20/35 | 10,290,278 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-59, Class 1A1 | ||||||||||||||||
| 10,651,217 | 5.660 | 11/20/35 | 10,686,411 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-59, Class 1A2A | ||||||||||||||||
| 8,876,014 | 5.710 | 11/20/35 | 8,902,293 | |||||||||||||
| Countrywide Alternative Loan Trust Series 2005-62, Class 1A1 | ||||||||||||||||
| 15,409,419 | 5.620 | 12/25/35 | 15,474,835 | |||||||||||||
| Countrywide Home Loan Mortgage Pass Through Trust Series 2006-3, Class 1A1 | ||||||||||||||||
| 8,041,706 | 5.560 | 03/25/36 | 8,052,174 | |||||||||||||
| Countrywide Home Loans Series 2003-37, Class 1A1 | ||||||||||||||||
| 148,854 | 5.875 | 08/25/33 | 148,610 | |||||||||||||
| Countrywide Securities Corp. Series 2006-OA19, Class A1 | ||||||||||||||||
| 23,500,000 | 5.525 | 12/25/46 | 23,500,000 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-AR9, Class 2A2 | ||||||||||||||||
| 190,862 | 5.100 | 03/25/33 | 189,991 | |||||||||||||
| Downey Savings & Loan Association Mortgage Loan Trust Series 2005-AR6, Class 2A1A | ||||||||||||||||
| 12,027,364 | 5.610 | 10/19/45 | 12,072,785 | |||||||||||||
| Harborside Mortgage Loan Trust Series 2006-12, Class 2A2A | ||||||||||||||||
| 28,000,000 | 5.500 | 12/19/45 | 28,000,000 | |||||||||||||
| Harborview Mortgage Loan Trust Series 2005-10, Class 2A1A | ||||||||||||||||
| 16,250,622 | 5.630 | 11/19/35 | 16,300,277 | |||||||||||||
| Harborview Mortgage Loan Trust Series 2005-16, Class 2A1A | ||||||||||||||||
| 3,721,952 | 5.560 | 01/19/36 | 3,732,111 | |||||||||||||
| Harborview Mortgage Loan Trust Series 2005-16, Class 3A1A | ||||||||||||||||
| 20,179,514 | 5.570 | 01/19/36 | 20,173,593 | |||||||||||||
| Impac CMB Trust Series 2004-8, Class 1A | ||||||||||||||||
| 2,761,614 | 5.680 | 10/25/34 | 2,777,551 | |||||||||||||
| Impac CMB Trust Series 2005-6, Class 1A1 | ||||||||||||||||
| 13,772,017 | 5.570 | 10/25/35 | 13,781,915 | |||||||||||||
| Impac Secured Assets Corp. Series 2005-2, Class A1W | ||||||||||||||||
| 13,345,329 | 5.570 | 03/25/36 | 13,361,747 | |||||||||||||
| Indymac Index Mortgage Loan Trust Series 2006-AR2, Class 1A1A | ||||||||||||||||
| 11,953,992 | 5.540 | 04/25/46 | 11,963,711 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
38
GOLDMAN SACHS CORE FIXED INCOME FUND
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| Adjustable Rate Non-Agency(b) – (continued) | ||||||||||||||||
| Indymac Index Mortgage Loan Trust Series 2006-AR4 Class A1A | ||||||||||||||||
| $ | 14,044,558 | 5.540 | % | 05/25/46 | $ | 14,052,172 | ||||||||||
| Lehman XS Trust Series 2005-5N, Class 3A1A | ||||||||||||||||
| 14,052,398 | 5.620 | 11/25/35 | 14,064,400 | |||||||||||||
| Lehman XS Trust Series 2005-9N, Class 1A1 | ||||||||||||||||
| 14,461,015 | 5.590 | 02/25/36 | 14,474,572 | |||||||||||||
| Luminent Mortgage Trust Series 2006-2, Class A1A | ||||||||||||||||
| 14,297,019 | 5.520 | 02/25/46 | 14,302,112 | |||||||||||||
| Luminent Mortgage Trust Series 2006-2, Class A1B | ||||||||||||||||
| 2,859,404 | 5.600 | 02/25/46 | 2,862,363 | |||||||||||||
| Master Adjustable Rate Mortgages Trust Series 2004-9, Class 2A1 | ||||||||||||||||
| 762,621 | 5.700 | 11/25/34 | 766,563 | |||||||||||||
| MLCC Mortgage Investors, Inc. Series 2004-E, Class A2B | ||||||||||||||||
| 6,543,407 | 5.780 | 11/25/29 | 6,547,493 | |||||||||||||
| Mortgage IT Trust Series 2005-AR1, Class 1A1 | ||||||||||||||||
| 13,622,184 | 5.580 | 11/25/35 | 13,666,056 | |||||||||||||
| Sequoia Mortgage Trust Series 2003-4, Class 1A2 | ||||||||||||||||
| 3,906,931 | 5.913 | 07/20/33 | 3,911,650 | |||||||||||||
| Structured Asset Mortgage Investments, Inc. Series 2006-AR1, Class 3A1 | ||||||||||||||||
| 18,780,416 | 5.550 | 02/25/36 | 18,801,039 | |||||||||||||
| Structured Asset Mortgage Investments, Inc. Series 2006-AR2, Class A1 | ||||||||||||||||
| 12,378,766 | 5.550 | 02/25/36 | 12,392,227 | |||||||||||||
| Structured Asset Securities Corp. Series 2003-37A, Class 3A7 | ||||||||||||||||
| 5,158,162 | 4.520 | 12/25/33 | 5,122,190 | |||||||||||||
| Thornburg Mortgage Securities Trust Series 2006-5, Class A1 | ||||||||||||||||
| 29,519,526 | 5.450 | 08/25/36 | 29,454,208 | |||||||||||||
| UBS Warburg LLC Series 2006-0A2, Class 4A1 | ||||||||||||||||
| 17,275,725 | 5.503 | 11/25/46 | 17,267,627 | |||||||||||||
| Washington Mutual Series 2002-AR19, Class A7 | ||||||||||||||||
| 926,911 | 4.679 | 02/25/33 | 915,365 | |||||||||||||
| Washington Mutual Series 2005-AR8, Class 2A1A | ||||||||||||||||
| 17,805,153 | 5.610 | 07/25/45 | 17,872,164 | |||||||||||||
| Washington Mutual Series 2005-AR11, Class A1A | ||||||||||||||||
| 10,180,960 | 5.640 | 08/25/45 | 10,211,176 | |||||||||||||
| Washington Mutual Series 2005-AR13, Class A1A1 | ||||||||||||||||
| 17,635,704 | 5.610 | 10/25/45 | 17,733,519 | |||||||||||||
| Washington Mutual Series 2005-AR15, Class A1A1 | ||||||||||||||||
| 19,388,223 | 5.580 | 11/25/45 | 19,453,391 | |||||||||||||
| Washington Mutual Series 2005-AR17, Series A1A1 | ||||||||||||||||
| 14,445,066 | 5.590 | 12/25/45 | 14,408,809 | |||||||||||||
| Washington Mutual Series 2006-AR13, Class 1A | ||||||||||||||||
| 17,526,099 | 5.544 | 10/25/46 | 17,519,938 | |||||||||||||
| Washington Mutual, Inc. Series 2006-AR11, Class 3A1A | ||||||||||||||||
| 4,942,505 | 5.584 | 09/25/46 | 4,946,173 | |||||||||||||
| Wells Fargo Mortgage Backed Securities Trust Series 2005-AR16, Class 1A1 | ||||||||||||||||
| 14,807,765 | 4.977 | 10/25/35 | 14,824,832 | |||||||||||||
| Wells Fargo Mortgage Backed Securities Trust Series 2006-AR2, Class 2A3 | ||||||||||||||||
| 27,808,893 | 5.092 | 03/25/36 | 27,647,109 | |||||||||||||
| WMALT Mortgage Pass-Through Certificates Series 2006-AR7, Class A1A | ||||||||||||||||
| 12,312,420 | 5.483 | 09/25/46 | 12,329,254 | |||||||||||||
| WMALT Mortgage Pass-Through Certificates Series 2006-AR9, Class 2A | ||||||||||||||||
| 24,000,000 | 5.504 | 11/25/46 | 24,000,000 | |||||||||||||
| 596,746,352 | ||||||||||||||||
| CMBS – 8.9% | ||||||||||||||||
| Interest Only(a)(b)(c) – 0.1% | ||||||||||||||||
| Bear Stearns Commercial Mortgage Securities, Inc. Series 2001-TOP2, Class X2 | ||||||||||||||||
| 38,000,000 | 1.288 | 02/15/35 | 623,671 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2002-CKS4, Class ASP | ||||||||||||||||
| 26,177,440 | 1.592 | 11/15/36 | 1,022,483 | |||||||||||||
| 1,646,154 | ||||||||||||||||
| Sequential Fixed Rate – 8.8% | ||||||||||||||||
| Asset Securitization Corp. Series 1997-D4, Class A1D | ||||||||||||||||
| 578,455 | 7.490 | 04/14/29 | 581,262 | |||||||||||||
| Banc of America Commercial Mortgage, Inc. Series 2005-6, Class A4 | ||||||||||||||||
| 20,000,000 | 5.182 | 09/10/47 | 19,934,392 | |||||||||||||
| Banc of America Commercial Mortgage, Inc. Series 2006-4 Class A4 | ||||||||||||||||
| 12,000,000 | 5.634 | 07/10/46 | 12,297,287 | |||||||||||||
| Bear Stearns Commercial Mortgage Securities Series 2006-PW12, Class A4 | ||||||||||||||||
| 12,500,000 | 5.711 | 09/11/38 | 12,950,467 | |||||||||||||
| Citigroup Commercial Mortgage Trust Series 2006-C4, Class A3 | ||||||||||||||||
| 13,000,000 | 5.720 | 03/15/49 | 13,467,649 | |||||||||||||
| Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2006-C02, Class A4 | ||||||||||||||||
| 15,000,000 | 5.362 | 01/15/46 | 15,135,822 | |||||||||||||
| Commercial Mortgage Acceptance Corp. Series 1997-ML1, Class A3 | ||||||||||||||||
| 2,800,000 | 6.570 | 12/15/30 | 2,814,607 | |||||||||||||
| Commercial Mortgage Pass Through Certificates Series 2006-C7, Class A4 | ||||||||||||||||
| 24,000,000 | 5.769 | 06/10/46 | 24,922,730 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 1997-C2, Class A3 | ||||||||||||||||
| 9,360,907 | 6.550 | 01/17/35 | 9,446,219 | |||||||||||||
| First Union National Bank Commercial Mortgage Trust Series 2000-C2, Class A2 | ||||||||||||||||
| 17,000,000 | 7.202 | 10/15/32 | 18,082,618 | |||||||||||||
| GMAC Commercial Mortgage Securities, Inc. Series 2002-C1, Class A2 | ||||||||||||||||
| 15,000,000 | 6.278 | 11/15/39 | 15,668,217 | |||||||||||||
| LB-UBS Commercial Mortgage Trust Series 2005-C5, Class A4 | ||||||||||||||||
| 9,000,000 | 4.954 | 09/15/30 | 8,806,822 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
39
GOLDMAN SACHS CORE FIXED INCOME FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| Sequential Fixed Rate – (continued) | ||||||||||||||||
| LB-UBS Commercial Mortgage Trust Series 2005-C7, Class A4 | ||||||||||||||||
| $ | 10,175,000 | 5.197 | % | 11/15/30 | $ | 10,123,483 | ||||||||||
| LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4 | ||||||||||||||||
| 12,000,000 | 5.156 | 02/15/31 | 11,856,564 | |||||||||||||
| Merrill Lynch Mortgage Investors, Inc. Series 1998-C2, Class A2 | ||||||||||||||||
| 1,231,678 | 6.390 | 02/15/30 | 1,238,418 | |||||||||||||
| Merrill Lynch Mortgage Investors, Inc. Series 1999-C1, Class A2 | ||||||||||||||||
| 4,133,319 | 7.560 | 11/15/31 | 4,335,752 | |||||||||||||
| Morgan Stanley Capital I Series 2006-T21, Class A4 | ||||||||||||||||
| 19,000,000 | 5.162 | 10/12/52 | 18,830,408 | |||||||||||||
| Washington Mutual Series 2006-AR17, Class 1A | ||||||||||||||||
| 9,000,000 | 5.504 | 11/25/46 | 9,000,000 | |||||||||||||
| 209,492,717 | ||||||||||||||||
| TOTAL CMBS | 211,138,871 | |||||||||||||||
| CMO – 0.6% | ||||||||||||||||
| Interest Only(c) – 0.1% | ||||||||||||||||
| ABN AMRO Mortgage Corp. Series 2003-5, Class A2 | ||||||||||||||||
| 2,419,335 | 5.500 | 04/25/33 | 241,717 | |||||||||||||
| Countrywide Home Loan Trust Series 2003-42, Class 2X1(b) | ||||||||||||||||
| 3,136,476 | 0.364 | 10/25/33 | 15,328 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2002-AR31, Class 5X(b) | ||||||||||||||||
| 1,428,402 | 0.000 | 11/25/32 | 857 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-08, Class 3A2 | ||||||||||||||||
| 475,374 | 5.500 | 04/25/33 | 25,903 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-10, Class 3A13 | ||||||||||||||||
| 368,365 | 5.750 | 05/25/33 | 14,423 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-11, Class 1A2 | ||||||||||||||||
| 322,300 | 5.500 | 06/25/33 | 20,484 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-AR18, Class 2X(b) | ||||||||||||||||
| 3,375,278 | 0.782 | 07/25/33 | 22,210 | |||||||||||||
| CS First Boston Mortgage Securities Corp. Series 2003-AR20, Class 2X(b) | ||||||||||||||||
| 3,814,326 | 0.605 | 08/25/33 | 24,375 | |||||||||||||
| FNMA Series 1992-24, Class N | ||||||||||||||||
| 94 | 789.000 | 03/25/07 | 184 | |||||||||||||
| FNMA Series 2004-47, Class EI(b) | ||||||||||||||||
| 7,004,709 | 0.000 | 06/25/34 | 283,033 | |||||||||||||
| FNMA Series 2004-62, Class DI(b) | ||||||||||||||||
| 3,102,415 | 0.000 | 07/25/33 | 126,996 | |||||||||||||
| FNMA Series 2004-71, Class DI(b) | ||||||||||||||||
| 6,364,157 | 0.000 | 04/25/34 | 166,143 | |||||||||||||
| Washington Mutual Series 2003-AR04, Class X1(b) | ||||||||||||||||
| 5,213,208 | 1.181 | 01/25/08 | 58,333 | |||||||||||||
| Washington Mutual Series 2003-AR05, Class X1(b) | ||||||||||||||||
| 14,753,636 | 0.756 | 02/25/08 | 125,543 | |||||||||||||
| Washington Mutual Series 2003-AR06, Class X2 | ||||||||||||||||
| 11,481,200 | 0.371 | 05/25/08 | 48,591 | |||||||||||||
| Washington Mutual Series 2003-AR07, Class X(b) | ||||||||||||||||
| 18,557,053 | 0.940 | 06/25/08 | 196,532 | |||||||||||||
| Washington Mutual Series 2003-AR12, Class X(b) | ||||||||||||||||
| 12,589,701 | 0.484 | 02/25/34 | 88,162 | |||||||||||||
| Wells Fargo Mortgage Backed Securities Trust Series 2003-G, ClassAI0(b) | ||||||||||||||||
| 13,192,041 | 0.760 | 06/25/33 | 352,226 | |||||||||||||
| 1,811,040 | ||||||||||||||||
| Inverse Floaters(b) – 0.2% | ||||||||||||||||
| FHLMC Series 1544, Class M | ||||||||||||||||
| 44,368 | 11.206 | 07/15/08 | 45,634 | |||||||||||||
| FNMA Series 1993-072, Class SA | ||||||||||||||||
| 17,370 | 9.123 | 05/25/08 | 17,836 | |||||||||||||
| FNMA Series 1993-093, Class SA | ||||||||||||||||
| 24,598 | 11.994 | 05/25/08 | 25,644 | |||||||||||||
| FNMA Series 1993-095, Class SE | ||||||||||||||||
| 29,490 | 12.304 | 06/25/08 | 30,902 | |||||||||||||
| FNMA Series 1993-135, Class S | ||||||||||||||||
| 60,779 | 6.500 | 07/25/08 | 62,228 | |||||||||||||
| FNMA Series 1993-175, Class SA | ||||||||||||||||
| 208,973 | 11.895 | 09/25/08 | 219,606 | |||||||||||||
| GNMA Series 2001-48, Class SA | ||||||||||||||||
| 229,983 | 9.198 | 10/16/31 | 260,933 | |||||||||||||
| GNMA Series 2001-51, Class SA | ||||||||||||||||
| 445,156 | 9.447 | 10/16/31 | 513,234 | |||||||||||||
| GNMA Series 2001-51, Class SB | ||||||||||||||||
| 460,045 | 9.198 | 10/16/31 | 518,578 | |||||||||||||
| GNMA Series 2001-59, Class SA | ||||||||||||||||
| 81,205 | 9.035 | 11/16/24 | 92,153 | |||||||||||||
| GNMA Series 2002-11, Class SA | ||||||||||||||||
| 231,889 | 12.740 | 02/16/32 | 291,323 | |||||||||||||
| GNMA Series 2002-13, Class SB | ||||||||||||||||
| 540,552 | 12.740 | 02/16/32 | 675,387 | |||||||||||||
| Morgan Stanley Mortgage Trust Series 40, Class 16 | ||||||||||||||||
| 825,544 | 8.949 | 01/20/22 | 829,078 | |||||||||||||
| 3,582,536 | ||||||||||||||||
| PAC – 0.0% | ||||||||||||||||
| FNMA Series 1999-51, Class LG | ||||||||||||||||
| 260,717 | 6.500 | 12/25/28 | 260,564 | |||||||||||||
| Regular Floater(b) – 0.0% | ||||||||||||||||
| FNMA REMIC Trust Series 1993-175, Class FA | ||||||||||||||||
| 451,383 | 4.060 | 09/25/08 | 445,440 | |||||||||||||
| Sequential Fixed Rate – 0.3% | ||||||||||||||||
| FHLMC Series 2367, Class BC | ||||||||||||||||
| 798,949 | 6.000 | 04/15/16 | 798,149 | |||||||||||||
| FNMA REMIC Trust Series 1993-78, Class H | ||||||||||||||||
| 440,829 | 6.500 | 06/25/08 | 442,134 | |||||||||||||
| FNMA Series 1999-1, Class PG | ||||||||||||||||
| 419,833 | 6.500 | 04/25/28 | 418,378 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
40
GOLDMAN SACHS CORE FIXED INCOME FUND
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| Sequential Fixed Rate – (continued) | ||||||||||||||||
| FNMA Series 2001-M2, Class C | ||||||||||||||||
| $ | 5,390,822 | 6.300 | % | 09/25/15 | $ | 5,532,221 | ||||||||||
| 7,190,882 | ||||||||||||||||
| TOTAL CMO | 13,290,462 | |||||||||||||||
| FHLB – 0.1% | ||||||||||||||||
| 1,269,571 | 7.040 | 08/01/15 | 1,405,487 | |||||||||||||
| FHLMC – 4.2% | ||||||||||||||||
| 307,624 | 5.000 | 12/01/12 | 305,919 | |||||||||||||
| 31,793 | 5.500 | 07/01/13 | 31,948 | |||||||||||||
| 206,753 | 5.500 | 12/01/13 | 207,766 | |||||||||||||
| 2,630,624 | 6.500 | 12/01/13 | 2,683,946 | |||||||||||||
| 77,600 | 5.500 | 02/01/14 | 77,980 | |||||||||||||
| 29,064 | 5.500 | 06/01/14 | 29,188 | |||||||||||||
| 71,152 | 5.500 | 09/01/14 | 71,457 | |||||||||||||
| 4,270 | 7.000 | 10/01/14 | 4,365 | |||||||||||||
| 1,431,625 | 6.000 | 12/01/14 | 1,438,261 | |||||||||||||
| 39,883 | 7.000 | 05/01/15 | 40,769 | |||||||||||||
| 116,244 | 8.000 | 07/01/15 | 122,492 | |||||||||||||
| 14,995 | 7.000 | 02/01/16 | 15,381 | |||||||||||||
| 36,508 | 7.000 | 03/01/16 | 37,447 | |||||||||||||
| 920,941 | 7.500 | 05/01/16 | 960,436 | |||||||||||||
| 3,337 | 7.000 | 10/01/17 | 3,468 | |||||||||||||
| 2,712,191 | 4.500 | 05/01/18 | 2,626,047 | |||||||||||||
| 642,321 | 4.500 | 06/01/18 | 621,964 | |||||||||||||
| 2,639,004 | 4.500 | 09/01/18 | 2,555,368 | |||||||||||||
| 1,907,283 | 4.500 | 10/01/18 | 1,846,794 | |||||||||||||
| 1,746,747 | 5.000 | 10/01/18 | 1,723,439 | |||||||||||||
| 2,450,002 | 4.500 | 11/01/18 | 2,372,296 | |||||||||||||
| 2,027,363 | 4.500 | 12/01/18 | 1,963,110 | |||||||||||||
| 5,753,406 | 5.000 | 12/01/18 | 5,676,648 | |||||||||||||
| 713,466 | 4.500 | 01/01/19 | 690,854 | |||||||||||||
| 1,900,635 | 4.500 | 03/01/19 | 1,839,636 | |||||||||||||
| 44,941,106 | 4.000 | 06/01/19 | 42,557,092 | |||||||||||||
| 8,796,067 | 4.500 | 06/01/19 | 8,517,296 | |||||||||||||
| 707,572 | 5.000 | 06/01/19 | 697,355 | |||||||||||||
| 3,897,313 | 4.500 | 02/01/20 | 3,773,797 | |||||||||||||
| 1,980,535 | 5.500 | 05/01/23 | 1,970,672 | |||||||||||||
| 1,219,650 | 5.500 | 06/01/23 | 1,213,576 | |||||||||||||
| 1,198,962 | 5.500 | 07/01/23 | 1,192,990 | |||||||||||||
| 3,673,384 | 4.500 | 10/01/23 | 3,509,053 | |||||||||||||
| 598,378 | 5.500 | 10/01/25 | 596,435 | |||||||||||||
| 830,783 | 5.500 | 11/01/25 | 828,086 | |||||||||||||
| 83,586 | 7.000 | 06/01/26 | 86,565 | |||||||||||||
| 63,263 | 7.500 | 03/01/27 | 65,470 | |||||||||||||
| 18,178 | 6.500 | 06/01/29 | 18,651 | |||||||||||||
| 2,551,175 | 6.500 | 12/01/29 | 2,618,353 | |||||||||||||
| 68,591 | 7.500 | 12/01/30 | 70,982 | |||||||||||||
| 59,294 | 7.500 | 01/01/31 | 61,360 | |||||||||||||
| 86,875 | 6.500 | 03/01/32 | 88,974 | |||||||||||||
| 20,738 | 6.500 | 04/01/32 | 21,239 | |||||||||||||
| 220,271 | 6.500 | 07/01/32 | 225,593 | |||||||||||||
| 1,544,475 | 6.500 | 08/01/33 | 1,581,788 | |||||||||||||
| 559,423 | 6.500 | 10/01/33 | 571,892 | |||||||||||||
| 98,214,198 | ||||||||||||||||
| FNMA – 9.4% | ||||||||||||||||
| 1,378 | 9.000 | 09/15/08 | 1,409 | |||||||||||||
| 385,815 | 8.500 | 10/01/15 | 411,007 | |||||||||||||
| 15,724 | 7.000 | 01/01/16 | 16,060 | |||||||||||||
| 757,630 | 6.000 | 12/01/16 | 770,406 | |||||||||||||
| 9,027,578 | 5.000 | 10/01/17 | 8,913,529 | |||||||||||||
| 60,225,431 | 5.000 | 12/01/17 | 59,464,581 | |||||||||||||
| 1,729,759 | 5.000 | 01/01/18 | 1,707,907 | |||||||||||||
| 5,904,194 | 5.000 | 02/01/18 | 5,828,264 | |||||||||||||
| 1,240,941 | 4.500 | 04/01/18 | 1,203,128 | |||||||||||||
| 1,781,531 | 5.000 | 04/01/18 | 1,758,587 | |||||||||||||
| 10,507,014 | 4.500 | 05/01/18 | 10,186,855 | |||||||||||||
| 1,281,235 | 5.000 | 05/01/18 | 1,264,735 | |||||||||||||
| 14,268,178 | 4.500 | 06/01/18 | 13,833,408 | |||||||||||||
| 951,153 | 5.000 | 06/01/18 | 938,903 | |||||||||||||
| 6,867,767 | 4.000 | 07/01/18 | 6,523,402 | |||||||||||||
| 2,294,832 | 4.500 | 07/01/18 | 2,224,905 | |||||||||||||
| 3,431,988 | 4.000 | 08/01/18 | 3,259,900 | |||||||||||||
| 1,594,679 | 4.500 | 08/01/18 | 1,546,087 | |||||||||||||
| 91,931 | 6.000 | 08/01/18 | 92,870 | |||||||||||||
| 28,726,158 | 4.000 | 09/01/18 | 27,285,761 | |||||||||||||
| 2,955,559 | 4.500 | 10/01/18 | 2,865,499 | |||||||||||||
| 3,012,917 | 5.000 | 11/01/18 | 2,974,115 | |||||||||||||
| 94,510 | 4.500 | 12/01/18 | 91,630 | |||||||||||||
