<PAGE>
As filed with the Securities and Exchange Commission on
April 23, 1997.
1933 Act Registration No. 33-17619
1940 Act Registration No. 811-5349
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
____________
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 ( X )
Post-Effective Amendment No. 33 ( X )
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 ( X )
Amendment No. 35 ( X )
(Check appropriate box or boxes)
__________
GOLDMAN SACHS TRUST
(Exact name of registrant as specified in charter)
4900 Sears Tower
Chicago, Illinois 60606-6303
(Address of principal executive offices)
Registrant's Telephone Number,
including Area Code 312-993-4400
____________
Michael J. Richman, Esq. Copies to:
Goldman, Sachs & Co. Pamela J. Wilson, Esq.
85 Broad Street - 12th Floor Hale and Dorr LLP
New York, New York 10004 60 State Street
Boston, MA 02109
(Name and address of agent for service)
<PAGE>
It is proposed that this filing will become effective (check appropriate box)
( ) immediately upon filing pursuant to paragraph (b)
(X) on April 30, 1997 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) On May 1, 1997 pursuant to paragraph (a)(1)
( ) 75 days after filing pursuant to paragraph (a)(2)
( ) On (date) pursuant to paragraph (a)(2) of rule 485.
____________
Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2. On December 20, 1996, Registrant
filed a Rule 24f-2 notice for its fiscal year ended October 31, 1996.
<PAGE>
GOLDMAN SACHS TRUST
-------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FST SHARES
OF FINANCIAL SQUARE FUNDS
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
PART A CAPTION
- ------ -------
<S> <C>
1. Cover Page Cover Page
2. Synopsis An Introduction to the Fund;
Shareholder and Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description An Introduction to the Fund;
of Registrant Investment Objective and Policies;
Description of Securities and
Investment Techniques; Investment
Limitations; Organization and Shares
of the Trust
5. Management of the Fund Management; Organization and
Shares of the Trust
6. Capital Stock and Purchase of Shares; Reports to
Other Securities Shareholders; Distributions;
Organization and Shares of the Trust
7. Purchase of Securities Purchase of Units; Exchanges;
Being Offered Net Asset Value
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
<TABLE>
PART B CAPTION
- ------ -------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies
and Policies Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Management; Organization and
Principal Holders Capitalization
of Securities
16. Investment Advisory The Adviser, Distributor and other
Services Transfer Agent; Portfolio
Transactions; Custodian and
Subcustodian; Independent Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value; Shareholder
Pricing of Securities Investment Account; Redemptions
Being Offered
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
FST ADMINISTRATION SHARES
OF FINANCIAL SQUARE FUNDS
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
PART A CAPTION
- ------ -------
<S> <C>
1. Cover Page Cover Page
2. Synopsis An Introduction to the Fund;
Shareholder and Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description An Introduction to the
of Registrant Fund; Investment Objective
and Policies; Description of
Securities and Investment
Techniques; Investment Limitations;
Organization and Shares of the Trust
5. Management of the Fund Fund Management; Organization and
Shares of the Trust
6. Capital Stock and Purchase of Shares; Reports to
Other Securities Shareholders; Distributions;
Organization and Shares of the Trust
7. Purchase of Securities Purchase of Shares;
Exchanges; Net Asset Value
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B CAPTION
- ------ -------
<S> <C>
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies
and Policies Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Management; Organization and
Principal Holders Capitalization of Securities
16. Investment Advisory The Adviser, Distributor and
Administrator and Transfer Agent;
Portfolio Transactions; Custodian
and Subcustodian; Independent
Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value; Shareholder
Pricing of Securities Investment Account; Redemptions
Being Offered
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
GOLDMAN SACHS TRUST
-------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FST SERVICE SHARES
OF FINANCIAL SQUARE FUNDS
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
PART A CAPTION
- ------ -------
<S> <C>
1. Cover Page Cover Page
2. Synopsis An Introduction to the Fund;
Shareholder and Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description An Introduction to the Fund;
of Registrant Investment Policies; Description
of Securities and Investment
Techniques; Investment Limitations;
Organization and Shares of the Trust
5. Management of the Fund Fund Management; Organization and
Shares of the Trust
6. Capital Stock and Purchase of Shares;
Other Securities Reports to Shareholders; Distributions;
Organization and Shares of the Trust
7. Purchase of Securities Purchase of Shares;
Being Offered Exchanges; Net Asset Value
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B CAPTION
- ------ -------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies
and Policies Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Management; Organization and
Principal Holders Capitalization
of Securities
16. Investment Advisory and The Adviser, Distributor and
Administrator and Transfer Agent;
Portfolio Transactions; Custodian
and Subcustodian; Independent
Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value; Shareholder
Pricing of Securities Investment Account; Redemptions
Being Offered
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
FST PREFERRED SHARES
OF FINANCIAL SQUARE FUNDS
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
PART A CAPTION
- ------ -------
<S> <C>
1. Cover Page Cover Page
2. Synopsis An Introduction to the Fund;
Shareholder and Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description An Introduction to the Fund;
of Registrant Investment Policies; Description
Securities and Investment Techniques;
Investment Limitations; Organization and
Shares of the Trust
5. Management of the Fund Management; Organization and
Shares of the Trust
6. Capital Stock and
Other Securities Purchase of Shares; Reports to
Shareholders; Distributions; Taxes;
Administration; Organization and
Shares of the Trust
7. Purchase of Securities
Being Offered Purchase of Shares; Exchanges;
Net Asset Value1
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
<TABLE>
PART B CAPTION
- ------ -------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies and Practices
and Policies of the Fund; Investment Limitations
14. Management of the Fund Trustees and Officers; the Adviser,
Administrator, Distributor and Transfer Agent
15. Control Persons and Trustees and Officers; the Adviser,
Principal Holders of Administrator, Distributor and
Securities Transfer Agent Organization
and Capitalization
16. Investment Advisory The Adviser, Administrator, Distributor
Other Services and Transfer Agent; Portfolio Transactions;
Custodian and Subcustodian; Independent
Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value; Redemptions
Pricing of Securities
Being Offered
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
ILA UNITS
OF GOLDMAN SACHS INSTITUTIONAL LIQUID ASSETS PORTFOLIOS
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
PART A CAPTION
- ------- -------
<S> <C>
1. Cover Page Cover Page
2. Synopsis An Introduction to the Portfolio;
Unitholder and Portfolio Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description An Introduction to the Portfolio;
of Registrant Investment Policies; Description
of Securities and Investment
Techniques; Investment Limitations;
Organization and Units of the Portfolio
5. Management of the Fund Fund Management; Organization
and Units of the Portfolio
6. Capital Stock and Purchase of Units; Reports to
Other Securities Unitholders; Distributions;
Taxes; Organization and Units
of the Portfolio
7. Purchase of Securities Purchase of Units; Exchanges;
Being Offered Net Asset Value
8. Redemption or Repurchase Redemption of Units
9. Pending Legal Proceedings Not Applicable
</TABLE>
<TABLE>
PART B CAPTION
- ------ -------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies and Practices
and Policies of the Funds; Investment Restrictions
14. Management of the Management
Fund
15. Control Persons and Management; Organization and
Principal Holders Capitalization of Securities
16. Investment Advisory The Adviser, Distributor and
and Other Services Transfer Agent; Portfolio
Transactions; Custodian and
Subcustodian; Independent
Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value; Shareholder
Pricing of Securities Investment Account; Redemptions
Being Offered
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
ILA ADMINISTRATION UNITS
OF GOLDMAN SACHS INSTITUTIONAL LIQUID ASSETS PORTFOLIOS
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
PART A CAPTION
- ------ -------
<S> <C>
1. Cover Page Cover Page
2. Synopsis An Introduction to the Portfolio;
Unitholder and Portfolio Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description An Introduction to the Portfolio;
of Registrant Investment Policies; Description
of Securities and Investment
Techniques; Investment Limitations;
Organization and Units of the Portfolio
5. Management of the Fund Management; Organization and
Units of the Portfolio
6. Capital Stock and Purchase of Units; Reports to
Other Securities Unitholders; Distributions; Taxes;
Organization and Units of the Portfolios
7. Purchase of Securities Purchase of Units; Exchanges;
Net Asset Value
8. Redemption or Repurchase Redemption of Units
9. Pending Legal Proceedings Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B CAPTION
- ------ -------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies and Practices
and Policies of the Funds; Investment Restrictions
14. Management of the Fund Management
15. Control Persons and Management; Organization and
Principal Holders Capitalization
of Securities
16. Investment Advisory The Adviser, Distributor and
Other Services Administrator and Transfer Agent;
Portfolio Transactions; Custodian and
Subcustodian;
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value; Shareholder
Pricing of Securities Investment Account; Redemptions
Being Offered
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
ILA SERVICE UNITS
OF GOLDMAN SACHS INSTITUTIONAL LIQUID ASSETS PORTFOLIOS
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
PART A CAPTION
- ------ -------
<S> <C>
1. Cover Page Cover Page
2. Synopsis An Introduction to the Portfolio;
Unitholder and Portfolio Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description An Introduction to the Portfolio;
of Registrant Investment Policies; Description
of Securities and
Investment Techniques;
Investment Restrictions;
Organization and Units of
the Portfolio
5. Management of the Fund Management; Organization and
Units of the Portfolio
6. Capital Stock and Purchase of Units; Reports to
Other Securities Unitholders; Distributions;
Taxes; Organization and Units
of the Portfolio
7. Purchase of Securities Purchase of Units; Exchanges;
Being Offered Net Asset Value
8. Redemption or Repurchase Redemption of Units
9. Pending Legal Proceedings Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B CAPTION
- ------ -------
<S> <C>
10. Cover Page
</TABLE>
<PAGE>
<TABLE>
<S> <C>
11. Table of Contents Table of Contents
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies and
Practices of the Funds;
and Policies Investment
Restrictions
14. Management of the Fund Management
15. Control Persons and Management; Organization and
Principal Holders Capitalization
of Securities
16. Investment Advisory and The Adviser, Distributor and
Other Services Administrator and Transfer Agent;
Portfolio Transactions; Custodian and
Subcustodian; Independent Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization
Other Securities
19. Purchase, Redemption and Net Asset Value; Shareholder
Pricing of Securities Investment Account; Redemptions
Being Offered
20. Tax Status Tax Information
21. Underwriters The Adviser, Administrator,
Distributor and Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
ILA SERVICE UNITS
ILA CLASS B UNITS
OF INSTITUTIONAL LIQUID ASSETS PORTFOLIOS
---------------
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
PART A CAPTION
- ------ -------
Institutional Liquid Assets Prime Obligations Portfolio and
Institutional Liquid Assets Tax-Exempt Diversified Portfolio
<S> <C>
1. Cover Page Cover Page
2. Synopsis An Introduction to the Portfolios;
Unitholder and Portfolio Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description
of Registrant An Introduction to the Portfolios;
Investment Policies; Description of
Securities and Investment Techniques;
Investment Limitations; Distribution and
Authorized Dealer Service Plans;
Organization and Units of the Portfolios
5. Management of the Fund Management; Organization and
Units of the Portfolios
6. Capital Stock and
Other Securities Purchase of Units; Reports to
Unitholders; Distributions; Taxes;
Organization and Units of the Portfolios
7. Purchase of Securities Purchase of Units; Exchanges;
Net Asset Value
8. Redemption or Repurchase Redemption of Units
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
<TABLE>
PART A CAPTION
- ------ -------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Organization and Capitalization
and History
13. Investment Objectives Investment Policies and Practices
and Policies of the Fund; Investment Limitations
14. Management of the Fund Trustees and Officers; The Adviser,
Distributor and Transfer Agent
15. Control Persons and Trustees and Officers; The Distributor
Principal Holders and Transfer Agent; of Securities
Organization and Capitalization
16. Investment Advisory The Adviser, Distributor and
and Other Services Transfer Agent; Portfolio Transactions;
Custodian and Subcustodian; Independent
Accountants
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Organization and Capitalization;
Other Securities Service Plan
19. Purchase, Redemption and Net Asset Value; Redemptions
Pricing of Securities
Being Offered
20. Tax Status Tax Information
21. Underwriters The Adviser, Distributor and
Transfer Agent
22. Calculation of Calculation of Yield Quotations
Performance Data
23. Financial Statements Financial Statements
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to this Registration Statement.
<PAGE>
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS--INSTITUTIONAL LIQUID ASSETS
ILA UNITS
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is a no-load, open-end, management
investment company (a "mutual fund") which includes the Goldman Sachs--
Institutional Liquid Assets portfolios (the "Portfolios"). This Prospectus
relates only to the offering of ILA shares of beneficial interest ("ILA
Units") of the Portfolios. Goldman Sachs Asset Management, a separate
operating division of Goldman, Sachs & Co., serves as each Portfolio's
investment adviser. Goldman, Sachs & Co. serves as each Portfolio's
distributor and transfer agent.
The following Portfolios seek to maximize current income to the extent
consistent with the preservation of capital and the maintenance of liquidity
by investing exclusively in high quality money market instruments. These
Portfolios may invest in diversified portfolios of the following types of
instruments:
Prime Obligations Portfolio. Securities of the U.S. Government, its
agencies, authorities and instrumentalities, obligations of U.S. banks,
commercial paper and other short-term obligations of U.S. companies, states,
municipalities and other entities, and repurchase agreements.
Money Market Portfolio. Securities of the U.S. Government, its agencies,
authorities and instrumentalities, U.S. dollar denominated obligations of U.S.
and foreign banks, U. S. dollar denominated commercial paper and other short-
term obligations of U.S. and foreign companies, foreign governments, states,
municipalities and other entities, and repurchase agreements.
Treasury Obligations Portfolio. Securities issued or guaranteed by the U.S.
Treasury and repurchase agreements relating to such securities.
Treasury Instruments Portfolio. Securities issued or guaranteed by the U.S.
Treasury, the interest income from which is generally exempt from state income
taxation.
Government Portfolio. Securities of the U.S. Government, its agencies,
authorities and instrumentalities, and repurchase agreements relating to such
securities.
Federal Portfolio. Securities of the U.S. Government and certain of its
agencies, authorities and instrumentalities, the interest income from which is
generally exempt from state income taxation.
The following Portfolios seek to the extent consistent with the preservation
of capital and prescribed portfolio standards, a high level of income excluded
from gross income for federal income tax purposes, and in the case of the Tax-
Exempt California Portfolio and Tax-Exempt New York Portfolio, exempt from
California state and New York state and city personal income taxes,
respectively, by investing primarily in municipal instruments. The Tax-Exempt
California and Tax-Exempt New York Portfolios concentrate their investments in
securities issued by or on behalf of California and New York municipal issuers
and therefore investment in such Portfolios may be riskier than other types of
money market funds. These Portfolios may invest in the following types of
instruments:
Tax-Exempt Diversified Portfolio. A diversified portfolio of municipal
obligations issued by or on behalf of states, territories and possessions of
the United States and their political subdivisions, agencies, authorities and
instrumentalities, and the District of Columbia.
Tax-Exempt California Portfolio. A non-diversified portfolio consisting
primarily of municipal obligations issued by or on behalf of the State of
California and its political subdivisions, agencies and instrumentalities and
other obligations that are exempt from federal and California state income
taxes.
Tax-Exempt New York Portfolio. A non-diversified portfolio consisting
primarily of municipal obligations issued by or on behalf of the State of New
York and its political subdivisions, agencies and instrumentalities and other
obligations that are exempt from federal, New York state and New York City
personal income taxes.
AN INVESTMENT IN A PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION....... Goldman Sachs Funds--Toll Free: 800-621-2550
This Prospectus provides you with information about the Portfolios that you
should know before investing in ILA Units. It should be read and retained for
future reference. If you would like more detailed information, the Statement
of Additional Information dated May 1, 1997, as amended or supplemented from
time to time, is available upon request without charge by calling the
telephone number listed above or by writing Goldman Sachs, Attention:
Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois
60606. The Statement of Additional Information, which is incorporated by
reference into this Prospectus, has been filed with the Securities and
Exchange Commission. Not all Portfolios are available in certain states.
Please call the phone number listed above to determine availability in your
state. The SEC maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information and other information regarding the Trust.
- -------------------------------------------------------------------------------
ILA UNITS OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A PORTFOLIO 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.
The date of this Prospectus is May 1, 1997.
<PAGE>
UNITHOLDER AND PORTFOLIO EXPENSES
ILA UNITS
<TABLE>
<CAPTION>
PRIME MONEY TREASURY TREASURY TAX-EXEMPT TAX-EXEMPT
OBLIGATIONS MARKET OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL DIVERSIFIED CALIFORNIA
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ----------- ----------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNITHOLDER TRANSAC-
TION EXPENSES
Maximum Sales
Charge Imposed on
Purchases.......... None None None None None None None None
Sales Charge
Imposed on
Reinvested
Distributions...... None None None None None None None None
Deferred Sales Load
Imposed on
Redemptions........ None None None None None None None None
Exchange Fee....... None None None None None None None None
ANNUAL OPERATING EX-
PENSES(1)
(as a percentage of average daily
net assets)
Management Fees
(after
limitations)(2).... 0.35% 0.31% 0.35% 0.16% 0.35% 0.21% 0.26% 0.35%
Other Expenses
(after expense
limitation)(3)..... 0.07% 0.06% 0.07% 0.06% 0.07% 0.06% 0.06% 0.07%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING EX-
PENSES (4).......... 0.42% 0.37% 0.42% 0.22% 0.42% 0.27% 0.32% 0.42%
==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
TAX-
EXEMPT
NEW YORK
PORTFOLIO
---------
<S> <C>
UNITHOLDER TRANSAC-
TION EXPENSES
Maximum Sales
Charge Imposed on
Purchases.......... None
Sales Charge
Imposed on
Reinvested
Distributions...... None
Deferred Sales Load
Imposed on
Redemptions........ None
Exchange Fee....... None
ANNUAL OPERATING EX-
PENSES(1)
(as a percentage of average daily
net assets)
Management Fees
(after
limitations)(2).... 0.27%
Other Expenses
(after expense
limitation)(3)..... 0.06%
---------
TOTAL OPERATING EX-
PENSES (4).......... 0.33%
=========
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Obligations Portfolio................ $4 $13 $24 $53
Money Market Portfolio..................... $4 $12 $21 $47
Treasury Obligations Portfolio............. $4 $13 $24 $53
Treasury Instruments Portfolio............. $2 $ 7 $12 $28
Government Portfolio....................... $4 $13 $24 $53
Federal Portfolio.......................... $3 $ 9 $15 $34
Tax-Exempt Diversified Portfolio........... $3 $10 $18 $41
Tax-Exempt California Portfolio............ $4 $13 $24 $53
Tax-Exempt New York Portfolio.............. $3 $11 $19 $42
</TABLE>
2
<PAGE>
- --------
(1) Based upon estimated amounts for the current fiscal year.
(2) The Investment Adviser has voluntarily agreed that a portion of the man-
agement fee would not be imposed on the Money Market, Treasury Instru-
ments, Federal, Tax-Exempt Diversified and Tax-Exempt New York Portfolios
equal to .04%, .19%, .14%, .09% and .08%, respectively. Without such limi-
tation, management fees for each Portfolio would be 0.35%.
(3) The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, taxes, interest and brokerage
and litigation, indemnification and other extraordinary expenses) to the
extent such expenses exceed 0.07% of the Prime Obligations, Treasury Obli-
gations, Government and Tax-Exempt California Portfolio's average daily
net assets and 0.06% of each other Portfolio's average daily net assets.
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Portfolios for the current fiscal year would be:
<TABLE>
<CAPTION>
OTHER TOTAL OPERATING
EXPENSES EXPENSES
-------- ---------------
<S> <C> <C>
Prime Obligations Portfolio......................... .08% 0.43%
Money Market Portfolio.............................. .08% 0.43%
Treasury Obligations Portfolio...................... .08% 0.43%
Treasury Instruments Portfolio...................... .08% 0.43%
Government Portfolio................................ .09% 0.44%
Federal Portfolio................................... .08% 0.43%
Tax-Exempt Diversified Portfolio.................... .06% 0.41%
Tax-Exempt California Portfolio..................... .07% 0.42%
Tax-Exempt New York Portfolio....................... .08% 0.43%
</TABLE>
The information set forth in the foregoing table and hypothetical example
relates only to ILA Units of the Portfolios. The Portfolios also offer ILA Ad-
ministration Units, ILA Service Units and ILA Class B Units (Prime Obligations
only). The other classes of the Portfolios are subject to different fees and
expenses (which affect performance) and are entitled to different services.
Information regarding any other class of the Portfolios may be obtained from
your sales representative or from Goldman Sachs by calling the number on the
front cover of this Prospectus.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Portfolio that an investor will bear di-
rectly or indirectly. The information on fees and expenses included in the ta-
ble and the hypothetical example above are based on each Portfolio's estimated
fees and expenses 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, a Portfo-
lio's actual performance will vary and may result in an actual return greater
or less than 5%. See "Management--Investment Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following data with respect to a unit (of the class specified) of the
Prime Obligations, Money Market, Treasury Obligations, Treasury Instruments,
Government, Federal, Tax-Exempt Diversified, Tax-Exempt California and Tax-Ex-
empt New York Portfolios outstanding during the periods indicated have been
audited by Arthur Andersen LLP, independent auditors, as indicated in their
report incorporated by reference and attached to the Statement of Additional
Information from the annual report to unitholders for the fiscal year ended
December 31, 1996 (the "Annual Report"), and should be read in conjunction
with the financial statements and related notes incorporated by reference and
attached to the Statement of Additional Information.
4
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Unit Outstanding Throughout Each Period Prime Obligations
Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- ----------------
1996-ILA units.. $1.00 $0.0511 -- $0.0511 $(0.0511) $1.00 5.22% 0.41% 5.11%
1996-ILA Admin-
istration units. 1.00 0.0497 -- 0.0497 (0.0497) 1.00 5.06 0.56 4.97
1996-ILA Service
units........... 1.00 0.0474 -- 0.0474 (0.0474) 1.00 4.80 0.81 4.74
1996-ILA B
units (b)....... 1.00 0.0262 -- 0.0262 (0.0262) 1.00 3.97(d) 1.41(d) 4.09(d)
1995-ILA units.. 1.00 0.0566 -- 0.0566 (0.0566) 1.00 5.79 0.41 5.66
1995-ILA Admin-
istration units. 1.00 0.0551 -- 0.0551 (0.0551) 1.00 5.63 0.56 5.51
1995-ILA Service
units........... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.37 0.81 5.22
1994-ILA units.. 1.00 0.0394 -- 0.0394 (0.0394) 1.00 4.07 0.40 3.94
1994-ILA Admin-
istration units. 1.00 0.0379 -- 0.0379 (0.0379) 1.00 3.91 0.55 3.79
1994-ILA Service
units........... 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.66 0.80 3.65
1993-ILA units.. 1.00 0.0291 0.0002 0.0293 (0.0293) 1.00 2.97 0.40 2.91
1993-ILA Admin-
istration units. 1.00 0.0275 0.0003 0.0278 (0.0278) 1.00 2.82 0.55 2.75
1993-ILA Service
units........... 1.00 0.0250 0.0001 0.0251 (0.0252) 1.00 2.56 0.80 2.50
1992-ILA units.. 1.00 0.0364 0.0010 0.0374 (0.0374) 1.00 3.75 0.40 3.64
1992-ILA Admin-
istration units. 1.00 0.0339 0.0010 0.0349 (0.0349) 1.00 3.60 0.55 3.39
1992-ILA Service
units........... 1.00 0.0311 0.0010 0.0321 (0.0320) 1.00 3.34 0.80 3.11
1991-ILA units.. 1.00 0.0591 0.0003 0.0594 (0.0594) 1.00 6.10 0.40 5.91
1991-ILA Admin-
istration units. 1.00 0.0568 0.0003 0.0571 (0.0571) 1.00 5.94 0.55 5.68
1991-ILA Service
units........... 1.00 0.0558 0.0003 0.0561 (0.0561) 1.00 5.68 0.80 5.58
1990-ILA units.. 1.00 0.0793 -- 0.0793 (0.0793) 1.00 8.21 0.38 7.93
1990-ILA Admin-
istration
units (c)....... 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.81(d) 0.55(d) 7.62(d)
1990-ILA Service
units (c)....... 1.00 0.0425 -- 0.0425 (0.0425) 1.00 7.56(d) 0.80(d) 7.25(d)
1989-ILA units.. 1.00 0.0890 -- 0.0890 (0.0890) 1.00 9.27 0.40 8.90
1988-ILA units.. 1.00 0.0714 -- 0.0714 (0.0714) 1.00 7.48 0.40 7.14
1987-ILA units.. 1.00 0.0634 -- 0.0634 (0.0634) 1.00 6.50 0.40 6.34
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE NET
(IN 000'S) NET ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- -----------------
1996-ILA units.. $1,154,787 0.43% 5.09%
1996-ILA Admin-
istration units. 23,738 0.58 4.95
1996-ILA Service
units........... 84,707 0.83 4.72
1996-ILA B
units (b)....... 346 1.43(d) 4.07(d)
1995-ILA units.. 1,261,251 0.43 5.64
1995-ILA Admin-
istration units. 63,018 0.58 5.49
1995-ILA Service
units........... 227,233 0.83 5.20
1994-ILA units.. 1,963,846 0.42 3.92
1994-ILA Admin-
istration units. 149,234 0.57 3.77
1994-ILA Service
units........... 170,453 0.82 3.63
1993-ILA units.. 2,332,771 0.42 2.89
1993-ILA Admin-
istration units. 189,431 0.57 2.73
1993-ILA Service
units........... 137,804 0.82 2.48
1992-ILA units.. 3,444,591 0.42 3.62
1992-ILA Admin-
istration units. 257,321 0.57 3.37
1992-ILA Service
units........... 22,044 0.82 3.09
1991-ILA units.. 3,531,736 0.42 5.89
1991-ILA Admin-
istration units. 198,417 0.57 5.66
1991-ILA Service
units........... 18,789 0.82 5.56
1990-ILA units.. 2,833,541 0.38 7.93
1990-ILA Admin-
istration
units (c)....... 209,272 0.55(d) 7.62(d)
1990-ILA Service
units (c)....... 19,039 0.80(d) 7.25(d)
1989-ILA units.. 3,761,964 0.40 8.90
1988-ILA units.. 3,799,628 0.40 7.14
1987-ILA units.. 5,814,280 0.40 6.34
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b)ILA Class B unit activity commenced during May of 1996.
(c)ILA Administration and Service unit activity commenced during June of 1990.
(d)Annualized.
5
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Money Market Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $1.00 $0.0515 $0.0001 $0.0516 $(0.0516) $1.00 5.27% 0.36% 5.15%
1996-ILA Admin-
istration units. 1.00 0.0500 0.0001 0.0501 (0.0501) 1.00 5.12 0.51 5.00
1996-ILA Service
units........... 1.00 0.0475 0.0001 0.0476 (0.0476) 1.00 4.86 0.76 4.75
1995-ILA units.. 1.00 0.0571 -- 0.0571 (0.0571) 1.00 5.85 0.36 5.71
1995-ILA Admin-
istration units. 1.00 0.0555 -- 0.0555 (0.0555) 1.00 5.69 0.51 5.55
1995-ILA Service
units........... 1.00 0.0529 -- 0.0529 (0.0529) 1.00 5.43 0.76 5.29
1994-ILA units.. 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.13 0.35 4.01
1994-ILA Admin-
istration units. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.98 0.50 3.88
1994-ILA Service
units........... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.72 0.75 3.61
1993-ILA units.. 1.00 0.0296 0.0003 0.0299 (0.0299) 1.00 3.03 0.35 2.96
1993-ILA Admin-
istration units. 1.00 0.0281 0.0003 0.0284 (0.0284) 1.00 2.88 0.50 2.81
1993-ILA Service
units........... 1.00 0.0257 0.0002 0.0259 (0.0259) 1.00 2.62 0.75 2.57
1992-ILA units.. 1.00 0.0368 0.0004 0.0372 (0.0372) 1.00 3.76 0.35 3.68
1992-ILA Admin-
istration units. 1.00 0.0356 0.0004 0.0360 (0.0360) 1.00 3.61 0.50 3.56
1992-ILA Service
units........... 1.00 0.0358 0.0006 0.0364 (0.0364) 1.00 3.35 0.75 3.58
1991-ILA units.. 1.00 0.0591 0.0004 0.0595 (0.0595) 1.00 6.12 0.35 5.91
1991-ILA Admin-
istration units. 1.00 0.0574 0.0004 0.0578 (0.0578) 1.00 5.96 0.50 5.74
1991-ILA Service
units........... 1.00 0.0547 0.0004 0.0551 (0.0551) 1.00 5.70 0.75 5.47
1990-ILA units.. 1.00 0.0793 0.0001 0.0794 (0.0794) 1.00 8.24 0.35 7.93
1990-ILA Admin-
istration
units (c)....... 1.00 0.0424 0.0001 0.0425 (0.0425) 1.00 7.86(b) 0.50(b) 7.63(b)
1990-ILA Service
units (c)....... 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.61(b) 0.75(b) 7.46(b)
1989-ILA units.. 1.00 0.0885 0.0001 0.0886 (0.0886) 1.00 9.31 0.35 8.85
1988-ILA units.. 1.00 0.0751 -- 0.0751 (0.0751) 1.00 7.66 0.27 7.51
<CAPTION>
FOR THE PERIOD DECEMBER 2, 1987 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987-ILA units.. 1.00 0.0063 -- 0.0063 (0.0063) 1.00 7.38(b) 0.15(b) 7.62(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $ 703,097 0.43% 5.08%
1996-ILA Admin-
istration units. 257,258 0.58 4.93
1996-ILA Service
units........... 28,845 0.83 4.68
1995-ILA units.. 574,155 0.42 5.65
1995-ILA Admin-
istration units. 164,422 0.57 5.49
1995-ILA Service
units........... 23,080 0.82 5.23
1994-ILA units.. 559,470 0.43 3.93
1994-ILA Admin-
istration units. 145,867 0.58 3.80
1994-ILA Service
units........... 21,862 0.83 3.53
1993-ILA units.. 699,604 0.43 2.88
1993-ILA Admin-
istration units. 150,452 0.58 2.73
1993-ILA Service
units........... 11,166 0.83 2.49
1992-ILA units.. 884,571 0.43 3.60
1992-ILA Admin-
istration units. 187,445 0.58 3.48
1992-ILA Service
units........... 15,114 0.83 3.50
1991-ILA units.. 1,153,191 0.42 5.84
1991-ILA Admin-
istration units. 210,330 0.57 5.67
1991-ILA Service
units........... 56,586 0.82 5.40
1990-ILA units.. 924,141 0.40 7.88
1990-ILA Admin-
istration
units (c)....... 204,477 0.55(b) 7.58(b)
1990-ILA Service
units (c)....... 38,128 0.80(b) 7.41(b)
1989-ILA units.. 1,295,389 0.40 8.80
1988-ILA units.. 701,105 0.40 7.38
<CAPTION>
FOR THE PERIOD DECEMBER 2, 1987 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- ------------------------------------------------------------
<S> <C> <C> <C>
1987-ILA units.. 183,633 0.40(b) 7.37(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during June of 1990.
6
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Government Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $1.00 $0.0504 $0.0001 $0.0505 $(0.0504) $1.00 5.15% 0.41% 5.04%
1996-ILA Admin-
istration units. 1.00 0.0489 0.0001 0.0490 (0.0489) 1.00 4.99 0.56 4.89
1996-ILA Service
units........... 1.00 0.0463 0.0001 0.0464 (0.0463) 1.00 4.73 0.81 4.63
1995-ILA units.. 1.00 0.0562 0.0002 0.0564 (0.0564) 1.00 5.77 0.41 5.62
1995-ILA Admin-
istration units. 1.00 0.0549 0.0002 0.0551 (0.0551) 1.00 5.62 0.56 5.49
1995-ILA Service
units........... 1.00 0.0519 0.0002 0.0521 (0.0521) 1.00 5.35 0.81 5.19
1994-ILA units.. 1.00 0.0378 0.0002 0.0380 (0.0380) 1.00 3.94 0.40 3.78
1994-ILA Admin-
istration units. 1.00 0.0362 0.0002 0.0364 (0.0364) 1.00 3.79 0.55 3.62
1994-ILA Service
units........... 1.00 0.0350 0.0002 0.0352 (0.0352) 1.00 3.53 0.80 3.50
1993-ILA units.. 1.00 0.0282 0.0008 0.0290 (0.0291) 1.00 2.94 0.40 2.82
1993-ILA Admin-
istration units. 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79 0.55 2.67
1993-ILA Service
units........... 1.00 0.0242 0.0006 0.0248 (0.0250) 1.00 2.53 0.80 2.42
1992-ILA units.. 1.00 0.0338 0.0027 0.0365 (0.0364) 1.00 3.70 0.40 3.38
1992-ILA Admin-
istration units. 1.00 0.0325 0.0027 0.0352 (0.0351) 1.00 3.55 0.55 3.25
1992-ILA Service
units........... 1.00 0.0309 0.0030 0.0339 (0.0336) 1.00 3.29 0.80 3.09
1991-ILA units.. 1.00 0.0567 0.0011 0.0578 (0.0578) 1.00 5.91 0.40 5.67
1991-ILA Admin-
istration units. 1.00 0.0545 0.0011 0.0556 (0.0556) 1.00 5.75 0.55 5.45
1991-ILA Service
units........... 1.00 0.0522 0.0011 0.0533 (0.0533) 1.00 5.49 0.80 5.22
1990-ILA units.. 1.00 0.0779 0.0003 0.0782 (0.0782) 1.00 8.11 0.39 7.79
1990-ILA Admin-
istration units
(c)............. 1.00 0.0439 0.0004 0.0443 (0.0443) 1.00 7.74(b) 0.55(b) 7.49(b)
1990-ILA Service
units (c)....... 1.00 0.0359 0.0002 0.0361 (0.0363) 1.00 7.42(b) 0.80(b) 7.15(b)
1989-ILA units.. 1.00 0.0877 0.0001 0.0878 (0.0878) 1.00 9.15 0.40 8.77
1988-ILA units.. 1.00 0.0716 0.0002 0.0718 (0.0718) 1.00 7.42 0.40 7.16
1987-ILA units.. 1.00 0.0622 0.0001 0.0623 (0.0624) 1.00 6.43 0.40 6.22
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $ 694,651 0.44% 5.01%
1996-ILA Admin-
istration units. 36,055 0.59 4.86
1996-ILA Service
units........... 94,228 0.84 4.60
1995-ILA units.. 570,469 0.43 5.60
1995-ILA Admin-
istration units. 47,558 0.58 5.47
1995-ILA Service
units........... 85,401 0.83 5.17
1994-ILA units.. 881,520 0.44 3.74
1994-ILA Admin-
istration units. 95,483 0.59 3.58
1994-ILA Service
units........... 156,930 0.84 3.46
1993-ILA units.. 1,315,378 0.43 2.79
1993-ILA Admin-
istration units. 161,845 0.58 2.64
1993-ILA Service
units........... 101,272 0.83 2.39
1992-ILA units.. 1,785,472 0.42 3.36
1992-ILA Admin-
istration units. 461,542 0.57 3.23
1992-ILA Service
units........... 56,389 0.82 3.07
1991-ILA units.. 2,103,627 0.43 5.64
1991-ILA Admin-
istration units. 464,060 0.58 5.42
1991-ILA Service
units........... 200,176 0.83 5.19
1990-ILA units.. 2,203,756 0.39 7.79
1990-ILA Admin-
istration units
(c)............. 296,313 0.55(b) 7.49(b)
1990-ILA Service
units (c)....... 132,888 0.80(b) 7.15(b)
1989-ILA units.. 2,268,330 0.40 8.77
1988-ILA units.. 2,197,796 0.40 7.16
1987-ILA units.. 2,243,870 0.40 6.22
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c)ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
7
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Obligations Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET
NET ASSET REALIZED TOTAL
VALUE AT NET GAIN ON INCOME FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C>
1996-ILA units.. $1.00 $0.0498 $0.0002 $0.0500
1996-ILA Admin-
istration units. 1.00 0.0483 0.0003 0.0486
1996-ILA Service
units........... 1.00 0.0459 0.0001 0.0460
1995-ILA units.. 1.00 0.0551 0.0007 0.0558
1995-ILA Admin-
istration units. 1.00 0.0537 0.0007 0.0544
1995-ILA Service
units........... 1.00 0.0511 0.0007 0.0518
1994-ILA units.. 1.00 0.0377 -- 0.0377
1994-ILA Admin-
istration units. 1.00 0.0368 -- 0.0368
1994-ILA Service
units........... 1.00 0.0340 -- 0.0340
1993-ILA units.. 1.00 0.0279 0.0006 0.0285
1993-ILA Admin-
istration units. 1.00 0.0264 0.0006 0.0270
1993-ILA Service
units........... 1.00 0.0239 0.0006 0.0245
1992-ILA units.. 1.00 0.0339 0.0025 0.0364
1992-ILA Admin-
istration units. 1.00 0.0320 0.0023 0.0343
1992-ILA Service
units........... 1.00 0.0294 0.0024 0.0318
1991-ILA units.. 1.00 0.0557 0.0018 0.0575
1991-ILA Admin-
istration units. 1.00 0.0540 0.0018 0.0558
1991-ILA Service
units........... 1.00 0.0515 0.0018 0.0533
1990-ILA units.. 1.00 0.0772 0.0002 0.0774
1990-ILA Admin-
istration
units (c)....... 1.00 0.0413 0.0002 0.0415
1990-ILA Service
units (c)....... 1.00 0.0417 0.0003 0.0420
1989-ILA units.. 1.00 0.0864 0.0005 0.0869
1988-ILA units.. 1.00 0.0704 0.0004 0.0708
1987-ILA units.. 1.00 0.0617 0.0002 0.0619
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
RATIO OF NET NET RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INVESTMENT
VALUE AT EXPENSES TO INCOME TO END OF EXPENSES TO INCOME TO
DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units.. $(0.0500) $1.00 5.11% 0.41% 4.98% $ 574,734 0.43% 4.96%
1996-ILA Admin-
istration units. (0.0486) 1.00 4.95 0.56 4.83 108,850 0.58 4.81
1996-ILA Service
units........... (0.0460) 1.00 4.69 0.81 4.59 123,483 0.83 4.57
1995-ILA units.. (0.0558) 1.00 5.73 0.41 5.51 711,209 0.43 5.49
1995-ILA Admin-
istration units. (0.0544) 1.00 5.57 0.56 5.37 92,643 0.58 5.35
1995-ILA Service
units........... (0.0518) 1.00 5.31 0.81 5.11 119,692 0.83 5.09
1994-ILA units.. (0.0377) 1.00 3.91 0.40 3.77 713,816 0.44 3.73
1994-ILA Admin-
istration units. (0.0368) 1.00 3.75 0.55 3.68 97,626 0.59 3.64
1994-ILA Service
units........... (0.0340) 1.00 3.49 0.80 3.40 108,972 0.84 3.35
1993-ILA units.. (0.0286) 1.00 2.89 0.40 2.79 969,565 0.43 2.76
1993-ILA Admin-
istration units. (0.0270) 1.00 2.74 0.55 2.64 121,327 0.58 2.61
1993-ILA Service
units........... (0.0246) 1.00 2.48 0.80 2.39 185,506 0.83 2.36
1992-ILA units.. (0.0362) 1.00 3.65 0.40 3.39 1,328,036 0.43 3.36
1992-ILA Admin-
istration units. (0.0343) 1.00 3.49 0.55 3.20 152,804 0.58 3.17
1992-ILA Service
units........... (0.0318) 1.00 3.23 0.80 2.94 183,208 0.83 2.91
1991-ILA units.. (0.0575) 1.00 5.90 0.40 5.57 1,709,321 0.43 5.54
1991-ILA Admin-
istration units. (0.0558) 1.00 5.74 0.55 5.40 146,795 0.58 5.37
1991-ILA Service
units........... (0.0533) 1.00 5.48 0.80 5.15 154,419 0.83 5.12
1990-ILA units.. (0.0774) 1.00 8.05 0.39 7.72 1,816,991 0.39 7.72
1990-ILA Admin-
istration
units (c)....... (0.0415) 1.00 7.67(b) 0.55(b) 7.42(b) 132,088 0.55(b) 7.42(b)
1990-ILA Service
units (c)....... (0.0421) 1.00 7.42(b) 0.80(b) 7.11(b) 148,323 0.80(b) 7.11(b)
1989-ILA units.. (0.0869) 1.00 9.06 0.40 8.64 1,769,974 0.40 8.64
1988-ILA units.. (0.0708) 1.00 7.30 0.40 7.04 1,657,215 0.40 7.04
1987-ILA units.. (0.0619) 1.00 6.32 0.40 6.17 1,693,767 0.40 6.17
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Administration and Service unit activity commenced during June and
July of 1990, respectively.
8
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Instruments Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0496 $0.0004 $0.0500 $(0.0500) $1.00 5.10% 0.21% 4.96%
1996-ILA Admin-
istration units. 1.00 0.0482 0.0004 0.0486 (0.0486) 1.00 4.95 0.36 4.82
1996-ILA Service
units........... 1.00 0.0456 0.0004 0.0460 (0.0460) 1.00 4.68 0.61 4.56
1995-ILA units.. 1.00 0.0550 0.0006 0.0556 (0.0556) 1.00 5.70 0.21 5.50
1995-ILA Admin-
istration units. 1.00 0.0534 0.0007 0.0541 (0.0540) 1.00 5.54 0.36 5.34
1995-ILA Service
units........... 1.00 0.0500 0.0005 0.0505 (0.0505) 1.00 5.28 0.61 5.00
1994-ILA units.. 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 4.01 0.20 3.96
1994-ILA Admin-
istration units. 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 3.85 0.35 3.97
1994-ILA Service
units........... 1.00 0.0371 0.0001 0.0372 (0.0372) 1.00 3.59 0.60 3.72
1993-ILA units.. 1.00 0.0288 0.0006 0.0294 (0.0294) 1.00 2.98 0.20 2.88
1993-ILA Admin-
istration units. 1.00 0.0273 0.0006 0.0279 (0.0279) 1.00 2.83 0.35 2.73
1993-ILA Service
units........... 1.00 0.0248 0.0006 0.0254 (0.0254) 1.00 2.57 0.60 2.48
1992-ILA units.. 1.00 0.0338 0.0012 0.0350 (0.0350) 1.00 3.54 0.18 3.38
1992-ILA Admin-
istration units. 1.00 0.0326 0.0012 0.0338 (0.0338) 1.00 3.38 0.33 3.26
1992-ILA Service
units........... 1.00 0.0275 0.0011 0.0286 (0.0286) 1.00 3.13 0.58 2.75
FOR THE PERIOD JANUARY 30, 1991 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1991-ILA units.. 1.00 0.0486 0.0013 0.0499 (0.0499) 1.00 5.75(b) 0.10(b) 5.28(b)
1991-ILA Admin-
istration
units (c)....... 1.00 0.0210 0.0010 0.0220 (0.0220) 1.00 5.21(b) 0.25(b) 4.77(b)
1991-ILA Service
units (c)....... 1.00 0.0473 0.0009 0.0482 (0.0482) 1.00 5.33(b) 0.50(b) 5.13(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $708,999 0.43% 4.74%
1996-ILA Admin-
istration units. 137,706 0.58 4.60
1996-ILA Service
units........... 383,901 0.83 4.34
1995-ILA units.. 586,294 0.44 5.27
1995-ILA Admin-
istration units. 68,713 0.59 5.11
1995-ILA Service
units........... 123,254 0.84 4.77
1994-ILA units.. 547,351 0.43 3.73
1994-ILA Admin-
istration units. 64,388 0.58 3.74
1994-ILA Service
units........... 74,451 0.83 3.49
1993-ILA units.. 456,411 0.44 2.64
1993-ILA Admin-
istration units. 26,553 0.59 2.49
1993-ILA Service
units........... 34,014 0.84 2.24
1992-ILA units.. 422,506 0.45 3.11
1992-ILA Admin-
istration units. 6,915 0.60 2.99
1992-ILA Service
units........... 29,522 0.85 2.48
FOR THE PERIOD JANUARY 30, 1991 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1991-ILA units.. 424,436 0.45(b) 4.93(b)
1991-ILA Admin-
istration
units (c)....... 17,649 0.60(b) 4.42(b)
1991-ILA Service
units (c)....... 9,430 0.85(b) 4.78(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during July and Jan-
uary of 1991, respectively.
9
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Federal Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0513 -- $0.0513 $(0.0513) $1.00 5.24% 0.26% 5.13%
1996-ILA Admin-
istration units. 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.09 0.41 4.98
1996-ILA Service
units........... 1.00 0.0473 -- 0.0473 (0.0473) 1.00 4.83 0.66 4.73
1995-ILA units.. 1.00 0.0569 -- 0.0569 (0.0569) 1.00 5.83 0.26 5.69
1995-ILA Admin-
istration units. 1.00 0.0550 -- 0.0550 (0.0550) 1.00 5.67 0.41 5.50
1995-ILA Service
units........... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.41 0.66 5.22
1994-ILA units.. 1.00 0.0407 -- 0.0407 (0.0407) 1.00 4.11 0.25 4.07
1994-ILA Admin-
istration units. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.95 0.40 3.88
1994-ILA Service
units........... 1.00 0.0392 -- 0.0392 (0.0392) 1.00 3.69 0.65 3.92
1993-ILA units.. 1.00 0.0296 -- 0.0296 (0.0296) 1.00 3.00 0.25 2.96
1993-ILA Admin-
istration units. 1.00 0.0281 -- 0.0281 (0.0281) 1.00 2.84 0.40 2.81
1993-ILA Service
units (c)....... 1.00 0.0157 -- 0.0157 (0.0157) 1.00 2.56(b) 0.65(b) 2.54(b)
1992-ILA units.. 1.00 0.0358 -- 0.0358 (0.0358) 1.00 3.61 0.25 3.58
1992-ILA Admin-
istration units. 1.00 0.0340 -- 0.0340 (0.0340) 1.00 3.46 0.40 3.40
1991-ILA units.. 1.00 0.0576 -- 0.0576 (0.0576) 1.00 5.94 0.25 5.76
1991-ILA Admin-
istration units. 1.00 0.0542 -- 0.0542 (0.0542) 1.00 5.78 0.40 5.42
1991-ILA Service
units (c)....... 1.00 0.0196 -- 0.0196 (0.0196) 1.00 5.55b) 0.65(b) 5.56(b)
1990-ILA units.. 1.00 0.0772 -- 0.0772 (0.0772) 1.00 8.06 0.25 7.72
1990-ILA Admin-
istration
units (d)....... 1.00 0.0205 -- 0.0205 (0.0205) 1.00 7.39(b) 0.40(b) 7.25(b)
FOR THE PERIOD MAY 22, 1989 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1989-ILA units.. 1.00 0.0516 -- 0.0516 (0.0516) 1.00 7.62(b) 0.19(b) 8.41(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $2,303,677 0.43% 4.96%
1996-ILA Admin-
istration units. 794,537 0.58 4.81
1996-ILA Service
units........... 192,416 0.83 4.56
1995-ILA units.. 1,731,935 0.42 5.53
1995-ILA Admin-
istration units. 516,917 0.57 5.34
1995-ILA Service
units........... 102,576 0.82 5.06
1994-ILA units.. 1,625,567 0.42 3.90
1994-ILA Admin-
istration units. 329,896 0.57 3.71
1994-ILA Service
units........... 15,539 0.82 3.75
1993-ILA units.. 1,430,292 0.42 2.79
1993-ILA Admin-
istration units. 362,401 0.57 2.64
1993-ILA Service
units (c)....... 1,425 0.82(b) 2.37(b)
1992-ILA units.. 1,600,989 0.42 3.41
1992-ILA Admin-
istration units. 312,792 0.57 3.23
1991-ILA units.. 1,656,232 0.42 5.59
1991-ILA Admin-
istration units. 291,810 0.57 5.25
1991-ILA Service
units (c)....... -- 0.82(b) 5.39(b)
1990-ILA units.. 1,368,765 0.40 7.57
1990-ILA Admin-
istration
units (d)....... 90,748 0.55(b) 7.10(b)
FOR THE PERIOD MAY 22, 1989 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1989-ILA units.. 455,230 0.40(b) 8.20(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Service unit activity commenced during April of 1991; no shares were
outstanding during the period from August 7, 1991 through May 15, 1993.
(d)ILA Administration unit activity commenced during September of 1990.
10
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt Diversified Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN (LOSS) ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0320 $ -- $0.0320 $(0.0320) $1.00 3.25% 0.31% 3.20%
1996-ILA Admin-
istration units. 1.00 0.0306 -- 0.0306 (0.0306) 1.00 3.09 0.46 3.06
1996-ILA Service
units........... 1.00 0.0279 -- 0.0279 (0.0279) 1.00 2.84 0.71 2.79
1995-ILA units.. 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.72 0.31 3.65
1995-ILA Admin-
istration units. 1.00 0.0351 -- 0.0351 (0.0352) 1.00 3.57 0.46 3.51
1995-ILA Service
units........... 1.00 0.0324 -- 0.0324 (0.0325) 1.00 3.31 0.71 3.24
1994-ILA units.. 1.00 0.0264 -- 0.0264 (0.0264) 1.00 2.71 0.30 2.64
1994-ILA Admin-
istration units. 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.55 0.45 2.50
1994-ILA Service
units........... 1.00 0.0220 -- 0.0220 (0.0220) 1.00 2.30 0.70 2.20
1993-ILA units.. 1.00 0.0222 -- 0.0222 (0.0222) 1.00 2.25 0.30 2.22
1993-ILA Admin-
istration units. 1.00 0.0207 -- 0.0207 (0.0207) 1.00 2.09 0.45 2.08
1993-ILA Service
units........... 1.00 0.0183 -- 0.0183 (0.0183) 1.00 1.84 0.70 1.83
1992-ILA units.. 1.00 0.0277 -- 0.0277 (0.0277) 1.00 2.82 0.30 2.77
1992-ILA Admin-
istration units. 1.00 0.0266 -- 0.0266 (0.0266) 1.00 2.67 0.45 2.66
1992-ILA Service
units........... 1.00 0.0243 -- 0.0243 (0.0243) 1.00 2.41 0.70 2.43
1991-ILA units.. 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.33 0.32 4.24
1991-ILA Admin-
istration units. 1.00 0.0406 -- 0.0406 (0.0406) 1.00 4.17 0.47 4.06
1991-ILA Service
units........... 1.00 0.0386 -- 0.0386 (0.0386) 1.00 3.91 0.72 3.86
1990-ILA units.. 1.00 0.0550 (0.0001) 0.0549 (0.0549) 1.00 5.64 0.40 5.50
1990-ILA Admin-
istration
units (c)....... 1.00 0.0301 -- 0.0301 (0.0300) 1.00 5.43(b) 0.55(b) 5.40(b)
1990-ILA Service
units (c)....... 1.00 0.0259 -- 0.0259 (0.0259) 1.00 5.17(b) 0.80(b) 5.16(b)
1989-ILA units.. 1.00 0.0591 (0.0001) 0.0590 (0.0590) 1.00 6.07 0.40 5.91
1988-ILA units.. 1.00 0.0487 0.0003 0.0490 (0.0490) 1.00 5.03 0.40 4.87
1987-ILA units.. 1.00 0.0413 (0.0003) 0.0410 (0.0410) 1.00 4.23 0.40 4.13
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1,514,443 0.41% 3.10%
1996-ILA Admin-
istration units. 59,097 0.56 2.96
1996-ILA Service
units........... 28,921 0.81 2.69
1995-ILA units.. 1,342,585 0.42 3.54
1995-ILA Admin-
istration units. 48,773 0.57 3.40
1995-ILA Service
units........... 49,647 0.82 3.13
1994-ILA units.. 1,434,965 0.41 2.53
1994-ILA Admin-
istration units. 97,778 0.56 2.39
1994-ILA Service
units........... 36,492 0.81 2.09
1993-ILA units.. 1,769,477 0.41 2.11
1993-ILA Admin-
istration units. 99,896 0.56 1.97
1993-ILA Service
units........... 45,172 0.81 1.72
1992-ILA units.. 1,333,925 0.42 2.65
1992-ILA Admin-
istration units. 50,225 0.57 2.54
1992-ILA Service
units........... 29,534 0.82 2.31
1991-ILA units.. 1,044,986 0.42 4.14
1991-ILA Admin-
istration units. 37,567 0.57 3.96
1991-ILA Service
units........... 52,399 0.82 3.76
1990-ILA units.. 603,895 0.40 5.50
1990-ILA Admin-
istration
units (c)....... 42,498 0.55(b) 5.40(b)
1990-ILA Service
units (c)....... 56,810 0.80(b) 5.16(b)
1989-ILA units.. 688,556 0.40 5.91
1988-ILA units.. 907,782 0.40 4.87
1987-ILA units.. 965,714 0.40 4.13
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
11
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt California Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET LOSS ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units.. $1.00 $0.0299 -- $0.0299 $(0.0299) $1.00 3.03% 0.41% 2.99%
1996-ILA Admin-
istration units. 1.00 0.0284 -- 0.0284 (0.0284) 1.00 2.88 0.56 2.84
1995-ILA units.. 1.00 0.0349 -- 0.0349 (0.0350) 1.00 3.55 0.41 3.49
1995-ILA Admin-
istration units. 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.40 0.56 3.32
1994-ILA units.. 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.53 0.40 2.50
1994-ILA Admin-
istration units. 1.00 0.0233 -- 0.0233 (0.0233) 1.00 2.37 0.55 2.33
1993-ILA units.. 1.00 0.0206 -- 0.0206 (0.0206) 1.00 2.09 0.40 2.06
1993-ILA Admin-
istration units. 1.00 0.0191 -- 0.0191 (0.0191) 1.00 1.93 0.55 1.91
1993-ILA Service
units........... 1.00 0.0166 -- 0.0166 (0.0166) 1.00 1.68 0.76 1.66
1992-ILA units.. 1.00 0.0256 (0.0001) 0.0255 (0.0256) 1.00 2.62 0.40 2.56
1992-ILA Admin-
istration units. 1.00 0.0235 (0.0002) 0.0233 (0.0235) 1.00 2.47 0.55 2.35
1992-ILA Service
units........... 1.00 0.0081 -- 0.0081 (0.0081) 1.00 1.99(b) 0.80(b) 2.03(b)
1991-ILA units.. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.92 0.40 3.88
1991-ILA Admin-
istration units
units........... 1.00 0.0376 -- 0.0376 (0.0376) 1.00 3.80 0.55 3.76
1990-ILA units.. 1.00 0.0511 (0.0001) 0.0510 (0.0511) 1.00 5.24 0.40 5.11
1990-ILA Admin-
istration
units (c)....... 1.00 0.0042 -- 0.0042 (0.0042) 1.00 5.14(b) 0.55(b) 5.33(b)
1989-ILA units.. 1.00 0.0573 (0.0001) 0.0572 (0.0572) 1.00 5.93 0.40 5.73
<CAPTION>
FOR THE PERIOD OCTOBER 3, 1988 (COMMENCEMENT OF
OPERATIONS) THROUGH DECEMBER 31,
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988-ILA units.. 1.00 0.0139 -- 0.0139 (0.0139) 1.00 5.81(b) 0.24(b) 5.74(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C>
1996-ILA units.. $440,476 0.42% 2.98%
1996-ILA Admin-
istration units. 142 0.57 2.83
1995-ILA units.. 346,728 0.41 3.49
1995-ILA Admin-
istration units. 61 0.56 3.32
1994-ILA units.. 227,399 0.41 2.49
1994-ILA Admin-
istration units. 790 0.56 2.32
1993-ILA units.. 229,839 0.44 2.02
1993-ILA Admin-
istration units. 1,425 0.59 1.87
1993-ILA Service
units........... -- 0.84 1.54
1992-ILA units.. 161,868 0.47 2.49
1992-ILA Admin-
istration units. 31 0.62 2.28
1992-ILA Service
units........... 3 0.87(b) 1.96(b)
1991-ILA units.. 102,494 0.47 3.81
1991-ILA Admin-
istration units
units........... 13 0.62 3.69
1990-ILA units.. 106,972 0.40 5.11
1990-ILA Admin-
istration
units (c)....... 68 0.55(b) 5.33(b)
1989-ILA units.. 112,463 0.40 5.73
<CAPTION>
FOR THE PERIOD OCTOBER 3, 1988 (COMMENCEMENT OF
OPERATIONS) THROUGH DECEMBER 31,
- -----------------------------------------------
<S> <C> <C> <C>
1988-ILA units.. 41,028 0.38(b) 5.60(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during December of
1990 and August of 1992, respectively. No service shares were outstanding for
the years ended December 31, 1996, 1995, 1994.
12
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt New York Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET
NET ASSET REALIZED TOTAL
VALUE AT NET LOSS ON INCOME FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C>
1996-ILA units.. $1.00 $0.0301 -- $0.0301
1996-ILA Admin-
istration units. 1.00 0.0288 -- 0.0288
1995-ILA units.. 1.00 0.0344 -- 0.0344
1995-ILA Admin-
istration units. 1.00 0.0328 -- 0.0328
1994-ILA units.. 1.00 0.0262 -- 0.0262
1994-ILA Admin-
istration units. 1.00 0.0247 -- 0.0247
1993-ILA units.. 1.00 0.0221 -- 0.0221
1993-ILA Admin-
istration units. 1.00 0.0205 -- 0.0205
1992-ILA units.. 1.00 0.0265 -- 0.0265
1992-ILA Admin-
istration units. 1.00 0.0253 -- 0.0253
FOR THE PERIOD FEBRUARY 15, 1991 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- -------------------------------------------------------------
1991-ILA units.. 1.00 0.0347 (0.0002) 0.0345
1991-ILA Admin-
istration
<CAPTION>units (c)....... 1.00 0.0330 -- 0.0330
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
RATIO OF NET NET RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INVESTMENT
VALUE AT EXPENSES TO INCOME TO END OF EXPENSES TO INCOME TO
DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units.. $(0.0301) $1.00 3.05% 0.32% 3.01% $70,175 0.43% 2.90%
1996-ILA Admin-
istration units. (0.0288) 1.00 2.90 0.47 2.88 44,319 0.58 2.77
1995-ILA units.. (0.0344) 1.00 3.51 0.30 3.44 90,537 0.44 3.30
1995-ILA Admin-
istration units. (0.0328) 1.00 3.35 0.45 3.28 26,724 0.59 3.14
1994-ILA units.. (0.0262) 1.00 2.56 0.24 2.62 84,517 0.47 2.39
1994-ILA Admin-
istration units. (0.0247) 1.00 2.41 0.39 2.47 38,970 0.62 2.24
1993-ILA units.. (0.0221) 1.00 2.21 0.10 2.21 48,367 0.51 1.80
1993-ILA Admin-
istration units. (0.0205) 1.00 2.05 0.25 2.05 20,306 0.66 1.64
1992-ILA units.. (0.0265) 1.00 2.71 0.10 2.65 16,844 0.57 2.18
1992-ILA Admin-
istration units. (0.0253) 1.00 2.55 0.25 2.53 14,641 0.72 2.06
FOR THE PERIOD FEBRUARY 15, 1991 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- -------------------------------------------------------------
1991-ILA units.. (0.0347) 1.00 4.02(b) 0.10(b) 3.96(b) 11,070 0.76(b) 3.30(b)
1991-ILA Admin-
istration
units (c)....... (0.0330) 1.00 3.87(b) 0.25(b) 3.90(b) 19,198 0.91(b) 3.24(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c)ILA Administration unit activity commenced during February of 1991.
13
<PAGE>
AN INTRODUCTION TO THE PORTFOLIOS
THE TRUST: The Trust is a no-load, open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "Invest-
ment Company Act"). Each Portfolio is a separate pool of assets which pursues
its investment objective through separate investment policies, as described
below.
THE ADVISER: Goldman Sachs Asset Management, a separate operating division
of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Portfolios' invest-
ment adviser (the "Adviser" or "GSAM").
THE DISTRIBUTOR: Goldman Sachs, which serves as the Portfolios' distributor
and transfer agent, is one of the largest international investment banking and
brokerage firms in the United States.
THE INVESTORS: The Portfolios are designed for investors seeking a high rate
of return, a stable net asset value and convenient liquidation privileges. The
Portfolios are particularly suitable for banks, corporations and other finan-
cial institutions that seek investment of short-term funds for their own ac-
counts or for the accounts of their customers.
THE PORTFOLIOS: Each Portfolio's securities are valued by the amortized cost
method as permitted by a rule ("Rule 2a-7") of the Securities and Exchange
Commission ("SEC"). Under such rule, each Portfolio may invest only in securi-
ties that are determined to present minimal credit risk and meet certain other
criteria.
TAXABLE PORTFOLIOS: Prime Obligations, Money Market, Treasury Obligations
and Government Portfolios.
TAX-ADVANTAGED PORTFOLIOS: Treasury Instruments and Federal Portfolios.
INVESTMENT OBJECTIVES AND POLICIES FOR TAXABLE AND TAX-ADVANTAGED
PORTFOLIOS: To seek to maximize current income to the extent consistent
with the preservation of capital and the maintenance of liquidity by in-
vesting exclusively in high quality money market instruments. The Treasury
Instruments and Federal Portfolios pursue their objectives by limiting
their investments to certain U.S. Treasury Obligations and U.S. Government
Securities (each as defined herein), respectively, the interest from which
is generally exempt from state income taxation. Each investor should con-
sult his or her tax adviser to determine whether distributions from the
Treasury Instruments and Federal Portfolios (and any other Portfolio that
may hold such obligations) derived from interest on such obligations are
exempt from state income taxation in the investor's own state.
TAX-EXEMPT PORTFOLIOS: Tax-Exempt Diversified, Tax-Exempt California and
Tax-Exempt New York Portfolios.
INVESTMENT OBJECTIVES AND POLICIES FOR TAX-EXEMPT PORTFOLIOS: To seek to
provide unitholders, to the extent consistent with the preservation of cap-
ital and prescribed portfolio standards, with a high level of income exempt
from federal income tax by investing primarily in Municipal Instruments, as
defined herein. In addition, the Tax-Exempt California and Tax-Exempt New
York Portfolios seek to provide unitholders with income exempt from Cali-
fornia state and New York state and city personal income taxes, respective-
ly.
NET ASSET VALUE: Each Portfolio seeks to maintain a stable net asset value
of $1.00 per unit.
MAXIMUM REMAINING MATURITY OF PORTFOLIO INVESTMENTS: Thirteen months at the
time of purchase.
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
FIRST TIER SECURITIES: Each Portfolio may purchase securities which are
rated (or that have been issued by an issuer that is rated with respect to a
class of short-term debt obligations, or any security within that class,
14
<PAGE>
comparable in priority and quality with such securities) in the highest short-
term rating category by at least two NRSROs (as defined below), or if only one
NRSRO has assigned a rating, by that NRSRO. U.S. Government Securities as de-
fined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Portfolios may purchase securities
which are not First Tier Securities but which are rated in the top two short-
term rating categories by at least two NRSROs, or if only one NRSRO has as-
signed a rating, by that NRSRO. The Taxable Portfolios will not invest in a
security which is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, unrated securities
may be purchased if they are deemed to be of comparable quality to First Tier
Securities, or to the extent that a Portfolio may purchase Second Tier Securi-
ties, comparable in quality to Second Tier Securities.
NRSROS: Nationally Recognized Statistical Rating Organizations include Stan-
dard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Lim-
ited and its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a descrip-
tion of each NRSRO's rating categories, see Appendix A to the Statement of Ad-
ditional Information.
15
<PAGE>
INVESTMENT POLICIES MATRIX
<TABLE>
<CAPTION>
SHORT-TERM
OBLIGATIONS OF ASSET-BACKED &
US US CORPORATIONS RECEIVABLES-
TREASURY GOVERNMENT BANK COMMERCIAL AND OTHER REPURCHASE BACKED
PORTFOLIO OBLIGATIONS SECURITIES OBLIGATIONS PAPER ENTITIES AGREEMENTS SECURITIES+
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Prime
Obligations [_] [_] [_] [_] [_] [_] [_]
U.S. Banks Only U.S. entities only
- ------------------------------------------------------------------------------------------------------------------------------
Money Market
[_] [_] [_] [_] [_] [_] [_]
Over 25% of total US and US and Foreign
assets must be Foreign (US$) (US$) Entities
invested in US Commercial Paper
and Foreign
(US$) Banks
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Obligations [_] [_]
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Instruments [_]
- -------------------------------------------------------------------------------------------------------------------------------
Government [_] [_] [_]
- -------------------------------------------------------------------------------------------------------------------------------
Federal [_] [_]
(Does not intend
to invest)
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
Diversified [_]
Tax-exempt only
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
California [_]
Tax-exempt only
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt New
York [_]
Tax-exempt only
<CAPTION>
FOREIGN
GOVERNMENT
OBLIGATIONS
PORTFOLIO (US$)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Prime
Obligations
- -------------------------------------------------------------------------------------------------------------------------------
Money Market
[_]
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Obligations
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Instruments
- -------------------------------------------------------------------------------------------------------------------------------
Government
- -------------------------------------------------------------------------------------------------------------------------------
Federal
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
Diversified
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
California
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt New
York
</TABLE>
Note: See "Description of Securities and Investment Techniques" for a de-
scription of, and certain criteria applicable to, each of these categories
of investments.
+ To the extent required by Rule 2a-7, asset-backed and receivables-backed
securities will be rated by the requisite number of NRSROs.
16
<PAGE>
<TABLE>
<CAPTION>
SUMMARY
OF
TAXABLE TAX-EXEMPT CREDIT INVESTMENT UNRATED TAXATION FOR
MUNICIPALS MUNICIPALS QUALITY**** COMPANIES SECURITIES DISTRIBUTIONS* MISCELLANEOUS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[_] [_] [_]
First Up to 10% of Taxable federal
Tier total assets and state**
in other
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
First Up to 10% Taxable federal May invest in
Tier of total and state** obligations of
assets in the
other International
investment Bank for
companies Reconstruction
and Development
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal
Tier of total and state**
assets in
other
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal
Tier of total and generally
assets in exempt from
other state taxation
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal
Tier of total and state**
assets in
other
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal Under
Tier of total and generally extraordinary
assets in exempt from circumstances,
other state taxation may hold cash,
investment U.S. Government
companies Securities
subject to
state taxation
or cash
equivalents
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
At least 80% of net assets First or Up to 10% Tax-exempt May (but does
in Municipal Instruments Second of total federal and not currently
(except in extraordinary Tier assets in taxable intend to)
circumstances) other state*** invest up to
investment 20% in AMT
companies securities and
may temporarily
invest in the
taxable money
market
instruments
described
herein
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
First or Up to 10% Tax-exempt May (but does
At least 80% of net assets Second of total federal and not currently
in Municipal Instruments and Tier assets in California intend to)
at least 65% of its total other State invest up to
assets must be invested in investment 20% in AMT
California Instruments companies securities and
(except in extraordinary may temporarily
circumstances) invest in the
taxable money
market
instruments
described
herein
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
At least 80% of net assets First or Up to 10% Tax-exempt May invest up
in Municipal Instruments and Second of total federal, New to 20% in AMT
at least 65% of its total Tier assets in York State and securities and
assets must be invested in other New York City may temporarily
New York Instruments (except investment invest in the
in companies taxable money
extraordinary circumstances) market
instruments
described
herein
</TABLE>
* See "Taxes" below for an explanation of the tax consequences summarized in
the table above.
** Taxable in many states except for distributions from U.S. Treasury obliga-
tion interest income and certain U.S. Government securities interest in-
come.
*** Taxable except for distributions from interest on obligations of an in-
vestor's state of residence in certain states.
**** To the extent permitted by Rule 2a-7, a Portfolio holding a security fully
supported by a guarantee may substitute the credit quality of the guaran-
tee in determining the credit quality of the security.
17
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. TREASURY OBLIGATIONS
"U.S. Treasury Obligations" are securities issued or guaranteed by the U.S.
Treasury, payments of principal and interest on which are backed by the full
faith and credit of the U.S. Government.
U.S. GOVERNMENT SECURITIES
"U.S. Government Securities" are obligations issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities. Unlike U.S.
Treasury Obligations, securities issued or guaranteed by U.S. Government agen-
cies, authorities or instrumentalities are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Government
National Mortgage Association), (b) the right of the issuer to borrow from the
Treasury (such as securities of the Student Loan Marketing Association), (c)
the discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation), or (d) only the credit of the
issuer. No assurance can be given that the U.S. Government will provide finan-
cial support to U.S. Government agencies, authorities or instrumentalities in
the future. U.S. Government Securities may include zero coupon bonds. Such
bonds may be purchased when yields are attractive.
Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are deemed to include (a) secu-
rities for which the payment of principal and interest is backed by an irrevo-
cable letter of credit issued by the U.S. Government, its agencies, authori-
ties or instrumentalities and (b) participations in loans made to foreign gov-
ernments or their agencies that are so guaranteed. The secondary market for
certain of these participations is limited. Such participations may therefore
be regarded as illiquid.
Each Portfolio may also invest in separately traded principal and interest
components of securities guaranteed or issued by the U.S. Treasury if such
components are traded independently under the Separate Trading of Registered
Interest and Principal of Securities program ("STRIPS").
The Treasury Instruments and Federal Portfolios invest in U.S. Treasury Ob-
ligations and the Federal Portfolio may also invest in certain U.S. Government
Securities the interest from which is generally exempt from state income taxa-
tion. Securities generally eligible for this exemption include those issued by
the U.S. Treasury and those issued by certain agencies, authorities or instru-
mentalities of the U.S. Government, including the Federal Home Loan Banks,
Federal Farm Credit Banks, Tennessee Valley Authority and the Student Loan
Marketing Association.
CUSTODIAL RECEIPTS
Each Portfolio (other than the Treasury Obligations, Treasury Instruments,
Government and Federal Portfolios) may also acquire securities issued or guar-
anteed as to principal and interest by the U.S. Government, its agencies, au-
thorities or instrumentalities in the form of custodial receipts that evidence
ownership of future
18
<PAGE>
interest payments, principal payments or both on certain notes or bonds issued
by the U.S. Government, its agencies, authorities or instrumentalities. For
certain securities law purposes, custodial receipts are not considered obliga-
tions of the U.S. Government.
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations and Money Market Portfolios may invest in "U.S. Bank
Obligations" limited to securities issued or guaranteed by U.S. banks (includ-
ing certificates of deposit, commercial paper, unsecured bank promissory notes
and bankers' acceptances) which have more than $1 billion in total assets at
the time of purchase. Such obligations may also include debt obligations is-
sued by U.S. subsidiaries of such banks.
The Money Market Portfolio may also invest in "Foreign Bank Obligations"
limited to U.S. dollar denominated obligations issued or guaranteed (including
fixed time deposits) by foreign banks which have more than $1 billion in total
assets at the time of purchase, U.S. branches of such foreign banks (Yankee
obligations), foreign branches of such foreign banks and foreign branches of
U.S. banks having more than $1 billion in total assets at the time of pur-
chase. Such bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligation
or by government regulation.
The Money Market Portfolio will invest more than 25% of its total assets in
bank obligations (whether foreign or domestic), including bank commercial pa-
per. However, if adverse economic conditions prevail in the banking industry
(such as substantial losses on loans, increases in non-performing assets and
charge-offs and declines in total deposits) the Portfolio may, for defensive
purposes, temporarily invest less than 25% of its total assets in bank obliga-
tions. As a result, the Portfolio may be especially affected by favorable and
adverse developments in or related to the banking industry. The activities of
U.S. banks and most foreign banks are subject to comprehensive regulations
which, in the case of U.S. regulations, have undergone substantial changes in
the past decade. The enactment of new legislation or regulations, as well as
changes in interpretation and enforcement of current laws, may affect the man-
ner of operations and profitability of domestic and foreign banks. Significant
developments in the U.S. banking industry have included deregulation of inter-
est rates, increased competition from other types of financial institutions,
increased acquisition activity, geographic expansion and, during the late
1980's, an increased number of bank failures. Banks may be particularly sus-
ceptible to certain economic factors, such as interest rate changes and ad-
verse developments in the market for real estate. Fiscal and monetary policy
and general economic cycles can affect the availability and cost of funds,
loan demand and asset quality and thereby impact the earnings and financial
conditions of banks. See "Foreign Government Obligations--Foreign Risks" be-
low.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations and Money Market Portfolios may invest in "Commercial
Paper" (including variable amount master demand notes and asset-backed commer-
cial paper) which is payable in U.S. dollars and is issued or guaranteed by
U.S. corporations, U.S. commercial banks, foreign corporations (Money Market
Portfolio only), foreign commercial banks (Money Market Portfolio only) or
other entities. In addition, the Portfolios may invest in other short-term ob-
ligations (including short-term funding agreements) payable in U.S. dollars
and issued or guaranteed by U.S. corporations, foreign corporations (Money
Market Portfolio only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations and Money Market Portfolios may invest in "Asset-
Backed and Receivables-Backed Securities" which represent participations in,
or are secured by and payable from, pools of assets such as motor
19
<PAGE>
vehicle installment sale contracts, installment loan contracts, leases of
various types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. Such asset pools
are securitized through the use of privately-formed trusts or special purpose
corporations. Payments or distributions of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution, or other
credit enhancements may be present. To the extent consistent with its
investment objectives and policies, each of the Prime Obligations and Money
Market Portfolios may invest in new types of mortgage-related securities and
in other asset-backed securities that may be developed in the future.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market Portfolio may invest in U.S. dollar-denominated obligations
(limited to commercial paper and other notes) issued or guaranteed by a for-
eign government or entity located or organized in a foreign country that main-
tains a short-term foreign currency rating in the highest short-term ratings
category by the requisite number of NRSROs. The Money Market Portfolio may not
invest more than 25% of its total assets in the securities of any one foreign
government.
FOREIGN RISKS. Investments in foreign securities and bank obligations may
present a greater degree of risk than investments in securities of domestic
issuers because of less publicly-available financial and other information,
less securities regulation, potential imposition of foreign withholding and
other taxes, war, expropriation or other adverse governmental actions. Foreign
banks and their foreign branches are not regulated by U.S. banking authori-
ties, and generally are not bound by the accounting, auditing and financial
reporting standards applicable to U.S. banks.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS: Obligations issued by or on behalf of states, terri-
tories and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia, the
interest from which is, in the opinion of bond counsel, if any, excluded from
gross income for federal income tax purposes.
CALIFORNIA INSTRUMENTS: Obligations issued by or on behalf of the State of
California and its political subdivisions, agencies and instrumentalities and
the governments of Puerto Rico, the U.S. Virgin Islands and Guam, the interest
from which is excluded from gross income for federal income tax purposes and
is exempt from California state personal income tax.
NEW YORK INSTRUMENTS: Obligations issued by or on behalf of the State of New
York and its political subdivisions, agencies and instrumentalities and the
governments of Puerto Rico, the U.S. Virgin Islands and Guam, the interest
from which is excluded from gross income for federal income tax purposes and
is exempt from New York state and New York city personal income tax.
20
<PAGE>
TYPES OF MUNICIPAL, CALIFORNIA AND NEW YORK INSTRUMENTS:
<TABLE>
<CAPTION>
TAX- TAX-
EXEMPT DIVERSIFIED EXEMPT CALIFORNIA TAX-EXEMPT NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED RATE NOTES AND In highest short- In one of the two In one of the two
SIMILAR DEBT term or one of the highest short-term highest short-term
INSTRUMENTS two highest long- or long-term rating or long-term rating
term rating categories categories
categories
- --------------------------------------------------------------------------------------
VARIABLE AND In highest short- In one of the two In one of the two
FLOATING RATE DEMAND term or one of the highest short-term highest short-term
INSTRUMENTS two highest long- or long-term rating or long-term rating
term rating categories categories
categories
- --------------------------------------------------------------------------------------
TAX-EXEMPT In highest rating In one of the two In one of the two
COMMERCIAL PAPER category highest rating highest rating
categories categories
- --------------------------------------------------------------------------------------
MUNICIPAL BONDS In one of the two In one of the two In one of the two
highest rating highest rating highest rating
categories categories categories
- --------------------------------------------------------------------------------------
UNRATED NOTES, Determined to be of Determined to be of Determined to be of
PAPER, BONDS AND comparable quality comparable quality comparable quality
OTHER INSTRUMENTS by Adviser pursuant by Adviser pursuant by Adviser pursuant
to criteria approved to criteria approved to criteria approved
by the Trustees by the Trustees by the Trustees
</TABLE>
As a matter of fundamental policy, at least 80% of each of the Tax-Exempt
Diversified, Tax-Exempt California and Tax-Exempt New York Portfolio's net as-
sets will ordinarily be invested in Municipal Instruments, except in extraor-
dinary circumstances. In addition, as a matter of fundamental policy, at least
65% of each of the Tax-Exempt California and Tax-Exempt New York Portfolio's
total assets will be invested in California and New York Instruments, respec-
tively, except in extraordinary circumstances. Each Tax-Exempt Portfolio may
temporarily invest in taxable money market instruments or, in the case of the
Tax-Exempt California and New York Portfolios, in Municipal Instruments that
are not California or New York Instruments, respectively, when acceptable Cal-
ifornia and New York Instruments are not available or when the Adviser be-
lieves that the market conditions dictate a defensive posture. Investments in
taxable money market instruments will be limited to those meeting the quality
standards of each Tax-Exempt Portfolio. The Tax-Exempt California and Tax-Ex-
empt New York Portfolios' distributions of interest from Municipal Instruments
other than California and New York Instruments, respectively, may be subject
to California and New York state and New York city personal income taxes, re-
spectively.
The Prime Obligations and Money Market Portfolios may invest in short-term
obligations issued or guaranteed by state and municipal governments when
yields on such securities are attractive compared to other taxable invest-
ments.
MUNICIPAL NOTES AND BONDS. Municipal notes include tax anticipation notes
("TANs"), revenue anticipation notes ("RANs"), bond anticipation notes
("BANs"), tax and revenue anticipation notes ("TRANs") and construction loan
notes. Municipal bonds include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing munici-
pality and are considered the safest type of bonds. Revenue bonds are backed
by the revenues of a project or facility such as the tolls from a toll bridge.
Revenue bonds also include lease rental revenue bonds which are issued by a
state or local authority for capital projects and are secured by annual lease
payments from the state or locality sufficient to cover debt service on the
authority's obligations. Industrial development bonds (generally referred to
under current tax law as "private activity bonds") are a specific type of rev-
enue bond backed by the credit and security of a private user and
21
<PAGE>
therefore have more potential risk. Municipal bonds may be issued in a variety
of forms, including commercial paper, tender option bonds and variable and
floating rate securities.
TENDER OPTION BONDS. A tender option bond is a Municipal Instrument (gener-
ally held pursuant to a custodial arrangement) having a relatively long matu-
rity 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 finan-
cial institution, pursuant to which such institution grants the security
holder the option, at periodic intervals, to tender its securities to the in-
stitution and receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees equal to the dif-
ference between the bond's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the 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 pre-
vailing short-term, tax-exempt rate. However, an institution will not be obli-
gated to accept tendered bonds in the event of certain defaults or a signifi-
cant downgrading in the credit rating assigned to the issuer of the bond. The
tender option will be taken into account in determining the maturity of the
tender option bonds and a Portfolio's average portfolio maturity. There is a
risk that a Portfolio will not be considered the owner of a tender option bond
for federal income tax purposes and thus will not be entitled to treat such
interest as exempt from federal income tax.
REVENUE ANTICIPATION WARRANTS. Revenue Anticipation Warrants ("RAWs") are
issued in anticipation of the issuer's receipt of revenues and present the
risk that such revenues will be insufficient to satisfy the issuer's payment
obligations. The entire amount of principal and interest on RAWs is due at
maturity. RAWs, including those with a maturity of more than 397 days, may
also be repackaged as instruments which include a demand feature that permits
the holder to sell the RAWs to a bank or other financial institution at a
purchase price equal to par plus accrued interest on each interest rate reset
date.
FLOATING AND VARIABLE RATE OBLIGATIONS. The value of floating and variable
rate obligations generally is more stable than that of fixed rate obligations
in response to changes in interest rate levels. Variable and floating rate ob-
ligations usually have demand features that permit the Portfolios to sell them
at par value plus accrued interest upon short notice. The issuers or financial
intermediaries providing demand features may support their ability to purchase
the obligations by obtaining credit with liquidity supports. These may include
lines of credit, which are conditional commitments to lend and letters of
credit, which will ordinarily be irrevocable, both of which may be issued by
domestic banks or foreign banks which have a branch, agency or subsidiary in
the United States. When considering whether an obligation meets a Portfolio's
quality standards, the Portfolio will, to the extent permitted by Rule 2a-7,
look to the creditworthiness of the party providing unconditional demand fea-
tures or other unconditional obligations to support the credit of the issuer
of the security. A Portfolio may consider the maturity of a variable or float-
ing rate Municipal Instrument to be shorter than its ultimate stated maturity
if the Portfolio has the right to demand prepayment of its principal at speci-
fied intervals prior to the security's ultimate stated maturity, subject to
the conditions for using amortized cost valuation under the Investment Company
Act. A Portfolio may purchase such variable or floating rate obligations from
the issuers or may purchase certificates of participation, a type of floating
or variable rate obligation, which are interests in a pool of debt obligations
held by a bank or other financial institution.
INDUSTRIAL DEVELOPMENT BONDS. The Portfolios (other than the Treasury Obli-
gations, Treasury Instruments, Government and Federal Portfolios) may invest
in industrial development bonds (generally referred to under current tax law
as "private activity bonds"), the interest from which would be an item of tax
preference when distributed as "exempt-interest dividends" to unitholders un-
der the federal alternative minimum tax. See
22
<PAGE>
"Taxes" and "Distributions." The Tax-Exempt New York Portfolio may invest up
to 20% of its net assets in private activity bonds. The Tax-Exempt Diversified
and Tax-Exempt California Portfolios do not currently intend to invest in such
bonds. If such policy should change in the future, unitholders would be noti-
fied and such investments would not exceed 20% of each Portfolio's net assets.
OTHER POLICIES. Ordinarily, the Tax-Exempt Portfolios expect that 100% of
their portfolio securities will be Municipal Instruments. However, the Portfo-
lios may hold cash or invest in short-term taxable securities as set forth
above. Such Portfolios may invest 25% or more of the value of their respective
total assets in Municipal Instruments which are related in such a way that an
economic, business or political development or change affecting one Municipal
Instrument would also affect the other Municipal Instruments. For example, the
Tax-Exempt Portfolios may invest all of their respective assets in (a) Munici-
pal Instruments the interest on which is paid solely from revenues from simi-
lar projects such as hospitals, electric utility systems, multi-family hous-
ing, nursing homes, commercial facilities (including hotels), steel companies
or life care facilities, (b) Municipal Instruments whose issuers are in the
same state (including, in the case of the Tax-Exempt California and Tax-Exempt
New York Portfolios, issuers in states other than California and New York, re-
spectively), or (c) industrial development obligations. Concentration of a
Portfolio's investments in these Municipal Instruments will subject the Port-
folio, to a greater extent than if such investment was more limited, to the
risks of adverse economic, business or political developments affecting any
such state, industry or other area of concentration.
Each Portfolio (other than the Treasury Obligations, Treasury Instruments,
Government and Federal Portfolios) may purchase Municipal Instruments which
are backed by letters of credit, which will ordinarily be irrevocable, issued
by domestic banks or foreign banks (excluding Prime Obligations Portfolio)
which have a branch, agency or subsidiary in the United States. In addition,
these Portfolios may acquire securities in the form of custodial receipts
which evidence ownership of future interest payments, principal payments or
both on obligations of certain state and local governments and authorities.
In order to enhance the liquidity, stability, or quality of a Municipal In-
strument, each Portfolio (other than the Treasury Obligations, Treasury In-
struments, Government and Federal Portfolios) may acquire the right to sell
the security to another party at a guaranteed price and date.
INVESTING IN CALIFORNIA AND NEW YORK
The Tax-Exempt California and Tax-Exempt New York Portfolios concentrate
their investments in California and New York Instruments, respectively. Conse-
quently, such Portfolios are more susceptible to factors adversely affecting
issuers of California and New York Instruments, respectively, and may be risk-
ier than comparable municipal bond funds and money market funds that do not
emphasize these issuers to this degree.
The Tax-Exempt California Portfolio's investments can be affected by politi-
cal and economic developments within the State of California (the "State'),
and by the financial condition of the State, its public authorities and polit-
ical subdivisions. After suffering a severe recession in the early 1990's
which caused the State to experience financial difficulties, California's
economy entered a sustained recovery since late 1993 and the State's budget
has returned to a positive balance. California's long-term credit rating has
been raised after being reduced during the recession. To respond to its own
revenue shortfalls during the recession, the State reduced assistance to its
public authorities and political subdivisions. Cutbacks in state aid could
further adversely affect the financial condition of cities, counties and edu-
cation districts which are subject to their own fiscal constraints. California
voters in the past have passed amendments to the California Constitution and
other measures that limit the taxing and spending authority of California gov-
ernmental entities and future voter initiatives could result in adverse
23
<PAGE>
consequences affecting California Instruments. Also, the ultimate fiscal ef-
fect of federally-mandated reform of welfare programs on the State and its lo-
cal governments is still to be resolved.
These factors, among others (including the outcome of related pending liti-
gation), could reduce the credit standing of certain issuers of California In-
struments. A more detailed discussion of the risks of investing in California
is included in the Statement of Additional Information.
The Tax-Exempt New York Portfolio's investments can be affected by political
and economic developments within the State of New York (the "State"), and by
the financial conditions of the State, its public authorities and political
subdivisions, particularly the City of New York (the "City"). The State and
the City face long-term economic problems that could seriously affect their
ability and that of other issuers of New York Instruments to meet their finan-
cial obligations. Certain substantial issuers of New York Instruments (includ-
ing issuers whose obligations may be acquired by the Portfolio) have experi-
enced serious financial difficulties in recent years. These difficulties have
at times jeopardized the credit standing and impaired the borrowing abilities
of all New York issuers and have generally contributed to higher interest
costs for their borrowings and fewer markets for their outstanding debt obli-
gations. In recent years, several different issues of municipal securities of
the State and its agencies and instrumentalities and of the City have been
downgraded by S&P and Moody's. On the other hand, strong demand for New York
Instruments has at times had the effect of permitting New York Instruments to
be issued with yields relatively lower, and after issuance, to trade in the
market at prices relatively higher, than comparably rated municipal obliga-
tions issued by other jurisdictions. A recurrence of the financial difficul-
ties previously experienced by certain issuers of New York Instruments could
result in defaults or declines in the market values of those issuers' existing
obligations and, possibly, in the obligations of other issuers of New York In-
struments. Although as of April 1, 1997 no issuers of New York Instruments
were in default with respect to the payment of their municipal obligations,
the occurrence of any such default could affect adversely the market values
and marketability of all New York Instruments and, consequently, the net asset
value of the Portfolio's holdings. A more detailed discussion of the risks of
investing in New York is included in the Statement of Additional Information.
If California, New York, or any of their local governmental entities are un-
able to meet their financial obligations, the corresponding Portfolio's in-
come, net asset value, ability to preserve or realize appreciation of capital
or liquidity could be adversely affected. Also, neither of these Portfolios is
a diversified fund (except to the extent that diversification is required for
federal income tax purposes). For these tax purposes, with respect to 50% of
the value of its total assets, none of these Portfolios invests more than 5%
of the value of its total assets in securities of a single issuer (except U.S.
Government Securities or securities of other regulated investment companies),
nor, with respect to the other 50% of the value of its total assets, does it
invest more than 25% of the value of its total assets in the securities of a
single issuer (except U.S. Government Securities or securities of other regu-
lated investment companies). These Federal tax diversification requirements
apply only at taxable quarter ends and are subject to certain qualifications
and exceptions. Because they may invest a larger percentage of their assets in
the securities of fewer issuers than do diversified funds, these Portfolios
may be exposed to greater risk in that an adverse change in the condition of
one or a small number of issuers would have a greater impact on them.
REPURCHASE AGREEMENTS
Each Portfolio (other than the Treasury Instruments Portfolio) may only en-
ter into repurchase agreements with primary dealers in U.S. Government Securi-
ties. A repurchase agreement is an agreement under which a Portfolio purchases
securities and the seller agrees to repurchase the securities within a partic-
ular time at a specified price. Such price will exceed the original purchase
price, the difference being income to the Portfolio,
24
<PAGE>
and will be unrelated to the interest rate on the purchased security. A Port-
folio's custodian or subcustodian will maintain custody of the purchased secu-
rities for the duration of the agreement. The value of the purchased securi-
ties, including accrued interest, will at all times equal or exceed the value
of the repurchase agreement. In the event of bankruptcy of the seller or fail-
ure of the seller to repurchase the securities as agreed, a Portfolio could
suffer losses, including loss of interest on or principal of the security and
costs associated with delay and enforcement of the repurchase agreement. In
evaluating whether to enter into a repurchase agreement, the Adviser will
carefully consider the creditworthiness of the seller pursuant to procedures
reviewed and approved by the Trustees. Distributions of the income from repur-
chase agreements entered into by a Portfolio will be taxable to its
unitholders. In addition, each Portfolio (other than the Treasury Instruments
Portfolio), together with other registered investment companies having advi-
sory agreements with the Adviser or any of its affiliates, may transfer
uninvested cash balances into a single joint account, the daily aggregate bal-
ance of which will be invested in one or more repurchase agreements.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Portfolio may purchase when-issued securities and make contracts to
purchase or sell securities for a fixed price at a future date beyond custom-
ary settlement time. A Portfolio is required to hold and maintain in a segre-
gated account with the Portfolio's custodian or subcustodian until three days
prior to settlement date, cash or liquid assets in an amount sufficient to
meet the purchase price. Alternatively, a Portfolio may enter into offsetting
contracts for the forward sale of other securities that it owns. Securities
purchased or sold on a when-issued or forward commitment basis involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date or if the value of the security to be sold increases prior to
the settlement date. Although a Portfolio would generally purchase securities
on a when-issued or forward commitment basis with the intention of acquiring
securities for its portfolio, the Portfolio may dispose of a when-issued secu-
rity or forward commitment prior to settlement if the Adviser deems it appro-
priate to do so.
OTHER INVESTMENT COMPANIES
The Adviser will determine, under guidelines established by the Trustees,
whether securities issued by other money market investment companies present
minimal credit risks. The amount of each Portfolio's investments in securities
of other investment companies will be subject to the limitations on such in-
vestments prescribed by the Investment Company Act. These limits include a
prohibition on any Portfolio acquiring more than 3% of the voting shares of
any other investment company and a prohibition on investing more than 5% of a
Portfolio's total assets in securities of any one investment company or more
than 10% of its total assets in securities of all investment companies. Each
Portfolio will indirectly bear its proportionate share of any management fees
and other expenses paid by such other investment companies. Such other invest-
ment companies will have investment objectives, policies and restrictions sub-
stantially similar to those of the acquiring Portfolio and will be subject to
substantially the same risks.
25
<PAGE>
INVESTMENT LIMITATIONS
TAXABLE AND TAX-EXEMPT PORTFOLIOS. Each Portfolio will comply with the con-
ditions for using amortized cost valuation set forth in Rule 2a-7 under the
Investment Company Act including, but not limited to, those conditions relat-
ing to maturity, diversification and credit quality. These operating policies
may be more restrictive than the fundamental policies set forth in the State-
ment of Additional Information.
INVESTMENT RESTRICTIONS. Each Portfolio is subject to certain investment re-
strictions that are described in detail under "Investment Restrictions" in the
Statement of Additional Information. Fundamental investment restrictions and
the investment objective of a Portfolio (except the Tax-Exempt California and
Tax-Exempt New York Portfolios' objectives of providing unitholders with in-
come exempt from California state and New York state and New York city per-
sonal income tax, respectively) cannot be changed without approval of a major-
ity of the outstanding units of that Portfolio. The Treasury Obligations Port-
folio's policy of limiting its investments to U.S. Treasury Obligations and
related repurchase agreements is also fundamental. All investment policies not
specifically designated as fundamental are non-fundamental and may be changed
without unitholder approval.
RESTRICTED AND OTHER ILLIQUID SECURITIES. Each Portfolio may purchase secu-
rities that are not registered ("restricted securities") under the Securities
Act of 1933 ("1933 Act"), but can be offered and sold to "qualified institu-
tional buyers" under Rule 144A under the 1933 Act. However, a Portfolio will
not invest more than 10% of its net assets in illiquid investments, which in-
clude fixed time deposits maturing in more than seven days and restricted se-
curities. Restricted securities (including commercial paper issued pursuant to
Section 4(2) of the 1933 Act) which the Board of Trustees has determined are
liquid, based upon a continuing review of the trading markets for the specific
restricted security, will not be deemed to be illiquid investments for pur-
poses of this restriction. The Board of Trustees may adopt guidelines and del-
egate to the Adviser the daily function of determining and monitoring the li-
quidity of restricted securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is
not possible to predict with assurance that the market for restricted securi-
ties eligible for resale under Rule 144A will continue to be liquid, the Ad-
viser will carefully monitor each Portfolio's investments in these securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in a Portfolio to the extent that quali-
fied institutional buyers become for a time uninterested in purchasing these
restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nomi-
nal fixed term on seven days or less notice. Such repurchase agreements will
be regarded as liquid instruments.
26
<PAGE>
MANAGEMENT
THE ADVISER
GSAM, One New York Plaza, New York, New York 10004, a separate operating di-
vision of Goldman, Sachs & Co., acts as investment adviser to the Portfolios.
Goldman Sachs registered as an investment adviser in 1981. As of April ,
1997, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $ billion in assets.
As of November 29, 1996, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $112 billion and partners' capital of $2 billion and
ranked as one of the largest international investment banking and brokerage
firms in the United States. Founded in 1869, Goldman Sachs is a major invest-
ment banking and brokerage firm providing a broad range of financing and in-
vestment services both in the United States and abroad.
Pursuant to an SEC order, each Taxable and Tax-Advantaged Portfolio may en-
ter into principal transactions in certain taxable money market instruments,
including repurchase agreements, with Goldman Sachs.
Under the Investment Advisory Agreements, GSAM continually manages each
Portfolio, including the purchase, retention and disposition of its securities
and other assets. In addition, GSAM administers each Portfolio's business af-
fairs and performs various unitholder servicing functions to the extent not
provided by other organizations. The management of each Portfolio is subject
to the supervision of the Trustees and each Portfolio's investment policies.
For these services, the Trust, on behalf of each Portfolio, pays GSAM a
monthly fee at an annual rate of each Portfolio's average daily net assets as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
CONTRACTUAL RATE DECEMBER 31, 1996
---------------- -----------------
<S> <C> <C>
Prime Obligations Portfolio .35% .35%
Money Market Portfolio .35% .30%
Treasury Obligations Portfolio .35% .35%
Treasury Instruments Portfolio .35% .15%
Government Portfolio .35% .35%
Federal Portfolio .35% .20%
Tax-Exempt Diversified Portfolio .35% .25%
Tax-Exempt California Portfolio .35% .35%
Tax-Exempt New York Portfolio .35% .26%
</TABLE>
The difference, if any, between the stated advisory fee and the actual fee
paid by the Portfolios reflects the fact that GSAM did not charge the full
amount of the advisory fees to which it would have been entitled.
GSAM has agreed to reduce or otherwise limit the daily expenses of each
Portfolio (excluding fees payable to Service Organizations, as defined herein,
taxes, interest, brokerage and litigation, indemnification and other extraor-
dinary expenses) on an annualized basis to .43% of the average daily net as-
sets of the Portfolio less the effect of fee reductions, if any. Such reduc-
tions or limits, if any, are calculated monthly on a cumulative basis. Any
such reductions or limits may be discontinued or modified only with the ex-
press approval of the Trustees. In addition, with respect to the Money Market,
Treasury Instruments, Federal, Tax-Exempt Diversified and Tax-Exempt New York
Portfolios, GSAM has voluntarily agreed to reduce or limit each Portfolio's
annual total
27
<PAGE>
operating expenses (excluding fees payable to Service Organizations, as de-
fined herein) to .37%, .22%, .27%, .32% and .33% respectively, of average
daily net assets and for each other Portfolio to .42% of average daily net as-
sets. GSAM has no current intention to but may in the future discontinue or
modify any of such limitations at its discretion.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of units of each Portfolio pursuant to a Distribution Agreement with
the Trust. The Distributor will assist in the sale of units of each Portfolio
upon the terms described herein. Goldman Sachs also serves as the Transfer
Agent of each Portfolio. For the transfer agency services, Goldman Sachs re-
ceives .04% (on an annualized basis) of the average daily net assets with re-
spect to each Portfolio.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold units of the Portfolios in order to increase the assets of the Portfo-
lios. Increasing the Portfolios' assets may enhance investment flexibility and
diversification. Goldman Sachs reserves the right to redeem at any time some
or all of the Portfolio units acquired for its own account. Goldman Sachs will
consider the effect of redemptions on the Portfolios and other unitholders in
deciding whether to redeem its units.
TAXES
Each Portfolio is treated as a separate entity for federal income tax pur-
poses, has elected to be treated and intends to continue to qualify and be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986 (the "Code") for each taxable year. To qualify as such,
each Portfolio must satisfy certain requirements relating to the sources of
its income, diversification of its assets and distribution of its income to
unitholders. As a regulated investment company, each Portfolio will not be
subject to federal income or excise tax on any net investment income and net
realized capital gains that are distributed to its unitholders in accordance
with certain timing requirements of the Code.
Dividends paid by a Portfolio from net investment income, the excess of net
short-term capital gain over net long-term capital loss and taxable original
issue discount or market discount income will be taxable to unitholders as or-
dinary income, except for any "exempt interest dividends" paid by the Tax-Ex-
empt Portfolios, as described below. Dividends paid by a Portfolio from the
excess of net long-term capital gain over net short-term capital loss will be
taxable as long-term capital gain regardless of how long the unitholders have
held their units. These tax consequences will apply to distributions of any
Portfolio regardless of whether distributions are received in cash or rein-
vested in units. Certain distributions paid by the Portfolios in January of a
given year will be taxable to unitholders as if received on December 31 of the
year in which they are declared. Unitholders will be informed annually about
the amount and character of distributions received from the Portfolios for
federal income tax purposes, including any distributions that may constitute a
return of capital or any distributions of the Tax-Exempt Portfolios that may
constitute a tax preference item under the federal alternative minimum tax.
The Tax-Exempt Portfolios intend to satisfy certain requirements of the Code
for the payment of "exempt-interest dividends" not included in unitholders'
federal gross income. The Tax-Exempt California Portfolio and the Tax-Exempt
New York Portfolio also intend to satisfy certain requirements of the Califor-
nia and New York City and State personal income tax laws, respectively, so
that exempt-interest dividends paid by these Portfolios
28
<PAGE>
will generally not be subject to personal income tax of the relevant state
(and, in the case of the Tax-Exempt New York Portfolio, New York City personal
income tax). Dividends paid by the Tax-Exempt Portfolios from interest on tax-
exempt obligations and properly designated by the Portfolio as exempt-interest
dividends, including dividends attributable to exempt-interest dividends re-
ceived by a Portfolio from other regulated investment companies, will gener-
ally be exempt from federal income tax, although a portion of such dividends
may be subject to the federal alternative minimum tax. Exempt-interest divi-
dends will be considered in computing the corporate federal alternative mini-
mum tax, and the extent, if any, to which social security or railroad retire-
ment benefits are taxable. Persons who are "substantial users" of facilities
financed by certain industrial development or private activity bonds should
consult their own tax advisers before purchasing units of these Portfolios.
Interest incurred to purchase or carry units of these Portfolios will not be
deductible for federal income tax purposes to the extent related to exempt-in-
terest dividends paid by the Portfolios and may not be deductible in whole or
in part for California or New York City and State income tax purposes.
Exempt-interest dividends of the Tax-Exempt California and Tax-Exempt New
York Portfolios that are derived from interest on California and New York In-
struments, respectively, will generally not be subject to the personal income
tax of the corresponding state, and in the case of the Tax-Exempt New York
Portfolio, New York City personal income tax. Other distributions will gener-
ally be taxable to unitholders for these state and city tax purposes.
Individuals and certain other classes of unitholders may be subject to 31%
backup withholding of federal income tax on taxable distributions if they fail
to furnish their correct taxpayer identification number and certain certifica-
tions required by the Internal Revenue Service or if they are otherwise sub-
ject to backup withholding. Individuals, corporations and other unitholders
that are not U.S. persons under the Code are subject to different tax rules
and may be subject to nonresident alien withholding at the rate of 30% (or a
lower rate provided by an applicable tax treaty) on amounts treated as ordi-
nary dividends from the Portfolios.
If a Portfolio invests in foreign securities, it may be subject to foreign
withholding or other foreign taxes on income earned on such securities and is
expected to be unable to pass such taxes through to unitholders, who therefore
are not expected to include such taxes in income or be entitled to claim for-
eign tax credits or deductions with respect to such taxes.
In addition to federal taxes, a unitholder may be subject to state, local or
foreign taxes on payments received from a Portfolio. A state income (and pos-
sibly local income and/or intangible property) tax exemption is generally
available to the extent a Portfolio's distributions are derived from interest
on (or, in the case of intangible property taxes, the value of its assets is
attributable to) certain U.S. Government obligations and/or tax-exempt munici-
pal obligations issued by or on behalf of the particular state or a political
subdivision thereof, provided in some states that certain thresholds for hold-
ings of such obligations and/or reporting requirements are satisfied.
Unitholders should consult their own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of each Portfolio is determined as of the close of regu-
lar trading on the New York Stock Exchange (normally 4:00 P.M. New York time)
on each Business Day. Net asset value per unit for each class of units of each
Portfolio is calculated by determining the amount of net assets attributable
to each class of units and dividing by the number of units for such class.
29
<PAGE>
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities markets close early, the Treasury
Instruments and Federal Portfolios will cease, and each other Portfolio re-
serves the right to cease, accepting purchase and redemption orders for same
Business Day credit at the time the PSA recommends that the securities markets
close. On days any Portfolio closes early, purchase and redemption orders re-
ceived after the PSA recommended closing time will be credited to the next
Business Day. In addition, each Portfolio reserves the right to advance the
time by which purchase and redemption orders must be received for same Busi-
ness Day credit as permitted by the SEC.
Each Portfolio seeks to maintain a net asset value of $1.00 per unit. In
this connection, each Portfolio values its portfolio securities on the basis
of amortized cost. The amortized cost method values a security at its cost on
the date of purchase and thereafter assumes a constant amortization to matu-
rity of any discount or premium, regardless of the impact of fluctuating in-
terest rates on the market value of the instrument. For a more complete de-
scription of the amortized cost valuation method and its effect on existing
and prospective unitholders, see the Statement of Additional Information.
There can be no assurance that a Portfolio will be able at all times to main-
tain a net asset value per unit of $1.00.
YIELD INFORMATION
From time to time, each Portfolio may advertise its yield, effective yield
and average total return. Average annual total return is determined by comput-
ing the average annual percentage change in value of $1,000 invested at the
maximum public offering price for a specified period of at least one year, as-
suming reinvestment of all dividends and distributions at net asset value. The
total return calculation assumes a complete redemption of the investment at
the end of the relevant period. Each Portfolio may furnish total return calcu-
lations based on a cumulative, average, year-by-year or other basis for vari-
ous specified periods by means of quotations, charts, graphs or schedules. The
yield of a Portfolio refers to the income generated by an investment in the
Portfolio over a seven-day period (which period will be stated in the adver-
tisement). This income is then annualized; that is, the amount of income gen-
erated by the investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the investment. The ef-
fective yield is calculated similarly but, when annualized, the income earned
by an investment in the Portfolio is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The Tax-Exempt Portfolios and the Federal and Treasury Instruments Portfo-
lios may each also quote tax-equivalent yield. Each Portfolio's tax-equivalent
yield is calculated by determining the rate of return that would have to be
achieved on a fully taxable investment to produce the after-tax equivalent
(which, in the case of the Tax-Exempt California combines federal and state
taxes, in the case of Tax-Exempt New York Portfolio, combines federal, state
and city taxes, and in the case of the Federal and Treasury Instruments Port-
folios assumes a level of state taxes) of the Portfolio's yield, assuming cer-
tain tax brackets for a unitholder.
Investors should note that the investment results of a Portfolio are based
on historical performance and will fluctuate over time. Any presentation of a
Portfolio's total return, yield, effective yield or tax-equivalent yield for
any prior period should not be considered a representation of what an invest-
ment may earn or what a Portfolio's total return, yield, effective yield or
tax-equivalent yield may be in any future period. In addition to the above,
each Portfolio may from time to time advertise its performance relative to
certain averages, performance rankings, indices, other information prepared by
recognized mutual fund statistical services and investments for which reliable
performance data is available.
30
<PAGE>
Total return, yield, effective yield and tax-equivalent yield will be calcu-
lated separately for each class of units in existence. Because each such class
of units is subject to different expenses, the total return and net yield of
such classes of a Portfolio for the same period may differ. See "Organization
and Units of the Portfolios" below.
ORGANIZATION AND UNITS OF THE PORTFOLIOS
Each portfolio is a series of the Goldman Sachs Trust, which was formed un-
der the laws of the State of Delaware on January 28, 1997. The Funds were for-
merly series of Goldman Sachs Money Market Trust, a Massachusetts trust, and
were reorganized into the Trust as of May 1, 1997. The Trustees have authority
under the Trust's Declaration of Trust to create and classify units of benefi-
cial interests in separate series, without further action by unitholders. Ad-
ditional series may be added in the future. The Trustees also have authority
to classify or reclassify any series or portfolio of units into one or more
classes. The Trustees have authorized the issuance of three classes of units
of each of the Portfolios, which are: ILA Units, ILA Administration Units and
ILA Service Units, except for the Prime Obligations Portfolio which has four
classes of units: ILA Units, ILA Administration Units, ILA Service Units and
ILA Class B Units. (Institutions that provide services to holders of ILA Ad-
ministration or ILA Service Units are referred to in this Prospectus as "Serv-
ice Organizations").
When issued, units are fully paid and nonassessable by the Trust. In the
event of liquidation, unitholders are entitled to share pro rata in the net
assets of the applicable Portfolio available for distribution to such
unitholders. Units entitle their holders to one vote per unit (but may, at the
discretion of the Trustees, be voted on a net asset value basis), have
noncumulative voting rights, are freely transferable and have no preemptive or
subscription rights.
The Trust does not intend to hold annual meetings of unitholders. However,
pursuant to the Trust's By-Laws, the recordholders of at least 10% of the
units outstanding and entitled to vote at a special meeting may require the
Trust to hold such special meeting of unitholders for any purpose and
recordholders may, under certain circumstances as permitted by the Act, commu-
nicate with other unitholders in connection with requiring a special meeting
of unitholders. The Board of Trustees, however, will call a special meeting of
unitholders for the purpose of electing Trustees if, at any time, less than a
majority of Trustees holding office at the time were elected by unitholders.
Units of a Portfolio will be voted separately by Portfolio with respect to
matters pertaining to that Portfolio except for the election of Trustees and
ratification of independent accountants. For example, unitholders of each
Portfolio are required to approve the adoption of any investment advisory
agreement relating to that Portfolio and any changes in fundamental investment
restrictions or policies of such Portfolio. Approval by the unitholders of one
Portfolio is effective only as to that Portfolio.
As of April 1, 1997, Bank of New York, 48 Wall Street, New York, NY 10286,
owned of record 32.49% of the outstanding units of Treasury Instruments Port-
folio.
The Trust does not intend to hold annual unitholder meetings, although spe-
cial meetings may be called for such purposes as electing or removing Trust-
ees, complying with a requirement of the Investment Company Act, or such other
purposes as are set forth above. The Trust will facilitate unitholder communi-
cation as required and in the manner prescribed by Section 16(c) of the In-
vestment Company Act.
31
<PAGE>
PURCHASE OF UNITS
ILA Units of a Portfolio may be purchased on any Business Day at the net as-
set value next determined after receipt of a purchase order in the manner set
forth below, and provided that The Northern Trust Company ("Northern"), Chica-
go, Illinois, the subcustodian for State Street Bank and Trust Company ("State
Street"), receives the purchase amount in federal funds on the same Business
Day. Purchase orders may be made by telephoning Goldman Sachs at 800-621-2550
or by a written request addressed to Goldman Sachs, Attention: Shareholder
Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois 60606. It
is strongly recommended that payment be effected by wiring federal funds to
Northern.
Purchases of ILA Units may also be made by delivering a Federal Reserve
draft or check (except that a third party check will not be accepted) payable
only to the appropriate Portfolio and drawn on a U.S. bank to Goldman Sachs,
Attention: Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chica-
go, Illinois 60606. It is expected that Federal Reserve drafts will ordinarily
be converted to federal funds on the day of receipt and that checks will be
converted to federal funds within two Business Days after receipt. ILA Units
purchased by check may not be redeemed until the check has cleared, as de-
scribed under "Redemption of Units."
Purchases of units of any Portfolio may also be made through an Automated
Clearing House ("ACH") transfer to Goldman Sachs Trust c/o Northern, as sub-
custodian for State Street. Purchase orders are effected at the net asset
value next determined after receipt of both the purchase order and the pur-
chase amount in federal funds. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer.
ILA Units of each Portfolio are deemed to have been purchased when an order
becomes effective and are entitled to dividends on ILA Units purchased as fol-
lows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED BY
GOLDMAN SACHS DIVIDENDS BEGIN
----------------------- ---------------
(1) In the case of the Taxable and Tax-Advantaged Portfolios
<S> <C> <C> <C> <C>
By: 3:00 p.m.-N.Y. time Same Business Day
- ---------------------------------------------------------------------------------------
After: 3:00 p.m.-N.Y. time Next Business Day
- ---------------------------------------------------------------------------------------
(2) In the case of the Tax-Exempt Portfolios
By: 1:00 p.m.-N.Y. time Same Business Day
- ---------------------------------------------------------------------------------------
After: 1:00 p.m.-N.Y. time Next Business Day
- ---------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
A Business Day means any day on which the New York Stock Exchange is open,
except for days on which Chicago, Boston or New York banks are closed for lo-
cal holidays.
ILA Units of the Portfolios are purchased at the net asset value per unit
without the imposition of a sales charge. However, banks, trust companies or
other institutions through which investors acquire ILA Units may impose
charges in connection with transactions in such Units.
Goldman Sachs, as each Portfolio's transfer agent, will maintain a complete
record of transactions and ILA Units held in each unitholder's account. The
Trust and Goldman Sachs each reserves the right to reject any purchase order
for any reason.
INITIAL PURCHASES
The minimum initial investment requirement is $50,000, which may be allo-
cated among the Portfolios. The Trust and Goldman Sachs each reserves the
right to waive the minimum investment requirement. Before or immediately after
placing an initial purchase order, investors should complete and send to
Goldman Sachs the Account Information Form included at the end of this Pro-
spectus.
SUBSEQUENT INVESTMENTS
There is no minimum amount required for subsequent investments. Orders for
the purchase of additional ILA Units should be accompanied by information
identifying the account and the Portfolio in which ILA Units are to be pur-
chased.
REPORTS TO UNITHOLDERS
ILA Unitholders of each Portfolio will receive an annual report containing
audited financial statements and a semiannual report. Each ILA Unitholder will
also be furnished with an individual monthly statement. Upon request, a
printed confirmation for each transaction will be provided by Goldman Sachs.
Any dividends and distributions paid by the Portfolios are also reflected in
regular statements issued by Goldman Sachs. A year-to-date statement for any
account will be provided upon request made to Goldman Sachs. ILA Unitholders
with inquiries regarding a Portfolio may call Goldman Sachs at 800-621-2550
(8:00 a.m. to 6:30 p.m. New York time) or write Goldman Sachs at the address
shown under "The Distributor and Transfer Agent."
SUB-ACCOUNTING SERVICES
The Trust has designed special procedures to assist banks and other institu-
tional investors desiring to establish multiple accounts (master accounts and
their sub-accounts). Sub-accounts may be established with registration by name
and/or number. Institutions will not normally be charged for this service un-
less otherwise agreed upon. Upon request, master accounts will be provided
with a monthly summary report which sets forth in order by account number (or
name) the unit balance at month-end and the monthly income together with the
total unit balance and monthly income for the master account.
To assist banks and other institutional investors performing their own sub-
accounting, each Portfolio's daily income per unit, calculated to nine decimal
places, and its annualized yield are normally available by 4:00 p.m. New York
time.
33
<PAGE>
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (as of 4:00 p.m. New York time) as a dividend and distributed
to ILA Unitholders monthly. Distributions will be made in additional ILA Units
of the same Portfolio or, at the election of ILA Unitholders, in cash. The
election to reinvest dividends and distributions or receive them in cash may
be changed at any time upon written notice to Goldman Sachs. If no election is
made, all dividends and capital gain distributions will be reinvested. Divi-
dends will be reinvested as of the last calendar day of each month. Cash dis-
tributions will be paid on or about the first business day of each month. Net
short-term capital gains, if any, will be distributed in accordance with the
requirements of the Code and may be reflected in a Portfolio's daily distribu-
tions. Each Portfolio may distribute at least annually its long-term capital
gains, if any, after reduction by available capital losses. In order to avoid
excessive fluctuations in the amount of monthly capital gains distributions, a
portion of any net capital gains realized on the disposition of securities
during the months of November and December may be distributed during the sub-
sequent calendar year. Although realized gains and losses on the assets of a
Portfolio are reflected in the net asset value of the Portfolio, they are not
expected to be of an amount which would affect the Portfolio's net asset value
of $1.00 per unit.
A Portfolio's net investment income consists of the excess of (i) accrued
interest or discount (including both original issue and market discount on
taxable securities) on portfolio securities, and (ii) any income of the Port-
folio from sources other than capital gains over (iii) the amortization of
market premium on all portfolio securities and (iv) the estimated expenses of
the Portfolio, including a proportionate share of the general expenses of the
Trust.
EXCHANGES
ILA Units of each Portfolio may be exchanged for units or shares of the cor-
responding class of any Portfolio or Fund of Goldman Sachs Trust at the net
asset value next determined either by writing to Goldman Sachs, Attention:
Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois
60606 or, if previously elected in the Account Information Form included at
the end of this Prospectus, by calling Goldman Sachs at 800-621-2550. All tel-
ephone exchanges must be registered in the same name(s) and with the same ad-
dress as are registered in the Portfolio from which the exchange is being
made. It may be difficult to implement the telephone exchange privilege in
times of drastic economic or market changes. In an effort to prevent unautho-
rized or fraudulent exchange requests by telephone, Goldman Sachs employs rea-
sonable procedures as set forth under "Redemption of Units" to confirm that
such instructions are genuine. Exchanges are available only in states where
the exchange may legally be made. The exchange privilege may be modified or
withdrawn at any time on 60 days' written notice.
REDEMPTION OF UNITS
HOW TO REDEEM
ILA Unitholders may redeem ILA Units of a Portfolio without charge upon re-
quest on any Business Day at the net asset value next determined after receipt
of the redemption request. Redemption requests may be made by telephoning
Goldman Sachs at 800-621-2550 or by a written request addressed to Goldman
Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower,
Chicago, Illinois 60606. The letter of instruction must specify the number of
ILA Units of the particular Portfolio to be redeemed, the account number, pay-
ment instructions and the exact registration on the account. Signatures must
be guaranteed in
34
<PAGE>
accordance with the procedures set forth below, if the proceeds are to be paid
to other than pre-established instructions on file with the Portfolio. An ILA
Unitholder may request redemptions by telephone only if the optional telephone
redemption privilege has been elected on the Account Information Form included
at the end of this Prospectus. It may be difficult to implement redemptions by
telephone in times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than
that designated on the Account Information Form must be in writing and signed
by an authorized person designated on the Account Information Form. Any such
written request is also confirmed by telephone with both the requesting party
and the designated bank account to verify instructions. Other procedures may
be implemented from time to time. If reasonable procedures are not implement-
ed, the Trust may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, neither the Trust nor Goldman Sachs will be
responsible for the authenticity of redemption instructions received by tele-
phone. A redemption may also be made with respect to certain Portfolios by
means of the check redemption privilege described below. Goldman Sachs re-
serves the right to redeem accounts with balances below $500.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs. The payment of
redemption proceeds for ILA Units recently purchased by check will be delayed
for up to 15 days until the check has cleared.
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
bank account designated on the ILA Unitholder's Account Information Form, un-
less payment by check has been requested.
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
REDEMPTION
REDEMPTION REQUEST PROCEEDS
RECEIVED BY GOLDMAN SACHS ORDINARILY DIVIDENDS
----------------------------- ---------- -------------------
<S> <C> <C> <C>
(1) In the case of the Taxable and Tax-Advantaged Portfolios
By: 3:00 p.m.-N.Y. time Wired Same Not earned on day
Business request is received
Day
- -----------------------------------------------------------------------------
After: 3:00 p.m.-N.Y. time Wired Next Earned on day
Business request is received
Day
- -----------------------------------------------------------------------------
(2) In the case of the Tax-Exempt Portfolios
By: 12:00 noon-N.Y. time Wired Same Not earned on day
Business request is received
Day
- -----------------------------------------------------------------------------
After: 12:00 noon-N.Y. time Wired Next Earned on day
Business request is received
Day
- -----------------------------------------------------------------------------
</TABLE>
The Portfolios will arrange for the proceeds of redemptions effected by any
means to be wired as federal funds to the bank account designated in the Ac-
count Information Form. Redemption proceeds will normally be wired as set
forth above, but may be paid up to three Business Days after receipt of a
properly executed
35
<PAGE>
redemption request. For example, payment may be delayed if the Federal Reserve
Bank is closed on the day redemption proceeds would ordinarily be wired. After
a wire has been initiated by Goldman Sachs, neither Goldman Sachs nor the
Trust assumes any further responsibility for the performance of intermediaries
or the ILA Unitholder's bank in the transfer process. If a problem with such
performance arises, the ILA Unitholder should deal directly with such interme-
diaries or bank.
An ILA Unitholder may change the bank designated to receive redemption pro-
ceeds by providing a written notice to Goldman Sachs which has been signed by
the ILA Unitholder or its authorized representative. This signature must be
guaranteed by a bank, a securities broker or dealer, a credit union having au-
thority to issue signature guarantees, a savings and loan association, a
building and loan association, a cooperative bank, a federal savings bank or
association, a national securities exchange, a registered securities associa-
tion or a clearing agency, provided that such institution satisfies the stan-
dards established by Goldman Sachs. Goldman Sachs may also require additional
documentation in connection with a request to change the designated bank.
CHECK REDEMPTION PRIVILEGE
An ILA Unitholder of any Portfolio may elect to have a special account with
State Street for the purpose of redeeming ILA Units from his or her account in
that Portfolio by check. When State Street receives a completed signature card
and authorization form, the ILA Unitholder will be provided with a supply of
checks. Checks drawn on this account may be payable to the order of any person
in any amount of $500 or more, but cannot be certified. The payee of the check
may cash or deposit it like any other check drawn on a bank. When such a check
is presented to State Street for payment, a sufficient number of full and
fractional ILA Units will be redeemed to cover the amount of the check. Can-
celled checks will be returned to the ILA Unitholder by State Street.
The check redemption privilege enables an ILA Unitholder to receive the div-
idends declared on the ILA Units to be redeemed until such time as the check
is processed. Because of this feature, the check redemption privilege may not
be used for a complete liquidation of an ILA Unitholder's account. If the
amount of a check is greater than the value of ILA Units held in the ILA
Unitholder's account, the check will be returned unpaid, and the ILA
Unitholder may be subject to extra charges.
Goldman Sachs reserves the right to impose conditions on, limit the avail-
ability of or terminate the check redemption privilege at any time with re-
spect to a particular ILA Unitholder or all ILA Unitholders in general. The
Trust and State Street reserve the right at any time to suspend redemptions by
check and intend to do so in the event that federal legislation or regulations
impose reserve requirements or other restrictions deemed by the Trustees to be
adverse to the interests of the Portfolios.
----------------
36
<PAGE>
APPENDIX
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Trust with your correct Social Secu-
rity 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 and to sign your name in the certification section of
the Account Information Form could result in withholding of 31% by the Trust
for the federal backup withholding tax on distributions, redemptions, ex-
changes and other payments relating to your account.
Any tax withheld may be credited against taxes owed on your federal income
tax return.
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 Reve-
nue Service (IRS). Backup withholding could apply to payments relating to your
account prior to the Trust's receipt of your TIN.
Special rules apply for certain entities. For example, for an account estab-
lished under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor
should be furnished.
If you have been notified by the IRS that you are subject to backup with-
holding 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 with-
holding should cease, you must cross out item (2) in the certification section
of the Account Information Form.
If you are an exempt recipient, you should furnish your TIN and certify your
exemption by signing the Certification section and writing "exempt" after your
signature. Exempt recipients include: corporations, tax-exempt pension plans
and IRA's, governmental agencies, financial institutions, registered securi-
ties and commodities dealers and others.
If you are a nonresident alien or foreign entity you must provide a com-
pleted Form W-8 to the Trust in order to avoid backup withholding on certain
payments. Other payments to you may be subject to non-resident alien withhold-
ing of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
GOLDMAN SACHS FUNDS -- ACCOUNT INFORMATION FORM
This Account Information Form Should be Forwarded Promptly to Goldman, Sachs &
Co.
No Redemption Can be Made Prior to Its Receipt
Master No. _______________
Send to:Goldman Sachs Funds Fund Use Only
4900 Sears Tower Date: ____________________
Chicago, IL 60606
1-800-621-2250
Institutional Liquid Assets Portfolios [_]Goldman Sachs Adjustable Rate Gov-
[_]Prime Obligations Portfolio ernment Fund
[_]Money Market Portfolio [_]Goldman Sachs Short Duration Gov-
[_]Treasury Obligations Portfolio ernment Fund
[_]Treasury Instruments Portfolio [_]Goldman Sachs Short Duration Tax-
[_]Government Portfolio Free Fund
[_]Federal Portfolio [_]Goldman Sachs Core Fixed Income
[_]Tax-Exempt Diversified Portfolio Fund
[_]Tax-Exempt California Portfolio [_]Goldman Sachs Global Income Fund
[_]Tax-Exempt New York Portfolio
[_]Other Goldman Sachs Funds
[_]Other Fill in Fund(s): ______________________
Fill in Fund(s): ______________________
A. ACCOUNT RECORD
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
Name of Account Telephone Number
- --------------------------------------- U.S. Citizen or
Street or P.O. Box Resident? Yes [_] No [_]
- --------------------------------------- If no is checked, fill in country of
City State Zip tax residence:
- --------------------------------------- ---------------------------------------
Attention
B. DIVIDENDS AND DISTRIBUTIONS -- Check appropriate box (see "Dividends" in
Prospectus)
- --------------------------------------------------------------------------------
Dividends (including net short-term [_] Cash [_] Units
capital gains) [_] Cash [_] Units
Net Long-Term Capital Gains [_] Units
Distributions
Dividends and capital gains reinvested
in another fund in the Goldman Sachs
Funds (see Prospectus for more
information)
Fill in Fund: _______________________
(If no box is checked, dividends and capital gains distributions will be
reinvested in the account.)
C. SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
- --------------------------------------------------------------------------------
Taxpayer Identification Number: _________________________
Under penalties of perjury, I certify that (1) The number shown on this form is
my correct Taxpayer Identification Number (or I am waiting for a number to be
issued to me), and (2) I am not subject to backup withholding because I am
exempt from backup withholding or I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or the IRS has notified me that I
am no longer subject to backup withholding. See the "Guidelines for
Certification of Taxpayer Identification Number on Account Information Form,"
contained in the Appendix to the accompanying Prospectus.
------------------------------- ---------------------------------------
SIGN Signature Name (print) and Title (if any)
HERE ------------------------------- ---------------------------------------
Date
D. OPTIONAL TELEPHONE EXCHANGE (see "Exchange Privilege" in Prospectus)
- --------------------------------------------------------------------------------
[_Goldman,]Sachs & Co. is hereby authorized to accept and act upon telephone
instructions from the undersigned or any other person for the exchange of
units of the Portfolio into any portfolio described in the accompanying
Prospectus. The undersigned understands and agrees that neither the
applicable Portfolio nor Goldman, Sachs & Co. will be liable for any loss,
expense, or cost arising out of any telephone request.
Continued on reverse side
<PAGE>
E. REDEMPTION PLANS -- check one box only (see "Redemption of Units" in
Prospectus)
- --------------------------------------------------------------------------------
[_]I authorize GOLDMAN, SACHS & CO. to honor telephone, telegraphic, or other
instructions WITHOUT SIGNATURE GUARANTEE, from any person for the redemption
of units for the above account provided that the proceeds are transferred to
the following bank account(s) only. I understand any changes to the following
information must be made in writing to GOLDMAN, SACHS & CO., must contain the
appropriate number of signatures listed below and all signatures MUST BE
SIGNATURE GUARANTEED. Absent its own gross negligence, neither the applicable
Fund nor GOLDMAN, SACHS & CO., shall be liable for such redemption or for
payments made to any unauthorized account.
[_]I have furnished GOLDMAN, SACHS & CO., WITH A SIGNATURE GUARANTEE (see
section F). I authorize GOLDMAN, SACHS & CO. to honor telephone, telegraphic,
or other instructions from any person for the redemption of units for the
above account provided that the proceeds are transmitted to the following
bank account(s) only. Any changes to the following information must be made
in writing to GOLDMAN, SACHS & CO., (but without signature guarantee) and
contain the appropriate number of signatures listed below. Absent its own
gross negligence, neither the applicable Fund nor GOLDMAN, SACHS & CO. shall
be liable for such redemptions or for payments made to any unauthorized
account.
Additional documentation may be required for certain accounts.
Please complete the following bank account information and place a line through
the unused portion.
Additional instructions may be added as separate pages, if necessary.
Number of Bank Account Destinations completed in Section E of this form: [_]
1) ____________________________________ 3) ____________________________________
Bank Name Bank Routing No. Bank Name Bank Routing No.
------------------------------------- -------------------------------------
Street Address Street Address
------------------------------------- -------------------------------------
City State Zip City State Zip
------------------------------------- -------------------------------------
Account Name Account No. Account Name Account
No.
2) ____________________________________ 4) ____________________________________
Bank Name Bank Routing No. Bank Name Bank Routing No.
------------------------------------- -------------------------------------
Street Address Street Address
------------------------------------- -------------------------------------
City State Zip City State Zip
------------------------------------- -------------------------------------
Account Name Account No. Account Name Account
No.
[_] Special Draft (Transfer Agent to Supply) [_] By Mail
F. SIGNATURE AUTHORIZATION
- --------------------------------------------------------------------------------
By the execution of this Account Information Form, the undersigned represents
and warrants that it has full right, power and authority to make the investment
applied for pursuant to this application and is acting for itself or in some
fiduciary capacity in making such investments. THE UNDERSIGNED UNDERSTANDS THAT
NON-MONEY MARKET FUNDS DO NOT MAINTAIN A CONSTANT NET ASSET VALUE AND FURTHER
THAT A CONSTANT NET ASSET VALUE IN MONEY MARKET FUNDS IS NOT GUARANTEED. AS A
RESULT THE UNDERSIGNED MAY EXPERIENCE A LOSS OF PRINCIPAL ON ITS INVESTMENTS.
The undersigned affirms that it has received a current prospectus for the
Portfolios and has reviewed the same.
Number of Signatures required to make changes to this form: [_]
------------------------------- ---------------------------------------
SIGN Signature Name (print) and Title (if any)
HERE
------------------------------- --------------------------------------
Date
------------------------------- ---------------------------------------
Signature Name (print) and Title (if any)
------------------------------- ---------------------------------------
Date
G. SIGNATURE GUARANTEE
- --------------------------------------------------------------------------------
- --------------------------------------- Affix Guarantee Stamp Here
Signature Guaranteed By
- ---------------------------------------
Authorized Signature
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
ILA UNITS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE:800-621-2550
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unitholder and Portfolio Expenses.......................................... 2
Financial Highlights....................................................... 4
An Introduction to the Portfolios.......................................... 14
Investment Policies Matrix................................................. 16
Description of Securities and Investment Techniques........................ 18
Investment Limitations..................................................... 26
Management................................................................. 27
Taxes...................................................................... 28
Net Asset Value............................................................ 30
Yield Information.......................................................... 30
Organization and Units of the Portfolios................................... 31
Purchase of Units.......................................................... 32
Reports to Unitholders..................................................... 33
Distributions.............................................................. 34
Exchanges.................................................................. 34
Redemption of Units........................................................ 34
Appendix................................................................... A-1
Account Information Form
</TABLE>
ILA-1IS-MMT10K/596
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS--INSTITUTIONAL LIQUID ASSETS
ILA UNITS
------------
PROSPECTUS
------------
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS--INSTITUTIONAL LIQUID ASSETS
ILA ADMINISTRATION UNITS
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is a no-load, open-end, management
investment company (a "mutual fund") which includes the Goldman Sachs--
Institutional Liquid Assets portfolios (the "Portfolios"). This Prospectus
relates only to the offering of ILA Administration shares of beneficial
interest ("ILA Administration Units") of the Portfolios. Goldman Sachs Asset
Management, a separate operating division of Goldman, Sachs & Co., serves as
each Portfolio's investment adviser. Goldman, Sachs & Co. serves as each
Portfolio's distributor and transfer agent.
The following Portfolios seek to maximize current income to the extent
consistent with the preservation of capital and the maintenance of liquidity
by investing exclusively in high quality money market instruments. These
Portfolios may invest in diversified portfolios of the following types of
instruments:
Prime Obligations Portfolio. Securities of the U.S. Government, its
agencies, authorities and instrumentalities, obligations of U.S. banks,
commercial paper and other short-term obligations of U.S. companies, states,
municipalities and other entities, and repurchase agreements.
Money Market Portfolio. Securities of the U.S. Government, its agencies,
authorities and instrumentalities, U.S. dollar denominated obligations of U.S.
and foreign banks, U.S. dollar denominated commercial paper and other short-
term obligations of U.S. and foreign companies, foreign governments, states,
municipalities and other entities, and repurchase agreements.
Treasury Obligations Portfolio. Securities issued or guaranteed by the U.S.
Treasury and repurchase agreements relating to such securities.
Treasury Instruments Portfolio. Securities issued or guaranteed by the U.S.
Treasury, the interest income from which is generally exempt from state income
taxation.
Government Portfolio. Securities of the U.S. Government, its agencies,
authorities and instrumentalities, and repurchase agreements relating to such
securities.
Federal Portfolio. Securities of the U.S. Government and certain of its
agencies, authorities and instrumentalities, the interest income from which is
generally exempt from state income taxation.
The following Portfolios seek to the extent consistent with the preservation
of capital and prescribed portfolio standards, a high level of income excluded
from gross income for federal income tax purposes, and in the case of the Tax-
Exempt California Portfolio and Tax-Exempt New York Portfolio, exempt from
California state and New York state and city personal income taxes,
respectively, by investing primarily in municipal instruments. The Tax-Exempt
California and Tax-Exempt New York Portfolios concentrate their investments in
securities issued by or on behalf of California and New York municipal issuers
and therefore investment in such Portfolios may be riskier than other types of
money market funds. These Portfolios may invest in the following types of
instruments:
Tax-Exempt Diversified Portfolio. A diversified portfolio of municipal
obligations issued by or on behalf of states, territories and possessions of
the United States and their political subdivisions, agencies, authorities and
instrumentalities, and the District of Columbia.
Tax-Exempt California Portfolio. A non-diversified portfolio consisting
primarily of municipal obligations issued by or on behalf of the State of
California and its political subdivisions, agencies and instrumentalities and
other obligations that are exempt from federal and California state income
taxes.
Tax-Exempt New York Portfolio. A non-diversified portfolio consisting
primarily of municipal obligations issued by or on behalf of the State of New
York and its political subdivisions, agencies and instrumentalities and other
obligations that are exempt from federal, New York state and New York City
personal income taxes.
AN INVESTMENT IN A PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
................................................................ Goldman Sachs
Funds--Toll Free: 800-621-2550
This Prospectus provides you with information about the Portfolios that you
should know before investing in ILA Administration Units. It should be read
and retained for future reference. If you would like more detailed
information, the Statement of Additional Information dated May 1, 1997, as
amended or supplemented from time to time, is available upon request without
charge from Service Organizations, as defined herein, or by calling the
telephone number listed above or by writing Goldman Sachs, Attention:
Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois
60606. The Statement of Additional Information, which is incorporated by
reference into this Prospectus, has been filed with the Securities and
Exchange Commission. Not all Portfolios are available in certain states.
Please call the phone number listed above to determine availability in your
state. The SEC maintains a Web site (http://wp.sec.gov) that contains the
Statement of Additional Information and other information regarding the Trust.
- -------------------------------------------------------------------------------
ILA ADMINISTRATION UNITS OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY
INSTITUTION, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A
PORTFOLIO 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.
The date of this Prospectus is May 1, 1997.
<PAGE>
UNITHOLDER AND PORTFOLIO EXPENSES
ILA ADMINISTRATION UNITS
<TABLE>
<CAPTION>
TAX-
PRIME MONEY TREASURY TREASURY TAX-EXEMPT TAX-EXEMPT EXEMPT
OBLIGATIONS MARKET OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL DIVERSIFIED CALIFORNIA NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ----------- ----------- ---------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNITHOLDER
TRANSACTION
EXPENSES
Maximum Sales
Charge Imposed on
Purchases......... None None None None None None None None None
Sales Charge
Imposed on
Reinvested
Distributions..... None None None None None None None None None
Deferred Sales
Load Imposed on
Redemptions....... None None None None None None None None None
Exchange Fee...... None None None None None None None None None
ANNUAL OPERATING
EXPENSES (1)
(as a percentage
of average daily
net assets)
Management Fees
(after
limitations) (2).. 0.35% 0.31% 0.35% 0.16% 0.35% 0.21% 0.26% 0.35% 0.27%
Other Expenses
Administration
Fees............. 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Other Expenses
(after expense
limitation) (3).. 0.07% 0.06% 0.07% 0.06% 0.07% 0.06% 0.06% 0.07% 0.06%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING
EXPENSES (4)....... 0.57% 0.52% 0.57% 0.37% 0.57% 0.42% 0.47% 0.57% 0.48%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Obligations Portfolio................ $6 $18 $32 $71
Money Market Portfolio..................... $5 $17 $29 $65
Treasury Obligations Portfolio............. $6 $18 $32 $71
Treasury Instruments Portfolio............. $4 $12 $21 $47
Government Portfolio....................... $6 $18 $32 $71
Federal Portfolio.......................... $4 $13 $24 $53
Tax-Exempt Diversified Portfolio........... $5 $15 $26 $59
Tax-Exempt California Portfolio............ $6 $18 $32 $71
Tax-Exempt New York Portfolio.............. $5 $15 $27 $60
</TABLE>
2
<PAGE>
- --------
(1) Based upon estimated amounts for the current fiscal year.
(2) The Investment Adviser has voluntarily agreed that a portion of the
management fee would not be imposed on the Money Market, Treasury
Instruments, Federal, Tax-Exempt Diversified and Tax-Exempt New York
Portfolios equal to .04%, .19%, .14%, .09% and .08%, respectively. Without
such limitation, management fees for each Portfolio would be 0.35%.
(3) The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, fees payable to Service
Organizations, as defined herein, taxes, interest and brokerage and
litigation, indemnification and other extraordinary expenses) to the
extent such expenses exceed 0.07% of the Prime Obligations, Treasury
Obligations, Government and Tax-Exempt California Portfolio's average
daily net assets and 0.06% of each other Portfolio's average daily net
assets.
(4) Without the limitations described above, "Other Expenses" and "Total
Operating Expenses" of the Portfolios for the current fiscal year would
be:
<TABLE>
<CAPTION>
OTHER TOTAL OPERATING
EXPENSES EXPENSES
-------- ---------------
<S> <C> <C>
Prime Obligations Portfolio......................... 0.08% 0.58%
Money Market Portfolio.............................. 0.08% 0.58%
Treasury Obligations Portfolio...................... 0.08% 0.58%
Treasury Instruments Portfolio...................... 0.08% 0.58%
Government Portfolio................................ 0.09% 0.59%
Federal Portfolio................................... 0.08% 0.58%
Tax-Exempt Diversified Portfolio.................... 0.06% 0.56%
Tax-Exempt California Portfolio..................... 0.07% 0.57%
Tax-Exempt New York Portfolio....................... 0.08% 0.58%
</TABLE>
The information set forth in the foregoing table and hypothetical example
relates only to ILA Administration Units of the Portfolios. The Portfolios
also offer ILA Units, ILA Service Units and ILA Class B Units (Prime Obliga-
tions only). The other classes of the Portfolios are subject to different fees
and expenses (which affect performance) and are entitled to different servic-
es. Information regarding any other class of the Portfolios may be obtained
from your sales representative or from Goldman Sachs by calling the number on
the front cover of this Prospectus.
Service Organizations may charge other fees to their customers who are the
beneficial owners of ILA Administration Units in connection with their custom-
ers' accounts. See "Administration." Such fees, if any, may affect the return
such customers realize with respect to their investments.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Portfolio that an investor will bear di-
rectly or indirectly. The information on fees and expenses included in the ta-
ble and the hypothetical example above are based on each Portfolio's estimated
fees and expenses 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, a Portfo-
lio's actual performance will vary and may result in an actual return greater
or less than 5%. See "Management--Investment Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following data with respect to a unit (of the class specified) of the
Prime Obligations, Money Market, Treasury Obligations, Treasury Instruments,
Government, Federal, Tax-Exempt Diversified, Tax-Exempt California and Tax-Ex-
empt New York Portfolios outstanding during the periods indicated have been
audited by Arthur Andersen LLP, independent auditors, as indicated in their
report incorporated by reference and attached to the Statement of Additional
Information from the annual report to unitholders for the fiscal year ended
December 31, 1996 (the "Annual Report"), and should be read in conjunction
with the financial statements and related notes incorporated by reference and
attached to the Statement of Additional Information.
4
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Unit Outstanding Throughout Each Period Prime Obligations
Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- ----------------
1996-ILA units.. $1.00 $0.0511 -- $0.0511 $(0.0511) $1.00 5.22% 0.41% 5.11%
1996-ILA Admin-
istration units. 1.00 0.0497 -- 0.0497 (0.0497) 1.00 5.06 0.56 4.97
1996-ILA Service
units........... 1.00 0.0474 -- 0.0474 (0.0474) 1.00 4.80 0.81 4.74
1996-ILA B
units (b)....... 1.00 0.0262 -- 0.0262 (0.0262) 1.00 3.97(d) 1.41(d) 4.09(d)
1995-ILA units.. 1.00 0.0566 -- 0.0566 (0.0566) 1.00 5.79 0.41 5.66
1995-ILA Admin-
istration units. 1.00 0.0551 -- 0.0551 (0.0551) 1.00 5.63 0.56 5.51
1995-ILA Service
units........... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.37 0.81 5.22
1994-ILA units.. 1.00 0.0394 -- 0.0394 (0.0394) 1.00 4.07 0.40 3.94
1994-ILA Admin-
istration units. 1.00 0.0379 -- 0.0379 (0.0379) 1.00 3.91 0.55 3.79
1994-ILA Service
units........... 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.66 0.80 3.65
1993-ILA units.. 1.00 0.0291 0.0002 0.0293 (0.0293) 1.00 2.97 0.40 2.91
1993-ILA Admin-
istration units. 1.00 0.0275 0.0003 0.0278 (0.0278) 1.00 2.82 0.55 2.75
1993-ILA Service
units........... 1.00 0.0250 0.0001 0.0251 (0.0252) 1.00 2.56 0.80 2.50
1992-ILA units.. 1.00 0.0364 0.0010 0.0374 (0.0374) 1.00 3.75 0.40 3.64
1992-ILA Admin-
istration units. 1.00 0.0339 0.0010 0.0349 (0.0349) 1.00 3.60 0.55 3.39
1992-ILA Service
units........... 1.00 0.0311 0.0010 0.0321 (0.0320) 1.00 3.34 0.80 3.11
1991-ILA units.. 1.00 0.0591 0.0003 0.0594 (0.0594) 1.00 6.10 0.40 5.91
1991-ILA Admin-
istration units. 1.00 0.0568 0.0003 0.0571 (0.0571) 1.00 5.94 0.55 5.68
1991-ILA Service
units........... 1.00 0.0558 0.0003 0.0561 (0.0561) 1.00 5.68 0.80 5.58
1990-ILA units.. 1.00 0.0793 -- 0.0793 (0.0793) 1.00 8.21 0.38 7.93
1990-ILA Admin-
istration
units (c)....... 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.81(d) 0.55(d) 7.62(d)
1990-ILA Service
units (c)....... 1.00 0.0425 -- 0.0425 (0.0425) 1.00 7.56(d) 0.80(d) 7.25(d)
1989-ILA units.. 1.00 0.0890 -- 0.0890 (0.0890) 1.00 9.27 0.40 8.90
1988-ILA units.. 1.00 0.0714 -- 0.0714 (0.0714) 1.00 7.48 0.40 7.14
1987-ILA units.. 1.00 0.0634 -- 0.0634 (0.0634) 1.00 6.50 0.40 6.34
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE NET
(IN 000'S) NET ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- -----------------
1996-ILA units.. $1,154,787 0.43% 5.09%
1996-ILA Admin-
istration units. 23,738 0.58 4.95
1996-ILA Service
units........... 84,707 0.83 4.72
1996-ILA B
units (b)....... 346 1.43(d) 4.07(d)
1995-ILA units.. 1,261,251 0.43 5.64
1995-ILA Admin-
istration units. 63,018 0.58 5.49
1995-ILA Service
units........... 227,233 0.83 5.20
1994-ILA units.. 1,963,846 0.42 3.92
1994-ILA Admin-
istration units. 149,234 0.57 3.77
1994-ILA Service
units........... 170,453 0.82 3.63
1993-ILA units.. 2,332,771 0.42 2.89
1993-ILA Admin-
istration units. 189,431 0.57 2.73
1993-ILA Service
units........... 137,804 0.82 2.48
1992-ILA units.. 3,444,591 0.42 3.62
1992-ILA Admin-
istration units. 257,321 0.57 3.37
1992-ILA Service
units........... 22,044 0.82 3.09
1991-ILA units.. 3,531,736 0.42 5.89
1991-ILA Admin-
istration units. 198,417 0.57 5.66
1991-ILA Service
units........... 18,789 0.82 5.56
1990-ILA units.. 2,833,541 0.38 7.93
1990-ILA Admin-
istration
units (c)....... 209,272 0.55(d) 7.62(d)
1990-ILA Service
units (c)....... 19,039 0.80(d) 7.25(d)
1989-ILA units.. 3,761,964 0.40 8.90
1988-ILA units.. 3,799,628 0.40 7.14
1987-ILA units.. 5,814,280 0.40 6.34
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b)ILA Class B unit activity commenced during May of 1996.
(c)ILA Administration and Service unit activity commenced during June of 1990.
(d)Annualized.
5
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Money Market Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $1.00 $0.0515 $0.0001 $0.0516 $(0.0516) $1.00 5.27% 0.36% 5.15%
1996-ILA Admin-
istration units. 1.00 0.0500 0.0001 0.0501 (0.0501) 1.00 5.12 0.51 5.00
1996-ILA Service
units........... 1.00 0.0475 0.0001 0.0476 (0.0476) 1.00 4.86 0.76 4.75
1995-ILA units.. 1.00 0.0571 -- 0.0571 (0.0571) 1.00 5.85 0.36 5.71
1995-ILA Admin-
istration units. 1.00 0.0555 -- 0.0555 (0.0555) 1.00 5.69 0.51 5.55
1995-ILA Service
units........... 1.00 0.0529 -- 0.0529 (0.0529) 1.00 5.43 0.76 5.29
1994-ILA units.. 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.13 0.35 4.01
1994-ILA Admin-
istration units. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.98 0.50 3.88
1994-ILA Service
units........... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.72 0.75 3.61
1993-ILA units.. 1.00 0.0296 0.0003 0.0299 (0.0299) 1.00 3.03 0.35 2.96
1993-ILA Admin-
istration units. 1.00 0.0281 0.0003 0.0284 (0.0284) 1.00 2.88 0.50 2.81
1993-ILA Service
units........... 1.00 0.0257 0.0002 0.0259 (0.0259) 1.00 2.62 0.75 2.57
1992-ILA units.. 1.00 0.0368 0.0004 0.0372 (0.0372) 1.00 3.76 0.35 3.68
1992-ILA Admin-
istration units. 1.00 0.0356 0.0004 0.0360 (0.0360) 1.00 3.61 0.50 3.56
1992-ILA Service
units........... 1.00 0.0358 0.0006 0.0364 (0.0364) 1.00 3.35 0.75 3.58
1991-ILA units.. 1.00 0.0591 0.0004 0.0595 (0.0595) 1.00 6.12 0.35 5.91
1991-ILA Admin-
istration units. 1.00 0.0574 0.0004 0.0578 (0.0578) 1.00 5.96 0.50 5.74
1991-ILA Service
units........... 1.00 0.0547 0.0004 0.0551 (0.0551) 1.00 5.70 0.75 5.47
1990-ILA units.. 1.00 0.0793 0.0001 0.0794 (0.0794) 1.00 8.24 0.35 7.93
1990-ILA Admin-
istration
units (c)....... 1.00 0.0424 0.0001 0.0425 (0.0425) 1.00 7.86(b) 0.50(b) 7.63(b)
1990-ILA Service
units (c)....... 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.61(b) 0.75(b) 7.46(b)
1989-ILA units.. 1.00 0.0885 0.0001 0.0886 (0.0886) 1.00 9.31 0.35 8.85
1988-ILA units.. 1.00 0.0751 -- 0.0751 (0.0751) 1.00 7.66 0.27 7.51
<CAPTION>
FOR THE PERIOD DECEMBER 2, 1987 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987-ILA units.. 1.00 0.0063 -- 0.0063 (0.0063) 1.00 7.38(b) 0.15(b) 7.62(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $ 703,097 0.43% 5.08%
1996-ILA Admin-
istration units. 257,258 0.58 4.93
1996-ILA Service
units........... 28,845 0.83 4.68
1995-ILA units.. 574,155 0.42 5.65
1995-ILA Admin-
istration units. 164,422 0.57 5.49
1995-ILA Service
units........... 23,080 0.82 5.23
1994-ILA units.. 559,470 0.43 3.93
1994-ILA Admin-
istration units. 145,867 0.58 3.80
1994-ILA Service
units........... 21,862 0.83 3.53
1993-ILA units.. 699,604 0.43 2.88
1993-ILA Admin-
istration units. 150,452 0.58 2.73
1993-ILA Service
units........... 11,166 0.83 2.49
1992-ILA units.. 884,571 0.43 3.60
1992-ILA Admin-
istration units. 187,445 0.58 3.48
1992-ILA Service
units........... 15,114 0.83 3.50
1991-ILA units.. 1,153,191 0.42 5.84
1991-ILA Admin-
istration units. 210,330 0.57 5.67
1991-ILA Service
units........... 56,586 0.82 5.40
1990-ILA units.. 924,141 0.40 7.88
1990-ILA Admin-
istration
units (c)....... 204,477 0.55(b) 7.58(b)
1990-ILA Service
units (c)....... 38,128 0.80(b) 7.41(b)
1989-ILA units.. 1,295,389 0.40 8.80
1988-ILA units.. 701,105 0.40 7.38
<CAPTION>
FOR THE PERIOD DECEMBER 2, 1987 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- ------------------------------------------------------------
<S> <C> <C> <C>
1987-ILA units.. 183,633 0.40(b) 7.37(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during June of 1990.
6
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Government Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $1.00 $0.0504 $0.0001 $0.0505 $(0.0504) $1.00 5.15% 0.41% 5.04%
1996-ILA Admin-
istration units. 1.00 0.0489 0.0001 0.0490 (0.0489) 1.00 4.99 0.56 4.89
1996-ILA Service
units........... 1.00 0.0463 0.0001 0.0464 (0.0463) 1.00 4.73 0.81 4.63
1995-ILA units.. 1.00 0.0562 0.0002 0.0564 (0.0564) 1.00 5.77 0.41 5.62
1995-ILA Admin-
istration units. 1.00 0.0549 0.0002 0.0551 (0.0551) 1.00 5.62 0.56 5.49
1995-ILA Service
units........... 1.00 0.0519 0.0002 0.0521 (0.0521) 1.00 5.35 0.81 5.19
1994-ILA units.. 1.00 0.0378 0.0002 0.0380 (0.0380) 1.00 3.94 0.40 3.78
1994-ILA Admin-
istration units. 1.00 0.0362 0.0002 0.0364 (0.0364) 1.00 3.79 0.55 3.62
1994-ILA Service
units........... 1.00 0.0350 0.0002 0.0352 (0.0352) 1.00 3.53 0.80 3.50
1993-ILA units.. 1.00 0.0282 0.0008 0.0290 (0.0291) 1.00 2.94 0.40 2.82
1993-ILA Admin-
istration units. 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79 0.55 2.67
1993-ILA Service
units........... 1.00 0.0242 0.0006 0.0248 (0.0250) 1.00 2.53 0.80 2.42
1992-ILA units.. 1.00 0.0338 0.0027 0.0365 (0.0364) 1.00 3.70 0.40 3.38
1992-ILA Admin-
istration units. 1.00 0.0325 0.0027 0.0352 (0.0351) 1.00 3.55 0.55 3.25
1992-ILA Service
units........... 1.00 0.0309 0.0030 0.0339 (0.0336) 1.00 3.29 0.80 3.09
1991-ILA units.. 1.00 0.0567 0.0011 0.0578 (0.0578) 1.00 5.91 0.40 5.67
1991-ILA Admin-
istration units. 1.00 0.0545 0.0011 0.0556 (0.0556) 1.00 5.75 0.55 5.45
1991-ILA Service
units........... 1.00 0.0522 0.0011 0.0533 (0.0533) 1.00 5.49 0.80 5.22
1990-ILA units.. 1.00 0.0779 0.0003 0.0782 (0.0782) 1.00 8.11 0.39 7.79
1990-ILA Admin-
istration units
(c)............. 1.00 0.0439 0.0004 0.0443 (0.0443) 1.00 7.74(b) 0.55(b) 7.49(b)
1990-ILA Service
units (c)....... 1.00 0.0359 0.0002 0.0361 (0.0363) 1.00 7.42(b) 0.80(b) 7.15(b)
1989-ILA units.. 1.00 0.0877 0.0001 0.0878 (0.0878) 1.00 9.15 0.40 8.77
1988-ILA units.. 1.00 0.0716 0.0002 0.0718 (0.0718) 1.00 7.42 0.40 7.16
1987-ILA units.. 1.00 0.0622 0.0001 0.0623 (0.0624) 1.00 6.43 0.40 6.22
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $ 694,651 0.44% 5.01%
1996-ILA Admin-
istration units. 36,055 0.59 4.86
1996-ILA Service
units........... 94,228 0.84 4.60
1995-ILA units.. 570,469 0.43 5.60
1995-ILA Admin-
istration units. 47,558 0.58 5.47
1995-ILA Service
units........... 85,401 0.83 5.17
1994-ILA units.. 881,520 0.44 3.74
1994-ILA Admin-
istration units. 95,483 0.59 3.58
1994-ILA Service
units........... 156,930 0.84 3.46
1993-ILA units.. 1,315,378 0.43 2.79
1993-ILA Admin-
istration units. 161,845 0.58 2.64
1993-ILA Service
units........... 101,272 0.83 2.39
1992-ILA units.. 1,785,472 0.42 3.36
1992-ILA Admin-
istration units. 461,542 0.57 3.23
1992-ILA Service
units........... 56,389 0.82 3.07
1991-ILA units.. 2,103,627 0.43 5.64
1991-ILA Admin-
istration units. 464,060 0.58 5.42
1991-ILA Service
units........... 200,176 0.83 5.19
1990-ILA units.. 2,203,756 0.39 7.79
1990-ILA Admin-
istration units
(c)............. 296,313 0.55(b) 7.49(b)
1990-ILA Service
units (c)....... 132,888 0.80(b) 7.15(b)
1989-ILA units.. 2,268,330 0.40 8.77
1988-ILA units.. 2,197,796 0.40 7.16
1987-ILA units.. 2,243,870 0.40 6.22
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c)ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
7
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Obligations Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET
NET ASSET REALIZED TOTAL
VALUE AT NET GAIN ON INCOME FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C>
1996-ILA units.. $1.00 $0.0498 $0.0002 $0.0500
1996-ILA Admin-
istration units. 1.00 0.0483 0.0003 0.0486
1996-ILA Service
units........... 1.00 0.0459 0.0001 0.0460
1995-ILA units.. 1.00 0.0551 0.0007 0.0558
1995-ILA Admin-
istration units. 1.00 0.0537 0.0007 0.0544
1995-ILA Service
units........... 1.00 0.0511 0.0007 0.0518
1994-ILA units.. 1.00 0.0377 -- 0.0377
1994-ILA Admin-
istration units. 1.00 0.0368 -- 0.0368
1994-ILA Service
units........... 1.00 0.0340 -- 0.0340
1993-ILA units.. 1.00 0.0279 0.0006 0.0285
1993-ILA Admin-
istration units. 1.00 0.0264 0.0006 0.0270
1993-ILA Service
units........... 1.00 0.0239 0.0006 0.0245
1992-ILA units.. 1.00 0.0339 0.0025 0.0364
1992-ILA Admin-
istration units. 1.00 0.0320 0.0023 0.0343
1992-ILA Service
units........... 1.00 0.0294 0.0024 0.0318
1991-ILA units.. 1.00 0.0557 0.0018 0.0575
1991-ILA Admin-
istration units. 1.00 0.0540 0.0018 0.0558
1991-ILA Service
units........... 1.00 0.0515 0.0018 0.0533
1990-ILA units.. 1.00 0.0772 0.0002 0.0774
1990-ILA Admin-
istration
units (c)....... 1.00 0.0413 0.0002 0.0415
1990-ILA Service
units (c)....... 1.00 0.0417 0.0003 0.0420
1989-ILA units.. 1.00 0.0864 0.0005 0.0869
1988-ILA units.. 1.00 0.0704 0.0004 0.0708
1987-ILA units.. 1.00 0.0617 0.0002 0.0619
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
RATIO OF NET NET RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INVESTMENT
VALUE AT EXPENSES TO INCOME TO END OF EXPENSES TO INCOME TO
DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units.. $(0.0500) $1.00 5.11% 0.41% 4.98% $ 574,734 0.43% 4.96%
1996-ILA Admin-
istration units. (0.0486) 1.00 4.95 0.56 4.83 108,850 0.58 4.81
1996-ILA Service
units........... (0.0460) 1.00 4.69 0.81 4.59 123,483 0.83 4.57
1995-ILA units.. (0.0558) 1.00 5.73 0.41 5.51 711,209 0.43 5.49
1995-ILA Admin-
istration units. (0.0544) 1.00 5.57 0.56 5.37 92,643 0.58 5.35
1995-ILA Service
units........... (0.0518) 1.00 5.31 0.81 5.11 119,692 0.83 5.09
1994-ILA units.. (0.0377) 1.00 3.91 0.40 3.77 713,816 0.44 3.73
1994-ILA Admin-
istration units. (0.0368) 1.00 3.75 0.55 3.68 97,626 0.59 3.64
1994-ILA Service
units........... (0.0340) 1.00 3.49 0.80 3.40 108,972 0.84 3.35
1993-ILA units.. (0.0286) 1.00 2.89 0.40 2.79 969,565 0.43 2.76
1993-ILA Admin-
istration units. (0.0270) 1.00 2.74 0.55 2.64 121,327 0.58 2.61
1993-ILA Service
units........... (0.0246) 1.00 2.48 0.80 2.39 185,506 0.83 2.36
1992-ILA units.. (0.0362) 1.00 3.65 0.40 3.39 1,328,036 0.43 3.36
1992-ILA Admin-
istration units. (0.0343) 1.00 3.49 0.55 3.20 152,804 0.58 3.17
1992-ILA Service
units........... (0.0318) 1.00 3.23 0.80 2.94 183,208 0.83 2.91
1991-ILA units.. (0.0575) 1.00 5.90 0.40 5.57 1,709,321 0.43 5.54
1991-ILA Admin-
istration units. (0.0558) 1.00 5.74 0.55 5.40 146,795 0.58 5.37
1991-ILA Service
units........... (0.0533) 1.00 5.48 0.80 5.15 154,419 0.83 5.12
1990-ILA units.. (0.0774) 1.00 8.05 0.39 7.72 1,816,991 0.39 7.72
1990-ILA Admin-
istration
units (c)....... (0.0415) 1.00 7.67(b) 0.55(b) 7.42(b) 132,088 0.55(b) 7.42(b)
1990-ILA Service
units (c)....... (0.0421) 1.00 7.42(b) 0.80(b) 7.11(b) 148,323 0.80(b) 7.11(b)
1989-ILA units.. (0.0869) 1.00 9.06 0.40 8.64 1,769,974 0.40 8.64
1988-ILA units.. (0.0708) 1.00 7.30 0.40 7.04 1,657,215 0.40 7.04
1987-ILA units.. (0.0619) 1.00 6.32 0.40 6.17 1,693,767 0.40 6.17
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Administration and Service unit activity commenced during June and
July of 1990, respectively.
8
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Instruments Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0496 $0.0004 $0.0500 $(0.0500) $1.00 5.10% 0.21% 4.96%
1996-ILA Admin-
istration units. 1.00 0.0482 0.0004 0.0486 (0.0486) 1.00 4.95 0.36 4.82
1996-ILA Service
units........... 1.00 0.0456 0.0004 0.0460 (0.0460) 1.00 4.68 0.61 4.56
1995-ILA units.. 1.00 0.0550 0.0006 0.0556 (0.0556) 1.00 5.70 0.21 5.50
1995-ILA Admin-
istration units. 1.00 0.0534 0.0007 0.0541 (0.0540) 1.00 5.54 0.36 5.34
1995-ILA Service
units........... 1.00 0.0500 0.0005 0.0505 (0.0505) 1.00 5.28 0.61 5.00
1994-ILA units.. 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 4.01 0.20 3.96
1994-ILA Admin-
istration units. 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 3.85 0.35 3.97
1994-ILA Service
units........... 1.00 0.0371 0.0001 0.0372 (0.0372) 1.00 3.59 0.60 3.72
1993-ILA units.. 1.00 0.0288 0.0006 0.0294 (0.0294) 1.00 2.98 0.20 2.88
1993-ILA Admin-
istration units. 1.00 0.0273 0.0006 0.0279 (0.0279) 1.00 2.83 0.35 2.73
1993-ILA Service
units........... 1.00 0.0248 0.0006 0.0254 (0.0254) 1.00 2.57 0.60 2.48
1992-ILA units.. 1.00 0.0338 0.0012 0.0350 (0.0350) 1.00 3.54 0.18 3.38
1992-ILA Admin-
istration units. 1.00 0.0326 0.0012 0.0338 (0.0338) 1.00 3.38 0.33 3.26
1992-ILA Service
units........... 1.00 0.0275 0.0011 0.0286 (0.0286) 1.00 3.13 0.58 2.75
FOR THE PERIOD JANUARY 30, 1991 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1991-ILA units.. 1.00 0.0486 0.0013 0.0499 (0.0499) 1.00 5.75(b) 0.10(b) 5.28(b)
1991-ILA Admin-
istration
units (c)....... 1.00 0.0210 0.0010 0.0220 (0.0220) 1.00 5.21(b) 0.25(b) 4.77(b)
1991-ILA Service
units (c)....... 1.00 0.0473 0.0009 0.0482 (0.0482) 1.00 5.33(b) 0.50(b) 5.13(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $708,999 0.43% 4.74%
1996-ILA Admin-
istration units. 137,706 0.58 4.60
1996-ILA Service
units........... 383,901 0.83 4.34
1995-ILA units.. 586,294 0.44 5.27
1995-ILA Admin-
istration units. 68,713 0.59 5.11
1995-ILA Service
units........... 123,254 0.84 4.77
1994-ILA units.. 547,351 0.43 3.73
1994-ILA Admin-
istration units. 64,388 0.58 3.74
1994-ILA Service
units........... 74,451 0.83 3.49
1993-ILA units.. 456,411 0.44 2.64
1993-ILA Admin-
istration units. 26,553 0.59 2.49
1993-ILA Service
units........... 34,014 0.84 2.24
1992-ILA units.. 422,506 0.45 3.11
1992-ILA Admin-
istration units. 6,915 0.60 2.99
1992-ILA Service
units........... 29,522 0.85 2.48
FOR THE PERIOD JANUARY 30, 1991 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1991-ILA units.. 424,436 0.45(b) 4.93(b)
1991-ILA Admin-
istration
units (c)....... 17,649 0.60(b) 4.42(b)
1991-ILA Service
units (c)....... 9,430 0.85(b) 4.78(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during July and Jan-
uary of 1991, respectively.
9
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Federal Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0513 -- $0.0513 $(0.0513) $1.00 5.24% 0.26% 5.13%
1996-ILA Admin-
istration units. 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.09 0.41 4.98
1996-ILA Service
units........... 1.00 0.0473 -- 0.0473 (0.0473) 1.00 4.83 0.66 4.73
1995-ILA units.. 1.00 0.0569 -- 0.0569 (0.0569) 1.00 5.83 0.26 5.69
1995-ILA Admin-
istration units. 1.00 0.0550 -- 0.0550 (0.0550) 1.00 5.67 0.41 5.50
1995-ILA Service
units........... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.41 0.66 5.22
1994-ILA units.. 1.00 0.0407 -- 0.0407 (0.0407) 1.00 4.11 0.25 4.07
1994-ILA Admin-
istration units. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.95 0.40 3.88
1994-ILA Service
units........... 1.00 0.0392 -- 0.0392 (0.0392) 1.00 3.69 0.65 3.92
1993-ILA units.. 1.00 0.0296 -- 0.0296 (0.0296) 1.00 3.00 0.25 2.96
1993-ILA Admin-
istration units. 1.00 0.0281 -- 0.0281 (0.0281) 1.00 2.84 0.40 2.81
1993-ILA Service
units (c)....... 1.00 0.0157 -- 0.0157 (0.0157) 1.00 2.56(b) 0.65(b) 2.54(b)
1992-ILA units.. 1.00 0.0358 -- 0.0358 (0.0358) 1.00 3.61 0.25 3.58
1992-ILA Admin-
istration units. 1.00 0.0340 -- 0.0340 (0.0340) 1.00 3.46 0.40 3.40
1991-ILA units.. 1.00 0.0576 -- 0.0576 (0.0576) 1.00 5.94 0.25 5.76
1991-ILA Admin-
istration units. 1.00 0.0542 -- 0.0542 (0.0542) 1.00 5.78 0.40 5.42
1991-ILA Service
units (c)....... 1.00 0.0196 -- 0.0196 (0.0196) 1.00 5.55b) 0.65(b) 5.56(b)
1990-ILA units.. 1.00 0.0772 -- 0.0772 (0.0772) 1.00 8.06 0.25 7.72
1990-ILA Admin-
istration
units (d)....... 1.00 0.0205 -- 0.0205 (0.0205) 1.00 7.39(b) 0.40(b) 7.25(b)
FOR THE PERIOD MAY 22, 1989 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1989-ILA units.. 1.00 0.0516 -- 0.0516 (0.0516) 1.00 7.62(b) 0.19(b) 8.41(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $2,303,677 0.43% 4.96%
1996-ILA Admin-
istration units. 794,537 0.58 4.81
1996-ILA Service
units........... 192,416 0.83 4.56
1995-ILA units.. 1,731,935 0.42 5.53
1995-ILA Admin-
istration units. 516,917 0.57 5.34
1995-ILA Service
units........... 102,576 0.82 5.06
1994-ILA units.. 1,625,567 0.42 3.90
1994-ILA Admin-
istration units. 329,896 0.57 3.71
1994-ILA Service
units........... 15,539 0.82 3.75
1993-ILA units.. 1,430,292 0.42 2.79
1993-ILA Admin-
istration units. 362,401 0.57 2.64
1993-ILA Service
units (c)....... 1,425 0.82(b) 2.37(b)
1992-ILA units.. 1,600,989 0.42 3.41
1992-ILA Admin-
istration units. 312,792 0.57 3.23
1991-ILA units.. 1,656,232 0.42 5.59
1991-ILA Admin-
istration units. 291,810 0.57 5.25
1991-ILA Service
units (c)....... -- 0.82(b) 5.39(b)
1990-ILA units.. 1,368,765 0.40 7.57
1990-ILA Admin-
istration
units (d)....... 90,748 0.55(b) 7.10(b)
FOR THE PERIOD MAY 22, 1989 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1989-ILA units.. 455,230 0.40(b) 8.20(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Service unit activity commenced during April of 1991; no shares were
outstanding during the period from August 7, 1991 through May 15, 1993.
(d)ILA Administration unit activity commenced during September of 1990.
10
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt Diversified Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN (LOSS) ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0320 $ -- $0.0320 $(0.0320) $1.00 3.25% 0.31% 3.20%
1996-ILA Admin-
istration units. 1.00 0.0306 -- 0.0306 (0.0306) 1.00 3.09 0.46 3.06
1996-ILA Service
units........... 1.00 0.0279 -- 0.0279 (0.0279) 1.00 2.84 0.71 2.79
1995-ILA units.. 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.72 0.31 3.65
1995-ILA Admin-
istration units. 1.00 0.0351 -- 0.0351 (0.0352) 1.00 3.57 0.46 3.51
1995-ILA Service
units........... 1.00 0.0324 -- 0.0324 (0.0325) 1.00 3.31 0.71 3.24
1994-ILA units.. 1.00 0.0264 -- 0.0264 (0.0264) 1.00 2.71 0.30 2.64
1994-ILA Admin-
istration units. 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.55 0.45 2.50
1994-ILA Service
units........... 1.00 0.0220 -- 0.0220 (0.0220) 1.00 2.30 0.70 2.20
1993-ILA units.. 1.00 0.0222 -- 0.0222 (0.0222) 1.00 2.25 0.30 2.22
1993-ILA Admin-
istration units. 1.00 0.0207 -- 0.0207 (0.0207) 1.00 2.09 0.45 2.08
1993-ILA Service
units........... 1.00 0.0183 -- 0.0183 (0.0183) 1.00 1.84 0.70 1.83
1992-ILA units.. 1.00 0.0277 -- 0.0277 (0.0277) 1.00 2.82 0.30 2.77
1992-ILA Admin-
istration units. 1.00 0.0266 -- 0.0266 (0.0266) 1.00 2.67 0.45 2.66
1992-ILA Service
units........... 1.00 0.0243 -- 0.0243 (0.0243) 1.00 2.41 0.70 2.43
1991-ILA units.. 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.33 0.32 4.24
1991-ILA Admin-
istration units. 1.00 0.0406 -- 0.0406 (0.0406) 1.00 4.17 0.47 4.06
1991-ILA Service
units........... 1.00 0.0386 -- 0.0386 (0.0386) 1.00 3.91 0.72 3.86
1990-ILA units.. 1.00 0.0550 (0.0001) 0.0549 (0.0549) 1.00 5.64 0.40 5.50
1990-ILA Admin-
istration
units (c)....... 1.00 0.0301 -- 0.0301 (0.0300) 1.00 5.43(b) 0.55(b) 5.40(b)
1990-ILA Service
units (c)....... 1.00 0.0259 -- 0.0259 (0.0259) 1.00 5.17(b) 0.80(b) 5.16(b)
1989-ILA units.. 1.00 0.0591 (0.0001) 0.0590 (0.0590) 1.00 6.07 0.40 5.91
1988-ILA units.. 1.00 0.0487 0.0003 0.0490 (0.0490) 1.00 5.03 0.40 4.87
1987-ILA units.. 1.00 0.0413 (0.0003) 0.0410 (0.0410) 1.00 4.23 0.40 4.13
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1,514,443 0.41% 3.10%
1996-ILA Admin-
istration units. 59,097 0.56 2.96
1996-ILA Service
units........... 28,921 0.81 2.69
1995-ILA units.. 1,342,585 0.42 3.54
1995-ILA Admin-
istration units. 48,773 0.57 3.40
1995-ILA Service
units........... 49,647 0.82 3.13
1994-ILA units.. 1,434,965 0.41 2.53
1994-ILA Admin-
istration units. 97,778 0.56 2.39
1994-ILA Service
units........... 36,492 0.81 2.09
1993-ILA units.. 1,769,477 0.41 2.11
1993-ILA Admin-
istration units. 99,896 0.56 1.97
1993-ILA Service
units........... 45,172 0.81 1.72
1992-ILA units.. 1,333,925 0.42 2.65
1992-ILA Admin-
istration units. 50,225 0.57 2.54
1992-ILA Service
units........... 29,534 0.82 2.31
1991-ILA units.. 1,044,986 0.42 4.14
1991-ILA Admin-
istration units. 37,567 0.57 3.96
1991-ILA Service
units........... 52,399 0.82 3.76
1990-ILA units.. 603,895 0.40 5.50
1990-ILA Admin-
istration
units (c)....... 42,498 0.55(b) 5.40(b)
1990-ILA Service
units (c)....... 56,810 0.80(b) 5.16(b)
1989-ILA units.. 688,556 0.40 5.91
1988-ILA units.. 907,782 0.40 4.87
1987-ILA units.. 965,714 0.40 4.13
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
11
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt California Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET LOSS ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units.. $1.00 $0.0299 -- $0.0299 $(0.0299) $1.00 3.03% 0.41% 2.99%
1996-ILA Admin-
istration units. 1.00 0.0284 -- 0.0284 (0.0284) 1.00 2.88 0.56 2.84
1995-ILA units.. 1.00 0.0349 -- 0.0349 (0.0350) 1.00 3.55 0.41 3.49
1995-ILA Admin-
istration units. 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.40 0.56 3.32
1994-ILA units.. 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.53 0.40 2.50
1994-ILA Admin-
istration units. 1.00 0.0233 -- 0.0233 (0.0233) 1.00 2.37 0.55 2.33
1993-ILA units.. 1.00 0.0206 -- 0.0206 (0.0206) 1.00 2.09 0.40 2.06
1993-ILA Admin-
istration units. 1.00 0.0191 -- 0.0191 (0.0191) 1.00 1.93 0.55 1.91
1993-ILA Service
units........... 1.00 0.0166 -- 0.0166 (0.0166) 1.00 1.68 0.76 1.66
1992-ILA units.. 1.00 0.0256 (0.0001) 0.0255 (0.0256) 1.00 2.62 0.40 2.56
1992-ILA Admin-
istration units. 1.00 0.0235 (0.0002) 0.0233 (0.0235) 1.00 2.47 0.55 2.35
1992-ILA Service
units........... 1.00 0.0081 -- 0.0081 (0.0081) 1.00 1.99(b) 0.80(b) 2.03(b)
1991-ILA units.. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.92 0.40 3.88
1991-ILA Admin-
istration units
units........... 1.00 0.0376 -- 0.0376 (0.0376) 1.00 3.80 0.55 3.76
1990-ILA units.. 1.00 0.0511 (0.0001) 0.0510 (0.0511) 1.00 5.24 0.40 5.11
1990-ILA Admin-
istration
units (c)....... 1.00 0.0042 -- 0.0042 (0.0042) 1.00 5.14(b) 0.55(b) 5.33(b)
1989-ILA units.. 1.00 0.0573 (0.0001) 0.0572 (0.0572) 1.00 5.93 0.40 5.73
<CAPTION>
FOR THE PERIOD OCTOBER 3, 1988 (COMMENCEMENT OF
OPERATIONS) THROUGH DECEMBER 31,
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988-ILA units.. 1.00 0.0139 -- 0.0139 (0.0139) 1.00 5.81(b) 0.24(b) 5.74(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C>
1996-ILA units.. $440,476 0.42% 2.98%
1996-ILA Admin-
istration units. 142 0.57 2.83
1995-ILA units.. 346,728 0.41 3.49
1995-ILA Admin-
istration units. 61 0.56 3.32
1994-ILA units.. 227,399 0.41 2.49
1994-ILA Admin-
istration units. 790 0.56 2.32
1993-ILA units.. 229,839 0.44 2.02
1993-ILA Admin-
istration units. 1,425 0.59 1.87
1993-ILA Service
units........... -- 0.84 1.54
1992-ILA units.. 161,868 0.47 2.49
1992-ILA Admin-
istration units. 31 0.62 2.28
1992-ILA Service
units........... 3 0.87(b) 1.96(b)
1991-ILA units.. 102,494 0.47 3.81
1991-ILA Admin-
istration units
units........... 13 0.62 3.69
1990-ILA units.. 106,972 0.40 5.11
1990-ILA Admin-
istration
units (c)....... 68 0.55(b) 5.33(b)
1989-ILA units.. 112,463 0.40 5.73
<CAPTION>
FOR THE PERIOD OCTOBER 3, 1988 (COMMENCEMENT OF
OPERATIONS) THROUGH DECEMBER 31,
- -----------------------------------------------
<S> <C> <C> <C>
1988-ILA units.. 41,028 0.38(b) 5.60(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during December of
1990 and August of 1992, respectively. No service shares were outstanding for
the years ended December 31, 1996, 1995, 1994.
12
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt New York Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET
NET ASSET REALIZED TOTAL
VALUE AT NET LOSS ON INCOME FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C>
1996-ILA units.. $1.00 $0.0301 -- $0.0301
1996-ILA Admin-
istration units. 1.00 0.0288 -- 0.0288
1995-ILA units.. 1.00 0.0344 -- 0.0344
1995-ILA Admin-
istration units. 1.00 0.0328 -- 0.0328
1994-ILA units.. 1.00 0.0262 -- 0.0262
1994-ILA Admin-
istration units. 1.00 0.0247 -- 0.0247
1993-ILA units.. 1.00 0.0221 -- 0.0221
1993-ILA Admin-
istration units. 1.00 0.0205 -- 0.0205
1992-ILA units.. 1.00 0.0265 -- 0.0265
1992-ILA Admin-
istration units. 1.00 0.0253 -- 0.0253
FOR THE PERIOD FEBRUARY 15, 1991 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- -------------------------------------------------------------
1991-ILA units.. 1.00 0.0347 (0.0002) 0.0345
1991-ILA Admin-
istration
<CAPTION>units (c)....... 1.00 0.0330 -- 0.0330
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
RATIO OF NET NET RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INVESTMENT
VALUE AT EXPENSES TO INCOME TO END OF EXPENSES TO INCOME TO
DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units.. $(0.0301) $1.00 3.05% 0.32% 3.01% $70,175 0.43% 2.90%
1996-ILA Admin-
istration units. (0.0288) 1.00 2.90 0.47 2.88 44,319 0.58 2.77
1995-ILA units.. (0.0344) 1.00 3.51 0.30 3.44 90,537 0.44 3.30
1995-ILA Admin-
istration units. (0.0328) 1.00 3.35 0.45 3.28 26,724 0.59 3.14
1994-ILA units.. (0.0262) 1.00 2.56 0.24 2.62 84,517 0.47 2.39
1994-ILA Admin-
istration units. (0.0247) 1.00 2.41 0.39 2.47 38,970 0.62 2.24
1993-ILA units.. (0.0221) 1.00 2.21 0.10 2.21 48,367 0.51 1.80
1993-ILA Admin-
istration units. (0.0205) 1.00 2.05 0.25 2.05 20,306 0.66 1.64
1992-ILA units.. (0.0265) 1.00 2.71 0.10 2.65 16,844 0.57 2.18
1992-ILA Admin-
istration units. (0.0253) 1.00 2.55 0.25 2.53 14,641 0.72 2.06
FOR THE PERIOD FEBRUARY 15, 1991 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- -------------------------------------------------------------
1991-ILA units.. (0.0347) 1.00 4.02(b) 0.10(b) 3.96(b) 11,070 0.76(b) 3.30(b)
1991-ILA Admin-
istration
units (c)....... (0.0330) 1.00 3.87(b) 0.25(b) 3.90(b) 19,198 0.91(b) 3.24(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c)ILA Administration unit activity commenced during February of 1991.
13
<PAGE>
AN INTRODUCTION TO THE PORTFOLIOS
THE TRUST: The Trust is a no-load, open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "Invest-
ment Company Act"). Each Portfolio is a separate pool of assets which pursues
its investment objective through separate investment policies, as described
below.
THE ADVISER: Goldman Sachs Asset Management, a separate operating division
of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Portfolios' invest-
ment adviser (the "Adviser" or "GSAM").
THE DISTRIBUTOR: Goldman Sachs, which serves as the Portfolios' distributor
and transfer agent, is one of the largest international investment banking and
brokerage firms in the United States.
THE INVESTORS: The Portfolios are designed for investors seeking a high rate
of return, a stable net asset value and convenient liquidation privileges. The
Portfolios are particularly suitable for banks, corporations and other finan-
cial institutions that seek investment of short-term funds for their own ac-
counts or for the accounts of their customers.
THE PORTFOLIOS: Each Portfolio's securities are valued by the amortized cost
method as permitted by a rule ("Rule 2a-7") of the Securities and Exchange
Commission ("SEC"). Under such rule, each Portfolio may invest only in securi-
ties that are determined to present minimal credit risk and meet certain other
criteria.
TAXABLE PORTFOLIOS: Prime Obligations, Money Market, Treasury Obligations
and Government Portfolios.
TAX-ADVANTAGED PORTFOLIOS: Treasury Instruments and Federal Portfolios.
INVESTMENT OBJECTIVES AND POLICIES FOR TAXABLE AND TAX-ADVANTAGED
PORTFOLIOS: To seek to maximize current income to the extent consistent
with the preservation of capital and the maintenance of liquidity by in-
vesting exclusively in high quality money market instruments. The Treasury
Instruments and Federal Portfolios pursue their objectives by limiting
their investments to certain U.S. Treasury Obligations and U.S. Government
Securities (each as defined herein), respectively, the interest from which
is generally exempt from state income taxation. Each investor should con-
sult his or her tax adviser to determine whether distributions from the
Treasury Instruments and Federal Portfolios (and any other Portfolio that
may hold such obligations) derived from interest on such obligations are
exempt from state income taxation in the investor's own state.
TAX-EXEMPT PORTFOLIOS: Tax-Exempt Diversified, Tax-Exempt California and
Tax-Exempt New York Portfolios.
INVESTMENT OBJECTIVES AND POLICIES FOR TAX-EXEMPT PORTFOLIOS: To seek to
provide unitholders, to the extent consistent with the preservation of cap-
ital and prescribed portfolio standards, with a high level of income exempt
from federal income tax by investing primarily in Municipal Instruments, as
defined herein. In addition, the Tax-Exempt California and Tax-Exempt New
York Portfolios seek to provide unitholders with income exempt from Cali-
fornia state and New York state and city personal income taxes, respective-
ly.
NET ASSET VALUE: Each Portfolio seeks to maintain a stable net asset value
of $1.00 per unit.
MAXIMUM REMAINING MATURITY OF PORTFOLIO INVESTMENTS: Thirteen months at the
time of purchase.
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
FIRST TIER SECURITIES: Each Portfolio may purchase securities which are
rated (or that have been issued by an issuer that is rated with respect to a
class of short-term debt obligations, or any security within that class,
14
<PAGE>
comparable in priority and quality with such securities) in the highest short-
term rating category by at least two NRSROs (as defined below), or if only one
NRSRO has assigned a rating, by that NRSRO. U.S. Government Securities as de-
fined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Portfolios may purchase securities
which are not First Tier Securities but which are rated in the top two short-
term rating categories by at least two NRSROs, or if only one NRSRO has as-
signed a rating, by that NRSRO. The Taxable Portfolios will not invest in a
security which is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, unrated securities
may be purchased if they are deemed to be of comparable quality to First Tier
Securities, or to the extent that a Portfolio may purchase Second Tier Securi-
ties, comparable in quality to Second Tier Securities.
NRSROS: Nationally Recognized Statistical Rating Organizations include Stan-
dard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Lim-
ited and its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a descrip-
tion of each NRSRO's rating categories, see Appendix A to the Statement of Ad-
ditional Information.
15
<PAGE>
INVESTMENT POLICIES MATRIX
<TABLE>
<CAPTION>
SHORT-TERM
OBLIGATIONS OF ASSET-BACKED &
US US CORPORATIONS RECEIVABLES-
TREASURY GOVERNMENT BANK COMMERCIAL AND OTHER REPURCHASE BACKED
PORTFOLIO OBLIGATIONS SECURITIES OBLIGATIONS PAPER ENTITIES AGREEMENTS SECURITIES+
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Prime
Obligations [_] [_] [_] [_] [_] [_] [_]
U.S. Banks Only U.S. entities only
- ------------------------------------------------------------------------------------------------------------------------------
Money Market
[_] [_] [_] [_] [_] [_] [_]
Over 25% of total US and US and Foreign
assets must be Foreign (US$) (US$) Entities
invested in US Commercial Paper
and Foreign
(US$) Banks
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Obligations [_] [_]
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Instruments [_]
- -------------------------------------------------------------------------------------------------------------------------------
Government [_] [_] [_]
- -------------------------------------------------------------------------------------------------------------------------------
Federal [_] [_]
(Does not intend
to invest)
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
Diversified [_]
Tax-exempt only
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
California [_]
Tax-exempt only
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt New
York [_]
Tax-exempt only
<CAPTION>
FOREIGN
GOVERNMENT
OBLIGATIONS
PORTFOLIO (US$)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Prime
Obligations
- -------------------------------------------------------------------------------------------------------------------------------
Money Market
[_]
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Obligations
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Instruments
- -------------------------------------------------------------------------------------------------------------------------------
Government
- -------------------------------------------------------------------------------------------------------------------------------
Federal
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
Diversified
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
California
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt New
York
</TABLE>
Note: See "Description of Securities and Investment Techniques" for a de-
scription of, and certain criteria applicable to, each of these categories
of investments.
+ To the extent required by Rule 2a-7, asset-backed and receivables-backed
securities will be rated by the requisite number of NRSROs.
16
<PAGE>
<TABLE>
<CAPTION>
SUMMARY
OF
TAXABLE TAX-EXEMPT CREDIT INVESTMENT UNRATED TAXATION FOR
MUNICIPALS MUNICIPALS QUALITY**** COMPANIES SECURITIES DISTRIBUTIONS* MISCELLANEOUS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[_] [_] [_]
First Up to 10% of Taxable federal
Tier total assets and state**
in other
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
First Up to 10% Taxable federal May invest in
Tier of total and state** obligations of
assets in the
other International
investment Bank for
companies Reconstruction
and Development
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal
Tier of total and state**
assets in
other
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal
Tier of total and generally
assets in exempt from
other state taxation
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal
Tier of total and state**
assets in
other
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal Under
Tier of total and generally extraordinary
assets in exempt from circumstances,
other state taxation may hold cash,
investment U.S. Government
companies Securities
subject to
state taxation
or cash
equivalents
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
At least 80% of net assets First or Up to 10% Tax-exempt May (but does
in Municipal Instruments Second of total federal and not currently
(except in extraordinary Tier assets in taxable intend to)
circumstances) other state*** invest up to
investment 20% in AMT
companies securities and
may temporarily
invest in the
taxable money
market
instruments
described
herein
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
First or Up to 10% Tax-exempt May (but does
At least 80% of net assets Second of total federal and not currently
in Municipal Instruments and Tier assets in California intend to)
at least 65% of its total other State invest up to
assets must be invested in investment 20% in AMT
California Instruments companies securities and
(except in extraordinary may temporarily
circumstances) invest in the
taxable money
market
instruments
described
herein
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
At least 80% of net assets First or Up to 10% Tax-exempt May invest up
in Municipal Instruments and Second of total federal, New to 20% in AMT
at least 65% of its total Tier assets in York State and securities and
assets must be invested in other New York City may temporarily
New York Instruments (except investment invest in the
in companies taxable money
extraordinary circumstances) market
instruments
described
herein
</TABLE>
* See "Taxes" below for an explanation of the tax consequences summarized in
the table above.
** Taxable in many states except for distributions from U.S. Treasury obliga-
tion interest income and certain U.S. Government securities interest in-
come.
*** Taxable except for distributions from interest on obligations of an in-
vestor's state of residence in certain states.
**** To the extent permitted by Rule 2a-7, a Portfolio holding a security fully
supported by a guarantee may substitute the credit quality of the guaran-
tee in determining the credit quality of the security.
17
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. TREASURY OBLIGATIONS
"U.S. Treasury Obligations" are securities issued or guaranteed by the U.S.
Treasury, payments of principal and interest on which are backed by the full
faith and credit of the U.S. Government.
U.S. GOVERNMENT SECURITIES
"U.S. Government Securities" are obligations issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities. Unlike U.S.
Treasury Obligations, securities issued or guaranteed by U.S. Government agen-
cies, authorities or instrumentalities are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Government
National Mortgage Association), (b) the right of the issuer to borrow from the
Treasury (such as securities of the Student Loan Marketing Association), (c)
the discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation), or (d) only the credit of the
issuer. No assurance can be given that the U.S. Government will provide finan-
cial support to U.S. Government agencies, authorities or instrumentalities in
the future. U.S. Government Securities may include zero coupon bonds. Such
bonds may be purchased when yields are attractive.
Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are deemed to include (a) secu-
rities for which the payment of principal and interest is backed by an irrevo-
cable letter of credit issued by the U.S. Government, its agencies, authori-
ties or instrumentalities and (b) participations in loans made to foreign gov-
ernments or their agencies that are so guaranteed. The secondary market for
certain of these participations is limited. Such participations may therefore
be regarded as illiquid.
Each Portfolio may also invest in separately traded principal and interest
components of securities guaranteed or issued by the U.S. Treasury if such
components are traded independently under the Separate Trading of Registered
Interest and Principal of Securities program ("STRIPS").
The Treasury Instruments and Federal Portfolios invest in U.S. Treasury Ob-
ligations and the Federal Portfolio may also invest in certain U.S. Government
Securities the interest from which is generally exempt from state income taxa-
tion. Securities generally eligible for this exemption include those issued by
the U.S. Treasury and those issued by certain agencies, authorities or instru-
mentalities of the U.S. Government, including the Federal Home Loan Banks,
Federal Farm Credit Banks, Tennessee Valley Authority and the Student Loan
Marketing Association.
CUSTODIAL RECEIPTS
Each Portfolio (other than the Treasury Obligations, Treasury Instruments,
Government and Federal Portfolios) may also acquire securities issued or guar-
anteed as to principal and interest by the U.S. Government, its agencies, au-
thorities or instrumentalities in the form of custodial receipts that evidence
ownership of future
18
<PAGE>
interest payments, principal payments or both on certain notes or bonds issued
by the U.S. Government, its agencies, authorities or instrumentalities. For
certain securities law purposes, custodial receipts are not considered obliga-
tions of the U.S. Government.
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations and Money Market Portfolios may invest in "U.S. Bank
Obligations" limited to securities issued or guaranteed by U.S. banks (includ-
ing certificates of deposit, commercial paper, unsecured bank promissory notes
and bankers' acceptances) which have more than $1 billion in total assets at
the time of purchase. Such obligations may also include debt obligations is-
sued by U.S. subsidiaries of such banks.
The Money Market Portfolio may also invest in "Foreign Bank Obligations"
limited to U.S. dollar denominated obligations issued or guaranteed (including
fixed time deposits) by foreign banks which have more than $1 billion in total
assets at the time of purchase, U.S. branches of such foreign banks (Yankee
obligations), foreign branches of such foreign banks and foreign branches of
U.S. banks having more than $1 billion in total assets at the time of pur-
chase. Such bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligation
or by government regulation.
The Money Market Portfolio will invest more than 25% of its total assets in
bank obligations (whether foreign or domestic), including bank commercial pa-
per. However, if adverse economic conditions prevail in the banking industry
(such as substantial losses on loans, increases in non-performing assets and
charge-offs and declines in total deposits) the Portfolio may, for defensive
purposes, temporarily invest less than 25% of its total assets in bank obliga-
tions. As a result, the Portfolio may be especially affected by favorable and
adverse developments in or related to the banking industry. The activities of
U.S. banks and most foreign banks are subject to comprehensive regulations
which, in the case of U.S. regulations, have undergone substantial changes in
the past decade. The enactment of new legislation or regulations, as well as
changes in interpretation and enforcement of current laws, may affect the man-
ner of operations and profitability of domestic and foreign banks. Significant
developments in the U.S. banking industry have included deregulation of inter-
est rates, increased competition from other types of financial institutions,
increased acquisition activity, geographic expansion and, during the late
1980's, an increased number of bank failures. Banks may be particularly sus-
ceptible to certain economic factors, such as interest rate changes and ad-
verse developments in the market for real estate. Fiscal and monetary policy
and general economic cycles can affect the availability and cost of funds,
loan demand and asset quality and thereby impact the earnings and financial
conditions of banks. See "Foreign Government Obligations--Foreign Risks" be-
low.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations and Money Market Portfolios may invest in "Commercial
Paper" (including variable amount master demand notes and asset-backed commer-
cial paper) which is payable in U.S. dollars and is issued or guaranteed by
U.S. corporations, U.S. commercial banks, foreign corporations (Money Market
Portfolio only), foreign commercial banks (Money Market Portfolio only) or
other entities. In addition, the Portfolios may invest in other short-term ob-
ligations (including short-term funding agreements) payable in U.S. dollars
and issued or guaranteed by U.S. corporations, foreign corporations (Money
Market Portfolio only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations and Money Market Portfolios may invest in "Asset-
Backed and Receivables-Backed Securities" which represent participations in,
or are secured by and payable from, pools of assets such as motor
19
<PAGE>
vehicle installment sale contracts, installment loan contracts, leases of
various types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. Such asset pools
are securitized through the use of privately-formed trusts or special purpose
corporations. Payments or distributions of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution, or other
credit enhancements may be present. To the extent consistent with its
investment objectives and policies, each of the Prime Obligations and Money
Market Portfolios may invest in new types of mortgage-related securities and
in other asset-backed securities that may be developed in the future.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market Portfolio may invest in U.S. dollar-denominated obligations
(limited to commercial paper and other notes) issued or guaranteed by a for-
eign government or entity located or organized in a foreign country that main-
tains a short-term foreign currency rating in the highest short-term ratings
category by the requisite number of NRSROs. The Money Market Portfolio may not
invest more than 25% of its total assets in the securities of any one foreign
government.
FOREIGN RISKS. Investments in foreign securities and bank obligations may
present a greater degree of risk than investments in securities of domestic
issuers because of less publicly-available financial and other information,
less securities regulation, potential imposition of foreign withholding and
other taxes, war, expropriation or other adverse governmental actions. Foreign
banks and their foreign branches are not regulated by U.S. banking authori-
ties, and generally are not bound by the accounting, auditing and financial
reporting standards applicable to U.S. banks.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS: Obligations issued by or on behalf of states, terri-
tories and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia, the
interest from which is, in the opinion of bond counsel, if any, excluded from
gross income for federal income tax purposes.
CALIFORNIA INSTRUMENTS: Obligations issued by or on behalf of the State of
California and its political subdivisions, agencies and instrumentalities and
the governments of Puerto Rico, the U.S. Virgin Islands and Guam, the interest
from which is excluded from gross income for federal income tax purposes and
is exempt from California state personal income tax.
NEW YORK INSTRUMENTS: Obligations issued by or on behalf of the State of New
York and its political subdivisions, agencies and instrumentalities and the
governments of Puerto Rico, the U.S. Virgin Islands and Guam, the interest
from which is excluded from gross income for federal income tax purposes and
is exempt from New York state and New York city personal income tax.
20
<PAGE>
TYPES OF MUNICIPAL, CALIFORNIA AND NEW YORK INSTRUMENTS:
<TABLE>
<CAPTION>
TAX- TAX-
EXEMPT DIVERSIFIED EXEMPT CALIFORNIA TAX-EXEMPT NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED RATE NOTES AND In highest short- In one of the two In one of the two
SIMILAR DEBT term or one of the highest short-term highest short-term
INSTRUMENTS two highest long- or long-term rating or long-term rating
term rating categories categories
categories
- --------------------------------------------------------------------------------------
VARIABLE AND In highest short- In one of the two In one of the two
FLOATING RATE DEMAND term or one of the highest short-term highest short-term
INSTRUMENTS two highest long- or long-term rating or long-term rating
term rating categories categories
categories
- --------------------------------------------------------------------------------------
TAX-EXEMPT In highest rating In one of the two In one of the two
COMMERCIAL PAPER category highest rating highest rating
categories categories
- --------------------------------------------------------------------------------------
MUNICIPAL BONDS In one of the two In one of the two In one of the two
highest rating highest rating highest rating
categories categories categories
- --------------------------------------------------------------------------------------
UNRATED NOTES, Determined to be of Determined to be of Determined to be of
PAPER, BONDS AND comparable quality comparable quality comparable quality
OTHER INSTRUMENTS by Adviser pursuant by Adviser pursuant by Adviser pursuant
to criteria approved to criteria approved to criteria approved
by the Trustees by the Trustees by the Trustees
</TABLE>
As a matter of fundamental policy, at least 80% of each of the Tax-Exempt
Diversified, Tax-Exempt California and Tax-Exempt New York Portfolio's net as-
sets will ordinarily be invested in Municipal Instruments, except in extraor-
dinary circumstances. In addition, as a matter of fundamental policy, at least
65% of each of the Tax-Exempt California and Tax-Exempt New York Portfolio's
total assets will be invested in California and New York Instruments, respec-
tively, except in extraordinary circumstances. Each Tax-Exempt Portfolio may
temporarily invest in taxable money market instruments or, in the case of the
Tax-Exempt California and New York Portfolios, in Municipal Instruments that
are not California or New York Instruments, respectively, when acceptable Cal-
ifornia and New York Instruments are not available or when the Adviser be-
lieves that the market conditions dictate a defensive posture. Investments in
taxable money market instruments will be limited to those meeting the quality
standards of each Tax-Exempt Portfolio. The Tax-Exempt California and Tax-Ex-
empt New York Portfolios' distributions of interest from Municipal Instruments
other than California and New York Instruments, respectively, may be subject
to California and New York state and New York city personal income taxes, re-
spectively.
The Prime Obligations and Money Market Portfolios may invest in short-term
obligations issued or guaranteed by state and municipal governments when
yields on such securities are attractive compared to other taxable invest-
ments.
MUNICIPAL NOTES AND BONDS. Municipal notes include tax anticipation notes
("TANs"), revenue anticipation notes ("RANs"), bond anticipation notes
("BANs"), tax and revenue anticipation notes ("TRANs") and construction loan
notes. Municipal bonds include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing munici-
pality and are considered the safest type of bonds. Revenue bonds are backed
by the revenues of a project or facility such as the tolls from a toll bridge.
Revenue bonds also include lease rental revenue bonds which are issued by a
state or local authority for capital projects and are secured by annual lease
payments from the state or locality sufficient to cover debt service on the
authority's obligations. Industrial development bonds (generally referred to
under current tax law as "private activity bonds") are a specific type of rev-
enue bond backed by the credit and security of a private user and
21
<PAGE>
therefore have more potential risk. Municipal bonds may be issued in a variety
of forms, including commercial paper, tender option bonds and variable and
floating rate securities.
TENDER OPTION BONDS. A tender option bond is a Municipal Instrument (gener-
ally held pursuant to a custodial arrangement) having a relatively long matu-
rity 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 finan-
cial institution, pursuant to which such institution grants the security
holder the option, at periodic intervals, to tender its securities to the in-
stitution and receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees equal to the dif-
ference between the bond's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the 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 pre-
vailing short-term, tax-exempt rate. However, an institution will not be obli-
gated to accept tendered bonds in the event of certain defaults or a signifi-
cant downgrading in the credit rating assigned to the issuer of the bond. The
tender option will be taken into account in determining the maturity of the
tender option bonds and a Portfolio's average portfolio maturity. There is a
risk that a Portfolio will not be considered the owner of a tender option bond
for federal income tax purposes and thus will not be entitled to treat such
interest as exempt from federal income tax.
REVENUE ANTICIPATION WARRANTS. Revenue Anticipation Warrants ("RAWs") are
issued in anticipation of the issuer's receipt of revenues and present the
risk that such revenues will be insufficient to satisfy the issuer's payment
obligations. The entire amount of principal and interest on RAWs is due at
maturity. RAWs, including those with a maturity of more than 397 days, may
also be repackaged as instruments which include a demand feature that permits
the holder to sell the RAWs to a bank or other financial institution at a
purchase price equal to par plus accrued interest on each interest rate reset
date.
FLOATING AND VARIABLE RATE OBLIGATIONS. The value of floating and variable
rate obligations generally is more stable than that of fixed rate obligations
in response to changes in interest rate levels. Variable and floating rate ob-
ligations usually have demand features that permit the Portfolios to sell them
at par value plus accrued interest upon short notice. The issuers or financial
intermediaries providing demand features may support their ability to purchase
the obligations by obtaining credit with liquidity supports. These may include
lines of credit, which are conditional commitments to lend and letters of
credit, which will ordinarily be irrevocable, both of which may be issued by
domestic banks or foreign banks which have a branch, agency or subsidiary in
the United States. When considering whether an obligation meets a Portfolio's
quality standards, the Portfolio will, to the extent permitted by Rule 2a-7,
look to the creditworthiness of the party providing unconditional demand fea-
tures or other unconditional obligations to support the credit of the issuer
of the security. A Portfolio may consider the maturity of a variable or float-
ing rate Municipal Instrument to be shorter than its ultimate stated maturity
if the Portfolio has the right to demand prepayment of its principal at speci-
fied intervals prior to the security's ultimate stated maturity, subject to
the conditions for using amortized cost valuation under the Investment Company
Act. A Portfolio may purchase such variable or floating rate obligations from
the issuers or may purchase certificates of participation, a type of floating
or variable rate obligation, which are interests in a pool of debt obligations
held by a bank or other financial institution.
INDUSTRIAL DEVELOPMENT BONDS. The Portfolios (other than the Treasury Obli-
gations, Treasury Instruments, Government and Federal Portfolios) may invest
in industrial development bonds (generally referred to under current tax law
as "private activity bonds"), the interest from which would be an item of tax
preference when distributed as "exempt-interest dividends" to unitholders un-
der the federal alternative minimum tax. See
22
<PAGE>
"Taxes" and "Distributions." The Tax-Exempt New York Portfolio may invest up
to 20% of its net assets in private activity bonds. The Tax-Exempt Diversified
and Tax-Exempt California Portfolios do not currently intend to invest in such
bonds. If such policy should change in the future, unitholders would be noti-
fied and such investments would not exceed 20% of each Portfolio's net assets.
OTHER POLICIES. Ordinarily, the Tax-Exempt Portfolios expect that 100% of
their portfolio securities will be Municipal Instruments. However, the Portfo-
lios may hold cash or invest in short-term taxable securities as set forth
above. Such Portfolios may invest 25% or more of the value of their respective
total assets in Municipal Instruments which are related in such a way that an
economic, business or political development or change affecting one Municipal
Instrument would also affect the other Municipal Instruments. For example, the
Tax-Exempt Portfolios may invest all of their respective assets in (a) Munici-
pal Instruments the interest on which is paid solely from revenues from simi-
lar projects such as hospitals, electric utility systems, multi-family hous-
ing, nursing homes, commercial facilities (including hotels), steel companies
or life care facilities, (b) Municipal Instruments whose issuers are in the
same state (including, in the case of the Tax-Exempt California and Tax-Exempt
New York Portfolios, issuers in states other than California and New York, re-
spectively), or (c) industrial development obligations. Concentration of a
Portfolio's investments in these Municipal Instruments will subject the Port-
folio, to a greater extent than if such investment was more limited, to the
risks of adverse economic, business or political developments affecting any
such state, industry or other area of concentration.
Each Portfolio (other than the Treasury Obligations, Treasury Instruments,
Government and Federal Portfolios) may purchase Municipal Instruments which
are backed by letters of credit, which will ordinarily be irrevocable, issued
by domestic banks or foreign banks (excluding Prime Obligations Portfolio)
which have a branch, agency or subsidiary in the United States. In addition,
these Portfolios may acquire securities in the form of custodial receipts
which evidence ownership of future interest payments, principal payments or
both on obligations of certain state and local governments and authorities.
In order to enhance the liquidity, stability, or quality of a Municipal In-
strument, each Portfolio (other than the Treasury Obligations, Treasury In-
struments, Government and Federal Portfolios) may acquire the right to sell
the security to another party at a guaranteed price and date.
INVESTING IN CALIFORNIA AND NEW YORK
The Tax-Exempt California and Tax-Exempt New York Portfolios concentrate
their investments in California and New York Instruments, respectively. Conse-
quently, such Portfolios are more susceptible to factors adversely affecting
issuers of California and New York Instruments, respectively, and may be risk-
ier than comparable municipal bond funds and money market funds that do not
emphasize these issuers to this degree.
The Tax-Exempt California Portfolio's investments can be affected by politi-
cal and economic developments within the State of California (the "State'),
and by the financial condition of the State, its public authorities and polit-
ical subdivisions. After suffering a severe recession in the early 1990's
which caused the State to experience financial difficulties, California's
economy entered a sustained recovery since late 1993 and the State's budget
has returned to a positive balance. California's long-term credit rating has
been raised after being reduced during the recession. To respond to its own
revenue shortfalls during the recession, the State reduced assistance to its
public authorities and political subdivisions. Cutbacks in state aid could
further adversely affect the financial condition of cities, counties and edu-
cation districts which are subject to their own fiscal constraints. California
voters in the past have passed amendments to the California Constitution and
other measures that limit the taxing and spending authority of California gov-
ernmental entities and future voter initiatives could result in adverse
23
<PAGE>
consequences affecting California Instruments. Also, the ultimate fiscal ef-
fect of federally-mandated reform of welfare programs on the State and its lo-
cal governments is still to be resolved.
These factors, among others (including the outcome of related pending liti-
gation), could reduce the credit standing of certain issuers of California In-
struments. A more detailed discussion of the risks of investing in California
is included in the Statement of Additional Information.
The Tax-Exempt New York Portfolio's investments can be affected by political
and economic developments within the State of New York (the "State"), and by
the financial conditions of the State, its public authorities and political
subdivisions, particularly the City of New York (the "City"). The State and
the City face long-term economic problems that could seriously affect their
ability and that of other issuers of New York Instruments to meet their finan-
cial obligations. Certain substantial issuers of New York Instruments (includ-
ing issuers whose obligations may be acquired by the Portfolio) have experi-
enced serious financial difficulties in recent years. These difficulties have
at times jeopardized the credit standing and impaired the borrowing abilities
of all New York issuers and have generally contributed to higher interest
costs for their borrowings and fewer markets for their outstanding debt obli-
gations. In recent years, several different issues of municipal securities of
the State and its agencies and instrumentalities and of the City have been
downgraded by S&P and Moody's. On the other hand, strong demand for New York
Instruments has at times had the effect of permitting New York Instruments to
be issued with yields relatively lower, and after issuance, to trade in the
market at prices relatively higher, than comparably rated municipal obliga-
tions issued by other jurisdictions. A recurrence of the financial difficul-
ties previously experienced by certain issuers of New York Instruments could
result in defaults or declines in the market values of those issuers' existing
obligations and, possibly, in the obligations of other issuers of New York In-
struments. Although as of April 1, 1997 no issuers of New York Instruments
were in default with respect to the payment of their municipal obligations,
the occurrence of any such default could affect adversely the market values
and marketability of all New York Instruments and, consequently, the net asset
value of the Portfolio's holdings. A more detailed discussion of the risks of
investing in New York is included in the Statement of Additional Information.
