<PAGE>
As filed with the Securities and Exchange Commission on October 18, 1995
1933 ACT REGISTRATION NO. 2-54809
1940 ACT REGISTRATION NO. 811-2598
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 51 ( X )
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 35 ( X )
GOLDMAN SACHS MONEY MARKET TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
4900 Sears Tower
Chicago, Illinois 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
800-621-2550
(REGISTRANT'S TELEPHONE NUMBER)
with a copy to:
Michael J. Richman Ernest V. Klein
Goldman Sachs Asset Management Hale and Dorr
85 Broad Street 60 State Street
New York, New York 10004 Boston, Massachusetts 02109
(name and address of agent for service)
<PAGE>
It is proposed that this filing will become effective
(check appropriate box)
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
( ) on (date) pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a)(i) of
Rule 485 or earlier upon acceleration of the effective
date by the Commission
( ) on (date) pursuant to paragraph (a)(i) of Rule 485
( X ) 75 days after filing pursuant to paragraph (a)(ii) of
Rule 485 or earlier upon acceleration of the effective
date by the Commission
( ) on (date) pursuant to paragraph (a)(ii) of Rule 485
Registrant has registered an indefinite number of its units under the Securities
Act of 1933 pursuant to Rule 24f-2. On February 28, 1995, Registrant filed a
Rule 24f-2 Notice for its fiscal year ended December 31, 1994.
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FST SHARES
OF FINANCIAL SQUARE FUNDS
CROSS REFERENCE SHEET
Items Required by Form N-1A
Item Number in Part A Prospectus Caption
- --------------------- ------------------
Financial Square Prime Rated Money Market Fund
1. Cover Page Cover Page
2. Synopsis An Introduction to the
Fund;Shareholder and
Fund Expenses
3. Condensed Financial Not Applicable
Information
4. General Description An Introduction to the
of Registrant Fund; Investment
Objective and Policies of the
Fund; Description of Securities
and Investment Techniques;
Investment Restrictions;
Organization and Shares of the
Fund
5. Management of the Fund Fund Management; Organization
and Shares of the Fund
6. Capital Stock and Purchase of Units; Reports to
Other Securities Shareholders; Distributions and
Taxes; Organization and Shares
of the Fund
7. Purchase of Securities Purchase of Units; Exchanges;
Being Offered Net Asset Value
Other Securities
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
Statement of Additional
Item Number in Part B Information Caption
- --------------------- -----------------------
Financial Square Prime Rated Money Market Fund
10. Cover Page Cover Page
i
<PAGE>
11. Table of Contents Table of Contents
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies and
and Policies Practices of the Funds;
Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Management;
Principal Holders Organization and Capitalization
of Securities
16. Investment Advisory The Adviser, Distributor and
and Other Services Transfer Agent; Portfolio
Transactions; Custodian and
Subcustodian; Independent
Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value;
Pricing of Securities Shareholder Investment Account;
Being Offered Redemptions
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
Item Number in Part C
- ---------------------
Information required to be included in Part C is set forth under
the appropriate item, so numbered in Part C to this Registration
Statement.
ii
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FST ADMINISTRATION SHARES
OF FINANCIAL SQUARE FUNDS
CROSS REFERENCE SHEET
Items Required by Form N-1A
Item Number in Part A Prospectus Caption
- --------------------- ------------------
Financial Square Prime Rated Money Market Fund
1. Cover Page Cover Page
2. Synopsis An Introduction to the
Fund; Shareholder and
Fund Expenses
3. Condensed Financial Not Applicable
Information
4. General Description An Introduction to the
of Registrant Fund; Investment
Objective and Policies of the
Fund; Description of Securities
and Investment Techniques;
Investment Restrictions;
Organization and Shares of the
Fund
5. Management of the Fund Fund Management; Organization
and Shares of the Fund
6. Capital Stock and Purchase of Shares; Reports to
Other Securities Unitholders; Distributions and
Taxes; Organization and Units of
the Portfolios
7. Purchase of Securities Purchase of Units; Exchanges;
Net Asset Value
Other Securities
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
Statement of Additional
Item Number in Part B Information Caption
- --------------------- -----------------------
Financial Square Prime Rated Money Market Fund
10. Cover Page Cover Page
iii
<PAGE>
11. Table of Contents Table of Contents
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies and
and Policies Practices of the Funds;
Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Management;
Principal Holders Organization and Capitalization
of Securities
16. Investment Advisory The Adviser, Distributor and
Other Services Administrator and Transfer
Agent; Portfolio
Transactions; Custodian and
Subcustodian; Independent
Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value;
Pricing of Securities Shareholder Investment Account;
Being Offered Redemptions
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
Item Number in Part C
- ---------------------
Information required to be included in Part C is set forth under
the appropriate item, so numbered in Part C to this Registration
Statement.
iv
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FST SERVICE SHARES
OF FINANCIAL SQUARE FUNDS
CROSS REFERENCE SHEET
Items Required by Form N-1A
Item Number in Part A Prospectus Caption
- --------------------- ------------------
Financial Square Prime Rated Money Market Fund
1. Cover Page Cover Page
2. Synopsis An Introduction to the
Fund; Shareholder and
Fund Expenses
3. Condensed Financial Not Applicable
Information
4. General Description An Introduction to the
of Registrant Fund; Investment
Objective and Policies of the
Fund; Description of Securities
and Investment Techniques;
Investment Restrictions;
Organization and Shares of the
Fund
5. Management of the Fund Fund Management; Organization
and Shares of the Fund
6. Capital Stock and Purchase of Shares; Reports to
Other Securities Shareholders; Distributions and
Taxes; Organization and Shares
of the Fund
7. Purchase of Securities Purchase of Shares; Exchanges;
Being Offered Net Asset Value
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
Statement of Additional
Item Number in Part B Information Caption
- --------------------- -----------------------
Financial Square Prime Rated Money Market Fund
10. Cover Page Cover Page
v
<PAGE>
11. Table of Contents Table of Contents
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies and
and Policies Practices of the Funds;
Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Management;
Principal Holders Organization and Capitalization
of Securities
16. Investment Advisory and The Adviser, Distributor and
Other Services Administrator and Transfer
Agent; Portfolio
Transactions; Custodian and
Subcustodian; Independent
Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value;
Pricing of Securities Shareholder Investment Account;
Being Offered Redemptions
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
Item Number in Part C
- ---------------------
Information required to be included in Part C is set forth under
the appropriate item, so numbered in Part C to this Registration
Statement.
vi
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FST PREFERRED SHARES
OF FINANCIAL SQUARE FUNDS
CROSS REFERENCE SHEET
Items Required by Form N-1A
Item Number in Part A Prospectus Caption
- --------------------- ------------------
Financial Square Prime Rated Money Market Fund
1. Cover Page Cover Page
2. Synopsis An Introduction to the
Fund; Shareholder and
Fund Expenses
3. Condensed Financial Not Applicable
Information
4. General Description An Introduction to the
of Registrant Fund; Investment
Objective and Policies of the
Fund; Description of Securities
and Investment Techniques;
Investment Restrictions;
Organization and Shares of the
Fund
5. Management of the Fund Fund Management; Organization
and Shares of the Fund
6. Capital Stock and Purchase of Shares; Reports to
Other Securities Shareholders; Distributions and
Taxes; Organization and Shares
of the Fund
7. Purchase of Securities Purchase of Shares; Exchanges;
Being Offered Net Asset Value
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
Statement of Additional
Item Number in Part B Information Caption
- --------------------- -----------------------
Financial Square Prime Rated Money Market Fund
10. Cover Page Cover Page
vii
<PAGE>
11. Table of Contents Table of Contents
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies and
and Policies Practices of the Funds;
Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Management;
Principal Holders Organization and Capitalization
of Securities
16. Investment Advisory and The Adviser, Distributor and
Other Services Administrator and Transfer
Agent; Portfolio
Transactions; Custodian and
Subcustodian; Independent
Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value;
Pricing of Securities Shareholder Investment Account;
Being Offered Redemptions
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
Item Number in Part C
- ---------------------
Information required to be included in Part C is set forth under
the appropriate item, so numbered in Part C to this Registration
Statement.
viii
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE PRIME RATED MONEY MARKET FUND
FST SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Money Market Trust (the "Trust") is a no-load, open-end, man-
agement investment company (a "mutual fund") which includes the Financial
Square Prime Rated Money Market Fund (the "Fund"). This Prospectus relates
only to the offering of FST units of beneficial interest ("FST Shares") of the
Fund. Goldman Sachs Asset Management, a separate operating division of
Goldman, Sachs & Co., serves as the Fund's investment adviser and administra-
tor. Goldman, Sachs & Co. serves as the Fund's distributor and transfer agent.
The Fund seeks to maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity by investing exclu-
sively in high quality money market instruments. The Fund pursues its objec-
tive by investing in securities of the U.S. Government, its agencies, authori-
ties and instrumentalities, U.S. dollar denominated obligations of U.S. and
foreign banks, U.S. dollar denominated commercial paper and other short-term
obligations of U.S. and foreign companies, securities issued by foreign gov-
ernments, states, municipalities and other entities, and repurchase agree-
ments.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOV-
ERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION.... Goldman Sachs Mutual Funds--Toll Free: 800-621-2550
This Prospectus provides you with information about the Fund that you should
know before investing in FST Shares. It should be read and retained for future
reference. If you would like more detailed information, the Statement of Addi-
tional Information dated January , 1996, as amended or supplemented from
time to time, is available upon request without charge by calling the tele-
phone number listed above or by writing Goldman, Sachs & Co., 4900 Sears Tow-
er, Chicago, Illinois 60606. The Statement of Additional Information, which is
incorporated by reference into this Prospectus, has been filed with the Secu-
rities and Exchange Commission. The Fund is not available in certain states.
Please call the phone number listed above to determine availability in your
state.
- -------------------------------------------------------------------------------
FST SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT IN-
SURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUND INVOLVES 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 January , 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder and Fund Expenses............................................. 3
An Introduction to the Fund............................................... 5
Investment Objective and Policies of Financial Square Prime Rated Money
Market Fund.............................................................. 6
Description of Securities and Investment Techniques....................... 7
Investment Limitations.................................................... 9
Management................................................................ 10
Taxes..................................................................... 11
Net Asset Value........................................................... 12
Yield Information......................................................... 12
Organization and Shares of the Trust...................................... 12
Purchase of Shares........................................................ 14
Reports to Shareholders................................................... 15
Distributions............................................................. 15
Exchanges................................................................. 15
Redemption of Shares...................................................... 16
Appendix A................................................................ A-1
Account Information Form
</TABLE>
2
<PAGE>
SHAREHOLDER AND FUND EXPENSES (NOTE 1)
FST SHARES (NOTE 2)
<TABLE>
<CAPTION>
FINANCIAL SQUARE
PRIME RATED
MONEY MARKET
FUND
----------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases................ None
Sales Charge Imposed on Reinvested Distributions......... None
Deferred Sales Load Imposed on Redemptions............... None
Exchange Fee............................................. None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets after ad-
justments)
Management Fees (after fee adjustments) (Note 3)......... 0.04%
Other Expenses (after expense limitation) (Note 3)
Account Administration Fees........................... 0.13%
Other Expenses........................................ 0.01%
----
TOTAL OPERATING EXPENSES (Note 3)......................... 0.18%
====
</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 YEAR 3 YEARS
------ -------
<S> <C> <C>
Financial Square Prime Rated Money Market Fund................ $2 $ 6
</TABLE>
- --------
Notes:
(1) The purpose of this table is to assist investors in understanding the vari-
ous costs and expenses that an investment in the Fund will bear directly or
indirectly. For the fiscal year ended December 31, 1995 no FST Shares of
the Fund had been issued. Accordingly, the costs and expenses included in
the table and hypothetical example are based on estimated fees and expenses
for the current fiscal year ended December 31, 1996. The table and hypo-
thetical example should not be considered a representation of past or fu-
ture expenses; actual expenses may vary depending upon a variety of factors
including the actual performance of the Fund, which may be greater or less
than 5%. See "Management."
(2) The information with respect to the Fund set forth in the foregoing table
and hypothetical example relates only to FST Shares of the Fund. The Fund
also offers FST Administration Shares, FST Preferred Shares and FST Service
Shares which are subject to different fees and expenses (which affects per-
formance) and are entitled to different services. Information regarding FST
Administration Shares, FST Preferred Shares and FST Service Shares may be
obtained from your sales representative or Goldman Sachs by calling the
number on the cover page of this Prospectus.
(3) Goldman Sachs Asset Management (the "Adviser" or "GSAM") has agreed that a
portion of its fees will not be imposed, pursuant to applicable contracts.
In addition, the Adviser has agreed to reduce or otherwise limit certain
expenses of the Fund (excluding fees payable to Service Organizations, as
defined
3
<PAGE>
herein, management and account administration fees, taxes, interest, broker-
age and litigation, indemnification and other extraordinary expenses), on an
annualized basis, to .01% of the Fund's average daily net assets. Had the
reduction of fees otherwise payable and expense limitations not been re-
flected in the above table, the estimated management fees payable by the
Fund would be 0.075% of average daily net assets, and the estimated amount
of other expenses payable by the Fund, would be 0.035% of average daily net
assets. Had the reduction of fees otherwise payable and expense limitations
not been reflected in the above table, the estimated annual operating ex-
penses of the Fund would be 0.24%, of average daily net assets.
4
<PAGE>
AN INTRODUCTION TO THE FUND
Financial Square Prime Rated Money Market Fund (the "Fund") is a portfolio of
Goldman Sachs Money Market Trust (the "Trust"), a no-load, open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Goldman Sachs Asset Management, a sepa-
rate operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
the Fund's investment adviser and administrator (the "Adviser" or "GSAM").
Goldman Sachs, which serves as the Fund's distributor and transfer agent, is
one of the largest international investment banking and brokerage firms in the
United States.
The Fund is designed for institutional investors seeking a high rate of re-
turn, a stable net asset value and convenient liquidation privileges. The Fund
is particularly suitable for banks, corporations and other financial institu-
tions that seek investment of short-term funds for their own accounts or for
the accounts of their customers. The Fund seeks to maintain a stable net asset
value of $1.00 per share. To facilitate this goal, the Fund's portfolio securi-
ties are valued by the amortized cost method as permitted by a rule of the Se-
curities 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 the Fund maintain a dollar-
weighted average portfolio maturity of not more than ninety (90) days. Invest-
ments by the Fund must present minimal credit risk.
The Fund 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 priority and quality with such
securities) in the highest short-term rating category by at least two nation-
ally recognized statistical rating organizations ("NRSRO's"), 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. Purchases of securities which
are unrated or rated by only one NRSRO must be approved or ratified by the
Trustees.
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.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES OF FINANCIAL SQUARE PRIME RATED MONEY MARKET
FUND
The investment objective of the Fund is to maximize current income to the ex-
tent consistent with the preservation of capital and the maintenance of liquid-
ity. The Fund pursues its objective by investing in the following instruments:
(A) Securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies, authorities and 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;
(C) U.S. dollar denominated obligations issued or guaranteed (including
fixed time deposits) by foreign banks which have more than $1 billion
in total assets at the time of purchase, U.S. branches of such foreign
banks (Yankee obligations), foreign branches of such foreign banks, and
foreign branches of U.S. banks having more than $1 billion in total as-
sets at the time of purchase. Such bank obligations may be general ob-
ligations of the parent bank or may be limited to the issuing branch by
the terms of the specific obligation or by government regulation;
(D) commercial paper (including variable amount master demand notes and as-
set-backed commercial paper) issued or guar- anteed by U.S. corpora-
tions, U.S. commercial banks, foreign corporations, foreign commercial
banks or other entities, payable in U.S. dollars;
(E) 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;
(F) other short-term obligations issued or guaranteed by U.S. corporations,
foreign corporations or other entities, payable in U.S. dollars (in-
cluding short-term funding agreements);
(G) 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);
(H) U.S. dollar denominated obligations of the International Bank for Re-
construction and Development;
(I) U.S. dollar denominated obligations (limited to commercial paper and
other notes) issued or guaranteed by the governments of or entities lo-
cated or organized in the United Kingdom, France, Germany, Belgium, the
Netherlands, Italy, Switzerland, Denmark, Norway, Austria, Finland,
Spain, Ireland, Sweden, Australia, New Zealand, Japan, Cayman Islands
and Canada. Not more than 25% of Money Market Fund's total assets will
be invested in the securities of any one foreign government;
(J) asset-backed securities (including interests in pools of assets such as
motor vehicle installment purchase obligations and credit card receiv-
ables); and
(K) repurchase agreements.
The Fund may acquire any of the above securities on a forward commitment or
when-issued basis.
The Fund will invest more than 25% of the value of its total assets in bank
obligations (whether foreign or domestic) except that if adverse economic con-
ditions prevail in the banking industry (such as substantial losses on loans,
larger increases in non-performing assets, increased charge-offs and losses of
deposits) the Fund may, for defensive purposes, temporarily invest less than
25% of the value of its total assets in bank obligations. As a result, the Fund
may be especially affected by favorable and adverse developments in the banking
industry.
6
<PAGE>
RISKS OF FOREIGN SECURITIES. Investments in foreign securities and bank obli-
gations may present a greater degree of risk than investments in domestic secu-
rities because of less publicly-available financial and other information, less
securities regulation, potential imposition of foreign withholding and other
taxes, war, expropriation or other adverse governmental actions. Foreign banks
and their foreign branches are not regulated by U.S. banking authorities, and
generally are not bound by the accounting, auditing and financial reporting
standards applicable to U.S. banks.
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.
The Fund may also invest in separately traded principal and interest compo-
nents of securities guaranteed or issued by the U.S. Treasury if such compo-
nents are traded independently under the Separate Trading of Registered Inter-
est and Principal of Securities program ("STRIPS").
CUSTODIAL RECEIPTS
The Fund may also acquire securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities
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 obligations of
the U.S. Government.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Fund may invest in asset-backed and receivables-backed securities. These
securities represent participations in, or are secured by and payable from,
pools of assets such as motor vehicle installment sale contracts, installment
loan contracts, leases of various types of real and personal property, receiv-
ables from revolving credit (credit card) agreements and other categories of
receivables. Such asset pools are securitized through the use of privately-
formed trusts or special purpose corporations. Payments or distributions of
principal and interest may be guaranteed up to certain amounts and for a cer-
tain time period by a letter of credit or a pool insurance policy issued by a
financial institution or other credit enhancements may be present.
7
<PAGE>
The Fund may invest in new types of mortgage-related securities and in other
asset-backed securities that may be developed in the future to the extent con-
sistent with its investment objective and policies.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with selected broker-dealers,
banks or other financial institutions. A repurchase agreement is an agreement
under which the Fund 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 Fund,
and will be unrelated to the interest rate on the purchased security. The
Fund's custodian or sub-custodian will maintain custody of the purchased secu-
rities for the duration of the agreement. The value of the purchased securi-
ties, including accrued interest, will at all times exceed the value of the re-
purchase agreement. In the event of bankruptcy of the seller or failure of the
seller to repurchase the securities as agreed, the Fund 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 carefully consider the
creditworthiness of the seller pursuant to procedures reviewed and approved by
the Trustees. In addition, the Fund, together with other registered investment
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 agree-
ments.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
The Fund may purchase when-issued securities and make contracts to purchase
or sell securities for a fixed price at a future date beyond customary settle-
ment time. The Fund is required to hold and maintain in a segregated account
with the Fund's custodian or sub-custodian until the settlement date, cash or
liquid, high quality debt obligations in an amount sufficient to meet the pur-
chase price. Alternatively, the Fund may enter into offsetting contracts for
the forward sale of other securities that it owns. Securities 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 the Fund would generally purchase securities on a when-issued or for-
ward commitment basis with the intention of acquiring securities for its port-
folio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The Fund may invest in securities issued by other money market investment
companies. Such investments will be determined by the Adviser, under guidelines
established by the Trustees, to present minimal credit risks. The amount of the
Fund's investments in securities of other investment companies will be subject
to the limitations on such investments prescribed by the Investment Company Act
and certain state securities regulations. These limits include a prohibition on
the Fund acquiring more than 3% of the voting shares of any other investment
company and a prohibition on investing more than 5% of the Fund's assets in se-
curities of any one investment company or more than 10% of its assets in secu-
rities of all investment companies. The Fund will indirectly bear its propor-
tionate share of any management fees and other expenses paid by such other in-
vestment companies. Goldman Sachs will not impose a portion of the management
fees payable by the Fund with respect to assets invested in another money mar-
ket investment company (the "Acquired Fund") as follows. The amount of the man-
agement fees otherwise payable by the Fund and not imposed by Goldman Sachs
will be equal to the amount of management fees indirectly paid by the Fund as a
shareholder of the
8
<PAGE>
Acquired Fund. Such other investment companies will have investment objec-
tives, policies and restrictions substantially similar to those of the Fund
and will be subject to substantially the same risks.
INVESTMENT LIMITATIONS
Pursuant to SEC Rule 2a-7 under the Investment Company Act, the Fund 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 securities). The Fund 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 Fund may
not make more than one such investment at any time. The Fund may not invest in
securities which are Second Tier Securities at the time of purchase. Second
Tier Securities are securities rated in the top two short-term rating catego-
ries by at least two NRSROs, or if only one NRSRO has assigned a rating, by
that NRSRO, but which are not First Tier Securities. Immediately after the ac-
quisition of any put by the Fund, not more than 5% of the Fund's total assets
may be invested in securities issued by or subject to puts from the same issu-
er. However, this limitation will not apply to the issuer of unconditional
puts if the Fund does not have more than 10% of its total assets invested in
securities issued by or subject to unconditional puts from such issuer. The
foregoing operating policies are more restrictive than the fundamental policy
set forth below, which would give the Fund the ability to invest, with respect
to 25% of its assets, more than 5% of its assets in any one issuer. The Fund
operates in accordance with these operating policies which comply with SEC
Rule 2a-7.
INVESTMENT RESTRICTIONS
The Trust, on behalf of the Fund, has adopted certain fundamental investment
restrictions which are enumerated in detail in the Statement of Additional In-
formation and which may not be changed with respect to the Fund unless autho-
rized by a majority of its outstanding shares. Among other restrictions, the
Fund 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 collateralized by
such securities) or acquire more than 10% of any class of the outstanding vot-
ing securities of any one issuer. In addition, the Fund 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 being treated as sepa-
rate industries for the purpose of the restriction), provided that there is no
25% limitation in respect of, and the Fund reserves freedom of action to con-
centrate its investments in, U.S. Government Securities, and obligations is-
sued or guaranteed by U.S. banks and foreign banks. The Fund will concentrate
in obligations of domestic and foreign banks, except during adverse conditions
in the banking industry. Tax diversification requirements for qualification as
a regulated investment company apply to the Fund and are in certain instances
more strict than these investment restrictions. In applying the above restric-
tions, the Fund will not treat a guarantee as a security issued by the guaran-
tor if the value of all securities issued or guaranteed by the guarantor and
owned by the Fund does not exceed 10% of its total assets.
The Fund may borrow money from banks only for temporary or emergency pur-
poses in an aggregate amount not exceeding one-third of the value of its total
assets. The Fund may not purchase securities while such borrowings exceed 5%
of the value of its assets. Except for such enumerated restrictions and as
otherwise indicated in this Prospectus, the investment objective and policies
of the Fund are not fundamental policies and accordingly may be changed by the
Trust's Board of Trustees without obtaining the approval of the Fund's share-
holders.
RESTRICTED AND OTHER ILLIQUID SECURITIES
The Fund may purchase securities that are not registered ("restricted secu-
rities") under the Secu-
9
<PAGE>
rities Act of 1933 ("1933 Act"), but can be offered and sold to "qualified in-
stitutional buyers" under Rule 144A under the 1933 Act. However, the Fund will
not invest more than 10% of its net assets in illiquid investments, which in-
cludes fixed time deposits maturing in more than seven days and restricted se-
curities. Restricted securities (including commercial 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 trading markets for the specific
restricted security, will not be deemed to be illiquid 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, 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 securi-
ties eligible for resale under Rule 144A will continue to be liquid, the Board
will carefully monitor the Fund's investments 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 the Fund to the extent that qualified institu-
tional buyers become for a time uninterested in purchasing these restricted
securities.
In addition, the Fund 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 the Fund (taken at market
value) would be invested in such investments. Certain repurchase agreements
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
regarded as liquid instruments.
MANAGEMENT
THE ADVISER AND ADMINISTRATOR
GSAM, One New York Plaza, New York, New York, a separate operating division
of Goldman Sachs, acts as investment adviser and administrator to the Fund.
Goldman Sachs registered as an investment adviser in 1981. As of September 30,
1995, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $53.7 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 broker-
age 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
financing and investment services both in the United States and abroad.
Pursuant to an SEC order, the Fund 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 the Investment Advisory Agreement, GSAM continually manages the Fund,
including the purchase, retention and disposition of its securities and other
assets. The management of the Fund's portfolio is subject to the supervision
of the Board of Trustees and the Fund's investment policies. For these servic-
es, GSAM is entitled to a monthly fee at an annual rate equal to .075% of the
Fund's average daily net assets.
GSAM has agreed that it will not impose a portion of its advisory fee, pur-
suant to applicable contracts.
GSAM has agreed to reduce or otherwise limit certain expenses of the Fund
(excluding fees payable to Service Organizations, as defined herein, manage-
ment and account administration fees, and taxes, interest, brokerage and liti-
gation, indemnification and other extraordinary expenses) on an annualized ba-
sis to .01% of the Fund's average daily net assets. GSAM has no current inten-
tion to but may discontinue or modify any of such reductions or limitations at
its discretion.
10
<PAGE>
In addition, under the Trust's Administration Agreement with GSAM, GSAM ad-
ministers the Fund's business affairs subject to the supervision of the Board
of Trustees and, in connection therewith, furnishes the Fund with office facil-
ities, bears all fees and costs of the services furnished by the transfer agent
to the Fund, and is responsible for ordinary clerical, recordkeeping and book-
keeping functions required to be performed by the Fund (excluding those per-
formed by the Fund's custodian), preparation and filing of documents required
to comply with federal and state securities laws, supervising the activities of
the Fund's custodian and transfer agent, providing assistance in connection
with meetings of the Board of Trustees and shareholders and other administra-
tive services necessary to conduct the Fund's business.
For those administrative services and facilities the Fund pays an account ad-
ministration fee to GSAM. The account administration fee is charged and allo-
cated to each shareholder account daily in the amount equal on an annual basis
to .13% of the Fund's average daily net assets.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of shares of the Fund pursuant to a Distribution Agreement with the
Trust. The Distributor will assist in the sale of shares of the Fund upon the
terms described herein. Goldman Sachs also serves as the Transfer Agent of the
Fund.
TAXES
The Fund is treated as a separate entity for federal income tax purposes 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, the Fund must satisfy certain requirements relating
to the sources of its income, diversification of its assets and distribution of
its income to shareholders. As a regulated investment compa-ny, the Fund 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 shareholders in accor-
dance with certain timing requirements of the Code.
Dividends paid by the Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss and original issue dis-
count or market discount income will be taxable to shareholders as ordinary in-
come. Dividends paid by the Fund from the excess of net long-term capital gain
over net short-term capital loss will be taxable as long-term capital gain re-
gardless of how long the shareholders have held their shares. These tax conse-
quences will apply to distributions of the Fund regardless of whether distribu-
tions are received in cash or reinvested in shares. Certain distributions paid
by the Fund in January of a given year will be taxable to shareholders as if
received on December 31 of the year in which they are declared. Shareholders
will be informed annually about the amount and character of distributions re-
ceived from the Fund for federal income tax purposes, including any distribu-
tions that may constitute a return of capital.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on the Fund's distributions if they
fail to furnish their correct taxpayer identification number and certain certi-
fications or if they are otherwise subject to backup withholding. Individuals,
corporations and other shareholders that are not U.S. persons under the Code
are subject to different tax rules and may be subject to nonresident alien
withholding at the rate of 30% (or a lower rate provided by an applicable tax
treaty) on amounts treated as ordinary dividends from the Fund.
If the Fund invests in foreign securities, it may be subject to foreign with-
holding or other foreign taxes on income earned on such securities and is ex-
pected to be unable to pass such taxes through to shareholders, who therefore
are not expected to
11
<PAGE>
include such taxes in income or be entitled to claim foreign tax credits or de-
ductions with respect to such taxes.
In addition to federal taxes, a shareholder may be subject to state, local or
foreign taxes on payments received from the Fund. A state income (and possibly
local income and/or intangible property) tax exemption is generally available
to the extent the Fund's distributions are derived from interest on (or, in the
case of intangibles taxes, the value 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. Shareholders should consult their
own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. New York time) on
each Business Day. Net asset value per share for each class of shares of the
Fund is calculated by determining the amount of net assets attributable to each
class of shares and dividing by the number of shares for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities market close early, the Fund re-
serves the right to cease accepting purchase and redemption orders for same
Business Day credit at the time PSA recommends that the securities market
close. On days the Fund closes early, purchases and redemption orders received
after the PSA recommended closing time will be credited for the next Business
Day. In addition, the Fund reserves the right to advance the time by which pur-
chase and redemption orders must be received for same Business Day credit as
permitted by the SEC.
The Fund's portfolio securities are valued at their amortized cost, which
does not take into ac count unrealized securities gains or losses. This method
involves initially valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any premium paid or discount received.
YIELD INFORMATION
From time to time, the Fund may advertise its yield and effective yield. The
yield of the Fund refers to the income generated by an investment in the Fund
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 Fund is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed rein-
vestment.
Investors should note that the investment results of the Fund are based on
historical performance and will fluctuate over time. Any presentation of the
Fund's yield or effective yield for any prior period should not be considered a
representation of what an investment may earn or what the Fund's yield or ef-
fective yield may be in any future period.
Yield and effective yield will be calculated separately for FST Shares, FST
Preferred Shares, FST Administration Shares and FST Service Shares. Because
each such class of shares is subject to different expenses, the net yield of
such classes of the Fund for the same period may differ. See "Organization and
Shares of the Trust" below.
ORGANIZATION AND SHARES OF THE TRUST
The Trust was formed as a business trust under the laws of The Commonwealth
of Massachusetts
12
<PAGE>
on December 6, 1978. The Trustees of the Trust are responsible for the overall
management and supervision of its affairs. The Declaration of Trust authorizes
the Trustees to classify or reclassify any series or portfolio of shares into
one or more classes. The Trustees have authorized the issuance of four classes
of shares of the Fund, which are: FST Shares, FST Preferred Shares, FST Admin-
istration Shares and FST Service Shares. (Institutions that provide services to
holders of FST Preferred Shares, FST Administration or Service Shares are re-
ferred to in this Prospectus as "Service Organizations").
When issued, shares are fully paid and nonassessable by the Trust. In the
event of liquidation, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to such shareholders. Shares en-
title their holders to one vote per share, are freely transferable and have no
preemptive, subscription or conversion rights.
Shares of the Fund will be voted separately by Fund with respect to matters
pertaining to the Fund except for the election of Trustees and ratification of
independent accountants. For example, shareholders of the Fund are required to
approve the adoption of any investment advisory agreement relating to the Fund
and any changes in fundamental investment restrictions or policies of the Fund.
Approval by the shareholders of the Fund is effective only as to the Fund.
The Trust does not intend to hold annual shareholder 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 pur-
poses as are set forth above. The Trust will facilitate shareholder communica-
tion as required and in the manner prescribed by Section 16(c) of the Invest-
ment Company Act.
13
<PAGE>
PURCHASE OF SHARES
FST Shares of the Fund may be purchased on any Business Day at the net asset
value next determined after receipt of a purchase order in the manner set
forth below, and provided that The Northern Trust Company ("Northern"), Chica-
go, Illinois, the sub-custodian for State Street Bank and Trust Company
("State Street"), receives the purchase price in Federal Funds on the same
Business Day. Purchase orders may be made by telephoning Goldman Sachs at 800-
621-2550 or by a written request addressed to Goldman Sachs, Attention: Share-
holder Services, Goldman Sachs Money Market Trust, 4900 Sears Tower, Chicago,
Illinois 60606. It is strongly recommended that payment be effected by wiring
Federal Funds to Northern.
Purchases of FST Shares may also be made by delivering a Federal Reserve
draft or check payable to the Fund and drawn on a U.S. bank to Goldman Sachs,
Attention: Shareholder Services, Goldman Sachs Money Market Trust, 4900 Sears
Tower, Chicago, Illinois 60606. 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. FST Shares purchased by check may not be redeemed until the check has
cleared, as described under "Redemption of Shares."
- -------------------------------------------------------------------------------
FST Shares of the Fund are deemed to have been purchased when an order be-
comes effective and are entitled to dividends on FST Shares purchased as fol-
lows:
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED BY GOLDMAN SACHS DIVIDENDS BEGIN
------------------------------------- ---------------
<S> <C>
By:3:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------
After:3:00 p.m.--N.Y. 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 lo-
cal holidays.
FST Shares of the Fund are purchased at the net asset value per Share with-
out the imposition of a sales charge. However, banks, trust companies or other
institutions through which investors acquire FST Shares may impose charges in
connection with transactions in such Shares.
Goldman Sachs, as the Fund's transfer agent, will maintain a complete record
of transactions and FST Shares held in each shareholder'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 shares of the Fund. 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 the Fund (after adjustments) and are attributable to shares held by
such customers. Such compensation will not represent an additional expense to
the Fund or its shareholders, since it will be paid from assets of Goldman
Sachs or its affiliates.
INITIAL PURCHASES
The minimum requirement for investing in the Fund is $50 million ($10 mil-
lion if an investor satisfies the minimum initial investment in certain other
series of the Trust). The Trust and Goldman Sachs each reserves the right to
waive the minimum investment requirement. Before or immediately after placing
an initial purchase order, investors should complete and send to Goldman Sachs
the Account Information Form included at the end of this Prospectus.
14
<PAGE>
SUBSEQUENT INVESTMENTS
There is no minimum amount required for subsequent investments. Orders for
the purchase of additional FST Shares should be accompanied by information
identifying the account and the Fund in which FST Shares are to be purchased.
REPORTS TO SHAREHOLDERS
FST Shareholders of the Fund will receive an annual report containing audited
financial statements and a semiannual report. Each FST Shareholder will also be
furnished with an individual monthly statement. Upon request, a printed confir-
mation for each transaction will be provided by Goldman Sachs. Any dividends
and distributions paid by the Fund are also reflected in regular statements is-
sued by Goldman Sachs. A year-to-date statement for any account will be pro-
vided upon request made to Goldman Sachs. FST Shareholders with inquiries re-
garding the Fund may call Goldman Sachs at 800-621-2550 (8:00 a.m. to 6:30 p.m.
New York time) or write Goldman Sachs at the address shown under "The Distribu-
tor and Transfer Agent."
DISTRIBUTIONS
All or substantially all of the Fund's net investment income will be declared
daily (as of 4:00 p.m. New York time), as a dividend and distributed to FST
Shareholders monthly. Distributions will be made in additional FST Shares of
the Fund or, at the election of FST Shareholders, in cash. The election to re-
invest dividends and distributions or receive them in cash may be changed at
any time upon written notice to Goldman Sachs. If no election is made, all div-
idends and capital gain distributions will be reinvested. Dividends will be re-
invested 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 accordance with the requirements of the
Code and may be reflected in the Fund's daily distributions. The Fund may dis-
tribute 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 the Fund are reflected in the net
asset value of the Fund, they are not expected to be of an amount which would
affect the Fund's net asset value of $1.00 per share.
The Fund's net investment income consists of the excess of (i) accrued
interest or discount (including both original issue and market discount on
taxable securities) on portfolio securities, and (ii) any income of the Fund
from sources other than capital gains over (iii) the amortization of market
premium on all portfolio securities and (iv) the estimated expenses of the
Fund, including a proportionate share of the general expenses of the Trust.
EXCHANGES
FST Shares of the Fund may be exchanged for the relevant class of any other
Fund or Portfolio of Goldman Sachs Money Market Trust at the net asset value
next determined either by writing to Goldman Sachs, Attention: Shareholder
Services, Goldman Sachs Money Market Trust, 4900 Sears Tower, Chicago, Illinois
60606 or, if previously elected in the Account Information Form included at the
end of this Prospectus, by calling Goldman Sachs at 800-621-2550. All telephone
exchanges must be registered in the same name(s) and with the same address as
are registered in the Fund or Portfolio from which the exchange is being made.
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
15
<PAGE>
Shares" to confirm that such instructions are genuine. Exchanges are available
only in states where the exchange may legally be made. The exchange privilege
may be modified or withdrawn at any time on 60 days' written notice.
REDEMPTION OF SHARES
HOW TO REDEEM
FST Shareholders may redeem FST Shares of the Fund without charge upon re-
quest on any Business Day at the net asset value next determined after receipt
of the redemption request. Redemption requests may be made by telephoning
Goldman Sachs at 800-621-2550 or by a written request addressed to Goldman
Sachs, Attention: Shareholder Services, Goldman Sachs Money Market Trust, 4900
Sears Tower, Chicago, Illinois 60606. The letter of instruction must specify
the number of FST Shares of the Fund to be redeemed, the account number, pay-
ment instructions and the exact registration on the account. Signatures must
be guaranteed in accordance with the procedures set forth below, if the pro-
ceeds are to be paid to other than pre-established instructions on file with
the Fund. A FST Shareholder may request redemptions by telephone only if the
optional telephone redemption privilege has been elected on the Account Infor-
mation Form included at the end of this Prospectus. It may be difficult to im-
plement 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 employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than
that designated on the Account Information Form must be in writing and signed
by an authorized person designated on the Account Information Form. Any such
written request is also confirmed by telephone with both the requesting party
and the designated bank account to verify instructions. Other procedures may
be implemented from time to time. If reasonable procedures are not implement-
ed, the Trust may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, neither the Trust nor Goldman Sachs will be
responsible for the authenticity of redemption instructions received by tele-
phone.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs. The payment of
redemption proceeds for FST Shares recently purchased by check will be delayed
for up to 15 days until the check has cleared.
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
bank account designated on the FST Shareholder's Account Information Form.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST RECEIVED REDEMPTION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
- --------------------------- ------------------- ---------
<S> <C> <C>
By:3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day request is
received
- ---------------------------------------------------------------------------------------
After:3:00 p.m.--N.Y.
time Wired Next Business Day Earned on Day request is
received
- ---------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
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 FST Shareholder's bank in the transfer process. If a problem with
such performance arises, the FST Shareholder should deal directly with such in-
termediaries or bank.
An FST Shareholder may change the bank designated to receive redemption pro-
ceeds by providing a written notice to Goldman Sachs which has been signed by
the FST Shareholder or its authorized representative. This signature must be
guaranteed by a bank, a securities broker or dealer, a credit union having au-
thority to issue signature guarantees, a savings and loan association, a build-
ing and loan association, a cooperative bank, a federal savings bank or associ-
ation, a national securities exchange, a registered securities association or a
clearing agency, provided that such institution satisfies the standards estab-
lished by Goldman Sachs. Goldman Sachs may also require additional documenta-
tion in connection with a request to change the designated bank.
OTHER REDEMPTION INFORMATION
A minimum account balance of $50 million in the Fund ($10 million if an in-
vestor satisfies the minimum initial investment in certain other series of the
Trust) is required to remain a FST Shareholder. The Fund may redeem all of the
FST Shares of any FST Shareholder whose account in the Fund has a net asset
value which is less than the minimum described above. The Trust will give sixty
(60) days' prior written notice to such shareholders whose FST Shares are being
redeemed to allow them to purchase sufficient additional FST Shares of the Fund
to avoid such redemption.
----------------
17
<PAGE>
APPENDIX A
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Fund in which you invest with your
correct Social Security or other Taxpayer 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 in Section C and to sign your name
on the line provided in that Section of the Account Information Form could re-
sult in withholding of 31% by the Fund for the federal backup withholding tax
on distributions, redemptions, exchanges and other payments relating to your
account. However, distributions will not be subject to back-up withholding if
the Fund 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 Fund successfully maintains a constant $1.00 net as-
set value per Share. The Fund reserves 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 write "Applied for" in the space for a TIN in Section C. In
this event, you should provide your TIN and required certifications within 60
days. If you do not provide your TIN and required certifications within 60
days, 31% withholding may apply. Backup withholding could apply to payments re-
lating to your account prior to the Fund's receipt of your TIN and required
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 Section C.
If you are an exempt recipient, you should furnish your TIN in Section C, un-
derline the word "exempt" and sign on the line provided in that Section. Exempt
recipients include: corporations, tax-exempt pension plans and IRA's, govern-
mental agencies, financial institutions, registered securities and commodities
dealers and others.
If you are a nonresident alien or foreign entity, check the "No" box in Sec-
tion A and provide a completed Form W-8 to the Fund in order to avoid backup
withholding on certain payments. Other payments to you may be subject to non-
resident 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.
A-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
GOLDMAN SACHS MUTUAL FUNDS--ACCOUNT INFORMATION FORM
This Account Information Form Should be Forwarded Promptly to
Goldman, Sachs & Co.
No Redemption Can be Made Prior to Its Receipt
Send to: Goldman Sachs Mutual Funds Master No. _________________
4900 Sears Tower Fund Use Only
Chicago, IL 60606
1-800-621-2550 Date: ______________________
<TABLE>
<S> <C>
FINANCIAL SQUARE FUNDS [_] GS - Adjustable Rate Government Agency
[_] Financial Square Prime Obligations Fund
Fund [_] GS - Short-Term Government Agency Fund
[_] Financial Square Money Market Fund [_] GS - Short Duration Tax-Free Fund
[_] Financial Square Treasury [_] GS - Core Fixed Income Fund
Obligations Fund [_] The Goldman Sachs Portfolios
[_] Financial Square Government Fund Fill in Funds(s): ________________
[_] Financial Square Tax-Free Money [_] Other
Market Fund Fill in Fund(s): _________________
[_] Financial Square Prime Rated Money
Market Fund
[_] Other
Fill in Fund(s): __________________
</TABLE>
A. ACCOUNT RECORD
- -------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
Name of Account Telephone Number
- ---------------------------------------
Street or P.O. Box U.S. Citizen or Resident? Yes [_]No [_]
- --------------------------------------- If no is checked, fill in country of
City State Zip tax residence:
- --------------------------------------- ---------------------------------------
Attention
B. DIVIDENDS AND DISTRIBUTIONS--Check appropriate box (see "Dividends" in
Prospectus)
- -------------------------------------------------------------------------------
Dividends (including net short-term capital gains) [_] Cash [_] Shares
Net Long-Term Capital Gains Distributions [_] Cash [_] Shares
Dividends and capital gains
reinvested in another fund in the
Goldman Sachs Portfolios (see
Prospectus for more information) [_] Shares
Fill in Fund(s): _______________________
(If no box is checked, dividends and capital gains distributions will be rein-
vested in the account.)
C. SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION NUMBER
CERTIFICATION
- -------------------------------------------------------------------------------
Taxpayer Identification Number: __________________
Under penalties of perjury, I certify that (1) The number shown on this form
is my correct Taxpayer Identification Number (or I am waiting for a number to
be issued to me), and (2) I am not subject to backup withholding because I am
exempt from backup withholding or 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 the IRS has notified me that I
am no longer subject to backup withholding. See the "Guidelines for Certifica-
tion of Taxpayer Identification Number on Account Information Form," contained
in the Appendix to the accompanying Prospectus.
------------------------------- ---------------------------------------
SIGN Signature Name (print) and Title (if any)
HERE
------------------------------- ---------------------------------------
Date
D. OPTIONAL TELEPHONE EXCHANGE (see "Exchange Privilege" in Prospectus)
- -------------------------------------------------------------------------------
[_] Goldman, Sachs & Co. is hereby authorized to accept and act upon telephone
instructions from the undersigned or any other person for the exchange of
shares of the Fund into any fund described in the accompanying Prospectus.
The undersigned understands and agrees that neither the applicable Fund nor
Goldman, Sachs & Co. will be liable for any loss, expense, or cost arising
out of any telephone request.
E. REDEMPTION PLANS--Check one box only (see "Redemption of Shares" in
Prospectus)
- -------------------------------------------------------------------------------
[_] I authorize GOLDMAN, SACHS & CO. to honor telephone, telegraphic, or other
instructions WITHOUT SIGNATURE GUARANTEE, from any person for the redemption
of shares for the above account provided that the proceeds are transmitted
to the following bank account(s) only. I understand any changes to the fol-
lowing information must be made in writing to GOLDMAN, SACHS & CO., must
contain the appropriate number of signatures listed below and all signatures
MUST BE SIGNATURE GUARANTEED. Absent its own gross negligence, neither the
applicable Fund nor GOLDMAN, SACHS & CO. shall be liable for such redemp-
tions or for payments made to any unauthorized account.
Continued on next page
<PAGE>
[_] I have furnished GOLDMAN, SACHS & CO., WITH A SIGNATURE GUARANTEE (See sec-
tion F). I authorize GOLDMAN, SACHS & CO. to honor telephone, telegraphic,
or other instructions from any person for the redemption of shares for the
above account provided that the proceeds are transmitted to the following
bank account(s) only. Any changes to the following information must be made
in writing to GOLDMAN, SACHS & CO., (but without signature guarantee) and
contain the appropriate number of signatures listed below. Absent its own
gross negligence, neither the applicable Fund nor GOLDMAN, SACHS & CO. shall
be liable for such redemptions or fee payments made to any unauthorized
account.
Please complete the following bank account information and place a line
through the unused portion.
Additional instructions may be added on separate pages, if necessary.
Number of Bank Account Destinations completed in Section E of this form: [_]
1) ___________________________________ 3) _____________________________________
Bank Name Bank Routing No. Bank Name Bank Routing No.
___________________________________ _____________________________________
Street Address Street Address
___________________________________ _____________________________________
City State Zip City State Zip
___________________________________ _____________________________________
Account Name Account No. Account Name Account No.
2) ___________________________________ 4) _____________________________________
Bank Name Bank Routing No. Bank Name Bank Routing No.
___________________________________ _____________________________________
Street Address Street Address
___________________________________ _____________________________________
City State Zip City State Zip
___________________________________ _____________________________________
Account Name Account No. Account Name Account No.
If additional Bank Account Destinations are needed please attach on a separate
sheet.
[_] Special Draft (Transfer Agent to Supply) [_] By Mail
F. SIGNATURE AUTHORIZATION
- -------------------------------------------------------------------------------
By the execution of this Account Information Form, the undersigned represents
and warrants that it has full right power and authority to make the investment
applied for pursuant to this application and is signing for itself or in some
fiduciary capacity in making such investment, and the individual(s) signing on
behalf of the undersigned represent and warrant that they are duly authorized
to sign this application and to purchase and redeem Fund shares on behalf of
the undersigned. THE UNDERSIGNED AFFIRMS THAT IT HAS RECEIVED AND REVIEWED A
CURRENT FUND PROSPECTUS.
The undersigned understands that a lesser degree of flexibility concerning the
precise timing of a redemption of its investment in the GS Adjustable Rate
Government Agency Fund, GS Core Fixed Income Fund, GS Short-Term Government
Agency Fund or GS Short Duration Tax-Free 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 upon 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.
Number of Signatures required to make changes to this form. [_]
_________________________________ __________________________________
SIGN Signature Name (print) and Title (if any)
HERE
_________________________________ __________________________________
Date
G. SIGNATURE GUARANTEE
- -------------------------------------------------------------------------------
_______________________________________ Affix Guarantee Stamp Here
Signature Guaranteed By
_______________________________________
Authorized Signature
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE PRIME RATED MONEY MARKET FUND
FST ADMINISTRATION SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Money Market Trust (the "Trust") is a no-load, open-end, man-
agement investment company (a "mutual fund") which includes the Financial
Square Prime Rated Money Market Fund (the "Fund"). This Prospectus relates
only to the offering of FST Administration units of beneficial interest ("FST
Administration Shares") of the Fund. Goldman Sachs Asset Management, a sepa-
rate operating division of Goldman, Sachs & Co., serves as the Fund's invest-
ment adviser and administrator. Goldman, Sachs & Co. serves as the Fund's dis-
tributor and transfer agent.
The Fund seeks to maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity by investing exclu-
sively in high quality money market instruments. The Fund pursues its objec-
tive by investing in securities of the U.S. Government, its agencies, authori-
ties and instrumentalities, U.S. dollar denominated obligations of U.S. and
foreign banks, U.S. dollar denominated commercial paper and other short-term
obligations of U.S. and foreign companies, securities issued by foreign gov-
ernments, states, municipalities and other entities, and repurchase agree-
ments.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOV-
ERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION.......Goldman Sachs Mutual Funds-Toll Free: 800-621-2550
This Prospectus provides you with information about the Fund that you should
know before investing in FST Administration Shares. It should be read and re-
tained for future reference. If you would like more detailed information, the
Statement of Additional Information dated January , 1996, as amended or sup-
plemented from time to time, is available upon request without charge from in-
stitutions ("Service Organizations") that hold, directly or through an agent,
FST Administration Shares for the benefit of their customers, 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 Se-
curities and Exchange Commission. The Fund is not available in certain states.
Please call the phone number listed above to determine availability in your
state.
