<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
GOLDMAN SACHS-INSTITUTIONAL LIQUID ASSETS
(PRIME OBLIGATIONS PORTFOLIO)
(TAX-EXEMPT DIVERSIFIED PORTFOLIO)
ILA SERVICE UNITS
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Money Market Trust (the "Trust") is a no-load, open-end,
management investment company (a "mutual fund") which includes the Goldman
Sachs-Institutional Liquid Assets portfolios. This Prospectus relates to the
offering of ILA Service Units of the Prime Obligations Portfolio and Tax-Exempt
Diversified Portfolio (the "Portfolios"). Goldman Sachs Asset Management, a
separate operating division of Goldman, Sachs & Co., serves as each Portfolio's
investment adviser. Goldman, Sachs & Co. serves as each Portfolio's distributor
and transfer agent.
The Prime Obligations Portfolio seeks to maximize current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity by investing exclusively in high quality money market instruments.
The Portfolio pursues its objective by investing in a diversified portfolio of
securities of the U.S. Government, its agencies, authorities and
instrumentalities, obligations of U.S. banks, commercial paper and other short-
term obligations of U.S. companies, states, municipalities and other entities,
and repurchase agreements.
The Tax-Exempt Diversified Portfolio seeks to provide unitholders, to the ex-
tent consistent with the preservation of capital and prescribed portfolio stan-
dards, with a high level of income excluded from gross income for federal in-
come tax purposes, by investing primarily in municipal instruments. The Portfo-
lio pursues its objective by investing in a diversified portfolio of municipal
obligations issued by or on behalf of states, territories and possessions of
the United States and their political subdivisions, agencies, authorities and
instrumentalities, and the District of Columbia.
AN INVESTMENT IN A PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE TO MAIN-
TAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION.................................. Toll Free: 800-526-7384
This Prospectus provides you with information about the Prime Obligations
Portfolio and Tax-Exempt Diversified Portfolio that you should know before
investing in ILA Service Units. It should be read and retained for future
reference. If you would like more detailed information, the Statement of
Additional Information dated March 15, 1995, as amended or supplemented from
time to time, is available upon request without charge by calling the telephone
number listed above or by writing Goldman, Sachs & Co., 4900 Sears Tower,
Chicago, Illinois 60606. The Statement of Additional Information, which is
incorporated by reference into this Prospectus, has been filed with the
Securities and Exchange Commission. The Tax-Exempt Diversified Portfolio may
not be available in certain states. Please call the phone number above to
determine availability in your state.
- --------------------------------------------------------------------------------
ILA SERVICE UNITS OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A PORTFOLIO IN-
VOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is March 15, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unitholder and Portfolio Expenses................................ 3
Financial Highlights............................................. 4
An Introduction to the Portfolios................................ 7
Investment Objective and Policies of the Prime
Obligations Portfolio........................................... 8
Investment Objective and Policies of the Tax-Exempt
Diversified Portfolio........................................... 8
Description of Securities and Investment Techniques.............. 9
Investment Limitations........................................... 12
Management....................................................... 14
Additional Services.............................................. 15
Purchase of Units................................................ 15
Reports to Unitholders........................................... 17
Distributions and Taxes.......................................... 18
Automatic Exchange Program....................................... 19
Exchanges........................................................ 20
Redemption of Units.............................................. 21
Net Asset Value.................................................. 23
Yield Information................................................ 23
Organization and Units of the Portfolios......................... 24
Appendix A....................................................... 25
Account Information Form
</TABLE>
2
<PAGE>
UNITHOLDER AND PORTFOLIO EXPENSES (NOTE 1)
ILA SERVICE UNITS (NOTE 2)
<TABLE>
<CAPTION>
PRIME TAX-EXEMPT
OBLIGATIONS DIVERSIFIED
PORTFOLIO PORTFOLIO
----------- -----------
<S> <C> <C>
UNITHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases............. None None
Sales Charge Imposed on Reinvested Distributions...... None None
Deferred Sales Load Imposed on Redemptions............ None None
Exchange Fee.......................................... None None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets after ad-
justments)
Management Fees....................................... 0.35% 0.25%
Other Expenses (after expense limitation) (Note 3)
Service Fees (Note 4)................................ 0.40% 0.40%
Other Expenses....................................... 0.06% 0.06%
---- ----
TOTAL OPERATING EXPENSES (Note 3)...................... 0.81% 0.71%
==== ====
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment, as-
suming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Prime Obligations Portfolio............................. $8 $26 $45 $100
Tax-Exempt Diversified Portfolio........................ $7 $23 $40 $ 88
</TABLE>
- --------
Notes:
(1) The purpose of this table is to assist investors in understanding the
various costs and expenses that an investment in the Portfolios will bear
directly or indirectly. Operating expenses for the Portfolios are based on
estimates of expenses expected to be incurred during the fiscal year ending
December 31, 1995. The table and hypothetical example should not be
considered a representation of past or future expenses; actual expenses may
vary depending upon a variety of factors including the actual performance
of each Portfolio, which may be greater or less than 5%. Annual Operating
Expenses incurred by the Portfolios during the fiscal year ended December
31, 1994 (expressed as a percentage of average daily net assets after fee
adjustments and expense limitations) were as follows: Management Fees,
Service Fees and Other Expenses for the Prime Obligations Portfolio of
0.35%, 0.40% and 0.05%, respectively for Total Operating Expenses of 0.80%
and for the Tax-Exempt Diversified Portfolio of 0.25%, 0.40% and 0.05%,
respectively for Total Operating Expenses of 0.70%. See "Management".
Investors should be aware that, due to the service fees, a long-term
unitholder in a Portfolio may pay over time more than the economic
equivalent of the maximum front-end sales charge permitted under the rules
of the National Association of Securities Dealers, Inc.
(2) The information set forth in the foregoing table and example relates only
to ILA Service Units of the Portfolios. ILA Units and ILA Administration
Units are subject to different fees and expenses. See "Organization and
Units of the Portfolios." ILA Units are not subject to any administration
or service fees. ILA Administration Units are subject to a service fee of
up to 0.15% of average daily net assets. All other expenses related to ILA
Units and ILA Administration are the same as for ILA Service Units.
(3) Goldman Sachs Asset Management (the "Adviser" or "GSAM") has agreed to
reduce or otherwise limit certain expenses of the Portfolios (excluding
fees payable to Service Organizations, as defined herein, taxes, interest,
brokerage and litigation, indemnification and other extraordinary
expenses), on an annualized basis, to 0.41% of the average daily net assets
of each Portfolio, less the effect of fee reductions, if any. The Adviser
has agreed that a portion of its fees will not be imposed for the Tax-
Exempt Diversified Portfolio. Had the reduction of fees otherwise payable
and expense limitations not been reflected in the above table, the
management fees payable by the Tax-Exempt Diversified Portfolio would be
0.35% of average daily net assets and the amount of other expenses payable
by the Prime Obligations Portfolio and Tax-Exempt Diversified Portfolio
would be 0.07% and 0.06%, respectively, of average daily net assets. Had
the reduction of fees otherwise payable and expense limitations not been
reflected in the above table, the annual operating expenses of the Prime
Obligations Portfolio and Tax-Exempt Diversified Portfolio would be 0.82%
and 0.81%, respectively of average daily net assets.
(4) Service Organizations, other than Goldman Sachs, may charge other fees to
their customers who are the beneficial owners of ILA Service Units in
connection with their customers' accounts. See "Additional Services." Such
fees, if any, may affect the return such customers realize with respect to
their investments.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following data with respect to a unit of the Prime Obligations Portfolio
and Tax-Exempt Diversified Portfolio outstanding during the periods indicated
have been audited by Arthur Andersen LLP, independent auditors, as indicated in
their report incorporated by reference and attached to the Statement of
Additional Information from the annual report to unitholders for the fiscal
year ended December 31, 1994 (the "Annual Report"), and should be read in
conjunction with the financial statements and related notes incorporated by
reference and attached to the Statement of Additional Information.
4
<PAGE>
Goldman Sachs--Institutional Liquid Assets
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A UNIT OUTSTANDING THROUGHOUT EACH PERIOD
PRIME OBLIGATIONS PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET
VALUE AT NET GAIN INCOME FROM VALUE AT EXPENSES TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (a) ASSETS
--------- ---------- ------------- ----------- -------------- --------- ---------- ------------
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994-ILA units...................... $1.00 $0.0394 $ -- $0.0394 $(0.0394) $1.00 4.07% 0.40%
1994-ILA Admin-
istration units..................... 1.00 0.0379 -- 0.0379 (0.0379) 1.00 3.91 0.55
1994-ILA Service
units............................... 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.66 0.80
1993-ILA units...................... 1.00 0.0291 0.0002 0.0293 (0.0293) 1.00 2.97 0.40
1993-ILA Admin-
istration units..................... 1.00 0.0275 0.0003 0.0278 (0.0278) 1.00 2.82 0.55
1993-ILA Service
units............................... 1.00 0.0250 0.0001 0.0251 (0.0252) 1.00 2.56 0.80
1992-ILA units...................... 1.00 0.0364 0.0010 0.0374 (0.0374) 1.00 3.75 0.40
1992-ILA Admin-
istration units..................... 1.00 0.0339 0.0010 0.0349 (0.0349) 1.00 3.60 0.55
1992-ILA Service
units............................... 1.00 0.0311 0.0010 0.0321 (0.0320) 1.00 3.34 0.80
1991-ILA units...................... 1.00 0.0591 0.0003 0.0594 (0.0594) 1.00 6.10 0.40
1991-ILA Admin-
istration units..................... 1.00 0.0568 0.0003 0.0571 (0.0571) 1.00 5.94 0.55
1991-ILA Service
units............................... 1.00 0.0558 0.0003 0.0561 (0.0561) 1.00 5.68 0.80
1990-ILA units...................... 1.00 0.0793 -- 0.0793 (0.0793) 1.00 8.21 0.38
1990-ILA Admin-
istration units
(c)................................. 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.81(b) 0.55(b)
1990-ILA Service
units (c)........................... 1.00 0.0425 -- 0.0425 (0.0425) 1.00 7.56(b) 0.80(b)
1989-ILA units...................... 1.00 0.0890 -- 0.0890 (0.0890) 1.00 9.27 0.40
1988-ILA units...................... 1.00 0.0714 -- 0.0714 (0.0714) 1.00 7.48 0.40
1987-ILA units...................... 1.00 0.0634 -- 0.0634 (0.0634) 1.00 6.50 0.40
1986-ILA units...................... 1.00 0.0644 0.0001 0.0645 (0.0645) 1.00 6.67 0.40
1985-ILA units...................... 1.00 0.0792 0.0004 0.0796 (0.0796) 1.00 8.25 0.38
<CAPTION>
RATIO OF NET NET
INVESTMENT ASSETS AT
INCOME TO END OF
AVERAGE NET PERIOD
ASSETS (IN 000S)
------------ ---------
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
<S> <C> <C>
1994-ILA units...................... 3.94% $1,963,846
1994-ILA Admin-
istration units..................... 3.79 149,234
1994-ILA Service
units............................... 3.65 170,453
1993-ILA units...................... 2.91 2,332,771
1993-ILA Admin-
istration units..................... 2.75 189,431
1993-ILA Service
units............................... 2.50 137,804
1992-ILA units...................... 3.64 3,444,591
1992-ILA Admin-
istration units..................... 3.39 257,321
1992-ILA Service
units............................... 3.11 22,044
1991-ILA units...................... 5.91 3,531,736
1991-ILA Admin-
istration units..................... 5.68 198,417
1991-ILA Service
units............................... 5.58 18,789
1990-ILA units...................... 7.93 2,833,541
1990-ILA Admin-
istration units
(c)................................. 7.62(b) 209,272
1990-ILA Service
units (c)........................... 7.25(b) 19,039
1989-ILA units...................... 8.90 3,761,964
1988-ILA units...................... 7.14 3,799,628
1987-ILA units...................... 6.34 5,814,280
1986-ILA units...................... 6.44 4,654,076
1985-ILA units...................... 7.92 5,149,617
</TABLE>
- ----------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Administration and Service unit activity commenced during June of 1990.