If California, New York, or any of their local governmental entities are un-
able to meet their financial obligations, the corresponding Portfolio's in-
come, net asset value, ability to preserve or realize appreciation of capital
or liquidity could be adversely affected. Also, neither of these Portfolios is
a diversified fund (except to the extent that diversification is required for
federal income tax purposes). For these tax purposes, with respect to 50% of
the value of its total assets, none of these Portfolios invests more than 5%
of the value of its total assets in securities of a single issuer (except U.S.
Government Securities or securities of other regulated investment companies),
nor, with respect to the other 50% of the value of its total assets, does it
invest more than 25% of the value of its total assets in the securities of a
single issuer (except U.S. Government Securities or securities of other regu-
lated investment companies). These Federal tax diversification requirements
apply only at taxable quarter ends and are subject to certain qualifications
and exceptions. Because they may invest a larger percentage of their assets in
the securities of fewer issuers than do diversified funds, these Portfolios
may be exposed to greater risk in that an adverse change in the condition of
one or a small number of issuers would have a greater impact on them.
REPURCHASE AGREEMENTS
Each Portfolio (other than the Treasury Instruments Portfolio) may only en-
ter into repurchase agreements with primary dealers in U.S. Government Securi-
ties. A repurchase agreement is an agreement under which a Portfolio purchases
securities and the seller agrees to repurchase the securities within a partic-
ular time at a specified price. Such price will exceed the original purchase
price, the difference being income to the Portfolio,
24
<PAGE>
and will be unrelated to the interest rate on the purchased security. A Port-
folio's custodian or subcustodian will maintain custody of the purchased secu-
rities for the duration of the agreement. The value of the purchased securi-
ties, including accrued interest, will at all times equal or exceed the value
of the repurchase agreement. In the event of bankruptcy of the seller or fail-
ure of the seller to repurchase the securities as agreed, a Portfolio could
suffer losses, including loss of interest on or principal of the security and
costs associated with delay and enforcement of the repurchase agreement. In
evaluating whether to enter into a repurchase agreement, the Adviser will
carefully consider the creditworthiness of the seller pursuant to procedures
reviewed and approved by the Trustees. Distributions of the income from repur-
chase agreements entered into by a Portfolio will be taxable to its
unitholders. In addition, each Portfolio (other than the Treasury Instruments
Portfolio), together with other registered investment companies having advi-
sory agreements with the Adviser or any of its affiliates, may transfer
uninvested cash balances into a single joint account, the daily aggregate bal-
ance of which will be invested in one or more repurchase agreements.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Portfolio may purchase when-issued securities and make contracts to
purchase or sell securities for a fixed price at a future date beyond custom-
ary settlement time. A Portfolio is required to hold and maintain in a segre-
gated account with the Portfolio's custodian or subcustodian until three days
prior to settlement date, cash or liquid assets in an amount sufficient to
meet the purchase price. Alternatively, a Portfolio may enter into offsetting
contracts for the forward sale of other securities that it owns. Securities
purchased or sold on a when-issued or forward commitment basis involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date or if the value of the security to be sold increases prior to
the settlement date. Although a Portfolio would generally purchase securities
on a when-issued or forward commitment basis with the intention of acquiring
securities for its portfolio, the Portfolio may dispose of a when-issued secu-
rity or forward commitment prior to settlement if the Adviser deems it appro-
priate to do so.
OTHER INVESTMENT COMPANIES
The Adviser will determine, under guidelines established by the Trustees,
whether securities issued by other money market investment companies present
minimal credit risks. The amount of each Portfolio's investments in securities
of other investment companies will be subject to the limitations on such in-
vestments prescribed by the Investment Company Act. These limits include a
prohibition on any Portfolio acquiring more than 3% of the voting shares of
any other investment company and a prohibition on investing more than 5% of a
Portfolio's total assets in securities of any one investment company or more
than 10% of its total assets in securities of all investment companies. Each
Portfolio will indirectly bear its proportionate share of any management fees
and other expenses paid by such other investment companies. Such other invest-
ment companies will have investment objectives, policies and restrictions sub-
stantially similar to those of the acquiring Portfolio and will be subject to
substantially the same risks.
25
<PAGE>
INVESTMENT LIMITATIONS
TAXABLE AND TAX-EXEMPT PORTFOLIOS. Each Portfolio will comply with the con-
ditions for using amortized cost valuation set forth in Rule 2a-7 under the
Investment Company Act including, but not limited to, those conditions relat-
ing to maturity, diversification and credit quality. These operating policies
may be more restrictive than the fundamental policies set forth in the State-
ment of Additional Information.
INVESTMENT RESTRICTIONS. Each Portfolio is subject to certain investment re-
strictions that are described in detail under "Investment Restrictions" in the
Statement of Additional Information. Fundamental investment restrictions and
the investment objective of a Portfolio (except the Tax-Exempt California and
Tax-Exempt New York Portfolios' objectives of providing unitholders with in-
come exempt from California state and New York state and New York city per-
sonal income tax, respectively) cannot be changed without approval of a major-
ity of the outstanding units of that Portfolio. The Treasury Obligations Port-
folio's policy of limiting its investments to U.S. Treasury Obligations and
related repurchase agreements is also fundamental. All investment policies not
specifically designated as fundamental are non-fundamental and may be changed
without unitholder approval.
RESTRICTED AND OTHER ILLIQUID SECURITIES. Each Portfolio may purchase secu-
rities that are not registered ("restricted securities") under the Securities
Act of 1933 ("1933 Act"), but can be offered and sold to "qualified institu-
tional buyers" under Rule 144A under the 1933 Act. However, a Portfolio will
not invest more than 10% of its net assets in illiquid investments, which in-
clude fixed time deposits maturing in more than seven days and restricted se-
curities. Restricted securities (including commercial paper issued pursuant to
Section 4(2) of the 1933 Act) which the Board of Trustees has determined are
liquid, based upon a continuing review of the trading markets for the specific
restricted security, will not be deemed to be illiquid investments for pur-
poses of this restriction. The Board of Trustees may adopt guidelines and del-
egate to the Adviser the daily function of determining and monitoring the li-
quidity of restricted securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is
not possible to predict with assurance that the market for restricted securi-
ties eligible for resale under Rule 144A will continue to be liquid, the Ad-
viser will carefully monitor each Portfolio's investments in these securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in a Portfolio to the extent that quali-
fied institutional buyers become for a time uninterested in purchasing these
restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nomi-
nal fixed term on seven days or less notice. Such repurchase agreements will
be regarded as liquid instruments.
26
<PAGE>
MANAGEMENT
THE ADVISER
GSAM, One New York Plaza, New York, New York 10004, a separate operating di-
vision of Goldman, Sachs & Co., acts as investment adviser to the Portfolios.
Goldman Sachs registered as an investment adviser in 1981. As of April ,
1997, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $ billion in assets.
As of November 29, 1996, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $112 billion and partners' capital of $2 billion and
ranked as one of the largest international investment banking and brokerage
firms in the United States. Founded in 1869, Goldman Sachs is a major invest-
ment banking and brokerage firm providing a broad range of financing and in-
vestment services both in the United States and abroad.
Pursuant to an SEC order, each Taxable and Tax-Advantaged Portfolio may en-
ter into principal transactions in certain taxable money market instruments,
including repurchase agreements, with Goldman Sachs.
Under the Investment Advisory Agreements, GSAM continually manages each
Portfolio, including the purchase, retention and disposition of its securities
and other assets. In addition, GSAM administers each Portfolio's business af-
fairs and performs various unitholder servicing functions to the extent not
provided by other organizations. The management of each Portfolio is subject
to the supervision of the Trustees and each Portfolio's investment policies.
For these services, the Trust, on behalf of each Portfolio, pays GSAM a
monthly fee at an annual rate of each Portfolio's average daily net assets as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
CONTRACTUAL RATE DECEMBER 31, 1996
---------------- -----------------
<S> <C> <C>
Prime Obligations Portfolio .35% .35%
Money Market Portfolio .35% .30%
Treasury Obligations Portfolio .35% .35%
Treasury Instruments Portfolio .35% .15%
Government Portfolio .35% .35%
Federal Portfolio .35% .20%
Tax-Exempt Diversified Portfolio .35% .25%
Tax-Exempt California Portfolio .35% .35%
Tax-Exempt New York Portfolio .35% .26%
</TABLE>
The difference, if any, between the stated advisory fee and the actual fee
paid by the Portfolios reflects the fact that GSAM did not charge the full
amount of the advisory fees to which it would have been entitled.
GSAM has agreed to reduce or otherwise limit the daily expenses of each
Portfolio (excluding fees payable to Service Organizations, as defined herein,
taxes, interest, brokerage and litigation, indemnification and other extraor-
dinary expenses) on an annualized basis to .43% of the average daily net as-
sets of the Portfolio less the effect of fee reductions, if any. Such reduc-
tions or limits, if any, are calculated monthly on a cumulative basis. Any
such reductions or limits may be discontinued or modified only with the ex-
press approval of the Trustees. In addition, with respect to the Money Market,
Treasury Instruments, Federal, Tax-Exempt Diversified and Tax-Exempt New York
Portfolios, GSAM has voluntarily agreed to reduce or limit each Portfolio's
annual total
27
<PAGE>
operating expenses (excluding fees payable to Service Organizations, as de-
fined herein) to .37%, .22%, .27%, .32% and .33% respectively, of average
daily net assets and for each other Portfolio to .42% of average daily net as-
sets. GSAM has no current intention to but may in the future discontinue or
modify any of such limitations at its discretion.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of units of each Portfolio pursuant to a Distribution Agreement with
the Trust. The Distributor will assist in the sale of units of each Portfolio
upon the terms described herein. Goldman Sachs also serves as the Transfer
Agent of each Portfolio. For the transfer agency services, Goldman Sachs re-
ceives .04% (on an annualized basis) of the average daily net assets with re-
spect to each Portfolio.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold units of the Portfolios in order to increase the assets of the Portfo-
lios. Increasing the Portfolios' assets may enhance investment flexibility and
diversification. Goldman Sachs reserves the right to redeem at any time some
or all of the Portfolio units acquired for its own account. Goldman Sachs will
consider the effect of redemptions on the Portfolios and other unitholders in
deciding whether to redeem its units.
TAXES
Each Portfolio is treated as a separate entity for federal income tax pur-
poses, has elected to be treated and intends to continue to qualify and be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986 (the "Code") for each taxable year. To qualify as such,
each Portfolio must satisfy certain requirements relating to the sources of
its income, diversification of its assets and distribution of its income to
unitholders. As a regulated investment company, each Portfolio will not be
subject to federal income or excise tax on any net investment income and net
realized capital gains that are distributed to its unitholders in accordance
with certain timing requirements of the Code.
Dividends paid by a Portfolio from net investment income, the excess of net
short-term capital gain over net long-term capital loss and taxable original
issue discount or market discount income will be taxable to unitholders as or-
dinary income, except for any "exempt interest dividends" paid by the Tax-Ex-
empt Portfolios, as described below. Dividends paid by a Portfolio from the
excess of net long-term capital gain over net short-term capital loss will be
taxable as long-term capital gain regardless of how long the unitholders have
held their units. These tax consequences will apply to distributions of any
Portfolio regardless of whether distributions are received in cash or rein-
vested in units. Certain distributions paid by the Portfolios in January of a
given year will be taxable to unitholders as if received on December 31 of the
year in which they are declared. Unitholders will be informed annually about
the amount and character of distributions received from the Portfolios for
federal income tax purposes, including any distributions that may constitute a
return of capital or any distributions of the Tax-Exempt Portfolios that may
constitute a tax preference item under the federal alternative minimum tax.
The Tax-Exempt Portfolios intend to satisfy certain requirements of the Code
for the payment of "exempt-interest dividends" not included in unitholders'
federal gross income. The Tax-Exempt California Portfolio and the Tax-Exempt
New York Portfolio also intend to satisfy certain requirements of the Califor-
nia and New York City and State personal income tax laws, respectively, so
that exempt-interest dividends paid by these Portfolios
28
<PAGE>
will generally not be subject to personal income tax of the relevant state
(and, in the case of the Tax-Exempt New York Portfolio, New York City personal
income tax). Dividends paid by the Tax-Exempt Portfolios from interest on tax-
exempt obligations and properly designated by the Portfolio as exempt-interest
dividends, including dividends attributable to exempt-interest dividends re-
ceived by a Portfolio from other regulated investment companies, will gener-
ally be exempt from federal income tax, although a portion of such dividends
may be subject to the federal alternative minimum tax. Exempt-interest divi-
dends will be considered in computing the corporate federal alternative mini-
mum tax, and the extent, if any, to which social security or railroad retire-
ment benefits are taxable. Persons who are "substantial users" of facilities
financed by certain industrial development or private activity bonds should
consult their own tax advisers before purchasing units of these Portfolios.
Interest incurred to purchase or carry units of these Portfolios will not be
deductible for federal income tax purposes to the extent related to exempt-in-
terest dividends paid by the Portfolios and may not be deductible in whole or
in part for California or New York City and State income tax purposes.
Exempt-interest dividends of the Tax-Exempt California and Tax-Exempt New
York Portfolios that are derived from interest on California and New York In-
struments, respectively, will generally not be subject to the personal income
tax of the corresponding state, and in the case of the Tax-Exempt New York
Portfolio, New York City personal income tax. Other distributions will gener-
ally be taxable to unitholders for these state and city tax purposes.
Individuals and certain other classes of unitholders may be subject to 31%
backup withholding of federal income tax on taxable distributions if they fail
to furnish their correct taxpayer identification number and certain certifica-
tions required by the Internal Revenue Service or if they are otherwise sub-
ject to backup withholding. Individuals, corporations and other unitholders
that are not U.S. persons under the Code are subject to different tax rules
and may be subject to nonresident alien withholding at the rate of 30% (or a
lower rate provided by an applicable tax treaty) on amounts treated as ordi-
nary dividends from the Portfolios.
If a Portfolio invests in foreign securities, it may be subject to foreign
withholding or other foreign taxes on income earned on such securities and is
expected to be unable to pass such taxes through to unitholders, who therefore
are not expected to include such taxes in income or be entitled to claim for-
eign tax credits or deductions with respect to such taxes.
In addition to federal taxes, a unitholder may be subject to state, local or
foreign taxes on payments received from a Portfolio. A state income (and pos-
sibly local income and/or intangible property) tax exemption is generally
available to the extent a Portfolio's distributions are derived from interest
on (or, in the case of intangible property taxes, the value of its assets is
attributable to) certain U.S. Government obligations and/or tax-exempt munici-
pal obligations issued by or on behalf of the particular state or a political
subdivision thereof, provided in some states that certain thresholds for hold-
ings of such obligations and/or reporting requirements are satisfied.
Unitholders should consult their own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of each Portfolio is determined as of the close of regu-
lar trading on the New York Stock Exchange (normally 4:00 P.M. New York time)
on each Business Day. Net asset value per unit for each class of units of each
Portfolio is calculated by determining the amount of net assets attributable
to each class of units and dividing by the number of units for such class.
29
<PAGE>
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities markets close early, the Treasury
Instruments and Federal Portfolios will cease, and each other Portfolio re-
serves the right to cease, accepting purchase and redemption orders for same
Business Day credit at the time the PSA recommends that the securities markets
close. On days any Portfolio closes early, purchase and redemption orders re-
ceived after the PSA recommended closing time will be credited to the next
Business Day. In addition, each Portfolio reserves the right to advance the
time by which purchase and redemption orders must be received for same Busi-
ness Day credit as permitted by the SEC.
Each Portfolio seeks to maintain a net asset value of $1.00 per unit. In
this connection, each Portfolio values its portfolio securities on the basis
of amortized cost. The amortized cost method values a security at its cost on
the date of purchase and thereafter assumes a constant amortization to matu-
rity of any discount or premium, regardless of the impact of fluctuating in-
terest rates on the market value of the instrument. For a more complete de-
scription of the amortized cost valuation method and its effect on existing
and prospective unitholders, see the Statement of Additional Information.
There can be no assurance that a Portfolio will be able at all times to main-
tain a net asset value per unit of $1.00.
YIELD INFORMATION
From time to time, each Portfolio may advertise its yield, effective yield
and average total return. Average annual total return is determined by comput-
ing the average annual percentage change in value of $1,000 invested at the
maximum public offering price for a specified period of at least one year, as-
suming reinvestment of all dividends and distributions at net asset value. The
total return calculation assumes a complete redemption of the investment at
the end of the relevant period. Each Portfolio may furnish total return calcu-
lations based on a cumulative, average, year-by-year or other basis for vari-
ous specified periods by means of quotations, charts, graphs or schedules. The
yield of a Portfolio refers to the income generated by an investment in the
Portfolio over a seven-day period (which period will be stated in the adver-
tisement). This income is then annualized; that is, the amount of income gen-
erated by the investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the investment. The ef-
fective yield is calculated similarly but, when annualized, the income earned
by an investment in the Portfolio is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The Tax-Exempt Portfolios and the Federal and Treasury Instruments Portfo-
lios may each also quote tax-equivalent yield. Each Portfolio's tax-equivalent
yield is calculated by determining the rate of return that would have to be
achieved on a fully taxable investment to produce the after-tax equivalent
(which, in the case of the Tax-Exempt California combines federal and state
taxes, in the case of Tax-Exempt New York Portfolio, combines federal, state
and city taxes, and in the case of the Federal and Treasury Instruments Port-
folios assumes a level of state taxes) of the Portfolio's yield, assuming cer-
tain tax brackets for a unitholder.
Investors should note that the investment results of a Portfolio are based
on historical performance and will fluctuate over time. Any presentation of a
Portfolio's total return, yield, effective yield or tax-equivalent yield for
any prior period should not be considered a representation of what an invest-
ment may earn or what a Portfolio's total return, yield, effective yield or
tax-equivalent yield may be in any future period. In addition to the above,
each Portfolio may from time to time advertise its performance relative to
certain averages, performance rankings, indices, other information prepared by
recognized mutual fund statistical services and investments for which reliable
performance data is available.
30
<PAGE>
Total return, yield, effective yield and tax-equivalent yield will be calcu-
lated separately for each class of units in existence. Because each such class
of units is subject to different expenses, the total return and net yield of
such classes of a Portfolio for the same period may differ. See "Organization
and Units of the Portfolios" below.
ORGANIZATION AND UNITS OF THE PORTFOLIOS
Each portfolio is a series of the Goldman Sachs Trust, which was formed un-
der the laws of the State of Delaware on January 28, 1997. The Funds were for-
merly series of Goldman Sachs Money Market Trust, a Massachusetts trust, and
were reorganized into the Trust as of May 1, 1997. The Trustees have authority
under the Trust's Declaration of Trust to create and classify units of benefi-
cial interests in separate series, without further action by unitholders. Ad-
ditional series may be added in the future. The Trustees also have authority
to classify or reclassify any series or portfolio of units into one or more
classes. The Trustees have authorized the issuance of three classes of units
of each of the Portfolios, which are: ILA Units, ILA Administration Units and
ILA Service Units, except for the Prime Obligations Portfolio which has four
classes of units: ILA Units, ILA Administration Units, ILA Service Units and
ILA Class B Units. (Institutions that provide services to holders of ILA Ad-
ministration or ILA Service Units are referred to in this Prospectus as "Serv-
ice Organizations").
When issued, units are fully paid and nonassessable by the Trust. In the
event of liquidation, unitholders are entitled to share pro rata in the net
assets of the applicable Portfolio available for distribution to such
unitholders. Units entitle their holders to one vote per unit (but may, at the
discretion of the Trustees, be voted on a net asset value basis), have
noncumulative voting rights, are freely transferable and have no preemptive or
subscription rights.
The Trust does not intend to hold annual meetings of unitholders. However,
pursuant to the Trust's By-Laws, the recordholders of at least 10% of the
units outstanding and entitled to vote at a special meeting may require the
Trust to hold such special meeting of unitholders for any purpose and
recordholders may, under certain circumstances as permitted by the Act, commu-
nicate with other unitholders in connection with requiring a special meeting
of unitholders. The Board of Trustees, however, will call a special meeting of
unitholders for the purpose of electing Trustees if, at any time, less than a
majority of Trustees holding office at the time were elected by unitholders.
Units of a Portfolio will be voted separately by Portfolio with respect to
matters pertaining to that Portfolio except for the election of Trustees and
ratification of independent accountants. For example, unitholders of each
Portfolio are required to approve the adoption of any investment advisory
agreement relating to that Portfolio and any changes in fundamental investment
restrictions or policies of such Portfolio. Approval by the unitholders of one
Portfolio is effective only as to that Portfolio.
As of April 1, 1997, Bank of New York, 48 Wall Street, New York, NY 10286,
owned of record 32.49% of the outstanding units of Treasury Instruments Port-
folio.
The Trust does not intend to hold annual unitholder meetings, although spe-
cial meetings may be called for such purposes as electing or removing Trust-
ees, complying with a requirement of the Investment Company Act, or such other
purposes as are set forth above. The Trust will facilitate unitholder communi-
cation as required and in the manner prescribed by Section 16(c) of the In-
vestment Company Act.
31
<PAGE>
ADMINISTRATION
Each Portfolio has adopted an Administration Plan with respect to the ILA
Administration Units which authorizes it to compensate certain institutions
for providing account administration services to their customers who are bene-
ficial owners of such Units (each a "Service Organization"). Each Portfolio
will enter into agreements with Service Organizations which purchase ILA Ad-
ministration Units on behalf of their customers ("Service Agreements"). The
Service Agreements will provide for compensation to the Service Organization
in an amount up to .15% (on an annualized basis) of the average daily net as-
sets of the ILA Administration Units of that Portfolio attributable to or held
in the name of the Service Organization for its customers. The services pro-
vided by a Service Organization may include acting, directly or through an
agent, as the sole unitholder of record, maintaining account records for its
customers, and processing orders to purchase, redeem and exchange ILA Adminis-
tration Units for its customers. In addition, GSAM, at its own expense, may
pay a Service Organization compensation equal on an annual basis up to .10% of
the average daily net asset value of the ILA Administration Units attributable
to or held of record by such Service Organization for providing certain addi-
tional services to its customers. Such compensation will not represent an ad-
ditional expense to a Portfolio or its unitholders, since it will be paid from
the assets of GSAM.
For the fiscal year ended December 31, 1996, the Trust, on behalf of each
Portfolio, paid Service Organizations fees at the annual rate of .15% of each
Portfolio's average daily net assets attributable to ILA Administration Units.
Holders of ILA Administration Units of a Portfolio will bear all expenses
and fees paid to Service Organizations with respect to such Units as well as
any other expenses which are directly attributable to such Units.
Service Organizations may charge other fees to their customers who are the
beneficial owners of ILA Administration Units in connection with their cus-
tomer accounts. These fees would be in addition to any amounts received by the
Service Organization under a Service Agreement and may affect an investor's
return with respect to an investment in a Portfolio.
All inquiries of beneficial owners of ILA Administration Units of the Port-
folios should be directed to such owners' Service Organization.
PURCHASE OF UNITS
It is expected that all direct purchasers of ILA Administration Units will
be Service Organizations or their nominees, which may purchase ILA Administra-
tion Units of the Portfolios through Goldman Sachs. Customers of Service Orga-
nizations may invest in such Units only through their Service Organizations.
As set forth below, ILA Administration Units of the Portfolios may be pur-
chased on any Business Day at the net asset value next determined after re-
ceipt from the Service Organization of both the purchase order and the pur-
chase amount in federal funds. Purchase orders may be made by telephoning
Goldman Sachs at 800-621-2550 or by a written request addressed to Goldman
Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower,
Chicago, Illinois 60606. It is strongly recommended that payment be effected
by wiring federal funds to The Northern Trust Company ("Northern"), Chicago,
Illinois, as subcustodian for State Street Bank and Trust Company ("State
Street").
32
<PAGE>
Purchases of ILA Administration Units may also be made by a Service Organi-
zation by delivering a Federal Reserve draft or check (except that a third
party check will not be accepted) payable only to the appropriate Portfolio
and drawn on a U.S. bank to Goldman Sachs, Attention: Shareholder Services,
Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois 60606. It is expected
that Federal Reserve drafts will ordinarily be converted to federal funds on
the day of receipt and that checks will be converted to federal funds within
two Business Days after receipt. ILA Administration Units purchased by check
may not be redeemed until the check has cleared, as described under "Redemp-
tion of Units."
Purchases of units of any Portfolio may also be made through an Automated
Clearing House ("ACH") transfer to Goldman Sachs Trust c/o Northern, as
subcustodian for State Street. Purchase orders are effected at the net asset
value next determined after receipt of both the purchase order and the pur-
chase amount in federal funds. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer.
ILA Administration Units of each Portfolio are deemed to have been purchased
when an order becomes effective and are entitled to dividends on ILA Adminis-
tration Units purchased as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED FROM A
SERVICE
ORGANIZATION BY GOLDMAN SACHS DIVIDENDS BEGIN
-------------------------------- -----------------
(1) In the case of the Taxable and Tax-Advantaged Portfolios
<S> <C> <C> <C> <C>
By: 3:00 p.m.-N.Y. time Same Business Day
- ---------------------------------------------------------------------------------------
After: 3:00 p.m.-N.Y. time Next Business Day
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
(2) In the case of the Tax-Exempt Portfolios
By: 1:00 p.m.-N.Y. time Same Business Day
- ---------------------------------------------------------------------------------------
After: 1:00 p.m.-N.Y. time Next Business Day
- ---------------------------------------------------------------------------------------
</TABLE>
The Service Organizations are responsible for timely transmittal of purchase
orders to Goldman Sachs and federal funds to Northern. In order to facilitate
timely transmittal, the Service Organizations have established times by which
purchase orders and federal funds must be received by them.
A Business Day means any day on which the New York Stock Exchange is open,
except for days on which Chicago, Boston or New York banks are closed for lo-
cal holidays.
ILA Administration Units of the Portfolios are purchased at the net asset
value per unit without the imposition of a sales charge. Goldman Sachs, as
each Portfolio's transfer agent, will maintain a complete record of transac-
tions and ILA Administration Units held in each record holder's account. The
Trust and Goldman Sachs each reserves the right to reject any purchase order
for any reason.
MINIMUM INVESTMENT AND OTHER INFORMATION
The Trust does not have any minimum purchase or account requirements with
respect to ILA Administration Units. However, a Service Organization may im-
pose a minimum amount for initial and subsequent investments
33
<PAGE>
in ILA Administration Units of the Portfolios, and may establish other re-
quirements such as a minimum account balance. A Service Organization may ef-
fect redemptions of noncomplying accounts, and may impose a charge for any
special services rendered to its customers. Customers should contact their
Service Organization for further information concerning such requirements and
charges. A Service Organization may purchase ILA Administration Units in con-
nection with sweep account programs.
REPORTS TO UNITHOLDERS
The Trust will issue an annual report containing audited financial state-
ments and a semiannual report to record holders of ILA Administration Units of
each Portfolio, including Service Organizations who hold such Units for the
benefit of their customers. Upon request, a printed confirmation for each
transaction will be provided by Goldman Sachs. Any dividends and distributions
paid by the Portfolios are also reflected in regular statements issued by
Goldman Sachs to unitholders of record. Service Organizations will be respon-
sible for providing similar services to their own customers who are the bene-
ficial owners of such Units.
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (as of 4:00 p.m. New York time) as a dividend and distributed
to Service Organizations monthly. Distributions will be made in additional ILA
Administration Units of the same Portfolio or, at the election of a Service
Organization, in cash. The election to reinvest dividends and distributions or
receive them in cash may be changed by a Service Organization at any time upon
written notice to Goldman Sachs. If no election is made, all dividends and
capital gain distributions will be reinvested. Dividends will be reinvested as
of the last calendar day of each month. Cash distributions will be paid on or
about the first business day of each month. Net short-term capital gains, if
any, will be distributed in accordance with the requirements of the Code and
may be reflected in a Portfolio's daily distributions. Each Portfolio may dis-
tribute at least annually its long-term capital gains, if any, after reduction
by available capital losses. In order to avoid excessive fluctuations in the
amount of monthly capital gains distributions, a portion of any net capital
gains realized on the disposition of securities during the months of November
and December may be distributed during the subsequent calendar year. Although
realized gains and losses on the assets of a Portfolio are reflected in the
net asset value of the Portfolio, they are not expected to be of an amount
which would affect the Portfolio's net asset value of $1.00 per unit.
A Portfolio's net investment income consists of the excess of (i) accrued
interest or discount (including both original issue and market discount on
taxable securities) on portfolio securities, and (ii) any income of the Port-
folio from sources other than capital gains over (iii) the amortization of
market premium on all portfolio securities and (iv) the estimated expenses of
the Portfolio, including a proportionate share of the general expenses of the
Trust.
EXCHANGES
ILA Administration Units of each Portfolio may be exchanged by Service Orga-
nizations for units of the corresponding class of any Portfolio or Fund of
Goldman Sachs Trust at the net asset value next determined either by writing
to Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower,
34
<PAGE>
Chicago, Illinois 60606 or, if previously elected in the Account Information
Form, by calling Goldman Sachs at 800-621-2550. All telephone exchanges must
be registered in the same name(s) and with the same address as are registered
in the Portfolio from which the exchange is being made. It may be difficult to
implement the telephone exchange privilege in times of drastic economic or
market changes. In an effort to prevent unauthorized or fraudulent exchange
requests by telephone, Goldman Sachs employs reasonable procedures as set
forth under "Redemption of Units" to confirm that such instructions are genu-
ine. Exchanges are available only in states where the exchange may legally be
made. The exchange privilege may be modified or withdrawn at any time on 60
days' written notice.
REDEMPTION OF UNITS
HOW TO REDEEM
Customers of Service Organizations may redeem ILA Administration Units of a
Portfolio through their respective Service Organizations. The Service Organi-
zations are responsible for the transmittal of redemption requests by their
customers to Goldman Sachs. In order to facilitate timely transmittal of
redemption requests, Service Organizations have established procedures by
which redemption requests must be made and times by which redemption requests
must be received by them. Additional documentation may be required when deemed
appropriate by a Service Organization.
A Service Organization may redeem such Units without charge upon request on
any Business Day at the net asset value next determined after receipt by
Goldman Sachs of the redemption request. Redemption requests may be made by
telephoning Goldman Sachs at 800-621-2550 or by a written request addressed to
Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower, Chicago, Illinois 60606. A Service Organization may request re-
demptions by telephone only if the optional telephone redemption privilege has
been elected on the Account Information Form. It may be difficult to implement
redemptions by telephone in times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than
that designated on the Account Information Form must be in writing and signed
by an authorized person designated on the Account Information Form. Any such
written request is also confirmed by telephone with both the requesting party
and the designated bank account to verify instructions. Other procedures may
be implemented from time to time. If reasonable procedures are not implement-
ed, the Trust may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, neither the Trust nor Goldman Sachs will be
responsible for the authenticity of redemption instructions received by tele-
phone. A redemption may also be made with respect to certain Portfolios by
means of the check redemption privilege described below. Goldman Sachs re-
serves the right to redeem accounts with balances below $500.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs by the Service
Organization. The payment of redemption proceeds for ILA Administration Units
recently purchased by check will be delayed for up to 15 days until the check
has cleared.
35
<PAGE>
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
record holder of ILA Administration Units.
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
REDEMPTION REQUEST
RECEIVED FROM A REDEMPTION
SERVICE ORGANIZATION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
------------------------------------ ---------- ---------------------
(1) In the case of the Taxable and Tax-Advantaged Portfolios
<S> <C> <C> <C>
By: 3:00 p.m.-N.Y. time Wired Same Not earned on Day
Business request is received
Day
- ------------------------------------------------------------------------------
After: 3:00 p.m.-N.Y. time Wired Next Earned on Day
Business request is received
Day
- ------------------------------------------------------------------------------
(2) In the case of the Tax-Exempt Portfolios
By: 12:00 noon-N.Y. time Wired Same Not earned on Day
Business request is received
Day
- ------------------------------------------------------------------------------
After: 12:00 noon-N.Y. time Wired Next Earned on Day
Business request is received
Day
- ------------------------------------------------------------------------------
</TABLE>
The Portfolios will arrange for the proceeds of redemptions effected by any
means to be wired as federal funds to the Service Organization's bank account
designated in the Account Information Form. Redemption proceeds will normally
be wired as set forth above, but may be paid up to three Business Days after
receipt of the Service Organization's properly executed redemption request.
For example, payment may be delayed if the Federal Reserve Bank is closed on
the day redemption proceeds would ordinarily be wired. After a wire has been
initiated by Goldman Sachs, neither Goldman Sachs nor the Trust assumes any
further responsibility for the performance of intermediaries or the ILA
Administration Unitholder's Service Organization in the transfer process. If a
problem with such performance arises, the ILA Administration Unitholder should
deal directly with such intermediaries or Service Organization.
CHECK REDEMPTION PRIVILEGE
A Service Organization may elect to have a special account with State Street
for the purpose of redeeming ILA Administration Units from its account in a
Portfolio by check. When State Street receives a completed signature card and
authorization form, the Service Organization will be provided with a supply of
checks. Checks drawn on this account may be payable to the order of any person
in any amount of $500 or more, but cannot be certified. The payee of the check
may cash or deposit it like any other check drawn on a bank. When such a check
is presented to State Street for payment, a sufficient number of full and
fractional ILA Administration Units will be redeemed to cover the amount of
the check. Cancelled checks will be returned to the Service Organization by
State Street.
The check redemption privilege enables a Service Organization to receive the
dividends declared on the ILA Administration Units to be redeemed until such
time as the check is processed. Because of this feature, the check redemption
privilege may not be used for a complete liquidation of an account. If the
amount of a check is greater than the value of ILA Administration Units held
in the Service Organization's account, the check will be returned unpaid, and
the Service Organization may be subject to extra charges.
36
<PAGE>
Goldman Sachs reserves the right to impose conditions on, limit the avail-
ability of or terminate the check redemption privilege at any time with re-
spect to a particular Service Organization or all Service Organizations in
general. The Trust and State Street reserve the right at any time to suspend
redemptions by check and intend to do so in the event that federal legislation
or regulations impose reserve requirements or other restrictions deemed by the
Trustees to be adverse to the interests of the Portfolios.
----------------
37
<PAGE>
APPENDIX
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Trust with your correct Social Secu-
rity 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 and to sign your name in the certification section of
the Account Information Form could result in withholding of 31% by the Trust
for the federal backup withholding tax on distributions, redemptions, ex-
changes and other payments relating to your account.
Any tax withheld may be credited against taxes owed on your federal income
tax return.
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 Reve-
nue Service (IRS). Backup withholding could apply to payments relating to your
account prior to the Trust's receipt of your TIN.
Special rules apply for certain entities. For example, for an account estab-
lished under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor
should be furnished.
If you have been notified by the IRS that you are subject to backup with-
holding 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 with-
holding should cease, you must cross out item (2) in the certification section
of the Account Information Form.
If you are an exempt recipient, you should furnish your TIN and certify your
exemption by signing the Certification section and writing "exempt" after your
signature. Exempt recipients include: corporations, tax-exempt pension plans
and IRA's, governmental agencies, financial institutions, registered securi-
ties and commodities dealers and others.
If you are a nonresident alien or foreign entity you must provide a com-
pleted Form W-8 to the Trust in order to avoid backup withholding on certain
payments. Other payments to you may be subject to non-resident alien withhold-
ing of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET TRUST
ILA ADMINISTRATION UNITS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE: 800-621-2550
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unitholder and Portfolio Expenses.......................................... 2
Financial Highlights....................................................... 4
An Introduction to the Portfolios.......................................... 14
Investment Policies Matrix................................................. 16
Description of Securities and Investment Techniques........................ 18
Investment Limitations..................................................... 26
Management................................................................. 27
Taxes...................................................................... 28
Net Asset Value............................................................ 30
Yield Information.......................................................... 30
Organization and Units of the Portfolios................................... 31
Administration............................................................. 32
Purchase of Units.......................................................... 32
Reports to Unitholders..................................................... 34
Distributions.............................................................. 34
Exchanges.................................................................. 34
Redemption of Units........................................................ 35
Appendix................................................................... A-1
</TABLE>
ILA-1AD-MMT 7K/596
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET TRUST
GOLDMAN SACHS--INSTITUTIONAL LIQUID ASSETS
ILA ADMINISTRATION UNITS
-----------
PROSPECTUS
-----------
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS--INSTITUTIONAL LIQUID ASSETS
ILA SERVICE UNITS
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is a no-load, open-end, management
investment company (a "mutual fund") which includes the Goldman Sachs--
Institutional Liquid Assets portfolios (the "Portfolios"). This Prospectus
relates only to the offering of ILA Service shares of beneficial interest
("ILA Service Units") of the Portfolios. Goldman Sachs Asset Management, a
separate operating division of Goldman, Sachs & Co., serves as each
Portfolio's investment adviser. Goldman, Sachs & Co. serves as each
Portfolio's distributor and transfer agent.
The following Portfolios seek to maximize current income to the extent
consistent with the preservation of capital and the maintenance of liquidity
by investing exclusively in high quality money market instruments. These
Portfolios may invest in diversified portfolios of the following types of
instruments:
Prime Obligations Portfolio. Securities of the U.S. Government, its
agencies, authorities and instrumentalities, obligations of U.S. banks,
commercial paper and other short-term obligations of U.S. companies, states,
municipalities and other entities, and repurchase agreements.
Money Market Portfolio. Securities of the U.S. Government, its agencies,
authorities and instrumentalities, U.S. dollar denominated obligations of U.S.
and foreign banks, U.S. dollar denominated commercial paper and other short-
term obligations of U.S. and foreign companies, foreign governments, states,
municipalities and other entities, and repurchase agreements.
Treasury Obligations Portfolio. Securities issued or guaranteed by the U.S.
Treasury and repurchase agreements relating to such securities.
Treasury Instruments Portfolio. Securities issued or guaranteed by the U.S.
Treasury, the interest income from which is generally exempt from state income
taxation.
Government Portfolio. Securities of the U.S. Government, its agencies,
authorities and instrumentalities, and repurchase agreements relating to such
securities.
Federal Portfolio. Securities of the U.S. Government and certain of its
agencies, authorities and instrumentalities, the interest income from which is
generally exempt from state income taxation.
The following Portfolios seek to the extent consistent with the preservation
of capital and prescribed portfolio standards, a high level of income excluded
from gross income for federal income tax purposes, and in the case of the Tax-
Exempt California Portfolio and Tax-Exempt New York Portfolio, exempt from
California state and New York state and city personal income taxes,
respectively, by investing primarily in municipal instruments. The Tax-Exempt
California and Tax-Exempt New York Portfolios concentrate their investments in
securities issued by or on behalf of California and New York municipal issuers
and therefore investment in such Portfolios may be riskier than other types of
money market funds. These Portfolios may invest in the following types of
instruments:
Tax-Exempt Diversified Portfolio. A diversified portfolio of municipal
obligations issued by or on behalf of states, territories and possessions of
the United States and their political subdivisions, agencies, authorities and
instrumentalities, and the District of Columbia.
Tax-Exempt California Portfolio. A non-diversified portfolio consisting
primarily of municipal obligations issued by or on behalf of the State of
California and its political subdivisions, agencies and instrumentalities and
other obligations that are exempt from federal and California state income
taxes.
Tax-Exempt New York Portfolio. A non-diversified portfolio consisting
primarily of municipal obligations issued by or on behalf of the State of New
York and its political subdivisions, agencies and instrumentalities and other
obligations that are exempt from federal, New York State and New York City
personal income taxes.
AN INVESTMENT IN A PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION....... Goldman Sachs Funds--Toll Free: 800-621-2550
This Prospectus provides you with information about the Portfolios that you
should know before investing in ILA Service Units. It should be read and
retained for future reference. If you would like more detailed information,
the Statement of Additional Information dated May 1, 1997, as amended or
supplemented from time to time, is available upon request without charge from
Service Organizations, as defined herein, or by calling the telephone number
listed above or by writing Goldman Sachs, Attention: Shareholder Services,
Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois 60606. The Statement
of Additional Information, which is incorporated by reference into this
Prospectus, has been filed with the Securities and Exchange Commission. Not
all Portfolios are available in certain states. Please call the phone number
listed above to determine availability in your state. The SEC maintains a Web
site (http://www.sec.gov) that contains the Statement of Additional
Information and other information regarding the Trust.
- -------------------------------------------------------------------------------
ILA SERVICE UNITS OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A PORTFOLIO
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.
The date of this Prospectus is May 1, 1997.
<PAGE>
UNITHOLDER AND PORTFOLIO EXPENSES
ILA SERVICE UNITS
<TABLE>
<CAPTION>
TAX- TAX- TAX-
PRIME MONEY TREASURY TREASURY EXEMPT EXEMPT EXEMPT
OBLIGATIONS MARKET OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL DIVERSIFIED CALIFORNIA NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ----------- ----------- ---------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNITHOLDER
TRANSACTION
EXPENSES
Maximum Sales
Charge Imposed on
Purchases......... None None None None None None None None None
Sales Charge
Imposed on
Reinvested
Distributions..... None None None None None None None None None
Deferred Sales
Load Imposed on
Redemptions....... None None None None None None None None None
Exchange Fee...... None None None None None None None None None
ANNUAL OPERATING
EXPENSES (1)
(as a percentage
of average daily
net assets)
Management Fees
(after
limitations) (2).. 0.35% 0.31% 0.35% 0.16% 0.35% 0.21% 0.26% 0.35% 0.27%
Other Expenses
Service Fees..... 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
Other Expenses
(after expense
limitation) (3).. 0.07% 0.06% 0.07% 0.06% 0.07% 0.06% 0.06% 0.07% 0.06%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING
EXPENSES (4)....... 0.82% 0.77% 0.82% 0.62% 0.82% 0.67% 0.72% 0.82% 0.73%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Obligations Portfolio................ $8 $26 $46 $101
Money Market Portfolio..................... $8 $25 $43 $ 95
Treasury Obligations Portfolio............. $8 $26 $46 $101
Treasury Instruments Portfolio............. $6 $20 $35 $ 77
Government Portfolio....................... $8 $26 $46 $101
Federal Portfolio.......................... $7 $21 $37 $ 83
Tax-Exempt Diversified Portfolio........... $7 $23 $40 $ 89
Tax-Exempt California Portfolio............ $8 $26 $46 $101
Tax-Exempt New York Portfolio.............. $7 $23 $41 $ 91
</TABLE>
2
<PAGE>
- --------
(1) Based upon estimated amounts for the current fiscal year.
(2) The Investment Adviser has voluntarily agreed that a portion of the
management fee would not be imposed on the Money Market, Treasury
Instruments, Federal, Tax-Exempt Diversified and Tax-Exempt New York
Portfolios equal to .04%, .19%, .14%, .09% and .08%, respectively. Without
such limitation, management fees for each Portfolio would be 0.35%.
(3) The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, fees payable to Service
Organizations, as defined herein, taxes, interest and brokerage and
litigation, indemnification and other extraordinary expenses) to the
extent such expenses exceed 0.07% of the Prime Obligations, Treasury
Obligations, Government and Tax-Exempt California Portfolio's average
daily net assets and 0.06% of each other Portfolio's average daily net
assets.
(4) Without the limitations described above, "Other Expenses" and "Total
Operating Expenses" of the Portfolios for the current fiscal year would
be:
<TABLE>
<CAPTION>
OTHER TOTAL OPERATING
EXPENSES EXPENSES
-------- ---------------
<S> <C> <C>
Prime Obligations Portfolio......................... 0.08% 0.83%
Money Market Portfolio.............................. 0.08% 0.83%
Treasury Obligations Portfolio...................... 0.08% 0.83%
Treasury Instruments Portfolio...................... 0.08% 0.83%
Government Portfolio................................ 0.09% 0.84%
Federal Portfolio................................... 0.08% 0.83%
Tax-Exempt Diversified Portfolio.................... 0.06% 0.81%
Tax-Exempt California Portfolio..................... 0.07% 0.82%
Tax-Exempt New York Portfolio....................... 0.08% 0.83%
</TABLE>
The information set forth in the foregoing table and hypothetical example
relates only to ILA Service Units of the Portfolios. The Portfolios also offer
ILA Units, ILA Administration Units and ILA Class B Units (Prime Obligations
only). The other classes of the Portfolios are subject to different fees and
expenses (which affect performance) and are entitled to different services.
Information regarding any other class of the Portfolios may be obtained from
your sales representative or from Goldman Sachs by calling the number on the
front cover of this Prospectus.
Service Organizations may charge other fees to their customers who are the
beneficial owners of ILA Service Units in connection with their customers' ac-
counts. Due to the service fees, a long-term shareholder may pay more than the
economic equivalent of the maximum front-end sales charge permitted by the Na-
tional Association of Securities Dealers, Inc.'s rules regarding investment
companies. See "Additional Services." Such fees, if any, may affect the return
such customers realize with respect to their investments.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Portfolio that an investor will bear di-
rectly or indirectly. The information on fees and expenses included in the ta-
ble and the hypothetical example above are based on each Portfolio's estimated
fees and expenses 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, a Portfo-
lio's actual performance will vary and may result in an actual return greater
or less than 5%. See "Management--Investment Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following data with respect to a unit (of the class specified) of the
Prime Obligations, Money Market, Treasury Obligations, Treasury Instruments,
Government, Federal, Tax-Exempt Diversified, Tax-Exempt California and Tax-Ex-
empt New York Portfolios outstanding during the periods indicated have been
audited by Arthur Andersen LLP, independent auditors, as indicated in their
report incorporated by reference and attached to the Statement of Additional
Information from the annual report to unitholders for the fiscal year ended
December 31, 1996 (the "Annual Report"), and should be read in conjunction
with the financial statements and related notes incorporated by reference and
attached to the Statement of Additional Information.
4
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Unit Outstanding Throughout Each Period Prime Obligations
Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- ----------------
1996-ILA units.. $1.00 $0.0511 -- $0.0511 $(0.0511) $1.00 5.22% 0.41% 5.11%
1996-ILA Admin-
istration units. 1.00 0.0497 -- 0.0497 (0.0497) 1.00 5.06 0.56 4.97
1996-ILA Service
units........... 1.00 0.0474 -- 0.0474 (0.0474) 1.00 4.80 0.81 4.74
1996-ILA B
units (b)....... 1.00 0.0262 -- 0.0262 (0.0262) 1.00 3.97(d) 1.41(d) 4.09(d)
1995-ILA units.. 1.00 0.0566 -- 0.0566 (0.0566) 1.00 5.79 0.41 5.66
1995-ILA Admin-
istration units. 1.00 0.0551 -- 0.0551 (0.0551) 1.00 5.63 0.56 5.51
1995-ILA Service
units........... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.37 0.81 5.22
1994-ILA units.. 1.00 0.0394 -- 0.0394 (0.0394) 1.00 4.07 0.40 3.94
1994-ILA Admin-
istration units. 1.00 0.0379 -- 0.0379 (0.0379) 1.00 3.91 0.55 3.79
1994-ILA Service
units........... 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.66 0.80 3.65
1993-ILA units.. 1.00 0.0291 0.0002 0.0293 (0.0293) 1.00 2.97 0.40 2.91
1993-ILA Admin-
istration units. 1.00 0.0275 0.0003 0.0278 (0.0278) 1.00 2.82 0.55 2.75
1993-ILA Service
units........... 1.00 0.0250 0.0001 0.0251 (0.0252) 1.00 2.56 0.80 2.50
1992-ILA units.. 1.00 0.0364 0.0010 0.0374 (0.0374) 1.00 3.75 0.40 3.64
1992-ILA Admin-
istration units. 1.00 0.0339 0.0010 0.0349 (0.0349) 1.00 3.60 0.55 3.39
1992-ILA Service
units........... 1.00 0.0311 0.0010 0.0321 (0.0320) 1.00 3.34 0.80 3.11
1991-ILA units.. 1.00 0.0591 0.0003 0.0594 (0.0594) 1.00 6.10 0.40 5.91
1991-ILA Admin-
istration units. 1.00 0.0568 0.0003 0.0571 (0.0571) 1.00 5.94 0.55 5.68
1991-ILA Service
units........... 1.00 0.0558 0.0003 0.0561 (0.0561) 1.00 5.68 0.80 5.58
1990-ILA units.. 1.00 0.0793 -- 0.0793 (0.0793) 1.00 8.21 0.38 7.93
1990-ILA Admin-
istration
units (c)....... 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.81(d) 0.55(d) 7.62(d)
1990-ILA Service
units (c)....... 1.00 0.0425 -- 0.0425 (0.0425) 1.00 7.56(d) 0.80(d) 7.25(d)
1989-ILA units.. 1.00 0.0890 -- 0.0890 (0.0890) 1.00 9.27 0.40 8.90
1988-ILA units.. 1.00 0.0714 -- 0.0714 (0.0714) 1.00 7.48 0.40 7.14
1987-ILA units.. 1.00 0.0634 -- 0.0634 (0.0634) 1.00 6.50 0.40 6.34
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE NET
(IN 000'S) NET ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- -----------------
1996-ILA units.. $1,154,787 0.43% 5.09%
1996-ILA Admin-
istration units. 23,738 0.58 4.95
1996-ILA Service
units........... 84,707 0.83 4.72
1996-ILA B
units (b)....... 346 1.43(d) 4.07(d)
1995-ILA units.. 1,261,251 0.43 5.64
1995-ILA Admin-
istration units. 63,018 0.58 5.49
1995-ILA Service
units........... 227,233 0.83 5.20
1994-ILA units.. 1,963,846 0.42 3.92
1994-ILA Admin-
istration units. 149,234 0.57 3.77
1994-ILA Service
units........... 170,453 0.82 3.63
1993-ILA units.. 2,332,771 0.42 2.89
1993-ILA Admin-
istration units. 189,431 0.57 2.73
1993-ILA Service
units........... 137,804 0.82 2.48
1992-ILA units.. 3,444,591 0.42 3.62
1992-ILA Admin-
istration units. 257,321 0.57 3.37
1992-ILA Service
units........... 22,044 0.82 3.09
1991-ILA units.. 3,531,736 0.42 5.89
1991-ILA Admin-
istration units. 198,417 0.57 5.66
1991-ILA Service
units........... 18,789 0.82 5.56
1990-ILA units.. 2,833,541 0.38 7.93
1990-ILA Admin-
istration
units (c)....... 209,272 0.55(d) 7.62(d)
1990-ILA Service
units (c)....... 19,039 0.80(d) 7.25(d)
1989-ILA units.. 3,761,964 0.40 8.90
1988-ILA units.. 3,799,628 0.40 7.14
1987-ILA units.. 5,814,280 0.40 6.34
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b)ILA Class B unit activity commenced during May of 1996.
(c)ILA Administration and Service unit activity commenced during June of 1990.
(d)Annualized.
5
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Money Market Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $1.00 $0.0515 $0.0001 $0.0516 $(0.0516) $1.00 5.27% 0.36% 5.15%
1996-ILA Admin-
istration units. 1.00 0.0500 0.0001 0.0501 (0.0501) 1.00 5.12 0.51 5.00
1996-ILA Service
units........... 1.00 0.0475 0.0001 0.0476 (0.0476) 1.00 4.86 0.76 4.75
1995-ILA units.. 1.00 0.0571 -- 0.0571 (0.0571) 1.00 5.85 0.36 5.71
1995-ILA Admin-
istration units. 1.00 0.0555 -- 0.0555 (0.0555) 1.00 5.69 0.51 5.55
1995-ILA Service
units........... 1.00 0.0529 -- 0.0529 (0.0529) 1.00 5.43 0.76 5.29
1994-ILA units.. 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.13 0.35 4.01
1994-ILA Admin-
istration units. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.98 0.50 3.88
1994-ILA Service
units........... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.72 0.75 3.61
1993-ILA units.. 1.00 0.0296 0.0003 0.0299 (0.0299) 1.00 3.03 0.35 2.96
1993-ILA Admin-
istration units. 1.00 0.0281 0.0003 0.0284 (0.0284) 1.00 2.88 0.50 2.81
1993-ILA Service
units........... 1.00 0.0257 0.0002 0.0259 (0.0259) 1.00 2.62 0.75 2.57
1992-ILA units.. 1.00 0.0368 0.0004 0.0372 (0.0372) 1.00 3.76 0.35 3.68
1992-ILA Admin-
istration units. 1.00 0.0356 0.0004 0.0360 (0.0360) 1.00 3.61 0.50 3.56
1992-ILA Service
units........... 1.00 0.0358 0.0006 0.0364 (0.0364) 1.00 3.35 0.75 3.58
1991-ILA units.. 1.00 0.0591 0.0004 0.0595 (0.0595) 1.00 6.12 0.35 5.91
1991-ILA Admin-
istration units. 1.00 0.0574 0.0004 0.0578 (0.0578) 1.00 5.96 0.50 5.74
1991-ILA Service
units........... 1.00 0.0547 0.0004 0.0551 (0.0551) 1.00 5.70 0.75 5.47
1990-ILA units.. 1.00 0.0793 0.0001 0.0794 (0.0794) 1.00 8.24 0.35 7.93
1990-ILA Admin-
istration
units (c)....... 1.00 0.0424 0.0001 0.0425 (0.0425) 1.00 7.86(b) 0.50(b) 7.63(b)
1990-ILA Service
units (c)....... 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.61(b) 0.75(b) 7.46(b)
1989-ILA units.. 1.00 0.0885 0.0001 0.0886 (0.0886) 1.00 9.31 0.35 8.85
1988-ILA units.. 1.00 0.0751 -- 0.0751 (0.0751) 1.00 7.66 0.27 7.51
<CAPTION>
FOR THE PERIOD DECEMBER 2, 1987 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987-ILA units.. 1.00 0.0063 -- 0.0063 (0.0063) 1.00 7.38(b) 0.15(b) 7.62(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $ 703,097 0.43% 5.08%
1996-ILA Admin-
istration units. 257,258 0.58 4.93
1996-ILA Service
units........... 28,845 0.83 4.68
1995-ILA units.. 574,155 0.42 5.65
1995-ILA Admin-
istration units. 164,422 0.57 5.49
1995-ILA Service
units........... 23,080 0.82 5.23
1994-ILA units.. 559,470 0.43 3.93
1994-ILA Admin-
istration units. 145,867 0.58 3.80
1994-ILA Service
units........... 21,862 0.83 3.53
1993-ILA units.. 699,604 0.43 2.88
1993-ILA Admin-
istration units. 150,452 0.58 2.73
1993-ILA Service
units........... 11,166 0.83 2.49
1992-ILA units.. 884,571 0.43 3.60
1992-ILA Admin-
istration units. 187,445 0.58 3.48
1992-ILA Service
units........... 15,114 0.83 3.50
1991-ILA units.. 1,153,191 0.42 5.84
1991-ILA Admin-
istration units. 210,330 0.57 5.67
1991-ILA Service
units........... 56,586 0.82 5.40
1990-ILA units.. 924,141 0.40 7.88
1990-ILA Admin-
istration
units (c)....... 204,477 0.55(b) 7.58(b)
1990-ILA Service
units (c)....... 38,128 0.80(b) 7.41(b)
1989-ILA units.. 1,295,389 0.40 8.80
1988-ILA units.. 701,105 0.40 7.38
<CAPTION>
FOR THE PERIOD DECEMBER 2, 1987 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- ------------------------------------------------------------
<S> <C> <C> <C>
1987-ILA units.. 183,633 0.40(b) 7.37(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during June of 1990.
6
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Government Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $1.00 $0.0504 $0.0001 $0.0505 $(0.0504) $1.00 5.15% 0.41% 5.04%
1996-ILA Admin-
istration units. 1.00 0.0489 0.0001 0.0490 (0.0489) 1.00 4.99 0.56 4.89
1996-ILA Service
units........... 1.00 0.0463 0.0001 0.0464 (0.0463) 1.00 4.73 0.81 4.63
1995-ILA units.. 1.00 0.0562 0.0002 0.0564 (0.0564) 1.00 5.77 0.41 5.62
1995-ILA Admin-
istration units. 1.00 0.0549 0.0002 0.0551 (0.0551) 1.00 5.62 0.56 5.49
1995-ILA Service
units........... 1.00 0.0519 0.0002 0.0521 (0.0521) 1.00 5.35 0.81 5.19
1994-ILA units.. 1.00 0.0378 0.0002 0.0380 (0.0380) 1.00 3.94 0.40 3.78
1994-ILA Admin-
istration units. 1.00 0.0362 0.0002 0.0364 (0.0364) 1.00 3.79 0.55 3.62
1994-ILA Service
units........... 1.00 0.0350 0.0002 0.0352 (0.0352) 1.00 3.53 0.80 3.50
1993-ILA units.. 1.00 0.0282 0.0008 0.0290 (0.0291) 1.00 2.94 0.40 2.82
1993-ILA Admin-
istration units. 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79 0.55 2.67
1993-ILA Service
units........... 1.00 0.0242 0.0006 0.0248 (0.0250) 1.00 2.53 0.80 2.42
1992-ILA units.. 1.00 0.0338 0.0027 0.0365 (0.0364) 1.00 3.70 0.40 3.38
1992-ILA Admin-
istration units. 1.00 0.0325 0.0027 0.0352 (0.0351) 1.00 3.55 0.55 3.25
1992-ILA Service
units........... 1.00 0.0309 0.0030 0.0339 (0.0336) 1.00 3.29 0.80 3.09
1991-ILA units.. 1.00 0.0567 0.0011 0.0578 (0.0578) 1.00 5.91 0.40 5.67
1991-ILA Admin-
istration units. 1.00 0.0545 0.0011 0.0556 (0.0556) 1.00 5.75 0.55 5.45
1991-ILA Service
units........... 1.00 0.0522 0.0011 0.0533 (0.0533) 1.00 5.49 0.80 5.22
1990-ILA units.. 1.00 0.0779 0.0003 0.0782 (0.0782) 1.00 8.11 0.39 7.79
1990-ILA Admin-
istration units
(c)............. 1.00 0.0439 0.0004 0.0443 (0.0443) 1.00 7.74(b) 0.55(b) 7.49(b)
1990-ILA Service
units (c)....... 1.00 0.0359 0.0002 0.0361 (0.0363) 1.00 7.42(b) 0.80(b) 7.15(b)
1989-ILA units.. 1.00 0.0877 0.0001 0.0878 (0.0878) 1.00 9.15 0.40 8.77
1988-ILA units.. 1.00 0.0716 0.0002 0.0718 (0.0718) 1.00 7.42 0.40 7.16
1987-ILA units.. 1.00 0.0622 0.0001 0.0623 (0.0624) 1.00 6.43 0.40 6.22
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
1996-ILA units.. $ 694,651 0.44% 5.01%
1996-ILA Admin-
istration units. 36,055 0.59 4.86
1996-ILA Service
units........... 94,228 0.84 4.60
1995-ILA units.. 570,469 0.43 5.60
1995-ILA Admin-
istration units. 47,558 0.58 5.47
1995-ILA Service
units........... 85,401 0.83 5.17
1994-ILA units.. 881,520 0.44 3.74
1994-ILA Admin-
istration units. 95,483 0.59 3.58
1994-ILA Service
units........... 156,930 0.84 3.46
1993-ILA units.. 1,315,378 0.43 2.79
1993-ILA Admin-
istration units. 161,845 0.58 2.64
1993-ILA Service
units........... 101,272 0.83 2.39
1992-ILA units.. 1,785,472 0.42 3.36
1992-ILA Admin-
istration units. 461,542 0.57 3.23
1992-ILA Service
units........... 56,389 0.82 3.07
1991-ILA units.. 2,103,627 0.43 5.64
1991-ILA Admin-
istration units. 464,060 0.58 5.42
1991-ILA Service
units........... 200,176 0.83 5.19
1990-ILA units.. 2,203,756 0.39 7.79
1990-ILA Admin-
istration units
(c)............. 296,313 0.55(b) 7.49(b)
1990-ILA Service
units (c)....... 132,888 0.80(b) 7.15(b)
1989-ILA units.. 2,268,330 0.40 8.77
1988-ILA units.. 2,197,796 0.40 7.16
1987-ILA units.. 2,243,870 0.40 6.22
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c)ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
7
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Obligations Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET
NET ASSET REALIZED TOTAL
VALUE AT NET GAIN ON INCOME FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C>
1996-ILA units.. $1.00 $0.0498 $0.0002 $0.0500
1996-ILA Admin-
istration units. 1.00 0.0483 0.0003 0.0486
1996-ILA Service
units........... 1.00 0.0459 0.0001 0.0460
1995-ILA units.. 1.00 0.0551 0.0007 0.0558
1995-ILA Admin-
istration units. 1.00 0.0537 0.0007 0.0544
1995-ILA Service
units........... 1.00 0.0511 0.0007 0.0518
1994-ILA units.. 1.00 0.0377 -- 0.0377
1994-ILA Admin-
istration units. 1.00 0.0368 -- 0.0368
1994-ILA Service
units........... 1.00 0.0340 -- 0.0340
1993-ILA units.. 1.00 0.0279 0.0006 0.0285
1993-ILA Admin-
istration units. 1.00 0.0264 0.0006 0.0270
1993-ILA Service
units........... 1.00 0.0239 0.0006 0.0245
1992-ILA units.. 1.00 0.0339 0.0025 0.0364
1992-ILA Admin-
istration units. 1.00 0.0320 0.0023 0.0343
1992-ILA Service
units........... 1.00 0.0294 0.0024 0.0318
1991-ILA units.. 1.00 0.0557 0.0018 0.0575
1991-ILA Admin-
istration units. 1.00 0.0540 0.0018 0.0558
1991-ILA Service
units........... 1.00 0.0515 0.0018 0.0533
1990-ILA units.. 1.00 0.0772 0.0002 0.0774
1990-ILA Admin-
istration
units (c)....... 1.00 0.0413 0.0002 0.0415
1990-ILA Service
units (c)....... 1.00 0.0417 0.0003 0.0420
1989-ILA units.. 1.00 0.0864 0.0005 0.0869
1988-ILA units.. 1.00 0.0704 0.0004 0.0708
1987-ILA units.. 1.00 0.0617 0.0002 0.0619
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
RATIO OF NET NET RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INVESTMENT
VALUE AT EXPENSES TO INCOME TO END OF EXPENSES TO INCOME TO
DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units.. $(0.0500) $1.00 5.11% 0.41% 4.98% $ 574,734 0.43% 4.96%
1996-ILA Admin-
istration units. (0.0486) 1.00 4.95 0.56 4.83 108,850 0.58 4.81
1996-ILA Service
units........... (0.0460) 1.00 4.69 0.81 4.59 123,483 0.83 4.57
1995-ILA units.. (0.0558) 1.00 5.73 0.41 5.51 711,209 0.43 5.49
1995-ILA Admin-
istration units. (0.0544) 1.00 5.57 0.56 5.37 92,643 0.58 5.35
1995-ILA Service
units........... (0.0518) 1.00 5.31 0.81 5.11 119,692 0.83 5.09
1994-ILA units.. (0.0377) 1.00 3.91 0.40 3.77 713,816 0.44 3.73
1994-ILA Admin-
istration units. (0.0368) 1.00 3.75 0.55 3.68 97,626 0.59 3.64
1994-ILA Service
units........... (0.0340) 1.00 3.49 0.80 3.40 108,972 0.84 3.35
1993-ILA units.. (0.0286) 1.00 2.89 0.40 2.79 969,565 0.43 2.76
1993-ILA Admin-
istration units. (0.0270) 1.00 2.74 0.55 2.64 121,327 0.58 2.61
1993-ILA Service
units........... (0.0246) 1.00 2.48 0.80 2.39 185,506 0.83 2.36
1992-ILA units.. (0.0362) 1.00 3.65 0.40 3.39 1,328,036 0.43 3.36
1992-ILA Admin-
istration units. (0.0343) 1.00 3.49 0.55 3.20 152,804 0.58 3.17
1992-ILA Service
units........... (0.0318) 1.00 3.23 0.80 2.94 183,208 0.83 2.91
1991-ILA units.. (0.0575) 1.00 5.90 0.40 5.57 1,709,321 0.43 5.54
1991-ILA Admin-
istration units. (0.0558) 1.00 5.74 0.55 5.40 146,795 0.58 5.37
1991-ILA Service
units........... (0.0533) 1.00 5.48 0.80 5.15 154,419 0.83 5.12
1990-ILA units.. (0.0774) 1.00 8.05 0.39 7.72 1,816,991 0.39 7.72
1990-ILA Admin-
istration
units (c)....... (0.0415) 1.00 7.67(b) 0.55(b) 7.42(b) 132,088 0.55(b) 7.42(b)
1990-ILA Service
units (c)....... (0.0421) 1.00 7.42(b) 0.80(b) 7.11(b) 148,323 0.80(b) 7.11(b)
1989-ILA units.. (0.0869) 1.00 9.06 0.40 8.64 1,769,974 0.40 8.64
1988-ILA units.. (0.0708) 1.00 7.30 0.40 7.04 1,657,215 0.40 7.04
1987-ILA units.. (0.0619) 1.00 6.32 0.40 6.17 1,693,767 0.40 6.17
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Administration and Service unit activity commenced during June and
July of 1990, respectively.
8
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Instruments Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0496 $0.0004 $0.0500 $(0.0500) $1.00 5.10% 0.21% 4.96%
1996-ILA Admin-
istration units. 1.00 0.0482 0.0004 0.0486 (0.0486) 1.00 4.95 0.36 4.82
1996-ILA Service
units........... 1.00 0.0456 0.0004 0.0460 (0.0460) 1.00 4.68 0.61 4.56
1995-ILA units.. 1.00 0.0550 0.0006 0.0556 (0.0556) 1.00 5.70 0.21 5.50
1995-ILA Admin-
istration units. 1.00 0.0534 0.0007 0.0541 (0.0540) 1.00 5.54 0.36 5.34
1995-ILA Service
units........... 1.00 0.0500 0.0005 0.0505 (0.0505) 1.00 5.28 0.61 5.00
1994-ILA units.. 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 4.01 0.20 3.96
1994-ILA Admin-
istration units. 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 3.85 0.35 3.97
1994-ILA Service
units........... 1.00 0.0371 0.0001 0.0372 (0.0372) 1.00 3.59 0.60 3.72
1993-ILA units.. 1.00 0.0288 0.0006 0.0294 (0.0294) 1.00 2.98 0.20 2.88
1993-ILA Admin-
istration units. 1.00 0.0273 0.0006 0.0279 (0.0279) 1.00 2.83 0.35 2.73
1993-ILA Service
units........... 1.00 0.0248 0.0006 0.0254 (0.0254) 1.00 2.57 0.60 2.48
1992-ILA units.. 1.00 0.0338 0.0012 0.0350 (0.0350) 1.00 3.54 0.18 3.38
1992-ILA Admin-
istration units. 1.00 0.0326 0.0012 0.0338 (0.0338) 1.00 3.38 0.33 3.26
1992-ILA Service
units........... 1.00 0.0275 0.0011 0.0286 (0.0286) 1.00 3.13 0.58 2.75
FOR THE PERIOD JANUARY 30, 1991 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1991-ILA units.. 1.00 0.0486 0.0013 0.0499 (0.0499) 1.00 5.75(b) 0.10(b) 5.28(b)
1991-ILA Admin-
istration
units (c)....... 1.00 0.0210 0.0010 0.0220 (0.0220) 1.00 5.21(b) 0.25(b) 4.77(b)
1991-ILA Service
units (c)....... 1.00 0.0473 0.0009 0.0482 (0.0482) 1.00 5.33(b) 0.50(b) 5.13(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $708,999 0.43% 4.74%
1996-ILA Admin-
istration units. 137,706 0.58 4.60
1996-ILA Service
units........... 383,901 0.83 4.34
1995-ILA units.. 586,294 0.44 5.27
1995-ILA Admin-
istration units. 68,713 0.59 5.11
1995-ILA Service
units........... 123,254 0.84 4.77
1994-ILA units.. 547,351 0.43 3.73
1994-ILA Admin-
istration units. 64,388 0.58 3.74
1994-ILA Service
units........... 74,451 0.83 3.49
1993-ILA units.. 456,411 0.44 2.64
1993-ILA Admin-
istration units. 26,553 0.59 2.49
1993-ILA Service
units........... 34,014 0.84 2.24
1992-ILA units.. 422,506 0.45 3.11
1992-ILA Admin-
istration units. 6,915 0.60 2.99
1992-ILA Service
units........... 29,522 0.85 2.48
FOR THE PERIOD JANUARY 30, 1991 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1991-ILA units.. 424,436 0.45(b) 4.93(b)
1991-ILA Admin-
istration
units (c)....... 17,649 0.60(b) 4.42(b)
1991-ILA Service
units (c)....... 9,430 0.85(b) 4.78(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during July and Jan-
uary of 1991, respectively.
9
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Federal Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0513 -- $0.0513 $(0.0513) $1.00 5.24% 0.26% 5.13%
1996-ILA Admin-
istration units. 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.09 0.41 4.98
1996-ILA Service
units........... 1.00 0.0473 -- 0.0473 (0.0473) 1.00 4.83 0.66 4.73
1995-ILA units.. 1.00 0.0569 -- 0.0569 (0.0569) 1.00 5.83 0.26 5.69
1995-ILA Admin-
istration units. 1.00 0.0550 -- 0.0550 (0.0550) 1.00 5.67 0.41 5.50
1995-ILA Service
units........... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.41 0.66 5.22
1994-ILA units.. 1.00 0.0407 -- 0.0407 (0.0407) 1.00 4.11 0.25 4.07
1994-ILA Admin-
istration units. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.95 0.40 3.88
1994-ILA Service
units........... 1.00 0.0392 -- 0.0392 (0.0392) 1.00 3.69 0.65 3.92
1993-ILA units.. 1.00 0.0296 -- 0.0296 (0.0296) 1.00 3.00 0.25 2.96
1993-ILA Admin-
istration units. 1.00 0.0281 -- 0.0281 (0.0281) 1.00 2.84 0.40 2.81
1993-ILA Service
units (c)....... 1.00 0.0157 -- 0.0157 (0.0157) 1.00 2.56(b) 0.65(b) 2.54(b)
1992-ILA units.. 1.00 0.0358 -- 0.0358 (0.0358) 1.00 3.61 0.25 3.58
1992-ILA Admin-
istration units. 1.00 0.0340 -- 0.0340 (0.0340) 1.00 3.46 0.40 3.40
1991-ILA units.. 1.00 0.0576 -- 0.0576 (0.0576) 1.00 5.94 0.25 5.76
1991-ILA Admin-
istration units. 1.00 0.0542 -- 0.0542 (0.0542) 1.00 5.78 0.40 5.42
1991-ILA Service
units (c)....... 1.00 0.0196 -- 0.0196 (0.0196) 1.00 5.55b) 0.65(b) 5.56(b)
1990-ILA units.. 1.00 0.0772 -- 0.0772 (0.0772) 1.00 8.06 0.25 7.72
1990-ILA Admin-
istration
units (d)....... 1.00 0.0205 -- 0.0205 (0.0205) 1.00 7.39(b) 0.40(b) 7.25(b)
FOR THE PERIOD MAY 22, 1989 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1989-ILA units.. 1.00 0.0516 -- 0.0516 (0.0516) 1.00 7.62(b) 0.19(b) 8.41(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $2,303,677 0.43% 4.96%
1996-ILA Admin-
istration units. 794,537 0.58 4.81
1996-ILA Service
units........... 192,416 0.83 4.56
1995-ILA units.. 1,731,935 0.42 5.53
1995-ILA Admin-
istration units. 516,917 0.57 5.34
1995-ILA Service
units........... 102,576 0.82 5.06
1994-ILA units.. 1,625,567 0.42 3.90
1994-ILA Admin-
istration units. 329,896 0.57 3.71
1994-ILA Service
units........... 15,539 0.82 3.75
1993-ILA units.. 1,430,292 0.42 2.79
1993-ILA Admin-
istration units. 362,401 0.57 2.64
1993-ILA Service
units (c)....... 1,425 0.82(b) 2.37(b)
1992-ILA units.. 1,600,989 0.42 3.41
1992-ILA Admin-
istration units. 312,792 0.57 3.23
1991-ILA units.. 1,656,232 0.42 5.59
1991-ILA Admin-
istration units. 291,810 0.57 5.25
1991-ILA Service
units (c)....... -- 0.82(b) 5.39(b)
1990-ILA units.. 1,368,765 0.40 7.57
1990-ILA Admin-
istration
units (d)....... 90,748 0.55(b) 7.10(b)
FOR THE PERIOD MAY 22, 1989 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31,
1989-ILA units.. 455,230 0.40(b) 8.20(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Service unit activity commenced during April of 1991; no shares were
outstanding during the period from August 7, 1991 through May 15, 1993.
(d)ILA Administration unit activity commenced during September of 1990.
10
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt Diversified Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN (LOSS) ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0320 $ -- $0.0320 $(0.0320) $1.00 3.25% 0.31% 3.20%
1996-ILA Admin-
istration units. 1.00 0.0306 -- 0.0306 (0.0306) 1.00 3.09 0.46 3.06
1996-ILA Service
units........... 1.00 0.0279 -- 0.0279 (0.0279) 1.00 2.84 0.71 2.79
1995-ILA units.. 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.72 0.31 3.65
1995-ILA Admin-
istration units. 1.00 0.0351 -- 0.0351 (0.0352) 1.00 3.57 0.46 3.51
1995-ILA Service
units........... 1.00 0.0324 -- 0.0324 (0.0325) 1.00 3.31 0.71 3.24
1994-ILA units.. 1.00 0.0264 -- 0.0264 (0.0264) 1.00 2.71 0.30 2.64
1994-ILA Admin-
istration units. 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.55 0.45 2.50
1994-ILA Service
units........... 1.00 0.0220 -- 0.0220 (0.0220) 1.00 2.30 0.70 2.20
1993-ILA units.. 1.00 0.0222 -- 0.0222 (0.0222) 1.00 2.25 0.30 2.22
1993-ILA Admin-
istration units. 1.00 0.0207 -- 0.0207 (0.0207) 1.00 2.09 0.45 2.08
1993-ILA Service
units........... 1.00 0.0183 -- 0.0183 (0.0183) 1.00 1.84 0.70 1.83
1992-ILA units.. 1.00 0.0277 -- 0.0277 (0.0277) 1.00 2.82 0.30 2.77
1992-ILA Admin-
istration units. 1.00 0.0266 -- 0.0266 (0.0266) 1.00 2.67 0.45 2.66
1992-ILA Service
units........... 1.00 0.0243 -- 0.0243 (0.0243) 1.00 2.41 0.70 2.43
1991-ILA units.. 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.33 0.32 4.24
1991-ILA Admin-
istration units. 1.00 0.0406 -- 0.0406 (0.0406) 1.00 4.17 0.47 4.06
1991-ILA Service
units........... 1.00 0.0386 -- 0.0386 (0.0386) 1.00 3.91 0.72 3.86
1990-ILA units.. 1.00 0.0550 (0.0001) 0.0549 (0.0549) 1.00 5.64 0.40 5.50
1990-ILA Admin-
istration
units (c)....... 1.00 0.0301 -- 0.0301 (0.0300) 1.00 5.43(b) 0.55(b) 5.40(b)
1990-ILA Service
units (c)....... 1.00 0.0259 -- 0.0259 (0.0259) 1.00 5.17(b) 0.80(b) 5.16(b)
1989-ILA units.. 1.00 0.0591 (0.0001) 0.0590 (0.0590) 1.00 6.07 0.40 5.91
1988-ILA units.. 1.00 0.0487 0.0003 0.0490 (0.0490) 1.00 5.03 0.40 4.87
1987-ILA units.. 1.00 0.0413 (0.0003) 0.0410 (0.0410) 1.00 4.23 0.40 4.13
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1,514,443 0.41% 3.10%
1996-ILA Admin-
istration units. 59,097 0.56 2.96
1996-ILA Service
units........... 28,921 0.81 2.69
1995-ILA units.. 1,342,585 0.42 3.54
1995-ILA Admin-
istration units. 48,773 0.57 3.40
1995-ILA Service
units........... 49,647 0.82 3.13
1994-ILA units.. 1,434,965 0.41 2.53
1994-ILA Admin-
istration units. 97,778 0.56 2.39
1994-ILA Service
units........... 36,492 0.81 2.09
1993-ILA units.. 1,769,477 0.41 2.11
1993-ILA Admin-
istration units. 99,896 0.56 1.97
1993-ILA Service
units........... 45,172 0.81 1.72
1992-ILA units.. 1,333,925 0.42 2.65
1992-ILA Admin-
istration units. 50,225 0.57 2.54
1992-ILA Service
units........... 29,534 0.82 2.31
1991-ILA units.. 1,044,986 0.42 4.14
1991-ILA Admin-
istration units. 37,567 0.57 3.96
1991-ILA Service
units........... 52,399 0.82 3.76
1990-ILA units.. 603,895 0.40 5.50
1990-ILA Admin-
istration
units (c)....... 42,498 0.55(b) 5.40(b)
1990-ILA Service
units (c)....... 56,810 0.80(b) 5.16(b)
1989-ILA units.. 688,556 0.40 5.91
1988-ILA units.. 907,782 0.40 4.87
1987-ILA units.. 965,714 0.40 4.13
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
11
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt California Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET LOSS ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units.. $1.00 $0.0299 -- $0.0299 $(0.0299) $1.00 3.03% 0.41% 2.99%
1996-ILA Admin-
istration units. 1.00 0.0284 -- 0.0284 (0.0284) 1.00 2.88 0.56 2.84
1995-ILA units.. 1.00 0.0349 -- 0.0349 (0.0350) 1.00 3.55 0.41 3.49
1995-ILA Admin-
istration units. 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.40 0.56 3.32
1994-ILA units.. 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.53 0.40 2.50
1994-ILA Admin-
istration units. 1.00 0.0233 -- 0.0233 (0.0233) 1.00 2.37 0.55 2.33
1993-ILA units.. 1.00 0.0206 -- 0.0206 (0.0206) 1.00 2.09 0.40 2.06
1993-ILA Admin-
istration units. 1.00 0.0191 -- 0.0191 (0.0191) 1.00 1.93 0.55 1.91
1993-ILA Service
units........... 1.00 0.0166 -- 0.0166 (0.0166) 1.00 1.68 0.76 1.66
1992-ILA units.. 1.00 0.0256 (0.0001) 0.0255 (0.0256) 1.00 2.62 0.40 2.56
1992-ILA Admin-
istration units. 1.00 0.0235 (0.0002) 0.0233 (0.0235) 1.00 2.47 0.55 2.35
1992-ILA Service
units........... 1.00 0.0081 -- 0.0081 (0.0081) 1.00 1.99(b) 0.80(b) 2.03(b)
1991-ILA units.. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.92 0.40 3.88
1991-ILA Admin-
istration units
units........... 1.00 0.0376 -- 0.0376 (0.0376) 1.00 3.80 0.55 3.76
1990-ILA units.. 1.00 0.0511 (0.0001) 0.0510 (0.0511) 1.00 5.24 0.40 5.11
1990-ILA Admin-
istration
units (c)....... 1.00 0.0042 -- 0.0042 (0.0042) 1.00 5.14(b) 0.55(b) 5.33(b)
1989-ILA units.. 1.00 0.0573 (0.0001) 0.0572 (0.0572) 1.00 5.93 0.40 5.73
<CAPTION>
FOR THE PERIOD OCTOBER 3, 1988 (COMMENCEMENT OF
OPERATIONS) THROUGH DECEMBER 31,
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988-ILA units.. 1.00 0.0139 -- 0.0139 (0.0139) 1.00 5.81(b) 0.24(b) 5.74(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C>
1996-ILA units.. $440,476 0.42% 2.98%
1996-ILA Admin-
istration units. 142 0.57 2.83
1995-ILA units.. 346,728 0.41 3.49
1995-ILA Admin-
istration units. 61 0.56 3.32
1994-ILA units.. 227,399 0.41 2.49
1994-ILA Admin-
istration units. 790 0.56 2.32
1993-ILA units.. 229,839 0.44 2.02
1993-ILA Admin-
istration units. 1,425 0.59 1.87
1993-ILA Service
units........... -- 0.84 1.54
1992-ILA units.. 161,868 0.47 2.49
1992-ILA Admin-
istration units. 31 0.62 2.28
1992-ILA Service
units........... 3 0.87(b) 1.96(b)
1991-ILA units.. 102,494 0.47 3.81
1991-ILA Admin-
istration units
units........... 13 0.62 3.69
1990-ILA units.. 106,972 0.40 5.11
1990-ILA Admin-
istration
units (c)....... 68 0.55(b) 5.33(b)
1989-ILA units.. 112,463 0.40 5.73
<CAPTION>
FOR THE PERIOD OCTOBER 3, 1988 (COMMENCEMENT OF
OPERATIONS) THROUGH DECEMBER 31,
- -----------------------------------------------
<S> <C> <C> <C>
1988-ILA units.. 41,028 0.38(b) 5.60(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during December of
1990 and August of 1992, respectively. No service shares were outstanding for
the years ended December 31, 1996, 1995, 1994.
12
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt New York Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET
NET ASSET REALIZED TOTAL
VALUE AT NET LOSS ON INCOME FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS OPERATIONS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C>
1996-ILA units.. $1.00 $0.0301 -- $0.0301
1996-ILA Admin-
istration units. 1.00 0.0288 -- 0.0288
1995-ILA units.. 1.00 0.0344 -- 0.0344
1995-ILA Admin-
istration units. 1.00 0.0328 -- 0.0328
1994-ILA units.. 1.00 0.0262 -- 0.0262
1994-ILA Admin-
istration units. 1.00 0.0247 -- 0.0247
1993-ILA units.. 1.00 0.0221 -- 0.0221
1993-ILA Admin-
istration units. 1.00 0.0205 -- 0.0205
1992-ILA units.. 1.00 0.0265 -- 0.0265
1992-ILA Admin-
istration units. 1.00 0.0253 -- 0.0253
FOR THE PERIOD FEBRUARY 15, 1991 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- -------------------------------------------------------------
1991-ILA units.. 1.00 0.0347 (0.0002) 0.0345
1991-ILA Admin-
istration
<CAPTION>units (c)....... 1.00 0.0330 -- 0.0330
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
RATIO OF NET NET RATIO OF NET
NET ASSET RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INVESTMENT
VALUE AT EXPENSES TO INCOME TO END OF EXPENSES TO INCOME TO
DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------
FOR THE YEARS
ENDED DECEMBER
31,
- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units.. $(0.0301) $1.00 3.05% 0.32% 3.01% $70,175 0.43% 2.90%
1996-ILA Admin-
istration units. (0.0288) 1.00 2.90 0.47 2.88 44,319 0.58 2.77
1995-ILA units.. (0.0344) 1.00 3.51 0.30 3.44 90,537 0.44 3.30
1995-ILA Admin-
istration units. (0.0328) 1.00 3.35 0.45 3.28 26,724 0.59 3.14
1994-ILA units.. (0.0262) 1.00 2.56 0.24 2.62 84,517 0.47 2.39
1994-ILA Admin-
istration units. (0.0247) 1.00 2.41 0.39 2.47 38,970 0.62 2.24
1993-ILA units.. (0.0221) 1.00 2.21 0.10 2.21 48,367 0.51 1.80
1993-ILA Admin-
istration units. (0.0205) 1.00 2.05 0.25 2.05 20,306 0.66 1.64
1992-ILA units.. (0.0265) 1.00 2.71 0.10 2.65 16,844 0.57 2.18
1992-ILA Admin-
istration units. (0.0253) 1.00 2.55 0.25 2.53 14,641 0.72 2.06
FOR THE PERIOD FEBRUARY 15, 1991 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31,
- -------------------------------------------------------------
1991-ILA units.. (0.0347) 1.00 4.02(b) 0.10(b) 3.96(b) 11,070 0.76(b) 3.30(b)
1991-ILA Admin-
istration
units (c)....... (0.0330) 1.00 3.87(b) 0.25(b) 3.90(b) 19,198 0.91(b) 3.24(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c)ILA Administration unit activity commenced during February of 1991.
13
<PAGE>
AN INTRODUCTION TO THE PORTFOLIOS
THE TRUST: The Trust is a no-load, open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "Invest-
ment Company Act"). Each Portfolio is a separate pool of assets which pursues
its investment objective through separate investment policies, as described
below.
THE ADVISER: Goldman Sachs Asset Management, a separate operating division
of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Portfolios' invest-
ment adviser (the "Adviser" or "GSAM").
THE DISTRIBUTOR: Goldman Sachs, which serves as the Portfolios' distributor
and transfer agent, is one of the largest international investment banking and
brokerage firms in the United States.
THE INVESTORS: The Portfolios are designed for investors seeking a high rate
of return, a stable net asset value and convenient liquidation privileges. The
Portfolios are particularly suitable for banks, corporations and other finan-
cial institutions that seek investment of short-term funds for their own ac-
counts or for the accounts of their customers.
THE PORTFOLIOS: Each Portfolio's securities are valued by the amortized cost
method as permitted by a rule ("Rule 2a-7") of the Securities and Exchange
Commission ("SEC"). Under such rule, each Portfolio may invest only in securi-
ties that are determined to present minimal credit risk and meet certain other
criteria.
TAXABLE PORTFOLIOS: Prime Obligations, Money Market, Treasury Obligations
and Government Portfolios.
TAX-ADVANTAGED PORTFOLIOS: Treasury Instruments and Federal Portfolios.
INVESTMENT OBJECTIVES AND POLICIES FOR TAXABLE AND TAX-ADVANTAGED
PORTFOLIOS: To seek to maximize current income to the extent consistent
with the preservation of capital and the maintenance of liquidity by in-
vesting exclusively in high quality money market instruments. The Treasury
Instruments and Federal Portfolios pursue their objectives by limiting
their investments to certain U.S. Treasury Obligations and U.S. Government
Securities (each as defined herein), respectively, the interest from which
is generally exempt from state income taxation. Each investor should con-
sult his or her tax adviser to determine whether distributions from the
Treasury Instruments and Federal Portfolios (and any other Portfolio that
may hold such obligations) derived from interest on such obligations are
exempt from state income taxation in the investor's own state.
TAX-EXEMPT PORTFOLIOS: Tax-Exempt Diversified, Tax-Exempt California and
Tax-Exempt New York Portfolios.
INVESTMENT OBJECTIVES AND POLICIES FOR TAX-EXEMPT PORTFOLIOS: To seek to
provide unitholders, to the extent consistent with the preservation of cap-
ital and prescribed portfolio standards, with a high level of income exempt
from federal income tax by investing primarily in Municipal Instruments, as
defined herein. In addition, the Tax-Exempt California and Tax-Exempt New
York Portfolios seek to provide unitholders with income exempt from Cali-
fornia state and New York state and city personal income taxes, respective-
ly.
NET ASSET VALUE: Each Portfolio seeks to maintain a stable net asset value
of $1.00 per unit.
MAXIMUM REMAINING MATURITY OF PORTFOLIO INVESTMENTS: Thirteen months at the
time of purchase.
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
FIRST TIER SECURITIES: Each Portfolio may purchase securities which are
rated (or that have been issued by an issuer that is rated with respect to a
class of short-term debt obligations, or any security within that class,
14
<PAGE>
comparable in priority and quality with such securities) in the highest short-
term rating category by at least two NRSROs (as defined below), or if only one
NRSRO has assigned a rating, by that NRSRO. U.S. Government Securities as de-
fined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Portfolios may purchase securities
which are not First Tier Securities but which are rated in the top two short-
term rating categories by at least two NRSROs, or if only one NRSRO has as-
signed a rating, by that NRSRO. The Taxable Portfolios will not invest in a
security which is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, unrated securities
may be purchased if they are deemed to be of comparable quality to First Tier
Securities, or to the extent that a Portfolio may purchase Second Tier Securi-
ties, comparable in quality to Second Tier Securities.
NRSROS: Nationally Recognized Statistical Rating Organizations include Stan-
dard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Lim-
ited and its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a descrip-
tion of each NRSRO's rating categories, see Appendix A to the Statement of Ad-
ditional Information.
15
<PAGE>
INVESTMENT POLICIES MATRIX
<TABLE>
<CAPTION>
SHORT-TERM
OBLIGATIONS OF ASSET-BACKED &
US US CORPORATIONS RECEIVABLES-
TREASURY GOVERNMENT BANK COMMERCIAL AND OTHER REPURCHASE BACKED
PORTFOLIO OBLIGATIONS SECURITIES OBLIGATIONS PAPER ENTITIES AGREEMENTS SECURITIES+
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Prime
Obligations [_] [_] [_] [_] [_] [_] [_]
U.S. Banks Only U.S. entities only
- ------------------------------------------------------------------------------------------------------------------------------
Money Market
[_] [_] [_] [_] [_] [_] [_]
Over 25% of total US and US and Foreign
assets must be Foreign (US$) (US$) Entities
invested in US Commercial Paper
and Foreign
(US$) Banks
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Obligations [_] [_]
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Instruments [_]
- -------------------------------------------------------------------------------------------------------------------------------
Government [_] [_] [_]
- -------------------------------------------------------------------------------------------------------------------------------
Federal [_] [_]
(Does not intend
to invest)
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
Diversified [_]
Tax-exempt only
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
California [_]
Tax-exempt only
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt New
York [_]
Tax-exempt only
<CAPTION>
FOREIGN
GOVERNMENT
OBLIGATIONS
PORTFOLIO (US$)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Prime
Obligations
- -------------------------------------------------------------------------------------------------------------------------------
Money Market
[_]
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Obligations
- -------------------------------------------------------------------------------------------------------------------------------
Treasury
Instruments
- -------------------------------------------------------------------------------------------------------------------------------
Government
- -------------------------------------------------------------------------------------------------------------------------------
Federal
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
Diversified
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt
California
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt New
York
</TABLE>
Note: See "Description of Securities and Investment Techniques" for a de-
scription of, and certain criteria applicable to, each of these categories
of investments.
+ To the extent required by Rule 2a-7, asset-backed and receivables-backed
securities will be rated by the requisite number of NRSROs.
16
<PAGE>
<TABLE>
<CAPTION>
SUMMARY
OF
TAXABLE TAX-EXEMPT CREDIT INVESTMENT UNRATED TAXATION FOR
MUNICIPALS MUNICIPALS QUALITY**** COMPANIES SECURITIES DISTRIBUTIONS* MISCELLANEOUS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[_] [_] [_]
First Up to 10% of Taxable federal
Tier total assets and state**
in other
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
First Up to 10% Taxable federal May invest in
Tier of total and state** obligations of
assets in the
other International
investment Bank for
companies Reconstruction
and Development
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal
Tier of total and state**
assets in
other
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal
Tier of total and generally
assets in exempt from
other state taxation
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal
Tier of total and state**
assets in
other
investment
companies
- ----------------------------------------------------------------------------------------------------------------------
[_]
First Up to 10% Taxable federal Under
Tier of total and generally extraordinary
assets in exempt from circumstances,
other state taxation may hold cash,
investment U.S. Government
companies Securities
subject to
state taxation
or cash
equivalents
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
At least 80% of net assets First or Up to 10% Tax-exempt May (but does
in Municipal Instruments Second of total federal and not currently
(except in extraordinary Tier assets in taxable intend to)
circumstances) other state*** invest up to
investment 20% in AMT
companies securities and
may temporarily
invest in the
taxable money
market
instruments
described
herein
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
First or Up to 10% Tax-exempt May (but does
At least 80% of net assets Second of total federal and not currently
in Municipal Instruments and Tier assets in California intend to)
at least 65% of its total other State invest up to
assets must be invested in investment 20% in AMT
California Instruments companies securities and
(except in extraordinary may temporarily
circumstances) invest in the
taxable money
market
instruments
described
herein
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
At least 80% of net assets First or Up to 10% Tax-exempt May invest up
in Municipal Instruments and Second of total federal, New to 20% in AMT
at least 65% of its total Tier assets in York State and securities and
assets must be invested in other New York City may temporarily
New York Instruments (except investment invest in the
in companies taxable money
extraordinary circumstances) market
instruments
described
herein
</TABLE>
* See "Taxes" below for an explanation of the tax consequences summarized in
the table above.
** Taxable in many states except for distributions from U.S. Treasury obliga-
tion interest income and certain U.S. Government securities interest in-
come.
*** Taxable except for distributions from interest on obligations of an in-
vestor's state of residence in certain states.
**** To the extent permitted by Rule 2a-7, a Portfolio holding a security fully
supported by a guarantee may substitute the credit quality of the guaran-
tee in determining the credit quality of the security.
17
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. TREASURY OBLIGATIONS
"U.S. Treasury Obligations" are securities issued or guaranteed by the U.S.
Treasury, payments of principal and interest on which are backed by the full
faith and credit of the U.S. Government.
U.S. GOVERNMENT SECURITIES
"U.S. Government Securities" are obligations issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities. Unlike U.S.
Treasury Obligations, securities issued or guaranteed by U.S. Government agen-
cies, authorities or instrumentalities are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Government
National Mortgage Association), (b) the right of the issuer to borrow from the
Treasury (such as securities of the Student Loan Marketing Association), (c)
the discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation), or (d) only the credit of the
issuer. No assurance can be given that the U.S. Government will provide finan-
cial support to U.S. Government agencies, authorities or instrumentalities in
the future. U.S. Government Securities may include zero coupon bonds. Such
bonds may be purchased when yields are attractive.
Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are deemed to include (a) secu-
rities for which the payment of principal and interest is backed by an irrevo-
cable letter of credit issued by the U.S. Government, its agencies, authori-
ties or instrumentalities and (b) participations in loans made to foreign gov-
ernments or their agencies that are so guaranteed. The secondary market for
certain of these participations is limited. Such participations may therefore
be regarded as illiquid.
Each Portfolio may also invest in separately traded principal and interest
components of securities guaranteed or issued by the U.S. Treasury if such
components are traded independently under the Separate Trading of Registered
Interest and Principal of Securities program ("STRIPS").
The Treasury Instruments and Federal Portfolios invest in U.S. Treasury Ob-
ligations and the Federal Portfolio may also invest in certain U.S. Government
Securities the interest from which is generally exempt from state income taxa-
tion. Securities generally eligible for this exemption include those issued by
the U.S. Treasury and those issued by certain agencies, authorities or instru-
mentalities of the U.S. Government, including the Federal Home Loan Banks,
Federal Farm Credit Banks, Tennessee Valley Authority and the Student Loan
Marketing Association.
CUSTODIAL RECEIPTS
Each Portfolio (other than the Treasury Obligations, Treasury Instruments,
Government and Federal Portfolios) may also acquire securities issued or guar-
anteed as to principal and interest by the U.S. Government, its agencies, au-
thorities or instrumentalities in the form of custodial receipts that evidence
ownership of future
18
<PAGE>
interest payments, principal payments or both on certain notes or bonds issued
by the U.S. Government, its agencies, authorities or instrumentalities. For
certain securities law purposes, custodial receipts are not considered obliga-
tions of the U.S. Government.
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations and Money Market Portfolios may invest in "U.S. Bank
Obligations" limited to securities issued or guaranteed by U.S. banks (includ-
ing certificates of deposit, commercial paper, unsecured bank promissory notes
and bankers' acceptances) which have more than $1 billion in total assets at
the time of purchase. Such obligations may also include debt obligations is-
sued by U.S. subsidiaries of such banks.
The Money Market Portfolio may also invest in "Foreign Bank Obligations"
limited to U.S. dollar denominated obligations issued or guaranteed (including
fixed time deposits) by foreign banks which have more than $1 billion in total
assets at the time of purchase, U.S. branches of such foreign banks (Yankee
obligations), foreign branches of such foreign banks and foreign branches of
U.S. banks having more than $1 billion in total assets at the time of pur-
chase. Such bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligation
or by government regulation.
The Money Market Portfolio will invest more than 25% of its total assets in
bank obligations (whether foreign or domestic), including bank commercial pa-
per. However, if adverse economic conditions prevail in the banking industry
(such as substantial losses on loans, increases in non-performing assets and
charge-offs and declines in total deposits) the Portfolio may, for defensive
purposes, temporarily invest less than 25% of its total assets in bank obliga-
tions. As a result, the Portfolio may be especially affected by favorable and
adverse developments in or related to the banking industry. The activities of
U.S. banks and most foreign banks are subject to comprehensive regulations
which, in the case of U.S. regulations, have undergone substantial changes in
the past decade. The enactment of new legislation or regulations, as well as
changes in interpretation and enforcement of current laws, may affect the man-
ner of operations and profitability of domestic and foreign banks. Significant
developments in the U.S. banking industry have included deregulation of inter-
est rates, increased competition from other types of financial institutions,
increased acquisition activity, geographic expansion and, during the late
1980's, an increased number of bank failures. Banks may be particularly sus-
ceptible to certain economic factors, such as interest rate changes and ad-
verse developments in the market for real estate. Fiscal and monetary policy
and general economic cycles can affect the availability and cost of funds,
loan demand and asset quality and thereby impact the earnings and financial
conditions of banks. See "Foreign Government Obligations--Foreign Risks" be-
low.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations and Money Market Portfolios may invest in "Commercial
Paper" (including variable amount master demand notes and asset-backed commer-
cial paper) which is payable in U.S. dollars and is issued or guaranteed by
U.S. corporations, U.S. commercial banks, foreign corporations (Money Market
Portfolio only), foreign commercial banks (Money Market Portfolio only) or
other entities. In addition, the Portfolios may invest in other short-term ob-
ligations (including short-term funding agreements) payable in U.S. dollars
and issued or guaranteed by U.S. corporations, foreign corporations (Money
Market Portfolio only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations and Money Market Portfolios may invest in "Asset-
Backed and Receivables-Backed Securities" which represent participations in,
or are secured by and payable from, pools of assets such as motor
19
<PAGE>
vehicle installment sale contracts, installment loan contracts, leases of
various types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. Such asset pools
are securitized through the use of privately-formed trusts or special purpose
corporations. Payments or distributions of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution, or other
credit enhancements may be present. To the extent consistent with its
investment objectives and policies, each of the Prime Obligations and Money
Market Portfolios may invest in new types of mortgage-related securities and
in other asset-backed securities that may be developed in the future.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market Portfolio may invest in U.S. dollar-denominated obligations
(limited to commercial paper and other notes) issued or guaranteed by a for-
eign government or entity located or organized in a foreign country that main-
tains a short-term foreign currency rating in the highest short-term ratings
category by the requisite number of NRSROs. The Money Market Portfolio may not
invest more than 25% of its total assets in the securities of any one foreign
government.
FOREIGN RISKS. Investments in foreign securities and bank obligations may
present a greater degree of risk than investments in securities of domestic
issuers because of less publicly-available financial and other information,
less securities regulation, potential imposition of foreign withholding and
other taxes, war, expropriation or other adverse governmental actions. Foreign
banks and their foreign branches are not regulated by U.S. banking authori-
ties, and generally are not bound by the accounting, auditing and financial
reporting standards applicable to U.S. banks.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS: Obligations issued by or on behalf of states, terri-
tories and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia, the
interest from which is, in the opinion of bond counsel, if any, excluded from
gross income for federal income tax purposes.
CALIFORNIA INSTRUMENTS: Obligations issued by or on behalf of the State of
California and its political subdivisions, agencies and instrumentalities and
the governments of Puerto Rico, the U.S. Virgin Islands and Guam, the interest
from which is excluded from gross income for federal income tax purposes and
is exempt from California state personal income tax.
NEW YORK INSTRUMENTS: Obligations issued by or on behalf of the State of New
York and its political subdivisions, agencies and instrumentalities and the
governments of Puerto Rico, the U.S. Virgin Islands and Guam, the interest
from which is excluded from gross income for federal income tax purposes and
is exempt from New York state and New York city personal income tax.
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TYPES OF MUNICIPAL, CALIFORNIA AND NEW YORK INSTRUMENTS:
<TABLE>
<CAPTION>
TAX- TAX-
EXEMPT DIVERSIFIED EXEMPT CALIFORNIA TAX-EXEMPT NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED RATE NOTES AND In highest short- In one of the two In one of the two
SIMILAR DEBT term or one of the highest short-term highest short-term
INSTRUMENTS two highest long- or long-term rating or long-term rating
term rating categories categories
categories
- --------------------------------------------------------------------------------------
VARIABLE AND In highest short- In one of the two In one of the two
FLOATING RATE DEMAND term or one of the highest short-term highest short-term
INSTRUMENTS two highest long- or long-term rating or long-term rating
term rating categories categories
categories
- --------------------------------------------------------------------------------------
TAX-EXEMPT In highest rating In one of the two In one of the two
COMMERCIAL PAPER category highest rating highest rating
categories categories
- --------------------------------------------------------------------------------------
MUNICIPAL BONDS In one of the two In one of the two In one of the two
highest rating highest rating highest rating
categories categories categories
- --------------------------------------------------------------------------------------
UNRATED NOTES, Determined to be of Determined to be of Determined to be of
PAPER, BONDS AND comparable quality comparable quality comparable quality
OTHER INSTRUMENTS by Adviser pursuant by Adviser pursuant by Adviser pursuant
to criteria approved to criteria approved to criteria approved
by the Trustees by the Trustees by the Trustees
</TABLE>
As a matter of fundamental policy, at least 80% of each of the Tax-Exempt
Diversified, Tax-Exempt California and Tax-Exempt New York Portfolio's net as-
sets will ordinarily be invested in Municipal Instruments, except in extraor-
dinary circumstances. In addition, as a matter of fundamental policy, at least
65% of each of the Tax-Exempt California and Tax-Exempt New York Portfolio's
total assets will be invested in California and New York Instruments, respec-
tively, except in extraordinary circumstances. Each Tax-Exempt Portfolio may
temporarily invest in taxable money market instruments or, in the case of the
Tax-Exempt California and New York Portfolios, in Municipal Instruments that
are not California or New York Instruments, respectively, when acceptable Cal-
ifornia and New York Instruments are not available or when the Adviser be-
lieves that the market conditions dictate a defensive posture. Investments in
taxable money market instruments will be limited to those meeting the quality
standards of each Tax-Exempt Portfolio. The Tax-Exempt California and Tax-Ex-
empt New York Portfolios' distributions of interest from Municipal Instruments
other than California and New York Instruments, respectively, may be subject
to California and New York state and New York city personal income taxes, re-
spectively.
The Prime Obligations and Money Market Portfolios may invest in short-term
obligations issued or guaranteed by state and municipal governments when
yields on such securities are attractive compared to other taxable invest-
ments.
MUNICIPAL NOTES AND BONDS. Municipal notes include tax anticipation notes
("TANs"), revenue anticipation notes ("RANs"), bond anticipation notes
("BANs"), tax and revenue anticipation notes ("TRANs") and construction loan
notes. Municipal bonds include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing munici-
pality and are considered the safest type of bonds. Revenue bonds are backed
by the revenues of a project or facility such as the tolls from a toll bridge.
Revenue bonds also include lease rental revenue bonds which are issued by a
state or local authority for capital projects and are secured by annual lease
payments from the state or locality sufficient to cover debt service on the
authority's obligations. Industrial development bonds (generally referred to
under current tax law as "private activity bonds") are a specific type of rev-
enue bond backed by the credit and security of a private user and
21
<PAGE>
therefore have more potential risk. Municipal bonds may be issued in a variety
of forms, including commercial paper, tender option bonds and variable and
floating rate securities.
TENDER OPTION BONDS. A tender option bond is a Municipal Instrument (gener-
ally held pursuant to a custodial arrangement) having a relatively long matu-
rity 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 finan-
cial institution, pursuant to which such institution grants the security
holder the option, at periodic intervals, to tender its securities to the in-
stitution and receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees equal to the dif-
ference between the bond's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the 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 pre-
vailing short-term, tax-exempt rate. However, an institution will not be obli-
gated to accept tendered bonds in the event of certain defaults or a signifi-
cant downgrading in the credit rating assigned to the issuer of the bond. The
tender option will be taken into account in determining the maturity of the
tender option bonds and a Portfolio's average portfolio maturity. There is a
risk that a Portfolio will not be considered the owner of a tender option bond
for federal income tax purposes and thus will not be entitled to treat such
interest as exempt from federal income tax.
REVENUE ANTICIPATION WARRANTS. Revenue Anticipation Warrants ("RAWs") are
issued in anticipation of the issuer's receipt of revenues and present the
risk that such revenues will be insufficient to satisfy the issuer's payment
obligations. The entire amount of principal and interest on RAWs is due at
maturity. RAWs, including those with a maturity of more than 397 days, may
also be repackaged as instruments which include a demand feature that permits
the holder to sell the RAWs to a bank or other financial institution at a
purchase price equal to par plus accrued interest on each interest rate reset
date.
FLOATING AND VARIABLE RATE OBLIGATIONS. The value of floating and variable
rate obligations generally is more stable than that of fixed rate obligations
in response to changes in interest rate levels. Variable and floating rate ob-
ligations usually have demand features that permit the Portfolios to sell them
at par value plus accrued interest upon short notice. The issuers or financial
intermediaries providing demand features may support their ability to purchase
the obligations by obtaining credit with liquidity supports. These may include
lines of credit, which are conditional commitments to lend and letters of
credit, which will ordinarily be irrevocable, both of which may be issued by
domestic banks or foreign banks which have a branch, agency or subsidiary in
the United States. When considering whether an obligation meets a Portfolio's
quality standards, the Portfolio will, to the extent permitted by Rule 2a-7,
look to the creditworthiness of the party providing unconditional demand fea-
tures or other unconditional obligations to support the credit of the issuer
of the security. A Portfolio may consider the maturity of a variable or float-
ing rate Municipal Instrument to be shorter than its ultimate stated maturity
if the Portfolio has the right to demand prepayment of its principal at speci-
fied intervals prior to the security's ultimate stated maturity, subject to
the conditions for using amortized cost valuation under the Investment Company
Act. A Portfolio may purchase such variable or floating rate obligations from
the issuers or may purchase certificates of participation, a type of floating
or variable rate obligation, which are interests in a pool of debt obligations
held by a bank or other financial institution.
INDUSTRIAL DEVELOPMENT BONDS. The Portfolios (other than the Treasury Obli-
gations, Treasury Instruments, Government and Federal Portfolios) may invest
in industrial development bonds (generally referred to under current tax law
as "private activity bonds"), the interest from which would be an item of tax
preference when distributed as "exempt-interest dividends" to unitholders un-
der the federal alternative minimum tax. See
22
<PAGE>
"Taxes" and "Distributions." The Tax-Exempt New York Portfolio may invest up
to 20% of its net assets in private activity bonds. The Tax-Exempt Diversified
and Tax-Exempt California Portfolios do not currently intend to invest in such
bonds. If such policy should change in the future, unitholders would be noti-
fied and such investments would not exceed 20% of each Portfolio's net assets.
OTHER POLICIES. Ordinarily, the Tax-Exempt Portfolios expect that 100% of
their portfolio securities will be Municipal Instruments. However, the Portfo-
lios may hold cash or invest in short-term taxable securities as set forth
above. Such Portfolios may invest 25% or more of the value of their respective
total assets in Municipal Instruments which are related in such a way that an
economic, business or political development or change affecting one Municipal
Instrument would also affect the other Municipal Instruments. For example, the
Tax-Exempt Portfolios may invest all of their respective assets in (a) Munici-
pal Instruments the interest on which is paid solely from revenues from simi-
lar projects such as hospitals, electric utility systems, multi-family hous-
ing, nursing homes, commercial facilities (including hotels), steel companies
or life care facilities, (b) Municipal Instruments whose issuers are in the
same state (including, in the case of the Tax-Exempt California and Tax-Exempt
New York Portfolios, issuers in states other than California and New York, re-
spectively), or (c) industrial development obligations. Concentration of a
Portfolio's investments in these Municipal Instruments will subject the Port-
folio, to a greater extent than if such investment was more limited, to the
risks of adverse economic, business or political developments affecting any
such state, industry or other area of concentration.
Each Portfolio (other than the Treasury Obligations, Treasury Instruments,
Government and Federal Portfolios) may purchase Municipal Instruments which
are backed by letters of credit, which will ordinarily be irrevocable, issued
by domestic banks or foreign banks (excluding Prime Obligations Portfolio)
which have a branch, agency or subsidiary in the United States. In addition,
these Portfolios may acquire securities in the form of custodial receipts
which evidence ownership of future interest payments, principal payments or
both on obligations of certain state and local governments and authorities.
In order to enhance the liquidity, stability, or quality of a Municipal In-
strument, each Portfolio (other than the Treasury Obligations, Treasury In-
struments, Government and Federal Portfolios) may acquire the right to sell
the security to another party at a guaranteed price and date.
INVESTING IN CALIFORNIA AND NEW YORK
The Tax-Exempt California and Tax-Exempt New York Portfolios concentrate
their investments in California and New York Instruments, respectively. Conse-
quently, such Portfolios are more susceptible to factors adversely affecting
issuers of California and New York Instruments, respectively, and may be risk-
ier than comparable municipal bond funds and money market funds that do not
emphasize these issuers to this degree.
The Tax-Exempt California Portfolio's investments can be affected by politi-
cal and economic developments within the State of California (the "State'),
and by the financial condition of the State, its public authorities and polit-
ical subdivisions. After suffering a severe recession in the early 1990's
which caused the State to experience financial difficulties, California's
economy entered a sustained recovery since late 1993 and the State's budget
has returned to a positive balance. California's long-term credit rating has
been raised after being reduced during the recession. To respond to its own
revenue shortfalls during the recession, the State reduced assistance to its
public authorities and political subdivisions. Cutbacks in state aid could
further adversely affect the financial condition of cities, counties and edu-
cation districts which are subject to their own fiscal constraints. California
voters in the past have passed amendments to the California Constitution and
other measures that limit the taxing and spending authority of California gov-
ernmental entities and future voter initiatives could result in adverse
23
<PAGE>
consequences affecting California Instruments. Also, the ultimate fiscal ef-
fect of federally-mandated reform of welfare programs on the State and its lo-
cal governments is still to be resolved.
These factors, among others (including the outcome of related pending liti-
gation), could reduce the credit standing of certain issuers of California In-
struments. A more detailed discussion of the risks of investing in California
is included in the Statement of Additional Information.
The Tax-Exempt New York Portfolio's investments can be affected by political
and economic developments within the State of New York (the "State"), and by
the financial conditions of the State, its public authorities and political
subdivisions, particularly the City of New York (the "City"). The State and
the City face long-term economic problems that could seriously affect their
ability and that of other issuers of New York Instruments to meet their finan-
cial obligations. Certain substantial issuers of New York Instruments (includ-
ing issuers whose obligations may be acquired by the Portfolio) have experi-
enced serious financial difficulties in recent years. These difficulties have
at times jeopardized the credit standing and impaired the borrowing abilities
of all New York issuers and have generally contributed to higher interest
costs for their borrowings and fewer markets for their outstanding debt obli-
gations. In recent years, several different issues of municipal securities of
the State and its agencies and instrumentalities and of the City have been
downgraded by S&P and Moody's. On the other hand, strong demand for New York
Instruments has at times had the effect of permitting New York Instruments to
be issued with yields relatively lower, and after issuance, to trade in the
market at prices relatively higher, than comparably rated municipal obliga-
tions issued by other jurisdictions. A recurrence of the financial difficul-
ties previously experienced by certain issuers of New York Instruments could
result in defaults or declines in the market values of those issuers' existing
obligations and, possibly, in the obligations of other issuers of New York In-
struments. Although as of April 1, 1997 no issuers of New York Instruments
were in default with respect to the payment of their municipal obligations,
the occurrence of any such default could affect adversely the market values
and marketability of all New York Instruments and, consequently, the net asset
value of the Portfolio's holdings. A more detailed discussion of the risks of
investing in New York is included in the Statement of Additional Information.
If California, New York, or any of their local governmental entities are un-
able to meet their financial obligations, the corresponding Portfolio's in-
come, net asset value, ability to preserve or realize appreciation of capital
or liquidity could be adversely affected. Also, neither of these Portfolios is
a diversified fund (except to the extent that diversification is required for
federal income tax purposes). For these tax purposes, with respect to 50% of
the value of its total assets, none of these Portfolios invests more than 5%
of the value of its total assets in securities of a single issuer (except U.S.
Government Securities or securities of other regulated investment companies),
nor, with respect to the other 50% of the value of its total assets, does it
invest more than 25% of the value of its total assets in the securities of a
single issuer (except U.S. Government Securities or securities of other regu-
lated investment companies). These Federal tax diversification requirements
apply only at taxable quarter ends and are subject to certain qualifications
and exceptions. Because they may invest a larger percentage of their assets in
the securities of fewer issuers than do diversified funds, these Portfolios
may be exposed to greater risk in that an adverse change in the condition of
one or a small number of issuers would have a greater impact on them.
REPURCHASE AGREEMENTS
Each Portfolio (other than the Treasury Instruments Portfolio) may only en-
ter into repurchase agreements with primary dealers in U.S. Government Securi-
ties. A repurchase agreement is an agreement under which a Portfolio purchases
securities and the seller agrees to repurchase the securities within a partic-
ular time at a specified price. Such price will exceed the original purchase
price, the difference being income to the Portfolio,
24
<PAGE>
and will be unrelated to the interest rate on the purchased security. A Port-
folio's custodian or subcustodian will maintain custody of the purchased secu-
rities for the duration of the agreement. The value of the purchased securi-
ties, including accrued interest, will at all times equal or exceed the value
of the repurchase agreement. In the event of bankruptcy of the seller or fail-
ure of the seller to repurchase the securities as agreed, a Portfolio could
suffer losses, including loss of interest on or principal of the security and
costs associated with delay and enforcement of the repurchase agreement. In
evaluating whether to enter into a repurchase agreement, the Adviser will
carefully consider the creditworthiness of the seller pursuant to procedures
reviewed and approved by the Trustees. Distributions of the income from repur-
chase agreements entered into by a Portfolio will be taxable to its
unitholders. In addition, each Portfolio (other than the Treasury Instruments
Portfolio), together with other registered investment companies having advi-
sory agreements with the Adviser or any of its affiliates, may transfer
uninvested cash balances into a single joint account, the daily aggregate bal-
ance of which will be invested in one or more repurchase agreements.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Portfolio may purchase when-issued securities and make contracts to
purchase or sell securities for a fixed price at a future date beyond custom-
ary settlement time. A Portfolio is required to hold and maintain in a segre-
gated account with the Portfolio's custodian or subcustodian until three days
prior to settlement date, cash or liquid assets in an amount sufficient to
meet the purchase price. Alternatively, a Portfolio may enter into offsetting
contracts for the forward sale of other securities that it owns. Securities
purchased or sold on a when-issued or forward commitment basis involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date or if the value of the security to be sold increases prior to
the settlement date. Although a Portfolio would generally purchase securities
on a when-issued or forward commitment basis with the intention of acquiring
securities for its portfolio, the Portfolio may dispose of a when-issued secu-
rity or forward commitment prior to settlement if the Adviser deems it appro-
priate to do so.
OTHER INVESTMENT COMPANIES
The Adviser will determine, under guidelines established by the Trustees,
whether securities issued by other money market investment companies present
minimal credit risks. The amount of each Portfolio's investments in securities
of other investment companies will be subject to the limitations on such in-
vestments prescribed by the Investment Company Act. These limits include a
prohibition on any Portfolio acquiring more than 3% of the voting shares of
any other investment company and a prohibition on investing more than 5% of a
Portfolio's total assets in securities of any one investment company or more
than 10% of its total assets in securities of all investment companies. Each
Portfolio will indirectly bear its proportionate share of any management fees
and other expenses paid by such other investment companies. Such other invest-
ment companies will have investment objectives, policies and restrictions sub-
stantially similar to those of the acquiring Portfolio and will be subject to
substantially the same risks.
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<PAGE>
INVESTMENT LIMITATIONS
TAXABLE AND TAX-EXEMPT PORTFOLIOS. Each Portfolio will comply with the con-
ditions for using amortized cost valuation set forth in Rule 2a-7 under the
Investment Company Act including, but not limited to, those conditions relat-
ing to maturity, diversification and credit quality. These operating policies
may be more restrictive than the fundamental policies set forth in the State-
ment of Additional Information.
INVESTMENT RESTRICTIONS. Each Portfolio is subject to certain investment re-
strictions that are described in detail under "Investment Restrictions" in the
Statement of Additional Information. Fundamental investment restrictions and
the investment objective of a Portfolio (except the Tax-Exempt California and
Tax-Exempt New York Portfolios' objectives of providing unitholders with in-
come exempt from California state and New York state and New York city per-
sonal income tax, respectively) cannot be changed without approval of a major-
ity of the outstanding units of that Portfolio. The Treasury Obligations Port-
folio's policy of limiting its investments to U.S. Treasury Obligations and
related repurchase agreements is also fundamental. All investment policies not
specifically designated as fundamental are non-fundamental and may be changed
without unitholder approval.
RESTRICTED AND OTHER ILLIQUID SECURITIES. Each Portfolio may purchase secu-
rities that are not registered ("restricted securities") under the Securities
Act of 1933 ("1933 Act"), but can be offered and sold to "qualified institu-
tional buyers" under Rule 144A under the 1933 Act. However, a Portfolio will
not invest more than 10% of its net assets in illiquid investments, which in-
clude fixed time deposits maturing in more than seven days and restricted se-
curities. Restricted securities (including commercial paper issued pursuant to
Section 4(2) of the 1933 Act) which the Board of Trustees has determined are
liquid, based upon a continuing review of the trading markets for the specific
restricted security, will not be deemed to be illiquid investments for pur-
poses of this restriction. The Board of Trustees may adopt guidelines and del-
egate to the Adviser the daily function of determining and monitoring the li-
quidity of restricted securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is
not possible to predict with assurance that the market for restricted securi-
ties eligible for resale under Rule 144A will continue to be liquid, the Ad-
viser will carefully monitor each Portfolio's investments in these securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in a Portfolio to the extent that quali-
fied institutional buyers become for a time uninterested in purchasing these
restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nomi-
nal fixed term on seven days or less notice. Such repurchase agreements will
be regarded as liquid instruments.
26
<PAGE>
MANAGEMENT
THE ADVISER
GSAM, One New York Plaza, New York, New York 10004, a separate operating di-
vision of Goldman, Sachs & Co., acts as investment adviser to the Portfolios.
Goldman Sachs registered as an investment adviser in 1981. As of April ,
1997, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $ billion in assets.
As of November 29, 1996, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $112 billion and partners' capital of $2 billion and
ranked as one of the largest international investment banking and brokerage
firms in the United States. Founded in 1869, Goldman Sachs is a major invest-
ment banking and brokerage firm providing a broad range of financing and in-
vestment services both in the United States and abroad.
Pursuant to an SEC order, each Taxable and Tax-Advantaged Portfolio may en-
ter into principal transactions in certain taxable money market instruments,
including repurchase agreements, with Goldman Sachs.
Under the Investment Advisory Agreements, GSAM continually manages each
Portfolio, including the purchase, retention and disposition of its securities
and other assets. In addition, GSAM administers each Portfolio's business af-
fairs and performs various unitholder servicing functions to the extent not
provided by other organizations. The management of each Portfolio is subject
to the supervision of the Trustees and each Portfolio's investment policies.
For these services, the Trust, on behalf of each Portfolio, pays GSAM a
monthly fee at an annual rate of each Portfolio's average daily net assets as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
CONTRACTUAL RATE DECEMBER 31, 1996
---------------- -----------------
<S> <C> <C>
Prime Obligations Portfolio .35% .35%
Money Market Portfolio .35% .30%
Treasury Obligations Portfolio .35% .35%
Treasury Instruments Portfolio .35% .15%
Government Portfolio .35% .35%
Federal Portfolio .35% .20%
Tax-Exempt Diversified Portfolio .35% .25%
Tax-Exempt California Portfolio .35% .35%
Tax-Exempt New York Portfolio .35% .26%
</TABLE>
The difference, if any, between the stated advisory fee and the actual fee
paid by the Portfolios reflects the fact that GSAM did not charge the full
amount of the advisory fees to which it would have been entitled.
GSAM has agreed to reduce or otherwise limit the daily expenses of each
Portfolio (excluding fees payable to Service Organizations, as defined herein,
taxes, interest, brokerage and litigation, indemnification and other extraor-
dinary expenses) on an annualized basis to .43% of the average daily net as-
sets of the Portfolio less the effect of fee reductions, if any. Such reduc-
tions or limits, if any, are calculated monthly on a cumulative basis. Any
such reductions or limits may be discontinued or modified only with the ex-
press approval of the Trustees. In addition, with respect to the Money Market,
Treasury Instruments, Federal, Tax-Exempt Diversified and Tax-Exempt New York
Portfolios, GSAM has voluntarily agreed to reduce or limit each Portfolio's
annual total
27
<PAGE>
operating expenses (excluding fees payable to Service Organizations, as de-
fined herein) to .37%, .22%, .27%, .32% and .33% respectively, of average
daily net assets and for each other Portfolio to .42% of average daily net as-
sets. GSAM has no current intention to but may in the future discontinue or
modify any of such limitations at its discretion.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of units of each Portfolio pursuant to a Distribution Agreement with
the Trust. The Distributor will assist in the sale of units of each Portfolio
upon the terms described herein. Goldman Sachs also serves as the Transfer
Agent of each Portfolio. For the transfer agency services, Goldman Sachs re-
ceives .04% (on an annualized basis) of the average daily net assets with re-
spect to each Portfolio.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold units of the Portfolios in order to increase the assets of the Portfo-
lios. Increasing the Portfolios' assets may enhance investment flexibility and
diversification. Goldman Sachs reserves the right to redeem at any time some
or all of the Portfolio units acquired for its own account. Goldman Sachs will
consider the effect of redemptions on the Portfolios and other unitholders in
deciding whether to redeem its units.
TAXES
Each Portfolio is treated as a separate entity for federal income tax pur-
poses, has elected to be treated and intends to continue to qualify and be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986 (the "Code") for each taxable year. To qualify as such,
each Portfolio must satisfy certain requirements relating to the sources of
its income, diversification of its assets and distribution of its income to
unitholders. As a regulated investment company, each Portfolio will not be
subject to federal income or excise tax on any net investment income and net
realized capital gains that are distributed to its unitholders in accordance
with certain timing requirements of the Code.
Dividends paid by a Portfolio from net investment income, the excess of net
short-term capital gain over net long-term capital loss and taxable original
issue discount or market discount income will be taxable to unitholders as or-
dinary income, except for any "exempt interest dividends" paid by the Tax-Ex-
empt Portfolios, as described below. Dividends paid by a Portfolio from the
excess of net long-term capital gain over net short-term capital loss will be
taxable as long-term capital gain regardless of how long the unitholders have
held their units. These tax consequences will apply to distributions of any
Portfolio regardless of whether distributions are received in cash or rein-
vested in units. Certain distributions paid by the Portfolios in January of a
given year will be taxable to unitholders as if received on December 31 of the
year in which they are declared. Unitholders will be informed annually about
the amount and character of distributions received from the Portfolios for
federal income tax purposes, including any distributions that may constitute a
return of capital or any distributions of the Tax-Exempt Portfolios that may
constitute a tax preference item under the federal alternative minimum tax.
The Tax-Exempt Portfolios intend to satisfy certain requirements of the Code
for the payment of "exempt-interest dividends" not included in unitholders'
federal gross income. The Tax-Exempt California Portfolio and the Tax-Exempt
New York Portfolio also intend to satisfy certain requirements of the Califor-
nia and New York City and State personal income tax laws, respectively, so
that exempt-interest dividends paid by these Portfolios
28
<PAGE>
will generally not be subject to personal income tax of the relevant state
(and, in the case of the Tax-Exempt New York Portfolio, New York City personal
income tax). Dividends paid by the Tax-Exempt Portfolios from interest on tax-
exempt obligations and properly designated by the Portfolio as exempt-interest
dividends, including dividends attributable to exempt-interest dividends re-
ceived by a Portfolio from other regulated investment companies, will gener-
ally be exempt from federal income tax, although a portion of such dividends
may be subject to the federal alternative minimum tax. Exempt-interest divi-
dends will be considered in computing the corporate federal alternative mini-
mum tax, and the extent, if any, to which social security or railroad retire-
ment benefits are taxable. Persons who are "substantial users" of facilities
financed by certain industrial development or private activity bonds should
consult their own tax advisers before purchasing units of these Portfolios.
Interest incurred to purchase or carry units of these Portfolios will not be
deductible for federal income tax purposes to the extent related to exempt-in-
terest dividends paid by the Portfolios and may not be deductible in whole or
in part for California or New York City and State income tax purposes.
Exempt-interest dividends of the Tax-Exempt California and Tax-Exempt New
York Portfolios that are derived from interest on California and New York In-
struments, respectively, will generally not be subject to the personal income
tax of the corresponding state, and in the case of the Tax-Exempt New York
Portfolio, New York City personal income tax. Other distributions will gener-
ally be taxable to unitholders for these state and city tax purposes.
Individuals and certain other classes of unitholders may be subject to 31%
backup withholding of federal income tax on taxable distributions if they fail
to furnish their correct taxpayer identification number and certain certifica-
tions required by the Internal Revenue Service or if they are otherwise sub-
ject to backup withholding. Individuals, corporations and other unitholders
that are not U.S. persons under the Code are subject to different tax rules
and may be subject to nonresident alien withholding at the rate of 30% (or a
lower rate provided by an applicable tax treaty) on amounts treated as ordi-
nary dividends from the Portfolios.
If a Portfolio invests in foreign securities, it may be subject to foreign
withholding or other foreign taxes on income earned on such securities and is
expected to be unable to pass such taxes through to unitholders, who therefore
are not expected to include such taxes in income or be entitled to claim for-
eign tax credits or deductions with respect to such taxes.
In addition to federal taxes, a unitholder may be subject to state, local or
foreign taxes on payments received from a Portfolio. A state income (and pos-
sibly local income and/or intangible property) tax exemption is generally
available to the extent a Portfolio's distributions are derived from interest
on (or, in the case of intangible property taxes, the value of its assets is
attributable to) certain U.S. Government obligations and/or tax-exempt munici-
pal obligations issued by or on behalf of the particular state or a political
subdivision thereof, provided in some states that certain thresholds for hold-
ings of such obligations and/or reporting requirements are satisfied.
Unitholders should consult their own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of each Portfolio is determined as of the close of regu-
lar trading on the New York Stock Exchange (normally 4:00 P.M. New York time)
on each Business Day. Net asset value per unit for each class of units of each
Portfolio is calculated by determining the amount of net assets attributable
to each class of units and dividing by the number of units for such class.
29
<PAGE>
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities markets close early, the Treasury
Instruments and Federal Portfolios will cease, and each other Portfolio re-
serves the right to cease, accepting purchase and redemption orders for same
Business Day credit at the time the PSA recommends that the securities markets
close. On days any Portfolio closes early, purchase and redemption orders re-
ceived after the PSA recommended closing time will be credited to the next
Business Day. In addition, each Portfolio reserves the right to advance the
time by which purchase and redemption orders must be received for same Busi-
ness Day credit as permitted by the SEC.
Each Portfolio seeks to maintain a net asset value of $1.00 per unit. In
this connection, each Portfolio values its portfolio securities on the basis
of amortized cost. The amortized cost method values a security at its cost on
the date of purchase and thereafter assumes a constant amortization to matu-
rity of any discount or premium, regardless of the impact of fluctuating in-
terest rates on the market value of the instrument. For a more complete de-
scription of the amortized cost valuation method and its effect on existing
and prospective unitholders, see the Statement of Additional Information.
There can be no assurance that a Portfolio will be able at all times to main-
tain a net asset value per unit of $1.00.
YIELD INFORMATION
From time to time, each Portfolio may advertise its yield, effective yield
and average total return. Average annual total return is determined by comput-
ing the average annual percentage change in value of $1,000 invested at the
maximum public offering price for a specified period of at least one year, as-
suming reinvestment of all dividends and distributions at net asset value. The
total return calculation assumes a complete redemption of the investment at
the end of the relevant period. Each Portfolio may furnish total return calcu-
lations based on a cumulative, average, year-by-year or other basis for vari-
ous specified periods by means of quotations, charts, graphs or schedules. The
yield of a Portfolio refers to the income generated by an investment in the
Portfolio over a seven-day period (which period will be stated in the adver-
tisement). This income is then annualized; that is, the amount of income gen-
erated by the investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the investment. The ef-
fective yield is calculated similarly but, when annualized, the income earned
by an investment in the Portfolio is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The Tax-Exempt Portfolios and the Federal and Treasury Instruments Portfo-
lios may each also quote tax-equivalent yield. Each Portfolio's tax-equivalent
yield is calculated by determining the rate of return that would have to be
achieved on a fully taxable investment to produce the after-tax equivalent
(which, in the case of the Tax-Exempt California combines federal and state
taxes, in the case of Tax-Exempt New York Portfolio, combines federal, state
and city taxes, and in the case of the Federal and Treasury Instruments Port-
folios assumes a level of state taxes) of the Portfolio's yield, assuming cer-
tain tax brackets for a unitholder.
Investors should note that the investment results of a Portfolio are based
on historical performance and will fluctuate over time. Any presentation of a
Portfolio's total return, yield, effective yield or tax-equivalent yield for
any prior period should not be considered a representation of what an invest-
ment may earn or what a Portfolio's total return, yield, effective yield or
tax-equivalent yield may be in any future period. In addition to the above,
each Portfolio may from time to time advertise its performance relative to
certain averages, performance rankings, indices, other information prepared by
recognized mutual fund statistical services and investments for which reliable
performance data is available.
30
<PAGE>
Total return, yield, effective yield and tax-equivalent yield will be calcu-
lated separately for each class of units in existence. Because each such class
of units is subject to different expenses, the total return and net yield of
such classes of a Portfolio for the same period may differ. See "Organization
and Units of the Portfolios" below.
ORGANIZATION AND UNITS OF THE PORTFOLIOS
Each portfolio is a series of the Goldman Sachs Trust, which was formed un-
der the laws of the State of Delaware on January 28, 1997. The Funds were for-
merly series of Goldman Sachs Money Market Trust, a Massachusetts trust, and
were reorganized into the Trust as of May 1, 1997. The Trustees have authority
under the Trust's Declaration of Trust to create and classify units of benefi-
cial interests in separate series, without further action by unitholders. Ad-
ditional series may be added in the future. The Trustees also have authority
to classify or reclassify any series or portfolio of units into one or more
classes. The Trustees have authorized the issuance of three classes of units
of each of the Portfolios, which are: ILA Units, ILA Administration Units and
ILA Service Units, except for the Prime Obligations Portfolio which has four
classes of units: ILA Units, ILA Administration Units, ILA Service Units and
ILA Class B Units. (Institutions that provide services to holders of ILA Ad-
ministration or ILA Service Units are referred to in this Prospectus as "Serv-
ice Organizations").
When issued, units are fully paid and nonassessable by the Trust. In the
event of liquidation, unitholders are entitled to share pro rata in the net
assets of the applicable Portfolio available for distribution to such
unitholders. Units entitle their holders to one vote per unit (but may, at the
discretion of the Trustees, be voted on a net asset value basis), have
noncumulative voting rights, are freely transferable and have no preemptive or
subscription rights.
The Trust does not intend to hold annual meetings of unitholders. However,
pursuant to the Trust's By-Laws, the recordholders of at least 10% of the
units outstanding and entitled to vote at a special meeting may require the
Trust to hold such special meeting of unitholders for any purpose and
recordholders may, under certain circumstances as permitted by the Act, commu-
nicate with other unitholders in connection with requiring a special meeting
of unitholders. The Board of Trustees, however, will call a special meeting of
unitholders for the purpose of electing Trustees if, at any time, less than a
majority of Trustees holding office at the time were elected by unitholders.
Units of a Portfolio will be voted separately by Portfolio with respect to
matters pertaining to that Portfolio except for the election of Trustees and
ratification of independent accountants. For example, unitholders of each
Portfolio are required to approve the adoption of any investment advisory
agreement relating to that Portfolio and any changes in fundamental investment
restrictions or policies of such Portfolio. Approval by the unitholders of one
Portfolio is effective only as to that Portfolio.
As of April 1, 1997, Bank of New York, 48 Wall Street, New York, NY 10286,
owned of record 32.49% of the outstanding units of Treasury Instruments Port-
folio.
The Trust does not intend to hold annual unitholder meetings, although spe-
cial meetings may be called for such purposes as electing or removing Trust-
ees, complying with a requirement of the Investment Company Act, or such other
purposes as are set forth above. The Trust will facilitate unitholder communi-
cation as required and in the manner prescribed by Section 16(c) of the In-
vestment Company Act.
31
<PAGE>
ADDITIONAL SERVICES
Each Portfolio has adopted a Service Plan with respect to the ILA Service
Units which authorizes it to compensate certain institutions for providing ac-
count administration and personal and account maintenance services to their
customers who are beneficial owners of such Units (each a "Service Organiza-
tion"). Each Portfolio will enter into agreements with Service Organizations
which purchase ILA Service Units on behalf of their customers ("Service Agree-
ments"). The Service Agreements will provide for compensation to the Service
Organization in an amount up to .40% (on an annualized basis) of the average
daily net assets of the ILA Service Units of that Portfolio attributable to or
held in the name of the Service Organization for its customers; provided, how-
ever, that the fee paid for personal and account maintenance services shall
not exceed .25% of such average daily net assets. The services provided by a
Service Organization may include acting, directly or through an agent, as the
sole unitholder of record, maintaining account records for its customers,
processing orders to purchase, redeem and exchange ILA Service Units for its
customers, responding to inquiries from prospective and existing unitholders
and assisting customers with investment procedures. In addition, GSAM, at its
own expense, may pay a Service Organization compensation equal on an annual
basis up to .10% of the average daily net assets of the ILA Service Units at-
tributable to or held of record by such Service Organization for providing
certain additional services to its customers. Such compensation will not rep-
resent an additional expense to a Portfolio or its unitholders, since it will
be paid from the assets of GSAM.
For the fiscal year ended December 31, 1996, the Trust, on behalf of the
Prime Obligations, Money Market, Treasury Obligations, Treasury Instruments,
Government, Federal and Tax-Exempt Diversified Portfolios paid Service Organi-
zations fees at the annual rate of .40% of each Portfolio's average daily net
assets attributable to ILA Service Units.
Holders of ILA Service Units of a Portfolio will bear all expenses and fees
paid to Service Organizations with respect to such Units as well as any other
expenses which are directly attributable to such Units.
Service Organizations may charge other fees to their customers who are the
beneficial owners of ILA Service Units in connection with their customer ac-
counts. These fees would be in addition to any amounts received by the Service
Organization under a Service Agreement and may affect an investor's return
with respect to an investment in a Portfolio.
All inquiries of beneficial owners of ILA Service Units of the Portfolios
should be directed to such owners' Service Organization.
PURCHASE OF UNITS
It is expected that all direct purchasers of ILA Service Units will be Serv-
ice Organizations or their nominees, which may purchase ILA Service Units of
the Portfolios through Goldman Sachs. Customers of Service Organizations may
invest in such Units only through their Service Organizations.
As set forth below, ILA Service Units of the Portfolios may be purchased on
any Business Day at the net asset value next determined after receipt from the
Service Organization of both the purchase order and the purchase amount in
federal funds. Purchase orders may be made by telephoning Goldman Sachs at
800-621-2550 or by a written request addressed to Goldman Sachs, Attention:
Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois
60606. It is strongly recommended that payment be effected by wiring
32
<PAGE>
federal funds to The Northern Trust Company ("Northern"), Chicago, Illinois,
as subcustodian for State Street Bank and Trust Company ("State Street").
Purchases of ILA Service Units may also be made by a Service Organization by
delivering a Federal Reserve draft or check (except that a third party check
will not be accepted) payable only to the appropriate Portfolio and drawn on a
U.S. bank to Goldman Sachs, Attention: Shareholder Services, Goldman Sachs
Trust, 4900 Sears Tower, Chicago, Illinois 60606. It is expected that Federal
Reserve drafts will ordinarily be converted to federal funds on the day of re-
ceipt and that checks will be converted to federal funds within two Business
Days after receipt. ILA Service Units purchased by check may not be redeemed
until the check has cleared, as described under "Redemption of Units."
Purchases of units of any Portfolio may also be made through an Automated
Clearing House ("ACH") transfer to Goldman Sachs Trust c/o Northern, as
subcustodian for State Street. Purchase orders are effected at the net asset
value next determined after receipt of both the purchase order and the pur-
chase amount in federal funds. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer.
ILA Service Units of each Portfolio are deemed to have been purchased when
an order becomes effective and are entitled to dividends on ILA Service Units
purchased as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED FROM A
SERVICE
ORGANIZATION BY GOLDMAN SACHS DIVIDENDS BEGIN
----------------------------- -----------------
(1) In the case of the Taxable and Tax-Advantaged Portfolios
<S> <C> <C> <C> <C>
By: 3:00 p.m.-N.Y. time Same Business Day
- ---------------------------------------------------------------------------------------
After: 3:00 p.m.-N.Y. time Next Business Day
- ---------------------------------------------------------------------------------------
(2) In the case of the Tax-Exempt Portfolios
By: 1:00 p.m.-N.Y. time Same Business Day
- ---------------------------------------------------------------------------------------
After: 1:00 p.m.-N.Y. time Next Business Day
- ---------------------------------------------------------------------------------------
</TABLE>
The Service Organizations are responsible for timely transmittal of purchase
orders to Goldman Sachs and federal funds to Northern. In order to facilitate
timely transmittal, the Service Organizations have established times by which
purchase orders and federal funds must be received by them.
A Business Day means any day on which the New York Stock Exchange is open,
except for days on which Chicago, Boston or New York banks are closed for lo-
cal holidays.
ILA Service Units of the Portfolios are purchased at the net asset value per
unit without the imposition of a sales charge. Goldman Sachs, as each Portfo-
lio's transfer agent, will maintain a complete record of transactions and ILA
Service Units held in each record holder's account. The Trust and Goldman
Sachs each reserves the right to reject any purchase order for any reason.
MINIMUM INVESTMENT AND OTHER INFORMATION
The Trust does not have any minimum purchase or account requirements with
respect to ILA Service Units. However, a Service Organization may impose a
minimum amount for initial and subsequent investments in ILA
33
<PAGE>
Service Units of the Portfolios, and may establish other requirements such as
a minimum account balance. A Service Organization may effect redemptions of
noncomplying accounts, and may impose a charge for any special services ren-
dered to its customers. Customers should contact their Service Organization
for further information concerning such requirements and charges. A Service
Organization may purchase ILA Service Units in connection with sweep account
programs.
REPORTS TO UNITHOLDERS
The Trust will issue an annual report containing audited financial state-
ments and a semiannual report to record holders of ILA Service Units of each
Portfolio, including Service Organizations who hold such Units for the benefit
of their customers. Upon request, a printed confirmation for each transaction
will be provided by Goldman Sachs. Any dividends and distributions paid by the
Portfolios are also reflected in regular statements issued by Goldman Sachs to
unitholders of record. Service Organizations will be responsible for providing
similar services to their own customers who are the beneficial owners of such
Units.
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (as of 4:00 p.m. New York time) as a dividend and distributed
to Service Organizations monthly. Distributions will be made in additional ILA
Service Units of the same Portfolio or, at the election of a Service Organiza-
tion, in cash. The election to reinvest dividends and distributions or receive
them in cash may be changed by a Service Organization at any time upon written
notice to Goldman Sachs. If no election is made, all dividends and capital
gain distributions will be reinvested. Dividends will be reinvested as of the
last calendar day of each month. Cash distributions will be paid on or about
the first business day of each month. Net short-term capital gains, if any,
will be distributed in accordance with the requirements of the Code and may be
reflected in a Portfolio's daily distributions. Each Portfolio may distribute
at least annually its long-term capital gains, if any, after reduction by
available capital losses. In order to avoid excessive fluctuations in the
amount of monthly capital gains distributions, a portion of any net capital
gains realized on the disposition of securities during the months of November
and December may be distributed during the subsequent calendar year. Although
realized gains and losses on the assets of a Portfolio are reflected in the
net asset value of the Portfolio, they are not expected to be of an amount
which would affect the Portfolio's net asset value of $1.00 per unit.
A Portfolio's net investment income consists of the excess of (i) accrued
interest or discount (including both original issue and market discount on
taxable securities) on portfolio securities, and (ii) any income of the Port-
folio from sources other than capital gains over (iii) the amortization of
market premium on all portfolio securities and (iv) the estimated expenses of
the Portfolio, including a proportionate share of the general expenses of the
Trust.
EXCHANGES
ILA Service Units of each Portfolio may be exchanged by Service Organiza-
tions for units of the corresponding class of any Portfolio or Fund of Goldman
Sachs Trust at the net asset value next determined either by writing to
Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower, Chicago, Illinois 60606 or, if previously elected in the Account
Information Form, by calling Goldman Sachs at 800-621-2550. All telephone ex-
changes must be registered in the same name(s) and with the same address as
are registered in the Portfolio from which the exchange is being made. It may
be difficult to implement the telephone exchange privilege in times of drastic
economic or market changes. In an effort to prevent unauthorized or
34
<PAGE>
fraudulent exchange requests by telephone, Goldman Sachs employs reasonable
procedures as set forth under "Redemption of Units" to confirm that such in-
structions are genuine. Exchanges are available only in states where the ex-
change may legally be made. The exchange privilege may be modified or with-
drawn at any time on 60 days' written notice.
REDEMPTION OF UNITS
HOW TO REDEEM
Customers of Service Organizations may redeem ILA Service Units of a Portfo-
lio through their respective Service Organizations. The Service Organizations
are responsible for the transmittal of redemption requests by their customers
to Goldman Sachs. In order to facilitate timely transmittal of redemption re-
quests, Service Organizations have established procedures by which redemption
requests must be made and times by which redemption requests must be received
by them. Additional documentation may be required when deemed appropriate by a
Service Organization.
A Service Organization may redeem such Units without charge upon request on
any Business Day at the net asset value next determined after receipt by
Goldman Sachs of the redemption request. Redemption requests may be made by
telephoning Goldman Sachs at 800-621-2550 or by a written request addressed to
Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower, Chicago, Illinois 60606. A Service Organization may request re-
demptions by telephone only if the optional telephone privilege has been
elected on the Account Information Form. It may be difficult to implement re-
demptions by telephone in times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than
that designated on the Account Information Form must be in writing and signed
by an authorized person designated on the Account Information Form. Any such
written request is also confirmed by telephone with both the requesting party
and the designated bank account to verify instructions. Other procedures may
be implemented from time to time. If reasonable procedures are not implement-
ed, the Trust may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, neither the Trust nor Goldman Sachs will be
responsible for the authenticity of redemption instructions received by tele-
phone. A redemption may also be made with respect to certain Portfolios by
means of the check redemption privilege described below. Goldman Sachs re-
serves the right to redeem accounts with balances below $500.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs by the Service
Organization. The payment of redemption proceeds for ILA Service Units re-
cently purchased by check will be delayed for up to 15 days until the check
has cleared.
35
<PAGE>
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
record holder of ILA Service Units.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST REDEMPTION
RECEIVED FROM A SERVICE PROCEEDS
ORGANIZATION BY GOLDMAN SACHS ORDINARILY DIVIDENDS
------------------------------------ ---------- ---------------------
<S> <C> <C> <C>
(1) In the case of the Taxable and Tax-Advantaged Portfolios
By: 3:00 p.m.-N.Y. time Wired Same Not earned on Day
Business request is received
Day
- -----------------------------------------------------------------------------------------------------------------------------------
After: 3:00 p.m.-N.Y. time Wired Next Earned on Day
Business request is received
Day
- -----------------------------------------------------------------------------------------------------------------------------------
(2) In the case of the Tax-Exempt Portfolios
By: 12:00 noon-N.Y. time Wired Same Not earned on Day
Business request is received
Day
- -----------------------------------------------------------------------------------------------------------------------------------
After: 12:00 noon-N.Y. time Wired Next Earned on Day
Business request is received
Day
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Portfolios will arrange for the proceeds of redemptions effected by any
means to be wired as federal funds to the Service Organization's bank account
designated in the Account Information Form. Redemption proceeds will normally
be wired as set forth above, but may be paid up to three Business Days after
receipt of the Service Organization's properly executed redemption request.
For example, payment may be delayed if the Federal Reserve Bank is closed on
the day redemption proceeds would ordinarily be wired. After a wire has been
initiated by Goldman Sachs, neither Goldman Sachs nor the Trust assumes any
further responsibility for the performance of intermediaries or the ILA Serv-
ice Unitholder's Service Organization in the transfer process. If a problem
with such performance arises, the ILA Service Unitholder should deal directly
with such intermediaries or Service Organization.
CHECK REDEMPTION PRIVILEGE
A Service Organization may elect to have a special account with State Street
for the purpose of redeeming ILA Service Units from its account in a Portfolio
by check. When State Street receives a completed signature card and authoriza-
tion form, the Service Organization will be provided with a supply of checks.
Checks drawn on this account may be payable to the order of any person in any
amount of $500 or more, but cannot be certified. The payee of the check may
cash or deposit it like any other check drawn on a bank. When such a check is
presented to State Street for payment, a sufficient number of full and frac-
tional ILA Service Units will be redeemed to cover the amount of the check.
Cancelled checks will be returned to the Service Organization by State Street.
The check redemption privilege enables a Service Organization to receive the
dividends declared on the ILA Service Units to be redeemed until such time as
the check is processed. Because of this feature, the check redemption privi-
lege may not be used for a complete liquidation of an account. If the amount
of a check is greater than the value of ILA Service Units held in the Service
Organization's account, the check will be returned unpaid, and the Service Or-
ganization may be subject to extra charges.
36
<PAGE>
Goldman Sachs reserves the right to impose conditions on, limit the avail-
ability of or terminate the check redemption privilege at any time with re-
spect to a particular Service Organization or all Service Organizations in
general. The Trust and State Street reserve the right at any time to suspend
redemptions by check and intend to do so in the event that federal legislation
or regulations impose reserve requirements or other restrictions deemed by the
Trustees to be adverse to the interests of the Portfolios.
----------------
37
<PAGE>
APPENDIX
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Trust with your correct Social Secu-
rity 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 and to sign your name in the certification section of
the Account Information Form could result in withholding of 31% by the Trust
for the federal backup withholding tax on distributions, redemptions, ex-
changes and other payments relating to your account.
Any tax withheld may be credited against taxes owed on your federal income
tax return.
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 Reve-
nue Service (IRS). Backup withholding could apply to payments relating to your
account prior to the Trust's receipt of your TIN.
Special rules apply for certain entities. For example, for an account estab-
lished under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor
should be furnished.
If you have been notified by the IRS that you are subject to backup with-
holding 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 with-
holding should cease, you must cross out item (2) in the certification section
of the Account Information Form.
If you are an exempt recipient, you should furnish your TIN and certify your
exemption by signing the Certification section and writing "exempt" after your
signature. Exempt recipients include: corporations, tax-exempt pension plans
and IRA's, governmental agencies, financial institutions, registered securi-
ties and commodities dealers and others.
If you are a nonresident alien or foreign entity you must provide a com-
pleted Form W-8 to the Trust in order to avoid backup withholding on certain
payments. Other payments to you may be subject to non-resident alien withhold-
ing of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
ILA SERVICE UNITS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE: 800-621-2550
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unitholder and Portfolio Expenses.......................................... 2
Financial Highlights....................................................... 4
An Introduction to the Portfolios.......................................... 14
Investment Policies Matrix................................................. 16
Description of Securities and Investment Techniques........................ 18
Investment Limitations..................................................... 26
Management................................................................. 27
Taxes...................................................................... 28
Net Asset Value............................................................ 30
Yield Information.......................................................... 30
Organization and Units of the Portfolios................................... 31
Additional Services........................................................ 32
Purchase of Units.......................................................... 32
Reports to Unitholders..................................................... 34
Distributions.............................................................. 34
Exchanges.................................................................. 34
Redemption of Units........................................................ 35
Appendix................................................................... A-1
</TABLE>
ILA-1SS-MMT3K/596
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS--INSTITUTIONAL LIQUID ASSETS
ILA SERVICE UNITS
------------
PROSPECTUS
------------
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS-INSTITUTIONAL LIQUID ASSETS
(PRIME OBLIGATIONS PORTFOLIO)
(TAX-EXEMPT DIVERSIFIED PORTFOLIO)
ILA SERVICE UNITS
ILA CLASS B UNITS
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Money Market Trust (the "Trust") is an open-end, management
investment company (a "mutual fund") which includes the Goldman Sachs-
Institutional Liquid Assets portfolios. This Prospectus relates to the
offering of ILA Service shares of beneficial interest ("ILA Service Units") of
the Prime Obligations and Tax-Exempt Diversified Portfolios (the "Portfolios")
and ILA Class B shares of beneficial interest ("ILA Class B Units") of the
Prime Obligations Portfolio. ILA Class B Units will typically be issued only
upon an exchange of Class B Shares of any mutual fund sponsored by Goldman
Sachs which is subject to a contingent deferred sales charge ("Goldman Sachs
Funds"). Goldman Sachs Asset Management, a separate operating division of
Goldman, Sachs & Co., serves as each Portfolio's investment adviser. Goldman,
Sachs & Co. serves as each Portfolio's distributor and transfer agent.
The Prime Obligations Portfolio seeks to maximize current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity by investing exclusively in high quality money market instruments.
The Portfolio pursues its objective by investing in a diversified portfolio of
securities of the U.S. Government, its agencies, authorities and
instrumentalities, obligations of U.S. banks, commercial paper and other
short-term obligations of U.S. companies, states, municipalities and other
entities, and repurchase agreements.
The Tax-Exempt Diversified Portfolio seeks to the extent consistent with the
preservation of capital and prescribed portfolio standards, a high level of
income excluded from gross income for federal income tax purposes, by
investing primarily in municipal instruments. The Portfolio pursues its
objective by investing in a diversified portfolio of municipal obligations
issued by or on behalf of states, territories and possessions of the United
States and their political subdivisions, agencies, authorities and
instrumentalities, and the District of Columbia.
AN INVESTMENT IN A PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT A PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER UNIT.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION.................................. Toll Free:
800-526-7384
This Prospectus provides you with information about the Portfolios that you
should know before investing. It should be read and retained for future
reference. If you would like more detailed information, the Statement of
Additional Information dated May 1, 1997, as amended or supplemented from time
to time, is available upon request without charge by calling the telephone
number listed above or by writing Goldman Sachs, Attention: Shareholder
Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois 60606. The
Statement of Additional Information, which is incorporated by reference into
this Prospectus, has been filed with the Securities and Exchange Commission.
The Tax-Exempt Diversified Portfolio may not be available in certain states.
Please call the phone number above to determine availability in your state.
The SEC maintains a Web site (http://www.sec.gov) that contains the Statement
of Additional Information and other information regarding the Trust.
- -------------------------------------------------------------------------------
UNITS OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT IN-
SURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A PORTFOLIO INVOLVES INVEST-
MENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1997.
<PAGE>
UNITHOLDER AND PORTFOLIO EXPENSES
<TABLE>
<CAPTION>
PRIME OBLIGATIONS TAX-EXEMPT
PORTFOLIO DIVERSIFIED
---------------------------- PORTFOLIO
(ILA SERVICE) (ILA CLASS B+) (ILA SERVICE)
------------- -------------- -------------
<S> <C> <C> <C>
UNITHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases......................... None None None
Sales Charge Imposed on Reinvested
Distributions..................... None None None
Deferred Sales Load Imposed on
Redemptions....................... None 5.0% None
Exchange Fee....................... None None None
ANNUAL OPERATING EXPENSES (1)
(as a percentage of average daily
net assets)
Management Fees (after limitations)
(2)............................... 0.35% 0.35% 0.26%
Distribution (Rule 12b-1) Fees..... None 0.75% None
Other Expenses
Service Fees...................... 0.40% None 0.40%
Authorized Dealer Service Fees.... None 0.25% None
Other Expenses (after expense
limitation) (3).................. 0.07% 0.07% 0.06%
---- ---- ----
TOTAL OPERATING EXPENSES (4)........ 0.82% 1.42% 0.72%
==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Prime Obligations Portfolio
ILA Service Units...................................... $ 8 $26 $46 $101
ILA Class B Units......................................
--Assuming complete redemption at end of period....... $64 $75 $98 $148*
--Assuming no redemption.............................. $14 $45 $78 $148*
Tax-Exempt Diversified Portfolio
ILA Service Units...................................... $ 7 $23 $40 $ 89
</TABLE>
- -------
* ILA Class B Units convert to ILA Service Units eight years after purchase;
therefore, ILA Class B expenses in the hypothetical example above assume
this conversion.
+ Investors wishing to purchase Units of the Prime Obligations Portfolio are
generally required to purchase ILA Service Units. ILA Class B Units of the
Prime Obligations Portfolio will typically be issued only in exchange for
Class B Shares of any other Goldman Sachs Fund.
(1) Based upon estimated amounts for the current fiscal year.
(2) The Investment Adviser has voluntarily agreed that a portion of the man-
agement fee would not be imposed on the Tax-Exempt Diversified Portfolio
equal to .09%. Without such limitation, management fees for the Portfolio
would be 0.35%.
(3) The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, fees payable to Service Organi-
zations, as defined herein, distribution and authorized dealer service
fees, taxes, interest and brokerage and litigation, indemnification and
other extraordinary expenses) to the extent such expenses exceed 0.07% of
the Prime Obligations Portfolio's average daily net assets and 0.06% of
the Tax-Exempt Diversified Portfolio's average daily net assets.
2
<PAGE>
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Portfolios for the current fiscal year would be:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Prime Obligations Portfolio (ILA Service Units)........... .08% 0.83%
Prime Obligations Portfolio (ILA Class B Units)........... .08% 1.43%
Tax-Exempt Diversified Portfolio.......................... .06% 0.81%
</TABLE>
The information set forth in the foregoing table and hypothetical example
relates only to ILA Service Units of the Prime Obligations and Tax-Exempt Di-
versified Portfolios and ILA Class B Units of the Prime Obligations Portfolio.
The Portfolios also offer ILA Units and ILA Administration Units. The other
classes of the Portfolios are subject to different fees and expenses (which
affect performance) and are entitled to different services. Information re-
garding any other class of the Portfolios may be obtained from your sales rep-
resentative or from Goldman Sachs by calling the number on the front cover of
this Prospectus.
Service Organizations may charge other fees to their customers who are the
beneficial owners of ILA Service Units in connection with their customers' ac-
counts. Due to the Distribution and Service Plans, a long-term shareholder may
pay more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.'s ("NASD")
rules regarding investment companies. Such fees, if any, may affect the return
such customers realize with respect to their investments.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Portfolio that an investor will bear di-
rectly or indirectly. The information on fees and expenses included in the ta-
ble and the hypothetical example above are based on each Portfolio's estimated
fees and expenses 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, a Portfo-
lio's actual performance will vary and may result in an actual return or less
than 5%. See "Management--Investment Adviser."
FINANCIAL HIGHLIGHTS
The following data with respect to a unit (of the class specified) of the
Prime Obligations and Tax-Exempt Diversified Portfolios outstanding during the
periods indicated have been audited by Arthur Andersen LLP, independent
auditors, as indicated in their report incorporated by reference and attached
to the Statement of Additional Information from the annual report to
unitholders for the fiscal year ended December 31, 1996 (the "Annual Report"),
and should be read in conjunction with the financial statements and related
notes incorporated by reference and attached to the Statement of Additional
Information.
3
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Unit Outstanding Throughout Each Period
Prime Obligations Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0511 -- $0.0511 $(0.0511) $1.00 5.22% 0.41% 5.11%
1996-ILA Admin-
istration units. 1.00 0.0497 -- 0.0497 (0.0497) 1.00 5.06 0.56 4.97
1996-ILA Service
units........... 1.00 0.0474 -- 0.0474 (0.0474) 1.00 4.80 0.81 4.74
1996-ILA B
units (b)....... 1.00 0.0262 -- 0.0262 (0.0262) 1.00 3.97(d) 1.41(d) 4.09(d)
1995-ILA units.. 1.00 0.0566 -- 0.0566 (0.0566) 1.00 5.79 0.41 5.66
1995-ILA Admin-
istration units. 1.00 0.0551 -- 0.0551 (0.0551) 1.00 5.63 0.56 5.51
1995-ILA Service
units........... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.37 0.81 5.22
1994-ILA units.. 1.00 0.0394 -- 0.0394 (0.0394) 1.00 4.07 0.40 3.94
1994-ILA Admin-
istration units. 1.00 0.0379 -- 0.0379 (0.0379) 1.00 3.91 0.55 3.79
1994-ILA Service
units........... 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.66 0.80 3.65
1993-ILA units.. 1.00 0.0291 0.0002 0.0293 (0.0293) 1.00 2.97 0.40 2.91
1993-ILA Admin-
istration units. 1.00 0.0275 0.0003 0.0278 (0.0278) 1.00 2.82 0.55 2.75
1993-ILA Service
units........... 1.00 0.0250 0.0001 0.0251 (0.0252) 1.00 2.56 0.80 2.50
1992-ILA units.. 1.00 0.0364 0.0010 0.0374 (0.0374) 1.00 3.75 0.40 3.64
1992-ILA Admin-
istration units. 1.00 0.0339 0.0010 0.0349 (0.0349) 1.00 3.60 0.55 3.39
1992-ILA Service
units........... 1.00 0.0311 0.0010 0.0321 (0.0320) 1.00 3.34 0.80 3.11
1991-ILA units.. 1.00 0.0591 0.0003 0.0594 (0.0594) 1.00 6.10 0.40 5.91
1991-ILA Admin-
istration units. 1.00 0.0568 0.0003 0.0571 (0.0571) 1.00 5.94 0.55 5.68
1991-ILA Service
units........... 1.00 0.0558 0.0003 0.0561 (0.0561) 1.00 5.68 0.80 5.58
1990-ILA units.. 1.00 0.0793 -- 0.0793 (0.0793) 1.00 8.21 0.38 7.93
1990-ILA Admin-
istration
units (c)....... 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.81(d) 0.55(d) 7.62(d)
1990-ILA Service
units (c)....... 1.00 0.0425 -- 0.0425 (0.0425) 1.00 7.56(d) 0.80(d) 7.25(d)
1989-ILA units.. 1.00 0.0890 -- 0.0890 (0.0890) 1.00 9.27 0.40 8.90
1988-ILA units.. 1.00 0.0714 -- 0.0714 (0.0714) 1.00 7.48 0.40 7.14
1987-ILA units.. 1.00 0.0634 -- 0.0634 (0.0634) 1.00 6.50 0.40 6.34
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1,154,787 0.43% 5.09%
1996-ILA Admin-
istration units. 23,738 0.58 4.95
1996-ILA Service
units........... 84,707 0.83 4.72
1996-ILA B
units (b)....... 346 1.43(d) 4.07(d)
1995-ILA units.. 1,261,251 0.43 5.64
1995-ILA Admin-
istration units. 63,018 0.58 5.49
1995-ILA Service
units........... 227,233 0.83 5.20
1994-ILA units.. 1,963,846 0.42 3.92
1994-ILA Admin-
istration units. 149,234 0.57 3.77
1994-ILA Service
units........... 170,453 0.82 3.63
1993-ILA units.. 2,332,771 0.42 2.89
1993-ILA Admin-
istration units. 189,431 0.57 2.73
1993-ILA Service
units........... 137,804 0.82 2.48
1992-ILA units.. 3,444,591 0.42 3.62
1992-ILA Admin-
istration units. 257,321 0.57 3.37
1992-ILA Service
units........... 22,044 0.82 3.09
1991-ILA units.. 3,531,736 0.42 5.89
1991-ILA Admin-
istration units. 198,417 0.57 5.66
1991-ILA Service
units........... 18,789 0.82 5.56
1990-ILA units.. 2,833,541 0.38 7.93
1990-ILA Admin-
istration
units (c)....... 209,272 0.55(d) 7.62(d)
1990-ILA Service
units (c)....... 19,039 0.80(d) 7.25(d)
1989-ILA units.. 3,761,964 0.40 8.90
1988-ILA units.. 3,799,628 0.40 7.14
1987-ILA units.. 5,814,280 0.40 6.34
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)ILA Class B unit activity commenced during May of 1996.
(c)ILA Administration and Service unit activity commenced during June of 1990.
(d)Annualized.
4
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt Diversified Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------
NET RATIO OF NET
NET ASSET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN (LOSS) ON INCOME FROM VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT DISTRIBUTIONS END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS TO UNITHOLDERS OF PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1.00 $0.0320 $ -- $0.0320 $(0.0320) $1.00 3.25% 0.31% 3.20%
1996-ILA Admin-
istration units. 1.00 0.0306 -- 0.0306 (0.0306) 1.00 3.09 0.46 3.06
1996-ILA Service
units........... 1.00 0.0279 -- 0.0279 (0.0279) 1.00 2.84 0.71 2.79
1995-ILA units.. 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.72 0.31 3.65
1995-ILA Admin-
istration units. 1.00 0.0351 -- 0.0351 (0.0352) 1.00 3.57 0.46 3.51
1995-ILA Service
units........... 1.00 0.0324 -- 0.0324 (0.0325) 1.00 3.31 0.71 3.24
1994-ILA units.. 1.00 0.0264 -- 0.0264 (0.0264) 1.00 2.71 0.30 2.64
1994-ILA Admin-
istration units. 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.55 0.45 2.50
1994-ILA Service
units........... 1.00 0.0220 -- 0.0220 (0.0220) 1.00 2.30 0.70 2.20
1993-ILA units.. 1.00 0.0222 -- 0.0222 (0.0222) 1.00 2.25 0.30 2.22
1993-ILA Admin-
istration units. 1.00 0.0207 -- 0.0207 (0.0207) 1.00 2.09 0.45 2.08
1993-ILA Service
units........... 1.00 0.0183 -- 0.0183 (0.0183) 1.00 1.84 0.70 1.83
1992-ILA units.. 1.00 0.0277 -- 0.0277 (0.0277) 1.00 2.82 0.30 2.77
1992-ILA Admin-
istration units. 1.00 0.0266 -- 0.0266 (0.0266) 1.00 2.67 0.45 2.66
1992-ILA Service
units........... 1.00 0.0243 -- 0.0243 (0.0243) 1.00 2.41 0.70 2.43
1991-ILA units.. 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.33 0.32 4.24
1991-ILA Admin-
istration units. 1.00 0.0406 -- 0.0406 (0.0406) 1.00 4.17 0.47 4.06
1991-ILA Service
units........... 1.00 0.0386 -- 0.0386 (0.0386) 1.00 3.91 0.72 3.86
1990-ILA units.. 1.00 0.0550 (0.0001) 0.0549 (0.0549) 1.00 5.64 0.40 5.50
1990-ILA Admin-
istration
units (c)....... 1.00 0.0301 -- 0.0301 (0.0300) 1.00 5.43(b) 0.55(b) 5.40(b)
1990-ILA Service
units (c)....... 1.00 0.0259 -- 0.0259 (0.0259) 1.00 5.17(b) 0.80(b) 5.16(b)
1989-ILA units.. 1.00 0.0591 (0.0001) 0.0590 (0.0590) 1.00 6.07 0.40 5.91
1988-ILA units.. 1.00 0.0487 0.0003 0.0490 (0.0490) 1.00 5.03 0.40 4.87
1987-ILA units.. 1.00 0.0413 (0.0003) 0.0410 (0.0410) 1.00 4.23 0.40 4.13
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF NET INVESTMENT
END OF EXPENSES TO INCOME TO
PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEARS
ENDED DECEMBER
31,
1996-ILA units.. $1,514,443 0.41% 3.10%
1996-ILA Admin-
istration units. 59,097 0.56 2.96
1996-ILA Service
units........... 28,921 0.81 2.69
1995-ILA units.. $1,342,585 0.42 3.54
1995-ILA Admin-
istration units. 48,773 0.57 3.40
1995-ILA Service
units........... 49,647 0.82 3.13
1994-ILA units.. 1,434,965 0.41 2.53
1994-ILA Admin-
istration units. 97,778 0.56 2.39
1994-ILA Service
units........... 36,492 0.81 2.09
1993-ILA units.. 1,769,477 0.41 2.11
1993-ILA Admin-
istration units. 99,896 0.56 1.97
1993-ILA Service
units........... 45,172 0.81 1.72
1992-ILA units.. 1,333,925 0.42 2.65
1992-ILA Admin-
istration units. 50,225 0.57 2.54
1992-ILA Service
units........... 29,534 0.82 2.31
1991-ILA units.. 1,044,986 0.42 4.14
1991-ILA Admin-
istration units. 37,567 0.57 3.96
1991-ILA Service
units........... 52,399 0.82 3.76
1990-ILA units.. 603,895 0.40 5.50
1990-ILA Admin-
istration
units (c)....... 42,498 0.55(b) 5.40(b)
1990-ILA Service
units (c)....... 56,810 0.80(b) 5.16(b)
1989-ILA units.. 688,556 0.40 5.91
1988-ILA units.. 907,782 0.40 4.87
1987-ILA units.. 965,714 0.40 4.13
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
5
<PAGE>
AN INTRODUCTION TO THE PORTFOLIOS
THE TRUST: The Trust is an open-end, management investment company regis-
tered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"). Each Portfolio is a separate pool of assets which pursues its
investment objective through separate investment policies, as described below.
THE ADVISER: Goldman Sachs Asset Management, a separate operating division
of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Portfolios' invest-
ment adviser (the "Adviser" or "GSAM").
THE DISTRIBUTOR: Goldman Sachs, which serves as the Portfolios' distributor
and transfer agent, is one of the largest international investment banking and
brokerage firms in the United States.
THE PORTFOLIOS: Each Portfolio's securities are valued by the amortized cost
method as permitted by a rule ("Rule 2a-7") of the Securities and Exchange
Commission ("SEC"). Under such rule, each Portfolio may invest only in securi-
ties that are determined to present minimal credit risk and meet certain other
criteria.
INVESTMENT OBJECTIVES AND POLICIES FOR PRIME OBLIGATIONS PORTFOLIO: To
seek to maximize current income to the extent consistent with the preserva-
tion of capital and the maintenance of liquidity by investing exclusively
in high quality money market instruments.
INVESTMENT OBJECTIVES AND POLICIES FOR TAX-EXEMPT DIVERSIFIED
PORTFOLIO: To seek to the extent consistent with the preservation of capi-
tal and prescribed portfolio standards, a high level of income exempt from
federal income tax by investing primarily in Municipal Instruments, as de-
fined herein.
NET ASSET VALUE: Each Portfolio seeks to maintain a stable net asset value
of $1.00 per unit.
MAXIMUM REMAINING MATURITY OF PORTFOLIO INVESTMENTS: Thirteen months at the
time of purchase.
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
FIRST TIER SECURITIES: Each Portfolio may purchase securities which are
rated (or that have been issued by an issuer that is rated with respect to a
class of short-term debt obligations, or any security within that class, com-
parable in priority and quality with such securities) in the highest short-
term rating category by at least two NRSROs (as defined below), or if only one
NRSRO has assigned a rating, by that NRSRO. U.S. Government Securities as de-
fined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Diversified Portfolio may purchase
securities which are not First Tier Securities but which are rated in the top
two short-term rating categories by at least two NRSROs, or if only one NRSRO
has assigned a rating, by that NRSRO. The Prime Obligations Portfolio will not
invest in a security which is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, unrated securities
may be purchased if they are deemed to be of comparable quality to First Tier
Securities, or, to the extent that a Portfolio may purchase Second Tier Secu-
rities, comparable in quality to Second Tier Securities.
NRSROS: Nationally Recognized Statistical Rating Organizations include Stan-
dard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Lim-
ited and its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a descrip-
tion of each NRSRO's rating categories, see Appendix A to the Statement of Ad-
ditional Information.
6
<PAGE>
INVESTMENT POLICIES MATRIX
<TABLE>
<CAPTION>
PRIME OBLIGATIONS PORTFOLIO TAX-EXEMPT DIVERSIFIED PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
US Treasury Obligations [_]
- ---------------------------------------------------------------------------------------------
US Government Securities [_]
- ---------------------------------------------------------------------------------------------
Bank Obligations
[_]
US Banks Only
- ---------------------------------------------------------------------------------------------
Commercial Paper [_] [_]
Tax-exempt only
- ---------------------------------------------------------------------------------------------
Short-Term Obligations of
Corporations and Other [_]
Entities US entities Only
- ---------------------------------------------------------------------------------------------
Repurchase Agreements [_]
- ---------------------------------------------------------------------------------------------
Asset-Backed & Receivables- [_]
Backed Securities+
- ---------------------------------------------------------------------------------------------
Taxable Municipals [_]
- ---------------------------------------------------------------------------------------------
Tax-Exempt Municipals [_]
At least 80% of net assets in
Municipal Instruments (except in
extraordinary circumstances)
- ---------------------------------------------------------------------------------------------
Credit Quality**** First Tier First or Second Tier
- ---------------------------------------------------------------------------------------------
Investment Companies [_] [_]
Up to 10% of total Up to 10% of total assets in
assets in other other investment companies
investment companies
- ---------------------------------------------------------------------------------------------
Unrated Securities [_] [_]
- ---------------------------------------------------------------------------------------------
Summary of Taxation for Taxable federal and Tax-exempt federal and taxable
Distributors* state** state***
- ---------------------------------------------------------------------------------------------
Miscellaneous May (but does not currently
intend to) invest up to 20% in
AMT securities and may
temporarily invest in the taxable
money market instruments
described herein
</TABLE>
Note: See "Description of Securities and Investment Techniques" for a descrip-
tion of, and certain criteria applicable to, each of these categories of
investments.
+ To the extent required by Rule 2a-7, asset-backed and receivables-backed
securities will be rated by the requisite number of NRSROs.
* See "Taxes" below for an explanation of the tax consequences summarized
in the table above.
** Taxable in many states except for distributions from U.S. Treasury obli-
gation interest income and certain U.S. Government securities interest
income.
*** Taxable except for distributions from interest on obligations of an in-
vestor's state of residence in certain states.
****To the extent permitted by Rule 2a-7, a Portfolio holding a security fully
supported by a guarantee may substitute the credit quality of the guarantee
in determining the credit quality of the security.
7
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. TREASURY OBLIGATIONS
"U.S. Treasury Obligations" are securities issued or guaranteed by the U.S.
Treasury, payments of principal and interest on which are backed by the full
faith and credit of the U.S. Government.
U.S. GOVERNMENT SECURITIES
"U.S. Government Securities" are obligations issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities. Unlike U.S.
Treasury Obligations, securities issued or guaranteed by U.S. Government agen-
cies, authorities or instrumentalities are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Government
National Mortgage Association), (b) the right of the issuer to borrow from the
Treasury (such as securities of the Student Loan Marketing Association), (c)
the discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation), or (d) only the credit of the
issuer. No assurance can be given that the U.S. Government will provide finan-
cial support to U.S. Government agencies, authorities or instrumentalities in
the future. U.S. Government Securities may include zero coupon bonds. Such
bonds may be purchased when yields are attractive.
Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are deemed to include (a) secu-
rities for which the payment of principal and interest is backed by an irrevo-
cable letter of credit issued by the U.S. Government, its agencies, authori-
ties or instrumentalities and (b) participations in loans made to foreign gov-
ernments or their agencies that are so guaranteed. The secondary market for
certain of these participations is limited. Such participations may therefore
be regarded as illiquid.
Each Portfolio may also invest in separately traded principal and interest
components of securities guaranteed or issued by the U.S. Treasury if such
components are traded independently under the Separate Trading of Registered
Interest and Principal of Securities program ("STRIPS").
CUSTODIAL RECEIPTS
Each Portfolio may also acquire securities issued or guaranteed as to prin-
cipal and interest by the U.S. Government, its agencies, authorities or in-
strumentalities in the form of custodial receipts that evidence ownership of
future interest payments, principal payments or both on certain notes or bonds
issued by the U.S. Government, its agencies, authorities or instrumentalities.
For certain securities law purposes, custodial receipts are not considered ob-
ligations of the U.S. Government.
U.S. BANK OBLIGATIONS
The Prime Obligations Portfolio may invest in "U.S. Bank Obligations" lim-
ited to securities issued or guaranteed by U.S. banks (including certificates
of deposit, commercial paper, unsecured bank promissory notes and bankers' ac-
ceptances) which have more than $1 billion in total assets at the time of pur-
chase. Such obligations may also include debt obligations issued by U.S. sub-
sidiaries of such banks.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations Portfolio may invest in "Commercial Paper" (including
variable amount master demand notes and asset-backed commercial paper) which
is payable in U.S. dollars and is issued or guaranteed
8
<PAGE>
by U.S. corporations, U.S. commercial banks, or other entities. In addition,
the Portfolio may invest in other short-term obligations (including short-term
funding agreements) payable in U.S. dollars and issued or guaranteed by U.S.
corporations or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations Portfolio may invest in "Asset-Backed and Receivables-
Backed Securities" which represent participations in, or are secured by and
payable from, pools of assets such as motor vehicle installment sale con-
tracts, installment loan contracts, leases of various types of real and per-
sonal property, receivables from revolving credit (credit card) agreements and
other categories of receivables. Such asset pools are securitized through the
use of privately-formed trusts or special purpose-corporations. Payments or
distributions of principal and interest may be guaranteed up to certain
amounts and for a certain time period by a letter of credit or a pool insur-
ance policy issued by a financial institution, or other credit enhancements
may be present. To the extent consistent with its investment objective and
policies, the Prime Obligations Portfolio may invest in new types of mortgage-
related securities and in other asset-backed securities that may be developed
in the future to the extent consistent with its investment objective and poli-
cies.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS: Obligations issued by or on behalf of states, terri-
tories and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia, the
interest from which is, in the opinion of bond counsel, if any, excluded from
gross income for federal income tax purposes.
Such Municipal Instruments may include:
(A) fixed rate notes and similar debt instruments rated in the highest
short-term rating category or in one of the two highest long-term rating
categories;
(B) variable and floating rate demand instruments rated in the highest
short-term or one of the two highest long-term rating categories;
(C) tax-exempt commercial paper rated in the highest rating category;
(D) municipal bonds rated in one of the two highest rating categories;
and
(E) unrated notes, paper, bonds or other instruments determined to be of
comparable quality by the Adviser pursuant to criteria approved by the
Trustees.
As a matter of fundamental policy, at least 80% of the Tax-Exempt Diversi-
fied Portfolio's [net assets will ordinarily be invested in] Municipal Instru-
ments, except in extraordinary circumstances. The Portfolio may temporarily
invest in taxable money market instruments when the Adviser believes that the
market conditions dictate a defensive posture. Investments in taxable money
market instruments will be limited to those meeting the quality standards of
the Tax-Exempt Diversified Portfolio.
The Prime Obligations Portfolio may invest in short-term obligations issued
or guaranteed by state and municipal governments when yields on such securi-
ties are attractive compared to other taxable investments.
9
<PAGE>
MUNICIPAL NOTES AND BONDS. Municipal notes include tax anticipation notes
("TANs"), revenue anticipation notes ("RANs"), bond anticipation notes
("BANs"), tax and revenue anticipation notes ("TRANs") and construction loan
notes. Municipal bonds include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing munici-
pality and are considered the safest type of bonds. Revenue bonds are backed
by the revenues of a project or facility such as the tolls from a toll bridge.
Revenue bonds also include lease rental revenue bonds which are issued by a
state or local authority for capital projects and are secured by annual lease
payments from the state or locality sufficient to cover debt service on the
authority's obligations. Industrial development bonds (generally referred to
under current tax law as "private activity bonds") are a specific type of rev-
enue bond backed by the credit and security of a private user and therefore
have more potential risk. Municipal bonds may be issued in a variety of forms,
including commercial paper, tender option bonds and variable and floating rate
securities.
TENDER OPTION BONDS. A tender option bond is a Municipal Instrument (gener-
ally held pursuant to a custodial arrangement) having a relatively long matu-
rity 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 finan-
cial institution, pursuant to which such institution grants the security
holder the option, at periodic intervals, to tender its securities to the in-
stitution and receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees equal to the dif-
ference between the bond's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the 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 pre-
vailing short-term, tax-exempt rate. However, an institution will not be obli-
gated to accept tendered bonds in the event of certain defaults or a signifi-
cant downgrading in the credit rating assigned to the issuer of the bond. The
tender option will be taken into account in determining the maturity of the
tender option bonds and a Portfolio's average portfolio maturity. There is a
risk that the Tax-Exempt Diversified Portfolio will not be considered the
owner of a tender option bond for federal income tax purposes and thus will
not be entitled to treat such interest as exempt from federal income tax.
REVENUE ANTICIPATION WARRANTS. Revenue Anticipation Warrants ("RAWs") are
issued in anticipation of the issuer's receipt of revenues and present the
risk that such revenues will be insufficient to satisfy the issuer's payment
obligations. The entire amount of principal and interest on RAWs is due at ma-
turity. RAWs, including those with a maturity of more than 397 days, may also
be repackaged as instruments which include a demand feature that permits the
holder to sell the RAWs to a bank or other financial institution at a purchase
price equal to par plus accrued interest on each interest rate reset date.
FLOATING AND VARIABLE RATE OBLIGATIONS. The value of floating and variable
rate obligations generally is more stable than that of fixed rate obligations
in response to changes in interest rate levels. Variable and floating rate ob-
ligations usually have demand features that permit the Portfolios to sell them
at par value plus accrued interest upon short notice. The issuers or financial
intermediaries providing demand features may support their ability to purchase
the obligations by obtaining credit with liquidity supports. These may include
lines of credit, which are conditional commitments to lend, and letters of
credit, which will ordinarily be irrevocable, both of which may be issued by
domestic banks or foreign banks which have a branch, agency or subsidiary in
the United States. When considering whether an obligation meets a Portfolio's
quality standards, the Portfolio will, to the extent permitted by Rule 2a-7,
look to the creditworthiness of the party providing unconditional demand fea-
tures or other unconditional obligations to support the credit of the issuer
of the security. A Portfolio may consider the maturity of a variable or float-
ing rate Municipal Instrument to be shorter than its ultimate stated
10
<PAGE>
maturity if the Portfolio has the right to demand prepayment of its principal
at specified intervals prior to the security's ultimate stated maturity, sub-
ject to the conditions for using amortized cost valuation under the Investment
Company Act. A Portfolio may purchase such variable or floating rate obliga-
tions from the issuers or may purchase certificates of participation, a type
of floating or variable rate obligation, which are interests in a pool of debt
obligations held by a bank or other financial institution.
INDUSTRIAL DEVELOPMENT BONDS. The Portfolios may invest in industrial devel-
opment bonds (generally referred to under current tax law as "private activity
bonds"), the interest from which would be an item of tax preference when dis-
tributed by the Tax-Exempt Diversified Portfolio as "exempt interest divi-
dends" to unitholders under the federal alternative minimum tax. See "Taxes"
and "Distributions." The Tax-Exempt Diversified Portfolio may, but does not
currently intend to, invest up to 20% of its net assets in private activity
bonds. If such policy should change in the future, unitholders would be noti-
fied and such investments would not exceed 20% of the Portfolio's net assets.
OTHER POLICIES. Ordinarily, the Tax-Exempt Diversified Portfolio expects
that 100% of its portfolio securities will be Municipal Instruments. However,
the Portfolio may hold cash or invest in short-term taxable securities as set
forth above. The Portfolio may invest 25% or more of the value of its total
assets in Municipal Instruments which are related in such a way that an eco-
nomic, business or political development or change affecting one Municipal In-
strument would also affect the other Municipal Instruments. For example, the
Portfolio may invest all of its assets in (a) Municipal Instruments the inter-
est on which is paid solely from revenues from similar projects such as hospi-
tals, electric utility systems, multi-family housing, nursing homes, commer-
cial facilities (including hotels), steel companies or life care facilities,
(b) Municipal Instruments whose issuers are in the same state, or (c) indus-
trial development obligations. Concentration of the Portfolio's investments in
these Municipal Instruments will subject the Portfolio, to a greater extent
than if such investment was more limited, to the risks of adverse economic,
business or political developments affecting any such state, industry or other
area of concentration.
Each Portfolio may purchase Municipal Instruments which are backed by let-
ters of credit, which will ordinarily be irrevocable, issued by domestic banks
or foreign banks (excluding the Prime Obligations Portfolio) which have a
branch, agency or subsidiary in the United States. In addition, the Portfolios
may acquire securities in the form of custodial receipts which evidence owner-
ship of future interest payments, principal payments or both on obligations of
certain state and local governments and authorities.
In order to enhance the liquidity, stability, or quality of a Municipal In-
strument, each Portfolio may acquire the right to sell the security to another
party at a guaranteed price and date.
REPURCHASE AGREEMENTS
Each Portfolio may only enter into repurchase agreements with primary deal-
ers in U.S. Government Securities. A repurchase agreement is an agreement un-
der which a Portfolio purchases securities and the seller agrees to repurchase
the securities within a particular time at a specified price. Such price will
exceed the original purchase price, the difference being income to the Portfo-
lio, and will be unrelated to the interest rate on the purchased security. A
Portfolio's custodian or sub-custodian will maintain custody of the purchased
securities for the duration of the agreement. The value of the purchased secu-
rities, including accrued interest, will at all times equal or exceed the
value of the repurchase agreement. In the event of bankruptcy of the seller or
failure of the seller to repurchase the securities as agreed, a Portfolio
could suffer losses, including loss of interest on or principal of the secu-
rity and costs associated with delay and enforcement of the repurchase agree-
ment. In
11
<PAGE>
evaluating whether to enter into a repurchase agreement, the Adviser will
carefully consider the creditworthiness of the seller pursuant to procedures
reviewed and approved by the Trustees. Distributions of the income from repur-
chase agreements entered into by a Portfolio will be taxable to its
unitholders. In addition, each Portfolio, together with other registered in-
vestment companies having advisory agreements with the Adviser or any of its
affiliates, may transfer uninvested cash balances into a single joint account,
the daily aggregate balance of which will be invested in one or more repur-
chase agreements.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
The Portfolios may purchase when-issued securities and make contracts to
purchase or sell securities for a fixed price at a future date beyond custom-
ary settlement time. A Portfolio is required to hold and maintain in a segre-
gated account with the Portfolio's custodian or subcustodian until three days
prior to settlement date, cash or liquid assets in an amount sufficient to
meet the purchase price. Alternatively, a Portfolio may enter into offsetting
contracts for the forward sale of other securities that it owns. Securities
purchased or sold on a when-issued or forward commitment basis involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date or if the value of the security to be sold increases prior to
the settlement date. Although a Portfolio would generally purchase securities
on a when-issued or forward commitment basis with the intention of acquiring
securities for its portfolio, the Portfolio may dispose of a when-issued secu-
rity or forward commitment prior to settlement if the Adviser deems it appro-
priate to do so.
OTHER INVESTMENT COMPANIES
The Adviser will determine, under guidelines established by the Trustees,
whether securities issued by other money market investment companies present
minimal credit risks. The amount of a Portfolio's investments in securities of
other investment companies will be subject to the limitations on such invest-
ments prescribed by the Investment Company Act. These limits include a prohi-
bition on any Portfolio acquiring more than 3% of the voting shares of any
other investment company, and a prohibition on investing more than 5% of a
Portfolio's total assets in securities of any one investment company or more
than 10% of its total assets in securities of all investment companies. Each
Portfolio will indirectly bear its proportionate share of any management fees
and other expenses paid by such other investment companies. Such other invest-
ment companies will have investment objectives, policies and restrictions sub-
stantially similar to those of the acquiring Portfolio and will be subject to
substantially the same risks.
INVESTMENT LIMITATIONS
RULE 2A-7. Each Portfolio will comply with the conditions for using amor-
tized cost valuation set forth in Rule 2a-7 under the Investment Company Act
including, but not limited to, those conditions relating to maturity, diversi-
fication and credit quality. These operating policies may be more restrictive
than the fundamental policies set forth in the Statement of Additional Infor-
mation.
INVESTMENT RESTRICTIONS. Each Portfolio is subject to certain investment re-
strictions that are described in detail under "Investment Restrictions" in the
Statement of Additional Information. Fundamental investment restrictions and
the investment objective of a Portfolio cannot be changed without approval of
a majority of the outstanding units of that Portfolio. All policies not spe-
cifically designated as fundamental are non-fundamental and may be changed
without unitholder approval.
12
<PAGE>
RESTRICTED AND OTHER ILLIQUID SECURITIES. Each Portfolio may purchase secu-
rities that are not registered ("restricted securities") under the Securities
Act of 1933 ("1933 Act"), but can be offered and sold to "qualified institu-
tional buyers" under Rule 144A under the 1933 Act. However, a Portfolio will
not invest more than 10% of its net assets in illiquid investments, which in-
clude fixed time deposits maturing in more than seven days and restricted se-
curities. Restricted securities (including commercial paper issued pursuant to
Section 4(2) of the 1933 Act) which the Board of Trustees has determined are
liquid, based upon a continuing review of the trading markets for the specific
restricted security, will not be deemed to be illiquid investments for pur-
poses of this restriction. The Board of Trustees may adopt guidelines and del-
egate to the Adviser the daily function of determining and monitoring the li-
quidity of restricted securities. The Board, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is
not possible to predict with assurance that the market for restricted securi-
ties eligible for resale under Rule 144A will continue to be liquid, the Ad-
viser will carefully monitor each Portfolio's investments in these securities,
focusing on such important factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in a Portfolio to the extent that quali-
fied institutional buyers become for a time uninterested in purchasing these
restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nomi-
nal fixed term on seven days or less notice. Such repurchase agreements will
be regarded as liquid instruments.
MANAGEMENT
THE ADVISER
GSAM, One New York Plaza, New York, New York 10004, a separate operating di-
vision of Goldman, Sachs & Co., acts as investment adviser to the Portfolios.
Goldman Sachs registered as an investment adviser in 1981. As of March 24,
1997, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $104.9 billion in assets.
As of November 29, 1996, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $112 billion and partners' capital of $2 billion and
ranked as one of the largest international investment banking and brokerage
firms in the United States. Founded in 1869, Goldman Sachs is a major invest-
ment banking and brokerage firm providing a broad range of financing and in-
vestment services both in the United States and abroad.
Pursuant to an SEC order, the Prime Obligations Portfolio may enter into
principal transactions in certain taxable money market instruments, including
repurchase agreements, with Goldman Sachs.
Under the Investment Advisory Agreements, GSAM continually manages each
Portfolio, including the purchase, retention and disposition of its securities
and other assets. In addition, GSAM administers the Portfolios' business af-
fairs and performs various unitholder servicing functions to the extent not
provided by other organizations. GSAM may pay a Service Organization, as de-
fined herein, other than Goldman Sachs, compensation equal on an annual basis
up to .10% of the average daily net assets of the ILA Service Units attribut-
able to
13
<PAGE>
or held of record by such Service Organization for providing certain
unitholder services to its customers. The management of each Portfolio is sub-
ject to the supervision of the Trustees and each Portfolio's investment poli-
cies. For these services, the Trust, on behalf of each Portfolio, pays GSAM a
monthly fee at an annual rate of each Portfolio's average daily net assets as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
CONTRACTUAL DECEMBER 31,
RATE 1996
----------- ------------
<S> <C> <C>
Prime Obligations Portfolio............................ .35% .35%
Tax-Exempt Diversified Portfolio....................... .35% .25%
</TABLE>
The difference, if any, between the stated fees and the actual advisory fees
paid by the Portfolios reflects the fact that GSAM did not charge the full
amount of the advisory fees to which it would have been entitled.
GSAM has agreed to reduce or otherwise limit the daily expenses of each
Portfolio (excluding fees payable to Service Organizations, as defined herein,
distribution and authorized dealer service fees, taxes, interest, brokerage
and litigation, indemnification and other extraordinary expenses), on an
annualized basis, to .43% of the average daily net assets of the Portfolio
less the effect of fee reductions, if any. Such reductions or limits, if any,
are calculated monthly on a cumulative basis. Any such reductions or limits
may be discontinued or modified only with the express approval of the Trust-
ees. In addition, GSAM has voluntarily agreed to reduce or limit the Prime Ob-
ligations and Tax-Exempt Diversified Portfolios' annual total operating ex-
penses (excluding fees payable to Service Organizations, as defined herein,
and distribution and authorized dealer service fees), to .42% and .32%, re-
spectively, of average daily net assets. GSAM has no current intention to, but
may in the future, discontinue or modify either of the limitations at its dis-
cretion.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of units of each Portfolio pursuant to a Distribution Agreement with
the Trust. The Distributor will assist in the sale of units of each Portfolio
upon the terms described herein. Units of each Portfolio may also be sold by
certain investment dealers, including members of the NASD and certain other
financial service firms that have sales agreements with Goldman Sachs ("Autho-
rized Dealers"). Goldman Sachs, 4900 Sears Tower, Chicago, Illinois also
serves as the Transfer Agent of each Portfolio. For the transfer agency serv-
ices, Goldman Sachs receives .04% (on an annualized basis) of the average
daily net assets with respect to each Portfolio.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold units of the Portfolios in order to increase the assets of the Portfo-
lios. Increasing the Portfolios' assets may enhance investment flexibility and
diversification. Goldman Sachs reserves the right to redeem at any time some
or all of the Portfolio units acquired for its own account. Goldman Sachs will
consider the effect of redemptions on the Portfolios and other unitholders in
deciding whether to redeem its units.
14
<PAGE>
ADDITIONAL SERVICES
SERVICE PLAN (ILA SERVICE UNITS ONLY)
Each Portfolio has adopted a Service Plan with respect to the ILA Service
Units which authorizes it to compensate Service Organizations for providing
account administration and personal and account maintenance services to their
customers who are beneficial owners of such Units. Each Portfolio will enter
into agreements with Service Organizations, including Goldman Sachs, which
purchase ILA Service Units, on behalf of their customers ("Service Agree-
ments"). On behalf of its clients who purchase ILA Service Units of a Portfo-
lio, Goldman Sachs will provide services as set forth under the Service Agree-
ment. The Service Agreements will provide for compensation to each Service Or-
ganization in an amount up to .40% (on an annualized basis) of the average
daily net assets of the ILA Service Units of that Portfolio attributable to or
held in the name of the Service Organization for its customers; provided, how-
ever, that the fee paid for personal and account maintenance services shall
not exceed .25% of such average daily net assets. The services provided by a
Service Organization may include acting, directly or through an agent, as the
sole unitholder of record, maintaining account records for its customers,
processing orders to purchase, redeem and exchange ILA Service Units for its
customers, responding to inquiries from prospective and existing unitholders
and assisting customers with investment procedures.
For the fiscal year ended December 31, 1996, the Trust, on behalf of each
Portfolio, paid Service Organizations fees at the annual rate of .40% of each
Portfolio's average daily net assets attributable to ILA Service Units.
Holders of ILA Service Units of a Portfolio will bear all expenses and fees
paid to Service Organizations with respect to such Units as well as any other
expenses which are directly attributable to such Units.
Service Organizations may charge other fees to their customers who are the
beneficial owners of ILA Service Units in connection with their customer ac-
counts. These fees would be in addition to any amounts received by the Service
Organization under a Service Agreement and may affect an investor's return
with respect to an investment in a Portfolio.
All inquiries of beneficial owners of ILA Service Units of the Portfolios
should be directed to such owners' Service Organization.
DISTRIBUTION AND AUTHORIZED DEALER SERVICE PLANS (ILA CLASS B UNITS ONLY)
DISTRIBUTION PLAN-CLASS B UNITS. Prime Obligations Portfolio, with respect
to its ILA Class B Units, has adopted a Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act (the "Class B Distribution Plan"). Un-
der the Class B Distribution Plan, Goldman Sachs is entitled to a quarterly
fee from the Portfolio for distribution services equal, on an annual basis, to
0.75% of the Portfolio's average daily net assets attributable to its ILA
Class B Units.
Goldman Sachs may use the distribution fee for its expenses of distributing
the ILA Class B Units. The types of expenses for which Goldman Sachs may be
compensated for distribution services under the Class B Distribution Plan in-
clude compensation paid to and expenses incurred by authorized dealers,
Goldman Sachs and their respective officers, employees and sales representa-
tives, commissions paid to authorized dealers, allocable overhead, telephone
and travel expenses, the printing of prospectuses for prospective unitholders,
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 ILA Class B Units. If the fee received by Goldman
Sachs pursuant
15
<PAGE>
to the Class B Distribution Plan exceeds its expenses, Goldman Sachs may real-
ize a profit from these arrangements. The Class B Distribution Plan will be
reviewed and is subject to approval annually by the Board of Trustees of the
Trust. The aggregate compensation that may be received under the Class B Dis-
tribution Plan for distribution services may not exceed the limitations im-
posed by the NASD's Conduct Rules.
AUTHORIZED DEALER SERVICE PLAN-CLASS B UNITS. Prime Obligations Portfolio,
with respect to its ILA Class B Units, has adopted a non-Rule 12b-1 Authorized
Dealer Service Plan (an "Authorized Dealer Service Plan") pursuant to which
Goldman Sachs and authorized dealers are compensated for providing personal
and account maintenance services. The Portfolio pays a fee under its Autho-
rized Dealer Service Plan equal on an annual basis to 0.25% of its average
daily net assets attributable to its ILA Class B Units. The fee for personal
and account maintenance services paid pursuant to an Authorized Dealer Service
Plan may be used to make payments to Goldman Sachs, authorized dealers and
their officers, sales representatives and employees for responding to inqui-
ries of, and furnishing assistance to, unitholders regarding ownership of
their units or their accounts or similar services not otherwise provided on
behalf of the Portfolios. The Authorized Dealer Service Plan will be reviewed
and is subject to approval annually by the Board of Trustees.
ALTERNATIVE PURCHASE ARRANGEMENTS
Each Portfolio continuously offers ILA Service Units and the Prime Obliga-
tions Portfolio also offers ILA Class B Units through this prospectus, as de-
scribed more fully below. ILA Class B Units of the Prime Obligations Portfolio
will be typically issued only upon an exchange of Class B Shares of any of the
Goldman Sachs Funds (as defined herein) or to accounts which intend to system-
atically exchange ILA Class B Units for Class B Shares of any of the Goldman
Sachs Funds. If an investor does not specify in the instructions to the Port-
folios which class of Units an investor wishes to purchase, exchange or re-
deem, the Portfolios will assume that the instructions apply to ILA Service
Units, since such units are not subject to any contingent deferred sales
charge or distribution fees.
ILA SERVICE UNITS. ILA Service Units of the Portfolios may be purchased
through Goldman Sachs acting as a Service Organization or through Authorized
Dealers. ILA Service Units are not subject to any initial or contingent de-
ferred sales charge or any fee for distribution services. However, ILA Service
Units are subject to a service fee at the annual rate of 0.40% of the Portfo-
lios' average daily net assets attributable to ILA Service Units.
ILA CLASS B UNITS. ILA Class B Units of the Prime Obligations Portfolio may
be purchased through Goldman Sachs or through Authorized Dealers. ILA Class B
Units are sold without an initial sales charge, but are subject to a contin-
gent deferred sales charge ("CDSC"), as described below, if redeemed within
six years of purchase. ILA Class B Units are also subject to distribution and
authorized dealer service fees of up to 0.75% and 0.25%, respectively, of the
Portfolio's average daily net assets attributable to ILA Class B Units. Your
entire investment in ILA Class B Units is available to work for you from the
time you make your initial investment, but the distribution fee paid by ILA
Class B Units will cause your Units (until conversion to ILA Service Units) to
have a higher expense ratio and to pay lower dividends than ILA Service Units.
ILA Class B Units will automatically convert to ILA Service Units, based on
their relative net asset values, eight years after purchase. No CDSC is im-
posed upon exchanges between the Prime Obligations Portfolio and another
Goldman Sachs Fund. However, units or shares acquired in an exchange will be
subject to the CDSC to the same extent as if there had been no exchange. For
purposes of determining whether the CDSC is applicable, the length of time an
investor has owned units or shares acquired by exchange will be measured from
the date the investor acquired the original units or shares and will not be
affected by any subsequent exchange. There is a maximum purchase limitation of
$250,000 on purchases of ILA Class B Units by each investor.
16
<PAGE>
OFFERING PRICE-ILA CLASS B UNITS
Investors may purchase ILA Class B Units of the Prime Obligations Portfolio
at the next determined net asset value without the imposition of an initial
sales charge. However, ILA Class B Units redeemed within six years of purchase
will be subject to a CDSC at the rates shown in the table that follows. At re-
demption, the charge will be assessed on the amount equal to the lesser of the
current market value or the original purchase cost of the units being re-
deemed. No CDSC will be imposed on increases in account value above the ini-
tial purchase price, including units derived from the reinvestment of divi-
dends or capital gains distributions.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of ILA Class B Units.
For the purpose of determining the number of years from the time of any pur-
chase, all payments during a month will be aggregated and deemed to have been
made on the first day of that month. In processing redemptions of ILA Class B
Units, the Portfolio will first redeem units not subject to any CDSC, and then
units held longest during the eight-year period. As a result, a redeeming
unitholder will pay the lowest possible CDSC.
<TABLE>
<CAPTION>
CDSC AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CDSC
- ------------------- ---------------
<S> <C>
First........................................................... 5.0%
Second.......................................................... 4.0%
Third........................................................... 3.0%
Fourth.......................................................... 3.0%
Fifth........................................................... 2.0%
Sixth........................................................... 1.0%
Seventh and thereafter.......................................... none
</TABLE>
Proceeds from the CDSC are payable to the Distributor and may be used in
whole or part to defray the Distributor's expenses related to providing dis-
tribution-related services in connection with the sale of ILA Class B Units,
including the payment of compensation to Authorized Dealers. A commission
equal to 4% (or 3% in certain circumstances) of the amount invested is paid to
Authorized Dealers.
ILA Class B Units of the Prime Obligations Portfolio will automatically con-
vert into ILA Service Units of the Prime Obligations Portfolio at the end of
the calendar quarter that is eight years after the purchase date, except as
noted below. ILA Class B Units of the Portfolio acquired by exchange from
Class B Shares of another Goldman Sachs Fund will convert into ILA Service
Units based on the date of the initial purchase. ILA Class B Units acquired
through reinvestment of distributions will convert into ILA Service Units
based on the date of the initial purchase of the units on which the distribu-
tion was paid.
Waiver or Reduction of Contingent Deferred Sales Charge. The CDSC on ILA
Class B units may be waived or reduced if the redemption relates to (a) re-
tirement distributions or loans to participants or beneficiaries from pension
and profit sharing plans, pension funds and other company sponsored benefit
plans (each a "Plan"); (b) the death or disability (as defined in section 72
of the Code) of a participant or beneficiary in a Plan; (c) hardship withdraw-
als by a participant or beneficiary in a Plan; (d) satisfying the minimum dis-
tribution
17
<PAGE>
requirements of the Code; (e) the establishment of "substantially equal peri-
odic payments" as described in Section 72(t) of the Code; (f) the separation
from service by a participant or beneficiary in a Plan; (g) the death or dis-
ability (as defined in section 72 of the Code) of a shareholder if the redemp-
tion is made within one year of such event; (h) excess contributions being re-
turned to a Plan; (i) distributions from a qualified retirement plan invested
in the Goldman Sachs Funds which are being reinvested into a Goldman Sachs
IRA; and (j) redemption proceeds which are to be reinvested in accounts or
non-registered products over which GSAM or its advisory affiliates have in-
vestment discretion.
GENERAL INFORMATION
ILA Service Units and ILA Class B Units may be purchased on any Business Day
at the net asset value next determined after receipt by State Street Bank and
Trust Company ("State Street"), as agent for Goldman Sachs, of both the pur-
chase order and the purchase price in federal funds. Purchase orders may be
made by contacting Goldman Sachs or, if units are held in a "street name" ac-
count, the applicable Authorized Dealer. Since the Portfolios and Goldman
Sachs will have no record of the beneficial owner's transactions in a "street
name" account, the beneficial owner should contact its Authorized Dealer to
purchase, redeem or exchange units, to make changes in or give instructions
concerning the account or to obtain information about the account. It is the
responsibility of the Authorized Dealer to promptly forward orders and payment
to the Portfolios.
Goldman Sachs may from time to time, at its own expense, provide compensa-
tion to certain Authorized Dealers and other persons for performing adminis-
trative services to their customers. These services include maintaining ac-
count records, processing orders to purchase, redeem and exchange units and
responding to certain customer inquires. In addition, these services may also
include responding to certain inquiries from and providing written materials
to depository institutions about the Portfolios; furnishing advice about and
assisting depository institutions in obtaining from state regulatory agencies
any rulings, exemptions or other authorizations that may be required to con-
duct a mutual fund sales program; acting as liaison between depository insti-
tutions and national regulatory organizations; assisting with the preparation
of sales material; and providing general assistance and advice in establishing
and maintaining mutual fund sales programs on the premises of depository in-
stitutions.
PURCHASES BY CHECK
Initial purchases of ILA Service Units and ILA Class B Units may be made by
mailing a completed Account Application along with a Federal Reserve draft or
check (except that a third party check will not be accepted) payable only to
the appropriate Portfolio and drawn on a U.S. bank and for subsequent invest-
ments may be made by mailing a check with the investor's account number to
Goldman Sachs Money Market Trust (Prime Obligations Portfolio--Indicate Class
of Units) or (Tax-Exempt Diversified Portfolio--Service Units), c/o NFDS, P.O.
Box 419711, Kansas City, MO 64141-6711. The order becomes effective as soon as
the check or draft is converted to federal funds. It is expected that Federal
Reserve drafts will ordinarily be converted to Federal Funds on the day of re-
ceipt and that checks will be converted to federal funds within two Business
Days after receipt. Payment of redemption proceeds from ILA Service Units and
ILA Class B Units purchased by check may be delayed up to 15 days until the
check has cleared, as described under "Redemption of Units".
AUTOMATIC INVESTMENT PLAN
Systematic cash investments in ILA Service Units or ILA Class B Units may be
made through a unitholder's bank via the Automated Clearing House Network or a
unitholder's checking account via bank draft each month.
18
<PAGE>
Required forms are available from Goldman Sachs or any Authorized Dealer. A
minimum investment of $50 is required for Automatic Investment Plans.
PURCHASES
ILA Service Units and ILA Class B Units of the Prime Obligations Portfolio
are deemed to have been purchased when an order becomes effective and are en-
titled to dividends as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF AN ORDER IS RECEIVED BY
STATE STREET DIVIDENDS BEGIN
-------------------------- -----------------
<S> <C>
By: 3:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------
After: 3:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------
</TABLE>
ILA Service Units of the Tax-Exempt Diversified Portfolio are deemed to have
been purchased when an order becomes effective and are entitled to dividends
as follows:
<TABLE>
<CAPTION>
IF AN ORDER IS RECEIVED BY
STATE STREET DIVIDENDS BEGIN
-------------------------- -----------------
<S> <C>
By: 1:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------
After: 1:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------
</TABLE>
A Business Day means any day on which the New York Stock Exchange is open,
except for days on which Chicago, Boston or New York banks are closed for lo-
cal holidays.
ILA Service Units of the Portfolios are purchased at the net asset value per
unit without the imposition of a sales charge. ILA Class B Units acquired
through an exchange will be purchased at the net asset value per unit and will
only be subject to the CDSC of the shares originally held. For purposes of de-
termining the amount of any applicable CDSC, the length of time a unitholder
has owned ILA Class B Units will be measured from the date the unitholder ac-
quired the original Class B shares and will not be affected by any subsequent
exchange. Investors should consult their Goldman Sachs Fund Class B shares
prospectus to determine the amount of their remaining CDSC.
Goldman Sachs, as each Portfolio's transfer agent, will maintain a complete
record of transactions and ILA Service Units or ILA Class B Units held in each
unitholder's account. The Trust and Goldman Sachs each reserves the right to
reject any purchase order for any reason.