- -------------------------------------------------------------------------------
FST ADMINISTRATION SHARES OF THE FUND 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 THE FUND 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 January , 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder and Fund Expenses............................................. 3
An Introduction to the Fund............................................... 5
Investment Objective and Policies of Financial Square Prime Rated Money
Market Fund.............................................................. 6
Description of Securities and Investment Techniques....................... 7
Investment Limitations.................................................... 9
Management................................................................ 10
Taxes..................................................................... 11
Net Asset Value........................................................... 12
Yield Information......................................................... 12
Organization and Shares of the Trust...................................... 12
Administration............................................................ 14
Purchase of Shares........................................................ 14
Reports to Shareholders................................................... 15
Distributions............................................................. 16
Exchanges................................................................. 16
Redemption of Shares...................................................... 16
</TABLE>
2
<PAGE>
SHAREHOLDER AND FUND EXPENSES (NOTE 1)
FST ADMINISTRATION SHARES (NOTE 2)
<TABLE>
<CAPTION>
FINANCIAL
SQUARE
PRIME RATED
MONEY MARKET
FUND
------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases................... None
Sales Charge Imposed on Reinvested Distributions............ None
Deferred Sales Load Imposed on Redemptions.................. None
Exchange Fee................................................ None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets after
adjustments)
Management Fees (after fee adjustments) (Note 3)............ 0.04%
Other Expenses (after expense limitation) (Note 3)
Account Administration Fees............................... 0.13%
Administration Fees (Note 4).............................. 0.25%
Other Expenses............................................ 0.01%
----
TOTAL OPERATING EXPENSES (Note 3)............................. 0.43%
====
</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 YEAR 3 YEARS
------ -------
<S> <C> <C>
Financial Square Prime Rated Money Market Fund.............. $ 4 $14
</TABLE>
3
<PAGE>
- --------
Notes:
(1) The purpose of this table is to assist investors in understanding the vari-
ous costs and expenses that an investment in the Fund will bear directly or
indirectly. For the fiscal year ended December 31, 1995 no FST Administra-
tion shares of the Fund had been issued. Accordingly, the costs and ex-
penses included in the table and hypothetical example are based on esti-
mated fees and expenses for the current fiscal year ended December 31,
1996. The table and hypothetical example should not be considered a repre-
sentation of past or future expenses; actual expenses may vary depending
upon a variety of factors including the actual performance of the Fund,
which may be greater or less than 5%. See "Management."
(2) The information with respect to the Fund set forth in the foregoing table
and hypothetical example relates only to FST Administration Shares of the
Fund. The Fund also offers FST Shares, FST Preferred Shares, and FST Serv-
ice Shares which are subject to different fees and expenses (which affects
performance) and are entitled to different services. Information regarding
FST Shares, FST Preferred Shares, and FST Service Shares may be obtained
from your sales representative or Goldman Sachs by calling the number on
the cover page of this Prospectus.
(3) Goldman Sachs Asset Management (the "Adviser" or "GSAM") has agreed that a
portion of its fees will not be imposed, pursuant to applicable contracts.
In addition, the Adviser has agreed to reduce or otherwise limit certain
expenses of the Fund (excluding fees payable to Service Organizations, as
defined herein, management and account administration fees, taxes, inter-
est, brokerage and litigation, indemnification and other extraordinary ex-
penses), on an annualized basis, to .01% of the Fund's average daily net
assets. Had the reduction of fees otherwise payable and expense limitations
not been reflected in the above table, the management fees payable by the
Fund would be 0.075% of average daily net assets, and the estimated amount
of other expenses payable by the Fund, would be 0.035% of average daily net
assets. Had the reduction of fees otherwise payable and expense limitations
not been reflected in the above table, the estimated annual operating ex-
penses of the Fund would be 0.49% of average daily net assets.
(4) Service Organizations (other than broker-dealers) may charge other fees to
their customers who are the beneficial owners of FST Administration Shares
in connection with their customers' accounts. See "Administration." Such
fees, if any, may affect the return such customers realize with respect to
their investments.
4
<PAGE>
AN INTRODUCTION TO THE FUND
Financial Square Prime Rated Money Market Fund (the "Fund") is a portfolio of
Goldman Sachs Money Market Trust (the "Trust"), a no-load, open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Goldman Sachs Asset Management, a sepa-
rate operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
the Fund's investment adviser and administrator (the "Adviser" or "GSAM").
Goldman Sachs, which serves as the Fund's distributor and transfer agent, is
one of the largest international investment banking and brokerage firms in the
United States.
The Fund is designed for institutional investors seeking a high rate of re-
turn, a stable net asset value and convenient liquidation privileges. The Fund
is particularly suitable for banks, corporations and other financial institu-
tions that seek investment of short-term funds for their own accounts or for
the accounts of their customers. The Fund seeks to maintain a stable net asset
value of $1.00 per share. To facilitate this goal, the Fund's portfolio securi-
ties are valued by the amortized cost method as permitted by a rule of the Se-
curities 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 the Fund maintain a dollar-
weighted average portfolio maturity of not more than ninety (90) days. Invest-
ments by the Fund must present minimal credit risk.
The Fund 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 priority and quality with such
securities) in the highest short-term rating category by at least two nation-
ally recognized statistical rating organizations ("NRSRO's"), 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. Purchases of securities which
are unrated or rated by only one NRSRO must be approved or ratified by the
Trustees.
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.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES OF FINANCIAL SQUARE PRIME RATED MONEY MARKET
FUND
The investment objective of the Fund is to maximize current income to the ex-
tent consistent with the preservation of capital and the maintenance of liquid-
ity. The Fund pursues its objective by investing in the following instruments:
(A) Securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies, authorities and 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;
(C) U.S. dollar denominated obligations issued or guaranteed (including
fixed time deposits) by foreign banks which have more than $1 billion
in total assets at the time of purchase, U.S. branches of such foreign
banks (Yankee obligations), foreign branches of such foreign banks, and
foreign branches of U.S. banks having more than $1 billion in total as-
sets at the time of purchase. Such bank obligations may be general ob-
ligations of the parent bank or may be limited to the issuing branch by
the terms of the specific obligation or by government regulation;
(D) commercial paper (including variable amount master demand notes and as-
set-backed commercial paper) issued or guar- anteed by U.S. corpora-
tions, U.S. commercial banks, foreign corporations, foreign commercial
banks or other entities, payable in U.S. dollars;
(E) 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;
(F) other short-term obligations issued or guaranteed by U.S. corporations,
foreign corporations or other entities, payable in U.S. dollars (in-
cluding short-term funding agreements);
(G) 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);
(H) U.S. dollar denominated obligations of the International Bank for Re-
construction and Development;
(I) U.S. dollar denominated obligations (limited to commercial paper and
other notes) issued or guaranteed by the governments of or entities lo-
cated or organized in the United Kingdom, France, Germany, Belgium, the
Netherlands, Italy, Switzerland, Denmark, Norway, Austria, Finland,
Spain, Ireland, Sweden, Australia, New Zealand, Japan, Cayman Islands
and Canada. Not more than 25% of Money Market Fund's total assets will
be invested in the securities of any one foreign government;
(J) asset-backed securities (including interests in pools of assets such as
motor vehicle installment purchase obligations and credit card receiv-
ables); and
(K) repurchase agreements.
The Fund may acquire any of the above securities on a forward commitment or
when-issued basis.
The Fund will invest more than 25% of the value of its total assets in bank
obligations (whether foreign or domestic) except that if adverse economic con-
ditions prevail in the banking industry (such as substantial losses on loans,
larger increases in non-performing assets, increased charge-offs and losses of
deposits) the Fund may, for defensive purposes, temporarily invest less than
25% of the value of its total assets in bank obligations. As a result, the Fund
may be especially affected by favorable and adverse developments in the banking
industry.
6
<PAGE>
RISKS OF FOREIGN SECURITIES. Investments in foreign securities and bank obli-
gations may present a greater degree of risk than investments in domestic secu-
rities because of less publicly-available financial and other information, less
securities regulation, potential imposition of foreign withholding and other
taxes, war, expropriation or other adverse governmental actions. Foreign banks
and their foreign branches are not regulated by U.S. banking authorities, and
generally are not bound by the accounting, auditing and financial reporting
standards applicable to U.S. banks.
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.
The Fund may also invest in separately traded principal and interest compo-
nents of securities guaranteed or issued by the U.S. Treasury if such compo-
nents are traded independently under the Separate Trading of Registered Inter-
est and Principal of Securities program ("STRIPS").
CUSTODIAL RECEIPTS
The Fund may also acquire securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities
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 obligations of
the U.S. Government.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Fund may invest in asset-backed and receivables-backed securities. These
securities represent participations in, or are secured by and payable from,
pools of assets such as motor vehicle installment sale contracts, installment
loan contracts, leases of various types of real and personal property, receiv-
ables from revolving credit (credit card) agreements and other categories of
receivables. Such asset pools are securitized through the use of privately-
formed trusts or special purpose corporations. Payments or distributions of
principal and interest may be guaranteed up to certain amounts and for a cer-
tain time period by a letter of credit or a pool insurance policy issued by a
financial institution or other credit enhancements may be present.
7
<PAGE>
The Fund may invest in new types of mortgage-related securities and in other
asset-backed securities that may be developed in the future to the extent con-
sistent with its investment objective and policies.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with selected broker-dealers,
banks or other financial institutions. A repurchase agreement is an agreement
under which the Fund 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 Fund,
and will be unrelated to the interest rate on the purchased security. The
Fund's custodian or sub-custodian will maintain custody of the purchased secu-
rities for the duration of the agreement. The value of the purchased securi-
ties, including accrued interest, will at all times exceed the value of the re-
purchase agreement. In the event of bankruptcy of the seller or failure of the
seller to repurchase the securities as agreed, the Fund 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 carefully consider the
creditworthiness of the seller pursuant to procedures reviewed and approved by
the Trustees. In addition, the Fund, together with other registered investment
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 agree-
ments.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
The Fund may purchase when-issued securities and make contracts to purchase
or sell securities for a fixed price at a future date beyond customary settle-
ment time. The Fund is required to hold and maintain in a segregated account
with the Fund's custodian or sub-custodian until the settlement date, cash or
liquid, high quality debt obligations in an amount sufficient to meet the pur-
chase price. Alternatively, the Fund may enter into offsetting contracts for
the forward sale of other securities that it owns. Securities 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 the Fund would generally purchase securities on a when-issued or for-
ward commitment basis with the intention of acquiring securities for its port-
folio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The Fund may invest in securities issued by other money market investment
companies. Such investments will be determined by the Adviser, under guidelines
established by the Trustees, to present minimal credit risks. The amount of the
Fund's investments in securities of other investment companies will be subject
to the limitations on such investments prescribed by the Investment Company Act
and certain state securities regulations. These limits include a prohibition on
the Fund acquiring more than 3% of the voting shares of any other investment
company and a prohibition on investing more than 5% of the Fund's assets in se-
curities of any one investment company or more than 10% of its assets in secu-
rities of all investment companies. The Fund will indirectly bear its propor-
tionate share of any management fees and other expenses paid by such other in-
vestment companies. Goldman Sachs will not impose a portion of the management
fees payable by the Fund with respect to assets invested in another money mar-
ket investment company (the "Acquired Fund") as follows. The amount of the man-
agement fees otherwise payable by the Fund and not imposed by Goldman Sachs
will be equal to the amount of management fees indirectly paid by the Fund as a
shareholder of the
8
<PAGE>
Acquired Fund. Such other investment companies will have investment objec-
tives, policies and restrictions substantially similar to those of the Fund
and will be subject to substantially the same risks.
INVESTMENT LIMITATIONS
Pursuant to SEC Rule 2a-7 under the Investment Company Act, the Fund 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 securities). The Fund 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 Fund may
not make more than one such investment at any time. The Fund may not invest in
securities which are Second Tier Securities at the time of purchase. Second
Tier Securities are securities rated in the top two short-term rating catego-
ries by at least two NRSROs, or if only one NRSRO has assigned a rating, by
that NRSRO, but which are not First Tier Securities. Immediately after the ac-
quisition of any put by the Fund, not more than 5% of the Fund's total assets
may be invested in securities issued by or subject to puts from the same issu-
er. However, this limitation will not apply to the issuer of unconditional
puts if the Fund does not have more than 10% of its total assets invested in
securities issued by or subject to unconditional puts from such issuer. The
foregoing operating policies are more restrictive than the fundamental policy
set forth below, which would give the Fund the ability to invest, with respect
to 25% of its assets, more than 5% of its assets in any one issuer. The Fund
operates in accordance with these operating policies which comply with SEC
Rule 2a-7.
INVESTMENT RESTRICTIONS
The Trust, on behalf of the Fund, has adopted certain fundamental investment
restrictions which are enumerated in detail in the Statement of Additional In-
formation and which may not be changed with respect to the Fund unless autho-
rized by a majority of its outstanding shares. Among other restrictions, the
Fund 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 collateralized by
such securities) or acquire more than 10% of any class of the outstanding vot-
ing securities of any one issuer. In addition, the Fund 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 being treated as sepa-
rate industries for the purpose of the restriction), provided that there is no
25% limitation in respect of, and the Fund reserves freedom of action to con-
centrate its investments in, U.S. Government Securities, and obligations is-
sued or guaranteed by U.S. banks and foreign banks. The Fund will concentrate
in obligations of domestic and foreign banks, except during adverse conditions
in the banking industry. Tax diversification requirements for qualification as
a regulated investment company apply to the Fund and are in certain instances
more strict than these investment restrictions. In applying the above restric-
tions, the Fund will not treat a guarantee as a security issued by the guaran-
tor if the value of all securities issued or guaranteed by the guarantor and
owned by the Fund does not exceed 10% of its total assets.
The Fund may borrow money from banks only for temporary or emergency pur-
poses in an aggregate amount not exceeding one-third of the value of its total
assets. The Fund may not purchase securities while such borrowings exceed 5%
of the value of its assets. Except for such enumerated restrictions and as
otherwise indicated in this Prospectus, the investment objective and policies
of the Fund are not fundamental policies and accordingly may be changed by the
Trust's Board of Trustees without obtaining the approval of the Fund's share-
holders.
RESTRICTED AND OTHER ILLIQUID SECURITIES
The Fund may purchase securities that are not registered ("restricted secu-
rities") under the Secu-
9
<PAGE>
rities Act of 1933 ("1933 Act"), but can be offered and sold to "qualified in-
stitutional buyers" under Rule 144A under the 1933 Act. However, the Fund will
not invest more than 10% of its net assets in illiquid investments, which in-
cludes fixed time deposits maturing in more than seven days and restricted se-
curities. Restricted securities (including commercial 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 trading markets for the specific
restricted security, will not be deemed to be illiquid 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, 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 securi-
ties eligible for resale under Rule 144A will continue to be liquid, the Board
will carefully monitor the Fund's investments 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 the Fund to the extent that qualified institu-
tional buyers become for a time uninterested in purchasing these restricted
securities.
In addition, the Fund 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 the Fund (taken at market
value) would be invested in such investments. Certain repurchase agreements
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
regarded as liquid instruments.
MANAGEMENT
THE ADVISER AND ADMINISTRATOR
GSAM, One New York Plaza, New York, New York, a separate operating division
of Goldman Sachs, acts as investment adviser and administrator to the Fund.
Goldman Sachs registered as an investment adviser in 1981. As of September 30,
1995, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $53.7 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 broker-
age 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
financing and investment services both in the United States and abroad.
Pursuant to an SEC order, the Fund 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 the Investment Advisory Agreement, GSAM continually manages the Fund,
including the purchase, retention and disposition of its securities and other
assets. The management of the Fund's portfolio is subject to the supervision
of the Board of Trustees and the Fund's investment policies. For these servic-
es, GSAM is entitled to a monthly fee at an annual rate equal to .075% of the
Fund's average daily net assets.
GSAM has agreed that it will not impose a portion of its advisory fee, pur-
suant to applicable contracts.
GSAM has agreed to reduce or otherwise limit certain expenses of the Fund
(excluding fees payable to Service Organizations, as defined herein, manage-
ment and account administration fees, and taxes, interest, brokerage and liti-
gation, indemnification and other extraordinary expenses) on an annualized ba-
sis to .01% of the Fund's average daily net assets. GSAM has no current inten-
tion to but may discontinue or modify any of such reductions or limitations at
its discretion.
10
<PAGE>
In addition, under the Trust's Administration Agreement with GSAM, GSAM ad-
ministers the Fund's business affairs subject to the supervision of the Board
of Trustees and, in connection therewith, furnishes the Fund with office facil-
ities, bears all fees and costs of the services furnished by the transfer agent
to the Fund, and is responsible for ordinary clerical, recordkeeping and book-
keeping functions required to be performed by the Fund (excluding those per-
formed by the Fund's custodian), preparation and filing of documents required
to comply with federal and state securities laws, supervising the activities of
the Fund's custodian and transfer agent, providing assistance in connection
with meetings of the Board of Trustees and shareholders and other administra-
tive services necessary to conduct the Fund's business.
For those administrative services and facilities the Fund pays an account ad-
ministration fee to GSAM. The account administration fee is charged and allo-
cated to each shareholder account daily in the amount equal on an annual basis
to .13% of the Fund's average daily net assets.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of shares of the Fund pursuant to a Distribution Agreement with the
Trust. The Distributor will assist in the sale of shares of the Fund upon the
terms described herein. Goldman Sachs also serves as the Transfer Agent of the
Fund.
TAXES
The Fund is treated as a separate entity for federal income tax purposes 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, the Fund must satisfy certain requirements relating
to the sources of its income, diversification of its assets and distribution of
its income to shareholders. As a regulated investment compa-ny, the Fund 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 shareholders in accor-
dance with certain timing requirements of the Code.
Dividends paid by the Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss and original issue dis-
count or market discount income will be taxable to shareholders as ordinary in-
come. Dividends paid by the Fund from the excess of net long-term capital gain
over net short-term capital loss will be taxable as long-term capital gain re-
gardless of how long the shareholders have held their shares. These tax conse-
quences will apply to distributions of the Fund regardless of whether distribu-
tions are received in cash or reinvested in shares. Certain distributions paid
by the Fund in January of a given year will be taxable to shareholders as if
received on December 31 of the year in which they are declared. Shareholders
will be informed annually about the amount and character of distributions re-
ceived from the Fund for federal income tax purposes, including any distribu-
tions that may constitute a return of capital.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on the Fund's distributions if they
fail to furnish their correct taxpayer identification number and certain certi-
fications or if they are otherwise subject to backup withholding. Individuals,
corporations and other shareholders that are not U.S. persons under the Code
are subject to different tax rules and may be subject to nonresident alien
withholding at the rate of 30% (or a lower rate provided by an applicable tax
treaty) on amounts treated as ordinary dividends from the Fund.
If the Fund invests in foreign securities, it may be subject to foreign with-
holding or other foreign taxes on income earned on such securities and is ex-
pected to be unable to pass such taxes through to shareholders, who therefore
are not expected to
11
<PAGE>
include such taxes in income or be entitled to claim foreign tax credits or de-
ductions with respect to such taxes.
In addition to federal taxes, a shareholder may be subject to state, local or
foreign taxes on payments received from the Fund. A state income (and possibly
local income and/or intangible property) tax exemption is generally available
to the extent the Fund's distributions are derived from interest on (or, in the
case of intangibles taxes, the value 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. Shareholders should consult their
own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. New York time) on
each Business Day. Net asset value per share for each class of shares of the
Fund is calculated by determining the amount of net assets attributable to each
class of shares and dividing by the number of shares for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities market close early, the Fund re-
serves the right to cease accepting purchase and redemption orders for same
Business Day credit at the time PSA recommends that the securities market
close. On days the Fund closes early, purchases and redemption orders received
after the PSA recommended closing time will be credited for the next Business
Day. In addition, the Fund reserves the right to advance the time by which pur-
chase and redemption orders must be received for same Business Day credit as
permitted by the SEC.
The Fund's portfolio securities are valued at their amortized cost, which
does not take into ac count unrealized securities gains or losses. This method
involves initially valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any premium paid or discount received.
YIELD INFORMATION
From time to time, the Fund may advertise its yield and effective yield. The
yield of the Fund refers to the income generated by an investment in the Fund
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 Fund is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed rein-
vestment.
Investors should note that the investment results of the Fund are based on
historical performance and will fluctuate over time. Any presentation of the
Fund's yield or effective yield for any prior period should not be considered a
representation of what an investment may earn or what the Fund's yield or ef-
fective yield may be in any future period.
Yield and effective yield will be calculated separately for FST Shares, FST
Preferred Shares, FST Administration Shares and FST Service Shares. Because
each such class of shares is subject to different expenses, the net yield of
such classes of the Fund for the same period may differ. See "Organization and
Shares of the Trust" below.
ORGANIZATION AND SHARES OF THE TRUST
The Trust was formed as a business trust under the laws of The Commonwealth
of Massachusetts
12
<PAGE>
on December 6, 1978. The Trustees of the Trust are responsible for the overall
management and supervision of its affairs. The Declaration of Trust authorizes
the Trustees to classify or reclassify any series or portfolio of shares into
one or more classes. The Trustees have authorized the issuance of four classes
of shares of the Fund, which are: FST Shares, FST Preferred Shares, FST Admin-
istration Shares and FST Service Shares. (Institutions that provide services to
holders of FST Preferred Shares, FST Administration or Service Shares are re-
ferred to in this Prospectus as "Service Organizations").
When issued, shares are fully paid and nonassessable by the Trust. In the
event of liquidation, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to such shareholders. Shares en-
title their holders to one vote per share, are freely transferable and have no
preemptive, subscription or conversion rights.
Shares of the Fund will be voted separately by Fund with respect to matters
pertaining to the Fund except for the election of Trustees and ratification of
independent accountants. For example, shareholders of the Fund are required to
approve the adoption of any investment advisory agreement relating to the Fund
and any changes in fundamental investment restrictions or policies of the Fund.
Approval by the shareholders of the Fund is effective only as to the Fund.
The Trust does not intend to hold annual shareholder 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 pur-
poses as are set forth above. The Trust will facilitate shareholder communica-
tion as required and in the manner prescribed by Section 16(c) of the Invest-
ment Company Act.
13
<PAGE>
ADMINISTRATION
The Fund has adopted an Administration Plan with respect to the FST Adminis-
tration Shares which authorizes it to compensate Service Organizations for pro-
viding account administration services to their customers who are beneficial
owners of such Shares. The Fund will enter into agreements with Service Organi-
zations which purchase FST Administration Shares on behalf of their customers
("Service Agreements"). The Service Agreements will provide for compensation to
the Service Organization in an amount up to .25 of 1% (on an annualized basis)
of the average daily net asset value of the FST Administration Shares of the
Fund attributable to or held in the name of the Service Organization for its
customers. The services provided by a Service Organization may include acting,
directly or through an agent, as the sole shareholder of record, maintaining
account records for its customers, and processing orders to purchase and redeem
FST Administration Shares for its customers.
Holders of FST Administration Shares of the Fund will bear all expenses and
fees paid to Service Organizations with respect to such Shares as well as any
other expenses which are directly attributable to such Shares.
Service Organizations (other than broker-dealers) may charge other fees to
their customers who are the beneficial owners of FST Administration Shares in
connection 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 the Fund.
All inquiries of beneficial owners of FST Administration Shares of the Fund
should be directed to such owners' Service Organization.
PURCHASE OF SHARES
It is expected that all direct purchasers of FST Administration Shares will
be Service Organizations or their nominees, which may purchase FST Administra-
tion Shares of the Fund through Goldman Sachs. Customers of Service Organiza-
tions may invest in such shares only through their Service Organizations.
As set forth below, FST Administration Shares of the Fund may be purchased on
any Business Day at the net asset value next determined after receipt from the
Service Organization of both the purchase order and the purchase price in Fed-
eral Funds. Purchase orders may be made by telephoning Goldman Sachs at 800-
621-2550 or by a written request addressed to Goldman Sachs, Attention: Share-
holder Services, Goldman Sachs Money Market Trust, 4900 Sears Tower, Chicago,
Illinois 60606. It is strongly recommended that payment be effected by wiring
Federal Funds to The Northern Trust Company ("Northern"), Chicago, Illinois, as
the sub-custodian for State Street Bank and Trust Company ("State Street").
Purchases of FST Administration Shares may also be made by a Service Organi-
zation by delivering a Federal Reserve draft or check payable to the Fund and
drawn on a U.S. bank to Goldman Sachs, Attention: Shareholder Services, Goldman
Sachs Money Market Trust, 4900 Sears Tower, Chicago, Illinois 60606. It is ex-
pected 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 receipt. FST Administration Shares purchased by
check may not be redeemed until the check has cleared, as described under "Re-
demption of Shares."
The Service Organizations are responsible for timely transmittal of purchase
orders to Goldman Sachs and Federal Funds to Northern. In order to facilitate
timely transmittal, the Service Organizations have established times by which
purchase orders and Federal Funds must be received by them.
14
<PAGE>
- --------------------------------------------------------------------------------
FST Administration Shares of the Fund are deemed to have been purchased when
an order becomes effective and are entitled to dividends on FST Administration
Shares purchased as follows:
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED FROM A SERVICE
ORGANIZATION BY GOLDMAN SACHS DIVIDENDS BEGIN
----------------------------------- ---------------
<C> <S> <C>
By: 3:00 p.m.--N.Y. time Same Business Day
- -------------------------------------------------------------
After: 3:00 p.m.--N.Y. 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.
FST Administration Shares of the Fund are purchased at the net asset value
per share without the imposition of a sales charge.
Goldman Sachs, as the Fund's transfer agent, will maintain a complete record
of transactions and FST Administration Shares held in each record holder's ac-
count.
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 shares of the Fund. 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 the Fund (after adjustments) and are attributable to shares held by
such customers. Such compensation will not represent an additional expense to
the Fund or its shareholders, since it will be paid from assets of Goldman
Sachs or its affiliates.
MINIMUM INVESTMENT AND OTHER INFORMATION
The minimum requirement for investing in the Fund is $50 million ($10 million
if an investor satisfies the minimum initial investment in certain other series
of the Trust). The Trust and Goldman Sachs each reserves the right to waive the
minimum investment requirement. A Service Organization may impose a minimum
amount for initial and subsequent investments in FST Administration Shares of
the Fund, and may establish other requirements such as a minimum account bal-
ance. A Service Organization may effect redemptions of noncomplying accounts,
and may impose a charge for any special services rendered to its customers.
Customers should contact their Service Organizations for further information
concerning such requirements and charges. A Service Organization may purchase
FST Administration Shares in connection with sweep account programs.
SUBSEQUENT INVESTMENTS
There is no minimum amount required for subsequent investments. Orders for
the purchase of additional FST Administration Shares should be accompanied by
information identifying the account in which FST Administration Shares are to
be purchased.
REPORTS TO SHAREHOLDERS
The Trust will issue an annual report containing audited financial statements
and a semi-annual report to record holders of FST Administration Shares of the
Fund, including Service Organizations who hold such Shares 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 Fund
are also reflected in regular statements issued by Goldman Sachs to sharehold-
ers of record. The Service Organizations, as record holders of FST Administra-
tion Shares, will be responsible for pro-
15
<PAGE>
viding similar services to their own customers who are the beneficial owners of
such Shares. For example, Service Organizations are responsible for providing
each customer exercising investment discretion with monthly statements with re-
spect to such customer's account in lieu of an immediate confirmation of each
transaction.
DISTRIBUTIONS
All or substantially all of the Fund'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, as record owners of FST Administration Shares, monthly. Distri-
butions will be made in additional FST Administration Shares of the Fund or, at
the election of a Service Organization, in cash. The election to reinvest divi-
dends and distributions or receive them in cash may be changed by a Service Or-
ganization at any time upon written notice to Goldman Sachs. If no election is
made, all dividends and capital gain distributions will be reinvested. Divi-
dends will be reinvested as of the last calendar day of each month. Cash dis-
tributions will be paid on or about the first business day of each month. Net
short-term capital gains, if any, will be distributed in accordance with the
requirements of the Code and may be reflected in the Fund's daily distribu-
tions. The Fund may distribute at least annually its long-term capital gains,
if any, after reduction by available capital losses. In order to avoid exces-
sive fluctuations in the amount of monthly capital gains distributions, a por-
tion 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 the Fund are
reflected in the net asset value of the Fund, they are not expected to be of an
amount which would affect the Fund's net asset value of $1.00 per share.
The Fund's net investment income consists of the excess of (i) accrued inter-
est or discount (including both original issue and market discount on taxable
securities) on portfolio securities, and (ii) any income of the Fund from
sources other than capital gains over (iii) the amortization of market premium
on all portfolio securities and (iv) the estimated expenses of the Fund, in-
cluding a proportionate share of the general expenses of the Trust.
EXCHANGES
FST Administration Shares of the Fund may be exchanged by Service Organiza-
tions for the relevant class of any other Fund or Portfolio of Goldman Sachs
Money Market Trust at the net asset value next determined either by writing to
Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Money Market
Trust, 4900 Sears Tower, Chicago, Illinois 60606 or, if previously elected in
the Account Information Form, by calling Goldman Sachs at 800-621-2550. All
telephone exchanges must be registered in the same name(s) and with the same
address as are registered in the Fund or Portfolio from which the exchange is
being made. It may be difficult to implement the telephone exchange privilege
in times of drastic economic or market changes. In an effort to prevent unau-
thorized or fraudulent exchange requests by telephone, Goldman Sachs employs
reasonable procedures as set forth under "Redemption of Shares" to confirm that
such instructions are genuine. Exchanges are available only in states where the
exchange may legally be made. The exchange privilege may be modified or with-
drawn at any time on 60 days' written notice.
REDEMPTION OF SHARES
HOW TO REDEEM
Customers of Service Organizations may redeem FST Administration Shares of
the Fund through their respective Service Organizations. The Service Organiza-
tions are responsible for the transmittal of redemption requests by their cus-
tomers to Goldman Sachs. In order to facilitate timely transmittal of redemp-
tion requests, Service Organizations have established procedures by which
redemp-
16
<PAGE>
tion requests must be made and times by which redemption requests must be re-
ceived by them. Additional documentation may be required when deemed appropri-
ate by a Service Organization.
A Service Organization as the record holder of FST Administration Shares may
then redeem such Shares without charge upon request on any Business Day at the
net asset value next determined after receipt by Goldman Sachs of the redemp-
tion request. Redemption requests may be made by telephoning Goldman Sachs at
800-621-2550 or by a written request addressed to Goldman Sachs, Attention:
Shareholder Services, Goldman Sachs Money Market Trust, 4900 Sears Tower, Chi-
cago, Illinois 60606. A Service Organization may request redemptions by tele-
phone only if the optional telephone redemption privilege has been elected on
the Account Information Form. It may be difficult to implement 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 employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than that
designated on the Account Information Form must be in writing and signed by an
authorized person designated on the Account Information Form. Any such written
request is also confirmed by telephone with both the requesting party and the
designated bank account to verify instructions. Other procedures may be imple-
mented 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 Trust nor Goldman Sachs will be respon-
sible for the authenticity of redemption instructions received by telephone.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs by the
recordholder of FST Administration Shares. The payment of redemption proceeds
for FST Administration Shares recently purchased by check will be delayed for
up to 15 days until the check has cleared.
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
record holder of FST Administration Shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST
RECEIVED FROM REDEMPTION
SERVICE ORGANIZATION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
-------------------- ---------- ---------
<C> <S> <C> <C>
By: 3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ---------------------------------------------------------------------------
After: 3:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- ---------------------------------------------------------------------------
</TABLE>
17
<PAGE>
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 FST Administration Shareholder's Service Organization in the
transfer process. If a problem with such performance arises, the FST Adminis-
tration Shareholder should deal directly with such intermediaries or Service
Organization.
OTHER REDEMPTION INFORMATION
A minimum account balance of $50 million in the Fund ($10 million if an in-
vestor satisfies the minimum initial investment in certain other series of the
Trust) is required to remain a FST Administration Shareholder. The Fund may re-
deem all of the FST Administration Shares of any FST Administration Shareholder
whose account in the Fund has a net asset value which is less than the minimum
described above. The Trust will give sixty (60) days' prior written notice to
such Shareholders whose FST Administration Shares are being redeemed to allow
them to purchase sufficient additional FST Administration Shares of the Fund to
avoid such redemption.
----------------
18
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE PRIME RATED MONEY MARKET FUND
FST SERVICE SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Money Market Trust (the "Trust") is no-load, open-end, manage-
ment investment company (a "mutual fund") which includes the Financial Square
Prime Rated Money Market Fund (the "Fund"). This Prospectus relates only to
the offering of FST Service units of beneficial interest ("FST Service
Shares") of the Fund. Goldman Sachs Asset Management, a separate operating di-
vision of Goldman, Sachs & Co., serves as the Fund's investment adviser and
administrator. Goldman, Sachs & Co. serves as the Fund's distributor and
transfer agent.
The Fund seeks to maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity by investing exclu-
sively in high quality money market instruments. The Fund pursues its objec-
tive by investing in securities of the U.S. Government, its agencies, authori-
ties and instrumentalities, U.S. dollar denominated obligations of U.S. and
foreign banks, U.S. dollar denominated commercial paper and other short-term
obligations of U.S. and foreign companies, securities issued by foreign gov-
ernments, states, municipalities and other entities, and repurchase agree-
ments.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOV-
ERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION......Goldman Sachs Mutual Funds--Toll Free: 800-621-2550
This Prospectus provides you with information about the Fund that you should
know before investing in FST Service Shares. It should be read and retained
for future reference. If you would like more detailed information, the State-
ment of Additional Information dated January , 1996, as amended or supple-
mented from time to time, is available upon request without charge from insti-
tutions ("Service Organizations") that hold, directly or through an agent, FST
Service Shares for the benefit of their customers, by calling the telephone
number listed above or by writing Goldman, Sachs & Co., 4900 Sears Tower, Chi-
cago, Illinois 60606. The Statement of Additional Information, which is incor-
porated by reference into this Prospectus, has been filed with the Securities
and Exchange Commission. The Fund is not available in certain states. Please
call the phone number listed above to determine availability in your state.
- -------------------------------------------------------------------------------
FST SERVICE SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED 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 THE FUND INVOLVES IN-
VESTMENT 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 January , 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder and Fund Expenses............................................. 3
An Introduction to the Fund............................................... 5
Investment Objective and Policies of Financial Square Prime Rated Money
Market Fund.............................................................. 6
Description of Securities and Investment Techniques....................... 7
Investment Limitations.................................................... 9
Management................................................................ 10
Taxes..................................................................... 11
Net Asset Value........................................................... 12
Yield Information......................................................... 12
Organization and Shares of the Trust...................................... 12
Additional Services....................................................... 14
Purchase of Shares........................................................ 14
Reports to Shareholders................................................... 15
Distributions............................................................. 16
Exchanges................................................................. 16
Redemption of Shares...................................................... 16
</TABLE>
2
<PAGE>
SHAREHOLDER AND FUND EXPENSES (NOTE 1)
FST SERVICE SHARES (NOTE 2)
<TABLE>
<CAPTION>
FINANCIAL
SQUARE
PRIME RATED
MONEY MARKET
FUND
------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases................... None
Sales Charge Imposed on Reinvested Distributions............ None
Deferred Sales Load Imposed on Redemptions.................. None
Exchange Fee................................................ None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets after
adjustments)
Management Fees (after fee adjustments) (Note 3)............ 0.04%
Other Expenses (after expense limitation) (Note 3)
Account Administration Fees............................... 0.13%
Service Fees (Note 4)..................................... 0.50%
Other Expenses............................................ 0.01%
----
TOTAL OPERATING EXPENSES (Note 3)............................. 0.68%
====
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Financial Square Prime Rated Money Market Fund.............. $ 7 $ 22
</TABLE>
3
<PAGE>
- --------
Notes:
(1) The purpose of this table is to assist investors in understanding the var-
ious costs and expenses that an investment in the Fund will bear directly
or indirectly. For the fiscal year ended December 31, 1995 no FST Service
shares of the Fund had been issued. Accordingly, the costs and expenses
included in the table and hypothetical example are based on estimated fees
and expenses for the current fiscal year ended December 31, 1996. The ta-
ble 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 the Fund, which may be
greater or less than 5%. See "Management." Investors should be aware that,
due to service fees, a long-term shareholder in the Fund 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 Deal-
ers, Inc.
(2) The information with respect to the Fund set forth in the foregoing table
and hypothetical example relates only to FST Service Shares of the Fund.
The Fund also offers FST Administration Shares, FST Preferred Shares and
FST Shares which are subject to different fees and expenses (which affects
performance) and are entitled to different services. Information regarding
FST Administration Shares, FST Preferred Shares and FST Shares may be ob-
tained from your sales representative or Goldman Sachs by calling the num-
ber on the cover page of this Prospectus.
(3) Goldman Sachs Asset Management (the "Adviser" or "GSAM") has agreed that a
portion of its fees will not be imposed, pursuant to applicable contracts.
In addition, the Adviser has agreed to reduce or otherwise limit certain
expenses of the Fund (excluding fees payable to Service Organizations, as
defined herein, management and account administration fees, taxes, inter-
est, brokerage and litigation, indemnification and other extraordinary ex-
penses), on an annualized basis, to .01% of the Fund's average daily net
assets. Had the reduction of fees otherwise payable and expense limita-
tions not been reflected in the above table, the management fees payable
by the Fund would be 0.075% of average daily net assets, and the estimated
amount of other expenses payable by the Fund, would be 0.035% of average
daily net assets. Had the reduction of fees otherwise payable and expense
limitations not been reflected in the above table, the estimated annual
operating expenses of the Fund would be 0.74% of average daily net assets.
(4) Service Organizations (other than broker-dealers) may charge other fees to
their customers who are the beneficial owners of FST Service Shares 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.
4
<PAGE>
AN INTRODUCTION TO THE FUND
Financial Square Prime Rated Money Market Fund (the "Fund") is a portfolio of
Goldman Sachs Money Market Trust (the "Trust"), a no-load, open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Goldman Sachs Asset Management, a sepa-
rate operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
the Fund's investment adviser and administrator (the "Adviser" or "GSAM").
Goldman Sachs, which serves as the Fund's distributor and transfer agent, is
one of the largest international investment banking and brokerage firms in the
United States.
The Fund is designed for institutional investors seeking a high rate of re-
turn, a stable net asset value and convenient liquidation privileges. The Fund
is particularly suitable for banks, corporations and other financial institu-
tions that seek investment of short-term funds for their own accounts or for
the accounts of their customers. The Fund seeks to maintain a stable net asset
value of $1.00 per share. To facilitate this goal, the Fund's portfolio securi-
ties are valued by the amortized cost method as permitted by a rule of the Se-
curities 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 the Fund maintain a dollar-
weighted average portfolio maturity of not more than ninety (90) days. Invest-
ments by the Fund must present minimal credit risk.
The Fund 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 priority and quality with such
securities) in the highest short-term rating category by at least two nation-
ally recognized statistical rating organizations ("NRSRO's"), 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. Purchases of securities which
are unrated or rated by only one NRSRO must be approved or ratified by the
Trustees.
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.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES OF FINANCIAL SQUARE PRIME RATED MONEY MARKET
FUND
The investment objective of the Fund is to maximize current income to the ex-
tent consistent with the preservation of capital and the maintenance of liquid-
ity. The Fund pursues its objective by investing in the following instruments:
(A) Securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies, authorities and 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;
(C) U.S. dollar denominated obligations issued or guaranteed (including
fixed time deposits) by foreign banks which have more than $1 billion
in total assets at the time of purchase, U.S. branches of such foreign
banks (Yankee obligations), foreign branches of such foreign banks, and
foreign branches of U.S. banks having more than $1 billion in total as-
sets at the time of purchase. Such bank obligations may be general ob-
ligations of the parent bank or may be limited to the issuing branch by
the terms of the specific obligation or by government regulation;
(D) commercial paper (including variable amount master demand notes and as-
set-backed commercial paper) issued or guar- anteed by U.S. corpora-
tions, U.S. commercial banks, foreign corporations, foreign commercial
banks or other entities, payable in U.S. dollars;
(E) 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;
(F) other short-term obligations issued or guaranteed by U.S. corporations,
foreign corporations or other entities, payable in U.S. dollars (in-
cluding short-term funding agreements);
(G) 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);
(H) U.S. dollar denominated obligations of the International Bank for Re-
construction and Development;
(I) U.S. dollar denominated obligations (limited to commercial paper and
other notes) issued or guaranteed by the governments of or entities lo-
cated or organized in the United Kingdom, France, Germany, Belgium, the
Netherlands, Italy, Switzerland, Denmark, Norway, Austria, Finland,
Spain, Ireland, Sweden, Australia, New Zealand, Japan, Cayman Islands
and Canada. Not more than 25% of Money Market Fund's total assets will
be invested in the securities of any one foreign government;
(J) asset-backed securities (including interests in pools of assets such as
motor vehicle installment purchase obligations and credit card receiv-
ables); and
(K) repurchase agreements.
The Fund may acquire any of the above securities on a forward commitment or
when-issued basis.
The Fund will invest more than 25% of the value of its total assets in bank
obligations (whether foreign or domestic) except that if adverse economic con-
ditions prevail in the banking industry (such as substantial losses on loans,
larger increases in non-performing assets, increased charge-offs and losses of
deposits) the Fund may, for defensive purposes, temporarily invest less than
25% of the value of its total assets in bank obligations. As a result, the Fund
may be especially affected by favorable and adverse developments in the banking
industry.
6
<PAGE>
RISKS OF FOREIGN SECURITIES. Investments in foreign securities and bank obli-
gations may present a greater degree of risk than investments in domestic secu-
rities because of less publicly-available financial and other information, less
securities regulation, potential imposition of foreign withholding and other
taxes, war, expropriation or other adverse governmental actions. Foreign banks
and their foreign branches are not regulated by U.S. banking authorities, and
generally are not bound by the accounting, auditing and financial reporting
standards applicable to U.S. banks.
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.
The Fund may also invest in separately traded principal and interest compo-
nents of securities guaranteed or issued by the U.S. Treasury if such compo-
nents are traded independently under the Separate Trading of Registered Inter-
est and Principal of Securities program ("STRIPS").
CUSTODIAL RECEIPTS
The Fund may also acquire securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities
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 obligations of
the U.S. Government.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Fund may invest in asset-backed and receivables-backed securities. These
securities represent participations in, or are secured by and payable from,
pools of assets such as motor vehicle installment sale contracts, installment
loan contracts, leases of various types of real and personal property, receiv-
ables from revolving credit (credit card) agreements and other categories of
receivables. Such asset pools are securitized through the use of privately-
formed trusts or special purpose corporations. Payments or distributions of
principal and interest may be guaranteed up to certain amounts and for a cer-
tain time period by a letter of credit or a pool insurance policy issued by a
financial institution or other credit enhancements may be present.
7
<PAGE>
The Fund may invest in new types of mortgage-related securities and in other
asset-backed securities that may be developed in the future to the extent con-
sistent with its investment objective and policies.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with selected broker-dealers,
banks or other financial institutions. A repurchase agreement is an agreement
under which the Fund 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 Fund,
and will be unrelated to the interest rate on the purchased security. The
Fund's custodian or sub-custodian will maintain custody of the purchased secu-
rities for the duration of the agreement. The value of the purchased securi-
ties, including accrued interest, will at all times exceed the value of the re-
purchase agreement. In the event of bankruptcy of the seller or failure of the
seller to repurchase the securities as agreed, the Fund 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 carefully consider the
creditworthiness of the seller pursuant to procedures reviewed and approved by
the Trustees. In addition, the Fund, together with other registered investment
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 agree-
ments.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
The Fund may purchase when-issued securities and make contracts to purchase
or sell securities for a fixed price at a future date beyond customary settle-
ment time. The Fund is required to hold and maintain in a segregated account
with the Fund's custodian or sub-custodian until the settlement date, cash or
liquid, high quality debt obligations in an amount sufficient to meet the pur-
chase price. Alternatively, the Fund may enter into offsetting contracts for
the forward sale of other securities that it owns. Securities 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 the Fund would generally purchase securities on a when-issued or for-
ward commitment basis with the intention of acquiring securities for its port-
folio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The Fund may invest in securities issued by other money market investment
companies. Such investments will be determined by the Adviser, under guidelines
established by the Trustees, to present minimal credit risks. The amount of the
Fund's investments in securities of other investment companies will be subject
to the limitations on such investments prescribed by the Investment Company Act
and certain state securities regulations. These limits include a prohibition on
the Fund acquiring more than 3% of the voting shares of any other investment
company and a prohibition on investing more than 5% of the Fund's assets in se-
curities of any one investment company or more than 10% of its assets in secu-
rities of all investment companies. The Fund will indirectly bear its propor-
tionate share of any management fees and other expenses paid by such other in-
vestment companies. Goldman Sachs will not impose a portion of the management
fees payable by the Fund with respect to assets invested in another money mar-
ket investment company (the "Acquired Fund") as follows. The amount of the man-
agement fees otherwise payable by the Fund and not imposed by Goldman Sachs
will be equal to the amount of management fees indirectly paid by the Fund as a
shareholder of the
8
<PAGE>
Acquired Fund. Such other investment companies will have investment objec-
tives, policies and restrictions substantially similar to those of the Fund
and will be subject to substantially the same risks.
INVESTMENT LIMITATIONS
Pursuant to SEC Rule 2a-7 under the Investment Company Act, the Fund 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 securities). The Fund 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 Fund may
not make more than one such investment at any time. The Fund may not invest in
securities which are Second Tier Securities at the time of purchase. Second
Tier Securities are securities rated in the top two short-term rating catego-
ries by at least two NRSROs, or if only one NRSRO has assigned a rating, by
that NRSRO, but which are not First Tier Securities. Immediately after the ac-
quisition of any put by the Fund, not more than 5% of the Fund's total assets
may be invested in securities issued by or subject to puts from the same issu-
er. However, this limitation will not apply to the issuer of unconditional
puts if the Fund does not have more than 10% of its total assets invested in
securities issued by or subject to unconditional puts from such issuer. The
foregoing operating policies are more restrictive than the fundamental policy
set forth below, which would give the Fund the ability to invest, with respect
to 25% of its assets, more than 5% of its assets in any one issuer. The Fund
operates in accordance with these operating policies which comply with SEC
Rule 2a-7.
INVESTMENT RESTRICTIONS
The Trust, on behalf of the Fund, has adopted certain fundamental investment
restrictions which are enumerated in detail in the Statement of Additional In-
formation and which may not be changed with respect to the Fund unless autho-
rized by a majority of its outstanding shares. Among other restrictions, the
Fund 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 collateralized by
such securities) or acquire more than 10% of any class of the outstanding vot-
ing securities of any one issuer. In addition, the Fund 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 being treated as sepa-
rate industries for the purpose of the restriction), provided that there is no
25% limitation in respect of, and the Fund reserves freedom of action to con-
centrate its investments in, U.S. Government Securities, and obligations is-
sued or guaranteed by U.S. banks and foreign banks. The Fund will concentrate
in obligations of domestic and foreign banks, except during adverse conditions
in the banking industry. Tax diversification requirements for qualification as
a regulated investment company apply to the Fund and are in certain instances
more strict than these investment restrictions. In applying the above restric-
tions, the Fund will not treat a guarantee as a security issued by the guaran-
tor if the value of all securities issued or guaranteed by the guarantor and
owned by the Fund does not exceed 10% of its total assets.
The Fund may borrow money from banks only for temporary or emergency pur-
poses in an aggregate amount not exceeding one-third of the value of its total
assets. The Fund may not purchase securities while such borrowings exceed 5%
of the value of its assets. Except for such enumerated restrictions and as
otherwise indicated in this Prospectus, the investment objective and policies
of the Fund are not fundamental policies and accordingly may be changed by the
Trust's Board of Trustees without obtaining the approval of the Fund's share-
holders.
RESTRICTED AND OTHER ILLIQUID SECURITIES
The Fund may purchase securities that are not registered ("restricted secu-
rities") under the Secu-
9
<PAGE>
rities Act of 1933 ("1933 Act"), but can be offered and sold to "qualified in-
stitutional buyers" under Rule 144A under the 1933 Act. However, the Fund will
not invest more than 10% of its net assets in illiquid investments, which in-
cludes fixed time deposits maturing in more than seven days and restricted se-
curities. Restricted securities (including commercial 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 trading markets for the specific
restricted security, will not be deemed to be illiquid 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, 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 securi-
ties eligible for resale under Rule 144A will continue to be liquid, the Board
will carefully monitor the Fund's investments 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 the Fund to the extent that qualified institu-
tional buyers become for a time uninterested in purchasing these restricted
securities.
In addition, the Fund 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 the Fund (taken at market
value) would be invested in such investments. Certain repurchase agreements
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
regarded as liquid instruments.
MANAGEMENT
THE ADVISER AND ADMINISTRATOR
GSAM, One New York Plaza, New York, New York, a separate operating division
of Goldman Sachs, acts as investment adviser and administrator to the Fund.
Goldman Sachs registered as an investment adviser in 1981. As of September 30,
1995, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $53.7 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 broker-
age 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
financing and investment services both in the United States and abroad.