5
<PAGE>
Goldman Sachs--Institutional Liquid Assets
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
TAX-EXEMPT DIVERSIFIED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
NET
NET ASSET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT DISTRIBUTIONS END
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD
--------- ---------- ------------- ----------- -------------- ---------
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994-ILA units.. $1.00 $0.0264 $ -- $0.0264 $(0.0264) $1.00
1994-ILA Admin-
istration units. 1.00 0.0250 -- 0.0250 (0.0250) 1.00
1994-ILA Service
units........... 1.00 0.0220 -- 0.0220 (0.0220) 1.00
1993-ILA units.. 1.00 0.0222 -- 0.0222 (0.0222) 1.00
1993-ILA Admin-
istration units
................ 1.00 0.0207 -- 0.0207 (0.0207) 1.00
1993-ILA Service
units .......... 1.00 0.0183 -- 0.0183 (0.0183) 1.00
1992-ILA units
................ 1.00 0.0277 -- 0.0277 (0.0277) 1.00
1992-ILA Admin-
istration units. 1.00 0.0266 -- 0.0266 (0.0266) 1.00
1992-ILA Service
units .......... 1.00 0.0243 -- 0.0243 (0.0243) 1.00
1991-ILA units.. 1.00 0.0424 -- 0.0424 (0.0424) 1.00
1991-ILA Admin-
istration units. 1.00 0.0406 -- 0.0406 (0.0406) 1.00
1991-ILA Service
units........... 1.00 0.0386 -- 0.0386 (0.0386) 1.00
1990-ILA units.. 1.00 0.0550 (0.0001) 0.0549 (0.0549) 1.00
1990-ILA Admin-
istration
units(c)........ 1.00 0.0301 -- 0.0301 (0.0300) 1.00
1990-ILA Service
units(c)........ 1.00 0.0259 -- 0.0259 (0.0259) 1.00
1989-ILA units.. 1.00 0.0591 (0.0001) 0.0590 (0.0590) 1.00
1988-ILA units.. 1.00 0.0487 0.0003 0.0490 (0.0490) 1.00
1987-ILA units.. 1.00 0.0413 (0.0003) 0.0410 (0.0410) 1.00
1986-ILA units.. 1.00 0.0426 -- 0.0426 (0.0426) 1.00
1985-ILA units.. 1.00 0.0491 -- 0.0491 (0.0491) 1.00
<CAPTION>
RATIO INFORMATION
ASSUMING NO WAIVER OF
ADVISORY FEES
-------------------------
RATIO OF NET NET RATIO OF NET
RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INVESTMENT
EXPENSES TO INCOME TO END OF EXPENSES TO INCOME TO
TOTAL AVERAGE NET AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
RETURN(a) ASSETS ASSETS (IN 000S) ASSETS ASSETS
--------- ------------ ------------ --------- ------------ ------------
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994-ILA units.. 2.71% 0.30% 2.64% $1,434,965 0.40% 2.54%
1994-ILA Admin-
istration units. 2.55 0.45 2.50 97,778 0.55 2.40
1994-ILA Service
units........... 2.30 0.70 2.20 36,492 0.80 2.10
1993-ILA units.. 2.25 0.30 2.22 1,769,477 0.40 2.12
1993-ILA Admin-
istration units
................ 2.09 0.45 2.08 99,896 0.55 1.98
1993-ILA Service
units .......... 1.84 0.70 1.83 45,172 0.80 1.73
1992-ILA units
................ 2.82 0.30 2.77 1,333,925 0.40 2.67
1992-ILA Admin-
istration units. 2.67 0.45 2.66 50,225 0.55 2.56
1992-ILA Service
units .......... 2.41 0.70 2.43 29,534 0.80 2.33
1991-ILA units.. 4.33 0.32 4.24 1,044,986 0.40 4.16
1991-ILA Admin-
istration units. 4.17 0.47 4.06 37,567 0.55 3.98
1991-ILA Service
units........... 3.91 0.72 3.86 52,399 0.80 3.78
1990-ILA units.. 5.64 0.40 5.50 603,895 0.40 5.50
1990-ILA Admin-
istration
units(c)........ 5.43(b) 0.55(b) 5.40(b) 42,498 0.55(b) 5.40(b)
1990-ILA Service
units(c)........ 5.17(b) 0.80(b) 5.16(b) 56,810 0.80(b) 5.16(b)
1989-ILA units.. 6.07 0.40 5.91 688,556 0.40 5.91
1988-ILA units.. 5.03 0.40 4.87 907,782 0.40 4.87
1987-ILA units.. 4.23 0.40 4.13 965,714 0.40 4.13
1986-ILA units.. 4.45 0.40 4.26 1,492,752 0.40 4.26
1985-ILA units.. 5.04 0.40 4.91 652,033 0.40 4.91
</TABLE>
- ----------
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions and a complete redemption
of the investment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
6
<PAGE>
AN INTRODUCTION TO THE PORTFOLIOS
The Trust is a no-load, open-end, management investment company registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"). This Prospectus relates to the offering of ILA Service Units of the
Prime Obligations Portfolio and Tax-Exempt Diversified Portfolio (the "Portfo-
lios"). Goldman Sachs Asset Management, a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Portfolios' investment
adviser (the "Adviser" or "GSAM"). Goldman Sachs, which serves as the Portfo-
lios' distributor and transfer agent, is one of the largest international in-
vestment banking and brokerage firms in the United States.
The Portfolios are designed for investors seeking a high rate of return, a
stable net asset value and convenient liquidation privileges. Each Portfolio
seeks to maintain a stable net asset value of $1.00 per unit. To facilitate
this goal, each Portfolio's securities are valued by the amortized cost method
as permitted by a rule of the Securities and Exchange Commission ("SEC"). The
SEC rule requires, among other things, that all portfolio securities have at
the time of purchase a maximum remaining maturity of thirteen months and that
each Portfolio maintain a dollar-weighted average portfolio maturity of not
more than ninety (90) days. Investments by each Portfolio must present minimal
credit risk.
The Prime Obligations Portfolio may only purchase "First Tier Securities" as
defined herein. First Tier Securities are securities which are rated (or that
have been issued by an issuer that is rated with respect to a class of short-
term debt obligations, or any security within that class, comparable in prior-
ity and quality with such securities) in the highest short-term rating category
by at least two nationally recognized statistical rating organizations
("NRSROs"), or if only one NRSRO has assigned a rating by that NRSRO.
Securities which are unrated may be purchased only if they are deemed to be
of comparable quality to First Tier Securities or, in the case of Tax-Exempt
Diversified Portfolio, "Second Tier Securities" as defined herein. The Tax-Ex-
empt Diversified Portfolio may invest in First and Second Tier Securities. Sec-
ond Tier Securities are securities rated in the top two short-term rating cate-
gories by at least two NRSROs, or if only one NRSRO has assigned a rating, by
that NRSRO, but which are not First Tier Securities. Purchases of securities
which are unrated or rated by only one NRSRO must be approved or ratified by
the Trustees, except for purchases made on behalf of the Tax-Exempt Diversified
Portfolio.
NRSROs include Standard & Poor's Ratings Group, Moody's Investors Service,
Inc., Fitch Investors Service, Inc., Duff and Phelps, Inc., IBCA Limited and
its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a description of each
NRSRO's rating categories, see Appendix A to the Statement of Additional Infor-
mation.
7
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES OF THE PRIME OBLIGATIONS PORTFOLIO
The investment objective of the Prime Obligations Portfolio is to maximize
current income to the extent consistent with the preservation of capital and
the maintenance of liquidity by investing exclusively in high quality money
market instruments. The Portfolio pursues its objective by investing exclu-
sively in the following instruments:
(A) securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies, authorities or instrumentalities ("U.S.
Government Securities");
(B) obligations issued or guaranteed by U.S. banks (including certificates
of deposit, commercial paper, unsecured bank promissory notes and bank-
ers' acceptances) which have more than $1 billion in total assets at
the time of purchase. Such obligations may also include debt obliga-
tions issued by U.S. subsidiaries of such banks;
(C) commercial paper (including variable amount master demand notes and as-
set-backed commercial paper) issued or guaranteed by U.S. corporations,
U.S. commercial banks, or other entities;
(D) unrated notes, paper or other instruments which are determined to be of
comparable high quality by the Adviser pursuant to criteria approved by
the Trustees;
(E) other short-term obligations issued or guaranteed by U.S. corporations,
or other entities (including short-term funding agreements);
(F) other short-term obligations issued or guaranteed by state and munici-
pal governments (such securities may be purchased when yields on such
securities are attractive when compared to other taxable investments;
and
(G) repurchase agreements.
The Portfolio may acquire any of the above securities on a forward commitment
or when-issued basis.
INVESTMENT OBJECTIVE AND POLICIES OF THE TAX-EXEMPT DIVERSIFIED PORTFOLIO
The investment objective of the Tax-Exempt Diversified Portfolio is to pro-
vide its unitholders, to the extent consistent with the preservation of capital
and prescribed portfolio standards, with a high level of income exempt from
federal income tax by investing primarily in Municipal Instruments, as defined
below. The Portfolio pursues its objective by investing primarily in obliga-
tions issued by or on behalf of states, territories and possessions of the
United States and their political subdivisions, agencies, authorities and in-
strumentalities, and the District of Columbia ("Municipal Instruments"), the
interest from which is, in the opinion of bond counsel, if any, excluded from
gross income for federal income tax purposes. Such Municipal Instruments may
include:
(A) fixed rate notes and similar debt instruments rated in the highest
short-term rating category or in one of the two highest long-term rat-
ing categories of at least one NRSRO;
(B) variable and floating rate demand instruments rated (i) in the highest
rating category for municipal notes or (ii) in one of the two highest
rating categories for long- term instruments or (iii) in the highest
rating category for commercial paper and municipal notes with demand
features of at least one NRSRO;
(C) tax-exempt commercial paper rated in the highest rating category of at
least one NRSRO;
(D) unrated notes, paper or other instruments which are determined to be of
comparable high quality by the Adviser pursuant to criteria approved by
the Trustees; and
(E) municipal bonds rated in one of the two highest rating categories of at
least one
8
<PAGE>
NRSRO and unrated bonds determined to be of comparable quality by the
Adviser pursuant to criteria approved by the Trustees.