MINIMUM INVESTMENT AND OTHER INFORMATION
The Trust does not have any minimum purchase or account requirements with
respect to ILA Service Units. However, Goldman Sachs has established a minimum
initial investment requirement of $5,000. Shareholders of any Goldman Sachs
Fund who wish to purchase ILA Service Units of the Portfolios or ILA Class B
Units of the Prime Obligations Portfolio through an exchange of shares of such
a Goldman Sachs Fund may be subject to different minimum investment require-
ments. (See "Exchanges," on page 22 of the Prospectus.)
TAX-SHELTERED RETIREMENT PLANS
The Prime Obligations Portfolio is offered for purchase by retirement plans,
including Individual Retirement Account plans for individuals and their non-
employed spouses, IRA plans for employees in connection with employer spon-
sored SEP, SAR-SEP and SIMPLE IRA plans, and defined contribution plans such
as 401(k) Salary Reduction Plans.
19
<PAGE>
Detailed information concerning these plans and copies of the plans may be
obtained from the Transfer Agent. This information should be read carefully,
and consultation with an attorney or tax adviser may be advisable. The infor-
mation sets forth the service fee charged for retirement plans and describes
the federal income tax consequences of establishing a plan.
The minimum initial investment for all such retirement plans is $5,000, ex-
cept for certain exchanges of shares of any Goldman Sachs Fund and except that
the minimum for tax-sheltered retirement plans is $250. There is a minimum of
$50 for all subsequent investments.
REPORTS TO UNITHOLDERS
The Trust will issue an annual report containing audited financial state-
ments and a semiannual report to record holders of ILA Service Units of each
Portfolio, including Service Organizations who hold such Units for the benefit
of their customers and to unitholders of ILA Class B Units of the Prime Obli-
gations Portfolio. Upon request, a printed confirmation for each transaction
will be provided by Goldman Sachs. Any dividends and distributions paid by the
Portfolio are also reflected in regular statements issued by Goldman Sachs, in
its capacity as transfer agent and income disbursing agent, to unitholders of
record. The Service Organizations, including Goldman Sachs, will be responsi-
ble for providing similar services to their own customers who are the benefi-
cial owners of such Units.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (as of 4:00 p.m. New York time) as a dividend and distributed
monthly. Distributions will be made in additional ILA Service Units or ILA
Class B Units of the same Portfolio or, at the election of a Service Organiza-
tion (with respect to ILA Service Units) or ILA Class B Unitholders, in cash.
Such reinvestments will not be subject to any CDSC. The election to reinvest
dividends and distributions or receive them in cash may be changed by a Serv-
ice Organization or ILA Class B Unitholder at any time upon written notice to
Goldman Sachs, in its capacity as transfer agent and income disbursing agent.
If no election is made, all dividend and capital gain distributions will be
reinvested. Dividends will be reinvested as of the last calendar day of each
month. Cash distributions will be paid on or about the first business day of
each month. Net short-term capital gains, if any, will be distributed in ac-
cordance with the requirements of the Code and may be reflected in a Portfo-
lio's daily distributions. Each Portfolio may distribute at least annually its
long-term capital gains, if any, after reduction by available capital losses.
In order to avoid excessive fluctuations in the amount of monthly capital
gains distributions, a portion of any net capital gains realized on the dispo-
sition of securities during the months of November and December may be dis-
tributed during the subsequent calendar year. Although realized gains and
losses on the assets of a Portfolio are reflected in the net asset value of
the Portfolio, they are not expected to be of an amount which would affect the
Portfolio's net asset value of $1.00 per unit.
A Portfolio's net investment income consists of the excess of (i) accrued
interest or discount (including both original issue and market discount on
taxable securities) on portfolio securities, and (ii) any income of the Port-
folio from sources other than capital gains over (iii) the amortization of
market premium on all portfolio
20
<PAGE>
securities and (iv) the estimated expenses of the Portfolio, including a pro-
portionate share of the general expenses of the Trust.
TAXES
Each Portfolio is treated as a separate entity for federal income tax pur-
poses, has elected to be treated and intends to continue to qualify and be
treated as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986 (the "Code") for each taxable year. To qualify as such,
each Portfolio must satisfy certain requirements relating to the sources of
its income, diversification of its assets and distribution of its income to
unitholders. As a regulated investment company, each Portfolio will not be
subject to federal income or excise tax on any net investment income and net
realized capital gains that are distributed to its unitholders in accordance
with certain timing requirements of the Code.
Dividends paid by a Portfolio from net investment income, the excess of net
short-term capital gain over net long-term capital loss and original issue
discount or market discount income will be taxable to unitholders as ordinary
income, except for any "exempt-interest dividends" paid by the Tax-Exempt Di-
versified Portfolio, as described below. Dividends paid by a Portfolio from
the excess of net long-term capital gain over net short-term capital loss will
be taxable as long-term capital gain regardless of how long the unitholders
have held their units. These tax consequences will apply to distributions of
either Portfolio regardless of whether distributions are received in cash or
reinvested in units. Certain distributions paid by the Portfolios in January
of a given year will be taxable to unitholders as if received on December 31
of the year in which they are declared. Unitholders will be informed annually
about the amount and character of distributions received from the Portfolios
for federal income tax purposes, including any distributions that may consti-
tute a return of capital or any distributions of the Tax-Exempt Diversified
Portfolio that may constitute a tax preference item under the federal alterna-
tive minimum tax.
The Tax-Exempt Diversified Portfolio intends to satisfy certain requirements
of the Code for the payment of "exempt-interest dividends" not included in
unitholders' federal gross income. Dividends paid by the Tax-Exempt Diversi-
fied Portfolio from interest on tax-exempt obligations and properly designated
by the Portfolio as exempt-interest dividends, including dividends attribut-
able to exempt-interest dividends received by the Portfolio from other regu-
lated investment companies, will generally be exempt from federal income tax,
although a portion of such dividends may be subject to the federal alternative
minimum tax. Exempt-interest dividends will be considered in computing the
corporate federal alternative minimum tax and the extent, if any, to which so-
cial security or railroad retirement benefits are taxable. Persons who are
"substantial users" of facilities financed by certain industrial development
or private activity bonds should consult their own tax advisers before pur-
chasing units of the Tax-Exempt Diversified Portfolio. Interest incurred to
purchase or carry units of the Tax-Exempt Diversified Portfolio will not be
deductible for federal income tax purposes to the extent related to exempt-in-
terest dividends paid by the Portfolio.
Individuals and certain other classes of unitholders may be subject to 31%
backup withholding of federal income tax on taxable distributions if they fail
to furnish their correct taxpayer identification number and certain certifica-
tions required by the Internal Revenue Service or if they are otherwise sub-
ject to backup withholding. Individuals, corporations and other unitholders
that are not U.S. persons under the Code are subject to different tax rules
and may be subject to nonresident alien withholding at the rate of 30% (or a
lower rate provided by an applicable tax treaty) on amounts treated as ordi-
nary dividends from the Portfolios.
In addition to federal taxes, a unitholder may be subject to state and local
taxes on payments received from a Portfolio. A state income (and possibly lo-
cal income and/or intangible property) tax exemption is generally
21
<PAGE>
available to the extent a Portfolio's distributions are derived from interest
on (or, in the case of intangible property taxes, the value of its assets is
attributable to) certain U.S. Government obligations and/or tax-exempt munici-
pal obligations issued by or on behalf of the particular state or a political
subdivision thereof, provided in some states that certain thresholds for hold-
ings of such obligations and/or reporting requirements are satisfied.
Unitholders should consult their own tax advisers concerning these matters.
AUTOMATIC EXCHANGE PROGRAM
Unitholders of a Portfolio may elect on the Account Application to automati-
cally exchange a specified dollar amount of ILA Service Units or ILA Class B
Units for corresponding shares of any Goldman Sachs Fund. In the case of ILA
Service Units, such exchanges will be made into the relevant Goldman Sachs
Fund at the public offering price, which may include a sales charge, unless a
sales charge has previously been paid on the investment represented by the ex-
changed units (i.e., the units to be exchanged were originally issued in ex-
change for shares on which a sales charge was paid), in which case the auto-
matic exchanges will be made at net asset value. In the case of ILA Class B
Unitholders, such exchanges will be made into the relevant Goldman Sachs Fund
at net asset value and will be subject to the CDSC of the original shares
held. For purposes of determining the amount of any applicable CDSC, the
length of time a unitholder has owned ILA Class B Units will be measured from
the date the unitholder acquired the original Class B shares and will not be
affected by any subsequent exchange. Investors should consult their Goldman
Sachs Fund Class B shares prospectus to determine the amount of their applica-
ble CDSC. Dividends and/or capital gains of ILA Service Units of each Portfo-
lio and ILA Class B Units of the Prime Obligations Portfolio which have been
reinvested may be exchanged for corresponding shares of a Goldman Sachs Fund
without an initial sales charge or CDSC. These automatic exchanges are made
monthly on the fifteenth day of each month or the first Business Day thereaf-
ter and are subject to the following conditions. The minimum dollar amount for
automatic exchanges must be at least $50 per month. At the time the election
is made (i) the value of the unitholder's account in the Portfolio from which
the exchange is made must equal or exceed $5,000 and (ii) the value of the ac-
count in the acquired fund must equal or exceed the acquired fund's minimum
initial investment requirement or, if the unitholder has elected the automatic
exchange privilege and the value of the acquired fund does not equal the ac-
quired fund's minimum, such election must continue until the minimum initial
investment requirement is met. The names, addresses and social security or
other taxpayer identification numbers for the unitholder accounts with the ex-
changed and acquired funds must be identical. A unitholder should obtain and
read the prospectus relating to any Goldman Sachs Fund and its shares and con-
sider its investment objective, policies and applicable fees and expenses be-
fore electing an automatic exchange into that Goldman Sachs Fund.
EXCHANGES
ILA Service Units of each Portfolio and ILA Class B Units of the Prime Obli-
gations Portfolio may be exchanged for units of the corresponding class of any
Goldman Sachs Fund. A unitholder should obtain and read the prospectus for the
relevant Goldman Sachs Fund and consider its investment objectives, policies
and applicable fees before making an exchange. Exchanges of ILA Service Units
from each Portfolio will be made into the relevant Goldman Sachs Fund at the
public offering price, which may include a sales charge, unless a sales charge
has previously been paid on the investment represented by the exchanged units
(i.e., the units to be exchanged were originally issued in exchange for shares
on which a sales charge was paid), in which case the exchange will be made at
net asset value. In the case of ILA Class B Unitholders, such exchanges will
be made into the relevant Goldman Sachs Fund at net asset value and will be
subject to the CDSC of the original
22
<PAGE>
shares held. For purposes of determining the amount of any applicable CDSC,
the length of time a unitholder has owned ILA Class B Units will be measured
from the date the unitholder acquired the original Class B shares and will not
be affected by any subsequent exchange. Investors should consult their Goldman
Sachs Fund Class B shares prospectus to determine the amount of their applica-
ble CDSC. ILA Service Units of each Portfolio or ILA Class B Units of the
Prime Obligations Portfolio purchased through dividend and/or capital gains
reinvestment may be exchanged for corresponding shares of a Goldman Sachs Fund
without an initial sales charge or CDSC.
ILA Service Units of a Portfolio acquired in an exchange transaction for
shares of a Goldman Sachs Fund will be subject to the CDSC, if any, of the
shares of the Goldman Sachs Fund originally held. For purposes of determining
the amount of any applicable CDSC, the length of time a unitholder had owned
units acquired will be measured from the date the unitholder acquired the
original units subject to a CDSC, and will not be affected by any subsequent
exchange. A subsequent exchange of ILA Service Units of a Portfolio that are
subject to a CDSC (i.e., because the ILA Service Units were acquired in an ex-
change transaction for shares of a Goldman Sachs Fund that were subject to a
CDSC) will not be subject to the applicable CDSC at the time of exchange.
An exchange may be made by contacting an Authorized Dealer or writing to
Goldman Sachs Trust, c/o NFDS, P.O. Box 419711, Kansas City, MO 64141-6711 or,
unless the investor has specifically declined telephone exchange privileges on
the Account Application or elected in writing not to utilize telephone ex-
changes, by a telephone request to the Transfer Agent at 1-800-526-7384
(9:00 a.m. to 5:00 p.m. New York time). Certain procedures are employed to
prevent unauthorized or fraudulent exchange requests as set forth under "Re-
demption of Units." Under the telephone exchange privilege, units may be ex-
changed among accounts with different names, addresses or social security or
other taxpayer identification numbers only if the exchange instructions are in
writing and are received in accordance with the procedures set forth under
"Redemption of Units." In times of drastic economic or market changes the tel-
ephone exchange privilege may be difficult to implement.
In addition to free automatic exchanges pursuant to the Automatic Exchange
Program, six free exchanges are permitted in each twelve-month period. It may
be difficult to implement the telephone exchange privilege in times of drastic
economic or market changes. In an effort to prevent unauthorized or fraudulent
exchange requests by telephone, Goldman Sachs employs reasonable procedures as
set forth under "Redemption of Units" to confirm that such instructions are
genuine. All exchanges are subject to the minimum investment requirements of
the Portfolio or Goldman Sachs Fund into which the shares or units are being
exchanged. The minimum initial exchange for shareholders of a Goldman Sachs
Fund is $5,000 or the full account share balance, whichever is less.
An exchange fee may be imposed or the exchange privilege may be modified or
withdrawn at any time upon 60 days' notice to unitholders. The Trust, the rel-
evant fund or Goldman Sachs may reject or restrict purchases of units or
shares by a particular purchaser or group, for example, when a pattern of fre-
quent purchases and sales of units or shares is evident or if the purchase and
sale orders are, or a subsequent abrupt redemption might be, of a size that
would disrupt management of a Portfolio or a Goldman Sachs Fund. Exchanges are
available only in states where the exchange may be legally made.
23
<PAGE>
REDEMPTION OF UNITS
HOW TO REDEEM
ILA Service Units may be redeemed through Goldman Sachs acting as a Service
Organization as specified below.
ILA Service Units of a Portfolio may be redeemed without charge upon request
on any Business Day at the net asset value next determined after receipt by
State Street as agent for Goldman Sachs, as a Service Organization, of the re-
demption request. ILA Class B Units of the Prime Obligations Portfolio may be
redeemed without charge upon request on any Business Day at the net asset
value next determined after receipt of the redemption request less any appli-
cable CDSC. Investors should consult their Goldman Sachs Fund Class B shares
prospectus to determine the amount, if any, of the CDSC at the time of redemp-
tion. Redemption requests may be made by contacting Goldman Sachs or, if units
are held in a "street name" account, the applicable Authorized Dealer. Written
requests may be addressed to Goldman Sachs Trust, c/o NFDS, P.O. Box 419711,
Kansas City, MO 64141-6711.
The Trust accepts telephone requests for redemption of units for amounts up
to $50,000 within any seven (7) calendar day period, except for investors who
have specifically declined telephone redemption privileges on the Account Ap-
plication or elected in writing not to utilize telephone redemptions (proceeds
which are sent to Goldman Sachs brokerage account are not subject to the
$50,000 limit). It may be difficult to implement redemptions by telephone in
times of drastic economic or market changes. By completing an Account Applica-
tion, an investor agrees that the Trust, the Distributor and the Transfer
Agent shall not be liable for any loss incurred by the investor by reason of
the Trust accepting unauthorized telephone redemption requests for his account
if the Trust reasonably believes the instructions to be genuine. Thus,
unitholders risk possible losses in the event of a telephone redemption not
authorized by them. The Trust may accept telephone redemption instructions
from any person identifying himself as the owner of an account or the owner's
broker where the owner has not declined in writing to utilize this service.
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 unitholder's address of record or authorized bank account
designated in the Account Application and exchanges of units 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. Proceeds of telephone redemptions will be mailed to
the unitholder's address of record or wired to the authorized bank account
indicated on the Account Application, unless the unitholder provides written
instructions (accompanied by a signature guarantee) indicating another
address. Telephone redemptions will not be accepted during the 30-day period
following any change in a unitholder's address of record. This redemption
option does not apply to units held in a "street name" account. Unitholders
whose accounts are held in "Street Name" should contact their brokers of
record who may effect telephone redemptions on their behalf. The Trust
reserves the right to terminate or modify the telephone redemption service at
any time.
Written requests for redemptions must be signed by each unitholder with its
signature guaranteed by a bank, a securities broker or dealer, a credit union
having authority to issue signature guarantees, a savings and loan associa-
tion, a building and loan association, a cooperative bank, a federal savings
bank or association, a national securities exchange, a registered securities
association or a clearing agency, provided that such institution satisfies the
standards established by the Transfer Agent.
24
<PAGE>
- -------------------------------------------------------------------------------
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired or
mailed to the record holder of ILA Service Units or ILA Class B Units.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST RECEIVED BY
STATE STREET AS AGENT FOR GOLDMAN REDEMPTION
SACHS PROCEEDS ORDINARILY DIVIDENDS
--------------------------------- ------------------- ---------
<C> <S> <C>
(1)Prime Obligations Portfolio
By:3:00 p.m.--N.Y. time (i) Wire Redemptions Sent Not earned on Day
Same Business Day request is received
(ii) Check Redemptions Sent
Next Business Day
- -----------------------------------------------------------------------------------------------------------------------------------
After: 3:00 p.m.--N.Y. time (i) Wire Redemptions Sent Earned on Day
Next Business Day request is received
(ii) Check Redemptions Sent
Within Two Business
Days
- -----------------------------------------------------------------------------------------------------------------------------------
(2)Tax-Exempt Diversified Portfolio
By:12:00 noon--N.Y. time (i) Wire Redemptions Sent Not earned on Day
Same Business Day request is received
(ii) Check Redemptions Sent
Next Business Day
- -----------------------------------------------------------------------------------------------------------------------------------
After:12:00 noon--N.Y. time (i) Wire Redemptions Sent Earned on Day
Next Business Day request is received
(ii) Check Redemptions Sent
Within Two Business
Days
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Portfolios will arrange for the proceeds of redemptions effected by any
means to be wired as federal funds to the bank account designated in the Ac-
count Application. Redemption proceeds will normally be wired as set forth
above, but may be paid up to three Business Days after receipt of the properly
executed redemption request. For example, payment may be delayed if the Fed-
eral Reserve Bank is closed on the day redemption proceeds would ordinarily be
wired. After a wire has been initiated by Goldman Sachs, neither Goldman Sachs
nor the Trust assumes any further responsibility for the performance of inter-
mediaries or the customer's Service Organization in the transfer process. If a
problem with such performance arises, the customer should deal directly with
such intermediaries or Service Organization.
CHECK REDEMPTION PRIVILEGE (ILA SERVICE UNITS ONLY)
Goldman Sachs or its agent, as a record holder of ILA Service Units of a
Portfolio, may elect to have a special account with State Street for the pur-
pose of permitting its customers to redeem ILA Service Units from their ac-
counts in each Portfolio by check. When State Street receives a completed ap-
plication form, Goldman Sachs or its agent, as a record holder of the ILA
Service Units, will forward to the requesting customer a supply of checks.
Checks drawn on this account may be payable to the order of any person in any
amount of $500 or more, but cannot be certified. The payee of the check may
cash or deposit it like any other check drawn on a bank. When such a check is
presented to State Street for payment, a sufficient number of full and frac-
tional ILA Service Units will be redeemed to cover the amount of the check.
Cancelled checks will be returned to the record holder of ILA Service Units by
State Street.
25
<PAGE>
The check redemption privilege enables a unitholder to receive the dividends
declared on the ILA Service Units to be redeemed until such time as the check
is processed. Because of this feature, the check redemption privilege may not
be used for a complete liquidation of a unitholder's account. If the amount of
a check is greater than the value of the ILA Service Units held in the
unitholder's account, the check will be returned unpaid, and the unitholder
may be subject to extra charges.
Goldman Sachs reserves the right to impose conditions on, limit the avail-
ability of or terminate the check redemption privilege at any time with re-
spect to a particular unitholder or all unitholders in general. The Trust and
State Street reserve the right at any time to suspend the procedure permitting
redemptions by check and intend to do so in the event that federal legislation
or regulations impose reserve requirements or other restrictions deemed by the
Trustees to be adverse to the interests of other ILA Service Unitholders of
the Portfolios.
NET ASSET VALUE
The net asset value of ILA Service Units of each Portfolio and ILA Class B
Units of Prime Obligations Portfolio is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 P.M. New York time) on
each Business Day. Net asset value per unit for each class of units of each
Portfolio is calculated by determining the amount of net assets attributable
to each class of units and dividing by the number of units for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities markets close early, the Prime Ob-
ligations Portfolio and Tax-Exempt Diversified Portfolio reserve the right to
cease accepting purchase and redemption orders for same Business Day credit at
the time the PSA recommends that the securities markets close. On days either
Portfolio closes early, purchase and redemption orders received after the PSA
recommended closing time will be credited to the next Business Day. In addi-
tion, each Portfolio reserves the right to advance the time by which purchase
and redemption orders must be received for same Business Day credit as permit-
ted by the SEC.
Each Portfolio seeks to maintain a net asset value of $1.00 per unit. In
this connection, each Portfolio values its portfolio securities on the basis
of amortized cost. The amortized cost method values a security at its cost on
the date of purchase and thereafter assumes a constant amortization to matu-
rity of any discount or premium, regardless of the impact of fluctuating in-
terest rates on the market value of the instrument. For a more complete de-
scription of the amortized cost valuation method and its effect on existing
and prospective unitholders, see the Statement of Additional Information.
There can be no assurance that a Portfolio will be able at all times to main-
tain a net asset value per unit of $1.00.
YIELD INFORMATION
From time to time, each Portfolio may advertise its yield, effective yield
and average total return. Average annual total return is determined by comput-
ing the average annual percentage change in value of $1,000 invested at the
maximum public offering price for a specified period of at least one year, as-
suming reinvestment of all dividends and distributions at net asset value. The
total return calculation assumes a complete redemption of the investment at
the end of the relevent period. Each Portfolio may furnish total return calcu-
lations based on a cumulative, average, year-by-year or other basis for vari-
ous specified periods by means of quotations, charts, graphs or schedules. The
yield of a Portfolio refers to the income generated by an investment in the
Portfolio over a seven-day period (which period will be stated in the adver-
tisement). This income is then annualized; that
26
<PAGE>
is, the amount of income generated by the investment during that week is as-
sumed to be generated each week over a 52-week period and is shown as a per-
centage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the Portfolio is as-
sumed to be reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
The Tax-Exempt Diversified Portfolio may also quote tax-equivalent yield.
The Portfolio's tax-equivalent yield is calculated by determining the rate of
return that would have to be achieved on a fully taxable investment to produce
the after-tax equivalent of the Portfolio's yield, assuming certain tax brack-
ets for a unitholder.
Investors should note that the investment results of a Portfolio are based
on historical performance and will fluctuate over time. Any presentation of a
Portfolio's total return, yield, effective yield or tax-equivalent yield for
any prior period should not be considered a representation of what an invest-
ment may earn or what a Portfolio's total return, yield, effective yield or
tax-equivalent yield may be in any future period. In addition to the above,
each Portfolio may from time to time advertise its performance relative to
certain averages, performance rankings, indices, other information prepared by
recognized mutual fund statistical services and investments for which reliable
performance data is available.
Total return, yield, effective yield and tax-equivalent yield will be calcu-
lated separately for each class of units in existence. Because each such class
of units is subject to different expenses, the net yield of such classes of a
Portfolio for the same period may differ. See "Organization and Units of the
Portfolios" below.
ORGANIZATION AND UNITS OF THE PORTFOLIOS
Each Portfolio is a series of the Goldman Sachs Trust, which was formed un-
der the laws of the State of Delaware on January 28, 1997. The Portfolios were
formerly series of Goldman Sachs Money Market Trust, a Massachusetts trust and
were reorganized into the Trust as of May 1, 1997. The Trustees have authority
under the Trust's Declaration of Trust to create and classify units of benefi-
cial interest in separate series, without further action by unitholders. Addi-
tional series may be added in the future. The Trustees also have authority to
classify or reclassify any series or portfolio of into one or more classes.
The Trustees have authorized the issuance of three classes of the Tax-Exempt
Diversified Portfolio and four classes of units of the Prime Obligations Port-
folio, which are: ILA Units, ILA Administration and ILA Service and in the
case of the Prime Obligations Portfolio, ILA Class B.
When issued, units are fully paid and nonassessable. In the event of liqui-
dation, unitholders are entitled to share pro rata in the net assets of the
applicable Portfolio available for distribution to unitholders. Units entitle
their holders to one vote per unit (but may, at the discretion of the Trust-
ees, be voted on a net asset value basis), have noncumulative voting rights
are freely transferable and have no preemptive or subscription rights.
The Trust does not intend to hold annual meetings of unitholders. However,
pursuant to the Trust's By-Laws, the recordholders of at least 10% of the
units outstanding and entitled to vote at a special meeting may require the
Trust to hold such special meeting of unitholders for any purpose and
recordholders may, under certain circumstances as permitted by the Act, commu-
nicate with other unitholders in connection with requiring a special meeting
of unitholders. The Board of Trustees, however, will call a special meeting of
unitholders for the purpose of electing Trustees if, at any time, less than a
majority of Trustees holding office at the time were elected by unitholders.
27
<PAGE>
Units of a Portfolio will be voted separately by Portfolio with respect to
matters pertaining to that Portfolio except for the election of Trustees and
ratification of independent accountants. For example, unitholders of each
Portfolio are required to approve the adoption of any investment advisory
agreement relating to that Portfolio and any changes in fundamental investment
restrictions or policies of such Portfolio. Approval by the unitholders of one
Portfolio is effective only as to that Portfolio.
The Trust does not intend to hold annual unitholder meetings, although spe-
cial meetings may be called for such purposes as electing or removing Trust-
ees, complying with a requirement of the Investment Company Act, or such other
purposes as are set forth above. The Trust will facilitate unitholder communi-
cation as required and in the manner prescribed by Section 16(c) of the In-
vestment Company Act.
28
<PAGE>
APPENDIX
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Trust with your correct Social Secu-
rity 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 and to sign your name in the certification section of
the Account Information Form could result in withholding of 31% by the Trust
for the federal backup withholding tax on distributions, redemptions, ex-
changes and other payments relating to your account.
Any tax withheld may be credited against taxes owed on your federal income
tax return.
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 Reve-
nue Service (IRS). Backup withholding could apply to payments relating to your
account prior to the Trust's receipt of your TIN.
Special rules apply for certain entities. For example, for an account estab-
lished under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor
should be furnished.
If you have been notified by the IRS that you are subject to backup with-
holding 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 with-
holding should cease, you must cross out item (2) in the certification section
of the Account Information Form.
If you are an exempt recipient, you should furnish your TIN and certify your
exemption by signing the Certification section and writing "exempt" after your
signature. Exempt recipients include: corporations, tax-exempt pension plans
and IRA's, governmental agencies, financial institutions, registered securi-
ties and commodities dealers and others.
If you are a nonresident alien or foreign entity you must provide a com-
pleted Form W-8 to the Trust in order to avoid backup withholding on certain
payments. Other payments to you may be subject to non-resident alien withhold-
ing of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET TRUST
ILA SERVICE UNITS
ILA CLASS B UNITS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE: 800-526-7384
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unitholder and Portfolio Expenses.......................................... 2
Financial Highlights....................................................... 3
An Introduction to the Portfolios.......................................... 6
Investment Policies Matrix................................................. 7
Description of Securities and Investment
Techniques................................................................ 8
Investment Limitations..................................................... 12
Management................................................................. 13
Additional Services........................................................ 15
Service Plan.............................................................. 15
Distribution and Authorized Dealer
Service Plans............................................................ 15
Alternative Purchase Arrangements......................................... 16
Reports to Unitholders..................................................... 20
Distributions and Taxes.................................................... 20
Automatic Exchange Program................................................. 22
Exchanges.................................................................. 22
Redemption of Units........................................................ 24
Net Asset Value............................................................ 26
Yield Information.......................................................... 26
Organization and Units of the Portfolios................................... 27
Appendix................................................................... A-1
</TABLE>
ILA-RET-MMT6K/596
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET TRUST
GOLDMAN SACHS-- INSTITUTIONAL LIQUID ASSETS
PRIME OBLIGATIONS PORTFOLIO
TAX-EXEMPT DIVERSIFIED PORTFOLIO
-----------
PROSPECTUS
-----------
ILA SERVICE UNITS
ILA CLASS B UNITS
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS MONEY MARKET FUNDS
FINANCIAL SQUARE FUNDS
FST SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is a no-load, open-end, management invest-
ment company (a "mutual fund") which includes the Financial Square Funds (the
"Funds"). This Prospectus relates only to the offering of FST shares of bene-
ficial interest ("FST Shares") of the Funds. Goldman Sachs Asset Management, a
separate operating division of Goldman, Sachs & Co., serves as each Fund's in-
vestment adviser. Goldman, Sachs & Co. serves as each Fund's distributor and
transfer agent.
The following Funds seek to maximize current income to the extent consistent
with the preservation of capital and the maintenance of liquidity by investing
exclusively in high quality money market instruments. The Funds may invest in
diversified portfolios of the following types of instruments:
Financial Square Prime Obligations Fund. Securities of the U.S. Government,
its agencies, authorities and instrumentalities, obligations of U.S. banks,
commercial paper and other short-term obligations of U.S. companies, states,
municipalities and other entities, and repurchase agreements.
Financial Square Money Market Fund. Securities of the U.S. Government, its
agencies, authorities and instrumentalities, U.S. dollar denominated obliga-
tions of U.S. and foreign banks, U.S. dollar denominated commercial paper and
other short-term obligations of U.S. and foreign companies, foreign govern-
ments, states, municipalities and other entities, and repurchase agreements.
Financial Square Money Market Plus Fund. Securities of the U.S. Government,
its agencies, authorities and instrumentalities, U.S. dollar denominated obli-
gations of U.S. and foreign banks, U.S. dollar denominated commercial paper
and other short-term obligations of U.S. and foreign companies, foreign gov-
ernments, states, municipalities and other entities, and repurchase agree-
ments. In order to obtain a rating from a rating organization, the Fund will
observe special investment restrictions.
Financial Square Treasury Obligations Fund. Securities issued or guaranteed
by the U.S. Treasury and repurchase agreements relating to such securities.
Financial Square Treasury Instruments Fund. Securities issued or guaranteed
by the U.S. Treasury, the interest income from which is generally exempt from
state income taxation.
Financial Square Government Fund. Securities of the U.S. Government, its
agencies, authorities, and instrumentalities, and repurchase agreements relat-
ing to such securities.
Financial Square Federal Fund. Securities of the U.S. Government and certain
of its agencies, authorities and instrumentalities, the interest income from
which is generally exempt from state income taxation.
Financial Square Tax-Free Money Market Fund. Securities issued by or on be-
half of states, territories and possessions of the United States and their po-
litical subdivisions, agencies, authorities and instrumentalities, and the
District of Columbia, the interest from which is, in the opinion of bond coun-
sel, if any, excluded from gross income for federal income tax purposes and
not an item of tax preference under the federal alternative minimum tax.
Financial Square Municipal Money Market Fund. Securities issued by or on be-
half of states, territories and possessions of the United States and their po-
litical subdivisions, agencies, authorities and instrumentalities, and the
District of Columbia, the interest from which is, in the opinion of bond coun-
sel, if any, excluded from gross income for federal income tax purposes (but
not necessarily exempt from federal alternative minimum tax or state and local
taxes).
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOV-
ERNMENT AND THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION...... Goldman Sachs Funds--Toll Free: 800-621-2550
This Prospectus provides you with information about the Funds that you should
know before investing in FST Shares. It should be read and retained for future
reference. If you would like more detailed information, the Statement of Addi-
tional Information dated May 1, 1997, as amended or supplemented from time to
time, is available upon request without charge by calling the telephone number
listed above or by writing Goldman Sachs, Attention: Shareholder Services,
Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois 60606. The Statement
of Additional Information, which is incorporated by reference into this Pro-
spectus, has been filed with the Securities and Exchange Commission. Not all
Funds are available in certain states. Please call the phone number listed
above to determine availability in your state. The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information and
other information regarding the Trust.
- -------------------------------------------------------------------------------
FST SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT IN-
SURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1997.
<PAGE>
SHAREHOLDER AND FUND EXPENSES
FST SHARES
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL FINANCIAL
FINANCIAL FINANCIAL SQUARE FINANCIAL FINANCIAL SQUARE SQUARE
SQUARE SQUARE MONEY SQUARE SQUARE FINANCIAL FINANCIAL TAX-FREE MUNICIPAL
PRIME MONEY MARKET TREASURY TREASURY SQUARE SQUARE MONEY MONEY
OBLIGATIONS MARKET PLUS OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL MARKET MARKET
FUND FUND FUND FUND FUND FUND FUND FUND FUND
----------- --------- --------- ----------- ----------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION EXPENSES
Maximum Sales Charge
Imposed on Purchases. None None None None None None None None None
Sales Charge Imposed
on Reinvested
Distributions....... None None None None None None None None None
Deferred Sales Load
Imposed on
Redemptions......... None None None None None None None None None
Exchange Fee......... None None None None None None None None None
ANNUAL OPERATING
EXPENSES (1)
(as a percentage of
average daily net
assets)
Management Fees
(after
limitations)(2)..... 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17%
Other Expenses
(after expense
limitations) (3).... 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING EX-
PENSES (4)........... 0.18% 0.18% 0.18% 0.18% 0.18% 0.18% 0.18% 0.18% 0.18%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment, as-
suming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Financial Square Prime Obligations Fund..... $2 $ 6 $10 $23
Financial Square Money Market Fund.......... $ 2 $ 6 $10 $23
Financial Square Money Market Plus Fund..... $ 2 $ 6 N/A N/A
Financial Square Treasury Obligations Fund.. $ 2 $ 6 $10 $23
Financial Square Treasury Instruments Fund.. $ 2 $ 6 N/A N/A
Financial Square Government Fund............ $ 2 $ 6 $10 $23
Financial Square Federal Fund............... $ 2 $ 6 N/A N/A
Financial Square Tax-Free Money Market Fund. $ 2 $ 6 $10 $23
Financial Square Municipal Money Market
Fund....................................... $ 2 $ 6 N/A N/A
</TABLE>
2
<PAGE>
- --------
(1) Based on estimated amounts for the current fiscal year for the Financial
Square Money Market Plus, Financial Square Treasury Instruments, Financial
Square Federal and Financial Square Municipal Money Market Funds.
(2) The Investment Adviser has voluntarily agreed not to impose 0.035% of its
management fee for each Fund. Without such limitation, management fees for
each Fund would be 0.205%.
(3) The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, taxes, interest and brokerage
and litigation, indemnification and other extraordinary expenses) to the
extent such expenses exceed 0.01% of a Fund's average daily net assets.
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Financial Square Prime Obligations, Financial
Square Money Market, Financial Square Treasury Obligations, Financial
Square Government and Financial Square Tax-Free Money Market Funds for the
fiscal year ended December 31, 1996, would have been as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Financial Square Prime Obligations Fund................... .025% .23%
Financial Square Money Market Fund........................ .025% .23%
Financial Square Treasury Obligations Fund................ .035% .24%
Financial Square Government Fund.......................... .035% .24%
Financial Square Tax-Free Money Market Fund............... .025% .23%
</TABLE>
In addition, without the limitations described above, "Other Expenses" and
"Total Operating Expenses" of the Financial Square Money Market Plus, Finan-
cial Square Treasury Instruments, Financial Square Federal and Financial
Square Municipal Money Market Funds for the current fiscal year are estimated
to be as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Financial Square Money Market Plus Fund................... .035% .24%
Financial Square Treasury Instruments Fund................ .125% .33%
Financial Square Federal Fund............................. .095% .30%
Financial Square Municipal Money Market Fund.............. .285% .49%
</TABLE>
The information set forth in the foregoing table and hypothetical example
relates only to FST Shares of the Funds. The Funds also offer FST Preferred
Shares, FST Administration Shares and FST Service Shares. The other classes of
the Funds are subject to different fees and expenses (which affect perfor-
mance) and are entitled to different services. Information regarding any other
class of the Funds may be obtained from your sales representative or from
Goldman Sachs by calling the number on the front cover of this Prospectus.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Fund that an investor will bear directly or
indirectly. The information on fees and expenses included in the table and the
hypothetical example above are based on each Fund's fees and expenses (actual
or estimated) and should not be considered as representative of past or future
expenses. Actual fees and expenses may be greater or less than those indicat-
ed. Moreover, while the example assumes a 5% annual return, a Fund's actual
performance will vary and may result in an actual return greater or less than
5%. See "Management--Investment Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following data with respect to a share (of the class specified) of the
Financial Square Prime Obligations, Financial Square Money Market, Financial
Square Treasury Obligations, Financial Square Government and Financial Square
Tax-Free Money Market Funds outstanding during the periods indicated have been
audited by Arthur Andersen LLP, independent auditors, as indicated in their
report incorporated by reference and attached to the Statement of Additional
Information from the annual report to shareholders for the fiscal year ended
December 31, 1996 (the "Annual Report"), and should be read in conjunction
with the financial statements and related notes incorporated by reference and
attached to the Statement of Additional Information.
Financial Square Municipal Money Market, Financial Square Money Market Plus,
Financial Square Federal and Financial Square Treasury Instruments Funds had
no operations during the fiscal year ended December 31, 1996. Accordingly,
there are no selected per share data and ratios presented for these Funds.
4
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
Prime Obligations Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET EXPENSES TO INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT AVERAGE INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $1.00 $0.0529 $ -- $0.0529 $(0.0529) $1.00 5.41% 0.18% 5.29%
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0346 -- 0.0346 (0.0346) 1.00 5.28(b) 0.28(b) 5.19(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0506 -- 0.0506 (0.0506) 1.00 5.14 0.43 5.06
1996-FST Service
shares.......... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.88 0.68 4.78
1995-FST shares. 1.00 0.0586 -- 0.0586 (0.0586) 1.00 6.02 0.18 5.86
1995-FST Admin-
istration
shares.......... 1.00 0.0559 -- 0.0559 (0.0559) 1.00 5.75 0.43 5.59
1995-FST Service
shares.......... 1.00 0.0533 -- 0.0533 (0.0533) 1.00 5.49 0.68 5.33
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(d)....... 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.38(b) 0.18(b) 4.38(b)
1994-FST Admin-
istration
shares(d)....... 1.00 0.0383 -- 0.0383 (0.0383) 1.00 4.12(b) 0.43(b) 4.18(b)
1994-FST Service
shares(d)....... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.86(b) 0.68(b) 3.98(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1.00 0.0311 0.0002 0.0313 (0.0313) 1.00 3.18 0.17 3.11
1994-FST Admin-
istration
shares.......... 1.00 0.0286 0.0002 0.0288 (0.0288) 1.00 2.92 0.42 2.86
1994-FST Service
shares.......... 1.00 0.0261 0.0002 0.0263 (0.0263) 1.00 2.66 0.67 2.61
1993-FST shares. 1.00 0.0360 0.0007 0.0367 (0.0367) 1.00 3.75 0.18 3.60
1993-FST Admin-
istration
shares(e)....... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b) 0.44(b) 2.96(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68 3.01
1992-FST shares. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18 5.72
1992-FST Service
shares(e)....... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b) 0.66(b) 4.10(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 1.00 0.0727 -- 0.0727 (0.0727) 1.00 8.27(b) 0.18(b) 8.04(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $3,901,797 0.23% 5.24%
1996-FST Pre-
ferred
shares(c)....... 127,126 0.33(b) 5.14(b)
1996-FST Admin-
istration
shares.......... 215,898 0.48 5.01
1996-FST Service
shares.......... 115,154 0.73 4.73
1995-FST shares. 3,295,791 0.22 5.82
1995-FST Admin-
istration
shares.......... 147,894 0.47 5.55
1995-FST Service
shares.......... 65,278 0.72 5.29
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(d)....... 2,774,849 0.24(b) 4.32(b)
1994-FST Admin-
istration
shares(d)....... 66,113 0.49(b) 4.12(b)
1994-FST Service
shares(d)....... 41,372 0.74(b) 3.92(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1,831,413 0.25 3.03
1994-FST Admin-
istration
shares.......... 35,250 0.50 2.78
1994-FST Service
shares.......... 14,001 0.75 2.53
1993-FST shares. 813,126 0.25 3.53
1993-FST Admin-
istration
shares(e)....... 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 336 0.75 2.94
1992-FST shares. 917,073 0.27 5.63
1992-FST Service
shares(e)....... 118 0.74(b) 4.02(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 578,495 0.28(b) 7.94(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
(e) FST Administration share and FST Service share activity commenced during
November of 1992 and January of 1992, respectively.
(f) Commencement of operations.
5
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -----------------
1996-FST shares. $1.00 $0.0533 $0.0001 $0.0534 $(0.0534) $1.00 5.45% 0.18% 5.33%
1996-FST
Preferred
shares(c)....... 1.00 0.0348 -- 0.0348 (0.0348) 1.00 5.31(b) 0.28(b) 5.23(b)
1996-FST
Administration
shares.......... 1.00 0.0504 0.0001 0.0505 (0.0505) 1.00 5.19 0.43 5.04
1996-FST Service
shares.......... 1.00 0.0484 -- 0.0484 (0.0484) 1.00 4.93 0.68 4.84
1995-FST shares. 1.00 0.0589 -- 0.0589 (0.0589) 1.00 6.07 0.15 5.89
1995-FST
Administration
shares.......... 1.00 0.0561 -- 0.0561 (0.0561) 1.00 5.80 0.40 5.61
1995-FST Service
shares(d)....... 1.00 0.0231 -- 0.0231 (0.0231) 1.00 5.41(b) 0.65(b) 4.93(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(d)....... 1.00 0.0305 -- 0.0305 (0.0305) 1.00 4.91(b) 0.11(b) 4.88(b)
1994-FST
Administration
shares(d)....... 1.00 0.0298 -- 0.0298 (0.0298) 1.00 4.65(b) 0.36(b) 4.82(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -----------------
1996-FST shares. $2,540,366 0.23% 5.28%
1996-FST
Preferred
shares(c)....... 17,510 0.33(b) 5.18(b)
1996-FST
Administration
shares.......... 165,766 0.48 4.99
1996-FST Service
shares.......... 234,376 0.73 4.79
1995-FST shares. 2,069,197 0.23 5.81
1995-FST
Administration
shares.......... 137,412 0.48 5.53
1995-FST Service
shares(d)....... 4,219 0.73(b) 4.85(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(d)....... 862,971 0.25(b) 4.74(b)
1994-FST
Administration
shares(d)....... 66,560 0.50(b) 4.68(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)FST Preferred share activity commenced on May 1, 1996.
(d)FST, FST Administration and FST Service share activity commenced May 18,
1994, May 20, 1994 and July 14, 1995, respectively.
6
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Treasury Obligations Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL RATIO OF NET INVESTMENT
VALUE AT NET GAIN (LOSS) INCOME FROM DISTRIBUTIONS NET ASSET EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS END OF PERIOD RETURN(A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $1.00 $0.0522 $0.0003 $0.0525 $(0.0524) $1.00 5.35% 0.18% 5.22%
1996-FST
Preferred
shares(c)....... 1.00 0.0342 0.0001 0.0343 (0.0343) 1.00 5.24(b) 0.28(b) 5.11(b)
1996-FST
Administration
shares.......... 1.00 0.0497 0.0002 0.0499 (0.0498) 1.00 5.09 0.43 4.97
1996-FST Service
shares.......... 1.00 0.0472 0.0002 0.0474 (0.0474) 1.00 4.83 0.68 4.72
1995-FST shares. 1.00 0.0573 0.0005 0.0578 (0.0578) 1.00 5.96 0.18 5.73
1995-FST
Administration
shares.......... 1.00 0.0547 0.0005 0.0552 (0.0552) 1.00 5.69 0.43 5.47
1995-FST Service
shares.......... 1.00 0.0521 0.0005 0.0526 (0.0526) 1.00 5.43 0.68 5.21
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1994-FST
shares(d)....... 1.00 0.0379 (0.0001) 0.0378 (0.0378) 1.00 4.23(b) 0.18(b) 4.13(b)
1994-FST
Administration
shares(d)....... 1.00 0.0388 (0.0001) 0.0387 (0.0387) 1.00 3.97(b) 0.43(b) 4.24(b)
1994-FST Service
shares(d)....... 1.00 0.0349 (0.0001) 0.0348 (0.0348) 1.00 3.71(b) 0.68(b) 3.82(b)
FOR THE YEAR ENDED JANUARY 31,
- ----------------
1994-FST shares. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11 0.17 3.01
1994-FST
Administration
shares.......... 1.00 0.0276 0.0006 0.0282 (0.0281) 1.00 2.85 0.42 2.76
1994-FST Service
shares.......... 1.00 0.0251 0.0008 0.0259 (0.0256) 1.00 2.60 0.67 2.51
1993-FST shares. 1.00 0.0342 0.0012 0.0354 (0.0355) 1.00 3.69 0.18 3.42
1993-FST
Administration
shares(e) ...... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83(b) 0.43(b) 2.83(b)
1993-FST Service
shares.......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17 0.68 2.96
1992-FST shares. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84 0.18 5.49
1992-FST Service
shares(e)....... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47(b) 0.68(b) 3.77(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 1.00 0.0600 0.0006 0.0606 (0.0605) 1.00 8.06(b) 0.21(b) 7.74(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $2,291,051 0.24% 5.16%
1996-FST
Preferred
shares(c)....... 46,637 0.34(b) 5.05(b)
1996-FST
Administration
shares.......... 536,895 0.49 4.91
1996-FST Service
shares.......... 220,560 0.74 4.66
1995-FST shares. 1,587,715 0.23 5.68
1995-FST
Administration
shares.......... 283,186 0.48 5.42
1995-FST Service
shares.......... 139,117 0.73 5.16
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1994-FST
shares(d)....... 958,196 0.25(b) 4.06(b)
1994-FST
Administration
shares(d)....... 82,124 0.50(b) 4.17(b)
1994-FST Service
shares(d)....... 81,162 0.75(b) 3.75(b)
FOR THE YEAR ENDED JANUARY 31,
- ----------------
1994-FST shares. 812,420 0.24 2.94
1994-FST
Administration
shares.......... 24,485 0.49 2.69
1994-FST Service
shares.......... 35,656 0.74 2.44
1993-FST shares. 776,181 0.26 3.34
1993-FST
Administration
shares(e) ...... 1 0.51(b) 2.75(b)
1993-FST Service
shares.......... 5,155 0.76 2.88
1992-FST shares. 413,171 0.28 5.39
1992-FST Service
shares(e)....... 3,634 0.78(b) 3.67(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 229,988 0.34(b) 7.61(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)FST Preferred share activity commenced on May 1, 1996.
(d)The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of the
funds as a series of Goldman Sachs Money Market Trust.
(e)FST Administration and FST Service share activity commenced during January
of 1993 and October of 1991, respectively.
(f)Commencement of operations.
7
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Government Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------
NET ASSET TOTAL
VALUE AT NET NET REALIZED GAIN INCOME FROM DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31,
- ------------------
1996-FST shares...... $1.00 $0.0525 $0.0001 $0.0526 $(0.0526) $1.00 5.38%
1996-FST Preferred
shares(c)............ 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26(b)
1996-FST Administra-
tion shares.......... 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12
1996-FST Service
shares............... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86
1995-FST shares...... 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00
1995-FST Administra-
tion shares.......... 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74
1995-FST Service
shares(d)............ 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(e)... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36(b)
1994-FST Administra-
tion shares(e)....... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10(b)
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1993-FST shares(d)... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b)
1993-FST Administra-
tion shares(d)....... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET RATIO OF NET
RATIO OF NET INVESTMENT NET RATIO OF INVESTMENT
EXPENSES TO INCOME TO ASSETS AT END EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET OF PERIOD AVERAGE NET AVERAGE NET
ASSETS ASSETS (IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31,
- ------------------
1996-FST shares...... 0.18% 5.25% $858,769 0.24% 5.19%
1996-FST Preferred
shares(c)............ 0.28(b) 5.14(b) 112 0.34(b) 5.08(b)
1996-FST Administra-
tion shares.......... 0.43 5.01 145,108 0.49 4.95
1996-FST Service
shares............... 0.68 4.74 223,554 0.74 4.68
1995-FST shares...... 0.18 5.81 743,884 0.24 5.75
1995-FST Administra-
tion shares.......... 0.43 5.54 82,386 0.49 5.48
1995-FST Service
shares(d)............ 0.68(b) 5.08(b) 14,508 0.74(b) 5.02(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(e)... 0.15(b) 4.64(b) 258,350 0.25(b) 4.54(b)
1994-FST Administra-
tion shares(e)....... 0.40(b) 4.67(b) 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1993-FST shares(d)... 0.08(b) 3.10(b) 44,697 0.59(b) 2.59(b)
1993-FST Administra-
tion shares(d)....... 0.35(b) 2.85(b) 14,126 0.76(b) 2.44(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) FST share, FST Administration share and FST Service share activity com-
menced April 6, 1993, September 1, 1993 and May 16, 1995, respectively.
(e) The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
8
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Tax-Free Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------
NET NET TOTAL
ASSET NET REALIZED INCOME NET ASSET RATIO OF NET
VALUE AT INVEST- GAIN ON FROM DISTRIBUTIONS VALUE AT EXPENSES TO
BEGINNING MENT INVESTMENT INVESTMENT TO END OF TOTAL AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS PERIOD RETURN (A) ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year
Ended December
31,
- --------------
1996-FST shares. $1.00 $ 0.0335 -- $ 0.0335 $(0.0335) $1.00 3.39% 0.18%
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30(b) 0.28(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13 0.43
1996-FST Service
shares.......... 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88 0.68
1995-FST shares. 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89 0.14
1995-FST Admin-
istration
shares.......... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63 0.39
1995-FST Service
shares.......... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38 0.64
For the Period
Ended December
31,
- --------------
1994-FST
shares(d)....... 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41(b) 0.07(b)
1994-FST
Administration shares(d). 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19(b) 0.32(b)
1994-FST Service
shares(d)....... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11(b) 0.57(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET NET RATIO OF NET
INVESTMENT ASSETS AT RATIO OF INVESTMENT
INCOME TO END OF EXPENSES TO INCOME TO
AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the Year
Ended December
31,
- --------------
1996-FST shares. 3.35% $440,838 0.23% 3.30%
1996-FST Pre-
ferred
shares(c)....... 3.26(b) 28,731 0.33(b) 3.21(b)
1996-FST Admin-
istration
shares.......... 3.10 51,661 0.48 3.05
1996-FST Service
shares.......... 2.85 19,855 0.73 2.80
1995-FST shares. 3.81 448,367 0.24 3.71
1995-FST Admin-
istration
shares.......... 3.54 20,939 0.49 3.44
1995-FST Service
shares.......... 3.32 19,860 0.74 3.22
For the Period
Ended December
31,
- --------------
1994-FST
shares(d)....... 3.42(b) 183,570 0.31(b) 3.18(b)
1994-FST
Administration shares(d). 3.25(b) 2,042 0.56(b) 3.01(b)
1994-FST Service
shares(d)....... 3.32(b) 2,267 0.81(b) 3.08(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) FST share, FST Administration share and FST Service share activity com-
menced July 19, 1994, August 1, 1994 and September 23, 1994, respectively.
9
<PAGE>
AN INTRODUCTION TO THE FUNDS
THE TRUST: The Trust is a no-load, open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "Invest-
ment Company Act"). Each Fund is a separate pool of assets which pursues its
investment objective through separate investment policies, as described below.
THE ADVISER: Goldman Sachs Asset Management, a separate operating division
of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds' investment ad-
viser (the "Adviser" or "GSAM").
THE DISTRIBUTOR: Goldman Sachs, which serves as the Funds' distributor and
transfer agent, is one of the largest international investment banking and
brokerage firms in the United States.
THE INVESTORS: The Funds are designed for institutional investors seeking a
high rate of return, a stable net asset value and convenient liquidation priv-
ileges. The Funds are particularly suitable for banks, corporations and other
financial institutions that seek investment of short-term funds for their own
accounts or for the accounts of their customers. Shares of the Government Fund
are intended to qualify as eligible investments for Federally chartered credit
unions pursuant to Sections 107(7), 107(8) and 107(15) of the Federal Credit
Union Act, Part 703 of the National Credit Union Administration ("NCUA") Rules
and Regulations and NCUA Letter Number 155. The Fund intends to review changes
in the applicable laws, rules and regulations governing eligible investments
for federally chartered credit unions, and to take such action as may be nec-
essary so that the investments of the Fund qualify as eligible investments un-
der the Federal Credit Union Act and the regulations thereunder. Shares of the
Government Fund, however, may or may not qualify as eligible investments for
particular state chartered credit unions. State chartered credit unions should
consult qualified legal counsel to determine whether the Government Fund is a
permissible investment under the law applicable to it.
THE FUNDS: Each Fund's securities are valued by the amortized cost method as
permitted by a rule ("Rule 2a-7") of the Securities and Exchange Commission
("SEC"). Under such rule, each Fund may invest only in securities that are de-
termined to present minimal credit risk and meet certain other criteria.
TAXABLE FUNDS: Prime Obligations, Money Market, Money Market Plus, Trea-
sury Obligations and Government Funds.
TAX ADVANTAGED FUNDS: Treasury Instruments and Federal Funds.
TAX-EXEMPT FUNDS: Tax-Free Money Market and Municipal Money Market Funds.
INVESTMENT OBJECTIVES AND POLICIES FOR TAXABLE, TAX-ADVANTAGED AND TAX-
EXEMPT FUNDS: To maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity by investing ex-
clusively in high quality money market instruments. In order to obtain a
rating from a rating organization, the Money Market Plus Fund will observe
special investment restrictions. The Treasury Instruments and Federal Funds
pursue their objectives by limiting their investments to certain U.S. Trea-
sury Obligations and U.S. Government Securities (each as defined herein),
respectively, the interest from which is generally exempt from state income
taxation. Each investor should consult his or her tax adviser to determine
whether distributions from the Treasury Instruments and Federal Funds (and
any other Fund that may hold such obligations) derived from interest on
such obligations are exempt from state income taxation in the investor's
own state.
NET ASSET VALUE: Each Fund seeks to maintain a stable net asset value of
$1.00 per share.
MAXIMUM REMAINING MATURITY OF PORTFOLIO INVESTMENTS: Thirteen months at the
time of purchase.
10
<PAGE>
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
FIRST TIER SECURITIES: Each Fund may purchase securities which are rated (or
that have been issued by an issuer that is rated with respect to a class of
short-term debt obligations, or any security within that class, comparable in
priority and quality with such securities) in the highest short-term rating
category by at least two NRSROs (as defined below), or if only one NRSRO has
assigned a rating, by that NRSRO. U.S. Government Securities as defined herein
are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Funds may purchase securities which
are not First Tier Securities but which are rated in the top two short-term
rating categories by at least two NRSROs, or if only one NRSRO has assigned a
rating, by that NRSRO. The Taxable Funds will not invest in a security which
is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, unrated securities
may be purchased if they are deemed to be of comparable quality to First Tier
Securities, or to the extent that a Fund may purchase Second Tier Securities,
comparable in quality to Second Tier Securities.
NRSROS: Nationally Recognized Statistical Rating Organizations include Stan-
dard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Lim-
ited and its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a descrip-
tion of each NRSRO's rating categories, see Appendix A to the Statement of Ad-
ditional Information.
11
<PAGE>
INVESTMENT POLICIES MATRIX
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
OBLIGATIONS OF ASSET-BACKED & FOREIGN
US US CORPORATIONS RECEIVABLES- GOVERNMENT
TREASURY GOVERNMENT BANK COMMERCIAL AND OTHER REPURCHASE BACKED OBLIGATIONS
FUND OBLIGATIONS SECURITIES OBLIGATIONS PAPER ENTITIES AGREEMENTS SECURITIES+ (US$)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prime Obligations [_] [_] [_] [_] [_] [_] [_]
U.S. banks U.S. entities
only only
- ------------------------------------------------------------------------------------------------------------------------
Money Market [_] [_] [_] [_] [_] [_] [_] [_]
Over 25% of U.S. and U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Money Market [_] [_] [_] [_] [_] [_] [_] [_]
Plus Over 25% of U.S. and U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Treasury [_] [_]
Obligations
- ------------------------------------------------------------------------------------------------------------------------
Treasury [_]
Instruments
- ------------------------------------------------------------------------------------------------------------------------
Government [_] [_] [_]
- ------------------------------------------------------------------------------------------------------------------------
Federal [_] [_] (Does not
intend to
invest)
- ------------------------------------------------------------------------------------------------------------------------
Tax-Free Money [_]
Market Tax-exempt
only
- ------------------------------------------------------------------------------------------------------------------------
Municipal Money [_]
Market Tax-exempt
only
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: See "Description of Securities and Investment Techniques" for a descrip-
tion of, and certain criteria applicable to, each of these categories of
investments.
+ To the extent required by Rule 2a-7, asset-backed and receivables backed
securities will be rated by the requisite number of NRSROs.
12
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SUMMARY OF
TAXABLE TAX-EXEMPT CREDIT INVESTMENT UNRATED TAXATION FOR
MUNICIPALS MUNICIPALS QUALITY**** COMPANIES SECURITIES DISTRIBUTIONS* MISCELLANEOUS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[_] First [_] [ ] Taxable
Tier Up to 10% of federal and
total assets state**
in other
investment
companies
- ---------------------------------------------------------------------------------------------------
[_] First [_] [_] Taxable May invest in
Tier Up to 10% of federal and obligations of
total assets state** the
in other International
investment Bank for
companies Reconstruction
and Development
- ---------------------------------------------------------------------------------------------------
[_]
First [_] [_] Taxable May invest in
Tier Up to 10% of federal and obligations of
total assets state** the
in other International
investment Bank for
companies Reconstruction
and Development
- ---------------------------------------------------------------------------------------------------
First [_] Taxable
Tier Up to 10% of federal and
total assets state**
in other
investment
companies
- ---------------------------------------------------------------------------------------------------
First [_] Taxable
Tier Up to 10% of federal and
total assets generally
in other exempt from
investment state taxation
companies
- ---------------------------------------------------------------------------------------------------
First [_]
Tier Up to 10% of Taxable
total assets federal and
in other state**
investment
companies
- ---------------------------------------------------------------------------------------------------
Under
First [_] Taxable extraordinary
Tier Up to 10% of federal and circumstances,
total assets generally may hold cash,
in other exempt from U.S. Government
investment state taxation Securities
companies subject to state
taxation or cash
equivalents
- ---------------------------------------------------------------------------------------------------
[_] First or [_] [_] Tax-exempt May (but does
At least 80% of Second Up to 10% of federal and not currently
net assets in Tier total assets taxable intend to)
Municipal in other state*** invest up to 20%
Instruments investment in AMT
(except in companies securities and
extraordinary may temporarily
circumstances) invest in the
taxable money
market
instruments
described herein
- ---------------------------------------------------------------------------------------------------
[_] First or [_] [_] Tax-exempt May invest up to
At least 80% of Second Up to 10% of federal and 100% in AMT
net assets in Tier total assets taxable securities and
Municipal in other state*** may temporarily
Instruments investment invest in the
(except in companies taxable money
extraordinary market
circumstances) instruments
described herein
- ---------------------------------------------------------------------------------------------------
</TABLE>
* See "Taxes" below for an explanation of the tax consequences summarized
in the table above.
** Taxable in many states except for distributions from U.S. Treasury obli-
gation interest income and certain U.S. Government securities interest
income.
*** Taxable except for distributions from interest on obligations of an in-
vestor's state of residence in certain states.
**** To the extent permitted by Rule 2a-7, a Fund holding a security fully
supported by a guarantee may substitute the credit quality of the guaran-
tee in determining the credit quality of the security.
13
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. TREASURY OBLIGATIONS
"U.S. Treasury Obligations" are securities issued or guaranteed by the U.S.
Treasury, payments of principal and interest on which are backed by the full
faith and credit of the U.S. Government.
U.S. GOVERNMENT SECURITIES
"U.S. Government Securities" are obligations issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities. Unlike U.S.
Treasury Obligations, securities issued or guaranteed by U.S. Government agen-
cies, authorities or instrumentalities are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Government
National Mortgage Association), (b) the right of the issuer to borrow from the
Treasury (such as securities of the Student Loan Marketing Association), (c)
the discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation), or (d) only the credit of the
issuer. No assurance can be given that the U.S. Government will provide finan-
cial support to U.S. Government agencies, authorities or instrumentalities in
the future. U.S. Government Securities may include zero coupon bonds. Such
bonds may be purchased when yields are attractive.
Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are deemed to include (a) secu-
rities for which the payment of principal and interest is backed by an irrevo-
cable letter of credit issued by the U.S. Government, its agencies, authori-
ties or instrumentalities and (b) participations in loans made to foreign gov-
ernments or their agencies that are so guaranteed. The secondary market for
certain of these participations is limited. Such participations may therefore
be regarded as illiquid.
Each Fund may also invest in separately traded principal and interest compo-
nents of securities guaranteed or issued by the U.S. Treasury if such compo-
nents are traded independently under the Separate Trading of Registered Inter-
est and Principal of Securities program ("STRIPS").
The Treasury Instruments and Federal Funds invest in U.S. Treasury Obliga-
tions and the Federal Fund may also invest in certain U.S. Government Securi-
ties the interest from which is generally exempt from state income taxation.
Securities generally eligible for this exemption include those issued by the
U.S. Treasury and those issued by certain agencies, authorities or instrumen-
talities of the U.S. Government, including the Federal Home Loan Banks, Fed-
eral Farm Credit Banks, Tennessee Valley Authority and the Student Loan Mar-
keting Association.
CUSTODIAL RECEIPTS
Each Fund (other than the Treasury Obligations, Treasury Instruments, Gov-
ernment and Federal Funds) may also acquire securities issued or guaranteed as
to principal and interest by the U.S. Government, its agencies, authorities or
instrumentalities in the form of custodial receipts that evidence ownership of
future interest payments, principal payments or both on certain notes or bonds
issued by the U.S. Government, its agencies, authorities or instrumentalities.
For certain securities law purposes, custodial receipts are not considered ob-
ligations of the U.S. Government.
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "U.S. Bank Obligations" limited to securities issued or guaranteed by U.S.
banks (including certificates of deposit, commercial
14
<PAGE>
paper, unsecured bank promissory notes and bankers' acceptances) which have
more than $1 billion in total assets at the time of purchase. Such obligations
may also include debt obligations issued by U.S. subsidiaries of such banks.
The Money Market and Money Market Plus Funds may also invest in "Foreign
Bank Obligations" limited to U.S. dollar-denominated obligations issued or
guaranteed (including fixed time deposits) by foreign banks which have more
than $1 billion in total assets at the time of purchase, U.S. branches of such
foreign banks (Yankee obligations), foreign branches of such foreign banks and
foreign branches of U.S. banks having more than $1 billion in total assets at
the time of purchase. Such bank obligations may be general obligations of the
parent bank or may be limited to the issuing branch by the terms of the spe-
cific obligations or by government regulation.
The Money Market and Money Market Plus Funds will invest more than 25% of
their total assets in bank obligations (whether foreign or domestic), includ-
ing bank commercial paper. However, if adverse economic conditions prevail in
the banking industry (such as substantial losses on loans, increases in non-
performing assets and charge-offs and declines in total deposits) the Funds
may, for defensive purposes, temporarily invest less than 25% of their total
assets in bank obligations. As a result, the Funds may be especially affected
by favorable and adverse developments in or related to the banking industry.
The activities of U.S. banks and most foreign banks are subject to comprehen-
sive regulations which, in the case of U.S. regulations, have undergone sub-
stantial changes in the past decade. The enactment of new legislation or regu-
lations, as well as changes in interpretation and enforcement of current laws,
may affect the manner of operations and profitability of domestic and foreign
banks. Significant developments in the U.S. banking industry have included de-
regulation of interest rates, increased competition from other types of finan-
cial institutions, increased acquisition activity, geographic expansion and,
during the late 1980's, an increased number of bank failures. Banks may be
particularly susceptible to certain economic factors, such as interest rate
changes and adverse developments in the market for real estate. Fiscal and
monetary policy and general economic cycles can affect the availability and
cost of funds, loan demand and asset quality and thereby impact the earnings
and financial conditions of banks. See "Foreign Government Obligations--For-
eign Risks" below.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "Commercial Paper" (including variable amount master demand notes and as-
set-backed commercial paper) which is payable in U.S. dollars and is issued or
guaranteed by U.S. corporations, U.S. commercial banks, foreign corporations
(Money Market and Money Market Plus Funds only), foreign commercial banks
(Money Market and Money Market Plus Funds only) or other entities. In addi-
tion, the Funds may invest in other short-term obligations (including short-
term funding agreements) payable in U.S. dollars and issued or guaranteed by
U.S. corporations, foreign corporations (Money Market and Money Market Plus
Funds only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "Asset-Backed and Receivables-Backed Securities" which represent participa-
tions in, or are secured by and payable from, pools of assets such as motor
vehicle installment sale contracts, installment loan contracts, leases of var-
ious types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. Such asset pools
are securitized through the use of privately-formed trusts or special purpose
corporations. Payments or distributions of principal and interest may be guar-
anteed up to certain amounts and for a certain
15
<PAGE>
time period by a letter of credit or a pool insurance policy issued by a fi-
nancial institution, or other credit enhancements may be present. To the ex-
tent consistent with its investment objectives and policies, each of the Prime
Obligations, Money Market and Money Market Plus Funds may invest in new types
of mortgage-related securities and in other asset-backed securities that may
be developed in the future.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market and Money Market Plus Funds may invest in U.S. dollar-de-
nominated obligations (limited to commercial paper and other notes) issued or
guaranteed by a foreign government or any entity located or organized in a
foreign country that maintains a short-term foreign currency rating in the
highest short-term ratings category by the requisite number of NRSROs. The
Money Market and Money Market Plus Funds may not invest more than 25% of their
total assets in the securities of any one foreign government.
FOREIGN RISKS. Investments in foreign securities and bank obligations may
present a greater degree of risk than investments in securities of domestic
issuers because of less publicly-available financial and other information,
less securities regulation, potential imposition of foreign withholding and
other taxes, war, expropriation or other adverse governmental actions. Foreign
banks and their foreign branches are not regulated by U.S. banking authori-
ties, and generally are not bound by the accounting, auditing and financial
reporting standards applicable to U.S. banks.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS. Obligations issued by or on behalf of states, terri-
tories and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia, the
interest from which is, in the opinion of bond counsel, if any, excluded from
gross income for federal income tax purposes.
TYPES OF MUNICIPAL INSTRUMENTS:
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET AND
MUNICIPAL MONEY MARKET FUNDS
-------------------------------------------------------------------------
<S> <C>
FIXED RATE NOTES AND SIMILAR In highest short-term or one of the
DEBT INSTRUMENTS two highest long-term rating
categories
-------------------------------------------------------------------------
VARIABLE AND FLOATING RATE In highest short-term or one of the
DEMAND INSTRUMENTS two highest long-term rating
categories
-------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER In highest rating category
-------------------------------------------------------------------------
MUNICIPAL BONDS In one of the two highest rating
categories
-------------------------------------------------------------------------
UNRATED NOTES, PAPER, BONDS AND Determined to be of comparable quality
OTHER INSTRUMENTS by Adviser pursuant to criteria
approved by the Trustees
</TABLE>
16
<PAGE>
As a matter of fundamental policy, at least 80% of each of the Tax-Free
Money Market and Municipal Money Market Fund's net assets will ordinarily be
invested in Municipal Instruments. Each Tax-Exempt Fund may temporarily invest
in taxable money market instruments when the Adviser believes that the market
conditions dictate a defensive posture. Investments in taxable money market
instruments will be limited to those meeting the quality standards of each
Tax-Exempt Fund. The Prime Obligations, Money Market and Money Market Plus
Funds may invest in short-term obligations issued or guaranteed by state and
municipal governments when yields on such securities are attractive compared
to other taxable investments.
MUNICIPAL NOTES AND BONDS. Municipal notes include tax anticipation notes
("TANs"), revenue anticipation notes ("RANs"), bond anticipation notes
("BANs"), tax and revenue anticipation notes ("TRANs") and construction loan
notes. Municipal bonds include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing munici-
pality and are considered the safest type of bonds. Revenue bonds are backed
by the revenues of a project or facility such as the tolls from a toll bridge.
Revenue bonds also include lease rental revenue bonds which are issued by a
state or local authority for capital projects and are secured by annual lease
payments from the state or locality sufficient to cover debt service on the
authority's obligations. Industrial development bonds (generally referred to
under current tax law as "private activity bonds") are a specific type of rev-
enue bond backed by the credit and security of a private user and therefore
have more potential risk. Municipal bonds may be issued in a variety of forms,
including commercial paper, tender option bonds and variable and floating rate
securities.
TENDER OPTION BONDS. A tender option bond is a Municipal Instrument (gener-
ally held pursuant to a custodial arrangement) having a relatively long matu-
rity 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 finan-
cial institution, pursuant to which such institution grants the security
holder the option, at periodic intervals, to tender its securities to the in-
stitution and receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees equal to the dif-
ference between the bond's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the 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 pre-
vailing short-term, tax-exempt rate. However, an institution will not be obli-
gated to accept tendered bonds in the event of certain defaults or a signifi-
cant downgrading in the credit rating assigned to the issuer of the bond. The
tender option will be taken into account in determining the maturity of the
tender option bonds and a Fund's average portfolio maturity. There is a risk
that a Fund will not be considered the owner of a tender option bond for fed-
eral income tax purposes and thus will not be entitled to treat such interest
as exempt from federal income tax.
REVENUE ANTICIPATION WARRANTS. Revenue Anticipation Warrants ("RAWs") are
issued in anticipation of the issuer's receipt of revenues and present the
risk that such revenues will be insufficient to satisfy the issuer's payment
obligations. The entire amount of principal and interest on RAWs is due at ma-
turity. RAWs, including those with a maturity of more than 397 days, may also
be repackaged as instruments which include a demand feature that permits the
holder to sell the RAWs to a bank or other financial institution at a purchase
price equal to par plus accrued interest on each interest rate reset date.
FLOATING AND VARIABLE RATE OBLIGATIONS. The value of floating and variable
rate obligations generally is more stable than that of fixed rate obligations
in response to changes in interest rate levels. Variable and floating rate ob-
ligations usually have demand features that permit the Funds to sell them at
par value plus accrued interest
17
<PAGE>
upon short notice. The issuers or financial intermediaries providing demand
features may support their ability to purchase the obligations by obtaining
credit with liquidity supports. These may include lines of credit, which are
conditional commitments to lend and letters of credit, which will ordinarily
be irrevocable, both of which may be issued by domestic banks or foreign banks
which have a branch, agency or subsidiary in the United States. When consider-
ing whether an obligation meets a Fund's quality standards, the Fund will, to
the extent permitted by Rule 2a-7, look to the creditworthiness of the party
providing unconditional demand features or other unconditional obligations to
support the credit of the issuer of the security. A Fund may consider the ma-
turity of a variable or floating rate Municipal Instrument to be shorter than
its ultimate stated maturity if the Fund has the right to demand prepayment of
its principal at specified intervals prior to the security's ultimate stated
maturity, subject to the conditions for using amortized cost valuation under
the Investment Company Act. A Fund may purchase such variable or floating rate
obligations from the issuers or may purchase certificates of participation, a
type of floating or variable rate obligation, which are interests in a pool of
debt obligations held by a bank or other financial institution.
INDUSTRIAL DEVELOPMENT BONDS. The Funds (other than the Treasury Obliga-
tions, Treasury Instruments, Government and Federal Funds) may invest in in-
dustrial development bonds (generally referred to under current tax law as
"private activity bonds"), the interest from which would be an item of tax
preference when distributed as "exempt-interest dividends" to shareholders un-
der the federal alternative minimum tax. See "Taxes" and "Distributions." Mu-
nicipal Fund may invest up to 100% of its assets in private activity bonds.
Tax-Free Fund does not currently intend to invest in such bonds. If Tax-Free
Fund's policy not to invest in private activity bonds should change in the fu-
ture, shareholders would be notified and such investments would not exceed 20%
of Tax-Free Fund's net assets.
OTHER POLICIES. Ordinarily the Tax-Exempt Funds expect that 100% of their
portfolio securities will be Municipal Instruments. However, the Funds may
hold cash or invest in short-term taxable securities as set forth above. Such
Funds may invest 25% or more of the value of their respective total assets in
Municipal Instruments which are related in such a way that an economic, busi-
ness or political development or change affecting one Municipal Instrument
would also affect the other Municipal Instruments. For example, the Tax-Exempt
Funds may invest all of their respective assets in (a) Municipal Instruments
the interest on which is paid solely from revenues from similar projects such
as hospitals, electric utility systems, multi-family housing, nursing homes,
commercial facilities (including hotels), steel companies or life care facili-
ties, (b) Municipal Instruments whose issuers are in the same state or (c) in-
dustrial development obligations. Concentration of a Fund's investments in
these Municipal Instruments will subject the Fund, to a greater extent than if
such investment was more limited, to the risks of adverse economic, business
or political developments affecting any such state, industry or other area of
concentration.
Each Fund (other than the Treasury Obligations, Treasury Instruments, Gov-
ernment and Federal Funds) may purchase Municipal Instruments which are backed
by letters of credit, which will ordinarily be irrevocable, issued by domestic
banks or foreign banks (excluding Prime Obligations Fund) which have a branch,
agency or subsidiary in the United States. In addition, these Funds may ac-
quire securities in the form of custodial receipts which evidence ownership of
future interest payments, principal payments or both on obligations of certain
state and local governments and authorities.
In order to enhance the liquidity, stability, or quality of a Municipal In-
strument, each Fund (other than the Treasury Obligations, Treasury Instru-
ments, Government and Federal Funds) may acquire the right to sell the secu-
rity to another party at a guaranteed price and date.
18
<PAGE>
REPURCHASE AGREEMENTS
Each Fund (other than the Treasury Instruments Fund) may only enter into re-
purchase agreements with primary dealers in U.S. Government Securities. A re-
purchase agreement is an agreement under which a Fund purchases securities and
the seller agrees to repurchase the securities within a particular time at a
specified price. Such price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate
on the purchased security. A Fund's custodian or sub-custodian will maintain
custody of the purchased securities for the duration of the agreement. The
value of the purchased securities, including accrued interest, will at all
times equal or exceed the value of the repurchase agreement. In the event of
bankruptcy of the seller or failure of the seller to repurchase the securities
as agreed, a Fund could suffer losses, including loss of interest on or prin-
cipal of the security and costs associated with delay and enforcement of the
repurchase agreement. In evaluating whether to enter into a repurchase agree-
ment, the Adviser will carefully consider the creditworthiness of the seller
pursuant to procedures reviewed and approved by the Trustees. Distributions of
the income from repurchase agreements entered into by a Fund will be taxable
to its shareholders. In addition, each Fund, together with other registered
investment companies having management agreements with the Adviser or any of
its affiliates, may 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.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Fund may purchase when-issued securities and make contracts to purchase
or sell securities for a fixed price at a future date beyond customary settle-
ment time. A Fund is required to hold and maintain in a segregated account
with the Fund's custodian or sub-custodian until three days prior to settle-
ment date, cash or liquid assets in an amount sufficient to meet the purchase
price. Alternatively, a Fund may enter into offsetting contracts for the for-
ward sale of other securities that it owns. Securities purchased or sold on a
when-issued or forward commitment basis involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date or if the
value of the security to be sold increases prior to the settlement date. Al-
though a Fund would generally purchase securities on a when-issued or forward
commitment basis with the intention of acquiring securities for its portfolio,
the Fund may dispose of a when-issued security or forward commitment prior to
settlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The Adviser will determine, under guidelines established by the Trustees,
whether securities issued by other money market investment companies present
minimal credit risks. The amount of each Fund's investments in securities of
other investment companies will be subject to the limitations on such invest-
ments prescribed by the Investment Company Act. These limits include a prohi-
bition on any Fund acquiring more than 3% of the voting shares of any other
investment company and a prohibition on investing more than 5% of a Fund's to-
tal assets in securities of any one investment company or more than 10% of its
total assets in securities of all investment companies. Each Fund will indi-
rectly bear its proportionate share of any management fees and other expenses
paid by such other investment companies. Such other investment companies will
have investment objectives, policies and restrictions substantially similar to
those of the acquiring Fund and will be subject to substantially the same
risks.
INVESTMENT LIMITATIONS
TAXABLE AND TAX-EXEMPT FUNDS. Each Fund will comply with the conditions for
using amortized cost valuation set forth in Rule 2a-7 under the Investment
Company Act including, but not limited to, those condi-
19
<PAGE>
tions relating to maturity, diversification and credit quality. These operat-
ing policies may be more restrictive than the fundamental policies set forth
in the Statement of Additional Information.
INVESTMENT RESTRICTIONS. Each Fund is subject to certain investment restric-
tions that are described in detail under "Investment Restrictions" in the
Statement of Additional Information. Fundamental investment restrictions of a
Fund cannot be changed without approval of a majority of the outstanding
shares of that Fund. Treasury Obligations Fund's policy of limiting its in-
vestments to U.S. Treasury Obligations and related repurchase agreements is
also fundamental. All investment objectives and policies not specifically des-
ignated as fundamental are non-fundamental and may be changed without share-
holder approval.
RESTRICTED AND OTHER ILLIQUID SECURITIES. Each Fund may purchase securities
that are not registered ("restricted securities") under the Securities Act of
1933 ("1933 Act"), but can be offered and sold to "qualified institutional
buyers" under Rule 144A under the 1933 Act. However, a Fund will not invest
more than 10% of its net assets in illiquid investments, which include fixed
time deposits maturing in more than seven days and restricted securities.
Restricted securities (including commercial paper issued pursuant to Section
4(2) of the 1933 Act) which the Board of Trustees has determined are liquid,
based upon a continuing review of the trading markets for the specific re-
stricted security, will not be deemed to be illiquid investments for purposes
of this restriction. The Board of Trustees may adopt guidelines and delegate
to the Adviser the daily function of determining and monitoring the liquidity
of restricted securities. The Board, however, will retain sufficient oversight
and be ultimately responsible for the determinations. Since it is not possible
to predict with assurance that the market for restricted securities eligible
for resale under Rule 144A will continue to be liquid, the Adviser will care-
fully monitor each Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in a Fund to the extent that qualified institutional buy-
ers become for a time uninterested in purchasing these restricted securities.
In addition, each Fund may not invest in repurchase agreements maturing in
more than seven days and securities which are not readily marketable if, as a
result thereof, more than 10% of the net assets of that Fund (taken at market
value) would be invested in such investments. Certain repurchase agreements
which mature in more than seven days can be liquidated before the nominal
fixed term on seven days or less notice. Such repurchase agreements will be
regarded as liquid instruments.
MANAGEMENT
THE ADVISER
GSAM, One New York Plaza, New York, New York 10004, a separate operating di-
vision of Goldman, Sachs & Co., acts as investment adviser to the Funds.
Goldman Sachs registered as an investment adviser in 1981. As of March 24,
1997, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $104.9 billion in assets.
As of November 29, 1996, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $112 billion and partners' capital of $2 billion and
ranked as one of the largest international investment banking and brokerage
firms in the United States. Founded in 1869, Goldman Sachs is a major invest-
ment banking and brokerage firm providing a broad range of financing and in-
vestment services both in the United States and abroad.
20
<PAGE>
Pursuant to an SEC order, each Taxable and Tax-Advantaged Fund may enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
Under the Management Agreement, GSAM continually manages each Fund, includ-
ing the purchase, retention and disposition of its securities and other as-
sets. In addition, GSAM administers each Fund's business affairs and performs
various shareholder servicing functions to the extent not provided by other
organizations. The management of each Fund is subject to the supervision of
the Trustees and each Fund's investment policies. For these services, the
Trust, on behalf of each Fund, pays GSAM a monthly fee at an annual rate of
each Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
CONTRACTUAL DECEMBER 31,
RATE 1996
----------- ------------
<S> <C> <C>
Financial Square Prime Obligations Fund................ .205% .17%
Financial Square Money Market Fund..................... .205% .17%
Financial Square Money Market Plus Fund................ .205% N/A
Financial Square Treasury Obligations Fund............. .205% .17%
Financial Square Treasury Instruments Fund............. .205% N/A
Financial Square Government Fund....................... .205% .17%
Financial Square Federal Fund.......................... .205% N/A
Financial Square Tax Free Money Market Fund............ .205% .17%
Financial Square Municipal Money Market Fund........... .205% N/A
</TABLE>
A Management Agreement combining both advisory and administrative services
was adopted effective April 30, 1997. The contractual rate set forth in the
table is the rate payable under the Management Agreement and is identical to
the aggregate advisory and administration fees payable by each Fund under the
previously separate investment advisory and administration agreements. For the
fiscal year ended December 31, 1996, the annual rate expressed is the combined
advisory and administration fees paid (after voluntary fee limitations). The
difference, if any, between the stated fees and the actual fees paid by the
Funds reflects the fact that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled.
GSAM has agreed not to impose a portion of its management fee and/or to re-
duce or otherwise limit the total operating expenses of each Fund (excluding
fees payable to Service Organizations, as defined herein, taxes, interest,
brokerage and litigation, indemnification and other extraordinary expenses).
GSAM has no current intention to but may in the future discontinue or modify
any of such reductions or limitations at its discretion.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of shares of each Fund pursuant to a Distribution Agreement with the
Trust. The Distributor will assist in the sale of shares of each Fund upon the
terms described herein. Goldman Sachs also serves as the Transfer Agent of
each Fund.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold shares of the Funds in order to increase the assets of the Funds. In-
creasing the Fund's assets may enhance investment flexibility and diversifica-
tion. Goldman Sachs reserves the right to redeem at any time some or all of
the Fund shares acquired for its own account. Goldman Sachs will consider the
effect of redemptions on the Funds and other shareholders in deciding whether
to redeem its shares.
TAXES
Each Fund is treated as a separate entity for federal income tax purposes.
The Treasury Instruments and Federal Funds intend to elect and each other Fund
has elected to be treated as a regulated investment company
21
<PAGE>
and each Fund intends to continue to qualify for such treatment under
Subchapter M of the Internal Revenue Code of 1986 (the "Code") for each tax-
able year. To qualify as such, each Fund must satisfy certain requirements re-
lating to the sources of its income, diversification of its assets and distri-
bution of its income to shareholders. As a regulated investment company, each
Fund will not be subject to federal income or excise tax on any net investment
income and net realized capital gains that are distributed to its shareholders
in accordance with certain timing requirements of the Code.
Dividends paid by a Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss and taxable original
issue discount or market discount income will be taxable to shareholders as
ordinary income, except for any "exempt-interest dividends" paid by the Tax-
Exempt Funds, as described below. Dividends paid by a Fund from the excess of
net long-term capital gain over net short-term capital loss will be taxable as
long-term capital gain regardless of how long the shareholders have held their
shares. These tax consequences will apply to distributions of any Fund
regardless of whether distributions are received in cash or reinvested in
shares. Certain distributions paid by the Funds in January of a given year
will be taxable to shareholders as if received on December 31 of the year in
which they are declared. Shareholders will be informed annually about the
amount and character of distributions received from the Funds for federal
income tax purposes, including any distributions that may constitute a return
of capital or any distributions of Municipal Fund that may constitute a tax
preference item under the federal alternative minimum tax.
The Tax-Exempt Funds intend to satisfy certain requirements of the Code for
the payment of "exempt-interest dividends" not included in shareholders' fed-
eral gross income. Dividends paid by these Funds from interest on tax-exempt
obligations and properly designated by the Funds as exempt-interest dividends,
including dividends attributable to exempt-interest dividends received by a
Fund from other regulated investment companies, will generally be exempt from
federal income tax, although a portion of such dividends may be subject to the
federal alternative minimum tax. Exempt-interest dividends will be considered
in computing the corporate federal alternative minimum tax, and the extent, if
any, to which social security or railroad retirement benefits are taxable.
Persons who are "substantial users" of facilities financed by certain indus-
trial development or private activity bonds should consult their own tax ad-
visers before purchasing shares of these Funds. Interest incurred to purchase
or carry shares of these Funds will not be deductible for federal income tax
purposes to the extent related to exempt-interest dividends paid by the Funds.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on taxable distributions if they fail
to furnish their correct taxpayer identification number and certain certifica-
tions required by the Internal Revenue Service or if they are otherwise sub-
ject 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 ordi-
nary dividends from the Funds.
If a Fund invests in foreign securities, it may be subject to foreign with-
holding or other foreign taxes on income earned on such securities and is ex-
pected to be unable to pass such taxes through to shareholders, who therefore
are not expected to include such taxes in income or be entitled to claim for-
eign tax credits or deductions with respect to such taxes.
In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on payments received from a Fund. A state income (and possi-
bly local income and/or intangible property) tax exemption is generally avail-
able to the extent a Fund's distributions are derived from interest on (or, in
the case of intangible property taxes, the value of its assets is attributable
to) certain U.S. Government obligations and/or tax-exempt
22
<PAGE>
municipal obligations issued by or on behalf of the particular state or a po-
litical 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 concerning these matters.
NET ASSET VALUE
The net asset value of each Fund (other than the Government, Treasury Obli-
gations and Money Market Plus Funds) is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. New York time) on
each Business Day. The net asset value of Government, Treasury Obligations and
Money Market Plus Funds is determined as of 5:00 p.m. New York time on each
Business Day. Net asset value per share for each class of shares of each Fund
is calculated by determining the amount of net assets attributable to each
class of shares and dividing by the number of shares for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities markets close early, the Treasury
Instruments and Federal Funds will cease, and each other Fund reserves the
right to cease, accepting purchase and redemption orders for same Business Day
credit at the time PSA recommends that the securities markets close. On days
any Fund closes early, purchase and redemption orders received after the PSA
recommended closing time will be credited to the next Business Day. In addi-
tion, each Fund reserves the right to advance the time by which purchase and
redemption orders must be received for same Business Day credit as permitted
by the SEC.
Each Fund seeks to maintain a net asset value of $1.00 per share. In this
connection, each Fund values its portfolio securities on the basis of amor-
tized cost. The amortized cost method values a security at its cost on the
date of purchase and thereafter assumes a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. For a more complete description
of the amortized cost valuation method and its effect on existing and prospec-
tive shareholders, see the Statement of Additional Information. There can be
no assurance that a Fund will be able at all times to maintain a net asset
value per share of $1.00.
YIELD INFORMATION
From time to time, each Fund may advertise its yield, effective yield and
average annual total return. Average annual total return is determined by com-
puting the average annual percentage change in value of $1,000 invested at the
maximum public offering price for a specified period of at least one year, as-
suming reinvestment of all dividends and distributions at net asset value. The
total return calculation assumes a complete redemption of the investment at
the end of the relevant period. Each Fund may furnish total return calcula-
tions based on a cumulative, average, year-by-year or other basis for various
specified periods by means of quotations, charts, graphs or schedules. The
yield of a Fund refers to the income generated by an investment in that Fund
over a seven-day period (which period will be stated in the advertisement).
This income is then annualized; that is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
23
<PAGE>
The Tax-Exempt Funds and the Federal and Treasury Instruments Funds may each
also quote tax-equivalent yield. Each Fund's tax-equivalent yield is calcu-
lated by determining the rate of return that would have to be achieved on a
fully taxable investment to produce the after-tax equivalent of the Fund's
yield, assuming certain tax brackets for a shareholder.
Investors should note that the investment results of a Fund are based on
historical performance and will fluctuate over time. Any presentation of a
Fund's total return, yield, effective yield or tax-equivalent yield for any
prior period should not be considered a representation of what an investment
may earn or what a Fund's total return, yield, effective yield or tax-equiva-
lent yield may be in any future period. In addition to the above, each Fund
may from time to time advertise its performance relative to certain averages,
performance rankings, indices, other information prepared by recognized mutual
fund statistical services and investments for which reliable performance data
is available.
Total return, yield, effective yield and tax-equivalent yield will be calcu-
lated separately for each class of shares in existence. Because each such
class of shares is subject to different expenses, the total return and net
yield of such classes of a Fund for the same period may differ. See "Organiza-
tion and Shares of the Trust" below.
ORGANIZATION AND SHARES OF THE TRUST
Each Fund is a series of the Goldman Sachs Trust, which was formed under the
laws of the State of Delaware on January 28, 1997. The Funds were formerly se-
ries of Goldman Sachs Money Market Trust, a Massachusetts business trust, and
were reorganized into the Trust as of April 30, 1997. The Trustees have au-
thority under the Trust's Declaration of Trust to create and classify shares
of beneficial interest in separate series, without further action by share-
holders. Additional series may be added in the future. The Trustees also have
authority to classify or reclassify any series or portfolio of shares into one
or more classes. (Institutions that provide services to holders of FST Pre-
ferred Shares, FST Administration Shares or FST Service Shares are referred to
in this Prospectus as "Service Organizations").
When issued, shares are fully paid and nonassessable. In the event of liqui-
dation, shareholders are entitled to share pro rata in the net assets of the
applicable Fund available for distribution to such shareholders. All shares
are freely transferable and have no preemptive, subscription or conversion
rights. Shareholders are entitled to one vote per share, provided that, at the
option of the Trustees, shareholders will be entitled to a number of votes
based upon the net asset values represented by their shares.
Shares of a Fund will be voted seperately by Fund with respect to matters
pertaining to that Fund except for the election of Trustees and ratification
of independent accountants. For example, shareholders of each Fund are re-
quired to approve the adoption of any management agreement relating to that
Fund and any changes in fundamental investment restrictions or policies of
such Fund. Approval by the shareholders of one Fund is effective only as to
that Fund.
As of April 1, 1997, Harris Trust & Savings Bank, 200 W. Monroe St. Fl 12,
Chicago, IL 60606, owned of record 40.64% of the outstanding shares of Trea-
sury Instruments Fund.
The Trust does not intend to hold annual meetings of shareholders. However,
pursuant to the Trust's By-Laws, the recordholders of at least 10% of the
shares outstanding and entitled to vote at a special meeting may require the
Trust to hold such special meeting of shareholders for any purpose, and
recordholders may, under certain circumstances, as permitted by the Investment
Company Act, communicate with other shareholders in connection with requiring
a special meeting of shareholders. The Trustees will call a special meeting of
shareholders 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.
24
<PAGE>
PURCHASE OF SHARES
FST Shares of a Fund may be purchased on any Business Day at the net asset
value next determined after receipt of a purchase order in the manner set
forth below, and provided that The Northern Trust Company ("Northern"), Chica-
go, Illinois, the sub-custodian for State Street Bank and Trust Company
("State Street"), receives the purchase amount in federal funds on the same
Business Day. Purchase orders may be made by telephoning Goldman Sachs at 800-
621-2550 or by a written request addressed to Goldman Sachs, Attention: Share-
holder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois
60606. It is strongly recommended that payment be effected by wiring federal
funds to Northern.
Purchases of FST Shares may also be made by delivering a Federal Reserve
draft or check (except that a third party check will not be accepted) payable
only to the appropriate Fund and drawn on a U.S. bank to Goldman Sachs, Atten-
tion: Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago,
Illinois 60606. It is expected that Federal Reserve drafts will ordinarily be
converted to federal funds on the day of receipt and that checks will be con-
verted to federal funds within two Business Days after receipt. FST Shares
purchased by check may not be redeemed until the check has cleared, as de-
scribed under "Redemption of Shares."
Purchases of shares of any Fund may also be made through an Automated Clear-
ing House ("ACH") transfer to Goldman Sachs Trust c/o Northern, as
subcustodian for State Street. Purchase orders are effected at the net asset
value next determined after receipt of both the purchase order and the pur-
chase amount in federal funds. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer.
FST Shares of each Fund are deemed to have been purchased when an order be-
comes effective and are entitled to dividends on FST Shares purchased as fol-
lows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED BY GOLDMAN SACHS DIVIDENDS BEGIN
------------------------------------- ---------------
<S> <C> <C>
(1) In the case of the Taxable and Tax-Advantaged Funds
(except for Government, Treasury Obligations and
Money Market Plus Funds)
By:3:00 p.m.--N.Y. time Same Business Day
- -----------------------------------------------------------------
After:3:00 p.m.--N.Y. time Next Business Day
- -----------------------------------------------------------------
(2) In the case of the Government, Treasury Obligations
and Money Market Plus Funds
By:5:00 p.m.--N.Y. time Same Business Day
- -----------------------------------------------------------------
After:5:00 p.m.--N.Y. time Next Business Day
- -----------------------------------------------------------------
(3) In the case of the Municipal Fund
By:1:00 p.m.- N.Y. time Same Business Day
- -----------------------------------------------------------------
After:1:00 p.m.- N.Y. time Next Business Day
- -----------------------------------------------------------------
(4) In the case of the Tax-Free Fund
By:2:00 p.m.- N.Y. time Same Business Day
- -----------------------------------------------------------------
After:2:00 p.m.- N.Y. time Next Business Day
- -----------------------------------------------------------------
</TABLE>
25
<PAGE>
A Business Day means any day on which the New York Stock Exchange is open,
except for days on which Chicago, Boston or New York banks are closed for lo-
cal holidays.
FST Shares of the Funds are purchased at the net asset value per share with-
out the imposition of a sales charge. However, banks, trust companies or other
institutions through which investors acquire FST Shares may impose charges in
connection with transactions in such Shares.
Goldman Sachs, as each Fund's transfer agent, will maintain a complete rec-
ord of transactions and FST Shares held in each shareholder's account. The
Trust and Goldman Sachs each reserves the right to reject any purchase order
for any reason.
INITIAL PURCHASES
The minimum initial investment requirement is $10 million, which may be al-
located among the Funds. The Trust and Goldman Sachs each reserves the right
to waive the minimum investment requirement. Before or immediately after plac-
ing an initial purchase order, investors should complete and send to Goldman
Sachs the Account Information Form included at the end of this Prospectus.
SUBSEQUENT INVESTMENTS
There is no minimum amount required for subsequent investments. Orders for
the purchase of additional FST Shares should be accompanied by information
identifying the account and the Fund in which FST Shares are to be purchased.
REPORTS TO SHAREHOLDERS
FST Shareholders of each Fund will receive an annual report containing au-
dited financial statements and a semiannual report. Each FST Shareholder will
also be furnished with an individual monthly statement. Upon request, a
printed confirmation for each transaction will be provided by Goldman Sachs.
Any dividends and distributions paid by a Fund are also reflected in regular
statements issued by Goldman Sachs. A year-to-date statement for any account
will be provided upon request made to Goldman Sachs. FST Shareholders with in-
quiries regarding a Fund may call Goldman Sachs at 800-621-2550 (8:00 a.m. to
6:30 p.m. New York time) or write Goldman Sachs at the address shown under
"The Distributor and Transfer Agent."
SUB-ACCOUNTING SERVICES
The Trust has designed special procedures to assist banks and other institu-
tional investors desiring to establish multiple accounts (master accounts and
their sub-accounts). Sub-accounts may be established with registration by name
and/or number. Institutions will not normally be charged for this service un-
less otherwise agreed upon. Upon request, master accounts will be provided
with a monthly summary report which sets forth in order by account number (or
name) the share balance at month-end and the monthly income together with the
total share balance and monthly income for the master account.
To assist banks and other institutional investors performing their own sub-
accounting, each Fund's daily income per share, calculated to nine decimal
places, and its annualized yield are normally available by 4:00 p.m. New York
time.
26
<PAGE>
DISTRIBUTIONS
All or substantially all of each Fund's net investment income will be de-
clared daily (as of 4:00 p.m. New York time for each Fund other than the Gov-
ernment, Treasury Obligations and Money Market Plus Funds and as of 5:00 p.m.
New York time for the Government, Treasury Obligations and Money Market Plus
Funds) as a dividend and distributed to FST Shareholders monthly. Distribu-
tions will be made in additional FST Shares of the same Fund or, at the elec-
tion of FST Shareholders, in cash. The election to reinvest dividends and dis-
tributions or receive them in cash may be changed at any time upon written no-
tice to Goldman Sachs. If no election is made, all dividends and capital gain
distributions will be reinvested. Dividends will be reinvested as of the last
calendar day of each month. Cash distributions will be paid on or about the
first business day of each month. Net short-term capital gains, if any, will
be distributed in accordance with the requirements of the Code and may be re-
flected in the Fund's daily distributions. Each Fund may distribute at least
annually its long-term capital gains, if any, after reduction by available
capital losses. In order to avoid excessive fluctuations in the amount of
monthly capital gains distributions, a portion of any net capital gains real-
ized on the disposition of securities during the months of November and Decem-
ber may be distributed during the subsequent calendar year. Although realized
gains and losses on the assets of a Fund are reflected in the net asset value
of the Fund, they are not expected to be of an amount which would affect the
Fund's net asset value of $1.00 per share.
The income declared as a dividend for the Treasury Obligations, Government
and Money Market Plus Funds is based on estimates of net investment income for
the Fund. Actual income may differ from estimates, and differences, if any,
will be included in the calculation of subsequent dividends.
A Fund's net investment income consists of the excess of (i) accrued
interest or discount (including both original issue and market discount on
taxable securities) on portfolio securities, and (ii) any income of the Fund
from sources other than capital gains over (iii) the amortization of market
premium on all portfolio securities and (iv) the estimated expenses of the
Fund, including a proportionate share of the general expenses of the Trust.
EXCHANGES
FST Shares of each Fund may be exchanged for shares of the corresponding
class of any Fund or Portfolio of Goldman Sachs Trust at the net asset value
next determined either by writing to Goldman Sachs, Attention: Shareholder
Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois 60606 or,
if previously elected in the Account Information Form included at the end of
this Prospectus, by calling Goldman Sachs at 800-621-2550. All telephone
exchanges must be registered in the same name(s) and with the same address as
are registered in the Fund from which the exchange is being made. It may be
difficult to implement the telephone exchange privilege in times of drastic
economic or market changes. In an effort to prevent unauthorized or fraudulent
exchange requests by telephone, Goldman Sachs employs reasonable procedures as
set forth under "Redemption of Shares" to confirm that such instructions are
genuine. Exchanges are available only in states where the exchange may legally
be made. The exchange privilege may be modified or withdrawn at any time on 60
days' written notice.
REDEMPTION OF SHARES
HOW TO REDEEM
FST Shareholders may redeem FST Shares of a Fund without charge upon request
on any Business Day at the net asset value next determined after receipt of
the redemption request. Redemption requests may be made by
27
<PAGE>
telephoning Goldman Sachs at 800-621-2550 or by a written request addressed to
Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower, Chicago, Illinois 60606. The letter of instruction must specify
the number of FST Shares of the particular Fund to be redeemed, the account
number, payment instructions and the exact registration on the account. Signa-
tures must be guaranteed in accordance with the procedures set forth below, if
the proceeds are to be paid to other than pre-established instructions on file
with the Fund. A FST Shareholder may request redemptions by telephone only if
the optional telephone redemption privilege has been elected on the Account
Information Form included at the end of this Prospectus. It may be difficult
to implement redemptions by telephone in times of drastic economic or market
changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than
that designated on the Account Information Form must be in writing and signed
by an authorized person designated on the Account Information Form. Any such
written request is also confirmed by telephone with both the requesting party
and the designated bank account to verify instructions. Other procedures may
be implemented from time to time. If reasonable procedures are not implement-
ed, the Trust may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, neither the Trust nor Goldman Sachs will be
responsible for the authenticity of redemption instructions received by tele-
phone. A redemption may also be made with respect to certain Funds by means of
the check redemption privilege described in the Statement of Additional Infor-
mation. Goldman Sachs reserves the right to redeem accounts with balances be-
low $500.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs. The payment of
redemption proceeds for FST Shares recently purchased by check will be delayed
for up to 15 days until the check has cleared.
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
bank account designated on the FST Shareholder's Account Information Form, un-
less payment by check has been requested.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST RECEIVED REDEMPTION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
- --------------------------- ------------------- ---------
<S> <C> <C> <C> <C> <C>
(1) In the case of the Taxable and Tax-Advantaged Funds (except for Government,
Treasury Obligations and Money Market Plus Funds)
By:3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day request is
received
- ----------------------------------------------------------------------------------------------------
After:3:00 p.m.--N.Y.
time Wired Next Business Day Earned on Day request is
received
- ----------------------------------------------------------------------------------------------------
(2) In the case of the Government, Treasury Obligations and Money Market Plus Funds
By:5:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day request is
received
- ----------------------------------------------------------------------------------------------------
After:5:00 p.m.--N.Y.
time Wired Next Business Day Earned on Day request is
received
- ----------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
REDEMPTION REQUEST RECEIVED REDEMPTION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
- --------------------------- ------------------- ---------
<S> <C> <C>
(3) In the case of the Municipal Fund
By:12:00 noon--N.Y. time Wired Same Business Day Not earned on Day request is
received
- ---------------------------------------------------------------------------------------
After:12:00 noon--N.Y.
time Wired Next Business Day Earned on Day request is
received
- ---------------------------------------------------------------------------------------
(4) In the case of the Tax-Free Fund
By:1:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day request is
received
- ---------------------------------------------------------------------------------------
After:1:00 p.m.--N.Y.
time Wired Next Business Day Earned on Day request is
received
- ---------------------------------------------------------------------------------------
</TABLE>
The Funds will arrange for the proceeds of redemptions effected by any means
to be wired as federal funds to the bank account designated in the Account In-
formation Form. Redemption proceeds will normally be wired as set forth above,
but may be paid up to three Business Days after receipt of a properly executed
redemption request. For example, payment may be delayed if the Federal Reserve
Bank is closed on the day redemption proceeds would ordinarily be wired. After
a wire has been initiated by Goldman Sachs, neither Goldman Sachs nor the
Trust assumes any further responsibility for the performance of intermediaries
or the FST Shareholder's bank in the transfer process. If a problem with such
performance arises, the FST Shareholder should deal directly with such inter-
mediaries or bank.
An FST Shareholder may change the bank designated to receive redemption pro-
ceeds by providing a written notice to Goldman Sachs which has been signed by
the FST Shareholder or its authorized representative. This signature must be
guaranteed by a bank, a securities broker or dealer, a credit union having au-
thority to issue signature guarantees, a savings and loan association, a
building and loan association, a cooperative bank, a federal savings bank or
association, a national securities exchange, a registered securities associa-
tion or a clearing agency, provided that such institution satisfies the stan-
dards established by Goldman Sachs. Goldman Sachs may also require additional
documentation in connection with a request to change the designated bank.
OTHER REDEMPTION INFORMATION
A minimum account balance of $10 million is required to remain a FST Share-
holder. The Funds may redeem all of the FST Shares of any FST Shareholder
whose account has a net asset value which is less than the minimum described
above. The Trust will give sixty (60) days' prior written notice to such
shareholders whose FST Shares are being redeemed to allow them to purchase
sufficient additional FST Shares to avoid such redemption.
----------------
29
<PAGE>
APPENDIX
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Fund with your correct Social Secu-
rity 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 and to sign your name in 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, ex-
changes and other payments relating to your account.
Any tax withheld may be credited against taxes owed on your federal income
tax return.
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 Reve-
nue Service (IRS). Backup withholding could apply to payments relating to your
account prior to the Fund's receipt of your TIN.
Special rules apply for certain entities. For example, for an account estab-
lished under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor
should be furnished.
If you have been notified by the IRS that you are subject to backup with-
holding 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 with-
holding should cease, you must cross out item (2) in the certification section
of the Account Information Form.
If you are an exempt recipient, you should furnish your TIN and certify your
exemption by signing the Certification section and writing "exempt" after your
signature. Exempt recipients include: corporations, tax-exempt pension plans
and IRA's, governmental agencies, financial institutions, registered securi-
ties and commodities dealers and others.
If you are a nonresident alien or foreign entity, you must provide a com-
pleted Form W-8 to the Fund in order to avoid backup withholding on certain
payments. Other payments to you may be subject to non-resident alien withhold-
ing of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
[LOGO] Goldman Sachs
GOLDMAN SACHS FUNDS--ACCOUNT INFORMATION FORM
This Account Information Form Should be Forwarded Promptly to Goldman,
Sachs & Co.
No Redemption Can be Made Prior to Its Receipt
Send to: Goldman Sachs Funds Master No. __________________
4900 Sears Tower Fund Use Only
Chicago, IL 60606
1-800-621-2550 Date: _______________________
[_] GOLDMAN SACHS MONEY MARKET FUNDS [_] GOLDMAN SACHS FIXED INCOME FUNDS
Fill in Fund(s), Class(es) of Shares Fill in Fund(s), Class(es) of
and Fund number(s): Shares and Fund number(s):
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
[_] GOLDMAN SACHS EQUITY FUNDS [_] OTHER
Fill in Fund(s), Class(es) of Shares Fill in Fund(s), Class(es) of
and Fund number(s): Shares and Fund number(s):
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
------------------------------------ ----------------------------------
A. ACCOUNT RECORD
- --------------------------------------------------------------------------------
- ---------------------------------------- --------------------------------------
Name of Account Telephone Number
- ----------------------------------------
Street or P.O. Box
U.S. Citizen or
- ---------------------------------------- Resident? Yes [_] No [_]
City State Zip If no is checked, fill in country of
tax residence:
- ---------------------------------------- --------------------------------------
Attention
B. DIVIDENDS AND DISTRIBUTIONS - Check appropriate box (see "Dividends" in Pro-
spectus)
- --------------------------------------------------------------------------------
Daily dividend funds: [_] Cash [_] Units/Shares
Dividends (including net,
short-term capital gains) [_] Cash [_] Units/Shares
Net long-term capital gains [_] Units/Shares
Dividends and capital gains
reinvested in another fund in the
Goldman Sachs Funds (See
Prospectus for more information.)
Fill in Fund(s):
--------------------------
--------------------------
Non-daily dividend funds:
Dividends [_] Cash [_] Units/Shares
Capital gains (including
short-term and long-term) [_] Cash [_] Units/Shares
Dividends and capital gains
reinvested in another fund in the
Goldman Sachs Funds (See
Prospectus for more information.)
Fill in Fund(s): _______________________
(If no box is checked, dividends and capital gains distributions will be rein-
vested in the account.)
C. SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION NUMBER CERTIFICATION
- --------------------------------------------------------------------------------
Taxpayer Identification Number: _________________
Under penalties of perjury, I certify that (1) the number shown on this form is
my correct Taxpayer Identification Number (or I am waiting for a number to be
issued to me), and (2) I am not subject to backup withholding because I am ex-
empt from backup withholding or I have not been notified by the Internal Reve-
nue Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or the IRS has notified me that I
am no longer subject to backup withholding. See the "Guidelines for Certifica-
tion of Taxpayer Identification Number on Account Information Form," contained
in the Appendix to the accompanying Prospectus.
SIGN ------------------------------ ----------------------------------------
HERE Signature Name (print) and Title (if any)
------------------------------ ----------------------------------------
Date Continued on next page
<PAGE>
D. OPTIONAL TELEPHONE EXCHANGE (see "Exchange Privilege" in Prospectus)
- -------------------------------------------------------------------------------
[_] GOLDMAN, SACHS & CO. is hereby authorized to accept and act upon telephone
instructions from the undersigned or any other person for the exchange of
shares/units of the Fund into any Fund described in the accompanying Pro-
spectus. The undersigned understands and agrees that neither the applicable
Fund nor GOLDMAN, SACHS & Co. will be liable for any loss, expense, or cost
arising out of any telephone request.
E. REDEMPTION PLANS - Check one box only (see "Redemption of Shares" in Pro-
spectus)
- -------------------------------------------------------------------------------
[_] I authorize GOLDMAN, SACHS & CO. to honor telephone, telegraphic, or other
instructions WITHOUT A MEDALLION SIGNATURE GUARANTEE, from any person for
the redemption of shares/units for the above account provided that the pro-
ceeds are transmitted either to the following bank account(s) or mailed to
the address of record of the account, as specified below. I understand any
changes to the following information must be made in writing to GOLDMAN,
SACHS & CO., must contain the appropriate number of signatures listed below
and all signatures MUST BE MEDALLION SIGNATURE GUARANTEED. Absent its own
gross negligence, neither the applicable Fund nor GOLDMAN, SACHS & CO. shall
be liable for such redemptions or for payments made to any unauthorized ac-
count.
[_] I have furnished GOLDMAN, SACHS & CO., WITH A MEDALLION SIGNATURE GUARANTEE
(See section H). I authorize GOLDMAN, SACHS & CO. to honor telephone, tele-
graphic, or other instructions from any person for the redemption of
shares/units for the above account provided that the proceeds are transmit-
ted either to the following bank account(s) or mailed to the address of rec-
ord of the account, as specified below. Any changes to the following infor-
mation must be made in writing to GOLDMAN, SACHS & CO., (but WITHOUT MEDAL-
LION SIGNATURE GUARANTEE) and contain the appropriate number of signatures
listed below. Absent its own gross negligence, neither the applicable Fund
nor GOLDMAN, SACHS & CO. shall be liable for such redemptions or fee pay-
ments made to any unauthorized account.
Check the appropriate box below specifying how redemption proceeds shall be
transmitted to you:
[_] BY WIRE (transmitted to my bank account(s) designated below).
or
[_] BY MAIL. Please mail a check to the address of record of the account set
forth in Section A.
If you indicated that redemption proceeds should be wired to your bank ac-
count(s), please complete the following bank account information and place a
line through the unused portion.
Additional instructions may be added on separate pages, if necessary.
Number of Bank Account Destinations completed in Section E of this form: [_]
1) ___________________________________ 3) _____________________________________
Bank Name Bank Routing No. Bank Name Bank Routing No.
------------------------------------ ----------------------------------------
Street Address Street Address
------------------------------------ ----------------------------------------
City State Zip City State Zip
------------------------------------ ----------------------------------------
Account Name Account No. Account Name Account No.
2) ___________________________________ 4) _____________________________________
Bank Name Bank Routing No. Bank Name Bank Routing No.
------------------------------------ ----------------------------------------
Street Address Street Address
------------------------------------ ----------------------------------------
City State Zip City State Zip
------------------------------------ ----------------------------------------
Account Name Account No. Account Name Account No.
F. CHECKWRITING PRIVILEGE - FOR MONEY MARKET FUND ACCOUNTS ONLY (OPTIONAL)
- -------------------------------------------------------------------------------
[_] I have invested in a Goldman Sachs Money Market Fund and would like to have
the checkwriting privilege. Please send a signature card for checkwriting to
me at the address listed in Section A.
G. SIGNATURE AUTHORIZATION
- -------------------------------------------------------------------------------
By the execution of this Account Information Form, the undersigned represents
and warrants that it has full right, power and authority to make the invest-
ment applied for pursuant to this application and is acting for itself or in
some fiduciary capacity in making such investment, and that the individual(s)
signing on behalf of the undersigned represent and warrant that they are duly
authorized to sign this application and to purchase and redeem Fund
units/shares on behalf of the undersigned. The undersigned affirms that it has
received and reviewed a current Fund Prospectus.
THE UNDERSIGNED UNDERSTANDS THAT NON-MONEY MARKET FUNDS DO NOT MAINTAIN A CON-
STANT NET ASSET VALUE AND FURTHER THAT A CONSTANT NET ASSET VALUE IN MONEY
MARKET FUNDS IS NOT GUARANTEED. AS A RESULT, THE UNDERSIGNED MAY EXPERIENCE A
LOSS OF PRINCIPAL ON ITS INVESTMENTS.
Continued on next page
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FST SHARES
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE: 800-621-2550
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder and Fund Expenses.............................................. 2
Financial Highlights....................................................... 4
An Introduction to the Funds............................................... 10
Investment Policies Matrix................................................. 12
Description of Securities and Investment Techniques........................ 14
Investment Limitations..................................................... 20
Management................................................................. 21
Taxes...................................................................... 22
Net Asset Value............................................................ 23
Yield Information.......................................................... 23
Organization and Shares of the Trust....................................... 24
Purchase of Shares......................................................... 25
Reports to Shareholders.................................................... 26
Distributions.............................................................. 27
Exchanges.................................................................. 27
Redemption of Shares....................................................... 27
Appendix................................................................... A-1
Account Information Form
</TABLE>
FST-IFS-MMT15K/596
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FINANCIAL SQUARE FUNDS
FST SHARES
-----------
PROSPECTUS
-----------
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS MONEY MARKET FUNDS
FINANCIAL SQUARE FUNDS
FST ADMINISTRATION SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is a no-load, open-end, management invest-
ment company (a "mutual fund") which includes the Financial Square Funds (the
"Funds"). This Prospectus relates only to the offering of FST Administration
shares of beneficial interest ("FST Administration Shares") of the Funds.
Goldman Sachs Asset Management, a separate operating division of Goldman,
Sachs & Co., serves as each Fund's investment adviser. Goldman, Sachs & Co.
serves as each Fund's distributor and transfer agent.
The following Funds seek to maximize current income to the extent consistent
with the preservation of capital and the maintenance of liquidity by investing
exclusively in high quality money market instruments. The Funds may invest in
diversified portfolios of the following types of instruments:
Financial Square Prime Obligations Fund. Securities of the U.S. Government,
its agencies, authorities and instrumentalities, obligations of U.S. banks,
commercial paper and other short-term obligations of U.S. companies, states,
municipalities and other entities, and repurchase agreements.
Financial Square Money Market Fund. Securities of the U.S. Government, its
agencies, authorities and instrumentalities, U.S. dollar denominated obliga-
tions of U.S. and foreign banks, U.S. dollar denominated commercial paper and
other short-term obligations of U.S. and foreign companies, foreign govern-
ments, states, municipalities and other entities, and repurchase agreements.
Financial Square Money Market Plus Fund. Securities of the U.S. Government,
its agencies, authorities and instrumentalities, U.S. dollar denominated obli-
gations of U.S. and foreign banks, U.S. dollar denominated commercial paper
and other short-term obligations of U.S. and foreign companies, foreign gov-
ernments, states, municipalities and other entities, and repurchase agree-
ments. In order to obtain a rating from a rating organization, the Fund will
observe special investment restrictions.
Financial Square Treasury Obligations Fund. Securities issued or guaranteed
by the U.S. Treasury and repurchase agreements relating to such securities.
Financial Square Treasury Instruments Fund. Securities issued or guaranteed
by the U.S. Treasury, the interest income from which is generally exempt from
state income taxation.
Financial Square Government Fund. Securities of the U.S. Government, its
agencies, authorities, and instrumentalities, and repurchase agreements relat-
ing to such securities.
Financial Square Federal Fund. Securities of the U.S. Government and certain
of its agencies, authorities and instrumentalities, the interest income from
which is generally exempt from state income taxation.
Financial Square Tax-Free Money Market Fund. Securities issued by or on be-
half of states, territories and possessions of the United States and their po-
litical subdivisions, agencies, authorities and instrumentalities, and the
District of Columbia, the interest from which is, in the opinion of bond coun-
sel, if any, excluded from gross income for federal income tax purposes and
not an item of tax preference under the federal alternative minimum tax.
Financial Square Municipal Money Market Fund. Securities issued by or on be-
half of states, territories and possessions of the United States and their po-
litical subdivisions, agencies, authorities and instrumentalities, and the
District of Columbia, the interest from which is, in the opinion of bond coun-
sel, if any, excluded from gross income for federal income tax purposes (but
not necessarily exempt from federal alternative minimum tax or state and local
taxes).
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOV-
ERNMENT AND THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION.........Goldman Sachs Funds-Toll Free: 800-621-2550
This Prospectus provides you with information about the Funds that you should
know before investing in FST Administration Shares. It should be read and re-
tained for future reference. If you would like more detailed information, the
Statement of Additional Information dated May 1, 1997, as amended or supple-
mented from time to time, is available upon request without charge from Serv-
ice Organizations, as defined herein, or by calling the telephone number
listed above or by writing Goldman Sachs, Attention: Shareholder Services,
Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois 60606. The Statement
of Additional Information, which is incorporated by reference into this Pro-
spectus, has been filed with the Securities and Exchange Commission. Not all
Funds are available in certain states. Please call the phone number listed
above to determine availability in your state. The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information and
other information regarding the Trust.
- -------------------------------------------------------------------------------
FST ADMINISTRATION SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1997.
<PAGE>
SHAREHOLDER AND FUND EXPENSES
FST ADMINISTRATION SHARES
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL FINANCIAL
FINANCIAL FINANCIAL SQUARE FINANCIAL FINANCIAL SQUARE SQUARE
SQUARE SQUARE MONEY SQUARE SQUARE FINANCIAL FINANCIAL TAX-FREE MUNICIPAL
PRIME MONEY MARKET TREASURY TREASURY SQUARE SQUARE MONEY MONEY
OBLIGATIONS MARKET PLUS OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL MARKET MARKET
FUND FUND FUND FUND FUND FUND FUND FUND FUND
----------- --------- --------- ----------- ----------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION EXPENSES
Maximum Sales Charge
Imposed on
Purchases.......... None None None None None None None None None
Sales Charge Imposed
on Reinvested
Distributions...... None None None None None None None None None
Deferred Sales Load
Imposed on
Redemptions........ None None None None None None None None None
Exchange Fee........ None None None None None None None None None
ANNUAL OPERATING
EXPENSES (1)
(as a percentage of
average daily
net assets)
Management Fees
(after limitations)
(2)................ 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17%
Other Expenses
Administration
Fees.............. 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses
(after ex-
pense limitations)
(3).............. 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING
EXPENSES (4)......... 0.43% 0.43% 0.43% 0.43% 0.43% 0.43% 0.43% 0.43% 0.43%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Financial Square Prime Obligations Fund... $ 4 $14 $24 $54
Financial Square Money Market Fund........ $ 4 $14 $24 $54
Financial Square Money Market Plus Fund... $ 4 $14 N/A N/A
Financial Square Treasury Obligations
Fund..................................... $ 4 $14 $24 $54
Financial Square Treasury Instruments
Fund..................................... $ 4 $14 N/A N/A
Financial Square Government Fund.......... $ 4 $14 $24 $54
Financial Square Federal Fund............. $ 4 $14 N/A N/A
Financial Square Tax-Free Money Market
Fund..................................... $ 4 $14 $24 $54
Financial Square Municipal Money Market
Fund..................................... $ 4 $14 N/A N/A
</TABLE>
2
<PAGE>
- --------
(1) Based on estimated amounts for the current fiscal year for the Financial
Square Money Market Plus, Financial Square Treasury Instruments, Financial
Square Federal and Financial Square Municipal Money Market Funds.
(2) The Investment Adviser has voluntarily agreed not to impose 0.035% of its
management fee for each Fund. Without such limitation, management fees for
each Fund would be 0.205%.
(3) The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, fees payable to Service Organi-
zations, as defined herein, taxes, interest and brokerage and litigation,
indemnification and other extraordinary expenses) to the extent such ex-
penses exceed 0.01% of a Fund's average daily net assets.
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Financial Square Prime Obligations, Financial
Square Money Market, Financial Square Treasury Obligations, Financial
Square Government and Financial Square Tax-Free Money Market Funds for the
fiscal year ended December 31, 1996, would have been as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Financial Square Prime Obligations Fund................... .025% .48%
Financial Square Money Market Fund........................ .025% .48%
Financial Square Treasury Obligations Fund................ .035% .49%
Financial Square Government Fund.......................... .035% .49%
Financial Square Tax-Free Money Market Fund............... .025% .48%
</TABLE>
In addition, without the limitations described above, "Other Expenses" and
"Total Operating Expenses" of the Financial Square Money Market Plus, Finan-
cial Square Treasury Instruments, Financial Square Federal and Financial
Square Municipal Money Market Funds for the current fiscal year are estimated
to be as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Financial Square Money Market Plus Fund................... .035% .49%
Financial Square Treasury Instruments Fund................ .125% .58%
Financial Square Federal Fund............................. .095% .55%
Financial Square Municipal Money Market Fund.............. .285% .74%
</TABLE>
The information set forth in the foregoing table and hypothetical example
relates only to FST Administration Shares of the Funds. The Funds also offer
FST Shares, FST Preferred Shares and FST Service Shares. The other classes of
the Funds are subject to different fees and expenses (which affect perfor-
mance) and are entitled to different services. Information regarding any other
class of the Funds may be obtained from your sales representative or from
Goldman Sachs by calling the number on the front cover of this Prospectus.
Service Organizations may charge other fees to their customers who are the
beneficial owners of FST Administration Shares in connection with their cus-
tomers' accounts. See "Administration." Such fees, if any, may affect the re-
turn such customers realize with respect to their investments.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Fund that an investor will bear directly or
indirectly. The information on fees and expenses included in the table and the
hypothetical example above are based on each Fund's fees and expenses (actual
or estimated) and should not be considered as representative of past or future
expenses. Actual fees and expenses may be greater or less than those indicat-
ed. Moreover, while the example assumes a 5% annual return, a Fund's actual
performance will vary and may result in an actual return greater or less than
5%. See "Management--Investment Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following data with respect to a share (of the class specified) of the
Financial Square Prime Obligations, Financial Square Money Market, Financial
Square Treasury Obligations, Financial Square Government and Financial Square
Tax-Free Money Market Funds outstanding during the periods indicated have been
audited by Arthur Andersen LLP, independent auditors, as indicated in their
report incorporated by reference and attached to the Statement of Additional
Information from the annual report to shareholders for the fiscal year ended
December 31, 1996 (the "Annual Report"), and should be read in conjunction
with the financial statements and related notes incorporated by reference and
attached to the Statement of Additional Information.
Financial Square Municipal Money Market, Financial Square Money Market Plus,
Financial Square Federal and Financial Square Treasury Instruments Funds had
no operations during the fiscal year ended December 31, 1996. Accordingly,
there are no selected per share data and ratios presented for these Funds.
4
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
Prime Obligations Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET EXPENSES TO INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT AVERAGE INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $1.00 $0.0529 $ -- $0.0529 $(0.0529) $1.00 5.41% 0.18% 5.29%
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0346 -- 0.0346 (0.0346) 1.00 5.28(b) 0.28(b) 5.19(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0506 -- 0.0506 (0.0506) 1.00 5.14 0.43 5.06
1996-FST Service
shares.......... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.88 0.68 4.78
1995-FST shares. 1.00 0.0586 -- 0.0586 (0.0586) 1.00 6.02 0.18 5.86
1995-FST Admin-
istration
shares.......... 1.00 0.0559 -- 0.0559 (0.0559) 1.00 5.75 0.43 5.59
1995-FST Service
shares.......... 1.00 0.0533 -- 0.0533 (0.0533) 1.00 5.49 0.68 5.33
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(d)....... 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.38(b) 0.18(b) 4.38(b)
1994-FST Admin-
istration
shares(d)....... 1.00 0.0383 -- 0.0383 (0.0383) 1.00 4.12(b) 0.43(b) 4.18(b)
1994-FST Service
shares(d)....... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.86(b) 0.68(b) 3.98(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1.00 0.0311 0.0002 0.0313 (0.0313) 1.00 3.18 0.17 3.11
1994-FST Admin-
istration
shares.......... 1.00 0.0286 0.0002 0.0288 (0.0288) 1.00 2.92 0.42 2.86
1994-FST Service
shares.......... 1.00 0.0261 0.0002 0.0263 (0.0263) 1.00 2.66 0.67 2.61
1993-FST shares. 1.00 0.0360 0.0007 0.0367 (0.0367) 1.00 3.75 0.18 3.60
1993-FST Admin-
istration
shares(e)....... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b) 0.44(b) 2.96(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68 3.01
1992-FST shares. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18 5.72
1992-FST Service
shares(e)....... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b) 0.66(b) 4.10(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 1.00 0.0727 -- 0.0727 (0.0727) 1.00 8.27(b) 0.18(b) 8.04(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $3,901,797 0.23% 5.24%
1996-FST Pre-
ferred
shares(c)....... 127,126 0.33(b) 5.14(b)
1996-FST Admin-
istration
shares.......... 215,898 0.48 5.01
1996-FST Service
shares.......... 115,154 0.73 4.73
1995-FST shares. 3,295,791 0.22 5.82
1995-FST Admin-
istration
shares.......... 147,894 0.47 5.55
1995-FST Service
shares.......... 65,278 0.72 5.29
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(d)....... 2,774,849 0.24(b) 4.32(b)
1994-FST Admin-
istration
shares(d)....... 66,113 0.49(b) 4.12(b)
1994-FST Service
shares(d)....... 41,372 0.74(b) 3.92(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1,831,413 0.25 3.03
1994-FST Admin-
istration
shares.......... 35,250 0.50 2.78
1994-FST Service
shares.......... 14,001 0.75 2.53
1993-FST shares. 813,126 0.25 3.53
1993-FST Admin-
istration
shares(e)....... 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 336 0.75 2.94
1992-FST shares. 917,073 0.27 5.63
1992-FST Service
shares(e)....... 118 0.74(b) 4.02(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 578,495 0.28(b) 7.94(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
(e) FST Administration share and FST Service share activity commenced during
November of 1992 and January of 1992, respectively.
(f) Commencement of operations.
5
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -----------------
1996-FST shares. $1.00 $0.0533 $0.0001 $0.0534 $(0.0534) $1.00 5.45% 0.18% 5.33%
1996-FST
Preferred
shares(c)....... 1.00 0.0348 -- 0.0348 (0.0348) 1.00 5.31(b) 0.28(b) 5.23(b)
1996-FST
Administration
shares.......... 1.00 0.0504 0.0001 0.0505 (0.0505) 1.00 5.19 0.43 5.04
1996-FST Service
shares.......... 1.00 0.0484 -- 0.0484 (0.0484) 1.00 4.93 0.68 4.84
1995-FST shares. 1.00 0.0589 -- 0.0589 (0.0589) 1.00 6.07 0.15 5.89
1995-FST
Administration
shares.......... 1.00 0.0561 -- 0.0561 (0.0561) 1.00 5.80 0.40 5.61
1995-FST Service
shares(d)....... 1.00 0.0231 -- 0.0231 (0.0231) 1.00 5.41(b) 0.65(b) 4.93(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(d)....... 1.00 0.0305 -- 0.0305 (0.0305) 1.00 4.91(b) 0.11(b) 4.88(b)
1994-FST
Administration
shares(d)....... 1.00 0.0298 -- 0.0298 (0.0298) 1.00 4.65(b) 0.36(b) 4.82(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -----------------
1996-FST shares. $2,540,366 0.23% 5.28%
1996-FST
Preferred
shares(c)....... 17,510 0.33(b) 5.18(b)
1996-FST
Administration
shares.......... 165,766 0.48 4.99
1996-FST Service
shares.......... 234,376 0.73 4.79
1995-FST shares. 2,069,197 0.23 5.81
1995-FST
Administration
shares.......... 137,412 0.48 5.53
1995-FST Service
shares(d)....... 4,219 0.73(b) 4.85(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(d)....... 862,971 0.25(b) 4.74(b)
1994-FST
Administration
shares(d)....... 66,560 0.50(b) 4.68(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)FST Preferred share activity commenced on May 1, 1996.
(d)FST, FST Administration and FST Service share activity commenced May 18,
1994, May 20, 1994 and July 14, 1995, respectively.
6
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Treasury Obligations Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL RATIO OF NET INVESTMENT
VALUE AT NET GAIN (LOSS) INCOME FROM DISTRIBUTIONS NET ASSET EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS END OF PERIOD RETURN(A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $1.00 $0.0522 $0.0003 $0.0525 $(0.0524) $1.00 5.35% 0.18% 5.22%
1996-FST
Preferred
shares(c)....... 1.00 0.0342 0.0001 0.0343 (0.0343) 1.00 5.24(b) 0.28(b) 5.11(b)
1996-FST
Administration
shares.......... 1.00 0.0497 0.0002 0.0499 (0.0498) 1.00 5.09 0.43 4.97
1996-FST Service
shares.......... 1.00 0.0472 0.0002 0.0474 (0.0474) 1.00 4.83 0.68 4.72
1995-FST shares. 1.00 0.0573 0.0005 0.0578 (0.0578) 1.00 5.96 0.18 5.73
1995-FST
Administration
shares.......... 1.00 0.0547 0.0005 0.0552 (0.0552) 1.00 5.69 0.43 5.47
1995-FST Service
shares.......... 1.00 0.0521 0.0005 0.0526 (0.0526) 1.00 5.43 0.68 5.21
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1994-FST
shares(d)....... 1.00 0.0379 (0.0001) 0.0378 (0.0378) 1.00 4.23(b) 0.18(b) 4.13(b)
1994-FST
Administration
shares(d)....... 1.00 0.0388 (0.0001) 0.0387 (0.0387) 1.00 3.97(b) 0.43(b) 4.24(b)
1994-FST Service
shares(d)....... 1.00 0.0349 (0.0001) 0.0348 (0.0348) 1.00 3.71(b) 0.68(b) 3.82(b)
FOR THE YEAR ENDED JANUARY 31,
- ----------------
1994-FST shares. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11 0.17 3.01
1994-FST
Administration
shares.......... 1.00 0.0276 0.0006 0.0282 (0.0281) 1.00 2.85 0.42 2.76
1994-FST Service
shares.......... 1.00 0.0251 0.0008 0.0259 (0.0256) 1.00 2.60 0.67 2.51
1993-FST shares. 1.00 0.0342 0.0012 0.0354 (0.0355) 1.00 3.69 0.18 3.42
1993-FST
Administration
shares(e) ...... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83(b) 0.43(b) 2.83(b)
1993-FST Service
shares.......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17 0.68 2.96
1992-FST shares. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84 0.18 5.49
1992-FST Service
shares(e)....... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47(b) 0.68(b) 3.77(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 1.00 0.0600 0.0006 0.0606 (0.0605) 1.00 8.06(b) 0.21(b) 7.74(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $2,291,051 0.24% 5.16%
1996-FST
Preferred
shares(c)....... 46,637 0.34(b) 5.05(b)
1996-FST
Administration
shares.......... 536,895 0.49 4.91
1996-FST Service
shares.......... 220,560 0.74 4.66
1995-FST shares. 1,587,715 0.23 5.68
1995-FST
Administration
shares.......... 283,186 0.48 5.42
1995-FST Service
shares.......... 139,117 0.73 5.16
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1994-FST
shares(d)....... 958,196 0.25(b) 4.06(b)
1994-FST
Administration
shares(d)....... 82,124 0.50(b) 4.17(b)
1994-FST Service
shares(d)....... 81,162 0.75(b) 3.75(b)
FOR THE YEAR ENDED JANUARY 31,
- ----------------
1994-FST shares. 812,420 0.24 2.94
1994-FST
Administration
shares.......... 24,485 0.49 2.69
1994-FST Service
shares.......... 35,656 0.74 2.44
1993-FST shares. 776,181 0.26 3.34
1993-FST
Administration
shares(e) ...... 1 0.51(b) 2.75(b)
1993-FST Service
shares.......... 5,155 0.76 2.88
1992-FST shares. 413,171 0.28 5.39
1992-FST Service
shares(e)....... 3,634 0.78(b) 3.67(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 229,988 0.34(b) 7.61(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)FST Preferred share activity commenced on May 1, 1996.
(d)The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of the
funds as a series of Goldman Sachs Money Market Trust.
(e)FST Administration and FST Service share activity commenced during January
of 1993 and October of 1991, respectively.
(f)Commencement of operations.
7
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Government Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------
NET ASSET TOTAL
VALUE AT NET NET REALIZED GAIN INCOME FROM DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31,
- ------------------
1996-FST shares...... $1.00 $0.0525 $0.0001 $0.0526 $(0.0526) $1.00 5.38%
1996-FST Preferred
shares(c)............ 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26(b)
1996-FST Administra-
tion shares.......... 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12
1996-FST Service
shares............... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86
1995-FST shares...... 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00
1995-FST Administra-
tion shares.......... 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74
1995-FST Service
shares(d)............ 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(e)... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36(b)
1994-FST Administra-
tion shares(e)....... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10(b)
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1993-FST shares(d)... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b)
1993-FST Administra-
tion shares(d)....... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET RATIO OF NET
RATIO OF NET INVESTMENT NET RATIO OF INVESTMENT
EXPENSES TO INCOME TO ASSETS AT END EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET OF PERIOD AVERAGE NET AVERAGE NET
ASSETS ASSETS (IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31,
- ------------------
1996-FST shares...... 0.18% 5.25% $858,769 0.24% 5.19%
1996-FST Preferred
shares(c)............ 0.28(b) 5.14(b) 112 0.34(b) 5.08(b)
1996-FST Administra-
tion shares.......... 0.43 5.01 145,108 0.49 4.95
1996-FST Service
shares............... 0.68 4.74 223,554 0.74 4.68
1995-FST shares...... 0.18 5.81 743,884 0.24 5.75
1995-FST Administra-
tion shares.......... 0.43 5.54 82,386 0.49 5.48
1995-FST Service
shares(d)............ 0.68(b) 5.08(b) 14,508 0.74(b) 5.02(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(e)... 0.15(b) 4.64(b) 258,350 0.25(b) 4.54(b)
1994-FST Administra-
tion shares(e)....... 0.40(b) 4.67(b) 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1993-FST shares(d)... 0.08(b) 3.10(b) 44,697 0.59(b) 2.59(b)
1993-FST Administra-
tion shares(d)....... 0.35(b) 2.85(b) 14,126 0.76(b) 2.44(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) FST share, FST Administration share and FST Service share activity com-
menced April 6, 1993, September 1, 1993 and May 16, 1995, respectively.
(e) The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
8
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Tax-Free Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------
NET NET TOTAL
ASSET NET REALIZED INCOME NET ASSET RATIO OF NET
VALUE AT INVEST- GAIN ON FROM DISTRIBUTIONS VALUE AT EXPENSES TO
BEGINNING MENT INVESTMENT INVESTMENT TO END OF TOTAL AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS PERIOD RETURN (A) ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year
Ended December
31,
- --------------
1996-FST shares. $1.00 $ 0.0335 -- $ 0.0335 $(0.0335) $1.00 3.39% 0.18%
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30(b) 0.28(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13 0.43
1996-FST Service
shares.......... 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88 0.68
1995-FST shares. 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89 0.14
1995-FST Admin-
istration
shares.......... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63 0.39
1995-FST Service
shares.......... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38 0.64
For the Period
Ended December
31,
- --------------
1994-FST
shares(d)....... 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41(b) 0.07(b)
1994-FST
Administration shares(d). 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19(b) 0.32(b)
1994-FST Service
shares(d)....... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11(b) 0.57(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET NET RATIO OF NET
INVESTMENT ASSETS AT RATIO OF INVESTMENT
INCOME TO END OF EXPENSES TO INCOME TO
AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the Year
Ended December
31,
- --------------
1996-FST shares. 3.35% $440,838 0.23% 3.30%
1996-FST Pre-
ferred
shares(c)....... 3.26(b) 28,731 0.33(b) 3.21(b)
1996-FST Admin-
istration
shares.......... 3.10 51,661 0.48 3.05
1996-FST Service
shares.......... 2.85 19,855 0.73 2.80
1995-FST shares. 3.81 448,367 0.24 3.71
1995-FST Admin-
istration
shares.......... 3.54 20,939 0.49 3.44
1995-FST Service
shares.......... 3.32 19,860 0.74 3.22
For the Period
Ended December
31,
- --------------
1994-FST
shares(d)....... 3.42(b) 183,570 0.31(b) 3.18(b)
1994-FST
Administration shares(d). 3.25(b) 2,042 0.56(b) 3.01(b)
1994-FST Service
shares(d)....... 3.32(b) 2,267 0.81(b) 3.08(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) FST share, FST Administration share and FST Service share activity com-
menced July 19, 1994, August 1, 1994 and September 23, 1994, respectively.
9
<PAGE>
AN INTRODUCTION TO THE FUNDS
THE TRUST: The Trust is a no-load, open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "Invest-
ment Company Act"). Each Fund is a separate pool of assets which pursues its
investment objective through separate investment policies, as described below.
THE ADVISER: Goldman Sachs Asset Management, a separate operating division
of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds' investment ad-
viser (the "Adviser" or "GSAM").
THE DISTRIBUTOR: Goldman Sachs, which serves as the Funds' distributor and
transfer agent, is one of the largest international investment banking and
brokerage firms in the United States.
THE INVESTORS: The Funds are designed for institutional investors seeking a
high rate of return, a stable net asset value and convenient liquidation priv-
ileges. The Funds are particularly suitable for banks, corporations and other
financial institutions that seek investment of short-term funds for their own
accounts or for the accounts of their customers. Shares of the Government Fund
are intended to qualify as eligible investments for Federally chartered credit
unions pursuant to Sections 107(7), 107(8) and 107(15) of the Federal Credit
Union Act, Part 703 of the National Credit Union Administration ("NCUA") Rules
and Regulations and NCUA Letter Number 155. The Fund intends to review changes
in the applicable laws, rules and regulations governing eligible investments
for federally chartered credit unions, and to take such action as may be nec-
essary so that the investments of the Fund qualify as eligible investments un-
der the Federal Credit Union Act and the regulations thereunder. Shares of the
Government Fund, however, may or may not qualify as eligible investments for
particular state chartered credit unions. State chartered credit unions should
consult qualified legal counsel to determine whether the Government Fund is a
permissible investment under the law applicable to it.
THE FUNDS: Each Fund's securities are valued by the amortized cost method as
permitted by a rule ("Rule 2a-7") of the Securities and Exchange Commission
("SEC"). Under such rule, each Fund may invest only in securities that are de-
termined to present minimal credit risk and meet certain other criteria.
TAXABLE FUNDS: Prime Obligations, Money Market, Money Market Plus, Trea-
sury Obligations and Government Funds.
TAX ADVANTAGED FUNDS: Treasury Instruments and Federal Funds.
TAX-EXEMPT FUNDS: Tax-Free Money Market and Municipal Money Market Funds.
INVESTMENT OBJECTIVES AND POLICIES FOR TAXABLE, TAX-ADVANTAGED AND TAX-
EXEMPT FUNDS: To maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity by investing ex-
clusively in high quality money market instruments. In order to obtain a
rating from a rating organization, the Money Market Plus Fund will observe
special investment restrictions. The Treasury Instruments and Federal Funds
pursue their objectives by limiting their investments to certain U.S. Trea-
sury Obligations and U.S. Government Securities (each as defined herein),
respectively, the interest from which is generally exempt from state income
taxation. Each investor should consult his or her tax adviser to determine
whether distributions from the Treasury Instruments and Federal Funds (and
any other Fund that may hold such obligations) derived from interest on
such obligations are exempt from state income taxation in the investor's
own state.
NET ASSET VALUE: Each Fund seeks to maintain a stable net asset value of
$1.00 per share.
MAXIMUM REMAINING MATURITY OF PORTFOLIO INVESTMENTS: Thirteen months at the
time of purchase.
10
<PAGE>
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
FIRST TIER SECURITIES: Each Fund may purchase securities which are rated (or
that have been issued by an issuer that is rated with respect to a class of
short-term debt obligations, or any security within that class, comparable in
priority and quality with such securities) in the highest short-term rating
category by at least two NRSROs (as defined below), or if only one NRSRO has
assigned a rating, by that NRSRO. U.S. Government Securities as defined herein
are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Funds may purchase securities which
are not First Tier Securities but which are rated in the top two short-term
rating categories by at least two NRSROs, or if only one NRSRO has assigned a
rating, by that NRSRO. The Taxable Funds will not invest in a security which
is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, unrated securities
may be purchased if they are deemed to be of comparable quality to First Tier
Securities, or to the extent that a Fund may purchase Second Tier Securities,
comparable in quality to Second Tier Securities.
NRSROS: Nationally Recognized Statistical Rating Organizations include Stan-
dard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Lim-
ited and its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a descrip-
tion of each NRSRO's rating categories, see Appendix A to the Statement of Ad-
ditional Information.
11
<PAGE>
INVESTMENT POLICIES MATRIX
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
OBLIGATIONS OF ASSET-BACKED & FOREIGN
US US CORPORATIONS RECEIVABLES- GOVERNMENT
TREASURY GOVERNMENT BANK COMMERCIAL AND OTHER REPURCHASE BACKED OBLIGATIONS
FUND OBLIGATIONS SECURITIES OBLIGATIONS PAPER ENTITIES AGREEMENTS SECURITIES+ (US$)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prime Obligations [_] [_] [_] [_] [_] [_] [_]
U.S. banks U.S. entities
only only
- ------------------------------------------------------------------------------------------------------------------------
Money Market [_] [_] [_] [_] [_] [_] [_] [_]
Over 25% of U.S. and U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Money Market [_] [_] [_] [_] [_] [_] [_] [_]
Plus Over 25% of U.S. and U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Treasury [_] [_]
Obligations
- ------------------------------------------------------------------------------------------------------------------------
Treasury [_]
Instruments
- ------------------------------------------------------------------------------------------------------------------------
Government [_] [_] [_]
- ------------------------------------------------------------------------------------------------------------------------
Federal [_] [_] (Does not
intend to
invest)
- ------------------------------------------------------------------------------------------------------------------------
Tax-Free Money [_]
Market Tax-exempt
only
- ------------------------------------------------------------------------------------------------------------------------
Municipal Money [_]
Market Tax-exempt
only
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: See "Description of Securities and Investment Techniques" for a descrip-
tion of, and certain criteria applicable to, each of these categories of
investments.
+ To the extent required by Rule 2a-7, asset-backed and receivables backed
securities will be rated by the requisite number of NRSROs.
12
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SUMMARY OF
TAXABLE TAX-EXEMPT CREDIT INVESTMENT UNRATED TAXATION FOR
MUNICIPALS MUNICIPALS QUALITY**** COMPANIES SECURITIES DISTRIBUTIONS* MISCELLANEOUS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[_] First [_] [ ] Taxable
Tier Up to 10% of federal and
total assets state**
in other
investment
companies
- ---------------------------------------------------------------------------------------------------
[_] First [_] [_] Taxable May invest in
Tier Up to 10% of federal and obligations of
total assets state** the
in other International
investment Bank for
companies Reconstruction
and Development
- ---------------------------------------------------------------------------------------------------
[_]
First [_] [_] Taxable May invest in
Tier Up to 10% of federal and obligations of
total assets state** the
in other International
investment Bank for
companies Reconstruction
and Development
- ---------------------------------------------------------------------------------------------------
First [_] Taxable
Tier Up to 10% of federal and
total assets state**
in other
investment
companies
- ---------------------------------------------------------------------------------------------------
First [_] Taxable
Tier Up to 10% of federal and
total assets generally
in other exempt from
investment state taxation
companies
- ---------------------------------------------------------------------------------------------------
First [_]
Tier Up to 10% of Taxable
total assets federal and
in other state**
investment
companies
- ---------------------------------------------------------------------------------------------------
Under
First [_] Taxable extraordinary
Tier Up to 10% of federal and circumstances,
total assets generally may hold cash,
in other exempt from U.S. Government
investment state taxation Securities
companies subject to state
taxation or cash
equivalents
- ---------------------------------------------------------------------------------------------------
[_] First or [_] [_] Tax-exempt May (but does
At least 80% of Second Up to 10% of federal and not currently
net assets in Tier total assets taxable intend to)
Municipal in other state*** invest up to 20%
Instruments investment in AMT
(except in companies securities and
extraordinary may temporarily
circumstances) invest in the
taxable money
market
instruments
described herein
- ---------------------------------------------------------------------------------------------------
[_] First or [_] [_] Tax-exempt May invest up to
At least 80% of Second Up to 10% of federal and 100% in AMT
net assets in Tier total assets taxable securities and
Municipal in other state*** may temporarily
Instruments investment invest in the
(except in companies taxable money
extraordinary market
circumstances) instruments
described herein
- ---------------------------------------------------------------------------------------------------
</TABLE>
* See "Taxes" below for an explanation of the tax consequences summarized
in the table above.
** Taxable in many states except for distributions from U.S. Treasury obli-
gation interest income and certain U.S. Government securities interest
income.
*** Taxable except for distributions from interest on obligations of an in-
vestor's state of residence in certain states.
**** To the extent permitted by Rule 2a-7, a Fund holding a security fully
supported by a guarantee may substitute the credit quality of the guaran-
tee in determining the credit quality of the security.
13
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. TREASURY OBLIGATIONS
"U.S. Treasury Obligations" are securities issued or guaranteed by the U.S.
Treasury, payments of principal and interest on which are backed by the full
faith and credit of the U.S. Government.
U.S. GOVERNMENT SECURITIES
"U.S. Government Securities" are obligations issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities. Unlike U.S.
Treasury Obligations, securities issued or guaranteed by U.S. Government agen-
cies, authorities or instrumentalities are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Government
National Mortgage Association), (b) the right of the issuer to borrow from the
Treasury (such as securities of the Student Loan Marketing Association), (c)
the discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation), or (d) only the credit of the
issuer. No assurance can be given that the U.S. Government will provide finan-
cial support to U.S. Government agencies, authorities or instrumentalities in
the future. U.S. Government Securities may include zero coupon bonds. Such
bonds may be purchased when yields are attractive.
Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are deemed to include (a) secu-
rities for which the payment of principal and interest is backed by an irrevo-
cable letter of credit issued by the U.S. Government, its agencies, authori-
ties or instrumentalities and (b) participations in loans made to foreign gov-
ernments or their agencies that are so guaranteed. The secondary market for
certain of these participations is limited. Such participations may therefore
be regarded as illiquid.
Each Fund may also invest in separately traded principal and interest compo-
nents of securities guaranteed or issued by the U.S. Treasury if such compo-
nents are traded independently under the Separate Trading of Registered Inter-
est and Principal of Securities program ("STRIPS").
The Treasury Instruments and Federal Funds invest in U.S. Treasury Obliga-
tions and the Federal Fund may also invest in certain U.S. Government Securi-
ties the interest from which is generally exempt from state income taxation.
Securities generally eligible for this exemption include those issued by the
U.S. Treasury and those issued by certain agencies, authorities or instrumen-
talities of the U.S. Government, including the Federal Home Loan Banks, Fed-
eral Farm Credit Banks, Tennessee Valley Authority and the Student Loan Mar-
keting Association.
CUSTODIAL RECEIPTS
Each Fund (other than the Treasury Obligations, Treasury Instruments, Gov-
ernment and Federal Funds) may also acquire securities issued or guaranteed as
to principal and interest by the U.S. Government, its agencies, authorities or
instrumentalities in the form of custodial receipts that evidence ownership of
future interest payments, principal payments or both on certain notes or bonds
issued by the U.S. Government, its agencies, authorities or instrumentalities.
For certain securities law purposes, custodial receipts are not considered ob-
ligations of the U.S. Government.
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "U.S. Bank Obligations" limited to securities issued or guaranteed by U.S.
banks (including certificates of deposit, commercial
14
<PAGE>
paper, unsecured bank promissory notes and bankers' acceptances) which have
more than $1 billion in total assets at the time of purchase. Such obligations
may also include debt obligations issued by U.S. subsidiaries of such banks.
The Money Market and Money Market Plus Funds may also invest in "Foreign
Bank Obligations" limited to U.S. dollar-denominated obligations issued or
guaranteed (including fixed time deposits) by foreign banks which have more
than $1 billion in total assets at the time of purchase, U.S. branches of such
foreign banks (Yankee obligations), foreign branches of such foreign banks and
foreign branches of U.S. banks having more than $1 billion in total assets at
the time of purchase. Such bank obligations may be general obligations of the
parent bank or may be limited to the issuing branch by the terms of the spe-
cific obligations or by government regulation.
The Money Market and Money Market Plus Funds will invest more than 25% of
their total assets in bank obligations (whether foreign or domestic), includ-
ing bank commercial paper. However, if adverse economic conditions prevail in
the banking industry (such as substantial losses on loans, increases in non-
performing assets and charge-offs and declines in total deposits) the Funds
may, for defensive purposes, temporarily invest less than 25% of their total
assets in bank obligations. As a result, the Funds may be especially affected
by favorable and adverse developments in or related to the banking industry.
The activities of U.S. banks and most foreign banks are subject to comprehen-
sive regulations which, in the case of U.S. regulations, have undergone sub-
stantial changes in the past decade. The enactment of new legislation or regu-
lations, as well as changes in interpretation and enforcement of current laws,
may affect the manner of operations and profitability of domestic and foreign
banks. Significant developments in the U.S. banking industry have included de-
regulation of interest rates, increased competition from other types of finan-
cial institutions, increased acquisition activity, geographic expansion and,
during the late 1980's, an increased number of bank failures. Banks may be
particularly susceptible to certain economic factors, such as interest rate
changes and adverse developments in the market for real estate. Fiscal and
monetary policy and general economic cycles can affect the availability and
cost of funds, loan demand and asset quality and thereby impact the earnings
and financial conditions of banks. See "Foreign Government Obligations--For-
eign Risks" below.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "Commercial Paper" (including variable amount master demand notes and as-
set-backed commercial paper) which is payable in U.S. dollars and is issued or
guaranteed by U.S. corporations, U.S. commercial banks, foreign corporations
(Money Market and Money Market Plus Funds only), foreign commercial banks
(Money Market and Money Market Plus Funds only) or other entities. In addi-
tion, the Funds may invest in other short-term obligations (including short-
term funding agreements) payable in U.S. dollars and issued or guaranteed by
U.S. corporations, foreign corporations (Money Market and Money Market Plus
Funds only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "Asset-Backed and Receivables-Backed Securities" which represent participa-
tions in, or are secured by and payable from, pools of assets such as motor
vehicle installment sale contracts, installment loan contracts, leases of var-
ious types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. Such asset pools
are securitized through the use of privately-formed trusts or special purpose
corporations. Payments or distributions of principal and interest may be guar-
anteed up to certain amounts and for a certain
15
<PAGE>
time period by a letter of credit or a pool insurance policy issued by a fi-
nancial institution, or other credit enhancements may be present. To the ex-
tent consistent with its investment objectives and policies, each of the Prime
Obligations, Money Market and Money Market Plus Funds may invest in new types
of mortgage-related securities and in other asset-backed securities that may
be developed in the future.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market and Money Market Plus Funds may invest in U.S. dollar-de-
nominated obligations (limited to commercial paper and other notes) issued or
guaranteed by a foreign government or any entity located or organized in a
foreign country that maintains a short-term foreign currency rating in the
highest short-term ratings category by the requisite number of NRSROs. The
Money Market and Money Market Plus Funds may not invest more than 25% of their
total assets in the securities of any one foreign government.
FOREIGN RISKS. Investments in foreign securities and bank obligations may
present a greater degree of risk than investments in securities of domestic
issuers because of less publicly-available financial and other information,
less securities regulation, potential imposition of foreign withholding and
other taxes, war, expropriation or other adverse governmental actions. Foreign
banks and their foreign branches are not regulated by U.S. banking authori-
ties, and generally are not bound by the accounting, auditing and financial
reporting standards applicable to U.S. banks.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS. Obligations issued by or on behalf of states, terri-
tories and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia, the
interest from which is, in the opinion of bond counsel, if any, excluded from
gross income for federal income tax purposes.
TYPES OF MUNICIPAL INSTRUMENTS:
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET AND
MUNICIPAL MONEY MARKET FUNDS
-------------------------------------------------------------------------
<S> <C>
FIXED RATE NOTES AND SIMILAR In highest short-term or one of the
DEBT INSTRUMENTS two highest long-term rating
categories
-------------------------------------------------------------------------
VARIABLE AND FLOATING RATE In highest short-term or one of the
DEMAND INSTRUMENTS two highest long-term rating
categories
-------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER In highest rating category
-------------------------------------------------------------------------
MUNICIPAL BONDS In one of the two highest rating
categories
-------------------------------------------------------------------------
UNRATED NOTES, PAPER, BONDS AND Determined to be of comparable quality
OTHER INSTRUMENTS by Adviser pursuant to criteria
approved by the Trustees
</TABLE>
16
<PAGE>
As a matter of fundamental policy, at least 80% of each of the Tax-Free
Money Market and Municipal Money Market Fund's net assets will ordinarily be
invested in Municipal Instruments. Each Tax-Exempt Fund may temporarily invest
in taxable money market instruments when the Adviser believes that the market
conditions dictate a defensive posture. Investments in taxable money market
instruments will be limited to those meeting the quality standards of each
Tax-Exempt Fund. The Prime Obligations, Money Market and Money Market Plus
Funds may invest in short-term obligations issued or guaranteed by state and
municipal governments when yields on such securities are attractive compared
to other taxable investments.
MUNICIPAL NOTES AND BONDS. Municipal notes include tax anticipation notes
("TANs"), revenue anticipation notes ("RANs"), bond anticipation notes
("BANs"), tax and revenue anticipation notes ("TRANs") and construction loan
notes. Municipal bonds include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing munici-
pality and are considered the safest type of bonds. Revenue bonds are backed
by the revenues of a project or facility such as the tolls from a toll bridge.
Revenue bonds also include lease rental revenue bonds which are issued by a
state or local authority for capital projects and are secured by annual lease
payments from the state or locality sufficient to cover debt service on the
authority's obligations. Industrial development bonds (generally referred to
under current tax law as "private activity bonds") are a specific type of rev-
enue bond backed by the credit and security of a private user and therefore
have more potential risk. Municipal bonds may be issued in a variety of forms,
including commercial paper, tender option bonds and variable and floating rate
securities.
TENDER OPTION BONDS. A tender option bond is a Municipal Instrument (gener-
ally held pursuant to a custodial arrangement) having a relatively long matu-
rity 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 finan-
cial institution, pursuant to which such institution grants the security
holder the option, at periodic intervals, to tender its securities to the in-
stitution and receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees equal to the dif-
ference between the bond's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the 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 pre-
vailing short-term, tax-exempt rate. However, an institution will not be obli-
gated to accept tendered bonds in the event of certain defaults or a signifi-
cant downgrading in the credit rating assigned to the issuer of the bond. The
tender option will be taken into account in determining the maturity of the
tender option bonds and a Fund's average portfolio maturity. There is a risk
that a Fund will not be considered the owner of a tender option bond for fed-
eral income tax purposes and thus will not be entitled to treat such interest
as exempt from federal income tax.
REVENUE ANTICIPATION WARRANTS. Revenue Anticipation Warrants ("RAWs") are
issued in anticipation of the issuer's receipt of revenues and present the
risk that such revenues will be insufficient to satisfy the issuer's payment
obligations. The entire amount of principal and interest on RAWs is due at ma-
turity. RAWs, including those with a maturity of more than 397 days, may also
be repackaged as instruments which include a demand feature that permits the
holder to sell the RAWs to a bank or other financial institution at a purchase
price equal to par plus accrued interest on each interest rate reset date.
FLOATING AND VARIABLE RATE OBLIGATIONS. The value of floating and variable
rate obligations generally is more stable than that of fixed rate obligations
in response to changes in interest rate levels. Variable and floating rate ob-
ligations usually have demand features that permit the Funds to sell them at
par value plus accrued interest
17
<PAGE>
upon short notice. The issuers or financial intermediaries providing demand
features may support their ability to purchase the obligations by obtaining
credit with liquidity supports. These may include lines of credit, which are
conditional commitments to lend and letters of credit, which will ordinarily
be irrevocable, both of which may be issued by domestic banks or foreign banks
which have a branch, agency or subsidiary in the United States. When consider-
ing whether an obligation meets a Fund's quality standards, the Fund will, to
the extent permitted by Rule 2a-7, look to the creditworthiness of the party
providing unconditional demand features or other unconditional obligations to
support the credit of the issuer of the security. A Fund may consider the ma-
turity of a variable or floating rate Municipal Instrument to be shorter than
its ultimate stated maturity if the Fund has the right to demand prepayment of
its principal at specified intervals prior to the security's ultimate stated
maturity, subject to the conditions for using amortized cost valuation under
the Investment Company Act. A Fund may purchase such variable or floating rate
obligations from the issuers or may purchase certificates of participation, a
type of floating or variable rate obligation, which are interests in a pool of
debt obligations held by a bank or other financial institution.
INDUSTRIAL DEVELOPMENT BONDS. The Funds (other than the Treasury Obliga-
tions, Treasury Instruments, Government and Federal Funds) may invest in in-
dustrial development bonds (generally referred to under current tax law as
"private activity bonds"), the interest from which would be an item of tax
preference when distributed as "exempt-interest dividends" to shareholders un-
der the federal alternative minimum tax. See "Taxes" and "Distributions." Mu-
nicipal Fund may invest up to 100% of its assets in private activity bonds.
Tax-Free Fund does not currently intend to invest in such bonds. If Tax-Free
Fund's policy not to invest in private activity bonds should change in the fu-
ture, shareholders would be notified and such investments would not exceed 20%
of Tax-Free Fund's net assets.
OTHER POLICIES. Ordinarily the Tax-Exempt Funds expect that 100% of their
portfolio securities will be Municipal Instruments. However, the Funds may
hold cash or invest in short-term taxable securities as set forth above. Such
Funds may invest 25% or more of the value of their respective total assets in
Municipal Instruments which are related in such a way that an economic, busi-
ness or political development or change affecting one Municipal Instrument
would also affect the other Municipal Instruments. For example, the Tax-Exempt
Funds may invest all of their respective assets in (a) Municipal Instruments
the interest on which is paid solely from revenues from similar projects such
as hospitals, electric utility systems, multi-family housing, nursing homes,
commercial facilities (including hotels), steel companies or life care facili-
ties, (b) Municipal Instruments whose issuers are in the same state or (c) in-
dustrial development obligations. Concentration of a Fund's investments in
these Municipal Instruments will subject the Fund, to a greater extent than if
such investment was more limited, to the risks of adverse economic, business
or political developments affecting any such state, industry or other area of
concentration.
Each Fund (other than the Treasury Obligations, Treasury Instruments, Gov-
ernment and Federal Funds) may purchase Municipal Instruments which are backed
by letters of credit, which will ordinarily be irrevocable, issued by domestic
banks or foreign banks (excluding Prime Obligations Fund) which have a branch,
agency or subsidiary in the United States. In addition, these Funds may ac-
quire securities in the form of custodial receipts which evidence ownership of
future interest payments, principal payments or both on obligations of certain
state and local governments and authorities.
In order to enhance the liquidity, stability, or quality of a Municipal In-
strument, each Fund (other than the Treasury Obligations, Treasury Instru-
ments, Government and Federal Funds) may acquire the right to sell the secu-
rity to another party at a guaranteed price and date.
18
<PAGE>
REPURCHASE AGREEMENTS
Each Fund (other than the Treasury Instruments Fund) may only enter into re-
purchase agreements with primary dealers in U.S. Government Securities. A re-
purchase agreement is an agreement under which a Fund purchases securities and
the seller agrees to repurchase the securities within a particular time at a
specified price. Such price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate
on the purchased security. A Fund's custodian or sub-custodian will maintain
custody of the purchased securities for the duration of the agreement. The
value of the purchased securities, including accrued interest, will at all
times equal or exceed the value of the repurchase agreement. In the event of
bankruptcy of the seller or failure of the seller to repurchase the securities
as agreed, a Fund could suffer losses, including loss of interest on or prin-
cipal of the security and costs associated with delay and enforcement of the
repurchase agreement. In evaluating whether to enter into a repurchase agree-
ment, the Adviser will carefully consider the creditworthiness of the seller
pursuant to procedures reviewed and approved by the Trustees. Distributions of
the income from repurchase agreements entered into by a Fund will be taxable
to its shareholders. In addition, each Fund, together with other registered
investment companies having management agreements with the Adviser or any of
its affiliates, may 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.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Fund may purchase when-issued securities and make contracts to purchase
or sell securities for a fixed price at a future date beyond customary settle-
ment time. A Fund is required to hold and maintain in a segregated account
with the Fund's custodian or sub-custodian until three days prior to settle-
ment date, cash or liquid assets in an amount sufficient to meet the purchase
price. Alternatively, a Fund may enter into offsetting contracts for the for-
ward sale of other securities that it owns. Securities purchased or sold on a
when-issued or forward commitment basis involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date or if the
value of the security to be sold increases prior to the settlement date. Al-
though a Fund would generally purchase securities on a when-issued or forward
commitment basis with the intention of acquiring securities for its portfolio,
the Fund may dispose of a when-issued security or forward commitment prior to
settlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The Adviser will determine, under guidelines established by the Trustees,
whether securities issued by other money market investment companies present
minimal credit risks. The amount of each Fund's investments in securities of
other investment companies will be subject to the limitations on such invest-
ments prescribed by the Investment Company Act. These limits include a prohi-
bition on any Fund acquiring more than 3% of the voting shares of any other
investment company and a prohibition on investing more than 5% of a Fund's to-
tal assets in securities of any one investment company or more than 10% of its
total assets in securities of all investment companies. Each Fund will indi-
rectly bear its proportionate share of any management fees and other expenses
paid by such other investment companies. Such other investment companies will
have investment objectives, policies and restrictions substantially similar to
those of the acquiring Fund and will be subject to substantially the same
risks.
INVESTMENT LIMITATIONS
TAXABLE AND TAX-EXEMPT FUNDS. Each Fund will comply with the conditions for
using amortized cost valuation set forth in Rule 2a-7 under the Investment
Company Act including, but not limited to, those condi-
19
<PAGE>
tions relating to maturity, diversification and credit quality. These operat-
ing policies may be more restrictive than the fundamental policies set forth
in the Statement of Additional Information.
INVESTMENT RESTRICTIONS. Each Fund is subject to certain investment restric-
tions that are described in detail under "Investment Restrictions" in the
Statement of Additional Information. Fundamental investment restrictions of a
Fund cannot be changed without approval of a majority of the outstanding
shares of that Fund. Treasury Obligations Fund's policy of limiting its in-
vestments to U.S. Treasury Obligations and related repurchase agreements is
also fundamental. All investment objectives and policies not specifically des-
ignated as fundamental are non-fundamental and may be changed without share-
holder approval.
RESTRICTED AND OTHER ILLIQUID SECURITIES. Each Fund may purchase securities
that are not registered ("restricted securities") under the Securities Act of
1933 ("1933 Act"), but can be offered and sold to "qualified institutional
buyers" under Rule 144A under the 1933 Act. However, a Fund will not invest
more than 10% of its net assets in illiquid investments, which include fixed
time deposits maturing in more than seven days and restricted securities.
Restricted securities (including commercial paper issued pursuant to Section
4(2) of the 1933 Act) which the Board of Trustees has determined are liquid,
based upon a continuing review of the trading markets for the specific re-
stricted security, will not be deemed to be illiquid investments for purposes
of this restriction. The Board of Trustees may adopt guidelines and delegate
to the Adviser the daily function of determining and monitoring the liquidity
of restricted securities. The Board, however, will retain sufficient oversight
and be ultimately responsible for the determinations. Since it is not possible
to predict with assurance that the market for restricted securities eligible
for resale under Rule 144A will continue to be liquid, the Adviser will care-
fully monitor each Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in a Fund to the extent that qualified institutional buy-
ers become for a time uninterested in purchasing these restricted securities.
In addition, each Fund may not invest in repurchase agreements maturing in
more than seven days and securities which are not readily marketable if, as a
result thereof, more than 10% of the net assets of that Fund (taken at market
value) would be invested in such investments. Certain repurchase agreements
which mature in more than seven days can be liquidated before the nominal
fixed term on seven days or less notice. Such repurchase agreements will be
regarded as liquid instruments.
MANAGEMENT
THE ADVISER
GSAM, One New York Plaza, New York, New York 10004, a separate operating di-
vision of Goldman, Sachs & Co., acts as investment adviser to the Funds.
Goldman Sachs registered as an investment adviser in 1981. As of March 24,
1997, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $104.9 billion in assets.
As of November 29, 1996, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $112 billion and partners' capital of $2 billion and
ranked as one of the largest international investment banking and brokerage
firms in the United States. Founded in 1869, Goldman Sachs is a major invest-
ment banking and brokerage firm providing a broad range of financing and in-
vestment services both in the United States and abroad.
20
<PAGE>
Pursuant to an SEC order, each Taxable and Tax-Advantaged Fund may enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
Under the Management Agreement, GSAM continually manages each Fund, includ-
ing the purchase, retention and disposition of its securities and other as-
sets. In addition, GSAM administers each Fund's business affairs and performs
various shareholder servicing functions to the extent not provided by other
organizations. The management of each Fund is subject to the supervision of
the Trustees and each Fund's investment policies. For these services, the
Trust, on behalf of each Fund, pays GSAM a monthly fee at an annual rate of
each Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
CONTRACTUAL DECEMBER 31,
RATE 1996
----------- ------------
<S> <C> <C>
Financial Square Prime Obligations Fund................ .205% .17%
Financial Square Money Market Fund..................... .205% .17%
Financial Square Money Market Plus Fund................ .205% N/A
Financial Square Treasury Obligations Fund............. .205% .17%
Financial Square Treasury Instruments Fund............. .205% N/A
Financial Square Government Fund....................... .205% .17%
Financial Square Federal Fund.......................... .205% N/A
Financial Square Tax Free Money Market Fund............ .205% .17%
Financial Square Municipal Money Market Fund........... .205% N/A
</TABLE>
A Management Agreement combining both advisory and administrative services
was adopted effective April 30, 1997. The contractual rate set forth in the
table is the rate payable under the Management Agreement and is identical to
the aggregate advisory and administration fees payable by each Fund under the
previously separate investment advisory and administration agreements. For the
fiscal year ended December 31, 1996, the annual rate expressed is the combined
advisory and administration fees paid (after voluntary fee limitations). The
difference, if any, between the stated fees and the actual fees paid by the
Funds reflects the fact that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled.
GSAM has agreed not to impose a portion of its management fee and/or to re-
duce or otherwise limit the total operating expenses of each Fund (excluding
fees payable to Service Organizations, as defined herein, taxes, interest,
brokerage and litigation, indemnification and other extraordinary expenses).
GSAM has no current intention to but may in the future discontinue or modify
any of such reductions or limitations at its discretion.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of shares of each Fund pursuant to a Distribution Agreement with the
Trust. The Distributor will assist in the sale of shares of each Fund upon the
terms described herein. Goldman Sachs also serves as the Transfer Agent of
each Fund.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold shares of the Funds in order to increase the assets of the Funds. In-
creasing the Fund's assets may enhance investment flexibility and diversifica-
tion. Goldman Sachs reserves the right to redeem at any time some or all of
the Fund shares acquired for its own account. Goldman Sachs will consider the
effect of redemptions on the Funds and other shareholders in deciding whether
to redeem its shares.
TAXES
Each Fund is treated as a separate entity for federal income tax purposes.
The Treasury Instruments and Federal Funds intend to elect and each other Fund
has elected to be treated as a regulated investment company
21
<PAGE>
and each Fund intends to continue to qualify for such treatment under
Subchapter M of the Internal Revenue Code of 1986 (the "Code") for each tax-
able year. To qualify as such, each Fund must satisfy certain requirements re-
lating to the sources of its income, diversification of its assets and distri-
bution of its income to shareholders. As a regulated investment company, each
Fund will not be subject to federal income or excise tax on any net investment
income and net realized capital gains that are distributed to its shareholders
in accordance with certain timing requirements of the Code.
Dividends paid by a Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss and taxable original
issue discount or market discount income will be taxable to shareholders as
ordinary income, except for any "exempt-interest dividends" paid by the Tax-
Exempt Funds, as described below. Dividends paid by a Fund from the excess of
net long-term capital gain over net short-term capital loss will be taxable as
long-term capital gain regardless of how long the shareholders have held their
shares. These tax consequences will apply to distributions of any Fund
regardless of whether distributions are received in cash or reinvested in
shares. Certain distributions paid by the Funds in January of a given year
will be taxable to shareholders as if received on December 31 of the year in
which they are declared. Shareholders will be informed annually about the
amount and character of distributions received from the Funds for federal
income tax purposes, including any distributions that may constitute a return
of capital or any distributions of Municipal Fund that may constitute a tax
preference item under the federal alternative minimum tax.
The Tax-Exempt Funds intend to satisfy certain requirements of the Code for
the payment of "exempt-interest dividends" not included in shareholders' fed-
eral gross income. Dividends paid by these Funds from interest on tax-exempt
obligations and properly designated by the Funds as exempt-interest dividends,
including dividends attributable to exempt-interest dividends received by a
Fund from other regulated investment companies, will generally be exempt from
federal income tax, although a portion of such dividends may be subject to the
federal alternative minimum tax. Exempt-interest dividends will be considered
in computing the corporate federal alternative minimum tax, and the extent, if
any, to which social security or railroad retirement benefits are taxable.
Persons who are "substantial users" of facilities financed by certain indus-
trial development or private activity bonds should consult their own tax ad-
visers before purchasing shares of these Funds. Interest incurred to purchase
or carry shares of these Funds will not be deductible for federal income tax
purposes to the extent related to exempt-interest dividends paid by the Funds.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on taxable distributions if they fail
to furnish their correct taxpayer identification number and certain certifica-
tions required by the Internal Revenue Service or if they are otherwise sub-
ject 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 ordi-
nary dividends from the Funds.
If a Fund invests in foreign securities, it may be subject to foreign with-
holding or other foreign taxes on income earned on such securities and is ex-
pected to be unable to pass such taxes through to shareholders, who therefore
are not expected to include such taxes in income or be entitled to claim for-
eign tax credits or deductions with respect to such taxes.
In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on payments received from a Fund. A state income (and possi-
bly local income and/or intangible property) tax exemption is generally avail-
able to the extent a Fund's distributions are derived from interest on (or, in
the case of intangible property taxes, the value of its assets is attributable
to) certain U.S. Government obligations and/or tax-exempt
22
<PAGE>
municipal obligations issued by or on behalf of the particular state or a po-
litical 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 concerning these matters.
NET ASSET VALUE
The net asset value of each Fund (other than the Government, Treasury Obli-
gations and Money Market Plus Funds) is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. New York time) on
each Business Day. The net asset value of Government, Treasury Obligations and
Money Market Plus Funds is determined as of 5:00 p.m. New York time on each
Business Day. Net asset value per share for each class of shares of each Fund
is calculated by determining the amount of net assets attributable to each
class of shares and dividing by the number of shares for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities markets close early, the Treasury
Instruments and Federal Funds will cease, and each other Fund reserves the
right to cease, accepting purchase and redemption orders for same Business Day
credit at the time PSA recommends that the securities markets close. On days
any Fund closes early, purchase and redemption orders received after the PSA
recommended closing time will be credited to the next Business Day. In addi-
tion, each Fund reserves the right to advance the time by which purchase and
redemption orders must be received for same Business Day credit as permitted
by the SEC.
Each Fund seeks to maintain a net asset value of $1.00 per share. In this
connection, each Fund values its portfolio securities on the basis of amor-
tized cost. The amortized cost method values a security at its cost on the
date of purchase and thereafter assumes a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. For a more complete description
of the amortized cost valuation method and its effect on existing and prospec-
tive shareholders, see the Statement of Additional Information. There can be
no assurance that a Fund will be able at all times to maintain a net asset
value per share of $1.00.
YIELD INFORMATION
From time to time, each Fund may advertise its yield, effective yield and
average annual total return. Average annual total return is determined by com-
puting the average annual percentage change in value of $1,000 invested at the
maximum public offering price for a specified period of at least one year, as-
suming reinvestment of all dividends and distributions at net asset value. The
total return calculation assumes a complete redemption of the investment at
the end of the relevant period. Each Fund may furnish total return calcula-
tions based on a cumulative, average, year-by-year or other basis for various
specified periods by means of quotations, charts, graphs or schedules. The
yield of a Fund refers to the income generated by an investment in that Fund
over a seven-day period (which period will be stated in the advertisement).
This income is then annualized; that is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
23
<PAGE>
The Tax-Exempt Funds and the Federal and Treasury Instruments Funds may each
also quote tax-equivalent yield. Each Fund's tax-equivalent yield is calcu-
lated by determining the rate of return that would have to be achieved on a
fully taxable investment to produce the after-tax equivalent of the Fund's
yield, assuming certain tax brackets for a shareholder.
Investors should note that the investment results of a Fund are based on
historical performance and will fluctuate over time. Any presentation of a
Fund's total return, yield, effective yield or tax-equivalent yield for any
prior period should not be considered a representation of what an investment
may earn or what a Fund's total return, yield, effective yield or tax-equiva-
lent yield may be in any future period. In addition to the above, each Fund
may from time to time advertise its performance relative to certain averages,
performance rankings, indices, other information prepared by recognized mutual
fund statistical services and investments for which reliable performance data
is available.
Total return, yield, effective yield and tax-equivalent yield will be calcu-
lated separately for each class of shares in existence. Because each such
class of shares is subject to different expenses, the total return and net
yield of such classes of a Fund for the same period may differ. See "Organiza-
tion and Shares of the Trust" below.
ORGANIZATION AND SHARES OF THE TRUST
Each Fund is a series of the Goldman Sachs Trust, which was formed under the
laws of the State of Delaware on January 28, 1997. The Funds were formerly se-
ries of Goldman Sachs Money Market Trust, a Massachusetts business trust, and
were reorganized into the Trust as of April 30, 1997. The Trustees have au-
thority under the Trust's Declaration of Trust to create and classify shares
of beneficial interest in separate series, without further action by share-
holders. Additional series may be added in the future. The Trustees also have
authority to classify or reclassify any series or portfolio of shares into one
or more classes. (Institutions that provide services to holders of FST Pre-
ferred Shares, FST Administration Shares or FST Service Shares are referred to
in this Prospectus as "Service Organizations").
When issued, shares are fully paid and nonassessable. In the event of liqui-
dation, shareholders are entitled to share pro rata in the net assets of the
applicable Fund available for distribution to such shareholders. All shares
are freely transferable and have no preemptive, subscription or conversion
rights. Shareholders are entitled to one vote per share, provided that, at the
option of the Trustees, shareholders will be entitled to a number of votes
based upon the net asset values represented by their shares.
Shares of a Fund will be voted seperately by Fund with respect to matters
pertaining to that Fund except for the election of Trustees and ratification
of independent accountants. For example, shareholders of each Fund are re-
quired to approve the adoption of any management agreement relating to that
Fund and any changes in fundamental investment restrictions or policies of
such Fund. Approval by the shareholders of one Fund is effective only as to
that Fund.
As of April 1, 1997, Harris Trust & Savings Bank, 200 W. Monroe St. Fl 12,
Chicago, IL 60606, owned of record 40.64% of the outstanding shares of Trea-
sury Instruments Fund.
The Trust does not intend to hold annual meetings of shareholders. However,
pursuant to the Trust's By-Laws, the recordholders of at least 10% of the
shares outstanding and entitled to vote at a special meeting may require the
Trust to hold such special meeting of shareholders for any purpose, and
recordholders may, under certain circumstances, as permitted by the Investment
Company Act, communicate with other shareholders in connection with requiring
a special meeting of shareholders. The Trustees will call a special meeting of
shareholders 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.
24
<PAGE>
ADMINISTRATION
Each Fund has adopted an Administration Plan with respect to the FST Admin-
istration Shares which authorizes it to compensate certain institutions for
providing account administration services to their customers who are benefi-
cial owners of such Shares (each a "Service Organization"). Each Fund will en-
ter into agreements with Service Organizations which purchase FST Administra-
tion Shares on behalf of their customers ("Service Agreements"). The Service
Agreements will provide for compensation to the Service Organization in an
amount up to .25% (on an annualized basis) of the average daily net asset
value of the FST Administration Shares of that Fund attributable to or held in
the name of the Service Organization for its customers. The services provided
by a Service Organization may include acting, directly or through an agent, as
the sole shareholder of record, maintaining account records for its customers,
and processing orders to purchase, redeem and exchange FST Administration
Shares for its customers.
For the fiscal year ended December 31, 1996, the Trust, on behalf of the
Prime Obligations Fund, Money Market Fund, Treasury Obligations Fund, Govern-
ment Fund and Tax-Free Fund paid Service Organizations fees at the annual rate
of .25% of each Fund's average daily net assets attributable to FST Adminis-
tration Shares.
Holders of FST Administration Shares of a Fund will bear all expenses and
fees paid to Service Organizations with respect to such Shares as well as any
other expenses which are directly attributable to such Shares.
Service Organizations may charge other fees to their customers who are the
beneficial owners of FST Administration Shares in connection with their cus-
tomer accounts. These fees would be in addition to any amounts received by the
Service Organization under a Service Agreement and may affect an investor's
return with respect to an investment in a Fund.
All inquiries of beneficial owners of FST Administration Shares of the Funds
should be directed to such owners' Service Organization.
PURCHASE OF SHARES
It is expected that all direct purchasers of FST Administration Shares will
be Service Organizations or their nominees, which may purchase FST Administra-
tion Shares of the Funds through Goldman Sachs. Customers of Service Organiza-
tions may invest in such shares only through their Service Organizations.
As set forth below, FST Administration Shares of the Funds may be purchased
on any Business Day at the net asset value next determined after receipt from
the Service Organization of both the purchase order and the purchase amount in
federal funds. Purchase orders may be made by telephoning Goldman Sachs at
800-621-2550 or by a written request addressed to Goldman Sachs, Attention:
Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois
60606. It is strongly recommended that payment be effected by wiring federal
funds to The Northern Trust Company ("Northern"), Chicago, Illinois, as the
sub-custodian for State Street Bank and Trust Company ("State Street").
Purchases of FST Administration Shares may also be made by a Service Organi-
zation by delivering a Federal Reserve draft or check (except that a third
party check will not be accepted) payable only to the appropriate Fund and
drawn on a U.S. bank to Goldman Sachs, Attention: Shareholder Services,
Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois 60606. It is expected
that Federal Reserve drafts will ordinarily be converted to federal funds on
the day of receipt and that checks will be converted to federal funds within
two Business Days after receipt. FST Administration Shares purchased by check
may not be redeemed until the check has cleared, as described under "Redemp-
tion of Shares."
25
<PAGE>
Purchases of shares of any Fund may also be made through an Automated Clear-
ing House ("ACH") transfer to Goldman Sachs Trust c/o Northern, as
subcustodian for State Street. Purchase orders are effected at the net asset
value next determined after receipt of both the purchase order and the pur-
chase amount in Federal Funds. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer.
FST Administration Shares of each Fund are deemed to have been purchased
when an order becomes effective and are entitled to dividends on FST Adminis-
tration Shares purchased as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED FROM A SERVICE
ORGANIZATION BY GOLDMAN SACHS DIVIDENDS BEGIN
----------------------------------- ---------------
<C> <S> <C>
(1) In the case of the Taxable and Tax-
Advantaged Funds (except for
Government, Treasury Obligations and
Money Market Plus Funds)
By: 3:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 3:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
(2) In the case of the Government,
Treasury Obligations and Money Market
Plus Funds
By: 5:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 5:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
(3) In the case of the Municipal Fund
By: 1:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 1:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
(4) In the case of the Tax-Free Fund
By: 2:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 2:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
</TABLE>
The Service Organizations are responsible for timely transmittal of pur-
chase orders to Goldman Sachs and federal funds to Northern. In order to fa-
cilitate timely transmittal, the Service Organizations have established times
by which purchase orders and Federal Funds must be received by them.
A Business Day means any day on which the New York Stock Exchange is open,
except for days on which Chicago, Boston or New York banks are closed for lo-
cal holidays.
FST Administration Shares of a Fund are purchased at the net asset value per
share without the imposition of a sales charge. Goldman Sachs, as each Fund's
transfer agent, will maintain a complete record of transactions and FST Admin-
istration Shares held in each record holder's account. The Trust and Goldman
Sachs each reserves the right to reject any purchase order for any reason.
26
<PAGE>
MINIMUM INVESTMENT AND OTHER INFORMATION
The minimum initial investment requirement is $10 million, which may be al-
located among the Funds. The Trust and Goldman Sachs each reserves the right
to waive the minimum investment requirement. A Service Organization may impose
a minimum amount for initial and subsequent investments in FST Administration
Shares of the Funds, and may establish other requirements such as a minimum
account balance. A Service Organization may effect redemptions of noncomplying
accounts, and may impose a charge for any special services rendered to its
customers. Customers should contact their Service Organizations for further
information concerning such requirements and charges. A Service Organization
may purchase FST Administration Shares in connection with sweep account pro-
grams.
SUBSEQUENT INVESTMENTS
There is no minimum amount required for subsequent investments. Orders for
the purchase of additional FST Administration Shares should be accompanied by
information identifying the account and the Fund in which FST Administration
Shares are to be purchased.
REPORTS TO SHAREHOLDERS
The Trust will issue an annual report containing audited financial state-
ments and a semi-annual report to record holders of FST Administration Shares
of each Fund, including Service Organizations who hold such Shares for the
benefit of their customers. Upon request, a printed confirmation for each
transaction will be provided by Goldman Sachs. Any dividends and distributions
paid by the Funds are also reflected in regular statements issued by Goldman
Sachs to shareholders of record. Service Organizations will be responsible for
providing similar services to their own customers who are the beneficial own-
ers of such Shares.
DISTRIBUTIONS
All or substantially all of each Fund's net investment income will be de-
clared daily (as of 4:00 p.m. New York time for each Fund other than the Gov-
ernment, Treasury Obligations and Money Market Plus Funds and as of 5:00 p.m.
New York time for the Government, Treasury Obligations and Money Market Plus
Funds) as a dividend and distributed to Service Organizations monthly. Distri-
butions will be made in additional FST Administration Shares of the same Fund
or, at the election of a Service Organization, in cash. The election to rein-
vest dividends and distributions or receive them in cash may be changed by a
Service Organization at any time upon written notice to Goldman Sachs. If no
election is made, all dividends and capital gain distributions will be rein-
vested. Dividends will be reinvested as of the last calendar day of each
month. Cash distributions will be paid on or about the first business day of
each month. Net short-term capital gains, if any, will be distributed in ac-
cordance with the requirements of the Code and may be reflected in the Fund's
daily distributions. Each Fund may distribute at least annually its long-term
capital gains, if any, after reduction by available capital losses. In order
to avoid excessive fluctuations in the amount of monthly capital gains distri-
butions, a portion of any net capital gains realized on the disposition of se-
curities during the months of November and December may be distributed during
the subsequent calendar year. Although realized gains and losses on the assets
of a Fund are reflected in the net asset value of the Fund, they are not ex-
pected to be of an amount which would affect the Fund's net asset value of
$1.00 per share.
The income declared as a dividend for the Treasury Obligations, Government
and Money Market Plus Funds is based on estimates of net investment income for
the Fund. Actual income may differ from estimates, and differences, if any,
will be included in the calculation of subsequent dividends.
27
<PAGE>
A Fund's net investment income consists of the excess of (i) accrued inter-
est or discount (including both original issue and market discount on taxable
securities) on portfolio securities, and (ii) any income of the Fund from
sources other than capital gains over (iii) the amortization of market premium
on all portfolio securities and (iv) the estimated expenses of the Fund, in-
cluding a proportionate share of the general expenses of the Trust.
EXCHANGES
FST Administration Shares of each Fund may be exchanged by Service Organiza-
tions for shares of the corresponding class of any Fund or Portfolio of
Goldman Sachs Trust at the net asset value next determined either by writing
to Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower, Chicago, Illinois 60606 or, if previously elected in the Account
Information Form, by calling Goldman Sachs at 800-621-2550. All telephone ex-
changes must be registered in the same name(s) and with the same address as
are registered in the Fund from which the exchange is being made. It may be
difficult to implement the telephone exchange privilege in times of drastic
economic or market changes. In an effort to prevent unauthorized or fraudulent
exchange requests by telephone, Goldman Sachs employs reasonable procedures as
set forth under "Redemption of Shares" to confirm that such instructions are
genuine. Exchanges are available only in states where the exchange may legally
be made. The exchange privilege may be modified or withdrawn at any time on 60
days' written notice.
REDEMPTION OF SHARES
HOW TO REDEEM
Customers of Service Organizations may redeem FST Administration Shares of a
Fund through their respective Service Organizations. The Service Organizations
are responsible for the transmittal of redemption requests by their customers
to Goldman Sachs. In order to facilitate timely transmittal of redemption re-
quests, Service Organizations have established procedures by which redemption
requests must be made and times by which redemption requests must be received
by them. Additional documentation may be required when deemed appropriate by a
Service Organization.
A Service Organization may redeem such Shares without charge upon request on
any Business Day at the net asset value next determined after receipt by
Goldman Sachs of the redemption request. Redemption requests may be made by
telephoning Goldman Sachs at 800-621-2550 or by a written request addressed to
Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower, Chicago, Illinois 60606. A Service Organization may request re-
demptions by telephone only if the optional telephone redemption privilege has
been elected on the Account Information Form. It may be difficult to implement
redemptions by telephone in times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than
that designated on the Account Information Form must be in writing and signed
by an authorized person designated on the Account Information Form. Any such
written request is also confirmed by telephone with both the requesting party
and the designated bank account to verify instructions. Other procedures may
be implemented from time to time. If reasonable procedures are not implement-
ed, the Trust may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, neither the Trust nor Goldman Sachs will be
responsible for the authenticity of redemption instructions received by tele-
phone. A redemption may also be made with respect to certain Funds by means of
the check redemption privilege described in the Statement of Additional Infor-
mation. Goldman Sachs reserves the right to redeem accounts with balances be-
low $500.
28
<PAGE>
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs by the Service
Organization. The payment of redemption proceeds for FST Administration Shares
recently purchased by check will be delayed for up to 15 days until the check
has cleared.
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
record holder of FST Administration Shares.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST
RECEIVED FROM REDEMPTION
SERVICE ORGANIZATION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
-------------------- ---------- ---------
<C> <S> <C>
(1) In the case of the Taxable and Tax-Advantaged Funds (except for
Government, Treasury Obligations and Money Market Plus Funds)
By:3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- -----------------------------------------------------------------------------
After:3:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- -----------------------------------------------------------------------------
(2) In the case of the Government, Treasury Obligations and Money Market
Plus Funds
By:5:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- -----------------------------------------------------------------------------
After:5:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- -----------------------------------------------------------------------------
(3) In the case of the Municipal Fund
By:12:00 noon--N.Y. time Wired Same Business Day Not earned on Day
request is received
- -----------------------------------------------------------------------------
After:12:00 noon--N.Y. time Wired Next Business Day Earned on Day
request is received
- -----------------------------------------------------------------------------
(4) In the case of the Tax-Free Fund
By:1:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- -----------------------------------------------------------------------------
After:1:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- -----------------------------------------------------------------------------
</TABLE>
The Funds will arrange for the proceeds of redemptions effected by any means
to be wired as federal funds to the Service Organization's bank account desig-
nated in the Account Information Form. Redemption proceeds
29
<PAGE>
will normally be wired as set forth above, but may be paid up to three Busi-
ness Days after receipt of the Service Organization's properly executed re-
demption request. For example, payment may be delayed if the Federal Reserve
Bank is closed on the day redemption proceeds would ordinarily be wired. After
a wire has been initiated by Goldman Sachs, neither Goldman Sachs nor the
Trust assumes any further responsibility for the performance of intermediaries
or the FST Administration Shareholder's Service Organization in the transfer
process. If a problem with such performance arises, the FST Administration
Shareholder should deal directly with such intermediaries or Service
Organization.
OTHER REDEMPTION INFORMATION
A minimum account balance of $10 million is required to remain a FST Admin-
istration Shareholder. The Funds may redeem all of the FST Administration
Shares of any FST Administration Shareholder whose account has a net asset
value which is less than the minimum described above. The Trust will give
sixty (60) days' prior written notice to such Shareholders whose FST
Administration Shares are being redeemed to allow them to purchase sufficient
additional FST Administration Shares to avoid such redemption.
----------------
30
<PAGE>
APPENDIX
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Fund with your correct Social Secu-
rity 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 and to sign your name in 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, ex-
changes and other payments relating to your account.
Any tax withheld may be credited against taxes owed on your federal income
tax return.
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 Reve-
nue Service (IRS). Backup withholding could apply to payments relating to your
account prior to the Fund's receipt of your TIN.
Special rules apply for certain entities. For example, for an account estab-
lished under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor
should be furnished.
If you have been notified by the IRS that you are subject to backup with-
holding 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 with-
holding should cease, you must cross out item (2) in the certification section
of the Account Information Form.
If you are an exempt recipient, you should furnish your TIN and certify your
exemption by signing the Certification section and writing "exempt" after your
signature. Exempt recipients include: corporations, tax-exempt pension plans
and IRA's, governmental agencies, financial institutions, registered securi-
ties and commodities dealers and others.
If you are a nonresident alien or foreign entity, you must provide a com-
pleted Form W-8 to the Fund in order to avoid backup withholding on certain
payments. Other payments to you may be subject to non-resident alien withhold-
ing of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FST ADMINISTRATION SHARES
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE: 800-621-2550
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder and Fund Expenses.............................................. 2
Financial Highlights....................................................... 4
An Introduction to the Funds............................................... 10
Investment Policies Matrix................................................. 12
Description of Securities and Investment Techniques........................ 14
Investment Limitations..................................................... 20
Management................................................................. 21
Taxes...................................................................... 22
Net Asset Value............................................................ 23
Yield Information.......................................................... 23
Organization and Shares of the Trust....................................... 24
Administration............................................................. 25
Purchase of Shares......................................................... 25
Reports to Shareholders.................................................... 27
Distributions.............................................................. 27
Exchanges.................................................................. 28
Redemption of Shares....................................................... 28
Appendix................................................................... A-1
</TABLE>
FST-1AD-MMT15K/596
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FINANCIAL SQUARE FUNDS
FST ADMINISTRATION SHARES
-----------
PROSPECTUS
-----------
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS MONEY MARKET FUNDS
FINANCIAL SQUARE FUNDS
FST SERVICE SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is a no-load, open-end, management invest-
ment company (a "mutual fund") which includes the Financial Square Funds (the
"Funds"). This Prospectus relates only to the offering of FST Service shares
of beneficial interest ("FST Service Shares") of the Funds. Goldman Sachs As-
set Management, a separate operating division of Goldman, Sachs & Co., serves
as each Fund's investment adviser. Goldman, Sachs & Co. serves as each Fund's
distributor and transfer agent.
The following Funds seek to maximize current income to the extent consistent
with the preservation of capital and the maintenance of liquidity by investing
exclusively in high quality money market instruments. The Funds may invest in
diversified portfolios of the following types of instruments:
Financial Square Prime Obligations Fund. Securities of the U.S. Government,
its agencies, authorities and instrumentalities, obligations of U.S. banks,
commercial paper and other short-term obligations of U.S. companies, states,
municipalities and other entities, and repurchase agreements.
Financial Square Money Market Fund. Securities of the U.S. Government, its
agencies, authorities and instrumentalities, U.S. dollar denominated obliga-
tions of U.S. and foreign banks, U.S. dollar denominated commercial paper and
other short-term obligations of U.S. and foreign companies, foreign govern-
ments, states, municipalities and other entities, and repurchase agreements.
Financial Square Money Market Plus Fund. Securities of the U.S. Government,
its agencies, authorities and instrumentalities, U.S. dollar denominated obli-
gations of U.S. and foreign banks, U.S. dollar denominated commercial paper
and other short-term obligations of U.S. and foreign companies, foreign gov-
ernments, states, municipalities and other entities, and repurchase agree-
ments. In order to obtain a rating from a rating organization, the Fund will
observe special investment restrictions.
Financial Square Treasury Obligations Fund. Securities issued or guaranteed
by the U.S. Treasury and repurchase agreements relating to such securities.
Financial Square Treasury Instruments Fund. Securities issued or guaranteed
by the U.S. Treasury, the interest income from which is generally exempt from
state income taxation.
Financial Square Government Fund. Securities of the U.S. Government, its
agencies, authorities, and instrumentalities, and repurchase agreements relat-
ing to such securities.
Financial Square Federal Fund. Securities of the U.S. Government and certain
of its agencies, authorities and instrumentalities, the interest income from
which is generally exempt from state income taxation.
Financial Square Tax-Free Money Market Fund. Securities issued by or on be-
half of states, territories and possessions of the United States and their po-
litical subdivisions, agencies, authorities and instrumentalities, and the
District of Columbia, the interest from which is, in the opinion of bond coun-
sel, if any, excluded from gross income for federal income tax purposes and
not an item of tax preference under the federal alternative minimum tax.
Financial Square Municipal Money Market Fund. Securities issued by or on be-
half of states, territories and possessions of the United States and their po-
litical subdivisions, agencies, authorities and instrumentalities, and the
District of Columbia, the interest from which is, in the opinion of bond coun-
sel, if any, excluded from gross income for federal income tax purposes (but
not necessarily exempt from federal alternative minimum tax or state and local
taxes).
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOV-
ERNMENT AND THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION....... Goldman Sachs Funds--Toll Free: 800-621-2550
This Prospectus provides you with information about the Funds that you should
know before investing in FST Service Shares. It should be read and retained
for future reference. If you would like more detailed information, the State-
ment of Additional Information dated May 1, 1997, as amended or supplemented
from time to time, is available upon request without charge from Service Orga-
nizations, as defined herein, or by calling the telephone number listed above
or by writing Goldman Sachs, Attention: Shareholder Services, Goldman Sachs
Trust, 4900 Sears Tower, Chicago, Illinois 60606. The Statement of Additional
Information, which is incorporated by reference into this Prospectus, has been
filed with the Securities and Exchange Commission. Not all Funds are available
in certain states. Please call the phone number listed above to determine
availability in your state. The SEC maintains a Web site (http://www.sec.gov)
that contains the Statement of Additional Information and other information
regarding the Trust.
- -------------------------------------------------------------------------------
FST SERVICE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES INVEST-
MENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1997.
<PAGE>
SHAREHOLDER AND FUND EXPENSES
FST SERVICE SHARES
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL FINANCIAL
FINANCIAL FINANCIAL SQUARE FINANCIAL FINANCIAL SQUARE SQUARE
SQUARE SQUARE MONEY SQUARE SQUARE FINANCIAL FINANCIAL TAX-FREE MUNICIPAL
PRIME MONEY MARKET TREASURY TREASURY SQUARE SQUARE MONEY MONEY
OBLIGATIONS MARKET PLUS OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL MARKET MARKET
FUND FUND FUND FUND FUND FUND FUND FUND FUND
----------- --------- --------- ----------- ----------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION EXPENSES
Maximum Sales Charge
Imposed on
Purchases........... None None None None None None None None None
Sales Charge Imposed
on Reinvested
Distributions....... None None None None None None None None None
Deferred Sales Load
Imposed on
Redemptions......... None None None None None None None None None
Exchange Fee......... None None None None None None None None None
ANNUAL OPERATING EXPENSES (1)
(as a percentage of average
daily net assets)
Management Fees
(after limitations)
(2) ................ 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17%
Other Expenses
Service Fees......... 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Other Expenses
(after expense
limitations) (3).... 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING EXPENSes (4) 0.68% 0.68% 0.68% 0.68% 0.68% 0.68% 0.68% 0.68% 0.68%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment,
assuming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Financial Square Prime Obligations Fund... $ 7 $22 $38 $85
Financial Square Money Market Fund........ $ 7 $22 $38 $85
Financial Square Money Market Plus Fund... $ 7 $22 N/A N/A
Financial Square Treasury Obligations
Fund..................................... $ 7 $22 $38 $85
Financial Square Treasury Instruments
Fund..................................... $ 7 $22 N/A N/A
Financial Square Government Fund.......... $ 7 $22 $38 $85
Financial Square Federal Fund............. $ 7 $22 N/A N/A
Financial Square Tax-Free Money Market
Fund..................................... $ 7 $22 $38 $85
Financial Square Municipal Money Market
Fund..................................... $ 7 $22 N/A N/A
</TABLE>
2
<PAGE>
- --------
(1) Based on estimated amounts for the current fiscal year for the Financial
Square Money Market Plus, Financial Square Treasury Instruments, Financial
Square Federal and Financial Square Municipal Money Market Funds.
(2) The Investment Adviser has voluntarily agreed not to impose 0.035% of its
management fee for each Fund. Without such limitation, management fees for
each Fund would be 0.205%.
(3) The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, fees payable to Service Organi-
zations, as defined herein, taxes, interest and brokerage and litigation,
indemnification and other extraordinary expenses) to the extent such ex-
penses exceed 0.01% of a Fund's average daily net assets.
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Financial Square Prime Obligations, Financial
Square Money Market, Financial Square Treasury Obligations, Financial
Square Government and Financial Square Tax-Free Money Market Funds for the
fiscal year ended December 31, 1996, would have been as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Financial Square Prime Obligations Fund................... .025% .73%
Financial Square Money Market Fund........................ .025% .73%
Financial Square Treasury Obligations Fund................ .035% .74%
Financial Square Government Fund.......................... .035% .74%
Financial Square Tax-Free Money Market Fund............... .025% .73%
</TABLE>
In addition, without the limitations described above, "Other Expenses" and
"Total Operating Expenses" of the Financial Square Money Market Plus, Finan-
cial Square Treasury Instruments, Financial Square Federal and Financial
Square Municipal Money Market Funds for the current fiscal year are estimated
to be as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Financial Square Money Market Plus Fund................... .035% .74%
Financial Square Treasury Instruments Fund................ .125% .83%
Financial Square Federal Fund............................. .095% .80%
Financial Square Municipal Money Market Fund.............. .285% .99%
</TABLE>
The information set forth in the foregoing table and hypothetical example
relates only to FST Service Shares of the Funds. The Funds also offer FST
Shares, FST Preferred Shares and FST Administration Shares. The other classes
of the Funds are subject to different fees and expenses (which affect perfor-
mance) and are entitled to different services. Information regarding any other
class of the Funds may be obtained from your sales representative or from
Goldman Sachs by calling the number on the front cover of this Prospectus.
Service Organizations may charge other fees to their customers who are the
beneficial owners of FST Service Shares in connection with their customers'
accounts. Due to the service fees, a long-term shareholder may pay more than
the economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc.'s rules regarding investment
companies. See "Additional Services." Such fees, if any, may affect the return
such customers realize with respect to their investments.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Fund that an investor will bear directly or
indirectly. The information on fees and expenses included in the table and the
hypothetical example above are based on each Fund's fees and expenses (actual
or estimated) and should not be considered as representative of past or future
expenses. Actual fees and expenses may be greater or less than those indicat-
ed. Moreover, while the example assumes a 5% annual return, a Fund's actual
performance will vary and may result in an actual return greater or less than
5%. See "Management--Investment Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following data with respect to a share (of the class specified) of the
Financial Square Prime Obligations, Financial Square Money Market, Financial
Square Treasury Obligations, Financial Square Government and Financial Square
Tax-Free Money Market Funds outstanding during the periods indicated have been
audited by Arthur Andersen LLP, independent auditors, as indicated in their
report incorporated by reference and attached to the Statement of Additional
Information from the annual report to shareholders for the fiscal year ended
December 31, 1996 (the "Annual Report"), and should be read in conjunction
with the financial statements and related notes incorporated by reference and
attached to the Statement of Additional Information.
Financial Square Municipal Money Market, Financial Square Money Market Plus,
Financial Square Federal and Financial Square Treasury Instruments Funds had
no operations during the fiscal year ended December 31, 1996. Accordingly,
there are no selected per share data and ratios presented for these Funds.
4
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
Prime Obligations Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET EXPENSES TO INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT AVERAGE INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $1.00 $0.0529 $ -- $0.0529 $(0.0529) $1.00 5.41% 0.18% 5.29%
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0346 -- 0.0346 (0.0346) 1.00 5.28(b) 0.28(b) 5.19(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0506 -- 0.0506 (0.0506) 1.00 5.14 0.43 5.06
1996-FST Service
shares.......... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.88 0.68 4.78
1995-FST shares. 1.00 0.0586 -- 0.0586 (0.0586) 1.00 6.02 0.18 5.86
1995-FST Admin-
istration
shares.......... 1.00 0.0559 -- 0.0559 (0.0559) 1.00 5.75 0.43 5.59
1995-FST Service
shares.......... 1.00 0.0533 -- 0.0533 (0.0533) 1.00 5.49 0.68 5.33
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(d)....... 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.38(b) 0.18(b) 4.38(b)
1994-FST Admin-
istration
shares(d)....... 1.00 0.0383 -- 0.0383 (0.0383) 1.00 4.12(b) 0.43(b) 4.18(b)
1994-FST Service
shares(d)....... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.86(b) 0.68(b) 3.98(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1.00 0.0311 0.0002 0.0313 (0.0313) 1.00 3.18 0.17 3.11
1994-FST Admin-
istration
shares.......... 1.00 0.0286 0.0002 0.0288 (0.0288) 1.00 2.92 0.42 2.86
1994-FST Service
shares.......... 1.00 0.0261 0.0002 0.0263 (0.0263) 1.00 2.66 0.67 2.61
1993-FST shares. 1.00 0.0360 0.0007 0.0367 (0.0367) 1.00 3.75 0.18 3.60
1993-FST Admin-
istration
shares(e)....... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b) 0.44(b) 2.96(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68 3.01
1992-FST shares. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18 5.72
1992-FST Service
shares(e)....... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b) 0.66(b) 4.10(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 1.00 0.0727 -- 0.0727 (0.0727) 1.00 8.27(b) 0.18(b) 8.04(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $3,901,797 0.23% 5.24%
1996-FST Pre-
ferred
shares(c)....... 127,126 0.33(b) 5.14(b)
1996-FST Admin-
istration
shares.......... 215,898 0.48 5.01
1996-FST Service
shares.......... 115,154 0.73 4.73
1995-FST shares. 3,295,791 0.22 5.82
1995-FST Admin-
istration
shares.......... 147,894 0.47 5.55
1995-FST Service
shares.......... 65,278 0.72 5.29
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(d)....... 2,774,849 0.24(b) 4.32(b)
1994-FST Admin-
istration
shares(d)....... 66,113 0.49(b) 4.12(b)
1994-FST Service
shares(d)....... 41,372 0.74(b) 3.92(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1,831,413 0.25 3.03
1994-FST Admin-
istration
shares.......... 35,250 0.50 2.78
1994-FST Service
shares.......... 14,001 0.75 2.53
1993-FST shares. 813,126 0.25 3.53
1993-FST Admin-
istration
shares(e)....... 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 336 0.75 2.94
1992-FST shares. 917,073 0.27 5.63
1992-FST Service
shares(e)....... 118 0.74(b) 4.02(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 578,495 0.28(b) 7.94(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
(e) FST Administration share and FST Service share activity commenced during
November of 1992 and January of 1992, respectively.
(f) Commencement of operations.
5
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -----------------
1996-FST shares. $1.00 $0.0533 $0.0001 $0.0534 $(0.0534) $1.00 5.45% 0.18% 5.33%
1996-FST
Preferred
shares(c)....... 1.00 0.0348 -- 0.0348 (0.0348) 1.00 5.31(b) 0.28(b) 5.23(b)
1996-FST
Administration
shares.......... 1.00 0.0504 0.0001 0.0505 (0.0505) 1.00 5.19 0.43 5.04
1996-FST Service
shares.......... 1.00 0.0484 -- 0.0484 (0.0484) 1.00 4.93 0.68 4.84
1995-FST shares. 1.00 0.0589 -- 0.0589 (0.0589) 1.00 6.07 0.15 5.89
1995-FST
Administration
shares.......... 1.00 0.0561 -- 0.0561 (0.0561) 1.00 5.80 0.40 5.61
1995-FST Service
shares(d)....... 1.00 0.0231 -- 0.0231 (0.0231) 1.00 5.41(b) 0.65(b) 4.93(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(d)....... 1.00 0.0305 -- 0.0305 (0.0305) 1.00 4.91(b) 0.11(b) 4.88(b)
1994-FST
Administration
shares(d)....... 1.00 0.0298 -- 0.0298 (0.0298) 1.00 4.65(b) 0.36(b) 4.82(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -----------------
1996-FST shares. $2,540,366 0.23% 5.28%
1996-FST
Preferred
shares(c)....... 17,510 0.33(b) 5.18(b)
1996-FST
Administration
shares.......... 165,766 0.48 4.99
1996-FST Service
shares.......... 234,376 0.73 4.79
1995-FST shares. 2,069,197 0.23 5.81
1995-FST
Administration
shares.......... 137,412 0.48 5.53
1995-FST Service
shares(d)....... 4,219 0.73(b) 4.85(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(d)....... 862,971 0.25(b) 4.74(b)
1994-FST
Administration
shares(d)....... 66,560 0.50(b) 4.68(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)FST Preferred share activity commenced on May 1, 1996.