| 2,692,365 | 5.500 | 12/01/18 | 2,702,604 | |||||||||||||
| 339,820 | 4.500 | 02/01/19 | 329,094 | |||||||||||||
| 2,839,584 | 4.500 | 04/01/19 | 2,749,953 | |||||||||||||
| 3,213,774 | 5.000 | 04/01/19 | 3,172,385 | |||||||||||||
| 1,194,113 | 4.500 | 05/01/19 | 1,156,420 | |||||||||||||
| 210,534 | 5.000 | 05/01/19 | 207,644 | |||||||||||||
| 1,102,085 | 4.500 | 06/01/19 | 1,067,796 | |||||||||||||
| 372,550 | 5.000 | 06/01/19 | 367,752 | |||||||||||||
| 126,504 | 4.500 | 09/01/19 | 122,511 | |||||||||||||
| 138,648 | 4.500 | 10/01/19 | 134,272 | |||||||||||||
| 539,333 | 4.500 | 11/01/19 | 522,307 | |||||||||||||
| 472,937 | 5.000 | 11/01/19 | 466,446 | |||||||||||||
| 197,800 | 4.500 | 12/01/19 | 191,556 | |||||||||||||
| 891,669 | 5.000 | 12/01/19 | 880,186 | |||||||||||||
| 11,844,589 | 4.500 | 09/01/23 | 11,322,610 | |||||||||||||
| 1,923,403 | 4.500 | 10/01/23 | 1,828,001 | |||||||||||||
| 2,800,430 | 6.460 | 12/01/28 | 2,970,401 | |||||||||||||
| 12,050 | 7.500 | 03/01/29 | 12,452 | |||||||||||||
| 11,237 | 7.500 | 08/01/29 | 11,612 | |||||||||||||
| 4,273 | 7.500 | 11/01/29 | 4,415 | |||||||||||||
| 56,027 | 6.500 | 12/01/30 | 57,379 | |||||||||||||
| 86,933 | 7.500 | 12/01/30 | 89,627 | |||||||||||||
| 153,453 | 8.000 | 01/01/31 | 160,445 | |||||||||||||
| 105,759 | 8.000 | 02/01/31 | 111,266 | |||||||||||||
| 852,286 | 7.000 | 03/01/31 | 879,231 | |||||||||||||
| 17,101 | 6.500 | 09/01/33 | 17,470 | |||||||||||||
| 981,824 | 8.000 | 11/01/36 | 1,021,251 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
41
GOLDMAN SACHS CORE FIXED INCOME FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
| FNMA – (continued) | ||||||||||||||||
| $ | 19,000,000 | 7.000 | % | TBA-15yr | (d) | $ | 19,534,375 | |||||||||
| 16,000,000 | 7.500 | TBA-15yr | (d) | 16,584,992 | ||||||||||||
| 221,839,401 | ||||||||||||||||
| Principal Only(e) – 0.6% | ||||||||||||||||
| FHLMC Series 235, Class PO | ||||||||||||||||
| 9,078,767 | 0.000 | 02/01/36 | 6,735,242 | |||||||||||||
| FNMA Series 363, Class 1 | ||||||||||||||||
| 9,187,288 | 0.000 | 11/01/35 | 6,883,038 | |||||||||||||
| 13,618,280 | ||||||||||||||||
| TOTAL MORTGAGE-BACKED OBLIGATIONS | ||||||||||||||||
| (Cost $1,163,444,174) | $ | 1,166,533,393 | ||||||||||||||
Agency Debentures – 18.0% | ||||||||||||||||
| FFCB | ||||||||||||||||
| $ | 2,500,000 | 3.250 | % | 06/15/07 | $ | 2,469,670 | ||||||||||
| 2,000,000 | 3.625 | 01/04/08 | 1,967,062 | |||||||||||||
| 3,000,000 | 3.150 | 07/21/08 | 2,912,643 | |||||||||||||
| 9,000,000 | 4.830 | 12/22/14 | 8,915,931 | |||||||||||||
| FHLB | ||||||||||||||||
| 5,000,000 | 4.125 | 11/15/06 | 4,997,425 | |||||||||||||
| 13,000,000 | 4.875 | 11/15/06 | 12,996,997 | |||||||||||||
| 37,000,000 | 5.270 | (b) | 12/13/06 | 37,000,666 | ||||||||||||
| 100,000,000 | 4.800 | 05/02/08 | 99,814,100 | |||||||||||||
| 1,500,000 | 5.800 | 09/02/08 | 1,522,218 | |||||||||||||
| 5,000,000 | 5.375 | (f) | 05/15/09 | 5,057,566 | ||||||||||||
| 10,000,000 | 6.715 | 06/29/09 | 10,480,760 | |||||||||||||
| 10,000,000 | 6.500 | 08/14/09 | 10,417,316 | |||||||||||||
| 2,500,000 | 4.000 | 02/15/11 | 2,416,300 | |||||||||||||
| 9,595,000 | 4.250 | 11/15/11 | 9,327,146 | |||||||||||||
| 17,360,000 | 4.500 | 09/14/12 | 16,979,005 | |||||||||||||
| FHLMC | ||||||||||||||||
| 5,000,000 | 6.700 | 01/05/07 | 5,010,870 | |||||||||||||
| 2,500,000 | 3.050 | 01/19/07 | 2,487,438 | |||||||||||||
| 1,950,000 | 3.500 | 09/15/07 | 1,923,133 | |||||||||||||
| 10,540,000 | 3.650 | 01/23/08 | 10,364,730 | |||||||||||||
| 40,000,000 | 4.480 | 09/19/08 | 39,659,144 | |||||||||||||
| 1,810,000 | 5.125 | 07/15/12 | 1,829,818 | |||||||||||||
| 9,000,000 | 5.000 | 01/30/14 | 8,941,711 | |||||||||||||
| FNMA | ||||||||||||||||
| 15,000,000 | 3.550 | 01/12/07 | 14,945,625 | |||||||||||||
| 19,000,000 | 6.160 | 12/18/07 | �� | 19,216,619 | ||||||||||||
| 2,850,000 | 5.750 | 02/15/08 | 2,875,524 | |||||||||||||
| 50,000,000 | 4.200 | 03/24/08 | 49,414,450 | |||||||||||||
| 1,000,000 | 5.250 | 01/15/09 | 1,008,160 | |||||||||||||
| 5,000,000 | 6.250 | 02/01/11 | 5,234,872 | |||||||||||||
| 19,560,000 | 5.300 | 02/22/11 | 19,495,878 | |||||||||||||
| 11,000,000 | 5.625 | 02/28/12 | 10,958,796 | |||||||||||||
| 4,500,000 | 5.250 | 08/01/12 | 4,541,454 | |||||||||||||
| Small Business Administration | ||||||||||||||||
| 890,061 | 6.300 | 06/01/18 | 914,432 | |||||||||||||
| TOTAL AGENCY DEBENTURES | ||||||||||||||||
| (Cost $427,578,616) | $ | 426,097,459 | ||||||||||||||
Asset-Backed Securities – 4.7% | ||||||||||||||||
| Credit Card – 0.1% | ||||||||||||||||
| MBNA Master Credit Card Trust II Series 1999-J, Class A | ||||||||||||||||
| $ | 3,000,000 | 7.000 | % | 02/15/12 | $ | 3,166,680 | ||||||||||
| Home Equity(b) – 4.2% | ||||||||||||||||
| Amortizing Residential Collateral Trust Series 2002-BC1M, Class A | ||||||||||||||||
| 1,326,370 | 5.600 | 01/01/32 | 1,324,297 | |||||||||||||
| ContiMortgage Home Equity Loan Trust Series 1999-1, Class A7 | ||||||||||||||||
| 19,968 | 6.970 | 12/25/13 | 19,931 | |||||||||||||
| Countrywide Asset-Backed Certificates Series 2004-BC5, Class A2 | ||||||||||||||||
| 1,008,621 | 5.590 | 10/25/34 | 1,008,810 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2002-E, Class A | ||||||||||||||||
| 2,817,283 | 5.580 | 10/15/28 | 2,826,200 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2003-A, Class A | ||||||||||||||||
| 8,931,627 | 5.670 | 03/15/29 | 8,953,148 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-G, Class 2A | ||||||||||||||||
| 1,960,895 | 5.540 | 12/15/29 | 1,965,196 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2004-S, Class 1A | ||||||||||||||||
| 6,348,916 | 5.560 | 02/15/30 | 6,357,254 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2005-I, Class 2A | ||||||||||||||||
| 12,523,449 | 5.550 | 02/15/36 | 12,503,881 | |||||||||||||
| Countrywide Home Equity Loan Trust Series 2006-H, Class 2A1B | ||||||||||||||||
| 40,000,000 | 5.489 | 11/15/36 | 39,975,000 | |||||||||||||
| First Franklin Mortgage Loan Asset Backed Certificates Series 2004-FF11, Class 2A2 | ||||||||||||||||
| 6,843,043 | 5.600 | 01/25/35 | 6,850,529 | |||||||||||||
| Impac CMB Trust Series 2004-10, Class 2A | ||||||||||||||||
| 6,913,736 | 5.640 | 03/25/35 | 6,935,904 | |||||||||||||
| Morgan Stanley ABS Capital I Series 2004-HE1, Class A4 | ||||||||||||||||
| 8,393,298 | 5.690 | 01/25/34 | 8,411,400 | |||||||||||||
| Popular ABS Mortgage Pass-Through Trust Series 2004-5, Class AV2 | ||||||||||||||||
| 2,039,582 | 5.660 | 12/25/34 | 2,041,814 | |||||||||||||
| 99,173,364 | ||||||||||||||||
| Manufactured Housing – 0.1% | ||||||||||||||||
| Mid-State Trust Series 4, Class A | ||||||||||||||||
| 1,963,425 | 8.330 | 04/01/30 | 2,026,098 | |||||||||||||
| Utilities – 0.3% | ||||||||||||||||
| Massachusetts RRB Special Purpose Trust Series 1999-1, Class A5 | ||||||||||||||||
| 6,150,000 | 7.030 | 03/15/12 | 6,424,659 | |||||||||||||
| TOTAL ASSET-BACKED SECURITIES | ||||||||||||||||
| (Cost $110,947,162) | $ | 110,790,801 | ||||||||||||||
The accompanying notes are an integral part of these financial statements.
42
GOLDMAN SACHS CORE FIXED INCOME FUND
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
U.S. Treasury Obligations – 6.6% | ||||||||||||||||
| United States Treasury Bonds | ||||||||||||||||
| $ | 31,100,000 | 4.500 | % | 02/15/36 | $ | 30,016,352 | ||||||||||
| United States Treasury Inflation Protected Securities | ||||||||||||||||
| 6,882,682 | 1.875 | 07/15/13 | 6,664,907 | |||||||||||||
| 6,730,984 | 2.000 | 01/15/14 | 6,560,340 | |||||||||||||
| 10,924,665 | 2.000 | 07/15/14 | 10,641,301 | |||||||||||||
| 15,618,329 | 1.875 | 07/15/15 | 15,041,232 | |||||||||||||
| 4,828,122 | 2.000 | 01/15/16 | 4,690,443 | |||||||||||||
| 20,595,432 | 2.500 | 07/15/16 | 20,891,491 | |||||||||||||
| United States Treasury Notes | ||||||||||||||||
| 2,000,000 | 5.625 | 05/15/08 | 2,025,600 | |||||||||||||
| 1,000,000 | 6.500 | 02/15/10 | 1,057,290 | |||||||||||||
| United States Treasury Principal-Only STRIPS(e) | ||||||||||||||||
| 560,000 | 0.000 | 05/15/18 | 325,802 | |||||||||||||
| 10,200,000 | 0.000 | 05/15/20 | 5,336,640 | |||||||||||||
| 1,800,000 | 0.000 | 08/15/20 | 928,355 | |||||||||||||
| 56,700,000 | 0.000 | 11/15/21 | 27,466,615 | |||||||||||||
| 6,250,000 | 0.000 | 11/15/22 | 2,886,250 | |||||||||||||
| 25,800,000 | 0.000 | 02/15/25 | 10,672,944 | |||||||||||||
| 27,700,000 | 0.000 | 11/15/26 | 10,582,342 | |||||||||||||
| TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||||
| (Cost $155,360,003) | $ | 155,787,904 | ||||||||||||||
Emerging Markets Debt – 0.3% | ||||||||||||||||
| VTB Capital (Vneshtorgbank)(a) | ||||||||||||||||
| $ | 7,980,000 | 5.970 | % | 08/01/08 | $ | 7,980,000 | ||||||||||
| (Cost $7,980,000) | ||||||||||||||||
| TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT – 94.7% | ||||||||||||||||
| (Cost $2,232,550,739) | $ | 2,238,275,835 | ||||||||||||||
Repurchase Agreement(g) – 9.3% | ||||||||||||||||
| Joint Repurchase Agreement Account II | ||||||||||||||||
| $ | 220,000,000 | 5.316 | % | 11/01/06 | $ | 220,000,000 | ||||||||||
| Maturity Value: $220,032,463 | ||||||||||||||||
| (Cost $220,000,000) | ||||||||||||||||
| TOTAL INVESTMENTS – 104.0% | ||||||||||||||||
| (Cost $2,452,550,739) | $ | 2,458,275,835 | ||||||||||||||
| LIABILITIES IN EXCESS OF OTHER ASSETS – (4.0)% | (93,920,315 | ) | ||||||||||||||
| NET ASSETS – 100.0% | $ | 2,364,355,520 | ||||||||||||||
| The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. |
| * | The principal amount of each security is stated in the currency in which the bond is denominated. All amounts shown are in U.S. dollars unless otherwise noted. See below. |
| Currency Description | ||||
| EUR | = | Euro Currency | ||
| (a) | Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $59,277,748, which represents approximately 2.5% of net assets as of October 31, 2006. |
| (b) | Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006. |
| (c) | Represents security with nominal principal amount. The actual effective yield of this security is different than the stated interest rate due to the amortization of related premiums or accretion of discounts. |
| (d) | TBA (To Be Announced) securities are purchased on a forward commitment basis with an approximate principal amount and no defined maturity date. The actual principal and maturity date will be determined upon settlement when the specific mortgage pools are assigned. Total market value of TBA securities amounts to $36,119,367 which represents approximately 1.5% of net assets as of October 31, 2006. |
| (e) | Security issued with a zero coupon. Income is recognized through the accretion of discount. |
| (f) | A portion of this security is segregated as collateral for initial margin requirement on futures transactions. |
| (g) | Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 55. |
| Investment Abbreviations: | ||||||
| CMBS | — | Commercial Mortgage Backed Securities | ||||
| CMO | — | Collateralized Mortgage Obligations | ||||
| FFCB | — | Federal Farm Credit Bank | ||||
| FHLB | — | Federal Home Loan Bank | ||||
| FHLMC | — | Federal Home Loan Mortgage Corp. | ||||
| FNMA | — | Federal National Mortgage Association | ||||
| GNMA | — | Government National Mortgage Association | ||||
| PAC | — | Planned Amortization Class | ||||
| REIT | — | Real Estate Investment Trust | ||||
| REMIC | — | Real Estate Mortgage Investment Conduit | ||||
| STRIPS | — | Separate Trading of Registered Interest and Principal of Securities | ||||
The accompanying notes are an integral part of these financial statements.
43
GOLDMAN SACHS CORE FIXED INCOME FUND
Schedule of Investments (continued)
October 31, 2006
| ADDITIONAL INVESTMENT INFORMATION |
FORWARD FOREIGN CURRENCY CONTRACTS — At October 31, 2006, the Fund had outstanding forward foreign currency exchange contracts, both to purchase and sell foreign currencies:
| Open Forward Foreign Currency | Expiration | Value on | Current | Unrealized | ||||||||||||
| Purchase Contracts | Date | Settlement Date | Value | Gain (Loss) | ||||||||||||
| Australian Dollar | 12/20/06 | $ | 51,179,702 | $ | 51,927,482 | $ | 747,780 | |||||||||
| British Pound | 12/20/06 | 63,532,090 | 64,271,560 | 739,470 | ||||||||||||
| Canadian Dollar | 12/20/06 | 8,234,000 | 8,170,760 | (63,240 | ) | |||||||||||
| Euro | 12/20/06 | 37,317,000 | 37,659,327 | 342,327 | ||||||||||||
| Japanese Yen | 12/20/06 | 14,954,000 | 15,054,289 | 100,289 | ||||||||||||
| New Zealand Dollar | 12/20/06 | 22,395,000 | 22,879,338 | 484,338 | ||||||||||||
| Norwegian Krone | 12/20/06 | 7,450,000 | 7,640,079 | 190,079 | ||||||||||||
| 12/20/06 | 7,821,158 | 7,781,363 | (39,795 | ) | ||||||||||||
| Swedish Krona | 12/20/06 | 22,845,237 | 23,010,005 | 164,768 | ||||||||||||
| TOTAL OPEN FORWARD FOREIGN CURRENCY PURCHASE CONTRACTS | $ | 235,728,187 | $ | 238,394,203 | $ | 2,666,016 | ||||||||||
| Open Forward Foreign Currency | Expiration | Value on | Current | Unrealized | ||||||||||||
| Sale Contracts | Date | Settlement Date | Value | Gain (Loss) | ||||||||||||
| Australian Dollar | 12/20/06 | $ | 30,532,361 | $ | 31,670,863 | $ | (1,138,502 | ) | ||||||||
| British Pound | 11/16/06 | 2,698,374 | 2,719,707 | (21,333 | ) | |||||||||||
| 12/20/06 | 22,276,000 | 22,754,332 | (478,332 | ) | ||||||||||||
| Canadian Dollar | 12/20/06 | 16,076,491 | 15,924,739 | 151,752 | ||||||||||||
| Euro | 11/29/06 | 4,137,670 | 4,169,341 | (31,671 | ) | |||||||||||
| 12/20/06 | 56,002,398 | 56,430,525 | (428,127 | ) | ||||||||||||
| Japanese Yen | 12/20/06 | 20,168,027 | 20,163,471 | 4,556 | ||||||||||||
| 12/20/06 | 40,000,839 | 40,025,994 | (25,155 | ) | ||||||||||||
| New Zealand Dollar | 12/20/06 | 34,269,464 | 35,652,173 | (1,382,709 | ) | |||||||||||
| Norwegian Krone | 12/20/06 | 14,945,000 | 14,999,630 | (54,630 | ) | |||||||||||
| Swedish Krona | 12/20/06 | 15,600,000 | 15,760,335 | (160,335 | ) | |||||||||||
| Swiss Franc | 12/20/06 | 23,640,144 | 23,544,581 | 95,563 | ||||||||||||
| 12/20/06 | 7,450,000 | 7,591,912 | (141,912 | ) | ||||||||||||
TOTAL OPEN FORWARD FOREIGN CURRENCY SALE CONTRACTS | $ | 287,796,768 | $ | 291,407,603 | $ | (3,610,835 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
44
GOLDMAN SACHS CORE FIXED INCOME FUND
| ADDITIONAL INVESTMENT INFORMATION (continued) |
FUTURES CONTRACTS — At October 31, 2006, the following futures contracts were open:
| Number of | ||||||||||||||
| Contracts | Settlement | Market | Unrealized | |||||||||||
| Type | Long (Short) | Month | Value | Gain (Loss) | ||||||||||
| Eurodollars | 869 | December 2006 | $ | 205,594,537 | $ | 1,707 | ||||||||
| Eurodollars | 457 | March 2007 | 108,286,150 | 84,946 | ||||||||||
| Eurodollars | 397 | June 2007 | 94,237,875 | (125,647 | ) | |||||||||
| Eurodollars | 314 | September 2007 | 74,673,125 | 39,832 | ||||||||||
| Eurodollars | 151 | December 2007 | 35,954,987 | 70,274 | ||||||||||
| Eurodollars | 158 | March 2008 | 37,637,575 | 82,413 | ||||||||||
| Eurodollars | 92 | June 2008 | 21,910,950 | 45,687 | ||||||||||
| U.S. Treasury Bonds | 327 | December 2006 | 36,838,594 | 772,237 | ||||||||||
| 2 Year U.S. Treasury Notes | (1,202 | ) | December 2006 | (245,696,312 | ) | 306,283 | ||||||||
| 5 Year U.S. Treasury Notes | (1,699 | ) | December 2006 | (179,350,687 | ) | (799,074 | ) | |||||||
| 10 Year U.S. Treasury Notes | (1,277 | ) | December 2006 | (138,195,344 | ) | (1,264,517 | ) | |||||||
TOTAL | $ | 51,891,450 | $ | (785,859 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
45
GOLDMAN SACHS CORE FIXED INCOME FUND
Schedule of Investments (continued)
October 31, 2006
| ADDITIONAL INVESTMENT INFORMATION (continued) |
SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:
INTEREST RATE SWAP CONTRACTS
| Rates Exchanged | ||||||||||||||||||||
| Upfront | ||||||||||||||||||||
| Notional | Payments | Payments | Payments | |||||||||||||||||
| Amount | Termination | received by | made by | made by | Unrealized | |||||||||||||||
| Swap Counterparty | (000s) | Date | the Fund | the Fund | the Fund | Gain (Loss) | ||||||||||||||
| Banc of America Securities LLC | $ | 60,000 | 12/27/06 | 3.427% | 3 month LIBOR | $ | — | $ | 207,261 | |||||||||||
| Banc of America Securities LLC | 100,000 | 10/14/08 | 3.514% | 3 month LIBOR | — | (2,993,118 | ) | |||||||||||||
| Banc of America Securities LLC(a) | 127,100 | 12/21/09 | 5.600% | 3 month LIBOR | 1,647,015 | 443,192 | ||||||||||||||
| Banc of America Securities LLC | 80,000 | 09/02/10 | 4.309% | 3 month LIBOR | — | (2,125,442 | ) | |||||||||||||
| Banc of America Securities LLC | 65,000 | 10/06/10 | 4.702% | 3 month LIBOR | — | (770,070 | ) | |||||||||||||
| Deutsche Bank Securities, Inc.(a) | 112,800 | 12/20/11 | 5.600% | 3 month LIBOR | 2,219,729 | 583,906 | ||||||||||||||
| Banc of America Securities LLC(a) | 60,000 | 12/20/11 | 5.600% | 3 month LIBOR | 1,109,027 | 385,670 | ||||||||||||||
| Banc of America Securities LLC | 65,000 | 04/19/12 | 4.547% | 3 month LIBOR | — | (1,573,393 | ) | |||||||||||||
| J.P. Morgan Securities, Inc.(a) | 100,000 | 12/20/13 | 5.650% | 3 month LIBOR | 1,882,500 | 1,459,601 | ||||||||||||||
| Deutsche Bank Securities, Inc.(a) | 90,000 | 12/20/13 | 5.650% | 3 month LIBOR | 1,665,000 | 1,342,891 | ||||||||||||||
| Banc of America Securities LLC | 11,000 | 05/26/15 | 4.532% | 3 month LIBOR | — | (332,961 | ) | |||||||||||||
| Banc of America Securities LLC | 25,000 | 10/19/15 | 4.965% | 3 month LIBOR | — | (283,252 | ) | |||||||||||||
| Bear Stearns & Co., Inc. | 85,000 | 06/19/06 | 5.666% | 3 month LIBOR | — | 4,661,276 | ||||||||||||||
| J.P. Morgan Securities, Inc.(a) | 69,800 | 12/20/16 | 5.700% | 3 month LIBOR | 2,194,421 | 859,778 | ||||||||||||||
| Banc of America Securities LLC | 80,000 | 03/23/20 | 3 month LIBOR | 5.108% | — | 664,835 | ||||||||||||||
| Banc of America Securities LLC | 9,000 | 03/30/35 | 5.320% | 3 month LIBOR | — | 79,977 | ||||||||||||||
| Banc of America Securities LLC | 10,000 | 04/09/35 | 5.265% | 3 month LIBOR | — | 7,007 | ||||||||||||||
TOTAL | $ | 10,717,692 | $ | 2,617,158 | ||||||||||||||||
| (a) | Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to October 31, 2006. |
LIBOR — London Interbank Offered Rate
The accompanying notes are an integral part of these financial statements.