The Portfolio may acquire any of the above securities on a forward commitment
or when-issued basis.
As a matter of fundamental policy, at least 80% of the Portfolio's annual
gross income will be derived from Municipal Instruments, except in extraordi-
nary circumstances. For example, the Portfolio may temporarily invest in tax-
able money market instruments when the Adviser believes that market conditions
dictate a defensive posture. Investments in taxable money market instruments
will be limited to those meeting the quality standards of the Portfolio.
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. GOVERNMENT SECURITIES
U.S. Government Securities are obligations issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities. Some U.S. Govern-
ment Securities, such as Treasury bills, notes and bonds, which differ only in
their interest rates, maturities and times of issuance, are supported by the
full faith and credit of the United States. Others, such as obligations issued
or guaranteed by U.S. Government agencies, authorities or instrumentalities are
supported either by (a) the full faith and credit of the U.S. Government (such
as securities of the Government National Mortgage Association), (b) the right
of the issuer to borrow from the Treasury (such as securities of the Student
Loan Marketing Association), (c) the discretionary authority of the U.S. Gov-
ernment to purchase the agency's obligations (such as securities of the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation),
or (d) only the credit of the issuer. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government agencies, authori-
ties or instrumentalities in the future. U.S. Government Securities may include
zero coupon bonds. Such bonds may be purchased when yields are attractive.
Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are deemed to include (a) secu-
rities for which the payment of principal and interest is backed by an irrevo-
cable letter of credit issued by the U.S. Government, its agencies, authorities
or instrumentalities and (b) participations in loans made to foreign govern-
ments or their agencies that are so guaranteed. The secondary market for cer-
tain of these participations is limited. Such participations may therefore be
regarded as illiquid.
Each Portfolio may also invest in separately traded principal and interest
components of securities guaranteed or issued by the U.S. Treasury if such com-
ponents are traded independently under the Separate Trading of Registered In-
terest and Principal of Securities program ("STRIPS").
CUSTODIAL RECEIPTS
Each Portfolio may also acquire securities issued or guaranteed as to princi-
pal and interest by the U.S. Government, its agencies, authorities or instru-
mentalities in the form of custodial receipts that evidence ownership of future
interest payments, principal payments or both on certain notes or bonds issued
by the U.S. Government, its agencies, authorities or instrumentalities. For
certain securities law purposes, custodial receipts are not considered obliga-
tions of the U.S. Government.
MUNICIPAL INSTRUMENTS
Municipal notes include tax anticipation notes ("TANs"), revenue anticipation
notes ("RANs"), bond anticipation notes ("BANs"), tax and revenue anticipation
notes ("TRANs") and construction loan notes. Municipal bonds include general
obligation bonds and revenue bonds. General obligation bonds are backed by the
taxing power of the issuing municipality and are considered the safest type of
bonds. Revenue bonds are backed by the revenues
9
<PAGE>
of a project or facility such as the tolls from a toll bridge. Revenue bonds
also include lease rental revenue bonds which are issued by a state or local
authority for capital projects and are secured by annual lease payments from
the state or locality sufficient to cover debt service on the authority's ob-
ligations. To the extent that a Portfolio invests in unrated lease rental rev-
enue bonds, the Trustees will monitor on an ongoing basis the credit quality
of such bonds and the risks of cancellation of the underlying leases. Indus-
trial development bonds (generally referred to under current tax law as "pri-
vate activity bonds") are a specific type of revenue bond backed by the credit
and security of a private user and therefore have more potential risk. Munici-
pal bonds may be issued in a variety of forms, including commercial paper,
tender option bonds and variable and floating rate securities.
A tender option bond is a Municipal Instrument (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest
at a fixed rate substantially higher than prevailing short-term, tax-exempt
rates. The bond is typically issued in conjunction with the agreement of a
third party, such as a bank, broker-dealer or other financial institution,
pursuant to which such institution grants the security holder the option, at
periodic intervals, to tender its securities to the institution and receive
the face value thereof. As consideration for providing the option, the finan-
cial institution receives periodic fees equal to the difference between the
bond's fixed coupon rate and the rate, as determined by a remarketing or simi-
lar agent at or near the commencement of such period, that would cause the se-
curities, coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder effec-
tively holds a demand obligation that bears interest at the prevailing short-
term, tax-exempt rate. However, an institution will not be obligated to accept
tendered bonds in the event of certain defaults or a significant downgrading
in the credit rating assigned to the issuer of the bond. The tender option
will be taken into account in determining the maturity of the tender option
bonds and a Portfolio's average portfolio maturity. There is a risk that a
Portfolio will not be considered the owner of a tender option bond for federal
income taxes purposes and thus will not be entitled to treat such interest as
exempt from federal income tax.
Revenue Anticipation Warrants ("RAWs") are issued in anticipation of the is-
suer's receipt of revenues and present the risk that such revenues will be in-
sufficient to satisfy the issuer's payment obligations. The entire principal
amount of principal and interest on RAWs is due at maturity. RAWs have been
issued with maturities of up to 22 months. RAWs may also be repackaged as in-
struments which include a demand feature that permits the holder to put the
RAWs to a bank or other financial institution at a purchase price equal to par
plus accrued interest on each interest rate reset date.
The value of floating and variable rate obligations generally is more stable
than that of fixed rate obligations in response to changes in interest rate
levels. Variable and floating rate obligations usually carry rights that per-
mit the Portfolios to sell them at par value plus accrued interest upon short
notice. The issuers or financial intermediaries providing rights to sell may
support their ability to purchase the obligations by obtaining credit with li-
quidity supports. These may include lines of credit, which are conditional
commitments to lend, and letters of credit, which will ordinarily be irrevoca-
ble, both of which may be issued by domestic banks or foreign banks which have
a branch, agency or subsidiary in the United States. When considering whether
an obligation meets a Portfolio's quality standards, the Portfolio will look
to the creditworthiness of the party providing the right to sell as well as to
the quality of the obligation itself. A Portfolio may consider the maturity of
a variable or floating rate Municipal Instrument to be shorter than its ulti-
mate stated maturity if the Portfolio has the right to demand prepayment of
its principal at specified intervals prior to the security's ultimate stated
maturity, subject to the conditions for using amortized cost valuation under
the Investment Company Act. A Portfolio may purchase such variable or floating
rate obligations from the issuers or may purchase certificates of participa-
tion, a type of floating or variable rate obligation, which are interests in a
pool of municipal obligations held by a bank or other financial institution.
10
<PAGE>
The Portfolios may invest in industrial development bonds (generally referred
to under current tax law as "private activity bonds"), the interest from which
would be an item of tax preference when distributed as "exempt interest divi-
dends" to unitholders under the federal alternative minimum tax. See "Taxes"
and "Distributions." Any such interest which the Tax-Exempt Diversified Portfo-
lio might earn will not be deemed to have been derived from Municipal Instru-
ments for purposes of determining whether at least 80% of the Portfolio's an-
nual gross income has been derived from such Instruments. The Tax-Exempt Diver-
sified Portfolio does not currently intend to invest in such bonds.
Ordinarily, the Tax-Exempt Diversified Portfolio expects that 100% of its
portfolio securities will be Municipal Instruments. However, the Portfolio may
hold cash or invest in short-term taxable securities as set forth above. The
Portfolio may invest 25% or more of the value of its total assets in Municipal
Instruments which are related in such a way that an economic, business or po-
litical development or change affecting one Municipal Instrument would also af-
fect the other Municipal Instruments. For example, the Portfolio may invest all
of its assets in (a) Municipal Instruments the interest on which is paid solely
from revenues from similar projects such as hospitals, electric utility sys-
tems, multi-family housing, nursing homes, commercial facilities (including ho-
tels), steel companies or life care facilities, (b) Municipal Instruments whose
issuers are in the same state, or (c) industrial development obligations. Con-
centration of the Portfolio's investments in Municipal Instruments in any of
the foregoing will subject the Portfolio, to a greater extent than if such in-
vestment was more limited, to the risks of adverse economic, business or polit-
ical developments affecting any such state, industry or other area of concen-
tration.
Each Portfolio may purchase Municipal Instruments which are backed by letters
of credit, which will ordinarily be irrevocable, issued by domestic banks or
foreign banks which have a branch, agency or subsidiary in the United States.
In addition, such Portfolios may acquire securities in the form of custodial
receipts which evidence ownership of future interest payments, principal pay-
ments or both on obligations of certain state and local governments and author-
ities.
In order to enhance the liquidity, stability, or quality of a Municipal In-
strument, each Portfolio may acquire the right to sell the security to another
party at a guaranteed price and date. These rights may be referred to as puts,
demand features, or standby commitments.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements with selected broker-
dealers, banks or other financial institutions. A repurchase agreement is an
agreement under which a Portfolio purchases securities and the seller agrees to
repurchase the securities within a particular time at a specified price. Such
price will exceed the original purchase price, the difference being income to
the Portfolio, and will be unrelated to the interest rate on the purchased se-
curity. A Portfolio's custodian or sub-custodian will maintain custody of the
purchased securities for the duration of the agreement. The value of the pur-
chased securities, including accrued interest, will at all times exceed the
value of the repurchase agreement. In the event of bankruptcy of the seller or
failure of the seller to repurchase the securities as agreed, a Portfolio could
suffer losses, including loss of interest on or principal of the security and
costs associated with delay and enforcement of the repurchase agreement. In
evaluating whether to enter into a repurchase agreement, the Adviser will care-
fully consider the creditworthiness of the seller pursuant to procedures re-
viewed and approved by the Trustees. Distributions of the income from repur-
chase agreements entered into by a Portfolio will be taxable to its
unitholders. In addition, each Portfolio, together with other registered in-
vestment companies having advisory agreements with the Adviser or any of its
affiliates, may transfer uninvested cash balances into a single joint account,
the daily aggregate balance of which will be invested in one or more repurchase
agreements.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
The Portfolios may purchase when-issued securities and make contracts to pur-
chase or sell securities for a fixed price at a future date beyond
11
<PAGE>
customary settlement time. A Portfolio is required to hold and maintain in a
segregated account with the Portfolio's custodian or subcustodian until the
settlement date, cash or liquid, high grade debt obligations in an amount suf-
ficient to meet the purchase price. Alternatively, a Portfolio may enter into
offsetting contracts for the forward sale of other securities that it owns. Se-
curities purchased or sold on a when-issued or forward commitment basis involve
a risk of loss if the value of the security to be purchased declines prior to
the settlement date or if the value of the security to be sold increases prior
to the settlement date. Although a Portfolio would generally purchase securi-
ties on a when-issued or forward commitment basis with the intention of acquir-
ing securities for its portfolio, the Portfolio may dispose of a when-issued
security or forward commitment prior to settlement if the Adviser deems it ap-
propriate to do so.
