<PAGE>
As filed with the Securities and Exchange Commission on
April 29, 1998
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. 44 ( X )
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 ( X )
Amendment No. 46 ( 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. Jeffrey A. Dalke, Esq.
85 Broad Street - 12th Floor Drinker Biddle & Reath LLP
New York, New York 10004 1345 Chestnut Street
Philadelphia, PA 19107
(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 May 1, 1998 pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) On (date) 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 January 26, 1998 Registrant filed a Rule 24f-2 notice on behalf of its fixed
income trusts for their fiscal year ended October 31, 1997.
On March 31, 1998 Registrant filed a Rule 24f-2 notice on behalf of its money
market funds for their fiscal year ended January 21, 1998.
On March 31, 1997 Registrant filed a Rule 24f-2 notice on behalf of its
equity funds for their fiscal year ended January 31, 1998.
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS Institutional Liquid Assets
Cash Management Shares
---------------
CROSS REFERENCE SHEET
(as required by Rule 481)
PAGE A CAPTION
- ------ -------
Goldman Sachs Money Market Funds
- --------------------------------
Goldman Sachs Prime Obligations Portfolio, Goldman Sachs Money Market Portfolio,
Goldman Sachs Government Portfolio, Goldman Sachs Tax-Exempt Diversified
Portfolio, Goldman Sachs Tax-Exempt California Portfolio and Goldman Sachs Tax-
Exempt New York Portfolio
1. Cover Page Cover Page
2. Synopsis Shareholder and Portfolio Expenses
3. Condensed Financial
Information Financial Highlights
4. General Description of Cover Page; An Introduction to the Portfolios;
Registrant Investment Policies Matrix; Description of
Securities and Investment Techniques; Investment
Limitations; Organization and Shares of the
Portfolios
5. Management of the Fund Management
6. Capital Stock and Other Organization and Shares of the Portfolios;
Securities Taxes; Additional Services; Distributions
7. Purchase of Securities Purchase of Shares; Net Asset Value;
Being Offered Additional Services
8. Redemption or Repurchase Redemption of Shares; Additional Services
9. Pending Legal Proceedings Not Applicable
<PAGE>
PART B CAPTION
- ------ -------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Organization and
History Capitalization
13. Investment Objectives Investment Policies and Practices of
and Policies the Series; Investment Limitations
14. Management of the The Adviser, Distributor and
Registrant Transfer Agent
15. Control Persons and Organization and Capitalization
Principal Holders of Securities
16. Investment Advisory and The Adviser, Distributor
Other Services and Transfer Agent
17. Brokerage Allocation and Other Portfolio Transactions
Securities
18. Capital Stock and Other Organizations and Capitalization
Securities
19. Purchase, Redemption and The Adviser, Distributor and
Pricing of Securities Transfer Agent; Net Asset
Being Offered Value; Redemptions; Other Information
Regarding Purchases; Administration
Plans; Service Plans; Distribution
and Authorized Dealer Service Plans
20. Tax Status Tax Information
21. Underwriters The Advisor, Distributor and
Transfer Agent
22. Calculation of Performance Calculation of Yield Quotations
Data
23. Financial Statements Financial Statements
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 TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS INSTITUTIONAL LIQUID ASSETS PORTFOLIOS
ILA UNITS
---------------
CROSS REFERENCE SHEET
(as required by Rule 481)
Part A Caption
- ------ -------
Goldman Sachs Money Market Funds
- --------------------------------
Goldman Sachs Prime Obligations Portfolio, Goldman Sachs Money Market Portfolio,
Goldman Sachs Treasury Obligations Portfolio, Goldman Sachs Treasury Instruments
Portfolio, Goldman Sachs Government Portfolio, Goldman Sachs Federal Portfolio,
Goldman Sachs Tax-Exempt Diversified Portfolio, Goldman Sachs Tax-Exempt
California Portfolio and Goldman Sachs Tax-Exempt New York Portfolio
1. Cover Page Cover Page
2. Synopsis Unitholder and Portfolio Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description Cover Page: An Introduction to the Portfolios;
of Registrant Investment Policies Matrix; Description
of Securities and Investment Techniques;
Investment Limitations; Organization and Units
of the Portfolios
5. Management of the Fund Fund Management
6. Capital Stock and Distributions; Taxes; Organization
Other Securities and Units of the Portfolios
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
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS INSTITUTIONAL LIQUID ASSETS PORTFOLIOS
ILA ADMINISTRATION UNITS
---------------
CROSS REFERENCE SHEET
(as required by Rule 481)
Goldman Sachs Money Market Funds
- --------------------------------
Goldman Sachs Prime Obligations Portfolio, Goldman Sachs Money Market
Portfolio, Goldman Sachs Treasury Obligations Portfolio, Goldman Sachs Treasury
Instruments Portfolio, Goldman Sachs Government Portfolio, Goldman Sachs Federal
Portfolio, Goldman Sachs Tax-Exempt Diversified Portfolio, Goldman Sachs Tax-
Exempt California Portfolio and Goldman Sachs Tax-Exempt New York Portfolio
Part A Caption
- ------ -------
1. Cover Page Cover Page
2. Synopsis Unitholder and Portfolio Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description An Introduction to the Portfolios;
of Registrant Investment Policies Matrix; Description
of Securities and Investment Techniques;
Investment Limitations; Organization and
Units of the Portfolios
5. Management of the Fund Management
6. Capital Stock and Purchase of Units; Distributions; Taxes;
Other Securities Organization and Units of the Portfolios
7. Purchase of Securities Purchase of Units; Exchanges; Net Asset
Value; Administration
8. Redemption or Repurchase Redemption of Units; Administration
9. Pending Legal Proceedings Not Applicable
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS INSTITUTIONAL LIQUID ASSETS PORTFOLIOS
ILA SERVICE UNITS
---------------
CROSS REFERENCE SHEET
(as required by Rule 481)
Part A Caption
- ------ -------
Goldman Sachs Money Market Funds
- --------------------------------
Goldman Sachs Prime Obligations Portfolio, Goldman Sachs Money Market Portfolio,
Goldman Sachs Treasury Obligations Portfolio, Goldman Sachs Treasury Instruments
Portfolio Goldman Sachs Government Portfolio, Goldman Sachs Federal Portfolio
Goldman Sachs Tax-Exempt Diversified Portfolio, Goldman Sachs Tax-Exempt
California Portfolio and Goldman Sachs Tax-Exempt New York Portfolio
1. Cover Page Cover Page
2. Synopsis Unitholder and Portfolio Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description Cover Page; An Introduction to the Portfolios;
of Registrant Investment Policies Matrix; Description
of Securities and Investment Techniques;
Investment Restrictions; Organization and
Units of the Portfolios
5. Management of the Fund Management
6. Capital Stock and Distributions; Taxes; Organization
Other Securities and Units of the Portfolios
7. Purchase of Securities Purchase of Units; Exchanges;
Being Offered Net Asset Value; Additional Services
8. Redemption or Repurchase Redemption of Units; Additional Services
9. Pending Legal Proceedings Not Applicable
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS INSTITUTIONAL LIQUID ASSETS PORTFOLIOS
ILA SERVICE UNITS
ILA CLASS B UNITS
ILA CLASS C UNITS
---------------
CROSS REFERENCE SHEET
(as required by Rule 481)
Part A Caption
- ------ -------
Goldman Sachs Money Market Funds
- --------------------------------
Institutional Liquid Assets Prime Obligations Portfolio and Institutional
Liquid Assets Tax-Exempt Diversified Portfolio
1. Cover Page Cover Page
2. Synopsis Unitholder and Portfolio Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description Cover Page; An Introduction to the
of Registrant Portfolios; Investment Policies Matrix;
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
6. Capital Stock and
Other Securities Distributions and Taxes;
Organization and Units of the Portfolios
7. Purchase of Securities How to Invest; Exchanges;
Net Asset Value; Additional Services
8. Redemption or Repurchase Redemption of Units
9. Pending Legal Proceedings Not Applicable
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS FINANCIAL SQUARE FUNDS
FST SHARES
---------------
CROSS REFERENCE SHEET
(as required by Rule 481)
Part A Caption
- ------ -------
Goldman Sachs Money Market Funds
- --------------------------------
Goldman Sachs Financial Square Prime Obligations Fund, Goldman Sachs Financial
Square Money Market Fund, Goldman Sachs Financial Square Premium Money Market
Fund, Goldman Sachs Financial Square Treasury Obligations Fund, Goldman Sachs
Financial Square Treasury Instruments Fund, Goldman Sachs Financial Square
Government Fund, Goldman Sachs Financial Square Federal Fund, Goldman Sachs
Financial Square Tax-Free Money Market Fund and Goldman Sachs Financial Square
Municipal Money Market Fund
1. Cover Page Cover Page
2. Synopsis Shareholder and Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description Cover Page; An Introduction to the Funds;
of Registrant Investment Policies Matrix; Investment Objective
and Policies; Description of Securities and
Investment Techniques; Investment Limitations;
Organization and Shares of the Trust
5. Management of the Fund Management
6. Capital Stock and Distributions; Taxes; Organization
Other Securities and Shares of the Trust
7. Purchase of Securities Purchase of Shares; Exchanges;
Being Offered Net Asset Value
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not Applicable
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS FINANCIAL SQUARE FUNDS
FST ADMINISTRATION SHARES
---------------
CROSS REFERENCE SHEET
(as required by Rule 481)
Part A Caption
- ------ -------
Goldman Sachs Money Market Funds
- --------------------------------
Goldman Sachs Financial Square Prime Obligations Fund, Goldman Sachs Financial
Square Money Market Fund, Goldman Sachs Financial Square Premium Money Market
Fund, Goldman Sachs Financial Square Treasury Obligations Fund, Goldman Sachs
Financial Square Treasury Instruments Fund, Goldman Sachs Financial Square
Government Fund, Goldman Sachs Financial Square Federal Fund, Goldman Sachs
Financial Square Tax-Free Money Market Fund and Goldman Sachs Financial Square
Municipal Money Market Fund
1. Cover Page Cover Page
2. Synopsis Shareholder and Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description Cover Page; An Introduction to the Funds;
of Registrant Investment Policies Matrix; 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
6. Capital Stock and Distributions; Taxes; Organization
Other Securities and Shares of the Trust
7. Purchase of Securities Purchase of Shares; Exchanges;
Net Asset Value; Administration
8. Redemption or Repurchase Redemption of Shares; Administration
9. Pending Legal Proceedings Not Applicable
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS FINANCIAL SQUARE FUNDS
FST SERVICE SHARES
---------------
CROSS REFERENCE SHEET
(as required by Rule 481)
Part A Caption
- ------ -------
Goldman Sachs Money Market Funds
- --------------------------------
Goldman Sachs Financial Square Prime Obligations Fund, Goldman Sachs Financial
Square Money Market Fund, Goldman Sachs Financial Square Premium Money Market
Fund, Goldman Sachs Financial Square Treasury Obligations Fund, Goldman Sachs
Financial Square Treasury Instruments Fund, Goldman Sachs Financial Square
Government Fund, Goldman Sachs Financial Square Federal Fund, Goldman Sachs
Financial Square Tax-Free Money Market Fund and Goldman Sachs Financial Square
Municipal Money Market Fund
1. Cover Page Cover Page
2. Synopsis Shareholder and Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description Cover Page; An Introduction to the Funds;
of Registrant Investment Policies Matrix; Investment
Policies; Description of Securities and
Investment Techniques; Investment
Limitations; Organization and Shares of the
Trust
5. Management of the Fund Management
6. Capital Stock and Distributions; Taxes; Organization
Other Securities and Shares of the Trust
7. Purchase of Securities Purchase of Shares; Exchanges;
Being Offered Net Asset Value; Additional Services
8. Redemption or Repurchase Redemption of Shares; Additional Services
9. Pending Legal Proceedings Not Applicable
<PAGE>
GOLDMAN SACHS TRUST
GOLDMAN SACHS MONEY MARKET FUNDS
GOLDMAN SACHS FINANCIAL SQUARE FUNDS
FST PREFERRED SHARES
---------------
CROSS REFERENCE SHEET
(as required by Rule 481)
Part A Caption
- ------ -------
Goldman Sachs Money Market Funds
Goldman Sachs Financial Square Prime Obligations Fund, Goldman Sachs Financial
Square Money Market Fund, Goldman Sachs Financial Square Premium Money Market
Fund, Goldman Sachs Financial Square Treasury Obligations Fund, Goldman Sachs
Financial Square Treasury Instruments Fund, Goldman Sachs Financial Square
Government Fund, Goldman Sachs Financial Square Federal Fund, Goldman Sachs
Financial Square Tax-Free Money Market Fund and Goldman Sachs Financial Square
Municipal Money Market Fund
1. Cover Page Cover Page
2. Synopsis Shareholder and Fund Expenses
3. Condensed Financial Financial Highlights
Information
4. General Description Cover Page; An Introduction to the Funds; In
of Registrant Investment Policies; Investment Policies
Matrix; Description Securities and Investment
Techniques; Investment Limitations;
Organization and Shares of the Trust
5. Management of the Fund Management
6. Capital Stock and Distributions; Taxes; Organization
Other Securities and Shares of the Trust
7. Purchase of Securities Purchase of Shares; Exchanges; Net
Being Offered Asset Value; Administration
8. Redemption or Repurchase Redemption of Shares; Administration
9. Pending Legal Proceedings Not Applicable
<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
ILA CLASS C UNITS
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs 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 and ILA Class C shares of beneficial interest ("ILA Class B Units" and
"ILA Class C Units," respectively) of the Prime Obligations Portfolio. ILA
Class B Units and ILA Class C Units will typically be issued only upon an
exchange of Class B or Class C Shares, respectively, of any mutual fund
sponsored by Goldman Sachs ("Goldman Sachs Funds"). Goldman Sachs Asset
Management, a separate operating division of Goldman, Sachs & Co., serves as
each Portfolio's investment adviser (the "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, 1998, 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 Portfolios 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, 1998.
<PAGE>
UNITHOLDER AND PORTFOLIO EXPENSES (3)
<TABLE>
<CAPTION>
PRIME OBLIGATIONS TAX-EXEMPT
PORTFOLIO DIVERSIFIED
------------------------------------------- PORTFOLIO
(ILA SERVICE) (ILA CLASS B+) (ILA CLASS C+) (ILA SERVICE)
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
UNITHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases.. None None None None
Sales Charge Imposed on
Reinvested
Distributions......... None None None None
Deferred Sales Load
Imposed on
Redemptions........... None 5.0%(1) 1.0%(2) None
Exchange Fee........... None None None None
ANNUAL OPERATING
EXPENSES
(as a percentage of
average daily net
assets)
Management Fees........ 0.35% 0.35% 0.35% 0.35%
Distribution (Rule 12b-
1) Fees............... None 0.75% 0.75% None
Other Expenses
Service Fees.......... 0.40% None None 0.40%
Authorized Dealer
Service Fees......... None 0.25% 0.25% None
Other Expenses........ 0.08% 0.08% 0.08% 0.06%
---- ---- ---- ----
TOTAL OPERATING EXPENSES
(4)(5)................. 0.83% 1.43% 1.43% 0.81%
==== ==== ==== ====
</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 $103
ILA Class B Units......................................
--Assuming complete redemption at end of period....... $65 $75 $98 $155*
--Assuming no redemption.............................. $15 $45 $78 $155*
ILA Class C Units......................................
--Assuming complete redemption at end of period....... $25 $45 $78 $171
--Assuming no redemption.............................. $15 $45 $78 $171
Tax-Exempt Diversified Portfolio
ILA Service Units...................................... $ 8 $26 $45 $100
</TABLE>
- -------
+ Investors wishing to purchase units of the Prime Obligations Portfolio are
generally required to purchase ILA Service Units. ILA Class B and Class C
Units of the Prime Obligations Portfolio will typically be issued only in
exchange for Class B or Class C shares, respectively, of any other Goldman
Sachs Fund.
* 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.
(1) A contingent deferred sales charge is imposed on units redeemed within six
years of purchase (or initial investment in a Goldman Sachs Fund from
which an exchange is made) at a rate of 5% in the first year, declining to
1% in the sixth year, and eliminated thereafter. See "Additional Servic-
es--Offering Price--ILA Class B Units".
(2) A contingent deferred sales charge is imposed on units redeemed within 12
months of purchase (or initial investment in a Goldman Sachs Fund from
which an exchange is made). See "Additional Services--Offering Price--ILA
Class C Units."
(3) Based on estimated amounts for the current fiscal year.
(4) The Adviser has voluntarily agreed to reduce or limit the Total Operating
Expenses of each Class of each Portfolio (excluding fees payable to Serv-
ice Organizations, as defined herein, distribution and authorized dealer
service fees, taxes, interest and brokerage and litigation, indemnifica-
tion and other extraordinary expenses) on an annualized basis to 0.43% of
the average daily net assets of a Portfolio.
2
<PAGE>
(5) For the fiscal year ended December 31, 1997, the Adviser waived or reim-
bursed certain fees and expenses such that "Management Fees," "Other Ex-
penses" and "Total Operating Expenses" actually incurred by the Portfolios
were as follows:
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
FEE EXPENSES EXPENSES
---------- -------- ---------
<S> <C> <C> <C>
Prime Obligations (ILA Service Units).......... 0.35% 0.07% 0.82%
Prime Obligations (ILA Class B Units).......... 0.35% 0.07% 1.42%
Prime Obligations (ILA Class C Units).......... 0.35% 0.07% 1.42%
Tax-Exempt Diversified (ILA Service Units)..... 0.26% 0.06% 0.72%
</TABLE>
Without such limitations, "Management Fees," "Other Expenses" and "Total
Operating Expenses" would have been as follows:
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER OPERATING
FEE EXPENSES EXPENSES
---------- -------- ---------
<S> <C> <C> <C>
Prime Obligations (ILA Service Units).......... 0.35% 0.08% 0.83%
Prime Obligations (ILA Class B Units).......... 0.35% 0.08% 1.43%
Prime Obligations (ILA Class C Units).......... 0.35% 0.08% 1.43%
Tax-Exempt Diversified (ILA Service Units)..... 0.35% 0.06% 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
Diversified Portfolios and ILA Class B and ILA Class C Units of the Prime
Obligations Portfolio. The Portfolios also offer ILA Units, ILA Administration
Units and ILA Cash Management Shares. 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.
Certain institutions may charge fees directly to their customers who are the
beneficial owners of units in connection with their customers' accounts. See
"Additional Services" in this Prospectus and the Statement of Additional
Information. Such fees, if any, may affect the return such customers realize
with respect to their investments.
Institutions may also receive other compensation in connection with the sale
and distribution of units of the Portfolios or for services to their
customers' accounts and/or the Portfolios. For additional information
regarding such compensation, see "Additional Services" in this Prospectus and
the Statement of Additional Information.
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
directly or indirectly. The information on fees and expenses included in the
table and the hypothetical example above are based on each Portfolio'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 indicated. Moreover, while the example assumes a 5%
annual return, a Portfolio's actual performance will vary and may result in an
actual return of greater or less than 5%. See "Management--The Adviser."
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP,
independent public accountants, whose report appears in the annual report to
unitholders of the Portfolios for the fiscal year ended December 31, 1997 (the
"Annual Report"). This information 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 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 ASSET NET 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0524 -- $0.0524 $(0.0524) $1.00 5.38%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.22
1997-ILA Service
units........... 1.00 0.0485 -- 0.0485 (0.0485) 1.00 4.96
1997-ILA B
units........... 1.00 0.0433 -- 0.0433 (0.0433) 1.00 4.33
1997-ILA C
units(b)........ 1.00 0.0365 -- 0.0365 (0.0365) 1.00 4.41(d)
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
<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,
- --------------------------------
1997-ILA units.. 0.42% 5.24% $ 866,445 0.43% 5.23%
1997-ILA
Administration
units........... 0.57 5.11 28,110 0.58 5.10
1997-ILA Service
units........... 0.82 4.85 78,316 0.83 4.84
1997-ILA B
units........... 1.42 4.33 1,574 1.43 4.32
1997-ILA C
units(b)........ 1.42(d) 4.39(d) 1,897 1.43(d) 4.38(d)
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
</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 and C unit activity commenced during May of 1996 and August of
1997, respectively.
(c) ILA Administration and Service unit activity commenced during June of
1990.
(d) Annualized.
- -------------------------------------------------------------------------------
4
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0333 -- $0.0333 $(0.0333) $1.00 3.39%
1997-ILA
Administration
units........... 1.00 0.0316 -- 0.0316 (0.0316) 1.00 3.23
1997-ILA Service
units........... 1.00 0.0297 -- 0.0297 (0.0297) 1.00 2.97
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
<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> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.32% 3.33% $1,479,486 0.41% 3.24%
1997-ILA
Administration
units........... 0.47 3.16 27,967 0.56 3.07
1997-ILA Service
units........... 0.72 2.97 30,513 0.81 2.88
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
</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 provide unitholders, to the extent consistent with
the preservation of capital and prescribed portfolio standards, with a high
level of income exempt from federal income tax by investing primarily in
Municipal Instruments, as defined 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 (as de-
termined pursuant to Rule 2a-7) 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 that either
(a) are rated 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;
or (b) have been issued or guaranteed by, or otherwise allow a Portfolio under
certain conditions to demand payment from, an entity with such ratings. U.S.
Government Securities as defined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Diversified Portfolio may purchase
securities that are not First Tier Securities but either (a) 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; or (b) have been issued or guaran-
teed by, or otherwise allow a Portfolio under certain conditions to demand
payment from, an entity with such ratings. 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, securities without
short-term ratings may be purchased if they are deemed to be of comparable
quality to First Tier Securities, or to the extent that a Portfolio may pur-
chase 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 IBCA, Inc., Duff and Phelps, Inc. and Thomson BankWatch,
Inc. For a description of each NRSRO's rating categories, see Appendix A to
the Statement of Additional 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
tax-exempt 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
Distributions* 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 sup-
ported by a guarantee or demand feature may rely on the credit quality of
the guarantee or demand feature in determining the credit quality of the
investment.
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 mortgages, motor vehicle installment sale
contracts, 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 insurance 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.
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. Subject to the conditions for using amortized cost valuation under the
Investment Company Act, a Portfolio may consider the maturity of a variable or
floating rate obligation to be shorter than its ultimate stated maturity if the
obligation is a U.S. Treasury Obligation or U.S. Government Security, if the
obligation has a remaining maturity of 397 calendar days or less, or if the ob-
ligation has a demand feature that permits the Portfolio to receive payment at
any time or at specified intervals not exceeding 397 calendar days. 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 let-
ters of credit, which will ordinarily be irrevocable, both of which may be is-
sued by domestic banks or foreign banks which have a branch, agency or subsidi-
ary in the United States. A Portfolio may purchase 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.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS: Obligations issued by or on behalf of states, territo-
ries and possessions of the United States and their political subdivisions,
agencies, authorities and instrumentalities, and the District of Columbia.
Such Municipal Instruments may include:
(A) fixed rate notes and similar debt instruments;
(B) variable and floating rate demand instruments;
(C) tax-exempt commercial paper;
(D) municipal bonds; and
(E) unrated notes, paper, bonds or other instruments.
As a matter of fundamental policy, at least 80% of the Tax-Exempt Diversified
Portfolio's net assets will ordinarily be invested in Municipal Instruments,
the interest from which is, in the opinion of bond counsel, if any,
9
<PAGE>
excluded from gross income for federal income tax purposes. The Portfolio may
temporarily invest in taxable money market instruments 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 the Tax-Exempt Diversified Portfolio.
The Prime Obligations Portfolio may also invest in Municipal Instruments 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. Gen-
eral obligation bonds are backed by the taxing power of the issuing municipal-
ity 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 ("private activity
bonds") are a specific type of revenue bond backed by the credit and security
of a private user and, therefore, have more potential risk. 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 institution
and receive the face value thereof. As consideration for providing the option,
the financial institution receives periodic fees equal to the difference be-
tween 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 effec-
tively holds a demand obligation that bears interest at the prevailing short-
term, tax-exempt rate. However, an institution will not be obligated to accept
tendered bonds in the event of certain defaults or a significant downgrading in
the credit rating assigned to the issuer of the bond. The tender option will be
taken into account in determining the maturity of the tender option bonds and a
Portfolio's average portfolio maturity. There is a risk that the Tax-Exempt Di-
versified 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 in-
terest as exempt from federal income tax.
REVENUE ANTICIPATION WARRANTS. Revenue Anticipation Warrants ("RAWs") are is-
sued 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 obliga-
tions. 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 re-
packaged 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.
INDUSTRIAL DEVELOPMENT BONDS. The Tax-Exempt Diversified Portfolio does not
currently intend to invest in industrial development bonds (private activity
bonds), the interest from which would be an item of tax preference when dis-
tributed by the Portfolio as "exempt interest dividends" to unitholders under
the federal alternative minimum tax. See "Taxes" and "Distributions." If such
policy should change in the future, such investments would not exceed 20% of
the Portfolio's net assets under normal market conditions.
10
<PAGE>
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. The Tax-Exempt Diversified Portfolio, however, does not
intend to invest more than 25% of the value of its total assets in industrial
development bonds or similar obligations where the non-governmental entities
supplying the revenues from which such bonds or obligations are to be paid are
in the same industry.
Each Portfolio may purchase Municipal Instruments which are backed by let-
ters of credit or other forms of credit enhancement issued by domestic banks
or foreign banks (excluding the Prime Obligations Portfolio) which have a
branch, agency or subsidiary in the United States or by other financial insti-
tutions. The credit quality of these banks and financial institutions could,
therefore, cause a loss to a Portfolio that invests in Municipal Instruments.
Letters of credit and other obligations of foreign banks and financial insti-
tutions may involve risks in addition to those of domestic obligations because
of less publicly-available financial and other information, less securities
regulation, potential imposition of foreign withholding and other taxes, war,
expropriation or other adverse governmental actions. Foreign banks and their
foreign branches are not regulated by U.S. banking authorities, and generally
are not bound by the accounting, auditing and financial reporting standards
applicable to U.S. banks. In addition, the 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 may acquire the right to sell the security to another
party at a guaranteed price and date.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements with primary dealers in
U.S. Government Securities and banks affiliated with such primary dealers. A
repurchase agreement is an agreement under which a Portfolio purchases securi-
ties and the seller agrees to repurchase the securities within a particular
time at a specified price. Such price will exceed the original purchase price,
the difference being income to the Portfolio, and will be unrelated to the in-
terest rate on the purchased security. A Portfolio's custodian or sub-custo-
dian 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 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 repurchase agreements entered into by a Port-
folio will be taxable to
11
<PAGE>
its unitholders. In addition, each 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 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 will segregate cash or liquid assets in an
amount sufficient to meet the purchase price until three days prior to settle-
ment date. 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 settle-
ment 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 security or for-
ward commitment prior to settlement if the Adviser deems it appropriate to do
so.
OTHER INVESTMENT COMPANIES
The amount of a Portfolio's investments in securities of other investment
companies will be subject to the limitations on such investments prescribed by
the Investment Company Act. These limits include a prohibition on any Portfo-
lio acquiring more than 3% of the voting shares of any other investment compa-
ny, 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 as-
sets 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 investment companies will have in-
vestment objectives, policies and restrictions substantially 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.
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. The Board of Trustees has adopted guidelines under which the Adviser
determines and monitors the liquidity of restricted securities subject to the
oversight of the Trustees. Restricted securities (including commercial paper
issued pursuant to Section 4(2) of the 1933 Act) which are determined to be
liquid
12
<PAGE>
pursuant to these guidelines will not be deemed to be illiquid investments for
purposes of the foregoing restriction. Since it is not possible to predict
with assurance that the market for restricted securities will continue to be
liquid, the Adviser will carefully monitor each Portfolio's investments in
these securities, focusing on such important factors, among others, as valua-
tion, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in a Portfolio to
the extent that qualified institutional buyers become for a time uninterested
in purchasing these restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nomi-
nal fixed term on seven days or less notice. Such repurchase agreements will
be regarded as liquid instruments.
BORROWINGS. Each Portfolio may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Portfolio may not make additional
investments if borrowings exceed 5% of its total assets. For more information,
see the Statement of Additional Information.
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 23,
1998, Goldman Sachs, together with its affiliates, acted as investment adviser
or distributor for approximately $153 billion in assets.
As of November 28, 1997, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $178 billion and partners' capital of $6.1 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 Portfolios' Management Agreement, 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. 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 DECEMBER 31,
RATE 1997
----------- ------------
<S> <C> <C>
Prime Obligations Portfolio............................ .35% .35%
Tax-Exempt Diversified Portfolio....................... .35% .26%
</TABLE>
13
<PAGE>
The difference, if any, between the stated and actual fees paid by the Port-
folios reflects the fact that the Adviser did not charge the full amount of
the fees to which it would have been entitled.
GSAM has voluntarily agreed to reduce or otherwise limit the daily expenses
of each Portfolio (excluding fees payable under the Portfolios' service and
administration plans, 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. Such reductions or limits, if any, are calculated monthly on a
cumulative basis. Any such reductions or limits may be discontinued or modi-
fied only with the express approval of the Trustees.
YEAR 2000. Many computer systems were designed using only two digits to sig-
nify the year (for example, "98" for "1998"). On January 1, 2000, if these
computer systems are not corrected, they may incorrectly interpret "00" as the
year "1900" rather than the year "2000," leading to computer shutdowns or er-
rors (commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Portfolios could be adversely affected in their ability to
process securities trades, price securities, provide unitholder account serv-
ices and otherwise conduct normal business operations if the computer systems
used by the Adviser or other Portfolio service providers do not adequately ad-
dress this problem in a timely manner. The Adviser has established a dedicated
group to analyze these issues and to implement the systems modifications nec-
essary to prepare for the Year 2000. Currently, the Adviser does not antici-
pate that the transition to the 21st Century will have any material impact on
its ability to continue to service the Portfolios at current levels. In addi-
tion, the Adviser has sought assurances from the Portfolios' other service
providers that they are taking the steps necessary so that they do not experi-
ence Year 2000 Problems, and the Adviser will continue to monitor the situa-
tion. At this time, however, no assurance can be given that the actions taken
by the Adviser and the Portfolios' other service providers will be sufficient
to avoid any adverse effect on the Portfolios due to the Year 2000 Problem.
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 each Portfolio's transfer agent (the "Transfer Agent"). For the
transfer agency services, Goldman Sachs receives .04% (on an annualized basis)
of the average daily net assets with respect to the Tax-Exempt Diversified
Portfolio. Goldman Sachs is entitled to receive a fee from the Prime Obliga-
tions Portfolio equal to each class' proportionate share of the total transfer
agency costs borne by the Portfolio. These costs are equal to $12,000 per year
per class and $7.50 per account, together with out-of-pocket and transaction
related expenses applicable to ILA Class B and Class C Units and .04% of the
average daily net assets of the other classes of the Prime Obligations Portfo-
lio.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold units of the Portfolios. Goldman Sachs reserves the right to redeem at
any time some or all of the Portfolio units acquired for its own account.
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 may not
exceed .25% of such average daily net assets. The services provided by a Serv-
ice Organization may include acting, directly or through an agent, as the sole
unitholder of record, maintaining account records for its customers, process-
ing orders to purchase, redeem and exchange ILA Service Units for its custom-
ers, responding to inquiries from prospective and existing unitholders and as-
sisting 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 attribut-
able to or held of record by such Service Organization for providing certain
additional services to its customers. Such compensation will not represent an
additional expense to a Portfolio or its unitholders, since it will be paid
from the assets of GSAM.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of ILA Service Units 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 Portfolio. The Trust, on behalf of the
Portfolios, accrues payments made pursuant to a Service Agreement daily. All
inquiries of beneficial owners of ILA Service Units should be directed to the
owners' Service Organization.
For the fiscal year ended December 31, 1997, 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.
DISTRIBUTION AND AUTHORIZED DEALER SERVICE PLANS (ILA CLASS B AND CLASS C
UNITS ONLY)
DISTRIBUTION PLAN-ILA CLASS B AND CLASS C UNITS. Prime Obligations Portfo-
lio, with respect to each of its ILA Class B and Class C Units, has adopted
Distribution Plans pursuant to Rule 12b-1 under the Investment Company Act
(each a "Distribution Plan"). Under the ILA Class B and Class C Distribution
Plans, Goldman Sachs is entitled to a monthly fee from the Portfolio for dis-
tribution services equal, on an annual basis, to 0.75% of the average daily
net assets attributable to its ILA Class B and Class C Units, respectively.
For the fiscal year ended December 31, 1997, the Portfolio paid distribution
fees at the foregoing rate for the Portfolio's ILA Class B and Class C Units.
Goldman Sachs may use the distribution fee for its expenses of distributing
the ILA Class B and Class C Units. The types of expenses for which Goldman
Sachs may be compensated for distribution services under the ILA Class B and
Class C Distribution Plans include compensation paid to and expenses incurred
by Authorized Dealers, Goldman Sachs and their respective officers, employees
and sales representatives, commissions paid to
15
<PAGE>
Authorized Dealers, allocable overhead, telephone and travel expenses, the
printing of prospectuses for prospective unitholders, preparation and distribu-
tion of sales literature, advertising of any type and all other expenses in-
curred in connection with activities primarily intended to result in the sale
of ILA Class B and Class C Units. If the fee received by Goldman Sachs pursuant
to a Distribution Plan exceeds its expenses, Goldman Sachs may realize a profit
from these arrangements. The Distribution Plans will be reviewed and are sub-
ject to approval annually by the Board of Trustees of the Trust. The aggregate
compensation that may be received under each Distribution Plan for distribution
services may not exceed the limitations imposed by the NASD's Conduct Rules.
In connection with the sale of ILA Class C Units, Goldman Sachs begins paying
the 0.75% distribution fee as an ongoing commission to Authorized Dealers after
the units have been held for one year. Goldman Sachs pays the distribution fee
on a quarterly basis.
AUTHORIZED DEALER SERVICE PLAN-ILA CLASS B AND CLASS C UNITS. Prime Obliga-
tions Portfolio, with respect to each of its ILA Class B and Class C Units, has
adopted a non-Rule 12b-1 Authorized Dealer Service Plan (each a "Service Plan")
pursuant to which Goldman Sachs, Authorized Dealers or other persons are com-
pensated for providing personal and account maintenance services. The Portfolio
pays a fee under its ILA Class B and Class C Service Plans equal on an annual
basis to 0.25% of its average daily net assets attributable to ILA Class B and
Class C Units, respectively. The fee for personal and account maintenance serv-
ices paid pursuant to a Service Plan may be used to make payments to Goldman
Sachs, Authorized Dealers and their officers, sales representatives and employ-
ees for responding to inquiries 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 Service Plans will be re-
viewed and are subject to approval annually by the Board of Trustees. For the
fiscal year ended December 31, 1997, the Portfolio paid Authorized Dealer serv-
ice fees at the foregoing rate for the Portfolio's ILA Class B and Class C
Units.
In connection with the sale of ILA Class C Units, Goldman Sachs begins paying
the 0.25% ongoing service fee to Authorized Dealers after the units have been
held for one year. Goldman Sachs pays the service fee on a quarterly basis.
HOW TO INVEST
ALTERNATIVE PURCHASE ARRANGEMENTS
Each Portfolio continuously offers ILA Service Units and the Prime Obliga-
tions Portfolio also offers ILA Class B and Class C Units through this Prospec-
tus, as described more fully below. ILA Class B and Class C Units of the Prime
Obligations Portfolio will be typically issued only upon an exchange of Class B
or Class C Shares, respectively, of any of the Goldman Sachs Funds or to ac-
counts which intend to systematically exchange ILA Class B or Class C Units for
Class B or Class C Shares, respectively, of any of the Goldman Sachs Funds. In
other instances, if an investor does not specify in the instructions to the
Portfolios 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
and have lower fees.
In order to make an initial investment in a Portfolio, an investor must es-
tablish an account with the Portfolio by furnishing to the Portfolio, Goldman
Sachs or the investor's Service Organization or Authorized Dealer the informa-
tion in the Account Application attached to this Prospectus. The Portfolios may
refuse to open an account
16
<PAGE>
for any investor who fails to (i) provide a social security number or other
taxpayer identification number, or (ii) certify that such number is correct (if
required to do so under applicable law).
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 contingent
deferred sales charge ("CDSC"), as described below, if redeemed within six
years of purchase. ILA Class B Units are also subject to distribution and au-
thorized dealer service fees of up to 0.75% and 0.25%, per annum, 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 imposed
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. Normally, there is a maximum purchase limitation of
$250,000 on purchases of ILA Class B Units by each investor.
ILA CLASS C UNITS. ILA Class C Units of the Prime Obligations Portfolio are
sold without an initial sales charge, but are subject to a CDSC of 1% if re-
deemed within 12 months of purchase. ILA Class C Units are subject to distribu-
tion and authorized dealer service fees of 0.75% and 0.25%, per annum, respec-
tively, of the Portfolio's average daily net assets attributable to ILA Class C
Units. ILA Class C Units have no conversion feature, and accordingly, an in-
vestor that purchases ILA Class C Units will be subject to distribution fees
that will be imposed on ILA Class C Units for an indefinite period, subject to
annual approval by the Portfolio's Board of Trustees and certain regulatory
limitations. Your entire investment in ILA Class C Units is available to work
for you from the time you make your initial investment, but the distribution
fee paid by ILA Class C Units will cause your ILA Class C Units to have a
higher expense ratio and to pay lower dividends, to the extent dividends are
paid, than ILA Service Units (or Class B Units after conversion to ILA Service
Units). Normally, there is a maximum purchase limitation of $1,000,000 on pur-
chases of ILA Class C Units by each investor.
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 redeemed.
No CDSC will be imposed on increases in account value above the initial pur-
chase price, including units derived from the reinvestment of dividends or cap-
ital gains distributions. Upon redemption of units subject to a CDSC,
unitholders will receive that portion of the appreciation in account value at-
tributable to the units actually redeemed.
17
<PAGE>
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 applicable period.
<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% 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. The conversion of ILA Class B Units to ILA Service Units will
not occur at any time the Portfolios are advised that such conversions may
constitute taxable events for federal tax purposes, which the Portfolios be-
lieve is unlikely. If the conversions do not occur as a result of possible
taxability, ILA Class B Units would continue to be subject to higher expenses
than ILA Service Units for an indeterminate period.
OFFERING PRICE--ILA CLASS C UNITS
Investors may purchase ILA Class C Units of the Prime Obligations Portfolio
at the next determined net asset value without the imposition of an initial
sales charge. However, if ILA Class C Units are redeemed within 12 months of
purchase, a CDSC of 1% will be deducted from the redemption proceeds. 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. Upon redemption of units subject to a
CDSC, unitholders will receive a portion of the appreciation in account value
attributable to the units actually redeemed.
For the purpose of determining the number of months from the time of any
purchase, 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 C Units, the Prime Obligations Portfolio will first redeem units held
for longer than 12
18
<PAGE>
months, and then units held for the longest period during the 12 month period.
Proceeds from the CDSC are payable to the Distributor and may be used in whole
or in part to defray the Distributor's expenses related to providing distribu-
tion-related services to the Portfolios in connection with the sale of ILA
Class C Units, including the payment of compensation to Authorized Dealers. An
amount equal to 1.00% of the amount invested is paid by the Distributor to Au-
thorized Dealers.
REINVESTMENT OF REDEMPTION PROCEEDS--ILA CLASS B AND CLASS C UNITS
A unitholder who redeems ILA Class B Units of the Prime Obligations Portfo-
lio may reinvest at net asset value any portion or all of the redemption pro-
ceeds (plus that amount necessary to acquire a fractional share to round off
the purchase to the nearest full share) in ILA Service Units of the Prime Ob-
ligations Portfolio or Tax-Exempt Diversified Portfolio or Class A shares of
any other Goldman Sachs Fund. A unitholder who redeems ILA Class C Units of
the Prime Obligations Portfolio may reinvest at net asset value any portion or
all of the redemption proceeds (plus that amount necessary to acquire a frac-
tional share to round off the purchase to the nearest full share) in ILA Class
C Units of the Prime Obligations Portfolio or Class C Shares of any other
Goldman Sachs Fund. Unitholders should obtain and read the applicable prospec-
tuses of such other funds and consider their objectives, policies and applica-
ble fees before investing in any of such funds. This reinvestment privilege is
subject to the condition that the units redeemed have been held for at least
thirty (30) days before the redemption and that the reinvestment is effected
within ninety (90) days after such redemption. If you redeemed ILA Class C
Units, paid a CDSC upon a redemption and reinvest in ILA Class C Units or
Class C shares subject to the conditions set forth above, your account will be
credited with the amount of the CDSC previously charged, and the reinvested
shares will continue to be subject to a CDSC. In this case, the holding period
of the Class C shares acquired through reinvestment for purposes of computing
the CDSC payable upon a subsequent redemption will include the holding period
of the redeemed units. If you redeemed ILA Class B Units and paid a CDSC upon
redemption, you are permitted to reinvest the redemption proceeds in ILA Serv-
ice Units of Prime Obligations Portfolio and Tax-Exempt Diversified Portfolio
or Class A shares of any Goldman Sachs Fund at net asset value as described
above, but the amount of the CDSC paid upon redemption will not be credited to
your account.
A reinvesting unitholder may be subject to tax as a result of such redemp-
tion. Unitholders should consult their own tax advisers concerning the tax
consequences of a redemption and reinvestment. Upon receipt of a written re-
quest, the reinvestment privilege may be exercised once annually by a
unitholder, except that there is no such time limit as to the availability of
this privilege in connection with transactions the sole purpose of which is to
reinvest the proceeds at net asset value in a tax-sheltered retirement plan.
WAIVER OR REDUCTION OF CONTINGENT DEFERRED SALES CHARGE--ILA SERVICE, ILA
CLASS B AND CLASS C UNITS
The CDSC on ILA Class B and Class C Units and ILA Service Class Units that
are subject to a CDSC (i.e., because the ILA Service Class Units were acquired
in an exchange transaction for shares of a Goldman Sachs Fund that were sub-
ject to a CDSC) 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(m)(7) of the Code) of a participant or beneficiary in a Plan; (c) hardship
withdrawals by a participant or beneficiary in a Plan; (d) satisfying the min-
imum distribution requirements of the Code; (e) the establishment of "substan-
tially equal periodic payments" as described in Section 72(t)(2) of the Code;
(f) the separation from service by a participant or beneficiary in a Plan; (g)
the death or disability (as defined in section 72(m)(7) of the Code) of a
shareholder if the redemption is made within one year of such event; (h) ex-
cess contributions
19
<PAGE>
distributed from a Plan; (i) distributions from a qualified retirement plan
invested in the Goldman Sachs Funds which are being rolled over to 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. In addition, ILA Service, Class B and Class C Units sub-
ject to a Systematic Withdrawal Plan may be redeemed without a CDSC. However,
Goldman Sachs reserves the right to limit such redemptions, on an annual ba-
sis, to 12% each of the value of your ILA Class B and Class C Units and 10% of
the value of your ILA Service Units.
SYSTEMATIC WITHDRAWAL PLAN
A unitholder may draw on unitholdings systematically via check or Automatic
Clearing House ("ACH") transfer in any amount specified by the unitholder over
$50. Checks are only available on or about the 25th of each month. Each sys-
tematic withdrawal is a redemption and therefore a taxable transaction. A min-
imum balance of $5,000 in Units of a Portfolio is required. The maintenance of
a withdrawal plan concurrently with purchases of additional units would be
disadvantageous to the extent a CDSC is imposed on your redemptions of ILA
Service, Class B or Class C Units. Any CDSC applicable to ILA Service, Class B
or Class C Units redeemed under a systematic withdrawal plan may be waived.
See "How to Invest--Waiver or Reduction of Contingent Deferred Sales Charge."
See the Statement of Additional Information for more information about the
Systematic Withdrawal Plan.
GENERAL INFORMATION
ILA Service Units, ILA Class B Units and ILA Class C 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 purchase order and the purchase price in federal funds.
Purchase orders may be made by contacting Goldman Sachs or, if units are held
in a "street name" or omnibus account, the applicable Authorized Dealer. Since
the Portfolios and Goldman Sachs will normally have no record of the benefi-
cial owner's transactions in a "street name" or omnibus account, the benefi-
cial owner should contact its Authorized Dealer to purchase, redeem or ex-
change 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.
The Trust may authorize certain institutions (including banks, trust compa-
nies, brokers and investment advisers) that provide recordkeeping, reporting
and processing services to their customers to accept on the Trust's behalf
purchase, redemption and exchange orders placed by their customers and, if ap-
proved by the Trust, to designate other intermediaries to accept such orders.
In these cases, a Portfolio will be deemed to have received an order in proper
form when the order is accepted by the authorized institution or intermediary
on a Business Day. The order will be priced at a Portfolio's net asset value
per unit next determined after such acceptance and the transmission of the or-
der and purchase payment in immediately available funds to the Trust or its
designee. The institution or intermediary will be responsible for transmitting
accepted orders and payments to the Trust within the period agreed upon by
them. A customer should contact its institution to learn whether it is autho-
rized to accept orders for the Trust. Such institutions may receive payments
from the Portfolios or Goldman Sachs for the services provided by them with
respect to the Portfolios' ILA Service, Class B and Class C Units. These pay-
ments may be in addition to other servicing and/or sub-transfer agency pay-
ments borne by the Portfolios and their classes.
The Adviser, Distributor, and/or their affiliates may pay compensation, from
time to time, out of their assets and not as an additional charge to the Port-
folios, to selected Authorized Dealers, Service Organizations and other
20
<PAGE>
persons in connection with the sale and/or servicing of ILA Service, ILA Class
B and ILA Class C Units of the Portfolios and other investment portfolios of
the Trust (such as additional payments based on new sales, amounts exceeding
pre-established thresholds, or the length of time customers' assets have re-
mained in the Trust) and, subject to applicable NASD regulations, contribute
to various non-cash and cash incentive arrangements to promote the sale of ILA
Service, ILA Class B and ILA Class C Units, as well as sponsor various educa-
tional programs, sales contests and/or promotions in which participants may
receive reimbursement of expenses, entertainment and prizes such as travel
awards, merchandise, cash, investment research and educational information and
related support materials. This additional compensation can vary among insti-
tutions depending upon such factors as the amounts their customers have in-
vested (or may invest) in particular portfolios of the Trust, the particular
program involved, or the amount of reimbursable expenses. For further informa-
tion, see the Statement of Additional Information.
PURCHASES BY CHECK AND ACH TRANSFER
Initial purchases of ILA Service Units, ILA Class B Units and ILA Class C
Units may be made by mailing a completed Account Application along with a Fed-
eral Reserve draft or check (except that a third party check will not be ac-
cepted) payable only to the appropriate Portfolio and drawn on a U.S. bank and
subsequent investments may be made by mailing a check as described above with
the investor's account number to Goldman Sachs Trust (Prime Obligations Port-
folio--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 be-
comes effective as soon as the check or draft is converted to federal funds.
It is expected that Federal Reserve drafts will ordinarily be converted to
federal funds on the day of receipt, and that checks will be converted to fed-
eral funds within two Business Days after receipt. Payment of redemption pro-
ceeds from ILA Service Units, ILA Class B Units and ILA Class C Units pur-
chased by check may be delayed up to 15 days until the check has cleared, as
described under "Redemption of Units."
Purchases of ILA Service Units, ILA Class B Units and ILA Class C Units may
also be made by ACH transfer to Goldman Sachs Trust c/o Northern, as
subcustodian for State Street. It is expected that ACH transfers will be con-
verted to federal funds on the Business Day following receipt of the ACH
transfer.
AUTOMATIC INVESTMENT PLAN
Systematic cash investments in ILA Service Units, ILA Class B Units or ILA
Class C Units may be made through a unitholder's bank via the ACH Network or a
unitholder's checking account via bank draft each month. Required forms are
available from Goldman Sachs or your Authorized Dealer. A minimum investment
of $50 is required for Automatic Investment Plans.
PURCHASE TIMES
ILA Service Units, ILA Class B Units and ILA Class C Units of the Prime Ob-
ligations Portfolio are deemed to have been purchased when an order becomes
effective and are entitled to dividends as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF AN EFFECTIVE ORDER IS
RECEIVED 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>
21
<PAGE>
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 EFFECTIVE ORDER IS
RECEIVED 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 and Class C 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 pur-
poses of determining the amount of any applicable CDSC, the length of time a
unitholder has owned ILA Class B or Class C Units will be measured from the
date the unitholder acquired the original Class B or Class C shares and will
not be affected by any subsequent exchange. Investors should consult their
Goldman Sachs Fund Class B or Class C 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, ILA Class B Units or ILA Class C
Units held in each recordholder's account. The Trust and Goldman Sachs each
reserves the right to reject any purchase order for any reason.
MINIMUM AND SUBSEQUENT INVESTMENTS AND OTHER INFORMATION
Goldman Sachs has established a minimum initial investment requirement of
$5,000. No minimum amount is required for subsequent investments. Orders for
the purchase of additional ILA Service, Class B and Class C Units should be
accompanied by information identifying the account and the Portfolio in which
ILA Service, Class B and Class C Units are to be purchased. Shareholders of
any Goldman Sachs Fund who wish to purchase ILA Service Units of the Portfo-
lios or ILA Class B or Class C Units of the Prime Obligations Portfolio
through an exchange of shares of such a Goldman Sachs Fund may be subject to
different minimum investment requirements. (See "Exchanges," on page 25 of the
Prospectus.) In addition, in connection with the establishment of a systematic
exchange program from an ILA Class B or Class C unitholder account into an-
other fund offering Class B or Class C shares, the minimum is reduced to
$1,000.
TAX-SHELTERED RETIREMENT PLANS
The Prime Obligations Portfolio is offered for purchase by retirement plans,
including Regular and Roth Individual Retirement Accounts ("IRAs") plans for
individuals and their spouses, IRA plans for employees in connection with em-
ployer sponsored SEP, SAR-SEP and SIMPLE IRA plans, 403(b) plans and defined
contribution plans such as 401(k) Salary Reduction Plans. Detailed information
concerning these plans may be obtained from the Transfer Agent. This informa-
tion should be read carefully, and consultation with an attorney or tax ad-
viser may be advisable. The information sets forth the service fee charged for
retirement plans and describes the federal income tax consequences of estab-
lishing 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 (excluding SIMPLE IRAs and Edu-
cation IRAs) is $250 and the minimum for 403(b) plans is $200. The minimum for
purchases in connection with SIMPLE and Education IRAs is $50. There is a min-
imum of $50 for all subsequent investments.
22
<PAGE>
REPORTS TO UNITHOLDERS
The Trust will issue an annual report containing audited financial statements
and a semiannual report. To eliminate unnecessary duplication, only one copy of
such reports may be sent to unitholders with the same mailing address.
Unitholders who desire a duplicate copy of such reports to be mailed to their
residence should contact Goldman Sachs at the number set forth on the cover.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (normally, but not always, as of 4:00 p.m. New York time) as a
dividend and distributed monthly. Distributions will be made in additional ILA
Service Units, ILA Class B Units or ILA Class C Units of the same Portfolio or,
at the election of a record unitholder, 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 Service Organization or ILA Class B or
ILA Class C 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
normally 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 (as defined below) and may be reflected in a Portfo-
lio's daily distributions. Each Portfolio may distribute at least annually
other realized capital gains, if any, after reduction by available capital
losses. In order to avoid excessive fluctuations in the amount of monthly capi-
tal gains distributions, a portion of any net capital gains realized on the
disposition of securities during the months of November and December may be
distributed during the subsequent calendar year. Although realized gains and
losses on the assets of a Portfolio are reflected in the net asset value of the
Portfolio, they are not expected to be of an amount which would affect the
Portfolio's net asset value of $1.00 per unit.
A Portfolio's net investment income consists of the excess of (i) accrued in-
terest or discount (including both original issue and market discount on tax-
able securities) on portfolio securities, and (ii) any income of the Portfolio
from sources other than capital gains over (iii) the amortization of market
premium on all portfolio securities and (iv) the estimated expenses of the
Portfolio, including a proportionate share of the general expenses of the
Trust.
TAXES
Each Portfolio is treated as a separate entity for federal income tax purpos-
es, 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 Port-
folio 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 dis-
count or market discount income, will be taxable to unitholders as ordinary in-
come, except for any "exempt-interest dividends" paid by the Tax-Exempt Diver-
sified Portfolio,
23
<PAGE>
as described below. Distributions out of net capital gain (the excess of net
long-term capital gain over net short-term capital loss), if any, will be tax-
able as long-term capital gain regardless of how long the unitholders have
held their units. Such long-term gain will constitute a 20% or 28% rate gain,
depending upon the Portfolio's holding period for the assets the sale of which
generated the gain. It is not, however, anticipated that the Portfolios will
have any significant amounts of such net capital gain. These tax consequences
will apply to distributions of either Portfolio whether 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 that may constitute a tax pref-
erence item under the federal alternative minimum tax.
The Tax-Exempt Diversified Portfolio intends to satisfy certain requirements
of the Code for the payment of "exempt-interest dividends" not included in
unitholders' federal gross income. Dividends paid by the 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 may be 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 municipal obligations
issued by or on behalf of the particular state or a political subdivision
thereof, provided in some states that certain thresholds for holdings of such
obligations and/or reporting requirements are satisfied. 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, ILA Class B
Units or ILA Class C Units for corresponding shares of any Goldman Sachs Fund.
In the case of ILA Service Units, such exchanges will be made into the rele-
vant Goldman Sachs Fund at the public offering price, which may include a
sales charge, unless a sales charge has previously been
24
<PAGE>
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 automatic exchanges will be made at net as-
set value. In the case of ILA Class B or Class C 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 or ILA Class C Units will be measured from the date the unitholder
acquired the original Class B or Class C shares and will not be affected by any
subsequent exchange. Investors should consult the relevant Goldman Sachs Fund
prospectus to determine the amount of their applicable CDSC. Dividends and/or
capital gains of ILA Service Units of each Portfolio and ILA Class B and Class
C 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 fif-
teenth day of each month or the first Business Day thereafter and are subject
to the following conditions. The minimum dollar amount for automatic exchanges
must be at least $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 account in the acquired
fund must equal or exceed the acquired fund's minimum initial investment re-
quirement or, if the unitholder has elected the automatic exchange privilege
and the value of the acquired fund does not equal the acquired fund's minimum,
such election must continue until the minimum initial investment requirement is
met. The names, addresses and social security or other taxpayer identification
numbers for the unitholder accounts with the exchanged and acquired funds must
be identical. A unitholder should obtain and read the prospectus relating to
any Goldman Sachs Fund and its shares and consider its investment objective,
policies and applicable fees and expenses before electing an automatic exchange
into that Goldman Sachs Fund.
EXCHANGES
ILA Service Units of each Portfolio and ILA Class B and Class C Units of the
Prime Obligations Portfolio may also be exchanged for units of the correspond-
ing class of any Goldman Sachs Fund without using the Automatic Exchange Pro-
gram. A unitholder should obtain and read the prospectus for the relevant
Goldman Sachs Fund and consider its investment objectives, policies and appli-
cable 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 of-
fering price, which may include a sales charge, unless a sales charge has pre-
viously 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 and Class C 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 or Class C Units will be measured from the date the unitholder ac-
quired the original Class B or Class C shares and will not be affected by any
subsequent exchange. Investors should consult their Goldman Sachs Fund Class B
or Class C shares prospectus to determine the amount of their applicable CDSC.
ILA Service Units of each Portfolio or ILA Class B or Class C Units of the
Prime Obligations Portfolio purchased through dividend and/or capital gains re-
investment 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
25
<PAGE>
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 ex-
change of ILA Service Units of a Portfolio that are subject to a CDSC (i.e.,
because the ILA Service Units were acquired in an exchange transaction for
shares of a Goldman Sachs Fund that were subject to a CDSC) will be made at net
asset value and will continue to be subject to the CDSC of the original shares
held.
An exchange may be made by contacting a Service Organization or Authorized
Dealer. In addition, unitholders of record may write 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 Applica-
tion or elected in writing not to utilize telephone exchanges, 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 fraudu-
lent exchange requests as set forth under "Redemption of Units." Under the tel-
ephone exchange privilege, units may be exchanged 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 telephone 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. For fed-
eral income tax purposes, an exchange, including an automatic exchange, is
treated as a redemption of the shares surrendered in the exchange, on which an
investor may be subject to tax, followed by a purchase of shares received in
the exchange. Investors should consult their tax advisers concerning the tax
consequences of an exchange.
An exchange fee may be imposed or the exchange privilege may be materially
modified or withdrawn at any time upon 60 days' notice to unitholders. The
Trust, the relevant fund or Goldman Sachs may reject or restrict purchases of
units or shares by a particular purchaser or group, for example, when a pattern
of frequent purchases and sales of units or shares is evident or if the pur-
chase 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. Ex-
changes are available only in states where the exchange may be legally made.
REDEMPTION OF UNITS
HOW TO REDEEM
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 Service, Class B and Class C Units of the Prime Obliga-
tions 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 applicable CDSC. Investors should consult the relevant Goldman Sachs
Fund Class B and Class C shares prospectus to determine the amount, if any, of
the CDSC payable at the
26
<PAGE>
time of redemption. Redemption requests may be made by contacting Goldman Sachs
or, if units are held in a "street name" or omnibus account, the applicable
Service Organization or Authorized Dealer. Written requests may be addressed to
Goldman Sachs Trust, c/o NFDS, P.O. Box 419711, Kansas City, MO 64141-6711.
(See "Additional Services--General Information" for a description of the lim-
ited situations where a Service Organization or other intermediary may be au-
thorized to accept redemption requests for the Portfolios.)
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 a 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 if the Trust reason-
ably 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 him-
self 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 concerning telephone redemptions and
exchanges. 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 broker 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 association,
a building and loan association, a cooperative bank, a federal savings bank or
association, a national securities exchange, a registered securities associa-
tion or a clearing agency, provided that such institution satisfies the stan-
dards established by the Transfer Agent.
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 by the recordholder of Units. The
payment of redemption proceeds for Units recently purchased by check may be de-
layed for up to 15 days until the check has cleared.
27
<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, ILA Class B Units or Class C Units.
<TABLE>
- --------------------------------------------------------------------------------------
<CAPTION>
REDEMPTION
REDEMPTION REQUEST RECEIVED 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>
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 redemp-
tion 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
customer's Service Organization or Authorized Dealer, if any, in the transfer
process. If a problem with such performance arises in connection with any re-
demption, the customer should deal directly with such intermediaries, Service
Organization or Authorized Dealer.
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 Serv-
ice Units, will forward to the requesting customer a supply of checks. Checks
drawn on this account may be payable to the order of any person in any amount
of $500 or more, but cannot be certified. The payee of the check may cash or
deposit it like any other check drawn on a bank. When such a check is presented
to State Street for payment, a sufficient number of full and fractional ILA
Service Units will be redeemed to cover the amount of the check. Cancelled
checks will be returned to the record holder of ILA Service Units by State
Street.
28
<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
and Class C Units of the Prime Obligations Portfolio is determined as of the
close of regular trading on the New York Stock Exchange (normally, but not al-
ways, 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 attributed to each class of units and dividing by the
number of units of such class.
On any Business Day, as defined herein, when The Bond Market Association
("BMA") recommends that the securities markets close early, each Portfolio re-
serves the right to close at or prior to the BMA recommended closing time, and
to cease granting same Business Day credit for purchase and redemption orders
received after the Portfolio's closing time. On days either Portfolio closes
early, purchase and redemption orders received after the Portfolio's 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 Business 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 total return. Total return is determined by computing the percentage
change in value of $1,000 invested at the maximum public offering price for a
specified period, assuming 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 calculations based on a cumulative, average, year-by-year or
other basis for
29
<PAGE>
various 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 ad-
vertisement). This income is then annualized; that is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the income
earned by an investment in the Portfolio is assumed to be reinvested. The ef-
fective yield will be slightly higher than the yield because of the com-
pounding 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. The Portfolios' performance quotations do not
reflect any fees charged by an institution to its customer accounts in connec-
tion with investments in the Portfolios.
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 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 business
trust, and were reorganized into the Trust as of April 30, 1997. The Trustees
have authority under the Trust's Declaration of Trust to create and classify
units of beneficial interest in separate series, without further action by
unitholders. Additional 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.
When issued, units are fully paid and nonassessable. In the event of liqui-
dation, unitholders of each class are entitled to share pro rata in the net
assets of the applicable Portfolio available for distribution to the
unitholders of such class. All units are freely transferable and have no pre-
emptive, subscription or conversion rights. Unitholders are entitled to one
vote per unit, provided that, at the option of the Trustees, unitholders will
be entitled to a number of votes based upon the net asset values represented
by their units.
The Trust does not intend to hold annual meetings of unitholders. However,
recordholders may, under certain circumstances, as permitted by the Investment
Company Act, communicate with other unitholders in connection with requiring a
special meeting of unitholders. The Trustees 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.
30
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY MARKET FUNDS
ILA SERVICE UNITS
ILA CLASS B UNITS
ILA CLASS C 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
How to Invest.............................................................. 16
Alternative Purchase Arrangements......................................... 16
Reports to Unitholders..................................................... 23
Distributions and Taxes.................................................... 23
Automatic Exchange Program................................................. 24
Exchanges.................................................................. 25
Redemption of Units........................................................ 26
Net Asset Value............................................................ 29
Yield Information.......................................................... 29
Organization and Units of the Portfolios................................... 30
</TABLE>
ILAPRORETMM
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS
MONEY MARKET FUNDS
GOLDMAN SACHS--
INSTITUTIONAL LIQUID ASSETS
PRIME OBLIGATIONS PORTFOLIO
TAX-EXEMPT DIVERSIFIED PORTFOLIO
-----------
PROSPECTUS
-----------
ILA SERVICE UNITS
ILA CLASS B UNITS
ILA CLASS C UNITS
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
CASH MANAGEMENT SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is an 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 Cash Management shares of beneficial interest ("Cash
Management Shares") of the Portfolios. Goldman Sachs Asset Management, a
separate operating division of Goldman, Sachs & Co., serves as each
Portfolio's investment adviser (the "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.
Government Portfolio. Securities of the U.S. Government, its agencies,
authorities and instrumentalities, and repurchase agreements relating to such
securities.
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 SHARE.
- -------------------------------------------------------------------------------
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 Cash Management Shares. It should be read and
retained for future reference. If you would like more detailed information,
the Statement of Additional Information dated May 1, 1998, 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.
- -------------------------------------------------------------------------------
CASH MANAGEMENT SHARES 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, 1998.
<PAGE>
SHAREHOLDER AND PORTFOLIO EXPENSES
CASH MANAGEMENT SHARES (1)
<TABLE>
<CAPTION>
TAX- TAX- TAX-
PRIME MONEY EXEMPT EXEMPT EXEMPT
OBLIGATIONS MARKET GOVERNMENT DIVERSIFIED CALIFORNIA NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases... None None None None None None
Sales Charge Imposed on
Reinvested
Distributions.......... None None None None None None
Deferred Sales Load
Imposed on Redemptions. None None None None None None
Exchange Fee........... None None None None None None
ANNUAL OPERATING
EXPENSES
(as a percentage of
average daily net
assets)
Management Fees........ 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Distribution (Rule 12b-
1) Fees (after expense
limitations) (2)....... 0.07% 0.07% 0.07% 0.07% 0.07% 0.07%
Other Expenses
Service Fees.......... 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Other Expenses........ 0.08% 0.07% 0.07% 0.06% 0.07% 0.08%
---- ---- ---- ---- ---- ----
TOTAL OPERATING EXPENSES
(3) (4)................. 1.00% 0.99% 0.99% 0.98% 0.99% 1.00%
==== ==== ==== ==== ==== ====
</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................ $10 $32 $55 $122
Money Market Portfolio..................... $10 $32 $55 $121
Government Portfolio....................... $10 $32 $55 $121
Tax-Exempt Diversified Portfolio........... $10 $31 $54 $120
Tax-Exempt California Portfolio............ $10 $32 $55 $121
Tax-Exempt New York Portfolio.............. $10 $32 $55 $122
</TABLE>
2
<PAGE>
- --------
(1) Based on estimated amounts for the current fiscal year.
(2) Goldman Sachs has voluntarily agreed not to impose a portion of the
distribution fee attributable to Cash Management Shares of each Portfolio.
Distribution fees for each Portfolio would otherwise be payable at the
rate of .50% of a Portfolio's average daily net assets.
(3) The Adviser has voluntarily agreed to reduce or limit the Total Operating
Expenses of each Portfolio (excluding fees payable to Service
Organizations, as defined herein, distribution fees, taxes, interest and
brokerage and litigation, indemnification and other extraordinary
expenses) on an annualized basis to 0.43% of the average daily net assets
of a Portfolio.
(4) Without the limitations described above, "Distribution Fees" and "Total
Operating Expenses" of the Portfolios for the current fiscal year are
estimated to be as follows:
<TABLE>
<CAPTION>
DISTRIBUTION TOTAL OPERATING
FEES EXPENSES
------------ ---------------
<S> <C> <C>
Prime Obligations Portfolio..................... 0.50% 1.43%
Money Market Portfolio.......................... 0.50% 1.42%
Government Portfolio............................ 0.50% 1.42%
Tax-Exempt Diversified Portfolio................ 0.50% 1.41%
Tax-Exempt California Portfolio................. 0.50% 1.42%
Tax-Exempt New York Portfolio................... 0.50% 1.43%
</TABLE>
As of the date of this Prospectus the Adviser has no intention of modifying
or discontinuing any of the limitations set forth above but may do so in the
future at its discretion. The information set forth in the foregoing table and
hypothetical example relates only to Cash Management Shares of the Portfolios.
The Portfolios also offer ILA Units, ILA Service Units and ILA Administration
Units (all Portfolios) and ILA Class B Units and ILA Class C Units (Prime Ob-
ligations 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 ob-
tained from your sales representative or from Goldman Sachs by calling the
number on the front cover of this Prospectus.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of Cash Management Shares in connection with their cus-
tomers' accounts. See "Additional Services" in this Prospectus and the State-
ment of Additional Information. Such fees, if any, may affect the return such
customers realize with respect to their investments.
Certain Service Organizations may also receive certain compensation in con-
nection with the sale and distribution of Cash Management Shares or for serv-
ices to their customers' accounts and/or the Portfolios. For additional infor-
mation regarding such compensation, see "Additional Services" in this Prospec-
tus and the Statement of Additional Information.
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 fees and
expenses (estimated) 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--The Adviser."
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, indepen-
dent public accountants, whose report appears in the annual report to share-
holders for the fiscal year ended December 31, 1997 (the "Annual Report").
This information should be read in conjunction with the financial statements
and related notes incorporated by reference and attached to the Statement of
Additional Information. During the periods shown, the Trust did not offer Cash
Management Shares of any of the Portfolios.
3
<PAGE>
GOLDMAN SACHS 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 asset Net 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0524 -- $0.0524 $(0.0524) $1.00 5.38%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.22
1997-ILA Service
units........... 1.00 0.0485 -- 0.0485 (0.0485) 1.00 4.96
1997-ILA B
units........... 1.00 0.0433 -- 0.0433 (0.0433) 1.00 4.33
1997-ILA C
units(b)........ 1.00 0.0365 -- 0.0365 (0.0365) 1.00 4.41(d)
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
<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,
- --------------------------------
1997-ILA units.. 0.42% 5.24% $ 866,445 0.43% 5.23%
1997-ILA
Administration
units........... 0.57 5.11 28,110 0.58 5.10
1997-ILA Service
units........... 0.82 4.85 78,316 0.83 4.84
1997-ILA B
units........... 1.42 4.33 1,574 1.43 4.32
1997-ILA C
units(b)........ 1.42(d) 4.39(d) 1,897 1.43(d) 4.38(d)
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
</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 and C unit activity commenced during May of 1996 and August of
1997, respectively.
(c) ILA Administration and Service unit activity commenced during June of
1990.
(d) Annualized.
- -------------------------------------------------------
4
<PAGE>
Goldman Sachs 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 asset Net realized Total Net asset
value at Net gain on income from Distributions value at
beginning investment investment investment to end Total
of period income transactions operations unitholders of period return(a)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0531 -- $0.0531 $(0.0531) $1.00 5.43%
1997-ILA
Administration
units........... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28
1997-ILA Service
units........... 1.00 0.0490 -- 0.0490 (0.0490) 1.00 5.01
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
Ratio of net Net investment
Ratio of net investment assets at Ratio of net income to
expenses to income to end expenses to average
average net average net of period average net net
assets assets (in 000's) assets assets
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.37% 5.31% $ 806,096 0.42% 5.26%
1997-ILA
Administration
units........... 0.52 5.15 307,480 0.57 5.10
1997-ILA Service
units........... 0.77 4.90 20,517 0.82 4.85
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 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 of
1990.
- ------------------------------------------------------
5
<PAGE>
GOLDMAN SACHS 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 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0516 -- $0.0516 $(0.0516) $1.00 5.31%
1997-ILA
Administration
units........... 1.00 0.0499 -- 0.0499 (0.0498) 1.00 5.15
1997-ILA Service
units........... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.89
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
units........... 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79
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 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,
- --------------------------------
1997-ILA units.. 0.42% 5.16% $460,457 0.42% 5.16%
1997-ILA
Administration
units........... 0.57 4.98 10,192 0.57 4.98
1997-ILA Service
units........... 0.82 4.78 83,799 0.82 4.78
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 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.
- ------------------------------------------------------
6
<PAGE>
GOLDMAN SACHS 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 asset Net realized Total Net asset
value at Net gain (loss) income from value at
beginning investment on 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0333 -- $0.0333 $(0.0333) $1.00 3.39%
1997-ILA
Administration
units........... 1.00 0.0316 -- 0.0316 (0.0316) 1.00 3.23
1997-ILA Service
units........... 1.00 0.0297 -- 0.0297 (0.0297) 1.00 2.97
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
<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,
- --------------------------------
1997-ILA units.. 0.32% 3.33% $1,479,486 0.41% 3.24%
1997-ILA
Administration
units........... 0.47 3.16 27,967 0.56 3.07
1997-ILA Service
units........... 0.72 2.97 30,513 0.81 2.88
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
</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.
- -------------------------------------------------------
7
<PAGE>
GOLDMAN SACHS 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 asset Net realized Total Net asset
value at Net gain (loss) income from value at
beginning investment on 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0310 -- $0.0310 $(0.0310) $1.00 3.15%
1997-ILA
Administration
units........... 1.00 0.0298 -- 0.0298 (0.0301) 1.00 3.00
1997-ILA Service
units (d)....... 1.00 0.0085 -- 0.0085 (0.0080) 1.00 2.87(b)
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 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,
- --------------------------------
1997-ILA units.. 0.42% 3.10% $591,003 0.42% 3.10%
1997-ILA
Administration
units........... 0.57 2.98 360 0.57 2.98
1997-ILA Service
units (d)....... 0.82(b) 2.90(b) 2 0.82(b) 2.90(b)
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) 2.03(b) 3 0.87(b) 1.96(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 units were outstanding
for the years ended December 31, 1994, 1995 and 1996.
(d) ILA Service unit activity re-commenced during September of 1997.
- -------------------------------------------------------
8
<PAGE>
GOLDMAN SACHS 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 asset Net realized Total Net asset
value at Net gain (loss) income from value at
beginning investment on 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0325 -- $0.0325 $(0.0325) $1.00 3.29%
1997-ILA
Administration
units........... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.14
1997-ILA Service
units(c)........ 1.00 0.0089 -- 0.0089 (0.0089) 1.00 3.02(b)
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 Ratio of net
Ratio of net investment assets at 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,
- --------------------------------
1997-ILA units.. 0.33% 3.24% $102,887 0.43% 3.14%
1997-ILA
Administration
units........... 0.48 3.09 31,993 0.58 2.99
1997-ILA Service
units(c)........ 0.73(b) 3.04(b) 2 0.83(b) 2.94(b)
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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Administration and Service unit activity commenced during February of
1991 and September of 1997, respectively.
- ------------------------------------------------------
9
<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 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 and Government Port-
folios.
INVESTMENT OBJECTIVES AND POLICIES FOR TAXABLE PORTFOLIOS: To 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. Each investor should consult his or her
tax adviser to determine whether distributions from any Portfolio that may
hold certain U.S. Treasury Obligations and U.S. Government Securities, the
interest from which is generally exempt from state taxation, 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 shareholders, to the extent consistent with the preservation of
capital and prescribed portfolio standards, with a high level of income ex-
empt from federal income tax by investing primarily in Municipal Instru-
ments, as defined herein. In addition, the Tax-Exempt California and Tax-
Exempt New York Portfolios seek to provide shareholders with income exempt
from California state and New York state and city personal income taxes,
respectively.
NET ASSET VALUE: Each Portfolio seeks to maintain a stable net asset value
of $1.00 per share.
MAXIMUM REMAINING MATURITY OF PORTFOLIO INVESTMENTS: Thirteen months (as de-
termined pursuant to Rule 2a-7) 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 that either
(a) are rated 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;
or (b) have been issued or guaranteed by, or otherwise allow a Portfolio under
certain conditions to demand payment from, an entity with such ratings. U.S.
Government Securities as defined herein are considered First Tier Securities.
10
<PAGE>
SECOND TIER SECURITIES: The Tax-Exempt Portfolios may purchase securities
that are not First Tier Securities but either (a) 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; or (b) have been issued or guaranteed by, or
otherwise allow a Portfolio under certain conditions to demand payment from,
an entity with such ratings. The Taxable Portfolios will not invest in a secu-
rity which is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, securities without
short-term ratings may be purchased if they are deemed to be of comparable
quality to First Tier Securities, or to the extent that a Portfolio may pur-
chase 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 IBCA, Inc., Duff and Phelps, Inc., and Thomson BankWatch,
Inc. For a description of each NRSRO's rating categories, see Appendix A to
the Statement of Additional Information.
11
<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 U.S. and U.S. and foreign
assets must be foreign (US$) (US$) entities
invested in U.S. commercial paper
and Foreign
(US$) Banks
- -------------------------------------------------------------------------------------------------------------------------
Government [_] [_] [_]
- -------------------------------------------------------------------------------------------------------------------------
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
[_]
- -------------------------------------------------------------------------------------------------------------------------
Government
- -------------------------------------------------------------------------------------------------------------------------
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.
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 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
- ----------------------------------------------------------------------------------------------------------------------
[_] [_] [_]
At least 80% of net assets First or Up to 10% Tax-exempt May (but does
in tax-exempt Municipal Second of total federal and not currently
Instruments (except in Tier assets in taxable intend to)
extraordinary 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 tax-exempt Municipal Tier assets in California intend to)
Instruments and at least 65% other State invest up to
of its total assets 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 tax-exempt Municipal Second of total federal, New to 20% in AMT
Instruments and at least 65% Tier assets in York State and securities and
of its total assets in New other New York City may temporarily
York Instruments (except in investment invest in the
extraordinary circumstances) companies taxable money
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 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 sup-
ported by a guarantee or demand feature may rely on the credit quality of
the guarantee or demand feature in determining the credit quality of the
investment.
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 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 (other than Government Portfolio) 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, custo-
dial receipts are not considered obligations 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),
14
<PAGE>
foreign branches of such foreign banks and foreign branches of U.S. banks hav-
ing 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 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 increased competition
from other types of financial institutions, increased acquisition activity and
geographic expansion. Banks may be particularly susceptible to certain eco-
nomic 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 "For-
eign Risks" below.
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 any entity located or organized in a foreign country that
maintains a short-term foreign currency rating in the highest short-term rat-
ings 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.
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
15
<PAGE>
mortgages, motor 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.
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. Subject to the conditions for using amortized cost valuation under the
Investment Company Act, a Portfolio may consider the maturity of a variable or
floating rate obligation to be shorter than its ultimate stated maturity if
the obligation is a U.S. Treasury Obligation or U.S. Government Security, if
the obligation has a remaining maturity of 397 calendar days or less, or if
the obligation has a demand feature that permits the Portfolio to receive pay-
ment at any time or at specified intervals not exceeding 397 calendar days.
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. A Portfolio may purchase variable
or floating rate obligations from the issuers or may purchase certificates of
participation, a type of floating or variable rate obligation, which are in-
terests in a pool of debt obligations held by a bank or other financial insti-
tution.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS: Municipal Instruments are 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.
CALIFORNIA INSTRUMENTS: California Instruments are 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 Is-
lands and Guam, the interest from which is excluded from gross income for fed-
eral income tax purposes and is exempt from California state personal income
tax.
NEW YORK INSTRUMENTS: New York Instruments are 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 per-
sonal income tax.
TYPES OF MUNICIPAL, CALIFORNIA AND NEW YORK INSTRUMENTS: Fixed rate notes
and similar debt instruments, variable and floating rate demand instruments,
tax-exempt commercial paper, municipal bond and unrated notes, paper, bonds
and other instruments.
16
<PAGE>
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, the interest from
which is, in the opinion of bond counsel, if any, excluded from gross income
for federal income tax purposes. In addition, as a matter of fundamental poli-
cy, 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 Instru-
ments, respectively, 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 California and New York Instruments are not available or when
the Adviser believes that the market conditions dictate a defensive posture.
Investments in taxable money market instruments will be limited to those meet-
ing the quality standards of each Tax-Exempt Portfolio. The Tax-Exempt Cali-
fornia and Tax-Exempt New York Portfolios' distributions of interest from Mu-
nicipal Instruments other than California and New York Instruments, respec-
tively, may be subject to California and New York state and New York city per-
sonal income taxes, respectively.
The Prime Obligations and Money Market Portfolios may also invest in Munici-
pal Instruments 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 ("private activity
bonds") are a specific type of revenue bond backed by the credit and security
of a private user and, therefore, have more potential risk. 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
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<PAGE>
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.
INDUSTRIAL DEVELOPMENT BONDS. The Portfolios (other than the Government
Portfolio) may invest in industrial development bonds (private activity
bonds), the interest from which would be an item of tax preference when dis-
tributed as "exempt-interest dividends" to unitholders under the federal al-
ternative minimum tax. See "Taxes" and "Distributions." The Tax-Exempt New
York Portfolio will limit its investments in private activity bonds to not
more than 20% of its net assets under normal market conditions. 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, such invest-
ments would not exceed 20% of each of the Tax-Exempt Diversified or Tax-Exempt
California Portfolio's net assets under normal market conditions.
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. The Tax-Exempt Portfo-
lios, however, do not intend to invest more than 25% of the value of their re-
spective total assets in industrial development bonds or similar obligations
where the non-governmental entities supplying the revenues from which such
bonds or obligations are to be paid are in the same industry.
Each Portfolio (other than the Government Portfolio) may purchase Municipal
Instruments which are backed by letters of credit or other forms of credit en-
hancement issued by domestic banks or foreign banks (excluding Prime Obliga-
tions Portfolio) which have a branch, agency or subsidiary in the United
States or by other financial institutions. The credit quality of these banks
and financial institutions could, therefore, cause a loss to a Portfolio that
invests in Municipal Instruments. Letters of credit and other obligations of
foreign banks and financial institutions may involve risks in addition to
those of domestic obligations. See "Foreign Risks" above. In addition, these
Portfolios may acquire securities in the form of custodial receipts which evi-
dence ownership of future interest payments, principal payments or both on ob-
ligations 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 Government Portfolio) 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
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<PAGE>
adversely affecting issuers of California and New York Instruments, respec-
tively, and may be riskier than comparable municipal bond funds and money mar-
ket 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 conse-
quences affecting California Instruments. Also, the ultimate fiscal effect of
federally-mandated reform of welfare programs on the State and its local gov-
ernments 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. Although several different issues of municipal securities of the
State and its agencies and instrumentalities and of the City have been down-
graded by S&P and Moody's in recent years, the most recent actions of S&P and
Moody's have been to place the debt obligations of the State on Credit Watch
with positive implications and to upgrade the debt obligations of the City,
respectively. Strong demand for New York Instruments has also 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 obligations issued by other jurisdictions. A
recurrence of the financial difficulties previously experienced by certain is-
suers of New York Instruments could result in defaults or declines in the mar-
ket values of those issuers' existing obligations and, possibly, in the obli-
gations of other issuers of New York Instruments. Although as of April 1, 1998
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 mate-
rially affect adversely the market values and marketability of all New York
Instruments and, consequently, the net asset value of the Portfolio's hold-
ings. A more detailed discussion of the risks of investing in New York is in-
cluded 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
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<PAGE>
the extent that diversification is required by Rule 2a-7 or for federal income
tax purposes). 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 may enter into repurchase agreements with primary dealers in
U.S. Government Securities and banks affiliated with such primary dealers. A
repurchase agreement is an agreement under which a Portfolio purchases securi-
ties and the seller agrees to repurchase the securities within a particular
time at a specified price. Such price will exceed the original purchase price,
the difference being income to the Portfolio, and will be unrelated to the in-
terest rate on the purchased security. A Portfolio's custodian or subcustodian
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 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 repurchase agreements entered into by a Port-
folio will be taxable to its shareholders. In addition, each Portfolio, to-
gether with other registered investment companies having advisory agreements
with the Adviser or any of its affiliates, may transfer uninvested cash bal-
ances into a single joint account, the daily aggregate balance of which will
be invested in one or more repurchase agreements.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
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 will segregate cash or liquid assets in an
amount sufficient to meet the purchase price until three days prior to settle-
ment date. 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 settle-
ment 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 security or for-
ward commitment prior to settlement if the Adviser deems it appropriate to do
so.
OTHER INVESTMENT COMPANIES
The amount of each Portfolio's investments in securities of other investment
companies will be subject to the limitations on such investments prescribed by
the Investment Company Act. These limits include a prohibition on any Portfo-
lio acquiring more than 3% of the voting shares of any other investment com-
pany 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 as-
sets 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 investment companies will have in-
vestment objectives, policies and restrictions substantially 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 shareholders 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. 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. The Board of Trustees has adopted guidelines under which the Adviser
determines and monitors the liquidity of restricted securities subject to the
oversight of the Trustees. Restricted securities (including commercial paper
issued pursuant to Section 4(2) of the 1933 Act) which are determined to be
liquid pursuant to these guidelines will not be deemed to be illiquid invest-
ments for purposes of the foregoing restriction. Since it is not possible to
predict with assurance that the market for restricted securities will continue
to be liquid, the Adviser will carefully monitor each Portfolio's investments
in these securities, focusing on such important factors, among others, as val-
uation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in a Portfolio to
the extent that qualified institutional buyers become for a time uninterested
in purchasing these restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nomi-
nal fixed term on seven days or less notice. Such repurchase agreements will
be regarded as liquid instruments.
BORROWINGS. Each Portfolio may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Portfolio may not make additional
investments if borrowings exceed 5% of its total assets. For more information,
see the Statement of Additional Information.
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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 23,
1998, Goldman Sachs, together with its affiliates, acted as investment adviser
or distributor for approximately $153 billion in assets.
As of November 28, 1997, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $178 billion and partners' capital of $6.1 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 Portfolio may enter into principal
transactions in certain taxable money market instruments, including repurchase
agreements, with Goldman Sachs.
Under the Portfolios' Management Agreement, 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 shareholder 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, 1997
---------------- -----------------
<S> <C> <C>
Prime Obligations Portfolio .35% .35%
Money Market Portfolio .35% .31%
Government Portfolio .35% .35%
Tax-Exempt Diversified Portfolio .35% .26%
Tax-Exempt California Portfolio .35% .35%
Tax-Exempt New York Portfolio .35% .27%
</TABLE>
The difference, if any, between the stated and actual fees paid by the Port-
folios reflects the fact that the Adviser did not charge the full amount of
the advisory fees to which it would have been entitled.
GSAM has voluntarily agreed to reduce or otherwise limit the daily expenses
of each Portfolio (excluding fees payable under the Portfolios' service, ad-
ministration and distributions plans for certain share classes, taxes, inter-
est, brokerage and litigation, indemnification and other extraordinary ex-
penses) on an annualized basis to .43% of the average daily net assets of the
Portfolio. Such reductions or limits, if any, are calculated monthly on a cu-
mulative basis. Any such reductions or limits may be discontinued or modified
only with the express approval of the Trustees.
YEAR 2000. Many computer systems were designed using only two digits to sig-
nify the year (for example, "98" for "1998"). On January 1, 2000, if these
computer systems are not corrected, they may incorrectly interpret "00" as the
year "1900" rather than the year "2000," leading to computer shutdowns or er-
rors (commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calcula
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<PAGE>
tions, these computer problems may occur prior to January 1, 2000. Like other
investment companies and financial and business organizations, the Portfolios
could be adversely affected in their ability to process securities trades,
price securities, provide unitholder account services and otherwise conduct
normal business operations if the computer systems used by the Adviser or
other Portfolio service providers do not adequately address this problem in a
timely manner. The Adviser has established a dedicated group to analyze these
issues and to implement the systems modifications necessary to prepare for the
Year 2000. Currently, the Adviser does not anticipate that the transition to
the 21st Century will have any material impact on its ability to continue to
service the Portfolios at current levels. In addition, the Adviser has sought
assurances from the Portfolios' other service providers that they are taking
the steps necessary so that they do not experience Year 2000 Problems, and the
Adviser will continue to monitor the situation. At this time, however, no as-
surance can be given that the actions taken by the Adviser and the Portfolios'
other service providers will be sufficient to avoid any adverse effect on the
Portfolios due to the Year 2000 Problem.
THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs, 4900 Sears Tower, Chicago, Illinois 60606, serves as the Dis-
tributor of shares of each Portfolio pursuant to a Distribution Agreement with
the Trust. The Distributor will assist in the sale of shares 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 (other than the Prime Obligations Portfolio). Goldman
Sachs is entitled to receive a fee from the Prime Obligations Portfolio equal
to each class' proportionate share of the total transfer agency costs borne by
the Portfolio. These costs are equal to $12,000 per year per class and $7.50
per account, together with out-of-pocket and transaction related expenses ap-
plicable to Class B and Class C Units and .04% of the average daily net assets
of the other classes of the Prime Obligations Portfolio.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold shares of the Portfolios. Goldman Sachs reserves the right to redeem at
any time some or all of the Portfolio shares acquired for its own account.
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
shareholders. 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 shareholders 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 shareholders as
ordinary income, except for any "exempt interest dividends" paid by the Tax-
Exempt Portfolios, as described below. Distributions out of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
if any, will be taxable as long-term capital gain regardless of how long the
shareholders have held their shares. Such long-term capital gain will consti-
tute a 20% or 28% rate gain, depending upon the Portfolio's holding period for
the assets the sale of which generated the gain. It is not, however, antici-
pated that the Portfolios will have any significant amounts of such net capi-
tal gain. These tax consequences will apply to
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<PAGE>
distributions of any Portfolio whether received in cash or reinvested in
shares. Certain distributions paid by the Portfolios 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 Portfolios for federal
income tax purposes, including any distributions that may constitute a return
of capital or any distributions that may constitute a tax preference item un-
der 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 shareholders'
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 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 received by a Portfolio
from other regulated investment companies, will generally be exempt from fed-
eral 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 Portfolios. Interest incurred to pur-
chase or carry shares of these Portfolios will not be deductible for federal
income tax purposes to the extent related to exempt-interest 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 shareholders for these state and city tax purposes.
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 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. It is
expected that a Portfolio will be unable to pass such taxes through to its
shareholders, who therefore are not expected to be able to include such taxes
in income or be entitled to claim foreign tax credits or deductions with re-
spect to such taxes.
In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on payments received from a Portfolio. A state income (and
possibly local income and/or intangible property) tax exemption may be avail-
able 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 at-
tributable to) certain U.S. Government obligations and/or tax-exempt municipal
obligations issued by or on behalf of the particular state or a political sub-
division thereof, provided in
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<PAGE>
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 Portfolio is determined as of the close of regu-
lar trading on the New York Stock Exchange (normally, but not always, 4:00
P.M. New York time) on each Business Day. Net asset value per share for each
class of shares of each Portfolio is calculated by determining the amount of
net assets attributed to each class of shares and dividing by the number of
shares of such class.
On any Business Day, as defined herein, when The Bond Market Association
("BMA") recommends that the securities markets close early, each Portfolio re-
serves the right to close at or prior to the BMA recommended closing time, and
to cease granting same Business Day credit for purchase and redemption orders
received after the Portfolio's closing time. On days any Portfolio closes ear-
ly, purchase and redemption orders received after the Portfolio's closing time
will be credited to the next Business Day. In addition, each Portfolio re-
serves 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 Portfolio seeks to maintain a net asset value of $1.00 per share. 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 shareholders, 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 share of $1.00.
YIELD INFORMATION
From time to time, each Portfolio may advertise its yield, effective yield
and total return. Total return is determined by computing the percentage
change in value of $1,000 invested at the maximum public offering price for a
specified period, assuming 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 calculations 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 Portfolio refers to the income generated
by an investment in the Portfolio over a seven-day period (which period will
be stated in the advertisement). This income is then annualized; that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned by an investment in the Portfolio is assumed to be reinvest-
ed. The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The Tax-Exempt Portfolios may each also quote tax-equivalent yield. Each
Portfolio's tax-equivalent yield is calculated by determining the rate of re-
turn that would have to be achieved on a fully taxable investment to produce
the after-tax equivalent (which, in the case of the Tax-Exempt California com-
bines federal and state taxes, and in the case of Tax-Exempt New York Portfo-
lio combines federal, state and city taxes) of the Portfolio's yield, assuming
certain tax brackets for a shareholder.
25
<PAGE>
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. The Portfolios' performance quotations do not
reflect any fees charged by an institution to its customer accounts in connec-
tion with investments in the Portfolios.
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 Portfolio for the same period may differ. See "Or-
ganization and Shares of the Portfolios" below.
ORGANIZATION AND SHARES 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 business
trust, and were reorganized into the Trust as of April 30, 1997. The Trustees
have authority under the Trust's Declaration of Trust to create and classify
shares of beneficial interest in separate series, without further action by
shareholders. 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.
When issued, shares are fully paid and nonassessable. In the event of liqui-
dation, shareholders of each class are entitled to share pro rata in the net
assets of the applicable Portfolio available for distribution to the share-
holders of such class. All shares are freely transferable and have no preemp-
tive, 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.
The Trust does not intend to hold annual meetings of shareholders. However,
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.
26
<PAGE>
ADDITIONAL SERVICES
SERVICE PLAN
Each Portfolio has adopted a Service Plan with respect to the Cash Manage-
ment Shares which authorizes it to compensate certain institutions for provid-
ing account administration and personal and account maintenance services to
their customers who are beneficial owners of such shares (each a "Service Or-
ganization"). Each Portfolio will enter into agreements with Service Organiza-
tions which purchase Cash Management 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 assets of the Cash Management Shares of that Portfo-
lio attributable to or held in the name of the Service Organization for its
customers; provided, however, that the fee paid for personal and account main-
tenance services may 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 shareholder of record, maintaining account rec-
ords for its customers, processing orders to purchase, redeem and exchange
Cash Management Shares for its customers, responding to inquiries from pro-
spective and existing shareholders, assisting customers with investment proce-
dures and developing, maintaining and supporting systems necessary to support
accounts for cash management services. In addition, GSAM, at its own expense,
may pay a Service Organization compensation based on the Cash Management
Shares attributable to or held of record by such Service Organization for pro-
viding services to its customers.
The Trust may authorize certain Service Organizations to accept on the
Trust's behalf purchase, redemption and exchange orders placed by their cus-
tomers and, if approved by the Trust, to designate other intermediaries to ac-
cept such orders. In these cases, a Portfolio will be deemed to have received
an order in proper form when the order is accepted by the authorized Service
Organization or intermediary on a Business Day. The order will be priced at a
Portfolio's net asset value per share next determined after such acceptance
and the transmission of the order and purchase payment in immediately avail-
able funds to the Trust or its designee. The Service Organization or interme-
diary will be responsible for transmitting accepted orders and payments to the
Trust within the period agreed upon by them. A customer should contact its
Service Organization to learn whether it is authorized to accept orders for
the Trust. Service Organizations that authorized to accept orders for the
Trust may receive payments from the Portfolios or Goldman Sachs that are in
addition to the payments payable by the Trust under the Service Plan.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of Cash Management 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 Portfolio. The Trust, on behalf of
the Portfolios, accrues payments made pursuant to a Service Agreement daily.
All inquiries of beneficial owners of Cash Management Shares of the Portfolios
should be directed to such owners' Service Organization.
The Adviser, Distributor, and/or their affiliates may pay other compensa-
tion, from time to time, out of their assets and not as an additional charge
to the Portfolios, to selected Service Organizations and other persons in con-
nection with the sale and/or servicing of ILA Cash Management Shares of the
Portfolios and other investment portfolios of the Trust (such as additional
payments based on new sales, amounts exceeding pre-established thresholds, or
the length of time customers' assets have remained in the Trust) and, subject
to applicable NASD
27
<PAGE>
regulations, contribute to various non-cash and cash incentive arrangements to
promote the sale of ILA Cash Management Shares, as well as sponsor various ed-
ucational programs, sales contests and/or promotions in which participants may
receive reimbursement of expenses, entertainment and prizes such as travel
awards, merchandise, cash, investment research and educational information and
related support materials. This additional compensation can vary among Service
Organizations depending upon such factors as the amounts their customers have
invested (or may invest) in particular portfolios of the Trust, the particular
program involved, or the amount of reimbursable expenses. For further informa-
tion, see the Statement of Additional Information.
For the fiscal year ended December 31, 1997, the Trust did not pay Service
Organizations any fees pursuant to the Service Plan since Cash Management
Shares were not then offered.
DISTRIBUTION PLAN
Each Portfolio has also adopted a Distribution Plan pursuant to Rule 12b-1
under the Investment Company Act (the "Distribution Plan"). Under the Distri-
bution Plan, Goldman Sachs is entitled to a monthly fee from each Portfolio
for distribution services equal, on an annual basis, to 0.50% of the average
daily net assets attributable to Cash Management Shares. Currently, Goldman
Sachs has voluntarily agreed to limit the amount of such fee to .07% of aver-
age daily net assets attributable to Cash Management Shares of each Portfolio.
As of the date of this Prospectus, Goldman Sachs has no intention of modifying
or discontinuing such limitation, but may do so in the future at its discre-
tion.
Goldman Sachs may use the distribution fee for its expenses of distributing
Cash Management Shares. The types of expenses for which Goldman Sachs may be
compensated for distribution services under the Distribution Plan include com-
pensation paid to and expenses incurred by Service Organizations, Goldman
Sachs and their respective officers, employees and sales representatives, com-
missions paid to Service Organizations, allocable overhead, telephone and
travel expenses, the printing of prospectuses for prospective Shareholders,
preparation and distribution of sales literature, advertising of any type and
all other expenses incurred in connection with activities primarily intended
to result in the sale of Cash Management Shares. If the fee received by
Goldman Sachs pursuant to the Distribution Plan exceeds its expenses, Goldman
Sachs may realize a profit from these arrangements. The 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 Distribu-
tion Plan for distribution services may not exceed the limitations imposed by
the NASD's Conduct Rules.
28
<PAGE>
PURCHASE OF SHARES
It is expected that all direct purchasers of Cash Management Shares will be
Service Organizations or their nominees, which may purchase Cash Management
Shares of the Portfolios through Goldman Sachs. Customers of Service Organiza-
tions may invest in such shares only through their Service Organizations.
As set forth below, Cash Management Shares 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. (See "Additional Services" for a description of
the limited situations where a Service Organization or other intermediary may
be authorized to accept orders for the Portfolios.) Purchase orders may be
made by telephoning Goldman Sachs at 800-621-2550 or by a written request ad-
dressed 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").
Purchases of Cash Management Shares may also be made by a Service Organiza-
tion 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. Cash Management Shares purchased by check may
not be redeemed until the check has cleared, as described under "Redemption of
Shares."
Purchases of shares 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. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer. Purchase orders are effected at the net asset value next deter-
mined after receipt of the purchase order and payment in federal funds.
Cash Management Shares of each Portfolio are deemed to have been purchased
when an order becomes effective and are entitled to dividends on Cash Manage-
ment Shares purchased as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF AN EFFECTIVE ORDER IS RECEIVED DIVIDENDS BEGIN
---------------------------------- -----------------
(1) In the case of the Taxable 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.
29
<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.
Cash Management Shares of the Portfolios are purchased at the net asset
value per share without the imposition of a sales charge. Goldman Sachs, as
each Portfolio's transfer agent, will maintain a complete record of transac-
tions and Cash Management 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 AND SUBSEQUENT INVESTMENTS AND OTHER INFORMATION
The Trust does not have any minimum purchase or account requirements with
respect to initial or subsequent investments in Cash Management Shares. Orders
for the purchase of additional Cash Management Shares should be accompanied by
information identifying the account and the Portfolio in which Cash Management
Shares are to be purchased. A Service Organization may impose a minimum amount
for initial and subsequent investments in Cash Management Shares of the Port-
folios, and may establish other requirements such as a minimum account bal-
ance. A Service Organization may effect redemptions of noncomplying accounts,
and may impose a charge for any special services rendered to its customers.
Customers should contact their Service Organizations for further information
concerning such requirements and charges. A Service Organization may purchase
Cash Management Shares in connection with sweep account programs.
REPORTS TO SHAREHOLDERS
The Trust will issue an annual report containing audited financial state-
ments and a semiannual report to record holders of Cash Management Shares of
each Portfolio, 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 Portfolios are also reflected in regular statements issued by
Goldman Sachs to shareholders of record. Service Organizations will be respon-
sible for providing similar services to their own customers who are the bene-
ficial owners of such shares.
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (normally, but not always, as of 4:00 p.m. New York time) as a
dividend and distributed to Service Organizations monthly. Distributions will
be made in additional Cash Management Shares of the same Portfolio or, at the
election of a Service Organization, in cash. The election to reinvest divi-
dends and distributions or receive them in cash may be changed by a Service
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 normally 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 other realized
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 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 share.
30
<PAGE>
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
Cash Management Shares of each Portfolio may be exchanged by Service Organi-
zations for shares 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 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 materially modified or withdrawn at any
time on 60 days' written notice.
REDEMPTION OF SHARES
HOW TO REDEEM
Customers of Service Organizations may redeem Cash Management Shares of a
Portfolio through their respective Service Organizations. The Service Organi-
zations are responsible for the timely 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 Cash Management Shares without charge upon
request on any Business Day at the net asset value next determined after re-
ceipt by Goldman Sachs of the redemption request. (See "Additional Services"
for a description of the limited situations where a Service Organization or
other intermediary may be authorized to accept redemption requests for the
Portfolios.) Redemption requests by a Service Organization may be made by tel-
ephoning 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
31
<PAGE>
Information Form. Any such written request is also confirmed by telephone with
both the requesting party and the designated bank account to verify instruc-
tions. Exchanges among accounts with different names, addresses and social se-
curity or other taxpayer identification numbers must also be in writing and
signed by an authorized person designated on the Account Information Form.
Other procedures may be implemented from time to time. If reasonable proce-
dures are not implemented, the Trust may be liable for any loss due to unau-
thorized or fraudulent transactions. In all other cases, neither the Trust nor
Goldman Sachs will be responsible for the authenticity of redemption or ex-
change instructions received by telephone. A redemption may also be made with
respect to certain Portfolios by means of the check redemption privilege de-
scribed below.
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 by the recordholder of Cash Man-
agement Shares. The payment of redemption proceeds for Cash Management Shares
recently purchased by check may 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 Cash Management Shares.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
REDEMPTION
PROCEEDS
REDEMPTION REQUEST RECEIVED ORDINARILY DIVIDENDS
------------------------------------ ---------- ---------------------
<S> <C> <C> <C>
(1) In the case of the Taxable 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>
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 ordi-
narily be wired. After a wire has been initiated by Goldman Sachs, neither
Goldman Sachs nor the Trust assumes any further responsibility for the perfor-
mance of intermediaries or the Cash Management Shareholder's Service Organiza-
tion in the transfer process. If a problem with such performance arises, the
Cash Management Shareholder should deal directly with such intermediaries or
Service Organization.
32
<PAGE>
CHECK REDEMPTION PRIVILEGE
A Service Organization may elect to have a special account with State Street
for the purpose of redeeming Cash Management Shares 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 Cash Management Shares 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 Cash Management 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 liquidation of an account. If the
amount of a check is greater than the value of Cash Management Shares held in
the Service Organization's account, the check will be returned unpaid, and the
Service Organization 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 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.
----------------
33
<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 IRAs, governmental agencies, financial institutions, registered securities
and commodities dealers and others.
If you are a nonresident alien or foreign entity you must provide a com-
pleted Form W-8 to a Portfolio 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
CASH MANAGEMENT SHARES
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
TOLL FREE: 800-621-2550
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Shareholder and Portfolio Expenses......................................... 2
Financial Highlights....................................................... 3
An Introduction to the Portfolios.......................................... 10
Investment Policies Matrix................................................. 12
Description of Securities and Investment Techniques........................ 14
Investment Limitations..................................................... 21
Management................................................................. 22
Taxes...................................................................... 23
Net Asset Value............................................................ 25
Yield Information.......................................................... 25
Organization and Shares of the Portfolios.................................. 26
Additional Services........................................................ 27
Purchase of Shares......................................................... 29
Reports to Shareholders.................................................... 30
Distributions.............................................................. 30
Exchanges.................................................................. 31
Redemption of Shares....................................................... 31
Appendix................................................................... A-1
</TABLE>
ILAPROCMS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY
MARKET FUNDS
GOLDMAN SACHS--
INSTITUTIONAL LIQUID
ASSETS
CASH MANAGEMENT
SHARES
------------
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 UNITS
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is an 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 (the
"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, 1998, 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, 1998.
<PAGE>
UNITHOLDER AND PORTFOLIO EXPENSES
ILA UNITS(1)
<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
(as a percentage of average daily
net assets)
Management Fees.... 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Other Expenses..... 0.08% 0.07% 0.07% 0.07% 0.07% 0.06% 0.06% 0.07%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING EX-
PENSES (2)(3)....... 0.43% 0.42% 0.42% 0.42% 0.42% 0.41% 0.41% 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
(as a percentage of average daily
net assets)
Management Fees.... 0.35%
Other Expenses..... 0.08%
---------
TOTAL OPERATING EX-
PENSES (2)(3)....... 0.43%
=========
</TABLE>
EXAMPLE OF EXPENSES
You would pay the following expenses on a hypothetical $1,000 investment, as-
suming a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Obligations Portfolio................ $4 $14 $24 $54
Money Market Portfolio..................... $4 $13 $24 $53
Treasury Obligations Portfolio............. $4 $13 $24 $53
Treasury Instruments Portfolio............. $4 $13 $24 $53
Government Portfolio....................... $4 $13 $24 $53
Federal Portfolio.......................... $4 $13 $23 $52
Tax-Exempt Diversified Portfolio........... $4 $13 $23 $52
Tax-Exempt California Portfolio............ $4 $13 $24 $53
Tax-Exempt New York Portfolio.............. $4 $14 $24 $54
</TABLE>
- ----
(1) Based on estimated amounts for the current fiscal year.
(2) The Adviser has voluntarily agreed to reduce or limit the Total Operating
Expenses of each Portfolio (excluding taxes, interest and brokerage and
litigation, indemnification and other extraordinary expenses) on an
annualized basis to 0.43% of the average daily net assets of a Portfolio.
2
<PAGE>
(3) For the fiscal year ended December 31, 1997, the Adviser waived and reim-
bursed certain fees and expenses such that "Management Fees," "Other Expenses"
and "Total Operating Expenses" actually incurred by the Portfolios were as
follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL OPERATING
FEES EXPENSES EXPENSES
---------- -------- ---------------
<S> <C> <C> <C>
Prime Obligations Portfolio.............. 0.35% 0.07% 0.42%
Money Market Portfolio................... 0.31% 0.06% 0.37%
Treasury Obligations Portfolio........... 0.35% 0.07% 0.42%
Treasury Instruments Portfolio........... 0.16% 0.06% 0.22%
Government Portfolio..................... 0.35% 0.07% 0.42%
Federal Portfolio........................ 0.21% 0.06% 0.27%
Tax-Exempt Diversified Portfolio......... 0.26% 0.06% 0.32%
Tax-Exempt California Portfolio.......... 0.35% 0.07% 0.42%
Tax-Exempt New York Portfolio............ 0.27% 0.06% 0.33%
</TABLE>
Without such limitations, "Management Fees," "Other Expenses" and "Total Op-
erating Expenses" of these Portfolios would have been as follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL OPERATING
FEES EXPENSES EXPENSES
---------- -------- ---------------
<S> <C> <C> <C>
Prime Obligations Portfolio.............. 0.35% 0.08% 0.43%
Money Market Portfolio................... 0.35% 0.07% 0.42%
Treasury Obligations Portfolio........... 0.35% 0.07% 0.42%
Treasury Instruments Portfolio........... 0.35% 0.07% 0.42%
Government Portfolio..................... 0.35% 0.07% 0.42%
Federal Portfolio........................ 0.35% 0.06% 0.41%
Tax-Exempt Diversified Portfolio......... 0.35% 0.06% 0.41%
Tax-Exempt California Portfolio.......... 0.35% 0.07% 0.42%
Tax-Exempt New York Portfolio............ 0.35% 0.08% 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 and ILA Service Units (all Portfolios), ILA Class B Units
and ILA Class C Units (Prime Obligations only) and ILA Cash Management Shares
(all Portfolios except Treasury Obligations, Treasury Instruments and Feder-
al). The other classes of the Portfolios are subject to different fees and ex-
penses (which affect performance) and are entitled to different services. In-
formation 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.
Institutions that invest in ILA Units on behalf of their customers may
charge fees directly to their customer accounts in connection with their in-
vestments. Such fees, if any, may affect the return such customers realize
with respect to their investments. Certain institutions may also receive other
compensation in connection with the sale and distribution of such units or for
services to their customers' accounts and/or the Portfolios. For additional
information regarding such compensation, see "Purchase of Units" in this Pro-
spectus and the Statement of Additional Information.
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 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 indicated. Moreover, while the example assumes a 5% annual return,
a Portfolio's actual performance will vary and may result in an actual return
greater or less than 5%. See "Management--The Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, indepen-
dent public accountants, whose report appears in the annual report to
unitholders of the Portfolios for the fiscal year ended December 31, 1997 (the
"Annual Report"). This information should be read in conjunction with the fi-
nancial statements and related notes incorporated by reference and attached to
the Statement of Additional Information.
4
<PAGE>
Goldman Sachs 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 ASSET NET 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0524 -- $0.0524 $(0.0524) $1.00 5.38%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.22
1997-ILA Service
units........... 1.00 0.0485 -- 0.0485 (0.0485) 1.00 4.96
1997-ILA B
units........... 1.00 0.0433 -- 0.0433 (0.0433) 1.00 4.33
1997-ILA C
units(b)........ 1.00 0.0365 -- 0.0365 (0.0365) 1.00 4.41(d)
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
<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,
- --------------------------------
1997-ILA units.. 0.42% 5.24% $ 866,445 0.43% 5.23%
1997-ILA
Administration
units........... 0.57 5.11 28,110 0.58 5.10
1997-ILA Service
units........... 0.82 4.85 78,316 0.83 4.84
1997-ILA B
units........... 1.42 4.33 1,574 1.43 4.32
1997-ILA C
units(b)........ 1.42(d) 4.39(d) 1,897 1.43(d) 4.38(d)
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
</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 and C unit activity commenced during May of 1996 and August of
1997, respectively.
(c) ILA Administration and Service unit activity commenced during June of
1990.
(d) Annualized.
5
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0531 -- $0.0531 $(0.0531) $1.00 5.43%
1997-ILA
Administration
units........... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28
1997-ILA Service
units........... 1.00 0.0490 -- 0.0490 (0.0490) 1.00 5.01
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
RATIO OF NET NET INVESTMENT
RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INCOME TO
EXPENSES TO INCOME TO END EXPENSES TO AVERAGE
AVERAGE NET AVERAGE NET OF PERIOD AVERAGE NET NET
ASSETS ASSETS (IN 000'S) ASSETS ASSETS
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.37% 5.31% $ 806,096 0.42% 5.26%
1997-ILA
Administration
units........... 0.52 5.15 307,480 0.57 5.10
1997-ILA Service
units........... 0.77 4.90 20,517 0.82 4.85
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 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 of
1990.
6
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0514 $0.0001 $0.0515 $(0.0513) $1.00 5.26%
1997-ILA
Administration
units........... 1.00 0.0500 0.0001 0.0501 (0.0508) 1.00 5.10
1997-ILA Service
units........... 1.00 0.0474 0.0001 0.0475 (0.0478) 1.00 4.84
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 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,
- --------------------------------
1997-ILA units.. 0.42% 5.12% $ 590,381 0.42% 5.12%
1997-ILA
Administration
units........... 0.57 4.99 124,159 0.57 4.99
1997-ILA Service
units........... 0.82 4.73 104,133 0.82 4.73
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 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 of
1990, respectively.
