<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT,
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
NEW YORK, NEW YORK
------------
Goldman Sachs Government Income Fund (the "Fund") is one fund in a family of
funds advised by Goldman Sachs Asset Management (the "Investment Adviser") or
its affiliates, Goldman Sachs Funds Management, L.P. and Goldman Sachs Asset
Management International. The Fund is organized as a separate diversified
portfolio of Goldman Sachs Trust (the "Trust"), an open-end, management
investment company.
The Fund's investment objective is to provide investors with a high level of
current income, consistent with safety of principal. The Fund will seek to
achieve its investment objective by investing primarily in securities,
including mortgage-backed securities, issued or guaranteed as to principal and
interest by the U.S. Government or its agencies, instrumentalities or
sponsored enterprises ("Government Securities"). The Fund will normally
maintain a dollar weighted average life of between five and ten years. Neither
the Fund's net asset value per share nor its yield is guaranteed by the U.S.
Government or by its agencies, instrumentalities or sponsored enterprises.
There can be no assurance that the Fund will achieve its investment objective.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in Government Securities and in repurchase agreements collateralized
by Government Securities. The Fund may also invest in mortgage-backed
securities of non-governmental issuers, asset-backed securities or corporate
debt obligations that are rated, at the time of investment, AAA by Standard &
Poor's Ratings Group ("Standard & Poor's") or Aaa by Moody's Investors
Service, Inc. ("Moody's") or equivalent short-term credit quality ratings or,
if unrated by such rating organizations, determined by the Fund's Investment
Adviser to be of comparable quality.
(continued on next page)
------------
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 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
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------
GOLDMAN, SACHS & CO.
------------
The date of this Prospectus is March 1, 1995.
<PAGE>
The Fund may employ certain active management techniques to hedge the
interest rate risks associated with the Fund's portfolio securities, to seek
to enhance safety of principal and to enhance its return. These techniques
consist of futures contracts and option contracts (including options on
futures), mortgage and interest rate swaps and interest rate floors, caps and
collars. The Fund may also attempt to enhance its return by utilizing
portfolio securities lending, mortgage dollar rolls, repurchase agreements and
other investments and practices described in this Prospectus. Although the
Fund seeks to provide safety of principal, it cannot eliminate the risk of a
loss of principal.
Goldman Sachs Asset Management, New York, New York, a separate operating
division 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's custodian is State Street Bank and Trust Company.
This Prospectus, which sets forth concisely the information about the Trust
and the Fund that a prospective investor ought to know before investing,
should be retained for future reference. A Statement of Additional Information
(the "Additional Statement"), dated March 1, 1995, containing further
information about the Trust and the Fund which may be of interest to
investors, has been filed with the Securities and Exchange Commission, is
incorporated herein by reference in its entirety, and may be obtained without
charge from Goldman, Sachs & Co. by calling the telephone number, or writing
to one of the addresses, listed below.
GOLDMAN SACHS TRUST GOLDMAN SACHS ASSET MANAGEMENT
4900 SEARS TOWER INVESTMENT ADVISER AND ADMINISTRATOR
CHICAGO, ILLINOIS 60606 ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
GOLDMAN, SACHS & CO. GOLDMAN, SACHS & CO.
DISTRIBUTOR TRANSFER AGENT
85 BROAD STREET 4900 SEARS TOWER
NEW YORK, NEW YORK 10004 CHICAGO, ILLINOIS 60606
TOLL FREE (IN U.S.)................. 800-526-7384
2
<PAGE>
SUMMARY
INTRODUCTION
Goldman Sachs Government Income Fund (the "Fund") is one fund in a family of
funds advised by Goldman Sachs Asset Management (the "Investment Adviser") or
its affiliates, Goldman Sachs Funds Management, L.P. and Goldman Sachs Asset
Management International. The Fund is organized as a separate diversified
portfolio of Goldman Sachs Trust (the "Trust"), an open-end, management
investment company.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to achieve a high level of current income,
consistent with safety of principal. The Fund will seek to achieve its
investment objective by investing primarily in securities, including mortgage-
backed securities, issued or guaranteed as to principal and interest by the
U.S. Government or its agencies, instrumentalities or sponsored enterprises
("Government Securities"). The Fund will normally maintain a dollar weighted
average life of between five and ten years. Neither the Fund's net asset value
per share nor its yield is guaranteed by the U.S. Government or its agencies,
instrumentalities or sponsored enterprises. There can be no assurance that the
Fund will achieve its investment objective.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in Government Securities and in repurchase agreements collateralized
by Government Securities. The Fund may also invest in mortgage-backed
securities of non-governmental issuers, asset-backed securities or corporate
debt obligations that are rated, at the time of investment, AAA by Standard &
Poor's Ratings Group ("Standard & Poor's") or Aaa by Moody's Investors Service,
Inc. ("Moody's") or equivalent short-term credit quality ratings or, if unrated
by such rating organizations, determined to be of comparable quality by the
Investment Adviser. A security will be deemed to have met this requirement if
it receives the minimum required rating from at least one such rating
organization even if it has been rated below the minimum rating by one or more
other rating organizations. See "Investment Objective and Policies."
At the discretion of the Investment Adviser, the Fund may, for temporary
defensive purposes to preserve capital, hold part or all of its assets in (a)
cash, (b) cash equivalents, such as certificates of deposit, commercial paper,
time deposits and bankers' acceptances issued by a bank the unsecured
commercial paper of which is rated A-1+ by Standard & Poor's or P-1 by Moody's
or (c) repurchase agreements collateralized by such instruments. See "Other
Investments and Practices -- Repurchase Agreements" for a description of
repurchase agreements.
The Fund may employ certain active management techniques to hedge the
interest rate risks associated with the Fund's portfolio securities, to seek to
enhance safety of principal and to enhance its return. These techniques consist
of futures contracts and option contracts (including options on futures),
mortgage and interest rate swaps and interest rate floors, caps and collars.
The Fund may also attempt to enhance its return by utilizing portfolio
securities lending, mortgage dollar rolls, repurchase agreements and other
investments and practices described under "Other Investments and Practices."
3
<PAGE>
INVESTMENT ADVISER AND ADMINISTRATOR
Goldman Sachs Asset Management, a separate operating division of Goldman,
Sachs & Co. ("Goldman Sachs"), serves as the Fund's investment adviser pursuant
to an Investment Advisory Agreement. The Fund's portfolio is managed by the
Investment Adviser's fixed income securities team, which, as of January 31,
1995, was responsible for managing approximately $15.9 billion in assets. For
its advisory services, the Investment Adviser receives from the Fund a monthly
fee equal on an annual basis to 0.50% of the Fund's average daily net assets.
Goldman Sachs is registered with the Securities and Exchange Commission (the
"SEC") as an investment adviser.
Goldman Sachs Asset Management also serves as the administrator of the Fund
pursuant to an Administration Agreement, for which it receives from the Fund a
monthly fee equal on an annual basis to 0.15% of the Fund's average daily net
assets. See "Management -- Investment Adviser and Administrator."
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund may be bought through Goldman Sachs and certain investment
dealers, including members of the National Association of Securities Dealers,
Inc. ("NASD") and certain other financial service firms that have sales
agreements with Goldman Sachs ("Authorized Dealers"). The minimum initial
investment in the Fund is $1,500, except in connection with the special
investment programs described under "Purchase of Shares" and purchases by
certain institutional investors, and except that this requirement may be waived
at the discretion of the Trust's officers. Shares of the Fund may be purchased
at the current net asset value per share plus any applicable sales charge. The
sales charge is paid at the time of purchase of shares of the Fund. The maximum
sales charge is currently 4.5% of the purchase price with reduced sales charges
for purchases of shares of the Fund of $100,000 or more. The sales charge is
waived for specified classes of investors described under "Purchase of
Shares -- Offering Price" and in connection with exchanges of shares. The Fund
and Goldman Sachs reserve the right to modify the minimum investment
requirement, the manner in which shares are offered or the sales charge rates
applicable to future purchases of shares. See "Purchase of Shares." The Fund
will redeem its shares upon request of a shareholder on any Business Day, as
defined below, at the net asset value next determined after receipt of such
request in proper form. See "Redemption of Shares."
DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs serves as the distributor for the Fund in the sale of its
shares. Under the Transfer Agency Agreement with the Fund, Goldman Sachs
provides transfer agency services and responds to shareholder inquires. See
"Management -- Distributor and Transfer Agent."
DISTRIBUTION PLAN
The Trust, on behalf of the Fund, has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "Investment Company Act").
4
<PAGE>
Under the Plan, the Fund will pay to Goldman Sachs a quarterly fee for
distribution and personal and account maintenance services that is equal, on an
annual basis, to 0.50% of the Fund's average daily net assets. Currently,
Goldman Sachs has voluntarily agreed to limit the amount of such fee to 0.25%
of the Fund's average daily net assets. Goldman Sachs has no current intention
of modifying or discontinuing such limitation, but may do so in the future at
its discretion. See "Distribution Plan."
DIVIDEND POLICY
The Fund intends to declare a daily dividend determined with the objective of
distributing the majority of net investment income. Such dividends will accrue
daily with respect to outstanding shares, commencing on the calendar day after
the receipt of payment for such shares, and will be paid monthly. Over the
course of the fiscal year, dividends accrued and paid will constitute all or
substantially all of the Fund's net investment income. From time to time a
portion of such dividends may constitute a return of capital. The Fund also
intends that substantially all net realized long-term and short-term capital
gains will be declared as a dividend and paid at least annually. Shareholders
will receive dividends in additional shares of the Fund or may elect to receive
cash, shares of certain designated mutual funds sponsored by Goldman Sachs
whose shares are subject to an initial sales charge (the "Goldman Sachs
Portfolios") or ILA Service Units of the Prime Obligations Portfolio or the
Tax-Exempt Diversified Portfolio of Goldman Sachs Money Market Trust (the "ILA
Portfolios"). For further information concerning dividends, see "Dividends."
RISK FACTORS
GENERAL. While the Fund seeks to provide investors with a high level of
current income, consistent with safety of principal, the Fund's current income
and net asset value per share will fluctuate. The inherent volatility risk of
the Fund is such that, during any particular period, if shares of the Fund are
redeemed, an investor could suffer a loss of principal.
The securities in the Fund's portfolio and, therefore, the Fund's net asset
value will tend to decrease in value when interest rates rise and increase in
value when interest rates fall (although, as discussed below, Mortgage-Backed
Securities (as defined below) will generally have less potential for capital
appreciation during periods of declining interest rates than other securities).
Because the Fund's investments are interest rate sensitive, the Fund's
performance will depend in large part upon the ability of the Fund to respond
to fluctuations in market interest rates and to utilize appropriate strategies
to maximize returns to the Fund, while attempting to minimize the associated
risks to its invested capital. Operating results will also depend upon the
availability of opportunities for the investment of the Fund's assets,
including purchases and sales of suitable securities.
MORTGAGE-BACKED SECURITIES. The Fund's investments in mortgage pass-through
securities, collateralized mortgage obligations and other mortgage securities
("Mortgage-Backed Securities") entail special risks. These risks include the
failure of an issuer or guarantor to meet its obligations, adverse interest
rate changes, adverse economic, real estate or unemployment trends, failures in
5
<PAGE>
connection with processing of transactions and the effects of prepayments on
mortgage cash flows. The Fund's policy of investing primarily in Government
Securities is designed, however, to minimize credit related risks otherwise
associated with Mortgage-Backed Securities.
YIELD CHARACTERISTICS AND MARKET RISKS. The yield characteristics of the
Mortgage-Backed Securities in which the Fund may invest differ from those of
traditional fixed income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates and the possibility that prepayments of
principal may be made at any time.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, the Fund may fail to recoup fully its
investment in some of the Mortgage-Backed Securities it holds notwithstanding a
direct or indirect governmental or agency guarantee. The Fund's investments in
Mortgage-Backed Securities are subject to more rapid repayment than their
stated maturity dates would indicate as a result of the pass-through of
prepayments of principal on the underlying loans. Such repayment may increase
the volatility of an investment in Mortgage-Backed Securities relative to
similarly rated debt securities and, therefore, may increase the volatility of
the Fund's net asset value. The Fund intends to use hedging techniques to
control these risks. See "Other Investments and Practices -- Hedging and Other
Active Management Techniques." When the Fund reinvests amounts representing
scheduled payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on its existing portfolio of
Mortgage-Backed Securities. Thus, Mortgage-Backed Securities, and adjustable
rate mortgage pass-through securities in particular, may be less effective than
other types of Government Securities as a means of "locking in" interest rates.
Although having less risk of decline in value during periods of rising
interest rates, adjustable rate Mortgage-Backed Securities have less potential
for capital appreciation than fixed rate Mortgage-Backed Securities because
their coupon rates will decline in response to market interest rate declines.
The market value of fixed rate Mortgage-Backed Securities may be adversely
affected as a result of increases in interest rates and, because of the risk of
principal prepayments, may benefit less than other fixed rate securities of
similar maturity from declining interest rates. Finally, a higher than
anticipated rate of unscheduled principal payments on Mortgage-Backed
Securities purchased at a premium or a lower than anticipated rate of
unscheduled principal payments on Mortgage-Backed Securities purchased at a
discount may result in a lower yield than was anticipated at the time such
securities were purchased.
OTHER INVESTMENTS AND PRACTICES. The Fund may invest in certain other
securities and engage in certain other investments and practices that involve
special risks. Such other securities consist of Mortgage-Backed Securities of
non-governmental issuers and asset-backed securities which are subject to
default and early payment risks and the other securities described under
"Description of
6
<PAGE>
Portfolio Securities." Such other investments and practices consist of making
forward commitments, lending portfolio securities, entering into mortgage
dollar rolls and repurchase agreements and engaging in transactions in futures
and options contracts (including options on futures), mortgage and interest
rate swaps and interest rate floors, caps and collars and making the other
investments and engaging in the other practices described under "Other
Investments and Practices."
CONFLICTS OF INTEREST. The involvement of Goldman Sachs, and its divisions
and affiliates (including the Investment Adviser), partners and officers, in
the investment activities and business operations of the Fund may present
certain conflicts of interest, as described under "Management -- Investment
Adviser and Administrator."
FEES AND EXPENSES
<TABLE>
<CAPTION>
GOLDMAN SACHS
GOVERNMENT
INCOME FUND
-------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases....................... 4.50%*
Maximum Sales Charge Imposed on Reinvested Dividends............ None
Redemption Fees................................................. None**
Exchange Fees................................................... None**
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)
Management Fees (includes advisory fees of 0.50% and administra-
tion fees of 0.15%)............................................ 0.65%****
Distribution and Service (Rule 12b-1) Fees (after expense limi-
tation)........................................................ 0.25%****
Other Expenses (after expense limitation)....................... 0.30%***
----
TOTAL FUND OPERATING EXPENSES (AFTER EXPENSE LIMITATION)....... 1.20%****
====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a hy-
pothetical $1,000 investment (including the
maximum sales charge), assuming (1) a 5% an-
nual return and (2) redemption at the end of
each time period ........................... $57 $81 $108 $184
</TABLE>
- ----------
* As a percentage of the offering price. No sales charge is imposed on
purchases by certain classes of investors. See "Purchase of Shares."
** A transaction fee of $7.50 may be charged for redemption proceeds paid by
wire. In addition to free reinvestments of dividends and distributions in
shares of other Goldman Sachs Portfolios or units of the ILA Portfolios
and free automatic exchanges pursuant to the Automatic Exchange Program,
six free exchanges are permitted in each twelve month period. A fee of
$12.50 may be charged for each subsequent exchange during such period. See
"Purchase of Shares --Exchange Privilege." A contingent deferred sales
charge may be imposed in connection with certain redemptions of shares
sold without an initial sales charge to certain participant directed
7
<PAGE>
plans. See "Purchase of Shares -- Participant Directed Plans." The
transfer agency fee incurred by the Fund is based on a fixed per account
charge plus transaction fees. See "Management --Distributor and Transfer
Agent."
*** Based on estimated amounts for the current year. The Investment Adviser
has voluntarily agreed to reduce or limit certain "Other Expenses" of the
Fund (excluding advisory, administration and distribution and service
fees, taxes, interest and brokerage and litigation, indemnification and
other extraordinary expenses) to the extent such expenses exceed 0.30%
per annum of the Fund's average daily net assets. The Investment Adviser
has no current intention of modifying or discontinuing such limitation
but may do so in the future at its discretion.
**** Goldman Sachs has agreed to limit the amount of the distribution and
service fees payable by the Fund to 0.25% of its average daily net
assets. Goldman Sachs has no current intention of modifying or
discontinuing such limitation, but may do so in the future at its
discretion. If Goldman Sachs and the Investment Adviser did not agree to
limit the amount of the distribution and service fees payable by the Fund
to 0.25% of its average daily net assets and to reduce or otherwise limit
certain "Other Expenses" of the Fund, these expenses would have been
0.50% and 1.71%, respectively, of such assets and the Fund's total
operating expenses would have been 2.86% of such assets. During the
fiscal year ended October 31, 1994, the Investment Adviser waived its
management fees and reimbursed all expenses. Annual operating expenses
incurred by the Fund during the fiscal year ended October 31, 1994
(expressed as a percentage of average daily net assets after fee
adjustments) were as follows: Management Fees, Distribution and Service
Fees and Other Expenses of 0.00%, 0.11% and 0.00%, respectively for total
operating expenses of 0.11%. See "Management -- Investment Adviser and
Administrator" and "Distribution Plan."
Investors should be aware that, due to the distribution 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 NASD.
The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses of the Fund that an investor in the Fund will
bear directly or indirectly. The costs and expenses included in the table and
hypothetical example above are based on estimated fees and expenses for the
current fiscal year, and should not be considered as representative of past or
future expenses. Actual fees and expenses may be greater or less than those
indicated. Moreover, while the example assumes a 5% annual return, the Fund's
actual performance will vary and may result in an actual return greater or
less than 5%. See "Management -- Investment Adviser and Administrator."
8
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
The following data with respect to a share of the Fund outstanding during
the periods indicated has been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report incorporated by reference and
attached to the Additional Statement, from the Fund's annual report to
shareholders for the period ended October 31, 1994 (the "Annual Report"). This
information should be read in conjunction with the financial statements and
related notes incorporated by reference and attached to the Additional
Statement. The Annual Report also contains performance information and is
available upon request and without charge by calling the telephone number or
writing to one of the addresses on the inside cover of this Prospectus.
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993(a)
---------------- -------------------
<S> <C> <C>
Net asset value, beginning of period $14.90 $14.32
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.85 0.56
Net realized and unrealized gain
(loss) on investments(b) (1.28) 0.58
- -------------------------------------------------------------------------------
Total income (loss) from investment
operations (0.43) 1.14
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.85) (0.56)
In excess of net investment income (0.02) --
From net realized gain on investment
transactions (0.12) --
In excess of net realized gain on in-
vestment transactions (0.01) --
- -------------------------------------------------------------------------------
Total distributions to shareholders (1.00) (0.56)
- -------------------------------------------------------------------------------
Net increase (decrease) in net asset
value (1.43) 0.58
- -------------------------------------------------------------------------------
Net asset value, end of period $13.47 $14.90
- -------------------------------------------------------------------------------
Total return(c) (2.98)% 8.03%
Ratio of net expenses to average net
assets 0.11% 0.00%(d)
Ratio of net investment income to av-
erage net assets 6.06% 4.87%(d)
Portfolio turnover rate(e) 654.90% 725.41%
Net assets at end of period $14,451,822 $12,859,984
Ratios assuming no waiver of fees or
expense limitation:
Ratio of expenses to average net as-
sets 2.86% 4.00%(d)
Ratio of net investment income to
average net assets 3.31% 0.87%(d)
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period from February 10, 1993 (commencement of operations) to
October 31, 1993.
(b) Includes the balancing effect of calculating per share amounts.
(c) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charge. Total return would be reduced if a sales charge were taken
into account.
(d) Annualized.
(e) Includes effect of mortgage dollar roll transactions.
9
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
THE FUND SEEKS The Fund's investment objective is to achieve a high level
A HIGH LEVEL OF of current income, consistent with safety of principal. The
CURRENT INCOME, Fund will seek to achieve its investment objective by in-
CONSISTENT WITH vesting primarily in securities, including Mortgage-Backed
SAFETY OF Securities, issued or guaranteed as to principal and inter-
PRINCIPAL. est by the U.S. Government or its agencies, instrumentali-
ties or sponsored enterprises ("Government Securities"). Un-
der normal circumstances, at least 65% of the Fund's total
assets will be invested in Government Securities and in re-
purchase agreements collateralized by Government Securities.
The Fund may also invest in Mortgage-Backed Securities of
non-governmental issuers, asset-backed securities or corpo-
rate debt obligations that are rated, at the time of invest-
ment, AAA by Standard & Poor's or Aaa by Moody's or equiva-
lent short-term credit quality ratings or, if unrated by
such rating organizations, determined by the Investment Ad-
viser to be of comparable quality. A security will be deemed
to have met this requirement if it receives the minimum re-
quired rating from at least one such rating organization
even if it has been rated below the minimum rating by one or
more rating organizations. The Fund is not required to dis-
pose of portfolio securities downgraded below the ratings
noted above.
THE FUND WILL The Fund will normally maintain a dollar weighted average
NORMALLY life of between five and ten years. In computing the dollar
MAINTAIN AN weighted average life of the Fund's portfolio, the Invest-
AVERAGE LIFE OF ment Adviser will estimate the average life of each portfo-
BETWEEN FIVE lio security based upon anticipated prepayment patterns
AND TEN YEARS. which, in turn, are based upon past prepayment patterns,
prevailing interest rates and other factors. Due to actual
prepayment experience, however, the actual average life of a
security after purchase by the Fund may prove to be differ-
ent from its estimated average life. The average life of a
Mortgage-Backed Security is likely to be shorter than its
stated maturity.
The Fund may employ certain active management techniques
to hedge the interest rate risks associated with the Fund's
portfolio securities, to seek to enhance safety of principal
and to enhance its return. These techniques consist of
transactions in futures contracts and options contracts (in-
cluding options on futures), mortgage and interest rate
swaps and interest rate floors, caps and collars. The Fund
may attempt to enhance its return by utilizing portfolio se-
curities lending, mortgage dollar rolls, repurchase agree-
ments and other investments and practices described under
"Other Investments and Practices."
At the discretion of the Investment Adviser, the Fund may,
for temporary defensive purposes to preserve capital, hold
part or all of its assets in (a) cash, (b) cash equivalents,
such as certificates of deposit, commercial paper, time de-
posits and bankers' acceptances issued by a bank the
unsecured commercial paper of which is rated A-1+ by Stan-
dard & Poor's or P-1 by Moody's or
10
<PAGE>
(c) repurchase agreements collateralized by such instru-
ments. See "Other Investments and Practices -- Repurchase
Agreements" for a description of repurchase agreements.
OTHER INVESTMENT POLICIES
Except as otherwise stated under "Investment Restric-
tions," the Fund's investment objective and policies are not
fundamental and may be changed without a vote of sharehold-
ers. If there is a change in the Fund's investment objec-
tive, shareholders should consider whether the Fund remains
an appropriate investment in light of their then current fi-
nancial positions and needs.
An investment in shares of the Fund does not constitute a
complete investment program. Investors may wish to comple-
ment an investment in the Fund with other types of invest-
ments.
INVESTMENT ADVISER AND ADMINISTRATOR
THE FUND'S The Fund's investment adviser and administrator is Goldman
INVESTMENT Sachs Asset Management, a separate operating division of
ADVISER AND Goldman Sachs. The management services provided by the In-
ADMINISTRATOR vestment Adviser are subject to the general supervision of
IS GOLDMAN the Trust's Board of Trustees. Goldman Sachs Asset Manage-
SACHS ASSET ment and its affiliates serve a wide range of clients in-
MANAGEMENT. cluding private and public pension funds, endowments, foun-
dations, banks, thrifts, insurance companies, corporations,
and private investors and family groups.
Founded in 1869, Goldman Sachs is among the oldest and
largest investment banking firms in the United States.
Goldman Sachs is a leader in virtually every field of in-
vesting and financing, participating in financial markets
worldwide and serving individuals, institutions, corpora-
tions and governments. Goldman Sachs is headquartered in New
York and has offices throughout the United States and in
Beijing, Frankfurt, George Town, Hong Kong, London, Madrid,
Milan, Montreal, Osaka, Paris, Seoul, Shanghai, Singapore,
Sydney, Taipei, Tokyo, Toronto, Vancouver and Zurich.
The Investment Adviser is able to draw on the research and
market expertise of Goldman Sachs, whose investment research
effort is one of the largest in the industry. The in-depth
information and analyses generated by Goldman Sachs' re-
search analysts, economists and portfolio strategists are
constantly available to the Investment Adviser.
11
<PAGE>
DESCRIPTION OF PORTFOLIO SECURITIES
THE FUND WILL GOVERNMENT SECURITIES
INVEST
PRIMARILY IN The Fund invests primarily in securities issued or guaran-
SECURITIES teed as to principal and interest by the U.S. Government or
ISSUED OR its agencies, instrumentalities or sponsored enterprises
GUARANTEED AS ("Government Securities"). These securities in general in-
TO PRINCIPAL clude a variety of U.S. Treasury obligations, consisting of
AND INTEREST BY bills, notes and bonds, which principally differ only in
THE U.S. their interest rates, maturities and times of issuance, and
GOVERNMENT OR obligations issued or guaranteed by U.S. Government agen-
ITS AGENCIES, cies, instrumentalities or sponsored enterprises which are
INSTRUMENTALITIES supported by (a) the full faith and credit of the U.S. Trea-
OR SPONSORED sury (such as the Ginnie Mae Certificates described below),
ENTERPRISES. (b) the right of the issuer to borrow from the U.S. Treasury
(such as securities of the Student Loan Marketing Associa-
tion), (c) the discretionary authority of the U.S. Govern-
ment to purchase certain obligations of the issuer (such as
the Fannie Mae Certificates described below), 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. Gov-
ernment agencies, instrumentalities or sponsored enterprises
in the future.
Government Securities include (to the extent consistent
with the Investment Company Act) securities for which the
payment of principal and interest is backed by an irrevoca-
ble letter of credit issued by the U.S. Government, its
agencies or instrumentalities. Government Securities also
include (to the extent consistent with the Investment Com-
pany Act) participations in loans made to foreign govern-
ments or their agencies that are guaranteed as to principal
and interest by the U.S. Government or its agencies, instru-
mentalities or sponsored enterprises. The secondary market
for certain of these participations is extremely limited. In
the absence of a substantial secondary market, such partici-
pations are regarded as illiquid.
THE FUND MAY The Fund may invest in Treasury receipts, zero coupon
ALSO INVEST IN bonds and other "stripped" securities issued or guaranteed
TREASURY by the U.S. Government, where the principal and interest
RECEIPTS, ZERO components are traded independently under a program like the
COUPON BONDS Separate Trading of Registered Interest and Principal of Se-
AND OTHER curities program ("STRIPS") or other similar programs. Under
"STRIPPED" these programs, the principal and interest components are
SECURITIES. individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institu-
tions, which then trade the component parts independently.
ZERO COUPON BONDS
The Fund may invest in zero coupon securities issued by
financial institutions and corporations, zero coupon U.S.
Treasury securities (which are Treasury notes and bonds that
have been stripped of their unmatured interest coupons), the
coupons themselves and receipts or certificates representing
12
<PAGE>
interests in such stripped debt obligations. A zero coupon
security pays no interest to its holder during its life and
its value consists of the difference between its face value
at maturity and its cost. The market prices of zero coupon
securities generally are more volatile than market prices of
securities that pay interest periodically and are likely to
respond to a greater degree to changes in interest rates
than interest bearing securities having similar maturities
and credit qualities. The Fund's investments in zero coupon
securities or other stripped securities may require the Fund
to sell certain of its portfolio securities to generate suf-
ficient cash to satisfy certain income distribution require-
ments. See "Taxation" in the Additional Statement.
MORTGAGE-BACKED SECURITIES
Mortgage-Backed Securities are securities that directly or
indirectly represent participations in, or are collateral-
ized by and payable from, mortgage loans secured by real
property. Each mortgage pool underlying Mortgage-Backed Se-
curities will consist of mortgage loans evidenced by promis-
sory notes secured by first mortgages or first deeds of
trust or other similar security instruments creating a first
lien on owner occupied and non-owner occupied one-unit to
four-unit residential properties (consisting of, among other
things, detached residences, townhouses, individual condo-
minium units, duplexes, triplexes, fourplexes, and units in
planned unit developments), multifamily (i.e., five or more
units) residential properties, agricultural properties, com-
mercial properties and mixed use properties.
THE FUND MAY MORTGAGE PASS-THROUGH SECURITIES. The Fund may invest in
INVEST IN mortgage pass-through securities ("Mortgage Pass-Throughs"),
MORTGAGE PASS- which are fixed or adjustable rate Mortgage-Backed Securi-
THROUGH ties that provide for monthly payments that are a "pass-
SECURITIES. through" of the monthly interest and principal payments (in-
cluding any prepayments) made by the individual borrowers on
the pooled mortgage loans, net of any fees or other amounts
paid to any guarantor, administrator and/or servicer of the
underlying mortgage loans.
THE FUND MAY MULTIPLE CLASS MORTGAGE-BACKED SECURITIES AND COLLATERAL-
INVEST IN IZED MORTGAGE OBLIGATIONS. The Fund may invest in collater-
COLLATERALIZED alized mortgage obligations ("CMOs"), which are multiple
MORTGAGE class Mortgage-Backed Securities. CMOs provide an investor
OBLIGATIONS. with a specified interest in the cash flow from a pool of
underlying mortgages or of other Mortgage-Backed Securities.
CMOs are issued in multiple classes, each with a specified
fixed or floating interest rate and a final scheduled dis-
tribution date. In most cases, payments of principal are ap-
plied to the CMO classes in the order of their respective
stated maturities, so that no principal payments will be
made on a CMO class until all other classes having an ear-
lier stated maturity date are paid in full. Sometimes, how-
ever, CMO classes are "parallel pay" (i.e., payments of
principal are made to two or more classes concurrently). The
Fund's investments in CMOs may
13
<PAGE>
include Real Estate Mortgage Investment Conduit certificates
("REMIC Certificates"), which qualify for favorable tax
treatment.
THE FUND MAY STRIPPED MORTGAGE-BACKED SECURITIES. The Fund may also in-
INVEST IN vest in stripped Mortgage-Backed Securities ("SMBS"), which
STRIPPED are derivative multiple class Mortgage-Backed Securities.
MORTGAGE-BACKED SMBS are usually structured with two classes that receive
SECURITIES. different proportions of the interest and principal distri-
butions from a pool of mortgage loans. A common type of SMBS
will have one class receiving all of the interest from the
mortgage loans, while the other class will receive all of
the principal. However, in some instances, one class will
receive some of the interest and most of the principal while
the other class will receive most of the interest and the
remainder of the principal. If the underlying mort gage
loans experience different than anticipated prepayments of
principal, the Fund may fail to fully recoup its initial in-
vestment in these securities. Although the market for such
securities is increasingly liquid, the Investment Adviser,
in accordance with guidelines and standards adopted by the
Board of Trustees, may determine that certain interest-only
and principal-only Agency Mortgage-Backed Securities are not
readily marketable. If so, these securities will be consid-
ered illiquid for purposes of the Fund's limitation on in-
vestments in illiquid securities. The Investment Adviser
will seek to manage prepayment risk, liquidity concerns re-
lating to privately issued SMBS and certain other risks (and
potential benefits) by investing in a variety of such secu-
rities and by using certain hedging techniques. See "Other
Investments and Practices."
THE FUND MAY INVERSE FLOATING RATE MORTGAGE-BACKED SECURITIES. The Fund
INVEST IN may invest in inverse floating rate Mortgage-Backed Securi-
INVERSE ties, including "leveraged inverse floaters." Typically, an
FLOATING RATE inverse floater is one of two components created from a pool
MORTGAGE-BACKED of fixed rate mortgages. The other component is a floating
SECURITIES. rate Mortgage-Backed Security in which the rate of interest
payable varies directly with a market interest rate index.
The interest rate on an inverse floater resets in the oppo-
site direction from the market rate of interest to which the
inverse floater is indexed. An inverse floater may be con-
sidered to be leveraged to the extent that its interest rate
varies by a magnitude that exceeds the magnitude of the
change in the index rate of interest. The higher the degree
of leverage of an inverse floater, the greater the volatil-
ity of its market value.
THE FUND MAY AGENCY MORTGAGE SECURITIES. The Fund may invest in Mort-
INVEST IN gage-Backed Securities issued or guaranteed by the U.S. Gov-
AGENCY MORTGAGE ernment or any of its agencies, instrumentalities or spon-
SECURITIES. sored enterprises, including but not limited to the Govern-
ment National Mortgage Association (" Ginnie Mae"), the Fed-
eral National Mortgage Association ("Fannie Mae") and the
Federal Home Loan Mortgage Corporation ("Freddie Mac") (col-
lectively, "Agency Mortgage Securities"). Ginnie Mae securi-
ties are backed by the full faith and credit of the U.S.
Government, which means that the U.S. Government guarantees
that
14
<PAGE>
the interest and principal will be paid when due. Fannie Mae
securities and Freddie Mac securities are not backed by the
full faith and credit of the U.S. Government; however, these
enterprises have the ability to obtain financing from the
U.S. Treasury. There are several types of Agency Mortgage
Securities currently available, including, but not limited
to, guaranteed mortgage pass-through certificates and multi-
ple class securities, which include guaranteed REMIC Certif-
icates and SMBS's.
THE FUND MAY PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Fund may
INVEST IN also invest in Mortgage-Backed Securities issued by trusts
PRIVATELY or other entities formed or sponsored by private originators
ISSUED of and institutional investors in mortgage loans and other
MORTGAGE- non-governmental entities (or representing custodial ar-
BACKED rangements administered by such institutions). These private
SECURITIES. originators and insti tutions include savings and loan asso-
ciations, mortgage bankers, commercial banks, insurance com-
panies, investment banks and special purpose subsidiaries of
the foregoing.