OTHER INVESTMENT COMPANIES
Each Portfolio may invest in securities issued by other money market invest-
ment companies. Such investments will be determined by the Adviser, under
guidelines established by the Trustees, to present minimal credit risks. The
amount of a Portfolio's investments in securities of other investment companies
will be subject to the limitations on such investments prescribed by the In-
vestment Company Act and certain state securities regulations. These limits in-
clude a prohibition on any Portfolio acquiring more than 3% of the voting
shares of any other investment company, and a prohibition on investing more
than 5% of a Portfolio's assets in securities of any one investment company or
more than 10% of its assets in securities of all investment companies. Each
Portfolio will indirectly bear its proportionate share of any management fees
and other expenses paid by such other investment companies. Goldman Sachs will
not impose a portion of the management fees payable by a Portfolio (the "Ac-
quiring Portfolio") with respect to assets invested in another money market in-
vestment company (the "Acquired Portfolio") as follows. The amount of the man-
agement fees otherwise payable by the Acquiring Portfolio and not imposed by
Goldman Sachs will be equal to the amount of management fees indirectly paid by
the Acquiring Portfolio as a unitholder of the Acquired Portfolio. Such other
investment companies will have investment objectives, policies and restrictions
substantially similar to those of the Acquiring Portfolio and will be subject
to substantially the same risks.
INVESTMENT LIMITATIONS
PRIME OBLIGATIONS PORTFOLIO. Pursuant to SEC Rule 2a-7 under the Investment
Company Act, the Prime Obligations Portfolio may not invest more than 5% of its
assets (taken at amortized cost) in the securities of any one issuer (except
U.S. Government Securities and repurchase agreements collateralized by such se-
curities). The Portfolio may, however, invest more than 5% of its assets in the
First Tier Securities of a single issuer for a period of up to three business
days after the purchase thereof, although the Portfolio may not make more than
one such investment at any time. The Prime Obligations Portfolio may not invest
in securities which are Second Tier Securities at the time of purchase. Immedi-
ately after the acquisition of any put by the Portfolio, not more than 5% of
such Portfolio's total assets may be invested in securities issued by or sub-
ject to puts from the same issuer. However, this limitation will not apply to
the issuer of unconditional puts if the Portfolio does not have more than 10%
of its total assets invested in securities issued by or subject to uncondi-
tional puts from such issuer. Pursuant to SEC Rule 2a-7 the foregoing restric-
tions are not applicable to the Tax-Exempt Diversified Portfolio. The foregoing
operating policies are more restrictive than the fundamental policy set forth
below, which would give the Prime Obligations Portfolio the ability to invest
with respect to 25% of its assets, more than 5% of its assets in any one issu-
er. The Prime Obligations Portfolio will operate in accordance with these oper-
ating policies which comply with SEC Rule 2a-7.
TAX-EXEMPT DIVERSIFIED PORTFOLIO. Pursuant to SEC Rule 2a-7, immediately af-
ter the acquisition of any put by the Tax-Exempt Diversified Portfolio, not
more than 5% of the Portfolio's total assets may
12
<PAGE>
be invested in securities issued by or subject to puts from the same issuer.
However, this limitation applies only with respect to 75% of the Portfolio's
total assets. Also, with respect to such Portfolio, this limitation will not
apply to the issuer of unconditional puts if the Portfolio does not have more
than 10% of its total assets invested in securities issued by or subject to un-
conditional puts from such issuer. The Portfolio will operate in accordance
with this operating policy which complies with SEC Rule 2a-7.
INVESTMENT RESTRICTIONS
The Trust, on behalf of each Portfolio, has adopted certain fundamental in-
vestment restrictions which are enumerated in detail in the Statement of Addi-
tional Information and which may not be changed with respect to a Portfolio un-
less authorized by a majority of its outstanding units. Among other restric-
tions, a Portfolio may not, with respect to 75% of its total assets taken at
market value, invest more than 5% of its total assets in the securities of any
one issuer (except U.S. Government Securities and repurchase agreements
collaterized by such securities) or acquire more than 10% of any class of the
outstanding voting securities of any one issuer. In addition, each Portfolio
may not invest more than 25% of its total assets in securities of issuers in
any one industry (the electric, gas, water and telephone utility industries be-
ing treated as separate industries for the purpose of the restriction), pro-
vided that there is no 25% limitation in respect of, and each Portfolio re-
serves freedom of action to concentrate its investments in, U.S. Government Se-
curities, obligations (other than commercial paper) issued or guaranteed by
U.S. banks and U.S. branches of foreign banks, provided such branches are sub-
ject to the same regulations as U.S. banks, and repurchase agreements and loans
of securities collateralized by U.S. Government Securities or such bank obliga-
tions, provided the investment policies of the Portfolio permit the particular
investment. Tax diversification requirements for qualification as a regulated
investment company apply to the Portfolios and are in certain instances more
strict than these investment restrictions. In applying the above restrictions,
a Portfolio will not treat a guarantee as a security issued by the guarantor if
the value of all securities issued or guaranteed by the guarantor and owned by
a Portfolio does not exceed 10% of its total assets.
Each Portfolio may borrow money as a temporary measure in amounts not exceed-
ing 5% of its total assets or from banks in an aggregate amount not exceeding
one-third of the value of its total assets. A Portfolio may not purchase secu-
rities while such borrowings exceed 5% of the value of its total assets. The
investment restrictions listed above are fundamental policies and accordingly
may not be changed with respect to a Portfolio without the approval of the ma-
jority of the outstanding units of that Portfolio. The investment objective of
each Portfolio is fundamental and may not be changed without a vote of the
unitholders. However, the investment policies and practices of each Portfolio,
unless otherwise specifically stated, are not fundamental.
RESTRICTED AND OTHER ILLIQUID SECURITIES
Each Portfolio may purchase securities that are not registered ("restricted
securities") under the Securities Act of 1933 ("1933 Act"), but can be offered
and sold to "qualified institutional buyers" under Rule 144A under the 1933
Act. However, a Portfolio will not invest more than 10% of its net assets in
illiquid investments, which includes fixed time deposits maturing in more than
seven days and restricted securities. Restricted securities (including commer-
cial paper issued pursuant to Section 4(2) of the 1933 Act) which the Board of
Trustees has determined are liquid, based upon a continuing review of the trad-
ing markets for the specific restricted security, will not be deemed to be il-
liquid investments for purposes of this restriction. The Board of Trustees may
adopt guidelines and delegate to the Adviser the daily function of determining
and monitoring the liquidity of restricted securities. The Board,
13
<PAGE>
however, will retain sufficient oversight and be ultimately responsible for the
determinations. Since it is not possible to predict with assurance that the
market for restricted securities eligible for resale under Rule 144A will con-
tinue to be liquid, the Board will carefully monitor each Portfolio's invest-
ments in these securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in a Portfolio to
the extent that qualified institutional buyers become for a time uninterested
in purchasing these restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nominal
fixed term on seven days or less notice. Such repurchase agreements will be re-
garded as liquid instruments.
MANAGEMENT
THE ADVISER
GSAM, One New York Plaza, New York, New York, a separate operating division
of Goldman Sachs, acts as investment adviser to the Portfolios. Goldman Sachs
registered as an investment adviser in 1981. As of January 31, 1995, Goldman
Sachs, together with its affiliates, acted as investment adviser, administrator
or distributor for approximately $48.7 billion in assets.
As of November 25, 1994, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $54.6 billion and partners' capital of $1.8 billion and
ranked as one of the largest international investment banking and brokerage
firms in the United States. Founded in 1869, Goldman Sachs is a major player
among investment banking and brokerage firms providing a broad range of financ-
ing and investing services both in the United States and abroad.
Pursuant to an SEC order, the Prime Obligations Portfolio may enter into
principal transactions in certain taxable money market instruments, including
repurchase agreements, with Goldman Sachs or its affiliate, Goldman Sachs Money
Market, L.P.
Under its Investment Advisory Agreement with the Trust, GSAM continually man-
ages each Portfolio, including the purchase, retention and disposition of its
securities and other assets. In addition, GSAM administers the Portfolios'
business affairs and performs various unitholder servicing functions to the ex-
tent not provided by other organizations. GSAM may pay a Service Organization,
as defined herein, other than Goldman Sachs, compensation equal on an annual
basis up to .10% of the average daily net assets of the ILA Service Units held
of record by such Service Organization for providing certain unitholder serv-
ices to its customers. The management of each Portfolio is subject to the su-
pervision of the Board of Trustees and each Portfolio's investment policies.
For these services, the Trust, on behalf of each Portfolio, pays GSAM a monthly
fee at an annual rate of each Portfolio's average daily net assets as follows:
<TABLE>
<CAPTION>
APPROXIMATE RATE PAID
ANNUAL FOR FISCAL YEAR
RATE ENDED 12/31/94
----------- ---------------
<S> <C> <C>
Prime Obligations Portfolio......................... .35% .35%
Tax-Exempt Diversified Portfolio.................... .35% .25%
</TABLE>
The difference, if any, between the stated advisory fee and the actual advi-
sory fees paid by the Portfolios reflects the fact that GSAM did not charge the
full amount of the advisory fees to which it would have been entitled.
GSAM has agreed to reduce or otherwise limit the daily expenses of each Port-
folio (excluding fees
14
<PAGE>
payable to Service Organizations, as defined herein, taxes, interest, broker-
age and litigation, indemnification and other extraordinary expenses), on an
annualized basis, to .43% of the average daily net assets of the Portfolio
less the effect of fee reductions, if any. Such reductions or limits, if any,
are calculated monthly on a cumulative basis. Any such reductions or limits
may be discontinued or modified only with the express approval of the Trust-
ees. In addition, GSAM has voluntarily agreed not to impose all or a portion
of its advisory fee and/or to reduce or otherwise limit the Prime Obligations
and Tax-Exempt Diversified Portfolios' annual total operating expenses (ex-
cluding fees payable to Service Organizations, as defined herein), to .41% and
.31%, respectively, of average daily net assets. GSAM has no current intention
to, but may in the future, discontinue or modify the voluntary limitation at
its discretion.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 85 Broad Street, New York, New York, serves as the Distribu-
tor of units of each Portfolio pursuant to a Distribution Agreement with the
Trust. The Distributor will assist in the sale of units of each Portfolio upon
the terms described herein. Goldman Sachs, 4900 Sears Tower, Chicago, Illinois
also serves as the Transfer Agent of each Portfolio.
ADDITIONAL SERVICES
Each Portfolio has adopted a Service Plan with respect to the ILA Service
Units which authorizes it to compensate Service Organizations for providing
account administration and personal and account maintenance services to their
customers who are beneficial owners of such Units. Each Portfolio will enter
into agreements with Service Organizations, including Goldman Sachs, which
purchase ILA Service Units, on behalf of their customers ("Service Agree-
ments"). On behalf of its clients who purchase ILA Service Units of a Portfo-
lio, Goldman Sachs will provide services as set forth under the Service Agree-
ment. The Service Agreements will provide for compensation to each Service Or-
ganization in an amount up to .40 of 1% (on an annualized basis) of the aver-
age daily net assets of the ILA Service Units of that Portfolio attributable
to or held in the name of the Service Organization for its customers; provid-
ed, however, that the fee paid for personal and account maintenance services
shall not exceed .25% of such average daily net assets. The services provided
by a Service Organization may include acting, directly or through an agent, as
the sole unitholder of record, maintaining account records for its customers,
processing orders to purchase, redeem and exchange ILA Service Units for its
customers, responding to inquiries from prospective and existing unitholders
and assisting customers with investment procedures.
For the fiscal year ended December 31, 1994, the Trust, on behalf of each
Portfolio, paid Service Organizations fees at the annual rate of .40% of each
Portfolio's average daily net assets attributable to ILA Service Units.