Pursuant to an SEC order, the Fund 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 the Investment Advisory Agreement, GSAM continually manages the Fund,
including the purchase, retention and disposition of its securities and other
assets. The management of the Fund's portfolio is subject to the supervision
of the Board of Trustees and the Fund's investment policies. For these servic-
es, GSAM is entitled to a monthly fee at an annual rate equal to .075% of the
Fund's average daily net assets.
GSAM has agreed that it will not impose a portion of its advisory fee, pur-
suant to applicable contracts.
GSAM has agreed to reduce or otherwise limit certain expenses of the Fund
(excluding fees payable to Service Organizations, as defined herein, manage-
ment and account administration fees, and taxes, interest, brokerage and liti-
gation, indemnification and other extraordinary expenses) on an annualized ba-
sis to .01% of the Fund's average daily net assets. GSAM has no current inten-
tion to but may discontinue or modify any of such reductions or limitations at
its discretion.
10
<PAGE>
In addition, under the Trust's Administration Agreement with GSAM, GSAM ad-
ministers the Fund's business affairs subject to the supervision of the Board
of Trustees and, in connection therewith, furnishes the Fund with office facil-
ities, bears all fees and costs of the services furnished by the transfer agent
to the Fund, and is responsible for ordinary clerical, recordkeeping and book-
keeping functions required to be performed by the Fund (excluding those per-
formed by the Fund's custodian), preparation and filing of documents required
to comply with federal and state securities laws, supervising the activities of
the Fund's custodian and transfer agent, providing assistance in connection
with meetings of the Board of Trustees and shareholders and other administra-
tive services necessary to conduct the Fund's business.
For those administrative services and facilities the Fund pays an account ad-
ministration fee to GSAM. The account administration fee is charged and allo-
cated to each shareholder account daily in the amount equal on an annual basis
to .13% of the Fund's average daily net assets.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of shares of the Fund pursuant to a Distribution Agreement with the
Trust. The Distributor will assist in the sale of shares of the Fund upon the
terms described herein. Goldman Sachs also serves as the Transfer Agent of the
Fund.
TAXES
The Fund is treated as a separate entity for federal income tax purposes 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, the Fund must satisfy certain requirements relating
to the sources of its income, diversification of its assets and distribution of
its income to shareholders. As a regulated investment compa-ny, the Fund 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 shareholders in accor-
dance with certain timing requirements of the Code.
Dividends paid by the Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss and original issue dis-
count or market discount income will be taxable to shareholders as ordinary in-
come. Dividends paid by the Fund from the excess of net long-term capital gain
over net short-term capital loss will be taxable as long-term capital gain re-
gardless of how long the shareholders have held their shares. These tax conse-
quences will apply to distributions of the Fund regardless of whether distribu-
tions are received in cash or reinvested in shares. Certain distributions paid
by the Fund in January of a given year will be taxable to shareholders as if
received on December 31 of the year in which they are declared. Shareholders
will be informed annually about the amount and character of distributions re-
ceived from the Fund for federal income tax purposes, including any distribu-
tions that may constitute a return of capital.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on the Fund's distributions if they
fail to furnish their correct taxpayer identification number and certain certi-
fications or if they are otherwise subject to backup withholding. Individuals,
corporations and other shareholders that are not U.S. persons under the Code
are subject to different tax rules and may be subject to nonresident alien
withholding at the rate of 30% (or a lower rate provided by an applicable tax
treaty) on amounts treated as ordinary dividends from the Fund.
If the Fund invests in foreign securities, it may be subject to foreign with-
holding or other foreign taxes on income earned on such securities and is ex-
pected to be unable to pass such taxes through to shareholders, who therefore
are not expected to
11
<PAGE>
include such taxes in income or be entitled to claim foreign tax credits or de-
ductions with respect to such taxes.
In addition to federal taxes, a shareholder may be subject to state, local or
foreign taxes on payments received from the Fund. A state income (and possibly
local income and/or intangible property) tax exemption is generally available
to the extent the Fund's distributions are derived from interest on (or, in the
case of intangibles taxes, the value 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. Shareholders should consult their
own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. New York time) on
each Business Day. Net asset value per share for each class of shares of the
Fund is calculated by determining the amount of net assets attributable to each
class of shares and dividing by the number of shares for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities market close early, the Fund re-
serves the right to cease accepting purchase and redemption orders for same
Business Day credit at the time PSA recommends that the securities market
close. On days the Fund closes early, purchases and redemption orders received
after the PSA recommended closing time will be credited for the next Business
Day. In addition, the Fund reserves the right to advance the time by which pur-
chase and redemption orders must be received for same Business Day credit as
permitted by the SEC.
The Fund's portfolio securities are valued at their amortized cost, which
does not take into ac count unrealized securities gains or losses. This method
involves initially valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any premium paid or discount received.
YIELD INFORMATION
From time to time, the Fund may advertise its yield and effective yield. The
yield of the Fund refers to the income generated by an investment in the Fund
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 Fund is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed rein-
vestment.
Investors should note that the investment results of the Fund are based on
historical performance and will fluctuate over time. Any presentation of the
Fund's yield or effective yield for any prior period should not be considered a
representation of what an investment may earn or what the Fund's yield or ef-
fective yield may be in any future period.
Yield and effective yield will be calculated separately for FST Shares, FST
Preferred Shares, FST Administration Shares and FST Service Shares. Because
each such class of shares is subject to different expenses, the net yield of
such classes of the Fund for the same period may differ. See "Organization and
Shares of the Trust" below.
ORGANIZATION AND SHARES OF THE TRUST
The Trust was formed as a business trust under the laws of The Commonwealth
of Massachusetts
12
<PAGE>
on December 6, 1978. The Trustees of the Trust are responsible for the overall
management and supervision of its affairs. The Declaration of Trust authorizes
the Trustees to classify or reclassify any series or portfolio of shares into
one or more classes. The Trustees have authorized the issuance of four classes
of shares of the Fund, which are: FST Shares, FST Preferred Shares, FST Admin-
istration Shares and FST Service Shares. (Institutions that provide services to
holders of FST Preferred Shares, FST Administration or Service Shares are re-
ferred to in this Prospectus as "Service Organizations").
When issued, shares are fully paid and nonassessable by the Trust. In the
event of liquidation, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to such shareholders. Shares en-
title their holders to one vote per share, are freely transferable and have no
preemptive, subscription or conversion rights.
Shares of the Fund will be voted separately by Fund with respect to matters
pertaining to the Fund except for the election of Trustees and ratification of
independent accountants. For example, shareholders of the Fund are required to
approve the adoption of any investment advisory agreement relating to the Fund
and any changes in fundamental investment restrictions or policies of the Fund.
Approval by the shareholders of the Fund is effective only as to the Fund.
The Trust does not intend to hold annual shareholder 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 pur-
poses as are set forth above. The Trust will facilitate shareholder communica-
tion as required and in the manner prescribed by Section 16(c) of the Invest-
ment Company Act.
13
<PAGE>
ADDITIONAL SERVICES
The Fund has adopted a Service Plan with respect to the FST Service Shares
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 Shares. The Fund will enter into agreements
with Service Organizations which purchase FST Service Shares on behalf of their
customers ("Service Agreements"). The Service Agreements will provide for com-
pensation to the Service Organization in an amount up to .50 of 1% (on an
annualized basis) of the average daily net asset value of the FST Service
Shares of the Fund attributable to or held in the name of the Service Organiza-
tion for its customers; provided, 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, di-
rectly or through an agent, as the sole shareholder of record, maintaining ac-
count records for its customers, and processing orders to purchase, redeem and
exchange FST Service Shares of the Fund for its customers, responding to inqui-
ries from prospective and existing shareholders and assisting customers with
investment procedures.
Holders of FST Service Shares of the Fund will bear all expenses and fees
paid to Service Organizations with respect to such Shares as well as any other
expenses which are directly attributable to such Shares.
Service Organizations (other than broker-dealers) may charge other fees to
their customers who are the beneficial owners of FST Service Shares 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 the Fund.
All inquiries of beneficial owners of FST Service Shares of the Fund should
be directed to such owners' Service Organization.
PURCHASE OF SHARES
It is expected that all direct purchasers of FST Service Shares will be Serv-
ice Organizations or their nominees, which may purchase FST Service Shares of
the Fund through Goldman Sachs. Customers of Service Organizations may invest
in such shares only through their Service Organizations.
As set forth below, FST Service Shares of the Fund may be purchased on any
Business Day at the net asset value next determined after receipt from the
Service Organization of both the purchase order and the purchase price in Fed-
eral Funds. Purchase orders may be made by telephoning Goldman Sachs at 800-
621-2550 or by a written request addressed to Goldman Sachs, Attention: Share-
holder Services, Goldman Sachs Money Market Trust, 4900 Sears Tower, Chicago,
Illinois 60606. It is strongly recommended that payment be effected by wiring
Federal Funds to The Northern Trust Company ("Northern"), Chicago, Illinois, as
the sub-custodian for State Street Bank and Trust Company ("State Street").
Purchases of FST Service Shares may also be made by a Service Organization by
delivering a Federal Reserve draft or check payable to the Fund and drawn on a
U.S. bank to Goldman Sachs, Attention: Shareholder Services, Goldman Sachs
Money Market Trust, 4900 Sears Tower, Chicago, Illinois 60606. 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 receipt. FST Service Shares purchased by check may not
be redeemed until the check has cleared, as described under "Redemption of
Shares."
The Service Organizations are responsible for timely transmittal of purchase
orders to Goldman Sachs and Federal Funds to Northern. In order to facilitate
timely transmittal, the Service Organizations have established times by which
purchase orders and Federal Funds must be received by them.
14
<PAGE>
- --------------------------------------------------------------------------------
FST Service Shares of the Fund are deemed to have been purchased when an or-
der becomes effective and are entitled to dividends on FST Service Shares pur-
chased as follows:
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED FROM A SERVICE
ORGANIZATION BY GOLDMAN SACHS DIVIDENDS BEGIN
----------------------------------- ---------------
<S> <C>
By: 3:00 p.m.--N.Y. time Same Business Day
- -------------------------------------------------------------
After: 3:00 p.m.--N.Y. 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.
FST Service Shares of the Fund are purchased at the net asset value per share
without the imposition of a sales charge.
Goldman Sachs, as the Fund's transfer agent, will maintain a complete record
of transactions and FST Service Shares held in each record holder'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 shares of the Fund. 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 the Fund (after adjustments) and are attributable to shares held by
such customers. Such compensation will not represent an additional expense to
the Fund or its shareholders, since it will be paid from assets of Goldman
Sachs or its affiliates.
MINIMUM INVESTMENT AND OTHER INFORMATION
The minimum requirement for investing in the Fund is $50 million ($10 million
if an investor satisfies the minimum initial investment in certain other series
of the Trust). The Trust and Goldman Sachs each reserves the right to waive the
minimum investment requirement. A Service Organization may impose a minimum
amount for initial and subsequent investments in FST Service Shares of the
Fund, and may establish other requirements such as a minimum account balance. A
Service Organization may effect redemptions of noncomplying accounts, and may
impose a charge for any special services rendered to its customers. Customers
should contact their Service Organizations for further information concerning
such requirements and charges. A Service Organization may purchase FST Service
Shares in connection with sweep account programs.
SUBSEQUENT INVESTMENTS
There is no minimum amount required for subsequent investments. Orders for
the purchase of additional FST Service Shares should be accompanied by informa-
tion identifying the account in which FST Service Shares are to be purchased.
REPORTS TO SHAREHOLDERS
The Trust will issue an annual report containing audited financial statements
and a semi-annual report to record holders of FST Service Shares of the Fund,
including Service Organizations who hold such Shares 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 Fund are
also reflected in regular statements issued by Goldman Sachs to shareholders of
record. The Service Organizations, as record holders of FST
15
<PAGE>
Service Shares, will be responsible for providing similar services to their own
customers who are the beneficial owners of such Shares. 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
All or substantially all of the Fund'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, as record owners of FST Service Shares, monthly. Distributions
will be made in additional FST Service Shares of the Fund or, at the election
of a Service Organization, in cash. The election to reinvest dividends and dis-
tributions or receive them in cash may be changed by a Service Organization at
any time upon written notice to Goldman Sachs. If no election is made, all div-
idends and capital gain distributions will be reinvested. Dividends will be re-
invested 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 accordance with the requirements of the
Code and may be reflected in the Fund's daily distributions. The Fund may dis-
tribute 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 the Fund are reflected in the net
asset value of the Fund, they are not expected to be of an amount which would
affect the Fund's net asset value of $1.00 per share.
The Fund's net investment income consists of the excess of (i) accrued inter-
est or discount (including both original issue and market discount on taxable
securities) on portfolio securities, and (ii) any income of the Fund from
sources other than capital gains over (iii) the amortization of market premium
on all portfolio securities and (iv) the estimated expenses of the Fund, in-
cluding a proportionate share of the general expenses of the Trust.
EXCHANGES
FST Service Shares of the Fund may be exchanged by Service Organizations for
the relevant class of any other Fund or Portfolio of Goldman Sachs Money Market
Trust at the net asset value next determined either by writing to Goldman
Sachs, Attention: Shareholder Services, Goldman Sachs Money Market Trust, 4900
Sears Tower, Chicago, Illinois 60606 or, if previously elected in the Account
Information Form, by calling Goldman Sachs at 800-621-2550. All telephone ex-
changes must be registered in the same name(s) and with the same address as are
registered in the Fund. It may be difficult to implement the telephone exchange
privilege in times of drastic economic or market changes. In an effort to pre-
vent unauthorized or fraudulent exchange requests by telephone, Goldman Sachs
employs reasonable procedures as set forth under "Redemption of Shares" to con-
firm that such instructions are genuine. Exchanges are available only in states
where the exchange may legally be made. The exchange privilege may be modified
or withdrawn at any time on 60 days' written notice.
REDEMPTION OF SHARES
HOW TO REDEEM
Customers of Service Organizations may redeem FST Service Shares of the Fund
through their respective Service Organizations. The Service Organizations are
responsible for the transmittal of redemption requests by their customers to
Goldman Sachs. In order to facilitate timely transmittal of redemption re-
quests, Service Organizations have es-
16
<PAGE>
tablished procedures by which redemption requests must be made and times by
which redemption requests must be received by them. Additional documentation
may be required when deemed appropriate by a Service Organization.
A Service Organization as the record holder of FST Service Shares may then
redeem such Shares without charge upon request on any Business Day at the net
asset value next determined after receipt by Goldman Sachs of the redemption
request. Redemption requests may be made by telephoning Goldman Sachs at 800-
621-2550 or by a written request addressed to Goldman Sachs, Attention: Share-
holder Services, Goldman Sachs Money Market Trust, 4900 Sears Tower, Chicago,
Illinois 60606. A Service Organization may request redemptions by telephone
only if the optional telephone redemption privilege has been elected on the Ac-
count Information Form. It may be difficult to implement redemptions by tele-
phone in times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than that
designated on the Account Information Form must be in writing and signed by an
authorized person designated on the Account Information Form. Any such written
request is also confirmed by telephone with both the requesting party and the
designated bank account to verify instructions. Other procedures may be imple-
mented 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 Trust nor Goldman Sachs will be respon-
sible for the authenticity of redemption instructions received by telephone.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs by the
recordholder of FST Service Shares. The payment of redemption proceeds for FST
Service Shares recently purchased by check will be delayed for up to 15 days
until the check has cleared.
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
record holder of FST Service Shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST RECEIVED
FROM SERVICE ORGANIZATION REDEMPTION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
--------------------------- ------------------- ---------
<S> <C> <C>
By: 3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is
received
- ----------------------------------------------------------------------------
After: 3:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is
received
- ----------------------------------------------------------------------------
</TABLE>
17
<PAGE>
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 FST Service Shareholder's Service Organization in the transfer
process. If a problem with such performance arises, the FST Service Shareholder
should deal directly with such intermediaries or Service Organization.
OTHER REDEMPTION INFORMATION
A minimum account balance of $50 million in the Fund ($10 million if an in-
vestor satisfies the minimum initial investment in certain other series of the
Trust) is required to remain a FST Service Shareholder. The Fund may redeem all
of the FST Service Shares of any FST Service Shareholder whose account in that
Fund has a net asset value which is less than the minimum described above. The
Trust will give sixty (60) days' prior written notice to such Shareholders
whose FST Service Shares are being redeemed to allow them to purchase suffi-
cient additional FST Service Shares of the Fund to avoid such redemption.
-------------------------------
18
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE PRIME RATED MONEY MARKET FUND
FST PREFERRED SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Money Market Trust (the "Trust") is a no-load, open-end, man-
agement investment company (a "mutual fund") which includes the Financial
Square Prime Rated Money Market Fund (the "Fund"). This Prospectus relates
only to the offering of FST Preferred units of beneficial interest ("FST Pre-
ferred Shares") of the Fund. Goldman Sachs Asset Management, a separate oper-
ating division of Goldman, Sachs & Co., serves as the Fund's investment ad-
viser and administrator. Goldman, Sachs & Co. serves as the Fund's distributor
and transfer agent.
The Fund seeks to maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity by investing exclu-
sively in high quality money market instruments. The Fund pursues its objec-
tive by investing in securities of the U.S. Government, its agencies, authori-
ties and instrumentalities, U.S. dollar denominated obligations of U.S. and
foreign banks, U.S. dollar denominated commercial paper and other short-term
obligations of U.S. and foreign companies, securities issued by foreign gov-
ernments, states, municipalities and other entities, and repurchase agree-
ments.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOV-
ERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION.......Goldman Sachs Mutual Funds-Toll Free: 800-621-2550
This Prospectus provides you with information about the Fund that you should
know before investing in FST Preferred Shares. It should be read and retained
for future reference. If you would like more detailed information, the State-
ment of Additional Information dated January , 1996, as amended or supple-
mented from time to time, is available upon request without charge from insti-
tutions ("Service Organizations") that hold, directly or through an agent, FST
Preferred Shares for the benefit of their customers, by calling the telephone
number listed above or by writing Goldman, Sachs & Co., 4900 Sears Tower, Chi-
cago, Illinois 60606. The Statement of Additional Information, which is incor-
porated by reference into this Prospectus, has been filed with the Securities
and Exchange Commission. The Fund is not available in certain states. Please
call the phone number listed above to determine availability in your state.
- -------------------------------------------------------------------------------
FST PREFERRED SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUAR-
ANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RE-
SERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUND INVOLVES
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 January , 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder and Fund Expenses............................................. 3
An Introduction to the Fund............................................... 5
Investment Objective and Policies of Financial Square Prime Rated Money
Market Fund.............................................................. 6
Description of Securities and Investment Techniques....................... 7
Investment Limitations.................................................... 9
Management................................................................ 10
Taxes..................................................................... 11
Net Asset Value........................................................... 12
Yield Information......................................................... 12
Organization and Shares of the Trust...................................... 12
Administration............................................................ 14
Purchase of Shares........................................................ 14
Reports to Shareholders................................................... 15
Distributions............................................................. 16
Redemption of Shares...................................................... 16
</TABLE>
2
<PAGE>
SHAREHOLDER AND FUND EXPENSES (NOTE 1)
FST PREFERRED SHARES (NOTE 2)
<TABLE>
<CAPTION>
FINANCIAL
SQUARE
PRIME RATED
MONEY MARKET
FUND
------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases................... None
Sales Charge Imposed on Reinvested Distributions............ None
Deferred Sales Load Imposed on Redemptions.................. None
Exchange Fee................................................ None
ANNUAL OPERATING EXPENSES
(as a percentage of average daily net assets after
adjustments)
Management Fees (after fee adjustments) (Note 3)............ 0.04%
Other Expenses (after expense limitation) (Note 3)
Account Administration Fees............................... 0.13%
Administration Fees (Note 4).............................. 0.10%
Other Expenses............................................ 0.01%
----
TOTAL OPERATING EXPENSES (Note 3)............................. 0.28%
====
</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 YEAR 3 YEARS
------ -------
<S> <C> <C>
Financial Square Prime Rated Money Market Fund.............. $ 3 $ 9
</TABLE>
3
<PAGE>
- --------
Notes:
(1) The purpose of this table is to assist investors in understanding the vari-
ous costs and expenses that an investment in the Fund will bear directly or
indirectly. For the fiscal year ended December 31, 1995 no FST Preferred
Shares of the Fund had been issued. Accordingly, the costs and expenses in-
cluded in the table and hypothetical example are based on estimated fees
and expenses for the current fiscal year ended December 31, 1996. 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 the Fund, which may be greater
or less than 5%. See "Management."
(2) The information with respect to the Fund set forth in the foregoing table
and hypothetical example relate only to FST Preferred Shares of the Fund.
The Fund also offers FST Shares, FST Administration Shares and FST Service
Shares which are subject to different fees and expenses (which affects per-
formance) and are entitled to different services. Information regarding FST
Shares, FST Administration Shares and FST Service Shares may be obtained
from your sales representative or Goldman Sachs by calling the number on
the cover page of this Prospectus.
(3) Goldman Sachs Asset Management (the "Adviser" or "GSAM") has agreed that a
portion of its fees will not be imposed, pursuant to applicable contracts.
In addition, the Adviser has agreed to reduce or otherwise limit certain
expenses of the Fund (excluding fees payable to Service Organizations, as
defined herein, management and account administration fees, taxes, inter-
est, brokerage and litigation, indemnification and other extraordinary ex-
penses), on an annualized basis, to .01% of the Fund's average daily net
assets. Had the reduction of fees otherwise payable and expense limitations
not been reflected in the above table, the management fees payable by the
Fund would be 0.075% of average daily net assets, and the estimated amount
of other expenses payable by the Fund, would be 0.035% of average daily net
assets. Had the reduction of fees otherwise payable and expense limitations
not been reflected in the above table, the estimated annual operating ex-
penses of the Fund would be 0.34% of average daily net assets.
(4) Service Organizations (other than broker-dealers) may charge other fees to
their customers who are the beneficial owners of FST Preferred Shares in
connection with their customers' accounts. See "Administration." Such fees,
if any, may affect the return such customers realize with respect to their
investments.
4
<PAGE>
AN INTRODUCTION TO THE FUND
Financial Square Prime Rated Money Market Fund (the "Fund") is a portfolio of
Goldman Sachs Money Market Trust (the "Trust"), a no-load, open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Goldman Sachs Asset Management, a sepa-
rate operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as
the Fund's investment adviser and administrator (the "Adviser" or "GSAM").
Goldman Sachs, which serves as the Fund's distributor and transfer agent, is
one of the largest international investment banking and brokerage firms in the
United States.
The Fund is designed for institutional investors seeking a high rate of re-
turn, a stable net asset value and convenient liquidation privileges. The Fund
is particularly suitable for banks, corporations and other financial institu-
tions that seek investment of short-term funds for their own accounts or for
the accounts of their customers. The Fund seeks to maintain a stable net asset
value of $1.00 per share. To facilitate this goal, the Fund's portfolio securi-
ties are valued by the amortized cost method as permitted by a rule of the Se-
curities 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 the Fund maintain a dollar-
weighted average portfolio maturity of not more than ninety (90) days. Invest-
ments by the Fund must present minimal credit risk.
The Fund 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 priority and quality with such
securities) in the highest short-term rating category by at least two nation-
ally recognized statistical rating organizations ("NRSRO's"), 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. Purchases of securities which
are unrated or rated by only one NRSRO must be approved or ratified by the
Trustees.
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.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES OF FINANCIAL SQUARE PRIME RATED MONEY MARKET
FUND
The investment objective of the Fund is to maximize current income to the ex-
tent consistent with the preservation of capital and the maintenance of liquid-
ity. The Fund pursues its objective by investing in the following instruments:
(A) Securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies, authorities and 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;
(C) U.S. dollar denominated obligations issued or guaranteed (including
fixed time deposits) by foreign banks which have more than $1 billion
in total assets at the time of purchase, U.S. branches of such foreign
banks (Yankee obligations), foreign branches of such foreign banks, and
foreign branches of U.S. banks having more than $1 billion in total as-
sets at the time of purchase. Such bank obligations may be general ob-
ligations of the parent bank or may be limited to the issuing branch by
the terms of the specific obligation or by government regulation;
(D) commercial paper (including variable amount master demand notes and as-
set-backed commercial paper) issued or guar- anteed by U.S. corpora-
tions, U.S. commercial banks, foreign corporations, foreign commercial
banks or other entities, payable in U.S. dollars;
(E) 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;
(F) other short-term obligations issued or guaranteed by U.S. corporations,
foreign corporations or other entities, payable in U.S. dollars (in-
cluding short-term funding agreements);
(G) 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);
(H) U.S. dollar denominated obligations of the International Bank for Re-
construction and Development;
(I) U.S. dollar denominated obligations (limited to commercial paper and
other notes) issued or guaranteed by the governments of or entities lo-
cated or organized in the United Kingdom, France, Germany, Belgium, the
Netherlands, Italy, Switzerland, Denmark, Norway, Austria, Finland,
Spain, Ireland, Sweden, Australia, New Zealand, Japan, Cayman Islands
and Canada. Not more than 25% of Money Market Fund's total assets will
be invested in the securities of any one foreign government;
(J) asset-backed securities (including interests in pools of assets such as
motor vehicle installment purchase obligations and credit card receiv-
ables); and
(K) repurchase agreements.
The Fund may acquire any of the above securities on a forward commitment or
when-issued basis.
The Fund will invest more than 25% of the value of its total assets in bank
obligations (whether foreign or domestic) except that if adverse economic con-
ditions prevail in the banking industry (such as substantial losses on loans,
larger increases in non-performing assets, increased charge-offs and losses of
deposits) the Fund may, for defensive purposes, temporarily invest less than
25% of the value of its total assets in bank obligations. As a result, the Fund
may be especially affected by favorable and adverse developments in the banking
industry.
6
<PAGE>
RISKS OF FOREIGN SECURITIES. Investments in foreign securities and bank obli-
gations may present a greater degree of risk than investments in domestic secu-
rities because of less publicly-available financial and other information, less
securities regulation, potential imposition of foreign withholding and other
taxes, war, expropriation or other adverse governmental actions. Foreign banks
and their foreign branches are not regulated by U.S. banking authorities, and
generally are not bound by the accounting, auditing and financial reporting
standards applicable to U.S. banks.
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.
The Fund may also invest in separately traded principal and interest compo-
nents of securities guaranteed or issued by the U.S. Treasury if such compo-
nents are traded independently under the Separate Trading of Registered Inter-
est and Principal of Securities program ("STRIPS").
CUSTODIAL RECEIPTS
The Fund may also acquire securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities
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 obligations of
the U.S. Government.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Fund may invest in asset-backed and receivables-backed securities. These
securities represent participations in, or are secured by and payable from,
pools of assets such as motor vehicle installment sale contracts, installment
loan contracts, leases of various types of real and personal property, receiv-
ables from revolving credit (credit card) agreements and other categories of
receivables. Such asset pools are securitized through the use of privately-
formed trusts or special purpose corporations. Payments or distributions of
principal and interest may be guaranteed up to certain amounts and for a cer-
tain time period by a letter of credit or a pool insurance policy issued by a
financial institution or other credit enhancements may be present.
7
<PAGE>
The Fund may invest in new types of mortgage-related securities and in other
asset-backed securities that may be developed in the future to the extent con-
sistent with its investment objective and policies.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with selected broker-dealers,
banks or other financial institutions. A repurchase agreement is an agreement
under which the Fund 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 Fund,
and will be unrelated to the interest rate on the purchased security. The
Fund's custodian or sub-custodian will maintain custody of the purchased secu-
rities for the duration of the agreement. The value of the purchased securi-
ties, including accrued interest, will at all times exceed the value of the re-
purchase agreement. In the event of bankruptcy of the seller or failure of the
seller to repurchase the securities as agreed, the Fund 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 carefully consider the
creditworthiness of the seller pursuant to procedures reviewed and approved by
the Trustees. In addition, the Fund, together with other registered investment
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 agree-
ments.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
The Fund may purchase when-issued securities and make contracts to purchase
or sell securities for a fixed price at a future date beyond customary settle-
ment time. The Fund is required to hold and maintain in a segregated account
with the Fund's custodian or sub-custodian until the settlement date, cash or
liquid, high quality debt obligations in an amount sufficient to meet the pur-
chase price. Alternatively, the Fund may enter into offsetting contracts for
the forward sale of other securities that it owns. Securities 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 the Fund would generally purchase securities on a when-issued or for-
ward commitment basis with the intention of acquiring securities for its port-
folio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The Fund may invest in securities issued by other money market investment
companies. Such investments will be determined by the Adviser, under guidelines
established by the Trustees, to present minimal credit risks. The amount of the
Fund's investments in securities of other investment companies will be subject
to the limitations on such investments prescribed by the Investment Company Act
and certain state securities regulations. These limits include a prohibition on
the Fund acquiring more than 3% of the voting shares of any other investment
company and a prohibition on investing more than 5% of the Fund's assets in se-
curities of any one investment company or more than 10% of its assets in secu-
rities of all investment companies. The Fund will indirectly bear its propor-
tionate share of any management fees and other expenses paid by such other in-
vestment companies. Goldman Sachs will not impose a portion of the management
fees payable by the Fund with respect to assets invested in another money mar-
ket investment company (the "Acquired Fund") as follows. The amount of the man-
agement fees otherwise payable by the Fund and not imposed by Goldman Sachs
will be equal to the amount of management fees indirectly paid by the Fund as a
shareholder of the
8
<PAGE>
Acquired Fund. Such other investment companies will have investment objec-
tives, policies and restrictions substantially similar to those of the Fund
and will be subject to substantially the same risks.
INVESTMENT LIMITATIONS
Pursuant to SEC Rule 2a-7 under the Investment Company Act, the Fund 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 securities). The Fund 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 Fund may
not make more than one such investment at any time. The Fund may not invest in
securities which are Second Tier Securities at the time of purchase. Second
Tier Securities are securities rated in the top two short-term rating catego-
ries by at least two NRSROs, or if only one NRSRO has assigned a rating, by
that NRSRO, but which are not First Tier Securities. Immediately after the ac-
quisition of any put by the Fund, not more than 5% of the Fund's total assets
may be invested in securities issued by or subject to puts from the same issu-
er. However, this limitation will not apply to the issuer of unconditional
puts if the Fund does not have more than 10% of its total assets invested in
securities issued by or subject to unconditional puts from such issuer. The
foregoing operating policies are more restrictive than the fundamental policy
set forth below, which would give the Fund the ability to invest, with respect
to 25% of its assets, more than 5% of its assets in any one issuer. The Fund
operates in accordance with these operating policies which comply with SEC
Rule 2a-7.
INVESTMENT RESTRICTIONS
The Trust, on behalf of the Fund, has adopted certain fundamental investment
restrictions which are enumerated in detail in the Statement of Additional In-
formation and which may not be changed with respect to the Fund unless autho-
rized by a majority of its outstanding shares. Among other restrictions, the
Fund 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 collateralized by
such securities) or acquire more than 10% of any class of the outstanding vot-
ing securities of any one issuer. In addition, the Fund 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 being treated as sepa-
rate industries for the purpose of the restriction), provided that there is no
25% limitation in respect of, and the Fund reserves freedom of action to con-
centrate its investments in, U.S. Government Securities, and obligations is-
sued or guaranteed by U.S. banks and foreign banks. The Fund will concentrate
in obligations of domestic and foreign banks, except during adverse conditions
in the banking industry. Tax diversification requirements for qualification as
a regulated investment company apply to the Fund and are in certain instances
more strict than these investment restrictions. In applying the above restric-
tions, the Fund will not treat a guarantee as a security issued by the guaran-
tor if the value of all securities issued or guaranteed by the guarantor and
owned by the Fund does not exceed 10% of its total assets.
The Fund may borrow money from banks only for temporary or emergency pur-
poses in an aggregate amount not exceeding one-third of the value of its total
assets. The Fund may not purchase securities while such borrowings exceed 5%
of the value of its assets. Except for such enumerated restrictions and as
otherwise indicated in this Prospectus, the investment objective and policies
of the Fund are not fundamental policies and accordingly may be changed by the
Trust's Board of Trustees without obtaining the approval of the Fund's share-
holders.
RESTRICTED AND OTHER ILLIQUID SECURITIES
The Fund may purchase securities that are not registered ("restricted secu-
rities") under the Secu-
9
<PAGE>
rities Act of 1933 ("1933 Act"), but can be offered and sold to "qualified in-
stitutional buyers" under Rule 144A under the 1933 Act. However, the Fund will
not invest more than 10% of its net assets in illiquid investments, which in-
cludes fixed time deposits maturing in more than seven days and restricted se-
curities. Restricted securities (including commercial 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 trading markets for the specific
restricted security, will not be deemed to be illiquid 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, 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 securi-
ties eligible for resale under Rule 144A will continue to be liquid, the Board
will carefully monitor the Fund's investments 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 the Fund to the extent that qualified institu-
tional buyers become for a time uninterested in purchasing these restricted
securities.
In addition, the Fund 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 the Fund (taken at market
value) would be invested in such investments. Certain repurchase agreements
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
regarded as liquid instruments.
MANAGEMENT
THE ADVISER AND ADMINISTRATOR
GSAM, One New York Plaza, New York, New York, a separate operating division
of Goldman Sachs, acts as investment adviser and administrator to the Fund.
Goldman Sachs registered as an investment adviser in 1981. As of September 30,
1995, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $53.7 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 broker-
age 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
financing and investment services both in the United States and abroad.
Pursuant to an SEC order, the Fund 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 the Investment Advisory Agreement, GSAM continually manages the Fund,
including the purchase, retention and disposition of its securities and other
assets. The management of the Fund's portfolio is subject to the supervision
of the Board of Trustees and the Fund's investment policies. For these servic-
es, GSAM is entitled to a monthly fee at an annual rate equal to .075% of the
Fund's average daily net assets.
GSAM has agreed that it will not impose a portion of its advisory fee, pur-
suant to applicable contracts.
GSAM has agreed to reduce or otherwise limit certain expenses of the Fund
(excluding fees payable to Service Organizations, as defined herein, manage-
ment and account administration fees, and taxes, interest, brokerage and liti-
gation, indemnification and other extraordinary expenses) on an annualized ba-
sis to .01% of the Fund's average daily net assets. GSAM has no current inten-
tion to but may discontinue or modify any of such reductions or limitations at
its discretion.
10
<PAGE>
In addition, under the Trust's Administration Agreement with GSAM, GSAM ad-
ministers the Fund's business affairs subject to the supervision of the Board
of Trustees and, in connection therewith, furnishes the Fund with office facil-
ities, bears all fees and costs of the services furnished by the transfer agent
to the Fund, and is responsible for ordinary clerical, recordkeeping and book-
keeping functions required to be performed by the Fund (excluding those per-
formed by the Fund's custodian), preparation and filing of documents required
to comply with federal and state securities laws, supervising the activities of
the Fund's custodian and transfer agent, providing assistance in connection
with meetings of the Board of Trustees and shareholders and other administra-
tive services necessary to conduct the Fund's business.
For those administrative services and facilities the Fund pays an account ad-
ministration fee to GSAM. The account administration fee is charged and allo-
cated to each shareholder account daily in the amount equal on an annual basis
to .13% of the Fund's average daily net assets.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of shares of the Fund pursuant to a Distribution Agreement with the
Trust. The Distributor will assist in the sale of shares of the Fund upon the
terms described herein. Goldman Sachs also serves as the Transfer Agent of the
Fund.
TAXES
The Fund is treated as a separate entity for federal income tax purposes 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, the Fund must satisfy certain requirements relating
to the sources of its income, diversification of its assets and distribution of
its income to shareholders. As a regulated investment compa-ny, the Fund 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 shareholders in accor-
dance with certain timing requirements of the Code.
Dividends paid by the Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss and original issue dis-
count or market discount income will be taxable to shareholders as ordinary in-
come. Dividends paid by the Fund from the excess of net long-term capital gain
over net short-term capital loss will be taxable as long-term capital gain re-
gardless of how long the shareholders have held their shares. These tax conse-
quences will apply to distributions of the Fund regardless of whether distribu-
tions are received in cash or reinvested in shares. Certain distributions paid
by the Fund in January of a given year will be taxable to shareholders as if
received on December 31 of the year in which they are declared. Shareholders
will be informed annually about the amount and character of distributions re-
ceived from the Fund for federal income tax purposes, including any distribu-
tions that may constitute a return of capital.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on the Fund's distributions if they
fail to furnish their correct taxpayer identification number and certain certi-
fications or if they are otherwise subject to backup withholding. Individuals,
corporations and other shareholders that are not U.S. persons under the Code
are subject to different tax rules and may be subject to nonresident alien
withholding at the rate of 30% (or a lower rate provided by an applicable tax
treaty) on amounts treated as ordinary dividends from the Fund.
If the Fund invests in foreign securities, it may be subject to foreign with-
holding or other foreign taxes on income earned on such securities and is ex-
pected to be unable to pass such taxes through to shareholders, who therefore
are not expected to
11
<PAGE>
include such taxes in income or be entitled to claim foreign tax credits or de-
ductions with respect to such taxes.
In addition to federal taxes, a shareholder may be subject to state, local or
foreign taxes on payments received from the Fund. A state income (and possibly
local income and/or intangible property) tax exemption is generally available
to the extent the Fund's distributions are derived from interest on (or, in the
case of intangibles taxes, the value 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. Shareholders should consult their
own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. New York time) on
each Business Day. Net asset value per share for each class of shares of the
Fund is calculated by determining the amount of net assets attributable to each
class of shares and dividing by the number of shares for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities market close early, the Fund re-
serves the right to cease accepting purchase and redemption orders for same
Business Day credit at the time PSA recommends that the securities market
close. On days the Fund closes early, purchases and redemption orders received
after the PSA recommended closing time will be credited for the next Business
Day. In addition, the Fund reserves the right to advance the time by which pur-
chase and redemption orders must be received for same Business Day credit as
permitted by the SEC.
The Fund's portfolio securities are valued at their amortized cost, which
does not take into ac count unrealized securities gains or losses. This method
involves initially valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any premium paid or discount received.
YIELD INFORMATION
From time to time, the Fund may advertise its yield and effective yield. The
yield of the Fund refers to the income generated by an investment in the Fund
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 Fund is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed rein-
vestment.
Investors should note that the investment results of the Fund are based on
historical performance and will fluctuate over time. Any presentation of the
Fund's yield or effective yield for any prior period should not be considered a
representation of what an investment may earn or what the Fund's yield or ef-
fective yield may be in any future period.
Yield and effective yield will be calculated separately for FST Shares, FST
Preferred Shares, FST Administration Shares and FST Service Shares. Because
each such class of shares is subject to different expenses, the net yield of
such classes of the Fund for the same period may differ. See "Organization and
Shares of the Trust" below.
ORGANIZATION AND SHARES OF THE TRUST
The Trust was formed as a business trust under the laws of The Commonwealth
of Massachusetts
12
<PAGE>
on December 6, 1978. The Trustees of the Trust are responsible for the overall
management and supervision of its affairs. The Declaration of Trust authorizes
the Trustees to classify or reclassify any series or portfolio of shares into
one or more classes. The Trustees have authorized the issuance of four classes
of shares of the Fund, which are: FST Shares, FST Preferred Shares, FST Admin-
istration Shares and FST Service Shares. (Institutions that provide services to
holders of FST Preferred Shares, FST Administration or Service Shares are re-
ferred to in this Prospectus as "Service Organizations").
When issued, shares are fully paid and nonassessable by the Trust. In the
event of liquidation, shareholders are entitled to share pro rata in the net
assets of the Fund available for distribution to such shareholders. Shares en-
title their holders to one vote per share, are freely transferable and have no
preemptive, subscription or conversion rights.
Shares of the Fund will be voted separately by Fund with respect to matters
pertaining to the Fund except for the election of Trustees and ratification of
independent accountants. For example, shareholders of the Fund are required to
approve the adoption of any investment advisory agreement relating to the Fund
and any changes in fundamental investment restrictions or policies of the Fund.
Approval by the shareholders of the Fund is effective only as to the Fund.
The Trust does not intend to hold annual shareholder 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 pur-
poses as are set forth above. The Trust will facilitate shareholder communica-
tion as required and in the manner prescribed by Section 16(c) of the Invest-
ment Company Act.
13
<PAGE>
ADMINISTRATION
The Fund has adopted a Preferred Administration Plan with respect to the FST
Preferred Shares which authorizes it to compensate Service Organizations for
providing account administration services to their customers who are beneficial
owners of such Shares. The Fund will enter into agreements with Service Organi-
zations which purchase FST Preferred Shares on behalf of their customers
("Service Agreements"). The Service Agreements will provide for compensation to
the Service Organization in an amount up to .10 of 1% (on an annualized basis)
of the average daily net asset value of the FST Preferred Shares of the Fund
attributable to or held in the name of the Service Organization for its custom-
ers. The services provided by a Service Organization may include acting, di-
rectly or through an agent, as the sole shareholder of record, maintaining ac-
count records for its customers, and processing orders to purchase and redeem
FST Preferred Shares for its customers.
Holders of FST Preferred Shares of the Fund will bear all expenses and fees
paid to Service Organizations with respect to such Shares as well as any other
expenses which are directly attributable to such Shares.
Service Organizations (other than broker-dealers) may charge other fees to
their customers who are the beneficial owners of FST Preferred Shares in con-
nection 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 the Fund.
All inquiries of beneficial owners of FST Preferred Shares of the Fund should
be directed to such owners' Service Organization.
PURCHASE OF SHARES
It is expected that all direct purchasers of FST Preferred Shares will be
Service Organizations or their nominees, which may purchase FST Preferred
Shares of the Fund through Goldman Sachs. Customers of Service Organizations
may invest in such shares only through their Service Organizations.
As set forth below, FST Preferred Shares of the Fund may be purchased on any
Business Day at the net asset value next determined after receipt from the
Service Organization of both the purchase order and the purchase price in Fed-
eral Funds. Purchase orders may be made by telephoning Goldman Sachs at 800-
621-2550 or by a written request addressed to Goldman Sachs, Attention: Share-
holder Services, Goldman Sachs Money Market Trust, 4900 Sears Tower, Chicago,
Illinois 60606. It is strongly recommended that payment be effected by wiring
Federal Funds to The Northern Trust Company ("Northern"), Chicago, Illinois, as
the sub-custodian for State Street Bank and Trust Company ("State Street").
Purchases of FST Preferred Shares may also be made by a Service Organization
by delivering a Federal Reserve draft or check payable to the Fund and drawn on
a U.S. bank to Goldman Sachs, Attention: Shareholder Services, Goldman Sachs
Money Market Trust, 4900 Sears Tower, Chicago, Illinois 60606. 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 receipt. FST Preferred Shares purchased by check may
not be redeemed until the check has cleared, as described under "Redemption of
Shares."
The Service Organizations are responsible for timely transmittal of purchase
orders to Goldman Sachs and Federal Funds to Northern. In order to facilitate
timely transmittal, the Service Organizations have established times by which
purchase orders and Federal Funds must be received by them.
14
<PAGE>
- --------------------------------------------------------------------------------
FST Preferred Shares of the Fund are deemed to have been purchased when an
order becomes effective and are entitled to dividends on FST Preferred Shares
purchased as follows:
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED FROM A SERVICE
ORGANIZATION BY GOLDMAN SACHS DIVIDENDS BEGIN
----------------------------------- ---------------
<C> <S> <C>
By: 3:00 p.m.--N.Y. time Same Business Day
- -------------------------------------------------------------
After: 3:00 p.m.--N.Y. 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.
FST Preferred Shares of the Fund are purchased at the net asset value per
share without the imposition of a sales charge.
Goldman Sachs, as the Fund's transfer agent, will maintain a complete record
of transactions and FST Preferred Shares held in each record holder'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 shares of the Fund. 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 the Fund (after adjustments) and are attributable to shares held by
such customers. Such compensation will not represent an additional expense to
the Fund or its shareholders, since it will be paid from assets of Goldman
Sachs or its affiliates.
MINIMUM INVESTMENT AND OTHER INFORMATION
The minimum requirement for investing in the Fund is $50 million ($10 million
if an investor satisfies the minimum initial investment in certain other series
of the Trust). The Trust and Goldman Sachs each reserves the right to waive the
minimum investment requirement. A Service Organization may impose a minimum
amount for initial and subsequent investments in FST Preferred Shares of the
Fund, and may establish other requirements such as a minimum account balance. A
Service Organization may effect redemptions of noncomplying accounts, and may
impose a charge for any special services rendered to its customers. Customers
should contact their Service Organizations for further information concerning
such requirements and charges. A Service Organization may purchase FST Pre-
ferred Shares in connection with sweep account programs.
SUBSEQUENT INVESTMENTS
There is no minimum amount required for subsequent investments. Orders for
the purchase of additional FST Preferred Shares should be accompanied by infor-
mation identifying the account in which FST Preferred Shares are to be pur-
chased.
REPORTS TO SHAREHOLDERS
The Trust will issue an annual report containing audited financial statements
and a semi-annual report to record holders of FST Preferred Shares of the Fund,
including Service Organizations who hold such Shares 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 Fund are
also reflected in regular statements issued by Goldman Sachs to shareholders of
record. The Service Organizations, as record holders of FST Preferred Shares,
will be responsible for providing
15
<PAGE>
similar services to their own customers who are the beneficial owners of such
Shares. 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 trans-
action.
DISTRIBUTIONS
All or substantially all of the Fund'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, as record owners of FST Administration Shares, monthly. Distri-
butions will be made in additional FST Preferred Shares of the Fund or, at the
election of a Service Organization, in cash. The election to reinvest dividends
and distributions or receive them in cash may be changed by a Service Organiza-
tion at any time upon written notice to Goldman Sachs. If no election is made,
all dividends 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 accordance with the requirements
of the Code and may be reflected in the Fund's daily distributions. The Fund
may distribute at least annually its long-term capital gains, if any, after re-
duction by available capital losses. In order to avoid excessive fluctuations
in the amount of monthly capital gains distributions, a portion of any net cap-
ital gains realized on the disposition of securities during the months of No-
vember and December may be distributed during the subsequent calendar year. Al-
though realized gains and losses on the assets of the Fund are reflected in the
net asset value of the Fund, they are not expected to be of an amount which
would affect the Fund's net asset value of $1.00 per share.
The Fund's net investment income consists of the excess of (i) accrued inter-
est or discount (including both original issue and market discount on taxable
securities) on portfolio securities, and (ii) any income of the Fund from
sources other than capital gains over (iii) the amortization of market premium
on all portfolio securities and (iv) the estimated expenses of the Fund, in-
cluding a proportionate share of the general expenses of the Trust.
REDEMPTION OF SHARES
HOW TO REDEEM
Customers of Service Organizations may redeem FST Preferred Shares of the
Fund through their respective Service Organizations. The Service Organizations
are responsible for the transmittal of redemption requests by their customers
to Goldman Sachs. In order to facilitate timely transmittal of redemption re-
quests, Service Organizations have established procedures by which redemption
requests must be made and times by which redemption re-quests must be received
by them. Additional documentation may be required when deemed appropriate by a
Service Organization.
A Service Organization as the record holder of FST Preferred Shares may then
redeem such Shares without charge upon request on any Business Day at the net
asset value next determined after receipt by Goldman Sachs of the redemption
request. Redemption requests may be made by telephoning Goldman Sachs at 800-
621-2550 or by a written request addressed to Goldman Sachs, Attention: Share-
holder Services, Goldman Sachs Money Market Trust, 4900 Sears Tower, Chicago,
Illinois 60606. A Service Organization may request redemptions by telephone
only if the optional telephone redemption privilege has been elected on the Ac-
count Information Form. It may be difficult to implement redemptions by tele-
phone in times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than that
designated on the Account Information Form must be in writing and signed by an
au-
16
<PAGE>
thorized person designated on the Account Information Form. Any such written
request is also confirmed by telephone with both the requesting party and the
designated bank account to verify instructions. Other procedures may be imple-
mented 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 Trust nor Goldman Sachs will be respon-
sible for the authenticity of redemption instructions received by telephone.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs by the
recordholder of FST Preferred Shares. The payment of redemption proceeds for
FST Preferred Shares recently purchased by check will be delayed for up to 15
days until the check has cleared.
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
record holder of FST Preferred Shares.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST
RECEIVED FROM REDEMPTION
SERVICE ORGANIZATION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
-------------------- ---------- ---------
<C> <S> <C> <C>
By: 3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ---------------------------------------------------------------------------
After: 3:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- ---------------------------------------------------------------------------
</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 FST Preferred Shareholder's Service Organization in the transfer
process. If a problem with such performance arises, the FST Preferred Share-
holder should deal directly with such intermediaries or Service Organization.
OTHER REDEMPTION INFORMATION
A minimum account balance of $50 million in the Fund ($10 million if an in-
vestor satisfies the minimum initial investment in certain other series of the
Trust) is required to remain a FST Preferred Shareholder. The Fund may redeem
all of the FST Preferred Shares of any FST Preferred Shareholder whose account
in the Fund has a net asset value which is less than the minimum described
above. The Trust will give sixty (60) days' prior written notice to such Share-
holders whose FST Preferred Shares are being redeemed to allow them to purchase
sufficient additional FST Preferred Shares of the Fund to avoid such
redemption.