Privately issued Mortgage-Backed Securities are generally
backed by pools of conventional (i.e., non-government guar-
anteed or insured) mortgage loans. Since such Mortgage-
Backed Securities normally are not guaranteed by an entity
having the credit standing of Ginnie Mae, Fannie Mae or
Freddie Mac, in order to receive a high quality rating from
the rating organizations (i.e., Standard & Poor's or
Moody's), they normally are structured with one or more
types of "credit enhancement".
YIELD, MARKET VALUE AND RISK CONSIDERATIONS OF MORTGAGE-
BACKED SECURITIES. The Fund may invest in certain Mortgage-
Backed Securities, such as interest-only and principal-only
SMBS, that are extremely sensitive to changes in prepayment
and interest rates. Even though such securities may be is-
sued or guaranteed by an agency, instrumentality or spon-
sored enterprise of the U.S. Government, under certain in-
terest rate or prepayment rate scenarios, the Fund may fail
to fully recover its investment in such securities.
The investment characteristics of Mortgage-Backed Securi-
ties differ from those of traditional fixed income securi-
ties. The major differences include the payment of interest
and principal on Mortgage-Backed Securities on a more fre-
quent (usually monthly) schedule, and the possibility that
principal may be prepaid at any time due to unscheduled pre-
payments, which can generally be made without penalty, on
the underlying mortgage loans or other assets. Prepayment
rates are influenced by changes in current interest rates
and a variety of economic, geographic, social and other fac-
tors and cannot be predicted with certainty. As with fixed
rate mortgage loans, adjustable rate mortgage loans may be
subject to a greater prepayment rate in a declining interest
rate environment. In a fluctuating interest rate environ-
ment, a predominant factor affecting the prepayment rate on
a pool of mortgage loans is the difference
15
<PAGE>
between the interest rates on the mortgage loans and pre-
vailing mortgage loan interest rates (giving consideration
to the cost of any refinancing). Other factors affecting
prepayment of mortgages include changes in mortgagors' hous-
ing needs, job transfers, unemployment, mortgagors' net eq-
uity in the mortgaged properties and servicing decisions.
The Fund's reinvestment of principal payments and prepay-
ments received on a Mortgage-Backed Security may be made at
rates higher or lower than the rate payable on such securi-
ty, thus affecting the return realized by the Fund. In addi-
tion, the receipt of interest payments monthly rather than
semi-annually by the Fund has a compounding effect that may
increase the yield to the Fund relative to debt obligations
that pay interest semi-annually. Due to these factors, Mort-
gage-Backed Securities may also be less effective than U.S.
Treasury securities of similar maturity at maintaining
yields during periods of changing interest rates. Prepay-
ments may have a disproportionate effect on certain multiple
class Mortgage-Backed Securities and certain other Mortgage-
Backed Securities.
RISKS ASSOCIATED WITH DERIVATIVE MORTGAGE-BACKED SECURI-
TIES. Derivative Mortgage-Backed Securities are subject to
different combinations of interest rate and/or prepayment
risk. In addition, particular derivative securities may also
be leveraged such that their exposure (i.e., price sensitiv-
ity) to interest rate and/or prepayment risk is magnified.
The Investment Adviser may use derivative Mortgage Backed
Securities and other derivative securities consist ently
with the Fund's investment objective for a variety of pur-
poses including adjusting the average duration or interest
rate sensitivity of the Fund's portfolio. The Investment Ad-
viser manages the risks and benefits of derivative Mortgage
Backed Securities and other derivative securities by prudent
analysis, selection and monitoring of such securities in-
cluded in the Fund's portfolio.
The risk of faster than anticipated prepayments generally
adversely affects interest-only securities (IOs), super
floaters and premium priced Mortgage-Backed Securities. The
risk of slower than anticipated prepayments generally ad-
versely affects principal-only securities (POs), floating
rate securities subject to interest rate caps, floors and
collars, support tranches and discount priced Mortgage-
Backed Securities.
RISKS ASSOCIATED WITH OTHER DERIVATIVE FLOATING RATE SECU-
RITIES. Other types of floating rate derivative debt securi-
ties present more complex types of interest rate risks. For
example, range floaters are subject to the risk that the
coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate
band or collar. Dual index or yield curve floaters are sub-
ject to lower prices in the event of an unfavorable change
in the spread between two designated interest rates.
16
<PAGE>
THE FUND MAY ASSET-BACKED SECURITIES
INVEST IN
ASSET- BACKED The Fund may invest in asset-backed securities, which rep-
SECURITIES. resent 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 re-
volving credit (credit card) agreements and other categories
of receivables. Such asset pools are securitized through the
use of privately-formed trusts or special purpose corpora-
tions. 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 unaffiliated with the
trust or corporation, or other credit enhancements may be
present. Asset-backed securities present certain risks that
are not presented by Mortgage-Backed Securities because as-
set-backed securities generally do not have the benefit of a
security interest in collateral that is comparable to mort-
gage assets.
THE FUND MAY CORPORATE DEBT OBLIGATIONS
INVEST IN
CORPORATE DEBT The Fund may invest in corporate debt obligations that are
OBLIGATIONS. rated, at the time of investment, AAA by Standard & Poor's
or Aaa by Moody's or equivalent short-term credit quality
ratings or, if unrated by such rating organizations, deter-
mined by the Investment Adviser to be of comparable quality.
In addition to obligations of corporations, corporate debt
obligations include bank obligations and zero coupon securi-
ties issued by financial institutions and corporations. Cor-
porate debt obligations are subject to the risk of an is-
suer's inability to meet principal and interest payments on
the obligations, and may also be subject to price volatility
due to such factors as market interest rates, market percep-
tion of the creditworthiness of the issuer and general mar-
ket liquidity.
OTHER INVESTMENTS AND PRACTICES
THE FUND MAY INTEREST RATE SWAPS, MORTGAGE SWAPS, CAPS, FLOORS AND
ENTER INTO COLLARS. In order to hedge against fluctuations in interest
INTEREST RATE rates and to seek to increase total return, the Fund may en-
AND MORTGAGE ter into interest rate swaps and mortgage swaps. The Fund
SWAPS AND may also enter into other types of interest rate swap ar-
INTEREST RATE rangements such as caps, floors and collars. Interest rate
CAPS, FLOORS swaps involve the exchange by the Fund with another party of
AND COLLARS. their respective commitments to pay or receive interest,
such as an exchange of fixed rate payments for floating rate
payments. Mortgage swaps are similar to interest rate swaps
in that they represent commitments to pay and receive inter-
est. The notional principal amount, however, is tied to a
reference pool or pools of mortgages. The purchase of an in-
terest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to
receive payment of interest on a notional principal amount
from the party selling such interest rate cap. The
17
<PAGE>
purchase of an interest rate floor entitles the purchaser,
to the extent that a specified index falls below a predeter-
mined interest rate, to receive payments of interest on a
notional principal amount from the party selling the inter-
est rate floor. An interest rate collar is the combination
of a cap and a floor that preserves a certain return within
a predetermined range of interest rates. Since interest rate
swaps, mortgage swaps, and interest rate caps and floors are
individually negotiated, the Fund expects to achieve an ac-
ceptable degree of correlation between its portfolio invest-
ments and its swap, cap, floor and collar positions entered
into for hedging purposes.
The Fund will enter into interest rate swaps and mortgage
swaps only on a net basis, which means that the two payment
streams are netted out, with the Fund receiving or paying,
as the case may be, only the net amount of the two payments.
Interest rate swaps and mortgage swaps do not involve the
delivery of securities, other underlying assets or princi-
pal. Accordingly, the risk of loss with respect to interest
rate swaps and mortgage swaps is limited to the net amount
of interest payments that the Fund is contractually obli-
gated to make. If the other party to an interest rate swap
or mortgage swap defaults, the Fund's risk of loss consists
of the net amount of interest payments that the Fund is con-
tractually entitled to receive, if any. The Fund will main-
tain in a segregated account with its custodian cash and
liquid, high grade debt securities equal to the net amount,
if any, of the excess of the Fund's obligations over its en-
titlements with respect to swap transactions. To the extent
that the net amount of a swap is held in a segregated ac-
count consisting of cash and liquid, high grade debt securi-
ties, the Fund and the Investment Adviser believe that swaps
do not constitute senior securities under the Investment
Company Act and, accordingly, will not treat them as being
subject to the Fund's borrowing restriction.
The Fund will not enter into interest rate or mortgage
swap, or interest rate cap, floor or collar transactions un-
less the unsecured commercial paper, senior debt or claims
paying ability of the other party is rated either AA or A-1
or better by Standard & Poor's or Aa or P-1 or better by
Moody's or, if unrated by such rating organizations, deter-
mined to be of comparable quality by the Investment Adviser.
The use of interest rate swaps, mortgage swaps, and inter-
est rate caps, floors and collars is a highly specialized
activity which involves investment techniques and risks dif-
ferent from those associated with ordinary portfolio securi-
ties transactions. If the Investment Adviser is incorrect in
its forecasts of market values and interest rates, the in-
vestment performance of the Fund would be less favorable
than it would have been if these investment techniques were
not used. The staff of the SEC currently takes the position
that swaps, caps, floors and collars are illiquid and thus
subject to the Fund's 15% limitation on illiquid securities.
18
<PAGE>
THE FUND MAY OPTIONS ON SECURITIES AND SECURITIES INDICES. The Fund may
PURCHASE AND write (sell) covered call and put options on any securities
WRITE (SELL) in which it may invest. The Fund may also write call and put
OPTIONS ON options on any securities index composed of securities in
SECURITIES AND which it may invest. The Fund may write and purchase op-
SECURITIES tions, referred to as "yield curve options," on the yield
INDICES. differential between two securities. In addition, the Fund
may purchase put and call options on any securities in which
it may invest or options on any securities index composed of
securities in which it may invest.
The writing and purchase of options is a highly special-
ized activity which involves investment techniques and risks
different from those associated with ordinary portfolio se-
curities transactions. The use of options to increase total
return involves the risk of loss if the Investment Adviser
is incorrect in its expectations of fluctuations in securi-
ties prices or interest rates. The successful use of options
for hedging purposes depends in part on the Investment Ad-
viser's ability to predict future price fluctuations and the
degree of correlation between the options and securities
markets. If the Investment Adviser is incorrect in its de-
termination of the correlation between the securities indi-
ces on which options are written and purchased and the secu-
rities in the Fund's investment portfolio or, with respect
to yield curve options, of the direction or the extent of
the movement of the yield differential, the investment per-
formance of the Fund will be less favorable than it would
have been in the absence of such options transactions. The
writing of options could significantly increase the Fund's
portfolio turnover rate and, therefore, associated brokerage
commissions or spreads.
THE FUND MAY FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. To
ENGAGE IN hedge against changes in interest rates or securities prices
FUTURES or to seek to increase total return, the Fund may purchase
TRANSACTIONS. and sell various kinds of futures contracts, and purchase
and write call and put options on any of such futures con-
tracts. The Fund may also enter into closing purchase and
sale transactions with respect to any of such contracts and
options. The futures contracts may be based on various secu-
rities (such as Government Securities), securities indices
and other financial instruments and indices. The Fund will
engage in futures and related options transactions only for
bona fide hedging purposes as defined in regulations of the
Commodity Futures Trading Commission or to seek to increase
total return to the extent permitted by such regulations.
The Fund may not purchase or sell futures contracts or
purchase or sell related options to increase total return,
except for closing purchase or sale transactions, if immedi-
ately thereafter the sum of the amount of initial margin de-
posits and premiums paid on the Fund's outstanding positions
in futures and related options entered into for the purpose
of seeking to increase total return would exceed 5% of the
market value of the Fund's net assets. Transactions in
futures contracts and options on futures involve brokerage
costs,
19
<PAGE>
require margin deposits and, in the case of contracts and
options obligating the Fund to purchase securities, require
the Fund to segregate cash or liquid, high-grade debt secu-
rities with a value equal the amount of the Fund's
obligations.
While transactions in futures contracts and options on
futures may reduce certain risks, such transactions them-
selves entail certain other risks. See "Investment Objec-
tives and Policies--Futures Contracts and Options on Futures
Contracts" in the Additional Statement. Thus, while the Fund
may benefit from the use of futures and options on futures,
unanticipated changes in interest rates or securities prices
may result in a poorer overall performance for the Fund than
if it had not entered into any futures contracts or options
transactions. The loss incurred by the Fund in writing op-
tions on futures is potentially unlimited and may exceed the
amount of the premium received.
The use of futures may increase the volatility of the
Fund's net asset value. The profitability of the Fund's
trading in futures to increase total return will depend on
the Investment Adviser's ability to correctly analyze the
futures markets. In addition, because of the low margin de-
posits normally required in futures trading, a relatively
small price movement in a futures contract may result in
substantial losses to the Fund. Further, futures trading may
be illiquid, and exchanges may limit fluctuations in futures
contract prices during a single day.
In the event of an imperfect correlation between a futures
position and a portfolio position which is intended to be
protected, the desired protection may not be obtained and
the Fund may be exposed to risk of loss. Perfect correlation
between the Fund's futures positions and portfolio positions
will be impossible to achieve. The Fund's transactions in
options and futures contracts may be limited by the require-
ments of the Internal Revenue Code of 1986, as amended (the
"Code'), for qualification as a regulated investment compa-
ny.
RISKS OF DERIVATIVE TRANSACTIONS. The Fund's transactions
in interest rate and mortgage swaps, interest rate caps,
floors and collars, options, futures and options on futures
involve certain risks, including a possible lack of correla-
tion between changes in the value of hedging instruments and
the portfolio assets being hedged, the potential illiquidity
of the markets for derivative instruments, the risks arising
from the margin requirements and related leverage factors
associated with such transactions. The use of these manage-
ment techniques to seek to increase total return also in-
volves the risk of loss if the Investment Adviser is incor-
rect in its expectation of fluctuations in securities prices
or interest rates.
THE FUND MAY REPURCHASE AGREEMENTS
ENTER INTO
REPURCHASE The Fund may enter into repurchase agreements with dealers
AGREEMENTS. in Government Securities and member banks of the Federal Re-
serve System which furnish collateral at least equal in
value or market price to the amount of their
20
<PAGE>
repurchase obligation. In a repurchase agreement, the Fund
purchases a debt security from a seller which undertakes to
repurchase the security at a specified resale price on an
agreed future date (ordinarily a week or less). The resale
price generally exceeds the purchase price by an amount
which reflects an agreed-upon market interest rate for the
term of the repurchase agreement. The primary risk is that,
if the seller defaults, the Fund might suffer a loss to the
extent that the proceeds from the sale of the underlying se-
curities and other collateral held by the Fund in connection
with the related repurchase agreement are less than the re-
purchase price. Repurchase agreements maturing in more than
seven days are considered by the Fund to be illiquid. In ad-
dition, the Fund, together with other registered investment
companies having advisory agreements with the Investment Ad-
viser 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.
THE FUND MAY LENDING OF PORTFOLIO SECURITIES
EARN ADDITIONAL
INCOME BY The Fund may seek to increase its income by lending port-
LENDING folio securities. Under present regulatory policies, such
PORTFOLIO loans may be made to institutions, such as broker-dealers,
SECURITIES. and are required to be secured continuously by collateral in
cash, cash equivalents, or U.S. Government Securities main-
tained on a current basis in an amount at least equal to the
market value of the securities loaned. Cash collateral may
be invested in cash equivalents. If the Investment Adviser
determines to make securities loans, the value of the secu-
rities loaned may not exceed 33 1/3% of the value of the to-
tal assets of the Fund. See "Investment Restrictions" in the
Additional Statement. The Fund may experience a loss or de-
lay in the recovery of its securities if the institution
with which it has engaged in a portfolio loan transaction
breaches its agreement with the Fund.
THE FUND MAY RESTRICTED AND ILLIQUID SECURITIES
INVEST IN
RESTRICTED The Fund may purchase securities that are not registered
SECURITIES ON A or are offered in an exempt non-public offering ("restricted
LIMITED BASIS. securities") under the Securities Act of 1933, as amended
("1933 Act"), including securities eligible for resale to
"qualified institutional buyers" under Rule 144A under the
1933 Act. However, the Fund will not invest more than 15% of
its net assets in illiquid investments, which includes re-
purchase agreements maturing in more than seven days, time
deposits with a notice or demand period of more than seven
days, privately issued SMBS, certain over-the-counter op-
tions, all interest rate and mortgage swaps, interest rate
caps, floors and collars, securities that are not readily
marketable and restricted securities, unless the Board of
Trustees of the Trust determines, based upon a continuing
review of the trading markets for the specific restricted
security, that such restricted security eligible for sale
21
<PAGE>
under Rule 144A is liquid. The Board of Trustees may adopt
guidelines and delegate to the Investment Adviser the daily
function of determining and monitoring the liquidity of re-
stricted 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 exactly how this market for restricted secu-
rities sold and offered under Rule 144A will develop, the
Board of Trustees will carefully monitor the Fund's invest-
ments in these securities, focusing on such important fac-
tors, among others, as valuation, liquidity and availability
of information. This investment practice could have the ef-
fect of increasing the level of illiquidity in the Fund to
the extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted securities.
The purchase price and subsequent valuation of restricted
securities normally reflect a discount from the price at
which such securities trade when they are not restricted,
since the restriction makes them less liquid. The amount of
the discount from the prevailing market price is expected to
vary depending upon the type of security, the character of
the issuer, the party who will bear the expenses of regis-
tering the restricted securities and prevailing supply and
demand conditions.
THE FUND MAY MORTGAGE DOLLAR ROLLS
ENTER INTO
MORTGAGE DOLLAR The Fund may enter into mortgage "dollar rolls" in which
ROLLS. the Fund sells securities for delivery in the current month
and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity) but not
identical securities on a specified future date. During the
roll period, the Fund loses the right to receive principal
and interest paid on the securities sold. However, the Fund
would benefit to the extent of any difference between the
price received for the securities sold and the lower forward
price for the future purchase (often referred to as the
"drop") or fee income plus the interest earned on the cash
proceeds of the securities sold until the settlement date of
the forward purchase. Unless such benefits exceed the in-
come, capital appreciation and gain or loss due to mortgage
prepayments that would have been realized on the securities
sold as part of the mortgage dollar roll, the use of this
technique will diminish the investment performance of the
Fund compared with what such performance would have been
without the use of mortgage dollar rolls. All cash proceeds
will be invested in instruments that are permissible invest-
ments for the Fund. The Fund will hold and maintain in a
segregated account until the settlement date cash or liquid,
high grade debt securities in an amount equal to the forward
purchase price.
For financial reporting and tax purposes, the Fund treats
mortgage dollar rolls as two separate transactions; one in-
volving the purchase of a security and a separate transac-
tion involving a sale. The Fund does not currently intend to
enter into mortgage dollar rolls that are accounted for as a
financing.
22
<PAGE>
Mortgage dollar rolls involve certain risks including the
following: If the broker-dealer to whom the Fund sells the
security becomes insolvent, the Fund's right to purchase or
repurchase the mortgage-related securities subject to the
mortgage dollar roll may be restricted and the instrument
which the Fund is required to repurchase may be worth less
than an instrument which the Fund originally held. Success-
ful use of mortgage dollar rolls will depend upon the In-
vestment Adviser's ability to manage its interest rate and
mortgage prepayment exposure. For these reasons, there is no
assurance that mortgage dollar rolls can be successfully em-
ployed.
THE FUND MAY WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
PURCHASE WHEN-
ISSUED The Fund may purchase securities on a when-issued basis.
SECURITIES AND When-issued transactions arise when securities are purchased
ENTER INTO by the Fund with payment and delivery taking place in the
FORWARD future in order to secure what is considered to be an advan-
COMMITMENT tageous price and yield to the Fund at the time of entering
TRANSACTIONS. into the transaction. The Fund may also purchase securities
on a forward commitment basis. In a forward commitment
transaction, the Fund contracts to purchase securities for a
fixed price at a future date beyond customary settlement
time. The Fund is required to hold and maintain in a segre-
gated account until the settlement date, cash or liquid,
high grade debt obligations in an amount sufficient to meet
the purchase price. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securi-
ties that it owns. The purchase of securities on a when-is-
sued or forward commitment basis involves a risk of loss if
the value of the security to be purchased declines prior to
the settlement date. Although the Fund will generally pur-
chase securities on a when-issued or forward commitment ba-
sis with the intention of actually acquiring securities for
its portfolio, the Fund may dispose of a when-issued secu-
rity or forward commitment prior to settlement if the In-
vestment Adviser deems it appropriate to do so.
THE FUND MAY OTHER INVESTMENT COMPANIES
INVEST IN THE
SECURITIES OF The Fund reserves the right to invest up to 10% of its to-
OTHER tal assets, calculated at the time of purchase, in the secu-
INVESTMENT rities of other investment companies including business de-
COMPANIES. velopment companies and small business investment companies.
The Fund may not invest more than 5% of its total assets in
the securities of any one investment company or acquire more
than 3% of the voting securities of any other investment
company. Pursuant to an exemptive order obtained from the
SEC, other investment companies in which the Fund may invest
include money market funds for which the Investment Adviser
or any of its affiliates serves as investment adviser. The
Fund will indirectly bear its proportionate share of any
management fees and other expenses paid by investment compa-
nies in which it invests in addition to the fees paid by the
Fund. However, to the extent that the Fund invests in a
money market fund for
23
<PAGE>
which the Investment Adviser or any of its affiliates acts
as adviser, the advisory and administration fees payable by
the Fund to the Investment Adviser will be reduced by an
amount equal to the Fund's proportionate share of the advi-
sory and administration fees paid by such money market fund
to the Investment Adviser or any of its affiliates.
OTHER RISK FACTORS
An investment in the Fund presents certain risk factors,
in addition to those described above, including the follow-
ing:
NET ASSET VALUE VOLATILITY. The net asset value of the
Fund's shares will change with changes in the value of its
portfolio securities. While the U.S. Government or its agen-
cies, instrumentalities or sponsored enterprises may guaran-
tee the payment of principal of and income on certain Gov-
ernment Securities in the Fund's portfolio, neither the U.S.
Government or its agencies, instrumentalities or sponsored
enterprises guarantees either the Fund's net asset value per
share or its yield. The net asset value of the shares of the
Fund can be expected to change as general levels of interest
rates fluctuate. Volatility may be greater during periods of
general economic uncertainty and interest rate fluctuation.
The securities in the Fund's portfolio will tend to de-
crease in value when interest rates rise and increase in
value when interest rates fall (although, as discussed
above, Mortgage-Backed Securities will generally have less
potential for capital appreciation during periods of declin-
ing rates than other securities). Because the Fund's invest-
ments are interest rate sensitive, the Fund's performance
will depend in large part upon the ability of the Fund to
anticipate and respond to fluctuations in market interest
rates and to utilize the hedging and other active management
techniques described above to maximize returns to the Fund,
while attempting to enhance safety of principal. However,
each of these techniques involves risks described above that
could adversely affect the Fund's net asset value. Operating
results will also depend upon opportunities for the invest-
ment of the Fund's assets, including the availability of
suitable securities.
A lesser degree of flexibility concerning the timing of a
redemption of the Fund's shares increases the likelihood
that the investor will be required to redeem the Fund's
shares under unfavorable market conditions. If shares are
redeemed at a price that is less than the price at which the
shares were purchased, the investor will experience a loss
of principal.
DEFAULT RISK. Certain types of Government Securities, such
as U.S. Treasury bonds, notes, and bills and agency securi-
ties issued by the General Services Administration, are
backed by the full faith and credit of the United States
Government as to repayment of principal and interest. Howev-
er, a sub-
24
<PAGE>
stantial portion of the Fund's portfolio may be invested in
securities issued or guaranteed by U.S. Government agencies,
instrumentalities (such as executive departments of the U.S.
Government), or sponsored enterprises (such as independent
federal organizations supervised by Congress) that have dif-
ferent degrees of government backing without being backed by
the full faith and credit of the U.S. Government. According-
ly, these securities may involve a risk of non-payment of
principal and interest.
In addition, up to 35% of the Fund's total assets may be
invested in securities other than Government Securities,
such as non-governmental Mortgage-Backed Securities, asset-
backed securities, or corporate securities, which also in-
volve a risk of non-payment of principal and interest. In
order to reduce the likelihood of non-payment of principal
or interest on securities purchased by the Fund, the Fund
will only invest in such securities if they are rated, at
the time of investment, AAA by Standard & Poor's or Aaa by
Moody's or equivalent short-term credit quality ratings or,
if unrated by such rating organizations, determined to be of
comparable quality by the Investment Adviser.
INVESTMENT RESTRICTIONS
CERTAIN OF THE The Fund is subject to certain investment restrictions
FUND'S which, as described in more detail in the Additional State-
INVESTMENT ment, are fundamental policies that cannot be changed with-
RESTRICTIONS out the approval of a majority of the outstanding shares of
CAN BE CHANGED the Fund. Among other restrictions, as a diversified fund,
ONLY BY the Fund may not, with respect to 75% of its total assets,
SHAREHOLDER purchase securities of any one issuer (other than securities
VOTE. issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if more than 5% of its total assets would
be invested in such issuer. The Fund will limit its invest-
ments so that less than 25% of the Fund's total assets will
be invested in the securities (other than Government Securi-
ties) of issuers in any one industry. The Fund may not bor-
row money, except from banks for temporary or short-term
purposes, in connection with redemptions and failed settle-
ments and to finance certain additional purchases of securi-
ties, provided that the Fund maintains asset coverage of at
least 300% for all such borrowings. As a matter of non-fun-
damental policy, the Fund may not purchase securities while
such borrowing exceeds 5% of the value of the Fund's assets.
For a more complete description of the investment restric-
tions to which the Fund is subject, see the Additional
Statement.
PORTFOLIO TURNOVER
THE FUND MAY The Fund may engage in active short-term trading to bene-
ENGAGE IN fit from yield disparities among different issues of Govern-
ACTIVE TRADING. ment Securities and Mortgage-Backed Securities, to seek
short-term profits during periods of fluctuating interest
rates or for other reasons. Such trading will increase the
Fund's portfolio
25
<PAGE>
turnover rate and may increase the incidence of short-term
capital gain (distributions of which are taxable to share-
holders as ordinary income). A high rate of portfolio turn-
over (100% or higher) involves correspondingly greater ex-
penses which must be borne by the Fund and its shareholders
and may under certain circumstances make it more difficult
for the Fund to qualify as a regulated investment company
under the Code. The portfolio turnover rate is calculated by
dividing the lesser of sales or purchases of portfolio secu-
rities by the average monthly value of the Fund's portfolio
securities, excluding securities having a maturity at the
date of purchase of one year or less. The portfolio turnover
rate includes the effect of entering into mortgage "dollar
rolls."
MANAGEMENT
THE TRUSTEES TRUSTEES AND OFFICERS
ARE RESPONSIBLE
FOR THE OVERALL The Trust's Board of Trustees is responsible for deciding
MANAGEMENT AND matters of general policy and reviewing the actions of the
SUPERVISION OF Investment Adviser, administrator, distributor and transfer
THE FUND'S agent. The officers of the Trust conduct and supervise the
BUSINESS. Fund's daily business operations. The Additional Statement
contains information as to the identity of, and other infor-
mation about, the Trustees and officers of the Trust.
GOLDMAN SACHS INVESTMENT ADVISER AND ADMINISTRATOR
ASSET
MANAGEMENT, INVESTMENT ADVISER. Goldman Sachs Asset Management, One
ACTING UNDER New York Plaza, New York, New York 10004, a separate operat-
THE SUPERVISION ing division of Goldman Sachs, acts as the investment ad-
OF THE viser and administrator of the Fund. Goldman Sachs regis-
TRUSTEES, tered as an investment adviser in 1981. As of January 31,
MANAGES THE 1995, Goldman Sachs Asset Management, together with its af-
FUND'S filiates, acted as investment adviser, administrator or dis-
INVESTMENTS. tributor for approximately $48.7 billion in assets.
Under its Investment Advisory Agreement with the Fund,
Goldman Sachs Asset Management, subject to general supervi-
sion by the Trust's Board of Trustees, manages the Fund's
portfolio. Goldman Sachs has agreed to permit the Trust to
use the name "Goldman Sachs" or a derivative thereof as part
of the Fund's name for as long as the Investment Advisory
Agreement is in effect.
The Fund's portfolio managers are Jonathan A. Beinner,
Richard C. Lucy and Theodore T. Sotir. Messrs. Beinner and
Lucy each specialize in investing in a particular type of
security the Fund may hold. Mr. Sotir helps with overall
portfolio strategy and is a member of the Investment Advis-
er's risk control team. Mr. Beinner is a Vice President of
Goldman Sachs and joined the Investment Adviser in 1990 af-
ter working in the trading and arbitrage group of Franklin
Savings Association. Mr. Lucy is a Vice President of Goldman
Sachs and joined the Investment Adviser in 1992 after spend-
ing nine years managing
26
<PAGE>
fixed income assets at Brown Brothers Harriman & Co. Mr.
Sotir is a Vice President of Goldman Sachs and joined the
Investment Adviser in 1993 after working as a portfolio man-
ager at Fidelity Management Trust Company. Prior to joining
Fidelity, Mr. Sotir worked for Goldman Sachs in the mortgage
securities department for six years.
It is the responsibility of the Investment Adviser to make
investment decisions for the Fund and to place the purchase
and sale orders for the Fund's portfolio transactions. Such
orders may be directed to any broker including, to the ex-
tent and in the manner permitted by applicable law, Goldman
Sachs or its affiliates.
THE FUND PAYS As compensation for the services rendered to the Fund by
GOLDMAN SACHS Goldman Sachs Asset Management pursuant to the Investment
ASSET Advisory Agreement and the assumption by Goldman Sachs Asset
MANAGEMENT AN Management of the related expenses, the Fund pays Goldman
ADVISORY FEE AT Sachs Asset Management a fee, computed daily and payable
AN ANNUAL RATE monthly, at an annual rate equal to 0.50% of the Fund's av-
EQUAL TO 0.50% erage daily net assets. For the fiscal year ended October
OF AVERAGE 31, 1994, Goldman Sachs Asset Management voluntarily agreed
DAILY NET not to impose its investment advisory fee and reimbursed all
ASSETS. Fund expenses. Goldman Sachs Asset Management has voluntar-
ily agreed to reduce or limit certain "Other Expenses" of
the Fund (excluding advisory, administration and distribu-
tion and service fees, taxes, interest and brokerage and
litigation, indemnification and other extraordinary ex-
penses) to the extent such expenses exceed 0.30% per annum
of the Fund's average daily net assets. Such reductions or
limits, if any, are calculated monthly on a cumulative basis
and may be discontinued or modified by Goldman Sachs Asset
Management at its discretion at any time. Goldman Sachs As-
set Management has voluntarily agreed to reduce the fees
payable to it (to the extent of its fees) by the amount that
the Fund's expenses would exceed the applicable expense lim-
itations imposed by state securities administrators. See
"Management -- Expenses" in the Additional Statement.
ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER
ACCOUNTS MANAGED BY GOLDMAN SACHS. The involvement of the
Investment Adviser and Goldman Sachs and their affiliates in
the management of, or their interest in, other accounts and
other activities of Goldman Sachs may present conflicts of
interest with respect to the Fund or limit its investment
activities. Goldman Sachs and its affiliates engage in pro-
prietary trading and advise accounts and funds which have
investment objectives similar to those of the Fund and/or
which engage in and compete for transactions in the same
types of securities and instruments as the Fund. Goldman
Sachs and its affiliates will not have any obligation to
make available any information regarding their proprietary
activities or strategies, or the activities or strategies
used for other accounts managed by them, for the benefit of
the management of the Fund and it is not anticipated that
the Investment Adviser will have access to proprietary infor-
27
<PAGE>
mation for the purpose of managing the Fund. The results of
the Fund's investment activities, therefore, may differ from
those of Goldman Sachs and its affiliates and it is possible
that the Fund could sustain losses during periods in which
Goldman Sachs and its affiliates and other accounts achieve
significant profits on their trading for proprietary or
other accounts. From time to time, the Fund's activities may
be limited because of regulatory restrictions applicable to
Goldman Sachs and its affiliates, and/or their internal pol-
icies designed to comply with such restrictions. See "Activ-
ities of Goldman Sachs and its Affiliates and Other Accounts
Managed by Goldman Sachs" in the Additional Statement for
further information.
THE FUND PAYS ADMINISTRATOR. As administrator, pursuant to an Adminis-
GOLDMAN SACHS tration Agreement with the Fund, Goldman Sachs Asset Manage-
ASSET ment provides personnel for supervisory, administrative, and
MANAGEMENT AN clerical functions; oversees the performance of administra-
ADMINISTRATION tive and professional services to the Fund by others; pro-
FEE AT AN vides office facilities; and prepares, but does not pay for,
ANNUAL RATE reports to shareholders, the SEC and other regulatory au-
EQUAL TO 0.15% thorities. As compensation for the services rendered to the
OF AVERAGE Fund by Goldman Sachs Asset Management pursuant to the Ad-
DAILY NET ministration Agreement, the Fund pays Goldman Sachs Asset
ASSETS. Management a fee, computed daily and payable monthly, at an
annual rate equal to 0.15% of the Fund's average daily net
assets. For the fiscal year ended October 31, 1994, Goldman
Sachs Asset Management voluntarily did not impose its admin-
istration fee. Goldman Sachs Asset Management has agreed to
reduce its fees payable (to the extent of its fees) by the
amount (if any) that the Fund's expenses exceed the applica-
ble expense limitations imposed by state securities adminis-
trators. See "Management -- Expenses" in the Additional
Statement.