46
GOLDMAN SACHS CORE FIXED INCOME FUND
| ADDITIONAL INVESTMENT INFORMATION (continued) |
CREDIT DEFAULT SWAP CONTRACTS
| Upfront | ||||||||||||||||||||||||
| Notional | Rate | Payments | ||||||||||||||||||||||
| Amount | Paid by | Termination | (received) | Unrealized | ||||||||||||||||||||
| Referenced Obligation | Swap Counterparty | (000s) | Fund | Date | by the Fund | Loss | ||||||||||||||||||
Protection Purchased: | ||||||||||||||||||||||||
| First Data Corp. 5.625% 11/01/11 | J.P. Morgan Chase Securities, Inc. | $ | 2,800 | 0.500 | % | 03/21/11 | $ | — | $ | (20,829 | ) | |||||||||||||
| First Data Corp. 5.625% 11/01/11 | J.P. Morgan Chase Securities, Inc. | 1,525 | 0.250 | 06/20/11 | — | (6,737 | ) | |||||||||||||||||
| PHH Corp. 7.125% 03/01/13 | Bear Stearns & Co., Inc. | 2,600 | 1.150 | 06/20/13 | — | (28,094 | ) | |||||||||||||||||
| Core Investment Grade Bond Trust | Deutsche Bank Securities, Inc. | 231,900 | 0.650 | 12/20/16 | (611,670 | ) | (1,012,842 | ) | ||||||||||||||||
TOTAL | $ | (611,670 | ) | $ | (1,068,502 | ) | ||||||||||||||||||
TOTAL RETURN INDEX SWAP CONTRACTS
| Rates Exchanged | ||||||||||||||||||
| Notional | Payments | Payments | ||||||||||||||||
| Swap | Amount | Termination | Reference | received by | made by | Unrealized | ||||||||||||
| Counterparty | (000s) | Date | Underlying | the Fund | the Fund | Gain | ||||||||||||
| Citibank, N.A. | $ | 25,000 | 03/31/07 | Banc of America Securities LLC CMBS AAA 10 Yr Index | Any positive monthly duration adjusted return on the underlying index | Any negative monthly duration adjusted return on the underlying index | $ | 12,420 | ||||||||||
| Banc of America Securities LLC | 25,000 | 09/28/07 | Banc of America Securities LLC CMBS AAA 10 Yr Index | Any positive monthly duration adjusted return on the underlying index | Any negative monthly duration adjusted return on the underlying index | 6,425 | ||||||||||||
TOTAL | $ | 18,845 | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
47
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
Performance Summary
October 31, 2006 (Unaudited)
The following graph shows the value, as of October 31, 2006, of a $10,000 investment made on November 3, 2003 (commencement of operations) in the Separate Account Institutional Shares of the Goldman Sachs Investment Grade Credit Fund. For comparative purposes, the performance of the Fund’s benchmark, the Lehman Brothers U.S. Credit Index (“Lehman U.S. Credit 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 reflects expense limitations in effect. In their absence, performance would be reduced. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of Class A and Institutional Shares will vary from Separate Account Institutional Shares due to differences in fees and loads. In addition to the investment adviser’s decisions regarding issuer/ industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
| Investment Grade Credit Fund’s Lifetime Performance |
Performance of a $10,000 Investment, Distributions Reinvested November 3, 2003 to October 31, 2006.
| Average Annual Total Return through October 31, 2006 | Since Inception | One Year | ||||||||
Class A (commenced November 3, 2003) | ||||||||||
| Excluding sales charges | 4.08% | 4.84% | ||||||||
| Including sales charges | 2.50% | 0.11% | ||||||||
Institutional Class (commenced November 3, 2003) | 4.57% | 5.35% | ||||||||
Separate Account Institutional (commenced November 3, 2003) | 4.59% | 5.30% | ||||||||
48
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
Schedule of Investments
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Corporate Bonds – 92.0% | ||||||||||||||||
| Automotive – 1.8% | ||||||||||||||||
| DaimlerChrysler NA | ||||||||||||||||
| $ | 400,000 | 8.500 | % | 01/18/31 | $ | 480,661 | ||||||||||
| DaimlerChrysler NA Holding Corp.(a) | ||||||||||||||||
| 380,000 | 5.870 | 09/10/07 | 380,949 | |||||||||||||
| Ford Motor Credit Co. | ||||||||||||||||
| 1,700,000 | 5.700 | 01/15/10 | 1,577,220 | |||||||||||||
| General Motors Acceptance Corp. | ||||||||||||||||
| 1,275,000 | 6.875 | 09/15/11 | 1,284,957 | |||||||||||||
| 3,723,787 | ||||||||||||||||
| Banks – 21.0% | ||||||||||||||||
| ANZ Capital Trust I(b) | ||||||||||||||||
| 325,000 | 4.484 | 01/15/49 | 315,999 | |||||||||||||
| 800,000 | 5.360 | 12/29/49 | 779,748 | |||||||||||||
| Astoria Financial Corp. | ||||||||||||||||
| 225,000 | 5.750 | 10/15/12 | 226,607 | |||||||||||||
| Banca Popolare di Bergamo Capital Trust(a) | ||||||||||||||||
| EUR475,000 | 8.364 | 02/15/49 | 692,947 | |||||||||||||
| Bank United Corp. | ||||||||||||||||
| $ | 250,000 | 8.875 | 05/01/07 | 254,156 | ||||||||||||
| Citigroup, Inc. | ||||||||||||||||
| 589,000 | 7.250 | 10/15/11 | 638,057 | |||||||||||||
| Commonwealth Bank of Australia(a)(b) | ||||||||||||||||
| 1,325,000 | 6.024 | 03/29/49 | 1,328,338 | |||||||||||||
| Credit Suisse (USA), Inc. | ||||||||||||||||
| 1,000,000 | 5.250 | 03/02/11 | 1,002,476 | |||||||||||||
| Credit Suisse First Boston London(a)(b) | ||||||||||||||||
| 1,625,000 | 7.900 | 05/29/49 | 1,644,885 | |||||||||||||
| Danske Bank A/S(a)(b) | ||||||||||||||||
| 300,000 | 7.400 | 06/15/10 | 303,829 | |||||||||||||
| Firstar Capital Trust I | ||||||||||||||||
| 2,500,000 | 8.320 | 12/15/26 | 2,611,027 | |||||||||||||
| ForeningSparbanken AB (Swedbank)(a)(b) | ||||||||||||||||
| 500,000 | 7.500 | 05/01/49 | 500,000 | |||||||||||||
| Greater Bay Bancorp Series D | ||||||||||||||||
| 2,700,000 | 5.125 | 04/15/10 | 2,672,954 | |||||||||||||
| GreenPoint Financial Corp. | ||||||||||||||||
| 600,000 | 3.200 | 06/06/08 | 581,096 | |||||||||||||
| HBOS PLC(a)(b) | ||||||||||||||||
| 1,750,000 | 5.375 | 12/29/49 | 1,727,625 | |||||||||||||
| HSBC Capital Funding LP(a)(b) | ||||||||||||||||
| 1,050,000 | 4.610 | 06/27/49 | 981,790 | |||||||||||||
| HSBC USA, Inc. | ||||||||||||||||
| 250,000 | 6.625 | 03/01/09 | 258,053 | |||||||||||||
| Huntington National Bank | ||||||||||||||||
| 1,000,000 | 8.000 | 04/01/10 | 1,084,961 | |||||||||||||
| J.P. Morgan Chase & Co. | ||||||||||||||||
| 550,000 | 6.625 | 03/15/12 | 584,521 | |||||||||||||
| Key Bank N.A.(c) | ||||||||||||||||
| 1,000,000 | 6.500 | 10/15/27 | 1,021,510 | |||||||||||||
| Lehman Brothers Holdings E-Capital Trust I(a) | ||||||||||||||||
| 675,000 | 6.173 | 08/19/65 | 679,561 | |||||||||||||
| Manufacturers & Traders Trust Co.(a) | ||||||||||||||||
| 1,495,000 | 5.585 | 12/28/20 | 1,484,414 | |||||||||||||
| Mizuho JGB Investment LLC(a)(b) | ||||||||||||||||
| 1,275,000 | 9.870 | 06/30/49 | 1,362,048 | |||||||||||||
| MUFG Capital Finance 1 Ltd.(a) | ||||||||||||||||
| 2,400,000 | 6.346 | 07/25/16 | 2,423,746 | |||||||||||||
| Nordbanken AB(a)(b) | ||||||||||||||||
| 2,380,000 | 8.950 | 11/12/09 | 2,604,655 | |||||||||||||
| North Fork Bancorp.(a) | ||||||||||||||||
| 1,350,000 | 5.000 | 08/15/12 | 1,345,833 | |||||||||||||
| PNC Funding Corp. | ||||||||||||||||
| 600,000 | 7.500 | 11/01/09 | 638,069 | |||||||||||||
| Popular North America, Inc. | ||||||||||||||||
| 1,775,000 | 5.200 | 12/12/07 | 1,768,180 | |||||||||||||
| 1,795,000 | 4.250 | 04/01/08 | 1,767,049 | |||||||||||||
| RBS Capital Trust II(a) | ||||||||||||||||
| 1,000,000 | 5.512 | 09/30/49 | 984,730 | |||||||||||||
| Resona Bank Ltd.(a)(b) | ||||||||||||||||
| EUR925,000 | 4.125 | 09/27/49 | 1,148,970 | |||||||||||||
| 1,475,000 | 5.850 | 09/29/49 | 1,444,829 | |||||||||||||
| Resona Preferred Global Securities Ltd.(a)(b) | ||||||||||||||||
| $ | 2,000,000 | 7.191 | 07/30/49 | 2,097,040 | ||||||||||||
| Royal Bank of Scotland Group PLC | ||||||||||||||||
| 400,000 | 9.118 | 03/31/49 | 445,465 | |||||||||||||
| Sovereign Bank | ||||||||||||||||
| 1,000,000 | 4.000 | 02/01/08 | 983,325 | |||||||||||||
| 300,000 | 5.125 | 03/15/13 | 294,568 | |||||||||||||
| 455,000 | 4.375 | (a) | 08/01/13 | 445,968 | ||||||||||||
| Tokai Preferred Capital Co. LLC(a)(b) | ||||||||||||||||
| 650,000 | 9.980 | 12/29/49 | 694,962 | |||||||||||||
| Unicredito Italiano Capital Trust(a)(b) | ||||||||||||||||
| 500,000 | 9.200 | 10/05/49 | 565,038 | |||||||||||||
| Wachovia Capital Trust III(a) | ||||||||||||||||
| 1,825,000 | 5.800 | 08/29/49 | 1,841,073 | |||||||||||||
| Washington Mutual Bank | ||||||||||||||||
| 500,000 | 5.950 | 05/20/13 | 511,207 | |||||||||||||
| 44,741,309 | ||||||||||||||||
| Brokerage – 1.0% | ||||||||||||||||
| Morgan Stanley | ||||||||||||||||
| 2,200,000 | 5.050 | 01/21/11 | 2,187,992 | |||||||||||||
| Captive Financial – 0.8% | ||||||||||||||||
| Nelnet, Inc. | ||||||||||||||||
| 1,760,000 | 5.125 | 06/01/10 | 1,723,262 | |||||||||||||
| Consumer Cyclical Services – 0.6% | ||||||||||||||||
| Sabre Holdings Corp. | ||||||||||||||||
| 1,300,000 | 6.350 | 03/15/16 | 1,292,639 | |||||||||||||
| Diversified Manufacturing – 1.7% | ||||||||||||||||
| Tyco International Group Participation Certificate(b) | ||||||||||||||||
| 2,350,000 | 4.436 | 06/15/07 | 2,333,719 | |||||||||||||
| Tyco International Group SA | ||||||||||||||||
| 1,300,000 | 6.750 | 02/15/11 | 1,375,329 | |||||||||||||
| 3,709,048 | ||||||||||||||||
| Electric – 8.5% | ||||||||||||||||
| Arizona Public Service Co. | ||||||||||||||||
| 2,000,000 | 6.875 | 08/01/36 | 2,128,156 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
49
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||||
| Electric – (continued) | ||||||||||||||||
| Calenergy, Inc. | ||||||||||||||||
| $ | 1,575,000 | 7.630 | % | 10/15/07 | $ | 1,607,713 | ||||||||||
| 280,000 | 7.520 | 09/15/08 | 291,174 | |||||||||||||
| Centerpoint Energy, Inc. | ||||||||||||||||
| 2,100,000 | 5.875 | 06/01/08 | 2,111,731 | |||||||||||||
| Centerpoint Energy, Inc. Series B | ||||||||||||||||
| 350,000 | 7.250 | 09/01/10 | 370,376 | |||||||||||||
| FirstEnergy Corp. Series C | ||||||||||||||||
| 1,745,000 | 7.375 | 11/15/31 | 2,036,309 | |||||||||||||
| MidAmerican Energy Holdings Co. | ||||||||||||||||
| 2,100,000 | 6.125 | 04/01/36 | 2,159,508 | |||||||||||||
| Nisource Finance Corp.(a) | ||||||||||||||||
| 500,000 | 5.968 | 11/23/09 | 499,955 | |||||||||||||
| Ohio Edison Co. | ||||||||||||||||
| 1,500,000 | 6.875 | 07/15/36 | 1,667,292 | |||||||||||||
| Progress Energy, Inc. | ||||||||||||||||
| 2,175,000 | 5.625 | 01/15/16 | 2,180,524 | |||||||||||||
| 1,000,000 | 7.000 | 10/30/31 | 1,125,810 | |||||||||||||
| Southwestern Public Service Cos. | ||||||||||||||||
| 375,000 | 6.000 | 10/01/36 | 376,015 | |||||||||||||
| Tampa Electric Co. | ||||||||||||||||
| 275,000 | 6.550 | 05/15/36 | 296,604 | |||||||||||||
| TXU Corp. Series O | ||||||||||||||||
| 1,225,000 | 4.800 | 11/15/09 | 1,197,249 | |||||||||||||
| 18,048,416 | ||||||||||||||||
| Energy – 2.5% | ||||||||||||||||
| Canadian Natural Resources Ltd. | ||||||||||||||||
| 925,000 | 6.500 | 02/15/37 | 951,418 | |||||||||||||
| Hess Corp. | ||||||||||||||||
| 1,950,000 | 7.125 | 03/15/33 | 2,171,631 | |||||||||||||
| Kerr-McGee Corp. | ||||||||||||||||
| 800,000 | 6.950 | 07/01/24 | 867,367 | |||||||||||||
| XTO Energy, Inc. | ||||||||||||||||
| 1,200,000 | 6.250 | 04/15/13 | 1,243,423 | |||||||||||||
| 5,233,839 | ||||||||||||||||
| Entertainment – 0.9% | ||||||||||||||||
| Time Warner Entertainment Co. | ||||||||||||||||
| 1,290,000 | 8.375 | 03/15/23 | 1,499,960 | |||||||||||||
| Time Warner Entertainment Co. LP | ||||||||||||||||
| 325,000 | 7.250 | 09/01/08 | 333,863 | |||||||||||||
| 1,833,823 | ||||||||||||||||
| Food & Drug Retailing – 0.1% | ||||||||||||||||
| Fred Meyer, Inc. | ||||||||||||||||
| 250,000 | 7.450 | 03/01/08 | 256,492 | |||||||||||||
| Gaming – 1.1% | ||||||||||||||||
| Harrahs Operating Co., Inc. | ||||||||||||||||
| 2,425,000 | 5.500 | 07/01/10 | 2,329,123 | |||||||||||||
| Life Insurance – 7.6% | ||||||||||||||||
| Americo Life, Inc.(b) | ||||||||||||||||
| 550,000 | 7.875 | 05/01/13 | 554,620 | |||||||||||||
| AmerUs Group Co. | ||||||||||||||||
| 1,575,000 | 5.950 | 08/15/15 | 1,614,449 | |||||||||||||
| AXA Financial, Inc. | ||||||||||||||||
| 805,000 | 7.750 | 08/01/10 | 870,141 | |||||||||||||
| Lincoln National Corp. | ||||||||||||||||
| 1,000,000 | 6.200 | 12/15/11 | 1,037,898 | |||||||||||||
| 1,600,000 | 7.000 | (a) | 05/17/66 | 1,684,254 | ||||||||||||
| Phoenix Life Insurance Co.(b) | ||||||||||||||||
| 2,275,000 | 7.150 | 12/15/34 | 2,458,397 | |||||||||||||
| PRICOA Global Funding I(b) | ||||||||||||||||
| 600,000 | 4.200 | 01/15/10 | 581,152 | |||||||||||||
| Reinsurance Group of America, Inc. | ||||||||||||||||
| 625,000 | 6.750 | 12/15/11 | 656,779 | |||||||||||||
| 2,250,000 | 6.750 | (a) | 12/15/65 | 2,234,078 | ||||||||||||
| Royal & Sun Alliance Insurance Group PLC | ||||||||||||||||
| GBP225,000 | 8.500 | 07/29/49 | 495,939 | |||||||||||||
| SL Finance PLC | ||||||||||||||||
| EUR650,000 | 6.375 | 07/12/22 | 910,414 | |||||||||||||
| The MONY Group, Inc. | ||||||||||||||||
| $ | 1,000,000 | 8.350 | 03/15/10 | 1,091,780 | ||||||||||||
| ZFS Finance USA Trust I(a)(b) | ||||||||||||||||
| 1,875,000 | 6.150 | 12/15/65 | 1,885,787 | |||||||||||||
| 16,075,688 | ||||||||||||||||
| Media – Cable – 3.4% | ||||||||||||||||
| Comcast Cable Communications Holdings, Inc. | ||||||||||||||||
| 575,000 | 6.875 | 06/15/09 | 597,440 | |||||||||||||
| 1,350,000 | 9.455 | 11/15/22 | 1,753,378 | |||||||||||||
| Cox Communications, Inc. | ||||||||||||||||
| 850,000 | 4.625 | 01/15/10 | 830,133 | |||||||||||||
| Cox Enterprises, Inc.(b) | ||||||||||||||||
| 3,275,000 | 4.375 | 05/01/08 | 3,215,490 | |||||||||||||
| Viacom, Inc. | ||||||||||||||||
| 850,000 | 5.750 | 04/30/11 | 851,058 | |||||||||||||
| 7,247,499 | ||||||||||||||||
| Media – Non-Cable – 0.8% | ||||||||||||||||
| Clear Channel Communications, Inc. | ||||||||||||||||
| 1,700,000 | 8.000 | 11/01/08 | 1,772,386 | |||||||||||||
| Noncaptive – Financial – 7.7% | ||||||||||||||||
| American General Finance Corp.(c) | ||||||||||||||||
| 1,825,000 | 8.450 | 10/15/09 | 1,981,466 | |||||||||||||
| Capital One Bank | ||||||||||||||||
| 325,000 | 5.000 | 06/15/09 | 322,866 | |||||||||||||
| Capital One Financial Corp. | ||||||||||||||||
| 1,775,000 | 5.700 | 09/15/11 | 1,799,573 | |||||||||||||
| GATX Financial Corp. | ||||||||||||||||
| 3,400,000 | 5.125 | 04/15/10 | 3,362,603 | |||||||||||||
| MGIC Investment Corp. | ||||||||||||||||
| 1,300,000 | 5.625 | 09/15/11 | 1,305,811 | |||||||||||||
| Nelnet, Inc.(a) | ||||||||||||||||
| 625,000 | 7.400 | 09/29/36 | 632,443 | |||||||||||||
| PHH Corp. | ||||||||||||||||
| 3,088,000 | 6.000 | 03/01/08 | 3,094,821 | |||||||||||||
| 750,000 | 7.125 | 03/01/13 | 766,126 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
50
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||||
| Noncaptive – Financial – (continued) | ||||||||||||||||
| Waddell & Reed Financial, Inc. | ||||||||||||||||
| $ | 3,250,000 | 5.600 | % | 01/15/11 | $ | 3,226,555 | ||||||||||
| 16,492,264 | ||||||||||||||||
| Pipelines – 3.3% | ||||||||||||||||
| Energy Transfer Partners | ||||||||||||||||
| 1,375,000 | 5.650 | 08/01/12 | 1,377,204 | |||||||||||||
| 2,000,000 | 5.950 | 02/01/15 | 2,018,710 | |||||||||||||
| Enterprise Products Partners LP | ||||||||||||||||
| 1,805,000 | 4.950 | 06/01/10 | 1,774,939 | |||||||||||||
| 275,000 | 5.000 | 03/01/15 | 259,914 | |||||||||||||
| ONEOK Partners LP | ||||||||||||||||
| 1,375,000 | 5.900 | 04/01/12 | 1,394,715 | |||||||||||||
| Panhandle Eastern Pipeline | ||||||||||||||||
| 150,000 | 4.800 | 08/15/08 | 148,677 | |||||||||||||
| 6,974,159 | ||||||||||||||||
| Property/Casualty Insurance – 6.4% | ||||||||||||||||
| Ace Capital Trust II | ||||||||||||||||
| 250,000 | 9.700 | 04/01/30 | 341,000 | |||||||||||||
| AON Capital Trust A | ||||||||||||||||
| 1,000,000 | 8.205 | 01/01/27 | 1,162,539 | |||||||||||||
| Arch Capital Group Ltd. | ||||||||||||||||
| 1,245,000 | 7.350 | 05/01/34 | 1,364,362 | |||||||||||||
| Aspen Insurance Holdings Ltd. | ||||||||||||||||
| 1,025,000 | 6.000 | 08/15/14 | 1,003,216 | |||||||||||||
| CNA Financial Corp. | ||||||||||||||||
| 520,000 | 6.750 | 11/15/06 | 520,178 | |||||||||||||
| 350,000 | 6.600 | 12/15/08 | 358,427 | |||||||||||||
| 1,000,000 | 5.850 | 12/15/14 | 1,006,080 | |||||||||||||
| Endurance Specialty Holdings Ltd. | ||||||||||||||||
| 500,000 | 6.150 | 10/15/15 | 498,033 | |||||||||||||
| 775,000 | 7.000 | 07/15/34 | 804,298 | |||||||||||||
| Liberty Mutual Group(b) | ||||||||||||||||
| 2,040,000 | 7.000 | 03/15/34 | 2,110,746 | |||||||||||||
| Marsh & McLennan Cos., Inc. | ||||||||||||||||
| 1,000,000 | 5.150 | 09/15/10 | 958,848 | |||||||||||||
| 1,000,000 | 5.750 | 09/15/15 | 963,638 | |||||||||||||
| QBE Insurance Group Ltd.(a)(b) | ||||||||||||||||
| 855,000 | 5.647 | 07/01/23 | 833,613 | |||||||||||||
| Symetra Financial Corp.(b) | ||||||||||||||||
| 1,600,000 | 6.125 | 04/01/16 | 1,622,154 | |||||||||||||
| Zurich Capital Trust I(b) | ||||||||||||||||
| 125,000 | 8.376 | 06/01/37 | 131,347 | |||||||||||||
| 13,678,479 | ||||||||||||||||
| REIT – 13.1% | ||||||||||||||||
| Arden Realty LP | ||||||||||||||||
| 1,160,000 | 5.200 | 09/01/11 | 1,162,192 | |||||||||||||
| BRE Properties Inc. | ||||||||||||||||
| 3,525,000 | 7.450 | 01/15/11 | 3,792,005 | |||||||||||||
| Camden Property Trust | ||||||||||||||||
| 1,650,000 | 4.375 | 01/15/10 | 1,608,219 | |||||||||||||
| Colonial Realty LP | ||||||||||||||||
| 1,750,000 | 6.050 | 09/01/16 | 1,770,212 | |||||||||||||
| EOP Operating LP | ||||||||||||||||
| 1,692,000 | 7.750 | 11/15/07 | 1,731,475 | |||||||||||||
| Health Care Property Investors, Inc. | ||||||||||||||||
| 1,825,000 | 5.950 | 09/15/11 | 1,845,966 | |||||||||||||
| Heritage Property Investment Trust | ||||||||||||||||
| 885,000 | 4.500 | 10/15/09 | 864,206 | |||||||||||||
| iStar Financial, Inc. Series B | ||||||||||||||||
| 3,200,000 | 5.700 | 03/01/14 | 3,187,117 | |||||||||||||
| Liberty Property LP | ||||||||||||||||
| 225,000 | 7.750 | 04/15/09 | 236,057 | |||||||||||||
| Pan Pacific Retail Properties, Inc. | ||||||||||||||||
| 1,350,000 | 5.950 | 06/01/14 | 1,373,699 | |||||||||||||
| Post Apartment Homes LP | ||||||||||||||||
| 1,500,000 | 7.700 | 12/20/10 | 1,615,518 | |||||||||||||
| 3,000,000 | 6.300 | 06/01/13 | 3,091,164 | |||||||||||||
| ProLogis | ||||||||||||||||
| 2,250,000 | 5.500 | 04/01/12 | 2,251,676 | |||||||||||||
| Shurgard Storage Centers, Inc. | ||||||||||||||||
| 2,050,000 | 7.750 | 02/22/11 | 2,217,331 | |||||||||||||
| Simon Property Group LP | ||||||||||||||||
| 200,000 | 7.000 | (c) | 06/15/08 | 205,170 | ||||||||||||
| 1,000,000 | 5.600 | 09/01/11 | 1,011,107 | |||||||||||||
| 27,963,114 | ||||||||||||||||
| Software – 1.1% | ||||||||||||||||
| Oracle Corp. and Ozark Holdings, Inc. | ||||||||||||||||
| 2,400,000 | 5.000 | 01/15/11 | 2,383,697 | |||||||||||||
| Technology – 0.7% | ||||||||||||||||
| First Data Corp. | ||||||||||||||||
| 1,375,000 | 5.625 | 11/01/11 | 1,405,260 | |||||||||||||
| Tobacco – 1.2% | ||||||||||||||||
| Altria Group, Inc. | ||||||||||||||||
| 275,000 | 7.000 | 11/04/13 | 301,161 | |||||||||||||
| 893,000 | 7.750 | 01/15/27 | 1,095,566 | |||||||||||||
| Imperial Tobacco Overseas BV | ||||||||||||||||
| 1,200,000 | 7.125 | 04/01/09 | 1,244,343 | |||||||||||||
| 2,641,070 | ||||||||||||||||
| Wireless Telecommunications – 1.6% | ||||||||||||||||
| America Movil SA de CV | ||||||||||||||||
| 800,000 | 5.500 | 03/01/14 | 781,408 | |||||||||||||
| AT&T Wireless Services, Inc. | ||||||||||||||||
| 950,000 | 7.875 | 03/01/11 | 1,041,553 | |||||||||||||
| 900,000 | 8.750 | 03/01/31 | 1,178,054 | |||||||||||||
| Intelsat | ||||||||||||||||
| 350,000 | 5.250 | 11/01/08 | 338,625 | |||||||||||||
| 3,339,640 | ||||||||||||||||
| Wirelines Telecommunications – 5.1% | ||||||||||||||||
| Ameritech Capital Funding | ||||||||||||||||
| 575,000 | 6.250 | 05/18/09 | 583,647 | |||||||||||||
| Bellsouth Telecommunications, Inc. | ||||||||||||||||
| 426,000 | 6.125 | 09/23/08 | 431,306 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
51
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
Schedule of Investments (continued)
October 31, 2006
| Principal | Interest | Maturity | ||||||||||||||
| Amount* | Rate | Date | Value | |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||||
| Wirelines Telecommunications – (continued) | ||||||||||||||||
| Deutsche Telekom International Finance BV | ||||||||||||||||
| $ | 550,000 | 5.375 | % | 03/23/11 | $ | 549,053 | ||||||||||
| 1,650,000 | 8.250 | 06/15/30 | 2,047,425 | |||||||||||||
| Embarq Corp. | ||||||||||||||||
| 500,000 | 7.995 | 06/01/36 | 531,700 | |||||||||||||
| France Telecom SA | ||||||||||||||||
| EUR175,000 | 8.125 | 01/28/33 | 306,842 | |||||||||||||
| GTE Corp. | ||||||||||||||||
| $ | 1,260,000 | 7.510 | 04/01/09 | 1,319,430 | ||||||||||||
| Sprint Capital Corp. | ||||||||||||||||
| 850,000 | 6.875 | 11/15/28 | 871,986 | |||||||||||||
| Telecom Italia Capital | ||||||||||||||||
| 700,000 | 4.000 | 01/15/10 | 666,728 | |||||||||||||
| 1,700,000 | 4.950 | 09/30/14 | 1,576,869 | |||||||||||||
| TPSA Finance BV | ||||||||||||||||
| 350,000 | 7.750 | (b) | 12/10/08 | 365,565 | ||||||||||||
| 1,500,000 | 7.625 | 01/30/11 | 1,616,933 | |||||||||||||
| 10,867,484 | ||||||||||||||||
| TOTAL CORPORATE BONDS | ||||||||||||||||
| (Cost $196,719,956) | $ | 195,920,470 | ||||||||||||||
Emerging Markets Debt – 0.4% | ||||||||||||||||
| Korea Development Bank | ||||||||||||||||
| $ | 150,000 | 5.750 | % | 09/10/13 | $ | 153,170 | ||||||||||
| VTB Capital (Vneshtorgbank)(a)(b) | ||||||||||||||||
| 700,000 | 5.970 | 08/01/08 | 700,000 | |||||||||||||
| TOTAL EMERGING MARKETS DEBT | ||||||||||||||||
| (Cost $852,500) | $ | 853,170 | ||||||||||||||
U.S. Treasury Obligations – 0.7% | ||||||||||||||||
| United States Treasury Bonds | ||||||||||||||||
| $ | 900,000 | 4.500 | % | 02/15/36 | $ | 865,055 | ||||||||||
| United States Treasury Principal-Only STRIPS(d) | ||||||||||||||||
| 1,500,000 | 0.000 | 11/15/26 | 573,051 | |||||||||||||
| TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||||
| (Cost $1,390,703) | $ | 1,438,106 | ||||||||||||||
| TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT — 93.1% | ||||||||||||||||
| (Cost $198,963,159) | $ | 198,211,746 | ||||||||||||||
Repurchase Agreement(e) – 3.9% | ||||||||||||||||
| Joint Repurchase Agreement Account II | ||||||||||||||||
| $ | 8,300,000 | 5.316 | % | 11/01/06 | $ | 8,300,000 | ||||||||||
| Maturity Value: $8,301,226 | ||||||||||||||||
| (Cost $8,300,000) | ||||||||||||||||
| TOTAL INVESTMENTS — 97.0% | ||||||||||||||||
| (Cost $207,263,159) | $ | 206,511,746 | ||||||||||||||
| OTHER ASSETS IN EXCESS OF LIABILITIES — 3.0% | 6,346,826 | |||||||||||||||
| NET ASSETS — 100.0% | $ | 212,858,572 | ||||||||||||||
| The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. |
| * | The principal amount of each security is stated in the currency in which the bond is denominated. All amounts shown are in U.S. dollars unless otherwise noted. See below. |
| Currency Description | ||||||||||
| EUR | = | Euro Currency | ||||||||
| GBP | = | British Pounds | ||||||||
| (a) | Variable rate security. Interest rate disclosed is that which is in effect at October 31, 2006. |
| (b) | Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $34,292,346, which represents approximately 16.1% of net assets as of October 31, 2006. |
| (c) | Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the final maturity dates. |
| (d) | Security issued with a zero coupon. Income is recognized through the accretion of discount. |
| (e) | Joint repurchase agreement was entered into on October 31, 2006. Additional information appears on page 55. |
| Investment Abbreviations: | ||||||
| REIT | — | Real Estate Investment Trust | ||||
| STRIPS | — | Separate Trading of Registered Interest and Principal of Securities | ||||
The accompanying notes are an integral part of these financial statements.