----------------
17
<PAGE>
Subject to completion dated January ____, 1996
This Preliminary Statement of Additional Information relates only to Financial
Square Prime Rated Fund. Investors seeking information regarding any other
series of the Trust should obtain a copy of the currently effective Statement of
Additional Information, dated March 15, 1995.
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE FUNDS
4900 Sears Tower, Chicago, Illinois 60606
- ----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION - MARCH 15, 1995 AS
SUPPLEMENTED JANUARY _______, 1996.
FST SHARES
- ----------------------------------------------------------------
Goldman Sachs Money Market Trust (the "Trust") is a no-load, open-end,
diversified, management investment company (or mutual fund) which includes the
Financial Square Funds. This Statement of Additional Information relates solely
to the offering of FST Shares of Financial Square Prime Obligations Fund ("Prime
Obligations Fund"), Financial Square Prime Rated Money Market Fund ("Prime Rated
Fund"), Financial Square Money Market Fund ("Money Market Fund"), Financial
Square Treasury Obligations Fund ("Treasury Obligations Fund"), Financial Square
Government Fund ("Government Fund"), Financial Square Tax-Free Money Market Fund
("Tax-Free Fund") and Financial Square Municipal Money Market Fund ("Municipal
Fund") (individually, a "Fund" and collectively the "Funds").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds'
investment adviser and administrator. Goldman Sachs serves as the Funds'
distributor and transfer agent.
The Goldman Sachs Mutual Funds Group ("MFG") offers banks, corporate cash
managers, investment advisers and other institutional investors a family of
professionally-managed mutual funds, including money market, fixed income and
equity funds, and a range of related services. MFG is part of GSAM. All
products are designed to provide clients with the benefit of the expertise of
GSAM and its affiliates in security selection, asset allocation, portfolio
construction and day-to-day management.
<PAGE>
The hallmark of MFG is personalized service, which reflects the priority that
Goldman Sachs places on serving clients' interests. As Goldman Sachs clients,
shareholders will be assigned an Account Administrator ("AA"), who is ready to
help shareholders with questions concerning their accounts. During business
hours, shareholders can call their AA through a toll-free number to place
purchase or redemption orders or obtain Fund and account information. The AA
can also answer inquiries about rates of return and portfolio
composition/holdings, and guide shareholders through operational details. A
Goldman Sachs client can also utilize the SMART/SM/ personal computer software
system which allows shareholders to purchase or redeem shares and also obtain
Fund and account information directly.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus relating to FST Shares dated March 15, 1995,
as supplemented on January ________, 1996, a copy of which may be obtained
without charge by calling Goldman Sachs at 800-621-2550 or by writing Goldman
Sachs, 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
Page in
Statement of
Additional
Information
-------------
Investment Policies and Practices
of the Funds 4
Investment Limitations 17
Trustees and Officers 21
The Adviser, Administrator,
Distributor and Transfer Agent 26
Portfolio Transactions 30
Net Asset Value 32
Redemptions 34
Calculation of Yield Quotations 35
Tax Information 37
Organization and Capitalization 42
Custodian and Subcustodian 45
Independent Accountants 45
Financial Statements 45
Appendix A (Description of Securities
Ratings) A-1
3
<PAGE>
Subject to completion dated January __, 1996
This Preliminary Statement of Additional Information relates only to Financial
Square Prime Rated Fund. Investors seeking information regarding any other
series of the Trust should obtain a copy of the currently effective Statement of
Additional Information, dated March 15, 1995.
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE FUNDS
4900 Sears Tower, Chicago, Illinois 60606
- ----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION - MARCH 15, 1995 AS
SUPPLEMENTED JANUARY _____, 1996
FST ADMINISTRATION SHARES
- ----------------------------------------------------------------
Goldman Sachs Money Market Trust (the "Trust") is a no-load, open-end,
diversified, management investment company (or mutual fund) which includes the
Financial Square Funds. This Statement of Additional Information relates solely
to the offering of FST Administration Shares of Financial Square Prime
Obligations Fund ("Prime Obligations Fund"), Financial Square Prime Rated Money
Market Fund ("Prime Rated Fund"), Financial Square Money Market Fund ("Money
Market Fund"), Financial Square Treasury Obligations Fund ("Treasury Obligations
Fund"), Financial Square Government Fund ("Government Fund"), Financial Square
Tax-Free Money Market Fund ("Tax-Free Fund") and Financial Square Municipal
Money Market Fund ("Municipal Fund")(individually, a "Fund" and collectively the
"Funds").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds'
investment adviser and administrator. Goldman Sachs serves as the Funds'
distributor and transfer agent.
The Goldman Sachs Mutual Funds Group ("MFG") offers banks, corporate cash
managers, investment advisers and other institutional investors a family of
professionally-managed mutual funds, including money market, fixed income and
equity funds, and a range of related services. MFG is part of GSAM. All
products are designed to provide clients with the benefit of the expertise of
GSAM and its affiliates in security selection, asset allocation, portfolio
construction and day-to-day management.
The hallmark of MFG is personalized service, which reflects the priority that
Goldman Sachs places on serving clients' interests. As Goldman Sachs clients,
shareholders will be assigned an Account Administrator ("AA"), who is ready to
help shareholders
<PAGE>
with questions concerning their accounts. During business hours, service
organizations can call their AA through a toll-free number to place purchase or
redemption orders or obtain Fund and account information. The AA can also
answer inquiries about rates of return and portfolio composition and holdings,
and guide service organizations through operational details. A Goldman Sachs
client can also utilize the SMART/SM/ personal computer software system which
allows shareholders to purchase or redeem shares and also obtain Fund and
account information directly.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus relating to FST Administration Shares dated
March 15, 1995, as supplemented on January ______, 1996, a copy of which may
be obtained without charge from institutions ("Service Organizations") that
hold, directly or through an agent, FST Administration Shares for the benefit of
their customers, or by calling Goldman Sachs at 800-621-2550 or by writing
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
------------
<S> <C>
Investment Policies and Practices of the Funds.. 4
Investment Limitations.......................... 17
Trustees and Officers........................... 21
The Adviser, Administrator, Distributor
and Transfer Agent............................ 26
Portfolio Transactions.......................... 30
Net Asset Value................................. 32
Redemptions..................................... 34
Calculation of Yield Quotations................. 35
Tax Information................................. 37
Organization and Capitalization................. 42
Custodian and Subcustodian...................... 45
Independent Accountants......................... 45
Financial Statements............................ 45
Administration Plan............................. 46
Appendix A (Description of Securities Ratings).. A-1
</TABLE>
3
<PAGE>
Subject to completion dated Janaury ____, 1996
This Preliminary Statement of Additional Information relates only to Financial
Square Prime Rated Fund. Investors seeking information regarding any other
series of the Trust should obtain a copy of the currently effective Statement of
Additional Information, dated March 15, 1995.
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE FUNDS
4900 Sears Tower, Chicago, Illinois 60606
- ----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION - MARCH 15, 1995 AS
SUPPLEMENTED JANUARY ______, 1996.
FST SERVICE SHARES
- ----------------------------------------------------------------
Goldman Sachs Money Market Trust (the "Trust") is a no-load, open-end,
diversified, management investment company (or mutual fund) which includes the
Financial Square Funds. This Statement of Additional Information relates solely
to the offering of FST Service Shares of Financial Square Prime Obligations Fund
("Prime Obligations Fund"), Financial Square Prime Rated Money Market Fund
("Prime Rated Fund"), Financial Square Money Market Fund ("Money Market Fund"),
Financial Square Treasury Obligations Fund ("Treasury Obligations Fund"),
Financial Square Government Fund ("Government Fund"), Financial Square Tax-Free
Money Market Fund ("Tax-Free Fund") and Financial Square Municipal Money Market
Fund ("Municipal Fund")(individually, a "Fund" and collectively the "Funds").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds'
investment adviser and administrator. Goldman Sachs serves as the Funds'
distributor and transfer agent.
The Goldman Sachs Mutual Funds Group ("MFG") offers banks, corporate cash
managers, investment advisers and other institutional investors a family of
professionally-managed mutual funds, including money market, fixed income and
equity funds, and a range of related services. MFG is part of GSAM. All
products are designed to provide clients with the benefit of the expertise of
GSAM and its affiliates in security selection, asset allocation, portfolio
construction and day-to-day management.
The hallmark of MFG is personalized service, which reflects the priority that
Goldman Sachs places on serving clients' interests. As Goldman Sachs clients,
shareholders will be assigned an Account Administrator ("AA"), who is ready to
help shareholders with questions concerning their accounts. During business
hours, service organizations can call their AA through a toll-free
<PAGE>
number to place purchase or redemption orders or obtain Fund and account
information. The AA can also answer inquiries about rates of return and
portfolio composition and holdings, and guide service organizations through
operational details. A Goldman Sachs client can also utilize the SMART/SM/
personal computer software system which allows shareholders to purchase or
redeem shares and also obtain Fund and account information directly.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus relating to FST Service Shares dated March
15, 1995, as supplemented on January ______, 1996, a copy of which may be
obtained without charge from institutions ("Service Organizations") that hold,
directly or through an agent, FST Service Shares for the benefit of their
customers, or by calling Goldman Sachs at 800-621-2550 or by writing Goldman
Sachs, 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
------------
<S> <C>
Investment Policies and Practices of the
Funds................................ 4
Investment Limitations.................... 17
Trustees and Officers..................... 21
The Adviser, Administrator, Distributor
and Transfer Agent................... 26
Portfolio Transactions.................... 30
Net Asset Value........................... 32
Redemptions............................... 34
Calculation of Yield Quotations........... 35
Tax Information........................... 37
Organization and Capitalization........... 42
Custodian and Subcustodian................ 45
Independent Accountants................... 45
Financial Statements...................... 45
Service Plan.............................. 46
Appendix A (Description of Securities
Ratings)............................. A-1
</TABLE>
3
<PAGE>
Subject to completion dated January ____, 1996
This Preliminary Statement of Additional Information relates only to Financial
Square Prime Rated Fund. Investors seeking information regarding any other
series of the Trust should obtain a copy of the currently effective Statement of
Additional Information, dated March 15, 1995.
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE FUNDS
4900 Sears Tower, Chicago, Illinois 60606
- ----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION - MARCH 15, 1995 AS
SUPPLEMENTED JANUARY ______, 1996.
FST PREFERRED SHARES
- ----------------------------------------------------------------
Goldman Sachs Money Market Trust (the "Trust") is a no-load, open-end,
diversified, management investment company (or mutual fund) which includes the
Financial Square Funds. This Statement of Additional Information relates solely
to the offering of FST Preferred Shares of Financial Square Prime Rated Money
Market Fund ("Prime Rated Fund"), Financial Square Prime Obligations Fund
("Prime Obligations Fund"), Financial Square Money Market Fund ("Money Market
Fund"), Financial Square Treasury Obligations Fund ("Treasury Obligations
Fund"), Financial Square Government Fund ("Government Fund"), Financial Square
Tax-Free Money Market Fund ("Tax-Free Fund") and Financial Square Municipal
Money Market Fund ("Municipal Fund")(individually, a "Fund" and collectively the
"Funds").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the
Funds' investment adviser and administrator. Goldman Sachs serves as the Funds'
distributor and transfer agent.
The Goldman Sachs Mutual Funds Group ("MFG") offers banks, corporate
cash managers, investment advisers and other institutional investors a family of
professionally-managed mutual funds, including money market, fixed income and
equity funds, and a range of related services. MFG is part of GSAM. All
products are designed to provide clients with the benefit of the expertise of
GSAM and its affiliates in security selection, asset allocation, portfolio
construction and day-to-day management.
The hallmark of MFG is personalized service, which reflects the
priority that Goldman Sachs places on serving clients' interests. As Goldman
Sachs clients, shareholders will be assigned an Account Administrator ("AA"),
who is ready to help shareholders with questions concerning their accounts.
During business hours, service organizations can call their AA through a
<PAGE>
toll-free number to place purchase or redemption orders or obtain Fund and
account information. The AA can also answer inquiries about rates of return and
portfolio composition and holdings, and guide service organizations through
operational details. A Goldman Sachs client can also utilize the SMART/SM/
personal computer software system which allows shareholders to purchase or
redeem shares and also obtain Fund and account information directly.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus relating to FST Preferred Shares dated
March 15, 1995, as supplemented on January ______, 1996, a copy of which may
be obtained without charge from institutions ("Service Organizations") that
hold, directly or through an agent, FST Preferred Shares for the benefit of
their customers, or by calling Goldman Sachs at 800-621-2550 or by writing
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
------------
<S> <C>
Investment Policies and Practices of the
Funds................................ 4
Investment Limitations.................... 17
Trustees and Officers..................... 21
The Adviser, Administrator, Distributor
and Transfer Agent................... 26
Portfolio Transactions.................... 30
Net Asset Value........................... 32
Redemptions............................... 34
Calculation of Yield Quotations........... 35
Tax Information........................... 37
Organization and Capitalization........... 42
Custodian and Subcustodian................ 45
Independent Accountants................... 45
Financial Statements...................... 45
Preferred Administration Plan............. 46
Appendix A (Description of Securities
Ratings)............................. A-1
</TABLE>
3
<PAGE>
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
The following discussion elaborates on the description of each Fund's investment
policies and practices contained in the Prospectus:
U.S. GOVERNMENT SECURITIES
- --------------------------
Each Fund may invest in separately traded principal and interest components of
securities issued or guaranteed by the U.S. Treasury. The principal and
interest components of selected securities are traded independently under the
Separate Trading of Registered Interest and Principal of Securities program
("STRIPS"). Under the STRIPS program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently.
CUSTODIAL RECEIPTS
- ------------------
Each Fund (other than Treasury Obligations Fund and Government Fund) may also
acquire custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Government notes or bonds. Such
notes and bonds are held in custody by a bank on behalf of the owners. These
custodial receipts are known by various names, including "Treasury Receipts,"
"Treasury Investors Growth Receipts" ("TIGR's"), and "Certificates of Accrual on
Treasury Securities" ("CATS"). Although custodial receipts are not considered
U.S. Government securities for certain securities law purposes, they are
indirectly issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities.
BANK AND CORPORATE OBLIGATIONS
- ------------------------------
Each Fund (other than Treasury Obligations Fund and Government Fund) may invest
in commercial paper. Commercial paper represents short-term unsecured
promissory notes issued in bearer form by banks or bank holding companies,
corporations, and finance companies. The commercial paper purchased by the
Funds consists of direct U.S. dollar denominated obligations of domestic, or in
the case of Money Market Fund, foreign issuers. Bank obligations in which the
Funds may invest include certificates of deposit, bankers' acceptances, fixed
time deposits and bank notes. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect, that the bank unconditionally agrees to pay the
face value of the instrument on maturity. Fixed time deposits are bank
obligations
4
<PAGE>
payable at a stated maturity date and bearing interest at a fixed rate. Fixed
time deposits may be withdrawn on demand by the investor, but may be subject to
early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. Bank notes and bankers'
acceptances rank junior to domestic deposit liabilities of the bank and pari
passu with other senior, unsecured obligations of the bank. Bank notes are not
insured by the Federal Deposit Insurance Corporation or any other insurer.
Deposit notes are insured by the Federal Deposit Insurance Corporation only to
the extent of $100,000 per depositor per bank.
Prime Obligations Fund, Prime Rated Fund and Money Market Fund may invest in
funding agreements. A funding agreement is a contract between an issuer and a
purchaser that obligates the issuer to pay a guaranteed rate of interest on a
principal sum deposited by the purchaser. Funding agreements will also
guarantee the return of principal and may guarantee a stream of payments over
time. A funding agreement has a fixed maturity date and may have either a fixed
rate or variable interest rate that is based on an index and guaranteed for a
set time period. Because there is no secondary market for these investments,
any such funding agreement purchased by a Fund will be regarded as illiquid.
REPURCHASE AGREEMENTS
- ---------------------
Each Fund (other than Treasury Obligations Fund) may enter into repurchase
agreements with selected broker-dealers, banks or other financial institutions.
Treasury Obligation Fund may only enter into repurchase agreements with primary
dealers in U.S. Government Securities. A repurchase agreement is an arrangement
under which the purchaser (i.e., the Fund) purchases a U.S. Government security
or other high quality short-term debt obligation (the "Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price.
Custody of the Obligation will be maintained by the Funds' custodian or
subcustodian. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price on repurchase. In either case, the income to a Fund is
unrelated to the interest rate on the Obligation subject to the repurchase
agreement.
Repurchase agreements pose certain risks for all entities, including the Funds,
that utilize them. Such risks are not unique to the Funds but are inherent in
repurchase agreements. The Funds seek to minimize such risks by, among others,
the means indicated below, but because of the inherent legal uncertainties
5
<PAGE>
involved in repurchase agreements, such risks cannot be eliminated.
For purposes of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and for federal income tax purposes, a repurchase agreement is
deemed to be a loan from a Fund to the seller of the Obligation. It is not
clear whether for other purposes a court would consider the Obligation purchased
by a Fund subject to a repurchase agreement as being owned by a Fund or as being
collateral for a loan by the Fund to the seller.
If, in the event of bankruptcy or insolvency proceedings against the seller of
the Obligation, a court holds that a Fund does not have a perfected security
interest in the Obligation, a Fund may be required to return the Obligation to
the seller's estate and be treated as an unsecured creditor of the seller. As
an unsecured creditor, a Fund would be at risk of losing some or all of the
principal and income involved in the transaction. To minimize this risk, the
Funds utilize custodians and subcustodians that the Adviser believes follow
customary securities industry practice with respect to repurchase agreements,
and the Adviser analyzes the creditworthiness of the obligor, in this case the
seller of the Obligation. But because of the legal uncertainties, this risk,
like others associated with repurchase agreements, cannot be eliminated.
Also, in the event of commencement of bankruptcy or insolvency proceedings with
respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, a Fund may encounter delay and incur costs before
being able to sell the security. Such a delay may involve loss of interest or a
decline in the price of the Obligation.
Apart from risks associated with bankruptcy or insolvency proceedings, there is
also the risk that the seller may fail to repurchase the security. However, if
the market value of the Obligation subject to the repurchase agreement becomes
less than the repurchase price (including accrued interest), the Fund will
direct the seller of the Obligation to deliver additional securities so that the
market value of all securities subject to the repurchase agreement equals or
exceeds the repurchase price.
Certain repurchase agreements 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 regarded as liquid instruments.
In addition, the Funds, together with other registered investment 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.
6
<PAGE>
FOREIGN SECURITIES
- ------------------
Money Market Fund and Prime Rated Fund may invest in foreign securities and in
certificates of deposit, bankers' acceptances and fixed time deposits and other
obligations issued by major foreign banks, foreign branches of U.S. banks, U.S.
branches of foreign banks and foreign branches of foreign banks. Investments
can include fixed time deposits in Cayman Island branches of such banks. Tax-
Free Fund and Municipal Fund may also invest in municipal instruments backed by
letters of credit issued by certain of such banks. Under current Securities and
Exchange Commission ("SEC") rules relating to the use of the amortized cost
method of portfolio securities valuation, Money Market Fund and Prime Rated Fund
are restricted to purchasing U.S. dollar denominated securities, but they are
not otherwise precluded from purchasing securities of foreign issuers.
Investments in foreign securities and bank obligations may involve
considerations different from investments in domestic securities due to limited
publicly available information; non-uniform accounting standards; the possible
imposition of withholding or confiscatory taxes; the possible adoption of
foreign governmental restrictions affecting the payment of principal and
interest; expropriation; or other adverse political or economic developments.
In addition, it may be more difficult to obtain and enforce a judgment against a
foreign issuer or a foreign branch of a domestic bank.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
- ----------------------------------------------
Each of Money Market Fund and Prime Rated Fund may invest up to 5% of their net
assets in asset-backed and receivables-backed securities. Asset-backed and
receivables backed securities represent participations in, or are secured by
and payable from, pools of assets such as motor vehicle installment sale
contracts, installment loan contracts, leases of various types of real and
personal property, receivables from revolving credit (credit card) agreements,
corporate securities and other categories of receivables. Such asset pools are
securitized through the use of privately-formed trusts or special purpose
vehicles. Payments or distributions of principal and interest may be guaranteed
up to certain amounts and for a certain time period by a letter of credit or a
pool insurance policy issued by a financial institution, or other credit
enhancements may be present. The value of a Fund's investments in asset-backed
and receivables-backed securities may be adversely affected by prepayment of the
underlying obligations. In addition, the risk of prepayment may cause the value
of these investments to be more volatile than Money Market Fund's or Prime Rated
Fund's other investments.
Through the use of trusts and special purpose corporations, various types of
assets, including automobile loans, computer leases, trade receivables and
credit card receivables, are being securitized in pass-through structures
similar to the mortgage
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<PAGE>
pass-through structures. Consistent with its investment objective and policies,
each of Money Market Fund and Prime Rated Fund may invest up to 5% of its net
assets in these and other types of asset-backed securities that may be developed
in the future. However, Money Market Fund and Prime Rated Fund will generally
not invest in an asset-backed security if the income received with respect to
such investment constitutes rental income or other income not treated as
qualifying income under the 90% test described in "Tax Information" below. In
general, the collateral supporting these securities is of shorter maturity than
mortgage loans and is less likely to experience substantial prepayments in
response to interest rate fluctuations.
Money Market Fund and Prime Rated Fund may invest in new types of asset-backed
securities that may be developed in the future to the extent consistent with
their investment objective and policies. This Statement of Additional
Information will be amended or supplemented as necessary to reflect Money Market
Fund's or Prime Rated Fund's intention to invest in asset-backed securities with
characteristics that are materially different from the securities described in
the preceding paragraph.
As set forth above, several types of asset-backed and receivables-backed
securities have already been offered to investors, including, for example,
Certificates for Automobile Receivables/sm/ ("CARS/sm/") and interests in pools
of credit card receivables. CARS/sm/ represent undivided fractional interests
in a trust ("CAR Trust") whose assets consist of a pool of motor vehicle retail
installment sales contracts and security interests in the vehicles securing the
contracts. Payments of principal and interest on CARS/sm/ are passed through
monthly to certificate holders, and are guaranteed up to certain amounts and for
a certain time period by a letter of credit issued by a financial institution
unaffiliated with the trustee or originator of the CAR Trust. An investor's
return on CARS/sm/ may be affected by early prepayment of principal on the
underlying vehicle sales contracts. If the letter of credit is exhausted, the
CAR Trust may be prevented from realizing the full amount due on a sales
contract because of state law requirements and restrictions relating to
foreclosure sales of vehicles and the obtaining of deficiency judgments
following such sales or because of depreciation, damage or loss of a vehicle,
the application of federal and state bankruptcy and insolvency laws, or other
factors. As a result, certificate holders may experience delays in payments or
losses if the letter of credit is exhausted.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the
benefit of any security interest in the related assets. Credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which give such
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. There is the
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possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities.
Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures
by obligors on underlying assets to make payments, the securities may contain
elements of credit support which fall into two categories: (i) liquidity
protection and (ii) protection against losses resulting from ultimate default
by an obligor or servicer. Liquidity protection refers to the provision of
advances, generally by the entity administering the pool of assets, to ensure
that the receipt of payments on the losses results from payment of the insurance
obligations on at least a portion of the assets in the pool. This protection
may be provided through guarantees, policies or letters of credit obtained by
the issuer or sponsor from third parties, through various means of structuring
the transactions or through a combination of such approaches. The degree of
credit support provided for each issue is generally based on historical
information reflecting the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated or failure of the
credit support could adversely affect the value of or return on an investment in
such a security.
The availability of asset-backed securities may be affected by legislative or
regulatory developments. It is possible that such developments could require
Money Market Fund or Prime Rated Fund to dispose of any of their respective then
existing holdings of such securities.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
- ----------------------------------------------
Each Fund may purchase securities on a when-issued basis or purchase or sell
securities on a forward commitment basis. These transactions involve a
commitment by the Fund to purchase or sell securities at a future date. The
price of the underlying securities (usually expressed in terms of yield) and the
date when the securities will be delivered and paid for (the settlement date)
are fixed at the time the transaction is negotiated. When-issued purchases and
forward commitment transactions are negotiated directly with the other party,
and such commitments are not traded on exchanges, but may be traded over-the-
counter.
A Fund will purchase securities on a when-issued basis or purchase or sell
securities on a forward commitment basis only with the intention of completing
the transaction and actually purchasing or selling the securities. If deemed
advisable as a matter of investment strategy, however, a Fund may dispose of or
renegotiate a commitment after entering into it. A Fund also may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. The Fund may realize a capital gain or loss in
connection with these transactions. For purposes of determining the Fund's
average dollar
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weighted maturity, the maturity of when-issued or forward commitment securities
will be calculated from the commitment date.
When a Fund purchases securities on a when-issued or forward commitment basis,
the Fund's custodian or subcustodian will maintain in a segregated account cash
or liquid high grade debt securities having a value (determined daily) at least
equal to the amount of the Fund's purchase commitments. In the case of a
forward commitment to sell portfolio securities subject to such commitment, the
custodian or subcustodian will hold the portfolio securities in a segregated
account while the commitment is outstanding. These procedures are designed to
ensure that the Fund will maintain sufficient assets at all times to cover its
obligations under when-issued purchases and forward commitments.
VARIABLE AMOUNT MASTER DEMAND NOTES
- -----------------------------------
Each Fund (other than Treasury Obligations Fund) may purchase variable amount
master demand notes. These obligations permit the investment of fluctuating
amounts at varying rates of interest pursuant to direct arrangements between a
Fund, as lender, and the borrower. Variable amount master demand notes are
direct lending arrangements between the lender and borrower and are not
generally transferable nor are they ordinarily rated. A Fund may invest in them
only if the Adviser believes that the notes are of comparable quality to the
other obligations in which the Fund may invest.
VARIABLE RATE AND FLOATING RATE DEMAND INSTRUMENTS
- --------------------------------------------------
Each Fund (other than Treasury Obligations Fund) may purchase variable and
floating rate demand instruments that are tax exempt municipal obligations or
other debt securities that possess a floating or variable interest rate
adjustment formula. These instruments permit a Fund to demand payment of the
principal balance plus unpaid accrued interest upon a specified number of days'
notice to the issuer or its agent. The demand feature may be backed by a bank
letter of credit or guarantee issued with respect to such instrument.
The terms of the variable or floating rate demand instruments that a Fund may
purchase provide that interest rates are adjustable at intervals ranging from
daily up to six months, and the adjustments are based upon current market
levels, the prime rate of a bank or other appropriate interest rate adjustment
index as provided in the respective instruments. Some of these instruments are
payable on demand on a daily basis or on not more than seven days' notice.
Others, such as instruments with quarterly or semiannual interest rate
adjustments, may be put back to the issuer on designated days on not more than
thirty days' notice. Still others are automatically called by the issuer unless
a Fund instructs otherwise. The Trust, on behalf of a Fund, intends to exercise
the demand only (1) upon a default under the terms of the debt security, (2) as
needed to provide liquidity to a Fund,
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(3) to maintain the respective quality standards of a Fund's investment
portfolio, or (4) to attain a more optimal portfolio structure. A Fund will
determine the variable or floating rate demand instruments that it will purchase
in accordance with procedures approved by the Trustees to minimize credit risks.
Accordingly, any variable or floating rate demand instrument must satisfy a
Fund's credit criteria with respect to both its long-term and short-term
ratings, except that where credit support is provided, a Fund may rely solely
upon the short-term rating of the variable or floating rate demand instrument,
i.e., the right to sell. To be eligible for purchase of a Fund, a variable or
floating rate demand instrument which is unrated must have quality
characteristics similar to those of other obligations in which the Fund may
invest. The Adviser may determine that an unrated variable or floating rate
demand instrument meets a Fund's quality criteria by reason of being backed by a
letter of credit or guarantee issued by a bank that meets the quality criteria
for a Fund. Thus, either the credit of the issuer of the obligation or the
guarantor bank or both will meet the quality standards of the Fund.
The maturity of the variable or floating rate demand instruments held by a Fund
will ordinarily be deemed to be the longer of (1) the notice period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (2) the period remaining until the instrument's next interest
rate adjustment. The acquisition of variable or floating rate demand notes for
a Fund must also meet the requirements of rules issued by the SEC applicable to
the use of the amortized cost method of securities valuation.
Each Fund (other than Treasury Obligations Fund and Government Fund) and may
invest in participation interests in variable or floating rate tax-exempt
obligations held by financial institutions (usually commercial banks). Such
participation interests provide a Fund with a specific undivided interest (up to
100%) in the underlying obligation and the right to demand payment of its
proportional interest in the unpaid principal balance plus accrued interest
from the financial institution upon a specific number of days' notice. In
addition, the participation interest generally is backed by an irrevocable
letter of credit or guarantee from the institution. The financial institution
usually is entitled to a fee for servicing the obligation and providing the
letter of credit.
RESTRICTED AND OTHER ILLIQUID SECURITIES
- ----------------------------------------
A Fund may purchase securities that are not registered ("re-stricted
securities") under the Securities Act of 1933, as amended ("1933 Act"),
including restricted securities offered and sold to "qualified institutional
buyers" under Rule 144A under the 1933 Act. However, a Fund will not invest
more than 10% of the value of its net assets in securities which are illiquid,
which includes fixed time deposits and repurchase agreements
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<PAGE>
maturing in more than seven days that cannot be traded on a secondary market and
restricted securities, unless, in the case of restricted securities, the Board
of Trustees determines, based upon a continuing review of the trading markets
for the specific restricted security, that such restricted securities are
liquid. The Board of Trustees may adopt guidelines and delegate to the Adviser
the daily function of determining and monitoring liquidity of restricted
securities. The Board of Trustees, 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 securities eligible for resale
under Rule 144A will continue to be liquid, the Board of Trustees will carefully
monitor each Fund's investments 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 Fund to the extent that qualified institutional buyers become
for a time uninterested in purchasing these restricted securities.
MUNICIPAL OBLIGATIONS
- ---------------------
Prime Obligations Fund, Prime Rated Fund, Money Market Fund, Tax-Free Fund and
Municipal Fund may invest in municipal obligations. Municipal obligations are
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 to obtain funds for various
public purposes. The interest on most of these obligations is generally exempt
from regular federal income tax. The two principal classifications of
municipal obligations are "notes" and "bonds."
Notes. Municipal notes are generally used to provide for short-term capital
needs and generally have maturities of one year or less. Municipal notes
include tax anticipation notes, revenue anticipation notes, bond anticipation
notes, tax and revenue anticipation notes, construction loan notes, tax-exempt
commercial paper and certain receipts for municipal obligations.
Tax anticipation notes are sold to finance working capital needs of
municipalities. They are generally payable from specific tax revenues expected
to be received at a future date. They are usually general obligations of the
issuer, secured by the taxing power for payment of principal and interest.
Revenue anticipation notes are issued in expectation of receipt of other types
of revenue such as federal revenues available under the Federal Revenue Sharing
Program. Tax anticipation notes and revenue anticipation notes are generally
issued in anticipation of various seasonal revenues such as income, sales, use,
and business taxes. Bond anticipation notes are sold to provide interim
financing in anticipation of long-term financing in the market. In most cases,
these monies provide for the repayment of the notes. Construction loan notes are
sold to provide construction
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<PAGE>
financing. These notes are secured by mortgage notes insured by the Federal
Housing Authority; however, the proceeds from the issuance may be less than the
economic equivalent of the payment of principal and interest on the mortgage
note if there had been a default. Tax-exempt commercial paper consists of
short-term unsecured promissory notes issued by a state or local government or
an authority or agency thereof. The Funds which invest in Municipal Obligations
may also acquire securities in the form of custodial receipts which evidence
ownership of future interest payments, principal payments or both on certain
state and local governmental and authority obligations where, in the opinion of
bond counsel, interest payments with respect to such custodial receipts are
excluded from gross income for federal income tax purposes. Such obligations
are held in custody by a bank on behalf of the holders of the receipts. These
custodial receipts are known by various names, including "Municipal Receipts"
("MRs") and "Municipal Certificates of Accrual on Tax-Exempt Securities" ("M-
CATS"). There are a number of other types of notes issued for different
purposes and secured differently from those described above.
Bonds. Municipal bonds, which generally meet longer term capital needs and have
maturities of more than one year when issued, have two principal
classifications, "general obligation" bonds and "revenue" bonds.
General obligation bonds are issued by entities such as states, counties,
cities, towns and regional districts and are used to fund a wide range of public
projects including the construction or improvement of schools, highways and
roads, water and sewer systems and a variety of other public purposes. The
basic security of general obligation bonds is the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest. The taxes
that can be levied for the payment of debt service may be limited or unlimited
as to rate or amount or special assessments.
Revenue bonds have been issued to fund a wide variety of capital projects
including: electric, gas, water and sewer systems; highways, bridges and
tunnels; port and airport facilities; colleges and universities; and hospitals.
The principal security for a revenue bond is generally the net revenues derived
from a particular facility or group of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may also be
used to make principal and interest payments on the issuer's obligations.
Housing finance authorities have a wide range of security including partially or
fully insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a
state's ability (without obligation) to make up deficiencies in
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<PAGE>
the debt service reserve fund. Lease rental revenue bonds issued by a state or
local authority for capital projects are secured by annual lease rental payments
from the state or locality to the authority sufficient to cover debt service on
the authority's obligations.
Private activity bonds (a term that includes certain types of bonds, the
proceeds of which are used to a specified extent for the benefit of persons
other than governmental units), although nominally issued by municipal
authorities, are generally not secured by the taxing power of the municipality
but are secured by the revenues of the authority derived from payments by the
industrial user. Tax-Free Fund does not intend to invest in private activity
bonds if the interest from such bonds would be an item of tax preference to
shareholders under the federal alternative minimum tax.
Municipal bonds with a series of maturity dates are called serial bonds. The
serial bonds which the Funds may purchase are limited to short-term serial
bonds--those with original or remaining maturities of thirteen months or less.
The Funds may purchase long-term bonds provided that they have a remaining
maturity of thirteen months or less or, in the case of bonds called for
redemption, the date on which the redemption payment must be made is within
thirteen months. The Funds may also purchase long-term bonds (sometimes
referred to as "Put Bonds"), which are subject to a Fund's commitment to put the
bond back to the issuer at par at a designated time within thirteen months and
the issuer's commitment to so purchase the bond at such price and time.
The Funds which invest in Municipal Obligations may invest in tender option
bonds. A tender option bond is a municipal obligation (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 holders the option, at
periodic intervals, to tender their securities to the institution and receive
the face value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the difference between the
bond's fixed coupon rate and the rate, as determined by a remarketing or similar
agent at or near the commencement of such period, that would cause the bond,
coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder effectively
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 by, or a significant downgrading in the
credit rating assigned to, the issuer of the bond.
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<PAGE>
The tender option will be taken into consideration in determining the maturity
of tender option bonds and the average portfolio maturity of each Fund. The
liquidity of a tender option bond is a function of the credit quality of both
the bond issuer and the financial institution providing liquidity.
Consequently, tender option bonds are deemed to be liquid unless, in the opinion
of the Adviser, the credit quality of the bond issuer and the financial
institution is deemed, in light of the relevant Fund's credit quality
requirements, to be inadequate.
Although Tax-Free Fund and Municipal Fund intend to invest in tender option
bonds the interest on which will, in the opinion of counsel for the issuer and
sponsor or counsel selected by the Adviser, be excluded from gross income for
federal income tax purposes, there is no assurance that the Internal Revenue
Service will agree with such counsel's opinion in any particular case.
Consequently, there is a risk that a Fund will not be considered the owner of
such tender option bonds and thus will not be entitled to treat such interest
as exempt from such tax. A similar risk exists for certain other investments
subject to puts or similar rights. Additionally, the federal income tax
treatment of certain other aspects of these investments, including the proper
tax treatment of tender options and the associated fees, in relation to various
regulated investment company tax provisions is unclear. Tax-Free Fund and
Municipal Fund intend to manage their respective portfolios in a manner designed
to eliminate or minimize any adverse impact from the tax rules applicable to
these investments.
In addition to general obligation bonds, revenue bonds and serial bonds, there
are a variety of hybrid and special types of municipal obligations as well as
numerous differences in the security of municipal obligations both within and
between the two principal classifications above.
Tax-Free Fund and Municipal Fund may purchase municipal instruments that are
backed by letters of credit issued by foreign banks that have a branch, agency
or subsidiary in the United States. Such letters of credit, like other
obligations of foreign banks, may involve credit risks in addition to those of
domestic obligations, including risks relating to future political and economic
developments, nationalization, foreign governmental restrictions such as
exchange controls and difficulties in obtaining or enforcing a judgment against
a foreign bank (including branches).
For the purpose of the Funds' investment restrictions, the identification of
the "issuer" of municipal obligations that are not general obligation bonds is
made by the Adviser on the basis of the characteristics of the obligation as
described above, the most significant of which is the source of funds for the
payment of principal of and interest on such obligations.
15
<PAGE>
An entire issue of municipal obligations may be purchased by one or a small
number of institutional investors such as a Fund. Thus, the issue may not be
said to be publicly offered. Unlike securities which must be registered under
the 1933 Act prior to offer and sale, unless an exemption from such registration
is available, municipal obligations which are not publicly offered may
nevertheless be readily marketable. A secondary market may exist for municipal
obligations which were not publicly offered initially.
Municipal obligations purchased for a Fund are subject to the policy on holdings
of securities which are not readily marketable contained in the Fund's
Prospectus. The Adviser determines whether a municipal obligation is liquid
based on whether it may be sold in a reasonable time consistent with the customs
of the municipal markets (usually seven days) at a price (or interest rate)
which accurately reflects its value. The Adviser believes that the quality
standards applicable to each Fund's investments enhance liquidity. In addition,
standby commitments and demand obligations also enhance liquidity.
Yields on municipal obligations depend on a variety of factors, including money
market conditions, municipal bond market conditions, the size of a particular
offering, the maturity of the obligation and the quality of the issue. High
grade municipal obligations tend to have a lower yield than lower rated
obligations. Municipal obligations are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or municipalities to levy taxes. There is also the possibility that
as a result of litigation or other conditions the power or ability of any one or
more issuers to pay when due principal of and interest on its or their municipal
obligations may be materially affected.
STANDBY COMMITMENTS
- -------------------
In order to enhance the liquidity, stability or quality of municipal
obligations, Prime Obligations Fund, Prime Rated Fund, Money Market Fund, Tax-
Free Fund and Municipal Fund may each acquire the right to sell a security to
another party at a guaranteed price and date. Such a right to resell may be
referred to as a put, demand feature or "standby commitment", depending on its
characteristics. The aggregate price which a Fund pays for securities with
standby commitments may be higher than the price which otherwise would be paid
for the securities. Standby commitments may not be available or may not be
available on satisfactory terms.
Standby commitments may involve letters of credit issued by domestic or foreign
banks supporting the other party's ability to
16
<PAGE>
purchase the security from the Fund. The right to sell may be exercisable on
demand or at specific intervals, and may form part of a security or be acquired
separately by the Fund. In considering whether a security meets a Fund's
quality standards, the Adviser will look to the creditworthiness of the party
providing the Fund with the right to sell as well as the quality of the security
itself.
Tax-Free Fund and Municipal Fund each value municipal obligations which are
subject to standby commitments at amortized cost. The exercise price of the
standby commitments is expected to approximate such amortized cost. No value is
assigned to the standby commitments for purposes of determining the Fund's net
asset value. Since the value of a standby commitment is dependent on the
ability of the standby commitment writer to meet its obligation to repurchase,
the policy of each Fund that may enter into such transactions is to enter into
such transactions only with banks, brokers or dealers which represent a minimal
risk of default. The duration of standby commitments will not be a factor in
determining the weighted average maturity of a Fund.
Management of the Trust understands that the Internal Revenue Service has issued
a favorable revenue ruling to the effect that, under specified circumstances, a
registered investment company will be the owner of tax-exempt municipal
obligations acquired subject to a put option. The Internal Revenue Service has
also issued private letter rulings to certain taxpayers (which do not serve as
precedent for other taxpayers, and which are applicable only to the taxpayer
requesting the ruling and which have, on occasion, been reversed by the Internal
Revenue Service) to the effect that they are considered the owners of the
municipal obligations subject to standby commitments so that the interest on
such instruments will be tax-exempt income to them. The Internal Revenue
Service has subsequently announced that it will not ordinarily issue advance
ruling letters as to the identity of the true owner of property in cases
involving the sale of securities or participation interests therein if the
purchaser has the right to cause the security, or the participation interest
therein, to be purchased by either the seller or a third party. The Tax-Free
Fund and Municipal Fund each intends to take the position that it is the owner
of any municipal obligations acquired subject to a standby commitment or
acquired or held with certain other types of put rights and that its
distribution of tax-exempt interest earned with respect to such municipal
obligations will be tax-exempt for its shareholders. There is no assurance
that standby commitments will be available to these Funds and neither Fund has
assumed that such commitments will be available under all market conditions.
INVESTMENT LIMITATIONS
The following restrictions may not be changed with respect to any Fund without
the approval of the majority of outstanding voting
17
<PAGE>
securities of that Fund (which, under the Investment Company Act and the rules
thereunder and as used in the Prospectus and this Statement of Additional
Information, means the lesser of (1) 67% of the shares of that Fund present at a
meeting if the holders of more than 50% of the outstanding shares of that Fund
are present in person or by proxy, or (2) more than 50% of the outstanding
shares of that Fund). Investment restrictions that involve a
maximum percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by or on behalf of, a Fund, with the exception of borrowings
permitted by Investment Restriction (3).
Accordingly, a Fund may not:
(1) with respect to 75% of its total assets taken at market value, invest more
than 5% of the value of the total assets of that Fund in the securities of any
one issuer, except U.S. Government securities and repurchase agreements
collateralized by U.S. Government securities. This restriction does not,
however, apply to any Fund classified as a non-diversified company under the
Investment Company Act;
(2) with respect to 75% of its total assets taken at market value, purchase the
securities of any one issuer if, as a result of such purchase, that Fund would
hold more than 10% of the outstanding voting securities of that issuer. This
restriction does not, however, apply to any Fund classified as a non-diversified
company under the Investment Company Act;
(3) borrow money, except from banks on a temporary basis for extraordinary or
emergency purposes, provided that a Fund is required to maintain asset coverage
of 300% for all borrowings and that no purchases of securities will be made if
such borrowings exceed 5% of the value of the Fund's assets. This restriction
does not apply to cash collateral received as a result of portfolio securities
lending;
(4) mortgage, pledge or hypothecate its assets except to secure permitted
borrowings;
(5) act as underwriter of the securities issued by others, except to the extent
that the purchase of securities in accordance with a Fund's investment objective
and policies directly from the issuer thereof and the later disposition thereof
may be deemed to be underwriting;
(6) purchase securities if such purchase would cause more than 25% in the
aggregate of the market value of the total assets of a Fund to be invested in
the securities of one or more issuers having their principal business activities
in the same industry, provided that there is no limitation with respect to, and
each Fund reserves freedom of action, when otherwise consistent with
18
<PAGE>
its investment policies, to concentrate its investments in, U.S. Government
securities, obligations (other than commercial paper) issued or guaranteed by
U.S. banks, and U.S. branches of foreign banks and repurchase agreements and
securities loans collateralized by U.S. Government securities or such bank
obligations, in the case of the Funds other than the Money Market Fund and Prime
Rated Fund, and obligations (other than commercial paper) issued by U.S. banks
and U.S. branches of U.S. or foreign banks and repurchase agreements and
securities loans collateralized by U.S. Government securities or such bank
obligations, in the case of the Money Market Fund and Prime Rated Fund. (For
the purposes of this restriction, state and municipal governments and their
agencies and authorities are not deemed to be industries, and telephone
companies are considered to be a separate industry from water, gas or electric
utilities, personal credit finance companies and business credit finance
companies are deemed to be separate industries and wholly-owned finance
companies are considered to be in the industry of their parents if their
activities are primarily related to financing the activities of their parents.
Such concentration may be effected when the Adviser determines that risk
adjusted returns in such industries are considered favorable relative to other
industries.) Notwithstanding the foregoing, Money Market Fund will invest more
than 25% of the value of its total assets in bank obligations (whether foreign
or domestic) except that if adverse economic conditions prevail in the banking
industry Money Market Fund and Prime Rated Fund may, for defensive purposes,
temporarily invest less than 25% of the value of its total assets in bank
obligations;
(7) issue senior securities, except as appropriate to evidence indebtedness
that a Fund is permitted to incur and except for shares of existing or
additional series of the Trust;
(8) purchase or sell real estate (excluding securities secured by real estate
or interests therein), interests in oil, gas or mineral leases, commodities or
commodities contracts. The Trust reserves the freedom to hold and to sell real
estate acquired for any Fund as a result of the ownership of securities;
(9) make loans to other persons, except loans of portfolio securities and
except to the extent that the purchase of debt obligations and entry into
repurchase agreements in accordance with such Fund's investment objective and
policies may be deemed to be loans;
(10) purchase securities on margin (except for delayed delivery or when-issued
transactions or such short-term credits as are necessary for the clearance of
transactions), make short sales of securities, maintain a short position, or
invest in or write puts, calls or combinations thereof (except that a Fund may
acquire puts in connection with the acquisition of a debt instrument);
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<PAGE>
(11) invest in other companies for the purpose of exercising control or
management.
In addition to the fundamental policies mentioned above, the Board of Trustees
of the Trust has adopted the following non-fundamental policy which may be
changed or amended by action of the Board of Trustees without approval of
shareholders. Accordingly, the Trust may not, on behalf of any Fund, 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 a Fund (taken at market value) would be invested in such investments.
The staff of the SEC has taken the position that fixed time deposits maturing in
more than seven days that cannot be traded on a secondary market are illiquid
and not readily marketable. Until such time (if any) as this position changes,
the Trust, on behalf of the Funds, will include such investments in the 10%
limit on unmarketable securities. Restricted securities (including commercial
paper issued pursuant to Section 4(2) of the 1933 Act) which the Board of
Trustees has determined are liquid will not be deemed to be unmarketable for
purposes of this restriction.
Pursuant to SEC Rule 2a-7, a Fund (other than Tax-Free Fund and Municipal Fund)
may not invest more than 5% of its total assets in the securities of any one
issuer (except U.S. Government securities or repurchase agreements
collateralized by such securities). A Fund may, however, invest more than 5%
of its total assets in the First Tier Securities of a single issuer for a period
of up to three business days after the purchase thereof, although such Fund may
not make more than one such investment at any time. Each Fund, other than the
Tax-Free Fund and Municipal Fund, may only purchase "First Tier Securities" as
defined below. Securities which are rated in the highest short-term rating
category by at least two Nationally Recognized Statistical Rating Organizations
("NRSROs") are "First Tier Securities". Securities rated in the top two short-
term rating categories by at least two NRSROs, or if only the NRSRO has assigned
a rating, by that NRSRO, but which are not First Tier Securities, are "Second
Tier Securities". Pursuant to SEC Rule 2a-7 the foregoing operating policies
are not applicable to Tax-Free Fund and Municipal Fund. Immediately after the
acquisition of any put by a Fund (other than Tax-Free Fund and Municipal Fund),
not more than 5% of such Fund's total assets may be invested in securities
issued by or subject to puts from the same issuer. However, this limitation
will not apply to the issuer of unconditional puts if the Fund does not have
more than 10% of its total assets invested in securities issued by or subject to
unconditional puts from such issuer. "NRSROs" include Standard & Poor's Ratings
Group, Moody's Investors Service, Inc., Duff & Phelps, Inc., Fitch Investors
Service, Inc., IBCA Limited and its affiliate IBCA Inc., and Thomson BankWatch,
Inc. For a description of their rating categories, see Appendix A.
20
<PAGE>
Pursuant to SEC Rule 2a-7, immediately after the acquisition of any put by
Tax-Free Fund and Municipal Fund, not more than 5% of the Fund's total assets
may be invested in securities issued by or subject to puts from the same issuer.
However, this limitation applies only with respect to 75% of each such Fund's
total assets. In addition, this limitation will not apply to the issuer of
unconditional puts if the Fund does not have more than 10% of its total assets
invested in securities issued by or subject to unconditional puts from such
issuer. Tax-Free and Municipal Fund each will operate in accordance with this
operating policy which complies with SEC Rule 2a-7.
"Value" for the purposes of all investment restrictions shall mean the value
used in determining a Fund's net asset value. "U.S. Government securities"
shall mean securities issued or guaranteed by the U.S. Government or any of its
agencies, authorities or instrumentalities.
TRUSTEES AND OFFICERS
Information pertaining to the Board of Trustees and officers of the Trust is set
forth below. Trustees and officers deemed to be "interested persons" of the
Trust for purposes of the Investment Company Act are indicated by an asterisk.
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Paul C. Nagel,Jr., 72 Chairman Retired. Director and
19223 Riverside Dr and Trustee Chairman of the Finance
Tequesta, FL 33469 and Audit Committees, Great
Atlantic & Pacific Tea Co.,
Inc.; Director, United Convey
or Corporation.