Goldman Sachs may from time to time, at its own expense,
provide compensation to certain Authorized Dealers for per-
forming administrative services for their customers. These
services include maintaining account records, processing or-
ders to purchase, redeem and exchange Fund shares and re-
sponding to certain customer inquiries. The amount of such
compensation may be up to .125% annually of the average
daily net assets of the Fund attributable to shares held by
customers of such Authorized Dealers. In addition, Goldman
Sachs may from time to time, at its own expense, provide
compensation to certain Authorized Dealers who perform ad-
ministrative services with respect to depository institu-
tions whose customers purchase shares of the Fund. These
services include responding to certain inquiries from and
providing written materials to depository institutions about
the Fund; furnishing advice about and assisting depository
institutions in obtaining from state regulatory agencies any
rulings, exemptions or other authorizations that may be re-
quired to conduct a mutual fund sales program; acting as li-
aison between depository institutions and national regula-
tory organizations; assisting with the preparation of sales
material; and providing general assistance and advice in
28
<PAGE>
establishing and maintaining mutual fund sales programs on
the premises of depository institutions. The amount of such
compensation may be up to .08% annually of the average daily
net assets of the Fund attributable to shares purchased
through, and held by the customers of, such depository in-
stitutions. Such compensation does not represent an addi-
tional expense to the Fund or its shareholders, since it
will be paid from the assets of Goldman Sachs or its affili-
ates.
DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 85 Broad Street, New York, New York, serves
as the exclusive distributor of the Fund's shares. Shares
may also be sold by Authorized Dealers. Authorized Dealers
include investment dealers that are members of the NASD and
certain other financial service firms. To become an Autho-
rized Dealer, a dealer or financial service firm must enter
into a sales agreement with Goldman Sachs. The minimum in-
vestment requirements, services, programs and purchase and
redemption options for shares purchased through a particular
Authorized Dealer may be different from those available to
investors purchasing through other Authorized Dealers.
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois, also
serves as the Fund's transfer agent (the "Transfer Agent")
and as such performs various shareholder servicing func-
tions. As compensation for the services rendered to the Fund
by Goldman Sachs as transfer agent and the assumption by
Goldman Sachs of the expenses related thereto, Goldman Sachs
is entitled to receive a fee with respect to the Fund equal
to $12,000 per year plus $3.50 per account, together with
out-of-pocket and transaction-related expenses (including
those out-of-pocket expenses payable to servicing agents).
Shareholders with inquiries regarding the Fund should con-
tact Goldman Sachs (as Transfer Agent) at the address or the
telephone number set forth on the inside front cover page of
this Prospectus.
REPORTS TO SHAREHOLDERS
THE FUND WILL Shareholders will receive an annual report containing au-
FURNISH dited financial statements and a semi-annual report. Each
SHAREHOLDERS shareholder will also be provided with a printed confirma-
WITH SEMI- tion for each transaction in the shareholder's account and
ANNUAL AND an individual quarterly account statement. A year-to-date
ANNUAL REPORTS statement for any account will be provided upon request made
AND QUARTERLY to Goldman Sachs. The Fund generally does not provide sub-
STATEMENTS. accounting services.
PURCHASE OF SHARES
Shares of the Fund may be purchased in any amount (subject
to the minimum investment requirement) through any Autho-
rized Dealer (including
29
<PAGE>
Goldman Sachs) on any Business Day (as defined under "Addi-
tional Information") at the net asset value next determined
after receipt of an order, plus the applicable sales charge.
The sales charge will vary with the size of the purchase as
shown in the table below and under certain other conditions
as described below. The Fund receives the net asset value
per share, while the sales charge is divided between Goldman
Sachs and the Authorized Dealer. If, by the close of regular
trading on the New York Stock Exchange (currently 3:00 p.m.
Chicago time, 4:00 p.m. New York time), a purchase order is
received by Goldman Sachs or an Authorized Dealer, the price
per share will be based on the net asset value computed on
the day the purchase order is received. Purchased shares
will be issued as of the time of such computation on that
day. See "Net Asset Value."
HOW TO PURCHASE PURCHASE PROCEDURES
SHARES.
Purchases of shares may be made by check (except that a
check drawn on a foreign bank will not be accepted) or Fed-
eral Reserve draft, Federal Funds wire, ACH transfer or bank
wire. Checks or Federal Reserve drafts should be made pay-
able as follows: (i) to an investor's Authorized Dealer, if
purchased through such Authorized Dealer, or (ii) to
"Goldman Sachs Trust -- Goldman Sachs Government Income
Fund," and should be directed to Goldman Sachs Trust --
Goldman Sachs Government Income Fund, c/o National Finan-
cial Data Services, Inc. ("NFDS"), P.O. Box 419711, Kansas
City, MO 64141-6711. Federal Funds wires, ACH transfers and
bank wires should be sent to State Street Bank and Trust
Company ("State Street"). Payment by check, Federal Reserve
draft, Federal Funds wire, ACH transfer or bank wire must be
received within five business days of receipt of the pur-
chase order by the Fund, Goldman Sachs or an Authorized
Dealer. Dividends will begin on purchased shares on the cal-
endar day after the date payment is received in the manner
described above. An investor's Authorized Dealer is respon-
sible for forwarding payment promptly to the Fund.
In order to make an initial investment in the Fund, an in-
vestor must establish an account with the Fund by furnishing
necessary information to the Fund, Goldman Sachs or any Au-
thorized Dealer. An Account Information Form, a copy of
which is attached to this Prospectus, should be used to es-
tablish such an account. The Fund reserves the right to ref-
use to open an account for, or to close the account of, any
investor who fails to (1) provide a social security number
or other taxpayer identification number, or (2) certify that
such number is correct (if required to do so under applica-
ble law) in establishing an account. Subsequent purchases of
shares may be made in the manner set forth in the preceding
paragraph.
AN INITIAL The minimum initial investment in the Fund is $1,500, ex-
INVESTMENT MUST cept in connection with the special investment programs de-
BE AT LEAST scribed below, purchases by certain institutional investors
$1,500. as described below, and in conjunction with vari-
30
<PAGE>
ous monthly accumulation plans established with certain Au-
thorized Dealers. The minimum initial investment in the Fund
is currently $50,000 for unitholders or shareholders of
Goldman Sachs Money Market Trust, GS Core Fixed Income Fund,
GS Short-Term Government Agency Fund, GS Adjustable Rate
Government Agency Fund, GS Short Duration Tax-Free Fund or
GS Government Agency Portfolio (For Financial Institutions)
that are banks, trust companies or other types of depository
institutions. These requirements may be waived at the dis-
cretion of the Trust's officers. Except in connection with
certain investment programs, a minimum of $50 is required
for subsequent investments. The Fund reserves the right to
redeem shares of any shareholder whose account balance is
less than $50 as a result of earlier redemptions. Such re-
demptions will not be implemented if the value of a share-
holder's account falls below the minimum account balance
solely as a result of market conditions. The Fund will give
sixty (60) days' prior written notice to shareholders whose
shares are being redeemed to allow them to purchase suffi-
cient additional shares of the Fund to avoid such redemp-
tion. In addition, the Fund and Goldman Sachs reserve the
right to modify the minimum investment, the manner in which
shares are offered and the sales charge rates applicable to
future purchases of shares.
THE SALES OFFERING PRICE
CHARGE MAY VARY
DEPENDING ON The offering price is the next determined net asset value
THE DOLLAR per share plus a sales charge, if any, paid at the time of
AMOUNT INVESTED purchase of shares of the Fund as shown in the following ta-
IN THE FUND. ble or as set forth under "Participant--Directed Plans":
<TABLE>
<CAPTION>
SALES CHARGE MAXIMUM DEALER
SALES CHARGE AS AS PERCENTAGE ALLOWANCE AS
AMOUNT OF PURCHASE PERCENTAGE OF OF NET AMOUNT PERCENTAGE OF
(INCLUDING SALES CHARGE, IF ANY) OFFERING PRICE INVESTED OFFERING PRICE
-------------------------------- --------------- ------------- --------------
<S> <C> <C> <C>
Less than $100,000...... 4.50% 4.71% 4.00%
$100,000 up to (but less
than) $250,000......... 3.00 3.09 2.50
$250,000 up to (but less
than) $500,000......... 2.50 2.56 2.00
$500,000 up to (but less
than) $1 million....... 2.00 2.04 1.75
$1 million up to (but
less than) $3 million.. 1.25 1.27 1.15
$3 million or more...... 0.00 0.00 *
</TABLE>
--------
* Goldman Sachs may pay a commission equal to 0.35% of the
amount of shares purchased to Authorized Dealers who
initiate or are responsible for purchases of $3 million or
more of shares of the Fund, provided such shares remain in
the Fund for at least twelve months.
31
<PAGE>
The entire amount of the sales charge will be reallowed to
Authorized Dealers during the period January 3, 1995 through
April 17, 1995 if shares of the Fund are purchased through
any Individual Retirement Account (IRA), including self-di-
rected IRAs.
In addition to concessions allowed to Authorized Dealers,
Goldman Sachs may, from time to time, assist Authorized
Dealers by, among other things, providing sales literature
to and holding informational programs for the benefit of Au-
thorized Dealers' registered representatives. Authorized
Dealers may limit the participation of registered represent-
atives in such informational programs by means of sales in-
centive programs which may require the sale of minimum dol-
lar amounts of shares of the Goldman Sachs Portfolios.
Goldman Sachs may also provide additional promotional incen-
tives to Authorized Dealers in connection with sales of
shares of the Goldman Sachs Portfolios. These incentives may
include payment for travel expenses, including lodging, in-
curred in connection with trips taken by qualified regis-
tered representatives and members of their families within
or without the United States. Incentive payments will be
provided for out of the sales charge and distribution fees
or out of Goldman Sachs' other resources. Other than sales
charges and distribution fees, the Fund and its shareholders
do not bear distribution expenses. An Authorized Dealer re-
ceiving such incentives may be deemed to be an underwriter
under the 1933 Act. In some instances, such incentives may
be made available only to certain Authorized Dealers whose
representatives have sold or are expected to sell signifi-
cant amounts of shares.
Shares of the Fund may be sold at net asset value without
payment of any initial sales charge to (a) Goldman Sachs,
its affiliates or their respective officers, partners, di-
rectors or employees (including retired employees and former
partners), any partnership of which Goldman Sachs is a gen-
eral partner, any Trustee or officer of the Trust and desig-
nated family members of any of the above individuals; (b)
qualified retirement plans of Goldman Sachs; (c) trustees or
directors of investment companies for which Goldman Sachs or
an affiliate acts as sponsor; (d) any employee, or regis-
tered representative of any Authorized Dealer or their re-
spective spouses and minor children; (e) institutional in-
vestors, including insurance companies, broker-dealers, dis-
cretionary accounts of investment advisers with at least
$100 million under management for the last twelve months and
business entities that have either gross assets of at least
$100 million or publicly traded securities outstanding; (f)
unitholders or shareholders of Goldman Sachs Money Market
Trust, GS Core Fixed Income Fund, GS Short-Term Government
Agency Fund, GS Adjustable Rate Government Agency Fund, GS
Short Duration Tax-Free Fund or GS Government Agency Portfo-
lio (For Financial Institutions) that are banks, trust com-
panies or other types of depository institutions; (g) any
state, county or city, or any instrumentality, department,
authority or agency thereof, which is prohibited by applica-
ble investment laws from paying a sales charge or commission
32
<PAGE>
in connection with the purchase of shares of the Fund; (h)
pension and profit sharing plans, pension funds or other
benefit plans sponsored by state and municipal gov-ernments
and by certain business entities, and Taft-Hartley plans,
provided any such plan has a minimum of $25 million under
management; (i) qualified non-profit organizations, founda-
tions and endowments that have gross assets of at least $100
million; and (j) shareholders whose purchase is attributable
to redemption proceeds (subject to appropriate documenta-
tion) from a registered open-end management investment com-
pany not distributed or managed by Goldman Sachs or its af-
filiates, if such redemption has occurred no more than 60
days prior to the purchase of shares of the Fund and the
shareholder either (i) paid an initial sales charge or (ii)
was at some time subject to a deferred sales charge with re-
spect to the redemption proceeds. In order to take advantage
of these exemptions, a purchaser must certify its eligibil-
ity for an exemption to Goldman Sachs on its Account Infor-
mation Form and must certify on such Form that it will no-
tify Goldman Sachs if, at the time of additional purchase,
it is no longer eligible for an exemption. Goldman Sachs re-
serves the right to request additional certification or in-
formation from a purchaser in order to verify that such pur-
chaser is eligible for an exemption. Goldman Sachs reserves
the right to limit the participation in the Fund of its
partners and employees. In addition, under certain circum-
stances, dividends and distributions from any Goldman Sachs
Portfolio may be reinvested in shares of the Fund at net as-
set value, as described under "Cross-Reinvestment of Divi-
dends and Distributions."
PARTICIPANT-DIRECTED PLANS
Participant-directed qualified retirement plans, including
401(k), 403(b), 457 and tax-sheltered annuity plans, may
purchase shares of the Fund at the next determined net asset
value per share plus a sales charge paid, except as set
forth below, at the time of purchase of shares of the Fund,
as shown in the following table.
<TABLE>
<CAPTION>
AMOUNT OF
PURCHASE SALES CHARGE MAXIMUM DEALER
(INCLUDING SALES CHARGE AS AS PERCENTAGE ALLOWANCE AS
SALES PERCENTAGE OF OF NET AMOUNT PERCENTAGE OF
CHARGE, IF ANY) OFFERING PRICE INVESTED OFFERING PRICE
--------------- --------------- ------------- --------------
<S> <C> <C> <C>
Less than $100,000...... 4.50% 4.71% 4.00%
$100,000 up to (but less
than) $250,000.......... 3.00 3.09 2.50
$250,000 up to (but less
than) $500,000.......... 2.50 2.56 2.00
$500,000 or more........ 0.00* 0.00* **
</TABLE>
--------
* No sales charge is payable by participant-directed plans
at the time of purchase on investments of $500,000 or
more, but for such investments a contingent deferred sales
charge, as described below, may be imposed in the event of
certain redemptions within one year of purchase.
33
<PAGE>
** Goldman Sachs may pay a one-time commission equal to a
percentage of the amount of shares purchased to Authorized
Dealers who initiate or are responsible for purchases by
participant-directed plans of $500,000 or more of shares
of the Funds at the rates shown in the following table:
<TABLE>
<CAPTION>
MAXIMUM DEALER
COMMISSION AS
PERCENTAGE OF
AMOUNT OF PURCHASE AMOUNT OF PURCHASE
------------------ ------------------
<S> <C>
$500,000 up to (but less than) $2 million........ 1.00%
$2 million up to (but less than) $3 million...... 0.80
$3 million up to (but less than) $50 million..... 0.50
$50 million up to (but less than) $100 million... 0.25
$100 million or more............................. 0.15
</TABLE>
Participant-directed plans are defined as qualified em-
ployee benefit plans not affiliated with Goldman Sachs which
allow their participants to select among one or more invest-
ment options, including the Fund. In order to take advantage
of the reduced sales charge rate described herein, the spon-
sor of a participant-directed plan must submit an investment
authorization form to Goldman Sachs (the "Authorization
Form") which establishes the Fund as an eligible investment
for the plan.
CUMULATIVE QUANTITY DISCOUNTS. For purposes of determining
the amount of purchase and the sales charge rate applicable
to purchases by participant-directed plans, shares of the
Fund and any other Goldman Sachs Portfolio will be combined
with shares purchased or held for all participants in the
same participant-directed plan. Participant-directed plans
may qualify for cumulative quantity discounts by using the
right of accumulation and statement of intention in the man-
ner described in this Prospectus. If a plan does not pur-
chase the entire amount of shares contemplated by a state-
ment of intention, Goldman Sachs may elect not to pursue the
recovery of any additional sales charge due if the amount of
the sales charge or the investment shortfall is considered
de minimis by Goldman Sachs.
CONTINGENT DEFERRED SALES CHARGE. Purchases by partici-
pant-directed plans of $500,000 or more of Fund shares will
be made at net asset value with no initial sales charge.
However, if, within 12 months after the effective date of
the applicable Authorization Form, the plan sponsor notifies
Goldman Sachs that it is terminating the eligibility of the
Fund as an investment for its plan, a contingent deferred
sales charge ("CDSC") will be imposed on all redemptions re-
sulting from such termination. Any CDSCs will be paid to the
Fund's principal distributor, Goldman Sachs. The amount of
the CDSC will be equal to 1% of the current market value or
the original purchase cost of the redeemed shares, whichever
is less. No CDSC will be imposed on increases in account
value above the initial purchase price, including any divi-
dends that
34
<PAGE>
have been reinvested in additional Fund shares. In determin-
ing whether a CDSC applies to a redemption, the calculation
will be made in a manner that results in the lowest possible
CDSC.
EXCHANGES. No CDSC is imposed upon exchanges between the
Fund and another Goldman Sachs Portfolio or an ILA Portfo-
lio. However, shares acquired in an exchange will be subject
to the CDSC to the same extent as if there had been no ex-
change. (As stated above, no CDSC will be imposed unless the
plan sponsor terminates the eligibility of the Fund as an
investment for the plan within the first twelve months.) For
purposes of determining whether the CDSC is applied, the
length of time a plan has owned shares acquired by exchange
will be measured from the date the plan acquired the origi-
nal shares and will not be affected by any subsequent ex-
change.
OTHER PURCHASE INFORMATION
Information concerning purchases of shares through an Au-
thorized Dealer should be obtained directly from the Autho-
rized Dealer. In the case of purchases made through the in-
vestor's Authorized Dealer, it is the responsibility of such
Authorized Dealer to promptly forward payment to the Fund
for shares being purchased. Authorized Dealers who receive a
portion of the sales charge applicable to the purchase of
shares of the Fund will not be permitted to impose any other
fees in connection with the purchase of such shares.
If shares of the Fund are held in a "street name" account
with an Authorized Dealer, all recordkeeping, transaction
processing and payments of distributions relating to the
beneficial owner's account will be performed by the Autho-
rized Dealer, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's
transactions, a beneficial owner should contact the Autho-
rized Dealer to purchase, redeem or exchange shares, to make
changes in or give instructions concerning the account or to
obtain information about the account. The transfer of shares
in a "street name" account to an account with another dealer
or to an account directly with the Fund involves special
procedures and will require the beneficial owner to obtain
historical purchase information about the shares in the ac-
count from the Authorized Dealer.
The Fund and Goldman Sachs each reserves the right to re-
ject any specific purchase order (including exchanges) or to
restrict purchases or exchanges by a particular purchaser
(or group of related purchasers). The Fund or Goldman Sachs
may reject or restrict purchases or exchanges of shares by a
particular purchaser or group, for example, when a pattern
of frequent purchases and sales of shares of the Fund is ev-
ident, or if the purchase and sale or exchange orders are,
or a subsequent abrupt redemption might be, of a size that
would disrupt management of the Fund.
35
<PAGE>
REINVESTMENT OF REDEMPTION PROCEEDS
A shareholder whose shares are redeemed may reinvest at
net asset value any portion or all of his redemption pro-
ceeds (plus that amount necessary to acquire a fractional
share to round off his purchase to the nearest full share)
in shares of the Fund or any other Goldman Sachs Portfolio.
Shareholders should obtain and read the applicable prospec-
tuses of such other funds and consider their objectives,
policies and applicable fees carefully before investing in
any of such funds. This reinvestment privilege is subject to
the condition that the shares redeemed have been held for at
least thirty (30) days before the redemption and that the
reinvestment is effected within ninety (90) days after such
redemption. Shares are sold to a reinvesting shareholder at
the net asset value next determined following timely receipt
by Goldman Sachs or an Authorized Dealer of a written pur-
chase order indicating that the shares are eligible for re-
investment at net asset value.
A reinvesting shareholder may realize a gain or loss for
federal tax purposes as a result of such redemption. If the
redemption occurs within ninety (90) days after the original
purchase of the shares, any sales charge paid on the origi-
nal purchase cannot be taken into account by a shareholder
reinvesting at net asset value pursuant to the reinvestment
privilege for purposes of determining gain or loss realized
on the redemption, but instead will be added to the tax ba-
sis of the shares received in the reinvestment. To the ex-
tent that any loss is realized and shares of the same Fund
are purchased within thirty (30) days before or after the
redemption, some or all of the loss generally may not be al-
lowed as a deduction depending upon the number of shares
purchased. Shareholders should consult their own tax advis-
ers concerning the tax consequences of a reinvestment. Upon
receipt of a written request, the reinvestment privilege may
be exercised once annually by a shareholder, except that
there is no such limit as to the availability of this privi-
lege in connection with transactions the sole purpose of
which is to reinvest the proceeds at net asset value in a
tax-sheltered retirement plan.
INVESTORS MAY RIGHT OF ACCUMULATION
QUALIFY FOR A
REDUCED SALES A shareholder qualifies for cumulative quantity discounts
CHARGE. if the current purchase price of the new investment plus the
shareholder's current holdings of existing shares (acquired
by purchase or exchange) of the Fund and shares of any other
Goldman Sachs Portfolio total the requisite amount for re-
ceiving a discount. For example, if a shareholder owns
shares with a current market value of $75,000 and purchases
additional shares with a purchase price of $25,000, the
sales charge for the $25,000 purchase would be 3.0% (the
rate applicable to a single purchase of $100,000). Shares
purchased without the imposition of a sales charge may not
be aggregated with shares purchased
36
<PAGE>
subject to a sales charge. Shares of the Fund and any other
Goldman Sachs Portfolio purchased (i) by an individual, his
spouse and his minor children, and (ii) by a trustee, guard-
ian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of de-
termining whether a purchase will qualify for such right of
accumulation and, if qualifying, the applicable sales charge
level. For purposes of applying the right of accumulation,
shares of the Fund and any other Goldman Sachs Portfolio
purchased by an existing client of the Private Client Serv-
ices Division of Goldman Sachs will be combined with shares
held by any other account over which such client or the cli-
ent's spouse exercises investment or voting power. In addi-
tion, shares of the Fund and shares of any other Goldman
Sachs Portfolio purchased by partners, directors, officers
or employees of the same business organization or by groups
of individuals represented by and investing on the recommen-
dation of the same accounting firm or other similar organi-
zation (collectively, "eligible persons") may be combined
for the purpose of determining whether a purchase will qual-
ify for the right of accumulation and, if qualifying, the
applicable sales charge level. This right of accumulation is
subject to the following conditions: (i) the business orga-
nization's or firm's agreement to cooperate in the offering
of the Fund's shares to eligible persons; and (ii) notifica-
tion to the Fund at the time of purchase that the investor
is eligible for this right of accumulation.
STATEMENT OF INTENTION
If a shareholder anticipates purchasing at least $100,000
of shares of the Fund alone or in combination with shares of
any other Goldman Sachs Portfolio within a 13-month period,
the shareholder may purchase shares of the Fund at a reduced
sales charge by submitting a Statement of Intention (the
"Statement"). See Appendix A to this Prospectus. Shares pur-
chased pursuant to a Statement will be eligible for the same
sales charge discount that would have been available if all
of the purchases had been made at the same time. The share-
holder or his Authorized Dealer must inform Goldman Sachs
that the Statement is in effect each time shares are pur-
chased. There is no obligation to purchase the full amount
of shares indicated in the Statement. A shareholder may in-
clude the value of all shares on which a sales charge has
previously been paid as an "accumulation credit" toward the
completion of the Statement, but a price readjustment will
be made only on shares purchased within ninety (90) days of
submitting the Statement. The Statement authorizes the
Transfer Agent to hold in escrow a sufficient number of
shares which can be redeemed to make up any difference in
the sales charge on the amount actually invested. For pur-
poses of satisfying the amount specified on the Statement,
the gross amount of each investment, exclusive of any appre-
ciation on shares previously purchased, will be taken into
account.
37
<PAGE>
THE FUND OFFERS AUTOMATIC INVESTMENT PLAN
SHAREHOLDERS
MANY CONVENIENT Systematic cash investments may be made through a share-
FEATURES AND holder's bank via the Automated Clearing House Network or a
BENEFITS, shareholder's checking account via bank draft each month.
INCLUDING Required forms are available from Goldman Sachs or any Au-
DOLLAR COST thorized Dealer. A minimum investment of $50 is required for
AVERAGING. Automatic Investment Plans.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
A shareholder in the Fund may elect to cross-reinvest div-
idends and capital gain distributions paid by the Fund at
net asset value without a sales charge in shares of any
other Goldman Sachs Portfolio or in units of the ILA Portfo-
lios. In addition, shareholders of any other Goldman Sachs
Portfolio may elect to cross-reinvest dividends and capital
gains distributions paid by such Goldman Sachs Portfolio at
net asset value without a sales charge in shares of the
Fund. Such cross-reinvestments are subject to the following
conditions: (i) the value of the shareholder's account(s) in
the paying fund must equal or exceed $10,000 and (ii) the
value of the account in the acquired fund must equal or ex-
ceed the acquired fund's minimum initial investment require-
ment or, the shareholder must elect to have dividends and
capital gain distributions paid on the paying and acquired
fund shares automatically reinvested in additional acquired
fund shares, until the value of acquired fund shares in the
shareholder's account equals or exceeds the acquired fund's
minimum initial investment requirement. A Fund shareholder
should obtain and read the prospectus relating to any other
Goldman Sachs Portfolio or ILA Portfolio and its shares or
units and consider its investment objective, policies and
applicable fees before electing cross-reinvestment into that
fund. The election to cross-reinvest dividends and capital
gain distributions will not affect the tax treatment of such
dividends and distributions, which will be treated as re-
ceived by the shareholder and then used to purchase shares
of the acquired fund. Such reinvestment of dividends and
distributions in shares of other Goldman Sachs Portfolios or
units of ILA Portfolios is available only in states where
such reinvestment may legally be made.
TAX-SHELTERED RETIREMENT PLANS
The Fund will offer shares for purchase by retirement
plans, including Individual Retirement Account Plans for in-
dividuals and their non-employed spouses and defined contri-
bution plans such as 401(k) Salary Reduction Plans. See
"Participant-Directed Plans."
Detailed information concerning these plans and copies of
the plans may be obtained from the Transfer Agent. This in-
formation should be read carefully, and consultation with an
attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and
describes
38
<PAGE>
the federal income tax consequences of establishing a plan.
Under all plans, dividends and distributions will be auto-
matically reinvested in additional shares of the Fund or, if
so directed by the shareholder, in cash, in shares of an-
other Goldman Sachs Portfolio or in units of the ILA Portfo-
lios. An initial investment minimum of $250 applies to pur-
chases in connection with tax-sheltered retirement plans.
AUTOMATIC EXCHANGE PROGRAM
Shareholders of the Fund may elect on the Account Informa-
tion Form to automatically exchange a specified dollar
amount of Fund shares at net asset value without an addi-
tional sales charge for shares of any other Goldman Sachs
Portfolio. Shareholders of any other Goldman Sachs Portfolio
may similarly elect to automatically exchange a specified
dollar amount of shares of such Goldman Sachs Portfolio at
net asset value without an additional sales charge for
shares of the Fund. These automatic exchanges are made
monthly on the fifteenth day of each month or the first
Business Day thereafter and are subject to the following
conditions. The minimum dollar amount for automatic ex-
changes must be at least $50 per month. At the time the
election is made (i) the value of the shareholder's account
in the fund from which the exchange is made must equal or
exceed $10,000 and (ii) the value of the account in the ac-
quired fund must equal or exceed the acquired fund's minimum
initial investment requirement or, if the shareholder has
elected the automatic exchange privilege and the value of
the acquired fund does not equal the acquired fund's mini-
mum, such election must continue until the minimum initial
investment requirement is met. The names, addresses and so-
cial security or other taxpayer identification numbers for
the shareholder accounts with the exchanged and acquired
funds must be identical. A Fund shareholder should obtain
and read the prospectus relating to any other Goldman Sachs
Portfolio and its shares and consider its investment objec-
tive, policies and applicable fees and expenses before
electing an automatic exchange into that Goldman Sachs Port-
folio.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged at net asset value
without an additional sales charge for: (i) shares of any
Goldman Sachs Portfolio; and (ii) units of the ILA
Portfolios. A shareholder should obtain and read the pro-
spectus relating to a fund and its shares or units and con-
sider its investment objective, policies and applicable fees
before making an exchange into that fund. The shares or
units of these other funds acquired in an exchange may later
be exchanged for shares of the Fund at the next determined
net asset value without a sales charge if the dollar amount
in the Fund resulting from such exchanges is below the
shareholder's all-time highest dollar amount on which it has
previously paid a sales charge. Shares or units of these
other funds
39
<PAGE>
purchased through dividends and/or capital gains reinvest-
ment may be exchanged for shares of the Fund without a sales
charge. In addition to free automatic exchanges pursuant to
the Automatic Exchange Program, six free exchanges are per-
mitted in each twelve-month period. A fee of $12.50 may be
charged for each subsequent exchange during such period. The
exchange privilege may be modified or withdrawn at any time
upon sixty (60) days' notice to shareholders and is subject
to certain limitations (see "Purchase of Shares").
An exchange may be made by either writing to Goldman
Sachs, Attention: Goldman Sachs Trust -- Goldman Sachs Gov-
ernment Income Fund, Shareholder Services, c/o NFDS, P.O.
Box 419711, Kansas City, Missouri 64141-6711 or, if previ-
ously elected in the Fund's Account Information Form, by
telephone at 800-526-7384 (8:00 a.m. to 3:00 p.m. Chicago
time). Certain procedures are employed to prevent unautho-
rized or fraudulent exchange requests as set forth under
"Redemption of Shares." Under the telephone exchange privi-
lege, shares may be exchanged among accounts with different
names, addresses and social security or other taxpayer iden-
tification numbers only if the exchange request is in writ-
ing and is received in accordance with the procedures set
forth under "Redemption of Shares." In times of drastic eco-
nomic or market changes the telephone exchange privilege may
be difficult to implement.
For federal income tax purposes, an exchange is treated as
a sale of the shares surrendered in the exchange, on which
an investor may realize a gain or loss, followed by a pur-
chase of shares or units received in the exchange. If such
sale occurs within ninety (90) days after the purchase of
such shares, to the extent a sales charge that would other-
wise apply to the shares or units received in the exchange
is not imposed, the sales charge paid on such purchase can-
not be taken into account by the exchanging shareholder for
purposes of determining gain or loss realized on such sale
for federal income tax purposes, but instead will be added
to the tax basis of the shares or units received in the ex-
change. Shareholders should consult their own tax advisers
concerning the tax consequences of an exchange.
All exchanges which represent an initial investment in a
fund must satisfy the minimum investment requirements of the
fund into which the shares are being exchanged. Exchanges
are only available in states where exchanges may legally be
made.
40
<PAGE>
DISTRIBUTION PLAN
THE FUND WILL The Trust, on behalf of the Fund, has adopted a Distribu-
FINANCE tion Plan (the "Plan") pursuant to Rule 12b-1 under the In-
DISTRIBUTION vestment Company Act. Under the Plan, the Fund will pay to
AND SHAREHOLDER Goldman Sachs a quarterly fee for distribution and personal
SERVICE and account maintenance services equal, on an annual basis,
ACTIVITIES to, 0.50% of the Fund's average daily net assets, of which
THROUGH up to 0.25% may be for personal and account maintenance
QUARTERLY services. Currently, Goldman Sachs has voluntarily agreed to
PAYMENTS TO limit the amount of such fee to 0.25% of the Fund's average
GOLDMAN SACHS daily net assets. Goldman Sachs has no current intention of
EQUAL ON AN modifying or discontinuing such limitation, but may do so in
ANNUAL BASIS TO the future at its discretion. At various times during the
0.25% OF THE fiscal year ended October 31, 1994, Goldman Sachs waived
FUND'S AVERAGE part or all of its distribution fee payable under the Fund's
DAILY NET Plan. The average annual rate charged for the period was
ASSETS. .11%.
Goldman Sachs may use the fee for its expenses of distri-
bution of shares of the Fund. In addition, Goldman Sachs may
pay up to the entire amount of such fee to Authorized Deal-
ers for providing services in connection with the sale of
shares of the Fund. The types of expenses for which Goldman
Sachs and Authorized Dealers may be compensated for distri-
bution services under the Plan include compensation paid to
and expenses incurred by their respective officers, employ-
ees and sales representatives, allocable overhead, telephone
and travel expenses, the printing of prospectuses for pro-
spective shareholders, preparation and distribution of sales
literature, advertising of any type and all other expenses
incurred in connection with activities primarily intended to
result in the sale of shares of the Fund. The portion of the
fee for personal and account maintenance services may be
used to make payments to Goldman Sachs, Authorized Dealers
and their officers, sale representatives and employees for
responding to inquiries of, and furnishing assistance to,
shareholders regarding ownership of their shares or their
accounts or similar services not otherwise provided by or on
behalf of the Fund. If the fee received by Goldman Sachs ex-
ceeds its expenses, Goldman Sachs may realize a profit from
these arrangements. The Plan will be reviewed and is subject
to approval annually by the Board of Trustees. The aggregate
compensation that may be received under the Plan for distri-
bution services and pursuant to a sales charge may not ex-
ceed the limitations imposed by the NASD's Rules of Fair
Practice.
41
<PAGE>
REDEMPTION OF SHARES
THE REDEMPTION The Fund will redeem its shares upon request of a share-
PRICE WILL BE holder on any Business Day at the net asset value next de-
BASED ON THE termined after the receipt of such request in proper form.
NET ASSET VALUE See "Net Asset Value." Redeemed shares will continue to earn
NEXT COMPUTED dividends through the day on which the redemption request is
AFTER RECEIPT received. Redemption proceeds will normally be mailed by
OF A REDEMPTION check to shareholders within seven (7) days of receipt of a
REQUEST. properly executed request. If shares to be redeemed were re-
cently purchased by check, the Fund may delay transmittal of
redemption proceeds until such time as it has assured itself
that good funds have been collected for the purchase of such
shares. This may take up to fifteen (15) days. Redemption
requests may be made by writing to or calling the Transfer
Agent at the address or telephone number set forth on the
inside front cover page of this Prospectus or by contacting
an Authorized Dealer.