Holders of ILA Service Units of a Portfolio will bear all expenses and fees
paid to Service Organizations with respect to such Units as well as any other
expenses which are directly attributable to such Units.
Service Organizations, other than Goldman Sachs, may charge other fees to
their customers who are the beneficial owners of ILA Service Units in connec-
tion with their customer accounts. These fees would be in addition to any
amounts received by the Service Organization under a Service Agreement and may
affect an investor's return with respect to an investment in a Portfolio.
All inquiries of beneficial owners of ILA Service Units of the Portfolios
should be directed to such owners' Service Organization.
PURCHASE OF UNITS
ILA Service Units of the Portfolios may be purchased through Goldman Sachs
acting as a
15
<PAGE>
Service Organization as specified below or through Authorized Dealers. Autho-
rized Dealers include investment dealers that are members of the National Asso-
ciation of Securities Dealers, Inc. and certain other financial service firms.
To become an Authorized Dealer, a dealer or financial service firm must enter
into a sales agreement with Goldman Sachs.
ILA Service Units of the Portfolios may be purchased on any Business Day at
the net asset value next determined after receipt by State Street Bank and
Trust Company ("State Street") as agent for Goldman Sachs (as a Service Organi-
zation) of both the purchase order and the purchase price in Federal Funds.
Purchase orders may be made by contacting Goldman Sachs or, if units are held
in a "street name" account, the applicable Authorized Dealer. Since the Portfo-
lios and Goldman Sachs will have no record of the beneficial owner's transac-
tions in a "street name" account, the beneficial owner should contact its Au-
thorized Dealer to purchase, redeem or exchange units, to make changes in or
give instructions concerning the account or to obtain information about the ac-
count. It is the responsibility of the Authorized Dealer to promptly forward
orders and payment to the Portfolios.
Goldman Sachs may from time to time, at its own expense, provide compensation
to certain dealers who perform administrative services with respect to deposi-
tory institutions whose customers purchase units of the Portfolios. These serv-
ices include responding to certain inquiries from and providing written materi-
als to depository institutions about the Portfolios; furnishing advice about
and assisting depository institutions in obtaining from state regulatory agen-
cies any rulings, exemptions or other authorizations that may be required to
conduct a mutual fund sales program; acting as liaison between depository in-
stitutions and national regulatory organizations; assisting with the prepara-
tion of sales material; and providing general assistance and advice in estab-
lishing and maintaining mutual fund sales programs on the premises of deposi-
tory institutions.
The amount of such compensation may be up to .08% annually of the average net
assets of each Portfolio attributable to units purchased through, and held by
the customers of, such depository institutions. Such compensation does not rep-
resent an additional expense to any Portfolio or its unitholders, since it will
be paid from the assets of Goldman Sachs or its affiliates.
PURCHASES BY CHECK
Initial purchases of ILA Service Units of the Portfolios may be made by mail-
ing a completed Account Information Form along with a Federal Reserve draft or
check payable to the appropriate Portfolio and drawn on a U.S. bank and for
subsequent investments may be made by mailing a check with the investor's ac-
count number to Goldman Sachs Money Market Trust (Prime Obligations Portfolio)
or (Tax-Exempt Diversified Portfolio) Service Units, c/o NFDS, P.O. Box 419711,
Kansas City, MO 64141-6711. The order becomes effective as soon as the check or
draft is converted to Federal Funds. It is expected that Federal Reserve drafts
will ordinarily be converted to Federal Funds on the day of receipt and that
checks will be converted to Federal Funds within two Business Days after re-
ceipt. Payment of redemption proceeds from ILA Service Units of the Portfolios
purchased by check may be delayed up to 15 days until the check has cleared, as
described under "Redemption of Units".
AUTOMATIC INVESTMENT PLAN
Systematic cash investments may be made through a unitholder's bank via the
Automated Clearing House Network or a unitholder's checking account via bank
draft each month. Required forms are available from Goldman Sachs or any autho-
rized dealer. A minimum investment of $50 is required for Automatic Investment
Plans.
PURCHASES
ILA Service Units of the Prime Obligations Portfolio are deemed to have been
purchased when
16
<PAGE>
an order becomes effective and are entitled to dividends as follows:
<TABLE>
<CAPTION>
IF AN ORDER IS RECEIVED BY
STATE STREET DIVIDENDS BEGIN
- -------------------------- -----------------
<S> <C>
By: 3:00 p.m.--eastern time Same Business Day
After: 3:00 p.m.--eastern time Next Business Day
</TABLE>
ILA Service Units of the Tax-Exempt Diversified Portfolio are deemed to have
been purchased when an order becomes effective and are entitled to dividends as
follows:
<TABLE>
<CAPTION>
IF AN ORDER IS RECEIVED BY
STATE STREET DIVIDENDS BEGIN
- -------------------------- -----------------
<S> <C>
By: 1:00 p.m.--eastern time Same Business Day
After: 1:00 p.m.--eastern time Next Business Day
</TABLE>
A Business Day means any day on which the New York Stock Exchange is open,
except for days on which Chicago, Boston or New York banks are closed for local
holidays.
ILA Service Units of the Portfolios are purchased at the net asset value per
unit without the imposition of a sales charge.
Goldman Sachs, as each Portfolio's transfer agent, will maintain a complete
record of transactions and ILA Service Units of the Portfolios held in each
unitholder's account.
The Trust and Goldman Sachs each reserves the right to reject any purchase
order for any reason.
Goldman Sachs may, at its own expense, provide compensation to certain deal-
ers whose customers purchase significant amounts of units of a Portfolio. The
amount of such compensation may be made on a one-time and/or periodic basis,
and may be up to 25% of the annual fees that are earned by GSAM as investment
adviser to such Portfolio (after adjustments) and are attributable to units
held by such customers. Such compensation will not represent an additional ex-
pense to the Portfolio or its unitholders, since it will be paid from assets of
Goldman Sachs or its affiliates.
MINIMUM INVESTMENT AND OTHER INFORMATION
The Trust does not have any minimum purchase or account requirements with re-
spect to ILA Service Units. However, Goldman Sachs, as a Service Organization,
has established a minimum initial investment requirement of $10,000. Sharehold-
ers of any mutual funds sponsored by Goldman Sachs which are subject to an
initial sales charge (the "Goldman Sachs Portfolios") who wish to purchase ILA
Service Units of the Portfolios through an exchange of shares of such a Goldman
Sachs Portfolio may be subject to different minimum investment requirements.
(See "Exchanges," on page 20 of the Prospectus.)
TAX-SHELTERED RETIREMENT PLANS
The Prime Obligations Portfolio offers for purchase by retirement plans, in-
cluding Individual Retirement Account Plans for individuals and their non-em-
ployed spouses and defined contribution plans such as 401(k) Salary Reduction
Plans.
Detailed information concerning these plans and copies of the plans may be
obtained from the Transfer Agent. This information should be read carefully,
and consultation with an attorney or tax adviser may be advisable. The informa-
tion sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans, divi-
dends and distributions will be automatically reinvested in additional units of
the Portfolio or, if so directed by the unitholder, in cash, in shares of an-
other Goldman Sachs Portfolio.
The minimum initial investment for all such retirement plans is $10,000, ex-
cept for certain exchanges of shares of any Goldman Sachs Portfolio and except
that the minimum for tax-sheltered retirement plans is $250. There is a minimum
of $50 for all subsequent investments.
REPORTS TO UNITHOLDERS
The Trust will issue an annual report containing audited financial statements
and a semiannual
17
<PAGE>
report to record holders of ILA Service Units of each Portfolio, including
Service Organizations who hold such Units for the benefit of their customers.
Upon request, a printed confirmation for each transaction will be provided by
Goldman Sachs. Any dividends and distributions paid by the Portfolio are also
reflected in regular statements issued by Goldman Sachs, in its capacity as
transfer agent and income disbursing agent, to unitholders of record. The Serv-
ice Organizations, including Goldman Sachs or their agents, as record holders
of ILA Service Units, will be responsible for providing similar services to
their own customers who are the beneficial owners of such Units. For example,
Service Organizations are responsible for providing each customer exercising
investment discretion with monthly statements with respect to such customer's
account in lieu of an immediate confirmation of each transaction.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (as of 4:00 p.m. New York time) as a dividend and distributed to
Service Organizations, including Goldman Sachs or their agents, as record own-
ers of ILA Service Units, monthly. Distributions will be made in additional ILA
Service Units of the same Portfolio or, at the election of a Service Organiza-
tion, in cash. The election to reinvest dividends and distributions or receive
them in cash may be changed by a Service Organization at any time upon written
notice to Goldman Sachs, in its capacity as transfer agent and income disburs-
ing agent. If no election is made, all dividend and capital gain distributions
will be reinvested. Dividends will be reinvested as of the last calendar day of
each month. Cash distributions will be paid on or about the first business day
of each month. Net short-term capital gains, if any, will be distributed in ac-
cordance with the requirements of the Code and may be reflected in a Portfo-
lio's daily distributions. Each Portfolio may distribute at least annually its
long-term capital gains, if any, after reduction by available capital losses.
In order to avoid excessive fluctuations in the amount of monthly capital gains
distributions, a portion of any net capital gains realized on the disposition
of securities during the months of November and December may be distributed
during the subsequent calendar year. Although realized gains and losses on the
assets of a Portfolio are reflected in the net asset value of the Portfolio,
they are not expected to be of an amount which would affect the Portfolio's net
asset value of $1.00 per unit.
A Portfolio's net investment income consists of the excess of (i) accrued in-
terest or discount (including both original issue and market discount on tax-
able securities) on portfolio securities, and (ii) any income of the Portfolio
from sources other than capital gains over (iii) the amortization of market
premium on all portfolio securities and (iv) the estimated expenses of the
Portfolio, including a proportionate share of the general expenses of the
Trust.
TAXES
Each Portfolio is treated as a separate entity for federal income tax pur-
poses and intends to qualify and be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986 (the "Code") for each
taxable year. To qualify as such, each Portfolio must satisfy certain require-
ments relating to the sources of its income, diversification of its assets and
distribution of its income to unitholders. As a regulated investment company,
each Portfolio will not be subject to federal income or excise tax on any net
investment income and net realized capital gains that are distributed to its
unitholders in accordance with certain timing requirements of the Code.
Dividends paid by a Portfolio from net investment income (except, in the case
of the Tax-Exempt Diversified Portfolio), the excess of net short-term capital
gain over net long-term capital loss and taxable original issue discount or
market discount income will be taxable to unitholders as ordinary in-
18
<PAGE>
come. Dividends paid by a Portfolio from the excess of net long-term capital
gain over net short-term capital loss will be taxable as long-term capital gain
regardless of how long the unitholders have held their units. These tax conse-
quences will apply to taxable distributions of a Portfolio (including the Tax-
Exempt Diversified Portfolio which also pays exempt-interest dividends, as de-
scribed below) regardless of whether distributions are received in cash or re-
invested in units. Certain distributions paid by the Portfolios in January of a
given year will be taxable to unitholders as if received on December 31 of the
year in which they are declared. Unitholders will be informed annually about
the amount and character of distributions received from the Portfolios for fed-
eral income tax purposes, including any distributions that may constitute a re-
turn of capital or any distributions of the Tax-Exempt Diversified Portfolio
that may constitute a tax preference item under the federal alternative minimum
tax.