Ashok N. Bakhru, 52 Trustee President, ABN Associates
1235 Westlakes Drive (since June 1994) Retired.
Senior Suite 385 Vice President of Scott Paper
Berwyn, PA 19312 Company; Director of Arkwright
Mutual Insurance Company;
Trustee of International House
of Philadelphia; Member of
Cornell University Council;
Trustee of the Walnut Street
Theater.
*Marcia L. Beck, 39 President Director, Institutional Funds
One New York Plaza and Group, GSAM (since September
New York, NY Trustee 1992); Vice President and
10004 Senior Portfolio Manager,
Goldman Sachs Asset Management
(from June 1988 to present).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
*David B. Ford, 49 Trustee General Partner, Goldman
One New York Plaza Sachs, (since 1986); Chair-
New York, NY 10004 man and Chief Executive Officer,
Goldman Sachs Asset Management
(since December 1994).
*Alan A. Shuch, 45 Trustee Director and Vice President of
One New York Plaza Goldman Sachs Funds Management
New York, NY 10004 Inc. (from April 1990 to November
1994); President and Chief Operating
Officer, GSAM (from September 1988 to;
November 1994). Limited Partner,
Goldman Sachs (since December 1994)
Jackson W. Smart, 64 Trustee Chairman and Chief Executive
One Northfield Plaza Officer, MSP Communications
#218 Inc.(a company engaged in
Northfield, IL 60093 radio broadcasting) (since
November 1988) and Consultant,
Thomas Industries, Inc. (a
manufacturer of lighting
fixtures, home decorations and
hardware items) (August 1987
to November 1988); Chairman
and member of Executive
Committee prior thereto;
Director, Federal Express
Corporation; Director, North
American Private Equity Group
(a venture capital fund).
William H. Springer, 65 Trustee Vice Chairman of Ameritech
701 Morningside Drive (a telecommunications holding
Lake Forest, IL 60045 company; February 1987 to
retirement in August 1992) and
Vice Chairman, Chief Financial
and Administrative Officer,
prior thereto; Director,
Walgreen Co. (a retail drug
store business); Director of
Baker, Fentress & Co. (a
closed-end, non-diversified
management investment company)
(April 1992 to present).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Richard P. Strubel, 55 Trustee Managing Director, Tandem
70 West Madison St. Partners, Inc. (since 1990);
Suite 1400 President and Chief Executive
Chicago, IL 60602 Officer, Microdot, Inc.
(a diversified manufacturer
of fastening systems and
connectors)(January 1984 to
October 1994).
*Scott M. Gilman, 35 Treasurer Director, Mutual Funds Admin-
One New York Plaza istration, Goldman Sachs Asset
New York, NY Management (since April 1994);
10004 Assistant Treasurer, Goldman
Sachs Funds Management, Inc.
(since March 1993); Vice Pre-
sident, Goldman Sachs (since
March 1990); Assistant Trea-
surer of the Trust (April 1990
to October 1991); Manager,
Arthur Andersen & Co.(prior
thereto).
*Pauline Taylor, 48 Vice Vice President of Goldman
4900 Sears Tower President Sachs (since June 1992);
Chicago, IL Consultant (1989 to June
60606 1992); Senior Vice President
of Fidelity Investments (prior
to 1989).
*John W. Mosior, 56 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL Services for GSAM Funds Group.
60606
*Nancy L. Mucker, 45 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL Services for GSAM Funds Group.
60606
*Michael J. Richman, 34 Secretary Vice President and Assistant
85 Broad Street General Counsel of Goldman
New York, NY Sachs (since June 1992);
10004 Associate General Counsel, Goldman Sachs
Asset Management, Counsel to the Funds
Group, GSAM (since June 1992);
Partner, Hale and Dorr
(September 1991 to June 1992).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
*Howard B. Surloff, 29 Assistant Vice President and Assistant
85 Broad Street Secretary General Counsel, Goldman Sachs
New York, NY 10004 (since November 1993 and May 1994,
respectively ); Counsel to the Funds Group,
Goldman Sachs Asset Management (since
November 1993); Formerly Associate of
Shereff Friedman, Hoffman & Goodman (prior
thereto).
*Steven E. Hartstein, 31 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs (June 1993 to
New York, NY 10004 present); Funds Compliance
Officer, Citibank Global Asset
Management (August 1991 to
June 1993); Legal Assistant,
Brown & Wood (prior thereto).
*Gail M. Shanley, 26 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs since June
New York, NY 10004 1994. Formerly Blue Sky
Legal Assistant at Smith
Barney Shearson.
*Kaysie P. Uniacke, 34 Assistant Vice President and Portfolio
One New York Plaza Secretary Manager, Goldman Sachs Asset
New York, NY 10004 Management (since 1988).
*Elizabeth D.
Alexander, 25 Assistant Fund Trading Assistant,
One New York Plaza Secretary Goldman Sachs Asset
New York, NY 10004 Management (since 1993). Com-
pliance Analyst, Prudential
Insurance (1991-1993).
</TABLE>
Each interested Trustee and officer holds comparable positions with certain
other investment companies of which Goldman Sachs, GSAM or an affiliate thereof
is the investment adviser, administrator and/or distributor. As of September
30, 1995, the Trustees and officers of the Trust as a group owned less than 1%
of the outstanding shares of beneficial interest of each Fund (other than
Municipal Fund). As of September 30, 1995, Municipal Fund had not commenced
operations and no shares of such Fund had been sold.
The Trust pays each Trustee, other than those who are "interested persons" of
Goldman Sachs, a fee for each Trustee meeting attended and an annual fee. Such
Trustees are also reimbursed for travel expenses incurred in connection with
attending such meetings.
24
<PAGE>
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the fiscal period ended December
31, 1994:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits from Goldman Sachs
Aggregate Accrued as Mutual Funds
Compensation Part of (including the
Name of Trustee from the Trust Trust's Expenses Trust)*
- --------------- -------------- ---------------- ------------------
<S> <C> <C> <C>
Paul C. Nagel, Jr. $69,345 $0 $101,000
Ashok N. Bakhru $41,745 $0 $ 61,000
Marcia L. Beck $ 0 $0 $ 0
David B. Ford $ 0 $0 $ 0
Robert P. Mayo $41,745 $0 $ 61,000
Alan A. Shuch $ 0 $0 $ 0
Jackson W. Smart $41,745 $0 $ 61,000
William H. Springer $41,745 $0 $ 61,000
Richard P. Strubel $41,745 $0 $ 61,000
</TABLE>
______________
* The Goldman Sachs Mutual Funds consisted of 32 mutual funds, including
the sixteen series of the Trust, on December 31, 1994.
25
<PAGE>
THE ADVISER, ADMINISTRATOR, DISTRIBUTOR AND TRANSFER AGENT
THE ADVISER AND ADMINISTRATOR
- -----------------------------
GSAM, a separate operating division of Goldman Sachs, acts as the investment
adviser and administrator of each Fund. As such, GSAM is responsible for the
management of each Fund's assets in accordance with such Fund's investment
objective and policies.
Under each of the separate Investment Advisory Agreements between GSAM and the
Trust on behalf of each Fund, GSAM, subject to the supervision of the Board of
Trustees and in conformity with the stated policies of each Fund, manages the
Fund's portfolio and directs the investments of the Fund. For these services,
GSAM is entitled to a monthly fee at an annual rate equal to .075% of each
Fund's average daily net assets. As of December 31, 1994, the Trust's fiscal
year end, Municipal Fund had not commenced operations and Prime Rated Fund was
organized in October, 1995.
Each Fund is responsible for all of its expenses other than those expressly
borne by GSAM under the Investment Advisory Agreement. The expenses borne by
shares of each Fund include the Fund's investment advisory fee, account
administration fees, expenses of issuing reports to shareholders, custodian
fees, taxes, its proportionate share of legal fees, SEC insurance fees, blue sky
fees, auditing and tax return preparing fees, taxes, Trustees' fees, insurance
expenses and trade association dues. In the event that the expenses of a Fund
(including the fees payable to GSAM, but excluding interest, taxes, brokerage
commissions, litigation and indemnification expenses and other extraordinary
expenses) for any fiscal year exceed the limits set by certain state securities
administrators, GSAM will reduce its fee payable on behalf of that Fund by the
amount of such excess but only to the extent of the Fund's fee. Repayment of any
excess amounts will be made on a monthly basis. The most restrictive expense
limitation currently applicable to each Fund is 2.5% of the first $30 million of
the Fund's average annual net assets, 2.0% of the next $70 million of such
assets, and 1.5% of such assets in excess of $100 million.
For the period ended December 31, 1994, and the fiscal years ended January 31,
1994 and January 31, 1993 the amount of the advisory fee incurred by each Fund
then in existence was as follows:
<TABLE>
<CAPTION>
Dec. 1994 Jan. 1994 Jan. 1993
--------- --------- ---------
<S> <C> <C> <C>
Prime Obligations Fund/(5)/ 695,689 -0- -0-
Money Market Fund/(1)/ 64,294 -- --
Treasury Obligations Fund/(5)/ 225,733 -0- -0-
Government Fund/(2)(5)/ 50,687 -0- --
Tax Free Money Market Fund/(3)/ 0 -- --
Municipal Money Market Fund/(4)/ 0 -- --
</TABLE>
- ----------
26
<PAGE>
/(1)/ Commenced operations May 18, 1994.
/(2)/ Commenced operations April 6, 1993.
/(3)/ Commenced operations July 19, 1994.
/(4)/ Had not commenced operations.
/(5)/ The Information presented for the period ended December 31, 1994
reflects eleven months of operations.
GSAM has agreed that it will not impose a portion of its advisory fees referred
to above, pursuant to applicable contracts. Had such fees been imposed during
the eleven month period ended December 31, 1994 with respect to Prime
Obligations Fund, Treasury Obligations Fund, and Government Fund, advisory fees
of $1,609,383, $554,447 and $128,944, respectively, would have been incurred by
these Funds during such period. Had the advisory fee been imposed during the
period from May 18, 1994 (commencement of operations) and July 19, 1994
(commencement of operations) through December 31, 1994, for Money Market Fund
and Tax-Free Fund, respectively, advisory fees of $482,154 and $53,176,
respectively, would have been incurred by these Funds during such periods.
Had the advisory fee been imposed during the eleven months ended January 31,
1994 with respect to the Prime Obligations Fund and Treasury Obligations Fund
and during the period from April 6, 1993 (commencement of operations) to January
31, 1994 for the Government Fund, advisory fees of $561,534, $1,016,441 and
$21,401, respectively, would have been incurred by these Funds during such
periods.
Had the advisory fee been imposed during the fiscal year ended January 31, 1993
with respect to the Prime Obligations Fund and Treasury Obligations Fund, fees
of $746,670 and $521,085 respectively, would have been incurred by these Funds
during such period.
The Investment Advisory Agreement entered into on behalf of each of the Funds
was most recently approved (or in the case of Prime Rated Fund, initially
approved) by the Board of Trustees, including the "non-interested" Trustees, on
October 24, 1995. The Investment Advisory Agreements will remain in effect until
June 30, 1997 and will continue in effect thereafter only if such continuance is
specifically approved at least annually by a majority of the Board of Trustees
or by a vote of a majority of the outstanding voting securities of each Fund (as
defined in the Investment Company Act) and, in either case, by a majority of
"non-interested" Trustees.
In connection with the foregoing services, GSAM bears the following expenses:
(a) the salaries and expenses of all personnel of the Trust, except the fees and
expenses of "non-interested" Trustees; and (b) office rent and the expenses of
providing investment advisory, research and statistical facilities and related
clerical expenses. Goldman Sachs has authorized any of its directors, partners,
officers and employees who have been elected
27
<PAGE>
or appointed as a Trustee or officer of the Trust to serve in the capacities in
which he or she has been elected or appointed.
Except for the expenses to be paid by GSAM as indicated above, the Trust, on
behalf of each Fund, is responsible under the Investment Advisory Agreements for
the payment of all other expenses related to each Fund's operations. The
expenses borne by each Fund include: (a) the fees payable to GSAM, (b) the
Fund's allocable share of fees and expenses of "non-interested" Trustees, (c)
the fees and expenses of the Funds' custodian, including the cost of pricing the
shares of the Fund, (d) the charges and expenses of the Funds' legal counsel and
independent accountants, (e) brokers' commissions and any issue or transfer
taxes chargeable to the Trust, on behalf of each Fund, in connection with its
securities transactions, (f) the fees of any trade association of which the Fund
is a member or, in the event the Trust is a member, the Fund's proportionate
share of such fees, (g) the cost of share certificates, if any, (h) the Fund's
allocable share of the organizational expenses of the Trust and the fees and
expenses involved in registering and maintaining registration of the Trust and
of its shares with the SEC and registering the Trust as a broker or dealer and
qualifying its shares under state securities laws, including the preparation and
printing of the Trust's registration statements and prospectuses for such
purposes, (i) the Fund's allocable share of communication expenses with respect
to investor services and all expenses of shareholders' and Trustees' meetings
and preparing, printing and mailing prospectuses and reports to shareholders,
(j) litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business, and (k) all taxes and
business fees payable by the Fund to federal, state or other governmental
agencies. Fees and expenses of legal counsel, registering shares, holding
meetings and communicating with shareholders include an allocable portion of
the cost of maintaining an internal legal and compliance department. Each Fund
will also bear an allocable portion of GSAM's costs of performing certain
accounting services not being provided by the Funds' custodian.
For the fiscal period from January 31, 1994 to December 31, 1994 (with respect
to (1) Money Market Fund the period from May 18, 1994 (commencement of
operations) to December 31, 1994 and (2) Tax-Free Fund the period from July 19,
1994 (commencement of operations) to December 31, 1994), GSAM assumed certain
expenses related to the operations of the Funds because such expenses would have
caused the Funds' total expenses to exceed certain voluntary expense
limitations. Had these expenses not been assumed, an additional $415,540,
$458,254, $237,091, 62,967, and $66,782 in expenses would have been incurred by
Prime Obligations Fund, Money Market Fund, Treasury Obligations Fund, Government
Fund and Tax-Free Fund, respectively, for the relevant periods.
For the period from April 6, 1993 (commencement of operations) to January 31,
1994, GSAM assumed certain expenses related to the
28
<PAGE>
operations of Government Fund because such expenses would have caused the Fund's
total expenses, on an annualized basis, to exceed certain voluntary expense
limitations with respect to such Fund. Had these expenses not been assumed, an
additional $98,125 in expenses would have been incurred by the Fund for such
period. No expenses were assumed by GSAM for the eleven month period ended
January 31, 1994 for Prime Obligations Fund or Treasury Obligations Fund.
For the fiscal year ended January 31, 1993, GSAM assumed certain expenses
related to the operations of Treasury Obligations Fund because such expenses
would have caused the Fund's total expenses to exceed certain voluntary expense
limitations. Had these expenses not been assumed, an additional $68,636 in
expenses would have been incurred by the Fund during such period. No expenses
for Prime Obligations Fund were assumed by GSAM for the fiscal year ended
January 31, 1993.
The Investment Advisory Agreements provide that GSAM shall not be liable to a
Fund for any error of judgment by GSAM or for any loss sustained by the Fund
except in the case of GSAM's willful misfeasance, bad faith, gross negligence or
reckless disregard of duty. Each Fund may use any name derived from the name
"Goldman Sachs" only as long as its Investment Advisory Agreement remains in
effect. Each Investment Advisory Agreement also provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by vote
of a majority of the outstanding voting securities of the Fund or by either
party upon sixty (60) days' written notice.
Under the Trust's Administration Agreement with GSAM, GSAM administers each
Fund's business affairs subject to the supervision of the Board of Trustees and,
in connection therewith, furnishes each Fund with office facilities, bears all
fees and costs of the services furnished by the transfer agent to the Fund and
is responsible for ordinary clerical, recordkeeping and bookkeeping functions,
to the extent not provided pursuant to the Funds' custodian and advisory
agreements; preparation and filing of documents required to comply with federal
and state securities laws; supervising the activities of the Funds' custodian
and transfer agent; providing assistance in connection with meetings of the
Board of Trustees and shareholders; and other administrative services necessary
to conduct the Trust's business. GSAM will receive account administration fees
from the Fund as described in the Prospectus.
For the fiscal years ended January 31, 1993 and January 31, 1994 and for the
fiscal period ended December 31, 1994, the amounts of account administration
fees paid to GSAM by the Funds then in existence were as follows:
29
<PAGE>
<TABLE>
<CAPTION>
Dec. 1994 Jan. 1994 Jan. 1993
---------- ---------- ----------
<S> <C> <C> <C>
Prime Obligations Fund/(5)/ $2,789,597 $1,761,831 $1,294,479
Money Market Fund/(1)/ 835,827 - -
Treasury Obligations Fund/(5)/ 961,040 973,325 903,414
Government Fund/(2)//(5)/ 193,154 11,124 -
Tax-Free Fund/(3)/ 35,436 - -
Municipal Fund/(4)/ - - -
---------- ---------- ----------
</TABLE>
- ----------
/(1)/ Commenced operations May 18, 1994.
/(2)/ Commenced operations April 6, 1993.
/(3)/ Commenced operations July 19, 1994.
/(4)/ Has not commenced operations.
/(5)/ The information presented for the period ended December 31, 1994
reflects eleven months of operations.
Had fee reductions not been in effect, Government Fund would have paid
account administration fees of $37,095 and $223,500 for the period from April 6,
1993 (commencement of operations) to January 31, 1994 and for the eleven months
ended December 31, 1994, respectively, and Tax-Free Fund would have paid account
administration fees of $92,169 for the period from July 19, 1994 (commencement
of operations) to December 31, 1994.
THE DISTRIBUTOR AND TRANSFER AGENT
- ---------------------------------
Goldman Sachs serves as the distributor of shares of each Fund pursuant to a
Distribution Agreement with the Trust which was most recently approved by the
Board of Trustees on October 25, 1994. Goldman Sachs also serves as the transfer
agent of each Fund. Goldman Sachs provides customary transfer agency services to
the record holders of the Funds, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, payment of dividends and distributions and related
functions.
Goldman Sachs is one of the largest international investment banking and
brokerage firms in the United States. Founded in 1869, Goldman Sachs is a leader
in financing and investing services both in the United States and abroad. 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. Goldman Sachs
became registered as an investment adviser in 1981. As of September 30, 1995,
Goldman Sachs, together with its affiliates, acted as investment adviser,
administrator or distributor for approximately $53.7 billion in total assets.
PORTFOLIO TRANSACTIONS
GSAM places the portfolio transactions of the Funds and of all other accounts
managed by GSAM for execution with many firms. GSAM uses its best efforts to
obtain execution of portfolio
30
<PAGE>
transactions at prices which are advantageous to each Fund and at reasonably
competitive spreads or (when a disclosed commission is being charged) at
reasonably competitive commission rates. In seeking such execution, GSAM will
use its best judgment in evaluating the terms of a transaction, and will give
consideration to various relevant factors, including without limitation the size
and type of the transaction, the nature and character of the market for the
security, the confidentiality, speed and certainty of effective execution
required for the transaction, the general execution and operational capabilities
of the broker-dealer, the general execution and operational capabilities of the
firm, the reputation, reliability, experience and financial condition of the
firm, the value and quality of the services rendered by the firm in this and
other transactions, and the reasonableness of the spread or commission, if any.
Securities purchased and sold by the Funds are generally traded in the over-the-
counter market on a net basis (i.e., without commission) through broker-dealers
and banks acting for their own account rather than as brokers, or otherwise
involve transactions directly with the issuer of such securities.
Goldman Sachs is active as an investor, dealer and/or underwriter in many types
of municipal and money market instruments. Its activities in this regard could
have some effect on the markets for those instruments which the Funds buy, hold
or sell. An order has been granted by the SEC under the Investment Company Act
which permits the Funds to deal with Goldman Sachs in transactions in certain
taxable securities in which Goldman Sachs acts as principal. As a result, the
Funds may trade with Goldman Sachs as principal subject to the terms and
conditions of such exemption.
Under the Investment Company Act, the Funds are prohibited from purchasing any
instrument of which Goldman Sachs is a principal underwriter during the
existence of an underwriting or selling syndicate relating to such instrument,
absent an exemptive order (the order referred to in the preceding paragraph will
not apply to such purchases) or the adoption of and compliance with certain
procedures under such Act. The Trust has adopted procedures which establish,
among other things, certain limitations on the amount of debt securities that
may be purchased in any single offering and on the amount of the Trust's assets
that may be invested in any single offering. Accordingly, in view of Goldman
Sachs' active role in the underwriting of debt securities, a Fund's ability to
purchase debt securities in the primary market may from time to time be limited.
In certain instances there may be securities which are suitable for a Fund's
portfolio as well as for that of another fund of the Trust or one or more of the
other clients of GSAM. Investment decisions for each Fund and for GSAM's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or
31
<PAGE>
sold for, other clients. Likewise, a particular security may be bought for one
or more clients when one or more other clients are selling that same security.
Some simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the same
security is suitable for the investment objectives of more than one client.
When two or more clients are simultaneously engaged in the purchase or sale of
the same security, the securities are allocated among clients in a manner
believed to be equitable to each. It is recognized that in some cases this
system could have a detrimental effect on the price or volume of the security in
a particular transaction as far as a Fund is concerned. Each Fund believes that
over time its ability to participate in volume transactions will produce better
executions for the Funds.
During the fiscal year ended December 31, 1994, the Trust acquired and sold
securities of its regular broker-dealers: Lehman Brothers, Bear Stearns, Salomon
Brothers, Inc., CS First Boston Corp., Merrill Lynch & Co., Inc., Daiwa
Securities, Morgan Stanley & Co., Inc., Morgan Guaranty Trust, Donaldson Lufkin
& Jenrette and Swiss Bank. As of December 31, 1994, each Fund held the following
amounts of securities of its regular broker/dealers as defined in Rule 10b-1
under the Investment Company Act, or their parents ($ in thousands); Prime
Obligations Fund - Lehman Brothers ($385,111), Bear Stearns ($47,000), Salomon
Brothers, Inc. ($249,100), CS First Boston Corp. ($54,050), Merrill Lynch & Co.,
Inc. ($52,453), Daiwa Securities ($175,650), Morgan Stanley & Co., Inc.
($119,159), Morgan Guaranty Trust ($40,000); Government Fund - Lehman Brothers
($37,455), Bear Stearns ($10,000), CS First Boston Corp. ($10,000), Daiwa
Securities ($ 16,450); Treasury Obligations Fund -Lehman Brothers ($214,730),
Bear Stearns ($30,000), CS First Boston Corp. ($30,000), Merrill Lynch & Co.,
Inc. ($30,000), Daiwa Securities ($98,700), Morgan Stanley & Co., Inc.
($35,000), Morgan Guaranty Trust ($30,000); and Money Market Fund - Lehman
Brothers ($ 66,500), Bear Stearns ($6,300), Salomon Brothers, Inc. ($33,390), CS
First Boston Corp. ($7,245), Merrill Lynch & Co., Inc. ($19,996), Daiwa
Securities ($60,900), Morgan Stanley & Co., Inc. ($45,000), Morgan Guaranty
Trust ($25,000).
NET ASSET VALUE
The net asset value per share of each Fund (except for Government Fund) is
determined by the Funds' custodian as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m. New York time) (in the case of the
Government Fund, net asset value is determined at 5:00 p.m. New York time) on
each Business Day. A Business Day means any day on which the New York Stock
Exchange is open, except for days on which banks in Chicago, Boston or New York
are closed on local holidays. Such holidays include: New Year's Day, Martin
Luther King Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of
July,
32
<PAGE>
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
Each Fund's portfolio securities are valued using the amortized cost method of
valuation in an effort to maintain a constant net asset value of $1.00 per
share, which the Board of Trustees has determined to be in the best interests of
each Fund and its shareholders. This method involves valuing a security at cost
on the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a Fund
would receive if it sold the instrument. During such periods, the yield to an
investor in a Fund may differ somewhat from that obtained in a similar
investment company which uses available market quotations to value all of its
portfolio securities. During periods of declining interest rates, the quoted
yield on shares of the Funds may tend to be higher than a like computation made
by a fund with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its portfolio
instruments. Thus, if the use of amortized cost by a Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield if he or she purchased
shares of the Fund on that day, than would result from investment in a fund
utilizing solely market values, and existing investors in the Fund would receive
less investment income. The converse would apply in a period of rising interest
rates.
The Board of Trustees has established procedures designed to stabilize, to the
extent reasonably possible, each Fund's price per share as computed for the
purpose of sales and redemptions at $1.00. Such procedures include review of
each Fund's portfolio by the Board of Trustees, at such intervals as it deems
appropriate, to determine whether such Fund's net asset value calculated by
using available market quotations (or an appropriate substitute which reflects
market conditions) deviates from $1.00 per share based on amortized cost, as
well as review of the methods used to calculate the deviation. If such deviation
exceeds 1/2 of 1%, the Board of Trustees will promptly consider what action, if
any, will be initiated. In the event the Board of Trustees determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, it will take such corrective action as it
regards to be necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding part or all of dividends or payment of
distributions from capital or capital gains; redemptions of shares in kind; or
establishing a net asset value per share by using available market quotations or
equivalents. In addition, in order to stabilize the net asset value
33
<PAGE>
per share at $1.00 the Board of Trustees has the authority (1) to reduce or
increase the number of shares outstanding on a pro rata basis, and (2) to offset
each shareholder's pro rata portion of the deviation between the net asset value
per share and $1.00 from the shareholder's accrued dividend account or from
future dividends. Each Fund may hold cash for the purpose of stabilizing its net
asset value per share. Holdings of cash, on which no return is earned, would
tend to lower the yield on such Fund's shares.
In order to continue to use the amortized cost method of valuation each Fund's
investments, including repurchase agreements, must be U.S. dollar-denominated
instruments which the Board of Trustees determines present minimal credit risks
and which are at the time of acquisition rated by the requisite number of NRSROs
in one of the two highest short-term rating categories or, in the case of any
instrument that is not so rated, of comparable quality as determined by GSAM
and confirmed by the Board of Trustees. Also, each Fund must maintain a dollar-
weighted average portfolio maturity (not more than ninety (90) days)
appropriate to its objective of maintaining a stable net asset value of $1.00
per share and may not purchase any instrument with a remaining maturity of more
than thirteen (13) months. However, a Fund may also, consistent with the
provisions of the above-mentioned rule, invest in securities with a stated
maturity of more than thirteen (13) months, if (i) the security is a floating
or variable rate security with certain demand and interest rate reset features
and (ii) the security, except in the case of Tax-Free Fund and Municipal Fund,
is a First Tier Security.
The proceeds received by each Fund for each issue or sale of its shares, and all
net investment income, realized and unrealized gain and proceeds thereof,
subject only to the rights of creditors, will be specifically allocated to such
Fund and constitute the underlying assets of that Fund. The underlying assets of
each Fund will be segregated on the books of account, and will be charged with
the liabilities in respect to that Fund and with a share of the general
liabilities of the Trust. Expenses are allocated in proportion to the net asset
values of the respective Funds except where allocations of direct expenses can
otherwise be fairly made. In addition, within each Fund, FST Shares, FST
Administration Shares and FST Service Shares will be subject to different
expense structures (see "Organization and Capitalization").
REDEMPTIONS
The Trust may suspend the right of redemption of shares of a Fund and may
postpone payment for any period: (i) during which the New York Stock Exchange is
closed for regular trading other than customary weekend and holiday closings or
during which trading on the New York Stock Exchange is restricted, (ii) when the
SEC
34
<PAGE>
determines that a state of emergency exists which may make payment or transfer
not reasonably practicable, (iii) as the SEC may by order permit for the
protection of the shareholders of the Trust or (iv) at any other time when the
Trust may, under applicable laws and regulations, suspend payment on the
redemption of the Fund's shares.
The Trust agrees to redeem shares of each Fund solely in cash up to the lesser
of $250,000 or 1% of the net asset value of the Fund during any 90-day period
for any one shareholder. The Trust reserves the right to pay other redemptions,
either total or partial, by a distribution in kind of securities (instead of
cash) from a Fund's portfolio. The securities distributed in such a distribution
would be valued at the same value as that assigned to them in calculating the
net asset value of the shares being redeemed. If a shareholder receives a
distribution in kind, he or she should expect to incur transaction costs when he
or she converts the securities to cash.
CALCULATION OF YIELD QUOTATIONS
Each Fund's yield quotations are calculated in accordance with a standard method
prescribed by the rules of the SEC. Under this method, the yield quotation is
based on a hypothetical account having a balance of exactly one share at the
beginning of a seven-day period.
Yield, effective yield and tax equivalent yield are calculated separately for
FST Shares, FST Administration Shares and FST Service Shares. Each type of Share
is subject to different fees and expenses and, consequently, may have differing
yields for the same period.
The yield quotation is computed as follows: the net change, exclusive of capital
changes (i.e., realized gains and losses from the sale of securities and
unrealized appreciation and depreciation), in the value of a hypothetical pre-
existing account having a balance of one share at the beginning of the base
period is determined by dividing the net change in value by the value of the
account at the beginning of the base period. This base period return is then
multiplied by 365/7 (366/7 in the event of a leap year) with the resulting yield
figure carried to the nearest 100th of 1%. Such yield quotation shall take into
account all fees that are charged to a Fund.
Each Fund also may advertise a quotation of effective yield for a seven (7)
calendar day period. Effective yield is computed by compounding the unannualized
base period return determined as in the preceding paragraph by adding one (1) to
that return, raising the sum to the 365/7 power (366/7 in the event of a leap
year) and subtracting one from the result, according to the following formula:
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<PAGE>
Effective Yield=[(base period return + 1) (365/7)] - 1.
Tax-Free Fund and Municipal Fund may each also advertise a tax-equivalent yield
which is computed by dividing that portion of a Fund's yield (as computed above)
which is tax-exempt by one minus a stated income tax rate and adding the
quotient to that portion, if any, of the yield of the Fund that is not tax-
exempt.
Unlike bank deposits or other investments which pay a fixed yield or return for
a stated period of time, the return for a Fund will fluctuate from time to time
and does not provide a basis for determining future returns. Return is a
function of portfolio quality, composition, maturity and market conditions as
well as the expenses allocated to a Fund. The return of each Fund may not be
comparable to other investment alternatives because of differences in the
foregoing variables and differences in the methods used to value portfolio
securities, compute expenses and calculate return.
The yield, effective yield and tax-equivalent yield of each Fund, except for the
Municipal Fund (which has not commenced operations) and Prime Rated Fund (which
was organized in October, 1995) with respect to FST Shares, FST Administration
Shares and FST Service Shares for the seven-day period ended December 31, 1994
were as follows:
<TABLE>
<CAPTION>
Effective Tax-Equivalent
Yield Yield Yield
----- --------- --------------
<S> <C> <C> <C>
Prime Obligations Fund:
FST Shares 5.66% 5.82% N/A
FST Administration Shares 5.41% 5.56% N/A
FST Service Shares 5.16% 5.29% N/A
Money Market Fund:
FST Shares 5.66% 5.83% N/A
FST Administration Shares 5.41% 5.56% N/A
FST Service Shares* 5.16% 5.30% N/A
Treasury Obligations Fund:
FST Shares 5.60% 5.75% N/A
FST Administration Shares 5.35% 5.49% N/A
FST Service Shares 5.10% 5.23% N/A
Government Fund:
FST Shares 5.66% 5.81% N/A
FST Administration Shares 5.41% 5.55% N/A
FST Service Shares* 5.16% 5.29% N/A
Tax-Free Fund:
FST Shares 4.76% 4.87% 7.88%
FST Administration Shares 4.51% 4.61% 7.47%
FST Service Shares 4.26% 4.35% 7.06%
</TABLE>
* Assuming such shared had been outstanding and are subject to maximum
administration or service fees.
The quotations of tax-equivalent yield set forth above for the seven-day period
ended December 31, 1994 are based on a federal marginal tax rate of 39.6%.
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<PAGE>
The information set forth in the foregoing table reflects certain fee reductions
voluntarily agreed to by the Adviser. See "The Adviser, Administrator,
Distributor and Transfer Agent." In the absence of such fee reductions, the
yield, effective yield and the tax-equivalent yield of each Fund (other than
Municipal and Prime Rated Funds) for the same period would have been as follows:
<TABLE>
<CAPTION>
Effective Tax-Equivalent
Yield Yield Yield
----- --------- --------------
<S> <C> <C> <C>
Prime Obligations Fund:
FST Shares 5.61% 5.76% N/A
FST Administration Shares 5.36% 5.50% N/A
FST Service Shares 5.11% 5.24% N/A
Money Market Fund:
FST Shares 5.55% 5.71% N/A
FST Administration Shares 5.30% 5.44% N/A
FST Service Shares* 5.05% 5.18% N/A
Treasury Obligations Fund:
FST Shares 5.53% 5.68% N/A
FST Administration Shares 5.28% 5.42% N/A
FST Service Shares 5.03% 5.16% N/A
Government Fund:
FST Shares 5.61% 5.76% N/A
FST Administration Shares 5.36% 5.50% N/A
FST Service Shares* 5.11% 5.24% N/A
Tax-Free Fund:
FST Shares 4.57% 4.67% 7.56%
FST Administration Shares 4.32% 4.41% 7.15%
FST Service Shares 4.07% 4.15% 6.74%
</TABLE>
* Assuming such shared had been outstanding and are subject to maximum
administration or service fees.
From time to time the Funds may publish an indication of their past performance
as measured by independent sources such as Lipper Analytical Services,
Incorporated, Weisenberger Investment Companies Service, Donoghue's Money Fund
Report, Barron's, Business Week, Changing Times, Financial World, Forbes, Money,
Personal Investor, Sylvia Porter's Personal Finance, and The Wall Street
Journal.
TAX INFORMATION
Each Fund has qualified and has elected or intends to qualify and elect to be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). Such qualification does not
involve supervision of management or investment practices or policies by any
governmental agency or bureau.
In order to qualify as a regulated investment company, each Fund must, among
other things, (a) derive at least 90% of its annual
37
<PAGE>
gross income from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of stock or securities or certain
other investments (the "90% test"); (b) derive less than 30% of its annual
gross income from the sale or other disposition of stock, securities or certain
other investments held less than three months; and (c) diversify its holdings so
that, at the end of each quarter of its taxable year, (i) at least 50% of the
market value of the Fund's total (gross) assets is represented by cash and cash
items (including receivables), U.S. Government securities, securities of other
regulated investment companies and other securities limited, in respect of any
one issuer, to an amount not greater in value than 5% of the value of the Fund's
total assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's total assets is invested in
the securities (other than U.S. Government securities and securities of other
regulated investment companies) of any one issuer or two or more issuers
controlled by the Fund and engaged in the same, similar or related trades or
businesses. For purposes of these requirements, participation interests will be
treated as securities, and the issuer will be identified on the basis of the
market risk and credit risk associated with any particular interest. Certain
payments received with respect to such interests, such as commitment fees and
certain facility fees, may not be treated as income qualifying under the 90%
test.
Each Fund, as a regulated investment company, will not be subject to federal
income tax on any of its net investment income and net realized capital gains
that are distributed to shareholders with respect to any taxable year, provided
that the Fund distributes at least 90% of its investment company taxable income
(generally all of its net taxable income other than "net capital gain," which is
the excess of net long-term capital gain over net short-term capital loss) for
such year, and in the case of any Fund that earns tax-exempt interest, at least
90% of the excess of the tax-exempt interest it earns over certain disallowed
deductions. A Fund will be subject to federal income tax at regular corporate
rates on any investment company taxable income or net capital gain that it does
not distribute for a taxable year. In order to avoid a nondeductible 4% federal
excise tax, a Fund must distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its taxable ordinary income
for such year, at least 98% of the excess of its capital gains over its capital
losses (generally computed on the basis of the one-year period ending on October
31 of such year), and all taxable ordinary income and the excess of capital
gains over capital losses for the previous year that were not distributed in
such year and on which the Fund paid no federal income tax.
Dividends paid by a Fund from taxable net investment income (including income
attributable to accrued market discount and a portion of the discount on certain
stripped tax-exempt obligations and their coupons) and the excess of net short-
term capital
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<PAGE>
gain over net long-term capital loss will be treated as ordinary income in the
hands of shareholders. Such distributions will not qualify for the corporate
dividends-received deduction. Distributions paid by a Fund from the excess of
net long-term capital gain over net short-term capital loss are taxable to
shareholders as long-term capital gain, regardless of the length of time the
shares of a Fund have been held by such shareholders, and also will not qualify
for the corporate dividends-received deduction. A Fund's net realized capital
gains for a taxable year are computed by taking into account any capital loss
carryforward of that Fund.
Distributions paid by Tax-Free Fund or Municipal Fund from tax-exempt interest
received by it and properly designated will generally be exempt from regular
federal income tax, provided that at least 50% of the value of the Fund's total
assets at the close of each quarter of its taxable year consists of tax-exempt
obligations (not including shares of other regulated investment companies that
may pay exempt-interest dividends, because such shares are not treated as tax-
exempt obligations for this purpose). Distributions paid by the other Funds from
any tax-exempt interest they may receive will not be tax-exempt, because they
will not satisfy the 50% requirement described in the preceding sentence. A
portion of any tax-exempt distributions may constitute tax preference items and
may give rise to, or increase liability under, the alternative minimum tax for
particular shareholders. In addition, all tax-exempt distributions of the Fund
will be considered in computing the "adjusted current earnings" preference item
of its corporate shareholders in determining the corporate alternative minimum
tax and the corporate environmental tax. To the extent that a Fund invests in
certain short-term instruments, including repurchase agreements, the interest on
which is not exempt from federal income tax, any distributions of income from
such investments will be taxable to shareholders as ordinary income. All or
substantially all of any interest on indebtedness incurred directly or
indirectly to purchase or carry shares of Tax-Free Fund or Municipal Fund will
generally not be deductible. The availability of tax-exempt obligations and the
value of these Funds may be affected by restrictive tax legislation enacted in
recent years.
In purchasing municipal obligations, Tax-Free Fund and Municipal Fund each
relies on opinions of nationally-recognized bond counsel for each issue as to
the excludability of interest on such obligations from gross income for federal
income tax purposes. Each Fund does not undertake independent investigations
concerning the tax-exempt status of such obligations, nor does it guarantee or
represent that bond counsels' opinions are correct.
Distributions of net investment income and net realized capital gains will be
taxable as described above, whether received in shares or in cash. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis in
39
<PAGE>
each share so received equal to the amount of cash they would have received had
they elected to receive cash.
Money Market Fund may be subject to foreign withholding or other foreign taxes
with respect to its investments in certain securities of foreign entities. These
taxes may be reduced under the terms of applicable U.S. income tax treaties, and
the Fund intends to satisfy any procedural requirements to qualify for benefits
under these treaties. Although the Fund does not anticipate that more than 50%
of the value of its total assets at the close of a taxable year will be composed
of securities of foreign corporations, if the 50% requirement were satisfied,
the Fund could make an election under Code Section 853 to permit its
shareholders to claim a credit or deduction on their federal income tax returns
for their pro rata portion of qualified taxes paid by the Fund in foreign
countries. In the event such an election is made, shareholders will be required
to include their pro rata share of such taxes in gross income and will be
entitled to claim a foreign tax credit or deduction with respect to such taxes,
subject to certain limitations under the Code. Shareholders who are precluded
from taking such credits or deductions will nevertheless be taxed on their pro
rata share of the foreign taxes included in their gross income, unless they are
otherwise exempt from federal income tax.
Each Fund will be required to report to the Internal Revenue Service all taxable
distributions, except in the case of certain exempt shareholders. Under the
backup withholding provisions of Code Section 3406, all such distributions may
be subject to withholding of federal income tax at the rate of 31% in the case
of nonexempt shareholders who fail to furnish the Fund with their taxpayer
identification number or with certain required certifications or if the Internal
Revenue Service or a broker notifies a Fund that the number furnished by the
shareholder is incorrect or that the shareholder is subject to backup
withholding as a result of failure to report interest or dividend income.
However, any taxable distributions from Tax-Free Fund or Municipal Fund will not
be subject to backup withholding if the Fund reasonably estimates that at least
95% of its distributions will be exempt interest dividends. Each Fund may refuse
to accept an application that does not contain any required taxpayer
identification number or certification that the number provided is correct or
that the investor is an exempt recipient. If the withholding provisions are
applicable, any such distributions, whether taken in cash or reinvested in
shares, will be reduced by the amounts required to be withheld. Investors may
wish to consult their tax advisors about the applicability of the backup
withholding provisions.
All distributions (including exempt-interest dividends) whether received in
shares or cash, must be reported by each shareholder on the shareholder's
federal income tax return. The Funds will inform shareholders of the federal
income tax status of their distributions after the end of each calendar year,
including, in
40
<PAGE>
the case of the Tax-Free Fund and the Municipal Fund, the amounts that qualify
as exempt-interest dividends and any portions of such amounts that constitute
tax preference items under the federal alternative minimum tax. Shareholders who
received exempt-interest dividends and have not held their shares of the
applicable Fund for its entire taxable year may have designated as tax-exempt or
as a tax preference item a percentage of their distributions which is not
exactly equal to a proportionate share of the amount of tax-exempt interest or
tax preference income earned during the period of their investment in such Fund.
Each shareholder should consult his or her own tax advisor to determine the tax
consequences of an investment in the Fund in the shareholder's own state and
locality.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions, and certain
prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
information.
Assuming that each Fund qualifies as a regulated investment company for federal
income tax purposes, each Fund, as a series of a Massachusetts business trust,
will not be subject to any income, franchise or corporate excise tax in
Massachusetts.
The foregoing discussion relates solely to U.S. federal income tax law as it
applies to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Each shareholder who is not a U.S. person should consult his or
her tax adviser regarding the U.S. and non-U.S. tax consequences of ownership of
shares of a Fund, including the possibility that such a shareholder may be
subject to a U.S. nonresident alien withholding tax at a rate of 30% (or at a
lower rate under an applicable U.S. income tax treaty) on certain distributions
from a Fund or to backup withholding on certain payments if a current IRS Form
W-8 or acceptable substitute is not on file with the Funds.
The Funds may be subject to state or local taxes in jurisdictions in which the
Funds may be deemed to be doing business. In addition, in those states or
localities which have income tax laws, the treatment of the Trust and its
shareholders under such laws may differ from their treatment under Federal
income tax laws, and investment in the Funds may have tax consequences for
shareholders different from those of a direct investment in the Funds'
securities. Shareholders should consult their own tax advisers concerning these
matters. For example, in such states or localities it may be appropriate for
shareholders to review with their tax advisers the state income and, if
applicable, intangibles tax consequences of investments by the Funds in
41
<PAGE>
securities issued by the particular state or the U.S. Government or its various
agencies or instrumentalities, because many states exempt from personal income
tax distributions by regulated investment companies from interest on
obligations of the particular state or on direct U.S. Government obligations
and/or exempt from intangibles tax the value of the shares of such companies
attributable to such obligations, subject to certain state-specific
requirements and/or limitations.
This discussion of the tax treatment of the Funds and their shareholders is
based on the tax laws in effect as of the date of this Statement of Additional
Information, which are subject to change either prospectively or retroactively.
ORGANIZATION AND CAPITALIZATION
Effective December 27, 1994, Prime Obligations Fund, Money Market Fund, Treasury
Obligations Fund, Government Fund, Tax-Free Fund and Municipal Fund were
reorganized, and each such Fund became a separate series of Goldman Sachs Money
Market Trust, a business trust organized under the laws of the Commonwealth of
Massachusetts on December 6, 1978. Prior to the reorganization, each Fund had
been a separate series of Financial Square Trust ("FST"), which was also a
Massachusetts business trust. Except for the fact that the Funds are now series
of Goldman Sachs Money Market Trust, shares of each Fund represent the same
interest in such Fund's assets, are of the same class, are subject to the same
terms and conditions, fees and expenses and confer the same rights as when each
Fund was a series of FST. Prime Rated Fund was organized as a series of the
Trust in October, 1995.
The Trust is a Massachusetts business trust established under the laws of The
Commonwealth of Massachusetts by a Declaration of Trust dated December 6, 1978.
Each shareholder is deemed to have expressly assented and agreed to the terms of
the Declaration of Trust and is deemed to be party thereto. The authorized
capital of the Trust consists of an unlimited number of shares of beneficial
interest. The Board of Trustees has authority under the Declaration of Trust to
create and classify shares of beneficial interest in separate series or funds of
the Trust without further action by shareholders. The Declaration of Trust
further authorizes the Board of Trustees to classify or reclassify any series or
portfolio of shares into one or more classes. The Board of Trustees has
authorized the issuance of three classes of shares of each of the Funds: FST
Shares, FST Service Shares and FST Administration Shares.
Each FST Share, FST Administration Share and FST Service Share of a Fund
represents an equal proportionate interest in the assets belonging to such Fund.
It is contemplated that most shares will be held in the accounts of which the
record owner is a bank or
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<PAGE>
other institution acting, directly or through an agent, as nominee for its
customers who are the beneficial owners of the shares or another organization
designated by such bank or institution. FST Shares may be purchased for accounts
held in the name of an investor or institution that is not compensated by the
Fund for services provided to the institution's investors. FST Administration
Shares may be purchased for accounts held in the name of an institution that
provides certain account administration services to its customers, including
maintenance of account records and processing orders to purchase, redeem and
exchange FST Administration Shares. FST Administration Shares of the Fund bear
the cost of administration fees at the annual rate of up to .25 of 1% of the
average daily net assets of such Shares. FST Service Shares may be purchased for
accounts held in the name of an institution that provides certain account
administration and shareholder liaison services to its customers, including
maintenance of account records, processing orders to purchase, redeem and
exchange FST Service Shares, responding to customer inquiries and assisting
customers with investment procedures. FST Service Shares of a Fund bear the cost
of service fees at the annual rate of up to .50 of 1% of the average daily net
assets of such Shares.
It is possible that an institution or its affiliates may offer different classes
of shares to its customers and thus receive different compensation with respect
to different classes of shares of a Fund. In the event a Fund is distributed by
sales persons or any other persons, they may receive different compensation with
respect to different classes of shares of a Fund. FST Administration Shares and
FST Service Shares each have certain exclusive voting rights on matters
relating to their respective plans. Shares of each class may be exchanged only
for shares of the same class in another Fund. Except as described above, the
three classes of shares are identical. Certain aspects of the shares may be
altered, after advance notice to shareholders, if it is deemed necessary in
order to satisfy certain tax regulatory requirements.
Each FST Share, FST Service Share and FST Administration Share of a Fund is
entitled to one vote per share; however, separate votes will be taken by the
Fund or class (or by more than one fund of the Trust or class voting as a single
class if similarly affected) on matters affecting only the Fund or class (or
those affected funds of the Trust or classes) or as otherwise required by law.
Shares are freely transferable and have no preemptive, subscription or
conversion rights. All shares issued and outstanding are fully paid and non-
assessable. The Declaration of Trust provides for shareholder voting only for
the election or removal of one or more Trustees, if a meeting is called for that
purpose, and for certain other designated matters. The Trust does not generally
hold annual or other meetings of shareholders. The shares of the Trust have non-
cumulative voting rights, which means that the holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of the Trustees if
they
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<PAGE>
choose to do so, and, in such event, the holders of the remaining less than 50%
of the shares voting for the election of Trustees will not be able to elect any
person or persons to the Board of Trustees. Each Trustee serves until the next
meeting of shareholders, if any, called for the purpose of electing or
reelecting such Trustee or successor to such Trustee, and until the election and
qualification of such successor, if any, or until such Trustee sooner dies,
resigns, retires or is removed by the shareholders or two-thirds of the
Trustees.
As of the date of this Statement of Additional Information, no shares of
Municipal Fund were outstanding.
As of September 30, 1995, the entities noted below may have owned beneficially
5% or more of the outstanding shares of Prime Obligations Fund: Commerce Bank of
Kansas City, PO Box 248, Kansas City, MO 64141 (12.48%), Citicorp Trust NA as
Custodian, 140 Royal Palm Way, Palm Beach, FL 33480 (9.29%), University of Texas
Systems, 201 W. 7th Street, Austin, TX (11.34%), Board of Regents, University of
Texas Systems, 210 W. 6th Street, Austin, TX (7.63%) and Michigan National Bank,
Luther & Co., PO Box 9088, Farmington HL, MI 48330 (5.39%). As of September 30,
1995, the entities noted below may have owned beneficially 5% or more of the
outstanding shares of Money Market Fund; Loral Corporation, 600 Third Avenue,
New York, NY 10016 (8.53%), Paging Network, Inc. 4965 Preston Park Blvd, Ste
500, Plano, TX 75093 (8.46%), State Street Bank & Trust Co., PO Box 1992,
Boston, MA 02101 (6.12%) and Citicorp Trust NA as Custodian, 400 Royal Palm Way,
Palm Beach, FL 33480 (7.88%). As of September 30, 1995, the entities noted below
may have owned beneficially 5% or more of the outstanding shares of Treasury
Obligations Fund: Commerce Bank of Kansas City, NA, PO Box 248, Kansas City, MO
64141 (14.19%), Commerce Bank, Charleston, NA, NB of C & Co., One Commerce
Square, Charleston, WV 25301 (8.52%), Central Bank Monroe LA, Centbank & Co., PO
Box 4928, Monroe, LA 71211 (5.30%), Amalgamated Bank of Chicago, One West Monroe
Street, Chicago, IL 60603 (9.18%), Continental Bank as C/F Relian, 231 S.