THERE ARE A shareholder may request redemptions by telephone if the
SEVERAL WAYS optional telephone redemption privilege is elected on the
SHAREHOLDERS Account Information Form accompanying this Prospectus. It
MAY ACCESS may be difficult to implement redemptions by telephone in
THEIR ACCOUNTS. times of drastic economic or market changes. In an effort to
prevent unauthorized or fraudulent redemption and exchange
requests by telephone, Goldman Sachs and NFDS each employ
reasonable procedures specified by the Trust to confirm that
such instructions are genuine. Consequently, proceeds of
telephone redemption requests will only be sent to the
shareholder's address of record or authorized bank account
designated in the Account Information Form and exchanges of
shares will only be made to an identical account. Telephone
requests may also be recorded. The Trust may implement other
procedures from time to time. If reasonable procedures are
not implemented, the Trust may be liable for any loss due to
unauthorized or fraudulent transactions. In all other cases,
neither the Fund, the Trust nor Goldman Sachs will be re-
sponsible for the authenticity of instructions received by
telephone. Proceeds of telephone redemptions will only be
mailed to the shareholder's address of record or wired to
the authorized bank account indicated on the Account Infor-
mation Form, unless the shareholder provides written in-
structions (accompanied by a signature guarantee) indicating
another address.
Written requests for redemptions must be signed by each
shareholder with its signature guaranteed by a bank, a secu-
rities broker or dealer, a credit union having authority to
issue signature guarantees, a savings and loan association,
a building and loan association, a cooperative bank, a fed-
eral savings bank or association, a national securities ex-
change, a registered securities association or a clearing
agency, provided that such institution satisfies the stan-
dards established by the Transfer Agent.
The Fund will also arrange for the proceeds of redemptions
effected by any means to be wired as Federal Funds to the
bank account designated in
42
<PAGE>
the shareholder's Account Information Form. Redemption pro-
ceeds will normally be wired on the next Business Day in
Federal Funds (for a total one business-day delay) following
receipt of a properly executed wire transfer redemption re-
quest. Wiring of redemption proceeds may be delayed one ad-
ditional Business Day if the Federal Reserve Bank is closed
on the day redemption proceeds would ordinarily be wired. A
transaction fee of $7.50 may be charged for payments of re-
demption proceeds by wire. In order to change the bank des-
ignated on the Account Information Form to receive redemp-
tion proceeds, a written request must be received by the
Transfer Agent. This request must be signature guaranteed as
set forth above. Further documentation may be required for
executors, trustees or corporations. Once wire transfer in-
structions have been given by Goldman Sachs or an Authorized
Dealer, neither the Fund, the Trust, Goldman Sachs nor an
Authorized Dealer assumes any further responsibility for the
performance of intermediaries or the shareholder's bank in
the transfer process. If a problem with such performance
arises, the shareholder should deal directly with such in-
termediaries or bank.
Additional documentation regarding a redemption by any
means may be required to effect a redemption when deemed ap-
propriate by the Transfer Agent. The request for such re-
demption will not be considered to have been received in
proper form until such additional documentation has been re-
ceived.
Except with respect to shareholders whose account balances
are less than $50 or who have not provided a social security
number or other taxpayer identification number and certifi-
cation (if required) that such number is correct, shares are
not redeemable at the option of the Fund unless the Board of
Trustees of the Trust determines in its sole discretion that
failure to so redeem may have material adverse consequences
to the shareholders of the Fund. The Fund, however, assumes
no responsibility to compel redemptions.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan (the "Systematic Withdrawal
Plan") will be available to shareholders of the Fund whose
shares are worth at least $10,000. The Systematic Withdrawal
Plan provides for monthly payments to the participating
shareholder of any amount not less than $50.
Dividends and capital gain distributions on shares held
under the Systematic Withdrawal Plan are reinvested in addi-
tional full and fractional shares of the Fund at net asset
value. The Transfer Agent acts as agent for the shareholder
in redeeming sufficient full and fractional shares to pro-
vide the amount of the systematic withdrawal payment. The
Systematic Withdrawal Plan may be terminated at any time.
Goldman Sachs reserves the right to initiate a fee of up to
$5 per withdrawal, upon thirty (30) days written notice to
the shareholder. Withdrawal payments should not be consid-
ered to be dividends, yield
43
<PAGE>
or income. If periodic withdrawals continuously exceed new
purchases and reinvested dividends and capital gains distri-
butions, the shareholder's original investment will be cor-
respondingly reduced and ultimately exhausted. Furthermore,
each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be reported for federal and state
income tax purposes. A shareholder should consult his or her
own tax adviser with regard to the tax consequences of par-
ticipating in the Systematic Withdrawal Plan. For further
information or to request a Systematic Withdrawal Plan,
please write or call the Transfer Agent.
DIVIDENDS
SHAREHOLDERS Each dividend from net investment income and capital gains
MAY CHOOSE distribution, if any, declared by the Fund on its outstand-
WHETHER TO ing shares will, at the election of each shareholder, be
RECEIVE paid (i) in cash, (ii) in additional shares of the Fund or
DISTRIBUTIONS (iii) in shares of any of the Goldman Sachs Portfolios or
(INCLUDING units of the ILA Portfolios as described under "Cross-Rein-
CAPITAL GAINS) vestment of Dividends and Distributions." This election
IN CASH OR TO should initially be made on a shareholder's Account Informa-
REINVEST tion Form and may be changed upon written notice to Goldman
DISTRIBUTIONS Sachs at any time prior to the record date for a particular
IN SHARES OF dividend or distribution. If no election is made, all divi-
THE FUND, IN dends from net investment income and capital gains distribu-
SHARES OF ANY tions will be reinvested in the Fund. If cash dividends are
OF THE GOLDMAN elected with respect to the Fund's net investment income
SACHS dividends, then cash dividends must also be elected with re-
PORTFOLIOS OR spect to the short-term capital gains component, if any, of
IN UNITS OF THE the Fund's annual dividend. Reinvestments of dividends from
ILA PORTFOLIOS. net investment income in additional shares of the Fund will
be made on the last Business Day of each month. Reinvest-
ments of dividends from net investment income in additional
shares of another Goldman Sachs Portfolio or in units of the
ILA Portfolios will be made on the payment date. Cash divi-
dends will be paid on or about the last calendar day of the
month. Capital gains distributions will be reinvested or
paid in cash, in accordance with the shareholder's prior
election, on the payment date.
The election to reinvest dividends and distributions paid
by the Fund in additional shares or units of the Fund or any
other Goldman Sachs Portfolio or ILA Portfolio will not af-
fect the tax treatment of such dividends and distributions,
which will be treated as received by the shareholder and
then used to purchase shares or units of the Fund, another
Goldman Sachs Portfolio or an ILA Portfolio.
The Fund intends to declare a daily dividend determined
with the objective of distributing the majority of net in-
vestment income. Such dividend will accrue daily with re-
spect to outstanding shares, commencing on the first calen-
dar day after the receipt of payment for such shares and
continuing through the redemption date, and will be paid
monthly. Over the course of the fiscal
44
<PAGE>
year, dividends accrued and paid will constitute all or sub-
stantially all of the Fund's net investment income. From
time to time a portion of such dividends may constitute a
return of capital, nontaxable to the extent of a sharehold-
er's tax basis in the shares. The Fund also intends that all
net realized long-term and short-term capital gains will be
declared as a dividend and paid at least annually. In deter-
mining amounts of capital gains to be distributed, capital
losses, including any available capital loss carryovers from
prior years, will be offset against capital gains realized
during the current year.
The Fund's net investment income is determined on a daily
basis. On days on which net asset value is calculated, such
determination is made immediately prior to the calculation
of the Fund's net asset value as of 3:00 p.m. Chicago time.
On days on which net asset value is not calculated, such de-
termination is made as of 3:00 p.m. Chicago time.
At the time of an investor's purchase of shares of the
Fund a portion of the net asset value per share may be rep-
resented by undistributed income of the Fund or realized or
unrealized appreciation of the Fund's portfolio securities.
Therefore, subsequent distributions (or portions thereof) of
taxable income or realized appreciation on such shares may
be taxable to the investor even if the net asset value of
the shares is, as a result of the distributions, reduced be-
low the cost of such shares and the distributions (or por-
tions thereof) represent a return of a portion of the pur-
chase price.
NET ASSET VALUE
NET ASSET VALUE The net asset value per share of the Fund is calculated by
IS COMPUTED the Fund's custodian as of the close of regular trading on
DAILY AS OF THE the New York Stock Exchange (normally 3:00 p.m. Chicago
CLOSE OF time, 4:00 p.m. New York time) immediately after determina-
REGULAR TRADING tion of the income to be declared as a dividend, on each
ON THE NEW YORK Business Day (as such term is defined under "Additional In-
STOCK EXCHANGE. formation"). Net asset value per share is calculated by add-
ing the value of all securities and other assets of the
Fund, subtracting the liabilities of the Fund, and dividing
the remainder by the number of outstanding shares.
Investments in Mortgage-Backed Securities and other debt
obligations are valued at fair value, based on yield equiva-
lents, a pricing matrix or other sources, under valuation
procedures established by the Trust's Board of Trustees.
Other portfolio securities for which accurate market quota-
tions are readily available are valued on the basis of quo-
tations, which may be furnished by a pricing service or pro-
vided by dealers in such securities. Portfolio securities
for which accurate market quotations are not readily avail-
able are valued in accordance with the Trust's valuation
procedures. Debt obligations with a remaining maturity of 60
days or less are valued at amortized cost. The Board of
45
<PAGE>
Trustees has determined that the amortized cost of such se-
curities approximates fair market value.
PERFORMANCE INFORMATION
From time to time the Fund may publish yield and average
annual total return in advertisements and communications to
shareholders or prospective investors.
Yield is computed by dividing net investment income earned
during a recent thirty-day period by the product of the av-
erage daily number of shares outstanding and entitled to re-
ceive dividends during the period and the maximum offering
price per share on the last day of the relevant period. The
results are compounded on a bond equivalent (semi-annual)
basis and then annualized. Net investment income per share
is equal to the dividends and interest earned during the pe-
riod, reduced by accrued expenses for the period. The calcu-
lation of net investment income for these purposes may dif-
fer from the net investment income determined for accounting
purposes.
Average annual total return is determined by computing the
average annual percentage change in value of $1,000 invested
at the maximum public offering price for specified periods
ending with the most recent calendar quarter, assuming rein-
vestment of all dividends and distributions at net asset
value. The total return calculation assumes a complete re-
demption of the investment at the end of the relevant peri-
od. The Fund may also from time to time advertise total re-
turn on a cumulative, average, year-by-year or other basis
for various specified periods by means of quotations,
charts, graphs or schedules. In addition, the Fund may fur-
nish total return calculations based on investments at vari-
ous sales charge levels or at net asset value. Any perfor-
mance data which is based on the Fund's net asset value per
share would be reduced if a sales charge were taken into ac-
count. In addition to the above, the Fund may from time to
time advertise its performance relative to certain perfor-
mance rankings and indices.
Quotations of distribution rates are calculated by
annualizing the most recent distribution of net investment
income for a monthly, quarterly or other relevant period and
dividing this amount by the net asset value per share or
maximum public offering price on the last day of the period
for which the distribution rates are being calculated.
The investment results of the Fund will fluctuate over
time and any presentation of investment results for any
prior period should not be considered a representation of
what an investment may earn or what the Fund's performance
may be in any future period. In addition to information pro-
vided in shareholder reports, the Fund may, at its discre-
tion, from time to time make a list of its holdings avail-
able to investors upon request.
46
<PAGE>
SHARES OF THE TRUST
THE FUND IS A The Fund is a series of Goldman Sachs Trust, which was or-
SERIES OF AN ganized under the laws of The Commonwealth of Massachusetts
OPEN-END on September 24, 1987 as a Massachusetts business trust un-
INVESTMENT der an Agreement and Declaration of Trust, as amended (the
COMPANY. "Trust Agreement"). Under the Trust Agreement the Trustees
are authorized to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. The Trustees
of the Trust are responsible for the overall management and
supervision of its affairs. The Trustees of the Trust have
authority under the Trust Agreement to create and classify
shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Pro-
spectus, the Trustees have authorized shares of the Fund and
ten other series. Additional series may be added in the fu-
ture. The Trustees also have authority to classify or re-
classify any series or portfolio of shares into one or more
classes.
When issued, shares are fully paid and non-assessable. In
the event of liquidation, shareholders are entitled to share
pro rata in the net assets of the Fund available for distri-
bution to such shareholders. All shares entitle their hold-
ers to one vote per share, are freely transferable and have
no preemptive, subscription or conversion rights.
As of November 30, 1994, Bob Smith MD Foundation, owned
beneficially and of record 32% of the shares of the Fund.
Under Massachusetts law, there is a remote possibility
that shareholders of a business trust could, under certain
circumstances, be held personally liable as partners for the
obligations of such trust. The Trust Agreement contains pro-
visions intended to limit such liability and to provide in-
demnification out of Trust property of any shareholder
charged or held personally liable for obligations or liabil-
ities of the Trust solely by reason of being or having been
a shareholder of the Trust and not because of such share-
holder's acts or omissions or for some other reason. Thus,
the risk of a shareholder incurring financial loss on ac-
count of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obli-
gations.
Unless otherwise required by the Investment Company Act,
ordinarily it will not be necessary for the Trust to hold
annual meetings of shareholders. As a result, shareholders
may not consider each year the election of Trustees or the
appointment of independent accountants. Shareholders may re-
move a Trustee by the affirmative vote of at least two-
thirds of the Trust's outstanding shares and the Trustees
must promptly call a meeting for such purpose when requested
to do so in writing by the record holders of not less than
10% of the outstanding shares of the Trust. Shareholders
may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting
of shareholders. The Board of Trustees, however, will call a
spe-
47
<PAGE>
cial meeting for the purpose of electing Trustees if, at any
time, less than a majority of Trustees holding office at the
time were elected by shareholders.
In the interest of economy and convenience, the Trust does
not issue certificates representing the Fund's shares. In-
stead, the Transfer Agent maintains a record of each share-
holder's ownership. Each shareholder receives confirmation
of purchase and redemption orders from the Transfer Agent.
Fund shares and any dividends and distributions paid by the
Fund are reflected in account statements from the Transfer
Agent.
TAXATION
THE FUND IS NOT FEDERAL TAXES
EXPECTED TO
HAVE ANY The Fund is treated as a separate entity for tax purposes.
FEDERAL TAX The Fund has qualified and elected to be treated as a regu-
LIABILITY. lated investment company under Subchapter M of the Code and
intends to continue to qualify for such treatment. To qual-
ify for treatment as a regulated investment company, 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 company, 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 share-
holders in accordance 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 discount or certain market
discount income will be taxable to shareholders as ordinary
income. 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 gains regardless of how long
the shareholders have held their shares. These tax conse-
quences will apply regardless of whether distributions are
received in cash or reinvested in shares. Certain distribu-
tions paid by the Fund in January of a given year may be
taxable to shareholders as if received the prior December
31. Shareholders will be informed annually about the amount
and character of distributions received from the Fund for
federal income tax purposes.
Investors should consider the tax implications of buying
shares immediately prior to a distribution. Investors who
purchase shares shortly before the record date for a distri-
bution will pay a per share price that includes the value of
the anticipated distribution and will be taxed on the dis-
tribution even though the distribution represents a return
of a portion of the purchase price.
Redemptions and exchanges of shares are taxable events on
which a shareholder may recognize a gain or loss.
48
<PAGE>
Individuals and certain other classes of shareholders may
be subject to 31% backup withholding of federal income tax
on distributions, redemptions and exchanges if they fail to
furnish the Fund with their correct taxpayer identification
number and certain certifications 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.
OTHER 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 inter-
est on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obli-
gations, provided in some states that certain thresholds for
holdings of such obligations and/or reporting requirements
are satisfied.
Shareholders should consult their own tax adviser regard-
ing the federal, state, local or foreign tax consequences of
investing in the Fund in their particular circumstances. See
the Additional Statement for a further discussion of certain
tax consequences of investing in shares of the Fund.
ADDITIONAL INFORMATION
The term "a vote of the majority of the outstanding
shares" of the Fund means the vote of the lesser of (i) 67%
or more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of
the outstanding shares of the Fund.
As used in this Prospectus, the term "Business Day" means
any day the New York Stock Exchange is open for trading,
which is Monday through Friday except for holidays. The New
York Stock Exchange is closed on the following holidays: New
Year's Day (observed), Presidents' Day, Good Friday, Memo-
rial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
49
<PAGE>
APPENDIX A
(APPLICABLE ONLY TO SHARES PURCHASED SUBJECT TO A SALES CHARGE)
STATEMENT OF INTENTION
If a shareholder anticipates purchasing $100,000 or more of shares of the
Fund alone or in combination with shares of another fund described in this
Prospectus within a 13-month period, the shareholder may obtain shares of the
Fund at the same reduced sales charge as though the total quantity were
invested in one lump sum by filing this Statement of Intention incorporated by
reference in the Account Information Form.
Instructions for issuance of shares in the name of a person who does not
sign the Account Information Form must be accompanied by a written statement
stating that the shares were paid for by a person who signed the Account
Information Form.
To insure that the reduced price will be received on future purchases, the
investor or his Authorized Dealer must inform Goldman, Sachs & Co. that this
Statement of Intention is in effect each time shares are purchased.
Subject to the conditions mentioned below, each purchase will be made at a
public offering price applicable to a single transaction of the dollar amount
specified on the Account Information Form, as described in the Prospectus. The
investor makes no commitment to purchase additional shares, but if his
purchases within 13 months plus the value of shares credited toward completion
do not total the sum specified, he will pay the increased amount of the sales
charge prescribed in the Escrow Agreement.
Income dividends and capital gain distributions taken in additional shares
will apply toward the completion of this Statement of Intention.
This Statement of Intention is not effective until accepted by Goldman,
Sachs & Co.
ESCROW AGREEMENT
Out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the Account Information Form shall be held in
escrow by the Transfer Agent in the form of shares registered in the
investor's name. All income dividends and capital gains distributions on
escrowed shares will be paid to the investor or to his order.
When the minimum investment so specified is completed (either prior to or by
the end of the thirteenth month), the shareholder will be notified and the
escrowed shares will be released.
If the intended investment is not completed, the investor will be asked to
remit to Goldman, Sachs & Co. any difference between the sales charge on the
amount specified and on the amount actually attained. If the investor does not
within 20 days after written request by Goldman, Sachs & Co. pay such
difference in the sales charge, the Transfer Agent will redeem an appropriate
number of the escrowed shares in order to realize such difference. Shares
remaining after any such redemption will be released by the Transfer Agent.
In signing the Account Information Form, the investor irrevocably
constitutes and appoints the Transfer Agent his attorney to surrender for
redemption any or all escrowed shares with full power of substitution in the
premises.
A-1
<PAGE>
APPENDIX B
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Fund with your correct Social
Security or other Taxpayer Identification Number (TIN), regardless of whether
you file tax returns. Failure to do so may subject you to penalties. Failure
to provide your correct TIN, to check the appropriate boxes in, and to sign
your name in the Social Security Number or other Taxpayer Identification
Number Certification section (the "Certification Section") of the Account
Information Form could result in withholding of 31% by the Fund for the
federal backup withholding tax on distributions, redemptions, exchanges and
other payments relating to your account. 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
established under a Uniform Gifts or Transfers to Minors Act, the TIN of the
minor should be furnished.
If you do not have a TIN, you should apply for one immediately by contacting
your local office of the Social Security Administration or the Internal
Revenue Service (IRS). If you do not have a TIN but have applied for or intend
to apply for one, you should check the first box in the Certification Section.
In this event, you should provide your TIN and required certifications within
60 days. Backup withholding could apply to payments relating 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
withholding because you failed to report all your interest and/or dividend
income on your tax return and you have not been notified by the IRS that such
withholding should cease, you must cross out item (2) in the Certification
Section.
If you are an exempt recipient, you should furnish your TIN and check the
second box in the Certification Section. Exempt recipients include:
corporations, tax-exempt pension plans and IRA's, governmental agencies,
financial institutions, registered securities and commodities dealers and
others.
If you are a nonresident alien or foreign entity, check the third box in the
Certification Section and provide a completed Form W-8 to the Fund in order to
avoid backup withholding on certain payments. Other payments to you may be
subject to nonresident alien withholding of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
B-1
<PAGE>
ACCOUNT INFORMATION FORM THE GOLDMAN SACHS PORTFOLIOS
This Account Information Form Should be
Forwarded Promptly to Goldman, Sachs & Co.
or any Authorized Dealer
- -------------------------------------------------------------------------------
SEND TO: The Goldman Sachs Portfolios
c/o NFDS
P.O. Box 419711
Kansas City, MO 64141-6711
For additional information
call 1-800-526-7384 Date: __________
- -------------------------------------------------------------------------------
INITIAL INVESTMENT-- [_] Asia Growth Fund [_] Global Income Fund
$1,500 MINIMUM [_] Balanced Fund [_] Government Income Fund
[_] Capital Growth Fund [_] Municipal Income Fund
[_] Growth & Income Fund [_] Other Fund_____________
[_] International Equity GOLDMAN SACHS MONEY MARKET
Fund TRUST*
[_] Select Equity Fund [_] ILA/Prime Obligations
[_] Small Cap Equity Fund Portfolio Service Units
[_] Adjustable Rate Mortgage [_] ILA/Tax-Exempt Diversi-
Fund fied Portfolio Service
Units
*$10,000 minimum or balance
of existing account
- -------------------------------------------------------------------------------
1. ACCOUNT Please Print
REGISTRATION
INDIVIDUAL
---------------------------------------- --------------
First Name Initial Last SS# or Tax ID#
JOINT TENANTS
The account will be registered as "Joint Tenants with
Right of Survivorship" unless otherwise specified.
---------------------------------------- --------------
First Name Initial Last SS# or Tax ID#
---------------------------------------- --------------
First Name Initial Last SS# or Tax ID#
GIFT TO MINORS
--------------------------------------------------------
Custodian's Name (Only one can be named)
---------------------------------------- --------------
Minor's Name (Only one) SS#
Under the _________ (State of Residence) Uniform Gift to
Minors Act
CORPORATION, TRUST, OR OTHER ENTITY
---------------------------------------- --------------
Name of Corporation, Trust or other Tax ID#
Non-Person Entity
--------------------------------------------------------
Attention:
--------------------------------------------------------
Date of Trust Instrument: Name of Beneficiary (If to
be included in the
registration)
--------------------------------------------------------
Name(s) of Trustee(s) (If to be included in the
registration)
- -------------------------------------------------------------------------------
2. MAILING ADDRESS ( )
------------------------------------ ------------------
Street Daytime Phone
--------------------------------------------------------
City State Zip Code
<PAGE>
- --------------------------------------------------------------------------------
3. TO PURCHASE SHARES Check appropriate box(es).
[_] A check for $_______ is enclosed. Check(s) should be
payable to the Fund(s) selected.
[_] An order # ______ for ______ shares or $_________
was placed on _____________________.
[_] I certify that I am an entity exempt from the sales
charge according to the section in the Fund
Prospectus "Purchase of Shares" and I am, therefore,
entitled to purchase shares of the Fund at net asset
value. By checking this box, the undersigned agrees
that I will notify Goldman, Sachs & Co. at or prior
to purchase if I am no longer in one of the
categories of eligible investors.
Reason for exemption _____________________________.
- --------------------------------------------------------------------------------
4. DIVIDEND AND Choose how you wish to receive dividends. If no boxes
DISTRIBUTION are checked, Option A will be assigned.
OPTIONS A. [_] All income and capital gains dividends
reinvested in the account.
B. [_] All income and short-term capital gains
dividends in cash and long-term capital gains
reinvested in the account. (COMPLETE CASH
DIVIDENDS SECTION BELOW.)
C. [_] All income and capital gains dividends paid in
cash. (COMPLETE CASH DIVIDENDS SECTION BELOW.)
D. [_] All dividends and capital gains reinvested in
another Goldman Sachs Portfolio account: (See
prospectus regarding limitations on this
privilege.)
Fund Name _________________ Account Number ____________
Please send cash dividends to (if no special payee,
cash dividends will be sent to the account registration
address):
[_] Account registration address.
[_] Check to special payee as follows:
[_] Deposit to bank (attach voided check)
Name of Payee ________________ Account No. (if
applicable) ____________
Street Address _________________________________________
City _____________________________ State ____ Zip ______
- --------------------------------------------------------------------------------
5. RIGHT OF See "Purchase of Shares"
ACCUMULATION
Cumulative quantity discounts are applicable if a
shareholder's current value of existing shares of the
Fund alone or in combination with shares of any other
fund described in the Prospectus, on which a sales
charge was paid, total the requisite amount for
receiving a discount as described in the accompanying
Prospectus. Below are listed all the accounts (account
name, Fund and number) which should be aggregated for a
right of accumulation.
Name _____________ Name _____________ Name _____________
Fund _____________ Fund _____________ Fund _____________
Acct No. _________ Acct No. _________ Acct No. _________
- --------------------------------------------------------------------------------
6. STATEMENT OF See "Purchase of Shares"
INTENTION
Although not obligated to do so, it is the
undersigned's intention to invest, over a 13-month
period from this date, in shares of the Fund alone or
in combination with shares of any other fund, on which
a sales charge was paid, described in the Prospectus
which qualify for a quantity discount as described in
the accompanying Prospectus, in an amount that will
equal or exceed:
[_] $50,000 [_] $100,000 [_] $250,000 [_] $500,000
[_] $1,000,000 [_] $3,000,000
I agree to the Statement of Intention and Escrow
Agreement set forth in the Appendices to the
accompanying Prospectus and incorporated by reference
herein.
<PAGE>
- --------------------------------------------------------------------------------
7. AUTOMATIC INVEST- See "Purchase of Shares"
MENT PLAN (ATTACH
VOIDED CHECK) Check One: [_] Monthly [_] Quarterly
Beginning on or about the 5th [_] or the 15th [_]
(check one) beginning with ___________(month) and every
month/quarter thereafter, I/We authorize State Street
Bank (the custodian for the Fund) to debit the amount
requested below from my/our bank account for investment
in the Fund. I/We understand that my/our participation
in the Automatic Investment Plan (the "Plan") is
subject to the terms and conditions of such plan as
amended from time to time.
--------------------------------------------------------
Bank Name Bank Account Number (if assigned)
--------------------------------------------------------
Amount of each monthly investment Name of Fund
(minimum $50)
--------------------------------------------------------
Amount of each monthly investment Name of Fund
(minimum $50)
--------------------------------------------------------
Authorized Signature (as shown on bank records)
--------------------------------------------------------
Authorized Signature (if joint bank account both sign)
- --------------------------------------------------------------------------------
8. TELEPHONE EXCHANGE [_] I/We authorize Goldman, Sachs & Co. to accept and act
upon telephone instructions from myself or any other
person for the exchange of shares of the Fund into
any fund described in the accompanying Prospectus.
I/We understand and agree that neither the Fund nor
Goldman, Sachs & Co. will be liable for any loss,
expense, or cost arising out of any telephone request
effected hereunder.
- --------------------------------------------------------------------------------
9. TELEPHONE REDEMPTION
(ATTACH VOIDED See "Redemption of Shares"
CHECK)
[_] Goldman, Sachs & Co. is hereby authorized to honor
telephone, telegraphic, or other instructions,
without signature guarantee, from any person for the
redemption of shares for the above account, without
an obligation on behalf of Goldman, Sachs & Co., to
verify that such person is the shareholder of record
or authorized to give redemption instructions,
provided that the proceeds are transmitted to the
following bank account only or are mailed to the
account registration address. Absent its own gross
negligence, neither the Fund nor Goldman, Sachs & Co.
shall be liable for such redemption or for payments
made to any unauthorized account.
--------------------------------------------------------
Bank Name ABA Routing #
--------------------------------------------------------
Street Address City State Zip
--------------------------------------------------------
Account Name Account Number
- --------------------------------------------------------------------------------
10. AUTOMATIC The originating fund's balance must be at least $10,000
EXCHANGES and the receiving fund's minimum investment must be met
prior to discontinuing this privilege if the minimum
investment requirement for the receiving fund has not
already been met.
I hereby authorize automatic exchanges of $______ (exact
dollars--$50 minimum) into my identically registered
account:
Exchange from ____________________________ (Name of Fund)
to ____________________________ (Name of Fund)
Account No. (if known) ___________________
Please make exchanges on the 15th (or next business day)
beginning the month of _________________________.
- --------------------------------------------------------------------------------
11. CHECKWRITING
PRIVILEGE See "Check Redemption Privilege"
[_] Check the box if you would like an application for
checkwriting sent to you.
The checkwriting privilege is available to holders of
ILA/Prime Obligations Portfolio Service Units or
ILA/Tax-Exempt Diversified Portfolio Service Units
ONLY.
<PAGE>
- --------------------------------------------------------------------------------
12. SOCIAL SECURITY . By the execution of this Account Information Form, the
NUMBER OR OTHER undersigned represents and warrants that it has full
TAXPAYER right, power and authority to make the investment
IDENTIFICATION applied for pursuant to this Form and is acting for
NUMBER itself or in some fiduciary capacity in making such
CERTIFICATION AND investment.
SIGNATURE
AUTHORIZATION THE UNDERSIGNED AFFIRMS THAT IT HAS RECEIVED A CURRENT
PROSPECTUS FOR THE FUND AND HAS REVIEWED THE SAME.
The undersigned understands that a lesser degree of
flexibility concerning the timing of a redemption of its
investment in Goldman Sachs Adjustable Rate Mortgage
Fund, Goldman Sachs Global Income Fund, Goldman Sachs
Municipal Income Fund, Goldman Sachs Government Income
Fund, Goldman Sachs Capital Growth Fund, Goldman Sachs
Select Equity Fund, Goldman Sachs Small Cap Equity Fund,
Goldman Sachs International Equity Fund, Goldman Sachs
Growth and Income Fund, Goldman Sachs Asia Growth Fund
and Goldman Sachs Balanced Fund, as well as all other
non-money market funds, increases the likelihood that
the shareholder will be required to redeem shares under
unfavorable market conditions. If shares are redeemed at
a disadvantageous time, the value of the Fund's shares
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.
. Fill in boxes below
Taxpayer Identification No.: ____________________________
(For joint tenants, first listed individual should
provide his/her number and sign below.) Under penalties
of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number
to be issued to me), and
(2) I am not subject to backup withholding because (a) I
am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service (IRS)
that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer
subject to backup withholding.
Certification Instruction: You must cross out item (2)
above if you have been notified by the IRS that you are
currently subject to federal backup withholding because
of underreporting interest or dividends on your federal
tax return. (Also see the "Guidelines for Certification
of Taxpayer Identification Number on Account Information
Form" contained in the Appendices to the accompanying
Prospectus).
NOTE: FAILURE TO COMPLETE THIS SECTION MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO
YOU.
By checking only the appropriate box and signing below,
I certify under penalties of perjury that:
[_] I do not have a taxpayer identification number, but
I have applied for or intend to apply for one. I
understand that the required 31% withholding may
apply before I provide such number and
certifications, which should be provided within 60
days.
or [_] I am an exempt recipient.
or [_] I am neither a citizen nor a resident of the United
States for the purpose of the Internal Revenue
Code. I am a resident of __________________ .
All recipients, including exempt recipients, must report
their taxpayer identification numbers and provide the
certifications requested to prevent backup withholding.
Sign Here:
---------------------------------------------------------
Signature Name (print) and Title (if any)
Date:
<PAGE>
- -------------------------------------------------------------------------------
13. SYSTEMATIC See "Redemption of Shares"
WITHDRAWAL PLAN
Minimum account balance must be $10,000. Withdrawal
minimum is $50.
Check One: [_] Monthly [_] Quarterly
Please make payments via (check one) [_] check [_] ACH
(Bank must be ACH affiliated. Attach voided check).
Payments made via check are withdrawn from your account
on or about the 25th of each month/quarter. (I
understand that I may change the date of redemption,
via ACH, or the amount at any time in writing to the
Fund at the address stated above.)
Complete this section if withdrawal payments are to be
made via ACH (funds are automatically credited to the
designated bank account.)
BANK INFORMATION:
Please withdraw $___________ from my account on the
___________ of the month.
Bank Account Registration: _____________________________
Routing #: _____________ Bank Account #: ______________
Bank Name/Branch Name: _________________________________
Bank Street Address: ___________________________________
Bank Telephone Number: _________________________________
Complete this section ONLY if check is to be made
payable to person(s) other than the registered owner,
and you must have this application SIGNATURE
GUARANTEED.
--------------------------------------------------------
Name of check recipient Address City State Zip
SIGNATURE GUARANTEE(S)
This request must be signed by each shareholder with
his or her signature guaranteed by a commercial bank,
trust company or member firm of a national securities
exchange.
--------------------------------------------------------
Shareholder Signature
--------------------------------------------------------
Signature Guaranteed By
--------------------------------------------------------
Authorized Signature
- -------------------------------------------------------------------------------
14. FOR DEALER ONLY Investment dealer's signature is required for
Systematic Withdrawal Plan or Statement of Intention.
If a Systematic Withdrawal Plan is being opened, we
believe that the amount to be withdrawn is reasonable
in light of the investor's circumstances and we
recommend establishment of the account.
--------------------------------------------------------
Name of Dealer Firm Home Office Location
--------------------------------------------------------
City State Zip
--------------------------------------------------------
Branch Office Location Branch Number/Branch Phone
--------------------------------------------------------
Authorized Signature State Zip
--------------------------------------------------------
Reg. Rep. Number Reg. Rep.'s Name
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY AND SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UN-
LAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE TRUST OR THE FUND SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
----
Summary ................................................................... 3
Financial Highlights....................................................... 9
Investment Objective and Policies.......................................... 10
Investment Adviser and Administrator....................................... 11
Description of Portfolio Securities........................................ 12
Other Investments and Practices............................................ 17
Other Risk Factors......................................................... 24
Investment Restrictions.................................................... 25
Portfolio Turnover......................................................... 25
Management................................................................. 26
Reports to Shareholders.................................................... 29
Purchase of Shares......................................................... 29
Distribution Plan.......................................................... 41
Redemption of Shares....................................................... 42
Dividends.................................................................. 44
Net Asset Value............................................................ 45
Performance Information.................................................... 46
Shares of the Trust........................................................ 47
Taxation................................................................... 48
Additional Information..................................................... 49
Appendix A................................................................. A-1
Appendix B................................................................. B-1
Account Information Form
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLDMAN SACHS
GOVERNMENT
INCOME FUND
MANAGED BY
GOLDMAN SACHS ASSET
MANAGEMENT,
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
-------------
PROSPECTUS
-------------
GOLDMAN, SACHS & CO.