7
<PAGE>
GOLDMAN SACHS 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 ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0502 $0.0001 $0.0503 $(0.0503) $1.00 5.17%
1997-ILA
Administration
units........... 1.00 0.0488 0.0001 0.0489 (0.0489) 1.00 5.01
1997-ILA Service
units........... 1.00 0.0463 0.0001 0.0464 (0.0464) 1.00 4.75
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)
<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,
- --------------------------------
1997-ILA units.. 0.22% 5.02% $330,241 0.42% 4.82%
1997-ILA
Administration
units........... 0.37 4.88 98,667 0.57 4.68
1997-ILA Service
units........... 0.62 4.63 295,404 0.82 4.43
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 (COMMENCEMENT OF OPERATIONS) 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.
8
<PAGE>
Goldman Sachs 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 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0516 -- $0.0516 $(0.0516) $1.00 5.31%
1997-ILA
Administration
units........... 1.00 0.0499 -- 0.0499 (0.0498) 1.00 5.15
1997-ILA Service
units........... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.89
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
units........... 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79
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 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,
- --------------------------------
1997-ILA units.. 0.42% 5.16% $460,457 0.42% 5.16%
1997-ILA
Administration
units........... 0.57 4.98 10,192 0.57 4.98
1997-ILA Service
units........... 0.82 4.78 83,799 0.82 4.78
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 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.
9
<PAGE>
Goldman Sachs 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 NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0526 -- $0.0526 $(0.0526) $1.00 5.40%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.24
1997-ILA Service
units........... 1.00 0.0483 -- 0.0483 (0.0483) 1.00 4.98
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,
- --------------------------------
1997-ILA units.. 0.27% 5.26% $2,050,559 0.41% 5.12%
1997-ILA
Administration
units........... 0.42 5.11 530,001 0.56 4.97
1997-ILA Service
units........... 0.67 4.83 34,540 0.81 4.69
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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Service unit activity commenced during April of 1991; no Service units
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 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0333 -- $0.0333 $(0.0333) $1.00 3.39%
1997-ILA
Administration
units........... 1.00 0.0316 -- 0.0316 (0.0316) 1.00 3.23
1997-ILA Service
units........... 1.00 0.0297 -- 0.0297 (0.0297) 1.00 2.97
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
<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> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.32% 3.33% $1,479,486 0.41% 3.24%
1997-ILA
Administration
units........... 0.47 3.16 27,967 0.56 3.07
1997-ILA Service
units........... 0.72 2.97 30,513 0.81 2.88
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
</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 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0310 -- $0.0310 $(0.0310) $1.00 3.15%
1997-ILA
Administration
units........... 1.00 0.0298 -- 0.0298 (0.0301) 1.00 3.00
1997-ILA Service
units (d)....... 1.00 0.0085 -- 0.0085 (0.0080) 1.00 2.87(b)
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 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,
- --------------------------------
1997-ILA units.. 0.42% 3.10% $591,003 0.42% 3.10%
1997-ILA
Administration
units........... 0.57 2.98 360 0.57 2.98
1997-ILA Service
units (d)....... 0.82(b) 2.90(b) 2 0.82(b) 2.90(b)
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) 2.03(b) 3 0.87(b) 1.96(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 units were outstanding
for the years ended December 31, 1994, 1995 and 1996.
(d) ILA Service unit activity re-commenced during September of 1997.
12
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0325 -- $0.0325 $(0.0325) $1.00 3.29%
1997-ILA
Administration
units........... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.14
1997-ILA Service
units(c)........ 1.00 0.0089 -- 0.0089 (0.0089) 1.00 3.02(b)
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 RATIO OF NET
RATIO OF NET INVESTMENT ASSETS AT 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,
- --------------------------------
1997-ILA units.. 0.33% 3.24% $102,887 0.43% 3.14%
1997-ILA
Administration
units........... 0.48 3.09 31,993 0.58 2.99
1997-ILA Service
units(c)........ 0.73(b) 3.04(b) 2 0.83(b) 2.94(b)
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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Administration and Service unit activity commenced during February of
1991 and September of 1997, respectively.
13
<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 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 (as de-
termined pursuant to Rule 2a-7) at the time of purchase.
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
14
<PAGE>
FIRST TIER SECURITIES: Each Portfolio may purchase securities that either
(a) are rated 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;
or (b) have been issued or guaranteed by, or otherwise allow a Portfolio under
certain conditions to demand payment from, an entity with such ratings. U.S.
Government Securities as defined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Portfolios may purchase securities
that are not First Tier Securities but either (a) 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; or (b) have been issued or guaranteed by, or
otherwise allow a Portfolio under certain conditions to demand payment from,
an entity with such ratings. The Taxable Portfolios will not invest in a secu-
rity which is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, securities without
short-term ratings may be purchased if they are deemed to be of comparable
quality to First Tier Securities, or to the extent that a Portfolio may pur-
chase 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 IBCA, Inc., Duff and Phelps, Inc., and Thomson BankWatch,
Inc. For a description of each NRSRO's rating categories, see Appendix A to
the Statement of Additional 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 U.S. and U.S. and foreign
assets must be foreign (US$) (US$) entities
invested in U.S. commercial paper
and Foreign
(US$) 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 tax-exempt Municipal Second of total federal and not currently
Instruments (except in Tier assets in taxable intend to)
extraordinary 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 tax-exempt Municipal Tier assets in California intend to)
Instruments and at least 65% other State invest up to
of its total assets 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 tax-exempt Municipal Second of total federal, New to 20% in AMT
Instruments and at least 65% Tier assets in York State and securities and
of its total assets in New other New York City may temporarily
York Instruments (except in investment invest in the
extraordinary circumstances) companies taxable money
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 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 sup-
ported by a guarantee or demand feature may rely on the credit quality of
the guarantee or demand feature in determining the credit quality of the
investment.
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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
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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 increased competition
from other types of financial institutions, increased acquisition activity and
geographic expansion. Banks may be particularly susceptible to certain eco-
nomic 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 "For-
eign Risks" below.
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 any entity located or organized in a foreign country that
maintains a short-term foreign currency rating in the highest short-term rat-
ings 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.
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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 mortgages, motor
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.
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. Subject to the conditions for using amortized cost valuation under the
Investment Company Act, a Portfolio may consider the maturity of a variable or
floating rate obligation to be shorter than its ultimate stated maturity if
the obligation is a U.S. Treasury Obligation or U.S. Government Security, if
the obligation has a remaining maturity of 397 calendar days or less, or if
the obligation has a demand feature that permits the Portfolio to receive pay-
ment at any time or at specified intervals not exceeding 397 calendar days.
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. A Portfolio may purchase variable
or floating rate obligations from the issuers or may purchase certificates of
participation, a type of floating or variable rate obligation, which are in-
terests in a pool of debt obligations held by a bank or other financial insti-
tution.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS: Municipal Instruments are 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.
CALIFORNIA INSTRUMENTS: California Instruments are 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 Is-
lands and Guam, the interest from which is excluded from gross income for fed-
eral income tax purposes and is exempt from California state personal income
tax.
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NEW YORK INSTRUMENTS: New York Instruments are 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 per-
sonal income tax.
TYPES OF MUNICIPAL, CALIFORNIA AND NEW YORK INSTRUMENTS: Fixed rate notes
and similar debt instruments, variable and floating rate demand instruments,
tax-exempt commercial paper, municipal bonds and unrated notes, paper, bonds
and other instruments.
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, the interest from
which is, in the opinion of bond counsel, if any, excluded from gross income
for federal income tax purposes. In addition, as a matter of fundamental poli-
cy, 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 Instru-
ments, respectively, 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 California and New York Instruments are not available or when
the Adviser believes that the market conditions dictate a defensive posture.
Investments in taxable money market instruments will be limited to those meet-
ing the quality standards of each Tax-Exempt Portfolio. The Tax-Exempt Cali-
fornia and Tax-Exempt New York Portfolios' distributions of interest from Mu-
nicipal Instruments other than California and New York Instruments, respec-
tively, may be subject to California and New York state and New York city per-
sonal income taxes, respectively.
The Prime Obligations and Money Market Portfolios may also invest in Munici-
pal Instruments 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 ("private activity
bonds") are a specific type of revenue bond backed by the credit and security
of a private user and, therefore, have more potential risk. 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
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<PAGE>
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 determina-
tion. 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 or a significant downgrading in the credit
rating assigned to the issuer of the bond. The tender option will be taken
into account in determining the maturity of the tender option bonds and a
Portfolio's average portfolio maturity. There is a risk that a Portfolio will
not be considered the owner of a tender option bond for federal income 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.
INDUSTRIAL DEVELOPMENT BONDS. The Portfolios (other than the Treasury Obli-
gations, Treasury Instruments, Government and Federal Portfolios) may invest
in industrial development bonds (private activity bonds), the interest from
which would be an item of tax preference when distributed as "exempt-interest
dividends" to unitholders under the federal alternative minimum tax. See "Tax-
es" and "Distributions." The Tax-Exempt New York Portfolio will limit its in-
vestments in private activity bonds to not more than 20% of its net assets un-
der normal market conditions. The Tax-Exempt Diversified and Tax-Exempt Cali-
fornia Portfolios do not currently intend to invest in such bonds. If such
policy should change in the future, such investments would not exceed 20% of
each of the Tax-Exempt Diversified or Tax-Exempt California Portfolio's net
assets under normal market conditions.
OTHER POLICIES. Ordinarily, the Tax-Exempt Portfolios expect that 100% of
their portfolio securities will be Municipal Instruments. However, the
Portfolios 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) 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 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, respectively), or (c) industrial development
obligations. Concentration of a 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. The Tax-Exempt Portfolios, however, do not intend to invest
more than 25% of the value of their respective total assets in industrial
development bonds or similar obligations where the non-governmental entities
supplying the revenues from which such bonds or obligations are to be paid are
in the same industry.
Each Portfolio (other than the Treasury Obligations, Treasury Instruments,
Government and Federal Portfolios) may purchase Municipal Instruments which
are backed by letters of credit or other forms of credit enhancement issued by
domestic banks or foreign banks (excluding Prime Obligations Portfolio) which
have a branch,
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agency or subsidiary in the United States or by other financial institutions.
The credit quality of these banks and financial institutions could, therefore,
cause a loss to a Portfolio that invests in Municipal Instruments. Letters of
credit and other obligations of foreign banks and financial institutions may
involve risks in addition to those of domestic obligations. See "Foreign
Risks" above. 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 govern-
ments 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 conse-
quences affecting California Instruments. Also, the ultimate fiscal effect of
federally-mandated reform of welfare programs on the State and its local gov-
ernments 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. Although several different issues of municipal securities of the
State and its agencies and instrumentalities and of the City have been down-
graded by S&P and Moody's in recent years, the most recent actions of S&P and
Moody's have been to place the debt obligations of the State on Credit Watch
with positive implications and to upgrade the debt obligations of the City,
respectively. Strong demand for New York Instruments has also at times had the
effect of permitting New York Instruments to be issued with yields
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relatively lower, and after issuance, to trade in the market at prices rela-
tively higher, than comparably rated municipal obligations issued by other ju-
risdictions. A recurrence of the financial difficulties previously experienced
by certain issuers of New York Instruments could result in defaults or de-
clines in the market values of those issuers' existing obligations and, possi-
bly, in the obligations of other issuers of New York Instruments. Although as
of April 1, 1998 no issuers of New York Instruments were in default with re-
spect to the payment of their municipal obligations, the occurrence of any
such default could materially affect adversely the market values and market-
ability 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 by
Rule 2a-7 or for federal income tax purposes). 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 enter
into repurchase agreements with primary dealers in U.S. Government Securities
and banks affiliated with such primary dealers. A repurchase agreement is an
agreement under which a Portfolio purchases securities and the seller agrees
to repurchase the securities within a particular time at a specified price.
Such price will exceed the original purchase price, the difference being in-
come to the Portfolio, and will be unrelated to the interest rate on the pur-
chased security. A Portfolio's custodian or subcustodian 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
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 Ad-
viser 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 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 will segregate cash or liquid assets in an
amount sufficient to meet the purchase price until three days prior to settle-
ment date. 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 settle-
ment 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 security or for-
ward commitment prior to settlement if the Adviser deems it appropriate to do
so.
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OTHER INVESTMENT COMPANIES
The amount of each Portfolio's investments in securities of other investment
companies will be subject to the limitations on such investments prescribed by
the Investment Company Act. These limits include a prohibition on any Portfo-
lio acquiring more than 3% of the voting shares of any other investment com-
pany 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 as-
sets 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 investment companies will have in-
vestment objectives, policies and restrictions substantially similar to those
of the acquiring Portfolio and will be subject to substantially the same
risks.
INVESTMENT LIMITATIONS
TAXABLE, TAX-ADVANTAGED AND TAX-EXEMPT PORTFOLIOS. Each Portfolio will com-
ply 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
conditions relating to maturity, diversification and credit quality. These op-
erating policies may be more restrictive than the fundamental policies set
forth in the Statement 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. The Board of Trustees has adopted guidelines under which the Adviser
determines and monitors the liquidity of restricted securities subject to the
oversight of the Trustees. Restricted securities (including commercial paper
issued pursuant to Section 4(2) of the 1933 Act) which are determined to be
liquid pursuant to these guidelines will not be deemed to be illiquid invest-
ments for purposes of the foregoing restriction. Since it is not possible to
predict with assurance that the market for restricted securities will continue
to be liquid, the Adviser will carefully monitor each Portfolio's investments
in these securities, focusing on such important factors, among others, as val-
uation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in a Portfolio to
the extent that qualified institutional buyers become for a time uninterested
in purchasing these restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nomi-
nal fixed term on seven days or less notice. Such repurchase agreements will
be regarded as liquid instruments.
BORROWINGS. Each Portfolio may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Portfolio may not make additional
investments if borrowings exceed 5% of its total assets. For more information,
see the Statement of Additional Information.
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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 23,
1998, Goldman Sachs, together with its affiliates, acted as investment adviser
or distributor for approximately $153 billion in assets.
As of November 28, 1997, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $178 billion and partners' capital of $6.1 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 enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
Under the Portfolios' Management Agreement, 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, 1997
---------------- -----------------
<S> <C> <C>
Prime Obligations Portfolio .35% .35%
Money Market Portfolio .35% .31%
Treasury Obligations Portfolio .35% .35%
Treasury Instruments Portfolio .35% .16%
Government Portfolio .35% .35%
Federal Portfolio .35% .21%
Tax-Exempt Diversified Portfolio .35% .26%
Tax-Exempt California Portfolio .35% .35%
Tax-Exempt New York Portfolio .35% .27%
</TABLE>
The difference, if any, between the stated and actual fees paid by the Port-
folios reflects the fact that the Adviser did not charge the full amount of the
fees to which it would have been entitled.
GSAM has voluntarily agreed to reduce or otherwise limit the daily expenses
of each Portfolio (excluding fees payable under the Portfolios' service, admin-
istration and distribution plans for certain share classes, 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.
Such reductions or limits, if any, are calculated monthly on a cumulative ba-
sis. Any such reductions or limits may be discontinued or modified only with
the express approval of the Trustees.
26
<PAGE>
YEAR 2000. Many computer systems were designed using only two digits to sig-
nify the year (for example, "98" for "1998"). On January 1, 2000, if these
computer systems are not corrected, they may incorrectly interpret "00" as the
year "1900" rather than the year "2000," leading to computer shutdowns or er-
rors (commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Portfolios could be adversely affected in their ability to
process securities trades, price securities, provide unitholder account serv-
ices and otherwise conduct normal business operations if the computer systems
used by the Adviser or other Portfolio service providers do not adequately ad-
dress this problem in a timely manner. The Adviser has established a dedicated
group to analyze these issues and to implement the systems modifications nec-
essary to prepare for the Year 2000. Currently, the Adviser does not antici-
pate that the transition to the 21st Century will have any material impact on
its ability to continue to service the Portfolios at current levels. In addi-
tion, the Adviser has sought assurances from the Portfolios' other service
providers that they are taking the steps necessary so that they do not experi-
ence Year 2000 Problems, and the Adviser will continue to monitor the situa-
tion. At this time, however, no assurance can be given that the actions taken
by the Adviser and the Portfolios' other service providers will be sufficient
to avoid any adverse effect on the Portfolios due to the Year 2000 Problem.
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 (other than the Prime Obligations Portfolio). Goldman
Sachs is entitled to receive a fee from the Prime Obligations Portfolio equal
to each class' proportionate share of the total transfer agency costs borne by
the Portfolio. These costs are equal to $12,000 per year per class and $7.50
per account, together with out-of-pocket and transaction related expenses ap-
plicable to Class B and Class C Units and .04% of the average daily net assets
of the other classes of the Prime Obligations Portfolio.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold units of the Portfolios. Goldman Sachs reserves the right to redeem at
any time some or all of the Portfolio units acquired for its own account.
TAXES
Each Portfolio is treated as a separate entity for federal income tax pur-
poses, has elected to be treated and intends to qualify and be treated as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986 (the "Code") for each taxable year. To qualify as such, each Portfolio
must satisfy certain requirements relating to the sources of its income, di-
versification 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 tim-
ing 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
ordinary income, except for any "exempt interest dividends" paid by the Tax-
Exempt Portfolios,
27
<PAGE>
as described below. Distributions out of net capital gain (the excess of net
long-term capital gain over net short-term capital loss), if any, will be tax-
able as long-term capital gain regardless of how long the unitholders have
held their units. Such long-term capital gain will constitute a 20% or 28%
rate gain, depending upon the Portfolio's holding period for the assets the
sale of which generated the gain. It is not, however, anticipated that the
Portfolios will have any significant amounts of such net capital gain. These
tax consequences will apply to distributions of any Portfolio whether 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 in-
formed 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 that may consti-
tute 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 California and New York City and State personal income tax laws, re-
spectively, so that exempt-interest dividends paid by these Portfolios 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 divi-
dends, including dividends attributable to exempt-interest dividends received
by a Portfolio 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 industrial development or private activity bonds should consult their
own tax advisers before purchasing units of these Portfolios. Interest in-
curred to purchase or carry units of these Portfolios will not be deductible
for federal income tax purposes to the extent related to exempt-interest divi-
dends 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. It is
expected that a Portfolio will be unable to pass such taxes through to its
unitholders, who therefore are not expected to be able to include such taxes
in income or be entitled to claim foreign tax credits or deductions with re-
spect to such taxes.
28
<PAGE>
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 may be 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 municipal obliga-
tions issued by or on behalf of the particular state or a political subdivi-
sion thereof, provided in some states that certain thresholds for holdings of
such obligations and/or reporting requirements are satisfied. Unitholders
should consult their own tax advisers concerning these matters.
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, but not always, 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 attributed to each class of units and dividing by the number of
units of such class.
On any Business Day, as defined herein, when The Bond Market Association
("BMA") recommends that the securities markets close early, each Portfolio re-
serves the right to close at or prior to the BMA recommended closing time, and
to cease granting same Business Day credit for purchase and redemption orders
received after the Portfolio's closing time. On days any Portfolio closes ear-
ly, purchase and redemption orders received after the Portfolio's closing time
will be credited to the next Business Day. In addition, each Portfolio re-
serves 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 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 total return. Total return is determined by computing the percentage
change in value of $1,000 invested at the maximum public offering price for a
specified period, assuming 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 calculations 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 Portfolio refers to the income generated
by an investment in the Portfolio over a seven-day period (which period will
be stated in the advertisement). This income is then annualized; that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned by an investment in the Portfolio is assumed to be reinvest-
ed. The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
29
<PAGE>
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. The Portfolios' performance quotations do not
reflect any fees charged by an institution to its customer accounts in connec-
tion with investments in the Portfolios.
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 business
trust, and were reorganized into the Trust as of April 30, 1997. The Trustees
have authority under the Trust's Declaration of Trust to create and classify
units of beneficial interest in separate series, without further action by
unitholders. Additional 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.
When issued, units are fully paid and nonassessable. In the event of liqui-
dation, unitholders of each class are entitled to share pro rata in the net
assets of the applicable Portfolio available for distribution to the
unitholders of such class. All units are freely transferable and have no pre-
emptive, subscription or conversion rights. Unitholders are entitled to one
vote per unit, provided that, at the option of the Trustees, unitholders will
be entitled to a number of votes based upon the net asset values represented
by their units.
As of April 3, 1998 , Bank of New York, (NCD) Hare & Co., 1 Wall Street FL
15, New York, NY 10286, owned of record 35.73% of the outstanding units of
Treasury Instruments Portfolio.
The Trust does not intend to hold annual meetings of unitholders. However,
recordholders may, under certain circumstances, as permitted by the Investment
Company Act, communicate with other unitholders in connection with requiring a
special meeting of unitholders. The Trustees 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.
30
<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. (See "Additional Information" below for a description of the limited sit-
uations where certain institutions or other intermediaries may be authorized
to accept orders for the Portfolios.) Purchase orders may be made by telephon-
ing 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. It is expected that ACH transfers will ordinarily
be converted to federal funds on the Business Day following receipt of the ACH
transfer. Purchase orders are effected at the net asset value next determined
after receipt of the purchase order and payment in federal funds.
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 AN EFFECTIVE ORDER IS
RECEIVED 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>
31
<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, which may affect an in-
vestor's return with respect to an investment in a Portfolio.
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 with this Prospectus.
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.
ADDITIONAL INFORMATION
The Trust may authorize certain institutions (including banks, trust compa-
nies, brokers and investment advisers) that provide recordkeeping, reporting
and processing services to their customers to accept on the Trust's behalf
purchase, redemption and exchange orders placed by or on behalf of such cus-
tomers and, if approved by the Trust, to designate other intermediaries to ac-
cept such orders. In these cases, a Portfolio will be deemed to have received
an order in proper form by or on behalf of a customer when the order is ac-
cepted by the authorized institution or intermediary on a Business Day. The
order will be priced at a Portfolio's net asset value per unit next determined
after such acceptance and the transmission of the order and purchase payment
in immediately available funds to the Trust or its designee. The institution
or intermediary will be responsible for transmitting accepted orders and pay-
ments to the Trust within the period agreed upon by them. A customer should
contact its institution to learn whether it is authorized to accept orders for
the Trust. Such institutions may receive payments from the Portfolios or
Goldman Sachs for the services provided by them with respect to the Portfo-
lios' ILA Units. These payments may be in addition to other sub-transfer
agency payments borne by the Portfolios and their classes.
The Adviser, Distributor, and/or their affiliates may pay other compensa-
tion, from time to time, out of their assets and not as an additional charge
to the Portfolios, to selected institutions (including banks, trust companies,
brokers and investment advisers) and other persons in connection with the sale
and/or servicing of ILA Units of the Portfolios and other investment portfo-
lios of the Trust (such as additional payments based on new sales, amounts ex-
ceeding pre-established thresholds, or the length of time customers' assets
have remained in the Trust) and, subject to applicable NASD regulations, con-
tribute to various non-cash and cash incentive arrangements to
32
<PAGE>
promote the sale of ILA Units, as well as sponsor various educational pro-
grams, sales contests and/or promotions in which participants may receive re-
imbursement of expenses, entertainment and prizes such as travel awards, mer-
chandise, cash, investment research and educational information and related
support materials. This additional compensation can vary among institutions
depending upon such factors as the amounts their customers have invested (or
may invest) in particular portfolios of the Trust, the particular program in-
volved, or the amount of reimbursable expenses. For further information, see
the Statement of Additional Information.
REPORTS TO UNITHOLDERS
ILA Unitholders of each Portfolio will receive an annual report containing
audited financial statements and a semiannual report. To eliminate unnecessary
duplication, only one copy of such reports may be sent to ILA Unitholders with
the same mailing address. ILA Unitholders who desire a duplicate copy of such
reports to be mailed to their residence should contact Goldman Sachs as pro-
vided below. 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.
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.
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (normally, but not always, 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. Dividends will be reinvested as of the last calendar day
of each month. Cash distributions normally will be paid on or about the first
business day of each month. Net short-term capital gains, if any, will be dis-
tributed 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 other realized 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 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.
33
<PAGE>
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 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 included with this Pro-
spectus, 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 regis-
tered in the Portfolio from which the exchange is being made. It may be diffi-
cult to implement the telephone exchange privilege in times of drastic eco-
nomic 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. Exchanges are available only in states where the exchange may legally
be made. The exchange privilege may be materially 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 accordance with the procedures set forth below, if the pro-
ceeds are to be paid other than as set forth in pre-established instructions
on file with the Portfolio. An ILA Unitholder may request redemptions by tele-
phone only if the optional telephone redemption privilege has been elected on
the Account Information Form included with this Prospectus. It may be diffi-
cult to implement redemptions by telephone in times of drastic economic or
market changes. (See "Purchase of Units" for a description of the limited sit-
uations when an institution or other intermediary may be authorized to accept
redemption requests for the Portfolios.)
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
34
<PAGE>
Information Form. Any such written request is also confirmed by telephone with
both the requesting party and the designated bank account to verify instruc-
tions. Exchanges among accounts with different names, addresses and social se-
curity or other taxpayer identification numbers must also be in writing and
signed by an authorized person designated on the Account Information Form.
Other procedures may be implemented from time to time. If reasonable proce-
dures are not implemented, the Trust may be liable for any loss due to unau-
thorized or fraudulent transactions. In all other cases, neither the Trust nor
Goldman Sachs will be responsible for the authenticity of redemption or ex-
change instructions received by telephone. A redemption may also be made with
respect to certain Portfolios by means of the check redemption privilege de-
scribed below.
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 by a unitholder. The payment of
redemption proceeds for ILA Units recently purchased by check may 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 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>
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 as-
sumes any further responsibility for the performance of intermediaries or the
ILA Unitholder's bank in the transfer process. If a problem with such perfor-
mance arises, the ILA Unitholder should deal directly with such intermediaries
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
35
<PAGE>
agency, provided that such institution satisfies the standards established by
Goldman Sachs. Goldman Sachs may also require additional documentation in con-
nection with a request to change the designated bank.
OTHER REDEMPTION INFORMATION
A minimum account balance of $50,000 is required to remain an ILA Unitholder.
The Trust and Goldman Sachs each reserves the right to waive the minimum ac-
count balance. The Trust also reserves the right to redeem units of a
unitholder account if the balance is less than the minimum described above. The
Trust will give sixty (60) days' prior written notice to such unitholders whose
ILA Units are to be redeemed to allow them to purchase sufficient additional
ILA Units to avoid such redemption.
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 frac-
tional ILA Units will be redeemed to cover the amount of the check. Cancelled
checks will be returned to the ILA Unitholder by State Street.
The check redemption privilege enables an ILA Unitholder to receive the divi-
dends 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 sub-
ject to extra charges.
Goldman Sachs reserves the right to impose conditions on, limit the avail-
ability of or terminate the check redemption privilege at any time with respect
to a particular 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 re-
serve 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 IRAs, governmental agencies, financial institutions, registered securities
and commodities dealers and others.
If you are a nonresident alien or foreign entity you must provide a com-
pleted Form W-8 to a Portfolio 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 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..................................................... 25
Management................................................................. 26
Taxes...................................................................... 27
Net Asset Value............................................................ 29
Yield Information.......................................................... 29
Organization and Units of the Portfolios................................... 30
Purchase of Units.......................................................... 31
Reports to Unitholders..................................................... 33
Distributions.............................................................. 33
Exchanges.................................................................. 34
Redemption of Units........................................................ 34
Appendix................................................................... A-1
Account Information Form
</TABLE>
ILAPROINSTMM
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 an 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 (the "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, 1998, 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, 1998.
<PAGE>
UNITHOLDER AND PORTFOLIO EXPENSES
ILA ADMINISTRATION UNITS (1)
<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
(as a percentage of
average daily
net assets)
Management Fees ... 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Other Expenses
Administration
Fees............... 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Other Expenses..... 0.08% 0.07% 0.07% 0.07% 0.07% 0.06% 0.06% 0.07% 0.08%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING
EXPENSES (2)(3)..... 0.58% 0.57% 0.57% 0.57% 0.57% 0.56% 0.56% 0.57% 0.58%
==== ==== ==== ==== ==== ==== ==== ==== ====
</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 $19 $32 $73
Money Market Portfolio..................... $6 $18 $32 $71
Treasury Obligations Portfolio............. $6 $18 $32 $71
Treasury Instruments Portfolio............. $6 $18 $32 $71
Government Portfolio....................... $6 $18 $32 $71
Federal Portfolio.......................... $6 $18 $31 $70
Tax-Exempt Diversified Portfolio........... $6 $18 $31 $70
Tax-Exempt California Portfolio............ $6 $18 $32 $71
Tax-Exempt New York Portfolio.............. $6 $19 $32 $73
</TABLE>
- ----
(1) Based on estimated amounts for the current fiscal year.
(2) The Adviser has voluntarily agreed to reduce or limit the Total Operating
Expenses of each Portfolio (excluding fees payable to Service
Organizations, as defined herein, taxes, interest and brokerage and
litigation, indemnification and other extraordinary expenses) on an
annualized basis to 0.43% of the average daily net assets of a Portfolio.
2
<PAGE>
(3) For the fiscal year ended December 31, 1997, the Adviser waived and reim-
bursed certain fees and expenses such that "Management Fees," "Other Expenses"
and "Total Operating Expenses" actually incurred by the Portfolios were as
follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL OPERATING
FEES EXPENSES EXPENSES
---------- -------- ---------------
<S> <C> <C> <C>
Prime Obligations Portfolio.............. 0.35% 0.07% 0.57%
Money Market Portfolio................... 0.31% 0.06% 0.52%
Treasury Obligations Portfolio........... 0.35% 0.07% 0.57%
Treasury Instruments Portfolio........... 0.16% 0.06% 0.37%
Government Portfolio..................... 0.35% 0.07% 0.57%
Federal Portfolio........................ 0.21% 0.06% 0.42%
Tax-Exempt Diversified Portfolio......... 0.26% 0.06% 0.47%
Tax-Exempt California Portfolio.......... 0.35% 0.07% 0.57%
Tax-Exempt New York Portfolio............ 0.27% 0.06% 0.48%
</TABLE>
Without such limitations, "Management Fees," "Other Expenses" and "Total Op-
erating Expenses" of these Portfolios would have been as follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL OPERATING
FEES EXPENSES EXPENSES
---------- -------- ---------------
<S> <C> <C> <C>
Prime Obligations Portfolio.............. 0.35% 0.08% 0.58%
Money Market Portfolio................... 0.35% 0.07% 0.57%
Treasury Obligations Portfolio........... 0.35% 0.07% 0.57%
Treasury Instruments Portfolio........... 0.35% 0.07% 0.57%
Government Portfolio..................... 0.35% 0.07% 0.57%
Federal Portfolio........................ 0.35% 0.06% 0.56%
Tax-Exempt Diversified Portfolio......... 0.35% 0.06% 0.56%
Tax-Exempt California Portfolio.......... 0.35% 0.07% 0.57%
Tax-Exempt New York Portfolio............ 0.35% 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 and ILA Service Units (all Portfolios), ILA Class B Units
and ILA Class C Units (Prime Obligations only) and ILA Cash Management Shares
(all Portfolios except Treasury Obligations, Treasury Instruments and Feder-
al). The other classes of the Portfolios are subject to different fees and ex-
penses (which affect performance) and are entitled to different services. In-
formation 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 fees directly to their customers who are
the beneficial owners of ILA Administration Units in connection with their
customers' accounts. See "Administration" in this Prospectus and the Statement
of Additional Information. Such fees, if any, may affect the return such cus-
tomers realize with respect to their investments.
Certain Service Organizations may also receive other compensation in connec-
tion with the sale and distribution of Administration Units or for services to
their customers' accounts and/or the Portfolios. For additional information
regarding such compensation, see "Administration" in the Prospectus and the
Statement of Additional Information.
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 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 indicated. Moreover, while the example assumes a 5% annual return,
a Portfolio's actual performance will vary and may result in an actual return
greater or less than 5%. See "Management--The Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, indepen-
dent public accountants, whose report appears in the annual report to
unitholders of the Portfolios for the fiscal year ended December 31, 1997 (the
"Annual Report"). This information should be read in conjunction with the fi-
nancial statements and related notes incorporated by reference and attached to
the Statement of Additional Information.
4
<PAGE>
Goldman Sachs 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 ASSET NET 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0524 -- $0.0524 $(0.0524) $1.00 5.38%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.22
1997-ILA Service
units........... 1.00 0.0485 -- 0.0485 (0.0485) 1.00 4.96
1997-ILA B
units........... 1.00 0.0433 -- 0.0433 (0.0433) 1.00 4.33
1997-ILA C
units(b)........ 1.00 0.0365 -- 0.0365 (0.0365) 1.00 4.41(d)
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
<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,
- --------------------------------
1997-ILA units.. 0.42% 5.24% $ 866,445 0.43% 5.23%
1997-ILA
Administration
units........... 0.57 5.11 28,110 0.58 5.10
1997-ILA Service
units........... 0.82 4.85 78,316 0.83 4.84
1997-ILA B
units........... 1.42 4.33 1,574 1.43 4.32
1997-ILA C
units(b)........ 1.42(d) 4.39(d) 1,897 1.43(d) 4.38(d)
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
</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 and C unit activity commenced during May of 1996 and August of
1997, respectively.
(c) ILA Administration and Service unit activity commenced during June of
1990.
(d) Annualized.
5
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0531 -- $0.0531 $(0.0531) $1.00 5.43%
1997-ILA
Administration
units........... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28
1997-ILA Service
units........... 1.00 0.0490 -- 0.0490 (0.0490) 1.00 5.01
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
RATIO OF NET NET INVESTMENT
RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INCOME TO
EXPENSES TO INCOME TO END EXPENSES TO AVERAGE
AVERAGE NET AVERAGE NET OF PERIOD AVERAGE NET NET
ASSETS ASSETS (IN 000'S) ASSETS ASSETS
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.37% 5.31% $ 806,096 0.42% 5.26%
1997-ILA
Administration
units........... 0.52 5.15 307,480 0.57 5.10
1997-ILA Service
units........... 0.77 4.90 20,517 0.82 4.85
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 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 of
1990.
6
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0514 $0.0001 $0.0515 $(0.0513) $1.00 5.26%
1997-ILA
Administration
units........... 1.00 0.0500 0.0001 0.0501 (0.0508) 1.00 5.10
1997-ILA Service
units........... 1.00 0.0474 0.0001 0.0475 (0.0478) 1.00 4.84
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 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,
- --------------------------------
1997-ILA units.. 0.42% 5.12% $ 590,381 0.42% 5.12%
1997-ILA
Administration
units........... 0.57 4.99 124,159 0.57 4.99
1997-ILA Service
units........... 0.82 4.73 104,133 0.82 4.73
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 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 of
1990, respectively.
7
<PAGE>
GOLDMAN SACHS 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 ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0502 $0.0001 $0.0503 $(0.0503) $1.00 5.17%
1997-ILA
Administration
units........... 1.00 0.0488 0.0001 0.0489 (0.0489) 1.00 5.01
1997-ILA Service
units........... 1.00 0.0463 0.0001 0.0464 (0.0464) 1.00 4.75
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)
<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,
- --------------------------------
1997-ILA units.. 0.22% 5.02% $330,241 0.42% 4.82%
1997-ILA
Administration
units........... 0.37 4.88 98,667 0.57 4.68
1997-ILA Service
units........... 0.62 4.63 295,404 0.82 4.43
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 (COMMENCEMENT OF OPERATIONS) 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.
8
<PAGE>
Goldman Sachs 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 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0516 -- $0.0516 $(0.0516) $1.00 5.31%
1997-ILA
Administration
units........... 1.00 0.0499 -- 0.0499 (0.0498) 1.00 5.15
1997-ILA Service
units........... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.89
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
units........... 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79
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 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,
- --------------------------------
1997-ILA units.. 0.42% 5.16% $460,457 0.42% 5.16%
1997-ILA
Administration
units........... 0.57 4.98 10,192 0.57 4.98
1997-ILA Service
units........... 0.82 4.78 83,799 0.82 4.78
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 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.
9
<PAGE>
Goldman Sachs 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 NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0526 -- $0.0526 $(0.0526) $1.00 5.40%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.24
1997-ILA Service
units........... 1.00 0.0483 -- 0.0483 (0.0483) 1.00 4.98
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,
- --------------------------------
1997-ILA units.. 0.27% 5.26% $2,050,559 0.41% 5.12%
1997-ILA
Administration
units........... 0.42 5.11 530,001 0.56 4.97
1997-ILA Service
units........... 0.67 4.83 34,540 0.81 4.69
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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Service unit activity commenced during April of 1991; no Service units
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 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0333 -- $0.0333 $(0.0333) $1.00 3.39%
1997-ILA
Administration
units........... 1.00 0.0316 -- 0.0316 (0.0316) 1.00 3.23
1997-ILA Service
units........... 1.00 0.0297 -- 0.0297 (0.0297) 1.00 2.97
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
<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> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.32% 3.33% $1,479,486 0.41% 3.24%
1997-ILA
Administration
units........... 0.47 3.16 27,967 0.56 3.07
1997-ILA Service
units........... 0.72 2.97 30,513 0.81 2.88
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
</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 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0310 -- $0.0310 $(0.0310) $1.00 3.15%
1997-ILA
Administration
units........... 1.00 0.0298 -- 0.0298 (0.0301) 1.00 3.00
1997-ILA Service
units (d)....... 1.00 0.0085 -- 0.0085 (0.0080) 1.00 2.87(b)
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 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,
- --------------------------------
1997-ILA units.. 0.42% 3.10% $591,003 0.42% 3.10%
1997-ILA
Administration
units........... 0.57 2.98 360 0.57 2.98
1997-ILA Service
units (d)....... 0.82(b) 2.90(b) 2 0.82(b) 2.90(b)
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) 2.03(b) 3 0.87(b) 1.96(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 units were outstanding
for the years ended December 31, 1994, 1995 and 1996.
(d) ILA Service unit activity re-commenced during September of 1997.
12
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0325 -- $0.0325 $(0.0325) $1.00 3.29%
1997-ILA
Administration
units........... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.14
1997-ILA Service
units(c)........ 1.00 0.0089 -- 0.0089 (0.0089) 1.00 3.02(b)
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 RATIO OF NET
RATIO OF NET INVESTMENT ASSETS AT 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,
- --------------------------------
1997-ILA units.. 0.33% 3.24% $102,887 0.43% 3.14%
1997-ILA
Administration
units........... 0.48 3.09 31,993 0.58 2.99
1997-ILA Service
units(c)........ 0.73(b) 3.04(b) 2 0.83(b) 2.94(b)
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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Administration and Service unit activity commenced during February of
1991 and September of 1997, respectively.
13
<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 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 (as de-
termined pursuant to Rule 2a-7) at the time of purchase.
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
14
<PAGE>
FIRST TIER SECURITIES: Each Portfolio may purchase securities that either
(a) are rated 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;
or (b) have been issued or guaranteed by, or otherwise allow a Portfolio under
certain conditions to demand payment from, an entity with such ratings. U.S.
Government Securities as defined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Portfolios may purchase securities
that are not First Tier Securities but either (a) 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; or (b) have been issued or guaranteed by, or
otherwise allow a Portfolio under certain conditions to demand payment from,
an entity with such ratings. The Taxable Portfolios will not invest in a secu-
rity which is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, securities without
short-term ratings may be purchased if they are deemed to be of comparable
quality to First Tier Securities, or to the extent that a Portfolio may pur-
chase 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 IBCA, Inc., Duff and Phelps, Inc., and Thomson BankWatch,
Inc. For a description of each NRSRO's rating categories, see Appendix A to
the Statement of Additional 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 U.S. and U.S. and foreign
assets must be foreign (US$) (US$) entities
invested in U.S. commercial paper
and Foreign
(US$) 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 tax-exempt Municipal Second of total federal and not currently
Instruments (except in Tier assets in taxable intend to)
extraordinary 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 tax-exempt Municipal Tier assets in California intend to)
Instruments and at least 65% other State invest up to
of its total assets 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 tax-exempt Municipal Second of total federal, New to 20% in AMT
Instruments and at least 65% Tier assets in York State and securities and
of its total assets in New other New York City may temporarily
York Instruments (except in investment invest in the
extraordinary circumstances) companies taxable money
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 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 sup-
ported by a guarantee or demand feature may rely on the credit quality of
the guarantee or demand feature in determining the credit quality of the
investment.
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 increased competition
from other types of financial institutions, increased acquisition activity and
geographic expansion. Banks may be particularly susceptible to certain eco-
nomic 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 "For-
eign Risks" below.
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 any entity located or organized in a foreign country that
maintains a short-term foreign currency rating in the highest short-term rat-
ings 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.
19
<PAGE>
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 mortgages, motor
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.
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. Subject to the conditions for using amortized cost valuation under the
Investment Company Act, a Portfolio may consider the maturity of a variable or
floating rate obligation to be shorter than its ultimate stated maturity if
the obligation is a U.S. Treasury Obligation or U.S. Government Security, if
the obligation has a remaining maturity of 397 calendar days or less, or if
the obligation has a demand feature that permits the Portfolio to receive pay-
ment at any time or at specified intervals not exceeding 397 calendar days.
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. A Portfolio may purchase variable
or floating rate obligations from the issuers or may purchase certificates of
participation, a type of floating or variable rate obligation, which are in-
terests in a pool of debt obligations held by a bank or other financial insti-
tution.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS: Municipal Instruments are 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.
CALIFORNIA INSTRUMENTS: California Instruments are 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 Is-
lands and Guam, the interest from which is excluded from gross income for fed-
eral income tax purposes and is exempt from California state personal income
tax.
20
<PAGE>
NEW YORK INSTRUMENTS: New York Instruments are 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 per-
sonal income tax.
TYPES OF MUNICIPAL, CALIFORNIA AND NEW YORK INSTRUMENTS: Fixed rate notes
and similar debt instruments, variable and floating rate demand instruments,
tax-exempt commercial paper, municipal bonds and unrated notes, paper, bonds
and other instruments.
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, the interest from
which is, in the opinion of bond counsel, if any, excluded from gross income
for federal income tax purposes. In addition, as a matter of fundamental poli-
cy, 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 Instru-
ments, respectively, 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 California and New York Instruments are not available or when
the Adviser believes that the market conditions dictate a defensive posture.
Investments in taxable money market instruments will be limited to those meet-
ing the quality standards of each Tax-Exempt Portfolio. The Tax-Exempt Cali-
fornia and Tax-Exempt New York Portfolios' distributions of interest from Mu-
nicipal Instruments other than California and New York Instruments, respec-
tively, may be subject to California and New York state and New York city per-
sonal income taxes, respectively.
The Prime Obligations and Money Market Portfolios may also invest in Munici-
pal Instruments 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 ("private activity
bonds") are a specific type of revenue bond backed by the credit and security
of a private user and, therefore, have more potential risk. 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
21
<PAGE>
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 determina-
tion. 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 or a significant downgrading in the credit
rating assigned to the issuer of the bond. The tender option will be taken
into account in determining the maturity of the tender option bonds and a
Portfolio's average portfolio maturity. There is a risk that a Portfolio will
not be considered the owner of a tender option bond for federal income 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.
INDUSTRIAL DEVELOPMENT BONDS. The Portfolios (other than the Treasury Obli-
gations, Treasury Instruments, Government and Federal Portfolios) may invest
in industrial development bonds (private activity bonds), the interest from
which would be an item of tax preference when distributed as "exempt-interest
dividends" to unitholders under the federal alternative minimum tax. See "Tax-
es" and "Distributions." The Tax-Exempt New York Portfolio will limit its in-
vestments in private activity bonds to not more than 20% of its net assets un-
der normal market conditions. The Tax-Exempt Diversified and Tax-Exempt Cali-
fornia Portfolios do not currently intend to invest in such bonds. If such
policy should change in the future, such investments would not exceed 20% of
each of the Tax-Exempt Diversified or Tax-Exempt California Portfolio's net
assets under normal market conditions.
OTHER POLICIES. Ordinarily, the Tax-Exempt Portfolios expect that 100% of
their portfolio securities will be Municipal Instruments. However, the
Portfolios 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) 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 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, respectively), or (c) industrial development
obligations. Concentration of a 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. The Tax-Exempt Portfolios, however, do not intend to invest
more than 25% of the value of their respective total assets in industrial
development bonds or similar obligations where the non-governmental entities
supplying the revenues from which such bonds or obligations are to be paid are
in the same industry.
Each Portfolio (other than the Treasury Obligations, Treasury Instruments,
Government and Federal Portfolios) may purchase Municipal Instruments which
are backed by letters of credit or other forms of credit enhancement issued by
domestic banks or foreign banks (excluding Prime Obligations Portfolio) which
have a branch,
22
<PAGE>
agency or subsidiary in the United States or by other financial institutions.
The credit quality of these banks and financial institutions could, therefore,
cause a loss to a Portfolio that invests in Municipal Instruments. Letters of
credit and other obligations of foreign banks and financial institutions may
involve risks in addition to those of domestic obligations. See "Foreign
Risks" above. 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 govern-
ments 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 conse-
quences affecting California Instruments. Also, the ultimate fiscal effect of
federally-mandated reform of welfare programs on the State and its local gov-
ernments 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. Although several different issues of municipal securities of the
State and its agencies and instrumentalities and of the City have been down-
graded by S&P and Moody's in recent years, the most recent actions of S&P and
Moody's have been to place the debt obligations of the State on Credit Watch
with positive implications and to upgrade the debt obligations of the City,
respectively. Strong demand for New York Instruments has also at times had the
effect of permitting New York Instruments to be issued with yields
23
<PAGE>
relatively lower, and after issuance, to trade in the market at prices rela-
tively higher, than comparably rated municipal obligations issued by other ju-
risdictions. A recurrence of the financial difficulties previously experienced
by certain issuers of New York Instruments could result in defaults or de-
clines in the market values of those issuers' existing obligations and, possi-
bly, in the obligations of other issuers of New York Instruments. Although as
of April 1, 1998 no issuers of New York Instruments were in default with re-
spect to the payment of their municipal obligations, the occurrence of any
such default could materially affect adversely the market values and market-
ability 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 by
Rule 2a-7 or for federal income tax purposes). 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 enter
into repurchase agreements with primary dealers in U.S. Government Securities
and banks affiliated with such primary dealers. A repurchase agreement is an
agreement under which a Portfolio purchases securities and the seller agrees
to repurchase the securities within a particular time at a specified price.
Such price will exceed the original purchase price, the difference being in-
come to the Portfolio, and will be unrelated to the interest rate on the pur-
chased security. A Portfolio's custodian or subcustodian 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
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 Ad-
viser 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 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 will segregate cash or liquid assets in an
amount sufficient to meet the purchase price until three days prior to settle-
ment date. 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 settle-
ment 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 security or for-
ward commitment prior to settlement if the Adviser deems it appropriate to do
so.
24
<PAGE>
OTHER INVESTMENT COMPANIES
The amount of each Portfolio's investments in securities of other investment
companies will be subject to the limitations on such investments prescribed by
the Investment Company Act. These limits include a prohibition on any Portfo-
lio acquiring more than 3% of the voting shares of any other investment com-
pany 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 as-
sets 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 investment companies will have in-
vestment objectives, policies and restrictions substantially similar to those
of the acquiring Portfolio and will be subject to substantially the same
risks.
INVESTMENT LIMITATIONS
TAXABLE, TAX-ADVANTAGED AND TAX-EXEMPT PORTFOLIOS. Each Portfolio will com-
ply 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
conditions relating to maturity, diversification and credit quality. These op-
erating policies may be more restrictive than the fundamental policies set
forth in the Statement 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. The Board of Trustees has adopted guidelines under which the Adviser
determines and monitors the liquidity of restricted securities subject to the
oversight of the Trustees. Restricted securities (including commercial paper
issued pursuant to Section 4(2) of the 1933 Act) which are determined to be
liquid pursuant to these guidelines will not be deemed to be illiquid invest-
ments for purposes of the foregoing restriction. Since it is not possible to
predict with assurance that the market for restricted securities will continue
to be liquid, the Adviser will carefully monitor each Portfolio's investments
in these securities, focusing on such important factors, among others, as val-
uation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in a Portfolio to
the extent that qualified institutional buyers become for a time uninterested
in purchasing these restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nomi-
nal fixed term on seven days or less notice. Such repurchase agreements will
be regarded as liquid instruments.
BORROWINGS. Each Portfolio may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Portfolio may not make additional
investments if borrowings exceed 5% of its total assets. For more information,
see the Statement of Additional Information.
25
<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 March 23,
1998, Goldman Sachs, together with its affiliates, acted as investment adviser
or distributor for approximately $153 billion in assets.
As of November 28, 1997, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $178 billion and partners' capital of $6.1 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 enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
Under the Portfolios' Management Agreement, 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, 1997
---------------- -----------------
<S> <C> <C>
Prime Obligations Portfolio .35% .35%
Money Market Portfolio .35% .31%
Treasury Obligations Portfolio .35% .35%
Treasury Instruments Portfolio .35% .16%
Government Portfolio .35% .35%
Federal Portfolio .35% .21%
Tax-Exempt Diversified Portfolio .35% .26%
Tax-Exempt California Portfolio .35% .35%
Tax-Exempt New York Portfolio .35% .27%
</TABLE>
The difference, if any, between the stated and actual fees paid by the Port-
folios reflects the fact that the Adviser did not charge the full amount of the
fees to which it would have been entitled.
GSAM has voluntarily agreed to reduce or otherwise limit the daily expenses
of each Portfolio (excluding fees payable under the Portfolios' service, admin-
istration and distribution plans for certain share classes, 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.
Such reductions or limits, if any, are calculated monthly on a cumulative ba-
sis. Any such reductions or limits may be discontinued or modified only with
the express approval of the Trustees.
26
<PAGE>
YEAR 2000. Many computer systems were designed using only two digits to sig-
nify the year (for example, "98" for "1998"). On January 1, 2000, if these
computer systems are not corrected, they may incorrectly interpret "00" as the
year "1900" rather than the year "2000," leading to computer shutdowns or er-
rors (commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Portfolios could be adversely affected in their ability to
process securities trades, price securities, provide unitholder account serv-
ices and otherwise conduct normal business operations if the computer systems
used by the Adviser or other Portfolio service providers do not adequately ad-
dress this problem in a timely manner. The Adviser has established a dedicated
group to analyze these issues and to implement the systems modifications nec-
essary to prepare for the Year 2000. Currently, the Adviser does not antici-
pate that the transition to the 21st Century will have any material impact on
its ability to continue to service the Portfolios at current levels. In addi-
tion, the Adviser has sought assurances from the Portfolios' other service
providers that they are taking the steps necessary so that they do not experi-
ence Year 2000 Problems, and the Adviser will continue to monitor the situa-
tion. At this time, however, no assurance can be given that the actions taken
by the Adviser and the Portfolios' other service providers will be sufficient
to avoid any adverse effect on the Portfolios due to the Year 2000 Problem.
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 (other than the Prime Obligations Portfolio). Goldman
Sachs is entitled to receive a fee from the Prime Obligations Portfolio equal
to each class' proportionate share of the total transfer agency costs borne by
the Portfolio. These costs are equal to $12,000 per year per class and $7.50
per account, together with out-of-pocket and transaction related expenses ap-
plicable to Class B and Class C Units and .04% of the average daily net assets
of the other classes of the Prime Obligations Portfolio.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold units of the Portfolios. Goldman Sachs reserves the right to redeem at
any time some or all of the Portfolio units acquired for its own account.
TAXES
Each Portfolio is treated as a separate entity for federal income tax pur-
poses, has elected to be treated and intends to qualify and be treated as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986 (the "Code") for each taxable year. To qualify as such, each Portfolio
must satisfy certain requirements relating to the sources of its income, di-
versification 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 tim-
ing 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
ordinary income, except for any "exempt interest dividends" paid by the Tax-
Exempt Portfolios,
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<PAGE>
as described below. Distributions out of net capital gain (the excess of net
long-term capital gain over net short-term capital loss), if any, will be tax-
able as long-term capital gain regardless of how long the unitholders have
held their units. Such long-term capital gain will constitute a 20% or 28%
rate gain, depending upon the Portfolio's holding period for the assets the
sale of which generated the gain. It is not, however, anticipated that the
Portfolios will have any significant amounts of such net capital gain. These
tax consequences will apply to distributions of any Portfolio whether 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 in-
formed 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 that may consti-
tute 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 California and New York City and State personal income tax laws, re-
spectively, so that exempt-interest dividends paid by these Portfolios 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 divi-
dends, including dividends attributable to exempt-interest dividends received
by a Portfolio 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 industrial development or private activity bonds should consult their
own tax advisers before purchasing units of these Portfolios. Interest in-
curred to purchase or carry units of these Portfolios will not be deductible
for federal income tax purposes to the extent related to exempt-interest divi-
dends 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. It is
expected that a Portfolio will be unable to pass such taxes through to its
unitholders, who therefore are not expected to be able to include such taxes
in income or be entitled to claim foreign tax credits or deductions with re-
spect to such taxes.
28
<PAGE>
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 may be 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 municipal obliga-
tions issued by or on behalf of the particular state or a political subdivi-
sion thereof, provided in some states that certain thresholds for holdings of
such obligations and/or reporting requirements are satisfied. Unitholders
should consult their own tax advisers concerning these matters.
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, but not always, 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 attributed to each class of units and dividing by the number of
units of such class.
On any Business Day, as defined herein, when The Bond Market Association
("BMA") recommends that the securities markets close early, each Portfolio re-
serves the right to close at or prior to the BMA recommended closing time, and
to cease granting same Business Day credit for purchase and redemption orders
received after the Portfolio's closing time. On days any Portfolio closes ear-
ly, purchase and redemption orders received after the Portfolio's closing time
will be credited to the next Business Day. In addition, each Portfolio re-
serves 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 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 total return. Total return is determined by computing the percentage
change in value of $1,000 invested at the maximum public offering price for a
specified period, assuming 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 calculations 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 Portfolio refers to the income generated
by an investment in the Portfolio over a seven-day period (which period will
be stated in the advertisement). This income is then annualized; that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned by an investment in the Portfolio is assumed to be reinvest-
ed. The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
29
<PAGE>
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. The Portfolios' performance quotations do not
reflect any fees charged by an institution to its customer accounts in connec-
tion with investments in the Portfolios.
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 business
trust, and were reorganized into the Trust as of April 30, 1997. The Trustees
have authority under the Trust's Declaration of Trust to create and classify
units of beneficial interest in separate series, without further action by
unitholders. Additional 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.
When issued, units are fully paid and nonassessable. In the event of liqui-
dation, unitholders of each class are entitled to share pro rata in the net
assets of the applicable Portfolio available for distribution to the
unitholders of such class. All units are freely transferable and have no pre-
emptive, subscription or conversion rights. Unitholders are entitled to one
vote per unit, provided that, at the option of the Trustees, unitholders will
be entitled to a number of votes based upon the net asset values represented
by their units.
As of April 3, 1998 , Bank of New York, (NCD) Hare & Co., 1 Wall Street FL
15, New York, NY 10286, owned of record 35.73% of the outstanding units of
Treasury Instruments Portfolio.
The Trust does not intend to hold annual meetings of unitholders. However,
recordholders may, under certain circumstances, as permitted by the Investment
Company Act, communicate with other unitholders in connection with requiring a
special meeting of unitholders. The Trustees 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.
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<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 assets 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.
The Trust may authorize certain Service Organizations to accept on the
Trust's behalf purchase, redemption and exchange orders placed by their cus-
tomers and, if approved by the Trust, to designate other intermediaries to ac-
cept such orders. In these cases, a Portfolio will be deemed to have received
an order in proper form when the order is accepted by the authorized Service
Organization or intermediary on a Business Day. The order will be priced at a
Portfolio's net asset value per unit next determined after such acceptance and
the transmission of the order and purchase payment in immediately available
funds to the Trust or its designee. The Service Organization or intermediary
will be responsible for transmitting accepted orders and payments to the Trust
within the period agreed upon by them. A customer should contact its Service
Organization to learn whether it is authorized to accept orders for the Trust.
Service Organizations that are authorized to accept orders for the Trust may
receive payments from the Portfolios or Goldman Sachs that are in addition to
the payments payable by the Trust under the Administration Plan.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of ILA Administration Units in connection with their
customer accounts. These fees would be in addition to any amounts received by
the Service Organization under a Service Agreement and may affect an invest-
or's return with respect to an investment in a Portfolio. The Trust, on behalf
of the Portfolios, accrues payments made pursuant to a Service Agreement dai-
ly. All inquiries of beneficial owners of ILA Administration Units should be
directed to the owners' Service Organization.
The Adviser, Distributor, and/or their affiliates may pay other compensa-
tion, from time to time, out of their assets and not as an additional charge
to the Portfolios, to selected Service Organizations and other persons in con-
nection with the sale and/or servicing of ILA Administration Units of the
Portfolios and other investment portfolios of the Trust (such as additional
payments based on new sales, amounts exceeding pre-established thresholds, or
the length of time customers' assets have remained in the Trust) and, subject
to applicable NASD regulations, contribute to various non-cash and cash incen-
tive arrangements to promote the sale of ILA Administration Units, as well as
sponsor various educational programs, sales contests and/or promotions in
which participants may receive reimbursement of expenses, entertainment and
prizes such as travel awards, merchandise, cash, investment research and edu-
cational information and related support materials. This additional compensa-
tion can vary among Service Organizations depending upon such factors as the
amounts their customers have invested (or may invest) in particular portfolios
of the Trust, the particular program involved, or the amount of reimbursable
expenses. For further information, see the Statement of Additional Informa-
tion.
31
<PAGE>
For the fiscal year ended December 31, 1997, 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.
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. (See "Administration" for a description of the
limited situations where a Service Organization or other intermediary may be
authorized to accept orders for the Portfolios.) 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 ("North-
ern"), Chicago, Illinois, as subcustodian for State Street Bank and Trust Com-
pany ("State Street").
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. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer. Purchase orders are effected at the net asset value next deter-
mined after receipt of the purchase order and payment in federal funds.
32
<PAGE>
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 AN EFFECTIVE ORDER IS
RECEIVED 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 AND SUBSEQUENT INVESTMENTS AND OTHER INFORMATION
The Trust does not have any minimum purchase or account requirements with
respect to initial or subsequent investments in ILA Administration Units. Or-
ders for the purchase of additional ILA Administration Units should be accom-
panied by information identifying the account and the Portfolio in which ILA
Administration Units are to be purchased. A Service Organization may impose a
minimum amount for initial and subsequent investments in ILA Administration
Units of the Portfolios, and may establish other requirements such as a mini-
mum account balance. A Service Organization may effect redemptions of noncom-
plying accounts, and may impose a charge for any special services rendered to
its customers. Customers should contact their Service Organizations for fur-
ther information concerning such requirements and charges. A Service Organiza-
tion may purchase ILA Administration 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 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.
33
<PAGE>
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (normally, but not always, 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 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 normally 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 other realized
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 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, 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 fraudulent
exchange requests by telephone, Goldman Sachs employs reasonable 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 materially 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 timely 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.
34
<PAGE>
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. (See "Administration" for a descrip-
tion of the limited situations where a Service Organization or other interme-
diary may be authorized to accept redemption requests for the Portfolios.) Re-
demption requests by a Service Organization 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 redemptions 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. Exchanges among ac-
counts with different names, addresses and social security or other taxpayer
identification numbers must also be in writing and signed by an authorized
person designated on the Account Information Form. Other procedures may be im-
plemented from time to time. If reasonable procedures are not implemented, the
Trust may be liable for any loss due to unauthorized or fraudulent transac-
tions. In all other cases, neither the Trust nor Goldman Sachs will be respon-
sible for the authenticity of redemption or exchange instructions received by
telephone. A redemption may also be made with respect to certain Portfolios by
means of the check redemption privilege described below.
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 by the recordholder of Administra-
tion Units. The payment of redemption proceeds for ILA Administration Units
recently purchased by check may 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 ILA Administration Units.
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
REDEMPTION
REDEMPTION REQUEST PROCEEDS
RECEIVED 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>
35
<PAGE>
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 ordi-
narily be wired. After a wire has been initiated by Goldman Sachs, neither
Goldman Sachs nor the Trust assumes any further responsibility for the per-
formance of intermediaries or the ILA Administration Unitholder's Service Or-
ganization in the transfer process. If a problem with such performance arises,
the ILA Administration Unitholder should deal directly with such intermediar-
ies 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.
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.
----------------
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 IRAs, governmental agencies, financial institutions, registered securities
and commodities dealers and others.
If you are a nonresident alien or foreign entity you must provide a com-
pleted Form W-8 to a Portfolio 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 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..................................................... 25
Management................................................................. 26
Taxes...................................................................... 27
Net Asset Value............................................................ 29
Yield Information.......................................................... 29
Organization and Units of the Portfolios................................... 30
Administration............................................................. 31
Purchase of Units.......................................................... 32
Reports to Unitholders..................................................... 33
Distributions.............................................................. 34
Exchanges.................................................................. 34
Redemption of Units........................................................ 34
Appendix................................................................... A-1
</TABLE>
ILAPROADMM
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS MONEY
MARKET FUNDS
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 an 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 (the "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, 1998, 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, 1998.
<PAGE>
UNITHOLDER AND PORTFOLIO EXPENSES
ILA SERVICE UNITS(1)
<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
(as a percentage of
average daily net
assets)
Management Fees.... 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
Other Expenses
Service Fees....... 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
Other Expenses..... 0.08% 0.07% 0.07% 0.07% 0.07% 0.06% 0.06% 0.07% 0.08%
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING
EXPENSES (2)(3)..... 0.83% 0.82% 0.82% 0.82% 0.82% 0.81% 0.81% 0.82% 0.83%
==== ==== ==== ==== ==== ==== ==== ==== ====
</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 $103
Money Market Portfolio..................... $8 $26 $46 $101
Treasury Obligations Portfolio............. $8 $26 $46 $101
Treasury Instruments Portfolio............. $8 $26 $46 $101
Government Portfolio....................... $8 $26 $46 $101
Federal Portfolio.......................... $8 $26 $45 $100
Tax-Exempt Diversified Portfolio........... $8 $26 $45 $100
Tax-Exempt California Portfolio............ $8 $26 $46 $101
Tax-Exempt New York Portfolio.............. $8 $26 $46 $103
</TABLE>
- ----
(1) Based on estimated amounts for the current fiscal year.
(2) The Adviser has voluntarily agreed to reduce or limit the Total Operating
Expenses of each Portfolio (excluding fees payable to Service Organiza-
tions, as defined herein, taxes, interest and brokerage and litigation,
indemnification and other extraordinary expenses) on an annualized basis
to 0.43% of the average daily net assets of a Portfolio.
2
<PAGE>
(3) For the fiscal year ended December 31, 1997, the Adviser waived and reim-
bursed certain fees and expenses such that "Management Fees," "Other Expenses"
and "Total Operating Expenses" actually incurred by the Portfolios were as
follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL OPERATING
FEES EXPENSES EXPENSES
---------- -------- ---------------
<S> <C> <C> <C>
Prime Obligations Portfolio.............. 0.35% 0.07% 0.82%
Money Market Portfolio................... 0.31% 0.06% 0.77%
Treasury Obligations Portfolio........... 0.35% 0.07% 0.82%
Treasury Instruments Portfolio........... 0.16% 0.06% 0.62%
Government Portfolio..................... 0.35% 0.07% 0.82%
Federal Portfolio........................ 0.21% 0.06% 0.67%
Tax-Exempt Diversified Portfolio......... 0.26% 0.06% 0.72%
Tax-Exempt California Portfolio.......... 0.35% 0.07% 0.82%
Tax-Exempt New York Portfolio............ 0.27% 0.06% 0.73%
</TABLE>
Without such limitations, "Management Fees," "Other Expenses" and "Total Op-
erating Expenses" of these Portfolios would have been as follows:
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL OPERATING
FEES EXPENSES EXPENSES
---------- -------- ---------------
<S> <C> <C> <C>
Prime Obligations Portfolio.............. 0.35% 0.08% 0.83%
Money Market Portfolio................... 0.35% 0.07% 0.82%
Treasury Obligations Portfolio........... 0.35% 0.07% 0.82%
Treasury Instruments Portfolio........... 0.35% 0.07% 0.82%
Government Portfolio..................... 0.35% 0.07% 0.82%
Federal Portfolio........................ 0.35% 0.06% 0.81%
Tax-Exempt Diversified Portfolio......... 0.35% 0.06% 0.81%
Tax-Exempt California Portfolio.......... 0.35% 0.07% 0.82%
Tax-Exempt New York Portfolio............ 0.35% 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 and ILA Administration Units (all Portfolios), ILA Class B Units and
ILA Class C Units (Prime Obligations only) and ILA Cash Management Shares (all
Portfolios except Treasury Obligations, Treasury Instruments and Federal). 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 fees directly to their customers who are
the beneficial owners of ILA Service Units in connection with their customers'
accounts. See "Additional Services" in this Prospectus and the Statement of
Additional Information. Such fees, if any, may affect the return such custom-
ers realize with respect to their investments.
Certain Service Organizations may also receive other compensation in connec-
tion with the sale and distribution of Service Units or for services to their
customers' accounts and/or the Portfolios. For additional information regard-
ing such compensation, see "Additional Services" in this Prospectus and the
Statement of Additional Information.
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 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 indicated. Moreover, while the example assumes a 5% annual return,
a Portfolio's actual performance will vary and may result in an actual return
greater or less than 5%. See "Management--The Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, indepen-
dent public accountants, whose report appears in the annual report to
unitholders of the Portfolios for the fiscal year ended December 31, 1997 (the
"Annual Report"). This information should be read in conjunction with the fi-
nancial statements and related notes incorporated by reference and attached to
the Statement of Additional Information.
4
<PAGE>
Goldman Sachs 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 ASSET NET 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0524 -- $0.0524 $(0.0524) $1.00 5.38%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.22
1997-ILA Service
units........... 1.00 0.0485 -- 0.0485 (0.0485) 1.00 4.96
1997-ILA B
units........... 1.00 0.0433 -- 0.0433 (0.0433) 1.00 4.33
1997-ILA C
units(b)........ 1.00 0.0365 -- 0.0365 (0.0365) 1.00 4.41(d)
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
<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,
- --------------------------------
1997-ILA units.. 0.42% 5.24% $ 866,445 0.43% 5.23%
1997-ILA
Administration
units........... 0.57 5.11 28,110 0.58 5.10
1997-ILA Service
units........... 0.82 4.85 78,316 0.83 4.84
1997-ILA B
units........... 1.42 4.33 1,574 1.43 4.32
1997-ILA C
units(b)........ 1.42(d) 4.39(d) 1,897 1.43(d) 4.38(d)
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
</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 and C unit activity commenced during May of 1996 and August of
1997, respectively.
(c) ILA Administration and Service unit activity commenced during June of
1990.
(d) Annualized.
5
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0531 -- $0.0531 $(0.0531) $1.00 5.43%
1997-ILA
Administration
units........... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28
1997-ILA Service
units........... 1.00 0.0490 -- 0.0490 (0.0490) 1.00 5.01
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
RATIO OF NET NET INVESTMENT
RATIO OF NET INVESTMENT ASSETS AT RATIO OF NET INCOME TO
EXPENSES TO INCOME TO END EXPENSES TO AVERAGE
AVERAGE NET AVERAGE NET OF PERIOD AVERAGE NET NET
ASSETS ASSETS (IN 000'S) ASSETS ASSETS
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.37% 5.31% $ 806,096 0.42% 5.26%
1997-ILA
Administration
units........... 0.52 5.15 307,480 0.57 5.10
1997-ILA Service
units........... 0.77 4.90 20,517 0.82 4.85
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 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 of
1990.
6
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0514 $0.0001 $0.0515 $(0.0513) $1.00 5.26%
1997-ILA
Administration
units........... 1.00 0.0500 0.0001 0.0501 (0.0508) 1.00 5.10
1997-ILA Service
units........... 1.00 0.0474 0.0001 0.0475 (0.0478) 1.00 4.84
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 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,
- --------------------------------
1997-ILA units.. 0.42% 5.12% $ 590,381 0.42% 5.12%
1997-ILA
Administration
units........... 0.57 4.99 124,159 0.57 4.99
1997-ILA Service
units........... 0.82 4.73 104,133 0.82 4.73
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 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 of
1990, respectively.
7
<PAGE>
GOLDMAN SACHS 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 ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0502 $0.0001 $0.0503 $(0.0503) $1.00 5.17%
1997-ILA
Administration
units........... 1.00 0.0488 0.0001 0.0489 (0.0489) 1.00 5.01
1997-ILA Service
units........... 1.00 0.0463 0.0001 0.0464 (0.0464) 1.00 4.75
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)
<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,
- --------------------------------
1997-ILA units.. 0.22% 5.02% $330,241 0.42% 4.82%
1997-ILA
Administration
units........... 0.37 4.88 98,667 0.57 4.68
1997-ILA Service
units........... 0.62 4.63 295,404 0.82 4.43
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 (COMMENCEMENT OF OPERATIONS) 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.
8
<PAGE>
Goldman Sachs 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 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0516 -- $0.0516 $(0.0516) $1.00 5.31%
1997-ILA
Administration
units........... 1.00 0.0499 -- 0.0499 (0.0498) 1.00 5.15
1997-ILA Service
units........... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.89
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
units........... 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79
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 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,
- --------------------------------
1997-ILA units.. 0.42% 5.16% $460,457 0.42% 5.16%
1997-ILA
Administration
units........... 0.57 4.98 10,192 0.57 4.98
1997-ILA Service
units........... 0.82 4.78 83,799 0.82 4.78
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 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.
9
<PAGE>
Goldman Sachs 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 NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS UNITHOLDERS OF PERIOD RETURN(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0526 -- $0.0526 $(0.0526) $1.00 5.40%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.24
1997-ILA Service
units........... 1.00 0.0483 -- 0.0483 (0.0483) 1.00 4.98
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,
- --------------------------------
1997-ILA units.. 0.27% 5.26% $2,050,559 0.41% 5.12%
1997-ILA
Administration
units........... 0.42 5.11 530,001 0.56 4.97
1997-ILA Service
units........... 0.67 4.83 34,540 0.81 4.69
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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Service unit activity commenced during April of 1991; no Service units
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 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0333 -- $0.0333 $(0.0333) $1.00 3.39%
1997-ILA
Administration
units........... 1.00 0.0316 -- 0.0316 (0.0316) 1.00 3.23
1997-ILA Service
units........... 1.00 0.0297 -- 0.0297 (0.0297) 1.00 2.97
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
<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> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.32% 3.33% $1,479,486 0.41% 3.24%
1997-ILA
Administration
units........... 0.47 3.16 27,967 0.56 3.07
1997-ILA Service
units........... 0.72 2.97 30,513 0.81 2.88
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
</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 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0310 -- $0.0310 $(0.0310) $1.00 3.15%
1997-ILA
Administration
units........... 1.00 0.0298 -- 0.0298 (0.0301) 1.00 3.00
1997-ILA Service
units (d)....... 1.00 0.0085 -- 0.0085 (0.0080) 1.00 2.87(b)
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 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,
- --------------------------------
1997-ILA units.. 0.42% 3.10% $591,003 0.42% 3.10%
1997-ILA
Administration
units........... 0.57 2.98 360 0.57 2.98
1997-ILA Service
units (d)....... 0.82(b) 2.90(b) 2 0.82(b) 2.90(b)
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) 2.03(b) 3 0.87(b) 1.96(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 units were outstanding
for the years ended December 31, 1994, 1995 and 1996.
(d) ILA Service unit activity re-commenced during September of 1997.
12
<PAGE>
Goldman Sachs 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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM VALUE AT
BEGINNING INVESTMENT ON 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0325 -- $0.0325 $(0.0325) $1.00 3.29%
1997-ILA
Administration
units........... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.14
1997-ILA Service
units(c)........ 1.00 0.0089 -- 0.0089 (0.0089) 1.00 3.02(b)
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 RATIO OF NET
RATIO OF NET INVESTMENT ASSETS AT 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,
- --------------------------------
1997-ILA units.. 0.33% 3.24% $102,887 0.43% 3.14%
1997-ILA
Administration
units........... 0.48 3.09 31,993 0.58 2.99
1997-ILA Service
units(c)........ 0.73(b) 3.04(b) 2 0.83(b) 2.94(b)
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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) ILA Administration and Service unit activity commenced during February of
1991 and September of 1997, respectively.
13
<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 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 (as de-
termined pursuant to Rule 2a-7) at the time of purchase.
DOLLAR-WEIGHTED AVERAGE PORTFOLIO MATURITY ("WAM"): Not more than ninety
days as required by Rule 2a-7.
14
<PAGE>
FIRST TIER SECURITIES: Each Portfolio may purchase securities that either
(a) are rated 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;
or (b) have been issued or guaranteed by, or otherwise allow a Portfolio under
certain conditions to demand payment from, an entity with such ratings. U.S.
Government Securities as defined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Portfolios may purchase securities
that are not First Tier Securities but either (a) 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; or (b) have been issued or guaranteed by, or
otherwise allow a Portfolio under certain conditions to demand payment from,
an entity with such ratings. The Taxable Portfolios will not invest in a secu-
rity which is a Second Tier Security at the time of purchase.
UNRATED SECURITIES: To the extent permitted by Rule 2a-7, securities without
short-term ratings may be purchased if they are deemed to be of comparable
quality to First Tier Securities, or to the extent that a Portfolio may pur-
chase 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 IBCA, Inc., Duff and Phelps, Inc., and Thomson BankWatch,
Inc. For a description of each NRSRO's rating categories, see Appendix A to
the Statement of Additional 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 U.S. and U.S. and foreign
assets must be foreign (US$) (US$) entities
invested in U.S. commercial paper
and Foreign
(US$) 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 tax-exempt Municipal Second of total federal and not currently
Instruments (except in Tier assets in taxable intend to)
extraordinary 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 tax-exempt Municipal Tier assets in California intend to)
Instruments and at least 65% other State invest up to
of its total assets 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 tax-exempt Municipal Second of total federal, New to 20% in AMT
Instruments and at least 65% Tier assets in York State and securities and
of its total assets in New other New York City may temporarily
York Instruments (except in investment invest in the
extraordinary circumstances) companies taxable money
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 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 sup-
ported by a guarantee or demand feature may rely on the credit quality of
the guarantee or demand feature in determining the credit quality of the
investment.
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 increased competition
from other types of financial institutions, increased acquisition activity and
geographic expansion. Banks may be particularly susceptible to certain eco-
nomic 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 "For-
eign Risks" below.
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 any entity located or organized in a foreign country that
maintains a short-term foreign currency rating in the highest short-term rat-
ings 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.
19
<PAGE>
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 mortgages, motor
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.
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. Subject to the conditions for using amortized cost valuation under the
Investment Company Act, a Portfolio may consider the maturity of a variable or
floating rate obligation to be shorter than its ultimate stated maturity if
the obligation is a U.S. Treasury Obligation or U.S. Government Security, if
the obligation has a remaining maturity of 397 calendar days or less, or if
the obligation has a demand feature that permits the Portfolio to receive pay-
ment at any time or at specified intervals not exceeding 397 calendar days.
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. A Portfolio may purchase variable
or floating rate obligations from the issuers or may purchase certificates of
participation, a type of floating or variable rate obligation, which are in-
terests in a pool of debt obligations held by a bank or other financial insti-
tution.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS: Municipal Instruments are 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.
CALIFORNIA INSTRUMENTS: California Instruments are 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 Is-
lands and Guam, the interest from which is excluded from gross income for fed-
eral income tax purposes and is exempt from California state personal income
tax.
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NEW YORK INSTRUMENTS: New York Instruments are 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 per-
sonal income tax.
TYPES OF MUNICIPAL, CALIFORNIA AND NEW YORK INSTRUMENTS: Fixed rate notes
and similar debt instruments, variable and floating rate demand instruments,
tax-exempt commercial paper, municipal bonds and unrated notes, paper, bonds
and other instruments.
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, the interest from
which is, in the opinion of bond counsel, if any, excluded from gross income
for federal income tax purposes. In addition, as a matter of fundamental poli-
cy, 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 Instru-
ments, respectively, 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 California and New York Instruments are not available or when
the Adviser believes that the market conditions dictate a defensive posture.
Investments in taxable money market instruments will be limited to those meet-
ing the quality standards of each Tax-Exempt Portfolio. The Tax-Exempt Cali-
fornia and Tax-Exempt New York Portfolios' distributions of interest from Mu-
nicipal Instruments other than California and New York Instruments, respec-
tively, may be subject to California and New York state and New York city per-
sonal income taxes, respectively.
The Prime Obligations and Money Market Portfolios may also invest in Munici-
pal Instruments 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 ("private activity
bonds") are a specific type of revenue bond backed by the credit and security
of a private user and, therefore, have more potential risk. 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
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<PAGE>
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 determina-
tion. 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 or a significant downgrading in the credit
rating assigned to the issuer of the bond. The tender option will be taken
into account in determining the maturity of the tender option bonds and a
Portfolio's average portfolio maturity. There is a risk that a Portfolio will
not be considered the owner of a tender option bond for federal income 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.
INDUSTRIAL DEVELOPMENT BONDS. The Portfolios (other than the Treasury Obli-
gations, Treasury Instruments, Government and Federal Portfolios) may invest
in industrial development bonds (private activity bonds), the interest from
which would be an item of tax preference when distributed as "exempt-interest
dividends" to unitholders under the federal alternative minimum tax. See "Tax-
es" and "Distributions." The Tax-Exempt New York Portfolio will limit its in-
vestments in private activity bonds to not more than 20% of its net assets un-
der normal market conditions. The Tax-Exempt Diversified and Tax-Exempt Cali-
fornia Portfolios do not currently intend to invest in such bonds. If such
policy should change in the future, such investments would not exceed 20% of
each of the Tax-Exempt Diversified or Tax-Exempt California Portfolio's net
assets under normal market conditions.
OTHER POLICIES. Ordinarily, the Tax-Exempt Portfolios expect that 100% of
their portfolio securities will be Municipal Instruments. However, the
Portfolios 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) 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 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, respectively), or (c) industrial development
obligations. Concentration of a 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. The Tax-Exempt Portfolios, however, do not intend to invest
more than 25% of the value of their respective total assets in industrial
development bonds or similar obligations where the non-governmental entities
supplying the revenues from which such bonds or obligations are to be paid are
in the same industry.
Each Portfolio (other than the Treasury Obligations, Treasury Instruments,
Government and Federal Portfolios) may purchase Municipal Instruments which
are backed by letters of credit or other forms of credit enhancement issued by
domestic banks or foreign banks (excluding Prime Obligations Portfolio) which
have a branch,
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<PAGE>
agency or subsidiary in the United States or by other financial institutions.
The credit quality of these banks and financial institutions could, therefore,
cause a loss to a Portfolio that invests in Municipal Instruments. Letters of
credit and other obligations of foreign banks and financial institutions may
involve risks in addition to those of domestic obligations. See "Foreign
Risks" above. 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 govern-
ments 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 conse-
quences affecting California Instruments. Also, the ultimate fiscal effect of
federally-mandated reform of welfare programs on the State and its local gov-
ernments 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. Although several different issues of municipal securities of the
State and its agencies and instrumentalities and of the City have been down-
graded by S&P and Moody's in recent years, the most recent actions of S&P and
Moody's have been to place the debt obligations of the State on Credit Watch
with positive implications and to upgrade the debt obligations of the City,
respectively. Strong demand for New York Instruments has also at times had the
effect of permitting New York Instruments to be issued with yields
23
<PAGE>
relatively lower, and after issuance, to trade in the market at prices rela-
tively higher, than comparably rated municipal obligations issued by other ju-
risdictions. A recurrence of the financial difficulties previously experienced
by certain issuers of New York Instruments could result in defaults or de-
clines in the market values of those issuers' existing obligations and, possi-
bly, in the obligations of other issuers of New York Instruments. Although as
of April 1, 1998 no issuers of New York Instruments were in default with re-
spect to the payment of their municipal obligations, the occurrence of any
such default could materially affect adversely the market values and market-
ability 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 by
Rule 2a-7 or for federal income tax purposes). 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 enter
into repurchase agreements with primary dealers in U.S. Government Securities
and banks affiliated with such primary dealers. A repurchase agreement is an
agreement under which a Portfolio purchases securities and the seller agrees
to repurchase the securities within a particular time at a specified price.
Such price will exceed the original purchase price, the difference being in-
come to the Portfolio, and will be unrelated to the interest rate on the pur-
chased security. A Portfolio's custodian or subcustodian 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
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 Ad-
viser 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 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 will segregate cash or liquid assets in an
amount sufficient to meet the purchase price until three days prior to settle-
ment date. 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 settle-
ment 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 security or for-
ward commitment prior to settlement if the Adviser deems it appropriate to do
so.
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<PAGE>
OTHER INVESTMENT COMPANIES
The amount of each Portfolio's investments in securities of other investment
companies will be subject to the limitations on such investments prescribed by
the Investment Company Act. These limits include a prohibition on any Portfo-
lio acquiring more than 3% of the voting shares of any other investment com-
pany 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 as-
sets 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 investment companies will have in-
vestment objectives, policies and restrictions substantially similar to those
of the acquiring Portfolio and will be subject to substantially the same
risks.
INVESTMENT LIMITATIONS
TAXABLE, TAX-ADVANTAGED AND TAX-EXEMPT PORTFOLIOS. Each Portfolio will com-
ply 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
conditions relating to maturity, diversification and credit quality. These op-
erating policies may be more restrictive than the fundamental policies set
forth in the Statement 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. The Board of Trustees has adopted guidelines under which the Adviser
determines and monitors the liquidity of restricted securities subject to the
oversight of the Trustees. Restricted securities (including commercial paper
issued pursuant to Section 4(2) of the 1933 Act) which are determined to be
liquid pursuant to these guidelines will not be deemed to be illiquid invest-
ments for purposes of the foregoing restriction. Since it is not possible to
predict with assurance that the market for restricted securities will continue
to be liquid, the Adviser will carefully monitor each Portfolio's investments
in these securities, focusing on such important factors, among others, as val-
uation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in a Portfolio to
the extent that qualified institutional buyers become for a time uninterested
in purchasing these restricted securities.
In addition, each Portfolio may not invest in repurchase agreements maturing
in more than seven days and securities which are not readily marketable if, as
a result thereof, more than 10% of the net assets of that Portfolio (taken at
market value) would be invested in such investments. Certain repurchase agree-
ments which mature in more than seven days can be liquidated before the nomi-
nal fixed term on seven days or less notice. Such repurchase agreements will
be regarded as liquid instruments.
BORROWINGS. Each Portfolio may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Portfolio may not make additional
investments if borrowings exceed 5% of its total assets. For more information,
see the Statement of Additional Information.
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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 23,
1998, Goldman Sachs, together with its affiliates, acted as investment adviser
or distributor for approximately $153 billion in assets.
As of November 28, 1997, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $178 billion and partners' capital of $6.1 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 enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
Under the Portfolios' Management Agreement, 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, 1997
---------------- -----------------
<S> <C> <C>
Prime Obligations Portfolio .35% .35%
Money Market Portfolio .35% .31%
Treasury Obligations Portfolio .35% .35%
Treasury Instruments Portfolio .35% .16%
Government Portfolio .35% .35%
Federal Portfolio .35% .21%
Tax-Exempt Diversified Portfolio .35% .26%
Tax-Exempt California Portfolio .35% .35%
Tax-Exempt New York Portfolio .35% .27%
</TABLE>
The difference, if any, between the stated and actual fees paid by the Port-
folios reflects the fact that the Adviser did not charge the full amount of the
fees to which it would have been entitled.
GSAM has voluntarily agreed to reduce or otherwise limit the daily expenses
of each Portfolio (excluding fees payable under the Portfolios' service, admin-
istration and distribution plans for certain share classes, 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.
Such reductions or limits, if any, are calculated monthly on a cumulative ba-
sis. Any such reductions or limits may be discontinued or modified only with
the express approval of the Trustees.
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YEAR 2000. Many computer systems were designed using only two digits to sig-
nify the year (for example, "98" for "1998"). On January 1, 2000, if these
computer systems are not corrected, they may incorrectly interpret "00" as the
year "1900" rather than the year "2000," leading to computer shutdowns or er-
rors (commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Portfolios could be adversely affected in their ability to
process securities trades, price securities, provide unitholder account serv-
ices and otherwise conduct normal business operations if the computer systems
used by the Adviser or other Portfolio service providers do not adequately ad-
dress this problem in a timely manner. The Adviser has established a dedicated
group to analyze these issues and to implement the systems modifications nec-
essary to prepare for the Year 2000. Currently, the Adviser does not antici-
pate that the transition to the 21st Century will have any material impact on
its ability to continue to service the Portfolios at current levels. In addi-
tion, the Adviser has sought assurances from the Portfolios' other service
providers that they are taking the steps necessary so that they do not experi-
ence Year 2000 Problems, and the Adviser will continue to monitor the situa-
tion. At this time, however, no assurance can be given that the actions taken
by the Adviser and the Portfolios' other service providers will be sufficient
to avoid any adverse effect on the Portfolios due to the Year 2000 Problem.
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 (other than the Prime Obligations Portfolio). Goldman
Sachs is entitled to receive a fee from the Prime Obligations Portfolio equal
to each class' proportionate share of the total transfer agency costs borne by
the Portfolio. These costs are equal to $12,000 per year per class and $7.50
per account, together with out-of-pocket and transaction related expenses ap-
plicable to Class B and Class C Units and .04% of the average daily net assets
of the other classes of the Prime Obligations Portfolio.
From time to time, Goldman Sachs or any of its affiliates may purchase and
hold units of the Portfolios. Goldman Sachs reserves the right to redeem at
any time some or all of the Portfolio units acquired for its own account.
TAXES
Each Portfolio is treated as a separate entity for federal income tax pur-
poses, has elected to be treated and intends to qualify and be treated as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986 (the "Code") for each taxable year. To qualify as such, each Portfolio
must satisfy certain requirements relating to the sources of its income, di-
versification 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 tim-
ing 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
ordinary income, except for any "exempt interest dividends" paid by the Tax-
Exempt Portfolios,
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<PAGE>
as described below. Distributions out of net capital gain (the excess of net
long-term capital gain over net short-term capital loss), if any, will be tax-
able as long-term capital gain regardless of how long the unitholders have
held their units. Such long-term capital gain will constitute a 20% or 28%
rate gain, depending upon the Portfolio's holding period for the assets the
sale of which generated the gain. It is not, however, anticipated that the
Portfolios will have any significant amounts of such net capital gain. These
tax consequences will apply to distributions of any Portfolio whether 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 in-
formed 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 that may consti-
tute 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 California and New York City and State personal income tax laws, re-
spectively, so that exempt-interest dividends paid by these Portfolios 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 divi-
dends, including dividends attributable to exempt-interest dividends received
by a Portfolio 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 industrial development or private activity bonds should consult their
own tax advisers before purchasing units of these Portfolios. Interest in-
curred to purchase or carry units of these Portfolios will not be deductible
for federal income tax purposes to the extent related to exempt-interest divi-
dends 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. It is
expected that a Portfolio will be unable to pass such taxes through to its
unitholders, who therefore are not expected to be able to include such taxes
in income or be entitled to claim foreign tax credits or deductions with re-
spect to such taxes.
28
<PAGE>
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 may be 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 municipal obliga-
tions issued by or on behalf of the particular state or a political subdivi-
sion thereof, provided in some states that certain thresholds for holdings of
such obligations and/or reporting requirements are satisfied. Unitholders
should consult their own tax advisers concerning these matters.
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, but not always, 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 attributed to each class of units and dividing by the number of
units of such class.
On any Business Day, as defined herein, when The Bond Market Association
("BMA") recommends that the securities markets close early, each Portfolio re-
serves the right to close at or prior to the BMA recommended closing time, and
to cease granting same Business Day credit for purchase and redemption orders
received after the Portfolio's closing time. On days any Portfolio closes ear-
ly, purchase and redemption orders received after the Portfolio's closing time
will be credited to the next Business Day. In addition, each Portfolio re-
serves 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 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 total return. Total return is determined by computing the percentage
change in value of $1,000 invested at the maximum public offering price for a
specified period, assuming 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 calculations 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 Portfolio refers to the income generated
by an investment in the Portfolio over a seven-day period (which period will
be stated in the advertisement). This income is then annualized; that is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned by an investment in the Portfolio is assumed to be reinvest-
ed. The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
29
<PAGE>
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. The Portfolios' performance quotations do not
reflect any fees charged by an institution to its customer accounts in connec-
tion with investments in the Portfolios.
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 business
trust, and were reorganized into the Trust as of April 30, 1997. The Trustees
have authority under the Trust's Declaration of Trust to create and classify
units of beneficial interest in separate series, without further action by
unitholders. Additional 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.
When issued, units are fully paid and nonassessable. In the event of liqui-
dation, unitholders of each class are entitled to share pro rata in the net
assets of the applicable Portfolio available for distribution to the
unitholders of such class. All units are freely transferable and have no pre-
emptive, subscription or conversion rights. Unitholders are entitled to one
vote per unit, provided that, at the option of the Trustees, unitholders will
be entitled to a number of votes based upon the net asset values represented
by their units.
As of April 3, 1998 , Bank of New York, (NCD) Hare & Co., 1 Wall Street FL
15, New York, NY 10286, owned of record 35.73% of the outstanding units of
Treasury Instruments Portfolio.
The Trust does not intend to hold annual meetings of unitholders. However,
recordholders may, under certain circumstances, as permitted by the Investment
Company Act, communicate with other unitholders in connection with requiring a
special meeting of unitholders. The Trustees 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.
30
<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 may not
exceed .25% of such average daily net assets. The services provided by a Serv-
ice Organization may include acting, directly or through an agent, as the sole
unitholder of record, maintaining account records for its customers, process-
ing orders to purchase, redeem and exchange ILA Service Units for its custom-
ers, responding to inquiries from prospective and existing unitholders and as-
sisting 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 attribut-
able to or held of record by such Service Organization for providing certain
additional services to its customers. Such compensation will not represent an
additional expense to a Portfolio or its unitholders, since it will be paid
from the assets of GSAM.
The Trust may authorize certain Service Organizations to accept on the
Trust's behalf purchase, redemption and exchange orders placed by their cus-
tomers and, if approved by the Trust, to designate other intermediaries to ac-
cept such orders. In these cases, a Portfolio will be deemed to have received
an order in proper form when the order is accepted by the authorized Service
Organization or intermediary on a Business Day. The order will be priced at a
Portfolio's net asset value per unit next determined after such acceptance and
the transmission of the order and purchase payment in immediately available
funds to the Trust or its designee. The Service Organization or intermediary
will be responsible for transmitting accepted orders and payments to the Trust
within the period agreed upon by them. A customer should contact its Service
Organization to learn whether it is authorized to accept orders for the Trust.
Service Organizations that are authorized to accept orders for the Trust may
receive payments from the Portfolios or Goldman Sachs that are in addition to
the payments payable by the Trust under the Service Plan.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of ILA Service Units 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 Portfolio. The Trust, on behalf of the
Portfolios, accrues payments made pursuant to a Service Agreement daily. All
inquiries of beneficial owners of ILA Service Units should be directed to the
owners' Service Organization.
The Adviser, Distributor, and/or their affiliates may pay other compensa-
tion, from time to time, out of their assets and not as an additional charge
to the Portfolios, to selected Service Organizations and other persons in con-
nection with the sale and/or servicing of ILA Service Units of the Portfolios
and other investment portfolios of the Trust (such as additional payments
based on new sales, amounts exceeding pre-established thresholds, or the
length of time customers' assets have remained in the Trust) and, subject to
applicable NASD regulations, contribute to various non-cash and cash incentive
arrangements to promote the sale of ILA Service Units, as
31
<PAGE>
well as sponsor various educational programs, sales contests and/or promotions
in which participants may receive reimbursement of expenses, entertainment and
prizes such as travel awards, merchandise, cash, investment research and educa-
tional information and related support materials. This additional compensation
can vary among Service Organizations depending upon such factors as the amounts
their customers have invested (or may invest) in particular portfolios of the
Trust, the particular program involved, or the amount of reimbursable expenses.
For further information, see the Statement of Additional Information.
For the fiscal year ended December 31, 1997, 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. For the fiscal year ended December
31, 1997, no Service Agreements were in place with respect to the Tax-Exempt
California and Tax-Exempt New York Portfolios; therefore, no fees were paid to
Service Organizations during this period.
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 fed-
eral funds. (See "Additional Services" for a description of the limited situa-
tions where a Service Organization or other intermediary may be authorized to
accept orders for the Portfolios). 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, Illi-
nois, 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. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer. Purchase orders are effected at the net asset value next deter-
mined after receipt of the purchase order and payment in federal funds.
32
<PAGE>
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 pur-
chased as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IF AN EFFECTIVE ORDER IS
RECEIVED 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 local
holidays.
ILA Service Units of the Portfolios are purchased at the net asset value per
unit without the imposition of a sales charge. Goldman Sachs, as each 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 AND SUBSEQUENT INVESTMENTS AND OTHER INFORMATION
The Trust does not have any minimum purchase or account requirements with re-
spect to initial or subsequent investments in ILA Service Units. Orders for the
purchase of additional ILA Service Units should be accompanied by information
identifying the account and the Portfolio in which ILA Service Units are to be
purchased. A Service Organization may impose a minimum amount for initial and
subsequent investments in ILA Service Units of the Portfolios, and may estab-
lish other requirements such as a minimum account balance. A Service Organiza-
tion 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 require-
ments 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 statements
and a semiannual report to record holders of ILA Service Units of each Portfo-
lio, 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 Port-
folios 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.
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<PAGE>
DISTRIBUTIONS
All or substantially all of each Portfolio's net investment income will be
declared daily (normally, but not always, 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 elec-
tion 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 nor-
mally 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 require-
ments of the Code and may be reflected in a Portfolio's daily distributions.
Each Portfolio may distribute at least annually other realized capital gains,
if any, after reduction by available capital losses. In order to avoid exces-
sive fluctuations in the amount of monthly capital gains distributions, a por-
tion of any net capital gains realized on the disposition of securities during
the months of November and December may be distributed during the subsequent
calendar year. Although realized gains and losses on the assets of a Portfolio
are reflected in the net asset value of the Portfolio, they are not expected to
be of an amount which would affect the Portfolio's net asset value of $1.00 per
unit.
A Portfolio's net investment income consists of the excess of (i) accrued in-
terest or discount (including both original issue and market discount on tax-
able securities) on portfolio securities, and (ii) any income of the Portfolio
from sources other than capital gains over (iii) the amortization of market
premium on all portfolio securities and (iv) the estimated expenses of the
Portfolio, including a proportionate share of the general expenses of the
Trust.
EXCHANGES
ILA Service Units of each Portfolio may be exchanged by Service Organizations
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 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 im-
plement 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. Exchanges
are available only in states where the exchange may legally be made. The ex-
change privilege may be materially modified or withdrawn 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 timely transmittal of redemption requests by their cus-
tomers 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 appro-
priate by a Service Organization.
34
<PAGE>
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. (See "Additional Services" for a de-
scription of the limited situations where a Service Organization or other in-
termediary may be authorized to accept redemption requests for the Portfolios.)
Redemption requests by a Service Organization 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 redemptions by tel-
ephone only if the optional telephone 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. Exchanges among accounts with
different names, addresses and social security or other taxpayer identification
numbers must also be in writing and signed by an authorized person designated
on the Account Information Form. 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 authen-
ticity of redemption or exchange instructions received by telephone. A redemp-
tion may also be made with respect to certain Portfolios by means of the check
redemption privilege described below.
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 by the recordholder of Service
Units. The payment of redemption proceeds for ILA Service Units recently pur-
chased by check may 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 ILA Service Units.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION
REDEMPTION REQUEST PROCEEDS
RECEIVED 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>
35
<PAGE>
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 ordi-
narily be wired. After a wire has been initiated by Goldman Sachs, neither
Goldman Sachs nor the Trust assumes any further responsibility for the perfor-
mance of intermediaries or the ILA Service Unitholder's Service Organization in
the transfer process. If a problem with such performance arises, the ILA Serv-
ice Unitholder should deal directly with such intermediaries or Service Organi-
zation.
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 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 Service Units held in the Service Orga-
nization's account, the check will be returned unpaid, and the Service Organi-
zation may be subject to extra charges.
Goldman Sachs reserves the right to impose conditions on, limit the avail-
ability of or terminate the check redemption privilege at any time with respect
to a particular 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 regula-
tions 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 IRAs, governmental agencies, financial institutions, registered securities
and commodities dealers and others.
If you are a nonresident alien or foreign entity you must provide a com-
pleted Form W-8 to a Portfolio 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..................................................... 25
Management................................................................. 26
Taxes...................................................................... 27
Net Asset Value............................................................ 29
Yield Information.......................................................... 29
Organization and Units of the Portfolios................................... 30
Additional Services........................................................ 31
Purchase of Units.......................................................... 32
Reports to Unitholders..................................................... 33
Distributions.............................................................. 34
Exchanges.................................................................. 34
Redemption of Units........................................................ 34
Appendix................................................................... A-1
</TABLE>
ILAPROSVCMM
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 FINANCIAL SQUARE FUNDS
FST SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is an open-end, management investment com-
pany (a "mutual fund") which includes the Goldman Sachs Financial Square Funds
(the "Funds"). This Prospectus relates only to the offering of FST shares of
beneficial interest ("FST Shares") of the Funds. Goldman Sachs Asset Manage-
ment, a separate operating division of Goldman, Sachs & Co., serves as each
Fund's investment adviser (the "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:
Prime Obligations Fund. Securities of the U.S. Government, its agencies, au-
thorities 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 Fund. Securities of the U.S. Government, its agencies, authori-
ties and instrumentalities, U.S. dollar denominated obligations of U.S. and
foreign banks, U.S. dollar denominated commercial paper and other short-term
obligations of U.S. and foreign companies, foreign governments, states, munic-
ipalities and other entities, and repurchase agreements.
Premium Money Market Fund. 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. In order to ob-
tain a rating from a rating organization, the Fund will observe special in-
vestment restrictions.
Treasury Obligations Fund. Securities issued or guaranteed by the U.S. Trea-
sury and repurchase agreements relating to such securities.
Treasury Instruments Fund. Securities issued or guaranteed by the U.S. Trea-
sury, the interest income from which is generally exempt from state income
taxation.
Government Fund. Securities of the U.S. Government, its agencies, authori-
ties, and instrumentalities, and repurchase agreements relating to such secu-
rities.
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.
Tax-Free Money Market Fund. Securities issued by or on behalf of states,
territories and possessions of the United States and their political subdivi-
sions, agencies, authorities and instrumentalities, and the District of Colum-
bia, the interest from which, if any, is, in the opinion of bond counsel, ex-
cluded from gross income for federal income tax purposes and not an item of
tax preference under the federal alternative minimum tax.
Municipal Money Market Fund. Securities issued by or on behalf of states,
territories and possessions of the United States and their political subdivi-
sions, agencies, authorities and instrumentalities, and the District of Colum-
bia, the interest from which, if any, is, in the opinion of bond counsel, ex-
cluded 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, 1998, 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, 1998.
<PAGE>
SHAREHOLDER AND FUND EXPENSES
FST SHARES
<TABLE>
<CAPTION>
PREMIUM TAX-FREE MUNICIPAL
PRIME MONEY MONEY TREASURY TREASURY MONEY MONEY
OBLIGATIONS MARKET MARKET 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 EXPENSES
(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,
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 Fund....................... $2 $ 6 $10 $23
Money Market Fund............................ $ 2 $ 6 $10 $23
Premium Money Market Fund.................... $ 2 $ 6 N/A N/A
Treasury Obligations Fund.................... $ 2 $ 6 $10 $23
Treasury Instruments Fund.................... $ 2 $ 6 $10 $23
Government Fund.............................. $ 2 $ 6 $10 $23
Federal Fund................................. $ 2 $ 6 $10 $23
Tax-Free Money Market Fund................... $ 2 $ 6 $10 $23
Municipal Money Market Fund.................. $ 2 $ 6 N/A N/A
</TABLE>
- -------
(1) Based on estimated amounts for the current fiscal year for the Premium
Money Market and Municipal Money Market Funds.
(2) The 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 Adviser has voluntarily agreed to reduce or limit certain other ex-
penses (excluding management fees, taxes, interest and brokerage and liti-
gation, indemnification and other extraordinary expenses) to the extent
such expenses exceed 0.01% of a Fund's average daily net assets.
2
<PAGE>
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Prime Obligations, Money Market, Treasury Obliga-
tions, Treasury Instruments, Government, Federal and Tax-Free Money Market
Funds for the year ended December 31, 1997, would have been as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Prime Obligations Fund.................................... .025% .23%
Money Market Fund......................................... .025% .23%
Treasury Obligations Fund................................. .025% .23%
Treasury Instruments Fund................................. .085% .29%
Government Fund........................................... .035% .24%
Federal Fund.............................................. .065% .27%
Tax-Free Money Market Fund................................ .035% .24%
</TABLE>
In addition, without the limitations described above, "Other Expenses" and
"Total Operating Expenses" of the Premium Money Market and 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>
Premium Money Market Fund................................. .225% .43%
Municipal Money Market Fund............................... .285% .49%
</TABLE>
As of the date of this Prospectus the Adviser has no intention of modifying
or discontinuing any of the limitations set forth above, but may do so in the
future at its discretion. 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 performance) and are entitled to different services. Information
regarding any other class of the Funds may be obtained from your sales repre-
sentative or from Goldman Sachs by calling the number on the front cover of
this Prospectus.
Institutions that invest in FST Shares on behalf of their customers may
charge fees directly to their customer accounts in connection with their in-
vestments. Such fees, if any, may affect the return such customers realize
with respect to their investments. Certain institutions may also receive other
compensation in connection with the sale and distribution of such shares or
for services to their customers' accounts and/or the Funds. For additional in-
formation regarding such compensation, see "Purchase of Shares" in this Pro-
spectus and the Statement of Additional Information.
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--The Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, indepen-
dent public accountants, whose report appears in the annual report to share-
holders of the Funds for the fiscal year ended December 31, 1997 (the "Annual
Report"). This information should be read in conjunction with the financial
statements and related notes incorporated by reference and attached to the
Statement of Additional Information.
Municipal Money Market Fund had no operations during the periods shown. Ac-
cordingly, there are no selected per share data and ratios presented for this
Fund.
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout The Period
Premium 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 TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... $1.00 $0.0235 $-- $0.0235 $(0.0235) $1.00 5.73%(b)
1997-FST Pre-
ferred shares... 1.00 0.0228 -- 0.0228 (0.0228) 1.00 5.62 (b)
1997-FST Admin-
istration
shares.......... 1.00 0.0223 -- 0.0223 (0.0223) 1.00 5.47 (b)
1997-FST Service
shares.......... 1.00 0.0217 -- 0.0217 (0.0217) 1.00 5.20 (b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
RATIO OF NET ASSETS AT RATIO OF NET
RATIO OF NET INVESTMENT END RATIO OF INVESTMENT
EXPENSES TO INCOME TO OF PERIOD EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET (IN AVERAGE NET AVERAGE NET
ASSETS ASSETS 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... 0.08%(b) 5.59%(b) $218,192 0.43%(b) 5.24%(b)
1997-FST Pre-
ferred shares... 0.18 (b) 5.50 (b) 558 0.53 (b) 5.15 (b)
1997-FST Admin-
istration
shares.......... 0.33 (b) 5.33 (b) 1,457 0.68 (b) 4.98 (b)
1997-FST Service
shares.......... 0.58 (b) 5.17 (b) 814 0.93 (b) 4.82 (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) Commencement of operations.
4
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0546 $ -- $0.0546 $(0.0546) $1.00 5.60% 0.18% 5.46%
1997-FST Pre-
ferred shares... 1.00 0.0538 -- 0.0538 (0.0538) 1.00 5.50 0.28 5.38
1997-FST Admin-
istration
shares.......... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.34 0.43 5.22
1997-FST Service
shares.......... 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.08 0.68 4.97
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(c)....... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b) 0.44(b) 2.96(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68 3.01
1992-FST shares. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18 5.72
1992-FST Service
shares(c)....... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b) 0.66(b) 4.10(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $3,867,739 0.23% 5.41%
1997-FST Pre-
ferred shares... 152,767 0.33 5.33
1997-FST Admin-
istration
shares.......... 241,607 0.48 5.17
1997-FST Service
shares.......... 176,133 0.73 4.92
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.......... 115,114 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(c)....... 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 336 0.75 2.94
1992-FST shares. 917,073 0.27 5.63
1992-FST Service
shares(c)....... 118 0.74(b) 4.02(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 share, FST Preferred share, FST Administration share and FST Service
share activity commenced March 8, 1990, May 1, 1996, November 9, 1992 and
January 8, 1992, respectively.
(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.
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 YEARS ENDED DECEMBER 31,
- ----------------
1997-FST
shares.......... $1.00 $0.0550 $ -- $0.0550 $(0.0550) $1.00 5.63% 0.18% 5.50%
1997-FST Pre-
ferred shares... 1.00 0.0544 -- 0.0544 (0.0544) 1.00 5.53 0.28 5.44
1997-FST Admin-
istration
shares.......... 1.00 0.0526 -- 0.0526 (0.0526) 1.00 5.37 0.43 5.26
1997-FST Service
shares.......... 1.00 0.0499 -- 0.0499 (0.0499) 1.00 5.11 0.68 4.99
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(c)....... 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(c)....... 1.00 0.0305 -- 0.0305 (0.0305) 1.00 4.91(b) 0.11(b) 4.88(b)
1994-FST
Administration
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- ----------------
1997-FST
shares.......... $4,346,519 0.23% 5.45%
1997-FST Pre-
ferred shares... 20,258 0.33 5.39
1997-FST Admin-
istration
shares.......... 221,256 0.48 5.21
1997-FST Service
shares.......... 316,304 0.73 4.94
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(c)....... 4,219 0.73(b) 4.85(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(c)....... 862,971 0.25(b) 4.74(b)
1994-FST
Administration
shares(c)....... 66,560 0.50(b) 4.68(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced May 18, 1994, May 1, 1996, 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0536 $0.0001 $0.0537 $(0.0537) $1.00 5.50% 0.18% 5.36%
1997-FST Pre-
ferred shares .. 1.00 0.0532 0.0001 0.0533 (0.0533) 1.00 5.40 0.28 5.32
1997-FST Admin-
istration shares
................. 1.00 0.0512 0.0001 0.0513 (0.0513) 1.00 5.24 0.43 5.12
1997-FST Service
shares ......... 1.00 0.0487 0.0001 0.0488 (0.0488) 1.00 4.98 0.68 4.87
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 PERIOD 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 YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11 0.17 3.01
1994-FST
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(c) ...... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83(b) 0.43(b) 2.83(b)
1993-FST Service
shares.......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17 0.68 2.96
1992-FST shares. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84 0.18 5.49
1992-FST Service
shares(c)....... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47(b) 0.68(b) 3.77(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $2,217,943 0.23% 5.31%
1997-FST Pre-
ferred shares .. 245,355 0.33 5.27
1997-FST Admin-
istration shares
................. 738,865 0.48 5.07
1997-FST Service
shares ......... 312,991 0.73 4.82
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 PERIOD 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 YEARS 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(c) ...... 1 0.51(b) 2.75(b)
1993-FST Service
shares.......... 5,155 0.76 2.88
1992-FST shares. 413,171 0.28 5.39
1992-FST Service
shares(c)....... 3,634 0.78(b) 3.67(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 229,988 0.34(b) 7.61(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced April 25, 1990, May 1, 1996, January 21, 1993 and
October 15, 1991, respectively.
(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.
7
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout The Period
Treasury Instruments Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares (c)...... $1.00 $0.0423 $0.0004 $0.0427 ($0.0427) $1.00 5.25%(b) 0.18%(b) 5.09%(b)
1997-FST Pre-
ferred
shares (c)...... 1.00 0.0296 -- 0.0296 (0.0296) 1.00 5.13(b) 0.28(b) 5.00(b)
1997-FST Admin-
istration
shares (c)...... 1.00 0.0364 0.0003 0.0367 (0.0367) 1.00 4.99(b) 0.43(b) 4.84(b)
1997-FST Service
shares (c)...... 1.00 0.0380 0.0003 0.0383 (0.0383) 1.00 4.71(b) 0.68(b) 4.62(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
ASSETS AT RATIO OF NET
END RATIO OF INVESTMENT
OF PERIOD EXPENSES TO INCOME TO
(IN AVERAGE NET AVERAGE NET
000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares (c)...... $496,419 0.29%(b) 4.98%(b)
1997-FST Pre-
ferred
shares (c)...... 2 0.39(b) 4.89(b)
1997-FST Admin-
istration
shares (c)...... 4,159 0.54(b) 4.73(b)
1997-FST Service
shares (c)...... 20,177 0.79(b) 4.51(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 share, FST Preferred share, FST Administration share, and FST Service
share activity commenced March 3, 1997, May 30, 1997, April 1, 1997, and
March 5, 1997, respectively.