52
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
| ADDITIONAL INVESTMENT INFORMATION |
FORWARD FOREIGN CURRENCY CONTRACTS — At October 31, 2006, the Fund had outstanding forward foreign currency exchange contracts, to sell foreign currencies:
| Open Forward Foreign Currency | Expiration | Value on | Current | Unrealized | ||||||||||||
| Sale Contract | Date | Settlement Date | Value | Loss | ||||||||||||
| British Pound | 11/16/06 | $ | 496,924 | $ | 500,853 | $ | (3,929 | ) | ||||||||
| Euro | 11/29/06 | 3,051,060 | 3,074,414 | (23,354 | ) | |||||||||||
TOTAL OPEN FORWARD FOREIGN CURRENCY SALE CONTRACT | $ | 3,547,984 | $ | 3,575,267 | $ | (27,283 | ) | |||||||||
FUTURES CONTRACTS — At October 31, 2006, the following futures contracts were open:
| Number of | ||||||||||||||
| Contracts | Settlement | Market | Unrealized | |||||||||||
| Type | Long (Short) | Month | Value | Gain (Loss) | ||||||||||
| Eurodollars | (12 | ) | March 2007 | $ | (2,843,400 | ) | $ | 27,859 | ||||||
| Eurodollars | 8 | June 2007 | 1,899,000 | 1,473 | ||||||||||
| Eurodollars | 6 | September 2007 | 1,426,875 | 1,967 | ||||||||||
| Eurodollars | 6 | December 2007 | 1,428,675 | 2,792 | ||||||||||
| Eurodollars | 7 | March 2008 | 1,667,488 | 3,664 | ||||||||||
| Eurodollars | 4 | June 2008 | 952,650 | 1,986 | ||||||||||
| U.S. Treasury Bonds | 21 | December 2006 | 2,365,781 | 16,368 | ||||||||||
| 2 Year U.S. Treasury Notes | (69 | ) | December 2006 | (14,104,031 | ) | (15,642 | ) | |||||||
| 5 Year U.S. Treasury Notes | (173 | ) | December 2006 | (18,262,313 | ) | (123,619 | ) | |||||||
| 10 Year U.S. Treasury Notes | 102 | December 2006 | 11,038,313 | 57,261 | ||||||||||
TOTAL | $ | (14,430,962 | ) | $ | (25,891 | ) | ||||||||
SWAP CONTRACTS — At October 31, 2006, the Fund had outstanding swap contracts with the following terms:
INTEREST RATE SWAP CONTRACTS
| Rates Exchanged | ||||||||||||||||||
| Notional | Payments | Payments | ||||||||||||||||
| Swap | Amount | Termination | received by | made by | Unrealized | |||||||||||||
| Counterparty | (000s) | Date | the Fund | the Fund | Gain (Loss) | |||||||||||||
| Banc of America Securities LLC | $ | 8,000 | 09/02/10 | 4.309 | % | 3 month LIBOR | $ | (212,544 | ) | |||||||||
| Banc of America Securities LLC | 5,000 | 05/23/12 | 4.374 | 3 month LIBOR | (118,944 | ) | ||||||||||||
| Banc of America Securities LLC | 7,000 | 10/19/15 | 4.965 | 3 month LIBOR | (79,310 | ) | ||||||||||||
| Banc of America Securities LLC | 4,000 | 03/19/35 | 5.288 | 3 month LIBOR | 15,618 | |||||||||||||
| Banc of America Securities LLC | 2,800 | 04/09/35 | 5.266 | 3 month LIBOR | 1,962 | |||||||||||||
TOTAL | $ | (393,218 | ) | |||||||||||||||
LIBOR — London Interbank Offered Rate
The accompanying notes are an integral part of these financial statements.
53
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
Schedule of Investments (continued)
October 31, 2006
| ADDITIONAL INVESTMENT INFORMATION (continued) |
CREDIT DEFAULT SWAP CONTRACTS
| Upfront | ||||||||||||||||||||||||
| Notional | Rate | Payments | ||||||||||||||||||||||
| Amount | Paid by | Termination | (received) | Unrealized | ||||||||||||||||||||
| Referenced Obligation | Swap Counterparty | (000s) | Fund | Date | by the Fund | Loss | ||||||||||||||||||
Protection Purchased | ||||||||||||||||||||||||
| First Data Corp. 5.625%, 11/1/2011 | J.P. Morgan Securities, Inc. | $ | 1,300 | 0.500 | % | 03/21/11 | $ | — | $ | (9,662 | ) | |||||||||||||
| First Data Corp. 5.625%, 11/1/2011 | J.P. Morgan Securities, Inc. | 210 | 0.250 | 06/20/11 | — | (928 | ) | |||||||||||||||||
| Autozone, Inc. 5.875%, 10/15/2012 | Bear Stearns & Co., Inc. | 2,000 | 0.680 | 06/20/11 | — | (23,777 | ) | |||||||||||||||||
| Bear Stearns Co., Inc. 7.625%, 12/7/2009 | J.P. Morgan Securities, Inc. | 4,000 | 0.300 | 06/20/13 | — | (14,806 | ) | |||||||||||||||||
| Centex Corp. 5.250%, 6/15/2015 | Bear Stearns & Co., Inc. | 2,000 | 0.845 | 06/20/13 | — | (22,822 | ) | |||||||||||||||||
| Lowe’s Co., Inc. 8.250%, 6/1/2010 | Banc of America Securities LLC | 5,000 | 0.180 | 06/20/13 | — | (1,498 | ) | |||||||||||||||||
| Core Investment Grade Bond Trust | Deutsche Bank Securities, Inc. | 33,500 | 0.650 | 12/20/16 | (98,576 | ) | (134,442 | ) | ||||||||||||||||
TOTAL | $ | (98,576 | ) | $ | (207,935 | ) | ||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
54
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| ADDITIONAL INVESTMENT INFORMATION (continued) |
JOINT REPURCHASE AGREEMENT ACCOUNT II — At October 31, 2006, the Funds had undivided interests in the Joint Repurchase Agreement Account II, as follows:
| Fund | Principal Amount | |||
| Government Income | $ | 112,200,000 | ||
| U.S. Mortgages | 14,600,000 | |||
| Core Fixed Income | 220,000,000 | |||
| Investment Grade Credit | 8,300,000 | |||
| Principal | Interest | Maturity | Maturity | |||||||||||
| Repurchase Agreements | Amount | Rate | Date | Value | ||||||||||
| ABN Amro, Inc. | $ | 500,000,000 | 5.32 | % | 11/01/06 | $ | 500,073,889 | |||||||
| Banc of America Securities LLC | 2,750,000,000 | 5.31 | 11/01/06 | 2,750,405,625 | ||||||||||
| Barclays Capital PLC | 200,000,000 | 5.31 | 11/01/06 | 200,029,500 | ||||||||||
| Barclays Capital PLC | 2,000,000,000 | 5.32 | 11/01/06 | 2,000,295,557 | ||||||||||
| Bear Stearns | 500,000,000 | 5.32 | 11/01/06 | 500,073,889 | ||||||||||
| Credit Suisse Securities (USA) LLC | 750,000,000 | 5.32 | 11/01/06 | 750,110,834 | ||||||||||
| Greenwich Capital Markets | 300,000,000 | 5.32 | 11/01/06 | 300,044,334 | ||||||||||
| Merrill Lynch | 500,000,000 | 5.31 | 11/01/06 | 500,073,750 | ||||||||||
| Wachovia Bank | 250,000,000 | 5.31 | 11/01/06 | 250,036,875 | ||||||||||
| UBS Securities LLC | 2,700,200,000 | 5.32 | 11/01/06 | 2,700,399,027 | ||||||||||
TOTAL | $ | 10,450,200,000 | $ | 10,451,543,280 | ||||||||||
At October 31, 2006, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 0.00% to 5.75%, due 12/14/06 to 09/22/15; Federal Home Loan Mortgage Association, 2.35% to 9.50%, due 11/17/06 to 09/01/36; Federal National Mortgage Association, 0.00% to 11.00%, due 11/1/06 to 11/01/36; Government National Mortgage Association, 4.50% to 9.00%, due 10/15/09 to 10/15/36 and U.S. Treasury Notes, 4.25% to 4.88% due 03/31/11 to 01/15/14. The aggregate market value of the collateral, including accrued interest, was $10,679,289,697.
The accompanying notes are an integral part of these financial statements.
55
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Statements of Assets and Liabilities
October 31, 2006
| Government | U.S. Mortgages | Core Fixed | Investment Grade | ||||||||||||||||||
| Income Fund | Fund | Income Fund | Credit Fund | ||||||||||||||||||
| Assets: | |||||||||||||||||||||
| Investments in securities, at value (identified cost $537,624,178, $482,694,739, $2,232,550,739 and $198,963,159, respectively) | $ | 534,844,155 | $ | 481,474,370 | $ | 2,238,275,835 | $ | 198,211,746 | |||||||||||||
| Repurchase agreement, at value | 112,200,000 | 14,600,000 | 220,000,000 | 8,300,000 | |||||||||||||||||
Cash(a) | 10,894,581 | 3,746,965 | 38,894,865 | 3,054,450 | |||||||||||||||||
| Foreign currencies, at value (identified cost $687 for Core Fixed Income Fund) | — | — | 696 | — | |||||||||||||||||
| Receivables: | |||||||||||||||||||||
| Investment securities sold | 14,066,740 | 36,788,069 | 51,691,509 | 3,730,997 | |||||||||||||||||
| Swap contracts, at value (includes upfront payments made of $3,336,775, $992,119, $10,717,692 and $0, respectively) | 5,915,513 | 1,451,883 | 21,431,931 | 17,580 | |||||||||||||||||
| Interest, at value | 3,348,872 | 1,649,853 | 16,498,984 | 3,242,651 | |||||||||||||||||
| Fund shares sold | 844,590 | — | 6,087,540 | — | |||||||||||||||||
| Reimbursement from investment adviser | 51,652 | 14,789 | — | 17,091 | |||||||||||||||||
| Due from broker | 25,438 | — | — | — | |||||||||||||||||
| Forward foreign currency exchange contracts, at value | — | — | 3,020,922 | — | |||||||||||||||||
| Other assets, at value | 2,606 | 1,959 | 5,530 | 556 | |||||||||||||||||
Total assets | 682,194,147 | 539,727,888 | 2,595,907,812 | 216,575,071 | |||||||||||||||||
| Liabilities: | |||||||||||||||||||||
| Payables: | |||||||||||||||||||||
| Investment securities purchased | 37,823,650 | 105,726,458 | 204,517,514 | 2,537,750 | |||||||||||||||||
| Swap contracts, at value (includes upfront payments received $0, $0, $611,670 and $98,576, respectively) | 2,605,091 | 793,521 | 9,758,408 | 717,309 | |||||||||||||||||
| Fund shares repurchased | 2,071,622 | 56 | 8,132,099 | 34 | |||||||||||||||||
| Income distribution | 326,685 | 301,430 | 2,812,936 | 204,021 | |||||||||||||||||
| Forward foreign currency exchange contracts, at value | — | — | 3,965,741 | 27,283 | |||||||||||||||||
| Amounts owed to affiliates | 482,326 | 127,174 | 1,107,084 | 62,354 | |||||||||||||||||
| Due to broker | — | 184,381 | 865,292 | 7,675 | |||||||||||||||||
| Accrued expenses | 233,219 | 189,630 | 393,218 | 160,073 | |||||||||||||||||
Total liabilities | 43,543,293 | 107,322,650 | 231,552,292 | 3,716,499 | |||||||||||||||||
| Net Assets: | |||||||||||||||||||||
| Paid-in capital | 651,009,122 | 435,025,598 | 2,383,745,773 | 218,129,321 | |||||||||||||||||
| Accumulated undistributed (distributions in excess of) net investment income | 2,438,600 | 889,846 | (3,125,486 | ) | 277,965 | ||||||||||||||||
| Accumulated net realized loss on investments, futures, swaps and foreign currency related transactions | (12,474,096 | ) | (1,615,491 | ) | (21,835,885 | ) | (4,145,521 | ) | |||||||||||||
| Net unrealized appreciation (depreciation) on investments, futures, swaps and translation of assets and liabilities denominated in foreign currencies | (2,322,772 | ) | (1,894,715 | ) | 5,571,118 | (1,403,193 | ) | ||||||||||||||
NET ASSETS | $ | 638,650,854 | $ | 432,405,238 | $ | 2,364,355,520 | $ | 212,858,572 | |||||||||||||
| Net Assets: | |||||||||||||||||||||
| Class A | $ | 432,761,594 | $ | 6,972,976 | $ | 714,876,529 | $ | 3,420,358 | |||||||||||||
| Class B | 18,712,710 | — | 22,971,472 | — | |||||||||||||||||
| Class C | 16,931,338 | — | 20,937,147 | — | |||||||||||||||||
| Institutional | 146,783,760 | 117,497,444 | 1,558,970,671 | 3,316,684 | |||||||||||||||||
| Service | 23,461,452 | — | 46,599,701 | — | |||||||||||||||||
| Separate Account Institutional Shares | — | 307,934,818 | — | 206,121,530 | |||||||||||||||||
| Shares Outstanding: | |||||||||||||||||||||
| Class A | 29,555,889 | 704,293 | 72,780,585 | 343,719 | |||||||||||||||||
| Class B | 1,277,939 | — | 2,329,026 | — | |||||||||||||||||
| Class C | 1,156,993 | — | 2,121,786 | — | |||||||||||||||||
| Institutional | 10,035,821 | 11,852,914 | 158,124,682 | 332,724 | |||||||||||||||||
| Service | 1,605,403 | — | 4,724,351 | — | |||||||||||||||||
| Separate Account Institutional Shares | — | 31,085,655 | — | 20,691,618 | |||||||||||||||||
| Total shares outstanding, $0.001 par value (unlimited number of shares authorized) | 43,632,045 | 43,642,862 | 240,080,430 | 21,368,061 | |||||||||||||||||
Net asset value, offering and redemption price per share:(b) | |||||||||||||||||||||
| Class A | $14.64 | $ | 9.90 | $ | 9.82 | $ | 9.95 | ||||||||||||||
| Class B | 14.64 | — | 9.86 | — | |||||||||||||||||
| Class C | 14.63 | — | 9.87 | — | |||||||||||||||||
| Institutional | 14.63 | 9.91 | 9.86 | 9.97 | |||||||||||||||||
| Service | 14.61 | — | 9.86 | — | |||||||||||||||||
| Separate Account Institutional Shares | — | 9.91 | — | 9.96 | |||||||||||||||||
| (a) | Includes restricted cash of $3,000,000, $450,000 and $275,000, relating to initial margin requirements and collateral on futures transactions for Government Income, U.S. Mortgages and Investment Grade Credit, respectively, and includes restricted cash of $6,519,266, $2,863,549, $33,559,856 and $2,699,840 relating to swap contracts for Government Income, U.S. Mortgages, Core Fixed Income and Investment Grade Credit, respectively. |
| (b) | Maximum public offering price per share for Class A shares of Government Income, U.S. Mortgages, Core Fixed Income and Investment Grade Credit (NAV per share multiplied by 1.0471) is $15.33, $10.37, $10.28, and $10.42, respectively. At redemption, Class B and Class C shares may be subject to a contingent deferred sales charge, assessed on the amount equal to the lesser of the current net asset value or the original purchase price of the shares. |
The accompanying notes are an integral part of these financial statements.
56
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Statements of Operations
For the Year Ended October 31, 2006
| Government | U.S. Mortgages | Core Fixed | Investment Grade | ||||||||||||||||||
| Income Fund | Fund | Income Fund | Credit Fund | ||||||||||||||||||
| Investment income: | |||||||||||||||||||||
Interest(a) | $ | 39,267,344 | $ | 23,877,664 | $ | 111,009,476 | $ | 11,993,578 | |||||||||||||
Total income | 39,267,344 | 23,877,664 | 111,009,476 | 11,993,578 | |||||||||||||||||
| Expenses: | |||||||||||||||||||||
| Management fees | 4,481,364 | 1,917,539 | 8,316,527 | 854,824 | |||||||||||||||||
Distribution and Service fees(b) | 2,036,968 | 19,601 | 2,226,502 | 9,551 | |||||||||||||||||
Transfer Agent fees(b) | 1,169,147 | 201,163 | 1,771,193 | 90,067 | |||||||||||||||||
| Custody and accounting fees | 315,453 | 311,423 | 474,492 | 118,412 | |||||||||||||||||
| Printing fees | 103,089 | 81,586 | 200,539 | 63,015 | |||||||||||||||||
| Registration fees | 146,339 | 43,728 | 125,688 | 40,583 | |||||||||||||||||
| Professional fees | 77,345 | 77,345 | 117,651 | 80,039 | |||||||||||||||||
| Service share fees | 95,515 | 49,742 | 197,790 | 3,665 | |||||||||||||||||
| Trustee fees | 16,201 | 16,201 | 16,201 | 16,201 | |||||||||||||||||
| Other | 120,745 | 34,572 | 142,820 | 23,050 | |||||||||||||||||
Total expenses | 8,562,166 | 2,752,900 | 13,589,403 | 1,299,407 | |||||||||||||||||
| Less — expense reductions | (813,458 | ) | (1,010,624 | ) | (212,151 | ) | (527,076 | ) | |||||||||||||
Net expenses | 7,748,708 | 1,742,276 | 13,377,252 | 772,331 | |||||||||||||||||
NET INVESTMENT INCOME | 31,518,636 | 22,135,388 | 97,632,224 | 11,221,247 | |||||||||||||||||
| Realized and unrealized gain (loss) on investment, futures, swaps and foreign currency related transactions: | |||||||||||||||||||||
| Net realized gain (loss) from: | |||||||||||||||||||||
| Investment transactions | (7,881,384 | ) | (37,744 | ) | (8,333,961 | ) | (2,672,331 | ) | |||||||||||||
| Futures transactions | (4,241,535 | ) | (146,131 | ) | (6,593,357 | ) | 578,868 | ||||||||||||||
| Swap contracts | (2,001,989 | ) | (158,362 | ) | (8,178,308 | ) | (1,693,487 | ) | |||||||||||||
| Foreign currency related transactions | — | — | (7,245,498 | ) | (183,354 | ) | |||||||||||||||
| Net change in unrealized gain (loss) on: | |||||||||||||||||||||
| Investments | 6,699,801 | 4,348,418 | 26,190,788 | 3,714,878 | |||||||||||||||||
| Futures | 303,462 | (167,971 | ) | (850,613 | ) | (225,191 | ) | ||||||||||||||
| Swap contracts | 4,337,671 | 926,943 | 13,975,767 | 4,912 | |||||||||||||||||
| Translation of assets and liabilities denominated in foreign currencies | — | — | (2,168,739 | ) | (25,150 | ) | |||||||||||||||
Net realized and unrealized gain (loss) on investment, futures, swaps and foreign currency related transactions | (2,783,974 | ) | 4,765,153 | 6,796,079 | (500,855 | ) | |||||||||||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 28,734,662 | $ | 26,900,541 | $ | 104,428,303 | $ | 10,720,392 | |||||||||||||
| (a) | Net of $1,269 in foreign withholding tax for the Investment Grade Credit Fund. |
| (b) | Class specific Distribution and Service and Transfer Agent fees were as follows: |
| Distribution and Service Fees | Transfer Agent Fees | Service Share Fees | ||||||||||||||||||||||||||||||||||||||||||
| Separate | Separate | |||||||||||||||||||||||||||||||||||||||||||
| Account | Account | |||||||||||||||||||||||||||||||||||||||||||
| Fund | Class A | Class B | Class C | Class A | Class B | Class C | Institutional | Service | Institutional | Service | Institutional | |||||||||||||||||||||||||||||||||
| Government Income | $ | 1,646,136 | $ | 213,883 | $ | 176,949 | $ | 1,053,527 | $ | 34,221 | $ | 28,312 | $ | 45,446 | $ | 7,641 | — | — | — | |||||||||||||||||||||||||
| U.S. Mortgages | 19,601 | — | — | 12,546 | — | — | 36,657 | — | $ | 151,960 | $ | 45,822 | $ | 3,920 | ||||||||||||||||||||||||||||||
| Core Fixed Income | 1,757,491 | 253,996 | 215,015 | 1,124,795 | 40,639 | 34,403 | 555,533 | 15,823 | — | — | — | |||||||||||||||||||||||||||||||||
| Investment Grade Credit | 9,551 | — | — | 6,113 | — | — | 1,404 | — | 82,550 | 1,755 | 1,910 | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
57
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Statements of Changes in Net Assets
| Government Income Fund | |||||||||||||
| For the | For the | ||||||||||||
| Year Ended | Year Ended | ||||||||||||
| October 31, 2006 | October 31, 2005 | ||||||||||||
| From operations: | |||||||||||||
| Net investment income | $ | 31,518,636 | $ | 20,216,131 | |||||||||
| Net realized gain (loss) on investment, futures, swaps and foreign currency related transactions | (14,124,908 | ) | 4,302,059 | ||||||||||
| Net change in unrealized gain (loss) on investments, futures, swaps and translation of assets and liabilities denominated in foreign currencies | 11,340,934 | (19,757,697 | ) | ||||||||||
Net increase (decrease) in net assets from operations | 28,734,662 | 4,760,493 | |||||||||||
| Distributions to shareholders: | |||||||||||||
| From net investment income | |||||||||||||
| Class A Shares | (24,629,669 | ) | (15,966,212 | ) | |||||||||
| Class B Shares | (650,709 | ) | (533,992 | ) | |||||||||
| Class C Shares | (542,468 | ) | (370,892 | ) | |||||||||
| Institutional Shares | (4,808,529 | ) | (1,564,131 | ) | |||||||||
| Service Shares | (711,718 | ) | (322,759 | ) | |||||||||
| Separate Account Institutional Shares | — | — | |||||||||||
| From net realized gains | |||||||||||||
| Class A Shares | (160,181 | ) | (5,845,096 | ) | |||||||||
| Class B Shares | (5,062 | ) | (362,623 | ) | |||||||||
| Class C Shares | (3,803 | ) | (237,517 | ) | |||||||||
| Institutional Shares | (12,822 | ) | (745,239 | ) | |||||||||
| Service Shares | (3,776 | ) | (116,638 | ) | |||||||||
| Separate Account Institutional Shares | — | — | |||||||||||
| From capital | |||||||||||||
| Class A Shares | — | — | |||||||||||
| Class B Shares | — | — | |||||||||||
| Class C Shares | — | — | |||||||||||
| Institutional Shares | — | — | |||||||||||
| Service Shares | — | — | |||||||||||
Total distributions to shareholders | (31,528,737 | ) | (26,065,099 | ) | |||||||||
| From share transactions: | |||||||||||||
| Net proceeds from sales of shares | 490,086,040 | 452,723,542 | |||||||||||
| Proceeds received in connection with merger | — | — | |||||||||||
| Reinvestment of dividends and distributions | 28,194,885 | 24,158,646 | |||||||||||
| Cost of shares repurchased | (727,312,932 | ) | (232,780,488 | ) | |||||||||
Net increase (decrease) in net assets resulting from share transactions | (209,032,007 | ) | 244,101,700 | ||||||||||
TOTAL INCREASE (DECREASE) | (211,826,082 | ) | 222,797,094 | ||||||||||
| Net assets: | |||||||||||||
| Beginning of year | 850,476,936 | 627,679,842 | |||||||||||
| End of year | $ | 638,650,854 | $ | 850,476,936 | |||||||||
Accumulated undistributed (distributions in excess of) net investment income | $ | 2,438,600 | $ | 5,254,578 | |||||||||
The accompanying notes are an integral part of these financial statements.