GOV 1/40K/0395
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS MUNICIPAL INCOME FUND
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT,
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
NEW YORK, NEW YORK
------------
Goldman Sachs Municipal Income Fund (the "Fund") is one fund in a family of
funds advised by Goldman Sachs Asset Management (the "Investment Adviser") or
its affiliates, Goldman Sachs Funds Management, L.P. and Goldman Sachs Asset
Management International. The Fund is organized as a separate diversified
portfolio of Goldman Sachs Trust (the "Trust"), an open-end, management
investment company.
The Fund's investment objective is to provide investors with a high level of
current income that is exempt from regular federal income tax, consistent with
preservation of capital. The Fund will seek to achieve its objective primarily
through investments in municipal securities, the interest on which is exempt
from regular federal income tax. The municipal securities in which the Fund
invests, at the time of investment, will be rated at least A by Standard &
Poor's Ratings Group ("Standard & Poor's") or Moody's Investors Service, Inc.
("Moody's"), or their respective equivalent ratings or, if unrated by such
rating organizations, determined by the Investment Adviser to be of comparable
credit quality. It is expected that, under normal market conditions, the
weighted average credit quality of the Fund's portfolio will be approximately
equivalent to that of securities rated AA by Standard & Poor's or Aa by
Moody's. The Fund will maintain, under normal market conditions, an average
portfolio maturity approximately equal to the average maturity of the Lehman
Brothers 15 Year Municipal Bond Index.
Goldman Sachs Asset Management, New York, New York, a separate operating
division 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's custodian is State Street Bank and Trust Company.
(continued on next page)
------------
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 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
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------
GOLDMAN, SACHS & CO.
------------
The date of this Prospectus is March 1, 1995
<PAGE>
This Prospectus, which sets forth concisely the information about the Trust
and the Fund that a prospective investor ought to know before investing,
should be retained for future reference. A Statement of Additional Information
(the "Additional Statement"), dated March 1, 1995, containing further
information about the Trust and the Fund which may be of interest to
investors, has been filed with the Securities and Exchange Commission, is
incorporated herein by reference in its entirety, and may be obtained without
charge from Goldman, Sachs & Co. by calling the telephone number, or writing
to one of the addresses, listed below.
GOLDMAN SACHS TRUST GOLDMAN SACHS ASSET MANAGEMENT
4900 SEARS TOWER INVESTMENT ADVISER
CHICAGO, ILLINOIS 60606 AND ADMINISTRATOR
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
GOLDMAN, SACHS & CO. GOLDMAN, SACHS & CO.
DISTRIBUTOR TRANSFER AGENT
85 BROAD STREET 4900 SEARS TOWER
NEW YORK, NEW YORK 10004 CHICAGO, ILLINOIS 60606
TOLL FREE (IN U.S.)................. 800-526-7384
2
<PAGE>
SUMMARY
INTRODUCTION
Goldman Sachs Municipal Income Fund (the "Fund") is one fund in a family of
funds advised by Goldman Sachs Asset Management (the "Investment Adviser") or
its affiliates, Goldman Sachs Funds Management, L.P. and Goldman Sachs Asset
Management International. The Fund is organized as a separate diversified
portfolio of Goldman Sachs Trust (the "Trust"), an open-end, management
investment company.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide investors with a high level of
current income that is exempt from regular federal income tax, consistent with
preservation of capital. The Fund will seek to achieve its objective primarily
through investments in securities issued by or on behalf of states, territories
and possessions of the United States (including the District of Columbia) and
the political subdivisions, agencies and instrumentalities thereof ("Municipal
Securities"), the interest on which is, in the opinion of bond counsel for the
issuers or counsel selected by the Investment Adviser, exempt from regular
federal income tax (i.e., excluded from gross income for federal income tax
purposes but not necessarily exempt from federal alternative minimum tax or
from state and local taxes). Municipal Securities in which the Fund invests
will be rated, at the time of investment, at least A by Standard & Poor's or
Moody's or their respective equivalent ratings or, if unrated by such rating
organizations, determined by the Fund's Investment Adviser to be of comparable
credit quality. A security will be deemed to have met this requirement if it
receives the minimum required rating from at least one such rating organization
even if it has been rated below the minimum rating by one or more other rating
organizations. It is expected that, under normal market conditions, the
weighted average credit quality of the Fund's portfolio will be equivalent to
that of securities rated AA by Standard & Poor's or Aa by Moody's.There can be
no assurance that the Fund will achieve its investment objective.
Under normal market conditions, at least 80% of the Fund's net assets will be
invested in Municipal Securities the interest on which is exempt from regular
federal income tax; however, the Fund may invest up to 100% of its net assets
in private activity bonds the interest from certain of which (including the
Fund's distributions of such interest) may be a preference item for purposes of
the federal alternative minimum tax. Although it does not expect to do so, the
Fund may invest up to 20% of its net assets in taxable investments consisting
of obligations issued or guaranteed by the U.S. Government, its agencies and
instrumentalities ("U.S. Government securities") and repurchase agreements
collateralized by U.S. Government securities ("Taxable Investments"). For
temporary defensive purposes, the Fund may invest more than 20% of its net
assets in Taxable Investments. The Fund's investments in Municipal Securities
and Taxable Investments may also generate capital gains that are taxable. See
"Taxation."
The Fund will maintain, under normal market conditions, an average portfolio
maturity approximately equal to the average maturity of the Lehman Brothers 15
Year Municipal Bond Index. The Investment Adviser may, however, increase or
decrease such average portfolio maturity depending upon the Investment
Adviser's expectation for changes in interest rates or market
3
<PAGE>
conditions. There is no limitation as to average weighted portfolio maturity or
permissible stated maturity with respect to individual securities. The average
maturity of the Fund's portfolio may cause it to be more susceptible to changes
in prevailing interest rates than a portfolio with a shorter average maturity.
Certain instruments in which the Fund is permitted to invest may also increase
the risk of volatility of the Fund's net asset value. Such maturity policy and
investments are expected to enhance the Fund's net income. The ability of the
Fund to achieve the capital preservation aspect of its investment objective
therefore depends in part on the extent to which the Fund is able to anticipate
and respond to fluctuations in market interest rates and to utilize appropriate
strategies to maximize returns to the Fund, while attempting to minimize the
risks associated with its invested capital.
INVESTMENT ADVISER AND ADMINISTRATOR
Pursuant to an Investment Advisory Agreement, Goldman Sachs Asset Management,
a separate operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves
as the Fund's investment adviser. For its advisory services, the Investment
Adviser receives from the Fund a monthly fee equal on an annual basis to 0.40%
of the Fund's average daily net assets. Goldman Sachs is registered with the
Securities and Exchange Commission (the "SEC") as an investment adviser.
Goldman Sachs Asset Management also serves as the administrator of the Fund
pursuant to an Administration Agreement, for which it receives from the Fund a
monthly fee equal on an annual basis to 0.15% of the Fund's average daily net
assets. See "Management--Investment Adviser and Administrator."
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund may be bought through Goldman Sachs and certain investment
dealers including members of the National Association of Securities Dealers,
Inc. ("NASD") and certain other financial service firms that have sales
agreements with Goldman Sachs ("Authorized Dealers"). The minimum initial
investment in the Fund is $1,500, except in connection with the special
investment programs described under "Purchase of Shares" and purchases by
certain institutional investors, and except that this requirement may be waived
at the discretion of the Trust's officers. Shares of the Fund may be purchased
at the current net asset value per share plus any applicable sales charge. The
sales charge is to be paid at the time of purchase of shares of the Fund. The
maximum sales charge is currently 4.5% of the purchase price with reduced sales
charges for purchases of shares of the Fund of $100,000 or more. The sales
charge is waived for specified classes of investors described under "Purchase
of Shares--Offering Price" and in connection with exchanges of shares. The Fund
and Goldman Sachs reserve the right to modify the minimum investment
requirement, the manner in which shares are offered or the sales charge rates
applicable to future purchases of shares. See "Purchase of Shares." The Fund
will redeem its shares upon request of a shareholder on any Business Day, as
defined below, at the net asset value next determined after receipt of such
request in proper form. See "Redemption of Shares."
DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs serves as distributor for the Fund in the sale of its shares.
Under a Transfer Agency Agreement with the Fund, Goldman Sachs provides
transfer agency services and responds to shareholder inquires. See
"Management--Distributor and Transfer Agent."
4
<PAGE>
DISTRIBUTION PLAN
The Trust, on behalf of the Fund, has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Under the Plan, the Fund will pay to
Goldman Sachs a quarterly fee for distribution and personal and account
maintenance services that is equal, on an annual basis, to 0.50% of the Fund's
average daily net assets. Currently, Goldman Sachs has voluntarily agreed to
limit the amount of such fee to 0.25% of the Fund's average daily net assets.
Goldman Sachs has no current intention of modifying or discontinuing such
limitation, but may do so in the future at its discretion. See "Distribution
Plan."
DIVIDEND POLICY
The Fund intends to declare a daily dividend determined with the objective of
distributing the majority of net investment income while enhancing the
stability of principal. Such dividends will accrue daily on outstanding shares,
commencing on the calendar day after receipt of payment for such shares, and
will be paid monthly. Over the course of the fiscal year, dividends accrued and
paid will constitute all or substantially all of the Fund's net investment
income. The Fund also intends that net realized capital gains, if any, after
offset by any available capital loss carryforwards from prior taxable years,
will be declared as a dividend at least annually. Shareholders will receive
dividends in additional shares or may elect to receive cash, shares of certain
designated mutual funds sponsored by Goldman Sachs whose shares are subject to
an initial sales charge (the "Goldman Sachs Portfolios") or ILA Service Units
of the Prime Obligations Portfolio or the Tax-Exempt Diversified Portfolio of
Goldman Sachs Money Market Trust (the "ILA Portfolios"). For further
information concerning dividends, see "Dividends."
TAXATION
The Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"), and to distribute the tax-exempt interest it receives from Municipal
Securities as "exempt-interest dividends." As a regulated investment company,
the Fund will not be required to pay federal income tax on taxable and tax-
exempt income or capital gains that it distributes to its shareholders in
accordance with the timing requirements of the Code. Shareholders may treat the
exempt-interest dividends they receive from the Fund as interest exempt from
regular federal income tax, although a portion of such dividends may be subject
to the federal alternative minimum tax for some shareholders. Distributions
from the Fund's taxable income or capital gains, if any, generally will be
taxable. See "Taxation."
RISK FACTORS
The Fund's investments in Municipal Securities entail certain risks,
including adverse income and principal value fluctuation associated with
general economic conditions affecting the Municipal Securities markets, the
issuers and guarantors of Municipal Securities and the facilities financed by
Municipal Securities as well as adverse interest rate changes and volatility of
yields of Municipal Securities. See "Risk Factors." In addition, the Fund's
yield will be subject to risks associated with particular issues in which it
invests, including potential defaults by issuers and guarantors and the size
and rating of an issue.
5
<PAGE>
GENERAL. While the Fund will seek to provide a high level of current income
that is exempt from regular federal income tax and to preserve capital, the
Fund's current income and net asset value will fluctuate. If the Fund invests
in Taxable Investments, as permitted, such Taxable Investments will result in
taxable income to shareholders. If the Fund acquires Municipal Securities or
Taxable Investments at a market discount, distributions from accrued market
discount income will also be taxable to shareholders. If the Fund invests in
private activity bonds, distributions attributable to the interest on such
securities may be a tax preference item subject to the federal alternative
minimum tax. A reduction in federal income tax rates would reduce the tax
equivalent yield received by shareholders of the Fund and would tend to reduce
the value of Municipal Securities held in the Fund's portfolio. Conversely, an
increase in federal income tax rates would increase the taxable equivalent
yield received by shareholders of the Fund. In addition, changes in federal law
adversely affecting the tax-exempt status of income derived from Municipal
Securities could significantly affect both the supply of and demand for
Municipal Securities, which in turn could affect the Fund's ability to acquire
and dispose of Municipal Securities at favorable prices. Shareholders may be
subject to state and local taxes on income received from the Fund.
Since the Fund invests in Municipal Securities with a range of maturities,
its volatility may vary (though not necessarily proportionately) as the average
maturity of its portfolio varies. The inherent volatility risk is such that,
during any particular period, there may be a loss of principal. The net asset
value of the shares of the Fund will change in response to fluctuations in
interest rates. When interest rates decline, the value of Municipal Securities
generally can be expected to rise. Conversely, when interest rates rise, the
value of Municipal Securities can generally be expected to decline. There can
be no assurance, however, as to the future level or direction of interest
rates.
The Fund may engage in active short-term trading to benefit from yield
disparities among different issues of Municipal Securities, to seek short-term
profits during periods of fluctuating interest rates or for other reasons. Such
trading will increase the Fund's portfolio turnover rate and may therefore
increase the incidence of short-term capital gains (distributions of which are
taxable to shareholders as ordinary income).
The Fund may enter into transactions in certain derivative instruments
consisting of futures, options and options on futures, and interest rate swaps,
floors, caps and collars. The Fund may enter into these transactions for
hedging purposes and to seek to increase total return. The Fund's use of such
investment practices and derivative instruments involves certain risks. These
include the risk of loss if the Investment Adviser is incorrect in its
expectation of fluctuations in securities prices or interest rates in
connection with transactions to increase total return. In addition, in the case
of hedging transactions, there may be a possible lack of correlation between
changes in the value of the hedging instruments and the portfolio assets being
hedged. The Fund could also be exposed to risk of loss if it is unable to close
out its derivative positions because of an illiquid secondary market.
Distributions of any net income or net realized capital gains from such
derivative transactions are taxable to shareholders.
CONFLICTS OF INTEREST. The involvement of Goldman Sachs, its divisions and
affiliates (including the Investment Adviser), partners and officers in the
investment activities and business operations of the Fund may present certain
conflicts of interest, as described under "Management--Investment Adviser and
Administrator."
6
<PAGE>
FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases.......................... 4.50%*
Maximum Sales Charge Imposed on Reinvested Dividends............... None
Redemption Fees.................................................... None**
Exchange Fees...................................................... None**
ANNUAL FUND OPERATING EXPENSES:
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
Management Fees (includes advisory fees of 0.40% and administration
fees of 0.15%)..................................................... 0.55%****
Distribution and Service (Rule 12b-1) Fees (after expense
limitation)........................................................ 0.25%****
Other Expenses (after expense limitation).......................... 0.05%***
----
TOTAL FUND OPERATING EXPENSES (AFTER EXPENSE LIMITATION)........... 0.85%****
====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a hypo-
thetical $1,000 investment (including the maxi-
mum sales charge), assuming (1) a 5% annual re-
turn and (2) redemption at the end of each time
period......................................... $53 $71 $90 $145
</TABLE>
- --------
* As a percentage of the offering price. No sales charge is imposed on
purchases by certain classes of investors. See "Purchase of Shares."
** A transaction fee of $7.50 may be charged for redemption proceeds paid by
wire. In addition to free reinvestments of dividends and distributions in
shares of other Goldman Sachs Portfolios or units of the ILA Portfolios and
free automatic exchanges pursuant to the Automatic Exchange Program, six
free exchanges are permitted in each twelve month period. A fee of $12.50
may be charged for each subsequent exchange during such period. See
"Purchase of Shares--Exchange Privilege." The transfer agency fee incurred
by the Fund is based on a fixed per account charge plus transaction fees.
See "Management--Distributor and Transfer Agent."
*** Based on estimated amounts for the current year. The Investment Adviser
has voluntarily agreed to reduce or limit certain "Other Expenses" of the
Fund (excluding advisory, administration and distribution and service
fees, taxes, interest and brokerage and litigation, indemnification and
other extraordinary expenses) to the extent such expenses exceed 0.05% per
annum of the Fund's average daily net assets. The Investment Adviser has
no current intention of modifying or discontinuing such limitation but may
do so in the future at its discretion.
**** Goldman Sachs has agreed to limit the amount of the distribution and
service fees payable by the Fund to 0.25% of its average daily net assets.
Goldman Sachs has no current intention of modifying or discontinuing such
limitation, but may do so in the future at its discretion. If Goldman
Sachs and the Investment Adviser did not agree to limit the amount of the
distribution and service fees payable by the Fund to 0.25% of its average
daily net assets and to reduce or otherwise limit certain "Other Expenses"
of the Fund, these expenses would have been 0.50% and 0.50%, respectively,
of such assets and the Fund's total operating expenses would have been
1.55% of such assets. During the fiscal year ended October 31, 1994, the
Investment Adviser waived a portion of its management fees and reimbursed
expenses. Annual operating expenses incurred by the Fund during the fiscal
year ended October 31, 1994 (expressed as a percentage of average daily
net assets after fee adjustments) were as follows: Management Fees,
Distribution and Service Fees and Other Expenses of 0.21%, 0.20% and
0.04%, respectively for total operating expenses of 0.45%. See "Management
-- Investment Adviser and Administrator" and "Distribution Plan."
7
<PAGE>
Investors should be aware that, due to the distribution 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 NASD.
The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses of the Fund that an investor in the Fund will
bear directly or indirectly. The costs and expenses included in the table and
hypothetical example above are based on estimated fees and expenses for the
current fiscal year, and should not be considered as representative of past or
future expenses. Actual fees and expenses may be greater or less than those
indicated. Moreover, while the example assumes a 5% annual return, the Fund's
actual performance will vary and may result in an actual return greater or less
than 5%. See "Management--Investment Adviser and Administrator."
8
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
The following data with respect to a share of the Fund outstanding during the
periods indicated has been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report, incorporated by reference and
attached to the Additional Statement, from the Fund's annual report to
Shareholders for the period ended October 31, 1994 (the "Annual Report"). This
information should be read in conjunction with the financial statements and
related notes incorporated by reference and attached to the Additional
Statement. The Annual Report also contains performance information and is
available upon request and without charge by calling the telephone number or
writing to one of the addresses on the inside cover of this Prospectus.
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993(a)
---------------- -------------------
<S> <C> <C>
Net asset value, beginning of period...... $14.64 $14.32
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.73 0.22
Net realized and unrealized gain (loss) on
investments(b)............................ (1.51) 0.32
----- ------
Total income (loss) from investment opera-
tions..................................... (0.78) 0.54
----- ------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................... (0.73) (0.22)
Net realized gain on investment transac-
tions.................................... (0.05) --
----- ---
Total distributions to shareholders....... (0.78) (0.22)
----- -----
Net increase (decrease) in net asset val-
ue....................................... (1.56) 0.32
----- ------
Net asset value, end of period........... $13.08 $14.64
====== ======
Total return(c)........................... (5.51)% 3.73%
Ratio of net expenses to average net as-
sets...................................... 0.45% 0.00%(d)
Ratio of net investment income to average
net assets................................ 5.28% 5.15%(d)
Portfolio turnover rate................... 357.54% 99.99%
Net assets at end of period............... $47,373,027 $30,166,152
Ratios assuming no waiver of fees or ex-
pense limitation:
Ratio of expenses to average net assets.. 1.55% 2.42%(d)
Ratio of net investment income to average
net assets............................... 4.18% 2.73%(d)
</TABLE>
- --------
(a) For the period from July 20, 1993 (commencement of operations) to October
31, 1993.
(b) Includes the balancing effect of calculating per share amounts.
(c) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charge. Total return would be reduced if a sales charge were taken into
account.
(d) Annualized.
9
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
THE FUND SEEKS The Fund's investment objective is to provide investors
A HIGH LEVEL OF with a high level of current income that is exempt from reg-
CURRENT INCOME, ular federal income tax, consistent with preservation of
CONSISTENT WITH capital. The Fund will seek to achieve its objective primar-
PRESERVATION OF ily through investments in the Municipal Securities de-
CAPITAL, THAT scribed below and in the Additional Statement.
IS EXEMPT FROM
REGULAR FEDERAL Under normal market conditions, at least 80% of the Fund's
INCOME TAX. net assets will be invested in Municipal Securities the in-
terest on which is exempt from regular federal income tax;
however, the Fund may invest up to 100% of its net assets in
private activity bonds, the interest from certain of which
may be a preference item for purposes of the federal alter-
native minimum tax and may also increase liability for the
corporate environmental tax. Distributions of tax-exempt in-
terest on Municipal Securities will be considered in comput-
ing the "adjusted current earnings" preference item for pur-
poses of the corporate alternative minimum tax, the corpo-
rate environmental tax, and the extent, if any, to which a
shareholder's Social Security and certain railroad retire-
ment benefits, are taxable.
THE FUND WILL The Municipal Securities in which the Fund invests will,
INVEST at the time of investment, be rated at least A by Standard &
PRIMARILY IN Poor's or Moody's or their respective equivalent ratings or,
MUNICIPAL if unrated by such rating organizations, determined by the
SECURITIES Investment Adviser to be of comparable credit quality. A se-
ISSUED BY curity will be deemed to have met this requirement if it re-
STATES, THEIR ceives the minimum required rating from at least one such
AGENCIES OR rating organization even if it has been rated below the min-
INSTRUMENTAL- imum rating by one or more other rating organizations. It is
ITIES. expected that, under normal market conditions, the weighted
average credit quality of the Fund's portfolio will be
equivalent to that of securities rated AA by Standard &
Poor's or Aa by Moody's. If a Municipal Security that at the
time of purchase satisfied the Fund's minimum rating crite-
ria is subsequently downgraded, the Fund will not be re-
quired to dispose of such security. If such a downgrading
occurs, the Investment Adviser will consider what action,
including the sale of such Municipal Security, is in the
best interest of the Fund. The Fund will not continue to
hold Municipal Securities that have been downgraded below
the Fund's credit criteria if more than 10% of the Fund's
total assets would consist of such downgraded securities.
See Appendix A for a description of Municipal Securities
ratings. The credit rating assigned to Municipal Securities
by these rating organizations or by the Investment Adviser
may reflect the existence of guarantees, letters of credit
or other credit enhancement features available to the is-
suers or holders of such Municipal Securities.
Although it does not expect to do so, the Fund may invest
up to 20% of its net assets in taxable investments consist-
ing of obligations issued or guar-
10
<PAGE>
anteed by the U.S. Government, its agencies and instrumen-
talities ("U.S. Government securities") and repurchase
agreements collateralized by U.S. Government securities
("Taxable Investments"). When the Investment Adviser deems
appropriate, the Fund may for temporary defensive purposes
depart from its stated investment objective and invest more
than 20% of its net assets in Taxable Investments. The
Fund's investments in Municipal Securities and Taxable In-
vestments may also generate taxable capital gains. See "Tax-
ation."
THE FUND WILL The Fund will maintain, under normal market conditions, an
NORMALLY average portfolio maturity approximately equal to the aver-
MAINTAIN AN age maturity of the Lehman Brothers 15 Year Municipal Bond
AVERAGE Index, which, as of November 30, 1994, was 14.4 years. The
PORTFOLIO Investment Adviser may, however, increase or decrease such
MATURITY EQUAL average portfolio maturity depending upon the Investment Ad-
TO THAT OF THE viser's expectation for changes in interest rates or market
LEHMAN BROTHERS conditions. There is no limitation as to the permissible
15 YEAR stated maturity of individual securities.
MUNICIPAL BOND
INDEX. Except for the Fund's policy to invest, under normal mar-
ket conditions, at least 80% of its net assets in Municipal
Securities the interest on which is exempt from regular fed-
eral income tax, and except as otherwise stated under "In-
vestment Restrictions," the Fund's investment objective and
policies are not fundamental and may be changed without a
vote of shareholders. If there is a change in the Fund's in-
vestment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their
then current financial positions and needs. There can be no
assurance that the Fund will achieve its investment objec-
tive.
INVESTMENT ADVISER AND ADMINISTRATOR
THE FUND'S The Fund's investment adviser and administrator is Goldman
INVESTMENT Sachs Asset Management, a separate operating division of
ADVISER AND Goldman Sachs. The management services provided by the In-
ADMINISTRATOR vestment Adviser are subject to the general supervision of
IS GOLDMAN the Trust's Board of Trustees. Goldman Sachs Asset Manage-
SACHS ASSET ment and its affiliates serve a wide range of clients in-
MANAGEMENT. cluding private and public pension funds, endowments, foun-
dations, banks, thrifts, insurance companies, corporations,
and private investors and family groups.
Founded in 1869, Goldman Sachs is among the oldest and
largest investment banking firms in the United States.
Goldman Sachs is a leader in virtually every field of in-
vesting and financing, participating in financial markets
worldwide and serving individuals, institutions, corpora-
tions and governments. Goldman Sachs is headquartered in New
York and has offices throughout the United States and in
Beijing, Frankfurt, George Town, Hong Kong, London, Madrid,
Milan, Montreal, Osaka, Paris, Seoul, Shanghai, Singapore,
Sydney, Taipei, Tokyo, Toronto, Vancouver and Zurich.
The Investment Adviser is able to draw on the research and
market expertise of Goldman Sachs, whose investment research
effort is one of the largest in the industry. The in-depth
information and analyses generated by
11
<PAGE>
Goldman Sachs' research analysts, economists and portfolio
strategists are available to the Investment Adviser.
MUNICIPAL SECURITIES AND OTHER INVESTMENTS
GENERAL. Municipal Securities consist of bonds, notes and
other instruments issued by or on behalf of states, territo-
ries and possessions of the United States (including the
District of Columbia) and their political subdivisions,
agencies or instrumentalities, the interest on which, in the
opinion of bond counsel for the issuers or counsel selected
by the Investment Adviser, is exempt from regular federal
income tax (i.e., excluded from gross income for federal in-
come tax purposes but not necessarily exempt from the fed-
eral alternative minimum tax or from state or local taxes).
In addition, participation interests in such securities the
interest on which, in the opinion of counsel, as described
above, is exempt from regular federal income tax are also
Municipal Securities. The Fund may revise its definition of
Municipal Securities in the future to include other types of
securities that currently exist or may be developed and that
are, or will be, in the opinion of counsel, exempt from reg-
ular federal income tax, provided that investing in such se-
curities is consistent with the Fund's investment objective
and policies. The Fund will reflect any such change in its
definition of Municipal Securities in its Prospectus.
Municipal Securities are often issued to obtain funds for
various public purposes, including the construction of a
wide range of public facilities such as bridges, highways,
housing, hospitals, mass transportation, schools, streets
and water and sewer works. Other public purposes for which
Municipal Securities may be issued include refunding out-
standing obligations, obtaining funds for general operating
expenses, and obtaining funds to lend to other public insti-
tutions and facilities. Municipal Securities also include
"private activity bonds" or industrial development bonds,
which are issued by or on behalf of public authorities to
obtain funds for privately-operated housing facilities, air-
port, mass transit or port facilities, sewage disposal,
solid waste disposal or hazardous waste treatment or dis-
posal facilities and certain local facilities for water sup-
ply, gas or electricity. In addition, proceeds of certain
industrial development bonds are used for constructing,
equipping, repairing or improving privately operated indus-
trial or commercial facilities. The interest income from
private activity bonds may subject certain investors to the
federal alternative minimum tax.
THE FUND MAY MUNICIPAL LEASES AND CERTIFICATES OF PARTICIPATION. The
INVEST IN Fund may invest in municipal leases and certificates of par-
MUNICIPAL ticipation in municipal leases. A municipal lease is an ob-
LEASES AND ligation in the form of a lease or installment purchase
CERTIFICATES OF which is issued by a state or local government to acquire
PARTICIPATION equipment and facilities. Certificates of participation rep-
IN MUNICIPAL resent undivided interests in municipal leases, installment
LEASES. purchase agreements or other instruments. The certificates
12
<PAGE>
are typically issued by a trust or other entity which has
received an assignment of the payments to be made by the
state or political subdivision under such leases or install-
ment purchase agreements. The primary risk associated with
municipal lease obligations and certificates of participa-
tion is that the governmental lessee will fail to appropri-
ate funds to enable it to meet its payment obligations under
the lease. Although the obligations may be secured by the
leased equipment or facilities, the disposition of the prop-
erty in the event of nonappropriation or foreclosure might
prove difficult, time consuming and costly, and result in a
delay in recovering or the failure to fully recover the
Fund's original investment. To the extent that the Fund in-
vests in unrated municipal leases or participates in such
leases, the Trustees shall monitor on an ongoing basis the
credit quality rating and risk of cancellation of such
unrated leases. Certain municipal lease obligations and cer-
tificates of participation may be deemed illiquid for the
purpose of the Fund's 15% limitation on investments in il-
liquid securities.
THE FUND MAY MUNICIPAL NOTES. The Fund may invest in municipal notes.
INVEST IN Municipal Securities in the form of notes generally are used
MUNICIPAL to provide for short-term capital needs in anticipation of
NOTES. an issuer's receipt of other revenues or financing, and typ-
ically have maturities of up to three years. Such instru-
ments may include Tax Anticipation Notes, Revenue Anticipa-
tion Notes, Bond Anticipation Notes, Tax and Revenue Antici-
pation Notes and Construction Loan Notes. The obligations of
an issuer of municipal notes are generally secured by the
anticipated revenues from taxes, grants or bond financing.
An investment in such instruments, however, presents a risk
that the anticipated revenues will not be received or that
such revenues will be insufficient to satisfy the issuer's
payment obligations under the notes or that refinancing will
be otherwise unavailable.
THE FUND MAY TAX-EXEMPT COMMERCIAL PAPER. The Fund may invest in tax-
INVEST IN TAX- exempt commercial paper. Commercial paper typically is
EXEMPT short-term, unsecured, negotiable promissory notes. These
COMMERCIAL obligations are issued by state and local governments and
PAPER. their agencies to finance working capital needs of munici-
palities or to provide interim construction financing and
are paid from general revenues of municipalities or are re-
financed with long-term debt.
THE FUND MAY PRE-REFUNDED MUNICIPAL SECURITIES. The Fund may invest in
INVEST IN PRE- pre-refunded Municipal Securities. The principal of and in-
REFUNDED terest on pre-refunded Municipal Securities are no longer
MUNICIPAL paid from the original revenue source for such securities.
SECURITIES. Instead, the source of such payments is typically an escrow
fund consisting of obligations issued or guaranteed by the
U.S. Government. The assets in the escrow fund are derived
from the proceeds of refunding bonds issued by the same is-
suer as the pre-refunded Municipal Securities.
VARIABLE AND FLOATING RATE SECURITIES. The interest rates
payable on certain securities in which the Fund may invest,
which generally are expected
13
<PAGE>
to be revenue obligations, are not fixed and may fluctuate
based upon changes in market rates. A variable rate obliga-
tion has an interest rate which is adjusted at predesignated
periods in response to changes in the market rate of inter-
est on which the obligation's interest rate is based. Unlike
fixed rate instruments, variable and floating rate obliga-
tions do not lock in a particular yield in a changing inter-
est rate environment. Nevertheless, such obligations may
fluctuate in value in response to interest rate changes if a
change in market interest rates does not coincide with the
interest reset date for the obligation.
THE FUND MAY TENDER OPTION BONDS. The Fund may invest in tender option
INVEST IN bonds. A tender option bond is a Municipal Security (gener-
TENDER OPTION ally held pursuant to a custodial arrangement) having a rel-
BONDS. atively 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, which grants the security hold-
ers the option, at periodic intervals, to tender their secu-
rities to the institution and receive the face value there-
of. 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 deter-
mined by a remarketing or similar agent at or near the com-
mencement of such period, that would cause the securities,
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 ac-
cept tendered bonds in the event of certain defaults or a
significant downgrading in the credit rating assigned to the
issuer of the bond. Although the Fund intends to invest in
tender option bonds the interest on which will, in the opin-
ion of bond counsel, counsel for the issuer of interests
therein or counsel selected by the Investment Adviser, be
exempt from regular federal income tax, there is a risk that
the Fund will not be considered the owner of such tender op-
tion bonds and thus will not be entitled to treat such in-
terest as exempt from such tax.
THE FUND MAY ZERO COUPON, DEFERRED INTEREST AND CAPITAL APPRECIATION
INVEST IN ZERO BONDS. The Fund may invest in zero coupon, deferred interest
COUPON, and capital appreciation bonds. Zero coupon, deferred
DEFERRED interest and capital appreciation bonds are debt securities
INTEREST AND issued or sold at a discount from their face value that do
CAPITAL not entitle the holder to any payment of interest prior to
APPRECIATION maturity or a specified commencement or redemption date (or
BONDS. cash payment date). The amount of the discount varies
depending on the time remaining until maturity or cash
payment date, prevailing interest rates, the liquidity of
the security and the perceived credit quality of the issuer.
These securities also may take the form of debt securities
that have been stripped of their unmatured interest coupons,
the coupons themselves or receipts or certificates
representing
14
<PAGE>
interests in such stripped debt obligations or coupons. A
portion of the discount with respect to stripped tax-exempt
securities or their coupons may be taxable. The market
prices of zero coupon, deferred interest and capital
appreciation bonds generally are more volatile than the
market prices of interest-bearing securities and are likely
to respond to a greater degree to changes in interest rates
than interest-bearing securities having similar maturities
and credit quality. The Fund's investments in zero coupon,
deferred interest and capital appreciation bonds or stripped
securities may require the Fund to sell certain of its
portfolio securities to generate sufficient cash to satisfy
certain income distribution requirements. See "Taxation" in
the Additional Statement.
THE FUND MAY INSURED BONDS. The Fund may invest in "insured" Municipal
INVEST IN Securities. Insured Municipal Securities are those for which
INSURED scheduled payments of interest and principal are guaranteed
MUNICIPAL by a private (non-governmental) insurance company. The in-
BONDS. surance entitles the Fund to receive only the face or par
value of the securities held by the Fund. The insurance does
not guarantee the market value of the Municipal Securities
or the value of the shares of the Fund.