(d)FST, FST Administration and FST Service share activity commenced May 18,
1994, May 20, 1994 and July 14, 1995, respectively.
6
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Treasury Obligations Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL RATIO OF NET INVESTMENT
VALUE AT NET GAIN (LOSS) INCOME FROM DISTRIBUTIONS NET ASSET EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS END OF PERIOD RETURN(A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $1.00 $0.0522 $0.0003 $0.0525 $(0.0524) $1.00 5.35% 0.18% 5.22%
1996-FST
Preferred
shares(c)....... 1.00 0.0342 0.0001 0.0343 (0.0343) 1.00 5.24(b) 0.28(b) 5.11(b)
1996-FST
Administration
shares.......... 1.00 0.0497 0.0002 0.0499 (0.0498) 1.00 5.09 0.43 4.97
1996-FST Service
shares.......... 1.00 0.0472 0.0002 0.0474 (0.0474) 1.00 4.83 0.68 4.72
1995-FST shares. 1.00 0.0573 0.0005 0.0578 (0.0578) 1.00 5.96 0.18 5.73
1995-FST
Administration
shares.......... 1.00 0.0547 0.0005 0.0552 (0.0552) 1.00 5.69 0.43 5.47
1995-FST Service
shares.......... 1.00 0.0521 0.0005 0.0526 (0.0526) 1.00 5.43 0.68 5.21
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1994-FST
shares(d)....... 1.00 0.0379 (0.0001) 0.0378 (0.0378) 1.00 4.23(b) 0.18(b) 4.13(b)
1994-FST
Administration
shares(d)....... 1.00 0.0388 (0.0001) 0.0387 (0.0387) 1.00 3.97(b) 0.43(b) 4.24(b)
1994-FST Service
shares(d)....... 1.00 0.0349 (0.0001) 0.0348 (0.0348) 1.00 3.71(b) 0.68(b) 3.82(b)
FOR THE YEAR ENDED JANUARY 31,
- ----------------
1994-FST shares. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11 0.17 3.01
1994-FST
Administration
shares.......... 1.00 0.0276 0.0006 0.0282 (0.0281) 1.00 2.85 0.42 2.76
1994-FST Service
shares.......... 1.00 0.0251 0.0008 0.0259 (0.0256) 1.00 2.60 0.67 2.51
1993-FST shares. 1.00 0.0342 0.0012 0.0354 (0.0355) 1.00 3.69 0.18 3.42
1993-FST
Administration
shares(e) ...... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83(b) 0.43(b) 2.83(b)
1993-FST Service
shares.......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17 0.68 2.96
1992-FST shares. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84 0.18 5.49
1992-FST Service
shares(e)....... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47(b) 0.68(b) 3.77(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 1.00 0.0600 0.0006 0.0606 (0.0605) 1.00 8.06(b) 0.21(b) 7.74(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $2,291,051 0.24% 5.16%
1996-FST
Preferred
shares(c)....... 46,637 0.34(b) 5.05(b)
1996-FST
Administration
shares.......... 536,895 0.49 4.91
1996-FST Service
shares.......... 220,560 0.74 4.66
1995-FST shares. 1,587,715 0.23 5.68
1995-FST
Administration
shares.......... 283,186 0.48 5.42
1995-FST Service
shares.......... 139,117 0.73 5.16
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1994-FST
shares(d)....... 958,196 0.25(b) 4.06(b)
1994-FST
Administration
shares(d)....... 82,124 0.50(b) 4.17(b)
1994-FST Service
shares(d)....... 81,162 0.75(b) 3.75(b)
FOR THE YEAR ENDED JANUARY 31,
- ----------------
1994-FST shares. 812,420 0.24 2.94
1994-FST
Administration
shares.......... 24,485 0.49 2.69
1994-FST Service
shares.......... 35,656 0.74 2.44
1993-FST shares. 776,181 0.26 3.34
1993-FST
Administration
shares(e) ...... 1 0.51(b) 2.75(b)
1993-FST Service
shares.......... 5,155 0.76 2.88
1992-FST shares. 413,171 0.28 5.39
1992-FST Service
shares(e)....... 3,634 0.78(b) 3.67(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 229,988 0.34(b) 7.61(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)FST Preferred share activity commenced on May 1, 1996.
(d)The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of the
funds as a series of Goldman Sachs Money Market Trust.
(e)FST Administration and FST Service share activity commenced during January
of 1993 and October of 1991, respectively.
(f)Commencement of operations.
7
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Government Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------
NET ASSET TOTAL
VALUE AT NET NET REALIZED GAIN INCOME FROM DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31,
- ------------------
1996-FST shares...... $1.00 $0.0525 $0.0001 $0.0526 $(0.0526) $1.00 5.38%
1996-FST Preferred
shares(c)............ 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26(b)
1996-FST Administra-
tion shares.......... 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12
1996-FST Service
shares............... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86
1995-FST shares...... 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00
1995-FST Administra-
tion shares.......... 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74
1995-FST Service
shares(d)............ 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(e)... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36(b)
1994-FST Administra-
tion shares(e)....... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10(b)
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1993-FST shares(d)... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b)
1993-FST Administra-
tion shares(d)....... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET RATIO OF NET
RATIO OF NET INVESTMENT NET RATIO OF INVESTMENT
EXPENSES TO INCOME TO ASSETS AT END EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET OF PERIOD AVERAGE NET AVERAGE NET
ASSETS ASSETS (IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31,
- ------------------
1996-FST shares...... 0.18% 5.25% $858,769 0.24% 5.19%
1996-FST Preferred
shares(c)............ 0.28(b) 5.14(b) 112 0.34(b) 5.08(b)
1996-FST Administra-
tion shares.......... 0.43 5.01 145,108 0.49 4.95
1996-FST Service
shares............... 0.68 4.74 223,554 0.74 4.68
1995-FST shares...... 0.18 5.81 743,884 0.24 5.75
1995-FST Administra-
tion shares.......... 0.43 5.54 82,386 0.49 5.48
1995-FST Service
shares(d)............ 0.68(b) 5.08(b) 14,508 0.74(b) 5.02(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(e)... 0.15(b) 4.64(b) 258,350 0.25(b) 4.54(b)
1994-FST Administra-
tion shares(e)....... 0.40(b) 4.67(b) 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1993-FST shares(d)... 0.08(b) 3.10(b) 44,697 0.59(b) 2.59(b)
1993-FST Administra-
tion shares(d)....... 0.35(b) 2.85(b) 14,126 0.76(b) 2.44(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) FST share, FST Administration share and FST Service share activity com-
menced April 6, 1993, September 1, 1993 and May 16, 1995, respectively.
(e) The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
8
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Tax-Free Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------
NET NET TOTAL
ASSET NET REALIZED INCOME NET ASSET RATIO OF NET
VALUE AT INVEST- GAIN ON FROM DISTRIBUTIONS VALUE AT EXPENSES TO
BEGINNING MENT INVESTMENT INVESTMENT TO END OF TOTAL AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS PERIOD RETURN (A) ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year
Ended December
31,
- --------------
1996-FST shares. $1.00 $ 0.0335 -- $ 0.0335 $(0.0335) $1.00 3.39% 0.18%
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30(b) 0.28(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13 0.43
1996-FST Service
shares.......... 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88 0.68
1995-FST shares. 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89 0.14
1995-FST Admin-
istration
shares.......... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63 0.39
1995-FST Service
shares.......... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38 0.64
For the Period
Ended December
31,
- --------------
1994-FST
shares(d)....... 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41(b) 0.07(b)
1994-FST
Administration shares(d). 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19(b) 0.32(b)
1994-FST Service
shares(d)....... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11(b) 0.57(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET NET RATIO OF NET
INVESTMENT ASSETS AT RATIO OF INVESTMENT
INCOME TO END OF EXPENSES TO INCOME TO
AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the Year
Ended December
31,
- --------------
1996-FST shares. 3.35% $440,838 0.23% 3.30%
1996-FST Pre-
ferred
shares(c)....... 3.26(b) 28,731 0.33(b) 3.21(b)
1996-FST Admin-
istration
shares.......... 3.10 51,661 0.48 3.05
1996-FST Service
shares.......... 2.85 19,855 0.73 2.80
1995-FST shares. 3.81 448,367 0.24 3.71
1995-FST Admin-
istration
shares.......... 3.54 20,939 0.49 3.44
1995-FST Service
shares.......... 3.32 19,860 0.74 3.22
For the Period
Ended December
31,
- --------------
1994-FST
shares(d)....... 3.42(b) 183,570 0.31(b) 3.18(b)
1994-FST
Administration shares(d). 3.25(b) 2,042 0.56(b) 3.01(b)
1994-FST Service
shares(d)....... 3.32(b) 2,267 0.81(b) 3.08(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) FST share, FST Administration share and FST Service share activity com-
menced July 19, 1994, August 1, 1994 and September 23, 1994, respectively.
9
<PAGE>
AN INTRODUCTION TO THE FUNDS
THE TRUST: The Trust is a no-load, open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "Invest-
ment Company Act"). Each Fund is a separate pool of assets which pursues its
investment objective through separate investment policies, as described below.
THE ADVISER: Goldman Sachs Asset Management, a separate operating division
of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds' investment ad-
viser (the "Adviser" or "GSAM").
THE DISTRIBUTOR: Goldman Sachs, which serves as the Funds' distributor and
transfer agent, is one of the largest international investment banking and
brokerage firms in the United States.
THE INVESTORS: The Funds are designed for institutional investors seeking a
high rate of return, a stable net asset value and convenient liquidation priv-
ileges. The Funds are particularly suitable for banks, corporations and other
financial institutions that seek investment of short-term funds for their own
accounts or for the accounts of their customers. Shares of the Government Fund
are intended to qualify as eligible investments for Federally chartered credit
unions pursuant to Sections 107(7), 107(8) and 107(15) of the Federal Credit
Union Act, Part 703 of the National Credit Union Administration ("NCUA") Rules
and Regulations and NCUA Letter Number 155. The Fund intends to review changes
in the applicable laws, rules and regulations governing eligible investments
for federally chartered credit unions, and to take such action as may be nec-
essary so that the investments of the Fund qualify as eligible investments un-
der the Federal Credit Union Act and the regulations thereunder. Shares of the
Government Fund, however, may or may not qualify as eligible investments for
particular state chartered credit unions. State chartered credit unions should
consult qualified legal counsel to determine whether the Government Fund is a
permissible investment under the law applicable to it.
THE FUNDS: Each Fund's securities are valued by the amortized cost method as
permitted by a rule ("Rule 2a-7") of the Securities and Exchange Commission
("SEC"). Under such rule, each Fund may invest only in securities that are de-
termined to present minimal credit risk and meet certain other criteria.
TAXABLE FUNDS: Prime Obligations, Money Market, Money Market Plus, Trea-
sury Obligations and Government Funds.
TAX ADVANTAGED FUNDS: Treasury Instruments and Federal Funds.
TAX-EXEMPT FUNDS: Tax-Free Money Market and Municipal Money Market Funds.
INVESTMENT OBJECTIVES AND POLICIES FOR TAXABLE, TAX-ADVANTAGED AND TAX-
EXEMPT FUNDS: To maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity by investing ex-
clusively in high quality money market instruments. In order to obtain a
rating from a rating organization, the Money Market Plus Fund will observe
special investment restrictions. The Treasury Instruments and Federal Funds
pursue their objectives by limiting their investments to certain U.S. Trea-
sury Obligations and U.S. Government Securities (each as defined herein),
respectively, the interest from which is generally exempt from state income
taxation. Each investor should consult his or her tax adviser to determine
whether distributions from the Treasury Instruments and Federal Funds (and
any other Fund that may hold such obligations) derived from interest on
such obligations are exempt from state income taxation in the investor's
own state.
NET ASSET VALUE: Each Fund seeks to maintain a stable net asset value of
$1.00 per share.
MAXIMUM REMAINING MATURITY OF PORTFOLIO INVESTMENTS: Thirteen months at the
time of purchase.
10
<PAGE>
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
FIRST TIER SECURITIES: Each Fund may purchase securities which are rated (or
that have been issued by an issuer that is rated with respect to a class of
short-term debt obligations, or any security within that class, comparable in
priority and quality with such securities) in the highest short-term rating
category by at least two NRSROs (as defined below), or if only one NRSRO has
assigned a rating, by that NRSRO. U.S. Government Securities as defined herein
are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Funds may purchase securities which
are not First Tier Securities but which are rated in the top two short-term
rating categories by at least two NRSROs, or if only one NRSRO has assigned a
rating, by that NRSRO. The Taxable Funds will not invest in a security which
is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, unrated securities
may be purchased if they are deemed to be of comparable quality to First Tier
Securities, or to the extent that a Fund may purchase Second Tier Securities,
comparable in quality to Second Tier Securities.
NRSROS: Nationally Recognized Statistical Rating Organizations include Stan-
dard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Lim-
ited and its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a descrip-
tion of each NRSRO's rating categories, see Appendix A to the Statement of Ad-
ditional Information.
11
<PAGE>
INVESTMENT POLICIES MATRIX
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
OBLIGATIONS OF ASSET-BACKED & FOREIGN
US US CORPORATIONS RECEIVABLES- GOVERNMENT
TREASURY GOVERNMENT BANK COMMERCIAL AND OTHER REPURCHASE BACKED OBLIGATIONS
FUND OBLIGATIONS SECURITIES OBLIGATIONS PAPER ENTITIES AGREEMENTS SECURITIES+ (US$)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prime Obligations [_] [_] [_] [_] [_] [_] [_]
U.S. banks U.S. entities
only only
- ------------------------------------------------------------------------------------------------------------------------
Money Market [_] [_] [_] [_] [_] [_] [_] [_]
Over 25% of U.S. and U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Money Market [_] [_] [_] [_] [_] [_] [_] [_]
Plus Over 25% of U.S. and U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Treasury [_] [_]
Obligations
- ------------------------------------------------------------------------------------------------------------------------
Treasury [_]
Instruments
- ------------------------------------------------------------------------------------------------------------------------
Government [_] [_] [_]
- ------------------------------------------------------------------------------------------------------------------------
Federal [_] [_] (Does not
intend to
invest)
- ------------------------------------------------------------------------------------------------------------------------
Tax-Free Money [_]
Market Tax-exempt
only
- ------------------------------------------------------------------------------------------------------------------------
Municipal Money [_]
Market Tax-exempt
only
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: See "Description of Securities and Investment Techniques" for a descrip-
tion of, and certain criteria applicable to, each of these categories of
investments.
+ To the extent required by Rule 2a-7, asset-backed and receivables backed
securities will be rated by the requisite number of NRSROs.
12
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SUMMARY OF
TAXABLE TAX-EXEMPT CREDIT INVESTMENT UNRATED TAXATION FOR
MUNICIPALS MUNICIPALS QUALITY**** COMPANIES SECURITIES DISTRIBUTIONS* MISCELLANEOUS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[_] First [_] [ ] Taxable
Tier Up to 10% of federal and
total assets state**
in other
investment
companies
- ---------------------------------------------------------------------------------------------------
[_] First [_] [_] Taxable May invest in
Tier Up to 10% of federal and obligations of
total assets state** the
in other International
investment Bank for
companies Reconstruction
and Development
- ---------------------------------------------------------------------------------------------------
[_]
First [_] [_] Taxable May invest in
Tier Up to 10% of federal and obligations of
total assets state** the
in other International
investment Bank for
companies Reconstruction
and Development
- ---------------------------------------------------------------------------------------------------
First [_] Taxable
Tier Up to 10% of federal and
total assets state**
in other
investment
companies
- ---------------------------------------------------------------------------------------------------
First [_] Taxable
Tier Up to 10% of federal and
total assets generally
in other exempt from
investment state taxation
companies
- ---------------------------------------------------------------------------------------------------
First [_]
Tier Up to 10% of Taxable
total assets federal and
in other state**
investment
companies
- ---------------------------------------------------------------------------------------------------
Under
First [_] Taxable extraordinary
Tier Up to 10% of federal and circumstances,
total assets generally may hold cash,
in other exempt from U.S. Government
investment state taxation Securities
companies subject to state
taxation or cash
equivalents
- ---------------------------------------------------------------------------------------------------
[_] First or [_] [_] Tax-exempt May (but does
At least 80% of Second Up to 10% of federal and not currently
net assets in Tier total assets taxable intend to)
Municipal in other state*** invest up to 20%
Instruments investment in AMT
(except in companies securities and
extraordinary may temporarily
circumstances) invest in the
taxable money
market
instruments
described herein
- ---------------------------------------------------------------------------------------------------
[_] First or [_] [_] Tax-exempt May invest up to
At least 80% of Second Up to 10% of federal and 100% in AMT
net assets in Tier total assets taxable securities and
Municipal in other state*** may temporarily
Instruments investment invest in the
(except in companies taxable money
extraordinary market
circumstances) instruments
described herein
- ---------------------------------------------------------------------------------------------------
</TABLE>
* See "Taxes" below for an explanation of the tax consequences summarized
in the table above.
** Taxable in many states except for distributions from U.S. Treasury obli-
gation interest income and certain U.S. Government securities interest
income.
*** Taxable except for distributions from interest on obligations of an in-
vestor's state of residence in certain states.
**** To the extent permitted by Rule 2a-7, a Fund holding a security fully
supported by a guarantee may substitute the credit quality of the guaran-
tee in determining the credit quality of the security.
13
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. TREASURY OBLIGATIONS
"U.S. Treasury Obligations" are securities issued or guaranteed by the U.S.
Treasury, payments of principal and interest on which are backed by the full
faith and credit of the U.S. Government.
U.S. GOVERNMENT SECURITIES
"U.S. Government Securities" are obligations issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities. Unlike U.S.
Treasury Obligations, securities issued or guaranteed by U.S. Government agen-
cies, authorities or instrumentalities are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Government
National Mortgage Association), (b) the right of the issuer to borrow from the
Treasury (such as securities of the Student Loan Marketing Association), (c)
the discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation), or (d) only the credit of the
issuer. No assurance can be given that the U.S. Government will provide finan-
cial support to U.S. Government agencies, authorities or instrumentalities in
the future. U.S. Government Securities may include zero coupon bonds. Such
bonds may be purchased when yields are attractive.
Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are deemed to include (a) secu-
rities for which the payment of principal and interest is backed by an irrevo-
cable letter of credit issued by the U.S. Government, its agencies, authori-
ties or instrumentalities and (b) participations in loans made to foreign gov-
ernments or their agencies that are so guaranteed. The secondary market for
certain of these participations is limited. Such participations may therefore
be regarded as illiquid.
Each Fund may also invest in separately traded principal and interest compo-
nents of securities guaranteed or issued by the U.S. Treasury if such compo-
nents are traded independently under the Separate Trading of Registered Inter-
est and Principal of Securities program ("STRIPS").
The Treasury Instruments and Federal Funds invest in U.S. Treasury Obliga-
tions and the Federal Fund may also invest in certain U.S. Government Securi-
ties the interest from which is generally exempt from state income taxation.
Securities generally eligible for this exemption include those issued by the
U.S. Treasury and those issued by certain agencies, authorities or instrumen-
talities of the U.S. Government, including the Federal Home Loan Banks, Fed-
eral Farm Credit Banks, Tennessee Valley Authority and the Student Loan Mar-
keting Association.
CUSTODIAL RECEIPTS
Each Fund (other than the Treasury Obligations, Treasury Instruments, Gov-
ernment and Federal Funds) may also acquire securities issued or guaranteed as
to principal and interest by the U.S. Government, its agencies, authorities or
instrumentalities in the form of custodial receipts that evidence ownership of
future interest payments, principal payments or both on certain notes or bonds
issued by the U.S. Government, its agencies, authorities or instrumentalities.
For certain securities law purposes, custodial receipts are not considered ob-
ligations of the U.S. Government.
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "U.S. Bank Obligations" limited to securities issued or guaranteed by U.S.
banks (including certificates of deposit, commercial
14
<PAGE>
paper, unsecured bank promissory notes and bankers' acceptances) which have
more than $1 billion in total assets at the time of purchase. Such obligations
may also include debt obligations issued by U.S. subsidiaries of such banks.
The Money Market and Money Market Plus Funds may also invest in "Foreign
Bank Obligations" limited to U.S. dollar-denominated obligations issued or
guaranteed (including fixed time deposits) by foreign banks which have more
than $1 billion in total assets at the time of purchase, U.S. branches of such
foreign banks (Yankee obligations), foreign branches of such foreign banks and
foreign branches of U.S. banks having more than $1 billion in total assets at
the time of purchase. Such bank obligations may be general obligations of the
parent bank or may be limited to the issuing branch by the terms of the spe-
cific obligations or by government regulation.
The Money Market and Money Market Plus Funds will invest more than 25% of
their total assets in bank obligations (whether foreign or domestic), includ-
ing bank commercial paper. However, if adverse economic conditions prevail in
the banking industry (such as substantial losses on loans, increases in non-
performing assets and charge-offs and declines in total deposits) the Funds
may, for defensive purposes, temporarily invest less than 25% of their total
assets in bank obligations. As a result, the Funds may be especially affected
by favorable and adverse developments in or related to the banking industry.
The activities of U.S. banks and most foreign banks are subject to comprehen-
sive regulations which, in the case of U.S. regulations, have undergone sub-
stantial changes in the past decade. The enactment of new legislation or regu-
lations, as well as changes in interpretation and enforcement of current laws,
may affect the manner of operations and profitability of domestic and foreign
banks. Significant developments in the U.S. banking industry have included de-
regulation of interest rates, increased competition from other types of finan-
cial institutions, increased acquisition activity, geographic expansion and,
during the late 1980's, an increased number of bank failures. Banks may be
particularly susceptible to certain economic factors, such as interest rate
changes and adverse developments in the market for real estate. Fiscal and
monetary policy and general economic cycles can affect the availability and
cost of funds, loan demand and asset quality and thereby impact the earnings
and financial conditions of banks. See "Foreign Government Obligations--For-
eign Risks" below.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "Commercial Paper" (including variable amount master demand notes and as-
set-backed commercial paper) which is payable in U.S. dollars and is issued or
guaranteed by U.S. corporations, U.S. commercial banks, foreign corporations
(Money Market and Money Market Plus Funds only), foreign commercial banks
(Money Market and Money Market Plus Funds only) or other entities. In addi-
tion, the Funds may invest in other short-term obligations (including short-
term funding agreements) payable in U.S. dollars and issued or guaranteed by
U.S. corporations, foreign corporations (Money Market and Money Market Plus
Funds only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "Asset-Backed and Receivables-Backed Securities" which represent participa-
tions in, or are secured by and payable from, pools of assets such as motor
vehicle installment sale contracts, installment loan contracts, leases of var-
ious types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. Such asset pools
are securitized through the use of privately-formed trusts or special purpose
corporations. Payments or distributions of principal and interest may be guar-
anteed up to certain amounts and for a certain
15
<PAGE>
time period by a letter of credit or a pool insurance policy issued by a fi-
nancial institution, or other credit enhancements may be present. To the ex-
tent consistent with its investment objectives and policies, each of the Prime
Obligations, Money Market and Money Market Plus Funds may invest in new types
of mortgage-related securities and in other asset-backed securities that may
be developed in the future.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market and Money Market Plus Funds may invest in U.S. dollar-de-
nominated obligations (limited to commercial paper and other notes) issued or
guaranteed by a foreign government or any entity located or organized in a
foreign country that maintains a short-term foreign currency rating in the
highest short-term ratings category by the requisite number of NRSROs. The
Money Market and Money Market Plus Funds may not invest more than 25% of their
total assets in the securities of any one foreign government.
FOREIGN RISKS. Investments in foreign securities and bank obligations may
present a greater degree of risk than investments in securities of domestic
issuers because of less publicly-available financial and other information,
less securities regulation, potential imposition of foreign withholding and
other taxes, war, expropriation or other adverse governmental actions. Foreign
banks and their foreign branches are not regulated by U.S. banking authori-
ties, and generally are not bound by the accounting, auditing and financial
reporting standards applicable to U.S. banks.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS. Obligations issued by or on behalf of states, terri-
tories and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia, the
interest from which is, in the opinion of bond counsel, if any, excluded from
gross income for federal income tax purposes.
TYPES OF MUNICIPAL INSTRUMENTS:
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET AND
MUNICIPAL MONEY MARKET FUNDS
-------------------------------------------------------------------------
<S> <C>
FIXED RATE NOTES AND SIMILAR In highest short-term or one of the
DEBT INSTRUMENTS two highest long-term rating
categories
-------------------------------------------------------------------------
VARIABLE AND FLOATING RATE In highest short-term or one of the
DEMAND INSTRUMENTS two highest long-term rating
categories
-------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER In highest rating category
-------------------------------------------------------------------------
MUNICIPAL BONDS In one of the two highest rating
categories
-------------------------------------------------------------------------
UNRATED NOTES, PAPER, BONDS AND Determined to be of comparable quality
OTHER INSTRUMENTS by Adviser pursuant to criteria
approved by the Trustees
</TABLE>
16
<PAGE>
As a matter of fundamental policy, at least 80% of each of the Tax-Free
Money Market and Municipal Money Market Fund's net assets will ordinarily be
invested in Municipal Instruments. Each Tax-Exempt Fund may temporarily invest
in taxable money market instruments when the Adviser believes that the market
conditions dictate a defensive posture. Investments in taxable money market
instruments will be limited to those meeting the quality standards of each
Tax-Exempt Fund. The Prime Obligations, Money Market and Money Market Plus
Funds may invest in short-term obligations issued or guaranteed by state and
municipal governments when yields on such securities are attractive compared
to other taxable investments.
MUNICIPAL NOTES AND BONDS. Municipal notes include tax anticipation notes
("TANs"), revenue anticipation notes ("RANs"), bond anticipation notes
("BANs"), tax and revenue anticipation notes ("TRANs") and construction loan
notes. Municipal bonds include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing munici-
pality and are considered the safest type of bonds. Revenue bonds are backed
by the revenues of a project or facility such as the tolls from a toll bridge.
Revenue bonds also include lease rental revenue bonds which are issued by a
state or local authority for capital projects and are secured by annual lease
payments from the state or locality sufficient to cover debt service on the
authority's obligations. Industrial development bonds (generally referred to
under current tax law as "private activity bonds") are a specific type of rev-
enue bond backed by the credit and security of a private user and therefore
have more potential risk. Municipal bonds may be issued in a variety of forms,
including commercial paper, tender option bonds and variable and floating rate
securities.
TENDER OPTION BONDS. A tender option bond is a Municipal Instrument (gener-
ally held pursuant to a custodial arrangement) having a relatively long matu-
rity 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 finan-
cial institution, pursuant to which such institution grants the security
holder the option, at periodic intervals, to tender its securities to the in-
stitution and receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees equal to the dif-
ference between the bond's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the 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 pre-
vailing short-term, tax-exempt rate. However, an institution will not be obli-
gated to accept tendered bonds in the event of certain defaults or a signifi-
cant downgrading in the credit rating assigned to the issuer of the bond. The
tender option will be taken into account in determining the maturity of the
tender option bonds and a Fund's average portfolio maturity. There is a risk
that a Fund will not be considered the owner of a tender option bond for fed-
eral income tax purposes and thus will not be entitled to treat such interest
as exempt from federal income tax.
REVENUE ANTICIPATION WARRANTS. Revenue Anticipation Warrants ("RAWs") are
issued in anticipation of the issuer's receipt of revenues and present the
risk that such revenues will be insufficient to satisfy the issuer's payment
obligations. The entire amount of principal and interest on RAWs is due at ma-
turity. RAWs, including those with a maturity of more than 397 days, may also
be repackaged as instruments which include a demand feature that permits the
holder to sell the RAWs to a bank or other financial institution at a purchase
price equal to par plus accrued interest on each interest rate reset date.
FLOATING AND VARIABLE RATE OBLIGATIONS. The value of floating and variable
rate obligations generally is more stable than that of fixed rate obligations
in response to changes in interest rate levels. Variable and floating rate ob-
ligations usually have demand features that permit the Funds to sell them at
par value plus accrued interest
17
<PAGE>
upon short notice. The issuers or financial intermediaries providing demand
features may support their ability to purchase the obligations by obtaining
credit with liquidity supports. These may include lines of credit, which are
conditional commitments to lend and letters of credit, which will ordinarily
be irrevocable, both of which may be issued by domestic banks or foreign banks
which have a branch, agency or subsidiary in the United States. When consider-
ing whether an obligation meets a Fund's quality standards, the Fund will, to
the extent permitted by Rule 2a-7, look to the creditworthiness of the party
providing unconditional demand features or other unconditional obligations to
support the credit of the issuer of the security. A Fund may consider the ma-
turity of a variable or floating rate Municipal Instrument to be shorter than
its ultimate stated maturity if the Fund has the right to demand prepayment of
its principal at specified intervals prior to the security's ultimate stated
maturity, subject to the conditions for using amortized cost valuation under
the Investment Company Act. A Fund may purchase such variable or floating rate
obligations from the issuers or may purchase certificates of participation, a
type of floating or variable rate obligation, which are interests in a pool of
debt obligations held by a bank or other financial institution.
INDUSTRIAL DEVELOPMENT BONDS. The Funds (other than the Treasury Obliga-
tions, Treasury Instruments, Government and Federal Funds) may invest in in-
dustrial development bonds (generally referred to under current tax law as
"private activity bonds"), the interest from which would be an item of tax
preference when distributed as "exempt-interest dividends" to shareholders un-
der the federal alternative minimum tax. See "Taxes" and "Distributions." Mu-
nicipal Fund may invest up to 100% of its assets in private activity bonds.
Tax-Free Fund does not currently intend to invest in such bonds. If Tax-Free
Fund's policy not to invest in private activity bonds should change in the fu-
ture, shareholders would be notified and such investments would not exceed 20%
of Tax-Free Fund's net assets.
OTHER POLICIES. Ordinarily the Tax-Exempt Funds expect that 100% of their
portfolio securities will be Municipal Instruments. However, the Funds may
hold cash or invest in short-term taxable securities as set forth above. Such
Funds may invest 25% or more of the value of their respective total assets in
Municipal Instruments which are related in such a way that an economic, busi-
ness or political development or change affecting one Municipal Instrument
would also affect the other Municipal Instruments. For example, the Tax-Exempt
Funds may invest all of their respective assets in (a) Municipal Instruments
the interest on which is paid solely from revenues from similar projects such
as hospitals, electric utility systems, multi-family housing, nursing homes,
commercial facilities (including hotels), steel companies or life care facili-
ties, (b) Municipal Instruments whose issuers are in the same state or (c) in-
dustrial development obligations. Concentration of a Fund's investments in
these Municipal Instruments will subject the Fund, to a greater extent than if
such investment was more limited, to the risks of adverse economic, business
or political developments affecting any such state, industry or other area of
concentration.
Each Fund (other than the Treasury Obligations, Treasury Instruments, Gov-
ernment and Federal Funds) may purchase Municipal Instruments which are backed
by letters of credit, which will ordinarily be irrevocable, issued by domestic
banks or foreign banks (excluding Prime Obligations Fund) which have a branch,
agency or subsidiary in the United States. In addition, these Funds may ac-
quire securities in the form of custodial receipts which evidence ownership of
future interest payments, principal payments or both on obligations of certain
state and local governments and authorities.
In order to enhance the liquidity, stability, or quality of a Municipal In-
strument, each Fund (other than the Treasury Obligations, Treasury Instru-
ments, Government and Federal Funds) may acquire the right to sell the secu-
rity to another party at a guaranteed price and date.
18
<PAGE>
REPURCHASE AGREEMENTS
Each Fund (other than the Treasury Instruments Fund) may only enter into re-
purchase agreements with primary dealers in U.S. Government Securities. A re-
purchase agreement is an agreement under which a Fund purchases securities and
the seller agrees to repurchase the securities within a particular time at a
specified price. Such price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate
on the purchased security. A Fund's custodian or sub-custodian will maintain
custody of the purchased securities for the duration of the agreement. The
value of the purchased securities, including accrued interest, will at all
times equal or exceed the value of the repurchase agreement. In the event of
bankruptcy of the seller or failure of the seller to repurchase the securities
as agreed, a Fund could suffer losses, including loss of interest on or prin-
cipal of the security and costs associated with delay and enforcement of the
repurchase agreement. In evaluating whether to enter into a repurchase agree-
ment, the Adviser will carefully consider the creditworthiness of the seller
pursuant to procedures reviewed and approved by the Trustees. Distributions of
the income from repurchase agreements entered into by a Fund will be taxable
to its shareholders. In addition, each Fund, together with other registered
investment companies having management agreements with the Adviser or any of
its affiliates, may 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.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Fund may purchase when-issued securities and make contracts to purchase
or sell securities for a fixed price at a future date beyond customary settle-
ment time. A Fund is required to hold and maintain in a segregated account
with the Fund's custodian or sub-custodian until three days prior to settle-
ment date, cash or liquid assets in an amount sufficient to meet the purchase
price. Alternatively, a Fund may enter into offsetting contracts for the for-
ward sale of other securities that it owns. Securities purchased or sold on a
when-issued or forward commitment basis involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date or if the
value of the security to be sold increases prior to the settlement date. Al-
though a Fund would generally purchase securities on a when-issued or forward
commitment basis with the intention of acquiring securities for its portfolio,
the Fund may dispose of a when-issued security or forward commitment prior to
settlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The Adviser will determine, under guidelines established by the Trustees,
whether securities issued by other money market investment companies present
minimal credit risks. The amount of each Fund's investments in securities of
other investment companies will be subject to the limitations on such invest-
ments prescribed by the Investment Company Act. These limits include a prohi-
bition on any Fund acquiring more than 3% of the voting shares of any other
investment company and a prohibition on investing more than 5% of a Fund's to-
tal assets in securities of any one investment company or more than 10% of its
total assets in securities of all investment companies. Each Fund will indi-
rectly bear its proportionate share of any management fees and other expenses
paid by such other investment companies. Such other investment companies will
have investment objectives, policies and restrictions substantially similar to
those of the acquiring Fund and will be subject to substantially the same
risks.
INVESTMENT LIMITATIONS
TAXABLE AND TAX-EXEMPT FUNDS. Each Fund will comply with the conditions for
using amortized cost valuation set forth in Rule 2a-7 under the Investment
Company Act including, but not limited to, those condi-
19
<PAGE>
tions relating to maturity, diversification and credit quality. These operat-
ing policies may be more restrictive than the fundamental policies set forth
in the Statement of Additional Information.
INVESTMENT RESTRICTIONS. Each Fund is subject to certain investment restric-
tions that are described in detail under "Investment Restrictions" in the
Statement of Additional Information. Fundamental investment restrictions of a
Fund cannot be changed without approval of a majority of the outstanding
shares of that Fund. Treasury Obligations Fund's policy of limiting its in-
vestments to U.S. Treasury Obligations and related repurchase agreements is
also fundamental. All investment objectives and policies not specifically des-
ignated as fundamental are non-fundamental and may be changed without share-
holder approval.
RESTRICTED AND OTHER ILLIQUID SECURITIES. Each Fund may purchase securities
that are not registered ("restricted securities") under the Securities Act of
1933 ("1933 Act"), but can be offered and sold to "qualified institutional
buyers" under Rule 144A under the 1933 Act. However, a Fund will not invest
more than 10% of its net assets in illiquid investments, which include fixed
time deposits maturing in more than seven days and restricted securities.
Restricted securities (including commercial paper issued pursuant to Section
4(2) of the 1933 Act) which the Board of Trustees has determined are liquid,
based upon a continuing review of the trading markets for the specific re-
stricted security, will not be deemed to be illiquid investments for purposes
of this restriction. The Board of Trustees may adopt guidelines and delegate
to the Adviser the daily function of determining and monitoring the liquidity
of restricted securities. The Board, however, will retain sufficient oversight
and be ultimately responsible for the determinations. Since it is not possible
to predict with assurance that the market for restricted securities eligible
for resale under Rule 144A will continue to be liquid, the Adviser will care-
fully monitor each Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in a Fund to the extent that qualified institutional buy-
ers become for a time uninterested in purchasing these restricted securities.
In addition, each Fund may not invest in repurchase agreements maturing in
more than seven days and securities which are not readily marketable if, as a
result thereof, more than 10% of the net assets of that Fund (taken at market
value) would be invested in such investments. Certain repurchase agreements
which mature in more than seven days can be liquidated before the nominal
fixed term on seven days or less notice. Such repurchase agreements will be
regarded as liquid instruments.
MANAGEMENT
THE ADVISER
GSAM, One New York Plaza, New York, New York 10004, a separate operating di-
vision of Goldman, Sachs & Co., acts as investment adviser to the Funds.
Goldman Sachs registered as an investment adviser in 1981. As of March 24,
1997, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $104.9 billion in assets.
As of November 29, 1996, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $112 billion and partners' capital of $2 billion and
ranked as one of the largest international investment banking and brokerage
firms in the United States. Founded in 1869, Goldman Sachs is a major invest-
ment banking and brokerage firm providing a broad range of financing and in-
vestment services both in the United States and abroad.
20
<PAGE>
Pursuant to an SEC order, each Taxable and Tax-Advantaged Fund may enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
Under the Management Agreement, GSAM continually manages each Fund, includ-
ing the purchase, retention and disposition of its securities and other as-
sets. In addition, GSAM administers each Fund's business affairs and performs
various shareholder servicing functions to the extent not provided by other
organizations. The management of each Fund is subject to the supervision of
the Trustees and each Fund's investment policies. For these services, the
Trust, on behalf of each Fund, pays GSAM a monthly fee at an annual rate of
each Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
CONTRACTUAL DECEMBER 31,
RATE 1996
----------- ------------
<S> <C> <C>
Financial Square Prime Obligations Fund................ .205% .17%
Financial Square Money Market Fund..................... .205% .17%
Financial Square Money Market Plus Fund................ .205% N/A
Financial Square Treasury Obligations Fund............. .205% .17%
Financial Square Treasury Instruments Fund............. .205% N/A
Financial Square Government Fund....................... .205% .17%
Financial Square Federal Fund.......................... .205% N/A
Financial Square Tax Free Money Market Fund............ .205% .17%
Financial Square Municipal Money Market Fund........... .205% N/A
</TABLE>
A Management Agreement combining both advisory and administrative services
was adopted effective April 30, 1997. The contractual rate set forth in the
table is the rate payable under the Management Agreement and is identical to
the aggregate advisory and administration fees payable by each Fund under the
previously separate investment advisory and administration agreements. For the
fiscal year ended December 31, 1996, the annual rate expressed is the combined
advisory and administration fees paid (after voluntary fee limitations). The
difference, if any, between the stated fees and the actual fees paid by the
Funds reflects the fact that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled.
GSAM has agreed not to impose a portion of its management fee and/or to re-
duce or otherwise limit the total operating expenses of each Fund (excluding
fees payable to Service Organizations, as defined herein, taxes, interest,
brokerage and litigation, indemnification and other extraordinary expenses).
GSAM has no current intention to but may in the future discontinue or modify
any of such reductions or limitations at its discretion.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of shares of each Fund pursuant to a Distribution Agreement with the
Trust. The Distributor will assist in the sale of shares of each Fund upon the
terms described herein. Goldman Sachs also serves as the Transfer Agent of
each Fund.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold shares of the Funds in order to increase the assets of the Funds. In-
creasing the Fund's assets may enhance investment flexibility and diversifica-
tion. Goldman Sachs reserves the right to redeem at any time some or all of
the Fund shares acquired for its own account. Goldman Sachs will consider the
effect of redemptions on the Funds and other shareholders in deciding whether
to redeem its shares.
TAXES
Each Fund is treated as a separate entity for federal income tax purposes.
The Treasury Instruments and Federal Funds intend to elect and each other Fund
has elected to be treated as a regulated investment company
21
<PAGE>
and each Fund intends to continue to qualify for such treatment under
Subchapter M of the Internal Revenue Code of 1986 (the "Code") for each tax-
able year. To qualify as such, each Fund must satisfy certain requirements re-
lating to the sources of its income, diversification of its assets and distri-
bution of its income to shareholders. As a regulated investment company, each
Fund will not be subject to federal income or excise tax on any net investment
income and net realized capital gains that are distributed to its shareholders
in accordance with certain timing requirements of the Code.
Dividends paid by a Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss and taxable original
issue discount or market discount income will be taxable to shareholders as
ordinary income, except for any "exempt-interest dividends" paid by the Tax-
Exempt Funds, as described below. Dividends paid by a Fund from the excess of
net long-term capital gain over net short-term capital loss will be taxable as
long-term capital gain regardless of how long the shareholders have held their
shares. These tax consequences will apply to distributions of any Fund
regardless of whether distributions are received in cash or reinvested in
shares. Certain distributions paid by the Funds in January of a given year
will be taxable to shareholders as if received on December 31 of the year in
which they are declared. Shareholders will be informed annually about the
amount and character of distributions received from the Funds for federal
income tax purposes, including any distributions that may constitute a return
of capital or any distributions of Municipal Fund that may constitute a tax
preference item under the federal alternative minimum tax.
The Tax-Exempt Funds intend to satisfy certain requirements of the Code for
the payment of "exempt-interest dividends" not included in shareholders' fed-
eral gross income. Dividends paid by these Funds from interest on tax-exempt
obligations and properly designated by the Funds as exempt-interest dividends,
including dividends attributable to exempt-interest dividends received by a
Fund from other regulated investment companies, will generally be exempt from
federal income tax, although a portion of such dividends may be subject to the
federal alternative minimum tax. Exempt-interest dividends will be considered
in computing the corporate federal alternative minimum tax, and the extent, if
any, to which social security or railroad retirement benefits are taxable.
Persons who are "substantial users" of facilities financed by certain indus-
trial development or private activity bonds should consult their own tax ad-
visers before purchasing shares of these Funds. Interest incurred to purchase
or carry shares of these Funds will not be deductible for federal income tax
purposes to the extent related to exempt-interest dividends paid by the Funds.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on taxable distributions if they fail
to furnish their correct taxpayer identification number and certain certifica-
tions required by the Internal Revenue Service or if they are otherwise sub-
ject 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 ordi-
nary dividends from the Funds.
If a Fund invests in foreign securities, it may be subject to foreign with-
holding or other foreign taxes on income earned on such securities and is ex-
pected to be unable to pass such taxes through to shareholders, who therefore
are not expected to include such taxes in income or be entitled to claim for-
eign tax credits or deductions with respect to such taxes.
In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on payments received from a Fund. A state income (and possi-
bly local income and/or intangible property) tax exemption is generally avail-
able to the extent a Fund's distributions are derived from interest on (or, in
the case of intangible property taxes, the value of its assets is attributable
to) certain U.S. Government obligations and/or tax-exempt
22
<PAGE>
municipal obligations issued by or on behalf of the particular state or a po-
litical 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 concerning these matters.
NET ASSET VALUE
The net asset value of each Fund (other than the Government, Treasury Obli-
gations and Money Market Plus Funds) is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. New York time) on
each Business Day. The net asset value of Government, Treasury Obligations and
Money Market Plus Funds is determined as of 5:00 p.m. New York time on each
Business Day. Net asset value per share for each class of shares of each Fund
is calculated by determining the amount of net assets attributable to each
class of shares and dividing by the number of shares for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities markets close early, the Treasury
Instruments and Federal Funds will cease, and each other Fund reserves the
right to cease, accepting purchase and redemption orders for same Business Day
credit at the time PSA recommends that the securities markets close. On days
any Fund closes early, purchase and redemption orders received after the PSA
recommended closing time will be credited to the next Business Day. In addi-
tion, each Fund reserves the right to advance the time by which purchase and
redemption orders must be received for same Business Day credit as permitted
by the SEC.
Each Fund seeks to maintain a net asset value of $1.00 per share. In this
connection, each Fund values its portfolio securities on the basis of amor-
tized cost. The amortized cost method values a security at its cost on the
date of purchase and thereafter assumes a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. For a more complete description
of the amortized cost valuation method and its effect on existing and prospec-
tive shareholders, see the Statement of Additional Information. There can be
no assurance that a Fund will be able at all times to maintain a net asset
value per share of $1.00.
YIELD INFORMATION
From time to time, each Fund may advertise its yield, effective yield and
average annual total return. Average annual total return is determined by com-
puting the average annual percentage change in value of $1,000 invested at the
maximum public offering price for a specified period of at least one year, as-
suming reinvestment of all dividends and distributions at net asset value. The
total return calculation assumes a complete redemption of the investment at
the end of the relevant period. Each Fund may furnish total return calcula-
tions based on a cumulative, average, year-by-year or other basis for various
specified periods by means of quotations, charts, graphs or schedules. The
yield of a Fund refers to the income generated by an investment in that Fund
over a seven-day period (which period will be stated in the advertisement).
This income is then annualized; that is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
23
<PAGE>
The Tax-Exempt Funds and the Federal and Treasury Instruments Funds may each
also quote tax-equivalent yield. Each Fund's tax-equivalent yield is calcu-
lated by determining the rate of return that would have to be achieved on a
fully taxable investment to produce the after-tax equivalent of the Fund's
yield, assuming certain tax brackets for a shareholder.
Investors should note that the investment results of a Fund are based on
historical performance and will fluctuate over time. Any presentation of a
Fund's total return, yield, effective yield or tax-equivalent yield for any
prior period should not be considered a representation of what an investment
may earn or what a Fund's total return, yield, effective yield or tax-equiva-
lent yield may be in any future period. In addition to the above, each Fund
may from time to time advertise its performance relative to certain averages,
performance rankings, indices, other information prepared by recognized mutual
fund statistical services and investments for which reliable performance data
is available.
Total return, yield, effective yield and tax-equivalent yield will be calcu-
lated separately for each class of shares in existence. Because each such
class of shares is subject to different expenses, the total return and net
yield of such classes of a Fund for the same period may differ. See "Organiza-
tion and Shares of the Trust" below.
ORGANIZATION AND SHARES OF THE TRUST
Each Fund is a series of the Goldman Sachs Trust, which was formed under the
laws of the State of Delaware on January 28, 1997. The Funds were formerly se-
ries of Goldman Sachs Money Market Trust, a Massachusetts business trust, and
were reorganized into the Trust as of April 30, 1997. The Trustees have au-
thority under the Trust's Declaration of Trust to create and classify shares
of beneficial interest in separate series, without further action by share-
holders. Additional series may be added in the future. The Trustees also have
authority to classify or reclassify any series or portfolio of shares into one
or more classes. (Institutions that provide services to holders of FST Pre-
ferred Shares, FST Administration Shares or FST Service Shares are referred to
in this Prospectus as "Service Organizations").
When issued, shares are fully paid and nonassessable. In the event of liqui-
dation, shareholders are entitled to share pro rata in the net assets of the
applicable Fund available for distribution to such shareholders. All shares
are freely transferable and have no preemptive, subscription or conversion
rights. Shareholders are entitled to one vote per share, provided that, at the
option of the Trustees, shareholders will be entitled to a number of votes
based upon the net asset values represented by their shares.
Shares of a Fund will be voted seperately by Fund with respect to matters
pertaining to that Fund except for the election of Trustees and ratification
of independent accountants. For example, shareholders of each Fund are re-
quired to approve the adoption of any management agreement relating to that
Fund and any changes in fundamental investment restrictions or policies of
such Fund. Approval by the shareholders of one Fund is effective only as to
that Fund.
As of April 1, 1997, Harris Trust & Savings Bank, 200 W. Monroe St. Fl 12,
Chicago, IL 60606, owned of record 40.64% of the outstanding shares of Trea-
sury Instruments Fund.
The Trust does not intend to hold annual meetings of shareholders. However,
pursuant to the Trust's By-Laws, the recordholders of at least 10% of the
shares outstanding and entitled to vote at a special meeting may require the
Trust to hold such special meeting of shareholders for any purpose, and
recordholders may, under certain circumstances, as permitted by the Investment
Company Act, communicate with other shareholders in connection with requiring
a special meeting of shareholders. The Trustees will call a special meeting of
shareholders 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.
24
<PAGE>
ADDITIONAL SERVICES
Each Fund has adopted a Service Plan with respect to the FST Service Shares
which authorizes it to compensate certain institutions for providing account
administration and personal and account maintenance services to their custom-
ers who are beneficial owners of such Shares (each a "Service Organization").
Each Fund will enter into agreements with Service Organizations which purchase
FST Service Shares on behalf of their customers ("Service Agreements"). The
Service Agreements will provide for compensation to the Service Organization
in an amount up to .50% (on an annualized basis) of the average daily net as-
set value of the FST Service Shares of that Fund attributable to or held in
the name of the Service Organization for its customers; provided, however,
that the fee paid for personal and account maintenance services shall not ex-
ceed .25% of such average daily net assets. The services provided by a Service
Organization may include acting, directly or through an agent, as the sole
shareholder of record, maintaining account records for its customers, and
processing orders to purchase, redeem and exchange FST Service Shares of a
Fund for its customers, responding to inquiries from prospective and existing
shareholders and assisting customers with investment procedures.
For the fiscal year ended December 31, 1996, the Trust, on behalf of Prime
Obligations Fund, Money Market Fund, Treasury Obligations Fund, Government
Fund and Tax-Free Fund paid Service Organizations fees at the annual rate of
.50% of each Fund's average daily net assets attributable to FST Service
Shares.
Holders of FST Service Shares of a Fund will bear all expenses and fees paid
to Service Organizations with respect to such Shares as well as any other ex-
penses which are directly attributable to such Shares.
Service Organizations may charge other fees to their customers who are the
beneficial owners of FST Service Shares in connection with their customer ac-
counts. These fees would be in addition to any amounts received by the Service
Organization under a Service Agreement and may affect an investor's return
with respect to an investment in a Fund.
All inquiries of beneficial owners of FST Service Shares of the Funds should
be directed to such owners' Service Organization.
PURCHASE OF SHARES
It is expected that all direct purchasers of FST Service Shares will be
Service Organizations or their nominees, which may purchase FST Service Shares
of the Funds through Goldman Sachs. Customers of Service Organizations may in-
vest in such shares only through their Service Organizations.
As set forth below, FST Service Shares of the Funds may be purchased on any
Business Day at the net asset value next determined after receipt from the
Service Organization of both the purchase order and the purchase amount in
federal funds. Purchase orders may be made by telephoning Goldman Sachs at
800-621-2550 or by a written request addressed to Goldman Sachs, Attention:
Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois
60606. It is strongly recommended that payment be effected by wiring federal
funds to The Northern Trust Company ("Northern"), Chicago, Illinois, as the
sub-custodian for State Street Bank and Trust Company ("State Street").
Purchases of FST Service Shares may also be made by a Service Organization
by delivering a Federal Reserve draft or check (except that a third party
check will not be accepted) payable only to the appropriate
25
<PAGE>
Fund and drawn on a U.S. bank to Goldman Sachs, Attention: Shareholder Servic-
es, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois 60606. It is ex-
pected that Federal Reserve drafts will ordinarily be converted to federal
funds on the day of receipt and that checks will be converted to federal funds
within two Business Days after receipt. FST Service Shares purchased by check
may not be redeemed until the check has cleared, as described under "Redemp-
tion of Shares."
Purchases of shares of any Fund may also be made through an Automated Clear-
ing House ("ACH") transfer to Goldman Sachs Trust c/o Northern, as
subcustodian for State Street. Purchase orders are effected at the net asset
value next determined after receipt of both the purchase order and the pur-
chase amount in federal funds. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer.
FST Service Shares of each Fund are deemed to have been purchased when an
order becomes effective and are entitled to dividends on FST Service Shares
purchased as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED FROM A SERVICE
ORGANIZATION BY GOLDMAN SACHS DIVIDENDS BEGIN
- ----------------------------------- ---------------
<S> <C>
(1) In the case of the Taxable and Tax-Advantaged
Funds (except for Government, Treasury Obligations
and Money Market Plus Funds)
By: 3:00 p.m.--N.Y. time Same Business Day
- -------------------------------------------------------------------------------
After: 3:00 p.m.--N.Y. time Next Business Day
- -------------------------------------------------------------------------------
(2) In the case of the Government, Treasury Obligations
and Money Market Plus Funds
By: 5:00 p.m.--N.Y. time Same Business Day
- -------------------------------------------------------------------------------
After: 5:00 p.m.--N.Y. time Next Business Day
- -------------------------------------------------------------------------------
(3) In the case of the Municipal Fund
By: 1:00 p.m.--N.Y. time Same Business Day
- -------------------------------------------------------------------------------
After: 1:00 p.m.--N.Y. time Next Business Day
- -------------------------------------------------------------------------------
(4) In the case of the Tax-Free Fund
By: 2:00 p.m.--N.Y. time Same Business Day
- -------------------------------------------------------------------------------
After: 2:00 p.m.--N.Y. time Next Business Day
- -------------------------------------------------------------------------------
</TABLE>
The Service Organizations are responsible for timely transmittal of purchase
orders to Goldman Sachs and Federal Funds to Northern. In order to facilitate
timely transmittal, the Service Organizations have established times by which
purchase orders and federal funds must be received by them.
26
<PAGE>
A Business Day means any day on which the New York Stock Exchange is open,
except for days on which Chicago, Boston or New York banks are closed for lo-
cal holidays.
FST Service Shares of a Fund are purchased at the net asset value per share
without the imposition of a sales charge. Goldman Sachs, as each Fund's trans-
fer agent, will maintain a complete record of transactions and FST Service
Shares held in each record holder's account. The Trust and Goldman Sachs each
reserves the right to reject any purchase order for any reason.
MINIMUM INVESTMENT AND OTHER INFORMATION
The minimum initial investment requirement is $10 million, which may be al-
located among the Funds. The Trust and Goldman Sachs each reserves the right
to waive the minimum investment requirement. A Service Organization may impose
a minimum amount for initial and subsequent investments in FST Service Shares
of the Funds, and may establish other requirements such as a minimum account
balance. A Service Organization may effect redemptions of noncomplying ac-
counts, and may impose a charge for any special services rendered to its cus-
tomers. Customers should contact their Service Organizations for further in-
formation concerning such requirements and charges. A Service Organization may
purchase FST Service Shares in connection with sweep account programs.
SUBSEQUENT INVESTMENTS
There is no minimum amount required for subsequent investments. Orders for
the purchase of additional FST Service Shares should be accompanied by infor-
mation identifying the account and the Fund in which FST Service Shares are to
be purchased.
REPORTS TO SHAREHOLDERS
The Trust will issue an annual report containing audited financial state-
ments and a semi-annual report to record holders of FST Service Shares of each
Fund, including Service Organizations who hold such Shares for the benefit of
their customers. Upon request, a printed confirmation for each transaction
will be provided by Goldman Sachs. Any dividends and distributions paid by the
Funds are also reflected in regular statements issued by Goldman Sachs to
shareholders of record. Service Organizations will be responsible for provid-
ing similar services to their own customers who are the beneficial owners of
such Shares.
DISTRIBUTIONS
All or substantially all of each Fund's net investment income will be de-
clared daily (as of 4:00 p.m. New York time for each Fund other than the Gov-
ernment, Treasury Obligations and Money Market Plus Funds and as of 5:00 p.m.
New York time for the Government, Treasury Obligations and Money Market Plus
Funds) as a dividend and distributed to Service Organizations monthly. Distri-
butions will be made in additional FST Service Shares of the same Fund or, at
the election of a Service Organization, in cash. The election to reinvest div-
idends and distributions or receive them in cash may be changed by a Service
Organization at any time upon written notice to Goldman Sachs. If no election
is made, all dividends and capital gain distributions will be reinvested. Div-
idends will be reinvested as of the last calendar day of each month. Cash dis-
tributions will be paid on or about the first business day of each month. Net
short-term capital gains, if any, will be distributed in accordance with the
requirements of the Code and may be reflected in the Fund's daily distribu-
tions. Each Fund may distribute at least annually its long-term capital gains,
if any, after reduction by available capital losses. In order to avoid exces-
sive fluctuations in the amount of monthly capital gains distributions, a por-
tion of any net capital gains realized on the disposition of securities during
the months of November and December may be distributed
27
<PAGE>
during the subsequent calendar year. Although realized gains and losses on the
assets of a Fund are reflected in the net asset value of the Fund, they are
not expected to be of an amount which would affect the Fund's net asset value
of $1.00 per share.
The income declared as a dividend for the Treasury Obligations, Government
and Money Market Plus Funds is based on estimates of net investment income for
the Fund. Actual income may differ from estimates, and differences, if any,
will be included in the calculation of subsequent dividends.
A Fund's net investment income consists of the excess of (i) accrued inter-
est or discount (including both original issue and market discount on taxable
securities) on portfolio securities, and (ii) any income of the Fund from
sources other than capital gains over (iii) the amortization of market premium
on all portfolio securities and (iv) the estimated expenses of the Fund, in-
cluding a proportionate share of the general expenses of the Trust.
EXCHANGES
FST Service Shares of each Fund may be exchanged by Service Organizations
for shares of the corresponding class of any Fund or Portfolio of Goldman
Sachs Trust at the net asset value next determined either by writing to
Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower, Chicago, Illinois 60606 or, if previously elected in the Account
Information Form, by calling Goldman Sachs at 800-621-2550. All telephone ex-
changes must be registered in the same name(s) and with the same address as
are registered in the Fund from which the exchange is being made. It may be
difficult to implement the telephone exchange privilege in times of drastic
economic or market changes. In an effort to prevent unauthorized or fraudulent
exchange requests by telephone, Goldman Sachs employs reasonable procedures as
set forth under "Redemption of Shares" to confirm that such instructions are
genuine. Exchanges are available only in states where the exchange may legally
be made. The exchange privilege may be modified or withdrawn at any time on 60
days' written notice.
REDEMPTION OF SHARES
HOW TO REDEEM
Customers of Service Organizations may redeem FST Service Shares of a Fund
through their respective Service Organizations. The Service Organizations are
responsible for the transmittal of redemption requests by their customers to
Goldman Sachs. In order to facilitate timely transmittal of redemption re-
quests, Service Organizations have established procedures by which redemption
requests must be made and times by which redemption requests must be received
by them. Additional documentation may be required when deemed appropriate by a
Service Organization.
A Service Organization may redeem such Shares without charge upon request on
any Business Day at the net asset value next determined after receipt by
Goldman Sachs of the redemption request. Redemption requests may be made by
telephoning Goldman Sachs at 800-621-2550 or by a written request addressed to
Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower, Chicago, Illinois 60606. A Service Organization may request re-
demptions by telephone only if the optional telephone redemption privilege has
been elected on the Account Information Form. It may be difficult to implement
redemptions by telephone in times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than
that designated on the Account Information Form must be in writing and signed
by an authorized person designated on the Account Information Form. Any such
written request is also confirmed by telephone with both the requesting party
and the designated bank account to verify instructions. Other procedures may
be implemented from time to time. If
28
<PAGE>
reasonable procedures are not implemented, the Trust may be liable for any
loss due to unauthorized or fraudulent transactions. In all other cases, nei-
ther the Trust nor Goldman Sachs will be responsible for the authenticity of
redemption instructions received by telephone. A redemption may also be made
with respect to certain Funds by means of the check redemption privilege de-
scribed in the Statement of Additional Information. Goldman Sachs reserves the
right to redeem accounts with balances below $500.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs by the Service
Organization. The payment of redemption proceeds for FST Service Shares re-
cently purchased by check will be delayed for up to 15 days until the check
has cleared.
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
record holder of FST Service Shares.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST RECEIVED
FROM SERVICE ORGANIZATION REDEMPTION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
- --------------------------- ------------------- ---------
<S> <C> <C>
(1) In the case of the Taxable
and Tax-Advantaged Funds
(except for Government,
Treasury Obligations and
Money Market Plus Funds)
By:3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ------------------------------------------------------------------------------
After:3:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- ------------------------------------------------------------------------------
(2) In the case of the
Government, Treasury
Obligations and Money
Market Plus Funds
By:5:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ------------------------------------------------------------------------------
After:5:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- ------------------------------------------------------------------------------
(3) In the case of the
Municipal Fund
By:12:00 noon--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ------------------------------------------------------------------------------
After:12:00 noon--N.Y. time Wired Next Business Day Earned on Day
request is received
- ------------------------------------------------------------------------------
(4) In the case of the
Tax-Free Fund
By:1:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ------------------------------------------------------------------------------
After:1:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- ------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
The Funds will arrange for the proceeds of redemptions effected by any means
to be wired as federal funds to the Service Organization's bank account desig-
nated in the Account Information Form. Redemption proceeds will normally be
wired as set forth above, but may be paid up to three Business Days after re-
ceipt of the Service Organization's properly executed redemption request. For
example, payment may be delayed if the Federal Reserve Bank is closed on the
day redemption proceeds would ordinarily be wired. After a wire has been ini-
tiated by Goldman Sachs, neither Goldman Sachs nor the Trust assumes any fur-
ther responsibility for the performance of intermediaries or the FST Service
Shareholder's Service Organization in the transfer process. If a problem with
such performance arises, the FST Service Shareholder should deal directly with
such intermediaries or Service Organization.
OTHER REDEMPTION INFORMATION
A minimum account balance of $10 million is required to remain a FST Service
Shareholder. The Funds may redeem all of the FST Service Shares of any FST
Service Shareholder whose account has a net asset value which is less than the
minimum described above. The Trust will give sixty (60) days' prior written
notice to such shareholders whose FST Service Shares are being redeemed to al-
low them to purchase sufficient additional FST Service Shares to avoid such
redemption.
----------------
30
<PAGE>
APPENDIX
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Fund with your correct Social Secu-
rity 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 and to sign your name in 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, ex-
changes and other payments relating to your account.
Any tax withheld may be credited against taxes owed on your federal income
tax return.
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 Reve-
nue Service (IRS). Backup withholding could apply to payments relating to your
account prior to the Fund's receipt of your TIN.
Special rules apply for certain entities. For example, for an account estab-
lished under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor
should be furnished.
If you have been notified by the IRS that you are subject to backup with-
holding 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 with-
holding should cease, you must cross out item (2) in the certification section
of the Account Information Form.
If you are an exempt recipient, you should furnish your TIN and certify your
exemption by signing the Certification section and writing "exempt" after your
signature. Exempt recipients include: corporations, tax-exempt pension plans
and IRA's, governmental agencies, financial institutions, registered securi-
ties and commodities dealers and others.
If you are a nonresident alien or foreign entity, you must provide a com-
pleted Form W-8 to the Fund in order to avoid backup withholding on certain
payments. Other payments to you may be subject to non-resident alien withhold-
ing of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FST SERVICE SHARES
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE: 800-621-2550
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder and Fund Expenses.............................................. 2
Financial Highlights....................................................... 4
An Introduction to the Funds............................................... 10
Investment Policies Matrix................................................. 12
Description of Securities and Investment
Techniques................................................................ 14
Investment Limitations..................................................... 20
Management................................................................. 21
Taxes...................................................................... 22
Net Asset Value............................................................ 23
Yield Information.......................................................... 23
Organization and Shares of the Trust....................................... 24
Additional Services........................................................ 25
Purchase of Shares......................................................... 25
Reports to Shareholders.................................................... 27
Distributions.............................................................. 27
Exchanges.................................................................. 28
Redemption of Shares....................................................... 28
Appendix................................................................... A-1
</TABLE>
FST-ISS-MMT15K/596
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FINANCIAL SQUARE FUNDS
FST SERVICE SHARES
-----------
PROSPECTUS
-----------
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS MONEY MARKET FUNDS
FINANCIAL SQUARE FUNDS
FST PREFERRED SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is a no-load, open-end, management invest-
ment company (a "mutual fund") which includes the Financial Square Funds (the
"Funds"). This Prospectus relates only to the offering of FST Preferred shares
of beneficial interest ("FST Preferred Shares") of the Funds. Goldman Sachs
Asset Management, a separate operating division of Goldman, Sachs & Co.,
serves as each Fund's investment adviser. Goldman, Sachs & Co. serves as each
Fund's distributor and transfer agent.
The following Funds seek to maximize current income to the extent consistent
with the preservation of capital and the maintenance of liquidity by investing
exclusively in high quality money market instruments. The Funds may invest in
diversified portfolios of the following types of instruments:
Financial Square Prime Obligations Fund. Securities of the U.S. Government,
its agencies, authorities and instrumentalities, obligations of U.S. banks,
commercial paper and other short-term obligations of U.S. companies, states,
municipalities and other entities, and repurchase agreements.
Financial Square Money Market Fund. Securities of the U.S. Government, its
agencies, authorities and instrumentalities, U.S. dollar denominated obliga-
tions of U.S. and foreign banks, U.S. dollar denominated commercial paper and
other short-term obligations of U.S. and foreign companies, foreign govern-
ments, states, municipalities and other entities, and repurchase agreements.
Financial Square Money Market Plus Fund. Securities of the U.S. Government,
its agencies, authorities and instrumentalities, U.S. dollar denominated obli-
gations of U.S. and foreign banks, U.S. dollar denominated commercial paper
and other short-term obligations of U.S. and foreign companies, foreign gov-
ernments, states, municipalities and other entities, and repurchase agree-
ments. In order to obtain a rating from a rating organization, the Fund will
observe special investment restrictions.
Financial Square Treasury Obligations Fund. Securities issued or guaranteed
by the U.S. Treasury and repurchase agreements relating to such securities.
Financial Square Treasury Instruments Fund. Securities issued or guaranteed
by the U.S. Treasury, the interest income from which is generally exempt from
state income taxation.
Financial Square Government Fund. Securities of the U.S. Government, its
agencies, authorities, and instrumentalities, and repurchase agreements relat-
ing to such securities.
Financial Square Federal Fund. Securities of the U.S. Government and certain
of its agencies, authorities and instrumentalities, the interest income from
which is generally exempt from state income taxation.
Financial Square Tax-Free Money Market Fund. Securities issued by or on be-
half of states, territories and possessions of the United States and their po-
litical subdivisions, agencies, authorities and instrumentalities, and the
District of Columbia, the interest from which is, in the opinion of bond coun-
sel, if any, excluded from gross income for federal income tax purposes and
not an item of tax preference under the federal alternative minimum tax.
Financial Square Municipal Money Market Fund. Securities issued by or on be-
half of states, territories and possessions of the United States and their po-
litical subdivisions, agencies, authorities and instrumentalities, and the
District of Columbia, the interest from which is, in the opinion of bond coun-
sel, if any, excluded from gross income for federal income tax purposes (but
not necessarily exempt from federal alternative minimum tax or state and local
taxes).
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOV-
ERNMENT AND THERE CAN BE NO ASSURANCE THAT A FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION.........Goldman Sachs Funds-Toll Free: 800-621-2550
This Prospectus provides you with information about the Funds that you should
know before investing in FST Preferred Shares. It should be read and retained
for future reference. If you would like more detailed information, the State-
ment of Additional Information dated May 1, 1997, as amended or supplemented
from time to time, is available upon request without charge from Service Orga-
nizations, as defined herein, or by calling the telephone number listed above
or by writing Goldman Sachs, Attention: Shareholder Services, Goldman Sachs
Trust, 4900 Sears Tower, Chicago, Illinois 60606. The Statement of Additional
Information, which is incorporated by reference into this Prospectus, has been
filed with the Securities and Exchange Commission. Not all Funds are available
in certain states. Please call the phone number listed above to determine
availability in your state. The SEC maintains a Web site (http://www.sec.gov)
that contains the Statement of Additional Information and other information
regarding the Trust.
- -------------------------------------------------------------------------------
FST PREFERRED SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUAR-
ANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RE-
SERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN A FUND INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 1, 1997.
<PAGE>
SHAREHOLDER AND FUND EXPENSES
FST PREFERRED SHARES
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL
FINANCIAL FINANCIAL FINANCIAL FINANCIAL FINANCIAL SQUARE SQUARE
SQUARE SQUARE SQUARE SQUARE SQUARE FINANCIAL FINANCIAL TAX-FREE MUNICIPAL
PRIME MONEY MONEY TREASURY TREASURY SQUARE SQUARE MONEY MONEY
OBLIGATIONS MARKET MARKET OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL MARKET MARKET
FUND FUND PLUS FUND FUND FUND FUND FUND FUND FUND
----------- --------- --------- ----------- ----------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSAC-
TION EXPENSES
Maximum Sales Charge
Imposed on
Purchases........... None None None None None None None None None
Sales Charge Imposed
on Reinvested
Distributions....... None None None None None None None None None
Deferred Sales Load
Imposed on
Redemptions......... None None None None None None None None None
Exchange Fee......... None None None None None None None None None
ANNUAL OPERATING EXPENSES
(1)
(as a percentage of
average daily net
assets)
Management Fees
(after
limitations) (2).... 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17% 0.17%
Other Expenses
Preferred Adminis-
tration Fees....... 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Other Expenses
(after expense
limitation) (3).... 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING
EXPENSES (4)......... 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment, as-
suming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Financial Square Prime Obligations Fund... $ 3 $9 $16 $36
Financial Square Money Market Fund........ $ 3 $ 9 $16 $36
Financial Square Money Market Plus Fund... $ 3 $ 9 N/A N/A
Financial Square Treasury Obligations
Fund..................................... $ 3 $ 9 $16 $36
Financial Square Treasury Instruments
Fund..................................... $ 3 $ 9 N/A N/A
Financial Square Government Fund.......... $ 3 $ 9 $16 $36
Financial Square Federal Fund............. $ 3 $ 9 N/A N/A
Financial Square Tax-Free Money Market
Fund..................................... $ 3 $ 9 $16 $36
Financial Square Municipal Money Market
Fund..................................... $ 3 $ 9 N/A N/A
</TABLE>
2
<PAGE>
- --------
(1) Based on estimated amounts for the current fiscal year for the Financial
Square Money Market Plus, Financial Square Treasury Instruments, Financial
Square Federal and Financial Square Municipal Money Market Funds.
(2) The Investment Adviser has voluntarily agreed not to impose 0.035% of its
management fee for each Fund. Without such limitation, management fees for
each Fund would be 0.205%.
(3) The Investment Adviser has voluntarily agreed to reduce or limit certain
other expenses (excluding management fees, fees payable to Service Organi-
zations, as defined herein, taxes, interest and brokerage and litigation,
indemnification and other extraordinary expenses) to the extent such ex-
penses exceed 0.01% of a Fund's average daily net assets.
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Financial Square Prime Obligations, Financial
Square Money Market, Financial Square Treasury Obligations, Financial
Square Government and Financial Square Tax-Free Money Market Funds for the
fiscal year ended December 31, 1996, would have been as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Financial Square Prime Obligations Fund................... .025% .33%
Financial Square Money Market Fund........................ .025% .33%
Financial Square Treasury Obligations Fund................ .035% .34%
Financial Square Government Fund.......................... .035% .34%
Financial Square Tax-Free Money Market Fund............... .025% .33%
</TABLE>
In addition, without the limitations described above, "Other Expenses" and
"Total Operating Expenses" of the Financial Square Money Market Plus, Finan-
cial Square Treasury Instruments, Financial Square Federal and Financial
Square Municipal Money Market Funds for the current fiscal year are estimated
to be as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Financial Square Money Market Plus Fund................... .035% .34%
Financial Square Treasury Instruments Fund................ .125% .43%
Financial Square Federal Fund............................. .095% .40%
Financial Square Municipal Money Market Fund.............. .285% .59%
</TABLE>
The information set forth in the foregoing table and hypothetical example
relates only to FST Preferred Shares of the Funds. The Funds also offer FST
Shares, FST Administration Shares and FST Service Shares. The other classes of
the Funds are subject to different fees and expenses (which affect perfor-
mance) and are entitled to different services. Information regarding any other
class of the Funds may be obtained from your sales representative or from
Goldman Sachs by calling the number on the front cover of this Prospectus.
Service Organizations (other than broker-dealers) may charge other fees to
their customers who are the beneficial owners of FST Preferred Shares in con-
nection with their customers' accounts. See "Administration." Such fees, if
any, may affect the return such customers realize with respect to their in-
vestments.
The purpose of the foregoing table is to assist investors in understanding
the various fees and expenses of a Fund that an investor will bear directly or
indirectly. The information on fees and expenses included in the table and the
hypothetical example above are based on each Fund's fees and expenses (actual
or estimated) and should not be considered as representative of past or future
expenses. Actual fees and expenses may be greater or less than those indicat-
ed. Moreover, while the example assumes a 5% annual return, a Fund's actual
performance will vary and may result in an actual return greater or less than
5%. See "Management--Investment Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following data with respect to a share (of the class specified) of the
Financial Square Prime Obligations, Financial Square Money Market, Financial
Square Treasury Obligations, Financial Square Government and Financial Square
Tax-Free Money Market Funds outstanding during the periods indicated have been
audited by Arthur Andersen LLP, independent auditors, as indicated in their
report incorporated by reference and attached to the Statement of Additional
Information from the annual report to shareholders for the fiscal year ended
December 31, 1996 (the "Annual Report"), and should be read in conjunction
with the financial statements and related notes incorporated by reference and
attached to the Statement of Additional Information.
Financial Square Municipal Money Market, Financial Square Money Market Plus,
Financial Square Federal and Financial Square Treasury Instruments Funds had
no operations during the fiscal year ended December 31, 1996. Accordingly,
there are no selected per share data and ratios presented for these Funds.
4
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout Each Period
Prime Obligations Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET EXPENSES TO INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT AVERAGE INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $1.00 $0.0529 $ -- $0.0529 $(0.0529) $1.00 5.41% 0.18% 5.29%
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0346 -- 0.0346 (0.0346) 1.00 5.28(b) 0.28(b) 5.19(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0506 -- 0.0506 (0.0506) 1.00 5.14 0.43 5.06
1996-FST Service
shares.......... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.88 0.68 4.78
1995-FST shares. 1.00 0.0586 -- 0.0586 (0.0586) 1.00 6.02 0.18 5.86
1995-FST Admin-
istration
shares.......... 1.00 0.0559 -- 0.0559 (0.0559) 1.00 5.75 0.43 5.59
1995-FST Service
shares.......... 1.00 0.0533 -- 0.0533 (0.0533) 1.00 5.49 0.68 5.33
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(d)....... 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.38(b) 0.18(b) 4.38(b)
1994-FST Admin-
istration
shares(d)....... 1.00 0.0383 -- 0.0383 (0.0383) 1.00 4.12(b) 0.43(b) 4.18(b)
1994-FST Service
shares(d)....... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.86(b) 0.68(b) 3.98(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1.00 0.0311 0.0002 0.0313 (0.0313) 1.00 3.18 0.17 3.11
1994-FST Admin-
istration
shares.......... 1.00 0.0286 0.0002 0.0288 (0.0288) 1.00 2.92 0.42 2.86
1994-FST Service
shares.......... 1.00 0.0261 0.0002 0.0263 (0.0263) 1.00 2.66 0.67 2.61
1993-FST shares. 1.00 0.0360 0.0007 0.0367 (0.0367) 1.00 3.75 0.18 3.60
1993-FST Admin-
istration
shares(e)....... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b) 0.44(b) 2.96(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68 3.01
1992-FST shares. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18 5.72
1992-FST Service
shares(e)....... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b) 0.66(b) 4.10(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 1.00 0.0727 -- 0.0727 (0.0727) 1.00 8.27(b) 0.18(b) 8.04(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $3,901,797 0.23% 5.24%
1996-FST Pre-
ferred
shares(c)....... 127,126 0.33(b) 5.14(b)
1996-FST Admin-
istration
shares.......... 215,898 0.48 5.01
1996-FST Service
shares.......... 115,154 0.73 4.73
1995-FST shares. 3,295,791 0.22 5.82
1995-FST Admin-
istration
shares.......... 147,894 0.47 5.55
1995-FST Service
shares.......... 65,278 0.72 5.29
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(d)....... 2,774,849 0.24(b) 4.32(b)
1994-FST Admin-
istration
shares(d)....... 66,113 0.49(b) 4.12(b)
1994-FST Service
shares(d)....... 41,372 0.74(b) 3.92(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1,831,413 0.25 3.03
1994-FST Admin-
istration
shares.......... 35,250 0.50 2.78
1994-FST Service
shares.......... 14,001 0.75 2.53
1993-FST shares. 813,126 0.25 3.53
1993-FST Admin-
istration
shares(e)....... 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 336 0.75 2.94
1992-FST shares. 917,073 0.27 5.63
1992-FST Service
shares(e)....... 118 0.74(b) 4.02(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 578,495 0.28(b) 7.94(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
(e) FST Administration share and FST Service share activity commenced during
November of 1992 and January of 1992, respectively.
(f) Commencement of operations.
5
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -----------------
1996-FST shares. $1.00 $0.0533 $0.0001 $0.0534 $(0.0534) $1.00 5.45% 0.18% 5.33%
1996-FST
Preferred
shares(c)....... 1.00 0.0348 -- 0.0348 (0.0348) 1.00 5.31(b) 0.28(b) 5.23(b)
1996-FST
Administration
shares.......... 1.00 0.0504 0.0001 0.0505 (0.0505) 1.00 5.19 0.43 5.04
1996-FST Service
shares.......... 1.00 0.0484 -- 0.0484 (0.0484) 1.00 4.93 0.68 4.84
1995-FST shares. 1.00 0.0589 -- 0.0589 (0.0589) 1.00 6.07 0.15 5.89
1995-FST
Administration
shares.......... 1.00 0.0561 -- 0.0561 (0.0561) 1.00 5.80 0.40 5.61
1995-FST Service
shares(d)....... 1.00 0.0231 -- 0.0231 (0.0231) 1.00 5.41(b) 0.65(b) 4.93(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(d)....... 1.00 0.0305 -- 0.0305 (0.0305) 1.00 4.91(b) 0.11(b) 4.88(b)
1994-FST
Administration
shares(d)....... 1.00 0.0298 -- 0.0298 (0.0298) 1.00 4.65(b) 0.36(b) 4.82(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -----------------
1996-FST shares. $2,540,366 0.23% 5.28%
1996-FST
Preferred
shares(c)....... 17,510 0.33(b) 5.18(b)
1996-FST
Administration
shares.......... 165,766 0.48 4.99
1996-FST Service
shares.......... 234,376 0.73 4.79
1995-FST shares. 2,069,197 0.23 5.81
1995-FST
Administration
shares.......... 137,412 0.48 5.53
1995-FST Service
shares(d)....... 4,219 0.73(b) 4.85(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(d)....... 862,971 0.25(b) 4.74(b)
1994-FST
Administration
shares(d)....... 66,560 0.50(b) 4.68(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)FST Preferred share activity commenced on May 1, 1996.
(d)FST, FST Administration and FST Service share activity commenced May 18,
1994, May 20, 1994 and July 14, 1995, respectively.
6
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Treasury Obligations Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL RATIO OF NET INVESTMENT
VALUE AT NET GAIN (LOSS) INCOME FROM DISTRIBUTIONS NET ASSET EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS END OF PERIOD RETURN(A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $1.00 $0.0522 $0.0003 $0.0525 $(0.0524) $1.00 5.35% 0.18% 5.22%
1996-FST
Preferred
shares(c)....... 1.00 0.0342 0.0001 0.0343 (0.0343) 1.00 5.24(b) 0.28(b) 5.11(b)
1996-FST
Administration
shares.......... 1.00 0.0497 0.0002 0.0499 (0.0498) 1.00 5.09 0.43 4.97
1996-FST Service
shares.......... 1.00 0.0472 0.0002 0.0474 (0.0474) 1.00 4.83 0.68 4.72
1995-FST shares. 1.00 0.0573 0.0005 0.0578 (0.0578) 1.00 5.96 0.18 5.73
1995-FST
Administration
shares.......... 1.00 0.0547 0.0005 0.0552 (0.0552) 1.00 5.69 0.43 5.47
1995-FST Service
shares.......... 1.00 0.0521 0.0005 0.0526 (0.0526) 1.00 5.43 0.68 5.21
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1994-FST
shares(d)....... 1.00 0.0379 (0.0001) 0.0378 (0.0378) 1.00 4.23(b) 0.18(b) 4.13(b)
1994-FST
Administration
shares(d)....... 1.00 0.0388 (0.0001) 0.0387 (0.0387) 1.00 3.97(b) 0.43(b) 4.24(b)
1994-FST Service
shares(d)....... 1.00 0.0349 (0.0001) 0.0348 (0.0348) 1.00 3.71(b) 0.68(b) 3.82(b)
FOR THE YEAR ENDED JANUARY 31,
- ----------------
1994-FST shares. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11 0.17 3.01
1994-FST
Administration
shares.......... 1.00 0.0276 0.0006 0.0282 (0.0281) 1.00 2.85 0.42 2.76
1994-FST Service
shares.......... 1.00 0.0251 0.0008 0.0259 (0.0256) 1.00 2.60 0.67 2.51
1993-FST shares. 1.00 0.0342 0.0012 0.0354 (0.0355) 1.00 3.69 0.18 3.42
1993-FST
Administration
shares(e) ...... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83(b) 0.43(b) 2.83(b)
1993-FST Service
shares.......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17 0.68 2.96
1992-FST shares. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84 0.18 5.49
1992-FST Service
shares(e)....... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47(b) 0.68(b) 3.77(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 1.00 0.0600 0.0006 0.0606 (0.0605) 1.00 8.06(b) 0.21(b) 7.74(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1996-FST shares. $2,291,051 0.24% 5.16%
1996-FST
Preferred
shares(c)....... 46,637 0.34(b) 5.05(b)
1996-FST
Administration
shares.......... 536,895 0.49 4.91
1996-FST Service
shares.......... 220,560 0.74 4.66
1995-FST shares. 1,587,715 0.23 5.68
1995-FST
Administration
shares.......... 283,186 0.48 5.42
1995-FST Service
shares.......... 139,117 0.73 5.16
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1994-FST
shares(d)....... 958,196 0.25(b) 4.06(b)
1994-FST
Administration
shares(d)....... 82,124 0.50(b) 4.17(b)
1994-FST Service
shares(d)....... 81,162 0.75(b) 3.75(b)
FOR THE YEAR ENDED JANUARY 31,
- ----------------
1994-FST shares. 812,420 0.24 2.94
1994-FST
Administration
shares.......... 24,485 0.49 2.69
1994-FST Service
shares.......... 35,656 0.74 2.44
1993-FST shares. 776,181 0.26 3.34
1993-FST
Administration
shares(e) ...... 1 0.51(b) 2.75(b)
1993-FST Service
shares.......... 5,155 0.76 2.88
1992-FST shares. 413,171 0.28 5.39
1992-FST Service
shares(e)....... 3,634 0.78(b) 3.67(b)
FOR THE PERIOD MARCH 8, 1990(F) THROUGH JANUARY 31,
- ---------------------------------------------------
1991-FST shares. 229,988 0.34(b) 7.61(b)
</TABLE>
- ----
(a)Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b)Annualized.
(c)FST Preferred share activity commenced on May 1, 1996.
(d)The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of the
funds as a series of Goldman Sachs Money Market Trust.
(e)FST Administration and FST Service share activity commenced during January
of 1993 and October of 1991, respectively.
(f)Commencement of operations.
7
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Government Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------
NET ASSET TOTAL
VALUE AT NET NET REALIZED GAIN INCOME FROM DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31,
- ------------------
1996-FST shares...... $1.00 $0.0525 $0.0001 $0.0526 $(0.0526) $1.00 5.38%
1996-FST Preferred
shares(c)............ 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26(b)
1996-FST Administra-
tion shares.......... 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12
1996-FST Service
shares............... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86
1995-FST shares...... 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00
1995-FST Administra-
tion shares.......... 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74
1995-FST Service
shares(d)............ 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(e)... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36(b)
1994-FST Administra-
tion shares(e)....... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10(b)
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1993-FST shares(d)... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b)
1993-FST Administra-
tion shares(d)....... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET RATIO OF NET
RATIO OF NET INVESTMENT NET RATIO OF INVESTMENT
EXPENSES TO INCOME TO ASSETS AT END EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET OF PERIOD AVERAGE NET AVERAGE NET
ASSETS ASSETS (IN 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31,
- ------------------
1996-FST shares...... 0.18% 5.25% $858,769 0.24% 5.19%
1996-FST Preferred
shares(c)............ 0.28(b) 5.14(b) 112 0.34(b) 5.08(b)
1996-FST Administra-
tion shares.......... 0.43 5.01 145,108 0.49 4.95
1996-FST Service
shares............... 0.68 4.74 223,554 0.74 4.68
1995-FST shares...... 0.18 5.81 743,884 0.24 5.75
1995-FST Administra-
tion shares.......... 0.43 5.54 82,386 0.49 5.48
1995-FST Service
shares(d)............ 0.68(b) 5.08(b) 14,508 0.74(b) 5.02(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(e)... 0.15(b) 4.64(b) 258,350 0.25(b) 4.54(b)
1994-FST Administra-
tion shares(e)....... 0.40(b) 4.67(b) 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED
JANUARY 31,
- --------------------
1993-FST shares(d)... 0.08(b) 3.10(b) 44,697 0.59(b) 2.59(b)
1993-FST Administra-
tion shares(d)....... 0.35(b) 2.85(b) 14,126 0.76(b) 2.44(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) FST share, FST Administration share and FST Service share activity com-
menced April 6, 1993, September 1, 1993 and May 16, 1995, respectively.
(e) The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
8
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Tax-Free Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------
NET NET TOTAL
ASSET NET REALIZED INCOME NET ASSET RATIO OF NET
VALUE AT INVEST- GAIN ON FROM DISTRIBUTIONS VALUE AT EXPENSES TO
BEGINNING MENT INVESTMENT INVESTMENT TO END OF TOTAL AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS PERIOD RETURN (A) ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year
Ended December
31,
- --------------
1996-FST shares. $1.00 $ 0.0335 -- $ 0.0335 $(0.0335) $1.00 3.39% 0.18%
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30(b) 0.28(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13 0.43
1996-FST Service
shares.......... 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88 0.68
1995-FST shares. 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89 0.14
1995-FST Admin-
istration
shares.......... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63 0.39
1995-FST Service
shares.......... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38 0.64
For the Period
Ended December
31,
- --------------
1994-FST
shares(d)....... 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41(b) 0.07(b)
1994-FST
Administration shares(d). 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19(b) 0.32(b)
1994-FST Service
shares(d)....... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11(b) 0.57(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET NET RATIO OF NET
INVESTMENT ASSETS AT RATIO OF INVESTMENT
INCOME TO END OF EXPENSES TO INCOME TO
AVERAGE NET PERIOD AVERAGE NET AVERAGE NET
ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For the Year
Ended December
31,
- --------------
1996-FST shares. 3.35% $440,838 0.23% 3.30%
1996-FST Pre-
ferred
shares(c)....... 3.26(b) 28,731 0.33(b) 3.21(b)
1996-FST Admin-
istration
shares.......... 3.10 51,661 0.48 3.05
1996-FST Service
shares.......... 2.85 19,855 0.73 2.80
1995-FST shares. 3.81 448,367 0.24 3.71
1995-FST Admin-
istration
shares.......... 3.54 20,939 0.49 3.44
1995-FST Service
shares.......... 3.32 19,860 0.74 3.22
For the Period
Ended December
31,
- --------------
1994-FST
shares(d)....... 3.42(b) 183,570 0.31(b) 3.18(b)
1994-FST
Administration shares(d). 3.25(b) 2,042 0.56(b) 3.01(b)
1994-FST Service
shares(d)....... 3.32(b) 2,267 0.81(b) 3.08(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the investment
at the net asset value at the end of the period.
(b) Annualized.
(c) FST Preferred share activity commenced on May 1, 1996.
(d) FST share, FST Administration share and FST Service share activity com-
menced July 19, 1994, August 1, 1994 and September 23, 1994, respectively.
9
<PAGE>
AN INTRODUCTION TO THE FUNDS
THE TRUST: The Trust is a no-load, open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "Invest-
ment Company Act"). Each Fund is a separate pool of assets which pursues its
investment objective through separate investment policies, as described below.
THE ADVISER: Goldman Sachs Asset Management, a separate operating division
of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds' investment ad-
viser (the "Adviser" or "GSAM").
THE DISTRIBUTOR: Goldman Sachs, which serves as the Funds' distributor and
transfer agent, is one of the largest international investment banking and
brokerage firms in the United States.
THE INVESTORS: The Funds are designed for institutional investors seeking a
high rate of return, a stable net asset value and convenient liquidation priv-
ileges. The Funds are particularly suitable for banks, corporations and other
financial institutions that seek investment of short-term funds for their own
accounts or for the accounts of their customers. Shares of the Government Fund
are intended to qualify as eligible investments for Federally chartered credit
unions pursuant to Sections 107(7), 107(8) and 107(15) of the Federal Credit
Union Act, Part 703 of the National Credit Union Administration ("NCUA") Rules
and Regulations and NCUA Letter Number 155. The Fund intends to review changes
in the applicable laws, rules and regulations governing eligible investments
for federally chartered credit unions, and to take such action as may be nec-
essary so that the investments of the Fund qualify as eligible investments un-
der the Federal Credit Union Act and the regulations thereunder. Shares of the
Government Fund, however, may or may not qualify as eligible investments for
particular state chartered credit unions. State chartered credit unions should
consult qualified legal counsel to determine whether the Government Fund is a
permissible investment under the law applicable to it.
THE FUNDS: Each Fund's securities are valued by the amortized cost method as
permitted by a rule ("Rule 2a-7") of the Securities and Exchange Commission
("SEC"). Under such rule, each Fund may invest only in securities that are de-
termined to present minimal credit risk and meet certain other criteria.
TAXABLE FUNDS: Prime Obligations, Money Market, Money Market Plus, Trea-
sury Obligations and Government Funds.
TAX ADVANTAGED FUNDS: Treasury Instruments and Federal Funds.
TAX-EXEMPT FUNDS: Tax-Free Money Market and Municipal Money Market Funds.
INVESTMENT OBJECTIVES AND POLICIES FOR TAXABLE, TAX-ADVANTAGED AND TAX-
EXEMPT FUNDS: To maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity by investing ex-
clusively in high quality money market instruments. In order to obtain a
rating from a rating organization, the Money Market Plus Fund will observe
special investment restrictions. The Treasury Instruments and Federal Funds
pursue their objectives by limiting their investments to certain U.S. Trea-
sury Obligations and U.S. Government Securities (each as defined herein),
respectively, the interest from which is generally exempt from state income
taxation. Each investor should consult his or her tax adviser to determine
whether distributions from the Treasury Instruments and Federal Funds (and
any other Fund that may hold such obligations) derived from interest on
such obligations are exempt from state income taxation in the investor's
own state.
NET ASSET VALUE: Each Fund seeks to maintain a stable net asset value of
$1.00 per share.
MAXIMUM REMAINING MATURITY OF PORTFOLIO INVESTMENTS: Thirteen months at the
time of purchase.
10
<PAGE>
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
FIRST TIER SECURITIES: Each Fund may purchase securities which are rated (or
that have been issued by an issuer that is rated with respect to a class of
short-term debt obligations, or any security within that class, comparable in
priority and quality with such securities) in the highest short-term rating
category by at least two NRSROs (as defined below), or if only one NRSRO has
assigned a rating, by that NRSRO. U.S. Government Securities as defined herein
are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Funds may purchase securities which
are not First Tier Securities but which are rated in the top two short-term
rating categories by at least two NRSROs, or if only one NRSRO has assigned a
rating, by that NRSRO. The Taxable Funds will not invest in a security which
is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, unrated securities
may be purchased if they are deemed to be of comparable quality to First Tier
Securities, or to the extent that a Fund may purchase Second Tier Securities,
comparable in quality to Second Tier Securities.
NRSROS: Nationally Recognized Statistical Rating Organizations include Stan-
dard & Poor's Ratings Group ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Lim-
ited and its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a descrip-
tion of each NRSRO's rating categories, see Appendix A to the Statement of Ad-
ditional Information.
11
<PAGE>
INVESTMENT POLICIES MATRIX
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SHORT-TERM
OBLIGATIONS OF ASSET-BACKED & FOREIGN
US US CORPORATIONS RECEIVABLES- GOVERNMENT
TREASURY GOVERNMENT BANK COMMERCIAL AND OTHER REPURCHASE BACKED OBLIGATIONS
FUND OBLIGATIONS SECURITIES OBLIGATIONS PAPER ENTITIES AGREEMENTS SECURITIES+ (US$)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Prime Obligations [_] [_] [_] [_] [_] [_] [_]
U.S. banks U.S. entities
only only
- ------------------------------------------------------------------------------------------------------------------------
Money Market [_] [_] [_] [_] [_] [_] [_] [_]
Over 25% of U.S. and U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Money Market [_] [_] [_] [_] [_] [_] [_] [_]
Plus Over 25% of U.S. and U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Treasury [_] [_]
Obligations
- ------------------------------------------------------------------------------------------------------------------------
Treasury [_]
Instruments
- ------------------------------------------------------------------------------------------------------------------------
Government [_] [_] [_]
- ------------------------------------------------------------------------------------------------------------------------
Federal [_] [_] (Does not
intend to
invest)
- ------------------------------------------------------------------------------------------------------------------------
Tax-Free Money [_]
Market Tax-exempt
only
- ------------------------------------------------------------------------------------------------------------------------
Municipal Money [_]
Market Tax-exempt
only
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: See "Description of Securities and Investment Techniques" for a descrip-
tion of, and certain criteria applicable to, each of these categories of
investments.
+ To the extent required by Rule 2a-7, asset-backed and receivables backed
securities will be rated by the requisite number of NRSROs.
12
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SUMMARY OF
TAXABLE TAX-EXEMPT CREDIT INVESTMENT UNRATED TAXATION FOR
MUNICIPALS MUNICIPALS QUALITY**** COMPANIES SECURITIES DISTRIBUTIONS* MISCELLANEOUS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[_] First [_] [ ] Taxable
Tier Up to 10% of federal and
total assets state**
in other
investment
companies
- ---------------------------------------------------------------------------------------------------
[_] First [_] [_] Taxable May invest in
Tier Up to 10% of federal and obligations of
total assets state** the
in other International
investment Bank for
companies Reconstruction
and Development
- ---------------------------------------------------------------------------------------------------
[_]
First [_] [_] Taxable May invest in
Tier Up to 10% of federal and obligations of
total assets state** the
in other International
investment Bank for
companies Reconstruction
and Development
- ---------------------------------------------------------------------------------------------------
First [_] Taxable
Tier Up to 10% of federal and
total assets state**
in other
investment
companies
- ---------------------------------------------------------------------------------------------------
First [_] Taxable
Tier Up to 10% of federal and
total assets generally
in other exempt from
investment state taxation
companies
- ---------------------------------------------------------------------------------------------------
First [_]
Tier Up to 10% of Taxable
total assets federal and
in other state**
investment
companies
- ---------------------------------------------------------------------------------------------------
Under
First [_] Taxable extraordinary
Tier Up to 10% of federal and circumstances,
total assets generally may hold cash,
in other exempt from U.S. Government
investment state taxation Securities
companies subject to state
taxation or cash
equivalents
- ---------------------------------------------------------------------------------------------------
[_] First or [_] [_] Tax-exempt May (but does
At least 80% of Second Up to 10% of federal and not currently
net assets in Tier total assets taxable intend to)
Municipal in other state*** invest up to 20%
Instruments investment in AMT
(except in companies securities and
extraordinary may temporarily
circumstances) invest in the
taxable money
market
instruments
described herein
- ---------------------------------------------------------------------------------------------------
[_] First or [_] [_] Tax-exempt May invest up to
At least 80% of Second Up to 10% of federal and 100% in AMT
net assets in Tier total assets taxable securities and
Municipal in other state*** may temporarily
Instruments investment invest in the
(except in companies taxable money
extraordinary market
circumstances) instruments
described herein
- ---------------------------------------------------------------------------------------------------
</TABLE>
* See "Taxes" below for an explanation of the tax consequences summarized
in the table above.
** Taxable in many states except for distributions from U.S. Treasury obli-
gation interest income and certain U.S. Government securities interest
income.
*** Taxable except for distributions from interest on obligations of an in-
vestor's state of residence in certain states.
**** To the extent permitted by Rule 2a-7, a Fund holding a security fully
supported by a guarantee may substitute the credit quality of the guaran-
tee in determining the credit quality of the security.
13
<PAGE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
U.S. TREASURY OBLIGATIONS
"U.S. Treasury Obligations" are securities issued or guaranteed by the U.S.
Treasury, payments of principal and interest on which are backed by the full
faith and credit of the U.S. Government.
U.S. GOVERNMENT SECURITIES
"U.S. Government Securities" are obligations issued or guaranteed by the
U.S. Government, its agencies, authorities or instrumentalities. Unlike U.S.
Treasury Obligations, securities issued or guaranteed by U.S. Government agen-
cies, authorities or instrumentalities are supported either by (a) the full
faith and credit of the U.S. Government (such as securities of the Government
National Mortgage Association), (b) the right of the issuer to borrow from the
Treasury (such as securities of the Student Loan Marketing Association), (c)
the discretionary authority of the U.S. Government to purchase the agency's
obligations (such as securities of the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation), or (d) only the credit of the
issuer. No assurance can be given that the U.S. Government will provide finan-
cial support to U.S. Government agencies, authorities or instrumentalities in
the future. U.S. Government Securities may include zero coupon bonds. Such
bonds may be purchased when yields are attractive.
Securities guaranteed as to principal and interest by the U.S. Government,
its agencies, authorities or instrumentalities are deemed to include (a) secu-
rities for which the payment of principal and interest is backed by an irrevo-
cable letter of credit issued by the U.S. Government, its agencies, authori-
ties or instrumentalities and (b) participations in loans made to foreign gov-
ernments or their agencies that are so guaranteed. The secondary market for
certain of these participations is limited. Such participations may therefore
be regarded as illiquid.
Each Fund may also invest in separately traded principal and interest compo-
nents of securities guaranteed or issued by the U.S. Treasury if such compo-
nents are traded independently under the Separate Trading of Registered Inter-
est and Principal of Securities program ("STRIPS").
The Treasury Instruments and Federal Funds invest in U.S. Treasury Obliga-
tions and the Federal Fund may also invest in certain U.S. Government Securi-
ties the interest from which is generally exempt from state income taxation.
Securities generally eligible for this exemption include those issued by the
U.S. Treasury and those issued by certain agencies, authorities or instrumen-
talities of the U.S. Government, including the Federal Home Loan Banks, Fed-
eral Farm Credit Banks, Tennessee Valley Authority and the Student Loan Mar-
keting Association.
CUSTODIAL RECEIPTS
Each Fund (other than the Treasury Obligations, Treasury Instruments, Gov-
ernment and Federal Funds) may also acquire securities issued or guaranteed as
to principal and interest by the U.S. Government, its agencies, authorities or
instrumentalities in the form of custodial receipts that evidence ownership of
future interest payments, principal payments or both on certain notes or bonds
issued by the U.S. Government, its agencies, authorities or instrumentalities.
For certain securities law purposes, custodial receipts are not considered ob-
ligations of the U.S. Government.
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "U.S. Bank Obligations" limited to securities issued or guaranteed by U.S.
banks (including certificates of deposit, commercial
14
<PAGE>
paper, unsecured bank promissory notes and bankers' acceptances) which have
more than $1 billion in total assets at the time of purchase. Such obligations
may also include debt obligations issued by U.S. subsidiaries of such banks.
The Money Market and Money Market Plus Funds may also invest in "Foreign
Bank Obligations" limited to U.S. dollar-denominated obligations issued or
guaranteed (including fixed time deposits) by foreign banks which have more
than $1 billion in total assets at the time of purchase, U.S. branches of such
foreign banks (Yankee obligations), foreign branches of such foreign banks and
foreign branches of U.S. banks having more than $1 billion in total assets at
the time of purchase. Such bank obligations may be general obligations of the
parent bank or may be limited to the issuing branch by the terms of the spe-
cific obligations or by government regulation.
The Money Market and Money Market Plus Funds will invest more than 25% of
their total assets in bank obligations (whether foreign or domestic), includ-
ing bank commercial paper. However, if adverse economic conditions prevail in
the banking industry (such as substantial losses on loans, increases in non-
performing assets and charge-offs and declines in total deposits) the Funds
may, for defensive purposes, temporarily invest less than 25% of their total
assets in bank obligations. As a result, the Funds may be especially affected
by favorable and adverse developments in or related to the banking industry.
The activities of U.S. banks and most foreign banks are subject to comprehen-
sive regulations which, in the case of U.S. regulations, have undergone sub-
stantial changes in the past decade. The enactment of new legislation or regu-
lations, as well as changes in interpretation and enforcement of current laws,
may affect the manner of operations and profitability of domestic and foreign
banks. Significant developments in the U.S. banking industry have included de-
regulation of interest rates, increased competition from other types of finan-
cial institutions, increased acquisition activity, geographic expansion and,
during the late 1980's, an increased number of bank failures. Banks may be
particularly susceptible to certain economic factors, such as interest rate
changes and adverse developments in the market for real estate. Fiscal and
monetary policy and general economic cycles can affect the availability and
cost of funds, loan demand and asset quality and thereby impact the earnings
and financial conditions of banks. See "Foreign Government Obligations--For-
eign Risks" below.
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "Commercial Paper" (including variable amount master demand notes and as-
set-backed commercial paper) which is payable in U.S. dollars and is issued or
guaranteed by U.S. corporations, U.S. commercial banks, foreign corporations
(Money Market and Money Market Plus Funds only), foreign commercial banks
(Money Market and Money Market Plus Funds only) or other entities. In addi-
tion, the Funds may invest in other short-term obligations (including short-
term funding agreements) payable in U.S. dollars and issued or guaranteed by
U.S. corporations, foreign corporations (Money Market and Money Market Plus
Funds only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations, Money Market and Money Market Plus Funds may invest
in "Asset-Backed and Receivables-Backed Securities" which represent participa-
tions in, or are secured by and payable from, pools of assets such as motor
vehicle installment sale contracts, installment loan contracts, leases of var-
ious types of real and personal property, receivables from revolving credit
(credit card) agreements and other categories of receivables. Such asset pools
are securitized through the use of privately-formed trusts or special purpose
corporations. Payments or distributions of principal and interest may be guar-
anteed up to certain amounts and for a certain
15
<PAGE>
time period by a letter of credit or a pool insurance policy issued by a fi-
nancial institution, or other credit enhancements may be present. To the ex-
tent consistent with its investment objectives and policies, each of the Prime
Obligations, Money Market and Money Market Plus Funds may invest in new types
of mortgage-related securities and in other asset-backed securities that may
be developed in the future.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market and Money Market Plus Funds may invest in U.S. dollar-de-
nominated obligations (limited to commercial paper and other notes) issued or
guaranteed by a foreign government or any entity located or organized in a
foreign country that maintains a short-term foreign currency rating in the
highest short-term ratings category by the requisite number of NRSROs. The
Money Market and Money Market Plus Funds may not invest more than 25% of their
total assets in the securities of any one foreign government.
FOREIGN RISKS. Investments in foreign securities and bank obligations may
present a greater degree of risk than investments in securities of domestic
issuers because of less publicly-available financial and other information,
less securities regulation, potential imposition of foreign withholding and
other taxes, war, expropriation or other adverse governmental actions. Foreign
banks and their foreign branches are not regulated by U.S. banking authori-
ties, and generally are not bound by the accounting, auditing and financial
reporting standards applicable to U.S. banks.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS. Obligations issued by or on behalf of states, terri-
tories and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia, the
interest from which is, in the opinion of bond counsel, if any, excluded from
gross income for federal income tax purposes.
TYPES OF MUNICIPAL INSTRUMENTS:
<TABLE>
<CAPTION>
TAX-FREE MONEY MARKET AND
MUNICIPAL MONEY MARKET FUNDS
-------------------------------------------------------------------------
<S> <C>
FIXED RATE NOTES AND SIMILAR In highest short-term or one of the
DEBT INSTRUMENTS two highest long-term rating
categories
-------------------------------------------------------------------------
VARIABLE AND FLOATING RATE In highest short-term or one of the
DEMAND INSTRUMENTS two highest long-term rating
categories
-------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER In highest rating category
-------------------------------------------------------------------------
MUNICIPAL BONDS In one of the two highest rating
categories
-------------------------------------------------------------------------
UNRATED NOTES, PAPER, BONDS AND Determined to be of comparable quality
OTHER INSTRUMENTS by Adviser pursuant to criteria
approved by the Trustees
</TABLE>
16
<PAGE>
As a matter of fundamental policy, at least 80% of each of the Tax-Free
Money Market and Municipal Money Market Fund's net assets will ordinarily be
invested in Municipal Instruments. Each Tax-Exempt Fund may temporarily invest
in taxable money market instruments when the Adviser believes that the market
conditions dictate a defensive posture. Investments in taxable money market
instruments will be limited to those meeting the quality standards of each
Tax-Exempt Fund. The Prime Obligations, Money Market and Money Market Plus
Funds may invest in short-term obligations issued or guaranteed by state and
municipal governments when yields on such securities are attractive compared
to other taxable investments.
MUNICIPAL NOTES AND BONDS. Municipal notes include tax anticipation notes
("TANs"), revenue anticipation notes ("RANs"), bond anticipation notes
("BANs"), tax and revenue anticipation notes ("TRANs") and construction loan
notes. Municipal bonds include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of the issuing munici-
pality and are considered the safest type of bonds. Revenue bonds are backed
by the revenues of a project or facility such as the tolls from a toll bridge.
Revenue bonds also include lease rental revenue bonds which are issued by a
state or local authority for capital projects and are secured by annual lease
payments from the state or locality sufficient to cover debt service on the
authority's obligations. Industrial development bonds (generally referred to
under current tax law as "private activity bonds") are a specific type of rev-
enue bond backed by the credit and security of a private user and therefore
have more potential risk. Municipal bonds may be issued in a variety of forms,
including commercial paper, tender option bonds and variable and floating rate
securities.
TENDER OPTION BONDS. A tender option bond is a Municipal Instrument (gener-
ally held pursuant to a custodial arrangement) having a relatively long matu-
rity 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 finan-
cial institution, pursuant to which such institution grants the security
holder the option, at periodic intervals, to tender its securities to the in-
stitution and receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees equal to the dif-
ference between the bond's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the 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 pre-
vailing short-term, tax-exempt rate. However, an institution will not be obli-
gated to accept tendered bonds in the event of certain defaults or a signifi-
cant downgrading in the credit rating assigned to the issuer of the bond. The
tender option will be taken into account in determining the maturity of the
tender option bonds and a Fund's average portfolio maturity. There is a risk
that a Fund will not be considered the owner of a tender option bond for fed-
eral income tax purposes and thus will not be entitled to treat such interest
as exempt from federal income tax.
REVENUE ANTICIPATION WARRANTS. Revenue Anticipation Warrants ("RAWs") are
issued in anticipation of the issuer's receipt of revenues and present the
risk that such revenues will be insufficient to satisfy the issuer's payment
obligations. The entire amount of principal and interest on RAWs is due at ma-
turity. RAWs, including those with a maturity of more than 397 days, may also
be repackaged as instruments which include a demand feature that permits the
holder to sell the RAWs to a bank or other financial institution at a purchase
price equal to par plus accrued interest on each interest rate reset date.
FLOATING AND VARIABLE RATE OBLIGATIONS. The value of floating and variable
rate obligations generally is more stable than that of fixed rate obligations
in response to changes in interest rate levels. Variable and floating rate ob-
ligations usually have demand features that permit the Funds to sell them at
par value plus accrued interest
17
<PAGE>
upon short notice. The issuers or financial intermediaries providing demand
features may support their ability to purchase the obligations by obtaining
credit with liquidity supports. These may include lines of credit, which are
conditional commitments to lend and letters of credit, which will ordinarily
be irrevocable, both of which may be issued by domestic banks or foreign banks
which have a branch, agency or subsidiary in the United States. When consider-
ing whether an obligation meets a Fund's quality standards, the Fund will, to
the extent permitted by Rule 2a-7, look to the creditworthiness of the party
providing unconditional demand features or other unconditional obligations to
support the credit of the issuer of the security. A Fund may consider the ma-
turity of a variable or floating rate Municipal Instrument to be shorter than
its ultimate stated maturity if the Fund has the right to demand prepayment of
its principal at specified intervals prior to the security's ultimate stated
maturity, subject to the conditions for using amortized cost valuation under
the Investment Company Act. A Fund may purchase such variable or floating rate
obligations from the issuers or may purchase certificates of participation, a
type of floating or variable rate obligation, which are interests in a pool of
debt obligations held by a bank or other financial institution.
INDUSTRIAL DEVELOPMENT BONDS. The Funds (other than the Treasury Obliga-
tions, Treasury Instruments, Government and Federal Funds) may invest in in-
dustrial development bonds (generally referred to under current tax law as
"private activity bonds"), the interest from which would be an item of tax
preference when distributed as "exempt-interest dividends" to shareholders un-
der the federal alternative minimum tax. See "Taxes" and "Distributions." Mu-
nicipal Fund may invest up to 100% of its assets in private activity bonds.
Tax-Free Fund does not currently intend to invest in such bonds. If Tax-Free
Fund's policy not to invest in private activity bonds should change in the fu-
ture, shareholders would be notified and such investments would not exceed 20%
of Tax-Free Fund's net assets.
OTHER POLICIES. Ordinarily the Tax-Exempt Funds expect that 100% of their
portfolio securities will be Municipal Instruments. However, the Funds may
hold cash or invest in short-term taxable securities as set forth above. Such
Funds may invest 25% or more of the value of their respective total assets in
Municipal Instruments which are related in such a way that an economic, busi-
ness or political development or change affecting one Municipal Instrument
would also affect the other Municipal Instruments. For example, the Tax-Exempt
Funds may invest all of their respective assets in (a) Municipal Instruments
the interest on which is paid solely from revenues from similar projects such
as hospitals, electric utility systems, multi-family housing, nursing homes,
commercial facilities (including hotels), steel companies or life care facili-
ties, (b) Municipal Instruments whose issuers are in the same state or (c) in-
dustrial development obligations. Concentration of a Fund's investments in
these Municipal Instruments will subject the Fund, to a greater extent than if
such investment was more limited, to the risks of adverse economic, business
or political developments affecting any such state, industry or other area of
concentration.
Each Fund (other than the Treasury Obligations, Treasury Instruments, Gov-
ernment and Federal Funds) may purchase Municipal Instruments which are backed
by letters of credit, which will ordinarily be irrevocable, issued by domestic
banks or foreign banks (excluding Prime Obligations Fund) which have a branch,
agency or subsidiary in the United States. In addition, these Funds may ac-
quire securities in the form of custodial receipts which evidence ownership of
future interest payments, principal payments or both on obligations of certain
state and local governments and authorities.
In order to enhance the liquidity, stability, or quality of a Municipal In-
strument, each Fund (other than the Treasury Obligations, Treasury Instru-
ments, Government and Federal Funds) may acquire the right to sell the secu-
rity to another party at a guaranteed price and date.
18
<PAGE>
REPURCHASE AGREEMENTS
Each Fund (other than the Treasury Instruments Fund) may only enter into re-
purchase agreements with primary dealers in U.S. Government Securities. A re-
purchase agreement is an agreement under which a Fund purchases securities and
the seller agrees to repurchase the securities within a particular time at a
specified price. Such price will exceed the original purchase price, the dif-
ference being income to the Fund, and will be unrelated to the interest rate
on the purchased security. A Fund's custodian or sub-custodian will maintain
custody of the purchased securities for the duration of the agreement. The
value of the purchased securities, including accrued interest, will at all
times equal or exceed the value of the repurchase agreement. In the event of
bankruptcy of the seller or failure of the seller to repurchase the securities
as agreed, a Fund could suffer losses, including loss of interest on or prin-
cipal of the security and costs associated with delay and enforcement of the
repurchase agreement. In evaluating whether to enter into a repurchase agree-
ment, the Adviser will carefully consider the creditworthiness of the seller
pursuant to procedures reviewed and approved by the Trustees. Distributions of
the income from repurchase agreements entered into by a Fund will be taxable
to its shareholders. In addition, each Fund, together with other registered
investment companies having management agreements with the Adviser or any of
its affiliates, may 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.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Fund may purchase when-issued securities and make contracts to purchase
or sell securities for a fixed price at a future date beyond customary settle-
ment time. A Fund is required to hold and maintain in a segregated account
with the Fund's custodian or sub-custodian until three days prior to settle-
ment date, cash or liquid assets in an amount sufficient to meet the purchase
price. Alternatively, a Fund may enter into offsetting contracts for the for-
ward sale of other securities that it owns. Securities purchased or sold on a
when-issued or forward commitment basis involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date or if the
value of the security to be sold increases prior to the settlement date. Al-
though a Fund would generally purchase securities on a when-issued or forward
commitment basis with the intention of acquiring securities for its portfolio,
the Fund may dispose of a when-issued security or forward commitment prior to
settlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The Adviser will determine, under guidelines established by the Trustees,
whether securities issued by other money market investment companies present
minimal credit risks. The amount of each Fund's investments in securities of
other investment companies will be subject to the limitations on such invest-
ments prescribed by the Investment Company Act. These limits include a prohi-
bition on any Fund acquiring more than 3% of the voting shares of any other
investment company and a prohibition on investing more than 5% of a Fund's to-
tal assets in securities of any one investment company or more than 10% of its
total assets in securities of all investment companies. Each Fund will indi-
rectly bear its proportionate share of any management fees and other expenses
paid by such other investment companies. Such other investment companies will
have investment objectives, policies and restrictions substantially similar to
those of the acquiring Fund and will be subject to substantially the same
risks.
INVESTMENT LIMITATIONS
TAXABLE AND TAX-EXEMPT FUNDS. Each Fund will comply with the conditions for
using amortized cost valuation set forth in Rule 2a-7 under the Investment
Company Act including, but not limited to, those condi-
19
<PAGE>
tions relating to maturity, diversification and credit quality. These operat-
ing policies may be more restrictive than the fundamental policies set forth
in the Statement of Additional Information.
INVESTMENT RESTRICTIONS. Each Fund is subject to certain investment restric-
tions that are described in detail under "Investment Restrictions" in the
Statement of Additional Information. Fundamental investment restrictions of a
Fund cannot be changed without approval of a majority of the outstanding
shares of that Fund. Treasury Obligations Fund's policy of limiting its in-
vestments to U.S. Treasury Obligations and related repurchase agreements is
also fundamental. All investment objectives and policies not specifically des-
ignated as fundamental are non-fundamental and may be changed without share-
holder approval.
RESTRICTED AND OTHER ILLIQUID SECURITIES. Each Fund may purchase securities
that are not registered ("restricted securities") under the Securities Act of
1933 ("1933 Act"), but can be offered and sold to "qualified institutional
buyers" under Rule 144A under the 1933 Act. However, a Fund will not invest
more than 10% of its net assets in illiquid investments, which include fixed
time deposits maturing in more than seven days and restricted securities.
Restricted securities (including commercial paper issued pursuant to Section
4(2) of the 1933 Act) which the Board of Trustees has determined are liquid,
based upon a continuing review of the trading markets for the specific re-
stricted security, will not be deemed to be illiquid investments for purposes
of this restriction. The Board of Trustees may adopt guidelines and delegate
to the Adviser the daily function of determining and monitoring the liquidity
of restricted securities. The Board, however, will retain sufficient oversight
and be ultimately responsible for the determinations. Since it is not possible
to predict with assurance that the market for restricted securities eligible
for resale under Rule 144A will continue to be liquid, the Adviser will care-
fully monitor each Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in a Fund to the extent that qualified institutional buy-
ers become for a time uninterested in purchasing these restricted securities.
In addition, each Fund may not invest in repurchase agreements maturing in
more than seven days and securities which are not readily marketable if, as a
result thereof, more than 10% of the net assets of that Fund (taken at market
value) would be invested in such investments. Certain repurchase agreements
which mature in more than seven days can be liquidated before the nominal
fixed term on seven days or less notice. Such repurchase agreements will be
regarded as liquid instruments.
MANAGEMENT
THE ADVISER
GSAM, One New York Plaza, New York, New York 10004, a separate operating di-
vision of Goldman, Sachs & Co., acts as investment adviser to the Funds.
Goldman Sachs registered as an investment adviser in 1981. As of March 24,
1997, Goldman Sachs, together with its affiliates, acted as investment advis-
er, administrator or distributor for approximately $104.9 billion in assets.
As of November 29, 1996, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $112 billion and partners' capital of $2 billion and
ranked as one of the largest international investment banking and brokerage
firms in the United States. Founded in 1869, Goldman Sachs is a major invest-
ment banking and brokerage firm providing a broad range of financing and in-
vestment services both in the United States and abroad.
20
<PAGE>
Pursuant to an SEC order, each Taxable and Tax-Advantaged Fund may enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
Under the Management Agreement, GSAM continually manages each Fund, includ-
ing the purchase, retention and disposition of its securities and other as-
sets. In addition, GSAM administers each Fund's business affairs and performs
various shareholder servicing functions to the extent not provided by other
organizations. The management of each Fund is subject to the supervision of
the Trustees and each Fund's investment policies. For these services, the
Trust, on behalf of each Fund, pays GSAM a monthly fee at an annual rate of
each Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
CONTRACTUAL DECEMBER 31,
RATE 1996
----------- ------------
<S> <C> <C>
Financial Square Prime Obligations Fund................ .205% .17%
Financial Square Money Market Fund..................... .205% .17%
Financial Square Money Market Plus Fund................ .205% N/A
Financial Square Treasury Obligations Fund............. .205% .17%
Financial Square Treasury Instruments Fund............. .205% N/A
Financial Square Government Fund....................... .205% .17%
Financial Square Federal Fund.......................... .205% N/A
Financial Square Tax Free Money Market Fund............ .205% .17%
Financial Square Municipal Money Market Fund........... .205% N/A
</TABLE>
A Management Agreement combining both advisory and administrative services
was adopted effective April 30, 1997. The contractual rate set forth in the
table is the rate payable under the Management Agreement and is identical to
the aggregate advisory and administration fees payable by each Fund under the
previously separate investment advisory and administration agreements. For the
fiscal year ended December 31, 1996, the annual rate expressed is the combined
advisory and administration fees paid (after voluntary fee limitations). The
difference, if any, between the stated fees and the actual fees paid by the
Funds reflects the fact that the Investment Adviser did not charge the full
amount of the fees to which it would have been entitled.
GSAM has agreed not to impose a portion of its management fee and/or to re-
duce or otherwise limit the total operating expenses of each Fund (excluding
fees payable to Service Organizations, as defined herein, taxes, interest,
brokerage and litigation, indemnification and other extraordinary expenses).
GSAM has no current intention to but may in the future discontinue or modify
any of such reductions or limitations at its discretion.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of shares of each Fund pursuant to a Distribution Agreement with the
Trust. The Distributor will assist in the sale of shares of each Fund upon the
terms described herein. Goldman Sachs also serves as the Transfer Agent of
each Fund.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold shares of the Funds in order to increase the assets of the Funds. In-
creasing the Fund's assets may enhance investment flexibility and diversifica-
tion. Goldman Sachs reserves the right to redeem at any time some or all of
the Fund shares acquired for its own account. Goldman Sachs will consider the
effect of redemptions on the Funds and other shareholders in deciding whether
to redeem its shares.
TAXES
Each Fund is treated as a separate entity for federal income tax purposes.
The Treasury Instruments and Federal Funds intend to elect and each other Fund
has elected to be treated as a regulated investment company
21
<PAGE>
and each Fund intends to continue to qualify for such treatment under
Subchapter M of the Internal Revenue Code of 1986 (the "Code") for each tax-
able year. To qualify as such, each Fund must satisfy certain requirements re-
lating to the sources of its income, diversification of its assets and distri-
bution of its income to shareholders. As a regulated investment company, each
Fund will not be subject to federal income or excise tax on any net investment
income and net realized capital gains that are distributed to its shareholders
in accordance with certain timing requirements of the Code.
Dividends paid by a Fund from net investment income, the excess of net
short-term capital gain over net long-term capital loss and taxable original
issue discount or market discount income will be taxable to shareholders as
ordinary income, except for any "exempt-interest dividends" paid by the Tax-
Exempt Funds, as described below. Dividends paid by a Fund from the excess of
net long-term capital gain over net short-term capital loss will be taxable as
long-term capital gain regardless of how long the shareholders have held their
shares. These tax consequences will apply to distributions of any Fund
regardless of whether distributions are received in cash or reinvested in
shares. Certain distributions paid by the Funds in January of a given year
will be taxable to shareholders as if received on December 31 of the year in
which they are declared. Shareholders will be informed annually about the
amount and character of distributions received from the Funds for federal
income tax purposes, including any distributions that may constitute a return
of capital or any distributions of Municipal Fund that may constitute a tax
preference item under the federal alternative minimum tax.
The Tax-Exempt Funds intend to satisfy certain requirements of the Code for
the payment of "exempt-interest dividends" not included in shareholders' fed-
eral gross income. Dividends paid by these Funds from interest on tax-exempt
obligations and properly designated by the Funds as exempt-interest dividends,
including dividends attributable to exempt-interest dividends received by a
Fund from other regulated investment companies, will generally be exempt from
federal income tax, although a portion of such dividends may be subject to the
federal alternative minimum tax. Exempt-interest dividends will be considered
in computing the corporate federal alternative minimum tax, and the extent, if
any, to which social security or railroad retirement benefits are taxable.
Persons who are "substantial users" of facilities financed by certain indus-
trial development or private activity bonds should consult their own tax ad-
visers before purchasing shares of these Funds. Interest incurred to purchase
or carry shares of these Funds will not be deductible for federal income tax
purposes to the extent related to exempt-interest dividends paid by the Funds.
Individuals and certain other classes of shareholders may be subject to 31%
backup withholding of federal income tax on taxable distributions if they fail
to furnish their correct taxpayer identification number and certain certifica-
tions required by the Internal Revenue Service or if they are otherwise sub-
ject 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 ordi-
nary dividends from the Funds.
If a Fund invests in foreign securities, it may be subject to foreign with-
holding or other foreign taxes on income earned on such securities and is ex-
pected to be unable to pass such taxes through to shareholders, who therefore
are not expected to include such taxes in income or be entitled to claim for-
eign tax credits or deductions with respect to such taxes.
In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on payments received from a Fund. A state income (and possi-
bly local income and/or intangible property) tax exemption is generally avail-
able to the extent a Fund's distributions are derived from interest on (or, in
the case of intangible property taxes, the value of its assets is attributable
to) certain U.S. Government obligations and/or tax-exempt
22
<PAGE>
municipal obligations issued by or on behalf of the particular state or a po-
litical 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 concerning these matters.
NET ASSET VALUE
The net asset value of each Fund (other than the Government, Treasury Obli-
gations and Money Market Plus Funds) is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. New York time) on
each Business Day. The net asset value of Government, Treasury Obligations and
Money Market Plus Funds is determined as of 5:00 p.m. New York time on each
Business Day. Net asset value per share for each class of shares of each Fund
is calculated by determining the amount of net assets attributable to each
class of shares and dividing by the number of shares for such class.
On any Business Day, as defined herein, when the Public Securities Associa-
tion ("PSA") recommends that the securities markets close early, the Treasury
Instruments and Federal Funds will cease, and each other Fund reserves the
right to cease, accepting purchase and redemption orders for same Business Day
credit at the time PSA recommends that the securities markets close. On days
any Fund closes early, purchase and redemption orders received after the PSA
recommended closing time will be credited to the next Business Day. In addi-
tion, each Fund reserves the right to advance the time by which purchase and
redemption orders must be received for same Business Day credit as permitted
by the SEC.
Each Fund seeks to maintain a net asset value of $1.00 per share. In this
connection, each Fund values its portfolio securities on the basis of amor-
tized cost. The amortized cost method values a security at its cost on the
date of purchase and thereafter assumes a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. For a more complete description
of the amortized cost valuation method and its effect on existing and prospec-
tive shareholders, see the Statement of Additional Information. There can be
no assurance that a Fund will be able at all times to maintain a net asset
value per share of $1.00.
YIELD INFORMATION
From time to time, each Fund may advertise its yield, effective yield and
average annual total return. Average annual total return is determined by com-
puting the average annual percentage change in value of $1,000 invested at the
maximum public offering price for a specified period of at least one year, as-
suming reinvestment of all dividends and distributions at net asset value. The
total return calculation assumes a complete redemption of the investment at
the end of the relevant period. Each Fund may furnish total return calcula-
tions based on a cumulative, average, year-by-year or other basis for various
specified periods by means of quotations, charts, graphs or schedules. The
yield of a Fund refers to the income generated by an investment in that Fund
over a seven-day period (which period will be stated in the advertisement).
This income is then annualized; that is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
23
<PAGE>
The Tax-Exempt Funds and the Federal and Treasury Instruments Funds may each
also quote tax-equivalent yield. Each Fund's tax-equivalent yield is calcu-
lated by determining the rate of return that would have to be achieved on a
fully taxable investment to produce the after-tax equivalent of the Fund's
yield, assuming certain tax brackets for a shareholder.
Investors should note that the investment results of a Fund are based on
historical performance and will fluctuate over time. Any presentation of a
Fund's total return, yield, effective yield or tax-equivalent yield for any
prior period should not be considered a representation of what an investment
may earn or what a Fund's total return, yield, effective yield or tax-equiva-
lent yield may be in any future period. In addition to the above, each Fund
may from time to time advertise its performance relative to certain averages,
performance rankings, indices, other information prepared by recognized mutual
fund statistical services and investments for which reliable performance data
is available.
Total return, yield, effective yield and tax-equivalent yield will be calcu-
lated separately for each class of shares in existence. Because each such
class of shares is subject to different expenses, the total return and net
yield of such classes of a Fund for the same period may differ. See "Organiza-
tion and Shares of the Trust" below.
ORGANIZATION AND SHARES OF THE TRUST
Each Fund is a series of the Goldman Sachs Trust, which was formed under the
laws of the State of Delaware on January 28, 1997. The Funds were formerly se-
ries of Goldman Sachs Money Market Trust, a Massachusetts business trust, and
were reorganized into the Trust as of April 30, 1997. The Trustees have au-
thority under the Trust's Declaration of Trust to create and classify shares
of beneficial interest in separate series, without further action by share-
holders. Additional series may be added in the future. The Trustees also have
authority to classify or reclassify any series or portfolio of shares into one
or more classes. (Institutions that provide services to holders of FST Pre-
ferred Shares, FST Administration Shares or FST Service Shares are referred to
in this Prospectus as "Service Organizations").
When issued, shares are fully paid and nonassessable. In the event of liqui-
dation, shareholders are entitled to share pro rata in the net assets of the
applicable Fund available for distribution to such shareholders. All shares
are freely transferable and have no preemptive, subscription or conversion
rights. Shareholders are entitled to one vote per share, provided that, at the
option of the Trustees, shareholders will be entitled to a number of votes
based upon the net asset values represented by their shares.
Shares of a Fund will be voted seperately by Fund with respect to matters
pertaining to that Fund except for the election of Trustees and ratification
of independent accountants. For example, shareholders of each Fund are re-
quired to approve the adoption of any management agreement relating to that
Fund and any changes in fundamental investment restrictions or policies of
such Fund. Approval by the shareholders of one Fund is effective only as to
that Fund.
As of April 1, 1997, Harris Trust & Savings Bank, 200 W. Monroe St. Fl 12,
Chicago, IL 60606, owned of record 40.64% of the outstanding shares of Trea-
sury Instruments Fund.
The Trust does not intend to hold annual meetings of shareholders. However,
pursuant to the Trust's By-Laws, the recordholders of at least 10% of the
shares outstanding and entitled to vote at a special meeting may require the
Trust to hold such special meeting of shareholders for any purpose, and
recordholders may, under certain circumstances, as permitted by the Investment
Company Act, communicate with other shareholders in connection with requiring
a special meeting of shareholders. The Trustees will call a special meeting of
shareholders 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.
24
<PAGE>
ADMINISTRATION
Each Fund has adopted a Preferred Administration Plan with respect to the
FST Preferred Shares which authorizes it to compensate certain institutions
for providing account administration services to their customers who are bene-
ficial owners of such Shares (each a "Service Organization"). Each Fund will
enter into agreements with Service Organizations which purchase FST Preferred
Shares on behalf of their customers ("Service Agreements"). The Service Agree-
ments will provide for compensation to the Service Organization in an amount
up to .10% (on an annualized basis) of the average daily net asset value of
the FST Preferred Shares of that Fund attributable to or held in the name of
the Service Organization for its customers. The services provided by a Service
Organization may include acting, directly or through an agent, as the sole
shareholder of record, maintaining account records for its customers, and
processing orders to purchase, redeem and exchange FST Preferred Shares for
its customers.
For the fiscal year ended December 31, 1996, the Trust, on behalf of Prime
Obligations Fund, Money Market Fund, Treasury Obligations Fund, Government
Fund and Tax-Free Fund paid Service Organizations fees at the annual rate of
.10% of each Fund's average daily net assets attributable to FST Preferred Ad-
ministration Shares.
Holders of FST Preferred Shares of a Fund will bear all expenses and fees
paid to Service Organizations with respect to such Shares as well as any other
expenses which are directly attributable to such Shares.
Service Organizations may charge other fees to their customers who are the
beneficial owners of FST Preferred Shares in connection with their customer
accounts. These fees would be in addition to any amounts received by the Serv-
ice Organization under a Service Agreement and may affect an investor's return
with respect to an investment in a Fund.
All inquiries of beneficial owners of FST Preferred Shares of the Funds
should be directed to such owners' Service Organization.
PURCHASE OF SHARES
It is expected that all direct purchasers of FST Preferred Shares will be
Service Organizations or their nominees, which may purchase FST Preferred
Shares of the Funds through Goldman Sachs. Customers of Service Organizations
may invest in such shares only through their Service Organizations.
As set forth below, FST Preferred Shares of the Funds may be purchased on
any Business Day at the net asset value next determined after receipt from the
Service Organization of both the purchase order and the purchase amount in
federal funds. Purchase orders may be made by telephoning Goldman Sachs at
800-621-2550 or by a written request addressed to Goldman Sachs, Attention:
Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois
60606. It is strongly recommended that payment be effected by wiring federal
funds to The Northern Trust Company ("Northern"), Chicago, Illinois, as the
sub-custodian for State Street Bank and Trust Company ("State Street").
Purchases of FST Preferred Shares may also be made by a Service Organization
by delivering a Federal Reserve draft or check (except that a third party
check will not be accepted) payable only to the appropriate Fund and drawn on
a U.S. bank to Goldman Sachs, Attention: Shareholder Services, Goldman Sachs
Trust, 4900
25
<PAGE>
Sears Tower, Chicago, Illinois 60606. It is expected that Federal Reserve
drafts will ordinarily be converted to federal funds on the day of receipt and
that checks will be converted to federal funds within two Business Days after
receipt. FST Preferred Shares purchased by check may not be redeemed until the
check has cleared, as described under "Redemption of Shares."
Purchases of shares of any Fund may also be made through an Automated Clear-
ing House ("ACH") transfer to Goldman Sachs Trust c/o Northern, as
subcustodian for State Street. Purchase orders are effected at the net asset
value next determined after receipt of both the purchase order and the pur-
chase amount in federal funds. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer.
FST Preferred Shares of each Fund are deemed to have been purchased when an
order becomes effective and are entitled to dividends on FST Preferred Shares
purchased as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF ORDER IS RECEIVED FROM A SERVICE
ORGANIZATION BY GOLDMAN SACHS DIVIDENDS BEGIN
----------------------------------- ---------------
<C> <S> <C> <C> <C>
(1) In the case of the Taxable and Tax-Advantaged Funds
(except for Government, Treasury Obligations
and Money Market Plus Funds)
By: 3:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 3:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
(2) In the case of the Government, Treasury Obligations
and Money Market Plus Funds
By: 5:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 5:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
(3) In the case of the Municipal Fund
By: 1:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 1:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
(4) In the case of the Tax-Free Fund
By: 2:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 2:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
</TABLE>
The Service Organizations are responsible for timely transmittal of purchase
orders to Goldman Sachs and federal funds to Northern. In order to facilitate
timely transmittal, the Service Organizations have established times by which
purchase orders and Federal Funds must be received by them.
A Business Day means any day on which the New York Stock Exchange is open,
except for days on which Chicago, Boston or New York banks are closed for lo-
cal holidays.
26
<PAGE>
FST Preferred Shares of a Fund are purchased at the net asset value per
share without the imposition of a sales charge. Goldman Sachs, as each Fund's
transfer agent, will maintain a complete record of transactions and FST Pre-
ferred Shares held in each record holder's account. The Trust and Goldman
Sachs each reserves the right to reject any purchase order for any reason.
MINIMUM INVESTMENT AND OTHER INFORMATION
The minimum initial investment requirement is $10 million, which may be al-
located among the Funds. The Trust and Goldman Sachs each reserves the right
to waive the minimum investment requirement. A Service Organization may impose
a minimum amount for initial and subsequent investments in FST Preferred
Shares of the Funds, and may establish other requirements such as a minimum
account balance. A Service Organization may effect redemptions of noncomplying
accounts, and may impose a charge for any special services rendered to its
customers. Customers should contact their Service Organizations for further
information concerning such requirements and charges. A Service Organization
may purchase FST Preferred Shares in connection with sweep account programs.
SUBSEQUENT INVESTMENTS
There is no minimum amount required for subsequent investments. Orders for
the purchase of additional FST Preferred Shares should be accompanied by in-
formation identifying the account and the Fund in which FST Preferred Shares
are to be purchased.
REPORTS TO SHAREHOLDERS
The Trust will issue an annual report containing audited financial state-
ments and a semi-annual report to record holders of FST Preferred Shares of
each Fund, including Service Organizations who hold such Shares for the bene-
fit of their customers. Upon request, a printed confirmation for each transac-
tion will be provided by Goldman Sachs. Any dividends and distributions paid
by the Funds are also reflected in regular statements issued by Goldman Sachs
to shareholders of record. Service Organizations will be responsible for pro-
viding similar services to their own customers who are the beneficial owners
of such Shares.
DISTRIBUTIONS
All or substantially all of each Fund's net investment income will be de-
clared daily (as of 4:00 p.m. New York time for each Fund other than the Gov-
ernment, Treasury Obligations and Money Market Plus Funds and as of 5:00 p.m.
New York time for the Government, Treasury Obligations and Money Market Plus
Funds) as a dividend and distributed to Service Organizations monthly. Distri-
butions will be made in additional FST Preferred Shares of the same Fund or,
at the election of a Service Organization, in cash. The election to reinvest
dividends and distributions or receive them in cash may be changed by a Serv-
ice Organization at any time upon written notice to Goldman Sachs. If no elec-
tion is made, all dividends and capital gain distributions will be reinvested.
Dividends will be reinvested as of the last calendar day of each month. Cash
distributions will be paid on or about the first business day of each month.
Net short-term capital gains, if any, will be distributed in accordance with
the requirements of the Code and may be reflected in the Fund's daily distri-
butions. Each Fund may distribute at least annually its long-term capital
gains, if any, after reduction by available capital losses. In order to avoid
excessive fluctuations in the amount of monthly capital gains distributions, a
portion of any net capital gains realized on the disposition of securities
during the months of November and December may be distributed during the sub-
sequent calendar year. Although realized gains and losses on the assets of a
Fund are reflected in the net asset value of the Fund, they are not expected
to be of an amount which would affect the Fund's net asset value of $1.00 per
share.
27
<PAGE>
The income declared as a dividend for the Treasury Obligations, Government
and Money Market Plus Funds is based on estimates of net investment income for
the Fund. Actual income may differ from estimates, and differences, if any,
will be included in the calculation of subsequent dividends.
A Fund's net investment income consists of the excess of (i) accrued inter-
est or discount (including both original issue and market discount on taxable
securities) on portfolio securities, and (ii) any income of the Fund from
sources other than capital gains over (iii) the amortization of market premium
on all portfolio securities and (iv) the estimated expenses of the Fund, in-
cluding a proportionate share of the general expenses of the Trust.
EXCHANGES
FST Preferred Shares of each Fund may be exchanged by Service Organizations
for FST Preferred Shares of any other Financial Square Fund at the net asset
value next determined either by writing to Goldman Sachs, Attention: Share-
holder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago, Illinois
60606, if previously elected in the Account Information Form, or by calling
Goldman Sachs at 800-621-2550. All telephone exchanges must be registered in
the same name(s) and with the same address as are registered in the Fund from
which the exchange is being made. It may be difficult to implement the tele-
phone exchange privilege in times of drastic economic or market changes. In an
effort to prevent unauthorized or fraudulent exchange requests by telephone,
Goldman Sachs employs reasonable procedures as set forth under "Redemption of
Shares" to confirm that such instructions are genuine. Exchanges are available
only in states where the exchange may legally be made. The exchange privilege
may be modified or withdrawn at any time on 60 days' written notice.
REDEMPTION OF SHARES
HOW TO REDEEM
Customers of Service Organizations may redeem FST Preferred Shares of a Fund
through their respective Service Organizations. The Service Organizations are
responsible for the transmittal of redemption requests by their customers to
Goldman Sachs. In order to facilitate timely transmittal of redemption re-
quests, Service Organizations have established procedures by which redemption
requests must be made and times by which redemption requests must be received
by them. Additional documentation may be required when deemed appropriate by a
Service Organization.
A Service Organization may redeem such Shares without charge upon request on
any Business Day at the net asset value next determined after receipt by
Goldman Sachs of the redemption request. Redemption requests may be made by
telephoning Goldman Sachs at 800-621-2550 or by a written request addressed to
Goldman Sachs, Attention: Shareholder Services, Goldman Sachs Trust, 4900
Sears Tower, Chicago, Illinois 60606. A Service Organization may request re-
demptions by telephone only if the optional telephone redemption privilege has
been elected on the Account Information Form. It may be difficult to implement
redemptions by telephone in times of drastic economic or market changes.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, Goldman Sachs employs reasonable procedures specified by the Trust
to confirm that such instructions are genuine. Among other things, any redemp-
tion request that requires money to go to an account or address other than
that designated on
28
<PAGE>
the Account Information Form must be in writing and signed by an authorized
person designated on the Account Information Form. Any such written request is
also confirmed by telephone with both the requesting party and the designated
bank account to verify instructions. Other procedures may be implemented from
time to time. If reasonable procedures are not implemented, the Trust may be
liable for any loss due to unauthorized or fraudulent transactions. In all
other cases, neither the Trust nor Goldman Sachs will be responsible for the
authenticity of redemption instructions received by telephone. A redemption
may also be made with respect to certain Funds by means of the check redemp-
tion privilege described in the Statement of Additional Information. Goldman
Sachs reserves the right to redeem accounts with balances below $500.
Additional documentation may be required by Goldman Sachs in order to estab-
lish that a redemption request has been properly authorized. A redemption re-
quest will not be considered to have been received in proper form until such
additional documentation has been submitted to Goldman Sachs by the Service
Organization. The payment of redemption proceeds for FST Preferred Shares re-
cently purchased by check will be delayed for up to 15 days until the check
has cleared.
PAYMENT OF REDEMPTION PROCEEDS AND DIVIDENDS
In accordance with the following, redemption proceeds will be wired to the
record holder of FST Preferred Shares.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION REQUEST
RECEIVED FROM REDEMPTION
SERVICE ORGANIZATION PROCEEDS
BY GOLDMAN SACHS ORDINARILY DIVIDENDS
-------------------- ---------- ---------
<C> <S> <C> <C>
(1) In the case of the Taxable and Tax-Advantaged Funds (except for
Government, Treasury Obligations and Money Market Plus Funds)
By: 3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ----------------------------------------------------------------------------
After: 3:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- ----------------------------------------------------------------------------
(2) In the case of the Government, Treasury Obligations and Money
Market Plus Funds
By: 5:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ----------------------------------------------------------------------------
After: 5:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- ----------------------------------------------------------------------------
(3) In the case of the Municipal Fund
By: 12:00 noon--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ----------------------------------------------------------------------------
After: 12:00 noon--N.Y. time Wired Next Business Day Earned on Day
request is received
- ----------------------------------------------------------------------------
(4) In the case of the Tax-Free Fund
By: 1:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ----------------------------------------------------------------------------
After: 1:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- ----------------------------------------------------------------------------
</TABLE>
29
<PAGE>
The Funds will arrange for the proceeds of redemptions effected by any means
to be wired as federal funds to the Service Organization's bank account desig-
nated in the Account Information Form. Redemption proceeds will normally be
wired as set forth above, but may be paid up to three Business Days after re-
ceipt of the Service Organization's properly executed redemption request. For
example, payment may be delayed if the Federal Reserve Bank is closed on the
day redemption proceeds would ordinarily be wired. After a wire has been ini-
tiated by Goldman Sachs, neither Goldman Sachs nor the Trust assumes any fur-
ther responsibility for the performance of intermediaries or the FST Preferred
Shareholder's Service Organization in the transfer process. If a problem with
such performance arises, the FST Preferred Shareholder should deal directly
with such intermediaries or Service Organization.
OTHER REDEMPTION INFORMATION
A minimum account balance of $10 million is required to remain a FST Pre-
ferred Shareholder. The Funds may redeem all of the FST Preferred Shares of
any FST Preferred Shareholder whose account has a net asset value which is
less than the minimum described above. The Trust will give sixty (60) days'
prior written notice to such shareholders whose FST Preferred Shares are being
redeemed to allow them to purchase sufficient additional FST Preferred Shares
to avoid such redemption.
----------------
30
<PAGE>
APPENDIX
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON ACCOUNT INFORMATION FORM
You are required by law to provide the Fund with your correct Social Secu-
rity 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 and to sign your name in 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, ex-
changes and other payments relating to your account.
Any tax withheld may be credited against taxes owed on your federal income
tax return.
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 Reve-
nue Service (IRS). Backup withholding could apply to payments relating to your
account prior to the Fund's receipt of your TIN.
Special rules apply for certain entities. For example, for an account estab-
lished under a Uniform Gifts or Transfers to Minors Act, the TIN of the minor
should be furnished.
If you have been notified by the IRS that you are subject to backup with-
holding 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 with-
holding should cease, you must cross out item (2) in the certification section
of the Account Information Form.
If you are an exempt recipient, you should furnish your TIN and certify your
exemption by signing the Certification section and writing "exempt" after your
signature. Exempt recipients include: corporations, tax-exempt pension plans
and IRA's, governmental agencies, financial institutions, registered securi-
ties and commodities dealers and others.
If you are a nonresident alien or foreign entity, you must provide a com-
pleted Form W-8 to the Fund in order to avoid backup withholding on certain
payments. Other payments to you may be subject to non-resident alien withhold-
ing of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FST PREFERRED SHARES
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE: 800-621-2550
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder and Fund Expenses.............................................. 2
Financial Highlights....................................................... 4
An Introduction to the Funds............................................... 10
Investment Policies Matrix................................................. 12
Description of Securities and Investment Techniques........................ 14
Investment Limitations..................................................... 20
Management................................................................. 21
Taxes...................................................................... 22
Net Asset Value............................................................ 23
Yield Information.......................................................... 23
Organization and Shares of the Trust....................................... 24
Administration............................................................. 25
Purchase of Shares......................................................... 25
Reports to Shareholders.................................................... 27
Distributions.............................................................. 27
Exchanges.................................................................. 28
Redemption of Shares....................................................... 28
Appendix................................................................... A-1
</TABLE>
FST-1PRE-MMT6K/596
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
FINANCIAL SQUARE FUNDS
FST PREFERRED SHARES
-----------
PROSPECTUS
-----------
MANAGED BY
GOLDMAN SACHS ASSET MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
GOLDMAN SACHS--INSTITUTIONAL LIQUID ASSETS
4900 Sears Tower
Chicago, Illinois 60606
STATEMENT OF ADDITIONAL INFORMATION -- MAY 1, 1997
ILA UNITS
Goldman Sachs Trust (the "Trust") is a no-load, open-end management
investment company (or mutual fund) which includes the Goldman Sachs--
Institutional Liquid Assets portfolios. This Statement of Additional Information
relates solely to the offering of ILA Units of:
Prime Obligations Portfolio;
Money Market Portfolio;
Treasury Obligations Portfolio;
Treasury Instruments Portfolio;
Government Portfolio;
Federal Portfolio;
Tax-Exempt Diversified Portfolio;
Tax-Exempt California Portfolio; and
Tax-Exempt New York Portfolio (individually, a "Portfolio" and collectively
the "Portfolios").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the
Portfolios' investment adviser. Goldman Sachs serves as distributor and
transfer agent to the Portfolios.
The Goldman Sachs Funds offers banks, corporate cash managers, investment
advisers and other institutional investors a family of professionally-managed
mutual funds, including money market, fixed income and equity funds, and a range
of related services. All products are designed to provide clients with the
benefit of the expertise of GSAM and its affiliates in security selection, asset
allocation, portfolio construction and day-to-day management.
The hallmark of the Goldman Sachs Funds is personalized service, which
reflects the priority that Goldman Sachs places on serving clients' interests.
As Goldman Sachs clients, unitholders will be assigned an Account Administrator
("AA"), who is ready to help unitholders with questions concerning their
accounts. During business hours, unitholders can call their AA through a toll-
free number to place purchase or redemption orders or to obtain Portfolio and
account information. The AA can also answer inquiries about rates of return and
portfolio composition/ holdings, and guide unitholders through operational
details. A Goldman Sachs client can also utilize the SMART/SM/ personal
computer
<PAGE>
software system which allows unitholders to purchase and redeem units and also
obtain Portfolio and account information directly.
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus relating to ILA Units dated
May 1, 1997, as amended and supplemented from time to time, a copy of which may
be obtained without charge by calling Goldman, Sachs & Co. at 800-621-2550 or by
writing Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
------------
<S> <C>
Investment Policies and Practices
of the Portfolios.................... 4
Investment Limitations................. 43
Trustees and Officers.................. 47
The Adviser, Distributor and Transfer
Agent.................................. 52
Portfolio Transactions................. 56
Net Asset Value........................ 58
Redemptions............................ 60
Calculation of Yield Quotations........ 60
Tax Information........................ 64
Organization and Capitalization........ 70
Custodian and Subcustodian............. 76
Independent Accountants................ 76
Financial Statements................... 76
Appendix A (Description of Securities
Ratings)............................. A-1
</TABLE>
3
<PAGE>
INVESTMENT POLICIES AND PRACTICES
OF THE PORTFOLIOS
The following discussion elaborates on the description of each
Portfolio's investment policies and practices contained in the Prospectus:
U.S. GOVERNMENT SECURITIES
Each Portfolio may invest in separately traded principal and interest
components of securities issued or guaranteed by the U.S. Treasury. The
principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently.
CUSTODIAL RECEIPTS
Each Portfolio (other than Treasury Obligations Portfolio, Treasury
Instruments Portfolio, Federal Portfolio and Government Portfolio) may also
acquire custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Government notes or bonds. Such
notes and bonds are held in custody by a bank on behalf of the owners. These
custodial receipts are known by various names, including "Treasury Receipts,"
"Treasury Investors Growth Receipts" ("TIGR's"), and "Certificates of Accrual on
Treasury Securities" ("CATS"). Although custodial receipts are not considered
U.S. Government Securities for certain securities law purposes, they are
indirectly issued or guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities.
BANK AND CORPORATE OBLIGATIONS
Each Portfolio (other than Treasury Obligations Portfolio, Government
Portfolio, Federal Portfolio and Treasury Instruments Portfolio) may invest in
commercial paper. Commercial paper represents short-term unsecured promissory
notes issued in bearer form by banks or bank holding companies, corporations,
and finance companies. The commercial paper purchased by the Portfolios
consists of direct U.S. dollar denominated obligations of domestic or, in the
case of Money Market Portfolio, foreign issuers. Bank obligations in which the
Portfolios may invest include certificates of deposit, bankers' acceptances,
fixed time deposits and bank notes. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which
are "accepted" by a bank, meaning, in
4
<PAGE>
effect, that the bank unconditionally agrees to pay the face value of the
instrument on maturity. Fixed time deposits are bank obligations payable at a
stated maturity date and bearing interest at a fixed rate. Fixed time deposits
may be withdrawn on demand by the investor, but may be subject to early
withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. Bank notes and bankers'
acceptances rank junior to domestic deposit liabilities of the bank and pari
passu with other senior, unsecured obligations of the bank. Bank notes are not
insured by the Federal Deposit Insurance Corporation or any other insurer.
Deposit notes are insured by the Federal Deposit Insurance Corporation only to
the extent of $100,000 per depositor per bank.
The Prime Obligations Portfolio and Money Market Portfolio may invest
in short-term funding agreements. A funding agreement is a contract between an
issuer and a purchaser that obligates the issuer to pay a guaranteed rate of
interest on a principal sum deposited by the purchaser. Funding agreements will
also guarantee the return of principal and may guarantee a stream of payments
over time. A funding agreement has a fixed maturity date and may have either a
fixed or variable interest rate that is based on an index and guaranteed for a
set time period. Because there is no secondary market for these investments,
any such funding agreement purchased by a Portfolio will be regarded as
illiquid.
REPURCHASE AGREEMENTS
Each Portfolio (other than the Treasury Instruments Portfolio) may
enter into repurchase agreements only with primary dealers in U.S. Government
Securities. A repurchase agreement is an arrangement under which the purchaser
(i.e., the Portfolio) purchases a U.S. Government security or other high quality
short-term debt obligation (the "Obligation") and the seller agrees, at the time
of sale, to repurchase the Obligation at a specified time and price.
Custody of the Obligation will be maintained by the Portfolios'
custodian or subcustodian. The repurchase price may be higher than the purchase
price, the difference being income to the Portfolio, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to the
Portfolio together with the repurchase price on repurchase. In either case, the
income to the Portfolio is unrelated to the interest rate on the Obligation
subject to the repurchase agreement.
Repurchase agreements pose certain risks for all entities, including
the Portfolios, that utilize them. Such risks are not unique to the Portfolios
but are inherent in repurchase agreements. The Portfolios seek to minimize such
risks by, among others, the means indicated below, but because of the inherent
legal
5
<PAGE>
uncertainties involved in repurchase agreements, such risks cannot be
eliminated.
For purposes of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and generally, for tax purposes, a repurchase
agreement is deemed to be a loan from the Portfolio to the seller of the
Obligation. It is not clear whether for other purposes a court would consider
the Obligation purchased by the Portfolio subject to a repurchase agreement as
being owned by the Portfolio or as being collateral for a loan by the Portfolio
to the seller.
If in the event of bankruptcy or insolvency proceedings against the
seller of the Obligation, a court holds that the Portfolio does not have a
perfected security interest in the Obligation, the Portfolio may be required to
return the Obligation to the seller's estate and be treated as an unsecured
creditor of the seller. As an unsecured creditor, a Portfolio would be at risk
of losing some or all of the principal and income involved in the transaction.
To minimize this risk, the Portfolios utilize custodians and subcustodians that
the Adviser believes follow customary securities industry practice with respect
to repurchase agreements, and the Adviser analyzes the creditworthiness of the
obligor, in this case the seller of the Obligation. But because of the legal
uncertainties, this risk, like others associated with repurchase agreements,
cannot be eliminated.
Also, in the event of commencement of bankruptcy or insolvency
proceedings with respect to the seller of the Obligation before repurchase of
the Obligation under a repurchase agreement, a Portfolio may encounter delay and
incur costs before being able to sell the security. Such a delay may involve
loss of interest or a decline in price of the Obligation.
Apart from risks associated with bankruptcy or insolvency proceedings,
there is also the risk that the seller may fail to repurchase the security.
However, if the market value of the Obligation subject to the repurchase
agreement becomes less than the repurchase price (including accrued interest),
the Portfolio will direct the seller of the Obligation to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement equals or exceeds the repurchase price.
Certain repurchase agreements which mature in more than seven days can
be liquidated before the nominal fixed term on seven days or less notice. Such
repurchase agreements will be regarded as liquid instruments.
In addition, each Portfolio (other than the Treasury Instruments
Portfolio), together with other registered investment companies having advisory
agreements with the Adviser or any of its affiliates, may transfer uninvested
cash balances into a single joint account, the daily aggregate balance of which
will be invested in one or more repurchase agreements.
6
<PAGE>
FOREIGN SECURITIES
The Money Market Portfolio may invest in foreign securities and in
certificates of deposit, bankers' acceptances and fixed time deposits and other
obligations issued by major foreign banks, foreign branches of U.S. banks, U.S.
branches of foreign banks and foreign branches of foreign banks. The Tax-Exempt
Diversified, Tax-Exempt California and Tax-Exempt New York Portfolios may also
invest in municipal instruments backed by letters of credit issued by certain of
such banks. Under current Securities and Exchange Commission ("SEC") rules
relating to the use of the amortized cost method of portfolio securities
valuation, the Money Market Portfolio is restricted to purchasing U.S. dollar
denominated securities, but it is not otherwise precluded from purchasing
securities of foreign issuers.
Investments in foreign securities and bank obligations may involve
considerations different from investments in domestic securities due to limited
publicly available information; non-uniform accounting standards; the possible
imposition of withholding or confiscatory taxes; the possible adoption of
foreign governmental restrictions affecting the payment of principal and
interest; expropriation; or other adverse political or economic developments.
In addition, it may be more difficult to obtain and enforce a judgment against a
foreign issuer or a foreign branch of a domestic bank.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations and Money Market Portfolios may invest in asset-
backed and receivables-backed securities. Asset-backed and receivables-backed
securities represent participations in, or are secured by and payable from,
pools of assets such as motor vehicle installment sale contracts, installment
loan contracts, leases of various types of real and personal property,
receivables from revolving credit (credit card) agreements, corporate
receivables and other categories of receivables. Such asset pools are
securitized through the use of privately-formed trusts or special purpose
vehicles. Payments or distributions of principal and interest may be guaranteed
up to certain amounts and for a certain time period by a letter of credit or a
pool insurance policy issued by a financial institution or other credit
enhancements may be present. The value of a Portfolio's investments in asset-
backed and receivables-backed securities may be adversely affected by prepayment
of the underlying obligations. In addition, the risk of prepayment may cause
the value of these investments to be more volatile than a Portfolio's other
investments.
Through the use of trusts and special purpose corporations, various
types of assets, including automobile loans, computer leases, trade receivables
and credit card receivables, are being securitized in pass-through structures
similar to the mortgage pass-through structures. Consistent with their
respective investment objectives and policies, the Portfolios may invest in
7
<PAGE>
these and other types of asset-backed securities that may be developed in the
future. This Statement of Additional Information will be amended or supplemented
as necessary to reflect the Prime Obligations and Money Market Portfolios'
intention to invest in asset-backed securities with characteristics that are
materially different from the securities described in the preceding paragraph.
However, a Portfolio will generally not invest in an asset-backed security if
the income received with respect to its investment constitutes rental income or
other income not treated as qualifying income under the 90% test described in
"Tax Information" below. In general, the collateral supporting these securities
is of shorter maturity than mortgage loans and is less likely to experience
substantial prepayments in response to interest rate fluctuations.
As set forth below, several types of asset-backed and receivables-
backed securities have already been offered to investors, including for example,
Certificates for Automobile Receivables/sm/ ("CARS/sm/") and interests in pools
of credit card receivables. CARS/sm/ represent undivided fractional interests
in a trust ("CAR Trust") whose assets consist of a pool of motor vehicle retail
installment sales contracts and security interests in the vehicles securing the
contracts. Payments of principal and interest on CARS/sm/ are passed through
monthly to certificate holders, and are guaranteed up to certain amounts and for
a certain time period by a letter of credit issued by a financial institution
unaffiliated with the trustee or originator of the CAR Trust. An investor's
return on CARS/sm/ may be affected by early prepayment of principal on the
underlying vehicle sales contracts. If the letter of credit is exhausted, the
CAR Trust may be prevented from realizing the full amount due on a sales
contract because of state law requirements and restrictions relating to
foreclosure sales of vehicles and the obtaining of deficiency judgments
following such sales or because of depreciation, damage or loss of a vehicle,
the application of federal and state bankruptcy and insolvency laws, or other
factors. As a result, certificate holders may experience delays in payments or
losses if the letter of credit is exhausted.
Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may not have the
benefit of any security interest in the related assets. Credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which give such
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. There is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection, and (ii) protection against losses
resulting from ultimate default
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by an obligor or servicer. Liquidity protection refers to the provision of
advances, generally by the entity administering the pool of assets, to ensure
that the receipt of payments on the losses results from payment of the insurance
obligations on at least a portion of the assets in the pool. This protection
may be provided through guarantees, policies or letters of credit obtained by
the issuer or sponsor from third parties, through various means of structuring
the transactions or through a combination of such approaches. The degree of
credit support provided for each issue is generally based on historical
information reflecting the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated or failure of the
credit support could adversely affect the value of or return on an investment in
such a security.
The availability of asset-backed securities may be affected by
legislative or regulatory developments. It is possible that such developments
could require the Prime Obligations and Money Market Portfolios to dispose of
any then existing holdings of such securities.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Portfolio may purchase securities on a when-issued basis or
purchase or sell securities on a forward commitment basis. These transactions
involve a commitment by the Portfolio to purchase or sell securities at a future
date. The price of the underlying securities (usually expressed in terms of
yield) and the date when the securities will be delivered and paid for (the
settlement date) are fixed at the time the transaction is negotiated. When-
issued purchases and forward commitment transactions are negotiated directly
with the other party, and such commitments are not traded on exchanges, but may
be traded over-the-counter.
A Portfolio will purchase securities on a when-issued basis or
purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, a
Portfolio may dispose of or negotiate a commitment after entering into it. A
Portfolio also may sell securities it has committed to purchase before those
securities are delivered to the Portfolio on the settlement date. The Portfolio
may realize a capital gain or loss in connection with these transactions;
distributions from any net capital gains would be taxable to its unitholders.
For purposes of determining a Portfolio's average dollar weighted maturity, the
maturity of when-issued or forward commitment securities will be calculated from
the commitment date.
When a Portfolio purchases securities on a when-issued or forward
commitment basis, the Portfolio's custodian or subcustodian will maintain in a
segregated account cash or liquid assets having a value (determined daily) at
least equal to the amount of the Portfolio's purchase commitments. In the case
of a forward
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commitment to sell portfolio securities subject to such commitment, the
custodian or subcustodian will hold the portfolio securities in a segregated
account while the commitment is outstanding. These procedures are designed to
ensure that the Portfolio will maintain sufficient assets at all times to cover
its obligations under when-issued purchases and forward commitments.
VARIABLE AMOUNT MASTER DEMAND NOTES
Each Portfolio (other than the Treasury Obligations, Federal and
Treasury Instruments Portfolios) may purchase variable amount master demand
notes. These obligations permit the investment of fluctuating amounts at
varying rates of interest pursuant to direct arrangements between a Portfolio,
as lender, and the borrower. Variable amount master demand notes are direct
lending arrangements between the lender and borrower and are not generally
transferable, nor are they ordinarily rated. A Portfolio may invest in them
only if the Adviser believes that the notes are of comparable quality to the
other obligations in which that Portfolio may invest.
VARIABLE RATE AND FLOATING RATE DEMAND INSTRUMENTS
Each Portfolio (other than the Treasury Obligations, Federal and
Treasury Instruments Portfolios) may purchase variable and floating rate demand
instruments that are tax exempt municipal obligations or other debt securities
that possess a floating or variable interest rate adjustment formula. These
instruments permit a Portfolio to demand payment of the principal balance plus
unpaid accrued interest upon a specified number of days' notice to the issuer or
its agent. The demand feature may be backed by a bank letter of credit or
guarantee issued with respect to such instrument.
The terms of the variable or floating rate demand instruments that a
Portfolio may purchase provide that interest rates are adjustable at intervals
ranging from daily up to six months, and the adjustments are based upon current
market levels, the prime rate of a bank or other appropriate interest rate
adjustment index as provided in the respective instruments. Some of these
instruments are payable on demand on a daily basis or on not more than seven
days' notice. Others, such as instruments with quarterly or semiannual
interest rate adjustments, may be put back to the issuer on designated days on
not more than thirty days' notice. Still others are automatically called by the
issuer unless the Portfolio instructs otherwise. The Trust, on behalf of the
Portfolios, intends to exercise the demand only (1) upon a default under the
terms of the debt security, (2) as needed to provide liquidity to a Portfolio,
(3) to maintain the respective quality standards of a Portfolio's investment
portfolio, or (4) to attain a more optimal portfolio structure. A Portfolio
will determine the variable or floating rate demand instruments that it will
purchase in accordance with procedures approved by the Trustees to minimize
credit risks. To be eligible for purchase by a Portfolio, a variable or
floating rate demand instrument which is unrated must have high quality
characteristics similar to other obligations in
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which the Portfolio may invest. The Adviser may determine that an unrated
variable or floating rate demand instrument meets a Portfolio's quality criteria
by reason of being backed by a letter of credit or guarantee issued by a bank
that meets the quality criteria for the Portfolio. Thus, either the credit of
the issuer of the obligation or the guarantor bank or both will meet the quality
standards of the Portfolio.
The maturity of the variable or floating rate demand instruments held
by a Portfolio will ordinarily be deemed to be the longer of (1) the notice
period required before the Portfolio is entitled to receive payment of the
principal amount of the instrument or (2) the period remaining until the
instrument's next interest rate adjustment. The acquisition of variable or
floating rate demand notes for a Portfolio must also meet the requirements of
rules issued by the SEC applicable to the use of the amortized cost method of
securities valuation. The Portfolios will also consider the liquidity of the
market for variable and floating rate instruments, and in the event that such
instruments are illiquid, the Portfolios' investments in such instruments will
be subject to the limitation on illiquid investments.
A Portfolio (other than Treasury Obligations Portfolio, Treasury
Instruments Portfolio, Government Portfolio and Federal Portfolio) may invest in
participation interests in variable or floating rate tax-exempt obligations held
by financial institutions (usually commercial banks). Such participation
interests provide the Portfolio with a specific undivided interest (up to 100%)
in the underlying obligation and the right to demand payment of its proportional
interest in the unpaid principal balance plus accrued interest from the
financial institution upon a specific number of day's notice. In addition, the
participation interest generally is backed by an irrevocable letter of credit or
guarantee from the institution. The financial institution usually is entitled
to a fee for servicing the obligation and providing the letter of credit.
RESTRICTED AND OTHER ILLIQUID SECURITIES
A Portfolio may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 (the "1933 Act"),
including restricted securities that can be offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act. However, a Portfolio
will not invest more than 10% of the value of its net assets in securities which
are illiquid, which includes fixed time deposits and repurchase agreements
maturing in more than seven days that cannot be traded on a secondary market and
restricted securities, unless, in the case of restricted securities, the
Trust's Board of Trustees determines, based upon a continuing review of the
trading markets for the specific restricted security, that such restricted
securities are liquid. The Board of Trustees may adopt guidelines and delegate
to the Adviser the daily function of determining and monitoring liquidity of
restricted securities. The Board, however, will retain sufficient oversight and
be ultimately responsible for the
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determinations. Since it is not possible to predict with assurance that the
market for securities eligible for resale under Rule 144A will continue to be
liquid, the Board will carefully monitor each Portfolio's investments in these
securities, focusing on such important factors, among others, as valuation,
liquidity and availability of information. This investment practice could have
the effect of increasing the level of illiquidity in a Portfolio to the extent
that qualified institutional buyers become for a time uninterested in purchasing
these restricted securities.
MUNICIPAL OBLIGATIONS
The Prime Obligations, Money Market, Tax-Exempt Diversified, Tax-
Exempt California and Tax-Exempt New York Portfolios may invest in municipal
obligations. Municipal obligations are issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies, authorities and instrumentalities and the District of
Columbia to obtain funds for various public purposes. The interest on most of
these obligations is generally exempt from regular federal income tax. The two
principal classifications of municipal obligations are "notes" and "bonds".
Notes. Municipal notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less. Municipal
notes include tax anticipation notes, revenue anticipation notes, bond
anticipation notes, tax and revenue anticipation notes, construction loan notes,
tax-exempt commercial paper and certain receipts for municipal obligations.
Tax anticipation notes are sold to finance working capital needs of
municipalities. They are generally payable from specific tax revenues expected
to be received at a future date. They are frequently general obligations of the
issuer, secured by the taxing power for payment of principal and interest.
Revenue anticipation notes are issued in expectation of receipt of other types
of revenue such as federal or state aid. Tax anticipation notes and revenue
anticipation notes are generally issued in anticipation of various seasonal
revenues such as income, sales, use, and business taxes. Bond anticipation
notes are sold to provide interim financing in anticipation of long-term
financing in the market. In most cases, these monies provide for the repayment
of the notes. Tax-exempt commercial paper consists of short-term unsecured
promissory notes issued by a state or local government or an authority or agency
thereof. The Portfolios which invest in municipal obligations may also acquire
securities in the form of custodial receipts which evidence ownership of future
interest payments, principal payments or both on certain state and local
governmental and authority obligations when, in the opinion of bond counsel,
interest payments with respect to such custodial receipts are excluded from
gross income for federal income tax purposes, and in the case of the Tax-Exempt
California and Tax-Exempt New York Portfolios, exempt from California and New
York (city and state) personal income taxes, respectively. Such obligations are
held in custody by a bank on behalf of the holders of the receipts. These
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custodial receipts are known by various names, including "Municipal Receipts"
("MRs") and "Municipal Certificates of Accrual on Tax-Exempt Securities" ("M-
CATS"). There are a number of other types of notes issued for different
purposes and secured differently from those described above.
Bonds. Municipal bonds, which generally meet longer term capital
needs and have maturities of more than one year when issued, have two principal
classifications, "general obligation" bonds and "revenue" bonds.
General obligation bonds are issued by entities such as states,
counties, cities, towns and regional districts and are used to fund a wide range
of public projects including the construction or improvement of schools,
highways and roads, water and sewer systems and a variety of other public
purposes. The basic security of general obligation bonds is the issuer's
pledge of its faith, credit, and taxing power for the payment of principal and
interest. The taxes that can be levied for the payment of debt service may be
limited or unlimited as to rate or amount or special assessments.
Revenue bonds have been issued to fund a wide variety of capital
projects including: electric, gas, water and sewer systems; highways, bridges
and tunnels; port and airport facilities; colleges and universities; and
hospitals. The principal security for a revenue bond is generally the net
revenues derived from a particular facility or group of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue source.
Although the principal security behind these bonds varies widely, many provide
additional security in the form of a debt service reserve fund whose monies may
also be used to make principal and interest payments on the issuer's
obligations. Housing finance authorities have a wide range of security
including partially or fully insured, rent subsidized and/or collateralized
mortgages, and/or the net revenues from housing or other public projects. In
addition to a debt service reserve fund, some authorities provide further
security in the form of a state's ability (without obligation) to make up
deficiencies in the debt service reserve fund. Lease rental revenue bonds
issued by a state or local authority for capital projects are secured by annual
lease rental payments from the state or locality to the authority sufficient to
cover debt service on the authority's obligations.
Private activity bonds (a term that includes certain types of bonds
the proceeds of which are used to a specified extent for the benefit of persons
other than governmental units), although nominally issued by municipal
authorities, are generally not secured by the taxing power of the municipality
but are secured by the revenues of the authority derived from payments by the
industrial user. The Tax-Exempt Diversified Portfolio and the Tax-Exempt
California Portfolio do not intend to invest in private activity bonds if the
interest from such bonds would be an item of tax preference to unitholders under
the federal alternative minimum tax.
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Municipal bonds with a series of maturity dates are called serial
bonds. The serial bonds which the Portfolios may purchase are limited to short-
term serial bonds---those with original or remaining maturities of thirteen
months or less. The Portfolios may purchase long-term bonds provided that they
have a remaining maturity of thirteen months or less or, in the case of bonds
called for redemption, the date on which the redemption payment must be made is
within thirteen months. The Portfolios may also purchase long-term bonds
(sometimes referred to as "Put Bonds"), which are subject to a Portfolio's
commitment to put the bond back to the issuer at par at a designated time within
thirteen months and the issuer's commitment to so purchase the bond at such
price and time.
The Portfolios which invest in municipal obligations may invest in
tender option bonds. A tender option bond is a municipal obligation (generally
held pursuant to a custodian arrangement) having a relatively long maturity and
bearing interest at a fixed rate substantially higher than prevailing short-term
tax-exempt rates. The bond is typically issued in conjunction with the
agreement of a third party, such as a bank, broker-dealer or other financial
institutions, pursuant to which such institution grants the security holder the
option, at periodic intervals, to tender its securities to the institution and
receive the face value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the difference between the
bond's fixed coupon rate and the rate, as determined by a remarketing or similar
agent at or near the commencement of such period, that would cause the bond,
coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder effectively
holds a demand obligation that bears interest at the prevailing short-term, tax-
exempt rate. However, an institution will not be obligated to accept tendered
bonds in the event of certain defaults by, or a significant downgrading in the
credit rating assigned to, the issuer of the bond.
The tender option will be taken into consideration in determining the
maturity of tender option bonds and the average portfolio maturity of a
Portfolio. The liquidity of a tender option bond is a function of the credit
quality of both the bond issuer and the financial institution providing
liquidity. Consequently, tender option bonds are deemed to be liquid unless, in
the opinion of the Adviser, the credit quality of the bond issuer and the
financial institution is deemed, in light of the relevant Portfolio's credit
quality requirements, to be inadequate.
Although the Tax-Exempt Diversified, Tax-Exempt California and Tax-
Exempt New York Portfolios intend to invest in tender option bonds the interest
on which will, in the opinion of counsel for the issuer and sponsor or counsel
selected by the Adviser, be excluded from gross income for federal income tax
purposes, there is no assurance that the Internal Revenue Service will agree
with such counsel's opinion in any particular case. Consequently, there is a
risk that a Portfolio will not be considered the owner of such
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tender option bonds and thus will not be entitled to treat such interest as
exempt from such tax. A similar risk exists for certain other investments
subject to puts or similar rights. Additionally, the federal income tax
treatment of certain other aspects of these investments, including the proper
tax treatment of tender options and the associated fees, in relation to various
regulated investment company tax provisions is unclear. The Tax-Exempt
Diversified, Tax-Exempt California and Tax-Exempt New York Portfolios intend to
manage their respective portfolios in a manner designed to eliminate or minimize
any adverse impact from the tax rules applicable to these investments.
In addition to general obligation bonds, revenue bonds and serial
bonds, there are a variety of hybrid and special types of municipal obligations
as well as numerous differences in the security of municipal obligations both
within and between the two principal classifications above.
The Tax-Exempt Diversified, Tax-Exempt California and Tax-Exempt New
York Portfolios may purchase municipal instruments that are backed by letters of
credit issued by foreign banks that have a branch, agency or subsidiary in the
United States. Such letters of credit, like other obligations of foreign banks,
may involve credit risks in addition to those of domestic obligations, including
risks relating to future political and economic developments, nationalization,
foreign governmental restrictions such as exchange controls and difficulties in
obtaining or enforcing a judgment against a foreign bank (including branches).
For the purpose of investment restrictions of the Portfolios, the
identification of the "issuer" of municipal obligations that are not general
obligation bonds is made by the Adviser on the basis of the characteristics of
the obligation as described above, the most significant of which is the source
of funds for the payment of principal of and interest on such obligations.
An entire issue of municipal obligations may be purchased by one or a
small number of institutional investors such as one of the Portfolios. Thus,
the issue may not be said to be publicly offered. Unlike securities which must
be registered under the Securities Act of 1933 prior to offer and sale,
municipal obligations which are not publicly offered may nevertheless be readily
marketable.
Municipal obligations purchased for a Portfolio may be subject to the
Portfolio's policy on holdings of illiquid securities. The Adviser determines
whether a municipal obligation is liquid based on whether it may be sold in a
reasonable time consistent with the customs of the municipal markets (usually
seven days) at a price (or interest rate) which accurately reflects its value.
The Adviser believes that the quality standards applicable to each Portfolio's
investments enhance liquidity. In addition, stand-by commitments and demand
obligations also enhance liquidity.
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Yields on municipal obligations depend on a variety of factors,
including money market conditions, municipal bond market conditions, the size of
a particular offering, the maturity of the obligation and the quality of the
issue. High quality municipal obligations tend to have a lower yield than lower
rated obligations. Municipal obligations are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Code, and laws, if any, which may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or municipalities to levy taxes. There is also the
possibility that as a result of litigation or other conditions the power or
ability of any one or more issuers to pay when due principal of and interest on
its or their municipal obligations may be materially affected.
INVESTING IN CALIFORNIA
The financial condition of the State of California ("California"), its
public authorities and local governments could affect the market values and
marketability of, and therefore the net asset value per unit and the interest
income of, the Tax-Exempt California Portfolio, or result in the default of
existing obligations, including obligations which may be held by the Tax-Exempt
California Portfolio. The following section provides only a brief summary of
the complex factors affecting the financial condition of California, and is
based on information obtained from California, as publicly available prior to
the date of this Statement of Additional Information. The information contained
in such publicly available documents has not been independently verified. It
should be noted that the creditworthiness of obligations issued by local issuers
may be unrelated to the creditworthiness of California, and that there is no
obligation on the part of California to make payment on such local obligations
in the event of default in the absence of a specific guarantee or pledge
provided by California.
During the early 1990's, California experienced significant financial
difficulties, which reduced its credit standing, but the State's finances have
improved since 1995. The ratings of certain related debt of other issuers for
which California has an outstanding lease purchase, guarantee or other
contractual obligation (such as for state-insured hospital bonds) are generally
linked directly to California's rating. Should the financial condition of
California deteriorate again, its credit ratings could be further reduced, and
the market value and marketability of all outstanding notes and bonds issued by
California, its public authorities or local governments could be adversely
affected.
Economic Factors. California's economy is the largest among the 50
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states (accounting for almost 13% of the nation's output of goods and services)
and one of the largest in the world. California's population of more than 32.6
million represents over 12% of the total United States population and grew by
27% in the
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1980s. While California's substantial population growth during the 1980's
stimulated local economic growth and diversification and sustained a real estate
boom between 1984 and 1990, it increased strains on California's limited water
resources and demands for government services. Population growth slowed since
1991 even while substantial immigration has continued, due to a significant
increase in outmigration by California residents. However, with the California
economy improving, the recent net outmigration within the Continental U.S. is
expected to decrease or be reversed.
From mid-1990 to late 1993, California's economy suffered its worst
recession since the 1930s, with over 700,000 jobs lost. The largest job losses
were in Southern California, led by declines in the aerospace and construction
industries. Significantly related to cuts in lost federal defense spending.
Since the start of 1994, the California economy has been in a steady
recovery in all parts of the State. The State Department of Finance reports net
job growth, particularly in construction and related manufacturing, wholesale
and retail trade, electronics, exports, transportation, recreation and services.
This growth has offset the continuing but slowing job losses in the aerospace
industry and restructuring of the finance and utility sectors. Prerecession job
levels were reached in 1996. Unemployment in California is down more than three
percent from its 10% peak in January, 1994, but still remains higher than the
national average rate.
Constitutional Limitations on Taxes, Other Changes and Appropriations
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Limitations on Property Taxes. Certain California Instruments may
-----------------------------
be obligations of issuers which rely in whole or in part, directly or
indirectly, on ad valorem property taxes as a source of revenue. The taxing
power of California local governments and districts is limited by Article XIIIA
of the California constitution, also known as "Proposition 13." Briefly, Article
XIIIA limits to 1% of full cash value the rate of ad valorem property taxes on
real property and generally restricts the reassessment of property to 2% per
year, except upon new construction or change of ownership (subject to a number
of exemptions). Taxing entities may, however, raise ad valorem taxes above the
1% limit to pay debt service on voter-approved bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied
against the assessed value of property as of the owner's date of acquisition (or
as of March 1, 1975, if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the acquisition-based
assessment system of Proposition 13, and on June 18, 1992 the U.S. Supreme Court
announced a decision upholding Proposition 13.
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Article XIIIA prohibits local governments from raising revenues
through ad valorem property taxes above the 1% limit; it also requires voters of
any governmental unit to give two-thirds approval to levy any "special tax".
Court decisions, however, allowed non-voter approved levy of "general taxes"
which were not dedicated to a specific use. In response to these decisions, the
voters of the State in 1986 adopted an initiative statute which imposed
significant new limits on the ability of local entities to raise or levy
general taxes, except by receiving majority local voter approval. Significant
elements of this initiative, "Proposition 62", have been overturned in recent
court cases. An initiative proposed to re-enact the provisions of Proposition
62 as a constitutional amendment was defeated by the voters in November 1990,
but such a proposal may be renewed in the future.
Limitations on Other Taxes, Fees and Charges. On November 5, 1996, the
--------------------------------------------
voters of the State approved Proposition 218, called the "Right to Vote on Taxes
Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution,
which contain a number of provisions affecting the ability of local agencies to
levy and collect both existing and future taxes, assessments, fees and charges.
Article XIIIC requires that all new or increased local taxes be
submitted to the electorate before they become effective. Taxes for general
governmental purposes require a majority vote and taxes for specific purposes
require a two-thirds vote. Further, any general purpose tax which was imposed,
extended or increased without voter approval after December 31, 1994 must be
approved by a majority vote within two years.
Article XIIID contains several new provisions making it generally more
difficult for local agencies to levy and maintain "assessments" for municipal
services and programs. Article XIIID also contains several new provisions
affecting "fees" and "charges", defined for purposes of Article XIIID to mean
"any levy other than an ad valorem tax, a special tax, or an assessment, imposed
by a [local government] upon a parcel or upon a person as an incident of
property ownership, including a user fee or charge for a property related
service." All new and existing property related fees and charges must conform
to requirements prohibiting, among other things, fees and charges which generate
revenues exceeding the funds required to provide the property related service or
are used for unrelated purposes. There are new notice, hearing and protest
procedures for levying or increasing property related fees and charges, and,
except for fees or charges for sewer, water and refuse collection services (or
fees for electrical and gas service, which are not treated as "property related"
for purposes of Article XIIID), no property related fee or charge may be imposed
or increased without majority approval by the property owners subject to the fee
or charge or, at the option of the local agency, two-thirds voter approval by
the electorate residing in the affected area.
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In addition to the provisions described above, Article XIIIC removes
limitations on the initiative power in matters of local taxes, assessments, fees
and charges. Consequently, local voters could, by future initiative, repeal,
reduce or prohibit the future imposition or increase of any local tax,
assessment, fee or charge. It is unclear how this right of local initiative may
be used in cases where taxes or charges have been or will be specifically
pledged to secure debt issues.
The interpretation and application of Proposition 218 will ultimately
be determined by the courts with respect to a number of matters, and it is not
possible at this time to predict with certainly the outcome of such
determinations. Proposition 218 is generally viewed as restricting the fiscal
flexibility of local governments, and for this reason, some ratings of
California cities and counties have been, and others may be, reduced.
Appropriation Limits. The State and its local governments are
--------------------
subject to an annual "appropriations limit" imposed by Article XIIIB of the
California Constitution, enacted by the voters in 1979 and significantly amended
by Propositions 98 and 111 in 1988 and 1990, respectively. Article XIIIB
prohibits the State or any covered local government from spending
"appropriations subject to limitation" in excess of the appropriations limit
imposed. "Appropriations subject to limitation" are authorizations to spend
"proceeds of taxes," which consist of tax revenues and certain other funds,
including proceeds from regulatory licenses, user charges or other fees, to the
extent that such proceeds exceed the cost of providing the product or service,
but "proceeds of taxes" excludes most State subventions to local governments.
No limit is imposed on appropriations of funds which are not "proceeds of
taxes," such as reasonable user charges or fees, and certain other non-tax
funds, including bond proceeds.
Among the expenditures not included in the Article XIIIB
appropriations limit are (1) the debt service cost of bonds issued or authorized
prior to January 1, 1979, or subsequently authorized by the voters, (2)
appropriations arising from certain emergencies declared by the Governor, (3)
appropriations for certain capital outlay projects, (4) appropriations by the
State of post 1989 increases in gasoline taxes and vehicle weight fees, and (5)
appropriations made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population and any transfer of service
responsibilities between governmental units. The definitions for such
adjustments were liberalized in 1990 to follow more closely growth in the
State's economy.
"Excess" revenues are measured over a two year cycle. Local
governments must return any excess to taxpayers by rate reductions. The State
must refund 50% paid to schools and community colleges. With more liberal
annual adjustment factors since 1988, and depressed revenues since 1990 because
of the recession, few governments, including the State, are currently operating
near
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their spending limits, but this condition may change over time. The State's
1996-97 Budget Act provides for State appropriations more than $7 billion under
the Article XIIIB limit. Local governments may by voter approval exceed their
spending limits for up to four years.
Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and
XIIID of the California Constitution, the ambiguities and possible
inconsistencies of their terms, and the impossibility of predicting future
appropriations or changes in population and cost of living, and the probability
of continuing legal challenges, it is not currently possible to determine fully
the impact of these articles on California Instruments. It is not presently
possible to predict the outcome of any pending litigation with respect to the
ultimate scope, impact or constitutionality of these articles, or the impact of
any such determinations upon State agencies or local governments, or upon their
ability to pay debt service or their obligations. Future initiatives or
legislative changes in laws or the California Constitution may also affect the
ability of the State or local issuers to repay their obligations.
State Debt. Under the California Constitution, debt service on
----------
outstanding general obligation bonds is the second charge to the General Fund
after support of the public school system and public institutions of higher
education. Total outstanding general obligation bonds and lease purchase debt
of California increased from $9.4 billion at June 30, 1987 to $23.8 billion at
March 1, 1997. The State also had outstanding at March 1, 1997 $358 million of
general obligation commercial paper notes which will be refunded into long-term
bonds at a later date. In FY1995-96, debt service on general obligation bonds
and lease purchase debt was approximately 5.2% of General Fund revenues. State
voters approved $6.4 billion of new general obligation bond authorizations on
the 1996 ballots.
Recent Financial Results. The principal sources of General Fund
------------------------
revenues in 1995-1996 were the California personal income tax (45% of total
revenues), the sales tax (34%), bank and corporation taxes (13%), and the gross
premium tax on insurance (3%). California maintains a Special Fund for Economic
Uncertainties (the "SFEV"), derived from General Fund revenues, as a reserve to
meet cash needs of the General Fund.
General. Throughout the 1980s, California state spending increased
-------
rapidly as California's population and economy also grew rapidly, including
increased spending for many assistance programs to local governments, which were
constrained by Proposition 13 and other laws. The largest state program is
assistance to local public school districts. In 1988, an initiative
(Proposition 98) was enacted which (subject to suspension by a two-thirds vote
of the Legislature and the Governor) guarantees local school districts and
community college districts a minimum share of California General Fund revenues
(currently about 35%).
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Beginning at the start of the 1990-91 Fiscal Year, California faced
adverse economic, fiscal and budget conditions. The economic recession seriously
affected California's tax revenues. It also caused increased expenditures for
health and welfare programs. Even though the economy is recovering, California
is still facing a structural imbalance in its budget with the largest programs
supported by the General Fund (education, health, welfare and corrections)
growing at rates higher than the growth rates for the principal revenue sources
of the General Fund. These structural concerns will be exacerbated in coming
years by the expected need to substantially increase capital and operating funds
for corrections as a result of a "Three Strikes" law enacted in 1994.
Recent Budgets. As a result of these factors, among others, from the
--------------
late 1980's until 1992-93, the State had a period of nearly chronic budget
imbalance, with expenditures exceeding revenues in four out of six years, and
the State accumulated and sustained a budget deficit in the budget reserve, the
SFEU, approaching $2.8 billion at its peak at June 30, 1993. Starting in the
1990-91 Fiscal Year and for each year thereafter, each budget required
multibillion dollar actions to bring projected revenues and expenditures into
balance and to close large "budget gaps" which were identified. The Legislature
and Governor eventually agreed on a number of different steps to produce Budget
Acts in the Fiscal Years 1991-92 to 1995-96, including the following (not all of
these actions were taken each year):
. significant cuts in health and welfare program expenditures;
. transfers of program responsibilities and some funding sources from
the State to local governments, coupled with some reduction in mandates on local
government;
. transfer of about $3.6 billion in annual local property tax
revenues from cities, counties, redevelopment agencies and some other districts
to local school districts, thereby reducing state funding for schools;
. reduction in growth of support for higher education programs,
coupled with increases in student fees;
. revenue increases (particularly in the 1991-92 Fiscal Year budget),
most of which were for a short duration;
. increased reliance on aid from the federal government to offset the
costs of incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less federal aid
than the State Administration had requested); and
. various one-time adjustment and accounting changes.
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Despite these budget actions, the effects of the recession led to
large unanticipated deficits in the SFEU, as compared to projected positive
balances. By the start of the 1993-94 Fiscal Year, the accumulated deficit was
so large (almost $2.8 billion) that it was impractical to budget to retire it in
one year, so a two-year program was implemented, using the issuance of revenue
anticipation warrants to carry a portion of the deficit over the end of the
fiscal year. When the economy failed to recover sufficiently in 1993-94, a
second two-year plan was implemented in 1994-95, to carry the final retirement
of the deficit into 1995-96.
The combination of stringent budget actions cutting State
expenditures, and the turnaround of the economy by late 1993, finally led to the
restoration of positive financial results. While General Fund revenues and
expenditures were essentially equal in FY 1992-93 (following two years of excess
expenditures over revenues), the General Fund had positive operating results in
FY 1993-94 and 1995-96, which reduced the accumulated budget deficit to less
than $100 million as of June 30, 1996. The State Department of Finance estimated
that the General Fund received revenues of about $46.3 billion in FY 1995-96,
more than $2 billion higher than was originally expected, as a result of the
strengthening economy. Expenditures totaled about $45.4 billion, also about $2
billion higher than budgeted, because, among other factors, the State
Constitution requires disbursement of a percentage of revenues to local school
districts and federal actions to reduce welfare costs and to pay for costs of
illegal immigrants were not forthcoming to the extent expected.
A consequence of the accumulated budget deficits in the early 1990's,
together with other factors such as disbursement of funds to local school
districts "borrowed" from future fiscal years and hence not shown in the annual
budget, was to significantly reduce the State's cash resources available to pay
its ongoing obligations. When the Legislature and the Governor failed to adopt
a budget for the 1992-93 Fiscal Year by July 1, 1992, which would have allowed
the State to carry out its normal annual cash flow borrowing to replenish its
cash reserves, the State Controller was forced to issue approximately $3.8
billion of registered warrants ("IOUs") over a 2-month period to pay a variety
of obligations representing prior years' or continuing appropriations, and
mandates from court orders. Available funds were used to make constitutionally-
mandated payments, such as debt service on bonds and warrants.
The State's cash condition became so serious that from late spring
1992 until 1995, the State had to rely on issuance of short-term notes which
matured in a subsequent fiscal year to finance its ongoing deficit and pay
current obligations. With the repayment of the last of these deficit notes in
April, 1996, the State does not plan to rely further on external borrowing
across fiscal years, but will continue its normal cash flow borrowing during a
fiscal year.
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Current Budget. The 1996-97 Budget Act was signed by the Governor on
--------------
July 15, 1996, along with various implementing bills. The Legislature rejected
the Governor's proposed 15% cut in personal income taxes (to be phased over
three years), but did approve a 5% cut in bank and corporation taxes, to be
effective for income years starting on January 1, 1997. As a result, revenues
for the Fiscal Year are estimated to total $47.643 billion, a 3.3 percent
increase over the final estimated 1995-96 revenues. The Budget Act contains
General Fund appropriations totaling $47.251 billion, a 4.0 percent increase
over the final estimated 1995-96 expenditures.
The following are principal features of the 1996-97 Budget Act:
1. Funding for schools and community college districts increased by
$1.65 billion total above revised 1995-96 levels. Almost half of this money was
budgeted to fund class-size reductions in kindergarten and grades 1-3. Also,
for the second year in a row, the full cost of living allowance (3.2 percent)
was funded. The funding increases have brought K-12 expenditures to almost
$4,800 per pupil, an almost 15% increase over the level prevailing during the
recession years.
2. Proposed cuts in health and welfare totaling $660 million. All of
these cuts required federal law changes (including welfare reform, which was
enacted), federal waivers, or federal budget appropriations in order to be
achieved. Ultimate federal actions after enactment of the Budget Act will allow
the State to save only about $360 million of this amount.
3. A 4.9 percent increase in funding for the University of California
and the California State University system, with no increases in student fees
for the second consecutive year.
4. The Budget Act assumed the federal government would provide
approximately $700 million in new aid for incarceration and health care costs of
illegal immigrants. These funds reduce appropriations in these categories that
would otherwise have to be paid from the General Fund.
With signing of the Budget Act, the State implemented its regular cash
flow borrowing program with the issuance of $3.0 billion of Revenue Anticipation
Notes to mature on June 30, 1997. The Budget Act appropriated a modest budget
reserve in the SFEU of $305 million, as of June 30, 1997. The General Fund fund
balance, however, still reflects $1.6 billion of "loans" which the General Fund
made to local schools in the recession years, representing cash outlays above
the mandatory minimum funding level. Settlement of litigation over these
transactions in July 1996 calls for repayment of these loans over the period
ending in 2001-02, about equally split between outlays from the General Fund and
from schools' entitlements. The 1996-97 Budget Act contained a $150 million
appropriation from the General Fund toward this settlement.
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The Department of Finance projected, when the Budget Act was passed,
that, on June 30, 1997, the State's available internal borrowable (cash)
resources will be $2.9 billion, after payment of all obligations due by that
date, so that no external cross-fiscal year borrowing will be needed. The State
will continue to rely on internal borrowing and intra-year external note
borrowing to meet its cash flow requirements.
The Department of Finance has reported that, based on stronger than
expected revenues during the first six months of the 1996-97 fiscal year,
reflecting the continued strength of the State's economic recovery, General Fund
revenues for the full 1996-97 fiscal year will be almost $800 million above
projections, at about $48.4 billion. This is expected to be offset by required
increased payments to schools, and lower than expected savings resulting from
federal welfare reform actions and federal aid for illegal immigrants. As a
result, the expected balance of the SFEU at June 30, 1997 has been slightly
reduced to about $197 million, still the first positive balance in the decade of
the 90's. The State has not yet given any prediction of how the federal
welfare reform law will impact the State's finances, or those of its local
agencies; the State is in the midst of making many decisions concerning
implementation of the new welfare law.
Proposed 1997-98 Budget On January 9, 1997, the Governor released his
-----------------------
proposed budget for FY 1997-98. Assuming continuing strength in the economy,
the Governor projects General Fund revenues of $50.7 billion, and proposes
expenditures of $50.3 billion, to leave a budget reserve in the SFEU of $550
million at June 30, 1998. The Governor proposed further programs to reduce
class size in lower primary grades, using excess revenues from FY 1996-97. He
also proposed a further cut in corporate taxes, and sweeping changes in public
assistance programs to respond to the new federal welfare reform law.
Although the State's strong economy is producing record revenues to
the State government, the State's budget continues to be under stress from
mandated spending on education, a rising prison population, and social needs of
a growing population with many immigrants. These factors which limit State
spending growth also put pressure on local governments. There can be no
assurances that, if economic conditions weaken, or other factors intercede, the
State will not experience budget gaps in the future.
Bond Ratings. The ratings on California's long-term general
------------
obligation bonds were reduced in the early 1990's from "AAA" levels which had
existed prior to the recession. In 1996, Fitch and Standard & Poor's raised
their ratings of California's general obligation bonds, which are currently
assigned ratings of "A+" from Standard & Poor's, "A1" from Moody's and "A+" from
Fitch. There can be no assurance that such ratings will be maintained in the
future. It should be noted that the creditworthiness of obligations issued by
local California issuers may be unrelated to the creditworthiness of obligations
issued by the State of California,
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and that there is no obligation on the part of California to make payment on
such obligations in the event of default.
Legal Proceedings. California is involved in certain legal
------------------
proceedings (described in California's recent financial statements) that, if
decided against California, may require California to make significant future
expenditures or may substantially impair revenues. Courts have recently entered
decisions which could overturn several parts of the state's recent budget
compromises. The matters covered by these lawsuits include a deferral of
payments by California to the Public Employees Retirement System, reductions in
welfare payments and the use of certain cigarette tax funds for health costs.
All of these cases are subject to further proceedings and appeals, and if
California eventually loses, the final remedies may not have to be implemented
in one year.
Obligations of Other Issuers
----------------------------
Other Issuers of California Instruments. There are a number of state
---------------------------------------
agencies, instrumentalities and political subdivisions of the State of
California that issue municipal obligations, some of which may be conduit
revenue obligations payable from payments from private borrowers. These
entities are subject to various economic risks and uncertainties, and the credit
quality of the securities issued by them may vary considerably from the credit
quality of obligations backed by the full faith and credit of the State of
California.
State Assistance. Property tax revenues received by local governments
----------------
declined more than 50% following passage of Proposition 13. Subsequently, the
California Legislature enacted measures to provide for the redistribution of
California's General Fund surplus to local agencies, the reallocation of certain
state revenues to local agencies and the assumption of certain governmental
functions by the State of California to assist municipal issuers to raise
revenues. Through 1990-91, local assistance (including public schools)
accounted for around 75% of General Fund spending. To reduce California General
Fund support for school districts, the 1992-93 and 1993-94 Budget Acts caused
local governments to transfer a total of $3.9 billion of property tax revenues
to school districts, representing loss of all the post-Proposition 13 "bailout"
aid. The largest share of these transfers came from counties, and the balance
from cities, special districts and redevelopment agencies. In order to make up
part of this shortfall, the Legislature proposed, and voters approved in 1993,
dedicating 0.5% of the sales tax to counties and cities for public safety
purposes. In addition, the Legislature has changed laws to relieve local
governments of certain mandates, allowing them to reduce costs.
To the extent that California should be constrained by its Article
XIIIB appropriations limit, or its obligation to conform to Proposition 98, or
other fiscal considerations, the absolute level, or the rate of growth, of state
assistance to local governments may
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continue to be reduced. Any such reductions in state aid could compound the
serious fiscal constraints already experienced by many local governments,
particularly counties. A number of counties have indicated that their budgetary
condition is extremely serious. In the 1995-96 and 1996-97 fiscal years, Los
Angeles County, the largest in the State, had to make significant cuts in
services and personnel, particularly in the health care system in order to
balance its budget. The County's debt was downgraded by Moody's and S&P in the
summer of 1995. Orange County, which recently emerged from federal bankruptcy
protection, has substantially reduced services and personnel in order to live
within much reduced means.
Counties and cities may face further budgetary pressures as a result
of changes in welfare and public assistance programs, which will have to be
enacted by June, 1997 in order to comply with the federal welfare reform law.
It is now yet known how the State's legislation will turn out and what its
overall impact will be on local government finances.
Assessment Bonds. California Instruments which are assessment bonds
----------------
may be adversely affected by a general decline in real estate values or a
slowdown in real estate sales activity. In many cases, such bonds are secured
by land which is undeveloped at the time of issuance but anticipated to be
developed within a few years after issuance. In the event of such reduction or
slowdown, such development may not occur or may be delayed, thereby increasing
the risk of a default on the bonds. Because the special assessments or taxes
securing these bonds are not the personal liability of the owners of the
property assessed, the lien on the property is the only security for the bonds.
Moreover, in most cases the issuer of these bonds is not required to make
payments on the bonds in the event of delinquency in the payment of assessments
or taxes, except from amounts, if any, in a reserve fund established for the
bonds.
California Long-Term Lease Obligations. Certain California long-term
--------------------------------------
lease obligations, though typically payable from the general fund of the
municipality, are subject to "abatement" in the event the facility being leased
is unavailable for beneficial use and occupancy by the municipality during the
term of the lease. Abatement is not a default, and there may be no remedies
available to the holders of the certificates evidencing the lease obligation in
the event abatement occurs. The most common cases of abatement are failure to
complete construction of the facility before the end of the period during which
lease payments have been capitalized and uninsured casualty losses to the
facility (e.g. due to earthquake). In the event abatement occurs with respect
to a lease obligation, lease payments may be interrupted (if all available
insurance proceeds and reserves are exhausted) and the certificates may not be
paid when due.
Several years ago the Richmond Unified School District (the
"District") entered into a lease transaction in which certain existing
properties of the District were sold and leased back in
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order to obtain funds to cover operating deficits. Following a fiscal crisis in
which the District's finances were taken over by a state receiver (including a
brief period under bankruptcy court protection), the District failed to make
rental payments on this lease, resulting in a lawsuit by the Trustee for the
Certificate of Participation holders, in which the State of California was a
named defendant (on the grounds that it controlled the District's finances). One
of the defenses raised in answer to this lawsuit was the invalidity of the
District's lease. The trial court upheld the validity of the lease, and the case
was subsequently settled. Any ultimate judgment in any future case against the
position taken by the Trustee may have adverse implications for lease
transactions of a similar nature by other California entities.
Other Considerations
--------------------
The repayment of industrial development securities secured by real
property may be affected by California laws limiting foreclosure rights of
creditors. Securities backed by health care and hospital revenues may be
affected by changes in state regulations governing cost reimbursements to health
care providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment project
area after the start of redevelopment activity. In the event that assessed
values in the redevelopment project decline (e.g. because of major natural
disaster such as an earthquake), the tax increment revenue may be insufficient
to make principal and interest payments on these bonds. Both Moody's and S&P
suspended ratings on California tax allocation bonds after the enactment of
Articles XIIIA and XIIIB, and only resumed such ratings on a selective basis.
Proposition 87, approved by California voters in 1988, requires that
all revenues produced by a tax rate increase go directly to the taxing entity
which increased such tax rate to repay that entity's general obligation
indebtedness. As a result, redevelopment agencies (which typically are the
issuers of tax allocation securities) no longer receive an increase in tax
increment when taxes on property in the project area are increased to repay
voter-approved bonded indebtedness.
The effect of these various constitutional and statutory changes upon
the ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been or
may be introduced which would modify existing taxes or other revenue raising
measures or which either would further limit or, alternatively, would increase
the abilities of state and local
27
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governments to impose new taxes or increase existing taxes. It is not presently
possible to predict the extent to which any such legislation will be enacted.
Nor is it presently possible to determine the impact of any such legislation on
California Instruments in which the California Portfolio may invest, future
allocations of state revenues to local governments or the abilities of state or
local governments to pay the interest on, or repay the principal of, such
California Instruments.
Substantially all of California is within an active geologic region
subject to major seismic activity. Northern California in 1989 and Southern
California in 1994 experienced major earthquakes causing billions of dollars in
damages. The federal government provided more than $13 billion in aid for both
earthquakes, and neither event is expected to have any long-term negative
economic impact. Any security in the Tax-Exempt California Portfolio could be
affected by an interruption of revenues because of damaged facilities, or,
consequently, income tax deductions for casualty losses or property tax
assessment reductions. Compensatory financial assistance could be constrained by
the inability of (i) an issuer to have obtained earthquake insurance coverage at
reasonable rates; (ii) an insurer to perform on its contracts of insurance in
the event of widespread losses; or (iii) the federal or state government to
appropriate sufficient funds within their respective budget limitations.
INVESTING IN NEW YORK
- ---------------------
Some of the significant financial considerations relating to the Tax-
Exempt New York Portfolio's investments in New York Instruments are summarized
below. This summary information is not intended to be a complete description
and is principally derived from official statements relating to issues of New
York Instruments that were available prior to the date of this Statement of
Additional Information. The accuracy and completeness of the information
contained in those official statements have not been independently verified.
STATE ECONOMY. New York is the third most populous state in the nation and has
- -------------
a relatively high level of personal wealth. The State's economy is diverse with
a comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share of the nation's
farming and mining activity. The State has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion engaged in
service industries. New York City (the "City"), which is the most populous city
in the State and nation and is the center of the nation's largest metropolitan
area, accounts for a large portion of the State's population and personal
income.
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the nation
as a whole, gradually eroding its relative economic position.
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There can be no assurance that the State economy will not experience
worse-than-predicted results in the 1996-97 fiscal year, with corresponding
material and adverse effects on the State's projections of receipts and
disbursements.
State per capita personal income has historically been significantly
higher than the national average, although the ratio has varied substantially.
State per capita income for 1994 was estimated at $25,999, which was 19.2% above
the 1994 estimated national average of $21,809. Between 1975 and 1990 total
employment grew by 21.3 percent while the labor force grew only by 15.7 percent.
During this period, unemployment fell from 9.5 percent to 5.2 percent of the
labor force. In 1991 and 1992, however, total employment in the State fell by
5.5 percent. As a result, the unemployment rate rose to 8.5 percent reflecting a
recession that has had a particularly strong impact on the entire Northeast.
Calendar years 1993 and 1994 saw only a partial recovery.
STATE BUDGET. The State Constitution requires the governor (the "Governor") to
- ------------
submit to the State legislature (the "Legislature") a balanced executive budget
which contains a complete plan of expenditures for the ensuing fiscal year and
all moneys and revenues estimated to be available therefor, accompanied by bills
containing all proposed appropriations or reappropriations and any new or
modified revenue measures to be enacted in connection with the executive budget.
The entire plan constitutes the proposed State financial plan for that fiscal
year. The Governor is required to submit to the Legislature quarterly budget
updates which include a revised cash-basis state financial plan, and an
explanation of any changes from the previous state financial plan.
The Governor presented his 1996-97 Executive Budget to the Legislature
on December 15, 1995, and subsequently amended it.
The Governor's Executive Budget projected balance on a cash basis in
the General Portfolio. It reflected a continuing strategy of substantially
reduced State spending, including program restructurings, reductions in social
welfare spending, and efficiency and productivity initiatives.
On March 15, 1996, the Governor presented amendments to the 1996-97
Executive Budget to provide for balancing the 1996-97 state financial plan if
the federal government failed to adopt entitlement changes assumed to produce
savings in the State's 1996-97 Executive Budget.
The State's budget for the 1996-97 fiscal year was enacted by the
Legislature on July 13, 1996, more than three months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State operations
and other purposes, including necessary appropriations for all State-supported
debt service. The State Financial Plan for the 1996-97 fiscal year was
formulated on July 25, 1996 and was based on the State's budget as enacted by
the Legislature and signed into law by the Governor, as well as actual
29
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results for the first quarter of the current fiscal year (the "1996-97 State
Financial Plan").
The 1996-97 State Financial Plan was projected to be balanced on a
cash basis. As compared to the Governor's proposed budget as revised on March
20, 1996, the 1996-97 State Financial Plan increases General Portfolio spending
by $842 million, primarily from funding increased for education, special
education and higher education ($563 million). The balance represented funding
increases to a variety of other programs, including community projects and
increased assistance to fiscally distressed cities. Resources used to fund these
additional expenditures include $540 million in increased revenues projected for
1996-97 based on higher-than-projected tax collections during the first half of
calendar 1996, $110 million in projected receipts from a new State tax amnesty
program, and other resources including certain non-recurring resources.
The State issued its first update to the 1996-97 State Financial Plan
(the "Mid-Year Update") on October 25, 1996. Revisions have been made to
estimates of both receipts and disbursements based on: (1) updated economic
forecasts for both the nation and the State, (2) an analysis of actual receipts
and disbursements through the first six months of the fiscal year, and (3) an
assessment of changing program requirements. The Mid-Year Update reflected a
balanced 1996-97 State Financial Plan, with a reserve for contingencies in the
General Portfolio of $300 million. This reserve will be utilized to help offset
a variety of potential risks and other unexpected contingencies that the State
may face during the balance of the 1996-97 fiscal year.