58
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| U.S. Mortgages Fund | Core Fixed Income Fund | Investment Grade Credit Fund | ||||||||||||||||||||||||
| For the | For the | For the | For the | For the | For the | |||||||||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||||
| October 31, 2006 | October 31, 2005 | October 31, 2006 | October 31, 2005 | October 31, 2006 | October 31, 2005 | |||||||||||||||||||||
| $ | 22,135,388 | $ | 11,749,541 | $ | 97,632,224 | $ | 56,281,074 | $ | 11,221,247 | $ | 6,144,224 | |||||||||||||||
| (342,237 | ) | 1,244,830 | (30,351,124 | ) | 24,313,407 | (3,970,304 | ) | (506,457 | ) | |||||||||||||||||
| 5,107,390 | (7,922,884 | ) | 37,147,203 | (58,064,406 | ) | 3,469,449 | (5,666,468 | ) | ||||||||||||||||||
| 26,900,541 | 5,071,487 | 104,428,303 | 22,530,075 | 10,720,392 | (28,701 | ) | ||||||||||||||||||||
| (327,343 | ) | (315,229 | ) | (27,592,559 | ) | (22,356,546 | ) | (173,533 | ) | (140,714 | ) | |||||||||||||||
| — | — | (809,299 | ) | (883,632 | ) | — | — | |||||||||||||||||||
| — | — | (683,475 | ) | (672,754 | ) | — | — | |||||||||||||||||||
| (4,165,860 | ) | (3,367,214 | ) | (59,364,208 | ) | (40,113,425 | ) | (173,199 | ) | (95,385 | ) | |||||||||||||||
| — | — | (1,497,789 | ) | (1,048,118 | ) | — | — | |||||||||||||||||||
| (17,156,726 | ) | (9,159,690 | ) | — | — | (10,283,179 | ) | (5,873,577 | ) | |||||||||||||||||
| — | (13,456 | ) | (4,057,820 | ) | (6,881,068 | ) | — | (8,899 | ) | |||||||||||||||||
| — | — | (173,446 | ) | (394,357 | ) | — | — | |||||||||||||||||||
| — | — | (143,326 | ) | (302,043 | ) | — | — | |||||||||||||||||||
| — | (2,109,001 | ) | (6,915,957 | ) | (10,458,548 | ) | — | (269,174 | ) | |||||||||||||||||
| — | (1,830,428 | ) | (198,051 | ) | (285,885 | ) | — | — | ||||||||||||||||||
| — | — | — | — | — | (293 | ) | ||||||||||||||||||||
| — | — | (666,129 | ) | — | — | — | ||||||||||||||||||||
| — | — | (19,538 | ) | — | — | — | ||||||||||||||||||||
| — | — | (16,500 | ) | — | — | — | ||||||||||||||||||||
| — | — | (1,433,147 | ) | — | — | — | ||||||||||||||||||||
| — | — | (36,159 | ) | — | — | — | ||||||||||||||||||||
| (21,649,929 | ) | (16,795,018 | ) | (103,607,403 | ) | (83,396,376 | ) | (10,629,911 | ) | (6,388,042 | ) | |||||||||||||||
| 293,021,211 | 584,326,694 | 1,051,438,670 | 958,769,563 | 68,516,397 | 181,422,818 | |||||||||||||||||||||
| — | — | 230,276,588 | 73,493,151 | — | — | |||||||||||||||||||||
| 18,063,365 | 13,333,622 | 70,943,055 | 57,569,645 | 8,219,129 | 5,592,276 | |||||||||||||||||||||
| (353,767,406 | ) | (338,784,172 | ) | (829,727,761 | ) | (648,011,975 | ) | (63,423,525 | ) | (53,666,553 | ) | |||||||||||||||
| (42,682,830 | ) | 258,876,144 | 522,930,552 | 441,820,384 | 13,312,001 | 133,348,541 | ||||||||||||||||||||
| (37,432,218 | ) | 247,152,613 | 523,751,452 | 380,954,083 | 13,402,482 | 126,931,798 | ||||||||||||||||||||
| 469,837,456 | 222,684,843 | 1,840,604,068 | 1,459,649,985 | 199,456,090 | 72,524,292 | |||||||||||||||||||||
| $ | 432,405,238 | $ | 469,837,456 | $ | 2,364,355,520 | $ | 1,840,604,068 | $ | 212,858,572 | $ | 199,456,090 | |||||||||||||||
| $ | 889,846 | $ | (75,909 | ) | $ | (3,125,486 | ) | $ | (695,234 | ) | $ | 277,965 | $ | 119,287 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
59
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Notes to Financial Statements
October 31, 2006
| 1. ORGANIZATION |
Goldman Sachs Trust (the “Trust”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes Goldman Sachs Government Income Fund (“Government Income”), Goldman Sachs U.S. Mortgages Fund (“U.S. Mortgages”), Goldman Sachs Core Fixed Income Fund (“Core Fixed Income”) and Goldman Sachs Investment Grade Credit Fund (“Investment Grade Credit”) (collectively, the “Funds” or individually a “Fund”). Each Fund is a diversified portfolio of the Trust. U.S. Mortgages and Investment Grade Credit offer three classes of shares — Class A, Institutional and Separate Account Institutional. Government Income and Core Fixed Income offer five classes of shares — Class A, Class B, Class C, Institutional and Service. Class A shares of the Funds charge a maximum initial sales charge of 4.50%. The contingent deferred sales charge for Class B shares is 5.00% maximum declining to zero after six years for Government Income and Core Fixed Income. The Class C shares of Government Income and Core Fixed Income have a contingent deferred sales charge of 1.00% during the first 12 months. Institutional, Service and Separate Account Institutional shares are not subject to a sales charge. Goldman, Sachs & Co. (“Goldman Sachs”) as distributor of the Funds receives such sales loads of which a certain portion may be retained.
| 2. SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of the significant accounting policies consistently followed by the Funds. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts. Actual results could differ from those estimates.
A. Investment Valuation — Portfolio securities for which market quotations are readily available are valued at market value on the basis of quotations furnished by a pricing service or provided by dealers in such securities. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Portfolio securities for which market quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued based on yield equivalents, pricing matrices or other sources, under valuation procedures established by the Trust’s Board of Trustees.
B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified cost basis. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted. Net investment income (other than class specific expenses) and unrealized and realized gains or losses are allocated daily to each class of shares of the respective Funds based upon the relative proportion of net assets of each class.
Certain mortgage security paydown gains and losses are recorded as interest income (loss) and are included in interest income in the accompanying Statements of Operations. Original issue discounts (OID) on debt securities are accreted to interest income over the life of the security with a corresponding increase in the cost basis of that security. Market discounts and market premiums on debt securities are accreted/amortized to interest income over the expected life of the security with a corresponding adjustment in the cost basis of that security.
Pursuant to applicable law and procedures adopted by the Trust’s Board of Trustees, securities transactions in portfolio securities (including futures transactions) may be effected from time to time through Goldman Sachs or an affiliate. In order for Goldman Sachs or an affiliate, acting as agent, to effect securities or futures transactions for a Fund, the commissions, fees or other remuneration received by Goldman Sachs or an affiliate must be reasonable and fair compared to the commissions, fees or other remuneration received by other brokers in connection with comparable transactions involving similar securities or futures contracts.
C. 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. Service Shares bear all expenses and fees relating to their Service and Shareholder
60
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| 2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
Administration Plans. Each class of shares of the Funds separately bear its respective class-specific Transfer Agency fees. Class A and Institutional shareholders of U.S. Mortgages and Investment Grade Credit bear their respective class specific Account Services fees.
D. Federal Taxes and Distribution to Shareholders — It is each Fund’s policy to comply with the requirements of the Internal Revenue Code (the “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. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually. Net capital losses are carried forward to future years and may be used to the extent allowed by the Code to offset any future capital gains. Utilization of capital loss carryforwards will reduce the requirement of future capital gain distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with Federal income tax rules, which may differ from U.S. generally accepted accounting principles. Therefore, the source of each Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gains, or as a tax return of capital.
E. 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 valuations, 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; and (ii) purchases and sales of foreign investments, income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions.
Net realized and unrealized gain (loss) on foreign currency transactions will represent: (i) foreign exchange gains and losses from the sale and holdings of foreign currencies; (ii) gains and losses from the sale of investments (applicable to fixed income securities); (iii) currency gains and losses between trade date and settlement date on investment securities transactions and forward exchange contracts; and (iv) gains and losses from the difference between amounts of interest, dividends and foreign withholding taxes recorded and the amounts actually received. The effect of changes in foreign currency exchange rates on securities and derivative instruments are segregated in the Statements of Operations from the effects of changes in market prices of those securities and derivative instruments, but are included with the net realized and unrealized gain (loss) on securities and derivative instruments. Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases and decreases in unrealized gain (loss) on foreign currency related transactions.
F. Forward Foreign Currency Exchange Contracts — Core Fixed Income and Investment Grade Credit 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 portfolio positions. Core Fixed Income and Investment Grade Credit may also purchase and sell forward contracts to seek to increase total return. All commitments are “marked-to-market” daily at the applicable translation rates and any resulting unrealized gains or losses are recorded in the Funds’ financial statements. Core Fixed Income and Investment Grade Credit record realized gains or losses at the time a forward contract is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
The contractual amounts of forward foreign currency exchange contracts do not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered. At October 31, 2006, Core Fixed Income and Investment Grade Credit had segregated sufficient cash and/or securities to cover any commitments under these contracts.
61
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Notes to Financial Statements (continued)
October 31, 2006
| 2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
G. Forward Sales Contracts — The Funds may enter into forward security sales of mortgage-backed securities in which the Funds sell securities in the current month for delivery of securities defined by pool-stipulated characteristics on a specified future date. The value of the contract is recorded as an asset and a liability on the Funds’ records with the difference between its market value and expected cash proceeds recorded as an unrealized gain or loss. Gains or losses are realized upon delivery of the security sold.
H. Futures Contracts — The Funds may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Funds are required to segregate 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, dependent on the fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Funds realize a gain or loss which is reported in the Statements of Operations.
The use of futures contracts involve, to varying degrees, elements of market and counterparty risk which may exceed the amounts recognized in the Statements of Assets and Liabilities. Changes in the value of a futures contract may not directly correlate with changes in the value of the underlying securities. These risks may decrease the effectiveness of the Funds’ strategies and potentially result in a loss.
I. Mortgage Dollar Rolls — The Funds may enter into mortgage “dollar rolls” in which the Funds sell securities in the current month for delivery and simultaneously 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 purchase of a security and a separate transaction involving a sale.
During the settlement period between sale and repurchase, the Funds will not be entitled to accrued interest and/or receive principal payments on the securities sold. Dollar roll transactions involve the risk that the market value of the securities sold by the Funds may decline below the repurchase price of those securities. In the event the buyer of the securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Funds’ use of proceeds of the transaction may be restricted pending a determination by, or with respect to, the other party.
J. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase the securities at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Funds, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Funds may be delayed or limited and there may be a decline in the value of the collateral during the period while the Funds seek to assert their rights. The underlying securities for all repurchase agreements are held in safekeeping at the Funds’ custodian or designated subcustodians under triparty repurchase agreements.
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and terms and conditions contained therein, the Funds, together with other registered investment companies having management or investment advisory agreements with Goldman Sachs Asset Management, L.P. (“GSAM”), or its affiliates, may transfer uninvested cash into joint accounts, the daily aggregate balance of which is invested in one or more repurchase agreements.
K. Securities purchased on a when-issued or delayed-delivery basis — The Funds may purchase securities on a when-issued or delayed-delivery basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after trade date; interest income is not accrued until settlement date. At the time a Fund enters into such transactions, it is required to have segregated assets with a current value at least equal to the amount of its when-issued or delayed-delivery purchase commitments. Credit risks exist on these commitments to the extent of any unrealized gains on the underlying securities purchased and any unrealized losses on the underlying securities sold. Market risk exists on these
62
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| 2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. In addition to the normal credit and market risks, transactions with delayed settlement dates may expose the Funds to greater risk that such transactions may not be consummated.
L. Segregation Transactions — As set forth in the prospectus, the Funds may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, swap contracts, written options, mortgage dollar rolls, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Funds are required to segregate liquid assets with a current value equal to or greater than the market value of the corresponding transactions.
M. Swap Contracts — The Funds may enter into swap transactions for hedging purposes or to seek to increase total return. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net payment to be received by the Funds, and/or the termination value at the end of the contract. Therefore, the Funds consider the creditworthiness of each counterparty to a contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying reference asset or index. Entering into these agreements involves, to varying degrees, market, liquidity, elements of credit, legal and documentation risk in excess of amounts recognized in the Statement of Assets and Liabilities. The Funds may invest in the following types of swaps;
An interest rate swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specific prices, rates or indices for a specified amount of an underlying notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.
A total return swap is an agreement that gives the Fund the right to receive the appreciation in the value of a specified security, index or other instrument in return for a fee paid to the counterparty, which will typically be an agreed upon interest rate. If the underlying asset declines in value over the term of the swap, the Fund may also be required to pay the dollar value of that decline to the counterparty.
Credit default swap agreements involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default by a third party, typically a corporate issuer on its obligation. A Fund may use credit default swaps to provide a measure of protection against defaults of a corporate issuer or to take an active long or short position with respect to the likelihood of a particular issuer’s default. As a seller of protection, a Fund generally receives an upfront payment or a fixed rate of income throughout the term of the swap provided that there is no credit event. Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. If the Fund enters into a buy contract and no credit event occurs, its exposure is limited to the periodic payments previously made to the counterparty. In addition, if the Fund enters into a sale contract and a credit event occurs, the value of the referenced obligation received by the Fund reduced by the period payments previously received may be less than the maximum payment it pays to the counterparty, resulting in a loss to the Fund.
Swaps are marked to market daily using either pricing vendor quotations, counterparty prices or models prices and the change in value, if any, is recorded as unrealized gain or loss in the Statement of Operations. An upfront payment made and/or received by the Funds, is recorded as an asset and/or liability on the Statement of Assets and Liabilities and is only recorded as a realized gain or loss when either the contract’s term ends or, with respect to a Credit Default Swap, a credit event occurs. Periodic payments received or made on swap contracts are recorded as realized gain or loss in the Statement of Operations. Gains or losses are also realized upon early termination of the swap agreements.
63
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Notes to Financial Statements (continued)
October 31, 2006
| 2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
N. Treasury Inflation-Protected Securities — The Funds may invest in Treasury Inflation-Protected Securities (“TIPS”), specially structured bonds in which the principal amount is adjusted daily to keep pace with inflation, as measured by the U.S. Consumer Pricing Index (“CPI”). The adjustments for interest income due to inflation are reflected in interest income on the Statements of Operations. The repayment of the original bond principal upon maturity is guaranteed by the full faith and credit of the U.S. Government.
| 3. AGREEMENTS |
GSAM, an affiliate of Goldman Sachs, serves as investment adviser pursuant to an Investment Management Agreement (the “Agreement”) with the Trust on behalf of the Funds. Under the Agreement, GSAM manages the Funds, subject to the general supervision of the Trust’s Board of Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administering the Funds’ business affairs, including providing facilities, GSAM is entitled to a fee (“Management fee”), computed daily and payable monthly, equal to an annual percentage rate of each Fund’s average daily net assets.
For the period from February 28, 2006 through October 31, 2006, GSAM received a Management fee on a contractual basis at the following rates:
| Government | Core Fixed | Investment | ||||||||||||||
| Average Daily Net Assets | Income | U.S. Mortgages1 | Income | Grade Credit1 | ||||||||||||
| Up to $1 billion | 0.54 | % | 0.40 | % | 0.40 | % | 0.40 | % | ||||||||
| Next $1 billion | 0.49 | 0.36 | 0.36 | 0.36 | ||||||||||||
| Over $2 billion | 0.47 | 0.34 | 0.34 | 0.34 | ||||||||||||
| 1 | GSAM has voluntarily agreed not to impose a portion of the Management fee on U.S. Mortgages and Investment Grade Credit Funds equal to 0.07% and 0.07%, respectively, of such Funds’ average daily net assets. As a result of fee waiver, the current Management fees of the U.S. Mortgages and Investment Credit Funds is 0.33% and 0.33%, respectively, of such Funds’ average daily net assets. |
Prior to February 28, 2006, the contractual Management fee for Government Income, U.S. Mortgages, Core Fixed Income and Investment Grade Credit as an annual percentage rate of average daily net assets was 0.54%, 0.40%, 0.40% and 0.40%, respectively. For the period prior to February 28, 2006, GSAM entered into a voluntary fee reduction commitment for the Funds, in order to achieve the rates in the above table.
GSAM has also voluntarily agreed to limit certain “Other Expenses” (excluding Management fees, Distribution and Service fees, Transfer Agency fees and expenses, Service Share fees, Account Service fees, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any expense offset arrangements) to the extent that such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of each Fund. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Funds are not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the year ended October 31, 2006, the Other Expense limitations for Government Income, U.S. Mortgages, Core Fixed Income, and Investment Grade Credit as an annual percentage rate of average daily net assets were 0.004%, 0.004%, 0.104% and 0.004%, respectively.
64
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| 3. AGREEMENTS (continued) |
The Trust, on behalf of each Fund, has adopted Distribution and Service Plans. Under the Plans, Goldman Sachs and/or authorized dealers are entitled to a monthly fee for distribution services equal to, on an annual basis, 0.25% of the average daily net assets of U.S. Mortgages and Investment Grade Credit attributable to Class A shares and 0.025%, 0.75% and 0.75% the average daily net assets of the Government Income and Core Fixed Income attributable to Class A, Class B and Class C shares, respectively. Additionally, Goldman Sachs and/or authorized dealers are entitled to receive, under the Plans, a separate fee for personal and account maintenance services equal to, on an annual basis, 0.25% of the average daily net assets of Government Income and Core Fixed Income attributable to Class B or Class C Shares.
Goldman Sachs serves as Distributor of the shares of the Funds pursuant to a Distribution Agreement. Goldman Sachs may retain a portion of the Class A sales load and Class B and Class C contingent deferred sales charges. During the year ended October 31, 2006, Goldman Sachs advised the Funds that it retained the following approximate amounts:
| Contingent Deferred | ||||||||||||
| Sales Load | Sales Charge | |||||||||||
| Fund | Class A | Class B | Class C | |||||||||
| Government Income | $ | 35,800 | $ | 200 | $ | 8,900 | ||||||
| U.S. Mortgages | 100 | — | — | |||||||||
| Core Fixed Income | 137,800 | — | 100 | |||||||||
| Investment Grade Credit | 900 | — | — | |||||||||
Goldman Sachs also serves as Transfer Agent of the Funds for a fee. The fees charged for such transfer agency services are calculated daily and payable monthly at an annual rate as follows: 0.16% of the average daily net assets for Class A, Class B and Class C Shares and 0.04% of the average daily net assets for Separate Account Institutional (U.S. Mortgages and Investment Grade Credit only), Institutional and Service shares (Government Income and Core Fixed Income only). For the year ended October 31, 2006, Goldman Sachs has voluntarily agreed to waive a portion of the Transfer Agent fees equal to 0.02% of the average daily net assets attributable to Institutional and Separate Account Institutional Shares of U.S. Mortgages and Investment Grade Credit. Goldman Sachs may discontinue or modify this waiver in the future at its discretion.
The Trust, on behalf of Government Income and Core Fixed Income, has adopted a Service Plan and a Shareholder Administration Plan for Service Shares. These plans allow for Service Shares to compensate service organizations for providing varying levels of personal and account administration and shareholder administration services to their customers who are beneficial owners of such shares. The Service Plan and Shareholder Administration Plan provide for compensation to the service organizations in an amount equal to, on an annualized basis, 0.25% and 0.25% respectively, of the average daily net assets of each share class. The Trust, on behalf of Class A and Institutional Class Shares of U.S. Mortgages and Investment Grade Credit Funds, has adopted Account Service Plans. Under these plans, Goldman Sachs and authorized dealers are entitled to receive a fee for account service and account maintenance equal to, on an annual basis, 0.05% of the average daily net assets of U.S. Mortgages and Investment Grade Credit Funds attributable to Class A and Institutional Class Shares.
65
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Notes to Financial Statements (continued)
October 31, 2006
| 3. AGREEMENTS (continued) |
For the year ended October 31, 2006, GSAM and the Distributor have voluntarily agreed to waive certain fees and reimburse other expenses. In addition, the Funds have entered into certain offset arrangements with the custodian and transfer agent resulting in a reduction of the Funds’ expenses. For the year ended October 31, 2006, expense reductions were as follows (in thousands):
| Fee Waivers | Fee Credits | |||||||||||||||||||||||
| Management | Transfer | Other Expense | Transfer | Total Expense | ||||||||||||||||||||
| Fund | Fees | Agent Fees | Reimbursement | Custody Fee | Agent Fee | Reductions | ||||||||||||||||||
| Government Income | $ | — | $ | — | $ | 746 | $ | 21 | $ | 46 | $ | 813 | ||||||||||||
| U.S. Mortgages | 336 | 94 | 546 | 34 | 1 | 1,011 | ||||||||||||||||||
| Core Fixed Income | 117 | — | — | 48 | 47 | 212 | ||||||||||||||||||
| Investment Grade Credit | 149 | 42 | 333 | 3 | — | 527 | ||||||||||||||||||
At October 31, 2006, the amounts owed to affiliates of the Trust were as follows (in thousands):
| Management | Distribution and | Transfer | ||||||||||||||
| Fund | Fees | Service Fees | Agent Fees | Total | ||||||||||||
| Government Income | $ | 291 | $ | 122 | $ | 69 | $ | 482 | ||||||||
| U.S. Mortgages | 118 | 1 | 8 | 127 | ||||||||||||
| Core Fixed Income | 754 | 193 | 160 | 1,107 | ||||||||||||
| Investment Grade Credit | 58 | 1 | 3 | 62 | ||||||||||||
66
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| 4. PORTFOLIO SECURITIES TRANSACTIONS |
The cost of purchases and proceeds from sales and maturities of long-term securities for the year ended October 31, 2006 were as follows:
| Sales and | Sales and Maturities | |||||||||||||||
| Purchases of | Purchases | Maturities of | (Excluding | |||||||||||||
| U.S. Government | (Excluding | U.S. Government | U.S. Government | |||||||||||||
| and Agency | U.S. Government and | and Agency | and Agency | |||||||||||||
| Fund | Obligations | Agency Obligations) | Obligations | Obligations) | ||||||||||||
| Government Income | $ | 5,856,214,906 | $ | 153,036,227 | $ | 6,013,828,136 | $ | 132,440,229 | ||||||||
| U.S. Mortgages | 9,331,554,238 | 155,752,252 | 9,366,360,741 | 67,312,909 | ||||||||||||
| Core Fixed Income | 11,371,326,934 | 969,701,773 | 11,522,181,489 | 276,889,510 | ||||||||||||
| Investment Grade Credit | 20,297,224 | 152,242,825 | 22,747,980 | 140,591,630 | ||||||||||||
For the year ended October 31, 2006, Government Income, U.S. Mortgages, Core Fixed Income and Investment Grade Credit paid commissions of approximately $69,500, $35,000, $154,300 and $17,700, respectively, in connection with futures contracts entered into with Goldman Sachs.
| 5. LINE OF CREDIT FACILITY |
The Funds participate in a $400,000,000 committed, unsecured revolving line of credit facility together with other registered investment companies having management or investment advisory agreements with GSAM. Under the most restrictive arrangement, the Funds must own securities having a market value in excess of 300% of each Fund’s total bank borrowings. This facility is 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 that has not been utilized. For the year ended October 31, 2006, the Funds did not have any borrowings under this facility.
67
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Notes to Financial Statements (continued)
October 31, 2006
| 6. TAX INFORMATION |
The tax character of distributions paid during the fiscal year ended October 31, 2006 was as follows:
| Government | U.S. | Core Fixed | Investment Grade | ||||||||||||||
| Income | Mortgages | Income | Credit | ||||||||||||||
| Distributions paid from: | |||||||||||||||||
| Ordinary Income | $ | 31,528,737 | $ | 21,649,929 | $ | 96,989,608 | $ | 10,629,911 | |||||||||
| Net long-term capital gains | — | — | 4,446,322 | — | |||||||||||||
| Total taxable distributions | $ | 31,528,737 | $ | 21,649,929 | $ | 101,435,930 | $ | 10,629,911 | |||||||||
| Tax return of capital | — | — | $ | 2,171,473 | — | ||||||||||||
The tax character of distributions paid during the fiscal year ended October 31, 2005 was as follows:
| Government | U.S. | Core Fixed | Investment Grade | ||||||||||||||
| Income | Mortgages | Income | Credit | ||||||||||||||
| Distributions paid from: | |||||||||||||||||
| Ordinary Income | $ | 19,974,907 | $ | 15,374,235 | $ | 70,913,539 | $ | 6,245,239 | |||||||||
| Net long-term capital gains | 6,090,192 | 1,420,783 | 12,482,837 | 142,803 | |||||||||||||
| Total taxable distributions | $ | 26,065,099 | $ | 16,795,018 | $ | 83,396,376 | $ | 6,388,042 | |||||||||
As of October 31, 2006, the components of accumulated earnings (losses) on a tax basis were as follows.
| Government | U.S. | Core Fixed | Investment Grade | ||||||||||||||
| Income | Mortgages | Income | Credit | ||||||||||||||
| Undistributed ordinary income — net | $ | 1,392,480 | $ | 1,241,148 | — | $ | 373,244 | ||||||||||
Capital loss carryforward:(1) | |||||||||||||||||
| Expiring 2013 | — | (936,118 | ) | — | (419,693 | ) | |||||||||||
| Expiring 2014 | (11,925,097 | ) | (978,868 | ) | $ | (22,304,650 | ) | (3,690,267 | ) | ||||||||
| Total capital loss carryforward | $ | (11,925,097 | ) | $ | (1,914,986 | ) | $ | (22,304,650 | ) | $ | (4,109,960 | ) | |||||
| Timing differences (dividends payable, straddles) | (326,685 | ) | (311,786 | ) | (2,837,105 | ) | (251,423 | ) | |||||||||
| Unrealized gains (losses) — net | (1,498,966 | ) | (1,634,736 | ) | 5,751,502 | (1,282,610 | ) | ||||||||||
| Total accumulated losses — net | (12,358,268 | ) | (2,620,360 | ) | (19,390,253 | ) | (5,270,749 | ) | |||||||||
| (1) | Expiration occurs on October 31 of the year indicated. |
As of October 31, 2006, the Funds’ aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes was as follows:
| Government | U.S. | Core Fixed | Investment | |||||||||||||
| Income | Mortgages | Income | Grade Credit | |||||||||||||
| Tax Cost | $ | 648,829,287 | $ | 497,319,082 | $ | 2,452,843,664 | $ | 207,192,082 | ||||||||
| Gross unrealized gain | 3,674,616 | 1,832,727 | 16,427,625 | 1,704,286 | ||||||||||||
| Gross unrealized loss | (5,459,748 | ) | (3,077,439 | ) | (10,995,454 | ) | (2,384,622 | ) | ||||||||
| Net unrealized security gain (loss) | $ | (1,785,132 | ) | $ | (1,244,712 | ) | $ | 5,432,171 | $ | (680,336 | ) | |||||
| Net unrealized gain (loss) on other investments | $ | 286,166 | $ | (390,024 | ) | $ | 319,331 | $ | (602,274 | ) | ||||||
| Net unrealized gain (loss) | (1,498,966 | ) | (1,634,736 | ) | 5,751,502 | (1,282,610 | ) | |||||||||
68
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| 6. TAX INFORMATION (continued) |
The differences between book-basis and tax-basis unrealized gains (losses) is attributable to wash sales, differences related to the tax treatment of non-periodic swap payments, amortization of swaps, market discount accretion and premium amortization and mark-to-market gains (losses) on 1256 futures contracts.