THE FUND MAY AUCTION RATE SECURITIES. The Fund may invest in auction
INVEST IN rate securities. Provided that the auction mechanism is suc-
AUCTION RATE cessful, auction rate securities permit the holder to sell
SECURITIES. the securities in an auction at par value at specified in-
tervals. The dividend or interest is reset by "Dutch" auc-
tion in which bids are made by broker-dealers and other in-
stitutions for a certain amount of securities at a specified
minimum yield. The rate set by the auction is the lowest in-
terest or dividend rate that covers all securities offered
for sale. While this process is designed to permit auction
rate securities to be traded at par value, there is the risk
that an auction will fail due to insufficient demand for the
securities. The Fund will take the next scheduled auction
date of the auction rate securities into consideration in
determining the average portfolio maturity of the Fund.
INVERSE FLOATING RATE INSTRUMENTS. While the Fund has no
current intent to do so, the Fund may in the future invest
in "leveraged" inverse floating rate debt instruments ("in-
verse floaters"). Investments in inverse floaters would not
exceed 25% of the Fund's net assets. The interest rate on
inverse floaters resets in the opposite direction from the
market rate of interest to which the inverse floater is in-
dexed. An inverse floater may be considered to be leveraged
to the extent that its interest rate varies by a magnitude
that exceeds the magnitude of the change in the index rate
of interest. The higher the degree of leverage of an inverse
floater the greater the volatility of its market value.
15
<PAGE>
OTHER INVESTMENTS AND PRACTICES
THE FUND MAY INTEREST RATE SWAPS, CAPS, FLOORS AND COLLARS
ENTER INTO
INTEREST RATE In order to hedge against fluctuations in interest rates
SWAPS, CAPS, and to seek to increase total return, the Fund may enter
FLOORS AND into interest rate swaps and other types of swap agreements
COLLARS. such as caps, floors and collars. Interest rate swaps in-
volve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, such as
an exchange of fixed rate payments for floating rate pay-
ments. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payment of interest
on a notional principal amount from the party selling such
interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index
falls below a predetermined interest rate, to receive pay-
ments of interest on a notional principal amount from the
party selling the interest rate floor. An interest rate col-
lar is the combination of a cap and a floor that preserves a
certain return within a predetermined range of interest
rates. Since interest rate swaps, caps, floors and collars
are individually negotiated, the Fund expects to achieve an
acceptable degree of correlation between its portfolio in-
vestments and its swap, cap, floor or collar positions en-
tered into for hedging purposes.
The Fund will enter into interest rate swaps only on a net
basis, which means that the two payment streams are netted
out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments. Interest rate swaps
do not involve the delivery of securities, other underlying
assets or principal. Accordingly, the risk of loss with re-
spect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated
to make. If the other party to an interest rate swap de-
faults, the Fund's risk of loss consists of the net amount
of interest payments that the Fund is contractually entitled
to receive, if any. The Fund will maintain in a segregated
account with the Fund's custodian cash and liquid high grade
debt securities equal to the net amount, if any, of the ex-
cess of the Fund's obligations over its entitlements with
respect to swap transactions. To the extent that the net
amount of a swap is held in a segregated account consisting
of cash and liquid, high grade debt securities, the Fund and
the Investment Adviser believe that swaps do not constitute
senior securities under the Investment Company Act and, ac-
cordingly, will not treat them as being subject to the
Fund's borrowing restriction.
The Fund will not enter into interest rate swap, cap,
floor or collar transactions unless the unsecured commercial
paper, senior debt or claims paying ability of the other
party is rated either AA or A-1 or better by Standard &
Poor's or Aa or P-1 or better by Moody's or, if unrated by
such rating organizations, determined to be of comparable
quality by the Investment Adviser.
The use of interest rate swaps, caps, floors and collars
is a highly specialized activity which involves investment
techniques and risks different from
16
<PAGE>
those associated with ordinary portfolio securities transac-
tions. If the Investment Adviser is incorrect in its fore-
casts of market values and interest rates, the investment
performance of the Fund would be less favorable than it
would have been if these investment techniques were not
used. The staff of the SEC currently takes the position that
swaps, caps, floors and collars are illiquid and thus sub-
ject to the Fund's 15% limitation on illiquid securities.
THE FUND MAY WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
PURCHASE WHEN-
ISSUED The Fund may purchase securities on a when-issued basis.
SECURITIES AND When-issued transactions arise when securities are purchased
ENTER INTO by the Fund with payment and delivery taking place in the
FORWARD future in order to secure what is considered to be an advan-
COMMITMENT tageous price and yield to the Fund at the time of entering
TRANSACTIONS. into the transaction. The Fund may also purchase securities
on a forward commitment basis. In a forward commitment
transaction, the Fund contracts to purchase securities for a
fixed price at a future date beyond the customary settlement
time. The Fund is required to hold and maintain in a segre-
gated account until the settlement date, cash or liquid,
high grade debt obligations in an amount sufficient to meet
the purchase price. Alternatively, the Fund may enter into
offsetting contracts for the forward sale of other securi-
ties that it owns. The purchase of securities on a when-is-
sued or forward commitment basis involves a risk of loss if
the value of the security to be purchased declines prior to
the settlement date. Although the Fund will generally pur-
chase securities on a when-issued or forward commitment ba-
sis with the intention of actually acquiring securities for
its portfolio, the Fund may dispose of a when-issued secu-
rity or forward commitment prior to settlement if the In-
vestment Adviser deems it appropriate to do so.
THE FUND MAY REPURCHASE AGREEMENTS
ENTER INTO
REPURCHASE The Fund may enter into repurchase agreements with dealers
AGREEMENTS. in U.S. Government securities and member banks of the Fed-
eral Reserve System which furnish collateral at least equal
in value or market price to the amount of their repurchase
obligation. In a repurchase agreement, the Fund purchases a
debt security from a seller which undertakes to repurchase
the security at a specified resale price on an agreed future
date (ordinarily a week or less). The resale price generally
exceeds the purchase price by an amount which reflects an
agreed-upon market interest rate for the term of the repur-
chase agreement. The primary risk is that, if the seller de-
faults, the Fund might suffer a loss to the extent that the
proceeds from the sale of the underlying securities and
other collateral held by the Fund in connection with the re-
lated repurchase agreement are less than the repurchase
price. Repurchase agreements maturing in more than seven
days are considered by the Fund to be illiquid. In addition,
the Fund, together with other registered investment compa-
nies having advisory agreements with the Investment Adviser
or any of its affiliates, may
17
<PAGE>
transfer uninvested cash balances into a single joint ac-
count, the daily aggregate balance of which will be invested
in one or more repurchase agreements.
ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its
net assets in securities which are illiquid, including re-
purchase agreements providing for settlement in more than
seven days after notice, interest rate swaps, floors, caps
and collars and certain municipal leases and participations
in Municipal Securities which do not include a right to de-
mand payment of the Fund's interest in the underlying Munic-
ipal Securities. For this purpose not all securities which
are restricted are deemed to be illiquid. For example, re-
stricted securities which the Board of Trustees has deter-
mined to be marketable pursuant to Rule 144A procedures will
not be deemed to be illiquid for purposes of this limita-
tion. Pursuant to such Rule 144A procedures, the Board of
Trustees has authorized the Investment Adviser to make de-
terminations of liquidity for Rule 144A securities. This in-
vestment practice could have the effect of increasing the
level of illiquidity in the Fund to the extent that quali-
fied institutional buyers become for a time uninterested in
purchasing these restricted securities. In addition, a re-
purchase agreement which by its terms can be liquidated be-
fore its nominal fixed term on seven days or less notice is
regarded as a liquid instrument. Subject to the limitations
described above, the Fund may acquire Municipal Securities
or illiquid securities in a private placement.
THE FUND MAY OPTIONS ON SECURITIES AND SECURITIES INDICES. The Fund may
PURCHASE AND write (sell) covered call and put options on any securities
WRITE (SELL) in which it may invest. The Fund may also write call and put
OPTIONS ON options on a securities index composed of securities in
SECURITIES AND which it may invest. In addition, the Fund may purchase put
SECURITIES and call options on any securities in which it may invest or
INDICES. options on any securities index composed of securities in
which it may invest.
The writing and purchase of options is a highly special-
ized activity which involves investment techniques and risks
different from those associated with ordinary portfolio se-
curities transactions. The use of options to increase total
return involves the risk of loss if the Investment Adviser
is incorrect in its expectation of fluctuations in securi-
ties prices or interest rates. The successful use of options
for hedging purposes depends in part on the ability of the
Investment Adviser to predict future price fluctuations and
the degree of correlation between the options and securities
markets. If the Investment Adviser is incorrect in its de-
termination of the correlation between the securities indi-
ces on which options are written and purchased and the secu-
rities in the Fund's
18
<PAGE>
portfolio, the investment performance of the Fund will be
less favorable than it would have been in the absence of
such option transactions. The writing of options could sig-
nificantly increase the Fund's portfolio turnover rate and,
therefore, associated brokerage commissions or spreads.
THE FUND MAY FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. To
ENGAGE IN hedge against changes in interest rates or securities prices
FUTURES or to seek to increase total return, the Fund may purchase
TRANSACTIONS. and sell various kinds of futures contracts, and purchase
and write call and put options on any of such futures con-
tracts. The Fund may also enter into closing purchase and
sale transactions with respect to any of such contracts and
options. The futures contracts may be based on various secu-
rities (such as U.S. Government securities), securities in-
dices and other financial instruments and indices. The Fund
will engage in futures or related options transactions only
for bona fide hedging purposes as defined in regulations of
the Commodity Futures Trading Commission ("CFTC") or to seek
to increase total return to the extent permitted by such
regulations.
The Fund may not purchase or sell futures contracts or
purchase or sell related options to increase total return,
except for closing purchase or sale transactions, if immedi-
ately thereafter the sum of the amount of initial margin de-
posits and premiums paid on the Fund's outstanding positions
in futures and related options entered into for the purpose
of seeking to increase total return would exceed 5% of the
market value of the Fund's net assets. Transactions in
futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts
and options obligating the Fund to purchase securities, re-
quire the Fund to segregate cash or liquid, high grade debt
securities with a value equal to the amount of the Fund's
obligations.
While transactions in futures contracts and options on
futures may reduce certain risks, such transactions them-
selves entail certain other risks. See "Investment Objec-
tives and Policies--Futures Contracts and Options on Futures
Contracts" in the Additional Statement. Thus, while the Fund
may benefit from the use of futures and options on futures,
unanticipated changes in interest rates may result in a
poorer overall performance for the Fund than if it had not
entered into any futures contracts or options transactions.
The loss incurred by the Fund in writing options on futures
is potentially unlimited and may exceed the amount of the
premium received.
The use of futures may increase the volatility of the
Fund's net asset value. The profitability of the Fund's
trading in futures to increase total return will depend on
the Investment Adviser's ability to correctly analyze the
futures markets. In addition, because of the low margin de-
posits normally required in futures trading, a relatively
small price movement in a futures contract may result in
substantial losses to the Fund. Further, futures trading may
be illiquid,
19
<PAGE>
and exchanges may limit fluctuations in commodity contract
prices during a single day.
In the event of an imperfect correlation between a futures
position and a portfolio position which is intended to be
protected, the desired protection may not be obtained and
the Fund may be exposed to risk of loss. Perfect correlation
between the Fund's futures positions and portfolio positions
will be impossible to achieve. The Fund's transactions in
options and futures contracts may be limited by the require-
ments of the Code for qualification as a regulated invest-
ment company.
THE FUND MAY OTHER INVESTMENT COMPANIES
INVEST IN THE
SECURITIES OF The Fund reserves the right to invest up to 10% of its to-
OTHER tal assets, calculated at the time of purchase, in the secu-
INVESTMENT rities of other investment companies including business de-
COMPANIES. velopment companies and small business investment companies.
The Fund may not invest more than 5% of its total assets in
the securities of any one investment company or acquire more
than 3% of the voting securities of any other investment
company. Pursuant to an exemptive order obtained from the
SEC, other investment companies in which the Fund may invest
include money market funds for which the Investment Adviser
or any of its affiliates serves as investment adviser. The
Fund will indirectly bear its proportionate share of any
management fees and other expenses paid by investment compa-
nies in which it invests in addition to the advisory and ad-
ministration fees paid by the Fund. However, to the extent
that the Fund invests in a money market fund for which the
Investment Adviser or any of its affiliates acts as adviser,
the advisory and administration fees payable by the Fund to
the Investment Adviser will be reduced by an amount equal to
the Fund's proportionate share of the advisory and adminis-
tration fees paid by such money market fund to the Invest-
ment Adviser or any of its affiliates.
THE FUND MAY LENDING OF PORTFOLIO SECURITIES
EARN ADDITIONAL
INCOME BY The Fund may seek to increase its income by lending port-
LENDING folio securities. Under present regulatory policies, such
PORTFOLIO loans may be made to institutions, such as certain brokers-
SECURITIES. dealers, and are required to be secured continuously by col-
lateral in cash, cash equivalents, or U.S. Government secu-
rities maintained on a current basis in an amount at least
equal to the market value of the securities loaned. Cash
collateral may be invested in cash equivalents. If the In-
vestment Adviser determines to make securities loans, the
value of the securities loaned may not exceed 33 1/3% of the
value of the total assets of the Fund. See "Investment Re-
strictions" in the Additional Statement. The Fund may expe-
rience a loss or delays in the recovery of its securities if
the institution with which it has engaged in a portfolio
loan transaction breaches its agreement with the Fund.
20
<PAGE>
RISK FACTORS
An investment in the Fund presents certain risks, in addi-
tion to those described above, including the following:
NET ASSET VALUE VOLATILITY. The net asset value of the
Fund's shares will change with changes in the value of its
portfolio securities. Because, under normal market condi-
tions, the Fund invests primarily in fixed income Municipal
Securities, the net asset value of the shares of the Fund
can be expected to change as general levels of interest
rates fluctuate. Volatility may be greater during periods of
general economic uncertainty and interest rate fluctuations.
The volatility of Municipal Securities may differ from other
fixed income securities.
YIELDS AND MARKET VALUES OF MUNICIPAL SECURITIES. The
yields and market values of Municipal Securities are deter-
mined primarily by the general level of interest rates, the
supply of and demand for Municipal Securities, the credit-
worthiness of the issuers of Municipal Securities and eco-
nomic and political conditions affecting such issuers. Due
to their tax-exempt status, the yields and market values of
Municipal Securities may be adversely affected by certain
factors, such as changes in tax rates and policies, which
may have less of an effect on the taxable fixed income mar-
kets. Moreover, certain types of Municipal Securities, such
as housing revenue bonds, which are based on mortgage reve-
nues, involve prepayment risks which could affect the yields
of such Municipal Securities.
When interest rates decline, the value of a portfolio of
Municipal Securities (with the exception of variable and
floating rate securities) can be expected to rise. Converse-
ly, when interest rates rise, the value of a portfolio of
Municipal Securities can be expected to decline. There can
be no assurance, however, as to the future level or direc-
tion of interest rates.
Certain types of instruments in which the Fund invests,
such as zero-coupon, deferred interest and capital apprecia-
tion bonds, are more susceptible than short or intermediate
term securities to fluctuations as a result of movements in
interest rates. As a result, a sudden and extreme rise in
interest rates could result in a substantial decline in the
value of such portfolio securities. The ability of the Fund
to achieve the capital preservation aspect of its investment
objective therefore depends in part on the extent to which
the Fund is able to anticipate and respond to fluctuations
in market interest rates and to utilize appropriate strate-
gies to maximize returns to the Fund, while attempting to
minimize the associated risks to its invested capital.
21
<PAGE>
DEFAULT RISK. Investments in Municipal Securities, includ-
ing general obligations and revenue obligations, are subject
to the risk that the issuer could default on its obliga-
tions, and the Fund could sustain losses on such invest-
ments. Such a default could result from the inadequacy of
the sources or revenues from which interest and principal
payments are to be made or the assets collateralizing such
obligations. Revenue obligations, including private activity
bonds, municipal leases, certificates of participation and
certain other types of instruments in which the Fund may in-
vest, are backed only by specific assets or revenue sources
and not by the full faith and credit of the governmental is-
suer.
TAX CONSEQUENCES. While the Fund, under normal market con-
ditions, invests substantially all of its assets in Munici-
pal Securities, the recognition of accrued market discount
income (if the Fund acquires Municipal Securities or other
obligations at a market discount) and income and/or capital
gains from certain types of instruments in which the Fund is
permitted to invest, including U.S. Government securities,
interest rate swaps, caps, floors and collars, futures con-
tracts and related options, securities loans, the disposi-
tion of when-issued securities or forward commitments prior
to settlement and repurchase agreements, will result in tax-
able income, distributions of which will be taxable to
shareholders. In addition, the Fund's investments in private
activity bonds subject to the federal alternative minimum
tax could result in income the distribution of which could
cause or increase alternative minimum tax liability for some
shareholders. The Fund may also generate capital gains from
the disposition of its investments and its distributions of
such capital gains will be taxable to shareholders. Share-
holders may be subject to state, local or foreign taxes on
certain income received from the Fund. See "Taxation."
Because interest income from Municipal Securities is not
subject to regular federal income taxation, the attractive-
ness of Municipal Securities in relation to other investment
alternatives is affected by changes in federal income tax
rates applicable to, or the continuing federal income tax-
exempt status of, such interest income. Any proposed or ac-
tual changes in such rates or exempt status, therefore, can
significantly affect both the supply of and demand for Mu-
nicipal Securities, which could in turn affect the Fund's
ability to acquire and dispose of Municipal Securities at
desirable yield and price levels.
CALL RISK AND REINVESTMENT RISK. The Municipal Securities
in which the Fund invests may include "call" provisions
which permit the issuers of such securities, at any time or
after a specified period, to redeem the securities prior to
their stated maturity. In the event that Municipal Securi-
ties held in the Fund's portfolio are called prior to matu-
rity, the Fund will be required to reinvest the proceeds re-
ceived on such securities at an earlier date and may be
22
<PAGE>
able to do so only at lower yields, thereby reducing the
Fund's return on its portfolio securities. There is a risk
that the proceeds of housing revenue bonds will be in excess
of demand for mortgages, which would result in early retire-
ment of the bonds by the issuer. Moreover, such housing rev-
enue bonds depend for their repayment upon the cash flow
from the underlying mortgages, which cannot be precisely
predicted when the bonds are issued. Any difference in the
actual cash flow from such mortgages from the assumed cash
flow could have an adverse impact upon the ability of the
issuer to make scheduled payments of principal and interest
on the bonds or could result in early retirement of the
bonds.
COUNTERPARTY CREDIT RISK. When the Fund enters into cer-
tain transactions, including repurchase agreements, stand-by
commitments (described in the Additional Statement), over-
the-counter options, interest rate swaps, caps, floors and
collars and securities lending transactions, it assumes the
risk that its counterparty will default on its obligations
to the Fund, which could result in losses.
RISKS OF DERIVATIVE TRANSACTIONS. The Fund's transactions
in interest rate swaps, caps, floors and collars, options,
futures and options on futures involve certain risks, in-
cluding a possible lack of correlation between changes in
the value of hedging instruments and the portfolio assets
being hedged, the potential illiquidity of the markets for
derivative instruments, the risks arising from the margin
requirements and related leverage factors associated with
such transactions. The use of these management techniques to
seek to increase total return also involves the risk of loss
if the Investment Adviser is incorrect in its expectations
of fluctuations in securities prices or interest rates.
INVESTMENT RESTRICTIONS
CERTAIN OF THE The Fund is subject to certain investment restrictions
FUND'S which, as described in more detail in the Additional State-
INVESTMENT ment, have been adopted by the Trust on behalf of the Fund
RESTRICTIONS as fundamental policies that cannot be changed without the
CAN BE CHANGED approval of a majority of the outstanding shares of the
ONLY BY Fund. Among other restrictions, the Fund may not, with re-
SHAREHOLDER spect to 75% of its total assets, purchase securities of any
VOTE. one issuer (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if
more than 5% of its total assets would be invested in such
issuer. In addition, the Fund will limit its investments so
that less than 25% of the Fund's total assets will be in-
vested in the securities of issuers in any one industry. For
the purposes of this restriction, state and municipal gov-
ernments and their agencies and instrumentalities are not
deemed to be industries in connection with the issuance of
tax-exempt
23
<PAGE>
securities. Thus, the Fund may invest 25% or more of the
value of its total assets in Municipal Securities which are
related in such a way that an economic, business or politi-
cal development or change affecting one Municipal Security
would also affect other Municipal Securities. For example,
the Fund may so invest in (a) Municipal Securities the in-
terest on which is paid solely from revenues of similar pro-
jects such as hospitals, electric utility systems, multi-
family housing, nursing homes, commercial facilities (in-
cluding hotels), steel companies or life care facilities,
(b) Municipal Securities whose issuers are in the same
state, or (c) industrial development obligations. The Fund
may not borrow money, except from banks for temporary or
short-term purposes, in connection with redemptions and
failed settlements and to finance certain additional pur-
chases of securities, provided that the Fund maintains asset
coverage of at least 300% for all such borrowing. As a mat-
ter of non-fundamental policy, the Fund may not purchase se-
curities while such borrowing exceeds 5% of the value of the
Fund's assets. For a more complete description of the in-
vestment restrictions to which the Fund is subject, see the
Additional Statement.
PORTFOLIO TURNOVER
THE FUND MAY The Fund may engage in active short-term trading to bene-
ENGAGE IN fit from yield disparities among different issues of Munici-
ACTIVE TRADING. pal Securities, to seek short-term profits during periods of
fluctuating interest rates or for other reasons. Such trad-
ing will increase the Fund's portfolio turnover rate and may
therefore increase the incidence of short-term capital gains
(distributions of which are taxable to shareholders as ordi-
nary income). A high rate of portfolio turnover (100% or
higher) involves correspondingly greater expenses which must
be borne by the Fund and its shareholders and may under cer-
tain circumstances make it more difficult for the Fund to
qualify as a regulated investment company under the Code.
The portfolio turnover rate is calculated by dividing the
lesser of sales or purchases of portfolio securities by the
average monthly value of the Fund's portfolio securities,
excluding securities having a maturity at the date of pur-
chase of one year or less.
MANAGEMENT
THE TRUSTEES TRUSTEES AND OFFICERS
ARE RESPONSIBLE
FOR THE OVERALL The Trust's Board of Trustees is responsible for deciding
MANAGEMENT AND matters of general policy and reviewing the actions of the
SUPERVISION OF Investment Adviser, administrator, distributor and transfer
THE FUND'S agent. The officers of the Trust conduct and supervise the
BUSINESS. Fund's daily business operations. The Additional Statement
contains information as to the identity of, and other infor-
mation about, the Trustees and officers of the Trust.
24
<PAGE>
GOLDMAN SACHS INVESTMENT ADVISER AND ADMINISTRATOR
ASSET
MANAGEMENT, INVESTMENT ADVISER. Goldman Sachs Asset Management, One
ACTING UNDER New York Plaza, New York, New York 10004, a separate operat-
THE SUPERVISION ing division of Goldman Sachs, acts as the investment ad-
OF THE viser and administrator of the Fund. Goldman Sachs was reg-
TRUSTEES, istered as an investment adviser in 1981. As of January 31,
MANAGES THE 1995, Goldman Sachs Asset Management, together with its af-
FUND'S filiates, acted as investment adviser, administrator or dis-
INVESTMENTS. tributor for approximately $48.7 billion in assets.
Under its Investment Advisory Agreement with the Fund,
Goldman Sachs Asset Management, subject to general supervi-
sion by the Trust's Board of Trustees, oversees the invest-
ment of the Fund's assets. Goldman Sachs has agreed to per-
mit the Trust to use the name "Goldman Sachs" or a deriva-
tive thereof as part of the Fund's name for as long as the
Investment Advisory Agreement is in effect.
The Fund's portfolio manager is Mr. Mark Muller. Mr.
Muller joined Goldman Sachs Asset Management in 1991 and is
currently a Vice President. Prior to 1991, he was a senior
portfolio manager for Van Kampen Merritt Investment Advisory
Corporation, where he was responsible for actively managing
a wide variety of municipal securities portfolios.
It is the responsibility of the Investment Adviser to make
investment decisions for the Fund and to place the purchase
and sale orders for the Fund's portfolio transactions. Such
orders may be directed to any broker including, to the ex-
tent and in the manner permitted by applicable law, Goldman
Sachs or its affiliates.
THE FUND PAYS As compensation for the services rendered to the Fund by
GOLDMAN SACHS Goldman Sachs Asset Management pursuant to the Investment
ASSET Advisory Agreement and the assumption by Goldman Sachs Asset
MANAGEMENT AN Management of the related expenses, the Fund pays Goldman
ADVISORY FEE AT Sachs Asset Management a fee, computed daily and payable
AN ANNUAL RATE monthly, at an annual rate equal to 0.40% of the Fund's av-
EQUAL TO 0.40% erage daily net assets. At various times during the fiscal
OF AVERAGE NET year ended October 31, 1994, Goldman Sachs Asset Management
ASSETS. waived part or all of its investment advisory fee. The aver-
age annual rate for the period was .08%. Goldman Sachs Asset
Management has voluntarily agreed to reduce or limit certain
"Other Expenses" of the Fund (excluding advisory, adminis-
tration and distribution and service fees, taxes, interest
and brokerage and litigation, indemnification and other ex-
traordinary expenses) to the extent such expenses exceed
0.05% per annum of the Fund's average net assets. Such re-
ductions or limits, if any, are calculated monthly on a cu-
mulative basis and may be discontinued or modified by
Goldman Sachs Asset Management at its discretion at any
time. Goldman Sachs Asset Management has voluntarily agreed
to reduce the fees
25
<PAGE>
payable to it (to the extent of its fees) by the amount, if
any, that the Fund's expenses would exceed the applicable
expense limitations imposed by state securities administra-
tors. See "Management--Expenses" in the Additional State-
ment.
ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER
ACCOUNTS MANAGED BY GOLDMAN SACHS. The involvement of the
Investment Adviser and Goldman Sachs and their affiliates in
the management of, or their interest in, other accounts and
other activities of Goldman Sachs may present conflicts of
interest with respect to the Fund or limit its investment
activities. Goldman Sachs and its affiliates engage in pro-
prietary trading and advise accounts and funds which have
investment objectives similar to those of the Fund and/or
which engage in and compete for transactions in the same
types of securities, and instruments as the Fund. Goldman
Sachs and its affiliates will not have any obligation to
make available any information regarding their proprietary
activities or strategies, or the activities or strategies
used for other accounts managed by them, for the benefit of
the management of the Fund and it is not anticipated that
the Investment Adviser will have access to proprietary in-
formation for the purpose of managing the Fund. The results
of the Fund's investment activities, therefore, may differ
from those of Goldman Sachs and its affiliates and it is
possible that the Fund could sustain losses during periods
in which Goldman Sachs and its affiliates and other accounts
achieve significant profits on their trading for proprietary
or other accounts. From time to time, the Fund's activities
may be limited because of regulatory restrictions applicable
to Goldman Sachs and its affiliates, and/or their internal
policies designed to comply with such restrictions. See "Ac-
tivities of Goldman Sachs and its Affiliates and Other Ac-
counts Managed by Goldman Sachs" in the Additional Statement
for further information.
THE FUND PAYS ADMINISTRATOR. As administrator, pursuant to an Adminis-
GOLDMAN SACHS tration Agreement with the Fund, Goldman Sachs Asset Manage-
ASSET ment provides personnel for supervisory, administrative, and
MANAGEMENT AN clerical functions; oversees the performance of administra-
ADMINISTRATION tive and professional services to the Fund by others;
FEE AT AN provides office facilities; and prepares, but does not pay
ANNUAL RATE for, reports to shareholders, the SEC and other regulatory
EQUAL TO 0.15% authorities. As compensation for the services rendered to
OF AVERAGE the Fund by Goldman Sachs Asset Management pursuant to the
DAILY NET Administration Agreement, the Fund pays Goldman Sachs Asset
ASSETS. Management a fee, computed daily and payable monthly, at an
annual rate equal to 0.15% of the Fund's average daily net
assets. At various times during the fiscal year ended Octo-
ber 31, 1994, Goldman Sachs Asset Management waived part or
all of its administration fee. The average annual rate for
the period was .13%. Goldman Sachs Asset Management has
agreed to reduce its fees payable (to the extent of its
fees) by the amount (if any) that the Fund's
26
<PAGE>
expenses exceed the applicable expense limitations imposed
by state securities administrators. See "Management--Ex-
penses" in the Additional Statement.
Goldman Sachs may from time to time, at its own expense,
provide compensation to certain Authorized Dealers for per-
forming administrative services for their customers. These
services include maintaining account records, processing or-
ders to purchase, redeem and exchange Fund shares and re-
sponding to certain customer inquiries. The amount of such
compensation may be up to 0.10% annually of the average
daily net assets of the Fund attributable to shares held by
customers of such Authorized Dealers. In addition, Goldman
Sachs may from time to time, at its own expense, provide
compensation to certain Authorized Dealers who perform
administrative services with respect to depository institu-
tions whose customers purchase shares of the Fund. These
services include responding to certain inquiries from and
providing written materials to depository institutions about
the Fund; furnishing advice about and assisting depository
institutions in obtaining from state regulatory agencies any
rulings, exemptions or other authorizations that may be re-
quired to conduct a mutual fund sales program; acting as li-
aison between depository institutions and national regula-
tory organizations; assisting with the preparation of sales
material; and providing general assistance and advice in es-
tablishing and maintaining mutual fund sales programs on the
premises of depository institutions. The amount of such com-
pensation may be up to .08% annually of the average daily
net assets of the Fund attributable to shares purchased
through, and held by the customers of, such depository in-
stitutions. Such compensation does not represent an addi-
tional expense to the Fund or its shareholders, since it
will be paid from the assets of Goldman Sachs or its affili-
ates.
DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 85 Broad Street, New York, New York, serves
as the exclusive distributor of the Fund's shares. Shares
may also be sold by Authorized Dealers. Authorized Dealers
include investment dealers that are members of the NASD and
certain other financial service firms. To become an Autho-
rized Dealer, a dealer or financial service firm must enter
into a sales agreement with Goldman Sachs. The minimum in-
vestment requirements, services, programs and purchase and
redemption options for shares purchased through a particular
Authorized Dealer may be different from those available to
investors purchasing through other Authorized Dealers.
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois, also
serves as the Fund's transfer agent (the "Transfer Agent")
and as such performs various shareholder servicing func-
tions. As compensation for the services rendered to the Fund
by Goldman Sachs as transfer agent and the assumption by
27
<PAGE>
Goldman Sachs of the expenses related thereto, Goldman Sachs
is entitled to receive a fee with respect to the Fund equal
to $12,000 per year plus $3.50 per account, together with
out-of-pocket and transaction-related expenses (including
those out-of-pocket expenses payable to servicing agents).
Shareholders with inquiries regarding the Fund should con-
tact Goldman Sachs (as Transfer Agent) at the address or the
telephone number set forth on the inside front cover page of
this Prospectus.
REPORTS TO SHAREHOLDERS
THE FUND WILL
FURNISH
SHAREHOLDERS
WITH SEMI- Shareholders will receive an annual report containing au-
ANNUAL AND dited financial statements and a semi-annual report. Each
ANNUAL REPORTS shareholder will also be provided with a printed confirma-
AND QUARTERLY tion for each transaction in the shareholder's account and
STATEMENTS. an individual quarterly account statement. A year-to-date
statement for any account will be provided upon request made
to Goldman Sachs. The Fund does not generally provide sub-
accounting services.
PURCHASE OF SHARES
Shares of the Fund may be purchased in any amount (subject
to the minimum investment requirement) through any Autho-
rized Dealer (including Goldman Sachs) on any Business Day
(as defined under "Additional Information") at the net asset
value next determined after receipt of an order, plus the
applicable sales charge. The sales charge will vary with the
size of the purchase as shown in the table below and under
certain other conditions as described below. The Fund re-
ceives the net asset value per share, while the sales charge
is divided between Goldman Sachs and the Authorized Dealer.
If by the close of regular trading on the New York Stock Ex-
change (currently 3:00 p.m. Chicago time, 4:00 p.m. New York
time), a purchase order is received by Goldman Sachs or an
Authorized Dealer, the price per share will be based on the
net asset value computed on the day the purchase order is
received. Purchased shares will be issued as of the time of
such computation on that day. See "Net Asset Value."
HOW TO PURCHASE PURCHASE PROCEDURES
SHARES.
Purchases of shares may be made by check (except that a
check drawn on a foreign bank will not be accepted), Federal
Reserve draft, Federal Funds wire, ACH transfer or bank
wire. Checks or Federal Reserve drafts should be made pay-
able as follows: (i) to an investor's Authorized Dealer, if
purchased through such Authorized Dealer, or (ii) to
"Goldman Sachs Trust--Goldman Sachs Municipal Income Fund,"
and should be directed to Goldman Sachs Trust--Goldman Sachs
Municipal Income Fund, c/o National Financial Data
28
<PAGE>
Services, Inc. ("NFDS"), P.O. Box 419711, Kansas City, MO
64141-6711. Federal Funds wires, ACH transfers and bank
wires should be sent to State Street Bank and Trust Company
("State Street"). Payment by check, Federal Reserve draft,
Federal Funds wire, ACH transfer or bank wire must be re-
ceived within five business days of receipt of the purchase
order by the Fund, Goldman Sachs or an Authorized Dealer.
Dividends will begin on purchased shares on the calendar day
after the date payment is received in the manner described
above. An investor's Authorized Dealer is responsible for
forwarding payment promptly to the Fund.