Although revisions to the 1996-97 State Financial Plan contained in
the Mid-Year Update are favorable, the State faces certain risks which could
potentially cost the State up to one-half billion dollars. The Division of the
Budget believes these risks are balanced by reserves in the 1996-97 State
Financial Plan, including the $300 million reserve created in the Mid-Year
Update. However, there can be no assurance that these reserves will fully
offset litigation or other risks to the 1996-97 State Financial Plan.
One major uncertainty to the 1996-97 State Financial Plan continues to
be risks related to the economy and tax collections, which could produce either
favorable or unfavorable variances during the balance of the year. An
additional risk to the 1996-97 State Financial Plan arises from the potential
impact of certain litigation now pending against the State, which could produce
adverse effects on the State's projections of receipts and disbursements.
Similarly, certain litigation which by itself did not produce a
material judgment against the State could have an adverse impact on the 1996-97
State Financial Plan because of the precedential nature of the court's decision.
Specifically, the State Court of Appeals has denied a motion to appeal a lower
court
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decision in the so-called "GTE Spacenet" case, in which the court ruled that GTE
Spacenet was not subject to the 3.5 percent tax on gross receipts imposed under
section 186-a of the tax law. The court decision is limited to provisions of
section 186-a as it existed prior to the 1995 amendments, and has little
prospective effect. While this litigation in and of itself carries only a small
judgment in favor of GTE Spacenet and similar companies, the consequences of the
ruling could eventually entail refunds to other taxpayers of several hundred
million dollars. Refund claims of over $300 million have been filed which, with
interest and assuming a similar exposure for open years for which claims have
yet to be filed, could approach $600 million in potential claims.
On August 13, 1996, the State Comptroller released a report in which
he identified several risks to the 1996-97 State Financial Plan and estimated
that the State faces a potential imbalance in receipts and disbursements of
approximately $3 billion for the State's 1997-98 fiscal year and approximately
$3.2 billion for the State's 1998-99 fiscal year.
The Governor is required to submit a balanced budget to the State
Legislature and has indicated he will close any potential imbalance in the 1997-
98 State Financial Plan primarily through General Portfolio expenditure
reductions and without increases in taxes or deferrals of scheduled tax
reductions. It is expected that the 1997-98 State Financial Plan will reflect a
continuing strategy of substantially reduced State spending, including agency
consolidations, reductions in the State workforce, and efficiency and
productivity initiatives.
On August 22, 1996, the President signed into law the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996. This federal
legislation fundamentally changed the programmatic and fiscal responsibilities
for administration of welfare programs at the federal, state and local levels.
The new law abolishes the federal Aid to Families with Dependent Children
program (AFDC), and creates a new Temporary Assistance to Needy Families program
(TANF) funded with a fixed federal block grant to states. The new law also
imposes (with certain exceptions) a five-year durational limit on TANF
recipients, requires that virtually all recipients be engaged in work or
community service activities within two years of receiving benefits, and limits
assistance provided to certain immigrants and other classes of individuals.
States are required to meet work activity participation targets for their TANF
caseload; these requirements are phased in over time. States that fail to meet
these federally mandated job participation rates, or that fail to conform with
certain other federal standards, face potential sanctions in the form of a
reduced federal block grant.
On October 16, 1996, the Governor submitted the State's TANF
implementation plan to the federal government as required under the new federal
welfare law. Submission of this plan to the federal government requires New
York State to begin compliance with certain time limits on welfare benefits and
permits the State to become
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eligible for approximately $2.36 billion in federal block grant funding.
Legislation will be required to implement the State's TANF plan. The Governor
has indicated that he plans to introduce legislation necessary to conform with
federal law shortly, and that he may submit amendments to the State plan if
necessary.
States are required to comply with the new federal welfare reform law
no later than July 1, 1997. Given the size and scope of the changes required
under federal law, it is likely that these proposals will produce extensive
public discussions. There can be no assurances that the State Legislature will
enact welfare reform proposals as submitted by the Governor and as required
under federal law.
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the federal government, that
are not under the control of the State. In addition, the 1996-97 State
Financial Plan is based upon forecasts of national and State economic activity.
Economic forecasts have frequently failed to predict accurately the timing and
magnitude of changes in the national and the State economies. The Division of
Budget believes that its projections of receipts and disbursements relating to
the current State Financial Plan, and the assumptions on which they are based,
are reasonable. Actual results, however, could differ materially and adversely
from the projections set forth therein, and those projections may be changed
materially and adversely from time to time. There are also risks and
uncertainties concerning the future-year impact of actions taken in the 1996-97
budget.
In the State's 1997 fiscal year and in certain recent fiscal years,
the State has failed to enact a budget prior to the beginning of the State's
fiscal year.
RECENT FINANCIAL RESULTS. The General Portfolio is the principal operating
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Portfolio of the State and is used to account for all financial transactions,
except those required to be accounted for in another Portfolio. It is the
State's largest Portfolio and receives almost all State taxes and other
resources not dedicated to particular purposes.
The General Portfolio is projected to be balanced on a cash basis for
the 1996-97 fiscal year. Total receipts and transfers from other Portfolios are
projected to be $33.17 billion, an increase of $365 million from the prior
fiscal year. Total General Portfolio disbursements and transfers to other
Portfolios are projected to be $33.12 billion, an increase of $444 million from
the total in the prior fiscal year.
Total revenues for 1994-95 were $31.455 billion. Revenues decreased
by $173 million over the prior fiscal year, a decrease of less than one percent.
Total expenditures for 1994-95 totaled
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$33.079 billion, an increase of $2.083 billion, or 6.7 percent over the prior
fiscal year.
The State's financial position on a GAAP (generally accepted
accounting principles) basis as of March 31, 1995 showed an accumulated deficit
in its combined governmental Portfolios of $1.666 billion, reflecting
liabilities of $14.778 billion and assets of $13.112 billion.
DEBT LIMITS AND OUTSTANDING DEBT. There are a number of methods by which the
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State of New York may incur debt. Under the State Constitution, the State may
not, with limited exceptions for emergencies, undertake long-term general
obligation borrowing (i.e., borrowing for more than one year) unless the
----
borrowing is authorized in a specific amount for a single work or purpose by the
Legislature and approved by the voters. There is no limitation on the amount of
long-term general obligation debt that may be so authorized and subsequently
incurred by the State.
The State may undertake short-term borrowings without voter approval
(i) in anticipation of the receipt of taxes and revenues, by issuing tax and
revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds
from the sale of duly authorized but unissued general obligation bonds, by
issuing bond anticipation notes. The State may also, pursuant to specific
constitutional authorization, directly guarantee certain obligations of the
State of New York's authorities and public benefit corporations ("Authorities").
Payments of debt service on New York State general obligation and New York
State-guaranteed bonds and notes are legally enforceable obligations of the
State of New York.
The State employs additional long-term financing mechanisms, lease-
purchase and contractual-obligation financings, which involve obligations of
public authorities or municipalities that are State-supported but are not
general obligations of the State. Under these financing arrangements, certain
public authorities and municipalities have issued obligations to finance the
construction and rehabilitation of facilities or the acquisition and
rehabilitation of equipment, and expect to meet their debt service requirements
through the receipt of rental or other contractual payments made by the State.
Although these financing arrangements involve a contractual agreement by the
State to make payments to a public authority, municipality or other entity, the
State's obligation to make such payments is generally expressly made subject to
appropriation by the Legislature and the actual availability of money to the
State for making the payments. The State has also entered into a contractual-
obligation financing arrangement with the Local Government Assistance
Corporation ("LGAC") in an effort to restructure the way the State makes certain
local aid payments.
In 1990, as part of a State fiscal reform program, legislation was
enacted creating LGAC, a public benefit corporation empowered to issue long-term
obligations to fund certain payments to local governments traditionally funded
through New York State's
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annual seasonal borrowing. The legislation empowered LGAC to issue its bonds and
notes in an amount not in excess of $4.7 billion (exclusive of certain refunding
bonds) plus certain other amounts. Over a period of years, the issuance of these
long-term obligations, which are to be amortized over no more than 30 years, was
expected to eliminate the need for continued short-term seasonal borrowing. The
legislation also dedicated revenues equal to one-quarter of the four cent State
sales and use tax to pay debt service on these bonds. The legislation also
imposed a cap on the annual seasonal borrowing of the State at $4.7 billion,
less net proceeds of bonds issued by LGAC and bonds issued to provide for
capitalized interest, except in cases where the Governor and the legislative
leaders have certified the need for additional borrowing and provided a schedule
for reducing it to the cap. If borrowing above the cap is thus permitted in any
fiscal year, it is required by law to be reduced to the cap by the fourth fiscal
year after the limit was first exceeded. As of June 1995, LGAC had issued bonds
to provide net proceeds of $4.7 billion, completing the program. The impact of
LGAC's borrowing is that the State is able to meet its cash flow needs in the
first quarter of the fiscal year without relying on short-term seasonal
borrowings.
In June 1994, the Legislature passed a proposed constitutional
amendment that would significantly change the long-term financing practices of
the State and its public authorities. The proposed amendment would permit the
State, within a formula-based cap, to issue revenue bonds, which would be debt
of the State secured solely by a pledge of certain State tax receipts (including
those allocated to State Portfolios dedicated for transportation purposes), and
not by the full faith and credit of the State. In addition, the proposed
amendment would (i) permit multiple purpose general obligation bond proposals to
be proposed on the same ballot, (ii) require that State debt be incurred only
for capital projects included in a multi-year capital financing plan, and (iii)
prohibit, after its effective date, lease-purchase and contractual-obligation
financing mechanisms for State facilities.
Before the approved constitutional amendment could be presented to the
voters for their consideration, it had to be passed by a separately elected
legislature. The amendment was passed by the Senate and Assembly in June 1995.
The Amendment was thereafter submitted to voters in November 1995, where it was
defeated.
On January 13, 1992, S&P reduced its ratings on the State's general
obligation bonds from A to A- and, in addition, reduced its ratings on the
State's moral obligation, lease purchase, guaranteed and contractual obligation
debt. S&P also continued its negative rating outlook assessment on State
general obligation debt. On April 26, 1993, S&P revised the rating outlook
assessment to stable. On February 14, 1994, S&P raised its outlook to positive
and, on February 28, 1994, confirmed its A- rating. On January 6, 1992, Moody's
reduced its ratings on outstanding limited-liability State lease purchase and
contractual obligations from A to Baa1. On February 28, 1994, Moody's
reconfirmed its A rating on the State's general obligation long-term
indebtedness.
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The State anticipated that its capital programs would be financed, in
part, by State and public authorities borrowings in 1996-97. The State expected
to issue $411 million in general obligation bonds (including $153.6 million for
purposes of redeeming outstanding bond anticipation notes) and $154 million in
general obligation commercial paper. The Legislature had also authorized the
issuance of up to $101 million in certificates of participation during the
State's 1996-97 fiscal year for equipment purchases. The projection of the State
regarding its borrowings for the 1996-97 fiscal year may change if circumstances
require.
In the 1996 legislative session, the Legislature approved the
Governor's proposal to present to the voters in November 1996 a $1.75 billion
State general obligation bond referendum to finance various environmental
improvement and remediation projects. The Clean Water, Clean Air Bond Act was
approved by the voters in November 1996. As a result, the amount of general
obligation bonds issued during the 1996-97 fiscal year may increase above the
$411 million currently included in the 1996-97 borrowing plan to finance a
portion of this new program.
Principal and interest payments on general obligation bonds and
interest payments on bond anticipation notes were $735 million for the 1995-96
fiscal year, and were estimated to be $719 million for the 1996-97 fiscal year.
Principal and interest payments on fixed rate and variable rate bonds issued by
LGAC were $340 million for the 1995-96 fiscal year, and were estimated to be
$323 million for 1996-97.
New York State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or contractual-obligation
financing arrangements and has never been called upon to make any direct
payments pursuant to its guarantees.
LITIGATION. Certain litigation pending against the State or its officers or
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employees could have a substantial or long-term adverse effect on State
finances. Among the more significant of these cases are those that involve (1)
the validity of agreements and treaties by which various Indian tribes
transferred title to New York State of certain land in central and upstate New
York; (2) certain aspects of New York State's Medicaid policies, including its
rates, regulations and procedures; (3) action against New York State and New
York City officials alleging inadequate shelter allowances to maintain proper
housing; (4) challenges to the practice of reimbursing certain Office of Mental
Health patient care expenses from the client's Social Security benefits; (5)
alleged responsibility of New York State officials to assist in remedying racial
segregation in the City of Yonkers; (6) challenges by commercial insurers,
employee welfare benefit plans, and health maintenance organizations to the
imposition of 13%, 11% and 9% surcharges on inpatient hospital bills; (7)
challenges to certain aspects of petroleum business taxes; (8) action alleging
damages resulting from the failure by the State's Department of Environmental
Conservation to timely provide certain data; (9) a challenge to the
constitutionality of a State lottery game; and (10)
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an action seeking reimbursement from the State for certain costs arising out of
the provision of pre-school services and programs for children with handicapped
conditions.
Several actions challenging the constitutionality of legislation
enacted during the 1990 legislative session which changed actuarial funding
methods for determining state and local contributions to state employee
retirement systems have been decided against the State. As a result, the
Comptroller developed a plan to restore the State's retirement systems to prior
funding levels. Such funding is expected to exceed prior levels by $116 million
in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in
fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under
the Comptroller's plan are projected to be less than that required under the
prior funding method. As a result of the United States Supreme Court decision
in the case of State of Delaware v. State of New York, on
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January 21, 1994, the State entered into a settlement agreement with various
parties. Pursuant to all agreements executed in connection with the action, the
State was required to make aggregate payments of $351.4 million. Annual payments
to the various parties will continue through the State's 2002-03 fiscal year in
amounts which will not exceed $48.4 million in any fiscal year subsequent to the
State's 1994-95 fiscal year. Litigation challenging the constitutionality of the
treatment of certain moneys held in a reserve Portfolio was settled in June 1996
and certain amounts in a Supplemental Reserve Portfolio previously credited by
the State against prior State and local pension contributions will be paid in
1998.
The legal proceedings noted above involve State finances, State
programs and miscellaneous tort, real property and contract claims in which the
State is a defendant and the monetary damages sought are substantial. These
proceedings could affect adversely the financial condition of the State.
Adverse developments in these proceedings or the initiation of new proceedings
could affect the ability of the State to maintain a balanced 1996-97 State
Financial Plan. An adverse decision in any of these proceedings could exceed
the amount of the 1996-97 State Financial Plan reserve for the payment of
judgments and, therefore, could affect the ability of the State to maintain a
balanced 1996-97 State Financial Plan. In its audited financial statements for
the fiscal year ended March 31, 1996, the State reported its estimated liability
for awarded and anticipated unfavorable judgments to be $474 million.
Although other litigation is pending against New York State, except as
described herein, no current litigation involves New York State's authority, as
a matter of law, to contract indebtedness, issue its obligations, or pay such
indebtedness when it matures, or affects New York State's power or ability, as a
matter of law, to impose or collect significant amounts of taxes and revenues.
AUTHORITIES. The fiscal stability of New York State is related, in part, to the
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fiscal stability of its Authorities, which generally have responsibility for
financing, constructing and operating
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revenue-producing public benefit facilities. Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the State
itself, and may issue bonds and notes within the amounts of, and as otherwise
restricted by, their legislative authorization. The State's access to the public
credit markets could be impaired, and the market price of its outstanding debt
may be materially and adversely affected, if any of the Authorities were to
default on their respective obligations, particularly with respect to debt that
is State-supported or State-related. As of September 30, 1995, date of the
latest data available, there were 17 Authorities that had outstanding debt of
$100 million or more. The aggregate outstanding debt, including refunding bonds,
of these 17 Authorities was $73.45 billion.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however,
New York State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain of the 18 Authorities for operating and
other expenses and, in fulfillment of its commitments on moral obligation
indebtedness or otherwise, for debt service. This operating assistance is
expected to continue to be required in future years. In addition, certain
statutory arrangements provide for State local assistance payments otherwise
payable to localities to be made under certain circumstances to certain
Authorities. The State has no obligation to provide additional assistance to
localities whose local assistance payments have been paid to Authorities under
these arrangements. However, in the event that such local assistance payments
are so diverted, the affected localities could seek additional State Portfolios.
NEW YORK CITY AND OTHER LOCALITIES. The fiscal health of the State of New York
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may also be impacted by the fiscal health of its localities, particularly the
City of New York, which has required and continues to require significant
financial assistance from New York State. The City depends on State aid both to
enable the City to balance its budget and to meet its cash requirements. The
City has achieved balanced operating results for each of its fiscal years since
1981 as reported in accordance with the then-applicable GAAP.
In 1975, New York City suffered a fiscal crisis that impaired the
borrowing ability of both the City and New York State. In that year the City
lost access to the public credit markets. The City was not able to sell short-
term notes to the public again until 1979.
In 1975, S&P suspended its A rating of City bonds. This suspension
remained in effect until March 1981, at which time the City received an
investment grade rating of BBB from S&P. On July 2, 1985, S&P revised its
rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On July 2,
1993, S&P reconfirmed its A-rating of City bonds, continued its negative rating
outlook assessment and stated that maintenance of such rating depended upon the
City's making further progress towards reducing budget gaps in
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the outlying years. Moody's ratings of City bonds were revised in November 1981
from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985
to Baa1, in May 1988 to A and again in February 1991 to Baa1. On July 10, 1995,
S&P downgraded its rating on the City's $23 billion of outstanding general
obligation bonds to "BBB+" from "A-", citing to the City's chronic structural
budget problems and weak economic outlook. S&P stated that New York City's
reliance on one-time revenue measures to close annual budget gaps, a dependence
on unrealized labor savings, overly optimistic estimates of revenues and state
and federal aid and the City's continued high debt levels also contributed to
its decision to lower the rating. Moody's currently has the City's rating under
review for a possible downgrade.
New York City is heavily dependent on New York State and federal
assistance to cover insufficiencies in its revenues. There can be no assurance
that in the future federal and State assistance will enable the City to make up
its budget deficits. To help alleviate the City's financial difficulties, the
Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since
its creation, MAC has provided, among other things, financing assistance to the
City by refunding maturing City short-term debt and transferring to the City
proceeds received from sales of MAC bonds and notes. MAC is authorized to issue
bonds and notes payable from certain stock transfer tax revenues, from the
City's portion of the State sales tax derived in the City and, subject to
certain prior claims, from State per capita aid otherwise payable by the State
to the City. Failure by the State to continue the imposition of such taxes, the
reduction of the rate of such taxes to rates less than those in effect on July
2, 1975, failure by the State to pay such aid revenues and the reduction of such
aid revenues below a specified level are included among the events of default in
the resolutions authorizing MAC's long-term debt. The occurrence of an event of
default may result in the acceleration of the maturity of all or a portion of
MAC's debt. MAC bonds and notes constitute general obligations of MAC and do
not constitute an enforceable obligation or debt of either the State or the
City. As of December 31, 1995, MAC had outstanding an aggregate of
approximately $4.684 billion of its bonds. MAC is authorized to issue bonds and
notes to refunds its outstanding bonds and notes and to fund certain reserves,
without limitation as to principal amount, and to finance certain capital
commitments to the Transit Authority and the New York City School Construction
Authority for the 1992 through 1997 fiscal years in the event the City fails to
provide such financing.
The City and MAC have reached an agreement in principle under which
MAC will develop and implement a debt restructuring program which will provide
the City with $125 million in budget relief in fiscal year 1996, in addition to
the $20 million of additional budget relief provided by MAC to the City since
January 1996. The City has agreed with MAC that it will reduce certain
expenditures by $125 million in each of the four fiscal years starting in fiscal
year 1997. The proposed refinancing, which must satisfy MAC refinancing
criteria, is subject to market conditions.
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Since 1975, the City's financial condition has been subject to
oversight and review by the New York State Financial Control Board (the "Control
Board") and since 1978 the City's financial statements have been audited by
independent accounting firms. To be eligible for guarantees and assistance, the
City is required during a "control period" to submit annually for Control Board
approval, and when a control period is not in effect for Control Board review, a
financial plan for the next four fiscal years covering the City and certain
agencies showing balanced budgets determined in accordance with GAAP. New York
State also established the Office of the State Deputy Comptroller for New York
City ("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the City satisfied the statutory
requirements for termination of the control period. This means that the Control
Board's powers of approval are suspended, but the Board continues to have
oversight responsibilities.
From time to time, the Control Board staff, OSDC, the City comptroller
and others issue reports and make public statements regarding the City's
financial condition, commenting on, among other matters, the City's financial
plans, projected revenues and expenditures and actions by the City to eliminate
projected operating deficits. Some of these reports and statements have warned
that the City may have underestimated certain expenditures and overestimated
certain revenues and have suggested that the City may not have adequately
provided for future contingencies. Certain of these reports have analyzed the
City's future economic and social conditions and have questioned whether the
City has the capacity to generate sufficient revenues in the future to meet the
costs of its expenditure increases and to provide necessary services.
On January 31, 1996, the City published the financial plan for the
1996-1999 fiscal years (the "City Financial Plan"), which is a modification to a
financial plan submitted to the Control Board on July 11, 1995. The City
Financial Plan set forth proposed actions by the City for the 1996 fiscal year
to close substantial projected budget gaps resulting from lower than projected
tax receipts and other revenues and greater than projected expenditures. In
addition to substantial proposed agency expenditure reductions, the City
Financial Plan reflected a strategy to substantially reduce spending for
entitlements for the 1996 and subsequent fiscal years, and to decrease the
City's costs for Medicaid in the 1997 fiscal year and thereafter by increasing
the federal share of Medicaid costs otherwise paid by the City. This strategy
has been the subject of substantial debate, and implementation of this strategy
will be significantly affected by State and federal budget proposals currently
being considered. It is likely that the City Financial Plan will be changed
significantly in connection with the preparation of the Executive Budget for the
1997 fiscal year as a result of the status of State and federal budget proposals
and other factors.
The City Financial Plan also set forth projections for the 1997
through 1999 fiscal years and outlined a proposed gap-closing program to
eliminate a projected gap of $2.0 billion for the
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1997 fiscal year, and to reduce projected gaps of $3.3 billion and $4.1 billion
for the 1998 and 1999 fiscal years, respectively, assuming successful
implementation of the gap-closing program for the 1996 fiscal year.
The proposed gap-closing actions for the 1997 through 1999 fiscal
years included: (i) additional agency actions, totaling between $643 million and
$691 million in each of the 1997 through 1999 fiscal years; (ii) additional
savings resulting from State and federal aid and cost containment in entitlement
programs to reduce City expenditures and increase revenues by $650 million in
the 1997 fiscal year and by $727 million in each of the 1998 and 1999 fiscal
years; (iii) additional proposed federal aid of $50 million in the 1997 fiscal
year and State aid of $100 million in each of the 1997 through 1999 fiscal
years; (iv) the receipt of $300 million in the 1997 fiscal year from
privatization or other initiatives, certain of which actions is expected to
require legislative action by the City Council; and (v) the assumed receipt of
revenues relating to rent payments for the City's airports, totaling $244
million, $226 million and $70 million in the 1997 through 1999 fiscal years,
respectively, which are currently the subject of a dispute with the Port
Authority and the collection of which may depend on the successful completion of
negotiations with the Port Authority or the enforcement of the City's remedies
under the leases through pending legal actions. The City was also preparing an
additional contingency gap-closing program for the 1997 fiscal year to be
comprised of $200 million in additional agency actions.
The federal and State budgets, when adopted, may result in substantial
reductions in revenues for the City, as well as a reduction in projected
expenditures in entitlement programs, including Medicare, Medicaid and welfare
programs. The nature and extent of the impact on the City of the federal and
State budgets, when adopted, is uncertain, and no assurance can be given that
federal or State actions included in the federal and State adopted budgets may
not have a significant adverse impact on the City's budget and the City
Financial Plan.
The projections for the 1996 through 1999 fiscal years reflected the
costs of the proposed settlement with the teachers union and the recent
settlement with a coalition of municipal unions, and assumed that the City will
reach agreement with its remaining municipal unions under terms which are
generally consistent with such settlements.
The City's financial plans have been the subject of extensive public
comment and criticism. The City comptroller has issued reports identifying
risks ranging between $440 million and $560 million in the 1996 fiscal year
before taking into account the availability of $160 million in the general
reserve, and between $2.05 billion and $2.15 billion in the 1997 fiscal year
after implementation of the City's proposed gap-closing actions. With respect
to the 1997 fiscal year, the report noted that the City Financial Plan assumed
the implementation of highly uncertain State and federal actions, most of which
are unlikely to be implemented,
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that would provide between $1.2 billion and $1.4 billion in relief to the City,
and identified additional risks. The report concluded that the magnitude of the
budget risk for the 1997 fiscal year, after two years of large agency cutbacks
and workforce reductions, indicated the seriousness of the City's continuing
budget difficulties, and that the City Financial Plan would require substantial
revision in order to provide a credible program for dealing with the large
projected budget gap for the 1997 fiscal year.
The City since 1981 has fully satisfied its seasonal financing needs
in the public credit markets, repaying all short-term obligations within their
fiscal year of issuance. The City has issued $2.4 billion of short-term
obligations in fiscal year 1996 to finance the City's current estimate of its
seasonal cash flow needs for the 1996 fiscal year. Seasonal financing
requirements for the 1995 fiscal year increased to $2.2 billion from $1.75
billion and $1.4 billion in the 1994 and 1993 fiscal years, respectively.
Certain localities, in addition to the City, could have financial
problems leading to requests for additional New York State assistance. The
potential impact on the State of such requests by localities was not included in
the State's projections of its receipts and disbursements.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of Yonkers
(the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged
with oversight of the fiscal affairs of Yonkers. Future actions taken by the
Governor or the Legislature to assist Yonkers could result in allocation of New
York State resources in amounts that cannot yet be determined.
Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the City
of Troy in 1994. The Supervisory Board's powers were increased in 1995, when
Troy MAC was created to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the city of Troy from seeking federal
bankruptcy protection while Troy MAC bonds are outstanding.
Seventeen municipalities received extraordinary assistance during the
1996 legislative session through $50 million in special appropriations targeted
for distressed cities.
Municipalities and school districts have engaged in substantial short-
term and long-term borrowings. In 1994, the total indebtedness of all
localities in New York State other than New York City was approximately $17.7
billion. A small portion (approximately $82.9 million) of that indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant to
enabling New York State legislation. State law requires the comptroller to
review and make recommendations concerning the budgets of those local government
units other than New York City authorized by State law to issue debt to finance
deficits during the
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period that such deficit financing is outstanding. Seventeen localities had
outstanding indebtedness for deficit financing at the close of their fiscal year
ending in 1994.
From time to time, federal expenditure reductions could reduce, or in
some cases eliminate, federal funding of some local programs and accordingly
might impose substantial increased expenditure requirements on affected
localities. If New York State, New York City or any of the Authorities were to
suffer serious financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds issued by
localities within New York State could be adversely affected. Localities also
face anticipated and potential problems resulting from certain pending
litigation, judicial decisions and long-range economic trends. Long-range
potential problems of declining urban population, increasing expenditures and
other economic trends could adversely affect localities and require increasing
New York State assistance in the future.
STANDBY COMMITMENTS
In order to enhance the liquidity, stability or quality of municipal
obligations, the Prime Obligations, Money Market, Tax-Exempt Diversified, Tax-
Exempt California and Tax-Exempt New York Portfolios each may acquire the right
to sell a security to another party at a guaranteed price and date. Such a
right to resell may be referred to as a put, demand feature or "standby
commitment", depending on its characteristics. The aggregate price which a
Portfolio pays for securities with standby commitments may be higher than the
price which otherwise would be paid for the securities. Standby commitments may
not be available or may not be available on satisfactory terms.
Standby commitments may involve letters of credit issued by domestic
or foreign banks supporting the other party's ability to purchase the security
from the Portfolio. The right to sell may be exercisable on demand or at
specified intervals, and may form part of a security or be acquired separately
by the Portfolio. In considering whether a security meets a Portfolio's quality
standards, the Adviser will look to the creditworthiness of the party providing
the Portfolio with the right to sell.
The Portfolios value municipal obligations which are subject to
standby commitments at amortized cost. The exercise price of the standby
commitments is expected to approximate such amortized cost. No value is
assigned to the standby commitments for purposes of determining a Portfolio's
net asset value. Since the value of a standby commitment is dependent on the
ability of the standby commitment writer to meet its obligation to repurchase,
the policy of each Portfolio that may enter into standby commitment transactions
is to enter into such transactions only with banks, brokers or dealers which
represent a minimal risk of default. The duration of standby commitments will
not be a factor in determining the weighted average maturity of a Portfolio.
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Management of the Trust understands that the Internal Revenue Service
has issued a favorable revenue ruling to the effect that, under specified
circumstances, a registered investment company will be the owner of tax-exempt
municipal obligations acquired subject to a put option. Institutional Tax-Exempt
Assets, the predecessor company of which Tax-Exempt Diversified Portfolio and
Tax-Exempt California Portfolio were series, has received a ruling from the
Internal Revenue Service to the effect that it is considered the owner of the
municipal obligations subject to standby commitments so that the interest on
such instruments will be tax-exempt income to it. The Internal Revenue Service
has subsequently announced that it will not ordinarily issue advance ruling
letters as to the identity of the true owner of property in cases involving the
sale of securities or participation interests therein if the purchaser has the
right to cause the security, or the participation interest therein, to be
purchased by either the seller or a third party. Each of the Tax-Exempt
Diversified, Tax-Exempt California and Tax-Exempt New York Portfolios intends to
take the position that it is the owner of any municipal obligations acquired
subject to a standby commitment or acquired or held with certain other types of
put rights and that its distributions of tax-exempt interest earned with respect
to such municipal obligations will be tax-exempt for its unitholders. There is
no assurance that standby commitments will be available to a Portfolio nor has
any Portfolio assumed that such commitments will continue to be available under
all market conditions.
INVESTMENT LIMITATIONS
The following restrictions may not be changed with respect to any
Portfolio without the approval of the majority of outstanding voting securities
of that Portfolio (which, under the Investment Company Act and the rules
thereunder and as used in the Prospectus and this Statement of Additional
Information, means the lesser of (1) 67% of the units of that Portfolio present
at a meeting if the holders of more than 50% of the outstanding units of that
Portfolio are present in person or by proxy, or (2) more than 50% of the
outstanding units of that Portfolio). Investment restrictions that involve a
maximum percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by or on behalf of, a Portfolio, with the exception of borrowings
permitted by Investment Restriction (4).
Accordingly, the Trust may not, on behalf of any Portfolio:
(1) purchase for any one Portfolio the securities of any one issuer,
other than obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, if immediately after such purchase, more
than 5% of the value of such Portfolio's total assets would be invested in
such issuer, except that (a) up to 25% of the value of its total assets may
43
<PAGE>
be invested without regard to such 5% limitation, and (b) such 5%
limitation shall not apply to repurchase agreements collateralized by
obligations of the U.S. Government, its agencies or instrumentalities.
This restriction does not, however, apply to any Portfolio classified as a
non-diversified company under the Investment Company Act;
(2) purchase securities if such purchase would cause more than 25% in the
aggregate of the market value of the total assets of a Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no
limitation with respect to, and each Portfolio reserves freedom of action,
when otherwise consistent with its investment policies, to concentrate its
investments in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, obligations (other than commercial paper)
issued or guaranteed by U.S. banks and U.S. branches of foreign banks and
repurchase agreements and securities loans collateralized by such U.S.
Government obligations or such bank obligations. (For the purposes of this
restriction, state and municipal governments and their agencies and
authorities are not deemed to be industries, and telephone companies are
considered to be a separate industry from water, gas or electric utilities,
personal credit finance companies and business credit finance companies are
deemed to be separate industries and wholly owned finance companies are
considered to be in the industry of their parents if their activities are
primarily related to financing the activities of their parents).
Notwithstanding the foregoing, the Money Market Portfolio will invest more
than 25% of the value of its total assets in bank obligations (whether
foreign or domestic) except that if adverse economic conditions prevail in
the banking industry the Money Market Portfolio may, for defensive
purposes, temporarily invest less than 25% of the value of its total assets
in bank obligations;
(3) make loans, except (a) through the purchase of debt obligations
in accordance with each Portfolio's investment objective and policies, (b)
through repurchase agreements with banks, brokers, dealers and other
financial institutions, and (c) loans of securities;
(4) borrow money, except (a) as a temporary measure, and then only in
amounts not exceeding 5% of the value of the applicable Portfolio's total
assets or (b) from banks, provided that immediately after any such
borrowing all borrowings of the applicable Portfolio do not exceed one-
third of such Portfolio's total assets. No purchases of securities will be
made if such borrowings exceed 5% of the value of the applicable
Portfolio's assets. The exceptions to this restriction are not for
investment leverage purposes but are solely for extraordinary or emergency
purposes or to facilitate
44
<PAGE>
management of the Portfolios by enabling the Trust to meet redemption
requests when the liquidation of portfolio instruments is deemed to be
disadvantageous or not possible. If due to market fluctuations or other
reasons the total assets of a Portfolio fall below 300% of its borrowings,
the Trust will promptly reduce the borrowings of such Portfolio in
accordance with the Investment Company Act;
(5) mortgage, pledge or hypothecate any assets except to secure
permitted borrowings;
(6) purchase or sell real estate (excluding securities secured by real
estate or interests therein), securities issued by real estate investment
trusts, commodities, commodity contracts or oil or gas or other mineral
exploration or development programs;
(7) invest in companies for the purposes of exercising control or
management;
(8) act as an underwriter of securities, (except as the Trust may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the purchase and sale of portfolio instruments in accordance with a
Portfolio's investment objective and portfolio management policies),
purchase securities on margin (except for delayed delivery or when issued
transactions or such short-term credits as are necessary for the clearance
of transactions), make short sales of securities or maintain a short
position or invest in or write puts, calls or combinations thereof (except
that the Trust may, on behalf of a Portfolio, acquire puts in connection
with the acquisition of a debt instrument); and
(9) purchase for any one Portfolio the securities of any issuer if
such purchase would cause more than 10% of the voting securities of such
issuer to be held by a Portfolio, except that up to 25% of the value of its
total assets may be invested without regard to this 10% limitation. This
restriction does not, however, apply to any Portfolio classified as a
nondiversified company under the Investment Company Act.
In addition, as a non-fundamental policy, the Portfolios may not:
Purchase, hold or deal in real estate (including real estate limited
partnerships) or oil, gas or mineral leases, although a Portfolio may purchase
and sell securities that are secured by real estate or interests therein and may
purchase mortgage-related securities and may hold and sell real estate acquired
by a Portfolio as a result of the ownership of securities; and
Issue senior securities, except as appropriate to evidence indebtedness
that a Portfolio is permitted to incur and except for units of existing or
additional series of the Trust.
45
<PAGE>
As money market funds, the Portfolios must also comply with Rule 2a-7 under
the Investment Company Act. Amendments to Rule 2a-7 have been proposed and are
expected to be effective at some time in 1997. The following assumes that such
amendments are in effect as currently proposed. While a detailed and technical
Rule, Rule 2a-7 has three basic requirements: portfolio maturity, portfolio
quality and portfolio diversification. Portfolio maturity. Rule 2a-7 requires
that the maximum maturity of any security in a Portfolio's portfolio may not
exceed 397 days and a Portfolio's average portfolio maturity may not exceed 90
days. Portfolio quality. A money market fund may only invest in First Tier and
Second Tier securities (as defined in the Rule and the Prospectus). Each
Portfolio, other than the Tax-Exempt Portfolios, as a matter of non-fundamental
policy only invests in First Tier securities. Portfolio diversification. The
Prime Obligations, Government, Treasury Obligations, Money Market, Federal,
Treasury Instruments and Tax-Exempt Diversified Portfolios may not invest more
than 5% of their total assets in the securities of any one issuer (except U.S.
Government securities, repurchase agreements collateralized by such securities
and certain securities subject to a guarantee or unconditional demand feature).
Each of such Portfolios may, however, invest up to 25% of its total assets in
the First Tier Securities of a single issuer for a period of up to three
business days after the purchase thereof. Tax-Exempt New York and Tax-Exempt
California Portfolios, with respect to 75% of their respective total assets, may
not invest more than 5% of their total assets in the securities of any one
issuer (except U.S. Government securities, repurchase agreements collateralized
by such securities and certain securities subject to a guarantee or
unconditional demand feature); provided that such funds may not invest more than
5% of their respective total assets in the securities of a single issuer unless
the securities are First Tier securities. Immediately after the acquisition of
any put (i.e., the right to sell the security within a specified period at a
price equal to its amortized cost), with respect to 75% of the assets of a
Portfolio, no more than 10% of the Portfolio's total assets may be invested in
securities issued by or subject to puts issued by the same issuer. In the case
of the Tax-Exempt Portfolios (which are the only Portfolios that invest in
Second Tier securities), immediately after the acquisition of a put that is a
Second Tier security, no more than 5% of the Tax-Exempt Portfolio's total assets
may be invested in securities or puts issued by the institution that issued the
put. The Tax-Exempt Portfolios' investment in Second Tier securities that are
conduit securities, which are municipal securities involving an agreement or
arrangement other than the issuer of the municipal security, that are not
subject to an unconditional demand feature, may not exceed 5% of the Portfolio's
total assets and the Portfolio's investment in such conduit securities issued by
any issuer may not exceed 1% of the Portfolio's total assets. Securities which
are rated in the highest short-term rating category by at least two Nationally
Recognized Statistical Rating Organizations ("NRSROs"), or if only one NRSRO has
assigned a rating, by that NRSRO, are "First Tier Securities". Securities rated
in the top two short-term rating categories by at least two NRSROs, but which
are not First Tier Securities are "Second Tier Securities." NRSROs include S&P,
46
<PAGE>
Moody's, Fitch Investors Services, Inc., Duff and Phelps, Inc., IBCA Limited and
its affiliate IBCA Inc., and Thomson BankWatch, Inc. For a description of their
rating categories, see Appendix A.
"Value" for the purposes of all investment restrictions shall mean the
value used in determining a Portfolio's net asset value. "U.S. Government
securities" shall mean securities issued or guaranteed by the U.S. Government or
any of its agencies, authorities or instrumentalities.
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and officers of the Trust is
set forth below. Trustees and officers deemed to be "interested persons" of the
Trust for purposes of the Investment Company Act are indicated by an asterisk.
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- --------------------------
<S> <C> <C>
Ashok N. Bakhru, 53 Chairman Executive Vice President -
1325 Ave. of Americas & Trustee Finance and Administration and
NY, NY 10019 Chief Financial Officer, Coty Inc.
(since April 1996);
President, ABN Associates (June
1994 to April 1996); Senior
Vice President of Scott Paper
Company until June 1994
Company; Director of Arkwright
Mutual Insurance Company;
Trustee of International House
of Philadelphia; Member of
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- ------------------------------
<S> <C> <C>
Cornell University Council;
Trustee of the Walnut Street
Theater.
*David B. Ford, 51 Trustee Managing Director, Goldman
One New York Plaza Sachs (since 1996); General
New York, NY 10004 Partner, Goldman Sachs (1986-
1996); Co-Head of GSAM (since
December 1994).
*Alan A. Shuch, 48 Trustee Limited Partner, Goldman Sachs
One New York Plaza (since 1994); Director and York,
NY 10004 Vice President of Goldman Sachs
Funds Management, Inc. (from
April 1990 to November 1994);
President and Chief Operating
Officer, GSAM (from September
1988 to November 1994).
Jackson W. Smart, 66 Trustee Chairman, Executive Committee,
One Northfield Plaza First Commonwealth, Inc. (a
#218 managed dental care company),
Northfield, IL 60093 (since January 1996); Chairman and Chief
Executive Officer, MSP Communications Inc.
(a company engaged in radio broadcasting)
(since November 1988); Director, Federal
Express Corporation (since 1976), Evanston
Hospital Corporation (since 1980), First
Commonwealth, Inc. (since 1988) and North
American Private Equity Group (a venture
capital fund).
William H. Springer, 67 Trustee Vice Chairman and Chief
701 Morningside Drive Financial and Administrative
Lake Forest, IL 60045 Officer of Ameritech (a telecommunications holding
company) (February 1987 to June 1991);
Director, Walgreen Co. (a retail drug store
business); Director of Baker, Fentress & Co.
(a closed-end, management investment
company).
Richard P. Strubel, 57 Trustee Managing Director, Tandem
70 West Madison St. Partners, Inc. (since 1990);
Suite 1400 President and Chief Executive
Chicago, IL 60602 Officer, Microdot, Inc.
(a diversified manufacturer
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ----------- -----------------------
<S> <C> <C>
of fastening systems and
connectors)(January 1984 to
October 1994).
*Douglas C. Grip, 35 Trustee Vice President, Goldman Sachs
One New York Plaza & President (since May 1996); President,
New York, NY 10004 MFS Retirement Services Inc., of
Massachusetts Financial Services(prior thereto).
*Scott M. Gilman, 37 Treasurer Director, Mutual Funds Admin-
One New York Plaza istration, GSAM (since April
New York, NY 1994); Assistant Treasurer,
10004 Goldman Sachs Funds Management,
Inc. (since March 1993);
Vice President, Goldman
Sachs (since March 1990).
*John M. Perlowski, 32 Assistant Vice President, Goldman Sachs
One New York Plaza Treasurer (since July 1995); Director,
New York, NY Investors Bank and Trust
10004 Company (November 1993 to July
1995); Audit Manager of Arthur
Andersen LLP (prior thereto).
*Pauline Taylor, 50 Vice Vice President of Goldman
4900 Sears Tower President Sachs (since June 1992); Chicago,
IL Director, Shareholder 60606 Servicing
of GSAM (since June 1992).
*John W. Mosior, 58 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL Servicing of GSAM (since 60606
November 1989).
*Nancy L. Mucker, 47 Vice Vice President, Goldman Sachs;
4900 Sears Tower President Manager of Shareholder Ser-
Chicago, IL vicing of GSAM (since November
60606 1989).
*Michael J. Richman, 36 Secretary Associate General Counsel of
85 Broad Street GSAM (since February 1994);
New York, NY Vice President and Assistant
10004 General Counsel of Goldman Sachs (since June
1992); Counsel to the Funds Group, GSAM
(since June 1992); Partner, Hale and Dorr
(September 1991 to June 1992).
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -----------------------------
<S> <C> <C>
*Howard B. Surloff, 31 Assistant Assistant General Counsel and
85 Broad Street Secretary Vice President, Goldman Sachs
New York, NY 10004 (since November 1993 and May
1994, respectively ); Counsel
to the Funds Group, GSAM (since
November 1993); Associate of
Shereff, Friedman, Hoffman &
Goodman (prior thereto).
*Steven E. Hartstein, 33 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs (June 1993 to
New York, NY 10004 present); Funds Compliance
Officer, Citibank Global Asset
Management (August 1991 to June
1993).
*Deborah Farrell, 25 Assistant Administrative Assistant,
85 Broad Street Secretary Goldman Sachs (since
New York, NY 10004 January 1994). Formerly at
Cleary Gottlieb, Steen and
Hamilton.
*Kaysie P. Uniacke, 36 Assistant Vice President and Senior
One New York Plaza Secretary Portfolio Manager, GSAM
New York, NY 10004 (since 1988).
*Elizabeth D.
Anderson, 27 Assistant Portfolio Manager, GSAM (since
One New York Plaza Secretary April 1996); Junior Portfolio
New York, NY 10004 Manager, GSAM (1995-1996); Funds Trading
Assistant, GSAM (1993-1995); Compliance
Analyst, Prudential Insurance (1991-1993).
</TABLE>
Each interested Trustee and officer holds comparable positions with certain
other investment companies of which Goldman Sachs, GSAM or an affiliate thereof
is the investment adviser, administrator and/or distributor. As of April 1,
1997, the Trustees and officers of the Trust as a group owned less than 1% of
the outstanding units of beneficial interest of each of the Portfolios.
50
<PAGE>
The Trust pays each of its Trustees, other than those who are "interested
persons" of Goldman Sachs a fee for each Trustee meeting attended and an annual
fee. Such Trustees are also reimbursed for travel expenses incurred in
connection with attending such meetings.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the fiscal year ended December 31,
1996:
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement from Goldman
Benefits Sachs Mutual
Aggregate Accrued as Funds
Compensation Part of (including
from the Portfolios' the
Name of Trustee Portfolios Expenses Portfolios)*
- --------------- ------------ ----------- -------------
<S> <C> <C> <C>
Paul C. Nagel, Jr.** $18,150 $0 $62,450
Ashok N. Bakhru $22,729 $0 $69,299
Marcia L. Beck*** $0 $0 $0
David B. Ford $0 $0 $0
Alan A. Shuch $0 $0 $0
Jackson W. Smart $18,893 $0 $58,954
William H. Springer $18,893 $0 $58,954
Richard P. Strubel $18,893 $0 $58,954
</TABLE>
- --------------
* The Goldman Sachs Mutual Funds consisted of ___ mutual funds, including
the nine portfolios, on December 31, 1996.
** Retired as of June 30, 1996.
*** Resigned as President and Trustee Trust on May 1, 1996.
51
<PAGE>
THE ADVISER, DISTRIBUTOR AND
TRANSFER AGENT
THE ADVISER
GSAM, a separate operating division of Goldman Sachs, acts as the
investment adviser to the Portfolios. Under the Advisory Agreement between
Goldman Sachs on behalf of GSAM and the Trust on behalf of the Portfolios, GSAM,
subject to the supervision of the Board of Trustees of the Trust and in
conformity with the stated policies of each Portfolio, acts as investment
adviser and directs the investments of the Portfolios. In addition, GSAM
administers the Portfolios' business affairs and, in connection therewith,
furnishes the Trust with office facilities and (to the extent not provided by
the Trust's custodian, transfer agent, or other organizations) clerical
recordkeeping and bookkeeping services and maintains the financial and account
records required to be maintained by the Trust. As compensation for these
services and for assuming expenses related thereto, the Trust pays GSAM a fee,
computed daily and paid monthly at an annual rate of .35% of each Portfolio's
average daily net assets. GSAM has agreed to reduce or otherwise limit certain
other expenses (excluding fees payable to Service Organizations, taxes,
interest, brokerage and litigation, indemnification and other extraordinary
expenses) of each Portfolio, on an annualized basis, to .06% of the average
daily net assets of that Portfolio. The amount of such reductions or limits, if
any, are calculated monthly and are based on the cumulative difference between a
Portfolio's estimated annualized expense ratio and the expense limit for that
Portfolio. This amount shall be reduced by any prior payments related to the
current fiscal year. GSAM has also voluntarily agreed to limit its advisory fee
to the rate paid during the fiscal year ended December 31, 1996.
The Trust, on behalf of each Portfolio, is responsible for all
expenses other than those expressly borne by GSAM under the Portfolios' Advisory
Agreement. The expenses borne by Units of each Portfolio include, without
limitation, the fees payable to GSAM, the fees and expenses of the Portfolios'
custodian, fees and expenses of the Portfolios' transfer agent, filing fees for
the registration or qualification of Units under federal or state securities
laws, expenses of the organization of the Portfolios, taxes (including income
and excise taxes, if any), interest, costs of liability insurance, fidelity
bonds, indemnification or contribution, any costs, expenses or losses arising
out of any liability of, or claim for damages or other relief asserted against,
the Portfolios for violation of any law, legal and auditing and tax fees and
expenses (including the cost of legal and certain accounting services rendered
by employees of Goldman Sachs with respect to the Portfolios), expenses of
preparing and setting in type prospectuses, statements of additional
information, proxy material, reports and notices, the printing and distribution
of the same to Unitholders and regulatory authorities, its proportionate share
of the compensation and expenses of its "non-interested" Trustees, and
extraordinary expenses incurred by the Portfolios.
52
<PAGE>
The Advisory Agreement entered into on behalf of the Portfolios was
most recently approved by the Board of Trustees, including the"non-interested"
Trustees, on April 23, 1997 and by the unitholders of each Portfolio (other than
the Treasury Instruments and Tax-Exempt New York Portfolios) on April 19, 1990
and by the unitholders of the Treasury Instruments and Tax-Exempt New York
Portfolios on June 3, 1991. The Advisory Agreement will remain in effect until
June 30, 1998, and will continue in effect thereafter only if such continuance
is specifically approved at least annually by a majority of the Trustees or by a
vote of a majority of the outstanding voting securities of the particular
Portfolio, as defined in the Investment Company Act, and, in either case, by a
majority of "non-interested" Trustees.
For the fiscal years ended December 31, 1996, December 31, 1995 and
December 31, 1994 the amount of the advisory fee incurred by each Portfolio was
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Prime Obligations Portfolio $6,728,074 $9,135,344
Money Market Portfolio 2,618,275 2,663,551
Treasury Obligations Portfolio 3,206,490 3,545,307
Treasury Instruments Portfolio 1,079,236 687,965
Government Portfolio 3,259,056 4,804,362
Federal Portfolio 4,543,196 3,396,214
Tax-Exempt Diversified Portfolio 3,795,451 4,372,766
Tax-Exempt California Portfolio 1,030,447 867,058
Tax-Exempt New York Portfolio 234,853 150,735
</TABLE>
GSAM agreed not to impose a portion of its advisory fees for the fiscal years
ended December 31, 1996, December 31, 1995 and December 31, 1994 with respect to
the Money Market, Treasury Instruments, Federal, Tax-Exempt Diversified and Tax-
Exempt New York Portfolios. Had such fees been imposed, the following
additional fees would have been incurred for the periods indicated:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Money Market Portfolio $ 436,325 $ 443,925
Treasury Instruments Portfolio 1,438,992 917,292
Federal Portfolio 3,407,655 2,547,168
Tax-Exempt Diversified Portfolio 1,518,129 1,749,116
Tax-Exempt New York Portfolio 109,464 123,050
</TABLE>
In addition, GSAM assumed certain expenses related to the operations of each
Portfolio during various periods of 1996, 1995 and 1994 to the extent such
expenses would have caused each Portfolio's total expenses to exceed, on an
annualized basis, certain contractual or voluntary expense limitations. Had
these expenses not been assumed, the following additional expense would have
been incurred for such years:
53
<PAGE>
<TABLE>
<CAPTION>
1994 1996 1995
<S> <C> <C>
Prime Obligations Portfolio $347,317 $635,085
Money Market Portfolio 135,715 301,326
Treasury Obligations Portfolio 203,882 371,456
Treasury Instruments Portfolio 223,652 150,525
Government Portfolio 276,785 526,310
Federal Portfolio 302,153 326,417
Tax-Exempt Diversified Portfolio 239,829 217,296
Tax-Exempt California Portfolio 19,625 34,612
Tax-Exempt New York Portfolio 32,403 51,675
</TABLE>
The Advisory Agreement provides that GSAM shall not be liable to a
Portfolio for any error of judgment by GSAM or for any loss sustained by the
Portfolio except in the case of GSAM's willful misfeasance, bad faith, gross
negligence or reckless disregard of duty. Each Portfolio may use any name
derived from the name "Goldman Sachs" only so long as the Advisory Agreement
remains in effect. The Advisory Agreement also provides that it shall terminate
automatically if assigned and that it may be terminated with respect to any
particular Portfolio without penalty by vote of a majority of the Trustees or a
majority of the outstanding voting securities of that Portfolio on 60 days'
written notice to GSAM or by GSAM without penalty at any time on 90 days'
written notice to the Trust.
Under the Advisory Agreement, GSAM is also responsible for the
administration of each Portfolio's business affairs subject to the supervision
of the Trustees and, in connection therewith, furnishes each Portfolio with
office facilities and is responsible for ordinary clerical, recordkeeping and
bookkeeping functions, to the extent not provided pursuant to the Portfolios'
custodian agreements; preparation and filing of documents required to comply
with federal and state securities laws; supervising the activities of the
Portfolios' custodian and transfer agent; providing assistance in connection
with meetings of the Trustees and unitholders; and other administrative services
necessary to conduct the Trust's business.
In managing the Tax-Exempt Diversified Portfolio, the Tax-Exempt
California Portfolio and the Tax-Exempt New York Portfolio, GSAM will draw upon
the extensive research generated by Goldman Sachs' Municipal Credit Group. The
Credit Group's research team continually reviews current information regarding
the issuers of municipal and other tax-exempt securities, with particular focus
on long-term creditworthiness, short-term liquidity, debt service costs,
liability structures, and administrative and economic characteristics.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs acts as principal underwriter and distributor of each
Portfolio's units. The Distribution Agreement between Goldman Sachs and the
Trust was most recently approved by the Trustees on
54
<PAGE>
April 23, 1997. Goldman Sachs also serves as the Portfolios' transfer agent.
Goldman Sachs provides customary transfer agency services to the Portfolios,
including the handling of unitholder communications, the processing of
unitholder transactions, the maintenance of unitholder account records, payment
of dividends and distributions and related functions. For these services,
Goldman Sachs receives .04% (on an annualized basis) of the average daily net
assets with respect to each Portfolio (other than the Prime Obligations
Portfolio). With respect to the Prime Obligations Portfolio, Goldman Sachs is
entitled to receive a fee from the Portfolio equal to the classes proportionate
share of the total transfer agency fees borne by the Portfolio, which are equal
to $12,000 per year plus $7.50 per account, together with out-of-pocket expenses
(including those out of pocket expenses payable to servicing agents) applicable
to ILA Class B Units and .04% of the average daily net assets of the other
classes of the Prime Obligations Portfolio. Goldman Sachs may from time to time
agree that the fee it would otherwise be entitled to receive under its transfer
agency agreement will be reduced.
For the fiscal years ended December 31, 1996, December 31, 1995 and December 31,
1994 the Portfolios incurred transfer agency fees as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Prime Obligations Portfolio $ 592,685 $768,923 $1,044,039
Money Market Portfolio 394,010 349,060 355,140
Treasury Obligations Portfolio 360,858 366,456 405,178
Treasury Instruments Portfolio 414,758 287,798 183,457
Government Portfolio 286,766 372,463 549,070
Federal Portfolio 1,085,286 908,708 679,243
Tax-Exempt Diversified Portfolio 616,119 607,252 699,643
Tax-Exempt California Portfolio 161,229 117,765 99,092
Tax-Exempt New York Portfolio 41,051 39,298 32,139
</TABLE>
Goldman Sachs is one of the largest international investment banking
firms in the United States. Founded in 1869, Goldman Sachs is a major
investment banking and brokerage firm providing a broad range of financing and
investment services both in the United States and abroad. As of November 29,
1996, Goldman Sachs and its consolidated subsidiaries had assets of
approximately $112 billion and partners' capital of $2 billion. Goldman Sachs
became registered as an investment adviser in 1981. As of April ___, 1997,
Goldman Sachs, together with its affiliates, acted as investment adviser,
administrator or distributor for approximately $____ billion in total assets.
Authorized Dealers and other financial intermediaries provide varying
arrangements for their clients to purchase and redeem Fund shares. Some may
establish higher minimum investment requirements and others may limit the
availability of certain privileges with respect to the purchase and redemption
of shares or the reinvestment of dividends. Firms may arrange with their clients
for other investment or administrative services and may independently
55
<PAGE>
establish and charge additional amounts to their clients for such services,
which charges would reduce a client's return. If shares of a Fund are held in a
"street name" account or were purchased through an Authorized Dealer,
unitholders should contact the Authorized 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 Investment Advisers, Distributor, and/or their affiliates may also
pay additional compensation, out of their assets and not as an additional charge
to the Funds, to selected Authorized Dealers or Service Organizations in
connection with the sale, distribution and/or servicing of units of one or more
chosen (such as additional payments based on new sales, amounts exceeding pre-
established thresholds, or the length of time clients' assets have remained in a
Fund), and may, subject to applicable NASD regulations, contribute to various
non-cash and cash incentive arrangements to promote the sale of units, as well
as sponsor various educational programs, sales contests and promotions in which
participants may receive reimbursement of expenses, entertainment and prizes
such as travel awards, merchandise and cash. The Distributor currently expects
that such additional bonuses or incentives will not exceed .50% of the amount of
any sales.
PORTFOLIO TRANSACTIONS
GSAM places the portfolio transactions of the Portfolios and of all
other accounts managed by GSAM for execution with many firms. GSAM uses its
best efforts to obtain execution of portfolio transactions at prices which are
advantageous to each Portfolio and at reasonable competitive spreads or (when a
disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, GSAM will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the broker-dealer, the general
execution and operational capabilities of the firm, the reputation, reliability,
experience and financial condition of the firm, the value and quality of the
services rendered by the firm in this and other transactions, and the
reasonableness of the spread or commission, if any. Securities purchased and
sold by the Portfolios are generally traded in the over-the-counter market on a
net basis (i.e., without commission) through broker-dealers and banks acting for
their own account rather than as brokers, or otherwise involve transactions
directly with the issuer of such securities.
Goldman Sachs is active as an investor, dealer and/or underwriter in
many types of municipal and money market instruments. Its activities in this
regard could have some effect
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on the markets for those instruments which the Portfolios buy, hold or sell. An
order has been granted by the SEC under the Investment Company Act which permits
the Portfolios to deal with Goldman Sachs in transactions in certain taxable
securities in which Goldman Sachs acts as principal. As a result, the Portfolios
may trade with Goldman Sachs as principal subject to the terms and conditions of
such exemption.
Under the Investment Company Act, the Portfolios are prohibited from
purchasing any instrument of which Goldman Sachs is a principal underwriter
during the existence of an underwriting or selling syndicate relating to such
instrument, absent an exemptive order (the order referred to in the preceding
paragraph will not apply to such purchases) or the adoption of and compliance
with certain procedures under such Act. The Trust has adopted procedures which
establish, among other things, certain limitations on the amount of debt
securities that may be purchased in any single offering and on the amount of the
Trust's assets that may be invested in any single offering. Accordingly, in
view of Goldman Sachs' active role in the underwriting of debt securities, a
Portfolio's ability to purchase debt securities in the primary market may from
time to time be limited.
In certain instances there may be securities which are suitable for
more than one Portfolio as well as for one or more of the other clients of GSAM.
Investment decisions for each Portfolio and for GSAM's other clients are made
with a view to achieving their respective investment objectives. It may develop
that a particular security is bought or sold for only one client even though it
might be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more other clients
are selling that same security. Some simultaneous transactions are inevitable
when several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in
the purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security in a particular transaction as far as a Portfolio is concerned.
Each Portfolio believes that over time its ability to participate in volume
transactions will produce better executions for the Portfolios.
During the fiscal year ended December 31, 1996, the Trust acquired and
sold securities of its regular broker/dealers: [insert names].
As of December 31, 1996, the Prime Obligations Portfolio held the
following amounts of securities of its regular broker/dealers; as defined in
Rule 10b-1 under the Investment Company Act, or their parents ($ in thousands):
Chase Manhattan ($57,038), Smith Barney ($30,000), Morgan Stanley ($58,323), and
Swiss Bank Corp. ($3,806).
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As of December 31, 1996, the Money Market Portfolio held the following
amounts of securities of its regular broker/dealers; as defined in Rule 10b-1
under the Investment Company Act, or their parents ($ in thousands): Bear
Stearns ($34,778), Morgan Stanley ($70,359), Chase Manhattan ($30,388), and
Swiss Bank Corp. ($13,730).
As of December 31, 1996, the Treasury Obligations Portfolio held the
following amounts of securities of its regular broker/dealers; as defined in
Rule 10b-1, or their parents ($ in thousands): Bear Stearns Companies ($35,000),
Daiwa Securities ($35,000), Lehman ($35,000), Smith Barney Inc. ($30,000), Union
Bank of Switzerland ($30,000), Chase Manhattan ($107,833), Morgan Stanley
($129,400), and Swiss Bank Corp. ($58,316).
As of December 31, 1996, the Government Portfolio held the following
amounts of securities of its regular broker/dealers; as defined in Rule 10b-1,
or their parents ($ in thousands): Bear Stearns Companies ($30,000), Diawa
Securities ($30,000), Lehman ($30,000), Morgan Stanley ($120,363), Chase
Manhattan ($100,303), and Swiss Bank Corp. ($54,244).
NET ASSET VALUE
The net asset value per unit of each Portfolio is determined by the
Portfolios' custodian as of the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. New York time) on each Business Day. A Business
Day means any day on which the New York Stock Exchange is open, except for days
on which Chicago, Boston or New York banks are closed for local holidays. Such
holidays include: New Year's Day, Martin Luther King Day, President's Day, Good
Friday, Memorial Day, the Fourth of July, Labor Day, Columbus Day, Veteran's
Day, Thanksgiving Day and Christmas Day.
Each Portfolio's securities are valued using the amortized cost method
of valuation in an effort to maintain a constant net asset value of $ 1.00 per
unit, which the Board of Trustees has determined to be in the best interest of
the Portfolios and their unitholders. This method involves valuing a security
at cost on the date of acquisition and thereafter assuming a constant accretion
of a discount or amortization of a premium to maturity, regardless of the impact
of fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a
Portfolio would receive if it sold the instrument. During such periods, the
yield to an investor in a Portfolio may differ somewhat from that obtained in a
similar investment company which uses available market quotations to value all
of its portfolio securities. During periods of declining interest rates, the
quoted yield on units of a Portfolio may tend to be higher than a like
computation made by a fund with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of its
portfolio instruments. Thus, if the
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use of amortized cost by a Portfolio resulted in a lower aggregate portfolio
value on a particular day, a prospective investor in the Portfolio would be able
to obtain a somewhat higher yield if he or she purchased units of the Portfolio
on that day, than would result from investment in a fund utilizing solely market
values, and existing investors in the Portfolio would receive less investment
income. The converse would apply in a period of rising interest rates.
The Trustees have established procedures designed to stabilize, to the
extent reasonably possible, each Portfolio's price per unit as computed for the
purpose of sales and redemptions at $1.00. Such procedures include review of
each Portfolio by the Trustees, at such intervals as they deem appropriate, to
determine whether the Portfolio's net asset value calculated by using available
market quotations (or an appropriate substitute which reflects market
conditions) deviates from $1.00 per unit based on amortized cost, as well as
review of methods used to calculate the deviation. If such deviation exceeds
1/2 of 1%, the Trustees will promptly consider what action, if any, will be
initiated. In the event the Trustees determine that a deviation exists which
may result in material dilution or other unfair results to investors or existing
unitholders, they will take such corrective action as they regard to be
necessary and appropriate, including the sale of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding part or all of dividends or payment of distributions from
capital or capital gains; redemptions of units in kind; or establishing a net
asset value per unit by using available market quotations or equivalents. In
addition, in order to stabilize the net asset value per unit at $1.00 the
Trustees have the authority (1) to reduce or increase the number of units
outstanding on a pro rata basis, and (2) to offset each unitholder's pro rata
portion of the deviation between the net asset value per unit and $1.00 from the
unitholder's accrued dividend account or from future dividends. Each Portfolio
may hold cash for the purpose of stabilizing its net asset value per unit.
Holdings of cash, on which no return is earned, would tend to lower the yield on
such Portfolio's units.
In order to continue to use the amortized cost method of valuation for
each Portfolio's investments, the Portfolios must comply with Rule 2a-7. See
"Investment Restrictions."
The proceeds received by each Portfolio for each issue or sale of its
units, and all net investment income, realized and unrealized gain and proceeds
thereof, subject only to the rights of creditors, will be specifically allocated
to such Portfolio and constitute the underlying assets of that Portfolio. The
underlying assets of each Portfolio will be segregated on the books of account,
and will be charged with the liabilities in respect to such Portfolio and with a
share of the general liabilities of the Trust. Expenses with respect to the
Portfolios are to be allocated in proportion to the net asset values of the
respective Portfolios except where allocations of direct expenses can otherwise
be fairly made. In addition, within each Portfolio, ILA Units, ILA
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Administration Units, ILA Service Units and ILA Class B Units (Prime Obligations
Portfolio only) will be subject to different expense structures (see
"Organization and Capitalization").
REDEMPTIONS
The Trust may suspend the right of redemption of units of a Portfolio
and may postpone payment for any period: (i) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings or during
which trading on the New York Stock Exchange is restricted, (ii) when the SEC
determines that a state of emergency exists which may make payment or transfer
not reasonably practicable, (iii) as the SEC may by order permit for the
protection of the unitholders of the Trust or (iv) at any other time when the
Trust may, under applicable laws and regulations, suspend payment on the
redemption of the Portfolio's units.
The Trust agrees to redeem units of each Portfolio solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Portfolio during
any 90-day period for any one unitholder. The Trust reserves the right to pay
other redemptions, either total or partial, by a distribution in kind of
securities (instead of cash) from the applicable Portfolio's portfolio. The
securities distributed in such a distribution would be valued at the same value
as that assigned to them in calculating the net asset value of the units being
redeemed. If a unitholder receives a distribution in kind, he or she should
expect to incur transaction costs when he or she converts the securities to
cash.
CALCULATION OF YIELD QUOTATIONS
Each Portfolio's yield quotations are calculated by a standard method
prescribed by the rules of the SEC. Under this method, the yield quotation is
based on a hypothetical account having a balance of exactly one unit at the
beginning of a seven-day period.
Yield, effective yield and tax-equivalent yield are calculated
separately for each class of units of a Portfolio. Each type of unit is subject
to different fees and expenses and may have differing yields for the same
period.
The yield quotation is computed as follows: the net change, exclusive
of capital changes (i.e., realized gains and losses from the sale of securities
and unrealized appreciation and depreciation), in the value of a hypothetical
pre-existing account having a balance of one unit at the beginning of the base
period is determined by dividing the net change in account value by the value of
the account at the beginning of the base period. This base period return is
then multiplied by 365/7 with the resulting yield figure carried to the nearest
100th of 1%. Such yield quotation shall take into account all fees that are
charged to a Portfolio.
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Each Portfolio also may advertise a quotation of effective yield for a
7-calendar day period. Effective yield is computed by compounding the
unannualized base period return determined as in the preceding paragraph by
adding 1 to that return, raising the sum to the 365/7 power and subtracting one
from the result, according to the following formula:
Effective Yield = [(base period return + 1)/365/7/] - 1
The Tax-Exempt Diversified, Tax-Exempt California, Tax-Exempt New
York, Federal and Treasury Instruments Portfolios may also advertise a tax-
equivalent yield which is computed by dividing that portion of a Portfolio's
yield (as computed above) which is tax-exempt by one minus a stated income tax
rate and adding the quotient to that portion, if any, of the yield of the
Portfolio that is not tax-exempt.
Unlike bank deposits or other investments which pay a fixed yield or
return for a stated period of time, the return for a Portfolio will fluctuate
from time to time and does not provide a basis for determining future returns.
Return is a function of portfolio quality, composition, maturity and market
conditions as well as of the expenses allocated to each Portfolio. The return
of a Portfolio may not be comparable to other investment alternatives because of
differences in the foregoing variables and differences in the methods used to
value portfolio securities, compute expenses and calculate return.
The yield, effective yield and tax-equivalent yield of each Portfolio
with respect to ILA Units, ILA Administration Units, ILA Service Units and ILA
Class B Units for the seven-day period ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Tax-
Effective Equivalent
Yield Yield Yield
----- --------- ----------
<S> <C> <C> <C>
Prime Obligations Portfolio:
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
ILA Class B Units ____ ____ N/A
Money Market Portfolio:
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
Treasury Obligations Portfolio:
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
Treasury Instruments Portfolio:
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Government Portfolio:
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
Federal Portfolio:
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
Tax-Exempt Diversified Portfolio:
ILA Units ____ ____ ____
ILA Administration Units ____ ____ ____
ILA Service Units ____ ____ ____
Tax-Exempt California Portfolio:
ILA Units ____ ____ ____
ILA Administration Units ____ ____ ____
ILA Service Units** ____ ____ ____
Tax-Exempt New York Portfolio*
ILA Units ____ ____ ____
ILA Administration Units ____ ____ ____
ILA Service Units** ____ ____ ____
</TABLE>
- -------------------------
* ____%, ____% and ____% for the ILA Units, ILA Administration Units and ILA
Service Units, respectively, when taking New York City taxes into account.
** Assuming such Units had been outstanding and were subject to maximum
administration or service fees.
The information set forth in the foregoing table reflects certain fee
reductions and expense limitations voluntarily agreed to by the Adviser. See
"The Adviser, Distributor and Transfer Agent." In the absence of such fee
reductions and expense limitations, the yield of each Portfolio for the same
period would have been as follows:
<TABLE>
<CAPTION>
Tax-
Effective Equivalent
Yield Yield Yield
----- --------- ----------
<S> <C> <C> <C>
Prime Obligations Portfolio
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
ILA Class B Units ____ ____ N/A
Money Market Portfolio
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
Treasury Obligations Portfolio
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
Treasury Instruments Portfolio
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Government Portfolio
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
Federal Portfolio
ILA Units ____ ____ N/A
ILA Administration Units ____ ____ N/A
ILA Service Units ____ ____ N/A
Tax-Exempt Diversified Portfolio
ILA Units ____ ____ ____
ILA Administration Units ____ ____ ____
ILA Service Units ____ ____ ____
Tax-Exempt California Portfolio
ILA Units ____ ____ ____
ILA Administration Units ____ ____ ____
ILA Service Units** ____ ____ ____
Tax-Exempt New York Portfolio*
ILA Units ____ ____ ____
ILA Administration Units ____ ____ ____
ILA Service Units** ____ ____ ____
</TABLE>
- ----------------------
* ____%, ____% and ____% for the ILA Units, ILA Administration Units and ILA
Service Units, respectively, when taking New York City taxes into account.
** Assuming such Units had been outstanding and were subject to maximum
administration or service fees.
The quotations of tax-equivalent yield set forth above for the seven-day
period ended December 31, 1996 are based on a federal marginal tax rate of
39.6%.
With respect to the Tax-Exempt California Portfolio, a California State
personal income tax rate of 11.0% is being assumed in addition to the 39.6%
federal tax rate, for a combined tax rate of 46.2%. With respect to the Tax-
Exempt New York Portfolio, the tax equivalent yields are being shown under two
scenarios. The first scenario assumes a federal marginal tax rate of 39.6% and
a New York State personal income tax rate of 7.594%, for a combined tax rate of
44.2%. The second scenario assumes a New York City personal income tax rate of
4.46% in addition to the above federal and New York State tax rates, for a
combined tax rate of 46.9%. The combined tax rates assume full deductibility of
state and, if applicable, city taxes in computing federal tax liability.
In addition, from time to time, advertisements or information may include a
discussion of asset allocation models developed or recommended by GSAM and/or
its affiliates, certain attributes or benefits to be derived from asset
allocation strategies and the Goldman Sachs mutual funds that may form a part of
such an asset allocation strategy. Such advertisements and information may also
include a discussion of GSAM's current economic outlook and domestic and
international market views and recommend periodic tactical modifications to
current asset
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allocation strategies. Such advertisements and information may include other
material which highlight or summarize the services provided in support of an
asset allocation program.
From time to time any Portfolio may publish an indication of its past
performance as measured by independent sources such as Lipper Analytical
Services, Incorporated, Weisenberger Investment Companies Service, Donoghue's
Money Fund Report, Barron's, Business Week, Changing Times, Financial World,
Forbes, Money, Personal Investor, Sylvia Porter's Personal Finance, and The Wall
Street Journal.
TAX INFORMATION
Each Portfolio has qualified and has elected or intends to qualify and elect
to be treated and to qualify as a separate regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code").
Such qualification does not involve supervision of management or investment
practices or policies by any governmental agency or bureau.
In order to qualify as a regulated investment company, each Portfolio must,
among other things, (a) derive at least 90% of its gross income for the taxable
year from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock or securities or certain other
investments (the "90% Test"); (b) derive less than 30% of its gross income for
the taxable year from the sale or other disposition of stock or securities or
certain other investments held less than three months; and (c) diversify its
holdings so that, at the close of each quarter of its taxable year, (i) at least
50% of the market value of the Portfolio's total gross assets is represented by
cash and cash items (including receivables), U.S. Government securities,
securities of other regulated investment companies and other securities limited,
in respect of any one issuer, to an amount not greater in value than 5% of the
value of the Portfolio's total assets and not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of the
Portfolio's total (gross) assets is invested in the securities (other than U.S.
Government securities and securities of other regulated investment companies) of
any one issuer or two or more issuers controlled by the Portfolio and engaged in
the same, similar or related trades or businesses. For purposes of these
requirements, participation interests will be treated as securities, and the
issuer will be identified on the basis of market risk and credit risk associated
with any particular interest. Certain payments received with respect to such
interests, such as commitment fees and certain facility fees, may not be treated
as income qualifying under the 90% test.
Each Portfolio, as a regulated investment company, will not be subject to
federal income tax on any of its net investment income and net realized capital
gains that are distributed to
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unitholders with respect to any taxable year in accordance with the Code's
timing and other requirements, provided that the Portfolio distributes at least
90% of its investment company taxable income (generally, all of its net taxable
income other than "net capital gain," which is the excess of net long-term
capital gain over net short-term capital loss) for such year and, in the case of
any Portfolio that earns tax-exempt interest, at least 90% of the excess of the
tax-exempt interest it earns over certain disallowed deductions. A Portfolio
will be subject to federal income tax at regular corporate rates on any
investment company taxable income or net capital gain that it does not
distribute for a taxable year. In order to avoid a non-deductible 4% federal
excise tax, each Portfolio must distribute (or be deemed to have distributed) by
December 31 of each calendar year at least 98% of its taxable ordinary income
for such year, at least 98% of the excess of its capital gains over its capital
losses (generally computed on the basis of the one-year period ending on October
31 of such year), and all taxable ordinary income and the excess of capital
gains over capital losses for the previous year that were not distributed in
such year and on which the Portfolio paid no federal income tax.
Dividends paid by a Portfolio from taxable net investment income (including
income attributable to accrued market discount and a portion of the discount on
certain stripped tax-exempt obligations and their coupons) and the excess of net
short-term capital gain over net long-term capital loss will be treated as
ordinary income in the hands of unitholders. Such distributions will not
qualify for the corporate dividends-received deduction. Dividends paid by a
Portfolio from the excess of net long-term capital gain (if any) over net short-
term capital loss are taxable to unitholders as long-term capital gain,
regardless of the length of time the units of a Portfolio have been held by such
unitholders, and also will not qualify for the corporate dividends-received
deduction. A Portfolio's net realized capital gains for a taxable year are
computed by taking into account realized capital losses, including any capital
loss carryforward of that Portfolio.
Distributions paid by the Tax-Exempt Diversified, Tax-Exempt California and
Tax-Exempt New York Portfolios from tax-exempt interest received by them and
properly designated as "exempt-interest dividends" will generally be exempt from
regular federal income tax, provided that at least 50% of the value of the
applicable Portfolio's total assets at the close of each quarter of its taxable
year consists of tax-exempt obligations, i.e., obligations described in Section
- -
103(a) of the Code (not including units of other regulated investment companies
that may pay exempt-interest dividends, because such units are not treated as
tax-exempt obligations for this purpose). Dividends paid by the other
Portfolios from any tax-exempt interest they may receive will not be tax-exempt,
because they will not satisfy the 50% requirement described in the preceding
sentence. A portion of any tax-exempt distributions attributable to interest on
certain "private activity bonds," if any, received by a Portfolio
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may constitute a tax preference items and may give rise to, or increase
liability under, the alternative minimum tax for particular unitholders. In
addition, tax-exempt distributions of the Portfolios may be considered in
computing the "adjusted current earnings" preference item of their corporate
unitholders in determining the corporate alternative minimum tax. To the extent
that the Tax-Exempt Diversified, Tax-Exempt California and Tax-Exempt New York
Portfolios invest in certain short-term instruments, including repurchase
agreements, the interest on which is not exempt from Federal income tax, or earn
other taxable income any distributions of income from such investments or other
taxable income will be taxable to unitholders as ordinary income. All or
substantially all of any interest on indebtedness incurred directly or
indirectly to purchase or carry units of the Portfolio will generally not be
deductible. The availability of tax-exempt obligations and the value of the
Portfolios may be affected by restrictive tax legislation enacted in recent
years.
In purchasing municipal obligations, the Tax-Exempt Diversified, Tax-Exempt
California and Tax-Exempt New York Portfolios rely on opinions of nationally-
recognized bond counsel for each issue as to the excludability of interest on
such obligations from gross income for federal income tax purposes and, where
applicable, the tax-exempt nature of such interest under the personal income tax
laws of a particular state. These Portfolios do not undertake independent
investigations concerning the tax-exempt status of such obligations, nor do they
guarantee or represent that bond counsels' opinions are correct.
Distributions of net investment income and net realized capital gains will be
taxable as described above, whether received in units or in cash. Unitholders
electing to receive distributions in the form of additional units will have a
cost basis in each unit so received equal to the amount of cash they would have
received had they elected to receive cash.
Certain Portfolios may be subject to foreign withholding taxes or other
foreign taxes with respect to their investments in certain securities of foreign
entities. These taxes may be reduced or eliminated under the terms of
applicable U.S. income tax treaties in some cases, and each Portfolio intends to
satisfy any procedural requirements to qualify for benefits under these
treaties. Although no Portfolio anticipates that more than 50% of the value of
its total assets at the close of a taxable year will be composed of securities
of foreign corporations, if the 50% requirement were satisfied by a portfolio,
that a Portfolio could make an election under Code Section 853 to permit its
unitholders to claim a credit or deduction on their federal income tax returns
for their pro rata portion of qualified taxes paid by that Portfolio in foreign
countries. In the event such an election is made, unitholders will be required
to include their pro rata share of such taxes in gross income and may be
entitled to claim a foreign tax credit or deduction with respect to such taxes,
subject to certain limitations under the Code.
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Unitholders who are precluded from taking such credits or deductions will
nevertheless be taxed on their pro rata share of the foreign taxes included in
their gross income, unless they are otherwise exempt from federal income tax.
Each Portfolio will be required to report to the Internal Revenue Service all
taxable distributions, except in the case of certain exempt unitholders. Under
the backup withholding provisions of Code Section 3406, all such distributions
may be subject to withholding of federal income tax at the rate of 31% in the
case of nonexempt unitholders who fail to furnish the Portfolio with their
taxpayer identification number and with certain certifications required by the
Internal Revenue Service or if the Internal Revenue Service or a broker notifies
a Portfolio that the number furnished by the unitholder is incorrect or that the
unitholder is subject to backup withholding as a result of failure to report
interest or dividend income. However, any taxable distributions from the Tax-
Exempt Diversified, Tax-Exempt California and Tax-Exempt New York Portfolios
will not be subject to backup withholding if the applicable Portfolio reasonably
estimates that at least 95% of its distributions will be exempt-interest
dividends. The Portfolios may refuse to accept an application that does not
contain any required taxpayer identification number or certification that the
number provided is correct, if applicable, or that the investor is an exempt
recipient. If the withholding provisions are applicable, any such
distributions, whether taken in cash or reinvested in units, will be reduced by
the amounts required to be withheld. Investors may wish to consult their tax
advisers about the applicability of the backup withholding provisions.
Redemptions (including exchanges) and other dispositions of units in
transactions that are treated as sales for tax purposes will generally not
result in taxable gain or loss, provided that the Portfolios successfully
maintain a constant net asset value per share, but a loss may be recognized to
the extent a CDSC is imposed on the redemption or exchange of ILA Class B Units.
All or a portion of such a loss may be disallowed under applicable code
provisions in certain circumstances. Unitholders should consult their own tax
advisors with reference to their circumstances to determine whether a
redemption, exchange, or other disposition of Portfolio Units is properly
treated as a sale for tax purposes.
All distributions (including exempt-interest dividends) whether received in
units or cash, must be reported by each unitholder who is required to file a
federal income tax return. The Portfolios will inform unitholders of the
federal income tax status of their distributions after the end of each calendar
year, including, in the case of the Tax-Exempt Diversified, Tax-Exempt
California and Tax-Exempt New York Portfolios, the amounts that qualify as
exempt-interest dividends and any portions of such amounts that constitute tax
preference items under the federal alternative minimum tax. Unitholders who
receive exempt-interest dividends and have not held their units of the
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applicable Portfolio for its entire taxable year may have designated as tax-
exempt or as a tax preference item a percentage of their distributions which is
not exactly equal to a proportionate share of the amount of tax-exempt interest
or tax preference income earned during the period of their investment in such
Portfolio. Each unitholder should consult his or her own tax advisor to
determine the tax consequences of an investment in a Portfolio in the
unitholder's own state and locality.
Different tax treatment, including penalties on certain excess contributions
and deferrals, certain pre-retirement and post-retirement distributions, and
certain prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Unitholders should consult their tax advisers for more
information.
The foregoing discussion relates solely to U.S. federal income tax law as it
applies to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Each unitholder who is not a U.S. person should consult his or
her tax adviser regarding the U.S. and non-U.S. tax consequences of ownership of
units of a Portfolio, including the possibility that such a unitholder may be
subject to a U.S. nonresident alien withholding tax at a rate of 30% (or at a
lower rate under an applicable U.S. income tax treaty) on certain distributions
from a Portfolio and, if a current IRS Form W-8 or acceptable substitute is not
on file with the Portfolio, may be subject to backup withholding on certain
payments.
STATE AND LOCAL
The Portfolios may be subject to state or local taxes in jurisdictions in
which the Portfolios may be deemed to be doing business. In addition, in those
states or localities which have income tax laws, the treatment of a Portfolio
and its unitholders under such laws may differ from their treatment under
Federal income tax laws, and an investment in the Portfolios may have tax
consequences for unitholders that are different from those of a direct
investment in the Portfolios' securities. Unitholders should consult their own
tax advisers concerning these matters. For example, in such states or
localities it may be appropriate for unitholders to review with their tax
advisers the state income and, if applicable, intangible property tax
consequences of investments by the Portfolios in securities issued by the
particular state or the U.S. Government or its various agencies or
instrumentalities, because many states (i) exempt from personal income tax
distributions made by regulated investment companies from interest on
obligations of the particular state or on direct U.S. Government obligations
and/or (ii) exempt from intangible property tax the value of the units of such
companies attributable to such obligations, subject to
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certain state-specific requirements and/or limitations. See also the discussion
below of these applicable provisions in California and New York.
Provided that the Portfolios qualify as regulated investment companies and
incur no federal income tax liability, the Portfolios may still be subject to
New York State and City minimum taxes, which are small in amount.
California State Taxation. The following discussion of California tax law
assumes that the Tax-Exempt California Portfolio will be qualified as a
regulated investment company under Subchapter M of the Code and will be
qualified thereunder to pay exempt-interest dividends. The Tax-Exempt
California Portfolio intends to qualify for each taxable year under California
law to pay "exempt interest dividends" which will be exempt from the California
personal income tax.
Individual unitholders of the Tax-Exempt California Portfolio who reside in
California will not be subject to California personal income tax on
distributions received from the Portfolio to the extent such distributions are
exempt-interest dividends attributable to interest on obligations the interest
on which is exempt from California personal income tax provided that the
Portfolio satisfies the requirement of California law that at least 50% of its
assets at the close of each quarter of its taxable year be invested in such
obligations and properly designates such exempt-interest dividends under
California Law. Distributions from the Tax-Exempt California Portfolio which are
attributable to sources other than those described in the second preceding
sentence will generally be taxable to such unitholders as ordinary income.
Moreover, California legislation which incorporates Subchapter M of the Code
provides that capital gain dividends may be treated as long-term capital gains.
Such gains are currently subject to personal income tax at ordinary income tax
rates. Capital gains that are retained by the Portfolio will be taxed to that
Portfolio, and California residents will receive no California personal income
tax credit for such tax. Distributions other than exempt-interest dividends are
includable in income subject to the California alternative minimum tax.
Distributions from investment income and long-term and short-term capital
gains will generally not be excluded from taxable income in determining
California corporate franchise taxes for corporate unitholders and will be
treated as ordinary dividend income for such purposes. In addition, such
distributions may be includable in income subject to the alternative minimum
tax.
Interest on indebtedness incurred or continued by unitholders to purchase or
carry units of the Tax-Exempt California Portfolio will not be deductible for
California personal income tax purposes.
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In addition, any loss realized by a unitholder of the Tax-Exempt California
Portfolio upon the sale of units held for six months or less may be disallowed
to the extent of any exempt-interest dividends received with respect to such
units. Moreover, any loss realized upon the redemption of units within six
months from the date of purchase of such units and following receipt of a long-
term capital gains distribution will be treated as long-term capital loss to the
extent of such long-term capital gains distribution. Finally, any loss realized
upon the redemption of units within thirty days before or after the acquisition
of other units of the same Portfolio may be disallowed under the "wash sale"
rules.
New York City and State Taxation. Individual unitholders who are residents of
New York State will be able to exclude for New York State income tax purposes
that portion of the exempt-interest dividends properly designated as such from
the Tax-Exempt New York Portfolio which is derived from interest on obligations
of New York State and its political subdivisions and obligations of Puerto Rico,
the U.S. Virgin Islands and Guam. Exempt- interest dividends may be properly
designated as such only if, as anticipated, at least 50% of the value of the
assets of the Portfolio are invested at the close of each quarter of its taxable
year in obligations of issuers the interest on which is excluded from gross
income for federal income tax purposes. Individual unitholders who are
residents of New York City will also be able to exclude such income for New York
City income tax purposes. Interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of the Tax-Exempt New York Portfolio is
not deductible for New York State or New York City personal income tax purposes.
Long-term capital gains, if any, that are distributed by the Tax-Exempt New
York Portfolio and are properly designated as capital gain dividends will be
treated as capital gains for New York State and City income tax purposes in the
hands of New York State and New York City residents
Unitholders should consult their tax advisers about the application of the
provisions of tax law described in this Statement of Additional Information in
light of their particular tax situations.
This discussion of the tax treatment of the Portfolio and its unitholders is
based on the tax laws in effect as of the date of this Statement of Additional
Information.
ORGANIZATION AND CAPITALIZATION
The Trust is a Massachusetts business trust established under the laws of the
Commonwealth of Massachusetts by a Declaration of Trust dated December 6, 1978.
The Tax-Exempt Diversified Portfolio and Tax-Exempt California Portfolio are the
successors to separate series of Goldman Sachs Institutional Tax-Exempt Assets
which was formed pursuant to a Declaration of Trust
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on March 23, 1982. Each of these Portfolios became a series of the Trust
pursuant to a reorganization which occurred on April 30, 1990. On December 13,
1990 the Trustees authorized the establishment of the Treasury Instruments and
Tax-Exempt New York Portfolios.
Each unitholder is deemed to have expressly assented and agreed to the terms
of the Declaration of Trust and is deemed to be party thereto. The authorized
capital of the Trust consists of an unlimited number of units of beneficial
interest. The Trustees have authority under the Declaration of Trust to create
and classify units of beneficial interest in separate series without further
action by unitholders. The Declaration of Trust further authorizes the Trustees
to classify or reclassify any series or portfolio of units into one or more
classes. The Trustees have authorized the issuance of three classes of units of
each of the Portfolios: ILA Units, ILA Administration Units and ILA Service
Units. In addition, the Trustees have authorized a fourth class of units, ILA
Class B Units with respect to the Prime Obligations Portfolio.
Each ILA Unit, ILA Administration Unit, ILA Service Unit and ILA Class B Unit
of a Portfolio represents an equal proportionate interest in the assets
belonging to that Portfolio. It is contemplated that most units (other than ILA
Class B Units) will be held in accounts of which the record owner is a bank or
other institution acting, directly or through an agent, as nominee for its
customers who are the beneficial owners of the units or another organization
designated by such bank or institution. ILA Class B Units generally are only
issued upon exchange from Class B Shares of other Funds of the Goldman Sachs
mutual funds. ILA Units may be purchased for accounts held in the name of an
investor or institution that is not compensated by the Trust for services
provided to the institution's investors. ILA Administration Units may be
purchased for accounts held in the name of an investor or an institution that
provides certain account administration services to its customers, including
maintenance of account records and processing orders to purchase, redeem and
exchange ILA Administration Units. ILA Administration Units of each Portfolio
bear the cost of administration fees at the annual rate of up to .15 of 1% of
the average daily net assets of such Units. ILA Service Units may be purchased
for accounts held in the name of an institution that provides certain account
administration and unitholder liaison services to its customers, including
maintenance of account records, processing orders to purchase, redeem and
exchange ILA Service Units, responding to customer inquiries and assisting
customers with investment procedures. ILA Service Units bear the cost of
service fees at the annual rate of up to .40 of 1% of the average daily net
assets of such Units. ILA Class B Units are sold subject to a contingent
deferred sales charge of up to 5.0% through brokers and dealers who are members
of the National Association of Securities Dealers Inc. and certain other
financial services firms that have sales arrangements with Goldman Sachs. ILA
Class B Units of the Prime Obligations Portfolio bear the cost of distribution
(Rule 12b-1) fees at the aggregate rate of up to 0.75% of the average daily net
assets attributable to ILA Class B Units. ILA Class B Units of the Prime
Obligations
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Portfolio also bear the cost of an Authorized Dealer Service Plan at an annual
rate of up to 0.25% of the average daily net assets of the Prime Obligations
Portfolio attributable to ILA Class B Units.
It is possible that an institution or its affiliates may offer different
classes of units to its customers and thus receive different compensation with
respect to different classes of units of the same Portfolio. In the event a
Portfolio is distributed by salespersons or any other persons, they may receive
different compensation with respect to different classes of units of the
Portfolio. ILA Administration Units, ILA Service Units and ILA Class B Units
each have certain exclusive voting rights on matters relating to their
respective plans. Units of each class may be exchanged only for Units of the
same class in another Portfolio or, in the case of the Prime Obligations
Portfolio, shares of the corresponding class of certain other mutual funds
sponsored by Goldman Sachs. Except as described above, the four classes of
units are identical. Certain aspects of the Units may be altered, after advance
notice to unitholders, if it is deemed necessary in order to satisfy certain tax
regulatory requirements.
Each ILA Unit, ILA Administration Unit, ILA Service Unit and ILA Class B Unit
of a Portfolio is entitled to one vote per unit; however, separate votes will be
taken by each Portfolio or class (or by more than one Portfolio or class voting
as a single class if similarly affected) on matters affecting only that
individual Portfolio or class (or those affected Portfolios or classes) or as
otherwise required by law. Units are freely transferable and have no
preemptive, subscription or conversion rights. All units issued and outstanding
are fully paid and nonassessable. The Declaration of Trust provides for
unitholder voting only for the election or removal of one or more Trustees, if a
meeting is called for that purpose, and for certain other designated matters.
The Trust does not generally hold annual or other meetings of unitholders. The
units of the Portfolios have non-cumulative voting rights, which means that the
holders of more than 50% of the units voting for the election of Trustees can
elect 100% of the Trustees if they choose to do so, and, in such event, the
holders of the remaining less than 50% of the units voting for the election of
Trustees will not be able to elect any person or persons to the Board of
Trustees. Each Trustee serves until the next meeting of unitholders, if any,
called for the purpose of electing or reelecting such Trustee or successor to
such Trustee, and until the election and qualification of such successor, if
any, or until such Trustee sooner dies, resigns, retires or is removed by the
unitholders or two-thirds of the Trustees.
As of April 1, 1997, the only holders of record of 5% or more of the
outstanding units of the Prime Obligations Portfolio
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were Duquesne Capital Management, Inc., 2579 Washington Rd. Ste. 322,
Pittsburgh, PA 15241-2563 (5.45%); Harris Trust & Savings Bank, 200 W. Monroe
Street, 12th Floor, Chicago, IL 60606-5509 (8.36%); United Missouri Bank of
Kansas City, PO Box 419692, Kansas City 64141-6692 (5.63%); and VF Corporation,
1047 North Park Road, Wyomissing, PA 19610 (6.85%) .
As of April 1, 1997, the only holders of record of 5% or more of the
outstanding units of the Money Market Portfolio were Bank of New York, 48 Wall
Street, New York, NY 10286 (20.40%) and Stone Street & Bridge Street Funds, 85
Broad Street, 4th Floor, New York, NY 10004-2434 (9.52%).
As of April 1, 1997, the only holders of record of 5% or more of the
outstanding units of the Treasury Obligations Portfolio were Bank of New York
(NCD), 1 Wall Street, 5th Floor, New York, NY 10286-0001 (6.83%); Bankers Trust
Company, PO Box 897, Des Moines, IA 50304-0897 (5.98%); First National Bank of
Omaha, PO Box 3128, Omaha, NE 68103-0128 (15.24%; Firstar Bank Madison, N.A.,
PO Box 7900, Madison, WI 53707-7900 (8.18%) and National City Bank Kentucky,
4100 W. 150th Street, 3rd Floor N. Annex, Cleveland, OH 44135 (7.485%).
As of April 1, 1997, the only holders of record of 5% or more of the
outstanding units of the Treasury Instruments Portfolio were Bank of New York
(NCD), 1 Wall Street, 5th Floor, New York, NY 10286-0001 (32.49%); Emerald
Partners, 237 Park Avenue Ste. 801, New York, NY 10017-3142 (5.18%); and Morgan
Stanley, 2 No. LaSalle Street, Ste. 500, Chicago, IL 60602 (7.48%).
As of April 1, 1997, the only holders of record of 5% or more of the
outstanding units of the Government Portfolio were American Exploration Co.,
1331 Lamar Street, Ste. 900, Houston, TX 77010-3027 (9.82%); Comerica Bank, PO
Box 55-519, Detroit, MI 48255-0499 (11.06%); Morgan Stanley, 2 No. LaSalle
Street, Ste. 500, Chicago, IL 60602 (7.86%); Northern Trust, 50 South LaSalle
Street, Chicago, IL 60675 (6.43%); State Street Bank & Trust Co., PO Box 1992,
Boston, MA 02105-1992 (6.55%); United Missouri Bank of Kansas City, PO Box
419692, Kansas City, MO 64141-6692 (5.19%); and Wells Fargo Bank, 26610 Agoura
Rd., Calabasas, CA 91302-1954 (7.00%).
As of April 1, 1997, the only holders of record of 5% or more of the
outstanding units of the Tax-Exempt New York Portfolio were Bank of New York, 48
Wall Street, New York, NY 10286 (20.62%); Marine Midland Bank, PO Box 4203,
Buffalo, NY 14240 (7.48%); Shames Trust Accounts, 57 Holly Place, Briarcliff,
NY 10510-2107 (9.01%) and Stephen Apkon & Lisa Hertz Apkon, 33 Ashland Ave.,
Pleasantville, NY 10570-2301 (8.36%).
As of April 1, 1997, the only holders of record of 5% or more of the
outstanding units of the Federal Portfolio was Bank of New York, 48 Wall Street,
New York, NY 10286 (10.46%); and
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The Baupost Group, Inc., PO Box 389125, Cambridge, MA 02238-9998 (5.95%).
As of April 1, 1997, the only holders of record of 5% of more of the
outstanding units of the Tax-Exempt Diversified Portfolio was Bodri Capital
Management, Inc., 525 University Avenue, Ste. 1322, Palo Alto, CA 94301
(5.26%); and Cheng-Moon Lee, Los Altos, CA 94022-4313 (5.45%).
UNITHOLDER AND TRUSTEE LIABILITY
The Trust is an entity of the type commonly known as a "Delaware business
trust," which is the form in which many mutual funds are organized. Under
Delaware law, the unitholders of the Delaware trust are not generally subject to
liability for the debts or obligations of the trust. Similarly, Delaware law
provides that a Portfolio will not be liable for the debts or obligations of any
other series of the Delaware business trust. However, no similar statutory or
other authority limiting business trust unitholder liability exists in many
other states. As a result, to the extent that a Delaware business trust or a
unitholder is subject to the jurisdiction of courts of such other states, the
courts may not apply Delaware law and may thereby subject the Delaware business
trust unitholders to liability. To guard against this risk, the Declaration of
Trust of the Trust contains express disclaimer of unitholder liability for acts
or obligations of a Portfolio. Notice of such disclaimer will normally be given
in each agreement, obligation or instrument entered into or executed by a
Portfolio or the Trustees. The Declaration of Trust of the Trust provides for
indemnification by the relevant Fund for any loss suffered by a unitholder as a
result of an obligation of the Portfolio. The Declaration of Trust of the Trust
also provides that a Portfolio shall, upon request, assume the defense of any
claim made against any unitholder for any act or obligation of the Portfolio and
satisfy any judgment thereon. In view of the above, the risk of personal
liability of unitholders is remote.
On any matter submitted to a vote of the Unitholders of the Trust, all Units
shall be voted in the aggregate and not by individual Portfolio or Class, except
(a) when required by the Investment Company Act, Units shall be voted by
individual Portfolio or Class, and (b) when the Trustees have determined that
the matter affects the interests of only one or more Portfolios or Classes, then
only the Unitholders of all such Portfolios or Classes shall be entitled to
vote. As determined by the Trustees without the vote or consent of Unitholders,
on any matter submitted to a vote of Unitholders, either (i) each whole Unit
shall be entitled to one vote as to any matter on which it is entitled to vote
and each fractional Unit shall be entitled to a proportionate fractional vote or
(ii) each dollar of Net Asset Value (number of Units owned times Net Asset Value
per share of such Portfolio or Class, as applicable) shall be entitled to one
vote on any matter on which such Units are entitled to vote and each fractional
dollar amount shall be
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entitled to a proportionate fractional vote. There is no cumulative voting in
the election of Trustees.
In connection with the establishment of one or more Portfolios or Classes, the
Trustees establishing such Portfolios or Classes may appoint, to the extent
permitted by the Delaware Business Trust Act, separate Trustees with respect to
such Portfolios or Classes (the "Series Trustees"). Series Trustees may, but
are not required to, serve as Trustees of the Trust or any other Portfolio or
Class of the Trust. To the extent provided by the Trustees in the appointment
of Series Trustees, the Series Trustees may have, to the exclusion of any other
Trustee of the Trust, all the powers and authority of Trustees with respect to
such Portfolio or Class, but may have no power or authority with respect to any
other Portfolio or Class. Unitholders for a Portfolio or Class with respect to
which Series Trustees have been appointed shall only be entitled to vote in the
election of such Series Trustees.
Upon the vote of a majority of the Units outstanding and entitled to vote of
the Trust or of each Portfolio to be affected, the Trustees may (i) sell and
convey all or substantially all of the assets of all Portfolios or any affected
Portfolio to another Portfolio or to another entity which is an open-end
investment company as defined in the Investment Company Act, or is a Portfolio
thereof, for adequate consideration, which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or contingent, of
the Trust or any affected Portfolio, and which may include Units of or interests
in such Portfolio, entity, or Portfolio thereof; or (ii) at any time sell and
convert into money all or substantially all of the assets of all Portfolios or
any affected Portfolio. The Trustees may take any of the actions specified
above without obtaining the vote of a majority of the outstanding Units of the
Trust or any Portfolio if a majority of the Trustees determines, in their sole
discretion, that the continuation of the Trust or Portfolio is not in the best
interests of the Trust, such Portfolio, or their respective Unitholders. Also,
the Trustees may, without Unitholder approval unless such approval is required
by applicable federal law, (i) cause the Trust to merge or consolidate with or
into one or more entities, if the surviving or resulting entity is the Trust or
another open-end management investment company under the Investment Company Act,
or a Portfolio thereof, (ii) cause the Units to be exchanged under or pursuant
to any state or federal statute to the extent permitted by law, or (iii) cause
the Trust to incorporate under the laws of Delaware or any other U.S.
jurisdiction. The Trustees may, without Unitholder approval, invest all or a
portion of the assets of any Portfolio, or dispose of all or a portion of the
assets of any Portfolio, and invest the proceeds of such disposition in
interests issued by one or more other investment companies registered under the
Investment Company Act. The Trustees may, without Unitholder approval unless
such approval is required by applicable law, cause a Portfolio that is organized
in the master/feeder fund
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structure to withdraw or redeem its assets from the master fund and cause such
Portfolio to invest its assets directly in securities and other financial
instrument or in another master fund.
In addition to the requirements set forth in Section 3816 of the Delaware
Business Trust Act, the Declaration of Trust provides that a Unitholder may
bring a derivative action on behalf of the Trust only if the following
conditions are met:
(a) Unitholders eligible to bring such derivative action under the Delaware
Business Trust Act who hold at least 10% of the outstanding Units of the Trust,
or 10% of the outstanding Units of the Portfolio or Class to which such action
relates, shall join in the request for the Trustees to commence such action; and
(b) the Trustees must be afforded a reasonable amount of time to consider
such Unitholder request and to investigate the basis of such claim. The
Trustees shall be entitled to retain counsel or other advisers in considering
the merits of the request and shall require an undertaking by the Unitholders
making such request to reimburse the Trust for the expense of any such advisers
in the event that the Trustees determine not to bring such action.
The Declaration of Trust of the Trust further provides that the Trustees will
not be liable for errors of judgment or mistakes of fact or law, but nothing in
the Declaration of Trust protects a Trustee against liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
CUSTODIAN AND SUBCUSTODIAN
State Street Bank and Trust Company ("State Street") has been retained to act
as custodian of the Portfolios' assets. In that capacity, State Street
maintains the accounting records and calculates the daily net asset value per
unit of the Portfolios. Its mailing address is P.O. Box 1713, Boston, MA 02105.
State Street has appointed The Northern Trust Company, 50 South LaSalle Street,
Chicago, Illinois 60675 as subcustodian to hold cash and certain securities
purchased by the Trust.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, [insert address], have
been selected as auditors of the Trust. In addition to audit services, Arthur
Andersen LLP prepares the Trust's federal and state tax returns, and provides
consultation and assistance on accounting, internal control and related matters.
FINANCIAL STATEMENTS
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The Financial Statements of the Portfolios, including the Statements of
Investments as of December 31, 1996, the Statements of Assets and Liabilities as
of December 31, 1996, the related Statements of Operations for the period then
ended, the Statements of Changes in Net Assets and the Financial Highlights for
the periods presented, the Notes to the Financial Statements, and the Report of
Independent Public Accountants, all of which are included in the 1996 Annual
Report to the unitholders, are attached hereto and incorporated by reference
into this Statement of Additional Information.
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APPENDIX A
DESCRIPTION OF SECURITIES RATINGS/1/
MOODY'S INVESTORS SERVICE, INC.
Bond Ratings
- ------------
AAA: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than with Aaa
securities.
Moody's applies numerical modifiers, 1, 2, and 3 in the Aa category. The
modifier 1 indicates that the obligation ranks in the higher end of the Aa
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of the Aa category.
Short-Term Ratings
- ------------------
P-1: Issuers have a superior ability for repayment of senior short-term
debt obligations. Prime-1 or P-1 repayment ability will normally be evidenced by
many of the following characteristics:
. Leading market positions in well established industries.
. High rates of return on funds employed.
. Conservative capitalization structure 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-1
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P-2: Issuers have a strong ability for repayment of senior 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, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
State and Municipal Obligations
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Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in bond
risk, long-term secular trends for example, may be less important over the short
run. Symbols used will be as follows:
MIG 1 -- This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG 2 -- This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG to reflect such
characteristics as payment upon periodic demand rather than fixed maturity dates
and payment relying on external liquidity. Additionally, investors should be
alert to the fact that the source of payment may be limited to the external
liquidity with no or limited legal recourse to the issuer in the event the
demand is not met. VMIG-1, and VMIG-2 ratings carry the same definitions as MIG-
1, and MIG-2, respectively.
STANDARD & POOR'S RATINGS GROUP
Bond Ratings
- ------------
AAA: Debt rated AAA has the highest rating assigned by S&P. 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 highest rated issues only in a small degree.
PLUS (+) OR MINUS (-): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA category.
A-2
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Short-Term Ratings
- ------------------
A-1: S&P's Commercial Paper ratings are current assessments of the
likelihood of timely payment of debt considered short-term in the relevant
market. The A-1 designation is the highest category and 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.
MUNICIPAL NOTES
An S&P 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 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term of the
notes.
SP-3 -- Speculative capacity to pay principal and interest.
S&P assigns "dual" ratings to all debt issues that have a put option or
demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, "AAA/A-1+"). With short-term demand debt, S&P's note rating symbols
are used with the commercial paper rating symbols (for example, "SP-1+/A-1+").
A-3
<PAGE>
DUFF & PHELPS, INC.
Bond Ratings
- ------------
AAA: Long-term fixed income securities which are rated AAA are judged to
be of the highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA: Long-term fixed income securities which are rated AA are judged to be
of high credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
Duff & Phelps applies modifiers, AA+ and AA- in the AA category for long-
term fixed income securities. The modifier AA+ indicates that the security
ranks in the higher end of the AA category: the modifier AA indicates a mid-
range ranking; and the modifier AA- indicates that the issue ranks in the lower
end of the AA category.
Short-Term Ratings
- ------------------
D-1: Commercial paper and certificates of deposit rated Duff 1 are
considered to have a very high certainty of timely payment. Liquidity factors
are excellent and are supported by strong fundamental protection factors. Risk
factors are minor.
D-2: Commercial paper and certificates of deposit rated Duff 2 are
considered to have a good certainty of timely payment. Liquidity factors and
company fundamentals are considered sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good and risk
factors are small.
Duff & Phelps applies a plus and minus rating scale, D-1+ , D-1 and D-1- in
the Duff 1 top grade category for commercial paper and certificates of deposit.
The rating D-1+ indicates that the security has the highest certainty of timely
payment, short-term liquidity is clearly outstanding and safety is just below
risk-free U.S. Treasury short-term obligations; the rating D-1 indicates a very
high certainty of timely payment, liquidity factors are excellent and risk
factors are minimal; and the rating D-1- indicates a high certainty of timely
payment, liquidity factors are strong and risk factors are very small.
FITCH INVESTORS SERVICE CORP.
AAA: Bonds which are rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
its obligations, which is unlikely to be affected by reasonably foreseeable
events.
A-4
<PAGE>
AA: Bonds which are rated AA are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
Fitch applies plus (" + ") and minus (" - ") modifiers in the AA category to
indicate the relative position of a credit within the rating category.
Eligible Fitch ratings for short-term debt obligations payable on demand or with
original maturities of up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes
may be rated F-1 or F-2.
F-1: Short-term debt obligations rated F-1 are considered to be of very
strong credit quality. Those issues determined to possess exceptionally strong
credit quality and having the strongest degree of assurance for timely payment
will be denoted with a plus ("+") sign designation.
F-2: Short-term debt obligations rated F-2 are considered to be of good
credit quality. Issues assigned this rating have a satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ and F-1 ratings.
IBCA LIMITED AND IBCA INC.
A1: Short-term obligations rated A1 are supported by a very strong
capacity for timely repayment. A plus ("+") sign is added to those issues
determined to possess the highest capacity for timely payment.
A2: Short-term obligations rated A2 are supported by a strong capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
THOMSON BANKWATCH, INC.
AAA: The highest category; indicates a superior ability to repay principal
and interest on a timely basis.
AA: The second highest category; indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category.
Ratings in the AA Long-Term Debt category may include a plus (+) or minus (-)
designation which indicates where within the respective category the issue is
placed.
A-5
<PAGE>
The TBW Short-Term Ratings apply only to unsecured instruments that have a
maturity of one year or less.
The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal and interest.
TBW-1: The highest category; indicates a very high degree of likelihood
that principal and interest will be paid on a timely basis.
TBW-2: The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".
/1/ The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings indicated do
not necessarily represent ratings which will be given to these securities on
the date of the Portfolios' taxable year end.
A-6
<PAGE>
================================================================================
Goldman Sachs
1 New York Plaza
New York, NY 10004
Trustees
Ashok N. Bakhru, Chairman
David B. Ford
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Douglas C. Grip, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Goldman Sachs
Investment Adviser, Administrator,
Distributor and Transfer Agent
Goldman Sachs
Money Market Trust
Financial Square
Funds
- -------------------------------------------------------------------
Annual Report
December 31, 1996
Prime Obligations Fund
Money Market Fund
Treasury Obligations Fund
Government Fund
Tax-Free Money Market Fund
- -------------
Goldman
Sachs
- -------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
================================================================================
================================================================================
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders:
We welcome this opportunity to provide you with a summary of the trends
and key events that affected the economy and the Goldman Sachs Money Market
Trust/Financial Square Funds in 1996. It was another strong year for the Funds,
during which all of the portfolios outperformed their respective IBC Financial
Data, Inc. averages during the period. Assets in the Financial Square Funds
totaled $12.2 billion as of December 31, 1996, up 34% from last year.
1996 in Review: After Easing Early in the Year, the Fed Remained Neutral Amid
Moderate Growth and Benign Inflation.
Last year began on a weak note, with the economy still in the doldrums as
harsh winter storms and a strike at General Motors continued to restrain growth.
Against that backdrop, the Federal Reserve Board (the "Fed") cut the Federal
funds rate by 25 basis points to 5.25% in January 1996, following an easing of
the same magnitude in December 1995. It soon became evident that the economy had
responded and was somewhat healthier than expected, with first-quarter real
Gross Domestic Product (GDP) at 2.0% annualized. Growth was more dramatic during
the second quarter, as industrial activity and automobile and home sales all
showed significant improvement, pushing real GDP to 4.7%, its highest rate in
two years. That growth caused some to expect the Fed to change direction and
tighten before year-end. However, the economy subsequently moderated
significantly, with third-quarter annualized real GDP retreating to 2.1%,
reflecting lackluster consumer spending and a widening U.S. trade deficit. As
1996 drew to a close, moderate economic growth and contained inflation kept the
Fed in a neutral mode, despite a very robust stock market.
Historical Yield Curve (LIBOR)
[BAR GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
Source: Goldman Sachs Fixed Income Database, reflecting the London Interbank
Offered Rate (LIBOR).
The Federal funds rate began the year at 5.50% and ended at 5.25%. The slope of
the LIBOR yield curve steepened significantly over the course of the year. By
the end of 1996, the spread between one- and 12-month LIBOR moved to plus 28
basis points.
A Nimble Strategy Contributed to Strong Performance
Taxable Sector. Structuring money market portfolios successfully during
1996 as the Fed shifted policy from easing to neutral to a bias to tighten
required strict attention to risk management, as well as to a detailed analysis
of market fundamentals and technicals. Analyzing the implied forward rates and
determining the extent to which the market had priced in too much easing at the
beginning of 1996 or too much tightening by midyear 1996 and then adjusting the
Funds' weighted average maturities and structures were equally important to our
strategy.
During the second and third quarters of 1996, we extended the Financial
Square Funds' weighted average maturities as the yield curve steepened in
anticipation of a Fed tightening that did not materialize. During the early part
of the fourth quarter, market data suggested that growth slowed in the third
quarter. Consequently, the market was priced to a more neutral Fed policy.
However, year-end financing pressures resulted in investment opportunities
maturing in the first quarter of 1997, and the Funds closed the year with
neutral weighted average maturities.
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
Tax-Exempt Sector. With tax reform basically a nonissue in 1996, investor
interest in the sector revived, causing total assets in the tax-exempt money
market fund category to increase by 13%. In contrast, supply was little changed
from 1995 levels, making tax-exempts slightly more expensive in 1996. These
supply/demand technicals coupled with our fundamental view that short-term rates
were likely to rise explains our neutral to short-to-neutral weighted average
maturities during the latter part of the year.
Summary for Financial Square Funds Institutional Shares* as of 12/31/96
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Weighted
SEC 7-Day SEC 7-Day 30-Day Average
Financial Square Current Effective Average Maturity
Funds Yield Yield Yield (days)
=====================================================================
<S> <C> <C> <C> <C>
Prime
Obligations 5.34% 5.48% 5.31% 41
- --------------------------------------------------------------------
Money Market 5.38% 5.54% 5.34% 37
- --------------------------------------------------------------------
Treasury
Obligations 5.43% 5.56% 5.29% 33
- --------------------------------------------------------------------
Government 5.36% 5.52% 5.30% 36
- --------------------------------------------------------------------
Tax-Free
Money Market 3.74% 3.81% 3.42% 34
- --------------------------------------------------------------------
</TABLE>
* Financial Square Funds offer four separate classes of shares (Institutional,
Preferred, Administration and Service), each of which is subject to different
fees and expenses that affect performance and entitle shareholders to different
services. The Preferred, Administration and Service shares offer financial
institutions the opportunity to receive a fee for providing administrative
support services. The Preferred shares pay 0.10%, Administration shares pay
0.25%, and the Service shares pay 0.50%. More complete information, including
management fees and expenses, is included in the Funds' prospectus or may be
obtained by calling Goldman Sachs Funds at 1-800-621-2550.
Domestic Credit Trends Were Positive, Reflecting a Healthy Economy and a Strong
Market
Credit trends in 1996 were positive on the whole in the U.S., with steady
growth, low inflation, a booming stock market, and technological advances and
globalization transforming many industries. The major story of 1996 was the Dow
Jones Industrial Average climb of 26%, which, following the 33.5% increase in
1995, added up to a 68% growth rate since 1994.
The rising stock market supported record levels of mergers and
acquisitions. Over $650 billion in mergers, acquisitions and spin-offs were
announced in the U.S. in 1996 (up 27% from 1995), with $1.4 trillion announced
globally. This trend was spurred on not only by the stock market, but also by
deregulation in telecommunications, utilities and broadcasting. Unlike the
1980s, mergers this past year were generally equity-financed and aimed at
expanding core businesses, rather than diversifying. Merger and acquisition
activity was also utilized to boost earnings growth, since cost-cutting
opportunities had been largely exhausted during 1995.
Banks, which dominated merger activity in 1995, were busy consolidating
those mergers in 1996. It is likely that large regional domestic banks will
continue making acquisitions in 1997, although this is not expected to affect
their credit quality. At the end of the third quarter 1996, 80% of the banking
sector had a stable rating outlook.
Although consumer confidence was buoyed by low unemployment and mild
inflation, growing household debt levels led to an all-time high in credit card
loan delinquencies and personal bankruptcies. Consequently, financial results in
the consumer products, retail, restaurant and entertainment businesses were
mediocre at best. Almost all other industries, however, had improved credit
quality, with upgrades surpassing downgrades in utilities, energy, healthcare
and financial institutions. Many companies used the strength of the stock market
to substitute debt capital with equity capital, thereby improving their credit
quality.
Credit quality in the tax-exempt market was steady-to-improving during
1996. Market concerns arising from the Orange County bankruptcy abated somewhat,
although various forms of credit enhancement remained popular, even among high-
quality issuers. Reflecting the strong national economy, many states and
localities experienced positive financial results, reducing their regular cash
flow borrowings.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Credit Picture Abroad: Europe Improved, While Asia Was Generally Stable
In Europe, developments were driven by the push towards European Monetary
Union (EMU), while the key factors in Asia were the fragile Japanese recovery
and a sharp downturn in Asian exports. In general, sovereign creditworthiness
improved during 1996. This was particularly the case in Europe, where the
political will to qualify for EMU produced significant improvements in fiscal
policy and debt dynamics, as it sparked more rapid corporate restructuring.
French and Italian banks did require close monitoring this year as their problem
loans continued, but French bank credit quality stabilized after having suffered
broad rating downgrades in 1995. The credit quality of most other European banks
was stable, with a few minor downgrades of German and Swiss banks.
In Asia, creditworthiness was fairly stable. The notable negative
exception was the Japanese financial sector, which remained under pressure from
the ongoing weakness of the real estate markets, sluggish economic growth and
ongoing deregulation. However, Japan's largest banks have strong fundamentals
and will continue to be important and dominant players in the global financial
market. Australian credit quality strengthened through improved macroeconomic
balances, which provided evidence that Australia's recent boom-and-bust cycles
may be over. The weakness of Asian exports did not affect creditworthiness
directly; exports should recover this year, and the scare could prompt salutary
policy adjustments going forward.
In 1996, we continued to apply conservative credit standards to our money
market Funds. The Goldman Sachs Credit Department, which has analysts based in
London, Tokyo, Frankfurt and New York, as well as extensive technological assets
and credit expertise, will continue to vigilantly monitor global developments.
Outlook and Strategies for 1997
Fourth-quarter 1996 GDP was reported at 4.7%, reflecting a stronger
economic picture from several sources: a sharp narrowing of the U.S. trade
deficit, as well as increases in consumer spending and industrial production.
Goldman Sachs' economists expect economic growth to continue at just under 2.0%
for the first quarter of 1997 and at approximately 3.0% for the full year. As a
result, Goldman Sachs currently believes the Fed is likely to raise short-term
interest rates by midyear.
Consequently, the Financial Square Funds will continue to be managed with
short-to-neutral average life targets and short, laddered structures to prepare
for the probability of higher rates ahead.
Extended Trading Hours Improve Service Further
To meet the needs of many institutional investors who receive inflows of
cash late in the day, we extended the trading hours for both purchases and
redemptions in the Financial Square Treasury Obligations Fund until 5:00 p.m.
EST. (The Financial Square Government Fund also provides late-day service.) We
have found many of our clients enjoy the added flexibility of late-day trading
and are increasing their use of this beneficial service.
In closing, we thank you for your support and for making 1996 a successful
year for the Financial Square Funds. We are pleased that many of you have joined
our conference calls following each Federal Open Market Committee meeting
throughout the year. Our goal is to continue to provide you with competitive
performance, as well as a range of value-added services that reflect the breadth
and depth of Goldman Sachs' outstanding resources.
Sincerely,
/s/ Kaysie P. Uniacke
- ---------------------
Kaysie P. Uniacke
Portfolio Manager
February 7, 1997
- --------------------------------------------------------------------------------
3
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Financial Square Prime Obligations Fund
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Commercial Paper and Corporate Obligations--53.0%
Bank Holding Companies
BankAmerica Corp.
$150,000,000 5.27% 03/21/97 $ 148,265,292
Chase Manhattan Corp.
100,000,000 5.28 03/14/97 98,944,000
JP Morgan & Co., Inc.
25,000,000 5.73 05/30/97 24,407,104
NationsBank Corp.
50,000,000 5.40 05/09/97 49,040,000
Business Credit Institutions
General Electric Capital Corp.
50,000,000 5.30 03/26/97 49,381,667
100,000,000 5.44 04/03/97 98,609,778
JC Penney Funding Corp.
50,000,000 5.31 01/31/97 49,778,750
Commercial Banks
CP Trust Certificates Series 1996
85,000,000 5.68/(a)/ 03/28/97 85,000,000
Financial Services
National Rural Utilities Cooperative
34,250,000 5.30 02/11/97 34,043,263
62,000,000 5.28 02/21/97 61,536,240
Life Insurance
Commonwealth Life Insurance Co.
20,000,000 5.64/(b)/ 05/08/97 20,000,000
Pacific Mutual Life Insurance Co.
50,000,000 5.52/(b)/ 02/28/97 50,000,000
Prudential Funding Corp.
50,000,000 6.50 01/02/97 49,990,972
50,000,000 5.43 02/28/97 49,562,583
Motor Vehicles and Equipment
Ford Motor Credit Co.
150,000,000 5.31 02/04/97 149,247,750
Personal Credit Institutions
Associates Corp. of North America
50,000,000 6.30 01/02/97 49,991,250
50,000,000 5.32 01/30/97 49,785,722
50,000,000 5.32 01/31/97 49,778,333
Household Finance Corp.
50,000,000 5.32 03/12/97 49,482,778
Transamerica Finance Corp.
10,000,000 5.52 01/28/97 9,958,600
50,000,000 5.43 02/28/97 49,562,584
21,000,000 5.29 03/13/97 20,780,906
31,308,000 5.29 03/14/97 30,976,761
USAA Capital Corp.
30,000,000 5.34 04/07/97 29,572,800
Receivable/Asset Financings
Beta Finance Inc.
16,000,000 5.58 01/27/97 15,935,520
24,000,000 5.58 02/03/97 23,877,240
15,000,000 5.50 02/04/97 14,922,083
19,000,000 5.35 04/07/97 18,728,933
25,000,000 6.11 06/17/97 25,000,000
Delaware Funding Corp.
30,832,000 5.29 02/20/97 30,605,470
Enterprise Funding Corp.
50,000,000 5.33 01/23/97 49,837,139
International Lease Finance Corp.
60,000,000 5.30 03/17/97 59,337,500
20,000,000 5.29 03/24/97 19,759,011
New Center Asset Trust
25,000,000 5.52 01/28/97 24,896,500
25,000,000 5.37 04/04/97 24,653,188
Security and Commodity Brokers, Dealers and Services
Bear Stearns Companies, Inc.
100,000,000 5.30 02/13/97 99,366,945
50,000,000 5.30 02/18/97 49,646,667
C.S. First Boston, Inc.
60,000,000 5.33 01/22/97 59,813,450
Merrill Lynch & Co., Inc.
50,000,000 5.35 02/11/97 49,695,347
25,000,000 5.45 02/19/97 24,814,549
75,000,000 5.33 02/26/97 74,378,167
Morgan Stanley Group, Inc.
40,000,000 5.59 01/28/97 39,832,300
50,000,000 5.41 02/03/97 49,752,042
20,000,000 5.32 02/06/97 19,893,600
40,000,000 5.53 06/27/97 40,000,000
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Financial Square Prime Obligations Fund (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Commercial Paper and Corporate Obligations (continued)
Telecommunications
Ameritech Corp.
$ 70,000,000 5.34% 04/07/97 $ 69,003,200
Tobacco
Philip Morris Co.
70,000,000 6.50 01/02/97 69,987,361
- -------------------------------------------------------------------
Total Commercial Paper and Corporate
Obligations $2,311,433,345
- -------------------------------------------------------------------
Bank Notes--15.6%
Dakota Certificates of Standard Credit Card Master Trust
$ 50,000,000 5.33%(b) 02/07/97 $ 49,726,097
FCC National Bank
40,000,000 5.70 05/22/97 39,953,925
75,000,000 6.00 06/02/97 75,003,030
First Bank FSB
50,000,000 5.62(b) 02/11/97 50,000,000
20,000,000 5.61(b) 04/11/97 19,998,937
First National Bank of Maryland
20,000,000 5.60(b) 09/30/97 19,994,187
Harris Trust & Savings Bank
16,500,000 6.04 06/17/97 16,520,097
Household Bank FSB
50,000,000 5.63(b) 09/23/97 49,997,602
Huntington National Bank
35,000,000 6.05 06/13/97 35,042,420
PNC Bank, N.A.
58,500,000 5.58(b) 04/01/97 58,488,742
100,000,000 5.40(b) 10/01/97 99,941,219
Society National Bank of Cleveland
100,000,000 5.58 05/14/97 99,961,237
SMM Trust 1996
40,000,000 5.69(b) 06/20/97 40,000,000
Southtrust Bank of Alabama, N.A.
25,000,000 5.54(b) 05/15/97 24,995,313
- -------------------------------------------------------------------
Total Bank Notes $ 679,622,806
- -------------------------------------------------------------------
U.S. Government Agency Obligations--7.1%
Federal Farm Credit Bank
32,000,000 5.39 02/24/97 31,741,280
Federal Home Loan Mortgage Corp.
50,000,000 5.40 02/24/97 49,595,000
Federal National Mortgage Association
$200,000,000 5.36% 03/04/97 $ 198,153,778
30,000,000 5.35 03/17/97 29,665,625
- -------------------------------------------------------------------
Total U.S. Government Agency Obligations $ 309,155,683
- -------------------------------------------------------------------
Certificates of Deposit--6.9%
Chase Manhattan Corp.
$ 25,000,000 5.75% 02/03/97 $ 25,000,000
25,000,000 5.42 03/12/97 25,000,000
Mellon Bank, N.A.
50,000,000 5.35 02/19/97 50,000,000
100,000,000 5.50 04/07/97 100,000,000
Morgan Guaranty Trust Co.
50,000,000 5.65 02/03/97 50,000,445
Union Bank of California
50,000,000 5.58 02/28/97 50,000,000
- -------------------------------------------------------------------
Total Certificates of Deposit $ 300,000,445
- -------------------------------------------------------------------
Repurchase Agreements--17.7%
C.S. First Boston Corp., dated 12/31/96, repurchase price
$302,790,000 (FNMA: $308,478,596, 6.00%-6.18%, 02/01/09-04/01/34)
$300,000,000 5.40% 03/03/97 $ 300,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase price
$100,036,111 (FNMA: $102,538,618, 5.47%, 12/30/97)
100,000,000 6.50 01/02/97 100,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase price
$75,641,250 (FNMA: $78,669,875, 7.50%, 04/01/26)
75,000,000 5.40 02/26/97 75,000,000
Joint Repurchase Agreement Account
297,900,000 6.58 01/02/97 297,900,000
- -------------------------------------------------------------------
Total Repurchase Agreements $ 772,900,000
- -------------------------------------------------------------------
Total Investments $4,373,112,279/(c)/
===================================================================
/(a)/Variable rate security - base index is either U.S. Treasury
Bill, one or three month LIBOR, one month commercial paper,
Federal Funds or Prime lending rate
/(b)/Variable rate master note-base index is Federal Funds.
/(c)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized
yield on date of purchase for discounted notes, or, for floating
rate securities, the current reset rate, which is based upon
current interest rate indices. The percentages shown for each
investment category reflect the value of investments in that
category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Statement of Investments
- --------------------------------------------------------------------
Financial Square Money Market Fund
December 31, 1996
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
====================================================================
Commercial Paper and Corporate Obligations--45.7%
Commercial Banks
CP Trust Certificates Series 1996
$ 60,000,000 5.68%\(a)\ 03/28/97 $ 60,000,000
Computer Software and Services
First Data Corp.
20,000,000 5.40 02/19/97 19,853,000
Siemens Capital Corp.
25,000,000 5.32 02/13/97 24,841,139
Foreign Banks
ABN Amro N.A.
50,000,000 5.45 02/28/97 49,560,972
Banca Crt Financial Corp.
15,000,000 5.35 01/31/97 14,933,125
22,945,000 5.42 04/01/97 22,634,095
20,000,000 5.47 04/03/97 19,720,422
13,000,000 5.42 04/08/97 12,810,149
BBL North America
125,000,000 6.90 01/02/97 124,976,042
Bex America, Inc.
36,000,000 5.36 01/21/97 35,892,900
Generale Bank
70,000,000 5.35 04/10/97 68,970,125
Nordbanken, N.A.
42,559,000 6.50 01/10/97 42,489,842
Royal Bank of Canada
100,000,000 6.50 01/02/97 99,981,944
San Paolo U.S. Finance Corp.
25,000,000 5.36 01/31/97 24,888,333
Swedbank, Inc.
100,000,000 5.47 02/04/97 99,483,389
Unifunding, Inc.
60,000,000 5.45 01/29/97 59,745,667
50,000,000 5.36 04/07/97 49,285,333
Life Insurance
Sunamerica Life Insurance Co.
50,000,000 5.50\(b)\ 09/02/97 50,000,000
Mortgage Brokers
Countrywide Funding Corp.
28,700,000 5.35 01/23/97 28,606,167
27,000,000 5.35 01/28/97 26,891,663
Countrywide Home Loans
50,000,000 6.65 01/02/97 49,990,764
Motor Vehicles and Equipment
Daimler Benz Corp., N.A.
16,312,000 5.57% 01/14/97 16,279,190
30,000,000 5.60 01/16/97 29,930,000
10,000,000 5.35 03/25/97 9,876,653
55,000,000 5.35 03/26/97 54,313,417
General Motors Acceptance Corp.
20,000,000 5.57 02/04/97 19,894,789
50,000,000 5.47 04/07/97 49,270,667
Security and Commodity Brokers, Dealers and Services
Merrill Lynch & Co., Inc.
25,000,000 5.35 02/11/97 24,847,674
25,000,000 5.45 02/19/97 24,814,549
50,000,000 5.33 02/26/97 49,585,444
Morgan Stanley Group, Inc.
22,900,000 5.53\(a)\ 06/27/97 22,900,000
Nomura Holdings
15,000,000 5.39 01/28/97 14,939,363
50,000,000 5.39 01/30/97 49,782,903
- --------------------------------------------------------------------
Total Commercial Paper and Corporate
Obligations $1,351,989,720
- --------------------------------------------------------------------
Bank Notes--15.1%
Dakota Certificates of Standard Credit Card Master Trust
$ 25,000,000 5.33%\(b)\ 02/07/97 $ 24,863,049
FCC National Bank
25,000,000 5.70 05/22/97 24,971,203
50,000,000 6.00 06/02/97 50,002,020
First Bank FSB
75,000,000 5.61\(b)\ 04/11/97 74,996,012
First National Bank of Maryland
30,000,000 5.61\(b)\ 09/26/97 29,991,409
25,000,000 5.60\(b)\ 09/30/97 24,992,734
Household Bank FSB
25,000,000 5.63\(b)\ 09/23/97 24,998,185
Huntington National Bank
10,000,000 6.05 06/13/97 9,996,458
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Statement of Investments
- ---------------------------------------------------------------------
Financial Square Money Market Fund (continued)
December 31, 1996
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
====================================================================
Bank Notes (continued)
PNC Bank, N.A.
$ 42,000,000 5.46%(b) 09/03/97 $ 41,977,353
50,000,000 5.40(b) 10/01/97 49,970,608
SMM Trust 1996
40,000,000 5.69(b) 06/20/97 40,000,000
Southtrust Bank of Alabama, N.A.
50,000,000 5.45(b) 07/11/97 49,983,901
- --------------------------------------------------------------------
Total Bank Notes $ 446,742,932
- --------------------------------------------------------------------
Certificates of Deposit--1.2%
Chase Manhattan Corp.
$ 35,000,000 5.75% 02/03/97 $ 35,000,000
- --------------------------------------------------------------------
Total Certificates of Deposit $ 35,000,000
- --------------------------------------------------------------------
Certificates of Deposit - Foreign Eurodollar--7.6%
Norinchukin Bank, London
$125,000,000 5.49% 03/18/97 $ 125,002,592
Sanwa Bank Ltd., London
100,000,000 5.46 03/21/97 100,001,079
- --------------------------------------------------------------------
Total Certificates of Deposit - Foreign Eurodollar $ 225,003,671
- --------------------------------------------------------------------
Certificates of Deposit - Yankeedollar--12.3%
Fuji Bank, Chicago
$100,000,000 5.52% 01/17/97 $ 100,000,441
Industrial Bank of Japan, New York
100,000,000 5.46 03/19/97 100,001,051
Landesbank Hessen Thuer Gir, New York
50,000,000 6.03 06/13/97 50,060,885
Sumitomo Bank, Los Angeles
75,000,000 5.52 02/28/97 74,994,514
Westpac Banking Corp., New York
40,000,000 5.97 06/06/97 40,027,198
- --------------------------------------------------------------------
Total Certificates of Deposit - Yankeedollar $ 365,084,089
- --------------------------------------------------------------------
Time Deposit--2.9%
Bank of Tokyo, Mitsubishi Bank Ltd., London
$ 85,000,000 5.50% 05/16/97 $ 85,000,000
- --------------------------------------------------------------------
Total Time Deposit $ 85,000,000
- --------------------------------------------------------------------
Repurchase Agreements--15.4%
JP Morgan Securities, Inc., dated 12/31/96, repurchase price
$100,036,111 (FNMA: $69,839,000, 5.47%, 12/30/97; FHLMC:
$32,517,875, 7.26%, 09/17/01)
$100,000,000 6.50% 01/02/97 $ 100,000,000
SBC Government Securities, Inc., dated 12/31/96, repurchase price
$150,052,083 (FNMA Stripped Securities: $149,437,500, 01/23/97;
FNMA: $3,650,246, 6.50%, 08/15/97)
150,000,000 6.25 01/02/97 150,000,000
Joint Repurchase Agreement Account
205,200,000 6.58 01/02/97 205,200,000
- --------------------------------------------------------------------
Total Repurchase Agreements $ 455,200,000
- --------------------------------------------------------------------
Total Investments $2,964,020,412(c)
================================================================================
(a) Variable rate security - base index is either U.S. Treasury Bill, one or
three month LIBOR, one month commercial paper, Federal Funds or Prime
lending rate
(b) Variable rate master note-base index is Federal Funds.
(c) The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Financial Square Treasury Obligations Fund
December 31, 1996
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
=====================================================================
U.S. Treasury Obligations--8.5%
United States Treasury Notes
$ 100,000,000 5.63% 06/30/97 $ 99,831,980
30,000,000 6.00 09/02/97 29,991,342
92,500,000 5.38 12/01/97 92,370,356
40,000,000 5.25 12/31/97 39,901,534
- --------------------------------------------------------------------
Total U.S. Treasury Obligations $ 262,095,212
====================================================================
Repurchase Agreements--91.9%
Bear Stearns Companies, Inc., dated 12/31/96, repurchase price
$125,046,875 (U.S. Treasury Notes: $127,384,047, 5.75%-5.88%,
10/31/98-12/31/98)
$ 125,000,000 6.75% 01/02/97 $ 125,000,000
C.S. First Boston Corp., dated 12/13/96, repurchase price
$101,332,500 (U.S. Treasury Note: $102,491,792, 5.50%,
11/15/98)
100,000,000 5.33 03/13/97 100,000,000
CIBC Wood Gundy Securities, dated 12/31/96, repurchase price
$125,046,528 (U.S. Treasury Bond: $71,136,658, 8.50%,
02/15/20; U.S. Treasury Note: $56,365,266, 7.25%, 08/15/04)
125,000,000 6.70 01/02/97 125,000,000
Daiwa Securities, dated 12/31/96, repurchase price $125,047,917
(U.S. Treasury Bill: $127,500,528, 11/13/97)
125,000,000 6.90 01/02/97 125,000,000
Goldman, Sachs & Co., dated 12/31/96, repurchase price
$125,045,833 (U.S. Treasury Bill: $127,500,296, 12/11/97)
125,000,000 6.60 01/02/97 125,000,000
JP Morgan Securities, dated 12/31/96, repurchase price
$125,045,833 (U.S. Treasury Notes: $127,371,815, 6.88%-7.75%,
12/31/99-11/15/01)
125,000,000 6.60 01/02/97 125,000,000
Lehman Government Securities, Inc., dated 12/31/96, repurchase
price $125,049,306 (U.S. Treasury Stripped Securities:
$127,500,543, 02/15/97-11/15/03)
125,000,000 7.10 01/02/97 125,000,000
Merrill Lynch Government Securities, Inc., dated 12/31/96,
repurchase price $125,044,792 (U.S. Treasury Bills:
$70,594,041, 01/09/97-01/30/97; U.S. Treasury Stripped
Securities: $14,626,460, 08/15/98-11/15/99; U.S. Treasury
Notes: $42,283,899, 7.50%-9.25%, 05/15/97-11/15/01)
125,000,000 6.45 01/02/97 125,000,000
Nomura Securities International, Inc., dated 12/12/96, repurchase
price $101,335,000 ( U.S. Treasury Bill: $9,629,890, 09/18/97;
U.S. Treasury Notes: $92,371,056, 5.00%-8.13%, 05/31/97-05/31/01)
100,000,000 5.34 03/12/97 100,000,000
Repurchase Agreements (continued)
Sanwa Securities, dated 12/31/96, repurchase price $125,046,875
(U.S. Treasury Notes: $85,107,798, 4.75%-5.25%,
08/31/98-04/30/01; U.S. Treasury Bill: $40,971,000, 10/16/97)
$ 125,000,000 6.75% 01/02/97 $ 125,000,000
Smith Barney, Inc., dated 12/11/96, repurchase price $101,335,000
(U.S. Treasury Bill: $1,475,971, 03/13/97; U.S. Treasury
Stripped Security: $ 15,052,048, 02/15/98; U.S. Treasury
Notes: $85,472,470, 4.75%-7.88%, 02/15/97-04/15/98)
100,000,000 5.34 03/11/97 100,000,000
UBS Securities, Inc., dated 12/31/96, repurchase price
$125,047,743 (U.S. Treasury Notes: $127,294,387, 6.13%-7.75%,
05/31/97-11/15/01)
125,000,000 6.88 01/02/97 125,000,000
Joint Repurchase Agreement Account
1,419,100,000 6.58 01/02/97 1,419,100,000
- --------------------------------------------------------------------
Total Repurchase Agreements $2,844,100,000
====================================================================
Total Investments $3,106,195,212/(a)/
====================================================================
/(a)/The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflects the value of the
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Statement of Investments
- -------------------------------------------------------------------
Financial Square Government Fund
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
U.S. Government Agency Obligations--44.7%
Federal Home Loan Bank
$ 35,000,000 5.40%(a) 04/04/97 $ 34,991,708
15,000,000 5.45 11/12/97 14,986,333
20,000,000 5.42 12/02/97 19,973,237
50,000,000 5.50(a) 12/26/97 49,959,182
Federal National Mortgage Association
72,000,000 5.35 01/21/97 71,786,000
25,000,000 5.35 01/24/97 24,914,549
20,000,000 5.27(a) 04/04/97 19,985,729
75,000,000 4.75(a) 04/21/97 74,974,867
100,000,000 5.43(a) 09/12/97 99,940,710
50,000,000 5.41(a) 09/29/97 49,981,540
12,500,000 5.53 10/29/97 12,495,125
75,000,000 5.40(a) 12/03/97 74,952,900
- -------------------------------------------------------------------
Total U.S. Government Agency Obligations $ 548,941,880
- -------------------------------------------------------------------
U.S. Treasury Obligations--6.5%
United States Treasury Notes
$ 50,000,000 5.63% 06/30/97 $ 49,915,080
30,000,000 6.00 09/02/97 29,990,027
- -------------------------------------------------------------------
Total U.S. Treasury Obligations $ 79,905,107
- -------------------------------------------------------------------
Repurchase Agreements--49.0%
Bear Stearns Companies, Inc., dated 12/31/96, repurchase price
$50,018,889 (FNMA: $51,422,558, 7.00%, 12/01/11-04/01/24)
$ 50,000,000 6.80% 01/02/97 $ 50,000,000
C.S. First Boston Corp., dated 12/11/96, repurchase price
$50,671,875 (FHLMC: $52,596,865, 7.00%, 11/01/26)
50,000,000 5.38 03/11/97 50,000,000
Goldman, Sachs & Co., dated 12/11/96, repurchase price
$50,671,875 (FNMA: $51,607,046, 6.12%, 10/01/32)
50,000,000 5.38 03/11/97 50,000,000
JP Morgan Securities, Inc., dated 12/12/96, repurchase price
$50,671,875 (FNMA: $52,512,714, 7.50%, 06/01/26)
50,000,000 5.38 03/12/97 50,000,000
Nomura Securities International, Inc., dated 12/31/96, repurchase
price $50,020,833 (FNMA: $34,860,373, 6.50%, 07/01/24; FHLMC:
$16,396,948, 7.00%-8.00%, 12/01/22-12/01/26)
50,000,000 7.50 01/02/97 50,000,000
Joint Repurchase Agreement Account
351,600,000 6.58 01/02/97 351,600,000
- -------------------------------------------------------------------
Total Repurchase Agreements $ 601,600,000
- -------------------------------------------------------------------
Total Investments $1,230,446,987/(b)/
===================================================================
/(a)/Variable rate security-base index is either Federal Funds, Prime
lending rate or one month LIBOR.
/(b)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized
yield on date of purchase for discounted notes, or, for floating
rate securities, the current reset rate, which is based upon
current interest rate indices.
The percentages shown for each investment category reflect the value
of investments in that category as a percentage of total net assets.
- -------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Statement of Investments
- -------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Alabama--4.8%
Columbia IDB PCRB for Alabama Power Co. Series 1995 (A-1/VMIG1)
$ 1,500,000 5.00% 01/01/97 $ 1,500,000
Jefferson County MF Hsg. Refunding RB for Hickory Knolls Project
Series 1994 (Amsouth Bank LOC)(P-1)
4,040,000 4.25 01/07/97 4,040,000
Jefferson County Sewer Revenue Warrants Series 1995 A (Bayerische
Landesbank Girozentrale LOC)(A-1+/VMIG1)
18,200,000 4.25 01/07/97 18,200,000
Parrish IDB PCRB for Alabama Power Co. Series 1994 A(A-1+/VMIG1)
2,150,000 5.00 01/01/97 2,150,000
- -------------------------------------------------------------------
$25,890,000
- -------------------------------------------------------------------
Arizona--1.4%
Maricopa County PCRB for Southern California Edison Co.
Series 1985 C(A-1/P-1)
$ 6,450,000 3.60% 03/12/97 $ 6,450,000
Phoenix IDA MF Hsg. VRDN for Del Mar Terrace Apartments (Bank of
America LOC)(MIG1)
1,300,000 4.15 01/07/97 1,300,000
- -------------------------------------------------------------------
$ 7,750,000
- -------------------------------------------------------------------
Arkansas--0.8%
Crossett City PCRB for Georgia Pacific Corp. Series 1991(Suntrust
Bank LOC)(A-1/P-1)
$ 4,500,000 4.15% 01/07/97 $ 4,500,000
- -------------------------------------------------------------------
California--5.0%
California RANS Index Series 1996-97 B(SP-1+/MIG1)
$16,000,000 3.47% 01/31/97 $16,000,000
California RANS VRDN Series 1996-97(SP-1+/VMIG1)
4,300,000 4.00 01/07/97 4,300,000
California School Cash Reserve Program Authority Series 1996
(MBIA)(MIG1)
4,500,000 4.50 12/19/97 4,537,690
Los Angeles County TRANS Series 1996-97 A(Credit Suisse/Morgan
Guaranty/Westdeutsche Landesbank Girozentrale/Bank of America/
Union Bank of Switzerland LOC)(SP-1/MIG1)
2,080,000 4.50 01/07/97 2,087,107
- -------------------------------------------------------------------
$26,924,797
- -------------------------------------------------------------------
Colorado--1.0%
Colorado Health Facilities Authority Series 1992 C(A-1+/VMIG1)
$ 5,500,000 4.15% 01/07/97 $ 5,500,000
- -------------------------------------------------------------------
District of Columbia--1.1%
District of Columbia VRDN ACES Series 1988 C (Bayerische
Landesbank Girozentrale LOC)(A-1/VMIG1)
$ 6,100,000 4.10% 01/07/97 $ 6,100,000
- -------------------------------------------------------------------
Florida--4.6%
Dade County Water & Sewer RB Series 1994 (FGIC)(A-1/VMIG1)
$ 3,700,000 4.00% 01/07/97 $ 3,700,000
Florida Local Government Pooled CP Notes (First Union National
Bank of Florida LOC)(A-1/P-1)
11,617,735 3.70 01/30/97 11,617,735
Jacksonville PCRB for Florida Power & Light Co. Series 1995
(A-1+/VMIG1)
600,000 5.25 01/01/97 600,000
Putnam County Development Authority for Seminole Electric Series
1984 H VRDN (CFC)(A-1+/P-1)
9,100,000 4.15 01/07/97 9,100,000
- -------------------------------------------------------------------
$25,017,735
- -------------------------------------------------------------------
Georgia--6.8%
Bartow County PCRB for Georgia Power Co. Series 1996(VMIG1)
$ 5,800,000 5.25% 01/01/97 $ 5,800,000
Burke County PCRB for Georgia Power Co. Second Series 1995
(A-1/VMIG1)
800,000 5.00 01/01/97 800,000
Burke County PCRB for Georgia Power Co. Series 1994(VMIG1)
3,800,000 5.00 01/01/97 3,800,000
Burke County PCRB for Georgia Power Co. Series 1995(A+/VMIG1)
3,400,000 5.00 01/01/97 3,400,000
6,300,000 5.25 01/01/97 6,300,000
Floyd County PCRB for Georgia Power Co. Series 1996(A-1/VMIG1)
3,000,000 5.00 01/01/97 3,000,000
Monroe County Development Authority for Georgia Power Scherer
Project Series 1995(A-1/VMIG1)
3,300,000 5.00 01/01/97 3,300,000
Municipal Electric Authority of Georgia Subordinate General
Resolution Series 1985 B(Credit Suisse/Morgan
Guaranty/Bayerische Landesbank Girozentrale LOC)(A-1+/VMIG1)
4,575,000 3.55 03/06/97 4,575,000
6,000,000 3.55 04/10/97 6,000,000
- -------------------------------------------------------------------
$36,975,000
- -------------------------------------------------------------------
Hawaii--0.7%
Hawaii Housing Finance and Development Authority MF Hsg.VRDN
Series 1985 A(FHLB LOC)(A-1+)
$ 4,000,000 3.00% 01/07/97 $ 4,000,000
- -------------------------------------------------------------------
- -------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
10
<PAGE>
Statement of Investments
- ---------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Illinois--8.3%
Illinois Health Facilities Authority VRDN for Elmhurst Memorial
Hospital Series 1993 B(VMIG1)
$ 8,900,000 5.30% 01/01/97 $ 8,900,000
Illinois Health Facilities Authority VRDN for Evangelical
Hospitals Corp. Series 1985 A (First National Bank of Chicago
LOC)(VMIG1)
2,600,000 4.10 01/07/97 2,600,000
Illinois Health Facilities Authority VRDN for Healthcorp
Affiliates Projects Series 1985 A (Northern Trust Company
LOC)(VMIG1)
2,700,000 4.15 01/07/97 2,700,000
Illinois Health Facilities Authority VRDN RB for Northwest
Community Hospital Series 1995 (A-1+/VMIG1)
5,000,000 4.20 01/01/97 5,000,000
Illinois Health Facilities Authority VRDN for Resurrection
Healthcare(VMIG1)
6,000,000 5.00 01/01/97 6,000,000
Illinois Health Facilities Authority VRDN Series 1985 C and D
Revolving Fund Pooled Finance Program (First National Bank of
Chicago LOC)(A-1/VMIG1)
16,700,000 4.15 01/07/97 16,700,000
Sauget PCRB VRDN for Monsanto Series 1992(P-1)
1,000,000 4.20 01/07/97 1,000,000
Sauget PCRB VRDN for Monsanto Series 1993(P-1)
1,900,000 4.20 01/07/97 1,900,000
- -------------------------------------------------------------------
$44,800,000
- -------------------------------------------------------------------
Indiana--5.1%
Fort Wayne Hospital Authority VRDN for Parkview Memorial Hospital
Series 1985 B (Bank of America LOC)(VMIG1)
$ 8,100,000 4.15% 01/07/97 $ 8,100,000
Indiana Hospital Equipment Financing Authority VRDN Series 1985 A
(MBIA)(A-1/VMIG1)
2,500,000 4.20 01/07/97 2,500,000
Jasper County PCRB for Nipsco Series 1994 A and C(A-1+/VMIG1)
9,300,000 5.10 01/01/97 9,300,000
Warrick County PCRB for Aluminum Company of America Series
1992(A-1)
7,475,000 4.15% 01/07/97 7,475,000
- -------------------------------------------------------------------
$27,375,000
- -------------------------------------------------------------------
Iowa--2.0%
Chillicothe PCRB for Midwest Power Systems Series 1993 A
(A-1/VMIG1)
$ 3,700,000 4.15% 01/07/97 $ 3,700,000
Muscatine County VRDN for Monsanto Corp. Series 1992(P-1)
7,200,000 4.20 01/07/97 7,200,000
- -------------------------------------------------------------------
$10,900,000
- -------------------------------------------------------------------
Kentucky--0.6%
Calvert PCRB for Air Products and Chemicals, Inc. Project Series
1993 A(A-1)
$ 3,000,000 4.20% 01/07/97 $ 3,000,000
- -------------------------------------------------------------------
Maryland--2.1%
Anne Arundel County RB for Baltimore Gas & Electric Series 1985
(A-1/VMIG1)
$ 1,000,000 3.65% 03/10/97 $ 1,000,000
5,380,000 3.60 03/13/97 5,380,000
Baltimore County PCRB for Baltimore Gas & Electric Series 1985
(A-1/VMIG1)
5,000,000 3.70 01/15/97 5,000,000
- -------------------------------------------------------------------
$11,380,000
- -------------------------------------------------------------------
Massachusetts--0.7%
Massachusetts Bay Transportation Authority Series 1996 A Notes
(SP-1/MIG2)
$ 4,000,000 3.75% 02/28/97 $ 4,002,951
- -------------------------------------------------------------------
Michigan--1.0%
Michigan Job Development Authority VRDN for Mazda Motor
Manufacturing Series 1985 (Sumitomo Bank)(VMIG1)
$ 1,400,000 4.25% 01/07/97 $ 1,400,000
Michigan State Strategic Fund Ltd. RB for Dow Chemical Series 1994
(A-1/P-1)
4,200,000 5.10 01/01/97 4,200,000
- -------------------------------------------------------------------
$ 5,600,000
- -------------------------------------------------------------------
Minnesota--1.9%
Minnesota State Higher Education Facility VRDN for Carleton
College Series 3-L2(VMIG1)
$ 6,000,000 4.11% 01/07/97 $ 6,000,000
Port Authority of St. Paul VRDN for Weyerhauser Project Series 1993
(A-1)
4,000,000 4.21 01/07/97 4,000,000
- -------------------------------------------------------------------
$10,000,000
- -------------------------------------------------------------------
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Statement of Investments
- --------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Mississippi--0.6%
Grenada County Refunding RB VRDN for Georgia Pacific Corp. Series
1994 (Sumitomo Bank LOC)(A1/P-1)
$ 1,000,000 4.30% 01/07/97 $ 1,000,000
Jackson County PCRB for Chevron USA, Inc. Series 1992(VMIG1)
2,000,000 5.00 01/01/97 2,000,000
- -------------------------------------------------------------------
$ 3,000,000
- -------------------------------------------------------------------
Missouri--1.1%
Missouri Health & Educational Facility Authority VRDN for SSM
Health Care Series 1995 B (MBIA)(AAA)
$ 4,500,000 4.10% 01/07/97 $ 4,500,000
Missouri State Environmental Improvement & Energy Resources
Authority VRDN for Monsanto Corp. Series 1993(P-1)
1,500,000 4.20 01/07/97 1,500,000
- -------------------------------------------------------------------
$ 6,000,000
- -------------------------------------------------------------------
New Jersey--3.1%
State of New Jersey TRANS Series 1997 A(A-1+/P-1)
$17,000,000 3.50% 03/11/97 $17,000,000
- -------------------------------------------------------------------
New Mexico--0.9%
Albuquerque RB for Sisters of Charity Series 1992(A-1+/VMIG1)
$ 5,000,000 4.15% 01/07/97 $ 5,000,000
- -------------------------------------------------------------------
New York--9.5%
Great Neck North Water Authority Water System RB Series 1993 A
(FGIC)(A-1+/VMIG1)
$ 3,400,000 4.00% 01/07/97 $ 3,400,000
New York City GO Series 1994 B (Morgan Guaranty LOC)(A-1/VMIG1)
2,800,000 4.50 01/01/97 2,800,000
New York City GO RANS Series 1997 A(SP-1+/VMIG1)
26,000,000 4.50 04/15/97 26,060,135
New York City Municipal Water Finance Authority CP Notes Series 3
(Toronto Dominion Bank/Bank of Nova Scotia LOC)(A-1+/P-1)
7,500,000 3.50 03/11/97 7,500,000
New York City Municipal Water Finance Authority RB Series 1995 A
(FGIC)(A-1+/VMIG1)
2,900,000 4.70 01/01/97 2,900,000
New York State Local Government VRDN Series 1995 C (Landesbank
Hessen-Thueringen Girozentrale LOC)(A-1+/VMIG1)
3,900,000 4.00 01/07/97 3,900,000
New York State Local Government VRDN Series 1995 G (National
Westminster Bank LOC)(A-1+/MIG1)
4,550,000 3.85 01/07/97 4,550,000
- -------------------------------------------------------------------
$51,110,135
- -------------------------------------------------------------------
North Carolina--6.8%
Rockingham County PCRB for Philip Morris Company Series
1992(A-1/P-1)
$ 7,700,000 4.15% 01/07/97 $ 7,700,000
Wake County PCRB for Carolina Power & Light Series 1990 A (Fuji
Bank LOC)(A-2/P-1)
18,870,000 3.55 02/10/97 18,870,000
Wake County PCRB for Carolina Power & Light Series 1990 B (Fuji
Bank LOC)(A-2/P-1)
10,000,000 3.75 02/13/97 10,000,000
- -------------------------------------------------------------------
$36,570,000
- -------------------------------------------------------------------
Ohio--2.2%
Columbus Electric System RB Series 1984 (Union Bank of Switzerland
LOC)(VMIG1)
$12,000,000 3.35% 01/31/97 $12,000,000
- -------------------------------------------------------------------
Oregon--1.7%
Portland Public Grain Elevator RB for Columbia Grain, Inc. Series
1984 (Fuji Bank/Bank of Tokyo LOC)(VMIG1)
$ 9,450,000 4.25% 01/07/97 $ 9,450,000
- -------------------------------------------------------------------
Pennsylvania--0.8%
Philadelphia TRANS Series 1996-7 A(SP-1/MIG1)
$ 4,500,000 4.50% 06/30/97 $ 4,511,725
- -------------------------------------------------------------------
Puerto Rico--2.3%
Commonwealth of Puerto Rico TRANS Series 1997 A(SP-1+/MIG1)
$12,500,000 4.00% 07/30/97 $12,540,250
- -------------------------------------------------------------------
South Carolina--1.1%
York County Floating/Fixed Rate PCRB Pooled Series 1984 N, North
Carolina Electric Membership Corp. (CFC)(A-1+/MIG1)
$ 5,775,000 4.15% 01/07/97 $ 5,775,000
- -------------------------------------------------------------------
Tennessee--0.6%
Blount County PCRB for Aluminum Company of America Series 1992
(A-1)
$ 2,450,000 4.15% 01/07/97 $ 2,450,000
Bradley County VRDN for Olin Corp. Series 1993 C (Wachovia Bank of
North Carolina LOC)(A-1+)
600,000 5.25 01/01/97 600,000
- -------------------------------------------------------------------
$ 3,050,000
- -------------------------------------------------------------------
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Statement of Investments
- -------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Texas--10.5%
Gulf Coast Waste Disposal Authority PCRB for Monsanto Corp. Series
1996(P-1)
$ 5,300,000 4.20% 01/07/97 $ 5,300,000
Harris County Hospital RB for Children's Hospital Series 1989
B-2(VMIG1)
10,000,000 4.10 01/07/97 10,000,000
Harris County Toll Road Adjustable/Fixed Rate Series 1994 C
(A-1+/VMIG1)
1,500,000 4.05 01/07/97 1,500,000
Houston GO Series A(A-1+/P-1)
5,000,000 3.50 03/12/97 5,000,000
Lower Colorado River Authority CP Notes Series C(A-1/P-1)
7,000,000 3.50 03/13/97 7,000,000
San Antonio Electric & Gas Systems CP Notes Series A(A-1+/P-1)
17,700,000 5.00 01/02/97 17,700,000
State of Texas TRANS Series 1996(SP-1+/MIG1)
10,000,000 4.75 08/29/97 10,050,571
- -------------------------------------------------------------------
$56,550,571
- -------------------------------------------------------------------
Virginia--4.6%
Louisa IDA PCRB for Virginia Electric & Power Series 1984(A-1/P-1)
$ 3,900,000 3.65% 01/24/97 $ 3,900,000
1,500,000 3.60 01/29/97 1,500,000
4,000,000 3.60 02/18/97 4,000,000
Roanoke VRDN for Carilion Health Systems Hospital Series A(A-1)
3,500,000 4.10 01/07/97 3,500,000
York County IDA PCRB for Virginia Electric & Power Series 1985
(A-1/A3)
9,000,000 3.70 01/14/97 9,000,000
2,900,000 3.60 02/05/97 2,900,000
- -------------------------------------------------------------------
$24,800,000
- -------------------------------------------------------------------
Washington--4.4%
Washington Healthcare Facility Authority VRDN for Sisters of
Providence Series 1985 B and E(A-1+/VMIG1)
$ 2,900,000 5.00% 01/01/97 $ 2,900,000
Washington Public Power Supply Project Electric RB Series 1993 A-2
(Bank of America LOC)(A-1/VMIG1)
20,880,000 4.10 01/07/97 20,880,000
- -------------------------------------------------------------------
$23,780,000
- -------------------------------------------------------------------
Wisconsin--1.5%
Milwaukee IDRB Multi-Modal for Pharmacia & Upjohn, Inc. Series
1994(P-1)
$ 8,000,000 4.60% 01/07/97 $ 8,000,000
- -------------------------------------------------------------------
Wyoming--0.3%
Converse County PCRB for Pacificorp. Series 1994(AMBAC)
(A-1/VMIG1)
$ 1,700,000 5.00% 01/01/97 $ 1,700,000
- -------------------------------------------------------------------
Total Investments $540,553,164/(a)/
===================================================================
/(a)/ The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rates indices.
Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those types of securities.
Security ratings are unaudited.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund (continued)
December 31, 1996
================================================================================
Investment Abbreviations:
ACES --Adjustable Convertible Extendible
Securities
AMBAC --Insured by American Municipal Bond
Assurance Corp.
CFC --Unconditionally guaranteed by CFC, Cooperative Finance Corp.
CP --Commercial Paper
FGIC --Insured by Financial Guaranty Insurance Co.
FHLB --Federal Home Loan Bank
GO --General Obligation
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDRB --Industrial Development Revenue Bond
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors
Assurance
MF Hsg. --Multi-Family Housing
PCRB --Pollution Control Revenue Bond
RANS --Revenue Anticipation Notes
RB --Revenue Bond
TRANS --Tax Revenue Anticipation Notes
VRDN --Variable Rate Demand Note
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
December 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Prime Treasury Tax-Free
Obligations Money Market Obligations Government Money Market
Fund Fund Fund Fund Fund
=======================================================================================
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities, at value
based on amortized cost $4,373,112,279 $2,964,020,412 $ 3,106,195,212 $1,230,446,987 $540,553,164
Interest receivable 11,583,246 11,328,488 2,442,834 3,375,926 2,193,518
Cash 88,907 53,776 72,630 25,740 160,336
Deferred organization expenses, net -- 21,473 -- -- 39,662
Other assets 107,980 65,537 181,145 117,177 14,269
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 4,384,892,412 2,975,489,686 3,108,891,821 1,233,965,830 542,960,949
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Dividends payable 23,926,806 16,502,413 12,829,625 5,834,710 1,711,051
Accrued expenses and other liabilities 989,400 969,498 919,263 588,231 164,840
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 24,916,206 17,471,911 13,748,888 6,422,941 1,875,891
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid in capital 4,359,975,116 2,958,016,821 3,095,062,895 1,227,516,405 541,097,917
Accumulated undistributed net realized
gain (loss) on investments 1,090 954 80,038 26,484 (12,859)
===================================================================================================================================
Net assets $4,359,976,206 $2,958,017,775 $3,095,142,933 $ 1,227,542,889 $541,085,058
===================================================================================================================================
Net asset value, offering and redemption
price per share (net assets/shares
outstanding) $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding:
FST shares 3,901,792,070 2,540,361,007 2,290,967,452 858,743,905 440,850,118
FST Administration shares 215,900,253 165,764,727 536,903,385 145,103,169 51,661,795
FST Service shares 115,154,059 234,380,537 220,555,465 223,556,901 19,855,446
FST Preferred shares 127,128,734 17,510,550 46,636,593 112,430 28,730,558
- -----------------------------------------------------------------------------------------------------------------------------------
Total shares of beneficial interest
outstanding, $0.01 par value
(unlimited number of shares
authorized) 4,359,975,116 2,958,016,821 3,095,062,895 1,227,516,405 541,097,917
===================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Prime Treasury Tax-Free
Obligations Money Market Obligations Government Money Market
Fund Fund Fund Fund Fund
==================================================================================
<S> <C> <C> <C> <C> <C>
Investment income:
Interest income $273,607,363 $168,464,120 $ 130,875,226 $69,659,598 $19,750,787
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment adviser fees 3,751,933 2,295,135 1,818,328 961,337 420,548
Account administration fees 6,503,286 3,978,642 3,152,251 1,667,071 728,870
Custodian fees 591,036 401,612 349,064 224,733 31,788
Registration fees 143,509 118,595 229,757 143,620 24,284
Trustee fees 78,242 51,602 31,550 16,933 9,385
Amortization of deferred organization expenses -- 9,065 -- -- 15,626
Other 325,076 181,947 184,245 95,419 59,633
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses 11,393,082 7,036,598 5,765,195 3,109,113 1,290,134
Less--Expenses reimbursable and fees
waived by Goldman Sachs (2,388,496) (1,598,929) (1,400,520) (800,866) (302,339)
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses 9,004,586 5,437,669 4,364,675 2,308,247 987,795
Administration share fees 527,357 474,043 1,100,814 250,618 128,721
Service share fees 541,076 271,936 849,624 1,258,434 91,599
Preferred share fees 42,963 2,874 15,097 395 13,155
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses and share fees 10,115,982 6,186,522 6,330,210 3,817,694 1,221,270
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 263,491,381 162,277,598 124,545,016 65,841,904 18,529,517
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment
transactions 105,304 189,110 587,091 136,538 (5,995)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations $263,596,685 $162,466,708 $125,132,107 $65,978,442 $18,523,522
==================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Treasury Tax-Free
Obligations Money Market Obligations Government Money Market
Fund Fund Fund Fund Fund
=========================================================================================
<S> <C> <C> <C> <C> <C>
From Operations:
Net investment income $ 263,491,381 $ 162,277,598 $ 124,545,016 $ 65,841,904 $ 18,529,517
Net realized gain (loss) on
investment transactions 105,304 189,110 587,091 136,538 (5,995)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 263,596,685 162,466,708 125,132,107 65,978,442 18,523,522
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
FST shares (245,389,523) (149,928,272) (93,857,124) (48,867,861) (15,981,710)
FST Administration shares (10,697,750) (9,558,151) (21,870,105) (5,023,737) (1,593,538)
FST Service shares (5,164,431) (2,628,897) (8,020,699) (11,930,553) (522,532)
FST Preferred shares (2,239,677) (162,278) (797,088) (19,753) (431,737)
Net realized gain on investment transactions
FST shares (128,847) (173,838) (385,734) (81,682) --
FST Administration shares (5,617) (11,082) (89,882) (8,397) --
FST Service shares (2,712) (3,048) (32,963) (19,942) --
FST Preferred shares (1,177) (188) (3,276) (33) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (263,629,734) (162,465,754) (125,056,871) (65,951,958) (18,529,517)
- ------------------------------------------------------------------------------------------------------------------------------------
From share transactions (at $1.00 per share):
Proceeds from sales of shares 48,481,127,400 44,257,102,764 20,383,057,696 14,111,648,633 4,669,259,507
Reinvestment of dividends and
distributions 126,514,648 91,077,089 45,060,831 21,912,928 6,495,873
Cost of shares repurchased (47,756,596,271) (43,600,991,427) (19,343,068,853) (13,746,823,336) (4,623,830,243)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from share
transactions 851,045,777 747,188,426 1,085,049,674 386,738,225 51,925,137
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase 851,012,728 747,189,380 1,085,124,910 386,764,709 51,919,142
Net Assets:
Beginning of year 3,508,963,478 2,210,828,395 2,010,018,023 840,778,180 489,165,916
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 4,359,976,206 $2,958,017,775 $ 3,095,142,933 $1,227,542,889 $ 541,085,058
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Treasury Tax-Free
Obligations Money Market Obligations Government Money Market
Fund Fund Fund Fund Fund
=========================================================================================
<S> <C> <C> <C> <C> <C>
From Operations:
Net investment income $ 247,196,840 $ 136,963,014 $ 79,821,378 $ 38,042,394 $ 13,622,900
Net realized gain (loss) on
investment transactions 95,511 7,374 781,869 65,308 (6,864)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 247,292,351 136,970,388 80,603,247 38,107,702 13,616,036
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
FST shares (236,894,656) (130,522,374) (63,729,881) (34,713,840) (12,702,550)
FST Administration shares (7,108,569) (6,351,769) (9,995,927) (2,917,098) (455,025)
FST Service shares (3,193,615) (88,871) (6,095,570) (411,456) (465,325)
Net realized gain on investment transactions
FST shares (55,079) (9,474) (612,499) (59,324) --
FST Administration shares (4,463) (504) (99,062) (5,878) --
FST Service shares (1,830) -- (62,143) (106) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (247,258,212) (136,972,992) (80,595,082) (38,107,702) (13,622,900)
- ------------------------------------------------------------------------------------------------------------------------------------
From share transactions (at $1.00 per share):
Proceeds from sales of shares 35,913,627,249 33,159,975,346 12,055,344,504 8,904,113,596 3,459,116,162
Reinvestment of dividends and
distributions 88,104,801 69,894,471 14,492,584 15,345,902 3,954,598
Cost of shares repurchased (35,375,137,049) (31,948,570,256) (11,181,309,002) (8,391,284,391) (3,161,776,879)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from share transactions 626,595,001 1,281,299,561 888,528,086 528,175,107 301,293,881
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase 626,629,140 1,281,296,957 888,536,251 528,175,107 301,287,017
Net Assets:
Beginning of year 2,882,334,338 929,531,438 1,121,481,772 312,603,073 187,878,899
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 3,508,963,478 $ 2,210,828,395 $ 2,010,018,023 $ 840,778,180 $ 489,165,916
====================================================================================================================================
Summary of Share Transactions (at $1.00 per share):
FST Shares:
Shares sold 34,469,057,699 31,539,337,948 8,859,672,375 8,279,786,329 3,135,487,639
Reinvestment of dividends and
distributions 85,898,572 66,409,325 11,189,134 14,336,357 3,262,842
Shares repurchased (34,034,050,903) (30,399,518,678) (8,241,356,158) (7,808,586,957) (2,873,945,734)
- ------------------------------------------------------------------------------------------------------------------------------------
520,905,368 1,206,228,595 629,505,351 485,535,729 264,804,747
- ------------------------------------------------------------------------------------------------------------------------------------
FST Administration shares:
Shares sold 721,501,944 1,608,362,145 1,309,118,844 331,435,289 110,334,205
Reinvestment of dividends and
distributions 761,953 3,443,404 845,389 785,525 320,945
Shares repurchased (640,480,667) (1,540,953,481) (1,108,896,222) (304,089,584) (91,758,941)
- ------------------------------------------------------------------------------------------------------------------------------------
81,783,230 70,852,068 201,068,011 28,131,230 18,896,209
- ------------------------------------------------------------------------------------------------------------------------------------
FST Service shares:
Shares sold 723,067,606 12,275,253 1,886,553,285 292,891,978 213,294,318
Reinvestment of dividends and
distributions 1,444,276 41,742 2,458,061 224,020 370,811
Shares repurchased (700,605,479) (8,098,097) (1,831,056,622) (278,607,850) (196,072,204)
- ------------------------------------------------------------------------------------------------------------------------------------
23,906,403 4,218,898 57,954,724 14,508,148 17,592,925
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in shares 626,595,001 1,281,299,561 888,528,086 528,175,107 301,293,881
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. Organization
Goldman Sachs Money Market Trust (the "Trust"), a business trust organized under
the laws of the Commonwealth of Massachusetts on December 6, 1978, includes the
Financial Square Funds, collectively "the Funds" or individually a "Fund". The
Trust is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. Financial Square consists of seven
diversified funds: Prime Obligations, Money Market, Treasury Obligations,
Government, Tax-Free Money Market , Municipal Money Market (inactive) and Money
Market Plus (inactive). The Financial Square Funds offer four classes of shares:
FST shares, FST Administration shares, FST Service shares and FST Preferred
shares. The investment objective of the Funds is to maximize current income to
the extent consistent with the preservation of capital and maintenance of
liquidity.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Funds. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that may affect the reported amounts.
A. Investment Valuation--
- --------------------------
Each Fund uses the amortized-cost method for valuing portfolio securities which
approximates market value. Under this method, all investments purchased at a
discount or premium are valued by amortizing the difference between the original
purchase price and maturity value of the issue over the period to maturity.
B. Interest Income--
- ---------------------
Interest income is determined on the basis of interest accrued, premium
amortized and discount earned.
C. Federal Taxes--
- -------------------
It is each Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute each year
substantially all investment company taxable and tax-exempt income to
shareholders. Accordingly, no federal tax provisions are required.
The characterization of distributions to shareholders for financial
reporting purposes is determined in accordance with federal income tax rules.
Therefore, the source of the Funds' distributions may be shown in the
accompanying financial statements as either from or in excess of net investment
income or net realized gain on investment transactions, or from paid-in capital,
depending on the type of book/tax differences that may exist.
At December 31, 1996, the Funds' tax year end, the Tax-Free Money Market
Fund had approximately $13,000 of capital loss carryforward for U.S. Federal tax
purposes. This capital loss carryforward expires in the year 2004.
D. Deferred Organization Expenses--
- ------------------------------------
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
E. Expenses--
- --------------
Expenses incurred by the Funds that do not specifically relate to an individual
fund are allocated to the Funds based on each Fund's relative average net assets
for the period.
Shareholders of FST Administration, FST Service and FST Preferred shares
bear all expenses and fees paid to service organizations for their services with
respect to such shares as well as other expenses (subject to expense
limitations) that are directly attributable to such shares.
3. Agreements
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as investment adviser pursuant to
an Investment Advisory Agreement. Under the Investment Advisory Agreement, GSAM,
subject to general
- --------------------------------------------------------------------------------
19
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
supervision of the Trust's Board of Trustees, manages the portfolios of the
Funds. As compensation for the services rendered under the Investment Advisory
Agreement and the assumption of the expenses related thereto, GSAM is entitled
to a fee, computed daily and payable monthly, at an annual rate equal to .075%
of each Fund's average daily net assets. These amounts are included in "Accrued
expenses and other liabilities" in the accompanying Statements of Assets and
Liabilities.
Until further notice, GSAM has voluntarily agreed to limit certain of each
of the Fund's expenses (excluding advisory fees, account administration fees,
service organization fees, taxes, interest, brokerage commissions and
extraordinary expenses) to the extent that such expenses exceed .01% per annum
of that Fund's average daily net assets. These amounts are included in "Other
assets" in the accompanying Statements of Assets and Liabilities.
GSAM also serves as administrator pursuant to an Administration Agreement.
Under the Administration Agreement, GSAM administers each Fund's business
affairs, including providing facilities and transfer agency services. As
compensation for the services rendered under the Administration Agreement, GSAM
is entitled to a fee, computed daily and payable monthly, at an annual rate
equal to .13% of each Fund's average daily net assets. These amounts are
included in "Accrued expenses and other liabilities" in the accompanying
Statements of Assets and Liabilities.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to a
Distribution Agreement and receives no fee. The following chart outlines the
waivers and reimbursements for the year ended December 31, 1996 and amounts owed
to affiliates and due from GSAM at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Adviser Expense Amounts Amounts
Fee Reimburs- due to due from
Fund Waived ements Total GSAM GSAM
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime
Obligations
Fund $1,751 $637 $2,388 $777 $108
- ---------------------------------------------------------------------
Money
Market
Fund 1,142 457 1,599 552 65
- ---------------------------------------------------------------------
Treasury
Obligations
Fund 848 553 1,401 419 155
- ---------------------------------------------------------------------
Government
Fund 449 352 801 197 117
- ---------------------------------------------------------------------
Tax-Free
Money
Market
Fund 217 85 302 86 13
- ---------------------------------------------------------------------
</TABLE>
4. Administration, Service and Preferred Plans
The Funds have adopted Administration, Service and Preferred Plans to compensate
service organizations for providing varying levels of account administration and
shareholder liaison services to their customers who are beneficial owners of
such shares. The Administration, Service and Preferred Plans provide for
compensation to the service organizations in an amount up to .25% , .50% and
.10% (on an annualized basis), respectively, of the average daily net asset
value of the respective shares.
5. Line of Credit Facility
The Funds participate in a $250,000,000 uncommitted, unsecured revolving line of
credit facility to be used solely for temporary or emergency purposes. Under the
most restrictive arrangement, each Fund must own securities having a market
value in excess of 300% of the total bank borrowings. The interest rate on the
borrowings is based on the Federal Funds rate. During the year ended December
31, 1996, the Funds did not have any borrowings under this facility.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. Repurchase Agreements
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping at the Fund's custodian.
7. Joint Repurchase Agreement Accounts
The Funds, together with other registered investment companies having advisory
agreements with GSAM or its affiliates, transfer uninvested cash balances into
joint accounts, the daily aggregate balances of which are invested in one or
more repurchase agreements. The underlying securities for the repurchase
agreements are U.S. Treasury obligations.
At December 31, 1996, the Prime Obligations, Money Market, Treasury
Obligations and Government Funds had undivided interests in the repurchase
agreements in the following joint account, which equaled $297,900,000,
$205,200,000, $1,419,100,000 and $351,600,000 in principal amount, respectively.
At December 31, 1996, the repurchase agreements in this joint account, along
with the corresponding underlying securities (including the type of security,
market value, interest rate and maturity date), were as follows:
- --------------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------
Repurchase Agreements
BT Securities Corp., dated 12/31/96, repurchase price $200,061,111 (U.S.
Treasury Notes: $154,133,720, 5.75%-6.38%, 08/31/97-04/30/01; U.S.
Treasury Bills: $48,126,398, 06/12/97)
$ 200,000,000 5.50% 01/02/97 $ 200,000,000
Chase Securities, Inc., dated 12/31/96, repurchase price $1,000,369,444
(U.S. Treasury Notes: $1,020,003,399, 5.00%-9.13%, 11/15/97-5/31/99)
1,000,000,000 6.65 01/02/97 1,000,000,000
Citicorp. Securities, Inc., dated 12/31/96, repurchase price $100,034,722
(U.S. Treasury Notes: $101,974,154, 5.88%-7.50%, 03/31/98-11/15/01)
100,000,000 6.25 01/02/97 100,000,000
Morgan Stanley & Co., dated 12/31/96, repurchase price $1,200,450,000
(U.S. Treasury Notes: $954,150,236, 6.00%-6.25%, 07/31/98-09/30/98;
U.S. Treasury Bills: $270,396,330, 01/23/97-10/16/97)
1,200,000,000 6.75 01/02/97 1,200,000,000
Swiss Bank Corp., dated 12/31/96, repurchase price $140,846,933 (U.S.
Treasury Notes: $129,531,177, 4.75%-8.88%, 01/15/97-08/15/03; U.S.
Treasury Bills: $14,639,156, 01/30/97-06/26/97)
140,800,000 6.00 01/02/97 140,800,000
Swiss Bank Corp., dated 12/31/96, repurchase price $400,150,000 (U.S.
Treasury Notes: $367,986,300, 4.75%-8.88%, 01/15/97-08/15/03; U.S.
Treasury Bills: $41,588,512, 01/30/97-06/26/97)
400,000,000 6.75 01/02/97 400,000,000
- --------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $3,040,800,000
==========================================================================
8. Other Matters
Pursuant to an SEC exemptive order, each taxable Fund may enter into certain
principal transactions, including repurchase agreements, with Goldman, Sachs &
Co. subject to certain limitations as follows: 25% of eligible security
transactions, as defined, and 10% of repurchase agreement transactions.
21
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
December 31, 1996
- --------------------------------------------------------------------------------
9. Summary of Share Transactions
Share activity for the year ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Tax-Free
Prime Obligations Money Market Treasury Government Money Market
Fund Fund Obligations Fund Fund Fund
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FST Shares:
Shares sold 44,941,258,260 41,611,799,874 15,303,462,361 11,674,849,553 4,186,677,890
Reinvestment of dividends and
distributions 120,569,689 84,724,371 33,617,264 19,640,980 4,879,667
Shares repurchased (44,455,790,432) (41,225,360,339) (14,633,812,470) (11,579,631,835) (4,199,081,918)
------------------------------------------------------------------------------------------------
606,037,517 471,163,906 703,267,155 114,858,698 (7,524,361)
FST Administration Shares:
Shares sold 1,718,885,581 2,097,089,351 2,868,056,191 1,074,614,378 177,906,627
Reinvestment of dividends and
distributions 2,721,453 5,879,304 4,640,302 1,055,828 844,377
Shares repurchased (1,653,602,695) (2,074,616,324) (2,618,986,546) (1,012,951,862) (148,027,716)
------------------------------------------------------------------------------------------------
68,004,339 28,352,331 253,709,947 62,718,344 30,723,288
FST Service Shares:
Shares sold 1,442,987,405 470,852,368 2,117,230,142 1,353,982,373 239,131,409
Reinvestment of dividends and
distributions 3,217,249 397,187 6,330,034 1,208,640 449,321
Shares repurchased (1,396,329,467) (241,087,916) (2,042,124,197) (1,146,142,260) (239,585,078)
------------------------------------------------------------------------------------------------
49,875,187 230,161,639 81,435,979 209,048,753 (4,348)
FST Preferred Shares:
Shares sold 377,996,154 77,361,171 94,309,002 8,202,329 65,543,581
Reinvestment of dividends and
distributions 6,257 76,227 473,231 7,480 322,508
Shares repurchased (250,873,677) (59,926,848) (48,145,640) (8,097,379) (37,135,531)
------------------------------------------------------------------------------------------------
127,128,734 17,510,550 46,636,593 112,430 28,730,558
------------------------------------------------------------------------------------------------
Net increase in shares 851,045,777 747,188,426 1,085,049,674 386,738,225 51,925,137
================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Prime Obligations Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
--------------------------------------
Ratio of net
Net asset Net realized Total Net asset expenses to
value at Net gain income from Distributions value at average
beginning investment on investment investment to end Total net
of period income transactions operations shareholders of period return(a) assets
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. $1.00 $0.0529 $-- $0.0529 $(0.0529) $1.00 5.41% 0.18%
1996-FST Preferred shares/(c)/... 1.00 0.0346 -- 0.0346 (0.0346) 1.00 5.28/(b)/ 0.28/(b)/
1996-FST Administration shares .. 1.00 0.0506 -- 0.0506 (0.0506) 1.00 5.14 0.43
1996-FST Service shares ......... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.88 0.68
1995-FST shares ................. 1.00 0.0586 -- 0.0586 (0.0586) 1.00 6.02 0.18
1995-FST Administration shares .. 1.00 0.0559 -- 0.0559 (0.0559) 1.00 5.75 0.43
1995-FST Service shares ......... 1.00 0.0533 -- 0.0533 (0.0533) 1.00 5.49 0.68
For the Period Ended December 31,
- ---------------------------------
1994-FST shares/(d)/............. 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.38/(b)/ 0.18/(b)/
1994-FST Administration shares/(d)/ 1.00 0.0383 -- 0.0383 (0.0383) 1.00 4.12/(b)/ 0.43/(b)/
1994-FST Service shares/(d)/..... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.86/(b)/ 0.68/(b)/
For the Years Ended January 31,
- -------------------------------
1994-FST shares ................. 1.00 0.0311 0.0002 0.0313 (0.0313) 1.00 3.18 0.17
1994-FST Administration shares .. 1.00 0.0286 0.0002 0.0288 (0.0288) 1.00 2.92 0.42
1994-FST Service shares ......... 1.00 0.0261 0.0002 0.0263 (0.0263) 1.00 2.66 0.67
1993-FST shares ................. 1.00 0.0360 0.0007 0.0367 (0.0367) 1.00 3.75 0.18
1993-FST Administration shares/(e)/ 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02/(b)/ 0.44/(b)/
1993-FST Service shares ......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68
1992-FST shares ................. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18
1992-FST Service shares (e)...... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10/(b)/ 0.66/(b)/
For the Period March 8, 1990 (f)
- --------------------------------
through January 31,
- -------------------
1991-FST shares ................. 1.00 0.0727 -- 0.0727 (0.0727) 1.00 8.27/(b)/ 0.18/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
----------------------------
Net Ratio of net
assets at Ratio of investment
end expenses to income to
of period average net average net
(in 000's) assets assets
----------------------------------------
<S> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. $3,901,797 0.23% 5.24%
1996-FST Preferred shares/(c)/... 127,126 0.33/(b)/ 5.14/(b)/
1996-FST Administration shares .. 215,898 0.48 5.01
1996-FST Service shares ......... 115,154 0.73 4.73
1995-FST shares ................. 3,295,791 0.22 5.82
1995-FST Administration shares .. 147,894 0.47 5.55
1995-FST Service shares ......... 65,278 0.72 5.29
For the Period Ended December 31,
- ---------------------------------
1994-FST shares/(d)/............. 2,774,849 0.24/(b)/ 4.32/(b)/
1994-FST Administration shares/(d)/ 66,113 0.49/(b)/ 4.12/(b)/
1994-FST Service shares/(d)/..... 41,372 0.74/(b)/ 3.92/(b)/
For the Years Ended January 31,
- -------------------------------
1994-FST shares ................. 1,831,413 0.25 3.03
1994-FST Administration shares .. 35,250 0.50 2.78
1994-FST Service shares ......... 14,001 0.75 2.53
1993-FST shares ................. 813,126 0.25 3.53
1993-FST Administration shares/(e)/ 1,124 0.52/(b)/ 2.88/(b)/
1993-FST Service shares ......... 336 0.75 2.94
1992-FST shares ................. 917,073 0.27 5.63
1992-FST Service shares/(e)/..... 118 0.74/(b)/ 4.02/(b)/
For the Period March 8, 1990/(f)/
- ---------------------------------
through January 31,
- -------------------
1991-FST shares ................. 578,495 0.28/(b)/ 7.94/(b)/
</TABLE>
- ---------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
/(e)/FST Administration share and FST Service share activity commenced during
November of 1992 and January of 1992, respectively.
/(f)/Commencement of operations.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=================================
Net Asset Net realized Total Net asset
value at Net gain income from Distributions value at
beginning investment on investment investment to end
of period income transactions operations shareholders of period
=========================================================================================
For the Year Ended December 31,
===============================
<S> <C> <C> <C> <C> <C> <C>
1996-FST shares ................. $1.00 $0.0533 $0.0001 $0.0534 $(0.0534) $1.00
1996-FST Preferred shares/(c)/... 1.00 0.0348 -- 0.0348 (0.0348) 1.00
1996-FST Administration shares .. 1.00 0.0504 0.0001 0.0505 (0.0505) 1.00
1996-FST Service shares ......... 1.00 0.0484 -- 0.0484 (0.0484) 1.00
1995-FST shares ................. 1.00 0.0589 -- 0.0589 (0.0589) 1.00
1995-FST Administration shares .. 1.00 0.0561 -- 0.0561 (0.0561) 1.00
1995-FST Service shares/(d)/..... 1.00 0.0231 -- 0.0231 (0.0231) 1.00
For the Period Ended December 31,
=================================
1994-FST shares/(d)/............. 1.00 0.0305 -- 0.0305 (0.0305) 1.00
1994-FST Administration shares
/(d)/......................... 1.00 0.0298 -- 0.0298 (0.0298) 1.00
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of investment
expenses to income to end expenses to income to
Total average net average net of period average net average net
return/(a)/ assets assets (in 000's) assets assets
==========================================================================================
For the Year Ended December 31,
===============================
<S> <C> <C> <C> <C> <C> <C>
1996-FST shares.................. 5.45% 0.18% 5.33% $2,540,366 0.23% 5.28%
1996-FST Preferred shares/(c)/... 5.31/(b)/ 0.28/(b)/ 5.23/(b)/ 17,510 0.33/(b)/ 5.18/(b)/
1996-FST Administration shares... 5.19 0.43 5.04 165,766 0.48 4.99
1996-FST Service shares.......... 4.93 0.68 4.84 234,376 0.73 4.79
1995-FST shares................. 6.07 0.15 5.89 2,069,197 0.23 5.81
1995-FST Adminstration shares.... 5.80 0.40 5.61 137,412 0.48 5.53
1995-FST Services shares/(d)/.... 5.41/(b)/ 0.65/(b)/ 4.93/(b)/ 4,219 0.73/(b)/ 4.85/(b)/
For the Period Ended December 31,
=================================
1994-FST shares/(d)/............. 4.91/(b)/ 0.11/(b)/ 4.88/(b)/ 862,971 0.25/(b)/ 4.74/(b)/
1994-FST Adminstration shares/(d)/ 4.65/(b)/ 0.36/(b)/ 4.82/(b)/ 66,560 0.50/(b)/ 4.68/(b)/
</TABLE>
- ------------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/FST, FST Adminstration and FST Service share activity commenced May 18,
1994, May 20, 1994 and July 14, 1995, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Treasury Obligations Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
-------------------------------------
Net Net Total
asset realized income Net asset
value at Net gain (loss) from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. $1.00 $0.0522 $0.0003 $0.0525 $(0.0524) $1.00 5.35%
1996-FST Preferred shares/(c)/... 1.00 0.0342 0.0001 0.0343 (0.0343) 1.00 5.24/(b)/
1996-FST Administration shares .. 1.00 0.0497 0.0002 0.0499 (0.0498) 1.00 5.09
1996-FST Service shares ......... 1.00 0.0472 0.0002 0.0474 (0.0474) 1.00 4.83
1995-FST shares ................. 1.00 0.0573 0.0005 0.0578 (0.0578) 1.00 5.96
1995-FST Administration shares .. 1.00 0.0547 0.0005 0.0552 (0.0552) 1.00 5.69
1995-FST Service shares ......... 1.00 0.0521 0.0005 0.0526 (0.0526) 1.00 5.43
For the Year Ended December 31,
- -------------------------------
1994-FST shares/(d)/............. 1.00 0.0379 (0.0001) 0.0378 (0.0378) 1.00 4.23/(b)/
1994-FST Administration shares
/(d)/.......................... 1.00 0.0388 (0.0001) 0.0387 (0.0387) 1.00 3.97/(b)/
1994-FST Service shares/(d)/..... 1.00 0.0349 (0.0001) 0.0348 (0.0348) 1.00 3.71/(b)/
For the Year Ended December 31,
- -------------------------------
1994-FST shares ................. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11
1994-FST Administration shares .. 1.00 0.0276 0.0006 0.0282 (0.0281) 1.00 2.85
1994-FST Service shares ......... 1.00 0.0251 0.0008 0.0259 (0.0256) 1.00 2.60
1993-FST shares ................. 1.00 0.0342 0.0012 0.0354 (0.0355) 1.00 3.69
1993-FST Administration shares
/(e)/.......................... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83/(b)/
1993-FST Service shares ......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17
1992-FST shares ................. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84
1992-FST Service shares/(e)/..... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47/(b)/
For the Period March 8, 1990/(f)/through January 31,
- -------------------------------------------
1991-FST shares ................. 1.00 0.0600 0.0006 0.0606 (0.0605) 1.00 8.06/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
----------------------------
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net period of average net average net
assets assets (in 000's) assets assets
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. 0.18% 5.22% $2,291,051 0.24% 5.16%
1996-FST Preferred shares/(c)/... 0.28/(b)/ 5.11/(b)/ 46,637 0.34/(b)/ 5.05/(b)/
1996-FST Administration shares .. 0.43 4.97 536,895 0.49 4.91
1996-FST Service shares ......... 0.68 4.72 220,560 0.74 4.66
1995-FST shares ................. 0.18 5.73 1,587,715 0.23 5.68
1995-FST Administration shares .. 0.43 5.47 283,186 0.48 5.42
1995-FST Service shares ......... 0.68 5.21 139,117 0.73 5.16
For the Period Ended December 31,
- -------------------------------
1994-FST shares/(d)/............. 0.18/(b)/ 4.13/(b)/ 958,196 0.25/(b)/ 4.06/(b)/
1994-FST Administration shares
/(d)/.......................... 0.43/(b)/ 4.24/(b)/ 82,124 0.50/(b)/ 4.17/(b)/
1994-FST Service shares/(d)/..... 0.68/(b)/ 3.82/(b)/ 81,162 0.75/(b)/ 3.75/(b)/
For the Years Ended January 31,
- -------------------------------
1994-FST shares ................. 0.17 3.01 812,420 0.24 2.94
1994-FST Administration shares .. 0.42 2.76 24,485 0.49 2.69
1994-FST Service shares ......... 0.67 2.51 35,656 0.74 2.44
1993-FST shares ................. 0.18 3.42 776,181 0.26 3.34
1993-FST Administration shares
/(e)/.......................... 0.43/(b)/ 2.83/(b)/ 1 0.51/(b)/ 2.75/(b)/
1993-FST Service shares ......... 0.68 2.96 5,155 0.76 2.88
1992-FST shares ................. 0.18 5.49 413,171 0.28 5.39
1992-FST Service shares/(e)/..... 0.68/(b)/ 3.77/(b)/ 3,634 0.78/(b)/ 3.67/(b)/
For the Period March 8, 1990/(f)/through January 31,
- -----------------------------------
1991-FST shares ................. 0.21/(b)/ 7.74/(b)/ 229,988 0.34/(b)/ 7.61/(b)/
- ----------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
/(e)/FST Administration and FST Service share activity commenced during January
of 1993 and October of 1991, respectively.
/(f)/Commencement of operations.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Government Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
-------------------------------------
Net Net Total
asset realized income Net asset
value at Net gain on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. $1.00 $0.0525 $0.0001 $0.0526 $(0.0526) $1.00 5.38%
1996-FST Preferred shares/(c)/... 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26/(b)/
1996-FST Administration shares .. 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12
1996-FST Service shares ......... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86
1995-FST shares ................. 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00
1995-FST Administration shares .. 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74
1995-FST Service shares/(d)/..... 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40/(b)/
For the Period Ended December 31,
- ---------------------------------
1994-FST shares/(e)/............. 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36/(b)/
1994-FST Administration shares
/(e)/.......................... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10/(b)/
For the Period Ended January 31,
- -------------------------------
1993-FST shares/(d)/............. 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14/(b)/
1993-FST Administration shares
/(d)/.......................... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
----------------------------
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net period of average net average net
assets assets (in 000's) assets assets
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. 0.18% 5.25% $858,769 0.24% 5.19%
1996-FST Preferred shares/(c)/... 0.28/(b)/ 5.14/(b)/ 112 0.34/(b)/ 5.08/(b)/
1996-FST Administration shares .. 0.43 5.01 145,108 0.49 4.95
1996-FST Service shares ......... 0.68 4.74 223,554 0.74 4.68
1995-FST shares ................. 0.18 5.81 743,884 0.24 5.75
1995-FST Administration shares .. 0.43 5.54 82,386 0.49 5.48
1995-FST Service shares/(d)/..... 0.68/(b)/ 5.08/(b)/ 14,508 0.74/(b)/ 5.02/(b)/
For the Period Ended December 31,
- -------------------------------
1994-FST shares/(e)/............. 0.15/(b)/ 4.64/(b)/ 258,350 0.25/(b)/ 4.54/(b)/
1994-FST Administration shares
/(e)/.......................... 0.40/(b)/ 4.67/(b)/ 54,253 0.50/(b)/ 4.57/(b)/
For the Period Ended January 31,
- -------------------------------
1993-FST shares/(d)/............. 0.08/(b)/ 3.10/(b)/ 44,697 0.59/(b)/ 2.59/(b)/
1993-FST Administration shares
/(d)/.......................... 0.35/(b)/ 2.85/(b)/ 14,126 0.76/(b)/ 2.44/(b)/
- ---------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/FST share, FST Administration share and FST Service share activity
commenced April 6, 1993, September 1, 1993 and May 16, 1995, respectively.
/(e)/The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Tax-Free Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=====================================
Net Net Total
asset realized income Net asset
value at Net gain on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations shareholders period return /(a)/
===========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31,
===============================
1996-FST shares ...................... $1.00 $0.0335 -- $0.0335 $(0.0335) $1.00 3.39%
1996-FST Preferred shares /(c)/....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30/(b)/
1996-FST Administration shares ....... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13
1996-FST Service shares .............. 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88
1995-FST shares ...................... 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89
1995-FST Administration shares ....... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63
1995-FST Service shares .............. 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38
For the Period Ended December 31,
=================================
1994-FST shares /(d)/................. 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41/(b)/
1994-FST Administration shares /(d)/.. 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19/(b)/
1994-FST Service shares /(d)/......... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
===========================================================================
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31,
===============================
1996-FST shares ...................... 0.18% 3.35% $440,838 0.23% 3.30%
1996-FST Preferred shares /(c)/....... 0.28/(b)/ 3.26/(b)/ 28,731 0.33/(b)/ 3.21/(b)/
1996-FST Administration shares ....... 0.43 3.10 51,661 0.48 3.05
1996-FST Service shares .............. 0.68 2.85 19,855 0.73 2.80
1995-FST shares ...................... 0.14 3.81 448,367 0.24 3.71
1995-FST Administration shares ....... 0.39 3.54 20,939 0.49 3.44
1995-FST Service shares .............. 0.64 3.32 19,860 0.74 3.22
For the Period Ended December 31,
=================================
1994-FST shares /(d)/................. 0.07/(b)/ 3.42/(b)/ 183,570 0.31/(b)/ 3.18/(b)/
1994-FST Administration shares /(d)/.. 0.32/(b)/ 3.25/(b)/ 2,042 0.56/(b)/ 3.01/(b)/
1994-FST Service shares /(d)/......... 0.57/(b)/ 3.32/(b)/ 2,267 0.81/(b)/ 3.08/(b)/
</TABLE>
- ---------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/FST share, FST Administration share and FST Service share activity
commenced July 19, 1994, August 1, 1994 and September 23, 1994,
respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of the Goldman Sachs Money Market
Trust--Financial Square Funds:
We have audited the accompanying statements of assets and liabilities of the
Goldman Sachs Money Market Trust--Financial Square Funds (a Massachusetts
business trust comprising the Prime Obligations, Money Market, Treasury
Obligations, Government and Tax-Free Money Market Funds), including the
statements of investments, as of December 31, 1996, and the related statements
of operations, and the statements of changes in net assets and the financial
highlights for each of the periods presented. These financial statements and the
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting Goldman Sachs Money
Market Trust--Financial Square Funds as of December 31, 1996, the results of
their operations and the changes in their net assets and the financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 10, 1997
- ------------------------------------- ---------------------------------------
28
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29
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30
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- ------------------------------------- -----------------------------------------
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Money Market Trust--Financial
Square Funds Prospectus which contains facts concerning each Fund's objectives
and policies, management, expenses and other information.
- --------------------------------------------------------------------------------
31
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
ILA Unitholder Letter/Annual Report
- --------------------------------------------------------------------------------
Dear Unitholders:
We welcome this opportunity to provide you with a summary of the trends and
key events that affected the economy and the Goldman Sachs Institutional Liquid
Assets (ILA) Portfolios in 1996. It has been another positive year for ILA in
which the Portfolios did well compared with their respective IBC Financial Data,
Inc. averages while adhering to their conservative investment guidelines.
1996 in Review: After Easing Early in the Year, the Fed Remained Neutral Amid
Moderate Growth and Benign Inflation
Last year began on a weak note, with the economy still in the doldrums as
harsh winter storms and a strike at General Motors continued to restrain growth.
Against that backdrop, the Federal Reserve Board (the "Fed") cut the Federal
funds rate by 25 basis points to 5.25% in January 1996, following an easing of
the same magnitude in December 1995. It soon became evident that the economy had
responded and was somewhat healthier than expected, with first-quarter real
Gross Domestic Product (GDP) reported at 2.0% annualized. Growth was more
dramatic during the second quarter, as industrial activity and automobile and
home sales all showed significant improvement, pushing real GDP to 4.7%, its
highest rate in two years. That growth rate caused some to expect the Fed to
change direction and tighten before year-end. However, the economy subsequently
moderated significantly, with third-quarter annualized real GDP retreating to
2.1%, reflecting lackluster consumer spending and a widening U.S. trade deficit.
As 1996 drew to a close, moderate economic growth and contained inflation kept
the Fed in a neutral mode, despite a very robust stock market.
Historical Yield Curve (LIBOR)
[BAR GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
Source: Goldman Sachs Fixed Income Database, reflecting the London Interbank
Offered Rate (LIBOR).
The Federal funds rate began the year at 5.50% and ended at 5.25%. The slope of
the LIBOR yield curve steepened significantly over the course of the year. By
the end of 1996, the spread between one- and 12-month LIBOR moved to plus 28
basis points.
A Nimble Strategy Contributed to Strong Performance
Taxable Sector. Structuring money market portfolios successfully during
1996 as the Fed shifted policy from easing to neutral to a bias to tighten
required strict attention to risk management, as well as to a detailed analysis
of market fundamentals and technicals. Analyzing the implied forward rates and
determining the extent to which the market had priced in too much easing at the
beginning of 1996 or too much tightening by midyear 1996 and then adjusting the
portfolios' weighted average maturities and structures were equally important to
our strategy.
During the second and third quarters of 1996, we extended the ILA
Portfolios' weighted average maturities as the yield curve steepened in
anticipation of a Fed tightening that did not materialize. During the early part
of the fourth quarter, market data suggested that growth slowed in the third
quarter. Consequently, the market was priced to a more neutral Fed policy.
However, year-end financing pressures resulted in investment opportunities
maturing in the first quarter of 1997, and the Portfolios closed the year with
neutral weighted average maturities.
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
ILA Unitholder Letter/Annual Report (continued)
- --------------------------------------------------------------------------------
Tax-Exempt Sector. With tax reform basically a nonissue in 1996, investor
interest in the sector revived, causing total assets in the tax-exempt money
market fund category to increase by 13%. In contrast, supply was little changed
from 1995 levels, making tax-exempts slightly more expensive in 1996. These
supply/demand technicals coupled with our fundamental view that short-term rates
were likely to rise explains our neutral to short-to-neutral weighted average
maturities during the latter part of the year.
Summary for ILA Portfolios Institutional Units* as of December 31, 1996
<TABLE>
<CAPTION>
---------------------------------------------------------
Weighted
Institutional SEC 7-Day SEC 7-Day 30-Day Average
Liquid Assets Current Effective Average Maturity
Portfolios Yield Yield Yield (days)
=========================================================
<S> <C> <C> <C> <C>
Prime
Obligations 5.12% 5.25% 5.10% 40
---------------------------------------------------------
Money Market 5.20% 5.33% 5.18% 43
---------------------------------------------------------
Government 5.19% 5.32% 5.07% 31
---------------------------------------------------------
Treasury
Obligations 5.19% 5.32% 5.06% 34
---------------------------------------------------------
Treasury
Instruments 4.84% 4.95% 4.98% 54
---------------------------------------------------------
Federal 5.15% 5.28% 5.12% 41
---------------------------------------------------------
Tax-Exempt
Diversified 3.58% 3.64% 3.30% 39
---------------------------------------------------------
Tax-Exempt
California 3.47% 3.53% 3.11% 34
---------------------------------------------------------
Tax-Exempt
New York 3.52% 3.58% 3.19% 34
---------------------------------------------------------
</TABLE>
* ILA offers three separate classes of units (Institutional, Administration and
Service), each of which is subject to different fees and expenses that affect
performance and entitle unitholders to different services. The Administration
units and the Service units offer financial institutions the opportunity to
receive a fee for providing administrative support services. The Administration
units pay 0.15% plus 0.10% from the adviser for a total of 0.25%. The Service
units pay 0.40% plus 0.10% from the adviser for a total of 0.50%. More complete
information, including management fees and expenses, is included in the ILA
Portfolios' prospectus or may be obtained by calling the Goldman Sachs Funds at
1-800-621-2550.
Domestic Credit Trends Were Positive, Reflecting a Healthy
Economy and a Strong Market
Credit trends in 1996 were positive on the whole in the U.S., with steady
growth, low inflation, a booming stock market, and technological advances and
globalization transforming many industries. The major story of 1996 was the Dow
Jones Industrial Average climb of 26%, which, following the 33.5% increase in
1995, added up to a 68% growth rate since 1994.
The rising stock market supported record levels of mergers and
acquisitions. Over $650 billion in mergers, acquisitions and spin-offs were
announced in the U.S. in 1996 (up 27% from 1995), with $1.4 trillion announced
globally. This trend was spurred on not only by the stock market, but also by
deregulation in telecommunications, utilities and broadcasting. Unlike the
1980s, mergers this past year were generally equity-financed and aimed at
expanding core businesses, rather than diversifying. Merger and acquisition
activity was also utilized to boost earnings growth, since cost-cutting
opportunities had been largely exhausted during 1995.
Banks, which dominated merger activity in 1995, were busy consolidating
those mergers in 1996. It is likely that large regional domestic banks will
continue making acquisitions in 1997, although this is not expected to affect
their credit quality. At the end of the third quarter 1996, 80% of the banking
sector had a stable rating outlook.
Although consumer confidence was buoyed by low unemployment and mild
inflation, growing household debt levels led to an all-time high in credit card
loan delinquencies and personal bankruptcies. Consequently, financial results in
the consumer products, retail, restaurant and entertainment businesses were
mediocre at best. Almost all other industries, however, had improved credit
quality, with upgrades surpassing downgrades in utilities, energy, healthcare
and financial institutions. Many companies used the strength of the stock market
to substitute debt capital with equity capital, thereby improving their credit
quality.
Credit quality in the tax-exempt market was steady-to-improving during
1996. Market concerns arising from
- --------------------------------------------------------------------------------
2
<PAGE>
the Orange County bankruptcy abated somewhat, although various forms of credit
enhancement remained popular, even among high-quality issuers. Reflecting the
strong national economy, many states and localities experienced positive
financial results, reducing their regular cash flow borrowings.
The Credit Picture Abroad: Europe Improved,
While Asia Was Generally Stable
In Europe, developments were driven by the push towards European Monetary
Union (EMU), while the key factors in Asia were the fragile Japanese recovery
and a sharp downturn in Asian exports. In general, sovereign creditworthiness
improved during 1996. This was particularly the case in Europe, where the
political will to qualify for EMU produced significant improvements in fiscal
policy and debt dynamics, as it sparked more rapid corporate restructuring.
French and Italian banks did require close monitoring this year as their problem
loans continued, but French bank credit quality stabilized after having suffered
broad rating downgrades in 1995. The credit quality of most other European banks
was stable, with a few minor downgrades of German and Swiss banks. In Asia,
creditworthiness was fairly stable. The notable negative exception was the
Japanese financial sector, which remained under pressure from the ongoing
weakness of the real estate markets, sluggish economic growth and ongoing
deregulation. However, Japan's largest banks have strong fundamentals and will
continue to be important and dominant players in the global financial market.
Australian credit quality strengthened through improved macroeconomic balances,
which provided evidence that Australia's recent boom-and-bust cycles may be
over. The weakness of Asian exports did not affect creditworthiness directly;
exports should recover this year, and the scare could prompt salutary policy
adjustments going forward.
In 1996, we continued to apply conservative credit standards to our money
market portfolios. The Goldman Sachs Credit Department, which has analysts based
in London, Tokyo, Frankfurt and New York, as well as extensive technological
assets and credit expertise, will continue to vigilantly monitor global
developments in 1997.
Outlook and Strategies for 1997
Fourth-quarter 1996 GDP was reported at 4.7%, reflecting a stronger
economic picture from several sources: a sharp narrowing of the U.S. trade
deficit, as well as increases in consumer spending and industrial production.
Goldman Sachs' economists expect economic growth to continue at just under 2.0%
for the first quarter of 1997 and at approximately 3.0% for the full year. As a
result, Goldman Sachs currently believes the Fed is likely to raise short-term
interest rates by midyear.
Consequently, ILA Portfolios will continue to be managed with
short-to-neutral average life targets and short, ddered structures to prepare
for higher rates ahead.
Extended Trading Hours Improve Service Further
On November 4, 1996, we extended the trading hours for the Institutional
Liquid Assets Federal and Treasury Instruments Portfolios to 3:00 p.m. EST. Many
clients have already taken advantage of this additional flexibility.
In closing, we thank you for your support and for making 1996 a successful
year for the ILA Portfolios. We are pleased that many of you have joined our
conference calls following each Federal Open Market Committee meeting throughout
the year. Our goal is to continue to provide you with competitive performance,
as well as a range of value-added services that reflect the breadth and depth of
Goldman Sachs' outstanding resources.
Sincerely,
/s/ Kaysie P. Uniacke
Kaysie P. Uniacke
Portfolio Manager
February 7, 1997
3
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Prime Obligations Portfolio
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Commercial Paper and Corporate Obligations--60.5%
Bank Holding Companies
BankAmerica Corp.