In order to present certain components of the Fund’s capital accounts on a tax basis, certain reclassifications have been recorded to the Funds’ accounts. These reclassifications have no impact on the net asset value of the Funds. Reclassifications result primarily from the difference in the tax treatment of foreign currency, swap transactions, and tax treatment of certain bonds.
| Accumulated | ||||||||||||
| Accumulated | Undistributed | |||||||||||
| Net Realized | Net Investment | |||||||||||
| Fund | Paid-in-Capital | Gain (Loss) | Income | |||||||||
| Government Income | $ | 1,062,705 | $ | 1,928,816 | $ | (2,991,521 | ) | |||||
| U.S. Mortgages | — | (480,292 | ) | 480,292 | ||||||||
| Core Fixed Income | 1,103,311 | 9,011,835 | (10,115,146 | ) | ||||||||
| Investment Grade Credit | — | 432,658 | (432,658 | ) | ||||||||
| 7. OTHER MATTERS |
As of October 31, 2006 the Goldman Sachs Growth and Income Strategy Portfolio was the beneficial owner of approximately 3% of the outstanding shares of the Core Fixed Income.
Legal Proceedings — Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds (including these Funds) and the Trustees and Officers of the Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. These Funds, along with certain other investment portfolios of the Trust, were named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended consolidated complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision. By agreement, the plaintiffs subsequently withdrew their appeal without prejudice but reserved their right to reactivate their appeal pending a decision by the circuit court of appeals in similar litigation.
Based on currently available information, GSAM and GSAMI believe that the likelihood that the pending purported class action and derivative action lawsuit will have a material adverse financial impact on the Funds is remote, and the pending action is not likely to materially affect their ability to provide investment management services to their clients, including the Goldman Sachs Funds.
69
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Notes to Financial Statements (continued)
October 31, 2006
| 7. OTHER MATTERS (continued) |
Mergers and Reorganizations — At a meeting held on November 4, 2004, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Expedition Agreement”) providing for the tax-free acquisition of the Expedition Investment Grade Bond Fund by Core Fixed Income. The acquisition was completed on February 25, 2005.
Pursuant to the Expedition Agreement, the assets and liabilities of the Expedition Investment Grade Bond Fund (“Acquired Fund”) Class A, Class B and Institutional Class were transferred into the Goldman Sachs Core Fixed Income (“Survivor Fund”) Class A, Class B and Institutional Class, respectively, in a tax-free exchange as follows:
| Exchanged Shares | Acquired Fund’s | |||||||||||
| of Survivor | Value of | Shares Outstanding | ||||||||||
| Survivor Share Class/Acquired Fund Share Class | Issued | Exchanged Shares | as of February 25, 2005 | |||||||||
| Core Fixed Income Class A/Expedition Investment Grade Bond Fund Class A | 443,072 | $ | 4,452,854 | 430,741 | ||||||||
| Core Fixed Income Class B/Expedition Investment Grade Bond Fund Class B | 168,369 | 1,698,846 | 163,996 | |||||||||
| Core Fixed Income Institutional Class/Expedition Investment Grade Bond Fund Institutional Class | 6,680,820 | 67,342,702 | 6,509,242 | |||||||||
The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized appreciation.
| Survivor Fund’s | ||||||||||||||||
| Survivor Fund’s | Acquired Fund’s | Aggregate | ||||||||||||||
| Aggregate | Aggregate | Acquired | Net Assets | |||||||||||||
| Net Assets | Net Assets | Fund’s | Immediately | |||||||||||||
| Before | Before | Unrealized | After | |||||||||||||
| Survivor/Acquired Fund | Acquisition | Acquisition | Appreciation | Acquisition | ||||||||||||
| Core Fixed Income/Expedition Investment Grade Bond Fund | $ | 1,459,857,120 | $ | 73,494,402 | $ | 4,701,480 | $ | 1,533,351,522 | ||||||||
At a meeting held on December 14, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “First Funds Agreement”) providing for the tax-free acquisition of the First Funds Intermediate Bond Portfolio by Core Fixed Income. On April 7, 2006, the Board of Trustees approved certain amendments to the First Funds Agreement. The acquisition was completed on June 5, 2006, as of the close of business June 2, 2006.
70
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| 7. OTHER MATTERS (continued) |
Pursuant to the First Funds Agreement, the assets and liabilities of the First Funds Intermediate Bond Portfolio (“Acquired Fund”) Institutional Class, Class A, Class B and Class C were transferred into the Core Fixed Income (“Survivor Fund”) Institutional Class and Class A, respectively, in a tax free exchange as follows:
| Acquired Fund’s | ||||||||||||
| Shares | ||||||||||||
| Exchanged Shares of | Value of Exchanged | Outstanding as of | ||||||||||
| Survivor Share Class/Acquired Fund Share Class | Survivor Issued | Shares | June 2, 2006 | |||||||||
| Core Fixed Income Institutional Class/First Funds Intermediate Bond Portfolio Institutional Class | 23,256,054 | $ | 225,816,117 | 22,869,788 | ||||||||
| Core Fixed Income Class A/First Fund Intermediate Bond Portfolio Class A | 249,590 | 2,413,528 | 244,781 | |||||||||
| Core Fixed Income Class A/First Funds Intermediate Bond Portfolio Class B | 32,136 | 310,758 | 31,472 | |||||||||
| Core Fixed Income Class A/First Funds Intermediate Bond Portfolio Class C | 179,544 | 1,736,185 | 175,687 | |||||||||
The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized depreciation.
| Survivor Fund’s | Acquired Fund’s | Survivor Fund’s | ||||||||||||||
| Aggregate Net | Aggregate Net | Acquired Fund’s | Aggregate Net | |||||||||||||
| Assets Before | Assets Before | Unrealized | Assets Immediately | |||||||||||||
| Survivor/Acquired Fund | Acquisition | Acquisition | Depreciation | After Acquisition | ||||||||||||
| Core Fixed Income/First Funds Intermediate Bond Portfolio | $ | 2,168,716,107 | $ | 230,276,588 | $ | 5,005,096 | $ | 2,398,992,695 | ||||||||
New Accounting Pronouncements — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, the adviser is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
On September 15, 2006, FASB released Statement Financial Accounting Standard No. 157 “Fair Value Measurement” (“FAS 157”) which provides enhanced guidance for using fair value to measure assets and liabilities. The standard requires companies to provide expanded information about the assets and liabilities measured at fair value and the potential effect of these fair valuations on an entity’s financial performance. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair valuation methods and applications. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adviser does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required.
71
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Notes to Financial Statements (continued)
October 31, 2006
| 8. SUMMARY OF SHARE TRANSACTIONS |
Share activity is as follows:
| Government Income Fund | ||||||||||||||||
| For the Year Ended | For the Year Ended | |||||||||||||||
| October 31, 2006 | October 31, 2005 | |||||||||||||||
| Shares | Dollars | Shares | Dollars | |||||||||||||
Class A Shares | ||||||||||||||||
| Shares sold | 19,006,196 | $ | 276,486,239 | 25,751,238 | $ | 380,364,618 | ||||||||||
Shares converted from Class B(a) | 71,331 | 1,040,729 | 31,509 | 463,949 | ||||||||||||
| Reinvestment of dividends and distributions | 1,574,240 | 22,857,034 | 1,408,483 | 20,800,018 | ||||||||||||
| Shares repurchased | (41,202,955 | ) | (593,696,503 | ) | (10,066,631 | ) | (148,602,957 | ) | ||||||||
| (20,551,188 | ) | (293,312,501 | ) | 17,124,599 | 253,025,628 | |||||||||||
Class B Shares | ||||||||||||||||
| Shares sold | 131,172 | 1,901,404 | 138,121 | 2,040,240 | ||||||||||||
| Reinvestment of dividends and distributions | 33,925 | 492,693 | 44,355 | 655,380 | ||||||||||||
Shares converted to Class A(a) | (71,326 | ) | (1,040,729 | ) | (31,509 | ) | (463,949 | ) | ||||||||
| Shares repurchased | (523,718 | ) | (7,594,308 | ) | (627,907 | ) | (9,275,437 | ) | ||||||||
| (429,947 | ) | (6,240,940 | ) | (476,940 | ) | (7,043,766 | ) | |||||||||
Class C Shares | ||||||||||||||||
| Shares sold | 273,958 | 3,976,041 | 362,664 | 5,356,965 | ||||||||||||
| Reinvestment of dividends and distributions | 28,527 | 414,100 | 33,061 | 488,032 | ||||||||||||
| Shares repurchased | (429,252 | ) | (6,230,332 | ) | (497,938 | ) | (7,351,325 | ) | ||||||||
| (126,767 | ) | (1,840,191 | ) | (102,213 | ) | (1,506,328 | ) | |||||||||
Institutional Shares | ||||||||||||||||
| Shares sold | 13,235,776 | 192,106,435 | 3,678,638 | 53,949,896 | ||||||||||||
| Reinvestment of dividends and distributions | 285,861 | 4,144,669 | 129,590 | 1,911,519 | ||||||||||||
| Shares repurchased | (7,659,473 | ) | (111,004,132 | ) | (4,293,634 | ) | (63,362,003 | ) | ||||||||
| 5,862,164 | 85,246,972 | (485,406 | ) | (7,500,588 | ) | |||||||||||
Service Shares | ||||||||||||||||
| Shares sold | 1,077,215 | 15,615,921 | 745,365 | 11,011,823 | ||||||||||||
| Reinvestment of dividends and distributions | 19,752 | 286,389 | 20,599 | 303,697 | ||||||||||||
| Shares repurchased | (605,504 | ) | (8,787,657 | ) | (284,114 | ) | (4,188,766 | ) | ||||||||
| 491,463 | 7,114,653 | 481,850 | 7,126,754 | |||||||||||||
NET INCREASE (DECREASE) | (14,754,275 | ) | $ | (209,032,007 | ) | 16,541,890 | $ | 244,101,700 | ||||||||
| (a) | Class B Shares automatically convert into Class A Shares at the end of the calendar quarter that is eight years after the initial purchase date of either the Fund or another Goldman Sachs Fund. |
72
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| 8. SUMMARY OF SHARE TRANSACTIONS (continued) |
| U.S. Mortgages Fund | ||||||||||||||||
| For the Year Ended | For the Year Ended | |||||||||||||||
| October 31, 2006 | October 31, 2005 | |||||||||||||||
| Shares | Dollars | Shares | Dollars | |||||||||||||
Class A Shares | ||||||||||||||||
| Shares sold | 74,629 | $ | 736,840 | 5,019,581 | $ | 50,101,170 | ||||||||||
| Reinvestment of dividends and distributions | 32,146 | 315,209 | 24,573 | 244,529 | ||||||||||||
| Shares repurchased | (208,971 | ) | (2,050,018 | ) | (4,299,105 | ) | (42,967,447 | ) | ||||||||
| (102,196 | ) | (997,969 | ) | 745,049 | 7,378,252 | |||||||||||
Institutional Shares | ||||||||||||||||
| Shares sold | 4,996,084 | 49,157,500 | 4,946,142 | 49,304,140 | ||||||||||||
| Reinvestment of dividends and distributions | 365,157 | 3,584,728 | 295,772 | 2,952,261 | ||||||||||||
| Shares repurchased | (1,103,686 | ) | (10,910,941 | ) | (9,444,926 | ) | (93,957,727 | ) | ||||||||
| 4,257,555 | 41,831,287 | (4,203,012 | ) | (41,701,326 | ) | |||||||||||
Separate Account Institutional Shares | ||||||||||||||||
| Shares sold | 24,833,736 | 243,126,871 | 48,765,071 | 484,921,384 | ||||||||||||
| Reinvestment of dividends and distributions | 1,443,931 | 14,163,428 | 1,017,500 | 10,136,832 | ||||||||||||
| Shares repurchased | (34,651,048 | ) | (340,806,447 | ) | (20,254,960 | ) | (201,858,998 | ) | ||||||||
| (8,373,381 | ) | (83,516,148 | ) | 29,527,611 | 293,199,218 | |||||||||||
NET INCREASE (DECREASE) | (4,218,022 | ) | $ | (42,682,830 | ) | 26,069,648 | $ | 258,876,144 | ||||||||
73
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Notes to Financial Statements (continued)
October 31, 2006
| 8. SUMMARY OF SHARE TRANSACTIONS (continued) |
| Core Fixed Income Fund | ||||||||||||||||
| For the Year Ended | For the Year Ended | |||||||||||||||
| October 31, 2006 | October 31, 2005 | |||||||||||||||
| Shares | Dollars | Shares | Dollars | |||||||||||||
Class A Shares | ||||||||||||||||
| Shares sold | 33,915,411 | $ | 330,454,717 | 35,960,982 | $ | 361,963,182 | ||||||||||
| Shares issued in connection with merger | 461,270 | 4,460,471 | 443,072 | 4,452,854 | ||||||||||||
Shares converted from Class B(a) | 94,032 | 918,118 | 46,202 | 464,412 | ||||||||||||
| Reinvestment of dividends and distributions | 2,859,107 | 27,907,378 | 2,464,922 | 24,786,186 | ||||||||||||
| Shares repurchased | (31,237,706 | ) | (304,040,411 | ) | (23,268,765 | ) | (233,859,094 | ) | ||||||||
| 6,092,114 | 59,700,273 | 15,646,413 | 157,807,540 | |||||||||||||
Class B Shares | ||||||||||||||||
| Shares sold | 413,768 | 4,040,182 | 415,966 | 4,202,378 | ||||||||||||
| Shares issued in connection with merger | — | — | 168,245 | 1,697,595 | ||||||||||||
| Reinvestment of dividends and distributions | 80,189 | 786,518 | 95,011 | 959,791 | ||||||||||||
Shares converted to Class A(a) | (93,649 | ) | (918,118 | ) | (46,019 | ) | (464,412 | ) | ||||||||
| Shares repurchased | (1,008,157 | ) | (9,859,452 | ) | (811,301 | ) | (8,186,679 | ) | ||||||||
| (607,849 | ) | (5,950,870 | ) | (178,098 | ) | (1,791,327 | ) | |||||||||
Class C Shares | ||||||||||||||||
| Shares sold | 861,312 | 8,439,976 | 941,827 | 9,522,000 | ||||||||||||
| Reinvestment of dividends and distributions | 75,872 | 744,534 | 86,409 | 872,871 | ||||||||||||
| Shares repurchased | (1,179,491 | ) | (11,563,276 | ) | (1,028,149 | ) | (10,392,335 | ) | ||||||||
| (242,307 | ) | (2,378,766 | ) | 87 | 2,536 | |||||||||||
Institutional Shares | ||||||||||||||||
| Shares sold | 70,215,331 | 684,433,513 | 55,776,185 | 561,484,946 | ||||||||||||
| Shares issued in connection with merger | 23,256,054 | 225,816,117 | 6,680,820 | 67,342,702 | ||||||||||||
| Reinvestment of dividends and distributions | 4,149,150 | 40,632,934 | 2,981,398 | 30,085,346 | ||||||||||||
| Shares repurchased | (50,393,455 | ) | (494,390,692 | ) | (38,187,685 | ) | (385,523,566 | ) | ||||||||
| 47,227,080 | 456,491,872 | 27,250,718 | 273,389,428 | |||||||||||||
Service Shares | ||||||||||||||||
| Shares sold | 2,448,389 | 24,070,282 | 2,143,270 | 21,597,057 | ||||||||||||
| Reinvestment of dividends and distributions | 88,895 | 871,691 | 85,720 | 865,451 | ||||||||||||
| Shares repurchased | (1,010,620 | ) | (9,873,930 | ) | (997,254 | ) | (10,050,301 | ) | ||||||||
| 1,526,664 | 15,068,043 | 1,231,736 | 12,412,207 | |||||||||||||
NET INCREASE (DECREASE) | 53,995,702 | $ | 522,930,552 | 43,950,856 | $ | 441,820,384 | ||||||||||
| (a) | Class B Shares automatically convert into Class A Shares at the end of the calendar quarter that is eight years after the initial purchase date of either the Fund or another Goldman Sachs Fund. |
74
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
| 8. SUMMARY OF SHARE TRANSACTIONS (continued) |
| Investment Grade Credit Fund | ||||||||||||||||
| For the Year Ended | For the Year Ended | |||||||||||||||
| October 31, 2006 | October 31, 2005 | |||||||||||||||
| Shares | Dollars | Shares | Dollars | |||||||||||||
Class A Shares | ||||||||||||||||
| Shares sold | 122,758 | $ | 1,221,812 | 320,645 | $ | 3,263,617 | ||||||||||
| Reinvestment of dividends and distributions | 13,743 | 135,325 | 11,900 | 121,009 | ||||||||||||
| Shares repurchased | (157,724 | ) | (1,542,363 | ) | (178,972 | ) | (1,810,430 | ) | ||||||||
| (21,223 | ) | (185,226 | ) | 153,573 | 1,574,196 | |||||||||||
Institutional Shares | ||||||||||||||||
| Shares sold | 22,238 | 219,000 | 470,899 | 4,733,479 | ||||||||||||
| Reinvestment of dividends and distributions | 16,932 | 166,973 | 9,313 | 94,718 | ||||||||||||
| Shares repurchased | (72,211 | ) | (705,458 | ) | (121,782 | ) | (1,237,372 | ) | ||||||||
| (33,041 | ) | (319,485 | ) | 358,430 | 3,590,825 | |||||||||||
Separate Account Institutional Shares | ||||||||||||||||
| Shares sold | 6,781,618 | 67,075,585 | 16,984,506 | 173,425,722 | ||||||||||||
| Reinvestment of dividends and distributions | 803,525 | 7,916,831 | 528,785 | 5,376,549 | ||||||||||||
| Shares repurchased | (6,233,643 | ) | (61,175,704 | ) | (4,986,999 | ) | (50,618,751 | ) | ||||||||
| 1,351,500 | 13,816,712 | 12,526,292 | 128,183,520 | |||||||||||||
NET INCREASE | 1,297,236 | $ | 13,312,001 | 13,038,295 | $ | 133,348,541 | ||||||||||
75
GOLDMAN SACHS GOVERNMENT INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
| Income (loss) from | ||||||||||||||||||||||||||||||||
| investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||
| Net asset | ||||||||||||||||||||||||||||||||
| value, | Net | Net realized | Total from | From net | From net | |||||||||||||||||||||||||||
| beginning | investment | and unrealized | investment | investment | realized | Total | ||||||||||||||||||||||||||
| Year - Share Class | of year | income(a) | gain (loss) | operations | income | gains | distributions | |||||||||||||||||||||||||
| FOR THE YEARS ENDED OCTOBER 31, | ||||||||||||||||||||||||||||||||
| 2006 - A | $ | 14.57 | $ | 0.55 | $ | 0.08 | $ | 0.63 | $ | (0.56 | ) | $ | — | (e) | $ | (0.56 | ) | |||||||||||||||
| 2006 - B | 14.57 | 0.44 | 0.08 | 0.52 | (0.45 | ) | — | (e) | (0.45 | ) | ||||||||||||||||||||||
| 2006 - C | 14.56 | 0.44 | 0.08 | 0.52 | (0.45 | ) | — | (e) | (0.45 | ) | ||||||||||||||||||||||
| 2006 - Institutional | 14.55 | 0.60 | 0.09 | 0.69 | (0.61 | ) | — | (e) | (0.61 | ) | ||||||||||||||||||||||
| 2006 - Service | 14.54 | 0.53 | 0.08 | 0.61 | (0.54 | ) | — | (e) | (0.54 | ) | ||||||||||||||||||||||
| 2005 - A | 15.00 | 0.43 | (0.30 | ) | 0.13 | (0.39 | ) | (0.17 | ) | (0.56 | ) | |||||||||||||||||||||
| 2005 - B | 15.00 | 0.30 | (0.28 | ) | 0.02 | (0.28 | ) | (0.17 | ) | (0.45 | ) | |||||||||||||||||||||
| 2005 - C | 14.99 | 0.31 | (0.29 | ) | 0.02 | (0.28 | ) | (0.17 | ) | (0.45 | ) | |||||||||||||||||||||
| 2005 - Institutional | 14.98 | 0.46 | (0.27 | ) | 0.19 | (0.45 | ) | (0.17 | ) | (0.62 | ) | |||||||||||||||||||||
| 2005 - Service | 14.98 | 0.41 | (0.31 | ) | 0.10 | (0.37 | ) | (0.17 | ) | (0.54 | ) | |||||||||||||||||||||
| 2004 - A | 14.88 | 0.39 | 0.33 | 0.72 | (0.47 | ) | (0.13 | ) | (0.60 | ) | ||||||||||||||||||||||
| 2004 - B | 14.88 | 0.28 | 0.32 | 0.60 | (0.35 | ) | (0.13 | ) | (0.48 | ) | ||||||||||||||||||||||
| 2004 - C | 14.87 | 0.28 | 0.32 | 0.60 | (0.35 | ) | (0.13 | ) | (0.48 | ) | ||||||||||||||||||||||
| 2004 - Institutional | 14.85 | 0.46 | 0.33 | 0.79 | (0.53 | ) | (0.13 | ) | (0.66 | ) | ||||||||||||||||||||||
| 2004 - Service | 14.85 | 0.37 | 0.34 | 0.71 | (0.45 | ) | (0.13 | ) | (0.58 | ) | ||||||||||||||||||||||
| 2003 - A | 14.95 | 0.41 | 0.05 | 0.46 | (0.51 | ) | (0.02 | ) | (0.53 | ) | ||||||||||||||||||||||
| 2003 - B | 14.95 | 0.31 | 0.04 | 0.35 | (0.40 | ) | (0.02 | ) | (0.42 | ) | ||||||||||||||||||||||
| 2003 - C | 14.94 | 0.31 | 0.04 | 0.35 | (0.40 | ) | (0.02 | ) | (0.42 | ) | ||||||||||||||||||||||
| 2003 - Institutional | 14.93 | 0.47 | 0.04 | 0.51 | (0.57 | ) | (0.02 | ) | (0.59 | ) | ||||||||||||||||||||||
| 2003 - Service | 14.92 | 0.41 | 0.04 | 0.45 | (0.50 | ) | (0.02 | ) | (0.52 | ) | ||||||||||||||||||||||
| 2002 - A | 14.96 | 0.63 | (d) | 0.19 | (d) | 0.82 | (0.67 | ) | (0.16 | ) | (0.83 | ) | ||||||||||||||||||||
| 2002 - B | 14.96 | 0.52 | (d) | 0.19 | (d) | 0.71 | (0.56 | ) | (0.16 | ) | (0.72 | ) | ||||||||||||||||||||
| 2002 - C | 14.95 | 0.51 | (d) | 0.20 | (d) | 0.71 | (0.56 | ) | (0.16 | ) | (0.72 | ) | ||||||||||||||||||||
| 2002 - Institutional | 14.94 | 0.69 | (d) | 0.19 | (d) | 0.88 | (0.73 | ) | (0.16 | ) | (0.89 | ) | ||||||||||||||||||||
| 2002 - Service | 14.93 | 0.62 | (d) | 0.19 | (d) | 0.81 | (0.66 | ) | (0.16 | ) | (0.82 | ) | ||||||||||||||||||||
| (a) | Calculated based on the average shares outstanding methodology. |
| (b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares. |
| (c) | The portfolio turnover rate excluding the effect of mortgage dollar rolls is 690% for the year ended October 31, 2006. Prior years include the effect of mortgage dollar roll transactions. |
| (d) | As required, effective November 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing all premiums and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was to decrease net investment income per share by $0.06, increase net realized and unrealized gains and losses per share by $0.06, and decrease the ratio of net investment income to average net assets with and without expense reductions by 0.44%. |
| (e) | Amount is less than $0.005 per share. |
The accompanying notes are an integral part of these financial statements.