8
<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 RATIO OF NET
VALUE AT NET NET REALIZED GAIN INCOME FROM DISTRIBUTIONS NET ASSET EXPENSES TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT END TOTAL AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST shares...... $1.00 $0.0541 $ -- $0.0541 $(0.0541) $1.00 5.54% 0.18%
1997-FST Preferred
shares............... 1.00 0.0534 -- 0.0534 (0.0534) 1.00 5.43 0.28
1997-FST Administra-
tion shares.......... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28 0.43
1997-FST Service
shares............... 1.00 0.0491 -- 0.0491 (0.0491) 1.00 5.02 0.68
1996-FST shares...... 1.00 0.0525 0.0001 0.0526 (0.0526) 1.00 5.38 0.18
1996-FST Preferred
shares(c)............ 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26(b) 0.28(b)
1996-FST Administra-
tion shares.......... 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12 0.43
1996-FST Service
shares............... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86 0.68
1995-FST shares...... 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00 0.18
1995-FST Administra-
tion shares.......... 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74 0.43
1995-FST Service
shares(c)............ 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40(b) 0.68(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(d)... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36(b) 0.15(b)
1994-FST Administra-
tion shares(d)....... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10(b) 0.40(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993-FST shares(c)... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b) 0.08(b)
1993-FST Administra-
tion shares(c)....... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87(b) 0.35(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET RATIO OF NET
INVESTMENT NET RATIO OF INVESTMENT
INCOME TO ASSETS AT END EXPENSES TO INCOME TO
AVERAGE NET OF PERIOD AVERAGE NET AVERAGE NET
ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST shares...... 5.41% $1,478,539 0.24% 5.35%
1997-FST Preferred
shares............... 5.34 7,147 0.34 5.28
1997-FST Administra-
tion shares.......... 5.15 299,804 0.49 5.09
1997-FST Service
shares............... 4.91 580,200 0.74 4.85
1996-FST shares...... 5.25 858,769 0.24 5.19
1996-FST Preferred
shares(c)............ 5.14(b) 112 0.34(b) 5.08(b)
1996-FST Administra-
tion shares.......... 5.01 145,108 0.49 4.95
1996-FST Service
shares............... 4.74 223,554 0.74 4.68
1995-FST shares...... 5.81 743,884 0.24 5.75
1995-FST Administra-
tion shares.......... 5.54 82,386 0.49 5.48
1995-FST Service
shares(c)............ 5.08(b) 14,508 0.74(b) 5.02(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(d)... 4.64(b) 258,350 0.25(b) 4.54(b)
1994-FST Administra-
tion shares(d)....... 4.67(b) 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993-FST shares(c)... 3.10(b) 44,697 0.59(b) 2.59(b)
1993-FST Administra-
tion shares(c)....... 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 share, FST Preferred share, FST Administration share and FST Service
share activity commenced April 6, 1993, May 1, 1996, September 1, 1993 and
May 16, 1995, respectively.
(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.
9
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout The Period
Federal 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 ON INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares(c)....... $1.00 $0.0454 $-- $0.0454 $(0.0454) $1.00 5.51%(b) 0.18%(b) 5.39%(b)
1997-FST Pre-
ferred
shares(c)....... 1.00 0.0311 -- 0.0311 (0.0311) 1.00 5.43(b) 0.28(b) 5.26(b)
1997-FST Admin-
istration
shares(c)....... 1.00 0.0388 -- 0.0388 (0.0388) 1.00 5.27(b) 0.43(b) 5.15(b)
1997-FST Service
shares(c)....... 1.00 0.0379 -- 0.0379 (0.0379) 1.00 5.00(b) 0.68(b) 4.78(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares(c)....... $1,125,681 0.27%(b) 5.30%(b)
1997-FST Pre-
ferred
shares(c)....... 194,375 0.37(b) 5.17(b)
1997-FST Admin-
istration
shares(c)....... 625,334 0.52(b) 5.06(b)
1997-FST Service
shares(c)....... 228,447 0.77(b) 4.69(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 share, FST Preferred share, FST Administration share, and FST Service
share activity commenced February 28, 1997, May 30, 1997, April 1, 1997
and March 25, 1997, respectively.
10
<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 RATIO OF NET
ASSET NET REALIZED INCOME NET ASSET RATIO OF NET INVESTMENT
VALUE AT INVEST- GAIN ON FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING MENT INVESTMENT INVESTMENT TO END OF TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $ 0.0350 $ -- $ 0.0350 $(0.0350) $1.00 3.54% 0.18% 3.50%
1997-FST Pre-
ferred shares... 1.00 0.0339 -- 0.0339 (0.0339) 1.00 3.43 0.28 3.39
1997-FST Admin-
istration
shares.......... 1.00 0.0327 -- 0.0327 (0.0327) 1.00 3.28 0.43 3.27
1997-FST Service
shares.......... 1.00 0.0301 -- 0.0301 (0.0301) 1.00 3.02 0.68 3.01
1996-FST shares. 1.00 0.0335 -- 0.0335 (0.0335) 1.00 3.39 0.18 3.35
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30(b) 0.28(b) 3.26(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13 0.43 3.10
1996-FST Service
shares.......... 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88 0.68 2.85
1995-FST shares. 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89 0.14 3.81
1995-FST Admin-
istration
shares.......... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63 0.39 3.54
1995-FST Service
shares.......... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38 0.64 3.32
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(c)....... 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41(b) 0.07(b) 3.42(b)
1994-FST Admin-
istration
shares(c)....... 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19(b) 0.32(b) 3.25(b)
1994-FST Service
shares(c)....... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11(b) 0.57(b) 3.32(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF 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,
- --------------------------------
1997-FST
shares.......... $939,407 0.24% 3.44%
1997-FST Pre-
ferred shares... 35,152 0.34 3.33
1997-FST Admin-
istration
shares.......... 103,049 0.49 3.21
1997-FST Service
shares.......... 42,578 0.74 2.95
1996-FST shares. 440,838 0.23 3.30
1996-FST Pre-
ferred
shares(c)....... 28,731 0.33(b) 3.21(b)
1996-FST Admin-
istration
shares.......... 51,661 0.48 3.05
1996-FST Service
shares.......... 19,855 0.73 2.80
1995-FST shares. 448,367 0.24 3.71
1995-FST Admin-
istration
shares.......... 20,939 0.49 3.44
1995-FST Service
shares.......... 19,860 0.74 3.22
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(c)....... 183,570 0.31(b) 3.18(b)
1994-FST Admin-
istration
shares(c)....... 2,042 0.56(b) 3.01(b)
1994-FST Service
shares(c)....... 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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced July 19, 1994, May 1, 1996, August 1, 1994 and
September 23, 1994, respectively.
11
<PAGE>
AN INTRODUCTION TO THE FUNDS
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 Fund is a separate pool of assets which pursues its in-
vestment 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. A state-chartered credit union
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, Premium Money Market,
Treasury 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 Premium Money Market Fund will ob-
serve special investment restrictions. The Treasury Instruments and Federal
Funds pursue their objectives by limiting their investments to certain U.S.
Treasury Obligations and U.S. Government Securities (each as defined here-
in), respectively, the interest from which is generally exempt from state
income taxation. Each investor should consult his or her tax adviser to de-
termine whether distributions from the Treasury Instruments and Federal
Funds (and any other Fund that may hold such obligations) derived from in-
terest on such obligations are exempt from state income taxation in the in-
vestor'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 (as de-
termined pursuant to Rule 2a-7) at the time of purchase.
12
<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 that either (a) are
rated in the highest short-term rating category by at least two NRSROs (as de-
fined below), or if only one NRSRO has assigned a rating, by that NRSRO; or
(b) have been issued or guaranteed by, or otherwise allow a Fund under certain
conditions to demand payment from, an entity with such ratings. U.S. Govern-
ment Securities as defined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Funds may purchase securities that
are not First Tier Securities but either (a) 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; or (b) have been issued or guaranteed by, or
otherwise allow a Fund under certain conditions to demand payment from, an en-
tity with such ratings. 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, securities without
short-term ratings 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 IBCA, Inc., Duff and Phelps, Inc., and Thomson BankWatch,
Inc. For a description of each NRSRO's rating categories, see Appendix A to
the Statement of Additional Information.
13
<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.
only entities
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$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Premium Money ^^ ^^ ^ ^ ^ ^^ ^^ ^
Market ^Over 25% of ^U.S. and ^U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
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 de-
scription of, and certain criteria applicable to, each of these catego-
ries 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.
14
<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)
tax-exempt in other state*** invest up to 20%
Municipal investment in AMT
Instruments companies securities and
(except in may temporarily
extraordinary invest in the
circumstances) 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
tax-exempt in other state*** may temporarily
Municipal investment invest in the
Instruments companies taxable money
(except in market
extraordinary instruments
circumstances) 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 supported
by a guarantee or demand feature may rely on the credit quality of the
guarantee or demand feature in determining the credit quality of the in-
vestment.
15
<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.
16
<PAGE>
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest in "U.S. Bank Obligations" limited to securities issued or guaranteed by
U.S. banks (including certificates of deposit, commercial paper, unsecured
bank promissory notes and bankers' acceptances) which have more than $1 bil-
lion in total assets at the time of purchase. Such obligations may also in-
clude debt obligations issued by U.S. subsidiaries of such banks.
The Money Market and Premium Money Market 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 Premium Money Market 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 in-
creased competition from other types of financial institutions, increased ac-
quisition activity and geographic expansion. Banks may be particularly suscep-
tible 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 condi-
tions of banks. See "Foreign Risks" below.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market and Premium Money Market Funds may invest in U.S. dollar-
denominated 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 Premium Money Market 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.
17
<PAGE>
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest 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 by U.S. corporations, U.S. commercial banks, foreign corpora-
tions (Money Market and Premium Money Market Funds only), foreign commercial
banks (Money Market and Premium Money Market Funds only) or other entities. In
addition, the Funds may invest in other short-term obligations (including
short-term funding agreements) payable in U.S. dollars and issued or guaran-
teed by U.S. corporations, foreign corporations (Money Market and Premium
Money Market Funds only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest in "Asset-Backed and Receivables-Backed Securities" which represent par-
ticipations in, or are secured by and payable from, pools of assets such as
mortgages, motor vehicle installment sale contracts, installment loan con-
tracts, leases of various types of real and personal property, receivables
from revolving credit (credit card) agreements and other categories of receiv-
ables. 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 con-
sistent with its investment objectives and policies, each of the Prime Obliga-
tions, Money Market and Premium Money Market Funds may invest in new types of
mortgage-related securities and in other asset-backed securities that may be
developed in the future.
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. Subject to the conditions for using amortized cost valuation under the
Investment Company Act, a Fund may consider the maturity of a variable or
floating rate obligation to be shorter than its ultimate stated maturity if
the obligation is a U.S. Treasury Obligation or U.S. Government Security, if
the obligation has a remaining maturity of 397 calendar days or less, or if
the obligation has a demand feature that permits the Fund to receive payment
at any time or at specified intervals not exceeding 397 calendar days. The is-
suers or financial intermediaries providing demand features may support their
ability to purchase the obligations by obtaining credit with liquidity sup-
ports. 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. A Fund may purchase variable or
floating rate obligations from the issuers or may purchase certificates of
participation, a type of floating or variable rate obligation, which are in-
terests in a pool of debt obligations held by a bank or other financial insti-
tution.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS. Municipal Instruments are 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. Municipal Instruments include: fixed rate notes and sim-
ilar debt instruments, variable and floating rate demand instruments, tax-ex-
empt commercial paper, municipal bonds and unrated notes, paper, bonds and
other instruments.
18
<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, the interest from which is, in the opinion
of bond counsel, if any, excluded from gross income for federal income tax
purposes. Each Tax-Exempt Fund may temporarily invest in taxable money market
instruments when the Adviser believes that the market conditions dictate a de-
fensive posture. Investments in taxable money market instruments will be lim-
ited to those meeting the quality standards of each Tax-Exempt Fund. The Prime
Obligations, Money Market and Premium Money Market Funds may also invest in
Municipal Instruments 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 ("private activity
bonds") are a specific type of revenue bond backed by the credit and security
of a private user and, therefore, have more potential risk. 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.
INDUSTRIAL DEVELOPMENT BONDS. The Funds (other than the Treasury Obliga-
tions, Treasury Instruments, Government and Federal Funds) may invest in in-
dustrial development bonds (private activity bonds), the interest
19
<PAGE>
from which would be an item of tax preference when distributed as "exempt-in-
terest dividends" to shareholders under the federal alternative minimum tax.
See "Taxes" and "Distributions." The Municipal Money Market Fund may invest up
to 100% of its assets in private activity bonds. The Tax-Free Money Market
Fund does not currently intend to invest in such bonds. If Tax-Free Money Mar-
ket Fund's policy not to invest in private activity bonds should change in the
future, such investments would not exceed 20% of Tax-Free Money Market Fund's
net assets under normal market conditions.
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. The Tax-Exempt Funds, however, do not intend to invest more
than 25% of the value of their respective total assets in industrial develop-
ment bonds or similar obligations where the non-governmental entities supply-
ing the revenues from which such bonds or obligations are to be paid are in
the same industry.
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 or other forms of credit enhancement, issued by domestic
banks or foreign banks (excluding Prime Obligations Fund) which have a branch,
agency or subsidiary in the United States or by other financial institutions.
The credit quality of these banks and financial institutions could, therefore,
cause a loss to a Fund that invests in Municipal Instruments. Letters of
credit and other obligations of foreign banks and financial institutions may
involve risks in addition to those of domestic obligations. See "Foreign
Risks" above. In addition, these Funds may acquire securities in the form of
custodial receipts which evidence ownership of future interest payments, prin-
cipal 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.
REPURCHASE AGREEMENTS
Each Fund (other than the Treasury Instruments Fund) may enter into repur-
chase agreements with primary dealers in U.S. Government Securities and banks
affiliated with such primary dealers. A repurchase 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 difference 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, in-
cluding 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 principal of the security and costs associ-
ated with
20
<PAGE>
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 repurchase agreements entered
into by a Fund will be taxable to its shareholders. In addition, each Fund
(other than the Treasury Instruments Fund), together with other registered in-
vestment companies having management 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
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 will segregate cash or liquid assets in an amount sufficient
to meet the purchase price until three days prior to settlement date. Alterna-
tively, a Fund may enter into offsetting contracts for the forward sale of
other securities that it owns. Securities purchased or sold on a when-issued
or forward commitment basis involve a risk of loss if the value of the secu-
rity 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
Fund would generally purchase securities on a when-issued or forward commit-
ment basis with the intention of acquiring securities for its portfolio, the
Fund may dispose of a when-issued security or forward commitment prior to set-
tlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The amount of each Fund's investments in securities of other investment com-
panies will be subject to the limitations on such investments prescribed by
the Investment Company Act. These limits include a prohibition on any Fund ac-
quiring more than 3% of the voting shares of any other investment company and
a prohibition on investing more than 5% of a Fund's total assets in securities
of any one investment company or more than 10% of its total assets in securi-
ties of all investment companies. Each Fund will indirectly bear its propor-
tionate share of any management fees and other expenses paid by such other in-
vestment companies. Such other investment companies will have investment ob-
jectives, policies and restrictions substantially similar to those of the ac-
quiring Fund and will be subject to substantially the same risks.
INVESTMENT LIMITATIONS
TAXABLE, TAX-ADVANTAGED 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 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 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. The Treasury Obligations Fund's policy of limiting its
investments 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.
21
<PAGE>
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. The
Board of Trustees has adopted guidelines under which the Adviser determines
and monitors the liquidity of restricted securities subject to the oversight
of the Trustees. Restricted securities (including commercial paper issued pur-
suant to Section 4(2) of the 1933 Act) which are determined to be liquid will
not be deemed to be illiquid investments for purposes of the foregoing re-
striction. Since it is not possible to predict with assurance that the market
for restricted securities 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.
BORROWINGS. Each Fund may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Fund may not make additional in-
vestments if borrowings exceed 5% of its total assets. For more information,
see the Statement of Additional Information.
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 23,
1998, Goldman Sachs, together with its affiliates, acted as investment adviser
or distributor for approximately $153 billion in assets.
As of November 28, 1997, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $178 billion and partners' capital of $6.1 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 Fund may enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
22
<PAGE>
Under the Funds' Management Agreement, GSAM continually manages each Fund,
including the purchase, retention and disposition of its securities and other
assets. In addition, GSAM administers each Fund's business affairs and per-
forms 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
OR PERIOD
ENDED
CONTRACTUAL DECEMBER 31,
RATE 1997
----------- ------------
<S> <C> <C>
Financial Square Prime Obligations Fund................ .205% .17%
Financial Square Money Market Fund..................... .205% .17%
Financial Square Premium Money Market Fund............. .205% .07%
Financial Square Treasury Obligations Fund............. .205% .17%
Financial Square Treasury Instruments Fund............. .205% .17%
Financial Square Government Fund....................... .205% .17%
Financial Square Federal Fund.......................... .205% .17%
Financial Square Tax Free Money Market Fund............ .205% .17%
Financial Square Municipal Money Market Fund........... .205% N/A*
</TABLE>
* As of December 31, 1997, the Municipal Money Market Fund had not commenced
operations.
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, 1997, the annual rate expressed is the combined
advisory and administration fees paid (after voluntary fee limitations). The
difference, if any, between the stated and actual fees paid by the Funds re-
flects the fact that the Adviser did not charge the full amount of the fees to
which it would have been entitled.
GSAM has voluntarily agreed not to impose a portion of its management fee
and/or to reduce or otherwise limit the total operating expenses of each Fund
(excluding fees payable under the Funds' service and administration plans for
certain share classes, taxes, interest, brokerage and litigation, indemnifica-
tion and other extraordinary expenses). As of the date of this prospectus,
GSAM has no current intention to but may in the future discontinue or modify
any of such reductions or limitations at its discretion.
YEAR 2000. Many computer systems were designed using only two digits to sig-
nify the year (for example, "98" for "1998"). On January 1, 2000, if these
computer systems are not corrected, they may incorrectly interpret "00" as the
year "1900" rather than the year "2000," leading to computer shutdowns or er-
rors (commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to proc-
ess securities trades, price securities, provide shareholder account services
and otherwise conduct normal business operations if the computer systems used
by the Adviser or other Fund service providers do not adequately address this
problem in a timely manner. The Adviser has established a dedicated group to
analyze these issues and to implement the systems modifications necessary to
prepare for the Year 2000. Currently, the Adviser does not anticipate that the
transition to the 21st Century will have any material impact on its ability to
continue to service
23
<PAGE>
the Funds at current levels. In addition, the Adviser has sought assurances
from the Funds' other service providers that they are taking the steps neces-
sary so that they do not experience Year 2000 Problems, and the Adviser will
continue to monitor the situation. At this time, however, no assurance can be
given that the actions taken by the Adviser and the Funds' other service prov-
iders will be sufficient to avoid any adverse effect on the Funds due to the
Year 2000 Problem.
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. Goldman Sachs reserves the right to redeem at any
time some or all of the Fund shares acquired for its own account.
TAXES
Each Fund is treated as a separate entity for federal tax purposes. The Mu-
nicipal Money Market Fund intends to elect and each other Fund has elected to
be treated as a regulated investment company 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 taxable year. To qualify as such, each Fund must
satisfy certain requirements relating to the sources of its income, diversifi-
cation of its assets and distribution of its income to shareholders. As a reg-
ulated 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 require-
ments 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. Distributions out of net capital gain (the
excess of net long-term capital gain over net short-term capital loss), if
any, will be taxable as long-term capital gain regardless of how long the
shareholders have held their shares. Such long-term capital gain will consti-
tute a 20% or 28% rate gain, depending upon the Fund's holding period for the
assets the sale of which generated the gain. It is not, however, anticipated
that the Funds will have any significant amounts of such net capital gain.
These tax consequences will apply to distributions of any Fund whether re-
ceived 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 re-
ceived on December 31 of the year in which they are declared. Shareholders
will be informed annually about the amount and character of distributions re-
ceived from the Funds for federal income tax purposes, including any distribu-
tions that may constitute a return of capital or any distributions 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
24
<PAGE>
the federal alternative minimum tax. Exempt-interest dividends will be consid-
ered in computing the corporate federal alternative minimum tax, and the ex-
tent, if any, to which social security or railroad retirement benefits are
taxable. Persons who are "substantial users" of facilities financed by certain
industrial development or private activity bonds should consult their own tax
advisers before purchasing shares of these Funds. Interest incurred to pur-
chase 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. It is ex-
pected that a Fund will be unable to pass such taxes through to its sharehold-
ers, who therefore are not expected to be able to include such taxes in income
or be entitled to claim foreign 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 may be available 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 municipal obligations
issued by or on behalf of the particular state or a political subdivision
thereof, provided in some states that certain thresholds for holdings of such
obligations and/or reporting requirements are satisfied. Shareholders should
consult their own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of each Fund (other than the Government, Treasury Obli-
gations and Premium Money Market Funds) is determined as of the close of
regular trading on the New York Stock Exchange (normally, but not always, 4:00
p.m. New York time) on each Business Day. The net asset value of Government,
Treasury Obligations and Premium Money Market 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 attributed to each class of shares and dividing by the number of shares
of such class.
On any Business Day, as defined herein, when The Bond Market Association
("BMA") recommends that the securities markets close early, each Fund reserves
the right to close at or prior to the BMA recommended closing time, and to
cease granting same Business Day credit for purchase and redemption orders re-
ceived after the Fund's closing time. On days any Fund closes early, purchase
and redemption orders received after the Fund's closing time will be credited
to the next Business Day. In addition, 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
25
<PAGE>
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
total return. Total return is determined by computing the percentage change in
value of $1,000 invested at the maximum public offering price for a specified
period, assuming reinvestment of all dividends and distributions at net asset
value. The total return calculation assumes a complete redemption of the in-
vestment at the end of the relevant period. Each Fund may furnish total return
calculations 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 advertise-
ment). 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.
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. The Funds' performance quotations do not reflect any fees
charged by an institution to its customer accounts in connection with invest-
ments in the Funds.
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.
26
<PAGE>
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.
When issued, shares are fully paid and nonassessable. In the event of liqui-
dation, shareholders of each class are entitled to share pro rata in the net
assets of the applicable Fund available for distribution to the shareholders
of such class. All shares are freely transferable and have no preemptive, sub-
scription or conversion rights. Shareholders are entitled to one vote per
share, provided that, at the option of the Trustees, shareholders will be en-
titled to a number of votes based upon the net asset values represented by
their shares.
As of April 3, 1998, Harris Trust & Savings Bank, 200 W. Monroe St. Fl 12,
Chicago, IL 60606, owned of record 36.70% of the outstanding shares of Trea-
sury Instruments Fund and BankBoston, P.O. Box 1130, Boston, MA 02103, owned
of record 31.95% of the outstanding shares of Premium Money Market Fund.
The Trust does not intend to hold annual meetings of shareholders. However,
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.
27
<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. (See "Additional Information" below for a description of the
limited situations where certain institutions or other intermediaries may be
authorized to accept orders for the 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 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. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer. Purchase orders are effected at the net asset value next deter-
mined after receipt of the purchase order and payment in federal funds.
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 AN EFFECTIVE ORDER IS RECEIVED DIVIDENDS BEGIN
--------------------------------- ---------------
<S> <C>
(1) Taxable and Tax-Advantaged Funds (except
Government, Treasury Obligations and Premium
Money Market Funds)
By:3:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------------
After:3:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------------
(2) Government, Treasury Obligations and
Premium Money Market Funds
By:5:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------------
After:5:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------------
(3) Municipal Money Market Fund
By:1:00 p.m.- N.Y. time Same Business Day
- ---------------------------------------------------------------------------
After:1:00 p.m.- N.Y. time Next Business Day
- ---------------------------------------------------------------------------
(4) Tax-Free Money Market Fund
By:2:00 p.m.- N.Y. time Same Business Day
- ---------------------------------------------------------------------------
After:2:00 p.m.- N.Y. time Next Business Day
- ---------------------------------------------------------------------------
</TABLE>
28
<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, which may affect an investor's
return with respect to an investment in a Fund.
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 with 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.
ADDITIONAL INFORMATION
The Trust may authorize certain institutions (including banks, trust compa-
nies, brokers and investment advisers) that provide recordkeeping, reporting
and processing services to their customers to accept on the Trust's behalf
purchase, redemption and exchange orders placed by or on behalf of such cus-
tomers and, if approved by the Trust, to designate other intermediaries to ac-
cept such orders. In these cases, a Fund will be deemed to have received an
order in proper form by or on behalf of a customer when the order is accepted
by the authorized institution or intermediary on a Business Day. The order
will be priced at a Fund's net asset value per share next determined after
such acceptance and the transmission of the order and purchase payment in im-
mediately available funds to the Trust or its designee. The institution or in-
termediary will be responsible for transmitting accepted orders and payments
to the Trust within the period agreed upon by them. A customer should contact
its institution to learn whether it is authorized to accept orders for the
Trust. Such institutions may receive payments from the Funds or Goldman Sachs
for the services provided by them with respect to the Funds' FST Shares. These
payments may be in addition to other sub-transfer agency payments borne by the
Funds and their classes.
The Adviser, Distributor, and/or their affiliates may pay other compensa-
tion, from time to time, out of their assets and not as an additional charge
to the Funds, to selected institutions (including banks, trust companies, bro-
kers and investment advisers) and other persons in connection with the sale
and/or servicing of FST Shares of the Funds and other investment portfolios of
the Trust (such as additional payments based on new sales, amounts exceeding
pre-established thresholds, or the length of time customers assets have re-
mained in the Trust) and, subject to applicable NASD regulations, contribute
to various non-cash and cash incentive arrangements to promote the sale of FST
Shares, as well as sponsor various educational programs, sales contests and/or
promotions in which participants may receive reimbursement of expenses, enter-
tainment and prizes such as travel
29
<PAGE>
awards, merchandise, cash, investment research and educational information and
related support materials. This additional compensation can vary among insti-
tutions depending upon such factors as the amounts their customers have in-
vested (or may invest) in particular portfolios of the Trust, the particular
program involved, or the amount of reimbursable expenses. For further informa-
tion, see the Statement of Additional Information.
REPORTS TO SHAREHOLDERS
FST Shareholders of each Fund will receive an annual report containing au-
dited financial statements and a semiannual report. To eliminate unnecessary
duplication, only one copy of such reports may be sent to FST Shareholders
with the same mailing address. FST Shareholders who desire a duplicate copy of
such reports to be mailed to their residence should contact Goldman Sachs as
provided below. 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. FST
Shareholders with inquiries 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.
DISTRIBUTIONS
All or substantially all of each Fund's net investment income will be de-
clared daily (normally, but not always, as of 4:00 p.m. New York time for each
Fund other than the Government, Treasury Obligations and Premium Money Market
Funds and normally, but not always, as of 5:00 p.m. New York time for the Gov-
ernment, Treasury Obligations and Premium Money Market Funds) as a dividend
and distributed to FST Shareholders monthly. Distributions will be made in ad-
ditional FST Shares of the same Fund or, at the election of FST Shareholders,
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 rein-
vested. Dividends will be reinvested as of the last calendar day of each
month. Cash distributions normally will be paid on or about the first business
day of each month. Net short-term capital gains, if any, will be distributed
in accordance with the requirements of the Code and may be reflected in the
Fund's daily distributions. Each Fund may distribute at least annually other
realized 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 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 Premium Money Market Funds is based on estimates of net investment income
for each Fund. Actual income may differ from estimates, and differences, if
any, will be included in the calculation of subsequent dividends.
30
<PAGE>
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 with 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 materially 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 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. Signatures must be
guaranteed in accordance with the procedures set forth below, if the proceeds
are to be paid other than as set forth in 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 with this Prospectus. It may be difficult to
implement redemptions by telephone in times of drastic economic or market
changes. (See "Purchase of Shares" for a description of the limited situations
when an institution or other intermediary may be authorized to accept
redemption requests for the Funds.)
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. Exchanges among ac-
counts with different names, addresses and social security or other taxpayer
identification numbers must also be in writing and signed by an authorized
person designated on the Account Information Form. Other procedures may be im-
plemented from time to time. If reasonable procedures are not implemented, the
Trust may be liable for any loss due to unauthorized or fraudulent transac-
tions. In all other cases, neither the Trust nor Goldman Sachs will be respon-
sible for the
31
<PAGE>
authenticity of redemption or exchange instructions received by telephone. A
redemption may also be made with respect to certain Funds by means of the
check redemption privilege described in the Statement of Additional Informa-
tion.
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 by a shareholder. The payment of
redemption proceeds for FST Shares recently purchased by check may 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 PROCEEDS
REDEMPTION REQUEST RECEIVED ORDINARILY DIVIDENDS
- --------------------------- ------------------- ---------
(1) Taxable and Tax-Advantaged Funds (except
Government, Treasury Obligations and Pre-
mium Money Market Funds)
<S> <C> <C>
By: 3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day request is
received
- --------------------------------------------------------------------------------------------
After: 3:00 p.m.--N.Y.
time Wired Next Business Day Earned on Day request is received
- --------------------------------------------------------------------------------------------
(2) Government, Treasury Obligations and Pre-
mium Money Market 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) Municipal Money Market Fund
By: 12:00 noon--N.Y. Not earned on Day request is
time Wired Same Business Day received
- --------------------------------------------------------------------------------------------
After: 12:00 noon--N.Y.
time Wired Next Business Day Earned on Day request is received
- --------------------------------------------------------------------------------------------
(4) Tax-Free Money Market Fund
Not earned on Day request is
By: 1:00 p.m.--N.Y. time Wired Same Business Day received
- --------------------------------------------------------------------------------------------
After: 1:00 p.m.--N.Y.
time Wired Next Business Day Earned on Day request is received
- --------------------------------------------------------------------------------------------
</TABLE>
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 as-
sumes any further responsibility for the performance of intermediaries or the
FST Shareholder's bank in the transfer process. If a problem with such perfor-
mance arises, the FST Shareholder should deal directly with such intermediar-
ies or bank.
32
<PAGE>
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 Trust and Goldman Sachs each reserves the right to waive the mini-
mum account balance. The Trust also reserves the right to redeem shares of a
shareholder account if the balance is less than the minimum described above.
The Trust will give sixty (60) days' prior written notice to such shareholders
whose FST Shares are to be redeemed to allow them to purchase sufficient addi-
tional FST Shares to avoid such redemption.
----------------
33
<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 IRAs, governmental agencies, financial institutions, registered securities
and commodities dealers and others.
If you are a nonresident alien or foreign entity, you must provide a com-
pleted Form W-8 to a Fund in order to avoid backup withholding on certain pay-
ments. Other payments to you may be subject to non-resident alien withholding
of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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............................................... 12
Investment Policies Matrix................................................. 14
Description of Securities and Investment Techniques........................ 16
Investment Limitations..................................................... 21
Management................................................................. 22
Taxes...................................................................... 24
Net Asset Value............................................................ 25
Yield Information.......................................................... 26
Organization and Shares of the Trust....................................... 27
Purchase of Shares......................................................... 28
Reports to Shareholders.................................................... 30
Distributions.............................................................. 30
Exchanges.................................................................. 31
Redemption of Shares....................................................... 31
Appendix................................................................... A-1
Account Information Form
</TABLE>
FSPROINSTMM
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS
MONEY MARKET FUNDS
GOLDMAN SACHS
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
GOLDMAN SACHS FINANCIAL SQUARE FUNDS
FST ADMINISTRATION SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is an open-end, management investment com-
pany (a "mutual fund") which includes the Goldman Sachs Financial Square Funds
(the "Funds"). This Prospectus relates only to the offering of FST Administra-
tion 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 (the "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:
Prime Obligations Fund. Securities of the U.S. Government, its agencies, au-
thorities 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 Fund. Securities of the U.S. Government, its agencies, authori-
ties and instrumentalities, U.S. dollar denominated obligations of U.S. and
foreign banks, U.S. dollar denominated commercial paper and other short-term
obligations of U.S. and foreign companies, foreign governments, states, munic-
ipalities and other entities, and repurchase agreements.
Premium Money Market Fund. 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. In order to ob-
tain a rating from a rating organization, the Fund will observe special in-
vestment restrictions.
Treasury Obligations Fund. Securities issued or guaranteed by the U.S. Trea-
sury and repurchase agreements relating to such securities.
Treasury Instruments Fund. Securities issued or guaranteed by the U.S. Trea-
sury, the interest income from which is generally exempt from state income
taxation.
Government Fund. Securities of the U.S. Government, its agencies, authori-
ties, and instrumentalities, and repurchase agreements relating to such secu-
rities.
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.
Tax-Free Money Market Fund. Securities issued by or on behalf of states,
territories and possessions of the United States and their political subdivi-
sions, agencies, authorities and instrumentalities, and the District of Colum-
bia, the interest from which, if any, is, in the opinion of bond counsel, ex-
cluded from gross income for federal income tax purposes and not an item of
tax preference under the federal alternative minimum tax.
Municipal Money Market Fund. Securities issued by or on behalf of states,
territories and possessions of the United States and their political subdivi-
sions, agencies, authorities and instrumentalities, and the District of Colum-
bia, the interest from which, if any, is, in the opinion of bond counsel, ex-
cluded 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, 1998, 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, 1998.
<PAGE>
SHAREHOLDER AND FUND EXPENSES
FST ADMINISTRATION SHARES
<TABLE>
<CAPTION>
PREMIUM TAX-FREE MUNICIPAL
PRIME MONEY MONEY TREASURY TREASURY MONEY MONEY
OBLIGATIONS MARKET MARKET 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 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)... 0.43% 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>
Prime Obligations Fund..................... $ 4 $14 $24 $54
Money Market Fund.......................... $ 4 $14 $24 $54
Premium Money Market Fund.................. $ 4 $14 N/A N/A
Treasury Obligations Fund.................. $ 4 $14 $24 $54
Treasury Instruments Fund.................. $ 4 $14 $24 $54
Government Fund............................ $ 4 $14 $24 $54
Federal Fund............................... $ 4 $14 $24 $54
Tax-Free Money Market Fund................. $ 4 $14 $24 $54
Municipal Money Market Fund................ $ 4 $14 N/A N/A
</TABLE>
- -------
(1) Based on estimated amounts for the current fiscal year for the Premium
Money Market and Municipal Money Market Funds.
(2) The 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 Adviser has voluntarily agreed to reduce or limit certain other ex-
penses (excluding management fees, fees payable to Service Organizations,
as defined herein, taxes, interest and brokerage and litigation, indemni-
fication and other extraordinary expenses) to the extent such expenses ex-
ceed 0.01% of a Fund's average daily net assets.
2
<PAGE>
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Prime Obligations, Money Market, Treasury Obliga-
tions, Treasury Instruments, Government, Federal and Tax-Free Money Market
Funds for the year ended December 31, 1997, would have been as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Prime Obligations Fund.................................... .025% .48%
Money Market Fund......................................... .025% .48%
Treasury Obligations Fund................................. .025% .48%
Treasury Instruments Fund................................. .085% .54%
Government Fund........................................... .035% .49%
Federal Fund.............................................. .065% .52%
Tax-Free Money Market Fund................................ .035% .49%
</TABLE>
In addition, without the limitations described above, "Other Expenses" and
"Total Operating Expenses" of the Premium Money Market and 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>
Premium Money Market Fund................................. .225% .68%
Municipal Money Market Fund............................... .285% .74%
</TABLE>
As of the date of this Prospectus the Adviser has no intention of modifying
or discontinuing any of the limitations set forth above, but may do so in the
future at its discretion. 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 performance) and are entitled to different services. Information
regarding any other class of the Funds may be obtained from your sales repre-
sentative or from Goldman Sachs by calling the number on the front cover of
this Prospectus.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of FST Administration Shares in connection with their
customers' accounts. See "Administration" in this Prospectus and the Statement
of Additional Information. Such fees, if any, may affect the return such cus-
tomers realize with respect to their investments.
Certain Service Organizations may also receive other compensation in connec-
tion with the sale and distribution of Administration Shares or for services
to their customers' accounts and/or the Funds. For additional information re-
garding such compensation, see "Administration" in this Prospectus and the
Statement of Additional Information.
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--The Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, indepen-
dent public accountants, whose report appears in the annual report to share-
holders of the Funds for the fiscal year ended December 31, 1997 (the "Annual
Report"). This information should be read in conjunction with the financial
statements and related notes incorporated by reference and attached to the
Statement of Additional Information.
Municipal Money Market Fund had no operations during the periods shown. Ac-
cordingly, there are no selected per share data and ratios presented for this
Fund.
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout The Period
Premium 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 TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... $1.00 $0.0235 $-- $0.0235 $(0.0235) $1.00 5.73%(b)
1997-FST Pre-
ferred shares... 1.00 0.0228 -- 0.0228 (0.0228) 1.00 5.62 (b)
1997-FST Admin-
istration
shares.......... 1.00 0.0223 -- 0.0223 (0.0223) 1.00 5.47 (b)
1997-FST Service
shares.......... 1.00 0.0217 -- 0.0217 (0.0217) 1.00 5.20 (b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
RATIO OF NET ASSETS AT RATIO OF NET
RATIO OF NET INVESTMENT END RATIO OF INVESTMENT
EXPENSES TO INCOME TO OF PERIOD EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET (IN AVERAGE NET AVERAGE NET
ASSETS ASSETS 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... 0.08%(b) 5.59%(b) $218,192 0.43%(b) 5.24%(b)
1997-FST Pre-
ferred shares... 0.18 (b) 5.50 (b) 558 0.53 (b) 5.15 (b)
1997-FST Admin-
istration
shares.......... 0.33 (b) 5.33 (b) 1,457 0.68 (b) 4.98 (b)
1997-FST Service
shares.......... 0.58 (b) 5.17 (b) 814 0.93 (b) 4.82 (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) Commencement of operations.
4
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0546 $ -- $0.0546 $(0.0546) $1.00 5.60% 0.18% 5.46%
1997-FST Pre-
ferred shares... 1.00 0.0538 -- 0.0538 (0.0538) 1.00 5.50 0.28 5.38
1997-FST Admin-
istration
shares.......... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.34 0.43 5.22
1997-FST Service
shares.......... 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.08 0.68 4.97
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(c)....... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b) 0.44(b) 2.96(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68 3.01
1992-FST shares. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18 5.72
1992-FST Service
shares(c)....... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b) 0.66(b) 4.10(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $3,867,739 0.23% 5.41%
1997-FST Pre-
ferred shares... 152,767 0.33 5.33
1997-FST Admin-
istration
shares.......... 241,607 0.48 5.17
1997-FST Service
shares.......... 176,133 0.73 4.92
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.......... 115,114 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(c)....... 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 336 0.75 2.94
1992-FST shares. 917,073 0.27 5.63
1992-FST Service
shares(c)....... 118 0.74(b) 4.02(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 share, FST Preferred share, FST Administration share and FST Service
share activity commenced March 8, 1990, May 1, 1996, November 9, 1992 and
January 8, 1992, respectively.
(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.
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 YEARS ENDED DECEMBER 31,
- ----------------
1997-FST
shares.......... $1.00 $0.0550 $ -- $0.0550 $(0.0550) $1.00 5.63% 0.18% 5.50%
1997-FST Pre-
ferred shares... 1.00 0.0544 -- 0.0544 (0.0544) 1.00 5.53 0.28 5.44
1997-FST Admin-
istration
shares.......... 1.00 0.0526 -- 0.0526 (0.0526) 1.00 5.37 0.43 5.26
1997-FST Service
shares.......... 1.00 0.0499 -- 0.0499 (0.0499) 1.00 5.11 0.68 4.99
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(c)....... 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(c)....... 1.00 0.0305 -- 0.0305 (0.0305) 1.00 4.91(b) 0.11(b) 4.88(b)
1994-FST
Administration
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- ----------------
1997-FST
shares.......... $4,346,519 0.23% 5.45%
1997-FST Pre-
ferred shares... 20,258 0.33 5.39
1997-FST Admin-
istration
shares.......... 221,256 0.48 5.21
1997-FST Service
shares.......... 316,304 0.73 4.94
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(c)....... 4,219 0.73(b) 4.85(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(c)....... 862,971 0.25(b) 4.74(b)
1994-FST
Administration
shares(c)....... 66,560 0.50(b) 4.68(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced May 18, 1994, May 1, 1996, 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0536 $0.0001 $0.0537 $(0.0537) $1.00 5.50% 0.18% 5.36%
1997-FST Pre-
ferred shares .. 1.00 0.0532 0.0001 0.0533 (0.0533) 1.00 5.40 0.28 5.32
1997-FST Admin-
istration shares
................. 1.00 0.0512 0.0001 0.0513 (0.0513) 1.00 5.24 0.43 5.12
1997-FST Service
shares ......... 1.00 0.0487 0.0001 0.0488 (0.0488) 1.00 4.98 0.68 4.87
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 PERIOD 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 YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11 0.17 3.01
1994-FST
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(c) ...... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83(b) 0.43(b) 2.83(b)
1993-FST Service
shares.......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17 0.68 2.96
1992-FST shares. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84 0.18 5.49
1992-FST Service
shares(c)....... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47(b) 0.68(b) 3.77(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $2,217,943 0.23% 5.31%
1997-FST Pre-
ferred shares .. 245,355 0.33 5.27
1997-FST Admin-
istration shares
................. 738,865 0.48 5.07
1997-FST Service
shares ......... 312,991 0.73 4.82
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 PERIOD 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 YEARS 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(c) ...... 1 0.51(b) 2.75(b)
1993-FST Service
shares.......... 5,155 0.76 2.88
1992-FST shares. 413,171 0.28 5.39
1992-FST Service
shares(c)....... 3,634 0.78(b) 3.67(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 229,988 0.34(b) 7.61(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced April 25, 1990, May 1, 1996, January 21, 1993 and
October 15, 1991, respectively.
(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.
7
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout The Period
Treasury Instruments Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares (c)...... $1.00 $0.0423 $0.0004 $0.0427 ($0.0427) $1.00 5.25%(b) 0.18%(b) 5.09%(b)
1997-FST Pre-
ferred
shares (c)...... 1.00 0.0296 -- 0.0296 (0.0296) 1.00 5.13(b) 0.28(b) 5.00(b)
1997-FST Admin-
istration
shares (c)...... 1.00 0.0364 0.0003 0.0367 (0.0367) 1.00 4.99(b) 0.43(b) 4.84(b)
1997-FST Service
shares (c)...... 1.00 0.0380 0.0003 0.0383 (0.0383) 1.00 4.71(b) 0.68(b) 4.62(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
ASSETS AT RATIO OF NET
END RATIO OF INVESTMENT
OF PERIOD EXPENSES TO INCOME TO
(IN AVERAGE NET AVERAGE NET
000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares (c)...... $496,419 0.29%(b) 4.98%(b)
1997-FST Pre-
ferred
shares (c)...... 2 0.39(b) 4.89(b)
1997-FST Admin-
istration
shares (c)...... 4,159 0.54(b) 4.73(b)
1997-FST Service
shares (c)...... 20,177 0.79(b) 4.51(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 share, FST Preferred share, FST Administration share, and FST Service
share activity commenced March 3, 1997, May 30, 1997, April 1, 1997, and
March 5, 1997, respectively.
8
<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 RATIO OF NET
VALUE AT NET NET REALIZED GAIN INCOME FROM DISTRIBUTIONS NET ASSET EXPENSES TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT END TOTAL AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST shares...... $1.00 $0.0541 $ -- $0.0541 $(0.0541) $1.00 5.54% 0.18%
1997-FST Preferred
shares............... 1.00 0.0534 -- 0.0534 (0.0534) 1.00 5.43 0.28
1997-FST Administra-
tion shares.......... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28 0.43
1997-FST Service
shares............... 1.00 0.0491 -- 0.0491 (0.0491) 1.00 5.02 0.68
1996-FST shares...... 1.00 0.0525 0.0001 0.0526 (0.0526) 1.00 5.38 0.18
1996-FST Preferred
shares(c)............ 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26(b) 0.28(b)
1996-FST Administra-
tion shares.......... 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12 0.43
1996-FST Service
shares............... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86 0.68
1995-FST shares...... 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00 0.18
1995-FST Administra-
tion shares.......... 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74 0.43
1995-FST Service
shares(c)............ 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40(b) 0.68(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(d)... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36(b) 0.15(b)
1994-FST Administra-
tion shares(d)....... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10(b) 0.40(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993-FST shares(c)... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b) 0.08(b)
1993-FST Administra-
tion shares(c)....... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87(b) 0.35(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET RATIO OF NET
INVESTMENT NET RATIO OF INVESTMENT
INCOME TO ASSETS AT END EXPENSES TO INCOME TO
AVERAGE NET OF PERIOD AVERAGE NET AVERAGE NET
ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST shares...... 5.41% $1,478,539 0.24% 5.35%
1997-FST Preferred
shares............... 5.34 7,147 0.34 5.28
1997-FST Administra-
tion shares.......... 5.15 299,804 0.49 5.09
1997-FST Service
shares............... 4.91 580,200 0.74 4.85
1996-FST shares...... 5.25 858,769 0.24 5.19
1996-FST Preferred
shares(c)............ 5.14(b) 112 0.34(b) 5.08(b)
1996-FST Administra-
tion shares.......... 5.01 145,108 0.49 4.95
1996-FST Service
shares............... 4.74 223,554 0.74 4.68
1995-FST shares...... 5.81 743,884 0.24 5.75
1995-FST Administra-
tion shares.......... 5.54 82,386 0.49 5.48
1995-FST Service
shares(c)............ 5.08(b) 14,508 0.74(b) 5.02(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(d)... 4.64(b) 258,350 0.25(b) 4.54(b)
1994-FST Administra-
tion shares(d)....... 4.67(b) 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993-FST shares(c)... 3.10(b) 44,697 0.59(b) 2.59(b)
1993-FST Administra-
tion shares(c)....... 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 share, FST Preferred share, FST Administration share and FST Service
share activity commenced April 6, 1993, May 1, 1996, September 1, 1993 and
May 16, 1995, respectively.
(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.
9
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout The Period
Federal 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 ON INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares(c)....... $1.00 $0.0454 $-- $0.0454 $(0.0454) $1.00 5.51%(b) 0.18%(b) 5.39%(b)
1997-FST Pre-
ferred
shares(c)....... 1.00 0.0311 -- 0.0311 (0.0311) 1.00 5.43(b) 0.28(b) 5.26(b)
1997-FST Admin-
istration
shares(c)....... 1.00 0.0388 -- 0.0388 (0.0388) 1.00 5.27(b) 0.43(b) 5.15(b)
1997-FST Service
shares(c)....... 1.00 0.0379 -- 0.0379 (0.0379) 1.00 5.00(b) 0.68(b) 4.78(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares(c)....... $1,125,681 0.27%(b) 5.30%(b)
1997-FST Pre-
ferred
shares(c)....... 194,375 0.37(b) 5.17(b)
1997-FST Admin-
istration
shares(c)....... 625,334 0.52(b) 5.06(b)
1997-FST Service
shares(c)....... 228,447 0.77(b) 4.69(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 share, FST Preferred share, FST Administration share, and FST Service
share activity commenced February 28, 1997, May 30, 1997, April 1, 1997
and March 25, 1997, respectively.
10
<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 RATIO OF NET
ASSET NET REALIZED INCOME NET ASSET RATIO OF NET INVESTMENT
VALUE AT INVEST- GAIN ON FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING MENT INVESTMENT INVESTMENT TO END OF TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $ 0.0350 $ -- $ 0.0350 $(0.0350) $1.00 3.54% 0.18% 3.50%
1997-FST Pre-
ferred shares... 1.00 0.0339 -- 0.0339 (0.0339) 1.00 3.43 0.28 3.39
1997-FST Admin-
istration
shares.......... 1.00 0.0327 -- 0.0327 (0.0327) 1.00 3.28 0.43 3.27
1997-FST Service
shares.......... 1.00 0.0301 -- 0.0301 (0.0301) 1.00 3.02 0.68 3.01
1996-FST shares. 1.00 0.0335 -- 0.0335 (0.0335) 1.00 3.39 0.18 3.35
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30(b) 0.28(b) 3.26(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13 0.43 3.10
1996-FST Service
shares.......... 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88 0.68 2.85
1995-FST shares. 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89 0.14 3.81
1995-FST Admin-
istration
shares.......... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63 0.39 3.54
1995-FST Service
shares.......... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38 0.64 3.32
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(c)....... 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41(b) 0.07(b) 3.42(b)
1994-FST Admin-
istration
shares(c)....... 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19(b) 0.32(b) 3.25(b)
1994-FST Service
shares(c)....... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11(b) 0.57(b) 3.32(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF 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,
- --------------------------------
1997-FST
shares.......... $939,407 0.24% 3.44%
1997-FST Pre-
ferred shares... 35,152 0.34 3.33
1997-FST Admin-
istration
shares.......... 103,049 0.49 3.21
1997-FST Service
shares.......... 42,578 0.74 2.95
1996-FST shares. 440,838 0.23 3.30
1996-FST Pre-
ferred
shares(c)....... 28,731 0.33(b) 3.21(b)
1996-FST Admin-
istration
shares.......... 51,661 0.48 3.05
1996-FST Service
shares.......... 19,855 0.73 2.80
1995-FST shares. 448,367 0.24 3.71
1995-FST Admin-
istration
shares.......... 20,939 0.49 3.44
1995-FST Service
shares.......... 19,860 0.74 3.22
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(c)....... 183,570 0.31(b) 3.18(b)
1994-FST Admin-
istration
shares(c)....... 2,042 0.56(b) 3.01(b)
1994-FST Service
shares(c)....... 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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced July 19, 1994, May 1, 1996, August 1, 1994 and
September 23, 1994, respectively.
11
<PAGE>
AN INTRODUCTION TO THE FUNDS
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 Fund is a separate pool of assets which pursues its in-
vestment 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. A state-chartered credit union
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, Premium Money Market,
Treasury 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 Premium Money Market Fund will ob-
serve special investment restrictions. The Treasury Instruments and Federal
Funds pursue their objectives by limiting their investments to certain U.S.
Treasury Obligations and U.S. Government Securities (each as defined here-
in), respectively, the interest from which is generally exempt from state
income taxation. Each investor should consult his or her tax adviser to de-
termine whether distributions from the Treasury Instruments and Federal
Funds (and any other Fund that may hold such obligations) derived from in-
terest on such obligations are exempt from state income taxation in the in-
vestor'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 (as de-
termined pursuant to Rule 2a-7) at the time of purchase.
12
<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 that either (a) are
rated in the highest short-term rating category by at least two NRSROs (as de-
fined below), or if only one NRSRO has assigned a rating, by that NRSRO; or
(b) have been issued or guaranteed by, or otherwise allow a Fund under certain
conditions to demand payment from, an entity with such ratings. U.S. Govern-
ment Securities as defined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Funds may purchase securities that
are not First Tier Securities but either (a) 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; or (b) have been issued or guaranteed by, or
otherwise allow a Fund under certain conditions to demand payment from, an en-
tity with such ratings. 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, securities without
short-term ratings 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 IBCA, Inc., Duff and Phelps, Inc., and Thomson BankWatch,
Inc. For a description of each NRSRO's rating categories, see Appendix A to
the Statement of Additional Information.
13
<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.
only entities
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$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Premium Money ^^ ^^ ^ ^ ^ ^^ ^^ ^
Market ^Over 25% of ^U.S. and ^U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
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 de-
scription of, and certain criteria applicable to, each of these catego-
ries 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.
14
<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)
tax-exempt in other state*** invest up to 20%
Municipal investment in AMT
Instruments companies securities and
(except in may temporarily
extraordinary invest in the
circumstances) 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
tax-exempt in other state*** may temporarily
Municipal investment invest in the
Instruments companies taxable money
(except in market
extraordinary instruments
circumstances) 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 supported
by a guarantee or demand feature may rely on the credit quality of the
guarantee or demand feature in determining the credit quality of the in-
vestment.
15
<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.
16
<PAGE>
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest in "U.S. Bank Obligations" limited to securities issued or guaranteed by
U.S. banks (including certificates of deposit, commercial paper, unsecured
bank promissory notes and bankers' acceptances) which have more than $1 bil-
lion in total assets at the time of purchase. Such obligations may also in-
clude debt obligations issued by U.S. subsidiaries of such banks.
The Money Market and Premium Money Market 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 Premium Money Market 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 in-
creased competition from other types of financial institutions, increased ac-
quisition activity and geographic expansion. Banks may be particularly suscep-
tible 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 condi-
tions of banks. See "Foreign Risks" below.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market and Premium Money Market Funds may invest in U.S. dollar-
denominated 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 Premium Money Market 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.
17
<PAGE>
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest 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 by U.S. corporations, U.S. commercial banks, foreign corpora-
tions (Money Market and Premium Money Market Funds only), foreign commercial
banks (Money Market and Premium Money Market Funds only) or other entities. In
addition, the Funds may invest in other short-term obligations (including
short-term funding agreements) payable in U.S. dollars and issued or guaran-
teed by U.S. corporations, foreign corporations (Money Market and Premium
Money Market Funds only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest in "Asset-Backed and Receivables-Backed Securities" which represent par-
ticipations in, or are secured by and payable from, pools of assets such as
mortgages, motor vehicle installment sale contracts, installment loan con-
tracts, leases of various types of real and personal property, receivables
from revolving credit (credit card) agreements and other categories of receiv-
ables. 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 con-
sistent with its investment objectives and policies, each of the Prime Obliga-
tions, Money Market and Premium Money Market Funds may invest in new types of
mortgage-related securities and in other asset-backed securities that may be
developed in the future.
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. Subject to the conditions for using amortized cost valuation under the
Investment Company Act, a Fund may consider the maturity of a variable or
floating rate obligation to be shorter than its ultimate stated maturity if
the obligation is a U.S. Treasury Obligation or U.S. Government Security, if
the obligation has a remaining maturity of 397 calendar days or less, or if
the obligation has a demand feature that permits the Fund to receive payment
at any time or at specified intervals not exceeding 397 calendar days. The is-
suers or financial intermediaries providing demand features may support their
ability to purchase the obligations by obtaining credit with liquidity sup-
ports. 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. A Fund may purchase variable or
floating rate obligations from the issuers or may purchase certificates of
participation, a type of floating or variable rate obligation, which are in-
terests in a pool of debt obligations held by a bank or other financial insti-
tution.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS. Municipal Instruments are 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. Municipal Instruments include: fixed rate notes and sim-
ilar debt instruments, variable and floating rate demand instruments, tax-ex-
empt commercial paper, municipal bonds and unrated notes, paper, bonds and
other instruments.
18
<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, the interest from which is, in the opinion
of bond counsel, if any, excluded from gross income for federal income tax
purposes. Each Tax-Exempt Fund may temporarily invest in taxable money market
instruments when the Adviser believes that the market conditions dictate a de-
fensive posture. Investments in taxable money market instruments will be lim-
ited to those meeting the quality standards of each Tax-Exempt Fund. The Prime
Obligations, Money Market and Premium Money Market Funds may also invest in
Municipal Instruments 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 ("private activity
bonds") are a specific type of revenue bond backed by the credit and security
of a private user and, therefore, have more potential risk. 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.
INDUSTRIAL DEVELOPMENT BONDS. The Funds (other than the Treasury Obliga-
tions, Treasury Instruments, Government and Federal Funds) may invest in in-
dustrial development bonds (private activity bonds), the interest
19
<PAGE>
from which would be an item of tax preference when distributed as "exempt-in-
terest dividends" to shareholders under the federal alternative minimum tax.
See "Taxes" and "Distributions." The Municipal Money Market Fund may invest up
to 100% of its assets in private activity bonds. The Tax-Free Money Market
Fund does not currently intend to invest in such bonds. If Tax-Free Money Mar-
ket Fund's policy not to invest in private activity bonds should change in the
future, such investments would not exceed 20% of Tax-Free Money Market Fund's
net assets under normal market conditions.
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. The Tax-Exempt Funds, however, do not intend to invest more
than 25% of the value of their respective total assets in industrial develop-
ment bonds or similar obligations where the non-governmental entities supply-
ing the revenues from which such bonds or obligations are to be paid are in
the same industry.
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 or other forms of credit enhancement, issued by domestic
banks or foreign banks (excluding Prime Obligations Fund) which have a branch,
agency or subsidiary in the United States or by other financial institutions.
The credit quality of these banks and financial institutions could, therefore,
cause a loss to a Fund that invests in Municipal Instruments. Letters of
credit and other obligations of foreign banks and financial institutions may
involve risks in addition to those of domestic obligations. See "Foreign
Risks" above. In addition, these Funds may acquire securities in the form of
custodial receipts which evidence ownership of future interest payments, prin-
cipal 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.
REPURCHASE AGREEMENTS
Each Fund (other than the Treasury Instruments Fund) may enter into repur-
chase agreements with primary dealers in U.S. Government Securities and banks
affiliated with such primary dealers. A repurchase 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 difference 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, in-
cluding 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 principal of the security and costs associ-
ated with
20
<PAGE>
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 repurchase agreements entered
into by a Fund will be taxable to its shareholders. In addition, each Fund
(other than the Treasury Instruments Fund), together with other registered in-
vestment companies having management 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
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 will segregate cash or liquid assets in an amount sufficient
to meet the purchase price until three days prior to settlement date. Alterna-
tively, a Fund may enter into offsetting contracts for the forward sale of
other securities that it owns. Securities purchased or sold on a when-issued
or forward commitment basis involve a risk of loss if the value of the secu-
rity 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
Fund would generally purchase securities on a when-issued or forward commit-
ment basis with the intention of acquiring securities for its portfolio, the
Fund may dispose of a when-issued security or forward commitment prior to set-
tlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The amount of each Fund's investments in securities of other investment com-
panies will be subject to the limitations on such investments prescribed by
the Investment Company Act. These limits include a prohibition on any Fund ac-
quiring more than 3% of the voting shares of any other investment company and
a prohibition on investing more than 5% of a Fund's total assets in securities
of any one investment company or more than 10% of its total assets in securi-
ties of all investment companies. Each Fund will indirectly bear its propor-
tionate share of any management fees and other expenses paid by such other in-
vestment companies. Such other investment companies will have investment ob-
jectives, policies and restrictions substantially similar to those of the ac-
quiring Fund and will be subject to substantially the same risks.
INVESTMENT LIMITATIONS
TAXABLE, TAX-ADVANTAGED 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 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 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. The Treasury Obligations Fund's policy of limiting its
investments 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.
21
<PAGE>
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. The
Board of Trustees has adopted guidelines under which the Adviser determines
and monitors the liquidity of restricted securities subject to the oversight
of the Trustees. Restricted securities (including commercial paper issued pur-
suant to Section 4(2) of the 1933 Act) which are determined to be liquid will
not be deemed to be illiquid investments for purposes of the foregoing re-
striction. Since it is not possible to predict with assurance that the market
for restricted securities 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.
BORROWINGS. Each Fund may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Fund may not make additional in-
vestments if borrowings exceed 5% of its total assets. For more information,
see the Statement of Additional Information.
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 23,
1998, Goldman Sachs, together with its affiliates, acted as investment adviser
or distributor for approximately $153 billion in assets.
As of November 28, 1997, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $178 billion and partners' capital of $6.1 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 Fund may enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
22
<PAGE>
Under the Funds' Management Agreement, GSAM continually manages each Fund,
including the purchase, retention and disposition of its securities and other
assets. In addition, GSAM administers each Fund's business affairs and per-
forms 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
OR PERIOD
ENDED
CONTRACTUAL DECEMBER 31,
RATE 1997
----------- ------------
<S> <C> <C>
Financial Square Prime Obligations Fund................ .205% .17%
Financial Square Money Market Fund..................... .205% .17%
Financial Square Premium Money Market Fund............. .205% .07%
Financial Square Treasury Obligations Fund............. .205% .17%
Financial Square Treasury Instruments Fund............. .205% .17%
Financial Square Government Fund....................... .205% .17%
Financial Square Federal Fund.......................... .205% .17%
Financial Square Tax Free Money Market Fund............ .205% .17%
Financial Square Municipal Money Market Fund........... .205% N/A*
</TABLE>
* As of December 31, 1997, the Municipal Money Market Fund had not commenced
operations.
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, 1997, the annual rate expressed is the combined
advisory and administration fees paid (after voluntary fee limitations). The
difference, if any, between the stated and actual fees paid by the Funds re-
flects the fact that the Adviser did not charge the full amount of the fees to
which it would have been entitled.
GSAM has voluntarily agreed not to impose a portion of its management fee
and/or to reduce or otherwise limit the total operating expenses of each Fund
(excluding fees payable under the Funds' service and administration plans for
certain share classes, taxes, interest, brokerage and litigation, indemnifica-
tion and other extraordinary expenses). As of the date of this prospectus,
GSAM has no current intention to but may in the future discontinue or modify
any of such reductions or limitations at its discretion.
YEAR 2000. Many computer systems were designed using only two digits to sig-
nify the year (for example, "98" for "1998"). On January 1, 2000, if these
computer systems are not corrected, they may incorrectly interpret "00" as the
year "1900" rather than the year "2000," leading to computer shutdowns or er-
rors (commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to proc-
ess securities trades, price securities, provide shareholder account services
and otherwise conduct normal business operations if the computer systems used
by the Adviser or other Fund service providers do not adequately address this
problem in a timely manner. The Adviser has established a dedicated group to
analyze these issues and to implement the systems modifications necessary to
prepare for the Year 2000. Currently, the Adviser does not anticipate that the
transition to the 21st Century will have any material impact on its ability to
continue to service
23
<PAGE>
the Funds at current levels. In addition, the Adviser has sought assurances
from the Funds' other service providers that they are taking the steps neces-
sary so that they do not experience Year 2000 Problems, and the Adviser will
continue to monitor the situation. At this time, however, no assurance can be
given that the actions taken by the Adviser and the Funds' other service prov-
iders will be sufficient to avoid any adverse effect on the Funds due to the
Year 2000 Problem.
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. Goldman Sachs reserves the right to redeem at any
time some or all of the Fund shares acquired for its own account.
TAXES
Each Fund is treated as a separate entity for federal tax purposes. The Mu-
nicipal Money Market Fund intends to elect and each other Fund has elected to
be treated as a regulated investment company 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 taxable year. To qualify as such, each Fund must
satisfy certain requirements relating to the sources of its income, diversifi-
cation of its assets and distribution of its income to shareholders. As a reg-
ulated 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 require-
ments 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. Distributions out of net capital gain (the
excess of net long-term capital gain over net short-term capital loss), if
any, will be taxable as long-term capital gain regardless of how long the
shareholders have held their shares. Such long-term capital gain will consti-
tute a 20% or 28% rate gain, depending upon the Fund's holding period for the
assets the sale of which generated the gain. It is not, however, anticipated
that the Funds will have any significant amounts of such net capital gain.
These tax consequences will apply to distributions of any Fund whether re-
ceived 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 re-
ceived on December 31 of the year in which they are declared. Shareholders
will be informed annually about the amount and character of distributions re-
ceived from the Funds for federal income tax purposes, including any distribu-
tions that may constitute a return of capital or any distributions 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
24
<PAGE>
the federal alternative minimum tax. Exempt-interest dividends will be consid-
ered in computing the corporate federal alternative minimum tax, and the ex-
tent, if any, to which social security or railroad retirement benefits are
taxable. Persons who are "substantial users" of facilities financed by certain
industrial development or private activity bonds should consult their own tax
advisers before purchasing shares of these Funds. Interest incurred to pur-
chase 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. It is ex-
pected that a Fund will be unable to pass such taxes through to its sharehold-
ers, who therefore are not expected to be able to include such taxes in income
or be entitled to claim foreign 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 may be available 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 municipal obligations
issued by or on behalf of the particular state or a political subdivision
thereof, provided in some states that certain thresholds for holdings of such
obligations and/or reporting requirements are satisfied. Shareholders should
consult their own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of each Fund (other than the Government, Treasury Obli-
gations and Premium Money Market Funds) is determined as of the close of
regular trading on the New York Stock Exchange (normally, but not always, 4:00
p.m. New York time) on each Business Day. The net asset value of Government,
Treasury Obligations and Premium Money Market 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 attributed to each class of shares and dividing by the number of shares
of such class.
On any Business Day, as defined herein, when The Bond Market Association
("BMA") recommends that the securities markets close early, each Fund reserves
the right to close at or prior to the BMA recommended closing time, and to
cease granting same Business Day credit for purchase and redemption orders re-
ceived after the Fund's closing time. On days any Fund closes early, purchase
and redemption orders received after the Fund's closing time will be credited
to the next Business Day. In addition, 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
25
<PAGE>
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
total return. Total return is determined by computing the percentage change in
value of $1,000 invested at the maximum public offering price for a specified
period, assuming reinvestment of all dividends and distributions at net asset
value. The total return calculation assumes a complete redemption of the in-
vestment at the end of the relevant period. Each Fund may furnish total return
calculations 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 advertise-
ment). 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.
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. The Funds' performance quotations do not reflect any fees
charged by an institution to its customer accounts in connection with invest-
ments in the Funds.
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.
26
<PAGE>
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.
When issued, shares are fully paid and nonassessable. In the event of liqui-
dation, shareholders of each class are entitled to share pro rata in the net
assets of the applicable Fund available for distribution to the shareholders
of such class. All shares are freely transferable and have no preemptive, sub-
scription or conversion rights. Shareholders are entitled to one vote per
share, provided that, at the option of the Trustees, shareholders will be en-
titled to a number of votes based upon the net asset values represented by
their shares.
As of April 3, 1998, Harris Trust & Savings Bank, 200 W. Monroe St. Fl 12,
Chicago, IL 60606, owned of record 36.70% of the outstanding shares of Trea-
sury Instruments Fund and BankBoston, P.O. Box 1130, Boston, MA 02103, owned
of record 31.95% of the outstanding shares of Premium Money Market Fund.
The Trust does not intend to hold annual meetings of shareholders. However,
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.
27
<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.
The Trust may authorize certain Service Organizations to accept on the
Trust's behalf purchase, redemption and exchange orders placed by their cus-
tomers and, if approved by the Trust, to designate other intermediaries to ac-
cept such orders. In these cases, a Fund will be deemed to have received an
order in proper form when the order is accepted by the authorized Service Or-
ganization or intermediary on a Business Day. The order will be priced at a
Fund's net asset value per share next determined after such acceptance and the
transmission of the order and purchase payment in immediately available funds
to the Trust or its designee. The Service Organization or intermediary will be
responsible for transmitting accepted orders and payments to the Trust within
the period agreed upon by them. A customer should contact its Service Organi-
zation to learn whether it is authorized to accept orders for the Trust. Serv-
ice Organizations that are authorized to accept orders for the Trust may re-
ceive payments from the Funds or Goldman Sachs that are in addition to the
payments payable by the Trust under the Administration Plan.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of FST Administration Shares in connection with their
customer accounts. These fees would be in addition to any amounts received by
the Service Organization under a Service Agreement and may affect an invest-
or's return with respect to an investment in a Fund. The Trust, on behalf of
the Funds, accrues payments made pursuant to a Service Agreement daily. All
inquiries of beneficial owners of Administration Shares should be directed to
the owners' Service Organization.
The Adviser, Distributor, and/or their affiliates may pay other compensa-
tion, from time to time, out of their assets and not as an additional charge
to the Funds, to selected Service Organizations and other persons in connec-
tion with the sale and/or servicing of FST Administration Shares of the Funds
and other investment portfolios of the Trust (such as additional payments
based on new sales, amounts exceeding pre-established thresholds, or the
length of time customers' assets have remained in the Trust) and, subject to
applicable NASD regulations, contribute to various non-cash and cash incentive
arrangements to promote the sale of FST Administration Shares, as well as
sponsor various educational programs, sales contests and/or promotions in
which participants may receive reimbursement of expenses, entertainment and
prizes such as travel awards, merchandise, cash, investment research and edu-
cational information and related support materials. This additional compensa-
tion can vary among Service Organizations depending upon such factors as the
amounts their customers have invested (or may invest) in particular portfolios
of the Trust, the particular program involved, or the amount of reimbursable
expenses. For further information, see the Statement of Additional Informa-
tion.
28
<PAGE>
For the fiscal year ended December 31, 1997, the Trust, on behalf of the
Prime Obligations Fund, Money Market Fund, Premium Money Market Fund, Treasury
Obligations Fund, Treasury Instruments Fund, Government Fund, Federal Fund and
Tax-Free Money Market 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. As of December 31, 1997, the Municipal Money Market Fund had
not commenced operations.
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. (See "Administration" for a description of the limited situa-
tions where a Service Organization or other intermediary may be authorized to
accept orders for the 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."
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. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer. Purchase orders are effected at the net asset value next deter-
mined after receipt of the purchase order and payment in federal funds.
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 AN EFFECTIVE ORDER IS RECEIVED DIVIDENDS BEGIN
--------------------------------- ---------------
<C> <S> <C>
(1) Taxable and Tax-Advantaged Funds
(except Government, Treasury Obligations
and Premium Money Market Funds)
By: 3:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
IF AN EFFECTIVE ORDER IS RECEIVED DIVIDENDS BEGIN
--------------------------------- ---------------
<C> <S> <C>
After: 3:00 p.m.--N.Y. time Next Business Day
- ----------------------------------------------------------------------
(2) Government, Treasury Obligations and
Premium Money Market Funds
By: 5:00 p.m.--N.Y. time Same Business Day
- ----------------------------------------------------------------------
After: 5:00 p.m.--N.Y. time Next Business Day
- ----------------------------------------------------------------------
(3) Municipal Money Market Fund
By: 1:00 p.m.--N.Y. time Same Business Day
- ----------------------------------------------------------------------
After: 1:00 p.m.--N.Y. time Next Business Day
- ----------------------------------------------------------------------
(4) Tax-Free Money Market 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.
MINIMUM AND SUBSEQUENT INVESTMENTS 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. The Trust requires no minimum
amount for subsequent investments. Orders for the purchase of additional FST
Administration Shares should be accompanied by information identifying the ac-
count and the Fund in which FST Administration Shares are to be purchased. 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 ef-
fect 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 con-
nection with sweep account programs.
30
<PAGE>
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 (normally, but not always, as of 4:00 p.m. New York time for each
Fund other than the Government, Treasury Obligations and Premium Money Market
Funds and normally, but not always, as of 5:00 p.m. New York time for the Gov-
ernment, Treasury Obligations and Premium Money Market Funds) as a dividend
and distributed to Service Organizations monthly. Distributions 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 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 nor-
mally 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 other realized 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.
The income declared as a dividend for the Treasury Obligations, Government
and Premium Money Market Funds is based on estimates of net investment income
for each 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 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
31
<PAGE>
"Redemption of Shares" to confirm that such instructions are genuine. Ex-
changes are available only in states where the exchange may legally be made.
The exchange privilege may be materially 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 timely transmittal of redemption requests by their
customers to Goldman Sachs. In order to facilitate timely transmittal of re-
demption 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 ap-
propriate 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. (See "Administration" for a descrip-
tion of the limited situations where a Service Organization or other interme-
diary may be authorized to accept redemption requests for the Funds.) Redemp-
tion requests by a Service Organization may be made by telephoning Goldman
Sachs at 800-621-2550 or by a written request addressed to Goldman Sachs, At-
tention: Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago,
Illinois 60606. A Service Organization may request redemptions by telephone
only if the optional telephone redemption privilege has been elected on the
Account Information Form. It may be difficult to implement redemptions by tel-
ephone 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. Exchanges among ac-
counts with different names, addresses and social security or other taxpayer
identification numbers must also be in writing and signed by an authorized
person designated on the Account Information Form. Other procedures may be im-
plemented from time to time. If reasonable procedures are not implemented, the
Trust may be liable for any loss due to unauthorized or fraudulent transac-
tions. In all other cases, neither the Trust nor Goldman Sachs will be respon-
sible for the authenticity of redemption or exchange instructions received by
telephone. A redemption may also be made with respect to certain Funds by
means of the check redemption privilege described in the Statement of Addi-
tional Information.
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 by the recordholder of Administra-
tion Shares. The payment of redemption proceeds for FST Administration Shares
recently purchased by check may 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.
32
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION
REDEMPTION REQUEST PROCEEDS
RECEIVED ORDINARILY DIVIDENDS
------------------ ---------- ---------
<C> <S> <C>
(1) Taxable and Tax-Advantaged Funds (except Government,
Treasury Obligations and Premium Money Market 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) Government, Treasury Obligations and
Premium Money Market 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) Municipal Money Market 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) Tax-Free Money Market 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>
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 ordi-
narily be wired. After a wire has been initiated by Goldman Sachs, neither
Goldman Sachs nor the Trust assumes any further responsibility for the perfor-
mance of intermediaries or the FST Administration Shareholder's Service Organ-
ization 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
Administration Shareholder. The Trust and Goldman Sachs each reserves the
right to waive the minimum account balance. The Trust also reserves the right
to redeem shares of a shareholder account if the balance 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 to be redeemed
to allow them to purchase sufficient additional FST Administration Shares to
avoid such redemption.
----------------
33
<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 IRAs, governmental agencies, financial institutions, registered securities
and commodities dealers and others.
If you are a nonresident alien or foreign entity, you must provide a com-
pleted Form W-8 to a Fund in order to avoid backup withholding on certain pay-
ments. Other payments to you may be subject to non-resident alien withholding
of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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............................................... 12
Investment Policies Matrix................................................. 14
Description of Securities and Investment Techniques........................ 16
Investment Limitations..................................................... 21
Management................................................................. 22
Taxes...................................................................... 24
Net Asset Value............................................................ 25
Yield Information.......................................................... 26
Organization and Shares of the Trust....................................... 27
Administration............................................................. 28
Purchase of Shares......................................................... 29
Reports to Shareholders.................................................... 31
Distributions.............................................................. 31
Exchanges.................................................................. 31
Redemption of Shares....................................................... 32
Appendix................................................................... A-1
</TABLE>
FSPROADMM
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS
MONEY MARKET FUNDS
GOLDMAN SACHS
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
GOLDMAN SACHS FINANCIAL SQUARE FUNDS
FST SERVICE SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is an open-end, management investment com-
pany (a "mutual fund") which includes the Goldman Sachs 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 Asset Management, a separate operating division of Goldman, Sachs & Co.,
serves as each Fund's investment adviser (the "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:
Prime Obligations Fund. Securities of the U.S. Government, its agencies, au-
thorities 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 Fund. Securities of the U.S. Government, its agencies, authori-
ties and instrumentalities, U.S. dollar denominated obligations of U.S. and
foreign banks, U.S. dollar denominated commercial paper and other short-term
obligations of U.S. and foreign companies, foreign governments, states, munic-
ipalities and other entities, and repurchase agreements.
Premium Money Market Fund. 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. In order to ob-
tain a rating from a rating organization, the Fund will observe special in-
vestment restrictions.
Treasury Obligations Fund. Securities issued or guaranteed by the U.S. Trea-
sury and repurchase agreements relating to such securities.
Treasury Instruments Fund. Securities issued or guaranteed by the U.S. Trea-
sury, the interest income from which is generally exempt from state income
taxation.
Government Fund. Securities of the U.S. Government, its agencies, authori-
ties, and instrumentalities, and repurchase agreements relating to such secu-
rities.
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.
Tax-Free Money Market Fund. Securities issued by or on behalf of states,
territories and possessions of the United States and their political subdivi-
sions, agencies, authorities and instrumentalities, and the District of Colum-
bia, the interest from which, if any, is, in the opinion of bond counsel, ex-
cluded from gross income for federal income tax purposes and not an item of
tax preference under the federal alternative minimum tax.
Municipal Money Market Fund. Securities issued by or on behalf of states,
territories and possessions of the United States and their political subdivi-
sions, agencies, authorities and instrumentalities, and the District of Colum-
bia, the interest from which, if any, is, in the opinion of bond counsel, ex-
cluded 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, 1998, 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, 1998.
<PAGE>
SHAREHOLDER AND FUND EXPENSES
FST SERVICE SHARES
<TABLE>
<CAPTION>
PREMIUM TAX-FREE
PRIME MONEY MONEY TREASURY TREASURY MONEY
OBLIGATIONS MARKET MARKET OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL MARKET
FUND FUND FUND FUND FUND FUND FUND FUND
----------- ------ ------- ----------- ----------- ---------- ------- --------
<S> <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
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 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%
Other Expenses
Service Fees................ 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%
---- ---- ---- ---- ---- ---- ---- ----
TOTAL OPERATING EXPENSES (4)... 0.68% 0.68% 0.68% 0.68% 0.68% 0.68% 0.68% 0.68%
==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
MUNICIPAL
MONEY
MARKET
FUND
---------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases................. None
Sales Charge Imposed on
Reinvested Distributions..... None
Deferred Sales Load Imposed
on Redemptions............... None
Exchange Fee.................. None
ANNUAL OPERATING EXPENSES (1)
(as a percentage of average daily net assets)
Management Fees (after limitations) (2) . 0.17%
Other Expenses
Service Fees................ 0.50%
Other Expenses (after
expense limitations) (3)... 0.01%
---------
TOTAL OPERATING EXPENSES (4)... 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>
Prime Obligations Fund..................... $ 7 $22 $38 $85
Money Market Fund.......................... $7 $22 $38 $85
Premium Money Market Fund.................. $ 7 $22 N/A N/A
Treasury Obligations Fund.................. $ 7 $22 $38 $85
Treasury Instruments Fund.................. $ 7 $22 $38 $85
Government Fund............................ $ 7 $22 $38 $85
Federal Fund............................... $ 7 $22 $38 $85
Tax-Free Money Market Fund................. $ 7 $22 $38 $85
Municipal Money Market Fund................ $ 7 $22 N/A N/A
</TABLE>
- -------
(1) Based on estimated amounts for the current fiscal year for the Premium
Money Market and Municipal Money Market Funds.
(2) The 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 Adviser has voluntarily agreed to reduce or limit certain other ex-
penses (excluding management fees, fees payable to Service Organizations,
as defined herein, taxes, interest and brokerage and litigation, indemni-
fication and other extraordinary expenses) to the extent such expenses ex-
ceed 0.01% of a Fund's average daily net assets.
2
<PAGE>
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Prime Obligations, Money Market, Treasury Obliga-
tions, Treasury Instruments, Government, Federal and Tax-Free Money Market
Funds for the year ended December 31, 1997, would have been as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Prime Obligations Fund.................................... .025% .73%
Money Market Fund......................................... .025% .73%
Treasury Obligations Fund................................. .025% .73%
Treasury Instruments Fund................................. .085% .79%
Government Fund........................................... .035% .74%
Federal Fund.............................................. .065% .77%
Tax-Free Money Market Fund................................ .035% .74%
</TABLE>
In addition, without the limitations described above, "Other Expenses" and
"Total Operating Expenses" of the Premium Money Market and 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>
Premium Money Market Fund................................. .225% .93%
Municipal Money Market Fund............................... .285% .99%
</TABLE>
As of the date of this Prospectus the Adviser has no intention of modifying
or discontinuing any of the limitations set forth above, but may do so in the
future at its discretion. 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 ex-
penses (which affect performance) and are entitled to different services. In-
formation 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 fees directly to their customers who are
the beneficial owners of FST Service Shares in connection with their custom-
ers' accounts. See "Additional Services" in this Prospectus and the Statement
of Additional Information. Such fees, if any, may affect the return such cus-
tomers realize with respect to their investments.
Certain Service Organizations may also receive other compensation in connec-
tion with the sale and distribution of Service Shares or for services to their
customers' accounts and/or the Funds. For additional information regarding
such compensation, see "Additional Services" in this Prospectus and the State-
ment of Additional Information.
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--The Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, indepen-
dent public accountants, whose report appears in the annual report to share-
holders of the Funds for the fiscal year ended December 31, 1997 (the "Annual
Report"). This information should be read in conjunction with the financial
statements and related notes incorporated by reference and attached to the
Statement of Additional Information.
Municipal Money Market Fund had no operations during the periods shown. Ac-
cordingly, there are no selected per share data and ratios presented for this
Fund.
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout The Period
Premium 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 TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... $1.00 $0.0235 $-- $0.0235 $(0.0235) $1.00 5.73%(b)
1997-FST Pre-
ferred shares... 1.00 0.0228 -- 0.0228 (0.0228) 1.00 5.62 (b)
1997-FST Admin-
istration
shares.......... 1.00 0.0223 -- 0.0223 (0.0223) 1.00 5.47 (b)
1997-FST Service
shares.......... 1.00 0.0217 -- 0.0217 (0.0217) 1.00 5.20 (b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
RATIO OF NET ASSETS AT RATIO OF NET
RATIO OF NET INVESTMENT END RATIO OF INVESTMENT
EXPENSES TO INCOME TO OF PERIOD EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET (IN AVERAGE NET AVERAGE NET
ASSETS ASSETS 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... 0.08%(b) 5.59%(b) $218,192 0.43%(b) 5.24%(b)
1997-FST Pre-
ferred shares... 0.18 (b) 5.50 (b) 558 0.53 (b) 5.15 (b)
1997-FST Admin-
istration
shares.......... 0.33 (b) 5.33 (b) 1,457 0.68 (b) 4.98 (b)
1997-FST Service
shares.......... 0.58 (b) 5.17 (b) 814 0.93 (b) 4.82 (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) Commencement of operations.
4
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0546 $ -- $0.0546 $(0.0546) $1.00 5.60% 0.18% 5.46%
1997-FST Pre-
ferred shares... 1.00 0.0538 -- 0.0538 (0.0538) 1.00 5.50 0.28 5.38
1997-FST Admin-
istration
shares.......... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.34 0.43 5.22
1997-FST Service
shares.......... 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.08 0.68 4.97
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(c)....... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b) 0.44(b) 2.96(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68 3.01
1992-FST shares. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18 5.72
1992-FST Service
shares(c)....... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b) 0.66(b) 4.10(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $3,867,739 0.23% 5.41%
1997-FST Pre-
ferred shares... 152,767 0.33 5.33
1997-FST Admin-
istration
shares.......... 241,607 0.48 5.17
1997-FST Service
shares.......... 176,133 0.73 4.92
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.......... 115,114 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(c)....... 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 336 0.75 2.94
1992-FST shares. 917,073 0.27 5.63
1992-FST Service
shares(c)....... 118 0.74(b) 4.02(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 share, FST Preferred share, FST Administration share and FST Service
share activity commenced March 8, 1990, May 1, 1996, November 9, 1992 and
January 8, 1992, respectively.
(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.
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 YEARS ENDED DECEMBER 31,
- ----------------
1997-FST
shares.......... $1.00 $0.0550 $ -- $0.0550 $(0.0550) $1.00 5.63% 0.18% 5.50%
1997-FST Pre-
ferred shares... 1.00 0.0544 -- 0.0544 (0.0544) 1.00 5.53 0.28 5.44
1997-FST Admin-
istration
shares.......... 1.00 0.0526 -- 0.0526 (0.0526) 1.00 5.37 0.43 5.26
1997-FST Service
shares.......... 1.00 0.0499 -- 0.0499 (0.0499) 1.00 5.11 0.68 4.99
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(c)....... 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(c)....... 1.00 0.0305 -- 0.0305 (0.0305) 1.00 4.91(b) 0.11(b) 4.88(b)
1994-FST
Administration
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- ----------------
1997-FST
shares.......... $4,346,519 0.23% 5.45%
1997-FST Pre-
ferred shares... 20,258 0.33 5.39
1997-FST Admin-
istration
shares.......... 221,256 0.48 5.21
1997-FST Service
shares.......... 316,304 0.73 4.94
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(c)....... 4,219 0.73(b) 4.85(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(c)....... 862,971 0.25(b) 4.74(b)
1994-FST
Administration
shares(c)....... 66,560 0.50(b) 4.68(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced May 18, 1994, May 1, 1996, 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0536 $0.0001 $0.0537 $(0.0537) $1.00 5.50% 0.18% 5.36%
1997-FST Pre-
ferred shares .. 1.00 0.0532 0.0001 0.0533 (0.0533) 1.00 5.40 0.28 5.32
1997-FST Admin-
istration shares
................. 1.00 0.0512 0.0001 0.0513 (0.0513) 1.00 5.24 0.43 5.12
1997-FST Service
shares ......... 1.00 0.0487 0.0001 0.0488 (0.0488) 1.00 4.98 0.68 4.87
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 PERIOD 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 YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11 0.17 3.01
1994-FST
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(c) ...... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83(b) 0.43(b) 2.83(b)
1993-FST Service
shares.......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17 0.68 2.96
1992-FST shares. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84 0.18 5.49
1992-FST Service
shares(c)....... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47(b) 0.68(b) 3.77(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $2,217,943 0.23% 5.31%
1997-FST Pre-
ferred shares .. 245,355 0.33 5.27
1997-FST Admin-
istration shares
................. 738,865 0.48 5.07
1997-FST Service
shares ......... 312,991 0.73 4.82
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 PERIOD 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 YEARS 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(c) ...... 1 0.51(b) 2.75(b)
1993-FST Service
shares.......... 5,155 0.76 2.88
1992-FST shares. 413,171 0.28 5.39
1992-FST Service
shares(c)....... 3,634 0.78(b) 3.67(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 229,988 0.34(b) 7.61(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced April 25, 1990, May 1, 1996, January 21, 1993 and
October 15, 1991, respectively.
(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.
7
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout The Period
Treasury Instruments Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares (c)...... $1.00 $0.0423 $0.0004 $0.0427 ($0.0427) $1.00 5.25%(b) 0.18%(b) 5.09%(b)
1997-FST Pre-
ferred
shares (c)...... 1.00 0.0296 -- 0.0296 (0.0296) 1.00 5.13(b) 0.28(b) 5.00(b)
1997-FST Admin-
istration
shares (c)...... 1.00 0.0364 0.0003 0.0367 (0.0367) 1.00 4.99(b) 0.43(b) 4.84(b)
1997-FST Service
shares (c)...... 1.00 0.0380 0.0003 0.0383 (0.0383) 1.00 4.71(b) 0.68(b) 4.62(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
ASSETS AT RATIO OF NET
END RATIO OF INVESTMENT
OF PERIOD EXPENSES TO INCOME TO
(IN AVERAGE NET AVERAGE NET
000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares (c)...... $496,419 0.29%(b) 4.98%(b)
1997-FST Pre-
ferred
shares (c)...... 2 0.39(b) 4.89(b)
1997-FST Admin-
istration
shares (c)...... 4,159 0.54(b) 4.73(b)
1997-FST Service
shares (c)...... 20,177 0.79(b) 4.51(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 share, FST Preferred share, FST Administration share, and FST Service
share activity commenced March 3, 1997, May 30, 1997, April 1, 1997, and
March 5, 1997, respectively.
8
<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 RATIO OF NET
VALUE AT NET NET REALIZED GAIN INCOME FROM DISTRIBUTIONS NET ASSET EXPENSES TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT END TOTAL AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST shares...... $1.00 $0.0541 $ -- $0.0541 $(0.0541) $1.00 5.54% 0.18%
1997-FST Preferred
shares............... 1.00 0.0534 -- 0.0534 (0.0534) 1.00 5.43 0.28
1997-FST Administra-
tion shares.......... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28 0.43
1997-FST Service
shares............... 1.00 0.0491 -- 0.0491 (0.0491) 1.00 5.02 0.68
1996-FST shares...... 1.00 0.0525 0.0001 0.0526 (0.0526) 1.00 5.38 0.18
1996-FST Preferred
shares(c)............ 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26(b) 0.28(b)
1996-FST Administra-
tion shares.......... 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12 0.43
1996-FST Service
shares............... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86 0.68
1995-FST shares...... 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00 0.18
1995-FST Administra-
tion shares.......... 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74 0.43
1995-FST Service
shares(c)............ 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40(b) 0.68(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(d)... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36(b) 0.15(b)
1994-FST Administra-
tion shares(d)....... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10(b) 0.40(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993-FST shares(c)... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b) 0.08(b)
1993-FST Administra-
tion shares(c)....... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87(b) 0.35(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET RATIO OF NET
INVESTMENT NET RATIO OF INVESTMENT
INCOME TO ASSETS AT END EXPENSES TO INCOME TO
AVERAGE NET OF PERIOD AVERAGE NET AVERAGE NET
ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST shares...... 5.41% $1,478,539 0.24% 5.35%
1997-FST Preferred
shares............... 5.34 7,147 0.34 5.28
1997-FST Administra-
tion shares.......... 5.15 299,804 0.49 5.09
1997-FST Service
shares............... 4.91 580,200 0.74 4.85
1996-FST shares...... 5.25 858,769 0.24 5.19
1996-FST Preferred
shares(c)............ 5.14(b) 112 0.34(b) 5.08(b)
1996-FST Administra-
tion shares.......... 5.01 145,108 0.49 4.95
1996-FST Service
shares............... 4.74 223,554 0.74 4.68
1995-FST shares...... 5.81 743,884 0.24 5.75
1995-FST Administra-
tion shares.......... 5.54 82,386 0.49 5.48
1995-FST Service
shares(c)............ 5.08(b) 14,508 0.74(b) 5.02(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(d)... 4.64(b) 258,350 0.25(b) 4.54(b)
1994-FST Administra-
tion shares(d)....... 4.67(b) 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993-FST shares(c)... 3.10(b) 44,697 0.59(b) 2.59(b)
1993-FST Administra-
tion shares(c)....... 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 share, FST Preferred share, FST Administration share and FST Service
share activity commenced April 6, 1993, May 1, 1996, September 1, 1993 and
May 16, 1995, respectively.
(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.
9
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout The Period
Federal 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 ON INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares(c)....... $1.00 $0.0454 $-- $0.0454 $(0.0454) $1.00 5.51%(b) 0.18%(b) 5.39%(b)
1997-FST Pre-
ferred
shares(c)....... 1.00 0.0311 -- 0.0311 (0.0311) 1.00 5.43(b) 0.28(b) 5.26(b)
1997-FST Admin-
istration
shares(c)....... 1.00 0.0388 -- 0.0388 (0.0388) 1.00 5.27(b) 0.43(b) 5.15(b)
1997-FST Service
shares(c)....... 1.00 0.0379 -- 0.0379 (0.0379) 1.00 5.00(b) 0.68(b) 4.78(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares(c)....... $1,125,681 0.27%(b) 5.30%(b)
1997-FST Pre-
ferred
shares(c)....... 194,375 0.37(b) 5.17(b)
1997-FST Admin-
istration
shares(c)....... 625,334 0.52(b) 5.06(b)
1997-FST Service
shares(c)....... 228,447 0.77(b) 4.69(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 share, FST Preferred share, FST Administration share, and FST Service
share activity commenced February 28, 1997, May 30, 1997, April 1, 1997
and March 25, 1997, respectively.
10
<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 RATIO OF NET
ASSET NET REALIZED INCOME NET ASSET RATIO OF NET INVESTMENT
VALUE AT INVEST- GAIN ON FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING MENT INVESTMENT INVESTMENT TO END OF TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $ 0.0350 $ -- $ 0.0350 $(0.0350) $1.00 3.54% 0.18% 3.50%
1997-FST Pre-
ferred shares... 1.00 0.0339 -- 0.0339 (0.0339) 1.00 3.43 0.28 3.39
1997-FST Admin-
istration
shares.......... 1.00 0.0327 -- 0.0327 (0.0327) 1.00 3.28 0.43 3.27
1997-FST Service
shares.......... 1.00 0.0301 -- 0.0301 (0.0301) 1.00 3.02 0.68 3.01
1996-FST shares. 1.00 0.0335 -- 0.0335 (0.0335) 1.00 3.39 0.18 3.35
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30(b) 0.28(b) 3.26(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13 0.43 3.10
1996-FST Service
shares.......... 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88 0.68 2.85
1995-FST shares. 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89 0.14 3.81
1995-FST Admin-
istration
shares.......... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63 0.39 3.54
1995-FST Service
shares.......... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38 0.64 3.32
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(c)....... 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41(b) 0.07(b) 3.42(b)
1994-FST Admin-
istration
shares(c)....... 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19(b) 0.32(b) 3.25(b)
1994-FST Service
shares(c)....... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11(b) 0.57(b) 3.32(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF 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,
- --------------------------------
1997-FST
shares.......... $939,407 0.24% 3.44%
1997-FST Pre-
ferred shares... 35,152 0.34 3.33
1997-FST Admin-
istration
shares.......... 103,049 0.49 3.21
1997-FST Service
shares.......... 42,578 0.74 2.95
1996-FST shares. 440,838 0.23 3.30
1996-FST Pre-
ferred
shares(c)....... 28,731 0.33(b) 3.21(b)
1996-FST Admin-
istration
shares.......... 51,661 0.48 3.05
1996-FST Service
shares.......... 19,855 0.73 2.80
1995-FST shares. 448,367 0.24 3.71
1995-FST Admin-
istration
shares.......... 20,939 0.49 3.44
1995-FST Service
shares.......... 19,860 0.74 3.22
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(c)....... 183,570 0.31(b) 3.18(b)
1994-FST Admin-
istration
shares(c)....... 2,042 0.56(b) 3.01(b)
1994-FST Service
shares(c)....... 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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced July 19, 1994, May 1, 1996, August 1, 1994 and
September 23, 1994, respectively.
11
<PAGE>
AN INTRODUCTION TO THE FUNDS
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 Fund is a separate pool of assets which pursues its in-
vestment 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. A state-chartered credit union
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, Premium Money Market,
Treasury 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 Premium Money Market Fund will ob-
serve special investment restrictions. The Treasury Instruments and Federal
Funds pursue their objectives by limiting their investments to certain U.S.
Treasury Obligations and U.S. Government Securities (each as defined here-
in), respectively, the interest from which is generally exempt from state
income taxation. Each investor should consult his or her tax adviser to de-
termine whether distributions from the Treasury Instruments and Federal
Funds (and any other Fund that may hold such obligations) derived from in-
terest on such obligations are exempt from state income taxation in the in-
vestor'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 (as de-
termined pursuant to Rule 2a-7) at the time of purchase.
12
<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 that either (a) are
rated in the highest short-term rating category by at least two NRSROs (as de-
fined below), or if only one NRSRO has assigned a rating, by that NRSRO; or
(b) have been issued or guaranteed by, or otherwise allow a Fund under certain
conditions to demand payment from, an entity with such ratings. U.S. Govern-
ment Securities as defined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Funds may purchase securities that
are not First Tier Securities but either (a) 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; or (b) have been issued or guaranteed by, or
otherwise allow a Fund under certain conditions to demand payment from, an en-
tity with such ratings. 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, securities without
short-term ratings 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 IBCA, Inc., Duff and Phelps, Inc., and Thomson BankWatch,
Inc. For a description of each NRSRO's rating categories, see Appendix A to
the Statement of Additional Information.
13
<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.
only entities
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$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Premium Money ^^ ^^ ^ ^ ^ ^^ ^^ ^
Market ^Over 25% of ^U.S. and ^U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
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 de-
scription of, and certain criteria applicable to, each of these catego-
ries 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.
14
<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)
tax-exempt in other state*** invest up to 20%
Municipal investment in AMT
Instruments companies securities and
(except in may temporarily
extraordinary invest in the
circumstances) 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
tax-exempt in other state*** may temporarily
Municipal investment invest in the
Instruments companies taxable money
(except in market
extraordinary instruments
circumstances) 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 supported
by a guarantee or demand feature may rely on the credit quality of the
guarantee or demand feature in determining the credit quality of the in-
vestment.
15
<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.
16
<PAGE>
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest in "U.S. Bank Obligations" limited to securities issued or guaranteed by
U.S. banks (including certificates of deposit, commercial paper, unsecured
bank promissory notes and bankers' acceptances) which have more than $1 bil-
lion in total assets at the time of purchase. Such obligations may also in-
clude debt obligations issued by U.S. subsidiaries of such banks.
The Money Market and Premium Money Market 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 Premium Money Market 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 in-
creased competition from other types of financial institutions, increased ac-
quisition activity and geographic expansion. Banks may be particularly suscep-
tible 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 condi-
tions of banks. See "Foreign Risks" below.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market and Premium Money Market Funds may invest in U.S. dollar-
denominated 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 Premium Money Market 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.
17
<PAGE>
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest 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 by U.S. corporations, U.S. commercial banks, foreign corpora-
tions (Money Market and Premium Money Market Funds only), foreign commercial
banks (Money Market and Premium Money Market Funds only) or other entities. In
addition, the Funds may invest in other short-term obligations (including
short-term funding agreements) payable in U.S. dollars and issued or guaran-
teed by U.S. corporations, foreign corporations (Money Market and Premium
Money Market Funds only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest in "Asset-Backed and Receivables-Backed Securities" which represent par-
ticipations in, or are secured by and payable from, pools of assets such as
mortgages, motor vehicle installment sale contracts, installment loan con-
tracts, leases of various types of real and personal property, receivables
from revolving credit (credit card) agreements and other categories of receiv-
ables. 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 con-
sistent with its investment objectives and policies, each of the Prime Obliga-
tions, Money Market and Premium Money Market Funds may invest in new types of
mortgage-related securities and in other asset-backed securities that may be
developed in the future.
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. Subject to the conditions for using amortized cost valuation under the
Investment Company Act, a Fund may consider the maturity of a variable or
floating rate obligation to be shorter than its ultimate stated maturity if
the obligation is a U.S. Treasury Obligation or U.S. Government Security, if
the obligation has a remaining maturity of 397 calendar days or less, or if
the obligation has a demand feature that permits the Fund to receive payment
at any time or at specified intervals not exceeding 397 calendar days. The is-
suers or financial intermediaries providing demand features may support their
ability to purchase the obligations by obtaining credit with liquidity sup-
ports. 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. A Fund may purchase variable or
floating rate obligations from the issuers or may purchase certificates of
participation, a type of floating or variable rate obligation, which are in-
terests in a pool of debt obligations held by a bank or other financial insti-
tution.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS. Municipal Instruments are 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. Municipal Instruments include: fixed rate notes and sim-
ilar debt instruments, variable and floating rate demand instruments, tax-ex-
empt commercial paper, municipal bonds and unrated notes, paper, bonds and
other instruments.
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<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, the interest from which is, in the opinion
of bond counsel, if any, excluded from gross income for federal income tax
purposes. Each Tax-Exempt Fund may temporarily invest in taxable money market
instruments when the Adviser believes that the market conditions dictate a de-
fensive posture. Investments in taxable money market instruments will be lim-
ited to those meeting the quality standards of each Tax-Exempt Fund. The Prime
Obligations, Money Market and Premium Money Market Funds may also invest in
Municipal Instruments 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 ("private activity
bonds") are a specific type of revenue bond backed by the credit and security
of a private user and, therefore, have more potential risk. 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.
INDUSTRIAL DEVELOPMENT BONDS. The Funds (other than the Treasury Obliga-
tions, Treasury Instruments, Government and Federal Funds) may invest in in-
dustrial development bonds (private activity bonds), the interest
19
<PAGE>
from which would be an item of tax preference when distributed as "exempt-in-
terest dividends" to shareholders under the federal alternative minimum tax.
See "Taxes" and "Distributions." The Municipal Money Market Fund may invest up
to 100% of its assets in private activity bonds. The Tax-Free Money Market
Fund does not currently intend to invest in such bonds. If Tax-Free Money Mar-
ket Fund's policy not to invest in private activity bonds should change in the
future, such investments would not exceed 20% of Tax-Free Money Market Fund's
net assets under normal market conditions.
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. The Tax-Exempt Funds, however, do not intend to invest more
than 25% of the value of their respective total assets in industrial develop-
ment bonds or similar obligations where the non-governmental entities supply-
ing the revenues from which such bonds or obligations are to be paid are in
the same industry.
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 or other forms of credit enhancement, issued by domestic
banks or foreign banks (excluding Prime Obligations Fund) which have a branch,
agency or subsidiary in the United States or by other financial institutions.
The credit quality of these banks and financial institutions could, therefore,
cause a loss to a Fund that invests in Municipal Instruments. Letters of
credit and other obligations of foreign banks and financial institutions may
involve risks in addition to those of domestic obligations. See "Foreign
Risks" above. In addition, these Funds may acquire securities in the form of
custodial receipts which evidence ownership of future interest payments, prin-
cipal 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.
REPURCHASE AGREEMENTS
Each Fund (other than the Treasury Instruments Fund) may enter into repur-
chase agreements with primary dealers in U.S. Government Securities and banks
affiliated with such primary dealers. A repurchase 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 difference 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, in-
cluding 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 principal of the security and costs associ-
ated with
20
<PAGE>
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 repurchase agreements entered
into by a Fund will be taxable to its shareholders. In addition, each Fund
(other than the Treasury Instruments Fund), together with other registered in-
vestment companies having management 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
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 will segregate cash or liquid assets in an amount sufficient
to meet the purchase price until three days prior to settlement date. Alterna-
tively, a Fund may enter into offsetting contracts for the forward sale of
other securities that it owns. Securities purchased or sold on a when-issued
or forward commitment basis involve a risk of loss if the value of the secu-
rity 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
Fund would generally purchase securities on a when-issued or forward commit-
ment basis with the intention of acquiring securities for its portfolio, the
Fund may dispose of a when-issued security or forward commitment prior to set-
tlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The amount of each Fund's investments in securities of other investment com-
panies will be subject to the limitations on such investments prescribed by
the Investment Company Act. These limits include a prohibition on any Fund ac-
quiring more than 3% of the voting shares of any other investment company and
a prohibition on investing more than 5% of a Fund's total assets in securities
of any one investment company or more than 10% of its total assets in securi-
ties of all investment companies. Each Fund will indirectly bear its propor-
tionate share of any management fees and other expenses paid by such other in-
vestment companies. Such other investment companies will have investment ob-
jectives, policies and restrictions substantially similar to those of the ac-
quiring Fund and will be subject to substantially the same risks.
INVESTMENT LIMITATIONS
TAXABLE, TAX-ADVANTAGED 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 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 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. The Treasury Obligations Fund's policy of limiting its
investments 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.
21
<PAGE>
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. The
Board of Trustees has adopted guidelines under which the Adviser determines
and monitors the liquidity of restricted securities subject to the oversight
of the Trustees. Restricted securities (including commercial paper issued pur-
suant to Section 4(2) of the 1933 Act) which are determined to be liquid will
not be deemed to be illiquid investments for purposes of the foregoing re-
striction. Since it is not possible to predict with assurance that the market
for restricted securities 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.
BORROWINGS. Each Fund may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Fund may not make additional in-
vestments if borrowings exceed 5% of its total assets. For more information,
see the Statement of Additional Information.
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 23,
1998, Goldman Sachs, together with its affiliates, acted as investment adviser
or distributor for approximately $153 billion in assets.
As of November 28, 1997, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $178 billion and partners' capital of $6.1 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 Fund may enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
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<PAGE>
Under the Funds' Management Agreement, GSAM continually manages each Fund,
including the purchase, retention and disposition of its securities and other
assets. In addition, GSAM administers each Fund's business affairs and per-
forms 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
OR PERIOD
ENDED
CONTRACTUAL DECEMBER 31,
RATE 1997
----------- ------------
<S> <C> <C>
Financial Square Prime Obligations Fund................ .205% .17%
Financial Square Money Market Fund..................... .205% .17%
Financial Square Premium Money Market Fund............. .205% .07%
Financial Square Treasury Obligations Fund............. .205% .17%
Financial Square Treasury Instruments Fund............. .205% .17%
Financial Square Government Fund....................... .205% .17%
Financial Square Federal Fund.......................... .205% .17%
Financial Square Tax Free Money Market Fund............ .205% .17%
Financial Square Municipal Money Market Fund........... .205% N/A*
</TABLE>
* As of December 31, 1997, the Municipal Money Market Fund had not commenced
operations.
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, 1997, the annual rate expressed is the combined
advisory and administration fees paid (after voluntary fee limitations). The
difference, if any, between the stated and actual fees paid by the Funds re-
flects the fact that the Adviser did not charge the full amount of the fees to
which it would have been entitled.
GSAM has voluntarily agreed not to impose a portion of its management fee
and/or to reduce or otherwise limit the total operating expenses of each Fund
(excluding fees payable under the Funds' service and administration plans for
certain share classes, taxes, interest, brokerage and litigation, indemnifica-
tion and other extraordinary expenses). As of the date of this prospectus,
GSAM has no current intention to but may in the future discontinue or modify
any of such reductions or limitations at its discretion.
YEAR 2000. Many computer systems were designed using only two digits to sig-
nify the year (for example, "98" for "1998"). On January 1, 2000, if these
computer systems are not corrected, they may incorrectly interpret "00" as the
year "1900" rather than the year "2000," leading to computer shutdowns or er-
rors (commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to proc-
ess securities trades, price securities, provide shareholder account services
and otherwise conduct normal business operations if the computer systems used
by the Adviser or other Fund service providers do not adequately address this
problem in a timely manner. The Adviser has established a dedicated group to
analyze these issues and to implement the systems modifications necessary to
prepare for the Year 2000. Currently, the Adviser does not anticipate that the
transition to the 21st Century will have any material impact on its ability to
continue to service
23
<PAGE>
the Funds at current levels. In addition, the Adviser has sought assurances
from the Funds' other service providers that they are taking the steps neces-
sary so that they do not experience Year 2000 Problems, and the Adviser will
continue to monitor the situation. At this time, however, no assurance can be
given that the actions taken by the Adviser and the Funds' other service prov-
iders will be sufficient to avoid any adverse effect on the Funds due to the
Year 2000 Problem.
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. Goldman Sachs reserves the right to redeem at any
time some or all of the Fund shares acquired for its own account.
TAXES
Each Fund is treated as a separate entity for federal tax purposes. The Mu-
nicipal Money Market Fund intends to elect and each other Fund has elected to
be treated as a regulated investment company 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 taxable year. To qualify as such, each Fund must
satisfy certain requirements relating to the sources of its income, diversifi-
cation of its assets and distribution of its income to shareholders. As a reg-
ulated 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 require-
ments 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. Distributions out of net capital gain (the
excess of net long-term capital gain over net short-term capital loss), if
any, will be taxable as long-term capital gain regardless of how long the
shareholders have held their shares. Such long-term capital gain will consti-
tute a 20% or 28% rate gain, depending upon the Fund's holding period for the
assets the sale of which generated the gain. It is not, however, anticipated
that the Funds will have any significant amounts of such net capital gain.
These tax consequences will apply to distributions of any Fund whether re-
ceived 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 re-
ceived on December 31 of the year in which they are declared. Shareholders
will be informed annually about the amount and character of distributions re-
ceived from the Funds for federal income tax purposes, including any distribu-
tions that may constitute a return of capital or any distributions 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
24
<PAGE>
the federal alternative minimum tax. Exempt-interest dividends will be consid-
ered in computing the corporate federal alternative minimum tax, and the ex-
tent, if any, to which social security or railroad retirement benefits are
taxable. Persons who are "substantial users" of facilities financed by certain
industrial development or private activity bonds should consult their own tax
advisers before purchasing shares of these Funds. Interest incurred to pur-
chase 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. It is ex-
pected that a Fund will be unable to pass such taxes through to its sharehold-
ers, who therefore are not expected to be able to include such taxes in income
or be entitled to claim foreign 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 may be available 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 municipal obligations
issued by or on behalf of the particular state or a political subdivision
thereof, provided in some states that certain thresholds for holdings of such
obligations and/or reporting requirements are satisfied. Shareholders should
consult their own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of each Fund (other than the Government, Treasury Obli-
gations and Premium Money Market Funds) is determined as of the close of
regular trading on the New York Stock Exchange (normally, but not always, 4:00
p.m. New York time) on each Business Day. The net asset value of Government,
Treasury Obligations and Premium Money Market 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 attributed to each class of shares and dividing by the number of shares
of such class.
On any Business Day, as defined herein, when The Bond Market Association
("BMA") recommends that the securities markets close early, each Fund reserves
the right to close at or prior to the BMA recommended closing time, and to
cease granting same Business Day credit for purchase and redemption orders re-
ceived after the Fund's closing time. On days any Fund closes early, purchase
and redemption orders received after the Fund's closing time will be credited
to the next Business Day. In addition, 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
25
<PAGE>
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
total return. Total return is determined by computing the percentage change in
value of $1,000 invested at the maximum public offering price for a specified
period, assuming reinvestment of all dividends and distributions at net asset
value. The total return calculation assumes a complete redemption of the in-
vestment at the end of the relevant period. Each Fund may furnish total return
calculations 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 advertise-
ment). 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.
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. The Funds' performance quotations do not reflect any fees
charged by an institution to its customer accounts in connection with invest-
ments in the Funds.
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.
26
<PAGE>
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.
When issued, shares are fully paid and nonassessable. In the event of liqui-
dation, shareholders of each class are entitled to share pro rata in the net
assets of the applicable Fund available for distribution to the shareholders
of such class. All shares are freely transferable and have no preemptive, sub-
scription or conversion rights. Shareholders are entitled to one vote per
share, provided that, at the option of the Trustees, shareholders will be en-
titled to a number of votes based upon the net asset values represented by
their shares.
As of April 3, 1998, Harris Trust & Savings Bank, 200 W. Monroe St. Fl 12,
Chicago, IL 60606, owned of record 36.70% of the outstanding shares of Trea-
sury Instruments Fund and BankBoston, P.O. Box 1130, Boston, MA 02103, owned
of record 31.95% of the outstanding shares of Premium Money Market Fund.
The Trust does not intend to hold annual meetings of shareholders. However,
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.
27
<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 may not exceed
..25% of such average daily net assets. The services provided by a Service Or-
ganization 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.