In order to make an initial investment in the Fund, an in-
vestor must establish an account with the Fund by furnishing
necessary information to the Fund, Goldman Sachs or any Au-
thorized Dealer. An Account Information Form, a copy of
which is attached to this Prospectus, should be used to es-
tablish such an account. The Fund reserves the right to ref-
use to open an account for, or to close the account of, any
investor who fails to (1) provide a social security number
or other taxpayer identification number, or (2) certify that
such number is correct (if required to do so under applica-
ble law) in establishing an account. Subsequent purchases of
shares may also be made in the manner set forth in the pre-
ceding paragraph.
AN INITIAL The minimum initial investment in the Fund is $1,500, ex-
INVESTMENT MUST cept in connection with the special investment programs de-
BE AT LEAST scribed below, purchases by certain institutional investors
$1,500. as described below, and in conjunction with various monthly
accumulation plans established with certain Authorized Deal-
ers. The minimum initial investment in the Fund is currently
$50,000 for unitholders or shareholders of Goldman Sachs
Money Market Trust, GS Core Fixed Income Fund, GS Short-Term
Government Agency Fund, GS Adjustable Rate Government Agency
Fund, GS Short Duration Tax-Free Fund or GS Government
Agency Portfolio (for Financial Institutions) that are
banks, trust companies or other types of depository institu-
tions. These requirements may be waived at the discretion of
the Trust's officers. Except in connection with certain in-
vestment programs, a minimum of $50 is required for subse-
quent investments. The Fund reserves the right to redeem
shares of any shareholder whose account balance is less than
$50 as a result of earlier redemptions. Such redemptions
will not be implemented if the value of a shareholder's ac-
count falls below the minimum account balance solely as a
result of market conditions. The Fund will give sixty (60)
days' prior written notice to shareholders whose shares are
being redeemed to allow them to purchase sufficient addi-
tional shares of the Fund to avoid such redemption. In addi-
tion, the Fund and Goldman Sachs reserve the right to modify
the minimum investment, the manner in which shares are of-
fered and the sales charge rates applicable to future pur-
chases of shares.
29
<PAGE>
THE SALES OFFERING PRICE
CHARGE MAY VARY
DEPENDING ON
THE DOLLAR
AMOUNT INVESTED
IN THE FUND(S).
The offering price is the next determined net asset value
per share plus a sales charge, if any, paid at the time of
purchase of shares of the Fund as shown in the following ta-
ble:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS MAXIMUM
A PERCENTAGE OF PERCENTAGE OF DEALER ALLOWANCE
AMOUNT OF PURCHASE OFFERING NET AMOUNT AS PERCENTAGE OF
(INCLUDING SALES CHARGE, IF ANY) PRICE INVESTED OFFERING PRICE
-------------------------------- --------------- --------------- ----------------
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.00%
$100,000 up to (but less
than) $250,000 3.00% 3.09% 2.50%
$250,000 up to (but less
than) $500,000 2.50% 2.56% 2.00%
$500,000 up to (but less
than)
$1 million 2.00% 2.04% 1.75%
$1 million up to (but
less than) $3 million 1.25% 1.27% 1.15%
$3 million or more 0.00 0.00 *
</TABLE>
----------
* Goldman Sachs may pay a commission equal to 0.30% of the
amount of shares purchased to Authorized Dealers who
initiate or are responsible for purchases of $3 million or
more of shares of the Fund, provided such shares remain in
the Fund at least twelve months.
In addition to concessions allowed to Authorized Dealers,
Goldman Sachs may, from time to time, assist Authorized
Dealers by, among other things, providing sales literature
to, and holding informational programs for the benefit of,
Authorized Dealers' registered representatives. Authorized
Dealers may limit the participation of registered represent-
atives in such informational programs by means of sales in-
centive programs which may require the sale of minimum dol-
lar amounts of shares of the Goldman Sachs Portfolios.
Goldman Sachs may also provide additional promotional incen-
tives to Authorized Dealers in connection with sales of
shares of the Goldman Sachs Portfolios. These incentives may
include payment for travel expenses, including lodging in-
curred in connection with trips taken by qualified regis-
tered representatives and members of their families within
or without the United States. Incentive payments will be
provided for out of the sales charge and distribution fees
or out of Goldman Sachs' other resources. Other than sales
charges and distribution fees, the Fund and its shareholders
do not bear distribution expenses. An Authorized Dealer re-
ceiving such incentives may be deemed to be an underwriter
under the Securities Act of 1933. In some instances, such
incentives may be made available only to certain Authorized
Dealers whose representatives have sold or are expected to
sell significant amounts of shares.
30
<PAGE>
Shares of the Fund may be sold at net asset value without
payment of any sales charge to (a) Goldman Sachs, its affil-
iates or their respective officers, partners, directors or
employees (including retired employees and former partners),
any partnership of which Goldman Sachs is a general partner,
any Trustee or officer of the Trust and designated family
members of any of the above individuals; (b) qualified re-
tirement plans of Goldman Sachs; (c) trustees or directors
of investment companies for which Goldman Sachs or an affil-
iate acts as sponsor; (d) any employee or registered repre-
sentative of any Authorized Dealer or their respective
spouses and minor children; (e) institutional investors, in-
cluding insurance companies, broker-dealers, discretionary
accounts of investment advisers with at least $100 million
under management for the last twelve months and business en-
tities that have either gross assets of at least $100 mil-
lion or publicly traded securities outstanding; (f)
unitholders or shareholders of Goldman Sachs Money Market
Trust, GS Core Fixed Income Fund, GS Short-Term Government
Agency Fund, GS Adjustable Rate Government Agency Fund, GS
Short Duration Tax-Free Fund or GS Government Agency Portfo-
lio (for Financial Institutions) that are banks, trust com-
panies or other types of depository institutions; (g) any
state, county or city, or any instrumentality, department,
authority or agency thereof, which is prohibited by applica-
ble investment laws from paying a sales charge or commission
in connection with the purchase of shares of the Fund; (h)
pension and profit sharing plans, pension funds or other
benefit plans sponsored by state and municipal governments
and by certain business entities, and Taft-Hartley plans,
provided any such plan has a minimum of $25 million under
management; (i) qualified non-profit organizations, founda-
tions and endowments that have gross assets of at least $100
million; and (j) shareholders whose purchase is attributable
to redemption proceeds (subject to appropriate documenta-
tion) from a registered open-end management investment com-
pany not distributed or managed by Goldman Sachs or its af-
filiates, if such redemption has occurred no more than 60
days prior to the purchase of shares of the Fund and the
shareholder either (i) paid an initial sales charge or (ii)
was at some time subject to a deferred sales charge with re-
spect to the redemption proceeds. In order to take advantage
of these exemptions, a purchaser must certify its eligibil-
ity for an exemption to Goldman Sachs on its Account Infor-
mation Form and must certify on such Form that it will no-
tify Goldman Sachs if, at the time of additional purchase,
it is no longer eligible for an exemption. Goldman Sachs re-
serves the right to request additional certification or in-
formation from a purchaser in order to verify that such pur-
chaser is eligible for an exemption. Goldman Sachs reserves
the right to limit the participation in the Fund of its
partners and employees. In addition, under certain circum-
stances, dividends or distributions from any Goldman Sachs
Portfolio may be reinvested in shares of the Fund at net as-
set value, as described under "Cross-Reinvestment of Divi-
dends and Distributions."
31
<PAGE>
OTHER PURCHASE INFORMATION
Information concerning purchases of shares through an Au-
thorized Dealer should be obtained directly from the Autho-
rized Dealer. In the case of purchases made through the in-
vestor's Authorized Dealer, it is the responsibility of such
Authorized Dealer to promptly forward payment to the Fund
for shares being purchased. Authorized Dealers who receive a
portion of the sales charge applicable to the purchase of
shares of the Fund will not be permitted to impose any other
fees in connection with the purchase of such shares.
If shares of the Fund are held in a "street name" account
with an Authorized Dealer, all recordkeeping, transaction
processing and payments of distributions relating to the
beneficial owner's account will be performed by the Autho-
rized Dealer, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's
transactions, a beneficial owner should contact the Autho-
rized Dealer to purchase, redeem or exchange shares, to make
changes in or give instructions concerning the account or to
obtain information about the account. The transfer of shares
in a "street name" account to an account with another dealer
or to an account directly with the Fund involves special
procedures and will require the beneficial owner to obtain
historical purchase information about the shares in the ac-
count from the Authorized Dealer.
The Fund and Goldman Sachs each reserves the right to re-
ject any specific purchase order (including exchanges) or to
restrict purchases or exchanges by a particular purchaser
(or group of related purchasers). The Fund or Goldman Sachs
may reject or restrict purchases or exchanges of shares by a
particular purchaser or group, for example, when a pattern
of frequent purchases and sales of shares of the Fund is ev-
ident, or if the purchase and sale or exchange orders are,
or a subsequent abrupt redemption might be, of a size that
would disrupt management of the Fund.
REINVESTMENT OF REDEMPTION PROCEEDS
A shareholder whose shares are redeemed may reinvest at
net asset value any portion or all of his redemption pro-
ceeds (plus that amount necessary to acquire a fractional
share to round off his purchase to the nearest full share)
in shares of the Fund or any other Goldman Sachs Portfolio.
Shareholders should obtain and read the applicable prospec-
tuses of such other funds and consider their objectives,
policies and applicable fees carefully before investing in
any of such funds. This reinvestment privilege is subject to
the condition that the shares redeemed have been held for at
least thirty (30) days before the redemption and that the
reinvestment is effected within ninety (90) days after such
redemption. Shares are sold to a reinvesting shareholder at
the net asset value next determined following timely receipt
by Goldman Sachs
32
<PAGE>
or an Authorized Dealer of a written purchase order indicat-
ing that the shares are eligible for reinvestment at net as-
set value.
A reinvesting shareholder may realize a gain or loss for
federal tax purposes as a result of such redemption. If the
redemption occurs within ninety (90) days after the original
purchase of the shares, any sales charge paid on the origi-
nal purchase cannot be taken into account by a shareholder
reinvesting at net asset value pursuant to the reinvestment
privilege for purposes of determining gain or loss realized
on the redemption, but instead will be added to the tax ba-
sis of the shares received in the reinvestment. To the ex-
tent that any loss is realized and shares of the same Fund
are purchased within thirty (30) days before or after the
redemption, some or all of the loss generally may not be al-
lowed as a deduction depending upon the number of shares
purchased. Shareholders should consult their own tax advis-
ers concerning the tax consequences of a reinvestment.
Shareholders should consult their own tax advisers concern-
ing the tax consequences of a reinvestment. Upon receipt of
a written request, the reinvestment privilege may be exer-
cised once annually by a shareholder.
INVESTORS MAY RIGHT OF ACCUMULATION
QUALIFY FOR A
REDUCED SALES A shareholder qualifies for cumulative quantity discounts
CHARGE. if the current purchase price of the new investment plus the
shareholder's current holdings of existing shares (acquired
by purchase or exchange) of the Fund and shares of any other
Goldman Sachs Portfolio total the requisite amount for re-
ceiving a discount. For example, if a shareholder owns
shares with a current market value of $60,000 and purchases
additional shares with a purchase price of $40,000, the
sales charge for the $40,000 purchase would be 3.0% (the
rate applicable to a single purchase of $100,000). Shares
purchased without the imposition of a sales charge may not
be aggregated with shares purchased subject to a sales
charge. Shares of the Fund and any other Goldman Sachs Port-
folio purchased (i) by an individual, his spouse and his mi-
nor children, and (ii) by a trustee, guardian or other fidu-
ciary of a single trust estate or a single fiduciary ac-
count, will be combined for the purpose of determining
whether a purchase will qualify for such right of accumula-
tion and, if qualifying, the applicable sales charge level.
For purposes of applying the right of accumulation, shares
of the Fund and any other Goldman Sachs Portfolio purchased
by an existing client of the Private Client Services Divi-
sion of Goldman Sachs will be combined with shares held by
any other account over which such client or the client's
spouse exercises investment or voting power. In addition,
shares of the Fund and shares of any other Goldman Sachs
Portfolio purchased by partners, directors, officers or em-
ployees of the same business organization or by groups of
individuals represented by and investing on the recommenda-
tion of the same accounting firm or other similar organiza-
tion (collectively, "eligible
33
<PAGE>
persons") may be combined for the purpose of determining
whether a purchase will qualify for the right of accumula-
tion and, if qualifying, the applicable sales charge level.
This right of accumulation is subject to the following con-
ditions: (i) the business organization's or firm's agreement
to cooperate in the offering of the Fund's shares to eligi-
ble persons; and (ii) notification to the Fund at the time
of purchase that the investor is eligible for this right of
accumulation.
STATEMENT OF INTENTION
If a shareholder anticipates purchasing at least $100,000
of shares of the Fund alone or in combination with shares of
any other Goldman Sachs Portfolio within a 13-month period,
the shareholder may purchase shares of the Fund at a reduced
sales charge by submitting a Statement of Intention (the
"Statement"). See Appendix B to this Prospectus. Shares pur-
chased pursuant to a Statement will be eligible for the same
sales charge discount that would have been available if all
of the purchases had been made at the same time. The share-
holder or his Authorized Dealer must inform Goldman Sachs
that the Statement is in effect each time shares are pur-
chased. There is no obligation to purchase the full amount
of shares indicated in the Statement. A shareholder may in-
clude the value of all shares on which a sales charge has
previously been paid as an "accumulation credit" toward the
completion of the Statement, but a price readjustment will
be made only on shares purchased within ninety (90) days of
submitting the Statement. The Statement authorizes the
Transfer Agent to hold in escrow a sufficient number of
shares which can be redeemed to make up any difference in
the sales charge on the amount actually invested. For pur-
poses of satisfying the amount specified on the Statement,
the gross amount of each investment, exclusive of any appre-
ciation on shares previously purchased, will be taken into
account.
THE FUND OFFERS AUTOMATIC INVESTMENT PLAN
SHAREHOLDERS
MANY CONVENIENT Systematic cash investments may be made through a share-
FEATURES AND holder's bank via the Automated Clearing House Network or a
BENEFITS, shareholder's checking account via bank draft each month.
INCLUDING Required forms are available from Goldman Sachs or any Au-
DOLLAR COST thorized Dealer. A minimum investment of $50 is required for
AVERAGING. Automatic Investment Plans.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
A shareholder in the Fund may elect to cross-reinvest div-
idends and capital gains distributions paid by the Fund at
net asset value without a sales charge in shares of any
other Goldman Sachs Portfolio or in units of the ILA Portfo-
lios. In addition, shareholders of any other Goldman Sachs
Portfolio may elect to cross-reinvest dividends and capital
gains distributions paid by such
34
<PAGE>
Goldman Sachs Portfolio at net asset value without a sales
charge in shares of the Fund. Such cross-reinvestments are
subject to the following conditions: (i) the value of the
shareholder's account(s) in the paying fund must equal or
exceed $10,000 and (ii) the value of the account in the ac-
quired fund must equal or exceed the acquired fund's minimum
initial investment requirement, or the shareholder must
elect to have dividends and capital gains distributions paid
on the paying and acquired fund shares automatically rein-
vested in additional acquired fund shares, until the value
of acquired fund shares in the shareholder's account equals
or exceeds the acquired fund's minimum initial investment
requirement. A Fund shareholder should obtain and read the
prospectus relating to any other Goldman Sachs Portfolio or
ILA Portfolio and its shares or units and consider its in-
vestment objective, policies and applicable fees before
electing cross-reinvestment into that fund. The election to
cross-reinvest dividends and capital gains distributions
will not affect the tax treatment of such dividends and dis-
tributions, which will be treated as received by the share-
holder and then used to purchase shares of the acquired
fund. Such reinvestment of dividends and distributions in
shares of other Goldman Sachs Portfolios or in units of ILA
Portfolios is available only in states where such reinvest-
ment may legally be made.
AUTOMATIC EXCHANGE PROGRAM
Shareholders of the Fund may elect on the Account Informa-
tion Form to automatically exchange a specified dollar
amount of Fund shares at net asset value without an addi-
tional sales charge for shares of any other Goldman Sachs
Portfolio. Shareholders of any other Goldman Sachs Portfolio
may similarly elect to automatically exchange a specified
dollar amount of shares of such Goldman Sachs Portfolio at
net asset value without an additional sales charge for
shares of the Fund. These automatic exchanges are made
monthly on the fifteenth day of each month or the first
Business Day thereafter and are subject to the following
conditions. The minimum dollar amount for automatic ex-
changes must be at least $50 per month. At the time the
election is made (i) the value of the shareholder's account
in the fund from which the exchange is made must equal or
exceed $10,000 and (ii) the value of the account in the ac-
quired fund must equal or exceed the acquired fund's minimum
initial investment requirement or, if the shareholder has
elected the automatic exchange privilege and the value of
the acquired fund does not equal the acquired fund's mini-
mum, such election must continue until the minimum initial
investment requirement is met. The names, addresses and so-
cial security or other taxpayer identification numbers for
the shareholder accounts with the exchanged and acquired
funds must be identical. A Fund shareholder should obtain
and read the prospectus relating to any other Goldman Sachs
Portfolio and its shares and consider its investment objec-
tive, policies and applicable fees and expenses before
electing an automatic exchange into that Goldman Sachs Port-
folio.
35
<PAGE>
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged at net asset value
without an additional sales charge for: (i) shares of any
Goldman Sachs Portfolio; and (ii) units of the ILA Portfo-
lios. A shareholder needs to obtain and read the prospectus
relating to a fund and its shares or units and consider its
investment objective, policies and applicable fees before
making an exchange into that fund. The shares or units of
these other funds acquired in an exchange may later be ex-
changed for shares of the Fund at the next determined net
asset value without a sales charge if the dollar amount in
the Fund resulting from such exchanges is below the share-
holder's all-time highest dollar amount on which it has pre-
viously paid a sales charge. Shares or units of these other
funds purchased through dividends and/or capital gains rein-
vestment may be exchanged for shares of the Fund without a
sales charge. In addition to free automatic exchanges pursu-
ant to the Automatic Exchanges Program, six free exchanges
are permitted in each twelve-month period. A fee of $12.50
may be charged for each subsequent exchange during such pe-
riod. The exchange privilege may be modified or withdrawn at
any time upon sixty (60) days' notice to shareholders and is
subject to certain limitations (see "Purchase of Shares").
An exchange may be made by either writing to Goldman
Sachs, Attention: Goldman Sachs Trust--Goldman Sachs Munici-
pal Income Fund, Shareholder Services, c/o NFDS, P.O. Box
419711, Kansas City, MO 64141-6711 or, if previously elected
in the Fund's Account Information Form, by telephone at 800-
526-7384 (8:00 a.m. to 3:00 p.m. Chicago time). Certain pro-
cedures are employed to prevent unauthorized or fraudulent
exchange requests as set forth under "Redemption of Shares."
Under the telephone exchange privilege, shares may be ex-
changed among accounts with different names, addresses and
social security or other taxpayer identification numbers
only if the exchange request is in writing and is received
in accordance with the procedures set forth under "Redemp-
tion of Shares." In times of drastic economic or market
changes the telephone exchange privilege may be difficult to
implement.
For federal income tax purposes, an exchange is treated as
a sale of the shares surrendered in the exchange, on which
an investor may realize a gain or loss, followed by a pur-
chase of shares or units received in the exchange. If such
sale occurs within ninety (90) days after the purchase of
such shares, to the extent a sales charge that would other-
wise apply to the shares or units received in the exchange
is not imposed, the sales charge paid on such purchase can-
not be taken into account by the exchanging shareholder for
purposes of determining gain or loss realized on such sale
for federal income tax purposes, but instead will be added
to the tax basis of the shares or units received in the ex-
change. Shareholders should consult their own tax advisers
concerning the tax consequences of an exchange.
36
<PAGE>
All exchanges which represent an initial investment in a
fund must satisfy the minimum investment requirements of the
fund into which the shares are being exchanged. Exchanges
are available only in states where exchanges may legally be
made.
DISTRIBUTION PLAN
The Trust, on behalf of the Fund, has adopted a Distribu-
THE FUND WILL tion Plan (the "Plan") pursuant to Rule 12b-1 under the In-
FINANCE vestment Company Act. Under the Plan, the Fund will pay to
DISTRIBUTION Goldman Sachs a quarterly fee for distribution and personal
ACTIVITIES and account maintenance services equal, on an annual basis,
THROUGH to 0.50% of the Fund's average daily net assets, of which up
QUARTERLY to 0.25% may be for personal and account maintenance servic-
PAYMENTS TO es. Currently, Goldman Sachs has voluntarily agreed to limit
GOLDMAN SACHS the amount of such fee to 0.25% of the Fund's average daily
EQUAL ON AN net assets. Goldman Sachs has no current intention of modi-
ANNUAL BASIS TO fying or discontinuing such limitation, but may do so in the
0.25% OF THE future at its discretion. At various times during the fiscal
FUND'S AVERAGE year ended October 31, 1994, Goldman Sachs waived part or
DAILY NET all of its distribution fee payable under the funds 12b-1
ASSETS. Plan. The average annual rate charged for the period was
.20%.
Goldman Sachs may use the fee for its expenses of distri-
bution of shares of the Fund. In addition, Goldman Sachs may
pay up to the entire amount of such fee to Authorized Deal-
ers for providing services in connection with the sale of
shares of the Fund. The types of expenses for which Goldman
Sachs and Authorized Dealers may be compensated for distri-
bution services under the Plan include compensation paid to
and expenses incurred by their respective officers, employ-
ees and sales representatives, allocable overhead, telephone
and travel expenses, the printing of prospectuses for pro-
spective shareholders, preparation and distribution of sales
literature, advertising of any type and all other expenses
incurred in connection with activities primarily intended to
result in the sale of shares of the Fund. The portion of the
fee for personal and account maintenance services may be
used to make payments to Goldman Sachs, Authorized Dealers,
their officers, sales representatives and employees for re-
sponding to inquiries of, and furnishing assistance to,
shareholders regarding ownership of their shares or their
accounts or similar services not otherwise provided by or on
behalf of the Fund. If the fee received by Goldman Sachs ex-
ceeds its expenses, Goldman Sachs may realize a profit from
these arrangements. The Plan will be reviewed and is subject
to approval annually by the Board of Trustees. The aggregate
compensation that may be received under the Plan for distri-
bution services and pursuant to a sales charge may not ex-
ceed the limitations imposed by the NASD's Rules of Fair
Practice.
37
<PAGE>
REDEMPTION OF SHARES
The Fund will redeem its shares upon request of a share-
THE REDEMPTION holder on any Business Day at the net asset value next de-
PRICE WILL BE termined after the receipt of such request in proper form.
BASED ON THE See "Net Asset Value." Redeemed shares will continue to earn
NET ASSET VALUE dividends through the day on which the redemption request is
NEXT COMPUTED received. Redemption proceeds will normally be mailed by
AFTER RECEIPT check to shareholders within seven (7) days of receipt of a
OF A REDEMPTION properly executed request. If shares to be redeemed were re-
REQUEST. cently purchased by check, the Fund may delay trans-mittal
of redemption proceeds until such time as it has assured it-
self that good funds have been collected for the purchase of
such shares. This may take up to fifteen (15) days. Redemp-
tion requests may be made by writing to or calling the
Transfer Agent at the address or telephone number set forth
on the inside front cover page of this Prospectus or by con-
tacting an Authorized Dealer.
THERE ARE A shareholder may request redemptions by telephone if the
SEVERAL WAYS optional telephone redemption privilege is elected on the
SHAREHOLDERS Account Information Form accompanying this Prospectus. It
MAY ACCESS may be difficult to implement redemptions by telephone in
THEIR ACCOUNTS. times of drastic economic or market changes. In an effort to
prevent unauthorized or fraudulent redemption and exchange
requests by telephone, Goldman Sachs and NFDS each employ
reasonable procedures specified by the Trust to confirm that
such instructions are genuine. Consequently, proceeds of
telephone redemption requests will only be sent to the
shareholder's address of record or authorized bank account
designated in the Account Information Form and exchanges of
shares will only be made to an identical account. Telephone
requests will also be recorded. The Trust may implement
other procedures from time to time. If reasonable procedures
are not implemented, the Trust may be liable for any loss
due to unauthorized or fraudulent transactions. In all other
cases, neither the Fund, the Trust nor Goldman Sachs will be
responsible for the authenticity of instructions received by
telephone. Proceeds of telephone redemptions will be mailed
to the shareholder's address of record or wired to the au-
thorized bank account indicated on the Account Information
Form, unless the shareholder provides written instructions
(accompanied by a signature guarantee) indicating another
address.
Written requests for redemptions must be signed by each
shareholder with its signature guaranteed by a bank, a secu-
rities broker or dealer, a credit union having authority to
issue signature guarantees, a savings and loan association,
a building and loan association, a cooperative bank, a fed-
eral savings bank or association, a national securities ex-
change, a registered securities association or a clearing
agency, provided that such institution satisfies the stan-
dards established by the Transfer Agent.
38
<PAGE>
The Fund will also arrange for the proceeds of redemptions
effected by any means to be wired as Federal Funds to the
bank account designated in the shareholder's Account Infor-
mation Form. Redemption proceeds will normally be wired on
the next Business Day in Federal Funds (for a total one
business-day delay) following receipt of a properly executed
wire transfer redemption request. Wiring of redemption pro-
ceeds may be delayed one additional Business Day if the Fed-
eral Reserve Bank is closed on the day redemption proceeds
would ordinarily be wired. A transaction fee of $7.50 may be
charged for payments of redemption proceeds by wire. In or-
der to change the bank designated on the Account Information
Form to receive redemption proceeds, a written request must
be received by the Transfer Agent. This request must be sig-
nature guaranteed as set forth above. Further documentation
may be required for executors, trustees or corporations.
Once wire transfer instructions have been given by Goldman
Sachs or an Authorized Dealer, neither the Fund, the Trust,
Goldman Sachs nor an Authorized Dealer assumes any further
responsibility for the performance of intermediaries or the
shareholder's bank in the transfer process. If a problem
with such performance arises, the shareholder should deal
directly with such intermediaries or bank.
Additional documentation regarding a redemption by any
means may be required to effect a redemption when deemed ap-
propriate by the Transfer Agent. The request for such re-
demption will not be considered to have been received in
proper form until such additional documentation has been re-
ceived.
Except with respect to shareholders whose account balances
are less than $50 or who have not provided a social security
number or other taxpayer identification number and certifi-
cation (if required) that such number is correct, shares are
not redeemable at the option of the Fund unless the Board of
Trustees of the Trust determines in its sole discretion that
failure to so redeem may have material adverse consequences
to the shareholders of the Fund. The Fund, however, assumes
no responsibility to compel redemptions.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan (the "Systematic Withdrawal
Plan") will be available to shareholders of the Fund whose
shares are worth at least $10,000. The Systematic Withdrawal
Plan provides for monthly payments to the participating
shareholder of any amount not less than $50.
Dividends and capital gains distributions on shares held
under the Systematic Withdrawal Plan are reinvested in addi-
tional full and fractional shares of the Fund at net asset
value. The Transfer Agent acts as agent for the shareholder
in redeeming sufficient full and fractional shares to pro-
vide the amount of the systematic withdrawal payment. The
Systematic Withdrawal Plan may be terminated at any time.
Goldman Sachs reserves the right to
39
<PAGE>
initiate a fee of up to $5 per withdrawal, upon thirty (30)
days' written notice to the shareholder. Withdrawal payments
should not be considered to be dividends, yield or income.
If periodic withdrawals continuously exceed new purchases
and reinvested dividends and capital gains distributions,
the shareholder's original investment will be correspond-
ingly reduced and ultimately exhausted. Furthermore, each
withdrawal constitutes a redemption of shares, and any gain
or loss realized must be reported for federal and state in-
come tax purposes. A shareholder should consult his or her
own tax adviser with regard to the tax consequences of par-
ticipating in the Systematic Withdrawal Plan. For further
information or to request a Systematic Withdrawal Plan,
please write or call the Transfer Agent.
DIVIDENDS
SHAREHOLDERS The Fund intends to declare a daily dividend determined
MAY CHOOSE with the objective of distributing the majority of net in-
WHETHER TO vestment income while enhancing the stability of principal.
RECEIVE Such dividend will accrue with respect to outstanding
DISTRIBUTIONS shares, commencing on the calendar day after receipt of pay-
(INCLUDING ment for such shares and continuing through the redemption
CAPITAL GAINS) date, and will be paid monthly. Over the course of the fis-
IN CASH OR TO cal year, dividends accrued and paid will constitute all or
REINVEST substantially all of the Fund's net investment income. The
DISTRIBUTIONS Fund also intends that all net realized long-term and short-
IN SHARES OF term capital gains will be declared as a dividend at least
THE FUND, IN annually. In determining amounts of capital gains to be dis-
SHARES OF ANY tributed, capital losses including any available capital
OF THE GOLDMAN loss carryovers from prior years will be offset against cap-
SACHS ital gains realized.
PORTFOLIOS OR
IN UNITS OF THE The Fund's net investment income is determined on a daily
ILA PORTFOLIOS. basis. On days on which net asset value is calculated, such
determination is made immediately prior to the calculation
of the Fund's net asset value as of 3:00 p.m. Chicago time.
On days on which net asset value is not calculated, such de-
termination is made as of 3:00 p.m. Chicago time.
Each dividend and capital gains distribution, if any, de-
clared by the Fund on its outstanding shares will, at the
election of each shareholder, be paid (i) in cash, (ii) in
additional shares of the Fund or (iii) in shares of any of
the Goldman Sachs Portfolios or units of the ILA Portfolios
as described under "Cross-Reinvestment of Dividends and Dis-
tributions." This election should initially be made on a
shareholder's Account Information Form and may be changed
upon written notice to Goldman Sachs at any time prior to
the record date for a particular dividend or distribution.
If no election is made, all dividends and capital gains dis-
tributions will be reinvested in the Fund making such divi-
dend or distribution. If cash dividends are elected with re-
spect to the Fund's net investment income dividends then
cash dividends must also be elected with respect to the
short-term capital gains component, if any, of the
40
<PAGE>
Fund's annual dividend. Reinvestments of dividends from net
investment income in additional shares of the Fund will be
made on the last Business Day of each month. Reinvestments
of dividends from net investment income in additional shares
of another Goldman Sachs Portfolio or in units of the ILA
Portfolios will be made on the payment date. Cash dividends
will be paid on or about the first calendar day of the
month. Capital gains distributions will be reinvested or
paid in cash, in accordance with the shareholder's prior
election, on the payment date.
The election to reinvest dividends and distributions paid
by the Fund in additional shares of the Fund, any other
Goldman Sachs Portfolio or ILA Portfolio will not affect the
tax treatment of such dividends, which will be treated as
received by the shareholder and then used to purchase shares
of the Fund, another Goldman Sachs Portfolio or an ILA Port-
folio.
At the time of an investor's purchase of shares of the
Fund a portion of the net asset value per share may be rep-
resented by undistributed income of the Fund or unrealized
appreciation of the Fund's portfolio securities. Therefore,
subsequent distributions (or portions thereof) of taxable
income or realized appreciation on such shares may be tax-
able to the investor even if the net asset value of the
shares is, as a result of the distributions, reduced below
the cost of such shares and the distributions (or portions
thereof) represent a return of a portion of the purchase
price.
NET ASSET VALUE
NET ASSET VALUE The net asset value per share of the Fund is calculated by
IS COMPUTED the Fund's custodian as of the close of regular trading on
DAILY AS OF THE the New York Stock Exchange (normally 3:00 p.m. Chicago
CLOSE OF time, 4:00 p.m. New York time) immediately after determina-
REGULAR TRADING tion of the income to be declared as a dividend, on each
ON THE NEW YORK Business Day (as such term is defined under "Additional In-
STOCK EXCHANGE. formation"). Net asset value per share is calculated by add-
ing the value of all securities and other assets of the
Fund, subtracting the liabilities of the Fund, and dividing
the remainder by the number of outstanding shares.
Portfolio securities are valued based on market quotations
or, if accurate quotations are not readily available, at
fair value as determined in good faith under procedures es-
tablished by the Trust's Board of Trustees.
PERFORMANCE INFORMATION
From time to time the Fund may publish yield, tax equiva-
lent yield and average annual total return in advertisements
and communications to shareholders or prospective investors.
41
<PAGE>
Yield is computed by dividing net investment income earned
during a recent thirty-day period by the product of the av-
erage daily number of shares outstanding and entitled to re-
ceive dividends during the period and the maximum public of-
fering price per share on the last day of the relevant peri-
od. The results are compounded on a bond equivalent (semi-
annual) basis and then annualized. Net investment income per
share is equal to the dividends and interest earned during
the period, reduced by accrued expenses for the period. The
calculation of net investment income for these purposes may
differ from the net investment income determined for ac-
counting purposes.
Tax equivalent yield represents the yield an investor
would have to earn to equal, after taxes, the Fund's tax-
free yield. Tax equivalent yield is calculated by dividing
the Fund's tax-exempt yield by one minus a stated federal
and/or state tax rate.
Average annual total return is determined by computing the
average annual percentage change in value of $1,000 invested
at the maximum public offering price for specified periods
ending with the most recent calendar quarter, assuming rein-
vestment of all dividends and distributions at net asset
value. The total return calculation assumes a complete re-
demption of the investment at the end of the relevant peri-
od. The Fund may also from time to time advertise total re-
turn on a cumulative, average, year-by-year or other basis
for various specified periods by means of quotations,
charts, graphs or schedules. In addition, the Fund may fur-
nish total return calculations based on investments at vari-
ous sales charge levels or at net asset value. Any perfor-
mance data which is based on the Fund's net asset value per
share would be reduced if a sales charge were taken into ac-
count. In addition to the above, the Fund may from time to
time advertise its performance relative to certain perfor-
mance rankings and indices.
Quotations of distribution rates are calculated by
annualizing the most recent distribution of net investment
income for a monthly, quarterly or other relevant period and
dividing this amount by the net asset value per share or
maximum public offering price on the last day of the period
for which the distribution rates are being calculated.
The investment results of the Fund will fluctuate over
time and any presentation of investment results for any
prior period should not be considered a representation of
what an investment may earn or what the Fund's performance
may be in any future period. In addition to information pro-
vided in shareholder reports, the Fund may, in its discre-
tion, from time to time make a list of its holdings avail-
able to investors upon request.