The Tax-Exempt Diversified Portfolio intends to satisfy certain requirements
of the Code for the payment of "exempt-interest dividends" not included in
unitholders' federal gross income. Dividends paid by the Portfolio from inter-
est on tax-exempt obligations and properly designated by the Portfolio as ex-
empt-interest dividends, including exempt-interest dividends received from
other regulated investment companies, will generally be exempt from federal in-
come tax although a portion of such dividends may be subject to the federal al-
ternative minimum tax. Exempt-interest dividends will be considered in comput-
ing the "adjusted current earnings" preference item for purposes of the corpo-
rate federal alternative minimum tax, the corporate environmental tax, and the
extent, if any, to which social security or railroad retirement benefits are
taxable. Persons who are "substantial users" of facilities financed by certain
industrial development or private activity bonds should consult their own tax
advisers before purchasing units of the Portfolio. Interest incurred to pur-
chase or carry units of the Portfolio will not be deductible for federal income
tax purposes to the extent related to exempt-interest may not be deductible for
federal or state income tax purposes.
Individuals and certain other classes of unitholders may be subject to 31%
backup withholding of federal income tax on taxable distribu-tions if they fail
to furnish their correct taxpayer identification number and certain certifica-
tions or if they are otherwise subject to backup withholding. Individuals, cor-
porations and other unitholders that are not U.S. persons under the Code are
subject to different tax rules and may be subject to nonresident alien with-
holding at the rate of 30% (or a lower rate provided by an applicable tax trea-
ty) on amounts treated as ordinary dividends from the Portfolios.
In addition to federal taxes, a unitholder may be subject to state and local
taxes on payments received from a Portfolio. A state income (and possibly local
income and/or intangible property) tax exemption is generally available to the
extent a Portfolio's distributions are derived from interest on (or, in the
case of intangibles taxes, the values of its assets is attributable to) certain
U.S. Government obligations and/or tax-exempt municipal obligations issued by
or on behalf of the particular state or a political subdivision thereof, pro-
vided in some states that certain thresholds for holdings of such obligations
and/or reporting requirements are satisfied. Unitholders should consult their
own tax advisers concerning these matters.
AUTOMATIC EXCHANGE PROGRAM
Unitholders of a Portfolio may elect on the Account Information Form to auto-
matically exchange a specified dollar amount of ILA Service Units for shares of
any Goldman Sachs Portfolio. Such exchanges will be made into the relevant
Goldman Sachs Portfolio at the public offering price, which may include a sales
charge, unless a sales charge has previously been paid on the investment repre-
sented by the exchanged units (i.e., the units to be exchanged were originally
issued in exchange for
19
<PAGE>
shares on which a sales charge was paid), in which case the automatic exchanges
will be made at net asset value. Dividends and/or capital gains of ILA Service
Units of each Portfolio which have been reinvested may be exchanged for shares
of a Goldman Sachs Portfolio without a sales charge. These automatic exchanges
are made monthly on the fifteenth day of each month or the first Business Day
thereafter and are subject to the following conditions. The minimum dollar
amount for automatic exchanges must be at least $100 per month. At the time the
election is made (i) the value of the unitholder's account in the Portfolio
from which the exchange is made must equal or exceed $10,000 and (ii) the value
of the account in the acquired fund must equal or exceed the acquired fund's
minimum initial investment requirement or, if the unitholder has elected the
automatic exchange privilege and the value of the acquired fund does not equal
the acquired fund's minimum, such election must continue until the minimum ini-
tial investment requirement is met. The names, addresses and social security or
taxpayer identification numbers for the unitholder accounts with the exchanged
and acquired funds must be identical. A unitholder should obtain and read the
prospectus relating to any Goldman Sachs Portfolio and its shares and consider
its investment objective, policies and applicable fees and expenses before
electing an automatic exchange into that Goldman Sachs Portfolio.
EXCHANGES
ILA Service Units of each Portfolio may be exchanged for shares of any
Goldman Sachs Portfolio. A unitholder should obtain and read the prospectus for
the relevant Goldman Sachs Portfolio and consider its investment objectives,
policies and applicable fees before making an exchange. Exchanges of ILA Serv-
ice Units from each Portfolio will be made into the relevant Goldman Sachs
Portfolio at the public offering price, which may include a sales charge, un-
less a sales charge has previously been paid on the investment represented by
the exchanged units (i.e., the units to be exchanged were originally issued in
exchange for shares on which a sales charge was paid), in which case the ex-
change will be made at net asset value. ILA Service Units of each Portfolio
purchased through dividend and/or capital gains reinvestment may be exchanged
for shares of a Goldman Sachs Portfolio without a sales charge.
An exchange may be made by contacting an authorized dealer or writing to
Goldman Sachs Money Market Trust, c/o NFDS, P.O. Box 419711, Kansas City, MO
64141-6711 or, if previously elected on the Account Information Form, by tele-
phone at 1-800-526-7384 (9:00 a.m. to 4:00 p.m. New York time). Under the tele-
phone exchange privilege, units may be exchanged among accounts with different
names, addresses or social security or taxpayer identification numbers only if
the exchange request is in writing and is received in accordance with the pro-
cedures set forth under "Redemption of Units."
In addition to free automatic exchanges pursuant to the Automatic Exchange
Program, six free exchanges are permitted in each twelve-month period. It may
be difficult to implement the telephone exchange privilege in times of drastic
economic or market changes. In an effort to prevent unauthorized or fraudulent
exchange requests by telephone, Goldman Sachs employs reasonable procedures as
set forth under "Redemption of Units" to confirm that such instructions are
genuine. All exchanges are subject to the minimum investment requirements of
the Portfolio or Goldman Sachs Portfolio into which the shares or units are be-
ing exchanged. The minimum initial exchange for shareholders of a Goldman Sachs
Portfolio is $10,000 or the full account share balance, whichever is less.
An exchange fee may be imposed or the exchange privilege may be modified or
withdrawn at any time upon 60 days' notice to unitholders. The Trust, the rele-
vant fund or Goldman Sachs may reject or restrict purchases of units or shares
by a particular purchaser or group, for example, when a pattern of frequent
purchases and sales of units or shares is evident or if the purchase and sale
orders
20
<PAGE>
are, or a subsequent abrupt redemption might be, of a size that would disrupt
management of a Portfolio or a Goldman Sachs Portfolio. Exchanges are available
only in states where the exchange may be legally made.
REDEMPTION OF UNITS
HOW TO REDEEM
ILA Service Units may be redeemed through Goldman Sachs acting as a Service
Organization as specified below.
ILA Service Units of a Portfolio may be redeemed without charge upon request
on any Business Day at the net asset value next determined after receipt by
State Street as agent for Goldman Sachs, as a Service Organization, of the re-
demption request. Redemption requests may be made by contacting Goldman Sachs
or, if units are held in a "street name" account, the applicable Authorized
Dealer. Written requests may be addressed to Goldman Sachs Money Market Trust,
c/o NFDS, P.O. Box 419711, Kansas City, MO 64141-6711. A unitholder may request
redemptions by telephone only if the optional telephone redemption privilege
has been elected on the Account Information Form. It may be difficult to imple-
ment redemptions by telephone in times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs and NFDS each employ reasonable procedures specified
by the Trust to confirm that such instructions are genuine. Consequently, pro-
ceeds of telephone redemption requests will only be sent to the unitholder's
address of record or authorized bank account designated in the Account Informa-
tion Form and exchanges of units will only be made to an identical account.
Telephone requests may also be recorded. The Trust may implement other proce-
dures from time to time. If reasonable procedures are not implemented, the
Trust may be liable for any loss due to unauthorized or fraudulent transac-
tions. In all other cases, neither the Portfolios, the Trust nor Goldman Sachs
will be responsible for the authenticity of instructions received by telephone.
Proceeds of telephone redemptions will be mailed to the unitholder's address of
record or wired to the authorized bank account indicated on the Account Infor-
mation Form, unless the unitholder provides written instructions (accompanied
by a signature guarantee) indicating another address.
Written requests for redemptions must be signed by each unitholder with its
signature guaranteed by a bank, a securities broker or dealer, a credit union
having authority to issue signature guarantees, a savings and loan association,
a building and loan association, a cooperative bank, a federal savings bank or
association, a national securities exchange, a registered securities associa-
tion or a clearing agency, provided that such institution satisfies the stan-
dards established by the Transfer Agent.
ILA Service Units of each Portfolio may be redeemed without charge upon re-
quest on any Business Day at the net asset value next determined after receipt
by State Street as agent for Goldman Sachs of the redemption request.
21
<PAGE>
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired or mailed
to the record holder of ILA Service Units.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
REDEMPTION REQUEST RECEIVED BY REDEMPTION
STATE STREET AS AGENT FOR GOLDMAN SACHS PROCEEDS ORDINARILY DIVIDENDS
--------------------------------------- ------------------- ---------
<C> <S> <C>
(1) Prime Obligations Portfolio
By: 3:00 p.m.--eastern time (i) Wire Redemptions Sent Not earned on Day
Same Business Day request is received
(ii) Check Redemptions Sent
Next Business Day
After: 3:00 p.m.--eastern time (i) Wire Redemptions Sent Earned on Day
Next Business Day request is received
(ii) Check Redemptions Sent
Within Two Business
Days
(2) Tax-Exempt Diversified Portfolio
By: 12:00 noon--eastern time (i) Wire Redemptions Sent Not earned on Day
Same Business Day request is received
(ii) Check Redemptions Sent
Next Business Day
After:12:00 noon--eastern time (i) Wire Redemptions Sent Earned on Day
Next Business Day request is received
(ii) Check Redemptions Sent
Within Two Business Days
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
After a wire has been initiated by Goldman Sachs, neither Goldman Sachs nor
the Trust assumes any further responsibility for the performance of intermedi-
aries or the customer's Service Organization in the transfer process. If a
problem with such performance arises, the customer should deal directly with
such intermediaries or Service Organization.
CHECK REDEMPTION PRIVILEGE
Goldman Sachs or its agent, as a record holder of ILA Service Units of a
Portfolio, may elect to have a special account with State Street for the pur-
pose of permitting its customers to redeem ILA Service Units from their ac-
counts in each Portfolio by check. When State Street receives a completed ap-
plication form, Goldman Sachs or its agent, as a record holder of the ILA Serv-
ice Units, will forward to the requesting customer a supply of checks. Checks
drawn on this account may be payable to the order of any person in any amount
of $500 or more, but cannot be certified. The payee of the check may cash or
deposit it like any other check drawn on a bank. When such a check is presented
to State Street for payment, a sufficient number of full and fractional ILA
Service Units will be redeemed to cover the amount of the check. Cancelled
checks will be returned to the record holder of ILA Service Units by State
Street.
The check redemption privilege enables a unitholder to receive the dividends
declared on the ILA Service Units to be redeemed until such time as the check
is processed. Because of this feature, the check redemption privilege may not
be used for a complete liquidation of a unitholder's account. If the amount of
a check is greater than the value of
22
<PAGE>
the ILA Service Units held in the unitholder's account, the check will be re-
turned unpaid, and the unitholder may be subject to extra charges.