The Trust may authorize certain Service Organizations to accept on the
Trust's behalf purchase, redemption and exchange orders placed by their cus-
tomers and, if approved by the Trust, to designate other intermediaries to ac-
cept such orders. In these cases, a Fund will be deemed to have received an
order in proper form when the order is accepted by the authorized Service Or-
ganization or intermediary on a Business Day. The order will be priced at a
Fund's net asset value per share next determined after such acceptance and the
transmission of the order and purchase payment in immediately available funds
to the Trust or its designee. The Service Organization or intermediary will be
responsible for transmitting accepted orders and payments to the Trust within
the period agreed upon by them. A customer should contact its Service Organi-
zation to learn whether it is authorized to accept orders for the Trust. Serv-
ice Organizations that are authorized to accept orders for the Trust may re-
ceive payments from the Funds or Goldman Sachs that are in addition to the
payments payable by the Trust under the Service Plan.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of FST Service 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. The Trust, on behalf of the Funds,
accrues payments made pursuant to a Service Agreement daily. All inquiries of
beneficial owners of Service Shares should be directed to the owners' Service
Organization.
The Adviser, Distributor, and/or their affiliates may pay other compensa-
tion, from time to time, out of their assets and not as an additional charge
to the Funds, to selected Service Organizations and other persons in connec-
tion with the sale and/or servicing of FST Service Shares of the Funds and
other investment portfolios of the Trust (such as additional payments based on
new sales, amounts exceeding pre-established thresholds, or the length of time
customers assets have remained in the Trust) and, subject to applicable NASD
regulations, contribute to various non-cash and cash incentive arrangements to
promote the sale of FST Service Shares, as well as sponsor various educational
programs, sales contests and/or promotions in which participants may receive
reimbursement of expenses, entertainment and prizes such as travel awards,
merchandise, cash, investment research and educational information and related
support materials. This additional compensation can vary among Service Organi-
zations depending upon such factors as the amounts their customers have in-
vested (or may invest) in particular portfolios of the Trust, the particular
program involved, or the amount of reimbursable expenses. For further informa-
tion, see the Statement of Additional Information.
28
<PAGE>
For the fiscal year ended December 31, 1997, the Trust, on behalf of Prime
Obligations Fund, Money Market Fund, Premium Money Market Fund, Treasury Obli-
gations Fund, Treasury Instruments Fund, Government Fund, Federal Fund and
Tax-Free Money Market Fund paid Service Organizations fees at the annual rate
of .50% of each Fund's average daily net assets attributable to FST Service
Shares. As of December 31, 1997, the Municipal Money Market Fund had not com-
menced operations.
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. (See "Additional Services" for a description of the limited
situations where a Service Organization or other intermediary may be autho-
rized to accept orders for the Funds). Purchase orders may be made by tele-
phoning 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 ("North-
ern"), 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 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 re-
ceipt and that checks will be converted to federal funds within two Business
Days after receipt. FST Service Shares purchased by check may not be redeemed
until the check has cleared, as described under "Redemption of Shares."
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. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer. Purchase orders are effected at the net asset value next deter-
mined after receipt of the purchase order and payment in federal funds.
29
<PAGE>
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 AN EFFECTIVE ORDER IS RECEIVED DIVIDENDS BEGIN
--------------------------------- ---------------
<S> <C>
(1) Taxable and Tax-Advantaged Funds (except Government,
Treasury Obligations and Premium Money Market Funds)
By: 3:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 3:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
(2) Government, Treasury Obligations and
Premium Money Market Funds
By: 5:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 5:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
(3) Municipal Money Market Fund
By: 1:00 p.m.--N.Y. time Same Business Day
- ---------------------------------------------------------------------
After: 1:00 p.m.--N.Y. time Next Business Day
- ---------------------------------------------------------------------
(4) Tax-Free Money Market 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.
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.
30
<PAGE>
MINIMUM AND SUBSEQUENT INVESTMENTS 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. The Trust requires no minimum
amount for subsequent investments. Orders for the purchase of additional FST
Service Shares should be accompanied by information identifying the account
and the Fund in which FST Service Shares are to be purchased. A Service Organ-
ization 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 accounts, and may impose a charge for any special services ren-
dered to its customers. Customers should contact their Service Organizations
for further information concerning such requirements and charges. A Service
Organization may purchase FST Service Shares in connection with sweep account
programs.
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 (normally, but not always, as of 4:00 p.m. New York time for each
Fund other than the Government, Treasury Obligations and Premium Money Market
Funds and normally, but not always, as of 5:00 p.m. New York time for the Gov-
ernment, Treasury Obligations and Premium Money Market Funds) as a dividend
and distributed to Service Organizations monthly. Distributions 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 dividends and distri-
butions 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 nor-
mally 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 other realized 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.
The income declared as a dividend for the Treasury Obligations, Government
and Premium Money Market Funds is based on estimates of net investment income
for each 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
31
<PAGE>
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 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 materially 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 timely transmittal of redemption requests by their custom-
ers to Goldman Sachs. In order to facilitate timely transmittal of redemption
requests, Service Organizations have established procedures by which redemp-
tion requests must be made and times by which redemption requests must be re-
ceived by them. Additional documentation may be required when deemed appropri-
ate by a Service Organization.
A Service Organization 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. (See "Additional Services" for a de-
scription of the limited situations where a Service Organization or other in-
termediary may be authorized to accept redemption requests for the Funds.) Re-
demption requests by a Service Organization may be made by telephoning Goldman
Sachs at 800-621-2550 or by a written request addressed to Goldman Sachs, At-
tention: Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago,
Illinois 60606. A Service Organization may request redemptions by telephone
only if the optional telephone redemption privilege has been elected on the
Account Information Form. It may be difficult to implement redemptions by tel-
ephone 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. Exchanges among ac-
counts with different names, addresses and social security or other taxpayer
identification numbers must also be in writing and signed by an authorized
person designated on the Account Information Form. Other procedures may be im-
plemented from time to time. If reasonable procedures are not implemented, the
Trust may be liable for any loss due to unauthorized or
32
<PAGE>
fraudulent transactions. In all other cases, neither the Trust nor Goldman
Sachs will be responsible for the authenticity of redemption or exchange in-
structions received by telephone. A redemption may also be made with respect
to certain Funds by means of the check redemption privilege described in the
Statement of Additional Information.
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 by the recordholder of Service
Shares. The payment of redemption proceeds for FST Service Shares recently
purchased by check may 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 PROCEEDS
REDEMPTION REQUEST RECEIVED ORDINARILY DIVIDENDS
--------------------------- ------------------- ---------
<S> <C> <C>
(1) Taxable and Tax-Advantaged Funds (except Govern-
ment, Treasury Obligations and Premium Money Market
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) Government, Treasury Obligations and
Premium Money Market 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) Municipal Money Market 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) Tax-Free Money Market 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>
33
<PAGE>
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 ordi-
narily be wired. After a wire has been initiated by Goldman Sachs, neither
Goldman Sachs nor the Trust assumes any further responsibility for the perfor-
mance 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 an FST Serv-
ice Shareholder. The Trust and Goldman Sachs each reserves the right to waive
the minimum account balance. The Trust also reserves the right to redeem
shares of a shareholder account if the balance is less than the minimum de-
scribed above. The Trust will give sixty (60) days' prior written notice to
such shareholders whose FST Service Shares are to be redeemed to allow them to
purchase sufficient additional FST Service Shares to avoid such redemption.
----------------
34
<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 IRAs, governmental agencies, financial institutions, registered securities
and commodities dealers and others.
If you are a nonresident alien or foreign entity, you must provide a com-
pleted Form W-8 to a Fund in order to avoid backup withholding on certain pay-
ments. Other payments to you may be subject to non-resident alien withholding
of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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............................................... 12
Investment Policies Matrix................................................. 14
Description of Securities and Investment Techniques........................ 16
Investment Limitations..................................................... 21
Management................................................................. 22
Taxes...................................................................... 24
Net Asset Value............................................................ 25
Yield Information.......................................................... 26
Organization and Shares of the Trust....................................... 27
Additional Services........................................................ 28
Purchase of Shares......................................................... 29
Reports to Shareholders.................................................... 31
Distributions.............................................................. 31
Exchanges.................................................................. 32
Redemption of Shares....................................................... 32
Appendix................................................................... A-1
</TABLE>
FSPROSVCMM
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS
MONEY MARKET FUNDS
GOLDMAN SACHS
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
GOLDMAN SACHS FINANCIAL SQUARE FUNDS
FST PREFERRED SHARES
4900 Sears Tower
Chicago, Illinois 60606
Goldman Sachs Trust (the "Trust") is an open-end, management investment com-
pany (a "mutual fund") which includes the Goldman Sachs 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 (the "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:
Prime Obligations Fund. Securities of the U.S. Government, its agencies, au-
thorities 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 Fund. Securities of the U.S. Government, its agencies, authori-
ties and instrumentalities, U.S. dollar denominated obligations of U.S. and
foreign banks, U.S. dollar denominated commercial paper and other short-term
obligations of U.S. and foreign companies, foreign governments, states, munic-
ipalities and other entities, and repurchase agreements.
Premium Money Market Fund. 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. In order to ob-
tain a rating from a rating organization, the Fund will observe special in-
vestment restrictions.
Treasury Obligations Fund. Securities issued or guaranteed by the U.S. Trea-
sury and repurchase agreements relating to such securities.
Treasury Instruments Fund. Securities issued or guaranteed by the U.S. Trea-
sury, the interest income from which is generally exempt from state income
taxation.
Government Fund. Securities of the U.S. Government, its agencies, authori-
ties, and instrumentalities, and repurchase agreements relating to such secu-
rities.
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.
Tax-Free Money Market Fund. Securities issued by or on behalf of states,
territories and possessions of the United States and their political subdivi-
sions, agencies, authorities and instrumentalities, and the District of Colum-
bia, the interest from which, if any, is, in the opinion of bond counsel, ex-
cluded from gross income for federal income tax purposes and not an item of
tax preference under the federal alternative minimum tax.
Municipal Money Market Fund. Securities issued by or on behalf of states,
territories and possessions of the United States and their political subdivi-
sions, agencies, authorities and instrumentalities, and the District of Colum-
bia, the interest from which, if any, is, in the opinion of bond counsel, ex-
cluded 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, 1998 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, 1998.
<PAGE>
SHAREHOLDER AND FUND EXPENSES
FST PREFERRED SHARES
<TABLE>
<CAPTION>
PREMIUM TAX-FREE MUNICIPAL
PRIME MONEY MONEY TREASURY TREASURY MONEY MONEY
OBLIGATIONS MARKET MARKET 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 EX-
PENSES
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 Administration
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,
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 Fund..................... $ 3 $9 $16 $36
Money Market Fund.......................... $ 3 $ 9 $16 $36
Premium Money Market Fund.................. $ 3 $ 9 N/A N/A
Treasury Obligations Fund.................. $ 3 $ 9 $16 $36
Treasury Instruments Fund.................. $ 3 $ 9 $16 $36
Government Fund............................ $ 3 $ 9 $16 $36
Federal Fund............................... $ 3 $ 9 $16 $36
Tax-Free Money Market Fund................. $ 3 $ 9 $16 $36
Municipal Money Market Fund................ $ 3 $ 9 N/A N/A
</TABLE>
- -------
(1) Based on estimated amounts for the current fiscal year for the Premium
Money Market and Municipal Money Market Funds.
(2) The 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 Adviser has voluntarily agreed to reduce or limit certain other ex-
penses (excluding management fees, fees payable to Service Organizations,
as defined herein, taxes, interest and brokerage and litigation, indemni-
fication and other extraordinary expenses) to the extent such expenses ex-
ceed 0.01% of a Fund's average daily net assets.
2
<PAGE>
(4) Without the limitations described above, "Other Expenses" and "Total Oper-
ating Expenses" of the Prime Obligations, Money Market, Treasury Obliga-
tions, Treasury Instruments, Government, Federal and Tax-Free Money Market
Funds for the year ended December 31, 1997, would have been as follows:
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING
EXPENSES EXPENSES
-------- ---------
<S> <C> <C>
Prime Obligations Fund.................................... .025% .33%
Money Market Fund......................................... .025% .33%
Treasury Obligations Fund................................. .025% .33%
Treasury Instruments Fund................................. .085% .39%
Government Fund........................................... .035% .34%
Federal Fund.............................................. .065% .37%
Tax-Free Money Market Fund................................ .035% .34%
</TABLE>
In addition, without the limitations described above, "Other Expenses" and
"Total Operating Expenses" of the Premium Money Market and 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>
Premium Money Market Fund................................. .225% .53%
Municipal Money Market Fund............................... .285% .59%
</TABLE>
As of the date of this Prospectus the Adviser has no intention of modifying
or discontinuing any of the limitations set forth above, but may do so in the
future at its discretion. 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 performance) and are entitled to different services. Information
regarding any other class of the Funds may be obtained from your sales repre-
sentative or from Goldman Sachs by calling the number on the front cover of
this Prospectus.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of FST Preferred Shares in connection with their custom-
ers' accounts. See "Administration" in this Prospectus and the Statement of
Additional Information. Such fees, if any, may affect the return such custom-
ers realize with respect to their investments.
Certain Service Organizations may also receive other compensation in connec-
tion with the sale and distribution of Preferred Shares or for services to
their customers' accounts and/or the Funds. For additional information regard-
ing such compensation, see "Administration" in this Prospectus and the State-
ment of Additional Information.
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--The Adviser."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, indepen-
dent public accountants, whose report appears in the annual report to share-
holders of the Funds for the fiscal year ended December 31, 1997 (the "Annual
Report"). This information should be read in conjunction with the financial
statements and related notes incorporated by reference and attached to the
Statement of Additional Information.
Municipal Money Market Fund had no operations during the periods shown. Ac-
cordingly, there are no selected per share data and ratios presented for this
Fund.
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding Throughout The Period
Premium 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 TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... $1.00 $0.0235 $-- $0.0235 $(0.0235) $1.00 5.73%(b)
1997-FST Pre-
ferred shares... 1.00 0.0228 -- 0.0228 (0.0228) 1.00 5.62 (b)
1997-FST Admin-
istration
shares.......... 1.00 0.0223 -- 0.0223 (0.0223) 1.00 5.47 (b)
1997-FST Service
shares.......... 1.00 0.0217 -- 0.0217 (0.0217) 1.00 5.20 (b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
RATIO OF NET ASSETS AT RATIO OF NET
RATIO OF NET INVESTMENT END RATIO OF INVESTMENT
EXPENSES TO INCOME TO OF PERIOD EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET (IN AVERAGE NET AVERAGE NET
ASSETS ASSETS 000'S) ASSETS ASSETS
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... 0.08%(b) 5.59%(b) $218,192 0.43%(b) 5.24%(b)
1997-FST Pre-
ferred shares... 0.18 (b) 5.50 (b) 558 0.53 (b) 5.15 (b)
1997-FST Admin-
istration
shares.......... 0.33 (b) 5.33 (b) 1,457 0.68 (b) 4.98 (b)
1997-FST Service
shares.......... 0.58 (b) 5.17 (b) 814 0.93 (b) 4.82 (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) Commencement of operations.
4
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0546 $ -- $0.0546 $(0.0546) $1.00 5.60% 0.18% 5.46%
1997-FST Pre-
ferred shares... 1.00 0.0538 -- 0.0538 (0.0538) 1.00 5.50 0.28 5.38
1997-FST Admin-
istration
shares.......... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.34 0.43 5.22
1997-FST Service
shares.......... 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.08 0.68 4.97
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(c)....... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b) 0.44(b) 2.96(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23 0.68 3.01
1992-FST shares. 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99 0.18 5.72
1992-FST Service
shares(c)....... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b) 0.66(b) 4.10(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $3,867,739 0.23% 5.41%
1997-FST Pre-
ferred shares... 152,767 0.33 5.33
1997-FST Admin-
istration
shares.......... 241,607 0.48 5.17
1997-FST Service
shares.......... 176,133 0.73 4.92
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.......... 115,114 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(c)....... 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 336 0.75 2.94
1992-FST shares. 917,073 0.27 5.63
1992-FST Service
shares(c)....... 118 0.74(b) 4.02(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 share, FST Preferred share, FST Administration share and FST Service
share activity commenced March 8, 1990, May 1, 1996, November 9, 1992 and
January 8, 1992, respectively.
(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.
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 YEARS ENDED DECEMBER 31,
- ----------------
1997-FST
shares.......... $1.00 $0.0550 $ -- $0.0550 $(0.0550) $1.00 5.63% 0.18% 5.50%
1997-FST Pre-
ferred shares... 1.00 0.0544 -- 0.0544 (0.0544) 1.00 5.53 0.28 5.44
1997-FST Admin-
istration
shares.......... 1.00 0.0526 -- 0.0526 (0.0526) 1.00 5.37 0.43 5.26
1997-FST Service
shares.......... 1.00 0.0499 -- 0.0499 (0.0499) 1.00 5.11 0.68 4.99
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(c)....... 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(c)....... 1.00 0.0305 -- 0.0305 (0.0305) 1.00 4.91(b) 0.11(b) 4.88(b)
1994-FST
Administration
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- ----------------
1997-FST
shares.......... $4,346,519 0.23% 5.45%
1997-FST Pre-
ferred shares... 20,258 0.33 5.39
1997-FST Admin-
istration
shares.......... 221,256 0.48 5.21
1997-FST Service
shares.......... 316,304 0.73 4.94
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(c)....... 4,219 0.73(b) 4.85(b)
FOR THE PERIOD ENDED
DECEMBER 31,
- --------------------
1994-FST
shares(c)....... 862,971 0.25(b) 4.74(b)
1994-FST
Administration
shares(c)....... 66,560 0.50(b) 4.68(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced May 18, 1994, May 1, 1996, 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0536 $0.0001 $0.0537 $(0.0537) $1.00 5.50% 0.18% 5.36%
1997-FST Pre-
ferred shares .. 1.00 0.0532 0.0001 0.0533 (0.0533) 1.00 5.40 0.28 5.32
1997-FST Admin-
istration shares
................. 1.00 0.0512 0.0001 0.0513 (0.0513) 1.00 5.24 0.43 5.12
1997-FST Service
shares ......... 1.00 0.0487 0.0001 0.0488 (0.0488) 1.00 4.98 0.68 4.87
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 PERIOD 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 YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST shares. 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11 0.17 3.01
1994-FST
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(c) ...... 1.00 0.0009 -- 0.0009 (0.0009) 1.00 2.83(b) 0.43(b) 2.83(b)
1993-FST Service
shares.......... 1.00 0.0296 0.0016 0.0312 (0.0309) 1.00 3.17 0.68 2.96
1992-FST shares. 1.00 0.0549 0.0015 0.0564 (0.0561) 1.00 5.84 0.18 5.49
1992-FST Service
shares(c)....... 1.00 0.0113 0.0006 0.0119 (0.0116) 1.00 4.47(b) 0.68(b) 3.77(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 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 YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $2,217,943 0.23% 5.31%
1997-FST Pre-
ferred shares .. 245,355 0.33 5.27
1997-FST Admin-
istration shares
................. 738,865 0.48 5.07
1997-FST Service
shares ......... 312,991 0.73 4.82
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 PERIOD 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 YEARS 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(c) ...... 1 0.51(b) 2.75(b)
1993-FST Service
shares.......... 5,155 0.76 2.88
1992-FST shares. 413,171 0.28 5.39
1992-FST Service
shares(c)....... 3,634 0.78(b) 3.67(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1991-FST
shares(c)....... 229,988 0.34(b) 7.61(b)
</TABLE>
- ----
(a) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all distributions and a complete redemption of the invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced April 25, 1990, May 1, 1996, January 21, 1993 and
October 15, 1991, respectively.
(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.
7
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout The Period
Treasury Instruments Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------
RATIO OF NET
NET ASSET NET REALIZED TOTAL NET ASSET RATIO OF NET INVESTMENT
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares (c)...... $1.00 $0.0423 $0.0004 $0.0427 ($0.0427) $1.00 5.25%(b) 0.18%(b) 5.09%(b)
1997-FST Pre-
ferred
shares (c)...... 1.00 0.0296 -- 0.0296 (0.0296) 1.00 5.13(b) 0.28(b) 5.00(b)
1997-FST Admin-
istration
shares (c)...... 1.00 0.0364 0.0003 0.0367 (0.0367) 1.00 4.99(b) 0.43(b) 4.84(b)
1997-FST Service
shares (c)...... 1.00 0.0380 0.0003 0.0383 (0.0383) 1.00 4.71(b) 0.68(b) 4.62(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
ASSETS AT RATIO OF NET
END RATIO OF INVESTMENT
OF PERIOD EXPENSES TO INCOME TO
(IN AVERAGE NET AVERAGE NET
000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares (c)...... $496,419 0.29%(b) 4.98%(b)
1997-FST Pre-
ferred
shares (c)...... 2 0.39(b) 4.89(b)
1997-FST Admin-
istration
shares (c)...... 4,159 0.54(b) 4.73(b)
1997-FST Service
shares (c)...... 20,177 0.79(b) 4.51(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 share, FST Preferred share, FST Administration share, and FST Service
share activity commenced March 3, 1997, May 30, 1997, April 1, 1997, and
March 5, 1997, respectively.
8
<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 RATIO OF NET
VALUE AT NET NET REALIZED GAIN INCOME FROM DISTRIBUTIONS NET ASSET EXPENSES TO
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO VALUE AT END TOTAL AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST shares...... $1.00 $0.0541 $ -- $0.0541 $(0.0541) $1.00 5.54% 0.18%
1997-FST Preferred
shares............... 1.00 0.0534 -- 0.0534 (0.0534) 1.00 5.43 0.28
1997-FST Administra-
tion shares.......... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28 0.43
1997-FST Service
shares............... 1.00 0.0491 -- 0.0491 (0.0491) 1.00 5.02 0.68
1996-FST shares...... 1.00 0.0525 0.0001 0.0526 (0.0526) 1.00 5.38 0.18
1996-FST Preferred
shares(c)............ 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26(b) 0.28(b)
1996-FST Administra-
tion shares.......... 1.00 0.0501 0.0001 0.0502 (0.0502) 1.00 5.12 0.43
1996-FST Service
shares............... 1.00 0.0474 0.0001 0.0475 (0.0475) 1.00 4.86 0.68
1995-FST shares...... 1.00 0.0581 0.0001 0.0582 (0.0582) 1.00 6.00 0.18
1995-FST Administra-
tion shares.......... 1.00 0.0554 0.0001 0.0555 (0.0555) 1.00 5.74 0.43
1995-FST Service
shares(c)............ 1.00 0.0320 -- 0.0320 (0.0320) 1.00 5.40(b) 0.68(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(d)... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36(b) 0.15(b)
1994-FST Administra-
tion shares(d)....... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10(b) 0.40(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993-FST shares(c)... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b) 0.08(b)
1993-FST Administra-
tion shares(c)....... 1.00 0.0120 0.0001 0.0121 (0.0121) 1.00 2.87(b) 0.35(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
RATIO OF NET RATIO OF NET
INVESTMENT NET RATIO OF INVESTMENT
INCOME TO ASSETS AT END EXPENSES TO INCOME TO
AVERAGE NET OF PERIOD AVERAGE NET AVERAGE NET
ASSETS (IN 000'S) ASSETS ASSETS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST shares...... 5.41% $1,478,539 0.24% 5.35%
1997-FST Preferred
shares............... 5.34 7,147 0.34 5.28
1997-FST Administra-
tion shares.......... 5.15 299,804 0.49 5.09
1997-FST Service
shares............... 4.91 580,200 0.74 4.85
1996-FST shares...... 5.25 858,769 0.24 5.19
1996-FST Preferred
shares(c)............ 5.14(b) 112 0.34(b) 5.08(b)
1996-FST Administra-
tion shares.......... 5.01 145,108 0.49 4.95
1996-FST Service
shares............... 4.74 223,554 0.74 4.68
1995-FST shares...... 5.81 743,884 0.24 5.75
1995-FST Administra-
tion shares.......... 5.54 82,386 0.49 5.48
1995-FST Service
shares(c)............ 5.08(b) 14,508 0.74(b) 5.02(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST shares(d)... 4.64(b) 258,350 0.25(b) 4.54(b)
1994-FST Administra-
tion shares(d)....... 4.67(b) 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1993-FST shares(c)... 3.10(b) 44,697 0.59(b) 2.59(b)
1993-FST Administra-
tion shares(c)....... 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 share, FST Preferred share, FST Administration share and FST Service
share activity commenced April 6, 1993, May 1, 1996, September 1, 1993 and
May 16, 1995, respectively.
(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.
9
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout The Period
Federal 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 ON INCOME FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO END TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A) ASSETS ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares(c)....... $1.00 $0.0454 $-- $0.0454 $(0.0454) $1.00 5.51%(b) 0.18%(b) 5.39%(b)
1997-FST Pre-
ferred
shares(c)....... 1.00 0.0311 -- 0.0311 (0.0311) 1.00 5.43(b) 0.28(b) 5.26(b)
1997-FST Admin-
istration
shares(c)....... 1.00 0.0388 -- 0.0388 (0.0388) 1.00 5.27(b) 0.43(b) 5.15(b)
1997-FST Service
shares(c)....... 1.00 0.0379 -- 0.0379 (0.0379) 1.00 5.00(b) 0.68(b) 4.78(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET RATIO OF NET
ASSETS AT RATIO OF INVESTMENT
END EXPENSES TO INCOME TO
OF PERIOD AVERAGE NET AVERAGE NET
(IN 000'S) ASSETS ASSETS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1997-FST
shares(c)....... $1,125,681 0.27%(b) 5.30%(b)
1997-FST Pre-
ferred
shares(c)....... 194,375 0.37(b) 5.17(b)
1997-FST Admin-
istration
shares(c)....... 625,334 0.52(b) 5.06(b)
1997-FST Service
shares(c)....... 228,447 0.77(b) 4.69(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 share, FST Preferred share, FST Administration share, and FST Service
share activity commenced February 28, 1997, May 30, 1997, April 1, 1997
and March 25, 1997, respectively.
10
<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 RATIO OF NET
ASSET NET REALIZED INCOME NET ASSET RATIO OF NET INVESTMENT
VALUE AT INVEST- GAIN ON FROM DISTRIBUTIONS VALUE AT EXPENSES TO INCOME TO
BEGINNING MENT INVESTMENT INVESTMENT TO END OF TOTAL AVERAGE NET AVERAGE NET
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS PERIOD RETURN (A) ASSETS ASSETS
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $ 0.0350 $ -- $ 0.0350 $(0.0350) $1.00 3.54% 0.18% 3.50%
1997-FST Pre-
ferred shares... 1.00 0.0339 -- 0.0339 (0.0339) 1.00 3.43 0.28 3.39
1997-FST Admin-
istration
shares.......... 1.00 0.0327 -- 0.0327 (0.0327) 1.00 3.28 0.43 3.27
1997-FST Service
shares.......... 1.00 0.0301 -- 0.0301 (0.0301) 1.00 3.02 0.68 3.01
1996-FST shares. 1.00 0.0335 -- 0.0335 (0.0335) 1.00 3.39 0.18 3.35
1996-FST Pre-
ferred
shares(c)....... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30(b) 0.28(b) 3.26(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.13 0.43 3.10
1996-FST Service
shares.......... 1.00 0.0285 -- 0.0285 (0.0285) 1.00 2.88 0.68 2.85
1995-FST shares. 1.00 0.0381 -- 0.0381 (0.0381) 1.00 3.89 0.14 3.81
1995-FST Admin-
istration
shares.......... 1.00 0.0354 -- 0.0354 (0.0354) 1.00 3.63 0.39 3.54
1995-FST Service
shares.......... 1.00 0.0332 -- 0.0332 (0.0332) 1.00 3.38 0.64 3.32
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(c)....... 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41(b) 0.07(b) 3.42(b)
1994-FST Admin-
istration
shares(c)....... 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19(b) 0.32(b) 3.25(b)
1994-FST Service
shares(c)....... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11(b) 0.57(b) 3.32(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET RATIO OF NET
ASSETS AT RATIO OF 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,
- --------------------------------
1997-FST
shares.......... $939,407 0.24% 3.44%
1997-FST Pre-
ferred shares... 35,152 0.34 3.33
1997-FST Admin-
istration
shares.......... 103,049 0.49 3.21
1997-FST Service
shares.......... 42,578 0.74 2.95
1996-FST shares. 440,838 0.23 3.30
1996-FST Pre-
ferred
shares(c)....... 28,731 0.33(b) 3.21(b)
1996-FST Admin-
istration
shares.......... 51,661 0.48 3.05
1996-FST Service
shares.......... 19,855 0.73 2.80
1995-FST shares. 448,367 0.24 3.71
1995-FST Admin-
istration
shares.......... 20,939 0.49 3.44
1995-FST Service
shares.......... 19,860 0.74 3.22
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares(c)....... 183,570 0.31(b) 3.18(b)
1994-FST Admin-
istration
shares(c)....... 2,042 0.56(b) 3.01(b)
1994-FST Service
shares(c)....... 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 invest-
ment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Preferred share, FST Administration share and FST Service
share activity commenced July 19, 1994, May 1, 1996, August 1, 1994 and
September 23, 1994, respectively.
11
<PAGE>
AN INTRODUCTION TO THE FUNDS
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 Fund is a separate pool of assets which pursues its in-
vestment 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. A state-chartered credit union
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, Premium Money Market,
Treasury 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 Premium Money Market Fund will ob-
serve special investment restrictions. The Treasury Instruments and Federal
Funds pursue their objectives by limiting their investments to certain U.S.
Treasury Obligations and U.S. Government Securities (each as defined here-
in), respectively, the interest from which is generally exempt from state
income taxation. Each investor should consult his or her tax adviser to de-
termine whether distributions from the Treasury Instruments and Federal
Funds (and any other Fund that may hold such obligations) derived from in-
terest on such obligations are exempt from state income taxation in the in-
vestor'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 (as de-
termined pursuant to Rule 2a-7) at the time of purchase.
12
<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 that either (a) are
rated in the highest short-term rating category by at least two NRSROs (as de-
fined below), or if only one NRSRO has assigned a rating, by that NRSRO; or
(b) have been issued or guaranteed by, or otherwise allow a Fund under certain
conditions to demand payment from, an entity with such ratings. U.S. Govern-
ment Securities as defined herein are considered First Tier Securities.
SECOND TIER SECURITIES: The Tax-Exempt Funds may purchase securities that
are not First Tier Securities but either (a) 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; or (b) have been issued or guaranteed by, or
otherwise allow a Fund under certain conditions to demand payment from, an en-
tity with such ratings. 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, securities without
short-term ratings 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 IBCA, Inc., Duff and Phelps, Inc., and Thomson BankWatch,
Inc. For a description of each NRSRO's rating categories, see Appendix A to
the Statement of Additional Information.
13
<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.
only entities
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$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
Premium Money ^^ ^^ ^ ^ ^ ^^ ^^ ^
Market ^Over 25% of ^U.S. and ^U.S. and
total assets foreign foreign
must be (US$) (US$)
invested in commercial entities
US and paper
Foreign (US$)
Banks
- ------------------------------------------------------------------------------------------------------------------------
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 de-
scription of, and certain criteria applicable to, each of these catego-
ries 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.
14
<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)
tax-exempt in other state*** invest up to 20%
Municipal investment in AMT
Instruments companies securities and
(except in may temporarily
extraordinary invest in the
circumstances) 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
tax-exempt in other state*** may temporarily
Municipal investment invest in the
Instruments companies taxable money
(except in market
extraordinary instruments
circumstances) 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 supported
by a guarantee or demand feature may rely on the credit quality of the
guarantee or demand feature in determining the credit quality of the in-
vestment.
15
<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.
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<PAGE>
U.S. AND FOREIGN BANK OBLIGATIONS
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest in "U.S. Bank Obligations" limited to securities issued or guaranteed by
U.S. banks (including certificates of deposit, commercial paper, unsecured
bank promissory notes and bankers' acceptances) which have more than $1 bil-
lion in total assets at the time of purchase. Such obligations may also in-
clude debt obligations issued by U.S. subsidiaries of such banks.
The Money Market and Premium Money Market 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 Premium Money Market 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 in-
creased competition from other types of financial institutions, increased ac-
quisition activity and geographic expansion. Banks may be particularly suscep-
tible 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 condi-
tions of banks. See "Foreign Risks" below.
FOREIGN GOVERNMENT OBLIGATIONS
The Money Market and Premium Money Market Funds may invest in U.S. dollar-
denominated 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 Premium Money Market 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.
17
<PAGE>
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest 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 by U.S. corporations, U.S. commercial banks, foreign corpora-
tions (Money Market and Premium Money Market Funds only), foreign commercial
banks (Money Market and Premium Money Market Funds only) or other entities. In
addition, the Funds may invest in other short-term obligations (including
short-term funding agreements) payable in U.S. dollars and issued or guaran-
teed by U.S. corporations, foreign corporations (Money Market and Premium
Money Market Funds only) or other entities.
ASSET-BACKED AND RECEIVABLES-BACKED SECURITIES
The Prime Obligations, Money Market and Premium Money Market Funds may in-
vest in "Asset-Backed and Receivables-Backed Securities" which represent par-
ticipations in, or are secured by and payable from, pools of assets such as
mortgages, motor vehicle installment sale contracts, installment loan con-
tracts, leases of various types of real and personal property, receivables
from revolving credit (credit card) agreements and other categories of receiv-
ables. 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 con-
sistent with its investment objectives and policies, each of the Prime Obliga-
tions, Money Market and Premium Money Market Funds may invest in new types of
mortgage-related securities and in other asset-backed securities that may be
developed in the future.
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. Subject to the conditions for using amortized cost valuation under the
Investment Company Act, a Fund may consider the maturity of a variable or
floating rate obligation to be shorter than its ultimate stated maturity if
the obligation is a U.S. Treasury Obligation or U.S. Government Security, if
the obligation has a remaining maturity of 397 calendar days or less, or if
the obligation has a demand feature that permits the Fund to receive payment
at any time or at specified intervals not exceeding 397 calendar days. The is-
suers or financial intermediaries providing demand features may support their
ability to purchase the obligations by obtaining credit with liquidity sup-
ports. 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. A Fund may purchase variable or
floating rate obligations from the issuers or may purchase certificates of
participation, a type of floating or variable rate obligation, which are in-
terests in a pool of debt obligations held by a bank or other financial insti-
tution.
MUNICIPAL OBLIGATIONS
MUNICIPAL INSTRUMENTS. Municipal Instruments are 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. Municipal Instruments include: fixed rate notes and sim-
ilar debt instruments, variable and floating rate demand instruments, tax-ex-
empt commercial paper, municipal bonds and unrated notes, paper, bonds and
other instruments.
18
<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, the interest from which is, in the opinion
of bond counsel, if any, excluded from gross income for federal income tax
purposes. Each Tax-Exempt Fund may temporarily invest in taxable money market
instruments when the Adviser believes that the market conditions dictate a de-
fensive posture. Investments in taxable money market instruments will be lim-
ited to those meeting the quality standards of each Tax-Exempt Fund. The Prime
Obligations, Money Market and Premium Money Market Funds may also invest in
Municipal Instruments 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 ("private activity
bonds") are a specific type of revenue bond backed by the credit and security
of a private user and, therefore, have more potential risk. 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.
INDUSTRIAL DEVELOPMENT BONDS. The Funds (other than the Treasury Obliga-
tions, Treasury Instruments, Government and Federal Funds) may invest in in-
dustrial development bonds (private activity bonds), the interest
19
<PAGE>
from which would be an item of tax preference when distributed as "exempt-in-
terest dividends" to shareholders under the federal alternative minimum tax.
See "Taxes" and "Distributions." The Municipal Money Market Fund may invest up
to 100% of its assets in private activity bonds. The Tax-Free Money Market
Fund does not currently intend to invest in such bonds. If Tax-Free Money Mar-
ket Fund's policy not to invest in private activity bonds should change in the
future, such investments would not exceed 20% of Tax-Free Money Market Fund's
net assets under normal market conditions.
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. The Tax-Exempt Funds, however, do not intend to invest more
than 25% of the value of their respective total assets in industrial develop-
ment bonds or similar obligations where the non-governmental entities supply-
ing the revenues from which such bonds or obligations are to be paid are in
the same industry.
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 or other forms of credit enhancement, issued by domestic
banks or foreign banks (excluding Prime Obligations Fund) which have a branch,
agency or subsidiary in the United States or by other financial institutions.
The credit quality of these banks and financial institutions could, therefore,
cause a loss to a Fund that invests in Municipal Instruments. Letters of
credit and other obligations of foreign banks and financial institutions may
involve risks in addition to those of domestic obligations. See "Foreign
Risks" above. In addition, these Funds may acquire securities in the form of
custodial receipts which evidence ownership of future interest payments, prin-
cipal 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.
REPURCHASE AGREEMENTS
Each Fund (other than the Treasury Instruments Fund) may enter into repur-
chase agreements with primary dealers in U.S. Government Securities and banks
affiliated with such primary dealers. A repurchase 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 difference 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, in-
cluding 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 principal of the security and costs associ-
ated with
20
<PAGE>
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 repurchase agreements entered
into by a Fund will be taxable to its shareholders. In addition, each Fund
(other than the Treasury Instruments Fund), together with other registered in-
vestment companies having management 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
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 will segregate cash or liquid assets in an amount sufficient
to meet the purchase price until three days prior to settlement date. Alterna-
tively, a Fund may enter into offsetting contracts for the forward sale of
other securities that it owns. Securities purchased or sold on a when-issued
or forward commitment basis involve a risk of loss if the value of the secu-
rity 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
Fund would generally purchase securities on a when-issued or forward commit-
ment basis with the intention of acquiring securities for its portfolio, the
Fund may dispose of a when-issued security or forward commitment prior to set-
tlement if the Adviser deems it appropriate to do so.
OTHER INVESTMENT COMPANIES
The amount of each Fund's investments in securities of other investment com-
panies will be subject to the limitations on such investments prescribed by
the Investment Company Act. These limits include a prohibition on any Fund ac-
quiring more than 3% of the voting shares of any other investment company and
a prohibition on investing more than 5% of a Fund's total assets in securities
of any one investment company or more than 10% of its total assets in securi-
ties of all investment companies. Each Fund will indirectly bear its propor-
tionate share of any management fees and other expenses paid by such other in-
vestment companies. Such other investment companies will have investment ob-
jectives, policies and restrictions substantially similar to those of the ac-
quiring Fund and will be subject to substantially the same risks.
INVESTMENT LIMITATIONS
TAXABLE, TAX-ADVANTAGED 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 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 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. The Treasury Obligations Fund's policy of limiting its
investments 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.
21
<PAGE>
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. The
Board of Trustees has adopted guidelines under which the Adviser determines
and monitors the liquidity of restricted securities subject to the oversight
of the Trustees. Restricted securities (including commercial paper issued pur-
suant to Section 4(2) of the 1933 Act) which are determined to be liquid will
not be deemed to be illiquid investments for purposes of the foregoing re-
striction. Since it is not possible to predict with assurance that the market
for restricted securities 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.
BORROWINGS. Each Fund may borrow up to 33 1/3% of its total assets from
banks for temporary or emergency purposes. A Fund may not make additional in-
vestments if borrowings exceed 5% of its total assets. For more information,
see the Statement of Additional Information.
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 23,
1998, Goldman Sachs, together with its affiliates, acted as investment adviser
or distributor for approximately $153 billion in assets.
As of November 28, 1997, Goldman Sachs and its consolidated subsidiaries had
assets of approximately $178 billion and partners' capital of $6.1 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 Fund may enter
into principal transactions in certain taxable money market instruments, in-
cluding repurchase agreements, with Goldman Sachs.
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<PAGE>
Under the Funds' Management Agreement, GSAM continually manages each Fund,
including the purchase, retention and disposition of its securities and other
assets. In addition, GSAM administers each Fund's business affairs and per-
forms 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
OR PERIOD
ENDED
CONTRACTUAL DECEMBER 31,
RATE 1997
----------- ------------
<S> <C> <C>
Financial Square Prime Obligations Fund................ .205% .17%
Financial Square Money Market Fund..................... .205% .17%
Financial Square Premium Money Market Fund............. .205% .07%
Financial Square Treasury Obligations Fund............. .205% .17%
Financial Square Treasury Instruments Fund............. .205% .17%
Financial Square Government Fund....................... .205% .17%
Financial Square Federal Fund.......................... .205% .17%
Financial Square Tax Free Money Market Fund............ .205% .17%
Financial Square Municipal Money Market Fund........... .205% N/A*
</TABLE>
* As of December 31, 1997, the Municipal Money Market Fund had not commenced
operations.
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, 1997, the annual rate expressed is the combined
advisory and administration fees paid (after voluntary fee limitations). The
difference, if any, between the stated and actual fees paid by the Funds re-
flects the fact that the Adviser did not charge the full amount of the fees to
which it would have been entitled.
GSAM has voluntarily agreed not to impose a portion of its management fee
and/or to reduce or otherwise limit the total operating expenses of each Fund
(excluding fees payable under the Funds' service and administration plans for
certain share classes, taxes, interest, brokerage and litigation, indemnifica-
tion and other extraordinary expenses). As of the date of this prospectus,
GSAM has no current intention to but may in the future discontinue or modify
any of such reductions or limitations at its discretion.
YEAR 2000. Many computer systems were designed using only two digits to sig-
nify the year (for example, "98" for "1998"). On January 1, 2000, if these
computer systems are not corrected, they may incorrectly interpret "00" as the
year "1900" rather than the year "2000," leading to computer shutdowns or er-
rors (commonly known as the "Year 2000 Problem"). To the extent these systems
conduct forward-looking calculations, these computer problems may occur prior
to January 1, 2000. Like other investment companies and financial and business
organizations, the Funds could be adversely affected in their ability to proc-
ess securities trades, price securities, provide shareholder account services
and otherwise conduct normal business operations if the computer systems used
by the Adviser or other Fund service providers do not adequately address this
problem in a timely manner. The Adviser has established a dedicated group to
analyze these issues and to implement the systems modifications necessary to
prepare for the Year 2000. Currently, the Adviser does not anticipate that the
transition to the 21st Century will have any material impact on its ability to
continue to service
23
<PAGE>
the Funds at current levels. In addition, the Adviser has sought assurances
from the Funds' other service providers that they are taking the steps neces-
sary so that they do not experience Year 2000 Problems, and the Adviser will
continue to monitor the situation. At this time, however, no assurance can be
given that the actions taken by the Adviser and the Funds' other service prov-
iders will be sufficient to avoid any adverse effect on the Funds due to the
Year 2000 Problem.
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. Goldman Sachs reserves the right to redeem at any
time some or all of the Fund shares acquired for its own account.
TAXES
Each Fund is treated as a separate entity for federal tax purposes. The Mu-
nicipal Money Market Fund intends to elect and each other Fund has elected to
be treated as a regulated investment company 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 taxable year. To qualify as such, each Fund must
satisfy certain requirements relating to the sources of its income, diversifi-
cation of its assets and distribution of its income to shareholders. As a reg-
ulated 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 require-
ments 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. Distributions out of net capital gain (the
excess of net long-term capital gain over net short-term capital loss), if
any, will be taxable as long-term capital gain regardless of how long the
shareholders have held their shares. Such long-term capital gain will consti-
tute a 20% or 28% rate gain, depending upon the Fund's holding period for the
assets the sale of which generated the gain. It is not, however, anticipated
that the Funds will have any significant amounts of such net capital gain.
These tax consequences will apply to distributions of any Fund whether re-
ceived 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 re-
ceived on December 31 of the year in which they are declared. Shareholders
will be informed annually about the amount and character of distributions re-
ceived from the Funds for federal income tax purposes, including any distribu-
tions that may constitute a return of capital or any distributions 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
24
<PAGE>
the federal alternative minimum tax. Exempt-interest dividends will be consid-
ered in computing the corporate federal alternative minimum tax, and the ex-
tent, if any, to which social security or railroad retirement benefits are
taxable. Persons who are "substantial users" of facilities financed by certain
industrial development or private activity bonds should consult their own tax
advisers before purchasing shares of these Funds. Interest incurred to pur-
chase 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. It is ex-
pected that a Fund will be unable to pass such taxes through to its sharehold-
ers, who therefore are not expected to be able to include such taxes in income
or be entitled to claim foreign 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 may be available 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 municipal obligations
issued by or on behalf of the particular state or a political subdivision
thereof, provided in some states that certain thresholds for holdings of such
obligations and/or reporting requirements are satisfied. Shareholders should
consult their own tax advisers concerning these matters.
NET ASSET VALUE
The net asset value of each Fund (other than the Government, Treasury Obli-
gations and Premium Money Market Funds) is determined as of the close of
regular trading on the New York Stock Exchange (normally, but not always, 4:00
p.m. New York time) on each Business Day. The net asset value of Government,
Treasury Obligations and Premium Money Market 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 attributed to each class of shares and dividing by the number of shares
of such class.
On any Business Day, as defined herein, when The Bond Market Association
("BMA") recommends that the securities markets close early, each Fund reserves
the right to close at or prior to the BMA recommended closing time, and to
cease granting same Business Day credit for purchase and redemption orders re-
ceived after the Fund's closing time. On days any Fund closes early, purchase
and redemption orders received after the Fund's closing time will be credited
to the next Business Day. In addition, 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
25
<PAGE>
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
total return. Total return is determined by computing the percentage change in
value of $1,000 invested at the maximum public offering price for a specified
period, assuming reinvestment of all dividends and distributions at net asset
value. The total return calculation assumes a complete redemption of the in-
vestment at the end of the relevant period. Each Fund may furnish total return
calculations 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 advertise-
ment). 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.
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. The Funds' performance quotations do not reflect any fees
charged by an institution to its customer accounts in connection with invest-
ments in the Funds.
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.
26
<PAGE>
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.
When issued, shares are fully paid and nonassessable. In the event of liqui-
dation, shareholders of each class are entitled to share pro rata in the net
assets of the applicable Fund available for distribution to the shareholders
of such class. All shares are freely transferable and have no preemptive, sub-
scription or conversion rights. Shareholders are entitled to one vote per
share, provided that, at the option of the Trustees, shareholders will be en-
titled to a number of votes based upon the net asset values represented by
their shares.
As of April 3, 1998, Harris Trust & Savings Bank, 200 W. Monroe St. Fl 12,
Chicago, IL 60606, owned of record 36.70% of the outstanding shares of Trea-
sury Instruments Fund and BankBoston, P.O. Box 1130, Boston, MA 02103, owned
of record 31.95% of the outstanding shares of Premium Money Market Fund.
The Trust does not intend to hold annual meetings of shareholders. However,
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.
27
<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.
The Trust may authorize certain Service Organizations to accept on the
Trust's behalf purchase, redemption and exchange orders placed by their cus-
tomers and, if approved by the Trust, to designate other intermediaries to ac-
cept such orders. In these cases, a Fund will be deemed to have received an
order in proper form when the order is accepted by the authorized Service Or-
ganization or intermediary on a Business Day. The order will be priced at a
Fund's net asset value per share next determined after such acceptance and the
transmission of the order and purchase payment in immediately available funds
to the Trust or its designee. The Service Organization or intermediary will be
responsible for transmitting accepted orders and payments to the Trust within
the period agreed upon by them. A customer should contact its Service Organi-
zation to learn whether it is authorized to accept orders for the Trust. Serv-
ice Organizations that are authorized to accept orders for the Trust may re-
ceive payments from the Funds or Goldman Sachs that are in addition to the
payments payable by the Trust under the Preferred Administration Plan.
Service Organizations may charge fees directly to their customers who are
the beneficial owners of FST Preferred 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. The Trust, on behalf of the
Funds, accrues payments made pursuant to a Service Agreement daily. All inqui-
ries of beneficial owners of Preferred Shares should be directed to the own-
ers' Service Organization.
The Adviser, Distributor, and/or their affiliates may pay other compensa-
tion, from time to time, out of their assets and not as an additional charge
to the Funds, to selected Service Organizations and other persons in connec-
tion with the sale and/or servicing of FST Preferred Shares of the Funds and
other investment portfolios of the Trust (such as additional payments based on
new sales, amounts exceeding pre-established thresholds, or the length of time
customers' assets have remained in the Trust) and, subject to applicable NASD
regulations, contribute to various non-cash and cash incentive arrangements to
promote the sale of FST Preferred Shares, as well as sponsor various educa-
tional programs, sales contests and/or promotions in which participants may
receive reimbursement of expenses, entertainment and prizes such as travel
awards, merchandise, cash, investment research and educational information and
related support materials. This additional compensation can vary among Service
Organizations depending upon such factors as the amounts their customers have
invested (or may invest) in particular portfolios of the Trust, the particular
program involved, or the amount of reimbursable expenses. For further informa-
tion, see the Statement of Additional Information.
28
<PAGE>
For the fiscal year ended December 31, 1997, the Trust, on behalf of Prime
Obligations Fund, Money Market Fund, Premium Money Market Fund, Treasury Obli-
gations Fund, Treasury Instruments Fund, Government Fund, Federal Fund and
Tax-Free Money Market Fund paid Service Organizations fees at the annual rate
of .10% of each Fund's average daily net assets attributable to FST Preferred
Shares. As of December 31, 1997, the Municipal Money Market Fund had not com-
menced operations.
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. (See "Administration" for a description of the limited situa-
tions where a Service Organization or other intermediary may be authorized to
accept orders for the 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 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. FST Preferred Shares purchased by check may not be re-
deemed 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. It is expected that ACH transfers will ordinar-
ily be converted to federal funds on the Business Day following receipt of the
ACH transfer. Purchase orders are effected at the net asset value next deter-
mined after receipt of the purchase order and payment in federal funds.
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 AN EFFECTIVE ORDER IS RECEIVED DIVIDENDS BEGIN
--------------------------------- ---------------
<C> <S> <C>
(1) Taxable and Tax-Advantaged Funds
(except Government,
Treasury Obligations and Premium Money
Market Funds)
By: 3:00 p.m.--N.Y. time Same Business Day
- ------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
IF AN EFFECTIVE ORDER IS RECEIVED DIVIDENDS BEGIN
--------------------------------- ---------------
<C> <S> <C>
After: 3:00 p.m.--N.Y. time Next Business Day
- ----------------------------------------------------------------------
(2) Government, Treasury Obligations
and Premium Money Market Funds
By: 5:00 p.m.--N.Y. time Same Business Day
- ----------------------------------------------------------------------
After: 5:00 p.m.--N.Y. time Next Business Day
- ----------------------------------------------------------------------
(3) Municipal Money Market Fund
By: 1:00 p.m.--N.Y. time Same Business Day
- ----------------------------------------------------------------------
After: 1:00 p.m.--N.Y. time Next Business Day
- ----------------------------------------------------------------------
(4) Tax-Free Money Market 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.
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 AND SUBSEQUENT INVESTMENTS 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. The Trust requires no minimum
amount for subsequent investments. Orders for the purchase of additional FST
Preferred Shares should be accompanied by information identifying the account
and the Fund in which FST Preferred Shares are to be purchased. A Service Or-
ganization 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 redemp-
tions of noncomplying accounts, and may impose a charge for any special serv-
ices rendered to its customers. Customers should contact their Service Organi-
zations for further information concerning such requirements and charges. A
Service Organization may purchase FST Preferred Shares in connection with
sweep account programs.
30
<PAGE>
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 (normally, but not always, as of 4:00 p.m. New York time for each
Fund other than the Government, Treasury Obligations and Premium Money Market
Funds and normally, but not always, as of 5:00 p.m. New York time for the Gov-
ernment, Treasury Obligations and Premium Money Market Funds) as a dividend
and distributed to Service Organizations monthly. Distributions 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 distri-
butions 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 nor-
mally 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 other realized 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.
The income declared as a dividend for the Treasury Obligations, Government
and Premium Money Market Funds is based on estimates of net investment income
for each 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 or, if previously elected in the Account Information Form, by calling
Goldman Sachs at 800-621-2550. All telephone exchanges must be registered in
the same name(s) and with the same address as are registered in the Fund 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 materially modified or withdrawn at any time on 60 days' written no-
tice.
31
<PAGE>
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 timely transmittal of redemption requests by their custom-
ers to Goldman Sachs. In order to facilitate timely transmittal of redemption
requests, Service Organizations have established procedures by which redemp-
tion requests must be made and times by which redemption requests must be re-
ceived by them. Additional documentation may be required when deemed appropri-
ate by a Service Organization.
A Service Organization 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. (See "Administration" for a descrip-
tion of the limited situations where a Service Organization or other interme-
diary may be authorized to accept redemption requests for the Funds.) Redemp-
tion requests by a Service Organization may be made by telephoning Goldman
Sachs at 800-621-2550 or by a written request addressed to Goldman Sachs, At-
tention: Shareholder Services, Goldman Sachs Trust, 4900 Sears Tower, Chicago,
Illinois 60606. A Service Organization may request redemptions by telephone
only if the optional telephone redemption privilege has been elected on the
Account Information Form. It may be difficult to implement redemptions by tel-
ephone 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. Exchanges among ac-
counts with different names, addresses and social security or other taxpayer
identification numbers must also be in writing and signed by an authorized
person designated on the Account Information Form. Other procedures may be im-
plemented from time to time. If reasonable procedures are not implemented, the
Trust may be liable for any loss due to unauthorized or fraudulent transac-
tions. In all other cases, neither the Trust nor Goldman Sachs will be respon-
sible for the authenticity of redemption or exchange instructions received by
telephone. A redemption may also be made with respect to certain Funds by
means of the check redemption privilege described in the Statement of Addi-
tional Information.
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 by the recordholder of Preferred
Shares. The payment of redemption proceeds for FST Preferred Shares recently
purchased by check may 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.
32
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDEMPTION
REDEMPTION REQUEST PROCEEDS
RECEIVED ORDINARILY DIVIDENDS
------------------ ---------- ---------
<C> <S> <C> <C>
(1) Taxable and Tax-Advantaged Funds (except
Government,
Treasury Obligations and Premium Money
Market Funds)
By: 3:00 p.m.--N.Y. time Wired Same Business Day Not earned on Day
request is received
- ----------------------------------------------------------------------------
<CAPTION>
REDEMPTION
REDEMPTION REQUEST PROCEEDS
RECEIVED ORDINARILY DIVIDENDS
------------------ ---------- ---------
<C> <S> <C> <C>
After: 3:00 p.m.--N.Y. time Wired Next Business Day Earned on Day
request is received
- ----------------------------------------------------------------------------
(2) Government, Treasury Obligations and
Premium Money Market 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) Municipal Money Market 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) Tax-Free Money Market 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>
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 ordi-
narily be wired. After a wire has been initiated by Goldman Sachs, neither
Goldman Sachs nor the Trust assumes any further responsibility for the perfor-
mance of intermediaries or the FST Preferred Shareholder's Service Organiza-
tion 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 Trust and Goldman Sachs each reserves the right to
waive the minimum account balance. The Trust also reserves the right to redeem
shares of a shareholder account if the balance is less than the minimum de-
scribed above. The Trust will give sixty (60) days' prior written notice to
such shareholders whose FST Preferred Shares are to be redeemed to allow them
to purchase sufficient additional FST Preferred Shares to avoid such redemp-
tion.
----------------
33
<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 IRAs, governmental agencies, financial institutions, registered securities
and commodities dealers and others.
If you are a nonresident alien or foreign entity, you must provide a com-
pleted Form W-8 to a Fund in order to avoid backup withholding on certain pay-
ments. Other payments to you may be subject to non-resident alien withholding
of up to 30%.
For further information regarding backup and nonresident alien withholding,
see Sections 3406, 1441 and 1442 of the Internal Revenue Code and consult your
tax adviser.
A-1
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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............................................... 12
Investment Policies Matrix................................................. 14
Description of Securities and Investment Techniques........................ 16
Investment Limitations..................................................... 21
Management................................................................. 22
Taxes...................................................................... 24
Net Asset Value............................................................ 25
Yield Information.......................................................... 26
Organization and Shares of the Trust....................................... 27
Administration............................................................. 28
Purchase of Shares......................................................... 29
Reports to Shareholders.................................................... 31
Distributions.............................................................. 31
Exchanges.................................................................. 31
Redemption of Shares....................................................... 32
Appendix................................................................... A-1
</TABLE>
FSPROPRMM
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GOLDMAN SACHS
MONEY MARKET FUNDS
GOLDMAN SACHS
FINANCIAL SQUARE FUNDS
FST PREFERRED SHARES
-----------
PROSPECTUS
-----------
MANAGED BY
GOLDMAN SACHS ASSET
MANAGEMENT
A SEPARATE OPERATING DIVISION OF
GOLDMAN, SACHS & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INVESTMENT POLICIES AND PRACTICES
OF THE SERIES
The following discussion elaborates on the description of each Series'
investment policies and practices contained in the Prospectus:
U.S. GOVERNMENT SECURITIES
Each Series 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 Series (other than ILA Treasury Obligations Portfolio, ILA Treasury
Instruments Portfolio, ILA Federal Portfolio, ILA Government Portfolio, FS
Treasury Obligations Fund, FS Government Fund, FS Treasury Instruments Fund and
FS Federal Fund) may also acquire custodial receipts that evidence ownership of
future interest payments, principal payments or both on certain U.S. Government
notes or bonds. Such notes and bonds are held in custody by a bank on behalf of
the owners. These custodial receipts are known by various names, including
"Treasury Receipts," "Treasury Investors Growth Receipts" ("TIGR's"), and
"Certificates of Accrual on Treasury Securities" ("CATS"). Although custodial
receipts are not considered U.S. Government Securities for certain securities
law purposes, they are indirectly issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or instrumentalities.
BANK AND CORPORATE OBLIGATIONS
Each Series (other than ILA Treasury Obligations Portfolio, ILA Government
Portfolio, ILA Federal Portfolio, ILA Treasury Instruments Portfolio, FS
Treasury Obligations Fund, FS Government Fund, FS Treasury Instruments Fund and
FS Federal Fund) may invest in commercial paper. Commercial paper represents
short-term unsecured promissory notes issued in bearer form by banks or bank
holding companies, corporations, and finance companies. The commercial paper
purchased by the Series consists of direct U.S. dollar denominated obligations
of domestic or, in the case of ILA Money Market Portfolio, FS Money Market Fund
and FS Premium Fund, foreign issuers. Bank
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obligations in which the Series may invest include certificates of deposit,
bankers' acceptances, fixed time deposits and bank notes. Certificates of
deposit are negotiable certificates issued against funds deposited in a
commercial bank for a definite period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific merchandise, which are
"accepted" by a bank, meaning, in effect, that the bank unconditionally agrees
to pay the face value of the instrument on maturity. Fixed time deposits are
bank obligations 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 ILA Prime Obligations Portfolio, ILA Money Market Portfolio, FS Prime
Obligations Fund, FS Premium Fund and FS 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
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 Series will be regarded as illiquid.
REPURCHASE AGREEMENTS
Each Series (other than the ILA Treasury Instruments Portfolio and FS
Treasury Instruments Fund) may enter into repurchase agreements only with
dealers in U.S. Government Securities and member banks of the Federal Reserve
System. A repurchase agreement is an arrangement under which the purchaser
(i.e., the Series) 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.
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Custody of the Obligation will be maintained by the Series' custodian or
subcustodian. The repurchase price may be higher than the purchase price, the
difference being income to the Series, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Series together with the
repurchase price on repurchase. In either case, the income to the Series is
unrelated to the interest rate on the Obligation subject to the repurchase
agreement.
Repurchase agreements pose certain risks for all entities, including the
Series, that utilize them. Such risks are not unique to the Series but are
inherent in repurchase agreements. The Series seek to minimize such risks by,
among others, the means indicated below, but because of the inherent legal
uncertainties involved in repurchase agreements, such risks cannot be
eliminated.
For purposes of the Investment Company Act of 1940, as amended (the "Act"),
and generally, for tax purposes, a repurchase agreement is deemed to be a loan
from the Series to the seller of the Obligation. It is not clear whether for
other purposes a court would consider the Obligation purchased by the Series
subject to a repurchase agreement as being owned by the Series or as being
collateral for a loan by the Series to the seller.
If in the event of bankruptcy or insolvency proceedings against the seller
of the Obligation, a court holds that the Series does not have a perfected
security interest in the Obligation, the Series 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 Series would be at risk of losing some or
all of the principal and income involved in the transaction. To minimize this
risk, the Series 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 Series may encounter delay and incur costs
before being able to sell the security. Such a delay may involve loss of
interest or a decline in the price of the Obligation.
Apart from risks associated with bankruptcy or insolvency proceedings,
there is also the risk that the seller may fail to repurchase the security.
However, if the market value of the Obligation subject to the repurchase
agreement becomes less than
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the repurchase price (including accrued interest), the Series 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 Series (other than the ILA Treasury Instruments Portfolio
and FS 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 account,
the daily aggregate balance of which will be invested in one or more repurchase
agreements.
FOREIGN SECURITIES
The ILA Money Market Portfolio, FS Money Market Fund and FS Premium 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. The ILA Tax-Exempt Diversified
Portfolio, ILA Tax-Exempt California Portfolio, ILA Tax-Exempt New York
Portfolio, FS Tax-Free Fund and FS Municipal Fund may also invest in municipal
instruments backed by letters of credit issued by certain of such banks. Under
current Securities and Exchange Commission ("SEC") rules relating to the use of
the amortized cost method of portfolio securities valuation, the ILA Money
Market Portfolio, FS Money Market Fund and FS Premium Fund are 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 ILA Prime Obligations Portfolio, ILA Money Market Portfolio, FS Prime
Obligations Fund, FS Money Market Fund and FS
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Premium 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, 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 Series' 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 Series'
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 Series 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 ILA Prime Obligations Portfolio, ILA Money Market
Portfolio, FS Prime Obligations Fund, FS Money Market Fund and FS Premium Fund
intention to invest in asset-backed securities with characteristics that are
materially different from the securities described in the preceding paragraph.
However, a Series 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
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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 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 ILA Prime Obligations Portfolio, ILA Money Market Portfolio, FS Prime
Obligations Fund, FS Money Market Fund and FS Premium Fund to dispose of any
then existing holdings of such securities.
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FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES
Each Series 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 Series 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 trans-actions are negotiated directly with the other party,
and such commitments are not traded on exchanges, but may be traded over-the-
counter.
A Series 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 Series may
dispose of or renegotiate a commitment after entering into it. A Series also
may sell securities it has committed to purchase before those securities are
delivered to the Series on the settlement date. The Series 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 Series' average dollar weighted maturity, the maturity of when-
issued or forward commitment securities will be calculated from the commitment
date.
When a Series purchases securities on a when-issued or forward commitment
basis, the Series will segregate cash or liquid assets having a value
(determined daily) at least equal to the amount of the Series' purchase
commitments. In the case of a forward commitment to sell portfolio securities
subject to such commitment, the Series will segregate the portfolio securities
while the commitment is outstanding. These procedures are designed to ensure
that the Series will maintain sufficient assets at all times to cover its
obligations under when-issued purchases and forward commitments.
VARIABLE AMOUNT MASTER DEMAND NOTES
Each Series (other than the ILA Treasury Obligations Portfolio, ILA Federal
Portfolio, ILA Treasury Instruments Portfolio, FS Treasury Obligations Fund and
FS Treasury Instruments Fund) may purchase variable amount master demand notes.
These obligations permit the investment of fluctuating amounts at varying rates
of interest pursuant to direct arrangements between a Series, 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 Series
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may invest in them only if the Adviser believes that the notes are of comparable
quality to the other obligations in which that Series may invest.
VARIABLE RATE AND FLOATING RATE DEMAND INSTRUMENTS
Each Series (other than the ILA Treasury Obligations Portfolio, ILA Federal
Portfolio, ILA Treasury Instruments Portfolio, FS Treasury Obligations and FS
Treasury Instruments Fund) may purchase variable and floating rate demand
instruments that are tax exempt municipal obligations or other debt securities
that possess a floating or variable interest rate adjustment formula. These
instruments permit a Series 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 Series
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 Series instructs otherwise. The Trust, on behalf of the Series, 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 Series, (3) to maintain the
respective quality standards of a Series' investment portfolio, or (4) to attain
a more optimal portfolio structure. A Series 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 Series, a variable or floating rate demand instrument which is
unrated must have high quality characteristics similar to other obligations in
which the Series may invest. The Adviser may determine that an unrated variable
or floating rate demand instrument meets a Series' 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 Series. Thus, either the credit of the issuer of the
obligation or the guarantor bank or both will meet the quality standards of the
Series.
The maturity of the variable or floating rate demand instruments held by a
Series will ordinarily be deemed to be the longer of (1) the notice period
required before the Series is
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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 Series must also
meet the requirements of rules issued by the SEC applicable to the use of the
amortized cost method of securities valuation. The Series will also consider the
liquidity of the market for variable and floating rate instruments, and in the
event that such instruments are illiquid, the Series' investments in such
instruments will be subject to the limitation on illiquid investments.
A Series (other than ILA Treasury Obligations Portfolio, ILA Treasury
Instruments Portfolio, ILA Government Portfolio, ILA Federal Portfolio, FS
Treasury Obligations Fund, FS Government Fund, FS Treasury Instruments Fund and
FS Federal Fund) 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 Series with a specific
undivided interest (up to 100%) in the underlying obligation and the right to
demand payment of its proportional interest in the unpaid principal balance plus
accrued interest from the financial institution upon a specific number of days'
notice. In addition, the participation interest generally is backed by an
irrevocable letter of credit or guarantee from the institution. The financial
institution usually is entitled to a fee for servicing the obligation and
providing the letter of credit.
RESTRICTED AND OTHER ILLIQUID SECURITIES
A Series may purchase securities that are not registered ("restricted
securities") under the Securities Act of 1933, as amended (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 Series
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 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
Series' investments in these securities, focusing on such important factors,
among others, as valuation, liquidity and availability of information.
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This investment practice could have the effect of increasing the level of
illiquidity in a Series to the extent that qualified institutional buyers become
for a time uninterested in purchasing these restricted securities.
MUNICIPAL OBLIGATIONS
The ILA Prime Obligations Portfolio, ILA Money Market Portfolio, ILA Tax-
Exempt Diversified Portfolio, ILA Tax-Exempt California Portfolio, ILA Tax-
Exempt New York Portfolio, FS Prime Obligations Fund, FS Premium Fund, FS Money
Market Fund, FS Tax-Free Fund and FS Municipal Fund may invest in municipal
obligations. Municipal obligations are issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies, authorities and instrumentalities and the District of
Columbia to obtain funds for various public purposes. The interest on most of
these obligations is generally exempt from regular federal income tax. The two
principal classifications of municipal obligations are "notes" and "bonds".
Notes. Municipal notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less. Municipal
notes include tax anticipation notes, revenue anticipation notes, bond
anticipation notes, tax and revenue anticipation notes, construction loan notes,
tax-exempt commercial paper and certain receipts for municipal obligations.
Tax anticipation notes are sold to finance working capital needs of
municipalities. They are generally payable from specific tax revenues expected
to be received at a future date. They are 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 Series 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 ILA Tax-
Exempt California and ILA Tax-Exempt New York Portfolios, exempt from California
and New York (city and state) personal income taxes,
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respectively. Such obligations are held in custody by a bank on behalf of the
holders of the receipts. These custodial receipts are known by various names,
including "Municipal Receipts" ("MRs") and "Municipal Certificates of Accrual on
Tax-Exempt Securities" ("M-CATS"). There are a number of other types of notes
issued for different purposes and secured differently from those described
above.
Bonds. Municipal bonds, which generally meet longer term capital needs and
have maturities of more than one year when issued, have two principal
classifications, "general obligation" bonds and "revenue" bonds.
General obligation bonds are issued by entities such as states, counties,
cities, towns and regional districts and are used to fund a wide range of public
projects including the construction or improvement of schools, highways and
roads, water and sewer systems and a variety of other public purposes. The
basic security of general obligation bonds is the issuer's pledge of its faith,
credit, and taxing power for the payment of principal and interest. The taxes
that can be levied for the payment of debt service may be limited or unlimited
as to rate or amount or special assessments.
Revenue bonds have been issued to fund a wide variety of capital projects
including: electric, gas, water and sewer systems; highways, bridges and
tunnels; port and airport facilities; colleges and universities; and hospitals.
The principal security for a revenue bond is generally the net revenues derived
from a particular facility or group of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source. Although the
principal security behind these bonds varies widely, many provide additional
security in the form of a debt service reserve fund whose monies may also be
used to make principal and interest payments on the issuer's obligations.
Housing finance authorities have a wide range of security including partially or
fully insured, rent subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. In addition to a debt service
reserve fund, some authorities provide further security in the form of a state's
ability (without obligation) to make up deficiencies in 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
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by the revenues of the authority derived from payments by the industrial user.
The ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt California Portfolio
and FS Tax-Free Fund 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.
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 Series 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 Series may also purchase long-term bonds (sometimes
referred to as "Put Bonds"), which are subject to a Series' 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 Series which invest in municipal obligations may invest in tender
option bonds. A tender option bond is a municipal obligation (generally held
pursuant to a custodial arrangement) having a relatively long maturity and
bearing interest at a fixed rate substantially higher than prevailing short-term
tax-exempt rates. The bond is typically issued in conjunction with the
agreement of a third party, such as a bank, broker-dealer or other financial
institution, pursuant to which such institution grants the security 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 Series.
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
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the financial institution is deemed, in light of the relevant Series' credit
quality requirements, to be inadequate.
Although the ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt
California Portfolio, ILA Tax-Exempt New York Portfolio, FS Tax-Free Fund and FS
Municipal Fund intend to invest in tender option bonds the interest on which
will, in the opinion of counsel for the issuer and sponsor or counsel selected
by the Adviser, be excluded from gross income for federal income tax purposes,
there is no assurance that the Internal Revenue Service will agree with such
counsel's opinion in any particular case. Consequently, there is a risk that a
Series will not be considered the owner of such tender option bonds and thus
will not be entitled to treat such interest as exempt from such tax. A similar
risk exists for certain other investments subject to puts or similar rights.
Additionally, the federal income tax treatment of certain other aspects of these
investments, including the proper tax treatment of tender options and the
associated fees, in relation to various regulated investment company tax
provisions is unclear. The ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt
California Portfolio, ILA Tax-Exempt New York Portfolio, FS Tax-Free Fund and FS
Municipal Fund intend to manage their respective portfolios in a manner designed
to eliminate or minimize any adverse impact from the tax rules applicable to
these investments.
In addition to general obligation bonds, revenue bonds and serial bonds,
there are a variety of hybrid and special types of municipal obligations as well
as numerous differences in the security of municipal obligations both within and
between the two principal classifications above.
The ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt California
Portfolio, ILA Tax-Exempt New York Portfolio, FS Tax-Free Fund and FS Municipal
Fund may purchase municipal instruments that are backed by letters of credit
issued by foreign banks that have a branch, agency or subsidiary in the United
States. Such letters of credit, like other obligations of foreign banks, may
involve credit risks in addition to those of domestic obligations, including
risks relating to future political and economic developments, nationalization,
foreign governmental restrictions such as exchange controls and difficulties in
obtaining or enforcing a judgment against a foreign bank (including branches).
For the purpose of investment restrictions of the Series, 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.
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An entire issue of municipal obligations may be purchased by one or a small
number of institutional investors such as one of the Series. 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, 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 Series may be subject to the Series'
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 Series' investments
enhance liquidity. In addition, stand-by commitments and demand obligations
also enhance liquidity.
Yields on municipal obligations depend on a variety of factors, including
money market conditions, municipal bond market conditions, the size of a
particular offering, the maturity of the obligation and the quality of the
issue. High 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 ILA Tax-Exempt California Portfolio, or result in the default of
existing obligations, including obligations which may be held by the ILA 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
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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 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 32.9 million
represents over 12% of the total United States population and grew by 27% in the
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. These losses were 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
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from its 10% peak in January, 1994, but still remains higher than the national
average rate.
Constitutional Limitations on Taxes, Other Charges and Appropriations
- ---------------------------------------------------------------------
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.
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.
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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.
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
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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 their
spending limits, but this condition may change over time. The State's 1997-98
Budget Act provides for State appropriations more than $6 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
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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 $24.9 billion at February 1,
1998. The State also had outstanding at February 1, 1998 $1.051 billion of
general obligation commercial paper notes which will be refunded into long-term
bonds at a later date. In FY1996-97, debt service on general obligation bonds
and lease purchase debt was approximately 5.0% of General Fund revenues.
Recent Financial Results. The principal sources of General Fund revenues
------------------------
in 1996-1997 were the California personal income tax (47% of total revenues),
the sales tax (34%), bank and corporation taxes (12%), and the gross premium tax
on insurance (3%). California maintains a Special Fund for Economic
Uncertainties (the "SFEU"), 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%).
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.
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 SFEU approaching $2.8 billion
at its peak at June 30, 1993. For several years, 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
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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.
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, with revenues equaling or exceeding expenditures
starting in FY 1992-93. As a result, the accumulated budget deficit of about
$2.8 billion was eliminated by June 30, 1997, when the State showed a positive
balance of about $408 million, on a budgetary basis, in the SFEU.
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. 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. For a two-month period in the summer of 1992,
pending adoption of the annual Budget Act, the State was forced to issue
registered warrants (IOUs) to some of its
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suppliers, employees and other creditors. The last of these deficit notes was
repaid in April, 1996.
The 1995-96 and 1996-97 Budget Acts reflected significantly improved
financial conditions, as the State's economy recovered and tax revenues soared
above projections. Over the two years, revenues averaged about $2 billion
higher than initially estimated. Most of the additional revenues were allocated
to school funding, as required by Proposition 98, and to make up shortfalls in
federal aid for health and welfare costs and costs of illegal aliens. The
budgets for both these years showed strong increases in funding for K-14 public
education, including implementation of initiatives to reduce class sizes for
lower elementary grades to not more than 20 pupils. Higher education funding
also increased. Spending for health and welfare programs was kept in check, as
previously-implemented cuts in benefit levels were retained.
The final results for FY 1996-97 showed General Fund revenues of $49.2
billion and expenditures of $48.9 billion. The improved revenues allowed the
repayment of the last of the recession-induced budget deficits; the SFEU had a
balance of $408 million on a budgetary basis ($281 million on a cash basis) as
of June 30, 1997, the first significant positive balance in the decade. In
1996-97, the State implemented its regular cash flow borrowing program with the
issuance of $3.0 billion of Revenue Anticipation Notes which matured on June 30,
1997, and did not require any external borrowing over the end of the fiscal
year.
Fiscal Year 1997-98 Budget. With continued strong economic recovery and
surging tax receipts, the State entered the 1997-98 Fiscal Year in the strongest
financial position in the decade. However, in May 1997, the California Supreme
Court ruled that the State had acted illegally in 1993 and 1994 by using a
deferral of payments to the Public Employees Retirement Fund to help balance
earlier budgets. In response to this court decision, the Governor ordered an
immediate repayment to the Retirement Fund of about $1.235 billion, which was
made in late July, 1997, and substantially "used up" the expected additional
revenues for the fiscal year.
On August 18, 1997, the Governor signed the 1997-98 Budget Act. The Budget
Act assumes General Fund revenues and transfers of $52.5 billion, and contains
expenditures of $52.8 billion. As a result, the budget reserve (SFEU) is
reduced to an estimated $112 million at June 30, 1998. The Budget Act also
contains $14.4 billion of Special Fund expenditures. Following enactment of the
Budget Act, the State plans to carry out its normal annual cash flow borrowing,
totaling $3.0 billion to mature June 30, 1998.
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The 1997-98 Budget Act provides another year of rapidly increasing funding
for K-14 public education. Total General Fund support will reach $5,150 per
pupil, more than 20% higher than the recession-period levels which were in
effect as late as FY 1993-94. The $1.75 billion in new funding will be spent on
class size reduction and other initiatives, as well as fully funding growth and
cost of living increases. Support for higher education units in the State also
increased by about 6 percent. Because of the pension payment, most other State
programs were funded at levels consistent with prior years, and several
initiatives had to be dropped. These included additional assistance to local
governments, state employee raises, and funding of a bond bank.
Part of the 1997-98 Budget Act was completion of State welfare reform
legislation to implement the new federal law passed in 1996. The new State
program, called "CalWORKs," to become effective January 1, 1998, will emphasize
programs to bring aid recipients into the workforce. As required by federal
law, new time limits will be placed on receipt of welfare aid. Grant levels for
1997-98 remain at the reduced, prior years' levels.
Although, as noted, the 1997-98 Budget Act projects a budget reserve in the
SFEU of $112 million on June 30, 1998, the General Fund fund balance on that
date also reflects $1.25 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 1997-98 Budget Act contained a $200 million appropriation
from the General Fund toward this settlement.
Updated figures from the Department of Finance, released in early January,
1998, project both revenues and expenditures will be higher in 1997-98 than
estimated when the Budget Act was passed, reflecting continued strong economic
activity. The Department projects the budget reserve (SFEU) at June 30, 1998
will be approximately $329 million.
Proposed 1998-99 Fiscal Year Budget
The Governor released his proposed FY 1998-99 Budget on January 9, 1998.
It projected General Fund revenues and transfers of $55.4 billion, an increase
of almost 5% over 1997-98. Revenue losses due to tax cuts enacted in late 1997
were expected to be offset by higher capital gains realizations. The Governor
proposed expenditures of $55.4 billion, also an almost 5% increase from the
prior year. The Governor's Budget proposes significant additional funding for
K-12 schools under
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Proposition 98, as well as additional funding for higher education, with a
proposed reduction of college student fees. State and federal funds will be
used in the new CalWORKS welfare program, with projections of a fourth
consecutive year of caseload decline. The Governor has proposed a large capital
expenditure program, focusing on schools and universities, but also including
corrections, environmental and general government projects. These proposals
would require approval of almost $10 billion of new general obligation bonds
over the next six years. All of the Governor's proposals will be reviewed by
the Legislature as part of the annual budget process.
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, but have been raised since 1996. The State's bonds are
currently assigned ratings of "A+" from Standard & Poor's, "A1" from Moody's and
"AA-" 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, 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 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
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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.
Legislation enacted in late 1997 provides for the State to take over
financial responsibility for funding trial courts throughout the State. This is
estimated to save counties and cities a total of over $350 million annually.
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 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.
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Counties and cities may face further budgetary pressures as a result of
changes in welfare and public assistance programs, which were enacted in August,
1997 in order to comply with the federal welfare reform law. Generally,
counties play a large role in the new system, and are given substantial
flexibility to develop and administer programs to bring aid recipients into the
workforce. Counties are also given financial incentives if either at the county
or statewide level, the "Welfare-to-Work" programs exceed minimum targets;
counties are also subject to financial penalties for failure to meet such
targets. Counties remain responsible to provide "general assistance" for able-
bodied indigents who are ineligible for other welfare programs. The long-term
financial impact of the new CalWORKs system on local governments is still
unknown.
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 order to obtain funds to cover operating
deficits. Following a fiscal crisis in which the District's finances were taken
over by
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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
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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 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 ILA 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 ILA 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
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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
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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. State per capita
personal income has historically been significantly higher than the national
average, although the ratio has varied substantially.
Moderate growth is projected to continue in 1998 and 1999 for employment,
wages, and personal income, although the growth rates will lessen gradually
during the course of the two years. Overall employment growth is expected to
continue at a modest rate, reflecting the slowing growth in the national
economy, continued spending restraint in government, and restructuring in the
health care, social service, and banking sectors.
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 BUDGET. The State Constitution requires the governor (the "Governor") to
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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 State's budget for the 1996-97 fiscal year was adopted by the
Legislature on August 4, 1997, more than four 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 1997-98 fiscal year was
formulated on August 11, 1997 and was based on the State's budget as enacted by
the Legislature, as well as actual results for the first quarter of the current
fiscal year (the "1997-98 State Financial Plan"). In recent years, the State
has failed to adopt a budget prior to the beginning of its fiscal year. There
can be no assurance that State budgets in future fiscal years will be adopted by
the April 1 statutory deadline.
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The Governor is required by law to propose a balanced budget each year. In
order to address any potential remaining budget gap, the Governor is expected to
make additional proposals to bring receipts in line with disbursements. The
State has closed projected budget gaps of $5.0 billion, $3.9 billion and $2.3
billion in its 1995-96, 1996-97 and 1997-98 fiscal years, respectively.
The 1997-98 General Fund Financial Plan is projected to be balanced on a
cash basis, with a projected cash surplus of $1.83 billion. As compared to the
Governor's Executive Budget as amended in February 1997, the State's adopted
budget for 1997-98 increased General Fund spending by $1.7 billion, primarily
from increases for local assistance ($1.3 billion). Resources used to fund
these additional expenditures include increased revenues projected for the 1997-
98 fiscal year, increased resources produced in the 1996-97 fiscal year that
will be utilized in 1997-98, re-estimates of social service, fringe benefit and
other spending, and certain non-recurring resources.
The 1997-98 adopted budget includes multi-year reductions, including a
State funded property and local income tax reduction program, estate tax relief,
utility gross receipts tax reductions, permanent reductions in the State sales
tax on clothing, and elimination of assessments on medical providers. These
reductions are intended to reduce the overall level of State and local taxes in
New York and to improve the State's competitive position vis-a-vis other states.
The various elements of the State and local tax and assessments reductions have
little or no impact on the 1997-98 State Financial Plan, and do not begin to
materially affect the outyear projections until the State's 1999-2000 fiscal
year.
Other actions taken in the 1997-98 adopted budget add further pressure to
future budget balance in New York State. For example, the fiscal effects of tax
reductions adopted in the 1997-98 budget are projected to grow more
substantially beyond the 1998-99 fiscal year, with incremental costs averaging
in excess of $1.3 billion annually over the last three years of the tax
reduction program. These incremental costs reflect the phase-in of State-funded
school property tax and local income tax relief, the phase-out of the
assessments on medical providers, and reductions in estate and gift levies,
utility gross receipts taxes, and the State sales tax on clothing. The full
annual cost of the enacted tax reduction package is estimated at approximately
$4.8 billion when fully effective in State fiscal year 2001-02. In addition,
the 1997-98 budget included multi-year commitments for school aid and pre-
kindergarten early learning programs which could add as much as $1.4 billion in
costs when fully annualized in fiscal year 2001-02. These spending commitments
are subject to annual appropriation.
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On September 11, 1997, the New York State Comptroller issued a report which
noted that the ability to deal with future budget gaps could become a
significant issue in the State's 2000-2001 fiscal year, when the cost of tax
cuts increases by $1.9 billion. The report contained projections that, based on
current economic conditions and current law for taxes and spending, showed a gap
in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the
2001-2002 State fiscal year. The report noted that these gaps would be smaller
if recurring spending reductions produce savings in earlier years. The State
Comptroller has also stated that if Wall Street earnings moderate and the State
experiences a moderate recession, the gap for the 2001-2002 State fiscal year
could grow to nearly $12 billion.
The Governor presented his 1998-99 Executive Budget to the Legislature on
January 20, 1998. The Executive Budget contains financial projections for the
State's 1997-98 through 2000-01 fiscal years, detailed estimates of receipts and
a proposed Capital Program and Financing Plan for the 1997-98 through 2002-03
fiscal years. It is expected that the Governor will prepare amendments to his
Executive Budget as permitted under law and that these amendments will be
reflected in a revised Financial Plan. There can be no assurance that the
Legislature will enact into law the Executive Budget as proposed by the
Governor, or that the State's adopted budget projections will not differ
materially and adversely from the projections set forth therein.
The 1998-99 Financial Plan is projected to be balanced on a cash basis in
the General Fund. Total General Fund receipts, including transfers from other
funds, are projected to be $36.22 billion, an increase of $1.02 billion over
projected receipts in the current fiscal year. Total General Fund
disbursements, including transfers to other funds, are projected to be $36.18
billion, an increase of $1.02 billion over the projected expenditures (including
pre-payments), for the current fiscal year. As compared to the 1997-98 State
Financial Plan, the Executive Budget proposes year-to-year growth in General
Fund spending of 2.89 percent. State Funds spending (i.e., General Fund plus
other dedicated funds, with the exception of federal aid) is projected to grow
by 8.5 percent. Spending from all Governmental Funds (excluding transfers) is
proposed to increase by 7.6 percent from the prior fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several
Executive Budget tax proposals that, if enacted, would further reduce receipts
otherwise available to the General Fund by approximately $700 million during
1998-99. The Executive Budget proposes accelerating school tax relief for
senior citizens under STAR, which is projected to reduce General Fund receipts
by $537 million in 1998-99. The proposed reduction supplements STAR tax
reductions already scheduled in law, which are projected at $187 million in
1998-99. The Budget also
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proposes several new tax-cut initiatives and other funding changes that are
projected to further reduce receipts available to the General Fund by over $200
million. These initiatives include reducing the fee to register passenger motor
vehicles and earmarking a larger portion of such fees to dedicated funds and
other purposes; extending the number of weeks in which certain clothing
purchases are exempt from sales taxes; more fully conforming State law to
reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax
rates; and accelerating scheduled property tax relief for farmers from 1999 to
1998. In addition to the specific tax and fee reductions discussed above, the
Executive Budget also proposes establishing a reserve of $100 million to permit
the acceleration into 1998-99 of other tax reductions that are otherwise
scheduled in law for implementation in future fiscal years.
The Division of the Budget estimates that the 1998-99 Financial Plan
includes approximately $62 million in non-recurring resources, comprising less
than two-tenths of one percent of General Fund disbursements. The non-recurring
resources projected for use in 1998-99 consist of $27 million in retroactive
federal welfare reimbursements for family assistance recipients with HIV/AIDS,
$25 million in receipts from the Housing Finance Agency that were originally
anticipated in 1997-98, and $10 million in other measures, including $5 million
in asset sales.
Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82
billion, or $1.07 billion higher than 1997-98. The proposed spending plan
includes: $2.51 billion in disbursements for transportation purposes, including
the State and local highway and bridge program; $815 million for environmental
activities; $379 million for correctional services; $228 million for the State
University of New York ("SUNY") and the City University of New York ("CUNY");
$290 million for mental hygiene projects; and $375 million for CEFAP.
Approximately 28 percent of capital projects are proposed to be financed by
"pay-as-you-go" resources. State-supported bond issuances finance 46 percent of
capital projects, with federal grants financing the remaining 26 percent.
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 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. Actual results,
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however, could differ materially and adversely from the projections set forth in
a financial plan, and those projections may be changed materially and adversely
from time to time.
In the past, the State has taken management actions and made use of
internal sources to address potential State financial plan shortfalls, and the
Division of Budget believes it could take similar actions should variances occur
in its projections for the current fiscal year.
RECENT FINANCIAL RESULTS. The General Fund is the principal operating fund of
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the State and is used to account for all financial transactions, except those
required to be accounted for in another fund. It is the State's largest fund
and receives almost all State taxes and other resources not dedicated to
particular purposes.
The State ended the first six months of its 1997-98 fiscal year with an
unaudited General Fund cash balance of $3.2 billion, or $254 million above the
August Financial Plan estimate. Total unaudited receipts, including transfers
from other funds, totaled $18.8 billion, or $340 million higher than expected.
The additional receipts reflected higher-than-anticipated tax revenues of $244
million and miscellaneous receipts of $93 million. Unaudited General Fund
spending for the same period equaled $16.0 billion, or $86 million above the
cashflow projections published in the August Financial Plan. For fiscal year
1997-98, total General Fund receipts were projected at $35.09 billion, an
increase of $2.05 billion from 1996-97 results. Total disbursements, including
transfers to capital projects, debt service and other funds, were projected at
$34.60 billion, or 5.2 percent higher than disbursements in 1996-97.
The mid-year update projected a closing balance in the General Fund of $927
million, which was composed of a $530 million reserve for future needs, a $332
million balance in the Tax Stabilization Reserve Fund ("TSRF"), and a $65
million balance in the Contingency Reserve Fund ("CRF").
As part of the 1997-98 Adopted Budget Report, the State also issued its
update to the GAAP-basis Financial Plan for the State's 1997-98 fiscal year,
based on the cash-basis 1997-98 State Financial Plan completed in August. The
GAAP-basis update projected a General Fund operating deficit of $959 million,
primarily reflecting the use of a portion of the 1996-97 cash surplus to fund
1997-98 liabilities, offset by the $530 million reserve for future needs.
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
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(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") to restructure the way the State makes certain local aid
payments.
In February 1997, the Job Development Authority ("JDA") issued
approximately $85 million of State-guaranteed bonds to refinance certain of its
outstanding bonds and notes in order to restructure and improve JDA's capital
structure. Due to concerns regarding the economic viability of its programs,
JDA's loan and loan guarantee activities had been suspended since the Governor
took office in 1995. As a result of the structural imbalances in JDA's capital
structure, and defaults in its loan portfolio and loan guarantee program
incurred between 1991 and 1996, JDA would have experienced a debt service cash
flow shortfall had it not completed its recent refinancing. JDA anticipates
that it will transact additional refinancings in 1999, 2000 and 2003 to complete
its long-term plan of finance and further alleviate cash
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flow imbalances which are likely to occur in future years. The State does not
anticipate that it will be called upon to make any payments pursuant to the
State guarantee in the 1997-98 fiscal year. JDA recently resumed its lending
activities under a revised set of lending programs and underwriting guidelines.
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 annual seasonal borrowing. The legislation empowered
LGAC to issue its bonds and notes in an amount to yield net proceeds not in
excess of $4.7 billion (exclusive of certain refunding bonds). 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 was thus permitted in any fiscal year it was 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.
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. On August 28, 1997, S&P revised its ratings on the State's general
obligation bonds from A- to A and revised its ratings on the State's moral
obligation, lease purchase, guaranteed and contractual obligation debt. On
March 2, 1998, S&P affirmed its A rating on the State's outstanding bonds.
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. On March 20, 1998, Moody's assigned the
highest commercial paper rating of P-1 to the short-term notes of the State and
stated that the outlook for the State's general obligations is stable.
The State anticipated that its capital programs will be financed, in part,
by State and public authorities borrowings in
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the 1997-98 fiscal year. The State expects to issue $605 million in general
obligation bonds (including $140 million for purposes of redeeming outstanding
bond anticipation notes) and $140 million in general obligation commercial
paper. The Legislature had also authorized the issuance of $311 million in
certificates of participation (including costs of issuance, reserve funds and
other costs) during the State's 1997-98 fiscal year for equipment purchases.
The projection of State borrowings for the 1997-98 fiscal year is subject to
change as market conditions, interest rates and other factors vary throughout
the fiscal year.
The proposed 1997-98 through 2002-03 Capital Program and Financing Plan was
released with the 1998-99 Executive Budget on January 20, 1998. As a part of
that Plan, changes were proposed to the State's 1997-98 borrowing plan,
including: the delay in the issuance of COPs to finance welfare information
systems until 1998-99 to permit a thorough assessment of
needs; and the elimination of issuances for the CEFAP to reflect the proposed
conversion of that bond-financed program to pay-as-you-go financing.
As a result of these changes, the State's 1997-98 borrowing plan now
reflects: $501 million in general obligation bonds (including $140 million for
purposes of redeeming outstanding BANs) and $140 million in general obligation
commercial paper; the issuance of $83 million in COPs for equipment purchases;
and approximately $1.8 billion in borrowings by public authorities pursuant to
lease-purchase and contractual-obligation financings for capital programs of the
State, including costs of issuance, reserve funds, and other costs, net of
anticipated refundings and other adjustments for 1997-98 capital projects. The
projection of State borrowings for the 1997-98 fiscal year is subject to change
as market conditions, interest rates and other factors vary through the end of
the fiscal year.
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
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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 to regulations
promulgated by the Superintendent of Insurance establishing certain excess
medical malpractice premium rates; (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) challenges to the constitutionality of Public Health Law 2807-
d, which imposes a gross receipts tax from certain patient care services; (10)
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; (11) action seeking enforcement of certain sales and excise taxes
and tobacco products and motor fuel sold to non-Indian consumers on Indian
reservations; and (12) a challenge to the constitutionality of Clean Water/Clean
Air Bond Act.
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 January 21, 1994, the State
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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 fund was settled in June 1996 and certain
amounts in a Supplemental Reserve Fund 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 cure rights, tort, real property and contract claims in which
the State is a defendant and the monetary damages sought are substantial,
generally in excess of $100 million. These proceedings could affect adversely
the financial condition of the State in the 1997-98 fiscal year or thereafter.
Adverse developments in these proceedings, other
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proceedings for which there are unanticipated, unfavorable and material
judgments, or the initiation of new proceedings could affect the ability of the
State to maintain a balanced financial plan. An adverse decision in any of
these proceedings could exceed the amount of the reserve established in the
State's financial plan for the payment of judgments and, therefore, could affect
the ability of the State to maintain a balanced financial plan. In its audited
financial statements for the 1996-97 fiscal year, the State reported its
estimated liability for awarded and anticipated unfavorable judgments to be $364
million, of which $134 million is expected to be paid during the 1997-98 fiscal
year.
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 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. There can be no assurance that there will not be
reductions in State aid to the City from amounts currently projected or that
State budgets will be adopted by the April 1 statutory deadline or that any such
reductions or delays will not have adverse effects on the City's cash flow or
expenditures. In addition, the Federal budget negotiation process could result
in a reduction in or a delay in the receipt of Federal grants which could have
additional adverse effects on the City's cash flow or revenues.
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 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
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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 funds.
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. There
can be no assurance that there will not be reductions in State aid to the City
from amounts currently projected or that State budgets will be adopted by the
April 1 statutory deadline or that any such reductions or delays will not have
adverse effects on the City's cash flow or expenditures. In addition, the
Federal budget negotiation process could result in a reduction in or a delay in
the receipt of Federal grants which could have additional adverse effects on the
City's cash flow or revenues.
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 February 3, 1998, S&P placed a BBB+ rating on the
City's general obligation debt on CreditWatch with positive implications.
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 February 25, 1998, Moody's
upgraded nearly $28 billion of the City's debt from Baa1 to A3.
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
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City short-term debt and transferring to the City funds 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 June 30, 1997, MAC
had outstanding an aggregate of approximately $4.267 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 1997 fiscal year in the event
the City fails to provide such financing.
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.
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. Although the City's current financial plan projects $2.4
billion of seasonal financing for the 1998 fiscal year, the City expects to
undertake only approximately $1.4 billion of seasonal financing. The City
issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal
financing requirements for the 1996 fiscal year increased to $2.4 billion from
$2.2 billion and $1.75
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<PAGE>
billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing
requirements were $1.4 billion in the 1993 fiscal year. The delay in the
adoption of the State's budget in certain past fiscal years has required the
City to issue short-term notes in amounts exceeding those expected early in such
fiscal years.
Certain localities, in addition to the City, have experienced financial
problems and have requested and received additional New York State assistance
during the last several State fiscal years. The potential impact on the State
of any future requests by localities for additional assistance is not included
in the State's projections of its receipts and disbursements for the 1997-98
fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted
in the re-establishment 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
State to assist Yonkers could result in increased State expenditures for
extraordinary local assistance.
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. Troy MAC has issued
bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the 1996
legislative session through $50 million in special appropriations targeted for
distressed cities, and that was largely continued in 1997. Twenty-eight
municipalities are scheduled to share in more than $32 million in targeted
unrestricted aid allocated in the 1997-98 budget. An additional $21 million
will be dispersed among all cities, towns and villages, a 3.97% increase in
General Purpose State Aid.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1995, the total indebtedness of all localities in
New York State other than New York City was approximately $19 billion. A small
portion (approximately $102.3 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
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<PAGE>
the period that such deficit financing is outstanding. Eighteen localities had
outstanding indebtedness for deficit financing at the close of their fiscal year
ending in 1995.
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 ILA Prime Obligations Portfolio, ILA Money Market Portfolio,
ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt California Portfolio, ILA
Tax-Exempt New York Portfolio, FS Prime Obligations Fund, FS Premium Fund, FS
Money Market Fund, FS Tax-Free Fund and FS Municipal Fund 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
Series 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 Series. 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
Series. In considering whether a security meets a Series' quality standards,
the Adviser will look to the creditworthiness of the party providing the Series
with the right to sell.
The Series 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 Series' net asset value. Since the
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<PAGE>
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
Series 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 Series.
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 ILA Tax-Exempt Diversified
Portfolio and ILA Tax-Exempt California Portfolio were series, has received a
ruling (which does 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) 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 ILA Tax-Exempt Diversified
Portfolio, ILA Tax-Exempt California Portfolio, ILA Tax-Exempt New York
Portfolio, FS Tax-Free Fund and FS Municipal Fund 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 Series nor has any Series 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 Series
without the approval of the majority of outstanding voting securities of that
Series (which, under the 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 Series present at a meeting if the holders of more than
50% of the outstanding units of that Series are present in person or by proxy,
or (2) more than 50% of the outstanding units
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<PAGE>
of that Series). 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
Series, with the exception of borrowings permitted by Investment Restriction
(3).
Accordingly, the Trust may not, on behalf of any Series (except for FS
Government Fund):
(1) make any investment inconsistent with the Series' classification
as a diversified company under the Act. This restriction does not,
however, apply to any Series classified as a non-diversified company under
the 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 Series 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 Series (other than the FS Money Market
Fund and FS Premium 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 or
guaranteed 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 ILA Money Market
Portfolio, FS Money Market Fund and FS Premium Fund may concentrate its
investments in obligations 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
collateralized by such obligations. However, if adverse economic
conditions prevail in the banking industry, each of ILA Money Market
Portfolio, FS Money Market Fund and FS Premium 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 restriction, state and
municipal governments and their agencies, 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 finance companies are deemed to be
separate industries; and wholly owned finance companies are considered to
be in the
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<PAGE>
industry of their parents if their activities are primarily related to
financing the activities of their parents.
(3) borrow money, except that (a) the Series may borrow from banks (as
defined in the Act) or through reverse repurchase agreements in amounts up
to 33 1/3% of its total assets (including the amount borrowed), (b) the
Series may, to the extent permitted by applicable law, borrow up to an
additional 5% of its total assets for temporary purposes, (c) the Series
may obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities and (d) the Series may purchase
securities on margin to the extent permitted by applicable law.
(4) make loans, except (a) through the purchase of debt obligations in
accordance with each Series' investment objective and policies, (b) through
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 the Series may be deemed to be an
underwriting.
(6) purchase, hold or deal in real estate, although the Series 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 the Series as a
result of the ownership of securities.
(7) invest in commodities or commodity contracts, except that the
Series 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.
FS Government Fund may not:
(1) with respect to 75% of its total assets taken at market value,
invest more than 5% of the value of the total assets of that Series in the
securities of any one issuer, except U.S. Government securities and
repurchase agreements collateralized by U.S. Government securities. This
restriction does not, however, apply to any Series classified as a non-
diversified company under the Act;
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<PAGE>
(2) with respect to 75% of its total assets taken at market value,
purchase the securities of any one issuer if, as a result of such purchase,
that Series would hold more than 10% of the outstanding voting securities
of that issuer. This restriction does not, however, apply to any Series
classified as a non-diversified company under the Act;
(3) borrow money, except from banks on a temporary basis for
extraordinary or emergency purposes, provided that a Series is required to
maintain asset coverage of 300% for all borrowings and that no purchases of
securities will be made if such borrowings exceed 5% of the value of the
Series' assets. This restriction does not apply to cash collateral
received as a result of portfolio securities lending;
(4) mortgage, pledge or hypothecate its assets except to secure
permitted borrowings;
(5) act as underwriter of the securities issued by others, except to
the extent that the purchase of securities in accordance with a Series'
investment objective and policies directly from the issuer thereof and the
later disposition thereof may be deemed to be underwriting;
(6) purchase securities if such purchase would cause more than 25% in
the aggregate of the market value of the total assets of a Series 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 the Series reserves freedom of action, when
otherwise consistent with its investment policies to, concentrate its
investments in, U.S. Government securities, obligations (other than
commercial paper) issued or guaranteed by U.S. banks, and U.S. branches of
foreign banks and repurchase agreements and securities loans collateralized
by U.S. Government securities or such bank obligations. (For the purposes
of this restriction, state and municipal governments and their agencies and
authorities are not deemed to be industries, and telephone companies are
considered to be a separate industry from water, gas or electric utilities,
personal credit finance companies and business credit finance companies are
deemed to be separate industries and wholly-owned finance companies are
considered to be in the industry of their parents if their activities are
primarily related to financing the activities of their parents. Such
concentration may be effected when the Adviser determines that risk
adjusted returns in such indus tries are considered favorable relative to
other indus tries.)
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<PAGE>
(7) issue senior securities, except as appropriate to evidence
indebtedness that a Series is permitted to incur and except for shares of
existing or additional series of the Trust;
(8) purchase or sell real estate (excluding securities secured by
real estate or interests therein), interests in oil, gas or mineral leases,
commodities or commodities contracts. The Trust reserves the freedom to
hold and to sell real estate acquired for any Series as a result of the
ownership of securities;
(9) make loans to other persons, except loans of portfolio securities
and except to the extent that the purchase of debt obligations and entry
into repurchase agreements in accordance with such Series' investment
objective and policies may be deemed to be loans;
(10) purchase securities on margin (except for delayed delivery or
when-issued transactions or such short-term credits as are necessary for
the clearance of transactions), make short sales of securities, maintain a
short position, or invest in or write puts, calls or combinations thereof
(except that a Series may acquire puts in connection with the acquisition
of a debt instrument);
(11) invest in other companies for the purpose of exercising control
or management.
Each Series may, notwithstanding any other fundamental investment
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
objectives, restrictions and policies as the Series.
As money market funds, the Series must also comply with Rule 2a-7 under the
Act. 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 Series' 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 Series, other than
the ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt California Portfolio,
ILA Tax-Exempt New York Portfolio and FST Tax-Free Fund (the "Tax-Exempt
Series"), as a matter of non-fundamental policy only invests in First Tier
securities. Portfolio diversification. The ILA Prime Obligations, ILA
Government, ILA Treasury Obligations, ILA Money Market, ILA Federal, ILA
Treasury Instruments and ILA Tax-Exempt Diversified Portfolios, FS Prime
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<PAGE>
Obligations, FS Premium, FS Government, FS Treasury Obligations, FS Money
Market, FS Federal, FS Treasury Instruments and FS 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 Series 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. ILA Tax-Exempt
New York and ILA 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 demand features or guarantees (i.e., generally, the right
to sell the security at a price equal to its approximate amortized cost (for a
demand feature) or principal amount (for a guarantee) plus accrued interest),
with respect to 75% of the assets of a Series, no more than 10% of the Series'
total assets may be invested in securities issued by or subject to demand
features or guarantees issued by the same issuer. In the case of the Tax-Exempt
Series (which are the only Series that invest in Second Tier securities),
subject to certain exceptions immediately after the acquisition of a demand
feature or guarantee that is a Second Tier security, no more than 5% of the Tax-
Exempt Series' total assets may be invested in securities or demand features or
guarantees issued by the institution that issued the demand feature or
guarantee. The Tax-Exempt Series' investment in Second Tier securities that are
conduit securities, (which, generally, 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 U.S. Government securities or securities
with a guarantee by a non-controlled person, may not exceed 1% of the Series'
total assets. Also, the Tax-Exempt Series' investment in Second Tier conduit
securities of all issuers combined may not exceed 5% of the Series 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 or by the only NRSRO which has assigned a rating, but which are
not First Tier Securities are "Second Tier Securities." NRSROs include S&P,
Moody's, Duff and Phelps, Inc., Fitch IBCA Inc., and Thomson BankWatch, Inc. For
a description of their rating categories, see Appendix A.
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<PAGE>
"Value" for the purposes of all investment restrictions shall mean the
value used in determining a Series' net asset value. "U.S. Government
securities" shall mean securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities.
In addition to the fundamental policies mentioned above, the Board of
Trustees of the Trust has adopted the following non-fundamental policies with
respect to the Financial Square Funds which may be changed or amended by action
of the Board of Trustees without approval of shareholders. Accordingly, the
Trust may not, on the behalf of any Series:
(a) invest in companies for the purpose of exercising control or
management.
(b) invest more than 10% of a Series' 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 Series' borrowings exceed 5% of
its net assets.
(d) make short sales of securities, except short sales against the box.
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 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, 55 Chairman Executive Vice President -
1325 Ave. of Americas Finance and Administration and
New York, NY 10019 Chief Financial Officer Coty
Inc. (since April 1996);
President, ABN Associates (June
1994 to March 1996); Senior Vice
President of Scott Paper Company
(until June 1994); Director of
Arkwright Mutual Insurance
Company; Trustee of International
House of Philadelphia; Member of
Cornell University Council;
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -----------------------
<S> <C> <C>
Trustee of the Walnut Street
Theater.
*David B. Ford, 52 Trustee & Managing Director, Goldman
One New York Plaza President Sachs (since 1996); General
New York, NY 10004 Partner, Goldman Sachs (1986-
1996); Co-Head of Goldman Sachs
Asset Management (since December
1994).
*Douglas C. Grip, 36 Trustee Vice President, Goldman Sachs
One New York Plaza (since May 1996); President,
New York, NY 10004 MFS Retirement Services Inc., of
Massachusetts Financial Services
(prior thereto).
*John P. McNulty, 45 Trustee Managing Director, Goldman
One New York Plaza Sachs (since 1996); General
New York, NY 10004 Partner of Goldman Sachs (1990-
1994 and 1995-1996); Co-Head of
Goldman Sachs Asset Management
(since November 1996); Limited
Partner of Goldman Sachs (1994 to
November 1995).
Mary P. McPherson, 62 Trustee President of Bryn Mawr College
Taylor Hall (since 1978); Director of
Bryn Mawr, PA 19010 Josiah Macy, Jr. Foundation
(since 1977); Director of the
Philadelphia Contributionship
(since 1985); Director of Amherst
College (since 1986); Director of
Dayton Hudson Corporation (since
1988); Director of the Spencer
Foundation (since 1993); and
member of PNC Advisory Board
(since 1993).
*Alan A. Shuch, 49 Trustee Limited Partner, Goldman Sachs
One New York Plaza (since 1994); Director and
New 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); Limited
Partner, Goldman Sachs since
December 1994.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -----------------------
<S> <C> <C>
Jackson W. Smart, 67 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, 68 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 retirement in
June 1992); Director, Walgreen
Co. (a retail drug store
business); Director of Baker,
Fentress & Co. (a closed-end,
non-diversified management
investment company) (April 1992
to present).
Richard P. Strubel, 59 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).
*John M. Perlowski, 33 Treasurer Vice President, Goldman Sachs
One New York Plaza (since July 1995); Director,
New York, NY 10004 Investors Bank and Trust
(November 1993 to July 1995);
Audit Manager of Arthur Andersen
LLP (prior thereto).
*John W. Mosior, 59 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL 60606 Servicing of GSAM (since November
1989).
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -----------------------
<S> <C> <C>
*Nancy L. Mucker, 48 Vice Vice President, Goldman Sachs
4900 Sears Tower President (since April 1985); Manager of
Chicago, IL 60606 Shareholder Servicing of GSAM
(since November 1989).
James A. Fitzpatrick, 33 Vice Vice President of Goldman Sachs
4900 Sears Tower President Asset Management (since April
Chicago, IL 60606 1997); Vice President and General
Manager, First Data Corporation -
Investor Services Group (prior
thereto).
*Michael J. Richman, 37 Secretary General Counsel of the Mutual
85 Broad Street Funds Group of Goldman Sachs
New York, NY 10004 Asset Management (since December
1997); Associate General Counsel
of Goldman Sachs Assets
Management (February 1994 to
December 1997); Vice President
and Assistant 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).
*Howard B. Surloff, 32 Assistant Assistant General Counsel,
85 Broad Street Secretary Goldman Sachs Asset Management
New York, NY 10004 and Associate General Counsel to
the Funds Group (since December
1997); Assistant General Counsel and
Vice President, Goldman Sachs
(since November 1993 and May
1994, respectively ); Counsel to
the Funds Group, Goldman Sachs
Asset Management (since November
1993); Associate of Shereff
Friedman, Hoffman & Goodman
(prior thereto).
*Valerie A. Zondorak, 32 Assistant Assistant General Counsel,
85 Broad Street Secretary Goldman Sachs Asset Management
New York, NY 10004 and Associate General Counsel to
the Funds Group (since December
1997); Vice President, Goldman
Sachs (since March 1997); Counsel
to the Funds Group, Goldman Sachs
Asset Management (since
March
</TABLE>
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<PAGE>
<TABLE>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- ----------- ---------- -----------------------
<S> <C> <C>
1997); Associate of Shereff
Friedman, Hoffman & Goodman
(prior thereto).
*Steven E. Hartstein, 34 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, 26 Assistant Administrative Assistant, Goldman
85 Broad Street Secretary Sachs (January 1996 to present);
New York, NY 10004 Secretary, Goldman Sachs (January
1994 to January 1996); Secretary,
Cleary Gottlieb, Steen and
Hamilton (September 1990
January 1994).
*Kaysie P. Uniacke, 37 Assistant Vice President and Senior
One New York Plaza Secretary Portfolio Manager, Goldman Sachs
New York, NY 10004 Asset Management (since 1988).
*Elizabeth D.