$50,000,000 5.27% 03/21/97 $ 49,421,764
Business Credit Institutions
General Electric Capital Corp.
20,000,000 5.30 03/26/97 19,752,667
30,000,000 5.44 04/03/97 29,582,933
JC Penney Funding Corp.
44,300,000 5.31 01/31/97 44,103,973
Chemicals
Bayer Corp.
25,000,000 5.33 03/13/97 24,737,201
Commercial Banks
CP Trust Certificates Series 1996
35,000,000 5.94/(a)/ 03/28/97 35,000,000
Life Insurance
Commonwealth Life Insurance Co.
55,000,000 6.11/(b)/ 05/08/97 55,000,000
Pacific Mutual Life Insurance Co.
25,000,000 5.52/(b)/ 02/28/97 25,000,000
Prudential Funding Corp.
40,000,000 5.42 01/29/97 39,831,378
Motor Vehicles and Equipment
Ford Motor Credit Corp.
20,000,000 5.50 01/28/97 19,917,500
Hertz Corporation
25,000,000 5.32 02/04/97 24,874,389
Personal Credit Institutions
Associates Corp.
50,000,000 5.32 01/29/97 49,793,111
Household Finance Corp.
50,000,000 5.32 03/12/97 49,482,778
Transamerica Finance Corp.
20,000,000 5.43 01/29/97 19,915,533
Receivable/Asset Financings
Beta Finance Inc.
7,000,000 6.11 06/17/97 7,000,000
Delaware Funding Corp.
30,000,000 5.29 02/20/97 29,779,583
Enterprise Funding Corp.
10,062,000 5.33 01/21/97 10,032,205
9,103,000 5.33 01/23/97 9,073,350
International Lease Finance Corp.
9,000,000 5.29% 03/24/97 $ 8,891,555
30,000,000 5.32 04/04/97 29,587,700
New Center Asset Trust
10,000,000 5.52 01/28/97 9,958,600
10,000,000 5.37 04/04/97 9,861,275
Security and Commodity Brokers, Dealers and Services
Bear Stearns Companies, Inc.
40,000,000 5.30 02/13/97 39,746,778
10,000,000 5.34 03/12/97 9,896,167
C.S. First Boston, Inc.
15,000,000 5.33 01/22/97 14,953,363
Merrill Lynch & Co., Inc.
10,000,000 5.45 02/19/97 9,925,819
40,000,000 5.33 02/26/97 39,668,356
Morgan Stanley Group, Inc.
10,000,000 5.59 01/28/97 9,958,075
15,000,000 5.32 02/06/97 14,920,200
25,000,000 5.79/(a)/ 06/27/97 25,000,000
- -----------------------------------------------------------
Total Commercial Paper and Corporate
Obligations $764,666,253
- -----------------------------------------------------------
Bank Notes--10.7%
Colorado National Bank
$25,000,000 5.59%/(b)/ 01/15/97 $ 24,999,810
FCC National Bank
15,000,000 5.70 05/22/97 14,982,722
20,000,000 6.00 06/02/97 20,000,808
Huntington National Bank
25,000,000 6.05 06/13/97 25,014,637
PNC Bank, N.A.
40,000,000 5.58/(b)/ 04/01/97 39,992,313
SMM Trust 1996
10,000,000 5.69/(b)/ 06/20/97 10,000,000
- -----------------------------------------------------------
Total Bank Notes $134,990,290
- -----------------------------------------------------------
U.S. Government Agency Obligations--1.6%
Federal National Mortgage Association
$20,400,000 5.36% 03/12/97 $ 20,187,386
- -----------------------------------------------------------
Total U.S. Government Agency Obligations $ 20,187,386
- -----------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Prime Obligations Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Certificates of Deposit--9.5%
Chase Manhattan Corp.
$ 10,000,000 5.75% 02/03/97 $ 10,000,000
40,000,000 5.42 03/12/97 40,000,000
First Alabama Bank
20,000,000 5.55 02/28/97 19,999,973
Mellon Bank, N.A.
40,000,000 5.35 02/19/97 40,000,000
Union Bank of California
10,000,000 5.58 02/28/97 10,000,000
- -----------------------------------------------------------
Total Certificates of Deposit $ 119,999,973
- -----------------------------------------------------------
Repurchase Agreements--17.9%
C.S. First Boston Corp., dated 12/31/96, repurchase
price $50,465,000 (FNMA: $51,588,373, 6.12%-6.23%,
02/01/32-10/01/32)
$ 50,000,000 5.40% 03/03/97 $ 50,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase
price $100,036,111 (U.S. Treasury Bond: $53,861,960,
11.25%, 02/15/15; FHLB Stripped Security:
$48,746,508, 06/23/97)
100,000,000 6.50 01/02/97 100,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase
price $25,213,750 (FNMA: $9,152,917, 7.50%,
04/01/26; FHLMC: $17,073,692, 7.50%, 11/01/26)
25,000,000 5.40 02/26/97 25,000,000
Smith Barney, Inc., dated 12/31/96, repurchase price
$30,257,450 (FHLMC: $31,328,053, 7.00%,
06/01/26-11/01/26)
30,000,000 5.42 02/26/97 30,000,000
Joint Repurchase Agreement Account
21,400,000 6.58 01/02/97 21,400,000
- -----------------------------------------------------------
Total Repurchase Agreements $ 226,400,000
- -----------------------------------------------------------
Total Investments $1,266,243,902/(c)/
===========================================================
/(a)/Variable rate security-base index is one of the following:
U.S. Treasury Bill
One or three month LIBOR
One month commercial paper
Federal Funds
Prime lending rate
/(b)/Variable rate master note-base index is LIBOR.
/(c)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Money Market Portfolio
December 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
<S> <C> <C> <C>
Commercial Paper and Corporate Obligations--48.5%
Business Credit Institutions
General Electric Capital Corp.
$15,000,000 5.44% 04/03/97 $ 14,791,467
Commercial Banks
CP Trust Certificates Series 1996
20,000,000 5.68/(a)/ 03/28/97 20,000,000
Computer Software and Services
Siemens Capital Corp.
25,000,000 5.32 02/13/97 24,841,139
Foreign Banks
Banca Crt Financial Corp.
10,000,000 5.35 01/22/97 9,968,792
5,000,000 5.35 01/31/97 4,977,708
17,430,000 5.45 03/03/97 17,269,039
5,400,000 5.42 04/03/97 5,325,204
Generale Bank
15,000,000 5.35 04/10/97 14,779,313
San Paolo U.S. Finance Co.
25,000,000 5.36 01/31/97 24,888,333
15,000,000 5.33 02/13/97 14,904,504
Unifunding, Inc.
40,000,000 5.45 01/29/97 39,830,444
Home Builders
International Lease Finance Corp.
40,000,000 5.43 03/07/97 39,607,833
Life Insurance
Commonwealth Life Insurance Co.
25,000,000 5.64/(b)/ 05/08/97 25,000,000
Prudential Funding Corp.
10,000,000 5.42 01/29/97 9,957,844
Motor Vehicles and Equipment
Daimler Benz Corp., N.A.
25,000,000 5.35 03/25/97 24,691,631
Ford Motor Credit Co.
40,000,000 5.32 02/04/97 39,799,022
Security and Commodity Brokers, Dealers and Services
Bear Stearns Companies, Inc.
35,000,000 5.30 02/13/97 34,778,431
Merrill Lynch & Co., Inc.
40,000,000 5.35 02/11/97 39,756,278
Morgan Stanley Group, Inc.
20,000,000 5.32 02/06/97 19,893,600
20,000,000 5.53/(a)/ 06/27/97 20,000,000
Nomura Holdings
35,000,000 5.39 01/29/97 34,853,272
- -----------------------------------------------------------
Total Commercial Paper and Corporate
Obligations $479,913,854
- -----------------------------------------------------------
Bank Notes--15.1%
Colorado National Bank
$15,000,000 5.59%/(b)/ 01/15/97 $ 14,999,886
Dakota Certificates of Standard Credit Card Master Trust
20,000,000 5.33/(b)/ 02/07/97 19,890,439
FCC National Bank, Wilmington
10,000,000 5.70 05/22/97 9,988,481
First Bank FSB
5,000,000 5.61/(b)/ 04/11/97 4,999,734
First National Bank of Maryland
5,000,000 5.60/(b)/ 09/30/97 4,998,547
Huntington National Bank
5,000,000 6.05 06/13/97 4,998,229
PNC Bank, N.A.
10,000,000 5.58/(b)/ 04/01/97 9,998,078
20,000,000 5.40/(b)/ 10/01/97 19,988,244
Society National Bank of Cleveland
25,000,000 5.58/(b)/ 05/14/97 24,990,309
SMM Trust 1996
10,000,000 5.69/(b)/ 06/20/97 10,000,000
Southtrust Bank of Alabama, N.A.
25,000,000 5.54/(b)/ 05/15/97 24,995,313
- -----------------------------------------------------------
Total Bank Notes $149,847,260
- -----------------------------------------------------------
Certificates of Deposit--0.5%
Chase Manhattan Corp.
$ 5,000,000 5.75% 02/03/97 $ 5,000,000
- -----------------------------------------------------------
Total Certificates of Deposit $ 5,000,000
- -----------------------------------------------------------
Certificates of Deposit - Foreign Eurodollar--7.6%
Norinchukin Bank, London
$40,000,000 5.49% 03/18/97 $ 40,000,830
Sanwa Bank Ltd., London
35,000,000 5.46 03/21/97 35,000,377
- -----------------------------------------------------------
Total Certificates of Deposit - Foreign
Eurodollar $ 75,001,207
- -----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Statement of Investments
- ----------------------------------------------------------
ILA Money Market Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Certificates of Deposit - Yankeedollar--9.1%
Industrial Bank of Japan, New York
$35,000,000 5.46% 03/19/97 $ 35,000,368
Landesbank Hessen Thuer Gir, New York
30,000,000 6.03 06/13/97 30,036,531
Sumitomo Bank, Los Angeles
25,000,000 5.52 02/28/97 24,998,171
- -----------------------------------------------------------
Total Certificates of Deposit - Yankeedollar $ 90,035,070
- -----------------------------------------------------------
Taxable Municipal Notes--2.9%
Florida Housing Finance Authority
$28,800,000 5.92%/(b)/ 01/01/34 $ 28,800,000
- -----------------------------------------------------------
Total Taxable Municipal Notes $ 28,800,000
- -----------------------------------------------------------
Time Deposit--3.6%
Bank of Tokyo, Mitsubishi Bank Ltd.
$35,000,000 5.50% 05/16/97 $ 35,000,000
- -----------------------------------------------------------
Total Time Deposit $ 35,000,000
- -----------------------------------------------------------
Repurchase Agreements--12.9%
JP Morgan Securities, Inc., dated 12/31/96, repurchase
price $50,018,056 (FHLMC: $52,044,149, 7.26%,
09/17/01)
$50,000,000 6.50% 01/02/97 $ 50,000,000
Joint Repurchase Agreement Account
77,200,000 6.58 01/02/97 77,200,000
- -----------------------------------------------------------
Total Repurchase Agreements $127,200,000
- -----------------------------------------------------------
Total Investments $990,797,391/(c)/
===========================================================
/(a)/Variable rate security-base index is one of the following:
U.S. Treasury Bill
One or three month LIBOR
One month commercial paper
Federal Funds
Prime lending rate
/(b)/Variable rate master note-base index is LIBOR.
/(c)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- -----------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Government Portfolio
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
U.S. Government Agency Obligations--31.2%
Federal Home Loan Bank
$ 25,000,000 5.35% 01/30/97 $ 24,892,257
50,000,000 5.40/(a)/ 04/04/97 49,988,154
25,000,000 5.45 11/12/97 24,977,221
10,000,000 5.42 12/02/97 9,986,619
25,000,000 5.50/(a)/ 12/26/97 24,979,592
Federal National Mortgage Association
30,000,000 6.50 01/02/97 29,994,583
15,000,000 4.72/(a)/ 01/27/97 14,999,007
20,000,000 5.41/(a)/ 09/29/97 19,992,616
7,500,000 5.53 10/29/97 7,497,075
50,000,000 5.40/(a)/ 12/03/97 49,968,600
- -----------------------------------------------------------
Total U.S. Government Agency Obligations $257,275,724
- -----------------------------------------------------------
U.S. Treasury Obligations--3.0%
United States Treasury Notes
$ 20,000,000 5.63% 06/30/97 $ 19,965,941
5,000,000 6.00 09/02/97 4,999,214
- -----------------------------------------------------------
Total U.S. Treasury Obligations $ 24,965,155
- -----------------------------------------------------------
Repurchase Agreements--66.1%
Bear Stearns Companies, Inc. dated 12/31/96, repurchase
price $30,011,333 (FNMA: $30,894,721, 8.50%, 09/01/25)
$ 30,000,000 6.80% 01/02/97 $30,000,000
C.S. First Boston Corp., dated 12/11/96, repurchase
price $30,403,125 (FHLM: $31,559,521, 7.00%, 11/01/26)
30,000,000 5.38 03/11/97 30,000,000
Daiwa Securities, dated 12/31/96, repurchase price
$30,011,500 (U.S. Treasury Bill: $30,600,013, 11/13/97)
30,000,000 6.90 01/02/97 30,000,000
Goldman, Sachs & Co., dated 12/11/96, repurchase price
$30,403,125 (FNMA: $30,964,228, 6.12%, 10/01/32)
30,000,000 5.38 03/11/97 30,000,000
JP Morgan Securities, Inc., dated 12/12/96, repurchase
price $30,403,125 (FNMA: $31,531,603, 8.00%, 06/01/26)
30,000,000 5.38 03/12/97 30,000,000
Lehman Government Securities, Inc., dated 12/31/96,
repurchase price $30,011,833 (U.S. Treasury Stripped
Security: $22,193,561, 11/15/99; U.S. Treasury
Notes: $8,408,442, 7.75%-8.88%, 2/15/00-2/15/01)
30,000,000 7.10 01/02/97 30,000,000
Merrill Lynch Government Securities, Inc., dated 12/31/96,
repurchase price $30,011,833 (FNMA: $30,385,501, 5.28%,
06/01/24)
30,000,000 7.10 01/02/97 30,000,000
Repurchase Agreements (continued)
Nomura Securities International, Inc., dated 12/31/96,
repurchase price $30,012,500 (FHLM: $30,924,339,
6.50%-8.00%, 01/01/00-09/01/11)
$ 30,000,000 7.50% 01/02/97 $ 30,000,000
Joint Repurchase Agreement Account
305,000,000 6.58 01/02/97 305,000,000
- -----------------------------------------------------------
Total Repurchase Agreements $545,000,000
- -----------------------------------------------------------
Total Investments $827,240,870/(b)/
===========================================================
/(a)/Variable rate security-base index is one of the following:
Federal Funds
Prime lending rate
One month LIBOR
/(b)/The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of the
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Treasury Obligations Portfolio
December 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
<S> <C> <C> <C>
U.S. Treasury Obligations--9.6%
United States Treasury Notes
$40,000,000 5.63% 06/30/97 $39,932,792
27,500,000 5.38 12/01/97 27,459,792
10,000,000 5.25 12/31/97 9,975,384
- -----------------------------------------------------------
Total U.S. Treasury Obligations $77,367,968
- -----------------------------------------------------------
Repurchase Agreements--90.8%
Bear Stearns Companies Inc., dated 12/31/96, repurchase
price $35,013,125 (U.S. Treasury Note: $35,659,606,
8.75%, 8/15/00)
$35,000,000 6.75% 01/02/97 $35,000,000
C.S. First Boston Corp., dated 12/13/96, repurchase price
$30,399,750 (U.S. Treasury Note: $30,748,620, 7.50%,
11/15/01)
30,000,000 5.33 03/13/97 30,000,000
CIBC Wood Gundy Securities, dated 12/31/96, repurchase
price $35,013,028 (U.S. Treasury Bond: $35,702,267,
8.50%, 02/15/20)
35,000,000 6.70 01/02/97 35,000,000
Daiwa Securities, dated 12/31/96, repurchase price
$35,013,417 (U.S. Treasury Bill: $35,700,492, 11/13/97)
35,000,000 6.90 01/02/97 35,000,000
Goldman, Sachs & Co., dated 12/31/96, repurchase price
$35,012,833 (U.S. Treasury Note: $35,700,497, 7.25%,
02/15/98)
35,000,000 6.60 01/02/97 35,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase
price $35,012,833 (U.S. Treasury Note: $35,838,260,
7.38%, 11/15/97)
35,000,000 6.60 01/02/97 35,000,000
Lehman Government Securities, Inc., dated 12/31/96,
repurchase price $35,013,806 (U.S. Treasury Stripped
Securities: $35,703,063, 02/15/00-11/15/00)
35,000,000 7.10 01/02/97 35,000,000
Merrill Lynch Government Securities, Inc., dated
12/31/96, repurchase price $35,012,542 (U.S. Treasury
Stripped Securities: $35,702,128, 02/15/02-02/15/26)
35,000,000 6.45 01/02/97 35,000,000
Nomura Securities International, Inc., dated 12/12/96,
repurchase price $30,400,500 (U.S. Treasury Notes:
$30,600,339, 5.13%-8.50%, 04/15/97-08/15/01)
30,000,000 5.34 03/12/97 30,000,000
Sanwa Securities, dated 12/31/96, repurchase price
$35,013,125 (U.S. Treasury Note: $36,039,356, 8.50%,
2/15/00)
35,000,000 6.75 01/02/97 35,000,000
Smith Barney Inc., dated 12/11/96, repurchase price
$30,400,500 (U.S. Treasury Notes: $28,942,094,
5.38%-6.88%, 05/15/97-07/31/99; U.S. Treasury Stripped
Security: $1,658,209, 02/15/00)
30,000,000 5.34 03/11/97 30,000,000
UBS Securities Inc., dated 12/31/96, repurchase price
$35,013,368 (U.S. Treasury Note: $35,676,249, 6.00%,
09/30/98)
35,000,000 6.88 01/02/97 35,000,000
Joint Repurchase Agreement Account
327,900,000 6.58 01/02/97 327,900,000
- -----------------------------------------------------------
Total Repurchase Agreements $732,900,000
- -----------------------------------------------------------
Total Investments $810,267,968/(a)/
===========================================================
</TABLE>
/(a)/The amount stated also represents aggregate cost for
federal income tax purposes.
Interest rates represent either the stated coupon rate,
annualized yield on date of purchase for discounted notes,
or, for floating rate securities, the current reset rate,
which is based upon current interest rate indices.
The percentages shown for each investment category reflect
the value of investments in that category as a percentage
of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Statement of Investments
- ------------------------------------------------------------
ILA Treasury Instruments Portfolio
December 31, 1996
- ------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
============================================================
U.S. Treasury Obligations--99.3%
United States Treasury Bills
$25,000,000 4.72% 01/30/97 $ 24,904,944
5,500,000 4.95 01/30/97 5,478,069
75,000,000 4.80 02/06/97 74,640,000
48,600,000 4.83 02/06/97 48,365,262
14,500,000 4.86 02/06/97 14,429,530
32,100,000 5.41 02/06/97 31,942,389
90,000,000 4.95 02/06/97 89,554,500
75,000,000 4.82 02/13/97 74,568,208
150,000,000 5.03 02/13/97 149,098,792
10,500,000 4.86 02/27/97 10,419,203
21,500,000 4.90 02/27/97 21,333,196
28,400,000 4.94 02/27/97 28,177,865
United States Treasury Notes
30,000,000 6.25 01/31/97 30,025,345
50,000,000 7.50 01/31/97 50,097,656
50,000,000 4.75 02/18/97 49,961,310
312,000,000 6.88 02/28/97 312,866,648
205,000,000 6.63 03/31/97 205,703,323
- ------------------------------------------------------------
Total U.S. Treasury Obligations $1,221,566,240
- ------------------------------------------------------------
Total Investments $1,221,566,240/(a)/
============================================================
/(a)/The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of the
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Federal Portfolio
December 31, 1996
- ------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
============================================================
U.S. Government Agency Obligations--100.3%
Federal Farm Credit Bank
$ 20,515,000 5.36% 01/02/97 $ 20,511,946
37,635,000 5.58 01/06/97 37,605,833
2,400,000 5.58 01/07/97 2,397,767
27,300,000 5.26-5.27 01/13/97 27,252,072
36,345,000 5.35 01/15/97 36,269,382
56,000,000 5.37 01/21/97 55,832,933
42,000,000 5.37 01/23/97 41,862,170
9,750,000 5.50 01/27/97 9,711,271
11,490,000 5.48 01/31/97 11,437,529
212,210,000 5.23-5.41/(a)/ 02/03/97 212,075,061
44,895,000 5.21 02/04/97 44,674,092
24,000,000 5.33 02/06/97 23,872,080
20,545,000 5.21-5.33 02/10/97 20,424,201
10,000,000 5.20 02/14/97 9,936,444
79,055,000 5.21-5.39 02/18/97 78,494,540
14,830,000 5.22 02/21/97 14,720,332
50,635,000 5.21-5.33 02/26/97 50,216,604
17,000,000 5.21 02/27/97 16,859,764
16,000,000 5.21 02/28/97 15,865,698
51,610,000 5.22-5.32 03/03/97 51,423,313
8,000,000 5.32 03/10/97 7,919,609
7,180,000 5.21 03/11/97 7,108,302
50,000,000 5.48/(b)/ 03/11/97 49,992,224
6,200,000 5.21 03/12/97 6,137,191
20,000,000 5.36 03/25/97 19,752,844
19,000,000 5.32-5.36 03/26/97 18,762,747
9,000,000 5.32 03/27/97 8,886,950
11,000,000 5.32 03/31/97 10,855,325
17,000,000 5.30 04/01/97 16,774,750
50,000,000 5.52/(b)/ 05/21/97 49,981,445
50,000,000 5.84 06/18/97 49,958,175
10,000,000 5.37/(b)/ 06/26/97 9,996,868
50,000,000 5.49/(b)/ 08/26/97 49,972,764
50,000,000 5.36/(b)/ 10/02/97 49,959,775
Federal Home Loan Bank
5,100,000 5.22 01/02/97 5,099,261
50,000,000 5.38/(b)/ 01/03/97 49,999,747
17,895,000 5.24 01/16/97 17,855,929
34,900,000 5.23 01/23/97 34,788,562
25,000,000 5.28 01/28/97 24,901,000
133,300,000 5.22-5.35 01/30/97 132,733,719
25,130,000 5.28 01/31/97 25,019,533
181,845,000 5.21-5.32 02/13/97 180,701,332
28,750,000 5.21-5.26 02/14/97 28,566,649
145,815,000 5.20% 02/20/97 144,761,891
34,300,000 5.31 02/21/97 34,041,978
125,320,000 5.20-5.21 02/27/97 124,287,275
27,680,000 5.21 03/06/97 27,423,622
101,750,000 5.23 03/13/97 100,700,477
35,000,000 5.35 03/27/97 34,557,882
50,000,000 5.51/(b)/ 03/27/97 49,989,790
80,000,000 5.35 03/31/97 78,941,889
100,000,000 5.22/(b)/ 04/01/97 99,981,167
25,000,000 5.84 06/27/97 24,976,809
50,000,000 5.51/(b)/ 08/28/97 49,977,691
65,000,000 5.50/(b)/ 09/26/97 64,962,440
50,000,000 5.50/(b)/ 12/26/97 49,959,182
Student Loan Marketing Association
75,000,000 5.41 10/02/97 74,972,733
74,000,000 5.46 11/10/97 73,963,185
Tennessee Valley Authority
40,000,000 5.21 01/24/97 39,866,856
47,975,000 5.21 02/05/97 47,731,993
47,300,000 5.21 02/06/97 47,053,567
87,385,000 5.20-5.22 02/19/97 86,765,491
75,000,000 5.17 02/20/97 74,461,458
75,000,000 5.17 02/21/97 74,450,688
60,840,000 5.26-5.31 02/25/97 60,347,412
20,000,000 5.23 03/21/97 19,770,461
106,885,000 5.28 03/26/97 105,568,177
75,000,000 5.25 04/09/97 73,928,125
- ------------------------------------------------------------
Total Investments $3,300,609,972/(c)/
============================================================
/(a)/Variable rate security-base index is one of the following:
U.S. Treasury Bill
One or three month LIBOR
Federal Funds
Prime lending rate
/(b)/Variable rate master note-base index is LIBOR.
/(c)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Statement of Investments
- -------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio
December 31, 1996
- --------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
==============================================================
Alabama--6.4%
Columbia IDB PCRB Series 1996 A for Alabama Power Co.
(VMIG1)
$21,000,000 5.00% 01/01/97 $21,000,000
Columbia IDB PCRB VRDN for Alabama Power Co. Series
1995 B
(A-1/VMIG1)/(c)/
23,500,000 5.00 01/01/97 23,500,000
Columbia IDB PCRB VRDN for Alabama Power Co. Series
1995 C
(A-1/VMIG1)
4,600,000 4.65 01/01/97 4,600,000
Columbia IDB PCRB VRDN for Alabama Power Co. Series
1995 E
(A-1/VMIG1)
4,900,000 5.10 01/01/97 4,900,000
Homewood RB for Samford University (Bank of Nova Scotia
LOC) (A-1+/VMIG1)
16,000,000 5.00 01/01/97 16,000,000
Jefferson County Sewer Revenue Warrants Series 1995 A
(Bayerische Landesbank Girozentrale LOC)(A-1+/P-1)
19,300,000 4.25 01/07/97 19,300,000
Mobile County IDA PCRB for M&T Chemicals (Bankers Trust
LOC) (A1)
3,000,000 4.13 01/01/97 3,000,000
Mobile IDA PCRB for Alabama Power Co. Series
1993A(A-1/VMIG1)
8,600,000 4.15 01/01/97 8,600,000
Mobile IDA PCRB for Alabama Power Co. Series
1994(A-1/VMIG1)
2,100,000 5.00 01/01/97 2,100,000
- -----------------------------------------------------------
$103,000,000
- -----------------------------------------------------------
Alaska--0.2%
Valdez Marine Terminal RB for Arco, Inc. Series 1994
C(A-1/P-1)
$ 2,600,000 3.60% 04/10/97 $ 2,600,000
- -----------------------------------------------------------
Arkansas--1.2%
Crossett PCRB for Georgia Pacific Corp. Series 1991
VRDN
(Suntrust Bank LOC)(A-1+/AA3)
$ 9,500,000 4.15% 01/07/97 $ 9,500,000
Union County PCRB Series 1988 for Great :Lakes Chemical
(A-1)
9,000,000 4.21/(b)/ 01/07/97 9,000,000
- -----------------------------------------------------------
$18,500,000
- -----------------------------------------------------------
California--5.8%
California RANS VRDN Series 1996-97 B(SP-1+/VMIG1)
$ 6,000,000 3.47% 01/31/97 $ 6,000,000
California RANS VRDN Series 1996-97 C1(SP-1+/VMIG1)
12,000,000 4.00 01/07/97 12,000,000
California Statewide Communities Development Authority
Refunding RB Series 1995(A-1+)/(c)/
$ 9,300,000 3.90% 01/07/97 $ 9,300,000
California Statewide Communities Development Authority
Refunding RB Series 1995A-2(A-1+)
2,500,000 3.90 01/07/97 2,500,000
Los Angeles County MF Hsg. RB(A-1+)
3,500,000 2.80 01/07/97 3,500,000
Los Angeles County TRANS (Credit Suisse/Morgan Guaranty
Trust Co./Westdeutsche Landesbank Girozentrale/Bank
of America/Union Bank of Switzerland
LOC)(SP-1/VMIG1)
12,450,000 4.50 06/30/97 12,492,536
Newport Beach VRDN RB Series 1996 A(A-1+)
600,000 5.15 01/01/97 600,000
State of California RANS Series 1996-97(SP-1+/VMIG1)
45,800,000 4.05 01/07/97 45,800,000
- -----------------------------------------------------------
$92,192,536
- -----------------------------------------------------------
Colorado--0.6%
State of Colorado General Fund TRANS Series 1996
A(SP-1+)
$10,000,000 4.50% 06/27/97 $10,033,630
- -----------------------------------------------------------
Connecticut--1.4%
State of Connecticut Development Authority
PCRB(Deutsche Bank LOC)(A-1+/VMIG1)
$17,400,000 4.15%/(b)/ 01/07/97 $17,400,000
State of Connecticut State 2nd Lien VRDN (Commerzbank
Bank LOC)(A-1+/VMIG1)
4,800,000 4.00 01/07/97 4,800,000
- -----------------------------------------------------------
$22,200,000
- -----------------------------------------------------------
District of Columbia--1.1%
District of Columbia VRDN ACES for Georgetown
University Series 1988 B, C and E (Bayerishe
Landesbank Girozentrale LOC)
(A-1+/VMIG1)
$10,900,000 4.10% 01/07/97 $10,900,000
HFA MF Hsg. for Mclean Gardens South Apartments VRDN
(Sumitomo Bank LOC)(VMIG1)
7,000,000 4.30 01/07/97 7,000,000
- -----------------------------------------------------------
$17,900,000
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Florida--2.8%
Dade County Water & Sewer VRDN Series 1994(A-1+/VMIG1)
$7,475,000 4.00%/(b)/ 01/07/97 $ 7,475,000
Florida Local Government Pooled CP Notes (First Union
National Bank of Florida LOC)(A-1+/P-1)
29,162,000 3.70 01/24/97 29,162,000
7,225,800 3.60 02/18/97 7,225,800
1,800,000 3.50 03/14/97 1,800,000
- -----------------------------------------------------------
$45,662,800
- -----------------------------------------------------------
Georgia--12.0%
Albany Dougherty PCRB for Philip Morris Co. (A-1/P-1)
$17,000,000 4.15% 01/07/97 $17,000,000
Albany Dougherty PCRB Series 1991 for Georgia Power
Co.(A-1+)
2,120,000 4.15 01/07/97 2,120,000
Burke County Development Authority RB(A-1+/VMIG1)
6,000,000 4.65 01/01/97 6,000,000
29,055,000 5.00 01/01/97 29,055,000
3,000,000 4.15 01/07/97 3,000,000
Burke County PCRB for Georgia Power Co.(A-1+/VMIG1)/(c)/
2,900,000 5.00 01/07/97 2,900,000
29,850,000 4.00/(b)/ 01/07/97 29,850,000
3,425,000 4.15 01/07/97 3,425,000
6,000,000 4.15 01/07/97 6,000,000
Burke County PCRB for Georgia Power Co. Series
1994(VMIG1)
3,400,000 5.00 01/07/97 3,400,000
Cobb County Institute of Nuclear Operations Inc. VRDN
for Georgia Power Co. (Suntrust Bank LOC)(Aa3)
4,295,000 4.15 01/07/97 4,295,000
Cobb County Power Operations Inc. VRDN (Trust Company
Bank LOC)(AA-)
2,330,000 4.15 01/07/97 2,330,000
Columbus Hospital Authority RB for St. Francis
Hospital(VMIG1)
7,750,000 4.15/(b)/ 01/01/97 7,750,000
DeKalb County IDA VRDN for Siemens Energy and
Automation, Inc.(P-1)
3,750,000 4.05 01/07/97 3,750,000
Dekalb Private Hospital Authority VRDN for Egleston
Children's Hospital Series 1994 A (Suntrust Bank
LOC)(VMIG1)
1,800,000 4.05 01/07/97 1,800,000
Floyd County PCRB for Georgia Power Co. Series
1996(A-1/VMIG1)
5,080,000 5.00 01/07/97 5,080,000
Fulco Hospital Authority Revenue Anticipation
Certificates Series 1992 (Suntrust Bank LOC)(A-1+)
4,815,000 4.15% 01/07/97 4,815,000
Georgia Municipal Gas Authority RB(A-1/VMIG1)
22,200,000 4.00/(b)/ 01/07/97 22,200,000
Heard County PCRB for Georgia Power Co. Series
1996(A-1/VMIG1)
1,800,000 5.00 01/01/97 1,800,000
Henry County IDA PCRB for Georgia Pacific Corp.
(Suntrust Bank LOC)(Aa3)
4,000,000 4.15 01/07/97 4,000,000
Municipal Electric Authority of Georgia Subordinate
General Resolution Series 1985 B and C (Credit
Suisse/Morgan Guaranty/Bayerische Landesbank
Girozentrale LOC)(A-1+/P-1)
12,650,000 3.55 03/06/97 12,650,000
8,145,000 3.55 03/11/97 8,145,000
Municipal Electric Authority of Georgia Subordinate
General Resolution Series 1994 C (Credit
Suisse/Morgan Guaranty/
Bayerische Landesbank Girozentrale LOC)(A-1+/VMIG1)
7,000,000 3.50 03/13/97 7,000,000
Savannah Economic Development Authority PCRB VRDN for
Savannah Electric & Power Co. (A-1/VMIG1)
4,085,000 4.15 01/07/97 4,085,000
- -----------------------------------------------------------
$192,450,000
- -----------------------------------------------------------
Hawaii--0.1%
Hawaii Housing Finance and Development Authority VRDN
(FHLB LOC)(A-1+)
$ 2,200,000 2.80% 01/07/97 $ 2,200,000
- -----------------------------------------------------------
Idaho--0.6%
Idaho Health Facilities for Holy Cross Health
Systems(A-1/VMIG1)
$10,000,000 4.10% 01/07/97 $10,000,000
- -----------------------------------------------------------
Illinois--3.2%
Belleville IDA for Weyerhaeuser Company Series
1993(A-1)
$ 1,800,000 4.21% 01/07/97 $ 1,800,000
Illinois Health Facilities Authority VRDN for Central
Dupage Hospital (Rabobank Nederland LOC)(VMIG1)
5,000,000 5.25 01/01/97 5,000,000
Illinois Health Facilities Authority VRDN for
Resurrection Healthcare(VMIG1)
15,000,000 5.00 01/01/97 15,000,000
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Statement of Investments
- ------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
============================================================
Illinois (continued)
Illinois Health Facilities Authority VRDN Series 1985 D Revolving
Fund Pooled Finance Program (First National Bank of Chicago
LOC)(A-1/VMIG1)
$16,600,000 4.15% 01/07/97 $ 16,600,000
Illinois Health Facility Authority VRDN for Elmhurst Memorial
Hospital(VMIG1)
100,000 5.30 01/01/97 100,000
Sauget PCRB VRDN Series 1992(P-1)
3,300,000 4.20 01/07/97 3,300,000
Sauget PCRB VRDN Series 1993(P-1)
9,335,000 4.20 01/07/97 9,335,000
- -----------------------------------------------------------
$ 51,135,000
- -----------------------------------------------------------
Indiana--5.1%
Fort Wayne Hospital Authority VRDN Series 1985 C and D (Bank of
America LOC)(VMIG1)
$ 1,180,000 4.15% 01/07/97 $ 1,180,000
Fort Wayne Parkview Memorial Hospital VRDN Series 1985
B, C & D (Fuji Bank LOC)(VMIG1)/(c)/
16,855,000 4.15 01/07/97 16,855,000
Gary CP Notes for U.S. Steel Corp. (Bank of New York LOC)
(A-1+/P-1)
20,000,000 3.55 03/11/97 20,000,000
Indiana Hospital Equipment Financing Authority VRDN
Series 1985 A (MBIA)(A-1/VMIG1)
29,490,000 4.20 01/07/97 29,490,000
Jasper County PCRB for Nipsco Series 1994 A(A-1+/VMIG1)
5,200,000 5.10 01/01/97 5,200,000
Schererville Economic Development VRDN Series 1983 for Avery
International Corp. Project (Bankers Trust LOC)(Aa2)
4,000,000 4.13 01/07/97 4,000,000
Warrick County PCRB for Aluminum Company of America Series
1992(A-1)
5,000,000 4.15 01/07/97 5,000,000
- -----------------------------------------------------------
$ 81,725,000
- -----------------------------------------------------------
Iowa--1.4%
Muscatine County VRDN for Monsanto Corp.(P-1)
$ 1,000,000 4.20% 01/07/97 $ 1,000,000
Salix PCRB VRDN for Midwest Power Systems Inc.(A-1/VMIG1)/(c)/
21,795,000 4.15 01/07/97 21,795,000
- -----------------------------------------------------------
$ 22,795,000
- -----------------------------------------------------------
Kentucky--1.7%
Calvert VRDN for Air Products and Chemicals Inc. Project(A-1)
$ 1,000,000 4.20% 01/07/97 $ 1,000,000
Mason County Variable/Fixed Rate PCRB Pooled for East Kentucky
Power (CFC)(A-1+/Aa3)
13,450,000 4.15 01/07/97 13,450,000
Trimble County PCRB for Louisville Gas & Electric Series 1996 A(A-
1+/VMIG1)
12,500,000 3.50 03/14/97 12,500,000
- -----------------------------------------------------------
$ 26,950,000
- -----------------------------------------------------------
Louisiana--2.5%
Ascension Parish PCRB for BASF Wyandotte Corp. Series
1985 (Bank of Tokyo LOC)(P-1)
$ 2,600,000 5.10% 01/01/97 $ 2,600,000
Ascension Parish PCRB for Vulcan Materials Co. Series 1996(A-
1+/VMIG1)
8,200,000 4.20 01/07/97 8,200,000
Louisiana Public Facilities Authority School Health Care System
UPDATE Series 1993(A-1+/VMIG1)
7,700,000 3.60 01/08/97 7,700,000
Parish of Desoto PCRB Series 1991 A (Swiss Bank LOC)(A-1+/VMIG1)
4,600,000 4.05 01/07/97 4,600,000
Parish of Iberville VRDN for Air Products and Chemicals, Inc.
Project(A-1)
6,200,000 4.20 01/07/97 6,200,000
Plaquemines Port RB for Teco Energy, Inc. Series 1985 B(A-1+/P-1)
2,000,000 3.60 02/13/97 2,000,000
South Louisiana Port Commission RB for Occidental Petroleum Corp.
Series 1996 (Wachovia Bank LOC)(P-1)
4,400,000 4.15 01/07/97 4,400,000
West Baton Rouge Parish VRDN for Dow Chemical Co. Series 1991
(P-1)
4,000,000 3.55 02/10/97 4,000,000
- -----------------------------------------------------------
$ 39,700,000
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Statement of Investments
- --------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
====================================================================
Maryland--0.9%
Baltimore County Consolidated Public Improvement BANS Series
1995(A-1+/P-1)
$10,000,000 3.55% 02/06/97 $ 10,000,000
Frederick GO VRDN (Fuji Bank LOC)(A-1/VMIG1)
4,800,000 4.25 01/07/97 4,800,000
- --------------------------------------------------------------------
$ 14,800,000
- --------------------------------------------------------------------
Massachusetts--1.6%
Massachusetts Bay Transportation Authority Series 1996 A Notes
(SP-1/MIG2)
$11,000,000 3.75% 02/28/97 $ 11,008,115
Massachusetts Health & Education Authority RB for Harvard
University Series I(A-1+/VMIG1)/(c)/
13,866,000 3.90 01/07/97 13,866,000
- --------------------------------------------------------------------
$ 24,874,115
- --------------------------------------------------------------------
Michigan--0.7%
Michigan Job Development Authority for Mazda Motor Manufacturing
VRDN (Sumitomo Bank LOC)(VMIG1)
$11,100,000 4.25% 01/07/97 $ 11,100,000
- --------------------------------------------------------------------
Minnesota--1.5%
Becker PCRB for Northern States Power Co. Series 1992 A(A-1+)
$ 8,000,000 3.65% 01/16/97 $ 8,000,000
6,000,000 3.55 03/12/97 6,000,000
Becker PCRB for Northern States Power Co. Series 1993 A(A-1/VMIG1)
4,000,000 3.55 03/12/97 4,000,000
White Bear Lake IDA for Weyerhauser Co. Series 1993(A-1)
6,800,000 4.21 01/07/97 6,800,000
- --------------------------------------------------------------------
$ 24,800,000
- --------------------------------------------------------------------
Mississippi--0.6%
Canton IDR for Levi Strauss Co. (Bank of America LOC)(P-1)
$10,000,000 4.15%/(b)/ 01/07/97 $ 10,000,000
- --------------------------------------------------------------------
Missouri--1.8%
Belton RB (Texas Commerce Bank LOC)(P-1)
$ 4,025,000 4.25% 01/07/97 $ 4,025,000
Kansas City Cloversett IDA MF Hsg. RB Series 1988 VRDN (Boatmen's
Bank of Kansas City LOC)(A-1+)
8,720,000 4.30 01/07/97 8,720,000
Missouri Health & Education Facility Authority VRDN (MBIA)(AAA)
10,500,000 4.10 01/07/97 10,500,000
State Environmental Improvement and Energy Resources
Authority RB for Monsanto Corporation (P-1)
$ 5,520,000 4.20% 01/07/97 $ 5,520,000
- --------------------------------------------------------------------
$ 28,765,000
- --------------------------------------------------------------------
Montana--0.3%
Forsyth PCRB for Pacificorp. Series 1988 (Industrial Bank of Japan
LOC)(A-1/P-1)
$ 3,400,000 4.70% 01/01/97 $ 3,400,000
Montana State Board of Investments VRDN Payroll Tax Bonds(VMIG1)
1,000,000 4.00 01/07/97 1,000,000
- --------------------------------------------------------------------
$ 4,400,000
- --------------------------------------------------------------------
Nevada--0.2%
Clark County VRDN for Nevada Airport System (MBIA)
(A-1+/VMIG1)
$ 3,200,000 4.00% 01/07/97 $ 3,200,000
- --------------------------------------------------------------------
New Jersey--3.3%
New Jersey TRANS Series 1997 A(A-1+/P-1)
$48,000,000 3.50% 03/12/97 $ 48,000,000
New Jersey Turnpike Authority RB Series 1991 D (FGIC)(P-1)
5,600,000 3.75 01/07/97 5,600,000
- --------------------------------------------------------------------
$ 53,600,000
- --------------------------------------------------------------------
New Mexico--0.2%
Farmington PCRB for Arizona Public Service Series 1994 A (Union
Bank of Switzerland LOC)(A-1+/P-1)
$ 2,600,000 5.00% 01/01/97 $ 2,600,000
- --------------------------------------------------------------------
New York--12.1%
New York City GO VRDN Series 1993 B (FGIC)(A-1+/VMIG1)
$ 5,500,000 4.50% 01/01/97 $ 5,500,000
New York City GO (MBIA)(VMIG1)
19,800,000 4.15 01/07/97 19,800,000
New York City GO RANS Series 1997 A(SP-1+/VMIG1)
60,000,000 4.50 04/15/97 60,137,770
New York City GO Series 1992 D (FGIC)
20,000,000 3.95 01/07/97 20,000,000
New York City GO Series 1994 (Union Bank of Switzerland
LOC)(A-1+/VMIG1)
2,200,000 4.50 01/01/97 2,200,000
New York City GO VRDN (Dai-Ichi Kangyo Bank LOC)(A-1/VMIG1)
2,600,000 4.50 01/01/97 2,600,000
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
====================================================================
New York (continued)
New York City GO VRDN (Norinchukin Bank LOC) (A-1+/VMIG1)
$ 7,000,000 4.50% 01/01/97 $ 7,000,000
New York City Municipal Water Finance Authority CP Notes Series 3
(Toronto Dominion Bank/Bank of Nova Scotia LOC)(A-1+/P-1)
8,900,000 3.50 03/12/97 8,900,000
New York City Municipal Water Finance Authority Series 3 (Toronto
Dominion Bank/Bank of Nova Scotia
LOC)(A-1+/P-1)
3,000,000 3.50 03/11/97 3,000,000
New York State Energy Research & Development Authority PCRB for
New York State Electric & Gas Series 1994 D (Union Bank of
Switzerland LOC)(A-1+/VMIG1)
8,700,000 4.40 01/01/97 8,700,000
New York State Housing Finance Agency for Normandie Court
Housing RB Series 1987 A (Fleet Bank LOC)(VMIG1)
900,000 4.00 01/07/97 900,000
New York State Local Government Assistance Series 1995 B VRDN
(Bank of Nova Scotia LOC)(A-1+/VMIG1)/(c)/
19,600,000 4.00 01/07/97 19,600,000
New York State Local Government Series G VRDN (National
Westminster Bank LOC)(A-1+/VMIG1)
1,150,000 3.85 01/07/97 1,150,000
New York State Local Government VRDN Series 1995 F (Toronto
Dominion Bank LOC)(A-1+/VMIG1)/(c)/
15,000,000 4.00 01/07/97 15,000,000
New York State Triborough Bridge & Tunnel Authority VRDN
(FGIC)(A-1+/VMIG1)
19,300,000 4.00 01/07/97 19,300,000
- --------------------------------------------------------------------
$193,787,770
- --------------------------------------------------------------------
North Carolina--6.0%
North Carolina Eastern Municipal Power Agency RB Series 1988 B
(Morgan Guaranty/Union Bank of Switzerland LOC)(A-1+)
$ 2,700,000 3.70% 01/16/97 $ 2,700,000
10,000,000 3.70 01/27/97 10,000,000
Person County PCRB for Carolina Power & Light Series 1992 A
(A-1/P-1)
7,000,000 4.25 01/07/97 7,000,000
Rockingham County IDA PCRB for Philip Morris Co.(A-1/P-1)
3,960,000 4.15 01/07/97 3,960,000
North Carolina (continued)
Wake County PCRB for Carolina Power & Light Series 1990 A & B (Fuji
Bank LOC)(A-2/P-1)
$ 7,000,000 3.75% 02/06/97 $ 7,000,000
11,000,000 3.55 02/07/97 11,000,000
12,100,000 3.55 02/10/97 12,100,000
12,900,000 3.75 02/14/97 12,900,000
29,000,000 3.75 02/18/97 29,000,000
- -------------------------------------------------------------
$95,660,000
- -------------------------------------------------------------
Ohio--2.4%
Cleveland-Cuyahoga County Port Authority VRDN for Rock & Roll
Hall of Fame (Credit Local de France LOC)(A-1+)
$ 9,000,000 4.05% 01/07/97 $ 9,000,000
Columbus Electric System Series 1994 RB (Union Bank of Switzerland
LOC)(VMIG1)
10,620,000 3.35 01/31/97 10,620,000
Franklin County Hospital RB for Holy Cross Health System Series
1995(A-1/VMIG1)/(c)/
18,900,000 4.10 01/07/97 18,900,000
- -------------------------------------------------------------
$38,520,000
- -------------------------------------------------------------
Oregon--1.7%
Lane County PCRB VRDN for Weyerhaeuser Company Series 1994
(A-1)
$ 6,500,000 4.21% 01/07/97 $ 6,500,000
Portland VRDN for Columbia Grain Inc. Project (Fuji Bank/Bank of
Tokyo LOC)(VMIG1)
17,650,000 4.25 01/07/97 17,650,000
State of Oregon Veteran's Welfare Series 73 H VRDN (Morgan
Guaranty LOC)(A-1+/VMIG1)
3,400,000 4.00 01/07/97 3,400,000
- -------------------------------------------------------------
$27,550,000
- -------------------------------------------------------------
Pennsylvania--2.7%
Allegheny County PCRB for U.S. Steel Series 1985 (Commerzbank
LOC)(A-1+/P-1)
$28,400,000 3.50% 03/13/97 $28,400,000
Allegheny County PCRB for U.S. Steel Series 1986 (Commerzbank
LOC)(A-1+/P-1)
700,000 3.50 02/06/97 700,000
Philadelphia TRANS Series 1996-97 A(SP-1/VMIG1)
14,000,000 4.50 06/30/97 14,036,476
- --------------------------------------------------------------
$43,136,476
- --------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Puerto Rico--2.0%
Commonwealth of Puerto Rico RANS Series 1997 A(SP-1+/VMIG1)
$32,000,000 4.00% 07/30/97 $ 32,103,040
- -------------------------------------------------------------------
South Carolina--0.7%
York County Floating/Fixed Rate PCRB Pooled Series 1984-North
Carolina Electric Membership Corp. VRDN (CFC)(A-1+/VMIG1)
$11,275,000 4.15% 01/07/97 $ 11,275,000
- -------------------------------------------------------------------
Texas--11.5%
Brazos Harbor IDA VRDN for Monsanto Co.(P-1)
$ 3,500,000 4.20% 01/07/97 $ 3,500,000
Brazos River Authority PCRB Series 1994 for Monsanto Co.(P-1)
5,100,000 4.20 01/07/97 5,100,000
Brazos River Authority VRDN for Monsanto Co.(P-1)
5,300,000 4.20 01/07/97 5,300,000
Brazos River Harbor Authority VRDN for Dow Chemical Corp. Series
1991(A-1/P-1)
13,500,000 3.60 01/24/97 13,500,000
Harris County Health Facilities Development Corp. UPDATE Series
1993(A-1+/VMIG1)
5,200,000 3.55 01/07/97 5,200,000
5,200,000 3.50 01/29/97 5,200,000
Harris County Hospital RB for Childrens Hospital Series 1989 B-2
(VMIG1)
7,900,000 4.10 01/07/97 7,900,000
Harris County Toll Road VRDN Series 1994 C(A-1+/VMIG1)
23,700,000 4.05 01/07/97 23,700,000
Nueces River IDA PCRB UPDATE for San Miguel Electric Series 1984
(CFC)(A-1+/VMIG1)
25,000,000 3.50 02/26/97 25,000,000
25,700,000 3.50 03/10/97 25,700,000
San Antonio Electric & Gas Systems CP Notes Series A(A-1+/P-1)
18,800,000 3.50 03/12/97 18,800,000
State of Texas TRANS Series 1996(SP-1+/VMIG1)/(c)/
25,000,000 4.75/(b)/ 08/29/97 25,193,274
20,000,000 4.75 08/29/97 20,154,620
- -------------------------------------------------------------------
$ 184,247,894
- -------------------------------------------------------------------
Utah--0.2%
Salt Lake County PCRB for Service Station/British Petroleum Series
1994 B(P-1)
$ 2,815,000 5.00% 01/01/97 $ 2,815,000
- -------------------------------------------------------------------
Virginia--6.7%
Chesapeake PCRB for Virginia Electric & Power Series
1985(A-1/P-1)
$22,000,000 3.60% 02/06/97 $22,000,000
Chesterfield County PCRB for Philip Morris Series 1987 A(A-1/P-1)
5,000,000 3.55 02/06/97 5,000,000
Chesterfield County PCRB for Philip Morris Series 1992(A-1/P-1)
14,700,000 4.15 01/07/97 14,700,000
Chesterfield County PCRB for Virginia Electric & Power Series 1985
(A-1/P-1)
8,000,000 3.60 02/07/97 8,000,000
5,200,000 3.60 02/12/97 5,200,000
Chesterfield County PCRB for Virginia Electric & Power
Series 1987 C(A-1/P-1)
1,000,000 3.60 02/12/97 1,000,000
Louisa PCRB For Virginia Electric & Power Series 1984(A-1/P-1)
4,000,000 3.60 02/07/97 4,000,000
4,000,000 3.60 02/13/97 4,000,000
3,000,000 3.60 02/14/97 3,000,000
Louisa PCRB for Virginia Electric & Power Series 1987(A-1/P-1)
1,300,000 3.55 02/06/97 1,300,000
Roanoke VRDN for Carilion Health Systems Hospital Series A(A-1)
20,400,000 4.10 01/07/97 20,400,000
Spotsylvania IDA for Carlisle Corporation (Suntrust Bank LOC)(AA3)
6,500,000 4.15/(b)/ 01/07/97 6,500,000
York County PCRB for Virginia Electric & Power Series 1985(A-1/P-1)
9,400,000 3.70 01/14/97 9,400,000
2,700,000 3.65 03/10/97 2,700,000
- -------------------------------------------------------------------
$ 107,200,000
- -------------------------------------------------------------------
Washington--4.6%
King County Sewer Revenue BANS Series A(A-1/P-1)
$10,000,000 3.55% 03/10/97 $10,000,000
Port of Grays Harbor IDA VRDN for Weyerhaeuser Project Series
1992(A-1+)
1,000,000 4.21 01/07/97 1,000,000
Port of Grays Harbor IDA VRDN for Weyerhaeuser Project Series
1993(A-1+)
5,850,000 4.21 01/07/97 5,850,000
Port of Kalama Floating/Fixed Rate for Conagra, Inc. Series 1983
(Morgan Guaranty Trust LOC)(AAA)
2,230,000 4.00 01/07/97 2,230,000
Union Gap City IDA VRDN for Weyerhaeuser Project Series 1992(A-1)
1,600,000 4.21 01/07/97 1,600,000
- ------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Washington (continued)
Washington Health Care Facilities Authority VRDN Series 1996
(Morgan Guaranty Trust LOC)(VMIG1)
$4,300,000 5.25% 01/01/97 $ 4,300,000
Washington Public Power Supply Project Electric RB Series 1993-1A
(Bank of America LOC)(A-1+/VMIG1)
10,860,000 4.10 01/07/97 10,860,000
Washington Public Power Supply Project Electric RB Series 1993-2A
(Bank of America LOC)(A-1/VMIG1)
11,100,000 4.10 01/07/97 11,100,000
Washington Public Power Supply System RB Series 1993-3A
(Bank of America LOC)(A-1+/VMIG1)
15,000,000 4.10/(b)/ 01/07/97 15,000,000
3,115,000 3.95 01/07/97 3,115,000
8,200,000 4.10 01/07/97 8,200,000
- -----------------------------------------------------------
$73,255,000
- -----------------------------------------------------------
Wyoming--1.4%
Pacificorp PCRB VRDN for Sweetwater County Series 1990 A
(Credit Suisse LOC)(VMIG1)
$16,200,000 4.15% 01/07/97 $16,200,000
Sweetwater County PCRB for Idaho Power Co. Series 1996 C
(A-1+/VMIG1)
6,100,000 5.10 01/01/97 6,100,000
- -----------------------------------------------------------
$22,300,000
- -----------------------------------------------------------
Total Investments $1,749,033,261/(a)/
==========================================================
/(a)/The amount stated also represents aggregate cost for federal
income tax purposes.
/(b)/When-issued securities.
/(c)/Portions of these securities are being segregated for when-issued
securities.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those type of securities.
Security ratings are unaudited.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- -----------------------------------------------------
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Tax-Exempt California Portfolio
December 31, 1996
- ------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
============================================================
California--96.4%
California Health Facilities Authority VRDN for Kaiser Permanente
Series 1993 A, B & C RB(A-1+/VMIG1)
$ 2,000,000 4.00% 01/07/97 $ 2,000,000
California Health Facility Finance Authority RB Series
1990 A VRDN (Rabobank Nederland LOC)(A-1+/VMIG1)
8,100,000 4.00 01/07/97 8,100,000
California PCRB for Pacific Gas & Electric (Banque Nationale de Paris
LOC)(A-1+)
4,100,000 4.80 01/01/97 4,100,000
California Pollution Control Financing Authority for Southern
California Edison Adjustable TRB Series 1986 D(A-1/VMIG1)
1,800,000 4.70 01/01/97 1,800,000
California RANS VRDN Series 1996-97 B(SP-1+/VMIG1)
10,000,000 3.47 01/31/97 10,000,000
California RANS VRDN Series 1996-97 C1(SP-1+/VMIG1)
25,500,000 4.01 01/07/97 25,500,000
California School Cash Reserves Program Authority Series 1996 A
(MBIA)(SP-1/VMIG1)
9,000,000 4.75 07/02/97 9,040,248
California School Cash Reserves Program Authority Series 1996 B
(MBIA)(VMIG1)
10,000,000 4.50 12/19/97 10,083,758
California Statewide Communities Development Authority
for Kaiser Foundation Hospital 1995 COPS(A-1+/VMIG1)
16,500,000 4.00 01/07/97 16,500,000
California Statewide Communities Development Authority RB Series
1995 A (A-1+)
13,900,000 3.90 01/07/97 13,900,000
California Statewide Communities Development Authority Series
1995A-1(A-1+)
14,200,000 3.90 01/07/97 14,200,000
California Statewide Communities Development Authority, Refunding
RB Series 1995A-2(A-1+)
5,500,000 3.90 01/07/97 5,500,000
Chula Vista RB Series 1996 A for San Diego Gas & Electric(A-
1/VMIG1)
11,200,000 5.10 01/01/97 11,200,000
City of Anaheim Electric RANS Tax Exempt CP
Notes(A-1+/P-1)
8,950,000 3.45 01/29/97 8,950,000
City of Fresno MF Hsg. Revenue Refunding Bonds Series 1996 A
(First Interstate Bank of California LOC)(VMIG1)
3,315,000 4.15 01/07/97 3,315,000
City of Irwindale IDRB Series 1984 for Toys-R-Us VRDN (Bankers
Trust LOC)(AA2)
2,000,000 4.13% 01/07/97 2,000,000
City of Los Angeles VRDN MF Hsg. Museum Terrace-84H (Bank of
America LOC)(VMIG1)
3,500,000 4.00 01/07/97 3,500,000
City of Newport Beach Floating/Fixed Rate Health Facilities Memorial
Hospital Facility VRDN(A-1/VMIG1)
10,750,000 5.15 01/01/97 10,750,000
City of Newport Beach VRDN RB Series 1996 A(A-1+)
3,800,000 5.15 01/01/97 3,800,000
City of Newport Beach VRDN RB Series 1996 B(A-1+)
23,000,000 5.15 01/01/97 23,000,000
City of San Diego VRDN MF Hsg. RB Series 1985 (Bank of
America LOC)(VMIG1)
15,700,000 4.05 01/07/97 15,700,000
City of San Diego MF Hsg. for Lacima Apartments VRDN (Citibank
LOC)(VMIG1)
13,125,000 4.05 01/07/97 13,125,000
City of San Diego MF Hsg. for Nobel Court Apartments VRDN
(Citibank LOC)(VMIG1)
11,555,000 4.05 01/07/97 11,555,000
Contra Costa MF Hsg. for Lakeshore Apartments VRDN(A-1+)
4,600,000 4.05 01/07/97 4,600,000
East Bay Municipal Utility District California Water & Waste
(A-1+/P-1)
4,300,000 3.45 02/27/97 4,300,000
Huntington Beach City Monthly MF Hsg. VRDN Series 1985 A (Bank
of America LOC)(VMIG1)
7,500,000 4.00 01/31/97 7,500,000
Kings County Housing Authority MF Hsg. Refunding RB Series 1996 A
(First Interstate Bank of California LOC)(VMIG1)
2,500,000 4.15 01/07/97 2,500,000
Los Angeles County Metro Transportation Authority VRDN
(MBIA)(SP-1+/VMIG1)
4,595,000 4.00 01/07/97 4,595,000
Los Angeles County Metro Transportation Authority RANS Series 1996
A(VMIG1)
10,000,000 4.00 02/27/97 10,013,586
Los Angeles County Metro Transportation CP Notes (National
Westminster/Union Bank of California/ABN Amro/Canadian
Imperial Bank of Commerce/Banque Nationale de Paris LOC)
(A-1+/P-1)
10,000,000 3.65 01/10/97 10,000,000
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Tax-Exempt California Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
California (continued)
Los Angeles County TRANS (Credit Suisse/Morgan Guaranty Trust
Co./Westdeutsche Landesbank Girozentrale/Bank of
America/Union Bank of Switzerland LOC)(SP-1+/VMIG1)
$16,400,000 4.50% 06/30/97 $16,456,497
Los Angeles County, VRDN MF Hsg. for Valencia Village Series 1984 C
(Industrial Bank of Japan Ltd. LOC)(A-1+)
16,400,000 2.80 01/07/97 16,400,000
Los Angeles Housing Authority MF Hsg. VRDN for Canyon Country
Villas Series 1985 H (Industrial Bank of Japan Ltd. LOC)(VMIG1)
19,000,000 2.80 01/07/97 19,000,000
Northern California Power Agency Geothermal Project Number 3
Adjustable Rate RB Series 1996 A (AMBAC)(A-1+/VMIG1)
8,500,000 3.85 01/07/97 8,500,000
Orange County Apartment Development RB Issue 1984 C Seaside
Meadow (Fuji Bank Ltd.)(A-1/VMIG1)
24,000,000 3.95 01/07/97 24,000,000
Pomona Public Financing Authority VRDN (Sumitomo Bank LOC)
(SP-1+)
2,075,000 4.25 01/07/97 2,075,000
Sacramento County 1990 COP Admin-Center Courthouse Project
VRDN (Union Bank of Switzerland LOC)(A-1+/VMIG1)
500,000 3.75 01/07/97 500,000
San Bernardino County VRDN-Woodview Apartments Series
1985 (Bank of America LOC)(VMIG1)
6,500,000 4.05 01/07/97 6,500,000
San Diego County MF Hsg. for Country Hills VRDN (FNMA)
(A-1+)
10,300,000 4.05 01/07/97 10,300,000
San Diego IDB Series 1995 B for San Diego Gas & Electric(A-1/VMIG1)
1,000,000 3.50 01/23/97 1,000,000
San Leandro MF Hsg. VRDN Series 1985 B- Haas Avenue
Apartments (Bank of America LOC)(VMIG1)
3,900,000 4.00 01/07/97 3,900,000
Southern California Metro Water District Series A CP Notes(A-1+/P-1)
5,400,000 3.50 02/20/97 5,400,000
Southern California Metropolitan Water District Revenue
Refunding Bonds Series 1996 A (AMBAC)(A-1+/VMIG1)
4,500,000 4.00 01/07/97 4,500,000
Southern California Public Power Authority 1991 Subordinated
Revenue Refunding Bonds (AMBAC)(A-1+/VMIG1)
9,100,000 3.90 01/07/97 9,100,000
Southern California Public Power Authority Power
Project RB Series 1996 B (AMBAC)(A-1+/VMIG1)
7,500,000 3.90 01/07/97 7,500,000
Southern California Public Power Authority Power
Project RB Series 1996 C (AMBAC)(A-1+/VMIG1)
10,000,000 3.90 01/07/97 10,000,000
Triunfo Sanitation District VRDN Refunding RB Series 1994 (Banque
Nationale de Paris LOC)(A-1+)
3,700,000 4.20 01/07/97 3,700,000
Tulare-Porterville Schools Finance Authority COPS (Union Bank of
California LOC)(VMIG1)
4,935,000 4.30 01/07/97 4,935,000
- -----------------------------------------------------------
$424,894,089
- -----------------------------------------------------------
Puerto Rico--3.2%
Commonwealth of Puerto Rico RANS Series 1997 A(SP-1+/VMIG1)
$14,000,000 4.00% 07/30/97 $14,045,081
- -----------------------------------------------------------
Total Investments $438,939,170/(a)/
===========================================================
/(a)/The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those types of securities.
Security ratings are unaudited.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Tax-Exempt New York Portfolio
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
New York--94.2%
City of Yonkers IDA RB for Consumers (Industrial Bank
of Japan LOC)(VMIG1)
$2,700,000 3.90% 01/07/97 $2,700,000
City of Yonkers IDA Series 1991 Civic Facility RB
(Industrial Bank of Japan LOC)(VMIG1)
2,900,000 3.90 01/07/97 2,900,000
Great Neck North Water Authority Water System RB Series
1993 A VRDN (FGIC)(A-1+/VMIG1)
3,800,000 4.00 01/07/97 3,800,000
IDA Civic Facility RB Cold Spring Harbor Labs Series
1989 VRDN (Morgan Guaranty Trust LOC)(A-1+)
2,200,000 4.90 01/01/97 2,200,000
Metropolitan Museum of Art Variable Rate Interest
Bonds(AA/AA)
1,500,000 4.00 01/07/97 1,500,000
Metropolitan Transportation Authority Commuter Facility
VRDN Series 1991 (National Westminster/Morgan
Guaranty/Industrial Bank of Japan/Sumitomo Bank/J.P.
Morgan/Bank of Tokyo LOC)(A-1+/VMIG1)
3,400,000 4.05 01/07/97 3,400,000
Nassau County TANS Series 1996 B(SP-1+)
3,500,000 4.25 08/29/97 3,515,754
New York City GO Bonds (Sumitomo Bank LOC)(A-1/VMIG1)
800,000 5.00 01/01/97 800,000
New York City GO Fiscal 1995 Series B-6
(MBIA)(A-1+/VMIG1)
3,900,000 5.10 01/01/97 3,900,000
1,250,000 5.10 01/01/97 1,250,000
New York City GO RANS Series 1997 A(SP-1+/VMIG1)
4,000,000 4.50 04/15/97 4,009,256
New York City IDA - Civic Facility RB 1989 National
Audubon Society, Inc. (Swiss Bank Corp. LOC)(A-1+)
4,000,000 4.80 01/01/97 4,000,000
New York City IDA for Columbia Grammar Prep School VRDN
(Chemical Bank LOC)(A-1+)
2,500,000 4.15 01/07/97 2,500,000
New York City Municipal Water Finance Authority CP
Series 1 (Canadian Imperial Bank of Commerce
LOC)(P-1)
6,900,000 3.55 01/16/97 6,900,000
New York City Municipal Water Finance Authority Series
3 (Toronto Dominion Bank/Bank of Nova Scotia
LOC)(P-1)
2,500,000 3.50 03/11/97 2,500,000
New York City Trust for Cultural Resources American
Museum of Natural History Adjustable Rate TRB VRDN
(MBIA)(VMIG1)
$3,200,000 3.80% 01/07/97 $3,200,000
New York State Dormitory Authority RB Series 1990 B for
Cornell University VRDN(VMIG1)
4,700,000 4.80 01/01/97 4,700,000
New York State Energy Research & Development Authority
For Long Island Lighting Co. VRDN (Toronto Dominion
Bank LOC) (A-1+/P-1)
3,000,000 4.05 01/07/97 3,000,000
New York State Energy Research & Development Authority
PCRB for New York State Electric & Gas Series 1994 B
(Union Bank of Switzerland LOC)(A-1+/VMIG1)
7,800,000 5.00 01/01/97 7,800,000
New York State Energy Research & Development Authority
PCRB for New York State Electric & Gas Series 1994 D
(Union Bank of Switzerland LOC)(A-1+/VMIG1)
3,600,000 4.40 01/01/97 3,600,000
New York State Energy Research & Development Authority
PCRB for Rochester Gas & Electric Series 1984
(Credit Suisse LOC)(P-1)
2,100,000 3.40 01/31/97 2,100,000
New York State Energy Research & Development Authority
PCRB Series A & B - Central Hudson Gas & Electric
VRDN (Deutsche Bank LOC)(AA2)
1,300,000 3.90 01/07/97 1,300,000
New York State Energy Research & Development Authority
for Orange and Rockland Utilities Series 1995 A VRDN
(AMBAC)(A-1+/VMIG1)
5,000,000 3.80 01/07/97 5,000,000
New York State GO BANS Series R(A-1/P-1)
4,500,000 3.55 02/25/97 4,500,000
New York State GO BANS Series T(A-1/P-1)
3,500,000 3.55 02/24/97 3,500,000
New York State Housing Finance Agency for Normandie
Court Housing RB Series 1987 A (Fleet Bank
LOC)(VMIG1)
5,100,000 4.00 01/07/97 5,100,000
New York State Local Government Assistance Series 1995
B VRDN (Bank of Nova Scotia LOC)(A-1+/VMIG1)
1,700,000 4.00 01/07/97 1,700,000
New York State Local Government Series C VRDN
(Landesbank Hessen-Thueringen Girozentrale
LOC)(A-1+/VMIG1)
7,000,000 4.00 01/07/97 7,000,000
- ----------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Tax-Exempt New York Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
New York (continued)
New York State Local Government Series G VRDN (National
Westminster Bank LOC)(A-1+/VMIG1)
$700,000 3.85% 01/07/97 $ 700,000
New York State Medical Care Facility Financing Agency
for Children's Hospital of Buffalo RB Series 1991 A
(Barclays Bank LOC)(VMIG1)
1,900,000 4.20 01/07/97 1,900,000
New York State Triborough Bridge & Tunnel Authority
VRDN (FGIC)(A-1+/VMIG1)
4,700,000 4.00 01/07/97 4,700,000
Oswego County IDA PCRB Series 1992 for Philip
Morris(A-1/P-1)
1,000,000 4.15 01/07/97 1,000,000
Syracuse University IDA VRDN (Morgan Guaranty
LOC)(AA+/A-1 /VMIG1)
1,200,000 4.80 01/01/97 1,200,000
- -----------------------------------------------------------
$107,875,010
- -----------------------------------------------------------
Puerto Rico--5.7%
Commonwealth of Puerto Rico RANS Series 1997
A(SP-1+/VMIG1)
$3,500,000 4.00% 07/30/97 $ 3,511,271
Puerto Rico Government Development Bank VRDN (Credit
Suisse LOC)(A-1/VMIG1)
1,000,000 3.75 01/07/97 1,000,000
Puerto Rico Medical and Environmental PCRB Series 1983
A for Key Pharmaceuticals Inc. (Morgan Guaranty LOC)
2,000,000 3.75 12/01/97 2,000,000
- -----------------------------------------------------------
$ 6,511,271
- -----------------------------------------------------------
Total Investments $114,386,281/(a)/
===========================================================
/(a)/ The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those types of securities.
Security ratings are unaudited.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
Investment Abbreviations:
ACES --Adjustable Convertible Extendible
Securities
AMBAC --Insured by American Municipal Bond
Assurance Corp.
BANS --Bond Anticipation Notes
CFC --Unconditionally Guaranteed by
Cooperative Finance Corp.
COPS --Certificates of Particication
CP --Commercial Paper
FGIC --Insured by Financial Guaranty
Insurance Co.
FNMA --Federal National Mortgage
Association
GO --General Obligation
HFA --Health Facility Authority
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDR --Industrial Development Revenue Bond
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors
Assurance
MF Hsg. --Multi-Family Housing
PCRB --Pollution Control Revenue Bond
RANS --Revenue Anticipation Notes
RB --Revenue Bond
TANS --Tax Anticipation Notes
TECP --Tax Exempt Commercial Paper
TRANS --Tax Revenue Anticipation Notes
TRB --Tender Revenue Bond
UPDATE --Unit Priced Daily Adjustable
Tax-Exempt Security
VRDN --Variable Rate Demand Note
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------- --------------------------------------
[This page intentionally left blank]
- -------------------------------------- -------------------------------------
23
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
Prime Money ILA
Obligations Market Government
Portfolio Portfolio Portfolio
==============================================
<S> <C> <C> <C>
Assets:
Investments in securities, at value based on amortized cost $1,266,243,902 $ 990,797,391 $ 827,240,879
Interest receivable 3,701,956 3,538,130 1,378,983
Cash 143,480 128,908 152,717
Other assets 18,680 33,706 48,509
- ------------------------------------------------------------------------------------------------------------------------
Total assets 1,270,108,018 994,498,135 828,821,088
- ------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investment securities purchased -- -- --
Dividends payable 5,999,306 4,784,617 3,427,645
Accrued expenses and other liabilities 530,616 513,611 459,492
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,529,922 5,298,228 3,887,137
- ------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid in capital 1,263,578,517 989,199,498 824,862,428
Accumulated undistributed net investment income -- -- --
Accumulated undistributed net realized gain (loss) on investment
transactions (421) 409 71,523
- ------------------------------------------------------------------------------------------------------------------------
Net assets $1,263,578,096 $ 989,199,907 824,933,951
========================================================================================================================
Net asset value, offering and redemption price per unit
(net assets/units outstanding) $ 1.00 $ 1.00 $ 1.00
========================================================================================================================
Units Outstanding:
ILA units 1,154,745,689 703,096,586 694,604,345
ILA Administration units 23,775,858 257,258,398 36,044,854
ILA Service units 84,710,642 28,844,514 94,213,229
ILA B units 346,328 -- --
- ------------------------------------------------------------------------------------------------------------------------
Total units of beneficial interest outstanding, $.001 par value
(unlimited number of units authorized) 1,263,578,517 989,199,498 824,862,428
========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
ILA ILA ILA ILA ILA
Treasury Treasury ILA Tax-Exempt Tax-Exempt Tax-Exempt
Obligations Instruments Federal Diversified California New York
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
================================================================================================
<S> <C> <C> <C> <C> <C>
$ 810,267,968 $1,221,566,240 $3,300,609,972 $1,749,033,261 $438,939,170 $114,386,281
532,015 14,004,604 4,477,173 7,404,080 2,433,885 404,538
99,319 148,266 365,400 1,862,438 599,385 41,299
775 10,026 125,725 8,601 8,650 --
- ------------------------------------------------------------------------------------------------
810,900,077 1,235,729,136 3,305,578,270 1,758,308,380 441,981,090 114,832,118
- ------------------------------------------------------------------------------------------------
-- -- -- 150,828,428 -- --
3,404,801 4,597,910 13,642,248 4,524,992 1,168,073 274,842
428,726 525,543 1,305,746 494,147 194,663 62,795
- ------------------------------------------------------------------------------------------------
3,833,527 5,123,453 14,947,994 155,847,567 1,362,736 337,637
- ------------------------------------------------------------------------------------------------
$ 807,035,766 1,230,590,333 3,290,699,109 1,602,342,561 440,637,879 114,499,366
-- -- -- 362,642 10,495 1,634
30,784 15,350 (68,833) (244,390) (30,020) (6,519)
- ------------------------------------------------------------------------------------------------
$ 807,066,550 $1,230,605,683 $3,290,630,276 $1,602,460,813 $440,618,354 $114,494,481
================================================================================================
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================================================================
574,608,995 708,990,271 2,303,703,731 1,514,523,522 440,495,857 70,178,026
108,916,431 137,701,171 794,578,398 59,097,259 142,022 44,321,340
123,510,340 383,898,891 192,416,980 28,918,372 -- --
-- -- -- -- -- --
- ------------------------------------------------------------------------------------------------
807,035,766 1,230,590,333 3,290,699,109 1,602,539,153 440,637,879 114,499,366
================================================================================================
- ------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- ------------------------------------------------------------------------------
Statements of Operations
For the Year Ended December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
Prime Money ILA
Obligations Market Government
Portfolio Portfolio Portfolio
=========================================
<S> <C> <C> <C>
Investment income:
Interest income $81,770,923 $54,320,799 $39,035,321
- ----------------------------------------------------------------------------------------------------------------------
Expenses:
Investment adviser fees 5,185,990 3,447,586 2,509,206
Transfer agent fees 592,685 394,010 286,766
Custodian fees 289,863 203,454 157,058
Professional fees 43,453 28,965 22,465
Trustees' fees 19,256 10,622 9,356
Other 178,787 197,862 186,415
- ----------------------------------------------------------------------------------------------------------------------
Total expenses 6,310,034 4,282,499 3,171,266
Less--Expenses reimbursable and fees waived by Goldman Sachs (234,432) (736,102) (231,536)
- ----------------------------------------------------------------------------------------------------------------------
Net expenses 6,075,602 3,546,397 2,939,730
Administration unit fees 65,534 316,155 63,048
Service unit fees 494,274 128,313 352,931
- ----------------------------------------------------------------------------------------------------------------------
Net expenses and unit fees 6,635,410 3,990,865 3,355,709
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 75,135,513 50,329,934 35,679,612
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 72,405 72,865 62,662
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $75,207,918 $50,402,799 $35,742,274
======================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA ILA ILA ILA
Treasury Treasury ILA Tax-Exempt Tax-Exempt Tax-Exempt
Obligations Instruments Federal Diversified California New York
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
=========================================================================================
<S> <C> <C> <C> <C> <C>
$48,666,691 $53,608,537 $146,327,912 $54,107,112 $13,695,668 $3,421,539
----------------------------------------------------------------------------------------
3,157,511 3,629,131 9,496,253 5,391,039 1,410,751 359,201
360,858 414,758 1,085,286 616,119 161,229 41,051
197,650 167,744 459,900 135,944 45,236 21,336
27,555 34,247 77,027 42,553 13,995 6,322
11,552 12,842 34,394 17,650 4,574 1,215
157,226 213,340 423,802 136,197 38,866 7,681
- -----------------------------------------------------------------------------------------
3,912,352 4,472,062 11,576,662 6,339,502 1,674,651 436,806
(212,886) (2,294,583) (4,522,286) (1,564,664) (22,092) (108,395)
----------------------------------------------------------------------------------------
3,699,466 2,177,479 7,054,376 4,774,838 1,652,559 328,411
145,201 145,441 906,321 73,660 262 39,843
579,790 1,266,586 562,023 130,158 -- --
- -----------------------------------------------------------------------------------------
4,424,457 3,589,506 8,522,720 4,978,656 1,652,821 368,254
- -----------------------------------------------------------------------------------------
44,242,234 50,019,031 137,805,192 49,128,456 12,042,847 3,053,285
- -----------------------------------------------------------------------------------------
195,578 416,602 (4,477) (12,968) 15 (4,539)
- -----------------------------------------------------------------------------------------
$44,437,812 $50,435,633 $137,800,715 $49,115,488 $12,042,862 $3,048,746
=========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
Prime Money ILA
Obligations Market Government
Portfolio Portfolio Portfolio
================================================
<S> <C> <C> <C>
From Operations:
Net investment income $ 75,135,513 $ 50,329,934 $ 35,679,612
Net realized gain(loss) on investment transactions 72,405 72,865 62,662
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 75,207,918 50,402,799 35,742,274
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Unitholders from:
Net investment income
ILA units (67,076,054) (38,261,044) (29,556,990)
ILA Administration units (2,206,827) (10,545,315) (2,048,010)
ILA Service units (5,850,540) (1,523,575) (4,074,612)
ILA B units (2,092) -- --
Net realized gain on investment transactions
ILA units (65,059) (54,983) (38,029)
ILA Administration units (2,127) (15,267) (2,635)
ILA Service units (5,640) (2,206) (5,242)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions to unitholders (75,208,339) (50,402,390) (35,725,518)
- ----------------------------------------------------------------------------------------------------------------------
From unit transactions (at $1.00 per unit):
Proceeds from sales of units 9,633,671,566 8,281,604,075 5,115,245,365
Reinvestment of dividends and distributions 40,414,429 38,191,105 17,312,306
Cost of units repurchased (9,962,009,233) (8,092,253,028) (5,011,078,568)
- ----------------------------------------------------------------------------------------------------------------------
Increase(decrease) in net assets resulting from unit transactions (287,923,238) 227,542,152 121,479,103
- ----------------------------------------------------------------------------------------------------------------------
Total increase(decrease) (287,923,659) 227,542,561 121,495,859
Net Assets:
Beginning of year 1,551,501,755 761,657,346 703,438,092
- ----------------------------------------------------------------------------------------------------------------------
End of year $1,263,578,096 $ 989,199,907 $ 824,933,951
======================================================================================================================
Accumulated undistributed net investment income -- -- --
======================================================================================================================
Summary of unit transactions (at $1.00 per unit):
ILA Units:
Units sold 8,756,241,159 5,161,953,773 4,490,979,392
Reinvestment of dividends and distributions 36,833,028 30,348,683 13,978,786
Units repurchased (8,899,537,496) (5,063,361,34) (4,380,790,567)
- ----------------------------------------------------------------------------------------------------------------------
(106,463,309) 128,941,113 124,167,611
- ----------------------------------------------------------------------------------------------------------------------
ILA Administration Units:
Units sold 318,656,203 2,902,067,359 220,574,807
Reinvestment of dividends and distributions 1,520,549 7,510,848 283,223
Units repurchased (359,456,201) (2,816,742,074) (232,371,387)
- ----------------------------------------------------------------------------------------------------------------------
(39,279,449) 92,836,133 (11,513,357)
- ----------------------------------------------------------------------------------------------------------------------
ILA Service Units:
Units sold 558,266,701 217,582,943 403,691,166
Reinvestment of dividends and distributions 2,060,072 331,574 3,050,297
Units repurchased (702,853,581) (212,149,611) (397,916,614)
- ----------------------------------------------------------------------------------------------------------------------
(142,526,808) 5,764,906 8,824,849
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units (288,269,566)* 227,542,152 121,479,103
======================================================================================================================
</TABLE>
* In addition, ILA B units had sales, reinvestments of dividends and
distributions and repurchases of 507,503, 780 and 161,955 units,
respectively, for a net increase of 346,328 units.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ILA ILA ILA ILA ILA
Treasury Treasury ILA Tax-Exempt Tax-Exempt Tax-Exempt
Obligations Instruments Federal Diversified California New York
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
=========================================================================================================
<S> <C> <C> <C> <C> <C>
$ 44,242,234 $ 50,019,031 $ 137,805,192 $ 49,128,456 $ 12,042,847 $ 3,053,285
195,578 416,602 (4,477) (12,968) 15 (4,539)
- ------------------------------------------------------------------------------------------------------
44,437,812 50,435,633 137,800,715 49,115,488 12,042,862 3,048,746
- ------------------------------------------------------------------------------------------------------
(32,818,890) (30,911,761) (101,011,206) (46,819,418) (12,036,826) (2,289,010)
(4,742,767) (4,651,770) (30,041,532) (1,375,597) (6,021) (764,275)
(6,680,577) (14,455,500) (6,752,454) (933,441) -- --
-- -- -- -- -- --
(124,367) (251,459) -- -- -- --
(17,973) (37,841) -- -- -- --
(25,316) (117,591) -- -- -- --
- ------------------------------------------------------------------------------------------------------
(44,409,890) (50,425,922) (137,805,192) (49,128,456) (12,042,847) (3,053,285)
- ------------------------------------------------------------------------------------------------------
5,362,879,167 5,282,794,697 15,965,974,823 9,518,523,372 2,958,021,573 648,758,829
13,347,956 20,444,542 79,358,869 35,078,864 11,445,149 2,949,980
(5,492,732,128) (4,850,904,367) (15,106,127,095) (9,392,133,030) (2,875,637,134) (654,470,394)
- ------------------------------------------------------------------------------------------------------
(116,505,005) 452,334,872 939,206,597 161,469,206 93,829,588 (2,761,585)
- ------------------------------------------------------------------------------------------------------
(116,477,083) 452,344,583 939,202,120 161,456,238 93,829,603 (2,766,124)
923,543,633 778,261,100 2,351,428,156 1,441,004,575 346,788,751 117,260,605
- ------------------------------------------------------------------------------------------------------
$ 807,066,550 $1,230,605,683 $3,290,630,276 $1,602,460,813 $ 440,618,354 $114,494,481
=======================================================================================================
-- -- -- $ 362,642 $ 10,495 $ 1,634
=======================================================================================================
3,696,243,017 3,783,423,031 11,171,686,790 9,264,641,627 2,957,305,487 340,781,821
11,811,603 19,300,481 66,486,820 34,471,658 11,444,982 2,236,468
(3,844,547,762) (3,680,022,103) (10,666,427,699) (9,127,243,309) (2,875,001,835) (363,376,230)
- ------------------------------------------------------------------------------------------------------
(136,493,142) 122,701,409 571,745,911 171,869,976 93,748,634 (20,357,941)
- ------------------------------------------------------------------------------------------------------
659,581,577 470,006,128 3,606,492,816 142,908,870 716,086 307,977,008
855,243 1,082,829 11,506,068 298,114 167 713,512
(644,240,509) (402,096,387) (3,340,378,274) (132,882,806) (635,299) (291,094,164)
- ------------------------------------------------------------------------------------------------------
16,196,311 68,992,570 277,620,610 10,324,178 80,954 17,596,356
- ------------------------------------------------------------------------------------------------------
1,007,054,573 1,029,365,538 1,187,795,217 110,972,875 -- --
681,110 61,232 1,365,981 309,092 -- --
(1,003,943,857) (768,785,877) (1,099,321,122) (132,006,915) -- --
- ------------------------------------------------------------------------------------------------------
3,791,826 260,640,893 89,840,076 (20,724,948) -- --
- ------------------------------------------------------------------------------------------------------
(116,505,005) 452,334,872 939,206,597 161,469,206 93,829,588 (2,761,585)
=======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
29
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
Prime Money ILA
Obligations Market Government
Portfolio Portfolio Portfolio
----------------------------------------------
<S> <C> <C> <C>
From Operations:
Net investment income $ 107,583,870 $ 49,478,386 $ 51,830,087
Net realized gain (loss) on investment transactions 14,828 23,170 168,758
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 107,598,698 49,501,556 51,998,845
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Unitholders from:
Net investment income
ILA units (90,145,210) (39,853,826) (42,814,965)
ILA Administration units (5,198,674) (8,266,526) (3,434,653)
ILA Service units (12,239,986) (1,358,034) (5,580,469)
Net realized gain on investment transactions
ILA units (12,607) (18,166) (138,212)
ILA Administration units (741) (4,378) (12,197)
ILA Service units (1,480) (626) (17,502)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions to unitholders (107,598,698) (49,501,556 ) (51,997,998)
- ----------------------------------------------------------------------------------------------------------------------
From unit transactions (at $1.00 per unit):
Proceeds from sales of units 12,338,624,975 6,865,371,082 6,147,457,376
Reinvestment of dividends and distributions 46,658,797 34,033,174 18,869,484
Cost of units repurchased (13,117,315,317) 6,864,945,994) (6,596,822,965)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from unit
transactions (732,031,545) 34,458,262 (430,496,105)
- ----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) (732,031,545) 34,458,262 (430,495,258)
Net Assets:
Beginning of year 2,283,533,300 727,199,084 1,133,933,350
- ----------------------------------------------------------------------------------------------------------------------
End of year $1,551,501,755 $ 761,657,346 $ 703,438,092
- ----------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Summary of unit transactions (at $1.00 per unit):
ILA Units:
Units sold 10,673,706,881 5,167,984,860 5,286,093,615
Reinvestment of dividends and distributions 43,663,215 30,173,260 14,307,877
Units repurchased (11,419,966,319) (5,183,472,607) (5,611,448,715)
- ----------------------------------------------------------------------------------------------------------------------
(702,596,223) 14,685,513 (311,047,223)
- ----------------------------------------------------------------------------------------------------------------------
ILA Administration Units:
Units sold 801,545,537 1,503,847,493 385,128,154
Reinvestment of dividends and distributions 1,574,573 3,545,805 410,476
Units repurchased (889,335,631) (1,488,837,741) (433,455,523)
- ----------------------------------------------------------------------------------------------------------------------
(86,215,521) 18,555,557 (47,916,893)
- ----------------------------------------------------------------------------------------------------------------------
ILA Service Units:
Units sold 863,372,557 193,538,729 476,235,607
Reinvestment of dividends and distributions 1,421,009 314,109 4,151,131
Units repurchased (808,013,367) (192,635,646) (551,918,727)
- ----------------------------------------------------------------------------------------------------------------------
56,780,199 1,217,192 (71,531,989)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units (732,031,545) 34,458,262 (430,496,105)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ILA ILA ILA ILA ILA
Treasury Treasury ILA Tax-Exempt Tax-Exempt Tax-Exempt
Obligations Instruments Federal Diversified California New York
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
======================================================================================================
<S> <C> <C> <C> <C> <C>
$ 49,882,996 $ 39,027,924 $ 127,991,600 $ 55,137,781 $ 10,292,899 $ 3,354,557
634,764 426,028 (11,971) (38,116) (4,501) --
- ------------------------------------------------------------------------------------------------------
50,517,760 39,453,952 127,979,629 55,099,665 10,288,398 3,354,557
- ------------------------------------------------------------------------------------------------------
(37,834,730) (31,147,754) (98,487,540) (50,915,901) (10,279,510) (2,746,431)
(5,921,841) (3,930,340) (26,181,728) (2,430,414) (13,389) (608,126)
(6,116,634) (3,949,830) (3,322,332) (1,791,466) -- --
(474,791) (338,176) -- -- -- --
(76,052) (43,832) -- -- -- --
(81,059) (43,878) -- -- -- --
- ------------------------------------------------------------------------------------------------------
(50,505,107) (39,453,810) (127,991,600) (55,137,781) (10,292,899) (3,354,557)
- ------------------------------------------------------------------------------------------------------
5,295,765,985 4,545,981,787 12,879,366,733 9,669,281,502 2,111,844,558 637,393,901
14,985,214 18,329,605 59,359,416 35,116,542 9,384,940 3,009,869
(5,307,633,793) (4,472,240,590) (12,558,288,438) (9,832,589,904) (2,002,625,120) (646,630,502)
- ------------------------------------------------------------------------------------------------------
3,117,406 92,070,802 380,437,711 (128,191,860) 118,604,378 (6,226,732)
- ------------------------------------------------------------------------------------------------------
3,130,059 92,070,944 380,425,740 (128,229,976) 118,599,877 (6,226,732)
920,413,574 686,190,156 1,971,002,416 1,569,234,551 228,188,874 123,487,337
- ------------------------------------------------------------------------------------------------------
$ 923,543,633 $ 778,261,100 $2,351,428,156 $1,441,004,575 $ 346,788,751 $117,260,605
======================================================================================================
-- -- -- $ 362,642 $ 10,495 $ 1,634
======================================================================================================
4,098,618,029 3,716,958,431 9,845,256,084 9,311,743,687 2,111,311,145 412,445,304
12,443,257 17,215,281 53,443,869 34,419,501 9,375,255 2,397,973
(4,113,675,854) (3,695,227,116) (9,792,323,613) (9,438,508,967) (2,001,353,653) (408,825,174)
- ------------------------------------------------------------------------------------------------------
(2,614,568) 38,946,596 106,376,340 (92,345,779) 119,332,747 6,018,103
- ------------------------------------------------------------------------------------------------------
852,080,094 450,755,034 2,431,546,258 230,975,117 533,413 224,948,597
2,541,957 1,065,347 5,373,341 522,467 9,685 611,896
(859,607,724) (447,499,474) (2,249,895,904) (280,499,429) (1,271,467) (237,805,328)
- ------------------------------------------------------------------------------------------------------
(4,985,673) 4,320,907 187,023,695 (49,001,845) (728,369) (12,244,835)
- ------------------------------------------------------------------------------------------------------
345,067,862 378,268,322 602,564,391 126,562,698 -- --
-- 48,977 542,206 174,574 -- --
(334,350,215) (329,514,000) (516,068,921) (113,581,508) -- --
- ------------------------------------------------------------------------------------------------------
10,717,647 48,803,299 87,037,676 13,155,764 -- --
- ------------------------------------------------------------------------------------------------------
3,117,406 92,070,802 380,437,711 (128,191,860) 118,604,378 (6,226,732)
======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
31
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. Organization
Goldman Sachs Money Market Trust (the "Trust"), a business trust organized under
the laws of the Commonwealth of Massachusetts on December 6, 1978, includes the
Goldman Sachs--Institutional Liquid Assets Portfolios ("ILA"). The Trust is
registered under the Investment Company Act of 1940 (as amended) as an open-end
management investment company. ILA consists of nine portfolios: Prime
Obligations, Money Market, Government, Treasury Obligations, Treasury
Instruments, Federal, Tax-Exempt Diversified, Tax-Exempt California and Tax-
Exempt New York. All of the portfolios are diversified except for the Tax-Exempt
California and Tax-Exempt New York Portfolios. ILA offers three classes of units
for each of its portfolios: ILA units, ILA Administration units and ILA Service
units. In addition, Prime Obligations offers ILA B units. The investment
objective of the Funds is to maximize current income to the extent consistent
with the preservation of capital and maintenance of liquidity.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by ILA. The preparation of financial statements in conformity with
generally accepted accounting principles require management to make estimates
and assumptions that may affect the reported amounts.
A. Investment Valuation--
- --------------------------
ILA uses the amortized-cost method for valuing portfolio securities, which
approximates market value. Under this method, all investments purchased at a
discount or premium are valued by amortizing the difference between the original
purchase price and maturity value of the issue over the period to maturity.
B. Interest Income--
- ---------------------
Interest income is determined on the basis of interest accrued, premium
amortized and discount earned.
C. Federal Taxes--
---------------
It is each portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all investment company taxable and tax-exempt income to
its unitholders. Accordingly, no federal tax provisions are required.
The characterization of distributions to unitholders for financial reporting
purposes is determined in accordance with federal income tax rules. Therefore,
the source of the Portfolios' distributions may be shown in the accompanying
financial statements as either from or in excess of net investment income or net
realized gain on investment transactions, or from paid-in capital, depending on
the type of book/tax differences that may exist.
At December 31, 1996, ILA's tax year end, the following portfolios had capital
loss carryforwards for U.S. Federal tax purposes of approximately:
<TABLE>
<CAPTION>
Years of
Portfolio Amount Expiration
--------- ------ ----------
<S> <C> <C>
Federal $ 72,000 2000 to 2004
Tax-Exempt Diversified 244,000 1997 to 2004
Tax-Exempt California 30,000 1999 to 2003
Tax-Exempt New York 7,000 1999 to 2004
</TABLE>
These amounts are available to be carried forward to offset future capital gains
to the extent permitted by applicable laws or regulations.
D. Expenses--
- --------------
Expenses incurred by ILA which do not specifically relate to an individual
portfolio of ILA are allocated to the portfolios based on each portfolio's
relative average net assets for the period.
Unitholders of ILA Administration, ILA Service and ILA B units bear all
expenses and fees paid to service and distribution organizations for their
services with respect to such units as well as other expenses (subject to
expense limitations) which are directly attributable to such units.
- --------------------------------------------------------------------------------
32
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
December 31,1996
- --------------------------------------------------------------------------------
3. Agreements
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), acts as investment adviser pursuant to
an Advisory Agreement. Under the Advisory Agreement, GSAM, subject to general
supervision of the Trust's Board of Trustees, manages the portfolios and
provides for the administration of ILA's other affairs. As compensation for the
services rendered under the Advisory Agreement and the assumption of the
expenses related thereto, GSAM is entitled to a fee, computed daily and payable
monthly, at an annual rate equal to .35% of each portfolio's average daily net
assets. For the year ended December 31, 1996 and until further notice, GSAM has
agreed to waive advisory fees of .05%, .20%, .15%, .10% and .09% for the Money
Market, Treasury Instruments, Federal, Tax-Exempt Diversified and Tax-Exempt New
York Portfolios, respectively.
Goldman Sachs also serves as ILA's transfer agent under a Transfer Agency
Agreement for a fee. In addition, Goldman Sachs acts as ILA's distributor under
a Distribution Agreement for which it receives no compensation. Amounts due to
Goldman Sachs are included in "Accrued expenses and other liabilities" in the
accompanying Statements of Assets and Liabilities.
GSAM has voluntarily agreed that if the sum of a portfolio's expenses
(including the advisory fee, but excluding interest, taxes, brokerage
commissions, litigation and indemnification expenses, administration, authorized
dealer service, distribution and service plan fees and other extraordinary
expenses) exceeds on an annualized basis .41% of such portfolio's net assets,
the portfolio will be reimbursed in the amount of such excess monthly.
In addition, GSAM has voluntarily agreed to reimburse the Money Market,
Treasury Instruments, Federal, Tax-Exempt Diversified and Tax-Exempt New York
Portfolios to the extent that each portfolio's expenses, as defined above,
exceed .36%, .21%, .26%, .31% and .32%, respectively, of the average net assets
per annum. Amounts due from Goldman Sachs at December 31, 1996 are included in
"Other assets" in the accompanying Statements of Assets and Liabilities.
The ILA B units of Prime Obligations Portfolio have adopted a Distribution
Plan (the "Distribution Plan") pursuant to Rule 12b-1. Under the Distribution
Plan, Goldman Sachs is entitled to a quarterly fee for distribution services
equal, on an annual basis, up to .75% of ILA B units average daily net assets.
The ILA B units of Prime Obligations Portfolio have adopted an Authorized
Dealer Service Plan (the "Service Plan") pursuant to which Goldman Sachs and
Authorized Dealers are compensated for providing personal and account
maintenance services. ILA B units pay a fee under this Service Plan equal, on an
annual basis, up to .25% of ILA Class B's average daily net assets.
The chart below outlines the fee waivers and expense reimbursements for the
year ended December 31, 1996 and amounts owed to and due from Goldman Sachs at
December 31, 1996 (in thousands):
- -------------------------------------------------------------------------------
Due to
Goldman
Sachs Amounts
Adviser Expense for Adviser/ due from
Fee Reimburse- Transfer Goldman
Fund Waived ments Total Agent Fees Sachs
================================================================================
Prime
Obligations
Portfolio $-- $234 $234 $462 $18
- --------------------------------------------------------------------------------
Money
Market
Portfolio 493 243 736 318 34
- --------------------------------------------------------------------------------
Government
Portfolio -- 232 232 265 45
- --------------------------------------------------------------------------------
Treasury
Obligations
Portfolio -- 213 213 267 --
- --------------------------------------------------------------------------------
Treasury
Instruments
Portfolio 2,074 221 2,295 180 10
- --------------------------------------------------------------------------------
Federal
Portfolio 4,070 452 4,522 648 126
- --------------------------------------------------------------------------------
Tax-Exempt
Diversified
Portfolio 1,540 25 1,565 399 --
- --------------------------------------------------------------------------------
Tax-Exempt
California
Portfolio -- 22 22 147 --
- -------------------------------------------------------------------------------
Tax-Exempt
New York
Portfolio 92 16 108 26 --
- -------------------------------------------------------------------------------
33
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
December 31, 1996
- --------------------------------------------------------------------------------
4. Administration and Service Plans
ILA has adopted Administration and Service Plans. These plans allow for ILA
Administration units and ILA Service units, respectively, to compensate service
organizations for providing varying levels of account administration and
unitholder liaison services to their customers who are beneficial owners of such
units. The Administration and Service Plans provide for compensation to the
service organizations in an amount up to .15% and .40% (on an annualized basis),
respectively, of the average daily net asset value of the respective units.
5. Line of Credit Facility
ILA participates in a $250,000,000 uncommitted, unsecured revolving line of
credit facility to be used solely for temporary or emergency purposes. Under the
most restrictive arrangement, each Portfolio must own securities having a market
value in excess of 300% of the total bank borrowings. The interest rate on the
borrowings is based on the Federal Funds rate. During the year ended
December 31, 1996, ILA did not have any borrowings under this facility.
6. Repurchase Agreements
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping by the custodian.
7. Joint Repurchase Agreement Accounts
The ILA Portfolios, together with other registered investment companies having
advisory agreements with GSAM or its affiliates, may transfer uninvested cash
balances into joint accounts, the daily aggregate balances of which are invested
in one or more repurchase agreements. The underlying securities for the
repurchase agreements are U.S. Treasury obligations.
As of December 31, 1996, the Prime Obligations, Money Market, Government and
Treasury Obligations Portfolios had investments in the following joint account
of $21,400,000, $77,200,000, $305,000,000 and $327,900,000 in principal amount,
respectively. As of December 31, 1996, the repurchase agreements in this joint
account, along with the corresponding underlying securities (including the type
of security, market value, interest rate and maturity date), were as follows:
Principal Interest Maturity Amortized
Amount Rate Date Cost
================================================================================
Repurchase Agreements
BT Securities Corp., dated 12/31/96, repurchase price $200,061,111 (U.S.
Treasury Notes: $154,133,720, 5.75%-6.38%, 08/31/97-04/30/01; U.S.
Treasury Bills: $48,126,398, 06/12/97)
$200,000,000 5.50% 01/02/97 $ 200,000,000
Chase Securities, Inc., dated 12/31/96, repurchase price $1,000,369,444
(U.S. Treasury Notes: $1,020,003,399, 5.00%-9.13%, 11/15/97-5/31/99)
1,000,000,000 6.65 01/02/97 1,000,000,000
Citicorp. Securities, Inc., dated 12/31/96, repurchase price $100,034,722
(U.S. Treasury Notes: $101,974,154, 5.88%-7.50%, 03/31/98-11/15/01)
100,000,000 6.25 01/02/97 100,000,000
Morgan Stanley & Co., dated 12/31/96, repurchase price $1,200,450,000
(U.S. Treasury Notes: $954,150,236, 6.00%-6.25%, 07/31/98-09/30/98;
U.S. Treasury Bills: $270,396,330, 01/23/97-10/16/97)
1,200,000,000 6.75 01/02/97 1,200,000,000
Swiss Bank Corp., dated 12/31/96, repurchase price $140,846,933
(U.S. Treasury Notes: $129,531,177, 4.75%-8.88%,01/15/97-08/15/03; U.S.
Treasury Bills: $14,639,156, 01/30/97-06/26/97)
140,800,000 6.00 01/02/97 140,800,000
Swiss Bank Corp., dated 12/31/96, repurchase price $400,150,000 (U.S.
Treasury Notes: $367,986,300, 4.75%-8.88%, 01/15/97-08/15/03; U.S.
Treasury Bills: $41,588,512, 01/30/97-06/26/97)
400,000,000 6.75 01/02/97 400,000,000
- -------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $3,040,800,000
================================================================================
8. Other Matters
Pursuant to an SEC exemptive order, each taxable Portfolio may enter into
certain principal transactions, including repurchase agreements, with Goldman,
Sachs & Co. subject to certain limitations which include the following: 25% of
eligible security transactions, as defined, and 10% of repurchase agreement
transactions.
- --------------------------------------------------------------------------------
34
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Unit Outstanding Throughout Each Period
Prime Obligations Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
===================================
Net
Net asset realized Total Net asset
value at Net gain on income from value at
beginning investment investment investment Distributions end Total
of period income transactions operations to unitholders of period return/(a)/
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ...................... $1.00 $0.0511 -- $0.0511 $(0.0511) $1.00 5.22%
1996-ILA Administration units ....... 1.00 0.0497 -- 0.0497 (0.0497) 1.00 5.06
1996-ILA Service units .............. 1.00 0.0474 -- 0.0474 (0.0474) 1.00 4.80
1996-ILA B units/(b)/................ 1.00 0.0262 -- 0.0262 (0.0262) 1.00 3.97/(d)/
1995-ILA units ...................... 1.00 0.0566 -- 0.0566 (0.0566) 1.00 5.79
1995-ILA Administration units ....... 1.00 0.0551 -- 0.0551 (0.0551) 1.00 5.63
1995-ILA Service units .............. 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.37
1994-ILA units ...................... 1.00 0.0394 -- 0.0394 (0.0394) 1.00 4.07
1994-ILA Administration units ....... 1.00 0.0379 -- 0.0379 (0.0379) 1.00 3.91
1994-ILA Service units .............. 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.66
1993-ILA units ...................... 1.00 0.0291 0.0002 0.0293 (0.0293) 1.00 2.97
1993-ILA Administration units ....... 1.00 0.0275 0.0003 0.0278 (0.0278) 1.00 2.82
1993-ILA Service units .............. 1.00 0.0250 0.0001 0.0251 (0.0252) 1.00 2.56
1992-ILA units ...................... 1.00 0.0364 0.0010 0.0374 (0.0374) 1.00 3.75
1992-ILA Administration units ....... 1.00 0.0339 0.0010 0.0349 (0.0349) 1.00 3.60
1992-ILA Service units .............. 1.00 0.0311 0.0010 0.0321 (0.0320) 1.00 3.34
1991-ILA units ...................... 1.00 0.0591 0.0003 0.0594 (0.0594) 1.00 6.10
1991-ILA Administration units ....... 1.00 0.0568 0.0003 0.0571 (0.0571) 1.00 5.94
1991-ILA Service units .............. 1.00 0.0558 0.0003 0.0561 (0.0561) 1.00 5.68
1990-ILA units ...................... 1.00 0.0793 -- 0.0793 (0.0793) 1.00 8.21
1990-ILA Administration units /(c)/.. 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.81/(d)/
1990-ILA Service units/(c)/.......... 1.00 0.0425 -- 0.0425 (0.0425) 1.00 7.56/(d)/
1989-ILA units ...................... 1.00 0.0890 -- 0.0890 (0.0890) 1.00 9.27
1988-ILA units ...................... 1.00 0.0714 -- 0.0714 (0.0714) 1.00 7.48
1987-ILA units ...................... 1.00 0.0634 -- 0.0634 (0.0634) 1.00 6.50
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
===========================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
===============================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ...................... 0.41% 5.11% $1,154,787 0.43% 5.09%
1996-ILA Administration units ....... 0.56 4.97 23,738 0.58 4.95
1996-ILA Service units .............. 0.81 4.74 84,707 0.83 4.72
1996-ILA B units/(b)/................ 1.41/(d)/ 4.09/(d)/ 346 1.43/(d)/ 4.07/(d)/
1995-ILA units ...................... 0.41 5.66 1,261,251 0.43 5.64
1995-ILA Administration units ....... 0.56 5.51 63,018 0.58 5.49
1995-ILA Service units .............. 0.81 5.22 227,233 0.83 5.20
1994-ILA units ...................... 0.40 3.94 1,963,846 0.42 3.92
1994-ILA Administration units ....... 0.55 3.79 149,234 0.57 3.77
1994-ILA Service units .............. 0.80 3.65 170,453 0.82 3.63
1993-ILA units ...................... 0.40 2.91 2,332,771 0.42 2.89
1993-ILA Administration units ....... 0.55 2.75 189,431 0.57 2.73
1993-ILA Service units .............. 0.80 2.50 137,804 0.82 2.48
1992-ILA units ...................... 0.40 3.64 3,444,591 0.42 3.62
1992-ILA Administration units ....... 0.55 3.39 257,321 0.57 3.37
1992-ILA Service units .............. 0.80 3.11 22,044 0.82 3.09
1991-ILA units ...................... 0.40 5.91 3,531,736 0.42 5.89
1991-ILA Administration units ....... 0.55 5.68 198,417 0.57 5.66
1991-ILA Service units .............. 0.80 5.58 18,789 0.82 5.56
1990-ILA units ...................... 0.38 7.93 2,833,541 0.38 7.93
1990-ILA Administration units /(c)/.. 0.55/(d)/ 7.62/(d)/ 209,272 0.55/(d)/ 7.62/(d)/
1990-ILA Service units/(c)/.......... 0.80/(d)/ 7.25/(d)/ 19,039 0.80/(d)/ 7.25/(d)/
1989-ILA units ...................... 0.40 8.90 3,761,964 0.40 8.90
1988-ILA units ...................... 0.40 7.14 3,799,628 0.40 7.14
1987-ILA units ...................... 0.40 6.34 5,814,280 0.40 6.34
</TABLE>
- -------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/ILA Class B unit activity commenced during May of 1996.
/(c)/ILA Administration and Service unit activity commenced during June of 1990.
/(d)/Annualized.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Money Market Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=====================================
Net Net Total
asset realized income Net asset
value at Net gain on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
===============================
1996-ILA units ............. $1.00 $0.0515 $0.0001 $0.0516 $(0.0516) $1.00 5.27%
1996-ILA Administration
units ................... 1.00 0.0500 0.0001 0.0501 (0.0501) 1.00 5.12
1996-ILA Service units ..... 1.00 0.0475 0.0001 0.0476 (0.0476) 1.00 4.86
1995-ILA units ............. 1.00 0.0571 -- 0.0571 (0.0571) 1.00 5.85
1995-ILA Administration
units ................... 1.00 0.0555 -- 0.0555 (0.0555) 1.00 5.69
1995-ILA Service units ..... 1.00 0.0529 -- 0.0529 (0.0529) 1.00 5.43
1994-ILA units ............. 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.13
1994-ILA Administration
units ................... 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.98
1994-ILA Service units ..... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.72
1993-ILA units ............. 1.00 0.0296 0.0003 0.0299 (0.0299) 1.00 3.03
1993-ILA Administration
units ................... 1.00 0.0281 0.0003 0.0284 (0.0284) 1.00 2.88
1993-ILA Service units ..... 1.00 0.0257 0.0002 0.0259 (0.0259) 1.00 2.62
1992-ILA units ............. 1.00 0.0368 0.0004 0.0372 (0.0372) 1.00 3.76
1992-ILA Administration
units ................... 1.00 0.0356 0.0004 0.0360 (0.0360) 1.00 3.61
1992-ILA Service units ..... 1.00 0.0358 0.0006 0.0364 (0.0364) 1.00 3.35
1991-ILA units ............. 1.00 0.0591 0.0004 0.0595 (0.0595) 1.00 6.12
1991-ILA Administration
units ................... 1.00 0.0574 0.0004 0.0578 (0.0578) 1.00 5.96
1991-ILA Service units ..... 1.00 0.0547 0.0004 0.0551 (0.0551) 1.00 5.70
1990-ILA units ............. 1.00 0.0793 0.0001 0.0794 (0.0794) 1.00 8.24
1990-ILA Administration
units/(c)/............... 1.00 0.0424 0.0001 0.0425 (0.0425) 1.00 7.86/(b)/
1990-ILA Service units/(c)/. 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.61/(b)/
1989-ILA units ............. 1.00 0.0885 0.0001 0.0886 (0.0886) 1.00 9.31
1988-ILA units ............. 1.00 0.0751 -- 0.0751 (0.0751) 1.00 7.66
For the Period December 2, 1987 (commencement of operations) through December 31,
================================================================================
1987-ILA units ............. 1.00 0.0063 -- 0.0063 (0.0063) 1.00 7.38/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
============================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
===============================
1996-ILA units ............. 0.36% 5.15% $703,097 0.43% 5.08%
1996-ILA Administration
units ................... 0.51 5.00 257,258 0.58 4.93
1996-ILA Service units ..... 0.76 4.75 28,845 0.83 4.68
1995-ILA units ............. 0.36 5.71 574,155 0.42 5.65
1995-ILA Administration
units ................... 0.51 5.55 164,422 0.57 5.49
1995-ILA Service units ..... 0.76 5.29 23,080 0.82 5.23
1994-ILA units ............. 0.35 4.01 559,470 0.43 3.93
1994-ILA Administration
units ................... 0.50 3.88 145,867 0.58 3.80
1994-ILA Service units ..... 0.75 3.61 21,862 0.83 3.53
1993-ILA units ............. 0.35 2.96 699,604 0.43 2.88
1993-ILA Administration
units ................... 0.50 2.81 150,452 0.58 2.73
1993-ILA Service units ..... 0.75 2.57 11,166 0.83 2.49
1992-ILA units ............. 0.35 3.68 884,571 0.43 3.60
1992-ILA Administration
units ................... 0.50 3.56 187,445 0.58 3.48
1992-ILA Service units ..... 0.75 3.58 15,114 0.83 3.50
1991-ILA units ............. 0.35 5.91 1,153,191 0.42 5.84
1991-ILA Administration
units ................... 0.50 5.74 210,330 0.57 5.67
1991-ILA Service units ..... 0.75 5.47 56,586 0.82 5.40
1990-ILA units ............. 0.35 7.93 924,141 0.40 7.88
1990-ILA Administration
units/(c)/............... 0.50/(b)/ 7.63/(b)/ 204,477 0.55/(b)/ 7.58/(b)/
1990-ILA Service units/(c)/. 0.75/(b)/ 7.46/(b)/ 38,128 0.80/(b)/ 7.41/(b)/
1989-ILA units ............. 0.35 8.85 1,295,389 0.40 8.80
1988-ILA units ............. 0.27 7.51 701,105 0.40 7.38
For the Period December 2, 1987 (commencement of operations) through December 31,
================================================================================
1987-ILA units ............. 0.15/(b)/ 7.62/(b)/ 183,633 0.40/(b)/ 7.37/(b)/
- -------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during June of 1990.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Government Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=====================================
Net Net Total
asset realized income Net asset
value at Net (gain) on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ............. $1.00 $0.0504 $ 0.0001 $0.0505 $(0.0504) $1.00 5.15%
1996-ILA Administration
units ................... 1.00 0.0489 0.0001 0.0490 (0.0489) 1.00 4.99
1996-ILA Service units ..... 1.00 0.0463 0.0001 0.0464 (0.0463) 1.00 4.73
1995-ILA units ............. 1.00 0.0562 0.0002 0.0564 (0.0564) 1.00 5.77
1995-ILA Administration
units ................... 1.00 0.0549 0.0002 0.0551 (0.0551) 1.00 5.62
1995-ILA Service units ..... 1.00 0.0519 0.0002 0.0521 (0.0521) 1.00 5.35
1994-ILA units ............. 1.00 0.0378 0.0002 0.0380 (0.0380) 1.00 3.94
1994-ILA Administration
units ................... 1.00 0.0362 0.0002 0.0364 (0.0364) 1.00 3.79
1994-ILA Service units ..... 1.00 0.0350 0.0002 0.0352 (0.0352) 1.00 3.53
1993-ILA units ............. 1.00 0.0282 0.0008 0.0290 (0.0291) 1.00 2.94
1993-ILA Administration 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79
units ...................
1993-ILA Service units ..... 1.00 0.0242 0.0006 0.0248 (0.0250) 1.00 2.53
1992-ILA units ............. 1.00 0.0338 0.0027 0.0365 (0.0364) 1.00 3.70
1992-ILA Administration
units ................... 1.00 0.0325 0.0027 0.0352 (0.0351) 1.00 3.55
1992-ILA Service units ..... 1.00 0.0309 0.0030 0.0339 (0.0336) 1.00 3.29
1991-ILA units ............. 1.00 0.0567 0.0011 0.0578 (0.0578) 1.00 5.91
1991-ILA Administration
units ................... 1.00 0.0545 0.0011 0.0556 (0.0556) 1.00 5.75
1991-ILA Service units ..... 1.00 0.0522 0.0011 0.0533 (0.0533) 1.00 5.49
1990-ILA units ............. 1.00 0.0779 0.0003 0.0782 (0.0782) 1.00 8.11
1990-ILA Administration
units (c)................ 1.00 0.0439 0.0004 0.0443 (0.0443) 1.00 7.74/(b)/
1990-ILA Service units (c).. 1.00 0.0359 0.0002 0.0361 (0.0363) 1.00 7.42/(b)/
1989-ILA units ............. 1.00 0.0877 0.0001 0.0878 (0.0878) 1.00 9.15
1988-ILA units ............. 1.00 0.0716 0.0002 0.0718 (0.0718) 1.00 7.42
1987-ILA units ............. 1.00 0.0622 0.0001 0.0623 (0.0624) 1.00 6.43
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
===========================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ............. 0.41% 5.04% $694,651 0.44% 5.01%
1996-ILA Administration
units ................... 0.56 4.89 36,055 0.59 4.86
1996-ILA Service units ..... 0.81 4.63 94,228 0.84 4.60
1995-ILA units ............. 0.41 5.62 570,469 0.43 5.60
1995-ILA Administration
units ................... 0.56 5.49 47,558 0.58 5.47
1995-ILA Service units ..... 0.81 5.19 85,401 0.83 5.17
1994-ILA units ............. 0.40 3.78 881,520 0.44 3.74
1994-ILA Administration
units ................... 0.55 3.62 95,483 0.59 3.58
1994-ILA Service units ..... 0.80 3.50 156,930 0.84 3.46
1993-ILA units ............. 0.40 2.82 1,315,378 0.43 2.79
1993-ILA Administration
units ................... 0.55 2.67 161,845 0.58 2.64
1993-ILA Service units ..... 0.80 2.42 101,272 0.83 2.39
1992-ILA units ............. 0.40 3.38 1,785,472 0.42 3.36
1992-ILA Administration
units ................... 0.55 3.25 461,542 0.57 3.23
1992-ILA Service units ..... 0.80 3.09 56,389 0.82 3.07
1991-ILA units ............. 0.40 5.67 2,103,627 0.43 5.64
1991-ILA Administration
units ................... 0.55 5.45 464,060 0.58 5.42
1991-ILA Service units ..... 0.80 5.22 200,176 0.83 5.19
1990-ILA units ............. 0.39 7.79 2,203,756 0.39 7.79
1990-ILA Administration
units (c)................ 0.55/(b) 7.49/(b)/ 296,313 0.55/(b)/ 7.49/(b)/
1990-ILA Service units (c).. 0.80/(b)/ 7.15/(b)/ 132,888 0.80/(b)/ 7.15/(b)/
1989-ILA units ............. 0.40 8.77 2,268,330 0.40 8.77
1988-ILA units ............. 0.40 7.16 2,197,796 0.40 7.16
1987-ILA units ............. 0.40 6.22 2,243,870 0.40 6.22
- -------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
Financial Highlights (continued)
- -------------------------------------------------------------------------------
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Obligations Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
===================================
Net
Net asset realized Total Net asset
value at Net gain on income from value at
beginning investment investment investment Distributions end of Total
of period income transaction operation to unitholders period return/(a)/
====================================================================================
For the Years Ended December 31,
================================
<S> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units ............................. $1.00 $0.0498 $0.0002 $0.0500 $(0.0500) $1.00 5.11%
1996-ILA Administration units .............. 1.00 0.0483 0.0003 0.0486 (0.0486) 1.00 4.95
1996-ILA Service units ..................... 1.00 0.0459 0.0001 0.0460 (0.0460) 1.00 4.69
1995-ILA units ............................. 1.00 0.0551 0.0007 0.0558 (0.0558) 1.00 5.73
1995-ILA Administration units .............. 1.00 0.0537 0.0007 0.0544 (0.0544) 1.00 5.57
1995-ILA Service units ..................... 1.00 0.0511 0.0007 0.0518 (0.0518) 1.00 5.31
1994-ILA units ............................. 1.00 0.0377 -- 0.0377 (0.0377) 1.00 3.91
1994-ILA Administration units .............. 1.00 0.0368 -- 0.0368 (0.0368) 1.00 3.75
1994-ILA Service units ..................... 1.00 0.0340 -- 0.0340 (0.0340) 1.00 3.49
1993-ILA units ............................. 1.00 0.0279 0.0006 0.0285 (0.0286) 1.00 2.89
1993-ILA Administration units .............. 1.00 0.0264 0.0006 0.0270 (0.0270) 1.00 2.74
1993-ILA Service units ..................... 1.00 0.0239 0.0006 0.0245 (0.0246) 1.00 2.48
1992-ILA units ............................. 1.00 0.0339 0.0025 0.0364 (0.0362) 1.00 3.65
1992-ILA Administration units .............. 1.00 0.0320 0.0023 0.0343 (0.0343) 1.00 3.49
1992-ILA Service units ..................... 1.00 0.0294 0.0024 0.0318 (0.0318) 1.00 3.23
1991-ILA units ............................. 1.00 0.0557 0.0018 0.0575 (0.0575) 1.00 5.90
1991-ILA Administration units .............. 1.00 0.0540 0.0018 0.0558 (0.0558) 1.00 5.74
1991-ILA Service units ..................... 1.00 0.0515 0.0018 0.0533 (0.0533) 1.00 5.48
1990-ILA units ............................. 1.00 0.0772 0.0002 0.0774 (0.0774) 1.00 8.05
1990-ILA Administration units /(c)/......... 1.00 0.0413 0.0002 0.0415 (0.0415) 1.00 7.67/(b)/
1990-ILA Service units /(c)/................ 1.00 0.0417 0.0003 0.0420 (0.0421) 1.00 7.42/(b)/
1989-ILA units ............................. 1.00 0.0864 0.0005 0.0869 (0.0869) 1.00 9.06
1988-ILA units ............................. 1.00 0.0704 0.0004 0.0708 (0.0708) 1.00 7.30
1987-ILA units ............................. 1.00 0.0617 0.0002 0.0619 (0.0619) 1.00 6.32
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
======================
Ratio Ratio of net Ratio of net
of net investment Net Ratio of net investment
expenses income to assets at expenses to income to
to average of average end of period average net average net
net assets net assets (in 000's) assets assets
=============================================================================
For the Years Ended December 31,
================================
1996-ILA units .................................. 0.41% 4.98% $574,734 0.43% 4.96%
1996-ILA Administration units ................... 0.56 4.83 108,850 0.58 4.81
1996-ILA Service units .......................... 0.81 4.59 123,483 0.83 4.57
1995-ILA units .................................. 0.41 5.51 711,209 0.43 5.49
1995-ILA Administration units ................... 0.56 5.37 92,643 0.58 5.35
1995-ILA Service units .......................... 0.81 5.11 119,692 0.83 5.09
1994-ILA units .................................. 0.40 3.77 713,816 0.44 3.73
1994-ILA Administration units ................... 0.55 3.68 97,626 0.59 3.64
1994-ILA Service units .......................... 0.80 3.40 108,972 0.84 3.35
1993-ILA units .................................. 0.40 2.79 969,565 0.43 2.76
1993-ILA Administration units ................... 0.55 2.64 121,327 0.58 2.61
1993-ILA Service units .......................... 0.80 2.39 185,506 0.83 2.36
1992-ILA units .................................. 0.40 3.39 1,328,036 0.43 3.36
1992-ILA Administration units ................... 0.55 3.20 152,804 0.58 3.17
1992-ILA Service units .......................... 0.80 2.94 183,208 0.83 2.91
1991-ILA units .................................. 0.40 5.57 1,709,321 0.43 5.54
1991-ILA Administration units ................... 0.55 5.40 146,795 0.58 5.37
1991-ILA Service units .......................... 0.80 5.15 154,419 0.83 5.12
1990-ILA units .................................. 0.39 7.72 1,816,991 0.39 7.72
1990-ILA Administration units /(c)/.............. 0.55/(b)/ 7.42/(b)/ 132,088 0.55/(b)/ 7.42/(b)/
1990-ILA Service units /(c)/..................... 0.80/(b)/ 7.11/(b)/ 148,323 0.80/(b)/ 7.11/(b)/
1989-ILA units .................................. 0.40 8.64 1,769,974 0.40 8.64
1988-ILA units .................................. 0.40 7.04 1,657,215 0.40 7.04
1987-ILA units .................................. 0.40 6.17 1,693,767 0.40 6.17
</TABLE>
- -------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Instruments Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
========================================
Net asset Net realized Total Net asset
value at Net gain income from Distributions value at
beginning investment on investment investment to end Total /(a)/
of period income transcations operations unitholders of period return
===================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ............. $1.00 $0.0496 $0.0004 $0.0500 $(0.0500) $1.00 5.10%
1996-ILA Administration
units ................... 1.00 0.0482 0.0004 0.0486 (0.0486) 1.00 4.95
1996-ILA Service units ..... 1.00 0.0456 0.0004 0.0460 (0.0460) 1.00 4.68
1995-ILA units ............. 1.00 0.0550 0.0006 0.0556 (0.0556) 1.00 5.70
1995-ILA Administration
units ................... 1.00 0.0534 0.0007 0.0541 (0.0540) 1.00 5.54
1995-ILA Service units ..... 1.00 0.0500 0.0005 0.0505 (0.0505) 1.00 5.28
1994-ILA units ............. 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 4.01
1994-ILA Administration
units ................... 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 3.85
1994-ILA Service units ..... 1.00 0.0371 0.0001 0.0372 (0.0372) 1.00 3.59
1993-ILA units ............. 1.00 0.0288 0.0006 0.0294 (0.0294) 1.00 2.98
1993-ILA Administration
units ................... 1.00 0.0273 0.0006 0.0279 (0.0279) 1.00 2.83
1993-ILA Service units ..... 1.00 0.0248 0.0006 0.0254 (0.0254) 1.00 2.57
1992-ILA units ............. 1.00 0.0338 0.0012 0.0350 (0.0350) 1.00 3.54
1992-ILA Administration
units ................... 1.00 0.0326 0.0012 0.0338 (0.0338) 1.00 3.38
1992-ILA Service units ..... 1.00 0.0275 0.0011 0.0286 (0.0286) 1.00 3.13
For the Period January 30, 1991 (commencement of operations) through December 31,
=================================================================================
1991-ILA units ............. 1.00 0.0486 0.0013 0.0499 (0.0499) 1.00 5.75/(b)/
1991-ILA Administration
units /(c)/.............. 1.00 0.0210 0.0010 0.0220 (0.0220) 1.00 5.21/(b)/
1991-ILA Service units /(c)/ 1.00 0.0473 0.0009 0.0482 (0.0482) 1.00 5.33/(b)/
</TABLE>
<TABLE>
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
====================================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net of period average net average net
assets assets (in 000's) assets assets
=============================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ............. 0.21% 4.96% $708,999 0.43% 4.74%
1996-ILA Administration
units ................... 0.36 4.82 137,706 0.58 4.60
1996-ILA Service units ..... 0.61 4.56 383,901 0.83 4.34
1995-ILA units ............. 0.21 5.50 586,294 0.44 5.27
1995-ILA Administration
units ................... 0.36 5.34 68,713 0.59 5.11
1995-ILA Service units ..... 0.61 5.00 123,254 0.84 4.77
1994-ILA units ............. 0.20 3.96 547,351 0.43 3.73
1994-ILA Administration
units ................... 0.35 3.97 64,388 0.58 3.74
1994-ILA Service units ..... 0.60 3.72 74,451 0.83 3.49
1993-ILA units ............. 0.20 2.88 456,411 0.44 2.64
1993-ILA Administration
units ................... 0.35 2.73 26,553 0.59 2.49
1993-ILA Service units ..... 0.60 2.48 34,014 0.84 2.24
1992-ILA units ............. 0.18 3.38 422,506 0.45 3.11
1992-ILA Administration
units ................... 0.33 3.26 6,915 0.60 2.99
1992-ILA Service units ..... 0.58 2.75 29,522 0.85 2.48
For the Period January 30, 1991 through December 31,
====================================================
1991-ILA units ............. 0.10/(b)/ 5.28/(b)/ 424,436 0.45/(b)/ 4.93/(b)/
1991-ILA Administration
units /(c)/.............. 0.25/(b)/ 4.77/(b)/ 17,649 0.60/(b)/ 4.42/(b)/
1991-ILA Service units /(c)/ 0.50/(b)/ 5.13/(b)/ 9,430 0.85/(b)/ 4.78/(b)/
</TABLE>
- -------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during July and
January of 1991, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Federal Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
--------------------------------------
Net
asset Net realized Total
value at gain income Net asset
beginning Net on from Distributions value at
of investment investment investment to end Total
period income transactions operations unitholders of period return(a)
======================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
- --------------------------------
1996-ILA units ....................... $1.00 $0.0513 -- $0.0513 $(0.0513) $1.00 5.24%
1996-ILA Administration units......... 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.09
1996-ILA Service units ............... 1.00 0.0473 -- 0.0473 (0.0473) 1.00 4.83
1995-ILA units ....................... 1.00 0.0569 -- 0.0569 (0.0569) 1.00 5.83
1995-ILA Administration units ........ 1.00 0.0550 -- 0.0550 (0.0550) 1.00 5.67
1995-ILA Service units ............... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.41
1994-ILA units ....................... 1.00 0.0407 -- 0.0407 (0.0407) 1.00 4.11
1994-ILA Administration units ........ 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.95
1994-ILA Service units ............... 1.00 0.0392 -- 0.0392 (0.0392) 1.00 3.69
1993-ILA units ....................... 1.00 0.0296 -- 0.0296 (0.0296) 1.00 3.00
1993-ILA Administration units ........ 1.00 0.0281 -- 0.0281 (0.0281) 1.00 2.84
1993-ILA Service units/(c)/........... 1.00 0.0157 -- 0.0157 (0.0157) 1.00 2.56/(b)/
1992-ILA units ....................... 1.00 0.0358 -- 0.0358 (0.0358) 1.00 3.61
1992-ILA Administration units ........ 1.00 0.0340 -- 0.0340 (0.0340) 1.00 3.46
1991-ILA units ....................... 1.00 0.0576 -- 0.0576 (0.0576) 1.00 5.94
1991-ILA Administration units ........ 1.00 0.0542 -- 0.0542 (0.0542) 1.00 5.78
1991-ILA Service units/(c)/........... 1.00 0.0196 -- 0.0196 (0.0196) 1.00 5.55/(b)/
1990-ILA units ....................... 1.00 0.0772 -- 0.0772 (0.0772) 1.00 8.06
1990-ILA Administration units/(d)/.... 1.00 0.0205 -- 0.0205 (0.0205) 1.00 7.39/(b)/
For the Period May 22, 1989 (commencement of operations) through December 31,
- -----------------------------------------------------------------------------
1989-ILA units ....................... 1.00 0.0516 -- 0.0516 (0.0516) 1.00 7.62(b)
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
---------------------------
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net of period average net average net
assets assets (in 000's) assets assets
====================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
- --------------------------------
1996-ILA units ....................... 0.26% 5.13% $2,303,677 0.43% 4.96%
1996-ILA Administration units......... 0.41 4.98 794,537 0.58 4.81
1996-ILA Service units ............... 0.66 4.73 192,416 0.83 4.56
1995-ILA units ....................... 0.26 5.69 1,731,935 0.42 5.53
1995-ILA Administration units ........ 0.41 5.50 516,917 0.57 5.34
1995-ILA Service units ............... 0.66 5.22 102,576 0.82 5.06
1994-ILA units ....................... 0.25 4.07 1,625,567 0.42 3.90
1994-ILA Administration units ........ 0.40 3.88 329,896 0.57 3.71
1994-ILA Service units ............... 0.65 3.92 15,539 0.82 3.75
1993-ILA units ....................... 0.25 2.96 1,430,292 0.42 2.79
1993-ILA Administration units ........ 0.40 2.81 362,401 0.57 2.64
1993-ILA Service units/(c)/........... 0.65/(b)/ 2.54/(b)/ 1,425 0.82/(b)/ 2.37/(b)/
1992-ILA units ....................... 0.25 3.58 1,600,989 0.42 3.41
1992-ILA Administration units ........ 0.40 3.40 312,792 0.57 3.23
1991-ILA units ....................... 0.25 5.76 1,656,232 0.42 5.59
1991-ILA Administration units ........ 0.40 5.42 291,810 0.57 5.25
1991-ILA Service units/(c)/........... 0.65/(b)/ 5.56/(b)/ -- 0.82/(b)/ 5.39/(b)/
1990-ILA units ....................... 0.25 7.72 1,368,765 0.40 7.57
1990-ILA Administration units/(d)/.... 0.40/(b)/ 7.25/(b)/ 90,748 0.55/(b)/ 7.10/(b)/
For the Period May 22, 1989 (commencement of operations) through December 31,
- -----------------------------------------------------------------------------
1989-ILA units ....................... 0.19/(b)/ 8.41/(b)/ 455,230 0.40/(b)/ 8.20/(b)/
</TABLE>
- ----------------
/(a)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/ Annualized.
/(c)/ ILA Service unit activity commenced during April of 1991; no shares were
outstanding during the period from August 7, 1991 through May 15, 1993.
(d)ILA Administration unit activity commenced during September of 1990.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Goldman Sachs--Institutional Liquid Assets
- ------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt Diversified Portfolio
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
======================================
Net
Net asset realized Total Net asset
value at Net gain(loss) income from value at
beginning investment on investment investment Distributions end of Total
of period income transactions operations to unitholders period return/(a)/
===============================================================================================
For the Years Ended December 31,
================================
<S> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units ..................... $1.00 $0.0320 $ $0.0320 $(0.0320) $1.00 3.25%
1996-ILA Administration units....... 1.00 0.0306 -- 0.0306 (0.0306) 1.00 3.09
1996-ILA Service units ............. 1.00 0.0279 -- 0.0279 (0.0279) 1.00 2.84
1995-ILA units ..................... 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.72
1995-ILA Administration units....... 1.00 0.0351 -- 0.0351 (0.0352) 1.00 3.57
1995-ILA Service units ............. 1.00 0.0324 -- 0.0324 (0.0325) 1.00 3.31
1994-ILA units ..................... 1.00 0.0264 -- 0.0264 (0.0264) 1.00 2.71
1994-ILA Administration units....... 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.55
1994-ILA Service units ............. 1.00 0.0220 -- 0.0220 (0.0220) 1.00 2.30
1993-ILA units ..................... 1.00 0.0222 -- 0.0222 (0.0222) 1.00 2.25
1993-ILA Administration units....... 1.00 0.0207 -- 0.0207 (0.0207) 1.00 2.09
1993-ILA Service units ............. 1.00 0.0183 -- 0.0183 (0.0183) 1.00 1.84
1992-ILA units ..................... 1.00 0.0277 -- 0.0277 (0.0277) 1.00 2.82
1992-ILA Administration units....... 1.00 0.0266 -- 0.0266 (0.0266) 1.00 2.67
1992-ILA Service units ............. 1.00 0.0243 -- 0.0243 (0.0243) 1.00 2.41
1991-ILA units ..................... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.33
1991-ILA Administration units....... 1.00 0.0406 -- 0.0406 (0.0406) 1.00 4.17
1991-ILA Service units ............. 1.00 0.0386 -- 0.0386 (0.0386) 1.00 3.91
1990-ILA units ..................... 1.00 0.0550 (0.0001) 0.0549 (0.0549) 1.00 5.64
1990-ILA Administration units /(c)/. 1.00 0.0301 -- 0.0301 (0.0300) 1.00 5.43/(b)/
1990-ILA Service units /(c)/........ 1.00 0.0259 -- 0.0259 (0.0259) 1.00 5.17/(b)/
1989-ILA units ..................... 1.00 0.0591 (0.0001) 0.0590 (0.0590) 1.00 6.07
1988-ILA units ..................... 1.00 0.0487 0.0003 0.0490 (0.0490) 1.00 5.03
1987-ILA units ..................... 1.00 0.0413 (0.0003) 0.0410 (0.0410) 1.00 4.23
<CAPTION>
Ratio assuming no
waiver of fees and no
expense limitation
==============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
===================================================================================
For the Years Ended December 31,
================================
<S> <C> <C> <C> <C> <C>
1996-ILA units ..................... 0.31% 3.20% $1,514,443 0.41% 3.10%
1996-ILA Administration units....... 0.46 3.06 59,097 0.56 2.96
1996-ILA Service units ............. 0.71 2.79 28,921 0.81 2.69
1995-ILA units ..................... 0.31 3.65 $1,342,585 0.42 3.54
1995-ILA Administration units....... 0.46 3.51 48,773 0.57 3.40
1995-ILA Service units ............. 0.71 3.24 49,647 0.82 3.13
1994-ILA units ..................... 0.30 2.64 1,434,965 0.41 2.53
1994-ILA Administration units....... 0.45 2.50 97,778 0.56 2.39
1994-ILA Service units ............. 0.70 2.20 36,492 0.81 2.09
1993-ILA units ..................... 0.30 2.22 1,769,477 0.41 2.11
1993-ILA Administration units....... 0.45 2.08 99,896 0.56 1.97
1993-ILA Service units ............. 0.70 1.83 45,172 0.81 1.72
1992-ILA units ..................... 0.30 2.77 1,333,925 0.42 2.65
1992-ILA Administration units....... 0.45 2.66 50,225 0.57 2.54
1992-ILA Service units ............. 0.70 2.43 29,534 0.82 2.31
1991-ILA units ..................... 0.32 4.24 1,044,986 0.42 4.14
1991-ILA Administration units....... 0.47 4.06 37,567 0.57 3.96
1991-ILA Service units ............. 0.72 3.86 52,399 0.82 3.76
1990-ILA units ..................... 0.40 5.50 603,895 0.40 5.50
1990-ILA Administration units /(c)/. 0.55/(b)/ 5.40/(b)/ 42,498 0.55/(b)/ 5.40/(b)/
1990-ILA Service units /(c)/........ 0.80/(b)/ 5.16/(b)/ 56,810 0.80/(b)/ 5.16/(b)/
1989-ILA units ..................... 0.40 5.91 688,556 0.40 5.91
1988-ILA units ..................... 0.40 4.87 907,782 0.40 4.87
1987-ILA units ..................... 0.40 4.13 965,714 0.40 4.13
- -------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt California Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=====================================
Net Net Total
asset realized income Net asset
value at Net (loss) on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended
December 31,
==========================
1996-ILA units ............. $1.00 $0.0299 -- $0.0299 $(0.0299) $1.00 3.03%
1996-ILA Administration
units ................... 1.00 0.0284 -- 0.0284 (0.0284) 1.00 2.88
1995-ILA units ............. 1.00 0.0349 -- 0.0349 (0.0350) 1.00 3.55
1995-ILA Administration
units ................... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.40
1994-ILA units ............. 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.53
1994-ILA Administration
units ................... 1.00 0.0233 -- 0.0233 (0.0233) 1.00 2.37
1993-ILA units ............. 1.00 0.0206 -- 0.0206 (0.0206) 1.00 2.09
1993-ILA Administration
units ................... 1.00 0.0191 -- 0.0191 (0.0191) 1.00 1.93
1993-ILA Service units ..... 1.00 0.0166 -- 0.0166 (0.0166) 1.00 1.68
1992-ILA units ............. 1.00 0.0256 (0.0001) 0.0255 (0.0256) 1.00 2.62
1992-ILA Administration
units ................... 1.00 0.0235 (0.0002) 0.0233 (0.0235) 1.00 2.47
1992-ILA Service units (c).. 1.00 0.0081 -- 0.0081 (0.0081) 1.00 1.99/(b)/
1991-ILA units ............. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.92
1991-ILA Administration
units ................... 1.00 0.0376 -- 0.0376 (0.0376) 1.00 3.80
1990-ILA units ............. 1.00 0.0511 (0.0001) 0.0510 (0.0511) 1.00 5.24
1990-ILA Administration
units (c)................ 1.00 0.0042 -- 0.0042 (0.0042) 1.00 5.14/(b)/
1989-ILA units ............. 1.00 0.0573 (0.0001) 0.0572 (0.0572) 1.00 5.93
For the Period October 3, 1988 (commencement of operations) through
December 31,
=========================================================
1988-ILA units ............. 1.00 0.0139 -- 0.0139 (0.0139) 1.00 5.81/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net period of average net average net
assets assets (in 000's) assets assets
===========================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended
December 31,
==========================
1996-ILA units ............. 0.41% 2.99% $440,476 0.42% 2.98%
1996-ILA Administration
units ................... 0.56 2.84 142 0.57 2.83
1995-ILA units ............. 0.41 3.49 346,728 0.41 3.49
1995-ILA Administration
units ................... 0.56 3.32 61 0.56 3.32
1994-ILA units ............. 0.40 2.50 227,399 0.41 2.49
1994-ILA Administration
units ................... 0.55 2.33 790 0.56 2.32
1993-ILA units ............. 0.40 2.06 229,839 0.44 2.02
1993-ILA Administration
units ................... 0.55 1.91 1,425 0.59 1.87
1993-ILA Service units ..... 0.76 1.66 -- 0.84 1.54
1992-ILA units ............. 0.40 2.56 161,868 0.47 2.49
1992-ILA Administration
units ................... 0.55 2.35 31 0.62 2.28
1992-ILA Service units (c).. 0.80/(b)/ 3 0.87/(b)/ 1.96/(b)/
2.03(b)
1991-ILA units ............. 0.40 3.88 102,494 0.47 3.81
1991-ILA Administration
units ................... 0.55 3.76 13 0.62 3.69
1990-ILA units ............. 0.40 5.11 106,972 0.40 5.11
1990-ILA Administration
units (c)................ 0.55/(b)/ 5.33(b) 68 0.55/(b)/ 5.33/(b)/
1989-ILA units ............. 0.40 5.73 112,463 0.40 5.73
For the Period October 3, 1988 (commencement of
operations) through December 31,
=========================================================
1988-ILA units ............. 0.24/(b)/ 5.74/(b)/ 41,028 0.38/(b)/ 5.60/(b)/
- -------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during December of
1990 and August of 1992, respectively. No service shares were outstanding
for the years ended December 31, 1996, 1995, 1994.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
<TABLE>
<CAPTION>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt New York Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
----------------------------------------
Net asset Net realized Total Net asset
value at Net loss income from value at
beginning investment on investment investment Distribution end Total
of period income transactions operations to unitholders of period return(a)
=============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
- ---------------------------------
1996-ILA units ..................... $1.00 $0.0301 -- $0.0301 $(0.0301) $1.00 3.05%
1996-ILA Administration units ...... 1.00 0.0288 -- 0.0288 (0.0288) 1.00 2.90
1995-ILA units ..................... 1.00 0.0344 -- 0.0344 (0.0344) 1.00 3.51
1995-ILA Administration units ...... 1.00 0.0328 -- 0.0328 (0.0328) 1.00 3.35
1994-ILA units ..................... 1.00 0.0262 -- 0.0262 (0.0262) 1.00 2.56
1994-ILA Administration units ...... 1.00 0.0247 -- 0.0247 (0.0247) 1.00 2.41
1993-ILA units ..................... 1.00 0.0221 -- 0.0221 (0.0221) 1.00 2.21
1993-ILA Administration units ...... 1.00 0.0205 -- 0.0205 (0.0205) 1.00 2.05
1992-ILA units ..................... 1.00 0.0265 -- 0.0265 (0.0265) 1.00 2.71
1992-ILA Administration units ...... 1.00 0.0253 -- 0.0253 (0.0253) 1.00 2.55
For the Period February 15, 1991 (commencement of operations) through December 31,
- -----------------------------------------------------------------------------------
1991-ILA units ..................... 1.00 0.0347 (0.0002) 0.0345 (0.0347) 1.00 4.02/(b)/
1991-ILA Administration units /(c)/. 1.00 0.0330 -- 0.0330 (0.0330) 1.00 3.87/(b)/
- --------------------
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
------------------------------
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net of period average net average net
assets assets (in 000's) assets assets
============================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
- ---------------------------------
1996-ILA units ..................... 0.32% 3.01% $70,175 0.43% 2.90%
1996-ILA Administration units ...... 0.47 2.88 44,319 0.58 2.77
1995-ILA units ..................... 0.30 3.44 90,537 0.44 3.30
1995-ILA Administration units ...... 0.45 3.28 26,724 0.59 3.14
1994-ILA units ..................... 0.24 2.62 84,517 0.47 2.39
1994-ILA Administration units ...... 0.39 2.47 38,970 0.62 2.24
1993-ILA units ..................... 0.10 2.21 48,367 0.51 1.80
1993-ILA Administration units ...... 0.25 2.05 20,306 0.66 1.64
1992-ILA units ..................... 0.10 2.65 16,844 0.57 2.18
1992-ILA Administration units ...... 0.25 2.53 14,641 0.72 2.06
For the Period February 15, 1991 (commencement of operations) through December 31,
- -----------------------------------------------------------------------------------
1991-ILA units ..................... 0.10/(b)/ 3.96/(b)/ 11,070 0.76/(b)/ 3.30/(b)/
1991-ILA Administration units/(c)/.. 0.25/(b)/ 3.90/(b)/ 19,198 0.91/(b)/ 3.24/(b)/
</TABLE>
- -------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration unit activity commenced during February of 1991.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Unitholders and Board of Trustees of Goldman Sachs Money Market
Trust--Institutional Liquid Assets:
We have audited the accompanying statements of assets and liabilities of
Goldman Sachs Money Market Trust--Institutional Liquid Assets (a Massachusetts
business trust comprising the Prime Obligations, Money Market, Government,
Treasury Obligations, Treasury Instruments, Federal, Tax-Exempt Diversified,
Tax-Exempt California and Tax-Exempt New York Portfolios), including the
statements of investments as of December 31, 1996, and the related statements of
operations for the year then ended, and the statements of changes in net assets
and the financial highlights for the periods presented. These financial
statements and the financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting Goldman Sachs Money
Market Trust--Institutional Liquid Assets as of December 31, 1996, the results
of their operations for the year then ended, the changes in their net assets and
the financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 10, 1997
- -------------------------------------- ----------------------------------------
44
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------- -----------------------------------------
[This page intentionally left blank]
- -------------------------------------- -----------------------------------------
45
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------ -----------------------------------------
[This page intentionally left blank]
- ------------------------------------ -----------------------------------------
46
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Money Market
Trust--Institutional Liquid Assets Portfolios' Prospectus which contains facts
concerning each Fund's objectives and policies, management, expenses and other
information.
- --------------------------------------------------------------------------------
47
<PAGE>
================================================================================
Goldman Sachs
1 New York Plaza
New York, NY 10004
Trustees
Ashok N. Bakhru, Chairman
David B. Ford
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Douglas C. Grip, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Goldman Sachs
Investment Adviser,
Distributor and Transfer Agent
Goldman Sachs
Money Market Trust
Institutional
Liquid Assets
- --------------------------------------------------------------------------------
Annual Report
December 31, 1996
Prime Obligations Portfolio
Money Market Portfolio
Government Portfolio
Treasury Obligations Portfolio
Treasury Instruments Portfolio
Federal Portfolio
Tax-Exempt Diversified Portfolio
Tax-Exempt California Portfolio
Tax-Exempt New York Portfolio
[LOGO OF GOLDMAN SACHS APPEARS HERE]
================================================================================
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
GOLDMAN SACHS--INSTITUTIONAL LIQUID ASSETS
4900 Sears Tower
Chicago, Illinois 60606
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION -- MAY 1, 1997
ILA ADMINISTRATION UNITS
- --------------------------------------------------------------------------------
Goldman Sachs Trust (the "Trust") is a no-load, open-end management investment
company (or mutual fund) which includes the Goldman Sachs - Institutional Liquid
Assets portfolios. This Statement of Additional Information relates solely to
the offering of ILA Administration Units of:
Prime Obligations Portfolio;
Money Market Portfolio;
Treasury Obligations Portfolio;
Treasury Instruments Portfolio;
Government Portfolio;
Federal Portfolio;
Tax-Exempt Diversified Portfolio;
Tax-Exempt California Portfolio; and
Tax-Exempt New York Portfolio (individually, a "Portfolio" and
collectively the "Portfolios").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Portfolios'
investment adviser. Goldman Sachs serves as distributor and transfer agent to
the Portfolios.
The Goldman Sachs Funds offers banks, corporate cash managers, investment
advisers and other institutional investors a family of professionally-managed
mutual funds, including money market, fixed income and equity funds, and a range
of related services. All products are designed to provide clients with the
benefit of the expertise of GSAM and its affiliates in security selection, asset
allocation, portfolio construction and day-to-day management.
The hallmark of the Goldman Sachs Funds is personalized service, which reflects
the priority that Goldman Sachs places on serving clients' interests. As
Goldman Sachs clients, Service Organizations, as defined below, will be assigned
an Account Administrator ("AA"), who is ready to help with questions concerning
their accounts. During business hours, Service Organizations can call their AA
through a toll-free number to place purchase or redemption orders or to obtain
Portfolio account information. The AA can also answer inquiries about rates of
return and portfolio composition/
<PAGE>
holdings, and guide Service Organizations through operational details. A
Goldman Sachs client can also utilize the SMART/SM/ personal computer software
system which allows Service Organizations to purchase and redeem units and also
obtain Portfolio and account information directly.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus relating to ILA Administration Units dated
May 1, 1997, as amended and supplemented from time to time. A copy of the
Prospectus may be obtained without charge from Service Organizations, as defined
herein, or by calling Goldman, Sachs & Co. at 800-621-2550 or by writing
Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
------------
<S> <C>
Investment Policies and
Practices of the Portfolios...... 4
Investment Limitations........... 43
Trustees and Officers............ 47
The Adviser, Distributor and
Transfer Agent................... 53
Portfolio Transactions........... 57
Net Asset Value.................. 58
Redemptions...................... 60
Calculation of Yield Quotations.. 61
Tax Information.................. 64
Organization and Capitalization.. 71
Custodian and Subcustodian....... 76
Independent Accountants.......... 76
Financial Statements............. 76
Administration Plan.............. 77
Appendix A (Description of
Securities Ratings).............. A-1
</TABLE>
3
<PAGE>
ADMINISTRATION PLAN
The Trust, on behalf of each Portfolio, has adopted an administration plan
(the "Plan") with respect to the ILA Administration Units which authorizes the
Portfolios to compensate Service Organizations for providing certain account
administration services to their customers who are beneficial owners of such
units. Pursuant to the Plan, the Trust, on behalf of each Portfolio, enters into
agreements with Service Organizations which purchase ILA Administration Units on
behalf of their customers ("Service Agreements"). Under such Service
Agreements, the Service Organizations may: (a) act, directly or through an
agent, as the sole unitholder of record and nominee for all customers, (b)
maintain account records for each customer who beneficially owns ILA
Administration Units, (c) answer questions and handle correspondence from
customers regarding their accounts, (d) process customer orders to purchase,
redeem and exchange ILA Administration Units, and handle the transmission of
funds representing the customers' purchase price or redemption proceeds, and (e)
issue confirmations for transactions in units by customers. As compensation for
such services, the Trust on behalf of each Portfolio pays each Service
Organization an administration fee in an amount up to .15% (on an annualized
basis) of the average daily net assets of the ILA Administration Units of each
Portfolio attributable to or held in the name of such Service Organization for
its customers.
For the fiscal years ended December 31, 1996, December 31, 1995 and
December 31, 1994, the amount of the administration fees paid by each Portfolio
to Service Organizations was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Prime Obligations
Portfolio $ 65,534 $141,500 $262,293
Money Market Portfolio 316,155 223,420 265,715
Treasury Obligations
Portfolio 145,201 165,430 175,368
Treasury Instruments
Portfolio 145,441 110,355 57,915
Government Portfolio 63,048 94,196 206,144
Federal Portfolio 906,321 713,846 491,089
Tax-Exempt Diversified
Portfolio 73,660 103,673 146,224
Tax-Exempt California
Portfolio 262 600 1,938
Tax-Exempt New York
Portfolio 39,843 27,783 26,576
</TABLE>
77
<PAGE>
Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in ILA Administration Units. Service Organizations, including banks
regulated by the Comptroller of the Currency, the Federal Reserve Board or the
Federal Deposit Insurance Corporation, and investment advisers and other money
managers subject to the jurisdiction of the Securities and Exchange Commission,
the Department of Labor or State Securities Commissions, are urged to consult
legal advisers before investing fiduciary assets in ILA Administration Units.
In addition, under some state securities laws, banks and other financial
institutions purchasing ILA Administration Units on behalf of their customers
may be required to register as dealers.
The Plans were approved by the respective holders of ILA Administration
Units of each Portfolio on June 3, 1991. The Trustees of the Trust, including a
majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of such Plans or
the related Service Agreements, most recently voted to approve the Plans and
Service Agreements at a meeting called for the purpose of voting on such Plan
and Service Agreements on April 23, 1997. They will remain in effect until
April 30, 1998 and continue in effect thereafter only if such continuance is
specifically approved annually by a vote of the Trustees in the manner described
above. A Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the ILA Administration
unitholders of the affected Portfolio, and all material amendments of the Plan
must also be approved by the Trustees in the manner described above. A Plan may
be terminated at any time by a majority of the Trustees as described above or by
vote of a majority of the outstanding ILA Administration Units of the affected
Portfolio. The Service Agreements may be terminated at any time, without
payment of any penalty, by vote of a majority of the Trustees as described above
or by a vote of a majority of the outstanding ILA Administration Units of the
affected Portfolio on not more than 60 days' written notice to any other party
to the Service Agreements. The Service Agreements shall terminate automatically
if assigned. So long as the Plans are in effect, the selection and nomination
of those Trustees who are not interested persons shall be committed to the
discretion of the Trust's Nominating Committee, which consists of all of the
non-interested members of the Board of Trustees. The Trustees have determined
that, in their judgment, there is a reasonable likelihood that the Plans will
benefit the Portfolios and holders of ILA Administration Units of such
Portfolios. In the Trustees' quarterly review of the Plans and Service
Agreements, they will consider their continued appropriateness and the level of
compensation provided therein.
78
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
GOLDMAN SACHS--INSTITUTIONAL LIQUID ASSETS
4900 Sears Tower
Chicago, Illinois 60606
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION -- MAY 1, 1997
ILA SERVICE UNITS
ILA CLASS B UNITS
_________________________________________________________________
Goldman Sachs Trust(the "Trust") is an open-end management investment company
(or mutual fund) which includes the Goldman Sachs - Institutional Liquid Assets
portfolios. This Statement of Additional Information relates solely to the
offering of ILA Class B Units of Prime Obligations Portfolio and ILA Service
Units of:
Prime Obligations Portfolio;
Money Market Portfolio;
Treasury Obligations Portfolio;
Treasury Instruments Portfolio;
Government Portfolio;
Federal Portfolio;
Tax-Exempt Diversified Portfolio;
Tax-Exempt California Portfolio; and
Tax-Exempt New York Portfolio (individually, a "Portfolio" and collectively
the "Portfolios").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Portfolios'
investment adviser. Goldman Sachs serves as distributor and transfer agent to
the Portfolios.
The Goldman Sachs Funds offers banks, corporate cash managers, investment
advisers and other institutional investors a family of professionally-managed
mutual funds, including money market, fixed income and equity funds, and a range
of related services. All products are designed to provide clients with the
benefit of the expertise of GSAM and its affiliates in security selection, asset
allocation, portfolio construction and day-to-day management.
The hallmark of the Goldman Sachs Funds is personalized service, which reflects
the priority that Goldman Sachs places on serving clients' interests. As
Goldman Sachs clients, Service Organizations, as defined below, will be assigned
an Account Administrator ("AA"), who is ready to help with questions concerning
their accounts. During business hours, Service Organizations can call their AA
through a toll-free number to place purchase or redemption orders or to obtain
Portfolio and
<PAGE>
account information. The AA can also answer inquiries about rates of return and
portfolio composition/ holdings, and guide Service Organizations through
operational details. A Goldman Sachs client can also utilize the SMART/SM/
personal computer software system which allows Service Organizations to purchase
and redeem units and also obtain Portfolio and account information
directly.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with each Prospectus relating to the ILA Service Units and ILA
Class B Units each dated May 1, 1997, as amended and supplemented from time to
time. A copy of each Prospectus may be obtained without charge from Service
Organizations, as defined herein, or by calling Goldman, Sachs & Co. at 800-621-
2550 or by writing Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois
60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
------------
<S> <C>
Investment Policies and
Practices of the Portfolios...... 4
Investment Limitations........... 43
Trustees and Officers............ 47
The Adviser, Distributor and
Transfer Agent................... 53
Portfolio Transactions........... 57
Net Asset Value.................. 58
Redemptions...................... 60
Calculation of Yield Quotations.. 61
Tax Information.................. 64
Organization and Capitalization.. 71
Custodian and Subcustodian....... 76
Independent Accountants.......... 76
Financial Statements............. 76
Service and Distribution Plans... 77
Appendix A (Description of
Securities Ratings).............. A-1
</TABLE>
3
<PAGE>
SERVICE PLAN
(ILA Service Units Only)
The Trust, on behalf of each Portfolio, has adopted a service plan (the
"Plan") with respect to the ILA Service Units which authorizes the Portfolios to
compensate Service Organizations for providing certain account administration
and personal account maintenance services to their customers who are or may
become beneficial owners of such units. Pursuant to the Plan, the Trust, on
behalf of each Portfolio, enters into agreements with Service Organizations
which purchase ILA Service Units on behalf of their customers ("Service
Agreements"). Under such Service Agreements the Service Organizations may: (a)
act, directly or through an agent, as the sole unitholder of record and nominee
for all customers, (b) maintain account records for each customer who
beneficially owns ILA Service Units, (c) answer questions and handle
correspondence from customers regarding their accounts, (d) process customer
orders to purchase, redeem and exchange ILA Service Units, and handle the
transmission of funds representing the customers' purchase price or redemption
proceeds, (e) issue confirmations for transactions in units by customers, (f)
provide facilities to answer questions from prospective and existing investors
about ILA Service Units, (g) receive and answer investor correspondence,
including requests for prospectuses and statements of additional information,
(h) display and make prospectuses available on the Service Organization's
premises, (i) assist customers in completing application forms, selecting
dividend and other account options and opening custody accounts with the Service
Organization, and (j) act as liaison between customers and the Trust, including
obtaining information from the Trust, working with the Trust to correct errors
and resolve problems and providing statistical and other information to the
Trust. As compensation for such services, the Trust on behalf of each Portfolio
pays each Service Organization a service fee in an amount up to .40% (on an
annualized basis) of the average daily net assets of the ILA Service Units of
each Portfolio attributable to or held in the name of such Service Organization
for its customers; provided, however, that the fee paid for personal and account
maintenance services shall not exceed .25% of such average daily net assets.
For the fiscal years ended December 31, 1996, December 31, 1995 and
December 31, 1994, the amount of the service fees paid by each Portfolio then in
existence to Service Organizations was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- -------- --------
<S> <C> <C> <C>
Prime Obligations
Portfolio $ 494,274 $937,733 $630,669
Money Market Portfolio 128,313 102,642 82,267
</TABLE>
77
<PAGE>
<TABLE>
<S> <C> <C> <C>
Treasury Obligations
Portfolio $ 579,790 478,419 435,536
Treasury Instruments
Portfolio 1,266,586 316,188 187,470
Government Portfolio 352,931 430,114 603,447
Federal Portfolio 562,023 254,508 34,415
Tax-Exempt Diversified
Portfolio 130,158 220,790 187,137
Tax-Exempt California
Portfolio/(1)/ -- -- --
Tax-Exempt New York
Portfolio/(1)/ -- -- --
</TABLE>
- --------------------------------------------------------
/(1)/ ILA Service Unit activity has not commenced operations.
The Trust has adopted each Plan pursuant to Rule 12b-l under the Investment
Company Act in order to avoid any possibility that payments to the Service
Organizations pursuant to the Service Agreements might violate the Investment
Company Act. Rule 12b-l, which was adopted by the Securities and Exchange
Commission under the Investment Company Act, regulates the circumstances under
which an investment company such as the Trust may bear expenses associated with
the distribution of its securities. In particular, such an investment company
cannot engage directly or indirectly in financing any activity which is
primarily intended to result in the sale of securities issued by the company
unless it has adopted a plan pursuant to, and complies with the other
requirements of, such Rule. The Trust believes that fees paid for the services
provided in the Plan and described above are not expenses incurred primarily for
effecting the distribution of ILA Service Units. However, should such payments
be deemed by a court or the Securities and Exchange Commission to be
distribution expenses, such payments would be duly authorized by the Plan.
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent in the business of issuing, underwriting, selling or
distributing securities, although institutions such as national banks are
permitted to purchase and sell securities upon the order and for the account of
their customers. Should future legislative or administrative action or judicial
or administrative decisions or interpretations prohibit or restrict the
activities of one or more of the Service Organizations in connection with the
Trust, such Service Organizations might be required to alter materially or
discontinue the services performed under their Service Agreements. If one or
more of the Service Organizations were restricted from effecting
78
<PAGE>
purchases or sales of ILA Service Units automatically pursuant to pre-authorized
instructions, for example, effecting such transactions on a manual basis might
affect the size and/or growth of the Portfolios. In addition, state securities
laws on this issue may differ from the interpretations of federal law expressed
herein and banks and other financial institutions purchasing ILA Service Units
on behalf of their customers may be required to register as dealers pursuant to
state law. Any such alteration or discontinuance of services could require the
Trustees of the Trust to consider changing the Trust's method of operations or
providing alternative means of offering ILA Service Units to customers of such
Service Organizations, in which case the operation of the Trust, its size and/or
its growth might be significantly altered. It is not anticipated, however, that
any alteration of the Trust's operations would have any effect on the net asset
value per unit or result in financial losses to any unitholder.
Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in ILA Service Units. Service Organizations, including banks regulated by
the Comptroller of the Currency, the Federal Reserve Board or the Federal
Deposit Insurance Corporation, and investment advisers and other money managers
subject to the jurisdiction of the Securities and Exchange Commission, the
Department of Labor or State Securities Commissions, are urged to consult legal
advisers before investing fiduciary assets in ILA Service Units.
The Plans were approved by the respective holders of ILA Service Units of
each Portfolio (other than the Tax-Exempt California and Tax-Exempt New York
Portfolios) on June 3, 1991. The Trustees of the Trust, including a majority of
the Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of such Plans or the related
Service Agreements, most recently voted to approve the Plans and Service
Agreements at a meeting called for the purpose of voting on such Plan and
Service Agreements on April 23, 1997. They will remain in effect until April
30, 1998 and will continue in effect thereafter only if such continuance is
specifically approved annually by a vote of the Trustees in the manner described
above. A Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the ILA Service
unitholders of the affected Portfolio, and all material amendments of a Plan
must also be approved by the Trustees in the manner described above. A Plan may
be terminated at any time by a majority of the Trustees as described above or by
vote of a majority of the outstanding ILA Service Units of the affected
Portfolio. The Service Agreements may be terminated at any time, without
payment of any penalty, by vote of a majority of the Trustees as
79
<PAGE>
described above or by a vote of a majority of the outstanding ILA Service Units
of the affected Portfolio on not more than 60 days' written notice to any other
party to the Service Agreements. The Service Agreements shall terminate
automatically if assigned. So long as the Plans are in effect, the selection
and nomination of those Trustees who are not interested persons shall be
determined by the discretion of the Trust's Nominating Committee, which consists
of all of the non-interested members of the Board of Trustees. The Trustees
have determined that, in their judgment, there is a reasonable likelihood that
the Plans will benefit the Portfolios and holders of ILA Service Units of such
Portfolios. In the Trustees' quarterly review of the Plans and Service
Agreements, they will consider their continued appropriateness and the level of
compensation provided therein.
DISTRIBUTION AND AUTHORIZED DEALER SERVICE PLANS (ILA CLASS B UNITS ONLY)
AUTHORIZED DEALER SERVICE PLAN
==============================
As described in the Prospectus, the Prime Obligations Portfolio with
respect to its ILA Class B Units has adopted a non-Rule 12b-1 Authorized Dealer
Service Plan (an "Authorized Dealer Service Plan") pursuant to which Goldman
Sachs and Authorized Dealers are compensated for the provision of personal and
account maintenance services. The Authorized Dealer Service Plan has been most
recently approved by the Board of Trustees, including a majority of the non-
interested Trustees who have no direct or indirect financial interest in the
Authorized Dealer Service Plan, at a meeting held on April 23, 1997. With
respect to its ILA Class B Units, the Prime Obligations Portfolio's Authorized
Dealer Service Plan provides for the compensation for personal and account
maintenance services at an annual rate of up to 0.25% of the Portfolio's average
daily net assets attributable to ILA Class B Units.
The Authorized Dealer Service Plan will remain in effect until June 1, 1998
and from year to year thereafter, provided that the continuance of such service
plan is approved annually by a majority vote of the Trustees of the Trust,
including a majority of the non-interested Trustees who have no direct or
indirect financial interest in the Authorized Dealer Service Plan. All material
amendments of the Authorized Dealer Service Plan must also be approved by the
Trustees of the Trust in the manner described above. The Authorized Dealer
Service Plan may be terminated at any time as to the Prime Obligations Portfolio
without payment of any penalty by a vote of a majority of the non-interested
Trustees of the Trust or by vote of a majority of the outstanding ILA Class B
Units of the Prime Obligations Portfolio. The Trustees of the Trust have
determined that in their judgment there is a reasonable likelihood that the
80
<PAGE>
Authorized Dealer Service Plan will benefit the Prime Obligations Portfolio and
its ILA Class B Unitholders.
CLASS B DISTRIBUTION PLAN. As described in the Prospectus, the Trust has
adopted, on behalf of the Prime Obligations Portfolio, a distribution plan (the
"Class B Plan") pursuant to Rule 12b-1 under the Investment Company Act with
respect to ILA Class B Units. See "Distribution and Authorized Dealer Service
Plans" in the Prospectus.
The Class B Plan was most recently approved on April 23, 1997 on behalf of
the Trust by a majority vote of the Trust's Board of Trustees, including a
majority of the Trustees who are not interested persons of the Trust and have no
direct or indirect financial interest in the Class B Plan, cast in person at a
meeting called for the purpose of approving the Class B Plan.
With respect to the Prime Obligations Portfolio, the compensation payable
under the Class B Plan is equal to 0.75% per annum of the average daily net
assets attributable to ILA Class B Units of that Portfolio. The fees received
by Goldman Sachs under the Class B Plan and contingent deferred sales charges on
ILA Class B Units may be sold by Goldman Sachs as distributor to entities which
provide financing for payments to Authorized Dealers in respect of sales of ILA
Class B Units. To the extent such fee is not paid to such dealers, Goldman
Sachs may retain such fee as compensation for its services and expenses of
distributing the Prime Obligations Portfolio's ILA Class B Units. If such fee
exceeds its expenses, Goldman Sachs may realize a profit from these
arrangements.
The Class B Plan is a compensation plan which provides for the payment of a
specified distribution fee without regard to the distribution expenses actually
incurred by Goldman Sachs. If the Class B Plan were terminated by the Trust's
Board of Trustees and no successor plan were adopted, the Prime Obligations
Portfolio would cease to make distribution payments to Goldman Sachs and Goldman
Sachs would be unable to recover the amount of any of its unreimbursed
distribution expenditures.
Under the Class B Plan, Goldman Sachs, as distributor of the Portfolio's ILA
Class B Units, will provide to the Board of Trustees for its review, and the
Board will review at least quarterly, a written report of the services provided
and amounts expended by Goldman Sachs under the Class B Plan and the purposes
for which such services were performed and expenditures were made.
The Class B Plan will remain in effect with respect to the Prime Obligations
Portfolio from year to year, provided such continuance is approved annually by a
majority vote of the Board
81
<PAGE>
of Trustees, including a majority of the non-interested Trustees. The Class B
Plan may not be amended to increase materially the amount to be spent for the
services described therein as to the Prime Obligations Portfolio without
approval of a majority of the outstanding ILA Class B Unitholders of that
Portfolio. All material amendments of the Class B Plan must also be approved by
the Board of Trustees of the Trust in the manner described above. The Class B
Plan may be terminated at any time without payment of any penalty by a vote of
the majority of the non-interested Trustees or by vote of a majority of the ILA
Class B Units of that Portfolio. So long as the Class B Plan is in effect, the
selection and nomination of non-interested Trustees shall be committed to the
discretion of the non-interested Trustees. The Trustees have determined that in
their judgment there is a reasonable likelihood that the Class B Plan will
benefit the Prime Obligations Portfolio and its respective ILA Class B
Unitholders.
82
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE FUNDS
4900 Sears Tower, Chicago, Illinois 60606
----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION - MAY 1, 1997
FST SHARES
----------------------------------------------------------------
Goldman Sachs Trust (the "Trust") is a no-load, open-end, manage ment investment
company (or mutual fund) which includes the Financial Square Funds. This
Statement of Additional Information relates solely to the offering of FST Shares
of Financial Square Prime Obligations Fund ("Prime Obligations Fund"), Financial
Square Money Market Plus Fund ("Plus Fund"), Financial Square Money Market Fund
("Money Market Fund"), Financial Square Trea sury Obligations Fund ("Treasury
Obligations Fund"), Financial Square Treasury Instruments Fund ("Treasury
Instruments Fund"), Financial Square Government Fund ("Government Fund"),
Financial Square Federal Fund ("Federal Fund"), Financial Square Tax-Free Money
Market Fund ("Tax-Free Fund") and Financial Square Munici pal Money Market Fund
("Municipal Fund") (individually, a "Fund" and collectively the "Funds").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds'
investment adviser. Goldman Sachs serves as the Funds' distributor and transfer
agent.
The Goldman Sachs Mutual Funds offer banks, corporate cash managers, investment
advisers and other institutional investors a family of professionally-managed
mutual funds, including money market, fixed income and equity funds, and a range
of related services. All products are designed to provide clients with the
benefit of the expertise of GSAM and its affiliates in security selection, asset
allocation, portfolio construction and day-to-day management.
The hallmark of the Goldman Sachs Funds is personalized service, which reflects
the priority that Goldman Sachs places on serving clients' interests. As
Goldman Sachs clients, shareholders will be assigned an Account Administrator
("AA"), who is ready to help shareholders with questions concerning their
accounts. During business hours, shareholders can call their AA through a toll-
free number to place purchase or redemption orders or obtain Fund and account
information. The AA can also answer inquiries about rates of return and
portfolio composition/holdings, and guide shareholders through operational
details. A Goldman Sachs client can also utilize the SMART/SM/
<PAGE>
personal computer software system which allows shareholders to purchase or
redeem shares and also obtain Fund and account information directly.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus relating to FST Shares dated May 1, 1997, a
copy of which may be obtained without charge by calling Goldman Sachs at 800-
621-2550 or by writing Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
-------------
<S> <C>
Investment Policies and Practices
of the Funds 4
Investment Limitations 17
Trustees and Officers 21
The Adviser, Distributor and Transfer
Agent 26
Portfolio Transactions 29
Net Asset Value 33
Redemptions 35
Calculation of Yield Quotations 36
Tax Information 38
Organization and Capitalization 43
Custodian and Subcustodian 47
Independent Accountants 47
Financial Statements 48
Appendix A (Description of Securities
Ratings) A-1
</TABLE>
3
<PAGE>
INVESTMENT POLICIES AND PRACTICES OF THE FUNDS
The following discussion elaborates on the description of each Fund's investment
policies and practices contained in the Pro spectus:
U.S. GOVERNMENT SECURITIES
- --------------------------
Each Fund may invest in separately traded principal and interest components of
securities issued or guaranteed by the U.S. Treasury. The principal and
interest components of selected securities are traded independently under the
Separate Trading of Registered Interest and Principal of Securities program
("STRIPS"). Under the STRIPS program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently.
CUSTODIAL RECEIPTS
- ------------------
Each Fund (other than Treasury Obligations, Government, Treasury Instruments and
Federal Funds) may also acquire custodial re ceipts that evidence ownership of
future interest payments, principal payments or both on certain U.S. Government
notes or bonds. Such notes and bonds are held in custody by a bank on behalf of
the owners. These custodial receipts are known by various names, including
"Treasury Receipts," "Treasury Investors Growth Receipts" ("TIGR's"), and
"Certificates of Accrual on Treasury Securities" ("CATS"). Although custodial
receipts are not considered U.S. Government securities for certain securities
law purposes, they are indirectly issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities.
BANK AND CORPORATE OBLIGATIONS
- ------------------------------
Each Fund (other than Treasury Obligations, Government, Treasury Instruments and
Federal Funds) may invest in commercial paper. Commercial paper represents
short-term unsecured promissory notes issued in bearer form by banks or bank
holding companies, corpo rations, and finance companies. The commercial paper
purchased by the Funds consists of direct U.S. dollar denominated obliga tions
of domestic, or in the case of the Money Market and Plus Funds, foreign issuers.
Bank obligations in which the Funds may invest include certificates of deposit,
bankers' acceptances, fixed time deposits and bank notes. Certificates of
deposit are negotiable certificates issued against funds deposited in a
commercial bank for a definite period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect,
4
<PAGE>
that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Fixed time deposits are bank obligations payable at a stated maturity
date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn
on demand by the investor, but may be subject to early withdrawal penalties
which vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed time deposit to a third party, although there is
no market for such deposits. Bank notes and bankers' acceptances rank junior to
domestic deposit liabilities of the bank and pari passu with other senior,
unsecured obligations of the bank. Bank notes are not insured by the Federal
Deposit Insurance Corporation or any other insurer. Deposit notes are insured
by the Federal Deposit Insurance Corporation only to the extent of $100,000 per
depositor per bank.
Prime Obligations Fund, Plus Fund and Money Market Fund may invest in short-term
funding agreements. A funding agreement is a contract between an issuer and a
purchaser that obligates the issuer to pay a guaranteed rate of interest on a
principal sum deposited by the purchaser. Funding agreements will also guaran
tee the return of principal and may guarantee a stream of pay ments over time.
A funding agreement has a fixed maturity date and may have either a fixed rate
or variable interest rate that is based on an index and guaranteed for a set
time period. Because there is no secondary market for these investments, any
such funding agreement purchased by a Fund will be regarded as illiquid.
REPURCHASE AGREEMENTS
- ---------------------
Each Fund (other than Treasury Instruments Fund) may enter into repurchase
agreements only with primary dealers in U.S. Govern ment Securities. A
repurchase agreement is an arrangement under which the purchaser (i.e., the
Fund) purchases a U.S. Government security or other high quality short-term debt
obligation (the "Obligation") and the seller agrees, at the time of sale, to
repurchase the Obligation at a specified time and price.
Custody of the Obligation will be maintained by the Funds' custodian or
subcustodian. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price on repurchase. In either case, the income to a Fund is
unrelated to the interest rate on the Obligation subject to the repurchase
agreement.
Repurchase agreements pose certain risks for all entities, including the Funds,
that utilize them. Such risks are not unique to the Funds but are inherent in
repurchase agreements. The Funds seek to minimize such risks by, among others,
the means indicated below, but because of the inherent legal uncertainties
5
<PAGE>
involved in repurchase agreements, such risks cannot be eliminat ed.
For purposes of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and, generally, for tax purposes, a repurchase agreement is
deemed to be a loan from a Fund to the seller of the Obligation. It is not
clear whether for other purposes a court would consider the Obligation purchased
by a Fund subject to a repurchase agreement as being owned by a Fund or as being
collateral for a loan by the Fund to the seller.
If, in the event of bankruptcy or insolvency proceedings against the seller of
the Obligation, a court holds that a Fund does not have a perfected security
interest in the Obligation, a Fund may be required to return the Obligation to
the seller's estate and be treated as an unsecured creditor of the seller. As
an unse cured creditor, a Fund would be at risk of losing some or all of the
principal and income involved in the transaction. To mini mize this risk, the
Funds utilize custodians and subcustodians that the Adviser believes follow
customary securities industry practice with respect to repurchase agreements,
and the Adviser analyzes the creditworthiness of the obligor, in this case the
seller of the Obligation. But because of the legal uncertain ties, this risk,
like others associated with repurchase agree ments, cannot be eliminated.
Also, in the event of commencement of bankruptcy or insolvency proceedings with
respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, a Fund may encounter delay and incur costs before
being able to sell the security. Such a delay may involve loss of interest or a
decline in the price of the Obligation.
Apart from risks associated with bankruptcy or insolvency pro ceedings, there is
also the risk that the seller may fail to repurchase the security. However, if
the market value of the Obligation subject to the repurchase agreement becomes
less than the repurchase price (including accrued interest), the Fund will
direct the seller of the Obligation to deliver additional securi ties so that
the market value of all securities subject to the repurchase agreement equals or
exceeds the repurchase price.
Certain repurchase agreements which mature in more than seven days can be
liquidated before the nominal fixed term on seven days or less notice. Such
repurchase agreements will be regarded as liquid instruments.
In addition, the Funds (other than the Treasury Instruments Fund), together with
other registered investment companies having management agreements with the
Adviser or any of its affiliates, may 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.
6
<PAGE>
FOREIGN SECURITIES
- ------------------
Money Market Fund and Plus Fund may invest in foreign securities and in
certificates of deposit, bankers' acceptances and fixed time deposits and other
obligations issued by major foreign banks, foreign branches of U.S. banks, U.S.
branches of foreign banks and foreign branches of foreign banks. Tax-Free Fund
and Municipal Fund may also invest in municipal instruments backed by letters of
credit issued by certain of such banks. Under current Securities and Exchange
Commission ("SEC") rules relating to the use of the amortized cost method of
portfolio securities valua tion, Money Market Fund and Plus Fund are restricted
to pur chasing U.S. dollar denominated securities, but they are not otherwise
precluded from purchasing securities of foreign issu ers.
Investments in foreign securities and bank obligations may involve
considerations different from investments in domestic securities due to limited
publicly available information; non-uniform accounting standards; the possible
imposition of withholding or confiscatory taxes; the possible adoption of
foreign governmental restrictions affecting the payment of principal and
interest; expropriation; or other adverse political or economic developments.
In addition, it may be more difficult to obtain and enforce a judgment against a
foreign issuer or a foreign branch of a domestic bank.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
- ----------------------------------------------
Each of Prime Obligations Fund, Money Market Fund and Plus Fund may invest in
asset-backed and receivables-backed securities. Asset-backed and receivables-
backed securities represent participations in, or are secured by and payable
from, pools of assets such as motor vehicle installment sale contracts, install
ment loan contracts, leases of various types of real and personal property,
receivables from revolving credit (credit card) agree ments, corporate
securities and other categories of receivables. Such asset pools are
securitized through the use of privately-formed trusts or special purpose
vehicles. Payments or distribu tions of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution, or other
credit enhancements may be present. The value of a Fund's investments in asset-
backed and receivables-backed securities may be adversely affected by prepayment
of the underlying obliga tions. In addition, the risk of prepayment may cause
the value of these investments to be more volatile than a Fund's other
investments.
Through the use of trusts and special purpose corporations, various types of
assets, including automobile loans, computer leases, trade receivables and
credit card receivables, are being securitized in pass-through structures
similar to the mortgage pass-through structures. Consistent with their
respective
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investment objective and policies, the Funds may invest in these and other types
of asset-backed securities that may be developed in the future. This Statement
of Additional Information will be amended or supplemented as necessary to
reflect the Prime Obliga tions, Money Market and Plus Funds' intention to invest
in asset-backed securities with characteristics that are materially different
from the securities described in the preceding para graph. However, a Fund will
generally not invest in an asset-backed security if the income received with
respect to such investment constitutes rental income or other income not treated
as qualifying income under the 90% test described in "Tax Infor mation" below.
In general, the collateral supporting these securities is of shorter maturity
than mortgage loans and is less likely to experience substantial prepayments in
response to interest rate fluctuations.
As set forth above, several types of asset-backed and receiv ables-backed
securities have already been offered to investors, including, for example,
Certificates for Automobile Receivables/sm/ ("CARS/sm/") and interests in pools
of credit card receivables. CARS/sm/ represent undivided fractional interests
in a trust ("CAR Trust") whose assets consist of a pool of motor vehicle retail
installment sales contracts and security interests in the vehi cles securing the
contracts. Payments of principal and interest on CARS/sm/ are passed through
monthly to certificate holders, and are guaranteed up to certain amounts and for
a certain time period by a letter of credit issued by a financial institution
unaffiliated with the trustee or originator of the CAR Trust. An investor's
return on CARS/sm/ may be affected by early prepayment of principal on the
underlying vehicle sales contracts. If the letter of credit is exhausted, the
CAR Trust may be prevented from realizing the full amount due on a sales
contract because of state law requirements and restrictions relating to
foreclosure sales of vehicles and the obtaining of deficiency judgments
following such sales or because of depreciation, damage or loss of a vehicle,
the application of federal and state bankruptcy and insolvency laws, or other
factors. As a result, certificate holders may experience delays in payments or
losses if the letter of credit is exhausted.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the
benefit of any security interest in the related assets. Credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which give such
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. There is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.
Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures
by obligors on underlying assets
8
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to make payments, the securities may contain elements of credit support which
fall into two categories: (i) liquidity protection and (ii) protection against
losses resulting from ultimate default by an obligor or servicer. Liquidity
protection refers to the provision of advances, generally by the entity
administer ing the pool of assets, to ensure that the receipt of payments on the
losses results from payment of the insurance obligations on at least a portion
of the assets in the pool. This protection may be provided through guarantees,
policies or letters of credit obtained by the issuer or sponsor from third
parties, through various means of structuring the transactions or through a
combination of such approaches. The degree of credit support provided for each
issue is generally based on historical informa tion reflecting the level of
credit risk associated with the underlying assets. Delinquency or loss in
excess of that antici pated or failure of the credit support could adversely
affect the value of or return on an investment in such a security.
The availability of asset-backed securities may be affected by legislative or
regulatory developments. It is possible that such developments could require
Prime Obligations, Money Market or Plus Fund to dispose of any of their
respective existing holdings of such securities.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
- ----------------------------------------------
Each Fund may purchase securities on a when-issued basis or purchase or sell
securities on a forward commitment basis. These transactions involve a
commitment by the Fund to purchase or sell securities at a future date. The
price of the underlying securi ties (usually expressed in terms of yield) and
the date when the securities will be delivered and paid for (the settlement
date) are fixed at the time the transaction is negotiated. When-issued
purchases and forward commitment transactions are negotiated directly with the
other party, and such commitments are not traded on exchanges, but may be traded
over-the-counter.
A Fund will purchase securities on a when-issued basis or pur chase or sell
securities on a forward commitment basis only with the intention of completing
the transaction and actually purchas ing or selling the securities. If deemed
advisable as a matter of investment strategy, however, a Fund may dispose of or
renego tiate a commitment after entering into it. A Fund also may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. The Fund may realize a capital gain or loss in
connection with these transac tions; distributions from any net capital gains
would be taxable to its shareholders. For purposes of determining the Fund's
average dollar weighted maturity, the maturity of when-issued or forward
commitment securities will be calculated from the commit ment date.
When a Fund purchases securities on a when-issued or forward commitment basis,
the Fund's custodian or subcustodian will
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<PAGE>
maintain in a segregated account cash or liquid assets having a value
(determined daily) at least equal to the amount of the Fund's purchase
commitments. In the case of a forward commitment to sell portfolio securities
subject to such commitment, the custodian or subcustodian will hold the
portfolio securities in a segregated account while the commitment is
outstanding. These procedures are designed to ensure that the Fund will
maintain sufficient assets at all times to cover its obligations under when-
issued purchases and forward commitments.
VARIABLE AMOUNT MASTER DEMAND NOTES
- -----------------------------------
Each Fund (other than Treasury Obligations and Treasury Instru ments Funds) may
purchase variable amount master demand notes. These obligations permit the
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangements between a Fund, as lender, and the borrower. Variable
amount master demand notes are direct lending arrangements between the lender
and borrower and are not generally transferable nor are they ordinarily rated.
A Fund may invest in them only if the Adviser believes that the notes are of
comparable quality to the other obligations in which the Fund may invest.
VARIABLE RATE AND FLOATING RATE DEMAND INSTRUMENTS
- --------------------------------------------------
Each Fund (other than Treasury Obligations and Treasury Instru ments Funds) may
purchase variable and floating rate demand instruments that are tax exempt
municipal obligations or other debt securities that possess a floating or
variable interest rate adjustment formula. These instruments permit a Fund to
demand payment of the principal balance plus unpaid accrued interest upon a
specified number of days' notice to the issuer or its agent. The demand feature
may be backed by a bank letter of credit or guarantee issued with respect to
such instrument.
The terms of the variable or floating rate demand instruments that a Fund may
purchase provide that interest rates are adjust able at intervals ranging from
daily up to six months, and the adjustments are based upon current market
levels, the prime rate of a bank or other appropriate interest rate adjustment
index as provided in the respective instruments. Some of these instru ments are
payable on demand on a daily basis or on not more than seven days' notice.
Others, such as instruments with quarterly or semiannual interest rate
adjustments, may be put back to the issuer on designated days on not more than
thirty days' notice. Still others are automatically called by the issuer unless
a Fund instructs otherwise. The Trust, on behalf of a Fund, intends to exercise
the demand only (1) upon a default under the terms of the debt security, (2) as
needed to provide liquidity to a Fund, (3) to maintain the respective quality
standards of a Fund's in vestment portfolio, or (4) to attain a more optimal
portfolio structure. A Fund will determine the variable or floating rate demand
instruments that it will purchase in accordance with procedures approved by the
Trustees to minimize credit risks. To
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be eligible for purchase by a Fund, a variable or floating rate demand
instrument which is unrated must have quality characteris tics similar to those
of other obligations in which the Fund may invest. The Adviser may determine
that an unrated variable or floating rate demand instrument meets a Fund's
quality criteria by reason of being backed by a letter of credit or guarantee
issued by a bank that meets the quality criteria for a Fund. Thus, either the
credit of the issuer of the obligation or the guarantor bank or both will meet
the quality standards of the Fund.
The maturity of the variable or floating rate demand instruments held by a Fund
will ordinarily be deemed to be the longer of (1) the notice period required
before the Fund is entitled to receive payment of the principal amount of the
instrument or (2) the period remaining until the instrument's next interest rate
adjustment. The acquisition of variable or floating rate demand notes for a
Fund must also meet the requirements of rules issued by the SEC applicable to
the use of the amortized cost method of securities valuation. The Funds will
also consider the liquidity of the market for variable and floating rate
instruments and in the event that such instruments are illiquid, the Funds'
invest ments in such instruments will be subject to the limitation on illiquid
securities.
Each Fund (other than Treasury Obligations, Government, Treasury Instruments and
Federal Funds) may invest in participation inter ests in variable or floating
rate tax-exempt obligations held by financial institutions (usually commercial
banks). Such partici pation interests provide a Fund with a specific undivided
inter est (up to 100%) in the underlying obligation and the right to demand
payment of its proportional interest in the unpaid princi pal balance plus
accrued interest from the financial institution upon a specific number of days'
notice. In addition, the partic ipation interest generally is backed by an
irrevocable letter of credit or guarantee from the institution. The financial
institu tion usually is entitled to a fee for servicing the obligation and
providing the letter of credit.
RESTRICTED AND OTHER ILLIQUID SECURITIES
- ----------------------------------------
A Fund may purchase securities that are not registered ("re stricted
securities") under the Securities Act of 1933, as amended ("1933 Act"),
including restricted securities offered and sold to "qualified institutional
buyers" under Rule 144A under the 1933 Act. However, a Fund will not invest
more than 10% of the value of its net assets in securities which are illiquid,
which includes fixed time deposits and repurchase agreements maturing in more
than seven days that cannot be traded on a secondary market and restricted
securities, unless, in the case of restricted securities, the Board of Trustees
determines, based upon a continuing review of the trading markets for the
specific restricted security, that such restricted securities are liquid. The
Board of Trustees may adopt guidelines and delegate to the
11
<PAGE>
Adviser the daily function of determining and monitoring liquidi ty of
restricted securities. The Board of Trustees, however, will retain sufficient
oversight and be ultimately responsible for the determinations. Since it is not
possible to predict with assurance that the market for securities eligible for
resale under Rule 144A will continue to be liquid, the Board of Trustees will
carefully monitor each Fund's investments in these securities, focusing on such
important factors, among others, as valuation, liquidity and availability of
information. This investment practice could have the effect of increasing the
level of illiquidity in a Fund to the extent that qualified institu tional
buyers become for a time uninterested in purchasing these restricted securities.
MUNICIPAL OBLIGATIONS
- ---------------------
Prime Obligations Fund, Plus Fund, Money Market Fund, Tax-Free Fund and
Municipal Fund may invest in municipal obligations. Municipal obligations are
issued by or on behalf of states, territories and possessions of the United
States and their political subdivisions, agencies, authorities and instrumentali
ties and the District of Columbia to obtain funds for various public purposes.
The interest on most of these obligations is generally exempt from regular
federal income tax. The two principal classifications of municipal obligations
are "notes" and "bonds."
Notes. Municipal notes are generally used to provide for short-term capital
needs and generally have maturities of one year or less. Municipal notes
include tax anticipation notes, revenue anticipation notes, bond anticipation
notes, tax and revenue anticipation notes, construction loan notes, tax-exempt
commercial paper and certain receipts for municipal obligations.
Tax anticipation notes are sold to finance working capital needs of
municipalities. They are generally payable from specific tax revenues expected
to be received at a future date. They are frequently general obligations of
the issuer, secured by the taxing power for payment of principal and interest.
Revenue anticipation notes are issued in expectation of receipt of other types
of revenue such as federal or state aid. Tax anticipation notes and revenue
anticipation notes are generally issued in anticipation of various seasonal
revenues such as income, sales, use, and business taxes. Bond anticipation
notes are sold to provide interim financing in anticipation of long-term
financing in the market. In most cases, these monies provide for the repayment
of the notes. Tax-exempt commercial paper consists of short-term unsecured
promissory notes issued by a state or local government or an authority or agency
thereof. The Funds which invest in municipal obligations may also acquire
securities in the form of custodial receipts which evidence ownership of future
interest payments, principal payments or both on certain state and local
governmental and authority obligations where, in the opinion of bond counsel,
interest payments with respect to
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<PAGE>
such custodial receipts are excluded from gross income for federal income tax
purposes. Such obligations are held in custody by a bank on behalf of the
holders of the receipts. These custodial receipts are known by various names,
including "Municipal Receipts" ("MRs") and "Municipal Certificates of Accrual on
Tax-Exempt Securities" ("M-CATS"). There are a number of other types of notes
issued for different purposes and secured differently from those described
above.
Bonds. Municipal bonds, which generally meet longer term capital needs and have
maturities of more than one year when issued, have two principal
classifications, "general obligation" bonds and "revenue" bonds.
General obligation bonds are issued by entities such as states, counties,
cities, towns and regional districts and are used to fund a wide range of public
projects including the construction or improvement of schools, highways and
roads, water and sewer systems and a variety of other public purposes. The
basic security of general obligation bonds is the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest. The taxes
that can be levied for the payment of debt service may be limited or unlimited
as to rate or amount or special assessments.
Revenue bonds have been issued to fund a wide variety of capital projects
including: electric, gas, water and sewer systems; highways, bridges and
tunnels; port and airport facilities; colleges and universities; and hospitals.
The principal security for a revenue bond is generally the net revenues derived
from a particular facility or group of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may also be
used to make principal and interest payments on the issuer's obligations.
Housing finance authorities have a wide range of security includ ing partially
or fully insured, rent subsidized and/or collater alized mortgages, and/or the
net revenues from housing or other public projects. In addition to a debt
service reserve fund, some authorities provide further security in the form of a
state's ability (without obligation) to make up deficiencies in the debt service
reserve fund. Lease rental revenue bonds issued by a state or local authority
for capital projects are secured by annual lease rental payments from the state
or locality to the authority sufficient to cover debt service on the authority's
obligations.
Private activity bonds (a term that includes certain types of bonds, the
proceeds of which are used to a specified extent for the benefit of persons
other than governmental units), although nominally issued by municipal
authorities, are generally not secured by the taxing power of the municipality
but are secured by the revenues of the authority derived from payments by the
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<PAGE>
industrial user. Tax-Free Fund does not intend to invest in private activity
bonds if the interest from such bonds would be an item of tax preference to
shareholders under the federal alternative minimum tax.
Municipal bonds with a series of maturity dates are called serial bonds. The
serial bonds which the Funds may purchase are limited to short-term serial
bonds--those with original or remaining maturities of thirteen months or less.
The Funds may purchase long-term bonds provided that they have a remaining
maturity of thirteen months or less or, in the case of bonds called for
redemption, the date on which the redemption payment must be made is within
thirteen months. The Funds may also purchase long-term bonds (sometimes
referred to as "Put Bonds"), which are subject to a Fund's commitment to put the
bond back to the issuer at par at a designated time within thirteen months and
the issuer's commitment to so purchase the bond at such price and time.
The Funds which invest in municipal obligations may invest in tender option
bonds. A tender option bond is a municipal obliga tion (generally held pursuant
to a custodial arrangement) having a relatively long maturity and bearing
interest at a fixed rate substantially higher than prevailing short-term tax-
exempt rates. The bond is typically issued in conjunction with the agreement of
a third party, such as a bank, broker-dealer or other financial institution,
pursuant to which such institution grants the security holders the option, at
periodic intervals, to tender their securities to the institution and receive
the face value thereof. As consideration for providing the option, the finan
cial institution receives periodic fees equal to the difference between the
bond's fixed coupon rate and the rate, as determined by a remarketing or similar
agent at or near the commencement of such period, that would cause the bond,
coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder effectively
holds a demand obligation that bears interest at the prevailing short-term tax-
exempt rate. However, an institution will not be obligated to accept tendered
bonds in the event of certain defaults by, or a significant downgrading in the
credit rating assigned to, the issuer of the bond.
The tender option will be taken into consideration in determining the maturity
of tender option bonds and the average portfolio maturity of each Fund. The
liquidity of a tender option bond is a function of the credit quality of both
the bond issuer and the financial institution providing liquidity.
Consequently, tender option bonds are deemed to be liquid unless, in the opinion
of the Adviser, the credit quality of the bond issuer and the financial
institution is deemed, in light of the relevant Fund's credit quality
requirements, to be inadequate.
Although Tax-Free Fund and Municipal Fund intend to invest in tender option
bonds the interest on which will, in the opinion of counsel for the issuer and
sponsor or counsel selected by the
14
<PAGE>
Adviser, be excluded from gross income for federal income tax purposes, there is
no assurance that the Internal Revenue Service will agree with such counsel's
opinion in any particular case. Consequently, there is a risk that a Fund will
not be considered the owner of such tender option bonds and thus will not be
entitled to treat such interest as exempt from such tax. A similar risk exists
for certain other investments subject to puts or similar rights. Additionally,
the federal income tax treat ment of certain other aspects of these investments,
including the proper tax treatment of tender options and the associated fees, in
relation to various regulated investment company tax provi sions is unclear.
Tax-Free Fund and Municipal Fund intend to manage their respective portfolios in
a manner designed to elimi nate or minimize any adverse impact from the tax
rules applicable to these investments.
In addition to general obligation bonds, revenue bonds and serial bonds, there
are a variety of hybrid and special types of munici pal obligations as well as
numerous differences in the security of municipal obligations both within and
between the two princi pal classifications above.
Tax-Free Fund and Municipal Fund may purchase municipal instru ments that are
backed by letters of credit issued by foreign banks that have a branch, agency
or subsidiary in the United States. Such letters of credit, like other
obligations of foreign banks, may involve credit risks in addition to those of
domestic obligations, including risks relating to future politi cal and economic
developments, nationalization, foreign govern mental restrictions such as
exchange controls and difficulties in obtaining or enforcing a judgment against
a foreign bank (includ ing branches).
For the purpose of the Funds' investment restrictions, the identification of the
"issuer" of municipal obligations that are not general obligation bonds is made
by the Adviser on the basis of the characteristics of the obligation as
described above, the most significant of which is the source of funds for the
payment of principal of and interest on such obligations.
An entire issue of municipal obligations may be purchased by one or a small
number of institutional investors such as a Fund. Thus, the issue may not be
said to be publicly offered. Unlike securities which must be registered under
the 1933 Act prior to offer and sale, unless an exemption from such registration
is available, municipal obligations which are not publicly offered may
nevertheless be readily marketable. A secondary market may exist for municipal
obligations which were not publicly offered initially.
Municipal obligations purchased for a Fund are subject to the policy on holdings
of securities which are not readily marketable contained in the Fund's
Prospectus. The Adviser determines whether a municipal obligation is liquid
based on whether it may
15
<PAGE>
be sold in a reasonable time consistent with the customs of the municipal
markets (usually seven days) at a price (or interest rate) which accurately
reflects its value. The Adviser believes that the quality standards applicable
to each Fund's investments enhance liquidity. In addition, standby commitments
and demand obligations also enhance liquidity.
Yields on municipal obligations depend on a variety of factors, including money
market conditions, municipal bond market condi tions, the size of a particular
offering, the maturity of the obligation and the quality of the issue. High
quality municipal obligations tend to have a lower yield than lower rated obliga
tions. Municipal obligations are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Congress or state legisla tures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or municipalities to levy taxes. There is also the possibility that
as a result of litigation or other conditions the power or ability of any one or
more issuers to pay when due principal of and interest on its or their municipal
obligations may be materially affected.
STANDBY COMMITMENTS
- -------------------
In order to enhance the liquidity, stability or quality of municipal
obligations, Prime Obligations Fund, Plus Fund, Money Market Fund, Tax-Free Fund
and Municipal Fund may each acquire the right to sell a security to another
party at a guaranteed price and date. Such a right to resell may be referred to
as a put, demand feature or "standby commitment", depending on its
characteristics. The aggregate price which a Fund pays for securities with
standby commitments may be higher than the price which otherwise would be paid
for the securities. Standby commitments may not be available or may not be
available on satisfactory terms.
Standby commitments may involve letters of credit issued by domestic or foreign
banks supporting the other party's ability to purchase the security from the
Fund. The right to sell may be exercisable on demand or at specific intervals,
and may form part of a security or be acquired separately by the Fund. In
consid ering whether a security meets a Fund's quality standards, the Adviser
will look to the creditworthiness of the party providing the Fund with the right
to sell.
The Funds each value municipal obligations which are subject to standby
commitments at amortized cost. The exercise price of the standby commitments is
expected to approximate such amortized cost. No value is assigned to the
standby commitments for purposes of determining the Fund's net asset value.
Since the value of a standby commitment is dependent on the ability of the
standby commitment writer to meet its obligation to repurchase,
16
<PAGE>
the policy of each Fund that may enter into such transactions is to enter into
such transactions only with banks, brokers or dealers which represent a minimal
risk of default. The duration of standby commitments will not be a factor in
determining the weighted average maturity of a Fund.
Management of the Trust understands that the Internal Revenue Service has issued
a favorable revenue ruling to the effect that, under specified circumstances, a
registered investment company will be the owner of tax-exempt municipal
obligations acquired subject to a put option. The Internal Revenue Service has
also issued private letter rulings to certain taxpayers (which do not serve as
precedent for other taxpayers, and which are applicable only to the taxpayer
requesting the ruling and which have, on occasion, been reversed by the Internal
Revenue Service) to the effect that they are considered the owners of the
municipal obligations subject to standby commitments so that the interest on
such instruments will be tax-exempt income to them. The Internal Revenue
Service has subsequently announced that it will not ordinarily issue advance
letter rulings as to the identity of the true owner of property in cases
involving the sale of securi ties or participation interests therein if the
purchaser has the right to cause the security, or the participation interest
therein, to be purchased by either the seller or a third party. The Tax-Free
Fund and Municipal Fund each intends to take the position that it is the owner
of any municipal obligations acquired subject to a standby commitment or
acquired or held with certain other types of put rights and that its
distribution of tax-exempt interest earned with respect to such municipal obliga
tions will be tax-exempt for its shareholders. There is no assurance that
standby commitments will be available to these Funds and neither Fund has
assumed that such commitments will be available under all market conditions.
INVESTMENT LIMITATIONS
The following restrictions may not be changed with respect to any Fund without
the approval of the majority of outstanding voting securities of that Fund
(which, under the Investment Company Act and the rules thereunder and as used in
the Prospectus and this Statement of Additional Information, means the lesser of
(1) 67% of the shares of that Fund present at a meeting if the holders of more
than 50% of the outstanding shares of that Fund are present in person or by
proxy, or (2) more than 50% of the outstanding shares of that Fund). Investment
restrictions that involve a
maximum percentage of securities or assets shall not be consid ered to be
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encum brance of securities or assets of, or
borrowings by or on behalf of, a Fund, with the exception of borrowings
permitted by Invest ment Restriction (3).
17
<PAGE>
Accordingly, the Trust may not on behalf of any Fund:
(1) make any investment inconsistent with the Fund's classifi cation as a
diversified company under the Investment Company Act. This restriction does
not, however, apply to any Fund classified as a non-diversified company
under the Investment Company Act.
(2) purchase securities if such purchase would cause more than 25% or more in
the aggregate of the market value of the total assets of the Fund to be
invested in the securities of one or more issuers having their principal
business activi ties in the same industry. However, there is no limitation
with respect to, and each Fund (other than Money Market Fund and Plus Fund)
reserves freedom of action, when otherwise consistent with its investment
policies, to concentrate its investments in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
obligations (other than commercial paper) issued by U.S. banks and U.S.
branches of U.S. or foreign banks and repurchase agreements and securities
loans collateralized by such U.S. Government obligations or such bank
obligations. Each of Money Market Fund and Plus Fund may concentrate its
investments in obli gations issued or guaranteed by the U.S. Government,
its agencies and instrumentalities and repurchase agreements and securities
loans collateralized by such obligations and will invest more than 25% of
its total assets in obligations issued or guaranteed by banks (whether
foreign or domestic) and repurchase agreements and securities loans
collateral ized by such obligations. However, if adverse economic
conditions prevail in the banking industry, each of Money Market Fund and
Plus Fund may, for defensive purposes, temporarily invest less than 25% of
the value of its total assets in such obligations. For the purposes of
this re striction, state and municipal governments and their agen cies,
authorities and instrumentalities are not deemed to be industries;
telephone companies are considered to be a separate industry from water,
gas or electric utilities; personal credit finance companies and business
credit fi nance companies are deemed to be separate industries; and wholly
owned finance companies are considered to be in the industry of their
parents if their activities are primarily related to financing the
activities of their parents.
(3) borrow money, except that (a) the Fund may borrow from banks (as defined in
the Investment Company Act) or through re verse repurchase agreements in
amounts up to 33/1/3/% of its total assets (including the amount borrowed),
(b) the Fund may, to the extent permitted by applicable law, borrow up to
an additional 5% of its total assets for temporary purposes, (c) the Fund
may obtain such short-term credits as may be necessary for the clearance of
purchases and sales of port
18
<PAGE>
folio securities, and (d) the Fund may purchase securities on margin to the
extent permitted by applicable law.
(4) make loans, except through (a) the purchase of debt obligations in
accordance with each Fund's investment objective and policies, (b)
repurchase agreements with banks, brokers, dealers and other financial
institutions, and (c) loans of securities as permitted by applicable law.
(5) underwrite securities issued by others, except to the extent that the sale
of portfolio securities by a Fund may be deemed to be an underwriting.
(6) purchase, hold or deal in real estate, although a Fund may purchase and
sell securities that are secured by real estate or interests therein,
securities of real estate investment trusts and mortgage-related securities
and may hold and sell real estate acquired by a Fund as a result of the
ownership of securities.
7) invest in commodities or commodity contracts, except that the Fund may
invest in currency and financial instruments and contracts that are
commodities or commodity contracts.
(8) issue senior securities to the extent such issuance would violate
applicable law.
Each Fund may, notwithstanding any other fundamental restriction or policy,
invest some or all of its assets in a single open-end investment company or
series thereof with substantially the same investment objective, restrictions
and policies as the Fund.
In addition to the fundamental policies mentioned above, the Board of Trustees
of the Trust has adopted the following non-fundamental policies which may be
changed or amended by action of the Board of Trustees without approval of
shareholders. Accord ingly, the Trust may not, on the behalf of any Fund:
(a) invest in companies for the purpose of exercising control or
management.
(b) invest more than 10% of a Fund's net assets in illiquid investments
including repurchase agreements maturing in more than seven days,
securities which are not readily marketable and restricted securities
not eligible for resale pursuant to Rule 144A under the 1933 Act.
(c) purchase additional securities if the Fund's borrowings exceed 5% of
its net assets.
(d) make short sales of securities, except short sales against the box.
19
<PAGE>
As money market funds, the Funds must also comply with Rule 2a-7 under the
Investment Company Act. Amendments to Rule 2a-7 have been proposed and are
expected to be effective at some time in 1997. The following assumes that such
amendments are in effect as currently proposed. While a detailed and technical
Rule, Rule 2a-7 has three basic requirements: portfolio maturity, portfolio
quality and portfolio diversification. Portfolio Maturity. Rule 2a-7 requires
that the maximum maturity of any security in a Fund's portfolio may not exceed
397 days and a Fund's average portfolio maturity may not exceed 90 days.
Portfolio quality. A money market fund may only invest in First Tier and Second
Tier securities (as defined in the Rule and the Prospectus). Each Fund, other
than the Tax-Exempt Funds, as a matter of non-funda mental policy only invests
in First Tier securities. Portfolio diversification. The Prime Obligations,
Money Market Plus, Government, Treasury Obligations, Money Market, Federal, Trea
sury Instruments and Tax-Free Money Market Funds may not invest more than 5% of
their total assets in the securities of any one issuer (except U.S. Government
securities, repurchase agreements collateralized by such securities and certain
securities subject to a guarantee or unconditional demand feature). Each of such
Funds may, however, invest up to 25% of its total assets in the First Tier
Securities of a single issuer for a period of up to three business days after
the purchase thereof. Immediately after the acquisition of any put (i.e., the
right to sell the security within a specified period at a price equal to its
amortized cost), with respect to 75% of the assets of a Fund , no more than 10%
of the Fund's total assets may be invested in securities issued by or subject to
puts issued by the same issuer. In the case of the Tax-Exempt Funds (which are
the only Funds that may invest in Second Tier securities), immediately after the
acquisition of a put that is a Second Tier security, no more than 5% of the Tax-
Exempt Fund's total assets may be invested in securities or puts issued by the
institution that issued the put. The Tax-Exempt Fund's investment in Second Tier
securities that are conduit securities, which are municipal securities involving
an agreement or arrangement providing for payment by a person other than the
issuer of the municipal security, that are not subject to an unconditional
demand feature, may not exceed 5% of the Fund's total assets and the Fund's
investment in such conduit securities issued by any issuer may not exceed 1% of
the Fund's total assets. Securities which are rated in the highest short-term
rating category by at least two Nationally Recognized Statistical Rating
Organizations ("NRSROs"), or if only one NRSRO has assigned a rating, by that
NRSRO, are "First Tier Securi ties". Securities rated in the top two short-term
rating catego ries by at least two NRSROs, but which are not First Tier Securi
ties are "Second Tier Securities." NRSROs include S&P, Moody's, Fitch Investors
Services, Inc., Duff and Phelps, Inc., IBCA Limited and its affiliate IBCA Inc.,
and Thomson BankWatch, Inc. For a description of their rating categories, see
Appendix A.