LaSalle St., Chicago, IL 60697 (5.33%) and State Street PO Box 1992, Boston,
MA 02101 (6.57%). As of September 30, 1995, the entities noted below may have
owned beneficially 5% or more of the outstanding shares of Government Fund:
Lincoln Industries, Inc., PO Box 80269, Lincoln, NE 68501 (12.92%),
Manufacturers Hanover Trust & Co., 270 Park Ave., New York, NY 10017 (5.27%),
Marine Midland Bank, PO Box 4203, Buffalo, NY 14240 (9.03%) and AMBAC Capital
Management Inc., 300 Nyala Farms Rd., Westport, CT 06880 (9.46%). As of
September 30, 1995, the entities noted below may have owned beneficially 5% or
more of the outstanding shares of Tax-Free Fund: Commerce Bank of Kansas City,
PO Box 2530, Concord, NH 03302 (28.33%) and Summit Bank (12.45%).
SHAREHOLDER AND TRUSTEE LIABILITY
- ---------------------------------
The Trust is an entity of the type commonly known as a "Massachusetts business
trust", which is the form in which many mutual funds are organized. Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Trust. The Declaration of Trust contains an express disclaimer of shareholder
44
<PAGE>
liability for acts or obligations of the Trust. Notice of such disclaimer will
normally be given in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust provides for
indemnification by the relevant fund of the Trust (including each Fund) for any
loss suffered by a shareholder as a result of an obligation of such fund. The
Declaration of Trust also provides that the Trust shall, upon request, assume
the defense of any claim made against any shareholder for any act or obligation
of the Trust and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which a Fund is unable to meet its obligations. The Trustees
believes that, in view of the above, the risk of personal liability of
shareholders is not material.
The Declaration of Trust provides that the Trustees of the Trust shall not be
liable for any action taken by them in good faith, and that they shall be fully
protected in relying in good faith upon the records of the Trust and upon
reports made to the Trust by persons selected in good faith by the Trustees as
qualified to make such reports. The Declaration of Trust further provides that
the Board of Trustees will not be liable for errors of judgment or mistakes of
fact or law. The Declaration of Trust provides that the Trust will indemnify the
Trustees and officers of the Trust against liabilities and expenses reasonably
incurred in connection with litigation in which they may be involved because of
their positions with the Trust, unless it is determined in the manner provided
in the Declaration of Trust that they have not acted in good faith in the
reasonable belief that, in the case of conduct in their official capacity with
the Trust, such conduct was in the best interests of the Trust, and in all other
cases, that the conduct was at least not opposed to the best interests of the
Trust (and in the case of any criminal proceeding, they had no reasonable cause
to believe that the conduct was unlawful). However, nothing in the Declaration
of Trust or the By-Laws protects or indemnifies a Trustee or officer against any
liability to which they would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.
CUSTODIAN AND SUBCUSTODIAN
State Street Bank and Trust Company ("State Street") has been retained to act as
custodian of the Funds' assets and, in that capacity, maintains the accounting
records and calculates the daily net asset value per share of a Fund. Its
mailing address is P.O. Box 1713, Boston, MA 02105. State Street has appointed
The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois 60675 as
subcustodian to hold cash and certain securities purchased by the Trust.
45
<PAGE>
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, independent public accounts, One International Place, 100
Oliver Street, Boston, Massachusetts 02110, have been selected as auditors of
the Trust. In addition to audit services, Arthur Andersen LLP prepares each
Fund's federal and state tax returns, and provides consultation and assistance
on accounting, internal control and related matters.
FINANCIAL STATEMENTS
The Financial Statements of the Funds then in existence and conducting
investment operations, including the Statements of Investments as of December
31, 1994, the Statements of Assets and Liabilities as of December 31, 1994, the
related Statements of Operations for the period then ended, the Statements of
Changes in Net Assets and the Financial Highlights for the periods presented,
the Notes to the Financial Statements, and the Report of Independent Public
Accountants, all of which are included in the December 31, 1994 Annual Report to
the shareholders, are attached hereto and incorporated by reference into this
Statement of Additional Information.
46
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholders:
We welcome this opportunity to provide you with a brief overview of events in
1994 that affected Financial Square Funds and bring you up to date on our
expectations for 1995. We will also describe some of the steps we have taken to
better serve you in the coming year.
Please note that this annual report covers the 11-month period ended on
December 31, 1994. The Trust was previously on a fiscal year that would have
ended January 31, 1995. The reason for this change is that as of December 28,
1994, the Financial Square Trust was reorganized to be part of Goldman Sachs
Money Market Trust (GSMMT). We want to assure you that neither the investment
policies nor the objectives of the Financial Square Funds will change in any
way. The reorganization was undertaken so that the new Trust could enjoy
substantial administrative efficiencies.
1994 IN REVIEW: A YEAR OF CHALLENGES SUCCESSFULLY MET
1994 was an eventful, challenging year for money market funds. It was a year
during which the Federal Reserve increased the federal funds rate on six
separate occasions by a total of 250 basis points; a year when some other money
market funds had to be supported in order to maintain their one-dollar net
asset values due to investments in volatile derivatives; and a year in which
the problems in Orange County, California raised the issue of credit risk for
some unfortunate money market investors. Through it all, Financial Square Funds
performed admirably by carefully managing risks while maximizing returns.
Conservative and thorough interest rate sensitivity analysis, a fundamental
tenet of the investment process used in the management of all Financial Square
Funds, enabled us to avoid volatile investments such as inverse floaters,
leveraged floaters, COFI (cost of funds index) floaters and the like that
proved so detrimental in a rising rate environment. Additionally, our
commitment to extensive credit research helped both the taxable and tax-exempt
Financial Square Funds to remain free of any direct exposure to Orange County,
California issues.
This same disciplined, analytic approach helped us structure the Financial
Square Funds appropriately for the tremendous increase in short-term interest
rates that were experienced this year. Due to many factors, including a robust
economy that grew by an estimated average quarterly rate of 4.1%, improvement
in the nation's employment level (unemployment fell from 6.7% in January 1994
to 5.4% in December 1994) and concerns about rising inflation, the Federal
Reserve Board tightened monetary policy, raising the targeted federal funds
rate from 3% in January 1994 to 5.5% by year end. This rapid increase in rates
resulted in money market funds being one of the few investment alternatives
that offered positive returns in 1994.
In 1994, Financial Square Funds performed particularly well given the rapid
increase in rates and significant steepening of the short-term yield curve. By
increasing the portfolios' exposure to floating rate securities whose coupons
quickly reflect increases in short-term rates and by restructuring the
portfolios' schedule of maturities at the appropriate times, we were able to
capture incremental returns. As a result, the Financial Square Funds
outperformed their respective IBC/Donoghue benchmarks during the period under
review while remaining within their conservative investment guidelines.
- --------------------------------------------------------------------------------
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
EXPECTATIONS AND STRATEGIES FOR 1995
Despite the restrictive monetary policy the Fed pursued during the course of
1994, economic growth remains strong. At this writing, the estimate of gross
domestic product for the fourth quarter of 1994 is 4.5%. Economic growth does
not appear to be slowing significantly as we begin 1995. Therefore, we believe
that the Fed may raise short-term interest rates by as much as another 100
basis points by mid-year 1995 before growth slows to the 2.5% to 3% level.
Consequently, Financial Square Funds will continue to be managed with shorter
average life targets and a barbell structure. In this way, we will seek to take
advantage of the steepness of the short end of the yield curve while remaining
liquid and poised for any further Fed tightening.
With the likelihood of higher short-term interest rates in the months ahead,
we believe that investors will find that the Financial Square Money Market Fund
provides a competitive alternative to cash with little risk of principal loss.
In addition, for investors whose goal is to maximize after-tax returns,
alternating between Financial Square's taxable and tax-exempt portfolios
continues to be a frictionless method of capitalizing on the changing
relationships between these two sectors without incurring transaction costs.
This strategy seeks to provide an attractive yield versus other short-term
investment opportunities.
A REVIEW OF CREDIT ISSUES DURING THE YEAR
Credit quality in the market in general declined modestly in 1994 after an
unusually strong year in 1993. Intense global competition, deregulation and
merger activity accounted for much of the weakness. Credit deterioration was
magnified in some cases by an increase in financial market volatility. Rapidly
rising interest rates, speculative derivative strategies and emerging market
exposure are only some of the shocks that impacted the system this year. Even
the traditionally secure municipal market was volatile as the bankruptcy of
Orange County, California sent ripples through the entire market. Other
industries under pressure included electric utilities, health care,
electronics, retail and property/casualty insurance.
Not all sectors experienced weakness. The strong U.S. economy, close
attention to cost control and efforts to deleverage the balance sheet helped
many U.S. industrial companies post record earnings and cash flows. Another
bright spot was the U.S. banking industry, which continued to benefit from
improved asset quality and capital levels. Merger and acquisition activity
returned to the headlines in 1994, but the trend was toward strategic
combinations that involved far less leverage than in the late 1980s. Thus, the
credit implications were far less significant than in previous merger waves.
OUR CONSERVATIVE APPROACH ADDS VALUE
The Goldman Sachs Credit Department's conservative credit standards took on
increased significance in the unstable market over the last year. While
carefully reviewing 1994 developments, our Credit Department placed or
maintained maturity or concentration limits on nearly one quarter of approved
issuers, decisions that were critical in helping us avoid potential risks.
As we begin 1995, we are encouraged by signs of stabilizing credit quality in
Japan and most of Europe as these economies finally emerge from recession. The
economic environment in the U.S. is also expected to be favorable. Despite the
stable
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
outlook for global credit quality, there are still many rapidly changing
industries and regional economies that require careful attention. As the year
progresses, our Credit Department will continue its thorough and diligent
monitoring of credit events at home and abroad.
NEW PORTFOLIOS INTRODUCED
During 1994, two new portfolios were introduced: the Financial Square Money
Market Fund, which opened in May, and the Financial Square Tax-Free Money
Market Fund, which opened in July.
IMPROVED CLIENT SERVICE
Goldman Sachs Asset Management has an ongoing commitment to improving the
quality of service we provide you. To better meet our clients' needs for
liquidity and convenience, during 1994 we extended the purchase and redemption
cut-off time from 2:30 p.m. to 3:00 p.m. EST for the Financial Square Prime
Obligations, Money Market and Treasury Obligation Funds and extended the cut-
off time from 2:30 to 5:00 p.m. EST for purchases of the Government Fund and
from 2:30 p.m. to 3 p.m. EST for redemptions.
In conclusion, we remain committed to our conservative, yet active,
investment management and credit policies, as well as to providing you with
outstanding client service. We appreciate the opportunity to serve you, and
invite discussion about the portfolios and your investment needs.
/s/ Kaysie P. Uniacke
Kaysie P. Uniacke
Portfolio Manager
February 23, 1995
- --------------------------------------------------------------------------------
3
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------- -------------------------------------------
To the Shareholders and Trustees of Goldman Sachs Money Market Trust-- Finan-
cial Square Funds:
We have audited the accompanying statements of assets and liabilities of
Goldman Sachs Money Market Trust--Financial Square Funds (a Massachusetts busi-
ness trust comprising the Prime Obligations, Government, Treasury Obligations,
Money Market and Tax-Free Money Market Funds) including the statements of in-
vestments as of December 31, 1994, the related statements of operations for the
periods then ended, the statements of changes in net assets and the financial
highlights for the periods presented. These financial statements and the finan-
cial highlights are the responsibility of the Trust's management. Our responsi-
bility is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of De-
cember 31, 1994 by correspondence with the custodian and brokers. As to securi-
ties purchased but not yet received, we carried out alternative auditing proce-
dures. An audit also includes assessing the accounting principles used and sig-
nificant estimates made by management, as well as evaluating the overall finan-
cial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective funds constituting Goldman Sachs Money Market Trust--Fi-
nancial Square Funds as of December 31, 1994, the results of their operations
for the periods then ended, the changes in their net assets and the financial
highlights for the periods presented, in conformity with generally accepted ac-
counting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 10, 1995
- ----------------------------------- -------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
Prime Obligations Fund
December 31, 1994
($ in thousands)
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER--50.8%
AIRCRAFT
Rockwell International Corp.
$ 25,000 6.59% 06/01/95 $ 24,309
BANK HOLDING COMPANIES
Bankers Trust New York Corp.
25,000 5.64(a) 03/17/95 24,997
35,000 5.62 04/11/95 34,454
Citicorp
80,000 6.25(a) 04/20/95 80,000
JP Morgan and Co., Inc.
35,000 6.17 03/09/95 34,598
Norwest Financial Corp.
25,000 5.60 02/13/95 24,833
25,000 5.70 02/22/95 24,794
BUSINESS CREDIT INSTITUTIONS
CIT Group Holdings, Inc.
20,000 5.90(a) 12/22/95 19,984
General Electric Capital Corp.
45,000 5.50 01/26/95 44,828
40,000 6.50 06/01/95 38,909
5,000 6.65 06/12/95 4,850
10,000 6.66 07/07/95 9,654
Heller Financial
50,000 5.68 02/13/95 49,662
FARM MACHINES
John Deere Capital Corp.
15,000 4.96 01/30/95 14,940
25,000 6.33 04/10/95 24,565
10,000 6.33 04/11/95 9,824
25,000 6.58 06/05/95 24,292
15,000 6.65 06/12/95 14,551
FIRE, MARINE AND CASUALTY INSURANCE CARRIERS
AI Credit Corp.
14,000 6.25 03/08/95 13,840
AIG Funding Corp.
25,000 6.45 04/13/95 24,542
20,000 6.65 06/12/95 19,402
LIFE INSURANCE
Commonwealth Life Insurance Co.
20,000 5.83(a) 05/09/95 20,000
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
LIFE INSURANCE (CONTINUED)
Pacific Mutual Life Insurance Co.
$ 25,000 5.73%(a) 03/01/95 $ 25,000
MISCELLANEOUS BUSINESS SERVICES
PHH Corp.
15,000 6.03(a) 10/03/95 14,994
MOTOR VEHICLES AND EQUIPMENT
Ford Motor Credit Corp.
75,000 5.38 01/17/95 74,820
15,000 5.68 02/09/95 14,908
PERSONAL CREDIT INSTITUTIONS
Household Finance Corp.
30,000 5.50 01/26/95 29,885
12,000 5.69(a) 03/17/95 12,000
Transamerica Finance Corp.
22,250 5.38 01/18/95 22,193
10,000 5.63 02/06/95 9,944
35,000 5.62 02/09/95 34,787
30,000 5.65 04/10/95 29,534
RADIO & TELEVISION EQUIPMENT
MCA Funding Corp.
23,000 5.65 02/06/95 22,870
RECEIVABLE/ASSET FINANCINGS
Ciesco, Inc.
25,000 5.63 02/06/95 24,859
Falcon Asset Securitization Corp.
25,500 5.65 02/06/95 25,356
McKenna Triangle National Corp.
50,000 5.63 02/06/95 49,719
25,000 6.50 06/01/95 24,318
15,000 6.60 06/13/95 14,552
New Center Asset Trust
20,000 5.39 01/18/95 19,949
40,000 5.47 01/24/95 39,860
15,000 5.67 02/06/95 14,915
25,000 5.69 02/07/95 24,854
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES
Bankers Trust Securities Corp.
15,000 6.06(b) 01/13/95 15,000
Cargill Financial Services Corp.
25,000 4.97 02/08/95 24,869
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (continued)
Prime Obligations Fund
December 31, 1994
($ in thousands)
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES (CONTINUED)
JP Morgan Securities, Inc.
$ 40,000 5.69%(b) 06/30/95 $ 40,000
Merrill Lynch & Co., Inc.
10,000 4.96 01/30/95 9,960
25,000 5.68(a) 03/01/95 25,000
10,000 6.00(a) 09/01/95 9,998
30,000 5.92(a) 11/27/95 29,995
Morgan Stanley Group Inc.
10,000 6.25 01/06/95 9,991
30,000 6.26 03/06/95 29,666
79,500 5.49(b) 09/01/95 79,502
TELECOMMUNICATIONS
AT&T Corp.
25,000 6.08 03/22/95 24,663
TELEPHONE COMMUNICATIONS
U.S. West Communications, Inc.
30,000 5.50 01/25/95 29,890
WATER SUPPLY AND OTHER SANITARY SERVICES
WMX Technologies, Inc.
26,577 6.70 06/13/95 25,771
- -----------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER $1,465,450
- -----------------------------------------------------------------------------------------------------
BANKERS' ACCEPTANCES--0.9%
Bank of America
$ 7,000 6.20% 03/06/95 $ 6,923
Wachovia Bank & Trust Co.
20,000 6.53 06/09/95 19,423
- -----------------------------------------------------------------------------------------------------
TOTAL BANKERS' ACCEPTANCES $ 26,346
- -----------------------------------------------------------------------------------------------------
BANK NOTES--12.0%
American Express Centurion Bank
$ 10,000 6.13%(a) 02/15/95 $ 10,000
25,000 5.75(a) 04/10/95 24,999
15,000 5.94(a) 10/24/95 14,999
25,000 6.00(a) 11/29/95 24,995
First National Bank of Chicago
25,000 5.46 01/17/95 25,000
25,000 5.64(a) 06/01/95 24,995
Fleet National Bank of Providence
15,000 6.03(a) 07/11/95 14,990
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BANK NOTES (CONTINUED)
Nationsbank of Texas N.A.
$ 75,000 5.57% 02/06/95 $ 75,000
PNC Bank, N.A.
25,000 3.50 01/31/95 24,997
25,000 5.70 04/20/95 24,973
Society National Bank, Cleveland
30,000 3.55 01/20/95 29,997
25,000 5.59(a) 03/14/95 24,996
Southtrust Bank of Alabama
25,000 6.00(a) 03/31/95 25,000
- --------------------------------------------------------------------------------------------------
TOTAL BANK NOTES $ 344,941
- --------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--3.3%
Federal Home Loan Mortgage Corp.
$ 20,000 6.15% 03/03/95 $ 19,792
Federal National Mortgage Assn.
75,000 5.60 02/17/95 74,451
- --------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS $ 94,243
- --------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--33.3%
Lehman Government Securities Inc., dated 12/30/94,
repurchase price $100,081 (FHLMC: $12,982, 7.00%,
01/01/08; FHLMC: $85,826, 7.50%, 06/01/23;
FHLMC: $10,736, 8.50%, 03/01/23)
$100,000 5.85% 01/03/95 $ 100,000
Joint Repurchase Agreement Accounts
110,600 5.75 01/03/95 110,600
750,000 5.99 01/03/95 750,000
- --------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 960,600
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $2,891,580(c)
- --------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
(a) Variable rate security-base index is one of the following:
U.S. Treasury Bill
One or three month LIBOR
One month commercial paper
Federal Funds
Prime lending rate
(b) Variable rate master note-base index is Federal Funds.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
6
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
Government Fund
December 31, 1994
($ in thousands)
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--63.3%
Federal Home Loan Bank
$25,000 5.55% 01/03/95 $ 24,992
10,000 6.45 06/05/95 9,722
10,000 6.60 06/13/95 9,701
10,000 5.53(a) 10/06/95 9,997
10,000 5.51(a) 10/20/95 9,995
Federal Home Loan Mortgage Corp.
5,000 5.51 04/03/95 4,930
Federal National Mortgage Assn.
50,000 5.90 01/04/95 49,975
5,000 5.00 01/17/95 4,989
10,000 4.94 01/19/95 9,975
10,000 5.27 01/20/95 9,972
8,000 4.83 02/03/95 7,965
15,000 6.39 06/08/95 14,579
5,000 6.40 06/08/95 4,860
6,810 6.45 06/19/95 6,604
10,000 6.65 07/17/95 9,636
10,000 5.54(a) 08/25/95 10,000
- ---------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $197,892
- ---------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--2.8%
United States Treasury Bills
$ 9,000 6.50% 06/30/95 $ 8,708
- ---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--34.3%
Bear Stearns and Co., dated 11/03/94, repurchase
price $10,108 (FNMA: $113, 9.00%, 04/01/02;
FHLMC: $10,745, 5.05%, 08/01/20)
$10,000 5.50% 01/12/95 $ 10,000
C.S. First Boston Corporation, dated 10/18/94,
repurchase price $10,137 (FNMA: $244, 6.00%,
02/01/24; FHLMC: $11,779, 6.50%, 04/01/24)
10,000 5.38 01/17/95 10,000
Lehman Government Securities Inc., dated 10/18/94, repurchase price
$10,137 (FNMA: $10,159, 8.00%,
02/01/07; FNMA: $121, 7.50%, 06/01/09; FHLMC:
$326, 7.50%, 01/01/23)
10,000 5.35 01/17/95 10,000
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
Lehman Government Securities Inc., dated 10/27/94, repurchase price
$15,206 (FNMA: $12,548, 5.50%,
07/01/00; FHLMC: $254, 8.50% 10/01/01; FNMA:
$3,774, 8.50%, 01/01/08; FNMA: $207, 7.00%,
03/01/14)
$15,000 5.50% 01/24/95 $15,000
Nationsbank Capital Markets, dated 12/30/94,
repurchase price $5,004 (U.S. Treasury Note:
$5,110, 6.50%, 09/30/96)
5,000 5.95 01/03/95 5,000
SBC Government Securities, dated 12/30/94,
repurchase price $5,004 (U.S. Treasury Note:
$5,145, 7.50%, 11/15/01)
5,000 6.05 01/03/95 5,000
Joint Repurchase Agreement Account
52,200 5.75 01/03/95 52,200
- ----------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $107,200
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $313,800(b)
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
(a) Variable rate security-base index is one of the following:
Federal Funds Prime lending rate
(b) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
7
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
Treasury Obligations Fund
December 31, 1994
($ in thousands)
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS--25.4%
<S> <C> <C> <C>
United States Treasury Bills
$ 15,000 4.87% 03/02/95 $ 14,878
20,000 6.30 06/08/95 19,447
35,000 6.30 06/15/95 33,989
60,000 6.27 06/22/95 58,210
40,000 6.25 06/29/95 38,757
United States Treasury Notes
50,000 4.63 01/03/95 49,988
70,000 7.63 01/03/95 69,989
- ----------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $ 285,258
- ----------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--74.4%
Bear Stearns and Co., dated 11/03/94, repurchase
price $30,382 (U.S. Treasury Notes: $30,795,
7.25%, 11/15/96)
$ 30,000 5.39% 01/26/95 $ 30,000
C.S. First Boston Corporation, dated 10/18/94,
repurchase price $30,403 (U.S. Treasury Notes: $80,
4.25%, 07/31/95; $28,825, 8.50%, 07/15/97; $255,
8.25%, 07/15/98; $190, 6.38%, 01/15/99)
30,000 5.25 01/17/95 30,000
Deutsche Bank Securities Corp., dated 12/30/94,
repurchase price $45,034 (U.S. Treasury Notes:
$48,745, 5.25%, 07/31/97)
45,000 5.50 01/03/95 45,000
J.P. Morgan Securities, Inc., dated 10/14/94,
repurchase price $30,994 (U.S. Treasury Notes:
$32,815, 5.13%, 02/28/98)
30,000 5.25 01/11/95 30,000
Lehman Government Securities Inc., dated 10/18/94, repurchase price
$30,403 (U.S. Treasury Notes: $1,195,
10.38%, 05/15/95; $280, 7.50%, 01/31/96; $255, 7.88%, 04/15/98; $28,050,
8.50%, 11/15/00)
30,000 5.25 01/17/95 30,000
Lehman Government Securities Inc., dated 10/27/94,
repurchase price $50,593 (U.S. Treasury Notes:
$5,235, 6.00%, 06/30/96; $435, 6.88%,
04/30/97; $43,445, 8.50%,
07/15/97)
50,000 5.40 01/13/95 50,000
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
Lehman Government Securities Inc., dated
12/02/94, repurchase price $60,295 (U.S. Treasury
Notes: $10,880, 3.88%, 02/28/95; $51,950, 4.38%,
08/15/96)
$ 60,000 5.90% 01/03/95 $ 60,000
Merrill Lynch Government Securities, Inc., dated
10/13/94, repurchase price $30,383 (U.S. Treasury
Notes: $275, 6.50%, 05/15/97; $30,170, 7.88%,
04/15/98)
30,000 5.35 01/06/95 30,000
Morgan Stanley & Co., Inc., dated 12/05/94,
repurchase price $35,172 (U.S. Treasury Notes:
$34,950, 8.50%, 05/15/97)
35,000 5.90 01/03/95 35,000
Nationsbank Capital Markets, dated 12/30/94,
repurchase price $45,037 (U.S. Treasury Notes:
$46,000, 6.50%, 09/30/96)
45,000 5.95 01/03/95 45,000
SBC Government Securities, dated 12/30/94,
repurchase price $45,038 (U.S. Treasury Notes:
$49,800, 5.00%, 01/31/99)
45,000 6.05 01/03/95 45,000
Sanwa Securities Co., dated 12/30/94, repurchase
price $45,037 (U.S. Treasury Notes: $47,615, 5.63%,
01/31/98)
45,000 5.90 01/03/95 45,000
UBS Securities, Inc., dated 12/30/94, repurchase
price $45,034 (U.S. Treasury Notes: $5,885, 4.63%,
02/15/96; $38,000, 8.50%, 07/15/97)
45,000 5.50 01/03/95 45,000
Joint Repurchase Agreement Account
314,000 5.75 01/03/95 314,000
- --------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 834,000
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $1,119,258(a)
- --------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
(a) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
8
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
Money Market Fund
December 31, 1994
($ in thousands)
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER--56.1%
BANK HOLDING COMPANIES
Bankers Trust New York Corp.
$ 5,000 5.64%(a) 03/17/95 $ 4,999
15,000 5.62 04/11/95 14,765
5,000 5.67(a) 06/20/95 5,000
BEVERAGES--SOFT DRINKS
Pepsico, Inc.
10,000 5.04 02/15/95 9,937
BUSINESS CREDIT INSTITUTIONS
CIT Group Holdings, Inc.
10,000 5.90(a) 12/22/95 9,992
General Electric Capital Corp.
25,000 6.65 06/12/95 24,252
5,000 6.66 07/07/95 4,827
DRUGS
American Home Products Corp.
25,000 6.70 06/26/95 24,181
ELECTRIC COMPANY
ENEL
16,777 5.70 04/06/95 16,525
FINANCIAL SERVICES
Mitsui & Co. USA
20,000 5.42 01/18/95 19,949
FOOD PRODUCTS
Nestle Capital Corp.
26,000 5.80 01/20/95 25,920
FOREIGN BANK
Banca CRT Financial Corp.
5,000 5.20 03/01/95 4,957
15,000 5.70 04/11/95 14,763
Cariplo Finance
25,000 6.26 04/03/95 24,609
Credito Italiano Delaware, Inc.
20,000 5.43 01/20/95 19,943
Skandinaviska Enskilda Banken
15,000 4.99 02/02/95 14,933
LIFE INSURANCE
Sun Life Insurance Co. of America
25,000 5.98(a) 10/23/95 25,000
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
MISCELLANEOUS BUSINESS SERVICES
PHH Corp.
$ 5,000 6.03%(a) 10/03/95 $ 4,998
MOTOR VEHICLES AND EQUIPMENT
American Honda Finance Corp.
20,000 5.71 02/01/95 19,902
Ford Motor Credit Co.
35,000 5.40 01/17/95 34,916
PERSONAL CREDIT INSTITUTIONS
Household Finance Corp.
20,000 5.50 01/26/95 19,924
Transamerica Finance Corp.
5,000 5.70 02/13/95 4,966
RECEIVABLE/ASSET FINANCINGS
Corporate Receivables Corp.
10,000 6.65 06/21/95 9,684
New Center Asset Trust
17,000 5.69 02/07/95 16,900
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES
Merrill Lynch & Co., Inc.
5,000 6.00(a) 09/01/95 4,999
15,000 5.92(a) 11/27/95 14,997
Morgan Guaranty Trust Co.
25,000 5.69(b) 06/30/95 25,000
Morgan Stanley Group, Inc.
45,000 5.49(b) 09/01/95 45,000
SERVICES DATA PROCESSING
Electronic Data Systems Corp.
20,000 5.75 02/13/95 19,863
TELECOMMUNICATIONS
NYNEX Corp.
10,000 5.70 02/02/95 9,949
10,000 5.73 02/13/95 9,932
WATER SUPPLY AND OTHER SANITARY SERVICES
WMX Technologies, Inc.
15,000 6.70 06/13/95 14,545
- -----------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER $520,127
- -----------------------------------------------------------------------------------------------------
BANKERS' ACCEPTANCES--YANKEEDOLLAR--1.1%
Sanwa Bank Ltd., New York
$ 11,000 6.66% 06/27/95 $ 10,640
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (continued)
Money Market Fund
December 31, 1994
($ in thousands)
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BANK NOTES--8.1%
American Express Centurion Bank
$ 15,000 5.94%(a) 10/24/95 $ 14,999
First National Bank, Chicago
15,000 5.46 01/17/95 15,000
5,000 5.64(a) 06/01/95 4,999
Fleet National Bank, Providence
5,000 6.03(a) 07/11/95 4,997
Huntington National Bank
5,000 5.95(a) 02/03/95 5,000
Nationsbank of Texas, N.A.
20,000 5.57 02/06/95 20,000
PNC Bank N.A.
10,000 5.70 04/20/95 9,989
- --------------------------------------------------------------------------------------------------
TOTAL BANK NOTES $ 74,984
- --------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--YANKEEDOLLAR--7.5%
Commerzbank Ag, New York
$ 40,000 6.05% 01/27/95 $ 40,007
Hessische Landesbank Girozentrale, New York
10,000 5.75 02/08/95 10,000
Sanwa Bank Ltd., New York
5,000 6.78 06/23/95 4,997
Sumitomo Bank Ltd., New York
15,000 5.62 01/31/95 14,998
- --------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF
DEPOSIT--YANKEEDOLLAR $ 70,002
- --------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS--5.3%
Federal National Mortgage Association
$ 50,000 5.60% 02/17/95 $ 49,634
- --------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--25.1%
Joint Repurchase Agreement Accounts
$133,500 5.75% 01/03/95 $133,500
100,000 5.99 01/03/95 100,000
- --------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $233,500
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $958,887(c)
- --------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
(a) Variable rate security-base index is one of the following:
U.S. Treasury Bill
One or three month LIBOR
One month commercial paper
Federal Funds
Prime lending rate
(b) Variable rate master note-base index is Federal Funds.
(c) The cost stated also represents aggregate cost for federal income tax
purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
10
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS
Tax-Free Money Market Fund
December 31, 1994
($ in thousands)
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALABAMA--5.5%
City of Mobile, Al PCRB Series 1994 for Alabama
Power Co. VRDN (A-1/VMIG-1)
$ 3,800 5.75% 01/01/95 $ 3,800
Parrish, Al IDA PCRB for Alabama Power VRDN
(A-1/VMIG-1)
6,500 5.75 01/01/95 6,500
- -------------------------------------------------------------------------------------------------------
10,300
- -------------------------------------------------------------------------------------------------------
ALASKA--1.1%
Alaska Housing Finance Corp., General Mortgage
RB, VRDN Series 1991A (A-1+/VMIG-1)
2,000 5.75 01/07/95 2,000
- -------------------------------------------------------------------------------------------------------
ARIZONA--0.9%
City of Phoenix IDA MF Hsg. Del Mar Terrace
Apartments VRDN (Bank of America LOC)
(Aa3/VMIG-1)
1,700 5.85 01/07/95 1,700
- -------------------------------------------------------------------------------------------------------
CALIFORNIA--7.9%
California RANS (Sp-1+/MIG-1)
4,000 5.00 06/28/95 4,010
City of Fremont MF Hsg. Series 1985D--Creekside
Village Apartment Project VRDN (Fuji Bank Ltd.
LOC) (Aa2/VMIG-1)
2,000 5.00 01/07/95 2,000
City of San Francisco, Ca USD TRANS
(Sp-1+/ MIG-1)
3,500 4.75 08/24/95 3,512
Humboldt County TRANS 1994-95 (Sp-1+)
1,000 4.75 08/01/95 1,003
Los Angeles County Metropolitan Transportation
Authority VRDN (MBIA)(A-1+/VMIG-1)
4,000 5.40 01/07/95 4,000
Orange County Seaside Meadows VRDN (Fuji Bank
LOC) (A-1/VMIG-1)
400 6.10 01/07/95 400
- -------------------------------------------------------------------------------------------------------
14,925
- -------------------------------------------------------------------------------------------------------
FLORIDA--8.1%
Dade County, Fl Water and Sewer Series 1994 VRDN
(FGIC) (A-1+/VMIG-1)
1,100 4.95 01/07/95 1,100
Florida Local Government Finance Commission Pooled
CP Notes--Series A (First Union National Bank of
Florida LOC)(A-1+/P-1)
5,000 4.40 02/14/95 5,000
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FLORIDA (CONTINUED)
Orange County, Fl MF Hsg. for Sunlake Apartments
Series 1985-H (Dai-Ichi Kangyo Bank LOC)
(A+/VMIG-1)
$ 5,155 4.50% 11/01/95 $ 5,155
Putnam County Development Authority for Seminole
Electric H-1 VRDN (CFC) (A-1/VMIG-1)
4,000 5.55 01/07/95 4,000
- -------------------------------------------------------------------------------------------------------
15,255
- -------------------------------------------------------------------------------------------------------
GEORGIA--14.1%
Burke County Development Authority, Ga Adjust Tender PCRB, Oglethorpe Power
Corp. Vogtle Series 92A
(Credit Suisse LOC) (Aaa/A-1+)
3,000 3.80 01/23/95 3,000
2,000 3.90 02/22/95 2,000
Burke County, Ga for Georgia Power Series 8 VRDN (A-1/VMIG-1)
7,500 5.90 01/01/95 7,499
Fulco, Ga Hospital Authority for Piedmont Hospital
VRDN (Trust Company Bank LOC) (A-1+)
7,100 5.65 01/07/95 7,100
Municipal Electric Authority of Georgia Project One Subordinate Series B-E
(A-1/VMIG-1)
3,000 4.50 02/27/95 3,000
3,800 4.55 04/13/95 3,800
- -------------------------------------------------------------------------------------------------------
26,399
- -------------------------------------------------------------------------------------------------------
HAWAII--2.1%
Hawaii Housing Finance and Development Authority
VRDN (Federal Home Loan Bank LOC) (A-1+)
4,000 5.50 01/07/95 4,000
- -------------------------------------------------------------------------------------------------------
ILLINOIS--4.3%
Illinois Health Facilities Authority Series B--Elmhurst
Memorial Hospital VRDN (MIG-1)
100 6.00 01/01/95 100
Illinois Health Facilities Authority VRDN Series 1985
B and C--Ingalls Memorial Hospital (Fuji Bank LOC) (Aa3/VMIG-1)
4,000 5.50 01/07/95 4,000
Illinois Health Facilities Authority VRDN Series 1985
C and D--Revolving Fund Pooled Finance Program
(First National Bank of Chicago LOC) (A-1/VMIG-1)
4,000 5.70 01/07/95 4,000
- -------------------------------------------------------------------------------------------------------
8,100
- -------------------------------------------------------------------------------------------------------
INDIANA--3.4%
Indiana Health Facility for Methodist Hospital VRDN (A-1+/VMIG-1)
6,300 5.55 01/07/95 6,300
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (continued)
Tax-Free Money Market Fund
December 31, 1994
($ in thousands)
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IOWA--2.1%
Salix Iowa PCRB for Midwest Power Systems Inc.
VRDN (A-1/VMIG-1)
$ 3,900 5.55% 01/07/95 $ 3,900
- -------------------------------------------------------------------------------------------------------
KANSAS--1.6%
City of Burlington-Kansas City Power and Light PCRB (Deutsche Bank LOC)(A-
1+/P-1)
3,000 3.80 01/23/95 3,000
- -------------------------------------------------------------------------------------------------------
KENTUCKY--2.1%
Mason County Variable/Fixed Rate PCRB Pooled for
East Kentucky Power Facility VRDN (CFC) (A-1+/Aa3)
4,000 5.55 01/07/95 4,000
- -------------------------------------------------------------------------------------------------------
LOUISIANA--4.5%
Louisiana State Adj. Ref. Tender GO Refunding Bonds
(Fuji Bank/Credit Local de France LOC)(Aa3/VMIG-1)
2,400 3.75 01/18/95 2,400
Plaquemine Port, Harbor and Terminal District Series
A-D (Tampa Electric)(Aa3/P-1)
6,000 3.90 01/26/95 6,000
- -------------------------------------------------------------------------------------------------------
8,400
- -------------------------------------------------------------------------------------------------------
MINNESOTA--2.1%
Port Authority of the City of St. Paul VRDN IDA for Weyerhaeuser Project (A-
1)
4,000 5.75 01/07/95 4,000
- -------------------------------------------------------------------------------------------------------
MISSOURI--5.8%
Kansas City Timberlane Apartment Project VRDN (Bank
of America LOC) (Aa3/VMIG-1)
500 5.75 01/07/95 500
Missouri Health Facility VRDN for Sisters of Mercy
Series A,B,C (A-1+/VMIG-1)
4,100 5.20 01/07/95 4,100
Missouri State Environmental Improvement and Energy Residential Authority
Series 1992-Kansas City Power
& Light VRDN (A-1/VMIG-1)
2,000 5.60 01/07/95 2,000
Missouri State Environmental Improvement and Energy Residential Authority
UPDATE Series A-Union
Electric Co. Facility (West Deutsche Landes Bank LOC)(Aaa/A-1+)
4,370 3.85 01/31/95 4,370
- -------------------------------------------------------------------------------------------------------
10,970
- -------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONTANA--3.7%
Montana State Health Facility Pooled Loan Program
Series A VRDN (FGIC) (A-1+/VMIG-1)
$6,864 5.60% 01/07/95 $6,864
- -------------------------------------------------------------------------------------------------------
NEVADA--2.7%
Clark County for Nevada Airport System VRDN (MBIA)
(A-1+/VMIG-1)
5,000 4.95 01/07/95 5,000
- -------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE--0.5%
New Hampshire Business Finance Authority PCRB 1990
Series B for New England Power (A-1/VMIG-1)
950 3.75 01/19/95 950
- -------------------------------------------------------------------------------------------------------
NEW YORK--4.9%
New York City RANS Series B Index Floaters
(Sp-1/MIG-1)
8,000 4.14 06/30/95 8,000
New York State Dormitory Authority RB, Series 1990B-
Cornell University VRDN (A-1+/VMIG-1)
1,200 5.75 01/01/95 1,200
- -------------------------------------------------------------------------------------------------------
9,200
- -------------------------------------------------------------------------------------------------------
OHIO--2.1%
City of Columbus, OH Electric System Series 1984
VRDN (DaiIchi Kangyo Bank LOC) (VMIG-1)
4,000 3.90 01/01/95 4,000
- -------------------------------------------------------------------------------------------------------
OREGON--0.5%
City of Medford, OR for Rogue Valley Health Services
VRDN (National Bank of Oregon LOC) (A-1/VMIG-1)
1,000 6.15 01/01/95 1,000
- -------------------------------------------------------------------------------------------------------
PENNSYLVANIA--4.5%
Philadelphia School District TRANS Series 1994-1995 (Sp-1/MIG-1)
3,000 4.75 06/30/95 3,008
Quakertown Hospital Group Pooled Finance VRDN
(First National Bank of Chicago LOC) (Aa2/VMIG-1)
5,400 5.50 01/07/95 5,400
- -------------------------------------------------------------------------------------------------------
8,408
- -------------------------------------------------------------------------------------------------------
TEXAS--10.4%
Brazos Harbor Authority Industrial Development
Corporation Variable Rate (Dow Chemical Co.)(A-1)
5,000 4.05 02/24/95 5,000
Harris County Health Facility for The Methodist Hospital
Series 1994 VRDN (A-1+)
1,000 5.85 01/01/95 1,000
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TEXAS (CONTINUED)
Lower Colorado River Authority Series B and C
(A-1/P-1)
$ 3,000 3.75% 01/12/95 $ 3,000
State of Texas TRANS Series 1995 (Sp-1+/MIG-1)
5,000 5.00 08/31/95 5,009
Texas Public Finance Authority Tax Exempt CP Notes
Series B (A-1+/P-1)
3,000 3.90 01/25/95 3,000
Texas Water Development Board Series 1992-A VRDN (A-1+/VMIG-1)
2,600 5.95 01/01/95 2,600
- ----------------------------------------------------------------------------------------------------
19,609
- ----------------------------------------------------------------------------------------------------
VIRGINIA--1.5%
IDA of York County PCRB Series 1985 (Virginia Electric
Power Co.)(A-1/P-1)
2,800 3.85 02/13/95 2,800
- ----------------------------------------------------------------------------------------------------
WASHINGTON, D.C.--5.7%
District of Columbia VRDN ACES-Series 1988 B-E
Georgetown University (A-1+/VMIG-1)
10,800 5.55 01/07/95 10,800
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $191,880(a)
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
(a) The cost stated also represents aggregate cost for federal income tax pur-
poses.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
INVESTMENT ABBREVIATIONS
ACES --Adjustable Convertible Extendible Securities
BANS --Bond Anticipation Notes
CFC --Unconditionally guaranteed by CFC, Cooperative Finance Corp.
CP --Commercial Paper
FGIC --Insured by Financial Guaranty Insurance Co.
GO --General Obligation
IDA --Industrial Development Authority
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors Assurance
MF Hsg. --Multi-Family Housing
PCRB --Pollution Control Revenue Bond
RANS --Revenue Anticipation Notes
RB --Revenue Bond
TRANS --Tax Revenue Anticipation Notes
UPDATE--Unit Priced Daily Adjustable Tax-Exempt Security
USD --Unified School District
VRDN --Variable Rate Demand Note
13
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME TREASURY TAX-FREE
OBLIGATIONS GOVERNMENT OBLIGATIONS MONEY MARKET MONEY MARKET
FUND FUND FUND FUND FUND
-------------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in
securities, at value
based on amortized
cost................... $2,891,579,754 $313,800,335 $1,119,257,833 $958,887,052 $191,879,939
Interest receivable..... 5,728,030 778,200 6,549,276 1,401,308 1,178,469
Cash.................... 53,689 28,629 61,404 24,505 536,958
Deferred organization
expenses, net.......... 1,850 -- 3,171 66,005 39,932
Other assets............ 124,152 10,823 72,754 94,205 19,632
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS 2,897,487,475 314,617,987 1,125,944,438 960,473,075 193,654,930
- ----------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment
securities purchased... -- -- -- 24,608,750 5,094,166
Dividends payable....... 14,229,339 1,865,093 4,076,131 5,839,960 619,306
Accrued expenses and
other liabilities...... 923,798 149,821 386,535 492,927 62,559
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 15,153,137 2,014,914 4,462,666 30,941,637 5,776,031
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Paid-in capital......... 2,882,334,338 312,603,073 1,121,485,135 929,528,834 187,878,899
Accumulated undistrib-
uted net realized gain
(loss) on investment
transactions........... -- -- (3,363) 2,604 --
- ----------------------------------------------------------------------------------------------
NET ASSETS $2,882,334,338 $312,603,073 $1,121,481,772 $929,531,438 $187,878,899
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, OFFER-
ING AND REDEMPTION
PRICE PER SHARE (NET
ASSETS/SHARES OUTSTAND-
ING) $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------
SHARES OUTSTANDING:
FST shares.............. 2,774,849,185 258,349,478 958,194,946 862,968,506 183,569,732
FST Administration
shares................. 66,112,684 54,253,595 82,125,427 66,560,328 2,042,298
FST Service shares...... 41,372,469 -- 81,164,762 -- 2,266,869
- ----------------------------------------------------------------------------------------------
TOTAL SHARES OF
BENEFICIAL INTEREST
OUTSTANDING, $0.01 PAR
VALUE (UNLIMITED NUMBER
OF SHARES AUTHORIZED).. 2,882,334,338 312,603,073 1,121,485,135 929,528,834 187,878,899
- ----------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Periods Ended December 31, 1994
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME TREASURY TAX-FREE
OBLIGATIONS GOVERNMENT OBLIGATIONS MONEY MARKET MONEY MARKET
FUND(B)(G) FUND(C)(G) FUND(D)(G) FUND(A)(E) FUND(A)(F)
-------------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income........ $97,863,068 $8,325,881 $32,052,045 $32,143,648 $2,469,380
- ------------------------------------------------------------------------------------------------
EXPENSES:
Investment adviser
fees.................. 695,689 50,687 225,733 64,294 --
Account administration
fees.................. 2,789,597 193,154 961,040 835,827 35,436
Custodian fees......... 334,033 42,827 206,445 97,714 10,954
Professional fees...... 128,129 6,689 50,939 42,071 4,622
Trustee fees........... 37,409 2,031 17,712 9,957 1,106
Amortization of de-
ferred organization
expenses.............. 9,370 -- 9,370 5,602 3,693
Other.................. 283,833 30,279 96,523 100,704 56,175
- ------------------------------------------------------------------------------------------------
TOTAL EXPENSES.......... 4,278,060 325,667 1,567,762 1,156,169 111,986
Less: Expenses reimburs-
able by GSAM........... 415,540 62,967 237,091 458,254 66,782
- ------------------------------------------------------------------------------------------------
Net expenses........... 3,862,520 262,700 1,330,671 697,915 45,204
Administration share
fees.................. 139,235 83,036 79,171 78,743 1,800
Service share fees..... 115,595 -- 168,982 -- 1,199
- ------------------------------------------------------------------------------------------------
Net expenses and share
fees.................. 4,117,350 345,736 1,578,824 776,658 48,203
- ------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME... 93,745,718 7,980,145 30,473,221 31,366,990 2,421,177
NET REALIZED GAIN (LOSS)
ON INVESTMENT
TRANSACTIONS........... 4,990 3,678 (79,393) 5,671 --
- ------------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS RESULTING FROM
OPERATIONS............. $93,750,708 $7,983,823 $30,393,828 $31,372,661 $2,421,177
- ------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
(a) The Money Market and Tax-Free Money Market Funds commenced operations on
May 18, 1994 and July 19, 1994, respectively.
(b) For the period ended December 31, 1994, GSAM waived investment advisory
fees of $913,694.
(c) For the period ended December 31, 1994, GSAM waived investment advisory
fees of $78,257 and account administration fees of $30,346.
(d) For the period ended December 31, 1994, GSAM waived investment advisory
fees of $328,714.
(e) For the period from May 18, 1994 to December 31, 1994, GSAM waived
investment advisory fees of $417,860.
(f) For the period from July 19, 1994 to December 31, 1994, GSAM waived
investment advisory fees of $53,176 and account administration fees of
$56,733.
(g) The information presented above reflects eleven months of operations due to
a change in fiscal year end. This change was caused by the reorganization
of the funds as a series of Goldman Sachs Money Market Trust.
15
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended December 31, 1994
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME GOVERNMENT TREASURY MONEY MARKET TAX-FREE
OBLIGATIONS FUND(b) FUND(b) OBLIGATIONS FUND(b) FUND(a) MONEY MARKET FUND(a)
------------------- ---------- ------------------- ---------------- --------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income... $ 93,745,718 $ 7,980,145 $ 30,473,221 $ 31,366,990 $ 2,421,177
Net realized gain (loss)
on investment transac-
tions.................. 4,990 3,678 (79,393) 5,671 --
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations 93,750,708 7,983,823 30,393,828 31,372,661 2,421,177
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income...
FST shares............. (90,514,074) (6,434,384) (27,649,397) (29,849,508) (2,389,827)
FST Administration
shares................ (2,319,934) (1,545,761) (1,338,481) (1,517,482) (23,394)
FST Service shares..... (919,709) -- (1,485,343) -- (7,956)
Net realized gain on in-
vestment transactions..