Anderson, 28 Assistant Portfolio Manager, GSAM (April
One New York Plaza Secretary 1996 to present); Junior
New York, NY 10004 Portfolio Manager, Goldman Sachs
Asset Management (1995 to April
1996); Funds Trading Assistant,
GSAM (1993-1995); Compliance Ana-
lyst, 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 3, 1998, 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 Series.
The Trust pays each Trustee, other than those who are "interested
persons" of Goldman Sachs, a fee for each Trustee meeting attended and an annual
fee. Such Trustees are also reimbursed for travel expenses incurred in
connection with attending such meetings.
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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,
1997:
Pension or Total
Retirement Compensation
Benefits from Goldman
Aggregate Accrued as Sachs Mutual
Compensation Part of Funds
from the Series' (including the
Name of Trustee Series Expenses Series)*
------ -------- -------
Ashok N. Bakhru $47,813 $0 $69,299
David B. Ford $0 $0 $0
Douglas C. Grip $0 $0 $0
Mary P. McPherson $0 $70,500
Alan A. Shuch $0 $0 $0
Jackson W. Smart $29,198 $0 $70,500
William H. Springer $29,198 $0 $70,500
Richard P. Strubel $29,198 $0 $70,500
______________
* The Goldman Sachs Mutual Funds consisted of 44 mutual funds,
including the nine portfolios, on December 31, 1997.
THE ADVISER, DISTRIBUTOR AND
TRANSFER AGENT
THE ADVISER
GSAM, a separate operating division of Goldman Sachs, acts as the
investment adviser to the Series. Under the Management Agreement between
Goldman Sachs on behalf of GSAM and the Trust on behalf of the Series, GSAM,
subject to the supervision of the Board of Trustees of the Trust and in
conformity with the stated policies of each Series, acts as investment adviser
and directs the investments of the Series. In addition, GSAM administers the
Series' 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
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annual rate of .35% and .205% of each ILA Portfolio's and Financial Square
Fund's average daily net assets, respectively. 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 Series, on an annualized basis, to .06% of
the average daily net assets of the ILA Treasury Instruments, ILA Money Market,
ILA Federal, ILA Tax-Exempt Diversified and ILA Tax-Exempt New York Portfolios;
to .07% of the average daily net assets of the ILA Prime Obligations, ILA
Treasury Obligations, ILA Government and ILA Tax-Exempt California Portfolios;
and to .01% of the average daily net assets of each Financial Square Fund. The
amount of such reductions or limits, if any, are calculated monthly and are
based on the cumulative difference between a Series' estimated annualized
expense ratio and the expense limit for that Series. This amount shall be
reduced by any prior payments related to the current fiscal year. GSAM has also
voluntarily agreed to waive a portion of its advisory fee for the ILA Treasury
Instruments, ILA Money Market, ILA Federal, ILA Tax-Exempt Diversified, ILA Tax-
Exempt New York Portfolios and Financial Square Funds during the fiscal year
ended December 31, 1997.
The Trust, on behalf of each Series, is responsible for all expenses
other than those expressly borne by GSAM under the Series' Management Agreement.
The expenses borne by Units of each Series include, without limitation, the fees
payable to GSAM, the fees and expenses of the Series' custodian, fees and
expenses of the Series' transfer agent, filing fees for the registration or
qualification of Units under federal or state securities laws, expenses of the
organization of the Series, 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 Series 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 Series), 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 Series.
The Management Agreement entered into on behalf of the ILA Portfolios
(the "ILA Management Agreement") was most recently approved by the Board of
Trustees, including the "non-interested" Trustees, on April 22, 1998 and by the
unitholders of each ILA Portfolio (other than the ILA Treasury Instruments and
ILA Tax-Exempt New York Portfolios) on April 19, 1990 and by the
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unitholders of the ILA Treasury Instruments and ILA Tax-Exempt New York
Portfolios on June 3, 1991. The ILA 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 ILA Portfolio, as defined in the Act, and, in either case, by a
majority of "non-interested" Trustees.
For the fiscal years ended December 31, 1997, December 31, 1996 and
December 31, 1995 the amount of the Management fee incurred by each ILA
Portfolio was as follows:
ILA PORTFOLIO 1997 1996 1995
------------- ---- ---- ----
Prime Obligations Portfolio $4,412,869 $5,185,990 $6,728,074
Money Market Portfolio $3,744,112 2,955,074 2,618,275
Treasury Obligations Portfolio $2,682,436 3,157,511 3,206,490
Treasury Instruments Portfolio $1,250,151 1,555,342 1,079,236
Government Portfolio $2,258,653 2,509,206 3,259,056
Federal Portfolio $5,630,323 5,426,430 4,543,196
Tax-Exempt Diversified Portfolio $4,244,463 3,850,742 3,795,451
Tax-Exempt California Portfolio $1,803,245 1,410,751 1,030,447
Tax-Exempt New York Portfolio $ 300,711 266,835 234,853
GSAM agreed not to impose a portion of its advisory fees for the
fiscal years ended December 31, 1997, December 31, 1996 and December 31, 1995
with respect to the ILA Money Market, ILA Treasury Instruments, ILA Federal, ILA
Tax-Exempt Diversified and ILA Tax-Exempt New York Portfolios. Had such fees
been imposed, the following additional fees would have been incurred for the
periods indicated:
ILA PORTFOLIO 1997 1996 1995
------------- ---- ---- ----
Money Market Portfolio $ 525,057 $ 492,512 $ 436,325
Treasury Instruments Portfolio 1,551,858 2,073,789 1,438,992
Federal Portfolio 3,925,458 4,069,823 3,407,655
Tax-Exempt Diversified Portfolio 1,543,881 1,540,297 1,518,129
Tax-Exempt New York Portfolio 93,920 92,366 109,464
In addition, GSAM assumed certain expenses related to the operations
of each ILA Portfolio during various periods of 1997, 1996 and 1995 to the
extent such expenses would have caused each ILA 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
expenses would have been incurred for such years:
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ILA PORTFOLIO 1997 1996 1995
------------- ---- ---- ----
Prime Obligations Portfolio $160,669 $234,432 $347,317
Money Market Portfolio 67,224 243,590 135,715
Treasury Obligations Portfolio 6,756 212,886 203,882
Treasury Instruments Portfolio 80,196 220,794 223,652
Government Portfolio 30,990 231,536 276,785
Federal Portfolio 44,904 452,463 302,153
Tax-Exempt Diversified Portfolio 1,052 24,367 239,829
Tax-Exempt California Portfolio 21,406 22,092 19,625
Tax-Exempt New York Portfolio 25,375 16,029 32,403
Prior to May 1, 1997, the Financial Square 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 "FS Management Agreement"). The services required to be
performed for the Financial Square Funds and the combined advisory and
administration fees payable by the Financial Square Funds under the former
advisory and administration agreements are identical to the services and fees
under the FS Management Agreement. For the fiscal years ended December 31,
1997, December 31, 1996 and December 31, 1995 the amounts of the management fee
(including both advisory and administration fees) incurred by each Financial
Square Fund (other than the FS Municipal Fund, which had not yet commenced
operations) were as follows:
FINANCIAL SQUARE FUND 1997 1996 1995
--------------------- ---- ---- ----
FS Prime Obligations Fund $8,706,734 $8,504,328 $7,194,392
FS Money Market Fund 8,298,316 5,131,644 3,236,027
FS Treasury Obligations Fund 5,329,826 4,121,944 2,401,903
FS Government Fund 3,562,882 2,179,655 1,119,731
FS Tax-Free Fund 1,405,152 930,176 459,413
FS Premium Money Market
Fund/(1)/ 50,146 N/A N/A
FS Treasury Instruments
Fund/(1)/ 383,414 N/A N/A
FS Federal Fund/(1)/ 1,623,443 N/A N/A
_______________________
/(1)/ FS Premium Money Market Fund, FS Treasury Instruments Fund and FS Federal
Fund commenced operations on August 1, 1997, March 3, 1997 and February
28, 1997, respectively.
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GSAM has agreed that it will not impose a portion of its management fee.
Had such fees been imposed, the following additional fees (including both
advisory and administration fees) would have been incurred by these Series for
the periods indicated:
FINANCIAL SQUARE FUND 1997 1996 1995
--------------------- ---- ---- ----
Prime Obligations Fund $1,792,563 $1,750,891 $3,173,924
Money Market Fund 1,708,477 1,142,133 1,063,477
Treasury Obligations Fund 1,097,197 848,635 1,747,326
Government Fund 733,442 448,753 493,804
Tax-Free Money Market Fund 289,296 219,242 304,151
FS Premium Money Market
Fund/(1)/ $ 104,092 N/A N/A
FS Treasury Instruments
Fund/(1)/ 80,267 N/A N/A
FS Federal Fund/(1)/ 344,281 N/A N/A
__________________________
/(1)/ FS Premium Money Market Fund, FS Treasury Instruments Fund and FS Federal
Fund commenced operations on August 1, 1977, March 3, 1997 and February 28,
1997, respectively.
The FS Management Agreement entered into on behalf of the Financial Square
Funds was most recently approved by the Trust ees, including the "non-
interested" Trustees, on April 22, 1998. The Financial Square Funds'
shareholders approved the FS Management Agreement on April 21, 1997. The FS
Management Agree ment will remain in effect until June 30, 1999 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 Financial Square Fund (as
defined in the 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 operations of
each Financial Square Fund during various periods of 1997, 1996 and 1995 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:
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FINANCIAL SQUARE FUND 1997 1996 1995
--------------------- ---- ---- ----
FS Prime Obligations Fund $718,967 $637,605 $382,318
FS Money Market Fund 791,686 456,796 420,234
FS Treasury Obligations 574,345 551,885 280,395
FS Government Fund 512,637 352,113 197,008
FS Tax-Free Money Market Fund 166,670 83,097 83,376
FS Premium Money Market
Fund/(1)/ 164,216 N/A N/A
FS Treasury Instruments
Fund/(1)/ 162,710 N/A N/A
FS Federal Fund/(1)/ 567,341 N/A N/A
__________________________
/(1)/ FS Premium Money Market Fund, FS Treasury Instruments Fund and FS Federal
Fund commenced operations on August 1, 1997, March 3, 1997 and February
28, 1997, respectively.
The ILA Management and FS Management Agreements provide that GSAM shall not
be liable to an ILA Portfolio or Financial Square Fund for any error of judgment
by GSAM or for any loss sustained by the ILA Portfolio or Financial Square Fund
except in the case of GSAM's willful misfeasance, bad faith, gross negligence or
reckless disregard of duty. Each ILA Portfolio or Financial Square Fund may use
any name derived from the name "Goldman Sachs" only so long as the ILA
Management and FS Management Agreements remain in effect. The ILA Management
and FS Management Agreements also provide that they shall terminate
automatically if assigned and that they may be terminated with respect to any
particular ILA Portfolio or Financial Square Fund without penalty by vote of a
majority of the Trustees or a majority of the outstanding voting securities of
that ILA Portfolio or Financial Square Fund on 60 days' written notice to GSAM
or by GSAM without penalty at any time on 90 days' (60 days with respect to an
Financial Square Fund) written notice to the Trust.
In managing the ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt
California Portfolio, ILA Tax-Exempt New York Portfolio, FS Tax-Free Money
Market Fund and FS Municipal 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 characteristics.
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THE DISTRIBUTOR AND TRANSFER AGENT
Goldman Sachs acts as principal underwriter and distributor of each Series'
units. The Distribution Agreement between Goldman Sachs and the Trust was most
recently approved by the Trustees on April 22, 1998. Goldman Sachs retained
approximately $10,530 of commissions on redemptions of ILA Class B shares during
1997. Goldman Sachs also serves as the Series' transfer agent. Goldman Sachs
provides customary transfer agency services to the Series, 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 ILA Portfolio (other than the ILA Prime Obligations
Portfolio). With respect to the ILA Prime Obligations Portfolio, Goldman Sachs
is entitled to receive a fee from the Series equal to the classes proportionate
share of the total transfer agency fees borne by the Series, 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 and ILA Class C Units and .04% of the average daily net assets of
the other classes of the ILA 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. Goldman Sachs currently imposes
no fees under its transfer agency agreement with the Financial Square Funds.
For the fiscal years ended December 31, 1997, December 31, 1996 and
December 31, 1995 the ILA Portfolios incurred transfer agency fees as follows:
1997 1996 1995
---- ---- ----
Prime Obligations Portfolio $ 535,143 $ 592,685 $768,923
Money Market Portfolio 487,902 394,010 349,060
Treasury Obligations Portfolio 306,564 360,858 366,456
Treasury Instruments Portfolio 320,230 414,758 287,798
Government Portfolio 258,132 286,766 372,463
Federal Portfolio 1,092,179 1,085,286 908,708
Tax-Exempt Diversified Portfoli 661,525 616,119 607,252
Tax-Exempt California Portfolio 206,085 161,229 117,765
Tax-Exempt New York Portfolio 45,100 41,051 39,298
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 28,
1997, Goldman Sachs and its consolidated subsidiaries had assets of
approximately
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$178 billion and partners' capital of $6.1 billion. Goldman Sachs became
registered as an investment adviser in 1981. As of March 23, 1998, Goldman
Sachs, together with its affiliates, acted as investment adviser, administrator
or distributor for approximately $153 billion in total assets.
ACTIVITIES OF GOLDMAN SACHS AND ITS AFFILIATES AND OTHER ACCOUNTS
-----------------------------------------------------------------
MANAGED BY GOLDMAN SACHS. The involvement of the Adviser and Goldman Sachs and
- ------------------------
their affiliates, in the management of, or their interest in, other accounts and
other activities of Goldman Sachs may present conflicts of interest with
respect to the Series or impede their investment activities.
Goldman Sachs and its affiliates, including, without limitation, the
Adviser and its advisory affiliates have proprietary interests in, and may
manage or advise with respect to, accounts or funds (including separate accounts
and other funds and collective investment vehicles) which have investment
objectives similar to those of the Series and/or which engage in transactions in
the same types of securities, currencies and instruments as the Series. Goldman
Sachs and its affiliates are major participants in the global currency,
equities, swap and fixed-income markets, in each case both 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,
currencies, and instruments in which the Series invest. Such activities could
affect the prices and availability of the securities, currencies, and
instruments in which the Series invest, which could have an adverse impact on
each Portfolio's performance. Such transactions, particularly in respect of
proprietary accounts or customer accounts other than those included in the
Adviser's and its advisory affiliates' asset management activities, will be
executed independently of the Portfolios' transactions and thus at prices or
rates that may be more or less favorable. When the Adviser and its advisory
affiliates seek to purchase or sell the same assets for their managed accounts,
including the Series, the assets actually purchased or sold may be allocated
among the accounts on a basis determined in its good faith discretion to be
equitable. In some cases, this system may adversely affect the size or the
price of the assets purchased or sold for the Series.
From time to time, the Series' activities may be restricted because of
regulatory restrictions applicable to Goldman Sachs 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 Adviser, and/or its affiliates,
will not initiate or recommend certain types of transactions in certain
securities or instruments with respect to which the Adviser and/or its
affiliates are performing services or when position limits have been reached.
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In connection with their management of the Series, the Adviser may
have access to certain fundamental analysis and proprietary technical models
developed by Goldman Sachs and other affiliates. The Adviser will not be under
any obligation, however, to effect transactions on behalf of the Series in
accordance 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 Series and it is not anticipated that the
Advisers will have access to such information for the purpose of managing the
Series. 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 Adviser in managing the Series.
The results of each Series' investment activities may differ
significantly from the results achieved by the Adviser and its 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 Series. Moreover, it is possible that a Series 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 Series'
activities, but will not be involved in the day-to-day management of such
Series. In such instances, those individuals may, as a result, obtain
information regarding the Series' 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 activities of Goldman Sachs and its
affiliates in securities, currencies and investments similar to those in which
the Series invests.
In addition, certain principals and certain of the employees of the
Adviser are also principals or employees of Goldman Sachs or its affiliated
entities. As a result, the performance by these principals and employees of
their obligations to such other entities may be a consideration of which
investors in the Series should be aware.
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The Adviser may enter into transactions and invest in instruments 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 Series, and such party may have no incentive to assure that
the Series obtain the best possible prices or terms in connection with the
transactions. Goldman Sachs and its affiliates may also create, write or issue
derivative instruments for customers of Goldman Sachs or its affiliates, the
underlying securities, currencies or instruments of which may be those in which
the Series invest or which may be based on the performance of a Series. The
Series 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 Series. At times, these activities may cause departments of Goldman
Sachs or its affiliates to give advice to clients that may cause these clients
to take actions adverse to the interests of the client. To the extent
affiliated transactions are permitted, the Series will deal with Goldman Sachs
and its affiliates on an arms-length basis.
Each Series will be required to establish business relationships with
its counterparties based on the Series' own credit standing. Neither Goldman
Sachs nor its affiliates will have any obligation to allow their credit to be
used in connection with a Series' establishment of its business relationships,
nor is it expected that a Series' counterparties will rely on the credit of
Goldman Sachs or any of its affiliates in evaluating the Series'
creditworthiness.
From time to time, Goldman Sachs or any of its affiliates may, but is
not required to, purchase and hold shares of a Series in order to increase the
assets of the Series. Increasing a Series' assets may enhance investment
flexibility and diversification and may contribute to economies of scale that
tend to reduce a Series' expense ratio. Goldman Sachs reserves the right to
redeem at any time some or all of the shares of a Series acquired for its own
account. A large redemption of shares of a Series by Goldman Sachs could
significantly reduce the asset size of the Series, which might have an adverse
effect on a Series' investment flexibility, portfolio diversification and
expense ratio. Goldman Sachs will consider the effect of redemptions on a
Series and other unitholders in deciding whether to redeem its units.
PORTFOLIO TRANSACTIONS
GSAM places the portfolio transactions of the Series and of all other
accounts managed by GSAM for execution with many firms.
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GSAM uses its best efforts to obtain execution of portfolio transactions at
prices which are advantageous to each Series and at reasonably competitive
spreads or (when a disclosed commission is being charged) at reasonably
competitive commission rates. In seeking such execution, GSAM will use its best
judgment in evaluating the terms of a transaction, and will give consideration
to various relevant factors, including without limitation the size and type of
the transaction, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the general execution and operational capabilities of the broker-
dealer, the general execution and operational capabilities of the firm, the
reputation, reliability, experience and financial condition of the firm, the
value and quality of the services rendered by the firm in this and other
transactions, and the reasonableness of the spread or commission, if any.
Securities purchased and sold by the Series are generally traded in the over-
the-counter market on a net basis (i.e., without commission) through broker-
dealers and banks acting for their own account rather than as brokers, or
otherwise involve transactions directly with the issuer of such securities.
Goldman Sachs is active as an investor, dealer and/or underwriter in
many types of municipal and money market instruments. Its activities in this
regard could have some effect on the markets for those instruments which the
Series buy, hold or sell. An order has been granted by the SEC under the Act
which permits the Series to deal with Goldman Sachs in transactions in certain
taxable securities in which Goldman Sachs acts as principal. As a result, the
Series may trade with Goldman Sachs as principal subject to the terms and
conditions of such exemption.
Under the Act, the Series 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 Series' 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 Series as well as for one or more of the other clients of GSAM.
Investment decisions for each Series and for GSAM's other clients are made with
a view to achieving
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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 Series is concerned. Each
Series believes that over time its ability to participate in volume transactions
will produce better executions for the Series.
During the fiscal year ended December 31, 1997, the Trust acquired and
sold securities of its regular broker/dealers: Lehman Brothers, Deutsche Bank,
Bear Stearns Cos., CS First Boston, Donaldson, Lufkin & Jenrette, Morgan
Stanley, Swiss Bank Corp., Canadian Imperial Bank, Salomon Brothers, Inc., and
JP Morgan.
As of December 31, 1997, each ILA Portfolio held the following amounts
of securities of its regular broker/dealers; as defined in Rule 10b-1 under the
Act, or their parents ($ in thousands); the ILA Prime Obligations Portfolio -
Bear Sterns ($39,795), Morgan Stanley ($79,219), Swiss Bank ($754), Donaldson,
Lufkin & Jenrette ($372), Salomon ($728); the ILA Money Market Portfolio -
Morgan Stanley ($39,789), Swiss Bank ($12,064), Donaldson, Lufkin & Jenrette
($5,952), Salomon ($11,648), Bear Sterns ($34,816), Canadian Imperial Bank
($15,499), JP Morgan ($9,735), the ILA Government Portfolio -Lehman Brothers
($25,000), Morgan Stanley ($50,000), Swiss Bank ($43,091), Donaldson, Lufkin &
Jenrette ($21,260), Salomon ($41,605); the ILA Treasury Obligations Portfolio -
Swiss Bank ($103,863), Bear Sterns ($35,000), CS First Boston ($30,000), JP
Morgan ($35,000), Morgan Stanley ($35,000), Lehman Brothers ($35,000),
Donaldson, Lufkin & Jenrette ($51,243), and Salomon ($100,282).
As of December 31, 1996, each Financial Square Fund held the following
amounts of securities of its regular broker/dealers as defined in Rule 10b-1
under the Investment Company Act, or their parents ($ in thousands); FS Prime
Obligations Fund - Bear Stearns ($174,079), Swiss Bank Corp. ($152,497), JP
Morgan ($50,000), Donaldson, Lufkin & Jenrette ($75,237), Salomon Brothers
($147,238) Lehman Brothers ($300,000), Morgan Stanley & Co. ($187,081); FS Money
Market Fund - Canadian Imperial Bank
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($62,996), Swiss Bank Corp. ($146,917), JP Morgan ($50,000), Donaldson, Lufkin &
Jenrette ($72,484), Salomon Brothers ($141,851) CS First Boston ($99,836),
Morgan Stanley & Co. ($149,406), Bear Stearns ($109,133); FS Treasury
Obligations Fund - Canadian Imperial Bank ($165,000), Swiss Bank Corp.
($386,123), JP Morgan ($165,000), Donaldson, Lufkin & Jenrette ($190,501), CS
First Boston ($150,000), Morgan Stanley & Co. ($165,000), Bear Stearns
($165,000), Salomon Brothers ($372,809), Lehman Brothers ($165,000); FS
Government Fund - Canadian Imperial Bank ($100,000), Swiss Bank Corp.
($126,823), JP Morgan ($100,000), Donaldson, Lufkin & Jenrette ($62,570),
Salomon Brothers ($122,450) Lehman Brothers ($100,000), Morgan Stanley & Co.
($200,000); FS Premium Money Market Fund - Swiss Bank Corp. ($25,221),
Donaldson, Lufkin & Jenrette ($12,443), CS First Boston ($5,990), Morgan Stanley
& Co. ($5,000), Salomon Brothers - ($24,352), Lehman Brothers ($5,000).
NET ASSET VALUE
The net asset value per unit of each Series (except for FS Government
Fund, FS Premium Fund and FS Treasury Obligations Fund) is determined by the
Series' 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 FS Government
Fund, FS Premium Fund and FS Treasury Obligations Fund, net asset value is
determined normally 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 Chicago, Boston or New York banks are closed for local
holidays. Such holidays include: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day,
Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
Each Series' 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
each Series and its 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
Series would receive if it sold the instrument. During such periods, the yield
to an investor in a Series 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 Series may tend to be higher than a like computation made by
a fund with identical
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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 Series resulted in a lower aggregate portfolio value
on a particular day, a prospective investor in the Series would be able to
obtain a somewhat higher yield if he or she purchased units of the Series on
that day, than would result from investment in a fund utilizing solely market
values, and existing investors in the Series 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 Series' price per unit as computed for the
purpose of sales and redemptions at $1.00. Such procedures include review of
each Series by the Trustees, at such intervals as they deem appropriate, to
determine whether the Series' 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 Series 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
Series' units.
In order to continue to use the amortized cost method of valuation for
each Series' investments, the Series must comply with Rule 2a-7. See
"Investment Restrictions."
The proceeds received by each Series 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 Series and constitute the underlying assets of that Series. The
underlying assets of each Series will be segregated on the books of account,
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and will be charged with the liabilities in respect to such Series and with a
share of the general liabilities of the Trust. Expenses with respect to the
Series are to be allocated in proportion to the net asset values of the
respective Series except where allocations of direct expenses can otherwise be
fairly made. In addition, within each Series, ILA Units, ILA Administration
Units, ILA Service Units, ILA Class B, Class C Units (Prime Obligations
Portfolio only) 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 units of a Series 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 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 Series' units.
The Trust agrees to redeem units of each Series solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the Series 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 Series' 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.
A FST shareholder of any Financial Square 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 Series 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 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
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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 liquidation 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 regulations impose reserve requirements or other restrictions deemed by the
Trustees to be adverse to the interests of the Series.
CALCULATION OF YIELD QUOTATIONS
Each Series' 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 Series. 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 Series.
Each Series 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
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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 ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt California
Portfolio, ILA Tax-Exempt New York Portfolio, ILA Federal Portfolio, ILA
Treasury Instruments Portfolio, FS Treasury Instruments Fund, FS Federal Fund,
FS Tax-Free Fund and FS Municipal Fund may also advertise a tax-equivalent yield
which is computed by dividing that portion of a Series' 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 Series 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 Series 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 Series. The return of a
Series 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 ILA
Portfolio with respect to ILA Units, ILA Administration Units, ILA Service
Units, ILA Class B Units, ILA Class C Units (Cash Management Shares had not been
offered as of December 31, 1997) for the seven-day period ended December 31,
1997 were as follows:
<TABLE>
<CAPTION>
Tax-
Effective Equivalent
Yield Yield Yield
------ ---------- ----------
<S> <C> <C> <C>
ILA Prime Obligations Portfolio:
ILA Units 5.40% 5.55% N/A
ILA Administration Units 5.25% 5.39% N/A
ILA Service Units 5.00% 5.13% N/A
ILA Class B Units 4.40% 4.55% N/A
ILA Class C Units
ILA Money Market Portfolio:
ILA Units 5.57% 5.72% N/A
ILA Administration Units 5.30% 5.46% N/A
ILA Service Units 5.07% 5.19% N/A
ILA Treasury Obligations Portfolio:
ILA Units 5.33% 5.47% N/A
ILA Administration Units 5.18% 5.31% N/A
ILA Service Units 4.92% 5.04% N/A
</TABLE>
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<PAGE>
ILA Treasury Instruments Portfolio:
ILA Units 5.13% 5.26% ____
ILA Administration Units 4.98% 5.10% ____
ILA Service Units 4.73% 4.84% ____
ILA Government Portfolio:
ILA Units 5.65% 5.81% N/A
ILA Administration Units 5.39% 5.55% N/A
ILA Service Units 5.15% 5.28% N/A
ILA Federal Portfolio:
ILA Units 5.64% 5.80% ____
ILA Administration Units 5.39% 5.54% ____
ILA Service Units 5.15% 5.28% ____
ILA Tax-Exempt Diversified Portfolio:
ILA Units 3.72% 3.79% ____
ILA Administration Units 3.57% 3.64% ____
ILA Service Units 3.32% 3.38% ____
ILA Tax-Exempt California Portfolio***:
ILA Units 3.49% 3.55% ____
ILA Administration Units 3.34% 3.40% ____
ILA Service Units** 3.09% 3.14% ____
ILA Tax-Exempt New York Portfolio*
ILA Units 3.61% 3.68% ____
ILA Administration Units 3.46% 3.52% ____
ILA Service Units** 3.21% 3.26% ____
- -------------------------
* ____%, ____% and ____% for the ILA Units, ILA Administration Units and ILA
Service Units, respectively, when taking New York State taxes into account,
and ____%, ____% and ____%, respectively, when taking New York City taxes
into account.
** Assuming such Units had been outstanding and were subject to maximum
administration or service fees.
*** ____%, ____% and ____% for the ILA Units, ILA Administration Units and ILA
Service Units, respectively, when taking California State taxes into account.
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 ILA Portfolio for the same
period would have been as follows:
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<PAGE>
Tax-
Effective Equivalent
Yield Yield Yield
------ ---------- ----------
ILA Prime Obligations Portfolio
ILA Units 5.38% 5.52% N/A
ILA Administration Units 5.23% 5.36% N/A
ILA Service Units 4.98% 5.10% N/A
ILA Class B Units 4.38% 4.52% N/A
ILA Money Market Portfolio
ILA Units 5.43% 5.58% N/A
ILA Administration Units 5.16% 5.32% N/A
ILA Service Units 4.93% 5.05% N/A
ILA Treasury Obligations Portfolio
ILA Units 5.31% 5.45% N/A
ILA Administration Units 5.16% 5.29% N/A
ILA Service Units 4.90% 5.02% N/A
ILA Treasury Instruments Portfolio
ILA Units 4.88% 4.99% ____
ILA Administration Units 4.73% 4.83% ____
ILA Service Units 4.48% 4.57% ____
ILA Government Portfolio
ILA Units 5.33% 5.50% N/A
ILA Administration Units 5.07% 5.24% N/A
ILA Service Units 4.83% 4.97% N/A
ILA Federal Portfolio
ILA Units 5.29% 5.43% ____
ILA Administration Units 5.04% 5.17% ____
ILA Service Units 4.80% 4.91% ____
ILA Tax-Exempt Diversified Portfolio
ILA Units 3.63% 3.69% ____
ILA Administration Units 3.48% 3.54% ____
ILA Service Units 3.23% 3.28% ____
ILA Tax-Exempt California Portfolio***
ILA Units 3.49% 3.55% ____
ILA Administration Units 3.34% 3.40% ____
ILA Service Units** 3.09% 3.14% ____
ILA Tax-Exempt New York Portfolio*
ILA Units 3.51% 3.57% ____
ILA Administration Units 3.36% 3.41% ____
ILA Service Units** 3.11% 3.15% ____
- -----------------------------
* ____%, ____% and ____% for the ILA Units, ILA Administration Units and ILA
Service Units, respectively, when taking New York State taxes into account,
and ____%, ____% and ____%, respectively, when taking New York City taxes
into account.
** Assuming such Units had been outstanding and were subject to maximum
administration or service fees.
*** ____%, ____% and ____% for the ILA Units, ILA Administration Units and ILA
Service Units, respectively, when taking the California State Taxes into
account.
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<PAGE>
The yield, effective yield and tax-equivalent yield of each Financial Square
Fund, with respect to FST Shares, FST Adminis tration Shares, FST Service Shares
and FST Preferred Shares for the seven-day period ended December 31, 1997 were
as follows:
Effective Tax-Equivalent
Yield Yield Yield
--------------------------------
FS Prime Obligations Fund:
FST Shares 5.64 5.80 N/A
FST Administration Shares 5.39 5.54 N/A
FST Service Shares 5.15 5.28 N/A
FST Preferred Shares 5.54 5.70 N/A
FS Money Market Fund:
FST Shares 5.65 5.81 N/A
FST Administration Shares 5.39 5.55 N/A
FST Service Shares 5.15 5.28 N/A
FST Preferred Shares 5.55 5.71 N/A
FS Treasury Obligations Fund:
FST Shares 5.57 5.72 N/A
FST Administration Shares 5.30 5.46 N/A
FST Service Shares 5.07 5.19 N/A
FST Preferred Shares 5.47 5.62 N/A
FS Treasury Instruments Fund:
FST Shares 5.10 5.23 N/A
FST Administration Shares 4.84 4.97 N/A
FST Service Shares 4.60 4.71 N/A
FST Preferred Shares 5.00 5.13 N/A
FS Government Fund:
FST Shares 5.62 5.78 N/A
FST Administration Shares 5.37 5.52 N/A
FST Service Shares 5.12 5.25 N/A
FST Preferred Shares 5.52 5.68 N/A
FS Federal Fund:
FST Shares 5.54 5.69 N/A
FST Administration Shares 5.29 5.43 N/A
FST Service Shares 5.04 5.17 N/A
FST Preferred Shares 5.44 5.59 N/A
FS Tax-Free Fund:
FST Shares 3.88 3.95 6.42
FST Administration Shares 3.62 3.69 5.60
FST Service Shares 3.38 3.43 5.60
FST Preferred Shares 3.78 3.85 6.26
FS Premium Money Market Fund:
FST Shares 5.69 5.85 N/A
FST Administration Shares 5.44 5.59 N/A
FST Service Shares 5.21 5.32 N/A
FST Preferred Shares 5.59 5.75 N/A
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
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and the tax-equivalent yield of each Financial Square Fund for the same period
would have been as follows:
Effective Tax-Equivalent
Yield Yield Yield
--------------------------------
FS Prime Obligations Fund:
FST Shares 5.59 5.75 N/A
FST Administration Shares 5.34 5.49 N/A
FST Service Shares 5.10 5.23 N/A
FST Preferred Shares 5.49 5.65 N/A
FS Money Market Fund:
FST Shares 5.60 5.76 N/A
FST Administration Shares 5.34 5.50 N/A
FST Service Shares 5.10 5.23 N/A
FST Preferred Shares 5.50 5.66 N/A
FS Treasury Obligations Fund:
FST Shares 5.50 5.65 N/A
FST Administration Shares 5.23 5.39 N/A
FST Service Shares 5.00 5.12 N/A
FST Preferred Shares 5.40 5.55 N/A
FS Treasury Instruments Fund:
FST Shares 5.02 5.14 N/A
FST Administration Shares 4.76 4.88 N/A
FST Service Shares 4.52 4.62 N/A
FST Preferred Shares 4.92 5.04 N/A
FS Government Fund:
FST Shares 5.55 5.70 N/A
FST Administration Shares 5.30 5.44 N/A
FST Service Shares 5.05 5.17 N/A
FST Preferred Shares 5.45 5.60 N/A
FS Federal Fund:
FST Shares 5.47 5.62 N/A
FST Administration Shares 5.22 5.36 N/A
FST Service Shares 4.97 5.10 N/A
FST Preferred Shares 5.37 5.52 N/A
FS Tax-Free Fund:
FST Shares 3.84 3.91 6.36
FST Administration Shares 3.58 3.65 5.93
FST Service Shares 3.34 3.39 5.53
FST Preferred Shares 3.74 3.81 6.19
FS Premium Money Market Fund:
FST Shares 5.44 5.58 N/A
FST Administration Shares 5.19 5.32 N/A
FST Service Shares 4.96 5.05 N/A
FST Preferred Shares 5.34 5.48 N/A
The quotations of tax-equivalent yield set forth above for the seven-day
period ended December 31, 1997 are based on a federal marginal tax rate of
39.6%.
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With respect to the ILA Tax-Exempt California Portfolio, the California top
marginal State personal income tax rate of 9.30% is being assumed in addition to
the 39.6% federal tax rate, for a combined tax rate of 46.42%. With respect to
the ILA Tax-Exempt New York Portfolio, the tax equivalent yields are being shown
under three scenarios. The first scenario assumes a federal marginal tax rate
of 39.6%, the second scenario assumes a New York top marginal State personal
income tax rate of 6.85%, for a combined effective tax rate of 44.94%. The
third scenario assumes a New York City top marginal personal income tax rate of
4.46% in addition to the above federal and New York State tax rates, for a
combined effective tax rate of 47.63%. 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 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 Series may publish an indication of its past
performance as measured by independent sources such as (but not limited to)
Lipper Analytical Services, Incorporated, Weisenberger Investment Companies
Service, Donoghue's Money Fund Report, Barron's, Business Week, Changing Times,
Financial World, Forbes, Money, Morningstar Mutual Funds, Micropal, Personal
Investor, Sylvia Porter's Personal Finance, and The Wall Street Journal.
The Trust may also advertise information which has been provided to the
NASD for publication in regional and local newspapers. In addition, the Trust
may from time to time advertise a Series' performance relative to certain
indices and benchmark investments, including (without limitation): inflation and
interest rates, certificates of deposit (CDs), money market deposit accounts
(MMDAs), checking accounts, savings accounts and repurchase agreements. The
Trust may also compare a Series' performance with that of other mutual funds
with similar investment objectives.
The composition of the investments in such mutual funds, comparative
indices and the characteristics of such benchmark investments are not identical
to, and in some cases are very different from, those of a Series. Indices and
averages are
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generally unmanaged and the items included in the calculations of such indices
and averages may not be identical to the formulas used by a Series to calculate
its performance data.
A Series' performance data will be based on historical results and is not
intended to indicate future performance. A Series' performance will vary based
on market conditions, portfolio expenses, portfolio investments and other
factors. Return for a Series will fluctuate unlike certain bank deposits or
other investments which pay a fixed yield or return.
The Trust may also, at its discretion, from time to time make a list of a
Series' holdings available to investors upon request. The Trust may from time
to time summarize the substance of discussions contained in shareholder reports
in advertisements and publish the Adviser's views as to markets, the rationale
for a Series' investments and discussions of a Fund's current holdings.
In addition, from time to time, quotations from articles from financial and
other publications, such as those listed above, may be used in advertisements,
sales literature and in reports to unitholders.
TAX INFORMATION
Each Series 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 Series 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"); and (b) 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 Series' 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
Series' 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 Series' total
(gross) assets is invested in the securities (other than U.S. Government
securities and securities of other regulated investment companies) of any
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one issuer or two or more issuers controlled by the Series 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 Series, 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 unitholders with respect to any taxable year in
accordance with the Code's timing and other requirements, provided that the
Series 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 Series that earns tax-exempt interest, at
least 90% of the excess of the tax-exempt interest it earns over certain
disallowed deductions. A Series 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 Series 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 Series paid no federal income tax.
Dividends paid by a Series 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
Series 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 Series have been held by such
unitholders, and also will not qualify for the corporate dividends-received
deduction. A Series' net realized capital gains for a taxable year are computed
by taking into account
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realized capital losses, including any capital loss carryforward of that Series.
At December 31, 1997, the following Series had approximately the following
amounts of capital loss carryforwards:
Amount Year of Expiration
------ ------------------
FS Tax Free Money Market Fund $14,940 2003-2005
FS Federal Fund 7,673 2005
Distributions paid by the ILA Tax-Exempt Diversified, ILA Tax-Exempt
California, ILA Tax-Exempt New York Portfolios, FS Tax-Free Fund or FS Municipal
Fund 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 Series' 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 Series 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 Series 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 Series 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 ILA Tax-Exempt Diversified, ILA Tax-Exempt
California, ILA Tax-Exempt New York Portfolios and FS Tax-Free and FS Municipal
Funds 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 Series will generally not be
deductible. The availability of tax-exempt obligations and the value of the
Series may be affected by restrictive tax legislation enacted in recent years.
In purchasing municipal obligations, the ILA Tax-Exempt Diversified, ILA
Tax-Exempt California, ILA Tax-Exempt New York Portfolios, FS Tax-Free and FS
Municipal Funds 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
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tax-exempt nature of such interest under the personal income tax laws of a
particular state. These Series 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 Series 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 Series intends to
satisfy any procedural requirements to qualify for benefits under these
treaties. Although no Series 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 Series, that
Series 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 Series 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. 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 Series 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 Series 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 Series
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 ILA Tax-Exempt
Diversified Portfolio, ILA Tax-Exempt California, ILA Tax-Exempt New York
Portfolio or FS Tax-Free or FS Municipal Funds will not be subject to backup
withholding if the applicable Series reasonably
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estimates that at least 95% of its distributions will be exempt-interest
dividends. The Series 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 Series 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 or Class C 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 Series 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 Series 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 ILA Tax-Exempt Diversified Portfolio, ILA Tax-
Exempt California Portfolio, ILA Tax-Exempt New York Portfolio, FS Tax-Free Fund
and FS Municipal Fund the amounts that qualify as exempt-interest dividends and
any portions of such amounts that constitute tax preference items under the
federal alternative minimum tax. Unitholders who receive exempt-interest
dividends and have not held their units of the applicable Series 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 Series. Each unitholder should
consult his or her own tax advisor to determine the tax consequences of an
investment in a Series 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.
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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 Series, 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 Series and, if a current IRS Form W-8 or acceptable substitute is not on
file with the Series, may be subject to backup withholding on certain payments.
STATE AND LOCAL
The Trust may be subject to state or local taxes in jurisdictions in which
the Trust may be deemed to be doing business. In addition, in those states or
localities which have income tax laws, the treatment of a Series and its
unitholders under such laws may differ from their treatment under Federal income
tax laws, and an investment in the Series may have tax consequences for
unitholders that are different from those of a direct investment in the Series'
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 Series 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 certain state-specific
requirements and/or limitations. See also the discussion below of these
applicable provisions in California and New York.
Provided that the Series qualify as regulated investment companies and
incur no federal income tax liability, the Series 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 ILA 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 ILA Tax-Exempt
California
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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 ILA 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 ILA 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 ILA Tax-Exempt California Portfolio will not be deductible
for California personal income tax purposes.
In addition, any loss realized by a unitholder of the ILA 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
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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 ILA 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 ILA 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 ILA 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 Series were reorganized from series of a Massachusetts business Trust
as part of Goldman Sachs Trust, a Delaware business trust, by a Declaration of
Trust dated January 28, 1997 on April 30, 1997.
The Act requires that where more than one class or series of units exists,
each class or series must be preferred over all other classes or series in
respect of assets specifically allocated to such class or series. The Trustees
also have authority to classify and reclassify any series of units into one or
more classes of units. As of the date of this Statement of Additional
Information, the Trustees have authorized the issuance
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of up to three classes of units of each of the ILA Portfolios: ILA Units, ILA
Administration Units and ILA Service Units. In addition, the Trustees have
authorized a fourth and fifth class of units, ILA Class B Units and ILA Class C
Units, with respect to the Prime Obligations Portfolio. The Trustees have also
authorized Cash Management Shares of the ILA Prime Obligations Portfolio, ILA
Money Market Portfolio, ILA Government Portfolio, ILA Tax-Exempt Diversified
Portfolio, ILA Tax-Exempt California Portfolio and ILA Tax-Exempt New York
Portfolio. As of the date of this Statement of Additional Information, the
Trustees have authorized the issuance of up to four classes of shares of each of
the Financial Square Funds: FST Shares, FST Service Shares, FST Administration
Shares and FST Preferred Shares.
Each ILA Unit, ILA Administration Unit, ILA Service Unit, ILA Class B Unit,
ILA Class C Unit, Cash Management Share, FST Share, FST Administration Share,
FST Service Share and FST Preferred Share of a Series represents an equal
proportionate interest in the assets belonging to that Series. It is
contemplated that most units (other than ILA Class B or Class C 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 and Class C Units generally are only issued upon
exchange from Class B or Class C Shares, respectively, of other Series of the
Goldman Sachs mutual funds. ILA Units and FST Shares 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 and FST Administration Shares 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 or FST Administration Shares. ILA Administration Units of
each ILA 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. FST Administration
Shares of a Financial Square 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.
ILA Service Units and FST Service Shares 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 or
FST Service Shares, 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. FST Service Shares of a Financial Square Fund bear the cost of service
fees at the annual
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rate of up to .50 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
customers, including acting directly or through an agent, as the sole
shareholder of record, maintaining account records of its customers and
processing orders to purchase, redeem and exchange FST Preferred Shares. FST
Preferred Shares of a Financial Square 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. ILA Class B Units of the Prime Obligations Portfolio are
sold subject to a contingent deferred sales charge of up to 5.0% and ILA Class C
Units are sold subject to a contingent deferred sales charge of 1.0% if redeemed
within 12 months of purchase. ILA Class B and Class C Units are sold 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 and Class C Units 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 and Class C Units,
respectively. ILA Class B and Class C Units 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 and Class
C Units. Cash Management Shares may be purchased for accounts held in the name
of an institution that provides certain account administration and shareholder
liaison services to its customers, including maintenance of account records,
processing orders to purchase, redeem and exchange Cash Management Shares,
responding to customer inquiries and assisting customers with investment
procedures. Cash Management Shares 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. Cash
Management Shares also bear the cost of distribution (Rule 12b-1) fees at an
annual rate of .50% of the average daily net assets attributable to Cash
Management Shares.
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 Series. In the event a Series
is distributed by salespersons or any other persons, they may receive different
compensation with respect to different classes of units of the Series. ILA
Administration Units, ILA Service Units, ILA Class B Units, ILA Class C Units,
Cash Management Shares, FST Administration Shares, FST Preferred Shares and FST
Service Shares 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 ILA 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 ten
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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.
Rule 18f-2 under the Act provides that any matter required to be submitted
by the provisions of the Act or applicable state law, or otherwise, to the
holders of the outstanding voting securities of an investment company such as
the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding units of each class or
series affected by such matter. Rule 18f-2 further provides that a class or
series shall be deemed to be affected by a matter unless the interests of each
class or series in the matter are substantially identical or the matter does not
affect any interest of such class or series. However, Rule 18f-2 exempts the
selection of independent public accountants, the approval of principal
distribution contracts and the election of directors from the separate voting
requirements of Rule 18f-2.
When issued units are fully paid and non-assessable. In the event of
liquidation, unitholders are entitled to share pro rata in the net assets of the
applicable class of the relevant Series available for distribution to such
unitholders. All units entitle their holders to one vote per unit, are freely
transferable and have no preemptive subscription or conversion rights.
The Trust is not required to hold annual meetings of shareholders and does
not intend to hold such meetings. In the event that a meeting of shareholders
is held, each share of the Trust will be entitled, as determined by the Trustees
without the vote or consent of shareholders, either to one vote for each share
or to one vote for each dollar of net asset value represented by such shares on
all matters presented to unitholders including the election of Trustees (this
method of voting being referred to as "dollar based voting"). However, to the
extent required by the Act or otherwise determined by the Trustees, series and
classes of the Trust will vote separately from each other. Shareholders of the
Trust do not have cumulative voting rights in the election of Trustees.
Meetings of shareholders of the Trust, or any series or class thereof, may be
called by the Trustees, certain officers or upon the written request of holders
of 10% or more of the shares entitled to vote at such meetings. The
shareholders of the Trust will have voting rights only with respect to the
limited number of matters specified in the Declaration of Trust and such other
matters as the Trustees may determine or may be required by law.
The Declaration of Trust provides for indemnification of Trustees, officers
and agents of the Trust unless the recipient is adjudicated (i) to be liable by
reason of willful misfeasance,
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bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office or (ii) not to have acted in good faith in the
reasonable belief that such person's actions were in the best interest of the
Trust. The Declaration of Trust provides that, if any shareholder or former
shareholder of any series is held personally liable solely by reason of being or
having been a shareholder and not because of the shareholder's acts or omissions
or for some other reason, the shareholder or former shareholder (or heirs,
executors, administrators, legal representatives or general successors) shall be
held harmless from and indemnified against all loss and expense arising from
such liability. The Trust acting on behalf of any affected series, must, upon
request by such shareholder, assume the defense of any claim made against such
shareholder for any act or obligation of the series and satisfy any judgment
thereon from the assets of the series.
The Declaration of Trust permits the termination of the Trust or of any
series or class of the Trust (i) by a majority of the affected shareholders at a
meeting of shareholders of the Trust, series or class; or (ii) by a majority of
the Trustees without shareholder approval if the Trustees determine that such
action is in the best interest of the Trust or its shareholders. The factors
and events that the Trustees may take into account in making such determination
include (i) the inability of the Trust or any successor series or class to
maintain its assets at an appropriate size; (ii) changes in laws or regulations
governing the Trust, or any series or class thereof, or affecting assets of the
type in which it invests; or (iii) economic developments or trends having a
significant adverse impact on their business or operations.
The Declaration of Trust authorizes the Trustees without shareholder
approval to cause the Trust, or any series thereof, to merge or consolidate with
any corporation, association, trust or other organization or sell or exchange
all or substantially all of the property belonging to the Trust or any series
thereof. In addition, the Trustees, without shareholder approval, may adopt a
"master-feeder" structure by investing all or a portion of the assets of a
series of the Trust in the securities of another open-end investment company.
The Declaration of Trust permits the Trustees to amend the Declaration of
Trust without a shareholder vote. However, shareholders of the Trust have the
right to vote on any amendment (i) that would affect the voting rights of
shareholders, (ii) that is required by law to be approved by shareholders; (iii)
that would amend the voting provisions of the Declaration of Trust; or (iv) that
the Trustees determine to submit to shareholders.
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The Trustees may appoint separate Trustees with respect to one or more
series or classes of the Trust's shares (the "Series Trustees"). To the extent
provided by the Trustees in the appointment of Series Trustees, Series Trustees
(a) may, but are not required to, serve as Trustees of the Trust or any other
series or class of the Trust; (b) may have, to the exclusion of any other
Trustee of the Trust, all the powers and authorities of Trustees under the
Declaration of Trust with respect to any other series or class; and/or (c) may
have no power or authority with respect to any other series or class. The
Trustees are not currently considering the appointment of Series Trustees for
the Trust.
As of April 3, 1998, the only holders of record of 5% or more of the
outstanding units of the ILA Prime Obligations Portfolio were Duquesne Capital
Management, Inc., 2579 Washington Rd. Ste. 322, Pittsburgh, PA 15241-2563
(12.29%); and National Financial Services, Co., P.O. Box 3752, Church Street
Station, New York, NY 10008 (5.91%).
As of April 3, 1998, the only holders of record of 5% or more of the
outstanding units of the ILA Money Market Portfolio were Bank of New York, 48
Wall Street, New York, NY 10286 (16.17%); and Stone Street & Bridge Street
Funds, 85 Broad Street, 4th Floor, New York, NY 10004-2434 (6.72%).
As of April 3, 1998, the only holders of record of 5% or more of the
outstanding units of the ILA Treasury Obligations Portfolio were First National
Bank of Omaha, P.O. Box 3128, Omaha, NE 68103-0128 (19.27%); Bank of New York
(NCD), Hare & Co., 1 Wall Street, 15th Floor, New York, NY 10286-0001 (7.45%);
Bank One Investment Advisors Corp., Strafe & Co., P.O. Box 710211, Columbus, OH,
43271-0211 (6.51%); and Bankers Trust Company, Hare & Co., P.O. Box 697, Des
Moines, IA 50304 (5.71%).
As of April 3, 1998, the only holders of record of 5% or more of the
outstanding units of the ILA Treasury Instruments Portfolio were Bank of New
York (NCD), Hare & Co., 1 Wall Street, 15th Floor, New York, NY 10286-0001
(35.73%); Hilliard Lyons Trust Co., P.O. Box 32780, Louisville, KY 40232
(7.46%); Morgan Stanley-Harris Assoc.-Sweep, 2 N. LaSalle Street, Ste. 500,
Chicago, IL 60602 (6.94%); and Mid-America Bank of Louisville-Banlou, P.O. Box
1101, Louisville, KY 40201 (5.06%).
As of April 3, 1998, the only holders of record of 5% or more of the
outstanding units of the ILA Government Portfolio were Morgan Stanley-Harris
Assoc.-Sweep, 2 N. LaSalle Street, Ste. 500, Chicago, IL 60602 (15.20%);
Standish Long/Shor Equity Fund LP, One Financial Ctr, Boston, MA 02111 (10.49%);
Comerica Bank, Calhoun & Co., P.O. Box 55-519, Detroit, MI 48255-0499 (7.95%);
Northern Trust, 50 South LaSalle Street, Chicago, IL
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60675 (7.36%); and Berger Accounts, P.O. Box 13390, Palm Desert, CA 92255
(5.23%).
As of April 3, 1998, the only holders of record of 5% or more of the
outstanding units of the ILA Tax-Exempt New York Portfolio were Bank of New
York, 48 Wall Street, New York, NY 10286 (13.94%); Werner Holding Co., Inc.,
1105 N. Market St., Ste. 130, Wilmington, DE 19501 (6.85%); and Stephen Apkon &
Lisa Hertz Apkon, 33 Ashland Ave., Pleasantville, NY 10570 (5.57%).
As of April 3, 1998, the only holders of record of 5% or more of the
outstanding units of the ILA Federal Portfolio were Bank of New York, 48 Wall
Street, New York, NY 10286 (11.23%); Hilliard Lyons Trust Co., P.O. Box 32760,
Louisville, KY 40232-2760 (6.79%); and The Baupost Group, Inc., P.O. Box 389125,
Cambridge, MA 02238 (5.64%).
As of April 3, 1998, the only holder of record of 5% or more of the
outstanding units of the ILA Tax-Exempt California Portfolio was Bodri Capital
Management, Inc., 525 University Ave., Ste. 1322, Palo Alto, CA 94301 (6.70%).
As of April 3, 1998, the entities noted below may have owned beneficially
5% or more of the outstanding shares of FS Prime Obligations Fund: Commerce
Bank of Kansas City, NA, P.O. Box 248, Kansas City, MO 64141 (9.72%); Citicorp
Trust, NA as Custo dian, 400 Royal Palm Way, Flr. 3, Palm Beach, FL 33480
(6.93%); and Deloitte & Touche, 10 Westport Road, P.O. Box 820, Wilton, CT 06897
(6.28%).
As of April 3, 1998, the entities noted below may have owned beneficially
5% or more of the outstanding shares of FS Money Market Fund: Kiewit
Diversified Group, Inc., One Thousand Kiewit Plz, Omaha, NE 68131 (9.12%); and
Citicorp Trust, NA as Custodi an, 400 Royal Palm Way, 3rd Flr., Palm Beach, FL
33480 (8.92%).
As of April 3, 1998, the entities noted below may have owned beneficially
5% or more of the outstanding shares of FS Premium Money Market Fund:
BankBoston, P.O. Box 1130, Boston, MA 02103 (31.95%); Corning, Inc., 1
Riverfront Plz, Corning, NY 14831 (8.49%); Walther Accounts, 3661 Buchanan St.,
San Francisco, CA, 94123 (8.22%); Midland Loan Services LP, 210 W. 10th St.-Fl.
6, Kansas City, MO 64105 (6.61%); and National City Bank, 4100 W. 150th St.,
Cleveland, OH 44135 (5.27%).
As of April 3, 1998, the entities noted below may have owned beneficially
5% or more of the outstanding shares of FS Govern ment Fund: Security Trust
Company, P.O. Box 1589, San Diego, CA 92112-1589 (11.49%); Chicago Trust
Company, 171 N. Clark St., #5CA, Chicago, IL 60601 (9.50%); Mellon Bank, Three
Mellon Bank Center, 34th Flr., Pittsburgh, PA 15258 (8.45%); and State Street
Bank & Trust Co., P.O. Box 1992, Boston, MA 02105 (8.09%).
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As of April 3, 1998, the entities noted below may have owned beneficially
5% or more of the outstanding shares of FS Tax-Free Fund: Commerce Bank of
Kansas City, NA, P.O. Box 248, Kansas City, MO 64141 (10.75%); International
Paper Trustees, 2 Manhattanville Road, Purchase, NY 10577 (6.44%); Mercantile
Bank of St. Louis, Mandell & Company, P.O. Box 387 MPO, St. Louis, MO 63101
(6.35%); Werner Holdings Co., Inc., 1105 N. Market St., Ste. 1300, Wilmington,
DE 19801 (6.24%); Reliance Trust Company, P.O. Box 48449, Atlanta, GA 30362
(6.12%); and Summit Bank, P.O. Box 821, Hakensack, NJ 07602 (5.29%).
As of April 3, 1998, the entities noted below may have owned beneficially
5% or more of the outstanding shares of FS Federal Fund: Bank of Oklahoma, NA,
P.O. Box 2300, Tulsa, OK 74192 (10.14%); and Amalgamated Bank of Chicago, One
West Monroe St., Chicago, IL 60603 (5.62%).
As of April 3, 1998, the entities noted below may have owned beneficially
5% or more of the outstanding shares of FS Treasury Instruments Fund: Harris
Trust & Savings Bank, 200 W. Monroe Street, Fl. 12, Chicago, IL 60606 (36.70%);
William Harris Investors, Inc., 2 N. LaSalle Street, Ste. 400, Chicago, IL
60602 (15.73%); IBJ Schroder Bank & Trust Co., One State Street-11th Fl., New
York, NY 10004 (9.70%); Northern Capital Trust of Fargo, P.O. Box 829, Fargo, ND
58102 (9.07%); Central Bank & Trust Co., CEBANTCO, P.O. Box 1360, Lexington, KY
40590 (6.89%); and Guaranty Bank & Trust Co., Haws & Co., P.O. Box 5847, Denver,
CO 80217 (6.10%).
As of April 3, 1998, the entities noted below may have owned beneficially
5% or more of the outstanding shares of FS Treasury Fund: Commerce Bank of
Kansas City, NA, P.O. Box 248, Kansas City, MO 64141 (8.08%); and Associated
Bank, Hard & Co., P.O. Box 1007, Neenah, WI 54957 (5.98%).
UNITHOLDER AND TRUSTEE LIABILITY
Under Delaware law, the unitholders of the Series are not generally subject
to liability for the debts or obligations of the Trust. Similarly, Delaware law
provides that a series of the Trust will not be liable for the debts or
obligations of any other series of the 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 contains express disclaimer of unitholder liability for acts or
obligations of a Series. Notice of such disclaimer will normally be given in
each agreement, obligation or instrument entered into or executed by a Portfolio
or the
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Trustees. The Declaration of Trust provides for indemnification by the relevant
Series for all loss suffered by a unitholder as a result of an obligation of the
Series. The Declaration of Trust also provides that a Series shall, upon
request, assume the defense of any claim made against any unitholder for any act
or obligation of the Series and satisfy any judgment thereon. In view of the
above, the risk of personal liability of unitholders is remote.
In addition to the requirements set forth under Delaware Law, the
Declaration of Trust provides that unitholders 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 Delaware law who hold at least
10% of the outstanding units of the Trust, or 10% of the outstanding units of
the series or class to which such action relates, must 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 will be entitled to retain counsel or
other advisers in considering the merits of the request and may 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 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 Series' assets. In that capacity, State Street
maintains the accounting records and calculates the daily net asset value per
unit of the Series. 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, 222 Franklin Street,
Boston, Massachusetts 02110, have been selected as auditors of the Trust. In
addition to audit services, Arthur Andersen prepares the Trust's federal and
state tax returns, and
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provides consultation and assistance on accounting, internal control and related
matters.
FINANCIAL STATEMENTS
The Financial Statements of the Series then in existence and conducting
investment operations, including the Statements of Investments as of December
31, 1997, the Statements of Assets and Liabilities as of December 31, 1997, the
related Statements of Operations for the period then ended, the Statements of
Changes in Net Assets, the Financial Highlights for the periods presented, the
Notes to the Financial Statements, and the Report of Independent Public
Accountants, all of which are included in the December 31, 1997 Annual Report to
the shareholders, are attached hereto and incorporated by reference into this
Statement of Additional Information.
OTHER INFORMATION REGARDING PURCHASES
The Adviser, Distributor and/or their affiliates may pay, out of their own
assets, compensation to Service Organizations and other persons in connection
with the sale and/or servicing of shares of the Series and other investment
funds of the Trust. These payments ("Additional Payments") would be in addition
to the payments by the Series described in the Series' Prospectuses and this
Statement of Additional Information for shareholder servicing and processing.
These Additional Payments may take the form of "due diligence" payments for an
institution's examination of the Series and payments for providing extra
employee training and information relating to the Series; "listing" fees for the
placement of the Series on a dealer's list of mutual funds available for
purchase by its customers; "finders" or "referral" fees for directing investors
to the Series; "marketing support" fees for providing assistance in promoting
the sale of the Series' shares; and payments for the sale of shares and/or the
maintenance of share balances. In addition, the Adviser, Distributor and/or
their affiliates may make Additional Payments for subaccounting, administrative
and/or shareholder processing services that are in addition to any shareholder
servicing and processing fees paid by the Series. The additional Payments made
by the Adviser, Distributor and their affiliates may be a fixed dollar amount,
may be based on the number of customer accounts maintained by an institution, or
may be based on a percentage of the value of shares sold to, or held by,
customers of the institutions involved, and may be different for different
institutions. Furthermore, the Adviser, Distributor and/or their affiliates may
contribute to various non-cash and cash incentive arrangements to promote the
sale of shares, as well as sponsor various educational programs, sales contests
and/or promotions in which participants may receive prizes such as travel
awards, merchandise and cash and/or
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investment research pertaining to particular securities and other financial
instruments or to the securities and financial markets generally, educational
information and related support materials and hardware and/or software. The
Adviser, Distributor and their affiliates may also pay for the travel expenses,
meals, lodging and entertainment of Service Organizations and other institutions
and their salespersons and guests in connection with educational, sales and
promotional programs, subject to applicable NASD regulations. The Distributor
currently expects that such additional bonuses or incentives will not exceed
0.50% of the amount of any sales.
ADMINISTRATION PLANS
The Trust, on behalf of each ILA Portfolio and Financial Square Fund, has
adopted an administration plan with respect to the ILA Administration Units (the
"ILA Administration Plan"), with respect to the FST Administration Shares (the
"FST Administration Plan") and FST Preferred Shares (the "FST Preferred Plan,"
together with the ILA Administration Plan and the FST Administration Plan, the
"Administration Plans") which authorize the ILA Portfolios and Financial Square
Funds to compensate Service Organizations for providing certain account
administration services to their customers who are beneficial owners of such
units. Pursuant to the Administration Plans, the Trust, on behalf of each
Series, enters into agreements with Service Organizations which purchase ILA
Administration Units, FST Administration Shares or 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 unitholder of record and nominee for all customers, (b)
maintain account records for each customer who beneficially owns ILA
Administration Units, FST Administration Shares or FST Preferred Shares, (c)
answer questions and handle correspondence from customers regarding their
accounts, (d) process customer orders to purchase, redeem and exchange ILA
Administration Units, FST Administration Shares or FST Preferred Shares, 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 ILA
Portfolio and Financial Square Fund 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 ILA Portfolio,
..25% (on an annualized basis) of the average daily net assets of the FST
Administration Shares and .10% (on an annualized basis) of the average daily net
assets of the FST Preferred Shares of each Financial Square Fund, attributable
to or held in the name of such Service Organization for its customers.
For the fiscal years ended December 31, 1997, December 31, 1996 and
December 31, 1995, the amount of the administration fees
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paid by each ILA Portfolio under its ILA Administration Plan to Service
Organizations was as follows:
1997 1996 1995
---- ---- ----
ILA Prime Obligations
Portfolio $ 65,534 $141,500
ILA Money Market Portfolio 316,155 223,420
ILA Treasury Obligations
Portfolio 145,201 165,430
ILA Treasury Instruments
Portfolio 145,441 110,355
ILA Government Portfolio 63,048 94,196
ILA Federal Portfolio 906,321 713,846
ILA Tax-Exempt Diversified
Portfolio 73,660 103,673
ILA Tax-Exempt California
Portfolio 262 600
ILA Tax-Exempt New York
Portfolio 39,843 27,783
For the fiscal years ended December 31, 1997, December 31, 1996 and
December 31, 1995, the amount of administration fees paid by each Financial
Square Fund under its FST Administration Plan to Service Organizations was as
follows:
1997 1996 1995
---- ---- ----
FS Prime Obligations Fund $ 662,090 $ 527,357 $318,346
FS Money Market Fund 780,489 474,043 283,241
FS Treasury Obligations Fund 1,741,440 1,100,814 457,071
FS Government Fund 649,313 250,618 131,629
FS Tax Free Fund 241,784 128,721 32,166
FS Premium Money Market Fund/(1)/ 13,845 N/A N/A
FS Treasury Instruments Fund/(1)/ 3,240 N/A N/A
FS Federal Fund/(1)/ 353,083 N/A N/A
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/(1)/ The FST Administration Shares of the FS Premium Money Market Fund, FS
Treasury Instruments Fund and FS Federal Fund commenced share activity on August
1, 1997, April 1, 1997 and May 30, 1997. As of December 31, 1997, the FS
Municipal Fund had not commenced operations.
For the fiscal year ended December 31, 1997 and December 31, 1996, the
amount of administration fees paid by each Financial Square Fund under its FST
Preferred Plan was as follows:
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1997 1996
---- ----
FS Prime Obligations Fund/(1)/ $181,303 $42,963
FS Money Market Fund/(1)/ 55,349 2,874
FS Treasury Obligations Fund/(1)/ 107,309 15,097
FS Government Fund/(1)/ 27,961 395
FS Tax Free Fund/(1)/ 15,965 13,155
FS Premium Money Market Fund/(1)/ 131 N/A
FS Treasury Instruments Fund/(1)/ 1 N/A
FS Federal Fund/(1)/ 66,047 N/A
/(1)/ The FST Preferred Shares of the FS Prime Obligations Fund, FS Money Market
Fund, FS Treasury Obligations Fund, FS Government Fund, FS Tax-Free Fund,
FS Premium Money Market Fund, FS Treasury Instruments Fund, and FS Federal
Fund commenced share activity on May 1, 1996, May 1, 1996, May 1, 1996,
May 1, 1996, May 1, 1996, August 1, 1997, May 30, 1997 and May 30, 1997.
As of December 31, 1997, the FS Municipal Fund has not commenced
operations.
Conflict of interest restrictions (including the Employee Retirement
Income Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in ILA Adminis tration Units, FST Administration Shares and 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 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, FST Administration
Shares or FST Preferred Shares. In addition, under some state securities laws,
banks and other financial institutions purchasing ILA Administration Units, FST
Administration Shares or FST Preferred Shares on behalf of their customers may
be required to register as dealers.
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 the Administration Plans or the related
Service Agreements, most recently voted to approve the Administration Plans and
Service Agreements at a meeting called for the purpose of voting on such
Administration Plans and Service Agreements on April 22, 1998. The
Administration Plans and Service Agreements will remain in effect until April
30, 1999 and continue in effect thereafter only if such continuance is
specifically approved annually by a vote of the Trustees in the manner described
above.
An Administration Plan may not be amended to increase materially the
amount to be spent for the services described therein without approval of the
ILA Administration, FST
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Administration or FST Preferred shareholders of the affected Series, and all
material amendments of the Administration Plan must also be approved by the
Trustees in the manner described above. An Administration 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, FST
Administration Shares or FST Preferred Shares of the affected Series. 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, FST Administration
Shares or FST Preferred Shares of the affected Series 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. So long as the
Administration 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 Administration Plans will
benefit the Series and holders of ILA Administration Units, FST Administration
Shares and FST Preferred Shares of such Series. In the Trustees' quarterly
review of the Administration Plans and Service Agreements, they will consider
their continued appropriateness and the level of compensation provided therein.
SERVICE PLANS
(ILA Service Units, Cash Management Shares and FST Service Shares Only)
The Trust has adopted a service plan on behalf of each ILA Portfolio
with respect to the ILA Service Units (the "ILA Service Plan"), on behalf of the
ILA Prime Obligations Portfolio, ILA Money Market Portfolio, ILA Government
Portfolio, ILA Tax-Exempt Diversified Portfolio and ILA Tax-Exempt New York
Portfolio with respect to the Cash Management Shares (the "Cash Management
Shares Service Plan") and on behalf of each Financial Square Fund with respect
to the FST Service Shares (the "FST Service Plan" and together with the ILA
Service Plan and the Cash Management Shares Service Plan, the "Service Plans")
which authorize the Series 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 Service Plans, the Trust, on behalf of each ILA Portfolio or Financial
Square Fund, enters into agreements with Service Organizations which purchase
ILA Service Units, Cash Management Shares or FST Service Shares on behalf of
their customers ("Service Agreements"). Under such Service Agreements the
Service Organizations may: (a) act, directly or through an agent, as the sole
unitholder of record and nominee
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for all customers; (b) maintain account records for each customer who
beneficially owns ILA Service Units, Cash Management Shares or FST Service
Shares; (c) answer questions and handle correspondence from customers regarding
their accounts; (d) process customer orders to purchase, redeem and exchange ILA
Service Units, Cash Management Shares or FST Service Shares, 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, Cash Management Shares or FST Service Shares; (g)
receive and answer investor correspondence, including requests for prospectuses
and statements of additional information; (h) display and make prospectuses
available on the Service Organization's premises; (i) assist customers in
completing application forms, selecting dividend and other account options and
opening custody accounts with the Service Organization; (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, and (k) with respect to the Cash
Management Shares Service Plan: (i) provide services to customers intended to
facilitate or improve their understanding of the benefits and risks of an ILA
Portfolio, (ii) facilitate the inclusion of an ILA Portfolio in investment,
retirement, asset allocation, cash management or sweep accounts or similar
products or services offered to customers by or through Service Organizations,
(iii) facilitate electronic or computer trading and/or processing in an ILA
Portfolio or providing electronic, computer or other database information
regarding an ILA Portfolio to Customers, and (iv) develop, maintain and support
systems necessary to support Cash Management Shares. As compensation for such
services, (a) the Trust on behalf of each ILA 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 ILA 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; (b)
the Trust on behalf of each ILA Portfolio pays each Service Organization a
service fee in an amount up to .50% (on an annual basis) of the average daily
net assets of the Cash Management Shares of each ILA 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; and (c) the Trust, on behalf
of each Financial Square 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 Financial Square Fund attributable to or held in
the name of such Service Organization for its customers;
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provided, however, that the fee paid for personal and account maintenance
services shall not exceed .25% of such average daily net assets.
No Cash Management Shares were
outstanding as of the fiscal year ended December 31, 1997.
For the fiscal years ended December 31, 1997, December 31, 1996 and
December 31, 1995, the amount of the service fees paid by each ILA Portfolio
then in existence to Service Organizations was as follows:
1997 1996 1995
---- ---- ----
ILA Prime Obligations
Portfolio $ 494,274 $937,733
ILA Money Market Portfolio 128,313 102,642
ILA Treasury Obligations
Portfolio $ 579,790 478,419
ILA Treasury Instruments
Portfolio 1,266,586 316,188
ILA Government Portfolio 352,931 430,114
ILA Federal Portfolio 562,023 254,508
ILA Tax-Exempt Diversified
Portfolio 130,158 220,790
ILA Tax-Exempt California
Portfolio/(1)/ -- --
ILA Tax-Exempt New York
Portfolio/(1)/ -- --
(1) ILA Service Unit activity has not commenced operations.
For the fiscal years ended December 31, 1997, December 31, 1996 and
December 31, 1995, the amount of service fees paid by each Financial Square Fund
to Service Organizations was as follows:
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1997 1996 1995
---- ---- ----
FS Prime Obligations
Fund $ 707,816 $ 541,076 $299,892
FS Money Market Fund/(1)/ 1,514,944 271,936 8,447
FS Treasury Obligations
Fund 1,201,356 $ 849,624 584,861
FS Government Fund/(2)/ 2,533,854 1,258,434 39,940
FS Tax-Free Fund 166,974 91,599 70,179
FS Premium Money Market Fund/(3)/ 114 N/A N/A
FS Treasury Instruments Fund/(4)/ 112,501 N/A N/A
FS Federal Fund/(5)/ 482,096 N/A N/A
- ---------------------------------------------------------------------
(1) FST Service Share activity commenced June 14, 1995.
(2) FST Service Share activity commenced May 16, 1995.
(3) FST Service Share activity commenced August 1, 1997.
(4) FST Service Share activity commenced March 5, 1997.
(5) FST Service Share activity commenced March 25, 1997.
As of December 31, 1997, FS Municipal Fund had not commenced operations.
The Trust has adopted each Service 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 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 Service Plans and described above are not expenses
incurred primarily for effecting the distribution of ILA Service Units, Cash
Management Shares or FST Service Shares. 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 Service Plans.
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
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or restrict the activities of one or more of the Service Organizations in
connection with the Trust, such Service Organi zations might be required to
alter materially or discontinue the services performed under their Service
Agreements. If one or more of the Service Organizations were restricted from
effecting purchases or sales of ILA Service Units, Cash Management Shares or 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 the Series. 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, Cash Management
Shares or FST Service Shares 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, Cash Management Shares or FST Service Shares 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 or shareholder.
Conflict of interest restrictions (including the Employee Retirement Income
Security Act of 1974) may apply to a Service Organization's receipt of
compensation paid by the Trust in connection with the investment of fiduciary
funds in ILA Service Units, Cash Management Shares or 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 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, Cash Management Shares or FST
Service Shares.
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 the Service Plans or the related Service
Agreements, most recently voted to approve the Service Plans and Service
Agreements at a meeting called for the purpose of voting on such Service Plans
and Service Agreements on April 22, 1998. They will remain in effect until
April 30, 1999 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.
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A Service 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, Cash Management Shareholders or FST Service Shareholders of the
affected Series, and all material amendments of a Plan must also be approved by
the Trustees in the manner described above. A Service 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 ILA Service Units, Cash Management Shareholders or
FST Service Shares of the affected Series. 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 ILA Service Units, Cash Management Shareholders or FST Service
Shares of the affected Series 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 Service 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 Service Plans will benefit the Series and holders
of ILA Service Units, Cash Management Shares and FST Service Shares of such
Series. In the Trustees' quarterly review of the Service Plans and Service
Agreements, they will consider their continued appropriateness and the level of
compensation provided therein.
DISTRIBUTION AND AUTHORIZED DEALER SERVICE PLANS
AUTHORIZED DEALER SERVICE PLAN. As described in the Prospectus, the ILA
Prime Obligations Portfolio with respect to each of its ILA Class B and Class C
Units has adopted a non-Rule 12b-1 Authorized Dealer Service Plan (the
"Authorized Dealer Service Plans") pursuant to which Goldman Sachs and
Authorized Dealers are compensated for the provision of personal and account
maintenance services. The Authorized Dealer Service Plans have 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 Plans, at a meeting held on April __, 1998. With
respect to its ILA Class B and Class C Units, the ILA Prime Obligations
Portfolio's Authorized Dealer Service Plans provide for the compensation for
personal and account maintenance services at an annual rate of up to 0.25% of
the Portfolios average daily net assets attributable to ILA Class B and Class C
Units, respectively. For the fiscal years ended December 31, 1997 and 1996, the
ILA Prime Obligations Portfolio paid Goldman Sachs $128 and ____ under the
Service Plan with respect to its Class B
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units. For the fiscal year ended October 31, 1997, the ICA Prime Obligations
Portfolio paid ____ under the Service Plan with respect to Class C Shares.
The Authorized Dealer Service Plans will remain in effect until May 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 Plans. All
material amendments of the Authorized Dealer-Service Plans must also be approved
by the Trustees of the Trust in the manner described above. The Authorized
Dealer Service Plans may be terminated at any time as to the ILA 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 and Class C Units of the ILA Prime Obligations
Portfolio. The Trustees of the Trust have determined that in their judgment
there is a reasonable likelihood that the Authorized Dealer Service Plan will
benefit the ILA Prime Obligations Portfolio and its ILA Class B and Class C
Unitholders.
DISTRIBUTION PLANS. As described in the Prospectuses, the Trust has
adopted distribution plans pursuant to Rule 12b-1 under the Investment Company
Act with respect to ILA Class B and Class C Units on behalf of the ILA Prime
Obligations Portfolio (the "Class B Distribution Plan" and "Class C Distribution
Plan," respectively), and with respect to Cash Management Shares on behalf of
the ILA Prime Obligations Portfolio, ILA Money Market Portfolio, ILA Government
Portfolio, ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt California
Portfolio and ILA Tax-Exempt New York Portfolio (the "Cash Management Shares
Distribution Plan"). See "Distribution and Authorized Dealer Service Plans" in
the ILA Class B and Class C Units Prospectus and "Distribution Plan" in the Cash
Management Shares Prospectus.
The Distribution Plans were most recently approved on April 22, 1998 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 Distribution Plans,
cast in person at a meeting called for the purpose of approving the Distribution
Plans.
With respect to the ILA Prime Obligations Portfolio, the compensation
payable under the Class B and Class C Distribution Plans is equal to 0.75% per
annum of the average daily net assets attributable to ILA Class B and Class C
Units, respectively, of that ILA Portfolio. The compensation payable under the
Cash Management Shares and Class C Distribution Plan with respect to the ILA
Prime Obligations Portfolio, ILA Money Market Portfolio,
-101-
<PAGE>
ILA Government Portfolio, ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt
California Portfolio and ILA Tax-Exempt New York Portfolio may not exceed 0.50%
per annum of the average daily net assets attributable to Cash Management Shares
of such ILA Portfolio. Currently, Goldman Sachs is limiting the fee payable by
ILA Prime Obligations Portfolio, ILA Money Market Portfolio, ILA Government
Portfolio, ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt California
Portfolio and ILA Tax-Exempt New York Portfolio to 0.___% of average daily net
assets attributable to Cash Management Shares. Goldman Sachs has no current
intention of modifying or discontinuing such waivers and limitation, but may do
so in the future at its discretion.
The fees received by Goldman Sachs under the Class B Distribution Plans 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. Goldman Sachs may
also pay up to the entire amount of its fee under the Distribution Plan to
Service Organizations or other institutions for providing services in connection
with the sale of Class C Units or Cash Management Shares. To the extent such
fees are not paid to such dealers, Goldman Sachs may retain such fee as
compensation for its services and expenses of distributing ILA Class B Units,
ILA Class C Units or Cash Management Shares. If such fee exceeds its expenses,
Goldman Sachs may realize a profit from these arrangements. For the fiscal
years ended December 31, 1997 and 1996, the ILA Prime Obligations Portfolio
paid-Goldman Sachs $382 and $____ under the Class B Distribution Plan. For the
fiscal year ended December 31, 1997, the ILA Prime Obligations Portfolio paid
Goldman Sachs $____ under the Class C Distribution Plan.
The Distribution Plans are a compensation plans which provide for the
payment of a specified distribution fee without regard to the distribution
expenses actually incurred by Goldman Sachs. If the Distribution Plans were
terminated by the Trust's Board of Trustees and no successor plan were adopted,
the ILA Prime Obligations Portfolio, ILA Money Market Portfolio, ILA Government
Portfolio, ILA Tax-Exempt Diversified Portfolio, ILA Tax-Exempt California
Portfolio and ILA Tax-Exempt New York 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. However, Goldman
Sachs does not intend to make expenditures for which it may be compensated under
the Cash Management Shares Distribution Plan at a rate that materially exceeds
the rate of compensation received under the Plan.
Under the Class B, Class C and Cash Management Distribution Plans, Goldman
Sachs, as distributor of the Portfolio's ILA Class B Units, Class C Units and
Cash Management Shares, will
-102-
<PAGE>
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 and Class C Distribution Plans and the
purposes for which such services were performed and expenditures were made.
The Distribution Plans will remain in affect from year to year,
provided such continuance is approved annually by a major to vote of the Board
of Trustees, including a majority of the non-interested Trustees. The
Distribution Plans may not be amended to increase materially the amount to be
spent for the services described therein as to a particular Portfolio without
approval of a majority of the outstanding Class B, Class C or Cash Management
Unitholders, as applicable, of that Portfolio. All material amendments to the
Distribution Plans must also be approved by the Board of Trustees of the Trust
in the manner described above. The Distribution Plans 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 Class B, Class C or Cash
Management Units, as applicable, of the applicable Portfolio. So long as the
Distribution Plans are 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 Distribution Plans will benefit the applicable Portfolios
and their respective Unitholders.
-103-
<PAGE>
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.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future.
Moody's applies numerical modifiers 1, 2, and 3 in the Aa and A
categories. The modifier 1 indicates that the obligation ranks in the higher
end of the category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of the respective
category.
/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-1
<PAGE>
Short-Term Ratings
- ------------------
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1 or
repayment ability will often be evidenced by many of the following
characteristics:
. Leading market positions in well established industries.
. High rates of return on funds employed.
. Conservative capitalization 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.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) 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, may 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 ("MIG" and variable rate demand obligations
are designated Variable Moody's Investment Grade ("VMIG"). Such ratings
recognize the differences between short-term credit risk and long- term risk.
Symbols used will be as follows:
MIG 1/VMIG 1 -- This designation denotes best quality enjoying strong
protection by established cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
A short-term rating may also be assigned on an issue having a demand
feature-variable rate demand obligation. 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
A-2
<PAGE>
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.
STANDARD & POOR'S RATINGS GROUP
Bond Ratings
- ------------
Aaa: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
Aa: An obligation rated AA differs from the highest rated obligations only
in small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still very strong.
PLUS (+) OR MINUS (-): The AA and A ratings may be modified by the
addition of a plus or minus sign to show relative standing within the category.
Short-Term Ratings
- ------------------
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
MUNICIPAL NOTES
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes maturing in 3 years or less will likely
receive a note rating.
Note rating symbols are as follows:
A-3
<PAGE>
SP-1 -- Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics will be given a plus (+)
designation.
SP-2 -- Satisfactory capacity to pay principal and interest with some
vulnerability to adverse financial and economic changes over the term of the
notes.
Standard & Poor's assigns "dual" ratings to all debt issues that have a put
option or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, "AAA/A-1+"). With short-term demand debt, S&P's note rating symbols
are used with the commercial paper rating symbols (for example, "SP-1+/A-1+").
DUFF & PHELPS, INC.
Bond Ratings
- ------------
Aaa: The highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
Aa: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A: Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
Duff & Phelps applies modifiers, + and -, in the AA and A categories for
long-term fixed income securities. The modifier + indicates that the security
ranks in the higher end of the category: the modifier AA or A indicates a mid-
range ranking; and the modifier - indicates that the issue ranks in the lower
end of the category.
Commercial Paper/Certificates of Deposit
- ----------------------------------------
DUFF 1: Commercial paper and certificates of deposit rated Duff 1 are
considered to have a very high certainty of timely payment. Liquidity factors
are excellent and are supported by good fundamental protection factors. Risk
factors are minor.
A-4
<PAGE>
DUFF 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, Duff 1+, Duff 1 and
Duff 1 - in the Duff 1 top grade category for short-term debt. The rating Duff
1+ indicates that the security has the highest certainty of timely payment,
short-term liquidity, including internal operating factors and/or ready access
to alternative sources of funds, is clearly outstanding and safety is just below
risk-free U.S. Treasury short-term obligations; the rating Duff 1 indicates a
very high certainty of timely payment, liquidity factors are excellent and are
supported by good fundamental protection factors and risk factors are minimal;
and the rating Duff 1 - indicates a high certainty of timely payment, liquidity
factors are strong and are supported by good fundamental protection factors and
risk factors are very small.
FITCH IBCA, INC.
Aaa: Bonds which are rated AAA are considered to be investment grade and
of the highest credit quality. The obligor has an exceptionally strong capacity
for timely payment of financial commitments, which is unlikely to be adversely
affected by reasonably foreseeable events.
Aa: Bonds which are rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issuers
is generally rated F-1+.
A: Bonds which are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
Fitch IBCA applies plus (+) and minus (-) modifiers in the AA and A
categories to indicate the relative position of a credit within the rating
category.
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
A-5
<PAGE>
F1: 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 capacity for timely payment may be
denoted with a plus ("+") sign designation.
F2: Short-term debt obligations rated F-2 are considered to be of good
credit quality. Issues assigned this rating have a satisfactory capacity for
timely payment of financial commitment, but the margin of safety is not as great
as for issues assigned F1 ratings.
THOMSON BANKWATCH, INC.
AAA: The highest category; indicates an extremely high ability to repay
principal and interest on a timely basis.
AA: The second highest category; indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk,
compared to issues rated in the highest category.
A: The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
Ratings from AAA through A may include a plus (+) or minus (-) designation which
indicates where within the respective category the issue is placed.
The TBW Short-Term Ratings specifically assess the likelihood of an untimely
payment of principal and interest of debt instruments with original maturities
of one year or less.
TBW-1: The highest category; indicates a very high 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 Trust
INSTITUTIONAL LIQUID ASSETS
. 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
Goldman
Sachs
ANNUAL REPORT
December 31, 1997
<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 Institutional Liquid
Assets (ILA) Portfolios in 1997. It was another strong year for the funds,
during which time all of the portfolios outperformed or performed in line with
their respective IBC Financial Data, Inc. averages. Assets in the ILA
Portfolios totaled $9.1 billion as of December 31, 1997.
1997 IN REVIEW
Over the first quarter, the U.S. economy demonstrated significant strength,
with no sign of slowing. Employment data pointed to continued growth as
unemployment rates dropped, average hourly earnings rose and real consumer
spending surged. In March, in a show of concern over the pace of economic
growth, the Federal Reserve chose to raise short-term rates by 25 basis points.
When all was said and done, first quarter's real gross domestic product (GDP)
posted a robust 4.9% increase--although this was attributed to an increase in
inventories, typically a precursor of slower growth.
Economic data early in the second quarter, including New Home Sales, the
Employment Cost Index (ECI), GDP and durable goods, continued to point to
ongoing momentum in the economy. By June, there was no overwhelming evidence
that the economy had slowed to a sustainable growth pace. Nevertheless, Fed
officials seemed impressed with a slowdown in the pace of broad price measures,
and opted to maintain a neutral stance. Early third-quarter data initially
suggested that any slowdown perceived by the Fed represented a modified
correction from the first quarter's rapid growth, not the onset of a weaker
trend. However, as the quarter progressed, subdued inflationary pressures and a
slower pace of economic growth further lowered the probability that Fed
officials would tighten monetary policy in the months that remained in 1997.
In the final months of the fiscal year, financial turmoil in Asia's equity
markets spilled into the U.S. However, a number of factors, including Federal
Reserve Chairman Alan Greenspan's testimony and U.S. investors' overall
reaction to the market, quickly restored confidence that the U.S. market would
not suffer a significant downturn. Not surprisingly, at its November meeting,
the Fed chose to leave monetary policy on hold. As the fourth quarter drew to a
close, central bankers continued to be torn between their anxiety over
excessively rapid demand growth and rising wages on the domestic front and
their worries that the Asian crisis could spread to new regions and have a
negative impact on U.S. output and earnings prospects. Consequently, Fed
officials chose to maintain their "wait-and-see" stance on monetary policy and
await future market developments.
HISTORICAL YIELD CURVE (LIBOR)
[THE FOLLOWING TABLE WAS REPRESENTED BY A GRAPH IN THE PRINTED MATERIAL]
Maturity Yield
(months) 1996 1997
-------- ---- ----
1 5.50% 5.72%
3 5.56% 5.81%
6 5.60% 5.84%
9 5.69% 5.91%
12 5.79% 5.97%
The Federal funds rate began the year at 5.25% and ended the year at 5.50%. The
slope of the LIBOR yield curve steepened significantly over the course of the
year. By the end of 1997, the spread between one- and 12-month LIBOR moved to
plus 25 basis points.
Source: Goldman Sachs Fixed Income Database, reflecting London Interbank
Offered Rate (LIBOR).
STRATEGY
Taxable. The portfolios began the fiscal period with a short laddered
structure intended to be advantageous in the event of a steepening yield curve.
In March, the
- -------------------------------- --------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
Fed's decision to tighten led us to extend the portfolios'
weighted average maturities. Despite a market rally over the next several
months, we maintained these longer weighted average maturities due to a benign
inflationary environment and a "wait-and-see" Fed. In the second half of the
fiscal year, a period of Fed inactivity caused us to slightly extend the
portfolios' durations to the upper end of the neutral range in seeking to
capture incremental yield. We maintained this stance throughout November and
December.
Tax-Exempt. Early in the year, the tax-exempt money market portfolios assumed
defensive weighted average maturities, as we anticipated higher short-term
rates in the near future. As expected, this scenario played itself out in March
when the Fed tightened, and was magnified in April when larger than expected
tax payments caused the market to back up further. During the second half of
the year, we began to extend the weighted average maturities of the portfolios
as the likelihood of further Fed tightening faded.
SUMMARY FOR ILA PORTFOLIOS INSTITUTIONAL UNITS* AS OF 12/31/97
<TABLE>
<CAPTION>
SEC
7-DAY SEC 7-DAY 30-DAY WEIGHTED AVG.
CURRENT EFFECTIVE AVERAGE MATURITY
ILA PORTFOLIOS YIELD YIELD YIELD (DAYS)
- -------------- ------- --------- ------- -------------
<S> <C> <C> <C> <C>
Prime Obligations...................... 5.40% 5.55% 5.38% 50
Money Market........................... 5.49 5.64 5.43 41
Government............................. 5.35 5.50 5.31 45
Treasury Obligations................... 5.33 5.47 5.26 35
Treasury Instruments................... 5.13 5.26 5.15 39
Federal................................ 5.45 5.60 5.40 41
Tax-Exempt Diversified................. 3.72 3.79 3.48 49
Tax-Exempt California.................. 3.49 3.55 3.24 46
Tax-Exempt New York.................... 3.61 3.68 3.38 43
</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 shareholders to different services. The Administration
and 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%. Furthermore, in addition to these classes, Prime
Obligations offers Class B and Class C shares, which are subject to a
distribution fee and an authorized dealer service fee and may be subject to
contingent deferred sales charges. Performance reflects fee waivers and expense
reimbursements. Had fees not been waived or expense reimbursed, performance
would be reduced. Past performance is no guarantee of future resulted. Yield
will vary. An investment in any one of the ILA Portfolios is neither insured
nor guaranteed by the U.S. Government nor is there any assurance that the Funds
will be able to maintain a stable net asset value of $1.00 per share. More
complete information, including management fees and expenses, is included in
the ILA Portfolios' prospectus or may be obtained by calling Goldman Sachs
Funds at 1-800-621-2550.
DOMESTIC CREDIT TRENDS POSITIVE
Domestic credit quality in 1997 continued its positive trend. It was the
third consecutive year of extraordinary stock market growth and record mergers
and acquisitions. It was the seventh straight year of growth for the U.S.
economy, with high employment, low inflation and relatively stable, low
interest rates. U.S. corporations and financial institutions reported strong
earnings as a result of the strong economic environment, as well as from
previous cost-cutting and consolidation moves.
The improvement in credit strength was broad-based, except in the consumer
credit sector, which continued its downward trend. Consumer bankruptcy filings
set another record high of 1.3 million cases in 1997. Credit card loan
delinquencies, however, began to stabilize by the end of the year. These
consumer credit problems had a negative impact on the financial sector,
including serious problems in the sub-prime auto lending industry. The Credit
Department's experienced team of financial institutions analysts closely
monitored consumer credit quality trends.
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
THE CREDIT PICTURE ABROAD: ASIA IN TROUBLE, EMU ON COURSE
The international credit environment in 1997 was dominated by the Asian
financial crisis and the apparent resolution of European Monetary Union's (EMU)
likely course. Thailand's forced currency devaluation in July set off a
financial fire that found ample fuel in the region's highly leveraged
economies. Even higher rated securities were affected; for example, Hong Kong
weathered various shocks flowing from Southeast Asia. At the time this report
was written, there were no Asian-issued holdings in any of the ILA money market
portfolios.
In Europe, the second half of the year presented a more positive picture than
the first part of the year. A "euroland" of 11 countries now appears on track,
with almost every government producing better than expected fiscal results and
unexpectedly strong economies. Yields and asset prices have begun to achieve a
measure of convergence across the Continent, while the rating agencies have
begun to clarify their (differing) approaches to creditworthiness under the
euro. Just as important, political resistance to EMU has been effectively
controlled despite stubbornly high unemployment. The combination of Europe's
improving performance and the U.S.'s continuing robust health has helped to
mute the broader contagion effects from Asia so far, though such effects may
become more potent if Asia's trouble continues well into 1998.
The year ahead will likely be more difficult for the domestic economy, with
the uncertain outlook in Europe and Asia. The Goldman Sachs Credit Department,
with its analysts based in London, Tokyo, Frankfurt and New York, as well as
extensive technological assets and credit expertise, will continue to
anticipate and monitor global developments and apply its conservative credit
standards to the money market portfolios.
OUTLOOK AND STRATEGIES FOR 1998
The pivotal factor in the U.S. economic outlook for 1998 is the tug of war
between the trade drag from Asia and the strength of the domestic economy. Asia
will most likely dominate the first half of the year while the tight U.S. labor
market is likely to have an impact in the second half of the year.
This view is dependent upon the behavior of the U.S. stock market, which has
boosted spending in both
households and businesses in recent years. A decline in the stock market could
hurt consumer spending and keep the Fed on hold throughout the year.
Providing there are no new disturbances relative to the Asian markets or
domestic financial asset prices, we anticipate that the Fed will hold off on
making policy changes for some time to come. With no signs of inflation and the
U.S. dollar ever stronger with respect to foreign markets, Chairman Greenspan
and the Fed have good reason to "wait and see" how events unfold overseas
before making any decisions that could prove destabilizing in the short-term
and whose long-term impact would be uncertain.
With the Fed on hold for the near-term, we expect to position the portfolios
with neutral weighted average maturities. However, a steepening yield curve
would give us the incentive to extend the weighted average maturities on all
portfolios, as any Fed tightening in 1998 is likely to be modest.
In closing, we thank you for your support and for making 1997 a year of
record assets for the ILA money market portfolios. As in the past, we will
continue to look for additional ways to improve our services, while seeking to
provide you with competitive performance. We welcome your suggestions and
questions, and look forward to another strong year in 1998.
Sincerely,
/s/ Kaysie Uniacke
Kaysie Uniacke
Portfolio Manager
February 2, 1998
- --------------------------------------- ---------------------------------------
3
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA PRIME OBLIGATIONS PORTFOLIO
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS--29.3%
BANK HOLDING COMPANIES
Bankers Trust Securities Corp.
$10,000,000 5.67% 06/09/98 $ 9,749,575
BUSINESS CREDIT INSTITUTIONS
General Electric Cap Corp.
20,000,000 5.69 02/12/98 19,867,233
20,000,000 5.67 03/13/98 19,776,350
COMMERCIAL BANKS
CP Trust Certificates Series 1996-1
35,000,000 6.22(a) 03/30/98 35,000,000
HOME BUILDERS
First Data Corp.
15,000,000 5.63 06/16/98 14,610,592
PHH Corp.
25,000,000 5.60 01/30/98 24,887,222
LIFE INSURANCE
Metlife Funding Inc.
30,000,000 5.68 01/23/98 29,895,867
RECEIVABLE/ASSET FINANCINGS
Ciesco LP
23,000,000 5.55 01/23/98 22,921,992
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES
Bear Stearns Companies, Inc.
30,000,000 5.62 01/29/98 29,868,867
10,000,000 5.71 02/17/98 9,925,714
Merrill Lynch & Co., Inc.
10,000,000 5.97 08/14/98 10,000,000
Morgan Stanley Dean Witter, Inc.
10,000,000 5.69 02/23/98 9,916,231
20,000,000 5.74 03/11/98 19,779,967
20,000,000 5.64 06/01/98 19,526,867
Smith Barney Holdings, Inc.
10,000,000 5.70 02/11/98 9,935,083
- ---------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER AND CORPORATE OBLIGATIONS $285,661,560
- ---------------------------------------------------------------------------------------------------
BANK NOTES--13.0%
Bank of Boston, N.A.
$20,000,000 5.75% 02/17/98 $ 20,000,000
10,000,000 5.99 08/13/98 10,000,000
10,000,000 5.97 10/21/98 10,000,000
Comerica Bank Detroit
15,000,000 6.00 03/27/98 14,994,334
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BANK NOTES (CONTINUED)
FCC National Bank
$20,000,000 6.01%(a) 07/06/98 $ 19,997,080
Huntington National Bank
12,000,000 5.82 11/13/98 11,996,023
Morgan Guaranty Trust Co.
15,000,000 6.02 03/25/98 14,996,809
Wachovia Bank, N.A.
25,000,000 5.60 01/12/98 25,000,000
- -------------------------------------------------------------------------------------------------
TOTAL BANK NOTES $126,984,246
- -------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES(A)--46.1%
American Express Centurion Bank
$ 5,000,000 5.93% 01/20/98 $ 5,000,000
5,000,000 5.95 01/13/98 5,000,000
5,000,000 5.97 01/08/98 5,000,000
Bank One Columbus, N.A.
25,000,000 5.55 01/06/98 24,992,895
Bank One Texas
25,000,000 5.55 01/06/98 24,990,422
Comerica Bank Detroit
15,000,000 5.88 01/15/98 14,997,060
20,000,000 5.90 01/15/98 19,998,703
Commonwealth Life Insurance Co.
35,000,000 5.86 01/01/98 35,000,000
20,000,000(c) 5.86 09/04/98 20,000,000
Corestates Bank, N.A.
20,000,000 5.93 01/02/98 20,000,000
5,000,000 5.96 01/06/98 5,000,000
FCC National Bank
10,000,000 5.74 01/28/98 9,995,574
20,000,000 6.16 01/28/98 19,996,658
First Bank, N.A.
35,000,000 5.86 01/21/98 34,993,214
15,000,000 5.87 01/21/98 14,996,964
First Union Corporation
40,000,000 6.06 02/24/98 40,015,359
Merrill Lynch & Co., Inc.
10,000,000 5.65 01/05/98 9,999,711
10,000,000 5.94 01/13/98 9,999,620
10,000,000 5.96 01/12/98 9,999,627
New York Life Insurance
10,000,000 5.89 03/03/98 10,000,000
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (CONTINUED)
Pacific Mutual Life Insurance Co.
$25,000,000 5.66% 01/01/98 $ 25,000,000
PNC Bank, N.A.
25,000,000 5.89 01/09/98 24,990,381
10,000,000 5.91 01/09/98 9,999,874
Southtrust Bank of Alabama, N.A.
40,000,000 5.91 01/02/98 39,996,167
SMM Trust Series 1997-x
10,000,000 6.00 01/12/98 10,000,000
- ------------------------------------------------------------------------------------------------
TOTAL VARIABLE RATE DEMAND NOTES $449,962,229
- ------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--11.3%
Bankers Trust Securities Corp.
$25,000,000 5.78% 06/18/98 $ 25,000,000
15,000,000 5.79 06/18/98 15,000,000
Chase Manhattan Bank U.S.A.
25,000,000 5.64 01/14/98 25,000,000
Chase Manhattan Bank, N.A.
15,000,000 5.75 02/17/98 15,000,000
Morgan Guaranty Trust Co.
15,000,000 5.91 03/19/98 14,998,790
Regions Bank
15,000,000 6.00 03/18/98 14,999,401
- ------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT $109,998,191
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--0.2%
Joint Repurchase Agreement Account(d)
$ 2,000,000 6.40% 01/02/98 $ 2,000,000
- ------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT $ 2,000,000
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $974,606,226(b)
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(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) The amount stated also represents aggregate cost for federal income tax
purposes.
(c) When-issued security.
(d) 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 date for floating rate securities, or the prerefunded date for those
type of securities.
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, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS--34.5%
BANK HOLDING COMPANIES
BUSINESS CREDIT INSTITUTIONS
General Electric Capital Corp.
$40,000,000 5.55% 01/20/98 $ 39,882,833
COMMERCIAL BANKS
CP Trust Certificates Series 1996-1
20,000,000 6.22(a) 03/30/98 20,000,000
ELECTRIC COMPANIES
Mitsui & Co U.S.A.
15,000,000 5.65 01/26/98 14,941,146
FOREIGN BANKS
Banca Crt Financial Corp.
14,000,000 6.05 02/12/98 13,901,183
11,600,000 6.05 02/13/98 11,516,174
6,000,000 6.05 02/17/98 5,952,608
17,000,000 6.05 02/24/98 16,845,725
BCI Funding Corporation
10,000,000 5.52 01/09/98 9,987,733
Cades
20,000,000 5.63 05/29/98 19,537,089
5,000,000 5.68 06/10/98 4,873,778
Cariplo Finance
10,000,000 5.65 01/08/98 9,989,014
Credit Suisse First Boston
25,000,000 5.52 01/08/98 24,973,167
11,000,000 5.70 01/15/98 10,975,617
Rose One
15,000,000 5.73 02/27/98 14,863,913
Unifunding Inc.
25,000,000 5.52 01/05/98 24,984,667
RECEIVABLE/ASSET FINANCINGS
Dakota Certificates
20,000,000 5.53 01/05/98 19,987,711
Delaware Funding
13,724,000 5.69 02/20/98 13,615,542
Enterprise Funding Corporation
10,636,000 5.72 01/22/98 10,600,511
Windmill Funding
25,000,000 5.65 01/23/98 24,913,681
10,000,000 5.70 02/25/98 9,912,917
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS (CONTINUED)
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES
Bear Stearns Companies, Inc.
$25,000,000 5.62% 01/29/98 $ 24,890,722
10,000,000 5.71 02/17/98 9,925,453
Morgan Stanley Dean Witter, Inc.
25,000,000 5.69 02/23/98 24,790,576
Smith Barney Holdings, Inc.
10,000,000 5.70 02/11/98 9,935,082
- -----------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER AND CORPORATE OBLIGATIONS $ 391,796,842
- -----------------------------------------------------------------------------------------------
BANK NOTES--2.0%
Huntington National Bank
$ 3,000,000 5.82% 11/13/98 $ 2,999,006
Morgan Guaranty Trust Co.
10,000,000 5.93 08/31/98 9,997,465
Westpac Banking Corp., New York
10,000,000 5.97 03/23/98 9,998,301
- -----------------------------------------------------------------------------------------------
TOTAL BANK NOTES $ 22,994,772
- -----------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - FOREIGN EURODOLLAR--3.8%
Norinchukin Bank, London
$ 8,000,000 6.27% 01/20/98 $ 8,000,063
Sanwa Bank Limited, London
10,000,000 6.12 01/14/98 10,000,036
25,000,000 5.79 01/26/98 25,000,171
- -----------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT - FOREIGN
EURODOLLAR $ 43,000,270
- -----------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - YANKEEDOLLAR--14.5%
Bank of Tokyo Mitsubishi, New York
$12,000,000 6.00% 01/14/98 $ 12,000,000
Canadian Imperial Bank of Commerce, New York
15,500,000 5.94 03/17/98 15,499,086
Credit Agric Indosuez, New York
15,000,000 5.95 08/13/98 14,995,601
Landesbank Hessen Thuringen, New York
20,000,000 5.93 06/30/98 19,988,598
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT - YANKEEDOLLAR (CONTINUED)
Norinchukin Bank, New York
$22,000,000 5.73% 01/05/98 $ 22,000,000
15,000,000 5.68 01/07/98 15,000,025
Rabobank Nederland, New York
35,000,000 6.07 03/26/98 34,996,924
5,000,000 6.05 03/27/98 4,998,667
Royal Bank of Canada, New York
10,000,000 5.81 06/03/98 10,000,000
Societe Generale, New York
5,000,000 5.91 10/15/98 4,997,745
10,000,000 5.91 10/20/98 9,992,736
- -------------------------------------------------------------------------------------------------
$ 164,469,382
TOTAL CERTIFICATES OF DEPOSIT - YANKEEDOLLAR
- -------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES(A)--41.3%
Abbey National
$50,000,000 5.86% 01/15/98 $ 49,982,361
ABN/AMRO Bank, New York
11,000,000 6.17 01/02/98 10,999,034
American Express Centurion Bank
5,000,000 5.93 01/20/98 5,000,000
5,000,000 5.95 01/13/98 5,000,000
5,000,000 5.97 01/08/98 5,000,000
Bank One Columbus, N.A.
25,000,000 5.55 01/06/98 24,992,895
Bayerische Landesbank
35,000,000 5.84 01/26/98 34,986,872
Comerica Bank Detroit
20,000,000 5.88 01/15/98 19,996,080
17,500,000 5.90 01/05/98 17,498,865
Commonwealth Life Insurance Co.
25,000,000(c) 5.86 09/04/98 25,000,000
Corestates Bank, N.A.
20,000,000 5.95 01/05/98 20,000,000
5,000,000 5.96 01/06/98 5,000,000
Dauphin Deposit Bank & Trust
10,000,000 5.66 02/04/98 9,997,713
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (CONTINUED)
Den Danske Bank, New York
$15,000,000 5.92% 01/26/98 $ 14,999,302
25,000,000 5.93 01/15/98 24,998,618
FCC National Bank
10,000,000 5.74 01/28/98 9,995,574
30,000,000 6.16 01/02/98 29,994,986
First Bank, N.A.
15,000,000 5.87 01/21/98 14,996,964
JP Morgan & Co., Inc.
10,000,000 5.64 06/19/98 9,735,233
Merrill Lynch & Co., Inc.
10,000,000 5.94 01/13/98 9,999,620
10,000,000 5.96 01/12/98 9,999,627
Morgan Stanley Dean Witter, Inc.
15,000,000(c) 5.54 01/15/99 14,998,577
New York Life Insurance
10,000,000 5.89 03/03/98 10,000,000
PNC Bank, N.A.
15,000,000 5.89 01/28/98 14,994,229
10,000,000 5.91 01/09/98 9,999,874
SMM Trust Series 1997-x
10,000,000 6.00 01/12/98 10,000,000
Societe Generale, New York
5,000,000 6.19 01/02/98 4,999,667
Southtrust Bank of Alabama, N.A.
20,000,000 5.91 01/02/98 19,998,083
U.S. Bank, N.A.
15,000,000 6.21 03/18/98 15,035,848
10,000,000 6.24 03/10/98 10,024,395
- -------------------------------------------------------------------------------------------------
$ 468,224,417
TOTAL VARIABLE RATE DEMAND NOTES
- -------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--2.2%
Chase Manhattan Bank U.S.A.
$25,000,000 5.64%(a) 01/14/98 $ 25,000,000
- -------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT $ 25,000,000
- -------------------------------------------------------------------------------------------------
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA MONEY MARKET PORTFOLIO (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT--2.8%
Joint Repurchase Agreement Account(d)
$32,000,000 6.40% 01/02/98 $ 32,000,000
- ---------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT $ 32,000,000
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $1,147,485,683(b)
- ---------------------------------------------------------------------------------------------
</TABLE>
(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) The amount stated also represents aggregate cost for federal income tax
purposes.
(c) When-issued security.
(d) 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.
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.
8
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA GOVERNMENT PORTFOLIO
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--49.9%
Federal Farm Credit Bank
$ 8,000,000 5.45% 03/03/98 $ 7,992,123
50,000,000 5.80(a) 04/14/98 49,987,517
15,000,000 5.70 12/01/98 14,985,535
12,000,000 5.65(c) 01/04/99 11,982,600
Federal Home Loan Bank
8,000,000 5.67 03/10/98 7,996,769
25,000,000 5.79 03/18/98 24,996,196
6,485,000 5.71 10/01/98 6,483,512
Federal Home Loan Mortgage Corp.
8,000,000 5.72 03/17/98 7,997,870
18,000,000 5.77(a) 03/20/98 17,996,380
Federal National Mortgage Association
75,000,000 5.59(a) 01/15/98 74,998,275
10,000,000 5.79 03/25/98 9,995,584
23,000,000 6.02 04/15/98 22,993,119
10,000,000 5.89 05/21/98 9,996,836
Student Loan Marketing Association
8,200,000 5.79 09/16/98 8,200,937
- ---------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $276,603,253
- ---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--52.2%
CIBC Oppenheimer, Dated 12/31/97, Repurchase Price $25,009,028 (Total
Collateral Value $25,504,324 consisting of U.S. Treasury Notes: 6.50%-
6.625%, 07/31/01-08/15/05)
$ 25,000,000 6.50% 01/02/98 $ 25,000,000
Deutsche Morgan Grenfell, Dated 12/31/97, Repurchase Price $25,009,444
(Total Collateral Value $25,500,784 consisting of FNMA: 02/02/98-02/11/00;
U.S. Treasury Bills: 01/29/98-04/30/98; U.S. Treasury Bond: 11.75%,
02/15/01; U.S. Treasury Notes: 5.875%-7.75%, 02/28/99-05/15/07; U.S.
Treasury Stripped Interest only Securities: 11/15/01-08/15/05)
25,000,000 6.80 01/02/98 25,000,000
Goldman, Sachs & Co., Dated 12/10/97, Repurchase Price $25,356,250 (FNMA:
$25,500,000, 6.50%, 08/01/02)
25,000,000 5.70 03/09/98 25,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
Lehman Brothers Inc., Dated 12/31/97, Repurchase Price $25,009,167 (Total
Collateral Value $25,502,919 consisting of FHLMC Pool: 7.0%-9.5%,
06/01/02-07/01/27)
$ 25,000,000 6.60% 01/02/98 $ 25,000,000
Morgan Stanley & Co., Dated 10/28/97, Repurchase Price $50,700,000 (Total
Collateral Value $51,230,758 consisting of FHLMC Pool: 5.5%-8.5%,
01/01/99-12/01/27)
50,000,000 5.60 01/26/98 50,000,000
Nomura Securities International Inc., Dated 12/31/97, Repurchase Price
$25,009,583 (FNMA: $25,553,189, 6.57%, 06/20/02)
25,000,000 6.90 01/02/98 25,000,000
Joint Repurchase Agreement Account(d)
114,300,000 6.40 01/02/98 114,300,000
- -------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $289,300,000
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $565,903,253(b)
- -------------------------------------------------------------------------------------------------
</TABLE>
(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.
(c) When-issued security.
(d) 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 date for floating rate securities, or the prerefunded date for those
type of securities.
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.