20
<PAGE>
"Value" for the purposes of all investment restrictions shall mean the value
used in determining a Fund's net asset value. "U.S. Government securities" shall
mean securities issued or guaranteed by the U.S. Government or any of its
agencies, author ities or instrumentalities.
TRUSTEES AND OFFICERS
Information pertaining to the Board of Trustees and officers of the Trust is set
forth below. Trustees and officers deemed to be "interested persons" of the
Trust for purposes of the Investment Company Act are indicated by an asterisk.
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Ashok N. Bakhru, 53 Chairman Executive Vice President -
1325 Ave. of Americas & Trustee Finance and Administration
and NY, NY 10019 Chief Financial Officer, Coty Inc.
(since April 1996); President, ABN
Associates (since June 1994); Senior
Vice President of Scott Paper Com pany
until June 1994; Director of Arkwright
Mutual Insurance Company; Trustee of
Interna tional House of Philadelphia;
Member of Cornell University Council;
Trustee of the Walnut Street Theater.
*David B. Ford, 51 Trustee Managing Director, Goldman
One New York Plaza Sachs (since 1996); General
New York, NY 10004 Partner, Goldman Sachs (1986-
1996); Co-Head of GSAM (since December
1994).
*Alan A. Shuch, 48 Trustee Limited Partner, Goldman Sachs
One New York Plaza (since 1994); Director and
York, NY 10004 Vice President of Goldman Sachs Funds
Management, Inc. (from April 1990 to
November 1994); President and Chief
Operating Officer, GSAM (from September
1988 to November 1994).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
Jackson W. Smart, 66 Trustee Chairman, Executive Committee,
One Northfield Plaza First Commonwealth, Inc. (a
#218 managed dental care company,
Northfield, IL 60093 (since January 1996); Chairman and Chief
Executive Officer, MSP Communications
Inc. (a company engaged in radio
broadcasting) (since November 1988);
Director, Federal Ex press Corporation
(since 1976), Evanston Hospital Cor
poration (since 1980), First
Commonwealth, Inc. (since 1988) and
North American Pri vate Equity Group (a
venture capital fund).
William H. Springer, 67 Trustee Vice Chairman and Chief
701 Morningside Drive Financial and Administrative
Lake Forest, IL 60045 Officer of Ameritech (a tele
communications holding company,(February
1987 to June 1991); Director, Walgreen
Co. (a retail drug store busi ness);
Director of Baker, Fentress & Co. (a
closed-end, management investment
company.
Richard P. Strubel, 57 Trustee Managing Director, Tandem
70 West Madison St. Partners, Inc. (since 1990);
Suite 1400 President and Chief Executive
Chicago, IL 60602 Officer, Microdot, Inc.
(a diversified manufacturer of fastening
systems and connectors)(January 1984 to
October 1994).
*Douglas C. Grip, 35 President Vice President, Goldman Sachs
One New York Plaza (since May 1996);
New York, NY 10004 President, MFS Retirement Services Inc.,
of Massachusetts Financial Services
(prior thereto).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
*Scott M. Gilman, 37 Treasurer Director, Mutual Funds Admin-
One New York Plaza istration, GSAM (since April
New York, NY 1994); Assistant Treasurer,
10004 Goldman Sachs Funds Management,
Inc. (since March 1993); Vice President,
Goldman Sachs (since March 1990).
*John M. Perlowski, 32 Assistant Vice President, Goldman Sachs
One New York Plaza Treasurer (since July 1995); Director,
New York, NY Investors Bank and Trust
10004 Company (November 1993 to July 1995);
Audit Manager of Arthur Andersen LLP
(prior thereto).
*Pauline Taylor, 50 Vice Vice President of Goldman
4900 Sears Tower President Sachs (since June 1992);
Chicago, IL Director, Shareholder Servic-
60606 ing of GSAM (since June 1992).
*John W. Mosior, 58 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL Servicing of GSAM (since
60606 November 1989).
*Nancy L. Mucker, 47 Vice Vice President, Goldman Sachs;
4900 Sears Tower President Manager of Shareholder
Chicago, IL Servicing of GSAM (since
60606 November 1989).
*Michael J. Richman, 36 Secretary Associate General Counsel of
85 Broad Street GSAM since February 1994);
New York, NY Vice President and Assistant
10004 General Counsel of Goldman Sachs (since
June 1992);
Counsel to the Funds Group, GSAM (since
June 1992); Partner, Hale and Dorr (Sep-
tember 1991 to June 1992).
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -------------------
<S> <C> <C>
*Howard B. Surloff, 31 Assistant Assistant General Counsel and
85 Broad Street Secretary Vice President, Goldman Sachs
New York, NY 10004 (since November 1993 and May 1994,
respectively ); Counsel to the Funds
Group, GSAM (since November 1993); Asso
ciate of Shereff, Friedman, Hoffman &
Goodman (prior thereto).
*Steven E. Hartstein, 33 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs (June 1993 to
New York, NY 10004 present); Funds Compliance Officer,
Citibank Global Asset Management (August
1991 to June 1993).
*Deborah Farrell, 25 Assistant Administrative Assistant,
85 Broad Street Secretary Goldman Sachs (since
New York, NY 10004 January 1994). Formerly at Cleary
Gottlieb, Steen and Hamilton.
*Kaysie P. Uniacke, 36 Assistant Vice President and Senior
One New York Plaza Secretary Portfolio Manager, GSAM
New York, NY 10004 (since 1988).
*Elizabeth D.
Anderson, 27 Assistant Portfolio Manager, GSAM (since
One New York Plaza Secretary April 1996); Junior Portfolio
New York, NY 10004 Manager, GSAM (since 1995-1996); Funds
Trading Assis tant, GSAM (1993-1995);
Com pliance Analyst, Prudential
Insurance (1991-1993).
</TABLE>
Each interested Trustee and officer holds comparable positions with certain
other investment companies of which Goldman Sachs, GSAM or an affiliate thereof
is the investment adviser, adminis trator and/or distributor. As of April 1,
1997, the Trustees and officers of the Trust as a group owned less than 1% of
the outstanding shares of beneficial interest of each Fund.
The Trust pays each Trustee, other than those who are "interested persons" of
Goldman Sachs, a fee for each Trustee meeting attend ed and an annual fee. Such
Trustees are also reimbursed for
24
<PAGE>
travel expenses incurred in connection with attending such meetings.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the fiscal year ended December 31,
1996:
25
<PAGE>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits from Goldman Sachs
Aggregate Accrued as Mutual Funds
Compensation Part of (including the
Name of Trustee from the Funds Funds' Expenses Funds)*
- ---------------------- -------------- --------------- ------------------
<S> <C> <C> <C>
Paul C. Nagel, Jr.** $28,050 $0 $62,450
Ashok N. Bakhru $35,126 $0 $69,299
Marcia L. Beck*** $0 $0 $0
David B. Ford $0 $0 $0
Alan A. Shuch $0 $0 $0
Jackson W. Smart $29,198 $0 $58,954
William H. Springer $29,198 $0 $58,954
Richard P. Strubel $29,198 $0 $58,594
</TABLE>
______________
* The Goldman Sachs Mutual Funds consisted of ____ mutual funds,
including the nine Funds, on December 31, 1996.
** Retired as of June 30, 1996.
*** Resigned as President and Trustee on May 1, 1996.
26
<PAGE>
THE ADVISER, DISTRIBUTOR AND TRANSFER AGENT
THE ADVISER
- -----------
GSAM, a separate operating division of Goldman Sachs, acts as the investment
adviser to the Funds. Under the Management Agreement between Goldman Sachs and
the Trust on behalf of the Funds, GSAM, subject to the supervision of the Board
of Trustees of the Trust and in conformity with the stated policies of each
Fund, acts as investment adviser and directs the investments of the Funds. In
addition, GSAM administers the Funds' business affairs and, in connection
therewith, furnishes the Trust with office facilities and (to the extent not
provided by the Trust's custodian, trans fer agent, or other organizations)
clerical recordkeeping and bookkeeping services and maintains the financial and
account records required to be maintained by the Trust. As compensation for
these services and for assuming expenses related thereto, the Trust pays GSAM a
fee, computed daily and paid monthly at an annual rate of .205% of each Fund's
average daily net assets. GSAM has agreed to reduce or otherwise limit certain
other expenses (excluding management fees, fees payable to Service
Organizations, taxes, interest, brokerage and litigation, indem nification and
other extraordinary expenses) of each Fund, on an annualized basis, to .01% of
the average daily net assets of that Fund. The amount of such reductions or
limits, if any, are calculated monthly and are based on the cumulative
difference between a Fund's estimated annualized expense ratio and the expense
limit for that Fund. This amount shall be reduced by any prior payments related
to the current fiscal year. GSAM has also voluntarily agreed not to impose a
portion of its management fee.
The Trust, on behalf of each Fund, is responsible for all expens es other than
those expressly borne by GSAM under the Funds' Management Agreement. The
expenses borne by shares of each Fund include, without limitation, the fees
payable to GSAM, the fees and expenses of the Funds' custodian, fees and
expenses of the Funds' transfer agent, filing fees for the registration or quali
fication of shares under federal or state securities laws, expenses of the
organization of the Funds, taxes (including income and excise taxes, if any),
interest, costs of liability insurance, fidelity bonds, indemnification or
contribution, any costs, expenses or losses arising out of any liability of, or
claim for damages or other relief asserted against, the Funds for violation of
any law, legal and auditing and tax fees and expens es (including the cost of
legal and certain accounting services rendered by employees of Goldman Sachs
with respect to the Trust), expenses of preparing and setting in type
prospectuses, statements of additional information, proxy material, reports and
notices, the printing and distribution of the same to sharehold ers and
regulatory authorities, their proportionate share of the compensation and
expenses of the Trust's "non-interested" Trust ees, and extraordinary expenses
incurred by the Funds.
27
<PAGE>
Prior to May 1, 1997, the Funds then in operation had separate investment
advisory and administration agreements. Effective May 1, 1997 the services
under such agreements were combined in the Management Agreement. The services
required to be performed for the Funds and the combined advisory and
administration fees payable by the Funds under the former advisory and
administration agreements are identical to the services and fees under the
Management Agreement. For the fiscal years ended December 31, 1996 and December
31, 1995 and the eleven months ended December 31, 1994 the amounts of the
management fee (including both advisory and administration fees) incurred by
each Fund were as follows:
<TABLE>
<CAPTION>
Dec. 1996 Dec. 1995 Dec. 1994
----------- ----------- -----------
<S> <C> <C> <C>
Prime Obligations Fund $8,504,328 $7,194,392 $3,485,286
Money Market Fund/(1)/ 5,131,644 3,236,027 900,121
Treasury Obligations Fund 4,121,944 2,401,903 1,186,773
Government Fund 2,179,655 1,119,731 243,841
Tax-Free Money Market Fund/(2)/ 930,176 459,413 35,436
- ------------------------------------------------------------------------
</TABLE>
/(1)/ Commenced operations May 18, 1994.
/(2)/ Commenced operations July 19, 1994.
GSAM has agreed that it will not impose a portion of its manage ment fee. Had
such fees been imposed, the following additional fees (including both advisory
and administration fees) would have been incurred by these Funds for the periods
indicated:
<TABLE>
<CAPTION>
Dec. 1996 Dec. 1995 Dec. 1994
---------- ---------- ----------
<S> <C> <C> <C>
Prime Obligations Fund $1,750,891 $3,173,924 $1,609,383
Treasury Obligations Fund 848,635 1,747,326 554,447
Government Fund 448,753 493,804 159,290
Money Market Fund/(1)/ 1,142,133 1,063,477 482,154
Tax-Free Money Market Fund/(2)/ 219,242 304,151 109,909
- ---------------------------------------------------------------------
</TABLE>
/(1)/ Commenced operations May 18, 1994.
/(2)/ Commenced operations July 19, 1994.
The Management Agreement entered into on behalf of the Funds was most recently
approved by the Trustees, including the "non-inter ested" Trustees, on April 23,
1997. The Funds' shareholders approved the Management Agreement on April ____,
1997. The Management Agreement will remain in effect until June 30, 1998 and
will continue in effect thereafter only if such continuance is specifically
approved at least annually by a majority of the Trustees or by a vote of a
majority of the outstanding voting securities of the particular Fund (as defined
in the Investment
28
<PAGE>
Company Act) and, in either case, by a majority of "non-interested" Trustees.
Goldman Sachs has authorized any of its directors, partners, officers and
employees who has been elected or appointed as a Trustee or officer of the Trust
to serve in the capacities in which he or she has been elected and appointed.
In addition, GSAM assumed certain expenses related to the opera tions of each
Fund during various periods of 1996, 1995 and 1994 to the extent such expenses
would have caused each Fund's total expenses to exceed, on an annualized basis,
certain contractual or voluntary expense limitations. Had these expenses not
been assumed, the Funds would have incurred the following additional expenses:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Prime Obligations Fund $637,605 $382,318 $ -0-
Money Market Fund 456,796 420,234 N/A
Treasury Obligations 551,885 280,395 -0-
Government Fund 352,113 197,008 98,125
Tax-Free Money Market Fund 83,097 83,376 N/A
- --------------------------
</TABLE>
Each Fund may use any name derived from the name "Goldman Sachs" only as long as
its Management Agreement remains in effect. The Management Agreement also
provides that it shall terminate automatically if assigned and that it may be
terminated with respect to any particular Fund without penalty by vote of a
majority of the Trustees or a majority of the outstanding voting securities of
that Fund or by either party upon sixty (60) days' written notice to GSAM or by
GSAM without penalty at any time on 60 days' written notice to the Trust.
In managing the Tax-Free Money Market Fund, GSAM will draw upon the extensive
research generated by Goldman Sachs' Municipal Credit Group. The Credit Group's
research team continually reviews current information regarding the issuers of
municipal and other tax-exempt securities, with particular focus on long-term
creditworthiness, short-term liquidity, debt service costs, liability
structures, and administrative and economic character istics.
THE DISTRIBUTOR AND TRANSFER AGENT
- ----------------------------------
Goldman Sachs acts as principal underwriter and distributor of each Fund's
shares pursuant to a Distribution Agreement with the Trust which was most
recently approved by the Board of Trustees on April 23, 1997. Goldman Sachs
also serves as the transfer agent of each Fund. Goldman Sachs provides customary
transfer agency services to the Funds, including the handling of share holder
communications, the processing of shareholder transac-
29
<PAGE>
tions, the maintenance of shareholder account records, payment of dividends and
distributions and related functions. Goldman Sachs currently imposes no fees
under its transfer agency agreement with the Funds.
Goldman Sachs is one of the largest international investment banking firms in
the United States. Founded in 1869, Goldman Sachs is a major investment banking
and brokerage firm providing a broad range of financing and investment services
both in the United States and abroad. As of November 29, 1996, Goldman Sachs
and its consolidated subsidiaries had assets of approximately $112 billion and
partners' capital of $2 billion. Goldman Sachs became registered as an
investment adviser in 1981. As of March 24, 1997, Goldman Sachs, together with
its affiliates, acted as investment adviser, administrator or distributor for
approximately $104.9 billion in total assets.
PORTFOLIO TRANSACTIONS
GSAM places the portfolio transactions of the Funds and of all other accounts
managed by GSAM for execution with many firms. GSAM uses its best efforts to
obtain execution of portfolio transactions at prices which are advantageous to
each Fund and at reasonably competitive spreads or (when a disclosed commission
is being charged) at reasonably competitive commission rates. In seeking such
execution, GSAM will use its best judgment in evaluating the terms of a
transaction, and will give consider ation to various relevant factors, including
without limitation the size and type of the transaction, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the general
execution and operational capabilities of the broker-dealer, the general
execution and operational capabilities of the firm, the reputation, reliability,
experience and finan cial condition of the firm, the value and quality of the
services rendered by the firm in this and other transactions, and the
reasonableness of the spread or commission, if any. Securities purchased and
sold by the Funds are generally traded in the over-the-counter market on a net
basis (i.e., without commission) through broker-dealers and banks acting for
their own account rather than as brokers, or otherwise involve transactions
direct ly with the issuer of such securities.
Goldman Sachs is active as an investor, dealer and/or underwriter in many types
of municipal and money market instruments. Its activities in this regard could
have some effect on the markets for those instruments which the Funds buy, hold
or sell. An order has been granted by the SEC under the Investment Company Act
which permits the Funds to deal with Goldman Sachs in trans actions in certain
taxable securities in which Goldman Sachs acts as principal. As a result, the
Funds may trade with Goldman Sachs as principal subject to the terms and
conditions of such exemption.
30
<PAGE>
Under the Investment Company Act, the Funds are prohibited from purchasing any
instrument of which Goldman Sachs is a principal underwriter during the
existence of an underwriting or selling syndicate relating to such instrument,
absent an exemptive order (the order referred to in the preceding paragraph will
not apply to such purchases) or the adoption of and compliance with certain
procedures under such Act. The Trust has adopted procedures which establish,
among other things, certain limitations on the amount of debt securities that
may be purchased in any single offering and on the amount of the Trust's assets
that may be invested in any single offering. Accordingly, in view of Goldman
Sachs' active role in the underwriting of debt securities, a Fund's ability to
purchase debt securities in the primary market may from time to time be limited.
ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS MANAGED
-------------------------------------------------------------------------
BY GOLDMAN SACHS. The involvement of the Advisers and Goldman Sachs and their
- ----------------
affiliates, in the manage ment of, or their interest in, other accounts and
other activi ties of Goldman Sachs may present conflicts of interest with
respect to the Funds or impede their investment activities.
Goldman Sachs and its affiliates, including, without limita tion, the
Advisers and their advisory affiliates, Goldman Sachs International ("GSI") and
J. Aron & Co. ("ARON") have proprietary interests in, and may manage or advise
with respect to, accounts or funds (including separate accounts and other funds
and collec tive investment vehicles) which have investment objectives similar to
those of the Funds and/or which engage in transactions in the same types of
securities, currencies and instruments as the Funds. Goldman Sachs and its
affiliates are major partici pants in the global currency, equities, swap and
fixed-income markets, in each case on a proprietary basis and for the accounts
of customers. As such, Goldman Sachs and its affiliates are actively engaged in
transactions in the same securities, curren cies, and instruments in which the
Funds invest. Such activities could affect the prices and availability of the
securities, currencies, and instruments in which the Funds invest, which could
have an adverse impact on each Fund's performance. Such transactions,
particularly in respect of proprietary accounts or customer accounts other than
those included in the Advisers' and their advisory affiliates' asset management
activities, will be executed independently of the Funds' transactions and thus
at prices or rates that may be more or less favorable. When the Advisers and
their advisory affiliates seek to purchase or sell the same assets for their
managed accounts, including the Funds, the assets actually purchased or sold may
be allocated among the accounts on a basis determined in its good faith
discretion of such entitles to be equitable. In some cases, this system may
adversely affect the size or the price of the assets purchased or sold for the
Funds.
From time to time, the Funds' activities may be restricted because of
regulatory restrictions applicable to Goldman Sachs
31
<PAGE>
and its affiliates, and/or their internal policies designed to comply with such
restrictions. As a result, there may be peri ods, for example, when the
Advisers, and/or their affiliates, will not initiate or recommend certain types
of transactions in certain securities or instruments with respect to which, or
in securities of issuers for which, the Advisers and/or their affiliates are
performing services or when position limits have been reached.
In connection with their management of the Funds, the Advisers may have
access to certain fundamental analysis and proprietary technical models
developed by Goldman Sachs, ARON and other affiliates. The Advisers will not be
under any obligation, however, to effect transactions on behalf of the Funds in
accor dance with such analysis and models. In addition, neither Goldman Sachs
nor any of its affiliates will 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 Funds and it is not anticipated that the
Advisers will have access to such information for the purpose of managing the
Funds. The proprietary activities or portfolio strategies of Goldman Sachs and
its affiliates or the activities or strategies used for accounts managed by them
or other customer accounts could conflict with the transactions and strategies
employed by the Advisers in managing the Funds.
The results of each Fund's investment activities may differ significantly
from the results achieved by the Advisers and their affiliates for their
proprietary accounts or accounts (including investment companies or collective
investment vehicles) managed or advised by them. It is possible that Goldman
Sachs and its affiliates and such other accounts will achieve investment results
which are substantially more or less favorable than the results achieved by a
Fund. Moreover, it is possible that a Fund will sustain losses during periods
in which Goldman Sachs and its affiliates achieve significant profits on their
trading for proprietary or other accounts. The opposite result is also
possible.
An investment policy committee which may include partners of Goldman Sachs
and its affiliates may develop general policies regarding a Fund's activities,
but will not be involved in the day-to-day management of such Fund. In such
instances, those individuals may, as a result, obtain information regarding the
Fund's proposed investment activities which is not generally available to the
public. In addition, by virtue of their affili ation with Goldman Sachs, any
such member of an investment policy committee will have direct or indirect
interests in the activi ties of Goldman Sachs and its affiliates in securities,
curren cies and investments similar to those in which the Fund invests.
In addition, certain principals and certain of the employees of the
Advisers are also principals or employees of Goldman
32
<PAGE>
Sachs, ARON and/or their affiliated entities. As a result, the performance by
these principals and employees of their obliga tions to such other entities may
be a consideration of which investors in the Funds should be aware.
The Advisers may enter into transactions and invest in instruments and, in
the case of Global Income Fund and Core Fund, currencies on behalf of the
applicable Funds in which customers of Goldman Sachs serve as the counterparty,
principal or issuer. In such cases, such party's interests in the transaction
will be adverse to the interests of the Funds, and such party may have no
incentive to assure that the Funds obtain the best possible prices or terms in
connection with the transactions. Goldman Sachs and its affiliates may also
create, write or issue deriva tive instruments for customers of Goldman Sachs
or its affili ates, the underlying securities currencies or instruments of which
may be those in which the Funds invest or which may be based on the performance
of a Fund. The Funds may, subject to applicable law, purchase investments which
are the subject of an underwriting or other distribution by Goldman Sachs or its
affiliates and may also enter into transactions with other clients of Goldman
Sachs or its affiliates where such other clients have interests adverse to those
of the Funds. At times, these activities may cause departments of the Firm to
give advice to clients that may cause these clients to take actions adverse to
the interest of the client. To the extent affiliated transac tions are
permitted, the Funds will deal with Goldman Sachs and its affiliates on an
arm's-length basis.
Each Fund will be required to establish business relation ships with its
counterparties based on the Fund's own credit standing. Neither Goldman Sachs
nor its affiliates will have any obligation to allow their credit to be used in
connection with a Fund's establishment of its business relationships, nor is it
expected that a Fund's counterparties will rely on the credit of Goldman Sachs
or any of its affiliates in evaluating the Fund's creditworthiness.
From time to time, Goldman Sachs or any of its affiliates may, but is not
required to, purchase and hold shares of a Fund in order to increase the assets
of the Fund. Increasing a Fund's assets may enhance investment flexibility and
diversification and may contribute to economies of scale that tend to reduce a
Fund's expense ratio. Goldman Sachs reserves the right to redeem at any time
some or all of the shares of a Fund acquired for its own account. A large
redemption of shares of a Fund by Goldman Sachs could significantly reduce the
asset size of the Fund, which might have an adverse effect on a Fund's
investment flexibility, portfolio diversification and expense ratio. Goldman
Sachs will consider the effect of redemptions on a Fund and other sharehold ers
in deciding whether to redeem its shares.
During the fiscal year ended December 31, 1996, the Trust ac quired and sold
securities of its regular broker-dealers: [insert
33
<PAGE>
names] As of December 31, 1995, each Fund held the following amounts of
securities of its regular broker/dealers as defined in Rule 10b-1 under the
Investment Company Act, or their parents ($ in thousands); Prime Obligations
Fund - Bear Stearns ($149,014), Swiss Bank Corp. ($52,981), Chase Manhattan
($246,912), Morgan Stanley & Co., Inc. ($267,039); Government Fund - Bear
Stearns ($50,000), Morgan Stanley & Co. ($138,753), Chase Manhattan ($115,627),
Swiss Bank Corp. ($62,531); Treasury Obligations Fund - Swiss Bank Corp.
($252,384), Bear Stearns ($125,000), Lehman Brothers ($125,000), Union Bank of
Switzerland ($125,000), Chase Manhattan ($466,686), Daiwa Securities ($125,000),
Morgan Stanley & Co., Inc. ($560,024), Smith Barney Inc. ($100,000); and Money
Market Fund - Swiss Bank Corp. ($36,494), Chase Manhattan ($102,482), Morgan
Stanley & Co., Inc. ($103,879).
NET ASSET VALUE
The net asset value per share of each Fund (except for Government Fund, Money
Market Plus Fund and Treasury Obligations Fund) is determined by the Funds'
custodian as of the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. New York time) (in the case of the Government Fund, Money
Market Plus Fund and Treasury Obligations Fund, net asset value is determined at
5:00 p.m. New York time) on each Business Day. A Business Day means any day on
which the New York Stock Exchange is open, except for days on which banks in
Chicago, Boston or New York are closed on local holidays. Such holidays
include: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, the Fourth of July, Labor Day, Columbus Day, Veteran's Day,
Thanksgiving Day and Christmas Day.
Each Fund's portfolio securities are valued using the amortized cost method of
valuation in an effort to maintain a constant net asset value of $1.00 per
share, which the Trustees have deter mined to be in the best interests of each
Fund and its sharehold ers. This method involves valuing a security at cost on
the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valua tion, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a Fund
would receive if it sold the instrument. During such periods, the yield to an
investor in a Fund may differ somewhat from that obtained in a similar
investment company which uses available market quotations to value all of its
portfolio securities. During periods of declining interest rates, the quoted
yield on shares of the Funds may tend to be higher than a like computation made
by a fund with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its portfolio
instruments. Thus, if the use of amortized cost by a Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund
34
<PAGE>
would be able to obtain a somewhat higher yield if he or she purchased
shares of the Fund on that day, than would result from investment in a fund
utilizing solely market values, and existing investors in the Fund would receive
less investment income. The converse would apply in a period of rising interest
rates.
The Trustees have established procedures designed to stabilize, to the extent
reasonably possible, each Fund's price per share as computed for the purpose of
sales and redemptions at $1.00. Such procedures include review of each Fund's
portfolio by the Trust ees, at such intervals as they deem appropriate, to
determine whether such Fund's net asset value calculated by using available
market quotations (or an appropriate substitute which reflects market
conditions) deviates from $1.00 per share based on amor tized cost, as well as
review of the methods used to calculate the deviation. If such deviation exceeds
1/2 of 1%, the Trustees will promptly consider what action, if any, will be
initiated. In the event the Trustees determine that a deviation exists which may
result in material dilution or other unfair results to investors or existing
shareholders, they will take such correc tive action as they regard to be
necessary and appropriate, including the sale of portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding part or all of dividends or payment of distributions from
capital or capital gains; redemptions of shares in kind; or establishing a net
asset value per share by using available market quotations or equivalents. In
addition, in order to stabilize the net asset value per share at $1.00 the
Trustees have the authority (1) to reduce or increase the number of shares
outstanding on a pro rata basis, and (2) to offset each shareholder's pro rata
portion of the deviation between the net asset value per share and $1.00 from
the shareholder's accrued dividend account or from future dividends. Each Fund
may hold cash for the purpose of stabilizing its net asset value per share.
Holdings of cash, on which no return is earned, would tend to lower the yield on
such Fund's shares.
In order to continue to use the amortized cost method of valua tion each Fund's
investments, including repurchase agreements, must be U.S. dollar-denominated
instruments which the Trustees determine present minimal credit risks and which
are at the time of acquisition rated by the requisite number of NRSROs in one of
the two highest short-term rating categories or, in the case of any instrument
that is not so rated, of comparable quality as determined by GSAM. Also, each
Fund must maintain a dollar-weighted average portfolio maturity (not more than
ninety (90) days) appropriate to its objective of maintaining a stable net asset
value of $1.00 per share and may not purchase any instrument with a remaining
maturity of more than thirteen (13) months. However, a Fund may also,
consistent with the provisions of the above-mentioned rule, invest in securities
with a stated maturity of more than thirteen (13) months, if (i) the security is
a floating or variable rate security with certain demand and interest rate reset
features and (ii) the security, except in the
35
<PAGE>
case of Tax-Free Fund and Municipal Fund, is a First Tier Security.
The proceeds received by each Fund for each issue or sale of its shares, and all
net investment income, realized and unrealized gain and proceeds thereof,
subject only to the rights of credi tors, will be specifically allocated to such
Fund and constitute the underlying assets of that Fund. The underlying assets of
each Fund will be segregated on the books of account, and will be charged with
the liabilities in respect to that Fund and with a share of the general
liabilities of the Trust. Expenses are allocated in proportion to the net asset
values of the respective Funds except where allocations of direct expenses can
otherwise be fairly made. In addition, within each Fund, FST Shares, FST
Administration Shares, FST Service Shares and FST Preferred Shares (if any) will
be subject to different expense structures (see "Organization and
Capitalization").
REDEMPTIONS
The Trust may suspend the right of redemption of shares of a Fund and may
postpone payment for any period: (i) during which the New York Stock Exchange
is closed for regular trading other than customary weekend and holiday closings
or during which trading on the New York Stock Exchange is restricted, (ii) when
the SEC determines that a state of emergency exists which may make payment or
transfer not reasonably practicable, (iii) as the SEC may by order permit for
the protection of the shareholders of the Trust or (iv) at any other time when
the Trust may, under appli cable laws and regulations, suspend payment on the
redemption of the Fund's shares.
The Trust agrees to redeem shares of each Fund solely in cash up to the lesser
of $250,000 or 1% of the net asset value of the Fund during any 90-day period
for any one shareholder. The Trust reserves the right to pay other
redemptions, either total or partial, by a distribution in kind of securities
(instead of cash) from a Fund's portfolio. The securities distributed in such a
distribution would be valued at the same value as that assigned to them in
calculating the net asset value of the shares being redeemed. If a shareholder
receives a distribution in kind, he or she should expect to incur transaction
costs when he or she converts the securities to cash.
A FST shareholder of any Fund with balances in excess of $100 million may elect
to have a special account with State Street for the purpose of redeeming shares
from its account in that Fund by check. When State Street receives a completed
signature card and authorization form, the shareholder will be provided with a
supply of checks. Checks drawn on this account may be payable to the order of
any person in any amount of $500 or more, but cannot be certified. The payee of
the check may cash or deposit it like any other check drawn on a bank. When
such a check is presented
36
<PAGE>
to State Street for payment, a sufficient number of full and fractional shares
will be redeemed to cover the amount of the check. Cancelled checks will be
returned to the shareholder by State Street. The Trust and Goldman Sachs each
reserves the right to waive the minimum requirement.
The check redemption privilege enables a shareholder to receive the dividends
declared on the shares to be redeemed until such time as the check is processed.
Because of this feature, the check redemption privilege may not be used for a
complete liqui dation of an account. If the amount of a check is greater than
the value of shares held in the shareholder's account, the check will be
returned unpaid, and the shareholder may be subject to extra charges.
Goldman Sachs reserves the right to impose conditions on, limit the availability
of or terminate the check redemption privilege at any time with respect to a
particular shareholder or Service Organization in general. The Trust and State
Street reserve the right at any time to suspend the check redemption privilege
and intend to do so in the event that federal legislation or regula tions impose
reserve requirements or other restrictions deemed by the Trustees to be adverse
to the interests of the Funds.
CALCULATION OF YIELD QUOTATIONS
Each Fund's yield quotations are calculated in accordance with a standard method
prescribed by the rules of the SEC. Under this method, the yield quotation is
based on a hypothetical account having a balance of exactly one share at the
beginning of a seven-day period.
Yield, effective yield and tax equivalent yield are calculated separately for
each class of a Fund's shares. Each class of shares is subject to different
fees and expenses and, consequently, may have differing yields for the same
period.
The yield quotation is computed as follows: the net change, exclusive of
capital changes (i.e., realized gains and losses from the sale of securities and
unrealized appreciation and depreciation), in the value of a hypothetical pre-
existing account having a balance of one share at the beginning of the base
period is determined by dividing the net change in value by the value of the
account at the beginning of the base period. This base period return is then
multiplied by 365/7 with the resulting yield figure carried to the nearest 100th
of 1%. Such yield quotation shall take into account all fees that are charged
to a Fund.
Each Fund also may advertise a quotation of effective yield for a seven (7)
calendar day period. Effective yield is computed by compounding the
unannualized base period return determined as in the preceding paragraph by
adding one (1) to that return, raising
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<PAGE>
the sum to the 365/7 power and subtracting one from the result, according to the
following formula:
Effective Yield=[(base period return + 1)/365/7/] - 1.
Treasury Instruments, Federal, Tax-Free and Municipal Funds may also advertise a
tax-equivalent yield which is computed by dividing that portion of a Fund's
yield (as computed above) which is tax-exempt by one minus a stated income tax
rate and adding the quotient to that portion, if any, of the yield of the Fund
that is not tax-exempt.
Unlike bank deposits or other investments which pay a fixed yield or return for
a stated period of time, the return for a Fund will fluctuate from time to time
and does not provide a basis for determining future returns. Return is a
function of portfolio quality, composition, maturity and market conditions as
well as the expenses allocated to a Fund. The return of each Fund may not be
comparable to other investment alternatives because of differences in the
foregoing variables and differences in the methods used to value portfolio
securities, compute expenses and calculate return.
The yield, effective yield and tax-equivalent yield of each Fund, with
respect to FST Shares, FST Administration Shares, FST Service Shares and FST
Preferred Shares for the seven-day period ended December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
Effective Tax-Equivalent
Yield Yield Yield
----- --------- --------------
<S> <C> <C> <C>
Prime Obligations Fund:
FST Shares ____ _____ N/A
FST Administration Shares ____ _____ N/A
FST Service Shares ____ _____ N/A
FST Preferred Shares ____ _____ N/A
Money Market Fund:
FST Shares ____ _____ N/A
FST Administration Shares ____ _____ N/A
FST Service Shares ____ _____ N/A
FST Preferred Shares ____ _____ N/A
Treasury Obligations Fund:
FST Shares ____ _____ N/A
FST Administration Shares ____ _____ N/A
FST Service Shares ____ _____ N/A
FST Preferred Shares ____ _____ N/A
Government Fund:
FST Shares ____ _____ N/A
FST Administration Shares ____ _____ N/A
FST Service Shares ____ _____ N/A
FST Preferred Shares ____ _____ N/A
Tax-Free Fund:
FST Shares ____ _____ _____
FST Administration Shares ____ _____ _____
FST Service Shares ____ _____ _____
</TABLE>
38
<PAGE>
<TABLE>
<S> <C> <C> <C>
FST Preferred Shares ____ _____ _____
</TABLE>
The information set forth in the foregoing table reflects certain fee reductions
and expense limitations voluntarily agreed to by the Adviser. See "The Adviser,
Distributor and Transfer Agent." In the absence of such fee reductions, the
yield, effective yield and the tax-equivalent yield of each Fund for the same
period would have been as follows:
<TABLE>
<CAPTION>
Effective Tax-Equivalent
Yield Yield Yield
----- --------- --------------
<S> <C> <C> <C>
Prime Obligations Fund:
FST Shares ____ _____ N/A
FST Administration Shares ____ _____ N/A
FST Service Shares ____ _____ N/A
FST Preferred Shares ____ _____ N/A
Money Market Fund:
FST Shares ____ _____ N/A
FST Administration Shares ____ _____ N/A
FST Service Shares ____ _____ N/A
FST Preferred Shares ____ _____ N/A
Treasury Obligations Fund:
FST Shares ____ _____ N/A
FST Administration Shares ____ _____ N/A
FST Service Shares ____ _____ N/A
FST Preferred Shares ____ _____ N/A
Government Fund:
FST Shares ____ _____ N/A
FST Administration Shares ____ _____ N/A
FST Service Shares ____ _____ N/A
FST Preferred Shares ____ _____ N/A
Tax-Free Fund:
FST Shares ____ _____ _____
FST Administration Shares ____ _____ _____
FST Service Shares ____ _____ _____
FST Preferred Shares ____ _____ _____
</TABLE>
The quotations of tax-equivalent yield set forth above for the seven-day period
ended December 31, 1996 are based on a federal marginal tax rate of 39.6%.
From time to time any Fund may publish an indication of its past performance as
measured by independent sources such as Lipper Analytical Services,
Incorporated, Weisenberger Investment Companies Service, Donoghue's Money Fund
Report, Barron's, Business Week, Changing Times, Financial World, Forbes,
Money, Personal Investor, Sylvia Porter's Personal Finance, and The Wall Street
Journal.
In addition, from time to time, advertisements or information may include a
discussion of asset allocation models developed or recommended by GSAM and/or
its affiliates, certain attributes or potential benefits to be derived from
asset allocation strategies and the Goldman Sachs mutual funds that may form
part of such an
39
<PAGE>
asset allocation strategy. Such advertisements and information may also include
a discussion of GSAM's current economic outlook and domestic and international
market views and recommend period ic tactical modifications to current asset
allocation strategies. Such advertisements and information may also highlight or
summa rize the services that GSAM and/or its affiliates provide in support of an
asset allocation program.
TAX INFORMATION
Each Fund has qualified and has elected or intends to qualify and elect to be
treated as a separate regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). Such qualification does
not involve supervision of management or investment practices or policies by any
governmental agency or bureau.
In order to qualify as a regulated investment company, each Fund must, among
other things, (a) derive at least 90% of its gross income for the taxable year
from dividends, interest, payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or certain other
investments (the "90% test"); (b) derive less than 30% of its gross income for
the taxable year from the sale or other disposition of stock, securities or
certain other investments held less than three months; and (c) diversify its
holdings so that, at the close of each quarter of its taxable year, (i) at least
50% of the market value of the Fund's total (gross) assets is represented by
cash and cash items (including receivables), U.S. Government secu rities,
securities of other regulated investment companies and other securities limited,
in respect of any one issuer, to an amount not greater in value than 5% of the
value of the Fund's total assets and not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the Fund's
total (gross) assets is invested in the securities (other than U.S. Government
securities and securities of other regulated investment companies) of any one
issuer or two or more issuers controlled by the Fund and engaged in the same,
similar or related trades or businesses. For purposes of these requirements,
participation interests will be treated as securi ties, and the issuer will be
identified on the basis of the market risk and credit risk associated with any
particular interest. Certain payments received with respect to such inter ests,
such as commitment fees and certain facility fees, may not be treated as income
qualifying under the 90% test.
Each Fund, as a regulated investment company, will not be subject to federal
income tax on any of its net investment income and net realized capital gains
that are distributed to shareholders with respect to any taxable year in
accordance with the Code's timing and other requirements, provided that the Fund
distributes at least 90% of its investment company taxable income (generally,
all of its net taxable income other than "net capital gain,"
40
<PAGE>
which is the excess of net long-term capital gain over net short-term capital
loss) for such year, and in the case of any Fund that earns tax-exempt interest,
at least 90% of the excess of the tax-exempt interest it earns over certain
disallowed deductions. A Fund will be subject to federal income tax at regular
corporate rates on any investment company taxable income or net capital gain
that it does not distribute for a taxable year. In order to avoid a
nondeductible 4% federal excise tax, a Fund must distribute (or be deemed to
have distributed) by December 31 of each calendar year at least 98% of its
taxable ordinary income for such year, at least 98% of the excess of its capital
gains over its capital losses (generally computed on the basis of the one-year
period ending on October 31 of such year), and all taxable ordinary income and
the excess of capital gains over capital losses for the previous year that were
not distributed in such year and on which the Fund paid no federal income tax.
Dividends paid by a Fund from taxable net investment income (including income
attributable to accrued market discount and a portion of the discount on certain
stripped tax-exempt obliga tions and their coupons) and the excess of net short-
term capital gain over net long-term capital loss will be treated as ordinary
income in the hands of shareholders. Such distributions will not qualify for
the corporate dividends-received deduction. Divi dends paid by a Fund from the
excess of net long-term capital gain (if any) over net short-term capital loss
are taxable to shareholders as long-term capital gain, regardless of the length
of time the shares of a Fund have been held by such shareholders, and also will
not qualify for the corporate dividends-received deduction. A Fund's net
realized capital gains for a taxable year are computed by taking into account
any capital loss carryforward of that Fund. At December 31, 1996, the Funds had
approximately the following amounts of capital loss carry for wards:
<TABLE>
<CAPTION>
Years of
Amount Expiration
------ ----------
<S> <C> <C>
Tax Free Money Market Fund $13,000 2004
</TABLE>
Distributions paid by Tax-Free Fund or Municipal Fund from tax-exempt interest
received by it and properly designated as "exempt-interest dividends" will
generally be exempt from regular federal income tax, provided that at least 50%
of the value of the applicable Fund's total assets at the close of each quarter
of its taxable year consists of tax-exempt obligations, i.e., obligations
described in Section 103(a) of the Code (not including shares of other
regulated investment companies that may pay exempt-interest dividends, because
such shares are not treated as tax-exempt obligations for this purpose).
Distributions paid by the other Funds from any tax-exempt interest they may
receive will not be tax-exempt, because they will not satisfy the 50%
requirement described in the preceding sentence. A portion of any tax-exempt
distributions attributable to interest on certain
41
<PAGE>
"private activity bonds", if any, received by a Fund may constitute tax
preference items and may give rise to, or increase liability under, the
alternative minimum tax for particular shareholders. In addition tax-exempt
distributions of a Fund may be considered in computing the "adjusted current
earnings" preference item of its corporate shareholders in determining the
corporate alternative minimum tax. To the extent that a Fund invests in certain
short-term instruments, including repurchase agreements, the interest on which
is not exempt from federal income tax, or earns other taxable income any
distributions of income from such investments or other taxable income will be
taxable to shareholders as ordinary income. All or substantially all of any
interest on indebtedness incurred directly or indi rectly to purchase or carry
shares of Tax-Free Fund or Municipal Fund will generally not be deductible. The
availability of tax-exempt obligations and the value of these Funds may be
affected by restrictive tax legislation enacted in recent years.
In purchasing municipal obligations, Tax-Free Fund and Municipal Fund each
relies on opinions of nationally-recognized bond counsel for each issue as to
the excludability of interest on such obligations from gross income for federal
income tax purpos es. Each Fund does not undertake independent investigations
con cerning the tax-exempt status of such obligations, nor does it guarantee or
represent that bond counsels' opinions are correct.
Distributions of net investment income and net realized capital gains will be
taxable as described above, whether received in shares or in cash. Shareholders
electing to receive distribu tions in the form of additional shares will have a
cost basis in each share so received equal to the amount of cash they would have
received had they elected to receive cash.
Money Market Fund and/or Plus Fund may be subject to foreign withholding or
other foreign taxes with respect to its invest ments in certain securities of
foreign entities. These taxes may be reduced or eliminated under the terms of
applicable U.S. income tax treaties in some cases, and the applicable Fund
intends to satisfy any procedural requirements to qualify for benefits under
these treaties. Although neither Fund anticipates that more than 50% of the
value of its total assets at the close of a taxable year will be composed of
securities of foreign corporations, if the 50% requirement were satisfied by
either Fund, that Fund could make an election under Code Section 853 to permit
its shareholders to claim a credit or deduction on their federal income tax
returns for their pro rata portion of quali fied taxes paid by the Fund in
foreign countries. In the event such an election is made, shareholders will be
required to include their pro rata share of such taxes in gross income and may
be entitled to claim a foreign tax credit or deduction with respect to such
taxes, subject to certain limitations under the Code. Shareholders who are
precluded from taking such credits or deductions will nevertheless be taxed on
their pro rata share of
42
<PAGE>
the foreign taxes included in their gross income, unless they are otherwise
exempt from federal income tax.
Each Fund will be required to report to the Internal Revenue Service all taxable
distributions, except in the case of certain exempt shareholders. Under the
backup withholding provisions of Code Section 3406, all such distributions may
be subject to withholding of federal income tax at the rate of 31% in the case
of nonexempt shareholders who fail to furnish the Fund with their taxpayer
identification number and with certain certifications required by the Internal
Revenue Service or if the Internal Revenue Service or a broker notifies a Fund
that the number furnished by the shareholder is incorrect or that the
shareholder is subject to backup withholding as a result of failure to report
interest or dividend income. However, any taxable distributions from Tax-Free
Fund or Municipal Fund will not be subject to backup withholding if the
applicable Fund reasonably estimates that at least 95% of its distributions will
be exempt interest dividends. Each Fund may refuse to accept an application that
does not contain any required taxpayer identification number or certification
that the number provided is correct, if applicable, or that the investor is an
exempt recipient. If the withholding provisions are applicable, any such
distributions, whether taken in cash or reinvested in shares, will be reduced by
the amounts required to be withheld. Investors may wish to consult their tax
advisors about the applicability of the backup withholding provisions.
Redemptions (including exchanges) and other dispositions of Fund shares in
transactions that are treated as sales for tax purposes will generally not
result in taxable gain or loss, provided that the Funds successfully maintain a
constant net asset value per share. Shareholers should consult their own tax
advisers with reference to their particular circumstances to determine whether a
redemption, exchange or other disposition of Fund shares is properly treated as
a sale for tax purposes.
All distributions (including exempt-interest dividends) whether received in
shares or cash, must be reported by each shareholder who is required to file a
federal income tax return. The Funds will inform shareholders of the federal
income tax status of their distributions after the end of each calendar year,
includ ing, in the case of the Tax-Free Fund and the Municipal Fund, the amounts
that qualify as exempt-interest dividends and any por tions of such amounts that
constitute tax preference items under the federal alternative minimum tax.
Shareholders who received exempt-interest dividends and have not held their
shares of the applicable Fund for its entire taxable year may have designated as
tax-exempt or as a tax preference item a percentage of their distributions which
is not exactly equal to a proportionate share of the amount of tax-exempt
interest or tax preference income earned during the period of their investment
in such Fund. Each shareholder should consult his or her own tax advisor to
deter
43
<PAGE>
mine the tax consequences of an investment in the Fund in the shareholder's own
state and locality.
Different tax treatment, including penalties on certain excess contributions and
deferrals, certain pre-retirement and post-retirement distributions, and certain
prohibited transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers for more
informa tion.
The foregoing discussion relates solely to U.S. federal income tax law as it
applies to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates) subject to tax under such law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Each shareholder who is not a U.S. person should consult his or
her tax adviser regarding the U.S. and non-U.S. tax consequences of ownership of
shares of a Fund, including the possibility that such a shareholder may be
subject to a U.S. nonresident alien withholding tax at a rate of 30% (or at a
lower rate under an applicable U.S. income tax treaty) on certain distributions
from a Fund and, if a current IRS Form W-8 or acceptable substitute is not on
file with the Fund, may be subject to backup witholding on certain payments.
The Funds may be subject to state or local taxes in jurisdictions in which the
Funds may be deemed to be doing business. In addition, in those states or
localities which have income tax laws, the treatment of a Fund and its
shareholders under such laws may differ from their treatment under federal
income tax laws, and investment in the Funds may have tax consequences for
shareholders different from those of a direct investment in the Funds'
securities. Shareholders should consult their own tax advisers concerning these
matters. For example, in such states or localities it may be appropriate for
shareholders to review with their tax advisers the state income and, if
applicable, intangible property tax consequences of investments by the Funds in
securities issued by the particular state or the U.S. Govern ment or its various
agencies or instrumentalities, because many states exempt from personal income
tax distributions by regulated investment companies from interest on obligations
of the particu lar state or on direct U.S. Government obligations and/or exempt
from intangible property tax the value of the shares of such companies
attributable to such obligations, subject to certain state-specific requirements
and/or limitations.
This discussion of the tax treatment of the Funds and their shareholders is
based on the tax laws in effect as of the date of this Statement of Additional
Information, which are subject to change either prospectively or retroactively.
44
<PAGE>
ORGANIZATION AND CAPITALIZATION
The Trust is a Massachusetts business trust established under the laws of The
Commonwealth of Massachusetts by a Declaration of Trust dated December 6, 1978.
Effective December 27, 1994, Prime Obligations Fund, Money Market Fund, Treasury
Obligations Fund, Government Fund, Tax-Free Fund and Municipal Fund were reorga
nized, and each such Fund became a separate series of the Trust, a business
trust organized under the laws of the Commonwealth of Massachusetts on December
6, 1978. Prior to the reorganization, each Fund (other than Plus Fund) had been
a separate series of Financial Square Trust ("FST"), which was also a
Massachusetts business trust. Except for the fact that the Funds are now series
of the Trust, shares of each Fund represent the same interest in such Fund's
assets, are of the same class, are subject to the same terms and conditions,
fees and expenses and confer the same rights as when each Fund was a series of
FST. Plus Fund was organized as a series of the Trust in October, 1995.
Each shareholder is deemed to have expressly assented and agreed to the terms of
the Declaration of Trust and is deemed to be party thereto. The authorized
capital of the Trust consists of an unlimited number of shares of beneficial
interest. The Board of Trustees has authority under the Declaration of Trust to
create and classify shares of beneficial interest in separate series or funds of
the Trust without further action by sharehold ers. The Declaration of Trust
further authorizes the Board of Trustees to classify or reclassify any series or
portfolio of shares into one or more classes. The Board of Trustees has
authorized the issuance of up to four classes of shares of each of the Funds:
FST Shares, FST Service Shares, FST Administra tion Shares and FST Preferred
Shares.
Each FST Share, FST Administration Share, FST Service Share and FST Preferred
Share of a Fund represents an equal proportionate interest in the assets
belonging to such Fund. It is contemplat ed that most shares will be held in
the accounts of which the record owner is a bank or other institution acting,
directly or through an agent, as nominee for its customers who are the
beneficial owners of the shares or another organization designat ed by such bank
or institution. FST Shares may be purchased for accounts held in the name of an
investor or institution that is not compensated by the Fund for services
provided to the institution's investors. FST Administration Shares may be
purchased for accounts held in the name of an institution that provides certain
account administration services to its custom ers, including maintenance of
account records and processing orders to purchase, redeem and exchange FST
Administration Shares. FST Administration Shares of a Fund bear the cost of
administration fees at the annual rate of up to .25 of 1% of the average daily
net assets of such Shares. FST Preferred Shares may be purchased for accounts
held in the name of an institution that provides certain account administration
services to its
45
<PAGE>
customers, including acting directly or through an agent, as the sole
shareholder of record, maintain account records of its customers and processing
orders to purchase, redeem and exchange FST Preferred Shares. FST Preferred
Shares of a Fund bear the cost of preferred administration fees at an annual
rate of up to 0.10% of the average daily net assets of such shares. FST Service
Shares may be purchased for accounts held in the name of an institution that
provides certain account administration and shareholder liaison services to its
customers, including mainte nance of account records, processing orders to
purchase, redeem and exchange FST Service Shares, responding to customer
inquiries and assisting customers with investment procedures. FST Service Shares
of a Fund bear the cost of service fees at the annual rate of up to .50 of 1% of
the average daily net assets of such Shares.
It is possible that an institution or its affiliates may offer different classes
of shares to its customers and thus receive different compensation with respect
to different classes of shares of a Fund. In the event a Fund is distributed by
sales persons or any other persons, they may receive different compen sation
with respect to different classes of shares of a Fund. FST Administration
Shares, FST Preferred Shares and FST Service Shares each have certain exclusive
voting rights on matters relating to their respective plans. Shares of each
class may be exchanged only for shares of the same class in another Fund. Except
as described above, the four classes of shares are identi cal. Certain aspects
of the shares may be altered, after advance notice to shareholders, if it is
deemed necessary in order to satisfy certain tax regulatory requirements.
Each FST Share, FST Service Share, FST Administration Share and FST Preferred
Share of a Fund is entitled to one vote per share; however, separate votes will
be taken by the Fund or class (or by more than one fund of the Trust or class
voting as a single class if similarly affected) on matters affecting only the
Fund or class (or those affected funds of the Trust or classes) or as otherwise
required by law. Shares are freely transferable and have no preemptive,
subscription or conversion rights. All shares issued and outstanding are fully
paid and non-assessable. The Declaration of Trust provides for shareholder
voting only for the election or removal of one or more Trustees, if a meeting is
called for that purpose, and for certain other designated mat ters. The Trust
does not generally hold annual or other meetings of shareholders. The shares of
the Trust have non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees if they choose to do so, and, in such event, the holders of the
remaining less than 50% of the shares voting for the election of Trustees will
not be able to elect any person or persons to the Board of Trustees. Each
Trustee serves until the next meeting of shareholders, if any, called for the
purpose of electing or reelecting such Trustee or successor to such Trustee, and
until the election and qualification of such successor, if
46
<PAGE>
any, or until such Trustee sooner dies, resigns, retires or is removed by the
shareholders or two-thirds of the Trustees.
As of the date of this Statement of Additional Information, no shares of
Municipal Fund and Plus Fund were outstanding.
As of April 1, 1997, the entities noted below may have owned beneficially 5% or
more of the outstanding shares of Prime Obligations Fund: Commerce Bank of
Kansas City, PO Box 248, Kansas City, MO 64141 (12.02%), Citicorp Trust NA as
Custodian, 400 Royal Palm Way, Palm Beach, FL 33480 (7.38%) and University of
Texas Systems, 201 W. 7th Street, Austin, TX (11.58%). As of April 1, 1997, the
entities noted below may have owned benefi cially 5% or more of the outstanding
shares of Money Market Fund: Loral Corporation, 600 Third Avenue, New York, NY
10016 (9.13%), Chicago Trust Company, 171 N. Clark Street, #5CA, Chicago, IL
60601-3203(7.87%) and Citicorp Trust NA as Custodian, 400 Royal Palm Way, Palm
Beach, FL 33480 (6.50%). As of April 1, 1997, the entities noted below may have
owned beneficially 5% or more of the outstanding shares of Treasury Obligations
Fund: Commerce Bank of Kansas City, NA, PO Box 248, Kansas City, MO 64141
(11.34%), Associated Bank, P.O. Box 1007, Neehah, WI (7.98%), Amalgamated Bank
of Chicago, One West Monroe Street, Chicago, IL 60603 (6.31%), and Fulton Bank,
P.O. Box 3215, Lancaster, PA 17604 (5.52%). As of April 1, 1997, the entities
noted below may have owned beneficially 5% or more of the outstanding shares of
Government Fund: Chicago Trust Company, 171 N. Clark St., Chicago, IL 60601
(21.46%), Mellon Bank, Three Mellon Bank Center, Pittsburgh, PA 15258 (5.64%)
and Texas State Treasury, P.O. Box 12608, Austin, TX 78711 (10.35%). As of April
1, 1997, the entities noted below may have owned beneficially 5% or more of the
outstanding shares of Tax-Free Fund: Mercantile Bank of St. Louis, N.A., Mandell
& Company, P.O. Box 387 MPO, St. Louis, MO 63101 (10.48%), Hilliard Lyons Trust
Co., P.O. Box 32760, Louisville, KY 40232 (6.22%), Commerce Bank of Kansas City,
P.O. Box 248, Kansas City, MO 64141 (16.78%) and Summit Bank, P.O. Box 821,
Hackensack, NJ 07602 (8.73%). As of April 1, 1997, the entities noted below may
have owned beneficially 5% or more of the outstanding shares of Federal Fund:
Burlington Bank & Trust, MATCO, P.O. Box 728, Burlington, IA 52601 (5.48%),
Central Carolina Bank & Trust Co., P.O. Box 931, Durham, NC 27702 (9.75%),
Commerce Bank NA, LENEXA, P.O. Box 419248, Kansas City, MO 64141 (5.64%),
Commerce Bank of Kansas City, P.O. Box 419248, BB4-1, Kansas City, MO 64141
(19.69%), First National Bank of Southwestern Ohio, P.O. Box 476, Hamilton, OH
45012 (16.40%), Mercantile Bank of St. Louis, N.A., Mandell & Company, P.O. Box
387 MPO, St. Louis, MO 63101 (14.13%), United National Bank-NJ, Hubbell & Co.,
202 Park Avenue, Plainfield, NJ 07060 (6.28%). As of April 1, 1997, the entities
noted below may have owned beneficially 5% or more of the outstanding shares of
Treasury Instruments Fund: Central Bank & Trust Co., CEBANTCO, P.O. Box 1360,
Lexington, KY 40590 (10.48%), Chicago Trust Company, 171 N. Clark Street, #5CA,
Chicago, IL 60601 (5.06%), Harris Trust & Savings Bank, 200 W. Monroe Street,
Fl. 12,
47
<PAGE>
Chicago, IL 60606 (40.64%), Northern Capital Trust of Fargo, P.O. Box
829, Fargo, ND 58102 (16.70%), William Harris Investors, Inc., 2 N. LaSalle
Street, Ste. 400, Chicago, IL 60602 (22.01%).
SHAREHOLDER AND TRUSTEE LIABILITY
- ---------------------------------
The Trust is an entity of the type commonly known as a "Massachu setts business
trust", which is the form in which many mutual funds are organized. Under
Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Trust. The Decla ration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. Notice of such disclaimer will
normally be given in each agreement, obligation or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust provides for
indemnification by the relevant fund of the Trust (including each Fund) for any
loss suffered by a shareholder as a result of an obligation of such fund. The
Declaration of Trust also provides that the Trust shall, upon request, assume
the defense of any claim made against any shareholder for any act or obligation
of the Trust and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which a Fund is unable to meet its obligations. The Trustees
believe that, in view of the above, the risk of personal liability of
shareholders is not material.
The Declaration of Trust provides that the Trustees of the Trust shall not be
liable for any action taken by them in good faith, and that they shall be fully
protected in relying in good faith upon the records of the Trust and upon
reports made to the Trust by persons selected in good faith by the Trustees as
qualified to make such reports. The Declaration of Trust further provides that
the Board of Trustees will not be liable for errors of judgment or mistakes of
fact or law. The Declaration of Trust provides that the Trust will indemnify
the Trustees and officers of the Trust against liabilities and expenses
reasonably incurred in connection with litigation in which they may be involved
because of their positions with the Trust, unless it is deter mined in the
manner provided in the Declaration of Trust that they have not acted in good
faith in the reasonable belief that, in the case of conduct in their official
capacity with the Trust, such conduct was in the best interests of the Trust,
and in all other cases, that the conduct was at least not opposed to the best
interests of the Trust (and in the case of any criminal proceeding, they had no
reasonable cause to believe that the conduct was unlawful). However, nothing in
the Declaration of Trust or the By-Laws protects or indemnifies a Trustee or
officer against any liability to which they would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their office.
48
<PAGE>
CUSTODIAN AND SUBCUSTODIAN
State Street Bank and Trust Company ("State Street") has been retained to act as
custodian of the Funds' assets and, in that capacity, maintains the accounting
records and calculates the daily net asset value per share of each Fund. Its
mailing address is P.O. Box 1713, Boston, MA 02105. State Street has appointed
The Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois 60675 as
subcustodian to hold cash and certain securities purchased by the Funds.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, independent public accounts, One Interna tional Place, 100
Oliver Street, Boston, Massachusetts 02110, have been selected as auditors of
the Trust. In addition to audit services, Arthur Andersen LLP prepares each
Fund's federal and state tax returns, and provides consultation and assistance
on accounting, internal control and related matters.
FINANCIAL STATEMENTS
The Financial Statements of the Funds then in existence and conducting
investment operations, including the Statements of Investments as of December
31, 1996, the Statements of Assets and Liabilities as of December 31, 1996, the
related Statements of Operations for the period then ended, the Statements of
Changes in Net Assets, the Financial Highlights for the periods present ed, the
Notes to the Financial Statements, and the Report of Independent Public
Accountants, all of which are included in the December 31, 1996 Annual Report to
the shareholders, are attached hereto and incorporated by reference into this
Statement of Additional Information.
49
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS*
MOODY'S INVESTORS SERVICE, INC.
Bond Ratings
- ------------
AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than with Aaa securities.
Moody's applies numerical modifiers, 1, 2, and 3 in the Aa category. The
modifier 1 indicates that the obligation ranks in the higher end of the Aa
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of the Aa category.
- ----------------------------------------------------------------
* The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they under take no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be given to these securities on the
date of the Portfolios' taxable year end.
A-1
<PAGE>
Short-Term Ratings
- ------------------
P-1: Issuers have a superior ability for repayment of senior short-term
promissory obligations. Prime-1 or P-1 repayment ability will normally be
evidenced by many of the following characteristics:
. Leading market positions in well established indus tries.
. High rates of return on funds employed.
. Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
. Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
. Well established access to a range of financial markets and assured
sources of alternate liquidity.
P-2: Issuers have a strong ability for repayment of senior 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, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
State and Municipal Obligations
- -------------------------------
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or (MIG). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the bor rower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in bond
risk, long-term secular trends for example, may be less important over the short
run. Symbols used will be as follows:
MIG 1 -- This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refi nancing.
MIG 2 -- This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
A short-term rating may also be assigned on an issue having a demand feature.
Such ratings will be designated as VMIG to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact
A-2
<PAGE>
that the source of payment may be limited to the external liquid ity with no or
limited legal recourse to the issuer in the event the demand is not met. VMIG-1,
and VMIG-2 ratings carry the same definitions as MIG-1, and MIG-2, respectively.
STANDARD & POOR'S RATINGS GROUP
Bond Ratings
- ------------
AAA: 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 highest rated issues only in small degree.
PLUS (+) OR MINUS (-): The AA rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA category.
Short-Term Ratings
- ------------------
A-1: Standard & Poor's Commercial Paper ratings are current assessments of the
likelihood of timely payment of debt consid ered short-term in the relevant
market. The A-1 designation is the highest category and 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.
Municipal Notes
- ---------------
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in 3 years or less will likely receive
a note rating. Notes maturing beyond 3 years will most likely receive a long-
term debt rating. The fol lowing 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:
A-3
<PAGE>
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term of the
notes.
Standard & Poor's assigns "dual" ratings to all debt issues that have a put
option or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of princi pal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, "AAA/A-1+"). With short-term demand debt, S&P's note rating symbols
are used with the commercial paper rating symbols (for example, "SP-1+/A-1+").
DUFF & PHELPS, INC.
Bond Ratings
- ------------
AAA: Long-term fixed income securities which are rated AAA are judged to be of
the highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA: Long-term fixed income securities which are rated AA are judged to be of
high credit quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
Duff & Phelps applies modifiers, AA+ and AA- in the AA category for long-term
fixed securities. The modifier AA+ indicates that the security ranks in the
higher end of the AA category: the modifier AA indicates a mid-range ranking;
and the modifier AA-indicates that the issue ranks in the lower end of the AA
catego ry.
Short-Term Ratings
- ------------------
D-1: Commercial paper and certificates of deposit rated Duff 1 are considered
to have a very high certainty of timely payment. Liquidity factors are
considered excellent and are supported by strong fundamental protection factors.
Risk factors are minor.
D-2: Commercial paper and certificates of deposit rated Duff 2 are considered
to have a good certainty of timely payment. Liquidity factors and company
fundamentals are considered sound. Although ongoing funding needs may enlarge
total financing
A-4
<PAGE>
requirements, access to capital markets is good and risk factors are small.
Duff & Phelps applies a plus and minus rating scale, D-1+, D-1 and D-1- in the
Duff 1 top grade category for commercial paper and certificates of deposit. The
rating D-1+ indicates that the security has the highest certainty of timely
payment, short-term liquidity is clearly outstanding and safety is just below
risk-free U.S. Treasury short-term obligations; the rating D-1 indicates a very
high certainty of timely payment, liquidity factors are excellent and risk
factors are minimal; and the rating D-1- indicates a high certainty of timely
payment, liquid ity factors are strong and risk factors are very small.
FITCH INVESTORS SERVICE CORP.
AAA: Bonds which are rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
its obligations, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds which are rated AA are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to fore
seeable future developments, short-term debt of these issuers is generally rated
"F-1+".
Fitch applies plus (" + ") and minus (" - ") modifiers in the AA category to
indicate the relative position of a credit within the rating category. The
modifier AA+ indicates that the security ranks at the higher end of the AA
category than a security rated AA or AA- .
Eligible Fitch ratings for short-term debt obligations payable on demand or with
original maturities of up to three years, includ ing commercial paper,
certificates of deposit, medium-term notes, and municipal and investment notes
may be rated F-1 or F-2.
F-1: Short-term debt obligations rated F-1 are considered to be of very strong
credit quality. Those issues determined to possess exceptionally strong credit
quality and having the strongest degree of assurance for timely payment will be
denoted with a plus ("+") sign designation.
F-2: Short-term debt obligations rated F-2 are considered to be of good credit
quality. Issues assigned this rating have a satisfactory degree of assurance
for timely payment, but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
IBCA LIMITED AND IBCA INC.
A-5
<PAGE>
A1: Short-term obligations rated A1 are supported by a very strong capacity
for timely repayment. A plus ("+") sign is added to those issues determined to
possess the highest capacity for timely payment.
A2: Short-term obligations rated A2 are supported by a strong capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
THOMSON BANKWATCH, INC.
AAA: The highest category; indicates a superior ability to repay principal and
interest on a timely basis.
AA:The second highest category; indicates a superior ability to repay principal
and interest on a timely basis with limited incremental risk versus issues rated
in the highest category.
Ratings in the AA Long-Term Debt category may include a plus (+) or minus (-)
designation which indicates where within the respec tive category the issue is
placed.
The TBW Short-Term Ratings apply only to unsecured instruments that have a
maturity of one year or less.
The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal and interest.
TBW-1: The highest category; indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
TBW-2: The second highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
A-6
<PAGE>
================================================================================
Goldman Sachs
1 New York Plaza
New York, NY 10004
Trustees
Ashok N. Bakhru, Chairman
David B. Ford
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Douglas C. Grip, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Goldman Sachs
Investment Adviser, Administrator,
Distributor and Transfer Agent
Goldman Sachs
Money Market Trust
Financial Square
Funds
- -------------------------------------------------------------------
Annual Report
December 31, 1996
Prime Obligations Fund
Money Market Fund
Treasury Obligations Fund
Government Fund
Tax-Free Money Market Fund
- -------------
Goldman
Sachs
- -------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
================================================================================
================================================================================
- --------------------------------------------------------------------------------
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders:
We welcome this opportunity to provide you with a summary of the trends
and key events that affected the economy and the Goldman Sachs Money Market
Trust/Financial Square Funds in 1996. It was another strong year for the Funds,
during which all of the portfolios outperformed their respective IBC Financial
Data, Inc. averages during the period. Assets in the Financial Square Funds
totaled $12.2 billion as of December 31, 1996, up 34% from last year.
1996 in Review: After Easing Early in the Year, the Fed Remained Neutral Amid
Moderate Growth and Benign Inflation.
Last year began on a weak note, with the economy still in the doldrums as
harsh winter storms and a strike at General Motors continued to restrain growth.
Against that backdrop, the Federal Reserve Board (the "Fed") cut the Federal
funds rate by 25 basis points to 5.25% in January 1996, following an easing of
the same magnitude in December 1995. It soon became evident that the economy had
responded and was somewhat healthier than expected, with first-quarter real
Gross Domestic Product (GDP) at 2.0% annualized. Growth was more dramatic during
the second quarter, as industrial activity and automobile and home sales all
showed significant improvement, pushing real GDP to 4.7%, its highest rate in
two years. That growth caused some to expect the Fed to change direction and
tighten before year-end. However, the economy subsequently moderated
significantly, with third-quarter annualized real GDP retreating to 2.1%,
reflecting lackluster consumer spending and a widening U.S. trade deficit. As
1996 drew to a close, moderate economic growth and contained inflation kept the
Fed in a neutral mode, despite a very robust stock market.
Historical Yield Curve (LIBOR)
[BAR GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
Source: Goldman Sachs Fixed Income Database, reflecting the London Interbank
Offered Rate (LIBOR).
The Federal funds rate began the year at 5.50% and ended at 5.25%. The slope of
the LIBOR yield curve steepened significantly over the course of the year. By
the end of 1996, the spread between one- and 12-month LIBOR moved to plus 28
basis points.
A Nimble Strategy Contributed to Strong Performance
Taxable Sector. Structuring money market portfolios successfully during
1996 as the Fed shifted policy from easing to neutral to a bias to tighten
required strict attention to risk management, as well as to a detailed analysis
of market fundamentals and technicals. Analyzing the implied forward rates and
determining the extent to which the market had priced in too much easing at the
beginning of 1996 or too much tightening by midyear 1996 and then adjusting the
Funds' weighted average maturities and structures were equally important to our
strategy.
During the second and third quarters of 1996, we extended the Financial
Square Funds' weighted average maturities as the yield curve steepened in
anticipation of a Fed tightening that did not materialize. During the early part
of the fourth quarter, market data suggested that growth slowed in the third
quarter. Consequently, the market was priced to a more neutral Fed policy.
However, year-end financing pressures resulted in investment opportunities
maturing in the first quarter of 1997, and the Funds closed the year with
neutral weighted average maturities.
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
Letter to Shareholders (continued)
- --------------------------------------------------------------------------------
Tax-Exempt Sector. With tax reform basically a nonissue in 1996, investor
interest in the sector revived, causing total assets in the tax-exempt money
market fund category to increase by 13%. In contrast, supply was little changed
from 1995 levels, making tax-exempts slightly more expensive in 1996. These
supply/demand technicals coupled with our fundamental view that short-term rates
were likely to rise explains our neutral to short-to-neutral weighted average
maturities during the latter part of the year.
Summary for Financial Square Funds Institutional Shares* as of 12/31/96
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Weighted
SEC 7-Day SEC 7-Day 30-Day Average
Financial Square Current Effective Average Maturity
Funds Yield Yield Yield (days)
=====================================================================
<S> <C> <C> <C> <C>
Prime
Obligations 5.34% 5.48% 5.31% 41
- --------------------------------------------------------------------
Money Market 5.38% 5.54% 5.34% 37
- --------------------------------------------------------------------
Treasury
Obligations 5.43% 5.56% 5.29% 33
- --------------------------------------------------------------------
Government 5.36% 5.52% 5.30% 36
- --------------------------------------------------------------------
Tax-Free
Money Market 3.74% 3.81% 3.42% 34
- --------------------------------------------------------------------
</TABLE>
* Financial Square Funds offer four separate classes of shares (Institutional,
Preferred, Administration and Service), each of which is subject to different
fees and expenses that affect performance and entitle shareholders to different
services. The Preferred, Administration and Service shares offer financial
institutions the opportunity to receive a fee for providing administrative
support services. The Preferred shares pay 0.10%, Administration shares pay
0.25%, and the Service shares pay 0.50%. More complete information, including
management fees and expenses, is included in the Funds' prospectus or may be
obtained by calling Goldman Sachs Funds at 1-800-621-2550.
Domestic Credit Trends Were Positive, Reflecting a Healthy Economy and a Strong
Market
Credit trends in 1996 were positive on the whole in the U.S., with steady
growth, low inflation, a booming stock market, and technological advances and
globalization transforming many industries. The major story of 1996 was the Dow
Jones Industrial Average climb of 26%, which, following the 33.5% increase in
1995, added up to a 68% growth rate since 1994.
The rising stock market supported record levels of mergers and
acquisitions. Over $650 billion in mergers, acquisitions and spin-offs were
announced in the U.S. in 1996 (up 27% from 1995), with $1.4 trillion announced
globally. This trend was spurred on not only by the stock market, but also by
deregulation in telecommunications, utilities and broadcasting. Unlike the
1980s, mergers this past year were generally equity-financed and aimed at
expanding core businesses, rather than diversifying. Merger and acquisition
activity was also utilized to boost earnings growth, since cost-cutting
opportunities had been largely exhausted during 1995.
Banks, which dominated merger activity in 1995, were busy consolidating
those mergers in 1996. It is likely that large regional domestic banks will
continue making acquisitions in 1997, although this is not expected to affect
their credit quality. At the end of the third quarter 1996, 80% of the banking
sector had a stable rating outlook.
Although consumer confidence was buoyed by low unemployment and mild
inflation, growing household debt levels led to an all-time high in credit card
loan delinquencies and personal bankruptcies. Consequently, financial results in
the consumer products, retail, restaurant and entertainment businesses were
mediocre at best. Almost all other industries, however, had improved credit
quality, with upgrades surpassing downgrades in utilities, energy, healthcare
and financial institutions. Many companies used the strength of the stock market
to substitute debt capital with equity capital, thereby improving their credit
quality.
Credit quality in the tax-exempt market was steady-to-improving during
1996. Market concerns arising from the Orange County bankruptcy abated somewhat,
although various forms of credit enhancement remained popular, even among high-
quality issuers. Reflecting the strong national economy, many states and
localities experienced positive financial results, reducing their regular cash
flow borrowings.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Credit Picture Abroad: Europe Improved, While Asia Was Generally Stable
In Europe, developments were driven by the push towards European Monetary
Union (EMU), while the key factors in Asia were the fragile Japanese recovery
and a sharp downturn in Asian exports. In general, sovereign creditworthiness
improved during 1996. This was particularly the case in Europe, where the
political will to qualify for EMU produced significant improvements in fiscal
policy and debt dynamics, as it sparked more rapid corporate restructuring.
French and Italian banks did require close monitoring this year as their problem
loans continued, but French bank credit quality stabilized after having suffered
broad rating downgrades in 1995. The credit quality of most other European banks
was stable, with a few minor downgrades of German and Swiss banks.
In Asia, creditworthiness was fairly stable. The notable negative
exception was the Japanese financial sector, which remained under pressure from
the ongoing weakness of the real estate markets, sluggish economic growth and
ongoing deregulation. However, Japan's largest banks have strong fundamentals
and will continue to be important and dominant players in the global financial
market. Australian credit quality strengthened through improved macroeconomic
balances, which provided evidence that Australia's recent boom-and-bust cycles
may be over. The weakness of Asian exports did not affect creditworthiness
directly; exports should recover this year, and the scare could prompt salutary
policy adjustments going forward.
In 1996, we continued to apply conservative credit standards to our money
market Funds. The Goldman Sachs Credit Department, which has analysts based in
London, Tokyo, Frankfurt and New York, as well as extensive technological assets
and credit expertise, will continue to vigilantly monitor global developments.
Outlook and Strategies for 1997
Fourth-quarter 1996 GDP was reported at 4.7%, reflecting a stronger
economic picture from several sources: a sharp narrowing of the U.S. trade
deficit, as well as increases in consumer spending and industrial production.
Goldman Sachs' economists expect economic growth to continue at just under 2.0%
for the first quarter of 1997 and at approximately 3.0% for the full year. As a
result, Goldman Sachs currently believes the Fed is likely to raise short-term
interest rates by midyear.
Consequently, the Financial Square Funds will continue to be managed with
short-to-neutral average life targets and short, laddered structures to prepare
for the probability of higher rates ahead.
Extended Trading Hours Improve Service Further
To meet the needs of many institutional investors who receive inflows of
cash late in the day, we extended the trading hours for both purchases and
redemptions in the Financial Square Treasury Obligations Fund until 5:00 p.m.
EST. (The Financial Square Government Fund also provides late-day service.) We
have found many of our clients enjoy the added flexibility of late-day trading
and are increasing their use of this beneficial service.
In closing, we thank you for your support and for making 1996 a successful
year for the Financial Square Funds. We are pleased that many of you have joined
our conference calls following each Federal Open Market Committee meeting
throughout the year. Our goal is to continue to provide you with competitive
performance, as well as a range of value-added services that reflect the breadth
and depth of Goldman Sachs' outstanding resources.
Sincerely,
/s/ Kaysie P. Uniacke
- ---------------------
Kaysie P. Uniacke
Portfolio Manager
February 7, 1997
- --------------------------------------------------------------------------------
3
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Financial Square Prime Obligations Fund
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Commercial Paper and Corporate Obligations--53.0%
Bank Holding Companies
BankAmerica Corp.
$150,000,000 5.27% 03/21/97 $ 148,265,292
Chase Manhattan Corp.
100,000,000 5.28 03/14/97 98,944,000
JP Morgan & Co., Inc.
25,000,000 5.73 05/30/97 24,407,104
NationsBank Corp.
50,000,000 5.40 05/09/97 49,040,000
Business Credit Institutions
General Electric Capital Corp.
50,000,000 5.30 03/26/97 49,381,667
100,000,000 5.44 04/03/97 98,609,778
JC Penney Funding Corp.
50,000,000 5.31 01/31/97 49,778,750
Commercial Banks
CP Trust Certificates Series 1996
85,000,000 5.68/(a)/ 03/28/97 85,000,000
Financial Services
National Rural Utilities Cooperative
34,250,000 5.30 02/11/97 34,043,263
62,000,000 5.28 02/21/97 61,536,240
Life Insurance
Commonwealth Life Insurance Co.
20,000,000 5.64/(b)/ 05/08/97 20,000,000
Pacific Mutual Life Insurance Co.
50,000,000 5.52/(b)/ 02/28/97 50,000,000
Prudential Funding Corp.
50,000,000 6.50 01/02/97 49,990,972
50,000,000 5.43 02/28/97 49,562,583
Motor Vehicles and Equipment
Ford Motor Credit Co.
150,000,000 5.31 02/04/97 149,247,750
Personal Credit Institutions
Associates Corp. of North America
50,000,000 6.30 01/02/97 49,991,250
50,000,000 5.32 01/30/97 49,785,722
50,000,000 5.32 01/31/97 49,778,333
Household Finance Corp.
50,000,000 5.32 03/12/97 49,482,778
Transamerica Finance Corp.
10,000,000 5.52 01/28/97 9,958,600
50,000,000 5.43 02/28/97 49,562,584
21,000,000 5.29 03/13/97 20,780,906
31,308,000 5.29 03/14/97 30,976,761
USAA Capital Corp.
30,000,000 5.34 04/07/97 29,572,800
Receivable/Asset Financings
Beta Finance Inc.
16,000,000 5.58 01/27/97 15,935,520
24,000,000 5.58 02/03/97 23,877,240
15,000,000 5.50 02/04/97 14,922,083
19,000,000 5.35 04/07/97 18,728,933
25,000,000 6.11 06/17/97 25,000,000
Delaware Funding Corp.
30,832,000 5.29 02/20/97 30,605,470
Enterprise Funding Corp.
50,000,000 5.33 01/23/97 49,837,139
International Lease Finance Corp.
60,000,000 5.30 03/17/97 59,337,500
20,000,000 5.29 03/24/97 19,759,011
New Center Asset Trust
25,000,000 5.52 01/28/97 24,896,500
25,000,000 5.37 04/04/97 24,653,188
Security and Commodity Brokers, Dealers and Services
Bear Stearns Companies, Inc.
100,000,000 5.30 02/13/97 99,366,945
50,000,000 5.30 02/18/97 49,646,667
C.S. First Boston, Inc.
60,000,000 5.33 01/22/97 59,813,450
Merrill Lynch & Co., Inc.
50,000,000 5.35 02/11/97 49,695,347
25,000,000 5.45 02/19/97 24,814,549
75,000,000 5.33 02/26/97 74,378,167
Morgan Stanley Group, Inc.
40,000,000 5.59 01/28/97 39,832,300
50,000,000 5.41 02/03/97 49,752,042
20,000,000 5.32 02/06/97 19,893,600
40,000,000 5.53 06/27/97 40,000,000
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Financial Square Prime Obligations Fund (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Commercial Paper and Corporate Obligations (continued)
Telecommunications
Ameritech Corp.
$ 70,000,000 5.34% 04/07/97 $ 69,003,200
Tobacco
Philip Morris Co.
70,000,000 6.50 01/02/97 69,987,361
- -------------------------------------------------------------------
Total Commercial Paper and Corporate
Obligations $2,311,433,345
- -------------------------------------------------------------------
Bank Notes--15.6%
Dakota Certificates of Standard Credit Card Master Trust
$ 50,000,000 5.33%(b) 02/07/97 $ 49,726,097
FCC National Bank
40,000,000 5.70 05/22/97 39,953,925
75,000,000 6.00 06/02/97 75,003,030
First Bank FSB
50,000,000 5.62(b) 02/11/97 50,000,000
20,000,000 5.61(b) 04/11/97 19,998,937
First National Bank of Maryland
20,000,000 5.60(b) 09/30/97 19,994,187
Harris Trust & Savings Bank
16,500,000 6.04 06/17/97 16,520,097
Household Bank FSB
50,000,000 5.63(b) 09/23/97 49,997,602
Huntington National Bank
35,000,000 6.05 06/13/97 35,042,420
PNC Bank, N.A.
58,500,000 5.58(b) 04/01/97 58,488,742
100,000,000 5.40(b) 10/01/97 99,941,219
Society National Bank of Cleveland
100,000,000 5.58 05/14/97 99,961,237
SMM Trust 1996
40,000,000 5.69(b) 06/20/97 40,000,000
Southtrust Bank of Alabama, N.A.
25,000,000 5.54(b) 05/15/97 24,995,313
- -------------------------------------------------------------------
Total Bank Notes $ 679,622,806
- -------------------------------------------------------------------
U.S. Government Agency Obligations--7.1%
Federal Farm Credit Bank
32,000,000 5.39 02/24/97 31,741,280
Federal Home Loan Mortgage Corp.
50,000,000 5.40 02/24/97 49,595,000
Federal National Mortgage Association
$200,000,000 5.36% 03/04/97 $ 198,153,778
30,000,000 5.35 03/17/97 29,665,625
- -------------------------------------------------------------------
Total U.S. Government Agency Obligations $ 309,155,683
- -------------------------------------------------------------------
Certificates of Deposit--6.9%
Chase Manhattan Corp.
$ 25,000,000 5.75% 02/03/97 $ 25,000,000
25,000,000 5.42 03/12/97 25,000,000
Mellon Bank, N.A.
50,000,000 5.35 02/19/97 50,000,000
100,000,000 5.50 04/07/97 100,000,000
Morgan Guaranty Trust Co.
50,000,000 5.65 02/03/97 50,000,445
Union Bank of California
50,000,000 5.58 02/28/97 50,000,000
- -------------------------------------------------------------------
Total Certificates of Deposit $ 300,000,445
- -------------------------------------------------------------------
Repurchase Agreements--17.7%
C.S. First Boston Corp., dated 12/31/96, repurchase price
$302,790,000 (FNMA: $308,478,596, 6.00%-6.18%, 02/01/09-04/01/34)
$300,000,000 5.40% 03/03/97 $ 300,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase price
$100,036,111 (FNMA: $102,538,618, 5.47%, 12/30/97)
100,000,000 6.50 01/02/97 100,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase price
$75,641,250 (FNMA: $78,669,875, 7.50%, 04/01/26)
75,000,000 5.40 02/26/97 75,000,000
Joint Repurchase Agreement Account
297,900,000 6.58 01/02/97 297,900,000
- -------------------------------------------------------------------
Total Repurchase Agreements $ 772,900,000
- -------------------------------------------------------------------
Total Investments $4,373,112,279/(c)/
===================================================================
/(a)/Variable rate security - base index is either U.S. Treasury
Bill, one or three month LIBOR, one month commercial paper,
Federal Funds or Prime lending rate
/(b)/Variable rate master note-base index is Federal Funds.
/(c)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized
yield on date of purchase for discounted notes, or, for floating
rate securities, the current reset rate, which is based upon
current interest rate indices. The percentages shown for each
investment category reflect the value of investments in that
category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Statement of Investments
- --------------------------------------------------------------------
Financial Square Money Market Fund
December 31, 1996
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
====================================================================
Commercial Paper and Corporate Obligations--45.7%
Commercial Banks
CP Trust Certificates Series 1996
$ 60,000,000 5.68%\(a)\ 03/28/97 $ 60,000,000
Computer Software and Services
First Data Corp.
20,000,000 5.40 02/19/97 19,853,000
Siemens Capital Corp.
25,000,000 5.32 02/13/97 24,841,139
Foreign Banks
ABN Amro N.A.
50,000,000 5.45 02/28/97 49,560,972
Banca Crt Financial Corp.
15,000,000 5.35 01/31/97 14,933,125
22,945,000 5.42 04/01/97 22,634,095
20,000,000 5.47 04/03/97 19,720,422
13,000,000 5.42 04/08/97 12,810,149
BBL North America
125,000,000 6.90 01/02/97 124,976,042
Bex America, Inc.
36,000,000 5.36 01/21/97 35,892,900
Generale Bank
70,000,000 5.35 04/10/97 68,970,125
Nordbanken, N.A.
42,559,000 6.50 01/10/97 42,489,842
Royal Bank of Canada
100,000,000 6.50 01/02/97 99,981,944
San Paolo U.S. Finance Corp.
25,000,000 5.36 01/31/97 24,888,333
Swedbank, Inc.
100,000,000 5.47 02/04/97 99,483,389
Unifunding, Inc.
60,000,000 5.45 01/29/97 59,745,667
50,000,000 5.36 04/07/97 49,285,333
Life Insurance
Sunamerica Life Insurance Co.
50,000,000 5.50\(b)\ 09/02/97 50,000,000
Mortgage Brokers
Countrywide Funding Corp.
28,700,000 5.35 01/23/97 28,606,167
27,000,000 5.35 01/28/97 26,891,663
Countrywide Home Loans
50,000,000 6.65 01/02/97 49,990,764
Motor Vehicles and Equipment
Daimler Benz Corp., N.A.
16,312,000 5.57% 01/14/97 16,279,190
30,000,000 5.60 01/16/97 29,930,000
10,000,000 5.35 03/25/97 9,876,653
55,000,000 5.35 03/26/97 54,313,417
General Motors Acceptance Corp.
20,000,000 5.57 02/04/97 19,894,789
50,000,000 5.47 04/07/97 49,270,667
Security and Commodity Brokers, Dealers and Services
Merrill Lynch & Co., Inc.
25,000,000 5.35 02/11/97 24,847,674
25,000,000 5.45 02/19/97 24,814,549
50,000,000 5.33 02/26/97 49,585,444
Morgan Stanley Group, Inc.
22,900,000 5.53\(a)\ 06/27/97 22,900,000
Nomura Holdings
15,000,000 5.39 01/28/97 14,939,363
50,000,000 5.39 01/30/97 49,782,903
- --------------------------------------------------------------------
Total Commercial Paper and Corporate
Obligations $1,351,989,720
- --------------------------------------------------------------------
Bank Notes--15.1%
Dakota Certificates of Standard Credit Card Master Trust
$ 25,000,000 5.33%\(b)\ 02/07/97 $ 24,863,049
FCC National Bank
25,000,000 5.70 05/22/97 24,971,203
50,000,000 6.00 06/02/97 50,002,020
First Bank FSB
75,000,000 5.61\(b)\ 04/11/97 74,996,012
First National Bank of Maryland
30,000,000 5.61\(b)\ 09/26/97 29,991,409
25,000,000 5.60\(b)\ 09/30/97 24,992,734
Household Bank FSB
25,000,000 5.63\(b)\ 09/23/97 24,998,185
Huntington National Bank
10,000,000 6.05 06/13/97 9,996,458
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Statement of Investments
- ---------------------------------------------------------------------
Financial Square Money Market Fund (continued)
December 31, 1996
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
====================================================================
Bank Notes (continued)
PNC Bank, N.A.
$ 42,000,000 5.46%(b) 09/03/97 $ 41,977,353
50,000,000 5.40(b) 10/01/97 49,970,608
SMM Trust 1996
40,000,000 5.69(b) 06/20/97 40,000,000
Southtrust Bank of Alabama, N.A.
50,000,000 5.45(b) 07/11/97 49,983,901
- --------------------------------------------------------------------
Total Bank Notes $ 446,742,932
- --------------------------------------------------------------------
Certificates of Deposit--1.2%
Chase Manhattan Corp.
$ 35,000,000 5.75% 02/03/97 $ 35,000,000
- --------------------------------------------------------------------
Total Certificates of Deposit $ 35,000,000
- --------------------------------------------------------------------
Certificates of Deposit - Foreign Eurodollar--7.6%
Norinchukin Bank, London
$125,000,000 5.49% 03/18/97 $ 125,002,592
Sanwa Bank Ltd., London
100,000,000 5.46 03/21/97 100,001,079
- --------------------------------------------------------------------
Total Certificates of Deposit - Foreign Eurodollar $ 225,003,671
- --------------------------------------------------------------------
Certificates of Deposit - Yankeedollar--12.3%
Fuji Bank, Chicago
$100,000,000 5.52% 01/17/97 $ 100,000,441
Industrial Bank of Japan, New York
100,000,000 5.46 03/19/97 100,001,051
Landesbank Hessen Thuer Gir, New York
50,000,000 6.03 06/13/97 50,060,885
Sumitomo Bank, Los Angeles
75,000,000 5.52 02/28/97 74,994,514
Westpac Banking Corp., New York
40,000,000 5.97 06/06/97 40,027,198
- --------------------------------------------------------------------
Total Certificates of Deposit - Yankeedollar $ 365,084,089
- --------------------------------------------------------------------
Time Deposit--2.9%
Bank of Tokyo, Mitsubishi Bank Ltd., London
$ 85,000,000 5.50% 05/16/97 $ 85,000,000
- --------------------------------------------------------------------
Total Time Deposit $ 85,000,000
- --------------------------------------------------------------------
Repurchase Agreements--15.4%
JP Morgan Securities, Inc., dated 12/31/96, repurchase price
$100,036,111 (FNMA: $69,839,000, 5.47%, 12/30/97; FHLMC:
$32,517,875, 7.26%, 09/17/01)
$100,000,000 6.50% 01/02/97 $ 100,000,000
SBC Government Securities, Inc., dated 12/31/96, repurchase price
$150,052,083 (FNMA Stripped Securities: $149,437,500, 01/23/97;
FNMA: $3,650,246, 6.50%, 08/15/97)
150,000,000 6.25 01/02/97 150,000,000
Joint Repurchase Agreement Account
205,200,000 6.58 01/02/97 205,200,000
- --------------------------------------------------------------------
Total Repurchase Agreements $ 455,200,000
- --------------------------------------------------------------------
Total Investments $2,964,020,412(c)
================================================================================
(a) Variable rate security - base index is either U.S. Treasury Bill, one or
three month LIBOR, one month commercial paper, Federal Funds or Prime
lending rate
(b) Variable rate master note-base index is Federal Funds.
(c) The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Financial Square Treasury Obligations Fund
December 31, 1996
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
=====================================================================
U.S. Treasury Obligations--8.5%
United States Treasury Notes
$ 100,000,000 5.63% 06/30/97 $ 99,831,980
30,000,000 6.00 09/02/97 29,991,342
92,500,000 5.38 12/01/97 92,370,356
40,000,000 5.25 12/31/97 39,901,534
- --------------------------------------------------------------------
Total U.S. Treasury Obligations $ 262,095,212
====================================================================
Repurchase Agreements--91.9%
Bear Stearns Companies, Inc., dated 12/31/96, repurchase price
$125,046,875 (U.S. Treasury Notes: $127,384,047, 5.75%-5.88%,
10/31/98-12/31/98)
$ 125,000,000 6.75% 01/02/97 $ 125,000,000
C.S. First Boston Corp., dated 12/13/96, repurchase price
$101,332,500 (U.S. Treasury Note: $102,491,792, 5.50%,
11/15/98)
100,000,000 5.33 03/13/97 100,000,000
CIBC Wood Gundy Securities, dated 12/31/96, repurchase price
$125,046,528 (U.S. Treasury Bond: $71,136,658, 8.50%,
02/15/20; U.S. Treasury Note: $56,365,266, 7.25%, 08/15/04)
125,000,000 6.70 01/02/97 125,000,000
Daiwa Securities, dated 12/31/96, repurchase price $125,047,917
(U.S. Treasury Bill: $127,500,528, 11/13/97)
125,000,000 6.90 01/02/97 125,000,000
Goldman, Sachs & Co., dated 12/31/96, repurchase price
$125,045,833 (U.S. Treasury Bill: $127,500,296, 12/11/97)
125,000,000 6.60 01/02/97 125,000,000
JP Morgan Securities, dated 12/31/96, repurchase price
$125,045,833 (U.S. Treasury Notes: $127,371,815, 6.88%-7.75%,
12/31/99-11/15/01)
125,000,000 6.60 01/02/97 125,000,000
Lehman Government Securities, Inc., dated 12/31/96, repurchase
price $125,049,306 (U.S. Treasury Stripped Securities:
$127,500,543, 02/15/97-11/15/03)
125,000,000 7.10 01/02/97 125,000,000
Merrill Lynch Government Securities, Inc., dated 12/31/96,
repurchase price $125,044,792 (U.S. Treasury Bills:
$70,594,041, 01/09/97-01/30/97; U.S. Treasury Stripped
Securities: $14,626,460, 08/15/98-11/15/99; U.S. Treasury
Notes: $42,283,899, 7.50%-9.25%, 05/15/97-11/15/01)
125,000,000 6.45 01/02/97 125,000,000
Nomura Securities International, Inc., dated 12/12/96, repurchase
price $101,335,000 ( U.S. Treasury Bill: $9,629,890, 09/18/97;
U.S. Treasury Notes: $92,371,056, 5.00%-8.13%, 05/31/97-05/31/01)
100,000,000 5.34 03/12/97 100,000,000
Repurchase Agreements (continued)
Sanwa Securities, dated 12/31/96, repurchase price $125,046,875
(U.S. Treasury Notes: $85,107,798, 4.75%-5.25%,
08/31/98-04/30/01; U.S. Treasury Bill: $40,971,000, 10/16/97)
$ 125,000,000 6.75% 01/02/97 $ 125,000,000
Smith Barney, Inc., dated 12/11/96, repurchase price $101,335,000
(U.S. Treasury Bill: $1,475,971, 03/13/97; U.S. Treasury
Stripped Security: $ 15,052,048, 02/15/98; U.S. Treasury
Notes: $85,472,470, 4.75%-7.88%, 02/15/97-04/15/98)
100,000,000 5.34 03/11/97 100,000,000
UBS Securities, Inc., dated 12/31/96, repurchase price
$125,047,743 (U.S. Treasury Notes: $127,294,387, 6.13%-7.75%,
05/31/97-11/15/01)
125,000,000 6.88 01/02/97 125,000,000
Joint Repurchase Agreement Account
1,419,100,000 6.58 01/02/97 1,419,100,000
- --------------------------------------------------------------------
Total Repurchase Agreements $2,844,100,000
====================================================================
Total Investments $3,106,195,212/(a)/
====================================================================
/(a)/The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflects the value of the
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Statement of Investments
- -------------------------------------------------------------------
Financial Square Government Fund
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
U.S. Government Agency Obligations--44.7%
Federal Home Loan Bank
$ 35,000,000 5.40%(a) 04/04/97 $ 34,991,708
15,000,000 5.45 11/12/97 14,986,333
20,000,000 5.42 12/02/97 19,973,237
50,000,000 5.50(a) 12/26/97 49,959,182
Federal National Mortgage Association
72,000,000 5.35 01/21/97 71,786,000
25,000,000 5.35 01/24/97 24,914,549
20,000,000 5.27(a) 04/04/97 19,985,729
75,000,000 4.75(a) 04/21/97 74,974,867
100,000,000 5.43(a) 09/12/97 99,940,710
50,000,000 5.41(a) 09/29/97 49,981,540
12,500,000 5.53 10/29/97 12,495,125
75,000,000 5.40(a) 12/03/97 74,952,900
- -------------------------------------------------------------------
Total U.S. Government Agency Obligations $ 548,941,880
- -------------------------------------------------------------------
U.S. Treasury Obligations--6.5%
United States Treasury Notes
$ 50,000,000 5.63% 06/30/97 $ 49,915,080
30,000,000 6.00 09/02/97 29,990,027
- -------------------------------------------------------------------
Total U.S. Treasury Obligations $ 79,905,107
- -------------------------------------------------------------------
Repurchase Agreements--49.0%
Bear Stearns Companies, Inc., dated 12/31/96, repurchase price
$50,018,889 (FNMA: $51,422,558, 7.00%, 12/01/11-04/01/24)
$ 50,000,000 6.80% 01/02/97 $ 50,000,000
C.S. First Boston Corp., dated 12/11/96, repurchase price
$50,671,875 (FHLMC: $52,596,865, 7.00%, 11/01/26)
50,000,000 5.38 03/11/97 50,000,000
Goldman, Sachs & Co., dated 12/11/96, repurchase price
$50,671,875 (FNMA: $51,607,046, 6.12%, 10/01/32)
50,000,000 5.38 03/11/97 50,000,000
JP Morgan Securities, Inc., dated 12/12/96, repurchase price
$50,671,875 (FNMA: $52,512,714, 7.50%, 06/01/26)
50,000,000 5.38 03/12/97 50,000,000
Nomura Securities International, Inc., dated 12/31/96, repurchase
price $50,020,833 (FNMA: $34,860,373, 6.50%, 07/01/24; FHLMC:
$16,396,948, 7.00%-8.00%, 12/01/22-12/01/26)
50,000,000 7.50 01/02/97 50,000,000
Joint Repurchase Agreement Account
351,600,000 6.58 01/02/97 351,600,000
- -------------------------------------------------------------------
Total Repurchase Agreements $ 601,600,000
- -------------------------------------------------------------------
Total Investments $1,230,446,987/(b)/
===================================================================
/(a)/Variable rate security-base index is either Federal Funds, Prime
lending rate or one month LIBOR.
/(b)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized
yield on date of purchase for discounted notes, or, for floating
rate securities, the current reset rate, which is based upon
current interest rate indices.
The percentages shown for each investment category reflect the value
of investments in that category as a percentage of total net assets.
- -------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Statement of Investments
- -------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Alabama--4.8%
Columbia IDB PCRB for Alabama Power Co. Series 1995 (A-1/VMIG1)
$ 1,500,000 5.00% 01/01/97 $ 1,500,000
Jefferson County MF Hsg. Refunding RB for Hickory Knolls Project
Series 1994 (Amsouth Bank LOC)(P-1)
4,040,000 4.25 01/07/97 4,040,000
Jefferson County Sewer Revenue Warrants Series 1995 A (Bayerische
Landesbank Girozentrale LOC)(A-1+/VMIG1)
18,200,000 4.25 01/07/97 18,200,000
Parrish IDB PCRB for Alabama Power Co. Series 1994 A(A-1+/VMIG1)
2,150,000 5.00 01/01/97 2,150,000
- -------------------------------------------------------------------
$25,890,000
- -------------------------------------------------------------------
Arizona--1.4%
Maricopa County PCRB for Southern California Edison Co.
Series 1985 C(A-1/P-1)
$ 6,450,000 3.60% 03/12/97 $ 6,450,000
Phoenix IDA MF Hsg. VRDN for Del Mar Terrace Apartments (Bank of
America LOC)(MIG1)
1,300,000 4.15 01/07/97 1,300,000
- -------------------------------------------------------------------
$ 7,750,000
- -------------------------------------------------------------------
Arkansas--0.8%
Crossett City PCRB for Georgia Pacific Corp. Series 1991(Suntrust
Bank LOC)(A-1/P-1)
$ 4,500,000 4.15% 01/07/97 $ 4,500,000
- -------------------------------------------------------------------
California--5.0%
California RANS Index Series 1996-97 B(SP-1+/MIG1)
$16,000,000 3.47% 01/31/97 $16,000,000
California RANS VRDN Series 1996-97(SP-1+/VMIG1)
4,300,000 4.00 01/07/97 4,300,000
California School Cash Reserve Program Authority Series 1996
(MBIA)(MIG1)
4,500,000 4.50 12/19/97 4,537,690
Los Angeles County TRANS Series 1996-97 A(Credit Suisse/Morgan
Guaranty/Westdeutsche Landesbank Girozentrale/Bank of America/
Union Bank of Switzerland LOC)(SP-1/MIG1)
2,080,000 4.50 01/07/97 2,087,107
- -------------------------------------------------------------------
$26,924,797
- -------------------------------------------------------------------
Colorado--1.0%
Colorado Health Facilities Authority Series 1992 C(A-1+/VMIG1)
$ 5,500,000 4.15% 01/07/97 $ 5,500,000
- -------------------------------------------------------------------
District of Columbia--1.1%
District of Columbia VRDN ACES Series 1988 C (Bayerische
Landesbank Girozentrale LOC)(A-1/VMIG1)
$ 6,100,000 4.10% 01/07/97 $ 6,100,000
- -------------------------------------------------------------------
Florida--4.6%
Dade County Water & Sewer RB Series 1994 (FGIC)(A-1/VMIG1)
$ 3,700,000 4.00% 01/07/97 $ 3,700,000
Florida Local Government Pooled CP Notes (First Union National
Bank of Florida LOC)(A-1/P-1)
11,617,735 3.70 01/30/97 11,617,735
Jacksonville PCRB for Florida Power & Light Co. Series 1995
(A-1+/VMIG1)
600,000 5.25 01/01/97 600,000
Putnam County Development Authority for Seminole Electric Series
1984 H VRDN (CFC)(A-1+/P-1)
9,100,000 4.15 01/07/97 9,100,000
- -------------------------------------------------------------------
$25,017,735
- -------------------------------------------------------------------
Georgia--6.8%
Bartow County PCRB for Georgia Power Co. Series 1996(VMIG1)
$ 5,800,000 5.25% 01/01/97 $ 5,800,000
Burke County PCRB for Georgia Power Co. Second Series 1995
(A-1/VMIG1)
800,000 5.00 01/01/97 800,000
Burke County PCRB for Georgia Power Co. Series 1994(VMIG1)
3,800,000 5.00 01/01/97 3,800,000
Burke County PCRB for Georgia Power Co. Series 1995(A+/VMIG1)
3,400,000 5.00 01/01/97 3,400,000
6,300,000 5.25 01/01/97 6,300,000
Floyd County PCRB for Georgia Power Co. Series 1996(A-1/VMIG1)
3,000,000 5.00 01/01/97 3,000,000
Monroe County Development Authority for Georgia Power Scherer
Project Series 1995(A-1/VMIG1)
3,300,000 5.00 01/01/97 3,300,000
Municipal Electric Authority of Georgia Subordinate General
Resolution Series 1985 B(Credit Suisse/Morgan
Guaranty/Bayerische Landesbank Girozentrale LOC)(A-1+/VMIG1)
4,575,000 3.55 03/06/97 4,575,000
6,000,000 3.55 04/10/97 6,000,000
- -------------------------------------------------------------------
$36,975,000
- -------------------------------------------------------------------
Hawaii--0.7%
Hawaii Housing Finance and Development Authority MF Hsg.VRDN
Series 1985 A(FHLB LOC)(A-1+)
$ 4,000,000 3.00% 01/07/97 $ 4,000,000
- -------------------------------------------------------------------
- -------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
10
<PAGE>
Statement of Investments
- ---------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Illinois--8.3%
Illinois Health Facilities Authority VRDN for Elmhurst Memorial
Hospital Series 1993 B(VMIG1)
$ 8,900,000 5.30% 01/01/97 $ 8,900,000
Illinois Health Facilities Authority VRDN for Evangelical
Hospitals Corp. Series 1985 A (First National Bank of Chicago
LOC)(VMIG1)
2,600,000 4.10 01/07/97 2,600,000
Illinois Health Facilities Authority VRDN for Healthcorp
Affiliates Projects Series 1985 A (Northern Trust Company
LOC)(VMIG1)
2,700,000 4.15 01/07/97 2,700,000
Illinois Health Facilities Authority VRDN RB for Northwest
Community Hospital Series 1995 (A-1+/VMIG1)
5,000,000 4.20 01/01/97 5,000,000
Illinois Health Facilities Authority VRDN for Resurrection
Healthcare(VMIG1)
6,000,000 5.00 01/01/97 6,000,000
Illinois Health Facilities Authority VRDN Series 1985 C and D
Revolving Fund Pooled Finance Program (First National Bank of
Chicago LOC)(A-1/VMIG1)
16,700,000 4.15 01/07/97 16,700,000
Sauget PCRB VRDN for Monsanto Series 1992(P-1)
1,000,000 4.20 01/07/97 1,000,000
Sauget PCRB VRDN for Monsanto Series 1993(P-1)
1,900,000 4.20 01/07/97 1,900,000
- -------------------------------------------------------------------
$44,800,000
- -------------------------------------------------------------------
Indiana--5.1%
Fort Wayne Hospital Authority VRDN for Parkview Memorial Hospital
Series 1985 B (Bank of America LOC)(VMIG1)
$ 8,100,000 4.15% 01/07/97 $ 8,100,000
Indiana Hospital Equipment Financing Authority VRDN Series 1985 A
(MBIA)(A-1/VMIG1)
2,500,000 4.20 01/07/97 2,500,000
Jasper County PCRB for Nipsco Series 1994 A and C(A-1+/VMIG1)
9,300,000 5.10 01/01/97 9,300,000
Warrick County PCRB for Aluminum Company of America Series
1992(A-1)
7,475,000 4.15% 01/07/97 7,475,000
- -------------------------------------------------------------------
$27,375,000
- -------------------------------------------------------------------
Iowa--2.0%
Chillicothe PCRB for Midwest Power Systems Series 1993 A
(A-1/VMIG1)
$ 3,700,000 4.15% 01/07/97 $ 3,700,000
Muscatine County VRDN for Monsanto Corp. Series 1992(P-1)
7,200,000 4.20 01/07/97 7,200,000
- -------------------------------------------------------------------
$10,900,000
- -------------------------------------------------------------------
Kentucky--0.6%
Calvert PCRB for Air Products and Chemicals, Inc. Project Series
1993 A(A-1)
$ 3,000,000 4.20% 01/07/97 $ 3,000,000
- -------------------------------------------------------------------
Maryland--2.1%
Anne Arundel County RB for Baltimore Gas & Electric Series 1985
(A-1/VMIG1)
$ 1,000,000 3.65% 03/10/97 $ 1,000,000
5,380,000 3.60 03/13/97 5,380,000
Baltimore County PCRB for Baltimore Gas & Electric Series 1985
(A-1/VMIG1)
5,000,000 3.70 01/15/97 5,000,000
- -------------------------------------------------------------------
$11,380,000
- -------------------------------------------------------------------
Massachusetts--0.7%
Massachusetts Bay Transportation Authority Series 1996 A Notes
(SP-1/MIG2)
$ 4,000,000 3.75% 02/28/97 $ 4,002,951
- -------------------------------------------------------------------
Michigan--1.0%
Michigan Job Development Authority VRDN for Mazda Motor
Manufacturing Series 1985 (Sumitomo Bank)(VMIG1)
$ 1,400,000 4.25% 01/07/97 $ 1,400,000
Michigan State Strategic Fund Ltd. RB for Dow Chemical Series 1994
(A-1/P-1)
4,200,000 5.10 01/01/97 4,200,000
- -------------------------------------------------------------------
$ 5,600,000
- -------------------------------------------------------------------
Minnesota--1.9%
Minnesota State Higher Education Facility VRDN for Carleton
College Series 3-L2(VMIG1)
$ 6,000,000 4.11% 01/07/97 $ 6,000,000
Port Authority of St. Paul VRDN for Weyerhauser Project Series 1993
(A-1)
4,000,000 4.21 01/07/97 4,000,000
- -------------------------------------------------------------------
$10,000,000
- -------------------------------------------------------------------
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Statement of Investments
- --------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Mississippi--0.6%
Grenada County Refunding RB VRDN for Georgia Pacific Corp. Series
1994 (Sumitomo Bank LOC)(A1/P-1)
$ 1,000,000 4.30% 01/07/97 $ 1,000,000
Jackson County PCRB for Chevron USA, Inc. Series 1992(VMIG1)
2,000,000 5.00 01/01/97 2,000,000
- -------------------------------------------------------------------
$ 3,000,000
- -------------------------------------------------------------------
Missouri--1.1%
Missouri Health & Educational Facility Authority VRDN for SSM
Health Care Series 1995 B (MBIA)(AAA)
$ 4,500,000 4.10% 01/07/97 $ 4,500,000
Missouri State Environmental Improvement & Energy Resources
Authority VRDN for Monsanto Corp. Series 1993(P-1)
1,500,000 4.20 01/07/97 1,500,000
- -------------------------------------------------------------------
$ 6,000,000
- -------------------------------------------------------------------
New Jersey--3.1%
State of New Jersey TRANS Series 1997 A(A-1+/P-1)
$17,000,000 3.50% 03/11/97 $17,000,000
- -------------------------------------------------------------------
New Mexico--0.9%
Albuquerque RB for Sisters of Charity Series 1992(A-1+/VMIG1)
$ 5,000,000 4.15% 01/07/97 $ 5,000,000
- -------------------------------------------------------------------
New York--9.5%
Great Neck North Water Authority Water System RB Series 1993 A
(FGIC)(A-1+/VMIG1)
$ 3,400,000 4.00% 01/07/97 $ 3,400,000
New York City GO Series 1994 B (Morgan Guaranty LOC)(A-1/VMIG1)
2,800,000 4.50 01/01/97 2,800,000
New York City GO RANS Series 1997 A(SP-1+/VMIG1)
26,000,000 4.50 04/15/97 26,060,135
New York City Municipal Water Finance Authority CP Notes Series 3
(Toronto Dominion Bank/Bank of Nova Scotia LOC)(A-1+/P-1)
7,500,000 3.50 03/11/97 7,500,000
New York City Municipal Water Finance Authority RB Series 1995 A
(FGIC)(A-1+/VMIG1)
2,900,000 4.70 01/01/97 2,900,000
New York State Local Government VRDN Series 1995 C (Landesbank
Hessen-Thueringen Girozentrale LOC)(A-1+/VMIG1)
3,900,000 4.00 01/07/97 3,900,000
New York State Local Government VRDN Series 1995 G (National
Westminster Bank LOC)(A-1+/MIG1)
4,550,000 3.85 01/07/97 4,550,000
- -------------------------------------------------------------------
$51,110,135
- -------------------------------------------------------------------
North Carolina--6.8%
Rockingham County PCRB for Philip Morris Company Series
1992(A-1/P-1)
$ 7,700,000 4.15% 01/07/97 $ 7,700,000
Wake County PCRB for Carolina Power & Light Series 1990 A (Fuji
Bank LOC)(A-2/P-1)
18,870,000 3.55 02/10/97 18,870,000
Wake County PCRB for Carolina Power & Light Series 1990 B (Fuji
Bank LOC)(A-2/P-1)
10,000,000 3.75 02/13/97 10,000,000
- -------------------------------------------------------------------
$36,570,000
- -------------------------------------------------------------------
Ohio--2.2%
Columbus Electric System RB Series 1984 (Union Bank of Switzerland
LOC)(VMIG1)
$12,000,000 3.35% 01/31/97 $12,000,000
- -------------------------------------------------------------------
Oregon--1.7%
Portland Public Grain Elevator RB for Columbia Grain, Inc. Series
1984 (Fuji Bank/Bank of Tokyo LOC)(VMIG1)
$ 9,450,000 4.25% 01/07/97 $ 9,450,000
- -------------------------------------------------------------------
Pennsylvania--0.8%
Philadelphia TRANS Series 1996-7 A(SP-1/MIG1)
$ 4,500,000 4.50% 06/30/97 $ 4,511,725
- -------------------------------------------------------------------
Puerto Rico--2.3%
Commonwealth of Puerto Rico TRANS Series 1997 A(SP-1+/MIG1)
$12,500,000 4.00% 07/30/97 $12,540,250
- -------------------------------------------------------------------
South Carolina--1.1%
York County Floating/Fixed Rate PCRB Pooled Series 1984 N, North
Carolina Electric Membership Corp. (CFC)(A-1+/MIG1)
$ 5,775,000 4.15% 01/07/97 $ 5,775,000
- -------------------------------------------------------------------
Tennessee--0.6%
Blount County PCRB for Aluminum Company of America Series 1992
(A-1)
$ 2,450,000 4.15% 01/07/97 $ 2,450,000
Bradley County VRDN for Olin Corp. Series 1993 C (Wachovia Bank of
North Carolina LOC)(A-1+)
600,000 5.25 01/01/97 600,000
- -------------------------------------------------------------------
$ 3,050,000
- -------------------------------------------------------------------
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Statement of Investments
- -------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Texas--10.5%
Gulf Coast Waste Disposal Authority PCRB for Monsanto Corp. Series
1996(P-1)
$ 5,300,000 4.20% 01/07/97 $ 5,300,000
Harris County Hospital RB for Children's Hospital Series 1989
B-2(VMIG1)
10,000,000 4.10 01/07/97 10,000,000
Harris County Toll Road Adjustable/Fixed Rate Series 1994 C
(A-1+/VMIG1)
1,500,000 4.05 01/07/97 1,500,000
Houston GO Series A(A-1+/P-1)
5,000,000 3.50 03/12/97 5,000,000
Lower Colorado River Authority CP Notes Series C(A-1/P-1)
7,000,000 3.50 03/13/97 7,000,000
San Antonio Electric & Gas Systems CP Notes Series A(A-1+/P-1)
17,700,000 5.00 01/02/97 17,700,000
State of Texas TRANS Series 1996(SP-1+/MIG1)
10,000,000 4.75 08/29/97 10,050,571
- -------------------------------------------------------------------
$56,550,571
- -------------------------------------------------------------------
Virginia--4.6%
Louisa IDA PCRB for Virginia Electric & Power Series 1984(A-1/P-1)
$ 3,900,000 3.65% 01/24/97 $ 3,900,000
1,500,000 3.60 01/29/97 1,500,000
4,000,000 3.60 02/18/97 4,000,000
Roanoke VRDN for Carilion Health Systems Hospital Series A(A-1)
3,500,000 4.10 01/07/97 3,500,000
York County IDA PCRB for Virginia Electric & Power Series 1985
(A-1/A3)
9,000,000 3.70 01/14/97 9,000,000
2,900,000 3.60 02/05/97 2,900,000
- -------------------------------------------------------------------
$24,800,000
- -------------------------------------------------------------------
Washington--4.4%
Washington Healthcare Facility Authority VRDN for Sisters of
Providence Series 1985 B and E(A-1+/VMIG1)
$ 2,900,000 5.00% 01/01/97 $ 2,900,000
Washington Public Power Supply Project Electric RB Series 1993 A-2
(Bank of America LOC)(A-1/VMIG1)
20,880,000 4.10 01/07/97 20,880,000
- -------------------------------------------------------------------
$23,780,000
- -------------------------------------------------------------------
Wisconsin--1.5%
Milwaukee IDRB Multi-Modal for Pharmacia & Upjohn, Inc. Series
1994(P-1)
$ 8,000,000 4.60% 01/07/97 $ 8,000,000
- -------------------------------------------------------------------
Wyoming--0.3%
Converse County PCRB for Pacificorp. Series 1994(AMBAC)
(A-1/VMIG1)
$ 1,700,000 5.00% 01/01/97 $ 1,700,000
- -------------------------------------------------------------------
Total Investments $540,553,164/(a)/
===================================================================
/(a)/ The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rates indices.
Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those types of securities.
Security ratings are unaudited.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
Financial Square Tax-Free Money Market Fund (continued)
December 31, 1996
================================================================================
Investment Abbreviations:
ACES --Adjustable Convertible Extendible
Securities
AMBAC --Insured by American Municipal Bond
Assurance Corp.
CFC --Unconditionally guaranteed by CFC, Cooperative Finance Corp.
CP --Commercial Paper
FGIC --Insured by Financial Guaranty Insurance Co.
FHLB --Federal Home Loan Bank
GO --General Obligation
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDRB --Industrial Development Revenue Bond
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors
Assurance
MF Hsg. --Multi-Family Housing
PCRB --Pollution Control Revenue Bond
RANS --Revenue Anticipation Notes
RB --Revenue Bond
TRANS --Tax Revenue Anticipation Notes
VRDN --Variable Rate Demand Note
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
December 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Prime Treasury Tax-Free
Obligations Money Market Obligations Government Money Market
Fund Fund Fund Fund Fund
=======================================================================================
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities, at value
based on amortized cost $4,373,112,279 $2,964,020,412 $ 3,106,195,212 $1,230,446,987 $540,553,164
Interest receivable 11,583,246 11,328,488 2,442,834 3,375,926 2,193,518
Cash 88,907 53,776 72,630 25,740 160,336
Deferred organization expenses, net -- 21,473 -- -- 39,662
Other assets 107,980 65,537 181,145 117,177 14,269
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 4,384,892,412 2,975,489,686 3,108,891,821 1,233,965,830 542,960,949
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Dividends payable 23,926,806 16,502,413 12,829,625 5,834,710 1,711,051
Accrued expenses and other liabilities 989,400 969,498 919,263 588,231 164,840
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 24,916,206 17,471,911 13,748,888 6,422,941 1,875,891
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid in capital 4,359,975,116 2,958,016,821 3,095,062,895 1,227,516,405 541,097,917
Accumulated undistributed net realized
gain (loss) on investments 1,090 954 80,038 26,484 (12,859)
===================================================================================================================================
Net assets $4,359,976,206 $2,958,017,775 $3,095,142,933 $ 1,227,542,889 $541,085,058
===================================================================================================================================
Net asset value, offering and redemption
price per share (net assets/shares
outstanding) $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding:
FST shares 3,901,792,070 2,540,361,007 2,290,967,452 858,743,905 440,850,118
FST Administration shares 215,900,253 165,764,727 536,903,385 145,103,169 51,661,795
FST Service shares 115,154,059 234,380,537 220,555,465 223,556,901 19,855,446
FST Preferred shares 127,128,734 17,510,550 46,636,593 112,430 28,730,558
- -----------------------------------------------------------------------------------------------------------------------------------
Total shares of beneficial interest
outstanding, $0.01 par value
(unlimited number of shares
authorized) 4,359,975,116 2,958,016,821 3,095,062,895 1,227,516,405 541,097,917
===================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Prime Treasury Tax-Free
Obligations Money Market Obligations Government Money Market
Fund Fund Fund Fund Fund
==================================================================================
<S> <C> <C> <C> <C> <C>
Investment income:
Interest income $273,607,363 $168,464,120 $ 130,875,226 $69,659,598 $19,750,787
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment adviser fees 3,751,933 2,295,135 1,818,328 961,337 420,548
Account administration fees 6,503,286 3,978,642 3,152,251 1,667,071 728,870
Custodian fees 591,036 401,612 349,064 224,733 31,788
Registration fees 143,509 118,595 229,757 143,620 24,284
Trustee fees 78,242 51,602 31,550 16,933 9,385
Amortization of deferred organization expenses -- 9,065 -- -- 15,626
Other 325,076 181,947 184,245 95,419 59,633
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses 11,393,082 7,036,598 5,765,195 3,109,113 1,290,134
Less--Expenses reimbursable and fees
waived by Goldman Sachs (2,388,496) (1,598,929) (1,400,520) (800,866) (302,339)
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses 9,004,586 5,437,669 4,364,675 2,308,247 987,795
Administration share fees 527,357 474,043 1,100,814 250,618 128,721
Service share fees 541,076 271,936 849,624 1,258,434 91,599
Preferred share fees 42,963 2,874 15,097 395 13,155
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses and share fees 10,115,982 6,186,522 6,330,210 3,817,694 1,221,270
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 263,491,381 162,277,598 124,545,016 65,841,904 18,529,517
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment
transactions 105,304 189,110 587,091 136,538 (5,995)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations $263,596,685 $162,466,708 $125,132,107 $65,978,442 $18,523,522
==================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Treasury Tax-Free
Obligations Money Market Obligations Government Money Market
Fund Fund Fund Fund Fund
=========================================================================================
<S> <C> <C> <C> <C> <C>
From Operations:
Net investment income $ 263,491,381 $ 162,277,598 $ 124,545,016 $ 65,841,904 $ 18,529,517
Net realized gain (loss) on
investment transactions 105,304 189,110 587,091 136,538 (5,995)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 263,596,685 162,466,708 125,132,107 65,978,442 18,523,522
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
FST shares (245,389,523) (149,928,272) (93,857,124) (48,867,861) (15,981,710)
FST Administration shares (10,697,750) (9,558,151) (21,870,105) (5,023,737) (1,593,538)
FST Service shares (5,164,431) (2,628,897) (8,020,699) (11,930,553) (522,532)
FST Preferred shares (2,239,677) (162,278) (797,088) (19,753) (431,737)
Net realized gain on investment transactions
FST shares (128,847) (173,838) (385,734) (81,682) --
FST Administration shares (5,617) (11,082) (89,882) (8,397) --
FST Service shares (2,712) (3,048) (32,963) (19,942) --
FST Preferred shares (1,177) (188) (3,276) (33) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (263,629,734) (162,465,754) (125,056,871) (65,951,958) (18,529,517)
- ------------------------------------------------------------------------------------------------------------------------------------
From share transactions (at $1.00 per share):
Proceeds from sales of shares 48,481,127,400 44,257,102,764 20,383,057,696 14,111,648,633 4,669,259,507
Reinvestment of dividends and
distributions 126,514,648 91,077,089 45,060,831 21,912,928 6,495,873
Cost of shares repurchased (47,756,596,271) (43,600,991,427) (19,343,068,853) (13,746,823,336) (4,623,830,243)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from share
transactions 851,045,777 747,188,426 1,085,049,674 386,738,225 51,925,137
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase 851,012,728 747,189,380 1,085,124,910 386,764,709 51,919,142
Net Assets:
Beginning of year 3,508,963,478 2,210,828,395 2,010,018,023 840,778,180 489,165,916
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 4,359,976,206 $2,958,017,775 $ 3,095,142,933 $1,227,542,889 $ 541,085,058
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Prime Treasury Tax-Free
Obligations Money Market Obligations Government Money Market
Fund Fund Fund Fund Fund
=========================================================================================
<S> <C> <C> <C> <C> <C>
From Operations:
Net investment income $ 247,196,840 $ 136,963,014 $ 79,821,378 $ 38,042,394 $ 13,622,900
Net realized gain (loss) on
investment transactions 95,511 7,374 781,869 65,308 (6,864)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 247,292,351 136,970,388 80,603,247 38,107,702 13,616,036
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
FST shares (236,894,656) (130,522,374) (63,729,881) (34,713,840) (12,702,550)
FST Administration shares (7,108,569) (6,351,769) (9,995,927) (2,917,098) (455,025)
FST Service shares (3,193,615) (88,871) (6,095,570) (411,456) (465,325)
Net realized gain on investment transactions
FST shares (55,079) (9,474) (612,499) (59,324) --
FST Administration shares (4,463) (504) (99,062) (5,878) --
FST Service shares (1,830) -- (62,143) (106) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (247,258,212) (136,972,992) (80,595,082) (38,107,702) (13,622,900)
- ------------------------------------------------------------------------------------------------------------------------------------
From share transactions (at $1.00 per share):
Proceeds from sales of shares 35,913,627,249 33,159,975,346 12,055,344,504 8,904,113,596 3,459,116,162
Reinvestment of dividends and
distributions 88,104,801 69,894,471 14,492,584 15,345,902 3,954,598
Cost of shares repurchased (35,375,137,049) (31,948,570,256) (11,181,309,002) (8,391,284,391) (3,161,776,879)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from share transactions 626,595,001 1,281,299,561 888,528,086 528,175,107 301,293,881
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase 626,629,140 1,281,296,957 888,536,251 528,175,107 301,287,017
Net Assets:
Beginning of year 2,882,334,338 929,531,438 1,121,481,772 312,603,073 187,878,899
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $ 3,508,963,478 $ 2,210,828,395 $ 2,010,018,023 $ 840,778,180 $ 489,165,916
====================================================================================================================================
Summary of Share Transactions (at $1.00 per share):
FST Shares:
Shares sold 34,469,057,699 31,539,337,948 8,859,672,375 8,279,786,329 3,135,487,639
Reinvestment of dividends and
distributions 85,898,572 66,409,325 11,189,134 14,336,357 3,262,842
Shares repurchased (34,034,050,903) (30,399,518,678) (8,241,356,158) (7,808,586,957) (2,873,945,734)
- ------------------------------------------------------------------------------------------------------------------------------------
520,905,368 1,206,228,595 629,505,351 485,535,729 264,804,747
- ------------------------------------------------------------------------------------------------------------------------------------
FST Administration shares:
Shares sold 721,501,944 1,608,362,145 1,309,118,844 331,435,289 110,334,205
Reinvestment of dividends and
distributions 761,953 3,443,404 845,389 785,525 320,945
Shares repurchased (640,480,667) (1,540,953,481) (1,108,896,222) (304,089,584) (91,758,941)
- ------------------------------------------------------------------------------------------------------------------------------------
81,783,230 70,852,068 201,068,011 28,131,230 18,896,209
- ------------------------------------------------------------------------------------------------------------------------------------
FST Service shares:
Shares sold 723,067,606 12,275,253 1,886,553,285 292,891,978 213,294,318
Reinvestment of dividends and
distributions 1,444,276 41,742 2,458,061 224,020 370,811
Shares repurchased (700,605,479) (8,098,097) (1,831,056,622) (278,607,850) (196,072,204)
- ------------------------------------------------------------------------------------------------------------------------------------
23,906,403 4,218,898 57,954,724 14,508,148 17,592,925
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in shares 626,595,001 1,281,299,561 888,528,086 528,175,107 301,293,881
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. Organization
Goldman Sachs Money Market Trust (the "Trust"), a business trust organized under
the laws of the Commonwealth of Massachusetts on December 6, 1978, includes the
Financial Square Funds, collectively "the Funds" or individually a "Fund". The
Trust is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. Financial Square consists of seven
diversified funds: Prime Obligations, Money Market, Treasury Obligations,
Government, Tax-Free Money Market , Municipal Money Market (inactive) and Money
Market Plus (inactive). The Financial Square Funds offer four classes of shares:
FST shares, FST Administration shares, FST Service shares and FST Preferred
shares. The investment objective of the Funds is to maximize current income to
the extent consistent with the preservation of capital and maintenance of
liquidity.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Funds. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that may affect the reported amounts.
A. Investment Valuation--
- --------------------------
Each Fund uses the amortized-cost method for valuing portfolio securities which
approximates market value. Under this method, all investments purchased at a
discount or premium are valued by amortizing the difference between the original
purchase price and maturity value of the issue over the period to maturity.
B. Interest Income--
- ---------------------
Interest income is determined on the basis of interest accrued, premium
amortized and discount earned.
C. Federal Taxes--
- -------------------
It is each Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute each year
substantially all investment company taxable and tax-exempt income to
shareholders. Accordingly, no federal tax provisions are required.
The characterization of distributions to shareholders for financial
reporting purposes is determined in accordance with federal income tax rules.
Therefore, the source of the Funds' distributions may be shown in the
accompanying financial statements as either from or in excess of net investment
income or net realized gain on investment transactions, or from paid-in capital,
depending on the type of book/tax differences that may exist.
At December 31, 1996, the Funds' tax year end, the Tax-Free Money Market
Fund had approximately $13,000 of capital loss carryforward for U.S. Federal tax
purposes. This capital loss carryforward expires in the year 2004.
D. Deferred Organization Expenses--
- ------------------------------------
Organization-related costs are being amortized on a straight-line basis over a
period of five years.
E. Expenses--
- --------------
Expenses incurred by the Funds that do not specifically relate to an individual
fund are allocated to the Funds based on each Fund's relative average net assets
for the period.
Shareholders of FST Administration, FST Service and FST Preferred shares
bear all expenses and fees paid to service organizations for their services with
respect to such shares as well as other expenses (subject to expense
limitations) that are directly attributable to such shares.
3. Agreements
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), serves as investment adviser pursuant to
an Investment Advisory Agreement. Under the Investment Advisory Agreement, GSAM,
subject to general
- --------------------------------------------------------------------------------
19
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
supervision of the Trust's Board of Trustees, manages the portfolios of the
Funds. As compensation for the services rendered under the Investment Advisory
Agreement and the assumption of the expenses related thereto, GSAM is entitled
to a fee, computed daily and payable monthly, at an annual rate equal to .075%
of each Fund's average daily net assets. These amounts are included in "Accrued
expenses and other liabilities" in the accompanying Statements of Assets and
Liabilities.
Until further notice, GSAM has voluntarily agreed to limit certain of each
of the Fund's expenses (excluding advisory fees, account administration fees,
service organization fees, taxes, interest, brokerage commissions and
extraordinary expenses) to the extent that such expenses exceed .01% per annum
of that Fund's average daily net assets. These amounts are included in "Other
assets" in the accompanying Statements of Assets and Liabilities.
GSAM also serves as administrator pursuant to an Administration Agreement.
Under the Administration Agreement, GSAM administers each Fund's business
affairs, including providing facilities and transfer agency services. As
compensation for the services rendered under the Administration Agreement, GSAM
is entitled to a fee, computed daily and payable monthly, at an annual rate
equal to .13% of each Fund's average daily net assets. These amounts are
included in "Accrued expenses and other liabilities" in the accompanying
Statements of Assets and Liabilities.
Goldman Sachs serves as the Distributor of shares of the Funds pursuant to a
Distribution Agreement and receives no fee. The following chart outlines the
waivers and reimbursements for the year ended December 31, 1996 and amounts owed
to affiliates and due from GSAM at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Adviser Expense Amounts Amounts
Fee Reimburs- due to due from
Fund Waived ements Total GSAM GSAM
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime
Obligations
Fund $1,751 $637 $2,388 $777 $108
- ---------------------------------------------------------------------
Money
Market
Fund 1,142 457 1,599 552 65
- ---------------------------------------------------------------------
Treasury
Obligations
Fund 848 553 1,401 419 155
- ---------------------------------------------------------------------
Government
Fund 449 352 801 197 117
- ---------------------------------------------------------------------
Tax-Free
Money
Market
Fund 217 85 302 86 13
- ---------------------------------------------------------------------
</TABLE>
4. Administration, Service and Preferred Plans
The Funds have adopted Administration, Service and Preferred Plans to compensate
service organizations for providing varying levels of account administration and
shareholder liaison services to their customers who are beneficial owners of
such shares. The Administration, Service and Preferred Plans provide for
compensation to the service organizations in an amount up to .25% , .50% and
.10% (on an annualized basis), respectively, of the average daily net asset
value of the respective shares.
5. Line of Credit Facility
The Funds participate in a $250,000,000 uncommitted, unsecured revolving line of
credit facility to be used solely for temporary or emergency purposes. Under the
most restrictive arrangement, each Fund must own securities having a market
value in excess of 300% of the total bank borrowings. The interest rate on the
borrowings is based on the Federal Funds rate. During the year ended December
31, 1996, the Funds did not have any borrowings under this facility.
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. Repurchase Agreements
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping at the Fund's custodian.
7. Joint Repurchase Agreement Accounts
The Funds, together with other registered investment companies having advisory
agreements with GSAM or its affiliates, transfer uninvested cash balances into
joint accounts, the daily aggregate balances of which are invested in one or
more repurchase agreements. The underlying securities for the repurchase
agreements are U.S. Treasury obligations.
At December 31, 1996, the Prime Obligations, Money Market, Treasury
Obligations and Government Funds had undivided interests in the repurchase
agreements in the following joint account, which equaled $297,900,000,
$205,200,000, $1,419,100,000 and $351,600,000 in principal amount, respectively.
At December 31, 1996, the repurchase agreements in this joint account, along
with the corresponding underlying securities (including the type of security,
market value, interest rate and maturity date), were as follows:
- --------------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------
Repurchase Agreements
BT Securities Corp., dated 12/31/96, repurchase price $200,061,111 (U.S.
Treasury Notes: $154,133,720, 5.75%-6.38%, 08/31/97-04/30/01; U.S.
Treasury Bills: $48,126,398, 06/12/97)
$ 200,000,000 5.50% 01/02/97 $ 200,000,000
Chase Securities, Inc., dated 12/31/96, repurchase price $1,000,369,444
(U.S. Treasury Notes: $1,020,003,399, 5.00%-9.13%, 11/15/97-5/31/99)
1,000,000,000 6.65 01/02/97 1,000,000,000
Citicorp. Securities, Inc., dated 12/31/96, repurchase price $100,034,722
(U.S. Treasury Notes: $101,974,154, 5.88%-7.50%, 03/31/98-11/15/01)
100,000,000 6.25 01/02/97 100,000,000
Morgan Stanley & Co., dated 12/31/96, repurchase price $1,200,450,000
(U.S. Treasury Notes: $954,150,236, 6.00%-6.25%, 07/31/98-09/30/98;
U.S. Treasury Bills: $270,396,330, 01/23/97-10/16/97)
1,200,000,000 6.75 01/02/97 1,200,000,000
Swiss Bank Corp., dated 12/31/96, repurchase price $140,846,933 (U.S.
Treasury Notes: $129,531,177, 4.75%-8.88%, 01/15/97-08/15/03; U.S.
Treasury Bills: $14,639,156, 01/30/97-06/26/97)
140,800,000 6.00 01/02/97 140,800,000
Swiss Bank Corp., dated 12/31/96, repurchase price $400,150,000 (U.S.
Treasury Notes: $367,986,300, 4.75%-8.88%, 01/15/97-08/15/03; U.S.
Treasury Bills: $41,588,512, 01/30/97-06/26/97)
400,000,000 6.75 01/02/97 400,000,000
- --------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $3,040,800,000
==========================================================================
8. Other Matters
Pursuant to an SEC exemptive order, each taxable Fund may enter into certain
principal transactions, including repurchase agreements, with Goldman, Sachs &
Co. subject to certain limitations as follows: 25% of eligible security
transactions, as defined, and 10% of repurchase agreement transactions.
21
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
December 31, 1996
- --------------------------------------------------------------------------------
9. Summary of Share Transactions
Share activity for the year ended December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Tax-Free
Prime Obligations Money Market Treasury Government Money Market
Fund Fund Obligations Fund Fund Fund
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FST Shares:
Shares sold 44,941,258,260 41,611,799,874 15,303,462,361 11,674,849,553 4,186,677,890
Reinvestment of dividends and
distributions 120,569,689 84,724,371 33,617,264 19,640,980 4,879,667
Shares repurchased (44,455,790,432) (41,225,360,339) (14,633,812,470) (11,579,631,835) (4,199,081,918)
------------------------------------------------------------------------------------------------
606,037,517 471,163,906 703,267,155 114,858,698 (7,524,361)
FST Administration Shares:
Shares sold 1,718,885,581 2,097,089,351 2,868,056,191 1,074,614,378 177,906,627
Reinvestment of dividends and
distributions 2,721,453 5,879,304 4,640,302 1,055,828 844,377
Shares repurchased (1,653,602,695) (2,074,616,324) (2,618,986,546) (1,012,951,862) (148,027,716)
------------------------------------------------------------------------------------------------
68,004,339 28,352,331 253,709,947 62,718,344 30,723,288
FST Service Shares:
Shares sold 1,442,987,405 470,852,368 2,117,230,142 1,353,982,373 239,131,409
Reinvestment of dividends and
distributions 3,217,249 397,187 6,330,034 1,208,640 449,321
Shares repurchased (1,396,329,467) (241,087,916) (2,042,124,197) (1,146,142,260) (239,585,078)
------------------------------------------------------------------------------------------------
49,875,187 230,161,639 81,435,979 209,048,753 (4,348)
FST Preferred Shares:
Shares sold 377,996,154 77,361,171 94,309,002 8,202,329 65,543,581
Reinvestment of dividends and
distributions 6,257 76,227 473,231 7,480 322,508
Shares repurchased (250,873,677) (59,926,848) (48,145,640) (8,097,379) (37,135,531)
------------------------------------------------------------------------------------------------
127,128,734 17,510,550 46,636,593 112,430 28,730,558
------------------------------------------------------------------------------------------------
Net increase in shares 851,045,777 747,188,426 1,085,049,674 386,738,225 51,925,137
================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Prime Obligations Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
--------------------------------------
Ratio of net
Net asset Net realized Total Net asset expenses to
value at Net gain income from Distributions value at average
beginning investment on investment investment to end Total net
of period income transactions operations shareholders of period return(a) assets
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. $1.00 $0.0529 $-- $0.0529 $(0.0529) $1.00 5.41% 0.18%
1996-FST Preferred shares/(c)/... 1.00 0.0346 -- 0.0346 (0.0346) 1.00 5.28/(b)/ 0.28/(b)/
1996-FST Administration shares .. 1.00 0.0506 -- 0.0506 (0.0506) 1.00 5.14 0.43
1996-FST Service shares ......... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.88 0.68
1995-FST shares ................. 1.00 0.0586 -- 0.0586 (0.0586) 1.00 6.02 0.18
1995-FST Administration shares .. 1.00 0.0559 -- 0.0559 (0.0559) 1.00 5.75 0.43
1995-FST Service shares ......... 1.00 0.0533 -- 0.0533 (0.0533) 1.00 5.49 0.68
For the Period Ended December 31,
- ---------------------------------
1994-FST shares/(d)/............. 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.38/(b)/ 0.18/(b)/
1994-FST Administration shares/(d)/ 1.00 0.0383 -- 0.0383 (0.0383) 1.00 4.12/(b)/ 0.43/(b)/
1994-FST Service shares/(d)/..... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.86/(b)/ 0.68/(b)/
For the Years Ended January 31,
- -------------------------------
1994-FST shares ................. 1.00 0.0311 0.0002 0.0313 (0.0313) 1.00 3.18 0.17
1994-FST Administration shares .. 1.00 0.0286 0.0002 0.0288 (0.0288) 1.00 2.92 0.42
1994-FST Service shares ......... 1.00 0.0261 0.0002 0.0263 (0.0263) 1.00 2.66 0.67
1993-FST shares ................. 1.00 0.0360 0.0007 0.0367 (0.0367) 1.00 3.75 0.18
1993-FST Administration shares/(e)/ 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02/(b)/ 0.44/(b)/
1993-FST Service shares ......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68
1992-FST shares ................. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18
1992-FST Service shares (e)...... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10/(b)/ 0.66/(b)/
For the Period March 8, 1990 (f)
- --------------------------------
through January 31,
- -------------------
1991-FST shares ................. 1.00 0.0727 -- 0.0727 (0.0727) 1.00 8.27/(b)/ 0.18/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
----------------------------
Net Ratio of net
assets at Ratio of investment
end expenses to income to
of period average net average net
(in 000's) assets assets
----------------------------------------
<S> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. $3,901,797 0.23% 5.24%
1996-FST Preferred shares/(c)/... 127,126 0.33/(b)/ 5.14/(b)/
1996-FST Administration shares .. 215,898 0.48 5.01
1996-FST Service shares ......... 115,154 0.73 4.73
1995-FST shares ................. 3,295,791 0.22 5.82
1995-FST Administration shares .. 147,894 0.47 5.55
1995-FST Service shares ......... 65,278 0.72 5.29
For the Period Ended December 31,
- ---------------------------------
1994-FST shares/(d)/............. 2,774,849 0.24/(b)/ 4.32/(b)/
1994-FST Administration shares/(d)/ 66,113 0.49/(b)/ 4.12/(b)/
1994-FST Service shares/(d)/..... 41,372 0.74/(b)/ 3.92/(b)/
For the Years Ended January 31,
- -------------------------------
1994-FST shares ................. 1,831,413 0.25 3.03
1994-FST Administration shares .. 35,250 0.50 2.78
1994-FST Service shares ......... 14,001 0.75 2.53
1993-FST shares ................. 813,126 0.25 3.53
1993-FST Administration shares/(e)/ 1,124 0.52/(b)/ 2.88/(b)/
1993-FST Service shares ......... 336 0.75 2.94
1992-FST shares ................. 917,073 0.27 5.63
1992-FST Service shares/(e)/..... 118 0.74/(b)/ 4.02/(b)/
For the Period March 8, 1990/(f)/
- ---------------------------------
through January 31,
- -------------------
1991-FST shares ................. 578,495 0.28/(b)/ 7.94/(b)/
</TABLE>
- ---------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
/(e)/FST Administration share and FST Service share activity commenced during
November of 1992 and January of 1992, respectively.
/(f)/Commencement of operations.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=================================
Net Asset Net realized Total Net asset
value at Net gain income from Distributions value at
beginning investment on investment investment to end
of period income transactions operations shareholders of period
=========================================================================================
For the Year Ended December 31,
===============================
<S> <C> <C> <C> <C> <C> <C>
1996-FST shares ................. $1.00 $0.0533 $0.0001 $0.0534 $(0.0534) $1.00
1996-FST Preferred shares/(c)/... 1.00 0.0348 -- 0.0348 (0.0348) 1.00
1996-FST Administration shares .. 1.00 0.0504 0.0001 0.0505 (0.0505) 1.00
1996-FST Service shares ......... 1.00 0.0484 -- 0.0484 (0.0484) 1.00
1995-FST shares ................. 1.00 0.0589 -- 0.0589 (0.0589) 1.00
1995-FST Administration shares .. 1.00 0.0561 -- 0.0561 (0.0561) 1.00
1995-FST Service shares/(d)/..... 1.00 0.0231 -- 0.0231 (0.0231) 1.00
For the Period Ended December 31,
=================================
1994-FST shares/(d)/............. 1.00 0.0305 -- 0.0305 (0.0305) 1.00
1994-FST Administration shares
/(d)/......................... 1.00 0.0298 -- 0.0298 (0.0298) 1.00
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of investment
expenses to income to end expenses to income to
Total average net average net of period average net average net
return/(a)/ assets assets (in 000's) assets assets
==========================================================================================
For the Year Ended December 31,
===============================
<S> <C> <C> <C> <C> <C> <C>
1996-FST shares.................. 5.45% 0.18% 5.33% $2,540,366 0.23% 5.28%
1996-FST Preferred shares/(c)/... 5.31/(b)/ 0.28/(b)/ 5.23/(b)/ 17,510 0.33/(b)/ 5.18/(b)/
1996-FST Administration shares... 5.19 0.43 5.04 165,766 0.48 4.99
1996-FST Service shares.......... 4.93 0.68 4.84 234,376 0.73 4.79
1995-FST shares................. 6.07 0.15 5.89 2,069,197 0.23 5.81
1995-FST Adminstration shares.... 5.80 0.40 5.61 137,412 0.48 5.53
1995-FST Services shares/(d)/.... 5.41/(b)/ 0.65/(b)/ 4.93/(b)/ 4,219 0.73/(b)/ 4.85/(b)/
For the Period Ended December 31,
=================================
1994-FST shares/(d)/............. 4.91/(b)/ 0.11/(b)/ 4.88/(b)/ 862,971 0.25/(b)/ 4.74/(b)/
1994-FST Adminstration shares/(d)/ 4.65/(b)/ 0.36/(b)/ 4.82/(b)/ 66,560 0.50/(b)/ 4.68/(b)/
</TABLE>
- ------------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/FST, FST Adminstration and FST Service share activity commenced May 18,
1994, May 20, 1994 and July 14, 1995, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Treasury Obligations Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
-------------------------------------
Net Net Total
asset realized income Net asset
value at Net gain (loss) from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. $1.00 $0.0522 $0.0003 $0.0525 $(0.0524) $1.00 5.35%
1996-FST Preferred shares/(c)/... 1.00 0.0342 0.0001 0.0343 (0.0343) 1.00 5.24/(b)/
1996-FST Administration shares .. 1.00 0.0497 0.0002 0.0499 (0.0498) 1.00 5.09
1996-FST Service shares ......... 1.00 0.0472 0.0002 0.0474 (0.0474) 1.00 4.83
1995-FST shares ................. 1.00 0.0573 0.0005 0.0578 (0.0578) 1.00 5.96
1995-FST Administration shares .. 1.00 0.0547 0.0005 0.0552 (0.0552) 1.00 5.69
1995-FST Service shares ......... 1.00 0.0521 0.0005 0.0526 (0.0526) 1.00 5.43
For the Year Ended December 31,
- -------------------------------
1994-FST shares/(d)/............. 1.00 0.0379 (0.0001) 0.0378 (0.0378) 1.00 4.23/(b)/
1994-FST Administration shares
/(d)/.......................... 1.00 0.0388 (0.0001) 0.0387 (0.0387) 1.00 3.97/(b)/
1994-FST Service shares/(d)/..... 1.00 0.0349 (0.0001) 0.0348 (0.0348) 1.00 3.71/(b)/
For the Year Ended December 31,
- -------------------------------
1994-FST shares ................. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11
1994-FST Administration shares .. 1.00 0.0276 0.0006 0.0282 (0.0281) 1.00 2.85
1994-FST Service shares ......... 1.00 0.0251 0.0008 0.0259 (0.0256) 1.00 2.60
1993-FST shares ................. 1.00 0.0342 0.0012 0.0354 (0.0355) 1.00 3.69
1993-FST Administration shares
/(e)/.......................... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83/(b)/
1993-FST Service shares ......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17
1992-FST shares ................. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84
1992-FST Service shares/(e)/..... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47/(b)/
For the Period March 8, 1990/(f)/through January 31,
- -------------------------------------------
1991-FST shares ................. 1.00 0.0600 0.0006 0.0606 (0.0605) 1.00 8.06/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
----------------------------
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net period of average net average net
assets assets (in 000's) assets assets
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. 0.18% 5.22% $2,291,051 0.24% 5.16%
1996-FST Preferred shares/(c)/... 0.28/(b)/ 5.11/(b)/ 46,637 0.34/(b)/ 5.05/(b)/
1996-FST Administration shares .. 0.43 4.97 536,895 0.49 4.91
1996-FST Service shares ......... 0.68 4.72 220,560 0.74 4.66
1995-FST shares ................. 0.18 5.73 1,587,715 0.23 5.68
1995-FST Administration shares .. 0.43 5.47 283,186 0.48 5.42
1995-FST Service shares ......... 0.68 5.21 139,117 0.73 5.16
For the Period Ended December 31,
- -------------------------------
1994-FST shares/(d)/............. 0.18/(b)/ 4.13/(b)/ 958,196 0.25/(b)/ 4.06/(b)/
1994-FST Administration shares
/(d)/.......................... 0.43/(b)/ 4.24/(b)/ 82,124 0.50/(b)/ 4.17/(b)/
1994-FST Service shares/(d)/..... 0.68/(b)/ 3.82/(b)/ 81,162 0.75/(b)/ 3.75/(b)/
For the Years Ended January 31,
- -------------------------------
1994-FST shares ................. 0.17 3.01 812,420 0.24 2.94
1994-FST Administration shares .. 0.42 2.76 24,485 0.49 2.69
1994-FST Service shares ......... 0.67 2.51 35,656 0.74 2.44
1993-FST shares ................. 0.18 3.42 776,181 0.26 3.34
1993-FST Administration shares
/(e)/.......................... 0.43/(b)/ 2.83/(b)/ 1 0.51/(b)/ 2.75/(b)/
1993-FST Service shares ......... 0.68 2.96 5,155 0.76 2.88
1992-FST shares ................. 0.18 5.49 413,171 0.28 5.39
1992-FST Service shares/(e)/..... 0.68/(b)/ 3.77/(b)/ 3,634 0.78/(b)/ 3.67/(b)/
For the Period March 8, 1990/(f)/through January 31,
- -----------------------------------
1991-FST shares ................. 0.21/(b)/ 7.74/(b)/ 229,988 0.34/(b)/ 7.61/(b)/
- ----------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
/(e)/FST Administration and FST Service share activity commenced during January
of 1993 and October of 1991, respectively.
/(f)/Commencement of operations.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Government Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
-------------------------------------
Net Net Total
asset realized income Net asset
value at Net gain on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. $1.00 $0.0525 $0.0001 $0.0526 $(0.0526) $1.00 5.38%
1996-FST Preferred shares/(c)/... 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26/(b)/
1996-FST Administration shares .. 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12
1996-FST Service shares ......... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86
1995-FST shares ................. 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00
1995-FST Administration shares .. 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74
1995-FST Service shares/(d)/..... 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40/(b)/
For the Period Ended December 31,
- ---------------------------------
1994-FST shares/(e)/............. 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36/(b)/
1994-FST Administration shares
/(e)/.......................... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10/(b)/
For the Period Ended January 31,
- -------------------------------
1993-FST shares/(d)/............. 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14/(b)/
1993-FST Administration shares
/(d)/.......................... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
----------------------------
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net period of average net average net
assets assets (in 000's) assets assets
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31,
- -------------------------------
1996-FST shares ................. 0.18% 5.25% $858,769 0.24% 5.19%
1996-FST Preferred shares/(c)/... 0.28/(b)/ 5.14/(b)/ 112 0.34/(b)/ 5.08/(b)/
1996-FST Administration shares .. 0.43 5.01 145,108 0.49 4.95
1996-FST Service shares ......... 0.68 4.74 223,554 0.74 4.68
1995-FST shares ................. 0.18 5.81 743,884 0.24 5.75
1995-FST Administration shares .. 0.43 5.54 82,386 0.49 5.48
1995-FST Service shares/(d)/..... 0.68/(b)/ 5.08/(b)/ 14,508 0.74/(b)/ 5.02/(b)/
For the Period Ended December 31,
- -------------------------------
1994-FST shares/(e)/............. 0.15/(b)/ 4.64/(b)/ 258,350 0.25/(b)/ 4.54/(b)/
1994-FST Administration shares
/(e)/.......................... 0.40/(b)/ 4.67/(b)/ 54,253 0.50/(b)/ 4.57/(b)/
For the Period Ended January 31,
- -------------------------------
1993-FST shares/(d)/............. 0.08/(b)/ 3.10/(b)/ 44,697 0.59/(b)/ 2.59/(b)/
1993-FST Administration shares
/(d)/.......................... 0.35/(b)/ 2.85/(b)/ 14,126 0.76/(b)/ 2.44/(b)/
- ---------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/FST share, FST Administration share and FST Service share activity
commenced April 6, 1993, September 1, 1993 and May 16, 1995, respectively.
/(e)/The information presented reflects eleven months of operations due to a
change in fiscal year end. This change was caused by the reorganization of
the funds as a series of Goldman Sachs Money Market Trust.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
Goldman Sachs Money Market Trust--Financial Square Funds
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Share Outstanding Throughout Each Period
Tax-Free Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=====================================
Net Net Total
asset realized income Net asset
value at Net gain on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations shareholders period return /(a)/
===========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31,
===============================
1996-FST shares ...................... $1.00 $0.0335 -- $0.0335 $(0.0335) $1.00 3.39%
1996-FST Preferred shares /(c)/....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30/(b)/
1996-FST Administration shares ....... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13
1996-FST Service shares .............. 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88
1995-FST shares ...................... 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89
1995-FST Administration shares ....... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63
1995-FST Service shares .............. 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38
For the Period Ended December 31,
=================================
1994-FST shares /(d)/................. 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41/(b)/
1994-FST Administration shares /(d)/.. 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19/(b)/
1994-FST Service shares /(d)/......... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
===========================================================================
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31,
===============================
1996-FST shares ...................... 0.18% 3.35% $440,838 0.23% 3.30%
1996-FST Preferred shares /(c)/....... 0.28/(b)/ 3.26/(b)/ 28,731 0.33/(b)/ 3.21/(b)/
1996-FST Administration shares ....... 0.43 3.10 51,661 0.48 3.05
1996-FST Service shares .............. 0.68 2.85 19,855 0.73 2.80
1995-FST shares ...................... 0.14 3.81 448,367 0.24 3.71
1995-FST Administration shares ....... 0.39 3.54 20,939 0.49 3.44
1995-FST Service shares .............. 0.64 3.32 19,860 0.74 3.22
For the Period Ended December 31,
=================================
1994-FST shares /(d)/................. 0.07/(b)/ 3.42/(b)/ 183,570 0.31/(b)/ 3.18/(b)/
1994-FST Administration shares /(d)/.. 0.32/(b)/ 3.25/(b)/ 2,042 0.56/(b)/ 3.01/(b)/
1994-FST Service shares /(d)/......... 0.57/(b)/ 3.32/(b)/ 2,267 0.81/(b)/ 3.08/(b)/
</TABLE>
- ---------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/FST Preferred share activity commenced on May 1, 1996.
/(d)/FST share, FST Administration share and FST Service share activity
commenced July 19, 1994, August 1, 1994 and September 23, 1994,
respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of the Goldman Sachs Money Market
Trust--Financial Square Funds:
We have audited the accompanying statements of assets and liabilities of the
Goldman Sachs Money Market Trust--Financial Square Funds (a Massachusetts
business trust comprising the Prime Obligations, Money Market, Treasury
Obligations, Government and Tax-Free Money Market Funds), including the
statements of investments, as of December 31, 1996, and the related statements
of operations, and the statements of changes in net assets and the financial
highlights for each of the periods presented. These financial statements and the
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting Goldman Sachs Money
Market Trust--Financial Square Funds as of December 31, 1996, the results of
their operations and the changes in their net assets and the financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 10, 1997
- ------------------------------------- ---------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------- ----------------------------------------
[This page intentionally left blank]
- -------------------------------------- ----------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------- ----------------------------------------
[This page intentionally left blank]
- -------------------------------------- ----------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------- -----------------------------------------
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Money Market Trust--Financial
Square Funds Prospectus which contains facts concerning each Fund's objectives
and policies, management, expenses and other information.
- --------------------------------------------------------------------------------
31
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
ILA Unitholder Letter/Annual Report
- --------------------------------------------------------------------------------
Dear Unitholders:
We welcome this opportunity to provide you with a summary of the trends and
key events that affected the economy and the Goldman Sachs Institutional Liquid
Assets (ILA) Portfolios in 1996. It has been another positive year for ILA in
which the Portfolios did well compared with their respective IBC Financial Data,
Inc. averages while adhering to their conservative investment guidelines.
1996 in Review: After Easing Early in the Year, the Fed Remained Neutral Amid
Moderate Growth and Benign Inflation
Last year began on a weak note, with the economy still in the doldrums as
harsh winter storms and a strike at General Motors continued to restrain growth.
Against that backdrop, the Federal Reserve Board (the "Fed") cut the Federal
funds rate by 25 basis points to 5.25% in January 1996, following an easing of
the same magnitude in December 1995. It soon became evident that the economy had
responded and was somewhat healthier than expected, with first-quarter real
Gross Domestic Product (GDP) reported at 2.0% annualized. Growth was more
dramatic during the second quarter, as industrial activity and automobile and
home sales all showed significant improvement, pushing real GDP to 4.7%, its
highest rate in two years. That growth rate caused some to expect the Fed to
change direction and tighten before year-end. However, the economy subsequently
moderated significantly, with third-quarter annualized real GDP retreating to
2.1%, reflecting lackluster consumer spending and a widening U.S. trade deficit.
As 1996 drew to a close, moderate economic growth and contained inflation kept
the Fed in a neutral mode, despite a very robust stock market.
Historical Yield Curve (LIBOR)
[BAR GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
Source: Goldman Sachs Fixed Income Database, reflecting the London Interbank
Offered Rate (LIBOR).
The Federal funds rate began the year at 5.50% and ended at 5.25%. The slope of
the LIBOR yield curve steepened significantly over the course of the year. By
the end of 1996, the spread between one- and 12-month LIBOR moved to plus 28
basis points.
A Nimble Strategy Contributed to Strong Performance
Taxable Sector. Structuring money market portfolios successfully during
1996 as the Fed shifted policy from easing to neutral to a bias to tighten
required strict attention to risk management, as well as to a detailed analysis
of market fundamentals and technicals. Analyzing the implied forward rates and
determining the extent to which the market had priced in too much easing at the
beginning of 1996 or too much tightening by midyear 1996 and then adjusting the
portfolios' weighted average maturities and structures were equally important to
our strategy.
During the second and third quarters of 1996, we extended the ILA
Portfolios' weighted average maturities as the yield curve steepened in
anticipation of a Fed tightening that did not materialize. During the early part
of the fourth quarter, market data suggested that growth slowed in the third
quarter. Consequently, the market was priced to a more neutral Fed policy.
However, year-end financing pressures resulted in investment opportunities
maturing in the first quarter of 1997, and the Portfolios closed the year with
neutral weighted average maturities.
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
ILA Unitholder Letter/Annual Report (continued)
- --------------------------------------------------------------------------------
Tax-Exempt Sector. With tax reform basically a nonissue in 1996, investor
interest in the sector revived, causing total assets in the tax-exempt money
market fund category to increase by 13%. In contrast, supply was little changed
from 1995 levels, making tax-exempts slightly more expensive in 1996. These
supply/demand technicals coupled with our fundamental view that short-term rates
were likely to rise explains our neutral to short-to-neutral weighted average
maturities during the latter part of the year.
Summary for ILA Portfolios Institutional Units* as of December 31, 1996
<TABLE>
<CAPTION>
---------------------------------------------------------
Weighted
Institutional SEC 7-Day SEC 7-Day 30-Day Average
Liquid Assets Current Effective Average Maturity
Portfolios Yield Yield Yield (days)
=========================================================
<S> <C> <C> <C> <C>
Prime
Obligations 5.12% 5.25% 5.10% 40
---------------------------------------------------------
Money Market 5.20% 5.33% 5.18% 43
---------------------------------------------------------
Government 5.19% 5.32% 5.07% 31
---------------------------------------------------------
Treasury
Obligations 5.19% 5.32% 5.06% 34
---------------------------------------------------------
Treasury
Instruments 4.84% 4.95% 4.98% 54
---------------------------------------------------------
Federal 5.15% 5.28% 5.12% 41
---------------------------------------------------------
Tax-Exempt
Diversified 3.58% 3.64% 3.30% 39
---------------------------------------------------------
Tax-Exempt
California 3.47% 3.53% 3.11% 34
---------------------------------------------------------
Tax-Exempt
New York 3.52% 3.58% 3.19% 34
---------------------------------------------------------
</TABLE>
* ILA offers three separate classes of units (Institutional, Administration and
Service), each of which is subject to different fees and expenses that affect
performance and entitle unitholders to different services. The Administration
units and the Service units offer financial institutions the opportunity to
receive a fee for providing administrative support services. The Administration
units pay 0.15% plus 0.10% from the adviser for a total of 0.25%. The Service
units pay 0.40% plus 0.10% from the adviser for a total of 0.50%. More complete
information, including management fees and expenses, is included in the ILA
Portfolios' prospectus or may be obtained by calling the Goldman Sachs Funds at
1-800-621-2550.
Domestic Credit Trends Were Positive, Reflecting a Healthy
Economy and a Strong Market
Credit trends in 1996 were positive on the whole in the U.S., with steady
growth, low inflation, a booming stock market, and technological advances and
globalization transforming many industries. The major story of 1996 was the Dow
Jones Industrial Average climb of 26%, which, following the 33.5% increase in
1995, added up to a 68% growth rate since 1994.
The rising stock market supported record levels of mergers and
acquisitions. Over $650 billion in mergers, acquisitions and spin-offs were
announced in the U.S. in 1996 (up 27% from 1995), with $1.4 trillion announced
globally. This trend was spurred on not only by the stock market, but also by
deregulation in telecommunications, utilities and broadcasting. Unlike the
1980s, mergers this past year were generally equity-financed and aimed at
expanding core businesses, rather than diversifying. Merger and acquisition
activity was also utilized to boost earnings growth, since cost-cutting
opportunities had been largely exhausted during 1995.
Banks, which dominated merger activity in 1995, were busy consolidating
those mergers in 1996. It is likely that large regional domestic banks will
continue making acquisitions in 1997, although this is not expected to affect
their credit quality. At the end of the third quarter 1996, 80% of the banking
sector had a stable rating outlook.
Although consumer confidence was buoyed by low unemployment and mild
inflation, growing household debt levels led to an all-time high in credit card
loan delinquencies and personal bankruptcies. Consequently, financial results in
the consumer products, retail, restaurant and entertainment businesses were
mediocre at best. Almost all other industries, however, had improved credit
quality, with upgrades surpassing downgrades in utilities, energy, healthcare
and financial institutions. Many companies used the strength of the stock market
to substitute debt capital with equity capital, thereby improving their credit
quality.
Credit quality in the tax-exempt market was steady-to-improving during
1996. Market concerns arising from
- --------------------------------------------------------------------------------
2
<PAGE>
the Orange County bankruptcy abated somewhat, although various forms of credit
enhancement remained popular, even among high-quality issuers. Reflecting the
strong national economy, many states and localities experienced positive
financial results, reducing their regular cash flow borrowings.
The Credit Picture Abroad: Europe Improved,
While Asia Was Generally Stable
In Europe, developments were driven by the push towards European Monetary
Union (EMU), while the key factors in Asia were the fragile Japanese recovery
and a sharp downturn in Asian exports. In general, sovereign creditworthiness
improved during 1996. This was particularly the case in Europe, where the
political will to qualify for EMU produced significant improvements in fiscal
policy and debt dynamics, as it sparked more rapid corporate restructuring.
French and Italian banks did require close monitoring this year as their problem
loans continued, but French bank credit quality stabilized after having suffered
broad rating downgrades in 1995. The credit quality of most other European banks
was stable, with a few minor downgrades of German and Swiss banks. In Asia,
creditworthiness was fairly stable. The notable negative exception was the
Japanese financial sector, which remained under pressure from the ongoing
weakness of the real estate markets, sluggish economic growth and ongoing
deregulation. However, Japan's largest banks have strong fundamentals and will
continue to be important and dominant players in the global financial market.
Australian credit quality strengthened through improved macroeconomic balances,
which provided evidence that Australia's recent boom-and-bust cycles may be
over. The weakness of Asian exports did not affect creditworthiness directly;
exports should recover this year, and the scare could prompt salutary policy
adjustments going forward.
In 1996, we continued to apply conservative credit standards to our money
market portfolios. The Goldman Sachs Credit Department, which has analysts based
in London, Tokyo, Frankfurt and New York, as well as extensive technological
assets and credit expertise, will continue to vigilantly monitor global
developments in 1997.
Outlook and Strategies for 1997
Fourth-quarter 1996 GDP was reported at 4.7%, reflecting a stronger
economic picture from several sources: a sharp narrowing of the U.S. trade
deficit, as well as increases in consumer spending and industrial production.
Goldman Sachs' economists expect economic growth to continue at just under 2.0%
for the first quarter of 1997 and at approximately 3.0% for the full year. As a
result, Goldman Sachs currently believes the Fed is likely to raise short-term
interest rates by midyear.
Consequently, ILA Portfolios will continue to be managed with
short-to-neutral average life targets and short, ddered structures to prepare
for higher rates ahead.
Extended Trading Hours Improve Service Further
On November 4, 1996, we extended the trading hours for the Institutional
Liquid Assets Federal and Treasury Instruments Portfolios to 3:00 p.m. EST. Many
clients have already taken advantage of this additional flexibility.
In closing, we thank you for your support and for making 1996 a successful
year for the ILA Portfolios. We are pleased that many of you have joined our
conference calls following each Federal Open Market Committee meeting throughout
the year. Our goal is to continue to provide you with competitive performance,
as well as a range of value-added services that reflect the breadth and depth of
Goldman Sachs' outstanding resources.
Sincerely,
/s/ Kaysie P. Uniacke
Kaysie P. Uniacke
Portfolio Manager
February 7, 1997
3
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Prime Obligations Portfolio
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Commercial Paper and Corporate Obligations--60.5%
Bank Holding Companies
BankAmerica Corp.
$50,000,000 5.27% 03/21/97 $ 49,421,764
Business Credit Institutions
General Electric Capital Corp.
20,000,000 5.30 03/26/97 19,752,667
30,000,000 5.44 04/03/97 29,582,933
JC Penney Funding Corp.
44,300,000 5.31 01/31/97 44,103,973
Chemicals
Bayer Corp.
25,000,000 5.33 03/13/97 24,737,201
Commercial Banks
CP Trust Certificates Series 1996
35,000,000 5.94/(a)/ 03/28/97 35,000,000
Life Insurance
Commonwealth Life Insurance Co.
55,000,000 6.11/(b)/ 05/08/97 55,000,000
Pacific Mutual Life Insurance Co.
25,000,000 5.52/(b)/ 02/28/97 25,000,000
Prudential Funding Corp.
40,000,000 5.42 01/29/97 39,831,378
Motor Vehicles and Equipment
Ford Motor Credit Corp.
20,000,000 5.50 01/28/97 19,917,500
Hertz Corporation
25,000,000 5.32 02/04/97 24,874,389
Personal Credit Institutions
Associates Corp.
50,000,000 5.32 01/29/97 49,793,111
Household Finance Corp.
50,000,000 5.32 03/12/97 49,482,778
Transamerica Finance Corp.
20,000,000 5.43 01/29/97 19,915,533
Receivable/Asset Financings
Beta Finance Inc.
7,000,000 6.11 06/17/97 7,000,000
Delaware Funding Corp.
30,000,000 5.29 02/20/97 29,779,583
Enterprise Funding Corp.
10,062,000 5.33 01/21/97 10,032,205
9,103,000 5.33 01/23/97 9,073,350
International Lease Finance Corp.
9,000,000 5.29% 03/24/97 $ 8,891,555
30,000,000 5.32 04/04/97 29,587,700
New Center Asset Trust
10,000,000 5.52 01/28/97 9,958,600
10,000,000 5.37 04/04/97 9,861,275
Security and Commodity Brokers, Dealers and Services
Bear Stearns Companies, Inc.
40,000,000 5.30 02/13/97 39,746,778
10,000,000 5.34 03/12/97 9,896,167
C.S. First Boston, Inc.
15,000,000 5.33 01/22/97 14,953,363
Merrill Lynch & Co., Inc.
10,000,000 5.45 02/19/97 9,925,819
40,000,000 5.33 02/26/97 39,668,356
Morgan Stanley Group, Inc.
10,000,000 5.59 01/28/97 9,958,075
15,000,000 5.32 02/06/97 14,920,200
25,000,000 5.79/(a)/ 06/27/97 25,000,000
- -----------------------------------------------------------
Total Commercial Paper and Corporate
Obligations $764,666,253
- -----------------------------------------------------------
Bank Notes--10.7%
Colorado National Bank
$25,000,000 5.59%/(b)/ 01/15/97 $ 24,999,810
FCC National Bank
15,000,000 5.70 05/22/97 14,982,722
20,000,000 6.00 06/02/97 20,000,808
Huntington National Bank
25,000,000 6.05 06/13/97 25,014,637
PNC Bank, N.A.
40,000,000 5.58/(b)/ 04/01/97 39,992,313
SMM Trust 1996
10,000,000 5.69/(b)/ 06/20/97 10,000,000
- -----------------------------------------------------------
Total Bank Notes $134,990,290
- -----------------------------------------------------------
U.S. Government Agency Obligations--1.6%
Federal National Mortgage Association
$20,400,000 5.36% 03/12/97 $ 20,187,386
- -----------------------------------------------------------
Total U.S. Government Agency Obligations $ 20,187,386
- -----------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Prime Obligations Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Certificates of Deposit--9.5%
Chase Manhattan Corp.
$ 10,000,000 5.75% 02/03/97 $ 10,000,000
40,000,000 5.42 03/12/97 40,000,000
First Alabama Bank
20,000,000 5.55 02/28/97 19,999,973
Mellon Bank, N.A.
40,000,000 5.35 02/19/97 40,000,000
Union Bank of California
10,000,000 5.58 02/28/97 10,000,000
- -----------------------------------------------------------
Total Certificates of Deposit $ 119,999,973
- -----------------------------------------------------------
Repurchase Agreements--17.9%
C.S. First Boston Corp., dated 12/31/96, repurchase
price $50,465,000 (FNMA: $51,588,373, 6.12%-6.23%,
02/01/32-10/01/32)
$ 50,000,000 5.40% 03/03/97 $ 50,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase
price $100,036,111 (U.S. Treasury Bond: $53,861,960,
11.25%, 02/15/15; FHLB Stripped Security:
$48,746,508, 06/23/97)
100,000,000 6.50 01/02/97 100,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase
price $25,213,750 (FNMA: $9,152,917, 7.50%,
04/01/26; FHLMC: $17,073,692, 7.50%, 11/01/26)
25,000,000 5.40 02/26/97 25,000,000
Smith Barney, Inc., dated 12/31/96, repurchase price
$30,257,450 (FHLMC: $31,328,053, 7.00%,
06/01/26-11/01/26)
30,000,000 5.42 02/26/97 30,000,000
Joint Repurchase Agreement Account
21,400,000 6.58 01/02/97 21,400,000
- -----------------------------------------------------------
Total Repurchase Agreements $ 226,400,000
- -----------------------------------------------------------
Total Investments $1,266,243,902/(c)/
===========================================================
/(a)/Variable rate security-base index is one of the following:
U.S. Treasury Bill
One or three month LIBOR
One month commercial paper
Federal Funds
Prime lending rate
/(b)/Variable rate master note-base index is LIBOR.
/(c)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Money Market Portfolio
December 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
<S> <C> <C> <C>
Commercial Paper and Corporate Obligations--48.5%
Business Credit Institutions
General Electric Capital Corp.
$15,000,000 5.44% 04/03/97 $ 14,791,467
Commercial Banks
CP Trust Certificates Series 1996
20,000,000 5.68/(a)/ 03/28/97 20,000,000
Computer Software and Services
Siemens Capital Corp.
25,000,000 5.32 02/13/97 24,841,139
Foreign Banks
Banca Crt Financial Corp.
10,000,000 5.35 01/22/97 9,968,792
5,000,000 5.35 01/31/97 4,977,708
17,430,000 5.45 03/03/97 17,269,039
5,400,000 5.42 04/03/97 5,325,204
Generale Bank
15,000,000 5.35 04/10/97 14,779,313
San Paolo U.S. Finance Co.
25,000,000 5.36 01/31/97 24,888,333
15,000,000 5.33 02/13/97 14,904,504
Unifunding, Inc.
40,000,000 5.45 01/29/97 39,830,444
Home Builders
International Lease Finance Corp.
40,000,000 5.43 03/07/97 39,607,833
Life Insurance
Commonwealth Life Insurance Co.
25,000,000 5.64/(b)/ 05/08/97 25,000,000
Prudential Funding Corp.
10,000,000 5.42 01/29/97 9,957,844
Motor Vehicles and Equipment
Daimler Benz Corp., N.A.
25,000,000 5.35 03/25/97 24,691,631
Ford Motor Credit Co.
40,000,000 5.32 02/04/97 39,799,022
Security and Commodity Brokers, Dealers and Services
Bear Stearns Companies, Inc.
35,000,000 5.30 02/13/97 34,778,431
Merrill Lynch & Co., Inc.
40,000,000 5.35 02/11/97 39,756,278
Morgan Stanley Group, Inc.
20,000,000 5.32 02/06/97 19,893,600
20,000,000 5.53/(a)/ 06/27/97 20,000,000
Nomura Holdings
35,000,000 5.39 01/29/97 34,853,272
- -----------------------------------------------------------
Total Commercial Paper and Corporate
Obligations $479,913,854
- -----------------------------------------------------------
Bank Notes--15.1%
Colorado National Bank
$15,000,000 5.59%/(b)/ 01/15/97 $ 14,999,886
Dakota Certificates of Standard Credit Card Master Trust
20,000,000 5.33/(b)/ 02/07/97 19,890,439
FCC National Bank, Wilmington
10,000,000 5.70 05/22/97 9,988,481
First Bank FSB
5,000,000 5.61/(b)/ 04/11/97 4,999,734
First National Bank of Maryland
5,000,000 5.60/(b)/ 09/30/97 4,998,547
Huntington National Bank
5,000,000 6.05 06/13/97 4,998,229
PNC Bank, N.A.
10,000,000 5.58/(b)/ 04/01/97 9,998,078
20,000,000 5.40/(b)/ 10/01/97 19,988,244
Society National Bank of Cleveland
25,000,000 5.58/(b)/ 05/14/97 24,990,309
SMM Trust 1996
10,000,000 5.69/(b)/ 06/20/97 10,000,000
Southtrust Bank of Alabama, N.A.
25,000,000 5.54/(b)/ 05/15/97 24,995,313
- -----------------------------------------------------------
Total Bank Notes $149,847,260
- -----------------------------------------------------------
Certificates of Deposit--0.5%
Chase Manhattan Corp.
$ 5,000,000 5.75% 02/03/97 $ 5,000,000
- -----------------------------------------------------------
Total Certificates of Deposit $ 5,000,000
- -----------------------------------------------------------
Certificates of Deposit - Foreign Eurodollar--7.6%
Norinchukin Bank, London
$40,000,000 5.49% 03/18/97 $ 40,000,830
Sanwa Bank Ltd., London
35,000,000 5.46 03/21/97 35,000,377
- -----------------------------------------------------------
Total Certificates of Deposit - Foreign
Eurodollar $ 75,001,207
- -----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
Statement of Investments
- ----------------------------------------------------------
ILA Money Market Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Certificates of Deposit - Yankeedollar--9.1%
Industrial Bank of Japan, New York
$35,000,000 5.46% 03/19/97 $ 35,000,368
Landesbank Hessen Thuer Gir, New York
30,000,000 6.03 06/13/97 30,036,531
Sumitomo Bank, Los Angeles
25,000,000 5.52 02/28/97 24,998,171
- -----------------------------------------------------------
Total Certificates of Deposit - Yankeedollar $ 90,035,070
- -----------------------------------------------------------
Taxable Municipal Notes--2.9%
Florida Housing Finance Authority
$28,800,000 5.92%/(b)/ 01/01/34 $ 28,800,000
- -----------------------------------------------------------
Total Taxable Municipal Notes $ 28,800,000
- -----------------------------------------------------------
Time Deposit--3.6%
Bank of Tokyo, Mitsubishi Bank Ltd.
$35,000,000 5.50% 05/16/97 $ 35,000,000
- -----------------------------------------------------------
Total Time Deposit $ 35,000,000
- -----------------------------------------------------------
Repurchase Agreements--12.9%
JP Morgan Securities, Inc., dated 12/31/96, repurchase
price $50,018,056 (FHLMC: $52,044,149, 7.26%,
09/17/01)
$50,000,000 6.50% 01/02/97 $ 50,000,000
Joint Repurchase Agreement Account
77,200,000 6.58 01/02/97 77,200,000
- -----------------------------------------------------------
Total Repurchase Agreements $127,200,000
- -----------------------------------------------------------
Total Investments $990,797,391/(c)/
===========================================================
/(a)/Variable rate security-base index is one of the following:
U.S. Treasury Bill
One or three month LIBOR
One month commercial paper
Federal Funds
Prime lending rate
/(b)/Variable rate master note-base index is LIBOR.
/(c)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- -----------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Government Portfolio
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
U.S. Government Agency Obligations--31.2%
Federal Home Loan Bank
$ 25,000,000 5.35% 01/30/97 $ 24,892,257
50,000,000 5.40/(a)/ 04/04/97 49,988,154
25,000,000 5.45 11/12/97 24,977,221
10,000,000 5.42 12/02/97 9,986,619
25,000,000 5.50/(a)/ 12/26/97 24,979,592
Federal National Mortgage Association
30,000,000 6.50 01/02/97 29,994,583
15,000,000 4.72/(a)/ 01/27/97 14,999,007
20,000,000 5.41/(a)/ 09/29/97 19,992,616
7,500,000 5.53 10/29/97 7,497,075
50,000,000 5.40/(a)/ 12/03/97 49,968,600
- -----------------------------------------------------------
Total U.S. Government Agency Obligations $257,275,724
- -----------------------------------------------------------
U.S. Treasury Obligations--3.0%
United States Treasury Notes
$ 20,000,000 5.63% 06/30/97 $ 19,965,941
5,000,000 6.00 09/02/97 4,999,214
- -----------------------------------------------------------
Total U.S. Treasury Obligations $ 24,965,155
- -----------------------------------------------------------
Repurchase Agreements--66.1%
Bear Stearns Companies, Inc. dated 12/31/96, repurchase
price $30,011,333 (FNMA: $30,894,721, 8.50%, 09/01/25)
$ 30,000,000 6.80% 01/02/97 $30,000,000
C.S. First Boston Corp., dated 12/11/96, repurchase
price $30,403,125 (FHLM: $31,559,521, 7.00%, 11/01/26)
30,000,000 5.38 03/11/97 30,000,000
Daiwa Securities, dated 12/31/96, repurchase price
$30,011,500 (U.S. Treasury Bill: $30,600,013, 11/13/97)
30,000,000 6.90 01/02/97 30,000,000
Goldman, Sachs & Co., dated 12/11/96, repurchase price
$30,403,125 (FNMA: $30,964,228, 6.12%, 10/01/32)
30,000,000 5.38 03/11/97 30,000,000
JP Morgan Securities, Inc., dated 12/12/96, repurchase
price $30,403,125 (FNMA: $31,531,603, 8.00%, 06/01/26)
30,000,000 5.38 03/12/97 30,000,000
Lehman Government Securities, Inc., dated 12/31/96,
repurchase price $30,011,833 (U.S. Treasury Stripped
Security: $22,193,561, 11/15/99; U.S. Treasury
Notes: $8,408,442, 7.75%-8.88%, 2/15/00-2/15/01)
30,000,000 7.10 01/02/97 30,000,000
Merrill Lynch Government Securities, Inc., dated 12/31/96,
repurchase price $30,011,833 (FNMA: $30,385,501, 5.28%,
06/01/24)
30,000,000 7.10 01/02/97 30,000,000
Repurchase Agreements (continued)
Nomura Securities International, Inc., dated 12/31/96,
repurchase price $30,012,500 (FHLM: $30,924,339,
6.50%-8.00%, 01/01/00-09/01/11)
$ 30,000,000 7.50% 01/02/97 $ 30,000,000
Joint Repurchase Agreement Account
305,000,000 6.58 01/02/97 305,000,000
- -----------------------------------------------------------
Total Repurchase Agreements $545,000,000
- -----------------------------------------------------------
Total Investments $827,240,870/(b)/
===========================================================
/(a)/Variable rate security-base index is one of the following:
Federal Funds
Prime lending rate
One month LIBOR
/(b)/The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of the
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Treasury Obligations Portfolio
December 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
<S> <C> <C> <C>
U.S. Treasury Obligations--9.6%
United States Treasury Notes
$40,000,000 5.63% 06/30/97 $39,932,792
27,500,000 5.38 12/01/97 27,459,792
10,000,000 5.25 12/31/97 9,975,384
- -----------------------------------------------------------
Total U.S. Treasury Obligations $77,367,968
- -----------------------------------------------------------
Repurchase Agreements--90.8%
Bear Stearns Companies Inc., dated 12/31/96, repurchase
price $35,013,125 (U.S. Treasury Note: $35,659,606,
8.75%, 8/15/00)
$35,000,000 6.75% 01/02/97 $35,000,000
C.S. First Boston Corp., dated 12/13/96, repurchase price
$30,399,750 (U.S. Treasury Note: $30,748,620, 7.50%,
11/15/01)
30,000,000 5.33 03/13/97 30,000,000
CIBC Wood Gundy Securities, dated 12/31/96, repurchase
price $35,013,028 (U.S. Treasury Bond: $35,702,267,
8.50%, 02/15/20)
35,000,000 6.70 01/02/97 35,000,000
Daiwa Securities, dated 12/31/96, repurchase price
$35,013,417 (U.S. Treasury Bill: $35,700,492, 11/13/97)
35,000,000 6.90 01/02/97 35,000,000
Goldman, Sachs & Co., dated 12/31/96, repurchase price
$35,012,833 (U.S. Treasury Note: $35,700,497, 7.25%,
02/15/98)
35,000,000 6.60 01/02/97 35,000,000
JP Morgan Securities, Inc., dated 12/31/96, repurchase
price $35,012,833 (U.S. Treasury Note: $35,838,260,
7.38%, 11/15/97)
35,000,000 6.60 01/02/97 35,000,000
Lehman Government Securities, Inc., dated 12/31/96,
repurchase price $35,013,806 (U.S. Treasury Stripped
Securities: $35,703,063, 02/15/00-11/15/00)
35,000,000 7.10 01/02/97 35,000,000
Merrill Lynch Government Securities, Inc., dated
12/31/96, repurchase price $35,012,542 (U.S. Treasury
Stripped Securities: $35,702,128, 02/15/02-02/15/26)
35,000,000 6.45 01/02/97 35,000,000
Nomura Securities International, Inc., dated 12/12/96,
repurchase price $30,400,500 (U.S. Treasury Notes:
$30,600,339, 5.13%-8.50%, 04/15/97-08/15/01)
30,000,000 5.34 03/12/97 30,000,000
Sanwa Securities, dated 12/31/96, repurchase price
$35,013,125 (U.S. Treasury Note: $36,039,356, 8.50%,
2/15/00)
35,000,000 6.75 01/02/97 35,000,000
Smith Barney Inc., dated 12/11/96, repurchase price
$30,400,500 (U.S. Treasury Notes: $28,942,094,
5.38%-6.88%, 05/15/97-07/31/99; U.S. Treasury Stripped
Security: $1,658,209, 02/15/00)
30,000,000 5.34 03/11/97 30,000,000
UBS Securities Inc., dated 12/31/96, repurchase price
$35,013,368 (U.S. Treasury Note: $35,676,249, 6.00%,
09/30/98)
35,000,000 6.88 01/02/97 35,000,000
Joint Repurchase Agreement Account
327,900,000 6.58 01/02/97 327,900,000
- -----------------------------------------------------------
Total Repurchase Agreements $732,900,000
- -----------------------------------------------------------
Total Investments $810,267,968/(a)/
===========================================================
</TABLE>
/(a)/The amount stated also represents aggregate cost for
federal income tax purposes.
Interest rates represent either the stated coupon rate,
annualized yield on date of purchase for discounted notes,
or, for floating rate securities, the current reset rate,
which is based upon current interest rate indices.
The percentages shown for each investment category reflect
the value of investments in that category as a percentage
of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Statement of Investments
- ------------------------------------------------------------
ILA Treasury Instruments Portfolio
December 31, 1996
- ------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
============================================================
U.S. Treasury Obligations--99.3%
United States Treasury Bills
$25,000,000 4.72% 01/30/97 $ 24,904,944
5,500,000 4.95 01/30/97 5,478,069
75,000,000 4.80 02/06/97 74,640,000
48,600,000 4.83 02/06/97 48,365,262
14,500,000 4.86 02/06/97 14,429,530
32,100,000 5.41 02/06/97 31,942,389
90,000,000 4.95 02/06/97 89,554,500
75,000,000 4.82 02/13/97 74,568,208
150,000,000 5.03 02/13/97 149,098,792
10,500,000 4.86 02/27/97 10,419,203
21,500,000 4.90 02/27/97 21,333,196
28,400,000 4.94 02/27/97 28,177,865
United States Treasury Notes
30,000,000 6.25 01/31/97 30,025,345
50,000,000 7.50 01/31/97 50,097,656
50,000,000 4.75 02/18/97 49,961,310
312,000,000 6.88 02/28/97 312,866,648
205,000,000 6.63 03/31/97 205,703,323
- ------------------------------------------------------------
Total U.S. Treasury Obligations $1,221,566,240
- ------------------------------------------------------------
Total Investments $1,221,566,240/(a)/
============================================================
/(a)/The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of the
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Federal Portfolio
December 31, 1996
- ------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
============================================================
U.S. Government Agency Obligations--100.3%
Federal Farm Credit Bank
$ 20,515,000 5.36% 01/02/97 $ 20,511,946
37,635,000 5.58 01/06/97 37,605,833
2,400,000 5.58 01/07/97 2,397,767
27,300,000 5.26-5.27 01/13/97 27,252,072
36,345,000 5.35 01/15/97 36,269,382
56,000,000 5.37 01/21/97 55,832,933
42,000,000 5.37 01/23/97 41,862,170
9,750,000 5.50 01/27/97 9,711,271
11,490,000 5.48 01/31/97 11,437,529
212,210,000 5.23-5.41/(a)/ 02/03/97 212,075,061
44,895,000 5.21 02/04/97 44,674,092
24,000,000 5.33 02/06/97 23,872,080
20,545,000 5.21-5.33 02/10/97 20,424,201
10,000,000 5.20 02/14/97 9,936,444
79,055,000 5.21-5.39 02/18/97 78,494,540
14,830,000 5.22 02/21/97 14,720,332
50,635,000 5.21-5.33 02/26/97 50,216,604
17,000,000 5.21 02/27/97 16,859,764
16,000,000 5.21 02/28/97 15,865,698
51,610,000 5.22-5.32 03/03/97 51,423,313
8,000,000 5.32 03/10/97 7,919,609
7,180,000 5.21 03/11/97 7,108,302
50,000,000 5.48/(b)/ 03/11/97 49,992,224
6,200,000 5.21 03/12/97 6,137,191
20,000,000 5.36 03/25/97 19,752,844
19,000,000 5.32-5.36 03/26/97 18,762,747
9,000,000 5.32 03/27/97 8,886,950
11,000,000 5.32 03/31/97 10,855,325
17,000,000 5.30 04/01/97 16,774,750
50,000,000 5.52/(b)/ 05/21/97 49,981,445
50,000,000 5.84 06/18/97 49,958,175
10,000,000 5.37/(b)/ 06/26/97 9,996,868
50,000,000 5.49/(b)/ 08/26/97 49,972,764
50,000,000 5.36/(b)/ 10/02/97 49,959,775
Federal Home Loan Bank
5,100,000 5.22 01/02/97 5,099,261
50,000,000 5.38/(b)/ 01/03/97 49,999,747
17,895,000 5.24 01/16/97 17,855,929
34,900,000 5.23 01/23/97 34,788,562
25,000,000 5.28 01/28/97 24,901,000
133,300,000 5.22-5.35 01/30/97 132,733,719
25,130,000 5.28 01/31/97 25,019,533
181,845,000 5.21-5.32 02/13/97 180,701,332
28,750,000 5.21-5.26 02/14/97 28,566,649
145,815,000 5.20% 02/20/97 144,761,891
34,300,000 5.31 02/21/97 34,041,978
125,320,000 5.20-5.21 02/27/97 124,287,275
27,680,000 5.21 03/06/97 27,423,622
101,750,000 5.23 03/13/97 100,700,477
35,000,000 5.35 03/27/97 34,557,882
50,000,000 5.51/(b)/ 03/27/97 49,989,790
80,000,000 5.35 03/31/97 78,941,889
100,000,000 5.22/(b)/ 04/01/97 99,981,167
25,000,000 5.84 06/27/97 24,976,809
50,000,000 5.51/(b)/ 08/28/97 49,977,691
65,000,000 5.50/(b)/ 09/26/97 64,962,440
50,000,000 5.50/(b)/ 12/26/97 49,959,182
Student Loan Marketing Association
75,000,000 5.41 10/02/97 74,972,733
74,000,000 5.46 11/10/97 73,963,185
Tennessee Valley Authority
40,000,000 5.21 01/24/97 39,866,856
47,975,000 5.21 02/05/97 47,731,993
47,300,000 5.21 02/06/97 47,053,567
87,385,000 5.20-5.22 02/19/97 86,765,491
75,000,000 5.17 02/20/97 74,461,458
75,000,000 5.17 02/21/97 74,450,688
60,840,000 5.26-5.31 02/25/97 60,347,412
20,000,000 5.23 03/21/97 19,770,461
106,885,000 5.28 03/26/97 105,568,177
75,000,000 5.25 04/09/97 73,928,125
- ------------------------------------------------------------
Total Investments $3,300,609,972/(c)/
============================================================
/(a)/Variable rate security-base index is one of the following:
U.S. Treasury Bill
One or three month LIBOR
Federal Funds
Prime lending rate
/(b)/Variable rate master note-base index is LIBOR.
/(c)/The amount stated also represents aggregate cost for federal
income tax purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Statement of Investments
- -------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio
December 31, 1996
- --------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
==============================================================
Alabama--6.4%
Columbia IDB PCRB Series 1996 A for Alabama Power Co.
(VMIG1)
$21,000,000 5.00% 01/01/97 $21,000,000
Columbia IDB PCRB VRDN for Alabama Power Co. Series
1995 B
(A-1/VMIG1)/(c)/
23,500,000 5.00 01/01/97 23,500,000
Columbia IDB PCRB VRDN for Alabama Power Co. Series
1995 C
(A-1/VMIG1)
4,600,000 4.65 01/01/97 4,600,000
Columbia IDB PCRB VRDN for Alabama Power Co. Series
1995 E
(A-1/VMIG1)
4,900,000 5.10 01/01/97 4,900,000
Homewood RB for Samford University (Bank of Nova Scotia
LOC) (A-1+/VMIG1)
16,000,000 5.00 01/01/97 16,000,000
Jefferson County Sewer Revenue Warrants Series 1995 A
(Bayerische Landesbank Girozentrale LOC)(A-1+/P-1)
19,300,000 4.25 01/07/97 19,300,000
Mobile County IDA PCRB for M&T Chemicals (Bankers Trust
LOC) (A1)
3,000,000 4.13 01/01/97 3,000,000
Mobile IDA PCRB for Alabama Power Co. Series
1993A(A-1/VMIG1)
8,600,000 4.15 01/01/97 8,600,000
Mobile IDA PCRB for Alabama Power Co. Series
1994(A-1/VMIG1)
2,100,000 5.00 01/01/97 2,100,000
- -----------------------------------------------------------
$103,000,000
- -----------------------------------------------------------
Alaska--0.2%
Valdez Marine Terminal RB for Arco, Inc. Series 1994
C(A-1/P-1)
$ 2,600,000 3.60% 04/10/97 $ 2,600,000
- -----------------------------------------------------------
Arkansas--1.2%
Crossett PCRB for Georgia Pacific Corp. Series 1991
VRDN
(Suntrust Bank LOC)(A-1+/AA3)
$ 9,500,000 4.15% 01/07/97 $ 9,500,000
Union County PCRB Series 1988 for Great :Lakes Chemical
(A-1)
9,000,000 4.21/(b)/ 01/07/97 9,000,000
- -----------------------------------------------------------
$18,500,000
- -----------------------------------------------------------
California--5.8%
California RANS VRDN Series 1996-97 B(SP-1+/VMIG1)
$ 6,000,000 3.47% 01/31/97 $ 6,000,000
California RANS VRDN Series 1996-97 C1(SP-1+/VMIG1)
12,000,000 4.00 01/07/97 12,000,000
California Statewide Communities Development Authority
Refunding RB Series 1995(A-1+)/(c)/
$ 9,300,000 3.90% 01/07/97 $ 9,300,000
California Statewide Communities Development Authority
Refunding RB Series 1995A-2(A-1+)
2,500,000 3.90 01/07/97 2,500,000
Los Angeles County MF Hsg. RB(A-1+)
3,500,000 2.80 01/07/97 3,500,000
Los Angeles County TRANS (Credit Suisse/Morgan Guaranty
Trust Co./Westdeutsche Landesbank Girozentrale/Bank
of America/Union Bank of Switzerland
LOC)(SP-1/VMIG1)
12,450,000 4.50 06/30/97 12,492,536
Newport Beach VRDN RB Series 1996 A(A-1+)
600,000 5.15 01/01/97 600,000
State of California RANS Series 1996-97(SP-1+/VMIG1)
45,800,000 4.05 01/07/97 45,800,000
- -----------------------------------------------------------
$92,192,536
- -----------------------------------------------------------
Colorado--0.6%
State of Colorado General Fund TRANS Series 1996
A(SP-1+)
$10,000,000 4.50% 06/27/97 $10,033,630
- -----------------------------------------------------------
Connecticut--1.4%
State of Connecticut Development Authority
PCRB(Deutsche Bank LOC)(A-1+/VMIG1)
$17,400,000 4.15%/(b)/ 01/07/97 $17,400,000
State of Connecticut State 2nd Lien VRDN (Commerzbank
Bank LOC)(A-1+/VMIG1)
4,800,000 4.00 01/07/97 4,800,000
- -----------------------------------------------------------
$22,200,000
- -----------------------------------------------------------
District of Columbia--1.1%
District of Columbia VRDN ACES for Georgetown
University Series 1988 B, C and E (Bayerishe
Landesbank Girozentrale LOC)
(A-1+/VMIG1)
$10,900,000 4.10% 01/07/97 $10,900,000
HFA MF Hsg. for Mclean Gardens South Apartments VRDN
(Sumitomo Bank LOC)(VMIG1)
7,000,000 4.30 01/07/97 7,000,000
- -----------------------------------------------------------
$17,900,000
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Florida--2.8%
Dade County Water & Sewer VRDN Series 1994(A-1+/VMIG1)
$7,475,000 4.00%/(b)/ 01/07/97 $ 7,475,000
Florida Local Government Pooled CP Notes (First Union
National Bank of Florida LOC)(A-1+/P-1)
29,162,000 3.70 01/24/97 29,162,000
7,225,800 3.60 02/18/97 7,225,800
1,800,000 3.50 03/14/97 1,800,000
- -----------------------------------------------------------
$45,662,800
- -----------------------------------------------------------
Georgia--12.0%
Albany Dougherty PCRB for Philip Morris Co. (A-1/P-1)
$17,000,000 4.15% 01/07/97 $17,000,000
Albany Dougherty PCRB Series 1991 for Georgia Power
Co.(A-1+)
2,120,000 4.15 01/07/97 2,120,000
Burke County Development Authority RB(A-1+/VMIG1)
6,000,000 4.65 01/01/97 6,000,000
29,055,000 5.00 01/01/97 29,055,000
3,000,000 4.15 01/07/97 3,000,000
Burke County PCRB for Georgia Power Co.(A-1+/VMIG1)/(c)/
2,900,000 5.00 01/07/97 2,900,000
29,850,000 4.00/(b)/ 01/07/97 29,850,000
3,425,000 4.15 01/07/97 3,425,000
6,000,000 4.15 01/07/97 6,000,000
Burke County PCRB for Georgia Power Co. Series
1994(VMIG1)
3,400,000 5.00 01/07/97 3,400,000
Cobb County Institute of Nuclear Operations Inc. VRDN
for Georgia Power Co. (Suntrust Bank LOC)(Aa3)
4,295,000 4.15 01/07/97 4,295,000
Cobb County Power Operations Inc. VRDN (Trust Company
Bank LOC)(AA-)
2,330,000 4.15 01/07/97 2,330,000
Columbus Hospital Authority RB for St. Francis
Hospital(VMIG1)
7,750,000 4.15/(b)/ 01/01/97 7,750,000
DeKalb County IDA VRDN for Siemens Energy and
Automation, Inc.(P-1)
3,750,000 4.05 01/07/97 3,750,000
Dekalb Private Hospital Authority VRDN for Egleston
Children's Hospital Series 1994 A (Suntrust Bank
LOC)(VMIG1)
1,800,000 4.05 01/07/97 1,800,000
Floyd County PCRB for Georgia Power Co. Series
1996(A-1/VMIG1)
5,080,000 5.00 01/07/97 5,080,000
Fulco Hospital Authority Revenue Anticipation
Certificates Series 1992 (Suntrust Bank LOC)(A-1+)
4,815,000 4.15% 01/07/97 4,815,000
Georgia Municipal Gas Authority RB(A-1/VMIG1)
22,200,000 4.00/(b)/ 01/07/97 22,200,000
Heard County PCRB for Georgia Power Co. Series
1996(A-1/VMIG1)
1,800,000 5.00 01/01/97 1,800,000
Henry County IDA PCRB for Georgia Pacific Corp.
(Suntrust Bank LOC)(Aa3)
4,000,000 4.15 01/07/97 4,000,000
Municipal Electric Authority of Georgia Subordinate
General Resolution Series 1985 B and C (Credit
Suisse/Morgan Guaranty/Bayerische Landesbank
Girozentrale LOC)(A-1+/P-1)
12,650,000 3.55 03/06/97 12,650,000
8,145,000 3.55 03/11/97 8,145,000
Municipal Electric Authority of Georgia Subordinate
General Resolution Series 1994 C (Credit
Suisse/Morgan Guaranty/
Bayerische Landesbank Girozentrale LOC)(A-1+/VMIG1)
7,000,000 3.50 03/13/97 7,000,000
Savannah Economic Development Authority PCRB VRDN for
Savannah Electric & Power Co. (A-1/VMIG1)
4,085,000 4.15 01/07/97 4,085,000
- -----------------------------------------------------------
$192,450,000
- -----------------------------------------------------------
Hawaii--0.1%
Hawaii Housing Finance and Development Authority VRDN
(FHLB LOC)(A-1+)
$ 2,200,000 2.80% 01/07/97 $ 2,200,000
- -----------------------------------------------------------
Idaho--0.6%
Idaho Health Facilities for Holy Cross Health
Systems(A-1/VMIG1)
$10,000,000 4.10% 01/07/97 $10,000,000
- -----------------------------------------------------------
Illinois--3.2%
Belleville IDA for Weyerhaeuser Company Series
1993(A-1)
$ 1,800,000 4.21% 01/07/97 $ 1,800,000
Illinois Health Facilities Authority VRDN for Central
Dupage Hospital (Rabobank Nederland LOC)(VMIG1)
5,000,000 5.25 01/01/97 5,000,000
Illinois Health Facilities Authority VRDN for
Resurrection Healthcare(VMIG1)
15,000,000 5.00 01/01/97 15,000,000
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Statement of Investments
- ------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
============================================================
Illinois (continued)
Illinois Health Facilities Authority VRDN Series 1985 D Revolving
Fund Pooled Finance Program (First National Bank of Chicago
LOC)(A-1/VMIG1)
$16,600,000 4.15% 01/07/97 $ 16,600,000
Illinois Health Facility Authority VRDN for Elmhurst Memorial
Hospital(VMIG1)
100,000 5.30 01/01/97 100,000
Sauget PCRB VRDN Series 1992(P-1)
3,300,000 4.20 01/07/97 3,300,000
Sauget PCRB VRDN Series 1993(P-1)
9,335,000 4.20 01/07/97 9,335,000
- -----------------------------------------------------------
$ 51,135,000
- -----------------------------------------------------------
Indiana--5.1%
Fort Wayne Hospital Authority VRDN Series 1985 C and D (Bank of
America LOC)(VMIG1)
$ 1,180,000 4.15% 01/07/97 $ 1,180,000
Fort Wayne Parkview Memorial Hospital VRDN Series 1985
B, C & D (Fuji Bank LOC)(VMIG1)/(c)/
16,855,000 4.15 01/07/97 16,855,000
Gary CP Notes for U.S. Steel Corp. (Bank of New York LOC)
(A-1+/P-1)
20,000,000 3.55 03/11/97 20,000,000
Indiana Hospital Equipment Financing Authority VRDN
Series 1985 A (MBIA)(A-1/VMIG1)
29,490,000 4.20 01/07/97 29,490,000
Jasper County PCRB for Nipsco Series 1994 A(A-1+/VMIG1)
5,200,000 5.10 01/01/97 5,200,000
Schererville Economic Development VRDN Series 1983 for Avery
International Corp. Project (Bankers Trust LOC)(Aa2)
4,000,000 4.13 01/07/97 4,000,000
Warrick County PCRB for Aluminum Company of America Series
1992(A-1)
5,000,000 4.15 01/07/97 5,000,000
- -----------------------------------------------------------
$ 81,725,000
- -----------------------------------------------------------
Iowa--1.4%
Muscatine County VRDN for Monsanto Corp.(P-1)
$ 1,000,000 4.20% 01/07/97 $ 1,000,000
Salix PCRB VRDN for Midwest Power Systems Inc.(A-1/VMIG1)/(c)/
21,795,000 4.15 01/07/97 21,795,000
- -----------------------------------------------------------
$ 22,795,000
- -----------------------------------------------------------
Kentucky--1.7%
Calvert VRDN for Air Products and Chemicals Inc. Project(A-1)
$ 1,000,000 4.20% 01/07/97 $ 1,000,000
Mason County Variable/Fixed Rate PCRB Pooled for East Kentucky
Power (CFC)(A-1+/Aa3)
13,450,000 4.15 01/07/97 13,450,000
Trimble County PCRB for Louisville Gas & Electric Series 1996 A(A-
1+/VMIG1)
12,500,000 3.50 03/14/97 12,500,000
- -----------------------------------------------------------
$ 26,950,000
- -----------------------------------------------------------
Louisiana--2.5%
Ascension Parish PCRB for BASF Wyandotte Corp. Series
1985 (Bank of Tokyo LOC)(P-1)
$ 2,600,000 5.10% 01/01/97 $ 2,600,000
Ascension Parish PCRB for Vulcan Materials Co. Series 1996(A-
1+/VMIG1)
8,200,000 4.20 01/07/97 8,200,000
Louisiana Public Facilities Authority School Health Care System
UPDATE Series 1993(A-1+/VMIG1)
7,700,000 3.60 01/08/97 7,700,000
Parish of Desoto PCRB Series 1991 A (Swiss Bank LOC)(A-1+/VMIG1)
4,600,000 4.05 01/07/97 4,600,000
Parish of Iberville VRDN for Air Products and Chemicals, Inc.
Project(A-1)
6,200,000 4.20 01/07/97 6,200,000
Plaquemines Port RB for Teco Energy, Inc. Series 1985 B(A-1+/P-1)
2,000,000 3.60 02/13/97 2,000,000
South Louisiana Port Commission RB for Occidental Petroleum Corp.