42
<PAGE>
SHARES OF THE TRUST
THE FUND IS A The Fund is a series of Goldman Sachs Trust, which was or-
SERIES OF AN ganized under the laws of The Commonwealth of Massachusetts
OPEN-END on September 24, 1987 as a Massachusetts business trust un-
INVESTMENT der an Agreement and Declaration of Trust, as amended (the
COMPANY. "Trust Agreement"). Under the Trust Agreement the Trustees
are authorized to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. The Trustees
of the Trust are responsible for the overall management and
supervision of its affairs. The Trustees of the Trust have
authority under the Trust Agreement to create and classify
shares of beneficial interest in separate series, without
further action by shareholders. As of the date of this Pro-
spectus, the Trustees have authorized shares of the Fund and
ten other series. Additional series may be added in the fu-
ture. The Trustees also have authority to classify or re-
classify any series or portfolio of shares into one or more
classes.
When issued, shares are fully paid and non-assessable. In
the event of liquidation, shareholders are entitled to share
pro rata in the net assets of the Fund available for distri-
bution to such shareholders. All shares entitle their hold-
ers to one vote per share, are freely transferable and have
no preemptive, subscription or appraisal rights.
Under Massachusetts law, there is a remote possibility
that shareholders of a business trust could, under certain
circumstances, be held personally liable as partners for the
obligations of such trust. The Trust Agreement contains pro-
visions intended to limit such liability and to provide in-
demnification out of Trust property of any shareholder
charged or held personally liable for obligations or liabil-
ities of the Trust solely by reason of being or having been
a shareholder of the Trust and not because of such share-
holder's acts or omissions or for some other reason. Thus,
the risk of a shareholder incurring financial loss on ac-
count of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obli-
gations.
Unless otherwise required by the Investment Company Act,
ordinarily it will not be necessary for the Trust to hold
annual meetings of shareholders. As a result, shareholders
may not consider each year the election of Trustees or the
appointment of independent accountants. Shareholders may re-
move a Trustee by the affirmative vote of at least two-
thirds of the Trust's outstanding shares and the Trustees
must promptly call a meeting for such purpose when requested
to do so in writing by the record holders of not less than
10% of the outstanding shares of the Trust. Shareholders
may, under certain circumstances, communicate with other
shareholders in connection with requesting a special meeting
of shareholders. The Board of Trustees, however, will call a
special meeting for the purpose of electing Trustees if, at
any time, less than a majority of Trustees holding office at
the time were elected by shareholders.
43
<PAGE>
In the interest of economy and convenience, the Trust does
not issue certificates representing the Fund's shares. In-
stead, the Transfer Agent maintains a record of each share-
holder's ownership. Each shareholder receives confirmation
of purchase and redemption orders from the Transfer Agent.
Fund shares and any dividends and distributions paid by the
Fund are reflected in account statements from the Transfer
Agent.
TAXATION
THE FUND IS NOT FEDERAL TAXES
EXPECTED TO
HAVE ANY The Fund is treated as a separate entity for tax purposes.
FEDERAL TAX The Fund has qualified and elected to be treated as a regu-
LIABILITY. lated investment company under Subchapter M of the Code and
intends to continue to qualify for such treatment. To qual-
ify for treatment as a regulated investment company, 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 company, 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 share-
holders in accordance with certain timing requirements of
the Code.
The Fund intends to satisfy certain requirements of the
Code so that it may distribute the tax-exempt interest it
receives as "exempt-interest dividends," as defined in the
Code. Distributions of the Fund that are attributable to in-
terest on tax-exempt obligations and that the Fund desig-
nates as exempt-interest dividends will be exempt from regu-
lar federal income tax, although all or a portion of such a
distribution may be subject to the federal alternative mini-
mum tax and the entire distribution may be includable in the
tax base for determining taxability of social security or
railroad retirement benefits. Persons who are "substantial
users" (or related persons to such substantial users) of fa-
cilities financed by industrial development or certain pri-
vate activity bonds should consult their own tax advisers
before purchasing shares of the Fund. Interest on indebted-
ness incurred or continued to purchase or carry shares of
the Fund is not deductible to the extent attributable to the
Fund's distributions that are exempt-interest dividends.
Dividends paid by the Fund from any taxable net investment
income, the excess of net short-term capital gain over net
long-term capital loss and certain taxable original issue
discount or market discount income will be taxable to share-
holders as ordinary income. 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 gains re-
gardless of how long the shareholders have held their
shares. These tax consequences will apply regardless of
whether distributions are received in cash or reinvested in
shares. Certain distributions paid
44
<PAGE>
by the Fund in January of a given year may be taxable to
shareholders as if received the prior December 31. Share-
holders will be informed annually about the amount and char-
acter of distributions received from the Fund for federal
income tax purposes, including any distributions that may
constitute a tax preference item under the federal alterna-
tive minimum tax.
Investors should consider the tax implications of buying
shares immediately prior to a distribution. Investors who
purchase shares shortly before the record date for a distri-
bution will pay a per share price that includes the value of
the anticipated distribution and will be taxed on the dis-
tribution (unless it is exempt from tax) even though the
distribution represents a return of a portion of the pur-
chase price.
Redemptions and exchanges of shares are taxable events on
which a shareholder may recognize a gain or loss.
Individuals and certain other classes of shareholders may
be subject to 31% backup withholding of federal income tax
on taxable distributions, redemptions and exchanges if they
fail to furnish the Fund with their correct taxpayer identi-
fication number and certain certifications or if they are
otherwise subject to backup withholding. Individuals, corpo-
rations and other shareholders that are not U.S. persons un-
der 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.
OTHER 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 inter-
est on (or, in the case of intangibles taxes, the value of
its assets is attributable to) certain U.S. Government obli-
gations and/or tax-exempt municipal obligations issued by or
on behalf of the particular state or a political subdivision
thereof, provided in some states that certain thresholds for
holdings of such obligations and/or reporting requirements
are satisfied.
Shareholders should consult their own tax advisers with
respect to the federal, state, local and foreign tax conse-
quences of investing in the Fund in their particular circum-
stances. See the Additional Statement for a further discus-
sion of certain tax consequences of investing in shares of
the Fund.
45
<PAGE>
ADDITIONAL INFORMATION
The term "a vote of the majority of the outstanding
shares" of the Fund means the vote of the lesser of (i) 67%
or more of the shares present at the meeting, if the holders
of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of
the outstanding shares of the Fund.
As used in this Prospectus, the term "Business Day" means
any day the New York Stock Exchange is open for trading,
which is Monday through Friday except for holidays. The New
York Stock Exchange is closed on the following holidays: New
Year's Day (observed), Presidents' Day, Good Friday, Memo-
rial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
46
<PAGE>
APPENDIX A
DESCRIPTION OF MUNICIPAL SECURITIES RATINGS
The ratings of Moody's Investors Service, Inc. and Standard & Poor's Ratings
Group represent their opinions as to the quality of various Municipal
Securities. It should be emphasized, however, that ratings are not absolute
standards of quality. Consequently, Municipal Securities with the same
maturity, coupon and rating may have different yields while Municipal
Securities of the same maturity and coupon with different ratings may have the
same yield.
Description of Ratings of State and Municipal Bonds
MOODY'S INVESTORS SERVICE, INC.
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 risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered medium grade obligations, i.e.
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a manner of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
A-1
<PAGE>
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
NOTE: Those bonds in the Aa and A and Baa groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa
1, A 1 and Baa 1.
STANDARD & POOR'S RATINGS GROUP
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or minus (-) for ratings from AA to CCC may be used to show
relative standing within the major rating categories.
Description of Ratings of State and Municipal Notes
MOODY'S INVESTORS SERVICE, INC.
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade ("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/VMIG-1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG-2/VMIG-2--This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
A-2
<PAGE>
STANDARD & POOR'S RATINGS GROUP
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).
Note rating symbols are as follows:
SP-1 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.
SP-3 Speculative capacity to pay principal and interest.
Description of Ratings of State and Municipal Commercial Paper
MOODY'S INVESTORS SERVICE, INC.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity in
excess of nine months. Moody's two highest commercial paper rating categories
are as follows:
"PRIME-1"--Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of 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.
A-3
<PAGE>
"Prime-2"--Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of short-term debt 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, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Standard & Poor's two highest commercial paper rating
categories are as follows:
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are 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".
Description of Ratings of Preferred Stock
MOODY'S INVESTORS SERVICE, INC.
Moody's utilizes a variation of its bond rating symbols in the quality
ranking of preferred stocks because of the fundamental differences between
preferred stock and bonds. Preferred stock occupies a junior position to bonds
within a particular capital structure and such securities are rated within the
universe of preferred stocks.
aaa: An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least
risk of dividend impairment within the universe of preferred stocks.
aa: An issue which is rated "aa" is considered a high-grade preferred stock.
This rating indicates that there is a reasonable assurance the earnings and
asset protection will remain relatively well maintained in the foreseeable
future.
a: An issue rated "a" is considered to be an upper-medium grade preferred
stock. While risks are judged to be somewhat greater than in the "aaa" and
"aa" classification, earnings and asset protection are, nevertheless, expected
to be maintained at adequate levels.
STANDARD & POOR'S RATINGS GROUP
A Standard & Poor's preferred stock rating is an assessment of the capacity
and willingness of an issuer to pay preferred stock dividends and any
applicable sinking fund obligations. A preferred stock rating differs from a
bond rating inasmuch as it is assigned to an equity issue, which issue is
intrinsically
A-4
<PAGE>
different from, and subordinated to, a debt issue. Therefore, to reflect this
difference, the preferred stock rating symbol will normally not be higher than
the debt rating symbol assigned to, or that would be assigned to the senior
debt of the same issuer.
The preferred stock ratings are based on the following considerations:
--Likelihood of payment--capacity and willingness of the issuer to meet
the timely payment of preferred stock dividends and any applicable sinking
fund requirements in accordance with the terms of the obligation;
--Nature of, and provisions of, the issue; and
--Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights.
AAA: This is the highest rating that may be assigned by Standard & Poor's to
a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA: A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A: An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions.
A-5
<PAGE>
APPENDIX B
STATEMENT OF INTENTION
(APPLICABLE ONLY TO SHARES PURCHASED SUBJECT TO A SALES CHARGE)
If a shareholder anticipates purchasing $100,000 or more of shares of the
Fund alone or in combination with shares of another fund described in this
Prospectus within a 13-month period, the shareholder may obtain shares of the
Fund at the same reduced sales charge as though the total quantity were
invested in one lump sum by filing this Statement of Intention incorporated by
reference in the Account Information Form.
Instructions for issuance of shares in the name of a person who does not
sign the Account Information Form must be accompanied by a written statement
stating that the shares were paid for by a person who signed the Account
Information Form.
To ensure that the reduced price will be received on future purchases, the
investor or his Authorized Dealer must inform Goldman, Sachs & Co. that this
Statement of Intention is in effect each time shares are purchased.
Subject to the conditions mentioned below, each purchase will be made at the
public offering price applicable to a single transaction of the dollar amount
specified on the Account Information Form, as described in the Prospectus. The
investor makes no commitment to purchase additional shares, but if his
purchases within 13 months plus the value of shares credited toward completion
do not total the sum specified, he will pay the increased amount of the sales
charge prescribed in the Escrow Agreement.
Income dividends and capital gain distributions taken in additional shares
will apply toward the completion of this Statement of Intention.
This Statement of Intention is not effective until accepted by Goldman,
Sachs & Co.
ESCROW AGREEMENT
Out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the Account Information Form shall be held in
escrow by the Transfer Agent in the form of shares registered in the
investor's name. All income dividends and capital gains distributions on
escrowed shares will be paid to the investor or to his order.
When the minimum investment so specified is completed (either prior to or by
the end of the thirteenth month), the shareholder will be notified and the
escrowed shares will be released.
If the intended investment is not completed, the investor will be asked to
remit to Goldman, Sachs & Co. any difference between the sales charge on the
amount specified and on the amount actually attained. If the investor does not
within 20 days after written request by Goldman, Sachs & Co. pay
B-1
<PAGE>
such difference in the sales charge, the Transfer Agent will redeem an
appropriate number of the escrowed shares in order to realize such difference.
Shares remaining after any such redemption will be released by the Transfer
Agent.
In signing the Account Information Form, the investor irrevocably
constitutes and appoints the Transfer Agent his attorney to surrender for
redemption any or all escrowed shares with full power of substitution in the
premises.
B-2
<PAGE>
APPENDIX C
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Fund with your correct Social
Security or other Taxpayer Identification Number (TIN), regardless of whether
you file tax returns. Failure to do so may subject you to penalties. Failure
to provide your correct TIN, to check the appropriate boxes in, and to sign
your name in the Social Security Number or other Taxpayer Identification
Number Certification section (the "Certification Section") of the Account
Information Form could result in withholding of 31% by the Fund for the
federal backup withholding tax on distributions, redemptions, exchanges and
other payments relating to your account. 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
established under a Uniform Gifts or Transfers to Minors Act, the TIN of the
minor should be furnished.
If you do not have a TIN, you should apply for one immediately by contacting
your local office of the Social Security Administration or the Internal
Revenue Service (IRS). If you do not have a TIN but have applied for or intend
to apply for one, you should check the first box in the Certification Section.
In this event, you should provide your TIN and required certifications within
60 days. Backup withholding could apply to payments relating 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
withholding because you failed to report all your interest and/or dividend
income on your tax return and you have not been notified by the IRS that such
withholding should cease, you must cross out item (2) in the Certification
Section.
If you are an exempt recipient, you should furnish your TIN and check the
second box in the Certification Section. Exempt recipients include:
corporations, tax-exempt pension plans and IRA's, governmental agencies,
financial institutions, registered securities and commodities dealers and
others.
If you are a nonresident alien or foreign entity, check the third box in the
Certification Section and provide a completed Form W-8 to the Fund in order to
avoid backup withholding on certain payments. Other payments to you may be
subject to nonresident alien withholding of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
C-1
<PAGE>
ACCOUNT INFORMATION FORM THE GOLDMAN SACHS PORTFOLIOS
This Account Information Form Should be
Forwarded Promptly to Goldman, Sachs & Co.
or any Authorized Dealer
- -------------------------------------------------------------------------------
SEND TO: The Goldman Sachs Portfolios
c/o NFDS
P.O. Box 419711
Kansas City, MO 64141-6711
For additional information
call 1-800-526-7384 Date: __________
- -------------------------------------------------------------------------------
INITIAL INVESTMENT-- [_] Asia Growth Fund [_] Global Income Fund
$1,500 MINIMUM [_] Balanced Fund [_] Government Income Fund
[_] Capital Growth Fund [_] Municipal Income Fund
[_] Growth & Income Fund [_] Other Fund_____________
[_] International Equity GOLDMAN SACHS MONEY MARKET
Fund TRUST*
[_] Select Equity Fund [_] ILA/Prime Obligations
[_] Small Cap Equity Fund Portfolio Service Units
[_] Adjustable Rate Mortgage [_] ILA/Tax-Exempt Diversi-
Fund fied Portfolio Service
Units
*$10,000 minimum or balance
of existing account
- -------------------------------------------------------------------------------
1. ACCOUNT Please Print
REGISTRATION
INDIVIDUAL
---------------------------------------- --------------
First Name Initial Last SS# or Tax ID#
JOINT TENANTS
The account will be registered as "Joint Tenants with
Right of Survivorship" unless otherwise specified.
---------------------------------------- --------------
First Name Initial Last SS# or Tax ID#
---------------------------------------- --------------
First Name Initial Last SS# or Tax ID#
GIFT TO MINORS
--------------------------------------------------------
Custodian's Name (Only one can be named)
---------------------------------------- --------------
Minor's Name (Only one) SS#
Under the _________ (State of Residence) Uniform Gift to
Minors Act
CORPORATION, TRUST, OR OTHER ENTITY
---------------------------------------- --------------
Name of Corporation, Trust or other Tax ID#
Non-Person Entity
--------------------------------------------------------
Attention:
--------------------------------------------------------
Date of Trust Instrument: Name of Beneficiary (If to
be included in the
registration)
--------------------------------------------------------
Name(s) of Trustee(s) (If to be included in the
registration)
- -------------------------------------------------------------------------------
2. MAILING ADDRESS ( )
------------------------------------ ------------------
Street Daytime Phone
--------------------------------------------------------
City State Zip Code
<PAGE>
- --------------------------------------------------------------------------------
3. TO PURCHASE SHARES Check appropriate box(es).
[_] A check for $_______ is enclosed. Check(s) should be
payable to the Fund(s) selected.
[_] An order # ______ for ______ shares or $_________
was placed on _____________________.
[_] I certify that I am an entity exempt from the sales
charge according to the section in the Fund
Prospectus "Purchase of Shares" and I am, therefore,
entitled to purchase shares of the Fund at net asset
value. By checking this box, the undersigned agrees
that I will notify Goldman, Sachs & Co. at or prior
to purchase if I am no longer in one of the
categories of eligible investors.
Reason for exemption _____________________________.
- --------------------------------------------------------------------------------
4. DIVIDEND AND Choose how you wish to receive dividends. If no boxes
DISTRIBUTION are checked, Option A will be assigned.
OPTIONS A. [_] All income and capital gains dividends
reinvested in the account.
B. [_] All income and short-term capital gains
dividends in cash and long-term capital gains
reinvested in the account. (COMPLETE CASH
DIVIDENDS SECTION BELOW.)
C. [_] All income and capital gains dividends paid in
cash. (COMPLETE CASH DIVIDENDS SECTION BELOW.)
D. [_] All dividends and capital gains reinvested in
another Goldman Sachs Portfolio account: (See
prospectus regarding limitations on this
privilege.)
Fund Name _________________ Account Number ____________
Please send cash dividends to (if no special payee,
cash dividends will be sent to the account registration
address):
[_] Account registration address.
[_] Check to special payee as follows:
[_] Deposit to bank (attach voided check)
Name of Payee ________________ Account No. (if
applicable) ____________
Street Address _________________________________________
City _____________________________ State ____ Zip ______
- --------------------------------------------------------------------------------
5. RIGHT OF See "Purchase of Shares"
ACCUMULATION
Cumulative quantity discounts are applicable if a
shareholder's current value of existing shares of the
Fund alone or in combination with shares of any other
fund described in the Prospectus, on which a sales
charge was paid, total the requisite amount for
receiving a discount as described in the accompanying
Prospectus. Below are listed all the accounts (account
name, Fund and number) which should be aggregated for a
right of accumulation.
Name _____________ Name _____________ Name _____________
Fund _____________ Fund _____________ Fund _____________
Acct No. _________ Acct No. _________ Acct No. _________
- --------------------------------------------------------------------------------
6. STATEMENT OF See "Purchase of Shares"
INTENTION
Although not obligated to do so, it is the
undersigned's intention to invest, over a 13-month
period from this date, in shares of the Fund alone or
in combination with shares of any other fund, on which
a sales charge was paid, described in the Prospectus
which qualify for a quantity discount as described in
the accompanying Prospectus, in an amount that will
equal or exceed:
[_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000
[_] $3,000,000
I agree to the Statement of Intention and Escrow
Agreement set forth in the Appendices to the
accompanying Prospectus and incorporated by reference
herein.
<PAGE>
- --------------------------------------------------------------------------------
7. AUTOMATIC INVEST- See "Purchase of Shares"
MENT PLAN (ATTACH
VOIDED CHECK) Check One: [_] Monthly [_] Quarterly
Beginning on or about the 5th [_] or the 15th [_]
(check one) beginning with ___________(month) and every
month/quarter thereafter, I/We authorize State Street
Bank (the custodian for the Fund) to debit the amount
requested below from my/our bank account for investment
in the Fund. I/We understand that my/our participation
in the Automatic Investment Plan (the "Plan") is
subject to the terms and conditions of such plan as
amended from time to time.
--------------------------------------------------------
Bank Name Bank Account Number (if assigned)
--------------------------------------------------------
Amount of each monthly investment Name of Fund
(minimum $50)
--------------------------------------------------------
Amount of each monthly investment Name of Fund
(minimum $50)
--------------------------------------------------------
Authorized Signature (as shown on bank records)
--------------------------------------------------------
Authorized Signature (if joint bank account both sign)
- --------------------------------------------------------------------------------
8. TELEPHONE EXCHANGE [_] I/We authorize Goldman, Sachs & Co. to accept and act
upon telephone instructions from myself or any other
person for the exchange of shares of the Fund into
any fund described in the accompanying Prospectus.
I/We understand and agree that neither the Fund nor
Goldman, Sachs & Co. will be liable for any loss,
expense, or cost arising out of any telephone request
effected hereunder.
- --------------------------------------------------------------------------------
9. TELEPHONE REDEMPTION
(ATTACH VOIDED See "Redemption of Shares"
CHECK)
[_] Goldman, Sachs & Co. is hereby authorized to honor
telephone, telegraphic, or other instructions,
without signature guarantee, from any person for the
redemption of shares for the above account, without
an obligation on behalf of Goldman, Sachs & Co., to
verify that such person is the shareholder of record
or authorized to give redemption instructions,
provided that the proceeds are transmitted to the
following bank account only or are mailed to the
account registration address. Absent its own gross
negligence, neither the Fund nor Goldman, Sachs & Co.
shall be liable for such redemption or for payments
made to any unauthorized account.
--------------------------------------------------------
Bank Name ABA Routing #
--------------------------------------------------------
Street Address City State Zip
--------------------------------------------------------
Account Name Account Number
- --------------------------------------------------------------------------------
10. AUTOMATIC The originating fund's balance must be at least $10,000
EXCHANGES and the receiving fund's minimum investment must be met
prior to discontinuing this privilege if the minimum
investment requirement for the receiving fund has not
already been met.
I hereby authorize automatic exchanges of $______ (exact
dollars--$50 minimum) into my identically registered
account:
Exchange from ____________________________ (Name of Fund)
to ____________________________ (Name of Fund)
Account No. (if known) ___________________
Please make exchanges on the 15th (or next business day)
beginning the month of _________________________.
- --------------------------------------------------------------------------------
11. CHECKWRITING
PRIVILEGE See "Check Redemption Privilege"
[_] Check the box if you would like an application for
checkwriting sent to you.
The checkwriting privilege is available to holders of
ILA/Prime Obligations Portfolio Service Units or
ILA/Tax-Exempt Diversified Portfolio Service Units
ONLY.
<PAGE>
- --------------------------------------------------------------------------------
12. SOCIAL SECURITY . By the execution of this Account Information Form, the
NUMBER OR OTHER undersigned represents and warrants that it has full
TAXPAYER right, power and authority to make the investment
IDENTIFICATION applied for pursuant to this Form and is acting for
NUMBER itself or in some fiduciary capacity in making such
CERTIFICATION AND investment.
SIGNATURE
AUTHORIZATION THE UNDERSIGNED AFFIRMS THAT IT HAS RECEIVED A CURRENT
PROSPECTUS FOR THE FUND AND HAS REVIEWED THE SAME.
The undersigned understands that a lesser degree of
flexibility concerning the timing of a redemption of its
investment in Goldman Sachs Adjustable Rate Mortgage
Fund, Goldman Sachs Global Income Fund, Goldman Sachs
Municipal Income Fund, Goldman Sachs Government Income
Fund, Goldman Sachs Capital Growth Fund, Goldman Sachs
Select Equity Fund, Goldman Sachs Small Cap Equity Fund,
Goldman Sachs International Equity Fund, Goldman Sachs
Growth and Income Fund, Goldman Sachs Asia Growth Fund
and Goldman Sachs Balanced Fund, as well as all other
non-money market funds, increases the likelihood that
the shareholder will be required to redeem shares under
unfavorable market conditions. If shares are redeemed at
a disadvantageous time, the value of the Fund's shares
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.
. Fill in boxes below
Taxpayer Identification No.: ____________________________
(For joint tenants, first listed individual should
provide his/her number and sign below.) Under penalties
of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number
to be issued to me), and
(2) I am not subject to backup withholding because (a) I
am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service (IRS)
that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer
subject to backup withholding.
Certification Instruction: You must cross out item (2)
above if you have been notified by the IRS that you are
currently subject to federal backup withholding because
of underreporting interest or dividends on your federal
tax return. (Also see the "Guidelines for Certification
of Taxpayer Identification Number on Account Information
Form" contained in the Appendices to the accompanying
Prospectus).
NOTE: FAILURE TO COMPLETE THIS SECTION MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO
YOU.
By checking only the appropriate box and signing below,
I certify under penalties of perjury that:
[_] I do not have a taxpayer identification number, but
I have applied for or intend to apply for one. I
understand that the required 31% withholding may
apply before I provide such number and
certifications, which should be provided within 60
days.
or [_] I am an exempt recipient.
or [_] I am neither a citizen nor a resident of the United
States for the purpose of the Internal Revenue
Code. I am a resident of __________________ .
All recipients, including exempt recipients, must report
their taxpayer identification numbers and provide the
certifications requested to prevent backup withholding.
Sign Here:
---------------------------------------------------------
Signature Name (print) and Title (if any)
Date:
<PAGE>
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13. SYSTEMATIC See "Redemption of Shares"
WITHDRAWAL PLAN
Minimum account balance must be $10,000. Withdrawal
minimum is $50.
Check One: [_] Monthly [_] Quarterly
Please make payments via (check one) [_] check [_] ACH
(Bank must be ACH affiliated. Attach voided check).
Payments made via check are withdrawn from your account
on or about the 25th of each month/quarter. (I
understand that I may change the date of redemption,
via ACH, or the amount at any time in writing to the
Fund at the address stated above.)
Complete this section if withdrawal payments are to be
made via ACH (funds are automatically credited to the
designated bank account.)
BANK INFORMATION:
Please withdraw $___________ from my account on the
___________ of the month.
Bank Account Registration: _____________________________
Routing #: _____________ Bank Account #: ______________
Bank Name/Branch Name: _________________________________
Bank Street Address: ___________________________________
Bank Telephone Number: _________________________________
Complete this section ONLY if check is to be made
payable to person(s) other than the registered owner,
and you must have this application SIGNATURE
GUARANTEED.
--------------------------------------------------------
Name of check recipient Address City State Zip
SIGNATURE GUARANTEE(S)
This request must be signed by each shareholder with
his or her signature guaranteed by a commercial bank,
trust company or member firm of a national securities
exchange.
--------------------------------------------------------
Shareholder Signature
--------------------------------------------------------
Signature Guaranteed By
--------------------------------------------------------
Authorized Signature
- -------------------------------------------------------------------------------
14. FOR DEALER ONLY Investment dealer's signature is required for
Systematic Withdrawal Plan or Statement of Intention.
If a Systematic Withdrawal Plan is being opened, we
believe that the amount to be withdrawn is reasonable
in light of the investor's circumstances and we
recommend establishment of the account.
--------------------------------------------------------
Name of Dealer Firm Home Office Location
--------------------------------------------------------
City State Zip
--------------------------------------------------------
Branch Office Location Branch Number/Branch Phone
--------------------------------------------------------
Authorized Signature State Zip
--------------------------------------------------------
Reg. Rep. Number Reg. Rep.'s Name
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTA- TIONS OTHER THAN THOSE CONTAINED IN THIS PRO- SPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMA- TION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PRO- SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY AND SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UN-
LAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE TRUST OR THE FUND SINCE THE DATE HEREOF OR THAT THE IN-
FORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... 3
Financial Highlights....................................................... 9
Investment Objective and Policies.......................................... 10
Investment Adviser and Administrator....................................... 11
Municipal Securities and Other Investments................................. 12
Other Investments and Practices............................................ 16
Risk Factors............................................................... 21
Investment Restrictions.................................................... 23
Portfolio Turnover......................................................... 24
Management................................................................. 24
Reports to Shareholders.................................................... 28
Purchase of Shares......................................................... 28
Distribution Plan.......................................................... 37
Redemption of Shares....................................................... 38
Dividends.................................................................. 40
Net Asset Value............................................................ 41
Performance Information.................................................... 41
Shares of the Trust........................................................ 43
Taxation................................................................... 44
Additional Information..................................................... 46
Appendix A A-1
Appendix B B-1
Appendix C C-1
Account Information Form
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GOLDMAN SACHS
MUNICIPAL
INCOME FUND
MANAGED BY
GOLDMAN SACHS
ASSET MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
-------------
PROSPECTUS
-------------
GOLDMAN, SACHS & CO.
MUNI1/40K/0395
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS GOVERNMENT INCOME FUND
GOLDMAN SACHS MUNICIPAL INCOME FUND
PROSPECTUS SUPPLEMENT DATED JUNE 1, 1995
TO PROSPECTUSES DATED MARCH 1, 1995
DISTRIBUTION AND AUTHORIZED DEALER SERVICE PLANS
Effective June 1, 1995, each Fund's Distribution Plan has been amended and
each Fund has adopted an Authorized Dealer Service Plan. Under the amended
Distribution Plans, Goldman Sachs will continue to provide the distribution
services described in the accompanying Prospectus; however, personal and
account administration services will no longer be provided under the
Distribution Plans. Goldman Sachs is entitled to be compensated under the
amended Distribution Plans at a rate of up to 0.25% annually of a Fund's
average daily net assets rather than the previous fee of up to 0.50% annually
of average daily net assets. Goldman Sachs currently intends to waive its
entire distribution fee but may modify or discontinue such waiver in the future
at its discretion.
Pursuant to the Authorized Dealer Service Plans, Goldman Sachs and Authorized
Dealers will be compensated for providing personal and account maintenance
services at an annual rate equal to 0.25% of a Fund's average daily net assets.
The fee for personal and account maintenance services paid pursuant to the
Authorized Dealer Service Plans may be used to make payments to Goldman Sachs,
Authorized Dealers and their officers, sales representatives and employees for
responding to inquiries of, and furnishing advice to, shareholders regarding
their shares or their accounts or similar services not otherwise provided on
behalf of the Funds. The aggregate services provided and the aggregate fees
payable under the amended Distribution Plans and the Authorized Dealer Service
Plans are the same as the services previously provided and the fees previously
payable under the Distribution Plans.
PURCHASE AND REDEMPTION PROCEDURES.
If a purchase order is received by an Authorized Dealer by 3:00 p.m., Chicago
time and payment is made by wire transfer or ACH transfer, Shares will be
issued and dividends will begin to accrue on the purchased Shares on the later
of (i) the Business Day after receipt by the Authorized Dealer of the purchase
order or (ii) the date of receipt of payment for the Shares. If a purchase
order is received by an Authorized Dealer by 3:00 p.m., Chicago time and
payment is made by check, Federal Reserve draft or bank wire, Shares will be
issued and dividends will begin to accrue on the Business Day after the date
payment is received.
Shares earn dividends accrued through the day on which such shares are
redeemed.
Effective June 7, 1995, purchases and redemptions of Shares of the Funds must
be settled within three Business Days of the receipt by a Fund of a complete
purchase order or properly executed redemption request. Except for the
requirement that a Fund receive payment for any Shares within three Business
Days (previously five Business Days) of receipt of a purchase order and as set
forth above, the purchase procedures described in the accompanying Prospectus
have not changed. Redemption proceeds to be paid by check will normally be
mailed within three Business Days after receipt of a properly executed
redemption request. Redemption proceeds paid by wire will normally be wired on
the next Business Day following receipt of a properly executed redemption
request but may be paid up to three Business Days after receipt of a properly
executed redemption request.
<PAGE>
Under the section entitled "Purchase of Shares--Offering Price," the
following replaces the third paragraph in the Goldman Sachs Municipal Income
Fund and the fourth paragraph in the Goldman Sachs Government Income Fund:
Shares of the Fund may be sold at net asset value without payment of any
initial sales charge to (a) Goldman, Sachs, its affiliates or their
respective officers, partners, directors or employees (including retired
employees and former partners), any partnership of which Goldman Sachs is a
general partner, any Trustee or officer of the Trust and designated family
members of any of the above individuals; (b) qualified retirement plans of
Goldman Sachs; (c) trustees or directors of investment companies for which
Goldman Sachs or an affiliate acts as sponsor; (d) any employee or
registered representative of any Authorized Dealer or their respective
spouses and children; (e) banks, trust companies or other types of
depository institutions investing for their own account or investing for
accounts for which they have investment discretion; (f) banks, trust
companies or other types of depository institutions investing for accounts
for which they do not have investment discretion, provided they have
entered into an agreement with GSAM specifying aggregate minimums and
certain operating policies and standards; (g) any state, county or city, or
any instrumentality, department, authority or agency thereof, which is
prohibited by applicable investment laws from paying a sales charge or
commission in connection with the purchase of shares of the Fund; (h)
pension and profit sharing plans, pension funds and other company-sponsored
benefit plans having either 200 eligible employees or at least $500,000
under management with GSAM and its affiliates; (i) qualified non-profit
organizations, foundations and endowments that have at least $1,000,000
under management with GSAM and its affiliates; (j) shareholders whose
purchase is attributable to redemption proceeds (subject to appropriate
documentation) from a registered open-end management investment company not
distributed or managed by Goldman Sachs or its affiliates, if such
redemption has occurred no more than 60 days prior to the purchase of
shares of the Fund and the shareholder either (i) paid an initial sales
charge or (ii) was at some time subject to a deferred sales charge with
respect to the redemption proceeds; (k) "wrap" accounts for the benefit of
clients of broker-dealers, financial institutions or financial planners,
provided that they have entered into an agreement with GSAM specifying
aggregate minimums and certain operating policies and standards; (l)
registered investment advisers who have entered into an agreement with GSAM
specifying aggregate minimums and certain operating policies and standards.
Purchasers must certify eligibility for an exemption on the Account
Information Form and notify Goldman Sachs if, the shareholder is no longer
eligible for an exemption. Exemptions will be granted subject to
confirmation of a purchaser's entitlement. Goldman Sachs reserves the right
to limit the participation in the Fund of its partners and employees. In
addition, under certain circumstances, dividends or distributions from any
of the Goldman Sachs Portfolios may be reinvested in shares of the Fund at
net asset value, as described under "Cross-Reinvestment of Dividends and
Distributions."