9
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA TREASURY OBLIGATIONS PORTFOLIO
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS--15.8%
United States Treasury Notes
$ 10,000,000 7.25% 02/15/98 $ 10,018,359
15,000,000 6.13 03/31/98 15,009,143
39,000,000 7.88 04/15/98 39,205,303
15,000,000 6.25 07/31/98 15,045,683
10,000,000 4.75 08/31/98 9,934,688
15,000,000 5.88 10/31/98 15,018,861
5,000,000 5.75 12/31/98 5,001,085
20,000,000 5.88 01/31/98 20,040,523
- ---------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $129,273,645
- ---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--84.3%
Bear Stearns Companies, Inc., Dated 12/31/97, Repurchase Price $35,012,153
(U.S. Treasury Bill: $35,725,759, 01/02/98)
$ 35,000,000 6.25% 01/02/98 $ 35,000,000
BZW Securities, Dated 12/31/97, Repurchase Price $35,012,882 (U.S. Treasury
Note: $35,700,057, 5.875%, 11/15/99)
35,000,000 6.63 01/02/98 35,000,000
C.S. First Boston Corp., Dated 12/31/97, Repurchase Price $30,419,042 (Total
Collateral Value $30,636,345 consisting of U.S. Treasury Interest Only
Stripped Securities: 02/15/99-08/15/06)
30,000,000 5.65 03/10/98 30,000,000
CIBC Oppenheimer, Dated 12/31/97, Repurchase Price $35,012,639 (Total
Collateral Value $35,700,652 consisting of U.S. Treasury Notes: 6.0%-7.0%,
08/15/00-07/15/06)
35,000,000 6.50 01/02/98 35,000,000
Deutsche Morgan Grenfell, Dated 12/31/97, Repurchase Price $35,013,222
(Total Collateral Value $35,700,788 consisting of U.S. Treasury Notes:
5.75%-7.25%, 2/28/99-5/15/06; U.S. Treasury Stripped Interest only
Security: 2/15/02)
35,000,000 6.80 01/02/98 35,000,000
Goldman, Sachs & Co., Dated 12/31/97, Repurchase Price $35,012,639 (U.S.
Treasury Note: $35,700,065, 5.625%, 11/30/99)
35,000,000 6.50 01/02/98 35,000,000
JP Morgan Securities, Inc., Dated 12/31/97, Repurchase Price $35,012,153
(U.S. Treasury Note: $36,312,500, 6.25%, 02/28/02)
35,000,000 6.25 01/02/98 35,000,000
Lehman Brothers Inc., Dated 12/31/97, Repurchase Price $35,012,542 (U.S.
Treasury Note: $35,698,470, 5.625%, 11/30/99)
35,000,000 6.45 01/02/98 35,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
Merrill Lynch Government Securities, Inc., Dated 12/31/97, Repurchase
Price $35,012,639 (Total Collateral Value $35,702,260 consisting of U.S.
Treasury Stripped Interest only Securities: 08/15/03-05/15/04)
$ 35,000,000 6.50% 01/02/98 $ 35,000,000
Morgan Stanley & Co., Dated 12/31/97, Repurchase Price $35,012,153 (U.S.
Treasury Note: $35,704,378, 5.125%, 03/31/98)
35,000,000 6.25 01/02/98 35,000,000
Nomura Securities International, Inc., Dated 12/31/97, Repurchase Price
$35,014,097 (U.S. Treasury Note: $35,014,097, 6.0%, 06/30/99)
35,000,000 7.25 01/02/98 35,000,000
UBS Securities, Inc., Dated 12/31/97, Repurchase Price $35,012,736
(U.S. Treasury Note: $38,368,750 7.875%, 08/15/01)
35,000,000 6.55 01/02/98 35,000,000
Joint Repurchase Agreement Account
275,500,000 6.40 01/02/98 275,500,000
- -------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $690,500,000
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $819,773,645(a)
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) The amount stated also represents aggregate cost for federal income tax
purposes.
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.
10
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA TREASURY INSTRUMENTS PORTFOLIO
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS--98.8%
U.S. Treasury Bills
$ 90,900,000 5.19% 01/22/98 $ 90,624,800
5,000,000 4.95 02/12/98 4,971,125
11,300,000 5.10 02/12/98 11,232,765
13,400,000 5.12 02/12/98 13,319,957
U.S. Treasury Notes
175,000,000 5.00 01/31/98 174,901,395
25,000,000 5.63 01/31/98 24,995,265
150,000,000 7.25 02/15/98 150,299,338
70,000,000 5.13 02/28/98 69,940,374
75,000,000 7.88 04/15/98 75,492,375
25,000,000 5.13 04/30/98 24,969,978
75,000,000 6.00 05/31/98 75,125,148
- -------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $715,872,520
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $715,872,520(a)
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) The amount stated also represents aggregate cost for federal income tax
purposes.
The percentages shown for each 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 FEDERAL PORTFOLIO
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--102.9%
Federal Farm Credit Bank
$ 50,000,000 5.53%(a) 01/02/98 $ 49,999,898
59,000,000 5.40 01/02/98 58,991,150
75,000,000(c) 5.50(a) 01/04/98 75,000,000
15,000,000 5.73 01/06/98 14,988,063
10,000,000 5.60 01/08/98 9,989,111
19,820,000 5.58 01/14/98 19,780,063
25,000,000 5.65 01/15/98 24,945,069
5,000,000 5.45 01/16/98 4,988,646
17,000,000 5.45-5.77 01/21/98 16,947,283
14,000,000 5.45 01/22/98 13,955,492
11,600,000 5.48 01/26/98 11,555,856
20,000,000 5.58 01/30/98 19,910,100
24,000,000 5.62 01/30/98 23,891,347
50,000,000 5.53(a) 01/30/98 49,985,210
210,000,000 5.50(a) 02/02/98 210,000,000
21,300,000 5.53-5.65 02/02/98 21,260,165
10,000,000 5.62 02/09/98 9,939,117
34,945,000 5.49 02/11/98 34,726,705
64,000,000 5.60 02/18/98 63,522,133
45,000,000 5.56 03/02/98 44,583,000
45,000,000 5.45 03/03/98 44,955,764
11,636,000 5.59 03/12/98 11,509,523
100,000,000(d) 6.05 05/01/98 99,992,295
10,000,000 5.49 06/15/98 9,748,375
20,000,000 5.75 09/11/98 19,987,523
30,000,000 5.70 12/01/98 29,971,069
Federal Home Loan Bank
50,600,000 4.90-5.72 01/02/98 50,592,782
50,000,000 5.73 01/06/98 49,960,208
42,590,000 5.55 01/07/98 42,550,604
43,000,000 5.67 01/14/98 42,911,958
134,805,000 5.44-5.50 01/16/98 134,498,642
101,800,000 5.50-5.75 01/21/98 101,476,749
95,131,000 5.48-5.65 02/11/98 94,535,437
146,100,000 5.48-5.65 02/13/98 145,134,333
80,510,000 5.50-5.65 02/18/98 79,912,846
15,000,000 5.61 03/04/98 14,855,075
25,000,000 5.67 03/10/98 24,989,903
116,000,000 5.79(a) 03/18/98 115,982,351
46,100,000 5.37-5.52 04/01/98 45,466,858
125,000,000 5.82(a) 04/14/98 124,973,996
20,000,000 5.59 04/22/98 19,655,283
50,000,000 5.77 07/07/98 49,975,070
50,000,000 5.74(a) 09/17/98 49,972,088
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Federal Home Loan Bank (continued)
$ 75,000,000 5.75%(a) 10/02/98 $ 74,956,136
30,000,000 5.70 10/23/98 29,977,936
Student Loan Marketing Association
25,000,000 5.10 01/02/98 24,996,458
60,000,000 5.47-5.48 01/27/98 59,762,714
20,000,000 5.79 09/16/98 20,012,372
Tennessee Valley Authority
64,700,000 5.48 01/13/98 64,581,815
25,000,000 5.58 02/05/98 24,864,375
15,000,000 5.47 02/10/98 14,908,833
25,000,000 5.51 02/20/98 24,808,681
25,000,000 5.57 02/24/98 24,791,125
50,000,000 5.57 03/09/98 49,481,681
15,000,000 5.57 03/11/98 14,839,863
50,000,000 5.58 03/13/98 49,449,750
30,000,000 5.57 03/20/98 29,637,950
- -------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $ 2,689,636,828
- -------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--0.2%
U.S. Treasury Bill
$ 5,300,000 5.12% 02/12/98 $ 5,268,342
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS $2,694,905,170(b)
- -------------------------------------------------------------------------------------
</TABLE>
(a) Variable rate security-base index is either U.S. Treasury Bill, one or
three month LIBOR, Federal Funds, Prime lending rate, or 30 day discount
note rate.
(b) The amount stated also represents aggregate cost for federal income tax
purposes.
(c) When-issued security.
(d) 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.
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.
12
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA TAX-EXEMPT DIVERSIFIED PORTFOLIO
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALABAMA--5.8%
Columbia IDB PCRB for Alabama Power Co. Series 1996 A (A-1/VMIG1)
$17,800,000 4.80% 01/02/98 $ 17,800,000
Columbia IDB PCRB for Alabama Power Co. Series 1995 B (A-1/VMIG1)
21,700,000 4.80 01/07/98 21,700,000
Homewood RB for Samford University (Bank of Nova Scotia LOC)
(A-1+/MIG1)
30,800,000 4.80 01/02/98 30,800,000
Mobile County IDA PCRB for M&T Chemicals Series 1984
(Bankers Trust Company LOC)(A1)
3,000,000 4.275 01/07/98 3,000,000
Mobile IDA PCRB for Alabama Power Series 1993A(A-1/VMIG1)
8,600,000 4.10 01/07/98 8,600,000
Montgomery Special Care RB Series 1994 A (Amsouth Bank LOC) (VMIG1)
6,720,000 4.20 01/07/98 6,720,000
- ---------------------------------------------------------------------------------------------------
$ 88,620,000
- ---------------------------------------------------------------------------------------------------
ARKANSAS--1.2%
Crossett PCRB for Georgia Pacific Corp. Series 1991
(Suntrust Bank LOC)(AA3)
$ 9,500,000 4.20% 01/07/98 $ 9,500,000
Union County PCRB Series 1988 for Great Lakes Chemical(A-1+)
9,000,000 4.25(c) 01/07/98 9,000,000
- ---------------------------------------------------------------------------------------------------
$ 18,500,000
- ---------------------------------------------------------------------------------------------------
CALIFORNIA--2.0%
California School Cash Reserve Program, 1997 Pool Bonds Series A (Ambac
Assurance Corporation)(SP-1+/MIG1)
$ 6,000,000 4.75% 07/02/98 $ 6,025,469
Los Angeles County, 1997-98 TRANS, Series A(SP-1+/MIG1)
24,500,000 4.50 06/30/98 24,576,245
- ---------------------------------------------------------------------------------------------------
$ 30,601,714
- ---------------------------------------------------------------------------------------------------
COLORADO--1.2%
Colorado Health Facilities Authority Series 1992 C(A-1+/VMIG1)
$ 5,400,000 4.15% 01/07/98 $ 5,400,000
Denver Airport System Subordinate RB Series 1997 B (Westdeutsche Landesbank
Girozentrale)(A-1+/VMIG1)
13,000,000 4.10 01/07/98 13,000,000
- ---------------------------------------------------------------------------------------------------
$ 18,400,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DISTRICT OF COLUMBIA--1.3%
District of Columbia VRDN ACES for Georgetown University Series 1988 B
Bayerische LandesBank Girozentrale LOC (A-1+/VMIG1)
$ 6,875,000 3.80% 01/07/98 $ 6,875,000
District of Columbia VRDN ACES for Georgetown University Series 1988 C(A-
1+/VMIG1)
5,100,000 3.80 01/07/98 5,100,000
District of Columbia VRDN ACES for Georgetown University Series 1988 E(A-
1+/VMIG1)
1,100,000 3.80 01/07/98 1,100,000
HFA MF Hsg. for Mclean Gardens South Apartments VRDN (Sumitomo Bank
LOC)(VMIG1)
7,000,000 4.35 01/07/98 7,000,000
- --------------------------------------------------------------------------------------------------
$ 20,075,000
- --------------------------------------------------------------------------------------------------
FLORIDA--2.4%
Florida Pooled Commercial Paper Notes Series A (First Union National Bank
of Florida)(A-1/P-1)
$27,445,000 3.90% 01/14/98 $ 27,445,000
Putnam County Development Authority VRDN PCRB For Seminole Electric Series
1984 H CFC (A-1+/P-1)
9,000,000 3.85 01/07/98 9,000,000
- --------------------------------------------------------------------------------------------------
$ 36,445,000
- --------------------------------------------------------------------------------------------------
GEORGIA--13.8%
Albany Dougherty PCRB for Philip Morris Company(A-1/P-1)
$17,000,000 3.90% 01/07/98 $ 17,000,000
Albany Dougherty PCRB Series 1991 for Georgia Power Co.(VMIG1)
2,120,000 4.20 01/07/98 2,120,000
Atlanta Water & Sewer RB Eagle Tax-exempt Trust Class A Series 1997
(Financial Guaranty Insurance Company)(A1+C)
10,500,000 4.27 01/07/98 10,500,000
Bartow County PCRB for Georgia Power Co. Series 1997 (VMIG1)
29,000,000 4.80 01/07/98 29,000,000
Burke County PCRB for Georgia Power Co. Fifth Series 1995 (MIG1)
5,100,000 5.05 01/02/98 5,100,000
Burke County PCRB for Georgia Power Co. 1st Series 1992 (VMIG1)
12,425,000 4.20 01/07/98 12,425,000
Burke County PCRB for Georgia Power Co. Eighth Series 1994
(A-1/VMIG1)
1,600,000 5.05 01/02/98 1,600,000
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
13
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA TAX-EXEMPT DIVERSIFIED PORTFOLIO (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GEORGIA (CONTINUED)
Burke County PCRB for Georgia Power Co. Ninth Series 1994
(A-1/VMIG1)
$11,200,000 5.05% 01/02/98 $ 11,200,000
Burke County PCRB for Oglethorpe Power Corp. Series 1993A (FGIC)(A-1+)
7,350,000 3.65 01/07/98 7,350,000
Cobb County Institute of Nuclear Operations Inc. VRDN for Georgia Power Co.
(Suntrust Bank LOC)(AA3)
5,525,000 4.20 01/07/98 5,525,000
Cobb County Power Operations Inc. Georgia Power Co. 1st Series 1991
(Trust Company Bank LOC)(VMIG1)
8,330,000 4.20 01/07/98 8,330,000
Columbus Hospital Authority RB for St. Francis Hospital
(Suntrust Bank LOC)(VMIG1)
7,350,000 4.20 01/07/98 7,350,000
Coweta County PCRB Series 1996 for Georgia Power Co.(A-1/VMIG1)
1,600,000 5.05 01/02/98 1,600,000
Dekalb County Hospital Authority RB Series 1993 B
(Suntrust Bank LOC)(MIG1)
5,200,000 4.20 01/07/98 5,200,000
DeKalb County IDA VRDN for Siemens Energy and Automation Inc. (P-1)
3,750,000 4.25 01/07/98 3,750,000
Floyd County PCRB for Georgia Power Co. 1st Series 1996(A-1/VMIG1)
1,500,000 5.05 01/02/98 1,500,000
Fulco Hospital Authority Series 1992 Revenue Anticipation Certificates
(Suntrust Bank LOC)(A-1+)
7,100,000 4.20 01/07/98 7,100,000
Georgia Municipal Gas Authority RB Series A (Credit Suisse First
Boston/Morgan Guaranty/Bayerische Landesbank Girozentrale/Wachovia Bank
National Association/ABN Amro Bank) (A-1+)
19,500,000 3.65 01/07/98 19,500,000
Georgia Municipal Gas Authority RB Series B (Credit Suisse First
Boston/Morgan Guaranty/Bayerische Landesbank Girozentrale/Wachovia Bank
National Association)(A-1+)
16,700,000 3.65 01/07/98 16,700,000
Heard County PCRB for Georgia Power Co. 1st Series 1996 (A-1/VMIG1)
1,800,000 5.05 01/02/98 1,800,000
Henry County Georgia IDA PCRB Series 1993 for Georgia Pacific Corp.
(Suntrust Bank LOC) (AA3)
4,000,000 4.20 01/07/98 4,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Meag Project One Subordinated Bonds Series 1985 A (Credit Suisse First
Boston/Morgan Guaranty Trust Co./Bayerische Landesbank Girozentrale)(A-
1+/VMIG1)
5,000,000 3.80 05/12/98 5,000,000
Meag Project One Subordinated Bond Series 1994 E (ABN Amro
Bank) (A-1+/VMIG1)
$14,100,000 3.85% 01/07/98 $ 14,100,000
Monroe County IDA PCRB 1st Series 1997 A(A-1/VMIG1)
2,000,000 5.05 01/02/98 2,000,000
Municipal Electric Authority of Georgia Subordinate General Resolution
Series 1985 B (Credit Suisse/Morgan Guaranty/Bayerische Landesbank
Girozentrale LOC)(A-1+/VMIG1)
8,145,000 3.65 01/07/98 8,145,000
Savannah Economic Development Authority PCRB VRDN for Savannah Electric &
Power(A-1/VMIG1)
4,085,000 4.20 01/07/98 4,085,000
- --------------------------------------------------------------------------------------------------
$211,980,000
- --------------------------------------------------------------------------------------------------
IDAHO--0.7%
Idaho Health Facilities for Holy Cross Health Systems(A-1/VMIG1)
$10,000,000 4.15% 01/07/98 $ 10,000,000
- --------------------------------------------------------------------------------------------------
ILLINOIS--9.5%
Belleville IDA for Weyerhaeuser Company Series 1993(A-1)
$ 1,800,000 4.20% 01/07/98 $ 1,800,000
Chicago GO Tender Notes Series 1997 (Morgan Stanley LOC) (A-1+/VMIG1)
38,000,000 3.65 02/05/98 37,997,088
Cook County GO Variable Rate Bonds Series 1996(A-1+/VMIG1)
50,700,000 3.70 01/07/98 50,700,000
Illinois Health Facilities Authority VRDN (First National Bank of
Chicago)(A-1+/VMIG1)
3,000,000 3.80 01/07/98 3,000,000
Illinois Health Facilities Authority 1990 VRDN for Central Dupage Hospital
(Rabobank Nederland LOC)(VMIG1)
4,710,000 5.10 01/02/98 4,710,000
Illinois Health Facilities Authority VRDN Series 1985 C Revolving Fund
Pooled Finance Program (First National Bank of Chicago LOC)
(A-1+/VMIG1)
13,575,000 3.80 01/07/98 13,575,000
Illinois Health Facilities Authority VRDN Series 1985 D Revolving Fund
Pooled Finance Program (First National Bank of Chicago LOC)
(A-1+/VMIG1)
8,300,000 3.80 01/07/98 8,300,000
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ILLINOIS (CONTINUED)
Illinois Health Facilities Authority VRDN for Elmhurst Memorial Hospital
(VMIG1)
$ 9,200,000 5.15% 01/02/98 $ 9,200,000
Illinois Health Facilities Authority VRDN for Northwest Community Hospital
Series 1995(A-1+/MIG1)
1,700,000 4.15 01/07/98 1,700,000
Sauget PCRB VRDN Series 1992 (Monsanto)(P-1)
3,300,000 3.80 01/07/98 3,300,000
Societe Generale Municipal Securities Trust Receipts For Chicago Midway
Airport RB Series 1996 A (MBIA)(A1+C)
12,000,000 4.25 01/07/98 12,000,000
- ---------------------------------------------------------------------------------------------------
$ 146,282,088
- ---------------------------------------------------------------------------------------------------
INDIANA--4.6%
Fort Wayne Hospital Authority VRDN Series 1985 D (Bank of America
LOC)(VMIG1)
$ 1,180,000 3.65% 01/07/98 $ 1,180,000
Fort Wayne Parkview Memorial Hospital VRDN Series 1985 B (Bank of America)
(VMIG1)
15,700,000 4.15 01/07/98 15,700,000
Fort Wayne Parkview Memorial Hospital VRDN Series 1985 C (Bank of
America)(VMIG1)
7,655,000 3.65 01/07/98 7,655,000
Gary RB for U.S. Steel Corp. Series 1986 (Bank of New York)(A-1+/P-2)
20,000,000 3.90 02/18/98 20,000,000
Indiana Health Facility Hospital RB(A-1+/VMIG1)
16,800,000 3.65 01/07/98 16,800,000
Schererville Economic Development VRDN Series 1983 for Avery International
Corp. Project (Bankers Trust LOC)(A1)
4,000,000 4.28 01/07/98 4,000,000
Warrick County PCRB for Aluminum Company of America Series 1992(A-1)
5,000,000 4.25 01/07/98 5,000,000
- ---------------------------------------------------------------------------------------------------
$ 70,335,000
- ---------------------------------------------------------------------------------------------------
IOWA--2.5%
Chillicothe PCRB for Midwest Power Systems Series 1993 A
(A-1/VMIG1)
$ 900,000 3.85% 01/07/98 $ 900,000
Louisa County PCRB for Iowa-Illinois Gas & Electric Co./Midamerican Energy
Co. Series 1986 A(A-1)
15,400,000 4.00 01/07/98 15,400,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IOWA (CONTINUED)
Muscatine County VRDN for Monsanto Corp. Series 1992(P-1)
$ 1,000,000 3.80% 01/07/98 $ 1,000,000
Salix PCRB VRDN for Midwest Power Systems Inc. Series 1993 (A-1/VMIG1)
21,795,000 3.85 01/07/98 21,795,000
- --------------------------------------------------------------------------------------------------
$ 39,095,000
- --------------------------------------------------------------------------------------------------
KENTUCKY--2.3%
Calvert VRDN for Air Products and Chemicals Inc. Project Series 1993 B (A-
1)
$ 1,000,000 4.20% 01/07/98 $ 1,000,000
Kentucky Turnpike Authority Refunding Bonds 1987A Series 1997 Fr/ri-17
(Financial Security Assurance Inc.)(A-1+/VMIG1)
5,000,000 3.90 01/07/98 5,000,000
Mason County Floating/Fixed Rate PCRB for East Kentucky Power Facility
Series 1984 B (National Rural Utilities Cooperative Finance Corp.)(A-1+/P-
1)
14,350,000 3.85 01/07/98 14,350,000
Mason County Variable/Fixed Rate PCRB Pooled for East Kentucky Power
(CFC)(A-1+/P-1)
5,650,000 3.85 01/07/98 5,650,000
Trimble County PCRB for Louisville Gas and Electric Co. Series 1996 A(A-
1+/VMIG1)
10,000,000 3.85 02/12/98 10,000,000
- --------------------------------------------------------------------------------------------------
$ 36,000,000
- --------------------------------------------------------------------------------------------------
LOUISIANA--0.9%
Ascension Parish PCRB for Vulcan Materials Co. Series 1996
(A-1+/VMIG1)
$ 8,200,000 3.80% 01/07/98 $ 8,200,000
Parish of Iberville VRDN for Air Products and Chemicals Inc. Project
Series 1992 (A-1)
6,200,000 4.20 01/07/98 6,200,000
- --------------------------------------------------------------------------------------------------
$ 14,400,000
- --------------------------------------------------------------------------------------------------
MASSACHUSETTS--1.1%
Massachusetts Bay Transportation Authority VRDN Series 1984 A(A-1+)
$ 4,200,000 3.75% 03/01/98 $ 4,200,000
Massachusetts Health & Education Authority Eagle Tax-exempt Trust for
Harvard University Series 972104(A1+C)
12,500,000 4.27 01/07/98 12,500,000
- --------------------------------------------------------------------------------------------------
$ 16,700,000
- --------------------------------------------------------------------------------------------------
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
15
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA TAX-EXEMPT DIVERSIFIED PORTFOLIO (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MICHIGAN--1.1%
Michigan Job Development Authority for Mazda Motor Manufacturing VRDN
(Sumitomo Bank LOC)(VMIG1)
$11,100,000 4.65%(c) 01/07/98 $ 11,100,000
State of Michigan GO Notes(SP-1+/MIG1)
6,000,000 4.50 09/30/98 6,032,697
- ---------------------------------------------------------------------------------------------------
$ 17,132,697
- ---------------------------------------------------------------------------------------------------
MINNESOTA--1.2%
Becker PCRB for Northern States Power Co. Series 1992 A (A-1+/VMIG1)
$ 8,000,000 3.70% 04/08/98 $ 8,000,000
Minnesota Education Facility Authority for Carleton College(VMIG1)
4,175,000 3.65 01/07/98 4,175,000
White Bear Lake IDA Series 1993 for Weyerhaeuser Co.(A-1)
6,800,000 4.20 01/07/98 6,800,000
- ---------------------------------------------------------------------------------------------------
$ 18,975,000
- ---------------------------------------------------------------------------------------------------
MISSISSIPPI--1.0%
Canton IDRB Series 1995 for Levi Strauss & Co. (Bank of America LOC)(A1+)
$10,000,000 3.65% 01/07/98 $ 10,000,000
Grenada County Refunding RB VRDN for Georgia Pacific Corp. Series 1994
(Sumitomo Bank LOC)(A1)
5,000,000 4.50 01/07/98 5,000,000
- ---------------------------------------------------------------------------------------------------
$ 15,000,000
- ---------------------------------------------------------------------------------------------------
MISSOURI--1.6%
Kansas City Cloversett IDA MF Hsg. RB Series 1988 VRDN (Boatmen's Bank of
Kansas City LOC)(A-1+)
$ 8,635,000 4.35%(c) 01/07/98 $ 8,635,000
Missouri Health & Education Facility Authority VRDN (MBIA)(A-1+)
10,500,000 3.70 01/07/98 10,500,000
Monsanto Corporation State Environmental Improvement and Energy Resources
Authority Series 1993 (Monsanto)(P-1)
5,000,000 3.80 01/07/98 5,000,000
- ---------------------------------------------------------------------------------------------------
$ 24,135,000
- ---------------------------------------------------------------------------------------------------
NEVADA--2.0%
Clark County VRDN for Nevada Airport System Series 1993A (MBIA)(A-1+/VMIG1)
$30,700,000 3.65%(b) 01/07/98 $ 30,700,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW JERSEY--1.9%
New Jersey TRANS Series 1998A(A-1+/P-1)
$20,000,000 3.75% 03/11/98 $ 20,000,000
9,300,000 3.75 05/08/98 9,300,000
- ---------------------------------------------------------------------------------------------------
$ 29,300,000
- ---------------------------------------------------------------------------------------------------
NEW MEXICO--1.2%
Albuquerque RB for Sisters of Charity Series 1992(A-1+/VMIG1)
$ 6,000,000 4.15% 01/07/98 $ 6,000,000
New Mexico TRANS Series 1997(SP-1+/VMIG1)
13,000,000 4.50 06/30/98 13,040,075
- ---------------------------------------------------------------------------------------------------
$ 19,040,075
- ---------------------------------------------------------------------------------------------------
NEW YORK--4.6%
Brentwood Union Free School District Tax Anticipation Notes of 1997(MIG1)
$ 5,000,000 4.25% 06/30/98 $ 5,009,923
New York City GO RANS Fiscal 1998 Series A (National Westminster Bank
/Morgan Guaranty Trust/Bayerische Landesbank Girozentrale/ Westdeutsche
Landesbank Girozentrale/Societe Generale/Landesbank LOC)(A-1+/MIG1)
31,000,000 4.50 06/30/98 31,105,347
New York City Health & Hospitals Corporation, Health System Bonds, 1997
Series B(Canadian Imperial Bank of Commerce)(A-1+/VMIG1)
6,800,000 3.55 01/07/98 6,800,000
New York City Water Finance Authority CP Series 5 Lob A (Bayerische
Landesbank Girozentrale/Westdeutsche Landesbank Girozentrale/Landesbank
Hessen-thueringen Girozentrale)
(A-1+/P-1)
15,000,000 3.80 03/24/98 15,000,000
New York State Floating Rate Trust Receipts Series 1997(VMIG1)
10,125,000 4.00 01/07/98 10,125,000
New York State Housing Finance Agency for Normandie Court Housing RB Series
1987 A (Fleet Bank LOC)(VMIG1)
1,000,000 4.00 01/07/98 1,000,000
New York State Triborough Bridge & Tunnel Authority VRDN Series 1994
(FGIC)(A-1+/VMIG1)
1,000,000 3.55 01/07/98 1,000,000
- ---------------------------------------------------------------------------------------------------
$ 70,040,270
- ---------------------------------------------------------------------------------------------------
NORTH CAROLINA--0.3%
Rockingham County IDA PCRB Series 1992 for Philip Morris Company(A-1/P-1)
$ 3,960,000 4.00% 01/07/98 $ 3,960,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OHIO--2.9%
Franklin County Hospital RB for Holy Cross Health System Series 1995(A-
1+/VMIG1)
$17,500,000 4.15% 01/07/98 $ 17,500,000
Hamilton County Adjustable Rate Hospital Facilities RB Series 1997 B for
The Health Alliance of Greater Cincinnati (MBIA)(A-1+/VMIG1)
26,675,000 3.70(c) 01/07/98 26,675,000
- -----------------------------------------------------------------------------------------------
$ 44,175,000
- -----------------------------------------------------------------------------------------------
OKLAHOMA--0.7%
Muskogee PCRB for Oklahoma Gas and Electric Co. Series 1997 A(A-1+/VMIG1)
$10,000,000 3.90% 01/07/98 $ 10,000,000
- -----------------------------------------------------------------------------------------------
OREGON--0.7%
Clackamas County Hospital TRB Series 1984(A-1+)
$ 4,110,000 3.75% 04/01/98 $ 4,110,000
Lane County PCRB VRDN for Weyerhaeuser Company Series 1994
(A-1)
6,500,000 4.20(c) 01/07/98 6,500,000
- -----------------------------------------------------------------------------------------------
$ 10,610,000
- -----------------------------------------------------------------------------------------------
PENNSYLVANIA--3.1%
Pennsylvania GO Bond Eagle Tax Exempt Trust Class A Series 1994 (AMBAC)(A-
1+C)
$14,400,000 4.27% 01/07/98 $ 14,400,000
Pennsylvania TRANS Series 1997-1998(SP-1+/MIG1)
27,000,000 4.50 06/30/98 27,096,053
Philadelphia School District TRANS Series 1997- 98
(Commerzbank)(SP-1+/MIG1)
6,000,000 4.50 06/30/98 6,017,947
- -----------------------------------------------------------------------------------------------
$ 47,514,000
- -----------------------------------------------------------------------------------------------
SOUTH CAROLINA--0.7%
York County Floating/Fixed Rate PCRB Pooled Series 1984-North Carolina
Electric Membership Corp. VRDN (CFC)(A-1+/MIG1)
$ 1,100,000 3.85% 01/07/98 $ 1,100,000
8,925,000 3.85 01/07/98 8,925,000
- -----------------------------------------------------------------------------------------------
$ 10,025,000
- -----------------------------------------------------------------------------------------------
SOUTH DAKOTA--0.7%
Puttable Floating Option Receipts Series PT-73(A1+C)
$10,240,000 4.25% 01/07/98 $ 10,240,000
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TEXAS--18.0%
Belton VRDN Series 1993 (Texas Commerce Bank LOC)(P-1)
$ 3,450,000 3.70% 01/07/98 $ 3,450,000
Brazos Harbor IDA VRDN Series 1996 for Monsanto Company
(P-1)
3,500,000 3.80 01/07/98 3,500,000
Brazos River Authority PCRB Series 1994 for Monsanto Company
(A-1/P-1)
5,100,000 3.80 01/07/98 5,100,000
Brazos River Authority VRDN for Monsanto Company(P-1)
5,300,000 3.80 01/07/98 5,300,000
Harris County Health Facility Development Adjustable RB for School of The
Incarnate Word Series 1997 A(A-1+C/VMIG1)
12,500,000 3.70 03/13/98 12,500,000
Harris County Hospital RB for Childrens Hospital Series 1989
B-2(VMIG1)
12,900,000 3.70 01/07/98 12,900,000
Houston GO CP Notes Series A(A-1+/P-1)
25,000,000 3.75 05/13/98 25,000,000
Lower Colorado River Authority CP Notes Series C(A-1+/P-1)
3,500,000 3.75 05/15/98 3,500,000
Nueces River IDA PCRB UPDATE Series 1984 for San Miguel (National Rural
Utilities Cooperative Finance Corp.)(A-1+/VMIG1)
50,700,000 3.70 03/10/98 50,700,000
San Antonio Electric & Gas Systems CP Notes Series A(A-1+/P-1)
15,000,000 3.75 01/15/98 15,000,000
11,000,000 3.75 05/01/98 11,000,000
6,000,000 3.75 05/26/98 6,000,000
San Antonio Electric & Gas System Revenue & Refunding Bonds New Series
1997 Sg 104 & Sg 105(A1+C)
33,000,000 4.25 01/07/98 33,000,000
State of Texas TRANS CP Series 1997B(A-1+/P-1)
5,000,000 3.70 02/25/98 5,000,000
Texas TRANS Series 1997 A(SP-1+/MIG1)
75,600,000 4.75 08/31/98 76,038,639
Travis County Health Facilities Development Variable Rate RB for Charity
Obligation Group Series 1997E(A-1+/VMIG1)
5,100,000 3.65 01/07/98 5,100,000
Waco Health Facilities Development Co. Variable Rate RB for Charity
Obligated Group Series 1997E(A-1+/VMIG1)
4,200,000 3.65 01/07/98 4,200,000
- -----------------------------------------------------------------------------------------------
$ 277,288,639
- -----------------------------------------------------------------------------------------------
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
17
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA TAX-EXEMPT DIVERSIFIED PORTFOLIO (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UTAH--0.3%
Utah State RB for University of Utah Series 1997A(A-1+/VMIG1)
$ 5,000,000 3.85% 01/07/98 $ 5,000,000
- -----------------------------------------------------------------------------------------------
VIRGINIA--8.5%
Chesapeake IDA PCRB for Virginia Electric & Power Co. Series 1985(A-1/P-1)
$22,000,000 3.80% 03/10/98 $ 22,000,000
Chesterfield County IDA PCRB for Virginia Electric & Power Co. Series
1985(A-1/P-1)
8,000,000 3.85 03/02/98 8,000,000
Chesterfield County IDA PCRB for Virginia Electric & Power Co. Series
1987A(A-1/P-1)
5,000,000 3.80 03/10/98 5,000,000
Chesterfield County IDA PCRB for Virginia Electric & Power Co. Series 1987
C(A-1)
1,000,000 3.90 02/10/98 1,000,000
Chesterfield County PCRB for Virginia Electric & Power Co. Series 1985(A-
1/P-1)
5,200,000 3.90 02/10/98 5,200,000
Louisa PCRB for Virginia Electric & Power Co. Series 1984(A-1/P-1)
3,700,000 3.95 02/13/98 3,700,000
4,000,000 3.80 02/26/98 4,000,000
4,000,000 3.80 02/27/98 4,000,000
4,000,000 3.85 03/17/98 4,000,000
4,000,000 3.85 03/30/98 4,000,000
Richmond VRDN Public Utility Revenue Notes Series A(A-1+/MIG1)
14,000,000 4.20 01/07/98 14,000,000
Roanoke VRDN for Carilion Health Systems Hospital Series A (A-1+/VMIG1)
33,700,000 4.10 01/07/98 33,700,000
Spotsylvania IDA PCRB Series 1993 for Carlisle Corp. (Suntrust Bank
LOC)(AA3)
6,500,000 4.20 01/07/98 6,500,000
York County IDA PCRB for Virginia Electric & Power Co. Series 1985(A-1)
9,400,000 3.90 02/09/98 9,400,000
5,600,000 3.80 03/11/98 5,600,000
- -----------------------------------------------------------------------------------------------
$ 130,100,000
- -----------------------------------------------------------------------------------------------
WASHINGTON--2.1%
Port of Grays Harbor IDA VRDN for Weyerhaeuser Project Series 1992(A-1)
$ 1,000,000 4.20% 01/07/98 $ 1,000,000
Port of Grays Harbor IDA VRDN for Weyerhaeuser Project Series 1993(A-1)
5,850,000 4.20 01/07/98 5,850,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
WASHINGTON (CONTINUED)
Union Gap City IDA VRDN for Weyerhaeuser Project Series 1992
(A-1)
1,600,000 4.20 01/07/98 1,600,000
Washington Health Care Facilities Authority VRDN Series 1996 (Morgan
Guaranty Trust LOC)(VMIG1)
$ 3,000,000 5.10% 01/02/98 $ 3,000,000
Washington Public Power Supply Project Electric RB Series 1993-1A (Bank
of America LOC)(A-1+/VMIG1)
9,000,000 3.75 01/07/98 9,000,000
Washington Public Power Supply System RB Series 1993-1A-2 (Bank of
America National Trust & Savings Association)(A-1+/VMIG1)
9,300,000 3.75 01/07/98 9,300,000
Washington VRDN for Hutchinson Cancer Research Centre Series 1991 A
(Morgan Guaranty Trust LOC)(VMIG1)
3,160,000 5.10 01/02/98 3,160,000
- ---------------------------------------------------------------------------------------------
$ 32,910,000
- ---------------------------------------------------------------------------------------------
WISCONSIN--1.9%
State of Wisconsin Operating Notes Series 1997(SP-1+/MIG1)
$ 6,700,000 4.50% 06/15/98 $ 6,720,268
Wisconsin Health & Educational Facilities Authority Variable Rate RB
Series 1997 (Toronto Dominion Bank)(A-1+/VMIG1)
7,000,000 4.10 01/07/98 7,000,000
Wisconsin Operating Notes Series 1997-2(SP 1+/MIG1)
15,000,000 4.50 06/15/98 15,050,537
- ---------------------------------------------------------------------------------------------
$ 28,770,805
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $1,592,350,288(a)
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) The amount stated also represents aggregate cost for federal income tax
purposes.
(b) When-issued security
(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, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA-98.2%
California GO CP (A-1/P-1)
$ 5,000,000 3.70% 03/09/98 $ 5,000,000
4,600,000 3.75 03/13/98 4,600,000
California Health Facilities Authority for Kaiser Permanente Series 1993 A
RB(A-1+/VMIG1)
2,000,000 3.45 01/07/98 2,000,000
California Health Facility Finance Authority RB Series 1990 A VRDN
(Rabobank Nederland LOC)(A-1+/VMIG1)
7,300,000 3.50 01/07/98 7,300,000
California PCRB for Pacific Gas & Electric Series 1996F (Banque Nationale
de Paris LOC)(A-1)
28,100,000 4.75 01/02/98 28,100,000
California Pollution Control Financing Authority for Pacific Gas & Electric
TRB Series 1996E (Morgan Guaranty LOC)(A-1+)
4,200,000 3.60 03/02/98 4,200,000
10,000,000 3.65 05/14/98 10,000,000
California Pollution Control Financing Authority for Southern California
Edison Adjustable TRB Series 1986 D(A-1/VMIG1)
2,600,000 4.20 01/02/98 2,600,000
California Pollution Control Financing Authority for Southern California
Edison TRB Series 1986 A(A-1/VMIG1)
10,400,000 4.20 01/02/98 10,400,000
California Pollution Control Financing Authority for Southern California
Edison TRB Series 1986 B(A-1/VMIG1)
5,000,000 4.20 01/02/98 5,000,000
California Pollution Control Financing Authority for Southern California
Edison TRB Series 1986 C(A-1/VMIG1)
2,800,000 4.20 01/02/98 2,800,000
California Revenue Anticipation Notes Series 1997 (SP 1+/MIG1)
10,000,000 4.50 06/30/98 10,031,007
California School Cash Reserve Program, 1997 Pool Bonds Series A(AMBAC)(SP
1+/MIG1)
14,900,000 4.75 07/02/98 14,965,638
California State Puttable Floating Option Receipts Series
Pt-1001 (FGIC)(A-1+)
18,870,000 4.20 01/07/98 18,870,000
California Statewide Communities Development Authority for Kaiser
Foundation Hospital 1995 COPS(A-1+/MIG1)
5,200,000 3.45 01/07/98 5,200,000
California Statewide Communities Development Authority Refunding RB Series
1995(A-1+)
700,000 3.45 01/07/98 700,000
California Statewide Communities Development Authority Refunding RB Series
1995A-2(A-1+)
8,000,000 3.45 01/07/98 8,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
California Statewide Communities Development Authority Series 1995A-1(A-1+)
$14,200,000 3.45% 01/07/98 $ 14,200,000
City of Berkely TRANS Series 1997 (MIG1)
14,500,000 4.25 09/09/98 14,540,294
City of Fresno MF Hsg. Revenue Refunding Bonds Series 1996 A (First
Interstate Bank of California LOC)(VMIG1)
3,315,000 3.65 01/07/98 3,315,000
City of Irwindale IDRB Series 1984 for Toys-R-Us VRDN (Bankers Trust
LOC)(A1)
2,000,000 4.28 01/07/98 2,000,000
City of Los Angeles VRDN MF Hsg. Museum Terrace-84H (Bank of America
LOC)(VMIG1)
4,000,000 3.65 01/07/98 4,000,000
City of Newport Beach Floating/Fixed Rate Health Facilities Memorial
Hospital Facility VRDN(A-1+/VMIG1)
10,050,000 5.00 01/02/98 10,050,000
City of Newport Beach VRDN RB Series 1996 B(A-1+)
1,000,000 5.00 01/02/98 1,000,000
City of San Diego MF Hsg. for Lacima Apartments VRDN (Citibank LOC)(VMIG1)
12,725,000 3.90 01/07/98 12,725,000
City of San Diego MF Hsg. for Nobel Court Apartments VRDN (Citibank
LOC)(VMIG1)
11,355,000 3.90 01/07/98 11,355,000
City of San Diego VRDN MF Hsg. RB Series 1985 (Swiss Bank LOC)(VMIG1)
15,700,000 3.85 01/07/98 15,700,000
Contra Costa MF Hsg. for Lakeshore Apartments VRDN(A-1+)
4,500,000 3.35 01/07/98 4,500,000
East Bay Municipal Utility District Water & Wastewater CP (A-1+/P-1)
9,300,000 3.70 04/08/98 9,300,000
6,000,000 3.65 04/09/98 6,000,000
Fremont MF Hsg. RB Series 1985 D (Krediet Bank LOC)(VMIG1)
14,400,000 3.90 01/07/98 14,400,000
Huntington Beach City Monthly MF Hsg. VRDN Series 1985 A (Bank of America
LOC)(VMIG1)
7,500,000 4.00 01/07/98 7,500,000
Kings County Housing Authority MF Hsg. Refunding RB Series 1996 A (Wells
Fargo) (VMIG1)
6,655,000 3.65 01/07/98 6,655,000
Los Angeles County Metro TRANS Authority VRDN (MBIA)(A-1+/MIG1)
8,095,000 3.85 01/07/98 8,095,000
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
19
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
ILA TAX-EXEMPT CALIFORNIA PORTFOLIO (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
Los Angeles Metro Transportation Authority CP Series A (National
Westminster Bank Plc/Bayerische Vereinsbank Ag/Canadian Imperial Bank of
Commerce)(A-1/P-1)
$10,000,000 3.70% 04/22/98 $ 10,000,000
Los Angeles TRANS Series 1997-98 A (SP 1+/MIG1)
26,100,000 4.50 06/30/98 26,179,939
Los Angeles Unified School District TRANS Series 1997-98 A (SP 1+/MIG1)
5,000,000 4.50 10/01/98 5,022,979
Los Angeles Unified School District Variable Rate Certificates of
Participation (Belmont Learning Complex) 1997 Series A(Commerzbank
AG)(VMIG1)
10,000,000 3.40 01/07/98 10,000,000
Los Angeles Wastewater System CP Revenue Notes(Morgan Guaranty Trust
Company of New York/Union Bank of Switzerland)(A-1+/P-1)
4,000,000 3.80 02/18/98 4,000,000
MSR Public Power Agency RB Series 1997 D (MBIA)(A-1+/VMIG1)
19,000,000 3.85 01/07/98 19,000,000
MSR Public Power Agency RB Series 1997 E (MBIA)(A-1+/VMIG1)
5,000,000 3.85 01/07/98 5,000,000
Newport Beach VRDN RB Series 1996 A(A-1+)
5,300,000 5.00 01/02/98 5,300,000
Newport Beach VRDN RB Series 1996 C For Hoag Memorial Hospital (A-1+)
19,600,000 5.00 01/02/98 19,600,000
Northern California Power Agency Geothermal Project Number 3 Adjustable
Rate RB Series 1996 A (AMBAC)(A-1+/VMIG1)
8,500,000 3.35 01/07/98 8,500,000
Orange County Apartment Development for Seaside Meadow RB Series 1984C
(Krediet Bank LOC)(A-1/VMIG1)
24,000,000 3.90 01/07/98 24,000,000
Orange County Apartment Development Revenue Refunding Bonds, Larkspur
Canyon Apartments Issue A of 1997(AAA)
6,635,000 3.35 01/07/98 6,635,000
Palo Alto Unified School District Series 1997 Sga 53, Municipal Securities
Trust Receipts(A-1+)
9,830,000 3.60 01/07/98 9,830,000
Sacramento County 1990 COP Admin-Center Courthouse Project VRDN (Union Bank
of Switzerland LOC)(A-1+/VMIG1)
5,800,000 3.80 01/07/98 5,800,000
Sacramento County MF Hsg. Revenue Refunding Bonds for Stone Creek
Apartments (FNMA) (A-1+)
5,950,000 3.95 01/07/98 5,950,000
Sacramento County TRANS Series 1997 (SP 1+/MIG1)
3,000,000 4.50 09/30/98 3,015,464
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
San Bernardino County VRDN--Woodview Apartments Series 1985 (Swiss Bank
LOC)(VMIG1)
$ 6,500,000 3.85% 01/07/98 $ 6,500,000
San Diego City MF Hsg. Revenue Refunding Bonds, Series 1993E (Carmel Del
Mar Apartments Project)(Citibank NA)(A-1+)
3,000,000 4.00 01/07/98 3,000,000
San Diego County MF Hsg. for Country Hills VRDN (FNMA)(A-1+)
10,100,000 3.40 01/07/98 10,100,000
San Francisco Redevelopment Agency VRDN MFH RB for Bayside Village Series
1985 A (Industrial Bank of Japan Limited LOC) (VMIG1)
10,000,000 4.25 01/07/98 10,000,000
San Leandro MF Hsg. VRDN Series 1985 B-Haas Avenue Apartments (Bank of
America LOC)(VMIG1)
3,900,000 3.65 01/07/98 3,900,000
San Diego County Sales Tax Revenue CP Series A(A-1+/P-1)
10,800,000 3.80 02/13/98 10,800,000
2,300,000 3.60 03/02/98 2,300,000
3,000,000 3.75 03/09/98 3,000,000
Southern California Metropolitan Water District Revenue Refunding Bonds
Series 1996 A (AMBAC)(A-1+/VMIG1)
5,940,000 3.85 01/07/98 5,940,000
Southern California Public Power Authority 1991 Subordinated Revenue
Refunding Bonds (AMBAC)(A-1+/VMIG1)
9,100,000 3.35 01/07/98 9,100,000
Southern California Public Power Authority Power Project RB Series 1996 B
(AMBAC)(A-1+/VMIG1)
5,900,000 3.35 01/07/98 5,900,000
Southern California Public Power Authority Power Project RB Series 1996 C
(AMBAC)(A-1+/VMIG1)
12,300,000 3.35 01/07/98 12,300,000
Southern California Metro Water District CP Series A (A-1+/P-1)
5,400,000 3.60 03/12/98 5,400,000
2,000,000 3.70 05/12/98 2,000,000
Southern California Metro Water District CP Series B (A-1+/P-1)
13,000,000 3.65 04/09/98 13,000,000
Triunfo Sanitation District VRDN Refunding RB Series 1994 (Banque
Nationale de Paris LOC)(A-1)
3,700,000 3.60 01/07/98 3,700,000
Tulare-Porterville Schools Finance Authority COPS (Union Bank of
California LOC)(A-1/VMIG1)
7,515,000 4.35 01/07/98 7,515,000
University of California CP, Series A (A-1+/P-1)
2,400,000 3.60 04/22/98 2,400,000
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
ILA TAX-EXEMPT
NEW YORK PORTFOLIO
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
University of California Trust Receipts Series 1997 D (MBIA)(VMIG1)
$10,905,000 3.80% 01/07/98 $10,905,000
- ------------------------------------------------------------------------------------------------
$580,695,321
- ------------------------------------------------------------------------------------------------
PUERTO RICO--1.3%
Commonwealth of Puerto Rico TRANS Series 1998A (SP 1+/MIG1)
$ 1,000,000 4.50% 07/30/98 $ 1,004,555
Puerto Rico Government Development Bank CP (A-1+)
3,200,000 3.65 03/16/98 3,200,000
3,700,000 3.70 05/13/98 3,700,000
- ------------------------------------------------------------------------------------------------
$ 7,904,555
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $588,599,876(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.
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.
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW YORK--94.8%
Brentwood Union Free School District TANS 1997(MIG1)
$ 3,250,000 4.25% 06/30/98 $ 3,256,450
City of Yonkers IDA RB for Consumers (Credit Local De France LOC)(VMIG1)
2,600,000 3.50 01/02/98 2,600,000
City of Yonkers IDA Series 1991 Civic Facility RB (Credit Local De France
LOC)(VMIG1)
2,800,000 3.50 01/02/98 2,800,000
Great Neck North Water Authority Water System RB Series 1993 A VRDN
(FGIC)(A-1+/VMIG1)
6,100,000 3.70 01/07/98 6,100,000
Guggenheim Foundation (West Deutsche/Landesbank Girozentrale LOC)(A-
+/VMIG1)
3,900,000 4.75 01/02/98 3,900,000
Metropolitan Museum of Art Variable Rate Interest Bonds (A-1+/VMIG1)
1,485,000 3.50 01/07/98 1,485,000
Municipal Assistance Corporation for The City of New York, Series K,
Subseries K-2 (Bayerische Landesbank Girozentrale LOC)(A-1+/VMIG1)
4,700,000 3.55 01/07/98 4,700,000
Nassau County Combined Sewer Districts RB Series 1988A (MBIA)(AAA/AAA)
1,355,000 6.70 07/15/98 1,402,495
Nassau County IDA Civic Facility RB Cold Spring Harbor Labs Series 1989
VRDN (Morgan Guaranty Trust LOC)(A-1+)
900,000 4.85 01/02/98 900,000
Nassau County RANS, Series B (SP-1/MIG1)
5,000,000 4.50 04/10/98 5,008,419
Nassau County TANS, Series 1997C(SP-1)
1,000,000 4.25 12/22/98 1,003,930
New York City GO Bonds Series 1994E (Morgan Guaranty Trust LOC)(A-1/VMIG1)
200,000 5.00 01/02/98 200,000
New York City GO Fiscal 1995 Series B-6 (MBIA)(A-1+/VMIG1)
2,100,000 5.00 01/07/98 2,100,000
New York City GO RANS Fiscal 1998 Series A (National Westminster
Bank/Morgan Guaranty Trust/Bayerische Landesbank Girozentrale/Westdeutsche
Landesbank Girozentrale/Societe Generale/Landesbank LOC)(A-1+/MIG1)
3,000,000 4.50 06/30/98 3,010,088
New York City Health & Hospitals Corporation, Health System Bonds, 1997
Series B (Canadian Imperial Bank of Commerce)(A-1+/VMIG1)
7,500,000 3.55 01/07/98 7,500,000
New York City IDA--Civic Facility RB 1989 National Audubon Society, Inc.
(Credit Local De France LOC)(A-1+)
3,000,000 4.75 01/02/98 3,000,000
</TABLE>
- --------------------------------------- ---------------------------------------
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, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW YORK (CONTINUED)
New York City IDA for Columbia Grammar Prep School VRDN
(Chase Manhattan Bank LOC)(A-1)
$ 3,200,000 3.60% 01/07/98 $ 3,200,000
New York City Municipal Water Finance Authority CP Notes Series 5 Lot B
(Bayerische Landesbank Girozentrale/Westdeutsche Landesbank
Girozentrale/Landesbank Hessen-thueringen Girozentrale)(A-1+/P-1)
2,500,000 3.75 04/13/98 2,500,000
New York City Municipal Water Finance Authority CP Series 3 (Toronto
Dominion Bank/Bank of Nova Scotia LOC)(A-1+/P-1)
2,500,000 3.75 02/26/98 2,500,000
New York City Water Finance Authority CP Series 4 (Credit Suisse First
Boston)(A-1+/P-1)
1,000,000 3.70 02/27/98 1,000,000
New York City Puttable GO Bonds Fiscal 1995 Series D (MBIA)
(VMIG1)
3,800,000 4.15 01/07/98 3,800,000
New York City Trust for Cultural Resources American Museum of Natural
History Adjustable Rate TRB VRDN (MBIA)(A-1+/VMIG1)
1,000,000 3.55 01/07/98 1,000,000
New York State Energy Research & Development Authority PCRB for Brooklyn
Union Gas Series 1997 A-1 (MBIA)(A-1+/VMIG1)
2,000,000 3.70 01/07/98 2,000,000
New York State Energy Research & Development Authority for Long Island
Lighting Co. VRDN (Toronto Dominion Bank LOC)
(VMIG1)
3,000,000 3.85 01/07/98 3,000,000
New York State Energy Research and Development Authority for Orange and
Rockland Utilities Series 1995 A VRDN (AMBAC)(A-1+/VMIG1)
400,000 3.55 01/02/98 400,000
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)
2,800,000 5.00 01/02/98 2,800,000
New York State Energy Research & Development Authority PCRB Series A & B--
Central Hudson Gas & Electric VRDN (Deutsche Bank LOC)(P-1)
1,300,000 3.95 01/07/98 1,300,000
New York State Floating Rate Trust Receipts Series 1997(A-1C/VMIG1)
300,000 4.00 01/07/98 300,000
New York State Housing Finance Agency for Normandie Court Housing RB
Series 1987 A (Fleet Bank LOC)(VMIG1)
4,800,000 4.00 01/07/98 4,800,000
New York State Local Government Assistance Series 1995 B VRDN (Bank of
Nova Scotia LOC)(A-1+/VMIG1)
3,000,000 3.55 01/07/98 3,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW YORK (CONTINUED)
New York State Local Government Series C VRDN (Landesbank Hessen-
Thueringen Girozentrale LOC)(A-1+/VMIG1)
$ 2,400,000 3.55% 01/07/98 $ 2,400,000
New York State Local Government Series G VRDN (National Westminster Bank
LOC)(A-1+/VMIG1)
300,000 3.55 01/07/98 300,000
New York State Local Government VRDN Series 1995 F (Toronto Dominion Bank
LOC)(A-1+/VMIG1)
1,100,000 3.50 01/07/98 1,100,000
New York State Medical Care Facility Financing Agency for Children's
Hospital of Buffalo RB Series 1991 A (Barclays Bank LOC)(VMIG1)
4,000,000 3.70 01/07/98 4,000,000
New York State Triborough Bridge & Tunnel Authority VRDN (FGIC)(A-
1+/VMIG1)
3,400,000 3.55 01/07/98 3,400,000
New York State Energy Research & Development Authority PCRB for New York
State Electric & Gas Series 1985 A (Morgan Guaranty LOC)(A-1+)
3,000,000 3.65 03/15/98 3,000,000
New York State Energy Research & Development Authority PCRB for Orange and
Rockland Utilities Series 1994 A (Financial Guaranty Insurance
Company)(A-1+/VMIG1)
600,000 3.55 01/07/98 600,000
New York State Energy Research & Development Authority RB for Brooklyn
Union Gas Series 1997 Series A-2 (MBIA) (A-1+/VMIG1)
1,800,000 3.60 01/07/98 1,800,000
New York State Environmental Quality 1986 Variable Interest Rate GO Bonds
Series 1997A(Bayerische Landesbank Girozentrale/Landesbank Hessen-
Thueringen Girozentrale)(A-1+/VMIG1)
2,000,000 3.70 04/22/98 2,000,000
3,000,000 3.70 05/26/98 3,000,000
New York State Housing Finance Agency for Related-Liberty View Apartments
Housing Rd Series 1997 A (Federal National Mortgage Association)(A-1+)
5,000,000 3.55 01/07/98 5,000,000
New York State Housing Finance Agency for Tribeca Park Housing RB Series
1997 A (Bayerische Hypotheken-und Wechsel-Bank LOC)(VMIG1)
5,000,000 4.10 01/07/98 5,000,000
Oswego County IDA PCRB Series 1992 for Philip Morris(A-1/P-1)
1,000,000 3.85 01/07/98 1,000,000
</TABLE>
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW YORK (CONTINUED)
Port Authority of New York And New Jersey Floating Rate Trust Receipts
(FSA)(A-1/VMIG1)
$ 6,000,000 4.00% 01/07/98 $ 6,000,000
Rensselaer County IDA RB for Rensselaer Polytechnic Institute Series
1997A(VMIG1)
4,440,000 4.10 01/07/98 4,440,000
Syracuse University IDA VRDN (Morgan Guaranty LOC)(A-1+/VMIG1)
4,300,000 4.75 01/02/98 4,300,000
- ------------------------------------------------------------------------------------------------
$127,906,382
- ------------------------------------------------------------------------------------------------
PUERTO RICO--4.8%
Puerto Rico Government Development Bank, TECP(A-1+/NR)
$ 1,500,000 3.70% 04/09/98 $ 1,500,000
2,000,000 3.70 05/12/98 2,000,000
Puerto Rico Medical & Environmental PCRB Series 1983 A for Key
Pharmaceuticals (Morgan Guaranty) (AAA)
3,000,000 3.75 12/01/98 2,998,627
- ------------------------------------------------------------------------------------------------
$ 6,498,627
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $134,405,009(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.
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:
<TABLE>
<C> <S>
ACES --Adjustable Convertible Extendible Securities
AMBAC --Insured by American Municipal Bond Assurance Corp.
BANS --Bond Anticipation Notes
COPS --Certificates of Participation
CP --Commercial Paper
FGIC --Insured by Financial Guaranty Insurance Co.
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
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
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
23
<PAGE>
Goldman Sachs Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<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 $974,606,226 $1,147,485,683 $565,903,253
Receivable for investments sold -- -- --
Interest receivable 7,554,296 8,003,135 3,028,806
Cash 78,548 28,630 322,631
Other assets 75,149 66,751 31,348
- ------------------------------------------------------------------------------
TOTAL ASSETS 982,314,219 1,155,584,199 569,286,038
- ------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased -- 14,998,553 11,982,600
Dividends payable 5,409,153 5,942,595 2,555,812
Due to bank -- -- --
Accrued expenses and other liabili-
ties 563,009 550,354 299,510
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 5,972,162 21,491,502 14,837,922
- ------------------------------------------------------------------------------
NET ASSETS:
Paid in capital 976,343,682 1,134,092,697 554,392,483
Accumulated undistributed net in-
vestment income -- -- 2,840
Accumulated undistributed net
realized gain (loss) on investment
transactions (1,625) -- 52,793
- ------------------------------------------------------------------------------
NET ASSETS $976,342,057 $1,134,092,697 $554,448,116
- ------------------------------------------------------------------------------
Net asset value, offering and re-
demption price per unit
(net assets/units outstanding) $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------
UNITS OUTSTANDING:
ILA units 866,405,891 806,095,979 460,423,182
ILA Administration units 28,147,490 307,480,205 10,182,126
ILA Service units 78,319,515 20,516,513 83,787,175
ILA B units 1,573,829 -- --
ILA C units 1,896,957 -- --
- ------------------------------------------------------------------------------
Total units of beneficial interest
outstanding, $.001 par value (un-
limited number of units autho-
rized) 976,343,682 1,134,092,697 554,392,483
- ------------------------------------------------------------------------------
</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>
$819,773,645 $715,872,520 $2,694,905,170 $1,592,350,288 $588,599,876 $134,405,009
-- -- -- -- -- 1,002,737
2,580,192 11,406,880 7,279,210 10,043,125 4,101,398 877,902
13,224 335,893 219,601 2,475,073 532,189 --
10,726 24,199 37,011 78,912 17,602 6,207
- ---------------------------------------------------------------------------------------
822,377,787 727,639,492 2,702,440,992 1,604,947,398 593,251,065 136,291,855
- ---------------------------------------------------------------------------------------
-- -- 75,000,000 61,275,000 -- --
3,306,307 2,983,665 11,601,478 5,082,002 1,635,248 368,540
-- -- -- -- -- 988,622
398,205 344,285 739,651 624,558 250,642 52,453
- ---------------------------------------------------------------------------------------
3,704,512 3,327,950 87,341,129 66,981,560 1,885,890 1,409,615
- ---------------------------------------------------------------------------------------
818,673,229 724,307,077 2,615,099,480 1,537,792,596 591,383,369 134,887,125
4,678 2,506 -- 362,642 10,495 1,634
(4,632) 1,959 383 (189,400) (28,689) (6,519)
- ---------------------------------------------------------------------------------------
$818,673,275 $724,311,542 $2,615,099,863 $1,537,965,838 $591,365,175 $134,882,240
- ---------------------------------------------------------------------------------------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------
590,278,995 330,237,533 2,050,535,778 1,479,581,838 591,021,540 102,890,525
124,230,332 98,664,287 530,026,646 27,967,106 360,320 31,995,090
104,163,902 295,405,257 34,537,056 30,510,544 1,509 1,510
-- -- -- -- -- --
-- -- -- -- -- --
- ---------------------------------------------------------------------------------------
818,673,229 724,307,077 2,615,099,480 1,538,059,488 591,383,369 134,887,125
- ---------------------------------------------------------------------------------------
</TABLE>
---------------------------------------
- ---------------------------------------
25
<PAGE>
Goldman Sachs Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
PRIME MONEY ILA
OBLIGATIONS MARKET GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $71,347,525 $69,192,244 $35,986,975
- ------------------------------------------------------------------------------
EXPENSES:
Management fees 4,412,869 4,269,169 2,258,653
Transfer agent fees 535,142 487,902 258,132
Custodian fees 270,096 202,633 121,357
Professional fees 48,881 24,075 29,152
Trustees' fees 17,422 9,957 8,107
Other 140,409 79,371 44,270
- ------------------------------------------------------------------------------
TOTAL EXPENSES 5,424,819 5,073,107 2,719,671
Less--Expenses reimbursable and fees
waived by Goldman Sachs (160,669) (592,281) (30,990)
- ------------------------------------------------------------------------------
Net Expenses 5,264,150 4,480,826 2,688,681
Administration unit fees 117,600 510,535 66,034
Service unit fees 300,300 40,053 342,976
- ------------------------------------------------------------------------------
NET EXPENSES AND UNIT FEES 5,682,050 5,031,414 3,097,691
- ------------------------------------------------------------------------------
NET INVESTMENT INCOME 65,665,475 64,160,830 32,889,284
- ------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS 7,264 7,828 39,273
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $65,672,739 $64,168,658 $32,928,557
- ------------------------------------------------------------------------------
</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>
$42,476,661 $41,956,511 $150,831,476 $60,259,120 $18,148,019 $4,024,935
- -----------------------------------------------------------------------------
2,682,436 2,802,009 9,555,781 5,788,344 1,803,245 394,631
306,564 320,230 1,092,179 661,525 206,085 45,100
151,972 151,227 402,941 119,196 48,325 20,563
22,843 17,511 50,420 47,886 12,163 5,498
8,079 4,584 19,867 17,105 3,589 985
33,642 71,848 122,624 152,488 101,159 25,739
- -----------------------------------------------------------------------------
3,205,536 3,367,409 11,243,812 6,786,544 2,174,566 492,516
(6,756) (1,632,054) (3,970,362) (1,544,933) (21,406) (119,295)
- -----------------------------------------------------------------------------
3,198,780 1,735,355 7,273,450 5,241,611 2,153,160 373,221
311,981 296,919 1,119,368 119,510 508 46,589
361,567 1,020,955 209,156 102,409 2 2
- -----------------------------------------------------------------------------
3,872,328 3,053,229 8,601,974 5,463,530 2,153,670 419,812
- -----------------------------------------------------------------------------
38,604,333 38,903,282 142,229,502 54,795,590 15,994,349 3,605,123
- -----------------------------------------------------------------------------
68,700 83,128 74,776 (15,310) 1,331 --
- -----------------------------------------------------------------------------
$38,673,033 $38,986,410 $142,304,278 $54,780,280 $15,995,680 $3,605,123
- -----------------------------------------------------------------------------
</TABLE>
---------------------------------------
- ---------------------------------------
27
<PAGE>
Goldman Sachs Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA
PRIME MONEY ILA
OBLIGATIONS MARKET GOVERNMENT
PORTFOLIO (a) PORTFOLIO PORTFOLIO
--------------------------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 65,665,475 $ 64,160,830 $ 32,889,284
Net realized gain (loss)
on investment transac-
tions 7,264 7,828 39,273
- -------------------------------------------------------------------------------
Net increase in net as-
sets resulting from op-
erations 65,672,739 64,168,658 32,928,557
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income
ILA units (59,354,126) (47,350,587) (27,429,780)
ILA Administration units (1,861,296) (15,644,221) (905,728)
ILA Service units (4,418,670) (1,166,022) (4,550,936)
ILA B units (26,790) -- --
ILA C units (4,593) -- --
Net realized gain on in-
vestment transactions
ILA units (7,654) (6,079) (48,379)
ILA Administration units (240) (2,008) (1,597)
ILA Service units (570) (150) (8,027)
ILA B units (3) -- --
ILA C units (1) -- --
- -------------------------------------------------------------------------------
Total distributions to
unitholders (65,673,943) (64,169,067) (32,944,447)
- -------------------------------------------------------------------------------
FROM UNIT TRANSACTIONS
(AT $1.00 PER UNIT):
Proceeds from sales of
units 8,100,238,207 10,177,000,201 3,631,302,781
Reinvestment of dividends
and distributions 36,672,387 54,788,884 17,235,209
Cost of units repurchased (8,424,145,429) (10,086,895,886) (3,919,007,935)
- -------------------------------------------------------------------------------
Increase (decrease) in
net assets resulting
from unit transactions (287,234,835) 144,893,199 (270,469,945)
- -------------------------------------------------------------------------------
Total increase (de-
crease) (287,236,039) 144,892,790 (270,485,835)
NET ASSETS:
Beginning of year 1,263,578,096 989,199,907 824,933,951
- -------------------------------------------------------------------------------
End of year $ 976,342,057 $ 1,134,092,697 $ 554,448,116
- -------------------------------------------------------------------------------
Accumulated undistributed
net investment income -- -- $ 2,840
- -------------------------------------------------------------------------------
SUMMARY OF UNIT TRANSAC-
TIONS (AT $1.00 PER
UNIT)
ILA UNITS:
Units sold 6,992,549,668 6,229,278,910 3,133,684,985
Reinvestment of divi-
dends and distributions 32,469,384 40,419,776 13,509,545
Units repurchased (7,313,358,850) (6,166,699,293) (3,381,375,693)
- -------------------------------------------------------------------------------
(288,339,798) 102,999,393 (234,181,163)
- -------------------------------------------------------------------------------
ILA ADMINISTRATION UNITS:
Units sold 305,758,205 3,772,593,876 76,180,173
Reinvestment of divi-
dends and distributions 1,666,739 14,007,620 255,167
Units repurchased (303,053,312) (3,736,379,689) (102,298,068)
- -------------------------------------------------------------------------------
4,371,632 50,221,807 (25,862,728)
- -------------------------------------------------------------------------------
ILA SERVICE UNITS:
Units sold 793,008,962 175,127,415 421,437,623
Reinvestment of divi-
dends and distributions 2,516,141 361,488 3,470,497
Units repurchased (801,916,230) (183,816,904) (435,334,174)
- -------------------------------------------------------------------------------
(6,391,127) (8,328,001) (10,426,054)
- -------------------------------------------------------------------------------
Net increase (decrease)
in units (290,359,293)* 144,893,199 (270,469,945)
- -------------------------------------------------------------------------------
</TABLE>
* In addition, ILA B units had sales, reinvestments of dividends and
distributions and repurchases of 6,341,071, 19,157 and 5,132,727 units,
respectively, for a net increase of 1,227,501 units. ILA C units had sales,
reinvestments of dividends and distributions and repurchases of 2,580,301,
966 and 684,310 units, respectively, for a net increase of 1,896,957 units.
(a) ILA Prime Obligations Portfolio C unit activity commenced on August 15,
1997.
(b) ILA Tax-Exempt California Portfolio and ILA Tax-Exempt New York Portfolio
Service unit activity commenced on September 15, 1997.
---------------------------------------
- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ILA ILA ILA
ILA ILA TAX- TAX- TAX-
TREASURY TREASURY ILA EXEMPT EXEMPT EXEMPT
OBLIGATIONS INSTRUMENTS FEDERAL DIVERSIFIED CALIFORNIA NEW YORK
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO (b) PORTFOLIO (b)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 38,604,333 $ 38,903,282 $ 142,229,502 $ 54,795,590 $ 15,994,349 $ 3,605,123
68,700 83,128 74,776 (15,310) 1,331 --
- -----------------------------------------------------------------------------------------------------
38,673,033 38,986,410 142,304,278 54,780,280 15,995,680 3,605,123
- -----------------------------------------------------------------------------------------------------
(27,001,884) (20,917,629) (106,705,052) (52,227,688) (15,984,157) (2,645,413)
(5,544,143) (4,217,185) (30,190,717) (1,423,227) (10,180) (959,697)
(6,053,628) (13,765,962) (5,333,733) (1,144,675) (12) (13)
-- -- -- -- -- --
-- -- -- -- -- --
(72,833) (51,900) (4,171) -- -- --
(14,954) (10,463) (1,180) -- -- --
(16,329) (34,156) (209) -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------
(38,703,771) (38,997,295) (142,235,062) (54,795,590) (15,994,349) (3,605,123)
- -----------------------------------------------------------------------------------------------------
5,211,063,367 3,670,371,899 16,814,872,375 9,843,836,580 3,353,570,112 827,650,114
13,130,596 16,821,105 103,222,618 43,365,293 14,638,737 3,317,213
(5,212,556,500) (4,193,476,260) (17,593,694,622) (9,951,681,538) (3,217,463,359) (810,579,568)
- -----------------------------------------------------------------------------------------------------
11,637,463 (506,283,256) (675,599,629) (64,479,665) 150,745,490 20,387,759
- -----------------------------------------------------------------------------------------------------
11,606,725 (506,294,141) (675,530,413) (64,494,975) 150,746,821 20,387,759
807,066,550 1,230,605,683 3,290,630,276 1,602,460,813 440,618,354 114,494,481
- -----------------------------------------------------------------------------------------------------
$ 818,673,275 $ 724,311,542 $ 2,615,099,863 $ 1,537,965,838 $ 591,365,175 $ 134,882,240
- -----------------------------------------------------------------------------------------------------
$ 4,678 $ 2,506 -- $ 362,642 $ 10,495 $ 1,634
- -----------------------------------------------------------------------------------------------------
3,424,838,381 2,560,753,797 12,019,743,098 9,577,662,569 3,352,291,159 495,921,548
11,264,434 15,705,121 86,047,218 42,436,074 14,638,445 2,353,341
(3,420,432,815) (2,955,211,656) (12,358,958,269) (9,655,040,327) (3,216,403,921) (465,562,390)
- -----------------------------------------------------------------------------------------------------
15,670,000 (378,752,738) (253,167,953) (34,941,684) 150,525,683 32,712,499
- -----------------------------------------------------------------------------------------------------
878,884,012 330,854,584 4,080,488,784 87,602,648 1,277,453 331,727,066
510,538 973,977 15,900,268 171,471 283 963,862
(864,080,649) (370,865,445) (4,360,940,804) (118,904,272) (1,059,438) (345,017,178)
- -----------------------------------------------------------------------------------------------------
15,313,901 (39,036,884) (264,551,752) (31,130,153) 218,298 (12,326,250)
- -----------------------------------------------------------------------------------------------------
907,340,974 778,763,518 714,640,493 178,571,363 1,500 1,500
1,355,624 142,007 1,275,132 757,748 9 10
(928,043,036) (867,399,159) (873,795,549) (177,736,939) -- --
- -----------------------------------------------------------------------------------------------------
(19,346,438) (88,493,634) (157,879,924) 1,592,172 1,509 1,510
- -----------------------------------------------------------------------------------------------------
11,637,463 (506,283,256) (675,599,629) (64,479,665) 150,745,490 20,387,759
- -----------------------------------------------------------------------------------------------------
</TABLE>
---------------------------------------
- ---------------------------------------
29
<PAGE>
Goldman Sachs 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 transac-
tions 72,405 72,865 62,662
- -------------------------------------------------------------------------------
Net increase in net as-
sets resulting from op-
erations 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 in-
vestment 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 TRANSAC-
TIONS (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) (5,063,361,343) (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.
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>
$ 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>
---------------------------------------
- ---------------------------------------
31
<PAGE>
Goldman Sachs Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
- --------------------------------------- ---------------------------------------
1. ORGANIZATION
Effective May 1, 1997, the Goldman Sachs Money Market Trust was reorganized
from a Massachusetts business trust to a Delaware business trust named the
Goldman Sachs Trust (the "Trust"). The Trust includes the Goldman Sachs--
Institutional Liquid Assets Portfolios, collectively "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, the Prime Obligations Portfolio offers ILA B
and ILA C 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 requires 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 Portfolio's 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, 1997 (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>
Tax-Exempt Diversified $189,400 1998 to 2005
Tax-Exempt New York 6,519 1999 to 2004
Tax-Exempt California 28,689 2000 to 2003
</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, ILA B and ILA C units bear all
expenses and fees paid to service and distribution organizations for their
services
---------------------------------------
- ---------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
with respect to such units as well as other expenses (subject to expense
limitations) which are directly attributable to such units.
3. AGREEMENTS
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co. ("Goldman Sachs"), acts as investment adviser pursuant to
an Investment Management Agreement (the "Agreement"). Under the Agreement,
GSAM, subject to general supervision by 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 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, 1997, GSAM has voluntarily
agreed to waive a portion of its management fees 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 except for the
ILA B and ILA C units of Prime Obligations Portfolio. 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 .42% (.41% prior to May
1, 1997) of such portfolio's net assets, the portfolio will be reimbursed in
the amount of such excess monthly.
For the year ended December 31, 1997, 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 .37%, .22%, .27%, .32% and .33%, respectively, of the
average net assets per annum. Amounts due from Goldman Sachs at December 31,
1997 are included in "Other assets"in the accompanying Statements of Assets and
Liabilities.
The ILA B and ILA C 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 and ILA C
units average daily net assets.
The ILA B and ILA C units of Prime Obligations Portfolio have also 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 and ILA C units pay a fee under this Service Plan
equal, on an annual basis, up to .25% of ILA B and C units average daily net
assets.
---------------------------------------
- ---------------------------------------
33
<PAGE>
Goldman Sachs Trust--Institutional Liquid Assets
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
3. AGREEMENTS (continued)
The chart below outlines the fee waivers and expense reimbursements for the
year ended December 31, 1997 and amounts owed to and due from Goldman Sachs at
December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
Amounts
Amounts due
Management Expense due to from
Fee Reimburse- Goldman Goldman
Portfolio Waived ments Total Sachs Sachs
<S> <C> <C> <C> <C> <C>
Prime
Obligations
Portfolio -- 161 161 460 --
- ------------------------------------------------------------
Money Market
Portfolio 525 67 592 421 --
- ------------------------------------------------------------
Government
Portfolio -- 31 31 230 --
- ------------------------------------------------------------
Treasury
Obligations
Portfolio -- 7 7 302 --
- ------------------------------------------------------------
Treasury
Instruments
Portfolio 1,552 80 1,632 180 --
- ------------------------------------------------------------
Federal
Portfolio 3,925 45 3,970 552 --
- ------------------------------------------------------------
Tax-Exempt
Diversified
Portfolio 1,544 1 1,545 563 --
- ------------------------------------------------------------
Tax-Exempt
California
Portfolio -- 21 21 197 --
- ------------------------------------------------------------
Tax-Exempt New
York Portfolio 94 25 119 34 5
</TABLE>
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, 1997, 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 a custodian.
7. JOINT REPURCHASE AGREEMENT ACCOUNTS
The ILA Portfolios, together with other registered investment companies having
management 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, 1997, the Prime Obligations, Money Market, Government and
Treasury Obligations Portfolios had investments in the following joint account
of $2,000,000, $32,000,000, $114,300,000 and $275,500,000 in principal amount,
respectively. As of December 31, 1997, the repurchase agreements in this joint
account, along with the corresponding underlying securities
- --------------------------------------- ---------------------------------------
34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
7. JOINT REPURCHASE AGREEMENT ACCOUNTS (continued)
(including the type of security, market value, interest rate and maturity
date), were as follows:
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS
Chase Manhattan Securities, dated 12/31/97, repurchase price $200,061,111
(total collateral value $204,001,955 consisting of U.S. Treasury Notes:
5.50%-8.75%, 02/15/00-08/31/00)
$ 200,000,000 5.50% 01/02/98 $200,000,000
Donaldson, Lufkin & Jenrette, Inc., dated 12/31/97, repurchase price
$510,185,583 (total collateral value $520,200,021 consisting of U.S.
Treasury Notes: 5.125%-8.125%, 01/31/98-02/15/04; U.S. Treasury Stripped
Interest only Securities: 02/15/98-02/15/04; U.S. Treasury Stripped
Principal Security: 08/15/01; U.S. Treasury Bill: 05/14/98)
510,000,000 6.55 01/02/98 510,000,000
Swiss Bank Corp., dated 12/31/97, repurchase price $735,367,495 (total
collateral value $749,834,669 consisting of U.S. Treasury Notes: 4.75%-
8.50%, 02/15/98-11/15/05; U.S. Treasury Inflation Indexed Bond: 3.375%,
01/15/07; U.S. Treasury Bills: 01/15/98-10/15/98; U.S. Treasury Bonds:
10.75%-11.125%, 08/15/03-08/15/05)
735,100,000 6.55 01/02/98 735,100,000
Swiss Bank Corp., dated 12/31/97, repurchase price $300,091,667 (total
collateral value $306,013,333 consisting of U.S. Treasury Notes: 4.75%-
8.50%, 02/15/98-11/15/05; U.S. Treasury Inflation Indexed Bond: 3.375%,
01/15/07; U.S. Treasury Bills: 01/15/98-10/15/98; U.S. Treasury Bonds:
10.75%-11.125%, 08/15/03-08/15/05)
300,000,000 5.50 01/02/98 300,000,000
Salomon-Smith Barney, Inc., dated 12/31/97, repurchase price
$1,000,369,444 (total collateral value $1,020,528,930 consisting of U.S.
Treasury Stripped Interest only Securities: 02/15/98-11/15/04; U.S.
Treasury Stripped Principal only Securities: 5.75%-11.625%, 02/15/98-
11/15/04; U.S. Treasury Bill: 10/15/98)
1,000,000,000 6.65 01/02/98 1,000,000,000
- ---------------------------------------------------------------------------------------------
TOTAL JOINT REPURCHASE AGREEMENT ACCOUNT $2,745,100,000
- ---------------------------------------------------------------------------------------------
</TABLE>
8. CERTAIN RECLASSIFICATION
In accordance with Statement Of Position 93-2, the Tax-Exempt Diversified
Portfolio have reclassified $70,300 from paid-in capital to accumulated
undistributed net realized gain (loss) on investment transactions.
9. OTHER MATTERS
Pursuant to an SEC exemptive order, certain of the Portfolios 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.
---------------------------------------
- ---------------------------------------
35
<PAGE>
Goldman Sachs 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 asset Net 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0524 -- $0.0524 $(0.0524) $1.00 5.38%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.22
1997-ILA Service
units........... 1.00 0.0485 -- 0.0485 (0.0485) 1.00 4.96
1997-ILA B
units........... 1.00 0.0433 -- 0.0433 (0.0433) 1.00 4.33
1997-ILA C
units(b)........ 1.00 0.0365 -- 0.0365 (0.0365) 1.00 4.41(d)
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
<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,
- --------------------------------
1997-ILA units.. 0.42% 5.24% $ 866,445 0.43% 5.23%
1997-ILA
Administration
units........... 0.57 5.11 28,110 0.58 5.10
1997-ILA Service
units........... 0.82 4.85 78,316 0.83 4.84
1997-ILA B
units........... 1.42 4.33 1,574 1.43 4.32
1997-ILA C
units(b)........ 1.42(d) 4.39(d) 1,897 1.43(d) 4.38(d)
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
</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 and C unit activity commenced during May of 1996 and August of
1997, respectively.
(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.
36
<PAGE>
Goldman Sachs 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 asset Net realized Total Net asset
value at Net gain on income from Distributions value at
beginning investment investment investment to end Total
of period income transactions operations unitholders of period return(a)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0531 -- $0.0531 $(0.0531) $1.00 5.43%
1997-ILA
Administration
units........... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28
1997-ILA Service
units........... 1.00 0.0490 -- 0.0490 (0.0490) 1.00 5.01
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
Ratio of net Net investment
Ratio of net investment assets at Ratio of net income to
expenses to income to end expenses to average
average net average net of period average net net
assets assets (in 000's) assets assets
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.37% 5.31% $ 806,096 0.42% 5.26%
1997-ILA
Administration
units........... 0.52 5.15 307,480 0.57 5.10
1997-ILA Service
units........... 0.77 4.90 20,517 0.82 4.85
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.
37
<PAGE>
Goldman Sachs 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 assets 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0516 -- $0.0516 $(0.0516) $1.00 5.31%
1997-ILA
Administration
units........... 1.00 0.0499 -- 0.0499 (0.0498) 1.00 5.15
1997-ILA Service
units........... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.89
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
units........... 1.00 0.0267 0.0008 0.0275 (0.0276) 1.00 2.79
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 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,
- --------------------------------
1997-ILA units.. 0.42% 5.16% $460,457 0.42% 5.16%
1997-ILA
Administration
units........... 0.57 4.98 10,192 0.57 4.98
1997-ILA Service
units........... 0.82 4.78 83,799 0.82 4.78
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.
38
<PAGE>
Goldman Sachs 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 asset Net realized Total Net asset
value at Net gain on income from Distributions value at
beginning investment investment investment to end Total
of period income transactions operations unitholders of period return(a)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0514 $0.0001 $0.0515 $(0.0513) $1.00 5.26%
1997-ILA
Administration
units........... 1.00 0.0500 0.0001 0.0501 (0.0508) 1.00 5.10
1997-ILA Service
units........... 1.00 0.0474 0.0001 0.0475 (0.0478) 1.00 4.84
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 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,
- --------------------------------
1997-ILA units.. 0.42% 5.12% $ 590,381 0.42% 5.12%
1997-ILA
Administration
units........... 0.57 4.99 124,159 0.57 4.99
1997-ILA Service
units........... 0.82 4.73 104,133 0.82 4.73
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 of
1990, respectively.
- ------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
Goldman Sachs 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 on income from Distributions value at
beginning investment investment investment to end Total
of period income transactions operations unitholders of period return(a)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0502 $0.0001 $0.0503 $(0.0503) $1.00 5.17%
1997-ILA
Administration
units........... 1.00 0.0488 0.0001 0.0489 (0.0489) 1.00 5.01
1997-ILA Service
units........... 1.00 0.0463 0.0001 0.0464 (0.0464) 1.00 4.75
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)
<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,
- --------------------------------
1997-ILA units.. 0.22% 5.02% $330,241 0.42% 4.82%
1997-ILA
Administration
units........... 0.37 4.88 98,667 0.57 4.68
1997-ILA Service
units........... 0.62 4.63 295,404 0.82 4.43
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 (COMMENCEMENT OF OPERATIONS) 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.
40
<PAGE>
Goldman Sachs 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 Net asset
value at Net gain on income from Distributions value at
beginning investment investment investment to end Total
of period income transactions operations unitholders of period return(a)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. $1.00 $0.0526 -- $0.0526 $(0.0526) $1.00 5.40%
1997-ILA
Administration
units........... 1.00 0.0511 -- 0.0511 (0.0511) 1.00 5.24
1997-ILA Service
units........... 1.00 0.0483 -- 0.0483 (0.0483) 1.00 4.98
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,
- --------------------------------
1997-ILA units.. 0.27% 5.26% $2,050,559 0.41% 5.12%
1997-ILA
Administration
units........... 0.42 5.11 530,001 0.56 4.97
1997-ILA Service
units........... 0.67 4.83 34,540 0.81 4.69
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.
41
<PAGE>
Goldman Sachs 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 asset Net realized Total Net asset
value at Net gain (loss) income from value at
beginning investment on 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0333 -- $0.0333 $(0.0333) $1.00 3.39%
1997-ILA
Administration
units........... 1.00 0.0316 -- 0.0316 (0.0316) 1.00 3.23
1997-ILA Service
units........... 1.00 0.0297 -- 0.0297 (0.0297) 1.00 2.97
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
<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> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-ILA units.. 0.32% 3.33% $1,479,486 0.41% 3.24%
1997-ILA
Administration
units........... 0.47 3.16 27,967 0.56 3.07
1997-ILA Service
units........... 0.72 2.97 30,513 0.81 2.88
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
</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.
42
<PAGE>
Goldman Sachs 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 asset Net realized Total Net asset
value at Net gain (loss) income from value at
beginning investment on 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0310 -- $0.0310 $(0.0310) $1.00 3.15%
1997-ILA
Administration
units........... 1.00 0.0298 -- 0.0298 (0.0301) 1.00 3.00
1997-ILA Service
units (d)....... 1.00 0.0085 -- 0.0085 (0.0080) 1.00 2.87(b)
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 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,
- --------------------------------
1997-ILA units.. 0.42% 3.10% $591,003 0.42% 3.10%
1997-ILA
Administration
units........... 0.57 2.98 360 0.57 2.98
1997-ILA Service
units (d)....... 0.82(b) 2.90(b) 2 0.82(b) 2.90(b)
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) 2.03(b) 3 0.87(b) 1.96(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, 1994, 1995 and 1996.
(d) ILA Service unit activity re-commenced during September of 1997.
- ------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
Goldman Sachs 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 asset Net realized Total Net asset
value at Net gain (loss) income from value at
beginning investment on 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,
- --------------------------------
1997-ILA units.. $1.00 $0.0325 -- $0.0325 $(0.0325) $1.00 3.29%
1997-ILA
Administration
units........... 1.00 0.0310 -- 0.0310 (0.0310) 1.00 3.14
1997-ILA Service
units(c)........ 1.00 0.0089 -- 0.0089 (0.0089) 1.00 3.02(b)
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 Ratio of net
Ratio of net investment assets at 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,
- --------------------------------
1997-ILA units.. 0.33% 3.24% $102,887 0.43% 3.14%
1997-ILA
Administration
units........... 0.48 3.09 31,993 0.58 2.99
1997-ILA Service
units(c)........ 0.73(b) 3.04(b) 2 0.83(b) 2.94(b)
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 and Service unit activity commenced during February of
1991 and September of 1997, respectively.
- ------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------- ---------------------------------------
To the Unitholders and Board of Trustees of the Goldman Sachs Trust--
Institutional Liquid Assets:
We have audited the accompanying statements of assets and liabilities of
Goldman Sachs Trust--Institutional Liquid Assets (a Delaware 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, 1997, 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, 1997 by correspondence with the custodian and broker. 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 Trust--
Institutional Liquid Assets as of December 31, 1997, 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 12, 1998
45
<PAGE>
VOTING RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
The proposals described below were submitted to a vote of unitholders of
Goldman Sachs Institutional Liquid Assets Portfolios (the "Trust") at a Special
Meeting of Unitholders held on April 1, 1997 and reconvened on April 24, 1997
(the "Meeting"):
- --------------------------------------------------------------------------------
PROPOSAL NO. 1--ELECTION OF TRUSTEES:
- --------------------------------------------------------------------------------
At the Meeting, Ashok Bakhru, David B. Ford, Douglas Grip, John McNulty, Mary
McPherson, Richard Strubel, Alan Shuch, Jackson Smart and William Springer were
elected to the Trust's Board of Trustees. In electing trustees, the Trust's
unitholders voted as follows:(/1/)
<TABLE>
<CAPTION>
DIRECTOR FOR AGAINST ABSTAIN BROKER NON-VOTES
-------- ------------------ ------- --------------- ----------------
<S> <C> <C> <C> <C>
Ashok Bakhru....... 13,198,134,650.489 0 317,290,085.860 0
David B. Ford...... 13,196,882,310.419 0 318,542,425.630 0
Douglas Grip....... 13,198,421,139.119 0 317,003,596.930 0
John McNulty....... 13,192,692,508.499 0 322,752,227.550 0
Mary McPherson..... 13,198,375,102.859 0 317,049,663.190 0
Alan Shuch......... 13,196,888,161.369 0 318,536,574.680 0
Jackson Smart...... 13,186,250,475.539 0 329,174,260.510 0
William Springer... 13,186,378,105.759 0 329,046,630.290 0
Richard Strubel.... 13,198,268,677.579 0 317,155,058.470 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 2--RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING
DECEMBER, 31, 1997:
- --------------------------------------------------------------------------------
At the Meeting, the Trust's unitholders approved Proposal No. 2 as
follows:(/1/)
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- -------------- --------------- ----------------
<S> <C> <C> <C>
12,740,448,563.959 86,008,900.390 688,967,266.700 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 4(B)--APPROVAL OF AN AMENDMENT TO THE TRUST'S DECLARATION OF TRUST
TO PERMIT INVESTMENT OF EACH FUND'S ASSETS IN ANOTHER OPEN-END
INVESTMENT COMPANY:
- --------------------------------------------------------------------------------
At the Meeting, the Trust's unitholders approved Proposal No. 4(B) as
follows:(/1/)
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- --------------- --------------- ----------------
<S> <C> <C> <C>
11,979,828,027.249 666,114,085.840 869,482,622.960 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 3--APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION PURSUANT TO
WHICH EACH PORTFOLIO OF THE TRUST WILL BE REORGANIZED AS A SERIES
OF THE GOLDMAN SACHS TRUST, A DELAWARE BUSINESS TRUST:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each of the Trust's portfolios (each, a
"Fund" and collectively, the "Funds") approved Proposal No. 3 as follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 712,565,921.869 242,943.290 25,505,695.170 0
Money Market............ 516,823,831.590 6,970,819.070 24,410,496.820 0
Government.............. 334,703,511.900 123,461,589.610 1,839,434.100 0
Treasury Obligations.... 468,748,245.020 52,349.040 42,433,478.980 0
Treasury Instruments.... 651,998,108.070 65,348,426.590 5,827,507.150 0
Federal................. 1,726,207,313.730 7,203,981.770 54,770,148.540 0
Tax-Exempt Diversified.. 668,379,114.130 16,024,005.530 109,560,527.870 0
Tax-Exempt California... 208,489,888.900 5,523.230 14,115,586.820 0
Tax-Exempt New York..... 55,095,994.960 195,516.090 7,800,334.690 0
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 4--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS TO PERMIT EACH FUND TO INVEST SUBSTANTIALLY ALL OF
ITS ASSETS IN ANOTHER OPEN-END INVESTMENT COMPANY:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 4 as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 647,870,547.009 59,650,745.650 30,793,267.670 0
Money Market............ 511,963,094.500 10,565,134.560 25,676,918.420 0
Government.............. 400,141,597.240 58,041,127.440 1,821,810.930 0
Treasury Obligations.... 436,391,496.290 5,008,378.970 69,834,197.780 0
Treasury Instruments.... 651,998,108.070 65,348,426.590 5,827,507.150 0
Federal................. 1,722,092,130.160 15,994,193.540 50,095,120.340 0
Tax-Exempt Diversified.. 660,773,671.500 23,733,454.350 109,456,521.680 0
Tax-Exempt California... 203,615,442.560 4,607,172.950 14,388,383.440 0
Tax-Exempt New York..... 54,956,961.700 575,338.300 7,559,545.740 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(A)--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS RELATING TO ISSUER DIVERSIFICATION:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 5(A) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 663,362,748.369 44,081,414.130 30,870,397.830 0
Money Market............ 514,239,550.690 9,059,065.940 24,906,530.850 0
Government.............. 389,415,820.100 68,527,347.690 2,061,367.820 0
Treasury Obligations.... 463,827,823.350 5,008,378.970 42,397,870.720 0
Treasury Instruments.... 665,723,563.120 51,622,971.540 5,827,507.150 0
Federal................. 1,728,433,466.310 9,475,231.770 50,272,745.960 0
Tax-Exempt Diversified.. 667,406,339.950 16,862,490.800 109,694,816.780 0
Tax-Exempt California... 208,174,431.280 1,076,891.910 13,359,675.760 0
Tax-Exempt New York..... 55,150,009.260 0 7,941,836.480 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(B)--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS RELATING TO BORROWING, MARGIN PURCHASES
AND PLEDGING ASSETS:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 5(B) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 651,887,355.399 55,504,550.190 30,922,654.740 0
Money Market............ 492,734,444.380 9,700,670.670 45,770,032.430 0
Government.............. 322,830,104.650 69,348,909.140 67,825,521.820 0
Treasury Obligations.... 463,621,255.690 5,214,946.630 42,397,870.720 0
Treasury Instruments.... 613,391,610.620 109,262,637.520 519,793.670 0
Federal................. 1,688,341,705.150 34,314,305.930 65,525,432.960 0
Tax-Exempt Diversified.. 595,302,477.970 88,094,689.320 110,566,480.240 0
Tax-Exempt California... 205,716,433.050 2,873,454.090 14,021,111.810 0
Tax-Exempt New York..... 55,056,709.090 93,300.170 7,941,836.480 0
</TABLE>
47
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(C)--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS RELATING TO UNDERWRITING:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 5(C) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 663,326,119.079 44,063,126.200 30,925,315.050 0
Money Market............ 508,616,005.340 9,059,065.940 30,530,076.200 0
Government.............. 323,233,872.990 68,824,654.510 67,946,008.110 0
Treasury Obligations.... 468,060,179.510 606,867.450 42,567,026.080 0
Treasury Instruments.... 632,424,779.150 51,622,971.540 39,126,291.120 0
Federal................. 1,721,111,336.850 5,645,294.300 61,424,812.890 0
Tax-Exempt Diversified.. 661,349,711.030 22,401,707.950 110,212,228.550 0
Tax-Exempt California... 206,245,319.340 1,015,093.840 15,350,585.770 0
Tax-Exempt New York..... 55,150,009.260 0 7,941,836.480 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(D)--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT
RESTRICTIONS RELATING TO INVESTMENTS IN REAL ESTATE, OIL AND
GAS:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 5(D) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 640,385,552.729 66,995,565.360 30,933,442.240 0
Money Market............ 508,443,121.040 9,243,481.870 30,518,544.570 0
Government.............. 322,664,193.140 69,164,900.990 68,175,441.480 0
Treasury Obligations.... 436,391,496.290 32,275,550.670 42,567,026.080 0
Treasury Instruments.... 623,254,542.890 56,930,685.020 42,988,813.900 0
Federal................. 1,697,204,506.430 29,337,113.840 61,639,823.770 0
Tax-Exempt Diversified.. 659,879,346.410 23,873,811.490 110,210,489.630 0
Tax-Exempt California... 206,410,527.450 1,675,179.170 14,525,292.330 0
Tax-Exempt New York..... 53,382,698.610 1,767,310.650 7,941,836.480 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(E)--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS RELATING TO INVESTMENTS IN COMMODITIES:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 5(E) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 662,306,969.869 45,127,069.290 30,880,521.170 0
Money Market............ 486,910,529.510 31,086,343.760 30,208,274.210 0
Government.............. 322,759,975.990 69,323,646.950 67,920,912.670 0
Treasury Obligations.... 436,560,651.650 32,275,550.670 42,397,870.720 0
Treasury Instruments.... 623,254,542.890 51,622,971.540 48,296,527.380 0
Federal................. 1,712,077,298.400 14,464,321.870 61,639,823.770 0
Tax-Exempt Diversified.. 664,706,879.770 18,456,351.640 110,800,416.120 0
Tax-Exempt California... 206,291,830.450 3,022,235.750 13,296,932.750 0
Tax-Exempt New York..... 55,056,709.090 93,300.170 7,941,836.480 0
</TABLE>
48
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(F)--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS RELATING TO THE ISSUANCE OF SENIOR
SECURITIES:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 5(F) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 666,760,538.409 40,610,456.340 30,943,565.580 0
Money Market............ 508,256,805.590 9,647,467.020 30,300,874.870 0
Government.............. 319,497,687.690 68,601,458.610 71,905,389.310 0
Treasury Obligations.... 464,244,863.920 4,591,338.400 42,397,870.720 0
Treasury Instruments.... 636,979,997.940 51,622,971.540 34,571,072.330 0
Federal................. 1,655,884,823.010 54,542,671.620 77,753,949.410 0
Tax-Exempt Diversified.. 661,636,399.680 22,134,203.520 110,193,044.330 0
Tax-Exempt California... 207,652,033.350 1,157,408.330 13,801,557.270 0
Tax-Exempt New York..... 55,150,009.260 0 7,941,836.480 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(G)--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT
RESTRICTIONS RELATING TO SHORT SALES OF SECURITIES:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 5(G) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 633,661,812.479 73,785,010.330 30,867,737.520 0
Money Market............ 470,662,407.590 30,994,535.020 46,548,204.870 0
Government.............. 318,784,978.900 69,397,554.330 71,822,002.380 0
Treasury Obligations.... 436,184,928.630 32,651,273.690 42,397,870.720 0
Treasury Instruments.... 665,723,563.120 51,622,971.540 5,827,507.150 0
Federal................. 1,640,265,983.120 64,442,160.340 83,473,300.580 0
Tax-Exempt Diversified.. 600,755,583.190 82,493,105.650 110,714,958.690 0
Tax-Exempt California... 205,507,408.730 3,302,032.950 13,801,557.270 0
Tax-Exempt New York..... 53,465,471.480 1,684,537.780 7,941,836.480 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(H)--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT
RESTRICTIONS RELATING TO INVESTMENTS IN OPTIONS:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 5(H) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 665,972,905.509 41,473,917.300 30,867,737.520 0
Money Market............ 486,107,497.980 30,982,828.190 31,114,821.310 0
Government.............. 318,888,036.380 69,035,878.400 72,080,620.830 0
Treasury Obligations.... 436,560,651.650 32,275,550.670 42,397,870.720 0
Treasury Instruments.... 665,723,563.120 51,622,971.540 5,827,507.150 0
Federal................. 1,654,139,453.480 55,955,350.840 78,086,639.720 0
Tax-Exempt Diversified.. 650,093,862.920 33,129,570.460 110,740,214.150 0
Tax-Exempt California... 204,847,324.400 3,962,117.280 13,801,557.270 0
Tax-Exempt New York..... 53,382,698.610 1,767,310.650 7,941,836.480 0
</TABLE>
49
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(I)--APPROVAL OF AN AMENDMENT TO EACH FUND'S FUNDAMENTAL
INVESTMENT RESTRICTIONS RELATING TO EXERCISE CONTROL:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 5(I) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ----------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Prime Obligations....... 641,214,201.709 66,222,497.760 30,877,860.860 0
Money Market............ 507,763,441.520 9,326,123.520 31,115,582.440 0
Government.............. 319,387,893.800 68,568,127.330 72,048,514.480 0
Treasury Obligations.... 464,244,863.920 4,591,338.400 42,397,870.720 0
Treasury Instruments.... 651,998,108.070 65,348,426.590 5,827,507.150 0
Federal................. 1,702,540,158.730 7,894,110.110 77,747,175.200 0
Tax-Exempt Diversified.. 661,147,907.340 22,893,587.050 109,922,153.140 0
Tax-Exempt California... 206,410,855.230 2,331,265.150 13,868,878.570 0
Tax-Exempt New York..... 53,465,471.480 1,684,537.780 7,941,836.480 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 6--APPROVAL OF A CHANGE IN THE FUNDAMENTAL INVESTMENT POLICIES OF
THE TAX-EXEMPT DIVERSIFIED, TAX-EXEMPT CALIFORNIA AND TAX-EXEMPT
NEW YORK PORTFOLIOS:
- --------------------------------------------------------------------------------
At the Meeting, the unitholders of each Fund approved Proposal No. 6 as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- --------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Tax-Exempt Diversified.. 667,228,981.130 16,402,187.130 110,332,479.270 0
Tax-Exempt California... 209,206,940.510 0 13,404,058.440 0
Tax-Exempt New York..... 53,696,767.540 139,033.260 9,256,044.940 0
</TABLE>
(1) The voting results for proposal No. 1, 2 and 4(B) reflect the vote of the
unitholders of the Trust and the unitholders of Goldman Sachs Financial
Square Funds.
50
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------- --------------------------------------
(THIS PAGE INTENTIONALLY LEFT BLANK)
--------------------------------------
- --------------------------------------
51
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Trust--Money Market Funds,
Institutional Liquid Assets Prospectus which contains facts concerning each
Fund's objectives and policies, management, expenses and other information.
- --------------------------------------------------------------------------------
52
<PAGE>
TRUSTEES
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
John P. McNulty
Mary P. McPherson
Alan. A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
OFFICERS
Douglas C. Grip, President
James A. Fitzpatrick, Vice President
John W. Mosior, Vice President
Nancy L. Mucker, 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
Goldman Sachs Funds
One New York Plaza, 41st Floor
New York, NY 10004
<PAGE>
Goldman Sachs Trust
FINANCIAL SQUARE FUNDS
. Prime Obligations Fund
. Money Market Fund
. Premium Money Market Fund
. Treasury Obligations Fund
. Treasury Instruments fund
. Government Fund
. Federal Fund
. Tax-Free Money Market Fund
Goldman
Sachs
ANNUAL REPORT
December 31, 1997
<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 Financial Square
Funds in 1997. It was another strong year for the funds, as all of them--with
the exception of three new Financial Square Funds, which do not yet possess 12-
month performance return information (see new fund information below)--
outperformed their respective IBC Financial Data, Inc. averages. Assets in the
Financial Square Funds totaled $19.3 billion as of December 31, 1997.
THREE NEW FINANCIAL SQUARE FUNDS AVAILABLE
We are pleased to inform you that three new Financial Square Funds became
available during the fiscal year. Each fund's objective is to maximize current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity by investing exclusively in high-quality money market
instruments.
..FINANCIAL SQUARE FEDERAL FUND
Investment Strategy: In seeking to achieve its objective, the fund invests in
U.S. Government securities and U.S. Treasury securities. The fund does not
invest in repurchase agreements.
AAAm Rating: The fund is rated AAAm by Standard & Poor's Ratings Group, and
appears on the National Association of Insurance Commissioners Approved List
of Class I Money Market Funds.
..FINANCIAL SQUARE TREASURY INSTRUMENTS FUND
Investment Strategy: In seeking to achieve its objective, the fund invests in
securities issued or guaranteed by the U.S. Treasury, which are backed by the
full faith and credit of the U.S. Government, the interest from which is
typically exempt from most state income taxes. The fund does not invest in
repurchase agreements.
AAAm Rating: The fund is rated AAAm by Standard & Poor's Ratings Group, and
Aaa by Moody's Investor Services, Inc., and appears on the National
Association of Insurance Commissioners Approved List of Exempt Money Market
Funds.
..FINANCIAL SQUARE PREMIUM MONEY MARKET FUND
Investment Strategy: In seeking to achieve its objective, the fund intends to
invest only in securities that are rated in the highest category for short-
term debt obligations by the requisite number of nationally recognized
statistical rating organizations. The fund can also invest in securities
which are unrated, but only if they are deemed to be of comparable quality by
the fund's Trustees.
AAAm Rating: The fund is rated AAAm by Standard & Poor's Ratings Group and
Aaa by Moody's Investors Services, Inc., and appears on the National
Association of Insurance Commissioners Approved List of Class I Money Market
Funds.
1997 IN REVIEW
Over the first quarter, the U.S. economy demonstrated significant strength,
with no sign of slowing. Employment data pointed to continued growth as
unemployment rates dropped, average hourly earnings rose and real consumer
spending surged. In March, in a show of concern over the pace of economic
growth, the Federal Reserve Board chose to raise short-term rates by 25 basis
points. When all was said and done, first quarter's real gross domestic product
(GDP) posted a robust 4.9% increase--although this was attributed to an
increase in inventories, typically a precursor of slower growth.
Economic data early in the second quarter, including New Home Sales, the
Employment Cost Index (ECI), GDP and durable goods, continued to point to
ongoing momentum in the economy. By June, there was no overwhelming evidence
that the economy had slowed to a sustainable growth pace. Nevertheless, Fed
officials seemed impressed with a slowdown in the pace of broad price measures,
and opted to maintain a neutral stance. Early third-quarter data initially
suggested that any slowdown perceived by the Fed represented a modified
correction from the first quarter's rapid growth, not the
--------------------------------
- --------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------- ---------------------------------------
onset of a weaker trend. However, as the quarter progressed, subdued
inflationary pressures and a slower pace of economic growth further lowered the
probability that Fed officials would tighten monetary policy in the months that
remained in 1997.
In the final months of the fiscal year, financial turmoil in Asia's equity
markets spilled into the U.S. However, a number of factors, including Federal
Reserve Chairman Alan Greenspan's testimony and U.S. investors' overall
reaction to the market, quickly restored confidence that the U.S. market would
not suffer a significant downturn. Not surprisingly, at its November meeting,
the Fed chose to leave monetary policy on hold. As the fourth quarter drew to a
close, central bankers continued to be torn between their anxiety over
excessively rapid demand growth and rising wages on the domestic front and
their worries that the Asian crisis could spread to new regions and have a
negative impact on U.S. output and earnings prospects. Consequently, Fed
officials chose to maintain their "wait-and-see" stance on monetary policy and
await future market developments.
HISTORICAL YIELD CURVE (LIBOR)
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
1 month 5.50 5.72
3 months 5.56 5.81
6 months 5.60 5.84
9 months 5.69 5.91
12 months 5.79 5.97
</TABLE>
The Federal funds rate began the year at 5.25% and ended the year at 5.50%. The
slope of the LIBOR yield curve steepened significantly over the course of the
year. By the end of 1997, the spread between one- and 12-month LIBOR moved to
plus 25 basis points.
Source: Goldman Sachs Fixed Income Database, reflecting London Interbank
Offered Rate (LIBOR).
SUMMARY FOR FINANCIAL SQUARE FUNDS INSTITUTIONAL SHARES* AS OF 12/31/97
<TABLE>
<CAPTION>
SEC SEC
7-DAY 7-DAY 30-DAY WEIGHTED AVG.
FINANCIAL SQUARE CURRENT EFFECTIVE AVERAGE MATURITY
FUNDS YIELD YIELD YIELD (DAYS)
---------------- ------- --------- ------- -------------
<S> <C> <C> <C> <C>
Prime
Obligations.... 5.64% 5.80% 5.61% 44
Money Market.... 5.65 5.81 5.62 38
Premium Money
Market......... 5.69 5.85 5.62 35
Treasury
Obligations.... 5.57 5.72 5.50 36
Treasury
Instruments.... 5.10 5.23 5.12 39
Government...... 5.62 5.78 5.55 42
Federal......... 5.54 5.69 5.50 35
Tax-Free Money
Market......... 3.88 3.95 3.58 47
</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%. Performance reflects fee waivers and
expense reimbursements. Had fees not been waived or expenses reimbursed
performance would be reduced. Past performance is no guarantee of future
results. Yields will vary. An investment in any one of the Financial Square
Funds is neither insured nor guaranteed by the U.S. Government nor is there any
assurance that the Funds will be able to maintain a stable net asset value of
$1.00 per share. 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.
STRATEGY
Taxable. The funds began the fiscal period with a short laddered structure
intended to be advantageous in the event of a steepening yield curve. In March,
the Fed's decision to tighten led us to extend the funds' weighted average
maturities. Despite a market rally over the next several months, we maintained
these longer weighted average maturities due to a benign inflationary
environment and a "wait-and-see" Fed. In the second
---------------------------------------
- ---------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
half of the fiscal year, a period of Fed inactivity caused us to slightly
extend the funds' durations to the upper end of the neutral range in seeking to
capture incremental yield. We maintained this stance throughout November and
December.
Tax-Exempt. Early in the year, the tax-exempt money market funds assumed
defensive weighted average maturities, as we anticipated higher short-term
rates in the near future. As expected, this scenario played itself out in March
when the Fed tightened, and was magnified in April when larger than expected
tax payments caused the market to back up further. During the second half of
the year, we began to extend the weighted average maturities of the funds as
the likelihood of further Fed tightening faded.
DOMESTIC CREDIT TRENDS POSITIVE
Domestic credit quality in 1997 continued its positive trend. It was the
third consecutive year of extraordinary stock market growth and record mergers
and acquisitions. It was the seventh straight year of growth for the U.S.
economy, with high employment, low inflation and relatively stable, low
interest rates. U.S. corporations and financial institutions reported strong
earnings as a result of the strong economic environment as well as from
previous cost-cutting and consolidation moves.
The improvement in credit strength was broad-based, except in the consumer
credit sector, which continued its downward trend. Consumer bankruptcy filings
set another record high of 1.3 million cases in 1997. Credit card loan
delinquencies, however, began to stabilize by the end of the year. These
consumer credit problems had a negative impact on the financial sector,
including serious problems in the sub-prime auto lending industry. The Credit
Department's experienced team of financial institutions analysts closely
monitored consumer credit quality trends.
THE CREDIT PICTURE ABROAD: ASIA IN TROUBLE, EMU ON COURSE
The international credit environment in 1997 was dominated by the Asian
financial crisis and the apparent resolution of European Monetary Union's (EMU)
likely course. Thailand's forced currency devaluation in July set off a
financial fire that found ample fuel in the region's highly leveraged
economies. Even higher-rated securities were affected; for example, Hong Kong
weathered various shocks flowing from Southeast Asia. At the time this report
was written, there were no Asian-issued holdings in any of the Financial Square
money market funds.