76
GOLDMAN SACHS GOVERNMENT INCOME FUND
| Ratios assuming no | ||||||||||||||||||||||||||||||||||
| expense reductions | ||||||||||||||||||||||||||||||||||
| Ratio of | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||
| Net assets | Ratio of | net investment | total | net investment | ||||||||||||||||||||||||||||||
| Net asset | at end of | net expenses | income to | expenses | income to | Portfolio | ||||||||||||||||||||||||||||
| value, end | Total | year | to average | average net | to average | average net | turnover | |||||||||||||||||||||||||||
| of year | return(b) | (in 000s) | net assets | assets | net assets | assets | rate(c) | |||||||||||||||||||||||||||
| $ | 14.64 | 4.40 | % | $ | 432,762 | 0.95 | % | 3.77 | % | 1.04 | % | 3.68 | % | 766 | % | |||||||||||||||||||
| 14.64 | 3.62 | 18,713 | 1.70 | 3.03 | 1.79 | 2.94 | 766 | |||||||||||||||||||||||||||
| 14.63 | 3.63 | 16,931 | 1.70 | 3.04 | 1.79 | 2.95 | 766 | |||||||||||||||||||||||||||
| 14.63 | 4.86 | 146,784 | 0.58 | 4.18 | 0.67 | 4.09 | 766 | |||||||||||||||||||||||||||
| 14.61 | 4.27 | 23,461 | 1.08 | 3.67 | 1.17 | 3.58 | 766 | |||||||||||||||||||||||||||
| 14.57 | 0.80 | 729,958 | 0.97 | 2.83 | 1.07 | 2.73 | 256 | |||||||||||||||||||||||||||
| 14.57 | 0.04 | 24,882 | 1.72 | 2.08 | 1.83 | 1.97 | 256 | |||||||||||||||||||||||||||
| 14.56 | 0.11 | 18,692 | 1.72 | 2.08 | 1.83 | 1.97 | 256 | |||||||||||||||||||||||||||
| 14.55 | 1.26 | 60,747 | 0.58 | 3.20 | 0.69 | 3.08 | 256 | |||||||||||||||||||||||||||
| 14.54 | 0.69 | 16,198 | 1.08 | 2.74 | 1.18 | 2.64 | 256 | |||||||||||||||||||||||||||
| 15.00 | 4.99 | 494,883 | 0.98 | 2.60 | 1.17 | 2.41 | 609 | |||||||||||||||||||||||||||
| 15.00 | 4.21 | 32,782 | 1.73 | 1.93 | 1.92 | 1.74 | 609 | |||||||||||||||||||||||||||
| 14.99 | 4.14 | 20,778 | 1.73 | 1.91 | 1.92 | 1.72 | 609 | |||||||||||||||||||||||||||
| 14.98 | 5.35 | 69,770 | 0.58 | 3.12 | 0.77 | 2.93 | 609 | |||||||||||||||||||||||||||
| 14.98 | 4.90 | 9,467 | 1.08 | 2.55 | 1.27 | 2.36 | 609 | |||||||||||||||||||||||||||
| 14.88 | 3.11 | 358,058 | 0.99 | 2.78 | 1.18 | 2.59 | 520 | |||||||||||||||||||||||||||
| 14.88 | 2.34 | 44,120 | 1.74 | 2.06 | 1.93 | 1.87 | 520 | |||||||||||||||||||||||||||
| 14.87 | 2.34 | 23,720 | 1.74 | 2.05 | 1.93 | 1.86 | 520 | |||||||||||||||||||||||||||
| 14.85 | 3.60 | 151,111 | 0.59 | 3.16 | 0.78 | 2.97 | 520 | |||||||||||||||||||||||||||
| 14.85 | 3.01 | 10,491 | 1.09 | 2.72 | 1.28 | 2.53 | 520 | |||||||||||||||||||||||||||
| 14.95 | 5.77 | 248,719 | 0.98 | 4.26 | (d) | 1.24 | 4.00 | (d) | 226 | |||||||||||||||||||||||||
| 14.95 | 4.99 | 51,124 | 1.73 | 3.54 | (d) | 1.99 | 3.28 | (d) | 226 | |||||||||||||||||||||||||
| 14.94 | 4.99 | 24,095 | 1.73 | 3.49 | (d) | 1.99 | 3.23 | (d) | 226 | |||||||||||||||||||||||||
| 14.93 | 6.13 | 82,523 | 0.58 | 4.74 | (d) | 0.84 | 4.48 | (d) | 226 | |||||||||||||||||||||||||
| 14.92 | 5.68 | 10,762 | 1.08 | 4.25 | (d) | 1.34 | 3.99 | (d) | 226 | |||||||||||||||||||||||||
77
GOLDMAN SACHS U.S. MORTGAGES FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
| Income from | Distributions | |||||||||||||||||||||||||||||||
| investment operations | to shareholders | |||||||||||||||||||||||||||||||
| Net asset | ||||||||||||||||||||||||||||||||
| value, | Net | Net realized | Total from | From net | From net | |||||||||||||||||||||||||||
| beginning | investment | and unrealized | investment | investment | realized | Total | ||||||||||||||||||||||||||
| Year - Share Class | of period | income(a) | gain (loss) | operations | income | gains | distributions | |||||||||||||||||||||||||
| FOR THE YEAR ENDED OCTOBER 31, | ||||||||||||||||||||||||||||||||
| 2006 - A | $ | 9.82 | $ | 0.41 | $ | 0.08 | $ | 0.49 | $ | (0.41 | ) | $ | — | $ | (0.41 | ) | ||||||||||||||||
| 2006 - Institutional | 9.82 | 0.45 | 0.08 | 0.53 | (0.44 | ) | — | (0.44 | ) | |||||||||||||||||||||||
| 2006 - Separate Account Institutional | 9.82 | 0.45 | 0.09 | 0.54 | (0.45 | ) | — | (0.45 | ) | |||||||||||||||||||||||
| 2005 - A | 10.22 | 0.28 | (0.17 | ) | 0.11 | (0.33 | ) | (0.18 | ) | (0.51 | ) | |||||||||||||||||||||
| 2005 - Institutional | 10.22 | 0.33 | (0.18 | ) | 0.15 | (0.37 | ) | (0.18 | ) | (0.55 | ) | |||||||||||||||||||||
| 2005 - Separate Account Institutional | 10.21 | 0.36 | (0.20 | ) | 0.16 | (0.37 | ) | (0.18 | ) | (0.55 | ) | |||||||||||||||||||||
| FOR THE PERIOD ENDED OCTOBER 31, | ||||||||||||||||||||||||||||||||
| 2004 - A (commenced November 3, 2003) | 10.00 | 0.22 | 0.33 | 0.55 | (0.33 | ) | — | (0.33 | ) | |||||||||||||||||||||||
| 2004 - Institutional (commenced November 3, 2003) | 10.00 | 0.29 | 0.31 | 0.60 | (0.38 | ) | — | (0.38 | ) | |||||||||||||||||||||||
| 2004 - Separate Account Institutional (commenced November 3, 2003) | 10.00 | 0.31 | 0.28 | 0.59 | (0.38 | ) | — | (0.38 | ) | |||||||||||||||||||||||
| (a) | Calculated based on the average shares outstanding methodology. |
| (b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the period and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Total returns for the periods less than one full year are not annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares. |
| (c) | The portfolio turnover rate excluding the effect of mortgage dollar rolls is 1442% for the year ended October 31, 2006. Prior years include the effect of mortgage dollar roll transactions. |
| (d) | Annualized. |
The accompanying notes are an integral part of these financial statements.
78
GOLDMAN SACHS U.S. MORTGAGES FUND
| Ratios assuming no | ||||||||||||||||||||||||||||||||||
| expense reductions | ||||||||||||||||||||||||||||||||||
| Ratio of | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||
| Net assets | Ratio of | net investment | total | net investment | ||||||||||||||||||||||||||||||
| Net asset | at end of | net expenses | income to | expenses | income to | Portfolio | ||||||||||||||||||||||||||||
| value, end | Total | period | to average | average net | to average | average net | turnover | |||||||||||||||||||||||||||
| of period | return(b) | (in 000s) | net assets | assets | net assets | assets | rate(c) | |||||||||||||||||||||||||||
| $ | 9.90 | 5.21 | % | $ | 6,973 | 0.79 | % | 4.24 | % | 0.98 | % | 4.05 | % | 1665 | % | |||||||||||||||||||
| 9.91 | 5.56 | 117,497 | 0.40 | 4.64 | 0.61 | 4.43 | 1665 | |||||||||||||||||||||||||||
| 9.91 | 5.73 | 307,935 | 0.35 | 4.62 | 0.56 | 4.41 | 1665 | |||||||||||||||||||||||||||
| 9.82 | 1.00 | 7,916 | 0.81 | 2.88 | 0.98 | 2.71 | 2006 | |||||||||||||||||||||||||||
| 9.82 | 1.49 | 74,616 | 0.40 | 3.43 | 0.58 | 3.24 | 2006 | |||||||||||||||||||||||||||
| 9.82 | 1.54 | 387,306 | 0.35 | 3.42 | 0.53 | 3.24 | 2006 | |||||||||||||||||||||||||||
| 10.22 | 5.60 | 628 | 0.82 | (d) | 1.95 | (d) | 1.08 | (d) | 1.69 | (d) | 1953 | |||||||||||||||||||||||
| 10.22 | 6.07 | 120,628 | 0.40 | (d) | 2.86 | (d) | 0.68 | (d) | 2.58 | (d) | 1953 | |||||||||||||||||||||||
| 10.21 | 6.03 | 101,429 | 0.35 | (d) | 2.98 | (d) | 0.63 | (d) | 2.70 | (d) | 1953 | |||||||||||||||||||||||
79
GOLDMAN SACHS CORE FIXED INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
| Income (loss) from | ||||||||||||||||||||||||||||||||||||
| investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||
| Net asset | ||||||||||||||||||||||||||||||||||||
| value, | Net | Net realized | Total from | From net | From net | |||||||||||||||||||||||||||||||
| beginning | investment | and unrealized | investment | investment | realized | From | Total | |||||||||||||||||||||||||||||
| Year - Share Class | of year | income(a) | gain (loss) | operations | income | gains | capital | distributions | ||||||||||||||||||||||||||||
| FOR THE YEARS ENDED OCTOBER 31, | ||||||||||||||||||||||||||||||||||||
| 2006 - A | $ | 9.87 | $ | 0.41 | $ | (0.01 | ) | $ | 0.40 | $ | (0.38 | ) | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.45 | ) | |||||||||||||||
| 2006 - B | 9.91 | 0.34 | (0.01 | ) | 0.33 | (0.31 | ) | (0.06 | ) | (0.01 | ) | (0.38 | ) | |||||||||||||||||||||||
| 2006 - C | 9.91 | 0.34 | — | 0.34 | (0.31 | ) | (0.06 | ) | (0.01 | ) | (0.38 | ) | ||||||||||||||||||||||||
| 2006 - Institutional | 9.90 | 0.45 | — | 0.45 | (0.42 | ) | (0.06 | ) | (0.01 | ) | (0.49 | ) | ||||||||||||||||||||||||
| 2006 - Service | 9.91 | 0.40 | (0.01 | ) | 0.39 | (0.37 | ) | (0.06 | ) | (0.01 | ) | (0.44 | ) | |||||||||||||||||||||||
| 2005 - A | 10.25 | 0.32 | (0.20 | ) | 0.12 | (0.37 | ) | (0.13 | ) | — | (0.50 | ) | ||||||||||||||||||||||||
| 2005 - B | 10.29 | 0.24 | (0.20 | ) | 0.04 | (0.29 | ) | (0.13 | ) | — | (0.42 | ) | ||||||||||||||||||||||||
| 2005 - C | 10.29 | 0.24 | (0.20 | ) | 0.04 | (0.29 | ) | (0.13 | ) | — | (0.42 | ) | ||||||||||||||||||||||||
| 2005 - Institutional | 10.28 | 0.36 | (0.21 | ) | 0.15 | (0.40 | ) | (0.13 | ) | — | (0.53 | ) | ||||||||||||||||||||||||
| 2005 - Service | 10.29 | 0.31 | (0.21 | ) | 0.10 | (0.35 | ) | (0.13 | ) | — | (0.48 | ) | ||||||||||||||||||||||||
| 2004 - A | 10.31 | 0.30 | 0.32 | 0.62 | (0.33 | ) | (0.35 | ) | — | (0.68 | ) | |||||||||||||||||||||||||
| 2004 - B | 10.35 | 0.23 | 0.31 | 0.54 | (0.25 | ) | (0.35 | ) | — | (0.60 | ) | |||||||||||||||||||||||||
| 2004 - C | 10.35 | 0.23 | 0.31 | 0.54 | (0.25 | ) | (0.35 | ) | — | (0.60 | ) | |||||||||||||||||||||||||
| 2004 - Institutional | 10.35 | 0.34 | 0.31 | 0.65 | (0.37 | ) | (0.35 | ) | — | (0.72 | ) | |||||||||||||||||||||||||
| 2004 - Service | 10.35 | 0.29 | 0.32 | 0.61 | (0.32 | ) | (0.35 | ) | — | (0.67 | ) | |||||||||||||||||||||||||
| 2003 - A | 10.07 | 0.40 | 0.28 | 0.68 | (0.40 | ) | (0.04 | ) | — | (0.44 | ) | |||||||||||||||||||||||||
| 2003 - B | 10.10 | 0.33 | 0.28 | 0.61 | (0.32 | ) | (0.04 | ) | — | (0.36 | ) | |||||||||||||||||||||||||
| 2003 - C | 10.10 | 0.33 | 0.28 | 0.61 | (0.32 | ) | (0.04 | ) | — | (0.36 | ) | |||||||||||||||||||||||||
| 2003 - Institutional | 10.09 | 0.45 | 0.29 | 0.74 | (0.44 | ) | (0.04 | ) | — | (0.48 | ) | |||||||||||||||||||||||||
| 2003 - Service | 10.09 | 0.40 | 0.29 | 0.69 | (0.39 | ) | (0.04 | ) | — | (0.43 | ) | |||||||||||||||||||||||||
| 2002 - A | 10.25 | 0.50 | (0.13 | ) | 0.37 | (0.52 | ) | (0.03 | ) | — | (0.55 | ) | ||||||||||||||||||||||||
| 2002 - B | 10.29 | 0.43 | (0.15 | ) | 0.28 | (0.44 | ) | (0.03 | ) | — | (0.47 | ) | ||||||||||||||||||||||||
| 2002 - C | 10.29 | 0.43 | (0.15 | ) | 0.28 | (0.44 | ) | (0.03 | ) | — | (0.47 | ) | ||||||||||||||||||||||||
| 2002 - Institutional | 10.28 | 0.55 | (0.15 | ) | 0.40 | (0.56 | ) | (0.03 | ) | — | (0.59 | ) | ||||||||||||||||||||||||
| 2002 - Service | 10.28 | 0.51 | (0.16 | ) | 0.35 | (0.51 | ) | (0.03 | ) | — | (0.54 | ) | ||||||||||||||||||||||||
| (a) | Calculated based on the average shares outstanding methodology. |
| (b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the year and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares. |
| (c) | The portfolio turnover rate excluding the effect of mortgage dollar rolls is 516% for the year ended October 31, 2006. Prior years include the effect of mortgage dollar roll transactions. |
The accompanying notes are an integral part of these financial statements.
80
GOLDMAN SACHS CORE FIXED INCOME FUND
| Ratios assuming no | ||||||||||||||||||||||||||||||||||
| expense reductions | ||||||||||||||||||||||||||||||||||
| Ratio of | Ratio of | |||||||||||||||||||||||||||||||||
| Net assets | Ratio of | net investment | Ratio of | net investment | ||||||||||||||||||||||||||||||
| Net asset | at end of | net expenses | income to | total expenses | income to | Portfolio | ||||||||||||||||||||||||||||
| value, end | Total | year | to average | average net | to average | average net | turnover | |||||||||||||||||||||||||||
| of year | return(b) | (in 000s) | net assets | assets | net assets | assets | rate(c) | |||||||||||||||||||||||||||
| $ | 9.82 | 4.21 | % | $ | 714,877 | 0.83 | % | 4.25 | % | 0.84 | % | 4.24 | % | 562 | % | |||||||||||||||||||
| 9.86 | 3.42 | 22,971 | 1.58 | 3.49 | 1.59 | 3.48 | 562 | |||||||||||||||||||||||||||
| 9.87 | 3.52 | 20,937 | 1.58 | 3.49 | 1.59 | 3.48 | 562 | |||||||||||||||||||||||||||
| 9.86 | 4.69 | 1,558,971 | 0.46 | 4.65 | 0.47 | 4.64 | 562 | |||||||||||||||||||||||||||
| 9.86 | 4.06 | 46,600 | 0.96 | 4.13 | 0.97 | 4.12 | 562 | |||||||||||||||||||||||||||
| 9.87 | 1.14 | 658,114 | 0.86 | 3.14 | 0.87 | 3.13 | 283 | |||||||||||||||||||||||||||
| 9.91 | 0.38 | 29,096 | �� | 1.61 | 2.40 | 1.62 | 2.39 | 283 | ||||||||||||||||||||||||||
| 9.91 | 0.38 | 23,432 | 1.61 | 2.40 | 1.62 | 2.39 | 283 | |||||||||||||||||||||||||||
| 9.90 | 1.53 | 1,098,280 | 0.47 | 3.54 | 0.48 | 3.53 | 283 | |||||||||||||||||||||||||||
| 9.91 | 1.02 | 31,682 | 0.97 | 3.03 | 0.98 | 3.02 | 283 | |||||||||||||||||||||||||||
| 10.25 | 6.24 | 523,045 | 0.90 | 2.96 | 0.90 | 2.96 | 549 | |||||||||||||||||||||||||||
| 10.29 | 5.43 | 32,040 | 1.65 | 2.21 | 1.65 | 2.21 | 549 | |||||||||||||||||||||||||||
| 10.29 | 5.42 | 24,323 | 1.65 | 2.21 | 1.65 | 2.21 | 549 | |||||||||||||||||||||||||||
| 10.28 | 6.55 | 860,021 | 0.50 | 3.36 | 0.50 | 3.36 | 549 | |||||||||||||||||||||||||||
| 10.29 | 6.22 | 20,221 | 1.00 | 2.86 | 1.00 | 2.86 | 549 | |||||||||||||||||||||||||||
| 10.31 | 7.03 | 445,178 | 0.89 | 3.91 | 0.89 | 3.91 | 489 | |||||||||||||||||||||||||||
| 10.35 | 6.31 | 37,120 | 1.64 | 3.21 | 1.64 | 3.21 | 489 | |||||||||||||||||||||||||||
| 10.35 | 6.21 | 25,409 | 1.64 | 3.16 | 1.64 | 3.16 | 489 | |||||||||||||||||||||||||||
| 10.35 | 7.54 | 695,181 | 0.49 | 4.39 | 0.49 | 4.39 | 489 | |||||||||||||||||||||||||||
| 10.35 | 6.90 | 21,827 | 0.99 | 3.89 | 0.99 | 3.89 | 489 | |||||||||||||||||||||||||||
| 10.07 | 3.59 | 315,441 | 0.90 | 5.03 | 0.90 | 5.03 | 437 | |||||||||||||||||||||||||||
| 10.10 | 2.70 | 36,131 | 1.65 | 4.33 | 1.65 | 4.33 | 437 | |||||||||||||||||||||||||||
| 10.10 | 2.80 | 20,176 | 1.65 | 4.32 | 1.65 | 4.32 | 437 | |||||||||||||||||||||||||||
| 10.09 | 3.99 | 733,996 | 0.50 | 5.51 | 0.50 | 5.51 | 437 | |||||||||||||||||||||||||||
| 10.09 | 3.47 | 29,761 | 1.00 | 5.05 | 1.00 | 5.05 | 437 | |||||||||||||||||||||||||||
81
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
| Income from | Distributions | |||||||||||||||||||||||||||||||
| investment operations | to shareholders | |||||||||||||||||||||||||||||||
| Net asset | ||||||||||||||||||||||||||||||||
| value, | Net | Net realized | Total from | From net | From net | |||||||||||||||||||||||||||
| beginning | investment | and unrealized | investment | investment | realized | Total | ||||||||||||||||||||||||||
| Year - Share Class | of year | income(a) | gain (loss) | operations | income | gains | distributions | |||||||||||||||||||||||||
| FOR THE YEAR ENDED OCTOBER 31, | ||||||||||||||||||||||||||||||||
| 2006 - A | $ | 9.93 | $ | 0.47 | $ | — | $ | 0.47 | $ | (0.45 | ) | $ | — | $ | (0.45 | ) | ||||||||||||||||
| 2006 - Institutional | 9.95 | 0.51 | — | 0.51 | (0.49 | ) | — | (0.49 | ) | |||||||||||||||||||||||
| 2006 - Separate Account Institutional | 9.94 | 0.52 | (0.01 | ) | 0.51 | (0.49 | ) | — | (0.49 | ) | ||||||||||||||||||||||
| 2005 - A | 10.31 | 0.40 | (0.35 | ) | 0.05 | (0.39 | ) | (0.04 | ) | (0.43 | ) | |||||||||||||||||||||
| 2005 - Institutional | 10.32 | 0.52 | (0.42 | ) | 0.10 | (0.43 | ) | (0.04 | ) | (0.47 | ) | |||||||||||||||||||||
| 2005 - Separate Account Institutional | 10.31 | 0.46 | (0.35 | ) | 0.11 | (0.44 | ) | (0.04 | ) | (0.48 | ) | |||||||||||||||||||||
| FOR THE PERIOD ENDED OCTOBER 31, | ||||||||||||||||||||||||||||||||
| 2004 - A (commenced November 3, 2003) | 10.00 | 0.38 | 0.31 | 0.69 | (0.38 | ) | — | (0.38 | ) | |||||||||||||||||||||||
| 2004 - Institutional (commenced November 3, 2003) | 10.00 | 0.44 | 0.30 | 0.74 | (0.42 | ) | — | (0.42 | ) | |||||||||||||||||||||||
| 2004 - Separate Account Institutional (commenced November 3, 2003) | 10.00 | 0.43 | 0.31 | 0.74 | (0.43 | ) | — | (0.43 | ) | |||||||||||||||||||||||
| (a) | Calculated based on the average shares outstanding methodology. |
| (b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, a complete redemption of the investment at the net asset value at the end of the period and no sales or redemption charges. Total return would be reduced if a sales or redemption charge were taken into account. Total returns for periods less than one full year are not annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares. |
| (c) | Annualized. |
The accompanying notes are an integral part of these financial statements.