Series 1996 (Wachovia Bank LOC)(P-1)
4,400,000 4.15 01/07/97 4,400,000
West Baton Rouge Parish VRDN for Dow Chemical Co. Series 1991
(P-1)
4,000,000 3.55 02/10/97 4,000,000
- -----------------------------------------------------------
$ 39,700,000
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Statement of Investments
- --------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
====================================================================
Maryland--0.9%
Baltimore County Consolidated Public Improvement BANS Series
1995(A-1+/P-1)
$10,000,000 3.55% 02/06/97 $ 10,000,000
Frederick GO VRDN (Fuji Bank LOC)(A-1/VMIG1)
4,800,000 4.25 01/07/97 4,800,000
- --------------------------------------------------------------------
$ 14,800,000
- --------------------------------------------------------------------
Massachusetts--1.6%
Massachusetts Bay Transportation Authority Series 1996 A Notes
(SP-1/MIG2)
$11,000,000 3.75% 02/28/97 $ 11,008,115
Massachusetts Health & Education Authority RB for Harvard
University Series I(A-1+/VMIG1)/(c)/
13,866,000 3.90 01/07/97 13,866,000
- --------------------------------------------------------------------
$ 24,874,115
- --------------------------------------------------------------------
Michigan--0.7%
Michigan Job Development Authority for Mazda Motor Manufacturing
VRDN (Sumitomo Bank LOC)(VMIG1)
$11,100,000 4.25% 01/07/97 $ 11,100,000
- --------------------------------------------------------------------
Minnesota--1.5%
Becker PCRB for Northern States Power Co. Series 1992 A(A-1+)
$ 8,000,000 3.65% 01/16/97 $ 8,000,000
6,000,000 3.55 03/12/97 6,000,000
Becker PCRB for Northern States Power Co. Series 1993 A(A-1/VMIG1)
4,000,000 3.55 03/12/97 4,000,000
White Bear Lake IDA for Weyerhauser Co. Series 1993(A-1)
6,800,000 4.21 01/07/97 6,800,000
- --------------------------------------------------------------------
$ 24,800,000
- --------------------------------------------------------------------
Mississippi--0.6%
Canton IDR for Levi Strauss Co. (Bank of America LOC)(P-1)
$10,000,000 4.15%/(b)/ 01/07/97 $ 10,000,000
- --------------------------------------------------------------------
Missouri--1.8%
Belton RB (Texas Commerce Bank LOC)(P-1)
$ 4,025,000 4.25% 01/07/97 $ 4,025,000
Kansas City Cloversett IDA MF Hsg. RB Series 1988 VRDN (Boatmen's
Bank of Kansas City LOC)(A-1+)
8,720,000 4.30 01/07/97 8,720,000
Missouri Health & Education Facility Authority VRDN (MBIA)(AAA)
10,500,000 4.10 01/07/97 10,500,000
State Environmental Improvement and Energy Resources
Authority RB for Monsanto Corporation (P-1)
$ 5,520,000 4.20% 01/07/97 $ 5,520,000
- --------------------------------------------------------------------
$ 28,765,000
- --------------------------------------------------------------------
Montana--0.3%
Forsyth PCRB for Pacificorp. Series 1988 (Industrial Bank of Japan
LOC)(A-1/P-1)
$ 3,400,000 4.70% 01/01/97 $ 3,400,000
Montana State Board of Investments VRDN Payroll Tax Bonds(VMIG1)
1,000,000 4.00 01/07/97 1,000,000
- --------------------------------------------------------------------
$ 4,400,000
- --------------------------------------------------------------------
Nevada--0.2%
Clark County VRDN for Nevada Airport System (MBIA)
(A-1+/VMIG1)
$ 3,200,000 4.00% 01/07/97 $ 3,200,000
- --------------------------------------------------------------------
New Jersey--3.3%
New Jersey TRANS Series 1997 A(A-1+/P-1)
$48,000,000 3.50% 03/12/97 $ 48,000,000
New Jersey Turnpike Authority RB Series 1991 D (FGIC)(P-1)
5,600,000 3.75 01/07/97 5,600,000
- --------------------------------------------------------------------
$ 53,600,000
- --------------------------------------------------------------------
New Mexico--0.2%
Farmington PCRB for Arizona Public Service Series 1994 A (Union
Bank of Switzerland LOC)(A-1+/P-1)
$ 2,600,000 5.00% 01/01/97 $ 2,600,000
- --------------------------------------------------------------------
New York--12.1%
New York City GO VRDN Series 1993 B (FGIC)(A-1+/VMIG1)
$ 5,500,000 4.50% 01/01/97 $ 5,500,000
New York City GO (MBIA)(VMIG1)
19,800,000 4.15 01/07/97 19,800,000
New York City GO RANS Series 1997 A(SP-1+/VMIG1)
60,000,000 4.50 04/15/97 60,137,770
New York City GO Series 1992 D (FGIC)
20,000,000 3.95 01/07/97 20,000,000
New York City GO Series 1994 (Union Bank of Switzerland
LOC)(A-1+/VMIG1)
2,200,000 4.50 01/01/97 2,200,000
New York City GO VRDN (Dai-Ichi Kangyo Bank LOC)(A-1/VMIG1)
2,600,000 4.50 01/01/97 2,600,000
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- --------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
====================================================================
New York (continued)
New York City GO VRDN (Norinchukin Bank LOC) (A-1+/VMIG1)
$ 7,000,000 4.50% 01/01/97 $ 7,000,000
New York City Municipal Water Finance Authority CP Notes Series 3
(Toronto Dominion Bank/Bank of Nova Scotia LOC)(A-1+/P-1)
8,900,000 3.50 03/12/97 8,900,000
New York City Municipal Water Finance Authority Series 3 (Toronto
Dominion Bank/Bank of Nova Scotia
LOC)(A-1+/P-1)
3,000,000 3.50 03/11/97 3,000,000
New York State Energy Research & Development Authority PCRB for
New York State Electric & Gas Series 1994 D (Union Bank of
Switzerland LOC)(A-1+/VMIG1)
8,700,000 4.40 01/01/97 8,700,000
New York State Housing Finance Agency for Normandie Court
Housing RB Series 1987 A (Fleet Bank LOC)(VMIG1)
900,000 4.00 01/07/97 900,000
New York State Local Government Assistance Series 1995 B VRDN
(Bank of Nova Scotia LOC)(A-1+/VMIG1)/(c)/
19,600,000 4.00 01/07/97 19,600,000
New York State Local Government Series G VRDN (National
Westminster Bank LOC)(A-1+/VMIG1)
1,150,000 3.85 01/07/97 1,150,000
New York State Local Government VRDN Series 1995 F (Toronto
Dominion Bank LOC)(A-1+/VMIG1)/(c)/
15,000,000 4.00 01/07/97 15,000,000
New York State Triborough Bridge & Tunnel Authority VRDN
(FGIC)(A-1+/VMIG1)
19,300,000 4.00 01/07/97 19,300,000
- --------------------------------------------------------------------
$193,787,770
- --------------------------------------------------------------------
North Carolina--6.0%
North Carolina Eastern Municipal Power Agency RB Series 1988 B
(Morgan Guaranty/Union Bank of Switzerland LOC)(A-1+)
$ 2,700,000 3.70% 01/16/97 $ 2,700,000
10,000,000 3.70 01/27/97 10,000,000
Person County PCRB for Carolina Power & Light Series 1992 A
(A-1/P-1)
7,000,000 4.25 01/07/97 7,000,000
Rockingham County IDA PCRB for Philip Morris Co.(A-1/P-1)
3,960,000 4.15 01/07/97 3,960,000
North Carolina (continued)
Wake County PCRB for Carolina Power & Light Series 1990 A & B (Fuji
Bank LOC)(A-2/P-1)
$ 7,000,000 3.75% 02/06/97 $ 7,000,000
11,000,000 3.55 02/07/97 11,000,000
12,100,000 3.55 02/10/97 12,100,000
12,900,000 3.75 02/14/97 12,900,000
29,000,000 3.75 02/18/97 29,000,000
- -------------------------------------------------------------
$95,660,000
- -------------------------------------------------------------
Ohio--2.4%
Cleveland-Cuyahoga County Port Authority VRDN for Rock & Roll
Hall of Fame (Credit Local de France LOC)(A-1+)
$ 9,000,000 4.05% 01/07/97 $ 9,000,000
Columbus Electric System Series 1994 RB (Union Bank of Switzerland
LOC)(VMIG1)
10,620,000 3.35 01/31/97 10,620,000
Franklin County Hospital RB for Holy Cross Health System Series
1995(A-1/VMIG1)/(c)/
18,900,000 4.10 01/07/97 18,900,000
- -------------------------------------------------------------
$38,520,000
- -------------------------------------------------------------
Oregon--1.7%
Lane County PCRB VRDN for Weyerhaeuser Company Series 1994
(A-1)
$ 6,500,000 4.21% 01/07/97 $ 6,500,000
Portland VRDN for Columbia Grain Inc. Project (Fuji Bank/Bank of
Tokyo LOC)(VMIG1)
17,650,000 4.25 01/07/97 17,650,000
State of Oregon Veteran's Welfare Series 73 H VRDN (Morgan
Guaranty LOC)(A-1+/VMIG1)
3,400,000 4.00 01/07/97 3,400,000
- -------------------------------------------------------------
$27,550,000
- -------------------------------------------------------------
Pennsylvania--2.7%
Allegheny County PCRB for U.S. Steel Series 1985 (Commerzbank
LOC)(A-1+/P-1)
$28,400,000 3.50% 03/13/97 $28,400,000
Allegheny County PCRB for U.S. Steel Series 1986 (Commerzbank
LOC)(A-1+/P-1)
700,000 3.50 02/06/97 700,000
Philadelphia TRANS Series 1996-97 A(SP-1/VMIG1)
14,000,000 4.50 06/30/97 14,036,476
- --------------------------------------------------------------
$43,136,476
- --------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- -------------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===================================================================
Puerto Rico--2.0%
Commonwealth of Puerto Rico RANS Series 1997 A(SP-1+/VMIG1)
$32,000,000 4.00% 07/30/97 $ 32,103,040
- -------------------------------------------------------------------
South Carolina--0.7%
York County Floating/Fixed Rate PCRB Pooled Series 1984-North
Carolina Electric Membership Corp. VRDN (CFC)(A-1+/VMIG1)
$11,275,000 4.15% 01/07/97 $ 11,275,000
- -------------------------------------------------------------------
Texas--11.5%
Brazos Harbor IDA VRDN for Monsanto Co.(P-1)
$ 3,500,000 4.20% 01/07/97 $ 3,500,000
Brazos River Authority PCRB Series 1994 for Monsanto Co.(P-1)
5,100,000 4.20 01/07/97 5,100,000
Brazos River Authority VRDN for Monsanto Co.(P-1)
5,300,000 4.20 01/07/97 5,300,000
Brazos River Harbor Authority VRDN for Dow Chemical Corp. Series
1991(A-1/P-1)
13,500,000 3.60 01/24/97 13,500,000
Harris County Health Facilities Development Corp. UPDATE Series
1993(A-1+/VMIG1)
5,200,000 3.55 01/07/97 5,200,000
5,200,000 3.50 01/29/97 5,200,000
Harris County Hospital RB for Childrens Hospital Series 1989 B-2
(VMIG1)
7,900,000 4.10 01/07/97 7,900,000
Harris County Toll Road VRDN Series 1994 C(A-1+/VMIG1)
23,700,000 4.05 01/07/97 23,700,000
Nueces River IDA PCRB UPDATE for San Miguel Electric Series 1984
(CFC)(A-1+/VMIG1)
25,000,000 3.50 02/26/97 25,000,000
25,700,000 3.50 03/10/97 25,700,000
San Antonio Electric & Gas Systems CP Notes Series A(A-1+/P-1)
18,800,000 3.50 03/12/97 18,800,000
State of Texas TRANS Series 1996(SP-1+/VMIG1)/(c)/
25,000,000 4.75/(b)/ 08/29/97 25,193,274
20,000,000 4.75 08/29/97 20,154,620
- -------------------------------------------------------------------
$ 184,247,894
- -------------------------------------------------------------------
Utah--0.2%
Salt Lake County PCRB for Service Station/British Petroleum Series
1994 B(P-1)
$ 2,815,000 5.00% 01/01/97 $ 2,815,000
- -------------------------------------------------------------------
Virginia--6.7%
Chesapeake PCRB for Virginia Electric & Power Series
1985(A-1/P-1)
$22,000,000 3.60% 02/06/97 $22,000,000
Chesterfield County PCRB for Philip Morris Series 1987 A(A-1/P-1)
5,000,000 3.55 02/06/97 5,000,000
Chesterfield County PCRB for Philip Morris Series 1992(A-1/P-1)
14,700,000 4.15 01/07/97 14,700,000
Chesterfield County PCRB for Virginia Electric & Power Series 1985
(A-1/P-1)
8,000,000 3.60 02/07/97 8,000,000
5,200,000 3.60 02/12/97 5,200,000
Chesterfield County PCRB for Virginia Electric & Power
Series 1987 C(A-1/P-1)
1,000,000 3.60 02/12/97 1,000,000
Louisa PCRB For Virginia Electric & Power Series 1984(A-1/P-1)
4,000,000 3.60 02/07/97 4,000,000
4,000,000 3.60 02/13/97 4,000,000
3,000,000 3.60 02/14/97 3,000,000
Louisa PCRB for Virginia Electric & Power Series 1987(A-1/P-1)
1,300,000 3.55 02/06/97 1,300,000
Roanoke VRDN for Carilion Health Systems Hospital Series A(A-1)
20,400,000 4.10 01/07/97 20,400,000
Spotsylvania IDA for Carlisle Corporation (Suntrust Bank LOC)(AA3)
6,500,000 4.15/(b)/ 01/07/97 6,500,000
York County PCRB for Virginia Electric & Power Series 1985(A-1/P-1)
9,400,000 3.70 01/14/97 9,400,000
2,700,000 3.65 03/10/97 2,700,000
- -------------------------------------------------------------------
$ 107,200,000
- -------------------------------------------------------------------
Washington--4.6%
King County Sewer Revenue BANS Series A(A-1/P-1)
$10,000,000 3.55% 03/10/97 $10,000,000
Port of Grays Harbor IDA VRDN for Weyerhaeuser Project Series
1992(A-1+)
1,000,000 4.21 01/07/97 1,000,000
Port of Grays Harbor IDA VRDN for Weyerhaeuser Project Series
1993(A-1+)
5,850,000 4.21 01/07/97 5,850,000
Port of Kalama Floating/Fixed Rate for Conagra, Inc. Series 1983
(Morgan Guaranty Trust LOC)(AAA)
2,230,000 4.00 01/07/97 2,230,000
Union Gap City IDA VRDN for Weyerhaeuser Project Series 1992(A-1)
1,600,000 4.21 01/07/97 1,600,000
- ------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Statement of Investments
- -------------------------------------------------------------------------------
ILA Tax-Exempt Diversified Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
Washington (continued)
Washington Health Care Facilities Authority VRDN Series 1996
(Morgan Guaranty Trust LOC)(VMIG1)
$4,300,000 5.25% 01/01/97 $ 4,300,000
Washington Public Power Supply Project Electric RB Series 1993-1A
(Bank of America LOC)(A-1+/VMIG1)
10,860,000 4.10 01/07/97 10,860,000
Washington Public Power Supply Project Electric RB Series 1993-2A
(Bank of America LOC)(A-1/VMIG1)
11,100,000 4.10 01/07/97 11,100,000
Washington Public Power Supply System RB Series 1993-3A
(Bank of America LOC)(A-1+/VMIG1)
15,000,000 4.10/(b)/ 01/07/97 15,000,000
3,115,000 3.95 01/07/97 3,115,000
8,200,000 4.10 01/07/97 8,200,000
- -----------------------------------------------------------
$73,255,000
- -----------------------------------------------------------
Wyoming--1.4%
Pacificorp PCRB VRDN for Sweetwater County Series 1990 A
(Credit Suisse LOC)(VMIG1)
$16,200,000 4.15% 01/07/97 $16,200,000
Sweetwater County PCRB for Idaho Power Co. Series 1996 C
(A-1+/VMIG1)
6,100,000 5.10 01/01/97 6,100,000
- -----------------------------------------------------------
$22,300,000
- -----------------------------------------------------------
Total Investments $1,749,033,261/(a)/
==========================================================
/(a)/The amount stated also represents aggregate cost for federal
income tax purposes.
/(b)/When-issued securities.
/(c)/Portions of these securities are being segregated for when-issued
securities.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those type of securities.
Security ratings are unaudited.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
- -----------------------------------------------------
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Tax-Exempt California Portfolio
December 31, 1996
- ------------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
============================================================
California--96.4%
California Health Facilities Authority VRDN for Kaiser Permanente
Series 1993 A, B & C RB(A-1+/VMIG1)
$ 2,000,000 4.00% 01/07/97 $ 2,000,000
California Health Facility Finance Authority RB Series
1990 A VRDN (Rabobank Nederland LOC)(A-1+/VMIG1)
8,100,000 4.00 01/07/97 8,100,000
California PCRB for Pacific Gas & Electric (Banque Nationale de Paris
LOC)(A-1+)
4,100,000 4.80 01/01/97 4,100,000
California Pollution Control Financing Authority for Southern
California Edison Adjustable TRB Series 1986 D(A-1/VMIG1)
1,800,000 4.70 01/01/97 1,800,000
California RANS VRDN Series 1996-97 B(SP-1+/VMIG1)
10,000,000 3.47 01/31/97 10,000,000
California RANS VRDN Series 1996-97 C1(SP-1+/VMIG1)
25,500,000 4.01 01/07/97 25,500,000
California School Cash Reserves Program Authority Series 1996 A
(MBIA)(SP-1/VMIG1)
9,000,000 4.75 07/02/97 9,040,248
California School Cash Reserves Program Authority Series 1996 B
(MBIA)(VMIG1)
10,000,000 4.50 12/19/97 10,083,758
California Statewide Communities Development Authority
for Kaiser Foundation Hospital 1995 COPS(A-1+/VMIG1)
16,500,000 4.00 01/07/97 16,500,000
California Statewide Communities Development Authority RB Series
1995 A (A-1+)
13,900,000 3.90 01/07/97 13,900,000
California Statewide Communities Development Authority Series
1995A-1(A-1+)
14,200,000 3.90 01/07/97 14,200,000
California Statewide Communities Development Authority, Refunding
RB Series 1995A-2(A-1+)
5,500,000 3.90 01/07/97 5,500,000
Chula Vista RB Series 1996 A for San Diego Gas & Electric(A-
1/VMIG1)
11,200,000 5.10 01/01/97 11,200,000
City of Anaheim Electric RANS Tax Exempt CP
Notes(A-1+/P-1)
8,950,000 3.45 01/29/97 8,950,000
City of Fresno MF Hsg. Revenue Refunding Bonds Series 1996 A
(First Interstate Bank of California LOC)(VMIG1)
3,315,000 4.15 01/07/97 3,315,000
City of Irwindale IDRB Series 1984 for Toys-R-Us VRDN (Bankers
Trust LOC)(AA2)
2,000,000 4.13% 01/07/97 2,000,000
City of Los Angeles VRDN MF Hsg. Museum Terrace-84H (Bank of
America LOC)(VMIG1)
3,500,000 4.00 01/07/97 3,500,000
City of Newport Beach Floating/Fixed Rate Health Facilities Memorial
Hospital Facility VRDN(A-1/VMIG1)
10,750,000 5.15 01/01/97 10,750,000
City of Newport Beach VRDN RB Series 1996 A(A-1+)
3,800,000 5.15 01/01/97 3,800,000
City of Newport Beach VRDN RB Series 1996 B(A-1+)
23,000,000 5.15 01/01/97 23,000,000
City of San Diego VRDN MF Hsg. RB Series 1985 (Bank of
America LOC)(VMIG1)
15,700,000 4.05 01/07/97 15,700,000
City of San Diego MF Hsg. for Lacima Apartments VRDN (Citibank
LOC)(VMIG1)
13,125,000 4.05 01/07/97 13,125,000
City of San Diego MF Hsg. for Nobel Court Apartments VRDN
(Citibank LOC)(VMIG1)
11,555,000 4.05 01/07/97 11,555,000
Contra Costa MF Hsg. for Lakeshore Apartments VRDN(A-1+)
4,600,000 4.05 01/07/97 4,600,000
East Bay Municipal Utility District California Water & Waste
(A-1+/P-1)
4,300,000 3.45 02/27/97 4,300,000
Huntington Beach City Monthly MF Hsg. VRDN Series 1985 A (Bank
of America LOC)(VMIG1)
7,500,000 4.00 01/31/97 7,500,000
Kings County Housing Authority MF Hsg. Refunding RB Series 1996 A
(First Interstate Bank of California LOC)(VMIG1)
2,500,000 4.15 01/07/97 2,500,000
Los Angeles County Metro Transportation Authority VRDN
(MBIA)(SP-1+/VMIG1)
4,595,000 4.00 01/07/97 4,595,000
Los Angeles County Metro Transportation Authority RANS Series 1996
A(VMIG1)
10,000,000 4.00 02/27/97 10,013,586
Los Angeles County Metro Transportation CP Notes (National
Westminster/Union Bank of California/ABN Amro/Canadian
Imperial Bank of Commerce/Banque Nationale de Paris LOC)
(A-1+/P-1)
10,000,000 3.65 01/10/97 10,000,000
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA Tax-Exempt California Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
California (continued)
Los Angeles County TRANS (Credit Suisse/Morgan Guaranty Trust
Co./Westdeutsche Landesbank Girozentrale/Bank of
America/Union Bank of Switzerland LOC)(SP-1+/VMIG1)
$16,400,000 4.50% 06/30/97 $16,456,497
Los Angeles County, VRDN MF Hsg. for Valencia Village Series 1984 C
(Industrial Bank of Japan Ltd. LOC)(A-1+)
16,400,000 2.80 01/07/97 16,400,000
Los Angeles Housing Authority MF Hsg. VRDN for Canyon Country
Villas Series 1985 H (Industrial Bank of Japan Ltd. LOC)(VMIG1)
19,000,000 2.80 01/07/97 19,000,000
Northern California Power Agency Geothermal Project Number 3
Adjustable Rate RB Series 1996 A (AMBAC)(A-1+/VMIG1)
8,500,000 3.85 01/07/97 8,500,000
Orange County Apartment Development RB Issue 1984 C Seaside
Meadow (Fuji Bank Ltd.)(A-1/VMIG1)
24,000,000 3.95 01/07/97 24,000,000
Pomona Public Financing Authority VRDN (Sumitomo Bank LOC)
(SP-1+)
2,075,000 4.25 01/07/97 2,075,000
Sacramento County 1990 COP Admin-Center Courthouse Project
VRDN (Union Bank of Switzerland LOC)(A-1+/VMIG1)
500,000 3.75 01/07/97 500,000
San Bernardino County VRDN-Woodview Apartments Series
1985 (Bank of America LOC)(VMIG1)
6,500,000 4.05 01/07/97 6,500,000
San Diego County MF Hsg. for Country Hills VRDN (FNMA)
(A-1+)
10,300,000 4.05 01/07/97 10,300,000
San Diego IDB Series 1995 B for San Diego Gas & Electric(A-1/VMIG1)
1,000,000 3.50 01/23/97 1,000,000
San Leandro MF Hsg. VRDN Series 1985 B- Haas Avenue
Apartments (Bank of America LOC)(VMIG1)
3,900,000 4.00 01/07/97 3,900,000
Southern California Metro Water District Series A CP Notes(A-1+/P-1)
5,400,000 3.50 02/20/97 5,400,000
Southern California Metropolitan Water District Revenue
Refunding Bonds Series 1996 A (AMBAC)(A-1+/VMIG1)
4,500,000 4.00 01/07/97 4,500,000
Southern California Public Power Authority 1991 Subordinated
Revenue Refunding Bonds (AMBAC)(A-1+/VMIG1)
9,100,000 3.90 01/07/97 9,100,000
Southern California Public Power Authority Power
Project RB Series 1996 B (AMBAC)(A-1+/VMIG1)
7,500,000 3.90 01/07/97 7,500,000
Southern California Public Power Authority Power
Project RB Series 1996 C (AMBAC)(A-1+/VMIG1)
10,000,000 3.90 01/07/97 10,000,000
Triunfo Sanitation District VRDN Refunding RB Series 1994 (Banque
Nationale de Paris LOC)(A-1+)
3,700,000 4.20 01/07/97 3,700,000
Tulare-Porterville Schools Finance Authority COPS (Union Bank of
California LOC)(VMIG1)
4,935,000 4.30 01/07/97 4,935,000
- -----------------------------------------------------------
$424,894,089
- -----------------------------------------------------------
Puerto Rico--3.2%
Commonwealth of Puerto Rico RANS Series 1997 A(SP-1+/VMIG1)
$14,000,000 4.00% 07/30/97 $14,045,081
- -----------------------------------------------------------
Total Investments $438,939,170/(a)/
===========================================================
/(a)/The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those types of securities.
Security ratings are unaudited.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Tax-Exempt New York Portfolio
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
New York--94.2%
City of Yonkers IDA RB for Consumers (Industrial Bank
of Japan LOC)(VMIG1)
$2,700,000 3.90% 01/07/97 $2,700,000
City of Yonkers IDA Series 1991 Civic Facility RB
(Industrial Bank of Japan LOC)(VMIG1)
2,900,000 3.90 01/07/97 2,900,000
Great Neck North Water Authority Water System RB Series
1993 A VRDN (FGIC)(A-1+/VMIG1)
3,800,000 4.00 01/07/97 3,800,000
IDA Civic Facility RB Cold Spring Harbor Labs Series
1989 VRDN (Morgan Guaranty Trust LOC)(A-1+)
2,200,000 4.90 01/01/97 2,200,000
Metropolitan Museum of Art Variable Rate Interest
Bonds(AA/AA)
1,500,000 4.00 01/07/97 1,500,000
Metropolitan Transportation Authority Commuter Facility
VRDN Series 1991 (National Westminster/Morgan
Guaranty/Industrial Bank of Japan/Sumitomo Bank/J.P.
Morgan/Bank of Tokyo LOC)(A-1+/VMIG1)
3,400,000 4.05 01/07/97 3,400,000
Nassau County TANS Series 1996 B(SP-1+)
3,500,000 4.25 08/29/97 3,515,754
New York City GO Bonds (Sumitomo Bank LOC)(A-1/VMIG1)
800,000 5.00 01/01/97 800,000
New York City GO Fiscal 1995 Series B-6
(MBIA)(A-1+/VMIG1)
3,900,000 5.10 01/01/97 3,900,000
1,250,000 5.10 01/01/97 1,250,000
New York City GO RANS Series 1997 A(SP-1+/VMIG1)
4,000,000 4.50 04/15/97 4,009,256
New York City IDA - Civic Facility RB 1989 National
Audubon Society, Inc. (Swiss Bank Corp. LOC)(A-1+)
4,000,000 4.80 01/01/97 4,000,000
New York City IDA for Columbia Grammar Prep School VRDN
(Chemical Bank LOC)(A-1+)
2,500,000 4.15 01/07/97 2,500,000
New York City Municipal Water Finance Authority CP
Series 1 (Canadian Imperial Bank of Commerce
LOC)(P-1)
6,900,000 3.55 01/16/97 6,900,000
New York City Municipal Water Finance Authority Series
3 (Toronto Dominion Bank/Bank of Nova Scotia
LOC)(P-1)
2,500,000 3.50 03/11/97 2,500,000
New York City Trust for Cultural Resources American
Museum of Natural History Adjustable Rate TRB VRDN
(MBIA)(VMIG1)
$3,200,000 3.80% 01/07/97 $3,200,000
New York State Dormitory Authority RB Series 1990 B for
Cornell University VRDN(VMIG1)
4,700,000 4.80 01/01/97 4,700,000
New York State Energy Research & Development Authority
For Long Island Lighting Co. VRDN (Toronto Dominion
Bank LOC) (A-1+/P-1)
3,000,000 4.05 01/07/97 3,000,000
New York State Energy Research & Development Authority
PCRB for New York State Electric & Gas Series 1994 B
(Union Bank of Switzerland LOC)(A-1+/VMIG1)
7,800,000 5.00 01/01/97 7,800,000
New York State Energy Research & Development Authority
PCRB for New York State Electric & Gas Series 1994 D
(Union Bank of Switzerland LOC)(A-1+/VMIG1)
3,600,000 4.40 01/01/97 3,600,000
New York State Energy Research & Development Authority
PCRB for Rochester Gas & Electric Series 1984
(Credit Suisse LOC)(P-1)
2,100,000 3.40 01/31/97 2,100,000
New York State Energy Research & Development Authority
PCRB Series A & B - Central Hudson Gas & Electric
VRDN (Deutsche Bank LOC)(AA2)
1,300,000 3.90 01/07/97 1,300,000
New York State Energy Research & Development Authority
for Orange and Rockland Utilities Series 1995 A VRDN
(AMBAC)(A-1+/VMIG1)
5,000,000 3.80 01/07/97 5,000,000
New York State GO BANS Series R(A-1/P-1)
4,500,000 3.55 02/25/97 4,500,000
New York State GO BANS Series T(A-1/P-1)
3,500,000 3.55 02/24/97 3,500,000
New York State Housing Finance Agency for Normandie
Court Housing RB Series 1987 A (Fleet Bank
LOC)(VMIG1)
5,100,000 4.00 01/07/97 5,100,000
New York State Local Government Assistance Series 1995
B VRDN (Bank of Nova Scotia LOC)(A-1+/VMIG1)
1,700,000 4.00 01/07/97 1,700,000
New York State Local Government Series C VRDN
(Landesbank Hessen-Thueringen Girozentrale
LOC)(A-1+/VMIG1)
7,000,000 4.00 01/07/97 7,000,000
- ----------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Statement of Investments
- -----------------------------------------------------------
ILA Tax-Exempt New York Portfolio (continued)
December 31, 1996
- -----------------------------------------------------------
Principal Interest Maturity Amortized
Amount Rate Date Cost
===========================================================
New York (continued)
New York State Local Government Series G VRDN (National
Westminster Bank LOC)(A-1+/VMIG1)
$700,000 3.85% 01/07/97 $ 700,000
New York State Medical Care Facility Financing Agency
for Children's Hospital of Buffalo RB Series 1991 A
(Barclays Bank LOC)(VMIG1)
1,900,000 4.20 01/07/97 1,900,000
New York State Triborough Bridge & Tunnel Authority
VRDN (FGIC)(A-1+/VMIG1)
4,700,000 4.00 01/07/97 4,700,000
Oswego County IDA PCRB Series 1992 for Philip
Morris(A-1/P-1)
1,000,000 4.15 01/07/97 1,000,000
Syracuse University IDA VRDN (Morgan Guaranty
LOC)(AA+/A-1 /VMIG1)
1,200,000 4.80 01/01/97 1,200,000
- -----------------------------------------------------------
$107,875,010
- -----------------------------------------------------------
Puerto Rico--5.7%
Commonwealth of Puerto Rico RANS Series 1997
A(SP-1+/VMIG1)
$3,500,000 4.00% 07/30/97 $ 3,511,271
Puerto Rico Government Development Bank VRDN (Credit
Suisse LOC)(A-1/VMIG1)
1,000,000 3.75 01/07/97 1,000,000
Puerto Rico Medical and Environmental PCRB Series 1983
A for Key Pharmaceuticals Inc. (Morgan Guaranty LOC)
2,000,000 3.75 12/01/97 2,000,000
- -----------------------------------------------------------
$ 6,511,271
- -----------------------------------------------------------
Total Investments $114,386,281/(a)/
===========================================================
/(a)/ The amount stated also represents aggregate cost for federal income tax
purposes.
Interest rates represent either the stated coupon rate, annualized yield on date
of purchase for discounted notes, or, for floating rate securities, the current
reset rate, which is based upon current interest rate indices.
Maturity dates represent either the stated date on the security, the next
interest reset date for floating rate securities, or the prerefunded date for
those types of securities.
Security ratings are unaudited.
The percentages shown for each investment category reflect the value of
investments in that category as a percentage of total net assets.
Investment Abbreviations:
ACES --Adjustable Convertible Extendible
Securities
AMBAC --Insured by American Municipal Bond
Assurance Corp.
BANS --Bond Anticipation Notes
CFC --Unconditionally Guaranteed by
Cooperative Finance Corp.
COPS --Certificates of Particication
CP --Commercial Paper
FGIC --Insured by Financial Guaranty
Insurance Co.
FNMA --Federal National Mortgage
Association
GO --General Obligation
HFA --Health Facility Authority
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDR --Industrial Development Revenue Bond
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors
Assurance
MF Hsg. --Multi-Family Housing
PCRB --Pollution Control Revenue Bond
RANS --Revenue Anticipation Notes
RB --Revenue Bond
TANS --Tax Anticipation Notes
TECP --Tax Exempt Commercial Paper
TRANS --Tax Revenue Anticipation Notes
TRB --Tender Revenue Bond
UPDATE --Unit Priced Daily Adjustable
Tax-Exempt Security
VRDN --Variable Rate Demand Note
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------- --------------------------------------
[This page intentionally left blank]
- -------------------------------------- -------------------------------------
23
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
Prime Money ILA
Obligations Market Government
Portfolio Portfolio Portfolio
==============================================
<S> <C> <C> <C>
Assets:
Investments in securities, at value based on amortized cost $1,266,243,902 $ 990,797,391 $ 827,240,879
Interest receivable 3,701,956 3,538,130 1,378,983
Cash 143,480 128,908 152,717
Other assets 18,680 33,706 48,509
- ------------------------------------------------------------------------------------------------------------------------
Total assets 1,270,108,018 994,498,135 828,821,088
- ------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investment securities purchased -- -- --
Dividends payable 5,999,306 4,784,617 3,427,645
Accrued expenses and other liabilities 530,616 513,611 459,492
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,529,922 5,298,228 3,887,137
- ------------------------------------------------------------------------------------------------------------------------
Net Assets:
Paid in capital 1,263,578,517 989,199,498 824,862,428
Accumulated undistributed net investment income -- -- --
Accumulated undistributed net realized gain (loss) on investment
transactions (421) 409 71,523
- ------------------------------------------------------------------------------------------------------------------------
Net assets $1,263,578,096 $ 989,199,907 824,933,951
========================================================================================================================
Net asset value, offering and redemption price per unit
(net assets/units outstanding) $ 1.00 $ 1.00 $ 1.00
========================================================================================================================
Units Outstanding:
ILA units 1,154,745,689 703,096,586 694,604,345
ILA Administration units 23,775,858 257,258,398 36,044,854
ILA Service units 84,710,642 28,844,514 94,213,229
ILA B units 346,328 -- --
- ------------------------------------------------------------------------------------------------------------------------
Total units of beneficial interest outstanding, $.001 par value
(unlimited number of units authorized) 1,263,578,517 989,199,498 824,862,428
========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
ILA ILA ILA ILA ILA
Treasury Treasury ILA Tax-Exempt Tax-Exempt Tax-Exempt
Obligations Instruments Federal Diversified California New York
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
================================================================================================
<S> <C> <C> <C> <C> <C>
$ 810,267,968 $1,221,566,240 $3,300,609,972 $1,749,033,261 $438,939,170 $114,386,281
532,015 14,004,604 4,477,173 7,404,080 2,433,885 404,538
99,319 148,266 365,400 1,862,438 599,385 41,299
775 10,026 125,725 8,601 8,650 --
- ------------------------------------------------------------------------------------------------
810,900,077 1,235,729,136 3,305,578,270 1,758,308,380 441,981,090 114,832,118
- ------------------------------------------------------------------------------------------------
-- -- -- 150,828,428 -- --
3,404,801 4,597,910 13,642,248 4,524,992 1,168,073 274,842
428,726 525,543 1,305,746 494,147 194,663 62,795
- ------------------------------------------------------------------------------------------------
3,833,527 5,123,453 14,947,994 155,847,567 1,362,736 337,637
- ------------------------------------------------------------------------------------------------
$ 807,035,766 1,230,590,333 3,290,699,109 1,602,342,561 440,637,879 114,499,366
-- -- -- 362,642 10,495 1,634
30,784 15,350 (68,833) (244,390) (30,020) (6,519)
- ------------------------------------------------------------------------------------------------
$ 807,066,550 $1,230,605,683 $3,290,630,276 $1,602,460,813 $440,618,354 $114,494,481
================================================================================================
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================================================================
574,608,995 708,990,271 2,303,703,731 1,514,523,522 440,495,857 70,178,026
108,916,431 137,701,171 794,578,398 59,097,259 142,022 44,321,340
123,510,340 383,898,891 192,416,980 28,918,372 -- --
-- -- -- -- -- --
- ------------------------------------------------------------------------------------------------
807,035,766 1,230,590,333 3,290,699,109 1,602,539,153 440,637,879 114,499,366
================================================================================================
- ------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- ------------------------------------------------------------------------------
Statements of Operations
For the Year Ended December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
Prime Money ILA
Obligations Market Government
Portfolio Portfolio Portfolio
=========================================
<S> <C> <C> <C>
Investment income:
Interest income $81,770,923 $54,320,799 $39,035,321
- ----------------------------------------------------------------------------------------------------------------------
Expenses:
Investment adviser fees 5,185,990 3,447,586 2,509,206
Transfer agent fees 592,685 394,010 286,766
Custodian fees 289,863 203,454 157,058
Professional fees 43,453 28,965 22,465
Trustees' fees 19,256 10,622 9,356
Other 178,787 197,862 186,415
- ----------------------------------------------------------------------------------------------------------------------
Total expenses 6,310,034 4,282,499 3,171,266
Less--Expenses reimbursable and fees waived by Goldman Sachs (234,432) (736,102) (231,536)
- ----------------------------------------------------------------------------------------------------------------------
Net expenses 6,075,602 3,546,397 2,939,730
Administration unit fees 65,534 316,155 63,048
Service unit fees 494,274 128,313 352,931
- ----------------------------------------------------------------------------------------------------------------------
Net expenses and unit fees 6,635,410 3,990,865 3,355,709
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 75,135,513 50,329,934 35,679,612
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions 72,405 72,865 62,662
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $75,207,918 $50,402,799 $35,742,274
======================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA ILA ILA ILA
Treasury Treasury ILA Tax-Exempt Tax-Exempt Tax-Exempt
Obligations Instruments Federal Diversified California New York
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
=========================================================================================
<S> <C> <C> <C> <C> <C>
$48,666,691 $53,608,537 $146,327,912 $54,107,112 $13,695,668 $3,421,539
----------------------------------------------------------------------------------------
3,157,511 3,629,131 9,496,253 5,391,039 1,410,751 359,201
360,858 414,758 1,085,286 616,119 161,229 41,051
197,650 167,744 459,900 135,944 45,236 21,336
27,555 34,247 77,027 42,553 13,995 6,322
11,552 12,842 34,394 17,650 4,574 1,215
157,226 213,340 423,802 136,197 38,866 7,681
- -----------------------------------------------------------------------------------------
3,912,352 4,472,062 11,576,662 6,339,502 1,674,651 436,806
(212,886) (2,294,583) (4,522,286) (1,564,664) (22,092) (108,395)
----------------------------------------------------------------------------------------
3,699,466 2,177,479 7,054,376 4,774,838 1,652,559 328,411
145,201 145,441 906,321 73,660 262 39,843
579,790 1,266,586 562,023 130,158 -- --
- -----------------------------------------------------------------------------------------
4,424,457 3,589,506 8,522,720 4,978,656 1,652,821 368,254
- -----------------------------------------------------------------------------------------
44,242,234 50,019,031 137,805,192 49,128,456 12,042,847 3,053,285
- -----------------------------------------------------------------------------------------
195,578 416,602 (4,477) (12,968) 15 (4,539)
- -----------------------------------------------------------------------------------------
$44,437,812 $50,435,633 $137,800,715 $49,115,488 $12,042,862 $3,048,746
=========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
Prime Money ILA
Obligations Market Government
Portfolio Portfolio Portfolio
================================================
<S> <C> <C> <C>
From Operations:
Net investment income $ 75,135,513 $ 50,329,934 $ 35,679,612
Net realized gain(loss) on investment transactions 72,405 72,865 62,662
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 75,207,918 50,402,799 35,742,274
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Unitholders from:
Net investment income
ILA units (67,076,054) (38,261,044) (29,556,990)
ILA Administration units (2,206,827) (10,545,315) (2,048,010)
ILA Service units (5,850,540) (1,523,575) (4,074,612)
ILA B units (2,092) -- --
Net realized gain on investment transactions
ILA units (65,059) (54,983) (38,029)
ILA Administration units (2,127) (15,267) (2,635)
ILA Service units (5,640) (2,206) (5,242)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions to unitholders (75,208,339) (50,402,390) (35,725,518)
- ----------------------------------------------------------------------------------------------------------------------
From unit transactions (at $1.00 per unit):
Proceeds from sales of units 9,633,671,566 8,281,604,075 5,115,245,365
Reinvestment of dividends and distributions 40,414,429 38,191,105 17,312,306
Cost of units repurchased (9,962,009,233) (8,092,253,028) (5,011,078,568)
- ----------------------------------------------------------------------------------------------------------------------
Increase(decrease) in net assets resulting from unit transactions (287,923,238) 227,542,152 121,479,103
- ----------------------------------------------------------------------------------------------------------------------
Total increase(decrease) (287,923,659) 227,542,561 121,495,859
Net Assets:
Beginning of year 1,551,501,755 761,657,346 703,438,092
- ----------------------------------------------------------------------------------------------------------------------
End of year $1,263,578,096 $ 989,199,907 $ 824,933,951
======================================================================================================================
Accumulated undistributed net investment income -- -- --
======================================================================================================================
Summary of unit transactions (at $1.00 per unit):
ILA Units:
Units sold 8,756,241,159 5,161,953,773 4,490,979,392
Reinvestment of dividends and distributions 36,833,028 30,348,683 13,978,786
Units repurchased (8,899,537,496) (5,063,361,34) (4,380,790,567)
- ----------------------------------------------------------------------------------------------------------------------
(106,463,309) 128,941,113 124,167,611
- ----------------------------------------------------------------------------------------------------------------------
ILA Administration Units:
Units sold 318,656,203 2,902,067,359 220,574,807
Reinvestment of dividends and distributions 1,520,549 7,510,848 283,223
Units repurchased (359,456,201) (2,816,742,074) (232,371,387)
- ----------------------------------------------------------------------------------------------------------------------
(39,279,449) 92,836,133 (11,513,357)
- ----------------------------------------------------------------------------------------------------------------------
ILA Service Units:
Units sold 558,266,701 217,582,943 403,691,166
Reinvestment of dividends and distributions 2,060,072 331,574 3,050,297
Units repurchased (702,853,581) (212,149,611) (397,916,614)
- ----------------------------------------------------------------------------------------------------------------------
(142,526,808) 5,764,906 8,824,849
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units (288,269,566)* 227,542,152 121,479,103
======================================================================================================================
</TABLE>
* In addition, ILA B units had sales, reinvestments of dividends and
distributions and repurchases of 507,503, 780 and 161,955 units,
respectively, for a net increase of 346,328 units.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ILA ILA ILA ILA ILA
Treasury Treasury ILA Tax-Exempt Tax-Exempt Tax-Exempt
Obligations Instruments Federal Diversified California New York
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
=========================================================================================================
<S> <C> <C> <C> <C> <C>
$ 44,242,234 $ 50,019,031 $ 137,805,192 $ 49,128,456 $ 12,042,847 $ 3,053,285
195,578 416,602 (4,477) (12,968) 15 (4,539)
- ------------------------------------------------------------------------------------------------------
44,437,812 50,435,633 137,800,715 49,115,488 12,042,862 3,048,746
- ------------------------------------------------------------------------------------------------------
(32,818,890) (30,911,761) (101,011,206) (46,819,418) (12,036,826) (2,289,010)
(4,742,767) (4,651,770) (30,041,532) (1,375,597) (6,021) (764,275)
(6,680,577) (14,455,500) (6,752,454) (933,441) -- --
-- -- -- -- -- --
(124,367) (251,459) -- -- -- --
(17,973) (37,841) -- -- -- --
(25,316) (117,591) -- -- -- --
- ------------------------------------------------------------------------------------------------------
(44,409,890) (50,425,922) (137,805,192) (49,128,456) (12,042,847) (3,053,285)
- ------------------------------------------------------------------------------------------------------
5,362,879,167 5,282,794,697 15,965,974,823 9,518,523,372 2,958,021,573 648,758,829
13,347,956 20,444,542 79,358,869 35,078,864 11,445,149 2,949,980
(5,492,732,128) (4,850,904,367) (15,106,127,095) (9,392,133,030) (2,875,637,134) (654,470,394)
- ------------------------------------------------------------------------------------------------------
(116,505,005) 452,334,872 939,206,597 161,469,206 93,829,588 (2,761,585)
- ------------------------------------------------------------------------------------------------------
(116,477,083) 452,344,583 939,202,120 161,456,238 93,829,603 (2,766,124)
923,543,633 778,261,100 2,351,428,156 1,441,004,575 346,788,751 117,260,605
- ------------------------------------------------------------------------------------------------------
$ 807,066,550 $1,230,605,683 $3,290,630,276 $1,602,460,813 $ 440,618,354 $114,494,481
=======================================================================================================
-- -- -- $ 362,642 $ 10,495 $ 1,634
=======================================================================================================
3,696,243,017 3,783,423,031 11,171,686,790 9,264,641,627 2,957,305,487 340,781,821
11,811,603 19,300,481 66,486,820 34,471,658 11,444,982 2,236,468
(3,844,547,762) (3,680,022,103) (10,666,427,699) (9,127,243,309) (2,875,001,835) (363,376,230)
- ------------------------------------------------------------------------------------------------------
(136,493,142) 122,701,409 571,745,911 171,869,976 93,748,634 (20,357,941)
- ------------------------------------------------------------------------------------------------------
659,581,577 470,006,128 3,606,492,816 142,908,870 716,086 307,977,008
855,243 1,082,829 11,506,068 298,114 167 713,512
(644,240,509) (402,096,387) (3,340,378,274) (132,882,806) (635,299) (291,094,164)
- ------------------------------------------------------------------------------------------------------
16,196,311 68,992,570 277,620,610 10,324,178 80,954 17,596,356
- ------------------------------------------------------------------------------------------------------
1,007,054,573 1,029,365,538 1,187,795,217 110,972,875 -- --
681,110 61,232 1,365,981 309,092 -- --
(1,003,943,857) (768,785,877) (1,099,321,122) (132,006,915) -- --
- ------------------------------------------------------------------------------------------------------
3,791,826 260,640,893 89,840,076 (20,724,948) -- --
- ------------------------------------------------------------------------------------------------------
(116,505,005) 452,334,872 939,206,597 161,469,206 93,829,588 (2,761,585)
=======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
29
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
For the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
Prime Money ILA
Obligations Market Government
Portfolio Portfolio Portfolio
----------------------------------------------
<S> <C> <C> <C>
From Operations:
Net investment income $ 107,583,870 $ 49,478,386 $ 51,830,087
Net realized gain (loss) on investment transactions 14,828 23,170 168,758
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 107,598,698 49,501,556 51,998,845
- ----------------------------------------------------------------------------------------------------------------------
Distributions to Unitholders from:
Net investment income
ILA units (90,145,210) (39,853,826) (42,814,965)
ILA Administration units (5,198,674) (8,266,526) (3,434,653)
ILA Service units (12,239,986) (1,358,034) (5,580,469)
Net realized gain on investment transactions
ILA units (12,607) (18,166) (138,212)
ILA Administration units (741) (4,378) (12,197)
ILA Service units (1,480) (626) (17,502)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions to unitholders (107,598,698) (49,501,556 ) (51,997,998)
- ----------------------------------------------------------------------------------------------------------------------
From unit transactions (at $1.00 per unit):
Proceeds from sales of units 12,338,624,975 6,865,371,082 6,147,457,376
Reinvestment of dividends and distributions 46,658,797 34,033,174 18,869,484
Cost of units repurchased (13,117,315,317) 6,864,945,994) (6,596,822,965)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from unit
transactions (732,031,545) 34,458,262 (430,496,105)
- ----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) (732,031,545) 34,458,262 (430,495,258)
Net Assets:
Beginning of year 2,283,533,300 727,199,084 1,133,933,350
- ----------------------------------------------------------------------------------------------------------------------
End of year $1,551,501,755 $ 761,657,346 $ 703,438,092
- ----------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Summary of unit transactions (at $1.00 per unit):
ILA Units:
Units sold 10,673,706,881 5,167,984,860 5,286,093,615
Reinvestment of dividends and distributions 43,663,215 30,173,260 14,307,877
Units repurchased (11,419,966,319) (5,183,472,607) (5,611,448,715)
- ----------------------------------------------------------------------------------------------------------------------
(702,596,223) 14,685,513 (311,047,223)
- ----------------------------------------------------------------------------------------------------------------------
ILA Administration Units:
Units sold 801,545,537 1,503,847,493 385,128,154
Reinvestment of dividends and distributions 1,574,573 3,545,805 410,476
Units repurchased (889,335,631) (1,488,837,741) (433,455,523)
- ----------------------------------------------------------------------------------------------------------------------
(86,215,521) 18,555,557 (47,916,893)
- ----------------------------------------------------------------------------------------------------------------------
ILA Service Units:
Units sold 863,372,557 193,538,729 476,235,607
Reinvestment of dividends and distributions 1,421,009 314,109 4,151,131
Units repurchased (808,013,367) (192,635,646) (551,918,727)
- ----------------------------------------------------------------------------------------------------------------------
56,780,199 1,217,192 (71,531,989)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units (732,031,545) 34,458,262 (430,496,105)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ILA ILA ILA ILA ILA
Treasury Treasury ILA Tax-Exempt Tax-Exempt Tax-Exempt
Obligations Instruments Federal Diversified California New York
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
======================================================================================================
<S> <C> <C> <C> <C> <C>
$ 49,882,996 $ 39,027,924 $ 127,991,600 $ 55,137,781 $ 10,292,899 $ 3,354,557
634,764 426,028 (11,971) (38,116) (4,501) --
- ------------------------------------------------------------------------------------------------------
50,517,760 39,453,952 127,979,629 55,099,665 10,288,398 3,354,557
- ------------------------------------------------------------------------------------------------------
(37,834,730) (31,147,754) (98,487,540) (50,915,901) (10,279,510) (2,746,431)
(5,921,841) (3,930,340) (26,181,728) (2,430,414) (13,389) (608,126)
(6,116,634) (3,949,830) (3,322,332) (1,791,466) -- --
(474,791) (338,176) -- -- -- --
(76,052) (43,832) -- -- -- --
(81,059) (43,878) -- -- -- --
- ------------------------------------------------------------------------------------------------------
(50,505,107) (39,453,810) (127,991,600) (55,137,781) (10,292,899) (3,354,557)
- ------------------------------------------------------------------------------------------------------
5,295,765,985 4,545,981,787 12,879,366,733 9,669,281,502 2,111,844,558 637,393,901
14,985,214 18,329,605 59,359,416 35,116,542 9,384,940 3,009,869
(5,307,633,793) (4,472,240,590) (12,558,288,438) (9,832,589,904) (2,002,625,120) (646,630,502)
- ------------------------------------------------------------------------------------------------------
3,117,406 92,070,802 380,437,711 (128,191,860) 118,604,378 (6,226,732)
- ------------------------------------------------------------------------------------------------------
3,130,059 92,070,944 380,425,740 (128,229,976) 118,599,877 (6,226,732)
920,413,574 686,190,156 1,971,002,416 1,569,234,551 228,188,874 123,487,337
- ------------------------------------------------------------------------------------------------------
$ 923,543,633 $ 778,261,100 $2,351,428,156 $1,441,004,575 $ 346,788,751 $117,260,605
======================================================================================================
-- -- -- $ 362,642 $ 10,495 $ 1,634
======================================================================================================
4,098,618,029 3,716,958,431 9,845,256,084 9,311,743,687 2,111,311,145 412,445,304
12,443,257 17,215,281 53,443,869 34,419,501 9,375,255 2,397,973
(4,113,675,854) (3,695,227,116) (9,792,323,613) (9,438,508,967) (2,001,353,653) (408,825,174)
- ------------------------------------------------------------------------------------------------------
(2,614,568) 38,946,596 106,376,340 (92,345,779) 119,332,747 6,018,103
- ------------------------------------------------------------------------------------------------------
852,080,094 450,755,034 2,431,546,258 230,975,117 533,413 224,948,597
2,541,957 1,065,347 5,373,341 522,467 9,685 611,896
(859,607,724) (447,499,474) (2,249,895,904) (280,499,429) (1,271,467) (237,805,328)
- ------------------------------------------------------------------------------------------------------
(4,985,673) 4,320,907 187,023,695 (49,001,845) (728,369) (12,244,835)
- ------------------------------------------------------------------------------------------------------
345,067,862 378,268,322 602,564,391 126,562,698 -- --
-- 48,977 542,206 174,574 -- --
(334,350,215) (329,514,000) (516,068,921) (113,581,508) -- --
- ------------------------------------------------------------------------------------------------------
10,717,647 48,803,299 87,037,676 13,155,764 -- --
- ------------------------------------------------------------------------------------------------------
3,117,406 92,070,802 380,437,711 (128,191,860) 118,604,378 (6,226,732)
======================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
31
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. Organization
Goldman Sachs Money Market Trust (the "Trust"), a business trust organized under
the laws of the Commonwealth of Massachusetts on December 6, 1978, includes the
Goldman Sachs--Institutional Liquid Assets Portfolios ("ILA"). The Trust is
registered under the Investment Company Act of 1940 (as amended) as an open-end
management investment company. ILA consists of nine portfolios: Prime
Obligations, Money Market, Government, Treasury Obligations, Treasury
Instruments, Federal, Tax-Exempt Diversified, Tax-Exempt California and Tax-
Exempt New York. All of the portfolios are diversified except for the Tax-Exempt
California and Tax-Exempt New York Portfolios. ILA offers three classes of units
for each of its portfolios: ILA units, ILA Administration units and ILA Service
units. In addition, Prime Obligations offers ILA B units. The investment
objective of the Funds is to maximize current income to the extent consistent
with the preservation of capital and maintenance of liquidity.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by ILA. The preparation of financial statements in conformity with
generally accepted accounting principles require management to make estimates
and assumptions that may affect the reported amounts.
A. Investment Valuation--
- --------------------------
ILA uses the amortized-cost method for valuing portfolio securities, which
approximates market value. Under this method, all investments purchased at a
discount or premium are valued by amortizing the difference between the original
purchase price and maturity value of the issue over the period to maturity.
B. Interest Income--
- ---------------------
Interest income is determined on the basis of interest accrued, premium
amortized and discount earned.
C. Federal Taxes--
---------------
It is each portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all investment company taxable and tax-exempt income to
its unitholders. Accordingly, no federal tax provisions are required.
The characterization of distributions to unitholders for financial reporting
purposes is determined in accordance with federal income tax rules. Therefore,
the source of the Portfolios' distributions may be shown in the accompanying
financial statements as either from or in excess of net investment income or net
realized gain on investment transactions, or from paid-in capital, depending on
the type of book/tax differences that may exist.
At December 31, 1996, ILA's tax year end, the following portfolios had capital
loss carryforwards for U.S. Federal tax purposes of approximately:
<TABLE>
<CAPTION>
Years of
Portfolio Amount Expiration
--------- ------ ----------
<S> <C> <C>
Federal $ 72,000 2000 to 2004
Tax-Exempt Diversified 244,000 1997 to 2004
Tax-Exempt California 30,000 1999 to 2003
Tax-Exempt New York 7,000 1999 to 2004
</TABLE>
These amounts are available to be carried forward to offset future capital gains
to the extent permitted by applicable laws or regulations.
D. Expenses--
- --------------
Expenses incurred by ILA which do not specifically relate to an individual
portfolio of ILA are allocated to the portfolios based on each portfolio's
relative average net assets for the period.
Unitholders of ILA Administration, ILA Service and ILA B units bear all
expenses and fees paid to service and distribution organizations for their
services with respect to such units as well as other expenses (subject to
expense limitations) which are directly attributable to such units.
- --------------------------------------------------------------------------------
32
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
December 31,1996
- --------------------------------------------------------------------------------
3. Agreements
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), acts as investment adviser pursuant to
an Advisory Agreement. Under the Advisory Agreement, GSAM, subject to general
supervision of the Trust's Board of Trustees, manages the portfolios and
provides for the administration of ILA's other affairs. As compensation for the
services rendered under the Advisory Agreement and the assumption of the
expenses related thereto, GSAM is entitled to a fee, computed daily and payable
monthly, at an annual rate equal to .35% of each portfolio's average daily net
assets. For the year ended December 31, 1996 and until further notice, GSAM has
agreed to waive advisory fees of .05%, .20%, .15%, .10% and .09% for the Money
Market, Treasury Instruments, Federal, Tax-Exempt Diversified and Tax-Exempt New
York Portfolios, respectively.
Goldman Sachs also serves as ILA's transfer agent under a Transfer Agency
Agreement for a fee. In addition, Goldman Sachs acts as ILA's distributor under
a Distribution Agreement for which it receives no compensation. Amounts due to
Goldman Sachs are included in "Accrued expenses and other liabilities" in the
accompanying Statements of Assets and Liabilities.
GSAM has voluntarily agreed that if the sum of a portfolio's expenses
(including the advisory fee, but excluding interest, taxes, brokerage
commissions, litigation and indemnification expenses, administration, authorized
dealer service, distribution and service plan fees and other extraordinary
expenses) exceeds on an annualized basis .41% of such portfolio's net assets,
the portfolio will be reimbursed in the amount of such excess monthly.
In addition, GSAM has voluntarily agreed to reimburse the Money Market,
Treasury Instruments, Federal, Tax-Exempt Diversified and Tax-Exempt New York
Portfolios to the extent that each portfolio's expenses, as defined above,
exceed .36%, .21%, .26%, .31% and .32%, respectively, of the average net assets
per annum. Amounts due from Goldman Sachs at December 31, 1996 are included in
"Other assets" in the accompanying Statements of Assets and Liabilities.
The ILA B units of Prime Obligations Portfolio have adopted a Distribution
Plan (the "Distribution Plan") pursuant to Rule 12b-1. Under the Distribution
Plan, Goldman Sachs is entitled to a quarterly fee for distribution services
equal, on an annual basis, up to .75% of ILA B units average daily net assets.
The ILA B units of Prime Obligations Portfolio have adopted an Authorized
Dealer Service Plan (the "Service Plan") pursuant to which Goldman Sachs and
Authorized Dealers are compensated for providing personal and account
maintenance services. ILA B units pay a fee under this Service Plan equal, on an
annual basis, up to .25% of ILA Class B's average daily net assets.
The chart below outlines the fee waivers and expense reimbursements for the
year ended December 31, 1996 and amounts owed to and due from Goldman Sachs at
December 31, 1996 (in thousands):
- -------------------------------------------------------------------------------
Due to
Goldman
Sachs Amounts
Adviser Expense for Adviser/ due from
Fee Reimburse- Transfer Goldman
Fund Waived ments Total Agent Fees Sachs
================================================================================
Prime
Obligations
Portfolio $-- $234 $234 $462 $18
- --------------------------------------------------------------------------------
Money
Market
Portfolio 493 243 736 318 34
- --------------------------------------------------------------------------------
Government
Portfolio -- 232 232 265 45
- --------------------------------------------------------------------------------
Treasury
Obligations
Portfolio -- 213 213 267 --
- --------------------------------------------------------------------------------
Treasury
Instruments
Portfolio 2,074 221 2,295 180 10
- --------------------------------------------------------------------------------
Federal
Portfolio 4,070 452 4,522 648 126
- --------------------------------------------------------------------------------
Tax-Exempt
Diversified
Portfolio 1,540 25 1,565 399 --
- --------------------------------------------------------------------------------
Tax-Exempt
California
Portfolio -- 22 22 147 --
- -------------------------------------------------------------------------------
Tax-Exempt
New York
Portfolio 92 16 108 26 --
- -------------------------------------------------------------------------------
33
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
December 31, 1996
- --------------------------------------------------------------------------------
4. Administration and Service Plans
ILA has adopted Administration and Service Plans. These plans allow for ILA
Administration units and ILA Service units, respectively, to compensate service
organizations for providing varying levels of account administration and
unitholder liaison services to their customers who are beneficial owners of such
units. The Administration and Service Plans provide for compensation to the
service organizations in an amount up to .15% and .40% (on an annualized basis),
respectively, of the average daily net asset value of the respective units.
5. Line of Credit Facility
ILA participates in a $250,000,000 uncommitted, unsecured revolving line of
credit facility to be used solely for temporary or emergency purposes. Under the
most restrictive arrangement, each Portfolio must own securities having a market
value in excess of 300% of the total bank borrowings. The interest rate on the
borrowings is based on the Federal Funds rate. During the year ended
December 31, 1996, ILA did not have any borrowings under this facility.
6. Repurchase Agreements
During the term of a repurchase agreement, the value of the underlying
securities, including accrued interest, is required to equal or exceed the value
of the repurchase agreement. The underlying securities for all repurchase
agreements are held in safekeeping by the custodian.
7. Joint Repurchase Agreement Accounts
The ILA Portfolios, together with other registered investment companies having
advisory agreements with GSAM or its affiliates, may transfer uninvested cash
balances into joint accounts, the daily aggregate balances of which are invested
in one or more repurchase agreements. The underlying securities for the
repurchase agreements are U.S. Treasury obligations.
As of December 31, 1996, the Prime Obligations, Money Market, Government and
Treasury Obligations Portfolios had investments in the following joint account
of $21,400,000, $77,200,000, $305,000,000 and $327,900,000 in principal amount,
respectively. As of December 31, 1996, the repurchase agreements in this joint
account, along with the corresponding underlying securities (including the type
of security, market value, interest rate and maturity date), were as follows:
Principal Interest Maturity Amortized
Amount Rate Date Cost
================================================================================
Repurchase Agreements
BT Securities Corp., dated 12/31/96, repurchase price $200,061,111 (U.S.
Treasury Notes: $154,133,720, 5.75%-6.38%, 08/31/97-04/30/01; U.S.
Treasury Bills: $48,126,398, 06/12/97)
$200,000,000 5.50% 01/02/97 $ 200,000,000
Chase Securities, Inc., dated 12/31/96, repurchase price $1,000,369,444
(U.S. Treasury Notes: $1,020,003,399, 5.00%-9.13%, 11/15/97-5/31/99)
1,000,000,000 6.65 01/02/97 1,000,000,000
Citicorp. Securities, Inc., dated 12/31/96, repurchase price $100,034,722
(U.S. Treasury Notes: $101,974,154, 5.88%-7.50%, 03/31/98-11/15/01)
100,000,000 6.25 01/02/97 100,000,000
Morgan Stanley & Co., dated 12/31/96, repurchase price $1,200,450,000
(U.S. Treasury Notes: $954,150,236, 6.00%-6.25%, 07/31/98-09/30/98;
U.S. Treasury Bills: $270,396,330, 01/23/97-10/16/97)
1,200,000,000 6.75 01/02/97 1,200,000,000
Swiss Bank Corp., dated 12/31/96, repurchase price $140,846,933
(U.S. Treasury Notes: $129,531,177, 4.75%-8.88%,01/15/97-08/15/03; U.S.
Treasury Bills: $14,639,156, 01/30/97-06/26/97)
140,800,000 6.00 01/02/97 140,800,000
Swiss Bank Corp., dated 12/31/96, repurchase price $400,150,000 (U.S.
Treasury Notes: $367,986,300, 4.75%-8.88%, 01/15/97-08/15/03; U.S.
Treasury Bills: $41,588,512, 01/30/97-06/26/97)
400,000,000 6.75 01/02/97 400,000,000
- -------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $3,040,800,000
================================================================================
8. Other Matters
Pursuant to an SEC exemptive order, each taxable Portfolio may enter into
certain principal transactions, including repurchase agreements, with Goldman,
Sachs & Co. subject to certain limitations which include the following: 25% of
eligible security transactions, as defined, and 10% of repurchase agreement
transactions.
- --------------------------------------------------------------------------------
34
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights
Selected Data for a Unit Outstanding Throughout Each Period
Prime Obligations Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
===================================
Net
Net asset realized Total Net asset
value at Net gain on income from value at
beginning investment investment investment Distributions end Total
of period income transactions operations to unitholders of period return/(a)/
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ...................... $1.00 $0.0511 -- $0.0511 $(0.0511) $1.00 5.22%
1996-ILA Administration units ....... 1.00 0.0497 -- 0.0497 (0.0497) 1.00 5.06
1996-ILA Service units .............. 1.00 0.0474 -- 0.0474 (0.0474) 1.00 4.80
1996-ILA B units/(b)/................ 1.00 0.0262 -- 0.0262 (0.0262) 1.00 3.97/(d)/
1995-ILA units ...................... 1.00 0.0566 -- 0.0566 (0.0566) 1.00 5.79
1995-ILA Administration units ....... 1.00 0.0551 -- 0.0551 (0.0551) 1.00 5.63
1995-ILA Service units .............. 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.37
1994-ILA units ...................... 1.00 0.0394 -- 0.0394 (0.0394) 1.00 4.07
1994-ILA Administration units ....... 1.00 0.0379 -- 0.0379 (0.0379) 1.00 3.91
1994-ILA Service units .............. 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.66
1993-ILA units ...................... 1.00 0.0291 0.0002 0.0293 (0.0293) 1.00 2.97
1993-ILA Administration units ....... 1.00 0.0275 0.0003 0.0278 (0.0278) 1.00 2.82
1993-ILA Service units .............. 1.00 0.0250 0.0001 0.0251 (0.0252) 1.00 2.56
1992-ILA units ...................... 1.00 0.0364 0.0010 0.0374 (0.0374) 1.00 3.75
1992-ILA Administration units ....... 1.00 0.0339 0.0010 0.0349 (0.0349) 1.00 3.60
1992-ILA Service units .............. 1.00 0.0311 0.0010 0.0321 (0.0320) 1.00 3.34
1991-ILA units ...................... 1.00 0.0591 0.0003 0.0594 (0.0594) 1.00 6.10
1991-ILA Administration units ....... 1.00 0.0568 0.0003 0.0571 (0.0571) 1.00 5.94
1991-ILA Service units .............. 1.00 0.0558 0.0003 0.0561 (0.0561) 1.00 5.68
1990-ILA units ...................... 1.00 0.0793 -- 0.0793 (0.0793) 1.00 8.21
1990-ILA Administration units /(c)/.. 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.81/(d)/
1990-ILA Service units/(c)/.......... 1.00 0.0425 -- 0.0425 (0.0425) 1.00 7.56/(d)/
1989-ILA units ...................... 1.00 0.0890 -- 0.0890 (0.0890) 1.00 9.27
1988-ILA units ...................... 1.00 0.0714 -- 0.0714 (0.0714) 1.00 7.48
1987-ILA units ...................... 1.00 0.0634 -- 0.0634 (0.0634) 1.00 6.50
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
===========================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
===============================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ...................... 0.41% 5.11% $1,154,787 0.43% 5.09%
1996-ILA Administration units ....... 0.56 4.97 23,738 0.58 4.95
1996-ILA Service units .............. 0.81 4.74 84,707 0.83 4.72
1996-ILA B units/(b)/................ 1.41/(d)/ 4.09/(d)/ 346 1.43/(d)/ 4.07/(d)/
1995-ILA units ...................... 0.41 5.66 1,261,251 0.43 5.64
1995-ILA Administration units ....... 0.56 5.51 63,018 0.58 5.49
1995-ILA Service units .............. 0.81 5.22 227,233 0.83 5.20
1994-ILA units ...................... 0.40 3.94 1,963,846 0.42 3.92
1994-ILA Administration units ....... 0.55 3.79 149,234 0.57 3.77
1994-ILA Service units .............. 0.80 3.65 170,453 0.82 3.63
1993-ILA units ...................... 0.40 2.91 2,332,771 0.42 2.89
1993-ILA Administration units ....... 0.55 2.75 189,431 0.57 2.73
1993-ILA Service units .............. 0.80 2.50 137,804 0.82 2.48
1992-ILA units ...................... 0.40 3.64 3,444,591 0.42 3.62
1992-ILA Administration units ....... 0.55 3.39 257,321 0.57 3.37
1992-ILA Service units .............. 0.80 3.11 22,044 0.82 3.09
1991-ILA units ...................... 0.40 5.91 3,531,736 0.42 5.89
1991-ILA Administration units ....... 0.55 5.68 198,417 0.57 5.66
1991-ILA Service units .............. 0.80 5.58 18,789 0.82 5.56
1990-ILA units ...................... 0.38 7.93 2,833,541 0.38 7.93
1990-ILA Administration units /(c)/.. 0.55/(d)/ 7.62/(d)/ 209,272 0.55/(d)/ 7.62/(d)/
1990-ILA Service units/(c)/.......... 0.80/(d)/ 7.25/(d)/ 19,039 0.80/(d)/ 7.25/(d)/
1989-ILA units ...................... 0.40 8.90 3,761,964 0.40 8.90
1988-ILA units ...................... 0.40 7.14 3,799,628 0.40 7.14
1987-ILA units ...................... 0.40 6.34 5,814,280 0.40 6.34
</TABLE>
- -------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/ILA Class B unit activity commenced during May of 1996.
/(c)/ILA Administration and Service unit activity commenced during June of 1990.
/(d)/Annualized.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Money Market Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=====================================
Net Net Total
asset realized income Net asset
value at Net gain on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
===============================
1996-ILA units ............. $1.00 $0.0515 $0.0001 $0.0516 $(0.0516) $1.00 5.27%
1996-ILA Administration
units ................... 1.00 0.0500 0.0001 0.0501 (0.0501) 1.00 5.12
1996-ILA Service units ..... 1.00 0.0475 0.0001 0.0476 (0.0476) 1.00 4.86
1995-ILA units ............. 1.00 0.0571 -- 0.0571 (0.0571) 1.00 5.85
1995-ILA Administration
units ................... 1.00 0.0555 -- 0.0555 (0.0555) 1.00 5.69
1995-ILA Service units ..... 1.00 0.0529 -- 0.0529 (0.0529) 1.00 5.43
1994-ILA units ............. 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.13
1994-ILA Administration
units ................... 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.98
1994-ILA Service units ..... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.72
1993-ILA units ............. 1.00 0.0296 0.0003 0.0299 (0.0299) 1.00 3.03
1993-ILA Administration
units ................... 1.00 0.0281 0.0003 0.0284 (0.0284) 1.00 2.88
1993-ILA Service units ..... 1.00 0.0257 0.0002 0.0259 (0.0259) 1.00 2.62
1992-ILA units ............. 1.00 0.0368 0.0004 0.0372 (0.0372) 1.00 3.76
1992-ILA Administration
units ................... 1.00 0.0356 0.0004 0.0360 (0.0360) 1.00 3.61
1992-ILA Service units ..... 1.00 0.0358 0.0006 0.0364 (0.0364) 1.00 3.35
1991-ILA units ............. 1.00 0.0591 0.0004 0.0595 (0.0595) 1.00 6.12
1991-ILA Administration
units ................... 1.00 0.0574 0.0004 0.0578 (0.0578) 1.00 5.96
1991-ILA Service units ..... 1.00 0.0547 0.0004 0.0551 (0.0551) 1.00 5.70
1990-ILA units ............. 1.00 0.0793 0.0001 0.0794 (0.0794) 1.00 8.24
1990-ILA Administration
units/(c)/............... 1.00 0.0424 0.0001 0.0425 (0.0425) 1.00 7.86/(b)/
1990-ILA Service units/(c)/. 1.00 0.0438 -- 0.0438 (0.0438) 1.00 7.61/(b)/
1989-ILA units ............. 1.00 0.0885 0.0001 0.0886 (0.0886) 1.00 9.31
1988-ILA units ............. 1.00 0.0751 -- 0.0751 (0.0751) 1.00 7.66
For the Period December 2, 1987 (commencement of operations) through December 31,
================================================================================
1987-ILA units ............. 1.00 0.0063 -- 0.0063 (0.0063) 1.00 7.38/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
============================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
===============================
1996-ILA units ............. 0.36% 5.15% $703,097 0.43% 5.08%
1996-ILA Administration
units ................... 0.51 5.00 257,258 0.58 4.93
1996-ILA Service units ..... 0.76 4.75 28,845 0.83 4.68
1995-ILA units ............. 0.36 5.71 574,155 0.42 5.65
1995-ILA Administration
units ................... 0.51 5.55 164,422 0.57 5.49
1995-ILA Service units ..... 0.76 5.29 23,080 0.82 5.23
1994-ILA units ............. 0.35 4.01 559,470 0.43 3.93
1994-ILA Administration
units ................... 0.50 3.88 145,867 0.58 3.80
1994-ILA Service units ..... 0.75 3.61 21,862 0.83 3.53
1993-ILA units ............. 0.35 2.96 699,604 0.43 2.88
1993-ILA Administration
units ................... 0.50 2.81 150,452 0.58 2.73
1993-ILA Service units ..... 0.75 2.57 11,166 0.83 2.49
1992-ILA units ............. 0.35 3.68 884,571 0.43 3.60
1992-ILA Administration
units ................... 0.50 3.56 187,445 0.58 3.48
1992-ILA Service units ..... 0.75 3.58 15,114 0.83 3.50
1991-ILA units ............. 0.35 5.91 1,153,191 0.42 5.84
1991-ILA Administration
units ................... 0.50 5.74 210,330 0.57 5.67
1991-ILA Service units ..... 0.75 5.47 56,586 0.82 5.40
1990-ILA units ............. 0.35 7.93 924,141 0.40 7.88
1990-ILA Administration
units/(c)/............... 0.50/(b)/ 7.63/(b)/ 204,477 0.55/(b)/ 7.58/(b)/
1990-ILA Service units/(c)/. 0.75/(b)/ 7.46/(b)/ 38,128 0.80/(b)/ 7.41/(b)/
1989-ILA units ............. 0.35 8.85 1,295,389 0.40 8.80
1988-ILA units ............. 0.27 7.51 701,105 0.40 7.38
For the Period December 2, 1987 (commencement of operations) through December 31,
================================================================================
1987-ILA units ............. 0.15/(b)/ 7.62/(b)/ 183,633 0.40/(b)/ 7.37/(b)/
- -------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during June of 1990.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Government Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=====================================
Net Net Total
asset realized income Net asset
value at Net (gain) on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ............. $1.00 $0.0504 $ 0.0001 $0.0505 $(0.0504) $1.00 5.15%
1996-ILA Administration
units ................... 1.00 0.0489 0.0001 0.0490 (0.0489) 1.00 4.99
1996-ILA Service units ..... 1.00 0.0463 0.0001 0.0464 (0.0463) 1.00 4.73
1995-ILA units ............. 1.00 0.0562 0.0002 0.0564 (0.0564) 1.00 5.77
1995-ILA Administration
units ................... 1.00 0.0549 0.0002 0.0551 (0.0551) 1.00 5.62
1995-ILA Service units ..... 1.00 0.0519 0.0002 0.0521 (0.0521) 1.00 5.35
1994-ILA units ............. 1.00 0.0378 0.0002 0.0380 (0.0380) 1.00 3.94
1994-ILA Administration
units ................... 1.00 0.0362 0.0002 0.0364 (0.0364) 1.00 3.79
1994-ILA Service units ..... 1.00 0.0350 0.0002 0.0352 (0.0352) 1.00 3.53
1993-ILA units ............. 1.00 0.0282 0.0008 0.0290 (0.0291) 1.00 2.94
1993-ILA Administration 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79
units ...................
1993-ILA Service units ..... 1.00 0.0242 0.0006 0.0248 (0.0250) 1.00 2.53
1992-ILA units ............. 1.00 0.0338 0.0027 0.0365 (0.0364) 1.00 3.70
1992-ILA Administration
units ................... 1.00 0.0325 0.0027 0.0352 (0.0351) 1.00 3.55
1992-ILA Service units ..... 1.00 0.0309 0.0030 0.0339 (0.0336) 1.00 3.29
1991-ILA units ............. 1.00 0.0567 0.0011 0.0578 (0.0578) 1.00 5.91
1991-ILA Administration
units ................... 1.00 0.0545 0.0011 0.0556 (0.0556) 1.00 5.75
1991-ILA Service units ..... 1.00 0.0522 0.0011 0.0533 (0.0533) 1.00 5.49
1990-ILA units ............. 1.00 0.0779 0.0003 0.0782 (0.0782) 1.00 8.11
1990-ILA Administration
units (c)................ 1.00 0.0439 0.0004 0.0443 (0.0443) 1.00 7.74/(b)/
1990-ILA Service units (c).. 1.00 0.0359 0.0002 0.0361 (0.0363) 1.00 7.42/(b)/
1989-ILA units ............. 1.00 0.0877 0.0001 0.0878 (0.0878) 1.00 9.15
1988-ILA units ............. 1.00 0.0716 0.0002 0.0718 (0.0718) 1.00 7.42
1987-ILA units ............. 1.00 0.0622 0.0001 0.0623 (0.0624) 1.00 6.43
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
===========================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ............. 0.41% 5.04% $694,651 0.44% 5.01%
1996-ILA Administration
units ................... 0.56 4.89 36,055 0.59 4.86
1996-ILA Service units ..... 0.81 4.63 94,228 0.84 4.60
1995-ILA units ............. 0.41 5.62 570,469 0.43 5.60
1995-ILA Administration
units ................... 0.56 5.49 47,558 0.58 5.47
1995-ILA Service units ..... 0.81 5.19 85,401 0.83 5.17
1994-ILA units ............. 0.40 3.78 881,520 0.44 3.74
1994-ILA Administration
units ................... 0.55 3.62 95,483 0.59 3.58
1994-ILA Service units ..... 0.80 3.50 156,930 0.84 3.46
1993-ILA units ............. 0.40 2.82 1,315,378 0.43 2.79
1993-ILA Administration
units ................... 0.55 2.67 161,845 0.58 2.64
1993-ILA Service units ..... 0.80 2.42 101,272 0.83 2.39
1992-ILA units ............. 0.40 3.38 1,785,472 0.42 3.36
1992-ILA Administration
units ................... 0.55 3.25 461,542 0.57 3.23
1992-ILA Service units ..... 0.80 3.09 56,389 0.82 3.07
1991-ILA units ............. 0.40 5.67 2,103,627 0.43 5.64
1991-ILA Administration
units ................... 0.55 5.45 464,060 0.58 5.42
1991-ILA Service units ..... 0.80 5.22 200,176 0.83 5.19
1990-ILA units ............. 0.39 7.79 2,203,756 0.39 7.79
1990-ILA Administration
units (c)................ 0.55/(b) 7.49/(b)/ 296,313 0.55/(b)/ 7.49/(b)/
1990-ILA Service units (c).. 0.80/(b)/ 7.15/(b)/ 132,888 0.80/(b)/ 7.15/(b)/
1989-ILA units ............. 0.40 8.77 2,268,330 0.40 8.77
1988-ILA units ............. 0.40 7.16 2,197,796 0.40 7.16
1987-ILA units ............. 0.40 6.22 2,243,870 0.40 6.22
- -------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- -------------------------------------------------------------------------------
Financial Highlights (continued)
- -------------------------------------------------------------------------------
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Obligations Portfolio
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
===================================
Net
Net asset realized Total Net asset
value at Net gain on income from value at
beginning investment investment investment Distributions end of Total
of period income transaction operation to unitholders period return/(a)/
====================================================================================
For the Years Ended December 31,
================================
<S> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units ............................. $1.00 $0.0498 $0.0002 $0.0500 $(0.0500) $1.00 5.11%
1996-ILA Administration units .............. 1.00 0.0483 0.0003 0.0486 (0.0486) 1.00 4.95
1996-ILA Service units ..................... 1.00 0.0459 0.0001 0.0460 (0.0460) 1.00 4.69
1995-ILA units ............................. 1.00 0.0551 0.0007 0.0558 (0.0558) 1.00 5.73
1995-ILA Administration units .............. 1.00 0.0537 0.0007 0.0544 (0.0544) 1.00 5.57
1995-ILA Service units ..................... 1.00 0.0511 0.0007 0.0518 (0.0518) 1.00 5.31
1994-ILA units ............................. 1.00 0.0377 -- 0.0377 (0.0377) 1.00 3.91
1994-ILA Administration units .............. 1.00 0.0368 -- 0.0368 (0.0368) 1.00 3.75
1994-ILA Service units ..................... 1.00 0.0340 -- 0.0340 (0.0340) 1.00 3.49
1993-ILA units ............................. 1.00 0.0279 0.0006 0.0285 (0.0286) 1.00 2.89
1993-ILA Administration units .............. 1.00 0.0264 0.0006 0.0270 (0.0270) 1.00 2.74
1993-ILA Service units ..................... 1.00 0.0239 0.0006 0.0245 (0.0246) 1.00 2.48
1992-ILA units ............................. 1.00 0.0339 0.0025 0.0364 (0.0362) 1.00 3.65
1992-ILA Administration units .............. 1.00 0.0320 0.0023 0.0343 (0.0343) 1.00 3.49
1992-ILA Service units ..................... 1.00 0.0294 0.0024 0.0318 (0.0318) 1.00 3.23
1991-ILA units ............................. 1.00 0.0557 0.0018 0.0575 (0.0575) 1.00 5.90
1991-ILA Administration units .............. 1.00 0.0540 0.0018 0.0558 (0.0558) 1.00 5.74
1991-ILA Service units ..................... 1.00 0.0515 0.0018 0.0533 (0.0533) 1.00 5.48
1990-ILA units ............................. 1.00 0.0772 0.0002 0.0774 (0.0774) 1.00 8.05
1990-ILA Administration units /(c)/......... 1.00 0.0413 0.0002 0.0415 (0.0415) 1.00 7.67/(b)/
1990-ILA Service units /(c)/................ 1.00 0.0417 0.0003 0.0420 (0.0421) 1.00 7.42/(b)/
1989-ILA units ............................. 1.00 0.0864 0.0005 0.0869 (0.0869) 1.00 9.06
1988-ILA units ............................. 1.00 0.0704 0.0004 0.0708 (0.0708) 1.00 7.30
1987-ILA units ............................. 1.00 0.0617 0.0002 0.0619 (0.0619) 1.00 6.32
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
======================
Ratio Ratio of net Ratio of net
of net investment Net Ratio of net investment
expenses income to assets at expenses to income to
to average of average end of period average net average net
net assets net assets (in 000's) assets assets
=============================================================================
For the Years Ended December 31,
================================
1996-ILA units .................................. 0.41% 4.98% $574,734 0.43% 4.96%
1996-ILA Administration units ................... 0.56 4.83 108,850 0.58 4.81
1996-ILA Service units .......................... 0.81 4.59 123,483 0.83 4.57
1995-ILA units .................................. 0.41 5.51 711,209 0.43 5.49
1995-ILA Administration units ................... 0.56 5.37 92,643 0.58 5.35
1995-ILA Service units .......................... 0.81 5.11 119,692 0.83 5.09
1994-ILA units .................................. 0.40 3.77 713,816 0.44 3.73
1994-ILA Administration units ................... 0.55 3.68 97,626 0.59 3.64
1994-ILA Service units .......................... 0.80 3.40 108,972 0.84 3.35
1993-ILA units .................................. 0.40 2.79 969,565 0.43 2.76
1993-ILA Administration units ................... 0.55 2.64 121,327 0.58 2.61
1993-ILA Service units .......................... 0.80 2.39 185,506 0.83 2.36
1992-ILA units .................................. 0.40 3.39 1,328,036 0.43 3.36
1992-ILA Administration units ................... 0.55 3.20 152,804 0.58 3.17
1992-ILA Service units .......................... 0.80 2.94 183,208 0.83 2.91
1991-ILA units .................................. 0.40 5.57 1,709,321 0.43 5.54
1991-ILA Administration units ................... 0.55 5.40 146,795 0.58 5.37
1991-ILA Service units .......................... 0.80 5.15 154,419 0.83 5.12
1990-ILA units .................................. 0.39 7.72 1,816,991 0.39 7.72
1990-ILA Administration units /(c)/.............. 0.55/(b)/ 7.42/(b)/ 132,088 0.55/(b)/ 7.42/(b)/
1990-ILA Service units /(c)/..................... 0.80/(b)/ 7.11/(b)/ 148,323 0.80/(b)/ 7.11/(b)/
1989-ILA units .................................. 0.40 8.64 1,769,974 0.40 8.64
1988-ILA units .................................. 0.40 7.04 1,657,215 0.40 7.04
1987-ILA units .................................. 0.40 6.17 1,693,767 0.40 6.17
</TABLE>
- -------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Treasury Instruments Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
========================================
Net asset Net realized Total Net asset
value at Net gain income from Distributions value at
beginning investment on investment investment to end Total /(a)/
of period income transcations operations unitholders of period return
===================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ............. $1.00 $0.0496 $0.0004 $0.0500 $(0.0500) $1.00 5.10%
1996-ILA Administration
units ................... 1.00 0.0482 0.0004 0.0486 (0.0486) 1.00 4.95
1996-ILA Service units ..... 1.00 0.0456 0.0004 0.0460 (0.0460) 1.00 4.68
1995-ILA units ............. 1.00 0.0550 0.0006 0.0556 (0.0556) 1.00 5.70
1995-ILA Administration
units ................... 1.00 0.0534 0.0007 0.0541 (0.0540) 1.00 5.54
1995-ILA Service units ..... 1.00 0.0500 0.0005 0.0505 (0.0505) 1.00 5.28
1994-ILA units ............. 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 4.01
1994-ILA Administration
units ................... 1.00 0.0397 0.0001 0.0398 (0.0398) 1.00 3.85
1994-ILA Service units ..... 1.00 0.0371 0.0001 0.0372 (0.0372) 1.00 3.59
1993-ILA units ............. 1.00 0.0288 0.0006 0.0294 (0.0294) 1.00 2.98
1993-ILA Administration
units ................... 1.00 0.0273 0.0006 0.0279 (0.0279) 1.00 2.83
1993-ILA Service units ..... 1.00 0.0248 0.0006 0.0254 (0.0254) 1.00 2.57
1992-ILA units ............. 1.00 0.0338 0.0012 0.0350 (0.0350) 1.00 3.54
1992-ILA Administration
units ................... 1.00 0.0326 0.0012 0.0338 (0.0338) 1.00 3.38
1992-ILA Service units ..... 1.00 0.0275 0.0011 0.0286 (0.0286) 1.00 3.13
For the Period January 30, 1991 (commencement of operations) through December 31,
=================================================================================
1991-ILA units ............. 1.00 0.0486 0.0013 0.0499 (0.0499) 1.00 5.75/(b)/
1991-ILA Administration
units /(c)/.............. 1.00 0.0210 0.0010 0.0220 (0.0220) 1.00 5.21/(b)/
1991-ILA Service units /(c)/ 1.00 0.0473 0.0009 0.0482 (0.0482) 1.00 5.33/(b)/
</TABLE>
<TABLE>
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
====================================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net of period average net average net
assets assets (in 000's) assets assets
=============================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
================================
1996-ILA units ............. 0.21% 4.96% $708,999 0.43% 4.74%
1996-ILA Administration
units ................... 0.36 4.82 137,706 0.58 4.60
1996-ILA Service units ..... 0.61 4.56 383,901 0.83 4.34
1995-ILA units ............. 0.21 5.50 586,294 0.44 5.27
1995-ILA Administration
units ................... 0.36 5.34 68,713 0.59 5.11
1995-ILA Service units ..... 0.61 5.00 123,254 0.84 4.77
1994-ILA units ............. 0.20 3.96 547,351 0.43 3.73
1994-ILA Administration
units ................... 0.35 3.97 64,388 0.58 3.74
1994-ILA Service units ..... 0.60 3.72 74,451 0.83 3.49
1993-ILA units ............. 0.20 2.88 456,411 0.44 2.64
1993-ILA Administration
units ................... 0.35 2.73 26,553 0.59 2.49
1993-ILA Service units ..... 0.60 2.48 34,014 0.84 2.24
1992-ILA units ............. 0.18 3.38 422,506 0.45 3.11
1992-ILA Administration
units ................... 0.33 3.26 6,915 0.60 2.99
1992-ILA Service units ..... 0.58 2.75 29,522 0.85 2.48
For the Period January 30, 1991 through December 31,
====================================================
1991-ILA units ............. 0.10/(b)/ 5.28/(b)/ 424,436 0.45/(b)/ 4.93/(b)/
1991-ILA Administration
units /(c)/.............. 0.25/(b)/ 4.77/(b)/ 17,649 0.60/(b)/ 4.42/(b)/
1991-ILA Service units /(c)/ 0.50/(b)/ 5.13/(b)/ 9,430 0.85/(b)/ 4.78/(b)/
</TABLE>
- -------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during July and
January of 1991, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Federal Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
--------------------------------------
Net
asset Net realized Total
value at gain income Net asset
beginning Net on from Distributions value at
of investment investment investment to end Total
period income transactions operations unitholders of period return(a)
======================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
- --------------------------------
1996-ILA units ....................... $1.00 $0.0513 -- $0.0513 $(0.0513) $1.00 5.24%
1996-ILA Administration units......... 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.09
1996-ILA Service units ............... 1.00 0.0473 -- 0.0473 (0.0473) 1.00 4.83
1995-ILA units ....................... 1.00 0.0569 -- 0.0569 (0.0569) 1.00 5.83
1995-ILA Administration units ........ 1.00 0.0550 -- 0.0550 (0.0550) 1.00 5.67
1995-ILA Service units ............... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.41
1994-ILA units ....................... 1.00 0.0407 -- 0.0407 (0.0407) 1.00 4.11
1994-ILA Administration units ........ 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.95
1994-ILA Service units ............... 1.00 0.0392 -- 0.0392 (0.0392) 1.00 3.69
1993-ILA units ....................... 1.00 0.0296 -- 0.0296 (0.0296) 1.00 3.00
1993-ILA Administration units ........ 1.00 0.0281 -- 0.0281 (0.0281) 1.00 2.84
1993-ILA Service units/(c)/........... 1.00 0.0157 -- 0.0157 (0.0157) 1.00 2.56/(b)/
1992-ILA units ....................... 1.00 0.0358 -- 0.0358 (0.0358) 1.00 3.61
1992-ILA Administration units ........ 1.00 0.0340 -- 0.0340 (0.0340) 1.00 3.46
1991-ILA units ....................... 1.00 0.0576 -- 0.0576 (0.0576) 1.00 5.94
1991-ILA Administration units ........ 1.00 0.0542 -- 0.0542 (0.0542) 1.00 5.78
1991-ILA Service units/(c)/........... 1.00 0.0196 -- 0.0196 (0.0196) 1.00 5.55/(b)/
1990-ILA units ....................... 1.00 0.0772 -- 0.0772 (0.0772) 1.00 8.06
1990-ILA Administration units/(d)/.... 1.00 0.0205 -- 0.0205 (0.0205) 1.00 7.39/(b)/
For the Period May 22, 1989 (commencement of operations) through December 31,
- -----------------------------------------------------------------------------
1989-ILA units ....................... 1.00 0.0516 -- 0.0516 (0.0516) 1.00 7.62(b)
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
---------------------------
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net of period average net average net
assets assets (in 000's) assets assets
====================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
- --------------------------------
1996-ILA units ....................... 0.26% 5.13% $2,303,677 0.43% 4.96%
1996-ILA Administration units......... 0.41 4.98 794,537 0.58 4.81
1996-ILA Service units ............... 0.66 4.73 192,416 0.83 4.56
1995-ILA units ....................... 0.26 5.69 1,731,935 0.42 5.53
1995-ILA Administration units ........ 0.41 5.50 516,917 0.57 5.34
1995-ILA Service units ............... 0.66 5.22 102,576 0.82 5.06
1994-ILA units ....................... 0.25 4.07 1,625,567 0.42 3.90
1994-ILA Administration units ........ 0.40 3.88 329,896 0.57 3.71
1994-ILA Service units ............... 0.65 3.92 15,539 0.82 3.75
1993-ILA units ....................... 0.25 2.96 1,430,292 0.42 2.79
1993-ILA Administration units ........ 0.40 2.81 362,401 0.57 2.64
1993-ILA Service units/(c)/........... 0.65/(b)/ 2.54/(b)/ 1,425 0.82/(b)/ 2.37/(b)/
1992-ILA units ....................... 0.25 3.58 1,600,989 0.42 3.41
1992-ILA Administration units ........ 0.40 3.40 312,792 0.57 3.23
1991-ILA units ....................... 0.25 5.76 1,656,232 0.42 5.59
1991-ILA Administration units ........ 0.40 5.42 291,810 0.57 5.25
1991-ILA Service units/(c)/........... 0.65/(b)/ 5.56/(b)/ -- 0.82/(b)/ 5.39/(b)/
1990-ILA units ....................... 0.25 7.72 1,368,765 0.40 7.57
1990-ILA Administration units/(d)/.... 0.40/(b)/ 7.25/(b)/ 90,748 0.55/(b)/ 7.10/(b)/
For the Period May 22, 1989 (commencement of operations) through December 31,
- -----------------------------------------------------------------------------
1989-ILA units ....................... 0.19/(b)/ 8.41/(b)/ 455,230 0.40/(b)/ 8.20/(b)/
</TABLE>
- ----------------
/(a)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/ Annualized.
/(c)/ ILA Service unit activity commenced during April of 1991; no shares were
outstanding during the period from August 7, 1991 through May 15, 1993.
(d)ILA Administration unit activity commenced during September of 1990.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Goldman Sachs--Institutional Liquid Assets
- ------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt Diversified Portfolio
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
======================================
Net
Net asset realized Total Net asset
value at Net gain(loss) income from value at
beginning investment on investment investment Distributions end of Total
of period income transactions operations to unitholders period return/(a)/
===============================================================================================
For the Years Ended December 31,
================================
<S> <C> <C> <C> <C> <C> <C> <C>
1996-ILA units ..................... $1.00 $0.0320 $ $0.0320 $(0.0320) $1.00 3.25%
1996-ILA Administration units....... 1.00 0.0306 -- 0.0306 (0.0306) 1.00 3.09
1996-ILA Service units ............. 1.00 0.0279 -- 0.0279 (0.0279) 1.00 2.84
1995-ILA units ..................... 1.00 0.0365 -- 0.0365 (0.0365) 1.00 3.72
1995-ILA Administration units....... 1.00 0.0351 -- 0.0351 (0.0352) 1.00 3.57
1995-ILA Service units ............. 1.00 0.0324 -- 0.0324 (0.0325) 1.00 3.31
1994-ILA units ..................... 1.00 0.0264 -- 0.0264 (0.0264) 1.00 2.71
1994-ILA Administration units....... 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.55
1994-ILA Service units ............. 1.00 0.0220 -- 0.0220 (0.0220) 1.00 2.30
1993-ILA units ..................... 1.00 0.0222 -- 0.0222 (0.0222) 1.00 2.25
1993-ILA Administration units....... 1.00 0.0207 -- 0.0207 (0.0207) 1.00 2.09
1993-ILA Service units ............. 1.00 0.0183 -- 0.0183 (0.0183) 1.00 1.84
1992-ILA units ..................... 1.00 0.0277 -- 0.0277 (0.0277) 1.00 2.82
1992-ILA Administration units....... 1.00 0.0266 -- 0.0266 (0.0266) 1.00 2.67
1992-ILA Service units ............. 1.00 0.0243 -- 0.0243 (0.0243) 1.00 2.41
1991-ILA units ..................... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.33
1991-ILA Administration units....... 1.00 0.0406 -- 0.0406 (0.0406) 1.00 4.17
1991-ILA Service units ............. 1.00 0.0386 -- 0.0386 (0.0386) 1.00 3.91
1990-ILA units ..................... 1.00 0.0550 (0.0001) 0.0549 (0.0549) 1.00 5.64
1990-ILA Administration units /(c)/. 1.00 0.0301 -- 0.0301 (0.0300) 1.00 5.43/(b)/
1990-ILA Service units /(c)/........ 1.00 0.0259 -- 0.0259 (0.0259) 1.00 5.17/(b)/
1989-ILA units ..................... 1.00 0.0591 (0.0001) 0.0590 (0.0590) 1.00 6.07
1988-ILA units ..................... 1.00 0.0487 0.0003 0.0490 (0.0490) 1.00 5.03
1987-ILA units ..................... 1.00 0.0413 (0.0003) 0.0410 (0.0410) 1.00 4.23
<CAPTION>
Ratio assuming no
waiver of fees and no
expense limitation
==============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end of expenses to income to
average net average net period average net average net
assets assets (in 000's) assets assets
===================================================================================
For the Years Ended December 31,
================================
<S> <C> <C> <C> <C> <C>
1996-ILA units ..................... 0.31% 3.20% $1,514,443 0.41% 3.10%
1996-ILA Administration units....... 0.46 3.06 59,097 0.56 2.96
1996-ILA Service units ............. 0.71 2.79 28,921 0.81 2.69
1995-ILA units ..................... 0.31 3.65 $1,342,585 0.42 3.54
1995-ILA Administration units....... 0.46 3.51 48,773 0.57 3.40
1995-ILA Service units ............. 0.71 3.24 49,647 0.82 3.13
1994-ILA units ..................... 0.30 2.64 1,434,965 0.41 2.53
1994-ILA Administration units....... 0.45 2.50 97,778 0.56 2.39
1994-ILA Service units ............. 0.70 2.20 36,492 0.81 2.09
1993-ILA units ..................... 0.30 2.22 1,769,477 0.41 2.11
1993-ILA Administration units....... 0.45 2.08 99,896 0.56 1.97
1993-ILA Service units ............. 0.70 1.83 45,172 0.81 1.72
1992-ILA units ..................... 0.30 2.77 1,333,925 0.42 2.65
1992-ILA Administration units....... 0.45 2.66 50,225 0.57 2.54
1992-ILA Service units ............. 0.70 2.43 29,534 0.82 2.31
1991-ILA units ..................... 0.32 4.24 1,044,986 0.42 4.14
1991-ILA Administration units....... 0.47 4.06 37,567 0.57 3.96
1991-ILA Service units ............. 0.72 3.86 52,399 0.82 3.76
1990-ILA units ..................... 0.40 5.50 603,895 0.40 5.50
1990-ILA Administration units /(c)/. 0.55/(b)/ 5.40/(b)/ 42,498 0.55/(b)/ 5.40/(b)/
1990-ILA Service units /(c)/........ 0.80/(b)/ 5.16/(b)/ 56,810 0.80/(b)/ 5.16/(b)/
1989-ILA units ..................... 0.40 5.91 688,556 0.40 5.91
1988-ILA units ..................... 0.40 4.87 907,782 0.40 4.87
1987-ILA units ..................... 0.40 4.13 965,714 0.40 4.13
- -------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during June and July
of 1990, respectively.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt California Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income from investment operations
=====================================
Net Net Total
asset realized income Net asset
value at Net (loss) on from Distributions value at
beginning investment investment investment to end of Total
of period income transactions operations unitholders period return /(a)/
==========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended
December 31,
==========================
1996-ILA units ............. $1.00 $0.0299 -- $0.0299 $(0.0299) $1.00 3.03%
1996-ILA Administration
units ................... 1.00 0.0284 -- 0.0284 (0.0284) 1.00 2.88
1995-ILA units ............. 1.00 0.0349 -- 0.0349 (0.0350) 1.00 3.55
1995-ILA Administration
units ................... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.40
1994-ILA units ............. 1.00 0.0250 -- 0.0250 (0.0250) 1.00 2.53
1994-ILA Administration
units ................... 1.00 0.0233 -- 0.0233 (0.0233) 1.00 2.37
1993-ILA units ............. 1.00 0.0206 -- 0.0206 (0.0206) 1.00 2.09
1993-ILA Administration
units ................... 1.00 0.0191 -- 0.0191 (0.0191) 1.00 1.93
1993-ILA Service units ..... 1.00 0.0166 -- 0.0166 (0.0166) 1.00 1.68
1992-ILA units ............. 1.00 0.0256 (0.0001) 0.0255 (0.0256) 1.00 2.62
1992-ILA Administration
units ................... 1.00 0.0235 (0.0002) 0.0233 (0.0235) 1.00 2.47
1992-ILA Service units (c).. 1.00 0.0081 -- 0.0081 (0.0081) 1.00 1.99/(b)/
1991-ILA units ............. 1.00 0.0388 -- 0.0388 (0.0388) 1.00 3.92
1991-ILA Administration
units ................... 1.00 0.0376 -- 0.0376 (0.0376) 1.00 3.80
1990-ILA units ............. 1.00 0.0511 (0.0001) 0.0510 (0.0511) 1.00 5.24
1990-ILA Administration
units (c)................ 1.00 0.0042 -- 0.0042 (0.0042) 1.00 5.14/(b)/
1989-ILA units ............. 1.00 0.0573 (0.0001) 0.0572 (0.0572) 1.00 5.93
For the Period October 3, 1988 (commencement of operations) through
December 31,
=========================================================
1988-ILA units ............. 1.00 0.0139 -- 0.0139 (0.0139) 1.00 5.81/(b)/
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
============================
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net period of average net average net
assets assets (in 000's) assets assets
===========================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended
December 31,
==========================
1996-ILA units ............. 0.41% 2.99% $440,476 0.42% 2.98%
1996-ILA Administration
units ................... 0.56 2.84 142 0.57 2.83
1995-ILA units ............. 0.41 3.49 346,728 0.41 3.49
1995-ILA Administration
units ................... 0.56 3.32 61 0.56 3.32
1994-ILA units ............. 0.40 2.50 227,399 0.41 2.49
1994-ILA Administration
units ................... 0.55 2.33 790 0.56 2.32
1993-ILA units ............. 0.40 2.06 229,839 0.44 2.02
1993-ILA Administration
units ................... 0.55 1.91 1,425 0.59 1.87
1993-ILA Service units ..... 0.76 1.66 -- 0.84 1.54
1992-ILA units ............. 0.40 2.56 161,868 0.47 2.49
1992-ILA Administration
units ................... 0.55 2.35 31 0.62 2.28
1992-ILA Service units (c).. 0.80/(b)/ 3 0.87/(b)/ 1.96/(b)/
2.03(b)
1991-ILA units ............. 0.40 3.88 102,494 0.47 3.81
1991-ILA Administration
units ................... 0.55 3.76 13 0.62 3.69
1990-ILA units ............. 0.40 5.11 106,972 0.40 5.11
1990-ILA Administration
units (c)................ 0.55/(b)/ 5.33(b) 68 0.55/(b)/ 5.33/(b)/
1989-ILA units ............. 0.40 5.73 112,463 0.40 5.73
For the Period October 3, 1988 (commencement of
operations) through December 31,
=========================================================
1988-ILA units ............. 0.24/(b)/ 5.74/(b)/ 41,028 0.38/(b)/ 5.60/(b)/
- -------------
</TABLE>
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration and Service unit activity commenced during December of
1990 and August of 1992, respectively. No service shares were outstanding
for the years ended December 31, 1996, 1995, 1994.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
<TABLE>
<CAPTION>
Goldman Sachs Money Market Trust--Institutional Liquid Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights (continued)
Selected Data for a Unit Outstanding Throughout Each Period
Tax-Exempt New York Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
----------------------------------------
Net asset Net realized Total Net asset
value at Net loss income from value at
beginning investment on investment investment Distribution end Total
of period income transactions operations to unitholders of period return(a)
=============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31,
- ---------------------------------
1996-ILA units ..................... $1.00 $0.0301 -- $0.0301 $(0.0301) $1.00 3.05%
1996-ILA Administration units ...... 1.00 0.0288 -- 0.0288 (0.0288) 1.00 2.90
1995-ILA units ..................... 1.00 0.0344 -- 0.0344 (0.0344) 1.00 3.51
1995-ILA Administration units ...... 1.00 0.0328 -- 0.0328 (0.0328) 1.00 3.35
1994-ILA units ..................... 1.00 0.0262 -- 0.0262 (0.0262) 1.00 2.56
1994-ILA Administration units ...... 1.00 0.0247 -- 0.0247 (0.0247) 1.00 2.41
1993-ILA units ..................... 1.00 0.0221 -- 0.0221 (0.0221) 1.00 2.21
1993-ILA Administration units ...... 1.00 0.0205 -- 0.0205 (0.0205) 1.00 2.05
1992-ILA units ..................... 1.00 0.0265 -- 0.0265 (0.0265) 1.00 2.71
1992-ILA Administration units ...... 1.00 0.0253 -- 0.0253 (0.0253) 1.00 2.55
For the Period February 15, 1991 (commencement of operations) through December 31,
- -----------------------------------------------------------------------------------
1991-ILA units ..................... 1.00 0.0347 (0.0002) 0.0345 (0.0347) 1.00 4.02/(b)/
1991-ILA Administration units /(c)/. 1.00 0.0330 -- 0.0330 (0.0330) 1.00 3.87/(b)/
- --------------------
<CAPTION>
Ratios assuming no
waiver of fees and no
expense limitations
------------------------------
Ratio of net Net Ratio of net
Ratio of net investment assets at Ratio of net investment
expenses to income to end expenses to income to
average net average net of period average net average net
assets assets (in 000's) assets assets
============================================================================
<S> <C> <C> <C> <C> <C>
For the Years Ended December 31,
- ---------------------------------
1996-ILA units ..................... 0.32% 3.01% $70,175 0.43% 2.90%
1996-ILA Administration units ...... 0.47 2.88 44,319 0.58 2.77
1995-ILA units ..................... 0.30 3.44 90,537 0.44 3.30
1995-ILA Administration units ...... 0.45 3.28 26,724 0.59 3.14
1994-ILA units ..................... 0.24 2.62 84,517 0.47 2.39
1994-ILA Administration units ...... 0.39 2.47 38,970 0.62 2.24
1993-ILA units ..................... 0.10 2.21 48,367 0.51 1.80
1993-ILA Administration units ...... 0.25 2.05 20,306 0.66 1.64
1992-ILA units ..................... 0.10 2.65 16,844 0.57 2.18
1992-ILA Administration units ...... 0.25 2.53 14,641 0.72 2.06
For the Period February 15, 1991 (commencement of operations) through December 31,
- -----------------------------------------------------------------------------------
1991-ILA units ..................... 0.10/(b)/ 3.96/(b)/ 11,070 0.76/(b)/ 3.30/(b)/
1991-ILA Administration units/(c)/.. 0.25/(b)/ 3.90/(b)/ 19,198 0.91/(b)/ 3.24/(b)/
</TABLE>
- -------------
/(a)/Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the
investment at the net asset value at the end of the period.
/(b)/Annualized.
/(c)/ILA Administration unit activity commenced during February of 1991.
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Unitholders and Board of Trustees of Goldman Sachs Money Market
Trust--Institutional Liquid Assets:
We have audited the accompanying statements of assets and liabilities of
Goldman Sachs Money Market Trust--Institutional Liquid Assets (a Massachusetts
business trust comprising the Prime Obligations, Money Market, Government,
Treasury Obligations, Treasury Instruments, Federal, Tax-Exempt Diversified,
Tax-Exempt California and Tax-Exempt New York Portfolios), including the
statements of investments as of December 31, 1996, and the related statements of
operations for the year then ended, and the statements of changes in net assets
and the financial highlights for the periods presented. These financial
statements and the financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting Goldman Sachs Money
Market Trust--Institutional Liquid Assets as of December 31, 1996, the results
of their operations for the year then ended, the changes in their net assets and
the financial highlights for the periods presented, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 10, 1997
- -------------------------------------- ----------------------------------------
44
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------- -----------------------------------------
[This page intentionally left blank]
- -------------------------------------- -----------------------------------------
45
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------ -----------------------------------------
[This page intentionally left blank]
- ------------------------------------ -----------------------------------------
46
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Money Market
Trust--Institutional Liquid Assets Portfolios' Prospectus which contains facts
concerning each Fund's objectives and policies, management, expenses and other
information.
- --------------------------------------------------------------------------------
47
<PAGE>
================================================================================
Goldman Sachs
1 New York Plaza
New York, NY 10004
Trustees
Ashok N. Bakhru, Chairman
David B. Ford
Alan A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
Officers
Douglas C. Grip, President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Goldman Sachs
Investment Adviser,
Distributor and Transfer Agent
Goldman Sachs
Money Market Trust
Institutional
Liquid Assets
- --------------------------------------------------------------------------------
Annual Report
December 31, 1996
Prime Obligations Portfolio
Money Market Portfolio
Government Portfolio
Treasury Obligations Portfolio
Treasury Instruments Portfolio
Federal Portfolio
Tax-Exempt Diversified Portfolio
Tax-Exempt California Portfolio
Tax-Exempt New York Portfolio
[LOGO OF GOLDMAN SACHS APPEARS HERE]
================================================================================
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE FUNDS
4900 Sears Tower, Chicago, Illinois 60606
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION - MAY 1, 1997
FST ADMINISTRATION SHARES
- --------------------------------------------------------------------------------
Goldman Sachs Trust (the "Trust") is a no-load, open-end, management investment
company (or mutual fund) which includes the Financial Square Funds. This
Statement of Additional Information relates solely to the offering of FST
Administration Shares of Financial Square Prime Obligations Fund ("Prime
Obligations Fund"), Financial Square Money Market Plus Fund ("Plus Fund"),
Financial Square Money Market Fund ("Money Market Fund"), Financial Square
Treasury Obligations Fund ("Treasury Obligations Fund"), Financial Square
Treasury Instruments Fund ("Treasury Instruments Fund"), Financial Square
Government Fund ("Government Fund"), Financial Square Federal Fund ("Federal
Fund"), Financial Square Tax-Free Money Market Fund ("Tax-Free Fund") and
Financial Square Municipal Money Market Fund ("Municipal Fund") (individually, a
"Fund" and collectively the "Funds").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds'
investment adviser . Goldman Sachs serves as the Funds' distributor and
transfer agent.
The Goldman Sachs Funds offers banks, corporate cash managers, investment
advisers and other institutional investors a family of professionally-managed
mutual funds, including money market, fixed income and equity funds, and a range
of related services. All products are designed to provide clients with the
benefit of the expertise of GSAM and its affiliates in security selection, asset
allocation, portfolio construction and day-to-day management.
The hallmark of the Goldman Sachs Funds is personalized service, which reflects
the priority that Goldman Sachs places on serving clients' interests. As
Goldman Sachs clients, shareholders will be assigned an Account Administrator
("AA"), who is ready to help shareholders with questions concerning their
accounts. During business hours, service organizations can call their AA
through a toll-free number to place purchase or redemption orders or obtain Fund
and account information. The AA can also answer inquiries about rates of return
and portfolio composition and holdings, and guide service organizations through
operational details. A Goldman Sachs client can also utilize the SMART/SM/
personal computer software system which allows shareholders
<PAGE>
to purchase or redeem shares and also obtain Fund and account information
directly.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectuses relating to FST Administration Shares
dated May 1, 1997, a copy of which may be obtained without charge from Service
Organizations, as defined herein, or by calling Goldman Sachs at 800-621-2550 or
by writing Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
------------
<S> <C>
Investment Policies and Practices of the Funds.. 4
Investment Limitations.......................... 17
Trustees and Officers........................... 21
The Adviser, Distributor
and Transfer Agent............................ 27
Portfolio Transactions.......................... 30
Net Asset Value................................. 32
Redemptions..................................... 34
Calculation of Yield Quotations................. 35
Tax Information................................. 38
Organization and Capitalization................. 42
Custodian and Subcustodian...................... 47
Independent Accountants......................... 47
Financial Statements............................ 47
Administration Plan............................. 48
Appendix A (Description of Securities Ratings).. A-1
</TABLE>
3
<PAGE>
ADMINISTRATION PLAN
The Trust, on behalf of each Fund, has adopted an administration plan
(the "Plan") with respect to the FST Administration Shares which authorizes the
Funds to compensate Service Organizations for providing certain account
administration services to their customers who are beneficial owners of such
shares. Pursuant to the Plan, the Trust, on behalf of each Fund, will enter
into agreements with Service Organizations which purchase FST Administration
Shares on behalf of their customers ("Service Agreements"). Under such Service
Agreements the Service Organizations may: (a) act, directly or through an agent,
as the sole shareholder of record and nominee for all customers, (b) maintain
account records for each customer who beneficially owns FST Administration
Shares, (c) answer questions and handle correspondence from customers regarding
their accounts, (d) process customer orders to purchase, redeem and exchange FST
Administration Shares, and handle the transmission of funds representing the
customers' purchase price or redemption proceeds, and (e) issue confirmations
for transactions in shares by customers. As compensation for such services,
each Fund will pay each Service Organization an administration fee in an amount
up to .25% (on an annualized basis) of the average daily net assets of the FST
Administration Shares of such Fund attributable to or held in the name of such
Service Organization.
For the fiscal years ended December 31, 1996 and December 31, 1995 and
the eleven months ended December 31, 1994, the amount of administration fees
paid by each Fund to Service Organizations was as follows:
<TABLE>
<CAPTION>
Dec. 1996 Dec. 1995 Dec. 1994
---------- --------- ---------
<S> <C> <C> <C>
Prime Obligations Fund..... $ 527,357 $318,346 $139,235
Money Market Fund/(1)/..... 474,043 283,241 78,743
Treasury Obligations Fund.. 1,100,814 457,071 79,171
Government Fund............ 250,618 131,629 83,036
Tax Free Fund/(2)/......... 128,721 32,166 1,800
- ---------------
</TABLE>
(1) FST Administration Share activity commenced May 20, 1994.
(2) FST Administration Share activity commenced August 1, 1994.
Conflict of interest restrictions (including the Employee Retirement
Income Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in FST Administration Shares. Service Organizations, including banks
regulated by the Comptroller of the Currency, the Federal Reserve Board or the
Federal Deposit Insurance Corporation, and investment advisers and other money
managers subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult legal advisers before
investing fiduciary assets in FST Administration Shares. In addition, under
some state securities laws, banks and other financial institutions purchasing
FST Administration Shares on behalf of their customers may be required to
register as dealers.
48
<PAGE>
The Trustees, including a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of such Plan or the related Service Agreements, most
recently voted to approve the Plan and Service Agreements for each Fund at a
meeting called for the purpose of voting on such Plan and Service Agreements on
April 23, 1997. The Plan and Service Agreements will remain in effect until
April 30, 1998 and will continue in effect thereafter only if such continuance
is specifically approved annually by a vote of the Board of Trustees in the
manner described above.
The Plan may not be amended to increase materially the amount to be
spent for the services described therein without approval of the FST
Administration Shareholders of each Fund, and all material amendments of the
Plan must also be approved by the Board of Trustees in the manner described
above. The Plan may be terminated at any time by a majority of the Board of
Trustees as described above or by vote of a majority of the outstanding FST
Administration Shares of each Fund. The Service Agreements may be terminated at
any time, without payment of any penalty, by vote of a majority of the Board of
Trustees as described above or by a vote of a majority of the outstanding FST
Administration Shares of each Fund on not more than sixty (60) days' written
notice to any other party to the Service Agreements. The Service Agreements
shall terminate automatically if assigned. As long as the Plan is in effect,
the selection and nomination of those Trustees who are not interested persons
shall be committed to the discretion of the Trust's Nominating Committee, which
consists of all of the non-interested members of the Board of Trustees. The
Board of Trustees has determined that, in its judgment, there is a reasonable
likelihood that the Plan will benefit each Fund and holders of FST
Administration Shares of such Fund. In the Board of Trustees' quarterly review
of the Plan and Service Agreements, the Board will consider their continued
appropriateness and the level of compensation provided therein.
49
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE FUNDS
4900 Sears Tower, Chicago, Illinois 60606
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION - MAY 1, 1997
FST SERVICE SHARES
- --------------------------------------------------------------------------------
Goldman Sachs Trust (the "Trust") is a no-load, open-end, manage ment investment
company (or mutual fund) which includes the Financial Square Funds. This
Statement of Additional Information relates solely to the offering of FST
Service Shares of Financial Square Prime Obligations Fund ("Prime Obligations
Fund"), Finan cial Square Money Market Plus Fund ("Plus Fund"), Financial Square
Money Market Fund ("Money Market Fund"), Financial Square Treasury Obligations
Fund ("Treasury Obligations Fund"), Finan cial Square Treasury Instruments Fund
("Treasury Instruments Fund"), Financial Square Government Fund ("Government
Fund"), Financial Square Federal Fund ("Federal Fund"), Financial Square Tax-
Free Money Market Fund ("Tax-Free Fund") and Financial Square Municipal Money
Market Fund ("Municipal Fund") (individually, a "Fund" and collectively the
"Funds").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate operating
division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the Funds'
investment adviser. Goldman Sachs serves as the Funds' distributor and transfer
agent.
The Goldman Sachs Funds offers banks, corporate cash managers, investment
advisers and other institutional investors a family of professionally-managed
mutual funds, including money market, fixed income and equity funds, and a range
of related services. All products are designed to provide clients with the
benefit of the expertise of GSAM and its affiliates in security selection, asset
allocation, portfolio construction and day-to-day manage ment.
The hallmark of the Goldman Sachs Funds is personalized service, which reflects
the priority that Goldman Sachs places on serving clients' interests. As
Goldman Sachs clients, shareholders will be assigned an Account Administrator
("AA"), who is ready to help shareholders with questions concerning their
accounts. During business hours, service organizations can call their AA
through a toll-free number to place purchase or redemption orders or obtain Fund
and account information. The AA can also answer inquiries about rates of return
and portfolio composition and holdings, and guide service organizations through
operational details. A Goldman Sachs client can also utilize the SMART/SM/
personal com puter software system which allows shareholders to purchase or
redeem shares and also obtain Fund and account information directly.
<PAGE>
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectuses relating to FST Service Shares dated May 1,
1997, a copy of which may be obtained without charge from Service Organizations,
as defined herein, or by calling Goldman Sachs at 800-621-2550 or by writing
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
------------
<S> <C>
Investment Policies and Practices of the
Funds................................ 4
Investment Limitations.................... 17
Trustees and Officers..................... 21
The Adviser, Distributor
and Transfer Agent................... 27
Portfolio Transactions.................... 30
Net Asset Value........................... 32
Redemptions............................... 34
Calculation of Yield Quotations........... 35
Tax Information........................... 38
Organization and Capitalization........... 42
Custodian and Subcustodian................ 47
Independent Accountants................... 47
Financial Statements...................... 47
Service Plan.............................. 48
Appendix A (Description of Securities
Ratings)............................. A-1
</TABLE>
3
<PAGE>
SERVICE PLAN
The Trust, on behalf of each Fund, has adopted a service plan (the "Plan") with
respect to the FST Service Shares which autho rizes the Funds to compensate
Service Organizations for providing certain account administration and personal
and account mainte nance services to their customers who are beneficial owners
of such shares. Pursuant to the Plan, the Trust, on behalf of each Fund, enters
into agreements with Service Organizations which purchase FST Service Shares on
behalf of their customers ("Ser vice Agreements"). Under such Service
Agreements the Service Organizations may: (a) act, directly or through an agent,
as the sole shareholder of record and nominee for all customers, (b) maintain
account records for each customer who beneficially owns FST Service Shares, (c)
answer questions and handle correspon dence from customers regarding their
accounts, (d) process customer orders to purchase, redeem and exchange FST
Service Shares, and handle the transmission of funds representing the customers'
purchase price or redemption proceeds, (e) issue confirmations for transactions
in shares by customers, (f) provide facilities to answer questions from
prospective and existing investors about FST Service Shares, (g) receive and
answer investor correspondence, including requests for prospec tuses and
statements of additional information, (h) display and make prospectuses
available on the Service Organization's premis es, (i) assist customers in
completing application forms, select ing dividend and other account options and
opening custody ac counts with the Service Organization and (j) act as liaison
between customers and the Funds, including obtaining information from the Funds,
working with the Funds to correct errors and resolve problems and providing
statistical and other information to the Funds. As compensation for such
services, the Trust, on behalf of each Fund, pays each Service Organization a
service fee in an amount up to .50% (on an annualized basis) of the average
daily net assets of the FST Service Shares of each Fund attribut able to or held
in the name of such Service Organization for its customers; provided, however,
that the fee paid for personal and account maintenance services shall not exceed
.25% of such average daily net assets.
For the fiscal years ended December 31, 1996 and December 31, 1995 and the
eleven months ended December 31, 1994, the amount of service fees paid by each
Fund to Service Organizations was as follows:
48
<PAGE>
<TABLE>
Dec. 1996 Dec. 1995 Dec. 1994
----------- --------- ---------
<S> <C> <C> <C>
Prime Obligations Fund $ 541,076 $299,892 $115,595
Money Market Fund/(1)/ 271,936 8,447 -
Treasury Obligations Fund 849,624 584,861 168,982
Government Fund/(2)/ 1,258,434 39,940 -
Tax-Free Fund/(3)/ 91,599 70,179 1,199
</TABLE>
_______________
(1) FST Service Share activity commenced June 14, 1995.
(2) FST Service Share activity commenced May 16, 1995.
(3) FST Service Share activity commenced September 23, 1994.
The Trust has adopted the Plan pursuant to Rule 12b-1 under the Investment
Company Act in order to avoid any possibility that payments to the Service
Organizations pursuant to the Service Agreements might violate the Investment
Company Act. Rule 12b-1, which was adopted by the SEC under the Investment
Company Act, regulates the circumstances under which an investment company or
series thereof may bear expenses associated with the distribution of its shares.
In particular, such an investment company or series thereof cannot engage
directly or indirectly in financing any activity which is primarily intended to
result in the sale of shares issued by the company unless it has adopted a plan
pursu ant to, and complies with the other requirements of, such Rule. The Trust
believes that fees paid for the services provided in the Plan and described
above are not expenses incurred primarily for effecting the distribution of FST
Service Shares. However, should such payments be deemed by a court or the SEC
to be distribution expenses, such payments would be duly authorized by the Plan.
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent in the business of issuing, underwriting, selling or
distributing securities, although institutions such as national banks are
permitted to purchase and sell securities upon the order and for the account of
their customers. In addition, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and other
financial institutions purchasing FST Service Shares on behalf of their
customers may be required to register as dealers pursuant to state law. Should
future legislative or administrative action or judicial or administrative
decisions or interpretations prohibit or restrict the activities of one or more
of the Service Organizations in connection with the Funds, such Service
Organizations might be required to alter materially or discontinue the services
performed under their Service Agree ments. If one or more of the Service
Organizations were re stricted from effecting purchases or sales of FST Service
Shares automatically pursuant to pre-authorized instructions, for example,
effecting such transactions on a manual basis might affect the size and/or
growth of a Fund. Any such alteration or discontinuance of services could
require the Board of Trustees to
49
<PAGE>
consider changing the Funds' method of operations or providing alternative means
of offering FST Service Shares to customers of such Service Organizations, in
which case the operation of a Fund, its size and/or its growth might be
significantly altered. It is not anticipated, however, that any alteration of
the Funds' operations would have any effect on the net asset value per share or
result in financial losses to any shareholder.
Conflict of interest restrictions (including the Employee Re tirement Income
Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in FST Service Shares. Service Organizations, including banks regulated
by the Comptroller of the Currency, the Federal Reserve Board or the Federal
Deposit Insurance Corporation, and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal advisers before investing
fiduciary assets in FST Service Shares.
The Trustees, including a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indi rect financial interest in
the operation of such Plan or the related Service Agreements, most recently
voted to approve the Plan and Service Agreements for each Fund at a meeting
called for the purpose of voting on such Plan and Service Agreements on April
23, 1997. The Plan and Service Agreements will remain in effect until April 30,
1998 and will continue in effect thereaf ter only if such continuance is
specifically approved annually by a vote of the Board of Trustees in the manner
described above.
The Plan may not be amended to increase materially the amount to be spent for
the services described therein without approval of the FST Service Shareholders
of each Fund, and all material amend ments of the Plan must also be approved by
the Board of Trustees in the manner described above. The Plan may be terminated
at any time by a majority of the Board of Trustees as described above or by vote
of a majority of the outstanding FST Service Shares of each Fund. The Service
Agreements may be terminated at any time, without payment of any penalty, by
vote of a majority of the Board of Trustees as described above or by a vote of a
majority of the outstanding FST Service Shares of each Fund on not more than
sixty (60) days' written notice to any other party to the Service Agreements.
The Service Agreements shall terminate automatically if assigned. As long as
the Plan is in effect, the selection and nomination of those Trustees who are
not interested persons shall be committed to the discretion of the Trust's
Nominating Committee, which consists of all of the non-interested members of the
Board of Trustees. The Board of Trustees has determined that, in its judgment,
there is a reasonable likeli hood that the Plan will benefit each Fund and
holders of FST Service Shares of such Fund. In the Board of Trustees' quarterly
50
<PAGE>
review of the Plan and Service Agreements, the Board will consider their
continued appropriateness and the level of compensation provided therein.
51
<PAGE>
GOLDMAN SACHS MONEY MARKET TRUST
FINANCIAL SQUARE FUNDS
4900 Sears Tower, Chicago, Illinois 60606
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION - MAY 1, 1997
FST PREFERRED SHARES
- --------------------------------------------------------------------------------
Goldman Sachs Trust (the "Trust") is a no-load, open-end, management
investment company (or mutual fund) which includes the Financial Square Funds.
This Statement of Additional Information relates solely to the offering of FST
Preferred Shares of Financial Square Prime Obligations Fund ("Prime Obligations
Fund"), Financial Square Money Market Fund ("Money Market Fund"), Financial
Square Treasury Obligations Fund ("Treasury Obligations Fund"), Financial Square
Treasury Instruments Fund ("Treasury Instruments Fund") Financial Square
Government Fund ("Government Fund"), Financial Square Federal Fund ("Federal
Fund"), Financial Square Tax-Free Money Market Fund ("Tax-Free Fund"), Financial
Square Money Market Plus Fund ("Plus Fund") and Financial Square Municipal Money
Market Fund ("Municipal Fund") (individually, a "Fund" and collectively the
"Funds").
Goldman Sachs Asset Management ("GSAM" or the "Adviser"), a separate
operating division of Goldman, Sachs & Co. ("Goldman Sachs"), serves as the
Funds' investment adviser . Goldman Sachs serves as the Funds' distributor and
transfer agent.
The Goldman Sachs Funds offers banks, corporate cash managers, investment
advisers and other institutional investors a family of professionally-managed
mutual funds, including money market, fixed income and equity funds, and a range
of related services. All products are designed to provide clients with the
benefit of the expertise of GSAM and its affiliates in security selection, asset
allocation, portfolio construction and day-to-day management.
The hallmark of the Goldman Sachs Funds is personalized service, which
reflects the priority that Goldman Sachs places on serving clients' interests.
As Goldman Sachs clients, shareholders will be assigned an Account Administrator
("AA"), who is ready to help shareholders with questions concerning their
accounts. During business hours, service organizations can call their AA
through a toll-free number to place purchase or redemption orders or obtain Fund
and account information. The AA can also answer inquiries about rates of return
and portfolio composition and holdings, and guide service organizations through
operational details. A Goldman Sachs client can also utilize the SMART/SM/
personal computer software system which allows shareholders to purchase or
redeem shares and also obtain Fund and account information directly.
<PAGE>
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus relating to FST Preferred
Shares dated May 1, 1997, a copy of which may be obtained without charge from
Service Organizations, as defined herein, or by calling Goldman Sachs at 800-
621-2550 or by writing Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page in
Statement of
Additional
Information
------------
<S> <C>
Investment Policies and Practices of the
Funds................................ 4
Investment Limitations.................... 17
Trustees and Officers..................... 21
The Adviser, Distributor
and Transfer Agent................... 27
Portfolio Transactions.................... 30
Net Asset Value........................... 32
Redemptions............................... 34
Calculation of Yield Quotations........... 35
Tax Information........................... 38
Organization and Capitalization........... 42
Custodian and Subcustodian................ 47
Independent Accountants................... 47
Financial Statements...................... 47
Preferred Administration Plan............. 48
Appendix A (Description of Securities
Ratings)............................. A-1
</TABLE>
3
<PAGE>
PREFERRED ADMINISTRATION PLAN
The Trust, on behalf of the Funds, has adopted a preferred administration
plan (the "Plan") with respect to the FST Preferred Shares which authorizes the
Funds to compensate Service Organizations for providing certain account
administration services to their customers who are beneficial owners of such
shares. Pursuant to the Plan, the Trust, on behalf of each Fund, will enter
into agreements with Service Organizations which purchase FST Preferred Shares
on behalf of their customers ("Service Agreements"). Under such Service
Agreements the Service Organizations may: (a) act, directly or through an agent,
as the sole shareholder of record and nominee for all customers, (b) maintain
account records for each customer who beneficially owns FST Preferred Shares,
(c) process customer orders to purchase, redeem and exchange FST Preferred
Shares, and handle the transmission of funds representing the customers'
purchase price or redemption proceeds. As compensation for such services, each
Fund, will pay each Service Organization a service fee in an amount up to .10%
(on an annualized basis) of the average daily net assets of the FST Preferred
Shares of the Fund attributable to or held in the name of such Service
Organization.
For the fiscal year ended December 31, 1996 the amount of preferred
administration fees paid by each Fund to Service Organizations was as
follows:
<TABLE>
<CAPTION>
Dec. 1996
---------
<S> <C>
Prime Obligations Fund..... $42,963
Money Market Fund.......... 2,874
Treasury Obligations Fund.. 15,097
Government Fund............ 395
Tax Free Fund.............. 13,155
</TABLE>
Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in FST Preferred Shares. Service Organizations, including banks regulated
by the Comptroller of the Currency, the Federal Reserve Board or the Federal
Deposit Insurance Corporation, and investment advisers and other money managers
subject to the jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult legal advisers before investing
fiduciary assets in FST Preferred Shares. In addition, under some state
securities laws, banks and other financial institutions purchasing FST Preferred
Shares on behalf of their customers may be required to register as dealers.
48
<PAGE>
The Trustees, including a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of such Plan or the related Service Agreements, most recently
voted to approve the Plan and Service Agreements at a meeting called for the
purpose of voting on such Plan and Service Agreements on April 23, 1997. The
Plan and Service Agreements will remain in effect until April 30, 1998 and will
continue in effect thereafter only if such continuance is specifically approved
annually by a vote of the Board of Trustees in the manner described above. The
Plan may not be amended to increase materially the amount to be spent for the
services described therein without approval of the FST Preferred Shareholders of
the Funds, and all material amendments of the Plan must also be approved by the
Board of Trustees in the manner described above. The Plan may be terminated at
any time by a majority of the Board of Trustees as described above or by vote of
a majority of the outstanding FST Preferred Shares of the Funds. The Service
Agreements may be terminated at any time, without payment of any penalty, by
vote of a majority of the Board of Trustees as described above or by a vote of a
majority of the outstanding FST Preferred Shares of the Funds on not more than
sixty (60) days' written notice to any other party to the Service Agreements.
The Service Agreements shall terminate automatically if assigned. As long as
the Plan is in effect, the selection and nomination of those Trustees who are
not interested persons shall be committed to the discretion of the Trust's
Nominating Committee, which consists of all of the non-interested members of the
Board of Trustees. The Board of Trustees has determined that, in its judgment,
there is a reasonable likelihood that the Plan will benefit the Funds and
holders of FST Preferred Shares of the Funds. In the Board of Trustees'
quarterly review of the Plan and Service Agreements, the Board will consider
their continued appropriateness and the level of compensation provided
therein.
49
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements --
Included in the Prospectus:
Financial Highlights for the Financial Square Treasury Obligations Fund,
Financial Square Prime Obligations Fund, Financial Square Government Fund,
Financial Square Money Market Fund and Financial Square Tax-Free Money
Market Fund (collectively, the "Financial Square Funds") for the period
ended December 31, 1996 (audited)
Financial Highlights for the Treasury Obligations Portfolio,
Treasury Instruments Portfolio, Prime Obligations Portfolio, Federal
Portfolio, Government Portfolio, Money Market Portfolio, Tax-Exempt
Diversified Portfolio, Tax-Exempt California Portfolio and Tax-Exempt New
York Portfolio for the period ended December 31, 1996 (audited)
Incorporated by Reference into the Statement of Additional Information:
Statements of Investments for the Financial Square Treasury Obligations,
Financial Square Prime Obligations, Financial Square Government, Financial
Square Money Market, Financial Square Tax-Free Money Market Funds, as of
December 31, 1996 (audited),
Statements of Investments for the Treasury Obligations Portfolio,
Treasury Instruments Portfolio, Prime Obligations Portfolio, Federal
Portfolio, Government Portfolio, Money Market Portfolio, Tax-Exempt
Diversified Portfolio, Tax-Exempt California Portfolio and Tax-Exempt New
York Portfolio for the period ended December 31, 1996 (audited),
Statements of Assets and Liabilities for the Financial Square Treasury
Obligations, Financial Square Prime Obligations, Financial Square
Government, Financial Square Money Market and Financial Square Tax-Free
Money Market Funds, as of December 31, 1996 (audited),
Statements of Assets and Liabilities for the Treasury Obligations
Portfolio, Treasury Instruments Portfolio, Prime Obligations Portfolio,
Federal Portfolio, Government Portfolio, Money Market Portfolio, Tax-Exempt
Diversified Portfolio, Tax-Exempt California Portfolio and Tax-Exempt New
York Portfolio for the period ended December 31, 1996 (audited),
<PAGE>
Statements of Operations for the Financial Square Treasury Obligations,
Financial Square Prime Obligations, Financial Square Government, Financial
Square Money Market and Financial Square Tax-Free Money Market Funds, as of
December 31, 1996 (audited),
Statements of Operations for the Treasury Obligations Portfolio,
Treasury Instruments Portfolio, Prime Obligations Portfolio, Federal
Portfolio, Government Portfolio, Money Market Portfolio, Tax-Exempt
Diversified Portfolio, Tax-Exempt California Portfolio and Tax-Exempt New
York Portfolio for the period ended December 31, 1996 (audited),
Statements of Changes in Net Assets for the Financial Square Treasury
Obligations, Financial Square Prime Obligations, Financial Square
Government, Financial Square Money Market and Financial Square Tax-Free
Money Market Funds, as of December 31, 1996 (audited),
Statements of Changes in Net Assets for the Treasury Obligations Portfolio,
Treasury Instruments Portfolio, Prime Obligations Portfolio, Federal
Portfolio, Government Portfolio, Money Market Portfolio, Tax-Exempt
Diversified Portfolio, Tax-Exempt California Portfolio and Tax-Exempt New
York Portfolio for the period ended December 31, 1996 (audited),
Financial Highlights for the Financial Square Treasury Obligations,
Financial Square Prime Obligations, Financial Square Government, Financial
Square Money Market and Financial Square Tax-Free Money Market Funds, as of
December 31, 1996 (audited),
Financial Highlights for the Treasury Obligations Portfolio, Treasury
Instruments Portfolio, Prime Obligations Portfolio, Federal Portfolio,
Government Portfolio, Money Market Portfolio, Tax-Exempt Diversified
Portfolio, Tax-Exempt California Portfolio and Tax-Exempt New York
Portfolio for the period ended December 31, 1996 (audited),
Notes to Financial Statements.
(b) Exhibits
The following exhibits are incorporated herein by reference to Registrant's
Registration Statement on form N-1A as initially filed (Reference A), to Pre-
Effective Amendment No. 1 to such Registration Statement (Reference B), or to
Post-Effective Amendment No. 1 to such Registration Statement (Reference C), or
to Post-Effective Amendment No. 2 to such Registration Statement (Reference D),
or to Post-Effective Amendment No. 4 to such Registration Statement (Reference
F), or to Post-Effective Amend-
2
<PAGE>
ment No. 12 to such Registration Statement (Reference M), or to Post-Effective
Amendment No. 16 to such Registration Statement (Reference Q) or to Post-
Effective Amendment No. 17 to such Registration Statement (Reference R), or to
Post-Effective Amendment No. 19 to such Registration Statement (Reference T), or
to Post-Effective Amendment No. 20 to such Registration Statement (Reference U),
or to Post-Effective Amendment No. 21 to such Registration Statement (Reference
V), or to Post-Effective Amendment No. 24 to such Registration Statement
(Reference Y), or to Post-Effective Amendment No. 25 to such Registration
Statement (Reference Z), to Post-Effective Amendment No. 26 to such Registration
Statement (Accession No. 0000950130-95-002856), to Post-Effective Amendment No.
27 to such Registration Statement (Accession No. 0000950130-96-004931), to Post-
Effective Amendment No. 29 to such Registration Statement (Accession
No.0000950130-97-000573), to Post-Effective Amendment No. 31 to such
Registration Statement (Accession No. 0000950130-97-000805) and to
Post-Effective Amendment No. 32 to such Registration Statement (Accession
No. 0000950130-97-001846).
1(a). Amendment No. 2 to the Agreement and Declaration of Trust of the
Registrant. (Reference B)
1(b). Amendment to the Agreement and Declaration of Trust of the
Registrant. (Reference G)
1(c). Amended and Restated Agreement and Declaration of Trust.
(Reference I).
1(d). Amendment to the Amended and Restated Declaration of Trust of the
Registrant dated August 19, 1992. (Reference K)
1(e). Amendment to Amended and Restated Agreement and Declaration of
Trust. (Reference L)
1(f). Amendment to the Amended and Restated Agreement and Declaration
of Trust (Reference S)
1(g). Agreement and Declaration of Trust on behalf of Delaware business
trust. (Accession No. 0000950130-97-000573)
2. By-laws of the Registrant. (Reference B)
2(a). By-laws of the Delaware business trust (Accession No. 0000950130-
97-000573)
5(a). Advisory Agreement between Registrant on behalf of GS Short-Term
Government Agency Fund and Goldman, Sachs & Co. (Reference P)
3
<PAGE>
5(b). Advisory Agreement between Registrant on behalf of Goldman Sachs
Global Income Fund and Goldman Sachs Asset Management.
(Reference P)
5(c). Subadvisory Agreement between Registrant on behalf of Goldman
Sachs Global Income Fund and Goldman Sachs Asset Management
International Limited. (Reference P)
5(d). Advisory Agreement between Registrant on behalf of GS Adjustable
Rate Government Agency Fund and Goldman Sachs Asset Management.
(Reference P)
5(e). Advisory Agreement between Registrant on behalf of GS Short
Duration Tax-Free Fund and Goldman, Sachs & Co. (Reference P)
5(g). Advisory Agreement between Registrant on behalf of Goldman Sachs
Government Income Fund and Goldman Sachs Asset Management.
(Reference P)
5(i). Advisory Agreement between Registrant on behalf of Goldman Sachs
Municipal Income Fund and Goldman Sachs Asset Management.
(Reference P)
5(h). Administration Agreement between the Registrant on behalf of
Goldman Sachs Municipal Income Fund and Goldman Sachs Asset
Management. (Reference P)
5(k). Administration Agreement between Registrant on behalf of Goldman
Sachs Global Income Fund and Goldman Sachs Asset Management.
(Reference P)
5(m). Administration Agreement between Registrant on behalf of Goldman
Sachs Government Income Fund and Goldman Sachs Asset Management.
(Reference P)
5(n). Advisory Agreement between Registrant on behalf of GS Core Fixed
Income Fund and Goldman Sachs Asset Management. (Reference T)
5(o). Form of Management Agreements on behalf of Delaware business
trust (Accesssion No. 0000950130-97-000573)
5(p). Form of Management Agreement on behalf of Delaware business trust
(Accession No. 0000950130-97-001846)
6(a). Distribution Agreement between Registrant and Goldman, Sachs &
Co. (Reference P)
8(a). Custodian Agreement between Registrant and State Street Bank and
Trust Company. (Reference P)
4
<PAGE>
8(b). Form of Wiring Agreement among State Street Bank and Trust
Company, Goldman, Sachs & Co. and The Northern Trust Company.
(Reference B)
8(c). Fee schedule relating to the Custodian Agreement between
Registrant and State Street Bank and Trust Company. (Reference C)
8(d). Form of Letter Agreement between Registrant and State Street Bank
and Trust pertaining to the latter's designation of Security
Pacific National Bank as its sub-custodian and certain other
matters. (Reference C)
8(g). Form of Amendment dated August, 1989 to the Wiring Agreement
among State Street Bank and Trust Company, Goldman, Sachs & Co.
and The Northern Trust Company relating to the indemnification of
The Northern Trust Company. (Reference D)
9(a). Transfer Agency Agreement between Registrant and
Goldman, Sachs & Co. (Reference P)
9(b). Fee schedule relating to the Transfer Agency Agreement between
Registrant and Goldman, Sachs & Co. (Reference B)
10(a). Opinion of Counsel (filed with 24f-2)
10(b). Opinion of Delaware Counsel
13. Subscription Agreement with Goldman, Sachs & Co. (Reference B)
15(a). Distribution Plan pursuant to Rule 12b-1 for Goldman Sachs
Municipal Income Fund. (Reference P)
15(c). Distribution Plan pursuant to Rule 12b-1 for Goldman Sachs
Government Income Fund (Reference O)
15(d). Distribution Plan pursuant to Rule 12b-1 for Goldman Sachs Global
Income Fund. (Reference O)
15(f). Distribution Plan Pursuant to Rule 12b-1 for GS Adjustable Rate
Government Agency Fund-Class A Shares. (Reference Y)
15(h). Administration Plan and Service Plan of the Trust. (Reference X)
18. Form of Plan entered into by Registrant pursuant to Rule 18f-3
(Reference Z).
19(a). Power of Attorney of Ms. Beck. (Reference N)
5
<PAGE>
19(b). Powers of Attorney of Messrs. Armellino, Bakhru, Mayo, Nagel,
Shuch, Smart, Springer, Strubel, Gilman, Hopkins, Mosior,
Richman, Mmes. Mucker and Taylor. (Reference O)
19(c). Power of Attorney Messr. Ford. (Reference W)
19(d) Powers of Attorney of Messrs. Bakhru, Ford, Grip, Shuch, Smart,
Sringer, Strubel, Mosior, Gilman, Perlowski, Richman, Surloff,
Mmes. MacPherson, Mucker and Taylor (Accession No. 0000950130-97-
000805)
The following exhibits relating to Goldman Sachs Trust are filed herewith
electronically pursuant to EDGAR rules:
11. Consent of Arthur Andersen LLP.
17. Financial Data Schedules.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
-------------------------------------------------------------
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
-------------------------------
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
- -------------- --------------
<S> <C>
Treasury Obligations Portfolio
ILA Units 763
ILA Administration Units 69
ILA Service Units 6
Treasury Instruments Portfolio
ILA Units 406
ILA Administration Units 51
ILA Service Units 20
Federal Portfolio
ILA Units 2,337
ILA Administration Units 714
ILA Service Units 129
Government Portfolio
ILA Units 1,363
ILA Administration Units 65
ILA Service Units 12
Prime Obligations Portfolio
ILA Units 924
ILA Administration Units 69
ILA Service Units 439
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
ILA Class B Units 10
Money Market Portfolio
ILA Units 1,454
ILA Administration Units 886
ILA Service Units 8
Tax-Exempt Diversified Portfolio
ILA Units 2,121
ILA Administration Units 28
ILA Service Units 21
Tax-Exempt California Portfolio
ILA Units 884
ILA Administration Units 4
ILA Service Units 1
Tax-Exempt New York Portfolio
ILA Units 199
ILA Administration Units 59
ILA Service Units 2
Financial Square Treasury Obligations Fund
FST Shares 343
FST Administration Shares 114
FST Service Shares 639
FST Preferred Shares 25
Financial Square Prime Obligations Fund
FST Shares 512
FST Administration Shares 128
FST Service Shares 432
FST Preferred Shares 11
Financial Square Government Fund
FST Shares 222
FST Administration Shares 179
FST Service Shares 81
FST Preferred Shares 8
Financial Square Money Market Fund
FST Shares 495
FST Administration Shares 222
FST Service Shares 119
FST Preferred Shares 21
Financial Square Tax-Free Money Market Fund
FST Shares 227
FST Administration Shares 51
FST Service Shares 84
FST Preferred Shares 6
Financial Square Treasury Instruments Fund
FST Shares 102
FST Administration Shares 0
FST Service Shares 0
FST Preferred Shares 0
Financial Square Federal Fund
FST Shares 150
FST Administration Shares 13
FST Service Shares 101
FST Preferred Shares 0
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Financial Square Municipal Money Market Fund
FST Shares 0
FST Administration Shares 0
FST Service Shares 0
FST Preferred Shares 0
Financial Square Money Market Plus Fund
FST Shares 0
FST Administration Shares 0
FST Service Shares 0
FST Preferred Shares 0
GS Short Duration Government Fund
Institutional Shares 348
Administration Shares 24
Service Shares 6
Class A 0
Class B 0
GS Adjustable Rate Government Fund
Institutional Shares 467
Administration Shares 18
Service Shares 2
Class A Shares 373
GS Short Duration Tax-Free Fund
Institutional Shares 150
Administration Shares 7
Service Shares 0
Class A 0
Class B 0
GS Core Fixed Income Fund
Institutional Shares 165
Administration Shares 21
Service Shares 4
Class A 0
Class B 0
Goldman Sachs Global Income Fund
Institutional Shares 34
Service Shares 6
Class A Shares 2,572
Class B Shares 86
Goldman Sachs Government Income Fund
Class A Shares 789
Class B Shares 83
Goldman Sachs Municipal Income Fund
Class A Shares 1,521
Class B Shares 22
Goldman Sachs Capital Growth Fund Shares
Class A 30,909
Class B 451
Goldman Sachs CORE U.S. Equity Fund Shares
Class A 11,420
Class B 1,233
Institutional Class 22
Service Class 8
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Goldman Sachs Small Cap Equity Fund Shares
Class A 16,583
Class B 573
Goldman Sachs International Equity Fund Shares
Class A 23,051
Class B 2,327
Institutional Class 37
Service Class 6
Goldman Sachs Growth and Income Fund Shares
Class A 34,085
Class B 3,108
Institutional Class 9
Service Class 8
Goldman Sachs Asia Growth Fund Shares
Class A 11,237
Class B 442
Institutional Class 18
Service Class 4
Goldman Sachs Balanced Fund Shares
Class A 3,682
Class B 283
Goldman Sachs Mid-Cap Equity Fund
Institutional Shares 17
Service Shares 4
Goldman Sachs CORE Large Cap Growth Fund
Class A 0
Class B 0
Institutional 0
Service 0
Goldman Sachs Emerging Markets Equity Fund
Class A 0
Class B 0
Institutional 0
Service 0
</TABLE>
(Information supplied as of April 1, 1997)
ITEM 27. INDEMNIFICATION
---------------
Article VI of the Registrant's Amended and Restated Agreement and Declaration of
Trust provides for indemnification of the Registrant's trustees and officers
under certain circumstances. A copy of each Amended and Restated Agreement and
Declaration of Trust is filed as Exhibit 1(f) in Post Effective Amendment No. 7
(Reference I).
Paragraph 7 of the Advisory Agreement dated March 28, 1988 between the
Registrant on behalf of GS Short-Term Government Agency Fund and Goldman, Sachs
& Co., paragraph 7 of the Advisory Agreement dated as of July 15, 1991 between
the Registrant on
9
<PAGE>
behalf of Goldman Sachs Global Income Fund and Goldman Sachs Asset Management,
paragraph 7 of the Advisory Agreement dated as of July 15, 1991 between GS
Adjustable Rate Government Agency Fund and Goldman Sachs Asset Management, and
paragraph 7 of the Advisory Agreement dated September 25, 1992 between the
Registrant on behalf of GS Short Duration Tax-Free Fund and Goldman Sachs & Co.,
paragraph 7 of the Advisory Agreement dated November 23, 1993 between the
Registrant on behalf of GS Government Agency Portfolio and Goldman, Sachs & Co.,
paragraph 7 of the Advisory Agreement dated February 1, 1993 between the
Registrant on behalf of each of GS Adjustable Rate Mortgage Fund and Goldman
Sachs Government Income Fund and Goldman Sachs Asset Management, and paragraph 7
of the Advisory Agreement dated July 16, 1993 between the Registrant on behalf
of Goldman Sachs Municipal Income Fund and Goldman Sachs Asset Management and
paragraph 7 of the Advisory Agreement between the Registrant on behalf of GS
Core Fixed Income Fund and Goldman Sachs Asset Management and paragraph 7 of the
Advisory Agreement dated October 27, 1993 between the registrant on behalf of
each of Goldman Sachs California Municipal Income Fund and Goldman Sachs New
York Municipal Income Fund and Goldman Sachs Asset Management, provide for
indemnification of Goldman, Sachs & Co., Goldman Sachs Asset Management or, in
lieu thereof, contribution by the Registrant under certain circumstances. Copies
of such Agreements were filed as Exhibits 5(a), (b), (d), (e), (f), (g), (h),
(i), (n), (o), and (p), respectively, to Registrant's Registration Statement.
Article III of the Declaration of Trust of Goldman Sachs Trust, the Delaware
business trust, provides for indemnification of the Trustees, offices and agents
of the Trust, subject to certain limitations. The Declaration of Trust was
filed as Exhibit 1(g).
The Management Agreement with each of the Funds (other than the ILA Portfolios)
provides that the applicable Investment Adviser will not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on the party of
the Investment Adviser or from reckless disregard by the Investment Adviser of
its obligations or duties under the Management Agreement. Section 7 of the
Advisory Agreement with respect to the ILA Portfolios provides that the ILA
Portfolios will indemnify the Adviser against certain liabilities; provided,
however, that such indemnification does not apply to any loss by reason of its
wilful misfeasance, bad faith or gross negligence or the Adviser's reckless
disregard of its obligation under the Advisory Agreement. The Management
Agreements were filed as Exhibit 5(o).
Section XI of the Distribution Agreement and Section 7 of the Transfer Agency
Agreement between the Registrant and Goldman, Sachs & Co. dated July 15, 1991
each provides that the Registrant will indemnify Goldman, Sachs & Co. against
certain liabilities.
10
<PAGE>
A copy of such Agreements were filed as Exhibits 6(a) and 17(a), respectively,
to the Registrant's Registration Statement.
Mutual fund and Trustees and officers liability policies purchased jointly by
the Registrant, Goldman Sachs Money Market Trust, Goldman Sachs Equity
Portfolios, Inc., Trust for Credit Unions, The Benchmark Funds and The Commerce
Funds and Goldman, Sachs & Co. insure such persons and their respective
trustees, partners, officers and employees, subject to the policies' coverage
limits and exclusions and varying deductibles, against loss resulting from
claims by reason of any act, error, omission, misstatement, misleading
statement, neglect or breach of duty.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
----------------------------------------------------
The business and other connections of the officers and Managing Directors of
Goldman, Sachs & Co., Goldman Sachs Funds Management, L.P., and Goldman Sachs
Asset Management International are listed on their respective Forms ADV as
currently filed with the Commission (File Nos. 801-16048, 801-37591 and 801-
38157, respectively) the text of which are hereby incorporated by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
----------------------
(a). Goldman, Sachs & Co. or an affiliate or a division thereof currently
serves as investment adviser and distributor of the units of Goldman Money
Market Trust, Trust for Credit Unions and for shares of Goldman Sachs Trust and
Goldman Sachs Equity Portfolios, Inc. Goldman, Sachs & Co., or a division
thereof currently serves as administrator and distributor of the units or shares
of The Benchmark Funds and The Commerce Funds.
(b). Set forth below is certain information pertaining to the Managing
Directors of Goldman, Sachs & Co., the Registrant's principal underwriter. None
of the members of the executive committee holds a position or office with the
Registrant.
GOLDMAN SACHS MANAGING DIRECTORS
Name and Principal
Business Address Position
---------------- --------
Jon S. Corzine (1) Chief Executive Officer
Robert J. Hurst (1) Managing Director
Henry M. Paulson, Jr. (1) Chief Operating Officer
John A. Thain (1)(3) Chief Financial Officer
John L. Thornton (3) Managing Director
Roy J. Zuckerberg (2) Managing Director
_______________________
(1) 85 Broad Street, New York, NY 10004
11
<PAGE>
(2) One New York Plaza, New York, NY 10004
(3) Peterborough Court, 133 Fleet Street, London EC4A 2BB, England
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
--------------------------------
The Amended and Restated Agreement and Declaration of Trust, By-laws and minute
books of the Registrant are in the physical possession of Goldman Sachs Asset
Management, One New York Plaza, New York, New York 10004. All other accounts,
books and other documents required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and the Rule promulgated thereunder are in the
physical possession of State Street Bank and Trust Company, P.O. Box 1713,
Boston, Massachusetts 02105 except for certain transfer agency records which are
maintained by Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606.
ITEM 31. MANAGEMENT SERVICES
-------------------
The Custodian Agreement between State Street Bank and Trust Company and
Registrant provides for State Street Bank and Trust Company to act as custodian
and to maintain certain accounting records for Registrant. Remuneration is
based on a minimum fixed dollar charge per annum and the Funds' average daily
net assets (such remuneration being subject to adjustment on the basis of the
amount of the Funds' uninvested cash) and on the number of portfolio
transactions. Such Agreement together with the related letter and other
agreements and amendments pertaining thereto, referred to under Item 24(b) are
hereby incorporated by reference.
ITEM 32. UNDERTAKINGS
------------
(a) The Funds Annual Reports contain performance information and are available
to any recipient of the Prospectuses upon request and without charge by writing
to Goldman, Sachs & Co., 4900 Sears Tower, Chicago, Illinois 60606.
(b) With respects to Goldman Sachs CORE Large Cap Growth Fund and Goldman Sachs
Emerging Markets Equity Fund and Goldman Sachs High Yield Fund the Registrant
undertakes to file a post-effective amendment, using financial statements which
need not be certified, within four to six months from the effective date of the
Post-Effective Amendment to the Registration Statement relating to shares of
such Fund.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Goldman Sachs Trust, a Massachusetts business trust (the
"Massachusetts Trust") has duly caused this Post-Effective Amendment No. 33
(which satisfies all the requirements for effectiveness pursuant to Rule 485(b)
under the Securities Act of 1933) to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City and State
of New York on the 21st day of April, 1997.
GOLDMAN SACHS TRUST
(A Massachusett business trust)
By: /s/Michael J. Richman
--------------------------
Michael J. Richman
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 33 to the Registration Statement of the Massachusetts
Trust has been signed below by the following persons in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------ --------------------- --------------
<S> <C> <C>
*Douglas C. Grip President April 21, 1997
- ------------------------
Douglas C. Grip
*Scott M. Gilman Principal Accounting April 21, 1997
- ------------------------
Scott M. Gilman Officer And Principal
Financial Officer
*David B. Ford Trustee April 21, 1997
- ------------------------
David B. Ford
*Ashok N. Bakhru Trustee April 21, 1997
- ------------------------
Ashok N. Bakhru
*Alan A. Shuch Trustee April 21, 1997
- ------------------------
Alan A. Shuch
*Jackson W. Smart Trustee April 21, 1997
- ------------------------
Jackson W. Smart, Jr.
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C>
*William H. Springer Trustee April 21, 1997
- ---------------------
William H. Springer
*Richard P. Strubel Trustee April 21, 1997
- ---------------------
Richard P. Strubel
*By: /s/Michael J. Richman April 21, 1997
----------------------
Michael J. Richman,
Attorney-In-Fact
</TABLE>
* Pursuant to a power of attorney previously filed.
14
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
- -------
11. Consent of Arthur Andersen LLP.
17. Financial Data Schedules.
15
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 012
<NAME> PRIME OBLIGATIONS PORTFOLIO-CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,266,243,902
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,701,956
<ASSETS-OTHER> 14,018
<OTHER-ITEMS-ASSETS> 143,480
<TOTAL-ASSETS> 1,270,103,356
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,525,260
<TOTAL-LIABILITIES> 6,525,260
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,263,578,517
<SHARES-COMMON-STOCK> 346,328
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (421)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,263,578,096
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 81,770,923
<OTHER-INCOME> 0
<EXPENSES-NET> 6,635,410
<NET-INVESTMENT-INCOME> 75,135,513
<REALIZED-GAINS-CURRENT> 72,405
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 75,207,918
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,092)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 507,503
<NUMBER-OF-SHARES-REDEEMED> (161,955)
<SHARES-REINVESTED> 780
<NET-CHANGE-IN-ASSETS> (287,929,659)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,728,074
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,263,930
<AVERAGE-NET-ASSETS> 1,481,701,001
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .026
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .026
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> PRIME OBLIGATIONS PORTFOLIO-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,266,243,902
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,701,956
<ASSETS-OTHER> 14,018
<OTHER-ITEMS-ASSETS> 143,480
<TOTAL-ASSETS> 1,270,103,356
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,525,260
<TOTAL-LIABILITIES> 6,525,260
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,263,578,517
<SHARES-COMMON-STOCK> 1,154,745,689
<SHARES-COMMON-PRIOR> 1,261,208,998
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (421)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,263,578,096
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 81,770,923
<OTHER-INCOME> 0
<EXPENSES-NET> 6,635,410
<NET-INVESTMENT-INCOME> 75,135,513
<REALIZED-GAINS-CURRENT> 72,405
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 75,207,918
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (67,076,054)
<DISTRIBUTIONS-OF-GAINS> (65,059)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,756,241,159
<NUMBER-OF-SHARES-REDEEMED> (8,899,537,496)
<SHARES-REINVESTED> 36,833,028
<NET-CHANGE-IN-ASSETS> (287,929,659)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,728,074
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,263,930
<AVERAGE-NET-ASSETS> 1,481,701,001
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .051
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .051
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 015
<NAME> PRIME OBLIGATIONS PORTFOLIO-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,266,243,902
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,701,956
<ASSETS-OTHER> 14,018
<OTHER-ITEMS-ASSETS> 143,480
<TOTAL-ASSETS> 1,270,103,356
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,525,260
<TOTAL-LIABILITIES> 6,525,260
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,263,578,517
<SHARES-COMMON-STOCK> 23,775,858
<SHARES-COMMON-PRIOR> 63,055,307
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (421)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,263,578,096
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 81,770,923
<OTHER-INCOME> 0
<EXPENSES-NET> 6,635,410
<NET-INVESTMENT-INCOME> 75,135,513
<REALIZED-GAINS-CURRENT> 72,405
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 75,207,918
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,206,827)
<DISTRIBUTIONS-OF-GAINS> (2,127)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 318,656,203
<NUMBER-OF-SHARES-REDEEMED> (359,456,201)
<SHARES-REINVESTED> 1,520,549
<NET-CHANGE-IN-ASSETS> (287,929,659)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,728,074
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,263,930
<AVERAGE-NET-ASSETS> 1,481,701,001
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .050
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 016
<NAME> PRIME OBLIGATIONS PORTFOLIO-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,266,243,902
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,701,956
<ASSETS-OTHER> 14,018
<OTHER-ITEMS-ASSETS> 143,480
<TOTAL-ASSETS> 1,270,103,356
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,525,260
<TOTAL-LIABILITIES> 6,525,260
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,263,578,517
<SHARES-COMMON-STOCK> 84,710,642
<SHARES-COMMON-PRIOR> 227,237,450
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (421)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,263,578,096
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 81,770,923
<OTHER-INCOME> 0
<EXPENSES-NET> 6,635,410
<NET-INVESTMENT-INCOME> 75,135,513
<REALIZED-GAINS-CURRENT> 72,405
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 75,207,918
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,850,540)
<DISTRIBUTIONS-OF-GAINS> (5,640)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 558,266,701
<NUMBER-OF-SHARES-REDEEMED> (702,853,581)
<SHARES-REINVESTED> 2,060,072
<NET-CHANGE-IN-ASSETS> (287,929,659)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,728,074
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,263,930
<AVERAGE-NET-ASSETS> 1,481,701,001
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .047
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .047
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 023
<NAME> GOVERNMENT PORTFOLIO-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 827,240,879
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1,378,983
<ASSETS-OTHER> 48,509
<OTHER-ITEMS-ASSETS> 152,717
<TOTAL-ASSETS> 828,821,088
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,887,137
<TOTAL-LIABILITIES> 3,887,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 824,862,428
<SHARES-COMMON-STOCK> 694,604,345
<SHARES-COMMON-PRIOR> 570,436,734
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 71,523
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 824,933,951
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 39,035,321
<OTHER-INCOME> 0
<EXPENSES-NET> 3,355,709
<NET-INVESTMENT-INCOME> 35,679,612
<REALIZED-GAINS-CURRENT> 62,662
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 35,742,274
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (29,556,990)
<DISTRIBUTIONS-OF-GAINS> (38,029)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,490,979,392
<NUMBER-OF-SHARES-REDEEMED> (4,380,790,567)
<SHARES-REINVESTED> 13,978,786
<NET-CHANGE-IN-ASSETS> 121,495,859
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 54,767
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,509,206
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,587,245
<AVERAGE-NET-ASSETS> 716,925,229
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.050)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 025
<NAME> GOVERNMENT PORTFOLIO-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 827,240,879
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1,378,983
<ASSETS-OTHER> 48,509
<OTHER-ITEMS-ASSETS> 152,717
<TOTAL-ASSETS> 828,821,088
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,887,137
<TOTAL-LIABILITIES> 3,887,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 824,862,428
<SHARES-COMMON-STOCK> 36,044,854
<SHARES-COMMON-PRIOR> 47,558,211
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 71,523
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 824,933,951
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 39,035,321
<OTHER-INCOME> 0
<EXPENSES-NET> 3,355,709
<NET-INVESTMENT-INCOME> 35,679,612
<REALIZED-GAINS-CURRENT> 62,662
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 35,742,274
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,048,010)
<DISTRIBUTIONS-OF-GAINS> (2,635)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 220,574,807
<NUMBER-OF-SHARES-REDEEMED> (232,371,387)
<SHARES-REINVESTED> 283,223
<NET-CHANGE-IN-ASSETS> 121,495,859
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 54,767
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,509,206
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,587,245
<AVERAGE-NET-ASSETS> 716,925,229
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .049
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.049)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 026
<NAME> GOVERNMENT PORTFOLIO-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 827,240,879
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1,378,983
<ASSETS-OTHER> 48,509
<OTHER-ITEMS-ASSETS> 152,717
<TOTAL-ASSETS> 828,821,088
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,887,137
<TOTAL-LIABILITIES> 3,887,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 824,862,428
<SHARES-COMMON-STOCK> 94,213,229
<SHARES-COMMON-PRIOR> 85,388,380
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 71,523
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 824,933,951
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 39,035,321
<OTHER-INCOME> 0
<EXPENSES-NET> 3,355,709
<NET-INVESTMENT-INCOME> 35,679,612
<REALIZED-GAINS-CURRENT> 62,662
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 35,742,274
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,074,612)
<DISTRIBUTIONS-OF-GAINS> (5,242)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 403,691,166
<NUMBER-OF-SHARES-REDEEMED> (397,916,614)
<SHARES-REINVESTED> 3,050,297
<NET-CHANGE-IN-ASSETS> 121,495,859
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 54,767
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,509,206
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,587,245
<AVERAGE-NET-ASSETS> 716,925,229
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .046
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.046)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 033
<NAME> TREASURY OBLIGATIONS PORTFOLIO-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 810,267,968
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 532,015
<ASSETS-OTHER> 775
<OTHER-ITEMS-ASSETS> 99,319
<TOTAL-ASSETS> 810,900,077
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,833,527
<TOTAL-LIABILITIES> 3,833,527
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 807,035,766
<SHARES-COMMON-STOCK> 574,608,995
<SHARES-COMMON-PRIOR> 711,102,137
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 30,784
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 807,066,550
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 48,666,691
<OTHER-INCOME> 0
<EXPENSES-NET> 4,424,234
<NET-INVESTMENT-INCOME> 44,242,234
<REALIZED-GAINS-CURRENT> 195,578
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 44,437,812
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (32,818,890)
<DISTRIBUTIONS-OF-GAINS> (124,367)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,696,243,017
<NUMBER-OF-SHARES-REDEEMED> (3,844,547,762)
<SHARES-REINVESTED> 11,811,603
<NET-CHANGE-IN-ASSETS> (116,477,083)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,862
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,157,511
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,637,343
<AVERAGE-NET-ASSETS> 902,053,303
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.050)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 035
<NAME> TREASURY OBLIGATIONS PORTFOLIO-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 810,267,968
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 532,015
<ASSETS-OTHER> 775
<OTHER-ITEMS-ASSETS> 99,319
<TOTAL-ASSETS> 810,900,077
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,833,527
<TOTAL-LIABILITIES> 3,833,527
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 807,035,766
<SHARES-COMMON-STOCK> 108,916,431
<SHARES-COMMON-PRIOR> 92,720,120
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 30,784
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 807,066,550
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 48,666,691
<OTHER-INCOME> 0
<EXPENSES-NET> 4,424,234
<NET-INVESTMENT-INCOME> 44,242,234
<REALIZED-GAINS-CURRENT> 195,578
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 44,437,812
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,742,767)
<DISTRIBUTIONS-OF-GAINS> (17,973)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 659,581,577
<NUMBER-OF-SHARES-REDEEMED> (644,240,509)
<SHARES-REINVESTED> 855,243
<NET-CHANGE-IN-ASSETS> (116,477,083)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,862
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,157,511
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,637,343
<AVERAGE-NET-ASSETS> 902,053,303
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .048
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.049)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 036
<NAME> TREASURY OBLIGATIONS PORTFOLIO-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 810,267,968
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 532,015
<ASSETS-OTHER> 775
<OTHER-ITEMS-ASSETS> 99,319
<TOTAL-ASSETS> 810,900,077
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,833,527
<TOTAL-LIABILITIES> 3,833,527
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 807,035,766
<SHARES-COMMON-STOCK> 123,510,340
<SHARES-COMMON-PRIOR> 119,718,514
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 30,784
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 807,066,550
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 48,666,691
<OTHER-INCOME> 0
<EXPENSES-NET> 4,424,234
<NET-INVESTMENT-INCOME> 44,242,234
<REALIZED-GAINS-CURRENT> 195,578
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 44,437,812
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,680,577)
<DISTRIBUTIONS-OF-GAINS> (25,316)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,007,054,573
<NUMBER-OF-SHARES-REDEEMED> (1,003,943,857)
<SHARES-REINVESTED> 681,110
<NET-CHANGE-IN-ASSETS> (116,477,083)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,862
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,157,511
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,637,343
<AVERAGE-NET-ASSETS> 902,053,303
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .046
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.046)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 043
<NAME> TREASURY INSTRUMENTS PORTFOLIO-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,221,566,240
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 14,004,604
<ASSETS-OTHER> 10,026
<OTHER-ITEMS-ASSETS> 148,266
<TOTAL-ASSETS> 1,235,729,136
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,123,453
<TOTAL-LIABILITIES> 5,123,453
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,230,590,333
<SHARES-COMMON-STOCK> 708,990,271
<SHARES-COMMON-PRIOR> 586,288,862
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,350
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,230,605,683
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,608,537
<OTHER-INCOME> 0
<EXPENSES-NET> 3,589,506
<NET-INVESTMENT-INCOME> 50,019,031
<REALIZED-GAINS-CURRENT> 416,602
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,435,633
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (30,911,761)
<DISTRIBUTIONS-OF-GAINS> (251,459)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,783,423,031
<NUMBER-OF-SHARES-REDEEMED> (3,680,022,103)
<SHARES-REINVESTED> 19,300,481
<NET-CHANGE-IN-ASSETS> 452,344,583
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 5,639
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,629,131
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,884,089
<AVERAGE-NET-ASSETS> 1,036,860,108
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.050)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 045
<NAME> TREASURY INSTRUMENTS PORTFOLIO-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,221,566,240
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 14,004,604
<ASSETS-OTHER> 10,026
<OTHER-ITEMS-ASSETS> 148,266
<TOTAL-ASSETS> 1,235,729,136
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,123,453
<TOTAL-LIABILITIES> 5,123,453
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,230,590,333
<SHARES-COMMON-STOCK> 137,701,171
<SHARES-COMMON-PRIOR> 68,708,601
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,350
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,230,605,683
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,608,537
<OTHER-INCOME> 0
<EXPENSES-NET> 3,589,506
<NET-INVESTMENT-INCOME> 50,019,031
<REALIZED-GAINS-CURRENT> 416,602
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,435,633
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,651,770)
<DISTRIBUTIONS-OF-GAINS> (37,841)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 470,006,128
<NUMBER-OF-SHARES-REDEEMED> (402,096,387)
<SHARES-REINVESTED> 1,082,829
<NET-CHANGE-IN-ASSETS> 452,344,583
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 5,639
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,629,131
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,884,089
<AVERAGE-NET-ASSETS> 1,036,860,108
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .048
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.049)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 046
<NAME> TREASURY INSTRUMENTS PORTFOLIO-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,221,566,240
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 14,004,604
<ASSETS-OTHER> 10,026
<OTHER-ITEMS-ASSETS> 148,266
<TOTAL-ASSETS> 1,235,729,136
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,123,453
<TOTAL-LIABILITIES> 5,123,453
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,230,590,333
<SHARES-COMMON-STOCK> 383,898,891
<SHARES-COMMON-PRIOR> 123,257,998
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15,350
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,230,605,683
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,608,537
<OTHER-INCOME> 0
<EXPENSES-NET> 3,589,506
<NET-INVESTMENT-INCOME> 50,019,031
<REALIZED-GAINS-CURRENT> 416,602
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,435,633
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (14,455,500)
<DISTRIBUTIONS-OF-GAINS> (117,591)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,029,365,538
<NUMBER-OF-SHARES-REDEEMED> (768,785,877)
<SHARES-REINVESTED> 61,232
<NET-CHANGE-IN-ASSETS> 452,344,583
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 5,639
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,629,131
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,884,089
<AVERAGE-NET-ASSETS> 1,036,860,108
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .046
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.046)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 053
<NAME> MONEY MARKET PORTFOLIO-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 990,797,391
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,538,130
<ASSETS-OTHER> 33,706
<OTHER-ITEMS-ASSETS> 128,908
<TOTAL-ASSETS> 994,498,135
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,298,228
<TOTAL-LIABILITIES> 5,298,228
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 989,199,498
<SHARES-COMMON-STOCK> 703,096,586
<SHARES-COMMON-PRIOR> 574,155,473
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 409
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 989,199,907
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,320,799
<OTHER-INCOME> 0
<EXPENSES-NET> 3,990,865
<NET-INVESTMENT-INCOME> 50,329,934
<REALIZED-GAINS-CURRENT> 72,865
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,402,799
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38,261,044)
<DISTRIBUTIONS-OF-GAINS> (54,983)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,161,953,773
<NUMBER-OF-SHARES-REDEEMED> (5,063,361,343)
<SHARES-REINVESTED> 30,348,683
<NET-CHANGE-IN-ASSETS> 227,542,561
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,447,586
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,726,967
<AVERAGE-NET-ASSETS> 984,999,160
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .052
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.052)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 055
<NAME> MONEY MARKET PORTFOLIO-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 990,797,391
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,538,130
<ASSETS-OTHER> 33,706
<OTHER-ITEMS-ASSETS> 128,908
<TOTAL-ASSETS> 994,498,135
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,298,228
<TOTAL-LIABILITIES> 5,298,228
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 989,199,498
<SHARES-COMMON-STOCK> 257,258,398
<SHARES-COMMON-PRIOR> 164,422,265
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 409
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 989,199,907
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,320,799
<OTHER-INCOME> 0
<EXPENSES-NET> 3,990,865
<NET-INVESTMENT-INCOME> 50,329,934
<REALIZED-GAINS-CURRENT> 72,865
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,402,799
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,545,315)
<DISTRIBUTIONS-OF-GAINS> (15,267)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,902,067,359
<NUMBER-OF-SHARES-REDEEMED> (2,816,742,074)
<SHARES-REINVESTED> 7,510,848
<NET-CHANGE-IN-ASSETS> 227,542,561
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,447,586
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,726,967
<AVERAGE-NET-ASSETS> 984,999,160
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> (.050)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 056
<NAME> MONEY MARKET PORTFOLIO-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 990,797,391
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,538,130
<ASSETS-OTHER> 33,706
<OTHER-ITEMS-ASSETS> 128,908
<TOTAL-ASSETS> 994,498,135
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,298,228
<TOTAL-LIABILITIES> 5,298,228
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 989,199,498
<SHARES-COMMON-STOCK> 28,844,514
<SHARES-COMMON-PRIOR> 23,079,608
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 409
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 989,199,907
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,320,799
<OTHER-INCOME> 0
<EXPENSES-NET> 3,990,865
<NET-INVESTMENT-INCOME> 50,329,934
<REALIZED-GAINS-CURRENT> 72,865
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,402,799
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,523,575)
<DISTRIBUTIONS-OF-GAINS> (2,206)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 217,582,943
<NUMBER-OF-SHARES-REDEEMED> (212,149,611)
<SHARES-REINVESTED> 331,574
<NET-CHANGE-IN-ASSETS> 227,542,561
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,447,586
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,726,967
<AVERAGE-NET-ASSETS> 984,999,160
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .048
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> .048
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 063
<NAME> FEDERAL PORTFOLIO-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,300,609,972
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 4,477,173
<ASSETS-OTHER> 125,725
<OTHER-ITEMS-ASSETS> 365,400
<TOTAL-ASSETS> 3,305,578,270
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,947,994
<TOTAL-LIABILITIES> 14,947,994
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,290,699,109
<SHARES-COMMON-STOCK> 2,303,703,731
<SHARES-COMMON-PRIOR> 1,731,957,820
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (68,833)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,290,630,276
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 146,327,912
<OTHER-INCOME> 0
<EXPENSES-NET> 8,522,720
<NET-INVESTMENT-INCOME> 137,805,192
<REALIZED-GAINS-CURRENT> (4,477)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 137,800,715
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (101,011,206)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,171,686,790
<NUMBER-OF-SHARES-REDEEMED> (10,666,427,699)
<SHARES-REINVESTED> 66,486,820
<NET-CHANGE-IN-ASSETS> 939,202,120
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (64,356)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,496,253
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,045,006
<AVERAGE-NET-ASSETS> 2,713,192,227
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .051
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.051)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 065
<NAME> FEDERAL PORTFOLIO-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,300,609,972
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 4,477,173
<ASSETS-OTHER> 125,725
<OTHER-ITEMS-ASSETS> 365,400
<TOTAL-ASSETS> 3,305,578,270
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,947,994
<TOTAL-LIABILITIES> 14,947,994
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,290,699,109
<SHARES-COMMON-STOCK> 794,578,398
<SHARES-COMMON-PRIOR> 516,957,788
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (68,833)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,290,630,276
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 146,327,912
<OTHER-INCOME> 0
<EXPENSES-NET> 8,522,720
<NET-INVESTMENT-INCOME> 137,805,192
<REALIZED-GAINS-CURRENT> (4,477)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 137,800,715
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (30,041,532)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,606,492,816
<NUMBER-OF-SHARES-REDEEMED> (3,340,378,274)
<SHARES-REINVESTED> 11,506,068
<NET-CHANGE-IN-ASSETS> 939,202,120
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (64,356)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,496,253
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,045,006
<AVERAGE-NET-ASSETS> 2,713,192,227
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.050)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 066
<NAME> FEDERAL PORTFOLIO-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,300,609,972
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 4,477,173
<ASSETS-OTHER> 125,725
<OTHER-ITEMS-ASSETS> 365,400
<TOTAL-ASSETS> 3,305,578,270
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,947,994
<TOTAL-LIABILITIES> 14,947,994
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,290,699,109
<SHARES-COMMON-STOCK> 192,416,980
<SHARES-COMMON-PRIOR> 102,576,904
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (68,833)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,290,630,276
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 146,327,912
<OTHER-INCOME> 0
<EXPENSES-NET> 8,522,720
<NET-INVESTMENT-INCOME> 137,805,192
<REALIZED-GAINS-CURRENT> (4,477)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 137,800,715
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,752,454)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,187,795,217
<NUMBER-OF-SHARES-REDEEMED> (1,099,321,122)
<SHARES-REINVESTED> 1,365,981
<NET-CHANGE-IN-ASSETS> 939,202,120
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (64,356)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,496,253
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,045,006
<AVERAGE-NET-ASSETS> 2,713,192,227
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .047
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.047)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 073
<NAME> TAX-EXEMPT DIVERSIFIED PORTFOLIO-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,749,033,261
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 7,404,080
<ASSETS-OTHER> 8,601
<OTHER-ITEMS-ASSETS> 1,862,438
<TOTAL-ASSETS> 1,758,308,380
<PAYABLE-FOR-SECURITIES> 150,828,428
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,019,139
<TOTAL-LIABILITIES> 155,847,567
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,602,342,561
<SHARES-COMMON-STOCK> 1,514,523,522
<SHARES-COMMON-PRIOR> 1,342,653,546
<ACCUMULATED-NII-CURRENT> 362,642
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (244,390)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,602,460,813
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,107,112
<OTHER-INCOME> 0
<EXPENSES-NET> 4,978,656
<NET-INVESTMENT-INCOME> 49,128,456
<REALIZED-GAINS-CURRENT> (12,968)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 49,115,488
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (46,819,418)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,264,641,627
<NUMBER-OF-SHARES-REDEEMED> (9,127,243,309)
<SHARES-REINVESTED> 34,471,658
<NET-CHANGE-IN-ASSETS> 161,456,238
<ACCUMULATED-NII-PRIOR> 362,642
<ACCUMULATED-GAINS-PRIOR> (231,422)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,391,039
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,543,320
<AVERAGE-NET-ASSETS> 1,540,317,437
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .032
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.032)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 075
<NAME> TAX-EXEMPT DIVERSIFIED PORTFOLIO-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,749,033,261
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 7,404,080
<ASSETS-OTHER> 8,601
<OTHER-ITEMS-ASSETS> 1,862,438
<TOTAL-ASSETS> 1,758,308,380
<PAYABLE-FOR-SECURITIES> 150,828,428
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,019,139
<TOTAL-LIABILITIES> 155,847,567
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,602,342,561
<SHARES-COMMON-STOCK> 59,097,259
<SHARES-COMMON-PRIOR> 48,773,081
<ACCUMULATED-NII-CURRENT> 362,642
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (244,390)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,602,460,813
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,107,112
<OTHER-INCOME> 0
<EXPENSES-NET> 4,978,656
<NET-INVESTMENT-INCOME> 49,128,456
<REALIZED-GAINS-CURRENT> (12,968)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 49,115,488
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,375,597)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 142,908,870
<NUMBER-OF-SHARES-REDEEMED> (132,882,806)
<SHARES-REINVESTED> 298,114
<NET-CHANGE-IN-ASSETS> 161,456,238
<ACCUMULATED-NII-PRIOR> 362,642
<ACCUMULATED-GAINS-PRIOR> (231,422)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,391,039
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,543,320
<AVERAGE-NET-ASSETS> 1,540,317,437
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .031
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENT.
</LEGEND>
<SERIES>
<NUMBER> 076
<NAME> TAX-EXEMPT DIVERSIFIED PORTFOLIO-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,749,033,261
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 7,404,080
<ASSETS-OTHER> 8,601
<OTHER-ITEMS-ASSETS> 1,862,438
<TOTAL-ASSETS> 1,758,308,380
<PAYABLE-FOR-SECURITIES> 150,828,428
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,019,139
<TOTAL-LIABILITIES> 155,847,567
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<PAID-IN-CAPITAL-COMMON> 1,602,342,561
<SHARES-COMMON-STOCK> 28,918,372
<SHARES-COMMON-PRIOR> 49,643,320
<ACCUMULATED-NII-CURRENT> 362,642
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (244,390)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,602,460,813
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,107,112
<OTHER-INCOME> 0
<EXPENSES-NET> 4,978,656
<NET-INVESTMENT-INCOME> 49,128,456
<REALIZED-GAINS-CURRENT> (12,968)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 49,115,488
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (933,441)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 110,972,875
<NUMBER-OF-SHARES-REDEEMED> (132,006,915)
<SHARES-REINVESTED> 309,092
<NET-CHANGE-IN-ASSETS> 161,456,238
<ACCUMULATED-NII-PRIOR> 362,642
<ACCUMULATED-GAINS-PRIOR> (231,422)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,391,039
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,543,320
<AVERAGE-NET-ASSETS> 1,540,317,437
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .028
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.028)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 083
<NAME> TAX-EXEMPT CALIFORNIA PORTFOLIO-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 438,939,170
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,433,885
<ASSETS-OTHER> 8,650
<OTHER-ITEMS-ASSETS> 599,385
<TOTAL-ASSETS> 441,981,090
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,362,736
<TOTAL-LIABILITIES> 1,362,736
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 440,637,879
<SHARES-COMMON-STOCK> 440,495,857
<SHARES-COMMON-PRIOR> 346,747,223
<ACCUMULATED-NII-CURRENT> 10,495
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (30,020)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 440,618,354
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,695,668
<OTHER-INCOME> 0
<EXPENSES-NET> 1,652,821
<NET-INVESTMENT-INCOME> 12,042,847
<REALIZED-GAINS-CURRENT> 15
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 12,042,862
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,036,826)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,957,305,487
<NUMBER-OF-SHARES-REDEEMED> (2,875,001,835)
<SHARES-REINVESTED> 11,444,982
<NET-CHANGE-IN-ASSETS> 93,829,603
<ACCUMULATED-NII-PRIOR> 10,495
<ACCUMULATED-GAINS-PRIOR> (30,035)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,410,751
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,674,913
<AVERAGE-NET-ASSETS> 403,066,202
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.030)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .41
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 085
<NAME> TAX-EXEMPT CALIFORNIA PORTFOLIO-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 438,939,170
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,433,885
<ASSETS-OTHER> 8,650
<OTHER-ITEMS-ASSETS> 599,385
<TOTAL-ASSETS> 441,981,090
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,362,736
<TOTAL-LIABILITIES> 1,362,736
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 440,637,879
<SHARES-COMMON-STOCK> 142,022
<SHARES-COMMON-PRIOR> 61,068
<ACCUMULATED-NII-CURRENT> 10,495
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (30,020)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 440,618,354
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,695,668
<OTHER-INCOME> 0
<EXPENSES-NET> 1,652,821
<NET-INVESTMENT-INCOME> 12,042,847
<REALIZED-GAINS-CURRENT> 15
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 12,042,862
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,021)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 716,086
<NUMBER-OF-SHARES-REDEEMED> (635,299)
<SHARES-REINVESTED> 167
<NET-CHANGE-IN-ASSETS> 93,829,603
<ACCUMULATED-NII-PRIOR> 10,495
<ACCUMULATED-GAINS-PRIOR> (30,035)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,410,751
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,674,913
<AVERAGE-NET-ASSETS> 403,066,202
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 093
<NAME> TAX-EXEMPT NEW YORK PORTFOLIO-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 114,386,281
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 404,538
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 41,299
<TOTAL-ASSETS> 114,832,118
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 337,637
<TOTAL-LIABILITIES> 337,637
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114,499,366
<SHARES-COMMON-STOCK> 70,178,026
<SHARES-COMMON-PRIOR> 90,535,967
<ACCUMULATED-NII-CURRENT> 1,634
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,519)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 114,494,481
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,421,539
<OTHER-INCOME> 0
<EXPENSES-NET> 368,254
<NET-INVESTMENT-INCOME> 3,053,285
<REALIZED-GAINS-CURRENT> (4,539)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,048,746
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,289,010)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 340,781,821
<NUMBER-OF-SHARES-REDEEMED> (363,376,230)
<SHARES-REINVESTED> 2,236,468
<NET-CHANGE-IN-ASSETS> (2,766,124)
<ACCUMULATED-NII-PRIOR> 1,634
<ACCUMULATED-GAINS-PRIOR> (1,980)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 359,201
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 476,649
<AVERAGE-NET-ASSETS> 102,625,852
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .030
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.030)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 095
<NAME> TAX-EXEMPT NEW YORK PORTFOLIO-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 114,386,281
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 404,538
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 41,299
<TOTAL-ASSETS> 114,832,118
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 337,637
<TOTAL-LIABILITIES> 337,637
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114,499,366
<SHARES-COMMON-STOCK> 44,321,340
<SHARES-COMMON-PRIOR> 26,724,984
<ACCUMULATED-NII-CURRENT> 1,634
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,519)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 114,494,481
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,421,539
<OTHER-INCOME> 0
<EXPENSES-NET> 368,254
<NET-INVESTMENT-INCOME> 3,053,285
<REALIZED-GAINS-CURRENT> (4,539)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,048,746
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (764,275)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 307,977,008
<NUMBER-OF-SHARES-REDEEMED> (291,094,164)
<SHARES-REINVESTED> 713,512
<NET-CHANGE-IN-ASSETS> (2,766,124)
<ACCUMULATED-NII-PRIOR> 1,634
<ACCUMULATED-GAINS-PRIOR> (1,980)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 359,201
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 476,649
<AVERAGE-NET-ASSETS> 102,625,852
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .029
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.029)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 113
<NAME> FINANCIAL SQUARE TREASURY OBLIGATIONS FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,106,195,212
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,442,834
<ASSETS-OTHER> 181,145
<OTHER-ITEMS-ASSETS> 72,630
<TOTAL-ASSETS> 3,108,891,821
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,748,888
<TOTAL-LIABILITIES> 13,748,888
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,095,062,895
<SHARES-COMMON-STOCK> 2,290,967,452
<SHARES-COMMON-PRIOR> 1,587,700,297
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80,038
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,095,142,933
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 130,875,226
<OTHER-INCOME> 0
<EXPENSES-NET> 6,330,210
<NET-INVESTMENT-INCOME> 124,545,016
<REALIZED-GAINS-CURRENT> 587,091
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 125,132,107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (93,857,124)
<DISTRIBUTIONS-OF-GAINS> (385,734)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,303,462,361
<NUMBER-OF-SHARES-REDEEMED> (14,633,812,470)
<SHARES-REINVESTED> 33,617,264
<NET-CHANGE-IN-ASSETS> 1,085,124,910
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,802
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,818,328
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,730,730
<AVERAGE-NET-ASSETS> 2,424,437,382
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .052
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.052)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 114
<NAME> FINANCIAL SQUARE TREASURY OBLIGATIONS FUND-PREFERRED SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,106,195,212
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,442,834
<ASSETS-OTHER> 181,145
<OTHER-ITEMS-ASSETS> 72,630
<TOTAL-ASSETS> 3,108,891,821
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,748,888
<TOTAL-LIABILITIES> 13,748,888
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,095,062,895
<SHARES-COMMON-STOCK> 46,636,593
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80,038
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,095,142,933
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 130,875,226
<OTHER-INCOME> 0
<EXPENSES-NET> 6,330,210
<NET-INVESTMENT-INCOME> 124,545,016
<REALIZED-GAINS-CURRENT> 587,091
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 125,132,107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (797,088)
<DISTRIBUTIONS-OF-GAINS> (3,276)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 94,309,002
<NUMBER-OF-SHARES-REDEEMED> (48,145,640)
<SHARES-REINVESTED> 473,231
<NET-CHANGE-IN-ASSETS> 1,085,124,910
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,802
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,818,328
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,730,730
<AVERAGE-NET-ASSETS> 2,424,437,382
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .034
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.034)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 1, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 115
<NAME> FINANCIAL SQUARE TREASURY OBLIGATIONS FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,106,195,212
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,442,834
<ASSETS-OTHER> 181,145
<OTHER-ITEMS-ASSETS> 72,630
<TOTAL-ASSETS> 3,108,891,821
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,748,888
<TOTAL-LIABILITIES> 13,748,888
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,095,062,895
<SHARES-COMMON-STOCK> 536,903,385
<SHARES-COMMON-PRIOR> 283,193,438
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80,038
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,095,142,933
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 130,875,226
<OTHER-INCOME> 0
<EXPENSES-NET> 6,330,210
<NET-INVESTMENT-INCOME> 124,545,016
<REALIZED-GAINS-CURRENT> 587,091
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 125,132,107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,870,105)
<DISTRIBUTIONS-OF-GAINS> (89,882)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,868,056,191
<NUMBER-OF-SHARES-REDEEMED> (2,618,986,546)
<SHARES-REINVESTED> 4,640,302
<NET-CHANGE-IN-ASSETS> 1,085,124,910
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,802
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,818,328
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,730,730
<AVERAGE-NET-ASSETS> 2,424,437,382
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.050)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 116
<NAME> FINANCIAL SQUARE TREASURY OBLIGATIONS FUND-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,106,195,212
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,442,834
<ASSETS-OTHER> 181,145
<OTHER-ITEMS-ASSETS> 72,630
<TOTAL-ASSETS> 3,108,891,821
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,748,888
<TOTAL-LIABILITIES> 13,748,888
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,095,062,895
<SHARES-COMMON-STOCK> 220,555,465
<SHARES-COMMON-PRIOR> 139,119,486
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80,038
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,095,142,933
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 130,875,226
<OTHER-INCOME> 0
<EXPENSES-NET> 6,330,210
<NET-INVESTMENT-INCOME> 124,545,016
<REALIZED-GAINS-CURRENT> 587,091
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 125,132,107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,020,699)
<DISTRIBUTIONS-OF-GAINS> (32,963)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,117,230,142
<NUMBER-OF-SHARES-REDEEMED> (2,042,124,197)
<SHARES-REINVESTED> 6,330,034
<NET-CHANGE-IN-ASSETS> 1,085,124,910
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,802
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,818,328
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,730,730
<AVERAGE-NET-ASSETS> 2,424,437,382
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .047
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.047)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 123
<NAME> FINANCIAL SQUARE PRIME OBLIGATIONS FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,373,112,279
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 11,583,246
<ASSETS-OTHER> 107,980
<OTHER-ITEMS-ASSETS> 88,907
<TOTAL-ASSETS> 4,384,892,412
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,916,206
<TOTAL-LIABILITIES> 24,916,206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,359,975,116
<SHARES-COMMON-STOCK> 3,901,792,070
<SHARES-COMMON-PRIOR> 3,295,754,553
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,090
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,359,976,206
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 273,607,363
<OTHER-INCOME> 0
<EXPENSES-NET> (10,115,982)
<NET-INVESTMENT-INCOME> 263,491,381
<REALIZED-GAINS-CURRENT> 105,304
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 263,596,685
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (245,389,523)
<DISTRIBUTIONS-OF-GAINS> (128,847)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 44,941,258,260
<NUMBER-OF-SHARES-REDEEMED> (44,455,790,432)
<SHARES-REINVESTED> 120,569,689
<NET-CHANGE-IN-ASSETS> 851,012,728
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 34,139
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,751,933
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,504,478
<AVERAGE-NET-ASSETS> 5,002,577,653
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .053
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.053)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 124
<NAME> FINANCIAL SQUARE PRIME OBLIGATIONS FUND-PREFERRED SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,373,112,279
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 11,583,246
<ASSETS-OTHER> 107,980
<OTHER-ITEMS-ASSETS> 88,907
<TOTAL-ASSETS> 4,384,892,412
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,916,206
<TOTAL-LIABILITIES> 24,916,206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,359,975,116
<SHARES-COMMON-STOCK> 127,128,734
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,090
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,359,976,206
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 273,607,363
<OTHER-INCOME> 0
<EXPENSES-NET> (10,115,982)
<NET-INVESTMENT-INCOME> 263,491,381
<REALIZED-GAINS-CURRENT> 105,304
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 263,596,685
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,239,677)
<DISTRIBUTIONS-OF-GAINS> (1,177)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 377,996,154
<NUMBER-OF-SHARES-REDEEMED> (250,873,677)
<SHARES-REINVESTED> 6,257
<NET-CHANGE-IN-ASSETS> 851,012,728
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 34,139
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,751,933
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,504,478
<AVERAGE-NET-ASSETS> 5,002,577,653
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .035
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.035)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 125
<NAME> FINANCIAL SQUARE PRIME OBLIGATIONS FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,373,112,279
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 11,583,246
<ASSETS-OTHER> 107,980
<OTHER-ITEMS-ASSETS> 88,907
<TOTAL-ASSETS> 4,384,892,412
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,916,206
<TOTAL-LIABILITIES> 24,916,206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,359,975,116
<SHARES-COMMON-STOCK> 215,900,253
<SHARES-COMMON-PRIOR> 147,895,914
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,090
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,359,976,206
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 273,607,363
<OTHER-INCOME> 0
<EXPENSES-NET> (10,115,982)
<NET-INVESTMENT-INCOME> 263,491,381
<REALIZED-GAINS-CURRENT> 105,304
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 263,596,685
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,697,750)
<DISTRIBUTIONS-OF-GAINS> (5,617)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,718,885,581
<NUMBER-OF-SHARES-REDEEMED> (1,653,602,695)
<SHARES-REINVESTED> 2,721,453
<NET-CHANGE-IN-ASSETS> 851,012,728
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 34,139
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,751,933
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,504,478
<AVERAGE-NET-ASSETS> 5,002,577,653
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .051
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .051
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 126
<NAME> FINANCIAL SQUARE PRIME OBLIGATIONS FUND-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,373,112,279
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 11,583,246
<ASSETS-OTHER> 107,980
<OTHER-ITEMS-ASSETS> 88,907
<TOTAL-ASSETS> 4,384,892,412
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,916,206
<TOTAL-LIABILITIES> 24,916,206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,359,975,116
<SHARES-COMMON-STOCK> 115,154,059
<SHARES-COMMON-PRIOR> 65,278,872
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,090
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,359,976,206
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 273,607,363
<OTHER-INCOME> 0
<EXPENSES-NET> (10,115,982)
<NET-INVESTMENT-INCOME> 263,491,381
<REALIZED-GAINS-CURRENT> 105,304
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 263,596,685
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,164,431)
<DISTRIBUTIONS-OF-GAINS> (2,712)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,442,987,405
<NUMBER-OF-SHARES-REDEEMED> (1,396,329,467)
<SHARES-REINVESTED> 3,217,249
<NET-CHANGE-IN-ASSETS> 851,012,728
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 34,139
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,751,933
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,504,478
<AVERAGE-NET-ASSETS> 5,002,577,653
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .048
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.048)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 133
<NAME> FINANCIAL SQUARE GOVERNMENT FUND-INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,230,446,987
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,375,926
<ASSETS-OTHER> 117,177
<OTHER-ITEMS-ASSETS> 25,740
<TOTAL-ASSETS> 1,233,965,830
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,422,941
<TOTAL-LIABILITIES> 6,422,941
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,227,516,405
<SHARES-COMMON-STOCK> 858,743,905
<SHARES-COMMON-PRIOR> 743,885,207
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,484
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,227,542,889
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 69,659,598
<OTHER-INCOME> 0
<EXPENSES-NET> 3,817,694
<NET-INVESTMENT-INCOME> 65,841,904
<REALIZED-GAINS-CURRENT> 136,538
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 65,978,442
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 48,867,861
<DISTRIBUTIONS-OF-GAINS> (81,682)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,674,849,553
<NUMBER-OF-SHARES-REDEEMED> (11,579,631,835)
<SHARES-REINVESTED> 19,640,980
<NET-CHANGE-IN-ASSETS> 386,764,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 961,337
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,618,560
<AVERAGE-NET-ASSETS> 1,281,782,780
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.53)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 134
<NAME> FINANCIAL SQUARE GOVERNMENT FUND-PREFERRED SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,230,446,987
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,375,926
<ASSETS-OTHER> 117,177
<OTHER-ITEMS-ASSETS> 25,740
<TOTAL-ASSETS> 1,233,965,830
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,422,941
<TOTAL-LIABILITIES> 6,422,941
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,227,516,405
<SHARES-COMMON-STOCK> 112,430
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,484
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,227,542,889
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 69,659,598
<OTHER-INCOME> 0
<EXPENSES-NET> 3,817,694
<NET-INVESTMENT-INCOME> 65,841,904
<REALIZED-GAINS-CURRENT> 136,538
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 65,978,442
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 19,753
<DISTRIBUTIONS-OF-GAINS> (33)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,202,329
<NUMBER-OF-SHARES-REDEEMED> (8,097,379)
<SHARES-REINVESTED> 7,480
<NET-CHANGE-IN-ASSETS> 386,764,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 961,337
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,618,560
<AVERAGE-NET-ASSETS> 1,281,782,780
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.35)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 135
<NAME> FINANCIAL SQUARE GOVERNMENT FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,230,446,987
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,375,926
<ASSETS-OTHER> 117,177
<OTHER-ITEMS-ASSETS> 25,740
<TOTAL-ASSETS> 1,233,965,830
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,422,941
<TOTAL-LIABILITIES> 6,422,941
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,227,516,405
<SHARES-COMMON-STOCK> 145,103,169
<SHARES-COMMON-PRIOR> 82,384,825
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,484
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,227,542,889
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 69,659,598
<OTHER-INCOME> 0
<EXPENSES-NET> 3,817,694
<NET-INVESTMENT-INCOME> 65,841,904
<REALIZED-GAINS-CURRENT> 136,538
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 65,978,442
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,023,737
<DISTRIBUTIONS-OF-GAINS> (8,397)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,074,614,378
<NUMBER-OF-SHARES-REDEEMED> (1,012,951,862)
<SHARES-REINVESTED> 1,055,828
<NET-CHANGE-IN-ASSETS> 386,764,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 961,337
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,618,560
<AVERAGE-NET-ASSETS> 1,281,782,780
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.050)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 136
<NAME> FINANCIAL SQUARE GOVERNMENT FUND-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,230,446,987
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,375,926
<ASSETS-OTHER> 117,177
<OTHER-ITEMS-ASSETS> 25,740
<TOTAL-ASSETS> 1,233,965,830
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,422,941
<TOTAL-LIABILITIES> 6,422,941
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,227,516,405
<SHARES-COMMON-STOCK> 223,556,901
<SHARES-COMMON-PRIOR> 14,508,148
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,484
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,227,542,889
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 69,659,598
<OTHER-INCOME> 0
<EXPENSES-NET> 3,817,694
<NET-INVESTMENT-INCOME> 65,841,904
<REALIZED-GAINS-CURRENT> 136,538
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 65,978,442
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11,930,553
<DISTRIBUTIONS-OF-GAINS> (19,942)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,353,982,373
<NUMBER-OF-SHARES-REDEEMED> (1,146,142,640)
<SHARES-REINVESTED> 1,208,640
<NET-CHANGE-IN-ASSETS> 386,764,709
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 961,337
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,618,560
<AVERAGE-NET-ASSETS> 1,281,782,780
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .047
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.48)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 143
<NAME> FINANCIAL SQUARE MONEY MARKET FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,964,020,412
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 11,328,488
<ASSETS-OTHER> 53,776
<OTHER-ITEMS-ASSETS> 87,010
<TOTAL-ASSETS> 2,975,489,686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,471,911
<TOTAL-LIABILITIES> 17,471,911
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,958,016,821
<SHARES-COMMON-STOCK> 2,540,361,007
<SHARES-COMMON-PRIOR> 2,069,197,101
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,958,017,775
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 168,464,120
<OTHER-INCOME> 0
<EXPENSES-NET> 6,186,522
<NET-INVESTMENT-INCOME> 162,277,598
<REALIZED-GAINS-CURRENT> 189,110
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 162,466,708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (149,928,272)
<DISTRIBUTIONS-OF-GAINS> (173,838)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41,611,799,874
<NUMBER-OF-SHARES-REDEEMED> (41,225,360,339)
<SHARES-REINVESTED> 84,724,371
<NET-CHANGE-IN-ASSETS> 747,189,380
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,295,135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,785,451
<AVERAGE-NET-ASSETS> 3,060,179,623
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .053
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.53)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 144
<NAME> FINANCIAL SQUARE MONEY MARKET FUND-PREFERRED SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,964,020,412
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 11,328,488
<ASSETS-OTHER> 53,776
<OTHER-ITEMS-ASSETS> 87,010
<TOTAL-ASSETS> 2,975,489,686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,471,911
<TOTAL-LIABILITIES> 17,471,911
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,958,016,821
<SHARES-COMMON-STOCK> 17,510,550
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,958,017,775
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 168,464,120
<OTHER-INCOME> 0
<EXPENSES-NET> 6,186,522
<NET-INVESTMENT-INCOME> 162,277,598
<REALIZED-GAINS-CURRENT> 189,110
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 162,466,708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (162,278)
<DISTRIBUTIONS-OF-GAINS> (188)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 77,361,171
<NUMBER-OF-SHARES-REDEEMED> (59,926,848)
<SHARES-REINVESTED> 76,227
<NET-CHANGE-IN-ASSETS> 747,189,380
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,295,135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,785,451
<AVERAGE-NET-ASSETS> 3,060,179,623
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .035
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.035)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 145
<NAME> FINANCIAL SQUARE MONEY MARKET FUND-ADMINISTRATION SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,964,020,412
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 11,328,488
<ASSETS-OTHER> 53,776
<OTHER-ITEMS-ASSETS> 87,010
<TOTAL-ASSETS> 2,975,489,686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,471,911
<TOTAL-LIABILITIES> 17,471,911
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,958,016,821
<SHARES-COMMON-STOCK> 165,764,727
<SHARES-COMMON-PRIOR> 137,412,396
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,958,017,775
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 168,464,120
<OTHER-INCOME> 0
<EXPENSES-NET> 6,186,522
<NET-INVESTMENT-INCOME> 162,277,598
<REALIZED-GAINS-CURRENT> 189,110
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 162,466,708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,558,151)
<DISTRIBUTIONS-OF-GAINS> (11,082)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,097,089,351
<NUMBER-OF-SHARES-REDEEMED> (2,074,616,324)
<SHARES-REINVESTED> 5,879,304
<NET-CHANGE-IN-ASSETS> 747,189,380
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,295,135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,785,451
<AVERAGE-NET-ASSETS> 3,060,179,623
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.50)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 146
<NAME> FINANCIAL SQUARE MONEY MARKET FUND-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,964,020,412
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 11,328,488
<ASSETS-OTHER> 53,776
<OTHER-ITEMS-ASSETS> 87,010
<TOTAL-ASSETS> 2,975,489,686
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,471,911
<TOTAL-LIABILITIES> 17,471,911
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,958,016,821
<SHARES-COMMON-STOCK> 234,380,537
<SHARES-COMMON-PRIOR> 4,218,898
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 954
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,958,017,775
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 168,464,120
<OTHER-INCOME> 0
<EXPENSES-NET> 6,186,522
<NET-INVESTMENT-INCOME> 162,277,598
<REALIZED-GAINS-CURRENT> 189,110
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 162,466,708
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,628,897)
<DISTRIBUTIONS-OF-GAINS> (3,048)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 470,852,368
<NUMBER-OF-SHARES-REDEEMED> (241,087,916)
<SHARES-REINVESTED> 397,187
<NET-CHANGE-IN-ASSETS> 747,189,380
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,295,135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,785,451
<AVERAGE-NET-ASSETS> 3,060,179,623
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.48)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 153
<NAME> FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 540,553,164
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,193,518
<ASSETS-OTHER> 14,269
<OTHER-ITEMS-ASSETS> 199,998
<TOTAL-ASSETS> 542,960,949
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,875,891
<TOTAL-LIABILITIES> 1,875,891
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 541,097,917
<SHARES-COMMON-STOCK> 440,850,118
<SHARES-COMMON-PRIOR> 448,374,479
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,859)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 541,085,058
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,750,787
<OTHER-INCOME> 0
<EXPENSES-NET> 1,221,270
<NET-INVESTMENT-INCOME> 18,529,517
<REALIZED-GAINS-CURRENT> (5,995)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 18,523,522
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,981,710)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,186,677,890
<NUMBER-OF-SHARES-REDEEMED> (4,199,081,918)
<SHARES-REINVESTED> 4,879,667
<NET-CHANGE-IN-ASSETS> 51,919,142
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (6,864)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 420,548
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,523,609
<AVERAGE-NET-ASSETS> 560,730,363
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.34)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET FUND'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 154
<NAME> FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND-PREFERRED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 540,553,164
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,193,518
<ASSETS-OTHER> 14,269
<OTHER-ITEMS-ASSETS> 199,998
<TOTAL-ASSETS> 542,960,949
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,875,891
<TOTAL-LIABILITIES> 1,875,891
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 541,097,917
<SHARES-COMMON-STOCK> 28,730,558
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,859)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 541,085,058
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,750,787
<OTHER-INCOME> 0
<EXPENSES-NET> 1,221,270
<NET-INVESTMENT-INCOME> 18,529,517
<REALIZED-GAINS-CURRENT> (5,995)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 18,523,522
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (431,737)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 65,543,581
<NUMBER-OF-SHARES-REDEEMED> (37,135,531)
<SHARES-REINVESTED> 322,508
<NET-CHANGE-IN-ASSETS> 51,919,142
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (6,864)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 420,548
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,523,609
<AVERAGE-NET-ASSETS> 560,730,363
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .022
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.022)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 155
<NAME> FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 540,553,164
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,193,518
<ASSETS-OTHER> 14,269
<OTHER-ITEMS-ASSETS> 199,998
<TOTAL-ASSETS> 542,960,949
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,875,891
<TOTAL-LIABILITIES> 1,875,891
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 541,097,917
<SHARES-COMMON-STOCK> 51,661,795
<SHARES-COMMON-PRIOR> 20,938,507
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,859)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 541,085,058
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,750,787
<OTHER-INCOME> 0
<EXPENSES-NET> 1,221,270
<NET-INVESTMENT-INCOME> 18,529,517
<REALIZED-GAINS-CURRENT> (5,995)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 18,523,522
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,593,538)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 177,906,627
<NUMBER-OF-SHARES-REDEEMED> (148,027,716)
<SHARES-REINVESTED> 844,377
<NET-CHANGE-IN-ASSETS> 51,919,142
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (6,864)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 420,548
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,523,609
<AVERAGE-NET-ASSETS> 560,730,363
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .031
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.031)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MONEY
MARKET TRUST'S ANNUAL STATEMENT DATED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 156
<NAME> FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND-SERVICE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 540,553,164
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 2,193,518
<ASSETS-OTHER> 14,269
<OTHER-ITEMS-ASSETS> 199,998
<TOTAL-ASSETS> 542,960,949
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,875,891
<TOTAL-LIABILITIES> 1,875,891
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 541,097,917
<SHARES-COMMON-STOCK> 19,855,446
<SHARES-COMMON-PRIOR> 19,859,794
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12,859)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 541,085,058
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,750,787
<OTHER-INCOME> 0
<EXPENSES-NET> 1,221,270
<NET-INVESTMENT-INCOME> 18,529,517
<REALIZED-GAINS-CURRENT> (5,995)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 18,523,522
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (522,532)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 239,131,409
<NUMBER-OF-SHARES-REDEEMED> (239,585,078)
<SHARES-REINVESTED> 449,321
<NET-CHANGE-IN-ASSETS> 51,919,142
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (6,864)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 420,548
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,523,609
<AVERAGE-NET-ASSETS> 560,730,363
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.29)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.11
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
for Goldman Sachs Money Market Trust-Institutional Liquid Assets and
Financial Square Funds dated February 10, 1997 (and to all references
to our firm) included in or made a part of Post-Effective Amendment No. 33 and
Amendment No. 35 to Registration Statement File Nos. 33-17619 and 811-5349,
respectively.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
April 17, 1997