In Europe, the second half of the year presented a more positive picture than
the first part of the year. A "euroland" of 11 countries now appears on track,
with almost every government producing better than expected fiscal results and
unexpectedly strong economies. Yields and asset prices have begun to achieve a
measure of convergence across the Continent, while the rating agencies have
begun to clarify their (differing) approaches to creditworthiness under the
euro. Just as important, political resistance to EMU has been effectively
controlled despite stubbornly high unemployment. The combination of Europe's
improving performance and the U.S.'s continuing robust health has helped to
mute the broader contagion effects from Asia so far, though such effects may
become more potent if Asia's trouble continues well into 1998.
The year ahead will likely be more difficult for the domestic economy, with
the uncertain outlook in Europe and Asia. The Goldman Sachs Credit Department,
with its analysts based in London, Tokyo, Frankfurt and New York, as well as
extensive technological assets and credit expertise, will continue to
anticipate and monitor global developments and apply its conservative credit
standards to the money market funds.
OUTLOOK AND STRATEGIES FOR 1998
The pivotal factor in the U.S. economic outlook for 1998 is the tug of war
between the trade drag from Asia and the strength of the domestic economy. Asia
will most likely dominate the first half of the year while the tight U.S. labor
market is likely to have an impact in the second half of the year.
---------------------------------------
- ---------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
This view is dependent upon the behavior of the U.S. stock market, which has
boosted spending in both households and businesses in recent years. A decline
in the stock market could hurt consumer spending and keep the Fed on hold
throughout the year.
Providing there are no new disturbances relative to the Asian markets or
domestic financial asset prices, we anticipate that the Fed will hold off on
making policy changes for some time to come. With no signs of inflation and the
U.S. dollar ever stronger with respect to foreign markets, Chairman Greenspan
and the Fed have good reason to "wait and see" how events unfold overseas
before making any decisions that could prove destabilizing in the short term
and whose long-term impact would be uncertain.
With the Fed on hold for the near term, we expect to position the funds with
neutral weighted average maturities. However, a steepening yield curve would
give us the incentive to extend the weighted average maturities on all funds,
as any Fed tightening in 1998 is likely to be modest.
In closing, we thank you for your support and for making 1997 a year of
record assets for the Financial Square money market funds. As in the past, we
will continue to look for additional ways to improve our services, while
seeking to provide you with competitive performance. We welcome your
suggestions and questions, and look forward to another strong year in 1998.
Sincerely,
/s/ Kaysie Uniacke
Kaysie Uniacke
Portfolio Manager
February 2, 1998
4
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
FINANCIAL SQUARE PRIME OBLIGATIONS FUND
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS--33.4%
BANK HOLDING COMPANIES
Bankers Trust Securities Corp.
$ 50,000,000 5.67% 06/09/98 $ 48,747,875
Corestates Bank, N.A.
30,000,000 5.93 01/02/98 30,000,000
BUSINESS CREDIT INSTITUTIONS
CIT Group Holdings, Inc.
100,000,000 5.63 04/29/98 98,154,611
General Electric Capital Corp.
50,000,000 5.60 01/28/98 49,790,000
40,000,000 5.69 02/12/98 39,734,467
50,000,000 5.69 02/17/98 49,628,569
COMMERCIAL BANKS
CP Trust Certificates Series 1996-1
85,000,000 6.22(a) 03/30/98 85,000,000
HOME BUILDERS
First Data Corp.
35,000,000 5.63 06/16/98 34,091,381
RECEIVABLE/ASSET FINANCINGS
Ciesco LP Series 4-2
25,000,000 5.55 01/23/98 24,913,681
Dakota Certificates of Standard Credit Card Master Trust
40,000,000 5.62 01/15/98 39,912,578
25,000,000 5.62 01/21/98 24,921,944
Enterprise Funding Corp.
44,917,000 5.64 01/16/98 44,811,445
20,598,000 5.61 01/21/98 20,533,803
50,000,000 5.72 01/22/98 49,832,583
17,099,000 5.63 01/30/98 17,021,451
35,610,000 5.71 04/28/98 34,949,167
11,776,000 5.68 05/28/98 11,502,875
Receivables Capital Corp.
50,000,000 5.60 01/14/98 49,898,889
14,643,000 5.61 01/15/98 14,611,054
44,047,000 5.69 02/11/98 43,761,563
WCP Funding Corp.
25,000,000 5.60 01/28/98 24,895,000
25,000,000 5.63 02/10/98 24,843,611
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES
Bear Stearns Companies, Inc.
50,000,000 5.62 01/14/98 49,898,528
15,000,000 5.61 01/28/98 14,936,888
20,000,000 5.62 01/29/98 19,912,578
90,000,000 5.69 02/17/98 89,331,425
JP Morgan Securities, Inc.
50,000,000 5.98(a) 01/09/98 50,000,000
Merrill Lynch & Co., Inc.
45,000,000 5.94 01/02/98 44,998,290
45,000,000 5.96 01/02/98 44,998,322
45,000,000 5.97 08/14/98 45,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS (CONTINUED)
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES (CONTINUED)
Morgan Stanley Dean Witter, Inc.
$ 70,000,000 5.69% 02/23/98 $69,413,614
40,000,000 5.74 03/11/98 39,559,933
80,000,000 5.64 06/01/98 78,107,467
Smith Barney Holdings, Inc.
25,000,000 5.51 01/06/98 24,980,868
50,000,000 5.70 02/11/98 49,675,417
- ------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER AND CORPORATE OBLIGATIONS $1,482,369,877
- ------------------------------------------------------------------------------------------------
BANK NOTES--9.0%
BankBoston, N.A.
$ 20,000,000 5.75% 02/17/98 $ 20,000,000
50,000,000 5.99 08/13/98 50,000,000
25,000,000 5.97 10/21/98 25,000,000
Comerica Bank Detroit
50,000,000 6.00 03/27/98 49,981,112
35,000,000 6.18 05/27/98 34,992,657
FCC National Bank
60,000,000 6.01 07/06/98 59,991,241
First National Bank of Boston, N.A.
50,000,000 5.61 01/06/98 50,000,000
Huntington National Bank
50,000,000 5.82 11/13/98 49,983,429
Morgan Guaranty Trust Co.
60,000,000 6.02 03/25/98 59,987,237
- ------------------------------------------------------------------------------------------------
TOTAL BANK NOTES $ 399,935,676
- ------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES(A)--35.8%
American Express Centurion Bank
$ 25,000,000 5.97% 01/08/98 $ 25,000,000
25,000,000 5.95 01/13/98 25,000,000
25,000,000 5.93 01/20/98 25,000,000
32,000,000 5.94 01/20/98 32,000,000
Amsouth Bank of Alabama, N.A.
50,000,000 5.92 01/28/98 49,992,064
Bank One Columbus, N.A.
50,000,000 5.55 01/06/98 49,985,789
50,000,000 5.57 01/06/98 49,989,068
Bank One Texas
75,000,000 5.55 01/06/98 74,971,266
Comerica Bank Detroit
65,000,000 5.90 01/05/98 64,995,785
75,000,000 5.88 01/15/98 74,985,302
Commonwealth Life Insurance Co.(b)
55,000,000 5.86 09/04/98 55,000,000
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
5
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
FINANCIAL SQUARE PRIME OBLIGATIONS FUND (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (CONTINUED)
Corestates Bank, N.A.
$ 25,000,000 5.93% 01/02/98 $ 25,000,000
45,000,000 5.96 01/02/98 45,000,000
25,000,000 5.65 01/05/98 25,000,000
50,000,000 5.66 01/05/98 50,000,000
10,000,000 5.95 06/05/98 10,000,000
Corestates Capital Corp.
25,000,000 5.93 01/23/98 25,000,000
Dakota Certificates of Standard Credit Card Master Trust
40,000,000 5.69 02/11/98 39,740,789
10,000,000 5.70 02/19/98 9,922,417
33,000,000 5.73 03/10/98 32,642,830
FCC National Bank
40,000,000 5.74 01/02/98 39,982,295
90,000,000 6.16 01/02/98 89,984,959
First Bank FSB
50,000,000 5.86 01/21/98 49,987,048
First Bank, N.A.
65,000,000 5.86 01/21/98 64,987,398
25,000,000 5.87 01/21/98 24,994,940
Ford Motor Credit Corp.
30,000,000 6.30 03/02/98 30,056,644
Merrill Lynch & Co., Inc.
30,000,000 5.95 01/09/98 29,997,734
19,500,000 5.65 08/03/98 19,499,437
Nationsbank Corp.
25,000,000 5.89 01/02/98 25,000,000
New York Life Insurance
40,000,000 5.89 03/03/98 40,000,000
Pacific Mutual Life Insurance Co.
50,000,000 5.66 03/03/98 50,000,000
PNC Bank, N.A.
25,000,000 5.87 01/02/98 24,999,056
75,000,000 6.13 01/02/98 74,972,661
Seattle Washington Tax Series 1994
25,000,000 6.00 01/01/98 25,000,000
SMM Trust Series 1997-X
35,000,000 6.00 12/14/98 35,000,000
Southtrust Bank of Alabama, N.A.
115,000,000 5.91 01/02/98 114,988,979
45,000,000 5.90 09/08/98 44,984,854
Texas State Vet Series 1996 A
14,255,000 6.00 01/01/98 14,255,000
- ------------------------------------------------------------------------------------------------
TOTAL VARIABLE RATE DEMAND NOTES $1,587,916,315
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT--6.6%
Bankers Trust Securities Corp.
$ 50,000,000 5.78% 06/18/98 $ 50,000,000
85,000,000 5.79 06/18/98 85,000,000
Crestar Bank
25,000,000 5.70 01/20/98 25,000,130
First National Bank of Boston, N.A.
30,000,000 5.81 04/22/98 30,000,209
Morgan Guaranty Trust Co.
45,000,000 5.91 03/19/98 44,996,370
Regions Bank
60,000,000 6.00 03/18/98 59,997,612
- ----------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT $ 294,994,321
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--15.9%
Joint Repurchase Agreement Account(c)
$404,500,000 6.40% 01/02/98 $ 404,500,000
Lehman Brothers, Inc., dated 12/31/97, repurchase price $300,100,833
(total collateral value $306,003,497 consisting of FHLMC: 6.00%-10.00%,
09/01/99-10/01/27; FNMA: 6.00%-9.50%, 03/01/99-12/01/27)
300,000,000 6.05 01/02/98 300,000,000
- ----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 704,500,000
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $4,469,716,189(d)
</TABLE>
- --------------------------------------------------------------------------------
(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) Portion of this security is when-issued.
(c) Portion of this security is being segregated for a when-issued security.
(d) 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 prefunded date for
those types of securities.
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.
6
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
FINANCIAL SQUARE MONEY MARKET FUND
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS--30.5%
BUSINESS CREDIT INSTITUTIONS
General Electric Capital Corp.
$ 30,000,000 5.69% 02/12/98 $ 29,800,850
CHEMICAL COMPANY
Henkel Corp.
10,000,000 5.60 01/14/98 9,979,778
COMMERCIAL BANKS
CP Trust Certificates Series 1996-1
60,000,000 6.22(a) 03/30/98 60,000,000
CP Trust Certificates Series 1996-2
50,000,000 6.24(a) 12/28/98 50,000,000
ELECTRIC COMPANIES
Mitsubishi & Co. USA, Inc.
20,000,000 5.64 01/23/98 19,931,067
25,000,000 5.65 01/26/98 24,901,910
FOREIGN BANKS
Banca CRT Financial Corp.
2,000,000 5.65 01/20/98 1,994,036
13,030,000 5.65 01/23/98 12,985,010
5,500,000 5.65 01/26/98 5,478,420
32,000,000 5.65 01/27/98 31,869,422
Bayerische Vereinsbank AG, New York(b)
100,000,000 5.52 07/02/98 97,224,667
BCI Funding Corp.
25,000,000 5.57 01/14/98 24,949,715
Cades
50,000,000 5.63 05/29/98 48,842,722
45,000,000 5.68 06/10/98 43,864,000
Credit Suisse First Boston, New York
50,000,000 5.52 01/08/98 49,946,333
50,000,000 5.70 01/15/98 49,889,167
Nordbanken North America
70,000,000 5.52 01/12/98 69,881,933
Rose One Plus
26,489,000 5.72 02/10/98 26,320,648
50,000,000 5.72 02/12/98 49,666,333
71,038,000 5.73 02/27/98 70,393,508
20,000,000 5.75 03/11/98 19,779,583
Unifunding Inc.
19,000,000 5.52 01/05/98 18,988,347
RECEIVABLE/ASSET FINANCINGS
Asset Securitization Corp.
11,000,000 5.69 02/24/98 10,906,115
CC USA, Inc.
36,000,000 5.60 01/08/98 35,960,800
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS (CONTINUED)
RECEIVABLE/ASSET FINANCINGS (CONTINUED)
Delaware Funding
$ 60,000,000 5.69% 02/20/98 $ 59,525,833
Enterprise Funding Corp.
37,432,000 5.74 01/13/98 37,360,380
28,191,000 5.73 01/29/98 28,065,362
Eureka Securities
40,000,000 5.69 02/04/98 39,785,044
40,000,000 5.69 02/12/98 39,734,467
Falcon Asset Securitization Corp.
20,675,000 5.74 01/16/98 20,625,552
Windmill Funding Corp.
25,000,000 5.65 01/23/98 24,913,681
50,000,000 5.70 02/05/98 49,722,917
SECURITY AND COMMODITY BROKERS, DEALERS AND SERVICES
Bear Stearns Companies, Inc.
35,000,000 5.62 01/29/98 34,847,011
30,000,000 5.71 02/17/98 29,776,358
25,000,000 5.75 03/09/98 24,732,465
20,000,000 5.74 03/12/98 19,776,778
JP Morgan Securities, Inc.(a)
50,000,000 5.98 01/09/98 50,000,000
Merrill Lynch & Co., Inc.
35,000,000 5.96 01/02/98 34,998,695
10,000,000 5.97 08/14/98 10,000,000
Morgan Stanley Dean Witter, Inc.
70,000,000 5.69 02/23/98 69,413,614
Smith Barney Holdings, Inc.
60,000,000 5.70 02/11/98 59,610,500
- ------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER AND CORPORATE
OBLIGATIONS $1,496,443,021
- ------------------------------------------------------------------------------------------------
BANK NOTES--1.7%
First National Bank of Boston, N.A.
$ 25,000,000 5.82% 05/26/98 $ 25,000,000
25,000,000 6.00 08/17/98 25,000,000
Huntington National Bank
7,000,000 5.82 11/13/98 6,997,680
National Australia Bank, Ltd., New York
26,000,000 5.85 10/05/98 25,993,684
- ------------------------------------------------------------------------------------------------
TOTAL BANK NOTES $ 82,991,364
- ------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - FOREIGN EURODOLLAR--6.1%
Abbey National Treasury Services
$ 25,000,000 5.86% 11/12/98 $ 25,000,000
Bank of Tokyo, Mitsubishi Bank Ltd., New York
65,000,000 5.80 01/26/98 64,998,737
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
7
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
FINANCIAL SQUARE MONEY MARKET FUND (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT - FOREIGN EURODOLLAR (CONTINUED)
Norinchukin Bank, London
$ 30,000,000 6.27% 01/20/98 $ 30,000,235
Royal Bank of Canada, New York
50,000,000 5.81 06/03/98 50,000,000
Sanwa Bank Limited, London
40,000,000 6.12 01/14/98 40,000,143
75,000,000 5.79 01/26/98 75,000,513
Sumitomo Bank, London
13,000,000 5.76 01/16/98 12,999,776
- ---------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT - FOREIGN
EURODOLLAR $ 297,999,404
- ---------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - YANKEEDOLLAR--13.4%
Bank of Tokyo Mitsubishi, New York
$ 85,000,000 6.00% 01/14/98 $ 85,000,000
Canadian Imperial Bank of Commerce, New York
63,000,000 5.94 03/17/98 62,996,286
Credit Agric Indosuez, New York
60,000,000 5.95 08/13/98 59,982,404
Landesbank Hessen Thuringen
60,000,000 5.93 06/30/98 59,965,794
National Bank of Canada, New York
50,000,000 6.03 03/18/98 49,997,910
Norinchukin Bank, New York
100,000,000 5.73 01/05/98 100,000,109
Rabobank Nederland
50,000,000 6.07 03/26/98 49,995,606
45,000,000 6.05 03/27/98 44,988,000
Sanwa Bank Ltd., New York
31,000,000 5.76 01/22/98 30,999,422
36,000,000 5.76 01/27/98 35,999,488
Societe Generale, New York
25,000,000 6.05 03/24/98 24,997,319
25,000,000 5.91 10/15/98 24,988,723
25,000,000 5.91 10/20/98 24,981,841
- ---------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT - YANKEEDOLLAR $ 654,892,902
- ---------------------------------------------------------------------------------------------
TAXABLE MUNICIPAL NOTES--0.6%
Florida Housing Finance Authority
$ 28,400,000 5.90%(a) 01/07/98 $ 28,400,000
- ---------------------------------------------------------------------------------------------
TOTAL TAXABLE MUNICIPAL NOTES $ 28,400,000
- ---------------------------------------------------------------------------------------------
TIME DEPOSIT--4.1%
Wachovia Bank, N.A.
$200,000,000 6.50% 01/02/98 $ 200,000,000
- ---------------------------------------------------------------------------------------------
TOTAL TIME DEPOSIT $ 200,000,000
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES(A)--39.3%
Abbey National
$150,000,000 5.86% 01/15/98 $ 149,946,853
ABN/AMRO Bank, New York
60,000,000 6.17 01/02/98 59,994,732
American Express Centurion Bank
15,000,000 5.93 01/20/98 15,000,000
15,000,000 5.95 01/13/98 15,000,000
15,000,000 5.97 01/08/98 15,000,000
Ameritech Corp.
17,000,000 5.83 01/12/98 17,004,985
Amsouth Bank of Alabama, N.A.
50,000,000 5.91 01/15/98 49,993,001
Bank One Columbus, N.A.
25,000,000 5.57 01/06/98 24,994,534
50,000,000 5.55 01/06/98 49,985,789
Bayerische Landesbank
15,000,000 5.84 01/26/98 14,994,374
Comerica Bank Detroit
55,000,000 5.90 01/05/98 54,996,433
90,000,000 5.88 01/15/98 89,982,362
50,000,000 5.85 01/20/98 49,984,056
12,000,000 5.80 03/11/98 11,994,765
Corestates Bank, N.A.
15,000,000 5.96 01/06/98 15,000,000
50,000,000 5.95 01/29/98 50,000,000
Dakota Certificates of Standard Credit Card Master Trust
10,000,000 5.69 03/10/98 9,960,417
50,000,000 5.73 01/26/98 49,458,833
Dauphin Deposit Bank & Trust
15,000,000 5.66 02/04/98 14,996,569
50,000,000 5.70 01/14/98 50,001,042
Den Danske Bank, New York
50,000,000 5.91 01/16/98 49,997,210
25,000,000 5.92 01/26/98 24,998,206
35,000,000 5.92 01/26/98 34,998,372
FCC National Bank
110,000,000 6.16 01/02/98 109,981,616
40,000,000 5.74 01/28/98 39,982,295
First Bank FSB
50,000,000 5.86 01/21/98 49,987,048
First Bank, N.A.
25,000,000 5.87 01/21/98 24,994,940
50,000,000 5.87 01/21/98 49,989,223
Fleet Financial Group
10,000,000 5.91 02/13/98 10,001,798
General Electric Capital Corp.
90,000,000 5.70 02/02/98 90,000,000
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES (CONTINUED)
Merrill Lynch & Co., Inc.
$ 35,000,000 5.94% 01/13/98 $ 34,998,670
Morgan Stanley Dean Witter(b)
80,000,000 5.54 04/15/98 79,992,280
National Bank of Canada, New York
20,000,000 6.04 03/08/98 20,002,565
Nationsbank Corp.
25,000,000 5.89 03/12/98 25,000,000
24,000,000 6.06 03/24/98 24,009,156
New York Life Insurance
40,000,000 5.89 03/03/98 40,000,000
PNC Bank, N.A.
25,000,000 6.13 01/02/98 24,990,887
Postipankki, Inc.
100,000,000 5.73 02/04/98 100,000,000
SMM Trust Series 1997-X
35,000,000 6.00 01/12/98 35,000,000
Societe Generale, New York
40,000,000 6.19 01/02/98 39,997,340
Southtrust Bank of Alabama, N.A.
150,000,000 5.90 01/12/98 149,967,235
Sunamerica Life Insururance Co.
50,000,000 6.06 01/02/98 50,000,000
U.S. Bank, N.A.
10,000,000 6.24 03/10/98 10,024,395
- ----------------------------------------------------------------------------------------------
TOTAL VARIABLE RATE DEMAND NOTES $1,927,201,981
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--7.9%
Joint Repurchase Agreement Account(c)
$389,700,000 6.40% 01/02/98 $ 389,700,000
- ----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 389,700,000
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $5,077,628,672(d)
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(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) When-issued securities.
(c) Portions of this security is being segragated for when-issued securities.
(d) 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.
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>
- --------------------------------------------------------------------------------
FINANCIAL SQUARE PREMIUM MONEY MARKET FUND
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS--41.7%
Associates Corp. of North America
$ 5,000,000 5.59% 01/26/98 $ 4,980,590
Henkel Corp.
6,000,000 5.60 01/14/98 5,987,867
BUSINESS CREDIT INSTITUTIONS
General Electric Capital Corp.
3,000,000 5.51 01/14/98 2,994,031
2,000,000 5.57 01/22/98 1,993,502
2,000,000 5.69 02/12/98 1,986,723
FOREIGN BANKS
Cades
5,000,000 5.63 05/29/98 4,884,272
Cariplo Finance
5,000,000 5.65 01/08/98 4,994,507
Commonwealth Bank of Australia
5,000,000 5.60 06/18/98 4,869,333
Credit Suisse First Boston, New York
3,000,000 5.52 01/08/98 2,996,780
3,000,000 5.70 01/15/98 2,993,350
RECEIVABLE/ASSET FINANCINGS
Asset Securitization Corp.
4,000,000 5.69 02/24/98 3,965,860
Beta Finance
7,000,000 5.63 06/16/98 6,818,276
CC USA, Inc.
3,000,000 5.53 01/08/98 2,996,774
Ciesco LP
2,000,000 5.55 01/23/98 1,993,217
Delaware Funding Corp.
5,000,000 5.56 01/16/98 4,988,417
Enterprise Funding Corp.
3,000,000 5.72 01/22/98 2,989,990
2,029,000 5.57 01/26/98 2,021,152
IMI Funding Corp., U.S.A.
5,000,000 5.57 01/15/98 4,989,169
International Securitization Corp.
5,000,000 5.75 01/29/98 4,977,639
Sheffield Receivables Corp.
3,000,000 5.61 01/16/98 2,992,988
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER AND CORPORATE OBLIGATIONS (CONTINUED)
RECEIVABLE/ASSET FINANCINGS (CONTINUED)
Siemens Capital Corp.
$5,000,000 5.59% 06/22/98 $ 4,866,461
Swedish Export Credit Corp.
5,000,000 5.59 06/15/98 4,871,896
Windmill Funding
5,000,000 5.65 01/23/98 4,982,736
- --------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER AND CORPORATE OBLIGATIONS $ 92,135,530
- --------------------------------------------------------------------------------------------------
BANK NOTES--1.4%
Wachovia Bank, N.A.
$3,000,000 5.60% 01/12/98 $ 3,000,000
- --------------------------------------------------------------------------------------------------
TOTAL BANK NOTES $ 3,000,000
- --------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - FOREIGN EURODOLLAR--3.2%
Norinchukin Bank, London
$2,000,000 6.27% 01/20/98 $ 2,000,016
Royal Bank of Canada, New York
5,000,000 5.81 06/03/98 5,000,000
- --------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT - FOREIGN EURODOLLAR $ 7,000,016
- --------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - YANKEEDOLLAR--8.1%
Bank of Tokyo, Mitsubishi Bank Ltd., New York
$2,000,000 5.85% 01/09/98 $ 2,000,014
3,000,000 6.00 01/14/98 3,000,000
Credit Agric Indosuez, New York
1,000,000 5.95 08/13/98 999,707
Landesbank Hessen Thuringen Gir
3,000,000 5.94 10/23/98 2,998,610
National Bank of Canada, New York
5,875,000 5.71 01/02/98 5,875,001
Norinchukin Bank, New York
3,000,000 5.73 01/05/98 3,000,003
- --------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT - YANKEEDOLLAR $ 17,873,335
- --------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VARIABLE RATE DEMAND NOTES(B)--9.0%
Comerica Bank Detroit
$ 3,000,000 5.80% 03/11/98 $ 2,998,691
Corestates Bank, N.A.
2,000,000 5.95 01/05/98 2,000,000
Merrill Lynch & Co., Inc.
2,000,000 5.65 01/05/98 1,999,942
Morgan Stanley Dean Witter(a)
5,000,000 5.54 04/15/98 4,999,518
SMM Trust Series 1997-X
2,000,000 6.00 01/01/98 2,000,000
Societe Generale, New York
3,000,000 6.16 01/02/98 2,998,681
Southtrust Bank of Alabama, N.A.
3,000,000 5.90 01/08/98 2,998,990
- ------------------------------------------------------------------------------------------------
TOTAL VARIABLE RATE DEMAND NOTES $ 19,995,822
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--39.3%
BZW Securities, dated 12/31/97, repurchase price $5,001,840 (SLMA:
$5,100,923, 05/21/98)
$ 5,000,000 6.63% 01/02/98 $ 5,000,000
Deutsche Morgan Grenfell, Inc., dated 12/31/97, repurchase price
$5,001,889 (total collateral value $5,100,127 consisting of U.S.
Treasury Bill: 06/11/98; U.S. Treasury Bonds: 11.63%-11.88%, 11/15/02-
11/15/03; U.S. Treasury Notes: 5.75%-7.88%, 01/15/98-08/15/03)
5,000,000 6.80 01/02/98 5,000,000
Joint Repurchase Agreement Account(c)
66,900,000 6.40 01/02/98 66,900,000
Lehman Government Securities, dated 12/31/97, repurchase price
$5,001,836 (total collateral value: $5,100,035, consisting of FNMA:
7.00%-8.50%, 09/01/07-01/01/26)
5,000,000 6.70 01/02/98 5,000,000
UBS Securities, Inc., dated 12/31/97, repurchase price $5,001,795
(U.S. Treasury Note: $5,162,500, 8.13%, 02/15/98)
5,000,000 6.55 01/02/98 5,000,000
- ------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $ 86,900,000
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $226,904,703(d)
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(a) When-issued security.
(b) 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.
(c) A portion of this security is being segregated for when-issued securities.
(d) 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 prefunded date for
those types of securities.
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
- --------------------------------------------------------------------------------
FINANCIAL SQUARE TREASURY OBLIGATIONS FUND
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS--15.2%
United States Treasury Notes
$ 70,000,000 6.13% 03/31/98 $ 70,041,209
127,000,000 7.88 04/15/98 127,677,326
110,000,000 6.25 07/31/98 110,335,012
50,000,000 5.88 08/15/98 50,042,411
50,000,000 5.88 10/31/98 50,069,089
25,000,000 5.88 10/31/98 25,025,215
50,000,000 5.75 12/31/98 50,010,854
50,000,000 5.88 01/31/99 50,101,307
- ---------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $ 533,302,423
- ---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--85.0%
Bear Stearns Companies, Inc., dated 12/31/97, repurchase price
$165,057,292 (Total collateral value $168,277,838 consisting of U.S.
Treasury Bills: 04/02/98; U.S. Treasury Note: 5.75%, 11/15/00)
$ 165,000,000 6.25% 01/02/98 $ 165,000,000
BZW Securities dated 12/31/97, repurchase price $165,060,729 (total
collateral value $168,300,287 consisting of U.S. Treasury stripped
securities: 02/15/98-11/15/04; U.S. Treasury Notes: 5.13%-8.00%,
11/30/98-08/31/02; U.S. Treasury Bond: 13.75%, 08/15/04)
165,000,000 6.63 01/02/98 165,000,000
CIBC Oppenheimer, Inc., dated 12/31/97, repurchase price $165,059,583
(U.S. Treasury Notes: $168,304,860, 5.50%-6.38%, 02/28/99-08/15/00)
165,000,000 6.50 01/02/98 165,000,000
C.S. First Boston Corp., dated 12/11/97, repurchase price $152,095,208
(U.S. Stripped Securities: $153,054,748. 02/15/98-11/15/04)
150,000,000 5.65 03/10/98 150,000,000
Deutsche Morgan Grenfell, Inc., dated 12/31/97, repurchase price
$165,062,333 (Total collateral value $168,300,705 consisting of U.S.
Treasury Stripped Securities: 08/15/99-08/15/02; U.S. Treasury Notes:
5.63%-7.50%, 11/30/98-11/15/05)
165,000,000 6.80 01/02/98 165,000,000
Goldman, Sachs & Co., dated 12/31/97, repurchase price $165,059,583 (U.S.
Treasury Note: $168,300,521, 5.75%, 09/30/99)
165,000,000 6.50 01/02/98 165,000,000
Joint Repurchase Agreement Account
1,024,200,000 6.40 01/02/98 1,024,200,000
JP Morgan Securities, Inc., dated 12/31/97, repurchase price $165,057,292
(U.S. Treasury Notes: $168,302,651, 6.25%-6.50%, 08/31/01-02/28/02)
165,000,000 6.25 01/02/98 165,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
Lehman Government Securities, Inc., dated 12/31/97, repurchase price
$165,059,125 (U.S. Treasury Note: $168,289,206, 5.63%, 11/30/99)
$ 165,000,000 6.45% 01/02/98 $ 165,000,000
Merrill Lynch Government Securities, Inc., dated 12/31/97, repurchase
price $165,059,583 (Total collateral value $168,300,113 consisting of
U.S. Treasury Bills: 01/02/98-12/10/98; U.S. Treasury Bond: 3.50%,
11/15/98; U.S. Treasury Notes: 6.38%-7.75%, 01/15/00-01/31/00; U.S.
Treasury Stripped Securities: 5.75%-9.25%. 05/15/98-11/30/99)
165,000,000 6.50 01/02/98 165,000,000
Morgan Stanley & Co., dated 12/31/97, repurchase price $165,057,292
(U.S. Treasury Notes: $168,302,832, 5.63%-7.88%, 11/30/98-08/15/01)
165,000,000 6.25 01/02/98 165,000,000
Nomura Securities International, Inc., dated 12/31/97, repurchase price
$165,066,458 (U.S. Treasury Notes: $168,305,269, 6.12%-7.75%,
12/21/99-12/31/01)
165,000,000 7.25 01/02/98 165,000,000
UBS Securities, Inc., dated 12/31/97, repurchase price $165,060,042
(U.S. Treasury Notes: $170,525,247, 7.125%-7.5%, 11/15/01-10/15/98)
165,000,000 6.55 01/02/98 165,000,000
- -------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $2,989,200,000
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $3,522,502,423(a)
- -------------------------------------------------------------------------------------------
</TABLE>
(a) The amount stated also represents aggregate cost for federal income tax
purposes.
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.
12
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
FINANCIAL SQUARE TREASURY INSTRUMENTS FUND
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS--99.3%
United States Treasury Bills
$ 65,000,000 4.70% 01/22/98 $ 64,821,792
50,000,000 4.75 01/22/98 49,861,458
2,500,000 5.00 01/22/98 2,492,716
23,600,000 5.10 01/22/98 23,529,790
4,600,000 5.15 01/22/98 4,586,181
3,400,000 5.17 01/22/98 3,389,746
8,600,000 5.20 01/22/98 8,573,914
65,000,000 5.12 02/05/98 64,676,760
20,000,000 4.95 02/12/98 19,884,500
13,400,000 5.12 02/12/98 13,319,957
United States Treasury Notes
16,600,000 7.88 01/15/98 16,618,156
8,000,000 5.00 01/31/98 7,996,000
96,800,000 5.63 01/31/98 96,793,075
35,000,000 7.25 02/15/98 35,069,845
10,000,000 5.13 02/28/98 9,990,057
50,000,000 7.88 04/15/98 50,328,250
25,000,000 5.13 04/30/98 24,969,979
20,000,000 6.00 05/31/98 20,033,373
- -------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $516,935,549
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $516,935,549(a)
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) The amount stated also represents aggregate cost for federal income tax
purposes.
The percentages shown for each 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 GOVERNMENT FUND
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--40.9%
Federal Farm Credit Bank
$ 25,000,000 5.45% 03/03/98 $ 24,975,385
75,000,000 5.80(a) 04/14/98 74,981,276
50,000,000 5.70 12/01/98 49,951,782
35,970,000(b) 5.65 01/04/99 35,917,844
Federal Home Loan Bank
41,000,000 5.83(a) 03/06/98 40,994,655
59,000,000 5.79(a) 03/18/98 58,991,023
100,000,000 5.82(a) 04/14/98 99,980,582
10,000,000 5.72 06/23/98 9,997,563
65,000,000 5.75 07/02/98 64,973,616
40,000,000 5.71 10/01/98 39,990,824
Federal Home Loan Mortgage Corp.
20,000,000 5.72 03/17/98 19,994,674
Federal National Mortgage Association
40,000,000 5.59(a) 01/15/98 39,999,080
34,000,000 5.63 03/13/98 33,622,477
20,000,000 5.71 03/18/98 19,994,586
70,000,000 5.79 03/25/98 69,996,253
40,000,000 6.02 04/15/98 39,988,033
14,505,000 6.08 05/06/98 14,520,047
30,000,000 5.89 05/21/98 29,990,509
100,000,000 5.79(a) 07/15/98 99,966,209
50,000,000 5.75(a) 09/15/98 49,968,842
Student Loan Marketing Association
49,000,000 5.79 09/16/98 48,992,550
- ---------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $967,787,810
- ---------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--60.7%
CIBC Oppenheimer, Inc., dated 12/31/97, repurchase price $100,036,111
(U.S. Treasury Notes: $102,002,643, 5.13%-6.00%, 04/30/98-12/31/99)
$ 100,000,000 6.50% 01/02/98 $100,000,000
Deutsche Morgan Grenfell, Inc., dated 12/31/97, repurchase price
$100,037,778 (total collateral value $102,000,788 consisting of
FHLMC: 5.50%-8.50%, 01/15/98-12/01/07; FHLB: 01/16/98; FNMA: 5.50%-
9.50%, 12/01/99-12/01/07; U.S. Treasury bill: 03/05/98; U.S. Treasury
Bond: 8.25%, 05/15/05; U.S. Treasury Notes: 5.63%-7.13%, 02/28/99-
10/31/99; U.S. Treasury stripped securities; 02/15/00-08/15/04; U.S.
Treasury Inflation Indexed Note: 3.38%, 01/15/07)
100,000,000 6.80 01/02/98 100,000,000
Goldman, Sachs & Co., dated 12/10/97, repurchase price $202,818,333
(FNMA: $204,000,000, 6.00%-9.00%, 03/01/99-12/01/07)
200,000,000 5.70 03/09/98 200,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (CONTINUED)
Joint Repurchase Agreement Account(c)
$336,400,000 6.40% 01/02/98 $ 336,400,000
JP Morgan Securities, Inc., dated 12/31/97, repurchase price $100,036,667
(FNMA: $102,002,181, 6.00%-9.05%, 08/19/99-07/15/02)
100,000,000 6.60 01/02/98 100,000,000
Lehman Government Securities, Inc., dated 12/31/97, repurchase price
$100,036,667 (Total Collateral value $102,001,527 consisting of FHLMC:
6.50%-10.00%, 03/01/01-09/01/26; FNMA: 6.50%-11.50%, 02/01/04-07/01/26)
100,000,000 6.60 01/02/98 100,000,000
Merrill Lynch Government Securities, Inc., dated 12/31/97, repurchase price
$100,036,667 (Total Collateral value $102,001,527 consisting of FFCB:
5.50%-14.05%, 01/02/98-06/02/03; FNMA: 5.10%-8.25%, 05/13/98-11/12/02;
FHLMC: 5.00%-8.14%, 12/15/98-04/20/05; FHLB: 06/20/07)
100,000,000 6.60 01/02/98 100,000,000
Morgan Stanley Group, Inc., dated 10/28/97, repurchase price $202,800,000
(FHLMC: $204,238,009, 5.50%-9.50%, 10/01/98-12/01/27)
200,000,000 5.60 01/26/98 200,000,000
Nomura Securities International, Inc., dated 12/31/97, repurchase price
$100,038,333 (FFCB: $102,001,213, 5.50%-5.65%, 01/02/98-02/02/98)
100,000,000 6.90 01/02/98 100,000,000
UBS Securities, Inc., dated 12/31/97, repurchase price $100,036,389
(U.S. Treasury Note $102,001,048, 8.50%, 02/15/00)
100,000,000 6.55 01/02/98 100,000,000
</TABLE>
<TABLE>
- --------------------------------
<S> <C> <C> <C>
TOTAL
REPURCHASE
AGREEMENTS $1,436,400,000
- --------------------------------
TOTAL
INVESTMENTS $2,404,187,810(d)
- --------------------------------
</TABLE>
(a) Variable rate security-base index is either Federal Funds, Prime lending
rate, or one month LIBOR.
(b) When-issued security.
(c) Portion of this security is being segregated for when-issued securities.
(d) 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.
14
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
FINANCIAL SQUARE FEDERAL FUND
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--102.6%
Federal Farm Credit Bank
$ 20,000,000 5.48% 01/05/98 $ 19,987,822
90,000,000 5.72 01/06/98 89,928,500
29,000,000 5.50 01/06/98 28,977,847
15,000,000 5.45 01/07/98 14,986,375
15,000,000 5.60 01/07/98 14,986,000
25,000,000 5.49 01/09/98 24,969,500
21,700,000 5.47 01/15/98 21,653,839
25,000,000 5.65 01/15/98 24,945,071
20,000,000 5.58 01/28/98 19,916,300
50,000,000(a) 5.53(b) 01/30/98 49,985,210
15,000,000 5.57 02/02/98 14,925,733
9,000,000 5.60 02/02/98 8,955,200
12,300,000 5.65 02/02/98 12,238,227
45,000,000 5.60 02/04/98 44,762,000
23,000,000 5.62 02/05/98 22,874,331
20,000,000 5.60 02/05/98 19,891,111
5,000,000 5.60 02/11/98 4,968,111
5,000,000 5.57 02/12/98 4,967,505
50,000,000(c) 5.65 02/12/98 50,000,000
3,000,000 5.57 02/18/98 2,977,720
10,000,000 5.45 03/03/98 9,990,170
75,000,000 5.80(b) 04/14/98 74,981,276
15,000,000 5.49 06/15/98 14,622,563
125,000,000 5.74(b) 09/02/98 124,929,808
10,000,000 5.75 09/11/98 9,993,762
15,000,000 5.70 12/01/98 14,985,535
Federal Home Loan Bank
23,900,000 4.82 01/02/98 23,896,800
190,000,000 4.90 01/02/98 189,974,139
25,000,000 5.10 01/02/98 24,996,458
5,000,000 5.36 01/02/98 4,999,256
108,100,000 5.68 01/05/98 108,031,777
15,075,000 5.39 01/09/98 15,056,944
5,100,000 5.47 01/09/98 5,093,801
21,309,000 5.75 01/14/98 21,264,754
8,000,000 5.74 01/15/98 7,982,142
29,500,000 5.75 01/21/98 29,405,764
27,000,000 5.46 02/04/98 26,860,770
30,000,000 5.48 02/11/98 29,812,767
25,000,000 5.65 02/11/98 24,839,132
15,000,000 5.49 02/13/98 14,901,727
35,000,000 5.65 02/13/98 34,763,799
25,000,000 5.51 02/18/98 24,816,333
20,000,000 5.65 02/18/98 19,849,333
25,000,000 5.57 03/04/98 24,760,181
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
Federal Home Loan Bank (continued)
$ 10,000,000 5.61% 03/04/98 $ 9,903,383
25,000,000 5.83(b) 03/06/98 24,996,741
2,500,000 5.37 04/01/98 2,466,438
43,430,000 5.37 04/01/98 42,846,952
23,950,000 5.51 04/01/98 23,620,089
50,000,000 5.52 04/01/98 49,310,000
1,100,000 5.37 04/03/98 1,084,904
25,000,000 5.82(b) 04/14/98 24,994,799
20,000,000 5.59 04/22/98 19,655,283
26,900,000 5.47 05/15/98 26,352,301
65,000,000 5.75(b) 07/02/98 64,971,614
50,000,000 5.77(b) 07/07/98 49,975,070
25,000,000 5.74(b) 09/17/98 24,986,044
45,000,000 5.75(b) 10/02/98 44,973,681
20,000,000 5.70 10/23/98 19,985,290
Student Loan Marketing Association
50,000,000 5.10 01/02/98 49,992,917
35,000,000 5.47 01/27/98 34,861,731
15,000,000 5.48 01/27/98 14,940,633
5,430,000 5.54 02/25/98 5,428,550
30,050,000 5.79 09/16/98 30,066,907
Tennessee Valley Authority
46,420,000 5.46 01/12/98 46,342,556
12,100,000 5.64 01/16/98 12,071,565
40,000,000 5.47 02/10/98 39,756,889
25,000,000 5.51 02/20/98 24,808,681
25,000,000 5.57 02/24/98 24,791,125
50,000,000 5.57 03/09/98 49,481,681
35,000,000 5.57 03/11/98 34,626,346
25,000,000 5.58 03/13/98 24,724,875
30,000,000 5.57 03/20/98 29,637,950
- ----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS $2,229,360,388
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $2,229,360,388(d)
- ----------------------------------------------------------------------------------------------
</TABLE>
(a) This security is being segregated for when-issued security.
(b) Variable rate security-base index is either Federal Funds, Prime lending
rate, or one month LIBOR.
(c) When-issued security.
(d) 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.
15
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
ALABAMA--3.1%
Columbia IDB PCRB for Alabama Power Co. Series 1996 A
(A-1/VMIG1)
$ 1,200,000 4.80% 01/02/98 $ 1,200,000
Columbia IDB PCRB for Alabama Power Company Series 1995 B
(A-1/VMIG1)
3,300,000 4.80 01/02/98 3,300,000
Eutaw City IDB PCRB for Mississippi Power Co. Greene County Plant Project
Series 1992 (A-1/VMIG1)
6,550,000 4.25 01/07/98 6,550,000
Gadsden City IDB PCRB for Alabama Power Co. Series 1994
(A-1/VMIG1)
3,950,000 4.80 01/02/98 3,950,000
Homewood City Educational Building Authority RB for Samford University
Series 1996 (Bank of Nova Scotia LOC) (A-1/VMIG1)
1,200,000 4.80 01/02/98 1,200,000
Jefferson County MF Hsg. RB for Hickory Knolls Project Series 1994
(Amsouth Bank LOC) (P-1)
3,910,000 4.25 01/07/98 3,910,000
Mobile IDA PCRB for Alabama Power Series 1993A (A-1/VMIG1)
3,000,000 4.10 01/07/98 3,000,000
Mobile IDA PCRB for Alabama Power Series 1994 (A-1/VMIG1)
3,700,000 4.80 01/02/98 3,700,000
Montgomery Special Care RB Series 1994 A (Amsouth Bank LOC) (VMIG1)
8,000,000 4.20 01/07/98 8,000,000
- -----------------------------------------------------------------------------------------------
$ 34,810,000
- -----------------------------------------------------------------------------------------------
ALASKA--1.0%
Valdez Marine Terminal RB for Exxon Corporation Series 1993 C (A-1+)
$11,200,000 5.00% 01/02/98 $ 11,200,000
- -----------------------------------------------------------------------------------------------
ARKANSAS--0.4%
Crossett City PCRB for Georgia Pacific Corp. Series 1991 VRDN (Suntrust
Bank LOC) (AA3)
$ 4,500,000 4.20% 01/07/98 $ 4,500,000
- -----------------------------------------------------------------------------------------------
CALIFORNIA--1.7%
California School Cash Reserves Program Authority Pool Bonds Series 1997 A
(AMBAC) (SP-1+/MIG1)
$ 4,000,000 4.75% 07/02/98 $ 4,016,979
California State RANS Series 1997 (SP-1+/MIG1)
9,500,000 4.50 06/30/98 9,534,384
Los Angeles County TRANS Series 1997-98 A (SP-1+/MIG1)
6,000,000 4.50 06/30/98 6,017,370
- -----------------------------------------------------------------------------------------------
$ 19,568,733
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
COLORADO--2.2%
Colorado Health Facilities Authority Series 92 C (A-1+/VMIG1)
$15,200,000 4.15% 01/07/98 $ 15,200,000
Denver Airport System Subordinate RB Series 1997 B (Westdeutsche
Landesbank Girozentrale) (A-1+/VMIG1)
7,000,000 4.10 01/07/98 7,000,000
Moffat County PCRB for Pacificorp Series 1994 (AMBAC) (A-1/VMIG1)
3,000,000 5.10 01/02/98 3,000,000
- -----------------------------------------------------------------------------------------------
$ 25,200,000
- -----------------------------------------------------------------------------------------------
CONNECTICUT--1.8%
State of Connecticut 2nd Lien Special TRANS VRDN Series 1 (Commerzbank
Bank LOC) (A-1+/VMIG1)
$20,700,000 3.65% 01/07/98 $ 20,700,000
- -----------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA--0.3%
District of Columbia VRDN ACES for Georgetown University Series 1988 B
(Bayerische Landesbank Girozentrale) (A-1+/VMIG1)
$ 600,000 3.80% 01/07/98 $ 600,000
District of Columbia VRDN ACES for Georgetown University Series 1988 C
(Bayerische Landesbank Girozentrale) (A-1+/VMIG1)
2,500,000 3.80 01/07/98 2,500,000
- -----------------------------------------------------------------------------------------------
$ 3,100,000
- -----------------------------------------------------------------------------------------------
FLORIDA--2.4%
Florida Local Government Pooled CP Notes Series A (First Union National
Bank of Florida LOC) (A-1/P-1)
$10,625,000 3.85% 01/14/98 $ 10,625,000
5,500,000 3.75 03/11/98 5,500,000
Putnam County Development Authority Floating/Fixed Rate PCRB for Seminole
Electric Cooperative Series 1984 H (CFC) (A-1+/P-1)
7,845,000 3.85 01/07/98 7,845,000
Putnam County Development Authority Floating/Fixed Rate PCRB for Seminole
Electric Cooperative Series 1984 S (CFC) (A-1+/P-1)
2,715,000 3.85 01/07/98 2,715,000
- -----------------------------------------------------------------------------------------------
$ 26,685,000
- -----------------------------------------------------------------------------------------------
GEORGIA--12.9%
Bartow County IDA PCRB for Georgia Power Co. First Series 1997 (VMIG1)
$ 9,000,000 4.80% 01/02/98 $ 9,000,000
Burke County IDA PCRB for Georgia Power Co. Fifth Series 1995 (VMIG1)
13,370,000 5.05 01/02/98 13,370,000
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
GEORGIA (CONTINUED)
Burke County IDA PCRB for Georgia Power Co. Second Series 1995 (A-1/VMIG1)
$ 3,700,000 4.80% 01/02/98 $ 3,700,000
Burke County IDA PCRB for Georgia Power Co. Eighth Series 1994 (A-1/VMIG1)
1,600,000 5.05 01/02/98 1,600,000
Burke County IDA PCRB for Georgia Power Co. Ninth Series 1994 (A-1/VMIG1)
7,700,000 5.05 01/02/98 7,700,000
Burke County IDA PCRB for Oglethorpe Power Series 1994 A (FGIC) (A-1+)
13,900,000 4.15 01/07/98 13,900,000
De Kalb County Hospital RB Series 1993B (Suntrust) (VMIG1)
2,230,000 4.20 01/07/98 2,230,000
Effingham County IDA PCRB for Savannah Electric And Power Co. Series 1997
(A-1/VMIG1)
3,000,000 5.05 01/02/98 3,000,000
Floyd County PCRB for Georgia Power Co. First Series 1996 (A-1/VMIG1)
4,000,000 5.05 01/02/98 4,000,000
Georgia Municipal Gas Authority RB for Gas Portfolio II Project Series B
(C.S. First Boston/Morgan Guaranty/Bayerische Landesbank
Girozentrale/Wachovia Bank ABN/AMRO) (A-1+)
19,000,000 3.65 01/07/98 19,000,000
Georgia Municipal Gas Authority RB for Gas Portfolio II Project Series B
(C.S. First Boston/Morgan Guaranty/Bayerische Landesbank Girozentrale)
(A-1+/VMIG1)
29,500,000 3.65 01/07/98 29,500,000
Municipal Electric Authority of Georgia Subordinated General Resolution
Bonds Series 1985 B (C.S. First Boston/Morgan Guaranty/Bayerische
Landesbank Girozentrale LOC)
(A-1+/VMIG1)
7,200,000 3.65 01/07/98 7,200,000
Municipal Electric Authority of Georgia Project One Subordinated Bonds
Series 1994 E (ABN/AMRO Bank) (A-1+/VMIG1)
14,095,000 3.85 01/07/98 14,095,000
Municipal Electric Authority of Georgia Project One Subordinated Bonds
Series 1985 B (C.S. First Boston/Morgan Guaranty/Bayerische Landesbank
Girozentrale LOC) (A-1+/VMIG1)
6,000,000 3.80 05/14/98 6,000,000
Municipal Electric Authority of Georgia Project One Subordinated Bonds
Series 1994 D (A-1+/VMIG1)
4,000,000 3.70 01/07/98 4,000,000
Municipal Electric Authority of Georgia Subordinated General Resolution
Bonds Series 1985 C (C.S. First Boston/Morgan Guaranty/Bayerische
Landesbank Girozentrale LOC) (A-1+/VMIG1)
6,400,000 3.70 01/07/98 6,400,000
- -----------------------------------------------------------------------------------------------
$ 144,695,000
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
IDAHO--1.2%
Idaho Health Facilities RB for Holy Cross Health Systems Series 1995
(A-1/VMIG1)
$13,000,000 4.15% 01/07/98 $ 13,000,000
- -----------------------------------------------------------------------------------------------
ILLINOIS--7.7%
Chicago GO Tender Notes Series 1997 (SP-1+/MIG1)
$17,000,000 3.65% 02/05/98 $ 16,998,432
Illinois Health Facilities Authority VRDN for Central Dupage Hospital
Series 1990 (Rabobank Nederland LOC ) (VMIG1)
6,200,000 5.10 01/02/98 6,200,000
Illinois Health Facilities Authority VRDN for Northwest Community Hospital
Series 1997 (A-1+/VMIG1)
8,400,000 4.15 01/07/98 8,400,000
Illinois Health Facilities Authority VRDN for Resurrection Healthcare
Series 1993 (VMIG1)
18,800,000 5.05 01/02/98 18,800,000
Illinois Health Facilities Authority VRDN Revolving Fund Pooled Finance
Program Series 1985 C (First National Bank of Chicago LOC) (A-1+/VMIG1)
4,000,000 3.80 01/07/98 4,000,000
Illinois Health Facilities Authority VRDN Revolving Fund Pooled Finance
Program Series 1985 D (First National Bank of Chicago LOC) (A-1+/VMIG1)
21,000,000 3.80 01/07/98 21,000,000
Sauget Village PCRB VRDN for Monsanto Series 1992 (P-1)
1,000,000 3.80 01/07/98 1,000,000
Sauget Village PCRB VRDN for Monsanto Series 1993 (P-1)
1,900,000 3.80 01/07/98 1,900,000
Societe Generale Municipal Securities Trust Receipts RB for Chicago Midway
Airport Series 1996 A (MBIA) (A-1+C)
7,540,000 4.25 01/07/98 7,540,000
- -----------------------------------------------------------------------------------------------
$ 85,838,432
- -----------------------------------------------------------------------------------------------
INDIANA--5.6%
Fort Wayne Hospital Authority VRDN for Parkview Memorial Hospital Series
1985 B (Bank of America LOC) (VMIG1)
$ 1,600,000 3.65% 01/07/98 $ 1,600,000
Indiana Health Facility Authority Variable Rate Hospital RB for Daughters
of Charity National Health System
Series 1997 E (A-1+/VMIG1)
14,000,000 3.65 01/07/98 14,000,000
Jasper County PCRB for Nipsco Series 1994 A (A-1/VMIG1)
8,500,000 5.10 01/02/98 8,500,000
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
17
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
INDIANA (CONTINUED)
Jasper County PCRB Nipsco Series 1994 C (A-1/VMIG1)
$21,500,000 5.10% 01/02/98 $ 21,500,000
Princeton City PCRB for PSI Energy Inc. Project Series 1996 (Canadian
Imperial Bank of Commerce) (A-1+/VMIG1)
9,500,000 5.10 01/02/98 9,500,000
Warrick County PCRB for Aluminum Company of America Series 1992 (A-1)
7,475,000 4.25 01/07/98 7,475,000
- -----------------------------------------------------------------------------------------------
$ 62,575,000
- -----------------------------------------------------------------------------------------------
IOWA--2.2%
Chillicothe City PCRB for Midwest Power Systems Series 1993 A (A-1/VMIG1)
$ 2,400,000 3.85% 01/07/98 $ 2,400,000
Louisa County PCRB for Iowa-Illinois Gas & Electric Co./Midamerican Energy
Co. Series 1986 A (A-1)
2,700,000 4.00 01/07/98 2,700,000
Louisa County PCRB for Midwest Power Systems Inc. Series 1994 (A-1/VMIG1)
20,000,000 4.00 01/07/98 20,000,000
- -----------------------------------------------------------------------------------------------
$ 25,100,000
- -----------------------------------------------------------------------------------------------
KENTUCKY--4.7%
Calvert PCRB for Air Products and Chemicals, Inc. Project Series 1993 A
(A-1)
$ 3,000,000 4.20% 01/07/98 $ 3,000,000
Kentucky Turnpike Authority Refunding RB Trust Receipts Series 1987 A
(Financial Security Assurance Inc.) (A-1+/VMIG1)
23,000,000 3.90 01/07/98 23,000,000
Mason County Variable/Fixed Rate PCRB for East Kentucky Power Series 1984
B (CFC) (A-1+/P-1)
23,800,000 3.85 01/07/98 23,800,000
Trimble County PCRB for Louisville Gas and Electric Company Series 1996 A
(A-1+/VMIG1)
2,500,000 3.80 05/12/98 2,500,000
- -----------------------------------------------------------------------------------------------
$ 52,300,000
- -----------------------------------------------------------------------------------------------
MASSACHUSETTS--1.1%
Massachusetts Bay Transportation Authority VRDN Series 1984 A (A-1+/VMIG1)
$ 2,800,000 3.75% 03/01/98 $ 2,800,000
Massachusetts Health & Education Authority COPS for Harvard University
Eagle Tax-Exempt Trust Series 972104, Class A (A-1+C)
10,000,000 4.27 01/07/98 10,000,000
- -----------------------------------------------------------------------------------------------
$ 12,800,000
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
MICHIGAN--1.1%
Michigan Job Development Authority PCRB for Autoalliance International,
Inc. Series 1985 (Sumitomo Bank LOC) (VMIG1)
$ 1,400,000 4.65% 01/07/98 $ 1,400,000
Monroe County Economic Development Corp. Ltd. RB Series 1992 CC (Barclays
Bank LOC) (P1)
6,600,000 5.05 01/02/98 6,600,000
State of Michigan GO Notes (SP-1+/MIG1)
4,000,000 4.50 09/30/98 4,021,798
- -----------------------------------------------------------------------------------------------
$ 12,021,798
- -----------------------------------------------------------------------------------------------
MINNESOTA--0.4%
Port Authority of St. Paul VRDN for Weyerhaeuser Project Series 1993 (A/A-
1)
$ 4,000,000 4.20% 01/07/98 $ 4,000,000
- -----------------------------------------------------------------------------------------------
MISSISSIPPI--1.9%
Grenada County Refunding RB for Georgia Pacific Corp. Series 1994
(Sumitomo Bank LOC) (A1)
$ 1,000,000 4.50% 01/07/98 $ 1,000,000
Perry County PCRB for Leaf River Forest Products Inc. Series 1992 (C.S.
First Boston) (P-1)
20,800,000 5.00 01/02/98 20,800,000
- -----------------------------------------------------------------------------------------------
$ 21,800,000
- -----------------------------------------------------------------------------------------------
MISSOURI--1.1%
Missouri Health & Education Facilities Authority RB Series 1984
(A-1+/VMIG1)
$ 6,400,000 3.70% 01/07/98 $ 6,400,000
Missouri Health & Education Facility Authority Tax-Exempt VRDN Series 1995
B (MBIA) (A-1+)
4,500,000 3.70 01/07/98 4,500,000
Missouri Environmental Improvement and Energy Resources Authority VRDN
PCRB for Monsanto Series 1993 (P-1)
1,500,000 3.80 01/07/98 1,500,000
- -----------------------------------------------------------------------------------------------
$ 12,400,000
- -----------------------------------------------------------------------------------------------
MONTANA--0.3%
Montana Health Facilities Authority Health Care RB Pooled Loan Program
Series 1985 A (FGIC) (A-1+/VMIG1)
$ 3,000,000 4.10% 01/07/98 $ 3,000,000
- -----------------------------------------------------------------------------------------------
NEVADA--2.1%
Clark County VRDN for Nevada Airport System (MBIA) (A-1/VMIG1)
$23,340,000 3.65% 01/07/98 $ 23,340,000
- -----------------------------------------------------------------------------------------------
NEW HAMPSHIRE--1.1%
New Hampshire State Business Finance Authority PCRB for New England Power
Series 1990 B (A-1/VMIG1)
$12,000,000 3.75% 03/20/98 $ 12,000,000
- -----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NEW JERSEY--0.9%
New Jersey TRANS Series 1998 A (A-1+/P-1)
$10,000,000 3.75% 03/11/98 $ 10,000,000
- -----------------------------------------------------------------------------------------------
NEW MEXICO--2.1%
Albuquerque Hospital RB (A-1+/VMIG1)
$ 3,000,000 4.15% 01/07/98 $ 3,000,000
New Mexico TRANS Series 1997 (SP-1+/MIG 1)
20,720,000 4.50 06/30/98 20,785,573
- -----------------------------------------------------------------------------------------------
$ 23,785,573
- -----------------------------------------------------------------------------------------------
NEW YORK--8.7%
Brentwood Union Free School District TRANS Series 1997 (MIG1)
$ 5,000,000 4.25% 06/30/98 $ 5,009,923
Great Neck, NY North Water Authority Water System RB Series 1993 A VRDN
(FGIC) (A-1+/VMIG1)
900,000 3.70 01/07/98 900,000
Municipal Assistance Corp. for The City of New York, Series K, Subseries
K-2 (Bayerische Landesbank Girozentrale LOC) (A-1+/VMIG1)
300,000 3.55 01/07/98 300,000
New York City GO RANS Fiscal 1998 Series A (National Westminster
Bank/Morgan Guaranty Trust/Bayerische Landesbank
Girozentrale/Westdeutsche Landesbank Girozentrale/Societe Generale
Landesbank LOC) (A-1+/MIG1)
50,000,000 4.50 06/30/98 50,175,154
New York City Health & Hospitals Corporation Health System Bonds Series
1997 B (Canadian Imperial Bank of Commerce) (A-1+/VMIG1)
3,000,000 3.55 01/07/98 3,000,000
New York City Municipal Water Finance Authority CP Notes Series 5 A
(Bayerische Landesbank/Westdeutsche Landesbank/Landesbank Hessen-
Thueringen LOC) (A-1+/P-1)
10,000,000 3.80 03/24/98 10,000,000
New York City Puttable Tax-Exempt Receipts GO Bonds Fiscal 1995 Series D
(MBIA) (VMIG1)
7,000,000 4.15 01/07/98 7,000,000
New York City Trust for Cultural Resources Adjustable Rate RB for the
American Museum of Natural History Series 1991B (MBIA) (A-1+/VMIG1)
3,200,000 3.55 01/07/98 3,200,000
New York State Energy Research & Development Authority PCRB for Brooklyn
Union Gas Series 1997 A-1 (MBIA) (A-1+/VMIG1)
6,135,000 3.70 01/07/98 6,135,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
New York State Energy Research & Development Authority PCRB for Brooklyn
Union Gas Series 1997 Series A-2 (MBIA) (A-1+/VMIG1)
$ 700,000 3.60% 01/07/98 $ 700,000
New York State Energy Research & Development Authority PCRB for Orange and
Rockland Utilities Series 1994 A (FGIC) (A-1+/VMIG1)
1,700,000 3.55 01/07/98 1,700,000
New York State Energy Research & Development Authority PCRB Rochester Gas
and Electric Corp. Series 1997 B (MBIA) (A-1+/VMIG1)
5,000,000 3.70 01/07/98 5,000,000
New York State Local Government Assistance Corp. VRDN Series 1995 C
(Landesbank Hessen-Thueringen Girozentrale LOC) (A-1+/VMIG1)
3,100,000 3.55 01/07/98 3,100,000
New York State Local Government Assistance Corp. VRDN Series 1995 F
(Toronto Dominion Bank LOC) (A-1+/VMIG1)
1,000,000 3.50 01/07/98 1,000,000
- -----------------------------------------------------------------------------------------------
$ 97,220,077
- -----------------------------------------------------------------------------------------------
NORTH CAROLINA--2.6%
North Carolina Medical Care Community RB for Moses H. Cone Memorial
Hospital Project Series 1993 (A-1+)
$ 5,000,000 4.15% 01/07/98 $ 5,000,000
Person County PCRB for Carolina Power & Light Series 1992 A (A-1/P-1)
16,400,000 3.90 01/07/98 16,400,000
Rockingham County IDA PCRB for Philip Morris Company Series 1992 (VMIG1)
7,700,000 4.00 01/07/98 7,700,000
- -----------------------------------------------------------------------------------------------
$ 29,100,000
- -----------------------------------------------------------------------------------------------
OHIO--1.2%
Columbus Electric System Series 1984 RB (Union Bank of Switzerland LOC)
(VMIG1)
$11,500,000 3.70% 01/07/98 $ 11,500,000
Franklin County Hospital RB for Holy Cross Health System Series 1995 (A-
1+/VMIG1)
1,400,000 4.15 01/07/98 1,400,000
- -----------------------------------------------------------------------------------------------
$ 12,900,000
- -----------------------------------------------------------------------------------------------
PENNSYLVANIA--3.7%
Delaware County IDA PCRB For BP Oil Inc. Project Series 1985 (A-1+/P-1)
$ 6,600,000 4.90% 01/02/98 $ 6,600,000
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
19
<PAGE>
Statement of Investments
- --------------------------------------------------------------------------------
FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
Pennsylvania GO Bond Eagle Tax Exempt Trust Class A COPS First Series 1994
(AMBAC) (A-1+C)
$13,000,000 4.27% 01/07/98 $ 13,000,000
Pennsylvania TRANS Series 1997-1998 (SP-1+/MIG1)
18,000,000 4.50 06/30/98 18,064,102
Philadelphia School District TRANS Series 1997- 98 (Commerzbank) (SP-
1+/MIG1)
4,000,000 4.50 06/30/98 4,011,899
- -----------------------------------------------------------------------------------------------
$ 41,676,001
- -----------------------------------------------------------------------------------------------
SOUTH CAROLINA--0.8%
York County Floating/Fixed Rate PCRB Pooled Series 1984-North Carolina
Electric Membership Corp. VRDN (CFC) (A-1+/VMIG1)
$ 8,675,000 3.85% 01/07/98 $ 8,675,000
- -----------------------------------------------------------------------------------------------
TENNESSEE--0.2%
Blount County PCRB for Aluminum Company of America Series 1992 (A-1)
$ 2,450,000 4.25% 01/07/98 $ 2,450,000
- -----------------------------------------------------------------------------------------------
TEXAS--18.6%
Coastal Bend Health Facilities Development Corp. RB Series 1997 (First
National Bank of Chicago) (VMIG1)
$ 1,000,000 4.15% 01/07/98 $ 1,000,000
Gulf Coast Waste Disposal Authority PCRB for Monsanto Series 1996 (P-1)
5,300,000 3.80 01/07/98 5,300,000
Harris County Health Facilities Development Corp. RB for St. Luke's
Episcopal Hospital Series 1997 B (A-1+)
16,300,000 5.00 01/02/98 16,300,000
Harris County Health Facilities Development Corp. RB For Methodist
Hospital Series 1994 (A-1+)
31,500,000 4.90 01/02/98 31,500,000
Harris County Health Facilities Development Corp. Series 1997 A
(A-1+C/VMIG1)
9,000,000 3.70 03/13/98 9,000,000
Harris County Hospital RB for Childrens Hospital Series 1989 B-2 (VMIG1)
5,000,000 3.70 01/07/98 5,000,000
Houston GO CP Notes Series A (A-1+/P-1)
15,000,000 3.75 05/13/98 15,000,000
Lower Colorado River Authority CP Notes Series B (A-1+/P-1)
7,000,000 3.80 04/07/98 7,000,000
10,400,000 3.75 05/15/98 10,400,000
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
San Antonio Electric & Gas System Revenue & Refunding Bonds New Series
1997 SG 104 & SG 105 (AA/A-1)
$17,000,000 4.25% 01/07/98 $ 17,000,000
San Antonio Electric & Gas Systems CP Notes Series A (A-1+/P-1)
10,000,000 3.75 01/15/98 10,000,000
9,900,000 3.70 04/16/98 9,900,000
10,000,000 3.75 05/26/98 10,000,000
State of Texas TRANS Series 1997 B (A-1+/P-1)
5,000,000 3.70 02/25/98 5,000,000
State of Texas TRANS Series 1997 A (SP-1+/MIG1)
44,310,000 4.75 08/31/98 44,571,573
Travis County Health Facilities Development Variable Rate RB For Charity
Obligation Group Series 1997 E (A-1+/VMIG1)
6,900,000 3.65 01/07/98 6,900,000
Waco Health Facilities Development Co. Variable Rate RB For Charity
Obligation Group Series 1997 E (A-1+/VMIG1)
5,000,000 3.65 01/07/98 5,000,000
- -----------------------------------------------------------------------------------------------
$ 208,871,573
- -----------------------------------------------------------------------------------------------
VIRGINIA--4.7%
Chesterfield County IDA PCRB for Philip Morris Companies, Inc. Series 1992
(A-1/P-1)
$14,700,000 4.00% 01/07/98 $ 14,700,000
Louisa PCRB for Virginia Electric & Power Series 1984 (A-1/VMIG1)
4,000,000 3.85 03/13/98 4,000,000
3,900,000 3.85 03/18/98 3,900,000
4,000,000 3.85 03/31/98 4,000,000
2,000,000 3.85 03/24/98 2,000,000
Richmond VRDN Public Utility Revenue Notes Series A (A-1/VMIG1)
10,000,000 4.20 01/07/98 10,000,000
Roanoke City IDA VRDN for Carilion Health Systems Hospital Series A
(A-1/VMIG1)
4,000,000 4.10 01/07/98 4,000,000
Roanoke City IDA VRDN for Carilion Health Systems Series B (A-1+/VMIG1)
1,000,000 4.10 01/07/98 1,000,000
York County IDA PCRB for Virginia Electric & Power Series 1985
(A-1+/VMIG1)
9,000,000 3.90 02/09/98 9,000,000
- -----------------------------------------------------------------------------------------------
$ 52,600,000
- -----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
WASHINGTON--3.4%
King County Sewer Revenue BANS Series A (A-1/P-1)
$10,000,000 3.75% 04/15/98 $ 10,000,000
4,600,000 3.75 04/16/98 4,600,000
Washington Health Care Facilities Authority Series 1985 B
(A-1+/VMIG1)
5,110,000 5.00 01/02/98 5,110,000
Washington Health Care Facilities Authority Series 1985 D
(A-1+/VMIG1)
3,100,000 5.00 01/02/98 3,100,000
Washington Health Care Facilities Authority Series 1985 E
(A-1+/VMIG1)
4,200,000 5.00 01/02/98 4,200,000
Washington Health Care Facilities Authority VRDN for Fred Hutchinson
Cancer Research Center Series 1991 A (Morgan Guaranty Trust LOC)
(VMIG1)
5,225,000 5.10 01/02/98 5,225,000
Washington Health Care Facilities Authority VRDN for Fred Hutchinson
Cancer Research Center Series 1996 (Morgan Guaranty Trust LOC) (VMIG1)
5,595,000 5.10 01/02/98 5,595,000
- ---------------------------------------------------------------------------------------------
$ 37,830,000
- ---------------------------------------------------------------------------------------------
WISCONSIN--2.8%
Milwaukee IDRB Multi-Modal for Pharmacia & Upjohn, Inc. Series 1994 (P-
1)
$ 8,000,000 4.20% 01/07/98 $ 8,000,000
State of Wisconsin Operating Notes Series 1997 (SP-1+/MIG1)
6,800,000 4.50 06/15/98 6,820,592
State of Wisconsin Operating Notes Series 1997-2 (SP-1+/MIG1)
10,000,000 4.50 06/15/98 10,033,691
Wisconsin Health & Educational Facilities Authority Variable Rate RB
for Wheaton Franciscan Services Series 1997 (Toronto Dominion Bank)
(A-1+/VMIG1)
6,575,000 4.10 01/07/98 6,575,000
- ---------------------------------------------------------------------------------------------
$ 31,429,283
- ---------------------------------------------------------------------------------------------
WYOMING--0.1%
Sweetwater PCRB for Pacificorp Project Series 1990 A (C.S. First Boston
LOC) (VMIG1)
$ 1,500,000 3.65% 01/07/98 $ 1,500,000
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS $1,188,671,470(a)
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
</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.
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:
<TABLE>
<C> <S>
ACES --Adjustable Convertible Extendible Securities
AMBAC --Insured by American Municipal Bond Assurance Corp.
BANS --Bond Anticipation Note
CFC --Unconditionally Guaranteed by CFC, Cooperative Finance Corp.
COPS --Certificates of Participation
CP --Commercial Paper
FGIC --Insured by Financial Guaranty Insurance Co.
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
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
21
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME PREMIUM
OBLIGATIONS MONEY MARKET MONEY MARKET
FUND FUND FUND
--------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at
value based on amortized cost $4,469,716,189 $5,077,628,672 $226,904,703
Cash 724,728 -- 70,643
Interest receivable 26,750,497 33,332,928 391,533
Deferred organization expenses,
net -- 12,432 --
Other assets 5,061 293,555 64,141
- ------------------------------------------------------------------------------
TOTAL ASSETS 4,497,196,475 5,111,267,587 227,431,020
- ------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased 35,000,000 177,216,947 4,999,518
Due to bank -- 90,617 --
Dividends payable 22,829,936 28,027,343 1,308,135
Accrued expenses and other
liabilities 1,120,150 1,595,937 102,078
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 58,950,086 206,930,844 6,409,731
- ------------------------------------------------------------------------------
NET ASSETS:
Paid in capital 4,438,254,520 4,904,335,361 221,021,289
Accumulated undistributed net
investment income -- -- --
Accumulated undistributed net
realized gain (loss) on
investments (8,131) 1,382 --
- ------------------------------------------------------------------------------
NET ASSETS $4,438,246,389 $4,904,336,743 $221,021,289
- ------------------------------------------------------------------------------
Net asset value, offering and
redemption price per share
(net assets/shares outstanding) $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
SHARES OUTSTANDING:
FST shares 3,867,740,474 4,346,515,706 218,192,392
FST Preferred shares 152,770,028 20,258,602 557,827
FST Administration shares 241,610,519 221,253,373 1,456,698
FST Service shares 176,133,499 316,307,680 814,372
- ------------------------------------------------------------------------------
Total shares of beneficial
interest outstanding, $0.001 par
value (unlimited number of
shares authorized) 4,438,254,520 4,904,335,361 221,021,289
- ------------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY TREASURY TAX-FREE
OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL MONEY MARKET
FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$3,522,502,423 $516,935,549 $2,404,187,810 $2,229,360,388 $1,188,671,470
14,370 70,699 69,034 51,898 491,011
10,248,818 5,333,790 9,708,940 3,566,555 7,168,593
-- -- -- -- 24,080
-- -- 313,847 399 117,318
- ---------------------------------------------------------------------------
3,532,765,611 522,340,038 2,414,279,631 2,232,979,240 1,196,472,472
- ---------------------------------------------------------------------------
-- -- 35,917,844 50,000,000 72,470,257
-- -- -- -- --
16,541,636 1,395,025 11,581,411 8,197,468 3,439,031
1,069,932 187,997 1,090,263 944,335 377,021
- ---------------------------------------------------------------------------
17,611,568 1,583,022 48,589,518 59,141,803 76,286,309
- ---------------------------------------------------------------------------
3,515,154,043 520,755,638 2,365,690,113 2,173,836,797 1,120,201,103
-- -- -- 8,313 --
-- 1,378 -- (7,673) (14,940)
- ---------------------------------------------------------------------------
$3,515,154,043 $520,757,016 $2,365,690,113 $2,173,837,437 $1,120,186,163
- ---------------------------------------------------------------------------
$1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------
2,217,903,808 496,418,745 1,478,535,045 1,125,680,906 939,421,140
245,360,997 1,539 7,146,792 194,374,977 35,151,663
738,895,099 4,159,015 299,801,906 625,333,945 103,049,763
312,994,139 20,176,339 580,206,370 228,446,969 42,578,537
- ---------------------------------------------------------------------------
3,515,154,043 520,755,638 2,365,690,113 2,173,836,797 1,120,201,103
- ---------------------------------------------------------------------------
</TABLE>
---------------------------------------
- ---------------------------------------
23
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME PREMIUM
OBLIGATIONS MONEY MARKET MONEY MARKET
FUND FUND FUND(A)
---------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest Income $288,754,558 $277,371,948 $4,265,812
- --------------------------------------------------------------------------------
EXPENSES:
Management fees 10,499,297 10,006,793 154,238
Custodian fees 660,532 568,180 20,086
Registration fees 144,676 532,913 118,335
Professional fees 105,490 29,237 5,834
Amortization of deferred organization
expenses -- 9,041 --
Trustees' fees 60,895 36,307 590
Other 264,396 109,004 26,895
- --------------------------------------------------------------------------------
TOTAL EXPENSES 11,735,286 11,291,475 325,978
Less--Expenses reimbursable and fees
waived by Goldman Sachs (2,511,530) (2,500,163) (268,308)
- --------------------------------------------------------------------------------
Net expenses 9,223,756 8,791,312 57,670
Preferred share fees 181,303 55,349 131
Administration share fees 662,090 780,489 13,845
Service share fees 707,816 1,514,944 114
- --------------------------------------------------------------------------------
NET EXPENSES AND SHARE FEES 10,774,965 11,142,094 71,760
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 277,979,593 266,229,854 4,194,052
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS 15,992 32,849 --
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $277,995,585 $266,262,703 $4,194,052
- --------------------------------------------------------------------------------
</TABLE>
(a) Commencement date of operations for the Premium Money Market, Treasury
Instruments and the Federal Fund was August 1, 1997, March 3, 1997 and
February 28, 1997, respectively.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
TREASURY TREASURY TAX-FREE
OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL MONEY MARKET
FUND FUND(A) FUND FUND(A) FUND
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$173,797,289 $11,914,704 $117,069,858 $53,521,252 $30,453,737
- ---------------------------------------------------------------------------------
6,427,023 463,681 4,296,324 1,967,724 1,694,448
455,269 39,985 318,894 114,477 33,896
202,135 123,596 340,455 514,252 160,249
46,344 7,077 17,117 12,440 13,000
-- -- -- -- 15,582
24,127 1,430 11,181 4,810 4,383
164,848 18,108 39,432 22,210 27,076
- ---------------------------------------------------------------------------------
7,319,746 653,877 5,023,403 2,635,913 1,948,634
(1,671,542) (242,977) (1,246,079) (911,622) (455,966)
- ---------------------------------------------------------------------------------
5,648,204 410,900 3,777,324 1,724,291 1,492,668
107,309 1 27,961 66,047 15,965
1,741,440 3,240 649,313 353,083 241,784
1,201,356 112,501 2,533,854 482,096 166,974
- ---------------------------------------------------------------------------------
8,698,309 526,642 6,988,452 2,625,517 1,917,391
- ---------------------------------------------------------------------------------
165,098,980 11,388,062 110,081,406 50,895,735 28,536,346
- ---------------------------------------------------------------------------------
300,712 89,851 127,727 (7,673) (2,081)
- ---------------------------------------------------------------------------------
$165,399,692 $11,477,913 $110,209,133 $50,888,062 $28,534,265
- ---------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME PREMIUM
OBLIGATIONS MONEY MARKET MONEY MARKET
FUND FUND FUND(A)
--------------------------------------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 277,979,593 $ 266,229,854 $ 4,194,052
Net realized gain (loss) on
investment transactions 15,992 32,849 0
- --------------------------------------------------------------------------------
Net increase in net as-
sets resulting from op-
erations 277,995,585 266,262,703 4,194,052
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLD-
ERS FROM:
Net investment income
FST shares (247,361,553) (231,700,902) (3,890,656)
FST Preferred shares (9,751,263) (3,010,280) (7,210)
FST Administration shares (13,824,313) (16,410,842) (295,011)
FST Service shares (7,042,464) (15,107,830) (1,175)
Net realized gain on in-
vestment transactions
FST shares (22,695) (24,966) --
FST Preferred shares (752) (571) --
FST Administration shares (1,302) (31) --
FST Service shares (464) (6,853) --
- --------------------------------------------------------------------------------
Total distributions to
shareholders (278,004,806) (266,262,275) (4,194,052)
- --------------------------------------------------------------------------------
FROM SHARE TRANSACTIONS (AT
$1.00 PER SHARE):
Proceeds from sales of
shares 53,179,415,600 68,053,947,094 1,075,863,230
Reinvestment of dividends
and distributions 112,453,328 134,114,443 1,495,718
Cost of shares repurchased (53,213,589,524) (66,241,742,997) (856,337,659)
- --------------------------------------------------------------------------------
Net increase in net as-
sets resulting from
share
transactions 78,279,404 1,946,318,540 221,021,289
- --------------------------------------------------------------------------------
Total increase 78,270,183 1,946,318,968 221,021,289
NET ASSETS:
Beginning of period 4,359,976,206 2,958,017,775 --
- --------------------------------------------------------------------------------
End of period $ 4,438,246,389 $ 4,904,336,743 $ 221,021,289
- --------------------------------------------------------------------------------
Accumulated undistributed
net investment income -- -- --
- --------------------------------------------------------------------------------
</TABLE>
(a) Commencement date of operations for the Premium Money Market, Treasury
Instruments and the Federal Fund was August 1, 1997, March 3, 1997 and
February 28, 1997, respectively.
- --------------------------------------- ---------------------------------------
The accompanying notes are an integral
part of these financial statements.
26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
TREASURY TREASURY TAX-FREE
OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL MONEY MARKET
FUND FUND(A) FUND FUND(A) FUND
- ---------------------------------------------------------------------------------------
$ 165,098,980 $ 11,388,062 $ 110,081,406 $ 50,895,735 $ 28,536,346
300,712 89,851 127,727 (7,673) (2,081)
- ---------------------------------------------------------------------------------------
165,399,692 11,477,913 110,209,133 50,888,062 28,534,265
- ---------------------------------------------------------------------------------------
(112,020,839) (10,293,085) (70,362,803) (35,377,629) (23,828,347)
(5,711,597) (45) (1,492,230) (3,504,242) (542,008)
(35,669,978) (62,666) (13,365,067) (7,278,709) (3,161,663)
(11,696,566) (1,032,266) (24,861,306) (4,726,842) (1,004,328)
(253,465) (78,370) (94,763) -- --
(9,681) (1) (1,310) -- --
(92,228) (459) (15,668) -- --
(25,376) (9,643) (42,470) -- --
- ---------------------------------------------------------------------------------------
(165,479,730) (11,476,535) (110,235,617) (50,887,422) (28,536,346)
- ---------------------------------------------------------------------------------------
30,901,418,469 1,886,752,702 20,842,203,467 7,175,698,490 6,856,129,085
61,924,789 3,001,270 30,237,427 17,286,075 8,395,593
(30,543,252,110) (1,368,998,334) (19,734,267,186) (5,019,147,768) (6,285,421,492)
- ---------------------------------------------------------------------------------------
420,091,148 520,755,638 1,138,173,708 2,173,836,797 579,103,186
- ---------------------------------------------------------------------------------------
420,011,110 520,757,016 1,138,147,224 2,173,837,437 579,101,105
3,095,142,933 -- 1,227,542,889 -- 541,085,058
- ---------------------------------------------------------------------------------------
$ 3,515,154,043 $ 520,757,016 $ 2,365,690,113 $ 2,173,837,437 $ 1,120,186,163
- ---------------------------------------------------------------------------------------
-- -- -- 8,313 --
- ---------------------------------------------------------------------------------------
</TABLE>
---------------------------------------
- ---------------------------------------
27
<PAGE>
Goldman Sachs 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 as-
sets resulting
from operations 263,596,685 162,466,708 125,132,107 65,978,442 18,523,522
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM:
Net investment income
FST shares (245,389,523) (149,928,272) (93,857,124) (48,867,861) (15,981,710)
FST Preferred shares (2,239,677) (162,278) (797,088) (19,753) (431,737)
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)
Net realized gain on
investment transactions
FST shares (128,847) (173,838) (385,734) (81,682) --
FST Preferred shares (1,177) (188) (3,276) (33) --
FST Administration
shares (5,617) (11,082) (89,882) (8,397) --
FST Service shares (2,712) (3,048) (32,963) (19,942) --
----------------------------------------------------------------------------------------------------------------
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 repur-
chased (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.
28
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
- --------------------------------------- ---------------------------------------
1. ORGANIZATION
Effective May 1, 1997, the Goldman Sachs Money Market Trust was reorganized
from a Massachusetts business trust to a Delaware business trust named the
Goldman Sachs Trust (the "Trust"). The Trust 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 nine diversified
funds: Prime Obligations, Money Market, Premium Money Market, Treasury
Obligations, Treasury Instruments, Government, Federal, Tax-Free Money Market,
Municipal Money Market (inactive as of December 31, 1997). The Financial Square
Funds offer four classes of shares: FST shares, FST Preferred shares, FST
Administration shares and FST Service 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, 1997, the Funds' tax year end, the following funds had capital
loss carryforwards for U.S. Federal tax purposes of approximately:
<TABLE>
<CAPTION>
Years of
Fund Amount Expiration
---- ------ ----------
<S> <C> <C>
Federal...................................................... $7,673 2005
Tax-Free Money Market........................................ 14,940 2003-2005
</TABLE>
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 generally allocated to the Funds based on each Fund's relative average
net assets for the period.
Shareholders of FST Preferred, FST Administration and FST Service shares bear
all expenses and fees paid to service organizations for their services with
respect to such shares.
---------------------------------------
- ---------------------------------------
29
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997
- --------------------------------------- ---------------------------------------
3. AGREEMENTS
As of May 1, 1997, the Fund's Investment Advisory and Administration Agreements
were combined into an Investment Management Agreement (the "Agreement")
encompassing the same services and fee structure. Goldman Sachs Asset
Management ("GSAM"), a separate operating division of Goldman, Sachs & Co.
("Goldman Sachs"), manages the portfolios of the Funds, subject to general
supervision by the Trust's Board of Trustees and administers each Fund's
business affairs, including providing facilities. As compensation for the
services rendered under the Investment Management 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 .205% 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.
For the year ended December 31, 1997, GSAM has voluntarily agreed to waive a
portion of its management fee. In addition, GSAM has limited certain of each of
the Fund's expenses (excluding management fees, service organization fees,
taxes, interest, brokerage commissions and extraordinary expenses) to the
extent that such expenses exceed .01% per annum of the Fund's average daily net
assets. These reimbursement amounts are included in "Other assets" in the
accompanying Statement of Assets and Liabilities.
Goldman Sachs serves as Transfer Agent and Distributor of shares of the Funds
pursuant to Transfer Agent and Distribution Agreements and receives no fee.
The following chart outlines the fee waivers and expense reimbursements for
the year ended December 31, 1997 and amounts owed to and due from GSAM at
December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
Amounts
Management Expense Amounts due
Fees Reimburse- due to from
Fund Waived ments Total GSAM GSAM
- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prime
Obligations
Fund $1,793 $719 $2,512 $852 --
- -------------------------------------------------------------
Money
Market Fund 1,708 792 2,500 863 $287
- -------------------------------------------------------------
Premium Money
Market Fund 104 164 268 21 64
- -------------------------------------------------------------
Treasury
Obligations
Fund 1,098 574 1,672 530 --
- -------------------------------------------------------------
Treasury
Instruments
Fund 80 163 243 105 --
- -------------------------------------------------------------
Government Fund 733 513 1,246 366 314
- -------------------------------------------------------------
Federal Fund 345 567 912 284 --
- -------------------------------------------------------------
Tax-Free Money
Market Fund 289 167 456 165 116
</TABLE>
4. PREFERRED, ADMINISTRATION AND SERVICE PLANS
The Funds have adopted Preferred, Administration and Service 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 Preferred, Administration and Service
Plans provide for compensation to the service organizations in an amount up to
..10%, .25% and .50% (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
---------------------------------------
- ---------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
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, 1997, the Funds
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 at a custodian.
7.JOINT REPURCHASE AGREEMENT ACCOUNTS
The Funds, together with other registered investment companies having
management 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, 1997, the Prime Obligations, Money Market, Premium Money
Market, Treasury Obligations and Government Funds had undivided interests in
the repurchase agreements in the following joint account, which equaled
$404,500,000, $389,700,000, $66,900,000, $1,024,200,000 and $336,400,000 in
principal amount, respectively. At December 31, 1997, 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:
<TABLE>
<CAPTION>
Principal Interest Maturity Amortized
Amount Rate Date Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS
Chase Manhattan Securities, dated 12/31/97, repurchase price $200,061,111
(total collateral value $204,001,955 consisting of U.S. Treasury Notes:
5.50%-8.75%, 02/15/00-08/31/00)
$200,000,000 5.50% 01/02/98 $200,000,000
Donaldson, Lufkin & Jenrette, Inc., dated 12/31/97, repurchase price
$510,185,583 (total collateral value $520,200,021 consisting of U.S. Trea-
sury Notes: 5.13%-8.13%, 01/31/98-02/15/04; U.S. Treasury Interest only
Stripped Securities: 02/15/98-02/15/04; U.S. Treasury Stripped Principal
Security: 08/15/01; U.S. Treasury Bill: 05/14/98)
510,000,000 6.55 01/02/98 510,000,000
Swiss Bank Corp., dated 12/31/97, repurchase price $735,367,495 (total col-
lateral value $749,834,669 consisting of U.S. Treasury Notes: 4.75%-8.50%,
02/15/98-11/15/05; U.S. Treasury Inflation Indexed Bond: 3.38%, 01/15/07;
U.S. Treasury Bills: 01/15/98-10/15/98; U.S. Treasury Bonds: 10.75%-11.13%,
08/15/03-08/15/05)
735,100,000 6.55 01/02/98 735,100,000
Swiss Bank Corp., dated 12/31/97, repurchase price $300,091,667 (total col-
lateral value $306,013,333 consisting of U.S. Treasury Notes: 4.75%-8.50%,
02/15/98-11/15/05; U.S. Treasury Inflation Indexed Bond: 3.38%, 01/15/07;
U.S. Treasury Bills: 01/15/98-10/15/98; U.S. Treasury Bonds: 10.75%-11.13%,
08/15/03-08/15/05)
300,000,000 5.50 01/02/98 300,000,000
Salomon-Smith Barney, Inc., dated 12/31/97, repurchase price $1,000,369,444
(total collateral value $1,020,528,930 consisting of U.S. Treasury Stripped
Interest Only Securities: 02/15/98-11/15/04; U.S. Treasury Stripped Princi-
pal Only Securities: 5.75%-11.63%, 02/15/98-11/15/04; U.S. Treasury Bill:
10/15/98)
1,000,000,000 6.65 01/02/98 1,000,000,000
- -------------------------------------------------------------------------------------------------
Total Joint Repurchase Agreement Account $2,745,100,000
- -------------------------------------------------------------------------------------------------
</TABLE>
8.OTHER MATTERS
Pursuant to an SEC exemptive order, certain of the Funds 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.
---------------------------------------
- ---------------------------------------
31
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997
- --------------------------------------------------------------------------------
9. SUMMARY OF SHARE TRANSACTIONS
Share activity for the year ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
PRIME PREMIUM
OBLIGATIONS MONEY MARKET MONEY MARKET
FUND FUND FUND(A)
<S> <C> <C> <C>
FST SHARES:
Shares sold 47,147,215,061 63,982,789,001 1,031,854,202
Reinvestment of dividends
and distributions 103,377,234 118,914,805 1,491,071
Shares repurchased (47,284,643,891) (62,295,549,107) (815,152,881)
- ------------------------------------------------------------------------------
(34,051,596) 1,806,154,699 218,192,392
- ------------------------------------------------------------------------------
FST PREFERRED SHARES:
Shares sold 1,624,299,212 754,498,086 553,233
Reinvestment of dividends
and distributions 1,010,173 1,861,300 4,594
Shares repurchased (1,599,668,091) (753,611,334) 0
- ------------------------------------------------------------------------------
25,641,294 2,748,052 557,827
- ------------------------------------------------------------------------------
FST ADMINISTRATION SHARES:
Shares sold 2,052,177,068 2,237,080,367 42,641,449
Reinvestment of dividends
and distributions 4,016,672 11,388,582 27
Shares repurchased (2,030,483,474) (2,192,980,303) (41,184,778)
- ------------------------------------------------------------------------------
25,710,266 55,488,646 1,456,698
- ------------------------------------------------------------------------------
FST SERVICE SHARES:
Shares sold 2,355,724,259 1,079,579,640 814,346
Reinvestment of dividends
and distributions 4,049,249 1,949,756 26
Shares repurchased (2,298,794,068) (999,602,253) 0
- ------------------------------------------------------------------------------
60,979,440 81,927,143 814,372
- ------------------------------------------------------------------------------
Net increase in shares 78,279,404 1,946,318,540 221,021,289
- ------------------------------------------------------------------------------
</TABLE>
(a) Commencement date of operations for the Premium Money Market, Treasury
Instruments and the Federal Fund was August 1, 1997, March 3, 1997 and
February 28, 1997, respectively.
- --------------------------------------- ---------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY TREASURY TAX-FREE
OBLIGATIONS INSTRUMENTS GOVERNMENT FEDERAL MONEY MARKET
FUND FUND(A) FUND FUND(A) FUND
<S> <C> <C> <C> <C>
21,293,469,586 1,757,063,242 16,068,538,976 4,332,722,729 6,019,992,055
39,794,793 2,990,503 25,573,363 11,815,388 6,844,739
(21,406,328,023) (1,263,635,000) (15,474,321,199) (3,218,857,211) (5,528,265,772)
- -----------------------------------------------------------------------------------
(73,063,644) 496,418,745 619,791,140 1,125,680,906 498,571,022
- -----------------------------------------------------------------------------------
1,389,183,384 1,500 141,301,549 300,365,996 271,642,865
1,089,957 39 164,952 2,470,479 87,192
(1,191,548,937) 0 (134,432,139) (108,461,498) (265,308,952)
- -----------------------------------------------------------------------------------
198,724,404 1,539 7,034,362 194,374,977 6,421,105
- -----------------------------------------------------------------------------------
5,271,440,356 9,051,015 2,286,537,497 1,298,319,389 271,268,796
12,077,349 5,093 2,533,048 1,136,485 865,271
(5,081,525,991) (4,897,093) (2,134,371,808) (674,121,929) (220,746,099)
- -----------------------------------------------------------------------------------
201,991,714 4,159,015 154,698,737 625,333,945 51,387,968
- -----------------------------------------------------------------------------------
2,947,325,143 120,636,945 2,345,825,445 1,244,406,778 293,225,369
8,962,690 5,635 1,966,064 1,747,321 598,391
(2,863,849,159) (100,466,241) (1,991,142,040) (1,017,707,130) (271,100,669)
- -----------------------------------------------------------------------------------
92,438,674 20,176,339 356,649,469 228,446,969 22,723,091
- -----------------------------------------------------------------------------------
420,091,148 520,755,638 1,138,173,708 2,173,836,797 579,103,186
- -----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------- ---------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs Trust--Financial Square Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1997
- --------------------------------------------------------------------------------
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
FST SHARES:
<S> <C> <C> <C> <C> <C>
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 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
- ---------------------------------------------------------------------------------------------------------------
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)
- ---------------------------------------------------------------------------------------------------------------
Net increase in shares 851,045,777 747,188,426 1,085,049,674 386,738,225 51,925,137
</TABLE>
---------------------------------------
- ---------------------------------------
34
<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
------------------------------------
NET ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0546 $ -- $0.0546 $(0.0546) $1.00 5.60%
1997-FST Pre-
ferred shares... 1.00 0.0538 -- 0.0538 (0.0538) 1.00 5.50
1997-FST Admin-
istration
shares.......... 1.00 0.0522 -- 0.0522 (0.0522) 1.00 5.34
1997-FST Service
shares.......... 1.00 0.0498 -- 0.0498 (0.0498) 1.00 5.08
1996-FST
shares.......... 1.00 0.0529 -- 0.0529 (0.0529) 1.00 5.41
1996-FST Pre-
ferred
Shares (c)...... 1.00 0.0346 -- 0.0346 (0.0346) 1.00 5.28(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0506 -- 0.0506 (0.0506) 1.00 5.14
1996-FST Service
shares.......... 1.00 0.0478 -- 0.0478 (0.0478) 1.00 4.88
1995-FST
shares.......... 1.00 0.0586 -- 0.0586 (0.0586) 1.00 6.02
1995-FST Admin-
istration
shares.......... 1.00 0.0559 -- 0.0559 (0.0559) 1.00 5.75
1995-FST Service
shares.......... 1.00 0.0533 -- 0.0533 (0.0533) 1.00 5.49
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares (d)...... 1.00 0.0401 -- 0.0401 (0.0401) 1.00 4.38(b)
1994-FST Pre-
ferred
Shares (d)...... 1.00 0.0383 -- 0.0383 (0.0383) 1.00 4.12(b)
1994-FST Service
shares (d)...... 1.00 0.0364 -- 0.0364 (0.0364) 1.00 3.86(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST
shares.......... 1.00 0.0311 0.0002 0.0313 (0.0313) 1.00 3.18
1994-FST Admin-
istration
shares.......... 1.00 0.0286 0.0002 0.0288 (0.0288) 1.00 2.92
1994-FST Service
shares.......... 1.00 0.0261 0.0002 0.0263 (0.0263) 1.00 2.66
1993-FST
shares.......... 1.00 0.0360 0.0007 0.0367 (0.0367) 1.00 3.75
1993-FST Admin-
istration
shares (e)...... 1.00 0.0068 0.0001 0.0069 (0.0069) 1.00 3.02(b)
1993-FST Service
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0308) 1.00 3.23
1992-FST
shares.......... 1.00 0.0572 0.0002 0.0574 (0.0574) 1.00 5.99
1992-FST Service
shares (e)...... 1.00 0.0027 -- 0.0027 (0.0027) 1.00 4.10(b)
FOR THE PERIOD MARCH 8, 1990 (F) THROUGH JANUARY 31,
- ----------------------------------------------------
1991-FST
shares.......... 1.00 0.0727 -- .0727 (0.0727) 1.00 8.27(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 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,
- --------------------------------
1997-FST
shares.......... 0.18% 5.46% $3,867,739 0.23% 5.41%
1997-FST Pre-
ferred shares... 0.28 5.38 152,767 0.33 5.33
1997-FST Admin-
istration
shares.......... 0.43 5.22 241,607 0.48 5.17
1997-FST Service
shares.......... 0.68 4.97 176,133 0.73 4.92
1996-FST
shares.......... 0.18 5.29 3,901,797 0.23 5.24
1996-FST Pre-
ferred
Shares (c)...... 0.28(b) 5.19(b) 127,126 0.33(b) 5.14(b)
1996-FST Admin-
istration
shares.......... 0.43 5.06 215,898 0.48 5.01
1996-FST Service
shares.......... 0.68 4.78 115,114 0.73 4.73
1995-FST
shares.......... 0.18 5.86 3,295,791 0.22 5.82
1995-FST Admin-
istration
shares.......... 0.43 5.59 147,894 0.47 5.55
1995-FST Service
shares.......... 0.68 5.33 65,278 0.72 5.29
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares (d)...... 0.18(b) 4.38(b) 2,774,849 0.24(b) 4.32(b)
1994-FST Pre-
ferred
Shares (d)...... 0.43(b) 4.18(b) 66,113 0.49(b) 4.12(b)
1994-FST Service
shares (d)...... 0.68(b) 3.98(b) 41,372 0.74(b) 3.92(b)
FOR THE YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST
shares.......... 0.17 3.11 1,831,413 0.25 3.03
1994-FST Admin-
istration
shares.......... 0.42 2.86 35,250 0.50 2.78
1994-FST Service
shares.......... 0.67 2.61 14,001 0.75 2.53
1993-FST
shares.......... 0.18 3.60 813,126 0.25 3.53
1993-FST Admin-
istration
shares (e)...... 0.44(b) 2.96(b) 1,124 0.52(b) 2.88(b)
1993-FST Service
shares.......... 0.68 3.01 336 0.75 2.94
1992-FST
shares.......... 0.18 5.72 917,073 0.27 5.63
1992-FST Service
shares (e)...... 0.66(b) 4.10(b) 118 0.74(b) 4.02(b)
FOR THE PERIOD MARCH 8, 1990 (F) THROUGH JANUARY 31,
- ----------------------------------------------------
1991-FST
shares.......... 0.18(b) 8.04(b) 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 1992, respectively.
(f) Commencement of operations.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
35
<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
------------------------------------
NET ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0550 $ -- $0.0550 $(0.0550) $1.00 5.63%
1997-FST Pre-
ferred shares... 1.00 0.0544 -- 0.0544 (0.0544) 1.00 5.53
1997-FST Admin-
istration
shares.......... 1.00 0.0526 -- 0.0526 (0.0526) 1.00 5.37
1997-FST Service
shares.......... 1.00 0.0499 -- 0.0499 (0.0499) 1.00 5.11
1996-FST
shares.......... 1.00 0.0533 0.0001 0.0534 (0.0534) 1.00 5.45
1996-FST Pre-
ferred
shares (c)...... 1.00 0.0348 -- 0.0348 (0.0348) 1.00 5.31(b)
1996-FST Admin-
istration
shares.......... 1.00 0.0504 0.0001 0.0505 (0.0505) 1.00 5.19
1996-FST Service
shares.......... 1.00 0.0484 -- 0.0484 (0.0484) 1.00 4.93
1995-FST
Shares.......... 1.00 0.0589 -- 0.0589 (0.0589) 1.00 6.07
1995-FST Admin-
istration
shares.......... 1.00 0.0561 -- 0.0561 (0.0561) 1.00 5.80
1995-FST Service
shares (c)...... 1.00 0.0231 -- 0.0231 (0.0231) 1.00 5.41(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares (c)...... 1.00 0.0305 -- 0.0305 (0.0305) 1.00 4.91(b)
1994-FST Admin-
istration
shares (c)...... 1.00 0.0298 -- 0.0298 (0.0298) 1.00 4.65(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 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,
- --------------------------------
1997-FST
shares.......... 0.18% 5.50% $4,346,519 0.23% 5.45%
1997-FST Pre-
ferred shares... 0.28 5.44 20,258 0.33 5.39
1997-FST Admin-
istration
shares.......... 0.43 5.26 221,256 0.48 5.21
1997-FST Service
shares.......... 0.68 4.99 316,304 0.73 4.94
1996-FST
shares.......... 0.18 5.33 2,540,366 0.23 5.28
1996-FST Pre-
ferred
shares (c)...... 0.28(b) 5.23(b) 17,510 0.33(b) 5.18(b)
1996-FST Admin-
istration
shares.......... 0.43 5.04 165,766 0.48 4.99
1996-FST Service
shares.......... 0.68 4.84 234,376 0.73 4.79
1995-FST
Shares.......... 0.15 5.89 2,069,197 0.23 5.81
1995-FST Admin-
istration
shares.......... 0.40 5.61 137,412 0.48 5.53
1995-FST Service
shares (c)...... 0.65(b) 4.93(b) 4,219 0.73(b) 4.85(b)
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares (c)...... 0.11(b) 4.88(b) 862,971 0.25(b) 4.74(b)
1994-FST Admin-
istration
shares (c)...... 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, FST Administration, FST Service and FST Preferred share activity
commenced May 18, 1994, May 20, 1994, July 14, 1995 and May 1, 1996,
respectively.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Premium 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 TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... $1.00 $0.0235 $-- $0.0235 $(0.0235) $1.00 5.73%(b)
1997-FST Pre-
ferred Shares... 1.00 0.0228 -- 0.0228 (0.0228) 1.00 5.62 (b)
1997-FST Admin-
istration
shares.......... 1.00 0.0223 -- 0.0223 (0.0223) 1.00 5.47 (b)
1997-FST Service
shares.......... 1.00 0.0217 -- 0.0217 (0.0217) 1.00 5.20 (b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
RATIO OF NET ASSETS AT RATIO OF NET
RATIO OF NET INVESTMENT END RATIO OF INVESTMENT
EXPENSES TO INCOME TO OF PERIOD EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET (IN AVERAGE NET AVERAGE NET
ASSETS ASSETS 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD AUGUST 1, 1997(C) THROUGH DECEMBER 31,
- -----------------------------------------------------
1997-FST
shares.......... 0.08%(b) 5.59%(b) $218,192 0.43%(b) 5.24%(b)
1997-FST Pre-
ferred Shares... 0.18 (b) 5.50 (b) 558 0.53 (b) 5.15 (b)
1997-FST Admin-
istration
shares.......... 0.33 (b) 5.33 (b) 1,457 0.68 (b) 4.98 (b)
1997-FST Service
shares.......... 0.58 (b) 5.17 (b) 814 0.93 (b) 4.82 (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) Commencement of operations.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
37
<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
------------------------------------
NET ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN (LOSS) INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0536 $ 0.0001 $0.0537 $(0.0537) $1.00 5.50%
1997-FST Pre-
ferred shares... 1.00 0.0532 0.0001 0.0533 (0.0533) 1.00 5.40
1997-FST Admin-
istration
shares.......... 1.00 0.0512 0.0001 0.0513 (0.0513) 1.00 5.24
1997-FST Service
shares.......... 1.00 0.0487 0.0001 0.0488 (0.0488) 1.00 4.98
1996-FST
shares.......... 1.00 0.0522 0.0003 0.0525 (0.0524) 1.00 5.35
1996-FST Pre-
ferred
shares (c)...... 1.00 0.0342 0.0001 0.0343 (0.0343) 1.00 5.24(b)
1996-FST Admin-
istration 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 Admin-
istration 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 PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares (d)...... 1.00 0.0379 (0.0001) 0.0378 (0.0378) 1.00 4.23(b)
1994-FST Admin-
istration
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 YEARS ENDED JANUARY 31,
- -------------------------------
1994-FST
shares.......... 1.00 0.0301 0.0007 0.0308 (0.0307) 1.00 3.11
1994-FST Admin-
istration 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 Admin-
istration
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 5, 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 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,
- --------------------------------
1997-FST
shares.......... 0.18% 5.36% $2,217,943 0.23% 5.31%
1997-FST Pre-
ferred shares... 0.28 5.32 245,355 0.33 5.27
1997-FST Admin-
istration
shares.......... 0.43 5.12 738,865 0.48 5.07
1997-FST Service
shares.......... 0.68 4.87 312,991 0.73 4.82
1996-FST
shares.......... 0.18 5.22 2,291,051 0.24 5.16
1996-FST Pre-
ferred
shares (c)...... 0.28(b) 5.11(b) 46,637 0.34(b) 5.05(b)
1996-FST Admin-
istration 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 Admin-
istration 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 Admin-
istration
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 Admin-
istration 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 Admin-
istration
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 3.67(b)
FOR THE PERIOD MARCH 5, 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 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 PST 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.
38
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Treasury Instruments 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 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,
- -------------------------------
1997-FST
shares (c)...... $1.00 $0.0423 $0.0004 $0.0427 ($0.0427) $1.00 5.25%(b)
1997-FST Pre-
ferred
shares (c)...... 1.00 0.0296 -- 0.0296 (0.0296) 1.00 5.13 (b)
1997-FST Admin-
istration
shares (c)...... 1.00 0.0364 0.0003 0.0367 (0.0367) 1.00 4.99 (b)
1997-FST Service
shares (c)...... 1.00 0.0380 0.0003 0.0383 (0.0383) 1.00 4.71 (b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
-------------------------
NET
RATIO OF NET ASSETS AT RATIO OF NET
RATIO OF NET INVESTMENT END RATIO OF INVESTMENT
EXPENSES TO INCOME TO OF PERIOD EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET (IN AVERAGE NET AVERAGE NET
ASSETS ASSETS 000'S) ASSETS ASSETS
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------
1997-FST
shares (c)...... 0.18%(b) 5.09%(b) $496,419 0.29%(b) 4.98%(b)
1997-FST Pre-
ferred
shares (c)...... 0.28(b) 5.00(b) 2 0.39(b) 4.89(b)
1997-FST Admin-
istration
shares (c)...... 0.43(b) 4.84(b) 4,159 0.54(b) 4.73(b)
1997-FST Service
shares (c)...... 0.68(b) 4.62(b) 20,177 0.79(b) 4.51(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 Share, FST Preferred Share, FST Administration Share, and FST Service
Share activity commenced March 3, 1997, May 30, 1997, April 1, 1997, and
March 5, 1997, respectively.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
39
<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 NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0541 $ -- $0.0541 $(0.0541) $1.00 5.54%
1997-FST Pre-
ferred shares... 1.00 0.0534 -- 0.0534 (0.0534) 1.00 5.43
1997-FST Admin-
istration
shares.......... 1.00 0.0515 -- 0.0515 (0.0515) 1.00 5.28
1997-FST Service
shares.......... 1.00 0.0491 -- 0.0491 (0.0491) 1.00 5.02
1996-FST
shares.......... 1.00 0.0525 0.0001 0.0526 (0.0526) 1.00 5.38
1996-FST Pre-
ferred
shares (c)...... 1.00 0.0344 0.0001 0.0345 (0.0345) 1.00 5.26(b)
1996-FST Admin-
istration
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
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares (d)...... 1.00 0.0424 -- 0.0424 (0.0424) 1.00 4.36(b)
1994-FST Admin-
istration
shares (d)...... 1.00 0.0426 -- 0.0426 (0.0426) 1.00 4.10(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1994-FST
shares (c)...... 1.00 0.0256 0.0001 0.0257 (0.0257) 1.00 3.14(b)
1994-FST Admin-
istration
shares (c)...... 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 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,
- --------------------------------
1997-FST
shares.......... 0.18% 5.41% $1,478,539 0.24% 5.35%
1997-FST Pre-
ferred shares... 0.28 5.34 7,147 0.34 5.28
1997-FST Admin-
istration
shares.......... 0.43 5.15 299,804 0.49 5.09
1997-FST Service
shares.......... 0.68 4.91 580,200 0.74 4.85
1996-FST
shares.......... 0.18 5.25 858,769 0.24 5.19
1996-FST Pre-
ferred
shares (c)...... 0.28(b) 5.14(b) 112 0.34(b) 5.08(b)
1996-FST Admin-
istration
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
FOR THE PERIOD ENDED DECEMBER 31,
- ---------------------------------
1994-FST
shares (d)...... 0.15(b) 4.64(b) 258,350 0.25(b) 4.54(b)
1994-FST Admin-
istration
shares (d)...... 0.40(b) 4.67(b) 54,253 0.50(b) 4.57(b)
FOR THE PERIOD ENDED JANUARY 31,
- --------------------------------
1994-FST
shares (c)...... 0.08(b) 3.10(b) 44,697 0.59(b) 2.59(b)
1994-FST Admin-
istration
shares (c)...... 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 complete redemption of the
investment at the net asset value at the end of the period.
(b) Annualized.
(c) FST share, FST Administration share, FST Service share and FST Preferred
share activity commenced April 6, 1993, September 1, 1993, May 16, 1995
and May 1, 1996, respectively.