FST shares............. (82,819) (3,010) (6,131) (3,002) --
FST Administration
shares................ (13,759) (668) (161) (65) --
FST Service shares..... (814) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (93,851,109) (7,983,823) (30,479,513) (31,370,057) (2,421,177)
- -------------------------------------------------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS
(at $1.00 per share):
Proceeds from sale of
shares................. 22,898,595,340 2,128,561,581 4,616,966,952 12,775,307,681 742,552,184
Reinvestment of divi-
dends and distribu-
tions.................. 23,668,421 2,146,045 2,940,080 9,676,488 395,745
Cost of shares repur-
chased................. (21,920,493,388) (1,876,927,328) (4,370,900,948) (11,855,455,335) (555,069,030)
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets resulting from
share
transactions 1,001,770,373 253,780,298 249,006,084 929,528,834 187,878,899
- -------------------------------------------------------------------------------------------------------------------------
Total increase......... 1,001,669,972 253,780,298 248,920,399 929,531,438 187,878,899
NET ASSETS:
Beginning of period..... 1,880,664,366 58,822,775 872,561,373 -- --
- -------------------------------------------------------------------------------------------------------------------------
End of Period $ 2,882,334,338 $ 312,603,073 $ 1,121,481,772 $ 929,531,438 $ 187,878,899
- -------------------------------------------------------------------------------------------------------------------------
SUMMARY OF SHARE TRANS-
ACTIONS (at $1.00 per
share):
FST shares:
Shares sold............ 22,560,410,624 1,927,187,116 4,110,849,675 12,311,243,995 732,710,640
Reinvestment of divi-
dends and distribu-
tions................. 23,317,361 1,684,083 2,581,039 8,626,882 380,335
Shares repurchased..... (21,640,191,346) (1,715,218,895) (3,967,576,749) (11,456,902,371) (549,521,243)
- -------------------------------------------------------------------------------------------------------------------------
943,536,639 213,652,304 145,853,965 862,968,506 183,569,732
- -------------------------------------------------------------------------------------------------------------------------
FST Administration
shares:
Shares sold............ 212,782,227 201,374,465 194,485,191 464,063,686 6,207,387
Reinvestment of divi-
dends and distribu-
tions................. 117,315 461,962 299,486 1,049,606 11,734
Shares repurchased..... (182,036,935) (161,708,433) (137,143,496) (398,552,964) (4,176,823)
- -------------------------------------------------------------------------------------------------------------------------
30,862,607 40,127,994 57,641,181 66,560,328 2,042,298
- -------------------------------------------------------------------------------------------------------------------------
FST Service shares:
Shares sold............ 125,402,489 -- 311,632,086 -- 3,634,157
Reinvestment of divi-
dends and distribu-
tions................. 233,745 -- 59,555 -- 3,676
Shares repurchased..... (98,265,107) -- (266,180,703) -- (1,370,964)
- -------------------------------------------------------------------------------------------------------------------------
27,371,127 -- 45,510,938 -- 2,266,869
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from share
transactions 1,001,770,373 253,780,298 249,006,084 929,528,834 187,878,899
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
(a) The Money Market and Tax-Free Money Market Funds commenced operations on
May 18, 1994 and July 19, 1994, respectively.
(b) The information presented above reflects eleven months of operations due to
a change in fiscal year end. This change was caused by the reorganization
of the funds as a series of Goldman Sachs Money Market Trust.
16
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended January 31, 1994
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME GOVERNMENT TREASURY
OBLIGATIONS FUND FUND OBLIGATIONS FUND
---------------- ------------- ----------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income........ $ 41,976,191 $ 878,704 $ 22,492,504
Net realized gain on invest-
ment transactions........... 303,569 2,125 489,998
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 42,279,760 880,829 22,982,502
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income........
FST shares.................. (40,187,490) (805,691) (22,203,395)
FST Administration shares... (1,256,150) (73,013) (184,253)
FST Service shares.......... (524,552) -- (104,856)
Net realized gain on invest-
ment transactions...........
FST shares.................. (275,100) (1,876) (435,286)
FST Administration shares... (9,488) (249) (2,805)
FST Service shares.......... (4,311) -- (2,360)
- --------------------------------------------------------------------------------
Total distributions to
shareholders (42,257,091) (880,829) (22,932,955)
- --------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS (at
$1.00 per share):
Proceeds from sale of shares. 13,297,915,109 331,144,623 4,128,643,382
Reinvestment of dividends and
distributions............... 5,128,063 6,325 1,123,945
Cost of shares repurchased... (12,236,987,870) (272,353,173) (4,038,592,707)
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from share trans-
actions 1,066,055,302 58,797,775 91,174,620
- --------------------------------------------------------------------------------
Total increase.............. 1,066,077,971 58,797,775 91,224,167
NET ASSETS:
Beginning of period.......... 814,586,395 25,000 781,337,206
- --------------------------------------------------------------------------------
End of period $ 1,880,664,366 $ 58,822,775 $ 872,561,373
- --------------------------------------------------------------------------------
Accumulated undistributed net
investment income $7,999 -- --
- --------------------------------------------------------------------------------
SUMMARY OF SHARE TRANSACTIONS
(at $1.00 per share):
FST shares:
Shares sold................. $ 13,008,507,049 $ 308,617,286 $ 4,025,671,354
Reinvestment of dividends
and distributions.......... 5,093,995 6,325 966,431
Shares repurchased.......... (11,995,336,995) (263,951,437) (3,990,445,702)
- --------------------------------------------------------------------------------
1,018,264,049 44,672,174 36,192,083
- --------------------------------------------------------------------------------
FST Administration shares:
Shares sold................. 195,705,800 22,527,337 30,334,779
Reinvestment of dividends
and distributions.......... 34,068 -- 157,340
Shares repurchased.......... (161,613,549) (8,401,736) (6,008,873)
- --------------------------------------------------------------------------------
34,126,319 14,125,601 24,483,246
- --------------------------------------------------------------------------------
FST Service shares:
Shares sold................. 93,702,260 -- 72,637,249
Reinvestment of dividends
and distributions.......... -- -- 174
Shares repurchased.......... (80,037,326) -- (42,138,132)
- --------------------------------------------------------------------------------
13,664,934 -- 30,499,291
- --------------------------------------------------------------------------------
Increase in net assets re-
sulting from share transac-
tions $ 1,066,055,302 $ 58,797,775 $ 91,174,620
- --------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31,1994
- ----------------------------------- -----------------------------------
1. ORGANIZATION
Goldman Sachs Money Market Trust (the "Trust"), a business trust organized un-
der the laws of the Commonwealth of Massachusetts on December 6, 1978 includes
the Financial Square Funds. The Trust is a Massachusetts business trust regis-
tered under the Investment Company Act of 1940, as amended, as an open-end man-
agement investment company. Financial Square consists of six diversified funds:
Prime Obligations, Government, Treasury Obligations, Money Market Tax-Free
Money Market and Municipal Money Market (inactive). Financial Square offers
three classes of shares: FST shares, FST Administration shares and FST Service
shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies consistently
followed by Financial Square Funds which are in conformity with those generally
accepted in the investment company industry:
A. Investment Valuation
Financial Square Funds uses the amortized cost method for valuing portfolio se-
curities. Under this method, all investments purchased at a discount or premium
are valued by amortizing the differences between the original purchase price
and maturity value of the issue over the period to maturity.
B. Interest Income
Interest income is determined on the basis of interest accrued, premium amor-
tized and discount earned.
C. Federal Taxes
It is each fund's policy to comply with the requirements of the Internal Reve-
nue Code applicable to regulated investment companies and to distribute each
year substantially all of its investment company taxable and tax-exempt income
to its share holders. Accordingly, no federal tax provisions are required.
At December 31, 1994, the Treasury Obligations Fund had approximately $79,000
of capital loss carryforward for U.S. Federal tax purposes. This capital loss
carryforward expires in the year 2002.
D. Deferred Organization Expenses
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
E. Expenses
Expenses incurred by Financial Square Funds which do not specifically relate to
an individual fund of Financial Square Funds are allocated to the funds based
on each fund's relative average net assets for the period.
Shareholders of FST Administration and FST Service shares bear all expenses
and fees paid to service organizations for their services with respect to such
shares as well as other expenses (subject to expense limitations) which are di-
rectly attributable to such shares.
3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as investment adviser pursuant
to an Investment Advisory Agreement. Under the Investment Advisory Agreement,
GSAM, subject to general supervision of the Trust's Board of Trustees, manages
the portfolios of the funds. As compensation for the services rendered under
the Investment Advisory Agreement and the assumption of the expenses related
thereto, GSAM is entitled to a fee, computed daily and payable monthly, at an
annual rate equal to .075% of each fund's average daily net assets. During the
periods ended December 31, 1994, GSAM voluntarily agreed to waive a portion of
the advisory fees incurred by Financial Square Funds amounting to $913,694,
$78,257, $328,714, $417,860 and $53,176 for the Prime Obligations, Government,
Treasury Obligations, Money Market and Tax-Free Money Market Funds,
- ----------------------------------- -------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
- ----------------------------------- -----------------------------------
3. AGREEMENTS--(CONTINUED)
respectively. At December 31, 1994, the advisory fees due GSAM were approxi-
mately $102,000, $14,000, $30,000 and $11,000 for the Prime Obligations, Gov-
ernment, Treasury Obligations and Money Market Funds, respectively. These
amounts are included in "Accrued expenses and other liabilities" in the accom-
panying Statements of Assets and Liabilities.
Until further notice, GSAM has voluntarily agreed to limit certain of each of
the fund's expenses (excluding advisory fees, account administration fees,
service organization fees, taxes, interest, brokerage commissions and extraor-
dinary expenses) to the extent such expenses exceed .01% per annum of that
fund's average daily net assets. At December 31, 1994, the amounts reimbursable
by GSAM were approximately $98,000, $8,000, $55,000, $100,000 and $22,000 for
the Prime Obligations, Government, Treasury Obligations, Money Market and Tax-
Free Money Market Funds, respectively; such amounts are included in "Other as-
sets" in the accompanying Statements of Assets and Liabilities.
GSAM also serves as administrator pursuant to an Administration Agreement. Un-
der the Administration Agreement, GSAM administers each fund's business af-
fairs, including providing facilities. As compensation for the services ren-
dered under the Administration Agreement, GSAM is entitled to a fee, computed
daily and payable monthly, at an annual rate equal to .13% of that fund's aver-
age daily net assets. During the periods ended December 31, 1994, GSAM volun-
tarily agreed to waive a portion of the account administration fees incurred
amounting to $30,346 and $56,733 for the Government and Tax-Free Money Market
Funds, respectively. At December 31, 1994, the account administration fees due
GSAM were approximately $333,000, $44,000, $99,000, $138,000 and $9,000 for the
Prime Obligations, Government, Treasury Obligations, Money Market and Tax-Free
Money Market Funds, respectively. These amounts are included in "Accrued ex-
penses and other liabilities" in the accompanying Statements of Assets and Lia-
bilities.
Goldman Sachs serves as the Distributor of shares of Financial Square Funds
pursuant to a Distribution Agreement. Goldman Sachs receives no compensation in
this capacity. Goldman Sachs also serves as Financial Square's transfer agent.
4. ADMINISTRATION AND SERVICE PLANS
Financial Square Funds has adopted Administration and Service Plans. These
plans allow for Administration shares and Service shares, respectively, to com-
pensate service organizations for providing varying levels of account adminis-
tration and shareholder liaison services to their customers who are beneficial
owners of such shares. The Administration and Service Plans provide for compen-
sation to the service organizations in an amount up to .25% and .50% (on an
annualized basis), respectively, of the average daily net asset value of the
respective shares. As of December 31, 1994, no Service shares were outstanding
for the Government and Money Market Funds.
5. OTHER MATTERS
Effective December 28, 1994, the Financial Square funds were reorganized and
became series of the Trust. Prior to the reorganization, each Financial Square
fund was a series of Financial Square Trust ("FST"), which was also a Massachu-
setts business trust. Except for the fact that the Financial Square funds is
now a series of the Trust, all shares of the individual funds represent the
same interest in each fund's assets, are of the same class, are subject to the
same terms and conditions, fees and expenses and confer the same rights as when
they were a series of FST.
- ----------------------------------- -------------------------------------------
19
<PAGE>
Financial Square Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1994
- ----------------------------------- -----------------------------------
6. REPURCHASE AGREEMENTS
During the term of a repurchase agreement, the value of the underlying securi-
ties, including accrued interest, is required to equal or exceed the value of
the repurchase agreement. The underlying securities for all repurchase agree-
ments are held in safekeeping in the customer-only account of State Street Bank
& Trust Co., Financial Square Funds' custo-dian, or at sub-custodians. GSAM
monitors the market value of the underlying securities by pricing them daily.
7. JOINT REPURCHASE AGREEMENT ACCOUNTS
The Financial Square Funds, together with other registered investment companies
having advisory agreements with GSAM, transfer uninvested cash balances into
joint accounts, the daily aggregate balance of which is invested in one or more
repurchase agreements. The underlying securities for the repurchase agreements
are U.S. Treasury obligations.
At December 31, 1994, the Prime Obligations and Money Market Funds had, respec-
tively, a 47.0% and 6.3% undivided interest in the repurchase agreements in the
following joint account which equalled $750,000,000 and $100,000,000 in princi-
pal amount, respectively. At December 31, 1994, the repurchase agreements held
in this joint account along with the corresponding underlying securities (in-
cluding the type of security, principal amount, interest rate and maturity
date) were as follows:
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
($ in Thousands)
<S> <C> <C> <C>
REPURCHASE AGREEMENTS
Bear Stearns and Co., dated 12/30/94,
repurchase price $100,080 (U.S.
Treasury Interest--Only Strips:
$138,596, 11/15/97-02/15/99)
$100,000 5.75% 01/03/95 $ 100,000
C.S. First Boston Corporation, dated
12/30/94, repurchase price $115,096
(U.S. Treasury Bills: $118,205,
01/12/95-04/20/95)
115,000 6.00 01/03/95 115,000
Daiwa Securities, Inc., dated
12/30/94, repurchase price $300,242
(U.S. Treasury Notes: $304,270,
5.13%-8.88%, 03/31/96-11/15/97)
300,000 5.80 01/03/95 300,000
Lehman Government Securities Inc.,
dated 12/30/94, repurchase price
$100,080 (U.S. Treasury Notes:
$99,842, 4.25%-8.63%, 01/15/95-
02/15/95)
100,000 5.75 01/03/95 100,000
Lehman Government Securities Inc.,
dated 12/30/94, repurchase price
$451,182 (U.S. Treasury Notes:
$200,399, 4.63%-8.88%, 12/31/94-
11/15/01; U.S. Treasury Interest--Only
Strips: $211,644, 02/15/95-11/15/99;
U.S. Treasury Principal--Only Strips:
$109,392, 7.25%-11.25%, 02/15/95-
11/15/01)
450,800 6.10 01/03/95 450,800
Salomon Brothers, Inc., dated 12/30/94,
repurchase price $530,449 (U.S.
Treasury Bills: $558,159, 06/29/95)
530,000 6.10 01/03/95 530,000
- -------------------------------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $1,595,800
- -------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
- ----------------------------------- -----------------------------------
7. JOINT REPURCHASE AGREEMENT ACCOUNTS--(CONTINUED)
At December 31, 1994, the Prime Obligations, Government, Treasury Obligations
and Money Market Funds had, respectively, a 9.9%, 4.7%, 28.2% and 12.0% undi-
vided interest in the repurchase agreements in the following joint account
which equalled $110,600,000, $52,200,000, $314,000,000, and $133,500,000 in
principal amount, respectively. At December 31, 1994, the repurchase agreements
held in this joint account, along with the corresponding underlying securities
(including the type of security, principal amount, interest rate and maturity
date) were as follows:
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
($ in Thousands)
<S> <C> <C> <C>
REPURCHASE AGREEMENTS
Bankers Trust Securities Corp., dated
12/30/94, repurchase price $500,399
(U.S. Treasury Notes: $521,170,
5.25%-9.13%, 07/31/98-02/15/00)
$500,000 5.75% 01/03/95 $ 500,000
Daiwa Securities, Inc., dated 12/30/94,
repurchase price $300,246 (U.S.
Treasury Notes: $310,260, 4.00%-8.75%,
01/31/96-02/15/01)
300,000 5.90 01/03/95 300,000
Daiwa Securities, Inc., dated 12/30/94,
repurchase price $50,031 (U.S.
Treasury Notes: $51,105, 5.88%-7.38%,
05/15/95-11/15/97)
50,000 4.50 01/03/95 50,000
Lehman Government Securities Inc.,
dated 12/30/94, repurchase price
$50,031 (U.S. Treasury Notes: $50,788,
4.13%-8.88%, 06/30/95-07/31/95)
50,000 4.50 01/03/95 50,000
Lehman Government Securities Inc.,
dated 12/30/94, repurchase price
$215,182 (U.S. Treasury Notes:
$218,681, 3.88%-8.50%, 04/30/95-
06/30/95)
215,000 6.10 01/03/95 215,000
- -------------------------------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $ 1,115,000
- -------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------- -------------------------------------------
21
<PAGE>
Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
Prime Obligations
Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
--------- ---------- ------------- ----------- ------------- --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
1994-FST
shares(e)....... $1.00 $0.0401 $0.0000 $0.0401 $(0.0401) $1.00 4.38%(b) 0.18%(b) 4.38%(b)
1994-FST
Administration
shares(e)....... 1.00 0.0383 0.0000 0.0383 (0.0383) 1.00 4.12(b) 0.43(b) 4.18(b)
1994-FST Service
shares(e)....... 1.00 0.0364 0.0000 0.0364 (0.0364) 1.00 3.86(b) 0.68(b) 3.98(b)
FOR THE YEARS ENDED JANUARY 31,
1994-FST shares. 1.00 0.0311 0.0002 0.0313 (0.0313) 1.00 3.18 0.17 3.11
1994-FST
Administration
shares.......... 1.00 0.0286 0.0002 0.0288 (0.0288) 1.00 2.92 0.42 2.86
1994-FST Service
shares.......... 1.00 0.0261 0.0002 0.0263 (0.0263) 1.00 2.66 0.67 2.61
1993-FST shares. 1.00 0.0360 0.0007 0.0367 (0.0367) 1.00 3.75 0.18 3.60
1993-FST
Administration
shares(c)....... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b) 0.44(b) 2.96(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68 3.01
1992-FST shares
................ 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18 5.72
1992-FST Service
shares(c)....... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b) 0.66(b) 4.10(b)
FOR THE PERIOD MARCH 8, 1990(D) THROUGH JANUARY 31,
1991-FST shares. 1.00 0.0727 -- 0.0727 (0.0727) 1.00 8.27(b) 0.18(b) 8.04(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
---------- ------------ ------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
1994-FST
shares(e)....... $2,774,849 0.24%(b) 4.32%(b)
1994-FST
Administration
shares(e)....... 66,113 0.49(b) 4.12(b)
1994-FST Service
shares(e)....... 41,372 0.74(b) 3.92(b)
FOR THE YEARS ENDED JANUARY 31,
1994-FST shares. 1,831,413 0.25 3.03
1994-FST
Administration
shares.......... 35,250 0.50 2.78
1994-FST Service
shares.......... 14,001 0.75 2.53
1993-FST shares. 813,126 0.25 3.53
1993-FST
Administration
shares(c)....... 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 336 0.75 2.94
1992-FST shares
................ 917,073 0.27 5.63
1992-FST Service
shares(c)....... 118 0.74(b) 4.02(b)
FOR THE PERIOD MARCH 8, 1990(D) THROUGH JANUARY 31,
1991-FST shares. 578,495 0.28(b) 7.94(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b)Annualized.
(c) FST Administration and FST Service share activity commenced during Novem-
ber of 1992 and January of 1992, respectively.
(d) Commencement of operations.
(e) The information presented above reflects eleven months of operations due
to a change in fiscal year end. This change was caused by the reorganiza-
tion of the funds as a series of Goldman Sachs Money Market Trust.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Government Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
--------- ---------- ------------- ----------- ------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
1994 FST
shares(d)....... $1.00 $0.0424 $0.0000 $0.0424 $(0.0424) $1.00 4.36%(b) 0.15%(b) 4.64%(b)
1994 FST Admin-
istration
shares(d)....... 1.00 0.0426 0.0000 0.0426 (0.0426) 1.00 4.10(b) 0.40(b) 4.67(b)
FOR THE PERIOD ENDED JANUARY 31,
1993-FST
shares(c)....... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b) 0.08(b) 3.10(b)
1993-FST Admin-
istration
shares(c)....... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87(b) 0.35(b) 2.85(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
ASSETS AT RATIO OF NET
END RATIO OF INVESTMENT
OF PERIOD EXPENSES TO INCOME TO
(IN AVERAGE NET AVERAGE NET
000'S) ASSETS ASSETS
--------- ------------ ------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
1994 FST
shares(d)....... $258,350 0.25%(b) 4.54%(b)
1994 FST Admin-
istration
shares(d)....... 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED JANUARY 31,
1993-FST
shares(c)....... 44,697 0.59(b) 2.59(b)
1993-FST Admin-
istration
shares(c)....... 14,126 0.76(b) 2.44(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b)Annualized.
(c) FST share and FST Administration share activity commenced April 6, 1993
and September 1, 1993, respectively.
(d) The information presented above reflects eleven months of operations due
to a change in fiscal year end. This change was caused by the reorganiza-
tion of the funds as a series of Goldman Sachs Money Market Trust.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Treasury Obligations Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN (LOSS) INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
--------- ---------- ------------- ----------- ------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
1994-FST
shares(e)....... $1.00 $0.0379 $(0.0001) $0.0378 $(0.0378) $1.00 4.23%(b) 0.18%(b) 4.13%(b)
1994-FST Admin-
istration
shares(e)....... 1.00 0.0388 (0.0001) 0.0387 (0.0387) 1.00 3.97(b) 0.43(b) 4.24(b)
1994-FST Service
shares(e)....... 1.00 0.0349 (0.0001) 0.0348 (0.0348) 1.00 3.71(b) 0.68(b) 3.82(b)
FOR THE YEARS ENDED JANUARY 31,
1994-FST shares. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11 0.17 3.01
1994-FST Admin-
istration
shares.......... 1.00 0.0276 0.0006 0.0282 (0.0281) 1.00 2.85 0.42 2.76
1994-FST Service
shares.......... 1.00 0.0251 0.0008 0.0259 (0.0256) 1.00 2.60 0.67 2.51
1993-FST shares. 1.00 0.0342 0.0012 0.0354 (0.0355) 1.00 3.69 0.18 3.42
1993-FST Admin-
istration
shares(c)....... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83(b) 0.43(b) 2.83(b)
1993-FST Service
shares.......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17 0.68 2.96
1992-FST shares. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84 0.18 5.49
1992-FST Service
shares(c)....... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47(b) 0.68(b) 3.77(b)
FOR THE PERIOD APRIL 24, 1990(D) THROUGH JANUARY 31,
1991-FST shares. 1.00 0.0600 0.0006 0.0606 (0.0605) 1.00 8.06(b) 0.21(b) 7.74(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
ASSETS AT RATIO OF NET
END RATIO OF INVESTMENT
OF PERIOD EXPENSES TO INCOME TO
(IN AVERAGE NET AVERAGE NET
000'S) ASSETS ASSETS
--------- ------------ ------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
1994-FST
shares(e)....... $958,196 0.25%(b) 4.06%(b)
1994-FST Admin-
istration
shares(e)....... 82,124 0.50(b) 4.17(b)
1994-FST Service
shares(e)....... 81,162 0.75(b) 3.75(b)
FOR THE YEARS ENDED JANUARY 31,
1994-FST shares. 812,420 0.24 2.94
1994-FST Admin-
istration
shares.......... 24,485 0.49 2.69
1994-FST Service
shares.......... 35,656 0.74 2.44
1993-FST shares. 776,181 0.26 3.34
1993-FST Admin-
istration
shares(c)....... 1 0.51(b) 2.75(b)
1993-FST Service
shares.......... 5,155 0.76 2.88
1992-FST shares. 413,171 0.28 5.39
1992-FST Service
shares(c)....... 3,634 0.78(b) 3.67(b)
FOR THE PERIOD APRIL 24, 1990(D) THROUGH JANUARY 31,
1991-FST shares. 229,988 0.34(b) 7.61(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b)Annualized.
(c) FST Administration and FST Service share activity commenced during January
of 1993 and October of 1991, respectively.
(d) Commencement of operations.
(e) The information presented above reflects eleven months of operations due
to a change in fiscal year end. This change was caused by the reorganiza-
tion of the funds as a series of Goldman Sachs Money Market Trust.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Money Market Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
--------- ---------- ------------- ----------- ------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
1994-FST
shares(c)....... $1.00 $0.0305 $0.0000 $0.0305 $(0.0305) $1.00 4.91%(b) 0.11%(b) 4.88%(b)
1994-FST Admin-
istration
shares(c)....... 1.00 0.0298 0.0000 0.0298 (0.0298) 1.00 4.65(b) 0.36(b) 4.82(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
ASSETS AT RATIO OF NET
END RATIO OF INVESTMENT
OF PERIOD EXPENSES TO INCOME TO
(IN AVERAGE NET AVERAGE NET
000'S) ASSETS ASSETS
--------- ------------ ------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
1994-FST
shares(c)....... $862,971 0.25%(b) 4.74%(b)
1994-FST Admin-
istration
shares(c)....... 66,560 0.50(b) 4.68(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b)Annualized.
(c) FST share and FST Administration share activity commenced May 18, 1994 and
May 20, 1994, respectively.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Goldman
Sachs
Goldman Sachs Goldman
1 New York Plaza Sachs
New York, NY 10004
TRUSTEES
Paul C. Nagel, Jr., Chairman
Ashok N. Bakhru
Marcia L. Beck
David B. Ford
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
OFFICERS
Marcia L. Beck, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
FINANCIAL SQUARE
GOLDMAN SACHS FUNDS
Investment Adviser, Administrator,
Distributor and Transfer Agent
Annual Report
December 31, 1994
FS-A94
<PAGE>
ADMINISTRATION PLAN
The Trust, on behalf of each Fund, has adopted an administration plan
(the "Plan") with respect to the FST Administration Shares which authorizes the
Funds to compensate Service Organizations for providing certain account
administration services to their customers who are beneficial owners of such
shares. Pursuant to the Plan, the Trust, on behalf of each Fund, will enter
into agreements with Service Organizations which purchase FST Administration
Shares on behalf of their customers ("Service Agreements"). Under such Service
Agreements the Service Organizations may: (a) act, directly or through an agent,
as the sole shareholder of record and nominee for all customers, (b) maintain
account records for each customer who beneficially owns FST Administration
Shares, (c) answer questions and handle correspondence from customers regarding
their accounts, (d) process customer orders to purchase, redeem and exchange FST
Administration Shares, and handle the transmission of funds representing the
customers' purchase price or redemption proceeds, and (e) issue confirmations
for transactions in shares by customers. As compensation for such services,
each Fund will pay each Service Organization an administration fee in an amount
up to .25% (on an annualized basis) of the average daily net assets of the FST
Administration Shares of such Fund attributable to or held in the name of such
Service Organization.
For the eleven months ended December 31, 1994, and the fiscal years
ended January 31, 1994 and January 31, 1993 with respect to each Fund, the
amount of administration fees paid by each Fund then in existence to Service
Organizations was as follows:
<TABLE>
<CAPTION>
Dec. 1994 Jan. 1994 1993
--------- --------- -----
<S> <C> <C> <C>
Prime Obligations Fund/(1)(7)/............. $139,235 $109,983 $ 374
Money Market Fund/(2)/..................... 78,743 - -
Treasury Obligations Fund/(3)(7)/ 79,171 16,665 11
Government Fund/(4)(7)/.................... 83,036 6,394 -
Tax Free Fund/(5)/......................... 1,800 - -
Municipal Fund/(6)/........................ - - -
- ---------------
</TABLE>
(1) FST Administration Share activity commenced November 2, 1992.
(2) FST Administration Share activity commenced May 20, 1994.
(3) FST Administration Share activity commenced January 21, 1993.
(4) FST Administration Share activity commenced September 1, 1993.
(5) FST Administration Share activity commenced August 1, 1994.
(6) Has not commenced operations.
(7) The information presented for the period ended December 31, 1994 reflects
the eleven months of operations.
Conflict of interest restrictions (including the Employee Retirement
Income Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in FST Administration Shares. Service Organizations, including banks
regulated by the Comptroller of the Currency, the Federal Reserve Board or the
Federal Deposit Insurance Corporation, and investment advis-
<PAGE>
ers and other money managers subject to the jurisdiction of the SEC, the
Department of Labor or state securities commissions, are urged to consult legal
advisers before investing fiduciary assets in FST Administration Shares. In
addition, under some state securities laws, banks and other financial
institutions purchasing FST Administration Shares on behalf of their customers
may be required to register as dealers.
The Plan was approved on December 27, 1994 by Financial Square Trust
as the sole shareholder of FST Administration Shares of each Fund. The Board of
Trustees, including a majority of the Trustees who are not interested persons of
the Trust and who have no direct or indirect financial interest in the operation
of such Plan or the related Service Agreements, most recently voted to approve
the Plan and Service Agreements at a meeting called for the purpose of voting on
such Plan and Service Agreements on October 25, 1994. The Plan and Service
Agreements will remain in effect until April 30, 1995 and will continue in
effect thereafter only if such continuance is specifically approved annually by
a vote of the Board of Trustees in the manner described above. The Plan may not
be amended to increase materially the amount to be spent for the services
described therein without approval of the FST Administration Shareholders of
each Fund, and all material amendments of the Plan must also be approved by the
Board of Trustees in the manner described above. The Plan may be terminated at
any time by a majority of the Board of Trustees as described above or by vote of
a majority of the outstanding FST Administration Shares of each Fund. The
Service Agreements may be terminated at any time, without payment of any
penalty, by vote of a majority of the Board of Trustees as described above or by
a vote of a majority of the outstanding FST Administration Shares of each Fund
on not more than sixty (60) days' written notice to any other party to the
Service Agreements. The Service Agreements shall terminate automatically if
assigned. As long as the Plan is in effect, the selection and nomination of
those Trustees who are not interested persons shall be committed to the
discretion of the Trust's Nominating Committee, which consists of all of the
non-interested members of the Board of Trustees. The Board of Trustees has
determined that, in its judgment, there is a reasonable likelihood that the Plan
will benefit each Fund and holders of FST Administration Shares of such Fund.
In the Board of Trustees' quarterly review of the Plan and Service Agreements,
the Board will consider their continued appropriateness and the level of
compensation provided therein.
<PAGE>
SERVICE PLAN
The Trust, on behalf of each Fund, has adopted a service plan (the "Plan") with
respect to the FST Service Shares which authorizes the Funds to compensate
Service Organizations for providing certain account administration and personal
and account maintenance services to their customers who are beneficial owners of
such shares. Pursuant to the Plan, the Trust, on behalf of each Fund, will
enter into agreements with Service Organizations which purchase FST Service
Shares on behalf of their customers ("Service Agreements"). Under such Service
Agreements the Service Organizations may: (a) act, directly or through an agent,
as the sole shareholder of record and nominee for all customers, (b) maintain
account records for each customer who beneficially owns FST Service Shares, (c)
answer questions and handle correspondence from customers regarding their
accounts, (d) process customer orders to purchase, redeem and exchange FST
Service Shares, and handle the transmission of funds representing the customers'
purchase price or redemption proceeds, (e) issue confirmations for transactions
in shares by customers, (f) provide facilities to answer questions from
prospective and existing investors about FST Service Shares, (g) receive and
answer investor correspondence, including requests for prospectuses and
statements of additional information, (h) display and make prospectuses
available on the Service Organization's premises, (i) assist customers in
completing application forms, selecting dividend and other account options and
opening custody accounts with the Service Organization and (j) act as liaison
between customers and the Funds, including obtaining information from the Funds,
working with the Funds to correct errors and resolve problems and providing
statistical and other information to the Funds. As compensation for such
services, the Trust, on behalf of each Fund, will pay each Service Organization
a service fee in an amount up to .50% (on an annualized basis) of the average
daily net assets of the FST Service Shares of each Fund attributable to or held
in the name of such Service Organization for its customers; provided, however,
that the fee paid for personal and account maintenance services shall not exceed
.25% of such average daily net assets.
For the eleven months ended December 31,1994, and the fiscal years ended
January 31, 1994 and January 31, 1993, with respect to each Fund, the amount of
service fees paid by each Fund then in existence to Service Organizations was as
follows:
<TABLE>
<CAPTION>
Dec. 1994 Jan. 1994 Jan. 1993
--------- --------- ---------
<S> <C> <C> <C>
Prime Obligations Fund/(1)(7)/..... $115,595 $100,676 $ 1,262
Money Market Fund/(2)/............. - - -
Treasury Obligations Fund/(3)(7)/ 168,982 20,914 17,386
Government Fund/(4)(7)/............ - - -
Tax-Free Fund/(5)/................. 1,199 - -
Municipal Fund/(6)/ - -
</TABLE>
<PAGE>
- ---------------
/(1)/ FST Service Share activity commenced January 8, 1992.
/(2)/ Has not commenced operations.
/(3)/ FST Service Share activity commenced October 15, 1991.
/(4)/ Has not commenced operations.
/(5)/ FST Service Share activity commenced September 23, 1994.
/(6)/ Has not commenced operations.
/(7)/ The information presented for the period ended December 31, 1994 reflects
eleven months of operations.
The Trust has adopted the Plan pursuant to Rule 12b-1 under the Investment
Company Act in order to avoid any possibility that payments to the Service
Organizations pursuant to the Service Agreements might violate the Investment
Company Act. Rule 12b-1, which was adopted by the SEC under the Investment
Company Act, regulates the circumstances under which an investment company or
series thereof may bear expenses associated with the distribution of its shares.
In particular, such an investment company or series thereof cannot engage
directly or indirectly in financing any activity which is primarily intended to
result in the sale of shares issued by the company unless it has adopted a plan
pursuant to, and complies with the other requirements of, such Rule. The Trust
believes that fees paid for the services provided in the Plan and described
above are not expenses incurred primarily for effecting the distribution of FST
Service Shares. However, should such payments be deemed by a court or the SEC
to be distribution expenses, such payments would be duly authorized by the
Plan.
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent in the business of issuing, underwriting, selling or
distributing securities, although institutions such as national banks are
permitted to purchase and sell securities upon the order and for the account of
their customers. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and other
financial institutions purchasing FST Service Shares on behalf of their
customers may be required to register as dealers pursuant to state law. Should
future legislative or administrative action or judicial or administrative
decisions or interpretations prohibit or restrict the activities of one or more
of the Service Organizations in connection with the Funds, such Service
Organizations might be required to alter materially or discontinue the services
performed under their Service Agreements. If one or more of the Service
Organizations were restricted from effecting purchases or sales of FST Service
Shares automatically pursuant to pre-authorized instructions, for example,
effecting such transactions on a manual basis might affect the size and/or
growth of a Fund. Any such alteration or discontinuance of services could
require the Board of Trustees to consider changing the Funds' method of
operations or providing alternative means of offering FST Service Shares to
customers of
<PAGE>
such Service Organizations, in which case the operation of a Fund, its size
and/or its growth might be significantly altered. It is not anticipated,
however, that any alteration of the Funds' operations would have any effect on
the net asset value per share or result in financial losses to any shareholder.
Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in FST Service Shares. Service Organizations, including banks regulated
by the Comptroller of the Currency, the Federal Reserve Board or the Federal
Deposit Insurance Corporation, and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal advisers before investing
fiduciary assets in FST Service Shares.
The Plan was approved on December 27, 1994 by Financial Square Trust as the sole
shareholder of FST Service Shares of each Fund. The Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of such
Plan or the related Service Agreements, most recently voted to approve the Plan
and Service Agreements at a meeting called for the purpose of voting on such
Plan and Service Agreements on October 25, 1994. The Plan and Service
Agreements will remain in effect until April 30, 1995 and will continue in
effect thereafter only if such continuance is specifically approved annually by
a vote of the Board of Trustees in the manner described above. The Plan may not
be amended to increase materially the amount to be spent for the services
described therein without approval of the FST Service Shareholders of each Fund,
and all material amendments of the Plan must also be approved by the Board of
Trustees in the manner described above. The Plan may be terminated at any time
by a majority of the Board of Trustees as described above or by vote of a
majority of the outstanding FST Service Shares of each Fund. The Service
Agreements may be terminated at any time, without payment of any penalty, by
vote of a majority of the Board of Trustees as described above or by a vote of a
majority of the outstanding FST Service Shares of each Fund on not more than
sixty (60) days' written notice to any other party to the Service Agreements.
The Service Agreements shall terminate automatically if assigned. As long as
the Plan is in effect, the selection and nomination of those Trustees who are
not interested persons shall be committed to the discretion of the Trust's
Nominating Committee, which consists of all of the non-interested members of the
Board of Trustees. The Board of Trustees has determined that, in its judgment,
there is a reasonable likelihood that the Plan will benefit each Fund and
holders of FST
<PAGE>
Service Shares of such Fund. In the Board of Trustees' quarterly review of the
Plan and Service Agreements, the Board will consider their continued
appropriateness and the level of compensation provided therein.
<PAGE>
PREFERRED ADMINISTRATION PLAN
The Trust, on behalf of the Financial Square Prime Rated Money Market Fund
(the "Fund"), has adopted a preferred administration plan (the "Plan") with
respect to the FST Preferred Shares which authorizes the Fund to compensate
Service Organizations for providing certain account administration services to
their customers who are beneficial owners of such shares. Pursuant to the Plan,
the Trust, on behalf of the Fund, will enter into agreements with Service
Organizations which purchase FST Preferred Shares on behalf of their customers
("Service Agreements"). Under such Service Agreements the Service
Organizations may: (a) act, directly or through an agent, as the sole
shareholder of record and nominee for all customers, (b) maintain account
records for each customer who beneficially owns FST Preferred Shares, (c)
process customer orders to purchase, redeem and exchange FST Preferred Shares,
and handle the transmission of funds representing the customers' purchase price
or redemption proceeds. As compensation for such services, the Trust, on behalf
of each Fund, will pay each Service Organization a service fee in an amount up
to .10% (on an annualized basis) of the average daily net assets of the FST
Preferred Shares of each Fund attributable to or held in the name of such
Service Organization.
Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in FST Preferred Shares. Service Organizations, including banks regulated
by the Comptroller of the Currency, the Federal Reserve Board or the Federal
Deposit Insurance Corporation, and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal advisers before investing
fiduciary assets in FST Preferred Shares. In addition, under some state
securities laws, banks and other financial institutions purchasing FST Preferred
Shares on behalf of their customers may be required to register as dealers.
The Plan was approved on December 27, 1994 by Goldman Sachs Money Market
Trust as the sole shareholder of FST Preferred Shares of the Fund. The Board of
Trustees, including a majority of the Trustees who are not interested persons of
the Trust and who have no direct or indirect financial interest in the operation
of such Plan or the related Service Agreements, most recently voted to approve
the Plan and Service Agreements at a meeting called for the purpose of voting on
such Plan and Service Agreements on October 24, 1995. The Plan and Service
Agreements will remain in effect until April 30, 1996 and will continue in
effect thereafter only if such continuance is specifically approved annually by
a vote of the Board of Trustees in the manner described above. /The Plan may
not be amended to increase materi-
46
<PAGE>
ally the amount to be spent for the services described therein without approval
of the FST Preferred Shareholders of the Fund, and all material amendments of
the Plan must also be approved by the Board of Trustees in the manner described
above. The Plan may be terminated at any time by a majority of the Board of
Trustees as described above or by vote of a majority of the outstanding FST
Preferred Shares of the Fund. The Service Agreements may be terminated at any
time, without payment of any penalty, by vote of a majority of the Board of
Trustees as described above or by a vote of a majority of the outstanding FST
Preferred Shares of the Fund on not more than sixty (60) days' written notice to
any other party to the Service Agreements. The Service Agreements shall
terminate automatically if assigned. As long as the Plan is in effect, the
selection and nomination of those Trustees who are not interested persons shall
be committed to the discretion of the Trust's Nominating Committee, which
consists of all of the non-interested members of the Board of Trustees. The
Board of Trustees has determined that, in its judgment, there is a reasonable
likelihood that the Plan will benefit the Fund and holders of FST Preferred
Shares of the Fund. In the Board of Trustees' quarterly review of the Plan and
Service Agreements, the Board will consider their continued appropriateness and
the level of compensation provided therein.
47
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS*
MOODY'S INVESTORS SERVICE, INC.
Bond Ratings
- ------------
AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than with Aaa securities.
Moody's applies numerical modifiers, 1, 2, and 3 in the Aa category. The
modifier 1 indicates that the security ranks in the higher end of the Aa
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of the Aa category.
- ----------------------------------------------------------------
* The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be given to these securities on the
date of the Portfolios' taxable year end.
A-1
<PAGE>
Short-Term Ratings
- ------------------
P-1: Issuers have a superior capacity for repayment of short-term promissory
obligations. Prime-1 or P-1 repayment capacity will normally be evidenced by the
following characteristics:
. Leading market positions in well established industries.
. High rates of return on funds employed.
. Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
. Well established access to a range of financial markets and assured sources
of alternate liquidity.
P-2: Issuers have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
State and Municipal Obligations
- -------------------------------
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk, long-
term secular trends for example, may be less important over the short run.
Symbols used will be as follows:
MIG 1 -- This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG 2 -- This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
A short-term rating may also be assigned on an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact
A-2
<PAGE>
that the source of payment may be limited to the external liquidity with no or
limited legal recourse to the issuer in the event the demand is not met VMIG-1,
and VMIG-2 ratings carry the same definitions as MIG-1, and MIG-2, respectively.
STANDARD & POOR'S RATINGS GROUP
Bond Ratings
- ------------
AAA: Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high-quality obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
PLUS (+) OR MINUS (-): The "AA" rating may be modified by the addition of a plus
or minus sign to show relative standing within the "AA" category.
Short-Term Ratings
- ------------------
A-1: Standard & Poor's Commercial Paper ratings are current assessments of the
likelihood of timely payment of debts having an original maturity of no more
than 365 days. The A-1 designation indicates that the degree of safety regarding
timely payment is very strong. Those issues determined to possess extremely
strong safety characteristics will be denoted with a plus ( + ) sign
designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
Municipal Notes
- ---------------
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in 3 years or less will likely receive a
note rating. Notes maturing beyond 3 years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment.
. Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
. Source of payment (the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note).
A-3
<PAGE>
Note rating symbols are as follows:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term of the
notes.
Standard & Poor's assigns "dual" ratings to all debt issues that have a put
option or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and interest
as due, and the second rating addresses only the demand feature. The long-term
debt rating symbols are used for bonds to denote the long-term maturity and the
commercial paper rating symbols for the put option (for example, "AAA/A-1+").
With short-term demand debt, S&P's note rating symbols are used with the
commercial paper rating symbols (for example, "SP-1+/A-1+").
DUFF & PHELPS, INC.
Bond Ratings
- ------------
AAA: Long-term fixed income securities which are rated AAA are judged to be of
the highest credit quality. The risk factors are negligible, being only slightly
more than for risk-free U.S. Treasury debt.
AA: Long-term fixed income securities which are rated AA are judged to be of
high credit quality. Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.
Duff & Phelps applies modifiers, AA+ and AA- in the AA category for long-term
fixed securities. The modifier AA+ indicates that the security ranks in the
higher end of the AA category: the modifier AA indicates a mid-range ranking;
and the modifier AA-indicates that the issue ranks in the lower end of the AA
category.
Short-Term Ratings
- ------------------
DUFF 1: Commercial paper and certificates of deposit rated Duff 1 are
considered to have a very high certainty of timely payment. Liquidity factors
are considered excellent and are supported by strong fundamental protection
factors. Risk factors are minor.
DUFF 2: Commercial paper and certificates of deposit rated Duff 2 are
considered to have a good certainty of timely payment.
A-4
<PAGE>
Liquidity factors and company fundamentals are considered sound. Although
ongoing internal funds needs may enlarge total financing requirements, access to
capital markets is good and risk factors are small.
Duff & Phelps applies a plus and minus rating scale, Duff 1 plus, Duff 1 and
Duff 1 minus in the Duff 1 top grade category for commercial paper and
certificates of deposit. The rating Duff 1 plus indicates that the security has
the highest certainty of timely payment, short-term liquidity is clearly
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations; the rating Duff 1 indicates a very high certainty of timely
payment, liquidity factors are excellent and risk factors are minimal; and the
rating Duff 1 minus indicates a high certainty of timely payment, liquidity
factors are strong and risk factors are very small.
FITCH INVESTORS SERVICE CORP.
AAA: Bonds which are rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA: Bonds which are rated AA are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA". Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1+".
Fitch applies plus (" + ") and minus (" - ") modifiers in the AA category to
indicate the relative position of a credit within the rating category. The
modifier AA+ indicates that the security ranks at the higher end of the AA
category than a security rated AA or AA-.
Eligible Fitch ratings for short-term debt obligations payable on demand or with
original maturities of up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes
may be rated F-1 or F-2.
F-1: Short-term debt obligations rated F-1 are considered to be of very strong
credit quality. Those issues determined to possess exceptionally strong credit
quality and having the strongest degree of assurance for timely payment will be
denoted with a plus ("+") sign designation.
F-2: Short-term debt obligations rated F-2 are considered to be of good credit
quality. Issues assigned this rating have a satisfactory degree of assurance for
timely payment, but the
A-5
<PAGE>
margin of safety is not as great as for issues assigned "F-1+" and "F-1"
ratings.
IBCA LIMITED AND IBCA INC.
A1: Short-term obligations rated A1 are supported by a very strong capacity for
timely repayment. A plus ("+") sign is added to those issues determined to
possess the highest capacity for timely payment.
A2: Short-term obligations rated A2 are supported by a strong capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
THOMSON BANKWATCH, INC.
AAA: The highest category; indicates a superior ability to repay principal and
interest on a timely basis is very high.
AA: The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category.
Ratings in the AA Long-Term Debt category may include a plus (+) or minus (-)
designation which indicates where within the respective category the issue is
placed.
The TBW Short-Term Ratings apply only to unsecured instruments that have a
maturity of one year or less.
The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal and interest.
TBW-1: The highest category; indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
TBW-2: The second highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
A-6
<PAGE>
PART C. OTHER INFORMATION
ITEM 24 FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
(a) Financial Statements --
Included in the Prospectus:
Financial Highlights for the Financial Square Treasury Obligations Fund,
Financial Square Prime Obligations Fund, Financial Square Government Fund,
Financial Square Money Market Fund and Financial Square Tax-Free Money
Market Fund (collectively, the "Financial Square Funds") for the period
ended December 31, 1994 (audited),
Incorporated by Reference into the Statement of Additional Information:
Statements of Investments for the Financial Square Treasury Obligations,
Financial Square Prime Obligations, Financial Square Government, Financial
Square Money Market, Financial Square Tax-Free Money Market Funds, as of
December 31, 1994 (audited),
Statements of Assets and Liabilities for the Financial Square Treasury
Obligations, Financial Square Prime Obligations, Financial Square
Government, Financial Square Money Market and Financial Square Tax-Free
Money Market Funds, as of December 31, 1994 (audited),
Statements of Operations for the Financial Square Treasury Obligations,
Financial Square Prime Obligations, Financial Square Government, Financial
Square Money Market and Financial Square Tax-Free Money Market Funds, as of
December 31, 1994 (audited),
Statements of Changes in Net Assets for the Financial Square Treasury
Obligations, Financial Square Prime Obligations, Financial Square
Government, Financial Square Money Market and Financial Square Tax-Free
Money Market Funds, as of December 31, 1994 (audited),
<PAGE>
Financial Highlights for the Financial Square Treasury Obligations,
Financial Square Prime Obligations, Financial Square Government, Financial
Square Money Market and Financial Square Tax-Free Money Market Funds, as of
December 31, 1994 (audited),
Notes to Financial Statements.
All other financial statements, schedules and historical financial information
have been omitted as the subject matter is not required, not present, or not
present in amounts sufficient to require submission.
(b) Exhibits
The following exhibits are incorporated herein by reference to Post-Effective
Amendment No. 15 to Registrant's Registration Statement on Form S-5 (Reference
A), to Post-Effective Amendment No. 17 to Registrant's Registration Statement on
Form S-5 (Reference B), to Registrant's Proxy Statement dated May 6, 1981
(Reference C), to Post-Effective Amendment No. 22 to Registrant's Registration
Statement on Form N-1 (Reference D), to Post-Effective Amendment No. 25 to
Registrant's Registration Statement on Form N-1 (Reference E), to Post-Effective
Amendment No. 26 to Registrant's Registration Statement on Form N-1 (Reference
F), to Post-Effective Amendment No. 29 to Registrant's Registration Statement on
Form N-1 (Reference G), to Post-Effective Amendment No. 30 to Registrant's
Registration Statement on Form N-1 (Reference H), to Post-Effective Amendment
No. 31 to Registrant's Registration Statement on Form N-1A (Reference I), to
Post-Effective Amendment No. 35 to Registrant's Registration Statement on Form
N-1A (Reference J), to Post-Effective Amendment No. 36 to Registrant's
Registration Statement on Form N-1A (Reference K), to Post-Effective Amendment
No. 37 to Registrant's Registration Statement on Form N-1A (Reference L), to
Post-Effective Amendment No. 38 to Registrant's Registration Statement on Form
N-1A (Reference M), to Post-Effective Amendment No. 39 to Registrant's
Registration Statement on Form N-1A (Reference N), to Post-Effective Amendment
No. 40 to Registrant's Registration Statement on Form N-1A (Reference O), to
Post-Effective Amendment No. 41 to Registrant's Registration Statement on Form
N-1A (Reference P), to Post-Effective Amendment No. 42 to Registrant's
Registration Statement on Form N-1A (Reference Q), to Post-Effective Amendment
No. 43 to Registrant's Registration Statement on Form N-1A (Reference R), to
Post-Effective Amendment No. 44 to Registrant's Registration Statement on Form
N-1A (Reference S), Post-Effective Amendment No. 45 to Registrant's Registration
Statement on Form N-1A (Reference T), Post-Effective Amendment No. 46 to
Registrant's Registration Statement on Form N-1A (Reference U),
2
<PAGE>
Post-Effective Amendment No. 47 to Registrant's Registration Statement on Form
N-1A (Reference V), Post-Effective Amendment No. 48 to Registrant's Registration
Statement on Form N-1A (Reference W), Post-Effective Amendment No. 49 to
Registrant's Registration Statement on Form N-1A (Reference X) and Post-
Effective Amendment No. 50 to Registrant's Registration Statement on Form N-1A
(Reference Y).