82
GOLDMAN SACHS INVESTMENT GRADE CREDIT FUND
| Ratios assuming no | ||||||||||||||||||||||||||||||||||
| expense reductions | ||||||||||||||||||||||||||||||||||
| Ratio of | Ratio of | |||||||||||||||||||||||||||||||||
| Net assets | Ratio of | net investment | Ratio of | net investment | ||||||||||||||||||||||||||||||
| Net asset | at end of | net expenses | income to | total expenses | income to | Portfolio | ||||||||||||||||||||||||||||
| value, end | Total | period | to average | average net | to average | average net | turnover | |||||||||||||||||||||||||||
| of period | return(b) | (in 000s) | net assets | assets | net assets | assets | rate | |||||||||||||||||||||||||||
| $ | 9.95 | 4.84 | % | $ | 3,420 | 0.79 | % | 4.82 | % | 1.04 | % | 4.57 | % | 74 | % | |||||||||||||||||||
| 9.97 | 5.35 | 3,317 | 0.40 | 5.21 | 0.65 | 4.96 | 74 | |||||||||||||||||||||||||||
| 9.96 | 5.30 | 206,122 | 0.35 | 5.26 | 0.60 | 5.01 | 74 | |||||||||||||||||||||||||||
| 9.93 | 0.50 | 3,622 | 0.81 | 3.88 | 1.07 | 3.62 | 88 | |||||||||||||||||||||||||||
| 9.95 | 0.89 | 3,638 | 0.40 | 4.40 | 0.66 | 4.14 | 88 | |||||||||||||||||||||||||||
| 9.94 | 1.04 | 192,196 | 0.35 | 4.34 | 0.62 | 4.07 | 88 | |||||||||||||||||||||||||||
| 10.31 | 7.00 | 2,179 | 0.82 | (c) | 3.66 | (c) | 1.85 | (c) | 2.63 | (c) | 78 | |||||||||||||||||||||||
| 10.32 | 7.57 | 76 | 0.40 | (c) | 4.28 | (c) | 1.45 | (c) | 3.23 | (c) | 78 | |||||||||||||||||||||||
| 10.31 | 7.52 | 70,269 | 0.35 | (c) | 4.26 | (c) | 1.40 | (c) | 3.21 | (c) | 78 | |||||||||||||||||||||||
83
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees
Goldman Sachs Trust
Goldman Sachs Trust
We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Goldman Sachs Government Income Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund and Goldman Sachs Investment Grade Credit Fund (four of the funds comprising the Goldman Sachs Trust) (the “Funds”), as of October 31, 2006, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2006, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Goldman Sachs Government Income Fund, Goldman Sachs U.S. Mortgages Fund, Goldman Sachs Core Fixed Income Fund and Goldman Sachs Investment Grade Credit Fund at October 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
 |
New York, New York
December 21, 2006
84
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Fund Expenses (Unaudited) — Six Month Period Ended October 31, 2006
As a shareholder of Class A, Class B, Class C, Institutional, Service or Separate Account Institutional Shares of the Funds you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments (with respect to Class A Shares), contingent deferred sales charges (loads) on redemptions (with respect to Class B and Class C Shares), and redemption fees (if any); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees (with respect to Class A, Class B and Class C Shares); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in Class A, Class B, Class C, Institutional, Service and Separate Account Institutional Shares of the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2006 through October 31, 2006.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account for this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Government Income Fund | U.S. Mortgages Fund | Core Fixed Income Fund | Investment Grade Credit Fund | |||||||||||||||||||||||||||||||||||||||||||||
| Expenses | Expenses | Expenses | Expenses | |||||||||||||||||||||||||||||||||||||||||||||
| Beginning | Ending | Paid for the | Beginning | Ending | Paid for the | Beginning | Ending | Paid for the | Beginning | Ending | Paid for the | |||||||||||||||||||||||||||||||||||||
| Account Value | Account Value | 6 months ended | Account Value | Account Value | 6 months ended | Account Value | Account Value | 6 months ended | Account Value | Account Value | 6 months ended | |||||||||||||||||||||||||||||||||||||
| Share Class | 05/01/06 | 10/31/06 | 10/31/06* | 05/01/06 | 10/31/06 | 10/31/06* | 05/01/06 | 10/31/06 | 10/31/06* | 05/01/06 | 10/31/06 | 10/31/06* | ||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||
| Actual | $ | 1,000.00 | $ | 1,037.20 | $ | 4.88 | $ | 1,000.00 | $ | 1,038.30 | $ | 4.06 | $ | 1,000.00 | $ | 1,037.10 | $ | 4.21 | $ | 1,000.00 | $ | 1,049.00 | $ | 4.10 | ||||||||||||||||||||||||
| Hypothetical 5% return | 1,000.00 | 1,020.41 | + | 4.84 | 1,000.00 | 1,021.23 | + | 4.02 | 1,000.00 | 1,021.07 | + | 4.18 | 1,000.00 | 1,021.20 | + | 4.05 | ||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||
| Actual | 1,000.00 | 1,033.30 | 8.70 | N/A | N/A | N/A | 1,000.00 | 1,033.10 | 8.05 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||
| Hypothetical 5% return | 1,000.00 | 1,016.64 | + | 8.63 | N/A | N/A | N/A | 1,000.00 | 1,017.28 | + | 7.99 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||
| Actual | 1,000.00 | 1,032.60 | 8.70 | N/A | N/A | N/A | 1,000.00 | 1,034.10 | 8.05 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||
| Hypothetical 5% return | 1,000.00 | 1,016.65 | + | 8.63 | N/A | N/A | N/A | 1,000.00 | 1,017.29 | + | 7.99 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||||||||||||||||||||||||||
| Actual | 1,000.00 | 1,039.20 | 2.98 | 1,000.00 | 1,040.10 | 2.05 | 1,000.00 | 1,040.00 | 2.31 | 1,000.00 | 1,051.00 | 2.08 | ||||||||||||||||||||||||||||||||||||
| Hypothetical 5% return | 1,000.00 | 1,022.28 | + | 2.95 | 1,000.00 | 1,023.20 | + | 2.03 | 1,000.00 | 1,022.94 | + | 2.29 | 1,000.00 | 1,023.17 | + | 2.06 | ||||||||||||||||||||||||||||||||
Separate Account Institutional | ||||||||||||||||||||||||||||||||||||||||||||||||
| Actual | N/A | N/A | N/A | 1,000.00 | 1,041.40 | 1.79 | N/A | N/A | N/A | 1,000.00 | 1,051.30 | 1.83 | ||||||||||||||||||||||||||||||||||||
| Hypothetical 5% return | N/A | N/A | N/A | 1,000.00 | 1,023.45 | + | 1.77 | N/A | N/A | N/A | 1,000.00 | 1,023.42 | + | 1.80 | ||||||||||||||||||||||||||||||||||
Service | ||||||||||||||||||||||||||||||||||||||||||||||||
| Actual | 1,000.00 | 1,035.90 | 5.52 | N/A | N/A | N/A | 1,000.00 | 1,036.30 | 4.88 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||
| Hypothetical 5% return | 1,000.00 | 1,019.78 | + | 5.48 | N/A | N/A | N/A | 1,000.00 | 1,020.41 | + | 4.84 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||
| * | Expenses for each share class are calculated using the Funds’ annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 10/31/06. Expenses are calculated by multiplying the annualized expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized expense ratios for the period were as follows: |
| Separate Account | ||||||||||||||||||||||||
| Fund | Class A | Class B | Class C | Institutional | Service | Institutional | ||||||||||||||||||
| Government Income | 0.95 | % | 1.70 | % | 1.70 | % | 0.58 | % | 1.08 | % | N/A | |||||||||||||
| U.S. Mortgages | 0.79 | N/A | N/A | 0.40 | N/A | 0.35 | % | |||||||||||||||||
| Core Fixed Income | 0.82 | 1.57 | 1.57 | 0.45 | 0.95 | N/A | ||||||||||||||||||
| Investment Grade Credit | 0.79 | N/A | N/A | 0.40 | N/A | 0.35 | ||||||||||||||||||
| + | Hypothetical expenses are based on each Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses. |
85
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited)
The Trustees oversee the management of Goldman Sachs Trust (the “Trust”), and review the investment performance and expenses of the investment funds covered by this Report (the “Funds”) at regularly scheduled meetings held during the Funds’ fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreements (the “Management Agreements”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Funds.
The Management Agreements were most recently approved by the Trustees, including all of the Trustees who are not parties to the Management Agreements or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), on June 15, 2006 (the “Annual Contract Meeting”).
To assist the Trustees in their deliberations at the Annual Contract Meeting, and in addition to the reviews of the Funds’ investment performance, expenses and other matters at other regularly scheduled meetings, the Trustees have a Contract Review Committee (the “Committee”) whose members include all of the Independent Trustees. The Committee held meetings on December 15, 2005, February 8, 2006 and May 10, 2006. At these Committee meetings, the Independent Trustees considered matters relating to the Management Agreements including: (a) the Funds’ investment performance; (b) the Funds’ management fee arrangements; (c) the Investment Adviser’s undertaking to reimburse certain expenses of the Funds that exceed specified levels; (d) the Investment Adviser’s potential economies of scale and the breakpoints implemented in 2005 for the fees payable by the Funds under the Management Agreements; (e) the relative expense levels of the Funds; (f) information on the advisory fees charged by the Investment Adviser to institutional accounts; (g) the Investment Adviser’s profitability with respect to the Trust and the Funds; (h) the quality of the non-advisory services provided to the Funds; (i) the statutory and regulatory requirements applicable to the approval and continuation of mutual fund investment management agreements; (j) an evaluation of the Trustees’ contract review process provided by an outside third party; and (k) information on the processes followed by the third party mutual fund data provider engaged as part of the Trustees’ contract review (the “Outside Data Provider”) in producing investment performance and expense comparisons for the Funds.
At the Annual Contract Meeting, the Trustees reviewed the matters that were considered at the Committee meetings and also considered additional matters including: (a) a summary of fee concessions by the Investment Adviser and its affiliates with respect to the Goldman Sachs mutual funds since 2003; (b) the quality of the Investment Adviser’s services; (c) the structure, staff and capabilities of the Investment Adviser and its portfolio management teams; (d) the groups within the Investment Adviser that support the portfolio management teams, including the legal and compliance departments, the credit department, the valuation oversight group, the risk and performance analytics group, the business planning team and the technology group; (e) the Investment Adviser’s business continuity and disaster recovery planning; (f) the Investment Adviser’s financial resources and its ability to hire and retain talented personnel; (g) the fees received by the Investment Adviser’s affiliates from the Funds for transfer agency, securities lending, distribution, portfolio brokerage and other services; (h) the terms of the Management Agreements; (i) the administrative services provided under the Management Agreements, including the nature and extent of the Investment Adviser’s oversight of the Funds’ other service providers including the custodian and fund accounting agent; and (j) the Investment Adviser’s policies addressing various types of potential conflicts of interest. At the Annual Contract Meeting, the Trustees also considered at further length the Funds’ investment performance, fees and expenses, including the Funds’ expense trends over time and the breakpoints in the contractual fee rates under the Management Agreements that were approved in 2005.
In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the payment of Rule 12b-1 distribution and service fees by the Funds. Information was also provided to the Trustees relating to the Funds’ portfolio turnover rates, revenue sharing by the Investment Adviser, portfolio manager compensation and the alignment of the interests of the Funds and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser or its affiliates present.
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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)
The presentations made at the Contract Review Committee meetings and at the Annual Contract Meeting encompassed the Funds and other mutual fund portfolios for which the Board of Trustees has responsibility. While the Management Agreements for all of the Funds were approved at the same Annual Contract Meeting, the Trustees considered the applicable Management Agreement as it applied to each Fund separately.
In evaluating the Management Agreements at the Annual Contract Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser, its services and the Funds. At those meetings the Trustees received materials relating to the Investment Adviser’s investment management and other services under the Management Agreements, including: (a) information on the investment performance of the Funds in comparison to other mutual funds and benchmark performance indices; (b) general investment outlooks in the markets in which the Funds invest; (c) compliance reports; and (d) expenses borne by the Funds. In addition, the Trustees were provided with disclosure materials regarding the Goldman Sachs mutual funds and their expenses that were provided to investors who had invested in the funds, as well as information on the Goldman Sachs mutual funds’ competitive universe and the broad range of other investment choices that are available to those investors.
In connection with their approval of the Management Agreements, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services, and the other, non-advisory services, that are provided to the Funds by the Investment Adviser and its affiliates. These services include services as the Funds’ transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser receive compensation in connection with the execution of the Funds’ portfolio securities transactions and sales loads on the sale of certain classes of shares offered by the Funds. The Trustees concluded that the Investment Adviser was both able to commit substantial financial and other resources to the operations of the Funds and had, in fact, continued to commit those resources in multiple areas including portfolio management, trading, technology, human resources, tax, treasury, legal, compliance, vendor oversight and risk management. The Trustees also believed that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Funds and the Investment Adviser, including education and training initiatives.
The Trustees also considered the investment performance of the Funds and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Funds to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Funds’ investment performance relative to their respective performance benchmarks. For Funds that had been in existence for the respective periods, this information on the Funds’ investment performance was provided for one, three, five and ten (where applicable) year periods. In addition, the Trustees considered the investment performance trends of the Funds over time, and reviewed the investment performance of the Funds in light of their respective investment objectives, policies and credit and duration parameters, as well as in light of periodic analyses of their respective quality and risk profiles. In addition, the Trustees considered whether the Funds had operated within their investment policies, and their record of compliance with their investment limitations. The Trustees believed that the Funds were providing investment performance within a competitive range for long-term investors.
The Board of Trustees also considered the contractual fee rates payable by the Funds under the Management Agreements. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Funds, which included both advisory and administrative services that were directed to the needs and operations of the Funds as registered mutual funds. They also considered information that indicated that these mutual fund services differed in various significant respects from the services provided to the Investment Adviser’s institutional accounts, which generally paid lower fees. In addition, the fees paid by the Funds and the Funds’ total operating expense ratios (before and after voluntary fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. Most of the comparisons of the Funds’ fee rates and total operating expense ratios were prepared by the Outside Data Provider.
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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)
More particularly, the Trustees reviewed analyses prepared by the Outside Data Provider of the expense rankings of the Funds. The analyses provided a comparison of the Funds��� management fees to relevant peer groups and category universes; an expense analysis which compared each Fund’s expenses to a peer group and a category universe; and a five-year history comparing each Fund’s expenses to a category average. The analyses also compared the Funds’ transfer agency fees, custody and accounting fees and other expenses to peer groups and medians. The Trustees believed that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees paid by the Fund. In addition, the Trustees noted the Investment Adviser’s voluntary undertaking to limit the Funds’ total expense ratios (excluding certain expenses) to specified levels.
The Board of Trustees also considered the breakpoints in the contractual fee rates under the Management Agreements for each of the Funds that were approved in 2005, which had been implemented at the following annual percentages of the average daily net assets of the respective Funds:
| Management Fee | Average Daily | |||||||
| Fund | Annual Rate | Net Assets | ||||||
| Government Income Fund | 0.54 | % | First $ | 1 Billion | ||||
| 0.49 | Next $ | 1 Billion | ||||||
| 0.47 | Over $ | 2 Billion | ||||||
| U.S. Mortgages Fund | 0.40 | First $ | 1 Billion | |||||
| 0.36 | Next $ | 1 Billion | ||||||
| 0.34 | Over $ | 2 Billion | ||||||
| Core Fixed Income Fund | 0.40 | First $ | 1 Billion | |||||
| 0.36 | Next $ | 1 Billion | ||||||
| 0.34 | Over $ | 2 Billion | ||||||
| Investment Grade Credit Fund | 0.40 | First $ | 1 Billion | |||||
| 0.36 | Next $ | 1 Billion | ||||||
| 0.34 | Over $ | 2 Billion | ||||||
In approving these fee breakpoints, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Funds and their shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Funds; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels.
88
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Funds as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services. The Trustees noted the reduction of the transfer agency fees on Class A, Class B and Class C Shares of the Funds in 2005. In addition, the Trustees reviewed the Investment Adviser’s pre-tax revenues and pre-tax margins with respect to the Trust and the Funds. In this regard the Trustees reviewed, among other things, profitability analyses and summaries, revenue and expense schedules and expense allocation methodologies, as well as a report of independent accountants regarding the results of certain agreed-upon procedures to verify expense allocation calculations that were designed to assist the Trustees in their evaluation of the Investment Adviser’s schedules of revenues and expenses. The Trustees considered the Investment Adviser’s revenues and margins both in absolute terms and in comparison to the information on the reported margins earned by other asset management firms.
After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded that the management fees paid by the Funds were reasonable in light of the services provided by the Investment Adviser, its costs and the Funds’ current and reasonably anticipated asset levels, and that the Management Agreements should be approved and continued.
Goldman Sachs Single/Multi-Sector Taxable Fixed Income Funds — Tax Information (Unaudited)
| Pursuant to Section 852 of the Internal Revenue Code, the Core Fixed Income Fund designates $4,446,322 as capital gain dividends paid during the year ended October 31, 2006. | |
| Pursuant to Section 871(k) of the Internal Revenue Code, the Government Income and Core Fixed Income Funds designate $182,487 and $7,042,948, respectively, as short-term capital gain dividends paid during the year ended October 31, 2006. |
89
GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Trustees and Officers (Unaudited)
Independent Trustees
| Number of | ||||||||||
| Term of | Portfolios in | |||||||||
| Position(s) | Office and | Fund Complex | Other | |||||||
| Name, | Held with | Length of | Principal Occupation(s) | Overseen by | Directorships | |||||
| Address and Age1 | the Trust2 | Time Served3 | During Past 5 Years | Trustee4 | Held by Trustee5 | |||||
| Ashok N. Bakhru Age: 64 | Chairman of the Board of Trustees | Since 1991 | President, ABN Associates (July 1994-March 1996 and November 1998-Present); Executive Vice President — Finance and Administration and Chief Financial Officer, Coty Inc. (manufacturer of fragrances and cosmetics) (April 1996-November 1998); Director of Arkwright Mutual Insurance Company (1984-1999); Trustee of International House of Philadelphia (program center and residential community for students and professional trainees from the United States and foreign countries) (1989-2004); Member of Cornell University Council (1992-2004); Trustee of the Walnut Street Theater (1992-2004); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-Present); Director, Private Equity Investors — III and IV (November 1998-Present), and Equity-Limited Investors II (April 2002-Present); and Chairman, Lenders Service Inc. (provider of mortgage lending services) (2000-2003). Chairman of the Board of Trustees — Goldman Sachs Mutual Fund Complex (registered investment companies). | 77 | None | |||||
| John P. Coblentz, Jr. Age: 65 | Trustee | Since 2003 | Partner, Deloitte & Touche LLP (June 1975-May 2003). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). | 77 | None | |||||
| Patrick T. Harker Age: 48 | Trustee | Since 2000 | Dean and Reliance Professor of Operations and Information Management, The Wharton School, University of Pennsylvania (February 2000-Present); Interim and Deputy Dean, The Wharton School, University of Pennsylvania (July 1999-2000); and Professor and Chairman of Department of Operations and Information Management, The Wharton School, University of Pennsylvania (July 1997-August 2000). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). | 77 | None | |||||
| Mary P. McPherson Age: 71 | Trustee | Since 1997 | Vice President, The Andrew W. Mellon Foundation (provider of grants for conservation, environmental and educational purposes) (October 1997-Present); Director, Smith College (1998-Present); Director, Josiah Macy, Jr. Foundation (health educational programs) (1977-Present); Director, Philadelphia Contributionship (insurance) (1985-Present); Director Emeritus, Amherst College (1986-1998); Director, The Spencer Foundation (educational research) (1993-February 2003); member of PNC Advisory Board (banking) (1993-1998); Director, American School of Classical Studies in Athens (1997-Present); and Trustee, Emeriti Retirement Health Solutions (post-retirement medical insurance program for non-profit institutions) (Since 2005). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). | 77 | None | |||||
| Wilma J. Smelcer Age: 57 | Trustee | Since 2001 | Chairman, Bank of America, Illinois (banking) (1998-January 2001); and Governor, Board of Governors, Chicago Stock Exchange (national securities exchange) (April 2001-April 2004). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). | 77 | Lawson Products Inc. (distributor of industrial products). | |||||
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GOLDMAN SACHS SINGLE/MULTI-SECTOR TAXABLE FIXED INCOME FUNDS
Trustees and Officers (Unaudited) (continued)
Independent Trustees
| Number of | ||||||||||
| Term of | Portfolios in | |||||||||
| Position(s) | Office and | Fund Complex | Other | |||||||
| Name, | Held with | Length of | Principal Occupation(s) | Overseen by | Directorships | |||||
| Address and Age1 | the Trust2 | Time Served3 | During Past 5 Years | Trustee4 | Held by Trustee5 | |||||
| Richard P. Strubel Age: 67 | Trustee | Since 1987 | Vice Chairman and Director, Cardean Learning Group (provider of educational services via the internet) (2003-Present); President, COO and Director, Cardean Learning Group (1999-2003); Director, Cantilever Technologies, Inc. (a private software company) (1999-2005); Trustee, The University of Chicago (1987-Present); and Managing Director, Tandem Partners, Inc. (management services firm) (1990-1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). | 77 | Gildan Activewear Inc. (clothing marketing and manufacturing company); Cardean Learning Group (provider of educational services via the internet); Northern Mutual Fund Complex (58 Portfolios). | |||||
Interested Trustees
| Number of | ||||||||||
| Term of | Portfolios in | |||||||||
| Position(s) | Office and | Fund Complex | Other | |||||||
| Name, | Held with | Length of | Principal Occupation(s) | Overseen by | Directorships | |||||
| Address and Age1 | the Trust2 | Time Served3 | During Past 5 Years | Trustee4 | Held by Trustee5 | |||||
| *Alan A. Shuch Age: 57 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994- May 1999). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). | 77 | None | |||||
| *Kaysie P. Uniacke Age: 45 | Trustee & | Since 2001 | Managing Director, Goldman Sachs (1997-Present). | 77 | None | |||||
| President | Since 2002 | Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (2002-Present) (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College | ||||||||
| * | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. | |
| 1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, One New York Plaza, 37th Floor, New York, New York, 10004, Attn: Peter V. Bonanno. | |
| 2 | The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997. | |
| 3 | Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the date the Trustee attains the age of 72 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust. | |
| 4 | The Goldman Sachs Mutual Fund Complex consists of the Trust and Goldman Sachs Variable Insurance Trust. As of October 31, 2006, the Trust consisted of 65 portfolios, including the Funds described in this Annual Report, and Goldman Sachs Variable Insurance Trust consisted of 12 portfolios. | |
| 5 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Funds’ Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-292-4726.
91
GOLDMAN SACHS SINGLE/MULTI SECTOR TAXABLE FIXED INCOME FUNDS
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
| Term of | ||||||
| Office and | ||||||
| Position(s) Held | Length of | |||||
| Name, Age And Address | With the Trust | Time Served1 | Principal Occupation(s) During Past 5 Years | |||
| Kaysie P. Uniacke 32 Old Slip New York, NY 10005 Age: 45 | President & Trustee | Since 2002 Since 2001 | Managing Director, Goldman Sachs (1997-Present). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies). President — Goldman Sachs Mutual Fund Complex (registered investment companies). Assistant Secretary — Goldman Sachs Mutual Fund Complex (1997-2002) (registered investment companies). Trustee — Gettysburg College. | |||
| James A. Fitzpatrick 71 South Wacker Drive Suite 500 Chicago, IL 60606 Age: 46 | Vice President | Since 1997 | Managing Director, Goldman Sachs (October 1999-Present); and Vice President of GSAM (April 1997-December 1999). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies). | |||
| James A. McNamara 32 Old Slip New York, NY 10005 Age: 44 | Vice President | Since 2001 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998). Vice President — Goldman Sachs Mutual Fund Complex (registered investment companies). Trustee — Goldman Sachs Mutual Fund Complex (registered investment companies) (December 2002-May 2004). | |||
| John M. Perlowski 32 Old Slip New York, NY 10005 Age: 42 | Treasurer | Since 1997 | Managing Director, Goldman Sachs (November 2003-Present) and Vice President, Goldman Sachs (July 1995-November 2003). Treasurer — Goldman Sachs Mutual Fund Complex (registered investment companies). | |||
| Peter V. Bonanno 32 Old Slip New York, NY 10005 Age: 37 | Secretary | Since 2006 | Managing Director, Goldman Sachs (December 2006-Present); Associate General Counsel, Goldman Sachs (2002-Present); Vice President Goldman Sachs (1999-2006); Assistant General Counsel, Goldman Sachs (1999-2002). Secretary — Goldman Sachs Mutual Fund Complex (registered investment companies). | |||
| 1 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. | |
| * | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Funds’ Statement of Additional Information which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-292-4726. |
92
FUNDS PROFILE
Goldman Sachs Funds
Goldman Sachs is a premier financial services firm, known since 1869 for creating thoughtful and customized investment solutions in complex global markets.
Today, The Investment Management Division of Goldman Sachs serves a diverse set of clients worldwide, including private institutions, public entities and individuals. With portfolio management teams located around the world — and $610.2 billion in assets under management as of September 30, 2006 — our investment professionals bring firsthand knowledge of local markets to every investment decision, making us one of the few truly global asset managers.
| GOLDMAN SACHS FUNDS |
In building a globally diversified portfolio, you can select from more than 50 Goldman Sachs Funds and gain access to investment opportunities across borders, investment styles, asset classes and security capitalizations.
| Money Market Funds1 Fixed Income Funds ▪ Enhanced Income Fund ▪ Ultra-Short Duration Government Fund ▪ Short Duration Government Fund ▪ Short Duration Tax-Free Fund ▪ California Intermediate AMT-Free Municipal Fund ▪ New York Intermediate AMT-Free Municipal Fund ▪ Tennessee Municipal Fund ▪ Municipal Income Fund ▪ U.S. Mortgages Fund ▪ Government Income Fund ▪ Core Fixed Income Fund ▪ Core Plus Fixed Income Fund ▪ Investment Grade Credit Fund ▪ Global Income Fund ▪ High Yield Municipal Fund ▪ High Yield Fund ▪ Emerging Markets Debt Fund | Domestic Equity Funds ▪ Balanced Fund ▪ Growth and Income Fund ▪ Structured Large Cap Value2 ▪ Large Cap Value ▪ Structured U.S. Equity Fund2 ▪ Structured U.S. Equity Flex Fund ▪ Structured Large Cap Growth Fund2 ▪ Capital Growth Fund ▪ Strategic Growth Fund ▪ Concentrated Growth Fund ▪ Mid Cap Value Fund ▪ Growth Opportunities Fund ▪ Small/Mid Cap Growth Fund ▪ Structured Small Cap Equity Fund2 ▪ Small Cap Value Fund | International Equity Funds ▪ Structured International Equity Fund2 ▪ Structured International Equity Flex Fund ▪ Concentrated International Equity Fund2 ▪ Japanese Equity Fund ▪ International Small Cap Fund2 ▪ Asia Equity Fund2 ▪ Emerging Markets Equity Fund ▪ BRIC Fund (Brazil, Russia, India, China) Asset Allocation Funds3 Specialty Funds3 ▪ U.S. Equity Dividend and Premium Fund ▪ Structured Tax-Managed Equity Fund2 ▪ Real Estate Securities Fund ▪ International Real Estate Securities Fund ▪ Tollkeeper FundSM |
| 1 | An investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Funds. |
| 2 | Effective December 30, 2005, the Asia Growth Fund was renamed the Asia Equity Fund and the International Growth Opportunities Fund was renamed the International Small Cap Fund. Also effective December 30, 2005, the CORE International Equity, CORE Small Cap Equity, CORE Large Cap Growth, CORE Large Cap Value and CORE U.S. Equity Funds were renamed, respectively, the Structured International Equity, Structured Small Cap Equity, Structured Large Cap Growth, Structured Large Cap Value Funds and Structured U.S. Equity. Effective January 6, 2006, the CORE Tax-Managed Equity Fund was renamed the Structured Tax-Managed Equity Fund. Effective December 26, 2006, the International Equity Fund was renamed the Concentrated International Equity Fund. |
| 3 | Individual Funds within the Asset Allocation and Specialty categories will have various placement on the risk/return spectrum and may have greater or lesser risk than that indicated by the placement of the general Asset Allocation or Specialty category. |
The Goldman Sachs Tollkeeper FundSM is a registered service mark of Goldman, Sachs & Co.
GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, 32ND FLOOR, NEW YORK, NEW YORK 10005
| TRUSTEES Ashok N. Bakhru, Chairman John P. Coblentz, Jr. Patrick T. Harker Mary Patterson McPherson Alan A. Shuch Wilma J. Smelcer Richard P. Strubel Kaysie P. Uniacke | OFFICERS Kaysie P. Uniacke, President James A. Fitzpatrick, Vice President James A. McNamara, Vice President John M. Perlowski, Treasurer Peter V. Bonanno, Secretary |
| GOLDMAN, SACHS & CO. Distributor and Transfer Agent | GOLDMAN SACHS ASSET MANAGEMENT, L.P. Investment Adviser |
Visit our Web site at www.goldmansachsfunds.com to obtain the most recent month-end returns.
The reports concerning the Funds included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Funds in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Funds, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Funds. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how a Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov.
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended January 31, 2005 and every first and third fiscal quarter thereafter, the Funds’ Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Funds’ first and third fiscal quarters. When available, the Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders).
Foreign and emerging markets investments may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Core Fixed Income and Investment Grade Credit Funds may be unable to sell certain of their portfolio securities without a substantial drop in price, if at all. The Core Fixed Income and Investment Grade Credit Funds may also engage in foreign currency transactions for hedging purposes including cross hedging or for speculative purposes. Forward foreign currency exchange contracts are subject to the risk that the counterparty to the contract will default on its obligations.
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Funds’ entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. Please consider a Fund’s objectives, risks, and charges and expenses, and read the Prospectus carefully before investing. The Prospectus contains this and other information about the Funds.
| Copyright 2006 Goldman, Sachs & Co. All rights reserved. 06-1991 | SMSTFIAR / 43.1K / 12-06 |