(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.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
Goldman Sachs Trust--Financial Square Funds
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected Data for a Share Outstanding Throughout Each Period
Federal Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------
NET ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN ON INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT INVESTMENT INVESTMENT TO 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,
- -------------------------------
1997-FST
shares(c)....... $1.00 $0.0454 $ -- $0.0454 $(0.0454) $1.00 5.51%(b)
1997-FST Pre-
ferred
shares(c)....... 1.00 0.0311 -- 0.0311 (0.0311) 1.00 5.43(b)
1997-FST
Administration
shares(c)....... 1.00 0.0388 -- 0.0388 (0.0388) 1.00 5.27(b)
1997-FST Service
shares(c)....... 1.00 0.0379 -- 0.0379 (0.0379) 1.00 5.00(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 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,
- -------------------------------
1997-FST
shares(c)....... 0.18%(b) 5.39%(b) $1,125,681 0.27%(b) 5.30%(b)
1997-FST Pre-
ferred
shares(c)....... 0.28(b) 5.26(b) 194,375 0.37(b) 5.17(b)
1997-FST
Administration
shares(c)....... 0.43(b) 5.15(b) 625,334 0.52(b) 5.06(b)
1997-FST Service
shares(c)....... 0.68(b) 4.78(b) 228,447 0.77(b) 4.69(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 share, FST Preferred share, FST Administration share, and FST Service
share activity commenced February 28, 1997, May 30, 1997, April 1, 1997
and March 25, 1997, respectively.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
41
<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 ASSET NET REALIZED TOTAL NET ASSET
VALUE AT NET GAIN INCOME FROM DISTRIBUTIONS VALUE AT
BEGINNING INVESTMENT ON INVESTMENT INVESTMENT TO END TOTAL
OF PERIOD INCOME TRANSACTIONS OPERATIONS SHAREHOLDERS OF PERIOD RETURN(A)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... $1.00 $0.0350 $ -- $0.0350 $(0.0350) $1.00 3.54%
1997-FST Pre-
ferred shares... 1.00 0.0339 -- 0.0339 (0.0339) 1.00 3.43
1997-FST Admin-
istration
shares.......... 1.00 0.0327 -- 0.0327 (0.0327) 1.00 3.28
1997-FST Service
shares.......... 1.00 0.0301 -- 0.0301 (0.0301) 1.00 3.02
1996-FST
shares.......... 1.00 0.0335 -- 0.0335 (0.0335) 1.00 3.39
1996-FST Pre-
ferred shares... 1.00 0.0218 -- 0.0218 (0.0218) 1.00 3.30(b)
1996-FST Admin-
istration
shares (c)...... 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 Admin-
istration
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 (c)...... 1.00 0.0156 -- 0.0156 (0.0156) 1.00 3.41(b)
1994-FST Admin-
istration
shares (c)...... 1.00 0.0136 -- 0.0136 (0.0136) 1.00 3.19(b)
1994-FST Service
shares (c)...... 1.00 0.0091 -- 0.0091 (0.0091) 1.00 3.11(b)
<CAPTION>
RATIOS ASSUMING NO
WAIVER OF FEES AND NO
EXPENSE LIMITATIONS
------------------------
NET
RATIO OF NET ASSETS AT RATIO OF NET
RATIO OF NET INVESTMENT END RATIO OF INVESTMENT
EXPENSES TO INCOME TO OF PERIOD EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET (IN AVERAGE NET AVERAGE NET
ASSETS ASSETS 000'S) ASSETS ASSETS
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------
1997-FST
shares.......... 0.18% 3.50% $939,407 0.24% 3.44%
1997-FST Pre-
ferred shares... 0.28 3.39 35,152 0.34 3.33
1997-FST Admin-
istration
shares.......... 0.43 3.27 103,049 0.49 3.21
1997-FST Service
shares.......... 0.68 3.01 42,578 0.74 2.95
1996-FST
shares.......... 0.18 3.35 440,838 0.23 3.30
1996-FST Pre-
ferred shares... 0.28(b) 3.26(b) 28,731 0.33(b) 3.21(b)
1996-FST Admin-
istration
shares (c)...... 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 Admin-
istration
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 (c)...... 0.07(b) 3.42(b) 183,570 0.31(b) 3.18(b)
1994-FST Admin-
istration
shares (c)...... 0.32(b) 3.25(b) 2,042 0.56(b) 3.01(b)
1994-FST Service
shares (c)...... 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 share, FST Administration share, FST Service share and FST Preferred
share activity commenced July 19, 1994, August 1, 1994, September 23, 1994
and May 1, 1996, respectively.
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------- ---------------------------------------
To the Shareholders and Board of Trustees of the Goldman Sachs Trust--Financial
Square Funds:
We have audited the accompanying statements of assets and liabilities of the
Goldman Sachs Trust--Financial Square Funds (a Delaware business trust
comprising the Prime Obligations, Money Market, Premium Money Market, Treasury
Obligations, Treasury Instruments, Government, Federal and Tax-Free Money
Market Funds), including the statements of investments as of December 31, 1997,
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, 1997 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 Funds constituting Goldman Sachs Trust--Financial Square
Funds as of December 31, 1997, 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 12, 1998
---------------------------------------
- ---------------------------------------
43
<PAGE>
VOTING RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
The proposals described below were submitted to a vote of shareholders of
Financial Square Funds (the "Trust") at a Special Meeting of Shareholders held
on April 1, 1997 and reconvened on April 24, 1997 (the "Meeting"):
- --------------------------------------------------------------------------------
PROPOSAL NO. 1--ELECTION OF TRUSTEES:
- --------------------------------------------------------------------------------
At the Meeting, Ashok Bakhru, David B. Ford, Douglas Grip, John McNulty, Mary
McPherson, Richard Strubel, Alan Shuch, Jackson Smart and William Springer were
elected to the Trust's Board of Trustees. In electing directors, the Trust's
shareholders voted as follows:/1/
<TABLE>
<CAPTION>
DIRECTOR FOR AGAINST ABSTAIN BROKER NON-VOTES
-------- ------------------ ------- --------------- ----------------
<S> <C> <C> <C> <C>
Ashok Bakhru............ 13,198,134,650.489 0 317,290,085.560 0
David B. Ford........... 13,196,882,310.419 0 318,542,425.630 0
Douglas Grip............ 13,198,421,139.119 0 317,003,596.930 0
John McNulty............ 13,192,672,508.499 0 322,752,227.550 0
Mary McPherson.......... 13,198,375,102.859 0 317,049,638.190 0
Richard Strubel......... 13,198,269,677.579 0 317,155,058.470 0
Alan Shuch.............. 13,196,888,161.369 0 318,536,574.680 0
Jackson Smart........... 13,186,250,475.539 0 329,174,260.510 0
William Springer........ 13,186,378,105.759 0 329,046,630.290 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 2--RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE
TRUST"S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1997:
- --------------------------------------------------------------------------------
At the Meeting, the Trust's shareholders approved Proposal No. 2 as
follows:/1/
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
- ------------------ -------------- --------------- ----------------
<S> <C> <C> <C>
12,740,448,568.959 86,008,900.390 688,967,266.700 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 4(B)--APPROVAL OF AN AMENDMENT TO THE TRUST'S DECLARATION OF TRUST
TO PERMIT INVESTMENT OF EACH FUND'S ASSETS IN ANOTHER OPEN-END
INVESTMENT COMPANY:
- --------------------------------------------------------------------------------
At the Meeting, the Trust's shareholders approved Proposal No. 4(B) as
follows:/1/
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
- ------------------ --------------- --------------- ----------------
<S> <C> <C> <C>
11,979,828,027.249 666,114,085.840 869,482,622.960 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 3--APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each of the Trust's portfolios (each, a
"Fund" and collectively, the "Funds") approved Proposal No. 3 as follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 2,750,763,971.82 19,674,207.77 19,428,103.21 0
FST--Government......... 614,737,552.22 49,958,078.95 212,013,615.15 0
FST--Treasury Obliga-
tions.................. 1,643,159,064.65 3,422,314.12 23,291,123.97 0
FST--Money Market....... 1,768,028,087.81 551,572.88 237,836,598.85 0
FST--Tax-Free........... 321,403,549.04 2,303,384.98 73,216.10 0
</TABLE>
44
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 4(A)--APPROVAL OF AN AMENDMENT TO THE FUND'S INVESTMENT
RESTRICTIONS TO PERMIT EACH FUND TO INVEST ALL OF ITS ASSETS IN
ANOTHER OPEN-END INVESTMENT COMPANY:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 4(A) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 2,632,813,935.56 137,676,305.03 19,376,042.21 0
FST--Government......... 600,507,908.99 50,171,200.71 226,030,136.62 0
FST--Treasury Obliga-
tions.................. 1,534,118,627.46 112,516,646.34 23,237,228.94 0
FST--Money Market....... 1,622,692,959.96 119,723,518.11 263,999,781.47 0
FST--Tax-Free........... 321,385,838.42 2,341,263.05 53,048.65 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(A)--INVESTMENT POLICY ON ISSUER DIVERSIFICATION:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(A) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 2,025,173,322.36 741,685,870.02 23,007,090.42 0
FST--Government......... 492,127,188.66 94,058,605.71 290,523,451.95 0
FST--Treasury Obliga-
tions.................. 1,590,614,773.93 3,298,162.45 75,959,566.36 0
FST--Money Market....... 1,641,176,450.29 93,217,845.13 272,021,964.12 0
FST--Tax-Free........... 319,424,168.46 2,303,384.98 2,052,596.68 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(B)--INVESTMENT POLICY ON INDUSTRY CONCENTRATION:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(B) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 2,113,864,890.90 655,676,834.86 20,324,557.04 0
FST--Government......... 536,127,188.66 50,058,605.71 290,523,451.95 0
FST--Treasury Obliga-
tions.................. 1,584,005,181.34 10,354,359.55 75,512,961.85 0
FST--Money Market....... 1,727,011,799.59 7,162,833.03 272,241,626.92 0
FST--Tax-Free........... 319,424,168.46 2,303,384.98 2,052,596.68 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(C)--INVESTMENT POLICIES ON BORROWING, MARGIN PURCHASES AND
PLEDGING ASSETS:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(C) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 2,032,851,854.68 735,012,001.25 22,002,426.87 0
FST--Government......... 536,014,593.26 50,171,201.11 290,523,451.95 0
FST--Treasury Obliga-
tions.................. 1,472,597,369.41 121,761,319.48 75,513,813.85 0
FST--Money Market....... 1,597,694,673.27 116,718,197.61 292,003,388.66 0
FST--Tax-Free........... 320,117,743.24 2,515,405.70 1,147,001.18 0
</TABLE>
45
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(D)--INVESTMENT POLICY ON LOANS:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(D) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 2,137,654,263.39 631,935,174.22 20,276,845.19 0
FST--Government......... 536,127,188.66 50,058,605.71 290,523,451.95 0
FST--Treasury Obliga-
tions.................. 1,563,411,594.51 10,339,372.94 96,121,535.29 0
FST--Money Market....... 1,647,121,629.22 86,498,763.32 272,795,867.00 0
FST--Tax-Free........... 321,423,716.49 2,303,384.98 53,048.65 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(E)--INVESTMENT POLICY ON UNDERWRITING:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(E) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 2,107,675,459.08 604,973,342.98 77,217,480.74 0
FST--Government......... 536,127,188.66 50,058,605.71 290,523,451.95 0
FST--Treasury Obliga-
tions.................. 1,563,423,400.52 10,339,372.93 96,109,729.29 0
FST--Money Market....... 1,647,222,596.46 86,498,763.32 272,694,899.76 0
FST--Tax-Free........... 321,423,716.49 2,303,384.98 53,048.65 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(F)--INVESTMENT POLICY ON REAL ESTATE AND OIL AND GAS:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal 5(F) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 1,864,040,389.62 866,974,034.38 58,851,858.80 0
FST--Government......... 498,311,661.41 87,874,132.96 290,523,451.95 0
FST--Treasury Obliga-
tions.................. 1,543,861,427.62 29,902,197.83 96,108,877.29 0
FST--Money Market....... 1,502,832,684.48 162,262,211.64 341,321,363.42 0
FST--Tax-Free........... 320,329,763.96 2,303,384.98 1,147,001.18 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(G)--INVESTMENT POLICY ON COMMODITIES:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(G) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 1,955,328,415.10 783,843,073.32 50,694,794.38 0
FST--Government......... 536,127,188.66 50,061,283.54 290,520,774.12 0
FST--Treasury Obliga-
tions.................. 1,462,302,194.33 111,554,993.46 96,015,314.95 0
FST--Money Market....... 1,592,467,171.50 141,153,221.04 272,795,867.00 0
FST--Tax-Free........... 315,235,397.48 6,492,155.96 2,052,596.68 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(H)--INVESTMENT POLICY ON SENIOR SECURITIES:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(H) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 2,006,584,642.16 735,239,141.88 48,042,498.76 0
FST--Government......... 536,017,271.49 50,171,200.71 290,520,774.12 0
FST--Treasury Obliga-
tions.................. 1,557,058,699.27 16,150,312.24 96,663,491.23 0
FST--Money Market....... 1,598,123,371.27 116,417,284.77 291,875,603.50 0
FST--Tax-Free........... 320,329,763.96 2,303,384.98 1,147,001.18 0
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(I)--INVESTMENT RESTRICTION CONCERNING SHORT SALES OF SECURITIES:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(I) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 1,881,193,604.90 848,795,361.47 59,877,316.43 0
FST--Government......... 535,990,656.40 50,171,201.11 290,547,388.81 0
FST--Treasury Obliga-
tions.................. 1,458,090,940.53 115,131,990.67 96,649,571.54 0
FST--Money Market....... 1,570,114,107.56 94,298,763.32 342,003,388.66 0
FST--Tax-Free........... 316,140,992.98 6,492,155.96 1,147,001.18 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(J)--INVESTMENT POLICY ON OPTIONS:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(J) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 1,946,413,177.34 783,795,361.47 59,657,743.99 0
FST--Government......... 536,103,251.80 50,061,283.54 290,544,710.98 0
FST--Treasury Obliga-
tions.................. 1,462,545,194.90 111,204,686.55 96,122,621.29 0
FST--Money Market....... 1,531,855,599.49 132,658,238.63 341,902,421.42 0
FST--Tax-Free........... 315,235,397.48 6,492,155.96 2,052,596.68 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 5(K)--INVESTMENTS TO EXERCISE CONTROL:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 5(K) as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 1,958,631,006.28 774,813,086.37 56,422,190.15 0
FST--Government......... 535,990,656.80 50,171,200.71 290,547,388.81 0
FST--Treasury Obliga-
tions.................. 1,476,366,263.54 117,965,355.72 75,540,884.48 0
FST--Money Market....... 1,676,388,608.83 124,858,238.63 205,169,412.08 0
FST--Tax-Free........... 321,423,716.49 2,303,384.98 53,048.65 0
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 6--APPROVAL OF AMENDED AND RESTATED MANAGEMENT AGREEMENTS:
- --------------------------------------------------------------------------------
At the Meeting, the shareholders of each Fund approved Proposal No. 6 as
follows:
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN BROKER NON-VOTES
---- ---------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
FST--Prime Obligations.. 2,514,108,328.97 39,546,154.00 236,211,799.83 0
FST--Government......... 600,653,684.02 50,058,605.71 225,996,956.59 0
FST--Treasury Obliga-
tions.................. 1,590,952,308.54 3,061,857.61 75,858,337.59 0
FST--Money Market....... 1,816,523,365.52 474,748.46 189,418,145.56 0
FST--Tax-Free........... 319,424,168.46 2,303,384.98 2,052,596.68 0
</TABLE>
/1/The voting results for proposal nos. 1, 2 and 4(B) reflect the vote of the
shareholders of the Trust and the shareholders of Goldman Sachs Financial
Square Funds.
47
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
[This page intentionally left blank]
48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------------------------------------------------
This Annual Report is authorized for distribution to prospective investors only
when preceded or accompanied by a Goldman Sachs Trust Financial Square Funds
Prospectus which contains facts concerning each Fund's objectives and policies,
management, expenses and other information.
- --------------------------------------------------------------------------------
49
<PAGE>
TRUSTEES
Ashok N. Bakhru, Chairman
David B. Ford
Douglas C. Grip
John P. McNulty
Mary P. McPherson
Alan. A. Shuch
Jackson W. Smart, Jr.
William H. Springer
Richard P. Strubel
OFFICERS
Douglas C. Grip, President
James A. Fitzpatrick, Vice President
John W. Mosior, Vice President
Nancy L. Mucker, 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
Goldman Sachs Funds
One New York Plaza, 41st Floor
New York, NY 10004
<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
Premium Money Market Fund, Financial Square Government Fund, Financial
Square Money Market Fund, Financial Square Treasury Instruments Fund,
Financial Square Federal Fund and Financial Square Tax-Free Money
Market Fund (collectively, the "Financial Square Funds") for the
period ended December 31, 1997 (audited); and
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, 1997 (audited).
Incorporated by Reference into the Additional Statement:
Report of Independent Public Accountants.
<PAGE>
Statements of Investments for the Financial Square Treasury Obligations
Fund, Financial Square Prime Obligations, Financial Square Premium Money
Market Fund, Financial Square Government Fund, Financial Square Money
Market Fund, Financial Square Treasury Instruments Fund, Financial Square
Federal Fund and Financial Square Tax-Free Money Market Fund, as of
December 31, 1997 (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, 1997 (audited);
Statements of Assets and Liabilities for the Financial Square Treasury
Obligations Fund, Financial Square Prime Obligations Fund, Financial Square
Premium Money Market Fund, Financial Square Government Fund, Financial
Square Money Market Fund, Financial Square Treasury Instruments Fund,
Financial Square Federal Fund and Financial Square Tax-Free Money Market
Fund, as of December 31, 1997 (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, 1997 (audited);
Statements of Operations for the Financial Square Treasury Obligations
Fund, Financial Square Prime Obligations Fund, Financial Square Premium
Money Market Fund, Financial Square Government Fund, Financial Square Money
Market Fund, Financial Square Treasury Instruments Fund, Financial Square
Federal Fund and Financial Square Tax-Free Money Market Fund, as of
December 31, 1997 (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, 1997 (audited);
Statements of Changes in Net Assets for the Financial Square Treasury
Obligations Fund, Financial Square Prime Obligations Fund, Financial Square
Premium Money Market Fund, Financial Square Government Fund, Financial
Square Money Market Fund, Financial Square Treasury Instruments Fund,
Financial Square Federal Fund and Financial Square Tax-Free Money Market
Fund, as of December 31, 1997 (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
2
<PAGE>
New York Portfolio for the period ended December 31, 1997 (audited);
Financial Highlights for the Financial Square Treasury Obligations Fund,
Financial Square Prime Obligations Fund, Financial Square Premium Money
Market Fund, Financial Square Government, Financial Square Money Market
Fund, Financial Square Treasury Instruments Fund, Financial Square Federal
Fund and Financial Square Tax-Free Money Market Fund, as of December 31,
1997 (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, 1997 (audited);
Notes to Financial Statements.
Report of Independent Public Accountants
The following exhibits relating to the Goldman Sachs Money Market Funds are
incorporated herein by reference to Post-Effective Amendment No. 26 to
Goldman Sachs Trust's Registration Statement on Form N-1A (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); to Post-
Effective Amendment No. 33 to such Registration Statement (Accession No.
0000950130-97-0001867); to Post-Effective Amendment No. 40 to such
Registration Statement (Accession No. 0000950130-97-004495); and to Post-
Effective Amendment No. 41 to such Registration Statement (Accession No.
0000-950130-98-000676); Post-Effective Amendment No. 43 to such
Registration Statement. (Accession No. 0000950130- 98 - 000965)
1(a). Agreement and Declaration of Trust. (Accession No.
0000950130-97-000573)
1(b). Amendment No. 1 to Agreement and Declaration of Trust.
(Accession No. 0000950130-97-004495)
1(c). Amendment No. 2 to Agreement and Declaration of Trust.
(Accession No. 0000950130-97-004495)
1(d). Amendment No.3 dated January 28, 1997 to the Agreement and
Declaration of Trust. (Accession No. 0000950130-98-000676)
1(e). Amendment No. 4 dated January 28, 1998 to the Agreement and
Declaration of Trust as amended, dated January 28, 1997.
(Accession No. 0000950130-98-000676)
2. By-laws of the Delaware business trust. (Accession No.
0000950130-97-000573)
3. Not applicable.
4. Not applicable.
3
<PAGE>
5(a). Management Agreement dated April 30, 1997 between Registrant on
behalf of Goldman Sachs Short Duration Government Fund and
Goldman Sachs Funds Management, L.P. (Accession No. 0000950130-
98-000676)
5(b). Management Agreement dated April 30, 1997 between Registrant on
behalf of Goldman Sachs Adjustable Rate Government Fund and
Goldman Sachs Funds Management, L.P. (Accession No. 0000950130-
98-000676)
5(b). Advisory Agreement between Registrant and Goldman, Sachs & Co.,
filed as Exhibit A.(Accession No. 0000950130 - 98 - 000965)
5(c). Management Agreement dated April 30, 1997 between Registrant on
behalf of Goldman Sachs Short Duration Tax-Free Fund and Goldman
Sachs Asset Management. (Accession No. 0000950130-98-000676)
5(d). Management Agreement dated April 30, 1997 between Registrant on
behalf of Goldman Sachs Core Fixed Income Fund and Goldman Sachs
Asset Management. (Accession No. 0000950130-98-000676)
5(d). Consent dated June 20, 1987 to change in duties under the
Advisory Agreement and Distribution Agreement between Registrant
and Goldman, Sachs & Co. (Accession No. 0000950130 - 98 - 000965)
5(e). Management Agreement dated January 28, 1998 on behalf of the
Registrant and Goldman Sachs Asset Management, Goldman Sachs
Funds Management L.P. and Goldman Sachs Asset Management
International. (Accession No. 0000950130-98-000676)
5(f). Management Agreement dated January 1, 1998 on behalf of the
Goldman Sachs Asset Allocation Portfolios and Goldman Sachs Asset
Management. (Accession No. 0000950130-98-000676)
5(g). Management Agreement dated April 30, 1997 between the Registrant
on behalf of Goldman Sachs - Institutional Liquid Assets and
Goldman Sachs Asset Management. (Accession No. 0000950130-98-
000676)
5(i). Consent pursuant to paragraph 1 of each Advisory Agreement and
Distribution Agreement regarding Treasury Instruments, Tax-Exempt
New Jersey and Tax-Exempt New York Portfolio (Accession No.
0000950130 - 98 - 000965)
4
<PAGE>
6. Distribution Agreement dated April 30, 1997 as amended October 21,
1997 between Registrant and Goldman, Sachs & Co. (Accession No.
0000950130-97-004495)
7. Not applicable.
8(a). Custodian Agreement between Registrant and State Street Bank and
Trust Company. (Accession No. 0000950130-95-002856)
8(b). Custodian Agreement between Registrant and State Street Bank and
Trust Company, filed as Exhibit 1(e) (Accession No. 0000950130 -
98 - 000965)
8(c). Letter-agreement dated December 27, 1978 between Registrant and
State Street Bank and Trust Company pertaining to the fees
payable by Registrant pursuant to the Custodian Agreement, filed
as Exhibit 8(c) (Accession No. 0000950130 - 98 - 000965)
8(d). Amendment dated May 28, 1981 to the Custodian Agreement referred to
above as Exhibit 8(a) (Accession No. 0000950130 - 98 - 000965)
8(e). Fee schedule relating to the Custodian Agreement between Registrant
on behalf of the Goldman Sachs Asset Allocation Portfolios and
State Street Bank and Trust Company. (Accession No. 0000950130-97-
004495)
8(f). Letter Agreement dated June 14, 1984 between Registrant and State
Street Bank and Trust Company pertaining to a change in wire
charges under the Custodian Agreement, filed as Exhibit 8(f)
(Accession No. 0000950130 - 98 - 000965)
5
<PAGE>
8(g). Letter Agreement dated March 28, 1983 between Registrant and State
Street Bank and Trust Company pertaining to the latter's
designation of Bank of America, N.T. and S.A. as its subcustodian
and certain other matters, filed as Exhibit 8(d) (Accession No.
0000950130 - 98 - 000965)
8(h). Letter Agreement dated March 21, 1985 between Registrant and State
Street Bank and Trust Company pertaining to the creation of a joint
repurchase agreement account, filed as Exhibit 8(g) (Accession No.
0000950130 - 98 - 000965)
8(i). Letter Agreement dated November 7, 1985, with attachments, between
Registrant and State Street Bank and Trust Company authorizing
State Street Bank and Trust Company to permit redemption of units
by check, filed as Exhibit 8(h) (Accession No. 0000950130 - 98 -
000965)
8(j). Money Transfer Services Agreement dated November 14, 1985,
including attachment, between Registrant and State Street Bank and
Trust Company pertaining to transfers of funds on deposit with
State Street Bank and Trust Company, filed as Exhibit 8(i)
(Accession No. 0000950130 - 98 - 000965)
8(k). Letter Agreement dated November 27, 1985 between Registrant and
State Street Bank and Trust Company amending the Custodian
Agreement (Accession No. 0000950130 - 98 - 000965)
Letter Agreement dated July 22, 1986 between Registrant and State
Street Bank and Trust Company pertaining to a change in wire
charges (Accession No. 0000950130 - 98 - 000965)
8(l). Wiring Agreement dated June 20, 1987 among Goldman, Sachs & Co.,
State Street Bank and Trust Company and The Northern Trust Company
(Accession No. 0000950130 - 98 - 000965)
8(m). Letter Agreement dated June 20, 1987 between Registrant and State
Street Bank and Trust Company amending the Custodian Agreement
(Accession No. 0000950130 - 98 - 000965)
8(n). Letter Agreement dated June 20, 1987 regarding use
6
<PAGE>
of checking account between Registrant and The Northern Trust
Company (Accession No. 0000950130 - 98 - 000965)
8(o). Letter Agreement between Registrant and State Street Bank and Trust
Company pertaining to the latter's designation of Security Pacific
National Bank as its sub-custodian and certain other matters
(Accession No. 0000950130 - 98 - 000965)
8(p). Amendment dated July 19, 1988 to the Custodian Agreement between
Registrant and State Street Bank and Trust Company (Accession No.
0000950130 - 98 - 000965)
8(q). Amendment dated September 15, 1988 to the Custodian Agreement
between Registrant and State Street Bank and Trust Company
(Accession No. 0000950130 - 98 - 000965)
9(a). Transfer Agency Agreement between Registrant and Goldman, Sachs &
Co. (Accession No. 0000950130-95-002856)
9(b). Fee schedule relating to Transfer Agency Agreement between
Registrant on behalf of the Goldman Sachs Asset Allocation
Portfolios and Goldman, Sachs & Co. (Accession No. 0000950130-97-
004495)
9(c). Transfer Agency Agreement dated May 1, 1988 between Registrant and
Goldman, Sachs & Co. and schedule of fees pertaining thereto
(Accession No. 0000950130 - 98 - 000965)
10(a). Opinion of Drinker Biddle and Reath. (Accession No. 0000950130-97-
004495)
10(b). Opinion of Morris, Nichols, Arsht & Tunnell - (Accession No.
0000950130-97-001846).
12. Not applicable.
14. Not applicable.
15(a). Class A Plan of Distribution pursuant to Rule 12b-1 dated January
28, 1998. (Accession No. 0000950130-98-000676)
15(b). Class B Plan of Distribution pursuant to Rule 12b-1 dated January
28, 1998. (Accession No. 0000950130-98-000676)
15(c) Class C Plan of Distribution pursuant to Rule 12b-1 dated January
28, 1998. (Accession No. 0000950130-98-000676)
7
<PAGE>
16. Schedule for Computation of Performance Data. (Reference V)
-
18(a). Plan entered into by Registrant pursuant to Rule 18f-3. (Accession
No. 0000950130-95-000628)
19. Powers of Attorney of Messrs. Bakhru, Ford, Grip, Shuch, Smart,
Sringer, Strubel, McNulty, Mosior, Gilman, Perlowski, Richman,
Surloff, Mmes. MacPherson, Mucker and Taylor. (Accession No.
0000950130-97-000805)
19(a). Powers of Attorney dated October 21, 1997 on behalf of James A.
Fitzpatrick and Valerie A. Zondorak. (Accession No. 0000950130-98-
000676)
The following exhibits relating to Goldman Sachs Trust is filed herewith
electronically pursuant to EDGAR rules:
11(a) Consent of Independent Auditors of Goldman Sachs - Institutional Liquid
Assets.
11(b) Consent of Independent Auditors of Goldman Sachs Trust - Financial
Square Fund.
15(d) Distribution Plan Pursuant to Rule 12b-1 for Cash Management Shares.
15(e) Service Plan for Cash Management Shares.
16. Schedule for computation of Performance Data for Goldman Sachs New York
Municipal Income Fund.
27. Financial Data Schedules.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
-------------------------------------------------------------
Not Applicable.
8
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES.
-------------------------------
Number of
Title of Class Record Holders
- -------------- --------------
Treasury Obligations Portfolio
ILA Units 702
ILA Administration Units 87
ILA Service Units 8
Treasury Instruments Portfolio
ILA Units 320
ILA Administration Units 43
ILA Service Units 18
Federal Portfolio
ILA Units 3,344
ILA Administration Units 602
ILA Service Units 139
Government Portfolio
ILA Units 792
ILA Administration Units 71
ILA Service Units 5
Prime Obligations Portfolio
ILA Class A 646
ILA Units 755
ILA Class B 132
ILA Class C 30
ILA Administration Units 101
ILA Service Units 19
Money Market Portfolio
ILA Units 1,922
ILA Administration Units 884
ILA Service Units 6
Tax-Exempt Diversified Portfolio
ILA Class A 68
ILA Units 2,514
ILA Administration Units 27
ILA Service Units 20
Tax-Exempt California Portfolio
ILA Units 1,005
ILA Administration Units 4
ILA Service Units 2
Tax-Exempt New York Portfolio
ILA Units
ILA Administration Units 265
ILA Service Units 63
Financial Square Treasury Obligations Fund 3
FST Shares 520
FST Administration Shares 258
FST Service Shares 749
FST Preferred Shares 19
Financial Square Prime Obligations Fund
FST Shares 607
FST Administration Shares 206
FST Service Shares 391
9
<PAGE>
FST Preferred Shares 23
Financial Square Government Fund
FST Shares 980
FST Administration Shares 250
FST Service Shares 111
FST Preferred Shares 27
Financial Square Money Market Fund
FST Shares 591
FST Administration Shares 355
FST Service Shares 189
FST Preferred Shares 47
Financial Square Tax-Free Money Market Fund
FST Shares 566
FST Administration Shares 67
FST Service Shares 101
FST Preferred Shares 15
Financial Square Treasury Instruments Fund
FST Shares 161
FST Administration Shares 15
FST Service Shares 10
FST Preferred Shares 4
Financial Square Federal Fund
FST Shares 285
FST Administration Shares 84
FST Service Shares 213
FST Preferred Shares 13
Financial Square Municipal Money Market Fund
FST Shares 0
FST Administration Shares 0
FST Service Shares 0
FST Preferred Shares 0
Financial Square Premium Money Market Fund
FST Shares 68
FST Administration Shares 6
FST Service Shares 7
FST Preferred Shares 8
Goldman Sachs Short Duration Government Fund
Class A 120
Class B 48
Class C 37
Institutional Shares 261
Administration Shares 15
Service Shares 6
Goldman Sachs Adjustable Rate Government Fund
Class A 406
Institutional Shares 836
Administration Shares 20
Service Shares 5
Goldman Sachs Short Duration Tax-Free Fund
Class A 119
Class B 15
Class C 13
Institutional Shares 302
Administration Shares 9
10
<PAGE>
Service Shares 0
Goldman Sachs Core Fixed Income Fund
Class A 387
Class B 128
Class C 67
Institutional Shares 217
Administration Shares 50
Service Shares 2
Goldman Sachs Global Income Fund
Class A 3,575
Class B 431
Class C 78
Institutional Shares 55
Service Shares 4
Goldman Sachs Government Income Fund
Class A 1,557
Class B 472
Class C 97
Institutional Shares 5
Service Shares 2
Goldman Sachs Municipal Income Fund
Class A 16,422
Class B 91
Class C 30
Institutional Shares 3
Service Shares 1
Goldman Sachs High Yield Fund
Class A 2,033
Class B 757
Class C 263
Institutional Shares 4
Service Shares 1
Goldman Sachs Capital Growth Fund
Class A 40,993
Class B 4,833
Class C 772
Institutional Shares 16
Service Shares 7
Goldman Sachs CORE U.S. Equity Fund
Class A 18,374
Class B 4,875
Class C 551
Institutional Shares 39
Service Shares 9
Goldman Sachs Small Cap Value Fund
Class A 22,523
Class B 4,465
Class C 622
Institutional Shares 12
Service Shares 5
Goldman Sachs International Equity Fund
Class A 29,151
Class B 5,679
11
<PAGE>
Class C 362
Institutional Shares 53
Service Shares 12
Goldman Sachs Growth and Income Fund
Class A 64,580
Class B 24,337
Class C 2,578
Institutional Shares 42
Service Shares 15
Goldman Sachs Asia Growth Fund
Class A 9,366
Class B 842
Class C 131
Institutional Shares 9
Service Shares 3
Goldman Sachs Balanced Fund
Class A 7,421
Class B 1,879
Class C 540
Institutional Shares 12
Service Shares 6
Goldman Sachs Mid Cap Equity Fund
Class A 4,565
Class B 2,597
Class C 584
Institutional Shares 50
Service Shares 6
Goldman Sachs CORE Large Cap Growth Fund
Class A 2,891
Class B 1,396
Class C 379
Institutional Shares 24
Service Shares 7
Goldman Sachs Emerging Markets Equity Fund
Class A 379
Class B 31
Class C 21
Institutional Shares 15
Service Shares 5
Goldman Sachs CORE Small Cap Equity Fund
Class A 1,158
Class B 547
Class C 224
Institutional Shares 12
Service Shares 5
Goldman Sachs CORE International Equity Fund
Class A 844
Class B 370
Class C 137
Institutional Shares 17
Service Shares 5
Goldman Sachs Japanese Equity Fund
Class A 0
Class B 0
12
<PAGE>
Class C 0
Institutional Shares 0
Service Shares 0
Goldman Sachs International Small Cap Fund
Class A 0
Class B 0
Class C 0
Institutional Shares 0
Service Shares 0
Goldman Sachs Real Estate Securities Fund
Class A 0
Class B 0
Class C 0
Institutional Shares 0
Service Shares 0
Goldman Sachs Income Strategy Portfolio
Class A 207
Class B 169
Class C 89
Institutional Shares 5
Service Shares 6
Goldman Sachs Growth & Income Strategy Portfolio
Class A 1,206
Class B 1,051
Class C 540
Institutional Shares 7
Service Shares 6
Goldman Sachs Growth Strategy Portfolio
Class A 1,296
Class B 1,216
Class C 476
Institutional Shares 7
Service Shares 5
Goldman Sachs Aggressive Growth Strategy Portfolio
Class A 815
Class B 681
Class C 325
Institutional Shares 5
Service Shares 6
(Information supplied as of April 15, 1998)
ITEM 27. INDEMNIFICATION
---------------
Article III of the Declaration of Trust of Goldman Sachs Trust, Delaware
business trust, provides for indemnification of the Trustees, officers and
agents of the Trust, subject to certain limitations. The Declaration of Trust is
filed as Exhibit 1.
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
13
<PAGE>
for any loss suffered by a Fund, except a loss resulting from wilful
misfeasance, bad faith or gross negligence on the part 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 Management 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 willful misfeasance,
bad faith or gross negligence or the Adviser's reckless disregard of its
obligation under the Management Agreement. The Management Agreements are filed
as Exhibits 5(a) through 5(g);
Section 9 of the Distribution Agreement between the Registrant and Goldman Sachs
dated April 30, 1997 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. A
copy of such Agreements were filed as Exhibits 6 and 9(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, Goldman Sachs
Variable Insurance Trust 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 Trust for Credit
Unions, for shares of Goldman Sachs Trust and for shares of Goldman Sachs
Variable Insurance Trust. 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
14
<PAGE>
principal underwriter, who are members of Goldman, Sachs & Co.'s Executive
Committee. None of the members of the executive committee holds a position or
office with the Registrant.
GOLDMAN SACHS EXECUTIVE COMMITTEE
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
(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 Declaration of Trust, By-laws, minute books of the Registrant and certain
investment adviser records 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
-------------------
Not applicable.
ITEM 32. UNDERTAKINGS
------------
(a) The Portfolios undertake to furnish each person to whom a prospectus is
delivered with the latest Annual Report.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Post-Effective Amendment No.
44 to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City and State of New York on the 28th day of
April, 1998.
GOLDMAN SACHS TRUST
(A Delaware 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. 44 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
NAME TITLE DATE
- ---- ----- ----
*Douglas C. Grip President and
Douglas C. Grip Trustee April 23, 1998
*Scott M. Gilman Principal Accounting
Scott M. Gilman Officer And Principal
Financial Officer April 23, 1998
*David B. Ford Trustee April 23, 1998
David B. Ford
*Mary Patterson McPherson Trustee April 23, 1998
Mary Patterson McPherson
*Ashok N. Bakhru Trustee April 23, 1998
Ashok N. Bakhru
*Alan A. Shuch Trustee April 23, 1998
Alan A. Shuch
*Jackson W. Smart Trustee April 23, 1998
Jackson W. Smart, Jr.
*John P. McNulty Trustee April 23, 1998
John P. McNulty
*William H. Springer Trustee April 23, 1998
William H. Springer
*Richard P. Strubel Trustee April 23, 1998
Richard P. Strubel
Richard P. Strubel
*By:/s/ Michael J. Richman
----------------------
Michael J. Richman,
Attorney-In-Fact
* Pursuant to a power of attorney previously filed.
16
<PAGE>
GOLDMAN SACHS TRUST
(a Delaware Business Trust)
CERTIFICATE OF SECRETARY
The foregoing resolution was duly adopted by the Board of Trustees of
Goldman Sachs Trust at a Meeting of the Board of Trustees held on April 23,
1998, and remains in effect on the date hereof:
RESOLVED, that the trustees and officers of the Trust who may be
required to execute any amendments to the Trust's Registration Statement be, and
each hereby is, authorized to execute a power of attorney appointing Michael J.
Richman, Howard B. Surloff and Valerie A. Zondorak their true and lawful
attorney or attorneys, to execute in their name, place and stead, in their
capacity as trustee or officer, or both, of the Trust any and all amendments to
the Registration Statement, and all instruments necessary or incidental in
connection therewith, and to file the same with the Securities and Exchange
Commission; and either of said attorneys shall have the power to act thereunder
with or without the other said attorney and shall have full power of
substitution and resubstitution; and to do in the name and on behalf of said
trustees and officers, or any or all of them, in any and all capacities, every
act whatsoever requisite or necessary to be done in the premises, as fully and
to all intents and purposes as each of said trustees or officers, or any or all
of them, might or could do in person, said acts of said attorneys, being hereby
ratified and approved.
IN WITNESS WHEREOF, I have hereunto set my hand this 24, day of April,
1998.
/s/ Michael R. Richman
Secretary
<PAGE>
Index To Exhibits
11(a). Consent of Independent Auditors of G/S - ILA
11(b). Consent of Independent and of G/S Trust - Financial Square Fund.
15(d). Distribution Plan Pursuant to Rule 12b-1 for Cash Management Shares.
15(e). Service Plan for Cash Management Shares.
16. Schedule for Computation of Performance Data for the Goldman Sachs New
York Municipal Income Fund.
27. Financial Data Schedules.
<PAGE>
EXHIBIT 11.1
Consent Of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report
for Goldman Sachs Trust Institutional Liquid Assets dated February 12, 1998 (and
to all references to our firm) included in or made a part of the Post-Effective
Amendment No. 44 and Amendment No. 46 to Registration Statement File Nos. 33-
17619 and 811-5349, respectively.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 27, 1998
<PAGE>
EXHIBIT 11.2
Consent Of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report
for Goldman Sachs Trust Financial Square Funds dated February 12, 1998 (and to
all references to our firm) included in or made a part of the Post-Effective
Amendment No. 44 and Amendment No. 46 to Registration Statement File Nos. 33-
17619 and 811-5349, respectively.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 27, 1998
<PAGE>
EXHIBIT 15(d)
GOLDMAN SACHS TRUST
On behalf of each of its series that has designated a class of its
shares as the "Cash Management Shares" thereof
CASH MANAGEMENT SHARES PLAN OF DISTRIBUTION
PURSUANT TO RULE 12B-1
May 1, 1998
WHEREAS, Goldman Sachs Trust (the "Trust") engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust's Board of Trustees has divided the Trust's shares into
series and classes and may create additional series and classes from time to
time;
WHEREAS, the Trust has established a class of shares of beneficial interest
designated as Cash Management Shares (the "Cash Management Shares") with respect
to certain series of the Trust;
WHEREAS, the Trust, on behalf of each series that offers Cash Management
Shares (a "Portfolio"), desires to adopt a Plan of Distribution pursuant to Rule
12b-1 under the Act, and the Board of Trustees of the Trust has determined that
there is a reasonable likelihood that adoption of this Plan of Distribution will
benefit each Portfolio and its shareholders; and
WHEREAS, the Trust, on behalf of each Portfolio, employs Goldman, Sachs & Co.
(the "Distributor") as distributor of its Cash Management Shares pursuant to a
Distribution Agreement dated April 30, 1997, as amended April 23, 1998.
NOW, THEREFORE, the Trust, on behalf of the Portfolios, hereby adopts, and the
Distributor hereby agrees to the terms of, this Plan of Distribution (the
"Plan") in accordance with Rule 12b-1 under the Act on the following terms and
conditions:
1. (a) The Trust, on behalf of each Portfolio, is authorized to
compensate the Distributor for distribution services performed
and expenses incurred by the Distributor in connection with
each Portfolio's Cash Management Shares. The amount of such
compensation paid during any one year shall not exceed .50% of
the average daily net assets of a Portfolio attributable to such
<PAGE>
\
Cash Management Shares. Such compensation shall be calculated
and accrued daily and paid monthly or at such other intervals as
the Board of Trustees may determine. No compensation paid under
this Plan shall be for "personal and account maintenance services
and expenses" as defined in the Service Plan adopted by the
Trust's Board of Trustees in connection with Cash Management
Shares.
(b) Distribution services and expenses for which the Distributor may
be compensated pursuant to this Plan include, without limitation:
compensation to and expenses of brokers and dealers who are
members of the National Association of Securities Dealers, Inc.
("NASD"), other financial services firms that have entered into
an agreement with the Distributor or their respective officers,
sales representatives and employees; compensation to and expenses
of the Distributor and any of its officers, sales representatives
and employees, including allocable overhead, travel and telephone
expenses, who engage in or support distribution of a Portfolio's
Cash Management Shares; printing of reports and prospectuses for
other than existing shareholders; and preparation, printing and
distribution of sales literature and advertising materials.
(c) Appropriate adjustments to payments made pursuant to clause (a)
of this paragraph 1 shall be made whenever necessary to ensure
that no payment is made by the Trust on behalf of a Portfolio in
excess of the applicable maximum cap imposed on asset based,
front-end and deferred sales charges by subsection (d) of Section
2830 of the Conduct Rules of the NASD.
2. This Plan shall not take effect until the Plan, together with any
related agreement, has been approved by votes of a majority of both
(a) the Board of Trustees of the Trust and (b) those Trustees of the
Trust who are not "interested persons" of the Trust (as defined by the
Act) and who have no direct or indirect financial interest in the
operation of the Plan or any agreements related to it (the "Rule 12b-1
Trustees") cast in person at a meeting (or meetings) called for the
purpose of voting on the Plan and such related agreement.
3. This Plan shall remain in effect until April 30, 1999 and shall
continue in effect thereafter so long as such
-2-
<PAGE>
continuance is specifically approved at least annually in the manner
provided for approval of this Plan in paragraph 2.
4. The Distributor shall provide to the Board of Trustees of the Trust
and the Board shall review, at least quarterly, a written report of
distribution services and expenses and the purposes for which such
services were performed and expenses were incurred.
5. This Plan may be terminated with respect to a Portfolio at any time by
a vote of a majority of the Rule 12b-1 Trustees or by vote of a
majority of the outstanding Cash Management Shares of such Portfolio.
6. This Plan may not be amended with respect to any Portfolio to increase
materially the amount of compensation payable pursuant to paragraph 1
hereof unless such amendment is approved by a vote of at least a
majority (as defined in the Act) of the outstanding Cash Management
Shares of such Portfolio, except to the extent that the approval of
another class of such Portfolio is required in accordance with Rule
18f-3 under the Act, in which case the approval of a majority (as
defined in the Act) of the outstanding voting securities of such class
shall also be required. No material amendment to the Plan shall be
made unless approved in the manner provided in paragraph 2 hereof.
7. While this Plan is in effect, the selection and nomination of the
Trustees who are not interested persons (as defined in the Act) of the
Trust shall be committed to the discretion of the Trustees who are not
such interested persons.
8. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 4 hereof, for a
period of not less than six years from the date of the Plan, any such
agreement or any such report, as the case may be, the first two
years in an easily accessible place.
-3-
<PAGE>
9. This Plan only relates to the Cash Management Shares of a Portfolio
and the fee determined in accordance with paragraph 1 shall be based
upon the average daily net assets of the Portfolio attributable to
Cash Management Shares. The obligations of the Trust and the
Portfolios hereunder are not personally binding upon, nor shall resort
be had to the private property of any of the Trustees, shareholders,
officers, employees or agents of the Trust, but only the Trust's
property allocable to Cash Management Shares shall be bound. No
series of the Trust shall be responsible for the obligations of any
other series of the Trust.
IN WITNESS WHEREOF, the Trust (on behalf of each Portfolio that has designated
a class of its shares as the "Cash Management Shares" thereof) and the
Distributor have executed this Plan of Distribution as of the day and year first
above written.
GOLDMAN SACHS TRUST
By:_______________________
Douglas C. Grip
President of the Trust
GOLDMAN, SACHS & CO.
By:________________________
David B. Ford
Managing Director
-4-
<PAGE>
EXHIBIT 15(e)
GOLDMAN SACHS TRUST
(CASH MANAGEMENT SHARES)
SERVICE PLAN
MAY 1, 1998
WHEREAS, Goldman Sachs Trust (the "Trust") engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust has separate series or Portfolios, each of which is a
separate pool of assets with its own investment policies (the "Portfolios"), and
each Portfolio investing in money market instruments may be divided into
multiple separate classes including, in the case of certain Portfolios, the ILA
Class, the ILA Administration Class, the ILA Service Class, the ILA Class B, the
ILA Class C and the Cash Management Class;
WHEREAS, the Trust, on behalf of shares of the Cash Management Class of each
Portfolio that offers such shares, desires to adopt a Service Plan and the Board
of Trustees of the Trust has determined that there is a reasonable likelihood
that adoption of this Service Plan will benefit the Trust and its shareholders;
and
WHEREAS, institutions (including Goldman, Sachs & Co.) ("Service
Organizations") may act directly or indirectly as nominees and recordholders of
shares of the Cash Management Shares for their respective customers who are or
may become beneficial owners of such shares (the "Customers"), provide services
to other Service Organizations intended to facilitate or improve a Service
Organization's services to its Customers with respect to the Portfolios and/or
perform certain account administration and shareholder liaison services with
respect to the Customers pursuant to Agreements between the Trust, on behalf of
the Cash Management Shares of each Portfolio, and such Service Organizations
(the "Agreements").
NOW, THEREFORE, the Trust, on behalf of the Cash Management Shares of each
Portfolio, hereby adopts this Service Plan (the "Plan") on the following terms
and conditions:
1. (a) The Trust, on behalf of the Cash Management Shares of each
Portfolio, is authorized to pay each Service Organization the monthly or
quarterly fee specified in the Agreement with such Service Organization, for (1)
administration services and (2)
<PAGE>
personal and account maintenance services performed and expenses incurred by the
Service Organization in connection with such Portfolio's Cash Management Shares.
The fee paid for such services during any one year shall not exceed .50% of the
average daily net asset value of the shares of the Cash Management Class of such
Portfolio which are owned beneficially by the Customers of such Service
Organization during such period; provided, however, that the fee paid for
personal and account maintenance services and expenses shall not exceed .25% of
the average daily net asset value of the shares of the Cash Management Class of
such Portfolio which are owned beneficially by the Customers of such Service
Organization during such period.
(b) Administration services and expenses for which a Service
Organization may be compensated or reimbursed under this Plan include, without
limitation: (i) acting, or arranging for another party to act, as recordholder
and nominee of all shares of the Cash Management Class beneficially owned by
Customers; (ii) establishing and maintaining individual accounts and records
with respect to shares of the Cash Management Class owned by Customers; (iii)
processing and issuing confirmations concerning Customer orders to purchase,
redeem and exchange shares of the Cash Management Class; (iv) receiving and
transmitting funds representing the purchase price or redemption proceeds of
such shares of the Cash Management Class; (v) providing services to Customers
intended to facilitate or improve their understanding of the benefits and risks
of a Portfolio; (vi) facilitating the inclusion of a Portfolio in investment,
retirement, asset allocation, cash management or sweep accounts or similar
products or services offered to Customers by or through Service Organizations;
(vii) facilitating electronic or computer trading and/or processing in a
Portfolio or providing electronic, computer or other database information
regarding a Portfolio to Customers; (viii) developing, maintaining and
supporting systems necessary to support accounts for Cash Management Shares; and
(ix) performing any other services which do not constitute "personal and account
maintenance services" within the meaning of the National Association of
Securities Dealers, Inc.'s Conduct Rules.
(c) Personal and account maintenance services and expenses for which a
Service Organization may be compensated under this Plan include, without
limitation, (i) providing facilities to answer inquiries and respond to
correspondence with Customers and other investors about the status of their
accounts or about other aspects of the Trust or the applicable Portfolio; (ii)
acting as liaison between Customers and the Trust, including obtaining
information from the Trust and assisting the Trust in correcting errors and
resolving problems; (iii) providing such statistical and other information as
may be reasonably requested by the Trust or necessary for the Trust to comply
with applicable federal or state law; (iv) responding to investor requests for
prospectuses; (v) displaying and making prospectuses available on the Service
-2-
<PAGE>
Organization's premises; and (vi) assisting Customers in completing application
forms, selecting dividend and other account options and opening custody accounts
with the Service Organization.
(d) Appropriate adjustments to payments made pursuant to clause (a) of
this paragraph 1 shall be made whenever necessary to ensure that no payment is
made by the Trust on behalf of a Portfolio in excess of the applicable maximum
cap imposed on asset based, front-end and deferred sales charges by the National
Association of Securities Dealers, Inc.'s Conduct Rules. No Portfolio may
compensate a Service Organization for services provided with respect to another
Portfolio.
2. This Plan shall not take effect as to any Portfolio until the Plan,
together with any related agreements, has been approved for such Portfolio by
votes of a majority of both (a) the Board of Trustees of the Trust and (b) those
Trustees of the Trust who are not "interested persons" of the Trust and who have
no direct or indirect financial interest in the operation of the Plan or any
agreements related to it (the "non-interested Trustees") cast in person at a
meeting (or meetings) called for the purpose of voting on the Plan and such
related agreements.
3. This Plan shall remain in effect until April 30, 1999 and shall
continue in effect thereafter so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
paragraph 2.
4. The President, Vice President, Treasurer or any Assistant Treasurer of
the Trust shall provide the Board of Trustees of the Trust and the Board shall
review, at least quarterly, a written report of services performed by and fees
paid to each Service Organization under the Agreements and this Plan.
5. This Plan may be terminated as to the Cash Management Class of any
Portfolio at any time by vote of a majority of the non-interested Trustees or by
vote of a majority of the outstanding voting securities of the Cash Management
Class of such Portfolio.
6. This Plan may not be amended to increase materially the amount of
compensation payable pursuant to paragraph 1 hereof with respect to a Portfolio
unless such amendment is approved by a vote of at least a majority (as defined
in the 1940 Act) of the outstanding voting securities of the Cash Management
Class of such Portfolio, except to the extent that the approval of another class
of such Portfolio is required in accordance with Rule 18f-3 under the 1940 Act,
in which case the approval of a majority (as defined in the 1940 Act) of the
outstanding voting securities of such class shall also be required. No material
amendment to this Plan shall be made unless approved in the manner provided in
paragraph
-3-
<PAGE>
2 hereof.
7. While this Plan is in effect, the selection and nomination of the non-
interested Trustees of the Trust shall be committed to the discretion of the
non-interested Trustees.
8. The Trust shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 4 hereof, for a period of not less
than six years from the date of the Plan, any such agreement or any such report,
as the case may be, the first two years in an easily accessible place.
9. In the case of a Portfolio that offers more than one class of Shares,
this Plan only relates to the Cash Management Shares of such Portfolio and the
fee determined in accordance with paragraph 1 shall be based upon the average
daily net assets of the Portfolio attributable to Class Management Shares. The
obligations of the Trust and the Portfolio hereunder are not personally binding
upon, nor shall resort be had to the private property of any of the Trustees,
shareholders, officers, employees or agents of the Trust, but only the Trust's
property allocable to Class Management Shares shall be bound. No series of the
Trust shall be responsible for the obligations of any other series of the Trust.
IN WITNESS WHEREOF, the Trust, on behalf of the Cash Management Class of
each Portfolio, has executed this Service Plan as of the day and year first
written above.
GOLDMAN SACHS TRUST
(on behalf of the Cash Management Class of each
Portfolio)
By ________________________
Douglas C. Grip
President of the Trust
-4-
<PAGE>
EXHIBIT 16-A(1) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- ----------------------------------------------------------------
SEC 30-DAY YIELD & TAX EQUIVALENT (Assuming the maximum sales load)-period
- --------------------------------------------------------------------------
ending JUNE 30,1994
- -------------------
Formula used in calculating SEC 30-day yield:
a - b
YIELD = 2 * [---- = 1) to the power of 6 - 1]
c * d
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the 30-day
period ending June 30, 1994
d = the maximum offering price per share on June 30, 1994
For the 30-day period ending June 30, 1994, these variables were as
follows:
a = 13,295.21
b = 0.00
c = 202,639.868
d = 15.52
Thus, the 30-Day Yield computed to 5.13%
-----------
Tax-Equivalent Yield* 8.49%
-----------
EXHIBIT 16-A(2) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- ----------------------------------------------------------------
30-DAY YIELD & TAX-EQUIVALENT YIELD (ASSUMING THE MAXIMUM SALES LOAD AND NO FEE
- -------------------------------------------------------------------------------
WAIVERS OR EXPENSE LIMITATIONS) - PERIOD ENDING JUNE 30, 1994
- -------------------------------------------------------------
Formula used in calculating SEC 30-day yield:
a - b
YIELD = 2 * [(---- + 1) to the power of 6 - 1]
c * d
a = dividends and interest earned during the period
b = expenses accrued for the period
c = the average daily number of shares outstanding during the 30-day
period ending June 30, 1994
d = the maximum offering price per share on June 30, 1994
For the 30-day period ending June 30, 1994, these variables were as
follows:
a = 13,295.21
b = 20,300.00
c = 202,639.868
d = 15.52
Thus, the 30-Day Yield computed to -2.66%
-----------
Tax-Equivalent Yield* -4.40%
-----------
The Tax-Equivalent Yields assume a Federal Income Tax Rate of 39.6% and are
calculated as follows:
Tax-Equivalent Yield = 30-Day Yield / (1 - Federal Tax Rate )
<PAGE>
EXHIBIT 16-A(3) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- ----------------------------------------------------------------
30-DAY DISTRIBUTION RATE (Assuming the maximum sales load) - Period ending June
- -------------------------------------------------------------------------------
30, 1994
- --------
Formula used in calculating 30-day distribution rate:
RATE: a
------ ------- X 365 days / 30 days
b
Where:
a = total distributions per share for the 30-day period ended
June 30, 1994
b = the maximum offering price per share on June 30, 1994
For the 30-day period ending June 30, 1994, these variables were as
follows:
a = 0.064103938
b = 15.52
Thus, the 30-Day Distribution Rate computed to 5.03%
-----
EXHIBIT 16-A(4) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- ----------------------------------------------------------------
30-DAY DISTRIBUTION RATE (ASSUMING THE MAXIMUM SALES LOAD AND NO FEE WAIVERS OR
- -------------------------------------------------------------------------------
EXPENSE LIMITATIONS) - PERIOD ENDING JUNE 30, 1994
- --------------------------------------------------
Formula used in calculating 30-day distribution rate:
RATE: a
------ X 365 days / 30 days
b
Where: a = total distributions per share for the 30-day period ended
June 30, 1994
b = the maximum offering price per share on June 30, 1994
For the 30-day period ending June 30, 1994, these variables were as
follows:
a = -0.062892986191
b = 15.52
Thus, the 30-Day Distribution Rate computed to -4.93%
------
<PAGE>
EXHIBIT 16-A(5) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- ----------------------------------------------------------------
30-DAY DISTRIBUTION RATE (Assuming the maximum sales load) - Period ending
- --------------------------------------------------------------------------
June 30, 1994
- -------------
Formula used in calculating 30-day distribution rate:
RATE: a
------ X 365 days / 30 days
b
Where: a = total distributions per share for the 30-day period ended
June 30, 1994
b = the maximum offering price per share on June 30, 1994
For the 30-day period ending June 30, 1994, these variables were as
follows:
a = 0.064103938
b = 14.55
Thus, the 30-Day Distribution Rate computed to 5.36%
-----
EXHIBIT 16-A(6) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- ----------------------------------------------------------------
30-DAY DISTRIBUTION RATE (ASSUMING THE MAXIMUM SALES LOAD AND NO FEE WAIVERS OR
- -------------------------------------------------------------------------------
EXPENSE LIMITATIONS) - PERIOD ENDING JUNE 30, 1994
- --------------------------------------------------
Formula used in calculating 30-day distribution rate:
RATE: a
------ X 365 days / 30 days
b
Where: a = total distributions per share for the 30-day period ended
June 30, 1994
b = the maximum offering price per share on June 30, 1994
For the 30-day period ending June 30, 1994, these variables were as
follows:
a = -0.062892986191
b = 14.55
Thus, the 30-Day Distribution Rate computed to -5.26%
------
<PAGE>
EXHIBIT 16-A(7) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- ----------------------------------------------------------------
CUMULATIVE TOTAL RETURN (Assuming the maximum sales load) - April 8, 1994
- -------------------------------------------------------------------------
(Inception) to June 30, 1994
- ----------------------------
CUMULATIVE TOTAL RETURN
-----------------------
ERV
Formula: T = ( ------ ) - 1
P
Where:
P = a hypothetical initial payment of $1,000 made on
April 8, 1994 (INCEPTION)
T = Cumulative total return
ERV = Ending Redeemable Value of a Hypothetical $1,000
payment made at the beginning of the period
assuming the maximum sales load of 4.5%
For the period ending June 30, 1994, these variables were as follows:
P = $1,000.00
T = $1,027.83
CUMULATIVE TOTAL RETURN = 2.78%
----
EXHIBIT 16-A(8) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- ----------------------------------------------------------------
CUMULATIVE TOTAL RETURN (Assuming the maximum sales load and no fee waivers or
- ------------------------------------------------------------------------------
expense limitations) - April 8, 1998 (Inception) to June 30, 1994
- -----------------------------------------------------------------
CUMULATIVE TOTAL RETURN
-----------------------
ERV
Formula: T = ( ------ ) - 1
P
Where:
P = a hypothetical initial payment of $1,000
made on April 8, 1994 (INCEPTION)
T = Cumulative total return
ERV = Ending Redeemable Value of a Hypothetical
$1,000 payment made at the beginning of the
period assuming the maximum sales load of 4.5%
For the period ending June 30, 1994, these variables were as follows:
P = $1,000.00
T = $ 981.57
CUMULATIVE TOTAL RETURN = -1.84%
-----
<PAGE>
EXHIBIT 16-A(9) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- ----------------------------------------------------------------
CUMULATIVE TOTAL RETURN (ASSUMING THE MAXIMUM SALES LOAD) - APRIL 8, 1994
- -------------------------------------------------------------------------
(INCEPTION) TO JUNE 30, 1994
- ----------------------------
CUMULATIVE TOTAL RETURN
----------------------
ERV
Formula: T = ( ------ ) - 1
P
Where:
P = a hypothetical initial payment of $1,000
made on April 8, 1994 (INCEPTION)
T = Cumulative total return
ERV = Ending Redeemable Value of a Hypothetical $1,000
payment made at the beginning of the period
assuming the maximum sales load of 4.5%
For the period ending June 30, 1994, these variables were as follows:
P = $1,000.00
T = $ 945.33
CUMULATIVE TOTAL RETURN = -5.47%
------
EXHIBIT 16-A(10) FOR GOLDMAN SACHS NEW YORK MUNICIPAL INCOME FUND
- -----------------------------------------------------------------
CUMULATIVE TOTAL RETURN (Assuming the maximum sales load and no fee waivers or
- ------------------------------------------------------------------------------
expense limitations) - April 8, 1998 (Inception) to June 30, 1994
- -----------------------------------------------------------------
CUMULATIVE TOTAL RETURN
----------------------
ERV
Formula: T = ( ------ ) - 1
P
Where:
P = a hypothetical initial payment of $1,000
made on April 8, 1994 (INCEPTION)
T = Cumulative total return
ERV = Ending Redeemable Value of a Hypothetical $1,000
payment made at the beginning of the period
assuming the maximum sales load of 4.5%
For the period ending June 30, 1994, these variables were as follows:
P = $1,000.00
T = $ 989.88
CUMULATIVE TOTAL RETURN = -1.01%
------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 212
<NAME> ILA PRIME OBLIGATIONS PORTFOLIO-CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 974,606,226
<INVESTMENTS-AT-VALUE> 974,606,226
<RECEIVABLES> 7,554,296
<ASSETS-OTHER> 153,697
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 982,314,219
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,972,162
<TOTAL-LIABILITIES> 5,972,162
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 976,343,682
<SHARES-COMMON-STOCK> 1,573,829
<SHARES-COMMON-PRIOR> 346,328
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,625)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 976,342,057
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 71,347,525
<OTHER-INCOME> 0
<EXPENSES-NET> (5,682,050)
<NET-INVESTMENT-INCOME> 65,665,475
<REALIZED-GAINS-CURRENT> 7,264
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 65,672,739
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26,790)
<DISTRIBUTIONS-OF-GAINS> (3)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,100,238,207
<NUMBER-OF-SHARES-REDEEMED> (8,424,145,429)
<SHARES-REINVESTED> 36,672,387
<NET-CHANGE-IN-ASSETS> (287,236,039)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (421)
<GROSS-ADVISORY-FEES> 4,412,869
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,842,719
<AVERAGE-NET-ASSETS> 1,260,840,239
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .043
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.043)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 215
<NAME> ILA PRIME OBLIGATIONS PORTFOLIO-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 974,606,226
<INVESTMENTS-AT-VALUE> 974,606,226
<RECEIVABLES> 7,554,296
<ASSETS-OTHER> 153,697
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 982,314,219
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,972,162
<TOTAL-LIABILITIES> 5,972,162
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 976,343,682
<SHARES-COMMON-STOCK> 28,147,490
<SHARES-COMMON-PRIOR> 23,775,858
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,625)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 976,342,057
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 71,347,525
<OTHER-INCOME> 0
<EXPENSES-NET> (5,682,050)
<NET-INVESTMENT-INCOME> 65,665,475
<REALIZED-GAINS-CURRENT> 7,264
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 65,672,739
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,861,296)
<DISTRIBUTIONS-OF-GAINS> (240)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,100,238,207
<NUMBER-OF-SHARES-REDEEMED> (8,424,145,429)
<SHARES-REINVESTED> 36,672,387
<NET-CHANGE-IN-ASSETS> (287,236,039)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (421)
<GROSS-ADVISORY-FEES> 4,412,869
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,842,719
<AVERAGE-NET-ASSETS> 1,260,840,239
<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> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 213
<NAME> ILA PRIME OBLIGATIONS PORTFOLIO-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
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<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 216
<NAME> ILA PRIME OBLIGATIONS PORTFOLIO-SERVICE
<S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 217
<NAME> ILA PRIME OBLIGATIONS PORTFOLIO-CLASS C
<S> <C>
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<TABLE> <S> <C>
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 293
<NAME> ILA TAX-EXEMPT NEW YORK PORTFOLIO-INSTITUTIONAL
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 295
<NAME> ILA TAX-EXEMPT NEW YORK PORTFOLIO-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-START> JAN-01-1997
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<INVESTMENTS-AT-COST> 134,405,009
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 296
<NAME> ILA TAX-EXEMPT NEW YORK PORTFOLIO-SERVICE
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
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<INVESTMENTS-AT-COST> 134,405,009
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 283
<NAME> ILA TAX-EXEMPT CALIFORNIA PORTFOLIO-INSTITUTIONAL
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
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<NAME> ILA TAX-EXEMPT CALIFORNIA PORTFOLIO-ADMINISTRATION
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<TABLE> <S> <C>
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 286
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<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
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<TABLE> <S> <C>
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
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<NAME> ILA TAX-EXEMPT DIVERSIFIED PORTFOLIO-ADMINISTRATION
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<SHARES-REINVESTED> 43,365,293
<NET-CHANGE-IN-ASSETS> (64,494,975)
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<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> (244,390)
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<AVERAGE-NET-ASSETS> 1,653,812,529
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<PER-SHARE-NAV-END> 1.00
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 276
<NAME> ILA TAX-EXEMPT DIVERSIFIED PORTFOLIO-SERVICE
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<PERIOD-START> JAN-01-1997
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<INVESTMENTS-AT-COST> 1,592,350,288
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<RECEIVABLES> 10,043,125
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<ACCUMULATED-NET-GAINS> 0
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<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,537,965,838
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCT TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 263
<NAME> ILA FEDERAL PORTFOLIO-INSTITUTIONAL
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<INVESTMENTS-AT-COST> 2,694,905,170
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<TABLE> <S> <C>
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 265
<NAME> ILA FEDERAL PORTFOLIO-ADMINISTRATION
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<TABLE> <S> <C>
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 266
<NAME> ILA FEDERAL PORTFOLIO-SERVICE
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 253
<NAME> ILA TREASURY INSTRUMENTS PORTFOLIO-INSTITUTIONAL
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<DISTRIBUTIONS-OF-GAINS> (51,900)
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<NUMBER-OF-SHARES-SOLD> 3,670,371,899
<NUMBER-OF-SHARES-REDEEMED> (4,193,476,260)
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<GROSS-EXPENSE> 4,685,283
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<PER-SHARE-NAV-BEGIN> 1.00
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<PER-SHARE-DIVIDEND> (.050)
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<PER-SHARE-NAV-END> 1.00
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 255
<NAME> ILA TREASURY INSTRUMENTS PORTFOLIO-ADMINISTRATION
<S> <C>
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<PERIOD-START> JAN-01-1997
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<NUMBER-OF-SHARES-SOLD> 3,670,371,899
<NUMBER-OF-SHARES-REDEEMED> (4,193,476,260)
<SHARES-REINVESTED> 16,821,105
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,685,283
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<PER-SHARE-DIVIDEND> (.049)
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<PER-SHARE-NAV-END> 1.00
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 256
<NAME> ILA TREASURY INSTRUMENTS PORTFOLIO-SERVICE
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<PERIOD-TYPE> 12-MOS
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<PERIOD-START> JAN-01-1997
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<INVESTMENTS-AT-COST> 715,872,520
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<NUMBER-OF-SHARES-SOLD> 3,670,371,899
<NUMBER-OF-SHARES-REDEEMED> (4,193,476,260)
<SHARES-REINVESTED> 16,821,105
<NET-CHANGE-IN-ASSETS> (506,294,141)
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<GROSS-EXPENSE> 4,685,283
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<PER-SHARE-DIVIDEND> (.046)
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<PER-SHARE-NAV-END> 1.00
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 243
<NAME> ILA TREASURY OBLIGATIONS PORTFOLIO-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-START> JAN-01-1997
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<INVESTMENTS-AT-VALUE> 819,773,645
<RECEIVABLES> 2,580,192
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<OVERDISTRIBUTION-GAINS> (4,632)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 818,673,275
<DIVIDEND-INCOME> 0
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<NET-INVESTMENT-INCOME> 38,604,333
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> (72,833)
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<NUMBER-OF-SHARES-SOLD> 5,211,063,367
<NUMBER-OF-SHARES-REDEEMED> (5,212,556,500)
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<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,879,084
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 245
<NAME> ILA TREASURY OBLIGATIONS PORTFOLIO-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
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<INVESTMENTS-AT-COST> 819,773,645
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (4,632)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 818,673,275
<DIVIDEND-INCOME> 0
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<DISTRIBUTIONS-OF-GAINS> (14,954)
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<NUMBER-OF-SHARES-SOLD> 5,211,063,367
<NUMBER-OF-SHARES-REDEEMED> (5,212,556,500)
<SHARES-REINVESTED> 13,130,596
<NET-CHANGE-IN-ASSETS> 11,606,725
<ACCUMULATED-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,879,084
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<PER-SHARE-NAV-END> 1.00
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANNUAL REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 246
<NAME> ILA TREASURY OBLIGATIONS PORTFOLIO-SERVICE
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<PERIOD-START> JAN-01-1997
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<INVESTMENTS-AT-COST> 819,773,645
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<NET-ASSETS> 818,673,275
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<NUMBER-OF-SHARES-SOLD> 5,211,063,367
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<PER-SHARE-NAV-END> 1.00
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 233
<NAME> ILA GOVERNMENT PORTFOLIO-INSTITUTIONAL
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</TABLE>
<TABLE> <S> <C>
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 235
<NAME> ILA GOVERNMENT PORTFOLIO-ADMINISTRATION
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
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<PAID-IN-CAPITAL-COMMON> 554,392,483
<SHARES-COMMON-STOCK> 83,787,175
<SHARES-COMMON-PRIOR> 94,213,229
<ACCUMULATED-NII-CURRENT> 2,840
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 52,793
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 554,448,116
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 35,986,975
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<EXPENSES-NET> 3,097,691
<NET-INVESTMENT-INCOME> 32,889,284
<REALIZED-GAINS-CURRENT> 39,273
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> (8,027)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,631,302,781
<NUMBER-OF-SHARES-REDEEMED> (3,919,007,935)
<SHARES-REINVESTED> 17,235,209
<NET-CHANGE-IN-ASSETS> (270,485,835)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 71,523
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,258,653
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,128,681
<AVERAGE-NET-ASSETS> 645,329,328
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .048
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.048)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 223
<NAME> ILA MONEY MARKET PORTFOLIO-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,147,485,683
<INVESTMENTS-AT-VALUE> 1,147,485,683
<RECEIVABLES> 8,003,135
<ASSETS-OTHER> 95,381
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,155,584,199
<PAYABLE-FOR-SECURITIES> 14,998,553
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,492,949
<TOTAL-LIABILITIES> 21,491,502
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,134,092,697
<SHARES-COMMON-STOCK> 806,095,979
<SHARES-COMMON-PRIOR> 703,096,586
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,134,092,697
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 69,192,244
<OTHER-INCOME> 0
<EXPENSES-NET> 5,031,414
<NET-INVESTMENT-INCOME> 64,160,830
<REALIZED-GAINS-CURRENT> 7,828
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 64,168,658
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (47,350,587)
<DISTRIBUTIONS-OF-GAINS> (6,079)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,177,000,201
<NUMBER-OF-SHARES-REDEEMED> (10,086,895,886)
<SHARES-REINVESTED> 54,788,884
<NET-CHANGE-IN-ASSETS> 144,892,790
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 409
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,269,169
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,623,695
<AVERAGE-NET-ASSETS> 1,219,762,617
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .053
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.053)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 225
<NAME> ILA MONEY MARKET PORTFOLIO-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,147,485,683
<INVESTMENTS-AT-VALUE> 1,147,485,683
<RECEIVABLES> 8,003,135
<ASSETS-OTHER> 95,381
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,155,584,199
<PAYABLE-FOR-SECURITIES> 14,998,553
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,492,949
<TOTAL-LIABILITIES> 21,491,502
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,134,092,697
<SHARES-COMMON-STOCK> 307,480,205
<SHARES-COMMON-PRIOR> 257,258,398
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,134,092,697
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 69,192,244
<OTHER-INCOME> 0
<EXPENSES-NET> 5,031,414
<NET-INVESTMENT-INCOME> 64,160,830
<REALIZED-GAINS-CURRENT> 7,828
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 64,168,658
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,644,221)
<DISTRIBUTIONS-OF-GAINS> (2,008)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,177,000,201
<NUMBER-OF-SHARES-REDEEMED> (10,086,895,886)
<SHARES-REINVESTED> 54,788,884
<NET-CHANGE-IN-ASSETS> 144,892,790
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 409
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,269,169
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,623,695
<AVERAGE-NET-ASSETS> 1,219,762,617
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .052
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.052)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 226
<NAME> ILA MONEY MARKET PORTFOLIO-SERVICE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,147,485,683
<INVESTMENTS-AT-VALUE> 1,147,485,683
<RECEIVABLES> 8,003,135
<ASSETS-OTHER> 95,381
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,155,584,199
<PAYABLE-FOR-SECURITIES> 14,988,553
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,492,949
<TOTAL-LIABILITIES> 21,491,502
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,134,092,697
<SHARES-COMMON-STOCK> 20,516,513
<SHARES-COMMON-PRIOR> 28,844,514
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,134,092,697
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 69,192,244
<OTHER-INCOME> 0
<EXPENSES-NET> 5,031,414
<NET-INVESTMENT-INCOME> 64,160,830
<REALIZED-GAINS-CURRENT> 7,828
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 64,168,658
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,166,022)
<DISTRIBUTIONS-OF-GAINS> (150)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,177,000,201
<NUMBER-OF-SHARES-REDEEMED> (10,086,895,886)
<SHARES-REINVESTED> 54,788,884
<NET-CHANGE-IN-ASSETS> 144,892,790
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 409
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,269,169
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,623,695
<AVERAGE-NET-ASSETS> 1,219,762,617
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .049
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.049)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 423
<NAME> FINANCIAL SQUARE PREMIUM MONEY MARKET FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> AUG-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 226,904,703
<INVESTMENTS-AT-VALUE> 226,904,703
<RECEIVABLES> 391,533
<ASSETS-OTHER> 134,784
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 227,431,020
<PAYABLE-FOR-SECURITIES> 4,999,518
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,410,213
<TOTAL-LIABILITIES> 6,409,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221,021,289
<SHARES-COMMON-STOCK> 218,192,392
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 221,021,289
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,265,812
<OTHER-INCOME> 0
<EXPENSES-NET> (71,760)
<NET-INVESTMENT-INCOME> 4,194,052
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,194,052
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,890,656)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,075,863,230
<NUMBER-OF-SHARES-REDEEMED> (856,337,659)
<SHARES-REINVESTED> 1,495,718
<NET-CHANGE-IN-ASSETS> 221,021,289
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 154,238
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 340,068
<AVERAGE-NET-ASSETS> 179,489,031
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .024
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.024)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT
DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 424
<NAME> FINANCIAL SQUARE PREMIUM MONEY MARKET FUND-PREFERRED
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> AUG-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 226,904,703
<INVESTMENTS-AT-VALUE> 226,904,703
<RECEIVABLES> 391,533
<ASSETS-OTHER> 134,784
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 227,431,020
<PAYABLE-FOR-SECURITIES> 4,999,518
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,410,213
<TOTAL-LIABILITIES> 6,409,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221,021,289
<SHARES-COMMON-STOCK> 557,827
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 221,021,289
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,265,812
<OTHER-INCOME> 0
<EXPENSES-NET> (71,760)
<NET-INVESTMENT-INCOME> 4,194,052
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,194,052
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,210)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,075,863,230
<NUMBER-OF-SHARES-REDEEMED> (856,337,659)
<SHARES-REINVESTED> 1,495,718
<NET-CHANGE-IN-ASSETS> 221,021,289
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 154,238
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 340,068
<AVERAGE-NET-ASSETS> 179,489,031
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .023
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.023)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 425
<NAME> FINANCIAL SQUARE PREMIUM MONEY MARKET FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> AUG-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 226,904,703
<INVESTMENTS-AT-VALUE> 226,904,703
<RECEIVABLES> 391,533
<ASSETS-OTHER> 134,784
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 227,431,020
<PAYABLE-FOR-SECURITIES> 4,999,518
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,410,213
<TOTAL-LIABILITIES> 6,409,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221,021,289
<SHARES-COMMON-STOCK> 1,456,698
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 221,021,289
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,265,812
<OTHER-INCOME> 0
<EXPENSES-NET> (71,760)
<NET-INVESTMENT-INCOME> 4,194,052
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,194,052
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (295,011)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,075,863,230
<NUMBER-OF-SHARES-REDEEMED> (856,337,659)
<SHARES-REINVESTED> 1,495,718
<NET-CHANGE-IN-ASSETS> 221,021,289
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 154,238
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 340,068
<AVERAGE-NET-ASSETS> 179,489,031
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .022
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.022)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 426
<NAME> FINANCIAL SQUARE PREMIUM MONEY MARKET FUND-SERVICE
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> AUG-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 226,904,703
<INVESTMENTS-AT-VALUE> 226,904,703
<RECEIVABLES> 391,533
<ASSETS-OTHER> 134,784
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 227,431,020
<PAYABLE-FOR-SECURITIES> 4,999,518
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,410,213
<TOTAL-LIABILITIES> 6,409,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 221,021,289
<SHARES-COMMON-STOCK> 814,372
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 221,021,289
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,265,812
<OTHER-INCOME> 0
<EXPENSES-NET> (71,760)
<NET-INVESTMENT-INCOME> 4,194,052
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,194,052
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,175)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,075,863,230
<NUMBER-OF-SHARES-REDEEMED> (856,337,659)
<SHARES-REINVESTED> 1,495,718
<NET-CHANGE-IN-ASSETS> 221,021,289
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 154,238
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 340,068
<AVERAGE-NET-ASSETS> 179,489,031
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .022
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.022)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 413
<NAME> FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,188,671,470
<INVESTMENTS-AT-VALUE> 1,188,671,470
<RECEIVABLES> 7,168,593
<ASSETS-OTHER> 632,409
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,196,472,472
<PAYABLE-FOR-SECURITIES> 72,470,257
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,816,052
<TOTAL-LIABILITIES> 76,286,309
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,120,201,103
<SHARES-COMMON-STOCK> 939,421,140
<SHARES-COMMON-PRIOR> 440,850,118
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (14,940)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,120,186,163
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,453,737
<OTHER-INCOME> 0
<EXPENSES-NET> (1,917,391)
<NET-INVESTMENT-INCOME> 28,536,346
<REALIZED-GAINS-CURRENT> (2,081)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 28,534,265
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23,828,347)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,856,129,085
<NUMBER-OF-SHARES-REDEEMED> (6,285,421,492)
<SHARES-REINVESTED> 8,395,593
<NET-CHANGE-IN-ASSETS> 579,101,105
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (12,859)
<GROSS-ADVISORY-FEES> 1,694,448
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,373,357
<AVERAGE-NET-ASSETS> 826,559,717
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .035
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.035)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTIANS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT
DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 414
<NAME> FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND-PREFERRED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,188,671,470
<INVESTMENTS-AT-VALUE> 1,188,671,470
<RECEIVABLES> 7,168,593
<ASSETS-OTHER> 632,409
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,196,472,472
<PAYABLE-FOR-SECURITIES> 72,470,257
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,816,052
<TOTAL-LIABILITIES> 76,286,309
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,120,201,103
<SHARES-COMMON-STOCK> 35,151,663
<SHARES-COMMON-PRIOR> 28,730,558
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (14,940)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,120,186,163
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,453,737
<OTHER-INCOME> 0
<EXPENSES-NET> (1,917,391)
<NET-INVESTMENT-INCOME> 28,536,346
<REALIZED-GAINS-CURRENT> (2,081)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 28,534,265
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (542,008)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,856,129,085
<NUMBER-OF-SHARES-REDEEMED> (6,285,421,492)
<SHARES-REINVESTED> 8,395,593
<NET-CHANGE-IN-ASSETS> 579,101,105
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (12,859)
<GROSS-ADVISORY-FEES> 1,694,448
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,373,357
<AVERAGE-NET-ASSETS> 826,559,717
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .039
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.039)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 415
<NAME> FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,188,671,470
<INVESTMENTS-AT-VALUE> 1,188,671,470
<RECEIVABLES> 7,168,593
<ASSETS-OTHER> 632,409
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,196,472,472
<PAYABLE-FOR-SECURITIES> 72,470,257
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,816,052
<TOTAL-LIABILITIES> 76,286,309
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,120,201,103
<SHARES-COMMON-STOCK> 103,049,763
<SHARES-COMMON-PRIOR> 51,661,795
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (14,940)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,120,186,163
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,453,737
<OTHER-INCOME> 0
<EXPENSES-NET> (1,917,391)
<NET-INVESTMENT-INCOME> 28,536,346
<REALIZED-GAINS-CURRENT> (2,081)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 28,534,265
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,161,663)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,856,129,085
<NUMBER-OF-SHARES-REDEEMED> (6,285,421,492)
<SHARES-REINVESTED> 8,395,593
<NET-CHANGE-IN-ASSETS> 579,101,105
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (12,859)
<GROSS-ADVISORY-FEES> 1,694,448
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,373,357
<AVERAGE-NET-ASSETS> 826,559,717
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .033
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.033)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT
DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 416
<NAME> FINANCIAL SQUARE TAX-FREE MONEY MARKET FUND-SERVICE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,188,671,470
<INVESTMENTS-AT-VALUE> 1,188,671,470
<RECEIVABLES> 7,168,593
<ASSETS-OTHER> 632,409
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,196,472,472
<PAYABLE-FOR-SECURITIES> 72,470,257
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,816,052
<TOTAL-LIABILITIES> 76,286,309
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,120,201,103
<SHARES-COMMON-STOCK> 42,578,537
<SHARES-COMMON-PRIOR> 19,855,446
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (14,940)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,120,186,163
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,453,737
<OTHER-INCOME> 0
<EXPENSES-NET> (1,917,391)
<NET-INVESTMENT-INCOME> 28,536,346
<REALIZED-GAINS-CURRENT> (2,081)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 28,534,265
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,004,328)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,856,129,085
<NUMBER-OF-SHARES-REDEEMED> (6,285,421,492)
<SHARES-REINVESTED> 8,395,593
<NET-CHANGE-IN-ASSETS> 579,101,105
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (12,859)
<GROSS-ADVISORY-FEES> 1,694,448
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,373,357
<AVERAGE-NET-ASSETS> 826,559,717
<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> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 403
<NAME> FINANCIAL SQUARE GOVERNMENT FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,404,187,810
<INVESTMENTS-AT-VALUE> 2,404,187,810
<RECEIVABLES> 9,708,940
<ASSETS-OTHER> 382,881
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,414,279,631
<PAYABLE-FOR-SECURITIES> 35,917,844
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,671,674
<TOTAL-LIABILITIES> 48,589,518
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,365,690,113
<SHARES-COMMON-STOCK> 1,478,535,045
<SHARES-COMMON-PRIOR> 858,743,905
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,365,690,113
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 117,069,858
<OTHER-INCOME> 0
<EXPENSES-NET> (6,988,452)
<NET-INVESTMENT-INCOME> 110,081,406
<REALIZED-GAINS-CURRENT> 127,727
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 110,209,133
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (70,362,803)
<DISTRIBUTIONS-OF-GAINS> (94,763)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,842,203,467
<NUMBER-OF-SHARES-REDEEMED> (19,734,267,186)
<SHARES-REINVESTED> 30,237,427
<NET-CHANGE-IN-ASSETS> 1,138,147,224
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 26,484
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,296,324
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,234,531
<AVERAGE-NET-ASSETS> 2,095,767,912
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .054
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.054)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 404
<NAME> FINANCIAL SQUARE GOVERNMENT FUND-PREFERRED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,404,187,810
<INVESTMENTS-AT-VALUE> 2,404,187,810
<RECEIVABLES> 9,708,940
<ASSETS-OTHER> 382,881
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,414,279,631
<PAYABLE-FOR-SECURITIES> 35,917,844
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,671,674
<TOTAL-LIABILITIES> 48,589,518
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,365,690,113
<SHARES-COMMON-STOCK> 7,146,792
<SHARES-COMMON-PRIOR> 112,430
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,365,690,113
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 117,069,858
<OTHER-INCOME> 0
<EXPENSES-NET> (6,988,452)
<NET-INVESTMENT-INCOME> 110,081,406
<REALIZED-GAINS-CURRENT> 127,727
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 110,209,133
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,492,230)
<DISTRIBUTIONS-OF-GAINS> (1,310)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,842,203,467
<NUMBER-OF-SHARES-REDEEMED> (19,734,267,186)
<SHARES-REINVESTED> 30,237,427
<NET-CHANGE-IN-ASSETS> 1,138,147,224
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 26,484
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,296,324
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,234,531
<AVERAGE-NET-ASSETS> 2,095,767,912
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .053
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.053)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 405
<NAME> FINANCIAL SQUARE GOVERNMENT FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,404,187,810
<INVESTMENTS-AT-VALUE> 2,404,187,810
<RECEIVABLES> 9,708,940
<ASSETS-OTHER> 382,881
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<TOTAL-ASSETS> 2,414,279,631
<PAYABLE-FOR-SECURITIES> 35,917,844
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,671,674
<TOTAL-LIABILITIES> 48,589,518
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<PAID-IN-CAPITAL-COMMON> 2,365,690,113
<SHARES-COMMON-STOCK> 299,801,906
<SHARES-COMMON-PRIOR> 145,103,169
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,365,690,113
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 117,069,858
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<EXPENSES-NET> (6,988,452)
<NET-INVESTMENT-INCOME> 110,081,406
<REALIZED-GAINS-CURRENT> 127,727
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<NET-CHANGE-FROM-OPS> 110,209,133
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,365,067)
<DISTRIBUTIONS-OF-GAINS> (15,668)
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<NUMBER-OF-SHARES-SOLD> 20,842,203,467
<NUMBER-OF-SHARES-REDEEMED> (19,734,267,186)
<SHARES-REINVESTED> 30,237,427
<NET-CHANGE-IN-ASSETS> 1,138,147,224
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 26,484
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<GROSS-ADVISORY-FEES> 4,296,324
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,234,531
<AVERAGE-NET-ASSETS> 2,095,767,912
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .052
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.052)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT
DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 406
<NAME> FINANCIAL SQUARE GOVERNMENT FUND-SERVICE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,404,187,810
<INVESTMENTS-AT-VALUE> 2,404,187,810
<RECEIVABLES> 9,708,940
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<PAYABLE-FOR-SECURITIES> 35,917,844
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,671,674
<TOTAL-LIABILITIES> 48,589,518
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<PAID-IN-CAPITAL-COMMON> 2,365,690,113
<SHARES-COMMON-STOCK> 580,206,370
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<NET-ASSETS> 2,365,690,113
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 117,069,858
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<EXPENSES-NET> (6,988,452)
<NET-INVESTMENT-INCOME> 110,081,406
<REALIZED-GAINS-CURRENT> 127,727
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 110,209,113
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (24,861,306)
<DISTRIBUTIONS-OF-GAINS> (42,470)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,842,203,467
<NUMBER-OF-SHARES-REDEEMED> (19,734,267,186)
<SHARES-REINVESTED> 30,237,427
<NET-CHANGE-IN-ASSETS> 1,138,147,224
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<GROSS-ADVISORY-FEES> 4,296,324
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<GROSS-EXPENSE> 8,234,531
<AVERAGE-NET-ASSETS> 2,095,767,912
<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> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 393
<NAME> FINANCIAL SQUARE FEDERAL FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> FEB-28-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,229,360,388
<INVESTMENTS-AT-VALUE> 2,229,360,388
<RECEIVABLES> 3,566,555
<ASSETS-OTHER> 52,297
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,232,979,240
<PAYABLE-FOR-SECURITIES> 50,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,141,803
<TOTAL-LIABILITIES> 59,141,803
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,173,836,797
<SHARES-COMMON-STOCK> 1,125,680,906
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8,313
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,673)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,173,837,437
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,521,252
<OTHER-INCOME> 0
<EXPENSES-NET> (2,625,517)
<NET-INVESTMENT-INCOME> 50,895,735
<REALIZED-GAINS-CURRENT> (7,673)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,888,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (35,377,629)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,175,698,490
<NUMBER-OF-SHARES-REDEEMED> (5,019,147,768)
<SHARES-REINVESTED> 17,286,075
<NET-CHANGE-IN-ASSETS> 2,173,837,437
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,967,724
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,537,139
<AVERAGE-NET-ASSETS> 1,141,207,981
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .045
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.045)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 394
<NAME> FINANCIAL SQUARE FEDERAL FUND-PREFERRED
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAY-30-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,229,360,388
<INVESTMENTS-AT-VALUE> 2,229,360,388
<RECEIVABLES> 3,566,555
<ASSETS-OTHER> 52,297
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,232,979,240
<PAYABLE-FOR-SECURITIES> 50,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,141,803
<TOTAL-LIABILITIES> 59,141,803
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,173,836,797
<SHARES-COMMON-STOCK> 194,374,977
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8,313
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,673)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,173,837,437
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,521,252
<OTHER-INCOME> 0
<EXPENSES-NET> (2,625,517)
<NET-INVESTMENT-INCOME> 50,895,735
<REALIZED-GAINS-CURRENT> (7,673)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,888,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,504,242)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,175,698,490
<NUMBER-OF-SHARES-REDEEMED> (5,019,147,768)
<SHARES-REINVESTED> 17,286,075
<NET-CHANGE-IN-ASSETS> 2,173,837,437
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,967,724
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,537,139
<AVERAGE-NET-ASSETS> 1,141,207,981
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .031
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.031)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 395
<NAME> FINANCIAL SQUARE FEDERAL FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,229,360,388
<INVESTMENTS-AT-VALUE> 2,229,360,388
<RECEIVABLES> 3,566,555
<ASSETS-OTHER> 52,297
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,232,979,240
<PAYABLE-FOR-SECURITIES> 50,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,141,803
<TOTAL-LIABILITIES> 59,141,803
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,173,836,797
<SHARES-COMMON-STOCK> 625,333,945
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8,313
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,673)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,173,837,437
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,521,252
<OTHER-INCOME> 0
<EXPENSES-NET> (2,625,517)
<NET-INVESTMENT-INCOME> 50,895,735
<REALIZED-GAINS-CURRENT> (7,673)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,888,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,278,709)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,175,698,490
<NUMBER-OF-SHARES-REDEEMED> (5,019,147,768)
<SHARES-REINVESTED> 17,286,075
<NET-CHANGE-IN-ASSETS> 2,173,837,437
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,967,724
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,537,139
<AVERAGE-NET-ASSETS> 1,141,207,981
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .039
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.039)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 396
<NAME> FINANCIAL SQUARE FEDERAL FUND-SERVICE
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAR-25-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,229,360,388
<INVESTMENTS-AT-VALUE> 2,229,360,388
<RECEIVABLES> 3,566,555
<ASSETS-OTHER> 52,297
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,232,979,240
<PAYABLE-FOR-SECURITIES> 50,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,141,803
<TOTAL-LIABILITIES> 59,141,803
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,173,836,797
<SHARES-COMMON-STOCK> 228,446,969
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8,313
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,673)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,173,837,437
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 53,521,252
<OTHER-INCOME> 0
<EXPENSES-NET> (2,625,517)
<NET-INVESTMENT-INCOME> 50,895,735
<REALIZED-GAINS-CURRENT> (7,673)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,888,062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,726,842)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,175,698,490
<NUMBER-OF-SHARES-REDEEMED> (5,019,147,768)
<SHARES-REINVESTED> 17,286,075
<NET-CHANGE-IN-ASSETS> 2,173,837,437
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,967,724
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,537,139
<AVERAGE-NET-ASSETS> 1,141,207,981
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .038
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.038)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 383
<NAME> FINANCIAL SQUARE TREASURY INSTRUMENTS FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAR-03-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 516,935,549
<INVESTMENTS-AT-VALUE> 516,935,549
<RECEIVABLES> 5,333,790
<ASSETS-OTHER> 70,699
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 522,340,038
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,583,022
<TOTAL-LIABILITIES> 1,583,022
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 520,755,638
<SHARES-COMMON-STOCK> 496,418,745
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,378
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 520,757,016
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,914,704
<OTHER-INCOME> 0
<EXPENSES-NET> (526,642)
<NET-INVESTMENT-INCOME> 11,388,062
<REALIZED-GAINS-CURRENT> 89,851
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 11,477,913
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10,293,085)
<DISTRIBUTIONS-OF-GAINS> (78,370)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,886,752,702
<NUMBER-OF-SHARES-REDEEMED> (1,368,998,334)
<SHARES-REINVESTED> 3,001,270
<NET-CHANGE-IN-ASSETS> 520,755,638
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 463,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 769,619
<AVERAGE-NET-ASSETS> 271,571,837
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .042
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.042)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 384
<NAME> FINANCIAL SQUARE TREASURY INSTRUMENTS FUND-PREFERRED
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAY-30-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 516,935,549
<INVESTMENTS-AT-VALUE> 516,935,549
<RECEIVABLES> 5,333,790
<ASSETS-OTHER> 70,699
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<TOTAL-ASSETS> 522,340,038
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,583,022
<TOTAL-LIABILITIES> 1,583,022
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 520,755,638
<SHARES-COMMON-STOCK> 1,539
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,378
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 520,757,016
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,914,704
<OTHER-INCOME> 0
<EXPENSES-NET> (526,642)
<NET-INVESTMENT-INCOME> 11,388,062
<REALIZED-GAINS-CURRENT> 89,851
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<NET-CHANGE-FROM-OPS> 11,477,913
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (45)
<DISTRIBUTIONS-OF-GAINS> (1)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,886,752,702
<NUMBER-OF-SHARES-REDEEMED> (1,368,998,334)
<SHARES-REINVESTED> 3,001,270
<NET-CHANGE-IN-ASSETS> 520,755,638
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 463,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 769,619
<AVERAGE-NET-ASSETS> 271,571,837
<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> .28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 385
<NAME> FINANCIAL SQUARE TREASURY INSTRUMENTS FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 516,935,549
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<RECEIVABLES> 5,333,790
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<PAID-IN-CAPITAL-COMMON> 520,755,638
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<ACCUMULATED-NET-GAINS> 1,378
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 520,757,016
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,914,704
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<EXPENSES-NET> (526,642)
<NET-INVESTMENT-INCOME> 11,388,062
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> (459)
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<NUMBER-OF-SHARES-SOLD> 1,886,752,702
<NUMBER-OF-SHARES-REDEEMED> (1,368,998,334)
<SHARES-REINVESTED> 3,001,270
<NET-CHANGE-IN-ASSETS> 520,755,638
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 463,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 769,619
<AVERAGE-NET-ASSETS> 271,571,837
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .036
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.036)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 386
<NAME> FINANCIAL SQUARE TREASURY INSTRUMENTS FUND-SERVICE
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1997
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<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 516,935,549
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<RECEIVABLES> 5,333,790
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<OTHER-ITEMS-LIABILITIES> 1,583,022
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<PAID-IN-CAPITAL-COMMON> 520,755,638
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<NET-ASSETS> 520,757,016
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<EXPENSES-NET> (526,642)
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> (9,643)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,886,752,702
<NUMBER-OF-SHARES-REDEEMED> (1,368,998,334)
<SHARES-REINVESTED> 3,001,270
<NET-CHANGE-IN-ASSETS> 520,755,638
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 769,619
<AVERAGE-NET-ASSETS> 271,571,837
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .038
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.038)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 373
<NAME> FINANCIAL SQUARE TREASURY OBLIGATIONS FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,522,502,423
<INVESTMENTS-AT-VALUE> 3,522,502,423
<RECEIVABLES> 10,248,818
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,611,568
<TOTAL-LIABILITIES> 17,611,568
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,515,154,043
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<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,515,154,043
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 173,797,289
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<EXPENSES-NET> (8,698,309)
<NET-INVESTMENT-INCOME> 165,098,980
<REALIZED-GAINS-CURRENT> 300,712
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<NET-CHANGE-FROM-OPS> 165,399,692
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> (253,465)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30,901,418,469
<NUMBER-OF-SHARES-REDEEMED> (30,543,252,110)
<SHARES-REINVESTED> 61,924,789
<NET-CHANGE-IN-ASSETS> 420,091,148
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 80,038
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,427,023
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,369,851
<AVERAGE-NET-ASSETS> 3,135,133,049
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .054
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.054)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .18
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 374
<NAME> FINANCIAL SQUARE TREASURY OBLIGATIONS FUND-PREFERRED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,522,502,423
<INVESTMENTS-AT-VALUE> 3,522,502,423
<RECEIVABLES> 10,248,818
<ASSETS-OTHER> 14,370
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,532,765,611
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,611,568
<TOTAL-LIABILITIES> 17,611,568
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,515,154,043
<SHARES-COMMON-STOCK> 245,360,997
<SHARES-COMMON-PRIOR> 46,636,593
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,515,154,043
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 173,797,289
<OTHER-INCOME> 0
<EXPENSES-NET> (8,698,309)
<NET-INVESTMENT-INCOME> 165,098,980
<REALIZED-GAINS-CURRENT> 300,712
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 165,399,692
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,711,597)
<DISTRIBUTIONS-OF-GAINS> (9,681)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30,901,418,469
<NUMBER-OF-SHARES-REDEEMED> (30,543,252,110)
<SHARES-REINVESTED> 61,924,789
<NET-CHANGE-IN-ASSETS> 420,091,148
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 80,038
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,427,023
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,369,851
<AVERAGE-NET-ASSETS> 3,135,133,049
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .053
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.053)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 375
<NAME> FINANCIAL SQUARE TREASURY OBLIGATIONS FUND-ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,522,502,423
<INVESTMENTS-AT-VALUE> 3,522,502,423
<RECEIVABLES> 10,248,818
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<TOTAL-ASSETS> 3,532,765,611
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,611,568
<TOTAL-LIABILITIES> 17,611,568
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,515,154,043
<SHARES-COMMON-STOCK> 738,895,099
<SHARES-COMMON-PRIOR> 536,903,385
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,515,154,043
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 173,797,289
<OTHER-INCOME> 0
<EXPENSES-NET> (8,698,309)
<NET-INVESTMENT-INCOME> 165,098,980
<REALIZED-GAINS-CURRENT> 300,712
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 165,399,692
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (35,669,978)
<DISTRIBUTIONS-OF-GAINS> (92,228)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30,901,418,469
<NUMBER-OF-SHARES-REDEEMED> (30,543,252,110)
<SHARES-REINVESTED> 61,924,789
<NET-CHANGE-IN-ASSETS> 420,091,148
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 80,038
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,427,023
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,369,851
<AVERAGE-NET-ASSETS> 3,135,133,049
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .051
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<PER-SHARE-DIVIDEND> (.051)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 376
<NAME> FINANCIAL SQUARE TREASURY OBLIGATIONS FUND-SERVICE
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,522,502,423
<INVESTMENTS-AT-VALUE> 3,522,502,423
<RECEIVABLES> 10,248,818
<ASSETS-OTHER> 14,370
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,532,765,611
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,611,568
<TOTAL-LIABILITIES> 17,611,568
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,515,154,043
<SHARES-COMMON-STOCK> 312,994,139
<SHARES-COMMON-PRIOR> 220,555,465
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,515,154,043
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 173,797,289
<OTHER-INCOME> 0
<EXPENSES-NET> (8,698,309)
<NET-INVESTMENT-INCOME> 165,098,980
<REALIZED-GAINS-CURRENT> 300,712
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 165,399,692
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,696,566)
<DISTRIBUTIONS-OF-GAINS> (25,376)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30,901,418,469
<NUMBER-OF-SHARES-REDEEMED> (30,543,252,110)
<SHARES-REINVESTED> 61,924,789
<NET-CHANGE-IN-ASSETS> 420,091,148
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 80,038
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 6,427,023
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,369,851
<AVERAGE-NET-ASSETS> 3,135,133,049
<PER-SHARE-NAV-BEGIN> 1.00
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<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.049)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 363
<NAME> FINANCIAL SQUARE MONEY MARKET FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 5,077,628,672
<INVESTMENTS-AT-VALUE> 5,077,628,672
<RECEIVABLES> 33,332,928
<ASSETS-OTHER> 305,987
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,111,267,587
<PAYABLE-FOR-SECURITIES> 177,216,947
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,713,897
<TOTAL-LIABILITIES> 206,930,844
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,904,335,361
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<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 1,382
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,904,336,743
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 277,371,948
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<EXPENSES-NET> (11,142,094)
<NET-INVESTMENT-INCOME> 266,229,854
<REALIZED-GAINS-CURRENT> 32,849
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<NET-CHANGE-FROM-OPS> 266,262,703
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (231,700,902)
<DISTRIBUTIONS-OF-GAINS> (24,966)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 68,053,947,094
<NUMBER-OF-SHARES-REDEEMED> (66,241,742,997)
<SHARES-REINVESTED> 134,114,443
<NET-CHANGE-IN-ASSETS> 1,946,318,968
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 954
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,006,793
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,642,257
<AVERAGE-NET-ASSETS> 4,881,362,595
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .055
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.055)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .18
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT
DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 364
<NAME> FINANCIAL SQUARE MONEY MARKET FUND-PREFERRED
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 5,077,628,672
<INVESTMENTS-AT-VALUE> 5,077,628,672
<RECEIVABLES> 33,332,928
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<TOTAL-ASSETS> 5,111,267,587
<PAYABLE-FOR-SECURITIES> 177,216,947
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,713,897
<TOTAL-LIABILITIES> 206,930,844
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<PAID-IN-CAPITAL-COMMON> 4,904,335,361
<SHARES-COMMON-STOCK> 20,258,602
<SHARES-COMMON-PRIOR> 17,510,550
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<ACCUMULATED-NET-GAINS> 1,382
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<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,904,336,743
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 277,371,948
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<EXPENSES-NET> (11,142,094)
<NET-INVESTMENT-INCOME> 266,229,854
<REALIZED-GAINS-CURRENT> 32,849
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<NET-CHANGE-FROM-OPS> 266,262,703
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> (571)
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<NUMBER-OF-SHARES-SOLD> 68,053,947,094
<NUMBER-OF-SHARES-REDEEMED> (66,241,742,997)
<SHARES-REINVESTED> 134,114,443
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<ACCUMULATED-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 10,006,793
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<GROSS-EXPENSE> 13,642,257
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<PER-SHARE-NII> .054
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<PER-SHARE-DIVIDEND> (.054)
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<PER-SHARE-NAV-END> 1.00
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 365
<NAME> FINANCIAL SQUARE MONEY MARKET FUND-ADMINISTRATION
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<PERIOD-START> JAN-01-1997
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<INVESTMENTS-AT-COST> 5,077,628,672
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<NET-ASSETS> 4,904,336,743
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<NET-INVESTMENT-INCOME> 266,229,854
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<NET-CHANGE-FROM-OPS> 266,262,703
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<NUMBER-OF-SHARES-SOLD> 68,053,947,094
<NUMBER-OF-SHARES-REDEEMED> (66,241,742,997)
<SHARES-REINVESTED> 134,114,443
<NET-CHANGE-IN-ASSETS> 1,946,318,968
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,642,257
<AVERAGE-NET-ASSETS> 4,881,362,595
<PER-SHARE-NAV-BEGIN> 1.00
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<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.053)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT
DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 366
<NAME> FINANCIAL SQUARE MONEY MARKET FUND-SERVICE
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<INVESTMENTS-AT-COST> 5,077,628,672
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<RECEIVABLES> 33,332,928
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<TOTAL-ASSETS> 5,111,267,587
<PAYABLE-FOR-SECURITIES> 177,216,947
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,713,897
<TOTAL-LIABILITIES> 206,930,844
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,904,335,361
<SHARES-COMMON-STOCK> 316,307,680
<SHARES-COMMON-PRIOR> 234,380,537
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,382
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,904,336,743
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 277,371,948
<OTHER-INCOME> 0
<EXPENSES-NET> (11,142,094)
<NET-INVESTMENT-INCOME> 266,229,854
<REALIZED-GAINS-CURRENT> 32,849
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 266,262,703
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,107,830)
<DISTRIBUTIONS-OF-GAINS> (6,853)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 68,053,947,094
<NUMBER-OF-SHARES-REDEEMED> (66,241,742,997)
<SHARES-REINVESTED> 134,114,443
<NET-CHANGE-IN-ASSETS> 1,946,318,968
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 954
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,006,793
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,642,257
<AVERAGE-NET-ASSETS> 4,881,362,595
<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> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 353
<NAME> FINANCIAL SQUARE PRIME OBLIGATIONS FUND-INSTITUTIONAL
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 4,469,716,189
<INVESTMENTS-AT-VALUE> 4,469,716,189
<RECEIVABLES> 26,750,497
<ASSETS-OTHER> 729,789
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,497,196,475
<PAYABLE-FOR-SECURITIES> 35,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,950,086
<TOTAL-LIABILITIES> 58,950,086
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,438,254,520
<SHARES-COMMON-STOCK> 3,867,740,474
<SHARES-COMMON-PRIOR> 3,901,792,070
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (8,131)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,438,246,389
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 288,754,558
<OTHER-INCOME> 0
<EXPENSES-NET> (10,774,965)
<NET-INVESTMENT-INCOME> 277,979,593
<REALIZED-GAINS-CURRENT> 15,992
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 277,995,585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (247,361,553)
<DISTRIBUTIONS-OF-GAINS> (22,695)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53,179,415,600
<NUMBER-OF-SHARES-REDEEMED> (53,213,589,524)
<SHARES-REINVESTED> 112,453,328
<NET-CHANGE-IN-ASSETS> 78,270,183
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,090
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,499,297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,286,495
<AVERAGE-NET-ASSETS> 5,121,608,334
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .055
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.055)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 354
<NAME> FINANCIAL SQUARE PRIME OBLIGATIONS FUNDS-PREFERRED
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 4,469,716,189
<INVESTMENTS-AT-VALUE> 4,469,716,189
<RECEIVABLES> 26,750,497
<ASSETS-OTHER> 729,789
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,497,196,475
<PAYABLE-FOR-SECURITIES> 35,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,950,086
<TOTAL-LIABILITIES> 58,950,086
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,438,254,520
<SHARES-COMMON-STOCK> 152,770,028
<SHARES-COMMON-PRIOR> 127,128,734
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (8,131)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,438,246,389
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 288,754,558
<OTHER-INCOME> 0
<EXPENSES-NET> (10,774,965)
<NET-INVESTMENT-INCOME> 277,979,593
<REALIZED-GAINS-CURRENT> 15,992
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 277,995,585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,751,263)
<DISTRIBUTIONS-OF-GAINS> (752)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53,179,415,600
<NUMBER-OF-SHARES-REDEEMED> (53,213,589,524)
<SHARES-REINVESTED> 112,453,328
<NET-CHANGE-IN-ASSETS> 78,270,183
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,090
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,499,297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,286,495
<AVERAGE-NET-ASSETS> 5,121,608,334
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .054
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.054)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 355
<NAME> FINANCIAL SQUARE PRIME OBLIGATIONS FUND - ADMINISTRATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 4,469,716,189
<INVESTMENTS-AT-VALUE> 4,469,716,189
<RECEIVABLES> 26,750,497
<ASSETS-OTHER> 729,789
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,497,196,475
<PAYABLE-FOR-SECURITIES> 35,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,950,086
<TOTAL-LIABILITIES> 58,950,086
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,438,254,520
<SHARES-COMMON-STOCK> 241,610,519
<SHARES-COMMON-PRIOR> 215,900,253
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (8,131)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,438,246,389
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 288,754,558
<OTHER-INCOME> 0
<EXPENSES-NET> (10,774,965)
<NET-INVESTMENT-INCOME> 277,979,593
<REALIZED-GAINS-CURRENT> 15,992
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 277,995,585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,824,313)
<DISTRIBUTIONS-OF-GAINS> (1,302)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53,179,415,600
<NUMBER-OF-SHARES-REDEEMED> (53,213,589,524)
<SHARES-REINVESTED> 112,453,328
<NET-CHANGE-IN-ASSETS> 78,270,183
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,090
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,499,297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,286,495
<AVERAGE-NET-ASSETS> 5,121,608,334
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .052
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.052)
<PER-SHARE-DISTRIBUTIONS> 0
<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>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 356
<NAME> FINANCIAL SQUARE PRIME OBLIGATIONS FUND-SERVICE
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 4,469,716,189
<INVESTMENTS-AT-VALUE> 4,469,716,189
<RECEIVABLES> 26,750,497
<ASSETS-OTHER> 729,789
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,497,196,475
<PAYABLE-FOR-SECURITIES> 35,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,950,086
<TOTAL-LIABILITIES> 58,950,086
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,438,254,520
<SHARES-COMMON-STOCK> 176,133,499
<SHARES-COMMON-PRIOR> 115,154,059
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (8,131)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,438,246,389
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 288,754,588
<OTHER-INCOME> 0
<EXPENSES-NET> (10,774,965)
<NET-INVESTMENT-INCOME> 277,979,593
<REALIZED-GAINS-CURRENT> 15,992
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 277,995,585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,042,464)
<DISTRIBUTIONS-OF-GAINS> (464)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53,179,415,600
<NUMBER-OF-SHARES-REDEEMED> (53,213,589,524)
<SHARES-REINVESTED> 112,453,328
<NET-CHANGE-IN-ASSETS> 78,270,183
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,090
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,499,297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,286,495
<AVERAGE-NET-ASSETS> 5,121,608,334
<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> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