Goldman Sachs reserves the right to impose conditions on, limit the avail-
ability of or terminate the check redemption privilege at any time with respect
to a particular unitholder or all unitholders in general. The Trust and State
Street reserve the right at any time to suspend the procedure permitting re-
demptions by check and intend to do so in the event that federal legislation or
regulations impose reserve requirements or other restrictions deemed by the
Trustees to be adverse to the interests of other ILA Service Unitholders of the
Portfolios.
NET ASSET VALUE
The net asset value of each Portfolio is determined as of the close of regu-
lar trading on the New York Stock Exchange (normally 4:00 P.M. New York time)
on each Business Day. Net asset value per unit for each class of units of each
Portfolio is calculated by determining the amount of net assets attributable to
each class of units and dividing by the number of units for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion (PSA) recommends that the securities markets close early, the Prime Obli-
gations Portfolio and Tax-Exempt Diversified Portfolio reserve the right to
cease, accepting purchase and redemption orders for same Business Day credit at
the time the PSA recommends that the securities markets close. On days either
Portfolio closes early, purchase and redemption orders received after the PSA
recommended closing time will be credited for the next Business Day. In addi-
tion, each Portfolio reserves the right to advance the time by which purchase
and redemption orders must be received for same Business Day credit as permit-
ted by the SEC.
Each Portfolio's portfolio securities are valued at their amortized cost,
which does not take into account unrealized securities gains or losses. This
method involves initially valuing an instrument at its cost and thereafter as-
suming a constant amortization to maturity of any premium paid or discount re-
ceived.
YIELD INFORMATION
From time to time, each Portfolio may advertise its yield and effective
yield. The yield of a Portfolio refers to the income generated by an investment
in the Portfolio over a seven-day period (which period will be stated in the
advertisement). This income is then annualized; that is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment in the Portfolio is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The Tax-Exempt Diversified Portfolio may also quote tax-equivalent yield. The
Portfolio's tax-equivalent yield is calculated by determining the rate of re-
turn that would have to be achieved on a fully taxable investment to produce
the after-tax equivalent of the Portfolio's yield, assuming certain tax brack-
ets for a unitholder.
Investors should note that the investment results of a Portfolio are based on
historical performance and will fluctuate over time. Any presentation of a
Portfolio's yield, effective yield or tax-equivalent yield for any prior period
should not be considered a representation of what an investment may earn or
what a Portfolio's yield, effective yield or tax-equivalent yield may be in any
future period.
Yield, effective yield and tax-equivalent yield will be calculated separately
for ILA Service Units, ILA Units and ILA Administration Units. Because each
such class of units is subject to different expenses, the net yield of such
classes of a Portfolio for the same period may differ. Due to the fees payable
under the Service Plan and the Administration Plan, the investment performance,
for any period, of the ILA Units will always be higher than that of the ILA
Service Units and ILA Administration Units and the investment performance of
the ILA
23
<PAGE>
Administration Units will always be higher than that of the ILA Service Units.
See "Organization and Units of the Portfolios" below.
ORGANIZATION AND UNITS OF THE PORTFOLIOS
The Trust was formed as a business trust under the laws of The Commonwealth
of Massachusetts on December 6, 1978. The Trustees of the Trust are responsible
for the overall management and supervision of its affairs. The Declaration of
Trust further authorizes the Trustees to classify or reclassify any series or
portfolio of units into one or more classes. The Trustees have authorized the
issuance of three classes of units of each of the portfolios, which are: ILA
Units, ILA Administration Units and ILA Service Units.
Each ILA Unit, ILA Administration Unit and ILA Service Unit of a Portfolio
represents an equal proportionate interest in the assets belonging to that
Portfolio. It is contemplated that most units will be held in accounts of which
the record owner is a bank or other institution acting, directly or through an
agent, as nominee for its customers who are beneficial owners of the units or
another organization designated by such bank or institution. ILA Units may be
purchased for accounts held in the name of an institution that is not compen-
sated by the Trust for services provided to the institution's investors. ILA
Administration Units may be purchased for accounts held in the name of an in-
stitution that provides certain account administration services to its custom-
ers, including maintenance of account records, processing orders to purchase,
redeem and exchange ILA Administration Units. ILA Administration Units of each
Portfolio bear the cost of administration fees at the annual rate of up to .15
of 1% of the average daily net assets of such Units. ILA Service Units may be
purchased for accounts held in the name of an institution that provides certain
account administration and unitholder liaison services to its customers, in-
cluding maintenance of account records and processing orders to purchase, re-
deem and exchange ILA Service Units, responding to customer inquiries and as-
sisting customers with investment procedures. ILA Service Units bear the cost
of service fees at the annual rate of up to .40 of 1% of the average daily net
assets of such Units. (Institutions that provide services to holders of ILA Ad-
ministration or Service Units are referred to in this Prospectus as "Service
Organizations").
It is possible that an institution or its affiliate may offer different clas-
ses of units to its customers and thus receive different compensation with re-
spect to different classes of units of the same Portfolio. In the event a Port-
folio is distributed by salespersons or any other persons, they may receive
different compensation with respect to different classes of units of the Port-
folio. ILA Service Units and ILA Administration Units each have certain exclu-
sive voting rights on matters relating to their respective plans. Except as de-
scribed above, the three classes of units are identical. Certain aspects of the
Units may be altered, after advance notice to unitholders, if it is deemed
necessary in order to satisfy certain tax regulatory requirements.
When issued, units are fully paid and nonassessable by the Trust. In the
event of liquidation, unitholders are entitled to share pro rata in the net as-
sets of the applicable Portfolio available for distribution to unitholders.
Units entitle their holders to one vote per unit, are freely transferable and
have no preemptive, subscription or conversion rights.
Units of a Portfolio will be voted separately by Portfolio with respect to
matters pertaining to that Portfolio except for the election of Trustees and
ratification of independent accountants. For example, unitholders of each Port-
folio are required to approve the adoption of any investment advisory agreement
relating to that Portfolio and any changes in fundamental investment restric-
tions or policies of such Portfolio. Approval by the unitholders of one Portfo-
lio is effective only as to that Portfolio.
The Trust does not intend to hold annual unitholder meetings, although spe-
cial meetings may be called for such purposes as electing or removing
Trustees, complying with a requirement of the Investment Company Act, or such
other purposes as are set forth above. The Trust will facilitate unitholder
communication as required and in the manner prescribed by Section 16(c) of the
Investment Company Act.
24
<PAGE>
APPENDIX A
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Portfolio in which you invest with
your correct Social Security or Taxpaper Identification Number (TIN), regard-
less of whether you file tax returns. Failure to do so may subject you to pen-
alties. Failure to provide your correct TIN, to check the appropriate boxes,
and to sign your name in the Social Security Number or other Taxpayer Identifi-
cation Number Certification section (the "Certification Section") of the Ac-
count Information Form, could result in withholding of 31% by the Portfolio for
the federal backup withholding tax on distributions, redemptions, exchanges and
other payments relating to your account. However, distributions will not be
subject to backup withholding if a Portfolio reasonably estimates that at least
95% of its distributions will be exempt-interest dividends, and redemptions and
exchanges will not be subject to backup withholding if the Portfolio success-
fully maintains a constant $1.00 net asset value per unit. Each Portfolio re-
serves the right to refuse to open an account for, or to close the account of,
any investor who fails to (1) provide a TIN, or (2) certify that such TIN is
correct (if required to do so under applicable law) in establishing an account.
Any tax withheld may be credited against taxes owed on your federal income
tax return.
Special rules apply for certain entities. For example, for an account estab-
lished under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor
should be furnished.
If you do not have a TIN, you should apply for one immediately by contacting
your local office of the Social Security Administration or the Internal Revenue
Service (IRS). If you do not have a TIN but have applied for or intend to apply
for one, you should check the first box in the Certification Section. In this
event, you should provide your TIN and required certifications within 60 days.
If you do not provide your TIN and required certification within 60 days, 31%
backup withholding may apply. Backup withholding could also apply to payments
relating to your account prior to the Portfolio's receipt of your TIN and re-
quired certifications.
If you have been notified by the IRS that you are subject to backup withhold-
ing because you failed to report all your interest and/or dividend income on
your tax return and you have not been notified by the IRS that such withholding
should cease, you must cross out item (2) in the Certification Section.
If you are an exempt recipient, you should furnish your TIN and check the
second box in the Certification Section. Exempt recipients include
corporations, tax-exempt pension plans and IRA's, governmental agencies,
financial institutions, registered securities and commodities dealers and
others.
If you are a nonresident alien or foreign entity, check the third box in the
Certification Section and provide a completed Form W-8 to the Portfolio in or-
der to avoid backup withholding on certain payments. Other payments to you may
be subject to nonresident alien withholding of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441, and 1442 of the Internal Revenue Code and consult your
tax adviser.
25
<PAGE>
ACCOUNT INFORMATION FORM THE GOLDMAN SACHS PORTFOLIOS
This Account Information Form Should be
Forwarded Promptly to Goldman, Sachs & Co.
or any Authorized Dealer
- -------------------------------------------------------------------------------
The Goldman Sachs Portfolios c/o NFDS P.O. Box 419711
SEND TO: Kansas City, MO 64141-6711
For additional information call 1-800-526-7384
Date: __________
- -------------------------------------------------------------------------------
[_] Asia Growth Fund [_] Global Income Fund
INITIAL INVESTMENT--
$1,500 MINIMUM [_] Balanced Fund [_] Government Income Fund
[_] Capital Growth Fund [_] Municipal Income Fund
[_] Growth & Income Fund [_] Other Fund __________
[_] International Equity GOLDMAN SACHS MONEY MARKET
Fund TRUST*
[_] ILA/Prime Obligations
[_] Select Equity Fund Portfolio Service Units
[_] Small Cap Equity Fund [_] ILA/Tax-Exempt]Diversified
Portfolio Service Units
[_] Adjustable Rate Mortgage *$10,000 minimum or balance
Fund of existing account
- -------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION Please Print
INDIVIDUAL
---------------------------------------- --------------
First Name Initial Last SS# or Tax
ID#
JOINT TENANTS
The account will be registered as "Joint Tenants with
Right of Survivorship" unless otherwise specified.
---------------------------------------- --------------
First Name Initial Last SS# or Tax
ID#
---------------------------------------- --------------
First Name Initial Last SS# or Tax
ID#
GIFT TO MINORS
--------------------------------------------------------
Custodian's Name (Only one can be named)
---------------------------------------- --------------
Minor's Name (Only one) SS#
Under the ___ (State of Residence) Uniform Gift to
Minors Act
CORPORATION, TRUST, OR OTHER ENTITY
---------------------------------------- --------------
Name of Corporation, Trust or other Non-Person Entity
Tax ID#
--------------------------------------------------------
Attention:
--------------------------------------------------------
Date of Trust Instrument:Name of Beneficiary (If to be
included in the registration)
--------------------------------------------------------
Name(s) of Trustee(s) (If to be included in the
registration)
- -------------------------------------------------------------------------------
2. MAILING ADDRESS ( )
------------------------------------ ------------------
Street Daytime Phone
--------------------------------------------------------
City State Zip Code
<PAGE>
- --------------------------------------------------------------------------------
3. TO PURCHASE SHARES Check appropriate box(es).
[_] A check for $_ is enclosed. Check(s) should be payable
to the Fund(s) selected.