1(a). Agreement and Declaration of Trust (Reference A).
1(b). Form of Amendment to Agreement and Declaration of Trust (Reference D).
1(c). Form of Amendment to Agreement and Declaration of Trust (Reference F).
1(d). Form of Amendment to Agreement and Declaration of Trust regarding the
Money Market Portfolio (Reference M).
1(e). Form of Amendment to Agreement and Declaration of Trust regarding the
Federal Portfolio (Reference P).
1(f). Form of Amendment to Agreement and Declaration of Trust regarding Tax-
Exempt Diversified Portfolio and Tax-Exempt California Portfolio
(Reference Q).
1(g). Form of Amendment to Agreement and Declaration of Trust regarding
Treasury Instruments, Tax-Exempt New Jersey and Tax-Exempt New York
Portfolios (Reference S).
1(h). Amendment to Agreement and Declaration of Trust regarding Financial
Square Prime Obligations, Financial Square Treasury Obligations,
Financial Square Government, Financial Square Tax-Free Money Market,
Financial Square Money Market, Financial Square Municipal Money Market
and Financial Square Federal Funds (Reference Y).
2(a). By-Laws, filed as Exhibit 1(b) (Reference A).
2(b). Amendment to Section 3.5 of By-Laws (Reference E).
2(c). Amendment to Section 6.3 of By-Laws dated September 1, 1983 (Reference
H).
2(d). Amendment to Section 2.4 of By-Laws (Reference J).
2(e). Amendment to Section 3.7 of the By-Laws (Reference K).
4(a). Specimen certificates for the Prime Obligations Units and Government
Units filed as Exhibit 2 (Reference B).
3
<PAGE>
4(b). Specimen certificate for the Treasury Obligations Units (Reference F)
4(c) Specimen certificate for Goldman Sachs--Institutional Liquid Assets
(Reference U)
5(b). Form of Advisory Agreement between Registrant and Goldman, Sachs &
Co., filed as Exhibit A (Reference C).
5(c). Form of consent pursuant to paragraph 1 of the Advisory Agreement
between Registrant and Goldman, Sachs & Co. regarding the Treasury
Obligations Portfolio (Reference F).
5(d). Consent dated June 20, 1987 to change in duties under the Advisory
Agreement and Distribution Agreement between Registrant and Goldman,
Sachs & Co. (Reference M).
5(e). Form of consent pursuant to paragraph 1 of each of the Advisory
Agreement and Distribution Agreement between Registrant and Goldman,
Sachs & Co. regarding the Money Market Portfolio (Reference M).
5(f). Form of consent pursuant to paragraph 1 of each of the Advisory
Agreement and Distribution Agreement between Registrant and Goldman,
Sachs & Co. regarding the Federal Portfolio (Reference P).
5(g). Form of consent pursuant to paragraph 1 of each Advisory Agreement and
Distribution Agreement between Registrant and Goldman, Sachs & Co.
regarding the Tax-Exempt Diversified and Tax-Exempt California
Portfolios (formerly series of Goldman Sachs--Institutional Tax-Exempt
Assets). (Reference R).
5(h). Advisory Agreement between Registrant and Goldman, Sachs & Co.
(Reference S).
5(i). Form of consent pursuant to paragraph 1 of each Advisory Agreement and
Distribution Agreement regarding Treasury Instruments, Tax-Exempt New
Jersey and Tax-Exempt New York Portfolio (Reference S).
5(j). Investment Advisory Agreement between the Registrant on behalf of the
Financial Square Prime Obligations Fund and Goldman Sachs Asset
Management (Reference Y).
5(k). Investment Advisory Agreement on behalf of the Financial Square
Treasury Obligations Fund and Goldman Sachs Asset Management
(Reference Y).
4
<PAGE>
5(l). Investment Advisory Agreement between the Registrant on behalf of the
Financial Square Government Fund and Goldman Sachs Asset Management
(Reference Y).
5(m). Investment Advisory Agreement between the Registrant on behalf of
Financial Square Money Market Fund and Goldman Sachs Asset Management
(Reference Y).
5(n). Investment Advisory Agreement between the Registrant on behalf of the
Financial Square Tax-Free Money Market Fund and Goldman Sachs Asset
Management (Reference Y).
5(o). Form of Investment Advisory Agreement between the Registrant on behalf
of the Financial Square Municipal Money Market Fund and Goldman Sachs
Asset Management (Reference X).
5(p). Investment Advisory Agreement between the Registrant on behalf of the
Financial Square Federal Fund and Goldman Sachs Asset Management
(Reference Y).
6(b). Form of Distribution Agreement between Registrant and Goldman, Sachs &
Co., filed as Exhibit B (Reference C).
6(c). Distribution Agreement between Registrant and Goldman, Sachs & Co.
(Reference S).
6(d). Distribution Agreement between Registrant and Goldman, Sachs & Co.
(Reference Y).
8(a). Custodian Agreement between Registrant and State Street Bank and Trust
Company, filed as Exhibit 1(e) (Reference B).
8(b). Letter-agreement dated December 27, 1978 between Registrant and State
Street Bank and Trust Company pertaining to the fees payable by
Registrant pursuant to the Custodian Agreement, filed as Exhibit 8(c)
(Reference E).
8(c). Amendment dated May 28, 1981 to the Custodian Agreement referred to
above as Exhibit 8(a) (Reference F).
8(d). Letter Agreement dated June 14, 1984 between Registrant and State
Street Bank and Trust Company pertaining to a change in wire charges
under the Custodian Agreement, filed as Exhibit 8(f) (Reference I).
8(e). Letter Agreement dated March 21, 1985 between Registrant and State
Street Bank and Trust Company pertaining to the creation of a joint
repurchase agreement account, filed as Exhibit 8(g) (Reference I).
5
<PAGE>
8(f). Letter Agreement dated March 28, 1983 between Registrant and State
Street Bank and Trust Company pertaining to the latter's designation
of Bank of America, N.T. and S.A. as its subcustodian and certain
other matters, filed as Exhibit 8(d) (Reference F).
8(g). Letter Agreement dated November 7, 1985, with attachments, between
Registrant and State Street Bank and Trust Company authorizing State
Street Bank and Trust Company to permit redemption of units by check,
filed as Exhibit 8(h) (Reference J).
8(h). Money Transfer Services Agreement dated November 14, 1985, including
attachment, between Registrant and State Street Bank and Trust Company
pertaining to transfers of funds on deposit with State Street Bank and
Trust Company, filed as Exhibit 8(i) (Reference J).
8(i). Letter Agreement dated November 27, 1985 between Registrant and State
Street Bank and Trust Company amending the Custodian Agreement
(Reference J).
8(j). Letter Agreement dated July 22, 1986 between Registrant and State
Street Bank and Trust Company pertaining to a change in wire charges
(Reference K).
8(k). Wiring Agreement dated June 20, 1987 among Goldman, Sachs & Co., State
Street Bank and Trust Company and The Northern Trust Company
(Reference M).
8(l). Letter Agreement dated June 20, 1987 between Registrant and State
Street Bank and Trust Company amending the Custodian Agreement
(Reference M).
8(m). Letter Agreement dated June 20, 1987 regarding use of checking account
between Registrant and The Northern Trust Company (Reference M).
8(n). Letter Agreement dated May 1, 1988 between Registrant and State Street
Bank and Trust Company amending the Custodian Agreement (Reference N).
8(p). Form of Letter Agreement between Registrant and State Street Bank and
Trust Company pertaining to the latter's designation of Security
Pacific National Bank as its sub-custodian and certain other matters
(Reference O).
8(q). Amendment dated July 19, 1988 to the Custodian Agreement between
Registrant and State Street Bank and Trust Company (Reference O).
6
<PAGE>
8(r). Amendment dated September 15, 1988 to the Custodian Agreement between
Registrant and State Street Bank and Trust Company (Reference O).
9. Administration Agreement between the Registrant and Goldman Sachs
Asset Management (Reference Y).
15(a). Administration Plan Agreement (Reference Y).
15(b). Service Plan (Reference Y).
16. Schedule for Computation of Performance Data (Reference V).
17(a). Powers of Attorney from Paul C. Nagel, Jr., Robert A. Friedman, and
Jackson W. Smart (Reference K).
17(b). Powers Of Attorney from James P. Gorter, Robert P. Mayo, and Stephen
H. Hopkins each dated January 24, 1989 (Reference O).
17(c). Form of Transfer Agency Agreement dated May 1, 1988 between Registrant
and Goldman, Sachs & Co. and schedule of fees pertaining thereto
(Reference N).
17(d). Power of Attorney from Messrs. Wells, Nagel, Springer, Strubel, Mayo,
Smart, Bakhru, Corzine, Hopkins, Gilman and Shuch dated February 11,
1992 (Reference T).
17(e). Power of Attorney from Messr. Surloff dated January 25, 1994
(Reference W).
The following exhibits are filed herewith:
1(h). Form of Amendment to Agreement and Declaration of Trust regarding
Financial Square Prime Rated Money Market Fund.
5(q). Form of Investment Advisory Agreement between the Registrant on behalf
of the Financial Square Prime Rated Money Market Fund and Goldman
Sachs Asset Management
11. Consent of Independent Public Accountants
15(c). Form of Preferred Administration Plan
15(d) Form of Preferred Administration Plan Agreement
7
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
-------------------------------------------------------------
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF SEPTEMBER 30, 1995)
----------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- ---------------------------------------------- --------------
<S> <C>
Treasury Obligations Portfolio 2532
Treasury Instruments Portfolio 1266
Federal Portfolio 5632
Government Portfolio 4394
Prime Obligations Portfolio 3697
Money Market Portfolio 3840
Tax-Exempt Diversified Portfolio 4599
Tax-Exempt California Portfolio 2081
Tax-Exempt New York Portfolio 543
Financial Square Treasury Obligations Fund 1184
Financial Square Prime Obligations Fund 1823
Financial Square Government Fund 635
Financial Square Money Market Fund 833
Financial Square Tax-Free Money Market Fund 427
Financial Square Municipal Money Market Fund 0
</TABLE>
ITEM 27. INDEMNIFICATION.
---------------
Article VI of the Registrant's Agreement and Declaration of Trust provides for
indemnification of the Registrant's trustees and officers under certain
circumstances. A copy of such Agreement and Declaration of Trust was filed with
the Commission as Exhibit 1(a) to Post-Effective Amendment No. 15 to
Registrant's Registration Statement on Form S-5.
Paragraph 7 of the Advisory Agreement between the Registrant on behalf of all
Portfolios other than the Financial Square Funds, and Goldman, Sachs & Co.
provides for indemnification of Goldman, Sachs & Co. by the Registrant under
certain circumstances. A copy of such Agreement was filed with the Commission as
Exhibit 5(h) to Post-Effective Amendment No. 44 to Registrant's Registration
Statement on Form N-1A.
8
<PAGE>
Section 7 of the Transfer Agency Agreement between Registrant on behalf of all
Portfolios other than the Financial Square Funds, and Goldman, Sachs & Co.
provides for indemnification of Goldman, Sachs & Co. by the Registrant under
certain circumstances. A copy of such Agreement was filed as Exhibit 17(j) to
Post-Effective Amendment No. 39 to Registrant's Registration Statement on Form
N-1A.
Mutual fund and Trustees and officers liability policies purchased jointly by
the Registrant, Goldman Sachs Trust, Financial Square Trust, Goldman Sachs
Equity Portfolios, Inc., Paragon Portfolio, Trust for Credit Unions, The
Benchmark Funds and Goldman, Sachs & Co., insure such persons and their
respective trustees, partners, officers and employees, subject to the policies'
coverage limits and exclusions and varying deductibles, against loss resulting
from claims by reason of any act, error, omission misstatement, misleading
statement, neglect or breach of duty.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
----------------------------------------------------
The business and other connections of the officers and general partners who have
direct responsibility for the asset management division of Goldman, Sachs & Co.
are listed on the Uniform Application for Investment Adviser Registration ("Form
ADV") of Goldman, Sachs & Co. (No. 801-16048), Goldman Sachs Funds Management,
L.P. (No. 801-37591), and Goldman Sachs Assets Management International (No.
801-38157) as applicable. These Form ADVs, the texts of which are hereby
incorporated by reference, are currently on file with the Commission.
ITEM 29. PRINCIPAL UNDERWRITERS.
----------------------
(a) Goldman, Sachs & Co. or an affiliate of a division thereof currently serves
as investment adviser to and distributor of the units or shares of Goldman
Sachs Money Market Trust, Goldman Sachs Equity Portfolios, Inc., Goldman
Sachs Trust, Trust for Credit Unions and Paragon Treasury Money Market
Fund. Goldman, Sachs & Co., or an affiliate or a division thereof,
currently serves as investment adviser of two portfolios (Pilot Short-Term
Tax-Exempt Portfolio and Pilot Short-Term Tax-Exempt Diversified Portfolio)
of Pilot Funds. Goldman, Sachs & Co., or a division thereof currently
serves as administrator to and distributor of the units or shares of The
Benchmark Funds, Paragon Portfolio and The Commerce Funds.
(b) Set forth below is certain information pertaining to the general partners
of Goldman, Sachs & Co., Registrant's principal underwriter. Each of the
following persons is a general partner of Goldman, Sachs & Co. and, except
for Mr. Ford does not hold a position with Registrant. Mr. Ford is a
Trustee of Registrant.
9
<PAGE>
GOLDMAN SACHS GENERAL PARTNERS
Name and Principal Name and Principal
Business Address Business Address
---------------- ----------------
Jon Corzine, Chairman (1)(2)
Roy J. Zuckerberg (2) Hideo Ishihara (10)
David M. Silfen (2) Oki Matsumoto Inc. (2)
Eugene V. Fife (7) Richard M. Hayden (2)
Robert J. Hurst (2) Armen A. Avanessians (2)
Paul M. Achleitner (7) Howard C. Katz (2)
Joel S. Beckman (2) Peter K. Barker (9)
Eric S. Dobkin (2) David W. Blood (7)
Willard J. Overlock, Jr. (2) Henry M. Paulson, Jr.(8)
Jonathan L. Cohen (2) Zachariah Cobrinik (7)
Frederic B. Garonzik (7) Kevin W. Kennedy (2)
William C. Landreth (11) Daniel M. Neidich (2)
Gary D. Cohn (7) Edward Spiegel (2)
Fischer Black (5) Christopher A. Cole (2)
Robert F. Cummings, Jr. (2) Henry Cornell (13)
Angelo De Caro (7) Robert V. Delaney (2)
Steven G. Einhorn (2) Joseph DellaRosa (2)
J. Michael Evans (7) David B. Ford (2)
David M. Leuschen (2) Lawton W. Fitt (2)
Michael R. Lynch (2) Michael D. McCarthy (2)
Donald C. Opatrny, Jr. (7) Joseph D. Gatto (2)
Peter C. Gerhard (2) Thomas E. Tuft (2)
Robert J. Katz (1) (2) Michael P. Mortara (2)
Nomi P. Ghez (2) Lloyd C. Blankfein (2)
David T. Hamamoto (2) John P. Curtin, Jr. (2)
Gavyn Davies (7) Dexter D. Earle (2)
John Ehara (10) Christopher Flowers (2)
Gary Gensler (2) Walter H. Haydock (15)
Charles T. Harris, III (2) Thomas J. Healey (2)
Stephen Hendel (2) Robert E. Higgins (2)
Ernest S. Liu (2) David L. Henle (2)
Eff W. Martin (11) Charles B. Mayer, Jr. (2)
Michael J. O'Brien (7) Mark Schwartz (2)
Stephen M. Semlitz (2) Robert K. Steel (7)
Francis J. Ingrassia (2) John A. Thain (2)
John L. Thornton (7) Scott B. Kapnick (7)
Bracebridge H. Young, Jr. (10) Joseph R. Zimmel (2)
Barry L. Zubrow (2) Gary L. Zwerling (2)
Jon R. Aisbitt (7) Andrew M. Alper (2)
William J. Buckley (2) Frank L. Coulson, Jr. (2)
Connie Duckworth (8) Richard A. Friedman (2)
Alan R. Gillespie (7) John H. Gleberman (2)
Jacob D. Goldfield (2) Steven M. Heller (2)
Ann F. Kaplan (2) Robert S. Kaplan (10)
Peter D. Kiernan, III (2) Kevin M. Kelly (2)
T. Willem Mesdag (7) Gaetano J. Muzio (2)
10
<PAGE>
Robin Neustein (2) Timothy J. O'Neill (2)
Scott M. Pinkus (2) John J. Powers (2)
Stephen D. Quinn (2) Arthur J. Reimers,III (7)
James P. Riley, Jr. (2) Richard A. Sapp (7)
John C. Keinert (2) Donald F. Textor (2)
Thomas B. Walker, III (2) Patrick J. Ward (10)
Jeffrey M. Weingarten (7) Jon Winkelried (2)
Richard E. Witten (2) Gregory K. Palm (7)
Carlos A. Cordeiro (7) John O. Downing (7)
W. Mark Evans (7) Michael D. Fascitelli (2)
Sylvain M. Hefes (7) Reuben Jeffrey, III (2)
Lawrence H. Linden (2) Jun Makihara (9)
Masanori Mochida (10) Robert B. Morris,III (11)
Philip D. Murphy (14) Suzanne M. Johnson (9)
Terence M. O'Toole (2) Carl G.E. Palmstierna (7)
Michael G. Rantz (2) J. David Rogers (10)
Joseph Sassoon (7) Peter Savitz (10)
Charles B. Seelig, Jr. (2) Ralph F. Severson (11)
Gene T. Sykes (9) Gary A. Syman (10)
Leslie C. Tortora (2) John L. Townsend, III (2)
Lee G. Vance (7) David A. Viniar (2)
John S. Weinberg (2) Peter A. Weinberg (2)
Laurence M. Weiss (2) George W. Wellde, Jr. (2)
Jaime E. Yordan (2) Sharmin Mossavar-
Jonathan L. Kolatch (2) Rahmani (5)
Peter S. Kraus (2) Robert Litterman (2)
Jonathan M. Lopatin (2) Thomas J. Macirowski (2)
Peter G. Mallinson (13) Oki Matsumoto (10)
E. Scott Mead (7) Eric M. Mindich (2)
Steven T. Mnuchin (2) Thomas K. Montag (2)
Edward A. Mule (2) Kipp M. Nelson (7)
Christopher K. Norton (14) Robert J. O'Shea (2)
Wiet H. Pot (7) Jack L. Salzman (2)
Eric S. Schwartz (2) Michael F. Schwerin (2)
Richard S. Sharp (7) Richard G. Sherlund (2)
Michael S. Sherwood (7) Cody J. Smith (2)
Daniel W. Stanton (2) Esta E. Stecher (2)
Frederic E. Steck (11) Byron D. Trott (8)
Barry S. Volpert (2) Peter S. Wheeler (13)
Anthony G. Williams (7) Gary W. Williams (2)
Tracy R. Wolstencroft (4) Danny O. Yee (13)
Michael J. Zamkow (2) Mark A. Zurack (2)
(1) Management Committee
(2) 85 Broad Street, New York, NY 10004
(3) Mellon Bank Center, 1735 Market Street, 26th Floor,
Philadelphia, PA 19103
(4) 100 Crescent Court, Suite 1000, Dallas, TX 75201
(5) One New York Plaza, New York, NY 10004
(6) 1000 Louisiana Street, Suite 550, Houston, TX 77002
(7) Peterborough Court, 133 Fleet Street, London EC4A 2BB,
England
11
<PAGE>
(8) 4900 Sears Tower, Chicago, IL 60606
(9) 333 South Grand Avenue, Suite 1900, Los Angeles, CA 90071
(10) ARK Mori Bldg.,10th Floor, 12-32 Akasaka, 1-chome, Minato-
ku, Tokyo 107, Japan
(11) 555 California Street, 31st Floor, San Francisco, CA 94104
(12) Exchange Place, 53 State Street, 13th Floor, Boston, MA
02109
(13) Asia Pacific Finance Tower, 35th Floor, Citibank Plaza, 3
Garden Road, Hong Kong
(14) Finanz GmbH, MesseTurm, 60308 Frankfurt am Main 1, Germany
(15) Munsterhof 4, 8022, Zurich, Switzerland
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
--------------------------------
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940, as amended and the rules thereunder
will be maintained (1) at the offices of the Registrant at 4900 Sears Tower,
Chicago, Illinois 60606 and (2) at the offices of the Registrant's Custodian,
---
State Street Bank and Trust Company, at 225 Franklin Street, Boston, MA 02110.
ITEM 31. MANAGEMENT SERVICES.
-------------------
Not Applicable.
ITEM 32. UNDERTAKINGS.
------------
(a) Registrant undertakes to comply with Section 16(c) of the Investment
Company Act of 1940, as amended, which relates to the assistance to be rendered
to shareholders by the Directors of the Registrant in calling a meeting of
shareholders for the purpose of voting upon the question of the removal of a
Director.
(b) The Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six months from
the effective date of this Post-Effective Amendment.
(c) The Annual Report also contains performance information and is
available to any recipient of the Prospectus upon request and without charge by
writing to Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 51 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York on the 16th day of October, 1995.
GOLDMAN SACHS MONEY MARKET TRUST
By: /S/MICHAEL J. RICHMAN
-----------------------
Michael J. Richman, Secretary
Pursuant to the requirements of the Securities Act of 1933, the Post-Effective
Amendment No. 51 to the Registration Statement has been signed below by the
following persons in the capacities indicated on October 16, 1995.
<TABLE>
<CAPTION>
Name Title Date
----------------
<S> <C> <C>
*MARCIA L. BECK President and Trustee October 16, 1995
- ------------------------
Marcia L. Beck
*SCOTT M. GILMAN Treasurer October 16, 1995
- ------------------------
Scott M. Gilman
*ASHOK N. BAKHRU Trustee October 16, 1995
- ------------------------
Ashok N. Bakhru
*DAVID FORD Trustee October 16, 1995
- ------------------------
David Ford
*PAUL C. NAGEL, JR. Trustee October 16, 1995
- ------------------------
Paul C. Nagel, Jr.
*JACKSON W. SMART, JR. Trustee October 16, 1995
- ------------------------
Jackson W. Smart, Jr.
*WILLIAM H. SPRINGER Trustee October 16, 1995
- ------------------------
William H. Springer
*RICHARD P. STRUBEL Trustee October 16, 1995
- ------------------------
Richard P. Strubel
</TABLE>
By: /S/MICHAEL J. RICHMAN
-----------------------------------
Michael J. Richman
* Attorney-in-fact
13
<PAGE>
Index to Exhibits
1(i). Form of Amendment to Agreement and Declaration of Trust regarding
Financial Square Prime Rated Money Market Fund.
5(q). Form of Investment Advisory Agreement between the Registrant on behalf
of the Financial Square Prime Rated Money Market Fund and Goldman
Sachs Asset Management
11. Consent of Independent Public Accountants
15(c) Form of Preferred Administration Plan
15(d) Form of Preferred Administration Plan Agreement
14
<PAGE>
EXHIBIT 99.1(i)
GOLDMAN SACHS MONEY MARKET TRUST
AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
-----------------------------------------------
WHEREAS, Section 7.3 of the Agreement and Declaration of Trust of Goldman
Sachs--Institutional Liquid Assets (the "Trust") dated December 6, 1978, as
amended (the "Declaration"), provides that the Declaration may be amended from
time to time by an instrument in writing signed by a majority of the then
Trustees (or by an officer of the Trust pursuant to a vote of a majority of the
then Trustees);
WHEREAS, Section 7.3 also provides that any such amendment having the
purpose of changing the name of the Trust or the name of any series of Units
theretofore established and designated, or establishing and designating new
series of Units of the Trust, shall not require authorization by Unitholder
vote;
RESOLVED, that the Declaration be further amended as contemplated in
Section 7.3 thereof by establishing and designating (1) an additional series of
Units of beneficial interest to be known as Financial Square Prime Rated Money
Market Fund and (2) four classes of such series of such Units, to be known as
"FST Shares," "FST Administration Shares," "FST Service Shares" and "FST
Preferred Shares", such series to have the relative rights and preferences set
forth in Section 4.2 of the Declaration; and
FURTHER RESOLVED, that the President, any Vice President, the Treasurer and
the Secretary of this Trust be, and they each hereby are, severally authorized
to execute an instrument in writing effecting the aforesaid amendment and to
cause the same to be filed wherever in the discretion of such officer such
filing is appropriate.
NOW, THEREFORE, the undersigned, Michael J. Richman, being the duly
elected, appointed and serving Secretary of the Trust, hereby certifies that the
resolutions above have been duly adopted by the Trust's Trustees and submits
such amendment to the Commonwealth of Massachusetts for filing.
WITNESS my hand this day of , 1995.
GOLDMAN SACHS MONEY MARKET TRUST
-------------------------------------
Michael J. Richman
Secretary of the Trust
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
Then personally appeared the above-named Michael J. Richman and
acknowledged this instrument to be his free act and deed this day
of , 1995.
-------------------------------------
Notary Public
My commission expires:
<PAGE>
EXHIBIT 99.5(q)
GOLDMAN SACHS MONEY MARKET TRUST
ONE NEW YORK PLAZA
NEW YORK, NY 10004
October __________, 1995
Goldman Sachs Asset Management,
a division of Goldman, Sachs & Co.
One New York Plaza
New York, NY 10004
INVESTMENT ADVISORY AGREEMENT
-----------------------------
(FINANCIAL SQUARE PRIME RATED MONEY MARKET FUND)
Dear Sirs:
Goldman Sachs Money Market Trust (the "Trust") has been organized under the
laws of Massachusetts to engage in the business of an investment company. The
shares of beneficial interest of the Trust ("Shares") are divided into multiple
series, including Financial Square Prime Rated Money Market Fund (the "Fund"),
as established pursuant to a written instrument executed by the Trustees of the
Trust. Series may be terminated, and additional series established, from time
to time by action of the Trustees. The Trust on behalf of the Fund has selected
you to act as the investment adviser of the Fund and to provide certain
services, as more fully set forth below, and you are willing to act as such
investment adviser and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust agrees with you as follows:
1. Name of Fund. The Trust may use any name including the terms
------------
"Financial Square" or derived from the name "Goldman, Sachs & Co." in connection
with the Fund only for so long as this Agreement or any extension, renewal or
amendment hereof remains in effect, including any similar agreement with any
organization which shall have succeeded to your business as investment adviser.
At such time as such an agreement shall no longer be in effect, the Trust (to
the extent that it lawfully can) will cause the Fund to cease to use such a name
or any other name indicating that it is advised by or otherwise connected with
you or any organization which shall have so succeeded to your business.
2. Advisory Services. You will regularly provide the Fund with investment
-----------------
research, advice and supervision and will furnish continuously an investment
program for the Fund consistent with the investment objectives and policies of
the Fund. You will determine what securities shall be purchased for the Fund,
what securities shall be held or sold by the Fund, and what portion of the
Fund's assets shall be held uninvested, subject always to the provisions of the
Trust's Declaration of Trust and By-Laws and of the Investment Company Act of
1940, as amended (the "1940 Act"), and to the investment objectives, policies
and restrictions of the Fund, as each of the same shall be from time to time in
effect, and subject, further, to such policies and instructions as the Board of
Trustees may from time to time establish. You will maintain all books and
records with respect to the Fund's securities transactions required to be
maintained by an adviser pursuant to the 1940 Act and the rules and regulations
thereto and will provide to the Trust's Trustees such periodic and special
reports as the Trustees may reasonably request. You shall for all purposes
herein be deemed to be an independent contractor and shall, except as otherwise
expressly provided or authorized, have no authority to act for or represent the
Trust in any way or otherwise be deemed an agent of the Trust.
<PAGE>
3. Allocation of Charges and Expenses. You will pay all costs incurred by
----------------------------------
you in connection with the performance of your duties under paragraph 2 other
than those costs assumed by the Administrator of the Trust pursuant to the
Administration Agreement. You will pay the compensation and expenses of all
personnel of yours and will make available, without expense to the Trust, the
services of such of your partners, officers and employees as may duly be elected
officers or Trustees of the Trust, subject to their individual consent to serve
and to any limitations imposed by law. You will not be required to pay any
expenses of the Trust other than those specifically allocated to you in this
paragraph 3. In particular, but without limiting the generality of the
foregoing, you will not be required to pay; (i) fees and expenses of the
Administrator of the Trust; (ii) organization expenses of the Trust; (iii) fees
and expenses incurred by the Trust in connection with membership in investment
company organizations; (iv) brokers' commissions; (v) payment for portfolio
pricing services to a pricing agent, if any; (vi) legal, auditing or accounting
expenses (including an allocable portion of the costs of your employees
rendering legal and accounting services to the Trust); (vii) taxes or
governmental fees; (viii) the fees and expenses of the transfer agent of the
Trust; (ix) the cost of preparing Share certificates or any other expenses,
including clerical expenses of issue, redemption or repurchase of Shares of the
Trust; (x) the expenses of and fees for registering or qualifying securities for
sale and of maintaining the registration of the Trust and registering the Trust
as a broker or a dealer; (xi) the fees and expenses of Trustees of the Trust who
are not affiliated with you or the Administrator; (xii) the cost of preparing
and distributing reports and notices to shareholders; (xiii) the fees or
disbursements of custodians of the Trust's assets, including expenses incurred
in the performance of any obligations enumerated by the Declaration of Trust or
By-Laws of the Trust insofar as they govern agreements with any such custodian;
or (xiv) litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Trust's business. You shall
not be required to pay expenses of activities which are primarily intended to
result in sales of Shares of the Fund.
4. Compensation of the Adviser:
---------------------------
(a) For all services to be rendered and payments made as provided in paragraphs
2 and 3 hereof, the Trust on behalf of the Fund will pay you on the last
day of each month a fee at an annual rate equal to .075% per annum of the
average daily net assets, as defined below, of the Fund. The "average
daily net assets" of the Fund are defined as the average of the values
placed on the net assets as of 4:00 p.m. (New York time), on each day on
which the net asset value of the Fund's portfolio is determined consistent
with the provisions of Rule 22c-1 under the 1940 Act or, if the Fund
lawfully determines the value of the net assets of its portfolio as of some
other time on each business day, as of such time. The value of net assets
of the Fund shall be determined pursuant to the applicable provisions of
the Declaration of Trust of the Trust. If, pursuant to such provisions,
the determination of net asset value is suspended for any particular
business day, then for the purposes of this paragraph 4, the value of the
net assets of the Fund as last determined shall be deemed to be the value
of the net assets as of the close of the New York Stock Exchange, or as of
such other time as the value of the net assets of the Fund's portfolio may
lawfully be determined, on that day. If the determination of the net asset
value of the Shares of the Fund has been suspended pursuant to the
Declaration of Trust of the Trust for a period including such month, your
compensation payable at the end of such month shall be computed on the
basis of the value of the net assets of the Fund as last determined
(whether during or prior to such month). If the Fund determines the value
of the net assets of its portfolio more than once on any day, the last such
determination thereof on that day shall be deemed to be the sole
determination thereof on that day for the purposes of this paragraph 4.
(b) If, in any fiscal year, the sum of the Fund's expenses (including the fee
payable pursuant to this paragraph 4, but excluding taxes, interest,
brokerage commissions relating to the purchase or sale of portfolio
securities, distribution expenses and
2
<PAGE>
extraordinary expenses such as for litigation) exceeds the expense
limitations, if any, applicable to the Fund imposed by state securities
administrators, as such limitations may be modified from time to time, you
shall repay or pay to the Fund a portion of your fee for such fiscal year
equal to the amount of such excess to the extent required by such expense
limitations, provided that the amount of such reimbursement shall not
exceed the amount of your fee during such fiscal year.
(c) In addition to the foregoing, you may from time to time agree not to impose
all or a portion of your fee otherwise payable hereunder (in advance of the
time such fee or portion thereof would otherwise accrue) and/or undertake
to pay or reimburse the Fund for all or a portion of its expenses not
otherwise required to be borne or reimbursed by you. Any such fee
reduction or undertaking may be discontinued or modified by you at any
time.
5. Avoidance of Inconsistent Position. In connection with purchases or
----------------------------------
sales of portfolio securities for the account of the Fund, neither you nor any
of your partners, officers or employees will act as a principal or agent or
receive any commission. You or your agent shall arrange for the placing of all
orders for the purchase and sale of portfolio securities for the Fund's account
with brokers or dealers selected by you. In the selection of such brokers or
dealers and the placing of such orders, you are directed at all times to seek
for the Fund the most favorable execution and net price available. It is also
understood that it is desirable for the Fund that you have access to
supplemental investment and market research and security and economic analyses
provided by brokers who may execute brokerage transactions at a higher cost to
the Fund than may result when allocating brokerage to other brokers on the basis
of seeking the most favorable price and efficient execution. Therefore, you are
authorized to place orders for the purchase and sale of securities for the Fund
with such brokers, subject to review by the Trust's Trustees from time to time
with respect to the extent and continuation of this practice. It is understood
that the services provided by such brokers may be useful to you in connection
with your services to other clients. If any occasion should arise in which you
give any advice to your clients concerning the Shares of the Fund, you will act
solely as investment counsel for such clients and not in any way on behalf of
the Fund. Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and other services to others.
6. Limitation of Liability of Adviser. You shall not be liable for any
----------------------------------
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from reckless disregard by you of your
obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Trust or
the Fund shall be deemed, when acting within the scope of his employment by the
Trust, to be acting in such employment solely for the Trust and not as your
employee or agent.
7. Duration and Termination of this Agreement. This Agreement shall
------------------------------------------
remain in force until June 30, 1997 and from year to year thereafter, but only
so long as such continuance is specifically approved at least annually by the
vote of a majority of the Trustees who are not interested persons of you or of
the Trust, cast in person at a meeting called for the purpose of voting on such
approval and by a vote of the Board of Trustees or of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder. This Agreement may, on 60 days' written notice, be
terminated at any time without the payment of any penalty, by the Board of
Trustees, by vote of a majority of the outstanding voting securities of the
Fund, or by you. This Agreement shall automatically terminate in the event of
its assignment. In interpreting the provisions of this Agreement, the
definitions contained in Section 2(a) of the 1940 Act (particularly the
definitions of "interested person," "assignment" and "majority of the
outstanding voting securities"), as from time to time amended, shall be applied,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission by any rule, regulation or order.
3
<PAGE>
8. Amendment of this Agreement. No provisions of this Agreement may be
---------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective until approved by vote of the holders of a majority of the outstanding
voting securities of the Fund and by the Board of Trustees, including a majority
of the Trustees who are not interested persons of you or of the Trust, cast in
person at a meeting called for the purpose of voting on such approval.
9. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
10. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
The name "Goldman Sachs Money Market Trust" is the designation of the
Trustees for the time being under the Declaration of Trust dated December 6,
1978, as amended from time to time, and all persons dealing with the Trust or
the Fund must look solely to the property of the Trust or the Fund for the
enforcement of any claims against the Trust as neither the Trustees, officers,
agents or shareholders assume any personal liability for obligations entered
into on behalf of the Trust. The Fund shall not be liable for any claims
against any other series of the Trust.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract.
Yours very truly,
GOLDMAN SACHS MONEY MARKET TRUST
(ON BEHALF OF FINANCIAL SQUARE PRIME RATED MONEY MARKET FUND)
Attest:______________________________ By:______________________________
Michael J. Richman Marcia L. Beck
Secretary President of the Trust
The foregoing Agreement is hereby accepted as of the date thereof.
GOLDMAN SACHS ASSET MANAGEMENT,
A DIVISION OF GOLDMAN, SACHS & CO.
Attest:_______________________________ By:______________________________
Michael J. Richman David B. Ford
Counsel to the Funds Chairman and Chief Executive
Officer
4
<PAGE>
EXHIBIT 99.11
Arthur Andersen LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Goldman Sachs Money Market Trust:
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 10, 1995
for the Goldman Sachs Money Market Trust Financial Square Funds (which includes,
Prime Obligations Fund, Money Market Fund, Treasury Obligations Fund, Government
Fund and Tax-Free Money Market Fund) and to all references to our firm included
in or made a part of Post-Effective Amendment No. 51 and Amendment No. 35 to
Registration Statement File Nos. 2-54809 and 811-2598 respectively.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
October 13, 1995
<PAGE>
EXHIBIT 99.15(c)
GOLDMAN SACHS MONEY MARKET TRUST
(FINANCIAL SQUARE PRIME RATED MONEY MARKET FUND - PREFERRED CLASS)
PREFERRED ADMINISTRATION PLAN
October 10, 1995
WHEREAS, Goldman Sachs Money Market Trust (the "Trust") engages in business
as an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust has a particular series or Fund, which is a separate
pool of assets with its own investment policies (the "Fund") and such Fund may
be divided into four separate classes: the FST Class, the FST Administration
Class, the FST Service Class and the FST Preferred Class;
WHEREAS, the Trust, on behalf of the FST Preferred Class of such Fund,
desires to adopt a Preferred Administration Plan and the Board of Trustees of
the Trust has determined that there is a reasonable likelihood that adoption of
this Preferred Administration Plan will benefit the Trust and its shareholders;
and
WHEREAS, the Trust, on behalf of the FST Preferred Class of such Fund,
employs institutions (the "Service Organizations") to act as nominees and record
holders of shares of the FST Preferred Class for their respective customers who
are or may become beneficial owners of such shares (the "Customers") and to
perform certain account administration services with respect to the Customers
pursuant to Administration Agreements between the Trust, on behalf of the FST
Preferred Class of such Fund, and such Service Organizations (the "Agreements").
NOW, THEREFORE, the Trust, on behalf of the FST Preferred Class of such
Fund, hereby adopts this Preferred Administration Plan (the "Plan") on the
following terms and conditions:
1. (a) The Trust, on behalf of the FST Preferred Class of such Fund, is
authorized to pay each Service Organization the monthly or quarterly
administration fee specified in the Agreement with such Service Organization,
which shall be equal on an annual basis to not more than .10 of 1% of the
average daily net asset value of the shares of the FST Preferred Class of such
Fund which are owned beneficially by the Customers of such Service Organization
during such period.
(b) The types of administration services and expenses for which a
Service Organization may be compensated under this Plan include, without
limitation: (i) acting as record holder and nominee of all shares of the FST
Preferred Class beneficially owned by Customers; (ii) establishing and
maintaining individual accounts and records with respect to shares of the FST
Preferred Class owned by each Customer; and (iii) receiving and transmitting
funds representing the purchase price or redemption proceeds of such shares. No
Fund may compensate a Service Organization for services provided with respect to
another Fund.
2. This Plan shall not take effect with respect to the FST Preferred Class
of the Fund until it has been approved by a vote of at least a majority of the
outstanding voting securities of the FST Preferred Class of such Fund.
<PAGE>
3. This Plan shall not take effect as to the Fund until the Plan, together
with any related agreements, has been approved for such Fund by votes of a
majority of both (a) the Board of Trustees of the Trust and (b) those Trustees
of the Trust who are not "interested persons" of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or any
agreements related to it (the "non-interested Trustees") cast in person at a
meeting (or meetings) called for the purpose of voting on the Plan and such
related agreements.
4. This Plan shall remain in effect until April 30 and shall continue in
effect thereafter so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 3.
5. The President, Vice President, Treasurer or any Assistant Treasurer of
the Trust shall provide the Board of Trustees of the Trust and the Board shall
review, at least quarterly, a written report of services performed by and fees
paid to each Service Organization under the Agreements and this Plan.
6. This Plan may be terminated as to the FST Preferred Class of the Fund
at any time by vote of a majority of the non-interested Trustees or by vote of a
majority of the outstanding voting securities of the FST Preferred Class of such
Fund.
7. This Plan may not be amended to increase materially the amount of
compensation payable pursuant to paragraph 1 hereof unless such amendment is
approved in the manner provided for initial approval in paragraph 2 hereof. No
material amendment to the Plan shall be made unless approved in the manner
provided in paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of the non-
interested Trustees of the Trust shall be committed to the discretion of the
non-interested Trustees.
9. The Trust shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 5 hereof, for a period of not less
than six years from the date of the Plan, any such agreement or any such report,
as the case may be, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the Trust, on behalf of the FST Preferred Class of such
Fund, has executed this Preferred Administration Plan as of the day and year
first written above.
Goldman Sachs Money Market Trust
(on behalf of the FST Preferred Class of such
Fund)
By_____________________________________________
Marcia L. Beck
President of the Trust
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EXHIBIT 99.15(d)
Form 1 - Preferred Class
Investment Advisers - Full Service
[Date of Agreement]
[Name of Service Organization]
[Address]
[City, State, Zip]
RE: FST PREFERRED CLASS OF FINANCIAL SQUARE Prime Rated Money Market Fund
(the "Fund")
Gentlemen:
The Fund is a series of Goldman Sachs Money Market Trust (the "Trust"), an open-
end management investment company which currently has fifteen series or Funds.
Shares of beneficial interest ("shares") of the Fund may be divided into four
separate classes, including the FST Preferred Class.
You are an investment adviser (the "Service Organization") acting as nominee and
record holder of shares of the FST Preferred Class for your customers, who are
or may become the beneficial owners of such shares (the "Customers"). You are
willing to perform, and the Trust wishes to compensate you for performing,
certain account administration services with respect to the Customers (the
"Services"). Accordingly, the Service Organization and the Trust agree as
follows.
1. The Trust hereby engages the Service Organization, and the Service
Organization hereby agrees, to perform the following services: (a) act as or
assist an entity as record holder and nominee of all shares of the FST Preferred
Class beneficially owned by the Customers; (b) establish and maintain individual
accounts and records with respect to shares of the FST Preferred Class owned by
each Customer; (c) receive and transmit funds representing the purchase price or
redemption proceeds of such shares.
2. The Service Organization shall furnish such office space, equipment,
facilities and personnel as is necessary to perform its duties hereunder. The
Service Organization shall bear all costs incurred by it in performing such
duties.
3. For the administrative services provided and the expenses incurred by
the Service Organization hereunder, the Trust on behalf of the Fund will pay to
the Service Organization a monthly administration fee equal on an annual basis
to .10 of 1% of the average daily net asset value of the shares of the FST
Preferred Class of the Fund which are owned beneficially by Customers of the
Service Organization during such period. However, if the total administration
fees to be accrued by the Fund on any day with respect to FST Preferred Class
shares of the Fund exceed the net income, exclusive of such administration fees,
to be accrued by the Fund on such shares, the administration fee payable by the
Fund to the Service Organization on such day will be reduced by an amount equal
to the Service Organization's proportionate share of such excess, in order to
avoid adversely affecting the net asset value per share.
4.1 In performing its duties hereunder, the Service Organization will act
in conformity with the then effective prospectus and statement of additional
information of the FST Preferred Class, the Investment Company Act of 1940 (the
"1940 Act") and all other applicable federal and state laws, regulations and
rulings and the constitution, by-laws and rules of any applicable self-
regulatory organization. The Service Organization will assume sole
responsibility for its compliance with applicable federal and state laws and
regulations, and shall rely exclusively upon its own determination, or that of
its legal advisers, that the performance of its duties hereunder complies with
such laws and regulations. Under no circumstances shall the Trust, Goldman,
Sachs & Co. or any
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of their affiliates be held responsible or liable in any respect for any
statements or representations made by them or their legal advisers to the
Service Organization or any customer of the Service Organization concerning the
applicability of any federal or state laws or regulations to the activities
described herein. The Service Organization will perform its duties hereunder in
a manner consistent with the customs and practices of other institutions that
provide similar services.
4.2 Representations and Warranties. The Service Organization represents,
warrants and covenants to the Trust that
(a) it is a corporation or partnership duly organized, validly existing, and in
good standing under the laws of the state, province or country of its
organization;
(b) it is registered and in good standing, and will during the term of this
Agreement remain in good standing, as an investment adviser with the United
States Securities and Exchange Commission and with the securities
commission of any state, territory, or possession of the United States or
of any province of Canada and other jurisdictions in which such
registration is required, and is in full compliance with the rules,
regulations and policies (collectively, the "Rules") of the aforesaid
commissions, particularly those Rules governing capital requirements,
financial reporting, bonding, fiduciary standards and supervisory concerns;
(c) its entering into and performing its obligations under this Agreement does
not and will not violate (i) its charter, documents, or by-laws; (ii) any
laws, rules or regulations (including Rule 206(4)-2 and rules of
regulations or any self-regulatory organization) or (iii) any agreement to
which it is a party; and
(d) it will keep confidential any information acquired as a result of this
Agreement regarding the business and affairs of the Trust, which
requirement shall survive the term of this Agreement.
4.3 The Service Organization agrees that the Trust shall have no
responsibility or liability to review any purchase or redemption request which
is presented by the Service Organization to determine whether such request is
genuine or authorized by the Customer of the Service Organization. The Trust
shall be entitled to rely conclusively on any purchase or redemption request
communicated to it by the Service Organization, and shall have no liability
whatsoever for any losses, claims or damages to or against the Service
Organization or any Customer resulting from a failure of the Service
Organization to transmit any such request, or from any errors contained in any
request.
5.1 The Service Organization hereby represents that the payment of any
administration fee hereunder will (a) be fully disclosed by the Service
Organization to its Customers, (b) be duly authorized by its Customers, and (c)
not cause the aggregate fees paid by Customers to the Service Organization to be
excessive.
5.2 If a proposal concerning any related Administration Plan is submitted
to shareholders for their approval, the Service Organization shall vote any
shares held by it for its own account in the same proportion as the votes of
those shares beneficially owned by its Customers.
6.1 This Agreement shall continue in effect until June 30, and shall
continue in effect from year to year thereafter only if it is approved annually
by a vote of a majority of the Trustees of the Trust, including a majority of
those Trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of the related
Administration Plan, this Agreement or any related agreements (the "Independent
Trustees") cast in person at a meeting called for the purpose of voting on this
Agreement. This Agreement may be terminated at any time, on not less than 60
days' notice to the Service Organization and without the payment
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<PAGE>
of any penalty, by vote of a majority of the Independent Trustees or, with
respect to the FST Preferred Class of the Fund, by vote of a majority of the
outstanding voting securities of that class and of the Fund. This Agreement may
also be terminated by the Service Organization at any time on 60 days' notice to
the Trust and will terminate automatically in the event of its assignment. All
material amendments to this Agreement must be in writing and must be approved by
the Independent Trustees in the manner described above for continuing this
Agreement. The terms "majority of the outstanding voting securities" and
"assignment" shall have the meanings given to them in the 1940 Act. Any notice
furnished hereunder shall be in writing and shall be mailed or delivered to the
other party at its address set forth above.
6.2 The Trust and the Service Organization each agree to hold each other,
and each of the respective persons who control (within the meaning of the word
"control" as defined in Section 2(a)(9) of the 1940 Act), the Trust or the
Service Organization harmless from and against all claims, demands, proceedings,
suits, and actions, and all liabilities, losses, expenses, and costs (including
any legal fees and expenses) relating to either party's defense or any failure,
for any reason, fraudulent or otherwise, by either party or their employees or
customers, as the case may be, to comply with any obligations under this
Agreement or any other agreement executed and delivered to either party in
connection with the performance of the Services hereunder, except for any act or
failure to act which is the result of gross negligence on the part of any such
employee or customer of either party.
7. The Service Organization should be deemed an independent contractor and
not an agent of the Trust for all purposes hereunder and shall have no authority
to act for or represent the Trust. In addition, no officer or employee of the
Service Organization should be deemed to be an employee or agent of the Trust or
Goldman Sachs Asset Management ("GSAM"), nor will be subject, in any respect, to
the supervision of GSAM or any affiliate thereof. The Service Organization will
not act as an "underwriter" or "distributor" or shares, as those terms variously
are used in the 1940 Act, the Securities Act of 1933, and rules and regulations
promulgated thereunder.
8. The obligations of the Trust under this Agreement are not binding upon
any of the Trustees, officers or shareholders of the Trust individually but are
binding only upon the Trust and its assets. No class or Fund of the Trust shall
be liable for the obligations of any other class or Fund hereunder.
9. If any provision of this Agreement shall be held or made invalid by a
decision in a judicial or administrative proceeding, statute, rule or otherwise,
the enforceability of the remainder of this Agreement will not be impaired
thereby. This Agreement shall be governed by the laws of New York
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<PAGE>
(except with respect to paragraph 8, which will be governed by the laws of
Massachusetts) and shall be binding upon and insure to the benefit of the
parties hereto and their respective successors.
Very truly yours,
FINANCIAL SQUARE PRIME RATED MONEY
MARKET FUND
By: ____________________________________
[Authorized Officer]
ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN.
[NAME OF SERVICE ORGANIZATION]
By: ____________________________________
[Authorized Officer]
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