[_] An order #___ for shares or $_________ was placed on
_____.
[_] I certify that I am an entity exempt from the sales
charge according to the section in the Fund
Prospectus "Purchase of Shares" and I am, therefore,
entitled to purchase shares of the Fund at net asset
value. By checking this box, the undersigned agrees
that I will notify Goldman, Sachs & Co. at or prior
to purchase if I am no longer in one of the
categories of eligible investors.
Reason for exemption ________________________________.
- --------------------------------------------------------------------------------
4. DIVIDEND AND Choose how you wish to receive dividends. If no boxes
DISTRIBUTION are checked, Option A will be assigned.
OPTIONS A. [_] All income and capital gains dividends
reinvested in the account.
B. [_] All income and short-term capital gains
dividends in cash and long-term capital gains
reinvested in the account. (COMPLETE CASH DIVIDENDS
SECTION BELOW.)
C. [_] All income and capital gains dividends paid in
cash. (COMPLETE CASH DIVIDENDS SECTION BELOW.)
D. [_] All dividends and capital gains reinvested in
another Goldman Sachs Portfolio account: (See
prospectus regarding limitations on this
privilege.)
Fund Name _________________ Account Number ____________
Please send cash dividends to (if no special payee,
cash dividends will be sent to the account registration
address):
[_] Deposit
to bank
[_] Account registration address. (attach
voided
check)
[_] Check to special payee as
follows:
Name of Payee ________________ Account No. (if
applicable) __________
Street Address _________________________________________
City _____________________________ State ____ Zip ______
- --------------------------------------------------------------------------------
5. RIGHT OF ACCUMULATION
See "Purchase of Shares"
Cumulative quantity discounts are applicable if a
shareholder's current value of existing shares of the
Fund alone or in combination with shares of any other
fund described in the Prospectus, on which a sales
charge was paid, total the requisite amount for
receiving a discount as described in the accompanying
Prospectus. Below are listed all the accounts (account
name, Fund and number) which should be aggregated for a
right of accumulation.
Name _____________ Name _____________ Name _____________
Fund _____________ Fund _____________ Fund _____________
Acct No. _________ Acct No. _________ Acct No. _________
- --------------------------------------------------------------------------------
6. STATEMENT OF INTENTION
See "Purchase of Shares"
Although not obligated to do so, it is the
undersigned's intention to invest, over a 13-month
period from this date, in shares of the Fund alone or
in combination with shares of any other fund, on which
a sales charge was paid, described in the Prospectus
which qualify for a quantity discount as described in
the accompanying Prospectus, in an amount that will
equal or exceed:
[_] $50,000[_] $100,000[_] $250,000[_] $500,000[_] $1,000,000[_] $3,000,000
I agree to the Statement of Intention and Escrow
Agreement set forth in the Appendices to the
accompanying Prospectus and incorporated by reference
herein.
<PAGE>
- --------------------------------------------------------------------------------
7. AUTOMATIC INVESTMENT PLAN
(ATTACH VOIDED CHECK)
See "Purchase of Shares"
Check One: [_] Monthly [_] Quarterly
Beginning on or about the 5th [_] or the 15th [_]
(check one) beginning with ______ (month) and every
month/quarter thereafter, I/We authorize State Street
Bank (the custodian for the Fund) to debit the amount
requested below from my/our bank account for investment
in the Fund. I/We understand that my/our participation
in the Automatic Investment Plan (the "Plan") is
subject to the terms and conditions of such plan as
amended from time to time.
------------------------------------------------------
Bank Name Bank Account Number (if assigned)
------------------------------------------------------
Amount of each monthly investment (minimum $50)
Name of Fund
------------------------------------------------------
Amount of each monthly investment (minimum $50)
Name of Fund
------------------------------------------------------
Authorized Signature (as shown on bank records)
------------------------------------------------------
Authorized Signature (if joint bank account both sign)
- --------------------------------------------------------------------------------
8. TELEPHONE EXCHANGE [_] I/We authorize Goldman, Sachs & Co. to accept and act
upon telephone instructions from myself or any other
person for the exchange of shares of the Fund into
any fund described in the accompanying Prospectus.
I/We understand and agree that neither the Fund nor
Goldman, Sachs & Co. will be liable for any loss,
expense, or cost arising out of any telephone request
effected hereunder.
- --------------------------------------------------------------------------------
9. TELEPHONE REDEMPTION See "Redemption of Shares"
(ATTACH VOIDED CHECK)
[_] Goldman, Sachs & Co. is hereby authorized to honor
telephone, telegraphic, or other instructions,
without signature guarantee, from any person for
the redemption of shares for the above account,
without an obligation on behalf of Goldman, Sachs &
Co., to verify that such person is the shareholder
of record or authorized to give redemption
instructions, provided that the proceeds are
transmitted to the following bank account only or
are mailed to the account registration address.
Absent its own gross negligence, neither the Fund
nor Goldman, Sachs & Co. shall be liable for such
redemption or for payments made to any unauthorized
account.
------------------------------------------------------
Bank Name ABA Routing #
------------------------------------------------------
Street Address City State Zip
------------------------------------------------------
Account NameAccount Number
- --------------------------------------------------------------------------------
10. AUTOMATIC EXCHANGES The originating fund's balance must be at least $10,000
and the receiving fund's minimum investment must be met
prior to discontinuing this privilege if the minimum
investment requirement for the receiving fund has not
already been met .
I hereby authorize automatic exchanges of $______
(exact dollars--$50 minimum) into my identically
registered account:
Exchange ___________________________________ (Name of
from Fund)
to ___________________________________ (Name of
Account No. (if known) ______________________ Fund)
Please make exchanges on the 15th (or next business
day) beginning the month of .
- --------------------------------------------------------------------------------
11. CHECKWRITING PRIVILEGE See "Check Redemption Privilege"
[_] Check the box if you would like an application
for checkwriting sent to you.
The checkwriting privilege is available to holders
of ILA/Prime Obligations Portfolio Service Units or
ILA/Tax-Exempt Diversified Portfolio Service Units
ONLY.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. SOCIAL SECURITY . By the execution of this Account Information Form, the
NUMBER OR OTHER undersigned represents and warrants that it has full
TAXPAYER right, power and authority to make the investment
IDENTIFICATION applied for pursuant to this Form and is acting for
NUMBER itself or in some fiduciary capacity in making such
CERTIFICATION AND investment.
SIGNATURE THE UNDERSIGNED AFFIRMS THAT IT HAS RECEIVED A CURRENT
AUTHORIZATION PROSPECTUS FOR THE FUND AND HAS REVIEWED THE SAME.
The undersigned understands that a lesser degree of
flexibility concerning the timing of a redemption of its
investment in Goldman Sachs Adjustable Rate Mortgage
Fund, Goldman Sachs Global Income Fund, Goldman Sachs
Municipal Income Fund, Goldman Sachs Government Income
Fund, Goldman Sachs Capital Growth Fund, Goldman Sachs
Select Equity Fund, Goldman Sachs Small Cap Equity Fund,
Goldman Sachs International Equity Fund, Goldman Sachs
Growth and Income Fund, Goldman Sachs Asia Growth Fund
and Goldman Sachs Balanced Fund, as well as all other
non-money market funds, increases the likelihood that
the shareholder will be required to redeem shares under
unfavorable market conditions. If shares are redeemed at
a disadvantageous time, the value of the Fund's shares
redemption may be less than the price at which the
Fund's shares were purchased. Since none of the Funds
listed in this paragraph is a money market fund or
maintains a constant net asset value per share, the
undersigned may experience a loss of principal on its
investments in any such Fund during any particular
period.
. Fill in boxes below
Taxpayer Identification No.: ________________________
(For joint tenants, first listed individual should
provide his/her number and sign below.) Under penalties
of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer
Identification number or I am waitg a number to be
issued to me), and
(2) I am not subject to backup withholding because (a) I
am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service (IRS)
that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer
subject to backup withholding.
Certification Instruction: You must cross out item (2)
above if you have been notified by the IRS that you are
currently subject to federal backup withholding because
of underreporting interest or dividends on your federal
tax return. (Also see the "Guidelines for Certification
of Taxpayer Identification Number on Account Information
Form" contained in the Appendices to the accompanying
Prospectus).
NOTE: FAILURE TO COMPLETE THIS SECTION MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO
YOU.
By checking only the appropriate box and signing below,
I certify under penalties of perjury that:
[_] I do not have a taxpayer identification number, but
I have applied for or intend to apply for one. I
understand that the required 31% withholding may
apply before I provide such number and
certifications, which should be provided within 60
days.
or[_] Iam an exempt recipient.
or[_] I am neither a citizen nor a resident of the United
States for the purpose of the Internal
Revenue Code. I am a resident of _________________ .
All recipients, including exempt recipients, must report
their taxpayer identification numbers and provide the
certifications requested to prevent backup withholding.
Sign Here:
--------------------------------------------------------
Signature Name (print) and Title (if any)
Date:
--------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
See "Redemption of Shares"
13. SYSTEMATIC
WITHDRAWAL PLAN
Minimum account balance must be $10,000. Withdrawal
minimum is $50.
Check One: [_] Monthly [_] Quarterly
Please make payments via (check one) [_] check [_] ACH
(Bank must be ACH affiliated. Attach voided check).
Payments made via check are withdrawn from your account
on or about the 25th of each month/quarter. (I
understand that I may change the date of redemption,
via ACH, or the amount at any time in writing to the
Fund at the address stated above.)
Complete this section if withdrawal payments are to be
made via ACH (funds are automatically credited to the
designated bank account.)
BANK INFORMATION:
Please withdraw $ ______ from my account on the _____
of the month.
Bank Account Registration: _____________________________
Routing #: _____________ Bank Account #: ______________
Bank Name/Branch Name: _________________________________
Bank Street Address: ___________________________________
Bank Telephone Number: _________________________________
Complete this section ONLY if check is to be made
payable to person(s) other than the registered owner,
and you must have this application SIGNATURE
GUARANTEED.
--------------------------------------------------------
Name of check recipient Address City State Zip
SIGNATURE GUARANTEE(S)
This request must be signed by each shareholder with
his or her signature guaranteed by a commercial bank,
trust company or member firm of a national securities
exchange.
--------------------------------------------------------
Shareholder Signature
--------------------------------------------------------
Signature Guaranteed By
--------------------------------------------------------
Authorized Signature
- -------------------------------------------------------------------------------
14. FOR DEALER ONLY Investment dealer's signature is required for
Systematic Withdrawal Plan or Statement of Intention.
If a Systematic Withdrawal Plan is being opened, we
believe that the amount to be withdrawn is reasonable
in light of the investor's circumstances and we
recommend establishment of the account.
--------------------------------------------------------
Name of Dealer Firm Home Office Location
--------------------------------------------------------
City State Zip
--------------------------------------------------------
Branch Office Location Branch Number/Branch Phone
--------------------------------------------------------
Authorized Signature State Zip
--------------------------------------------------------
Reg. Rep. Number Reg. Rep.'s Name
